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Company Announcements
Albion Venture Capital Trust PLC : Annual Financial Report
Related Companies
As required by the UK Listing Authority's Disclosure and Transparency Rules 4.1
and 6.3, Albion Venture Capital Trust PLC today makes public its information
relating to the Annual Report and Financial Statements for the year ended 31
March 2012.
This announcement was approved for release by the Board of Directors on 28 June
2012.
This announcement has not been audited.
You will shortly be able to view the Annual Report and Financial Statements for
the year to 31 March 2012 (which have been audited) at: www.albion-
ventures.co.uk by clicking on 'Our Funds' and then 'Albion Venture Capital Trust
PLC'. The Annual Report and Financial Statements for the year to 31 March 2012
will be available as a PDF document via a link under the 'Investor Centre' in
the 'Financial Reports and Circulars' section. The information contained in the
Annual Report and Financial Statements will include information as required by
the Disclosure and Transparency Rules, including Rule 4.1.
Investment objectives
Albion Venture Capital Trust PLC (the "Company") is a venture capital trust
which raised a total of £39.7 million through an issue of Ordinary shares in the
spring of 1996 and through an issue of C shares in the following year. The C
shares merged with the Ordinary shares in 2001. The Company raised a further
£3.1 million under the Albion VCTs Linked Top Up Offers in 2011 and 2012.
The Company's investment strategy is to reduce the risk, normally associated
with investments in smaller, unquoted companies. This is achieved as follows:
* qualifying unquoted investments are predominantly in specially-formed
companies which provide a high level of asset backing for the capital value
of the investment;
* Albion Venture Capital Trust PLC invests alongside selected partners with
proven experience in the sectors concerned;
* investments are normally structured as a mixture of equity and loan stock.
The loan stock represents the majority of the finance provided and is
secured on the assets of the investee company. Funds managed or advised by
Albion Ventures LLP typically own 50 per cent. of the equity of the investee
company;
* other than the loan stock issued to funds managed or advised by Albion
Ventures LLP, investee companies do not normally have external borrowings.
The Company offers tax-paying investors substantial tax benefits at the time of
investment, on payment of dividends and on the ultimate disposal of the
investment.
Financial calendar
Record date for first dividend 6 July 2012
Payment of first dividend 31 July 2012
Annual General Meeting 17 September 2012
Announcement of half-yearly results for the six months ended November 2012
30 September 2012
Payment of second dividend subject to Board approval December 2012
Financial highlights
+--------------------------------------------------------+
197.8p | |
|Net asset value plus dividends from launch to 31 March |
|2012 |
+--------------------------------------------------------+
+--------------------------------------------------------+
5.0p | |
|Tax-free dividend per share paid in the year to 31 March|
|2012 |
| |
+--------------------------------------------------------+
+--------------------------------------------------------+
2.5p | |
|The Board has declared a first tax free dividend per |
|share for the year to 31 March 2013 |
| |
+--------------------------------------------------------+
+--------------------------------------------------------+
78.0p | |
|Net asset value per share as at 31 March 2012 |
| |
+--------------------------------------------------------+
+-----------------------------------------------------------+
| 31 March 2012 31 March 2011 |
| |
| (pence per share) (pence per share) |
| |
| |
| |
| Dividends paid 5.0 5.0 |
| |
| Revenue return 2.1 2.5 |
| |
| Capital return - 1.2 |
| |
| Net asset value 78.0 80.5 |
+-----------------------------------------------------------+
+-----------------------------------------------------+---------------+--------+
|Total shareholder net asset value return to 31 March |Ordinary shares|C shares|
|2012 | | |
+-----------------------------------------------------+---------------+--------+
|Total dividends paid during the year ended : |2.00 |- |
|31 March 1997 | | |
+-----------------------------------------------------+---------------+--------+
| 31 March 1998 |5.20 |2.00 |
+-----------------------------------------------------+---------------+--------+
| 31 March 1999 |11.05 |8.75 |
+-----------------------------------------------------+---------------+--------+
| 31 March 2000 |3.00 |2.70 |
+-----------------------------------------------------+---------------+--------+
| |8.55 |4.80 |
| 31 March 2001 | | |
+-----------------------------------------------------+---------------+--------+
| 31 March 2002 |7.60 |7.60 |
+-----------------------------------------------------+---------------+--------+
| 31 March 2003 |7.70 |7.70 |
+-----------------------------------------------------+---------------+--------+
| 31 March 2004 |8.20 |8.20 |
+-----------------------------------------------------+---------------+--------+
| 31 March 2005 |9.75 |9.75 |
+-----------------------------------------------------+---------------+--------+
| |11.75 |11.75 |
| 31 March 2006 | | |
+-----------------------------------------------------+---------------+--------+
| 31 March 2007 |10.00 |10.00 |
+-----------------------------------------------------+---------------+--------+
| 31 March 2008|10.00 |10.00 |
+-----------------------------------------------------+---------------+--------+
| 31 March 2009 |10.00 |10.00 |
+-----------------------------------------------------+---------------+--------+
| 31 March 2010 |5.00 |5.00 |
+-----------------------------------------------------+---------------+--------+
| |5.00 |5.00 |
| 31 March 2011 | | |
+-----------------------------------------------------+---------------+--------+
| 31 March 2012 |5.00 |5.00 |
+-----------------------------------------------------+---------------+--------+
|Total dividends paid to 31 March 2012 |119.80 |108.25 |
+-----------------------------------------------------+---------------+--------+
| | | |
+-----------------------------------------------------+---------------+--------+
|Net asset value as at 31 March 2012 |78.00 |78.00 |
+-----------------------------------------------------+---------------+--------+
| | | |
+-----------------------------------------------------+---------------+--------+
|Total shareholder net asset value return to 31 March |197.80 |186.25 |
|2012 | | |
+-----------------------------------------------------+---------------+--------+
| | | |
+-----------------------------------------------------+---------------+--------+
In addition to the dividends summarised above, the Board has declared a first
dividend for the year ending 31 March 2013 of 2.5 pence per share to be paid on
31 July 2012 to shareholders on the register as at 6 July 2012.
Notes
* Dividends paid before 5 April 1999 were paid to qualifying shareholders
inclusive of the associated tax credit. The dividends for the year to 31
March 1999 were maximised in order to take advantage of this tax credit.
* A capital dividend of 2.55 pence paid in the year to 31 March 2000 enabled
the Ordinary shares and the C shares to merge on an equal basis.
* All dividends paid by the Company are free of income tax. It is an H.M.
Revenue & Customs requirement that dividend vouchers indicate the tax
element should dividends have been subject to income tax. Investors should
ignore this figure on their dividend voucher and need not disclose any
income they receive from a VCT on their tax return.
* The net asset value of the Company is not its share price as quoted on the
official list of the London Stock Exchange. The share price of the Company
can be found in the Investment Companies - VCTs section of the Financial
Times on a daily basis. Investors are reminded that it is common for shares
in VCTs to trade at a discount to their net asset value.
Chairman's statement
Introduction
The results for the year to 31 March 2012 show a total return of 2.1 pence per
share before dividends, compared to 3.7 pence per share for the previous year.
The lower return reflects weaker trading within our hotel portfolio. The VCT
raised approximately £1.3m under the Albion VCTs Linked Top Up Offer 2011/2012,
and has recently announced a proposal to merge with Albion Prime VCT PLC.
Investment performance and progress
As stated last year, it is the Company's strategy to reduce its exposure to the
hotel sector, which we see as being more vulnerable to the current broader
economic uncertainties than many other sectors. With this aim in mind, the
Company successfully sold The Place Sandwich VCT Limited, realising proceeds of
£1,785,000 compared to the holding value of £1,501,000 and cost of £1,640,000.
In addition to the sale proceeds, the Company received £785,000 in interest over
the course of the investment, producing a total return of approximately 1.6
times cost. A further, £1.2m was returned by other investee companies,
principally through the repayment of loan stock.
During the year the Company invested £2.6m in three new and seven existing
investee companies. The great majority of the investment was in the healthcare
and environmental sectors, with £1.3m invested in scheduled follow-on
investments in Oakland Care Centre, which opened its care home for the elderly
in Chingford in October 2011; Nelson House Hospital, which has recently opened a
psychiatric hospital in Gosport, Hampshire; and in Orchard Portman Hospital,
which opened a psychiatric hospital near Taunton in Somerset in May 2011. £1.2m
was invested in renewable energy companies, principally in wind and solar
projects.
Following third party professional valuations, the Company saw a pleasing uplift
in the value of its cinema investments following strong trading; in Oakland Care
Centre; and in Radnor House School in Twickenham which successfully opened in
September with twice the budgeted level of pupils. These were tempered by
downward valuations of The Stanwell Hotel, which has taken longer to establish
itself than anticipated; Kew Green VCT (Stansted) and The Crown Hotel,
Harrogate, both of which were less profitable than the previous period. The net
movement in valuations, including realised movements, was an increase of £0.3m
in the year.
