Half-yearly Report
Matrix Income & Growth 4 VCT plc
Half-Yearly Report for the six months ended 31 July 2010
INVESTMENT OBJECTIVE
The objective of Matrix Income & Growth 4 VCT plc ("the Company" or "MIG4") is
to provide shareholders with an attractive investment return, principally by
maximising the stream of dividend distributions from the income and capital
gains generated by a portfolio of investments in a wide variety of unquoted
companies in the UK.
The portfolio comprises a number of diverse investments over a wide range of
different business sectors, thus spreading risk by avoiding over-concentration
in any one sector.
FINANCIAL HIGHLIGHTS
As at 31 July 2010
- Increase of 4.3% in net asset value (NAV) over the six month period
- Increase of 4.8% in total shareholder return (share price basis) over the six
month period
- Increase of 5.4% in total shareholder return (net asset value basis) over the
six month period
Performance Summary - Ordinary Shares of 1 penny
Period Net Net asset NAV total Share Share price
assets value return to price (p)1 total return to
(NAV) per shareholders shareholders
(£ share (p) since launch since launch
million (p)2 per share (p)2
Six months ended
31 July 2010 23.3 110.9 128.6 95.5 113.2
31 July 2009 21.1 105.1 119.8 82.0 96.7
Year ended
31 January 2010 21.2 106.3 122.0 92.3 108.0
31 January 2009 21.0 104.6 118.3 92.0 105.7
31 January 2008 24.1 117.4 128.9 109.0 120.5
31 January 2007 9.8 116.3 125.2 91.0 101.7
31 January 2006 9.3 106.6 115.0 85.0 93.9
1 Source: London Stock Exchange 2 Total returns to Shareholders include
dividends paid
The tables below show the NAV total returns at 31 July 2010 for a shareholder
that invested £10,000 in the different fundraisings undertaken by the Company:
BEFORE BENEFIT OF INITIAL INCOME TAX RELIEF
Tax year Issue Number Net asset Dividends NAV total Profit/
ended 5 price of value paid to return to (loss)
April per shares (NAV) at shareholder shareholder before
share held since since income
(p) 31 July subscription subscription tax
2010 (£) (£) (£) relief 3
(£)
1999 & 2000 200.01 5,000 5,545 885 6,430 (3,570)
2007 119.92 8,340 9,249 584 9,833 (167)
2010 & 2011 112.4 8,896 9,866 178 10,044 44
1 Original investment at 100p per ordinary share of 5p each, converted on a 2
for 1 basis to ordinary shares of 1p each in October 2006.
2 Average issue price of shares.
3 NAV total return minus initial investment cost (before income tax relief).
AFTER BENEFIT OF INITIAL INCOME TAX RELIEF
Tax year Income Cost net Net Dividends NAV total Profit/
ended 5 tax of income asset paid to return to (loss)
April relief tax relief value shareholder shareholder after
(£) (NAV) at since since income
subscription subscription tax
31 July (£) (£) relief 2
2010 (£) (£)
1999 & 2000 20%1 8,000 5,545 885 £6,430 £(1,570)
2007 30% 7,000 9,249 584 £9,833 £2,833
2010 & 2011 30% 7,000 9,866 178 £10,044 £3,044
1 Additional capital gains tax deferral relief of up to £4,000 available to
qualifying shareholders.
2 NAV total return minus cost net of income tax relief.
The data for the initial fundraising above includes the period up to 1 August
2006, when the Company used three investment advisers. The two subsequent
fundraisings have been solely managed by Matrix Private Equity Partners LLP.
CHAIRMAN'S STATEMENT
I am pleased to present the Company's Half-Yearly Report for the six months
ended 31 July 2010.
Performance
As at 31 July 2010 the Company's NAV per Ordinary Share was 110.9 pence (31
January 2010: 106.3 pence) an increase of 4.3% over the six month period. This
compares with a decline of 0.9% in the FTSE SmallCap CR Index and a rise of
2.7% in the FTSE AiM CR Index.
This result combines an element of recovery leading to increased value in some
of the portfolio companies, together with the tendency for unquoted asset
portfolios to lag the trends seen in the main quoted indices.
Cumulative dividends paid to date amount to 17.7 pence per Ordinary Share.
Portfolio
Quoted markets have remained volatile during the six months under review with
sector price earnings multiples (by reference to which unquoted investments are
often valued) varying accordingly.
Overall, the portfolio showed a net increase of £1.4 million over the six month
period. The significant contributors to this increase were Monsal, ATG Media,
Focus Pharma, British International and Racoon.
Monsal's current valuation is based on the price paid in July for an equity
stake of 26% for an investment of £4 million by Four Winds Capital Management.
Four Winds specialises in providing funding for the global commodities and
natural resources sectors. ATG Media and Focus Pharma are reporting better
results than budgeted whilst British International has benefited from an oil
exploration contract in the Falklands. Racoon has improved its profitability
through more focussed marketing expenditure.
Stortext FM was disposed of for cash proceeds of £465,079, a loss of £96,741.
DiGiCo Europe made a partial loan repayment of £74,745 in June, as well as
paying a dividend of 18p per share received shortly after the period end. Two
very small follow-on investments were made in sparesFinder and Monsal.
