Proven VCT plc : Annual Financial Report

PROVEN VCT PLC
ANNUAL FINANCIAL REPORT
YEAR ENDED 29 FEBRUARY 2016

Financial summary

Ordinary Shares as at:	29 February	28 February
	2016 Pence	2015 Pence
Net asset value per share	100.7	100.9
Dividends paid since launch	20.0	15.0
Total return (net asset value plus dividends paid since launch)	120.7	115.9
Year on year change in:
Net asset value per share (adjusted for dividends paid in the year)	4.8%

Chairman's Statement

The year has been one of changing sentiment. We started with an economy that reflected a healthy and confident outlook. The Investment Manager completed a number of attractive investments and generated strong realised returns from two portfolio companies. The Company also raised considerable new capital during the year and after the year end. Towards the end of the year, the EU Referendum has cast a shadow over the economy and changes to the VCT regulations came into effect, with more being announced after the year end, which has focussed investment activity. There remains, however, a plentiful supply of positive and vibrant smaller companies in which the Investment Manager specialises.

Results for the year
The Company's net asset value ("NAV") per share increased by 4.8p over the year (after adding back the dividends of 5.0p paid in the year), an increase of 4.8% on the opening NAV.  At 29 February 2016 the NAV per share stood at 100.7p.

The total return on ordinary activities for the year was £3.2 million, or 5.0p per share (2015: £3.1 million, 5.2p per share), comprising a revenue return of £364,000, or 0.6p per share (2015: £360,000, 0.6p per share) and capital return of £2.8 million, or 4.4p per share (2015: £2.8 million, 4.6p per share).

Dividends
The Company made total dividend payments during 2015 of 5.0p per share.  This comprised two dividends: a final dividend of 2.5p for the year ended 28 February 2015 paid on 31 July 2015, and an interim dividend of 2.5p for the year ended 29 February 2016 paid on 20 November 2015. 

The Board is proposing a final dividend for the year to 29 February 2016 of 4.0p per share to be paid on 15 July 2016 to shareholders on the register at 17 June 2016. The total dividends of 6.5p per share for the year ended 29 February 2016 exceeds the Company's stated dividend target of a 5% dividend yield on NAV and follows the successful partial realisation of the Company's investment in Monica Vinader.
   
Portfolio activity and valuation
The Company invested £3.3 million in four new portfolio companies and £8.6 million in thirteen existing portfolio companies during the year, as well as funding three companies (two new and one existing), set up with the objective of identifying attractive growth capital opportunities, with £9.7 million.

The Company made a number of disposals during the year, most significantly the partial disposal of its investment in Monica Vinader and the sale of its shareholding in IS Solutions at an attractive price. Monica Vinader has been a strong performer in the portfolio and some of the increase in value of the investment has been recognised in previous valuations, but overall the investment cost the Company £1.5 million and the cash realised, together with the remaining equity investment held, represents a total return to date of £8.7 million. The Investment Manager remains positive on the prospects for the business as it looks to expand and develop further. The Company's shareholding in AIM-listed IS Solutions was received as part of the consideration for the Company's disposal of Speed-Trap Holdings last year.  The sale of the remaining investment in IS Solutions in November 2015 generated a realised gain of £1.4 million.  This resulted in an overall profit of £1.9 million and a 2.4x return on the initial cost of the investment in Speed-Trap.

In addition to the realised gains, the investment portfolio increased in value by £3.7 million, or 5.6p per share. Several companies continue to perform strongly and there were notable uplifts in value for Watchfinder and the residual holding in Monica Vinader. There were reductions in value for some other investments, including Utility Exchange Online, which is now valued below cost, and Skills Matter, which has been fully provided against.

Fundraising activities
There has been strong demand for VCT share issues and the Company launched a top-up offer for subscription on 6 March 2015 which raised gross proceeds of £3.4 million. A further full offer was launched on 3 December 2015 and was effectively fully subscribed raising gross proceeds of £33.8 million, all of which was allotted after the year end.

Share buybacks
The Company has a policy of buying back shares that become available in the market at a discount of approximately 5% to the latest published net asset value, subject to the Company having sufficient liquidity.  The Company retains Panmure Gordon to act as its corporate broker. Shareholders who are considering selling their shares may wish to contact Panmure Gordon, who will be able to provide details of the price at which the Company is buying shares.

During the year, the Company purchased 849,635 shares at an average price of 95.1p per share and for an aggregate consideration of £807,624 (net of costs). This represents 1.4% of the shares in issue at the start of the year.  All the shares were subsequently cancelled.

A special resolution to allow the Board to continue to purchase shares for cancellation will be proposed at the forthcoming Annual General Meeting ("AGM").

Performance Fee
The Board negotiated, and the Shareholders approved, revised performance fee arrangements with the Investment Manager in 2011, in order to assist in recruiting and retaining talented investment professionals against competition from other venture capital investment companies. The Company has continued to perform well since the new arrangements were introduced, driven by strong investment returns from companies. The investment return hurdle has been achieved at the year end and a performance fee of £2,554,000 is now payable to the Investment Manager.  A provision for this fee has been included in the accounts and is reflected in the NAV per share.  

Annual General Meeting
The next AGM of the Company will be held in The Dryden Suite, Kingsway Hall Hotel, 66 Great Queen Street, Covent Garden, London WC2B 5BX at 9.30 a.m. on Tuesday 5 July 2016. 

Three items of special business will be proposed at the AGM.  There are two resolutions giving the Directors authority to allot shares, to enable the Company to raise additional funds, and one resolution to allow the Company to continue to make share buy-backs as outlined above.

Shareholder event
Following the success in recent years of the Company's annual shareholder event, another event is being arranged for 2016. This year it will take place on Tuesday 15 November 2016 at 10.30 a.m. at the British Library, 96 Euston Rd, London NW1 2DB.

The event gives shareholders the opportunity to meet with the Directors and members of the investment management team. 

A formal invitation will be sent in due course and I would very much encourage shareholders to attend.

VCT regulations
The Finance (No. 2) Act 2015, which was enacted in November 2015, imposed a number of new restrictions on the Company's ability to make new investments, including the prohibition of:

• VCT funds being used for the purpose of acquiring businesses or shares, which effectively prevents VCTs from funding management buy-outs or acquisitions by portfolio companies;
• VCT investment in a company more than 7 years (10 years for knowledge intensive companies) after it has made its first commercial sale, with certain limited exceptions; and
• Total State Aid funding into a company over its lifetime of more than £12 million (£20 million for knowledge intensive companies), in addition to the previous limit of £5 million in any twelve month period.

In addition, the Budget in March 2016 announced further restrictions on making non-qualifying investments.

The amended VCT regulations represent a significant change to the rules which applied prior to November 2015, to which all VCTs will have to adapt. At the time of writing this statement, there are persistent uncertainties around the precise interpretation of some of the rules.

Outlook
The UK economy is subject to several uncertainties that have been identified by the Chancellor of the Exchequer in his 2016 Budget, in particular the outcome of the EU Referendum. In addition, the changes in the VCT regulations will focus the Company, and the rest of the VCT industry, on a narrower range of investment opportunities. However, the vibrant entrepreneurial community has an excellent record in surmounting the ebbs and flows in the country's fortunes.

