TIDMMIXT
Matrix Income & Growth 3 VCT plc
Annual Results Announcement for the year ended 31 December 2009
17 March 2010
Investment Objective
Matrix Income & Growth 3 VCT plc ("the VCT" or "MIG3 VCT") is a Venture Capital
Trust ("VCT") listed on the London Stock Exchange. Its investment portfolio,
which invests primarily in established and profitable unquoted companies, is
managed by Matrix Private Equity Partners LLP ("MPEP").
The Company's objective is to provide investors with a regular income stream,
by way of tax free dividends, and to generate capital growth through portfolio
realisations, which can be distributed by way of additional tax free dividends.
Financial Highlights
Ordinary Shares (listed on 26 January 2006)
Initial net asset value per share 94.5 pence
Initial net assets GBP18,907,738
31 December 2009 31 December 2008
Net assets GBP17,478,122 GBP17,757,415
Net asset value per share 90.0 p 88.9 p
Net cumulative dividends paid 5.6 p 4.75 p
Total return per share to Shareholders 95.6 p 93.7 p
since launch*
Share price (mid-market price) 63.0 p 80.0 p
Total expense ratio 3.6 % 3.7 %
* Net asset value per share plus cumulative dividends paid per share. This
compares with an original investment cost of 60 pence per share after allowing
for income tax relief of 40 pence per share.
An interim capital dividend of 4.0 pence per share will be paid to Shareholders
on 21 April 2010, thereby increasing net cumulative dividends paid since launch
to 9.6 pence per share (2008: 5.6 pence).
Chairman's Statement
I am pleased to present the annual results of Matrix Income & Growth 3 VCT plc
for the year to 31 December 2009.
Overview
The economic downturn has brought challenging conditions for smaller companies
during 2009 and in spite of some small positive signs of recovery we expect
these conditions to continue well into 2010. The smaller company sector in
which your Company invests is still volatile and will continue to be affected
by this difficult trading environment. The Manager, supported by the Board has
therefore adopted a cautious strategy in its approach to new investment,
deciding not to invest in over-priced or over-leveraged companies which have
all too frequently appeared on the market particularly in the first six months
of last year.
Encouragingly, there have been indications in the second half of 2009 of
improved deal flow and companies becoming available for sale at more realistic
prices. This might in part be due to a general belief that the worst of the
global banking industry crisis is now behind us which has restored confidence
to some extent. Two of the Company's acquisition vehicles made investments
totalling GBP1.7 million in December 2009 to support the management buy-outs of
Country Baskets and Iglu.com respectively. In addition, as reported in the
Half-Yearly Report, the Company made a new investment into Westway Cooling in
June 2009. Meanwhile the disposal proceeds from the sale of PastaKing and
repayment of loan stocks by DiGiCo Europe and Westway resulted in a GBP1.6
million repayment to the Company. In addition, GBP328,265 was returned to the
Company from the acquisition vehicle Barnfield Management Investments as a
result of the investment in Iglu.com. Therefore, the Company's total investment
in qualifying companies remained broadly the same for the second year running.
Of particular note was the successful disposal of the Company's investment in
PastaKing to NBGI Private Equity for net proceeds of GBP1,124,828. This
realisation contributed to total proceeds of GBP1,369,250 to the Company over the
life of the investment, representing a multiple of 3.25 of the Company's
original investment of GBP419,418. This is the first realisation for MIG3 VCT and
may be evidence that there are some signs of recovery in the market that make
transactions possible at realistic prices.
Although the Company's qualifying portfolio has seen four of the valuations
reduced compared to last year in response to worsening trading conditions, the
majority of investee companies remain cash generative. Full details of these
companies and the year's transactions are contained in the Investment Manager's
Review which follows below.
Your Company continued to meet the level of investment required by the VCT
regulations throughout the year under review to retain qualifying tax status
for shareholders and our strategy has been to maintain the Company's high cash
balances until sensibly priced investment opportunities of the right quality
begin to emerge. In the Board's view, this is the correct strategy to build
longer term value for Shareholders.
Merger with Matrix Income & Growth VCT plc
The Board announced on 9 February 2010 that agreement in principle had been
reached for the merger of the Company with Matrix Income & Growth VCT plc ("MIG
VCT"). Discussions between the two companies have now concluded and details of
the proposals to be put to Shareholders will be circulated shortly. The
intention is that the proposed merger will be completed pursuant to a section
110 scheme of reconstruction under the Insolvency Act 1986 by transferring the
assets and liabilities of the Company to MIG VCT in consideration for new
shares in the MIG VCT to be issued to the Company's Shareholders on a relative
net asset value basis. The proposals will, if effected, result in the creation
of an enlarged company with net assets of over GBP34 million and which is
expected to deliver cost savings and strategic benefits. An Extraordinary
General Meeting ("EGM") will be held during May at which the Board will seek
Shareholder approval to effect the proposals and full details of the EGM will
be included in the Shareholder Circular.
