PROVEN VCT PLC
FINAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2009
Financial Summary
Ordinary Shares 'C' Shares
As at 28 February 2009 2008 2009 2008
pence pence pence pence
Net asset value per share 57.70 88.50 75.60 89.60
Dividends paid since launch 92.45 74.20 3.75 1.00
Total return (net asset value plus 150.15 162.70 79.35 90.60
dividends paid since launch)
Year on year change in:
VCT total return -7.7% -12.4%
FTSE All Share Index total return -33.0% -33.0%
There were no 'D' Shares in issue at 28 February 2009
Chairman's Statement
Introduction
I am pleased to present the Annual Report for ProVen VCT plc for the
year ended 28 February 2009. I would also like to welcome any new
shareholders who may have subscribed under the Company's "Linked D
Share offer".
The year has seen a dramatic deterioration in economic conditions
which has had some impact on your Company. Portfolio companies now
face greater challenges and the valuation of those businesses has
fallen, partly as a result of falls in stock market comparables
which, in many cases are used as the bases for your Company's
investment valuations.
Net Asset Value
Ordinary Shares
At the year end, the Company's net asset value per Ordinary Share
("Ordinary NAV") stood at 57.7p, a decrease of 12.55p per share or
14.2% over the year after adjusting for the dividends of 18.25p per
Ordinary Share which were paid during the year.
Total return (Ordinary NAV plus cumulative dividends paid) to
Ordinary Shareholders who invested at the outset of the Company now
stands at 150.15p per share, compared to an original investment, net
of income tax relief, of 80p per share.
'C' Shares
At the year end, the Company's net asset value per 'C' Share ("'C'
Share NAV") stood at 75.6p, a decrease of 11.25p per share or 12.6%
over the year after adjusting for the dividends of 2.75p per 'C'
Share which were paid during the year.
Total return ('C' Share NAV plus cumulative dividends paid) to 'C'
Shareholders who invested at the 'C' Share fundraising now stands at
79.35p per share, compared to an original investment, net of income
tax relief, of 70p per share.
Portfolio Activity and Valuation
Ordinary Share pool
The Ordinary Share pool achieved one major investment exit during the
year, being the sale of ILG Digital Limited. This was sold as part of
a private equity transaction and produced proceeds of £4.4 million
against an original cost of £1.3 million in November 2005. The
Investment Manager worked closely with the company throughout the
period that the investment was held and is to be congratulated for
this excellent outcome.
The Ordinary share pool made three new investments and four follow on
investments during the year at a total cost of £1.8 million. The
Board has reviewed the unquoted investment valuations at the year
end. The Ordinary share pool has a large proportion of its value
within one investment, Espresso Group. This company has continued to
make good progress and is starting to develop its business into other
areas. At the year end the Board has valued the investment at £4.2
million, a reduction of £1.4 million over the year, but still valued
substantially above original cost.
The AIM market has been hit particularly hard by the economic
conditions with the FTSE AIM All Share Index falling by 61.9% over
the year. The Ordinary share pool's small portfolio of AIM
investments all lost value in the year.
Total unrealised losses on the portfolio for the year stood at £4.7
million. In reviewing the unquoted portfolio at the year end, the
Board considers P/E ratios and similar indicators of listed
businesses in similar sectors. In some cases, this alone has been the
reason for the reduction in the valuation of investments.
'C' Share pool
The C Share pool continued to be an active investor during the year.
The pool invested £2.4 million in five new investments and £0.4
million in three follow on investments. At the year end the pool held
a portfolio comprising of 14 investments with a cost of £7.5 million.
The challenging economic environment has impacted on businesses
across the 'C' Share portfolio. As a result, there have been a number
of reductions in valuations since the previous year end, with
unrealised losses totalling £1.9 million.
Full details of the investment activities of both the Ordinary and
'C' Share pools can be found in the Investment Manager's Review.
VAT on Management Fees
Following a European Court judgement, the Government made changes in
the Finance Bill 2008 such that VCTs became exempt from paying VAT on
management fees from 1 October 2008. This has the effect of slightly
reducing running costs for the Company. In addition, I am pleased to
report that Beringea successfully made a claim to recover VAT that
had previously been charged on their management fees. In view of the
fact that some years' management fees were restricted by the running
costs cap and that performance fees are calculated inclusive of VAT,
the Board agreed a basis on which the VAT recovered (including
interest) should be apportioned between the Company and Beringea.
