TIDMAAVC
Albion Venture Capital Trust PLC
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 2015.
This announcement was approved for release by the Board of Directors on
25 June 2015.
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 2015 (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 2015 will be available as a PDF document via a
link under '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 objective and policy
The investment strategy of Albion Venture Capital Trust PLC (the
"Company") is to manage the risk normally associated with investments in
smaller unquoted companies whilst maintaining an attractive yield,
through allowing investors the opportunity to participate in a balanced
portfolio of asset-backed businesses. The Company's investment portfolio
will thus be structured to provide a balance between income and capital
growth for the longer term.
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;
-- the Company 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 portfolio company. Funds managed or
advised by Albion Ventures LLP typically own 50 per cent. of the equity
of the portfolio company;
-- other than the loan stock issued to funds managed or advised by Albion
Ventures LLP, portfolio 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.
Background to the Company
The Company is a venture capital trust which raised a total of GBP39.7
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 has raised a further
GBP14.5 million under the Albion VCTs Top Up Offers since 2011.
On 25 September 2012, the Company acquired the assets and liabilities of
Albion Prime VCT PLC ("Prime") in exchange for new shares in the
Company. Each Prime shareholder received 0.8801 shares in the Company
for each Prime share that they held at the date of the Merger.
Financial calendar
Record date for first dividend 10 July 2015
Annual General Meeting 11.30am on 31 July
2015
Payment of first dividend 31 July 2015
Announcement of half-yearly results for the six months November 2015
ended 30 September 2015
Payment of second dividend (subject to Board approval) 31 December 2015
Financial highlights
5.3p Basic and diluted total return per share for the year
ended 31 March 2015
5.0p Total tax-free dividend per share paid during the
year ended 31 March 2015
71.6p Net asset value per share as at 31 March 2015
206.4p Net asset value plus dividends since launch to 31
March 2015
7.6% Tax free yield on share price (dividend per annum/share
price as at 31 March 2015)
6.3% Annualised return since launch (without tax relief)
31 March 2015 31 March 2014
(pence per share) (pence per share)
Dividends paid 5.00 5.00
Revenue return 2.07 1.70
Capital return 3.26 0.30
Net asset value 71.62 71.30
Ordinary C shares
Total shareholder return to 31 March 2015 shares (i)
Total dividends paid during the year ended : 31 March
1997 2.00 -
31 March 1998 5.20 2.00
31 March 1999 11.05 8.75
31 March 2000 3.00 2.70
31 March 2001 8.55 4.80
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
31 March 2006 11.75 11.75
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
31 March 2011 5.00 5.00
31 March 2012 5.00 5.00
31 March 2013 5.00 5.00
31 March 2014 5.00 5.00
31 March 2015 5.00 5.00
Total dividends paid to 31 March 2015 134.80 123.25
Net asset value as at 31 March 2015 71.62 71.62
Total shareholder return to 31 March 2015 206.42 194.87
(i) The C shares merged with the Ordinary shares on an equal basis in
2001.
The financial summary above is for the Company, Albion Venture Capital
Trust PLC only. Details of the financial performance of Albion Prime
VCT PLC, which has been merged into the Company, can be found at the end
of this report.
In addition to the dividends summarised above, the Board has declared a
first dividend for the year ending 31 March 2016 of 2.50 pence per share
to be paid on 31 July 2015 to shareholders on the register as at 10 July
2015.
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.
-- All dividends paid by the Company are paid free of income tax to
qualifying shareholders. 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 2015 show a total return of 5.3
pence per share, against 2.0 pence for the previous year and net assets
of 71.6 pence per share compared to 71.3 pence per share at 31 March
2014, following the payment of total tax-free dividends of 5 pence per
share. The Company raised approximately GBP2.9 million during the year
under the Albion VCTs Top Up Offers 2013/2014 and approximately GBP1.6
million under the Albion VCTs Prospectus Top Up Offers 2014/2015, with a
subsequent GBP3.6 million after the year end.
