ProVen Health VCT plc (formerly Noble Health Fund VCT plc)
Final Results for the year ended 31 January 2009
Key Data
31 January 2009 31 January 2008
Total net asset value ("NAV") £9.95m £14.5m
Shares in issue 19,307,784 18,837,545
NAV per share 51.5p 77.0p
Mid market share price 40.0p 59.5p
Market capitalisation £7.7m £11.2m
Share price discount to NAV 22.3% 22.7%
NAV per share plus cumulative 65.0p 90.5p
dividends paid to date
Cumulative dividends per ordinary 13.5p 13.5p
share since inception
Chairman's Statement
Introduction
I have pleasure in presenting my first, and the Company's eighth,
annual report for ProVen Health VCT plc (formerly Noble Health Fund
VCT plc). The change in name was approved by the Company's
shareholders subsequent to the year end and reflects the change in
investment manager, further details of which are provided below.
I would like to start by welcoming new shareholders who subscribed in
the 2007/2008 fundraising which closed during the financial year and
to thank my predecessor, Gill Nott, who had been Chairman since the
Company's inception and retired at last year's Annual General
Meeting.
The year to 31 January 2009 has been one of considerable volatility
in worldwide financial markets. Virtually all asset classes and stock
markets have seen falls in value as the effects of the global credit
crisis have worked (and continue to work) their way through the
financial system and the general economy. Government intervention on
an unprecedented level has been seen in the UK, US and other
international economies. The full impact of these interventions
remains unclear but a quick return to the easy credit conditions that
prevailed prior to the crisis seems unlikely.
Portfolio Performance
The Company's net asset value at 31 January 2009 was 51.5p compared
with 77.0p at the start of the financial year, a fall of 33.1%.
During the same period, the FTSE All-Share Total Return Index fell by
27.8% whilst the FTSE AIM All-Share Total Return Index fell by 57.6%.
The NAV total return (net asset value plus cumulative dividends) for
the Company since inception is 65.0p which compares to an initial
investment cost for 2000/2001 investors, net of income tax relief, of
80p, a fall of 18.9%. At the year end, the Company's investment
portfolio comprised 11 unquoted companies and 12 quoted companies
with a total valuation of £6.9 million.
Valuation movements were seen in both the quoted and unquoted
portfolios. Unquoted valuations are made in accordance with
International Private Equity and Venture Capital Valuation
Guidelines. The quoted investments are valued according to bid prices
set by the market but unquoted valuations are more subjective. The
Investment Manager and Board seek to take a cautious view of the
future prospects of these unquoted businesses. The Investment
Manager's Review provides more detail of portfolio movements.
Portfolio Activity
The Company made five new investments totalling £776,000. The largest
new investment was £347,000 in Population Genetics Technologies which
provides sequencing technologies for pharmaceutical companies and
researchers. Four new investments into AIM companies were made of
which two, Abcam, which produces and distributes research grade
antibodies, and Purecircle, which has pioneered the use of a low
calorie natural sweetener (Reb A), were still held at the year end.
In addition, a further £1.0 million was invested in five existing
companies.
The Company disposed of four investments including two AIM holdings,
Corin Group and CustomVis, which were acquired during the year.
Unfortunately these investments were realised at a loss and so did
not provide funds for distribution.
Subsequent to the year end the Company made a further follow on
investment of £520,000 in Population Genetics Technologies and
realised, partially or in full, a number of the quoted company
holdings. Further detail on all portfolio activity is provided in the
Investment Manager's Review.
Fundraising
The Company concluded a fundraising for the 2007/2008 tax year which
was initiated in the preceding financial year. A total of £551,500
was raised and a further 708,339 ordinary shares were issued.
Buyback Policy
It is the Company's intention to operate a share buyback policy
purchasing shares at a discount to net asset value agreed by the
Board. This reflects the general lack of a secondary market for most
VCT shares. This policy was suspended earlier in the year due to the
state of the economy and the Board has concluded that it would be
inappropriate to recommence buybacks at this point. This decision
will be kept under review.
VCT Qualification Status
The Company continues to receive full approval from HM Revenue &
Customs as a VCT and continues to meet the VCT qualifying tests. The
Board reviews the Company's overall qualifying status at each Board
meeting and has retained PricewaterhouseCoopers (PwC) to advise on
VCT qualification matters. PwC reports to the Board twice a year.
