Half-yearly report

ProVen VCT plc Half Yearly Financial Report for the Six Months Ended 31 August 2007 SHAREHOLDER INFORMATION Recent Performance Summary 31 Aug 2007 28 Feb 2007 31 Aug 2006 pence pence pence Net asset value per Ordinary 96.6 108.3 133.9 share Cumulative distributions per 68.2 53.2 22.2 Ordinary share Total return per Ordinary share 164.8 161.5 156.1 Net asset value per 'C' share 95.6 n/a n/a Cumulative distributions per 'C' - n/a n/a share Total return per 'C' share 95.6 n/a n/a Dividend History Pence per share Year ended 28 February 2001 2002 2003 2004 2005 2006 2007 Total Ordinary Shares 2.4 2.3 1.0 3.5 6.5 6.5 46.0 68.2 CHAIRMAN'S STATEMENT I am pleased to present the results of ProVen VCT plc for the six months ended 31 August 2007. Fundraising As reported previously, the Company's 'C' Share offer closed on 31 May 2007 having raised £13.8 million net of costs. This provides the VCT with a larger asset base over which to spread its running costs. Net Asset Value As at 31 August 2007, the Company's Ordinary share net asset value per share stood at 96.6p, an increase of 3.3p per share (3.0%) since the previous year end (after adjusting for dividends paid in the period). The net asset value per 'C' Share stood at 95.6p at 31 August 2007, a small increase over the initial 'C' Share net asset value (after charging fundraising costs) of 94.5p per share. Venture Capital Investments Ordinary Share Pool The Company made two significant disposals during the period. Oasis Healthcare plc was the subject of a takeover offer, generating a realised gain of £1.5 million, and an opportunity was taken to dispose of the holding in Cardpoint plc realising a gain of £229,000. A number of new investments were made by the Ordinary Share Pool, at a total cost of £2 million. The Board reviewed the valuations of the investments held at the period end and made a number of adjustments. The net unrealised movement on the venture capital investments was an increase of £276,000 over the period. C Share Pool A good start has been made in investing the 'C' Share funds. Five new investments were made in the period at a total cost of £2.4 million. As these investments have all been made recently, they have been valued at cost at the period end. 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 £4.7 million in three such funds, mainly relating 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 £903,000 (£234,000 revenue return and £669,000 capital return). Details of how this is analysed between the share pools is shown on note 7. Dividend The Company will pay an interim capital dividend of 6.0p per Ordinary Share being a distribution of the gains made on Oasis Healthcare and Cardpoint. 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 continues to have a policy of purchasing its own shares that become available, at approximately a 10% discount to the last published NAV, in order to help provide liquidity to those Shareholders that need it. During the period, the Company purchased 122,048 Ordinary shares at an average price of 81.9p per share. These shares were subsequently cancelled. No 'C' Shares were purchased in the period. 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 an investment is made, close monitoring of the business. The Company's compliance with the VCT regulations is continually monitored by the Administrator, who reports regularly 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 While working towards profitable exits for the more mature investments within the Ordinary Share Pool remains an important role, the Investment Manager's main focus is now on building the 'C' Share portfolio and also reinvesting surplus cash in the Ordinary Share pool. With the turbulence experienced by world stockmarkets during August, the climate for investing may start to become more challenging. However, the Investment Manager continues to report satisfactory deal flow and the Board remains generally happy with the quality and quantity of new investment proposals being presented to it. Andrew Davison Chairman INVESTMENT MANAGER'S REPORT Introduction This review covers the Company's six month period ended 31 August 2007. The total return attributable to the Ordinary Shares increased by 2.0% over the period compared to an increase in the total return on the FTSE All Share Index of 4.2%. The VCT closed its 'C' Share fundraising on 31 May 2007 raising a total of £14.6 million (£13.8 million after expenses). The net asset value of the C shares increased to 95.6p compared to 94.5p at issue. 