Last checked at 
18 Sep 2009 07:00
Matrix Income & Growth 4 VCT plc ("the Company")
Half-yearly results for the six months ended 31 July 2009
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 Highlights as at 31 July 2009
* Increase of 0.5% in net asset value (NAV) over the six month period
* Decrease of 8.5% in total shareholder return (share price basis) over the
six month period
* Increase of 1.3% in total shareholder return (net asset value basis) over
the six month period
* Liquidity maintained in face of market downturn
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 2009 21.1 105.1 119.8 82.0 96.7 Year ended 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 31 January 2005 10.1 110.3 118.5 85.0 93.4
1 Source: London Stock Exchange 2 Total returns to Shareholders include dividends paid
Chairman's Statement
I am pleased to present the Company's Half-Yearly Report for the six months ended 31 July 2009.
At 31 July 2009 the Company's NAV per Ordinary Share was 105.1 pence (31January 2009: 104.6 pence), an increase of 0.5% over the six month period. Thiscompares with an increase of 34.3% in the capital return of the FTSE SmallCapIndex and a rise of 34.0% in the FTSE All-Share AiM Index during the sameperiod. It should be noted that over the twelve month period the Company hasout-performed the benchmark indices: the NAV per Ordinary Share fell by 6.5%from 112.4 pence at 31 July 2008 while the capital return of the FTSE SmallCapand the FTSE All-Share AiM Indices fell by 13.2% and 34.2% respectively.Cumulative dividends paid to date amount to 14.7 pence per ordinary share.
Portfolio
While some commentators are now suggesting that the worst of the recession isover, investment portfolios in the UK continue to be affected by the difficulteconomic conditions. Over the last six months sector price earnings multiplesin the UK have been highly volatile with the Pharmaceuticals & Biotechnologyand Food sectors showing large decreases. In contrast, the Technology Hardware& Equipment, Personal Goods and Support Services have been the mainbeneficiaries. These swings between sectors inevitably affect our portfoliovaluations.Notwithstanding the impact of these swings in sector price earnings multipleson the valuations, a number of the portfolio companies, particularly those inthe construction sector, are experiencing the negative effects of therecession. Whilst all these companies have been taking steps to minimise theseadverse effects with cost cutting and similar measures, the impact onprofitability cannot be counteracted entirely or immediately.Within the portfolio, a partial loan stock repayment of 233,581 at a premiumof 16,189 was made by DiGiCo Europe Limited in May 2009. In June 2009, a newinvestment of 373,376 was made into MC 440 Limited to support the MBO ofWestway Cooling Limited. Based in Greenford, Middlesex, Westway specialises ininstalling, servicing and maintaining high quality air-conditioning systems andassociated building services plant in the refurbishment and maintenance market.At the beginning of July, the Company sold its investment in Tottel PublishingLimited, the specialist publisher of legal and tax titles to Bloomsbury Groupearning a fourfold gain on the initial investment on a total return basis,including net sale proceeds of 851,084. The Company's original investment of 235,200 had already been reduced to 148,568 in March of this year when Tottelrepaid 50% of the Company's loan stock.
Cash and liquidity fund balances as at 31 July 2009 amounted to 13.6 million.
Dividend
The Board has declared an interim dividend of 1 penny per share for the yearending 31 January 2010, payable on 7 November 2009 to Shareholders on theregister on 9 October 2009. The dividend will be paid from capital from therealised profit arising from the sale of Tottel Publishing in June of this
yearreferred to above.Revenue account
For the six months ended 31 July 2009, the revenue account recorded a loss of 14,420 (31 January 2009: profit of 478,663).
Share buy-backs
During the six months ended 31 July 2009 the Company continued to implement itsbuy-back policy and bought back 69,500 Ordinary Shares, representing 0.35% ofthe shares in issue at 1 February 2009 at a total cost of 58,149 (includingexpenses). These shares were subsequently cancelled by the Company.
