Half-yearly report

ProVen Growth and Income VCT plc Half-Yearly Financial Report for the Six Months Ended 31 August 2007 SHAREHOLDER INFORMATION Recent Performance Summary 31 Aug 28 Feb 31 Aug 2007 2007 2006 pence pence pence Net asset value per Ordinary share 126.0 129.7 171.0 Cumulative distributions per Ordinary share 75.9 68.9 18.9 Total return per Ordinary share 201.9 198.6 189.9 Net asset value per 'C' share 95.7 97.2 95.1 Cumulative distributions per 'C' share 2.0 - - Net asset value per 'C' share 97.7 97.2 95.1 Dividend History Year ended 28 February Pence per share 2002 2003 2004 2005 2006 2007 Total Ordinary Shares 1.4 1.0 3.5 6.5 6.5 57.0 75.9 'C' Shares n/a n/a n/a n/a n/a 2.0 2.0 CHAIRMAN'S STATEMENT Introduction I am pleased to present the results of Proven Growth & Income VCT plc for the six months ended 31 August 2007 Net Asset Values At 31 August 2007, the Company's net asset value per Ordinary Share stood at 126.0p, an increase of 3.3p (2.5%) per share since the previous year end (after adjusting for dividends paid in the period). The net asset value per 'C' share at 31 August 2007 stood at 95.7p, a small increase of 0.5p per share since 28 February 2007 (again after adjusting for dividends paid in the period). Venture Capital Investments Ordinary Share Pool Two disposals took place from the Ordinary Share pool during the period. Oasis Healthcare plc was the subject of a takeover offer generating a realised gain in the period of £219,000. The remaining holding in AIM-quoted Cardpoint plc was also sold realising a gain against original cost of £44,000. The Board has reviewed the valuations of the investments held at the period end and made several valuation adjustments. The net unrealised movement on the venture capital investments was a gain of £111,000 over the period. 'C' Share Pool The Manager has been very active during the period in building the 'C' Share portfolio. Nine new investments were made at a total cost of £5.5 million. The 'C' Share pool now comprises eleven investments with a total cost of £6.4 million. In reviewing the valuations at the period end, the Board has agreed two valuation adjustments such that the portfolio shows a small loss of £87,000 over the six months. Further details of the investments and investment management activities are included in the Investment Manager's Report below. Liquidity Fund Investments The Company holds a proportion of its surplus funds in AAA rated liquidity funds. At the period end the Company held £18.1 million in six such funds, the majority of which related to the 'C' Share pool. The Board expects to continue to hold these investments until funds are needed for venture capital investments. Results The return on ordinary activities after taxation for the period was £330,000 (comprising £313,000 revenue return and £17,000 capital return). Details of how this is analysed between the share pools is shown in note 7. Dividend The Company will pay an interim capital dividend of 6.0p per Ordinary Share. A revenue dividend of 1.0p per C Share will also be paid. Both dividends will be paid on 6 December 2007 to Shareholders on the registers at 16 November 2007. Repurchase of Shares The Company has a policy of purchasing its own shares that become available, at approximately a 10% discount to the latest published NAV, in order to help provide liquidity to those Shareholders that need it. During the period the Company purchased 4,427 Ordinary Shares at an average price of 109.5p per share and 13,420 "C" shares at an average price 86.0p per share. These shares were subsequently cancelled. Risk and uncertainties Under the Disclosure and Transparency Directive, the Board is now 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 facing the Company over the remainder of the financial period are as follows: * investment risk associated with a large proportion of the Company's assets being invested in a small number of investments; * investment risk associated with investing in small and immature businesses; and * failure to maintain approval as a VCT. Although having a large proportion of the Company's assets invested in a small number of investments involves additional risks, this situation is not unusual within the venture capital industry and has arisen as a result of strong growth in the value of two investments. The Board regularly reviews the position to ensure that the potential benefits of continuing to hold these investments outweighs the additional risk. In the case of the other key risks, the Board