This has resulted in a recovery to the Company of £427,000, which has
been recognised in the Income Statement in the year under review.
Results and dividend
The loss on activities after taxation for the year was £4,665,000
(2008: loss £313,000), comprising a revenue return of £754,000 and a
capital loss of £5,419,000.
On 31 October 2008 the Company paid an interim dividend of 14.5p per
Ordinary Share (2008: 6.0p per share) and 1.0p per 'C' Share (2008:
1.0p).
The Board is proposing final dividends as follows:
Ordinary Shares 1.0p per share
'C' Shares 1.0p per share
Subject to Shareholder approval at the AGM, these dividends will be
paid on 10 July 2009 to Shareholders on the register at 19 June 2009.
Linked 'D' Share issue
In November 2008, the Company launched a Linked 'D' Share offer, in
conjunction with ProVen VCT plc. No shares were issued before 28
February 2009 and therefore 'D' Shares are not included in the
balance sheet and income statement in this report.
Up to the date of this report, the offer had raised a total of £9.3
million of which £4.6 million is allocated to 'D' Shares issued and
to be issued by ProVen VCT plc.
The offer has now been extended and will close on 30 October 2009 (or
earlier if fully subscribed). The offer should provide the Company
with a reasonable level of additional funds for further investment.
Share buybacks
In order to ensure liquidity in the market in the Company's shares,
the Company operates a policy of buying in its own shares as they
become available in the market.
During the year the Company purchased 528,873 Ordinary Shares at an
average price of 71p per Share and 5,000 'C' Shares at an average
price of 70.5p per Share.
Generally, share buybacks are undertaken at a 10% discount to the
latest NAV published by the Company, although the Board regularly
reviews the discount level and, should it be considered appropriate,
will make adjustments.
A special resolution to allow the Board to continue to purchase
shares for cancellation will be proposed at the forthcoming Annual
General Meeting ("AGM").
Annual General Meeting
The AGM of the Company will be held at 39 Earlham Street, London WC2H
9LT at 9:45 am on 10 July 2009.
Three items of special business will be proposed at the AGM in
respect of share buybacks as mentioned above and two resolutions in
connection with authority for the directors to allot shares.
Outlook
Although the Company's NAVs have fallen over the year, the Board
remains broadly satisfied with the portfolio performance given the
difficult conditions. The Board does not expect to see a significant
increase in the NAVs over the coming year but over the longer term,
good quality portfolio companies that can adapt to the conditions
should be well positioned to deliver rewards to Shareholders when
conditions improve.
The Ordinary Share pool and the 'C' Share pool have a significant
level of funds available for investment. In addition, the 'D' Share
pool will start to invest its newly raised funds shortly. Although it
remains a risky time for making new investments, it may now be the
time in the economic cycle when opportunities start to arise that can
produce excellent returns in due course.
Andrew Davison
Chairman
Investment Manager's Review
Introduction
Beringea LLP is a specialist venture capital management company which
has been established for over 20 years. It currently manages
approximately £70 million of venture capital funds and has been the
investment manager of Proven VCT plc since inception in 2000.
The Company currently has three share classes: Ordinary Shares, 'C'
shares and 'D' shares. The ordinary share pool was established in
2000 with further fundraisings in 2004, 2005 and 2008. The 'C' share
pool was established in 2007. Further details of the performance of
these two pools is provided below. In the current year, the Company
announced a linked 'D' Share fundraising with ProVen Growth and VCT
Income plc. The offer remains open but has currently raised over £9.3
million, of which the Company has taken £4.6 million which will be
primarily used for future investment. At 28 February 2009, no D
shares had been issued.
Ordinary Share Pool - Share Performance & Portfolio
We were pleased to be able to generate further capital profits which
has enabled the Company to maintain the strong dividend returns to
Ordinary Shareholders with dividends paid during the year of 14.50p,
representing a tax free yield of 18.125% on an initial investment of
80p (for original investors in 2000 after 20% income tax relief). The
total dividends paid to original shareholders stood at 92.45p at 28
February 2009.
The portfolio benefited from the successful sale of ILG Digital to
the Private Equity firm ECI for £45.5m. We were pleased to execute a
sale of a quality asset at a point which with hindsight was close to
the top of market values. The exit delivered a return on capital of
3.3x in under two and a half years.
