Annual Financial Report

PROVEN VCT PLC FINAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2009 Financial Summary Ordinary Shares 'C' Shares As at 28 February 2009 2008 2009 2008 pence pence pence pence Net asset value per share 57.70 88.50 75.60 89.60 Dividends paid since launch 92.45 74.20 3.75 1.00 Total return (net asset value plus 150.15 162.70 79.35 90.60 dividends paid since launch) Year on year change in: VCT total return -7.7% -12.4% FTSE All Share Index total return -33.0% -33.0% There were no 'D' Shares in issue at 28 February 2009 Chairman's Statement Introduction I am pleased to present the Annual Report for ProVen VCT plc for the year ended 28 February 2009. I would also like to welcome any new shareholders who may have subscribed under the Company's "Linked D Share offer". The year has seen a dramatic deterioration in economic conditions which has had some impact on your Company. Portfolio companies now face greater challenges and the valuation of those businesses has fallen, partly as a result of falls in stock market comparables which, in many cases are used as the bases for your Company's investment valuations. Net Asset Value Ordinary Shares At the year end, the Company's net asset value per Ordinary Share ("Ordinary NAV") stood at 57.7p, a decrease of 12.55p per share or 14.2% over the year after adjusting for the dividends of 18.25p per Ordinary Share which were paid during the year. Total return (Ordinary NAV plus cumulative dividends paid) to Ordinary Shareholders who invested at the outset of the Company now stands at 150.15p per share, compared to an original investment, net of income tax relief, of 80p per share. 'C' Shares At the year end, the Company's net asset value per 'C' Share ("'C' Share NAV") stood at 75.6p, a decrease of 11.25p per share or 12.6% over the year after adjusting for the dividends of 2.75p per 'C' Share which were paid during the year. Total return ('C' Share NAV plus cumulative dividends paid) to 'C' Shareholders who invested at the 'C' Share fundraising now stands at 79.35p per share, compared to an original investment, net of income tax relief, of 70p per share. Portfolio Activity and Valuation Ordinary Share pool The Ordinary Share pool achieved one major investment exit during the year, being the sale of ILG Digital Limited. This was sold as part of a private equity transaction and produced proceeds of £4.4 million against an original cost of £1.3 million in November 2005. The Investment Manager worked closely with the company throughout the period that the investment was held and is to be congratulated for this excellent outcome. The Ordinary share pool made three new investments and four follow on investments during the year at a total cost of £1.8 million. The Board has reviewed the unquoted investment valuations at the year end. The Ordinary share pool has a large proportion of its value within one investment, Espresso Group. This company has continued to make good progress and is starting to develop its business into other areas. At the year end the Board has valued the investment at £4.2 million, a reduction of £1.4 million over the year, but still valued substantially above original cost. The AIM market has been hit particularly hard by the economic conditions with the FTSE AIM All Share Index falling by 61.9% over the year. The Ordinary share pool's small portfolio of AIM investments all lost value in the year. Total unrealised losses on the portfolio for the year stood at £4.7 million. In reviewing the unquoted portfolio at the year end, the Board considers P/E ratios and similar indicators of listed businesses in similar sectors. In some cases, this alone has been the reason for the reduction in the valuation of investments. 'C' Share pool The C Share pool continued to be an active investor during the year. The pool invested £2.4 million in five new investments and £0.4 million in three follow on investments. At the year end the pool held a portfolio comprising of 14 investments with a cost of £7.5 million. The challenging economic environment has impacted on businesses across the 'C' Share portfolio. As a result, there have been a number of reductions in valuations since the previous year end, with unrealised losses totalling £1.9 million. Full details of the investment activities of both the Ordinary and 'C' Share pools can be found in the Investment Manager's Review. VAT on Management Fees Following a European Court judgement, the Government made changes in the Finance Bill 2008 such that VCTs became exempt from paying VAT on management fees from 1 October 2008. This has the effect of slightly reducing running costs for the Company. In addition, I am pleased to report that Beringea successfully made a claim to recover VAT that had previously been charged on