TIDMRUG
Summary of results and financial highlights
RENN UNIVERSAL GROWTH INVESTMENT TRUST PLC
HALF YEARLY REPORT
for the period ended 30 September 2012 (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 may also include 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 capitalisations 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 businesses which generate 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 than 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 US Security and Exchange
Commission filings.
The Manager seeks to avoid conflicts of interest arising between itself and the
Company's investee companies. 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 2012
to
30 September 31 March 30 September 30 September
2012 2012 2012 2011
Total net assets GBP51,872,000 GBP60,423,000 (14.15) GBP48,507,000
Net asset value
(`NAV') per
Ordinary share
- pence 294.34 335.23 (12.20) 264.51
- US cents 475.31 535.61 (11.26) 412.05
Mid-market price 227.50p 195.00p 16.67 193.62p
per Ordinary share
Discount to NAV 22.71% 41.83% 19.12 26.80%
Net revenue return GBP(571,000) GBP(1,811,000) - GBP(1,146,000)
after taxation
Revenue return per (3.19)p (9.87)p - (6.19)
Ordinary share
Costs of running
the company*
- Manager's fee GBP384,000 GBP720,000 - GBP375,000
- Other expenses GBP243,000 GBP498,000 - GBP228,000
- Performance fee GBP(175,000) GBP889,000 - nil
As a percentage of
average net assets*
- Manager's fee 0.70% 1.44% - 0.72%
- Other Expenses 0.44% 1.00% - 0.44%
Exchange rate - US$ 1.61480 1.59775 1.07 1.55780
/GBP
S&P 500 Index 2,513.93 2,430 3.42 1,930.79
(Total Return)
S&P 500 Index 1,556.32 1,520.03 2.39 1,233.89
(Total Return) -
Sterling adjusted
Russell 2000 Index 3,831.33 3,771.10 1.60 2,904.55
(Total Return)
Russell 2000 Index 2,371.90 2,358.26 0.58 1,856.18
(Total Return)
- Sterling adjusted
* Calculated in accordance with the AIC recommended methodology for the
calculation of `Ongoing Charges' issued in May 2012. The comparative figures
have been amended to reflect this change.
Interim management report
Performance
For the six months ended 30 September 2012, your Company's net asset value
decreased 12.2% in Sterling terms, compared with an increase of 0.6% for the
Russell 2000 (Sterling adjusted).
The reason for the decline in value was due to the second largest holding,
Cover-All Technologies, falling 49% in value, the reasons for which are
discussed later. It should also be noted that your Company's largest holding,
AnchorFree is unquoted and therefore, not revalued on a frequent basis.
During the period the Company sold 16% of its holding in AnchorFree. This is
partially why `cash and near cash' represented GBP3.91 million.
As we have said before, returns in this Company are volatile due to the unique
asset allocation and investment style. Unlike many investment trusts that
closely track an index, this Company's returns should not be expected to track
the Russell 2000 index over the short term. Nevertheless, we believe the
Russell 2000, while not ideal, is the index which best encapsulates the type of
companies in which we invest.
Discount control
Your Board constantly monitors the Company's share price and its discount to
net asset value. Opportunities are taken regularly to repurchase shares for
cancellation when the discount to net asset value widens, thus increasing the
NAV on the reduced number of shares remaining.
During the six months, the Company repurchased 401,677 shares resulting in an
uplift in NAV since the year end of, 2.53 pence per share.
