Proven Growth & Income VCT plc : Final Results

ProVen Growth & Income VCT plc

Final Results for the year ended 29 February 2012

Financial summary

	Ordinary Shares			'D' Shares
As at 29 February	2012 pence	2011 pence		2012 pence	2011 pence
Net asset value per share	82.2	86.4		86.8	90.0
Dividends paid since share conversion/class launch	4.5	-		-	-
Total return (net asset value plus dividends paid since share conversion/class launch)	86.7	86.4		86.8	90.0
Year on year change in:
Net asset value per share (adjusted for dividends paid)	0.3%			-3.6%
FTSE All Share Index total return	1.5%			1.5%

Chairman's Statement
I am pleased to present the Annual Report for ProVen Growth & Income VCT plc for the year ended 29 February 2012.

The year saw a continuation of the difficult economic conditions, with renewed fears of a Eurozone crisis fuelling more volatility in stock market prices and hindering a recovery in investor confidence.  Some of the Company's portfolio companies have been impacted by this climate, however, a number of the stronger portfolio companies have been able to make headway, such that the Ordinary Share pool has been able to report an increase in NAV over the year (after adjusting for dividends paid).

Net asset value
Ordinary Shares
At 29 February 2012, the Company's Ordinary Share NAV stood at 82.2p per share. This represents an increase of 0.3p or 0.3% since 28 February 2011 after adjusting for the dividend of 4.5p per share which was paid in the year.

'D' Shares
The NAV of the Company's 'D' Shares stood at 86.8p at 29 February 2012, a decrease of 3.2p or 3.6% since 28 February 2011. No dividends have been paid to 'D' Shareholders to date. The fall in NAV is partly a function of the fact that the 'D' Share pool is still in the process of being invested and uninvested cash does not provide sufficient income to cover running costs.

Portfolio activity and valuation
Ordinary Share pool
Having raised a significant level of new funds at the start of the year, the Ordinary Share pool has seen a reasonable level of investment activity. Three new investments and three follow-on investments were completed during the year at a total cost of £2.9 million. The new investments were Cross Solar PV, Eagle-i Music and Utility Exchange Online. The Ordinary Share pool also exited from four investments, including Coolabi and Steak Media, which was acquired in a cash transaction and has resulted in a total gain of £439,000 against cost, with the possibility of further proceeds dependent on future performance.

The Board has reviewed the valuations of the unquoted investments at the year end and made a number of adjustments to the previous carrying values. The net movement on the portfolio was a gain for the year of £88,000. Further details are provided in the Investment Manager's Review and the Review of Investments.

'D' Share pool
The 'D' Share pool also has funds available for investment and continued to make progress in building its portfolio during the year. Two new investments and two follow-on investments were made at a total cost of £610,000.

As with the Ordinary Share pool, the Board has reviewed the unquoted valuations at the year end and made some adjustments to the carrying values. This has resulted in a net unrealised loss of £114,000. Further details are provided in the Investment Manager's Review and the Review of Investments.

Results
The total (loss)/return on ordinary activities for the year was as follows:

	Revenue	Capital	Total
	£'000	£'000	£'000
Ordinary Shares	199	(77)	122
'D' Shares	(37)	(226)	(263)
	162	(303)	(141)

Dividends
The Company paid an interim dividend of 4.5p per Ordinary Share on 29 July 2011. The Board is proposing to pay a final dividend of 4.5p per Ordinary Share in respect of the year ended 29 February 2012 on 31 August 2012 to Ordinary Shareholders on the register at 3 August 2012, subject to Shareholder approval at the AGM. No dividend is proposed in respect of the 'D' Shares.

Fundraising
During the year, the Company raised funds under its Ordinary Share offer for subscription which opened on 10 December 2010. The offer closed on 31 October 2011 having raised gross funds of £10.0 million.

'D' Shares - proposed conversion to Ordinary Shares
The Board has reviewed the current structure of the Company and believes there are significant benefits for both Shareholders and the Company in merging the Company's two share classes together. Having one share class will provide all Shareholders with exposure to a broader range of investments and reduce the potential impact of underperformance of any one investment. It will also simplify the task of managing the investments, reporting to Shareholders and administration.

The Board will put proposals to Shareholders to convert 'D' Shares into Ordinary Shares shortly. It is proposed that the 'D' Shares will be converted to Ordinary Shares based on the relative NAV of each share class at 31 August 2012. If these proposals are approved, the Company will have one Ordinary share class going forward.