Valuation policy
Quoted stocks are valued at bid prices in accordance with accounting standards.It is worth commenting that the Fund does hold two relatively early stageAiM-listed stocks with limited marketability. In such cases, the price at whicha sizeable block of shares could be traded, if at all, may vary significantlyfrom the market price used.OutlookWhilst some commentators are anticipating that the worst of the recession isover, a number of influential economists are suggesting that a further periodof financial instability is not unlikely. The strength of stock markets overthe last few months may, therefore, be highlighting a `false dawn'. In thatevent, small, early stage growth businesses will be tested further.The Company retains its significant cash position. This continues to place theCompany in an excellent position to take advantage of what are expected to beincreasingly attractive purchase opportunities which should become available asthis recession continues. Therefore, while short term valuations may besubject to continuing pressures, your Board still expects to see attractiveinvestment opportunities and a recovery in performance and portfolio valuesover the longer term.The current level of interest rates in the United Kingdom means that it will bedifficult for the Company to pay a dividend from revenue this year. Moreover,it is too early to say with any degree of certainty whether the Company willpay a further dividend from capital reserves in respect of this financial year.
MIG 4 website
May I remind you that the Company has its own website which is available at
www.mig4vct.co.uk
In conclusion, may I again thank Shareholders for their continued support.
Colin HookChairmanResponsibility Statement
The Directors confirm that to the best of their knowledge:
a. The half-yearly financial statements, have been prepared in accordance with
the Statement "Half-Yearly Financial Reports" issued by the UK Accounting
Standards Board and give a true and fair view of the assets, liabilities,
financial position and profit of the Company as at 31 July 2009, as
required by DTR 4.2.4; and
b. The interim management report included within the Chairman's Statement and
Investment Manager's Review includes a fair review of the information
required by DTR 4.2.7 being an indication of 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 for the remaining
six months of the year is set out below in accordance with DTR 4.2.7; and
d. There are no relevant related party transactions to be reported as required
by DTR 4.2.8.
Principal Risks and Uncertainties
In accordance with DTR 4.2.7, the Board confirms that the principal risks and uncertainties facing the Company have not materially changed since the publication of the Annual Report and Accounts for the year ended 31 January 2009. The Board acknowledges that there is regulatory risk and continues to manage the Company's affairs in such a manner as to comply with section 274 Income Tax Act 2007. Other risks relate to credit risk, market price risk, liquidity risk, interest rate risk and currency risk. A more detailed explanation of these can be found in Note 20 on pages 55 to 60 of the 2009 Annual Report and Accounts - copies are available on the VCT's website, www.mig4vct.co.uk.
Cautionary Statement
This Report may contain forward looking statements with regards to the financial condition and results of the Company which are made in the light of current economic and business circumstances. Nothing in this announcement should be construed as a profit forecast.
On behalf of the BoardColin HookChairmanInvestment 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.
Uninvested funds are held in cash and lower risk money market funds.
UK companies
The companies in which investments are made must have no more than 15 million of gross assets at the time of investment to be classed as a VCT qualifying holding.
VCT regulation
The investment policy is designed to ensure that the Company continues toqualify and is approved as a VCT by HM Revenue & Customs ("HMRC"). Amongstother conditions, the Company may not invest more than 15% of its investmentsin a single company and must have at least 70% by value of its investmentsthroughout the period in shares or securities comprised in VCT qualifyingholdings, of which a minimum overall of 30% by value must be ordinary shareswhich carry no preferential rights. In addition, although the Company caninvest less than 30% of an investment in a specific company in ordinary sharesit must have at least 10% by value of its total investments in each VCTqualifying 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 70% 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. No holding in any one company willrepresent more than 10% of the value of the Company's investments at the timeof investment. 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 four 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
During the six month period covered by this report, we have continued to adopta highly cautious approach to new investment believing that vendors' priceexpectations in the current market will prove unsustainable in the long-term.We have also continued to avoid transactions requiring high levels of bankborrowing as we anticipate that over-leveraged companies will be increasinglyvulnerable as economic conditions deteriorate. The low level of market activitywhich has persisted throughout the period is producing only limitedopportunities for deals where willing vendors are selling to strategic buyers.
