TIDMNHF
ProVen Health VCT plc
Annual Financial Report for the year ended 31 January 2012
Financial summary
31 January 2012 31 January 2011
Net asset value per share ("NAV") 44.2p 48.0p
Dividends paid since launch 17.5p 16.5p
Total return (NAV plus dividends paid since 61.7p 64.5p
launch)
Mid market share price 37.5p 42.0p
Chairman's Statement
Introduction
I have pleasure in presenting the Annual Report and Accounts for the year ended
31 January 2012 for ProVen Health VCT plc.
At the year end, the Company's net asset value per share ("NAV") stood at
44.2p, a decrease of 2.8p per share, or 5.8%, over the year after adjusting for
the dividend of 1.0p per share paid on 17 June 2011. A further dividend of 1.0p
per share was paid on 9 March 2012 in respect of the year ended 31 January
2012. The total return (NAV plus cumulative dividends paid) to ordinary
shareholders who invested at the outset of the Company was 61.7p per share at
31 January 2012.
Portfolio activity and valuation
At 31 January 2012, the Company's investment portfolio consisted of 8 unquoted
investments and 2 quoted investments at a total valuation of GBP5.0 million. In
addition, the Company had cash and liquidity fund investments of GBP3.6 million.
Two new investments were added to the portfolio during the year. APM Healthcare
Limited is the holding company of Community Pharmacies (UK) Limited which aims
to develop pharmacies in existing medical centres in partnership with local GPs.
Polytherics Limited is a biotechnology company that applies precision chemistry
to develop protein and peptide-based drugs. Both of these new investments are
valued at cost and are progressing to plan.
The Company realised its investments in Biovex, Chromogenex and Onyx Scientific
as well as disposing of part of its holding in Vectura Group. The realisations
of Biovex and Chromogenex occurred early in the financial year and were
highlighted in last year's Chairman's Statement and Investment Manager's Review.
Biovex provided an initial receipt of over US$1.1 million ( GBP661,000) and a
further US$134,000 ( GBP83,000), being the release of initial sales proceeds held
in escrow, was received in March 2012. Further payments of up to $1.9 million
may be received dependent on the achievement of certain commercialisation and
sales milestones of Biovex products. There is considerable uncertainty as to
whether these payments will be received and, if so, over what timescale. We are
constrained in what information we receive from Amgen Inc, the acquirer of
Biovex, in regards to the ongoing progress of the Biovex products because of
Amgen's US stock exchange listing. Accordingly, the Board does not consider the
fair value of any future receipts to be material at this point and therefore no
value has been ascribed to these potential payments at the balance sheet date.
This is subject to ongoing review to ensure that any material changes are
reflected in the net asset value of the Company.
The remaining investments showed an overall loss of GBP0.3 million with gains on
Population Genetics Technologies and Digital Healthcare being partially offset
by unrealised losses on Omni Dental Sciences and Sinclair IS Pharma (created
from the merger of Sinclair Pharma plc and IS Pharma plc in May 2011).
Further details on portfolio activity are provided in the Investment Manager's
Review.
Results
The loss on activities after taxation for the year was GBP559,000 (2011: loss
GBP428,000), comprising a revenue loss of GBP156,000 and a capital loss of GBP403,000.
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 the Company's Half Year Report to 31 July 2011, I announced that the Board
and Investment Manager had been looking at ways of increasing the size of the
Company and were seeking shareholder input into the process by way of a short
survey. The Board and the Investment Manager would like to thank all
shareholders who took the time to complete the survey and also to provide
additional comments.
On 22 December 2011, we were pleased to announce that the boards of the Company
and Longbow Growth and Income VCT plc ("LGIV") had entered discussions regarding
a possible merger of the two companies to be effected by means of a scheme of
reconstruction and winding up of LGIV. These discussions proceeded
satisfactorily and on 10 February 2012, we were able to announce firm proposals
for the merger. At the same time, shareholder approval was sought for an
enhanced share buyback, to enable existing shareholders to sell Ordinary Shares
back to the Company with the sale proceeds used to subscribe for New Ordinary
Shares (allowing shareholders effectively to retain substantially all of their
investment in the Company while obtaining new income tax relief of up to 30% on
the amount subscribed); a revision to the investment policy to allow the
Investment Manager to invest in a more diversified portfolio of growth
companies, rather than be restricted to investments in the health sector; and an
offer for subscription. Shareholder approval was subsequently received on 12
March 2012.
