15th Jul 2008 09:05
Chairman's Statement
I am pleased to present the results of the Company for the year ended 30 April 2008.
Overview of performance for the year ended 30 April 2008
In light of the economic uncertainty and turmoil in financial markets during the last twelve months, this has been a challenging period for investment companies. This is clearly evidenced by the stock market indices discussed below, all of which fell significantly. Several of our VCT peers have seen annual reductions of between 10% and 20% in their net asset values.
In contrast, the performance of your Company has been relatively stable, withsome encouraging results. Our Ordinary Shareholders have seen a small decreasein net asset value, but a healthy 6 pence per share dividend has beenmaintained. Our C shareholders have seen a small increase in net asset valueand an increased 2.5 pence per share dividend.The Company's total Ordinary Shareholder (NAV) return declined by 3.6% in theyear, from 122.03 pence per share to 117.70 pence per share. An interimcapital dividend of 4.5 pence and an interim income dividend of 1.5 pence forthe year have been declared and will be paid in July.The Company's total C Shareholder (NAV) return showed an increase of 2.9% from97.15 pence per share to 99.98 pence per share. An interim income dividend of2.5 pence for the year has been declared and will be paid in July.
By comparison, during the twelve-month period ended 30 April 2008 the FTSE All-Share Index fell by 7.6%, the SmallCap Index by 23% and the AIM Index by 17.3%.
Revenue and Capital returns for the year ended 30 April 2008
The results for the year ended 30 April 2008 are set out in the followingpages. The total return (after tax) attributable to the Ordinary Shareholdersfor the year was a loss of ‚£633,730 (2007: Profit of ‚£2,378,445) and the netasset value ("NAV") per Ordinary Share at 30 April 2008 was 96.91 pencecompared with 107.24 pence as at 30 April 2007. This fall is mainly explainedfirstly, by a dividend of 6p in respect of the year ended 30 April 2007 havingbeen paid on 19 September 2007 and secondly, a fall in valuations ofunrealised investments. The after tax revenue return before net capital gainswas 1.82 pence per Ordinary Share for the year to 30 April 2008 (2007: 1.54pence).The total return (after tax) attributable to the C Shareholders for the yearwas ‚£259,528 (2007: ‚£258,730) and the NAV per C Share at 30 April 2008 was98.48 pence compared with 97.15 pence as at 30 April 2007. The after taxrevenue return before net capital gains was 2.65 pence per Ordinary Share forthe year to 30 April 2008 (2007: 2.30 pence).This year's macro-economic environment has been considerably tougher than theprevious year's and the Board is encouraged by these results. In the case ofOrdinary Shareholders, the performance continues to reflect the benefits ofthe change in investment strategy pursued since September 2005, which hasbegun to deliver stronger income flows to the Ordinary Share Fund, and now theC fund. This has been combined with some net increases in the valuations ofboth Funds over that time, although the valuation of the Ordinary Share Fundhas reduced slightly at this year-end, mainly in response to the falls inquoted markets.
New Investment Activity
This year has seen the Ordinary Share Fund invest ‚£1.3 million intwo new investments, and one follow-on investment alongside the C Share Fund,which co-invested ‚£1.1 million. The C Share Fund also invested a further ‚£1.4million in two other new investments, when the Ordinary Share Fund wastemporarily fully invested and hence unable to co-invest. Thus, the C ShareFund invested a total of ‚£2.5 million in the year. All of these investmentswere in management buy-out ("MBO") transactions by your Investment Manager,Matrix Private Equity Partners ("MPEP").A feature of MBO investments is their ability to generate income tothe Funds by investing in loan stocks as well as ordinary shares. Theannualised yield from loan stocks at valuation is now running at 9.2% and 9.0%to the Ordinary and C Share Funds respectively. During the year interest anddividend income totalled ‚£0.575 million, an increase of 34% over the previousyear.Portfolio ActivityIn January and February of this year, the Ordinary Share Fundrealised its investments in Gyro International for ‚£2.4 million, againstoriginal cost of ‚£750,000, and a return of over 3 times the originalinvestment in 3 years, BBI Holdings plc for ‚£262,000 against cost of ‚£119,000and Clarity Commerce Solutions plc for proceeds of ‚£162,000 against a cost of‚£510,000. In April, part of the loan stock held in VSI Limited was redeemedfor ‚£148,000, being a premium on cost of ‚£13,000.