I would like to draw shareholders' attention to the consequences of a possible
merger upon the normal "going-concern" basis of preparation of this year's
accounts. The Board has given particular consideration this year to whether
continued application of the going-concern basis of preparation of the accounts
remains appropriate, As there is no certainty that, at the date of this Report,
such a proposed merger will proceed, the going-concern basis of preparation
remains appropriate.
Review of results
The net asset value ("NAV") per share at 31 December 2009 is 90.0 pence (2008:
88.9 pence), a rise over the year of 1.1 pence (1.2%) (2008: fall of 8.8%). The
total NAV return per share, including dividends paid to date, is now 95.6 pence
(2008: 93.7 pence), a rise over the year of 1.9 pence (2.0%). This compares
with the initial NAV per share, net of initial costs, of 94.5 pence
representing a positive total return per share since inception of 1.2% (2008:
negative total return per share of 0.9%).
Far less encouraging has been the significant drop in income received by the
Company. Income from the Company's loan stock investments was running at an
aggregate annualised rate of 4.1% at 31 December 2009 (2008: 4.3%). The annual
running yield on the qualifying investment portfolio as a whole was 2.6% (2008:
2.7%), while the yield on all assets was 2.1% (2008: 2.6%). Revenue is still
suffering from a general decline in interest rates and those assets linked to
variable interest rates such as the Company's holdings in OEIC money-market
funds are continuing to yield considerably lower levels of income. In addition,
certain of the investee companies are not currently fully servicing the loans
that the Company has made to them. Together, these factors have and will
continue to reduce income dividends for the foreseeable future. For further
details explain the fall in income, please see Note 2 to the accounts below.
Dividends
Although the revenue account generated a net loss (after tax) for the year of GBP
68,151 (2008: profit of GBP358,577), the successful realisation of the investment
in PastaKing generated a net profit of GBP949,832. Largely as a result of this
gain your Directors are pleased to declare a total dividend in respect of 2009
of 4.0 pence per share (2008: 1.8 pence) in the form of an interim capital
dividend. The Board do not propose to recommend a final income or capital
dividend in respect of the year just ended. .
This interim dividend will be paid on 21 April 2010 to Shareholders on the
Register on 26 March 2010. Dividends paid since inception will increase to 9.55
pence (2008: 5.55 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 2009, the Company was 71% (2008:
74.6%) invested in qualifying companies (based upon the tax values, which
differ from the Investment Portfolio Summary below).
Share buy-backs
The Company bought back 560,752 (2008: Nil) Ordinary Shares during the year
under review at an average price of 61.0 pence per share. These shares,
representing 2.8% of the issued share capital at the beginning of the year,
were subsequently cancelled by the Company. Purchases were made at discounts to
the latest published NAVs per share ranging between 30.0% and 34.5%. The sharp
increase in the discount at which the Company was prepared to buy-back shares
reflected the uncertain economic, financial and market conditions prevailing at
the time and very largely explains the decline in the Company's share price
from 80 pence per share to 63 pence per share during the period under review.
On a more positive note, these share purchases enhanced the Company's NAV by
around 0.8 pence per share during the year to the benefit of continuing
Shareholders
The Board regularly reviews its share buy back policy, considering a number of
factors, including the Company's liquidity, and seeks to balance the interests
of both continuing and departing shareholders.
The Board
Christopher Moore has been approached to assume a position which, under the
provisions of the AIC Code and the revised Listing Rules shortly to come into
effect for VCTs, will mean that he will be required to stand down as a Director
of your Company. Christopher has made an outstanding contribution to the
development of the Company since its launch in 2004 both as a member of the
Board but particularly as Chairman of its Investment Committee. His knowledge
of the private equity market and his forthright and perceptive views will be
greatly missed. We thank him and wish him all the very best for the future.
Articles of Association
At the Annual General Meeting it is proposed to adopt new Articles of
Association. The amendments to the existing articles reflect the changes in
company law introduced by those elements of the Companies Act 2006 which came
into force on 1 October 2009.
Communication with shareholders
We aim to communicate regularly with our Shareholders. In addition to the
half-yearly and annual reports, an Investment Manager's Newsletter, approved by
the Board, is circulated twice-yearly. The May AGM will provide a useful
platform for the Board to meet Shareholders and exchange views. Your Board
welcomes your attendance at General Meetings to give you the opportunity to
meet your Directors and representatives of the Investment Manager.
Outlook
There are many conflicting opinions as to the state of the economy and
prospects for recovery both worldwide and in the UK although official
statistics are starting to indicate that we may be coming out of recession. We
have seen some signs of improved dealflow in the latter half of 2009 but it is
difficult to predict how permanent this trend will be and we do not believe
that the real economy is yet out of the woods. The effects of the downturn will
continue to impact the investments held by your Company over the coming year.
In the foreseeable future, the Company's ability to pay income dividends may be
adversely affected by the inability of certain investee companies to service
the Company's loans to them and the lower interest rate environment. Capital
dividends will continue to reflect the level of profitable exit opportunities
available in the market.
Overall, we consider that, the Company has performed relatively well in these
conditions and could have fared considerably less well if it was not for its
diversified portfolio of investee companies and its strong cash position that
we continue to maintain through this period of economic uncertainty. This will
ensure that the Company is able support existing investments, if necessary, and
take advantage of attractive new investment opportunities as they present
themselves. The Board, therefore, remains confident that the Company will
provide long term investors with an attractive combination of capital growth
and income.