Core Holding & Asset Allocation
At 30 September 2012, the top ten holdings represented approximately 81% of the
net asset value compared to 90% at 31 March 2012. The top ten holdings at 30
September and 31 March 2012 were as follows:
% of net % of net
30 September 2012 assets 31 March 2012 assets
AnchorFree 33.0% AnchorFree 34.1%
Cover-All Technologies 11.1% Cover-All Technologies 19.0%
iSatori 7.1% iSatori 6.6%
Bovie Medical Corporation 6.9% Acadia Healthcare 6.3%
Plures Technologies 6.7% Plures Technologies 6.0%
Points International 5.5% Fushi Copperweld 4.3%
Acadia Healthcare 3.9% Bovie Medical Corporation 4.0%
Flamel Technologies 3.4% Access Plans 4.0%
Hollysys Automation 2.4% Points International 3.6%
Technologies
Skystar Bio-Pharmaceutical 1.3% Hollysys Automation 2.2%
Technologies
As at 30 September 2012, the asset allocation of the portfolio was as follows:
Listed US based companies (15 companies) 43.6%
Unquoted US based companies (1 company) 33.0%
US listed China based companies (7 companies) 7.0%
US listed Canadian companies (1 company) 5.5%
US listed French based companies (1 company) 3.4%
Cash and near cash 7.5%
AnchorFree, Inc. (Private) is the world's most popular virtual private network
("VPN"). AnchorFree offers a free ad-supported version and a paid version which
has no advertisements. 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 regularly blocked by government agencies around the world. We
estimate individuals and companies from over 100 countries are using this VPN
service. The company continues to garner positive press comment and additional
users. We expect AnchorFree's revenues to continue to accelerate, not just
because of the increased number of users, but also because of increased
revenues per user going forward. In May 2012, Goldman Sachs acquired a stake of
$52 million in AnchorFree of which $25 million went to selling shareholders and
$27 million went into the company to support further growth. Your Company
tendered 852,288 shares (16% of its holding) and received $5.3 million
(covering its total investment of $2.5 million in full, with a return of 110%).
Your Company still retains 84% of its initial holding valued at $27.6 million.
AnchorFree has a very strong balance sheet, is debt free and enjoys high
operating margins. For the six months ended June 2012, revenues are up 78% and
earnings before taxes are up 37% over the same period last year. For the twelve
months ended June 2012, revenues are up 93% and earnings before taxes are up
48% over the same period last year. The company continues to make strong
progress and we see a bright future ahead.
Cover-All Technologies (OTCBB: COVR) provides software products and services
for the property/casualty insurance industry in the US. Its software products
and services focus on the functions required to underwrite, rate, quote, issue,
print, bill and support the lifecycle of insurance policies. The company's
software products include My Insurance Center ("MIC"), a web-based,
data-centric software platform with integrated workflows and access to
real-time information and MIC NexGen that provides full policy support for
customised products. In addition, the company provides a business intelligence
suite of products to enable its customers to leverage their information assets
for real time business insights, risk selection, pricing and financial
reporting. Further, it offers professional services that support product
customisations, conversion from existing systems, data integration with other
software or reporting agencies and other technical services; and ongoing
support services including recent insurance rates, rules and form changes. The
company markets its products to insurance companies, agents, brokers and
managing general agents directly, as well as through consultants and other
complimentary service providers. The reason for the 49% decline in the share
price between March and September 2012 came from the March quarterly results
showing a net loss of $1.5 million compared to $1.2 million of net income
during the same period last year. This was caused by a sharp decrease in its
high margin licence revenue. As expected, the June quarter saw a sharp recovery
in its high margin licence revenue, but this was not enough for Cover-All to
report a positive net income. This caused the company to seek and obtain a
secured credit facility in September to strengthen its working capital. On a
positive note, the company announced in October that it has been chosen by Old
Republic International Corporation (NYSE: ORI) to provide a wide range of its
software products and services to this $5 billion in revenues insurance
underwriter in all 51 US jurisdictions. Cover-All management believes a number
of significant contracts will be signed in the fourth quarter and the company
will have a sixth consecutive year of record revenues. We believe Cover-All
would make an excellent acquisition candidate for several public and private
software companies. Cover-All Technologies, Inc. was founded in 1971 and is
headquartered in Fairfield, New Jersey.