The Board believes that the established record and reputation of your Investment Manager will continue to attract a strong flow of investment opportunities and that the existing portfolio provides good opportunities for future profitable realisations.

Andrew Davison
Chairman

Investment Manager's Review

Introduction
We have pleasure in presenting our annual review for the year ended 29 February 2016. This has been a strong year for new investment, with £3.3 million being invested in four new portfolio companies and £8.6 million being invested in thirteen existing portfolio companies. In addition, three companies (two new and one existing) were funded with £9.7 million. These companies were set up with the objective of identifying attractive growth capital opportunities.  The changes to the VCT rules provided an additional challenge in the final quarter of the year but we have continued to identify attractive investment opportunities.

The year also saw a number of disposals resulting in aggregate realisation proceeds of £10.1 million and net realised gains on the initial investment cost of over £6.1 million.

At 29 February 2016, the Company's venture capital portfolio comprised 40 investments at a cost of £55.0 million and a valuation of £61.5 million, an overall uplift of 11.8% on cost.

The net cash outflow for the year before fund raising was £16.0 million. The Company's cash balances were, however, replenished by net funds raised during the year of £23.9 million, of which £20.6 million was unallotted at the year end. The Company's cash balance at the year end, together with the further funds raised after the year end, will ensure that there are sufficient funds available to take advantage of new investment opportunities.

Investment activity
New investments
The Company made three new wholly or partly VCT qualifying investments during the year. The new investments in D3O Holdings, an impact protection solutions company (£797,000), and Sealskinz, a provider of waterproof and breathable outdoor accessories (£570,000), were completed shortly after the previous year end and discussed in the previous year's annual report. Further investments in both D3O (£80,000) and Sealskinz (£264,000) were made in October and November 2015, respectively.

In August 2015 a new qualifying investment (£340,000) was made in Network Locum, an online platform used by GPs to manage booking and invoices for locum doctors. The funds are being used to scale the company's GP locum recruitment and since we invested the business has doubled in size.

The Company made a further debt finance investment, with £1,250,000 being provided to Linkdex, a search engine optimisation platform, in December 2015 and February 2016. The funds are being used to help grow the company's operations.

The Company also funded two new companies Litchfield Media and Monmouth Holdings with a total of £7.6 million, and Pulpitum, which was originally funded in 2013, was funded with a further £2.1 million. These entities were established with the objective of identifying and investing into attractive growth capital opportunities across a range of SMEs.

Follow-on investments
The Company has been active in supporting the development of existing portfolio companies, making follow-on investments in thirteen companies during the year. The largest of these (£1,667,000) was in Cogora Group, the medical communications business. The investment was used to acquire PCM Healthcare, a business focussed on medical education and communications, as part of Cogora's transformation from a pure-play publisher to an agency business focussing on medical marketing and communications. 

A further investment of £1,350,000 was made into Think. The investment is being used to support the company's shift in strategy from a full service digital agency towards a more focussed consultancy business.

Further significant follow-on investments, primarily to support continued expansion and growth opportunities, were made in Big Data Partnership (£975,000), InContext (£923,000), Perfect Channel (£890,000), MyOptique (£820,000), Chess Technologies (£617,000), Blis Media (£437,000) and Disposable Cubicle Curtains (£423,000).

There were a number of smaller investments of less than £250,000 each in Utility Exchange Online, Senselogix, Simplestream and Skills Matter.

Investment disposals
Monica Vinader, the Company's largest investment at the end of the previous year, continued to make strong progress. Annual revenues have now grown from just over £1 million when we initially invested in 2010 to £19.8 million in the year to July 2015. The company's strong track record and plans to expand into the US attracted interest from external investors.  The Company was therefore able to realise a significant proportion of its holding in Monica Vinader in February 2016 as part of a refinancing and growth capital investment of £20 million by Piper, one of the UK's leading specialist investors in consumer brands, and Winona Capital, a US consumer specialist. Although almost 60% of the Company's shareholding was realised as part of this transaction, the remaining investment in Monica Vinader continues to constitute 3.9% of the Company's portfolio and we remain excited about the prospects of the business. At the year end, the valuation of the Company's investment in Monica Vinader represented a 6.5x multiple of cost.

We also took the opportunity to sell the Company's remaining shareholding in AIM listed IS Solutions. This was originally received as part of the consideration from the Company's disposal of Speed-Trap Holdings in the prior year. This disposal generated a realised gain of £1.4 million, which, when combined with the realised gain of £0.5 million recognised previously, takes the total realised gains related to the Speed-Trap disposal to £1.9 million.  This is equivalent to a multiple of 2.4x the initial investment cost.

There were full disposals of the investments in Long Eaton and Eagle-i in May 2015 and in October 2015, Cross Solar was sold to trade buyers.

Maplin and SPC International repaid loan notes, following capital restructurings, generating proceeds of £279,000 and £652,000, respectively.  The Company also received a number of other loan note repayments during the year, including all the scheduled repayments from the debt-finance investments and the scheduled loan repayment from Campden Wealth, which included a 100% redemption premium.

Key developments at existing portfolio companies
Following the partial realisation of Monica Vinader, the Company's largest investment is Watchfinder.co.uk, which accounts for 6.2% of the Company's portfolio. Watchfinder.co.uk continues to go from strength to strength and appeared in the 2015 Sunday Times Fast Track 100 Report, having recorded average sales growth of 42.9% per annum between 2012 and 2015. The company opened a new retail shop in Leeds Victoria Quarter during the year and has now sold more than £200 million worth of watches. The valuation of the Company's investment increased by £2.9 million over the course of the year.

Blis Media also had a strong year.  In March 2016, a $20 million funding round was closed, with investment from Unilever Ventures, Endeit Capital and funds managed by our US office. The funding will be used to accelerate the company's expansion into the US. The price implied by the transaction represented an uplift on the previous carrying value of £0.4 million. The valuation of Blis Media at the year end represents an unrealised uplift on cost of over 2.6x.

There have inevitably been some downward movements in valuations in the portfolio. Utility Exchange Online has suffered from downward pressure on margins as new, well-funded entrants look to secure market share.  In addition, the upheaval of the relocation of the business from Derby to Manchester resulted in a decline in profits.  These factors have resulted in a reduction in value for the investment of £1.2 million. Skills Matter has also suffered from a serious disruption to trading caused by a move to new premises.  We have taken a cautious view of the company's prospects and have made a full provision against the investment, representing a reduction in value of £0.4 million

In addition to the realised gains, the investment portfolio showed an overall uplift of £3.7 million, or 5.6p per share.

Post year-end developments
Between 29 February 2016 and the date of this report, the Company issued 32,867,383 Ordinary Shares for an aggregate consideration of £33.8 million. Share issue costs thereon amount to £1.1 million.

The Company made one new and two significant follow on investments totalling £1,466,000, with further deals in the pipeline.

In May 2016, the Company invested £880,000 in Thread Inc., a menswear e-commerce site which recommends styles and items based on an individual's tastes and preferences. The company offers customers the ability to receive personalised styling suggestions from over 1,000 brands.

