Interim Results for the six months ended 30 Jun...

Matrix Income & Growth VCT plc ("the Company") Investment Objective Matrix Income & Growth VCT plc is a Venture Capital Trust ("VCT") managed by Matrix Private Equity Partners investing primarily in established, profitable, unquoted companies. The Company's objective is to provide investors with a regular and growing 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 Interim Results for the six months ended 30 June 2007 30 June 2007 30 June 2006 31 December 2006 Net assets £23,715,873 £20,844,852 £22,244,902 Net asset value per share 107.29p 94.13p 100.64p Total return per share* 110.49p 95.13p 102.45p Share price (mid-market 91.50p 99.00p 88.50p price) Net cumulative dividends 3.20p 1.00p 1.80p paid** * Net asset value per share plus cumulative dividends per share. This compares with an original investment cost of 100 pence per share, which after allowing for income tax relief of 40 pence per share equates to 60 pence per share. ** For a breakdown of recent dividends paid, please see `Dividends paid' in the Income Statement below. In addition, an interim dividend of 1.00 pence per share has been declared and is payable on 20 September 2007 to Shareholders on the Register on 24 August 2007, thereby increasing net cumulative dividends to 4.20 pence per share. Chairman's Statement I am pleased to present the interim results of the Company covering the six month period ended 30 June 2007. Results and dividend The revenue account generated a net return (after tax) for the period of £306,813 (2006: £231,302). The Board has declared an interim dividend of 1.00 pence per share (2006: 0.80 pence per share) which will be paid on 20 September 2007 to Shareholders on the Register on 24 August 2007. Net Asset Value The net asset value (NAV) at 30 June 2007 was 107.29 pence per share (30 June 2006: 94.13 pence per share) compared with an NAV of 100.64 pence per share at the beginning of the period, an increase of 6.6%. Investment portfolio No new investments were completed during the period. This, in part, reflected an extremely competitive environment for private equity deals leading to inflated price expectations on the part of many vendors. Against this background your Investment Manager, supported by the Board, continued to pursue a measured and selective approach towards new investment proposals. Since the end of the period the Company has invested £1.0 million in the management buy out of Digico Europe Limited and the Investment Manager is currently progressing a number of other attractive investment opportunities. Meanwhile, the current portfolio exhibited encouraging progress over the period with a number of upward valuation movements. For further information on these investments please see the Investment Manager's Review below. Income Income was derived from two main sources. First, income from OEIC money market funds generated an average annualised yield of approximately 5.3% over the period; secondly, the investments made by your Investment Manager usually include a substantial component of interest-bearing loan stocks. These loan stocks are now beginning to make a significant contribution and at 30 June 2007 were generating an annualised yield of 7.8%. As at the end of the period, the annualised running yield on the qualifying investment portfolio as a whole was 4.1%, while upon all investments it was 4.9%. Investment in qualifying holdings The key date by which the Investment Manager 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 is 31 December 2007. Following the investment in Digico the Company was 48.6% invested in qualifying companies, based on VCT cost as defined in tax legislation, and, as outlined in the accompanying Review, the Investment Manager remains confident of achieving this investment target by the end of the year. The balance of the portfolio is invested in a selection of OEIC money market funds. Communicating with shareholders The Company maintains a programme of regular communication with Shareholders, with newsletters and a dedicated website: www.migvct.co.uk, supplementing the interim and annual reports. The Board welcomes the opportunity to meet Shareholders at the Company's Annual 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 2008. Extraordinary General Meeting 30 October 2007 - Electronic Communications Subject to Shareholder approval, the Companies Act 2006 allows companies to send or supply documents and information to Shareholders in electronic form and by a website in place of hard copies. The Directors are of the opinion that this could be beneficial for both the Company and its Shareholders, in particular