iSatori, Inc. (OTCBB: IFIT) is a consumer products company that develops and
sells nutritional products in the performance, weight loss and energy markets
worldwide. It offers sport nutritional products, including Amino-Phase, a
time-released branched-chain amino acid; Morph, a beta-alanine to delay muscle
fatigue; RestorAid, a post-workout recovery product; 3-XL, a creatine;
Isa-Test, a natural testosterone booster; and PWR, a pre-workout performance
enhancer. The company also provides Energize and Energize Bullets, which are
energy supplements by a combination of time-released caffeine, vitamins and
herbal formulations; a meal replacement protein bar and powders under the
Eat-Smart brand; and weight loss products under the Lean System 7, MX-LS7,
Curvelle, HCG Activator and African Mango Super-Fruit brands. iSatori sells its
products directly to consumers through its websites and a proprietary online
direct marketing system, as well as through wholesalers, specialty, grocery,
convenience, drug and mass-market distribution channels via Fortune 500
partners. On 9 April 2012, the merger of Integrated Security Systems, Inc. and
iSatori Technologies, Inc. was announced. For the six months ending 30 June
2012, the company's revenue increased 10% over the same period last year to
$4.7 million. The company's income from continuing operations, adding back
one-time merger related costs of $512,000, was $785,000, up 37% over the same
period last year. With a much stronger balance sheet, we look forward to
iSatori reaching its stated long-term growth goals. The company was founded in
2001 and is headquartered in Golden, Colorado.
Bovie Medical Coporation (AMEX: BVX) develops, manufactures and markets medical
products and devices with an emphasis on electrosurgical generators and
electrosurgical disposables. Its electro surgery product line comprises
desiccators, generators, electrodes, electrosurgical pencils and various
ancillary disposable products used in surgical procedures in gynaecology,
urology, plastic surgery, dermatology, veterinary and other surgical markets
for cutting and coagulation of tissue. Further, it provides battery-operated
cauteries used for sculpting woven grafts in bypass surgery, vasectomies and
evacuation of subungual hematoma, as well as for arresting bleeding in various
types of surgeries; battery-operated medical lights that act as specialty
lighting instruments and nerve locator stimulators used for identifying motor
nerves in hand and facial reconstructive surgery. The company continues to
place great effort and resources into 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. 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 specialities has
been most encouraging. Bovie's management team is convinced that the J-Plasma
addressable market is large and that J-Plasma will be the prime engine of
growth going forward. For the six months ended 30 June 2012, Bovie's revenues
grew 9% over the same period last year though income from operations declined
from $1.1 million to $636,000. Nevertheless, its common stock rose during the
six months ended 30 September 2012 by 33% in anticipation of the growth of its
new J-Plasma surgical handpiece, initial orders for same and the granting of
its fifth patent for J-Plasma. Bovie Medical Corporation was founded in 1982
and is based in Melville, New York.
Plures Technologies, Inc. (OTCBB: MANY) through its subsidiary, Advanced
MicroSensors Corporation, engages in the development, engineering and
manufacture of micro-electrical mechanical systems ("MEMS") and Spintronics
products primarily in the US. Its products comprise magnetic compassing sensors
and MEMS switches. The company offers its products for use in magnetic
compassing sensors, medical sensors and switches and industrial switches. 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. The company has a strong intellectual property portfolio,
its own foundry, an experienced work force, few competitors and high barriers
to entry for potential new participants. Your Company invested in Plures for
the first time in May 2011. Following our investment, Plures' revenues
increased from $667,000 in the second quarter of 2011 to $2,800,000 in the
first quarter of 2012 and the company became profitable. Then in the second
quarter of 2012, Plures lost a substantial customer. Thus, during the second
quarter of this year, revenue fell to $1,735,000 and Plures was unprofitable.
The company continues to focus on product development, with plans for new
product lines next year.
Points International (NASDAQ: PCOM) provides a range of e-commerce and
technology services to loyalty programme operators primarily in the US, Europe
and Canada. Its services enable the sale of loyalty currencies, including
frequent flyer miles, hotel points and credit card points, as well as enhance
loyalty programme consumer offerings and their back-end operations. The company
offers a range of white label or private branded e-commerce services comprising
the online sale of loyalty currency direct to programme members. This allows
members to top-up their accounts to reach a redemption threshold or as a gift
for friends and family members and the online transfer of pre-existing loyalty
currency from one member into another member's account, primarily a family
member or friend, as another means of enabling that other member to accumulate
sufficient miles or points to reach a redemption threshold. It also operates
Points.com, a consumer-focused reward management website that provides members
of multiple loyalty programmes the ability to track and manage their loyalty
currencies. For the six months ended June 2012, Points reported revenues up 5%
to $64.5 million and net income up 500% to $1.9 million compared with the same
period last year. The company also reiterated its 2012 guidance anticipating
15-20% organic revenue growth over 2011. The company was incorporated in 1999
and is headquartered in Toronto, Canada.
