Final Results
PROVENÂ GROWTH AND INCOME VCT plc
FINAL RESULTS for the year ended 28 FEBRUARY 2010
FINANCIAL SUMMARY
  New Original  'C' 'D'
Ordinary Ordinary  Shares  Shares
Shares  Shares
As at 28 February 2010 2009 2010 2009 2010 2009 2010 2009
pence pence pence pence pence pence pence pence
Net asset value per share 74.10 n/a 45.80 57.10 74.10 76.70 92.30 n/a
Dividends paid since launch - n/a 146.90 132.90 9.60 8.25 - n/a
Total return 74.10 n/a 192.70 190.00 83.70 84.95 92.30 n/a
(net asset value plus
dividends paid since launch)
CHAIRMAN'S STATEMENT
I am pleased to present the Annual Report for ProVen Growth and Income VCT plc
for the year ended 28 February 2010 and would like to welcome any new
shareholders who may have subscribed under the Company's recent Linked 'D' Share
offer or the Ordinary Share Top-Up Offer.
Against a background of unprecedented volatility in stock markets, the
continuing uncertainty about the economy has held back development of many
smaller companies. Â The Investment Manager has also taken a cautious approach to
investing in this climate. Â This has resulted in a relatively low level of
investment activity during the year. The Board recognises that this has been a
risky time for investing and is supportive of the Investment Manager's patient
approach to identifying and securing suitable investment opportunities. The
valuations of unquoted businesses are generally a discounted reflection of stock
market pricing and it is therefore pleasing to be able to report that overall
the existing portfolio has performed satisfactorily.
Away from the investment activities, the Company undertook a number of corporate
actions. Fundraisings were launched in both the 'D' Share and Ordinary Share
pools. Â A tender offer was undertaken in respect of the 'C' Shares and
subsequently the 'C' Share pool was merged with the original ordinary share pool
and followed with a share consolidation to create New Ordinary Shares. Details
of the tender offer, merger and share consolidation are shown below. Following
these events, the Company now has two classes of shares which simplifies the
management and administration tasks.
Net asset value
Ordinary Shares
At 28 February 2010 the Company's New Ordinary Share Net Asset Value ("NAV")
stood at 74.1p per share.
For original Ordinary Shareholders, this represents an increase of 2.7p or 6.3%
since 28 February 2009 after adjusting for the dividends of 14.0p which were
paid during the year and the conversion to New Ordinary Shares. The Total Return
(NAV plus dividends paid to date) to Ordinary Shareholders that invested at the
Company's launch now stands at 192.7p per original ordinary share.
For Shareholders who originally invested in 'C' Shares this represents a small
decrease of 1.25p or 1.7% since 28 February 2009 after adjusting for the
dividends of 1.35p per share which were paid during the year.
'D' Shares
The NAV of the Company's 'D' Shares stood at 92.3p at 28 February 2010, a
decrease of 2.2p or 2.3% on the initial 'D' Share NAV of 94.5p per share. No
dividends have been paid to 'D' Shareholders to date.
Portfolio activity and valuation
Ordinary Share pool (including 'C' Share portfolio)
The economic climate has not been supportive of investment realisations at
attractive prices, nor has new investment been easy. A number of new investment
opportunities were progressed to an advanced stage, but they have proved
impossible to complete on acceptable terms. Accordingly, the investment activity
in the Ordinary Share pool during the year comprised two follow-on investments
totalling £643,000 and a small number of realisations were achieved, primarily
from repayments of loan stock, which produced total proceeds of £283,000.
A detailed review of the investment valuations of the unquoted portfolio at the
year end has resulted in a net unrealised gain for the year of £1.0 million.
 Further details are provided in the Investment Manager's Review and the Review
of Investments.
'D' Share pool
The 'D' Share pool did not make any investments during the year and held its
funds in bank deposits and liquidity funds as at the year end.
Results and dividends
The total return on ordinary activities for the year was as follows:
 Revenue Capital Total
 £'000 £'000 £'000
Ordinary Shares (152) 996 844
'C' Shares (393) (499) (892)
'D' Shares (54) (69) (123)
 (599) 428 (171)
On 3 July 2009, the Company paid interim dividends of 14.0p per original
Ordinary Share (2009: 31.0p per share) and 1.35p per 'C' Share (2009: 1.0p).
The Board is not proposing to pay final dividends in respect of either share
class for the year ended 28 February 2010.
New fundraisings
Linked 'D' Share issue
In November 2009, the Company launched a second Linked 'D' Share offer, in
conjunction with ProVen VCT plc. Â Up to the date of this report, the offer has
raised a total of £5.2 million of which £2.6 million is allocated to 'D' Shares
issued and to be issued by ProVen Growth and Income VCT plc. No shares were
issued before 28 February 2010.
The offer is scheduled to close on 29 October 2010 and will provide the Company
with additional funds over which the fixed running costs of the Company can be
borne and to make further venture capital investments.