This Fund now holds twelve investments made since the change of investment strategy in 2005, accounting for almost 56% by cost and almost 68% by valuation of the Fund's assets. Eleven of these investments are MBOs.
The C Share Fund currently holds investments in ten companies,showing valuations at this early stage of this portfolio's life which are 5.4%above cost. Although at an earlier stage of development, this fund realisedits investment in BBI Holdings plc, realising ‚£183,000 against a cost of‚£83,000, and also received proceeds of ‚£50,000 at a premium on cost of ‚£5,000upon part of its loan stock investment in VSI Ltd.All investments held by the Company continue to be valued inaccordance with International Private Equity Venture Capital Valuation("IPEVCV") guidelines. We will, in any event, always follow a consistent andprudent valuation policy. The investments quoted on AIM and the money marketsecurities are carried at market value.
Dividends
The revenue account generated a net revenue return for the year of ‚£214,894 for the Ordinary Share Fund (2007: (‚£190,379)) causing the Ordinary Share Fund's revenue reserve to become positive by the end of the year, and ‚£242,682 for the C Share Fund (2007: ‚£210,137). The dividends declared as interims for the year ended 30 April 2008 will be paid on 23 July 2008 to Shareholders on the register on 27 June 2008. Your Directors will not be recommending a final income or capital dividend for Ordinary or C Shareholders.
New capital raising
Your Board has decided to seek to raise additional capital in the CShare Fund by launching an offer of new shares towards the end of thiscalendar year. We anticipate that there will be significant opportunities toinvest over the medium term and intend the Company to have adequate liquidityto participate fully in these opportunities, alongside other MPEP-advisedVCTs. Such a fund-raising will enable the Company to achieve better economiesof scale by spreading its running costs across a larger capital base and willgive existing and new shareholders the opportunity to invest further at whatmay be an advantageous point in the economic cycle.The Board will be seeking shareholders' permission to issue thisadditional share capital through resolutions to be tabled at the AnnualGeneral Meeting on 10 September 2008. We consider that these resolutions arein the best interests of the Company and its Shareholders as a whole andrecommend Shareholders to vote in favour of them, as they intend to do inrespect of their own beneficial holdings totalling 40,900 Ordinary shares(0.36 per cent of the issued Ordinary share capital) and 47,475 C Shares (0.51per cent of the issued C Share capital).
Outlook
In my Statement in the Half-Yearly Report to shareholders, I emphasised that the Board and the Investment Manager are paying close attention to current economic indicators. The scale of economic and market downturn is as yet uncertain, but there is clearly a heightened risk to the smaller company sector in which your VCT invests. Your Board continues to believe that the Investment Manager's strategy of investing in MBOs is appropriate, and that, looking forward, good opportunities will present themselves for new investment. The current portfolio is still performing satisfactorily, and there remains scope for further attractive returns to shareholders in the medium term.
Conclusion
I would like to express my thanks to all Shareholders for your continuing support of the Company. I hope to have the opportunity of meeting you at the Annual General Meeting on 10 September 2008.
Nigel MelvilleChairman14 July 2008Responsibility Statement
The Directors confirm that to the best of their knowledge:
(a) the financial statements, which have been prepared in accordance with applicable accounting standards in the United Kingdom, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
(b) the Chairman's Statement and Investment Policy include 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.
Investment Policy
The VCT's policy is to invest primarily in a diverse portfolio of UK established, profitable, unquoted companies to generate capital gains from trade sales and flotations.
Investments are structured as part loan and part equity in order to receive regular income and to provide downside protection in the event of under-performance.