Acadia Healthcare Company, Inc. (NASDAQ: ACHC) engages in the provision of
behavioural healthcare services in the US. It operates acute in-patient
psychiatric facilities that provide evaluation and crisis stabilisation of
patients with severe psychiatric diagnoses; residential treatment centres,
which provide intensive, medically-driven interventions and individualised
treatment to patients with moderate to high level acuity and substance abuse
centres, which offer continuum care for adults with addictive disorders and
co-occurring mental disorders, as well as providing community-based services
comprising therapeutic treatment to children and adolescents suffering from
severe congenital, neurobiological, speech/motor and early onset psychiatric
disorders. The company also provides specialised education services, including
vocational education and training, GED preparation courses and tutoring
services; behavioural health programmes for adolescent females, mentally
retarded and developmentally disabled youth and persistently mentally ill
youths and call centre services. As of 4 September 2012, it operated a network
of 33 behavioural health facilities with approximately 2,300 licensed beds in
19 states. The company also operates two substance abuse centres and eleven
educational facilities. For the six months ended June 2012, Acadia reported
revenues up 136% to $190 million and net income up to $9.6 million from a loss
of $22.1 million during the same period last year. The company also provided
guidance of net earnings per share of $0.60 for the fiscal year ending December
2012. Acadia Healthcare Company, Inc. was founded in 2005 and is headquartered
in Franklin, Tennessee.
Flamel Technologies SA (NASDAQ: FLML) is a bio pharmaceutical company engaged
in the development and commercialisation of controlled-release therapeutic
products based on its proprietary polymer-based technology in the UK, Ireland,
US, France and the rest of Europe. Its principal product based on Micropump
technology is Coreg CR, which is intended for the treatment of moderate to
severe heart failure and left ventricular dysfunction following myocardial
infarction. The company's products under development based upon Medusa
technology include Interferon-alpha, a naturally occurring protein that the
body uses for the treatment of Hepatitis C virus and as a immune response; and
FT-105, an injectable insulin formulation for diabetic patients. Its products
based on its Micropump technology comprise LiquiTime for the elderly and
paediatric patients or others who have difficulty swallowing. For the six
months ending June 2012, the company reported flat revenues of $13.5 million
compared with last year, and a net loss of $5.9 million compared to a net loss
of $8.4 million last year. The company has strategic alliances with Baxter
International, Inc., GlaxoSmithKline, Merck Serono and Pfizer, Inc., as well as
a joint development agreement with Digna Biotech. S.L. Flamel Technologies S.A.
was founded in 1990 and is headquartered in Venissieux, France.
Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) provides automation and
control technologies and applications to customers in the industrial, railway,
subway and nuclear industries in the People's Republic of China, Southeast Asia
and the Middle East. It offers distributed control systems, which are networks
of controllers, sensors, actuators and other devices that can be programmed to
control outputs based on input conditions and/or algorithms; programmable logic
controllers that are small computer devices installed on machines or equipment;
and train control centres ("TCC"), which monitor route conditions, track
status, train schedules, distance between trains and the working status of
other essential function devices. For the twelve months ending June 2012, the
company reported revenues up 22% to $321.7 million and net income up 36% to
$56.6 million. Hollysys Automation Technologies Ltd. was founded in 1993 and is
headquartered in Beijing, the People's Republic of China.
Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI) engages in the research,
development, manufacture and distribution of veterinary health care and medical
care products in the People's Republic of China. The company's products include
veterinary medicine for poultry and livestock, aquaculture medicine,
micro-organisms, bio-pharmaceutical veterinary vaccines and feed additives. It
sells its products to distributors and direct customers. For the six months
ended June 2012, the company reported flat revenues of $16.7 million 5%
increase in net income to $3.6 million over the same period last year. The
company is headquartered in Xi'an, the People's Republic of China.
New Investments, Follow-on Investments and Sales
During the six months ended September 2012, we made five new portfolio
investments for a total cost of $5.2 million. These five new holdings were all
open market common stock purchases. We bought shares in Cantel Medical Corp.
