Final Results

 

 

 

 

The Statement to Shareholders by the Chairman, Andrew Davison, includes the following:

I am very pleased to present the Annual Report covering what has been a very successful year for ProVen Growth and Income VCT plc.  The Ordinary share pool's Total Return (Net Asset Value plus dividends paid to date) is now the third highest achieved by any VCT, of which there are now more than 100.

At 28 February 2007, the Company's Ordinary Share Net Asset Value ("NAV") stood at 129.7 per share, an increase of 48.9p or 36.4% compared to the NAV at 28 February 2006 after adjusting for the dividends of 53.5p per share which were paid during the year.

 

The Total Return (NAV plus dividends paid to date) to Ordinary Shareholders  that invested at the Company's launch now stands at 198.6p compared to an original investment net of income tax relief of 80p per share. 

 

The NAV of the Company's 'C' shares stood at 97.2p at 28 February 2007, an increase of 2.3p or 2.4% compared to the NAV at 28 February 2006.

 

Alexander Spiro Jr stepped down from the Board on 25 January 2007 as a result of his changing role within Beringea LLC, the group which provides investment management services to the Company.  I wish to thank Alexander for his strong support and perceptive and relevant contribution since joining the Board in May 2003 and wish him well in his future activities.

 

On the same date, David Eberly joined the Board as a non-executive director representing Beringea.  David is a Senior Managing Director and co-founder of Beringea LLC and also sits on the board of Beringea Limited, the Company's investment manager.  David has previously been a director of European Gateway Acquisition Corp. (1996-1998) and also Williams Controls Inc (2002-2003).  I am sure that, with his extensive experience in investment banking, David will be a valuable addition to the Board. 

 

The Company's 'C' Share fundraising, launched in November 2005, closed fully subscribed in April 2006 having raised gross proceeds of £25.0 million. 

 

In order that the Ordinary Shareholders and 'C' Shareholders can assess the performance of their respective funds, separate Income Statements, Balance Sheets and Cash flow Statements have been included for each pool as well as for the Company as a whole.

Although there were relatively few transactions during the year within the Ordinary Share investment portfolio, the exit from the investment in Mergermarket Limited was very successful, producing proceeds of £4.3 million against an original cost of just £317,000.   This was not, however, the only profitable investment disposal, with the holding in restaurant chain, Ma Potters, also showing a realised gain against cost of £432,000 (giving a return of capital of 71.6%).

 

Of the investments still held at the year end, there were a number of adjustments to the valuations, which overall showed a net gain of £1.2 million.

 

With the 'C' Share fundraising closing during the year, the task of building the investment portfolio is in its early stages.  At the year end the 'C' Share pool had competed two investments at a cost of £884,000.  Both investments have performed ahead of plan and have been revalued upwards by a total of £324,000.

The total return on ordinary activities for the year was as follows:

 

 

As a result of successful disposal of the Mergermarket investment, a special interim dividend of 50.0p per share was paid on 7 December 2006 to Ordinary Shareholders.  A second interim dividend of 7p per share was also paid to Ordinary Shareholders on 5 April 2007.

 

An interim dividend of 2.0 p per share was paid to 'C' Shareholders on 5 April 2007.

 

In view of the dividends paid on 5 April 2007, the Board is not proposing to pay any final dividends for the year to either Ordinary or 'C' Shareholders.

 

The Directors are conscious that the Company's share prices are affected by the illiquidity of its shares in the market resulting from the fact that investors purchasing "second-hand" shares do not benefit from income tax relief on their investment.

 

The Directors continue to monitor the market in the Company's shares and will make share purchases when appropriate.  During the period the Company repurchased 116,413 Ordinary Shares of 1p each, at an average price of 125.1p per share, for cancellation. No 'C' Shares were repurchased during the year. 

 

Generally share buybacks are undertaken at a 10% discount to the latest NAV published by the Company.  A Special Resolution to allow the Board to continue to purchase shares for cancellation will be proposed at the forthcoming AGM.

 

The Annual General Meeting ("AGM") of the Company will be held at 39 Earlham Street, London WC2H 9LT at 2:45pm on 26 July 2007. 

 

The Board is very pleased with the performance of the Company over the last year and congratulates the Investment Manager on delivering such strong results.  The Directors are, however, conscious that, with the disposal proceeds that have been retained in the Company and the majority of the 'C' share issue proceeds, the primary focus must now be on making new investments.

 

I am pleased to report that several new investments have been made since the year end and Board is satisfied that the Manager has an adequate level of deal flow from which to source the new investments. 

 

I look forward to updating Shareholders on the progress in making new investments in the newly-introduced interim management statement (which the Company will prepare shortly for the period to 31 May 2007) and in the interim results to 31 August 2007.

 

 

 

 

 

The revenue and capital movements in the year for the Ordinary Shares and 'C' Shares relate to continuing operations.

 

 

 

 

The Company has prepared its financial statements under UK Generally Accepted Accounting Practice ("UK GAAP") and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" revised December 2005 ("SORP").  

 

The financial statements are prepared under the historical cost convention except for the revaluation of certain financial instruments.

In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the Association of Investment Companies ("AIC"), supplementary information which analyses the income statement between items of a revenue and capital nature has been presented alongside the income statement. The net revenue is the measure the directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 842 Income and Corporation Taxes Act 1988.

 

All investments are designated as "fair value through profit or loss" assets and are initially measured at cost. Thereafter the investments are measured at subsequent reporting dates at fair value.

 

Listed fixed income investments and investments quoted on AIM are measured using bid prices with illiquidity discounts applied where deemed appropriate.

 

In respect of unquoted instruments, fair value is established by using International Private Equity and Venture Capital Valuation Guidelines. Where no reliable fair value can be estimated for such unquoted equity investments they are carried at cost, subject to any provision for impairment. Where an investee company has gone into receivership or liquidation the investment, although not physically disposed of, is treated as being realised.

 

Gains and losses arising from changes in fair value are included in the income statement for the year as a capital item and transaction costs on acquisition or disposal of the investment expensed.

 

It is not the Company's policy to exercise either significant or controlling influence over investee companies.  Therefore the results of these companies are not incorporated into the revenue account except to the extent of any income accrued.

 

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

 

Interest income is accrued on a timely basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount, and only where there is reasonable certainty of collection.

 

All expenses are accounted for on 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 disposal of an investment are deducted from the disposal proceeds of the investment.

 

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

 

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 Section 842AA of the Income and Corporation Taxes Act (1988), no provision for taxation is required in respect of any realised or unrealised appreciation of the Company's investments which arises.

 

Deferred taxation is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements.

 

 

The financial information set out in this announcement does not constitute the Company's statutory accounts for the year ended 28 February 2007 or 28 February 2006.  The statutory accounts for the year ended 28 February 2007 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

 

The financial information for the year ended 28 February 2006 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies.  The auditors reported on those accounts; this report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

 

A copy of the full annual report and financial statements for the year ended 28 February 2007 will be printed and posted to shareholders. Copies will also be available to the public at the registered office of the Company at 39 Earlham Street, London WC2H 9LT.