It is encouraging that the Company's total return is now more than
covering its dividend of 5 pence. This has been partly through an
increase in the income generated by the investment portfolio, which has
risen 15 per cent. from the previous year. It also shows the benefits
from the merger with Albion Prime VCT, which resulted in cost savings of
around GBP120,000 per annum. Perhaps most important though, has been an
improvement of the hotel portfolio after a number of years of decline,
combined with continued growth in investment areas such as education and
renewable energy and a strong showing from our healthcare investments.
Investment performance and progress
In general, we have been continuing the task of repositioning the
portfolio towards greater emphasis on the healthcare and renewable
energy sectors, together with a reduced reliance on sectors that are
exposed to the consumer and business cycle. Renewable energy currently
accounts for just over 20 per cent. of the portfolio, while healthcare
accounted for 13 per cent. of the portfolio. Once the three care homes
which are currently under construction are completed, however,
healthcare will account for close to 30 per cent. of the portfolio.
Hotels, meanwhile, have declined to 27 per cent. of the portfolio.
The hotel sector has shown some improvement during the year. In
particular a strong revival in passenger numbers at Stansted airport has
led to increased profitability at Kew Green. The Crown Hotel in
Harrogate also had a decent year. Elsewhere in the consumer-facing
sector, we saw a successful exit from the Tower Bridge Health Club in
November where we received proceeds which, when added to interest income,
gave a 2.6x return on our investment. We also saw good growth at our
Kensington Club offset by a continued competitive environment at
Weybridge.
In the Healthcare sector, we sold the successful Oakland Care Centre
during the year with total proceeds, including income, amounting to
twice cost, while we sold our Taunton Psychiatric hospital (Orchard
Portman Group) for 1.6x cost. Meanwhile, we are developing three new
care homes in Oxford, Hillingdon and a site just south of Reading.
As a result of a strong performance in our renewable energy portfolio,
with an uplift in the year of over GBP1 million, this sector has now
reached its target of 20 per cent. of the investment portfolio, though
further revaluations may push it slightly above this level. We now have
three hydro-electric plants in operation, which between them supply
sufficient power for 3,000 homes, in addition to four brownfield wind
turbines in Wales, a biogas plant and roof mounted solar panels on
domestic buildings.
Radnor House School continues to grow with over 400 pupils in place for
September 2015. During the year the school also acquired Combe Bank
School near Sevenoaks in Kent, which is a Grade I listed house set in
over 30 acres of freehold land and which currently has 210 pupils.
Education will continue to be an important part of our investment
activities.
Risks and uncertainties
Despite its current growth, the outlook for the UK economy continues to
be the key risk affecting your Company. Importantly, however, your
Company remains conservatively financed with no bank borrowings. The
Company's policy remains that its portfolio companies should not
normally have external borrowings and for the Company to have a first
charge over portfolio companies' assets. The Board and the Manager see
this as an important factor in the control of investment risk. However,
on an exceptional basis, certain portfolio companies may take on
external borrowings, where the Board considers this will offer a
significant benefit to the Company.
A detailed analysis of the other risks and uncertainties facing the
business is set out in the Strategic report below.
Share buy-backs
It remains the Board's primary objective to maintain sufficient
resources for investment in existing and new portfolio 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 criterion 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 2015 to GBP750,000. This compares to a
total value bought in for the previous six months to 31 March 2015 of
GBP394,000. Subject to the constraints referred to above and subject to
first purchasing shares held by the market makers, the Board will target
such buy-backs to be in the region of a 5 per cent. discount to net
asset value, so far as market conditions and liquidity permit.
Results and dividends
As at 31 March 2015, the net asset value was GBP46.9 million or 71.6
pence per share, compared to GBP42.7 million or 71.3 pence per share as
at 31 March 2014, after the payment of total tax-free dividends of 5
pence per share. The results comprised 2.1 pence per share revenue
return (2014: 1.7 pence per share) and a 3.3 pence per share capital
return after taking into account capitalised expenses (2014: 0.3 pence
per share). The revenue return before taxation was GBP1.5 million
compared to GBP1.1 million for the year to 31 March 2014. The Company
will pay a first dividend of 2.5 pence per share for the year ending 31
March 2016, on 31 July 2015 to shareholders on the register on 10 July
2015, which is in line with the Company's current objective of paying a
dividend of 5 pence per share annually.