(NYSE: CMN), a healthcare company which provides infection prevention and
control products and services; DXP Enterprises, Inc. (NASDAQ: DXPE), an
industrial distributor of maintenance, repair and operating products, equipment
and services to industrial customers; Titan Machinery, Inc. (NASDAQ: TITN), a
distributor of agricultural and construction equipment through stores in the US
and Europe; USANA Health Sciences, Inc. (NYSE: USNA), a manufacturer and
distributor of nutritional and personal care products worldwide; and ZAGG, Inc.
(NASDAQ: ZAGG), a manufacturer and distributor of protective coverings, audio
accessories and power solutions for consumer electronics and hand-held devices
primarily in the US and Europe.
With respect to follow-on investments, we purchased $411,000 of common stock in
Bovie Medical Corporation, $2,030,000 of common stock of Flamel Technologies,
$500,000 of common stock in Plures Technologies, Inc. and $758,000 of common
stock in Points International Ltd.
With respect to capital gains and losses during the six months ended September
2012, your Company realised a loss in Dynamic Green Energy, Healthzone Limited
and Murdoch Security; made partial sales of Acadia Healthcare and AnchorFree,
Inc.; and completed sales in Access Plans, Inc., China Jo-Jo Drug
Stores, Fushi Copperweld, Inc., SkyPeople Fruit Juice and Wonder Auto
Technologies. The combination of sales during the period resulted in a realised
gain of approximately $2.1 million.
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 the path of least resistance
at this point is clearly toward recovery and more normal valuations.
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. We believe a number of our holdings could make
attractive merger candidates and provide good returns to our Company.
27 November, 2012
For further information, please contact:
Russell Cleveland
RENN Capital Group, Inc
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 2012:
Liquidity/marketability risk; interest rate risk; gearing risk; foreign
currency risk; country risk; market price risk and discount volatility risk;
compliance with sections 1158/1159 of the Corporation Tax Act 2010; credit
risks; risk associated with the engagement of third parties; risk associated
with the continuation vote; and valuation risk.
There have been no changes to these risks since the publication of the 2012
Annual Report and Accounts.
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 27 November
2012 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 2012
Six months ended Six months ended Year ended
30 September 2012 30 September 2011 31 March 2012
(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)/gains on - (7,022) (7,022) - (8,426) (8,426) - 5,618 5,618
investments at fair
value through profit
or loss
Exchange (losses)/ - (234) (234) - 175 175 - 141 141
gains on capital
items
Income (see note 4) 128 - 128 81 - 81 151 - 151
Investment Management (384) - (384) (375) - (375) (720) - (720)
fee (see note 5)
Investment Managers - 175 175 - - - - (889) (889)
performance fee (see
note 5)
Bad debt expense (63) - (63) (623) - (623) (797) - (797)
Other expenses (243) - (243) (228) - (228) (444) - (444)
Net return before (562) (7,081) (7,643) (1,145) (8,251) (9,396) (1,810) 4,870 3,060
finance costs and
taxation
Finance costs - - - (1) - (1) (1) - (1)
Net return before (562) (7,081) (7,643) (1,146) (8,251) (9,397) (1,811) 4,870 3,059
taxation
Taxation on ordinary (9) - (9) - - - - - -
activities (see note
8)
Net return on (571) (7,081) (7,652) (1,146) (8,251) (9,397) (1,811) 4,870 3,059
ordinary activities
after taxation for
the period
pence pence pence pence pence pence pence pence pence
Return per Ordinary (3.19) (39.53) (42.72) (6.19) (44.54) (50.73) (9.87) 26.54 16.67
share (see note 2)
The total column if 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 Statement of Recommended Practice ("SORP")
issued by the Association of Investment Companies ("AIC"). 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 (unaudited)
for the six months ended 30 September 2012
Six months ended Share Capital
30September 2012 Share premium redemption Special Capital Revenue