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 low 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 regulationThe investment policy is designed to ensure that the VCT continuesto qualify and is approved as a VCT by HMRC. Amongst other conditions, the VCTmay not invest more than 15% of its investments in a single company and mustachieve at least 70% by value of its investments throughout the period inshares or securities in qualifying holdings, of which a minimum overall of 30%by value must be ordinary shares which carry no preferential rights. Inaddition, although the VCT can invest less than 30% of an investment in aspecific company in ordinary shares it must have at least 10% by value of itstotal investments in each qualifying company in ordinary shares which carry
nopreferential rights.Asset mix
The Investment Manager aims to hold approximately 80% by value of the VCT's investments in qualifying holdings. The balance of the portfolio is held in readily realisable interest bearing investments and deposits.
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, based on cost, at the time of investment. Ongoing monitoring of each investment is carried out by the Manager generally through taking a seat on the Board of each VCT qualifying company.
Co-investment
The VCT aims to invest alongside four other Income and Growth VCTsadvised by the Manager with a similar investment policy. This enables the VCTto participate in combined investments by the Investment Manager of up to ‚£5million.Borrowing
The VCT has no borrowing and does not have any current plans for future borrowings.
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 Manager and are then subject to formal approval by the Directors. Matrix Securities provides Company Secretarial and Accountancy services to the VCT.
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 complywith Section 274 of the Income Tax Act 2007 which allows it to be exemptedfrom capital gains tax on investment gains. Any breach of these rules may leadto the VCT losing its approval as a VCT, qualifying shareholders who have notheld their shares for the designated holding period having to repay the incometax relief they obtained and future dividends paid by the VCT becoming subjectto tax. The VCT would also lose its exemption from corporation tax on capitalgains.- Investment and strategic - inappropriate strategy or consistentlyweak VCT qualifying investment recommendations might lead to under performanceand poor returns to shareholders. Investment in unquoted small companies byits nature involves a higher degree of risk than investment in companiestraded on the London Stock Exchange main market. Smaller companies often havelimited product lines, markets or financial resources and may be dependent fortheir management on a smaller number of key individuals. This may make themmore risk-prone and volatile investments.
- Regulatory - 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 breaches of regulations. Failure of the 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 - movements in the valuations of the VCT's investments will, inter alia, be connected to movements in UK Stock Market indices.
- Asset liquidity risk - The VCT's investments may be difficult to realise.
- Market liquidity risk - Shareholders may find it difficult to sell their shares at a price which is close to the net asset value.
The Board seeks to mitigate the internal risks by setting policyand by undertaking a key risk management review at each quarterly Boardmeeting. Performance is regularly reviewed and assurances in respect ofadequate internal controls and key risks are sought and received from theManager and Administrator on a six monthly basis. In the mitigation andmanagement of these risks, the Board applies rigorously the principlesdetailed in the AIC Code of Corporate Governance. The Board also has a ShareBuy Back policy to try to mitigate the Market Liquidity risk. This policy isreviewed at each quarterly Board Meeting.Investment Portfolio Summaryas at 30 April 2008 % of net assets byOrdinary Share Fund value Date of Total first Book cost Valuation investment ‚£ ‚£Qualifying investments AIM quoted investments August 150,000 107,143 0.9%SectorGuard plc 2005Provision of