as it may help reduce administration costs and will ensure that Shareholders receive documents in a more timely manner. To implement this the Directors are convening an Extraordinary General Meeting to be held on 30 October 2007 at which Shareholders will be asked to approve a single resolution authorising the Company to send communications electronically to Shareholders and make documents and information available to Shareholders on a website. The Notice of this meeting and a personalised Proxy Form for use in relation to this meeting will be included with Shareholders' copies of the Interim Report. Outlook The Board is encouraged by the evidence of value creation within the current portfolio and with it the potential for profitable exit opportunities as the portfolio matures. Based on the Investment Manager's planned investment programme for the second half of the year, the Board is confident, also, that the Company should achieve the 70% test by 31 December 2007 and at least maintain this level of investment in qualifying companies going forward. Finally, I would like to thank all of our Shareholders for their continuing support. Keith Niven Chairman Investment Manager's Review Over the last six months the portfolio has begun to demonstrate the benefits of our approach of investing in established, profitable companies, principally by way of Management Buy Outs ("MBOs"). The rate at which we have made new investments has slowed considerably, particularly compared to the rate seen in the first half of 2006. Competition for transactions has increased markedly. This has in part been driven by the amount of debt and equity funding available to companies, which has led to inflation in purchase prices. We have also been offered a greater number of lower quality transactions. We have therefore been adopting a highly selective and cautious approach towards new investment in the current environment. Since the period end an investment of £1 million has been completed as part of the MBO of Digico Europe Limited, the global market leading manufacturer of digital sound mixing consoles for the live performance theatre, post-production and broadcast markets. Several other opportunities have also been agreed and are proceeding through diligence and contract negotiations. They include investments in three new companies that are being established with experienced operating partners in the support services, healthcare and food and beverage sectors. In the light of these opportunities, we remain fully confident of meeting the 70% qualifying investment target by the 31 December 2007 deadline. At 30 June 2007 a total of £8.8 million at cost had been invested in thirteen companies, and these have been valued at that date, in accordance with International Private Equity & Venture Capital Valuation ("IPEVCV") guidelines, at £11.9 million, an uplift of 35%. Six companies have moved from cost to a discounted earnings valuation since the beginning of the year, and all have shown an increase, generally reflecting performance in line with our expectations at the time we made our investment. Of particular note has been the strong trading experienced by both Blaze Signs and PastaKing, the former seeing growth from its major retail customers and the latter benefiting from the increasing trend towards healthy eating in schools and colleges. Of the other four companies which have seen an uplift in value; Campden Media is expanding its US conferencing business and establishing an online offering for its healthcare publications; British International has recently been successful in gaining offshore work for its helicopter fleet and is entering its busy summer period; Vectair is showing impressive revenue and profit growth in Europe for its range of air fresheners and toiletry products, and is also expanding into the USA, and VSI has performed fully in line with expectations and is considering expansion opportunities. Whilst unquoted companies are not immune from the wider economic environment and the recent increases in interest rates, we remain encouraged by the overall performance of the portfolio and have recently seen potential for some early realisations. Investment Portfolio Summary as at 30 June 2007 Date of Total Valuation % value initial book of net investment cost assets Qualifying investments £'000 £'000 AIM quoted investments BBI Holdings plc May-06 382 621 2.62% Developer and manufacturer of rapid test diagnostic products SectorGuard plc Aug-05 150 150 0.63% Provider of manned guarding, mobile patrolling, and alarm response services ---------- ---------- ---------- 532 771 3.25% Unquoted investments Youngman Group Limited