Continuation as a venture capital trust
At the 2012 Annual General Meeting members have the opportunity to confirm that
they wish the Company to continue as a venture capital trust. Otherwise the
Board is required to make proposals for the reorganisation, reconstruction or
the orderly liquidation and winding up of the Company and present these to the
members at a general meeting. Those shareholders who have been using their
investment in the VCT to defer a capital gain should note that, on a return of
capital, that gain would become chargeable at the prevailing rate of capital
gains tax.
Since its launch in 1996, the portfolio has paid out dividends of 119.8 pence
per share and achieved a total return (net asset value plus dividends but not
counting the upfront tax benefits) of just under 198 pence per share. This puts
the Company firmly in the top quartile of all venture capital trusts.
Your Board believes that Albion VCTs have the potential to be highly effective
long-term savings vehicles, with strong tax-free dividend streams. Therefore
the Board recommends that shareholders should vote in favour of the Company
continuing as a venture capital trust for a further five years, as they intend
to vote in respect of their own shares.
Merger with Albion Prime VCT PLC and Board changes
Following the year end, your Company announced the proposed merger with Albion
Prime VCT PLC which had net assets of £14.7m at 31 March 2012, has the same
investment policy and a near identical investment portfolio. It is intended,
subject to the consent of both VCTs' shareholders, that this will take effect in
September 2012. A circular and prospectus in relation to the merger is expected
to be posted to shareholders at the same time as the Annual Report.
Assuming the merger goes ahead, Jonathan Rounce has agreed to stand down at time
of the merger, and Ebbe Dinesen, a director of Albion Prime VCT PLC will be
appointed in his place. The Board thanks Jonathan for his excellent service to
the Company since his appointment in 2010.
Risks and uncertainties
The outlook for the UK economy continues to be the key risk affecting your
Company, with both the UK and much of Europe returning to recession.
Importantly, however, your Company remains conservatively financed with no bank
borrowings having a prior charge at either corporate or investee company level.
This is in addition to the policy of ensuring that the Company has a first
charge over investee companies' assets.
A detailed analysis of the other risks and uncertainties facing the business is
shown in note 23 to this announcement.
Details of post balance sheet events and related party transactions are set out
in notes 21 and 22 to this announcement.
Share buy-backs
It remains the Board's primary objective to maintain sufficient resources for
investment in existing and new investee companies and for the continued payment
of dividends to shareholders. Thereafter, it is still the Board's policy to buy
back shares in the market, subject to the overall constraint that such purchases
are in the Company's interest. The Company will limit the sum available for
share buy-backs for the six month period to 30 September 2012 to £350,000. This
compares to a total value bought in for the previous six months of £310,000.
Subject to the constraints referred to above, and subject to first purchasing
shares held by the marketmakers, the Board will target such buy-backs to be in
the region of a 10% to 15% discount to net asset value, so far as market
conditions and liquidity permit.
Results and dividends
As at 31 March 2012, the net asset value was £28.4 million or 78.0 pence per
share, compared to £28.8 million or 80.5 pence per share as at 31 March 2011,
after the payment of tax-free dividends of 5.0 pence per share. The results
comprised 2.1 pence per share revenue return (2011: 2.5 pence per share) and a
flat capital return per share (2011: 1.2 pence per share). The revenue return
before taxation was £933,000 compared to £911,000 for the year to 31 March
2011, though the tax charge was higher than the previous year. The Company will
pay a first dividend of 2.5 pence per share on 31 July 2012 to those
shareholders on the share register on 6 July 2012, which is in line with the
Company's current objective of paying dividends of 5.0 pence per share annually.
Outlook and prospects
The outlook for the UK economy remains uncertain but, despite this, trading
within the majority of our portfolio companies is encouraging. In the meantime,
we are concentrating our investment activities in sectors that we see as being
of long term value; in the current investment climate, where there is a general
shortage of finance, we are seeing interesting investment opportunities at
attractive prices.
David Watkins
Chairman
28 June 2012
Manager's report
Investment portfolio
Over the year we have made progress in re-balancing the Company's investment
portfolio by increasing the weighting in the healthcare and renewable energy
sectors, which we believe to have less exposure to the consumer and business
cycle, and reducing the weighting in hotels. The sector split of the portfolio
by valuation as at 31 March 2012 is shown below:
Please see the end of this announcement for the PDF of the sector split of the
portfolio by valuation as at 31 March 2012.
Source: Albion Ventures LLP
Investment activity
During the year the Company sold its investment in The Place Sandwich VCT, which
owned the Bell Hotel in Sandwich, realising proceeds of £1,785,000 compared to
the holding value of £1,501,000 and cost of £1,640,000. Including interest of
£785,000 over the course of the investment, the total return was approximately
1.6 times cost. In addition, £294,000 of loan stock was repaid by Kew Green VCT
(Stansted). This has led to hotels falling to 38% of the Company's portfolio at
31 March 2012 (2011: 48%).
A total of £1,263,000 was invested in three healthcare companies during the
year. These comprised £992,000 as a scheduled follow-on investment in Oakland
Care Centre, which opened a 46 bedroom care home for the elderly in Chingford in
October 2011; £240,000 in Nelson House Hospital, which opened a psychiactric
hospital in Gosport, Hampshire in April 2012; and £31,000 in Orchard Portman
Hospital, which opened a psychiatric hospital near Taunton, Somerset in May
2011. The occupancies of all three units are building up steadily.
In the renewable energy sector, £1,197,000 was invested in six companies. These
comprised £432,000 in Alto Prodotto Wind, which is erecting single unit wind
turbines on industrial sites in Wales; £280,000 in The Street by Street Solar
Programme which has been installing photovoltaic panels on residential buildings
in the Thames Valley; £248,000 in Regenerco Renewable Energy which has been
installing photovoltaic panels on a number of commercial buildings on the South
Coast and in Birmingham and domestic buildings in Cambridgeshire; £140,000 in
AVESI; and £90,000 in Greenenerco. These last two are also to fund wind
projects on industrial and brown field sites. Finally, an additional £7,000 was
invested in TEG Biogas (Perth) whose anaerobic digestion plant in Scotland,
converting food waste to energy, is now operational.
Investment portfolio review
In the hotel portfolio, revenue at the Holiday Inn Express at Stansted Airport
marginally increased over the year, but profits were lower and the independent
valuation reduced. The Crown Hotel in Harrogate also experienced lower
profitability and a decrease in valuation, but prospects for the current year
are more encouraging. The Stanwell Hotel, in the village of Stanwell near
Heathrow's Terminal 5, continued to disappoint, leading to a decision to change
our operating partner. The valuation of the Stanwell Hotel was sharply lower.
Meanwhile the Bear Hotel in Hungerford saw its valuation remain steady.
The cinema portfolio had another good year, leading to a further uplift in
valuations, especially of the Cambridge Arts and Greenwich Picturehouses and the
Ritzy Cinema in Brixton. City Screen (Cambridge) and CS (Greenwich) repaid
£100,000 and £36,000 loan stock respectively, while CS (Brixton) retained cash
for refurbishment. The Picturehouse at FACT in Liverpool, the Exeter
Picturehouse and Cinema City in Norwich also saw strong increases in
profitability.
In the health and fitness portfolio, the 37o health and fitness club near Tower
Bridge continued to experience strong trading and repaid £36,000 loan stock to
the Company and independent valuations of it and the Weybridge Club led to a
small increase in the Company's holding values. The 37o health and fitness club
at Kensington Olympia meanwhile saw a slight decline in valuation. All these
clubs, however, continue to experience growth in membership.
In the pub portfolio, The Charnwood Pub Company, which operates food-led pubs in
central England, repaid £140,000 loan stock; and GB Pub Company VCT sold one of
its two remaining pubs and repaid £29,000. Trading grew in the wet-led Bravo
Inns pubs in the North-West, leading to an increase in valuations, but a write
down in the value of GB's remaining pub and a small decline in Charnwood's
portfolio led to the portfolio, as a whole remaining stable.
One of the highlights of the year was the successful opening of Radnor House
School in Twickenham in September with twice the budgeted level of pupils. This
led to a pleasing uplift in valuation. We were also delighted that it has
recently been rated "outstanding" in an OFSTED inspection. The residential
development companies, meanwhile, returned £560,000 to the Company.
