Final Results
ProVen VCT plc
Final results for the year ended 28 February 2010
Financial summary
Ordinary 'C' Shares 'D' Shares
Shares
2010 2009 2010 2009 2010 2009
As at 28 February
pence pence pence pence pence pence*
Net asset value per share 54.80 57.70 75.50 75.60 92.20 n/a
Dividends paid since launch 93.45 92.45 4.75 3.75 - n/a
Total return (net asset value plus 148.25 150.15 80.25 79.35 92.20 n/a
dividends paid since launch)
Year on year change in:
VCT total return -1.3% 1.1% n/a
FTSE All Share Index total return 47.3% 47.3% 47.3%
* There were no 'D' shares in issue at 28 February 2009.
Chairman's Statement
I am pleased to present the Annual Report for ProVen VCT plc for the year ended
28 February 2010 and would like to welcome any new shareholders who may have
subscribed under the Company's recent Linked 'D' Share offer or the Ordinary
Share Top-Up Offer.
Against a background of unprecedented volatility in stock markets, the
continuing uncertainty about the economy has held back development of many
smaller companies. The Investment Manager has also taken a cautious approach to
investing in this climate. This has resulted in a relatively low level of
investment activity during the year. The Board recognises that this has been a
risky time for investing and is supportive of the Investment Manager's patient
approach to identifying and securing suitable investment opportunities. The
valuations of unquoted businesses are generally a discounted reflection of stock
market pricing and it is therefore pleasing to be able to report that overall
the existing portfolio has performed satisfactorily.
Net asset value
Ordinary Shares
At the year end, the Company's net asset value per Ordinary Share ("Ordinary
NAV") stood at 54.8p, a decrease of 1.9p per share or 3.3% over the year after
adjusting for the dividend of 1.0p per Ordinary Share which was 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 148.25p 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 75.5p, an increase of 0.9p per share or 1.2% over the year after
adjusting for the dividend of 1.0p per 'C' Share which was 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 80.25p per share,
compared to an original investment, net of income tax relief, of 70p per share.
'D' Shares
At the year end, the Company's net asset value per 'D' Share ("'D' Share NAV")
stood at 92.2p. No dividends have been paid to 'D' Shareholders to date.
Portfolio activity and valuation
Ordinary Share pool
The economic climate has not been supportive of investment realisations at
attractive prices, nor has new investment been easy. A number of new investment
opportunities were progressed to an advanced stage, but they have proved
impossible to complete on acceptable terms. Accordingly, the investment activity
in the Ordinary Share pool during the year comprised one new and two follow-on
investments totalling £1.2 million and a small number of realisations, primarily
from repayments of loan stock, which produced total proceeds of £529,000.
The detailed review of the investment valuations of the unquoted portfolio at
the year end has resulted in a number of investments showing increases and
decreases in value over the year. The net effect was such that the net
unrealised loss for the year was £65,000. Further details are provided in the
Investment Manager's Review and the Investment Portfolio.
'C' Share pool
The 'C' Share pool made two new investments and two follow-on investments during
the year at a total cost of £1.8 million.
In reviewing the unquoted investment valuations at the year end, the Board again
made a number of changes to the valuations, with the majority of these being
uplifts. Net unrealised gains on the 'C' Share portfolio for the year came to
£617,000. Again further details are provided in the Investment Manager's Review
and the Investment Portfolio.
'D' Share pool
The 'D' Share pool did not make any investments during the year and held its
funds in bank deposits and liquidity funds as at the year end.
Results and dividends
The total return on ordinary activities for the year was as follows:
Revenue Capital Total
£'000 £'000 £'000
Ordinary Shares (200) (275) (475)
'C' Shares (335) 452 117
'D' Shares (56) (69) (125)
(591) 108 (483)
On 10 July 2009, the Company paid final dividends of 1.0p per Ordinary Share and
1.0p per 'C' Share.
The Board is proposing to pay a final dividend of 8.0p per Ordinary Share for
the year ended 28 February 2010. No final dividends are proposed in respect of
the 'C' Shares or 'D' Shares. Subject to Shareholder approval, the Ordinary
Share dividend will be paid on 27 August 2010 to Shareholders on the register at
23 July 2010.
New fundraisings
Linked 'D' Share issue
In November 2009, the Company launched a second Linked 'D' Share offer, in
conjunction with ProVen Growth and Income VCT plc. Up to the date of this
report, the offer has raised a total of £5.2 million of which £2.6 million is
allocated to 'D' Shares issued and to be issued by ProVen VCT plc. No shares
were issued before 28 February 2010.
The offer is scheduled to close on 29 October 2010 and will provide the Company
with additional funds over which the fixed running costs of the Company can be
borne and to make further venture capital investments.