Further investments were also make into InContext Solutions (£400,000) and Big Data Partnership (£186,000).

In May 2016, the Company's loan with Speciality European Pharma was repaid in full. The Company received an aggregate amount of £2,022,000, which included all outstanding interest and capital, together with an exit fee of £59,000.

VCT regulations
The changes to the VCT rules discussed in the half yearly report came into effect in November 2015. However, there is still some uncertainty over the application of the rules in practice and further clarification will be needed over the coming months.

More recently, the March 2016 Budget introduced further changes effective from 6 April 2016, restricting the Company to investing the non-qualifying portion of the portfolio in certain specified categories of investment.  These changes will prevent the Company from making any non-qualifying investments in unquoted SMEs, even if these companies would otherwise have complied with the new VCT rules.

Outlook
The significant realisations during the period, together with continued strong performance of the rest of the portfolio, has resulted in the largest net gain on investments for over five years. The new VCT rules will provide an obvious challenge and we continue to work closely with the Company's VCT adviser to ensure VCT compliance of the new investments being pursued.

We are also seeing an increase in competition for new deals as the amount of capital targeting entrepreneurial growth companies continues to increase. However, we believe our experience and reputation will ensure that we continue to generate a strong flow of investment opportunities and are able to compete for these successfully.

Overall, we are pleased with the composition and performance of the current portfolio and despite the challenges of the market we are confident that we will be able to continue to deliver attractive returns to Shareholders from both the existing portfolio companies and new investments.

Beringea LLP

Investment activity

Investment activity during the year is summarised as follows:

Additions	Cost £'000
Monmouth Holdings Limited	4,000
Litchfield Media Limited	3,580
Pulpitum Limited	2,100
Cogora Group Limited	1,667
Think Limited	1,350
Linkdex Limited	1,250
Big Data Partnership Limited	975
InContext Solutions, Inc	923
Perfect Channel Limited	890
D3O Holdings Limited	877
Sealskinz Holdings Limited	834
MyOptique Group Limited	820
Chess Technologies Limited	617
Blis Media Limited	437
Disposable Cubicle Curtains Limited	423
Network Locum Limited	340
Utility Exchange Online Limited	175
Senselogix Limited	160
Simplestream Limited	121
Skills Matter Limited	65
Total	21,604

Disposals	Cost	Market value at 01/03/15 ***	Disposal proceeds	Realised gain/ (loss) against cost	Realised gain/ (loss) during the year
	£'000	£000	£'000	£'000	£'000
Monica Vinader Limited**	991	3,384	5,197	4,206	1,813
IS Solutions plc	493	1,215	1,926	1,433	711
SPC International Limited**	433	652	652	219	-
Cross Solar PV Limited	342	476	458	116	(18)
Campden   Wealth Limited	227	227	454	227	227
Speciality European Pharma Limited*	310	310	310	-	-
MEL Topco Limited (t/a Maplin)**	279	279	279	-	-
Celoxica Limited*	250	250	250	-	-
Chess Technologies Limited	200	200	200	-	-
Peerius Limited*	151	151	151	-	-
Think Limited**	200	230	102	(98)	(128)
Conversity Limited*	85	-	85	-	85
Espresso Group Limited	-	-	40	40	40
Eagle -i Music Limited	13	13	27	14	14
Long Eaton Healthcare Limited	1	5	10	9	5
Linkdex Limited*	6	6	6	-	-
Total	3,981	7,398	10,147	6,166	2,749

*             Loan repayments during the year
**          Partial disposal
***        Adjusted for purchases during the year

Of the investments above, Espresso Group Limited was realised in prior periods but received proceeds in the current period in excess of the amounts previously accrued.

Investment Portfolio
as at 29 February 2016

The following investments were held at 29 February 2016:

	Cost £'000	Valuation £'000	Valuation movement in year £'000	% of portfolio by value
Venture capital investments (by value)
Watchfinder.co.uk Limited	2,629	5,518	2,889	6.2%
Monmouth Holdings Limited*,***	4,000	4,000	-	4.5%
Pulpitum Limited*	4,200	3,933	(150)	4.4%
Cogora Group Limited**	2,643	3,658	161	4.1%
Litchfield Media Limited	3,580	3,580	-	4.0%
Monica Vinader Limited**	534	3,468	1,357	3.9%
Perfect Channel Limited	2,635	2,732	97	3.1%
Think Limited**	2,757	2,616	(238)	2.9%
MEL Topco Limited (t/a Maplin Electronics)*	2,217	2,465	247	2.7%
Chargemaster plc**	2,421	2,422	1	2.7%
MyOptique Group Limited**	2,420	2,420	-	2.7%
Donatantonio Group Limited	1,177	2,369	1,019	2.6%
Blis Media Limited**	841	2,207	390	2.5%
Third Bridge Group Limited (formerly Cognolink Limited)	949	2,079	145	2.3%
Speciality European Pharma Limited*	2,052	2,052	-	2.3%
Disposable Cubicle Curtains Limited**	1,693	1,937	245	2.2%
InContext Solutions, Inc**	1,576	1,713	142	1.9%
Big Data Partnership Limited	1,505	1,505	-	1.7%
Linkdex Limited*	1,244	1,244	-	1.4%
SPC International Limited**	386	1,196	(334)	1.3%
Response Tap Limited	1,060	1,121	61	1.3%
Charterhouse Leisure Limited**	875	951	(87)	1.1%
Matssoft Limited**	1,010	861	(308)	1.0%
APM Healthcare Limited	500	858	75	1.0%
Sealskinz Holdings Limited	834	834	-	0.9%
Chess Technologies Limited	1,045	829	(66)	0.9%
D30 Holdings Limited**	877	605	(272)	0.7%
Inskin Media Limited	365	552	(3)	0.6%
Celoxica Limited*	386	386	-	0.4%
Simplestream Limited**	344	370	23	0.4%
Network Locum	340	340	-	0.4%
Peerius Limited*	277	277	-	0.3%
Utility Exchange Online Limited	1,285	215	(1,154)	0.2%
Senselogix Limited	986	100	(161)	0.1%
Dianomi Limited	105	55	-	0.1%
7digital Group plc **	1,101	32	(28)	0.1%
	52,849	61,500	4,051	68.9%
Other venture capital investments	2,186	-	(381)	0.0%
Total venture capital investments	55,035	61,500	3,670	68.9%
Cash at bank and in hand		27,755		31.1%
Total investments		89,255		100.0%

Other venture capital investments at 29 February 2016 comprise: Skills Matter Limited*, Conversity Limited (formerly Cinergy International Limited), Steribottle Global Limited* and Vigilant Applications Limited*.

*   Non qualifying investment   
** Partially non qualifying investment
*** Investee company 100% owned by the Company but not consolidated as held exclusively for resale as part of an investment portfolio.

With the exception of 7digital Group plc which is quoted on AIM, all venture capital investments are unquoted.

All of the above investments, with the exception of Monmouth Holdings Limited, SPC International Limited and Think Limited were also held by ProVen Growth & Income VCT plc, of which Beringea LLP is the Investment Manager.