Ordinary Share Top-up Offer
In November 2009, the Company also launched an Ordinary Share Top-Up offer, in
conjunction with ProVen VCT plc and Proven Health VCT plc. Â The offer raised a
total of £2.1 million of which £0.7 million was allocated to Ordinary Shares
issued by ProVen Growth and Income VCT plc. No shares were issued before 28
February 2010. The offer closed on 28 May 2010.
Share buybacks
In order to ensure liquidity in the market in the Company's shares, the Company
has operated a policy of buying in its own shares that become available in the
market.
During the year, the Company repurchased 34,633 Original Ordinary Shares at an
average price of 39.5p per share, 5,174,771 'C' Shares at an average price of
75.2p per share and 186,001 New Ordinary Shares at an average price of 64.7p per
share for cancellation.
The Board intends to continue to make purchases of its shares when they become
available in the market and has a current policy of purchasing New Ordinary
Shares at a price equivalent to a 10% discount to the latest published NAV and
 at a 5% discount in respect of 'D' Shares.
A special resolution to allow the Board to continue to purchase shares for
cancellation will be proposed at the forthcoming AGM.
Investment policy
In light of the current market conditions, the Board has reviewed the Company's
Investment Policy and is proposing to make a minor adjustment to increase
flexibility in respect of the non-qualifying investments. The Investment Manager
sees opportunities to make further investments in existing portfolio companies
or other companies familiar to the Manager that, for technical reasons, would
not be VCT qualifying, for example, a purchase of shares from an exiting member
of an investee company's management team. Such investment opportunities can be
at attractive prices and are, of course, in companies well-known to the
Investment Manager.
Board composition
In September 2010, a UK Listing Rule in relation to Directors' Independence
becomes effective for all VCTs. Â Under the rule, Directors who also serve on the
Board of other funds managed by the same investment manager are deemed not to be
independent of the investment manager. Â In view of this, I have agreed to step
down from the Board of ProVen Growth and Income VCT at the forthcoming AGM. Â I
will continue as chairman of Proven VCT plc.
The Board has decided not to seek to appoint a replacement director as it has
concluded that a board comprising four directors is sufficient for a VCT of this
size. Â Marc Vlessing, who has served as a director since the Company's launch in
2001, has agreed to take over as Chairman. Some changes to the individual
directors' fees have been agreed to reflect the changes to the Board, however
total Directors' fees will not increase.
It has been a pleasure to chair what has been one of the best performing VCTs
and I wish Marc every success in his new role.
Annual General Meeting
The Annual General Meeting ("AGM") of the Company will be held at 39 Earlham
Street, London WC2H 9LT at 12:15Â p.m. on 24Â August 2010.
Five items of special business will be proposed at the AGM in respect of share
buybacks, adjustment to the Investment Policy, adoption of updated Articles of
Association (as described in the Report of the Directors) and two resolutions in
connection with authority for the Directors to allot shares.
Outlook
Although there has been a low level of investment activity over the year under
review, the Board takes comfort from the fact that the Company's NAVs have been
reasonably stable over this difficult year and are generally satisfied with the
performance of the majority of the existing portfolio companies.
The Board expects to see higher levels of new investment activity during the
coming year, in particular in respect of the 'D' Share pool. Â This has already
been evident since the year end, during which time the Company has made one new
investment. Â Although the recession may be coming to an end, we are still
expecting to see continuing turmoil and growth uncertainty. Â The new Government
has unprecedented challenges to deal with and, as a result, we must expect
uncomfortable and, possibly, abrupt policy changes which will provide
opportunities and reverses to the small enterprises that form our investment
pools. Â Nonetheless, this phase of the economic cycle has historically yielded
excellent growth opportunities. Â Accordingly, we will be looking to the
Investment Manager to continue to generate dealflow from which the Company can
secure attractive new investments.
Andrew Davison
Chairman
'C' SHARE TENDER OFFER, CONVERSION AND SHARE CONSOLIDATION
'C' Share tender offer
The prospectus for the 'C' Share fundraising issued by the Company in November
2005 set out an intention to return at least 25p per 'C' Share to 'C'
Shareholders within 3½ years of the close of the offer for subscription through
a combination of tax-free dividends and a tender offer. Â In July 2009, the
Company fulfilled this intention by means of a tender offer.
Under the tender offer the Company acquired 5,079,999 'C' Shares at a price of
75.35p per share. Â These shares were subsequently cancelled.
'C' Share conversion and share consolidation
Following the tender offer described above and as set out in the Company's 'C'
Share prospectus, the Company's 'C' Shares were converted into Ordinary Shares.
 The conversion was based on the relative NAVs of the Ordinary Shares and 'C'
Shares as at 31 August 2009.
Following the conversion, the Ordinary Shares were consolidated into New
Ordinary Shares at such a ratio such that the NAV of a New Ordinary Share was
equal to that of a 'C' Share before conversion. Â As the original 'C' Share class
had significantly more members than the original Ordinary Share class, the Board
felt that this consolidation made it more straightforward for the majority of
Shareholders to follow the value of their investment.
