TIDMNHF
PROVEN HEALTH VCT PLC
ANNUAL FINANCIAL REPORT
YEAR ENDED 31 JANUARY 2013
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 55.6p 61.7p
launch)
Mid market share price 34.5p 37.5p
Chairman's Statement
Introduction
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
GBP5.2 million. In addition, the Company had cash and liquidity fund
investments of GBP2.3 million resulting in total investments of GBP7.5
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 GBP911,000:
Inskin Media (GBP320,000) is a UK based company that has developed a
range of technologies for the rapidly growing area of online video
advertising; Cognolink (GBP319,000) offers a broad range of "expert
network" services to private equity firms, hedge funds, asset managers
and large consulting businesses; Skills Matter (GBP159,000) 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 (GBP113,000) 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 GBP475,000 in APM
Healthcare and an investment of GBP77,000 in Population Genetics
Technologies. The Merger resulted in the transfer into the portfolio of
a further GBP135,000 investment in Polytherics and GBP796,000 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 GBP847,000. 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
GBP120,000 has been ascribed to these potential receipts although the
eventual amounts received may be different.
The investment portfolio showed an overall loss of GBP1.4 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.
Results
The loss on activities after taxation for the year was GBP1,353,000
(2012: loss GBP559,000), comprising a revenue loss of GBP127,000 and a
capital loss of GBP1,226,000. 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 GBP1.2 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.
Outlook
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
Chairman
24 May 2013
Investment Manager's Review
Introduction
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
GBP911,000, in addition to two health sector investments totalling
GBP552,000. The investment portfolio was also boosted by the addition of
a further investment in Polytherics, valued at GBP135,000, and cash of
GBP796,000 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
GBP5.2 million. In addition, the Company had cash and liquidity fund
investments of GBP2.3 million. A summary of venture capital additions
and disposals is provided below:
Additions Cost
GBP'000
APM Healthcare Limited 475
Cognolink Limited 319
Inskin Media Limited 320
Polytherics Limited* 135
Population Genetics Technologies Limited 77
Skills Matter Limited 159
Utility Exchange Online Limited 113
1,598
**Transfer from LGIV
Gain/ (loss)
Market value Realised against
Disposals Cost at 31/01/12 Proceeds gain/(loss) cost
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
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 GBP159,000 as part of a total investment, alongside
other Beringea managed VCTs, of GBP1.5 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
GBP113,000 from ProVen Health VCT, was made in November 2012.
The Company made a further significant investment of GBP475,000 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 (GBP83,000) 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 GBP120,000 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 GBP1,372,000.
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
GBP64,000 in Altacor and GBP23,000 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
GBP720,000 against an initial investment cost of GBP482,000; the sale of
Sinclair IS Pharma generated proceeds of GBP405,000 against an initial
investment cost of GBP585,000.
Outlook
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:
Cost Valuation
GBP'000 GBP'000 Valuation movement in year GBP'000 % 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
Chairman
ProVen Health VCT plc
Company number: 04131354
http://wck2.companieshouse.gov.uk/24c00d2ccb43417d8f5ddf4216b58d09/compa
nysearch?link=41
Registered Office:
39 Earlham Street
London WC2H 9LT
24 May 2013
Income Statement
for the year ended 31 January 2013
2013 2012
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
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
GBP'000 GBP'000
Opening shareholders' funds 8,485 9,199
Proceeds from share issues 2,218 272
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
GBP'000 GBP'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
GBP'000 GBP'000
Net cash outflow from operating activities (256) (304)
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
Financing
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.
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
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.
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
Revenue
loss per
share Revenue Capital Total
Weighted average number of shares in issue (pence) loss Capital loss per share (pence) loss Total loss per share (pence) loss
GBP'000 GBP'000 GBP'000
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
2013 2012
Shares in issue Net asset value Net asset value
Pence per Pence per
2013 2012 share GBP'000 share GBP'000
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
GBP13,000 (2012: loss GBP232,000).
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.
2013 2012
Sensitivity 20% fall 20% fall
Risk Impact on Impact on Risk Impact on Impact on
exposure net NAV per exposure net NAV per
assets share assets share
GBP'000 GBP'000 Pence GBP'000 GBP'000 Pence
Venture
capital 5,164 (1,033) (5.0p) 4,951 (990) (5.2p)
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:
2013 2012
GBP'000 GBP'000
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 GBP9,000,
including interest valued at GBP9,000, was past due for payment (2012:
GBP277,000 including interest valued at GBP27,000). Total interest past
due for payment was GBP20,000 (2012: GBP58,000), 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: GBP61,000, 2012: GBP133,000) 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 GBP847,000 compared to the combined year end valuations of
GBP847,000.
The Company made further investments after the balance sheet date of
GBP64,000 in Altacor Limited and GBP23,000 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 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#1705133
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