Dividend policy
The subject on which I receive most correspondence is dividends.  In the survey conducted last year, the Board asked Shareholders whether they would prefer (1) profits on investment disposals to be distributed as they arise or for dividends to be smoothed, and (2) distribution of the maximum amount each year, even if this reduces the NAV, or an amount which maintains or increases the NAV. Of the Shareholders who responded, a small majority of both the Ordinary Shareholders and 'D' Shareholders expressed a preference for realised profits to be distributed as soon as possible.   However, when asked if the maximum possible dividend should be paid even if this reduces the net asset value per share, opinion was almost evenly split.

In anticipation of the merger of the Ordinary and 'D' Share classes proposed for later this year, the Board has decided to adopt a consistent dividend policy for both share classes. With the diversity of opinion expressed in the survey, it is impossible to provide a distribution policy which will satisfy all individual preferences.  The Board has therefore decided to set an objective of paying a distribution each year which will equate to a yield of approximately 5% of net asset value.  The ability to achieve this objective will, however, depend on there being sufficient reserves available for distribution, which in turn will depend on the level and timing of profitable realisations.  It, therefore, cannot be guaranteed. In the event of there being a realisation from the portfolio which results in an exceptionally large gain, the Board may decide to pay a special dividend which is significantly in excess of the target yield of 5%.

The Board believes that this objective is consistent with the net asset value per share remaining broadly stable or increasing over time, although this will clearly depend on the returns from the Company's investments and cannot be guaranteed.

To enable Shareholders who do not want distributions to automatically reinvest dividends, the Board has decided to introduce a dividend reinvestment scheme ("DRIS"). Shareholders who would like to take advantage of this should complete the mandate form enclosed with these Accounts. To provide liquidity to Shareholders who wish to sell their shares, the share buyback offer will be maintained, dependant on there being sufficient liquidity and subject to the annual limit of 10% of each share class.

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 made market purchases of 823,563 Ordinary Shares for cancellation at an average price of 74.0p per share and 33,097 'D' Shares for cancellation at an average price of 85.7p per share.

The Board intends to continue to make purchases of its shares when they become available in the market and has a current policy of purchasing Ordinary Shares at a price equivalent to a 10% discount to the latest published NAV and at a 5% discount in respect of 'D' Shares in accordance with the policies set out in the relevant prospectuses. If the proposed conversion of 'D' Shares into Ordinary Shares described above is approved by Shareholders, the Company will only have Ordinary Shares in issue following the conversion.  The discount of 10% to NAV will then apply to all share buybacks.

A special resolution to allow the Board to continue to purchase shares for cancellation will be proposed at the forthcoming AGM.

Shareholders who are considering selling their shares are reminded that the Company's Administrator, Downing LLP, is able to provide details of close periods and of the prices at which the Company has bought in shares.

Shareholders may be aware of "enhanced share buyback" schemes that have been offered by some VCTs, which allow investors who have held their share for more than 5 years to sell their shares back to the VCT at a nil or small discount to NAV and reinvest the proceeds in new shares issued by the VCT. This allows investors to effectively roll over their shareholding and obtain a further 30% income tax relief on the current value of their shares (assuming they hold the new shares for at least a further 5 years). The Board believes this is an attractive proposition for Shareholders and will consider offering such a scheme in the coming year.

Annual General Meeting
The Annual General Meeting ("AGM") of the Company will be held in The Forest Room at The Hospital Club, 24 Endell Street, Covent Garden, London WC2H 9HQ at 2:30 p.m. on 21 August 2012.

Seven items of special business will be proposed at the AGM as follows:

• one resolution in respect of share buybacks,  

• two resolutions in connection with authority for the Directors to allot shares and 

• four resolutions in connection with the introduction of the dividend reinvestment scheme. 

Shareholder event
I would like to take this opportunity to draw your attention to the Investment Manager's annual shareholder presentation which is expected to be held in central London later in the year. This event provides Shareholders with an opportunity to meet the Investment Manager and, additionally, to hear directly from some of the portfolio companies and to meet other VCT shareholders. Further details of the event will be communicated to Shareholders in due course.

Outlook
The proposed merger of the Company's two share classes will, subject to Shareholder approval, result in all Shareholders holding a stake in a more diversified investment portfolio and in a Company which has a significant level of funds available for investment.