The effect on the holdings of original ordinary shareholders and 'C'
Shareholders is summarised below:
* For every original ordinary share held 0.6178 New Ordinary Shares were
issued.
* For every 'C' Share held 1 New Ordinary Share was issued.
All Ordinary and 'C' Shareholders will have received new share certificates for
the New Ordinary Shares following the conversion and consolidation. Any original
Ordinary Share or 'C' Share certificates are now invalid.
INVESTMENT MANAGER'S REVIEW
Introduction
Beringea LLP is a specialist venture capital management company which has been
established for over 20 years. It currently manages over £60 million of venture
capital funds in the UK and has been the investment manager of ProVen Growth and
Income VCT plc since inception in 2001.
The Company currently has two share classes: Ordinary Shares and 'D' Shares. The
Company's 'C' Shares, which were in existence at the start of the year, merged
with the Ordinary Shares in October. As a result, the original ordinary
shareholders and original 'C' shareholders now have an interest in a wider range
of investments in the New Ordinary Share pool. Going forward, the Ordinary Share
and 'D' Share pools will remain as separate pools.
The year covered by this report was one of the most challenging periods for
making new investments for many years. Â With the UK economy in recession for
most of the period and the stock market falling dramatically between September
2008 and March 2009, confidence among the owners and directors of small growth
companies was in short supply. Â Consequently, few businesses were seeking to
raise additional capital, as companies put their expansion plans on hold until
there was visibility of a return to economic growth. Â Likewise, we were cautious
when reviewing new investment opportunities, focusing our attention on companies
with exceptional management and strong competitive positions. Â Against this
background, the volume of new investments made by the Company was much lower
than in previous years, reflecting the trend across the venture capital
industry. Â Following the UK's return to economic growth, the flow of new
investment opportunities has increased significantly and we expect that the rate
of new investment will increase during the year ending 28 February 2011. Â The
competition for good deals remains fierce, however, and we will be vigilant
about not overpaying for investments.
Ordinary Share pool - portfolio activity & valuation
Two follow on investments in Overtis and Fjordnet, totalling £643,000, were made
from the Ordinary Share pool during the year. The investment in Overtis enables
the company to further develop its software security solutions and its sales
channels to market. The investment in Fjordnet was part of the original
investment strategy but was delayed in order to meet the VCT qualification
rules. Since the Company's investment in Fjordnet, the digital media agency has
opened two new offices and now has operations in London, Helsinki, Berlin,
Madrid and New York. The new international offices have enabled Fjordnet to
respond to the needs of global clients. The company was instrumental in bringing
the BBC iPlayer to mobile.
At 28 February 2010, the Company's Ordinary Share pool comprised 26 investments
with a total cost of £17.9 million and a valuation of £15.3 million. In
addition, the Ordinary Share pool held cash and liquidity funds of £2.5 million.
The merger of the previously separate Ordinary Share and 'C' Share pools has
resulted in a broader diversification of investments. Only Espresso Group and
Fjordnet account individually for more than 10% by value of the total Ordinary
Share investments. Espresso is entering the next phase of its development having
secured a significant share of the primary school market. The company continues
to increase its share of the UK secondary school market and is exploring a
number of international expansion opportunities. Espresso's launch in Sweden has
already demonstrated its international potential and, since the year end, the
Espresso primary school service has also been launched in the United States.
Espresso made a further scheduled repayment of loan notes during the year, as
did Ashford Colour Press and Dianomi.
A number of other portfolio companies have shown encouraging results
particularly when viewed against the challenging economic backdrop. Eagle Rock
continues to perform well and is further strengthening its position by
indentifying new ways to leverage its impressive rights catalogue. Â The recent
purchase of Edel Music further adds to the company's attractiveness as a
potential acquisition target. Charterhouse Leisure, a small restaurant chain
operating under the brand name "Coal Grill & Bar" has also performed well. The
CEO is an experienced restaurateur who ran the Ma Potters restaurant chain in
which the Company invested and made a strong return. We have been able to uplift
the valuations of both these companies as a result of this performance.
Disappointingly, Optima Data Intelligence Solutions (ODIS) was placed in
administration. ODIS suffered from the impact of the economic downturn on its
clients in the magazine publishing industry. The company was unable to achieve a
trade sale and an orderly administration was the only viable alternative.
'D' Share pool - portfolio activity & valuation
At 28 February 2010, the 'D' Share portfolio comprised net assets of £5.1
million. This comprised net cash, after operating expenses, from the original
'D' Share offer which closed in October 2009 and funds from unallotted
subscriptions from the subsequent offer launched in November 2009. No
investments were made during the period.
In April 2010, £504,000 was invested from the 'D' Share pool in Tossed as part
of a total £1.5 million investment from ProVen VCT and ProVen Growth and Income
VCT. Tossed is a chain of healthy eating outlets offering ethically sourced
food. The company currently has six outlets in central London and the ProVen
VCTs' investment will provide funds for further development. The CEO, Vincent
McKevitt, has been recognised as one of the leading young entrepreneurs in the
country.
