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Proven Health VCT (NHF)

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Tuesday 28 May, 2013

Proven Health VCT

Proven Health VCT Plc : Annual Financial Report

Proven Health VCT Plc : Annual Financial Report




Financial summary

31 January 2013 31 January 2012
Net asset value per share ("NAV") 37.1p 44.2p
Dividends paid since launch 18.5p 17.5p
Total return (NAV plus dividends paid since launch) 55.6p 61.7p
Mid market share price  34.5p 37.5p

Chairman's Statement



At the year end, the Company's net asset value per share ("NAV") stood at 37.1p, a decrease of 6.1p per share, or 13.8%, over the year after adjusting for the dividend of 1.0p per share paid on 9 March 2012. The total return (NAV plus cumulative dividends paid) to ordinary shareholders who invested at the outset of the Company was 55.6p per share at 31 January 2013.

There is no disguising this very disappointing performance over the period which largely reflects further provisions made against three investments in what is a relatively concentrated investment portfolio. These investments were made before the decision to change the Company's investment focus, initially to later stage health sector investments and, during 2012 with shareholder approval, to allow non-health sector investments. Whilst there has been measurable progress since these changes, the unquoted status of the companies means that the full impact of these changes will take time to become evident.


In March 2012, following approval by the shareholders of both companies, the Company completed a scheme of reconstruction with Longbow Growth and Income VCT plc ("LGIV") (the "Scheme" or "Merger"). The Scheme was effected by LGIV transferring its net assets to the Company, in consideration for which the Company issued new ordinary shares to the shareholders of LGIV. Under the Scheme, LGIV was placed into members' voluntary liquidation.

Portfolio activity and valuation

At 31 January 2013, the Company's investment portfolio consisted of 13 unquoted investments and 2 quoted investments at a total valuation of £5.2 million. In addition, the Company had cash and liquidity fund investments of £2.3 million resulting in total investments of £7.5 million.

Following the change in investment remit to allow non-health sector investments, I am pleased to report that the Company made four non-health investments during the year at a total cost of £911,000: Inskin Media (£320,000) is a UK based company that has developed a range of technologies for the rapidly growing area of online video advertising; Cognolink (£319,000) offers a broad range of "expert network" services to private equity firms, hedge funds, asset managers and large consulting businesses; Skills Matter (£159,000) assists its 35,000 strong developer community to learn and share skills to write better software including through the provision of training, networking and seminars; Utility Exchange Online (£113,000) provides utility price comparison services for small businesses. All these investments were made alongside other Beringea managed VCTs. In addition to these investments, there was a further investment of £475,000 in APM Healthcare and an investment of £77,000 in Population Genetics Technologies. The Merger resulted in the transfer into the portfolio of a further £135,000 investment in Polytherics and £796,000 in cash.

The Company received proceeds during the year from the part disposals of investments in Amura Holdings and Omni Dental Sciences, proceeds held in escrow from the initial sale of Biovex and, following the year end, the sale of its investments in Vectura Group and Sinclair IS Pharma, these latter two sales generating net proceeds of £847,000. Shareholders may also recall that further payments of up to $1.9 million may be received in relation to the realisation of Biovex, dependent on the achievement of certain commercialisation and sales milestones with respect to its skin cancer treatment. As I have pointed out before, there is considerable uncertainty as to whether these payments will be received and, if so, over what timescale. We are further constrained in what information we receive from Amgen Inc, the acquirer of Biovex, because of Amgen's US stock exchange listing. We understand, however, that trials are continuing to progress, although this should not be viewed as a guarantee of future success. Even with a successful launch, a significant proportion of the receipts will only be payable after certain sales are reached. At 31 January 2013, a fair value of £120,000 has been ascribed to these potential receipts although the eventual amounts received may be different.

The investment portfolio showed an overall loss of £1.4 million reflecting further provisions against Population Genetics Technologies, Altacor, Omni Dental Sciences and Digital Healthcare, partially offset by gains in Polytherics, APM Healthcare and the quoted portfolio.


Further details on portfolio activity are provided in the Investment Manager's Review.