With the general economic outlook remaining gloomy, and uncertainties created by regulators and legislators, new investment activities are expected to remain challenging over the coming year. However, I believe that we have a number of interesting investments that have the potential to show meaningful profits and that the Investment Manager has the skill to deliver them. The Investment Manager also reports an attractive flow of potential investment opportunities, albeit at full prices, in sectors which have delivered good returns for the Company in the past and we therefore expect to see the Company being an active investor over the next 12 months.

Marc Vlessing
Chairman

Investment Manager's Review

Introduction

Beringea is a specialist venture capital management company which manages £200 million in the UK and USA on behalf of a number of clients. In the UK, Beringea has a dedicated investment team managing over £90 million across four VCTs.

ProVen Growth & Income VCT has been managed by Beringea since its inception in 2001. The Company's launch coincided with a downturn in both the general stock market and, no doubt as a direct consequence, VCT fundraising generally. The initial fundraising was, therefore, a modest £7 million. Major fundraisings since 2006 have since added net new funds of £42 million. Since inception, the Company has invested £30 million in 50 small and medium sized companies and, at the year end, had £17 million of cash and liquid funds, the vast majority of which can be used to make further venture capital investments. At present, the Company has investments in 28 companies, averaging approximately £630,000 per investment.

ProVen Growth & Income VCT and other VCTs like it continue to make an important contribution to the development of UK business particularly at a time when traditional lenders are reluctant to advance credit. This support extends beyond purely financial support with our investment executives providing ongoing mentoring and strategic advice and identifying new key directors who can both support individual businesses and drive them to the next level.

Review of the year
The Company invested £3.5 million during the year (2011: £3.0 million). There were four additions to the portfolio and further funding was provided to five existing companies. The Company realised its investments in four portfolio companies: Coolabi, Steak Media, Lazurite and Prelude Media. The value of the existing portfolio was overall broadly unchanged over the year: upwards revaluations from Donatantonio, Chess Technologies and Blis Media were offset by valuation reductions for a number of investments including those in Fjordnet, Senselogix and Overtis. It is worth pointing out that these reductions can reflect both the performance of the individual companies and/or the wider performance of comparable sectors/companies used in valuing the investments.

Ordinary Share pool - portfolio activity and valuation

At 29 February 2012, the Company's Ordinary Share pool comprised 22 companies, of which 19 were unquoted and 3 quoted, at a valuation of £15.2 million and original acquisition cost of £14.4 million. In addition, the Ordinary Share pool had cash and liquidity funds of £12.1 million, the majority of which was raised in the financial year to 29 February 2012.

Three new investments were added to the portfolio during the year: Cross Solar, a residential rooftop solar energy company, Eagle-i Music, a music publishing business, and Utility Exchange which provides utility (electricity, gas and telecommunications) price comparison and contract switching for small businesses. Further investments were made in Overtis, Campden Media and Blis Media.

The generation of renewable energy from solar installations which benefit from government backed Feed-in Tariffs has been well documented and Cross Solar is managed by one of the most experienced teams in this sector. Some of the funds for this investment came from another investment, Lazurite, and it also received funding from other ProVen VCTs.

Eagle-i Music is the music publishing arm of Eagle Rock Entertainment Group Limited in which the ProVen VCTs already have an investment. Publishing remains one of the most lucrative and valuable areas within the music industry, in part due to lower reliance on physical goods sales for revenues. The Company invested through Prelude Media, and alongside ProVen Planned Exit VCT plc, to develop this division.

Utility Exchange has an experienced team of managers with over 20 years' background delivering business telecommunications services and 10 years' experience delivering business electricity and gas to all sizes of customers, from SMEs to large corporates.

We were pleased to conclude the disposal of Steak Media in May 2011 which we reported on in last year's annual report. The investment has to date returned 1.8 times the initial investment cost with the potential for further receipts dependent on future performance. The Company also disposed of its holding in Coolabi plc as a result of it delisting from AIM and becoming a private company.

The investments in Espresso Group and Donatantonio account for 16.9% of the net asset value of the Ordinary Share pool. Espresso continues to perform well as a provider of digital content to schools both in the UK and overseas. The company's strong cash flow generation in the UK has provided a firm base for expansion into overseas territories. Donatantonio, a wholesaler of Mediterranean foods, has, after a difficult period following the Company's initial investment, made very good progress under the direction of a very competent senior management team. Good progress was also made by Chess Technologies and Blis Media, the latter receiving further investment from the Company and a new external investor to fund its ongoing development.

