Half-yearly Report

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") is to provide shareholders with an attractive investment return, principally by maximising the stream of dividend distributions from the income and capital gains generated by a portfolio of investments in a wide variety of unquoted companies in the UK. The portfolio comprises a number of diverse investments over a wide range of different business sectors, thus spreading risk by avoiding over-concentration in any one sector. Financial Highlights as at 31 July 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 (31 January 2009: 104.6 pence), an increase of 0.5% over the six month period. This compares with an increase of 34.3% in the capital return of the FTSE SmallCap Index and a rise of 34.0% in the FTSE All-Share AiM Index during the same period. It should be noted that over the twelve month period the Company has out-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 SmallCap and 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 is over, investment portfolios in the UK continue to be affected by the difficult economic conditions. Over the last six months sector price earnings multiples in the UK have been highly volatile with the Pharmaceuticals & Biotechnology and Food sectors showing large decreases. In contrast, the Technology Hardware & Equipment, Personal Goods and Support Services have been the main beneficiaries. These swings between sectors inevitably affect our portfolio valuations. Notwithstanding the impact of these swings in sector price earnings multiples on the valuations, a number of the portfolio companies, particularly those in the construction sector, are experiencing the negative effects of the recession. Whilst all these companies have been taking steps to minimise these adverse effects with cost cutting and similar measures, the impact on profitability cannot be counteracted entirely or immediately. Within the portfolio, a partial loan stock repayment of £233,581 at a premium of £16,189 was made by DiGiCo Europe Limited in May 2009. In June 2009, a new investment of £373,376 was made into MC 440 Limited to support the MBO of Westway Cooling Limited. Based in Greenford, Middlesex, Westway specialises in installing, servicing and maintaining high quality air-conditioning systems and associated building services plant in the refurbishment and maintenance market. At the beginning of July, the Company sold its investment in Tottel Publishing Limited, the specialist publisher of legal and tax titles to Bloomsbury Group earning 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 Tottel repaid 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 year ending 31 January 2010, payable on 7 November 2009 to Shareholders on the register on 9 October 2009. The dividend will be paid from capital from the realised profit arising from the sale of Tottel Publishing in June of this year referred 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 its buy-back policy and bought back 69,500 Ordinary Shares, representing 0.35% of the shares in issue at 1 February 2009 at a total cost of £58,149 (including expenses). 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 stage AiM-listed stocks with limited marketability. In such cases, the price at which a sizeable block of shares could be traded, if at all, may vary significantly from the market price used. Outlook Whilst some commentators are anticipating that the worst of the recession is over, a number of influential economists are suggesting that a further period of financial instability is not unlikely. The strength of stock markets over the last few months may, therefore, be highlighting a `false dawn'. In that event, small, early stage growth businesses will be tested further. The Company retains its significant cash position. This continues to place the Company in an excellent position to take advantage of what are expected to be increasingly attractive purchase opportunities which should become available as this recession continues. Therefore, while short term valuations may be subject to continuing pressures, your Board still expects to see attractive investment opportunities and a recovery in performance and portfolio values over the longer term. The current level of interest rates in the United Kingdom means that it will be difficult 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 will pay 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 Hook Chairman Responsibility 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 Board Colin Hook Chairman 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 £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 to qualify and is approved as a VCT by HM Revenue & Customs ("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 period in shares or securities comprised in VCT qualifying holdings, of which a minimum overall of 30% by value must be ordinary shares which carry no preferential rights. In addition, although the Company can invest less than 30% of an investment in a specific company in ordinary shares it must have at least 10% by value of its total investments in each VCT qualifying company in ordinary shares which carry no preferential rights. Asset mix The Company initially holds its funds in a portfolio of readily realisable interest bearing investments and deposits. The investment portfolio of qualifying investments is built up over a three year period with the aim of investing and maintaining at least 70% of net funds raised in qualifying investments. Risk diversification and maximum exposures Risk is spread by investing in a number of different businesses across different industry sectors. To reduce the risk of high exposure to equities, each qualifying investment is structured using a significant proportion of loan stock (up to 70% of the total investment in each VCT qualifying company). Initial investments in VCT qualifying companies are generally made in amounts ranging from £200,000 to £1 million at cost. 