Outlook and prospects
Trading in a number of our sectors has been promising and we are
optimistic that the brighter outlook for the UK economy, combined with
the more balanced nature of the current portfolio, should benefit the
Company moving forward.
David Watkins
Chairman
25 June 2015
Strategic report
Investment objective and policy
The Company's investment policy is to provide investors with the
opportunity to participate in a balanced portfolio of asset-backed
businesses. The Company's investment portfolio will thus be structured
to provide a balance between income and capital growth for the longer
term.
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;
-- the Company 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 normally represents the majority of the finance
provided and is secured on the assets of the portfolio company. Funds
managed or advised by Albion Ventures LLP typically own 50 per cent. of
the equity of the portfolio company; and
-- other than the loan stock issued to funds managed or advised by Albion
Ventures LLP, portfolio companies do not normally have external
borrowings.
Current portfolio sector allocation
The pie chart at the end of this announcement shows the split of the
portfolio valuation by industrial or commercial sector as at 31 March
2015. Details of the principal investments made by the Company are shown
in the Portfolio of investments on pages 16 and 17 of the full Annual
Report and Financial Statements.
Direction of portfolio
The sector analysis of the Company's investment portfolio shows that
renewable energy now accounts for 22 per cent. of the portfolio compared
to 14 per cent. at the end of the previous financial year, in line with
the Board's target exposure for the sector. Healthcare has 13 per cent.
of the portfolio compared to 18 per cent. at the end of the previous
financial year, following two disposals, but, once current care home
projects are complete, it is expected to rise to around 30 per cent.
Results and dividends
GBP'000
Net revenue return for the year ended 31 March 2015 1,314
Realised and unrealised capital gain for the year 2,068
Dividend of 2.50 pence per share paid on 31 July 2014 (1,576)
Dividend of 2.50 pence per share paid on 31 December
2014 (1,590)
Unclaimed dividends returned to the Company 41
Transferred to reserves 257
Net assets as at 31 March 2015 46,928
Net asset value per share as at 31 March 2015 71.62p
The Company paid dividends totalling 5.00 pence per share during the
year ended 31 March 2015 (2014: 5.00 pence per share). The dividend
objective of the Board is to provide Shareholders with a strong,
predictable dividend flow, with a dividend target of 5.00 pence per
share per year.
As noted in the Chairman's statement, the Board has declared a first
dividend of 2.50 pence per share for the year ending 31 March 2016. This
dividend will be paid on 31 July 2015 to shareholders on the register as
at 10 July 2015.
As shown in the Income statement, the Company's investment income has
increased to GBP1,989,000 (2014: GBP1,718,000) and the total revenue
return to equity holders also increased to GBP1,314,000 (2014:
GBP999,000), principally driven by the Company's successful renewable
energy development programme. Revenue return has increased due to
increased loan stock interest and the decrease in other expenses, to
2.07 pence per share (2014: 1.70 pence per share).
The capital gain on investments for the year was GBP2,569,000 (2014:
GBP626,000), offset by management fees charged to capital, net of the
related taxation impact, resulting in a capital return of 3.26 pence per
share (2014: 0.30 pence per share).
The total return was 5.33 pence per share (2014: 2.00 pence per share).
The Balance sheet shows that the net asset value has increased over the
last year to 71.62 pence per share (2014: 71.30 pence per share),
primarily reflecting the revenue return of 2.07 pence per share and the
capital return of 3.26 pence per share, offset by the payment of the
5.00 pence per share dividend during the year.
The cash flow for the Company has been a net inflow of GBP1,497,000 for
the year (2014: outflow GBP4,391,000), reflecting cash inflows from
operations, disposal proceeds and the issue of Ordinary shares under the
Albion VCTs Top Up Offers, offset by dividends paid, new investments in
the year and the buyback of shares.
During the year, unclaimed dividends older than twelve years of
GBP41,000 (2014: GBP27,000) were returned to the Company in accordance
with the terms of the Articles of Association.