Cash and liquidity fund balances as at 31 July 2010 amounted to £7.4 million.
Dividend
The Board has declared an interim capital dividend of one penny per share for
the year ending 31 January 2011, payable on 5 November 2010 to Shareholders on
the register on 15 October 2010.
Revenue Account
The revenue return for the six months to 31 July 2010 was £37,186 (after tax)
or 0.18p per share. This compares to a loss of £14,420 in the six months to 31
July 2009. Income has been improved by the receipt of loan stock interest from
Westway, CB Imports and Iglu.com. This is against the backdrop of six investee
companies being unable to service their loan stock interest due to bank
covenant breaches. As a result, £401,422 of loan interest is not being
recognised at this time. The Investment Manager expects servicing of these
loans to resume in some cases, while in others value may not be recovered or
received only on realisation.
DiGiCo declared a maiden dividend, which resulted in a payment of £69,574 to
the Company, received shortly after the period end. VSI also paid a small
preference share dividend during the period.
Interest received from money market funds continues to be low, at an average of
around 0.5%.
Investment Management expenses have increased by approximately £26,000 in total
compared to 2009, due to the increase in net assets and as a result of the
funds raised under the Top-up Offer earlier this year. Other expenses have
increased by around £41,000, following an adjustment to the accounting
treatment of trail commission and fees relating to the recruitment of a new
director.
Share buy-backs
During the six months ended 31 July 2010 the Company continued to implement its
buy-back policy and bought back 436,053 Ordinary Shares, representing 2.18% of
the shares in issue as at 1 February 2010 at a total cost of £405,046. These
shares were subsequently cancelled by the Company.
The Board regularly reviews its buyback policy and, given the less volatile
outlook for the valuation of the portfolio, has undertaken to reduce the
discount to NAV at which the Company's shares trade. At 24 September 2010, the
mid-market price for the Company's shares was 96.0 pence, representing a
discount of 13.4% to the NAV prevailing at 31 July 2010.
Top-up offer
1,479,320 new Ordinary Shares were allotted under the top-up offer which closed
on 3 April 2010. A total of £1.60m before expenses was raised.
Outlook
Much debate is currently taking place over whether the UK economy will enter a
double dip recession. What is certainly clear is that the imprudent stewardship
of the nation's finances by the previous government means that putting the UK
economy back on a sound basis will be a painful, and probably long, exercise.
Although this Fund invests in profitable companies, and is not investing in
technology high risk start ups, companies which are in most cases at a
relatively early stage in their growth will be challenged by the anticipated
testing economic environment over the coming winter. On the other hand, it is
very encouraging to be able to report that the majority of companies in the
portfolio continue to trade profitably and a number are reporting results ahead
of budget.
The Company continues to retain a significant cash position, having correctly
limited investment during the downturn. The unquoted sector is beginning to see
a return to more active levels, and it is hoped that a number of attractive
investment opportunities will be identified in the short term.
In summary, your Board is encouraged by the portfolio showing resilience and
promise in difficult conditions.
Future fundraising
For the reasons outlined above, the Company will be participating in a linked
fundraising with Matrix Income & Growth VCT plc and The Income & Growth VCT plc
which will be launched later this year. The funds raised will bolster the
Company's strong cash position to capitalise on new investment opportunities
and spread fixed running costs over a larger asset base. Details of the Offer
will be posted to shareholders shortly.
The Board
As advised in the last annual report, the new provisions of the AIC Code and
the revised listing rules for VCTs come into effect this month. As a result I
am resigning as Chairman on 27 September 2010 and Christopher Moore will be
appointed as my successor. I am pleased to report that on 1 August 2010 Andrew
Robson was appointed to the Board and will take over the role of Chairman of
the Audit Committee at the end of this month. Andrew is a qualified Chartered
Accountant who has wide City experience which includes private equity
investment. He is also a director of British Empire Securities & General Trust
plc, Shires Income plc, M&G Equity Investment Trust plc and J P Morgan Smaller
Companies Investment Trust plc.
MIG 4 website
May I remind you that the Company has its own website which is available at
www.mig4vct.co.uk.
On conclusion of my tenure as Chairman may I once more thank Shareholders for
their continued support which has always made my task, and indeed that of the
other members of the Board, so much easier. I would also like to thank the
partners and members of Matrix Private Equity Partners, together with the
Fund's accounting and legal advisers, for their advice, guidance and support
during the period of my Chairmanship. MIG 4 is currently in a healthy position
and I am very confident that the new Board, under Christopher Moore's
leadership, will successfully guide the Company through the difficult economic
times we currently face.
Colin Hook
Chairman
24 September 2010
PRINCIPAL RISKS AND UNCERTANTIES
In accordance with Disclosure and Transparency Rule (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 January 2010. 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.
The principal risks faced by the Company are:
* economic risk;
* investment and strategic risk;
* regulatory risk (including VCT status);
* financial and operating risk;
* market risk;
* asset liquidity risk;
* market liquidity risk;
* credit/counterparty risk.
A more detailed explanation of these can be found in the Directors' Report on
pages 23 - 24 and in Note 20 on pages 63 - 70 of the Annual Report and Accounts
for the year ended 31 January 2010 copies of which are available on the VCT's
website, www.mig4vct.co.uk.