Dividend policy
The Board is aware of the importance of tax free dividends to many investors,
particularly in the current low interest rate environment. At the same time, the
Company needs to ensure it has sufficient liquidity to meet working capital
requirements and to retain funds to remain at an economically viable size. The
Board will take these factors into account when determining dividends to be paid
to shareholders.
Shareholder communications
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 the Autumn. The
Board welcomes the opportunity to meet shareholders at this event and I would
encourage you to attend if at all possible.
I would like to thank those long term shareholders who continue to support the
Company through their shareholding and extend a warm welcome to those investors
who have become new shareholders. 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.
Outlook
The Company has entered into a new phase of its development with a revised
investment policy which allows it to continue to pursue attractive opportunities
in the health sector and to take advantage of opportunities in other sectors.
The Investment Manager is optimistic that it can repeat the successes of the
original ordinary share portfolios of both ProVen VCT and ProVen Growth and
Income VCT which have a similar investment policy to ProVen Health VCT and which
continue to be among the best performing of all VCT share classes in their
respective years of launch.
Charles Pinney
Chairman
Investment Manager's Review
Introduction
During the year the Company's investment portfolio saw the addition of two new
portfolio companies, a further investment into an existing portfolio company,
the merger of two quoted company investments, three disposals of unquoted
companies and one partial disposal of a quoted holding. Including revaluations
of the existing companies, the value of the venture capital portfolio decreased
by GBP346,000. The value of cash and liquidity funds increased by GBP338,000.
Portfolio performance and activity
At 31 January 2012, the Company's investment portfolio comprised holdings in 10
companies, of which 8 were unquoted and 2 quoted, at a valuation of GBP5.0 million
and original acquisition cost of GBP7.5 million. In addition, the Company had cash
and liquidity funds of GBP3.6 million. A summary of venture capital investments
and disposals is provided below:
Additions Cost
GBP'000
APM Healthcare 375
Limited
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Polytherics Limited 750
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Population Genetics 50
Technologies Limited
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1,175
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Market value at
Disposals 31/01/11 Realised Gain/ (loss)
Cost Proceeds gain/(loss) against cost
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Biovex Inc 848 678 661 (17) (187)
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Chromogenex Limited 253 - 31 31 (222)
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Vectura Group plc 232 225 278 53 46
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Onyx Scientific 850 997 990 (7) 140
Limited
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2,183 1,900 1,960 60 (223)
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The two additions to the portfolio, APM Healthcare, which is the holding company
of Community Pharmacies (UK) Limited (CPL), and Polytherics received, between
them, growth capital of GBP1,125,000 during the year. CPL is aiming to become a
prominent niche player in the prescription pharmacy sector in partnership with
GP practices. Since our investment, CPL has opened 5 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. Further funding, dependent on
the achievement of milestones, will be available to support the development of
the business as it continues to expand.
Polytherics is a biotechnology company that applies precision chemistry to
develop protein and peptide-based drugs. These drugs are administered to
patients by injection, which are often painful and have to be given frequently.
Polytherics is researching methods to increase the time that these drugs remain
in the body, thereby increasing their efficacy and reducing the need for them to
be administered so frequently. In addition, Polytherics is researching the use
of proteins as a conduit for highly targeted medication, such as cytotoxic drugs
used in the treatment of cancer. If these drugs can be delivered to their point
of use without leaching on the way, they will be more effective and side effects
will be reduced. Polytherics is well known to our investment management team
having received capital from investment funds at an earlier stage of its
development.
A further investment was made in Population Genetics Technologies, which is at
the forefront of the fast growing industry using genome technology for the
pharmaceutical and agrochemical industries, alongside a major investment from
Syngenta Venture, part of Syngenta, a leader in crop development. Population
Genetics Technologies' research into the identification of where and how genomes
vary will unlock the conundrum of why individual patients or crops react
differently to disease and treatment, and provide the platform to improve
treatment and remedy.
The Company realised its investments in Biovex, Chromogenex and Onyx Scientific
as well as disposing of part of its holding in Vectura Group. The Biovex sale
provided an initial receipt of over US$1.1 million ( GBP661,000) and a further
payment of US$134,000 ( GBP83,000), being the release of initial sales proceeds
held in escrow, was received in March 2012. Further payments of up to $1.9
million may be received dependent on the achievement of certain
commercialisation and sales milestones of Biovex products. As outlined in the
Chairman's Statement, there is considerable uncertainty as to whether these
individual payments will be received and, if so, over what timescale.
