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27 Sep 2010 17:31
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") isto provide shareholders with an attractive investment return, principally bymaximising the stream of dividend distributions from the income and capitalgains generated by a portfolio of investments in a wide variety of unquotedcompanies in the UK.The portfolio comprises a number of diverse investments over a wide range ofdifferent business sectors, thus spreading risk by avoiding over-concentrationin any one sector.FINANCIAL HIGHLIGHTSAs 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 shareholderthat 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 withsector price earnings multiples (by reference to which unquoted investments areoften valued) varying accordingly.Overall, the portfolio showed a net increase of £1.4 million over the six monthperiod. 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 equitystake of 26% for an investment of £4 million by Four Winds Capital Management.Four Winds specialises in providing funding for the global commodities andnatural resources sectors. ATG Media and Focus Pharma are reporting betterresults than budgeted whilst British International has benefited from an oilexploration contract in the Falklands. Racoon has improved its profitabilitythrough 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 aspaying a dividend of 18p per share received shortly after the period end. Twovery 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 forthe year ending 31 January 2011, payable on 5 November 2010 to Shareholders onthe 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 31July 2009. Income has been improved by the receipt of loan stock interest fromWestway, CB Imports and Iglu.com. This is against the backdrop of six investeecompanies being unable to service their loan stock interest due to bankcovenant breaches. As a result, £401,422 of loan interest is not beingrecognised at this time. The Investment Manager expects servicing of theseloans to resume in some cases, while in others value may not be recovered orreceived 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 itsbuy-back policy and bought back 436,053 Ordinary Shares, representing 2.18% ofthe shares in issue as at 1 February 2010 at a total cost of £405,046. Theseshares 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 adouble dip recession. What is certainly clear is that the imprudent stewardshipof the nation's finances by the previous government means that putting the UKeconomy back on a sound basis will be a painful, and probably long, exercise.Although this Fund invests in profitable companies, and is not investing intechnology high risk start ups, companies which are in most cases at arelatively early stage in their growth will be challenged by the anticipatedtesting economic environment over the coming winter. On the other hand, it isvery encouraging to be able to report that the majority of companies in theportfolio continue to trade profitably and a number are reporting results aheadof budget.The Company continues to retain a significant cash position, having correctlylimited investment during the downturn. The unquoted sector is beginning to seea return to more active levels, and it is hoped that a number of attractiveinvestment 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 linkedfundraising with Matrix Income & Growth VCT plc and The Income & Growth VCT plcwhich will be launched later this year. The funds raised will bolster theCompany's strong cash position to capitalise on new investment opportunitiesand spread fixed running costs over a larger asset base. Details of the Offerwill be posted to shareholders shortly.
The Board
As advised in the last annual report, the new provisions of the AIC Code andthe revised listing rules for VCTs come into effect this month. As a result Iam resigning as Chairman on 27 September 2010 and Christopher Moore will beappointed as my successor. I am pleased to report that on 1 August 2010 AndrewRobson was appointed to the Board and will take over the role of Chairman ofthe Audit Committee at the end of this month. Andrew is a qualified CharteredAccountant who has wide City experience which includes private equityinvestment. He is also a director of British Empire Securities & General Trustplc, Shires Income plc, M&G Equity Investment Trust plc and J P Morgan SmallerCompanies 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 fortheir continued support which has always made my task, and indeed that of theother members of the Board, so much easier. I would also like to thank thepartners and members of Matrix Private Equity Partners, together with theFund's accounting and legal advisers, for their advice, guidance and supportduring the period of my Chairmanship. MIG 4 is currently in a healthy positionand I am very confident that the new Board, under Christopher Moore'sleadership, will successfully guide the Company through the difficult economictimes we currently face.Colin HookChairman24 September 2010
PRINCIPAL RISKS AND UNCERTANTIES
In accordance with Disclosure and Transparency Rule (DTR) 4.2.7, the Boardconfirms that the principal risks and uncertainties facing the Company have notmaterially changed since the publication of the Annual Report and Accounts forthe year ended 31 January 2010. The Board acknowledges that there is regulatoryrisk and continues to manage the Company's affairs in such a manner as tocomply 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 onpages 23 - 24 and in Note 20 on pages 63 - 70 of the Annual Report and Accountsfor the year ended 31 January 2010 copies of which are available on the VCT'swebsite, 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 StatementThis report may contain forward looking statements with regards to thefinancial condition and results of the Company, which are made in the light ofcurrent economic and business circumstances. Nothing in this report should beconstrued as a profit forecast.On behalf of the BoardColin HookChairman24 September 2010INVESTMENT POLICYThe Company's policy is to invest primarily in a diverse portfolio of UKunquoted companies. Investments are structured as part loan and part equity inorder to receive regular income and to generate capital gains from trade salesand 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 itsperiod prior to 1 August 2006, when it was a multi-manager VCT. This includesinvestments 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 millionof gross assets at the time of investment to be classed as a VCT qualifyingholding. The £14.9 million of Funds raised by the Company after 6 April 2006are subject to a £7 million gross assets test for an investment to be VCTqualifying.