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 four other VCTs advised by the Investment Manager with a similar investment policy. This enables the Company to participate in combined investments advised on by the Investment Manager of up to £5 million. Borrowing The Company has no current plans to undertake any borrowing. Management The Board has overall responsibility for the Company's affairs including the determination of its investment policy. Investment and divestment proposals are originated, negotiated and recommended by the Investment Manager and are then subject to formal approval by the Board of Directors. Matrix Securities Limited provides Company Secretarial and Accountancy services to the Company. Investment Manager's Review Overview During the six month period covered by this report, we have continued to adopt a highly cautious approach to new investment believing that vendors' price expectations in the current market will prove unsustainable in the long-term. We have also continued to avoid transactions requiring high levels of bank borrowing as we anticipate that over-leveraged companies will be increasingly vulnerable as economic conditions deteriorate. The low level of market activity which has persisted throughout the period is producing only limited opportunities 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 the MBO of Westway Cooling in June 2009. Based in Greenford, Middlesex, Westway has been specialising in installing, servicing and maintaining high quality air-conditioning systems and associated building services plant in the refurbishment and maintenance market since 2001. With a turnover of £10 million and 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 funding despite the worsening economic environment. One follow-on investment was completed in January 2009 into Monsal Holdings of £70,475 to provide working capital and headroom. The company is now doing well following a difficult year in 2008. It has recently won a number of major contracts and is establishing a reputation 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 in Haywards Heath, Tottel was sold to the Bloomsbury Publishing Group for £10 million, earning a fourfold gain on the Company's investment and returning total proceeds over the life of the investment of £950,000. The Company's original investment cost of £235,200 had already been reduced to £148,568 in March of this year when Tottel repaid 50% of the Company's loan stock investment. At 31 July 2009, the MPEP-invested portfolio comprised investments in twenty-one companies at an aggregate current cost of £9.0 million and valued in accordance with International Private Equity and Venture Capital Valuation (IPEVCV) Guidelines at £7.3 million. After adjusting for new investment and repayments during the period, this now represents 85.9% of cost compared to 81.1% of cost at 31 January 2009. Of the twenty-one investments in the MPEP portfolio, two are currently held at cost, thirteen are valued below cost and six are valued above cost. It is important to note that to date valuation decreases remain unrealised rather than realised investment losses and we remain confident that values will recover across the portfolio as a whole in the 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 are reporting modest losses, we currently expect all companies in the portfolio to deliver operating profits (ie prior to goodwill amortisation and servicing debt) 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 has also significantly affected Blaze Signs, although there is guarded optimism that its clients are now beginning to invest again in signage. PastaKing and Vectair continue to make good levels of profits which could be enhanced if sterling were to strengthen against the euro, reducing the prices of their ingredients and raw materials. Although the advertising revenue of ATG Media has fallen, it remains on forecast to meet its budgeted profits due to the higher than expected revenue arising from its on-line auction software. Campden Media has also been affected by the reduction in advertising revenue but remains profitable. British International reported lower profits due to a shortage of available short term contract work. DiGiCo continues to trade strongly, is well ahead of budget and is improving on its 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 making steady progress after a year of record profits in 2008. Stortext broke into profit in 2009 and is showing good visibility for revenues for 2009 following a significant contract gain last year. SectorGuard has substantially re-organised its management and operations since its acquisition of Manguard in March 2008 and has made further significant acquisitions including the addition of Legion Group which has prompted a change of 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 better than many commentators had forecast and owners are generally preferring to trade through challenging conditions rather than sell their businesses or raise capital at what they perceive to be a low point in the business cycle. We do not therefore expect to complete many investments in 2009. However, we believe that during 2010, business owners will become much clearer as to their position and future prospects. They will then be far better informed as to their need for capital or an outright sale and the terms on which such a transaction can be completed. We therefore expect many more vendors to come forward. The Company is a well-positioned buyer with strong cash reserves and this should enable 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 Summary at 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 £ £ £ £ 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 been valued at nil and from which the Directors only expect to receive small recoveries ie Inca Interiors Limited (in administration) and Letraset Limited in the MPEP portfolio and ComponentSource Holding Corporation and Sparesfinder Limited 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 £ £ £ £ £ £ 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 £ £ £ 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 £ £ £ 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 884,438 881,642 883,743 reserve Revaluation reserve (1,779,492) 154,845 (1,537,950) Special distributable 16,776,720 17,090,348 16,968,144 reserve Profit and loss account 4,975,342 4,513,174 4,520,683 ------------------------- ------------------------- ------------------------- Equity shareholders' 21,057,391 22,843,188 21,035,698 funds ------------------------- ------------------------- ------------------------- Net asset value per 8 105.09p 112.43p 104.61p ordinary 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 £ £ £ Opening Shareholders' 21,035,698 24,067,317 24,067,317 Funds 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 21,035,698 funds ------------------------- ------------------------- ------------------------- 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 £ £ £ 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 73,196 172,463 220,645 operating 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 23,865 the period ------------------------- ------------------------- ------------------------- Net funds at the end of the 33,038 17,628 15,256 period ------------------------- ------------------------- ------------------------- 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) £ £ £ Profit/(loss) on ordinary 280,920 (778,203) (2,194,337) activities before taxation Net unrealised (gains)/ (139,431) 881,725 2,574,520 losses on investments Net (gains)/losses on realisations (289,185) 50,000 21,299 of investments Decrease/(increase) in 159,187 (29,775) (145,908) debtors Increase in creditors 61,705 48,716 (34,929) ------------------------- ------------------------- ------------------------- Net cash