TIDMMIXT
Matrix Income & Growth 3 VCT plc ("the Company")
Half-yearly results for the six months ended 30 June 2009
Investment Objective
Matrix Income & Growth VCT 3 plc ("MIG3 VCT" or the "VCT") is a Venture Capital
Trust ("VCT") listed on the London Stock Exchange. Its investment portfolio,
which invests primarily in established and profitable unquoted companies, is
managed by Matrix Private Equity Partners LLP ("MPEP" or "the Investment
Manager").
The Company's objective is to provide investors with a regular income stream,
by way of tax free dividends, and to generate capital growth through portfolio
realisations, which can be distributed by way of additional tax free dividends.
Financial Highlights
Half-yearly results for the six months ended 30 June 2009
Initial net asset value per share 94.5 p
Initial net assets GBP18,907,738
30 June 2009 30 June 2008 31 December 2008
Net assets GBP17,384,986 GBP18,610,249 GBP17,757,415
Net asset value (NAV) per 88.4 p 93.2 p 88.9 p
share
Net cumulative dividends 5.55 p 3.75 p 4.75 p
paid*
Total return per share to 94.0 p 96.9 p 93.7 p
shareholders since launch
(NAV basis)**
Share price (mid-market 59.75p 86.5 p 80.0 p
price)
* For a breakdown of recent dividends paid, please see Note 7 of the Notes to
the Unaudited Financial Statements below.
** Net asset value per share plus cumulative dividends per share. This compares
with an original investment cost of 60 pence per share after allowing for
income tax relief of 40 pence per share.
Chairman's Statement
I am pleased to present this Half-yearly Report covering the six month period
ended 30 June 2009.
Results and dividend
The continuing difficulties in the UK and world economies have remained over
the six month period covered by this report and your Company has not been
immune from their impact. The recession is affecting many of the companies in
the portfolio, particularly those exposed to the support services and
construction and materials sectors. However, the well-diversified nature of
your portfolio including, in particular, its strong underlying cash position,
has helped to limit the impact of this generally poor background on the overall
value of the Company's investments. Accordingly, the total return to
shareholders, based on NAV plus dividends paid, rose marginally by 0.3% in the
period from 93.7 pence per share to 94.0 pence per share.
Very disappointingly, in contrast to this steady total return performance,
income from the Company's investments has come under considerable pressure. The
revenue account generated a net loss (after tax) for the period of GBP13,021
(2008: profit of GBP291,308). This significant fall in revenue has been as a
result of a large fall in the loan stock interest received from investee
companies and a substantial decline in interest received from money market
funds which reflects the fall in interest rates from an average of 5.6% in the
same period last year to 0.5% this year. The Board will not be declaring an
interim dividend and unless the trend in interest income reverses quickly and
markedly the payment of an income dividend for 2009 appears very unlikely.
Net asset value (NAV)
The NAV at 30 June 2009 was 88.4 pence per share compared with a NAV of 88.9
pence per share at the beginning of the period (after dividends). This
represents a slight decline of 0.6%.
Investment portfolio
MPEP has continued to pursue a very selective approach to investing in new
businesses. Investment activity has generally been quieter than in previous
periods, the reasons for which are explained in the Investment Manager's
Review. In June 2009, the Company participated in the management buy-out of
Westway Cooling, a company that specialises in the installation and servicing
of air conditioning systems. In January, we also made one small follow-on
investment into Monsal Holdings.
For further information on the investment portfolio please see the Investment
Manager's Review below.
Liquidity
The Company was holding GBP4.3 million in cash and liquidity fund balances as at
30 June 2009 in addition to the GBP7 million invested in the Operating Partner
acquisition vehicles. It is therefore very well positioned both to make
follow-on investments to support the existing portfolio through this period of
economic uncertainty and take advantage of more favourable opportunities for
new investment that the Manager believes will emerge in 2010.
The Board has been very conscious of the need to spread risk in the current
environment and is therefore continuing to hold the Company's cash deposits
across a range of the leading money market funds.
Investment in qualifying holdings
The Company is required to meet the target set by HM Revenue & Customs of
investing 70% of the funds raised in qualifying unquoted and AiM quoted
companies, which it has achieved throughout the period. The Company was 77.84%
invested in qualifying companies (based on VCT cost as defined in tax
legislation which differes from actual cost in the Investment Portfolio Summary
on page 9) at the period-end, with the balance of the portfolio invested in a
selection of readily realisable, money market funds with AAA credit ratings.