'D' Share pool - portfolio activity and valuation

At 29 February 2012, the Company's 'D' Share pool comprised 9 unquoted companies at a valuation of £2.5 million and original cost of £2.7 million. In addition, the Company had cash and liquidity funds of £4.8 million.

New investments were made in Utility Exchange (described above) and APM Healthcare. Further follow-on funding was provided to Tossed and Senselogix. APM Healthcare is the holding company of Community Pharmacies (UK) Limited ("CPL") which is aiming to become a prominent niche player in the prescription pharmacy sector in partnership with GP practices. Since our investment, CPL has opened five new pharmacies. Staffed by professional pharmacists, the business encourages operating freedom to allow each outlet to provide exactly what local customers need, with support and expert guidance from a centralised head office.

The 'D' Share pool is valued near cost although at the individual company level there has been strong performance from the jewellery brand, Monica Vinader, which has enabled an upwards revaluation. MatsSoft and Tossed collectively account for 18.5% of the 'D' Share pool net assets.

Post year end developments
In April 2012, the 'D' Share pool received shares in Long Eaton Healthcare Limited, a Midlands based GP-centre pharmacy, by virtue of its investment in APM Healthcare. Major external funding was provided by ProVen Planned Exit VCT plc, which is also managed by Beringea. Further follow-on funding was also provided directly to APM Healthcare and to Utility Exchange, both in line with the original investment proposals.

In June 2012, the Company took the opportunity to realise its investment in Ashford Colour Press Limited with realisation proceeds exceeding the valuation at 29 February 2012.

Overtis Group went through a technical restructuring after the year end whereby it entered administration and its assets and intellectual property were acquired by a new entity called Vigilant Applications.  ProVen Growth and Income VCT rolled over £381,000 of its loan note investment in Overtis Group into the new entity. The investment in Overtis had been fully provided at the year end and there is therefore no impact on the Company's net asset value.

Outlook

We continue to see an attractive flow of investment opportunities in a variety of sectors. Digital media continues to be an attractive sector and one in which we have historically done well with companies such as Mergermarket, Saffron Media and ILG Digital, and in which we think there are further good opportunities. Our experience and network of contacts in the sector makes us a natural choice for those digital media businesses seeking funding. Despite the challenges facing many UK businesses, the portfolio continues to perform well overall.  We are also confident that good investment opportunities lie ahead.

Beringea LLP

Investment activity during the year is summarised as follows:
Additions

	Cost £'000
Ordinary Share pool
Cross Solar PV Limited**	978
Eagle-i Music Limited	804
Blis Media Limited **	375
Overtis Group Limited	366
Utility Exchange Online Limited	268
Campden Media Limited	113
	2,904
'D' Share pool
Utility Exchange Online Limited	234
APM Healthcare Limited	187
Tossed Limited	120
Senselogix Limited	69
	610
Total	3,514

Disposals

	Cost £'000	Market  value at 01/03/11 £'000	Proceeds £'000	Profit/ (loss) vs  cost £'000	Realised gain/ (loss) £'000
Ordinary Share pool
Lazurite Limited	1,000	930	902	(98)	(28)
Prelude Media Limited	1,000	925	876	(124)	(49)
Coolabi plc**	450	108	112	(338)	4
Steak Media Limited**	621	725	1,060	439	335
	3,071	2,688	2,950	(121)	262

** Partially non-qualifying investment

The 'D' Share pool did not make any disposals during the year.

All of the above investments, with the exception of Eagle-i Music Limited, were also held by ProVen VCT plc.

Cross Solar PV Limited, Eagle-i Music Limited and Campden Media Limited were also held by ProVen Planned Exit VCT plc.

APM Healthcare Limited was also held by ProVen Health VCT plc.

Proven VCT plc, ProVen Health VCT plc and ProVen Planned Exit VCT plc are all managed by Beringea LLP.

Investment Portfolio - Ordinary Share Pool

as at 29 February 2012

Ordinary Share portfolio of investments

The following investments were held at 29 February 2012:

	Cost £'000	Valuation £'000	Valuation movement  in year £'000	% of  portfolio by value
Top ten venture capital investments (by value)
Espresso Group Limited**	1,582	2,435	88	8.9%
Donatantonio Limited	1,366	2,337	627	8.6%
Fjordnet Limited	1,400	1,646	(777)	6.0%
Blis Media Limited**	621	1,373	651	5.0%
Chess Technologies Limited	900	1,096	414	4.0%
Charterhouse Leisure Limited**	1,000	1,057	87	3.9%
Cross Solar PV Limited**	978	978	-	3.6%
Eagle Rock Entertainment Group Limited	680	805	(102)	3.0%
Eagle-i Music Limited	804	804	-	2.9%
Campden Media Limited	757	776	79	2.8%
	10,088	13,307	1,067	48.7%
Other venture capital investments	4,262	1,861	(979)	6.8%
Total venture capital investments	14,350	15,168	88	55.5%
Liquidity funds		1,250		4.6%
Cash at bank and in hand		10,897		39.9%
Total Ordinary Share investments		27,315		100.0%