Responsibility Statement
In accordance with DTR 4.2.10 the Directors confirm that to the best of their
knowledge:
a. the condensed set of financial statements, which has been prepared in
accordance with the statement, "Half-Yearly Reports", issued by the
Accounting Standards Board, gives 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,
Investment Policy, Investment Manager's Review and the Investment Portfolio
Summary includes a fair review of the information required by DTR 4.2.7
being an indication of the important events that have occurred during the
first six months of the financial year and their impact on the condensed
set of financial statements.
c. a description of the principal risks and uncertainties facing the Company
for the remaining six months is set out above, in accordance with DTR
4.2.7; and
d. there were no related party transactions in the first six months of the
current financial year that are required to be reported, in accordance with
DTR 4.2.8.
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 report should be
construed as a profit forecast.
On behalf of the Board
Colin Hook
Chairman
24 September 2010
INVESTMENT POLICY
The Company'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 yet own. Investments are
primarily made in companies that are established and profitable.
The Company has a small legacy portfolio of investments in companies from its
period prior to 1 August 2006, when it was a multi-manager VCT. This includes
investments in early stage and technology companies.
The Company's cash and liquid resources may be invested to maximise income
returns in a range of instruments of varying maturities, subject to the
overriding criterion that the risk of loss of capital be minimised.
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. The £14.9 million of Funds raised by the Company after 6 April 2006
are subject to a £7 million gross assets test for an investment to be VCT
qualifying.
VCT regulation
The investment policy is designed to ensure that the Company continues to
qualify and is approved as a VCT by HMRC. Amongst other conditions, the Company
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 year in shares or
securities comprised in VCT qualifying holdings, of which a minimum overall of
30% by value must be ordinary shares which carry no preferential rights. In
addition, although the Company 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 VCT qualifying company in ordinary shares which carry
no preferential rights.
Asset mix
The Company initially holds its funds in a portfolio of readily realisable
interest bearing investments and deposits. The investment portfolio of
qualifying investments is built up over a three year period with the aim of
investing and maintaining at least 80% of net funds raised in qualifying
investments.
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. Normally, no holding in any one
company will represent more than 10% (but in any event will not be greater than
15%) of the value of the Company's investments, based on cost, 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 Company aims to invest in larger, more mature unquoted companies through
investing alongside the three other VCTs advised by the Investment Manager with
a similar investment policy. This enables the Company to participate in
combined investments advised on by the Investment Manager of up to £5 million.
Borrowing
The Company 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 Board of Directors. Matrix-Securities Limited
provides Company Secretarial and Accountancy services to the Company.
INVESTMENT MANAGER'S REVIEW
Overview
The six months to 31 July 2010 have continued to be challenging, both for new
investment and achieving exits. The recent political uncertainty and slow
recovery from recession have meant that companies have been reluctant to market
their businesses for sale or raise new capital. However, now that the coalition
Government has set out its plans for reducing the budget deficit, business
owners should now have the clarity they need to plan for the future. We are
hopeful, therefore, that a greater number of more attractively priced
opportunities will come forward.
Those deals that we have found sufficiently attractive have been difficult to
complete. We have remained cautious and continue to be highly selective in the
companies that we consider.
The Portfolio
The MPEP-invested portfolio at 31 July 2010 comprised twenty-eight investments
with a cost of £15.7 million and a valuation of £16.1 million. On a
like-for-like basis the value of the portfolio has increased by 10.2% in the
first six months of the year.
The uplift in value principally derives from the improved performance of four
companies; ATG Media, Focus Pharma, British International and Racoon; and a
third party investment in Monsal.
ATG Media has seen its core magazine business perform ahead of budget, partly
due to increased sales and also an increase in advertising revenues. Its online
auction technology continues to grow and is also performing ahead of budget.
Focus Pharma is seeing increased success and expects to be materially ahead of
its budget for the year. British International has returned to historic levels
of profitability after a disappointing year in 2009. It continues to supply
helicopter support to the drilling rig stationed in Falkland Islands' waters.
Racoon has improved its profitability through a more focussed marketing
expenditure.
Monsal successfully completed a second fundraising that brought in a new
investor, FourWinds Capital, which has invested £4 million at a valuation
significantly above our original cost and previous valuation. Matrix VCTs
received a repayment of their recent loan stock investment and made small
purchases of shares, MIG 4 receiving back £70,475 and investing £1,717 for
further shares. FourWinds Capital has also committed a further £10 million to
finance other business opportunities for Monsal.
DiGiCo continues to grow its business and generate strong profits. This has
been driven by a strong product offering and development of new innovative
products. In June, DiGiCo repaid £69,565 of loan stock plus a premium of £5,180
and paid a dividend of 18p per share to its shareholders.
CB Imports, Iglu and Westway have all made strong starts since investment and
are all performing ahead of their investment plans. CB Imports and Iglu.com
continue to be held at cost, having been completed in December 2009, although
we expect to see increased valuations going forward.
The six acquisition companies continue to seek investments in their chosen
sectors but have not yet found sufficiently attractive investments at the right
price.
In June, BG Consulting and Duncary 4 completed a restructuring, with your
Company's investment transferring to a new holding company, Duncary 8 Limited.
