TIDMRUG
Summary of results and financial highlights
RENN UNIVERSAL GROWTH INVESTMENT TRUST PLC
HALF YEARLY REPORT
FOR THE PERIOD ENDED 30 SEPTEMBER 2011 (UNAUDITED)
The Company's investment objective
Investment policy
The objective of the Company is to achieve capital growth and to outperform its
benchmark, the Russell 2000 Index.
Investments are made primarily in securities issued by companies listed, quoted
or domiciled in the US and Canada. These securities include, inter alia,
privately placed common stock, preferred stock, convertible debentures and
warrants, and securities traded on an exchange. The companies in which
investments are made would generally be regarded as belonging to the category
of companies with 'micro' stock market capitalisations at the time of purchase,
typically those companies with market capitalisation below $1 billion. From
time to time, the Company also invests in securities in unlisted US companies
with similar characteristics. Although there are no limits set by the Board on
the proportion which may be invested in unlisted securities, it is expected
that such exposure will not exceed 25% over a prolonged period.
The Company is able to invest its assets in business which generated sales and
earnings outside the US so the Company may have significant economic exposure
to markets or economies outside North America.
The Board sets no specific limits on sector weights, or on the number of
securities which may be held, although no investment will be made that would
represent more that 15% of the value of the Company's total investments at the
time of purchase. The Board reviews the investments at each Board meeting to
ensure that diversification is adequate for a portfolio of this type.
The Company is permitted by its Articles of Association to borrow up to 30% of
its net assets, and may do so on an opportunistic basis determined by the
availability of investment opportunities.
A large proportion of the Company's investments will be, by their very nature,
less readily marketable than equities in general.
The Company invests on a long only basis, and does not currently intend to
hedge its non UK Currency exposure back into sterling.
The Company's policy is not to invest in UK listed investment companies,
including investment trusts.
Construction of the Company's portfolio
Construction of the Company's portfolio involves subjective judgement, rather
than quantitative targeting, although a number of considerations are taken into
account:
? Because liquidity in the Company's holdings is often very limited, it is
likely that a relatively large number of positions will be held. The exact
number of holdings will depend largely on the opportunities available to the
Manager.
? Several different industries will typically be represented, but the portfolio
will often deviate substantially from the sector weights in the Company's
benchmark. It should be noted that the Company expects to take significant
risks relative to that benchmark, with the goal of meeting its objective.
? The investment process tries to identify stocks which have the capacity to
appreciate very substantially in price. As a result, positions which were
relatively small on acquisition can become very large (over 15% of the
portfolio) if the investment is successful. The Company will often hold these
`winners', even if they become a large part of the investment portfolio, and
this can lead to significant concentration of risk.
? Purchases of investment positions often involves negotiation with the
business concerned and may take several months. For this reason the Board
believes it is desirable in normal circumstances for the Company to hold cash
in anticipation of such investment.
? When no investment can be found with the desired return profile, the Company
may hold cash or equivalent, and there is no limit set by the Board on the
proportion of assets so held.
? The Manager may take a seat on the Board of investee companies in order to
influence the strategy of these companies. Consequently, it is possible that
this could lead to the acquisition of knowledge which might affect the ability
of the Manager to act freely in all circumstances.
Engagement with investee companies
The long term nature of the Company's investments requires the Manager to
actively engage with investee companies in order to enhance and protect
shareholder value. This typically includes the following activities:
? Regular face-to face meetings.
? Regular formal and informal telephone communications.
? Board representation on investee companies, where appropriate.
? Provision of management assistance, where appropriate.
? Review of press releases, financial results and U.S. Security and Exchange
Commission filings.
The Manager avoids conflicts of interest arising between itself and the
Company's investee companies by not investing alongside the Company. The
Manager's Compliance Officer also reviews any personal securities transactions
undertaken by employees of the Manager.
The Manager has a published statement on its voting policy in respect of
investee companies, which can be found on its website: www.rencapital.com.
The Board receives regular updates from the Manager on the performance of the
Company's investee companies and the ways in which the Manager engages with
these companies. The Board also receives face to face updates from some of the
major investee companies each year, as well as meeting with certain potential
investee companies.
Summary of results and financial highlights
% change
31 March 2011
30 September 31 March to 30 September 30 September
2011 2011 2011 2010
Total net asset GBP GBP GBP
value and 48,507,000 58,564,000 (17.17) 55,339,000
shareholders' funds
Net asset value per
Ordinary share
(`NAV')
- pence 264.51 313.86 (15.72) 296.58
- US cents 412.05 503.10 (18.10) 467.35
Mid market price per 193.62p 252.00p (23.17) 243.00p
Ordinary share
Discount to NAV 26.80% 19.71% 18.07%
Exchange rate - US$/ 1.55780 1.60295 (2.82) 1.57580
GBP
Russell 2000 Index 2,904.55 3,778.03 (23.12) 3,010.78
(Total Return)
Russell 2000 Index 1,856.18 2,351.86 (21.08) 1,914.28
(Total Return)
- Sterling adjusted
S&P 500 Index (Total 1,930.79 2,239.44 (13.78) 1,908.95
Return)
S&P 500 Index (Total 1,233.89 1,394.07 (11.49) 1,213.73
Return)
- Sterling adjusted
Interim management report
Performance
For the six months ended 30 September 2011, your Company's net asset value
decreased 15.7% in Sterling, compared with a decrease of 21.1% for the Russell
2000 (Sterling adjusted). With the widening of the discount the share price has
dropped 23.2% during the six months ended 30 September 2011.