Share buy-backs
During the six months to 30 June 2009, the Company bought back 305,059 of the
Company's own shares at an average price of 59.86 pence per share, which
represented a discount of approximately 30% to the published NAV at the time of
the buy-back adjusted for dividends payable.
These shares, representing 1.53% of the issued share capital at the beginning
of the period, were subsequently cancelled by the Company. The Board regularly
reviews its share buy-back policy.
VAT on management fees
As reported in the Annual Report for the year ended 31 December 2008 the
Company is no longer liable to pay VAT on investment management fees. The
Manager has been able to reclaim VAT previously paid on fees and the Company
has received a refund of GBP131,413, plus interest of GBP8,365, in the period.
These accounts recognise this interest together with GBP6,413 being the
additional VAT recovered to date, not anticipated as a debtor at 31 December
2008.
The Board is continuing to seek to recover additional amounts of VAT paid by
the Company together with compensation for loss of interest.
Communicating with shareholders
The Company maintains a programme of regular communication with Shareholders
through newsletters and a dedicated website www.mig3vct.co.uk, supplementing
the Half-Yearly and Annual Reports. The Board welcomes the opportunity to meet
Shareholders at the Company's General Meetings during which representatives of
the Investment Manager are present to discuss the progress of the portfolio.
The next AGM of the Company will be held in May 2010.
Outlook
Notwithstanding the very poor economic background, portfolio companies as a
whole are trading reasonably well. Almost all of the investee companies are
still forecast to be profitable before taking into account interest and
goodwill amortisation and several companies are showing real potential for
future development when the economy ultimately recovers. The Board remains
confident that the total return to shareholders should recover as and when
economic and financial conditions allow, although income generation will remain
under pressure for the foreseeable future.
The Manager also expects that by 2010 business owners will return to the market
to raise risk capital or to sell their companies. This should provide sound
investment opportunities for cash rich investors and investment companies. The
substantial liquid resources held by the Company should ensure that the Manager
has the means to invest at attractive valuations as these arise.
Finally, I would like to thank all of our Shareholders for their continuing
support.
On behalf of the Board
Keith Niven, Chairman
31 July 2009
Directors' Responsibility Statement
The Directors confirm that to the best of their knowledge:
a. the condensed set of financial statements, which have been prepared in
accordance with UK Generally Accepted Accounting Practice (UK GAAP) and the
2009 Statement of Recommended Practice (Financial Statements of Investment
Trust Companies and Venture Capital Trusts", give a true and fair view of
the assets, liabilities, financial position and profit of the Company, as
required by DTR 4.2.4; and
b. the Interim Management Report, included within the Chairman's Statement and
the Investment Manager's Review includes a fair review of the information
required by DTR 4.2.7 and in accordance with DTR 4.2.10.
Related Party Transactions
Details of related party transactions in accordance with DTR 4.2.8 can be found
in Note 12 to the Accounts below.
Principal risks and uncertainties
In accordance with DTR 4.2.7, the Board confirms that the principal risks and
uncertainties facing the Company have not materially changed since the
publication of the Annual Report and Accounts for the year ended 31 December
2008. The Board acknowledges that there is regulatory risk and continues to
manage the Company's affairs in such a manner as to comply with section 274
Income Tax Act 2007. Other risks relate to credit risk, market price risk,
liquidity risk, interest rate risk and currency risk. A more detailed
explanation of these can be found in Note 20 on pages 44 - 48 of the 2008
Annual Report, copies of which are available on the VCT's website,
www.mig3vct.co.uk.
Cautionary Statement
This Report may contain forward looking statements with regards to the
financial condition and results of the Company which are made in the light of
current economic and business circumstances. Nothing in this announcement
should be construed as a profit forecast.
On behalf of the Board
Keith Niven, Chairman
31 July 2009
Investment Manager's Review
Overview
We have continued to adopt a cautious approach to new investment and believe
that this remains the best path to take in the current market whilst vendors'
price expectations appear to us to be generally too high. The low level of
market activity which has persisted throughout the period is producing only
limited opportunities for deals where willing vendors are selling to strategic
buyers.
Investment portfolio
During the period, one new investment of GBP286,855 was completed to support the
MBO of Westway Cooling in June 2009. Based in Greenford, Middlesex, Westway has
been specialising in installing, servicing and maintaining high quality
air-conditioning systems and associated building services plant in the
refurbishment and maintenance market since 2001. With a turnover of GBP10 million
and a record order book, the company is well placed to grow, even in
challenging market conditions.
