Downing Income VCT 4 plc (formerly Framlington AIM VCT plc)

Half-Yearly Report for the six months ended 31 March 2012

FINANCIAL HIGHLIGHTS

CHAIRMAN'S STATEMENT

The six months ended 31 March 2012 has been a busy one for your Company in which a new Investment Manager, Downing LLP, was appointed towards the end of the period and, on 2 March 2012, the Company changed its name from Framlington AIM VCT plc to Downing Income VCT 4 plc.

New Manager

Downing took over as Investment Manager of the Company on 1 March 2012. The Board is pleased to be able to report that it has secured a lower management fee than the Company had paid its previous manager and, additionally, Downing agreed to bear the costs of the change of manager.

Downing's initial task is to undertake a thorough review of the investment portfolio with a view to identifying investments it sees as long term holds.  It then plans to gradually reduce exposure to the AIM market by re-employing some funds in attractive unquoted opportunities. Downing's approach towards the AIM investments is that it seeks to hold reasonably significant stakes, possibly along with other Downing-managed funds, such that the Manager is able to exert some influence over the businesses which, it believes, can drive better performance.

Net asset value and results

During the last six month period, economic conditions remained difficult and recurring fears of an escalation of the Eurozone sovereign debt crisis resulted in continuing market volatility.

Investment portfolio

The portfolio was managed by AXA Framlington ("Framlington") for the majority of the period under review.  Under Framlington's management, the Company participated in a number of placings at a total cost of £253,000, and disposed of holdings with total proceeds of £733,000, realising gains of £4,000.

Investment portfolio (continued)

A schedule of the full investment portfolio held at the period end, together with details of the additions and disposals in the period, is shown below.

Since Downing's appointment, the Company has made three full disposals and sold down some other holdings, producing just under £1 million of proceeds. Three new investments have also been made: an equity and loan stock investment of £254,000 in Ludorum plc, the company behind children's television show, Chuggington (www.ludorum.com); £400,000 in Vulcan Renewables Ltd; and £100,000 in Baron House Developments LLP, the last two of which are unquoted companies which have not yet commenced their planned projects. All of these transactions, with the exception of part of the investment in Ludorum, took place after the period end.

Future developments

The new Manager and Board will be considering a number of options over the coming months which may help the Company produce better returns for Shareholders. As mentioned in the letter to Shareholders at the time of the change of manager, these options include the possibility of merging with another VCT, the offering of an "enhanced share buyback" scheme and giving consideration to future fundraising strategy.

The Company is also currently reviewing its strategy in respect of purchasing its own shares. In the short term, the Company may purchase shares that become available in the market from time-to-time, however, in due course, the Company expects to be able to announce a more structured share buyback policy, including an expected discount to NAV at which the Company expects to purchase its own shares.

I will, of course, write to Shareholders if there are major developments in any of these areas before the next financial report.

Outlook

The Board has taken some major steps in seeking to improve future prospects for Shareholders and believes that the strategy of reducing overall exposure to the AIM market and employing Downing's approach to AIM investing of seeking to become an influential investor can bring benefits to Shareholders in due course.  As the Company is effectively fully invested, the task of rebalancing the portfolio will involve achieving exits from investments which are not seen as long-term holds. The Board is confident that Downing is well-placed to execute this strategy.

Tim How

Chairman

UNAUDITED BALANCE SHEET as at 31 March 2012

INCOME STATEMENT for the six months ended 31 March 2012

All Revenue and Capital items in the above statement derive from continuing operations.  No operations were acquired or discontinued during the year.  The total column within the Income Statement represents the profit and loss account of the Company.

A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement as noted above.

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the six months ended 31 March 2012

UNAUDITED CASH FLOW STATEMENT for the six months ended 31 March 2012

INVESTMENT PORTFOLIO as at 31 March 2012

All Venture Capital investments are quoted on AIM unless otherwise stated.

* Unquoted ** Quoted on Plus Market

SUMMARY OF INVESTMENT ADDITIONS for the six months ended 31 March 2012

SUMMARY OF INVESTMENT DISPOSALS for the six months ended 31 March 2012

* Adjusted for purchases in period

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS for the six months ended 31 March 2012

1. The unaudited half yearly financial results cover the six months to 31 March 2012 and have been prepared in accordance with the accounting policies set out in the statutory accounts for the year ended 30 September 2011 which were prepared under UK Generally Accepted Accounting Practice and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" January 2009.

2. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.

3. The comparative figures were in respect of the six months ended 31 March 2011 and the year ended 30 September 2011.

4. Return per share

5. Dividends

6. Net asset value per share

7. Called up share capital

8. Reserves

The special reserve is available to the Company to enable the purchase of its own shares in the market without affecting its ability to pay dividends/capital distributions.

Distributable reserves comprise the special reserve, capital reserve - realised and revenue reserve and are reduced by investment holding losses of £5.1 million.  At the period end there was £5.2 million of reserves available for distribution (30/09/2011: £6.3 million).

9. Cash outflow from operating activities and returns on investments

10. Analysis of net funds

11. The unaudited financial statements set out herein do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and have not been delivered to the Registrar of Companies.  The figures for the year ended 30 September 2011 have been extracted from the financial statements for that year, which have been delivered to the Registrar of Companies; the auditors' report on those financial statements was unqualified.

12. The Directors confirm that, to the best of their knowledge, the half yearly financial report has been prepared in accordance with the "Statement: Half Yearly Financial Reports" issued by the UK Accounting Standards Board and the half yearly financial report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial period and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the period; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place during the first six months of the current financial period and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.

13. Risks and uncertainties

Under the Disclosure and Transparency Directive, the Board is required, in the Company's half year results, to report on principal risks and uncertainties facing the Company over the remainder of the financial year.

The Board has concluded that the key risks are:

(i) investment risk associated with investing in small businesses;

(ii) investment risk arising from market volatility; and

(iii) failure to maintain approval as a VCT.

In the case of (i) and (ii) the Board is satisfied with the Company's approach to these risks.  As a VCT, the Company has significant exposure to the relatively small businesses.  However, by seeking to hold a well-diversified portfolio of businesses with strong management teams, the impact of falling markets and challenging economic conditions should be mitigated as much as possible given the Company's status as a VCT and its investment policy.

The Company's compliance with the VCT regulations is continually monitored by the Manager, who regularly reports to the Board on the current position.  The Company also retains PricewaterhouseCoopers to provide regular reviews and advice in this area.  The Board considers that this approach reduces the risk of a breach of the VCT regulations to a minimal level.

14. Going concern

The Company has sufficient financial resources at the period end, and holds a diversified portfolio of investments. As a consequence, the Directors believe that the Company is well placed to manage its business risks successfully, despite the current uncertain economic outlook.

The Directors are confident that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

15. Copies of the unaudited half yearly financial results will be sent to Shareholders shortly. Further copies can be obtained from the Company's Registered Office and will be available for download from www.downing.co.uk