Investment Strategy and Change of Manager
In the Company's interim management statement released in December
2008, following the review of the Company's investment strategy,
including consideration of proposals to expand its investment
mandate, the Board re-affirmed its commitment to the healthcare
sector and to maintaining a preference for unquoted investments, in
line with the current investment mandate. The Board concluded that
the best method to deliver this strategy required access to larger
deals and therefore that it needed to co-invest with partners. It was
further announced in the interim management statement that, in
pursuance of the above strategy, the Board was supporting an amicable
transfer of the management of the Company and its investments from
Noble Fund Managers (Noble) to Beringea LLP (Beringea).
Beringea is an established VCT manager, having managed ProVen VCT plc
and ProVen Growth & Income VCT plc since they were launched in 2000
and 2001 respectively. The initial ordinary share issues of these
VCTs are two of the best performing of more than 100 initial VCT
share issues with a track record of over two years. The transfer of
the management of the Company took effect on 1 February 2009. Dr
Stephane Mery has moved to Beringea and will continue to be involved
in the Company's management and its investments and Dr Louis Nisbet
will continue to represent the Company on the boards of a number of
portfolio companies.
It is anticipated that there will be opportunities for the Company to
co-invest with the existing ProVen VCTs, allowing it to invest in
larger, more established companies than is possible at present. The
Beringea Group has experience of healthcare venture capital
investing, having managed a healthcare venture capital fund in the
USA for nine years. Beringea won the 2008 VCT Fund Manager of the
Year Award at the Growth Company Awards and its investment management
team has more than 60 years combined experience of making and
managing venture capital investments.
Both the Board and Beringea are excited about the opportunity this
appointment presents and are looking forward to working together. On
behalf of the Board I would like to take this opportunity to thank
Noble for their work and commitment to the fund.
Annual General Meeting
The Annual General Meeting of the Company will be held at 11.00 am on
Monday 15 June 2009 at Beringea's offices at 39 Earlham Street,
London WC2H 9LT.
Outlook
The general economic outlook remains very uncertain given the
unprecedented and therefore untested interventions by central
governments round the world. That said, opportunities exist for well
managed companies to prosper as weaker competitors fall victim to
overborrowing and reduced consumer spending. The immediate focus for
the Company is to manage the existing portfolio to preserve and
enhance shareholder value. At the same time, the Investment Manager
will look to complement this with selective new investments,
including co-investments with other Beringea managed funds, and
disposals where cash and conditions allow.
Charles Pinney
Chairman
Investment Manager's Review
Introduction
We are delighted to present our first report as the manager for
ProVen Health VCT plc (formerly Noble Health Fund VCT plc). We
officially took over the management of the fund after the financial
year end but have been fortunate to secure the services of Dr
Stephane Mery, who has worked on the portfolio since May 2007, and Dr
Louis Nisbet, who will continue to represent the Company on several
portfolio company boards. We are looking forward to bringing our VCT,
healthcare and international experience and relationships together
for the benefit of the Company and its shareholders.
Portfolio Performance
The Chairman commented on the general economic conditions during the
period in his report. These conditions have affected all companies
but are particularly challenging for those early stage companies that
require funding to enable them to progress to self sustainability.
Those investors who are willing and able to provide funding can
currently demand terms that depress previous valuations. The
portfolio has a number of early stage companies and therefore, when
set in this context, it is not surprising that the Company's
performance has suffered.
At 31 January 2009, the Company's investment portfolio comprised
holdings in 23 companies, of which 11 were unquoted and 12 were
quoted, at a valuation of £6.9 million and originaI acquisition cost
of £11.7 million. In addition, the Company held £2.7 million in cash
and liquidity funds.
* Unquoted portfolio
Including additions and disposals, the unquoted portfolio fell in
value by £4.0 million during the financial year. The
key movements contributing to this change and the reasons for them
are summarised below:
* Inforsense (-£1.1 million): disappointing trading results released
in mid 2008 and additional funding from investors at a discount to
the Company's carrying valuation. Trading has improved since this
date although the company remains vulnerable to a continued
economic downturn and reduced IT spending.