Proposed change in investment policy
During the year we have been presented with several opportunities to make
further investments in portfolio companies which are performing well but where
the additional investment would not be VCT qualifying for technical reasons. Â We
are therefore supporting the Board's proposal that the Company's investment
policy is changed to allow a portion of the non-qualifying part of the Company's
assets to include investments originated in line with the Company's qualifying
VCT policy but which do not qualify under the VCT rules for technical reasons.
 We believe that this will allow us to achieve a higher total investment return.
 A resolution seeking Shareholder approval for this change is included in the
Notice of AGM.
Outlook
The UK economy appears to be growing again, although at a relatively slow rate.
 Historically, this phase of the economic cycle has been the best for making
venture capital investments, as entry prices are at a cyclical low point. Â As
the economy recovers over the next few years, well managed small companies have
the potential to grow much more quickly than larger businesses, resulting in
rapid increases in valuation and ultimately profitable disposals. Â We are
already seeing a significant increase in the flow of new opportunities which
could result in a healthy crop of new investments, although we remain highly
selective about the businesses in which the Company invests.
We continue to spend a substantial amount of time working with the Company's
existing portfolio companies to ensure that they are well positioned to take
advantage of the economic upturn. Â The benefits of this supportive approach to
the portfolio are already being seen in the companies' performance and we are
cautiously optimistic that this trend will strengthen throughout the current
financial year.
Beringea LLP
INVESTMENT MANAGER'S REVIEW
During the year £643,000 was invested into two existing portfolio companies.
Five investments with an original acquisition cost of £1.6 million were realised
generating a loss of £0.5 million. The tables below summarise the transactions
during the year:
Additions
 Cost
£'000
Venture capital investments
Fjordnet Limited** 400
Overtis Group Limited** 243
 643
Disposals
 Cost Market Proceeds Profit/(loss) vs Realised
Value at cost gain/(loss)£'000
£'000 28/02/09 £'000
£'000
Venture capital
investments
Ashford Colour 69 32 69 - -
Press Limited**
Espresso Group 147 147 147 - -
Limited**
Dianomi 54 54 54 - -
Limited**
 Sports Holdings - - 13 13 13
Limited**
Optima Data 1,299 507 - (1,299) (507)
Intelligence
Services Limited
 1,569 740 283 1,286 (494)
** Â Investments also held by Proven VCT plc
INVESTMENT PORTFOLIO - ORDINARY SHARE POOL
as at 28 February 2010
Ordinary Share portfolio of investments
The following investments were held at 28 February 2010:
  Valuation Valuation movement in % of portfolio
 Cost year
 £'000 by value
 £'000 £'000
Top ten venture capital
investments (by value)
Espresso Group Limited** 1,583 2,271 (277) 12.8%
Fjordnet Limited** 1,400 2,017 617 11.4%
Charterhouse Leisure 1,000 1,235 434 7.0%
Limited**
 Eagle Rock Entertainment 680 1,180 302 6.7%
Group Limited**
Overtis Group Limited** 1,093 1,074 (19) 6.0%
Chess Technologies 900 989 89 5.6%
Limited**
Lazurite Limited** 1,000 962 (37) 5.4%
Prelude Media Limited 1,000 959 (41) 5.4%
Donatantonio Limited** 1,366 890 239 5.0%
Saffron Media Group 670 889 219 5.0%
Limited**
10,692 12,466 1,526 70.3%
Other venture capital 7,215 2,804 (65) 15.7%
investments
Total venture capital 17,907 15,270 1,461 86.0%
investments
Liquidity funds  1,250  7.0%
Cash at bank and in hand  1,249  7.0%
Total Ordinary Share  17,769  100.0%
investments
All venture capital investments above are unquoted unless otherwise stated.
Other venture capital investments as at 28 February 2010 comprise:
SPC International Limited**, Path Group Limited**, Dianomi Limited**, Ashford
Colour Press Limited**, Heritage Partners Limited**, Campden Media Limited**,
Steak Media Limited**, Coolabi plc* **, Breeze Tech Limited**, Pilat Media
Global plc* **, UBC Media Group plc* **, Sports Holdings Limited**, Immedia
Group plc*, The Vending Corporation Limited**, Isango! Limited**, Baby
Innovations S.A. t/a Steribottle**.
* Quoted on AIM
** Investments also held by ProVen VCT plc
All venture capital investments above are registered in England and Wales with
the exception of Baby Innovations S.A., which is registered in Madeira.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Report of the Directors, the
Directors' Remuneration Report and the financial statements in accordance with
applicable law and regulations. They are also responsible for ensuring that the
annual report includes information required by the Listing Rules of the
Financial Services Authority.
Company law requires the Directors to prepare financial statements for each
financial year. Â Under that law the Directors have elected to prepare the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law).
 Under company law the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for that period.