Despite challenging trading conditions, BG Consulting has been trading ahead of
its budget. This, and the restructuring, have resulted in an increase in value
although the investment still remains below cost.
As reported in the Annual Report, Stortext FM was successfully sold in February
for cash proceeds of £465,079 plus loan notes in Box-It Data Management Limited
of £25,759. Box-It continues to trade satisfactorily although no value has as
yet been attributed to the loan notes.
Whilst the building and construction sector has continued to suffer from
sluggish demand, those portfolio companies with direct exposure to this sector,
Blaze Signs, Plastic Surgeon, PXP and Youngman, are all performing steadily. We
have worked with these and other portfolio businesses and encouraged them to
make the changes necessary to ensure they are in the best possible position to
withstand this period of economic uncertainty. It is a measure of this effort
that only one of these companies has required modest additional funding during
the past two years.
Despite a recent trading update which was only slightly behind market
expectations, Legion Group requested a suspension of its shares pending
clarification of its working capital position in July. Unfortunately, it was
unable to agree a repayment plan with a major creditor and the business was
placed into administration shortly after the period-end.
The investments previously made by Elderstreet are trading behind their budgets
and their valuations have reduced accordingly. Cashfac has, however, increased
its headcount in anticipation of a strong increase in sales in the financial
sector. Sift has experienced a weakening in advertising revenues although
management anticipates a partial recovery in the second half of its financial
year. In February, your Company acquired further shares in sparesFinder for a
total cost of £854. sparesFinder has been trading behind its budget for the
year but remains ahead of its previous financial year.
Outlook
Although the UK economic environment remains uncertain, there appear to be no
signs of further threats to the financial health of our portfolio companies.
The more stable political and economic environment should allow smaller
companies to plan for the future and we expect to see increasingly attractive
opportunities coming forward. With significant cash reserves, your Company is
well placed to take advantage of this point in the cycle.
INVESTMENT PORTFOLIO SUMMARY
As at 31 July 2010
Total cost Total Total % of % of
at valuation at valuation equity portfolio
31 Jan 10 at held by value
31 Jul 10 31-Jul-10
Matrix Private Equity £ £ £
Partners LLP
DiGiCo Europe Limited 495,652 1,697,193 1,688,891 6.52% 10.43%
Design and
manufacture of audio
mixing desks
ATG Media Holdings 1,000,000 905,295 1,225,512 8.50% 7.57%
Limited
Publisher and online
auction platform
operator
Monsal Holdings 636,013 675,928 1,147,620 6.37% 7.09%
Limited
Supplier of
engineering services
to water and waste
sectors
Focus Pharma Holdings 772,451 885,606 1,033,277 3.14% 6.38%
Limited
Licensor and
distributor of
generic
pharmaceuticals
CB Imports Group 1,000,000 1,000,000 1,000,000 6.00% 6.18%
Limited
Importer and
distributor of
artificial flowers,
floral sundries and
home decor products
Backbarrow Limited 1,000,000 1,000,000 1,000,000 25.00% 6.18%
Food manufacturing,
distribution and
brand management
Bladon Castle 1,000,000 1,000,000 1,000,000 25.00% 6.18%
Management Limited
Brand management,
consumer products and
retail
Fullfield Limited 1,000,000 1,000,000 1,000,000 25.00% 6.18%
Food manufacturing,
distribution and
brand management
Rusland Management 1,000,000 1,000,000 1,000,000 49.00% 6.18%
Limited
Brand management,
consumer products and
retail
Torvar Limited 1,000,000 1,000,000 1,000,000 49.00% 6.18%
Database management,
mapping, data mapping
and management
services to legal and
building industries
Vanir Consultants 1,000,000 1,000,000 1,000,000 16.67% 6.18%
Limited
Database management,
mapping, data mapping
and management
services to legal and
building industries
Iglu.com Holidays 878,249 878,249 878,249 7.15% 5.43%
Limited
Online ski and cruise
retailer
Westway Services 327,616 526,041 660,501 3.20% 4.08%
Holdings (2010)
Limited (formerly
MC440 Limited)
Installation,
maintenance and
servicing of
air-conditioning
systems
Higher Nature Limited 500,127 682,568 650,882 10.69% 4.02%
Supplier of mineral,
vitamin and food
supplements
Youngman Group 500,026 349,983 349,983 4.24% 2.16%
Limited
Manufacturer of
ladders and access
towers
VSI Limited 111,928 382,667 335,948 4.20% 2.08%
Provider of software
for CAD and CAM
vendors
