Final Results

Matrix Income & Growth 4 VCT plc Annual Results for the year ended 31 January 2012 Strategy Matrix Income & Growth 4 VCT plc ("MIG4", the "Company" or the "Fund") is a tax efficient company listed on the London Stock Exchange. It invests primarily in established and profitable unquoted companies. INVESTMENT OBJECTIVE The VCT's objective is to provide investors with a regular income stream by way of tax free dividends and to generate capital growth through portfolio realisations which can be distributed by way of additional tax free dividends. DIVIDEND POLICY The Company seeks to pay dividends at least annually out of income and capital as appropriate, and subject to fulfilling certain regulatory requirements. FINANCIAL HIGHLIGHTS As at 31 January 2012 - Increase in total shareholder return (net asset value basis) over the year of 5.2% from 131.6p to 138.4p per share - Further funds of Â£3.5 million subscribed in the year - Dividend of 5 pence per share declared for the year Performance Summary Year ended Net Net asset Cumulative NAV total Share Share price 31 January assets value per dividends return per price 1(p) total return share paid per share to per share to (Â£m) share (p) shareholders shareholders (p) since launch since launch (p) (p) 2 2012 29.4 116.7 21.70 138.4 100.0 121.7 2011 25.3 112.9 18.70 131.6 103.5 122.2 2010 21.2 106.3 15.70 122.0 92.3 108.0 2009 21.0 104.6 13.70 118.3 92.0 105.7 2008 24.1 117.4 11.45 128.9 109.0 120.5 2007 9.8 116.3 8.90 125.2 91.0 99.9 2006 9.3 106.6 8.40 115.0 85.0 93.4 1 Source: London Stock Exchange 2 Total returns to Shareholders include dividends paid Matrix Private Equity Partners LLP ("MPEP") became sole manager to the Company on 1 August 2006. In the graph on page 38, the NAV and share price total returns to shareholders comprise the NAV and share price respectively assuming the dividends paid were re-invested on the date on which the shares were quoted ex-dividend in respect of each dividend. The total return figures have been rebased to 100 at 31 January 2007. Return before and after income tax relief The table below shows the NAV total returns at 31 January 2012 for a shareholder that invested Â£10,000 in each fundraising undertaken by the Company: Fundraising 1999/2000 2006/2007 2010 2011 (Top-up Offer)3 (Linked Offer)4 Issue price per 200 1 120.9 2 112.4 121.6 share (p) Number of shares 5,000 8,271 8,897 8,224 held Net asset value 5,837 9,655 10,385 9,600 (NAV) at 31 January 2012 (Â£) Dividends paid to 1,085 910 534 2475 shareholder since subscription (Â£) NAV total return to 6,922 10,565 10,919 9,847 shareholder since subscription (Â£) Percentage change in 5.2% 5.7% 5.9% 6.3% NAV total return from last year (Loss)/ profit (3,078) 565 919 (153) 7 before income tax relief (Â£) 6 Income tax relief 20% 8 30% 30% 30% Cost net of income 8,000 7,000 7,000 7,000 tax relief (Â£) (Loss)/ profit after (1,078) 3,565 3,919 2,847 income tax relief (Â£) 9 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 Weighted average issue price of shares. 3 2010 Top-Up Offer to raise up to Â£2.18 million. 4 Linked Offer for Subscription with Matrix Income & Growth VCT plc and The Income & Growth VCT plc to raise up to Â£21 million in total. The issue price is a weighted average for all shares issued. 5 As all investors except for the last allotment received this period's dividend, it has been shown in these figures 6 NAV total return minus initial investment cost (before income tax relief). 7 Current unrealised loss results from initial Offer costs of 5.5% paid on subscription. 8 Additional capital gains tax deferral relief of up to Â£4,000 available to qualifying shareholders. 9 NAV total return minus cost net of income tax relief. The data for the 1999/2000 fundraising above includes the period up to 1 August 2006, when the Company used three investment advisers. The three subsequent fundraisings have raised capital which has been solely managed by MPEP. Dividend history Year ended 31 Dividends per share Cumulative dividends January paid in respect per share paid and proposed of each year since launch (p) (p) 2012 5.00** 26.70 2011 4.00 21.70 2010 3.00 17.70 2009 2.00 14.70 2008 2.00 12.70 2007 1.80* 10.70 2006 0.50* 8.90 2005 0.20* 8.40 2004 0.50* 8.20 2003 0.50* 7.70 2002 1.00* 7.20 2001 3.10* 6.20 2000 3.10* 3.10 Dividends paid include distributions from both income and capital. * re-stated following capital reorganisation in 2006. ** Interim dividend - an interim dividend of 5p per share for the year ended 31 January 2012 has been declared on 18 April 2012 payable on 6 June 2012. CHAIRMAN'S STATEMENT I am pleased to present to Shareholders the Annual Report of the Company for the year ended 31 January 2012. Performance At 31 January 2012, the Net Asset Value (NAV) per Share was 116.7 pence (2011: 112.9 pence). Adjusted for the dividends paid to shareholders during the year, this represents an increase of 6.0% over the twelve month period. The NAV Total Return per Share since launch increased in the year by 5.2% from 131.6 pence at 31 January 2011 to 138.4 pence at 31 January 2012. Despite tough economic conditions, many of the portfolio companies continue to develop well. The Board is satisfied with the performance of the portfolio compared to its generalist VCT peers (a benchmark the Board uses), and supports the Manager's investment approach. A continuation of current performance trends, if achieved, should result in payment of a useful dividend stream comprising both income and capital elements. In this context, it is relevant to note that total dividends declared in respect of the year to 31 January 2012 amount to 5 pence per share. Economic background The year under review was dominated by continuing concerns about the severity of the UK recession, the coalition government's reaction to this and the timing of any recovery. Further concerns are rising UK inflation and a lack of clarity on the future direction of the European community. Against this backdrop, the quoted UK equity market as represented by the FTSE All-Share Index was volatile but ended the year down (0.31%) on a total return basis. Bearing in mind that many of the portfolio companies are primarily valued by reference to the valuations of companies trading in similar sectors within the FTSE All-Share Index, it is encouraging to note that the Company's NAV total return rose by 5.2%. The portfolio The portfolio continues to be dominated by investments in management buy-out situations ("MBOs"), which has risen to 75.4% of the portfolio, followed by 16.8% in acquisition companies, 5.3% in development capital, 1.0% invested in one AIM investment and the remaining 1.5% of the portfolio being invested in what were originally development capital and early stage investments of previous managers. The portfolio is now invested in a wide range of market sectors with the largest of those being Support Services at 44.8%. The stronger dealflow in the second half of 2010 continued into 2011. Three new investments were completed during the year under review to support the management buy-outs ("MBOs") of Motorclean Group Limited, EMaC Limited, and to provide development capital to Equip Outdoor Technologies Limited. The Company's existing investments in the acquisition vehicles Fullfield and Vanir were used in respect of the Motorclean and EMaC investments. Further investments were made into ASL to support the acquisition of the assets of a similar company, Transcribe Copier Systems