Other venture capital investments as at 29 February 2012 comprise:
Ashford Colour Press Limited, Baby Innovations S.A. t/a Steribottle*, Dianomi Limited, Immedia Group plc, Isango! Limited, MatsSoft Limited**, Overtis Group Limited, Pilat Media Global plc**, SPC International Limited, Sports Holdings Limited*, UBC Media Group plc** and Utility Exchange Online Limited.

* Non-qualifying investment
** Partially non-qualifying investment

With the exclusion of Pilat Media Global plc, UBC Media Group plc and Immedia Group plc, which are quoted on AIM, all venture capital investments are unquoted.

All of the above investments, with the exclusion of Eagle-i Music Limited and Immedia Group plc, were also held by ProVen VCT plc.

Cross Solar PV Limited, Eagle-i Music Limited and Campden Media Limited were also held by ProVen Planned Exit VCT plc.

Proven VCT plc and ProVen Planned Exit VCT plc are both managed by Beringea LLP.

All venture capital investments above are registered in England and Wales, with the exception of Baby Innovations S.A., which is registered in Madeira.

Investment Portfolio - 'D' Share Pool

as at 29 February 2012

'D' Share portfolio of investments

The following investments were held at 29 February 2012:

	Cost £'000	Valuation £'000	Valuation movement in year £'000	% of  portfolio by value
Venture capital investments
Tossed Limited	624	671	47	9.3%
MatsSoft Limited**	650	650	-	9.0%
Monica Vinader Limited	138	315	177	4.4%
Utility Exchange Online Limited	234	234	-	3.2%
APM Healthcare Limited	187	187	-	2.6%
Speed-Trap Holdings Limited	295	181	(114)	2.5%
Cinergy International Limited	115	113	(2)	1.6%
Fjordnet Limited*	276	102	(84)	1.4%
Senselogix Limited	138	-	(138)	0.0%
Total venture capital investments	2,657	2,453	(114)	34.0%
Liquidity funds		1,250		17.4%
Cash at bank and in hand		3,505		48.6%
Total 'D' Share investments		7,208		100.0%

* Non-qualifying investment
** Partially non-qualifying investment

All venture capital investments above are unquoted.

All of the above investments were also held by ProVen VCT plc.

APM Healthcare Limited was also held by ProVen Health VCT plc.
Proven VCT plc and ProVen Health VCT plc are both managed by Beringea LLP.

All venture capital investments above are registered in England and Wales.

Directors' responsibilities statement

The directors are responsible for preparing the directors' report, the directors' remuneration report and the financial statements in accordance with applicable law and regulations. They are also responsible for ensuring that the annual report includes information required by the Listing Rules of the Financial Services Authority.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom accounting standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.

In preparing 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 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 included on the Manager'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.

Statement as to disclosure of information to the Auditor
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 Auditor is unaware. Each of the Directors has 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.

By order of the Board

Grant Whitehouse
Company Secretary

Balance Sheet

as at 29 February 2012

	29 February 2012				28 February 2011
	Ordinary Shares	'D' Shares	Total		Ordinary Shares	'D' Shares	Total
	£'000	£'000	£'000		£'000	£'000	£'000
Fixed assets
Investments	15,168	2,453	17,621		14,865	1,956	16,821
Current assets
Debtors	1,189	19	1,208		345	16	361
Current investments	1,250	1,250	2,500		1,250	1,250	2,500
Cash at bank and in hand	10,897	3,505	14,402		5,851	4,282	10,133
	13,336	4,774	18,110		7,446	5,548	12,994
Creditors: amounts falling due within one year	(271)	(76)	(347)		(1,512)	(62)	(1,574)
Net current assets	13,065	4,698	17,763		5,934	5,486	11,420
Total assets less current liabilities/ Net assets	28,233	7,151	35,384		20,799	7,442	28,241
Capital and reserves
Called up share capital	556	82	638		390	82	472
Capital redemption reserve	965	1	966		952	1	953
Share premium	9,973	7,785	17,758		681	7,785	8,466
Special reserve	14,513	-	14,513		15,940	-	15,940
Capital reserve - realised	1,752	(293)	1,459		2,860	(181)	2,679
Revaluation reserve	818	(204)	614		347	(90)	257
Revenue reserve	(344)	(220)	(564)		(371)	(155)	(526)
Total equity shareholders' funds	28,233	7,151	35,384		20,799	7,442	28,241
Basic and diluted net asset value per share	82.2p	86.8p			86.4p	90.0p