To date the investment portfolio has required very little additional funding
despite the worsening economic environment. One follow-on investment was
completed in January 2009 into Monsal Holdings of GBP61,817 to provide working
capital and headroom. The company is now doing well following a difficult year
in 2008. It has recently won a number of major contracts and is establishing a
reputation for its expertise in anaerobic technology.
At 30 June 2009, the portfolio comprised investments in nineteen companies at a
total current cost of GBP14.0 million and valued in accordance with International
Private Equity and Venture Capital Valuation (IPEVCV) Guidelines at GBP13.2
million. After adjusting for new investments and repayments during the period,
this now represents 94.3% of cost compared to 93.6% of cost at 31 December
2008.
GBP7 million of the investment cost is held in cash in the seven acquisition
companies in the Operating Partner Programme (for the full list, please see the
Investment Portfolio Summary on page 9). These companies are individually
actively seeking to acquire investments in the construction, food
manufacturing, healthcare, retailing, data management and market services
sectors but so far have not found investment transactions at the right price.
The majority of companies in the portfolio are servicing their loan stock
commitments to the Company. However, due to banking covenant breaches, four
companies were not currently servicing their VCT loan stocks at 30 June 2009.
With the exception of Plastic Surgeon, which is forecasting a modest loss, we
expect all of the companies in the portfolio to deliver operating profits (ie
prior to goodwill amortisation and servicing debt) in their current financial
year. The profitability of Plastic Surgeon and PXP has been particularly
affected by their direct exposure to the downturn in the construction and
house-building sector.
Pressure on capital and maintenance expenditure in the UK retail sector has
also significantly affected Blaze Signs, although there is guarded optimism
that its clients are now beginning to invest again in signage. PastaKing
continues to make good levels of profits which could be enhanced if sterling
were to strengthen against the euro, reducing the prices of its ingredients and
raw materials. Although the advertising revenue of ATG Media has fallen, it
remains on forecast to meet its budgeted profits due to the higher than
expected revenue arising from its on-line auctions. British International
reported reduced profits due to a combination of poor operating conditions on
the Penzance-Isles of Scilly route and unscheduled maintenance costs.
DiGiCo continues to trade strongly, is well ahead of budget and is improving on
its performance to date. It has also repaid GBP205,022 of its loan stock in May
2009, earlier than anticipated. VSI is making steady progress after a year of
record profits in 2008.
Focus Pharma enjoyed solid progress in 2008 and has begun the current year
well. Racoon is finding trading conditions difficult but remains profitable,
before interest and goodwill amortisation.
Over the past months we have been working even more closely with management of
a number of companies in the portfolio which have been most affected by a more
challenging trading environment. Significant redundancies and other cost
savings have been implemented in recent months as businesses seek to reduce
their breakeven levels. The need for further cost reductions is kept under
continuous review.
In summary, the portfolio is being affected by the wider environment in terms
of a slow down in trading resulting in a number of reduced valuations. However,
it is encouraging that there has been a modest increase in overall value and
the measured approach of the Operating Partner acquisition vehicle programme
has also been very helpful in preserving value. It is important to note that
the valuations reflect no realised investment losses and we remain confident
that values will therefore recover in the future.
Outlook for New Investments
The financial performance of many smaller companies has, as yet, been better
than many commentators had forecast and owners are generally preferring to
trade through challenging conditions rather than sell their businesses or raise
capital at what they perceive to be a low point in the business cycle. Many
companies' revenue lines have benefitted from relative strength in consumer
expenditure due to low interest rates and therefore low mortgage costs.
Favourable exchange rates, particularly sterling's weakness against the euro,
are providing a degree of stimulus to certain UK business sectors, notably
tourism.
We believe that in seeking to help small companies through measures such as
reducing VAT and intervening through support from the state-owned banks, the
Government may turn out to be simply deferring future corporate failures. The
worst effects of recession do not yet appear to have significantly filtered
through to the real economy. However, the two main factors that could change
this picture are future cuts in unsustainable levels of public sector
expenditure and rising unemployment which could feed through to reduced
domestic retail demand. Many more companies will need to take action to cut
their cost base and in some cases the available padding has already been cut
away. As a consequence of this analysis we do not expect to complete many
investments in 2009. However, we believe that during 2010, business owners will
become much clearer as to their position and future prospects. They will then
be far better informed as to their need for capital or an outright sale and the
terms on which such a transaction can be completed. We therefore expect many
more vendors to come forward. The Company is a well-positioned buyer with
strong cash reserves and this should enable us to acquire good businesses, at
attractive valuations.