(unaudited) capital account reserve reserve* reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2012 4,506 5,995 825 4,008 50,875 (5,786) 60,423
Net return after - - - - (7,081) (571) (7,652)
taxation for the
financial period
Cost of shares (100) - 100 (899) - - (899)
repurchased for
cancellation
At 30 September 2012 4,406 5,995 925 3,109 43,794 (6,357) 51,872
Year ended Share Capital
31 March 2012 Share premium redemption Special Capital Revenue
(audited) capital account reserve reserve* reserve reserve Total
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 - - - - 4,870 (1,811) 3,059
taxation for the
year
Cost of shares (159) - 159 (1,200) - - (1,200)
repurchased for
cancellation
At 31March2012 4,506 5,995 825 4,008 50,875 (5,786) 60,423
Six months ended 30 September 2011 (unaudited)
Share Capital
Share premium redemption Special Capital Revenue
capital account reserve reserve* reserve reserve Total
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)
repurchased for
cancellation
At 30 September 2011 4,585 5,995 746 4,548 37,754 (5,121) 48,507
* 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 2012
As at As at As at
30 September 31 March 30 September
2012 2012 2011
(unaudited) (audited) (unaudited)
GBP'000 GBP'000 GBP'000
Fixed assets
Investments at fair value through 47,959 60,888 45,568
profit or loss
Current assets
Debtors 374 312 255
Cash at bank 4,354 751 3,079
4,728 1,063 3,334
Creditors - amounts falling due
within one year
Creditors and accruals (464) (1,240) (281)
Net current assets 4,264 (177) 3,053
Provision for liabilities and
charges
Provision for bad debt* (351) (288) (114)
Total net assets 51,872 60,423 48,507
Share capital and reserves
Called up share capital (see note 4,406 4,506 4,585
6)
Share premium account 5,995 5,995 5,995
Capital redemption reserve 925 825 746
Special reserve 3,109 4,008 4,548
Capital reserve 43,794 50,875 37,754
Revenue reserve (6,357) (5,786) (5,121)
Equity shareholders' funds 51,872 60,423 48,507
Net asset value - pence per 294.34p 335.23p 264.51p
Ordinary share including current
period revenue (see note 3)
* a provision has been made for 100% 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 (six months ended 30 September
2011: 50%; year ended 31 March 2012: 100%).
The notes form part of these accounts.
Statement of cash flows (unaudited)
for the six months ended 30 September 2012
Six months Six months
ended ended Year ended
30 September 30 September 31 March
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Operating activities
Investment income received 61 6 6
Deposit interest received 3 1 3
Other income received - 1 8
Investment Management fees (393) (420) (754)
paid
Investment Management (714) - -
performance fee paid
Secretarial fees paid (40) (37) (77)
VAT recovered on secretarial - - 54
fees
Other cash payments (226) (226) (386)
Net cash outflow from (1,309) (675) (1,146)
operating activities
Servicing of finance
Other interest paid - (1) -
- (1) -
Taxation
Irrecoverable overseas tax (9) - -
Total taxation paid (9) - -
Capital expenditure and
financial investment
Purchases of investments (5,544) (3,287) (5,697)
Sales of investments 11,440 6,278 7,408
Net cash inflow from capital 5,896 2,991 1,711
expenditure and financial
investment
Net cash inflow before 4,578 2,315 565
financing
Financing
Repurchase of Ordinary shares (741) (660) (1,200)
for cancellation
Loan margin repayment - (241) (241)
Net cash outflow from (741) (901) (1,441)
financing
Increase/(decrease) in cash 3,837 1,414 (876)
The notes form part of these accounts.
Notes
for the six months ended 30 September 2012
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 2012. 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 17,912,030 Ordinary
shares being the weighted average number of shares in issue during the six
months ended at 30 September 2012 (six months ended 30 September 2011:
18,522,288 and year ended 31 March 2012: 18,348,241).
3. Net asset value per Ordinary share
The calculations of net asset value per Ordinary share are based on 17,622,916
Ordinary shares being in issue at 30 September 2012 (30 September 2011:
18,338,405 Ordinary shares and 31 March 2012: 18,024,593 Ordinary shares).