British International 295,455 191,887 333,626 2.50% 2.06%
Holdings Limited
Operator of
helicopter services
Racoon International 406,805 59,138 195,903 5.70% 1.21%
Holdings Limited
Supplier of hair
extensions, hair care
products and training
Vectair Holdings 100,000 170,535 168,738 2.14% 1.04%
Limited
Designer and
distributor of
washroom products
Blaze Signs Holdings 610,016 110,681 152,127 5.72% 0.94%
Limited
Manufacturer and
installer of signs
Duncary 8 Limited 126,995 33,725 120,836 5.10% 0.75%
(formerly Duncary 4/
BG Consulting
Limited) 2
Technical training
business
Plastic Surgeon 458,837 114,709 114,709 6.88% 0.71%
Holdings Limited
Snagging and
finishing of domestic
and commercial
properties
Campden Media Limited 152,620 34,024 54,118 1.75% 0.33%
Magazine publisher
and conference
organiser
Letraset Limited 150,000 - 19,625 5.00% 0.12%
Manufacturer and
distributor of
graphic art products
PXP Holdings Limited 679,549 - - 4.98% 0.00%
(Pinewood Structures)
Designer,
manufacturer and
supplier of timber
frames for buildings
BOX-IT Data 25,759 - - - 0.00%
Management Limited
(former investment in
Stortext FM Limited)
Software based
solutions for
document management
Stortext FM Limited - 445,866 - - 0.00%
Software based
solutions for
document management
Other investments in 500,102 64,323 - - 0.00%
the portfolio 1
----- ----- ----- ----- -----
Total 15,728,200 15,208,418 16,130,545 - 99.66%
Former Elderstreet
Private Equity
Limited Portfolio
Cashfac Limited 260,101 63,125 45,929 3.04% 0.28%
Provider of virtual
banking application
software
Sift Limited 130,116 1,226 566 1.03% 0.00%
Developer of business
to business internet
communities
Sparesfinder Limited 250,854 19,197 10,068 - 0.06%
Supplier of
industrial spare
parts on-line
----- ----- ----- ----- -----
Total 641,071 83,548 56,563 - 0.34%
----- ----- ----- ----- -----
Investment Managers' 16,369,271 15,291,966 16,187,108 - 100.00%
totals
===== ===== ===== ===== =====
1 Other investments in the portfolio comprises those investments that have been
valued at nil and from which the Directors only expect to receive small
recoveries ie Inca Interiors Limited (in administration) and Legion Group plc
(in administration.
2 There was a reconstruction in the period of BG Consulting/Duncary 4 Limited
into Duncary 8 Limited.
UNAUDITED INCOME STATEMENT
For the six months ended 31 July 2010
Six months ended 31 July 2010
(unaudited)
Notes Revenue Capital Total
£ £ £
Unrealised gains on 9 - 1,522,221 1,522,221
investments held at
fair value
Realised (losses)/ 9 - (80,807) (80,807)
gains on investments
held at fair value
Income 2 321,660 - 321,660
Recoverable VAT 3 - - -
Investment 4 (51,901) (155,703) (207,604)
management expense
Other expenses (232,573) - (232,573)
----- ----- -----
Profit/(loss) on 37,186 1,285,711 1,322,897
ordinary activities
before taxation
Tax on profit/(loss) 5 - - -
on ordinary
activities
----- ----- -----
Profit/(loss) 37,186 1,285,711 1,322,897
attributable to
equity shareholders
===== ===== =====
Basic and diluted 6 0.18p 6.17p 6.35p
earnings per
Ordinary share
Six months ended 31 July 2009
(unaudited)
Notes Revenue Capital Total
£ £ £
Unrealised gains on 9 - 139,431 139,431
investments held at
fair value
Realised (losses)/ 9 - 289,185 289,185
gains on investments
held at fair value
Income 2 222,835 - 222,835
Recoverable VAT 3 1,051 3,155 4,206
Investment 4 (45,477) (136,431) (181,908)
management expense
Other expenses (192,829) - (192,829)
----- ----- -----
Profit/(loss) on (14,420) 295,340 280,920
ordinary activities
before taxation
Tax on profit/(loss) 5 - - -
on ordinary
activities
----- ----- -----
Profit/(loss) (14,420) 295,340 280,920
attributable to
equity shareholders
===== ===== =====
Basic and diluted 6 (0.07)p 1.47p 1.40p
earnings per
Ordinary share
Year ended 31 January 2010
(audited)
Notes Revenue Capital Total
£ £ £
Unrealised gains on 9 - 700,336 700,336
investments held at
fair value
Realised (losses)/ 9 - 268,469 268,469
gains on investments
held at fair value
Income 2 489,753 - 489,753
Recoverable VAT 3 1,051 3,155 4,206
Investment 4 (97,204) (291,610) (388,814)
management expense
Other expenses (360,819) - (360,819)
----- ----- -----
Profit/(loss) on 32,781 680,350 713,131
ordinary activities
before taxation
Tax on profit/(loss) 5 - - -
on ordinary
activities
----- ----- -----
Profit/(loss) 32,781 680,350 713,131
attributable to
equity shareholders
===== ===== =====
Basic and diluted 6 0.16p 3.40p 3.56p
earnings per
Ordinary 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 profit/(loss) as
stated above and at historical cost.
The notes below form part of these Half-Yearly financial statements.