We are also mindful that there are an increasing number of distressed
competitors to several of our portfolio companies and these may represent good
acquisition opportunities for some investee companies. We continue to review
these opportunities with investee company management teams.
Matrix Private Equity Partners LLP
31 July 2009
Investment Portfolio Summary
as at 30 June 2009
Date of Total Valuation % value
initial book of net
investment cost assets
GBP'000 GBP'000
Qualifying investments
Unquoted investments
DiGiCo Europe Limited Jul-07 738 1,475 8.48%
Designer and manufacturer of audio mixing
desks
PastaKing Holdings Limited Jun-06 419 1,118 6.43%
Supplier to the educational and food
service market
Apricot Trading Limited Mar- 08 1,000 1,000 5.75%
Company seeking to acquire businesses in
the market services and media sector.
Aust Construction Investors Limited Jul- 08 1,000 1,000 5.75%
Company seeking to acquire businesses in
the construction sector
Barnfield Management Investments Limited Jul- 08 1,000 1,000 5.75%
Company seeking to acquire businesses in
the food sector
Calisamo Management Limited Jul- 08 1,000 1,000 5.75%
Company seeking to acquire businesses in
the healthcare sector
Vanir Consulting Limited Oct- 08 1,000 1,000 5.75%
Company seeking to invest in data
management, data mapping and management
services
Bladon Castle Management Limited Dec- 08 1,000 1,000 5.75%
Company seeking to acquire businesses in
the retailing, health and brand management
sector
Fullfield Limited Dec- 08 1,000 1,000 5.75%
Company seeking to acquire businesses in
the food sector
ATG Media Holdings Limited Oct- 08 776 776 4.46%
Publisher and on-line auction platform
operator
British International Holdings Limited Jun-06 750 736 4.23%
Supplier of helicopter services
Focus Pharma Holdings Limited Oct-07 594 631 3.63%
Licensor and distributor of generic
pharmaceuticals
VSI Limited Apr-06 143 468 2.69%
Developer and marketer of 3D software
Monsal Holdings Limited Dec-07 618 464 2.67%
Supplier of engineering services to water
and waste sectors
MC 440 Limited (Westway Cooling) Jun- 09 287 287 1.65%
Installation, maintenance and servicing of
air-conditioning systems
Blaze Signs Holdings Limited Apr-06 379 144 0.83%
Manufacturer and installer of signs
Plastic Surgeon Holdings Limited (The) Apr-08 353 88 0.51%
Snagging and finishing of domestic and
commercial properties
PXP Holdings Limited (Pinewood Structures) Dec-06 1,163 31 0.18%
Designer, manufacturer, supplier and
installer of timber-frames for buildings
Racoon International Holdings Limited Dec-06 790 0 0.00%
Supplier of hair extensions, hair care
products and training
------ ------
Total qualifying investments 14,010 13,218 76.01%
------ ------
Non-qualifying investments
Barclays Global Investors Cash Selection 953 953 5.48%
Funds plc *
Fidelity Institutional Cash Fund plc * 904 904 5.20%
Insight Liquidity Funds plc (HBOS) * 841 841 4.84%
SWIP Global Liquidity Fund plc (Scottish 521 521 3.00%
Widows) *
Institutional Cash Series plc (BlackRock) 516 516 2.97%
*
GS Funds plc (Goldman Sachs) * 301 301 1.73%
Global Treasury Funds plc (Royal Bank of 227 227 1.32%
Scotland) *
------ ------ ------
Total non-qualifying investments 4,263 4,263 24.54%
------ ------ ------
Total investments 18,273 17,481 100.55%
Other assets 85 85 0.49 %
Current liabilities (181) (181) (1.04)%
------ ------ ------
Net assets 18,177 17,385 100.00%
------ ------ ------
* Disclosed as Investments at fair value with Current assets in the Balance
Sheet
Unaudited Income Statement
for the six months ended 30 June 2009
Six months ended 30 June 2009 Six months ended 30 June 2008
(unaudited) (unaudited)
Notes Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
Unrealised gains/ 9 - 96,179 96,179 - (713,338) (713,338)
(losses) on
investments held
at fair value
Realised gains on 9 - 15,268 15,268 - - -
investments held
at fair value
Income 2 164,569 - 164,569 535,179 - 535,179
Recoverable VAT 3 1,603 4,810 6,413 - - -
Investment 4 (43,862) (131,584) (175,446) (56,965) (170,894) (227,859)
management expense
Other expenses (136,965) - (136,965) (136,416) - (136,416)
------ ------ ------ ------ ------ ------
(Loss)/profit on (14,655) (15,327) (29,982) 341,798 (884,232) (542,434)
ordinary
activities before
taxation
Tax on (loss)/ 5 1,634 - 1,634 (50,490) 30,810 (19,680)
profit on ordinary
activities
------ ------ ------ ------ ------ ------
(Loss)/profit (13,021) (15,327) (28,348) 291,308 (853,422) (562,114)