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 both the Ordinary Share and 'C' Share pools, and two further realisations from the Ordinary Share pool. Ordinary Share Pool The Company invested £2 million in four companies: £900,000 in Optima, a marketing and data intelligence services provider; £480,000 in Saffron Media Group, a mobile telephone and web services content provider; £420,000 in Eagle Rock Entertainment, a producer and publisher of music and entertainment programmes; and £200,000 in Coolabi plc, an AIM quoted media company. Oasis Healthcare, which was one of the VCT's earliest investments back in 2000, was sold after a period of sustained performance generating a total gain of 2.3 times the initial investment. In addition, the remaining holding in Cardpoint was sold at a profit to the initial cost. C Share Pool The Company has made a strong start in investing the proceeds from the recent 'C' Share issue. A total of £2.4 million was invested in five companies: £1 million in the Vending Corporation, distributors of automated vending machines; £650,000 in Heritage Media Partners, the owner of the rights to a large image library; £371,000 in Charterhouse Leisure, which is developing a chain of restaurants under the brand name "Coal"; and investments of £275,000 and £126,000 in Steak Media and Dianomi, both of which provide online marketing services. 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 18 investments valued at £16.2 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 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 Steribottle has also been fully provided against (current year effect £114,000) given the uncertainty over trading. In all these cases we continue to be proactive in trying to recover and realise shareholder value. In addition to the venture capital investments, the Ordinary Share pool held over £5 million in cash and liquidity funds. C Share Pool The new investments in the 'C' Share pool are valued at the cost of the investment in accordance with venture capital valuation guidelines. The 'C' Share pool has a further £11.5 million in cash and liquidity funds from which to fund further investments. Further details of both portfolios are provided below. Outlook The recent 'C' Share fundraising has enabled the VCT to enter a new stage of its development and we have already made good progress towards investing the new funds. 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. Equally importantly we continue to take an active role in the management of the existing portfolio. 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 583 - 583 Gains on investments - 1,531 1,531 583 1,531 2,114 Investment management fees (103) (308) (411) Performance incentive fees (46) (653) (699) Other expenses (99) (2) (101) Return on ordinary activities 335 568 903 Taxation (101) 101 - Return attributable to equity 234 669 903 shareholders Return per Ordinary share 0.2p 3.0p 3.2p Return per "C" share 1.4p (0.2p) 1.2p Ordinary Shares Income 249 - 249 Gains on investments - 1,531 1,531 249 1,531 1,780 Investment management fees (67) (202) (269) Performance incentive fees (46) (653) (699) Other expenses (61) (2) (63) Return on ordinary activities 75 674 749 before taxation Taxation (23) 23 - Return attributable to equity 52 697 749 shareholders 'C' Shares Income 334 - 334 Gains on investments - - - 334 - 334 Investment management fees (36) (106) (142) Other expenses (38) - (38) Return on ordinary activities 260 (106) 154 before taxation Taxation (78) 78 - Return attributable to equity 182 (28) 154 shareholders Six months ended Year ended 31 Aug 2006 28 Feb 2007 Company Total Income 303 - 303 576 Gains on investments - 6,282 6,282 9,059 303 6,282 6,585 9,635 Investment management fees (74) (221) (295) (639) Performance incentive fees - - - (1,416) Other expenses (94) - (94) (186) Return on ordinary activities 135 6,061 6,196 7,394 Taxation (26) 26 - - Return attributable