Finally, I would like to express my thanks to all Shareholders for their
continuing support of the Company.
Keith Niven
Chairman
Responsibility Statement of the Directors in respect of the Annual Financial
Report
The Directors confirm that to the best of their knowledge that:
a. the financial statements, prepared in accordance with UK Generally Accepted
Accounting Practice and the 2009 Statement of Recommended Practice,
`Financial Statements of Investment Trust Companies and Venture Capital
Trusts' (SORP), give a true and fair view of the assets, liabilities,
financial position and the profit of the Company.
(b) the management report, comprising the Chairman's Statement, Investment
Portfolio Summary, Investment Manager's Review and Directors' Report includes a
fair review of the development and performance of the business and the position
of the Company, together with a description of the principal risks and
uncertainties that it faces.
For and on behalf of the Board:
On behalf of the Board
Keith Niven
Chairman
Principal risks, management and regulatory environment
The Board believes that the principal risks faced by the VCT are:
* Economic risk - events such as an economic recession and movement in
interest rates could affect trading conditions for smaller companies and
consequently the value of the VCT's qualifying investments.
* Loss of approval as a Venture Capital Trust - the VCT must comply with
Section 274 of the Income Tax Act 2007 which allows it to be exempted from
capital gains tax on investment gains. Any breach of these rules may lead
to the VCT losing its approval as a VCT, qualifying shareholders who have
not held their shares for the designated holding period having to repay the
income tax relief they obtained and future dividends paid by the VCT
becoming subject to tax. The VCT would also lose its exemption from
corporation tax on capital gains.
* Investment and strategic risk - inappropriate strategy or consistently weak
VCT qualifying investment recommendations might lead to under performance
and poor returns to shareholders.
* Regulatory risk - the VCT is required to comply with the Companies Acts,
the rules of the UK Listing Authority and United Kingdom Accounting
Standards. Breach of any of these might lead to suspension of the VCT's
Stock Exchange listing, financial penalties or a qualified audit report.
* Financial and operating risk- inadequate controls might lead to
misappropriation of assets. Inappropriate accounting policies might lead to
misreporting or beaches of regulations. Failure of the Investment Manager's
and Administrator's accounting systems or disruption to its business might
lead to an inability to provide accurate reporting and monitoring.
* Market risk - Investment in unquoted companies, by its nature, involves a
higher degree of risk than investment in companies traded on the London
Stock Exchange main market. In particular, smaller companies often have
limited product lines, markets or financial resources and may be dependent
for their management on a smaller number of key individuals.
* Asset liquidity risk - The VCT's investments may be difficult to realise
especially in the current economic climate.
* Market liquidity risk - Shareholders may find it difficult to sell their
shares at a price which is close to the net asset value.
* Credit/counterparty risk
A counterparty may fail to discharge an obligation or commitment that it has
entered into with the Company.
The Board seeks to mitigate the internal risks by setting policy and by
undertaking a key risk management review at each quarterly Board meeting.
Performance is regularly reviewed and assurances in respect of adequate
internal controls and key risks are sought and received from the Investment
Manager and Administrator on a six monthly basis. In the mitigation and
management of these risks, the Board applies rigorously the principles detailed
in the AIC Code of Corporate Governance. The Board also has a Share Buy Back
policy to try to mitigate the Market Liquidity risk. This policy is reviewed at
each quarterly Board Meeting.
Investment Policy
The VCT's policy is to invest primarily in a diverse portfolio of UK unquoted
companies. Investments are structured as part loan and part equity in order to
receive regular income and to generate capital gains from trade sales and
flotations of investee companies.
Investments are made selectively across a number of sectors, primarily in
management buyout transactions ("MBOs") i.e. to support incumbent management
teams in acquiring the business they manage but do not own. Investments are
primarily made in companies that are established and profitable.
Uninvested funds are held in cash and lower risk money market funds.
* UK Companies
The companies in which investments are made must have no more than GBP15 million
of gross assets at the time of investment to be classed as a VCT qualifying
holding.
* VCT regulation
The investment policy is designed to ensure that the VCT continues to qualify
and is approved as a VCT by HMRC. Amongst other conditions, the VCT may not
invest more than 15% of its investments in a single company and must have at
least 70% by value of its investments throughout the period in shares or
securities comprised in Qualifying Holdings, of which a minimum overall of 30%
by value must be ordinary shares which carry no preferential rights. In
addition, although the VCT can invest less than 30% of an investment in a
specific company in ordinary shares it must have at least 10% by value of its
total investments in each Qualifying Company in ordinary shares which carry no
preferential rights.
* Asset Mix
The VCT holds funds awaiting investment in a portfolio of readily realisable
interest-bearing investments and deposits. The investment portfolio of
qualifying investments will be maintained at approximately 80% of net assets.
* Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses across
different industry sectors. To reduce the risk of high exposure to equities,
each qualifying investment is structured using a significant proportion of loan
stock (up to 70% of the total investment in each VCT qualifying company.)