Ordinary Share Top-up Offer
In November 2009, the Company also launched an Ordinary Share Top-Up offer, in
conjunction with ProVen Growth and Income VCT plc and ProVen Health VCT plc. The
offer closed on 28 May 2010 having raised a total of £2.1 million of which £1.2
million was allocated to Ordinary Shares issued by ProVen VCT plc. No shares
were issued before 28 February 2010.
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 repurchased 368,855 Ordinary Shares at an average
price of 48.5p per share and 41,460 'C' Shares at an average price of 66.6p per
share for cancellation. No 'D' Shares were repurchased in the year.
The Board intends to continue to make purchases of its shares when they become
available in the market and has a current policy of purchasing Ordinary Shares
and 'C' Shares at a price equivalent to a 10% discount to the latest published
NAV and at a 5% discount in respect of 'D' Shares.
A special resolution to allow the Board to continue to purchase shares for
cancellation will be proposed at the forthcoming AGM.
Investment policy
In light of the current market conditions, the Board has reviewed the Company's
Investment Policy and is proposing to make a minor adjustment to increase
flexibility in respect of the non-qualifying investments. The Investment Manager
sees opportunities to make further investments in existing portfolio companies
or other companies familiar to the Investment Manager that, for technical
reasons, would not be VCT qualifying, for example a purchase of shares from an
exiting member of an investee company's management team. Such investment
opportunities can be at attractive prices and are, of course, in companies
well-known to the Investment Manager.
Further details regarding Resolution 8 to be proposed at the AGM seeking
shareholder approval for the proposed change are set out in the Report of the
Directors.
Board composition
In September 2010, a UK Listing Rule in relation to Directors' Independence
becomes effective for all VCTs. Under the rule, Directors who also serve on the
Board of other funds managed by the same investment manager are deemed not to be
independent of the investment manager. In view of this, Nick Lewis has agreed to
step down from the Board of ProVen VCT plc at the forthcoming AGM. Nick will
continue to be a director of ProVen Growth and Income VCT plc.
The Board has decided not to seek to appoint a replacement director as it has
concluded that a board comprising three directors is sufficient for a VCT of
this size. Some changes to the individual directors' fees have been agreed to
reflect the changes to the Board, however, total directors' fees will fall
slightly.
I would like to thank Nick for his valuable contribution as a director since the
Company's' launch in 2000 and look forward to continuing to hear his views as a
result of his ongoing role in ProVen Growth and Income VCT plc
Annual General Meeting
The Annual General Meeting ("AGM") of the Company will be held at 39 Earlham
Street, London WC2H 9LT at 12:45Â pm on 24 August 2010.
Five items of special business will be proposed at the AGM in respect of share
buybacks, adjustment to the Investment Policy, adoption of updated Articles of
Association (as described in the Report of the Directors) and two resolutions in
connection with authority for the directors to allot shares.
Outlook
Although there has been a low level of investment activity over the year under
review, the Board takes comfort from the fact that the Company's NAVs have been
reasonably stable over this difficult year and are generally satisfied with the
performance of the majority of the existing portfolio companies.
The Board expects to see higher levels of new investment activity during the
coming year, in particular in respect of the 'D' Share pool. This has already
been evident since the year end, during which time the Company has made one new
investments. Although the recession may be coming to an end, we are still
expecting to see continuing turmoil and growth uncertainty. The new Government
has unprecedented challenges to deal with and, as a result, we must expect
uncomfortable and, possibly, abrupt policy changes which will provide
opportunities and reverses to the small enterprises that form our investment
pools. Nonetheless, this phase of the economic cycle has historically yielded
excellent growth opportunities. Accordingly, we will be looking to the
Investment Manager to continue to generate dealflow from which the Company can
secure attractive new investments.
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 over £60 million of venture
capital funds in the UK 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 share pools are initially kept as separate pools of assets. The
Ordinary and 'C' Share pools are due to merge in 2012; the 'D' Shares will
remain as a separate pool.
The year covered by this report was one of the most challenging periods for
making new investments for many years. With the UK economy in recession for most
of the period and the stock market falling dramatically between September 2008
and March 2009, confidence among the owners and directors of small growth
companies was in short supply. Consequently, few businesses were seeking to
raise additional capital, as companies put their expansion plans on hold until
there was visibility of a return to economic growth. Likewise, we were cautious
when reviewing new investment opportunities, focusing our attention on companies
with exceptional management and strong competitive positions. Against this
background, the volume of new investments made by the Company was much lower
than in previous years, reflecting the trend across the venture capital
industry. Following the UK's return to economic growth, the flow of new
investment opportunities has increased significantly and we expect that the rate
of new investment will increase during the year ending 28 February 2011. The
competition for good deals remains fierce, however, and we will be vigilant
about not overpaying for investments.