Review of business and future changes
A review of the Company's business during the year and investment
performance and progress is contained in the Chairman's statement in
this report. The healthcare sector performed particularly well again
this year with an increase in valuations (including disposals) of
GBP1,031,000 (2014: GBP649,000). The renewable energy sector was also
strong with an increase in valuations of GBP1,047,000. The hotel sector,
after a number of years of declining valuations, saw an increase of
GBP266,000; and there was an increase in the valuation of Radnor House
School of GBP165,000; and we disposed of one of our health and fitness
clubs, at Tower Bridge, with total realised gains of GBP526,000.
The Company continues with its objective to invest in asset-based
unquoted companies throughout the United Kingdom, with a view to
providing both capital growth and a reliable dividend income to
shareholders over the longer term. The Directors do not foresee any
major changes in the activity undertaken by the Company in the current
year.
Details of significant events which have occurred since the end of the
financial year are listed in note 21. Details of transactions with the
Manager are shown in note 5.
Future prospects
The Company's performance record reflects the resilience of the strategy
outlined above and has enabled the Company to maintain a predictable
stream of dividend payments to shareholders. The Board believes that
this model will continue to meet the investment objective and has the
potential to deliver attractive returns to shareholders in the future.
Further details on the Company's outlook and prospects can be found in
the Chairman's statement above.
Key performance indicators
The Directors believe that the following key performance indicators,
which are typical for venture capital trusts and used in its own
assessment of the Company, will provide shareholders with sufficient
information to assess how effectively the Company is applying its
investment policy to meet its objective. The Directors are satisfied
that the results shown in the following key performance indicators give
a good indication that the Company is achieving its investment objective
and policy. These are:
1. Net asset value total return relative to FTSE All Share Index total
return
The graph on page 4 of the full Annual Report and Financial Statements
shows the Company's net asset value total return against the FTSE
All-Share Index total return, in both instances with dividends
reinvested.
1. Net asset value per share and cumulative net asset value total
shareholder return
Net asset value increased by 7.5 per cent. (after adding back the 5.00
pence per share in dividends paid) to 71.62 pence per share for the year
ended 31 March 2015.
Cumulative NAV total shareholder return increased by 2.6 per cent. to
206.42 pence per share for the year ended 31 March 2015.
1. Dividend distributions
Dividends paid in respect of the year ended 31 March 2015 were 5.00
pence per share (2014: 5.00 pence per share), in line with the Board's
dividend objective. Cumulative dividends paid since inception amount to
134.80 pence per Ordinary share and 123.25 pence per historic C share.
1. Ongoing charges
The ongoing charges ratio for the year to 31 March 2015 was 2.5 per
cent. (2014: 2.5 per cent.). The ongoing charges ratio has been
calculated using the Association of Investment Companies' (AIC)
recommended methodology. This figure shows shareholders the total
recurring annual running expenses (including investment management fees
charged to capital reserve) as a percentage of the average net assets
attributable to shareholders. The Directors expect the ongoing charges
ratio for the year ahead to be approximately 2.5 per cent.
1. Maintenance of VCT qualifying status
The Company continues to comply with H.M. Revenue & Customs ("HMRC")
rules in order to maintain its status under Venture Capital Trust
legislation as highlighted below.
VCT regulation
The investment policy is designed to ensure that the Company continues
to qualify and is approved as a VCT by HMRC. In order to maintain its
status under Venture Capital Trust legislation, a VCT must comply on a
continuing basis with the provisions of Section 274 of the Income Tax
Act 2007, details of which are provided in the Directors' report on page
21 of the full Annual Report and Financial Statements.
As part of the EU rules relating to State Aid, new rules are being
introduced under the Finance Act 2015, which would include the
prohibition, under certain circumstances, of investment in companies
which have been trading for more than 12 years.
Given the profile of the kind of company that the Company invests in,
the Directors do not believe that updates to the Finance Act would
create a material change in the way the Company is currently run.
However, until the final legislation has been published, this remains a
risk for the Company.
The relevant tests to measure compliance have been carried out and
independently reviewed for the year ended 31 March 2015. These showed
that the Company has complied with all tests and continues to do so.