Albion Ventures LLP
Manager
28 June 2012
Responsibility Statement
In preparing these financial statements for the year to 31 March 2012, the
Directors of the Company, being David Watkins, John Kerr, Jonathan Rounce and
Jeff Warren, confirm that to the best of their knowledge:
- summary financial information contained in this announcement and the full
Annual Report and Financial Statements for the year ended 31 March 2012 for the
Company has been prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (UK Accounting Standards and applicable law) and give a true
and fair view of the assets, liabilities, financial position and profit and loss
of the Company for the year ended 31 March 2012 as required by DTR 4.1.12.R;
-the Chairman's statement and Manager's report include a fair review of the
information required by DTR 4.2.7R (indication of important events during the
year ended 31 March 2012 and description of principal risks and uncertainties
that the Company faces); and
-the Chairman's statement and Manager's report include a fair review of the
information required by DTR 4.2.8R (disclosure of related parties transactions
and changes therein).
A detailed "Statement of Directors' responsibilities for the preparation of the
Company's financial statements" is contained within the full audited Annual
Report and Financial Statements.
By order of the Board
David Watkins
Chairman
Income statement
+-----------------------------+----+---------------------+---------------------+
| | |Year ended 31 March |Year ended 31 March |
| | |2012 |2011 |
+-----------------------------+----+-------+-------+-----+-------+-------+-----+
| | |Revenue|Capital|Total|Revenue|Capital|Total|
+-----------------------------+----+-------+-------+-----+-------+-------+-----+
| |Note|£'000 |£'000 |£'000|£'000 |£'000 |£'000|
+-----------------------------+----+-------+-------+-----+-------+-------+-----+
| |3 |- |310 |310 |- |700 |700 |
|Gains on investments | | | | | | | |
| | | | | | | | |
|Investment income |4 |1,314 |- |1,314|1,300 |- |1,300|
| | | | | | | | |
|Investment management fees |5 |(143) |(428) |(571)|(141) |(424) |(565)|
| | | | | | | | |
|Other expenses |6 |(238) |- |(238)|(248) |- |(248)|
| | +-------+-------+-----+-------+-------+-----+
|Return/(loss) on ordinary | |933 |(118) |815 |911 |276 |1,187|
|activities before tax | | | | | | | |
| | | | | | | | |
|Tax (charge)/credit on |8 |(188) |118 |(70) |(41) |126 |85 |
|ordinary activities | | | | | | | |
| | +-------+-------+-----+-------+-------+-----+
|Return attributable to | |745 |- |745 |870 |402 |1,272|
|shareholders | | | | | | | |
| | +-------+-------+-----+-------+-------+-----+
|Basic and diluted return per |10 |2.1 |- |2.1 |2.5 |1.2 |3.7 |
|share (pence)* | | | | | | | |
+-----------------------------+----+-------+-------+-----+-------+-------+-----+
* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.
The total column of this Income statement represents the profit and loss account
of the Company. The supplementary revenue and capital columns have been prepared
in accordance with the Association of Investment Companies' Statement of
Recommended Practice.
All revenue and capital items in the above statement derive from continuing
operations.
There are no recognised gains or losses other than the results for the year
disclosed above. Accordingly a statement of total recognised gains and losses is
not required.
The difference between the reported return on ordinary activities before tax and
the historical profit is due to the fair value movements on investments. As a
result a note on historical cost profit and losses has not been prepared.
Balance sheet
+---------------------------------------------+----+-------------+-------------+
| | |31 March 2012|31 March 2011|
+---------------------------------------------+----+-------------+-------------+
| |Note|£'000 |£'000 |
+---------------------------------------------+----+-------------+-------------+
| | | | |
| | | | |
|Fixed asset investments |11 |25,945 |25,974 |
| | | | |
| | | | |
| | | | |
|Current assets | | | |
| | | | |
|Trade and other debtors |13 |10 |130 |
| | | | |
|Cash at bank and in hand |17 |2,956 |2,971 |
| | +-------------+-------------+
| | |2,966 |3,101 |
| | | | |
| | | | |
| | | | |
|Creditors: amounts falling due within one |14 |(525) |(314) |
|year | | | |
| | +-------------+-------------+
| | | | |
| | | | |
|Net current assets | |2,441 |2,787 |
| | +-------------+-------------+
| | | | |
| | | | |
|Net assets | |28,386 |28,761 |
| | +-------------+-------------+
| | | | |
| | | | |
|Capital and reserves | | | |
| | | | |
|Called up share capital |15 |19,733 |18,886 |
| | | | |
|Share premium | |1,005 |538 |
| | | | |
|Capital redemption reserve | |1,914 |1,914 |
| | | | |
|Unrealised capital reserve | |(3,067) |(3,871) |
| | | | |
|Treasury shares reserve | |(2,187) |(1,524) |
| | | | |
|Realised capital reserve | |10,087 |10,891 |
| | | | |
|Revenue reserve | |901 |1,927 |
| | +-------------+-------------+
|Total equity shareholders' funds | |28,386 |28,761 |
| | +-------------+-------------+
| | | | |
| | | | |
|Basic and diluted net asset value per share |16 |78.0 |80.5 |
|(pence)* | | | |
+---------------------------------------------+----+-------------+-------------+
* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.
These Financial Statements were approved by the Board of Directors and
authorised for issue on 28 June 2012, and were signed on its behalf by
David Watkins
Chairman
Company number: 3142609
Reconciliation of movements in shareholders' funds
+-------------+-------+-------+----------+----------+--------+--------+--------+--------+-------+
| |Called-|Share |Capital |Unrealised|Special |Treasury|Realised|Revenue |Total |
| |up |premium|redemption|capital |reserve*|shares |capital |reserve*| |
| |share | |reserve |reserve* | |reserve*|reserve*| | |
| |capital| | | | | | | | |
| +-------+-------+----------+----------+--------+--------+--------+--------+-------+
| |£'000 |£'000 |£'000 |£'000 |£'000 |£'000 |£'000 |£'000 |£'000 |
+-------------+-------+-------+----------+----------+--------+--------+--------+--------+-------+
|As at 1 April|18,886 |538 |1,914 |(3,871) |- |(1,524) |10,891 |1,927 |28,761 |
|2011 | | | | | | | | | |
| | | | | | | | | | |
|(Loss)/return|- |- |- |(13) |- |- |13 |745 |745 |
|for the | | | | | | | | | |
|period | | | | | | | | | |
| | | | | | | | | | |
|Transfer of |- |- |- |817 |- |- |(817) |- |- |
|previously | | | | | | | | | |
|unrealised | | | | | | | | | |
|losses on | | | | | | | | | |
|disposal of | | | | | | | | | |
|investments | | | | | | | | | |
| | | | | | | | | | |
|Purchase of |- |- |- |- |- |(663) |- |- |(663) |
|own treasury | | | | | | | | | |
|shares | | | | | | | | | |
| | | | | | | | | | |
|Issue of |847 |467 |- |- |- |- |- |- |1,314 |
|equity (net | | | | | | | | | |
|of costs) | | | | | | | | | |
| | | | | | | | | | |
|Net dividends|- |- |- |- |- |- |- |(1,771) |(1,771)|
|paid (note 9)| | | | | | | | | |
+-------------+-------+-------+----------+----------+--------+--------+--------+--------+-------+
|As at 31 |19,733 |1,005 |1,914 |(3,067) |- |(2,187) |10,087 |901 |28,386 |
|March 2012 | | | | | | | | | |
+-------------+-------+-------+----------+----------+--------+--------+--------+--------+-------+
+-------------+-------+-------+----------+----------+--------+--------+--------+--------+-------+
| |Called-|Share |Capital |Unrealised|Special |Treasury|Realised|Revenue |Total |
| |up |premium|redemption|capital |reserve*|shares |capital |reserve*| |
| |share | |reserve |reserve* | |reserve*|reserve*| | |
| |capital| | | | | | | | |
| +-------+-------+----------+----------+--------+--------+--------+--------+-------+
| |£'000 |£'000 |£'000 |£'000 |£'000 |£'000 |£'000 |£'000 |£'000 |
+-------------+-------+-------+----------+----------+--------+--------+--------+--------+-------+
|As at 1 April|18,050 |69 |1,914 |(4,599) |13,236 |(1,032) |(295) |1,057 |28,400 |
|2010 | | | | | | | | | |
| | | | | | | | | | |
|Return/(loss)|- |- |- |707 |- |- |(305) |870 |1,272 |
|for the | | | | | | | | | |
|period | | | | | | | | | |
| | | | | | | | | | |
|Transfer of |- |- |- |21 |- |- |(21) |- |- |
|previously | | | | | | | | | |
|unrealised | | | | | | | | | |
|losses on | | | | | | | | | |
|disposal of | | | | | | | | | |
|investments | | | | | | | | | |
| | | | | | | | | | |
|Purchase of |- |- |- |- |- |(492) |- |- |(492) |
|own treasury | | | | | | | | | |
|shares | | | | | | | | | |
| | | | | | | | | | |
|Issue of |836 |469 |- |- |- |- |- |- |1,305 |
|equity (net | | | | | | | | | |
|of costs) | | | | | | | | | |
| | | | | | | | | | |
|Dividends |- |- |- |- |- |- |- |(1,724) |(1,724)|
|paid | | | | | | | | | |
| | | | | | | | | | |
|Transfer from|- |- |- |- |(11,512)|- |11,512 |- |- |
|Special | | | | | | | | | |
|reserve to | | | | | | | | | |
|realised | | | | | | | | | |
|capital | | | | | | | | | |
|reserve | | | | | | | | | |
| | | | | | | | | | |
|Transfer from|- |- |- |- |(1,724) |- |- |1,724 |- |
|Special | | | | | | | | | |
|reserve to | | | | | | | | | |
|Revenue | | | | | | | | | |
|reserve | | | | | | | | | |
+-------------+-------+-------+----------+----------+--------+--------+--------+--------+-------+
|As at 31 |18,886 |538 |1,914 |(3,871) |- |(1,524) |10,891 |1,927 |28,761 |
|March 2011 | | | | | | | | | |
+-------------+-------+-------+----------+----------+--------+--------+--------+--------+-------+
* Included within the aggregate of these reserves is an amount of £5,734,000
(2011: £7,423,000) which is considered distributable.