Returns in this Company are lumpy, due to the unique asset allocation and
investment style. Unlike many investment trusts that closely track an index,
this Company's returns will not, and should not, be expected to track the
Russell 2000 index over the short term. The Company holds investments in small
companies, both quoted and unquoted, based in the US, Canada, Australia and
China. We maintain that a perfect index, or benchmark, to which to compare this
Company's return simply does not exist. We believe the Russell 2000, while not
ideal, is the index which best encapsulates the type of company in which we
invest. From inception to 30 September 2011, a period of 15 years, your
Company's Sterling net asset value return was
191.4% (7.4% on an annualised basis), compared with the Russell 2000's return
of 127.2% (5.6% on an annualised basis). Interestingly, for the 15 years to
September 2011, the Russell 2000 return has exceeded both the Standard & Poor's
500 and the Nasdaq Composite returns.
Core Holding & Asset Allocation
At 30 September 2011, the top ten holdings made up approximately 77% of the net
asset value compared to 71% at 31 March 2011. The top ten holdings at 30
September and 31 March were as follows:
30 September 2011 % of net 31 March 2011 % of net
assets assets
AnchorFree, Inc 21.5% Cover-All Technologies, 17.4%
Inc
Cover-All Technologies, Inc 19.6% AnchorFree, Inc 17.3%
Plures Technologies, Inc 7.6% Hollysys Automation 5.7%
(previously CMSF Corporation) Technologies Limited
Bovie Medical Corporation 5.0% Zhongpin, Inc 5.2%
PHC, Inc* 4.6% Sinohub, Inc 5.0%
Access Plans, Inc 4.1% Fushi Copperworld, Inc 4.7%
Integrated Security Systems, 4.0% Dynamic Green Energy 4.3%
Inc Limited
Points International Limited 4.0% PHC, Inc* 3.9%
Fushi Copperweld, Inc 3.6% Bovie Medical Corporation 3.6%
Healthzone Limited 2.6% Skystar 3.6%
Bio-Pharmaceutical
* PHC, Inc emerged with Acadia Healthcare on 1 November 2011.
As at 30 September, the asset allocation of net assets was as follows:
US listed investments 42.2%
US unlisted investments 27.9%
US listed Chinese investments 14.8%
Other net assets less liabilities 6.1%
US listed Canadian investments 4.0%
US listed Australian investments 2.5%
US unlisted Chinese investments 2.4%
US unlisted Australian investments 0.1%
Although the unquoted holdings are currently above our long term target, we do
not expect this to persist due to an anticipated initial public offering in one
of our unquoted companies.
AnchorFree, Inc. (Private) is the world's leading ad-supported virtual private
network ("VPN") providing security, privacy and freedom. Its Hotspot Shield
enables users to access all online content anonymously and securely from any
location in the world. The technology also enables the use of services such as
Skype, Facebook, YouTube, Twitter and Google which are often blocked by telecom
companies around the world. Individuals and companies from over 100 countries
are using this VPN service with 9 million unique users per month, 30 million
user sessions per month and over 2 billion page views per month. The company
continues to garner positive press and additional users. We expect AnchorFree's
revenue to continue to accelerate, not just because of increased number of
users, but also because of increased revenues per user going forward. For the
six months ended 30 September 2011, revenues were up 80% and earnings before
tax were up 60% against the same period last year. AnchorFree has a very strong
balance sheet, is debt free and enjoys high operating margins. AnchorFree is
also in the process of releasing a mobile application for Apple's iPhone and
iPad. These Apple applications will be free of advertising and thus AnchorFree
will be charging for this service.
Cover-All Technologies (OTCBB: COVR) licenses and maintains software for the
insurance industry. Its product platforms are robust and can be used for back
office compliance, billing, underwriting and insurance issuance. In the second
quarter, Cover-All delivered a new commercial software programme which provides
100% web-based capabilities designed to support its customers' aggressive
growth strategies - either one policy at a time or through the acquisition of
an entire book of business. This business intelligence suite is the insurance
industry's most comprehensive and turnkey solution designed to provide
unparalleled access to a wealth of data sources. As a result, Cover-All's sales
pipeline has reached its record levels. On 25 May 2011, Cover-All was listed on
the New York Stock Exchange-AMEX. For the six months ended 30 June 2011,
revenues increased 21% and net income increased 47% against the comparable
period in 2010.