Ordinary Share pool - portfolio activity & valuation
One new investment of £470,000 and two follow on investments totalling £733,000
were made from the Ordinary Share pool during the year. The new investment, made
alongside the 'C' Share pool, was in Think, a Newcastle based digital agency.
The investment will enable Think to enhance its strategic capabilities and
develop its creative team. Beringea has significant experience in the digital
media sector including a number of successful exits and Think, with its
impressive client list and strong management team is, we believe, well
positioned for continued growth.
Follow on investments were made in Overtis to support continued development of
their software security solutions and in Eagle Rock Entertainment Group to
support a further acquisition. Eagle Rock continues to perform well despite the
recent economic difficulties and is further strengthening its proposition by
identifying new ways to leverage its impressive rights catalogue. The recent
purchase of Edel Music further adds to the company's attractiveness as a
potential acquisition target.
Since the year end, the Ordinary Share pool has made an investment of £468,000
in healthy eating chain Tossed, further details of which are provided below.
At 28 February 2010, the Company's Ordinary Share pool comprised 16 investments
with a total cost of £10.6 million and a valuation of £9.5 million. In addition,
the Ordinary Share pool held cash and liquidity funds of £4.4 million. Espresso
Group and Eagle Rock together account for 35% of the Ordinary Share investments.
Espresso is entering the next phase of its development having secured a
significant share of the primary school market. The company continues to
increase its share of the UK secondary school market and is exploring a number
of international expansion opportunities. Espresso's launch in Sweden has
already demonstrated its international potential and, since the year end, the
Espresso primary school service has also been launched in the United States.
Espresso made a further scheduled repayment of loan notes during the year, as
did Ashford Colour Press.
The investment in GB Industries, which had previously been fully provided
against, was finally disposed of and disappointingly Optima Data Intelligence
Solutions (ODIS) was placed into administration. ODIS suffered from the impact
of the economic downturn on its clients in the magazine publishing industry. The
company was unable to achieve a trade sale and an orderly administration was the
only viable alternative. ID Data Group also went into administration but has had
no current year impact as it had been fully written down in previous years.
'C' Share pool - portfolio activity & valuation
The initial investment phase for the 'C' Share pool, raised primarily in the tax
year 2006/2007, was completed at the end of the year and the necessary VCT
qualifying totals were reached. Two new investments of £1,470,000 were made in
Think (£470,000), alongside the Ordinary Share pool, and Lazurite (£1 million),
an acquisition vehicle, originally funded by ProVen Growth and Income VCT. A
number of interesting opportunities for Lazurite have been investigated but as
yet no investment has been made. Follow on investments were made in Overtis
(£114,000) and Eagle Rock (£215,000).
At 28 February 2010, the Company's 'C' Share pool comprised 16 investments with
a total cost of £9.3 million and a valuation of £7.1 million. In addition, the
'C' Share pool held cash and liquidity funds of £4.0 million. Three investments,
Fjordnet, Lazurite and Charterhouse Leisure, accounted for 27% of the 'C' Share
investments, with Fjordnet being the largest contributor at 10%. Since the
Company's investment in Fjordnet, the digital media agency has opened two new
offices and now has operations in London, Helsinki, Berlin, Madrid and New York.
The new international offices have enabled Fjordnet to respond to the needs of
global clients. The company has experienced impressive growth, is well managed
and has a strong balance sheet with significant cash. Charterhouse Leisure is a
small restaurant chain operating under the brand name "Coal Grill & Bar". The
CEO is an experienced restaurateur who ran the Ma Potters restaurant chain in
which the Company invested and made a strong return. Both Fjordnet and
Charterhouse have performed well in challenging trading environments and show an
unrealised uplift against the original investment cost. Dianomi made a scheduled
repayment of loan notes.
Since the year end, the 'C' Share pool has made an investment of £345,000 in
Tossed, and a follow on investment of £171,000 in Steak Group. The trading
subsidiary of The Vending Corporation, which had been previously fully provided
against, went into administration in March 2010.
'D' Share pool - portfolio activity & valuation
At 28 February 2010, the 'D' Share portfolio comprised net assets of £5.1
million. This comprised net cash, after operating expenses, from the original
'D' Share offer which closed in October 2009 and funds from unallotted
subscriptions from the subsequent offer launched in November 2009. No
investments were made during the period.