Accordingly, no further value to these potential payments has been reflected in
the net assets of the Company at this stage.
In August 2011, we were pleased to conclude the sale of Onyx Scientific to an
Indian company resulting in a capital return of 16% on the initial investment
cost. We also disposed of a significant part of the Company's holding in Vectura
Group plc following a strong run in the company's share price. On a final point,
the merger of two of the Company's holdings, IS Pharma and Sinclair Pharma, was
completed in May 2011. The newly merged company Sinclair IS Pharma moved its
listing to AIM shortly after the merger.
The investment portfolio, after taking into account the effect of additions and
disposals showed a decrease in value of GBP346,000. The key contributors to this
change were uplifts in the value of Population Genetics Technologies and Digital
Healthcare, offset by decreases in valuations for Omni Dental Sciences and the
quoted company holdings.
Post year end developments
In March 2012, Altacor, a company in the ophthalmology sector, received a
significant new investment from French listed healthcare company NiCox S.A. A
key part of the transaction is the right of NicOx to acquire the entire share
capital of Altacor through a combination of shares and/or cash in mid 2012. The
future value of Altacor to the Company is dependent on whether this transaction
proceeds to completion, the nature of the consideration, any restrictions on the
disposal of any non-cash consideration and the future value of the non-cash
consideration. Altacor is currently being valued at the price of an earlier
investment funding round.
In April 2012, the Company received founder 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.
The merger of the Company with Longbow Growth and Income VCT plc (LGIV) which
was effected on 16 March 2012, following approval by both companies'
shareholders, has resulted in the Company acquiring a further investment, at
cost, of GBP135,000 in Polytherics and GBP0.8 million of cash for further
investment.
At the time of approval of the merger, the shareholders of the Company voted
overwhelmingly (98% of shareholders who voted) to allow the Company to invest in
a wider range of investment opportunities. Consequently the Company is now able
to focus on businesses with strong growth potential, without being limited to
the health sector. A broader range of sectors is a feature of two other VCTs
which Beringea manages, ProVen VCT and ProVen Growth and Income VCT. The
original ordinary share classes of these VCTs are among the best performing of
all VCT share classes.
Outlook
The widening of the investment policy marks the start of a new phase in the
development of ProVen Health VCT plc. We are aware that returns to shareholders
since the launch of the Company have been less than anticipated. Whilst the
health sector remains attractive, the widening of the investment policy gives us
greater flexibility and allows us to utilise fully our business experience and
gain maximum benefit from our network of contacts across all sectors. The
combination of the new opportunities and the use of more of our skills provides
an optimistic outlook for the development of the Company.
Beringea LLP
Investment Portfolio
as at 31 January 2012
The following investments were held at 31 January 2012:
Valuation movement in
year % of portfolio
Cost Valuation GBP'000 by value
GBP'000 GBP'000
Top venture capital
investments
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Altacor Limited 1,020 1,241 - 14.5%
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Population Genetics 1,129 1,129 49 13.2%
Technologies Limited
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Polytherics Limited**** 750 750 - 8.8%
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Digital Healthcare 1,010 518 137 6.1%
Limited
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APM Healthcare Limited*** 375 375 - 4.4%
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Omni Dental Sciences 750 335 (245) 3.9%
Limited
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Sinclair IS Pharma plc ** 585 321 (175) 3.8%
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Vectura Group plc * 250 282 (112) 3.3%
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5,869 4,951 (346) 58.0%
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Other venture capital 1,647 - - 0.0%
investments
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Total venture capital 7,516 4,951 (346) 58.0%
investments
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Deutsche Global Liquidity 1,812 21.2%
Managed Sterling Fund
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Cash at bank and in hand 1,772 20.8%
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Total investments 8,535 100.0%
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All venture capital investments are unquoted unless otherwise stated.
* Quoted on the Main Market
** Quoted on AIM
*** APM Healthcare Limited is also held by ProVen VCT plc and ProVen
Growth and Income VCT plc, both of which are managed by Beringea LLP
**** Polytherics Limited was also held by Longbow Growth and Income VCT plc
which merged with the Company on 16 March 2012
Other venture capital investments at 31 January 2012 comprise Amura Holdings
Limited and DeltaDOT Limited.