4. Income
Six months Six months Year
to to to
30 September 30 September 31 March
2012 2011 2012
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Income from US investments:
Convertible debenture stocks - 63 79 139
unlisted
Common stock - listed 61 - -
124 79 139
Other income:
Bank interest receivable 4 1 4
Other interest - 1 -
Interest on VAT refund - - 8
128 81 151
5. Investment Management fee
The Investment Management fee is charged 100% to revenue. Investment Management
fees of GBP384,000 (six months ended 30 September 2011: GBP375,000; year ended 31
March 2012: GBP720,000) have been charged to the income statement. At 30
September 2012, GBP177,000 (six months ended 30 September 2010: GBP176,000; year
ended 31 March 2012: GBP186,000) 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 for the six months
ended 30 September 2012 (30 September 2011: nil). The year ended 31 March 2012
contained an accrual of GBP889,000 based on the best estimate of the fee that
would be due at the balance sheet date. The actual fee that became payable on
final calculation was GBP714,000. The difference of GBP175,000 is shown in the
capital column of the income statement at 30 September 2012.
6. Called up share capital
30 September 30 September 31 March
2012 2011 2012
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Allotted, called up and fully 4,406 4,585 4,506
paid:
17,622,916 (30 September 2011:
18,338,405
(31 March 2012: 18,024,593)
Ordinary shares of 25p
7. Share buybacks
During the period, the Company repurchased 401,677 Ordinary Shares for
cancellation at a total consideration of GBP899,000 (six months ended 30
September 2011: 320,603 Ordinary shares; year ended 31 March 2012: 634,415
Ordinary shares). No Ordinary shares were repurchased to be held in Treasury
for the six months ended 30 September 2012 (six months ended 30 September 2011:
nil Ordinary shares; year ended 31 March 2012: nil Ordinary shares).
Since 30 September 2012, the Company has repurchased a further 115,032 Ordinary
shares at a total consideration of GBP256,000.
8. Taxation
The Company is subject to corporation tax at 24% (six months ended 30 September
2011: 26%; year ended 31 March 2012: 26%). 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 2011: nil; year ended 31 March 2012: nil), other than
withholding tax suffered on foreign dividends of GBP9,000 (30 September 2011:
nil; year ended 31 March 2012: nil).
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
2012 2011 2012
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Net return before finance costs and (7,643) (9,396) 3,060
taxation
Net capital return 7,081 8,251 (4,870)
Increase in provision for bad debt 63 36 210
Decrease in creditors and accruals (748) (87) (10)
(Increase)/decrease in prepayments (62) 521 464
and accrued income
Net cash outflow from operating (1,309) (675) (1,146)
activities
10. Reconciliation of net cashflow to net funds
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2012 2011 2012
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Increase/(decrease) in cash in 3,837 1,414 (876)
period/year
Effect of movement in exchange (234) 102 64
rates
Movement in net funds 3,603 1,516 (812)
Net funds at beginning of period/ 751 1,563 1,563
year
Net funds at end of period/year 4,354 3,079 751
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 33% or more of the share
capita; of iSatori, Inc. in funds under management.
Mr Cleveland is president and chief executive of RENN Capital Group, Inc. and
Mr Stephens is vice president and chief operating officer.
Mr Cleveland is a director of the following portfolio companies:
iSatori, Inc.
Cover-All Technologies
AnchorFree, Inc.
Mr Stephens is a director of Plures Technologies.
12. 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.
13. 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 2011
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 2012 and 30 September 2011 has not been audited or reviewed by the
Company's auditors.