Oct-05 1,000 2,716 11.45% Manufacturer of ladders and access towers British International Holdings Jun-06 1,000 1,170 4.93% Limited Supplier of helicopter services VSI Limited Apr-06 618 1,092 4.60% Developer and marketer of 3D software Ministry of Cake Limited Sep-05 1,000 1,075 4.53% Manufacturer of frozen cakes and desserts for the food service industry Campden Media Limited Jan-06 975 1,001 4.22% Magazine publisher and conference organiser PXP Holdings Limited Dec-06 1,000 1,000 4.22% (Pinewood Structures) Designer, manufacturer, supplier and installer of timber- frames for buildings Blaze Signs Holdings Apr-06 574 885 3.73% Limited Signwriter Racoon International Dec-06 874 874 3.69% Holdings Limited Supplier of hair extensions, hair care products and training PastaKing Holdings Limited Jun-06 464 749 3.16% Supplier to the educational and food service market Vectair Holdings Limited Jan-06 560 604 2.55% Designer and distributor of washroom products FH Ingredients Limited Feb-05 213 - 0.00% Processor and distributor of frozen herbs to the food processing industry ---------- ---------- ---------- 8,278 11,166 47.08% ---------- ---------- ---------- Total qualifying investments 8,810 11,937 50.33% ---------- ---------- ---------- Non-qualifying investments Global Treasury Funds 2,918 2,918 12.30% plc (Royal Bank of Scotland)** Fidelity Institutional Cash 2,039 2,039 8.60% Fund plc** SWIP Global Liquidity 1,933 1,933 8.15% Fund plc (Scottish Widows)** Barclays Global Investors 1,801 1,801 7.59% Cash Selection Funds plc** Insight Liquidity Funds 1,132 1,132 4.77% plc (HBOS)** GS Funds plc (Goldman 1,031 1,031 4.35% Sachs)** Institutional Cash Series plc 943 943 3.98% (BlackRock)** ---------- ---------- ---------- Total non-qualifying 11,797 11,797 49.74% investments ---------- ---------- ---------- Total investments 20,607 23,734 100.07% ====== ====== ====== Other assets 246 246 1.04 % Current liabilities (264) (264) (1.11)% ---------- ---------- ---------- Net assets 20,589 23,716 100.00% ====== ====== ====== **Disclosed as Investments at fair value within Current assets in the Balance Sheet. Unaudited Income Statement (incorporating the Revenue Account of the Company for the six months ended 30 June 2007 Six months ended 30 June 2007 Six months ended 30 June 2006 Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ Unrealised gains on investments held at fair value - 1,607,124 1,607,124 - 15,180 15,180 Realised losses on investments held at fair value - - - - - - Costs of investment transactions - (148) (148) - (61) (61) Income 625,023 - 625,023 517,317 - 517,317 Investment management fees (65,423) (196,271) (261,694) (61,340) (184,021) (245,361) Other expenses (160,711) - (160,711) (154,791) - (154,791) ---------- ---------- --------- ---------- ---------- ---------- Return on ordinary activities before taxation 398,889 1,410,705 1,809,594 301,186 (168,902) 132,284 Tax on ordinary activities (92,076) 62,904 (29,172) (69,884) 54,248 (15,636) ---------- ---------- --------- ---------- ---------- ---------- Return attributable to equity shareholders 306,813 1,473,609 1,780,422 231,302 (114,654) 116,648 ====== ====== ====== ====== ====== ====== Return per share 1.39p 6.66p 8.05p 1.04p (0.51)p 0.53p Dividends paid Interim dividend paid for the six months ended 30 June 2006 of 0.80 pence per share - - - - - - Final dividend paid for the year ended 31 December 2006 of 1.40 pence per share (period ended 31 December 2005: 0.70 of a penny per share) 309,451 - 309,451 155,005 - 155,005 ---------- ---------- ---------- ---------- ---------- 309,451 - 309,451 155,005 - 155,005 ---------- ----------- ---------- ---------- ---------- Year ended 31 December 2006 (audited) Revenue Capital Total £ £ £ Unrealised gains on investments held at fair value - 1,731,906 1,731,906 Realised losses on investments held at fair value - (212,893) (212,893) Costs of investment transactions - (82) (82) Income 1,071,415 - 1,071,415 Investment management fees (123,960) (371,881) (495,841) Other expenses (317,372) - (317,372) ---------- ---------- ---------- Return on ordinary activities before taxation 630,083 1,147,050 1,777,133 Tax on ordinary activities (161,126) 113,421 (47,705) ---------- ---------- ---------- Return attributable to equity shareholders 468,957 1,260,471 1,729,428 ====== ====== ====== Return per share 2.12p 5.69p 7.81p Dividends paid Interim dividend paid for the six months ended 30 June 2006 of 0.80 pence per share 177,149 - 177,149 Final dividend paid for the year ended 31 December 2006 of 1.40 pence per share (period ended 31 December 2005: 0.70 of a penny per share) 155,005 - 155,005 ---------- ---------- ---------- 