their management fees. In view of the fact that some years' management fees were restricted by the running costs cap and that performance fees are calculated inclusive of VAT, the Board agreed a basis on which the VAT recovered (including interest) should be apportioned between the Company and Beringea. This has resulted in a recovery to the Company of £427,000, which has been recognised in the Income Statement in the year under review. Results and dividend The loss on activities after taxation for the year was £4,665,000 (2008: loss £313,000), comprising a revenue return of £754,000 and a capital loss of £5,419,000. On 31 October 2008 the Company paid an interim dividend of 14.5p per Ordinary Share (2008: 6.0p per share) and 1.0p per 'C' Share (2008: 1.0p). The Board is proposing final dividends as follows: Ordinary Shares 1.0p per share 'C' Shares 1.0p per share Subject to Shareholder approval at the AGM, these dividends will be paid on 10 July 2009 to Shareholders on the register at 19 June 2009. Linked 'D' Share issue In November 2008, the Company launched a Linked 'D' Share offer, in conjunction with ProVen VCT plc. No shares were issued before 28 February 2009 and therefore 'D' Shares are not included in the balance sheet and income statement in this report. Up to the date of this report, the offer had raised a total of £9.3 million of which £4.6 million is allocated to 'D' Shares issued and to be issued by ProVen VCT plc. The offer has now been extended and will close on 30 October 2009 (or earlier if fully subscribed). The offer should provide the Company with a reasonable level of additional funds for further investment. Share buybacks In order to ensure liquidity in the market in the Company's shares, the Company operates a policy of buying in its own shares as they become available in the market. During the year the Company purchased 528,873 Ordinary Shares at an average price of 71p per Share and 5,000 'C' Shares at an average price of 70.5p per Share. Generally, share buybacks are undertaken at a 10% discount to the latest NAV published by the Company, although the Board regularly reviews the discount level and, should it be considered appropriate, will make adjustments. A special resolution to allow the Board to continue to purchase shares for cancellation will be proposed at the forthcoming Annual General Meeting ("AGM"). Annual General Meeting The AGM of the Company will be held at 39 Earlham Street, London WC2H 9LT at 9:45 am on 10 July 2009. Three items of special business will be proposed at the AGM in respect of share buybacks as mentioned above and two resolutions in connection with authority for the directors to allot shares. Outlook Although the Company's NAVs have fallen over the year, the Board remains broadly satisfied with the portfolio performance given the difficult conditions. The Board does not expect to see a significant increase in the NAVs over the coming year but over the longer term, good quality portfolio companies that can adapt to the conditions should be well positioned to deliver rewards to Shareholders when conditions improve. The Ordinary Share pool and the 'C' Share pool have a significant level of funds available for investment. In addition, the 'D' Share pool will start to invest its newly raised funds shortly. Although it remains a risky time for making new investments, it may now be the time in the economic cycle when opportunities start to arise that can produce excellent returns in due course. Andrew Davison Chairman Investment Manager's Review Introduction Beringea LLP is a specialist venture capital management company which has been established for over 20 years. It currently manages approximately £70 million of venture capital funds and has been the investment manager of Proven VCT plc since inception in 2000. The Company currently has three share classes: Ordinary Shares, 'C' shares and 'D' shares. The ordinary share pool was established in 2000 with further fundraisings in 2004, 2005 and 2008. The 'C' share pool was established in 2007. Further details of the performance of these two pools is provided below. In the current year, the Company announced a linked 'D' Share fundraising with ProVen Growth and VCT Income plc. The offer remains open but has currently raised over £9.3 million, of which the Company has taken £4.6 million which will be primarily used for future investment. At 28 February 2009, no D shares had been issued. Ordinary Share Pool - Share Performance & Portfolio We were pleased to be able to generate further capital profits which has enabled the Company to maintain the strong dividend returns to Ordinary Shareholders with dividends paid during the year of 14.50p, representing a tax free yield of 18.125% on an initial investment of 80p (for original investors