manned guarding, mobilepatrolling, and alarm response servicesVphase plc (formerly Flightstore Group plc) March 2001 254,586 9,504 0.1%Development of energy saving devices fordomestic use 404,586 116,647 1.0% Unquoted investments October 1,000,052 1,670,564 15.0%Youngman Group Limited 2005Manufacturer of ladders and access towersBlaze Signs Holdings Limited April 2006 791,608 1,136,072 10.2%Sign writerBritish International Holdings Limited June 2006 832,827 904,172 8.1%Supplier of helicopter servicesPastaKing Holdings Limited June 2006 274,624 829,135 7.4%Supplier to the educational and foodservice marketVSI Limited April 2006 231,020 656,004 5.9%Developer and marketer of 3D softwareDiGiCo Europe Limited July 2007 588,886 588,886 5.3%Design and manufacture of audio mixingdesks January 975,000 490,131 4.4%Campden Media Limited 2006
Magazine publisher and conference organiser PXP Holdings Limited (Pinewood Structures) December 588,886 481,971 4.3%
2006Designer, manufacturer and supplier oftimber frames for housingVectair Holdings Limited January 243,784
374,418 3.4%
2006A provider of air care and sanitarywashroom productsThe Plastic Surgeon Holdings Limited April 2008 230,986 230,986 2.1%Snagging and finishing of domestic andcommercial propertiesRacoon International Holdings Limited December 517,350 57,644 0.5% 2006Supplier of hair extensions, hair careproducts and trainingAward International Holdings plc March 2004 250,000
- 0.0%Sales promotion activities August 1,000,000 0.0%Recite Limited 2003 -Sales support software 7,525,023 7,419,983 66.6% Total qualifying investments 7,929,609 7,536,630 67.6% 1 Non-qualifying investmentsMoney market funds 2 3,373,809 3,373,809 30.3% Cash 54,863 54,863 0.5%SectorGuard plc 106 62 0.0%Total non-qualifying investments 3,428,778 3,428,734 30.8% Debtors 289,975 289,975 2.6%Creditors (119,809) (119,809) (1.0%) Net assets 11,528,553 11,135,530 100.0%
1 At 30 April 2008, the Company (comprising both share classes) held more than 70% of its total investments in qualifying holdings, and therefore complied with the VCT Investment test. For the purposes of the VCT Investment tests, the Company is permitted to disregard disposals of investments for 6 months from the date of disposal.
2 Disclosed within Non-current assets as Monies held pending Investment in the Balance Sheet
Investment Portfolio Summaryas at 30 April 2008 C Share Fund Total Date of Book cost Valuation % of net assets by value first ‚£ ‚£ investmentQualifying investments Unquoted investmentsMonsal Holdings Limited December 769,000 769,000 8.5% 2007Engineering services to water andwaste sectorsBlaze Signs Holdings Limited April 2006 606,890 666,686
7.4%
Sign writerFocus Pharma Holdings Limited October 2007 660,238 660,238
7.4%
Licensing and distribution of genericpharmaceuticalsPastaKing Holdings Limited June 2006 191,720 578,836
6.4%
Supplier to the educational and foodservice marketDiGiCo Europe Limited July 2007 411,114 411,114
4.6%
Design and manufacture of audiomixing desksPXP Holdings Limited (Pinewood December 411,114 336,474
3.8%
Structures) 2006Designer, manufacturer and supplierof timber frames for housingVSI Limited April 2006 77,623 220,419
2.4%
Developer and marketer of 3D softwareBritish International Holdings June 2006 167,173 181,524
2.0%
Limited
Supplier of helicopter servicesThe Plastic Surgeon Holdings Limited April 2008 161,278 161,278
1.8%
Snagging and finishing of domesticand commercial propertiesRacoon International Holdings Limited December 361,177 40,242
0.4%
2006Supplier of hair extensions, haircare products and training 3,817,327 4,025,811 44.7% Total qualifying investments 3,817,327 4,025,811 44.7% 1 Non-qualifying investmentsMoney market funds 2 4,984,365 4,984,365 55.3%Cash 34,891 34,891 0.4%
Total non-qualifying investments 5,019,256 5,019,256
55.7% Debtors 62,354 62,354 0.7%Creditors (100,060) (100,060) (1.1%) Net assets 8,798,877 9,007,361 100.0%
1 At 30 April 2008, the Company (comprising both share classes) held more than 70% of its total investments in qualifying holdings, and therefore complied with the VCT Investment test. For the purposes of the VCT Investment tests, the Company is permitted to disregard disposals of investments for the 6 months from the date of disposal.