Investments and disposals during the course of the year are
summarised below:
Acquisitions Cost Description
£'000
Unquoted
Optima Data 269 Marketing and data intelligence services
Intelligence
SPC International 473 Repair/refurbishment of electronic equipment
Ltd
Dontantonio 7 Import and distribution of Mediterranean
foods
Overtis Group Ltd 500 Technology security provider
Isango! Ltd 400 Travel provider
Fjord Ltd 200 Digital design/research agency
Quoted
Coolabi Plc 17 Character rights management
1,866
Disposals Realised Gain/
Market gain/(loss) (loss)
Value at against
Cost 29/02/08 Proceeds cost
£'000 £'000 £'000 £'000 £'000
Unquoted
Espresso Group 408 408 408 - -
Limited
ILG Digital 1,000 2,316 4,467 1,687 3,467
Limited
1,408 2,724 4,990 1,687 3,467
At 28 February 2009, the Company's unquoted and quoted ordinary share
portfolio comprised 18 investments with a cost of £12.5 million and a
valuation of £8.9 million. In addition, the ordinary share pool held
cash and liquidity funds of £6.9 million.
As the fund has matured and successful investments have been
realised, the value in the portfolio has become more concentrated in
a few of the remaining investments. Espresso Group accounted for 30%
of the Ordinary Share net asset value at the year end, broadly
consistent with the previous year end.
Espresso continues to perform strongly and has established itself as
the dominant provider of online educational video content to the UK
primary school sector with a market share of over 60% and high
contract renewal rates. Following the acquisition in 2007 of 4
Learning, the educational business of Channel 4, Espresso has entered
the UK secondary schools market with its Clipbank product and has
already established a strong and growing presence.
'C' Share Pool - Share Performance & Portfolio
Having only been established in 2007, the 'C' share pool remains in
its initial investment phase. During the year five new investments
and two follow on investments were made:
Acquisitions Cost Description
£'000
Unquoted
Dontantonio 10 Import and distribution of
Mediterranean foods
Heritage Partners Limited 100 Image rights ownership, management
and distribution
Charterhouse Leisure 329 Restaurants
Limited
Chess Technology Limited 600 Producer of electro-optical devices
SPC International Limited 403 Repair/refurbishment of electronic
equipment
Overtis Group Limited 400 Technology security provider
Isango! Ltd 200 Travel provider
Fjord Ltd 800 Digital design/research agency
2,842
As the 'C' Share pool is relatively young, there have been no
realisations to date. At the year end, the 'C' Share NAV stood at
75.6p per share, a fall of approximately 12.6% over the year (after
adjusting for dividends). The 'C' Share investment portfolio was
valued at £4.7 million against an original investment cost of £7.5
million. In addition, the 'C' Share pool held cash and liquidity
funds of £6.0 million.
Outlook
VCTs were created to provide a source of capital for SMEs (small and
medium sized enterprises), a sector of the economy which has
historically struggled to access capital for growth. The current
economic environment created in part by the collapse of the credit
markets has not only exacerbated this condition but at a time when
SMEs are suffering from reduced consumer/business spending and the
management of effective deflation. We would expect SMEs to experience
difficult trading conditions for at least the next 18 months and as
such, benefiting from the experience of previous periods of
recession, we continue to focus our efforts on the existing companies
within the portfolio ensuring their investment plans and cost
structures reflect the macro environment.
However, historic investment returns have shown us that difficult
economic conditions have provided a great opportunity to invest in
companies at attractive valuations. We see the opportunity for new
investments in areas of economic robustness such as our recent
investment in the defence contractor 'Chess Technologies' and areas
of established innovation such as the design of mobile media
platforms, 'Fjord'. At all times we will invest in market leading
companies with exceptional management teams.