is also satisfied with the Company's approach. The Investment Manager follows a rigorous process in vetting and careful structuring of new investments and, after the investment is made, close monitoring of the business. The Company's compliance with the VCT regulations is continually monitored by the Administrator, who regularly report 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. Outlook The Investment Manager's main focus now is on new investing activities, particularly in respect of the 'C' Share pool. At 31 August 2007, approximately 26% of the 'C' Share funds were invested in VCT qualifying businesses. With the target of 70% to be invested by 28 February 2009, the Board receives regular updates from the Manager to ensure that the satisfactory rate of investments achieved to date is maintained and a good quality, well-diversified portfolio is built in a timely manner. Despite the recent turbulence in stockmarkets, the Board is cautiously optimistic that the Manager can deliver further good results from this portfolio. Although there have been a number of major, profitable realisations in recent periods, the Ordinary Share portfolio still includes a number of maturing investments with bright prospects. Andrew Davison Chairman INVESTMENT MANAGER'S REVIEW Introduction This review covers the Company's six month period ended 31 August 2007. The total return attributable to the ordinary shares was 201.9p, more than double the initial subscription price, and an increase of 2.1% over the period. This compares to an increase in the total return on the FTSE All Share Index over the six month period of 4.2%. The 'C' Shares show a total return of 97.7p compared to 94.5p at launch and a small increase of 0.5p over the total return at 28 February 2007. The Company continued to comply with the VCT regulations throughout the period. Portfolio Activity The period has seen a significant number of new investments from the 'C' Share pool, and two further realisations from the ordinary share pool. Ordinary Share Pool During the period the Company made two realisations. Oasis Healthcare, which was one of the VCT's earliest investments back in 2001, was sold after a period of sustained performance generating a total gain of 2.3 times the initial investment. The Company's remaining holding in Cardpoint was finally sold at a small profit to the initial cost. 'C' Share Pool The period saw good progress towards investing the proceeds of the 2005/2006 'C' Share fundraising. In total, nine new investments totalling £5.5 million were made. Amount Company & activity £'000 The Vending Corporation 1,000 Distribution of automated vending machines Optima Data Intelligence Services 1,000 Marketing and data intelligence services Eagle Rock Entertainment 680 Music and entertainment programming Saffron Media Group 670 Mobile telephone and web services content provider Heritage Media Partners 650 Image library rights owner Charterhouse Leisure 529 Development of "Coal" branded restaurants Steak Media 375 Online marketing services Dianomi 324 Online marketing services Coolabi 300 AIM-quoted character rights owner Total 5,528 An agreement has been reached to make further investments in both Heritage Media Partners and Charterhouse Leisure subject to satisfactory performance and the achievement of other targets. Portfolio Valuation Ordinary Share Pool At 31 August 2007, the Company's quoted and unquoted Ordinary Share pool comprised 11 investments valued at £6.3 million. The major change for investments held at 28 February 2007 was a further uplift in the value of Espresso Broadband reflecting continued good progress within its core primary school market and the increasing contribution made by its newer, recent acquisitions. Offsetting this gain, in part, have been falls in the valuations of AIM companies Pilat and UBC Media. The Company's investment in Gyro has also fallen slightly as the result of the fall in market comparables although we continue to be pleased with the company's progress. In addition to the venture capital investments, the Ordinary Share pool held over £1.2 million in cash and liquidity funds. C Share Pool At 31 August 2007, the Company's quoted and unquoted 'C' Share pool comprised 11 investments with a total value of £6.6 million. Nine of these investments were valued at cost in accordance with venture capital valuation guidelines, the exceptions being ILG and Gyro which were valued on an earnings multiple basis. In addition, the 'C' Share pool held over £17 million in cash