Plures Technologies, Inc. (OTCBB: MANY) is a new portfolio holding. It is an
entrepreneurial company that specialises in the commercialisation of advanced
micro-electromechanical systems ("MEMS") semiconductor chips. The company has a
fabrication plant based just outside Boston, Massachusetts. The manufacturing
of MEMS consists of the design and manufacture of micro machines built on
silicon chips. These machines are used in a wide and growing range of
applications from location based chips for mobile phones to microphones,
sensors and switches. Plures Technologies has a strong customer list. The team
at Plures is able to accomplish tasks, projects and products that few can. The
company has just begun trading publicly.
Bovie Medical Corporation (AMEX:BVX) engages in the development, manufacture
and marketing of medical products and devices, primarily electrosurgical
generators and disposables in the US and Canada. For the six months ended 30
June 2011, revenues increased 13% and net income increased to $921,000 from a
loss of $170,000 during the same comparable period last year. The company
continues to place great effort and resources into the regulatory approval of
its new J-Plasma surgical hand piece. The J-Plasma surgical hand piece will
offer soft tissue coagulation and/or tissue cutting with no grounding pad
required as with other electrosurgical products, thus minimising the risk to
patient and surgeon. Once approved, we believe this new product will enhance
certain surgical procedures and could ultimately contribute to a new standard
of care. The feedback from surgeons in diverse specialties has been most
encouraging. Management is convinced that the J-Plasma addressable market is
large and that J-Plasma will be the prime engine of growth going forward.
Acadia Healthcare Company (formerly PHC, Inc.) (NASDAQ: ACHC) is the country's
leading publicly traded pure-play provider of inpatient behavioral health care
services. The company operates 34 facilities, with approximately 1,950 licensed
beds in 18 states, which would have produced annual revenues of more than $325
million on a pro forma basis for the twelve months ended 30 June 2011. The
investment bank Jefferies & Company arranged the merger between our former
holding PHC, Inc. and Acadia Healthcare. Jefferies has additional deals in the
pipeline that could make Acadia Healthcare a substantially larger company.
Access Plans, Inc. (OTCBB: APNC) is a leading membership benefits marketing
company with two distribution channels. The Wholesale/Retail Plans distribution
channel specialises in turnkey, private label membership benefit plans that
provide discount products and services, protection benefits and retail services
to more than 1 million customers in the US and Canada. America's Health Care
Plans (AHCP), the Company's Insurance Marketing distribution channel, is one of
the nation's largest independent agent networks and provides major medical,
life and supplemental insurance products to individuals. For the three months
ended 30 June 2011, revenues decreased 9% to $13.1 million, but net income
increased 61% to $1.5 million compared to the same period last year. The
company continues to explore strategic alternatives to deliver value to
shareholders including taking the company private.
Integrated Security Systems (OTCBB: IZZI) is a publicly traded shell company
with cash equivalents of approximately $4.1 million, total assets of $5.4
million and total liabilities of just $306,549. Your company owns approximately
47.4% of Integrated Security Systems. Your Manager has completed due diligence
on multiple merger candidates and is close to a transaction which we believe
could bring substantial value.
Points International (NASDAQ: PCOM) is the world's leading reward program
management platform. At Points.com consumers can earn, buy, gift, share, trade,
exchange and redeem miles and points from more than 25 of the world's leading
reward programs. For the three months ended 30 June 2011, revenues increased
51% and earnings before interest, taxes, depreciation and amortisation
increased 490% over the same period last year. The guidance for calendar 2011
is for revenue to increase 25% to 36% over 2010 and for net income of $0.20 to
$0.40 per share. In the last six months, the company has formed partnerships
with PayPal and Best Buy which should contribute to the growth of the retail
channel. We are optimistic concerning the growth, scalability and increasing
profitability of Points.
Fushi Copperweld, Inc. (NASDAQ: FSIN) manufactures bimetallic wire products,
principally copper-clad aluminum (CCA) and copper-clad steel (CCS). Its CCA and
CCS conductors are used as substitutes for solid copper conductors in
applications where specific electrical or physical attributes are necessary. It
primarily serves applications in the telecommunication, electrical utility and
transportation markets. For the quarter ended 30 June 2011, revenues increased
14% to $79 million and net income decreased by 14% to $10.6 million against the
same period last year. Although growth in revenues occurred in the second
quarter, raw material prices and pricing pressure as a result of decreased
investment in the 3G network build out in China caused a decrease in earnings.
Fushi retained BofA Merrill Lynch in conjunction with a proposed transaction to
take the company private at $11.50 per share. The company has a strong balance
sheet with $142 million in cash up from $123 million as of 31 December 2010.
The company reiterated its previous annual guidance of 2011 earnings of between
$1.15 and $1.25 a share.