Beringea LLP
Investment Portfolio - Ordinary Share Pool
as at 28 February 2009
Ordinary Share portfolio of investments
The following investments were held at 28 February 2009:
28 February 2009 29 February 2008
Valuation % of % of
movement portfolio portfolio
Cost Valuation in year by value Cost Valuation by
£'000 £'000 £'000 £'000 £'000 value
Top ten
venture
capital
investments
(by value)
Espresso 1,640 4,162 (1,445) 26.3% 2,048 6,015 29.5%
Group Limited
SPC 1,619 1,267 (218) 8.0% 1,145 1,011 4.9%
International
Limited
Eagle Rock 420 542 (23) 3.4% 420 565 2.8%
Entertainment
Group Limited
Overtis Group 500 500 - 3.2% n/a n/a n/a
Limited
Saffron Media 480 480 - 3.1% 480 480 2.4%
Group Limited
Optima Data 1,169 456 (713) 2.9% 900 900 4.4%
Intelligence
Services
Limited
Campden Media 975 414 (558) 2.6% 975 972 4.8%
Ltd
Ashford 750 286 (418) 1.8% 875 828 4.1%
Colour Press
Limited
Donatantonio 582 277 (304) 1.8% 575 575 2.8%
Limited
Fjord Limited 200 200 - 1.3% n/a n/a n/a
8,335 8,584 (3,679) 54.4% 7,418 11,346 55.7%
Other venture
capital
investments
UBC Media 1,101 166 (145) 1.0% 1,101 311 1.5%
plc*
Pilat Media 173 86 (233) 0.6% 173 320 1.6%
Global plc*
Coolabi plc* 300 77 (241) 0.4% 283 301 1.5%
ID Data* 262 - (3) 0.0% 263 3 0.0%
GB Industries 1,134 - - 0.0% 1,134 - 0.0%
Isango! Ltd 400 - (400) 0.0% n/a n/a n/a
Baby 604 - - 0.0% 604 - 0.0%
Innovations
S.A t/a
Steribottle
Sports 147 - - 0.0% 147 - 0.0%
Holding
Limited
ILG Digital - - - - 1,345 2,760 13.5%
Limited
4,121 329 (1,022) 2.0% 5,050 3,695 18.1%
Total venture 12,456 8,913 (4,701) 56.4 % 12,468 15,041 73.8%
capital
investments
Liquidity 4,190 26.5% 4,400 21.6%
funds
Cash at bank 2,711 17.1% 945 4.6%
and in hand
Total 15,814 100.0% 20,386 100.0%
Ordinary
Share
investments
All venture capital investments are unquoted unless otherwise stated.
* Quoted on AIM
All venture capital investments are registered in England and Wales
with the exception of Baby Innovations S.A., which is registered in
Madeira.
Investment Portfolio - C Share Pool
as at 28 February 2009
'C' Share portfolio of investments
The following investments were held at 28 February 2009:
28 February 2009 29 February 2008
Valuation
movement % of % of
Cost Valuation in year portfolio Cost Valuation portfolio
£'000 £'000 £'000 by value £'000 £'000 by value
Top ten venture capital investments
(by value)
Path Group 1,000 1,000 - 9.2% 1,000 1,000 7.6%
Limited
Fjord Limited 800 800 - 7.3% n/a n/a n/a
Chess 600 600 - 5.5% n/a n/a n/a
Technology
Limited
Charterhouse 700 561 (139) 5.2% 371 371 2.9%
Leisure
Limited
Donatantonio 885 422 (463) 3.9% 875 875 6.7%
Limited
SPC 403 399 (4) 3.7% n/a n/a n/a
International
Limited
Overtis Group 400 400 - 3.7% n/a n/a n/a
Ltd
Heritage 900 247 (653) 2.3% 800 800 6.1%
Partners Ltd
Dianomi Ltd 126 157 31 1.5% 126 126 1.0%
Steak Media 275 133 (252) 1.2% 275 385 2.9%
Limited
6,089 4,719 (1,480) 43.5% 3,447 3,557 27.2%
Other venture capital
investments
The Vending 1,012 - 5 0.0% 1,016 - 0.0%
Corporation
Breeze Tech 175 - (175) 0.0% 175 175 1.3%
Limited
Isango! 200 - (200) 0.0% n/a n/a n/a
Limited
1,387 - (370) 0.0% 1,191 175 1.3%
Total venture 7,476 4,719 (1.850) 43.5% 4,638 3,732 28.5%
capital
investments
Liquidity 6,010 55.4% 7,950 60.6%
funds
Cash at bank 119 1.1% 1,426 10.9%
and in hand
Total 'C' 10,848 100% 13,108 100.0%
Share
investments
All venture capital investments are unquoted and are registered in
England and Wales.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and
regulations.
United Kingdom company law requires the Directors to prepare
financial statements for each financial year. Under that law the
Directors have elected to prepare the financial statements in
accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law). The
financial statements are required by law to give a true and fair view
of the state of affairs of the Company and of the profit or loss of
the Company for that period. In preparing those financial statements,
the Directors are required to:
* select suitable accounting policies and then apply them
consistently;
* make judgements and estimates that are reasonable and prudent; and
* state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements.
The Directors are responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the financial
position of the Company and to enable them to ensure that the
financial statements comply with the requirements of the Companies
Act 1985. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for ensuring that the Report of the
Directors and other information included in the Annual Report is
prepared in accordance with company law in the United Kingdom. They
are also responsible for ensuring that the Annual Report includes
information required by the Listing Rules of the Financial Services
Authority.