In preparing those financial statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make 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;
and
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and to
enable them to ensure that the financial statements, and the Directors'
Remuneration Report, comply with the requirements of the Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information relating to the Company included on the Managers'
websites. Legislation in the United Kingdom governing the preparation and
dissemination of the financial statements and other information included in
annual reports may differ from legislation in other jurisdictions.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS
The Directors in office at the date of the report have confirmed, as far as they
are aware, that there is no relevant audit information of which the Auditors are
unaware. Each of the Directors have confirmed that they have taken all the steps
that they ought to have taken as Directors in order to make themselves aware of
any relevant audit information and to establish that it has been communicated to
the Auditors. This confirmation is given and should be interpreted in accordance
with the provisions of section 418 of the Companies Act 2006.
Grant Whitehouse
Company Secretary
39 Earlham Street
London WC2H 9LT
INCOME STATEMENT
for the year ended 28 February 2010
Company Position
  Year ended 28 February Year ended 28 February 2009
2010
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income  243  -  243  1,188  -  1,188
Gains/(losses) on  -  967  967  -  (4,055)  (4,055)
investments
  243  967  1,210  1,188  (4,055)  (2,867)
Investment management  (118)  (356)  (474)  (136)  (407)  (543)
fees
Performance incentive  (7)  (184)  (191)  (27)  (634)  (661)
fees
Recoverable VAT Â - Â 1 Â 1 Â 51 Â 155 Â 206
Other expenses  (717)  -  (717)  (271)  (16)  (287)
Return on ordinary  (599)  428  (171)  805  (4,957)  (4,152)
activities before tax
Tax on ordinary  -  -  -  (217)  217  -
activities
Return attributable  (599)  428  (171)  588  (4,740)  (4,152)
to equity
shareholders
Basic and Diluted  (2.3p)  2.1p  (0.2p)
return per New
Ordinary Share
Basic and Diluted        0.7p  (14.0p)  (13.3p)
return per Original
Ordinary Share
Basic and Diluted  -  -  -  2.2p  (15.2p)  (13.0p)
return per 'C' Share
Basic and Diluted  (1.1p)  (1.5p)  (2.6p)  -  -  -
return per 'D' Share
All revenue and capital items in the following statements and above derive from
continuing operations. Â No operations were acquired or discontinued during the
year. Â The total column within the Income Statement represents the profit and
loss account of the Company.
A Statement of Total Recognised Gains and Losses relating to each class of share
has not been prepared as all gains and losses are recognised in the relevant
Income Statements in the current and prior year as shown the following statement
and above.
Other than revaluation movements arising on investments held at fair value
through the Income Statement, there were no differences between the return/loss
as stated on the following statement and above and at historical cost.
There are no 'D' Share comparative figures; the first allotment of 'D' Shares
was in March 2009.
INCOME STATEMENT
for the year ended 28 February 2010
Split as:
Ordinary Shares (including 'C' Share pool)
  Year ended 28 February Year ended 28 February 2009
2010
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income  217  -  217  1,188  -  1,188
Gains/(Losses) on  -  967  967  -  (4,055)  (4,055)
investments
  217  967  1,184  1,188  (4,055)  (2,867)
Investment management  (95)  (287)  (382)  (136)  (407)  (543)
fees
Performance incentive  (7)  (184)  (191)  (27)  (634)  (661)
fees
Recoverable VAT Â - Â 1 Â 1 Â 51 Â 155 Â 206
Other expenses  (660)  -  (660)  (271)  (16)  (287)
Return on ordinary  (545)  497  (48)  805  (4,957)  (4,152)
activities before tax
Tax on ordinary  -  -  -  (217)  217  -
activities
 Return attributable  (545)  497  (48)  588  (4,740)  (4,152)
to equity
shareholders
'D' Shares
  Year ended 28 February Period ended 28 February
2010 2009
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income  26  -  26  -  -  -
Gains/(Losses) on  -  -  -  -  -  -
investments
  26  -  26  -  -  -
Investment management  (23)  (69)  (92)  -  -  -
fees
Performance incentive  -  -  -  -  -  -
fees
Recoverable VAT Â - Â - Â - Â - Â - Â -
Other expenses  (57)  -  (57)  -  -  -
Return on ordinary  (54)  (69)  (123)  -  -  -
activities before tax
Tax on ordinary  -  -  -  -  -  -
activities
 Return attributable to  (54)  (69)  (123)  -  -  -
equity shareholders
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 28 February 2010
 Year ended 28 February 2010 Year ended 28 February 2009
Ordinary 'C' 'D' Total Ordinary 'C' Total
Shares
Shares Shares Shares Shares
£'000 £'000 £'000 £'000 £'000 £'000 £'000
 Opening
shareholders'
funds 3,890 19,055 - 22,945 7,594 Â 23,691 Â 31,285
 Issue of
shares - - 5,526 5,526 Â 656 Â - Â 656
 Share issue  - - (304) (304)  (36)  -  (36)
costs
 Purchase of  (14) (3,911) - (3,925)  (47)  (77)  (124)