Blis Media Limited is also held by ProVen Planned Exit VCT plc, of which Beringea LLP was the Investment Manager until 31 March 2016 when ProVen Planned Exit VCT plc was placed into Members Voluntary Liquidation. The liquidator has agreed that Beringea LLP will continue to manage the investment in Blis Media Limited on behalf of ProVen Planned Exit VCT plc until it is sold.

All venture capital investments are registered in England and Wales except for InContext Solutions, Inc., a Delaware registered corporation in the United States of America.

Strategic Report

The Directors present the Strategic Report for the year ended 29 February 2016. The Board prepared this report in accordance with the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

Principal objectives and strategy
The Company's principal objective is to achieve long-term returns greater than those available from investing in a portfolio of quoted companies, by investing in:

• a portfolio of carefully selected qualifying investments in small and medium sized unquoted companies

with excellent growth prospects; and

• a portfolio of non-qualifying investments including cash, liquidity funds, fixed interest securities, debt and debt related securities in growth companies and non-qualifying venture capital investments,

within the conditions imposed on all VCTs and to minimise the risk of each investment and the portfolio as a
whole.

The Company has been approved by HM Revenue and Customs ("HMRC") as a Venture Capital Trust in accordance with Part 6 of the Income Tax Act 2007, and in the opinion of the Directors the Company has conducted its affairs so as to enable it to continue to maintain approval. Approval for the year ended 29 February 2016 is subject to review should there be any subsequent enquiry under corporation tax self-assessment.

Business model
The business acts as an investment company, investing in a portfolio of carefully selected smaller companies. The Company operates as a Venture Capital Trust to ensure that its shareholders can benefit from tax reliefs available and have outsourced the portfolio management and administration duties.

Business review and developments
The Company began the year with £43.6 million of venture capital investments and ended with £61.5 million spread over a portfolio of 40 companies.  30 of these investments with a value of £47.1 million were VCT qualifying (or part qualifying).

The profit on ordinary activities after taxation for the year was £3.2 million, comprising a revenue profit of £0.4 million and a capital profit of £2.8 million.

The Ongoing Charges ratio (excluding performance fees and recoverable VAT) in respect of the year ended 29 February 2016, based on average net assets during the year, was 2.6% (2015: 2.6%).
  
Investment policy
The Company's investment policy covers several areas as follows:

Qualifying investments
The Company seeks to make investments in VCT Qualifying companies with the following characteristics:

• a strong, balanced and well-motivated management team with a proven track record of achievement;
• a defensible market position;
• good growth potential;
• an attractive entry price for the Company;
• the ability to structure the investment with a proportion of secured loan notes in order to reduce risk; and
• a clearly identified route for a profitable realisation within a three to four year period.

The Company invests in companies at various stages of development, including those requiring capital for expansion and in management buy-outs, but not in start-ups. Investments are spread across a range of different sectors.

Other investments
Funds not invested in qualifying investments will be held in cash, fixed interest securities of A- rating or better, investments originated in line with the Company's qualifying VCT policy but which do not qualify under the VCT rules for technical reasons and debt and debt-related securities in growth companies.

Following recent changes to the VCT regulations, certain investments under the current investment policy will no longer be permitted. Notwithstanding this, the Board believes that the Company will still be able to make appropriate qualifying and non-qualifying investments that comply with the new VCT regulations under the current investment policy.

Listing Rules
In accordance with the Listing Rules:

1. the Company may not invest more than 10%, in aggregate, of the value of the total assets of the Company at the time an investment is made in other listed closed-ended investment funds except listed closed-ended investment funds which have published investment policies which permit them to invest no more than 15% of their total assets in other listed closed-ended investment funds;
2. the Company must not conduct any trading activity which is significant in the context of the Company; and
3. the Company must, at all times, invest and manage its assets in a way which is consistent with its objective of spreading investment risk and in accordance with its published investment policy set out in this document. This investment policy is in line with Chapter 15 of the Listing Rules and Part 6 Income Tax Act 2007.

Venture capital trust regulations
The Company has engaged Philip Hare & Associates LLP to advise it on compliance with VCT requirements, including evaluation of investment opportunities as appropriate and regular review of the portfolio.  Although Robertson Hare LLP  works closely with the Investment Manager, they report directly to the Board.

Compliance with the main VCT regulations as at 29 February 2016 and for the year then ended is summarised as follows:

At least 70% by value of the Company's investments  has been represented by qualifying holdings	Complied
At least 30% of the Company's qualifying investments in "eligible shares" for funds raised before 6 April 2011   At least 70% of the Company's qualifying investments in "eligible shares" for funds raised on or after 6 April 2011	Complied     Complied
At least 10% of each qualifying investment is held in "eligible shares"	Complied
No investment has at any time during the period, represented more than 15% by value of the Company's investments, at the time of the investment	Complied
The Company's income is derived wholly or mainly from shares and securities	Complied
No more than 15% of the income from shares and securities is retained	Complied
The Company has not made an investment in a company which causes a breach of the £5 million investment limit conditions	Complied
The Company's ordinary share capital has throughout the period been listed on a regulated European market   The Company has not made a prohibited payment to Shareholders derived from an issue of shares since 6 April 2014	Complied     Complied

Borrowings
It is not the Company's intention to have any borrowings.  The Company does, however, have the ability to borrow a maximum amount effectively equal to the sum of its share capital and reserves, which, at 29 February 2016, was equal to £86.5 million (2015: £63.1 million).  There are no plans to utilise this facility at the current time.

Investment management and administration fees
Beringea LLP ("Beringea" or the "Investment Manager") provides investment management services to the Company for an annual fee of 2.0% of the net assets per annum. Beringea is also entitled to receive performance incentive fees as described below. The investment management agreement is terminable by either party at any time by one year's prior written notice.  The investment management fees amounted to £1,318,000 (2015: £1,239,000) (inclusive of VAT where applicable), of which £322,000 (2015: £291,000) was outstanding at the year-end.

The Board is satisfied with Beringea's approach and procedures in providing investment management services to the Company.  The Directors have therefore concluded that the continuing appointment of Beringea as investment manager remains in the best interests of Shareholders. 

Downing LLP provided administration services to the Company up to 13 January 2015, at which point Beringea was appointed the Company's Administration Manager. In the year, Downing LLP's administration fees amounted to £18,500 (2015: £56,000) and fees paid to Beringea in their capacity as Administration Manager totalled £37,500. An amount of £14,000 remained payable to Beringea at the year end.

The annual running costs (excluding any performance fees payable) of the Company are subject to a cap of 3.25% of the Company's net assets at the end of the year. Any running costs in excess of this are borne by Beringea.

Beringea also received arrangement fees in respect of investments made by the Company and other VCTs managed by Beringea totalling £590,000 (2015: £575,000) and monitoring fees of £708,000 (2015: £714,000). These fees are payable by the investee companies into which the Company invests and are not a direct liability or expense of the Company.

Performance incentive fees
In line with VCT practice, the Company has performance incentive fee arrangements with Beringea whereby the Investment Manager is entitled to receive a performance related fee in relation to the Ordinary Shares, in order to align the interests of the Investment Manager as closely as possible with those of the Shareholders and to encourage and reward exceptional investment performance.