In April 2010, £183,000 was invested from the 'D' Share pool in Tossed as part
of a total £1.5 million investment from ProVen VCT and ProVen Growth and Income
VCT. Tossed is a chain of healthy eating outlets offering ethically sourced
food. The company currently has six outlets in central London and the ProVen
VCTs' investment will provide funds for further development. The CEO, Vincent
McKevitt, has been recognised as one of the leading young entrepreneurs in the
country.
Proposed change in investment policy
During the year we have been presented with several opportunities to make
further investments in portfolio companies which are performing well but where
the additional investment would not be VCT qualifying for technical reasons. We
therefore support the Board's proposal that the Company's investment policy is
changed to allow a portion of the non-qualifying part of the Company's assets to
include investments originated in line with the Company's qualifying VCT policy
but which do not qualify under the VCT rules for technical reasons. We believe
that this will allow us to achieve a higher total investment return.
Outlook
The UK economy appears to be growing again, although at a relatively slow rate.
Historically, this phase of the economic cycle has been the best for making
venture capital investments, as entry prices are at a cyclical low point. As the
economy recovers over the next few years, well managed small companies have the
potential to grow much more quickly than larger businesses, resulting in rapid
increases in valuation and ultimately profitable disposals. We are already
seeing a significant increase in the flow of new opportunities which could
result in a healthy crop of new investments, although we remain highly selective
about the businesses in which the Company invests.
We continue to spend a substantial amount of time working with the Company's
existing portfolio companies to ensure that they are well positioned to take
advantage of the economic upturn. The benefits of this supportive approach to
the portfolio are already being seen in the companies' performance and we are
cautiously optimistic that this trend will strengthen throughout the current
financial year.
Beringea LLP
Investment activity during the year is summarised as follows:
Additions
Cost
£'000
Ordinary Share pool
Eagle Rock Entertainment Group Limited* 590
Think Limited ** 470
Overtis Group Limited 143
Total Ordinary Share pool 1,203
'C' Share pool
Lazurite Limited 1,000
Think Limited ** 470
Eagle Rock Entertainment Group Limited* 215
Overtis Group Limited 114
Total 'C' Share pool 1,799
Total 3,002
Disposals
(Loss) / Total
gain realised
Market value Disposal (loss)/ gain
Cost at 01/03/09 against during the
proceeds year
cost
£'000 £000 £'000 £'000 £'000
Ordinary Share
pool
Optima Data Intelligence 456
Services Limited 1,169 - (1,169) (456)
GB Industries -
Limited ** 1,134 - (1,134) -
Espresso Group 382
Limited 382 382 - -
ID Data plc 263 - - (263) -
Ashford Colour 58
Press Limited 125 125 - -
Sports Holdings -
Limited - 40 40 40
3,073 896 547 (2,526) (416)
'C' Share pool
Dianomi Limited 21 21 21 - -
21 21 21 - -
Total 3,094 917 568 (2,526) (416)
* Non qualifying investment
** Partially non-qualifying investment
Investment Portfolio - Ordinary Share Pool
as at 28 February 2010
Ordinary Share portfolio of investments
The following investments were held at 28 February 2010:
Valuation movement in
year % of portfolio
Cost Valuation
£'000 by value
£'000 £'000
Top ten venture capital
investments (by value)
Espresso Group Limited** 1,257 3,059 (721) 22.0%
Eagle Rock Entertainment 1,010 1,734 602 12.5%
Group Limited**
SPC International 1,618 705 (562) 5.1%
Limited**
Saffron Media Group 480 637 157 4.6%
Limited**
Overtis Group Limited** 643 632 (11) 4.5%
Ashford Colour Press 625 492 331 3.5%
Limited**
Think Limited 470 470 - 3.4%
Campden Media Limited** 975 463 49 3.3%
Donatantonio Limited** 582 379 102 2.7%
Pilat Media Global plc* ** 173 307 220 2.2%
7,833 8,878 167 63.8%
Other venture capital 2,752 665 901 4.8%
investments
Total venture capital 10,585 9,543 1,068 68.6%
investments
Liquidity funds 3,190 22.9%
Cash at bank and in hand 1,172 8.5%
Total Ordinary Share
investments 13,905 100%
All venture capital investments are unquoted unless otherwise stated.