Initial investments in VCT qualifying companies are generally made in amounts
ranging from GBP200,000 to GBP1 million at cost. No holding in any one company will
represent more than 10% of the value of the VCT's investments at the time of
investment. Ongoing monitoring of each investment is carried out by the
Investment Manager generally through taking a seat on the Board of each VCT
qualifying company.
* Co-investment
The VCT aims to invest in larger more mature unquoted companies through
investing alongside four other Income and Growth VCTs advised by the Investment
Manager with a similar investment policy. This enables the VCT to participate
in combined investments by the Investment Manager of up to GBP5 million.
* Borrowing
The VCT has no current plans to undertake any borrowing.
* Management
The Board has overall responsibility for the Company's affairs including the
determination of its investment policy. Investment and divestment proposals are
originated, negotiated and recommended by the Investment Manager and are then
subject to formal approval by the Directors. Matrix Securities provides Company
Secretarial and Accountancy services to the VCT.
Investment Manager's Review
The continued economic deterioration in the UK and worldwide has made this a
challenging year for the Company and specifically for new investment.
Particularly, in the first six months of the year, a large proportion of the
new deals we looked at seemed unattractive and we have frequently taken the
view that vendors' price expectations would prove unsustainable over the medium
term.
Whilst there have been some encouraging signs that the rate of new deal
activity was starting to increase towards the end of 2009 it is still too early
to say whether this will be sustained. Some sellers have lowered their price
expectations in order to stimulate interest from buyers but it is premature to
see this as a clear trend. We therefore continue to be cautious and selective
in our consideration of potential new deals. We think this caution has been a
significant factor in maintaining value in the portfolio through a very
volatile period.
The predominance in the investment portfolio of management buy-out investments
reflects our strategy of seeking to capitalise companies properly at the time
of investment so that they are well positioned to contend with adverse market
conditions. Since commencing the investment programme four years ago, no
investments have ceased trading or failed to date. Furthermore, it is notable
that further funding has been provided by the VCT to only two investments,
Monsal and British International both of which have received very modest
additional funding during the year totalling GBP198,181 and each of these
companies appears to be financially sound and is showing profits at the
operating level.
Given recent general comment on the tightening of bank lending, we do not
consider that the portfolio is exposed to unsustainable levels of third party
debt. We have generally not invested during this period of economic uncertainty
since the end of 2007 in companies which have required high levels of bank
borrowing, believing that the economy was still deteriorating and that this
would make over-leveraged companies much too vulnerable in a tougher
environment.
We have been working actively with the management teams of investee companies
encouraging them to take cost cutting measures and looking with them at
planning, forecasting and cost systems, where appropriate, to ensure that they
are as resilient as possible in the current market. The majority of investee
companies have managed their cashflow well and remain cash-generative.
The portfolio
As at 31 December 2009, the portfolio comprised eighteen investments (2008:
eighteen) with a cost of GBP13.2 (2008: GBP13.9) million and valued at GBP12.1 (2008:
GBP13.0) million representing 91.7% (2008: 64.7%) of cost. Seven of these
investments are currently held at cost, seven are valued at below cost and four
above cost. Realisations during the year generated cash proceeds of GBP1.6
million.
As reported in the Half-Yearly Report, MIG3 VCT made a new investment in June
2009 of GBP286,855 to support the MBO of Westway Cooling, a company specialising
in the installation, servicing and maintenance of high quality air-conditioning
systems and associated building plant. With a turnover of GBP9.6 million and a
record order book, we believe that this company is well placed to grow.
Two further new investments were made in December 2009. The first of these was
an investment of GBP1 million, using the acquisition vehicle Calisamo Management
(now re-named CB Imports Group), to support the management buy-out of Country
Baskets. The investment comprises loan stock of GBP825,000 and a 6% equity stake.
Founded in 1990 and operating from a national distribution centre in Leeds, the
company has a turnover of circa GBP20 million. It is a leading importer and
distributor of artificial flowers, floral sundries, glassware, giftware, basket
ware and Christmas decorations. The company is planning to roll out further
outlets across the UK as part of a new growth phase funded by this investment.
The second new investment was into Iglu.com Holidays, the UK's largest online
specialist ski holiday operator and fastest growing cruise holiday travel
agent. MIG3 VCT invested GBP674,735 comprising loan stock of GBP571,956 and an
equity stake of 7%. Based in Wimbledon, Iglu.com is a profitable and cash
generative business with a strong management team that has a successful track
record of building a profitable niche business. The investment was made through
the acquisition vehicle Barnfield Management Investments.
As evidence that high quality investments remain in demand, MIG3 VCT
successfully sold its investment in PastaKing, to NBGI Private Equity in
November 2009 for net proceeds of GBP1,124,828. This realisation contributed to
total proceeds of GBP1,370,365 to the Company over the life of the investment,
representing a 3.25x return on the Company's original investment of GBP419,148.
PastaKing has benefited from healthy eating trends since investment in 2006 and
at the time of the sale had grown to a staff of 71 and an annual turnover of GBP
12 million.