Investment portfolio
During the period, one new investment of 373,376 was completed to support theMBO of Westway Cooling in June 2009. Based in Greenford, Middlesex, Westway hasbeen specialising in installing, servicing and maintaining high qualityair-conditioning systems and associated building services plant in therefurbishment and maintenance market since 2001. With a turnover of 10 millionand a record order book, we believe that the company is well placed to grow,even in challenging market conditions.To date the investment portfolio has required very little additional fundingdespite the worsening economic environment. One follow-on investment wascompleted in January 2009 into Monsal Holdings of 70,475 to provide workingcapital and headroom. The company is now doing well following a difficult yearin 2008. It has recently won a number of major contracts and is establishing areputation for its expertise in anaerobic technology.The Company successfully realised its investment in Tottel Publishing Limited,the specialist publisher of legal and tax titles at the end of June. Based inHaywards Heath, Tottel was sold to the Bloomsbury Publishing Group for 10million, earning a fourfold gain on the Company's investment and returningtotal proceeds over the life of the investment of 950,000. The Company'soriginal investment cost of 235,200 had already been reduced to 148,568 inMarch of this year when Tottel repaid 50% of the Company's loan stockinvestment.At 31 July 2009, the MPEP-invested portfolio comprised investments intwenty-one companies at an aggregate current cost of 9.0 million and valued inaccordance with International Private Equity and Venture Capital Valuation(IPEVCV) Guidelines at 7.3 million. After adjusting for new investment andrepayments during the period, this now represents 85.9% of cost compared to81.1% of cost at 31 January 2009. Of the twenty-one investments in the MPEPportfolio, two are currently held at cost, thirteen are valued below cost andsix are valued above cost. It is important to note that to date valuationdecreases remain unrealised rather than realised investment losses and weremain confident that values will recover across the portfolio as a whole inthe future.
Due to banking covenant breaches, seven companies were not servicing their VCT loan stock as at 31 July 2009; these represent 41% of the portfolio of loan stock investments at cost.
With the exception of BG Consulting, Letraset and Plastic Surgeon, which arereporting modest losses, we currently expect all companies in the portfolio todeliver operating profits (ie prior to goodwill amortisation and servicingdebt) in their current financial year.
BG and Letraset have experienced a downturn in demand for their products. The profitability of Plastic Surgeon, Youngman and PXP has been particularly affected by their direct exposure to the downturn in the construction and house-building sector.
Pressure on capital and maintenance expenditure in the UK retail sector hasalso significantly affected Blaze Signs, although there is guarded optimismthat its clients are now beginning to invest again in signage. PastaKing andVectair continue to make good levels of profits which could be enhanced ifsterling were to strengthen against the euro, reducing the prices of theiringredients and raw materials. Although the advertising revenue of ATG Mediahas fallen, it remains on forecast to meet its budgeted profits due to thehigher than expected revenue arising from its on-line auction software. CampdenMedia has also been affected by the reduction in advertising revenue butremains profitable. British International reported lower profits due to ashortage of available short term contract work.DiGiCo continues to trade strongly, is well ahead of budget and is improving onits performance to date. It has also repaid 217,392 (plus a premium of 16,189) of its loan stock in May 2009, earlier than anticipated. VSI is makingsteady progress after a year of record profits in 2008. Stortext broke intoprofit in 2009 and is showing good visibility for revenues for 2009 following asignificant contract gain last year.SectorGuard has substantially re-organised its management and operations sinceits acquisition of Manguard in March 2008 and has made further significantacquisitions including the addition of Legion Group which has prompted a changeof name to Legion Group plc at the end of June. As a result of these changes,brokers are now forecasting an improvement in profits.
Focus Pharma enjoyed solid progress in 2008 and has begun the current year well. Higher Nature is showing some vulnerability to the effects of the recession but we still believe that it is appropriate to value this investment above cost. Racoon is finding trading conditions difficult but remains profitable, before interest and goodwill amortisation.