Other venture capital investments at 28 February 2010 comprise Fjordnet
Limited**, UBC Media Group plc* **, Sports Holdings Limited**, Coolabi plc* **,
Baby Innovations S.A. t/a Steribottle** and Isango! Limited**
* Quoted on AIM
** Investments also held by ProVen Growth and Income VCT
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 2010
'C' Share portfolio of investments
The following investments were held at 28 February 2010:
Valuation movement in
year % of portfolio
Cost Valuation
£'000 £'000 by value
£'000
Top ten venture capital investments (by value)
Fjordnet Limited** 800 1,153 353 10.4%
Lazurite Limited** 1,000 1,000 - 9.0%
Charterhouse Leisure 700 865 304 7.8%
Limited**
Chess Technologies 600 659 59 5.9%
Limited**
Donatantonio Limited** 885 577 155 5.2%
Overtis Group Limited** 514 505 (9) 4.5%
Path Group Limited** 1,000 496 (504) 4.5%
Think Limited 470 470 - 4.3%
SPC International 403 397 (2) 3.6%
Limited**
Eagle Rock Entertainment 215 365 151 3.3%
Group Limited**
6,587 6,487 507 58.5%
Other venture capital 2,667 627 110 5.7%
investments
Total venture capital 9,254 7,114 617 64.2%
investments
Liquidity funds 3,460 31.2%
Cash at bank and in hand 519 4.6%
Total 'C' Share 11,093 100%
investments
All venture capital investments are unquoted unless otherwise stated.
Other venture capital investments at 28 February 2010 comprise Heritage Partners
Limited**, Steak Media Limited**, Dianomi Limited**, Breeze Tech Limited**,
Isango! Limited** and The Vending Corporation Limited**.
** Investments also held by ProVen Growth & Income VCT.
All venture capital investments are unquoted and are registered in England and
Wales.
'D' Share portfolio of investments
The 'D' Share pool did not hold any venture capital investments as at 28
February 2010.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Report of the Directors, the
Directors' Remuneration Report and the financial statements in accordance with
applicable law and regulations. They are also responsible for ensuring that the
annual report includes information required by the Listing Rules of the
Financial Services Authority.
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).
Under company law the directors must not approve the financial statements unless
they are satisfied that they 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;
* state whether applicable accounting standards have been followed, subject to
any material departures disclosed and explained in the financial statements;
and
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and to
enable them to ensure that the financial statements, and the Directors'
Remuneration Report, comply with the requirements of the Companies Act 2006.
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 the maintenance and integrity of the corporate
and financial information relating to the Company included on the Managers'
websites. Legislation in the United Kingdom governing the preparation and
dissemination of the financial statements and other information included in
annual reports may differ from legislation in other jurisdictions.
By Order of the Board
Grant Whitehouse
Secretary
39 Earlham Street
London WC2H 9LT
30 June 2010
Income Statement
for the year ended 28 February 2010
Company Position
Year ended 28 February Year ended 28 February
2010 2009
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income 266 - 266 1,442 - 1,442
Gains/ (losses) on - 591 591 - (4,865) (4,865)
investments
266 591 857 1,442 (4,865) (3,423)
Investment management fees (144) (431) (575) (143) (429) (572)
Performance incentive fees - (53) (53) (109) (717) (826)
Recoverable VAT - 1 1 107 320 427
Other expenses (713) - (713) (256) (15) (271)
Return on ordinary
activities before tax (591) 108 (483) 1,041 (5,706) (4,665)
Tax on ordinary activities - - - (287) 287 -
Return attributable to
equity shareholders (591) 108 (483) 754 (5,419) (4,665)
Return per Ordinary Share (0.8p) (1.2p) (2.0p) 2.0p (14.5p) (12.5p)
Return per 'C' Share (2.3p) 3.1p 0.8p 1.9p (13.2p) (11.3p)
Return per 'D' Share (1.1p) (1.4p) (2.5p) n/a n/a n/a
All revenue and capital movements in the year for the Ordinary Shares, 'C'
Shares, and 'D' 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 in the current and prior year as shown above and below.
Other than revaluation movements arising on investments held at fair value
through the Income Statement, there were no differences between return/loss as
stated on above and below at historical cost.
There are no 'D' Share comparative figures; the first allotment of 'D' Shares
was in March 2009.