All venture capital investments held at the year end are registered in England
and Wales.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Report of the Directors, the
Directors' Remuneration Report and the financial statements in accordance with
applicable law and regulations. They are also responsible for ensuring that the
Annual Report and Accounts 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 those financial statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements 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 requirements
of the Companies Act 2006. They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information relating to the Company included on the Investment
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.
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
Beringea LLP
Secretary of ProVen Health VCT plc
Company number: 04131354
Registered Office:
39 Earlham Street
London WC2H 9LT
Income Statement
for the year ended 31 January 2012
2012 2011
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 48 - 48 44 - 44
Losses on - (286) (286) - (136) (136)
investments
--------------------------------------------------------
48 (286) (238) 44 (136) (92)
Investment (39) (117) (156) (41) (122) (163)
management fees
Other expenses (165) - (165) (173) - (173)
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Loss on ordinary (156) (403) (559) (170) (258) (428)
activities before
tax
Tax on ordinary - - - - - -
activities
--------------------------------------------------------
Loss attributable to
equity shareholders (156) (403) (559) (170) (258) (428)
--------------------------------------------------------
Basic and diluted
loss per share (0.8p) (2.1p) (2.9p) (0.9p) (1.3p) (2.2p)
--------------------------------------------------------
All revenue and capital items in the above statement 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.
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 2012
2012 2011
GBP'000 GBP'000
Opening shareholders' funds 9,199 10,018
Proceeds from share issues 272 233
Share issue costs (9) (18)
Purchase of own shares (222) (219)
Total recognised loss for the period (559) (428)
Dividends paid (196) (387)
---------------------
Closing shareholders' funds 8,485 9,199
---------------------
Balance Sheet
as at 31 January 2012
2012 2011
GBP'000 GBP'000
Fixed assets
Investments 4,951 6,022
------------------
Current assets
Debtors 83 21
Current investments 1,812 1,800
Cash at bank and in hand 1,772 1,446
------------------
3,667 3,267
Creditors: amounts falling due within one year (133) (90)
------------------
Net current assets 3,534 3,177
------------------
------------------
Net assets 8,485 9,199
------------------
Capital and reserves
Called up share capital 192 192
Capital redemption reserve 404 398
Share premium account 7,427 7,170
Special distributable reserve 7,168 7,586
Capital reserve - realised (4,375) (2,914)
Capital reserve - unrealised (1,442) (2,500)
Revenue reserve (889) (733)
------------------
Total equity shareholders' funds 8,485 9,199
------------------
Basic and diluted net asset value per share 44.2p 48.0p
------------------
Cash Flow Statement
for the year ended 31 January 2012
2012 2011
GBP'000 GBP'000
Net cash outflow from operating activities (304) (292)
----------------------
Capital expenditure
Purchase of investments (1,175) (688)
Disposal of investments 1,960 1,463
----------------------
Net cash inflow from capital expenditure 785 775
----------------------
Equity dividends paid (163) (321)
----------------------
Net cash inflow before financing 318 162
----------------------
Financing
Proceeds from share issues 239 166
Share issue costs (9) (18)
Purchase of own shares (222) (222)
Net cash inflow/(outflow) from financing 8 (74)
----------------------
Increase in cash 326 88
----------------------
Notes to the Accounts
for the year ended 31 January 2012
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
Accounting Standards Board when required.
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. 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 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 "Associations and Joint Ventures", fixed asset investments
are held as part of an investment portfolio and are not accounted for as
associated undertakings.
Current assets investments
Current assets investments comprise investments in liquidity funds with AAA
rating and are redeemable on call. These investments are valued at bid price.
Income
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.
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.
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 Revenue loss Capital
average number per share loss per
of shares in (pence) Revenue loss share Capital
issue (pence) loss
GBP'000 GBP'000
Year ended 19,363,165 (0.8p) (156) (2.1p) (403)
31 January
2012
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Year ended 19,296,351 (0.9p) (170) (1.3p) (258)
31 January
2011
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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
Pence Pence
2012 2011 per share GBP'000 per share GBP'000
Ordinary shares 19,183,664 19,180,796 44.2p 8,485 48.0p 9,199
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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.
Further information about the VCT's investment policy is set out in the Report
of the Directors.
