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 £18,907,738
31 December 2009 31 December 2008
Net assets £17,478,122 £17,757,415
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
£1.7 million in December 2009 to support the management buy-outs of
Country Baskets and Iglu.com respectively. In addition, as reported
in the Half-Yearly Report, the Company made a new investment into
Westway Cooling in June 2009. Meanwhile the disposal proceeds from
the sale of PastaKing and repayment of loan stocks by DiGiCo Europe
and Westway resulted in a £1.6 million repayment to the Company. In
addition, £328,265 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
£1,124,828. This realisation contributed to total proceeds of
£1,369,250 to the Company over the life of the investment,
representing a multiple of 3.25 of the Company's original
investment of £419,418. 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 £34 million and which is expected
to deliver cost savings and strategic benefits. An Extraordinary
General Meeting ("EGM") will be held during May at which the Board
will seek Shareholder approval to effect the proposals and full
details of the EGM will be included in the Shareholder
Circular.
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 £ 68,151 (2008: profit of £358,577), the successful
realisation of the investment in PastaKing generated a net profit
of £949,832. 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 £15 million of gross assets at the time of investment to be
classed as a VCT qualifying holding.
* VCT regulation
The investment policy is designed to ensure that the VCT
continues to qualify and is approved as a VCT by HMRC. Amongst
other conditions, the VCT may not invest more than 15% of its
investments in a single company and must have at least 70% by value
of its investments throughout the period in shares or securities
comprised in Qualifying Holdings, of which a minimum overall of 30%
by value must be ordinary shares which carry no preferential
rights. In addition, although the VCT can invest less than 30% of
an investment in a specific company in ordinary shares it must have
at least 10% by value of its total investments in each Qualifying
Company in ordinary shares which carry no preferential rights.
* Asset Mix
The VCT holds funds awaiting investment in a portfolio of
readily realisable interest-bearing investments and deposits. The
investment portfolio of qualifying investments will be maintained
at approximately 80% of net assets.
* Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses
across different industry sectors. To reduce the risk of high
exposure to equities, each qualifying investment is structured
using a significant proportion of loan stock (up to 70% of the
total investment in each VCT qualifying company.) Initial
investments in VCT qualifying companies are generally made in
amounts ranging from £200,000 to £1 million at cost. No holding in
any one company will represent more than 10% of the value of the
VCT's investments at the time of investment. Ongoing monitoring of
each investment is carried out by the Investment Manager generally
through taking a seat on the Board of each VCT qualifying
company.
* Co-investment
The VCT aims to invest in larger more mature unquoted companies
through investing alongside four other Income and Growth VCTs
advised by the Investment Manager with a similar investment policy.
This enables the VCT to participate in combined investments by the
Investment Manager of up to £5 million.
* Borrowing
The VCT has no current plans to undertake any borrowing.
* Management
The Board has overall responsibility for the Company's affairs
including the determination of its investment policy. Investment
and divestment proposals are originated, negotiated and recommended
by the Investment Manager and are then subject to formal approval
by the Directors. Matrix Securities provides Company Secretarial
and Accountancy services to the VCT.
Investment Manager's Review
The continued economic deterioration in the UK and worldwide has
made this a challenging year for the Company and specifically for
new investment. 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
£198,181 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 £13.2 (2008: £13.9)
million and valued at £12.1 (2008: £13.0) 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
£1.6 million.
As reported in the Half-Yearly Report, MIG3 VCT made a new
investment in June 2009 of £286,855 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 £9.6 million and a record order
book, we believe that this company is well placed to grow.
Two further new investments were made in December 2009. The
first of these was an investment of £1 million, using the
acquisition vehicle Calisamo Management (now re-named CB Imports
Group), to support the management buy-out of Country Baskets. The
investment comprises loan stock of £825,000 and a 6% equity stake.
Founded in 1990 and operating from a national distribution centre
in Leeds, the company has a turnover of circa £20 million. It is a
leading importer and distributor of artificial flowers, floral
sundries, glassware, giftware, basket ware and Christmas
decorations. The company is planning to roll out further outlets
across the UK as part of a new growth phase funded by this
investment.
The second new investment was into Iglu.com Holidays, the UK's
largest online specialist ski holiday operator and fastest growing
cruise holiday travel agent. MIG3 VCT invested £674,735 comprising
loan stock of £571,956 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 £1,124,828. This
realisation contributed to total proceeds of £1,370,365 to the
Company over the life of the investment, representing a 3.25x
return on the Company's original investment of £419,148. 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 £ 12 million.
Some of the companies in the portfolio continue to be strongly
cash generative and amongst these Westway repaid £35,156 of loan
stock considerably earlier than expected in October 2009; and
DiGiCo Europe repaid a total of £410,043 in two instalments in May
and December of 2009 plus a premium of £30,536.
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
*
£'000 £'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
-------- -------------- ----------
-------- -------------- ----------
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
£ £ £ £ £ £
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
£ £
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
£ £
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
£ £ £ £
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
£ £
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
£nil (2008: £ 14,320), being a provision made against loan stock
interest regarded as collectable in previous years.
Total loan stock interest due but not recognised in the year was
£210,334 (2008: £162,706). 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
£ £ £ £ £ £
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 £125,000. Last year's accounts recognised this amount as
income of £80,148 above, and £44,852 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 £131,413 of VAT recoverable has been received. The excess
of £6,413 over the £125,000 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 £131,413 of income recognised in both the 2008 and current
year accounts, together with related interest of £8,365 shown in
note 2 above, equals the sum of £139,778 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
£ £
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. £18,738 was due to Matrix-Securities Limited at the end of
the year (2008: £18,711).
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 £341,741 (2008: £nil). Fees of
£9,161 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 £250,000, 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