Cash flow statement
+---------------------------------------------+----+-------------+-------------+
| | |Year ended |Year ended |
| | |31 March 2012|31 March 2011|
+---------------------------------------------+----+-------------+-------------+
| |Note|£'000 |£'000 |
+---------------------------------------------+----+-------------+-------------+
|Operating activities | | | |
| | | | |
|Investment income received | |1,244 |1,285 |
| | | | |
|Deposit interest received | |37 |19 |
| | | | |
|Investment management fees paid | |(571) |(601) |
| | | | |
|Other cash payments | |(261) |(203) |
| | +-------------+-------------+
|Net cash flow from operating activities |18 |449 |500 |
| | | | |
| | | | |
| | | | |
|Taxation | | | |
| | | | |
|UK corporation tax received | |205 |379 |
| | | | |
| | | | |
| | | | |
|Capital expenditure and financial investments| | | |
| | | | |
|Purchase of fixed asset investments | |(2,618) |(2,365) |
| | | | |
|Disposal of fixed asset investments | |3,000 |3,280 |
| | +-------------+-------------+
|Net cash flow from investing activities | |382 |915 |
| | | | |
| | | | |
| | | | |
|Equity dividends paid (net of costs of | |(1,635) |(1,644) |
|issuing shares under the Dividend | | | |
|Reinvestment Scheme and unclaimed dividends) | | | |
| | +-------------+-------------+
|Net cash flow before financing | |(599) |150 |
| | +-------------+-------------+
| | | | |
| | | | |
|Financing | | | |
| | | | |
|Purchase of own shares |15 |(663) |(492) |
| | | | |
|Issue of share capital (net of costs) | |1,247 |1,210 |
| | +-------------+-------------+
|Net cash flow from financing | |584 |718 |
| | +-------------+-------------+
| | | | |
| | +-------------+-------------+
|Cash flow in the year |17 |(15) |868 |
+---------------------------------------------+----+-------------+-------------+
Notes to the Financial Statements
1. Accounting convention
The Financial Statements have been prepared in accordance with the historical
cost convention, modified to include the revaluation of investments, in
accordance with applicable United Kingdom law and accounting standards and with
the Statement of Recommended Practice "Financial Statements of Investment Trust
Companies and Venture Capital Trusts" ("SORP") issued by The Association of
Investment Companies ("AIC") in January 2009. Accounting policies have been
applied consistently in current and prior periods.
2. Accounting policies
Investments
Unquoted equity investments, debt issued at a discount and convertible bonds
In accordance with FRS 26 "Financial Instruments Recognition and Measurement",
unquoted equity, debt issued at a discount and convertible bonds are designated
as fair value through profit or loss ("FVTPL"). Fair value is determined by the
Directors in accordance with the International Private Equity and Venture
Capital Valuation Guidelines (IPEVCV guidelines).
Desk top reviews are carried out by independent RICS qualified surveyors by
updating previously prepared full valuations for current trading and market
indices. Full valuations are prepared by similarly qualified surveyors, but in
full compliance with the RICS Red Book.
Fair value movements and gains and losses arising on the disposal of investments
are reflected in the capital column of the Income statement in accordance with
the AIC SORP; realised gains or losses on the sale of investments will be
reflected in the realised capital reserve; and unrealised gains or losses
arising from the revaluation of investments will be reflected in the unrealised
capital reserve.
Warrants and unquoted equity derived instruments
Warrants and unquoted equity derived instruments are only valued if there is
additional value to the Company in exercising or converting as at the balance
sheet date. Otherwise these instruments are held at nil value. The valuation
techniques used are those used for the underlying equity investment.
Unquoted loan stock
Unquoted loan stock (excluding convertible bonds and debt issued at a discount)
is classified as loans and receivables as permitted by FRS 26 and measured at
amortised cost using the effective interest rate method ("EIR") less impairment.
Movements in respect of capital provisions are reflected in the capital column
of the Income statement and are reflected in the realised capital reserve
following sale, or in the unrealised capital reserve on impairment arising from
revaluations of the fair value of the security.
For all unquoted loan stock, fully performing, renegotiated, past due and
impaired, the Board considers that the fair value is equal to or greater than
the security value of these assets. For unquoted loan stock, the amount of the
impairment is the difference between the asset's cost and the present value of
estimated future cash flows, discounted at the original effective interest rate.
The future cash flows are estimated based on the fair value of the security held
less estimated selling costs.
Investments are recognised as financial assets on legal completion of the
investment contract and are de-recognised on legal completion of the sale of an
investment.
Dividend income is not recognised as part of the fair value movement of an
investment, but is recognised separately as investment income through the
revenue reserve when a share becomes ex-dividend.
Loan stock accrued interest is recognised in the Balance sheet as part of the
carrying value of the loans and receivables at the end of each reporting period.
In accordance with the exemptions under FRS 9 "Associates and joint ventures",
those undertakings in which the Company holds more than 20 per cent. of the
equity as part of an investment portfolio are not regarded as associated
undertakings.
Investment income
Unquoted equity income
Dividend income is included in revenue when the investment is quoted ex-
dividend.
Unquoted loan stock and other preferred income
Fixed returns on non-equity shares and debt securities are recognised on a time
apportionment basis using the effective interest rate over the life of the
financial instrument. Income which is not capable of being received within a
reasonable period of time is reflected in the capital value of the investment.
Bank interest income
Interest income is recognised on an accrual basis using the rate of interest
agreed with the bank.
Investment management fees and other expenses
All expenses have been accounted for on an accruals basis. Expenses are charged
through the revenue account except the following which are charged through the
realised capital reserve:
75 per cent. of management fees are allocated to the capital account to the
extent that these relate to an enhancement in the value of the investments and
in line with the Board's expectation that over the long term 75 per cent. of the
Company's investment returns will be in the form of capital gains; and
expenses which are incidental to the purchase or disposal of an investment.
Total recurring expenses including management fees and excluding performance
fees will not exceed 3.5 per cent. of net asset value of the Company at year
end.
Performance incentive fee
In the event that a performance incentive fee crystallises, the fee will be
allocated between revenue and realised capital reserves based upon the
proportion to which the calculation of the fee is attributable to revenue and
capital returns.
Taxation
Taxation is applied on a current basis in accordance with FRS 16 "Current tax".
Taxation associated with capital expenses is applied in accordance with the
SORP. In accordance with FRS 19 "Deferred tax", 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. Deferred tax assets are recognised to the
extent that it is regarded as more likely than not that they will be recovered.
The Directors have considered the requirements of FRS 19 and do not believe that
any provision for deferred tax should be made.
Reserves
Share premium account
This reserve accounts for the difference between the price paid for shares and
the nominal value of the shares, less issue costs and transfers to the Special
reserve.
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is
diminished through the repurchase and cancellation of the Company's own shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at the year end
against cost are included in this reserve.
Treasury shares reserve
This reserve accounts for amounts by which the distributable reserves of the
Company are diminished through the repurchase of the Company's own shares for
treasury.
Realised capital reserve
The following are disclosed in this reserve:
gains and losses compared to cost on the realisation of investments;
expenses, together with the related taxation effect, charged in accordance with
the above policies; and
dividends paid to equity holders.
Dividends
In accordance with FRS 21 "Events after the balance sheet date", dividends
declared by the Company are accounted for in the period in which the dividend
has been paid or approved by shareholders in an Annual General Meeting.