* Biovex Group (-£646,000): further funding was required to ensure
continued development of the cancer treatment drugs. This was
secured in March 2009 but on terms which have impacted negatively
on the Company's small shareholding.
* deltaDOT (-£600,000): disappointing sales. Despite the appointment
of a new CEO, the company is in need of urgent cash funding and it
was therefore deemed appropriate to take a full provision against
the investment.
* Amura Holdings (-£514,000): the results of the company's clinical
trials have been positive but the company requires further cash to
continue its activities. This will be provided by existing
investors but on terms which reduce the valuation of the Company's
holding to slightly below the original investment cost.
* Altacor (-£463,000): despite reasonable progress, including the NHS
launch of Clinitas in September 2008, sales were below target and
the company has required additional funding which has depressed the
valuation.
* Omni Dental Sciences (-£420,000): sales of dental products have
been depressed by general market conditions and the company faces
an urgent cash funding requirement.
* Quoted portfolio
The quoted portfolio has fared relatively well when compared to the
performance of the FTSE AIM Index on which most of the stocks are
listed. On a like-for-like basis (which covers 77%, by value, of the
quoted portfolio at 31 January 2009), the portfolio fell in value by
27% compared to falls of c 57% in both the FTSE AIM Index and the
Total Return on the FTSE AIM Index. One holding, York Pharma,
accounted for the majority of the fall - excluding this company, the
fall is a more modest 8%. York Pharma's share price has been affected
by licensing delays to its lead product and an ambitious expansion
strategy which has been affected by the economic downturn. The
company's shares were suspended on 31 March 2009 as it sought to
secure funding. On the positive side Craneware, Medigene and Vectura
showed strong share price gains during the year and Immunodiagnostic
Systems Holdings, whilst suffering a decline in value, was still 2.8
times the original purchase cost at the year end.
Portfolio Activity
During the year a total of £1.8 million was invested into new or
existing companies. A total of £187,000 was received from the
disposal of four quoted companies resulting in a loss of £1.1 million
against the original investment cost.
* Unquoted portfolio
One new unquoted investment of £347,000 was made into Population
Genetics Technologies which provides technology for gene sequencing.
The investment is early stage and will thus require further funding,
including some from the Company, but has made good progress against
its initial milestones. Further funding of £869,000 was supplied to
Altacor, Digital Healthcare, Inforsense and Omni Dental Sciences.
* Quoted portfolio
New investments were made in Abcam, Corin Group, CustomVis and
Purecircle. These reflected the Board's desire to gain exposure to
larger, more mature companies to diversify the Company's risk from
some of the smaller early stage companies in the portfolio. Corin
Group, which makes orthopaedic devices, was exited at a loss in
September 2008 as the manager felt that the company was not getting
support from its key US partner. The share price fell by over 50%
during the remainder of the period under review. CustomVis, which
provides laser correction surgery, was also exited at a loss given
concerns over the business. Abcam, a producer and distributor of
research grade antibodies, and Purecircle, which has pioneered the
use of a low calorie natural sweetener (Reb A), showed modest
increases relative to their initial purchase cost by the year end.
The entire Genosis holding and a quarter of the York Pharma
shareholding were realised crystallising further losses.
Two further new names in the portfolio are Paion, a German
pharmaceutical company, which made a successful paper bid for AIM
listed Cenes Pharmaceuticals and IS Pharma which was formerly called
Maelor plc. The Company's stake in Maelor/IS Pharma was added to at
the time of the name change as part of a placing to fund the
acquisition of Speciality European Pharma International AG.
Outlook
The Board undertook a review of the investment strategy prior to the
appointment of Beringea as the investment manager. It reaffirmed its
commitment to the healthcare sector and a preference for unquoted
investments in line with the current investment mandate. This fits in
with Beringea's experience and expertise. Unquoted investments enable
the investment manager to take a more active role in all aspects of
the investment process from initial investigation and transaction
structuring; through ongoing monitoring of investments including
regular contact with senior management and, where appropriate, the
appointment of key individuals; and ultimately to input into the
final exit process. This level of input in quoted stocks is generally
reserved for company management. In addition, quoted stocks are
subject to market forces which may reflect motivations such as the
need for shareholders to receive cash, rather than be a reflection of
true value at any point.