In assessing the risk profile of its investment portfolio, the Board has
identified 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 a reasonable sensitivity in 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 2012, the
unrealised loss on quoted investments was GBP232,000 (2011: gain GBP48,000).
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
financial instruments (ordinary shares, preference shares, loan stocks and
liquidity funds) 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.
2012 2011
Sensitivity 20% fall 20% fall
Impact Impact Impact Impact
Risk on net on NAV Risk on net on NAV
exposure assets per exposure assets per
share share
GBP'000 GBP'000 Pence GBP'000 GBP'000 Pence
Venture
capital 4,951 (990) (5.2p) 6,022 (1,204) (6.3p)
investments
Liquidity 1,812 (362) (1.9p) 1,800 (360) (1.9p)
fund
-----------------------------------------------------------------
6,763 (1,352) (7.1p) 7,822 (1,564) (8.2p)
-----------------------------------------------------------------
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:
2012 2011
GBP'000 GBP'000
Fair value through profit or loss assets
Investments in loan stocks 536 476
Loans and receivables
Investments in liquidity funds 1,812 1,800
Cash and cash equivalents 1,772 1,446
Interest, dividends and other receivables 83 21
--------------------
4,203 3,743
--------------------
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 2012, loan stock valued at GBP277,000, including
interest valued at GBP27,000, was past due for payment. Total interest past due
for payment was GBP58,000 of which GBP15,000 was past due by less than 12 months;
GBP14,000 of interest was past due between 12 and 24 months, GBP17,000 of interest
was past due between 24 and 36 months and GBP12,000 of interest was past due
between 24 and 36 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 (2012: GBP133,000,
2011: GBP90,000) and has no borrowings, the Board believes that the Company's
exposure to liquidity risk is minimal.
5. Post balance sheet events
On 15 March 2012, 71,621 shares were issued at 43.3p per share under the
Company's dividend re-investment scheme. The aggregate consideration for the
shares was GBP31,000 with related share issue costs of GBP1,000.
Between 5 April 2012 and 13 April 2012, the Company issued 69,246 shares for
consideration at approximately 45.9p per share, under an offer for subscription
dated 10 February 2012. The aggregate consideration for the shares was GBP31,000
and share issue costs thereon amounted to GBP1,000
Under the terms of an enhanced share buyback, outlined in a circular issued by
the Company on 10 February 2012, the Company bought back and subsequently issued
a number of shares on 5 April 2012 in the tax year 2011/12 and 13 April 2012 in
the tax year 2012/13. On 5 April 2012, the Company purchased 1,804,994 shares
for cancellation at a price of 43.3p per share and issued 1,721,418 shares at a
price of 45.4p per share. On 13 April 2012, the Company purchased 1,025,322
shares for cancellation at a price of 43.3p per share and issued 977,859 shares
at a price of 45.4p per share. Total funds of GBP1.2 million were re-invested in
the Company with transaction costs of approximately GBP57,000 being incurred.
Beringea LLP was entitled to a fee of GBP12,000 in respect of services provided in
connection with the enhanced share buyback.
On 16 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 terms of the Scheme were set out in
a circular issued by the Company on 10 February 2012. The Scheme was effected by
LGIV transferring its net assets to the Company, in consideration for which the
Company issued 2,150,872 new ordinary shares to the shareholders of LGIV. Under
the Scheme, LGIV was placed into members' voluntary liquidation. The number of
new shares issued by the Company to the shareholders of LGIV was determined on
the basis of the relevant net assets of LGIV and the Company at the close of
business on 13 March 2012, in accordance with the terms of the Scheme. The new
ordinary shares rank pari passu in all respects and form a single class with the
existing ordinary shares.
The Merger resulted in the addition of net funds (including investments) of
GBP931,000, an increase of 11% over the net assets of the Company at 31 January
2012. At the date of the Merger, LGIV held one venture capital investment,
Polytherics Limited, in which the Company already had an investment. The
Company's costs of the Merger are GBP75,000 and will be recovered from the
Investment Manager by way of a management fee waiver over two years.
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 2012, but has been extracted
from the statutory financial statements for the year ended 31 January 2012,
which were approved by the Board of Directors on 25 April 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 s
498(2) and (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 January 2011 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 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.
-End
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Proven Health VCT Plc via Thomson Reuters ONE
[HUG#1606023]
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