VCT regulation
The investment policy is designed to ensure that the Company continues toqualify and is approved as a VCT by HMRC. Amongst other conditions, the Companymay not invest more than 15% of its investments in a single company and musthave at least 70% by value of its investments throughout the year in shares orsecurities comprised in VCT qualifying holdings, of which a minimum overall of30% by value must be ordinary shares which carry no preferential rights. Inaddition, although the Company 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 VCT qualifying company in ordinary shares which carryno 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 acrossdifferent industry sectors. To reduce the risk of high exposure to equities,each qualifying investment is structured using a significant proportion of loanstock (up to 70% of the total investment in each VCT qualifying company).Initial investments in VCT qualifying companies are generally made in amountsranging from £200,000 to £1 million at cost. Normally, no holding in any onecompany will represent more than 10% (but in any event will not be greater than15%) of the value of the Company's investments, based on cost, at the time ofinvestment. Ongoing monitoring of each investment is carried out by theInvestment Manager, generally through taking a seat on the board of each VCTqualifying company.Co-investmentThe Company aims to invest in larger, more mature unquoted companies throughinvesting alongside the three other VCTs advised by the Investment Manager witha similar investment policy. This enables the Company to participate incombined 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 thedetermination of its investment policy. Investment and divestment proposals areoriginated, negotiated and recommended by the Investment Manager and are thensubject to formal approval by the Board of Directors. Matrix-Securities Limitedprovides 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 newinvestment and achieving exits. The recent political uncertainty and slowrecovery from recession have meant that companies have been reluctant to markettheir businesses for sale or raise new capital. However, now that the coalitionGovernment has set out its plans for reducing the budget deficit, businessowners should now have the clarity they need to plan for the future. We arehopeful, therefore, that a greater number of more attractively pricedopportunities will come forward.Those deals that we have found sufficiently attractive have been difficult tocomplete. We have remained cautious and continue to be highly selective in
thecompanies that we consider.The PortfolioThe MPEP-invested portfolio at 31 July 2010 comprised twenty-eight investmentswith a cost of £15.7 million and a valuation of £16.1 million. On alike-for-like basis the value of the portfolio has increased by 10.2% in thefirst 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, partlydue to increased sales and also an increase in advertising revenues. Its onlineauction technology continues to grow and is also performing ahead of budget.Focus Pharma is seeing increased success and expects to be materially ahead ofits budget for the year. British International has returned to historic levelsof profitability after a disappointing year in 2009. It continues to supplyhelicopter support to the drilling rig stationed in Falkland Islands' waters.Racoon has improved its profitability through a more focussed marketingexpenditure.Monsal successfully completed a second fundraising that brought in a newinvestor, FourWinds Capital, which has invested £4 million at a valuationsignificantly above our original cost and previous valuation. Matrix VCTsreceived a repayment of their recent loan stock investment and made smallpurchases of shares, MIG 4 receiving back £70,475 and investing £1,717 forfurther shares. FourWinds Capital has also committed a further £10 million tofinance 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 andare all performing ahead of their investment plans. CB Imports and Iglu.comcontinue to be held at cost, having been completed in December 2009, althoughwe 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 yourCompany's investment transferring to a new holding company, Duncary 8 Limited.Despite challenging trading conditions, BG Consulting has been trading ahead ofits budget. This, and the restructuring, have resulted in an increase in valuealthough the investment still remains below cost.As reported in the Annual Report, Stortext FM was successfully sold in Februaryfor cash proceeds of £465,079 plus loan notes in Box-It Data Management Limitedof £25,759. Box-It continues to trade satisfactorily although no value has asyet been attributed to the loan notes.Whilst the building and construction sector has continued to suffer fromsluggish demand, those portfolio companies with direct exposure to this sector,Blaze Signs, Plastic Surgeon, PXP and Youngman, are all performing steadily. Wehave worked with these and other portfolio businesses and encouraged them tomake the changes necessary to ensure they are in the best possible position towithstand this period of economic uncertainty. It is a measure of this effortthat only one of these companies has required modest additional funding duringthe 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 budgetsand their valuations have reduced accordingly. Cashfac has, however, increasedits headcount in anticipation of a strong increase in sales in the financialsector. Sift has experienced a weakening in advertising revenues althoughmanagement anticipates a partial recovery in the second half of its financialyear. In February, your Company acquired further shares in sparesFinder for atotal cost of £854. sparesFinder has been trading behind its budget for theyear but remains ahead of its previous financial year.