Some of the companies in the portfolio continue to be strongly cash generative
and amongst these Westway repaid GBP35,156 of loan stock considerably earlier
than expected in October 2009; and DiGiCo Europe repaid a total of GBP410,043 in
two instalments in May and December of 2009 plus a premium of GBP30,536.
An important part of our strategy continues to be our Operating Partners'
programme. This involves establishing acquisition companies alongside
experienced entrepreneurs well known to us. Using the operating partner's
specialised knowledge and business contacts they offer additional opportunities
to access prospective investment that might otherwise not be sourced. At the
year-end, the Company held investments in five such companies. This programme
has met the twin aims of maintaining at least 70% of the monies raised in VCT
qualifying investments while at the same time, importantly, maintaining
significant cash balances for the VCT over a period we judged unattractive for
new investment. This has been possible because these acquisition companies,
which are structured as VCT qualifying investments, have two years in which to
invest in established VCT qualifying businesses or for the companies to
commence a qualifying trade. We believe this strategy has proved to be
extremely beneficial in protecting the value of the Company's asset base in
difficult market conditions.
These acquisition vehicles have been active during 2009, with Barnfield
Management Investments and Calisamo Management making new investments in
December into Iglu.com and Country Baskets respectively. Of the five remaining
companies, Aust Construction Investors and Apricot Trading have commenced
trading, providing management consultancy services whilst continuing to seek
suitable investment opportunities alongside Bladon Castle Management, Fullfield
and Vanir Consultants.
The qualifying investment portfolio has not been immune to the wider
deteriorating trading environment and fair values have fallen in those
investments where the investee company's trading has been affected. A number of
valuations have been reduced as as result of lower levels of profitability of
portfolio companies. However, other investments have continued to trade well.
We are hopeful that value will start to return to some of the investments in
the portfolio during 2010 as trading conditions start to improve.
The Company's investments in PXP and Plastic Surgeon each have exposure to the
house building and construction markets and all have continued to suffer from
the decline of this sector over the last two years. These companies have seen
business volumes shrink significantly and reduced demand from major customers
has impacted on revenue. Plastic Surgeon has made strong progress in reducing
its dependence on the new housing market and has diversified into the
commercial property and insurance claim markets. It has also substantially
reduced its direct and indirect cost base. PXP has responded similarly, moving
away from its dependence on private sector house building towards public sector
funded housing associations. It is still too early to assess when we are likely
to see signs of recovery in these areas.
Blaze Signs has also continued to experience a fall in activity arising from
much reduced levels of new signage rollouts from its major customers. Again it
has responded by reducing its cost base.
A number of companies in the portfolio are trading strongly and expanding their
businesses. DiGiCo Europe has continued to roll out new products following the
successful launch of its new digital audio mixing desk last year and this has
led to sustained profit growth since investment. The performance of Monsal
during the year has also improved materially and the outlook is further
enhanced by the prospect of new capital contracts as water companies commit to
new waste management projects and the company exploits its expertise in
anaerobic digestion. ATG Media has performed in line with expectations over
last year and the progress of its online auction platform looks particularly
promising.
Whilst the fall in a number of valuations over the year is disappointing, the
reduction in profitability of portfolio companies has made some decreases
inevitable. It is important to recognise that all of the reduction in the year
have been in unrealised valuations as opposed to any actual realisations below
cost. The realised loss shown in the Income Statement in the accounts reflects
the fall in the valuation of PastaKing from its valuation last year before its
disposal, which as reported earlier was a successful investment overall. We aim
to invest in strong, profitable companies and believe that the prospect of
significant future recovery over the medium term is good as we continue to
believe that the portfolio, taken as a whole, is resilient and of high quality.
Over the next year, the need for additional investment to support certain
portfolio companies may emerge. We also anticipate much more attractive buying
conditions emerging as the year progresses. Having retained significant
uninvested cash, we feel the Company is well placed to cover both the portfolio
needs that may arise and the new investment opportunities presented.
Investment Portfolio Summary
as at 31 December 2009
Date of Total Valuation % value of % of
initial book net assets equity
investment cost held by
funds
managed
by MPEP
*
GBP'000 GBP'000
Qualifying investments
Unquoted investments
DiGiCo Europe Limited Jul-07 533 1,492 8.5% 30.00%
Manufacturer of digital sound
mixing consoles
Apricot Trading Limited Mar-08 1,000 1,000 5.7% 49.00%
Company seeking to acquire
businesses in the market
services and media sector
Aust Construction Investors Jul-08 1,000 1,000 5.7% 49.00%
Limited
Company seeking to acquire
businesses in the specialist
construction, building
support services or building
products sectors
Bladon Castle Management Dec-08 1,000 1,000 5.7% 16.67%
Limited
Company seeking to acquire
businesses in the retail or
health and well-being
products sector.