Limited and into Monsal as part of a Â£1.75 million facility to continue supporting the turnaround of that company. There has been a pleasing level of realisations in the year. Most notably, in December 2011, the Company made a partial disposal of its investment in DiGiCo to ISIS Equity Partners. The Company has received total cash proceeds of Â£3.0 million over the life of this investment, representing a 3 times cash return to date. In addition, the Company continues to hold some loan stock and a small equity investment in this company, valued in total at Â£1.3 million. Five loan stocks held by the Company totalling Â£1.41 million in value were fully or partly repaid during the year (including any premia due). Repayments were received from Focus Pharma Holdings Limited, Fullfield (Motorclean), Iglu.com Holidays, MachineWorks and Vectair. In addition, Â£4 million was received in loan stock repayments and related premia from Bladon Castle Management Limited, Backbarrow Limited, Rusland Management Limited and Torvar Limited, who had not been able to find suitable investment opportunities. A number of the investee companies continued to trade well, notably DiGiCo, ATG Media and Iglu.com Holidays. Other companies are still endeavouring to recover from the effects of the 2008/09 recession. Plastic Surgeon returned a modest profit after a period of weak trading and Youngman fully repaid its bank debt and so is well-positioned to benefit from any upturn in its markets. Blaze Signs reported improved results demonstrating a recovery during the year. PXP, however, continues to be valued at nil although a further small investment into this company has been approved to support its prospective turnaround. As you will see from the Manager's Review, most companies in the portfolio continue to generate operating profits. As at the year end the portfolio included three acquisition companies actively searching for further investments. Since the year-end, investments of Â£1 million each have been made in 4 further acquisition companies. A number of opportunities are under active consideration. For further information on the portfolio please refer to the Investment Manager's Review on pages 12 - 19. Offer for Subscription The Company is participating in a linked fundraising with The Income & Growth VCT plc and Matrix Income & Growth VCT plc which was launched on 20 January 2012 to raise up to Â£21 million across the three VCTs. The funds to be raised for the VCT of up to Â£7 million will further improve the Company's liquidity, enable the VCT to continue to take advantage of the expected favourable conditions for new investment, support the Company's share buy-back policy and mean that its fixed running costs will be spread over a larger asset base. Details of the Offer have been posted to Shareholders. As at 30 April 2012, Â£4.3m has been subscribed after the year-end for further shares in the Company, and your Company has allotted 3,546,964 new ordinary shares so far. The Offer will remain open until 30 June 2012 although the Directors of the three VCTs reserve the right to extend the closing date at their discretion. Earlier in the year a further Â£3.4 million of net funds were raised from the 2010/2011 linked fundraising with The Income & Growth VCT plc and Matrix Income & Growth VCT plc, allotting 2,960,632 shares. Cash available for investment Cash and liquidity fund balances as at 31 January 2012 together with funds in acquisition companies, amounted to Â£14.4m which is advantageous to have at a time of increasing investment opportunities. In the meantime these funds continue to be invested in a number of leading cash funds and deposits with major banks. Despite the frustration of very low returns, your Board has taken the view that it would not be prudent to further increase counter party or timing exposures for a relatively small overall increase in the return rates. However, the Board continues to keep this policy under active review. Review of results The Company returned a profit for the year of Â£1,643,274 (2011: Â£1,893,790), comprised of a revenue return of Â£430,307 (2011: Â£119,808) and a capital return of Â£1,212,967 (2011: Â£1,773,982). The revenue return for the Company has increased markedly during the year, from Â£119,808 to Â£430,307. Three main factors affected the overall increase in income to Â£955,864, from Â£636,426 for the year to 31 January 2011. Firstly, loan interest from investee companies has increased by Â£208,204 (44%) to Â£677,597. This is due to the benefit of further investments made in the year, notably Motorclean, EOTH and EMaC, in addition to a full year's interest received from CB Imports, ASL and RDL. Youngman has resumed loan stock interest payments and settled some of the arrears. Secondly, the Company's dividend income from investee companies also rose by Â£79,130 (62%) to Â£206,966 during the year, compared to Â£127,836 for the year to 31 January 2011, predominantly due to dividends received from ATG Media and DiGiCo. Finally, interest on bank deposits and money-market funds continued to be modest, rising slightly to Â£45,637 (2011: Â£34,092) due to higher liquidity following monies raised from the joint offer for subscription. Against this net improvement in income, there was an increase in investment management fees of Â£185,898, principally due to increases in net assets and reclassification. This figure has been adjusted for the reclassification of Accounting and Company Secretarial fees to become part of Investment Management fees, which occurred in the previous year. Dividend A final dividend of 3 pence per share in respect of the year ended 31 January 2011 was paid in June 2011. The Company's earnings per Ordinary Share were 6.62 pence per share (2011: 9.04 pence per share) comprising 1.73 pence of Income and 4.89 pence of Capital. The Board is pleased to declare a dividend of 5 pence per share which will be paid as an interim dividend, comprising 1.5 pence from income and 3.5 pence from capital in respect of the year under review. This payment will bring total cumulative dividends paid since launch to 26.7 pence per share. Dividend Investment Scheme Shareholders have the opportunity of reinvesting all or part of their dividends into new Ordinary Shares of the Company at the higher of an amount equivalent to (i) the mid-market share price (averaged over the last 5 business days) or (ii) a 30% discount to the unaudited last published NAV per share. It provides a convenient, easy and cost effective way for Shareholders to build their shareholding in the Company, and further income tax relief is available on the amount re-invested. The recent dividend declared above will be eligible for the Scheme. Shareholders that wish to participate in the Scheme should contact Capita Registrars, whose contact details can be found on page 77. Please note that Shareholders must be registered no later than 15 days prior to the dividend payment date to be eligible for the Scheme. Investment in qualifying holdings In order to comply with VCT tax legislation, the Company must meet the target set by HM Revenue & Customs (HMRC) of investing 70% of total funds raised in qualifying unquoted and AiM quoted companies ("the 70% test"). At 31 January 2012, the Company was 61.2% invested in qualifying companies (based upon the tax values, which differ from the valuations included in the Investment Portfolio Summary on pages 20 - 21). However, once this figure is adjusted for the