Outlook
Although the UK economic environment remains uncertain, there appear to be nosigns of further threats to the financial health of our portfolio companies.The more stable political and economic environment should allow smallercompanies to plan for the future and we expect to see increasingly attractiveopportunities coming forward. With significant cash reserves, your Company iswell 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 beenvalued at nil and from which the Directors only expect to receive smallrecoveries 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 1,522,221investments 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 1,322,897ordinary activities before taxation Tax on profit/(loss) 5 - - -on ordinary activities ----- ----- ----- Profit/(loss) 37,186 1,285,711 1,322,897attributable to equity shareholders ===== ===== ===== Basic and diluted 6 0.18p 6.17p 6.35pearnings per Ordinary share Six months ended 31 July 2009 (unaudited) Notes Revenue Capital Total £ £ £ Unrealised gains on 9 - 139,431 139,431investments held at fair value Realised (losses)/ 9 - 289,185 289,185gains 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) 295,340 280,920ordinary activities before taxation Tax on profit/(loss) 5 - - -on ordinary activities ----- ----- ----- Profit/(loss) (14,420) 295,340 280,920attributable to equity shareholders ===== ===== ===== Basic and diluted 6 (0.07)p 1.47p 1.40pearnings per Ordinary share Year ended 31 January 2010 (audited) Notes Revenue Capital Total £ £ £ Unrealised gains on 9 - 700,336 700,336investments held at fair value Realised (losses)/ 9 - 268,469 268,469gains 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 32,781 680,350 713,131ordinary activities before taxation Tax on profit/(loss) 5 - - -on ordinary activities ----- ----- ----- Profit/(loss) 32,781 680,350 713,131attributable to equity shareholders ===== ===== ===== Basic and diluted 6 0.16p 3.40p 3.56pearnings 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 SHEETAs 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 15,291,966value Current assets Debtors and prepayments 152,051 118,914 139,702 Investments at fair 10 7,116,251 13,588,405 5,975,819value 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 889,606 884,438 885,245reserve Share premium reserve 1,583,088 - - Revaluation reserve 317,939 (1,779,492) (1,473,847) Special distributable 15,656,959 16,776,720 16,540,857reserve Profit and loss account 4,652,086 4,975,342 5,070,711 ----- ----- ----- Equity shareholders' 23,309,955 21,057,391 21,222,542funds ===== ===== ===== Net asset value per 8 110.85p 105.09p 106.34pOrdinary 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 21,035,698Funds Net share capital 1,598,150 - -subscribed Net share capital bought (405,046) (58,149) (124,256)back Profit for the period 1,322,897 282,920 713,131before dividends Dividends paid in period 7 (428,588) (201,078) (402,031) ----- ----- ----- Closing shareholders' 23,309,955 21,059,391 21,222,542funds ===== ===== =====
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) 7,137,292monies 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 55,148the period Net funds at the start 70,404 15,256 15,256of the period ----- ----- ----- Net funds at the end of 255,319 33,038 70,404the 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 1,322,897 280,920 713,131taxation
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 theperiod. Full details of principal accounting policies will be disclosed in
theAnnual Report. a. Basis of accounting The unaudited results cover the six months to 31 July 2010 and have beenprepared under UK Generally Accepted Accounting Practice (UK GAAP), consistentwith the accounting policies set out in the statutory accounts for the yearended 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 theauditors pursuant to the Auditing Practices Board (APB)'s guidance on Review ofInterim Financial Information.