2 Disclosed within Non-current assets as Monies held pending Investment in the Balance Sheet
The other Funds managed by MPEP include Matrix Income & Growth VCTplc (MIG VCT), Matrix Income & Growth 3 VCT plc (MIG3), Matrix Income & Growth4 VCT plc (MIG4) and The Income and Growth VCT plc (I&G). All of these Fundshave co-invested alongside the Company in Blaze Signs Holdings Limited,British International Holdings Limited, Campden Media Limited, PastaKingHoldings Limited, PXP Holdings Limited, Racoon International Holdings Limited,VSI Limited, DiGiCo Europe Limited, Monsal Holdings Limited, Focus PharmaHoldings Limited and Plastic Surgeon Holdings Limited. All of these Funds withthe exception of MIG3 have also co-invested alongside the Company in CampdenMedia Limited, SectorGuard plc, Vectair Holdings Limited and Youngman GroupLimited.
Non-Statutory analysis between the Ordinary Share and C Share Funds
Profit and Loss Accounts
for the year ended 30 April 2008
Ordinary Share Fund C Share Fund Revenue Capital Total Revenue Capital Total ‚£ ‚£ ‚£ ‚£ ‚£ ‚£ Unrealised (losses)/gains oninvestments held at fair value - (1,388,204) (1,388,204) - 76,422 76,422Realised gains oninvestments held at fair value - 688,893 688,893 - 64,374 64,374Income 536,833 - 536,833 490,190 - 490,190Investment management fees (73,410) (220,231) (293,641)
(51,700) (155,098) (206,798)Other expenses (204,418) - (204,418) (137,853) - (137,853) Return on ordinary
activities before taxation 259,005 (919,542) (660,537) 300,637 (14,302) 286,335Tax on ordinary activities (44,111) 70,918 26,807
(57,955) 31,148 (26,807) Return attributable toequity shareholders 214,894 (848,624) (633,730) 242,682 16,846 259,528 Return per share 1.82 p (7.20)p (5.38)p 2.65 p 0.19 p 2.84 p
Average number of shares in issue 11,789,161 9,145,990 Balance Sheetsas at 30 April 2008 Adjustments C Share Fund Total Ordinary Share Fund (see note below) ‚£ ‚£ ‚£ ‚£Non-current assetsAssets held at fair value
through profit and loss - investments 7,536,692 4,025,811 11,562,503Monies held pending investment 3,373,809 4,984,365
8,358,174 10,910,501 9,010,176 19,920,677 Current assetsDebtors and prepayments 289,975 62,354 (74,403) 277,926Cash at bank 54,863 34,891 89,754 344,838 97,245 (74,403) 367,680 Creditors: amountsfalling due within one year (119,809) (100,060) 74,403 (145,466)
Net current assets/(liabilities) 225,029 (2,815)
222,214Net assets 11,135,530 9,007,361 20,142,891 CapitalCalled up share capital 114,910 91,460 206,370Capital redemption reserve 16,896 - 16,896Capital reserve - unrealised 856,977 208,484 1,065,461Special distributable reserve 2,596,431 8,285,217 10,881,648Profit and loss account 7,550,316 422,200 7,972,516Equity shareholders' funds 11,135,530 9,007,361 20,142,891 Number of shares in issue: 11,491,008 9,145,990 Net asset value per 1p share: 96.91p 98.48p
Note: the adjustment above nets off the inter-fund debtor and creditor balances, so that the "Total of Both Funds" balance sheet agrees to the Statutory Balance Sheet below.