attributable to
equity
shareholders
------ ------ ------ ------ ------ ------
Basic and diluted 6 (0.06)p (0.08)p (0.14)p 1.46p (4.27)p (2.81)p
earnings per share
Year ended 31 December 2008
(audited)
Notes Revenue Capital Total
GBP GBP GBP
Unrealised gains/ 9 - (1,569,263) (1,569,263)
(losses) on
investments held
at fair value
Realised gains on 9 - - -
investments held
at fair value
Income 2 827,044 162,375 989,419
Recoverable VAT 3 20,037 60,111 80,148
Investment 4 (94,381) (283,144) (377,525)
management expense
Other expenses (279,379) - (279,379)
------ ------ ------
(Loss)/profit on 473,321 (1,629,921)
ordinary
activities before
taxation
Tax on (loss)/ 5 (114,744) 56,108 (58,636)
profit on ordinary
activities
------ ------ ------
(Loss)/profit 358,577 (1,573,813) (1,215,236)
attributable to
equity
shareholders
------ ------ ------
Basic and diluted 6 1.80p (7.88)p (6.08)p
earnings per share
The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
There were no other recognised gains or losses in the period.
Other than revaluation movements arising on investments held at fair value
through profit and loss, there were no differences between the loss as stated
above and at historical cost.
The notes below form part of these half-yearly financial statements.
Unaudited Balance Sheet
as at 30 June 2009
As at As at As at
30 June 2009 30 June 2008 31 December
2008
(restated) (restated)
(unaudited) (unaudited) (audited)
Notes GBP GBP GBP
Non-current assets
Investments at fair value 1c, 9 13,217,837 6,894,032 12,978,008
Current assets
Debtors and prepayments 35,255 126,956 200,701
Investments at fair value 10 4,263,465 11,805,255 4,751,577
Cash at bank 49,802 28,356 28,354
------ ------ ------
4,348,522 11,960,567 4,980,632
Creditors: amounts (181,373) (244,350) (201,225)
falling due within one
year
------ ------ ------
Net current assets 4,167,149 11,716,217 4,779,407
------ ------ ------
Net assets 17,384,986 18,610,249 17,757,415
------ ------ ------
Capital and reserves 11
Called up share capital 196,662 199,713 199,713
Capital redemption 3,323 272 272
reserve
Revaluation reserve (792,627) (32,881) (888,806)
Special distributable 17,764,132 18,683,635 18,683,635
reserve
Profit and loss account 213,496 (240,490) (237,399)
------ ------ ------
Equity shareholders' 17,384,986 18,610,249 17,757,415
funds
------ ------ ------
Net asset value per 8 88.40p 93.18p 88.91p
Ordinary Share
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 June 2009
Six months Six months Year ended
ended ended
30 June 2009 30 June 2008 31 December
2008
(unaudited) (unaudited) (audited)
Notes GBP GBP GBP
Opening Shareholders' 11 17,757,415 19,471,932 19,471,932
funds
Buyback of shares (184,311) - -
Loss for the period (28,348) (562,114) (1,215,236)
before dividends
Dividends paid in period 7 (159,770) (299,569) (499,281)
------ ------ ------
Closing Shareholders' 17,384,986 18,610,249 17,757,415
funds
------ ------ ------
Unaudited Summarised Cash Flow Statement
for the six months ended 30 June 2009
Six months Six months Year ended
ended ended
30 June 2009 30 June 2008 31 December
2008
(unaudited) (unaudited) (audited)
GBP GBP GBP
Operating activities
Investment income received 202,936 520,556 1,024,309
VAT recovered 131,413 - -
Investment management fees (186,362) (227,859) (411,462)
paid
Other cash payments (142,188) (112,409) (274,847)
------ ------ ------
Net cash inflow from operating 5,799 180,288 338,000
activities
Investing activities
Acquisitions of investments (348,672) (1,352,528) (8,516,827)
Disposals of investments 220,290 92,089 316,487
------ ------ ------
Net cash outflow from (128,382) (1,260,439) (8,200,340)
investing activities
Taxation
Taxation paid - (28) (71,807)
Dividends
Equity dividends paid (159,770) (299,569) (499,281)
------ ------ ------
Cash outflow before financing (282,353) (1,379,748) (8,433,428)
and liquid resource management
Financing
Ordinary shares bought back (184,311) - -
Management of liquid resources
Decrease in current 488,112 1,390,491 8,444,169
investments
------ ------ ------
Increase in cash for the 21,448 10,743 10,741
period
------ ------ ------
Reconciliation of loss on ordinary activities before taxation to net cash
inflow from operating activities
for the six months ended 30 June 2009
Six months Six months Year ended
ended ended
30 June 2009 30 June 2008 31 December
2008
(unaudited) (unaudited) (audited)
GBP GBP GBP
Loss on ordinary activities (29,982) (542,434) (1,156,600)