Reconciliation of Movements in Shareholders' Funds

for the year ended 29 February 2012

	Year ended 29 February 2012				Year ended 28 February 2011
	Ordinary Shares	'D' Shares	Total		Ordinary Shares	'D' Shares	Total
	£'000	£'000	£'000		£'000	£'000	£'000
Opening shareholders' funds	20,799	7,442	28,241		17,561	5,099	22,660
Issue of shares	10,020	-	10,020		737	2,800	3,537
Share issue costs	(549)	-	(549)		(41)	(154)	(195)
Purchase of own shares	(612)	(28)	(640)		(359)	(52)	(411)
Distributions	(1,547)	-	(1,547)		-	-	-
Total recognised gains/(losses) for the year	122	(263)	(141)		2,901	(251)	2,650
Closing shareholders' funds	28,233	7,151	35,384		20,799	7,442	28,241

Income Statement

for the year ended 29 February 2012

Company

	Year ended 29 February 2012						Year ended 28 February 2011
	Revenue		Capital		Total		Revenue		Capital		Total
	£'000		£'000		£'000		£'000		£'000		£'000
Income	663		-		663		517		-		517
Gains on investments	-		236		236		-		2,919		2,919
	663		236		899		517		2,919		3,436
Investment management fees	(179)		(539)		(718)		(132)		(393)		(525)
Other expenses	(322)		-		(322)		(261)		-		(261)
(Loss)/return on ordinary activities before tax	162		(303)		(141)		124		2,526		2,650
Tax on ordinary activities	-		-		-		-		-		-
(Loss)/return attributable to equity shareholders	162		(303)		(141)		124		2,526		2,650
Basic and diluted return/(loss) per share:
Ordinary Share	0.6p		(0.2p)		0.4p		0.7p		11.2p		11.9p
'D' Share	(0.5p)		(2.7p)		(3.2p)		(0.6p)		(2.5p)		(3.1p)

All revenue and capital items in the income statements derive from continuing operations.  No operations were acquired or discontinued during the year.  The total column within the Income Statement represents the profit and loss account of the Company, prepared in accordance with the accounting policies detailed in note 1. 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 Total Recognised Gains and Losses relating to each class of share has not been prepared as all gains and losses are recognised in the relevant Income Statements in the current and prior year as shown above.

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

Income Statement

for the year ended 29 February 2012

Split as: Ordinary Shares

	Year ended 29 February 2012						Year ended 28 February 2011
	Revenue		Capital		Total		Revenue		Capital		Total
	£'000		£'000		£'000		£'000		£'000		£'000
Income	585		-		585		466		-		466
Gains on investments	-		350		350		-		3,009		3,009
	585		350		935		466		3,009		3,475
Investment management fees	(143)		(427))		(570)		(94)		(281)		(375)
Other expenses	(243)		-		(243)		(199)		-		(199)
Return/(loss) on ordinary activities before tax	199		(77)		122		173		2,728		2,901
Tax on ordinary activities	-		-		-		-		-		-
Return/(loss) attributable to equity shareholders	199		(77)		122		173		2,728		2,901

'D' Shares

	Year ended 29 February 2012						Year ended 28 February 2011
	Revenue		Capital		Total		Revenue		Capital		Total
	£'000		£'000		£'000		£'000		£'000		£'000
Income	78		-		78		51		-		51
Losses on investments	-		(114)		(114)		-		(90)		(90)
	78		(114)		(36)		51		(90)		(39)
Investment management fees	(36)		(112)		(148)		(38)		(112)		(150)
Other expenses	(79)		-		(79)		(62)		-		(62)
Loss on ordinary activities before tax	(37)		(226)		(263)		(49)		(202)		(251)
Tax on ordinary activities	-		-		-		-		-		-
Lossattributable to equity shareholders	(37)		(226)		(263)		(49)		(202)		(251)