Outlook for new investments
The financial performance of many smaller companies has, as yet, been betterthan many commentators had forecast and owners are generally preferring totrade through challenging conditions rather than sell their businesses or raisecapital at what they perceive to be a low point in the business cycle. We donot therefore expect to complete many investments in 2009. However, we believethat during 2010, business owners will become much clearer as to their positionand future prospects. They will then be far better informed as to their needfor capital or an outright sale and the terms on which such a transaction canbe completed. We therefore expect many more vendors to come forward. TheCompany is a well-positioned buyer with strong cash reserves and this shouldenable us to acquire good businesses, at attractive valuations.
We are also mindful that there are an increasing number of distressed competitors to many of our portfolio companies and these may represent good acquisition opportunities for some investee companies. We continue to review these opportunities with investee company management teams.
Matrix Private Equity Partners LLP
Investment Portfolio Summaryat 31 July 2009 Total Total Additional Total % of % of cost valuation investments valuation equity held portfolio at 31-Jul-09 at 31-Jan-09 in the period at 31-Jul-09 by value GBP GBP GBP GBP
Matrix Private Equity Partners LLP DiGiCo Europe Limited 782,608 1,091,100
- 1,733,463 6.52% 23.16%
Design and manufacture of audio mixing desks ATG Media Holdings Limited 1,000,000 1,000,000 - 1,000,000 8.90% 13.36% Publisher and on-line auction platform operator Focus Pharma Holdings 772,451 758,440 - 811,354 3.10% 10.84%Limited Licensor and distributor of generic pharmaceuticals Higher Nature Limited 500,127 708,597 - 626,947 10.69% 8.38% Supplier of mineral, vitamin and food supplements
Monsal Holdings Limited 704,771 528,578
- 528,578 8.75% 7.06%
Supplier of engineering services to water and waste sectors Stortext FM Limited 561,820 375,968 - 417,042 4.60% 5.57% Software based solutions for document management VSI Limited 111,928 305,699 - 398,323 4.56% 5.32% Provider of software for CAD and CAM vendors MC 440 Limited (Westway 373,376 - 373,376 373,376 3.20% 4.99%Cooling) Installation, maintenance and servicing of air-conditioning systems PastaKing Holdings Limited 133,055 409,344
- 353,462 2.10% 4.72%
Manufacturer and supplier of fresh pasta meals Youngman Group Limited 500,026 476,523
- 349,983 4.29% 4.68%
Manufacturer of ladders and access towers Blaze Signs Holdings 610,016 593,471 - 226,545 5.70% 3.03%Limited Manufacturer and installer of signs Vectair Holdings Limited 100,000 141,884
- 146,745 2.14% 1.96%
Designer and distributor of washroom products British International 250,000 247,338 - 241,853 2.50% 3.24%Holdings Limited Operator of helicopter services
Plastic Surgeon Holdings 458,837 229,419 - 114,709 6.88% 1.53%Limited Snagging and finishing of domestic and commercial properties Legion Group plc (formerly 150,102 64,323 - 53,602 1.08% 0.72%SectorGuard plc) 1 Manned guarding, patrolling and alarm response services PXP Holdings Limited 679,549 139,086 - 22,057 4.98% 0.29%(Pinewood Structures) Designer, manufacturer and supplier of timber frames
for buildings
BG Consulting Group Limited 230,796 53,064 - 19,700 See note 3 0.26%/Duncary 4 Limited below Provider of financial training services Campden Media Limited 152,620 18,319
- 17,102 1.69% 0.23%
Magazine publisher and conference organiser Racoon International 406,805 - - - 5.70% 0.00%Limited Supplier of hair extensions, hair care products and training. Other investments in the 500,000 - - - - 0.00%portfolio 2 --------------- ----------------
--------------- --------------- ----------- -------------
Total 8,978,887 7,141,153 373,376 7,434,841 - 99.34%
Former Elderstreet Private Equity Limited Portfolio
Cashfac Limited 260,101 38,168 - 32,988 3.42% 0.44% Provider of virtual banking application software Sift Limited 125,000 - 11,599 0.63% 0.15% Developer of business to business internet communities Expansys plc 1 31,000 9,971 5,279 0.58% 0.07% Online retailer of digital devices Other investments in the 499,973 - - - 0.00%portfolio 2 --------------- ----------------
--------------- --------------- ----------- -------------
Total 916,074 48,139 - 49,866 - 0.66% --------------- ----------------
--------------- --------------- ----------- -------------
Investment Managers' totals 9,894,961 7,189,292 373,376 7,484,707 - 100.00% --------------- ----------------