partial disposal of DiGiCo, the percentage becomes 70.2%. In accordance with HMRC rules, the Company is allowed six months from the date of a realisation to meet the 70% test and the Board has taken sufficient steps to restore the position post year-end. Share buy-backs During the year ended 31 January 2012 the Company continued to implement its buy-back policy and bought back 275,403 (2011: 610,555) Ordinary Shares, representing 1.23% (2011: 3.1%) of the shares in issue at 1 February 2011 at a total cost of Â£280,089 (2011: Â£582,286). These shares were subsequently cancelled by the Company. The shares above were bought back for an average price of 101.05 pence per share. The share price discount to NAV has narrowed from 11.8% at the start of the year to around 9.9% at the year end, in line with the Board's current policy which is to seek to maintain the discount at which the Company's shares trade at around 10%. Shareholders will continue to benefit from the difference between the Net Asset Value and the price at which the Shares are bought back and cancelled. The Company's shares are listed on the London Stock Exchange and as such they should be sold in the same way as any other quoted company through a stockbroker. However, to ensure that they obtain the best price, Shareholders wishing to sell their shares are advised to contact the Company's stockbroker, Matrix Corporate Capital by telephoning 020 3206 7176/7 before agreeing a price with their stockbroker. Shareholders are also advised to discuss their individual tax position with their financial advisor before deciding to sell their shares. Change of ownership at Matrix Private Equity Partners Since April 2004, the Company's Investment Manager, MPEP has been owned jointly by its executive partners and Matrix Group Limited ("Matrix"). On 12 January 2012, the executive partners reached agreement to acquire Matrix's interest in the business and this will lead to the Manager becoming a fully independent owner-managed firm. The acquisition is subject to approval from the FSA of the change of control in MPEP and is expected to be completed on or around 30 June 2012. The Company's arrangements with MPEP, in particular its investment strategy and services, are not expected to change. The Directors look forward to continuing to work with MPEP to provide attractive long term returns on your Company investment whilst reserving the Company's rights under the investment management agreement. Shareholder communication Shareholders receive a twice-yearly Matrix VCT Newsletter from the Investment Manager, approved by the Board. The Annual General Meeting to be held in June 2012 will provide a useful platform for the Board to meet Shareholders and exchange views. Your Board welcomes your attendance at General Meetings to give you the opportunity to meet your Directors and representatives of the Investment Manager. The Investment Manager held a second successful investor workshop on 25 January 2012. The workshop provided a forum for about 100 Matrix VCT Shareholders to hear presentations from the Manager about its investment activity in greater depth and from a successful entrepreneur of one of the portfolio companies. It is intended that this will be an annual event, to which all Shareholders will be invited. May I remind you that the Company continues to have its own website which is available at www.mig4vct.co.uk. Outlook The outlook for the UK economy remains uncertain. The coalition government has largely side-stepped taking robust decisions to improve the balance between the productive sectors of the economy and the public sector overhead, with the result that an early recovery is less likely. Higher tax rates combined with the rise in inflation in 2011 has increased pressures on consumers and the small businesses that service them. Parts of the property and construction industry have also been adversely affected. Despite this difficult environment, the majority of companies in the portfolio continue to generate operating profits and several are reporting results ahead of their budget and prior year. However, the Manager expects that there may be companies in our portfolio which may find the challenges of the economic climate testing in the short term as the public sector cuts begin to take effect and the economy struggles to achieve permanent positive growth. The Company has a significant cash position which will be further increased by this year's fundraising. This will ensure that it is well-placed to take advantage of new investment opportunities as well as supporting existing investee companies' trade through a testing period. This is particularly important at a time that UK banks, despite government exhortations, are limiting, or even withdrawing funds from the smaller company sector. The Investment Manager continues to investigate a number of investment opportunities at realistic purchase levels. The Board believes that the VCT's strategy of investing primarily in MBOs and structuring investments to include loan stock will continue to mitigate downside risk. This should contribute to enhancing the Company's performance and help to achieve the objective of attractive dividend payout levels. As noted at the foot of the Investment Policy on page 11, your Board and Investment Manager are aware of proposed changes to the VCT legislation which could affect future operations and policies. It is still too early to know the final details, but any resulting impact on the fund will be reported to the Shareholders. Finally, I would like to express my thanks to all Shareholders for their continuing support of the Company. Christopher Moore Chairman 30 April 2012 Responsibility Statement of the Directors in respect of the Annual Financial Report The Directors confirm to the best of their knowledge that: (a) the financial statements, which have been prepared in accordance with UK Generally Accepted Accounting Practice and the 2009 Statement of Recommended Practice, `Financial Statements of Investment Trust Companies and Venture Capital Trusts' (SORP), give a true and fair view of the assets, liabilities, financial position and the profit of the Company; and (b) the management report, comprising the Chairman's Statement, Investment Portfolio Summary, Investment Manager's Review and Directors' Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. The names and functions of the Directors are stated in the Annual Report. On behalf of the Board Christopher Moore Chairman 30 April 2012 DIRECTORS' REPORT Principal risks The Board believes that the principal risks faced by the Company are: - Economic risk - events such as an economic recession and movement in interest rates could affect trading conditions for smaller companies and consequently the value of the Company's qualifying investments. - Loss of approval as a Venture Capital Trust - the Company must comply with section 274 of the Income Tax Act 2007 ("ITA") which allows it to be exempted from capital gains tax on investment gains. Any breach of these rules may lead to the Company losing its approval as a Venture Capital Trust (VCT), qualifying shareholders who have not held their shares for the designated holding period having to repay the income tax relief they obtained and future dividends paid by the Company becoming subject to tax. The Company would also lose its exemption from corporation tax on capital gains. If the proposals in the draft Finance Act 2012 are adopted in their current form it