own shares
 Distributions  (955) (335) - (1,290)  (3,375)  (1,309)  (4,684)
 Conversion of  13,917 (13,917) - -  -  -  -
shares
 Purchase of   -  -  -
own converted
shares (121) - - (121)
 Total
recognised
(losses)/gains
for the year 844 (892) (123) (171) Â (902) Â (3,250) Â (4,152)
 Closing  17,561 - 5,099 22,660 3,890  19,055  22,945
shareholders'
funds
BALANCE SHEET
as at 28 February 2010
28 February 2010 28 February 2009
New 'D' Total Original 'C' Total
Ordinary Ordinary
Shares** Shares*
Shares Shares
£'000 £'000 £'000 £'000 £'000 £'000
Fixed assets
Investments  15,270 -  15,270  2,406   11,537  13,943
Current assets
Debtors  380 589  969  945   569  1,514
Current  1,250 1,250  2,500  1,470   6,080  7,550
investments
Cash at bank  1,249 3,758  5,007  25   948  973
and in hand
 2,879 5,597  8,476  2,440   7,597  10,037
 (588) (498)  (1,086)  (956)   (79)  (1,035)
Net current  2,291 5,099  7,390  1,484   7,518  9,002
assets
Total assets less
current 17,561 5,099 22,660 3,890 19,055 22,945
liabilities/
Net assets
Capital and
reserves
Called up share  383 55  438  68   1,243  1,311
capital
Capital  943 -  943  9   6  15
redemption
reserve
Share premium  - 5,167  5,167  641   22,357  22,998
Special reserve  19,381 -  19,381  2,517   -  2,517
Capital reserve  34 (69)  (35)  971   (224)  747
- realised
Unrealised  (2,636) -  (2,636)  (350)   (4,541)  (4,891)
holding losses
Revenue reserve  (544) (54)  (598)  34   214  248
Total equity  17,561 5,099  22,660  3,890   19,055  22,945
shareholders'
funds
Basic and  74.1p 92.3p    57.1p   76.7p
diluted net
asset value per
share
CASH FLOW STATEMENT
for year ended 28 February 2010
 Year ended Year ended
28 February 2010 28 February 2009
 Ordinary 'C' 'D' Total Ordinary 'C' Total
Shares Shares Shares Shares Shares
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Net cash outflow
from operating
activities (315) (14) (214) (543) (752) (24) (776)
Capital
expenditure
Purchase of
investments (643) - - (643) (350) (7,687) (8,037)
Sale of 283 - - 283 2,662 422 3,084
investments
Net cash
inflow/(outflow)
from capital
expenditure (360) - - (360) 2,312 (7,265) (4,953)
Equity dividends
paid (955) (335) - (1,290) Â (3,375) (1,309) (4,684)
Management of
liquid resources
Purchase of
current
investments held
as liquidity funds - - (1,250) (1,250) (1,000) (300) (1,300)
Withdrawal from
liquidity funds 1,250 5,050 - 6,300 1,800 8,500 10,300
Net cash 1,250 5,050 (1,250) 5,050 800 8,200 9,000
inflow/(outflow)
from liquid
resources
Net cash
inflow/(outflow)
before financing (380) 4,701 (1,464) 2,857 (1,015) (398) (1,413)
Financing
Proceeds from
share issue - - 5,526 5,526 Â 637 - 637
Share issue costs  - - (304) (304)  (36) - (36)
Purchase of own
shares (13) (3,911) - (3,924) Â (47) (77) (124)
Transfer of bank
on conversion of
shares 1,738 (1,738) - - Â - - -
Purchase of own
converted shares (121) - - (121) Â - - -
Net cash
inflow/(outflow)
from financing 1,604 (5,649) 5,222 1,177 Â 554 (77) 477
Increase/
(decrease) in cash 1,224 (948) 3,758 4,034 (461) (475) (936)
NOTES
Basis of accounting
The Company has prepared its financial statements under UK Generally Accepted
Accounting Practice ("UK GAAP") and in accordance with the Statement of
Recommended Practice "Financial Statements of Investment Trust Companies and
Venture Capital Trusts" revised January 2009 ("SORP").
The financial statements are prepared under the historical cost convention
except for certain financial instruments measured at fair value.
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.
The Company implements new Financial Reporting Standards ("FRS") issued by the
Accounting Practices Board when required.
Presentation of income statement
In order to better reflect the activities of an investment trust company and in
accordance with guidance issued by the Association of Investment Companies
("AIC"), supplementary information which analyses the income statement between
items of a revenue and capital nature has been presented alongside the income
statement. The net revenue is the measure the Directors believe appropriate in
assessing the Company's compliance with certain requirements set out in Part 6
of the Income Tax Act 2007.
Fixed assets investments
Investments are designated as "fair value through profit or loss" assets due to
investments being managed and performance evaluated on a fair value basis. Â 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. Â The fair value of an investment upon
acquisition is deemed to be cost. Â Thereafter investments are measured at fair
value in accordance with the International Private Equity and Venture Capital
Valuation Guidelines ("IPEV Guidelines") together with FRS26 - Financial
Instruments: Recognition and Measurement. Â New IPEV Guidelines were issued in
September 2009 and have been used for the valuations as at 31 January 2010. The
Directors and the Investment Manager consider that the valuations prepared under
the new IPEV Guidelines do not differ materially from the valuations that would
have been prepared under the previous version of the IPEV Guidelines.