and liquidity funds. Further details of both portfolios are provided below. Outlook The Company has made good progress towards investing the proceeds of the C share fundraising and, equally importantly, we continue to take an active role in the management of the existing portfolio. We are excited to be working again with proven entrepreneurs from previous portfolio companies following the Company's investments in Charterhouse Leisure (run by the management team from former portfolio company Ma Potters) and Steak Media (run by senior executives from Espotting) In addition, we are delighted to be backing new management teams with exciting ideas and visions. The stockmarket falls of August 2007 demonstrate the dynamic environment in which we operate. Debt providers now appear to be taking a more cautious approach to funding new investments and this may have an effect on both new investment and possible exit opportunities. We believe, however, that strong, well managed businesses will continue to do well and are broadly pleased with the overall performance and positioning of the portfolios. Beringea Limited INCOME STATEMENT for the six months ended 31 August 2007 Six months ended 31 Aug 2007 Revenue Capital Total £'000 £'000 £'000 Company Total Income 700 - 700 Gains on investments - 236 236 700 236 936 Investment management fees (95) (284) (379) Performance incentive fees (13) (75) (88) Other expenses (139) - (139) Return on ordinary activities 453 (123) 330 before taxation Taxation (140) 140 - Return attributable to 313 17 330 equity shareholders Return per Ordinary share 0.3p 3.0p 3.3p Return per 'C' share 1.2p (0.7p) 0.5p Ordinary Shares Income 110 - 110 Gains on investments - 323 323 110 323 433 Investment management fees (24) (73) (97) Performance incentive fees (13) (75) (88) Other expenses (43) - (43) Return on ordinary activities 30 175 205 before taxation Taxation (11) 11 - Return attributable to 19 186 205 equity shareholders 'C' Shares Income 590 - 590 (Losses)/gains on investments - (87) (87) 590 (87) 503 Investment management fees (71) (211) (282) Other expenses (96) - (96) Return on ordinary activities 423 (298) 125 before taxation Taxation (129) 129 - Return attributable to 294 (169) 125 equity shareholders Six months ended Year ended 31 Aug 2006 28 Feb 2007 Revenue Capital Total Total £'000 £'000 £'000 £'000 Company Total Income 566 - 566 1,255 Gains on investments - 2,607 2,607 4,115 566 2,607 3,173 5,370 Investment management fees (90) (269) (359) (759) Performance incentive fees - - - (604) Other expenses (132) - (132) (258) Return on ordinary activities 344 2,338 2,682 3,749 before taxation Taxation (56) 56 - (3) Return attributable to 288 2,394 2,682 3,746 equity shareholders Return per Ordinary share 0.2p 39.6p 39.8p 48.5p Return per 'C' share 1.2p (0.6p) 0.6p 2.8p Ordinary Shares Income 80 - 80 200 Gains on investments - 2,607 2,607 3,791 80 2,607 2,687 3,991 Investment management fees (26) (78) (104) (222) Performance incentive fees - - - (604) Other expenses (44) - (44) (89) Return on ordinary activities 10 2,529 2,539 3,076 before taxation Taxation 6 (6) - (3) Return attributable to 16 2,523 2,539 3,073 equity shareholders 'C' Shares Income 486 - 486 1,055 (Losses)/gains on investments - - - 324 486 - 486 1,379 Investment management fees (64) (191) (255) (537) Other expenses (88) - (88) (169) Return on ordinary activities 334 (191) 143 673 before taxation Taxation (62) 62 - - Return attributable to 272 (129) 143 673 equity shareholders UNAUDITED SUMMARISED BALANCE SHEET as at 31 August 2007 As at As at 31 Aug 28 Feb As at 31 Aug 2007 2006 2007 Ordinary 'C' shares Shares Total Total Total £'000 £'000 £'000 £'000 £'000 Investments 6,286 6,649 12,935 10,475 7,732 Net current assets 1,609 17,253 18,862 24,108 24,690 Net assets 7,895 23,902 31,797 34,583 32,422 Capital and reserves Called up share capital 63 1,248 1,311 1,312 1,312 Capital redemption reserve 8 1 9 8 8 Share premium account 27 22,357 22,384 22,384 22,384 Special reserve 4,905 - 4,905 5,189 4,977 Capital reserve - realised 713 (257) 456 389 722 Capital reserve - unrealised 2,074 237 2,311 4,897 2,337 Revenue reserve 105 316 421 404 682 Equity shareholder's funds 7,895 23,902 31,797 34,583 32,422 Net asset value per: Ordinary Share 126.0p 171.0p 129.7p 'C' Share 95.7p 95.1p 97.2p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 31 Aug 28 Feb 31 Aug 2007 2006 2007 Ordinary 'C' shares Shares Total Total Total £'000 £'000 £'000 £'000 £'000 Opening shareholders' funds 8,134 24,288 32,422 