in 2000 after 20% income tax relief). The total dividends paid to original shareholders stood at 92.45p at 28 February 2009. The portfolio benefited from the successful sale of ILG Digital to the Private Equity firm ECI for £45.5m. We were pleased to execute a sale of a quality asset at a point which with hindsight was close to the top of market values. The exit delivered a return on capital of 3.3x in under two and a half years. Investments and disposals during the course of the year are summarised below: Acquisitions Cost Description £'000 Unquoted Optima Data 269 Marketing and data intelligence services Intelligence SPC International 473 Repair/refurbishment of electronic equipment Ltd Dontantonio 7 Import and distribution of Mediterranean foods Overtis Group Ltd 500 Technology security provider Isango! Ltd 400 Travel provider Fjord Ltd 200 Digital design/research agency Quoted Coolabi Plc 17 Character rights management 1,866 Disposals Realised Gain/ Market gain/(loss) (loss) Value at against Cost 29/02/08 Proceeds cost £'000 £'000 £'000 £'000 £'000 Unquoted Espresso Group 408 408 408 - - Limited ILG Digital 1,000 2,316 4,467 1,687 3,467 Limited 1,408 2,724 4,990 1,687 3,467 At 28 February 2009, the Company's unquoted and quoted ordinary share portfolio comprised 18 investments with a cost of £12.5 million and a valuation of £8.9 million. In addition, the ordinary share pool held cash and liquidity funds of £6.9 million. As the fund has matured and successful investments have been realised, the value in the portfolio has become more concentrated in a few of the remaining investments. Espresso Group accounted for 30% of the Ordinary Share net asset value at the year end, broadly consistent with the previous year end. Espresso continues to perform strongly and has established itself as the dominant provider of online educational video content to the UK primary school sector with a market share of over 60% and high contract renewal rates. Following the acquisition in 2007 of 4 Learning, the educational business of Channel 4, Espresso has entered the UK secondary schools market with its Clipbank product and has already established a strong and growing presence. 'C' Share Pool - Share Performance & Portfolio Having only been established in 2007, the 'C' share pool remains in its initial investment phase. During the year five new investments and two follow on investments were made: Acquisitions Cost Description £'000 Unquoted Dontantonio 10 Import and distribution of Mediterranean foods Heritage Partners Limited 100 Image rights ownership, management and distribution Charterhouse Leisure 329 Restaurants Limited Chess Technology Limited 600 Producer of electro-optical devices SPC International Limited 403 Repair/refurbishment of electronic equipment Overtis Group Limited 400 Technology security provider Isango! Ltd 200 Travel provider Fjord Ltd 800 Digital design/research agency 2,842 As the 'C' Share pool is relatively young, there have been no realisations to date. At the year end, the 'C' Share NAV stood at 75.6p per share, a fall of approximately 12.6% over the year (after adjusting for dividends). The 'C' Share investment portfolio was valued at £4.7 million against an original investment cost of £7.5 million. In addition, the 'C' Share pool held cash and liquidity funds of £6.0 million. Outlook VCTs were created to provide a source of capital for SMEs (small and medium sized enterprises), a sector of the economy which has historically struggled to access capital for growth. The current economic environment created in part by the collapse of the credit markets has not only exacerbated this condition but at a time when SMEs are suffering from reduced consumer/business spending and the management of effective deflation. We would expect SMEs to experience difficult trading conditions for at least the next 18 months and as such, benefiting from the experience of previous periods of recession, we continue to focus our efforts on the existing companies within the portfolio ensuring their investment plans and cost structures reflect the macro environment. However, historic investment returns have shown us that difficult economic conditions have provided a great opportunity to invest in companies at attractive valuations. We see the opportunity for new investments in areas of economic robustness such as our recent investment in the defence contractor 'Chess Technologies' and areas of established innovation such as the design of mobile media platforms, 'Fjord'. At all times we will invest in market leading companies with exceptional management teams. Beringea LLP Investment Portfolio - Ordinary Share Pool as at 28 February 2009 Ordinary Share portfolio of investments The following investments were held at 28 February 2009: 28 February 2009 