3. Gains on investments
Year ended 31 March Year ended 31 March
2012 2011
£'000 £'000
-------------------------------------------------------------------------------
Unrealised gains on fixed asset 782 725
investments held at fair value
through profit or loss
Impairments on fixed asset (795) (18)
investments held at amortised
cost
----------------------------------------------
Unrealised (losses)/gains sub (13) 707
total
----------------------------------------------
283 8
Realised gains on fixed asset
investments held at fair value
through profit or loss
Realised gains/(losses) on fixed 40 (15)
asset investments held at
amortised cost
----------------------------------------------
Realised gains/(losses) sub- 323 (7)
total
----------------------------------------------
310 700
----------------------------------------------
Investments measured at amortised cost are unquoted loan stock investments as
described in note 2.
4. Investment income
Year ended 31 March Year ended 31 March
2012 2011
£'000 £'000
-------------------------------------------------------------------------------
Income recognised on
investments held at fair value
through profit or loss
Income from convertible bonds 22 -
and discounted debt
Other income - 13
------------------------------------------------
22 13
------------------------------------------------
Income recognised on
investments held at amortised
cost
Return on loan stock 1,250 1,266
investments
Bank deposit interest 42 21
------------------------------------------------
1,292 1,287
------------------------------------------------
1,314 1,300
------------------------------------------------
Interest income earned on impaired investments at 31 March 2012 amounted to
£323,000 (2011: £276,000). These investments are all held at amortised cost.
5. Investment management fees
Year ended 31 March Year ended 31 March
2012 2011
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
----------------------------------------------------------------------
143 428 571 141 424 565
Investment management fee
--------------------------------------------
Further details of the Management agreement under which the investment
management fee is paid are shown in the Directors' report in the full Annual
Report and Financial Statements
6. Other expenses
Year ended 31 March Year ended 31 March
2012 2011
£'000 £'000
-------------------------------------------------------------------------------
Directors' fees (including VAT 87 94
and NIC)
Secretarial and administration 44 41
fee
Other administrative expenses 68 76
Tax services 16 15
Auditor's remuneration for 23 22
statutory audit services (exc.
VAT)
----------------------------------------------
238 248
----------------------------------------------
7. Directors' fees
The amounts paid to Directors during the year are as follows:
Year ended 31 March 2012 Year ended 31 March
2011
£'000 £'000
-------------------------------------------------------------------------------
Directors' fees 80 86
National insurance and/or VAT 7 8
-------------------------------------------------
87 94
-------------------------------------------------
Further information regarding Directors' remuneration can be found in the
Directors' remuneration report in the full Annual Report and Financial
Statements.
8. Tax (charge)/credit on ordinary activities
Year ended 31 March Year ended 31 March
2012 2011
Revenue Revenue Capital
£'000 Capital Total £'000 £'000 Total
£'000 £'000 £'000
-------------------------------------------------------------------------------
(234) 118 (116) (245) 126 (119)
UK corporation tax in respect of
current year
UK corporation tax in respect of 46 - 46 204 - 204
prior year
--------------------------------------------
(188) 118 (70) (41) 126 85
--------------------------------------------
Factors affecting the tax charge:
Year ended Year ended
31 March 2012 31 March 2011
£'000 £'000
--------------------------------------------------------------------------
815 1,187
Return on ordinary activities before taxation
----------------------------
Tax on profit at the standard rate (26%) (212) (333)
Factors affecting the charge:
Non-taxable gains 81 197
Consortium relief in respect of prior years 46 204
Marginal relief 15 17
----------------------------
(70) 85
----------------------------
The tax charge/(credit) for the year shown in the Income statement is lower than
the standard rate of corporation tax in the UK of 26 per cent. (2011: 28 per
cent.). The differences are explained above.
Consortium relief is recognised in the accounts in the period in which the claim
is submitted to HMRC and is shown as tax in respect of prior year.
Notes
(i) Venture Capital Trusts are not subject to corporation tax on capital
gains.
(ii) Tax relief on expenses charged to capital has been determined by
allocating tax relief to expenses by reference to the applicable corporation tax
rate and allocating the relief between revenue and capital in accordance with
the SORP.
(iii) No deferred tax asset or liability has arisen in the year.
9. Dividends
Year ended Year ended
31 March 31 March 2011
2012 £'000
£'000
-------------------------------------------------------------------------------
First dividend paid on 25 June 2010 - 2.5 pence - 867
per share
Second dividend paid on 31 December 2010 - 2.5 - 857
pence per share
First dividend paid 29 July 2011 - 2.5 pence per 897 -
share
Second dividend paid 30 December 2011 - 2.5 888 -
pence per share
Unclaimed dividends (14)
----------------------------
1,771 1,724
----------------------------
In addition to the dividends summarised above, the Board has declared a first
dividend for the year ending 31 March 2013 of 2.5 pence per share. This dividend
will be paid on 27 July 2012 to shareholders on the register as at 2 July 2012.
The total dividend will be approximately £930,000.
During the year, unclaimed dividends older than twelve years of £14,000 (2011:
£nil) were returned to the Company in accordance with the terms of the Articles
of Association.
10. Basic and diluted return per share
Year ended 31 March 2012 Year ended 31 March 2011
Revenue Revenue Capital
Capital Total Total
-------------------------------------------------------------------------------
The return per share
has been based on
the following
figures:
Return attributable 745 - 745 870 402 1,272
to equity shares
(£'000)
Weighted average 34,764,240
shares in issue 35,974,300
(excluding treasury
shares)
Return attributable 2.1 - 2.1 2.5 1.2 3.7
per equity share
(pence)
----------------------------------------------------------
The weighted average number of shares is calculated excluding treasury shares of
3,079,373 (2011: 2,043,273).
There are no convertible instruments, derivatives or contingent share agreements
in issue, and therefore no dilution affecting the return per share. The basic
return per share is therefore the same as the diluted return per share.
11. Fixed asset investments
31 March 2012 31 March 2011
£'000 £'000
-------------------------------------------------------------------------------
Unquoted equity investments at fair value through 8,490 7,792
profit or loss
Discounted debt and convertible loan stock at fair 1,315 119
value through profit or loss
Preference share investments at fair value through - 439
profit or loss
Unquoted loan stock investments measured at 16,140 17,624
amortised cost
----------------------------
25,945 25,974
----------------------------
£'000
-------------------------------------------------------------------------------
Opening valuation 25,974
Purchases at cost 2,635
Disposal proceeds (3,012)
Realised gains 323
Movement in loan stock accrued income 38
Unrealised loss (13)
--------
Closing valuation 25,945
--------
Movement in loan stock accrued income
Opening accumulated movement in loan stock accrued income 160
Movement in loan stock accrued income 38
--------
Closing accumulated movement in loan stock accrued income 198
--------
Movement in unrealised losses
Opening accumulated unrealised losses (3,871)
Transfer of previously unrealised losses to realised reserve 817
on disposal of investments
Movement in unrealised gains/reversal of impairments (13)
--------
Closing accumulated unrealised losses (3,067)
--------
Historic cost basis
Opening book cost 29,685
Purchases at cost 2,635
Sales at cost (3,506)
--------
Closing book cost 28,814
--------
Fixed asset investments held at fair value through the profit or loss account
total £9,805,000 (2011: £8,350,000). Investments held at amortised cost total
£16,140,000 (2011: £17,624,000).
The amounts shown for the purchase and disposal of fixed assets included in the
cash flow statement differ from the amounts shown above due to investment
settlement debtors and creditors.
Unquoted loan stock investments (excluding debt issued at a discount) are
measured at amortised cost. Loan stocks using a fixed interest rate total
£16,076,000 (2011: £17,624,000). Loan stocks with a floating rate of interest
total £64,000 (2011: £60,000).
The Directors believe that the carrying value of loan stock measured at
amortised cost is not materially different to fair value.
The Company does not hold any assets as the result of the enforcement of
security during the period, and believes that the carrying values for both
impaired and past due assets are covered by the value of security held for these
loan stock investments.
Unquoted equity investments and convertible and discounted debts are valued in
accordance with the IPEVCV guidelines as follows:
31 March 2012 31 March 2011
Valuation methodology £'000 £'000
-------------------------------------------------------------------------------
1,909 1,513
Cost (reviewed for impairment)
Net asset value supported by independent desktop 23 54
reviews
Net asset value supported by third party valuation 7,873 6,783
----------------------------
9,805 8,350
----------------------------
There have been no changes in valuation methodologies of unquoted equity
investments between 31 March 2011 and 31 March 2012.
The valuation method used will be the most appropriate valuation methodology for
an investment within its market, with regard to the financial health of the
investment and the September 2009 IPEVCV Guidelines. The Directors believe that,
within these parameters, there are no other reasonable methods of valuation
which would be reasonable as at 31 March 2012.