Reflecting this philosophy, we have since the year end, taken the
opportunity to sell some of the quoted shareholdings. In total
£992,000 of holdings, at cost, were realised. Immunodiagnostic
Systems Holdings, Abcam and Purecircle were fully realised generating
a profit of £145,000; Medigene was also sold in full, crystallising a
loss of £368,000. Craneware has been partially realised generating a
profit of £84,000. We intend to continue with this where we feel
better use can be made of the cash realised from the investments. New
investment is likely to include development or expansion capital
funding to more established "later stage" businesses which are at or
near profitability. This will provide balance to the early stage
companies within the portfolio. Since the year end we made a further
follow on investment of £520,000 in Population Genetics Technologies.
The future performance of ProVen Health VCT depends to some extent on
general economic sentiment and the outlook in this regard remains
uncertain. However, we believe that strong returns are possible over
the medium to long term and have demonstrated this through our other
VCTs. Our focus will be to work over the medium term, creating,
maintaining or recovering, as appropriate, value within the existing
unquoted portfolio and selectively adding new portfolio companies as
economic conditions and internal funding allow.
Beringea LLP
Investment Portfolio as at 31 January 2009
31 January 2009 31 January 2008
Cost Valuation Net Cost Valuation Net
Assets Assets
Quoted £ £ % £ £ %
investments
1st Dental 289,000 43,602 0.4 289,000 110,287 0.7
Laboratories plc
Abcam plc * 58,228 60,516 0.6 - - -
Chromogenex plc * 253,000 5,750 0.1 253,000 68,977 0.5
Craneware plc * 139,302 237,249 2.4 139,302 160,252 1.1
Genosis plc - - - 899,886 37,906 0.3
Immunodiagnostics 42,351 117,920 1.2 42,351 199,093 1.4
Systems
Holdings plc
IS Pharma plc * 365,940 321,959 3.2 214,169 257,002 1.8
MediGene AG 639,173 225,877 2.3 639,173 197,289 1.4
Paion AG 200,000 64,383 0.6 200,000 56,667 0.4
Purecircle 145,223 158,950 1.6 - - -
Limited *
Sinclair Pharma 219,219 26,064 0.3 219,219 93,021 0.6
plc
Vectura Group plc 481,664 477,341 4.8 481,664 365,583 2.5
*
York Pharma plc 449,198 24,453 0.2 592,413 542,865 3.7
Total quoted 3,282,298 1,764,064 17.7 3,970,177 2,088,942 14.4
investments
Unquoted
investments
Altacor Limited 619,978 157,006 1.6 300,000 300,000 2.1
Amura Holdings 987,150 924,698 9.3 987,150 1,438,303 9.9
Limited
BioVex Inc 763,885 - - 763,885 645,854 4.5
deltaDOT Limited 599,574 - - 599,574 599,574 4.1
Digital 1,010,000 834,466 8.4 810,000 777,078 5.4
Healthcare
Limited
Inforsense 1,119,187 378,446 3.8 1,020,000 1,418,215 9.8
Limited
Omni Dental 750,000 330,259 3.3 500,000 500,000 3.4
Sciences Limited
Onyx Research 850,000 864,583 8.7 850,000 850,000 5.8
Chemicals
Limited
Optasia Medical 650,000 518,293 5.2 650,000 650,000 4.5
Limited
Plum Baby Limited 749,148 749,148 7.5 749,148 749,148 5.2
Population 346,667 346,667 3.5 - - -
Genetics
Technologies
Limited
Total unquoted 8,445,589 5,103,566 51.3 7,229,757 7,928,172 54.7
investments
Total investments 11,727,887 6,867,630 69.0 11,199,934 10,017,114 69.1
Net current 3,082,441 31.0 4,480,575 30.9
assets
Shareholders' 9,950,071 100.0 14,497,689 100.0
funds
* These investments were also held by other funds managed by Noble
Fund Managers Limited at 31 January 2009.
Statement of Directors' Responsibilities
The directors are responsible for preparing the Annual 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).
The financial statements are required to give a true and fair view of
the state of affairs of the Company and of the profit or loss of the
Company for that period.