29 February 2008 Valuation % of % of movement portfolio portfolio Cost Valuation in year by value Cost Valuation by £'000 £'000 £'000 £'000 £'000 value Top ten venture capital investments (by value) Espresso 1,640 4,162 (1,445) 26.3% 2,048 6,015 29.5% Group Limited SPC 1,619 1,267 (218) 8.0% 1,145 1,011 4.9% International Limited Eagle Rock 420 542 (23) 3.4% 420 565 2.8% Entertainment Group Limited Overtis Group 500 500 - 3.2% n/a n/a n/a Limited Saffron Media 480 480 - 3.1% 480 480 2.4% Group Limited Optima Data 1,169 456 (713) 2.9% 900 900 4.4% Intelligence Services Limited Campden Media 975 414 (558) 2.6% 975 972 4.8% Ltd Ashford 750 286 (418) 1.8% 875 828 4.1% Colour Press Limited Donatantonio 582 277 (304) 1.8% 575 575 2.8% Limited Fjord Limited 200 200 - 1.3% n/a n/a n/a 8,335 8,584 (3,679) 54.4% 7,418 11,346 55.7% Other venture capital investments UBC Media 1,101 166 (145) 1.0% 1,101 311 1.5% plc* Pilat Media 173 86 (233) 0.6% 173 320 1.6% Global plc* Coolabi plc* 300 77 (241) 0.4% 283 301 1.5% ID Data* 262 - (3) 0.0% 263 3 0.0% GB Industries 1,134 - - 0.0% 1,134 - 0.0% Isango! Ltd 400 - (400) 0.0% n/a n/a n/a Baby 604 - - 0.0% 604 - 0.0% Innovations S.A t/a Steribottle Sports 147 - - 0.0% 147 - 0.0% Holding Limited ILG Digital - - - - 1,345 2,760 13.5% Limited 4,121 329 (1,022) 2.0% 5,050 3,695 18.1% Total venture 12,456 8,913 (4,701) 56.4 % 12,468 15,041 73.8% capital investments Liquidity 4,190 26.5% 4,400 21.6% funds Cash at bank 2,711 17.1% 945 4.6% and in hand Total 15,814 100.0% 20,386 100.0% Ordinary Share investments All venture capital investments are unquoted unless otherwise stated. * Quoted on AIM All venture capital investments are registered in England and Wales with the exception of Baby Innovations S.A., which is registered in Madeira. Investment Portfolio - C Share Pool as at 28 February 2009 'C' Share portfolio of investments The following investments were held at 28 February 2009: 28 February 2009 29 February 2008 Valuation movement % of % of Cost Valuation in year portfolio Cost Valuation portfolio £'000 £'000 £'000 by value £'000 £'000 by value Top ten venture capital investments (by value) Path Group 1,000 1,000 - 9.2% 1,000 1,000 7.6% Limited Fjord Limited 800 800 - 7.3% n/a n/a n/a Chess 600 600 - 5.5% n/a n/a n/a Technology Limited Charterhouse 700 561 (139) 5.2% 371 371 2.9% Leisure Limited Donatantonio 885 422 (463) 3.9% 875 875 6.7% Limited SPC 403 399 (4) 3.7% n/a n/a n/a International Limited Overtis Group 400 400 - 3.7% n/a n/a n/a Ltd Heritage 900 247 (653) 2.3% 800 800 6.1% Partners Ltd Dianomi Ltd 126 157 31 1.5% 126 126 1.0% Steak Media 275 133 (252) 1.2% 275 385 2.9% Limited 6,089 4,719 (1,480) 43.5% 3,447 3,557 27.2% Other venture capital investments The Vending 1,012 - 5 0.0% 1,016 - 0.0% Corporation Breeze Tech 175 - (175) 0.0% 175 175 1.3% Limited Isango! 200 - (200) 0.0% n/a n/a n/a Limited 1,387 - (370) 0.0% 1,191 175 1.3% Total venture 7,476 4,719 (1.850) 43.5% 4,638 3,732 28.5% capital investments Liquidity 6,010 55.4% 7,950 60.6% funds Cash at bank 119 1.1% 1,426 10.9% and in hand Total 'C' 10,848 100% 13,108 100.0% Share investments All venture capital investments are unquoted and are registered in England and Wales. Statement of Directors' Responsibilities The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. United Kingdom company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing those financial statements, the Directors are required to: * select suitable accounting policies and then apply them consistently; * make judgements and estimates that are reasonable and prudent; and * state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the requirements of the Companies Act 1985. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the Report of the Directors and other information included in the Annual Report is prepared in accordance with company law in the United Kingdom. They are also responsible for ensuring that the Annual Report includes information required by the Listing Rules of the Financial Services Authority. The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements differs 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 S234ZA of the Companies Act 1985. Income Statement for the year ended 28 February 2009 Company Position Year ended 28 February 2009 Year ended 29 February 2008 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Income 1,442 - 1,442 1,406 - 1,406 (Losses)/ - (4,865) (4,865) - 285 285 Gains on investments 1,442 (4,865) (3,423) 1,406 285 1,691 Investment (143) (429) (572) (218) (653) (871) management fees Performance (109) (717) (826) (47) (882) (929) incentive fees Recoverable 107 320 427 - - - VAT Other (256) (15) (271) (185) (19) (204) expenses Return on ordinary activities before tax 1,041 (5,706) (4,665) 956 (1,269) (313) Tax