The Directors are responsible for the maintenance and integrity of
the Company's website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements differs
from legislation in other jurisdictions.
Statement as to disclosure of information to Auditors
The Directors in office at the date of the report have confirmed, as
far as they are aware, that there is no relevant audit information of
which the Auditors are unaware. Each of the Directors have confirmed
that they have taken all the steps that they ought to have taken as
directors in order to make themselves aware of any relevant audit
information and to establish that it has been communicated to the
Auditors. This confirmation is given and should be interpreted in
accordance with the provisions of S234ZA of the Companies Act 1985.
Income Statement
for the year ended 28 February 2009
Company Position
Year ended 28 February 2009 Year ended 29 February
2008
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income 1,442 - 1,442 1,406 - 1,406
(Losses)/ - (4,865) (4,865) - 285 285
Gains on
investments
1,442 (4,865) (3,423) 1,406 285 1,691
Investment (143) (429) (572) (218) (653) (871)
management
fees
Performance (109) (717) (826) (47) (882) (929)
incentive
fees
Recoverable 107 320 427 - - -
VAT
Other (256) (15) (271) (185) (19) (204)
expenses
Return on
ordinary
activities
before tax 1,041 (5,706) (4,665) 956 (1,269) (313)
Tax on (287) 287 - (274) 274 -
ordinary
activities
Return 754 (5,419) (4,665) 682 (995) (313)
attributable
to equity
shareholders
Return per 2.0p (14.5p) (12.5p) 1.1p (0.1p) 1.0p
Ordinary
Share
Return per 1.9p (13.2p) (11.3p) 3.2p (7.1p) (3.9p)
'C' Share
Split as:
Ordinary Shares
Year ended 28 February 2009 Year ended 29 February 2008
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income 847 - 847 695 - 695
(Losses)/ - (3,014) (3,014) - 1,190 1,190
Gains on
investments
847 (3,014) (2,167)
695 1,190 1,885
Investment (71) (212) (283) (143) (430) (573)
management
fees
Performance (109) (717) (826) (47) (882) (929)
incentive
fees
Recoverable 95 285 380 - - -
VAT
Other (118) (10) (128) (114) (13) (127)
expenses
Return on 644 (3,668) (3,024) 91 (135) 256
ordinary
activities
before tax
Tax on (172) 172 - (118) 118 -
ordinary
activities
Return
attributable
to equity
shareholders 472 (3,496) (3,024) 273 (17) 256
'C' Shares
Year ended 28 February 2009 Year ended 29 February 2008
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income 595 - 595 711 - 711
(Losses)/ - (1,851) (1,851) - (905) (905)
Gains on
investments
595 (1,851) (1,256) 711 (905) (194)
Investment (72) (217) (289) (75) (223) (298)
management
fees
Performance - - - - - -
incentive
fees
Recoverable 12 35 47 - - -
VAT
Other (138) (5) (143) (71) (6) (77)
expenses
Return on
ordinary
activities
before tax 397 (2,038) (1,641) 565 (1,134) (569)
Tax on (116) 116 - (156) 156 -
ordinary
activities
Return
attributable
to equity
shareholders 281 (1,922) (1,641) 409 (978) (569)
All Revenue and Capital movements in the year for the Ordinary
Shares, 'C' Shares relate to continuing operations.
A Statement of Total Recognised Gains and Losses relating to each
class of share has not been prepared as all gains and losses are
recognised in the relevant Income Statements as shown above.