The performance related fee structure is designed to encourage significant payments to Shareholders by means of tax-free dividends, as well as capital growth.

For the financial years starting after 29 February 2012, a performance incentive fee will be payable in relation to the Ordinary Shares if, at the end of a financial year, the New Performance Value exceeds the Hurdle using the definitions below. In this event, the performance incentive fee will be equal to 20% of the amount by which the New Performance Value exceeds the Initial Net Asset Value, multiplied by the average number of Ordinary Shares in issue during the relevant financial year, less the amount of any performance incentive fee already paid in relation to previous financial years starting after 29 February 2012 (which will not include, for the avoidance of doubt, the residual performance incentive fee arrangements in respect of Espresso Group Limited and Think Limited as described below).

New Performance Value:  In respect of the relevant financial year end, the sum of (i) the net asset value per Ordinary Share at that date, (ii) all dividends per Ordinary Share paid in relation to financial years starting after 29 February 2012 up to the relevant financial year, (iii) all performance related incentive fees per Ordinary Share paid by the Company to the Investment Manager in relation to financial years starting after 29 February 2012, (iv) any 'C' Share Adjustment (whether relating to that or any prior financial year), and (v) any Residual PIF Adjustment (whether relating to that or any prior financial year).

Hurdle:  The greater of:

1. 1.25 times the Initial Net Asset Value, and
2. the Initial Net Asset Value increased, as from 31 August 2011, by the Bank of England base rate plus 1% per annum (compound)

Residual PIF Adjustment:  The performance incentive fee relating to the sale of Espresso Group Limited and Think Limited, as set out below ("Residual PIF"), divided by the number of Ordinary Shares in issue on 31 August 2011, assuming that the number of Ordinary Shares in issue on 31 August 2011 included the New Ordinary Shares subsequently issued under the Ordinary Share offer for subscription launched on 8 December 2012.

In consideration of the Investment Manager's performance in managing the Original Ordinary Share Portfolio, a performance incentive fee linked to the profit achieved on the future disposal of two investments from this portfolio, Espresso Group Limited and Think Limited, will be payable, known as the "Residual PIF". This performance incentive fee will be equal to 20% of the aggregate profit realised on the sale of Espresso Group Limited and Think Limited, subject to a maximum fee of £673,000 (being 20% of the aggregate unrealised profit on these investments as at 31 August 2011).

If, after 29 February 2012, the New Performance Value is less than or equal to the Hurdle in any financial year, no performance incentive fee will be payable in respect of that financial year.

The new performance incentive fee per Ordinary Share payable in relation to a financial year will be reduced, if necessary, to ensure that (i) the cumulative new performance incentive fee per Ordinary Share payable in relation to financial years starting after 29 February 2012 does not exceed 20% of Cumulative Dividends per Ordinary Share paid in relation to those financial years and (ii) the Total Return per Ordinary Share is at least equal to the Hurdle.

As at the 29 February 2016, the New Performance Value was 126.0p, comprising a NAV prior to the performance fee accrual of 104.6p, Cumulative Dividends of 20.0p , Performance fees paid of 0.1p and a Residual PIF Adjustment of 1.3p. With a New Performance Value of 126.0p the hurdle has now been met and the Investment Manager is eligible to receive a performance fee for the year ended 29 February 2016. All fees paid under the new performance incentive arrangements will be inclusive of VAT, if applicable.

The performance fees payable in respect of Ordinary Shares for the year under review were £2,564,000 (2015: £59,000) to Beringea of which £2,554,000 (2014: £65,000) was outstanding at the year end. 

Directors and senior management
The Company has four non-executive Directors at the year end, three of whom are male and one of whom is female. The Company has no employees and the same was true of the previous year.

Key performance indicators
At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in meeting its objectives (as shown above). The Board believes the Company's key performance indicators are Net Asset Value total return (NAV plus cumulative dividends paid to date) and dividends per share.

In addition, the Board considers the Company's performance in relation to other VCTs. As reported at www.aicstats.co.uk, at 30 April 2016 (the latest published rankings by the AIC),  the Company was ranked fourteenth out of thirty-one VCTs based on Net Asset Value total return over a ten year period.

Principal risks and uncertainties
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, the loss of tax reliefs currently available to Shareholders and the Company being subject to capital gains tax.  Serious breaches of other regulations, such as the Listing Rules of the Financial Conduct Authority 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. The Directors receive reports annually from the Investment Manager on the compliance of systems to manage these risks, and place reliance on the Investment Manager to give updates in the intervening periods. These policies have remained unchanged since the beginning of the financial year.

Viability Statement
The Board has assessed the Company's prospects over the three year period to 28 February 2019. A three year period has been considered appropriate as it broadly aligns with the time frame during which the Investment Manager will be required to invest 70% of the funds from the most recent offer for subscription dated 3 December 2015 in qualifying investments.

In order to support this statement the Board has carried out a robust assessment of the principal risks faced by the Company, as detailed above, and considered the availability of mitigating factors.

The Board consider that the primary risk faced by the Company is compliance with the VCT rules and although there are a number of mitigating factors such as a robust deal identification and diligence process, an experienced investment team and consultation with the Company's VCT status adviser to ensure that investments made comply with the new VCT rules, these factors cannot mitigate the risk that insufficient qualifying investments are identified to ensure ongoing compliance with the 70% VCT qualification test.

Accordingly, the amount required to invest in qualifying holdings to maintain compliance with the VCT rules was a major consideration in the Board's analysis. Together with the expected liabilities of the Company for the three years to 28 February 2019, the Board considered the forecast cash requirements against the expected cash position, taking into account a level of assumed investment realisations and investment income during the period.

Based on the above considerations, the Board has determined that the Company will be able to continue in operation, maintain compliance with the VCT rules and meet its liabilities as they fall due for the three years to 28 February 2019.

Directors' remuneration
It is a requirement under Companies Act 2006 for shareholders to approve the Directors remuneration policy every three years, or sooner if the Company wishes to make changes to the policy.

Greenhouse emissions
Whilst as a UK quoted company the VCT is required to report on its Greenhouse Gas (GHG) Emissions, as it outsources all of its activities and does not have any physical assets, property, employees or operations, it is not responsible for any direct emissions.

Environmental, social and human rights policy
The Board seeks to conduct the Company's affairs responsibly. Where appropriate, the Board and Investment Manager take environmental, social and human rights factors into consideration.

Future prospects
The Company's future prospects are set out in the Chairman's Statement and Investment Manager's Review.

The Directors do not foresee any major changes in the activity undertaken by the Company in the coming year. The Company continues with its objective to invest in unquoted companies throughout the United Kingdom with a view to minimising the risks of investment and providing both capital growth and dividend income to Shareholders over the long term whilst maintaining VCT qualifying status.

By order of the Board

Beringea LLP
Company Secretary of ProVen VCT plc

Directors' responsibilities
The Board considers that the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and that they provide the information necessary for Shareholders to assess the Company's performance, business model and strategy.