Healthzone Limited (OTCBB: HLTZY)* is a new portfolio holding that operates as
a distributor, producer, franchisor, and retailer of health and beauty products
primarily in Australia and China. It produces natural alternative products,
including food, skin and body care, and household cleaning products. The
company also engages in the wholesale distribution of health foods, and beauty
and fragrance products, and catalogue retail of wellness products. In addition,
it is involved in the retail sale of vitamin and mineral supplements, organic
and whole foods, natural beauty products, sports nutrition and supplements,
beverages and herbal teas. The company operates approximately 120 health food
retail stores comprising 31 company stores and 6 Healthy Life China stores in
Shanghai, China. The investment theme for Healthzone is buying into a
demographically attractive profitable business at a good price while obtaining
exposure to potentially rapid Asian growth prospects. For the 12 months ended
30 June 2011, the company reported revenues of $100.4 million and net income of
$3.2 million.
* This company went into receivership on 17 November 2011. See note 12.
New Investments
During the six months ended September 2011 we made two new portfolio
investments for a total of $4.3 million. These new holdings are Plures
Technologies, Inc. which was merged with the former holding CMSF Corporation
and Healthzone Limited, both of which are discussed above.
With respect to follow on investments, we purchased $479,000 of Bovie Medical
Corporation, $241,000 of Global Axcess Corporation and $226,000 of Acadia
Healthcare Company (PHC, Inc) for a total cost of $946,000. Your Company made
partial sales of Hollysys Automation Technologies, Ltd. and Wonder Auto
Technolgy, Inc and also completed sales of Business Processing Outsourcing,
ChinaCast Education Corporation, Global Sources Ltd., ilinc Communications,
Kingtone Wireless Solution Holding Ltd., Shengtai Pharmaceutical Inc., and
Zhongpin, Inc. The combined cost of the partial and complete sales was $8.1
million and the combined sale proceeds of the same were $9.8 million resulting
in a combined realised gain of approximately $1.7 million.
Write downs
The Board have considered the valuations of the unlisted securities as at 30
September 2011, and as a result have written down Dynamic Green Energy by 70%
to $1,162,000 and Murdoch Security by 38% to $349,000.
Purchase of shares from Global Special Opportunities Trust Plc ("GSOT")
On 19 May 2011, we made a purchase of a number of stocks and warrants from
GSOT, a company with a liquidation date of 31 May 2011. This transaction
increased the Company's holdings in AuraSound, Inc., Duoyuan Printing,
Hemobiotech, Inc., Petrohunter Energy Corporation, and SinoHub, Inc. These
stocks and warrants were purchased for an aggregate price of $95,000. RENN
Capital Group previously acted as an Investment Advisor to GSOT.
Outlook
Your Manager's view is that long term investment opportunities in companies led
by founder-owners offer good reward to risk metrics. The abundance of companies
growing at double digit rates while selling for low single digit
price-to-earnings ratios provide a large pool of investment opportunities.
We remain optimistic that today we have a portfolio that is reasonably valued
relative to its benchmark. Your Company's portfolio is characterised by larger
inside ownership positions, faster revenue growth, lower price to book values,
and lower price to earnings multiples than the Russell 2000. While there is the
ever-present risk of lower valuations, we believe that current prices offer
significant value.
One example of evidence for such a positive valuation change came on 30 October
2011 when a US traded Chinese firm, not in your Company's portfolio, Harbin
Electric Inc. (NASDAQ: HRBN) received shareholder approval to consummate its
management buyout. This transaction will close the first week of November and
has placed the short sellers on high alert. As we have opined before, North
American-listed Chinese companies are trading at significant discounts to their
China/Hong Konglisted peers. We believe this upward valuation trend will
continue as companies explore dual listings and other ways to increase their
share prices.
In conclusion, we continue to believe that investing in small founder-owner
growth companies provides an effective diversifying element in today's
complicated investment climate. A number of our holdings could make attractive
merger candidates and provide good returns to our Company.
24 November, 2011
For further information, please contact:
Russell Cleveland
RENN Capital Group, Inc
Tel: 001 214 891 8294
Principal risks and uncertainties
Details of the following principal risks and uncertainties facing the Company
are detailed in the Business Review section of the Company's Annual Report and
Accounts for the year ended 31 March 2011:
Liquidity/marketability risk; interest rate risk; gearing risk; foreign
currency risk; country risk; market price risk and discount volatility;
compliance with sections 1158/1159 of the Corporation Tax Act 2010; credit
risk; risk associated with the engagement of third parties; risk associated
with the continuation vote; and valuation risk.
Responsibility statement
The Directors confirm that to the best of their knowledge:
(a) the condensed set of financial statements, which has been prepared in
accordance with applicable accounting standards in the United Kingdom, gives a
true and fair view of the assets, liabilities, financial position and loss of
the Company as required by the Disclosure and Transparency Rules ("DTR")
4.2.4R;
(b) the interim management report includes a fair review of the information
required by DTR 4.2.7R 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
(c) the half yearly report includes a fair review of the information required
by DTR 4.2.8R 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.
This half yearly report was approved by the Board of Directors on 24 November
2011 and the above responsibility statement was signed on its behalf by the
Chairman.