UNAUDITED BALANCE SHEET
As at 31 July 2010
31 July 2010 31 July 2009 31 January 2010
(unaudited) (unaudited) (audited)
Notes £ £ £
Non-current assets
Investments at fair 9 16,187,108 7,484,707 15,291,966
value
Current assets
Debtors and prepayments 152,051 118,914 139,702
Investments at fair 10 7,116,251 13,588,405 5,975,819
value
Cash at bank 255,319 33,038 70,404
----- ----- -----
7,523,621 13,740,357 6,185,925
Creditors: amounts (400,774) (167,673) (255,349)
falling due within one
year
----- ----- -----
Net current assets 7,122,847 13,572,684 5,930,576
----- ----- -----
Net assets 23,309,955 21,057,391 21,222,542
===== ===== =====
Capital and reserves 11
Called up share capital 210,277 200,383 199,576
Capital redemption 889,606 884,438 885,245
reserve
Share premium reserve 1,583,088 - -
Revaluation reserve 317,939 (1,779,492) (1,473,847)
Special distributable 15,656,959 16,776,720 16,540,857
reserve
Profit and loss account 4,652,086 4,975,342 5,070,711
----- ----- -----
Equity shareholders' 23,309,955 21,057,391 21,222,542
funds
===== ===== =====
Net asset value per 8 110.85p 105.09p 106.34p
Ordinary share
UNAUDITED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 31 July 2010
Six months Six months Year ended 31
ended 31 July ended 31 July January 2010
2010 2009
(unaudited) (unaudited) (audited)
£ £ £
Opening Shareholders' 21,222,542 21,035,698 21,035,698
Funds
Net share capital 1,598,150 - -
subscribed
Net share capital bought (405,046) (58,149) (124,256)
back
Profit for the period 1,322,897 282,920 713,131
before dividends
Dividends paid in period 7 (428,588) (201,078) (402,031)
----- ----- -----
Closing shareholders' 23,309,955 21,059,391 21,222,542
funds
===== ===== =====
The notes below form part of these Half-Yearly financial statements.
UNAUDITED SUMMARISED CASH FLOW STATEMENT
For the six months ended 31 July 2010
Six months Six months Year ended 31
ended 31 July ended 31 July January 2010
2010 2009
(unaudited) (unaudited) (audited)
Notes £ £ £
Interest income received 285,302 146,807 281,147
Dividend income 22,653 84,140 156,673
Other income - 5,098 14,901
VAT received 44,569 89,665 100,239
Investment management fees (327,610) (118,181) (224,334)
paid
Cash payments for other (195,954) (134,333) (334,604)
expenses
----- ----- -----
Net cash (outflow)/inflow (171,040) 73,196 (5,978)
from operating activities
Investing activities
Sale of investments 9 548,848 1,084,665 1,784,500
Purchase of investments 9 (2,576) (373,376) (8,302,196)
----- ----- -----
Net cash inflow/(outflow) 546,272 711,289 (6,517,696)
from investing activities
----- ----- -----
Cash inflow/(outflow) 375,232 784,485 (6,523,674)
before financing and liquid
resource management
Dividends
Equity dividends paid 7 (428,588) (201,078) (402,031)
Financing
Share capital 1,598,150 - -
subscribed
Purchase of own shares (219,447) (90,331) (156,439)
Management of liquid
resources
(Increase)/decrease in (1,140,432) (475,294) 7,137,292
monies held in money
market funds
----- ----- -----
Increase in cash 184,915 17,782 55,148
===== ===== =====
Reconciliation of net
cash inflow/(outflow)
to movement in net
funds
Increase in cash for 184,915 17,782 55,148
the period
Net funds at the start 70,404 15,256 15,256
of the period
----- ----- -----
Net funds at the end of 255,319 33,038 70,404
the period
===== ===== =====
RECONCILIATION OF PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION TO NET CASH
(OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES
For the six months ended 31 July 2010
Six months Six months Year ended
ended 31 ended 31 31 January
July 2010 July 2009 2010
(unaudited) (unaudited) (audited)
£ £ £
Profit on ordinary activities before 1,322,897 280,920 713,131
taxation
Net unrealised gains on investments (1,522,221) (139,431) (700,336)
Net losses/(gains) on realisations of 80,807 (289,185) (268,469)
investments
(Increase)/decrease in debtors (12,349) 159,187 100,314
(Decrease)/increase in creditors (40,174) 61,705 149,382
----- ----- -----
Net cash (outflow)/inflow from operating (171,040) 73,196 (5,978)
activities
===== ===== =====
The notes below form part of these Half-Yearly financial statements.
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 31 July 2010 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 January 2010 and the 2009 Statement of Recommended Practice,
`Financial Statements of Investment Trust Companies and Venture Capital Trusts'
('the SORP').
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.
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
Investments are accounted for on a trade date basis.
All investments held by the Company are classified as "fair value through
profit and loss" 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. For investments actively traded in organised financial markets,
recognition and fair value is determined by reference to Stock Exchange market
trading rules and quoted bid prices at the close of business on the balance
sheet date.
Unquoted investments are valued by the Directors at `fair value through profit
and loss'. Accordingly, in the absence of a market price, the Directors have
valued unquoted investments in accordance with International Private Equity
Venture Capital Valuation (IPEVCV) guidelines as updated in September 2009,
which have not materially changed the results reported last year.