11,074 11,074 Issue of shares - - - 22,350 22,350 Share issue costs - - - (1,230) (1,229) Repurchase of own shares (5) (11) (16) (70) (146) Total recognised gains for the 205 125 330 2,682 3,746 period Distributions paid in period (439) (500) (939) (223) (3,373) Closing shareholders' funds 7,895 23,902 31,797 34,583 32,422 UNAUDITED CASH FLOW STATEMENT for the six months ended 31 August 2007 Six Six months months Year ended ended ended 31 Aug 31 Aug 28 Feb 2007 2006 2007 Note £'000 £'000 £'000 Cash (outflow)/inflow from operating 1 activities and returns on investments (605) 126 387 Capital expenditure Purchase of investments (5,528) (261) (1,145) Sale of investments 562 - 4,799 Net cash (outflow)/inflow from (4,966) (261) 3,654 capital expenditure Equity distributions paid (939) (223) (3,373) Management of liquid resources Purchase of current investments - (23,600) (24,600) held as liquidity funds Withdrawal from liquidity funds 3,900 - 3,000 3,900 (23,600) (21,600) Net cash outflow before financing (2,610) (23,958) (20,932) Financing Proceeds from share issue - 18,266 18,266 Share issue costs - (1,254) (1,254) Purchase of own shares (16) (59) (146) Net cash (outflow)/inflow from (16) 16,953 16,866 financing Decrease in cash 2 (2,626) (7,005) (4,066) Notes to the cash flow statement: 1. Cash flow from operating activities and returns on investments Net revenue before taxation 453 344 807 Expenses charged to capital (360) (269) (1,173) Increase in other debtors (48) (110) (53) (Decrease)/increase in accruals (650) 161 806 and other creditors Net cash (outflow)/inflow from (605) 126 387 operating activities 2. Analysis of net funds Beginning of period 3,123 7,189 7,189 Net cash outflow (2,626) (7,005) (4,066) End of period 497 184 3,123 SUMMARY OF INVESTMENT PORTFOLIO as at 31 August 2007 Movement % of in the Cost Valuation portfolio period £'000 £'000 by value £'000 Ordinary Share pool Venture capital investments Espresso Broadband Limited 784 2,416 32.0% 374 ILG Digital Limited 600 1,595 21.1% (38) (formerly i-Level Limited) Gyro International Limited 500 896 11.9% (127) Campden Media Limited 488 594 7.9% 67 Ashford Colour Press Limited 550 466 6.2% 7 UBC Media plc * 400 143 1.9% (63) Pilat Media Global plc * 50 119 1.6% (67) Sports Holdings Limited 260 39 0.5% (37) Immedia Broadcasting plc * 171 18 0.2% (5) Baby Innovations S.A. t/a 209 - - - Steribottle Campus Communications Group Limited (formerly - JVTV - Holdings Limited) 200 - - Total venture capital 111 investments 4,212 6,286 83.3% Liquidity funds 1,000 13.2% Cash at bank and in hand 264 3.5% Ordinary Share Pool - Total 7,550 100.0% C' Share pool Venture capital investments Optima Data Intelligence 1,000 1,000 4.2% - Limited The Vending Corporation Limited 1,000 1,000 4.2% - Gyro International Limited 681 821 3.4% (80) Eagle Rock Entertainment Group 680 680 2.8% - Limited Saffron Media Group Limited 670 670 2.8% - Heritage Partners Limited 650 650 2.7% - Charterhouse Leisure Limited 529 529 2.2% - Steak Media Limited 375 375 1.6% - Dianomi Limited 324 324 1.4% - Coolabi plc* 300 300 1.2% - ILG Digital Limited (formerly 203 300 1.2% (7) i-Level Limited) Total venture capital (87) investments 6,412 6,649 27.7% Liquidity funds 17,100 71.3% Cash at bank and in hand 233 1.0% 'C' Share Pool - Total 23,982 100.0% Company Total 31,532 All venture capital investments are unquoted unless otherwise stated. * Quoted on AIM SUMMARY OF INVESTMENT MOVEMENTS For the six months ended 31 August 2007 Additions £'000 'C' Share Portfolio Optima Data Intelligence Services Limited 1,000 The Vending Corporation Limited 1,000 Eagle Rock Entertainment Group Limited 680 Saffron Media Group Limited 670 Heritage Partners Limited 650 Charterhouse Leisure Limited 529 Steak Media Limited 375 Dianomi Limited 324 Coolabi plc 300 5,528 Disposals Market Total value at realised 1 March Disposal Gain/(loss) gain/ Cost 2007 Proceeds against cost (loss ) £'000 £'000 £'000 £'000 £'000 Ordinary Share Portfolio Cardpoint plc 129 176 173 44 (3) Oasis Healthcare plc 170 172 389 219 217 299 348 562 263 214 NOTES TO THE UNAUDITED FINANCIAL STATEMENTS 1. The unaudited interim results cover the six months to 31 August 2007 and have been prepared in accordance with the accounting policies set out in the statutory accounts for the year ended 28 February 2007 which were prepared under UK Generally Accepted Accounting Practice ("UK GAAP") and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" revised December 2005 ("SORP"). 