Ernest Fenton
Chairman
Income statement (unaudited)
for the six months ended 30 September 2011
Six months ended Six months ended Year ended
30 September 2011 30 September 2010 31 March 2011
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Losses on - (8,426) (8,426) - (12,320) (12,320) - (9,592) (9,592)
investments
at fair
value
through
profit or
loss
Exchange - 175 175 - (63) (63) - (168) (168)
gains/
(losses) on
capital
items
Income (see 81 - 81 213 - 213 1,573 - 1,573
note 4)
Investment (375) - (375) (439) - (439) (874) - (874)
Management
fee (see
note 5)
Bad debt (623) - (623) - - - (78) - (78)
expense*
Other (228) - (228) (239) - (239) (478) - (478)
expenses
Net return (1,145) (8,251) (9,396) (465) (12,383) (12,848) 143 (9,760) (9,617)
before
finance
costs and
taxation
Finance (1) - (1) (10) - (10) (16) - (16)
costs
Net return (1,146) (8,251) (9,397) (475) (12,383) (12,858) 127 (9,760) (9,633)
before
taxation
Taxation on - - - (1) - (1) (1) - (1)
ordinary
activities
Net return (1,146) (8,251) (9,397) (476) (12,383) (12,859) 126 (9,760) (9,634)
on ordinary
activities
after
taxation for
the period
pence pence pence pence pence pence pence pence pence
Return per (6.19) (44.54) (50.73) (2.55) (66.36) (68.91) 0.68 (52.31) (51.63)
Ordinary
share (see
note 2)
* The bad debt expense consists of :
50% of the interest owing on the Company's investment in PetroHunter 8.5%
convertible debenture, on the grounds of uncertainty GBP36,000 (six months ended
30 September 2010: GBPnil; year ended 31 March 2011: GBP78,000).
Write off for accrued income from prior years deemed no longer recoverable from
the Company's investments in Dynamic Green Energy 7% convertible notes, Ilinc
12% convertible notes and Pipeline Data 14% convertible debenture GBP587,000 (six
months ended 30 September 2010: GBPnil; year ended 31 March 2011: GBPnil).
The total column of this statement is the profit and loss account of the
Company. The supplementary revenue return and capital return columns have been
prepared in accordance with the Association of Investment Companies' SORP.
Revenue and capital return per share figures shown are also supplementary
information.
The accounts have been prepared using the accounting standards and policies
adopted at the previous year end.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the period.
There are no recognised gains and losses other than those reflected in the
income statement for the period, accordingly no statement of recognised gains
and losses has been prepared.
These accounts are unaudited and are not the Company's statutory accounts.
The notes form part of these accounts.
Reconciliation of movements in shareholders' funds
Six months ended 30 September 2011 (unaudited)
Share Share Capital Special Capital Revenue Total
capital premium redemption reserve reserve reserve
account reserve *
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2011 4,665 5,995 666 5,208 46,005 (3,975) 58,564
Net return after - - - - (8,251) (1,146) (9,397)
taxation for the
financial period
Cost of shares (80) - 80 (660) - - (660)
repurchasedfor
cancellation
At 30 September 2011 4,585 5,995 746 4,548 37,754 (5,121) 48,507
Year ended 31 March 2011(audited)
Share Share Capital Special Capital Revenue Total
capital premium redemption reserve reserve reserve
account reserve *
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 4,665 5,995 666 5,208 55,765 (4,101) 68,198
2010
Net return - - - - (9,760) 126 (9,634)
after
taxation
for the
year
At 31 March 4,665 5,995 666 5,208 46,005 (3,975) 58,564
2011
Six months ended 30 September 2010
(unaudited)
Share Share Capital Special Capital Revenue Total
capital premium redemption reserve reserve reserve
account reserve *
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 4,665 5,995 666 5,208 55,765 (4,101) 68,198
2010
Net return - - - - (12,383) (476) (12,859)
after
taxation for
the
financial
period
At 30 4,665 5,995 666 5,208 43,382 (4,577) 55,339
September
2010
* The special reserve was created in September 1998, following a transfer from
the share premium account, to enable
the Company to purchase its own shares.
The notes form part of these accounts.
Balance sheet (unaudited)
As at 30 September 2011
As at As at As at
30 September 31 March 30 September
2011 2011 2010
(unaudited) (audited) (unaudited)
GBP'000 GBP'000 GBP'000
Fixed assets
Investments at fair value through 45,568 56,894 54,941
profit or loss
Current assets
Debtors 255 776 538
Cash at bank 3,079 1,563 174
3,334 2,339 712
Creditors - amounts falling due
within one year
Creditors and accruals (281) (350) (313)
Loan margin facility - (241) (1)
(281) (591) (314)
Net current assets 3,053 1,748 398
Provision for liabilities and
charges
Provision for bad debt* (114) (78) -
Total net assets 48,507 58,564 55,339
Share capital and reserves
Called up share capital (see note 4,585 4,665 4,665
6)
Share premium account 5,995 5,995 5,995
Capital redemption reserve 746 666 666
Special reserve 4,548 5,208 5,208
Capital reserve 37,754 46,005 43,382
Revenue reserve (5,121) (3,975) (4,577)
Equity shareholders' funds 48,507 58,564 55,339
Net asset value - pence per 264.51p 313.86p 296.58p
Ordinary share including current
period revenue (see note 3)
* a provision has been made for 50% of the interest owing on the Company's
investment in PetroHunter 8.5% convertible debenture, on the grounds of
uncertainty that the payment will be received.