The Directors are responsible for preparing the Directors' Report, the Directors' Remuneration Report, Strategic 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 Conduct 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 these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
• state whether applicable UK 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, to 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 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. 

Directors' responsibilities pursuant to the Disclosure and Transparency Rule 4
Each of the Directors confirms that to the best of each person's knowledge:

• the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
   
• the Directors' Report, Chairman's Statement, Strategic Report, Investment Manager's Review and Review of Investments include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

Statement as to disclosure of information to the Auditor
The Directors in office at the date of this announcement have confirmed, as far as they are aware, that there is no relevant audit information of which the Auditor is 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 Auditor. This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

 Income Statement
for the year ended 29 February 2016

		Year ended 29 February 2016			Year ended 28 February 2015
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Income		1,103	-	1,103	1,027	-	1,027
Gains on investments		-	6,419	6,419	-	3,792	3,792
		1,103	6,419	7,522	1,027	3,792	4,819
Investment management fees		(329)	(989)	(1,318)	(310)	(929)	(1,239)
Performance incentive fee		-	(2,564)	(2,564)	-	(59)	(59)
Other expenses		(410)	(5)	(415)	(357)	(20)	(377)
Return on ordinary activities before tax		364	2,861	3,225	360	2,784	3,144
Tax on ordinary activities		-	-	-	-	-	-
Return attributable to equity shareholders		364	2,861	3,225	360	2,784	3,144
Basic and diluted return per share		0.6p	4.4p	5.0p	0.6p	4.6p	5.2p

All revenue and capital movements in the year relate to continuing operations. No operations were acquired or discontinued during the year.  The total column within the Income Statement represents the Income Statement of the Company, prepared in accordance with the accounting policies detailed in note 1 of this announcement. The supplementary revenue and capital columns are presented for information purposes in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies.

A Statement of Comprehensive Income has not been prepared as all gains and losses are recognised in the Income Statement in the current and prior year as shown.

Other than revaluation movements arising on investments held at fair value through profit or loss, there were no differences between the return as stated above and at historical cost.

Statement of Changes in Equity
for the year ended 29 February 2016

Year ended 29 February 2016

	Called up share capital £'000	Capital redemption reserve £'000	Special reserve £'000	Share premium £'000	Share capital to be issued £'000	Revaluation reserve £'000	Capital reserve- realised £'000	Revenue reserve £'000	Total £'000
At 1 March 2015	6,249	3,502	28,286	13,536	-	7,261	4,411	(189)	63,056
Issue of new shares	383	-	-	3,449	-	-	-	-	3,832
Share buybacks	(85)	85	(812)		-	-	-	-	(812)
Share issue costs	-	-	(72)	-	-	-	-	-	(72)
Total comprehensive income	-	-	-	-	-	253	2,608	364	3,225
Dividends paid	-	-	(2,945)	-	-	-	-	(328)	(3,273)
Unallotted share capital	-	-	-	-	20,576	-	-	-	20,576
At 29 February 2016	6,547	3,587	24,457	16,985	20,576	7,514	7,019	(153)	86,532

Year ended 28 February 2015

	Called up share capital £'000	Capital redemption  reserve £'000	Special reserve £'000	Share premium £'000	Share capital to be issued £'000	Revaluation  reserve £'000	Capital reserve- realised £'000	Revenue  reserve £'000	Total £'000
At 1 March 2014	4,876	3,399	30,398	70	5,550	5,120	6,940	(279)	56,074
Issue of new shares	1,476	-	-	13,466	(5,550)	-	-	-	9,392
Share buybacks	(103)	103	(964)	-	-	-	-	-	(964)
Share issue costs	-	-	(138)	-	-	-	-	-	(138)
Total comprehensive income	-	-	-	-	-	1,867	917	360	3,144
Dividends paid	-	-	(4,182)	-	-	-	-	(270)	(4,452)
Unrealised now realised	-	-	(274)	-	-	274	-	-	-
Transfer between reserves	-	-	3,446	-	-	-	(3,446)	-	-
At 28 February 2015	6,249	3,502	28,286	13,536	-	7,261	4,411	(189)	63,056

The special reserve, capital reserve - realised and revenue reserve are all distributable reserves. The distributable reserves are reduced by losses of £2,938,000 (2015: £2,938,000) which are included in the revaluation reserve. Reserves available for distribution therefore amount to £28,385,000 (2015: £29,570,000).

During the year the Company repurchased 849,635 shares (2015: 1,026,801) with a nominal value of £85,000 (2015: £103,000). All shares were subsequently cancelled.

Statement of Financial Position
as at 29 February 2016
                               

		29 February 2016	28 February 2015
		Total	Total
		£'000	£'000
Fixed assets
Investments		61,500	43,624
Current assets
Debtors		440	280
Cash at bank and in hand		27,755	19,787
		28,195	20,067
Creditors: amounts falling due within one year		(3,163)	(635)
Net current assets		25,032	19,432
Total assets		86,532	63,056
Capital and reserves
Called up share capital		6,547	6,249
Capital redemption reserve		3,587	3,502
Special reserve		24,457	28,286
Share premium		16,985	13,536
Share capital to be issued		20,576	-
Revaluation reserve		7,514	7,261
Capital reserve - realised		7,019	4,411
Revenue reserve		(153)	(189)
Total equity shareholders' funds		86,532	63,056
Basic and diluted net asset value per share		100.7p	100.9p

Statement of Cash Flows
for the year ended 29 February 2016

		Year ended 29 February 2016	Year ended 28 February 2015
		Total	Total
		£'000	£'000
Net cash used in operating activities		(818)	(658)
Cash flows from investing activities
Purchase of investments		(21,604)	(18,121)
Disposal of investments		10,152	7,480
Net cash from investing activities		(11,452)	(10,641)
Cash flows from financing activities
Proceeds from share issues		3,433	9,292
Share issue costs		(72)	(484)
Purchase of own shares		(824)	(890)
Share capital to be issued		20,576	-
Equity dividends paid		(2,875)	(4,006)
Net cash from financing		20,238	3,912
Increase/ (decrease) in cash and cash equivalents		7,968	(7,387)

'Net cash used in operating activities' includes interest and dividends received of £1,016,000 and £30,000, respectively. No interest was paid during the period. 

Notes to the Announcement
for the year ended 29 February 2016

1. Accounting policies

Basis of accounting
The Company has prepared its financial statements under Financial Reporting Standard 102 ("FRS102") and in accordance with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the "SORP") issued by the Association of Investment Companies ("AIC"), which was revised in November 2014.

This is the first period in which the financial statements have been prepared under FRS102, however, it has not been necessary to restate comparatives as the treatment previously applied aligns with the requirements of FRS102. As a result, there are no reconciling differences between the previous financial reporting framework and the current financial reporting framework and the comparative figures represent the position under both current and previous financial reporting frameworks.

The financial statements are prepared under the historical cost convention except for the revaluation of certain financial instruments measured at fair value.

The following accounting policies have been applied consistently throughout the period.

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 company and, in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue return attributable to equity shareholders 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.

Investments
Investments, including equity and loan stock, are recognised at their trade date and measured at "fair value through profit or loss" 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 International Private Equity and Venture Capital Valuation Guidelines ("IPEV Guidelines") issued in December 2015, together with sections 11 and 12 of FRS102.