to equity 109 6,087 6,196 7,394 shareholders Return per Ordinary share 0.5p 25.1p 25.6p 30.5p Return per "C" share n/a n/a n/a n/a Ordinary Shares Income 303 - 303 576 Gains on investments - 6,282 6,282 9,059 303 6,282 6,585 9,635 Investment management fees (74) (221) (295) (639) Performance incentive fees - - - (1,416) Other expenses (94) - (94) (186) Return on ordinary activities 135 6,061 6,196 7,394 before taxation Taxation (26) 26 - - Return attributable to equity 109 6,087 6,196 7,394 shareholders 'C' Shares Income n/a n/a n/a n/a Gains on investments n/a n/a n/a n/a n/a n/a n/a n/a Investment management fees n/a n/a n/a n/a Other expenses n/a n/a n/a n/a Return on ordinary activities n/a n/a n/a n/a before taxation Taxation n/a n/a n/a n/a Return attributable to equity n/a n/a n/a n/a shareholders UNAUDITED SUMMARISED BALANCE SHEET as at 31 August 2007 As at As at As at 31 Aug 28 Feb 31 Aug 2007 2006 2007 Ordinary 'C' shares Shares Total Total Total £'000 £'000 £'000 £'000 £'000 Investments 16,242 2,422 18,664 24,472 15,629 Net current assets 6,159 11,548 17,707 7,323 9,620 Net assets 22,401 13,970 36,371 31,795 25,249 Capital and reserves Called up share capital 1,159 3,655 4,814 1,187 1,165 Capital redemption reserve 138 - 138 110 132 Special reserve 12,863 - 12,863 13,780 13,145 Share premium account 3,759 10,161 13,920 3,759 3,759 Capital reserve - realised 2,242 (28) 2,214 2,918 4,348 Capital reserve - unrealised 2,097 - 2,097 9,806 2,376 Revenue reserve 143 182 325 235 324 Equity shareholder's funds 22,401 13,970 36,371 31,795 25,249 Net asset value per: Ordinary Share 96.6p 133.9p 108.3p 'C' Share 95.6p n/a n/a RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 31 Aug 31 Aug 28 Feb 2007 2006 2007 Ordinary 'C' shares Shares Total Total Total £'000 £'000 £'000 £'000 £'000 Opening shareholders' funds 25,249 - 25,249 26,733 26,733 Issue of shares - 14,620 14,620 - - Share issue costs - (804) (804) - - Repurchase of own shares (100) - (100) (297) (711) Total recognised gains for the 749 154 903 6,196 7,394 period Distributions paid in period (3,497) - (3,497) (837) (8,167) Closing shareholders' funds 22,401 13,970 36,371 31,795 25,249 UNAUDITED CASH FLOW STATEMENT for the six months ended 31 August 2007 Six Six months months Year ended ended ended 31 Aug 2007 31 Aug 2006 28 Feb 2007 Note £'000 £'000 £'000 Cash outflow from operating activities 1 and returns on investments (758) (270) (1,557) Capital expenditure Purchase of investments (4,422) (681) (1,679) Sale of investments 2,918 114 11,884 Net cash (outflow)/inflow from (1,504) (567) 10,205 capital expenditure Equity distributions paid (3,497) (841) (8,167) Management of liquid resources Purchase of current investments (11,250) - - held as liquidity funds Withdrawal from liquidity funds 2,500 950 950 Net cash (outflow)/inflow before (14,509) (728) 1,431 financing Financing Proceeds from share issue 10,130 - 4,491 Share issue costs (804) - - Purchase of own shares (118) (225) (697) Net cash inflow/(outflow) from 9,208 (225) 3,794 financing (Decrease)/increase in cash 2 (5,301) (953) 5,225 Notes to the cash flow statement: 1. Cash flow from operating activities and returns on investments Revenue return on ordinary 335 135 235 activities before taxation Expenses charged to capital (963) (221) (1,900) (Increase)/decrease in (85) (64) 90 prepayments and accrued income (Decrease)/increase in accruals (45) (120) 18 and deferred income Net cash outflow from operating (758) (270) (1,557) activities 2. Analysis of net funds Beginning of period 8,709 3,484 3,484 Net cash (outflow)/inflow (5,301) (953) 5,225 End of period 3,408 2,531 8,709 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 Top ten venture capital investments Espresso Broadband Limited 2,048 6,341 29.4% 1,009 ILG Digital Limited 1,345 3,274 15.2% (77) (formerly i-Level Limited) Campden Media Limited 975 1,187 5.5% 134 SPC International Limited 1,146 901 4.2% (209) Optima Data Intelligence Services 900 900 4.2% - Limited Ashford Colour Press Limited 1,000 847 3.9% 14 Gyro International Limited 652 788 3.6% (78) Saffron Media Group Limited 480 480 2.2% - Eagle Rock Entertainment Group 420 420 1.9% - Limited Pilat Media Global plc* 173 415 1.9% (233) 9,139 15,553 72.0% 