Reconciliation of Movements in Shareholders' Funds
for the year ended 28 February 2009
Year ended Year ended
28 February 2009 28 February 2008
Ordinary 'C' Ordinary 'C'
Shares Shares Total Shares Shares Total
£'000 £'000 £'000 £'000 £'000 £'000
Opening 25,249
shareholders'
funds 20,469 13,100 33,569 25,249 -
Issue of 14,621
shares 1,211 - 1,211 - 14,621
Share issue (804)
costs (67) - (67) - (804)
Purchase of (380) (4) (384) (148) (2) (150)
own shares
Total (313)
recognised
(losses)/gains
for the
year (3,024) (1,641) (4,665) 256 (569)
Distributions (4,385) (402) (4,787) (4,888) (146) (5,034)
Closing 13,824 11,053 24,877
shareholders'
funds 20,469 13,100 33,569
Balance Sheet
as at 28 February 2009
Year ended Year ended
28 February 2009 28 February 2008
Ordinary 'C' Ordinary 'C'
Shares Shares Total Shares Shares Total
£'000 £'000 £'000 £'000 £'000 £'000
Fixed assets
Investments 8,913 4,719 13,632 15,041 3,732 18,773
Current
assets
Debtors 615 308 923 769 87 856
Current 4,190 6,010 10,200 4,400 7,950 12,350
investments
Cash at bank 2,711 119 2,830 945 1,426 2,371
and in hand
7,516 6,437 13,953 6,114 9,463 15,577
Creditors:
amounts
falling due
within
one year (2,605) (103) (2,708) (686) (95) (781)
Net current 4,911 6,334 11,245 5,428 9,368 14,796
assets
Net assets 13,824 11,053 24,877 20,469 13,100 33,569
Capital and
reserves
Called up 1,197 3,653 4,850 1,157 3,654 4,811
share capital
Capital 167 2 169 140 1 141
redemption
reserve
Share premium 4,836 10,159 14,995 3,759 10,159 13,918
Special 7,081 - 7,081 8,836 - 8,836
reserve
Capital 3,793 (144) 3,649 3,640 (73) 3,567
reserve
-realised
Capital (3,542) (2,756) (6,298) 2,573 (905) 1,668
reserve -
unrealised
Revenue 292 139 431 364 264 628
reserve
Equity 13,824 11,053 24,877 20,469 13,100 33,569
Shareholders
funds
Net asset 57.7p 75.6p 88.5p 89.6p
value per
share
Cash Flow Statement
for the year ended 28 February 2009
Year ended Year ended
28 February 2009 28 February 2008
Ordinary 'C' Ordinary 'C'
Shares Shares Total Shares Shares Total
£'000 £'000 £'000 £'000 £'000 £'000
Net cash
(outflow)/inflow (1,003) 343 (660)
from 69 (88) (19)
operating
activities
Capital
expenditure
Purchase of (1,866) (2,842) (4,708) (2,805) (4,638) (7,443)
investments
Sale of 5,465 - 5,465 4,985 - 4,985
investments
Net cash inflow
/ (outflow) from
capital
expenditure 3,599 (2,842) 757 2,180 (4,638) (2,458)
Equity dividends (4,888) (146) (5,034)
paid (4,385) (402) (4,787)
Management of
liquid resources
Purchase of
current (4,190) (2,700) (11,850) (14,550)
investments held
as liquidity
funds (6,010) (10,200)
Withdrawal from 3,050 3,900 6,950
liquidity funds 4,400 7,950 12,350
Net cash 210 1,940 2,150 350 (7,950) (7,600)
inflow/(outflow)
from
liquid resources
Net cash
(outflow)/inflow (3,361) (12,391) (15,752)
before
financing (598) (1,301) (1,899)
Financing
Proceeds from 206 10,130 10,336
share issue 2,857 - 2,857
Share issue - (804) (804)
costs (67) - (67)
Purchase of own
shares (426) (6) (432) (118) - (118)
Net cash 2,364 (6) 2,358 88 9,326 9,414
inflow/(outflow)
from
financing
Increase / 1,766 (1,307) 459 (3,273) (3,065) (6,338)
(Decrease) in
cash
Notes
1 Accounting policies
Basis of accounting
The Company has prepared its financial statements under UK Generally
Accepted Accounting Practice ("UK GAAP") and in accordance with the
Statement of Recommended Practice "Financial Statements of Investment
Trust Companies" revised December 2005 ("SORP").
The financial statements are prepared under the historical cost
convention except for the revaluation of certain financial
instruments.
Going concern
The accounts have been prepared under a going concern basis in
accordance with the assessment made by the
Directors as set out in the Statement of Corporate Governance.
Presentation of income statement
In order to better reflect the activities of an investment trust
company and in accordance with guidance issued by the Association of
Investment Companies ("AIC"), supplementary information which
analyses the income statement between items of a revenue and capital
nature has been presented alongside the income statement. The net
revenue is the measure the directors believe appropriate in assessing
the Company's compliance with certain requirements set out in Part 6
of the Income Tax Act 2007.
Fixed assets investments
All investments are designated as "fair value through profit or loss"
assets and are initially measured at cost. Thereafter the investments
are measured at subsequent reporting dates at fair value. Listed
fixed income investments and investments quoted on AIM are measured
using bid prices. In respect of unquoted instruments, fair value is
established by using International Private Equity and Venture Capital
Valuation Guidelines. Where no reliable fair value can be estimated
for such unquoted equity investments they are carried at cost,
subject to any provision for impairment.