Reconciliation of Movements in Shareholders' Funds
for the year ended 30 April 2008
Ordinary Share Fund C Share Fund ‚£ ‚£ Opening shareholders' funds 12,912,394
8,885,025
Net share capital bought back in the year (420,667)
-
(Loss)/profit for the year (633,730)
259,528
Dividends paid in year (722,467)
(137,192)
Closing shareholders' funds 11,135,530 9,007,361Statutory InformationProfit and Loss Account
For the year ended 30 April 2008
Year ended 30 April 2008 Year ended 30 April 2007 Revenue Capital Total Revenue Capital Total ‚£ ‚£ ‚£ ‚£ ‚£ ‚£Unrealised (losses)/gainson investments held at fair value - (1,311,782) (1,311,782) - 2,712,523 2,712,523Realised gains/(losses) on investmentsheld at fair value - 753,267 753,267 - (205,547) (205,547)Income 1,027,023 - 1,027,023 906,689 - 906,689Investment management fees (125,110) (375,329) (500,439) (119,557) (358,668) (478,225)Other expenses (342,271) - (342,271) (298,265) - (298,265)Profit/(loss) on ordinary activitiesbefore taxation 559,642 (933,844)
(374,202) 488,867 2,148,308 2,637,175
Taxation on ordinary activities (102,066) 102,066 - (88,351) 88,351 -Profit/(loss) on ordinary activitiesafter taxation 457,576 (831,778)
(374,202) 400,516 2,236,659 2,637,175
Basic and Diluted earnings per share:Ordinary Shares 1.82p (7.20)p (5.38)p 1.54p 17.66p 19.20pC Shares 2.65p 0.19p 2.84p 2.30p 0.53p 2.83p
All the items in the above statement derive from continuing operations. No operations were discontinued in the year. There were no other gains or losses in the year.
The total column of this statement is the profit and loss account of the Company.
Note of Historical Cost Profits and Losses
For the year ended 30 April 2008
Year ended 30 April 2008 Year ended 30 April 2007 ‚£ ‚£ (Loss)/profit on ordinaryactivities before taxation (374,202) 2,637,175Add/(less) unrealisedlosses/(gains) on investments 1,311,782 (2,712,523)Less realisation of revaluationlosses of previous years (1,359,061)
(1,596,829)
Historical cost loss onordinary activities before taxation (421,481)
(1,672,177)
Historical cost loss for the yearafter taxation and dividends (1,281,140) (1,672,177) Balance SheetAs at 30 April 2008 30 April 2008 30 April 2007 ‚£ ‚£Non-current assetsAssets held at fair value through profit and loss - investments 11,562,503 11,529,046Monies held pending investment 8,358,174 10,289,021 19,920,677 21,818,067 Current assetsDebtors and prepayments 277,926 147,304Cash at bank 89,754 327,479 367,680 474,783 Creditors: amounts falling due within one year (145,466) (495,431) Net current assets/(liabilities) 222,214 (20,648) Net assets 20,142,891 21,797,419 Capital and reservesCalled up share capital 206,370 211,871Capital redemption reserve 16,896 11,395Revaluation reserve - unrealised 1,065,461 3,268,178Special distributable reserve 10,881,648 14,089,778Profit and loss account 7,972,516 4,216,197Equity shareholders' funds
20,142,891 21,797,419
Net asset value per shareOrdinary Shares 96.91p 107.24pC Shares 98.48p 97.15p Cash flow Statement
For the year ended 30 April 2008
Year ended Year ended 30 April 2008 30 April 2007 ‚£ ‚£ Net cash inflow from operating activities 15,964
100,740
Capital expenditure and financial investmentPurchase of investments - equities and loan stock (3,821,514) (3,546,925)Disposals of equities and loan stock 3,131,438
2,016,346
Net cash outflow from investing activities (690,076) (1,530,579) DividendsEquity dividends paid (859,659) - Net cash outflow before financing and liquid (1,533,771) (1,429,839)resource management FinancingPurchase of own shares (634,801) (167,592)Net cash outflow from financing (634,801)
(167,592)
Management of liquid resourcesMovement in money market investments 1,930,847
(537,585)
Net cash outflow as at 30 April 2008 (237,725)
(2,135,016)
Notes:
1. Reconciliation of loss before taxation to net cash inflow from operatingactivities 2008 2007 ‚£ ‚£Loss before taxation (374,202) 2,637,175
Unrealised losses/(gains) for the year 1,311,782 (2,712,523) Realised (gains)/losses
(753,267) 205,547Transaction costs (14,996) (609)Decrease/(Increase) in debtors 22,571 (58,361)
(Decrease)/increase in creditors and accruals (175,924) 29,511 Net cash inflow from operating activities 15,964 100,740
2. Analysis of changes in net funds
Cash Liquid resources Total ‚£ ‚£ ‚£At 30 April 2007 327,479 10,289,021 10,616,500Cash flows (237,725) (1,930,847) (2,168,572) At 30 April 2008 89,754 8,358,174 8,447,928
3. Related party transactions
Kenneth Vere Nicoll is a director and shareholder of Matrix Group Limited, which owns Matrix-Securities Limited, MPE Partners Limited and has a 51% interest in Prime Rate Capital Management LLP.