Gearing
As defined by the Articles of Association, the Company's maximum
exposure in relation to gearing is restricted to 10 per cent. of the
adjusted share capital and reserves. The Directors do not currently have
any intention to utilise gearing for the Company. On an exceptional
basis, certain portfolio companies may take on external borrowings,
where the Board considers this will offer a significant benefit to the
Company.
Operational arrangements
The Company has delegated the investment management of the portfolio to
Albion Ventures LLP, which is authorised and regulated by the Financial
Conduct Authority. Albion Ventures LLP also provides company secretarial
and other accounting and administrative support to the Company. Further
details regarding the terms of engagement of the Manager and the way the
Board has evaluated the performance of the Manager are shown below.
Management agreement
Under the Management agreement, the Manager provides investment
management, secretarial and administrative services to the Company. The
Management agreement can be terminated by either party on 12 months'
notice. The Management agreement is subject to earlier termination in
the event of certain breaches or on the insolvency of either party. The
Manager is paid an annual fee equal to 1.9 per cent. of the net asset
value of the Company, and an annual secretarial and administrative fee
of GBP47,658 (2014: GBP46,539) increased annually by RPI. These fees
are payable quarterly in arrears. The cap on total annual normal
expenses, including the management fee, have been reduced from 3.5 per
cent to 3.0 per cent. of the net asset value. The total annual normal
expenses for the year to 31 March 2015 was 2.5 per cent. (2014: 2.5 per
cent.).
In line with common practice, the Manager is also entitled to an
arrangement fee, payable by each portfolio company, of approximately 2
per cent. on each investment made and any applicable monitoring fees.
Management performance incentive
In order to provide the Manager with an incentive to maximise the return
to investors, the Company has entered into a management performance
incentive arrangement with the Manager. Under the incentive arrangement,
the Company will pay an incentive fee to the Manager of an amount equal
to 8 per cent. of the excess total return above 5 per cent. per annum,
paid out annually in cash as an addition to the management fee. Any
shortfall of the target return will be carried forward into subsequent
periods and the incentive fee will only be paid once all previous and
current target returns have been met. For the year to 31 March 2015, no
incentive fee became due to the Manager (2014: GBPnil).
No further performance fee will become due until the hurdle rate
comprising net asset value, plus dividends from 31 March 2004, has been
reached. As of 31 March 2015 the total return from 31 March 2004
amounted to 153.1 pence per share which compared to the hurdle of 193.4
pence per share at that date.
Investment and co-investment
The Company co-invests with other Albion Ventures LLP venture capital
trusts and funds. Allocation of investments is on the basis of an
allocation agreement which is based, inter alia, on the ratio of funds
available for investment.
Evaluation of the Manager
The Board has evaluated the performance of the Manager based on the
returns generated by the Company, the continuing achievement of the 70
per cent. investment requirement for venture capital trust status, the
long term prospects of current investments, a review of the Management
agreement and the services provided therein, and benchmarking the
performance of the Manager to other service providers. The Board
believes that it is in the interests of shareholders as a whole, and of
the Company, to continue the appointment of the Manager for the
forthcoming year.
Alternative Investment Fund Managers Directive ("AIFMD")
The Board has considered the impact on your Company of the AIFMD, an EU
Directive that came into force in July 2013 to regulate the Managers of
Alternative Investment Funds. The Board appointed Albion Ventures LLP as
the Company's AIFM as required by the AIFMD. Albion Ventures LLP's
registration as an AIFM was approved by the Financial Conduct Authority
on 3 June 2014.
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the Act to
detail information about social and community issues, employees and
human rights; including any policies it has in relation to these matters
and effectiveness of these policies. As an externally managed investment
company with no employees, the Company has no policies in these matters
and as such these requirements do not apply.
Further policies
The Company has adopted a number of further policies relating to:
-- Environment
-- Global greenhouse gas emissions
-- Anti-bribery
-- Diversity
and these are set out in the Directors' report on page 21 of the full
Annual Report and Financial Statements.