on (287) 287 - (274) 274 - ordinary activities Return 754 (5,419) (4,665) 682 (995) (313) attributable to equity shareholders Return per 2.0p (14.5p) (12.5p) 1.1p (0.1p) 1.0p Ordinary Share Return per 1.9p (13.2p) (11.3p) 3.2p (7.1p) (3.9p) 'C' Share Split as: Ordinary Shares Year ended 28 February 2009 Year ended 29 February 2008 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Income 847 - 847 695 - 695 (Losses)/ - (3,014) (3,014) - 1,190 1,190 Gains on investments 847 (3,014) (2,167) 695 1,190 1,885 Investment (71) (212) (283) (143) (430) (573) management fees Performance (109) (717) (826) (47) (882) (929) incentive fees Recoverable 95 285 380 - - - VAT Other (118) (10) (128) (114) (13) (127) expenses Return on 644 (3,668) (3,024) 91 (135) 256 ordinary activities before tax Tax on (172) 172 - (118) 118 - ordinary activities Return attributable to equity shareholders 472 (3,496) (3,024) 273 (17) 256 'C' Shares Year ended 28 February 2009 Year ended 29 February 2008 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Income 595 - 595 711 - 711 (Losses)/ - (1,851) (1,851) - (905) (905) Gains on investments 595 (1,851) (1,256) 711 (905) (194) Investment (72) (217) (289) (75) (223) (298) management fees Performance - - - - - - incentive fees Recoverable 12 35 47 - - - VAT Other (138) (5) (143) (71) (6) (77) expenses Return on ordinary activities before tax 397 (2,038) (1,641) 565 (1,134) (569) Tax on (116) 116 - (156) 156 - ordinary activities Return attributable to equity shareholders 281 (1,922) (1,641) 409 (978) (569) All Revenue and Capital movements in the year for the Ordinary Shares, 'C' Shares relate to continuing operations. A Statement of Total Recognised Gains and Losses relating to each class of share has not been prepared as all gains and losses are recognised in the relevant Income Statements as shown above. Reconciliation of Movements in Shareholders' Funds for the year ended 28 February 2009 Year ended Year ended 28 February 2009 28 February 2008 Ordinary 'C' Ordinary 'C' Shares Shares Total Shares Shares Total £'000 £'000 £'000 £'000 £'000 £'000 Opening 25,249 shareholders' funds 20,469 13,100 33,569 25,249 - Issue of 14,621 shares 1,211 - 1,211 - 14,621 Share issue (804) costs (67) - (67) - (804) Purchase of (380) (4) (384) (148) (2) (150) own shares Total (313) recognised (losses)/gains for the year (3,024) (1,641) (4,665) 256 (569) Distributions (4,385) (402) (4,787) (4,888) (146) (5,034) Closing 13,824 11,053 24,877 shareholders' funds 20,469 13,100 33,569 Balance Sheet as at 28 February 2009 Year ended Year ended 28 February 2009 28 February 2008 Ordinary 'C' Ordinary 'C' Shares Shares Total Shares Shares Total £'000 £'000 £'000 £'000 £'000 £'000 Fixed assets Investments 8,913 4,719 13,632 15,041 3,732 18,773 Current assets Debtors 615 308 923 769 87 856 Current 4,190 6,010 10,200 4,400 7,950 12,350 investments Cash at bank 2,711 119 2,830 945 1,426 2,371 and in hand 7,516 6,437 13,953 6,114 9,463 15,577 Creditors: amounts falling due within one year (2,605) (103) (2,708) (686) (95) (781) Net current 4,911 6,334 11,245 5,428 9,368 14,796 assets Net assets 13,824 11,053 24,877 20,469 13,100 33,569 Capital and reserves Called up 1,197 3,653 4,850 1,157 3,654 4,811 share capital Capital 167 2 169 140 1 141 redemption reserve Share premium 4,836 10,159 14,995 3,759 10,159 13,918 Special 7,081 - 7,081 8,836 - 8,836 reserve Capital 3,793 (144) 3,649 3,640 (73) 3,567 reserve -realised Capital (3,542) (2,756) (6,298) 2,573 (905) 1,668 reserve - unrealised Revenue 292 139 431 364 264 628 reserve Equity 13,824 11,053 24,877 20,469 13,100 33,569 Shareholders funds Net asset 57.7p 75.6p 88.5p 89.6p value per share Cash Flow Statement for the year ended 28 February 2009 Year ended Year ended 28 February 2009 28 February 2008 Ordinary 'C' Ordinary 'C' Shares Shares Total Shares Shares Total £'000 £'000 £'000 £'000 £'000 £'000 Net cash (outflow)/inflow (1,003) 343 (660) from 69 (88) (19) operating activities Capital expenditure Purchase of (1,866) (2,842) (4,708) (2,805) (4,638) (7,443) investments Sale of 5,465 - 5,465 4,985 - 4,985 investments Net cash inflow / (outflow) from capital expenditure 3,599 (2,842) 757 2,180 (4,638) (2,458) Equity dividends (4,888) (146) (5,034) paid (4,385) (402) (4,787) Management of liquid resources Purchase of current (4,190) (2,700) (11,850) (14,550) investments held as liquidity funds (6,010) (10,200) Withdrawal from 3,050 3,900 6,950 liquidity funds 4,400 7,950 12,350 Net cash 210 1,940 2,150 350 (7,950) (7,600) inflow/(outflow) from liquid resources Net cash (outflow)/inflow (3,361) (12,391) (15,752) before financing (598) (1,301) (1,899) Financing Proceeds from 206 10,130 10,336 share issue 2,857 - 2,857 Share issue - (804) (804) costs (67) - (67) Purchase of own shares (426) (6) (432) (118) - (118) Net cash 2,364 (6) 2,358 88 9,326 9,414 inflow/(outflow) from financing Increase / 1,766 (1,307) 459 (3,273) (3,065) (6,338) (Decrease) in cash Notes 1 Accounting policies Basis of accounting The Company has prepared its financial statements under UK Generally Accepted Accounting Practice ("UK GAAP") and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" revised December 2005 ("SORP"). The financial statements are prepared under the historical cost convention except for the revaluation of certain financial instruments. Going concern The accounts have been prepared under a going concern basis in accordance with the assessment made by the Directors as set out in the Statement of Corporate Governance. 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 All investments are designated as "fair value through profit or loss" assets and are initially measured at cost. Thereafter the investments are measured at subsequent reporting dates at fair value. Listed fixed income investments and investments quoted on AIM are measured using bid prices. In respect of unquoted instruments, fair value is established by using International Private Equity and Venture Capital Valuation Guidelines. Where no reliable fair value can be estimated for such unquoted equity investments they are carried at cost, subject to any provision for impairment. Gains and losses arising from changes in fair value are included in the income statement for the year as a capital item and transaction costs on acquisition or disposal of the investment expensed. It is not the Company's policy to exercise either significant or controlling influence over investee companies. Therefore the results of these companies are not incorporated into the revenue account except to the extent of any income accrued. Current assets investments Current assets investments comprise investments in liquidity funds with AAA rating and are redeemable on call. These investments are marked to market. Income Dividend income from investments is recognised when the shareholders' rights to receive payment has been established, normally the ex dividend date. Interest income is accrued on a receivable basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount, and only where there is reasonable certainty of collection. 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 and finance costs have 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. 2. Return per share Ordinary Shares 'C' Shares Revenue return per share based on: Net revenue after taxation (£'000) 472 281 Weighted average number of shares in 24,101,496 14,617,544 issue Capital return/(loss) per share based on: Net capital gain for the financial year (3,496) (1,922) (£'000) Weighted average number of shares in 24,101,496 14,617,544 issue 3. Net asset value per share 2009 2008 Shares in Issue Net asset value Net asset value 2009 2008 per £'000 per £'000 share share Ordinary 23,947,501 23,138,248 57.7p 13,824 88.5p 20,469 Shares 'C' Shares 14,612,777 14,617,777 75.6p 11,053 89.6p 13,100 24,877 33,569 4. Principal financial risks The principal financial risks faced by the Company, which include market price, interest rate and liquidity risks. In addition to these risks, the Company, as a fully listed company on the London Stock Exchange and as a Venture Capital Trust, operates in a complex regulatory environment and therefore faces a number of related risks. A breach of the VCT Regulations could result in the loss of VCT status and consequent loss of tax relief's currently available to Shareholders and the Company being subject to capital gains tax. Serious breaches of other regulations, such as the UKLA Listing Rules, the Companies Act 1985 and the Companies Act 2006 could lead to suspension from the Stock Exchange and damage to the Company's reputation. The Board reviews and agrees policies for managing each of these risks. They receive quarterly reports from the Managers which monitor the compliance of these risks, and place reliance on the Managers to give updates in the intervening periods. These policies have remained unchanged since the beginning of the financial period. The principal financial risks are outlined further as follows: Market price risk Market price risk arises from uncertainty about the future prices of financial instruments held in accordance with the Company's investment objectives. It represents the potential loss that the Company might suffer through holding market positions in the face of market movements. At 28 February 2009, the unrealised loss on AIM quoted investments was £1,507,100 (2008: loss £885,000). The investments the Company holds are, in the main, thinly traded and as such the prices are more volatile than those of more widely traded securities. In addition, the ability of the Company to realise the investments at their carrying value may at times not be possible if there are no willing purchasers. The ability of the Company to purchase or sell investments is also constrained by the requirements set down for Venture Capital Trusts. The Board considers each investment purchase to ensure that an acquisition will enable the Company to continue to have an appropriate spread of market risk and that an appropriate risk reward profile is maintained. 