before taxation
Net unrealised (gains)/losses (96,179) 713,338 1,569,263
on investments
Net gains on realisations of (15,268) - -
investments
Decrease/(increase) in debtors 165,446 (13,727) (87,472)
(Decrease)/increase in (18,218) 23,111 12,809
creditors
------ ------ ------
Net cash inflow from operating 5,799 180,288 338,000
activities
------ ------ ------
Notes to the Unaudited Financial Statements
1. Principal accounting policies
The following accounting policies have been applied consistently throughout the
period. Full details of principal accounting policies will be disclosed in the
Annual Report.
a) Basis of accounting
The unaudited results cover the six months to 30 June 2009 and have been
prepared under UK Generally Accepted Accounting Practice (UK GAAP), consistent
with the accounting policies set out in the statutory accounts for the year
ended 31 December 2008 and the 2009 Statement of Recommended Practice,
`Financial Statements of Investment Trust Companies and Venture Capital
Trusts'.
The Half-Yearly report has not been audited, nor has it been reviewed by the
auditors pursuant to the Auditing Practices Board (APB)'s guidance on Review of
Interim Financial Information.
As a result of the Directors' decision to distribute capital profits by way of
a dividend, the Company revoked its investment company status as defined under
section 833 of the Companies Act 2006 on 22 June 2009.
These statements differ from those previously presented in that unrealised
gains on investments are now reported within the revaluation reserve in the
balance sheet, rather than included in a separate unrealised capital reserve
and realised gains are included within the profit and loss reserve rather than
a separate realised capital reserve.
b) Presentation of the Income Statement
In order to better reflect the activities of a VCT and in accordance with the
SORP, supplementary information which analyses the Income Statement between
items of a revenue and capital nature has been presented alongside the Income
Statement. The revenue column of profit attributable to equity shareholders is
the measure the Directors believe appropriate in assessing the Company's
compliance with certain requirements set out in Section 274 Income Tax Act
2007.
c) Investments
All investments held by the Company are classified as "fair value through
profit and loss", in accordance with the International Private Equity and
Venture Capital Valuation ("IPEVCV") guidelines, as the Company's business is
to invest in financial assets with a view to profiting from their total return
in the form of capital growth and income. Purchases and sales of quoted
investments are recognised on the trade date where a contract of sale exists
whose terms require delivery within a time frame determined by the relevant
market. Purchases and sales of unlisted investments are recognised when the
contract for acquisition or sale becomes unconditional.
The fair value of quoted investments is the bid price value of those
investments at the close of business on 30 June 2009.
Unquoted investments are stated at fair value by the Directors in accordance
with the following rules, which are consistent with the IPEVCV guidelines:
(i) Investments which have been made in the last 12 months are at fair value
which, unless another methodology gives a better indication of fair value, will
be at cost;
(ii) Investments in companies at an early stage of their development are valued
at fair value which, unless another methodology gives a better indication of
fair value, will be at cost;
(iii) Where investments have been held for more than 12 months or have gone
beyond the stage in their development in (i) or (ii) above, the shares may be
valued by applying a suitable price-earnings ratio to that company's historic,
current or forecast earnings (the ratio used being based on a comparable listed
company or sector but the resulting value being adjusted to reflect points of
difference identified by the Investment Manager, as well as lack of
marketability). Where overriding factors apply, alternative methods of
valuation will be used. These will include the application of a material
arms-length transaction by an independent third party, cost less provision for
impairment, discounted cash flow, or a net asset basis;
(iv) Where a value is indicated by a material arms-length transaction by a
third party in the shares of a company, this value will be used.