All investments are held at the price of a recent investment for an appropriate
period where there is considered to have been no change in fair value. Where
such a basis is no longer considered appropriate, the following factors will be
considered:
i. Where a value is indicated by a material arms-length transaction by an
independent third party in the shares of a company, this value will be
used.
ii. In the absence of i), and depending upon both the subsequent trading
performance and investment structure of an investee company, the valuation
basis will usually move to either:-
a. an earnings multiple basis. The shares may be valued by applying a suitable
price-earnings ratio to that company's historic, current or forecast
post-tax earnings before interest and amortisation (the ratio used being
based on a comparable sector but the resulting value being adjusted to
reflect points of difference identified by the Investment Manager compared
to the sector including, inter alia, a lack of marketability).
or
b. 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 fallen permanently below
cost, the loss is treated as a permanent impairment and as a realised loss,
even though the investment is still held. The Board assesses the portfolio
for such investments and, after agreement with the Investment Manager, will
agree the values that represent the extent to which an investment loss has
become realised. 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.
iii. Premiums on loan stock investments are accrued at fair value when the
Company receives the right to the premium and when considered recoverable.
iv. Where an earnings multiple or cost less impairment basis is not appropriate
and overriding factors apply, discounted cash flow or net asset valuation
bases may be applied.
Capital gains and losses on investments, whether realised or unrealised, are
dealt with in the profit and loss and revaluation reserves and movements in the
period are shown in the Income Statement.
2. Income
3.
Year
Six months ended Six months ended
ended
31 July 2010 31 July 2009
31 January 2010
(unaudited) (unaudited) (audited)
Income from £ £ £
investments
Dividends 74,794 16,070 50,190
Money-market funds 17,108 62,041 96,060
Loan stock interest 229,721 128,360 327,454
Bank deposit interest 37 4,722 354
Interest received on - 6,544 6,544
VAT
Other Income - 5,098 9,151
----- ----- -----
Total Income 321,660 222,835 489,753
===== ===== =====
3. Recoverable VAT
As at 31 January 2010, a total of £93,695 of VAT recoverable had been received.
Of this amount, £8,236 was in excess of the amount recognised in the year to 31
January 2009 accounts with £4,206 being credited to the Income Statement and £
4,030 being not recognised as it may be repayable to a previous investment
manager or service provider as it relates to VAT charged during a period when
an expense cap applied to their fees. During the period to 31 July 2010, £
44,569 of recoverable VAT, not previously recognised, was received. This, again
has not been recognised since this also relates to a period in which the
investment manager was subject to an expense cap and hence may be repayable.
Therefore, at 31 July 2010 other creditors includes £48,599 of VAT recovered.
4. Investment management expense
In accordance with the policy statement published under "Management and
Administration" in the Company's prospectus dated 8 February 1999, the
Directors have charged 75% of the investment management expenses to the capital
account. This is in line with the Board's expectation of the long-term split of
returns from the investment portfolio of the Company.
5. Taxation
As there were taxable losses, there is no tax charge for the period.
6. Basic and diluted earnings per share
The basic 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 Six months ended Year ended 31
ended 31 July 31 July 2009 January 2010
2010
(unaudited) (unaudited) (audited)
£ £ £
i) Total earnings after 1,322,897 280,920 713,131
taxation
----- ----- -----
Basic and diluted earnings 6.35p 1.40p 3.56p
per Ordinary share (pence)
ii) Revenue earnings/ 37,186 (14,420) 32,781
(loss) from ordinary
activities after taxation
----- ----- -----
Basic and diluted revenue 0.18p (0.07)p 0.16p
earnings/(loss) per
Ordinary share (pence)
Net unrealised capital 1,522,221 139,431 700,336
gains
Net realised capital (80,807) 289,185 268,469
(losses)/gains
Capital expenses net of (155,703) (136,431) (291,610)
taxation
Capital element of VAT - 3,155 3,155
recoverable
Dividends received treated - - -
as capital
iii) Capital return 1,285,711 295,340 680,350
----- ----- -----
Basic and diluted capital 6.17p 1.47p 3.40p
earnings per Ordinary
share (pence)
----- ----- -----
iv) Weighted average 20,831,585 20,075,742 20,032,743
number of shares in issue
in the period
7. Dividends paid
8.
Year
Six months ended Six months ended
ended
31 July 2010 31 July 2009
31 January 2010
(unaudited) (unaudited) (audited)
£ £ £
Final dividend for the 428,588 -year ended 31 January
2010 of 2 pence per
Ordinary share of 1
penny paid on 9 June
2010
Final income dividend - 201,078 201,078
for the year ended 31
January 2009 of 1 penny
per Ordinary Share of 1
penny paid 10 June 2009
Interim capital - - 200,953
dividend for the year
ended 31 January 2010
of 1 penny per Ordinary
Share of 1 penny paid 7
November 2009
----- ----- -----
- 201,078 402,031
===== ===== =====
8. Net asset value per Ordinary Share
9.
As at As at As at
31 July 2010 31 July 2009 31 January 2010
(unaudited) (unaudited) (audited)
£ £ £
Net assets 23,309,955 21,057,391 21,222,542
Number of shares in issue 21,027,687 20,038,300 19,957,572
----- ----- -----
Net asset value per share 110.85p 105.09p 106.34p
(pence)
9. Summary of non current asset investments at fair value during the period
10.