The information for the year ended 31 March 2012 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 2012
Sector Book Market % of
cost value net
US$'000 US$'000 GBP'000 assets
Corporate investments
US unlisted convertible
debentures
PetroHunter Energy Oil and gas 2,100 294 182 0.4
exploration
Pipeline Data Business 1,500 597 370 0.7
services
Total US unlisted convertible 3,600 891 552 1.1
debentures
US unlisted convertible
preference shares
AnchorFree Wireless 2,162 27,613 17,100 33.0
communications
iSatori Personal 75 2 1 0.0
products
Plures Technologies Semiconductors 4,347 4,070 2,520 4.9
Total US unlisted convertible 6,584 31,685 19,621 37.9
preference shares
US unlistedwarrants
AuraSound Technology - - - 0.0
Hemobiotech Biotechnology - - - 0.0
iSatori Personal - - - 0.0
products
PetroHunter Energy Oil and gas - - - 0.0
exploration
Plures Technologies Semiconductors - 28 17 0.0
Total US unlisted warrants - 28 17 0.0
US unlisted Chinese warrants
Duoyuan Printing Industrial - - - 0.0
machinery
SinoHub Electronic - - - 0.0
components
Total US unlisted Chinese - - - 0.0
warrants
US listed Chinese warrants
Plastec Technologies Plastic - 10 6 0.0
products
Total US listed Chinese - 10 6 0.0
warrants
US listed Canadian equities
Points International Internet 2,537 4,596 2,846 5.5
software
Total US listed Canadian 2,537 4,596 2,846 5.5
equities
US listed Chinese equities
Cogo Information 1,083 621 385 0.7
technology
Hollysys Automation Electronic 1,187 1,976 1,224 2.4
Technologies equipment
Plastec Technologies Plastic 1,030 700 434 0.8
products
SearchMedia Holdings Advertising 2,422 785 486 0.9
SGOCO Group Electronic 2,000 280 173 0.3
equipment
SinoHub Electronic 4,932 371 230 0.5
components
Skystar Bio-Pharmaceutical Pharmaceuticals 2,277 1,126 697 1.4
Total US listed Chinese 14,931 5,859 3,629 7.0
equities
US listed French equities
Flamel Technologies Pharmaceuticals 3,367 2,863 1,773 3.4
Total US listed French 3,367 2,863 1,773 3.4
equities
US listed equities
Acadia Healthcare Healthcare 622 3,229 2,000 3.9
facilities
AuraSound Technology 2,013 5 3 0.0
Bovie Medical Corporation Healthcare 3,767 5,760 3,567 6.9
services
Cantel Medical Corporation Healthcare 1,020 1,029 637 1.2
equipment
Cover-All Technologies Information 5,051 9,314 5,768 11.1
technology
DXP Enterprises Trading 1,022 1,003 621 1.2
companies &
distributors
Global Axcess Commercial 2,061 507 314 0.6
services
Hemobiotech Biotechnology 1,983 46 29 0.1
iSatori Personal 9,562 5,981 3,704 7.1
products
PetroHunter Energy Oil and gas 202 23 14 0.0
exploration
Plures Technologies Semiconductors 3,037 1,555 963 1.9
Titan Machinery Trading 1,038 1,014 628 1.2
companies &
distributors
USANA Health Sciences Personal 1,033 1,022 633 1.2
products
ZAGG Consumer 1,048 1,024 634 1.2
electronics
Total US listed equities 33,459 31,512 19,515 37.6
Total corporate investments 64,478 77,444 47,959 92.5
Net current assets 6,886 4,264 8.2
Provision for liabilities (567) (351) (0.7)
Total net assets 83,763 51,872 100.0
Company information
Directors Custodian (USA)
Ernest J Fenton (Chairman, Frost National Bank
UK)
Andrew C Barker (UK) 8201 Preston Road
Steven A R Bates (UK) Suite 540
Alexandra Mackesy (UK) Dallas, Texas
William W Vanderfelt USA
(Switzerland)
Secretary and Registered O Stockbrokers
ffice
Capita Sinclair Henderson Winterflood Investment Trusts
Limited
Beaufort House The Atrium Building
51 New North Road Cannon Bridge
Exeter EX4 4EP 25 Dowgate Hill
Tel: 01392 412122 London EC4R 2GA
Auditor
Corporate website Chartered Accounts
www.renaissanceusgrowth.co.uk KPMG Audit Plc
100 Temple Street
Bristol BS1 6AG
Investment Manager Registrars
RENN Capital Group, Inc. Capita Registrars Limited
Suite 210 LB59 The Registry
8080 North Central Expressway 34 Beckenham Road
Dallas, Texas 75206-1857 Beckenham
USA Kent BR3 4TU
Tel: 001 214 891 8294 Tel: 0871 664 0300 - calls cost
10p per 639)
Fax: 001 214 891 8291 minute plus network extras (or
0044 208
www.rencapital.com 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, as
detailed above.
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 the Company's and the Manager's websites as
detailed above.
27 November 2012
National Storage Mechanism
A copy of the half-yearly report 2012 will be submitted shortly to the National
Storage Mechanism ("NSM") and will be available for inspection at the NSM,
which is situated at: www.morningstar.co.uk/uk/NSM.
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
END
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