v) Unquoted investments will not normally be re-valued upwards for a period of
at least twelve months from the date of acquisition. Where a company's
underperformance against plan indicates a diminution in the value of the
investment, provision against cost is made, as appropriate. Where the value of
an investment has become permanently impaired below cost, the loss is treated
as a permanent impairment and as a realised loss, even though the investment is
still held. The Board assess the portfolio for such investments, and after
agreement with the Manager, will agree the values that represent the extent to
which an investment has become permanently impaired. This is based upon an
assessment of objective evidence of that investment's future prospects, to
determine whether there is potential for the investment to recover in value.
(vi) Premium on loan stock investments are accrued at fair value when the
Company receives the right to the premium and when considered recoverable.
Although the Company holds more than 20% of the equity of certain companies, it
is considered that the investments are held as part of an investment portfolio.
Accordingly, and as permitted by FRS 9 'Associates and Joint Ventures', their
value to the Company lies in their marketable value as part of that portfolio.
It is not considered that any of the holdings represents investments in
associated companies.
2. Income
Six months ended Six months ended Year ended
30 June 2009 30 June 2008 31 December 2008
(unaudited) (unaudited) (audited)
GBP GBP GBP
Dividends 7,565 69,297 166,722
Money-market funds 29,108 344,795 533,840
Loan stock interest 119,277 119,249 284,376
Bank deposits 254 1,838 4,481
Interest on VAT recovered 8,365 - -
------ ------ ------
Total Income 164,569 535,179 989,419
------ ------ ------
3. Recoverable VAT
At 31 December 2008, the Directors considered it reasonably certain that the
Company would obtain a repayment of VAT of not less than GBP125,000. 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 this period GBP131,413 of
recoverable VAT was actually received. The excess of GBP6,413 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.
4. Investment management expense
In accordance with the policy statement published under "Management and
Administration" in the Company's prospectus dated 8 September 2005, the
Directors have charged 75% of the investment management expense to the capital
reserve.
5. Taxation
There is no tax charge for the period as the Company has incurred taxable
losses. A small credit arises from a write-back of deferred tax.
6. Earnings and return per share
The basic and diluted earnings, revenue return and capital return per share
shown below for each period are respectively based on numerators i)-iii), each
divided by the weighted average number of shares in issue in the period - see
iv) below.
Six months ended Six months ended Year ended
30 June 2009 30 June 2008 31 December 2008
(unaudited) (unaudited) (audited)
GBP GBP GBP
i) Total earnings after (28,348) (562,114) (1,215,236)
taxation
Basic and diluted (0.14)p (2.81)p (6.08)p
earnings/(loss) per
Ordinary share (pence)
ii) Net revenue from (13,021) 291,308 358,577
ordinary activities after
taxation
Basic and diluted (0.06)p 1.46p 1.80p
earnings/(loss) per
Ordinary share (pence)
Net unrealised capital 96,179 (713,338) (1,569,263)
gains/(losses)
Net realised capital 15,268 - -
gains
Capital element of VAT 4,810 - 60,111
recoverable
Dividends received - - 162,375
treated as capital
Capital expenses (net of (131,584) (140,084) (227,036)
taxation)
------ ------ ------
iii) Total capital return (15,327) (853,422) (1,573,813)
Basic and diluted capital (0.08)p (4.27)p (7.88)p
earnings/(loss) per
Ordinary share (pence)
iv) Weighted average 19,871,910 19,971,254 19,971,254
number of shares in issue
in the period
7. Dividends paid
Six months ended Six months ended Year ended
30 June 2009 30 June 2008 31 December 2008
(unaudited) (unaudited) (audited)
GBP GBP GBP
Final income dividend - 299,569 299,569
paid for year ended 31
December 2007 of 1.5p per
share
Interim income dividend - - 199,712
for the year ended 31
December 2008 of 1.0p per
share
Final income dividend 159,770 - -
paid for year ended 31
December 2008 of 0.8p per
share
------ ------ ------
159,770 299,569 499,281
------ ------ ------