--------------- --------------- ----------- -------------
1 Quoted on AIM.
2 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 Letraset Limitedin the MPEP portfolio and ComponentSource Holding Corporation and SparesfinderLimited in the former Elderstreet portfolio.
3 The % of equity held in BG Consulting Group Limited is 2.6% and in Duncary 4 Limited is 6.64%.
Unaudited Income Statement
for the six months ended 31 July 2009
Six months ended 31 July 2009 Six months ended 31 July 2008 (unaudited) (unaudited) Notes Revenue Capital Total Revenue Capital Total GBP GBP GBP GBP GBP GBP Unrealised gains/ 9 - 139,431 139,431 - (881,725) (881,725)(losses) on investments held at fair value Realised gains/(losses) 9 - 289,185 289,185 - (50,000) (50,000)on investments held at fair value Income 2 222,835 - 222,835 574,389 20,610 594,999 Recoverable VAT 3 1,051 3,155 4,206 - - - Investment management 4 (45,477) (136,431) (181,908) (65,290) (195,870) (261,160)expense Other expenses (192,829) - (192,829) (180,317) - (180,317) ------------- ------------- -------------
------------- ------------- -------------
(Loss)/profit on (14,420) 295,340 280,920 328,782 (1,106,985) (778,203)ordinary activities before taxation Tax on (loss)/profit on 5 - - - (66,801) 66,801 -ordinary activities ------------- ------------- -------------
------------- ------------- -------------
(Loss)/profit (14,420) 295,340 280,920 261,981 (1,040,184) (778,203)attributable to equity shareholders ------------- ------------- -------------
------------- ------------- -------------
Basic and diluted 6 (0.07)p 1.47p 1.40p 1.24p (4.93)p (3.69)p earnings per ordinary share Twelvemonths ended 31 January 2009 (audited) Notes Revenue Capital Total GBP GBP GBP Unrealised gains/ 9 - (2,574,520) (2,574,520) (losses) on investments held at fair value Realised gains/(losses) 9 - (21,299) (21,299) on investments held at fair value Income 2 1,068,647 30,915 1,099,562 Recoverable VAT 3 13,500 40,500 54,000 Investment management 4 (100,303) (300,909) (401,212) expense Other expenses (350,868) - (350,868) ------------- ------------- ------------- (Loss)/profit on 630,976 (2,825,313) (2,194,337) ordinary activities before taxation Tax on (loss)/profit on 5 (152,313) 152,313 - ordinary activities ------------- ------------- ------------- (Loss)/profit 478,663 (2,673,000) (2,194,337) attributable to equity shareholders ------------- ------------- ------------- Basic and diluted 6 2.35p (13.14)p (10.79)p 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.
