Half-yearly report

The AIM Distribution Trust plc Half Yearly Financial Report for the six months ended 30 September 2008 RECENT PERFORMANCE SUMMARY 30 Sept 31 Mar 30 Sept 2008 2008 2007 Pence pence pence Net asset value per share 42.5 50.3 65.3 Cumulative distributions per share 55.8 55.8 53.8 Total return per share 98.3 106.1 119.1 CHAIRMAN'S STATEMENT The period covered by these accounts has seen growing concern about the state of the economy, continuing selling pressure on small company shares and increasing difficulties in the financial sector, culminating, since the period end, in the part nationalisation of several banks. It has been a particularly poor period in which to announce any shortfall of previous expectations. Although smaller growing companies cannot reasonably be expected always to comply with their business plan, some share price reactions in the market as a whole have been very savage. Needless to say, your company's portfolio has not been immune from these conditions. The net asset value per share ("NAV") decreased by 15.5% to 42.5p during the period. Against the backdrop of a 35% fall in the FTSE AIM All Share index during the period, your Board believes that this is a reasonable performance under the circumstances. VCT Investment Portfolio The Company is essentially fully invested so investment activity has been at a relatively low level. During the period, the Company invested £100,000 in one new investment and £101,000 in follow-on investments. The Company also made a small number of part disposals generating proceeds of £426,000. The new investment was in Hoole Hall Spa and Leisure Limited, an unquoted business which is developing spa and leisure facilities on a site near Chester. The Board feels that, in the current climate, investments such as this, which have substantial fixed assets, may provide more stability than AIM-quoted investments which are directly affected by volatile stock market conditions. The main follow-on investment of £100,000 was made in Hill Station plc. The AIM-quoted ice cream manufacturer required additional funding in January 2008 to execute a revised strategy. Unfortunately, the business did not develop to plan and was put into administration in October 2008, producing an unrealised loss in the period of £398,000. Of the investments held throughout the period, almost all those quoted on AIM showed falls in value. Overall the venture capital portfolio produced realised gains of £124,000 and unrealised losses of £959,000. Fixed interest securities and other investments The Company holds a non VCT-qualifying portfolio comprising of three hedge funds and a holding of permanent interest bearing shares (PIBS). At the period end, the portfolio was valued at £1,270,000 with unrealised losses of £160,000 and realised losses of £1,000 thereon. Results and Dividend The return on ordinary activities after taxation for the period was £1,043,000 comprising a revenue loss of £8,000 and a capital loss of £1,035,000. As the Company has historical realised gains available for distribution, the Board has decided to declare an interim dividend of 2p per share. This will be paid on 27 March 2009 to Shareholders on the register at 27 February 2009. Repurchase of shares The Company has operated a policy, subject to certain restrictions, of buying its own shares that become available in the market. During the period the Company repurchased 445,637 Ordinary shares at an average price of 44.6p per share, being approximately a 10% discount to the latest published NAV at the time of purchase. These shares were subsequently cancelled. The Board notes that several AIM-focussed VCTs have now suspended their share buyback policies or have increased the discounts at which they are prepared to buy in shares. The Board has reviewed the situation and concluded that, under the present conditions, the lack of liquidity in the stock market would mean that to raise cash would require the sale of the best companies in the portfolio and this would likely be at a discount to their current share price. Under more normal circumstances, buying in shares at a discount benefits the fund as a whole but this is clearly not currently the case. Furthermore such transactions would jeopardise the ability to pay dividends. The Board has therefore decided not to undertake any further share buybacks at the current time. 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 are: (i) investment risk associated with investing in young 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 an AIM-focused VCT, the Company, by definition, has significant exposure to the relatively immature businesses quoted on AIM. 