8. Net asset value per Ordinary share
As at As at As at
30 June 2009 30 June 2008 31 December 2008
(unaudited) (unaudited) (audited)
GBP GBP GBP
Net assets 17,384,986 18,610,249 17,757,415
Number of shares in issue as at 19,666,195 19,971,254 19,971,254
30 June 2009
Net asset value per share (pence) 88.40p 93.18p 88.91p
9. Summary of non-current investments at fair value during the period
Unquoted Unquoted Loan Total
equity preference stock
shares shares
GBP GBP GBP GBP
Valuation at 1 January 2009 4,866,551 10,066 8,101,391 12,978,008
Purchases at cost 29,723 69 318,880 348,672
Sales - proceeds - - (220,290) (220,290)
- realised gains - - 15,268 15,268
Unrealised gains/(losses) 573,304 (4,740) (472,385) 96,179
------ ------ ------ ------
Valuation at 30 June 2009 5,469,578 5,395 7,742,864 13,217,837
------ ------ ------ ------
Book cost at 30 June 2009 4,899,309 13,266 9,097,889 14,010,464
Unrealised gains/(losses) at 570,269 (7,871) (1,355,025) (792,627)
30 June 2009
------ ------ ------ ------
Valuation at 30 June 2009 5,469,578 5,395 7,742,864 13,217,837
------ ------ ------ ------
Gains/(losses) on investments
Realised gains based on - - 15,268 15,268
carrying value at 31 December
2008
Net movement in unrealised 573,304 (4,740) (472,385) 96,179
appreciation/(depreciation) in
the period
------ ------ ------ ------
Gains/(losses) on investments 573,304 (4,740) (457,117) 111,447
at
30 June 2009
------ ------ ------ ------
10. Current investments at fair value
These comprise investments in 7 Dublin based OEIC money market funds managed by
Royal Bank of Scotland, Blackrock Investment Management, Goldman Sachs, Insight
Investment Management, Barclays Global Investors, Scottish Widows Investment
Management and Fidelity Investment Management.
11. Capital and reserves
Called Capital Revaluation Special Profit Total
up
share redemption reserve distributable and loss
capital reserve reserve account
GBP GBP GBP GBP GBP GBP
At 1 January 199,713 272 (888,806) 18,683,635 (237,399) 17,757,415
2009
Shares bought (3,051) 3,051 - (184,311) - (184,311)
back
Written off to - - - (735,192) 735,192 -
special
reserve
Dividend - - - - - (159,770) (159,770)
final for year
ended 31
December 2008
Profit/(loss) - - 96,179 - (124,527) (28,348)
for the period
------ ------ ------ ------ ------ ------
At 30 June 196,662 3,323 (792,627) 17,764,132 213,496 17,384,986
2009
------ ------ ------ ------ ------ ------
12. Related party transactions
Bridget Guérin is a director and shareholder (2.0%) of Matrix Group Limited,
which owns 100% of the equity of MPE Partners Limited. MPE Partners Limited has
a 50% interest in Matrix Private Equity Partners LLP ('MPEP'), the Company's
Investment Manager. Bridget Guérin is also a director of Matrix-Securities
Limited who provided Company Secretarial and Accountancy Services to the
Company under agreements dated 8 September 2005 for a fee of GBP37,476 (30 June
2008: GBP38,236; 31 December 2008: GBP77,240) in the period. The agreements with
MPEP and with Matrix-Securities Limited became effective from 24 January 2006.
13. The information for the year ended 31 December 2008 does not comprise full
financial statements within the meaning of Section 435 of the Companies Act
2006. The financial statements for the year ended 31 December 2008 have been
filed with the Registrar of Companies. The auditors have reported on these
financial statements and that report was unqualified and did not contain a
statement under section 498(2) of the Companies Act 2006.
14. This Half-Yearly Report will shortly be made available on our website:
www.mig3vct.co.uk and will be circulated by post to those shareholders who have
requested copies of the Report. Further copies are available free of charge
from the Company's registered office, One Vine Street, London W1J 0AH or can be
downloaded via the website.
Contact details for further enquiries:
Sarah Penfold of Matrix-Securities Limited (the Company Secretary) on 020 3206
7000 or by e-mail on MIG3@matrixgroup.co.uk.
Matrix Private Equity Partners LLP (the Investment Manager), on 020 3206 7000
or by e-mail on info@matrixpep.co.uk.
END
Matrix Income & Growth Vct 3 (LSE:MIXT)
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Matrix Income & Growth Vct 3 (LSE:MIXT)
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