Publicly traded investments are measured using bid prices in accordance with the IPEV Guidelines.

Key judgements and estimates
The valuation methodologies used by the Directors for estimating the fair value of unquoted investments are as follows:
·             investments are usually retained at cost for twelve months following investment, except where a company's performance against plan is significantly below the expectations on which the investment was made in which case a provision against cost is made as appropriate;
·             where a company is in the early stage of development it will normally continue to be held at cost as the best estimate of fair value, reviewed for impairment on the basis described above;
·             where a company is well established after an appropriate period, the investment may be valued by applying a suitable earnings or revenue multiple to that company's maintainable earnings or revenue.  The multiple used is based on comparable listed companies or a sector but discounted to reflect factors such as the different sizes of the comparable businesses, different growth rates and the lack of marketability of unquoted shares;
·             where a value is indicated by a material arms-length transaction by a third party in the shares of the company, the valuation will normally be based on this, reviewed for impairment as appropriate;
·             where alternative methods of valuation, such as net assets of the business or the discounted cash flows arising from the business are more appropriate, then such methods may be used; and
·             where repayment of the equity is not probable, redemption premiums will be recognised.

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.  Methodologies are applied consistently from year to year except where a change results in a better estimate of fair value.

Where an investee company has gone into receivership or liquidation, or the loss in value below cost is considered to be permanent, 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.

All investee companies are held as part of an investment portfolio and measured at fair value. Therefore, it is not the policy for investee companies to be consolidated and any gains or losses arising from changes in fair value are included in the Income Statement for the period as a capital item.

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 are expensed.

Investments are derecognised when the contractual rights to the cash flows from the asset expire or the Company transfers the asset and substantially all the risks and rewards of ownership of the asset to another entity.

Fair value
Fair value is defined as the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction. The Company has categorised its financial instruments that are measured subsequent to initial recognition at fair value, using the fair value hierarchy as follows:

Level a  Reflects financial instruments quoted in an active market.
Level b  Reflects financial instruments that have been valued based on prices of recent transactions for identical instruments.
Level c (i)             Reflects financial instruments that have been valued using valuation techniques with observable inputs.
Level c (ii)            Reflects financial instruments that have been valued using valuation techniques with unobservable inputs.

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 in the foreseeable future. Income which is not capable of being received within a reasonable period of time is reflected in the capital value of the investments. A provision is made for any fixed income not expected to be received.

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;
• 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.  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; and
• performance incentive fees are treated as a capital item.

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, which is not discounted, 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.

Share issue costs
Expenses in relation to share issues are deducted from the Special Reserve.

2 Basic and diluted return per share

	Year ended 29 February 2016	Year ended 28 February 2015
Revenue return per share based on:
Net revenue after taxation (£'000)	364	360
Weighted average number of shares in issue	65,338,271	60,902,742
Pence per share	0.6	0.6
Capital return per share based on:
Net capital gain for the financial year (£'000)	2,861	2,784
Weighted average number of shares in issue	65,338,271	60,902,742
Pence per share	4.4	4.6

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              Basic and diluted net asset value per share

			2016				2015
	Shares in Issue		Net asset value				Net asset value
	2016	2015		pence per share		£'000		pence per share		£'000
Ordinary Shares	65,473,795	62,491,991		100.7		65,956		100.9		63,056
Ordinary share capital to be issued						20,576				-
						86,532				63,056

As the Company has not issued any convertible securities or share options, there is no dilutive effect on net asset per share.  The net asset value per share disclosed therefore represents both basic and diluted return per share.

4              Principal risks and management objectives
The Company's investment activities expose the Company to a number of risks associated with financial instruments and the sectors in which the Company invests.  The principal financial risks arising from the Company's operations are:

• Market risks;
• Credit risk; and
• Liquidity risk.

The Board regularly reviews these risks and the policies in place for managing them.  There have been no significant changes to the nature of the risks that the Company is exposed to over the year and there have also been no significant changes to the policies for managing those risks during the year. The risk management policies used by the Company in respect of the principal financial risks and a review of the financial instruments held at the year-end are provided below:

Market risks
As a VCT, the Company is exposed to market risks in the form of potential losses and gains that may arise on the investments it holds. The management of these market risks is a fundamental part of investment activities undertaken by the Investment Manager and overseen by the Board. The Investment Manager monitors investments through regular contact with the management of investee companies, regular review of management accounts and other financial information and attendance at investee company board meetings.  This enables the Investment Manager to manage the investment risk in respect of individual investments. Market risk is also mitigated by holding a portfolio diversified across several business sectors and asset classes.
The key market risks to which the Company is exposed are:

• Market price risk; and
• Interest rate risk.

Market price risk
Market price risk arises from uncertainty about the future prices and valuations of financial instruments held in accordance with the Company's investment objectives.  It represents the potential loss that the Company might suffer through market price movements in respect of quoted investments and also changes in the fair value of unquoted investments that it holds.

At 29 February 2016, the AIM-quoted portfolio was valued at £32,000 (2015: £1,275,000).

The Company's sensitivity to fluctuations in the share prices of its AIM-quoted investments is summarised below.  A 10% movement in the share price of all of the AIM-quoted stocks held by the Company would have an effect as follows:

10% movement in AIM-quoted stocks			2016			2015
	Impact on net assets		Impact on NAV per share	Impact on net assets		Impact on NAV per share
	£'000		pence	£'000		Pence
AIM-quoted investments	3		0.0p	128		0.2p

At 29 February 2016, the unquoted portfolio was valued at £61,468,000 (2015: £42,349,000).

As many of the Company's unquoted investments are valued using revenue or earnings multiples of comparable companies or sectors, a fall in share prices generally would impact on the valuation of the unquoted portfolio. A 10% movement in the valuations of all of the unquoted investments held by the Company would have an effect as follows:

10% movement in unquoted investment valuations			2016			2015
	Impact on net assets		Impact on NAV per share	Impact on net assets		Impact on NAV per share
	£'000		Pence	£'000		Pence
Unquoted investments	6,147		9.4p	4,235		6.8p

The sensitivity analysis for unquoted valuations above assumes that each of the sub-categories of financial instruments (ordinary shares, preference shares and loan stocks) held by the Company produces an overall movement of 10%. Shareholders should note that equal correlation between these sub-categories is unlikely to be the case in reality, particularly in the case of loan stock instruments. Where share prices are falling, the equity instrument could fall in value before the loan stock instrument. It is not considered practical to assess the sensitivity of the loan stock instruments to market price risk in isolation.

Interest rate risk
The Company is exposed to interest rate risk on floating-rate financial assets through the effect of changes in prevailing interest rates.  The Company receives interest on its cash deposits at a rate agreed with its bankers. Investments in loan stock attract interest predominately at fixed rates.  A summary of the interest rate profile of the Company's financial instruments is shown below.