In preparing these financial statements the directors are required
to:
* select suitable accounting policies and then apply
them consistently.
* make judgments 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.
* 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 proper accounting records
that disclose with reasonable accuracy at any time the financial
position of the Company and enable them to ensure that the financial
statements comply with the Companies Act
1985. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company's
website. 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.
Under applicable law and regulations, the Directors are also
responsible for preparing a Directors' Report (including Business
Review) Directors' Remuneration Report and Corporate Governance
Statement that complies with law and those regulations.
In the case of each of the persons who are directors of the Company
at the date of approval of this report:
* so far as each of the directors is aware, there is no
relevant audit information (as defined in the Companies Act 1985)
of which the Company's auditors are unaware.
* the directors have taken all steps that they ought to
have taken as directors to make themselves aware of any relevant
audit information (as defined) and to establish that the Company's
auditors are aware of that information.
Responsibility statement of the directors in respect of the annual
financial report
We confirm that to the best of our knowledge:
* the financial statements, which have been prepared in
accordance with UK Generally Accepted Accounting Practice, give a
true and fair view of the assets, liabilities, financial position
and loss of the Company; and
* the directors' report includes 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.
By Order of the Board
Grant Whitehouse
Income Statement
for the year ended 31 January 2009
2009 2008
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
(Loss)/gain on - (208,296) (208,296) - 30,067 30,067
disposal of
investments
Decrease in - (4,551,395) (4,551,395) - (1,018,122) (1,018,122)
fair value of
investments
held
Income 195,536 - 195,536 340,652 - 340,652
Investment (37,296) (111,886) (149,182) (66,751) (200,254) (267,005)
management
fees
Other expenses (205,241) - (205,241) (267,467) - (267,467)
(Loss)/return (47,001) (4,871,577) (4,918,578) 6,434 (1,188,309) (1,181,875)
on ordinary
activities
before
taxation
Taxation on - - - - - -
ordinary
activities
(Loss)/return (47,001) (4,871,577) (4,918,578) 6,434 (1,188,309) (1,181,875)
on ordinary
activities
after taxation
Basic and (0.24)p (25.29)p (25.53)p 0.04p (6.58)p (6.54)p
diluted return
per ordinary
share
The total column is the profit and loss account of the Company.
The accompanying notes are an integral part of the financial
statements.
All revenue and capital items derive from continuing operations.
There were no other recognised gains or losses in the year. Other
than revaluation movements arising on investments held at fair value
through the profit and loss account, there were no other differences
between the (loss)/return as stated above and at historical cost.
Reconciliation of Movements in Shareholders' Funds for the year ended
31 January 2009
2009 2008
£ £
Opening shareholders' funds 14,497,689 12,137,079
Loss for the year (4,918,578) (1,181,875)
Increase in share capital in issue 370,960 4,768,117
Dividends paid - (1,225,632)
Closing shareholders' funds 9,950,071 14,497,689
Balance Sheet as at 31 January 2009
2009 2008
£ £
Fixed assets
Investments held at fair value 6,867,630 10,017,114
Current assets
Debtors 430,716 147,149
Cash at bank and on deposit 945,663 470,290
Investments - liquidity fund 1,773,658 3,943,498
3,150,037 4,560,937
Current liabilities
Creditors: amounts falling due within one year (67,596) (80,362)
Net current assets 3,082,441 4,480,575
Total assets less current liabilities 9,950,071 14,497,689
Capital and reserves
Called up share capital 193,077 188,375
Share premium account 6,931,312 6,403,631
Special distributable reserve* 8,458,244 8,622,048
Capital redemption reserve 391,571 389,190
Capital reserve* (5,635,580) (764,003)
Revenue reserve* (388,553) (341,552)
Equity shareholders' funds 9,950,071 14,497,689
Net asset value per share (basic and diluted) 51.5p 77.0p
* These reserves are distributable in whole or in part.