Unquoted Unquoted
Traded on AIM equity preference Loan Stock Total
shares shares
£ £ £ £ £
Valuation at 31 64,323 5,969,444 7,572 9,250,627 15,291,966
January 2010
Purchases at cost - 2,571 - 25,759 28,330
Sales - proceeds - (5,233) - (605,066) (610,299)
- realised gains (64,323) 5,233 - 13,980 (45,110)
Unrealised gains - 1,113,540 250 408,431 1,522,221
----- ----- ----- ----- -----
Valuation at 31 - 7,085,555 7,822 9,093,731 16,187,108
July 2010
Book cost at 31 150,102 6,039,402 124,467 10,055,300 16,369,271
July 2010
Unrealised gains/ - 1,096,153 (16,645) (761,569) 317,939
(losses) at 31 July
2010
Permanent (150,102) (50,000) (100,000) (200,000) (500,102)
impairment of
investments
----- ----- ----- ----- -----
Valuation at 31 - 7,085,555 7,822 9,093,731 16,187,108
July 2010
(Losses)/gains on (150,102) (180,626) - 16,053 (314,675)
investments
Less amounts 85,779 185,859 - (2,073) 269,565
recognised as
unrealised losses
in previous years
----- ----- ----- ----- -----
Realised (losses)/ (64,323) 5,233 - 13,980 (45,110)
gains based on
carrying value at
31 July 2010
Net movement in - 1,113,540 250 408,431 1,522,221
unrealised
appreciation in the
period
----- ----- ----- ----- -----
(Losses)/gains on (64,323) 1,118,773 250 422,411 1,477,111
investments for the
period ended 31
July 2010
===== ===== ===== ===== =====
Transaction costs of £35,697 were incurred in the period and are treated as
realised losses on investments in the Income Statement. Deducting this from £
45,110 realised losses above equals realised losses on Investments per the
Income Statement of £80,807. These transaction costs also reconcile the
difference between net additions and disposals per the cashflow statement of £
546,272 and net additions and disposals per the investment note above of £
581,969.
10. Current investments at fair value
These comprise investments in 6 Dublin based OEIC money market funds managed by
Royal Bank of Scotland, Blackrock Investment Management (UK) Ltd, Goldman
Sachs, Scottish Widows Investment Management and Fidelity Investment
Management.
£7,105,841 (31 July 2009: £13,578,048, 31 January 2010: £5,965,431) of this sum
is subject to same day access, whilst £10,410 (31 July 2009: £10,357, 31
January 2010: £10,388) is subject to 2 day access.
11. Capital and reserves
12.
Called up share Capital Share Premium Revaluation
capital redemption account reserve
reserve
£ £ £ £
At 1 February 2010 199,576 885,245 - (1,473,847)
Shares bought back (4,361) 4,361 - -
Shares issued via 269 24,969
Dividend
re-investment
scheme
Shares issued via 14,793 1,558,119
Offer for
Subscription
Profit/(loss) for - - - 1,522,221
the period
Realised losses - - - -
transferred to
special reserve
Realisation of - - - 269,565
previously
unrealised
appreciation
Dividend - final - - - -
paid for year
ended 31 January
2010
----- ----- ----- -----
At 31 July 2010 210,277 889,606 1,583,088 317,939
===== ===== ===== =====
Special Profit and loss Total
distributable reserve
reserve
£ £ £
At 1 February 2010 16,540,857 5,070,711 21,222,542
Shares bought back (405,046) - (405,046)
Shares issued via 25,238
Dividend
re-investment scheme
Shares issued via 1,572,912
Offer for
Subscription
Profit/(loss) for the - (199,324) 1,322,897
period
Realised losses (478,852) 478,852 -
transferred to
special reserve
Realisation of - (269,565) -
previously unrealised
appreciation
Dividend - final paid - (428,588) (428,588)
for year ended 31
January 2010
----- ----- -----
At 31 July 2010 15,656,959 4,652,086 23,309,955
===== ===== =====
On 31 March 2010 and 3 April 2010, the Company issued 1,479,320 new ordinary
shares at 112.40 pence per share under the Offer for Subscription launched on
20 January 2010.
12. The information for the year ended 31 July 2010 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 January 2010 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.
13. This Half-Yearly Report will shortly be made available on our website:
www.mig4vct.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.
CORPORATE INFORMATION
Directors (Non-executive)
Colin Hook (Chairman)
Christopher Moore
Helen Sinclair
Andrew Robson (appointed 1 August 2010)
Secretary
Matrix-Securities Limited
One Vine Street
London W1J 0AH
Company's Registered Office and Head Office
One Vine Street
London W1J 0AH
Company Registration Number
3707697
Investment Manager
Matrix Private Equity Partners LLP
One Vine Street
London W1J 0AH
www.matrixgroup.co.uk
Website: www.mig4vct.co.uk
Promoter and Administrator Independent Auditors
Matrix-Securities Limited PKF (UK) LLP
One Vine Street Farringdon Place
London W1J 0AH 20 Farringdon Road
London EC1M 3AP
Solicitors VCT Status Adviser
Martineau PricewaterhouseCoopers LLP
No 1 Colmore Square 1 Embankment Place
Birmingham B4 6AA London WC2N 6RH
Also at
35 New Bridge Street
London EC4V 6BW
Registrars Bankers and Custodians
Capita Registrars National Westminster Bank plc
Northern House Financial Institutions Team
Woodsome Park First Floor
Fenay Bridge Mayfair Commercial Banking Centre
Huddersfield 65 Piccadilly
West Yorkshire HD8 0GA London W1A 2PP
Stockbroker
Matrix Corporate Capital LLP
One Vine Street
London W1J 0AH
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