b. Presentation of the Income Statement
In order to better reflect the activities of a VCT and in accordance with theSORP, supplementary information which analyses the Income Statement betweenitems of a revenue and capital nature has been presented alongside the IncomeStatement. The revenue column of profit attributable to equity shareholders isthe measure the Directors believe appropriate in assessing the Company'scompliance with certain requirements set out in Section 274 Income Tax Act2007.
c. Investments
Investments are accounted for on a trade date basis.
All investments held by the Company are classified as "fair value throughprofit and loss" as the Company's business is to invest in financial assetswith a view to profiting from their total return in the form of capital growthand income. For investments actively traded in organised financial markets,recognition and fair value is determined by reference to Stock Exchange markettrading rules and quoted bid prices at the close of business on the balancesheet date.Unquoted investments are valued by the Directors at `fair value through profitand loss'. Accordingly, in the absence of a market price, the Directors havevalued unquoted investments in accordance with International Private EquityVenture 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 appropriateperiod where there is considered to have been no change in fair value. Wheresuch a basis is no longer considered appropriate, the following factors will beconsidered:
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, aredealt with in the profit and loss and revaluation reserves and movements in theperiod 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 6,544VAT 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 31January 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 investmentmanager or service provider as it relates to VAT charged during a period whenan expense cap applied to their fees. During the period to 31 July 2010, £44,569 of recoverable VAT, not previously recognised, was received. This, againhas not been recognised since this also relates to a period in which theinvestment 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 andAdministration" in the Company's prospectus dated 8 February 1999, theDirectors have charged 75% of the investment management expenses to the capitalaccount. This is in line with the Board's expectation of the long-term split ofreturns 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 foreach period are respectively based on numerators i)-iii), each divided by theweighted 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 1,322,897 280,920 713,131taxation ----- ----- ----- Basic and diluted earnings 6.35p 1.40p 3.56pper 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 0.16pearnings/(loss) per Ordinary share (pence) Net unrealised capital 1,522,221 139,431 700,336gains 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 3,155recoverable Dividends received treated - - -as capital iii) Capital return 1,285,711 295,340 680,350 ----- ----- ----- Basic and diluted capital 6.17p 1.47p 3.40pearnings per Ordinary share (pence) ----- ----- ----- iv) Weighted average 20,831,585 20,075,742 20,032,743number 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 - 201,078 201,078for the year ended 31 January 2009 of 1 penny per Ordinary Share of 1 penny paid 10 June 2009 Interim capital - - 200,953dividend 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 15,291,966January 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 16,187,108July 2010 Book cost at 31 150,102 6,039,402 124,467 10,055,300 16,369,271July 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 16,187,108July 2010 (Losses)/gains on (150,102) (180,626) - 16,053 (314,675)investments Less amounts 85,779 185,859 - (2,073) 269,565recognised 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 1,522,221unrealised appreciation in the period ----- ----- ----- ----- ----- (Losses)/gains on (64,323) 1,118,773 250 422,411 1,477,111investments for the period ended 31 July 2010 ===== ===== ===== ===== =====Transaction costs of £35,697 were incurred in the period and are treated asrealised losses on investments in the Income Statement. Deducting this from £45,110 realised losses above equals realised losses on Investments per theIncome Statement of £80,807. These transaction costs also reconcile thedifference 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 - - - 1,522,221the period Realised losses - - - -transferred to special reserve Realisation of - - - 269,565previously 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 25,238Dividend re-investment scheme Shares issued via 1,572,912Offer for Subscription Profit/(loss) for the - (199,324) 1,322,897period 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 ordinaryshares at 112.40 pence per share under the Offer for Subscription launched on20 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
MATRIX INCOME & GROWTH 4 VCT PLC