The loss on activities after taxation for the year was £1,353,000 (2012: loss £559,000), comprising a revenue loss of £127,000 and a capital loss of £1,226,000. The revenue element of the income statement continues to be impacted by the historic low interest rates achievable on cash deposits and the low income from the venture capital portfolio which is largely in the form of ordinary shares.

Company strategy and development

In my statement last year I reported on the Merger which provided a cost effective way for shareholders of increasing the size of the Company, albeit in a small way, as the Investment Manager agreed to meet the Company's costs. In addition, an enhanced share buyback resulted in funds of £1.2 million being reinvested in the Company and relative certainty over this funding, given the need for shareholders to hold the new shares for five years to retain the upfront tax benefits. It is clear, however, that the Company is still small and its performance, and hence the return to shareholders, can be impacted significantly by some of the larger investments, as has been experienced in this reporting period.


The Board, together with the Investment Manager, has therefore continued to discuss and investigate ways of potentially improving shareholder returns and the viability of the Company. What has been clear from these investigations is that it is currently difficult to attract a meaningful level of new funds and therefore build up the size of the Company. In addition, whilst dividends and an active share buyback scheme are both attractive for VCT shareholders, they result in an outflow of funds for the Company and impact those shareholders who wish to remain invested and therefore potentially the ongoing economic viability of the Company. The Board has therefore been looking into the possibility of a potential merger with another VCT on the basis that this could provide opportunities for all shareholders. A larger, relatively mature and diversified investment portfolio would be less susceptible to investment volatility and could provide scope for more frequent realisations and dividend payouts. A larger fund could also provide a share buyback facility for those shareholders who wish, or need, to realise their investment while retaining scale for shareholders who wish to remain invested.


The Board expects to be able to announce the outcome of this process shortly but has decided that, in the meantime, it would be prudent to temporarily suspend the Company's share buyback policy and not to consider further dividend payments until the outcome is clear.


Shareholder communications

I would like to take this opportunity to thank those shareholders who attended the Investment Manager's annual shareholder presentation which was held in October 2012 at the Royal College of Surgeons in Central London. The Board is always pleased to hear comments from shareholders and can be contacted through the Company's registered office at 39 Earlham Street, London WC2H 9LT. Please note that if you are considering selling your shares in the Company, please speak first to the Company Secretary who will be able to advise as to the Company's share buyback scheme and the prices at which the Company is buying back shares.



Whilst the Company's recent performance has been particularly disappointing, VCT investment in general can still provide attractive tax free returns to investors. The four non-health sector investments completed towards the end of 2012, together with other portfolio investments and potential investment opportunities under review by the Investment Manager, provide some grounds for cautious optimism.


Charles Pinney


24 May 2013



Investment Manager's Review


The period under review saw the extension of the Company's investment remit to allow non-health sector investments. We are pleased to report that the Company has since made four such investments totalling £911,000, in addition to two health sector investments totalling £552,000. The investment portfolio was also boosted by the addition of a further investment in Polytherics, valued at £135,000, and cash of £796,000 from the merger with LGIV. The portfolio performance has, however, been negatively impacted by the value of four earlier stage health sector investments.


Portfolio performance and activity

At 31 January 2013, the Company's investment portfolio consisted of 13 unquoted investments and 2 quoted investments at a total valuation of £5.2 million. In addition, the Company had cash and liquidity fund investments of £2.3 million. A summary of venture capital additions and disposals is provided below:


APM Healthcare Limited
Cognolink Limited
Inskin Media Limited
Polytherics Limited*
Population Genetics Technologies Limited
Skills Matter Limited
Utility Exchange Online Limited
**Transfer from LGIV     

Market value at 31/01/12
Gain/ (loss)
against cost
Amura Holdings Limited 60 - 38 38 (22)
Biovex Inc - - 83 83 83
Omni Dental Sciences Limited 13 13 13 - -
  73 13 134 121 61

The four non-health sector investments were made alongside other Beringea managed VCTs.

Inskin Media is a UK based company that has developed a range of technologies for the rapidly growing area of online video advertising. The company has established itself as a significant player in the UK market by its ability to provide innovative technology formats which have been proven to drive higher yields for online media owners and strong returns for advertising campaigns.