The notes form part of these accounts.
Statement of cash flows
for the six months ended 30 September 2011
Six months Six months Year
ended 30 ended 30 ended
September September 31 March
2011 2010 2011
unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Operating activities
Investment income received 6 81 1,209
Deposit interest received 1 1 2
Other income received 1 - -
Investment management fees (420) (459) (877)
paid
Secretarial fees paid (37) (36) (73)
Other cash payments (226) (195) (378)
Net cash outflow from (675) (608) (117)
operating activities
Servicing of finance
Other interest paid (1) - -
Loan interest paid - (10) (16)
(1) (10) (16)
Taxation
Irrecoverable overseas tax - (1) (1)
Total taxation paid - (1) (1)
Capital expenditure and
financial investment
Purchases of investments (3,287) (3,536) (7,119)
Sales of investments 6,278 3,879 8,228
Net cash inflow from capital 2,991 343 1,109
expenditure and financial
investment
Net cash inflow/(outflow) 2,315 (276) 975
before financing
Financing
Repurchase of Ordinary shares (660) - -
for cancellation
Loan margin drawdown - 1,102 1,964
Loan margin repayment (241) (4,198) (4,821)
Net cash outflow from (901) (3,096) (2,856)
financing
Increase/(decrease) in cash 1,414 (3,372) (1,881)
The notes form part of these accounts.
Notes
for the six months ended 30 September 2011
1. Basis of preparation
This financial information has been prepared under the historical cost
convention as modified by the revaluation of fixed asset investments and in
accordance with the Accounting Standard Board's ("ASB") Statement on Half
Yearly Financial Reports, applicable accounting standards in the United Kingdom
and with the Statement of Recommended Practice "Financial Statements of
Investment Trust Companies and Venture Capital Trusts" ("SORP") issued by the
Association of Investment Companies ("AIC") in January 2009 and in accordance
with the accounting policies set out in the statutory accounts for the year
ended 31 March 2011. All of the Company's activities are continuing and the
accounts are prepared on a going concern basis.
2. Return per Ordinary share
The calculations of return per Ordinary share are based on 18,522,288 Ordinary
shares being the weighted average number of shares in issue during the six
months ended at 30 September 2011 (six months ended 30 September 2010:
18,659,008 and year ended 31 March 2011: 18,659,008).
3. Net asset value per Ordinary share
The calculations of net asset value per Ordinary share are based on 18,338,405
Ordinary shares being in issue at 30 September 2011 (30 September 2010:
18,659,008 Ordinary shares and 31 March 2011: 18,659,008 Ordinary shares).
4. Income
Six months to Six months to Year to
30 September 2011 30 September 2010 31 March 2011
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Income from US
investments:
Convertible 79 207 497
debenture
stocks-unlisted
Convertible - 5 1,074
preference
shares-unlisted
79 212 1,571
Other income:
Bank interest 1 1 2
receivable
Other interest 1 - -
81 213 1,573
5. Investment Management fee
The Investment Management fee is charged 100% to revenue. Investment Management
fees of GBP375,000 (six months ended 30 September 2010: GBP439,000; year ended 31
March 2011: GBP874,000) have been charged to the income statement. At 30
September 2011, GBP176,000 (six months ended 30 September 2010: GBP204,000; year
ended 31 March 2011: GBP220,000) was due for payment to the Investment Manager in
respect of Investment Management fees.
A performance fee may also become payable at the end of each year and this is
charged 100% to capital. No performance fee has been accrued (30 September
2010: nil; year ended 31 March 2011: nil) based on the best estimate of the fee
that would be due at the balance sheet date.
6. Called up share capital
30 September 30 September 31 March
2011 2010 2011
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Allotted, called up 4,585 4,665 4,665
and fully paid:
18,338,405 (September
2010: 18,659,008,
March 2011:
18,659,008) Ordinary
shares of 25p
7. Share buybacks
During the period, the Company repurchased 320,603 Ordinary Shares for
cancellation at a total consideration of GBP660,000 (six months ended 30
September 2010: nil; year ended 31 March 2011: nil Ordinary shares). No
Ordinary shares were repurchased for holding in Treasury (six months ended 30
September 2010: nil; year ended 31 March 2011: nil Ordinary shares).
8. Taxation
The Company is subject to corporation tax at 26% (six months ended 30 September
2010:28%; year ended 31 March 2011: 28%). However, the available tax deductible
expenses (including substantial brought forward amounts) exceed the taxable
income of the Company and, as a result, there is no UK tax charge (six months
ended 30 September 2010: nil; year ended 31 March 2011: nil), other than
withholding tax suffered on foreign dividends.