The amended FRS 29 'Financial Instruments: Disclosures' requires the Company to
disclose the valuation methods applied to its investments measured at fair value
through profit or loss in a fair value hierarchy according to the following
definitions:
+--------------------+---------------------------------------------------------+
|Fair value hierarchy|Definition of valuation method |
+--------------------+---------------------------------------------------------+
|Level 1 |Unadjusted quoted (bid) prices applied |
| | |
+--------------------+---------------------------------------------------------+
|Level 2 |Inputs to valuation are from observable sources and are |
| |directly or indirectly derived from prices |
| | |
+--------------------+---------------------------------------------------------+
|Level 3 |Inputs to valuations not based on observable market data.|
| | |
+--------------------+---------------------------------------------------------+
Unquoted equity, preference share and convertible and discounted bond
investments are all valued according to Level 3 valuation methods.
Unquoted equity investments, debt issued at a discount and convertible bonds
valued at fair value through profit or loss (level 3) had the following
movements in the year to 31 March 2012:
Equity 31 March 2012 Equity 31 March 2011
Convertible and Total Convertible Total
discounted and discounted
bonds bonds
£'000 £'000 £'000 £'000 £'000 £'000
-------------------------------------------------------------------------------
Opening 8,231 119 8,350 7,684 - 7,684
balance
Additions 720 797 1,517 787 79 866
Disposal (1,127) - (1,127) (933) - (933)
proceeds
Realised gains 283 - 283 (2) 10 8
Unrealised 383 399 782 695 30 725
gains
------------------------------------------------------------
Closing 8,490 1,315 9,805 8,231 119 8,350
balance
------------------------------------------------------------
FRS 29 requires the Directors to consider the impact of changing one or more of
the inputs used as part of the valuation process to reasonable possible
alternative assumptions. After due consideration and noting that the valuation
methodology applied to 100 per cent. of the equity investments (by valuation) is
based on cost or independent third party market information, the Directors do
not believe that changes to reasonable possible alternative assumptions for the
valuation of the portfolio as a whole would lead to a significant change in the
fair value of the portfolio.
12. Significant interests
The principal activity of the Company is to select and hold a portfolio of
investments in unquoted securities. Although the Company, through the Manager,
will, in some cases, be represented on the board of the investee company, it
will not take a controlling interest or become involved in the management. The
size and structure of the companies with unquoted securities may result in
certain holdings in the portfolio representing a participating interest without
there being any partnership, joint venture or management consortium agreement.
The Company has interests of greater than 20 per cent. of the nominal value of
any class of the allotted shares in the investee companies as at 31 March 2012
as described below:
Company Country of Principal activity % class and
incorporation voting rights
-------------------------------------------------------------------------------
City Screen Great Britain Art house cinema 50.0% Ordinary
(Cambridge) Limited shares
G&K Smart Great Britain Residential 42.9% Ordinary
Developments VCT property developer shares
Limited
Kew Green VCT Great Britain Hotel owner and 28.2% Ordinary
(Stansted) Limited operator shares
The Bear Hungerford Great Britain Hotel owner and 26.2% Ordinary
Limited operator shares
The Stanwell Hotel Great Britain Hotel owner and 24.6% Ordinary
Limited operator shares
Oakland Care Centre Great Britain Care home 21.1% Ordinary
Limited shares
The investments listed above are held as part of an investment portfolio, and
therefore, as permitted by FRS 9, they are measured at fair value and not
accounted for using the equity method.
13. Current assets
31 March 2012 31 March 2011
Trade and other debtors £'000 £'000
-----------------------------------------------------------------
10 9
Prepayments and accrued income
UK corporation tax receivable - 99
Other debtors - 22
--------------------------------
10 130
--------------------------------
The Directors consider that the carrying amount of debtors is not materially
different to their fair value.
14. Creditors: amounts falling due within one year
31 March 2012 31 March 2011
£'000 £'000
---------------------------------------------------------------
Trade creditors 31 3
UK Corporation tax payable 175 -
Accruals and deferred income 319 311
--------------------------------
525 314
--------------------------------
The Directors consider that the carrying amount of creditors is not materially
different to their fair value.
15. Called up share capital
31 March 2012 31 March 2011
£'000 £'000
-------------------------------------------------------------------------------
Allotted, called up and fully paid
39,467,119 Ordinary shares of 50p each (2011: 37,772,181) 19,733 18,886
--------------
Shares in issue
36,387,746 Ordinary shares of 50p each (net of treasury shares)
(2011: 35,728,908)
The Company purchased 1,036,100 Ordinary shares (2011: 739,995) to be held in
treasury at a cost of £663,000 (2011: £492,000) representing 2.8 per cent of the
shares in issue (excluding treasury shares) as at 31 March 2012. The shares
purchased for treasury were funded from the Treasury shares reserve.
The Company holds a total of 3,079,373 shares (2011: 2,043,273) in treasury,
representing 7.8 per cent. of the Ordinary share capital in issue as at 31 March
2012.
Under the terms of the Dividend Reinvestment Scheme Circular dated 10 July
2008, the following Ordinary shares of nominal value 50 pence were allotted
during the year:
Date of Number of Aggregate Net Opening
allotment shares nominal consideration Issue price incl. market
allotted value of received issue price per
shares costs share on
(pence per allotment
date
£'000 £'000 share) (pence
per
share)
-------------------------------------------------------------------------------
29 July 64,021 32 41 78.0 66.0
2011
30 66,479 33 47 77.0 66.5
December
2011
-------------------------------------
130,500 65 88
-------------------------------------
During the year the following Ordinary shares of nominal value 50 pence were
allotted under the Albion VCT's Linked Top Up Offers:
Date of Number of Aggregate Net Opening
allotment shares nominal consideration Issue price market
allotted value of received incl. issue price per
shares costs share on
(pence per allotment
date
£'000 £'000 share) (pence per
share)
-------------------------------------------------------------------------------
5 April 514,084 257 404 83.1 60.0
2011
16 May 2011 43,662 22 34 83.1 61.0
10 January 489,770 245 378 81.5 66.5
2012
20 March 516,922 258 410 83.8 66.5
2012
-----------------------------------------
1,564,438 782 1,226
-----------------------------------------
16. Basic and diluted net asset values per share
31 March 2012 31 March 2011
-------------------------------------------------------------------------------
Basic and diluted net asset values per share 78.0 80.5
(pence)
----------------------------
The basic and diluted net asset values per share at the year end are calculated
in accordance with the Articles of Association and are based upon total shares
in issue (less treasury shares) of 36,387,746 Ordinary shares (2011:
35,728,908).
There are no convertible instruments, derivatives or contingent share agreements
in issue.
17. Analysis of changes in cash during the year
Year ended 31 March 2012 Year ended 31 March 2011
£'000 £'000
-------------------------------------------------------------------------------
Opening cash balances 2,971 2,103
Net cash flow (15) 868
---------------------------------------------------------
Closing cash balances 2,956 2,971
---------------------------------------------------------
18. Reconciliation of net return on ordinary activities before taxation to net
cash flow from operating activities
Year ended 31 March 2012 Year ended 31 March
2011
£'000 £'000
-------------------------------------------------------------------------------
Revenue return on ordinary 933 911
activities before taxation
Investment management fee (428) (424)
charged to capital
Movement in accrued amortised (38) 20
loan stock interest
Increase in debtors (1) (29)
Increase in creditors (17) 22
-------------------------------------------------
Net cash flow from operating 449 500
activities
-------------------------------------------------
19. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in note 15. The
Company is permitted to buy-back its own shares for cancellation or treasury
purposes, and this is described in more detail in the Chairman's statement.
The Company's financial instruments comprise equity and loan stock investments
in unquoted companies, cash balances and short term debtors and creditors which
arise from its operations. The main purpose of these financial instruments is to
generate cashflow and revenue and capital appreciation for the Company's
operations. The Company has no gearing or other financial liabilities apart from
short term creditors. The Company does not use any derivatives for the
management of its balance sheet within the full Annual Report and Financial
Statements.
The principal risks arising from the Company's operations are:
Investment (or market) risk (which comprises investment price and cash flow
interest rate risk);
credit risk; and
liquidity risk.
The Board regularly reviews and agrees policies for managing each of these
risks. There have been no changes in the nature of the risks that the Company
has faced during the past year and, apart from where noted below, there have
been no changes in the objectives, policies or processes for managing risks
during the past year. The key risks are summarised below.
Investment risk
As a venture capital trust, it is the Company's specific nature to evaluate and
control the investment risk of its portfolio in unquoted investments, details of
which are shown on pages 11 to12 of the full Annual Report and Financial
Statements. Investment risk is the exposure of the Company to the revaluation
and devaluation of investments. The main driver of investment risk is the
operational and financial performance of the investee company and the dynamics
of market quoted comparators. The Manager receives management accounts from
investee companies, and members of the investment management team often sit on
the boards of unquoted investee companies; this enables the close
identification, monitoring and management of investment risk.
The Manager and the Board formally review investment risk (which includes market
price risk), both at the time of initial investment and at quarterly Board
meetings.