Unaudited Balance Sheet as at 31 July 2009 31 July 2009 31 July 2008 31 January 2009 (unaudited) (unaudited) (audited) Notes GBP GBP GBP Non-current assets Investments at fair value 9 7,484,707 8,332,325 7,805,465 -------------------------
------------------------- -------------------------
Current assets Debtors and prepayments 118,914 123,885 240,016 Investments at fair value 10 13,588,405 14,595,298 13,113,111 Cash at bank 33,038 17,628 15,256 -------------------------
------------------------- -------------------------
13,740,357 14,736,811 13,368,383 Creditors: amounts (167,673) (225,948) (138,150)falling due within one year -------------------------
------------------------- -------------------------
Net current assets 13,572,684 14,510,863 13,230,233 -------------------------
------------------------- -------------------------
Net assets 21,057,391 22,843,188 21,035,698 -------------------------
------------------------- -------------------------
Capital and reserves 11 Called up share capital 200,383 203,179 201,078 Capital redemption 884,438 881,642 883,743reserve Revaluation reserve (1,779,492) 154,845 (1,537,950) Special distributable 16,776,720 17,090,348 16,968,144reserve Profit and loss account 4,975,342 4,513,174 4,520,683 -------------------------
------------------------- -------------------------
Equity shareholders' 21,057,391 22,843,188 21,035,698funds -------------------------
------------------------- -------------------------
Net asset value per 8 105.09p 112.43p 104.61pordinary share
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 31 July 2009
Six months ended Six months ended Year ended 31 July 2009 31 July 2008 31 January 2009 (unaudited) (unaudited) (audited) Notes GBP GBP GBP Opening Shareholders' 21,035,698 24,067,317 24,067,317Funds Net share capital bought (58,149) (191,077) (379,254)back Profit/(loss) for the 280,920 (778,203) (2,194,337)period before dividends Dividends paid in period 7 (201,078) (254,849) (458,028) -------------------------
------------------------- -------------------------
Closing shareholders' 21,057,391 22,843,188 21,035,698funds -------------------------
------------------------- -------------------------
Unaudited Summarised Cash Flow Statement
for the six months ended 31 July 2009
Six months ended Six months ended Year ended 31 July 2009 31 July 2008 31 January 2009 (unaudited) (unaudited) (audited) Notes GBP GBP GBP Operating activities Interest income received 146,807 151,551 304,782 Dividend income 84,140 444,692 814,332 Other income 5,098 - 5,098 VAT received 89,665 - - Investment management fees (118,181) (279,281) (516,689)paid Cash payments for other (134,333) (144,499) (386,878)expenses -------------------------
------------------------- -------------------------
Net cash inflow from 73,196 172,463 220,645operating activities Investing activities Sale of investments 9 1,084,665 198,912 227,615 Purchase of investments 9 (373,376) (458,837) (1,624,774) -------------------------
------------------------- -------------------------
Net cash inflow/(outflow) 711,289 (259,925) (1,397,159)from investing activities -------------------------
------------------------- -------------------------
Cash inflow/(outflow) before 784,485
(87,462) (1,176,514)financing and liquid resource management Dividends Equity dividends paid 7 (201,078) (254,849) (458,028) Financing Purchase of own shares (90,331) (192,936) (385,264) Management of liquid resources (Increase)/decrease in (475,294) 529,010 2,011,197
monies held in money market funds -------------------------
------------------------- -------------------------
Increase/(decrease) in cash 17,782 (6,237) (8,609) -------------------------
------------------------- -------------------------
Reconciliation of net cash inflow/(outflow) to movement in net funds
Increase/(decrease) in cash 17,782 (6,237) (8,609)for the period Net funds at the start of 15,256 23,865 23,865the period -------------------------
------------------------- -------------------------
Net funds at the end of the 33,038 17,628 15,256period -------------------------
------------------------- -------------------------
Reconciliation of profit/(loss) on ordinary activities before taxation to net
cash inflow from operating activites for the six months ended 31 July
2009 Six months ended Six months ended Year ended 31 July 2009 31 July 2008 31 January 2009 (unaudited) (unaudited) (audited) GBP GBP GBP Profit/(loss) on ordinary 280,920 (778,203) (2,194,337)activities before taxation Net unrealised (gains)/ (139,431) 881,725 2,574,520losses on investments
Net (gains)/losses on realisations (289,185)
50,000 21,299of investments Decrease/(increase) in 159,187 (29,775) (145,908)debtors Increase in creditors 61,705 48,716 (34,929) -------------------------
------------------------- -------------------------
Net cash inflow from 73,196 172,463 220,645operating activities -------------------------
------------------------- -------------------------
The notes to the unaudited financial statements 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 accountingThe unaudited results cover the six months to 31 July 2009 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 2009 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
All investments held by the Company are classified as "fair value throughprofit and loss", in accordance with the International Private Equity andVenture Capital Valuation ("IPEVCV") guidelines, as the Company's business isto invest in financial assets with a view to profiting from their total returnin the form of capital growth and income. Purchases and sales of quotedinvestments are recognised on the trade date where a contract of sale existswhose terms require delivery within a time frame determined by the relevantmarket. Purchases and sales of unlisted investments are recognised when thecontract for acquisition or sale becomes unconditional.