Publicly traded investments are measured using bid prices in accordance with the
IPEV Guidelines.
The valuation methodologies used by the Directors for assessing the fair value
of unquoted investments are as follows:
* Price of recent investment;
* Multiples;
* Net assets;
* Discounted cash flows or earnings (of underlying business);
* Discounted cash flows (from the investment); and
* Industry valuation benchmarks.
The methodology applied takes account of the nature, facts and circumstances of
the individual investment and uses reasonable data, market inputs, assumptions
and estimates in order to ascertain fair value.
Where an investee company has gone into receivership or liquidation, or there is
little likelihood of a recovery from a company in administration, the loss on
the investment, although not physically disposed of, is treated as being
realised.
Gains and losses arising from changes in fair value are included in the Income
Statement for the year as a capital item.
It is not the Company's policy to exercise significant influence over investee
companies. Â Therefore, the results of these companies are not incorporated into
the Income Statement except to the extent of any income accrued. This is in
accordance with the SORP that does not require portfolio investments to be
accounted for using the equity method of accounting.
Current assets investments
Current assets investments comprise investments in liquidity funds with AAA
rating and are redeemable on call. These investments are fair value through
profit or loss assets and are marked-to-market.
Income
Dividend income from investments is recognised when the shareholders' rights to
receive payment has been established, normally the ex dividend date or, where no
dividend date is established, when the Company's right to receive payment is
established.
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. Â 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 accruals basis. In respect of the analysis
between revenue and capital items presented within the income statement, all
expenses have been presented as revenue items except as follows:
* expenses which are incidental to the acquisition of an investment are
deducted from the Capital Account;
* expenses which are incidental to the disposal of an investment are deducted
from the disposal proceeds of the investment; and
* expenses are split and presented partly as capital items where a connection
with the maintenance or enhancement of the value of the investments held can
be demonstrated and accordingly the investment management fee has been
allocated 25% to revenue and 75% to capital, in order to reflect the
Directors' expected long-term view of the nature of the investment returns
of the Company.
Taxation
The tax effects of different items in the Income Statement are allocated between
capital and revenue on the same basis as the particular item to which they
relate using the Company's effective rate of tax for the accounting period.
Due to the Company's status as a venture capital trust and the continued
intention to meet the conditions required to comply with Part 6 of the Income
Tax Act 2007, no provision for taxation is required in respect of any realised
or unrealised appreciation of the Company's investments which arises.
Deferred taxation is provided in full on timing differences that result in an
obligation at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they crystallise based on
current tax rates and law. Timing differences arise from the inclusion of items
of income and expenditure in taxation computations in periods different from
those in which they are included in the financial statements. Deferred tax
assets are recognised to the extent that it is regarded as more likely than not
that they will be recovered. Deferred tax assets and liabilities are not
discounted.
Other debtors and other creditors
Other debtors (including accrued income) and other creditors are included within
the accounts at amortised cost, equivalent to the fair value of the expected
balance receivable/payable by the Company.
Share issue costs
Expenses in relation to share issues are deducted from the Share Premium
Account.
 Ordinary/'C' Share pool 'D' Share pool
Revenue return per share based on:
Net revenue after taxation (£'000) (545)  (54)
Weighted average number of shares in 23,773,597 Â 4,685,172
issue
Pence per New Ordinary Share/'D' Share (2.3p) Â (1.1p)
Capital return per share based on:
Net capital gain/(loss) for the 497 Â (69)
financial year (£'000)
Weighted average number of shares in 23,773,597 Â 4,685,172
issue
Pence per New Ordinary Share/'D' Share 2.1p  (1.5p)
As the Company has not issued any convertible securities or share options, there
is no dilutive effect on return per share. Â The return per share disclosed
therefore represents both basic and diluted return per share.
2010 2009
Shares in issue Net asset value Net asset value
2010 2009 pence per £'000 pence per £'000
share share
New Ordinary 23,684,352 n/a  74.1p  17,561   n/a  n/a
Shares
Original n/a 6,816,160  n/a  n/a   57.1p  3,890
Ordinary
Shares
'C' Shares - 24,855,707  -  -   76.7p  19,055
'D' Shares 5,525,501 -  92.3p  5,099   -  -
     22,660     22,945
As the Company has not issued any convertible securities or share options, there
is no dilutive effect on net asset per share. Â The net asset value per share
disclosed therefore represents both basic and diluted return per share.
As a VCT, the majority of the Company's assets are represented by financial
instruments which are held as part of the investment portfolio. In order to
ensure continued compliance with the relevant VCT regulations and to be in a
position to deliver the long-term capital growth which is part of the Company's
investment objective, the Board is very much aware of the need to manage and
mitigate the risks associated with these financial instruments.