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 Administrator, 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. Shareholder Questionnaire Recent investment performance, along with the effects of undertaking share buybacks and the policy of paying a reasonable level of annual dividends, has reduced your Company's net assets to, what is now, a low level for a VCT. At this level, running costs, many of which are fixed costs, start to become a significant burden. The Board is therefore undertaking a review to establish a suitable strategy for the future. Some of the options for future strategy might have tax implications for certain shareholders. The Board has produced a short questionnaire, the results of which will be considered as part of the review. The questionnaire will be sent to shareholders with the printed version of this report. Outlook Since the period end, there has been a massive escalation of the global financial crisis with government having to nationalise banks and the IMF having to bail out countries. This has fuelled further falls in stock market prices. At 31 October 2008, the Company's NAV had fallen to 37.8p per share. The prices of all shares and in particular those on AIM clearly discount a deep and prolonged recession. As a fully invested VCT, there is little action that can be taken to reduce the Company's exposure to the AIM market. The Board therefore does not expect to see any significant improvement in the Company's performance until markets begin to show signs of recovery. Sir Aubrey Brocklebank Chairman INCOME STATEMENT for the six months ended 30 September 2008 Six months ended 30 September 2008 Revenue Capital Total £'000 £'000 £'000 Income 85 - 85 (Losses)/gains investments - (996) (996) 85 (996) (911) Investment management fees (13) (39) (52) Other expenses (80) - (80) Return on ordinary activities before (8) (1,035) (1,043) taxation Taxation - - - Return attributable to equity (8) (1,035) (1,043) shareholders Return per share (0.1p) (7.7p) (7.8p) Six months ended Year ended 30 September 2007 31 March 2008 Revenue Capital Total Total £'000 £'000 £'000 £'000 Income 110 - 110 218 (Losses)/gains investments - 196 196 (1,574) 110 196 306 (1,356) Investment management fees (18) (51) (69) (134) Other expenses (83) - (83) (164) Return on ordinary activities 9 145 154 (1,654) before taxation Taxation - - - - Return attributable to equity 9 145 154 (1,654) shareholders Return per share 0.1p 1.0p 1.1p (11.8p) All Revenue and Capital items in the above statement derive from continuing operations. 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/losses are recognised in the Income Statement as noted above. UNAUDITED SUMMARISED BALANCE SHEET as at 30 September 2008 30 Sept 2008 30 Sept 2007 31 Mar 2008 £'000 £'000 £'000 Fixed assets Investments 5,264 9,006 6,749 Current assets Debtors 196 87 191 Cash at bank and in hand 183 109 42 379 196 233 Creditors: amounts falling due (53) (61) (150) within one year Net current assets 326 135 83 Net assets 5,590 9,141 6,832 Capital and reserves Called up share capital 3,285 3,500 3,396 Capital redemption reserve 1,126 911 1,015 Share premium 348 348 348 Capital reserve - unrealised (5,052) (1,676) (4,076) Capital reserve - realised 5,835 6,019 6,093 Revenue reserve 48 39 56 Equity shareholder's funds 5,590 9,141 6,832 Basic and diluted net asset 42.5p 65.3p 50.3p value per share RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 30 Sept 2008 30 Sept 2007 31 Mar 2008 £'000 £'000 £'000 Opening shareholders' funds 6,832 9,108 9,108 Purchase of own shares (199) (121) (346) Total recognised (losses)/gains (1,043) 154 (1,654) for the period Distributions paid - - (276) Closing shareholders' funds 5,590 9,141 6,832 UNAUDITED CASH FLOW STATEMENT for the six months ended 30 September 2008 Six Six months Months Year ended ended ended 30 Sept 30 Sept 31 Mar 2008 2007 2008 Note £'000 £'000 £'000 Cash outflow from operating activities and returns on 1 investments (79) (52) (88) Capital expenditure Purchase of investments (201) (1,509) (2,438) Sale of investments 703 727 2,044 Net cash inflow/(outflow) from capital 502 (782) (394) expenditure Equity distributions paid - - (276) Net cash (outflow)/inflow before 423 (834) (758) financing Financing Purchase of own shares (199) (210) (436) Net cash outflow from financing (199) (210) (436) Increase/(decrease) in cash 2 224 (1,044) (1,194) Notes to the cash flow statement: 1 Cash outflow from operating activities and