Income Statement
for the year ended 28 February 2010
Split as:
Ordinary Shares
Year ended 28 February Year ended 28 February
2010 2009
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income 170 - 170 847 - 847
(Losses)/gains on - (26) (26) - (3,014) (3,014)
investments
170 (26) 144 847 (3,014) (2,167)
Investment management fees (66) (197) (263) (71) (212) (283)
Performance incentive fees - (53) (53) (109) (717) (826)
Recoverable VAT - 1 1 95 285 380
Other expenses (304) - (304) (118) (10) (128)
Return on ordinary (200) (275) (475) 644 (3,668) (3,024)
activities before tax
Tax on ordinary activities - - - (172) 172 -
Return attributable to (200) (275) (475) 472 (3,496) (3,024)
equity shareholders
'C' Shares
Year ended 28 February Year ended 28 February
2010 2009
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income 75 - 75 595 - 595
Gains/ (losses) on - 617 617 - (1,851) (1,851)
investments
75 617 692 595 (1,851) (1,256)
Investment management fees (55) (165) (220) (72) (217) (289)
Performance incentive fees - - - - - -
Recoverable VAT - - - 12 35 47
Other expenses (355) - (355) (138) (5) (143)
Return on ordinary activities
before tax (335) 452 117 397 (2,038) (1,641)
Tax on ordinary activities - - (116) 116 -
Return attributable to equity
shareholders (335) 452 117 281 (1,922) (1,641)
Income Statement
for the year ended 28 February 2010
'D' Shares
Year ended 28 February Year ended 28 February
2010 2009
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income 21 - 21 - - -
(Losses)/ gains on investments - - - - - -
21 - 21 - - -
Investment management fees (23) (69) (92) - - -
Performance incentive fees - - - - - -
Recoverable VAT - - - - - -
Other expenses (54) - (54) - - -
Return on ordinary activities
before tax (56) (69) (125) - - -
Tax on ordinary activities - - - - - -
Return attributable to equity
shareholders (56) (69) (125) - - -
Reconciliation of Movements in Shareholders' Funds
for the year ended 28 February 2010
Year ended 28 February 2010 Year ended 28 February 2009
Ordinary 'C' 'D' Ordinary 'C' 'D'
Total Total
Shares Shares Shares Shares Shares Shares
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening
shareholders'
funds 13,824 11,053 - 24,877 20,469 13,100 - 33,569
Issue of shares - - 5,526 5,526 1,211 - - 1,211
Share issue costs - - (304) (304) (67) - - (67)
Purchase of own (180) (28) - (208) (380) (4) - (384)
shares
Total recognised
(losses)/gains
for the year (475) 117 (125) (483) (3,024) (1,641) - (4,665)
Distributions (240) (146) - (386) (4,385) (402) - (4,787)
Closing
shareholders' 12,929 10,996 5,097 29,022 13,824 11,053 - 24,877
funds
.Balance Sheet
as at 28 February 2010
28 February 2010 28 February 2009
Ordinary 'C' 'D' Ordinary 'C' 'D'
Total Total
Shares Shares Shares Shares Shares Shares
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Fixed assets
Investments 9,543 7,114 - 16,657 8,913 4,719 - 13,632
Current assets
Debtors 31 9 1 41 615 308 - 923
Current 3,190 3,460 3,550 10,200 4,190 6,010 - 10,200
investments
Cash at bank 1,172 519 2,633 4,324 2,711 119 - 2,830
and in hand
4,393 3,988 6,184 14,565 7,516 6,437 - 13,953
Creditors:
amounts (106) (1,087)
falling due
within one
year (1,007) (2,200) (2,605) (103) - (2,708)
Net current 3,386 3,882 5,097 12,365 4,911 6,334 - 11,245
assets
Total assets
less current
liabilities/ 12,929 10,996 5,097 29,022 13,824 11,053 - 24,877
Net assets
Capital and
reserves
Called up 1,179 3,643 55 4,877 1,197 3,653 - 4,850
share capital
Capital
redemption 185 12 - 197 167 2 - 169
reserve
Share premium - - 5,167 5,167 4,836 10,159 - 14,995
Special 8,961 9,676 - 18,637 7,081 - - 7,081
reserve
Capital
reserve 3,553 - (69) 3,484 3,793 (144) - 3,649
-realised
Capital
reserve - (1,041) (2,139) - (3,180) (3,542) (2,756) - (6,298)
unrealised
Revenue 92 (196) (56) (160) 292 139 - 431
reserve
Equity
shareholders 12,929 10,996 5,097 29,022 13,824 11,053 - 24,877
funds
Net asset
value per
share 54.8p 75.5p 92.2p 57.7p 75.6p n/a
Cash Flow Statement
for the year ended 28 February 2010
Year ended 28 February 2010 Year ended 28 February 2009
Ordinary 'C' 'D' Ordinary 'C' 'D'
Total Total
Shares Shares Shares Shares Shares Shares
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Net cash
(outflow)/inflow (1,463) (198) 961 (700)
from operating 69 (88) - (19)
activities
Capital
expenditure
Purchase of (1,203) (1,799) - (3,002) (1,957) (2,751) - (4,708)
investments
Sale of 547 21 - 568 5,465 - 5,465
investments
Net cash
(outflow)/inflow (656) (1,778) - (2,434)
from capital
expenditure 3,508 (2,751) - 757
Equity dividends (146) -
paid (240) (386) (4,385) (402) - (4,787)
Management of
liquid resources
Purchase of
current - - (3,550) (3,550)
investments held
as liquidity
funds (4,190) (6,010) - (10,200)
Withdrawal from 1,000 2,550 - 3,550
liquidity funds 4,400 7,950 - 12,350
Net cash inflow/
(outflow) from 1,000 2,550 (3,550) - 210 1,940 - 2,150
liquid resources
Net cash
(outflow)/ (1,359) 428 (2,589) (3,520)
inflow before
financing (598) (1,301) - (1,899)
Financing
Proceeds from - - 5,526 5,526
share issues 2,857 - - 2,857
Share issue - - (304) (304)
costs (67) - - (67)
Purchase of own (180) (28) - (208)
shares (426) (6) - (432)
Net cash
(outflow)/ (180) (28) 5,222 5,014
inflow from 2,364 (6) - 2,358
financing
Increase /
(decrease) in (1,539) 400 2,633 1,494 1,766 (1,307) - 459
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 and
Venture Capital Trusts" revised January 2009 ("SORP").