Cognolink offers a broad range of "expert network" services to private equity firms, hedge funds, asset managers and large consulting businesses. These services assist these clients in their primary research by facilitating consultations with industry experts via one-to-one phone calls, in-person meetings and interactive conference calls.

Launched in 2003, Skills Matter helps its 35,000 strong developer community to learn and share skills to write better software. ProVen Health VCT invested £159,000 as part of a total investment, alongside other Beringea managed VCTs, of £1.5 million. The new funding will be used to provide even more opportunities for its community to collaborate with the world's top technology experts including through expert talks, meetings and training courses. In addition, the company will now be able to offer work and collaboration space.

Utility Exchange Online provides utility price comparison services for small businesses. An original investment through Beringea managed VCTs was made in October 2011 and a further funding round, including £113,000 from ProVen Health VCT, was made in November 2012.

The Company made a further significant investment of £475,000 in APM Healthcare which, through its subsidiary Community Pharmacies (UK) Limited and in conjunction with local GPs, provides pharmacy services in GP centres. The company is progressing well with 16 pharmacies having been opened at the date of this report and a number in the pipeline. Through its interest in APM Healthcare, the Company received founder shares in Long Eaton Healthcare Limited, a standalone pharmacy in the East Midlands, with additional funding being provided by ProVen Planned Exit VCT.


The Company received modest proceeds from parts of its holdings in Omni Dental Sciences and Amura Holdings and further sales proceeds of US$134,000 (£83,000) from the initial sale of Biovex, being the release of sales proceeds held in escrow. Further payments of up to $1.9 million may be received dependent on the achievement of certain commercialisation and sales milestones of Biovex's skin cancer product although there is considerable uncertainty as to whether these individual payments will be received and, if so, over what timescale. A value of £120,000 has been attributed to this contingent consideration at the period end.

The investment portfolio, after taking into account the effect of additions and disposals, showed a decrease in value of £1,372,000. This is the result of reductions in carrying value for Altacor, Population Genetics Technologies, Omni Dental Sciences and Digital Healthcare, partly offset by gains in the value of Polytherics, APM Healthcare, Vectura Group and Sinclair IS Pharma. In March 2012, Altacor received a significant new investment from French listed healthcare company NicOx S.A. A key part of the transaction was the right of NicOx to acquire the entire share capital of Altacor through a combination of shares and/or cash in mid 2012. NicOx subsequently declined to take up this right but remains a significant investor in the company.

Post year end developments

Following the year end, the Company made further investments of £64,000 in Altacor and £23,000 in Population Genetics Technologies. The Company's remaining quoted shareholdings in Vectura Group and Sinclair IS Pharma were sold in March. The combined sales of Vectura, including an earlier sale in August 2011, generated total proceeds of £720,000 against an initial investment cost of £482,000; the sale of Sinclair IS Pharma generated proceeds of £405,000 against an initial investment cost of £585,000.



The portfolio has suffered during the year from valuation downgrades to a number of earlier investments. This has negated the positive impact of the new assets from the merger with LGIV. Unlike a quoted portfolio where a manager can relatively quickly dispose of investments that do not meet investment criteria or are not performing as planned, an unquoted portfolio is more inflexible. The impact of relatively poorly performing investments can also be much greater in a smaller portfolio. We have, however, made a number of exciting new investments which we hope will, alongside other portfolio investments, generate value for shareholders in the medium to long term.


Beringea LLP

24 May 2013


Investment Portfolio

as at 31 January 2013


The following investments were held at 31 January 2013:



Valuation movement in year

% of portfolio
by value
Top ten venture capital investments
Polytherics Limited* 885 1,018 133 13.6%
APM Healthcare Limited** 850 893 43 11.9%
Altacor Limited 1,020 815 (426) 10.9%
Vectura Group plc *** 250 446 164 6.0%
Sinclair IS Pharma plc **** 585 402 81  5.3%
Digital Healthcare Limited 1,010 384 (134)  5.1%
Inskin Media Limited** 320 320 -  4.3%
Cognolink Limited** 319 319 -  4.3%
Population Genetics Technologies Limited 1,206 295 (911)  3.9%
Skills Matter Limited** 159 159 -  2.1%
  6,604 5,051 (1,050)  67.4%
Other venture capital investments
2,437 113 (322)  1.5%
Total venture capital investments
9,041 5,164 (1,372) 68.9%
Liquidity funds 2,128 28.4%
Cash at bank and in hand 199 2.7%
Total investments 7,491 100.0%

All venture capital investments are unquoted unless otherwise stated.