The management of these risks starts with the application of a clear investment
policy which has been developed by the Board who are experienced investment
professionals. Furthermore, the Board has appointed an experienced investment
manager to whom they have communicated the Company's investment objectives and
whose remuneration is linked to the achievement of those objectives. The
Investment Manager reports regularly to the Board on performance.
Further information about the VCT's investment policy is set out in the Report
of the Directors.
In assessing the risk profile of its investment portfolio, the Board has
identified two principal classes of financial instrument. Instruments deemed to
be "fair value through profit or loss account" assets are recognised as such on
initial recognition.
In addition to its investment portfolio, the VCT maintains a portfolio of
liquidity funds and a cash balance with one of the main UK banks. The Directors
consider that the risk profile associated with cash deposits and liquidity fund
investments is low and thus the carrying value in the financial statements is a
close approximation of the fair value.
The Board has reviewed the Company's financial risk profile and is of the
opinion that the exposure to financial risk has not changed significantly since
the previous year.
A review of the specific financial risks faced by the Company is presented
below.
Financial liabilities
The Company has no financial liabilities or guarantees, other than the creditors
disclosed within the balance sheet.
Currency exposure
As at 28 February 2010, the Company had one overseas investment, Baby
Innovations S.A., which trades in Euros and was valued at £Nil (2009: £Nil).
This represented Nil% of Net Assets (2009: Nil %).
Market risks
The key market risks to which the Company is exposed are interest rate risk and
market price risk. The Company has undertaken sensitivity analysis on its
financial instruments, split into the relevant component parts, taking into
consideration the economic climate at the time of review in order to ascertain
the appropriate risk allocation.
Interest rate risk
The Company receives interest on its cash deposits at a rate agreed with its
banker and on liquidity funds at rates based on the underlying investments.
Investments in loan stock and fixed interest investments attract interest
predominately at fixed rates.
As the Company must comply with the VCT regulations, increases in interest rates
could lead to a potential breach of these regulations. Â The Company therefore
monitors the level of income received from fixed, variable floating, floating
and non interest rate assets to ensure that the regulations are not breached.
Due to the relatively short period to maturity of the fixed rate investments
held within the portfolio, it is considered that an increase or decrease of 25
basis points in the interest rates as at the reporting date would not have had a
significant effect on the Company's net assets or total return for the year.
Market price risk
Market price risk arises from uncertainty about the future prices of financial
instruments held in accordance with the Company's investment objectives. Â It
represents the potential loss that the Company might suffer through holding
market positions in the face of market movements. At 28 February 2010, the
unrealised loss on AIM quoted portfolios was £807,000 (2009: unrealised loss
£857,000).
The investments that the Company holds are, in the main, thinly traded and, as
such, the prices are more volatile than those of more widely traded securities.
 In addition, the ability of the Company to realise the investments at their
carrying value may at times not be possible if there are no willing purchasers.
 The ability of the Company to purchase or sell investments is also constrained
by the requirements set down for VCTs.
It is not the Company's policy to use derivative instruments to mitigate market
risk, as the Board believes that the effectiveness of such instruments does not
justify the cost involved.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument is unable
to discharge a commitment to the Company made under that instrument.
Credit risk in respect of investments in liquidity funds is minimised by, where
possible, investing in AAA-rated funds.
Investments in loan stocks comprise a fundamental part of the Company's venture
capital investments and are managed within the main investment management
procedures.
Cash is mainly held by Bank of Scotland plc, which is an AA- rated financial
institution part owned by the UK Government and, consequently the Directors
consider that the risk profile associated with cash deposits is low. Â There have
been no changes in fair value that are directly attributable to changes in
credit risk.
Interest, dividends and other receivables are predominantly covered within the
investment management procedures. There have been no changes in fair value 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. As
the Company only normally ever has a relatively low level of creditors and has
no borrowings, the Board believes that the Company's exposure to liquidity risk
is minimal.
Announcement based on audited accounts
The financial information set out in this announcement does not constitute the
Company's statutory financial statements in accordance with section 434
Companies Act 2006 for the year ended 28 February 2010, but has been extracted
from the statutory financial statements for the year ended 28 February 2010,
which were approved by the Board of Directors on 30 June 2010 and will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting. Â The Independent Auditor's Report on those financial statements was
unqualified and did not contain any emphasis of matter nor statements under s
498(2) and (3) of the Companies Act 2006.
The statutory accounts for the year ended 28 February 2009 have been delivered
to the Registrar of Companies and received an Independent Auditors report which
was unqualified and did not contain any emphasis of matter nor statements under
S237(2) or (3) of the Companies Act 1985.
A copy of the full annual report and financial statements for the year ended 28
February 2010 will be printed and posted to shareholders shortly. Copies will
also be available to the public at the registered office of the Company at 39
Earlham Street, London, WC2H 9LT and will be available for download from
www.provenvcts.co.uk and www.downing.co.uk .
[HUG#1428709]
This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the information contained therein.
All reproduction for further distribution is prohibited.
Source: Proven Growth & Income VCT plc via Thomson Reuters ONE
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