The Board monitors the prices at which sales of investments are made to ensure
that profits to the Company are maximised, and that valuations of investments
retained within the portfolio appear sufficiently prudent and realistic compared
to prices being achieved in the market for sales of unquoted investments.
The maximum investment risk as at the balance sheet date is the value of the
fixed investment portfolio which is £25,945,000 (2011: £25,974,000). Fixed
asset investments form 91.4 per cent. of the net asset value as at 31 March
2012 (2011: 90.3 per cent.).
More details regarding the classification of fixed asset investments are shown
in note 11.
Investment price risk
Investment price risk is the risk that the fair value of future investment cash
flows will fluctuate due to factors specific to an investment instrument or to a
market in similar instruments. To mitigate the investment price risk for the
Company as a whole, the strategy of the Company is to invest in a broad spread
of industries with approximately two-thirds of the unquoted investments
comprising debt securities, which, owing to the structure of their yield and the
fact that they are usually secured, have a lower level of price volatility than
equity. Details of the industries in which investments have been made are
contained in the Portfolio of investments section on pages 11 and 12 of the full
Annual Report and Financial Statements and in the Manager's report.
Valuations are based on the most appropriate valuation methodology for an
investment within its market, with regard to the financial
health of the investment and the IPEVCV Guidelines.
As required under FRS 29 "Financial Instruments: Disclosures", the Board is
required to illustrate by way of a sensitivity analysis the degree of exposure
to market risk. The Board considers that the value of the fixed asset investment
portfolio is sensitive to a 10 per cent. change based on the current economic
climate. The impact of a 10 per cent. change has been selected as this is
considered reasonable given the current level of volatility observed both on a
historical basis and future expectations.
The sensitivity of a 10 per cent. increase or decrease in the valuation of the
fixed and current asset investments (keeping all other variables constant) would
increase or decrease the net asset value and return for the year by £2,595,000
(2011: £2,597,000).
Cash flow interest rate risk
It is the Company's policy to accept a degree of interest rate risk on its
financial assets through the effect of interest rate changes. On the basis of
the Company's analysis, it is estimated that a rise of one percentage point in
all interest rates would have increased total return before tax for the year by
approximately £24,000 (2011: £13,000). Furthermore, it is considered that a fall
of interest rates below current levels during the year would have been very
unlikely.
The weighted average interest rate applied to the Company's fixed rate assets
during the year was approximately 6.4 per cent. (2011: 6.3 per cent.). The
weighted average period to maturity for the fixed rate assets is approximately
2.6 years (2011: 2.2 years).
The Company's financial assets and liabilities as at 31 March 2012, all
denominated in pounds sterling, consist of the following:
31 March 2012 31 March 2011
Floating Non- Total Floating Non- Total
Fixed rate interest £'000 Fixed rate interest £'000
rate £'000 bearing rate £'000 bearing
£'000 £'000 £'000 £'000
-------------------------------------------------------------------------------
- - 8,490 8,490 - - 8,231 8,231
Unquoted
equity
Convertible - - 1,315 1,315 - - 119 119
and
discounted
bonds
Unquoted 16,076 64 - 16,140 17,624 - - 17,624
loan stock
Debtors * 8 8 - - 25 25
Current (350) (350) - - (314) (314)
liabilities
Cash 1,479 1,477 - 2,956 1,874 1,097 - 2,971
------------------------------------------------------------------
Total net 17,555 1,541 9,463 28,559 19,498 1,097 8,061 28,656
assets
------------------------------------------------------------------
* The debtors and current liabilities do not reconcile to the balance sheet as
prepayments and tax payable are not included in the above table.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into with the
Company. The Company is exposed to credit risk through its debtors, investment
in unquoted loan stock, and through the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock prior to investment, and as part
of its ongoing monitoring of investments. In doing this, it takes into account
the extent and quality of any security held. Typically loan stock instruments
have a first fixed charge or a fixed and floating charge over the assets of the
investee company in order to mitigate the gross credit risk. The Manager
receives management accounts from investee companies, and members of the
investment management team often sit on the boards of unquoted investee
companies; this enables the close identification, monitoring and management of
investment specific credit risk.
The Manager and the Board formally review credit risk (including debtors) and
other risks, both at the time of initial investment and at quarterly Board
meetings.
The Company's total gross credit risk as at 31 March 2012 was limited to
£17,455,000 (2011: £17,743,000) of unquoted loan stock instruments (all of which
is secured on the assets of the investee company), £2,956,000 cash deposits with
banks (2011: £2,971,000) and £10,000 debtors (2011: £130,000).
The credit risk profile of unquoted loan stock is described under liquidity risk
below.
The cost, impairment and carrying value of impaired loan stocks held at
amortised cost at 31 March 2012 and 31 March 2011 are as follows:
31 March 2012 31 March 2011
Cost Impairment Carrying value Cost Impairment Carrying value
£'000 £'000 £'000 £'000 £'000 £'000
-------------------------------------------------------------------------------
Impaired loan 9,104 (2,345) 6,759 6,166 (1,454) 4,712
stock
Impaired loan stock instruments have a first fixed charge or a fixed and
floating charge over the assets of the investee company and the Board consider
the security value to be the carrying value.
As at the balance sheet date, the cash held by the Company is held with the
Royal Bank of Scotland plc, Lloyds TSB Bank Plc, Barclays Bank plc and Scottish
Widows Bank plc. Credit risk on cash transactions is mitigated by transacting
with counterparties that are regulated entities subject to regulatory
supervision, with Moody's credit ratings of at least 'A' or equivalent as
assigned by international credit-rating agencies.
The Company has an informal policy of limiting counterparty banking and floating
rate note exposure to a maximum of 20 per cent. of net asset value for any one
counterparty.
Liquidity risk
Liquid assets are held as cash on current, deposit or short term money market
accounts. Under the terms of its Articles, the Company has the ability to borrow
up to 10 per cent. of its adjusted capital and reserves of the latest published
audited balance sheet, which amounts to £2,842,000 as at 31 March 2012 (2011:
£2,876,000).
The Company has no committed borrowing facilities as at 31 March 2012 (2011:
£nil) and had cash balances of £2,956,000 (2011: £2,971,000). The main cash
outflows are for new investments, buy-back of shares and dividend payments,
which are within the control of the Company. The Manager formally reviews the
cash requirements of the Company on a monthly basis, and the Board on a
quarterly basis as part of its review of management accounts and forecasts. All
the Company's financial liabilities are short term in nature and total £490,000
for the year to 31 March 2012 (2011: £314,000).
The carrying value of loan stock investments at 31 March 2012 as analysed at
each year end by expected maturity dates is as follows:
Redemption date Fully performing loan Impaired loan stock Past due Total
stock £'000 £'000 £'000
£'000
-------------------------------------------------------------------------------
1,326 788 - 2,114
Less than one year
1-2 years 2,782 4,041 1,797 8,620
2-3 years 249 1,623 701 2,573
3-5 years 2,777 307 781 3,865
5+ years - - 283 283
-------------------------------------------------------------------------------
Total 7,134 6,759 3,562 17,455
-------------------------------------------------------------------------------
Loan stock categorised as past due includes:
Loan stock valued at £24,000 yielding 14% and loan stock valued at £265,000
yielding 6.6% which has capital past due by 12 months;
Loan stock valued at £181,000 yielding 14%, loan stock valued at £675,000
yielding 8% and loan stock valued at £802,000 yielding 6.6% all of which has
capital past due between 15 and 26 months;
Loan stock valued at £1,095,000 has interest overdue less than 3 months
Loan stock valued at £250,000 which has interest overdue by 5 months; and
Loan stock valued at £270,000 which has capital overdue by six years.
The carrying value of loan stock investments held at amortised cost at 31 March
2011 as analysed by expected maturity dates is as follows:
Redemption date Fully Renegotiated loan Impaired Past due Total
performing loan stock loan stock £'000 £'000
stock £'000 £'000
£'000
-------------------------------------------------------------------------------
971 1,287 922 460 3,640
Less than one
year
1-2 years 34 - 1,068 950 2,052
2-3 years 668 - 1,452 5,195 7,315
3-5 years 1,749 - 1,270 1,598 4,617
---------------------------------------------------------------
Total 3,422 1,287 4,712 8,203 17,624
---------------------------------------------------------------
In view of the information shown, the Board considers that the Company is
subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Company's financial assets and liabilities as at 31 March 2012 are
stated at fair value as determined by the Directors, with the exception of loans
and receivables included within investments, cash, debtors and creditors which
are carried at amortised cost, as permitted by FRS 26. The Directors believe
that the current carrying value of loan stock is not materially different to the
fair value. There are no financial liabilities other than creditors. The
Company's financial liabilities are all non-interest bearing. It is the
Directors' opinion that the book value of the financial liabilities is not
materially different to the fair value and all are payable within one year.