inflow from 73,196 172,463 220,645 operating 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 the period. Full details of principal accounting policies will be disclosed in the Annual Report. a) Basis of accounting The unaudited results cover the six months to 31 July 2009 and have been prepared under UK Generally Accepted Accounting Practice (UK GAAP), consistent with the accounting policies set out in the statutory accounts for the year ended 31 January 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 the auditors pursuant to the Auditing Practices Board (APB)'s guidance on Review of Interim Financial Information. b) Presentation of the Income Statement In order to better reflect the activities of a VCT and in accordance with the SORP, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 Income Tax Act 2007. c) Investments All investments held by the Company are classified as "fair value through profit and loss", in accordance with the International Private Equity and Venture Capital Valuation ("IPEVCV") guidelines, as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income. Purchases and sales of quoted investments are recognised on the trade date where a contract of sale exists whose terms require delivery within a time frame determined by the relevant market. Purchases and sales of unlisted investments are recognised when the contract 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, are dealt with in the profit and loss and revaluation reserves and movements in the period 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 £ £ £ investments 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 2,605 interest Interest received on 6,544 - - VAT Other income 5,098 - 5,098 ------------------------- ------------------------- ------------------------- Total income 222,835 594,999 1,099,562 ------------------------- ------------------------- ------------------------- 3. Recoverable VAT At 31 January 2009, the Directors considered it reasonably certain that the Company would obtain a repayment of VAT of not less than £85,459. This estimate was based upon information supplied by the Company's Investment Managers and discussions with the Company's professional advisors as a result of the European Court of Justice ruling and subsequent HMRC briefing that management fees be exempt for VAT purposes. During this period £89,665 of recoverable VAT was actually received. The excess of £4,206 has been credited to the Income Statement, allocated 25% to revenue and 75% to capital return and is in the same proportion as that in which the irrecoverable VAT was originally charged. 4. Investment management expense In accordance with the policy statement published under "Management and Administration" in the Company's prospectus dated 8th February 1999, the Directors have charged 75% of the investment management expenses to the capital account. This is in line with the Board's expectation of the long-term split of returns from the investment portfolio of the Company. 5. Taxation 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 for each period are respectively based on numerators i)-iii), each divided by the weighted average number of shares in issue in the period - see iv) below Six months ended Six months ended Year ended 31 July 2009 31 July 2008 31 January 2009 (unaudited) (unaudited) (audited) £ £ £ i) Total earnings/ 280,920 (778,203) (2,194,337) (loss) after taxation Basic and diluted 1.40p (3.69)p (10.79)p earnings/(loss) per Ordinary share (pence) ii) Revenue (loss)/ (14,420) 261,981 478,663 earnings from ordinary activities after taxation Basic and diluted (0.07)p 1.24p 2.35p revenue (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 - 40,500 VAT recoverable Dividends received - 20,610 30,915 treated as capital ------------------------- ------------------------- ------------------------- iii) Capital gain/ 295,340 (1,040,184) (2,673,000) (loss) Basic and diluted 1.47p (4.93)p (13.14)p capital earnings/ (loss) per Ordinary share (pence) iv) Weighted average 20,075,742 21,103,034 20,338,366 number 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) £ £ £ Final dividend for - 254,849 254,849 the year ended 31 January 2008 of 1.25 pence per Ordinary share of 1 pence paid 11 June 2008 Interim dividend for - - 203,179 the 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 ------------------------- ------------------------- ------------------------- 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) £ £ £ Net assets 21,057,391 22,843,188 21,035,698 Number of shares in 20,038,300 20,317,925 20,107,800 issue Net asset value per 105.09p 112.43p 104.61p share (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 £ £ £ £ £ 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 ------------------- ------------------- ------------------- ------------------- ------------------- 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 ------------------- ------------------- ------------------- ------------------- ------------------- Valuation at 58,881 3,127,972 6,155 4,291,699 7,484,707 31 July 2009 Gains on - 565,384 - 116,210 681,594 investments Less amounts - (319,037) - (61,936) (380,973) recognised as unrealised gains in previous years ------------------- ------------------- ------------------- ------------------- ------------------- Realised gains - 246,347 - 54,274 300,621 based on carrying value at 31 January 2009 Net movement in (15,413) 616,353 (14,768) (446,741) 139,431 unrealised (depreciation)/ appreciation in the period ------------------- ------------------- ------------------- ------------------- ------------------- (Losses)/gains on (15,413) 862,700 (14,768) (392,467) 440,052 investments for the period ended 31 July 2009 ------------------- ------------------- ------------------- ------------------- ------------------- Transaction costs of £11,436 were incurred in the period and are treated as realised losses on investments in the Income Statement. Deducting these from realised 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 managed by Royal Bank of Scotland, Blackrock Investment Management (UK), Goldman Sachs, Barclays Global Investors, Scottish Widows Investment Management and Fidelity Investment Management. £13,578,048 (31 July 2008: £14,585,294, 31 January 2009: £13,102,841 of this sum is subject to same day access, whilst £10,357 (31 July 2008: £10,004, 31 January 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 £ £ £ £ £ £ 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 - 141,489 280,920 period 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 ------------ -------------- --------------- --------------- ------------- ------------- At 31 July 2009 200,383 884,438 (1,779,492) 16,776,720 4,975,342 21,057,391 ------------ -------------- --------------- --------------- ------------- ------------- 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.

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