Cash Flow Statement
for the year ended 31 January 2009
2009 2008
£ £
Operating activities
Investment income received 236,406 299,398
Deposit interest received 9,317 16,039
Investment management fees (337,932) (303,213)
Other operating costs (217,976) (260,829)
Net cash outflow from operating activities (310,185) (248,605)
Financial investment
Purchase of investments (1,797,060) (4,129,602)
Disposal/(purchase) of liquidity funds 2,169,840 (2,355,796)
Disposals of investments 39,295 1,170,205
Net cash inflow/(outflow) from financial 412,075 (5,315,193)
investment
Dividends
Payment of dividends - (1,031,799)
Net cash inflow/(outflow) before financing 101,890 (6,595,597)
Financing
Issue of shares 551,500 5,896,127
Expenses of the issue of shares (14,213) (161,762)
Buy back of shares (163,804) (228,608)
Net cash inflow from financing 373,483 5,505,757
Increase/(decrease) in cash during the year 475,373 (1,089,840)
Reconciliation of net cash flow to movement
in net cash
Net cash at 1 February 2008 470,290 1,560,130
Net cash at 31 January 2009 945,663 470,290
Increase/(decrease) in cash during the year 475,373 (1,089,840)
Notes
1. Accounting Policies
Basis of accounting
The financial statements have been prepared under the historical cost
convention, modified to include a revaluation of fixed asset
investments, and in accordance with applicable Accounting Standards
and with the Statement of Recommended Practice, 'Financial Statements
of Investment Trust Companies' ("SORP") issued in December 2005.
Income
Dividends on quoted shares are recognised as income on the date that
the related investments are marked ex- dividend or, where no dividend
date is quoted, when the Company's right to receive payment is
established.
Income from fixed interest securities, other investment income and
deposit income are recognised on a time apportionment basis so as to
reflect the effective interest rate over the life of the financial
instrument. 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. Expenses are
charged wholly to revenue, with the exception of the investment
management fee, 75% of which is charged to capital reserve.
Share issue costs
Share issue costs are deducted from the share premium account.
Taxation
Deferred taxation is recognised in respect of all timing differences
that have originated but not reversed at the balance sheet date.
Deferred tax assets are only recognised when they arise from timing
differences where recovery in the foreseeable future is regarded as
probable. Timing differences are differences arising between the
Company's taxable profits and its results as stated in the financial
statements which are capable of reversal in one or more subsequent
periods.
Investments
Investments are classified at fair value through profit or loss.
Financial assets designated at fair value through profit or loss are
measured at subsequent reporting dates at fair value.
Publicly traded investments are valued at bid prices, in accordance
with FRS 26.
Unquoted investments are shown at fair value as assessed by the
directors in accordance with International Private
Equity and Venture Capital Valuation ("IPEVCV") guidelines:
* investments which have been made in the last 12 months are retained
at cost 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 reviewed for impairment on the
basis described above.
* where a company is well established after one year from the date of
investment the shares may be valued by applying a suitable
price-earnings ratio to that company's historical post-tax
earnings. The ratio used is based on a comparable listed company or
sector but discounted to reflect lack of marketability. Alternative
methods of valuation will include cost, provision against cost or
net asset value where such factors apply that make one of these
methods more appropriate.
* alternatively 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.
Realised surpluses or deficits on the disposal of investments and
permanent impairments in the value of investments are taken to
realised capital reserves, and unrealised surpluses and deficits on
the revaluation of investments are taken to unrealised capital
reserves.
Financial Instruments
The Company classifies financial instruments, or their component
parts, on initial recognition as a financial asset, a financial
liability or an equity instrument in accordance with the substance of
the contractual arrangement. Financial instruments are recognised on
trade date when the Company becomes a party to the contractual
provisions of the instrument. Financial instruments are recognised
initially at fair value plus, in the case of a financial instrument
not at fair value through profit or loss, transaction costs that are
directly attributable to the acquisition or issue of the financial
instrument.
Financial instruments are derecognised on trade date when the Company
is no longer a party to the contractual provisions of the instrument.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss comprise equity
investments, preference shares and loan stock. Movements in fair
values are taken directly to the income statement.
Trade receivables
Trade receivables are stated at their original invoiced value, as the
interest that would be recognised from discounting future cash
receipts over the short credit period is not considered to be
material. Trade receivables are reduced by appropriate allowances for
estimated irrecoverable amounts. Interest on overdue trade
receivables is recognised as it accrues.