may no longer be possible for the Investment Manager to carry out certain types of MBO transactions involving share acquisitions. If this turns out to be the case, the Company still intends to use other types of MBO transactions and therefore does not anticipate that this change will have a significant impact on the Company's investment policy. - Investment and strategic risk - inappropriate strategy or consistently weak VCT qualifying investment recommendations might lead to underperformance and poor returns to shareholders. - Regulatory risk - the Company is required to comply with the Companies Act 2006 ("the Companies Act"), the listing rules of the UK Listing Authority and United Kingdom Accounting Standards. Breach of any of these might lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report. In addition, rules and regulations, or their interpretation, may change from time to time, which may limit the types of investments the Company can make and/or reduce the level of returns which would otherwise be achievable. - Financial and operating risk - inadequate controls might lead to misappropriation of assets. Inappropriate accounting policies might lead to misreporting or breaches of regulations. Failure of the Investment Manager's and Administrator's accounting systems or disruption to its business might lead to an inability to provide accurate reporting and monitoring. - Market risk - Investment in unquoted companies, by its nature, involves a higher degree of risk than investment in companies traded on the London Stock Exchange main market. In particular, smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals. They may also be more susceptible to changes to political, exchange rate, taxation, economic and other regulatory changes and conditions. - Asset liquidity risk - The Company's investments may be difficult to realise, especially in the current economic climate. - Market liquidity risk - Shareholders may find it difficult to sell their shares at a price which is close to the net asset value. - Counterparty risk - A counterparty may fail to discharge an obligation or commitment that it has entered into with the Company. This may lead to the loss of liquid funds. - Fraud and dishonesty risk - Fraud may occur involving company assets perpetrated by a third party, the Investment Manager or other service provider. For further information on the last four risks, please see Note 19 to the accounts in the full Annual Report. The Board seeks to mitigate the internal risks by setting policies and by undertaking a key risk management review at each quarterly Board meeting. Performance is regularly reviewed and assurances in respect of adequate internal controls and key risks are sought and received from the Investment Manager on a six monthly basis. In mitigation and in management of these risks, the Board applies rigorously the principles detailed in the AIC Code of Corporate Governance. The Board also has a Share Buy Back policy which seeks to mitigate the Market Liquidity risk. This policy is reviewed at each quarterly Board Meeting. 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. 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 Â£15 million of gross assets at the time of investment to be classed as a VCT qualifying holding. The Â£20.2 million of Funds raised by the Company after 6 April 2006 are subject to a Â£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 (save as may be permitted under VCT rules). The VCT regulations in respect of funds raised after 6 April 2011 have changed, such that 70% of such funds must be invested in equity. Asset mix The Company initially holds any new 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 Â£200,000 to Â£1 million at cost. No holding in any one company will represent more than 10% of the value of the Company's investments 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 Â£5 million. Borrowing The Company has never borrowed and 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. ---------- Changes to the VCT tax legislation, which may be introduced with effect from 6 April 2012 as part of the Finance Bill 2012, were published in the Budget on 21 March 2012. The proposals are being considered by Parliament and will be subject to EU state aid approval. If implemented, the current proposals could impact on the Company's Investment Policy as follows: (1) The size of companies in which investment can be made is proposed to be increased back to pre 6 April 2006 levels of Â£15 million immediately before and Â£16 million immediately after the investment. (2) The number of permitted employees for an investee company at the time of investment is proposed to be increased from 50 to 250 (this limit does not apply to VCT funds raised before 6 April 2007). (3) The Â£1 million limit on the amount of investment a VCT may make into a particular company within a tax year is to be abolished. A new rule will require that an investee company should not receive more than Â£5 million from State Aid sources, including VCTs, within any twelve month rolling period. (4) If the proposals are adopted in their current form it will no longer be possible for the Manager to carry out certain types of MBO transactions using funds raised after 5 April 2012. If this turns out to be the case, the Company still intends to use other types of MBO transactions and therefore does not anticipate that this change will have a significant impact on the Company's investment policy. ---------- INVESTMENT MANAGER'S REVIEW Overview We continue to be encouraged by the positive signs that we have seen in our investment market both in terms of making investments and in achieving realisations. There has been a clear upward trend in deal flow in the year under review and we have seen a higher number of better priced, profitable, well-positioned and cash generative businesses seeking investment. We believe that this is due to two important converging factors which have combined to make our level of investment in 2011 the highest for several years. Firstly, the continuing flat level of activity in the economy has led to greater realism amongst vendors regarding the value of their companies, leading to more realistic pricing. Secondly, our ability to invest significant levels of capital in a market lacking bank funding means that management buy-out ("MBO") teams are increasingly turning to us as a source of deliverable, long-term finance. Furthermore, we are finding that there is trade interest, as well as enthusiasm from private equity investors, in the type of businesses in which we have invested, creating some interesting exit opportunities. We believe that the Company's strategy of investing in modestly-geared MBO opportunities, supporting highly motivated management teams, focusing on acquiring established, profitable, positive cashflow businesses and investing partly in income yielding loan stocks substantially increases the degree of downside protection to Shareholders' capital. We have continued to work actively with the management teams of investee companies, encouraging them to take cost cutting measures and discussing their budgets, forecasts and cost structure with them to ensure that their businesses remain as resilient as possible. The majority of investee companies have managed their cashflow well and remain cash-generative. New investment Three new investments completed during the year under review totalling Â£3.5 million, two of which used the