There are three categories in respect of interest which are attributable to the financial instruments held by the Company as follows: 

• "Fixed rate" assets represent investments with predetermined yield targets and comprise certain loan note investments and Preference Shares.
• "Floating rate" assets predominantly bear interest at rates linked to Bank of England base rate or LIBOR and comprise cash at bank and certain loan note investments.
• "No interest rate" assets do not attract interest and comprise equity investments, certain loan note investments, loans and receivables (excluding cash at bank) and other financial liabilities.

	Average	Average period	2016	2015
	interest rate	until maturity	£'000	£'000
Fixed rate	7.28%	1,238 days	27,847	14,716
Floating rate	0.92%	9 days	28,604	20,636
No interest rate			30,197	27,702
			86,648	63,054

The Company monitors the level of income received from fixed, floating and non interest rate assets and, if appropriate, may make adjustments to the allocation between the categories, in particular, should this be required to ensure compliance with the VCT regulations.

Based on the assumption that the yield of all floating rate financial instruments would change by an amount equal to the movement in prevailing interest rates, it is estimated that an increase of 1% in interest rates would have increased total return before taxation for the year by £286,000 (2015: £206,000). It is estimated that a decrease of 0.5% in interest rates would have decreased total return before taxation for the year by £143,000 (2015: £103,000).

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. The Company is exposed to credit risk through its holdings of loan stock in investee companies, investments in liquidity funds, cash deposits and debtors.  Credit risk relating to loan stock investee companies is considered to be part of market risk.

The Company's exposure to credit risk is summarised as follows:

	2016	2015
	£'000	£'000
Investments in loan stocks	28,696	15,565
Cash and cash equivalents	27,755	19,787
Interest, dividends and other receivables	299	254
	56,750	35,606

The Investment Manager manages credit risk in respect of loan stock with a similar approach as described under Investment risks above. In addition the credit risk is partially mitigated by registering floating charges over the assets of certain investee companies. The strength of this security in each case is dependent on the nature of the investee company's business and its identifiable assets. The level of security is a key means of managing credit risk. Similarly, the management of credit risk associated with interest, dividends and other receivables is covered within the investment management procedures.

Cash is mainly held by the Royal Bank of Scotland plc, rated BBB- and BBB+ by both Standard and Poor's and Fitch, respectively, and is also ultimately part-owned by the UK Government.  Consequently, the Directors consider that the risk profile associated with cash deposits is low. 

There have been no changes in fair value during the year that are directly attributable to changes in credit risk.

Liquidity risk
Liquidity risk is the risk that the Company encounters difficulties in meeting obligations associated with its financial liabilities. Liquidity risk may also arise from either the inability to sell financial instruments when required at their fair values or from the inability to generate cash inflows as required. The Company generally maintains a relatively low level of creditors relative to cash balances (£3.2 million relative to cash balances of £27.8 million at 29 February 2016) and has no borrowings. 

The Company always holds sufficient levels of funds as cash in order to meet expenses and other cash outflows as required.  For these reasons, the Board believes that the Company's exposure to liquidity risk is minimal.

The Company's liquidity risk is managed by the Investment Manager in line with guidance agreed with the Board and is reviewed by the Board at regular intervals.

Although the Company's investments are not held to meet the Company's liquidity requirements, the table below shows an analysis of the loan stock, highlighting the length of time that it could take the Company to realise its assets if it were required to do so.

The carrying value of loan stock investments (as opposed to the contractual cash flows) held at 29 February 2016, which is analysed by expected maturity date, is as follows:

As at 29 February 2016	Not later	Between	Between	Between	More
	than 1	1 and 2	2 and 3	3 and 5	than 5
	Year	Years	years	years	years	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Fully performing loan stock	2,418	2,346	5,450	17,329	-	27,543
Past due loan stock	-	1,153	-	-	-	1,153
	2,418	3,499	5,450	17,329	-	28,696
As at 28 February 2015
Fully performing loan stock	2,916	1,937	2,159	7,335	320	14,667
Past due loan stock	898	-	-	-	-	898
	3,814	1,937	2,159	7,335	320	15,565

Of the loan stock classified as "past due" above, the full amount relates to the principal of loan notes where the principal has passed its maturity date.

Fair Value of Financial Instruments
Fair value measurements recognised in the balance sheet
Investments are valued at fair value as determined using the measurement policies described in note 1. The carrying value of financial assets and financial liabilities recorded at amortised cost, which includes short term debtors and creditors, is considered by the Directors to be equivalent to their fair value.

The Company has categorised its financial instruments that are measured subsequent to initial recognition at  fair value, using the fair value hierarchy as follows:

Level a                 Reflects financial instruments quoted in an active market.
Level b                 Reflects financial instruments that have been valued based on prices of recent transactions for identical instruments.
Level c (i)               Reflects financial instruments that have been valued using valuation techniques with observable inputs.
Level c (ii)              Reflects financial instruments that have been valued using valuation techniques with unobservable inputs.

				2016						2015
	Level a		Level b		Level c (i)	Level c (ii)	Total		Level a	Level b	Level c (i)	Level c (ii)	Total
		£'000	£'000		£'000	£'000	£'000		£'000	£'000	£'000		£'000
AIM quoted		32	-		-	-	32		1,275	-	-	-	1,275
Loan notes		-	-		-	28,696	28,696		-	-	-	15,565	15,565
Unquoted equity		-	-		-	31,561	31,561		-	-	-	25,284	25,284
Preference shares		-	-		-	1,211	1,211		-	-	-	1,500	1,500
		32	-		-	61,468	61,500		1,275	-	-	42,349	43,624

Reconciliation of fair value for Level c (ii) financial instruments held at the year-end:

	Loan Notes		Unquoted Equity and Preference Shares		Total
	£'000		£'000		£'000
Balance at 28 February 2015	15,565		26,784		42,349
Movements in the Income Statement:
Gains in the Income Statement	233		5,503		5,736
Purchases at cost	15,387		6,217		21,604
Sales proceeds	(2,489)		(5,732)		(8,221)
Balance at 29 February 2016	28,696		32,772		61,468

There is an element of judgment in the choice of assumptions for unquoted investments and it is possible that, if different assumptions were used, different valuations could have been attributed to certain of the VCT's investments.

5              Post balance sheet events
Between 29 February 2016 and the date of this report, the Company issued 32,867,383 Ordinary Shares for an aggregate consideration of £33.8 million. Share issue costs thereon amount to £1.1 million.

The Company made one new and two significant follow on investments totalling £1,466,000.

In May 2016, the Company invested £880,000 in Thread Inc., a menswear e-commerce site which recommends styles and items based on an individual's tastes and preferences. The follow on investments comprised an investment of £400,000 into InContext Solutions and an investment into Big Data Partnership of £186,000.

Also in May 2016, the Company's loan with Speciality European Pharma was repaid in full. The Company received an aggregate amount of £2,022,000, which included all outstanding interest and capital, together with an exit fee of £59,000.

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 29 February 2016, but has been extracted from the statutory financial statements for the year ended 29 February 2016, which were approved by the Board of Directors on 1 June 2016 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 2015 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 S498(2) and (3) of the Companies Act 2006.

A copy of the full annual report and financial statements for the year ended 29 February 2016 will be made available 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.co.uk

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This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Proven VCT plc via Globenewswire

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