2. All revenue and capital items in the Income Statement derive from continuing operations. 3. There are no recognised gains or losses other than those disclosed in the Income Statement. 4. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits. 5. The comparative figures were in respect of the period ended 31 August 2006 and the year ended 28 February 2007 respectively. 6. Net Asset Value per share calculations are based on the following: Ordinary 'C' Shares Shares Net Assets (£'000) 7,895 23,902 Number of shares in issue at period end 6,267,239 24,979,862 7. Return per share calculations are based on the following: Ordinary 'C' Shares Shares Revenue return per share based on: Net revenue profit after taxation (£'000) 19 294 Weighted average number of shares in issue 6,270,752 24,979,862 Capital return per share based on: Net capital gain/(loss) after taxation (£'000) 186 (169) Weighted average number of shares in issue 6,270,752 24,966,242 8. Dividends 28 Feb 31 August 2007 31 August 2006 2007 Paid in year Revenue Capital Total Revenue Capital Total Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Ordinary Share dividends 2007 second 63 376 439 - - - - interim 2007 first interim - - - - - - 3,150 2006 second - - - 32 191 223 223 interim 63 376 439 32 191 223 3,373 'C' Share dividends 2007 first interim 500 - 500 - - - - 9. Reserves Capital Capital Capital Share Special redemption Share reserve reserve Revenue Capital reserve reserve premium - - Reserve unrealised realised £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 March 1,312 4,977 8 22,384 2,337 722 682 2007 Shares (1) (5) 1 - - - (11) repurchased Expenses - - - - - (219) - capitalised Gains on - - - - 23 213 - investments Realisation of - - - - (49) 49 - revaluations from previous years Distributions - - - - - (376) (563) paid Transfer - (67) - - - 67 - between reserves Retained net - - - - - - 313 revenue for the period At 31 August 1,311 4,905 9 22,384 2,311 456 421 2007 Analysed as: Ordinary £'000 £'000 £'000 £'000 £'000 £'000 £'000 Shares At 1 March 63 4,977 8 27 2,013 897 149 2007 Shares - (5) - - - - - repurchased Expenses - - - - - (137) - capitalised Gains on - - - - 110 213 - investments Realisation of - - - - (49) 49 - revaluations from previous years Distributions - - - - - (376) (63) paid Transfer - (67) - - - 67 - between reserves Retained net - - - - - - 19 revenue for the period At 31 August 63 4,905 8 27 2,074 713 105 2007 'C' Shares £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 March 1,249 - - 22,357 324 (175) 533 2007 Shares (1) - 1 - - - (11) repurchased Expenses - - - - - (82) - capitalised Losses on - - - - (87) - - investments Distributions - - - - - - (500) paid Retained net - - - - - - 294 revenue for the period At 31 August 1,248 - 1 22,357 237 (257) 316 2007 The Special Reserve is a distributable reserve that allows the Company to make market purchases of its own shares and to pay distributions. The Ordinary Capital reserve - realised and Revenue Reserves are also distributable reserves. 10. The unaudited financial statements set out herein do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 and have not been delivered to the Registrar of Companies. The figures for the year ended 28 February 2007 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. 11. On 4 October 2007, Shareholder approval was granted for a minor amendment to the Performance Incentive Fee Arrangements with the Investment Manager, Beringea Limited. The amendment replaced a hurdle that was based on net asset value in the original arrangements with an equivalent hurdle based on a performance value calculated by adding net asset value to cumulative dividends paid. The adoption of this amendment helps avoid a possible situation that could arise where the Investment Manager might not have been incentivised to support the payment of a dividend, although has this no material affect on the current financial position of the Company. 12. The Directors confirm that, to the best of their knowledge, 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 the half-yearly financial report includes a fair review of the information required by: 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 year 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 year; and DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year 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 Copies of the unaudited interim results will be sent to shareholders shortly. Further copies can be obtained from the Company's Registered Office. ---END OF MESSAGE---