Gains and losses arising from changes in fair value are included in
the income statement for the year as a capital
item and transaction costs on acquisition or disposal of the
investment expensed.
It is not the Company's policy to exercise either significant or
controlling influence over investee companies. Therefore the results
of these companies are not incorporated into the revenue account
except to the extent of any income accrued.
Current assets investments
Current assets investments comprise investments in liquidity funds
with AAA rating and are redeemable on call. These investments are
marked to market.
Income
Dividend income from investments is recognised when the shareholders'
rights to receive payment has been established, normally the ex
dividend date. Interest income is accrued on a receivable basis, by
reference to the principal outstanding and at the effective interest
rate applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset
to that asset's net carrying amount, and only where there is
reasonable certainty of collection.
Expenses
All expenses are accounted for on an accruals basis. In respect of
the analysis between revenue and capital items presented within the
income statement, all expenses have been presented as revenue items
except as follows:
* expenses which are incidental to the acquisition of an investment
are deducted from the Capital Account;
* expenses which are incidental to the disposal of an investment are
deducted from the disposal proceeds of the investment; and
* expenses are split and presented partly as capital items where a
connection with the maintenance or enhancement of the value of the
investments held can be demonstrated and accordingly the investment
management fee and finance costs have been allocated 25% to revenue
and 75% to capital, in order to reflect the directors' expected
long term view of the nature of the investment returns of the
Company.
Taxation
The tax effects of different items in the Income Statement are
allocated between capital and revenue on the same basis as the
particular item to which they relate using the Company's effective
rate of tax for the accounting period.
Due to the Company's status as a venture capital trust and the
continued intention to meet the conditions required to comply with
Part 6 of the Income Tax Act 2007, no provision for taxation is
required in respect of any realised or unrealised appreciation of the
Company's investments which arises.
Deferred taxation is provided in full on timing differences that
result in an obligation at the balance sheet date to pay more tax, or
a right to pay less tax, at a future date, at rates expected to apply
when they crystallise based on current tax rates and law. Timing
differences arise from the inclusion of items of income and
expenditure in taxation computations in periods different from those
in which they are included in the financial statements.
2. Return per share
Ordinary Shares 'C' Shares
Revenue return per share based on:
Net revenue after taxation (£'000) 472 281
Weighted average number of shares in 24,101,496 14,617,544
issue
Capital return/(loss) per share based
on:
Net capital gain for the financial year (3,496) (1,922)
(£'000)
Weighted average number of shares in 24,101,496 14,617,544
issue
3. Net asset value per share
2009 2008
Shares in Issue Net asset value Net asset value
2009 2008 per £'000 per £'000
share share
Ordinary 23,947,501 23,138,248 57.7p 13,824 88.5p 20,469
Shares
'C' Shares 14,612,777 14,617,777 75.6p 11,053 89.6p 13,100
24,877 33,569
4. Principal financial risks
The principal financial risks faced by the Company, which include
market price, interest rate and liquidity risks.
In addition to these risks, the Company, as a fully listed company on
the London Stock Exchange and as a Venture Capital Trust, operates in
a complex regulatory environment and therefore faces a number of
related risks. A breach of the VCT Regulations could result in the
loss of VCT status and consequent loss of tax relief's currently
available to Shareholders and the Company being subject to capital
gains tax. Serious breaches of other regulations, such as the UKLA
Listing Rules, the Companies Act 1985 and the Companies Act 2006
could lead to suspension from the Stock Exchange and damage to the
Company's reputation.
The Board reviews and agrees policies for managing each of these
risks. They receive quarterly reports from the Managers which monitor
the compliance of these risks, and place reliance on the Managers to
give updates in the intervening periods. These policies have remained
unchanged since the beginning of the financial period.
The principal financial risks are outlined further as follows:
Market price risk
Market price risk arises from uncertainty about the future prices of
financial instruments held in accordance with the Company's
investment objectives. It represents the potential loss that the
Company might suffer through holding market positions in the face of
market movements. At 28 February 2009, the unrealised loss on AIM
quoted investments was £1,507,100 (2008: loss £885,000).
The investments the Company holds are, in the main, thinly traded and
as such the prices are more volatile than those of more widely traded
securities. In addition, the ability of the Company to realise the
investments at their carrying value may at times not be possible if
there are no willing purchasers. The ability of the Company to
purchase or sell investments is also constrained by the requirements
set down for Venture Capital Trusts.