560 Other venture capital investments 5,006 689 3.2% (284) Total investments 14,145 16,242 75.2% 276 Net current assets (including cash and liquidity funds) 5,346 24.8% Ordinary Share pool - Total 21,588 100.0% 'C' Share pool The Vending Corporation Limited 1,000 1,000 7.2% - Heritage Partners Limited 650 650 4.6% - Charterhouse Leisure Limited 371 371 2.6% - Steak Media Limited 275 275 2.0% - Dianomi Limited 126 126 0.9% - 2,422 2,422 17.3% - Net current assets 11,561 82.7% (including cash and liquidity funds) 'C' Share pool - Total 13,983 100.0% Company Total 35,571 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 Ordinary Share Portfolio Optima Data Intelligence Services Limited 900 Saffron Media Group Limited 480 Eagle Rock Entertainment Group Limited 420 Coolabi plc 200 2,000 "C" Share Portfolio The Vending Corporation Limited 1,000 Heritage Partners Limited 650 Charterhouse Leisure Limited 371 Steak Media Limited 275 Dianomi Limited 126 2,422 Disposals Market value at Total 1 March Disposal Gain/(loss) realised Cost 2007 Proceeds against cost gain/(loss ) £'000 £'000 £'000 £'000 £'000 Ordinary Share Portfolio Cardpoint plc 438 680 666 228 (14) Chiaros - retention - release - 33 33 33 Oasis Healthcare 982 plc 670 2,218 1,548 1,236 1,108 1,662 2,917 1,809 1,255 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 Shares 'C' Shares Net Assets (£'000) 22,401 13,970 Number of shares in issue at period end 23,187,968 14,620,454 7. Return per share calculations are based on the following: Ordinary Shares 'C' Shares Revenue return per share based on: Net revenue profit after taxation (£'000) 52 182 Weighted average number of shares in issue 23,308,297 13,072,138 Capital return per share based on: Net capital gain/(loss) after taxation 697 (28) (£'000) Weighted average number of shares in issue 23,308,297 13,072,138 8. Dividends 31 August 2007 31 August 2006 28 Feb 2007 Revenue Capital Total Revenue Capital Total Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Paid in period 2007 Second 233 3,264 3,497 - - - - interim 2007 First interim - - - - - - 7,330 2006 Second - - - 478 359 837 837 interim 233 3,264 3,497 478 359 837 8,167 9. Reserves Share Capital Special Share Capital Capital Revenue capital redemption reserve premium reserve reserve - reserve reserve account - unrealised realised £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 March 1,165 132 13,145 3,759 4,348 2,376 324 2007 Issue of new 3,655 - - 10,965 - - - shares Share issue - - - (804) - - - costs Shares (6) 6 (100) - - - - repurchased Expenses charged to - - - - (863) - - capital Realised - - - - 1,255 - - gains in year Increase in unrealised - - - - - 276 - appreciation Realisation of - - - - 555 (555) - revaluations from previous years Distributions - - - - (3,263) - (233) paid Transfer - - (182) - 182 - between reserves Retained net - - - - - - 234 revenue At 31 August 4,814 138 12,863 13,920 2,214 2,097 325 2007 Analysed as: Ordinary £'000 £'000 £'000 £'000 £'000 £'000 £'000 shares At 1 March 1,165 132 13,145 3,759 4,348 2,376 324 2007 Shares (6) 6 (100) - - - - repurchased Expenses (835) charged to - - - - - - capital Realised - - - - 1,255 - - gains in year Increase in - unrealised - - - - 276 - appreciation Realisation of - - - - 555 (555) - revaluations from previous years Distributions - - - - (3,263) - (233) paid Transfer - - (182) - 182 - - between reserves Retained net - - - - - - 52 revenue At 31 August 1,159 138 12,863 3,759 2,242 2,097 143 2007 "C" shares £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 March - - - - - - - 2007 Issue of new 3,655 - - 10,965 - - - shares Share issue - - - (804) - - - costs Expenses charged to - - - - (28) - - capital Retained net - - - - - - 182 revenue At 31 August 3,655 - - 10,161 (28) - 182 2007 The Special Reserve, Capital Reserve - realised and Revenue Reserve are all 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. 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: 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 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 b. 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. 12. 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---

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