Other venture capital investments at 31 January 2013 comprise Utility Exchange Online Limited ** Amura Holdings Limited, Long Eaton Healthcare Limited, Omni Dental Sciences Limited and DeltaDOT Limited.

*      Polytherics Limited was also held by LGIV which merged with the Company on 16 March 2012

**     APM Healthcare Limited, Inskin Media Limited, Cognolink Limited, Skills Matter Limited and Utility Exchange Online Limited are also held by ProVen VCT plc and ProVen Growth and Income VCT plc, both of which are managed by Beringea LLP

       ***   Quoted on the Main Market

       ****  Quoted on AIM

 All venture capital investments held at the year end are registered in England and Wales.


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.

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 those 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; 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 adequate accounting records that are sufficient to show and explain the Company's transactions, to disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.


Directors' responsibilities pursuant to DTR 4

The Directors confirm, to the best of their knowledge:

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


Statement as to disclosure of information to 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.

By Order of the Board

Charles Pinney


ProVen Health VCT plc

Company number: 04131354

Registered Office:

39 Earlham Street

London WC2H 9LT


24 May 2013


Income Statement

for the year ended 31 January 2013


Income   103   -   103   48   -   48
Net losses on investments   -   (1,130)   (1,130)   -   (286)   (286)
    103   (1,130)   (1,027)   48   (286)   (238)
Investment management fees   (32)   (96)   (128)   (39)   (117)   (156)
Other expenses   (198)   -   (198)   (165)   -   (165)
Loss on ordinary activities before tax   (127)   (1,226)   (1,353)   (156)   (403)   (559)
Tax on ordinary activities   -   -   -   -   -   -
Loss attributable to equity shareholders    (127)    (1,226)    (1,353)   (156)

(403)    (559)
Basic and diluted loss  per share    (0.6p)    (5.9p)    (6.5p)    (0.8p)    (2.1p)  (2.9p)


All revenue and capital items in the above statement derive from continuing operations. This includes the return on the assets acquired from LGIV. The total column within the Income Statement represents the profit and loss account of the Company.

A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement as shown above.

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



Reconciliation of Movements in Shareholders' Funds

for the year ended 31 January 2013


    2013   2012
    £'000   £'000
Opening shareholders' funds     8,485   9,199
Proceeds from share issues   2,218
Share issue costs   (3)   (9)
Purchase of own shares   (1,508)   (222)
Total recognised loss for the year   (1,353)   (559)
Dividends paid   (192)   (196)
Closing shareholders' funds   7,647   8,485



Balance Sheet

as at 31 January 2013


    2013   2012
    £'000   £'000
Fixed assets        
Investments 5,164   4,951
Current assets  
Debtors 217   83
Current investments 2,128   1,812
Cash at bank and in hand 199   1,772
2,544   3,667
Creditors: amounts falling due within one year (61)   (133)
Net current assets 2,483   3,534
Net assets 7,647   8,485
Capital and reserves  
Called up share capital 206   192
Capital redemption reserve 439   404
Share premium account -   7,427
Special distributable reserve 15,061   7,168
Capital reserve - realised (4,901)   (4,375)
Capital reserve - unrealised (2,142)   (1,442)
Revenue reserve (1,016)   (889)
Total equity shareholders' funds 7,647   8,485
Basic and diluted net asset value per share  37.1p   44.2p



Cash Flow Statement

for the year ended 31 January 2013


    2013   2012
    £'000   £'000

Net cash outflow from operating activities



Capital expenditure

Purchase of investments   (1,463)   (1,175)
Disposal of investments   134   1,960
Net cash (outflow)/inflow from capital expenditure   (1,329)   785

Equity dividends paid

  (161)   (163)



Management of liquid resources

Purchase of current investments held as liquidity funds   (1,500)   -
Withdrawal from liquidity funds   1,185   -

Net cash outflow from liquid resources

  (315)   -


Net cash (outflow)/inflow before financing   (2,061)   318




Funds received as part of acquisition of LGIV   796   -
Proceeds from share issues   1,257   239
Share issue costs   (57)   (9)
Purchase of own shares   (1,508)   (222)
Net cash inflow from financing   488   8
(Decrease)/increase in cash   (1,573)   326


Notes to the Accounts

for the year ended 31 January 2013


1.       Accounting policies

Basis of accounting

The Company has prepared its financial statements under UK Generally Accepted Accounting Practice and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" 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 Financial Reporting Council when required.