returns on investments Loss on ordinary activities before (1,043) 154 (1,654) taxation Losses/(gains) on investments 996 (196) 1,574 (Increase)/decrease in other debtors (17) 8 2 (Decrease)/increase in other (15) (18) (10) creditors Net cash outflow from operating (79) (52) (88) activities 2 Analysis of net funds Beginning of period (41) 1,153 1,153 Net cash inflow/(outflow) 224 (1,044) (1,194) End of period 183 109 (41) SUMMARY OF INVESTMENT PORTFOLIO as at 30 September 2008 Unrealised gain/(loss) % of Cost Valuation in period portfolio £'000 £'000 £'000 by value Twenty largest VCT investments (by value) ANS Group plc ** 253 593 25 10.9% Connaught plc * 30 449 (5) 8.2% Spice plc * 256 385 71 7.1% Cadbury House Limited *** 319 319 - 5.9% Doubletake Portraits 250 250 - 4.6% Limited *** Atlantic Global plc 310 223 62 4.1% Printing.com plc 179 208 (53) 3.8% Supporta plc 250 178 39 3.3% Aero Inventory plc 115 176 (122) 3.2% Deltex Medical Group plc 233 130 (42) 2.4% Clerkenwell Ventures plc 175 126 9 2.3% Hoole Hall Spa and Leisure 100 100 - 1.8% Limited *** Huveaux plc 283 100 20 1.8% Keycom plc ** 408 93 (12) 1.7% Glisten plc 84 86 (36) 1.6% Richoux Holdings plc (formerly Gourmet 250 83 (28) 1.5% Holdings) Sanastro plc *** 200 70 - 1.3% The Medical House plc 223 56 (23) 1.0% Aortech International plc 569 52 (15) 1.0% AT Communications plc 178 51 (85) 0.9% 4,665 3,728 (195) 68.4% Other VCT investments 4,255 266 (764) 4.8% Listed fixed income securities 558 455 (114) 8.4% Other investments 838 815 (46) 15.0% 10,316 5,264 (1,119) 96.6% Cash at bank and in hand 224 3.4% Total investments 5,488 100.0% All VCT investments are quoted on AIM unless otherwise stated. * Listed on the Main Market of the London Stock Exchange ** Quoted on the PLUS Market *** Unquoted SUMMARY OF INVESTMENT MOVEMENTS for the six months ended 30 September 2008 Additions £'000 Venture Capital investments Hill Station plc 100 Hoole Hall Spa and Leisure Limited 100 Sundry investments 1 201 Disposals Market Gain/ value at (loss) in 1 March Disposal period Realised Cost 2008 proceeds vs cost gain/(loss) £'000 £'000 £'000 £'000 £'000 Part disposals Aero Inventory plc 22 57 55 33 (2) Connaught plc 5 76 77 72 1 Printing.com plc 5 9 10 5 1 Spice plc 47 58 71 24 13 Straight plc 33 13 23 (10) 10 112 213 236 124 23 Takeovers Triple Arc plc 247 12 49 (198) 37 Xpertise Group plc 81 77 141 60 64 328 89 190 (138) 101 Other investments Barclays Bank GAM Diversity Tracker 228 218 217 (11) (1) BlueCrest AllBlue Fund Limited 26 29 30 4 1 Goldman Sachs Dynamic Opps Ltd 16 17 16 - (1) 270 264 263 (7) (1) 710 566 689 (21) 123 NOTES TO THE UNAUDITED FINANCIAL STATEMENTS 1. The unaudited half yearly financial results cover the six months to 30 September 2008 and have been prepared in accordance with the accounting policies set out in the statutory accounts for the year ended 31 March 2008 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. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits. 4. The comparative figures were in respect of the year ended 31 March 2008 and the six months ended 30 September 2007 respectively. 5. Return per share for the period has been calculated on 13,459,101 shares, being the weighted average number of shares in issue during the period. 6. Net Asset Value per share for the period has been calculated on 13,140,436 shares, being the number of shares in issue at the period end. 7. Dividends 30 Sept 2008 31 Mar 2008 Revenue Capital Total Total £'000 £'000 £'000 £'000 Paid in period 2008 interim - - - 276 8. Reserves Capital Capital Capital redemption Share Special reserve reserve Revenue reserve premium reserve - - reserve unrealised realised £'000 £'000 £'000 £'000 £'000 £'000 At 1 April 2008 1,015 348 - (4,076) 6,093 56 Repurchase of 111 - (199) - - - shares Expenses - - - - (39) - capitalised Gains on - - - (1,119) 123 - investments Transfer between - - 199 143 (342) - reserves Retained net - - - - - (8) revenue At 30 September 1,126 348 - (5,052) 5,835 48 2008 The Special Reserve, Capital Reserve - realised and Revenue Reserve are all distributable reserves. 9. 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 31 March 2008 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. 10. 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 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 during 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. 11. 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. ---END OF MESSAGE--- This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.

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