20. Commitments and contingencies
As at 31 March 2012, the Company was not committed to making any investments.
There are no contingent liabilities or guarantees given by the Company as at 31
March 2012 (31 March 2011: nil).
21. Post balance sheet events
Since 31 March 2012 the Company has had the following post balance sheet events:
* On 16 May 2012, the Company announced that they had reached an agreement in
principle to merge with Albion Prime VCT PLC. Details can be found in the
Chairman's statement
* Investment of £25,000 in Nelson House Hospital Limited
* Investment of £100,000 in Bravo Inns II Limited;
* The following Ordinary shares of nominal value 50 pence per share were
allotted under the Albion VCTs Linked Top Up Offer:
Date of Number of Aggregate Net Issue price Opening
allotment shares nominal consideration incl. issue market
allotted value of received costs price per
shares (pence per share on
allotment
date
£'000 £'000 share) (pence per
share)
-------------------------------------------------------------------------------
5 April 791,924 396 627 83.8 68.50
2012
31 May 88,960 44 71 83.8 65.50
2012
22. Related party transactions
The Manager, Albion Ventures LLP, could be considered to be a related party by
virtue of the fact that it is party to a Management agreement from the Company.
During the year, services of a total value of £615,000 (2011: £606,000), were
purchased by the Company from Albion Ventures LLP; this includes £571,000 (2011:
£565,000) of investment management fee and £44,000 (2011: £41,000)
administration fee (including VAT). At the financial year end, the amount due to
Albion Ventures LLP in respect of these services disclosed within accruals and
deferred income was £169,000 (2011: £170,000).
During the year the Company raised new funds through the Albion VCTs Linked Top
Up Offer as detailed in note 15. The total cost of the issue of these shares was
5.5% of the sums subscribed. Of these costs, an amount of £6,740 (2011: £3,450)
was paid to the Manager, Albion Ventures LLP in respect of receiving agent
services. There were no sums outstanding in respect of receiving agent services
at 31 March 2012.
There are no other related party transactions or balances requiring disclosure.
Principal risks and uncertainties
In addition to the current economic risks outlined in the Chairman's statement,
the Board considers that the Company faces the following major risks and
uncertainties:
Economic risk
Changes in economic conditions, including, for example, interest rates, rates of
inflation, industry conditions, competition, political and diplomatic events and
other factors could substantially and adversely affect the Company's prospects
in a number of ways.
To reduce this risk, in addition to investing equity in portfolio companies, the
Company often invests in secured loan stock and has a policy of not permitting
any external bank borrowings within portfolio companies. Additionally, the
Manager has been rebalancing the sector exposure of the portfolio with a view to
reducing reliance on consumer led sectors.
Investment risk
This is the risk of investment in poor quality assets which reduces the capital
and income returns to shareholders, and negatively impacts on the Company's
reputation. By nature, smaller unquoted businesses, such as those that qualify
for venture capital trust purposes, are more fragile than larger, long
established businesses.
To reduce this risk, the Board places reliance upon the skills and expertise of
the Manager and its strong track record for investing in this segment of the
market. In addition, the Manager operates a formal and structured investment
process, which includes an Investment Committee, comprising investment
professionals from the Manager and at least one external investment
professional. The Manager also invites, and takes account of, comments from non-
executive Directors of the Company on investments discussed at the Investment
Committee meetings. Investments are actively and regularly monitored by the
Manager (investment managers normally sit on investee company boards) and the
Board receives detailed reports on each investment as part of the Manager's
report at quarterly board meetings. It is the policy of the Company for
portfolio companies to not normally have external borrowings.
Valuation risk
The Company's investment valuation method is reliant on the accuracy and
completeness of information that is issued by portfolio companies. In
particular, the Directors may not be aware of or take into account certain
events or circumstances which occur after the information issued by such
companies is reported.
As described in note 2 of the Financial Statements, the unquoted equity
investments, convertible loan stock and debt issued at a discount held by the
Company are designated at fair value through profit or loss and valued in
accordance with the International Private Equity and Venture Capital Valuation
Guidelines. These guidelines set out recommendations, intended to represent
current best practice on the valuation of venture capital investments. These
investments are valued on the basis of forward looking estimates and judgments
about the business itself, its market and the environment in which it operates,
together with the state of the mergers and acquisitions market, stock market
conditions and other factors. In making these judgments the valuation takes into
account all known material facts up to the date of approval of the Financial
Statements by the Board. All other unquoted loan stock is measured at amortised
cost.
4. Venture Capital Trust approval risk
The Company's current approval as a venture capital trust allows investors to
take advantage of tax reliefs on initial investment and ongoing tax free capital
gains and dividend income. Failure to meet the qualifying requirements could
result in investors losing the tax relief on initial investment and loss of tax
relief on any tax-free income or capital gains received. In addition, failure to
meet the qualifying requirements could result in a loss of listing of the
shares.
To reduce this risk, the Board has appointed the Manager, which has a team with
significant experience in venture capital trust management, used to operating
within the requirements of the venture capital trust legislation. In addition,
to provide further formal reassurance, the Board has appointed
PricewaterhouseCoopers LLP as its taxation advisers. PricewaterhouseCoopers LLP
report quarterly to the Board to independently confirm compliance with the
venture capital trust legislation, to highlight areas of risk and to inform on
changes in legislation.
5. Compliance risk
The Company is listed on The London Stock Exchange and is required to comply
with the rules of the UK Listing Authority, as well as with the Companies Act,
Accounting Standards and other legislation. Failure to comply with these
regulations could result in a delisting of the Company's shares, or other
penalties under the Companies Act or from financial reporting oversight bodies.
Board members and the Manager have experience of operating at senior levels
within quoted businesses. In addition, the Board and the Manager receive regular
updates on new regulation from its auditor, lawyers and other professional
bodies.
6. Internal control risk
Failures in key controls, within the Board or within the Manager's business,
could put assets of the Company at risk or result in reduced or inaccurate
information being passed to the Board or to shareholders.
The Audit Committee meets with the Manager's Internal Auditor, Littlejohn LLP,
when required, receiving a report regarding the last formal internal audit
performed on the Manager, and providing the opportunity for the Audit Committee
to ask specific and detailed questions. John Kerr, as Audit Committee Chairman,
met with the internal audit Partner of Littlejohn LLP in January 2012 to discuss
the most recent Internal Audit Report on the Manager. The Manager has a
comprehensive business continuity plan in place in the event that operational
continuity is threatened. Further details regarding the Board's management and
review of the Company's internal controls through the implementation of the
Turnbull guidance are detailed on page 25 of the full Annual Report and
Financial Statements.
Measures are in place to mitigate information risk in order to ensure the
integrity, availability and confidentiality of information used within the
business.
7. Reliance upon third parties risk
The Company is reliant upon the services of Albion Ventures LLP for the
provision of investment management and administrative functions. There are
provisions within the management agreement for the change of Manager under
certain circumstances (for more detail, see the management agreement paragraph
on page 20 of the full Annual Report and Financial Statements). In addition, the
Manager has demonstrated to the Board that there is no undue reliance placed
upon any one individual within Albion Ventures LLP.
8. Financial risks
By its nature, as a venture capital trust, the Company is exposed to investment
risk (which comprises investment price risk and cash flow interest rate risk),
credit risk and liquidity risk. The Company's policies for managing these risks
and its financial instruments are outlined in full in note 19 to the Financial
Statements.
All of the Company's income and expenditure is denominated in sterling and hence
the Company has no foreign currency risk. The Company is financed through equity
and does not have any borrowings. The Company does not use derivative financial
instruments for speculative purposes.
24. Other information
The information set out in this announcement does not constitute the Company's
statutory accounts within the terms of section 434 of the Companies Act 2006 for
the periods ended 31 March 2012 and 31 March 2011, and is derived from
the statutory accounts for those financial years, which have been, or in the
case of the accounts for the year ended 31 March 2012, which will be, delivered
to the Registrar of Companies. The Auditors reported on those accounts; their
reports were unqualified and did not contain a statement under s498 (2) or (3)
of the Companies Act 2006.
The Company's Annual General Meeting will be held at The City of London Club,
19 Old Broad Street, London, EC2N 1DS on 17 September 2012 at 11 am.
25. Publication
The full audited Annual Report and Financial Statements are being sent to
shareholders and copies will be made available to the public at the registered
office of the Company, Companies House, the National Storage Mechanism and also
electronically at www.albion-ventures.co.uk under the 'Our Funds' section, by
clicking on 'Albion Venture Capital Trust PLC', where the Report can be accessed
as a PDF document via a link under the 'Investor Centre' in the 'Financial
Reports and Circulars' section.
SECTOR split for announcement:
http://hugin.info/141809/R/1622815/518692.pdf
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: Albion Venture Capital Trust PLC via Thomson Reuters ONE
[HUG#1622815]
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