The financial statements are prepared under the historical cost convention
except for the revaluation of certain financial instruments measured at fair
value.
The Company implements new Financial Reporting Standards ("FRS") issued by the
Accounting Practices Board when required.
Going Concern
The directors have, at the time of approving the financial statements, a
reasonable expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. Thus they continue to adopt
the going concern basis of accounting in preparing the financial statements.
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
Investments are designated as "fair value through profit or loss" assets due to
investments being managed and performance evaluated on a fair value basis. A
financial asset is designated within this category if it is both acquired and
managed, with a view to selling after a period of time, in accordance with the
Company's documented investment policy. The fair value of an investment upon
acquisition is deemed to be cost. Thereafter investments are measured at fair
value in accordance with the International Private Equity and Venture Capital
Valuation Guidelines ("IPEV Guidelines") together with FRS26 - Financial
Instruments: Recognition and Measurements.
New IPEV Guidelines were issued in September 2009 and have been used for the
valuation as at 28 February 2010. The Directors and the Investment Manager
consider that the valuations prepared under the new IPEV Guidelines do not
differ materially from the valuations that would have been proposed under the
previous version of the IPEV Guidelines.
Publicly traded investments are measured using bid prices.
The valuation methodologies used by the Directors for assessing the fair value
of unquoted investments are as follows:
* Price of recent investment;
* Multiples;
* Net assets;
* Discounted cash flows or earnings (of underlying business);
* Discounted cash flows (from the investment); and
* Industry valuation benchmarks.
The methodology applied takes account of the nature, facts and circumstances of
the individual investment and uses reasonable data, market inputs, assumptions
and estimates in order to ascertain fair value.
Where an investee company has gone into receivership or liquidation, or there is
little likelihood of a recovery from a company in administration, the loss on
the investment, although not physically disposed of, is treated as being
realised.
Gains and losses arising from changes in fair value are included in the Income
Statement for the year as a capital item.
It is not the Company's policy to exercise significant influence over investee
companies. Therefore, the results of these companies are not incorporated into
the Income Statement except to the extent of any income accrued. This is in
accordance with the SORP that does not require portfolio investments to be
accounted for using the equity method of accounting.
Current assets investments
Current assets investments comprise investments in liquidity funds with AAA
rating and are redeemable on call. These investments are fair value through
profit or loss assets and 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 time basis, by reference to the principal
outstanding and at the effective interest rate applicable and only where there
is reasonable certainty of collection. Income which is not capable of being
received within a reasonable period of time is reflected in the capital value of
the investments.
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 has 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.
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. Deferred tax
assets are recognised to the extent that it is regarded as more likely than not
that they will be recovered. Deferred tax assets and liabilities are not
discounted.
Other debtors and other creditors
Other debtors (including accrued income) and other creditors are included within
the accounts at amortised cost, equivalent to the fair value of the expected
balance receivable/payable by the Company.
Share issue costs
Expenses in relation to share issues are deducted from the Share Premium
Account.
2 Basic and diluted return per share
    Ordinary Shares 'C' Shares 'D' Shares
Revenue return per share based on:
Net revenue after taxation (£'000) (200) (335) (56)
Weighted average number of shares in 23,857,331 14,610,800 5,077,961
issue
Pence per share (0.8p) (2.3p) (1.1p)
Capital return/(loss) per share based
on:
Net capital (loss)/ gain for the (275) 452 (69)
financial year (£'000)
Weighted average number of shares in 23,857,331 14,610,800 5,077,961
issue
Pence per share (1.2p) 3.1p (1.4p)
As the Company has not issued any convertible securities or Share options, there
is no dilutive effect on return per share. The return per share disclosed
therefore represents both basic and diluted return per share.