VCT's existing investments of Â£1 million each in the acquisition vehicles Fullfield and Vanir. First in July 2011, was a further investment of Â£280,880 into the acquisition vehicle Fullfield to enable it to support the MBO of Motorclean Group Limited, a provider of vehicle cleaning and valet services to the car dealership market, bringing the Company's investment in this company to Â£1.20 million. In October, the Company made an investment of Â£951,471 to provide mezzanine finance as part of a Â£7.8m transaction to support the acquisition of the international intellectual property and assets of Lowe Alpine Srl from administration in Italy, by Equip Outdoor Technologies Limited, a company specialising in owning and distributing brands focused on the outdoor sector. Finally the Company invested a further Â£263,817 into the acquisition vehicle Vanir to support the MBO of EMaC Limited, the UK's leading provider of outsourced service plans to franchised dealers in the automotive sector, bringing the Company's investment in this company to Â£1.26 million. Our Operating Partner programme continues to pursue an active search for investment opportunities in their chosen sectors. Two of the acquisition companies successfully identified promising businesses during the year, as described above. However, in December 2011, Bladon Castle Management Limited repaid its loan stock as it had been unable to execute a transaction within an acceptable period of time and its shares were exchanged for shares in Watchgate Limited. Similarly, Backbarrow Limited, Rusland Management Limited and Torvar Limited had not been able to identify suitable opportunities so they also repaid their loan stocks, and their shares have been sold to Watchgate Limited in January 2012. However, the research undertaken by these companies will not be lost as we will continue to work with our operating partners in new vehicles in which this Company has invested in January 2012, namely Ackling Management Limited, Fosse Management Limited and Peddars Management Limited. Each of these acquisition vehicles is headed by an experienced Chairman, well-known to us, who is working closely with us in seeking to identify and complete investments in specific sectors relevant to their industry knowledge and experience. We have established these companies to provide time for us to identify and invest in suitable target companies at sufficiently attractive prices. We anticipate that the Operating Partner programme will lead to further new investments during 2012. Follow-on investment In March and June 2011, a further Â£409,067 in total was invested in the loan stock of ASL Technology Holdings Limited, making the total investment in ASL Technology Holdings Â£1,257,133, to finance its acquisition of Transcribe Copier Systems Limited, as part of its strategy to be a large player in this sector. We have continued to work closely with our investee companies during the downturn in the economy to support and encourage them to make the necessary changes to ensure that they were well placed to withstand the economic contraction. It is indicative of the success of these efforts that Monsal is the only investment in the portfolio that has required further working capital funding during the year under review. Earlier in the year, Monsal was experiencing completion delays on an existing contract and in the commissioning of new contracts. These delays led to a requirement for additional funding and, following careful consideration, your Company approved a further loan stock investment of up to Â£147,007 as part of a Â£1.75 million fundraising alongside other Matrix VCTs and other shareholders. Three tranches of this new funding round, totalling Â£63,431, have been drawn down to date in separate tranches in July and August 2011; these investments are held at cost. The terms of this new investment round provided for it to rank ahead of the existing investment. With this additional funding, Monsal now has the ability to pursue a number of major contracts in the waste and water sector which will make the potential for recovery of value in the original investment a more realistic prospect. Encouragingly, since approval of this facility Monsal has materially advanced its negotiations on a number of new contracts, and has secured two of them. Realisations In the prevailing economic circumstances, we are pleased to report a healthy level of realisations. Realisations during the year generated cash proceeds of Â£3,582,042 (excluding seed company loan repayments of Â£3,996,000). In December 2011 the Company made a partial realisation of its investment in DiGiCo Europe Limited ("DiGiCo") through a sale to ISIS Equity Partners. This realisation increased the total cash proceeds received by the Company over the life of the investment by Â£2.14 million to Â£3.0 million, representing a 3.0 times cash return on the Company's original investment of Â£1.0 million. In addition, the VCT retains a 2.39% equity stake, and new loan stock in DiGiCo valued at Â£1.33 million at the date of completion of the transaction. The total return to date thus equates to approximately Â£4.4 million; a 4.4 times return on the Company's original investment. DiGiCo is a leading manufacturer and distributor of sound mixing consoles used at major corporate and sporting events worldwide. Its sustains strong profit growth since investment has been largely driven by product development and a series of successful launches. DiGiCo is a good example of how a properly financed business with strong management and a market-leading product can develop a niche opportunity and grow significant value. A number of companies in the portfolio continue to be strongly cash generative and some have repaid part or all of their loan stock during the year to 31 January 2012. As a result of this the Company has received a total of Â£1,409,899 in loan stock repayments plus premiums during the year. The payments received were: Â£876,207 from Iglu.com Holidays in February 2011; Â£90,322 from Vectair in March 2011; Â£116,588 from MachineWorks in April 2011, Â£241,390 from Focus Pharma in January 2012 and Â£85,392 from Fullfield in January 2012. The Portfolio The MPEP invested portfolio at 31 January 2012 comprised thirty-two investments (2011: thirty) with a cost of Â£18.1 million (2011: Â£17.4 million) and valued at Â£17.8 million (2011: Â£18.8 million), representing 98.3% of cost (2011: 107.7%). The portfolio's performance as a whole continues to be robust. Many investee companies, of which DiGiCo, Iglu.com Holidays and ATG Media have been the most notable, have continued to increase sales and profits despite the challenges of the economic environment. Of the new investments made during the year, Fullfield (Motorclean Group) and Ingleby (EMaC) have made a good start. Fullfield in particular is performing in line with its investment plan. EOTH (Equip), however, has experienced a lower level of growth than expected since investment, reflecting the recent problems affecting the retail leisure goods sector. Iglu.com Holidays continues to perform strongly and is now valued significantly above cost following out-performance of its business plans at the time of investment. DiGiCo and ATG experienced increased trading and profitability which has contributed to their higher valuations (in the former case, value is now held principally in loan stock). Focus Pharma continues to trade well, although it ended its financial year behind a