The financial statements have been prepared on a going concern basis. There is uncertainty whether the Company will continue for a period of 12 months from the date of the audit report, due to discussions around a possible merger. The reported result and net assets of the Company would not be expected to be materially different if the financial statements were not prepared on a going concern basis.

Acquisition of assets from LGIV

On 16 March 2012, the Company acquired the assets and liabilities of LGIV, the transaction being accounted for as an asset acquisition. The income and costs for the period up to 16 March 2012 and the comparable period for last year reflect the activities of the Company before the acquisition, and after that date reflect those of the Company as enlarged by the acquisition.

Presentation of Income Statement

In order to better reflect the activities of a venture capital trust and in accordance with the SORP, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement.

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 International Private Equity and Venture Capital Valuation Guidelines ("IPEVCVG") issued in September 2009 together with FRS26.

Publicly traded investments are measured using bid prices.

The valuation methodologies used by the Directors for assessing the fair value of unquoted investments are as follows:

  • investments are usually retained at cost for an appropriate period following investment, except where a company's performance against plan is significantly below the expectations on which the investment was made in which case a provision against cost is made as appropriate;
  • where a company is in the early stage of development it will normally continue to be held at cost, reviewed for impairment on the basis described above;
  • where a company is well established after an appropriate period, the investment may be valued by applying a suitable earnings or revenue multiple to that company's maintainable earnings or revenue. The multiple used is based on comparable listed companies or a sector but discounted to reflect factors such as the different sizes of the comparable businesses, different growth rates and the lack of marketability of unquoted shares;
  • where a value is indicated by a material arms-length transaction by a third party in the shares of the company, the valuation will normally be based on this, reviewed for impairment as appropriate; and
  • where alternative methods of valuation, such as net assets of the business or the discounted cash flows arising from the business are more appropriate, then such methods may be used.

The methodology applied takes account of the nature, facts and circumstances of the individual investment and uses reasonable data, market inputs, assumptions and estimates in order to ascertain fair value. Methodologies are applied consistently from year to year except where a change results in a better estimate of fair value.

Where there is little likelihood of an investment recovering fully its cost, the anticipated permanent diminution below cost, 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.

As permitted by FRS9 "Associates and Joint Ventures", fixed asset investments are held as part of an investment portfolio and are not accounted for under the equity method.

Current assets investments

Current asset investments comprise investments in liquidity funds with AAA rating and are redeemable with a maximum of one day's notice. These investments are valued at bid price.

Contingent consideration

Contingent consideration represents possible future sales proceeds from the realisation of investments and is valued at fair value taking into account an assessment of the likelihood and the timing of such receipts. The amount ultimately realised may differ materially from the amount included in the financial statements.


Dividend income from investments is recognised when the shareholders' rights to receive payment have been established, normally the ex dividend date.


Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable and only where there is reasonable certainty of collection.  Income which is not capable of being received within a reasonable period of time is reflected in the capital value of the investments.


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 charged to 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.

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

Due to the Company's status as a Venture Capital Trust and the continued intention to meet the conditions required to comply with Part 6 of the Income Tax Act 2007, no provision for taxation is required in respect of any realised or unrealised appreciation of the Company's investments.

Deferred taxation 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 and is not discounted. 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.

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

2.       Basic and diluted return per share



Weighted average number of shares in issue
Revenue loss per share
Revenue loss

Capital loss per share
Capital loss

Total loss per share
Total loss
Year ended 31 January 2013 20,743,672     (0.6p)        (127)        (5.9p)    (1,126)      (6.5p)  (1,353)
Year ended 31 January 2012 19,363,165     (0.8p)        (156)        (2.1p)      (403)      (2.9p)     (559)

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




Shares in issue
Net asset
Net asset
per share
per share



Ordinary shares 20,607,864 19,183,664   37.1p   7,647   44.2p   8,485

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 net asset value per share.