332,154 - 332,154 Unaudited Balance Sheet as at 30 June 2007 As at As at As at 30 June 30 June 31 December 2007 2006 2006 (audited) £ £ £ Non-current assets Investments at fair value 11,936,670 6,951,307 10,329,528 Current assets Debtors and prepayments 124,753 83,998 142,515 Investments at fair value 11,797,408 14,052,947 11,906,321 Cash at bank 121,289 63,384 58,250 ---------- ---------- ---------- 12,043,450 14,200,329 12,107,086 Creditors: amounts falling due within one year ( 264,247) ( 306,784) ( 191,712) ---------- ---------- ---------- Net current assets 11,779,203 13,893,545 11,915,374 ---------- ---------- ---------- Net assets 23,715,873 20,844,852 22,244,902 ---------- ---------- ---------- Capital and reserves Called up share capital 221,038 221,438 221,038 Capital redemption reserve 400 - 400 Share premium account - 20,711,686 - Capital reserve - unrealised 3,339,030 15,180 1,731,906 Capital reserve - realised ( 874,143) ( 399,027) ( 740,628) Special distributable reserve 20,676,105 - 20,676,105 Revenue reserves 353,443 295,575 356,081 ---------- ---------- ---------- Equity shareholders' funds 23,715,873 20,844,852 22,244,902 ---------- ---------- ---------- Net asset value per Ordinary Share 107.29p 94.13p 100.64p Unaudited Reconciliation of Movements in Shareholders' Funds for the six months ended 30 June 2007 Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 (audited) £ £ £ Opening Shareholders' funds 22,244,902 20,883,209 20,883,209 Ordinary Shares bought back - - (35,581) Return for the period before dividends 1,780,422 116,648 1,729,428 Dividends paid in period (309,451) (155,005) (332,154) ---------- ---------- ---------- Closing Shareholders' funds 23,715,873 20,844,852 22,244,902 Unaudited Summarised Cash Flow Statement for the six months to 30 June 2007 Six months Six months ended ended Year ended 30 June 30 June 31 December 2007 2006 2006 (audited) £ £ £ Operating activities Investment income received 644,916 527,331 1,023,128 Investment management fees paid (261,694) (246,172) (619,414) Other cash payments (119,627) (125,006) (312,203) ---------- ---------- ---------- Net cash inflow from operating activities 263,595 156,153 91,511 Investing activities Acquisitions of investments (18) (4,573,234) (6,447,622) Dividends Equity dividends paid (309,451) (155,005) (332,154) ---------- ---------- ---------- Cash outflow before financing and liquid resource management (45,874) (4,572,086) (6,688,265) Financing Share capital raised/(bought back) - - ( 35,581) Management of liquid resources Decrease in current investments 108,913 4,616,380 6,763,006 ---------- ---------- ---------- Increase in cash for the period 63,039 44,294 39,160 ---------- ---------- ---------- NOTES 1. The accounts have been prepared under UK Generally Accepted Accounting Practice (GAAP and, to the extent that it does not conflict with the fair value rules of the Companies Act 1985, the 2003 Statement of Recommended Practice, `Financial Statements of Investment Trust Companies', revised December 2005. 2. In accordance with the policy statement published under "Management and Administration" in the Company's Prospectus dated 9 July 2004, the Directors have charged 75% of the investment management expenses to the capital reserve. 3. The revenue return per Ordinary Share is based on the net revenue on ordinary activities after taxation of £306,813 and is based on 22,103,821 Ordinary Shares, being the weighted average number of Ordinary Shares in issue during this period. The capital gain per Ordinary Share is based on ordinary activities after taxation of £1,473,609 and is based on 22,103,821 Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the period. 4. Net asset value per Ordinary Share is based on net assets at 30 June 2007, and on 22,103,821 (at 30 June 2006: 22,143,821 at 31 December 2006: 22,103,821) Ordinary Shares, being the number of Ordinary Shares in issue on that date. 5. The financial information for the six months ended 30 June 2007 has neither been audited nor reviewed. 6. Copies of the Interim Report for the six months ended 30 June 2007 are being sent to all Shareholders. Further copies are available free of charge from the Company's registered office, One Jermyn Street, London SW1Y 4UH or can be downloaded via the Company's web site at www.migvct.co.uk Contact details for further enquiries: Sarah Penfold of Matrix-Securities Limited (the Company Secretary) on 020 7925 3300 or by e-mail on MIG@matrixgroup.co.uk Matrix Private Equity Partners LLP (the Investment Manager), on 020 7925 3300 or by e-mail on info@matrixpep.co.uk

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