stretching budget. It launched two new products during 2011 and expects to progress further with several further product launches planned for 2012. Other companies are still endeavouring to recover fully from the effects of the 2008-9 recession. Activity in the construction and house building sectors remains well below historical levels and this continues to affect the performance of PXP and Plastic Surgeon. Although Youngman has now fully repaid its bank debt, demand for its products remains volatile and difficult to predict. Blaze Signs has made an impressive recovery from the depths of the recession but profitability remains well below peak levels. Westway has experienced less favourable trading but remains solidly profitable and with strong customer relationships. ASL has now integrated Transcribe, is trading well and is examining further acquisitions. Elsewhere the position is mixed. RDL has had a disappointing first year with net reduction contract staff placements in its core pharmaceuticals and IT markets. Faversham is streamlining its operations although progress is slower than anticipated. Of the Company's investments more directly exposed to the consumer, CB Imports has continued to advance its position in a difficult floristry supplies market and has started its trading year strongly. Racoon continues to generate solid profitability. British International has experienced a disappointing year after record profitability in 2010 achieved on the back of high activity in oil and gas support work. The oil support work in the Falklands ended in May and has not been replaced by other contracts. In addition the long term decline in passenger numbers on the Penzance to Isles of Scilly passenger route has continued. In March 2011, VSI completed a demerger of its two constituent businesses and the VCT now holds equivalent investment in two companies, LightWorks Software Limited and MachineWorks Software Limited. As part of the agreement MachineWorks assumed all of VSI's loan stock, which it repaid in April. Both investments are valued above cost. The investments originally made by Elderstreet continue to trade satisfactorily with sparesFinder in particular making strong progress. We remain hopeful that value will be realised from the remaining investments, although their impact on the Company as a whole is now very small. Our strategy remains to invest in strong, profitable companies and we consider that the prospect of further recovery and progress over the medium term is good. We believe that the portfolio, taken as a whole, is resilient and of high quality. Outlook Whilst we cannot be sure of the extent of UK economic recovery, we have been encouraged by strong or resilient performance by most of our investee companies in the year and we look forward to a productive new investment period. The coming year may prove more testing as the public sector cuts continue and the economy struggles to stabilise its faltering growth. We consider that good quality companies of the calibre in which we seek to invest, capable of maintaining competitive advantage, still have the potential to succeed in this environment. We are seeing the confidence of both vendors and sellers return, although the difficult economic outlook and the volatility in the quoted markets will inevitably continue to have an impact on the unrealised valuations of the companies in the portfolio. However, we believe that the portfolio overall is resilient and essentially of high value which will be released in the long term. Our strategy of investing primarily in MBOs and structuring investments to include loan stock will continue to mitigate downside risk. Having retained significant uninvested cash, which will be bolstered by the current fundraising, we consider the Company is very well placed to cover both any portfolio needs and funding for attractive new investment opportunities that may arise. Alongside this, the Manager is conscious of the need to ensure that investee companies take appropriate actions to respond to the challenging environment ahead. Details of the Company's ten largest investments by value (excluding the three acquisition companies), representing 51.5% by cost and 64.1% by value of the portfolio are stated in the Annual Report. INVESTMENT PORTFOLIO SUMMARY as at 31 January 2012 % of % of Cost at Valuation at Additional Valuation at equity portfolio 31-Jan-12 31-Jan-11 investments 31-Jan-12 held by value Â£ Â£ Â£ Â£ Matrix Private Equity Partners Portfolio ATG Media Holdings Limited 888,993 1,293,507 104 1,854,802 8.50% 10.33% Publisher and online auction platform operator Newincco 1124 Limited (trading as DiGiCo Europe Limited) 1,334,293 - 1,334,293 1,334,293 2.39% 7.42% Manufacturer of audio mixing desks Ingleby (1879) Limited (trading as EMaC Limited) (previously Vanir Consultants Limited) 1,263,817 1,000,000 263,817 1,263,817 6.32% 7.03% Provider of service plans for the motor trade Fullfield Limited (Motorclean Limited) 1,195,488 1,000,000 280,880 1,195,488 8.75% 6.65% Vehicle cleaning and valet services ASL Technology 1,257,133 848,066 409,067 1,154,217 6.78% 6.42% Holdings Limited Printer and photocopier services Iglu.com Holidays Limited 133,779 1,420,200 - 1,107,862 7.15% 6.16% Online ski and cruise travel agent CB Imports Group Limited 1,000,000 1,242,622 - 1,082,283 5.79% 6.02% Importer and distributor of artificial flowers, floral sundries and home dÃ©cor products Ackling Management Limited 1,000,000 - 1,000,000 1,000,000 16.66% 5.56% Food manufacturing, distribution and brand management Fosse Management Limited 1,000,000 - 1,000,000 1,000,000 16.66% 5.56% Brand management, consumer products and retail Peddars Management Limited 1,000,000 - 1,000,000 1,000,000 16.66% 5.56% Database management, mapping, data mapping and management services to legal and building industries EOTH Limited (trading as Equip Outdoor Technologies) 951,471 - 951,471 951,471 1.71% 5.29% Distributor of branded outdoor equipment and clothing RDL Corporation Limited (previously Aust Recruitment Limited) 1,000,000 1,000,000 893,542 9.05% 4.97% Recruitment consultants for the pharmaceutical, business intelligence and IT industries Focus Pharma Holdings Limited 605,837 1,060,749 - 686,743 3.10% 3.82% Licensor and distributer of generic pharmaceuticals Blaze Signs Holdings Limited 610,016 560,223 - 618,137 5.70% 3.44% Manufacturer and installer of signs Westway Services Holdings (2010) Limited 236,096 646,071 - 422,062 3.20% 2.35% Installation, service and maintenance of air conditioning systems Youngman Group Limited 500,026 349,983 - 349,983 4.24% 1.95% Manufacturer of ladders and access towers British International Holdings Limited 295,455 433,545 - 323,360 2.50% 1.80% Helicopter service operator Faversham House Holdings Limited 346,488 346,488 - 290,720 6.26% 1.62% Publlisher, exhibition organiser and operator of websites for the environmental, visual communications and building services sectors Higher Nature Limited 500,127 429,671 - 258,347 10.34% 1.44% Mail order distributor of vitamins and natural medicines The Plastic Surgeon Holdings Limited 458,837 114,709 - 225,654 6.88% 1.26% Snagging and finishing of domestic and commercial properties Omega Diagnostics Group plc 1 199,998 241,664 - 174,998 1.96% 0.97% In-vitro diagnostics for food intolerance, autoimmune diseases and infectious diseases Machineworks Software Limited 2 9,329 277,184 - 143,770 4.20% 0.80% Provider of software for CAD and CAM vendors Duncary 8 