CB Imports Group Limited Jul-08 1,000 1,000 5.7% 24.00%
(formerly Calisamo Management
Limited)
Wholesale floristry supplies
& floral supplies
Fullfield Limited Dec-08 1,000 1,000 5.7% 16.67%
Company seeking to acquire
businesses in the food
manufacturing, distribution,
or brand management sectors
Vanir Consultants Limited Oct-08 1,000 1,000 5.7% 16.67%
Company seeking to invest in
data management, data mapping
and management services or
legal and building services
sectors
British International Jun-06 886 762 4.4% 34.93%
Holdings Limited
Helicopter service operator
ATG Media Holdings Limited Oct-08 776 711 4.1% 40.00%
Publisher of the leading
newspaper serving the UK
antiques trade and on-line
platform operator
Iglu.com Holidays Limited Jul-08 675 675 3.9% 35.00%
(formerly Barnfield
Management Investments
Limited)
Ski specialist travel agents
Focus Pharma Holdings Limited Oct-07 593 653 3.7% 13.00%
Licensor and distributor of
generic pharmaceuticals
Monsal Holdings Limited Dec-07 618 602 3.4% 46.51%
Supplier of engineering
services to water and waste
sectors
VSI Limited Apr-06 144 480 2.7% 48.91%
Provider of software for CAD
and CAM vendors
MC440 Limited (Westway Jun-09 252 421 2.4% 12.96%
Cooling)
Designer and distributor of
air conditioning units.
Racoon International Holdings Dec-06 790 118 0.7% 49.00%
Limited
Supplier of hair extensions,
hair care products and
training
The Plastic Surgeon Holdings Apr-08 353 88 0.5% 30.00%
Limited
Supplier of snagging and
finishing services to the
domestic and commercial
property markets
Blaze Signs Holdings Limited Apr-06 379 81 0.5% 52.50%
Manufacturer and installer of
signs
PXP Holdings Limited Dec-06 1,163 - 0.0% 37.33%
(Pinewood Structures)
Designer, manufacturer,
supplier and installer of
timber-frames for buildings
-------- -------------- ----------
Total qualifying investments 13,162 12,083 69.0%
Non-qualifying investments
Global Treasury Funds plc 1,861 1,861 10.7%
(Royal Bank of Scotland)**
Fidelity Institutional Cash 906 906 5.2%
Fund plc**
Insight Liquidity Funds plc 845 845 4.8%
(HBOS)**
Blackrock Sterling Liquidity 705 705 4.0%
first institutional share
class (formerly BGI)**
SWIP Global Liquidity Fund 523 523 3.0%
plc (Scottish Widows)**
Institutional Cash Series plc 518 518 3.0%
(BlackRock)**
GS Funds plc (Goldman Sachs)* 51 51 0.3%
*
-------- -------------- ----------
Total non-qualifying 5,409 5,409 31.0%
investments
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Total investments 18,571 17,492 100.0%
-------- -------------- ----------
Other assets 100 0.6 %
Current liabilities (114) (0.6)%
-------------- ----------
Net assets 17,478 100.0%
------------- ----------
* The other funds managed by MPEP include Matrix Income & Growth VCT plc
(MIG), Matrix Income & Growth 2 VCT plc (MIG2), Matrix Income & Growth 4
VCT plc (MIG4) and The Income & Growth VCT plc (Income & Growth VCT).
** Disclosed as Current investments within Current assets in the Balance Sheet.
Income Statement
for the year ended 31 December 2009
Year ended 31 December 2009 Year ended 31 December 2008
Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
Losses on - (159,151) (159,151) - - -
investments
realised
Unrealised gains/ - 707,142 707,142 - (1,569,263) (1,569,263)
(losses)
on investments
Income 295,276 - 295,276 827,044 162,375 989,419
Recoverable VAT 1,603 4,810 6,413 20,037 60,111 80,148
Investment (87,477) (262,432) (349,909) (94,381) (283,144) (377,525)
manager's fees
Other expenses (276,799) - (276,799) (279,379) - (279,379)
(Loss)/profit on (67,397) 290,369 222,972 73,321 (1,629,921) (1,156,600)
ordinary
activities
before tax
Tax on (loss)/ (754) - (754) (114,744) 56,108 (58,636)
profit on
ordinary
activities
(Loss)/profit for (68,151) 290,369 222,218 358,577 (1,573,813) (1,215,236)
the
year
Basic and diluted (0.35)p 1.48p 1.13p 1.80p (7.88)p (6.08)p
return per
ordinary share
All the items in the above statement derive from continuing operations. There
were no other recognised gains or losses in the year. The total column is the
profit and loss account of the Company. Other than revaluation movements
arising on investments held at fair value through the profit and loss account,
there were no differences between the return as stated above and at historical
cost.