3 Principal financial risks
As a VCT, the majority of the Company's assets are represented by financial
instruments which are held as part of the investment portfolio. In order to
ensure continued compliance with the relevant VCT regulations and to be in a
position to deliver the long-term capital growth which is part of the Company's
investment objective, the Board is very much aware of the need to manage and
mitigate the risks associated with these financial instruments.
The management of these risks starts with the application of a clear investment
policy which has been developed by the Board who are experienced investment
professionals. Furthermore, the Board has appointed an experienced investment
manager to whom they have communicated the Company's investment objectives and
whose remuneration is linked to the achievement of those objectives. The
Investment Manager reports regularly to the Board on performance.
In assessing the risk profile of its investment portfolio, the Board has
identified two principal classes of financial instrument. Instruments deemed to
be "fair value through profit or loss account" assets are recognised as such on
initial recognition.
In addition to its investment portfolio, the VCT maintains a portfolio of
liquidity funds and a cash balance with one of the main UK banks. The Directors
consider that the risk profile associated with cash deposits and liquidity fund
investments is low and thus the carrying value in the financial statements is a
close approximation of the fair value.
The Board has reviewed the Company's financial risk profile and is of the
opinion that the exposure to financial risk has not changed significantly since
the previous year.
A review of the specific financial risks faced by the Company is presented
below.
Financial liabilities
The Company has no financial liabilities or guarantees, other than as disclosed
within the balance sheet.
Currency exposure
As at 28 February 2010, the Company had one investment incorporated in Madeira
which trades in Euros and was valued at £Nil (2009: £Nil) and represented 0% of
Net Assets (2009: 0%).
Market risks
The key market risks to which the Company is exposed are interest rate risk and
market price risk. The Company has undertaken sensitivity analysis on its
financial instruments, split into the relevant component parts, taking into
consideration the economic climate at the time of review in order to ascertain
the appropriate risk allocation.
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 attract
interest predominately at fixed rates. A summary of the interest rate profile of
the Company's investments is shown in note below.
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 2010, the
unrealised loss on AIM-quoted investments was £1,036,000 (2009: unrealised loss
£1,507,000).
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.
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.
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.
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.
4 Contingencies, guarantees and financial commitments
The Company has guaranteed bank borrowings on one of its investments,
Donatantonio Limited, amounting to £225,000. A third party has provided a
guarantee to the Company amounting to £112,500 in respect of the above guarantee
such that the Company's net exposure is £112,500.
Apart from the above, the Company has no Contingent liabilities, guarantees and
financial commitments at the year end.
5 Related party transactions
Beringea Limited, of which Malcolm Moss is a director (and subsequently Beringea
LLP of which Malcolm Moss is a partner), acted as promoter for the Linked 'D'
Share Offer for Subscription dated November 2008 and agreed to underwrite the
costs of the Offer in return for a fee of 5.5% of the monies raised. The fees
amounted to £304,000 in the year. No issue costs were due or outstanding at the
year end.
Beringea LLP also acted as promoter to the further Linked 'D' Share Offer and
the Ordinary Share Top up Offer both launched in November 2009. Beringea LLP
receives 5.5% of the gross proceeds of the offers, out of which it must pay the
costs of the offers including initial commissions.
Beringea LLP 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
£624,000 (2009: £1,325,000) (inclusive of VAT where applicable), of which
£149,000 (2009: £660,000) was outstanding at the year end.
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 £43,000 (plus VAT & RPI adjustment) per annum. The total
fee relating to this service amounted to £53,000 (2009: £48,000), of which
£12,000 (2009: £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 £4,000 (2009: £74,000) (inclusive of VAT), of which £4,000 (2009:
£64,000) 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 ProVen Growth and Income
VCT Plc was owed £910,000 in respect of subscription monies for 'D' Shares. This
amount is included in other creditors.
ProVen Health VCT plc is a company which is managed by Beringea LLP. At the end
ProVen Health VCT plc was owed £76,000 in subscriptions monies for Ordinary
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 2010, but has been extracted
from the statutory financial statements for the year ended 28 February 2010,
which were approved by the Board of Directors on 30 June 2010 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 28 February 2009 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 2010 will be printed and posted to shareholders shortly. Copies will
also be available to the public at the registered office of the Company at Kings
Scholars House, 230 Vauxhall Bridge Road, London SW1V 1AU and will be available
for download from www.provenvcts.co.uk and www.downing.co.uk .
[HUG#1428692]
This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the information contained therein.
All reproduction for further distribution is prohibited.
Source: Proven VCT plc via Thomson Reuters ONE
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