Due to the Company's status as an investment trust, and the intention to
continue meeting the conditions required to obtain approval to retain that
status in the foreseeable future, the Company has not provided deferred tax on
any capital gains or losses arising on the revaluation or disposal of
investments.
9. Reconciliation of net return before finance costs and taxation to net cash
outflow from operating activities
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2011 2010 2011
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Net return before finance (9,396) (12,848) (9,617)
costs and taxation
Net capital return 8,251 12,383 9,760
Increase in provision for 36 - 78
bad debt
(Decrease)/increase in (87) (29) 14
creditors and accruals
Decrease/(increase) in 521 (114) (352)
prepayments and accrued
income
Net cash outflow from (675) (608) (117)
operating activities
10. Reconciliation of net cashflow to net funds
Six months ended Six months ended
30 September 30 September Year ended
2011 2010 31 March 2011
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Increase/(decrease) in 1,414 (3,372) (1,881)
cash in period/year
Effect of movement in 102 36 (66)
exchange rates
Movement in net funds 1,516 (3,336) (1,947)
Net funds at beginning 1,563 3,510 3,510
of period/year
Net funds at end of 3,079 174 1,563
period/year
11. Related party transactions
The Manager, RENN Capital Group Inc., is regarded as a related party of the
Company. The amounts paid to the Manager are disclosed in note 5.
RENN Capital Group Inc. has an aggregate interest in 50% or more of the share
capital of Integrated Security Systems.
Mr Cleveland is a director of Cover-All Technologies and Integrated Security
Systems. Details of the Company's holding in these investments can be found in
the Investment Portfolio.
On 19 May 2011, the Company purchased a number of stocks from Global Special
Opportunities PLC, which is now in liquidation. This transaction increased the
Company's holding in Hemiobiotech, Business Process Outsourcing, Aurasound,
Sinohub, PetroHunter Energy Corp, Duoyuan Printing and BPO Management Services.
These stocks were purchased for an aggregate price of $0.95 million. RENN
Capital Group previously acted as Investment Advisor to Global Special
Opportunities.
12. Post balance sheet event
On 17 November 2011, one of the Company's investments, Healthzone Limited, went
into receivership. As a result, the Board have considered the valuation and as
a precautionary measure have taken the decision to write down the value from
$1,866,000 to $780,000 with effect from 23 November 2011
13. Continuation vote
The Articles of Association provide for shareholders to vote for the
continuation of the Company at every third Annual General Meeting. The next
continuation vote will be put to shareholders in 2013.
14. Financial information
The financial information contained in this report does not constitute full
statutory accounts as defined in section 434 of the Companies Act 2006. The
comparative financial information for the six months ended 30 September 2010
does not constitute full statutory accounts as defined in section 434 of the
Companies Act 2006. The financial information for the six months ended 30
September 2011 and 30 September 2010 has not been audited or reviewed by the
Company's auditors.
The information for the year ended 31 March 2011 has been extracted from the
latest published audited accounts. Those accounts have been filed with the
Registrar of Companies and include the report of the auditors which was
unqualified and did not contain a statement under Section 498(2) of the
Companies Act 2006.
The Company has considerable financial resources and therefore, the Directors
believe that the Company is well placed to manage its business risks and also
believe that the Company will have sufficient adequate resources to continue in
operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in preparing this
half yearly report.
Investment portfolio
as at 30 September 2011
Sector Book Marketvalue % of
cost net
US$'000 US$'000 GBP'000 assets
Corporate investment
US unlisted Chinese
loan notes
Dynamic Green Solar energy 3,867 1,162 746 1.5
Energy
Total US unlisted 3,867 1,162 746 1.5
Chinese loan notes
US unlisted
convertible
debentures
PetroHunter Energy Oil and gas 2,100 375 241 0.5
Corporation exploration
Pipeline Data Business services 1,500 854 548 1.1
Total US unlisted 3,600 1,229 789 1.6
convertible
debentures
US unlisted
convertible
preference shares
AnchorFree Wireless 2,500 16,262 10,439 21.5
communications
Integrated Security Security services 75 1 1 0.0
Systems
Plures Technologies Semiconductors 1,500 3,251 2,087 4.3
(formerly CMSF
Corporation)
Total US unlisted 4,075 19,514 12,527 25.8
convertible
preference shares
US unlisted
equities