Balance Sheet
as at 31 December 2009
31 December 2009 31 December 2008
GBP GBP
Fixed assets
Investments at fair value 12,083,450 12,978,008
Current assets
Debtors and prepayments 55,381 200,701
Current investments 5,408,768 4,751,577
Cash at bank 45,103 28,354
----------------------------- -----------------------------
5,509,252 4,980,632
Creditors: amounts falling (114,580) (201,225)
due within one year
----------------------------- -----------------------------
Net current assets 5,394,672 4,779,407
----------------------------- -----------------------------
Net assets 17,478,122 17,757,415
----------------------------- -----------------------------
Capital and reserves
Called up share capital 194,105 199,713
Capital redemption reserve 5,880 272
Revaluation reserve (1,078,788) (888,806)
Special distributable reserve 17,475,854 18,683,635
Profit and loss account 881,071 (237,399)
----------------------------- -----------------------------
Equity shareholders' funds 17,478,122 17,757,415
----------------------------- -----------------------------
Net asset value per Ordinary 90.04p 88.91p
Share
Reconciliation of Movements in Shareholders' Funds
for the year ended 31 December 2009
Year ended Year ended
31 December 2009 31 December 2008
GBP GBP
Opening Shareholders' funds 17,757,415 19,471,932
Purchase of own shares (341,741) -
Profit/(loss) for the year 222,218 (1,215,236)
Dividends paid in year (159,770) (499,281)
----------------------------- -----------------------------
Closing shareholders' funds 17,478,122 17,757,415
Cash Flow Statement
for the year ended 31 December 2009
Year ended Year ended
31 December 2009 31 December 2008
GBP GBP GBP GBP
Operating activities
Investment income received 299,289 1,024,309
VAT received and interest 139,778 -
thereon
Investment management fees (360,825) (411,462)
paid
Other cash payments (286,571) (274,847)
-------------- -------------- -------------- --------------
Net cash (outflow)/inflow (208,329) 338,000
from operating activities
Investing activities
Acquisitions of investments (485,036) (8,516,827)
Disposals of investments 1,936,170 316,487
-------------- --------------
Net cash inflow/(outflow)from 1,451,134 (8,200,340)
investing activities
Taxation
Taxation paid (67,354) (71,807)
Equity dividends
Equity dividends paid (159,770) (499,281)
-------------- --------------
Cash inflow/(outflow) before 1,015,681 (8,433,428)
liquid resource management
and financing
Management of liquid
resources
(Decrease)/increase in liquid (657,191) 8,444,169
resources
-
Financing
Ordinary shares bought back (341,741) -
-------------- -------------- -------------- --------------
Increase in cash for the year 16,749 10,741
-------------- -------------- -------------- --------------
Notes
1. Basis of accounting
This announcement of the annual results of the Company for the year ended 31
December 2009 has been prepared using accounting policies consistent with those
adopted in the full audited annual accounts which have been prepared under UK
Generally Accepted Accounting Practice (UK GAAP) and the Statement of
Recommended Practice, `Financial Statements of Investment Trust Companies
and Venture Capital Trusts' ("SORP") issued by the Association of Investment
Companies in January 2009.
2. Income
2009 2008
GBP GBP
Income from bank deposits 925 4,481
---------------------- ----------------------
Income from investments
- from equities 7,650 166,722
- from overseas based OEICs 40,990 533,840
- from loan stock 233,293 284,376
- from VAT recoverable 8,365 -
---------------------- ----------------------
290,298 984,938
Other income 4,053 -
---------------------- ----------------------
Total income 295,276 989,419
Total income comprises
Dividends 48,640 700,562
Interest 242,583 288,857
Other Income 4,053 -
---------------------- ----------------------
295,276 989,419
Income from investments comprises
Listed overseas securities 40,990 533,840
Unlisted UK securities 7,650 166,722
Loan stock interest 233,293 284,376
---------------------- ----------------------
281,933 984,938
---------------------- ----------------------
Income from VAT recoverable relates to interest received on VAT recoverable
recognised to date as per note 3 below.
Loan stock interest above is stated after deducting an amount of GBPnil (2008: GBP
14,320), being a provision made against loan stock interest regarded as
collectable in previous years.
Total loan stock interest due but not recognised in the year was GBP210,334
(2008: GBP162,706). This increase was the main cause of the fall in loan stock
interest from last year. Dividends from equities have fallen from last year's
level, which contained several capital dividends that were not repeated this
year. The fall in income from overseas based OEICs, being the money-market
funds, reflected the fall in interest rates to exceptionally low levels.
3. Recoverable VAT
Revenue Capital Total Revenue Capital Total
2009 2009 2009 2008 2008 2008
GBP GBP GBP GBP GBP GBP
VAT recoverable 1,603 4,810 6,413 20,037 60,111 80,148
As at 31 December 2008 the Directors considered it reasonably certain that the
Company would obtain a repayment of VAT of not less than GBP125,000. Last year's
accounts recognised this amount as income of GBP80,148 above, and GBP44,852
deducted from last year's investment manager's fees. This estimate was based
upon information supplied by the Company's Investment Manager, and discussions
with the Company's professional advisors as a result of the European Court of
Justice ruling and subsequent HMRC briefing that management fees be exempt for
VAT purposes. During the year, a total of GBP131,413 of VAT recoverable has been
received. The excess of GBP6,413 over the GBP125,000 recognised in 2008's accounts
has been credited to the Income Statement, allocated 25% to revenue and 75% to
capital return and is in the same proportion as that in which the irrecoverable
VAT was originally charged.