4.       Principal financial risks


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 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 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.

In assessing the risk profile of its investment portfolio, the Board has identified three principal classes of financial instrument. Additionally, unquoted (level 3) investments may be further analysed between equity and non-equity investments.

In addition to its investment portfolio, the VCT maintains a portfolio of liquidity funds and cash balances with two 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.

Market risks

The key market risk to which the Company is exposed is 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. The impact of reasonably possible changes to interest rates is not considered to be significant on either the return or net assets of the VCT. The level of interest rates does impact more generally on the business environment in which the portfolio companies operate and on the supply and demand for their goods and services. It is, however, not considered practical to quantify accurately the impact of various interest rate scenarios either on the portfolio overall or on individual companies.


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 31 January 2013, the unrealised gain on quoted investments was £13,000 (2012: loss £232,000).

The investments the Company holds are, in the main, thinly traded (due to the underlying nature of the investments) and, as such, the prices are more volatile than those of more widely traded fully listed 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.

The sensitivity analysis below assumes that each of the sub categories of venture capital financial instruments (ordinary shares, preference shares and loan stocks) held by the Company produces an overall movement of 20%. Shareholders should note that equal correlation between these sub categories is unlikely to be the case in reality, particularly in the case of loan stock instruments. This is because the loan stock instruments would not share in the impact of any increase in share prices to the same extent as the equity instruments, as the returns are set by reference to interest rates and premiums agreed at the time of the initial investment. Similarly, where share prices are falling, the equity instrument could fall in value before the loan stock instrument. It is not considered practical to assess the sensitivity of the loan stock instruments to market price risk in isolation.

20% fall
20% fall
Risk exposure
Impact on net assets
Impact on NAV per share
Risk exposure
Impact on net assets
Impact on NAV per share
Venture capital investments  







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's financial assets that are exposed to credit risk are summarised as follows:

Fair value through profit or loss assets          
Investments in loan stocks     640   536
Loans and receivables          
Investments in liquidity funds     2,128   1,812
Cash and cash equivalents     199   1,772
Contingent consideration     120   -
Interest, dividends and other receivables     93   78
      3,180   4,198

Investments in loan stocks comprise a fundamental part of the Company's venture capital investments and

are managed within the main investment management procedures. At 31 January 2013, loan stock and loan stock interest valued at £9,000, including interest valued at £9,000, was past due for payment (2012: £277,000 including interest valued at £27,000). Total interest past due for payment was £20,000 (2012: £58,000), all of which was past due by less than 12 months.


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

Cash is held at Bank of Scotland plc and Natwest Bank plc and consequently, the Directors consider that the risk profile associated with cash deposits is low. 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 ever has a very low level of creditors (2013: £61,000, 2012: £133,000) and has no borrowings, the Board believes that the Company's exposure to liquidity risk is minimal.

5.       Post balance sheet events

The Company realised its holdings in Vectura Group plc and Sinclair IS Pharma plc after the balance sheet date. The realisations generated net proceeds of £847,000 compared to the combined year end valuations of £847,000.

The Company made further investments after the balance sheet date of £64,000 in Altacor Limited and £23,000 in Population Genetics Technologies Limited.

Announcement based on audited accounts


The financial information set out in this announcement does not constitute the Company's statutory financial statements in accordance with section 434 Companies Act 2006 for the year ended 31 January 2013, but has been extracted from the statutory financial statements for the year ended 31 January 2013, which were approved by the Board of Directors on 24 May 2013 and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.  The Independent Auditor's Report on those financial statements was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006.

The statutory accounts for the year ended 31 January 2012 have been delivered to the Registrar of Companies and received an Independent Auditors report which was unqualified and did not contain any emphasis of matter nor statements under S237(2) or (3) of the Companies Act 1985.

A copy of the full annual report and financial statements for the year ended 31 January 2013 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



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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.

Source: Proven Health VCT Plc via Thomson Reuters ONE


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