Murdoch Security & Security services 1,250 349 224 0.5
Investigation
Total US unlisted 1,250 349 224 0.5
equities
US unlisted
Australian warrants
Healthzone Personal products - 64 41 0.1
Total US unlisted - 64 41 0.1
Australian warrants
US unlisted
Chinesewarrants
AuraSound Technology - 654 420 0.9
Duoyuan Printing Industrial - - - 0.0
machinery
Shengtai Pharmaceuticals - - - 0.0
Pharmaceutical
SinoHub Electronic - - - 0.0
components
Total US unlisted - 654 420 0.9
Chinesewarrants
US listed Chinese
warrants
Plastec Plastic products - 17 11 0.0
Technologies
Total US listed - 17 11 0.0
Chinese warrants
US listed
Australian equities
Healthzone Personal products 2,012 1,866 1,198 2.5
Total US listed 2,012 1,866 1,198 2.5
Australian equities
US listed Canadian
equities
Points Internet software 1,506 2,993 1,921 4.0
International
Total US listed 1,506 2,993 1,921 4.0
Canadian equities
US listed Chinese
equities
AuraSound Technology 2,013 898 576 1.2
China Jo-Jo Drug Drug stores 1,000 280 180 0.4
stores
Cogo Information 1,083 639 410 0.8
technology
Fushi Copperweld Industrial 1,650 2,736 1,756 3.6
manufacturing
Hollysys Automation Electronic 1,187 1,182 759 1.6
Technologies equipment
Orient Paper Paper - 22 14 0.0
manufacturing
Plastec Plastic products 1,030 900 578 1.2
Technologies
SearchMedia Advertising 2,422 835 536 1.1
Holdings
SGOCO Technology Electronic 2,000 822 528 1.1
equipment
SinoHub Electronic 4,932 1,359 872 1.8
components
SkyPeople Fruit Consumer goods & 401 245 157 0.3
Juice beverages
Skystar Pharmaceuticals & 2,277 1,143 734 1.5
Bio-Pharmaceutical biotechnology
Wonder Auto Auto parts 502 154 99 0.2
Technology
Total US listed 20,497 11,215 7,199 14.8
Chinese equities
US listed equities
Access Plans USA Consumer services 3,876 3,077 1,975 4.1
Bovie Medical Healthcare 2,901 3,757 2,412 5.0
Corporation services
Cover-All Information 5,051 14,804 9,503 19.6
Technologies technology
Global Axcess Commercial 2,062 1,056 678 1.4
services
Hemobiotech Biotechnology 1,984 123 79 0.2
Integrated Security Security products 9,562 3,057 1,962 4.0
Systems
PetroHunter Energy Oil and gas 202 23 15 0.0
exploration
PHC (Acadia) Healthcare 1,703 3,502 2,248 4.6
Plures Technologies Semiconductors 5,384 2,524 1,620 3.3
(formerly CMSF
Corporation)
Total US listed 32,725 31,923 20,492 42.2
equities
Total corporate 69,532 70,986 45,568 93.9
investments
Net current assets 4,756 3,053 6.3
Provision for (178) (114) (0.2)
liabilities
Total net assets 75,564 48,507 100.0
Company information
Directors Custodian (USA)
Ernest J Fenton (Chairman, UK) Frost National Bank
Andrew C Barker (UK) 8201 Preston Road
Steven A R Bates (UK) Suite 540
Alexandra Mackesy (UK) Dallas, Texas
William W Vanderfelt (Switzerland) USA
Secretary and Registered Office Stockbrokers
Capita Sinclair Henderson Limited Winterflood Investment Trusts
(trading as "Capita Financial Group - The Atrium Building
Specialist Fund Services") Cannon Bridge
Beaufort House 25 Dowgate Hill
51 New North Road London EC4R 2GA
Exeter EX4 4EP
Tel: 01392 412122
Fax: 01392 253282 Auditor
Chartered Accounts
Corporate website KPMG Audit Plc
www.renaissanceusgrowth.co.uk 100 Temple Street
Bristol BS1 6AG
Investment Manager
RENN Capital Group, Inc. Registrars
Suite 210 LB59 Capita Registrars Limited
8080 North Central Expressway The Registry
Dallas, Texas 75206-1857 34 Beckenham Road
USA Beckenham
Tel: 001 214 891 8294 Kent BR3 4TU
Fax: 001 214 891 8291
www.rencapital.com Tel: 0871 664 0300 -
calls cost 10p per minute
plus network extras (or
0044 208 639 3399 for
overseas enquires)
email:
ssd@capitaregistrars.com
www.capitaregistrars.com
Sources of further information
The Company's share price is listed in the Financial Times and The Daily
Telegraph under "Investment Companies". Copies of the Company's annual and
half-yearly reports, stock exchange announcements and further information on
corporate governance can be obtained from the Company's corporate website:
www.renaissanceusgrowth.co.uk.
Key dates
March Company year end
May Annual results
July AGM
November Half yearly results
February / September Interim Management Statements
Frequency of NAV publication
The Company's net asset value is released to the London Stock Exchange on a
bi-weekly basis and is published on both the Company's and the Manager's
websites as detailed above.
24 November 2011
National Storage Mechanism
A copy of the Half yearly Report 2011 will be submitted shortly to the National
Storage Mechanism ("NSM") and will be available for inspection at the NSM,
which is situated at: www.hemscott.com/nsm.do.
Neither the contents of the Company's website or the contents of any website
accessible from hyperlinks on this announcement (or any other website) is
incorporated into, or forms part of, this announcement.
END
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