The GBP131,413 of income recognised in both the 2008 and current year accounts,
together with related interest of GBP8,365 shown in note 2 above, equals the sum
of GBP139,778 shown in the cash flow statement as part of cashflow from operating
activities.
4. Basic and diluted net asset value per share
Net asset value per Ordinary Share is based on net assets at the end of the
year, and on 19,410,502 (2008: 19,971,254) Ordinary Shares, being the number of
Ordinary Shares in issue on that date.
* Basic and diluted return per Ordinary Share
*
2009 2008
GBP GBP
Total earnings/(loss) after taxation: 222,218 ( 1,215,236)
Basic and diluted earnings/(loss) per 1.13p (6.08)p
share (note a)
Revenue (loss)/profit from ordinary ( 68,151) 358,577
activities after taxation
Basic and diluted revenue (loss)/ (0.35)p 1.80p
earnings per share (note b)
Net realised capital losses on ( 159,151) -
investments
Net unrealised capital gains/(losses) 707,142 ( 1,569,263)
on investments
Recoverable VAT 4,810 60,111
Dividends treated as capital - 162,375
Capital management fees less taxation ( 262,432) ( 227,036)
---------------------- ----------------------
Total capital earnings/(loss) 290,369 ( 1,573,813)
Basic and diluted capital gain per 1.48p (7.88)p
share (note c)
Weighted average number of shares in 19,728,182 19,971,254
issue in the year
Notes
a) Basic earnings per share is total earnings after taxation divided by the
weighted average number of shares in issue.
b) Revenue earnings per share is the revenue profit after taxation divided by
the weighted average number of shares in issue.
c) Capital earnings per share is the total capital return after taxation
divided by the weighted average number of shares in issue.
d) There are no instruments that will increase the number of shares in issue in
future. Accordingly, the above figures currently represent both basic and
diluted returns.
6. Investment Manager's Fees
In accordance with the policy statement published under "Management, Expenses
and Administration" in the Company's Prospectus dated 8 July 2005, the
Directors have charged 75% of the investment management expenses to the
realised capital reserve.
7. Dividends
The directors have declared an interim capital dividend in respect of the year
ended 31 December 2009 of 4.0 pence per share. The dividend will be paid on 21
April 2010 to shareholders on the Register on 26 March 2010.
8. Related party transactions
Bridget Guérin was until 22 December 2009 a director of and remains a
shareholder (2.0%) of Matrix Group Limited, which owns 100% of the equity of
MPE Partners Limited. MPE Partners Limited has a 50% interest in Matrix Private
Equity Partners LLP ("MPEP"), the Company's Investment Manager. Bridget Guérin
was also a director (until 22 December 2009) of Matrix-Securities Limited, a
wholly, owned subsidiary of Matric Group Limited, who provided Company
Secretarial and Accountancy Services to the Company under agreements dated 8
September 2005. The agreements with MPEP and with Matrix-Securities Limited
became effective from 26 January 2006. GBP18,738 was due to Matrix-Securities
Limited at the end of the year (2008: GBP18,711).
Matrix Group Limited has a significant interest in Matrix Corporate Capital LLP
("MCC"), who became the Company's brokers on 18 December 2008. Five share
buybacks were undertaken by MCC on the Company's instruction, costing GBP341,741
(2008: GBPnil). Fees of GBP9,161 were paid to MCC during the year.
9. The Directors announced on 9 February 2009 that the Board had reached
agreement in principle with the board of Matrix Income & Growth VCT plc ("MIG
VCT") to merge the two Companies, subject to approval by Shareholders. The
intention is that the proposed merger will be completed pursuant to a section
110 scheme of reconstruction under the Insolvency Act 1986 by transferring the
assets and liabilities of the Company to MIG VCT in consideration for new
shares in the MIG VCT to be issued to Shareholders on a relative net asset
value basis. The Company estimates that it will share merger costs, estimated
to total approximately GBP250,000, with MIG VCT.
10. Financial Information
The financial information set out in these statements does not constitute the
Company's statutory accounts for the year ended 31 December 2009 in terms of
section 434 of the Companies Act 2006 but is derived from those accounts.
Statutory accounts for the year ended 31 December 2009 will be delivered to
Companies House following the Company's Annual General Meeting. The auditors
have reported on those accounts: their report was unqualified and did not
contain a statement under Section 498 of the Companies Act 2006.
11.Annual Report
The Annual Report for the year ended 31 December 2009 will shortly be made
available on our website: www.mig3vct.co.uk and Shareholders will be notified
of this by email or post or sent a hard copy in the post in accordance with
their instructions. Copies will be available thereafter to members of the
public from the Company's registered office.
12.Annual General Meeting
The Annual General Meeting will be held at 11.15 am on Wednesday, 12 May 2009
at the offices of Matrix Group Limited, One Vine Street, London W1J 0AH.
Contact details for further enquiries:
Sarah Penfold of Matrix-Securities Limited (the Company Secretary) on 020 3206
7000 or by e-mail to mig@matrixgroup.co.uk
Mark Wignall or Mike Walker at Matrix Private Equity Partners LLP (the
Investment Manager), on 020 3206 7000 or by e-mail to info@matrixpep.co.uk
END
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