MPE Partners Limited has a 50% interest in Matrix Private EquityPartners LLP, the Company's Investment Manager. He is also a director ofMatrix-Securities Limited who provided accountancy and company secretarialservices to the Company for which it received payment of ‚£93,493 (2007:‚£89,551) including VAT during the year. ‚£nil (2007: ‚£22,202) was payable toMatrix Securities Limited at the year-end. Matrix Private Equity Partners LLPis the Company's Investment Manager in respect of venture capital investmentsand earned fees of ‚£512,111 (2007: ‚£478,225), including VAT for the year.‚£11,672nil (2007: ‚£nil) was due from Matrix Private Equity Partners LLP at theyear-end, in respect of the expense cap for the year. The Company has invested‚£1 million in a liquidity fund managed by Prime Rate Capital Management LLP,and earned income of ‚£4,628 from this fund in the year.
4. Segmental analysis
The operations of the company are wholly in the United Kingdom, and, in the opinion of the Directors, from one class of activity namely the making of investments in unquoted or AIM-quoted companies in the UK.
5. The accounts have been prepared under UK Generally Accepted Accounting Practice (UK GAAP) and, to the extent that it does not conflict with the Companies Act 1985, the 2003 Statement of Recommended Practice, `Financial Statements of Investment Trust Companies' (SORP), revised December 2005.
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 266 (3) of the Companies Act 1985, on 7 September 2005.
6. The net asset value per Ordinary Share is based on net assets at the end of the year, and on 11,491,008 Ordinary Shares (2007: 12,041,147), being the number of Ordinary Shares in issue on that date.
The net asset value per C Share is based on net assets at the end of the year, and on 9,145,990 C Shares (2007: 9,145,990), being the number of C Shares in issue on that date.
7. The revenue return per Ordinary Share is based on the return attributable to equity Shareholders of ‚£214,894 and is based on 11,789,161 Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the period.
The revenue return per C Share is based on the return attributable to equity Shareholders of ‚£242,682 and is based on 9,145,990 C shares, being the weighted average number of C Shares in issue during the period.
8. 75% of the fees payable to the Investment Manager are charged against realised capital reserve. This is in line with the Board's intended long-term split of returns from the investment portfolio of the Company.
9. The financial information set out in these statements does not constitutethe Company's statutory accounts, in terms of section 240 of the Companies Act1985, for the year ended 30 April 2008 but is derived from those accounts.Statutory accounts will be delivered to the Registrar of Companies after theAnnual General Meeting. The auditors have reported on those accounts: theirreport was unqualified and did not contain a statement under Section 237 (2)or (3) of the Companies Act 1985. The accounting policies set out in the mostrecently published set of accounts have been followed.
10. The Annual Report will shortly be made available on our website: www.mig2vct.co.uk and will be circulated by post to all Shareholders. Copies will be available thereafter to members of the public from the Company's registered office.
11. The Annual General Meeting of the Company will be held at 4.00pm on 10 September 2008 at One Vine Street, London W1J 0AH. The Annual GeneralMeeting will be followed by separate class meetings of the holders of OrdinaryShares and C Shares.
MATRIX INCOME & GROWTH 2 VCT PLCRelated Shares:
MIG.L