The fair value of quoted investments is the bid price value of those investments at the close of business on 31 July 2009.
d)Capital gains and losses
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 Six months ended Six months ended Year ended 31 July 2009 31 July 2008 31 January 2009 (unaudited) (unaudited) (audited) Income from GBP GBP GBPinvestments Dividends 16,070 36,176 85,896 Money-market funds 62,041 408,448 696,194 Loan stock interest 128,360 148,383 309,769 Bank deposit and other 4,722 1,992 2,605interest Interest received on 6,544 - -VAT Other income 5,098 - 5,098 ------------------------- ------------------------- ------------------------- Total income 222,835 594,999 1,099,562 ------------------------- -------------------------
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3. Recoverable VAT
At 31 January 2009, the Directors considered it reasonably certain that theCompany would obtain a repayment of VAT of not less than 85,459. This estimatewas based upon information supplied by the Company's Investment Managers anddiscussions with the Company's professional advisors as a result of theEuropean Court of Justice ruling and subsequent HMRC briefing that managementfees be exempt for VAT purposes. During this period 89,665 of recoverable VATwas actually received. The excess of 4,206 has been credited to the IncomeStatement, allocated 25% to revenue and 75% to capital return and is in thesame proportion as that in which the irrecoverable VAT was originally charged.
4. Investment management expense
In accordance with the policy statement published under "Management andAdministration" in the Company's prospectus dated 8th 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
There is no tax charge for the period, as there were taxable losses in 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 ended Six months ended Year ended 31 July 2009 31 July 2008 31 January 2009 (unaudited) (unaudited) (audited) GBP GBP GBP i) Total earnings/ 280,920 (778,203) (2,194,337)(loss) after taxation Basic and diluted 1.40p (3.69)p (10.79)pearnings/(loss) per Ordinary share (pence) ii) Revenue (loss)/ (14,420) 261,981 478,663earnings from ordinary activities after taxation Basic and diluted (0.07)p 1.24p 2.35prevenue (loss)/ earnings per Ordinary share (pence) Net unrealised 139,431 (881,725) (2,574,520)capital gains/ (losses) Net realised capital 289,185 (50,000) (21,299)gains/(losses) Capital expenses net (136,431) (129,069) (148,596)of taxation Capital element of 3,155 - 40,500VAT recoverable Dividends received - 20,610 30,915treated as capital ------------------------- ------------------------- ------------------------- iii) Capital gain/ 295,340 (1,040,184) (2,673,000)(loss) Basic and diluted 1.47p (4.93)p (13.14)pcapital earnings/ (loss) per Ordinary share (pence) iv) Weighted average 20,075,742 21,103,034 20,338,366number of shares in issue in the period 7. Dividends paid Six months ended Six months ended Year ended 31 July 2009 31 July 2008 31 January 2009 (unaudited) (unaudited) (audited) GBP GBP GBP Final dividend for - 254,849 254,849the year ended 31 January 2008 of 1.25 pence per Ordinary share of 1 pence paid 11 June 2008 Interim dividend for - - 203,179the year ended 31 January 2009 of 1.0 pence per Ordinary Share of 1 pence paid 7 November 2008 Final dividend for 201,078 - -the year ended 31 January 2009 of 1.0 pence per Ordinary share of 1 pence paid 10 June 2009 ------------------------- ------------------------- ------------------------- 201,078 254,849 458,028 ------------------------- -------------------------
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8. Net asset value per ordinary share
As at As at As at 31 July 2009 31 July 2008 31 January 2009 (unaudited) (unaudited) (audited) GBP GBP GBP Net assets 21,057,391 22,843,188 21,035,698 Number of shares in 20,038,300 20,317,925 20,107,800issue Net asset value per 105.09p 112.43p 104.61pshare (pence)