Cash Flow Statement

for the year ended 29 February 2012

	Year ended 29 February 2012				Year ended 28 February 2011
	Ordinary Shares	'D' Shares	Total		Ordinary Shares	'D' Shares	Total
	£'000	£'000	£'000		£'000	£'000	£'000
Net cash (outflow)/inflow from operating activities	(1,510)	(139)	(1,649)		850	(23)	827
Capital expenditure
Purchase of investments	(2,904)	(610)	(3,514)		(1,014)	(2,047)	(3,061)
Sale of investments	2,019	-	2,019		4,429	-	4,429
Net cash (outflow)/inflow from capital expenditure	(885)	(610)	(1,495)		3,415	(2,047)	1,368
Equity dividends paid	(1,547)	-	(1,547)		-	-	-
Net cash (outflow)/inflow before financing	(3,942)	(749)	(4,691)		4,265	(2,070)	2,195
Financing
Proceeds from share issue	10,020	-	10,020		737	2,800	3,537
Share issue costs	(549)	-	(549)		(41)	(154)	(195)
Purchase of own shares	(483)	(28)	(511)		(359)	(52)	(411)
Net cash inflow/(outflow) from financing	8,988	(28)	8,960		337	2,594	2,931
Increase/(decrease) in cash	5,046	(777)	4,269		4,602	524	5,126

Notes

for the year ended 29 February 2012

1 Accounting policies

Basis of accounting

The Company has prepared its financial statements under UK Generally Accepted Accounting Practice ("UK GAAP") and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" revised January 2009 ("SORP").  

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

The Company implements new Financial Reporting Standards ("FRS") issued by the Accounting Standards Board when required.

Going concern

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

Presentation of Income Statement

In order to better reflect the activities of an investment company and, in accordance with guidance issued by the Association of Investment Companies ("AIC"), supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The net revenue is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Part 6 of the Income Tax Act 2007.

Fixed assets investments
Investments are designated as "fair value through profit or loss" assets due to investments being managed and performance evaluated on a fair value basis. A financial asset is designated within this category if it is both acquired and managed, with a view to selling after a period of time, in accordance with the Company's documented investment policy.  The fair value of an investment upon acquisition is deemed to be cost.  Thereafter, investments are measured at fair value in accordance with the International Private Equity and Venture Capital Valuation Guidelines ("IPEV Guidelines") together with FRS26 - Financial Instruments: Recognition and Measurement.  

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.  

Fixed asset investments are derecognised when the contractual rights to the cashflows from the asset expire or it transfers the asset and substantially all the risks and rewards of ownership of the asset to another entity.

Where an investee company has gone into receivership or liquidation, or there is little likelihood of a recovery from a company in administration, the loss on the investment, although not physically disposed of, is treated as being realised.

Gains and losses arising from changes in fair value are included in the Income Statement for the year as a capital item.

It is not the Company's policy to exercise significant influence over investee companies.  Therefore, the results of these companies are not incorporated into the Income Statement except to the extent of any income accrued. This is in accordance with the SORP that does not require portfolio investments to be accounted for using the equity method of accounting.

Current asset investments
Current asset investments, which comprise investments in liquidity funds with AAA rating, are held at fair value through profit and loss and are marked-to-market. These assets are purchased and redeemed under a contract and the assets are recognised and derecognised on the trade date. These assets are initially measured at cost and subsequently valued at fair value, being the closing price of the fund as issued by the provider.

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 ex-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.  Income which is not capable of being received within a reasonable period of time is reflected in the capital value of the investments.

Expenses
All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Income Statement, all expenses have been presented as revenue items except as follows:

• expenses which are incidental to the acquisition of an investment are deducted from the Capital Account; 

• expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment; and 

• expenses are split and presented partly as capital items where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated and accordingly the investment management fee has been allocated 25% to revenue and 75% to capital, in order to reflect the Directors' expected long-term view of the nature of the investment returns of the Company. 

Taxation

The tax effects of different items in the Income Statement are allocated between capital and revenue on the same basis as the particular item to which they relate using the Company's effective rate of tax for the accounting period.

Due to the Company's status as a venture capital trust and the continued intention to meet the conditions required to comply with Part 6 of the Income Tax Act 2007, no provision for taxation is required in respect of any realised or unrealised appreciation of the Company's investments 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), other creditors and loan notes are included within the accounts at amortised cost.

Share issue costs

Expenses in relation to share issues are deducted from the Share Premium Account upon allotment of shares.