Limited (trading as BG Consulting Limited) 126,995 104,769 - 124,465 5.10% 0.70% City-based provider of specialist technical training Racoon International Holdings Limited 406,805 174,507 - 94,621 5.70% 0.53% Supplier of hair extensions, hair care products and training Letraset Limited 150,010 19,540 10 80,070 5.26% 0.46% Manufacturer and distributor of graphic art products Monsal Holdings Limited 699,444 - 63,431 63,431 6.14% 0.35% Supplier of engineering services to the water and waste sectors Vectair Holdings Limited 24,732 181,406 - 59,357 2.14% 0.33% Designer and distributor of washroom products Lightworks Software Limited 2 9,329 92,395 - 52,810 4.20% 0.29% Provider of software for CAD and CAM vendors DiGiCo Europe Limited - 1,900,210 - 6.52% 0.00% Manufacturer of audio mixing desks Backbarrow Limited - 1,000,000 - - 0.00% 0.00% Food manufacturing, distribution and brand management Bladon Castle Management Limited - 1,000,000 - - 0.00% 0.00% Brand management, consumer products and retail Rusland Management Limited - 1,000,000 - - 0.00% 0.00% Brand management, consumer products and retail Torvar Limited - 1,000,000 - - 0.00% 0.00% Database management, mapping, data mapping and management services to legal and building industries PXP Holdings Limited 679,549 - - - 4.98% 0.00% Designer, manufacturer and supplier of timber frames for buildings Legion Group plc (formerly Sectorguard plc) 150,102 - - - 0.72% 0.00% Provider of manned guarding, patrolling and alarm response services Box-it Data Management Limited 25,759 25,759 - - N/A 0.00% Document management and storage Watchgate Limited 1,000 - - - 33.33% 0.00% Holding company FH Ingredients Limited - - - N/A 0.00% Processor and distributor of frozen herbs to the food processing industry Total 18,060,908 18,763,268 6,303,073 17,806,303 99.08% Former Elderstreet Private Equity Portfolio Cashfac Limited 260,101 111,054 - 104,906 2.88% 0.58% Provider of virtual banking application software solutions to corporate customers Sparesfinder Limited 250,854 26,568 - 53,625 1.70% 0.30% Supplier of industrial spare parts online Sift Group Limited 130,116 - - 6,523 1.03% 0.04% Developer of business-to-business internet communities Westchester Holdings Limited - - - - 1.03% 0.00% E-tailer of CDs, videos and multi-media titles Total 641,071 137,622 - 165,054 0.92% Investment Manager's Total 18,701,979 18,900,890 6,303,073 17,971,357 100.00% 1 Quoted on AiM 2 On 31 March 2011, VSI Limited (VSI) undertook a demerger, such that the Company now holds separate investments in Machineworks Software Limited (Machineworks) and Lightworks Software Limited (Lightworks). On the demerger date, the cost of the ordinary shares and the cost and valuation of the preference shares were split equally between Machineworks and Lightworks. However the valuation of the ordinary share investments at the merger date were split 75:25 between Machineworks and Lightworks respectively. The former loan investment in VSI of Â£93,270 was wholly transferred to Machineworks at the date of the demerger. It was repaid in full on 4 April 2011. INCOME STATEMENT for the year ended 31 January 2012 Year ended 31 January 2012 Year ended 31 January 2011 Notes Revenue Capital Total Revenue Capital Total Â£ Â£ Â£ Â£ Â£ Â£ Unrealised gains on investments - 1,409,405 1,409,405 - 2,119,702 2,119,702 Gains on investments realised - 247,559 247,559 - 16,077 16,077 Income 2 955,864 - 955,864 636,426 - 636,426 Recoverable VAT - - - (264) (794) (1,058) Investment management fees 6 (166,809) (500,427) (667,236) (120,335) (361,003) (481,338) Other expenses (302,318) - (302,318) (396,019) - (396,019) Profit on ordinary activities before taxation 486,737 1,156,537 1,643,274 119,808 1,773,982 1,893,790 Taxation on ordinary activities (56,430) 56,430 - - - - Profit for the year 430,307 1,212,967 1,643,274 119,808 1,773,982 1,893,790 Basic and diluted earnings per ordinary share 5 1.73p 4.89p 6.62p 0.57p 8.47p 9.04p All the items in the above statement derive from continuing operations of the Company There were no other recognised gains or losses in the year. The total column is the profit and loss account of the Company. Other than revaluation movements arising on investments held at fair value through the profit and loss account, there were no differences between the return as stated above and at historical cost. BALANCE SHEET as at 31 January 2012 as at 31 January 2012 as at 31 January 2011 Notes Â£ Â£ Â£ Â£ Â£ Â£ Fixed assets Investments at fair value 17,971,357 18,900,890 Current assets Debtors and prepayments 200,080 1,948,065 Current investments 8,883,265 3,644,741 Cash at bank 2,511,010 1,061,164 11,594,355 6,653,970 Creditors: amounts falling due within one year (147,047) (209,681) Net current assets 11,447,308 6,444,289 Net assets 29,418,665 25,345,179 Capital and reserves Called up share capital 252,019 224,558 Share premium account 6,847,570 3,413,664 Capital redemption reserve 894,105 891,351 Revaluation reserve 1,204,972 992,420 Special distributable reserve 14,078,325 15,256,001 Profit and loss account 6,141,674 4,567,185 Equity shareholders' funds 29,418,665 25,345,179 Basic and diluted net asset value per Ordinary Share 4 116.73p 112.87p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the year ended 31 January 2012 Year ended Year ended 31 January 2012 31 January 2011 Â£ Â£ Opening shareholders' funds 25,345,179 21,222,542 Share capital subscribed 3,464,121 3,444,752 Purchase of own shares (280,089) (582,286) Profit for the year 1,643,274 1,893,790 Dividends paid in year (753,820) (633,619) Closing shareholders' funds 29,418,665 25,345,179 CASH FLOW STATEMENT for the year ended 31 January 2012 Year ended Year ended 31 January 2012 31 January 2011 Â£ Â£ Interest income received 609,497 494,974 Dividend income 264,438 144,366 VAT (paid)/received and interest thereon (15,287) 10,199 Other income - 2,544 Investment management fees paid (667,235) (561,799) Cash payments for other expenses (299,720) (397,775) Non-cash movement - - Net cash outflow from operating activities (108,307) (307,491) Taxation UK Corporation tax received/(paid) - - Investing activities Sale of investments 7,549,563 923,983 Purchase of investments (4,971,171) (2,397,128) Net cash inflow/(outflow) from investing activities 2,578,392 (1,473,145) Dividends Equity dividends paid (753,820) (633,619) Cash inflow/(outflow) before liquid resource management and financing 1,716,265 (2,414,255) Management of liquid resources (Increase)/decrease in monies held in current investments (5,238,524) 2,331,078 Financing Issue of own shares 5,297,186 1,611,231 Purchase of own shares (325,081) (537,294) Increase in cash for the year 1,449,846 990,760 NOTES TO THE ACCOUNTS 1. Basis of accounting The accounts have been prepared under UK Generally Accepted Accounting Practice (UK GAAP) and the Statement of Recommended Practice, `Financial Statements of Investment Trust Companies and Venture Capital Trusts' ("the SORP") issued by the Association of Investment Trust Companies in January 2009. 2. Income 2012 2011 Â£ Â£ Income from bank deposits 25,664 2,561 Income from investments - from equities 206,966 127,836 - from overseas based OEICs 45,637 34,092 - from loan stock 677,597 469,393 930,200 631,321 Other income - 2,544 Total income 955,864 636,426 Total income comprises Dividends 252,603 161,928 Interest 703,261 471,954 Other income - 2,544 955,864 636,426 Income from investments comprises Listed overseas securities 45,637 34,092 Unlisted UK securities 206,966 127,836 Loan stock interest 677,597 469,393 930,200 631,321 Loan stock interest above is stated after deducting an amount of Â£nil (2011: Â£nil), being a provision made against loan stock interest regarded as collectable in previous years. Total loan stock interest due but not recognised in the year was Â£155,190 (2011: Â£214,248). 