Trade payables
Trade payables are stated at their original invoiced value, as the
interest that would be recognised from discounting future cash
payments over the short payment period is not considered to be
material.
2 Basic and diluted return per share
The revenue return per share is based on the loss on ordinary
activities after taxation of £47,001 (2008: gain of £6,434) and on
19,261,320 (2008: 18,052,613) shares, being the weighted average
number of shares in issue during the year. The capital return per
share is based on the loss on ordinary activities after taxation of
£4,871,577 (2008: loss of £1,188,309) and on 19,261,320 (2008:
18,052,613) shares, being the weighted average number of shares in
issue during the year. There are no convertible instruments,
derivatives or contingent share agreements in issue.
3 Net asset value per ordinary share
The calculation of the basic and diluted net asset value per ordinary
share at 31 January 2009 is based on net assets of £9,950,071 (2008:
£14,497,689) divided by the 19,307,784 (2008: 18,837,545) shares in
issue at the year end.
4 Principle risks and uncertainties
The Board considers that the principal risks and uncertainties faced
by the Company are as follows:
Investment risk
This is the risk of investment in poor quality assets which reduce
the capital and income returns to shareholders and negatively impact
on the Company's reputation. By nature, smaller unquoted businesses,
such as those that qualify for venture capital trust purposes are
more fragile than larger, long established businesses.
To reduce the risk, the Board places reliance upon the skills and
expertise of the Investment Manager and its track record for
investing in this segment of the market. In addition, the Investment
Manager operates a formal and structured investment process, which
includes a formal investment committee. Investments are actively and
regularly monitored by the Investment Manager and the Board receives
detailed reports on each investment as part of the Investment
Manager's report at regular Board meetings.
Compliance risk
As a venture capital trust, and a fully listed company on the London
Stock Exchange, the Company operates in a complex regulatory
environment and, therefore, faces a number of related risks. A breach
of the VCT Regulations could result in the loss of VCT status and
consequent loss of tax reliefs currently available to shareholders
and the Company being subject to capital gains tax. Serious breaches
of other regulations, such as the UKLA Listing Rules, Companies Act
2006 and the Companies Act 1985 could lead to suspension from the
Stock Exchange and damage to the Company's reputation.
The Company's compliance with the VCT regulations is continually
monitored by the Investment Manager, who reports regularly to the
Board on the current position. The Company also retains
PricewaterhouseCoopers to provide regular reviews and advice in this
area. The Board considers that this approach reduces the risk of a
breach of the VCT regulations to a minimal level. Board members have
considerable experience of operating at senior levels within quoted
and unquoted businesses. In addition, the Company has engaged an
experienced Company Secretary to ensure that compliance with UK
Listing Rules is maintained and seeks legal and regulatory advice
from appropriate third-party experts when required.
Market risk
Investment in AIM-quoted, PLUS-traded and unquoted companies, by its
nature, involves a higher degree of risk than investment in companies
on the main market. In particular, smaller companies often have
limited product lines, markets or financial resources and may be
dependent for their management on a smaller number of key
individuals. In addition, the market for stock in smaller companies
is often less liquid than for stock in larger companies, bringing
with it potential difficulties in acquiring, valuing and disposing of
such stocks.
The Board seeks to mitigate the internal risks by setting policy,
regular reviews of performance, enforcement of contractual
obligations and monitoring progress and compliance.
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 31 January
2009, but has been extracted from the statutory financial statements
for the year ended 31 January 2009, which were approved by the Board
of Directors on 14 May 2009 and will be delivered to the Registrar of
Companies following the Company's Annual General Meeting. The
Independent Auditor's Report on those financial statements was
unqualified and did not contain any emphasis of matter nor statements
under s 498(2) and (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 January 2008 have been
delivered to the Registrar of Companies and received an Independent
Auditors report which was unqualified and did not contain any
emphasis of matter nor statements under S237(2) or (3) of the
Companies Act 1985.
A copy of the full annual report and financial statements for the
year ended 31 January 2009 will be printed and posted to shareholders
shortly. Copies will also be available to the public at the
registered office of the Company at 39 Earlham Street, London WC2H
9LT and will be available for download from www.provenvcts.com
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solely responsible for the content of this announcement.