2 Basic and diluted return per share

	Year ended 29 February 2012			Year ended 28 February 2011
	Ordinary  Shares	'D' Shares		Ordinary  Shares	'D' Shares
Revenue return per share based on:
Net revenue after taxation (£'000)	199	(37)		173	(49)
Weighted average number of shares in issue	33,425,600	8,246,968		24,319,643	7,970,999
Pence per share	0.6p	(0.5p)		0.7p	(0.6p)
Capital return/(loss) per share based on:
Net capital gain/(loss) for the financial year (£'000)	(77)	(226)		2,728	(202)
Weighted average number of shares in issue	33,425,600	8,246,968		24,319,643	7,970,999
Pence per share	(0.2p)	(2.7p)		11.2p	(2.5p)

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

			2012						2011
		Shares in issue		Net asset value					Net asset value
2012			2011	pence per share			£'000		pence per share			£'000
Ordinary Shares	34,341,341		24,068,108		82.2p		28,233			86.4p		20,799
'D' Shares	8,236,814		8,269,911		86.8p		7,151			90.0p		7,442
							35,384					28,241

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 Manager monitors investments through regular contact with management of investee companies, regular review of management accounts and other financial information and attendance at investee company board meetings.  This enables the 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. It represents the potential loss that the Company might suffer through market price movements in respect of quoted investments and through changes in the fair value of unquoted investments.

At 29 February 2012, the AIM-quoted portfolio was valued at £127,000 (2011: £291,000).At 29 February 2012, the unquoted portfolio was valued at £17,494,000 (2011: £16,530,000).

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 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.  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 liquidity fund investments 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		2012		2011
	interest rate		until maturity		£'000		£'000
Fixed rate	6.6%		1,105 days		8,153		6,150
Floating rate	0.6%		1,421 days		17,291		13,609
No interest rate					9,940		8,482
					35,384		28,241

The Company monitors the level of income received from fixed, floating and no 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 £180,000.  As the Bank of England base rate stood at 0.5% per annum throughout the year, it is not believed that a reduction from this level is likely.

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 is exposed to credit risk as follows:

		2012		2011
		£'000		£'000
Investments in liquidity funds		2,500		2,500
Investments in loan stocks		8,542		8,339
Cash and cash equivalents		14,402		10,133
Interest, dividends and other receivables		152		214
		25,596		21,186

Credit risk in respect of loan stock of £8,542,000 is partially mitigated by registering floating charges over the assets of the respective investee companies. The strength of this security in each case is dependent on the nature of the investee companies' business and its identifiable assets. Similarly, the management of credit risk associated with interest, dividends and other receivables is covered within the investment management procedures.

Credit risk in respect of investments in liquidity funds is minimised by investing in AAA-rated funds.

Cash is mainly held by Bank of Scotland plc and Royal Bank of Scotland plc, both of which are A-rated financial institutions and both 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 maintains a relatively low level of creditors (£347,000 at 29 February 2012) and has no borrowings. Also, liquidity funds and some quoted investments held by the Company are considered to be readily realisable.  The Company always holds sufficient levels of funds as cash and readily realisable investments 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.

5 Related party transactions

Beringea LLP, of which Malcolm Moss is a partner, acted as promoter for the Ordinary Share offer launched in December 2010.  Beringea LLP received 5.5% of the gross proceeds of the offer, out of which it paid the costs of the offer including initial commissions. The fees in the year amounted £549,000. No issue costs were due or outstanding at the year end.  

Beringea LLP was also the investment manager during the year. The total fees relating to this service amounted to £718,000 (2011: £525,000) (all inclusive of VAT), of which £187,000 (2011: £150,000) was outstanding at the year end.

Nicholas Lewis, a former Director who served during the year, is a partner of Downing LLP, which provides administration services to the Company. During the year, £52,000 (2011: £49,000) (inclusive of VAT) was due to Downing LLP in respect of these services, of which £13,000 (2011: £12,000) remained outstanding at the year end.

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 2012, but has been extracted from the statutory financial statements for the year ended 29 February 2012, which were approved by the Board of Directors on 25 June 2012 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 s498(2) and (3) of the Companies Act 2006.

The statutory accounts for the year ended 28 February 2011 have been delivered to the Registrar of Companies and received an Independent Auditor's report which was unqualified and did not contain any emphasis of matter nor statements under section 498(2) and (3) of the Companies Act 2006.

A copy of the full annual report and financial statements for the year ended 29 February 2012 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

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(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.

Source: Proven Growth & Income VCT plc via Thomson Reuters ONE

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