9. Summary of non current asset investments at fair value during the period
Traded Unquoted Unquoted Loan stock Total on AIM equity preference shares shares GBP GBP GBP GBP GBP Valuation at 74,294 2,850,768 23,969 4,856,434 7,805,465 31 January 2009 Purchases at cost - 38,688 90 334,598 373,376 Sales - proceeds - (624,184) (3,136) (506,866) (1,134,186) - realised gains - 246,347 - 54,274 300,621 Unrealised (15,413) 616,353 (14,768) (446,741) 139,431(losses)/gains
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Valuation at 58,881 3,127,972 6,155 4,291,699 7,484,707 31 July 2009 Book cost at 181,102 3,810,738 122,800 5,780,321 9,894,961 31 July 2009 Unrealised (122,221) 178,493 (15,783) (1,113,088) (1,072,599)
(losses)/gains at 31 July 2009 Permanent - (861,259) (100,862) (375,534) (1,337,655)impairment of investments ------------------- -------------------
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Valuation at 58,881 3,127,972 6,155 4,291,699 7,484,707 31 July 2009 Gains on - 565,384 - 116,210 681,594investments Less amounts - (319,037) - (61,936) (380,973)recognised as unrealised gains in previous years
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Realised gains - 246,347 - 54,274 300,621based on carrying value at 31 January 2009 Net movement in (15,413) 616,353 (14,768) (446,741) 139,431unrealised (depreciation)/ appreciation in the period ------------------- -------------------
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(Losses)/gains on (15,413) 862,700 (14,768) (392,467) 440,052investments for the period ended 31 July 2009 ------------------- -------------------
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Transaction costs of 11,436 were incurred in the period and are treated asrealised losses on investments in the Income Statement. Deducting these fromrealised gains above gives 289,185 of gains as shown in the Income Statement.Sale proceeds of 1,134,186 above include 38,085 receivable at the period-end,and the transaction costs of 11,436. Deducting these two amounts leaves 1,084,665 of sale proceeds as shown in the Cash Flow Statement.
10. Current investments at fair value
These comprise investments in six Dublin based OEIC money market funds managedby Royal Bank of Scotland, Blackrock Investment Management (UK), Goldman Sachs,Barclays Global Investors, Scottish Widows Investment Management and FidelityInvestment Management. 13,578,048 (31 July 2008: 14,585,294, 31 January 2009: 13,102,841 of thissum is subject to same day access, whilst 10,357 (31 July 2008: 10,004, 31January 2009: 10,270) is subject to 2 day access.
11. Capital and reserves
Called up Capital Revaluation Special Profit and Total share redemption reserve distributable loss capital reserve reserve reserve GBP GBP GBP GBP GBP GBP At 1 February 2009 201,078 883,743 (1,537,950) 16,968,144 4,520,683 21,035,698 Shares bought back (695) 695 - (58,149) - (58,149) Profit for the - - 139,431 - 141,489 280,920period Realised losses - - - (133,275) 133,275 -transferred to special reserve Realisation of - - (380,973) - 380,973 -previously unrealised appreciation Dividend - final - - - - (201,078) (201,078)paid for year ended 31 January 2009 ------------ -------------- ---------------
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At 31 July 2009 200,383 884,438 (1,779,492) 16,776,720 4,975,342 21,057,391
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12. The financial information contained in this Half-Yearly Report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial statements for the year ended 31 January 2009 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 either section 498(2) or 498(3) 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 shareholders. 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.
MATRIX INCOME & GROWTH 4 VCT PLC