The Board considers each investment purchase to ensure that an
acquisition will enable the Company to continue to have an
appropriate spread of market risk and that an appropriate risk reward
profile is maintained.
It is not the Company's policy to use derivative instruments to
mitigate market risk, as the Board believes that the effectiveness of
such instruments does not justify the cost involved.
Interest rate risk
The Company receives interest on its cash deposits at a rate agreed
with its banker, while investments in loan stock and fixed interest
investments predominately attract interest at fixed rates. As the
Company must comply with the VCT regulations, increases in interest
rates could lead to a potential breach of these regulations.
The Company therefore monitors the level of income received from
fixed, floating and non interest rate assets to ensure that the
regulations are not breached.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument
is unable to discharge a commitment to the Company made under that
instrument.
Credit risk in respect of investments in liquidity funds is minimised
by, where possible, investing in AAA rated funds.
Investments in loan stocks comprise a fundamental part of the
Company's venture capital investments and are managed within the main
investment management procedures.
Cash is mainly held by Bank of Scotland plc, which is an A rated
financial institution and, consequently the Directors consider that
the risk profile associated with cash deposits is low.
Interest, dividends and other receivables are predominantly covered
within the investment management procedures.
Liquidity risk
Liquidity risk is the risk that the Company encounters difficulties
in meeting obligations associated with its financial liabilities. As
the Company only ever has a very low level of creditors and has no
borrowings, the Board believes that the Company's exposure to
liquidity risk is minimal.
5. Related party transactions
Beringea Limited, of which Malcolm Moss is a director, acted as
promoter for the Offers for Subscription dated 11 February 2008 and
agreed to underwrite the costs of the Offer in return for a fee of
5.5% of the monies raised. No issue costs were due or outstanding at
the year end. Beringea Limited was also the investment manager and
provided investment management to the Company during the year. The
fees relating to this service, together with performance incentive
fees due in the year under the agreement, amounted to £1,324,000
(2008: £1,716,000) (inclusive of VAT where applicable), of which
£716,000 (2008: £450,000) was outstanding at the year end. Beringea
Limited (and subsequently, Beringea LLP, of which Malcolm Moss is a
partner) also acted as promoter to the "Linked D Share Offer"
launched in November 2008. Beringea LLP/Beringea Limited receives
5.5% of the gross proceeds of the Offer, out of which it must pay the
costs of the offer including initial commissions.
The Company has an agreement with Downing Management Services
Limited, a company of which Nicholas Lewis is a director, to provide
administration services to the Company for a fee of £38,000 (plus VAT
& RPI adjustment) per annum. The total fee relating to this service
amounted to £48,000 (2008: £47,000), of which £12,000 (2008: £12,000)
was outstanding at the year end.
Downing Corporate Finance Limited, a company of which Nicholas Lewis
is a director and shareholder, was entitled to performance incentive
fees during the year totalling £74,000 (2008: £84,000) (inclusive of
VAT), of which £64,000 (2008: £21,000) was outstanding at the year
end.
Proven Growth and Income VCT plc is a company of which Nicholas
Lewis, Andrew Davison and Malcolm Moss are directors. At the year end
the company was owed £929,344 in respect of subscription monies for D
shares, this amount is included in other creditors.
Announcement based on audited accounts
The financial information set out in this announcement does not
constitute the Company's statutory financial statements in accordance
with section 434 Companies Act 2006 for the year ended 28 February
2009, but has been extracted from the statutory financial statements
for the year ended 28 February 2009, which were approved by the Board
of Directors on 9 June 2009 and will be delivered to the Registrar of
Companies following the Company's Annual General Meeting. The
Independent Auditor's Report on those financial statements was
unqualified and did not contain any emphasis of matter nor statements
under s 498(2) and (3) of the Companies Act 2006.
The statutory accounts for the year ended 29 February 2008 have been
delivered to the Registrar of Companies and received an Independent
Auditors report which was unqualified and did not contain any
emphasis of matter nor statements under S237(2) or (3) of the
Companies Act 1985.
A copy of the full annual report and financial statements for the
year ended 28 February 2009 will be printed and posted to
shareholders shortly. Copies will also be available to the public at
the registered office of the Company at 39 Earlham Street, London
WC2H 9LT and will be available for download from www.provenvcts.com
and www.downing.co.uk .
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This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