4. Basic and diluted net asset value per share Net asset value per Ordinary Share is based on net assets at the end of the year, and on 25,201,906 (2011: 22,455,802) Ordinary Shares, being the number of Ordinary Shares in issue on that date. There are no instruments that will increase the number of shares in issue in future. Accordingly, the above figures currently represent both basic and diluted net asset value per share. 5. Basic and diluted earnings per share 2011 2011 Â£ Â£ Total earnings after taxation: 1,643,274 465,906 Basic and diluted earnings per share (note a) 6.62p 2.22p Net revenue from ordinary activities after taxation 430,307 119,808 Basic and diluted revenue return per share (note b) 1.73p 0.57p Net unrealised capital gains 1,409,405 691,818 Net realised capital gains 247,559 16,077 VAT recoverable - (794) Capital expenses (net of taxation) (443,997) (361,003) Total capital return 1,212,967 346,098 Basic and diluted capital return per share (note c) 4.89p 1.65p Weighted average number of shares in issue in the year 24,804,482 24,804,482 Notes: a) Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue. b) Revenue earnings per share is the revenue return after taxation divided by the weighted average number of shares in issue. c) Capital earnings per share is the total capital profit after taxation divided by the weighted average number of shares in issue. d) There are no instruments that will increase the number of shares in issue in future. Accordingly, the above figures currently represent both basic and diluted returns. 6. Investment Manager's Fees Revenue Capital Total Revenue Capital Total 2012 2012 2012 2011 2011 2011 Â£ Â£ Â£ Â£ Â£ Â£ Matrix Private Equity Partners LLP 166,809 500,427 667,236 120,335 361,003 481,338 Under the investment management agreement dated 1 November 2006, but effective 18 October 2006, Matrix Private Equity Partners LLP (MPEP LLP) was appointed to be sole advisor to the Company on investments in qualifying companies. The agreement was for an initial period of 3 years and thereafter unless if the appointment was terminated by not less than one year's notice in writing at any time after the initial period. MPEP LLP was entitled to an annual advisory fee of 2 per cent of the closing net assets attributable to the Fund. Under the terms of a revised investment management agreement dated 12 November 2010, MPEP provides investment advisory, administrative and company secretarial services to the Company, for a fee of 2% per annum of closing net assets, calculated on a quarterly basis by reference to the net assets at the end of the preceding quarter, plus a fixed fee of Â£112,518 per annum, the latter being subject to indexation, if applicable. This agreement replaced the previous agreements with MPEP described above, and with Matrix-Securities Limited dated 1 November 2006, which were all terminated with effect from 12 November 2010. The investment management fee includes provision for a cap on expenses excluding irrecoverable VAT and exceptional items set at 3.4% of closing net assets at the year-end. In accordance with the investment management agreement, any excess expenses are borne by the Investment Manager. The excess expenses during the year amounted to Â£nil (2011: Â£nil). Under the terms of a separate agreement dated 1 November 2006, from the end of the accounting period ending on 31 January 2009 and in each subsequent accounting period throughout the life of the company, the Investment Manager will be entitled to receive a performance related incentive fee of 20% of the excess above 6 per cent of the net asset value per share of the annual dividends paid to Shareholders. The performance fee will be payable annually, with any cumulative shortfalls below the 6 per cent hurdle having to be made up in later years. The incentive payment will be shared between the Investment Manager 75% and the Promoter 25%. No incentive fee is payable to date. The Company is responsible for external costs such as legal and accounting fees, incurred on transactions that do not proceed to completion ("abort expenses") subject to the cap on total annual expenses referred to above. In line with common practice, MPEP LLP retain the right to charge arrangement and syndication fees and Directors' or monitoring fees ("deal fees") to companies in which the Company invests. 7. Dividends The Board of Matrix Income & Growth 4 VCT plc announced on 20 April 2012 that it had declared a dividend of 5 pence per share which will be paid as an interim dividend, comprising 1.5 pence from income and 3.5 pence from capital in respect of the year ended 31 January 2012. The dividend will be payable on 6 June 2012 to Shareholders who are on the Register of Members at 6.00 pm on 11 May 2012. Following this payment, the total cumulative dividends paid to shareholders since launch will rise to 26.70 pence per share. It is intended that the Company's Dividend Investment Scheme (the "Scheme") will apply to the proposed dividend and elections under the Scheme should be made to the Scheme Administrator, Capita Registrars, by 23 May 2012. 8. Post balance sheet events From 8 March 2012 to the date of these financial statements, under the Linked Offer for subscription launched on 20 January 2012, 3,546,964 Ordinary shares were allotted at a price of 123.5 pence per share raising net funds of Â£4,145,844. On 20 March 2012, the Company made separate investments of Â£1 million into each of the acquisition vehicles Almsworthy Trading Limited, Culbone Trading Limited, Madacombe Trading Limited and Sawrey Limited. 9. Financial Information The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 31 January 2012 in terms of section 434 of the Companies Act 2006 but is derived from those accounts. Statutory accounts for the year ended 31 January 2012 will be delivered to Companies House following the Company's Annual General Meeting. The auditors have reported on those accounts: their report was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. 10. Annual Report A Summary Annual Report will be circulated by post to all Shareholders shortly and copies will be available thereafter to members of the public from the Company's registered office. Shareholders who wish to receive a copy of the full Annual Report may request a copy by writing to the Company Secretary, Matrix Private Equity Partners LLP, One Vine Street, London W1J 0AH. Alternatively copies may be downloaded via the Company Secretary's web site at www.mig4vct.co.uk. 11. Annual General Meeting The Annual General Meeting of the Company will be held at 12:00 noon on Wednesday, 13 June 2012 at the offices of Matrix Group Limited, One Vine Street, London W1J 0AH. Contact details for further enquiries: Robert Brittain at Matrix Private Equity Partners LLP (the Company Secretary) on 020 3206 7000 or by e-mail on mig4@matrixgroup.co.uk Mark Wignall or Mike Walker at Matrix Private Equity Partners LLP (the Investment Manager), on 020 3206 7000 or by e-mail on info@matrixpep.co.uk. DISCLAIMER Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

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