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. Interest rate risk The Company receives interest on its cash deposits at a rate agreed with its banker, while investments in loan stock and fixed interest investments predominately attract interest 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. The Company therefore monitors the level of income received from fixed, floating and non interest rate assets to ensure that the regulations are not breached. 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 A rated financial institution and, consequently the Directors consider that the risk profile associated with cash deposits is low. Interest, dividends and other receivables are predominantly covered within the investment management procedures. Liquidity risk Liquidity risk is the risk that the Company encounters difficulties in meeting obligations associated with its financial liabilities. As the Company only ever has a very low level of creditors and has no borrowings, the Board believes that the Company's exposure to liquidity risk is minimal. 5. Related party transactions Beringea Limited, of which Malcolm Moss is a director, acted as promoter for the Offers for Subscription dated 11 February 2008 and agreed to underwrite the costs of the Offer in return for a fee of 5.5% of the monies raised. No issue costs were due or outstanding at the year end. Beringea Limited was also the investment manager and provided investment management to the Company during the year. The fees relating to this service, together with performance incentive fees due in the year under the agreement, amounted to £1,324,000 (2008: £1,716,000) (inclusive of VAT where applicable), of which £716,000 (2008: £450,000) was outstanding at the year end. Beringea Limited (and subsequently, Beringea LLP, of which Malcolm Moss is a partner) also acted as promoter to the "Linked D Share Offer" launched in November 2008. Beringea LLP/Beringea Limited receives 5.5% of the gross proceeds of the Offer, out of which it must pay the costs of the offer including initial commissions. The Company has an agreement with Downing Management Services Limited, a company of which Nicholas Lewis is a director, to provide administration services to the Company for a fee of £38,000 (plus VAT & RPI adjustment) per annum. The total fee relating to this service amounted to £48,000 (2008: £47,000), of which £12,000 (2008: £12,000) was outstanding at the year end. Downing Corporate Finance Limited, a company of which Nicholas Lewis is a director and shareholder, was entitled to performance incentive fees during the year totalling £74,000 (2008: £84,000) (inclusive of VAT), of which £64,000 (2008: £21,000) was outstanding at the year end. Proven Growth and Income VCT plc is a company of which Nicholas Lewis, Andrew Davison and Malcolm Moss are directors. At the year end the company was owed £929,344 in respect of subscription monies for D shares, this amount is included in other creditors. Announcement based on audited accounts The financial information set out in this announcement does not constitute the Company's statutory financial statements in accordance with section 434 Companies Act 2006 for the year ended 28 February 2009, but has been extracted from the statutory financial statements for the year ended 28 February 2009, which were approved by the Board of Directors on 9 June 2009 and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The Independent Auditor's Report on those financial statements was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006. The statutory accounts for the year ended 29 February 2008 have been delivered to the Registrar of Companies and received an Independent Auditors report which was unqualified and did not contain any emphasis of matter nor statements under S237(2) or (3) of the Companies Act 1985. A copy of the full annual report and financial statements for the year ended 28 February 2009 will be printed and posted to shareholders shortly. Copies will also be available to the public at the registered office of the Company at 39 Earlham Street, London WC2H 9LT and will be available for download from www.provenvcts.com and www.downing.co.uk . ---END OF MESSAGE--- This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.

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