Risk management
The Board carries out a regular review of the risk environment in which
the Company operates. The principal risks and uncertainties of the
Company as identified by the Board and how they are managed are as
follows:
Risk Possible consequence Risk management
Economic Changes in economic conditions, including, for example, To reduce this risk, in addition to investing equity
risk interest rates, rates of inflation, industry conditions, in portfolio companies, the Company often invests
competition, political and diplomatic events and other in secured loan stock and has a policy of not normally
factors could substantially and adversely affect the permitting any external bank borrowings within portfolio
Company's prospects in a number of ways. companies. Additionally, the Manager has been rebalancing
the sector exposure of the portfolio with a view to
reducing reliance on consumer led sectors.
Investment This is the risk of investment in poor quality assets To reduce this risk, the Board places reliance upon
risk which reduces the capital and income returns to shareholders, the skills and expertise of the Manager and its strong
and negatively impacts on the Company's reputation. track record for investing in this segment of the
By nature, smaller unquoted businesses, such as those market. In addition, the Manager operates a formal
that qualify for venture capital trust purposes, are and structured investment process, which includes
more fragile than larger, long established businesses. 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
portfolio company boards) and the Board receives detailed
reports on each investment as part of the Manager's
report at quarterly board meetings.
Valuation The Company's investment valuation methodology is As described in note 2 of the Financial Statements,
risk reliant on the accuracy and completeness of information the unquoted equity investments, convertible loan
that is issued by portfolio companies. In particular, stock and debt issued at a discount held by the Company
the Directors may not be aware of or take into account are designated at fair value through profit or loss
certain events or circumstances which occur after and valued in accordance with the International Private
the information issued by such companies is reported. 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 judgements
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 judgements 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. The values of all investments are
at cost (reviewed for impairment) or underpinned by
independent third party professional valuations.
VCT The Company's current approval as a venture capital To reduce this risk, the Board has appointed the Manager,
approval trust allows investors to take advantage of tax reliefs which has a team with significant experience in venture
risk on initial investment and ongoing tax free capital capital trust management, used to operating within
gains and dividend income. Failure to meet the qualifying the requirements of the venture capital trust legislation.
requirements could result in investors losing the In addition, to provide further formal reassurance,
tax relief on initial investment and loss of tax relief the Board has appointed Robertson Hare LLP (previously
on any tax-free income or capital gains received. PricewaterhouseCoopers LLP) as its taxation adviser.
In addition, failure to meet the qualifying requirements Robertson Hare LLP reports quarterly to the Board
could result in a loss of listing of the shares. to independently confirm compliance with the venture
capital trust legislation, to highlight areas of risk
and to inform on changes in legislation. Each investment
in a new portfolio company is also pre-cleared with
H.M. Revenue & Customs.
Compliance The Company is listed on The London Stock Exchange Board members and the Manager have experience of operating
risk and is required to comply with the rules of the UK at senior levels within or advising quoted businesses.
Listing Authority, as well as with the Companies Act, In addition, the Board and the Manager receive regular
Accounting Standards and other legislation. Failure updates on new regulation from its auditor, lawyers
to comply with these regulations could result in a and other professional bodies. The Company is subject
delisting of the Company's shares, or other penalties to compliance checks via the Manager's Compliance
under the Companies Act or from financial reporting Officer. The Manager reports monthly to its Board
oversight bodies. on any issues arising from compliance or regulation.
These controls are also reviewed as part of the quarterly
Manager Board meetings, and also as part of the review
work undertaken by the Manager's Compliance Officer.
The report on controls is evaluated by Internal Audit
during its reports.
Internal Failures in key controls, within the Board or within The Audit Committee meets with the Manager's Internal
control the Manager's business, could put assets of the Company Auditor, PKF Littlejohn LLP, when required, receiving
risk at risk or result in reduced or inaccurate information a report regarding the last formal internal audit
being passed to the Board or to shareholders. performed on the Manager, and providing the opportunity
for the Audit Committee to ask specific and detailed
questions. John Kerr, as Chairman of the Audit Committee,
met with the internal audit Partner of PKF Littlejohn
LLP in January 2015 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 within the Statement
of Corporate Governance on page 28 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.
Reliance The Company is reliant upon the services of Albion There are provisions within the management agreement
upon Ventures LLP for the provision of investment management for the change of Manager under certain circumstances
third and administrative functions. (for further detail, see the Management agreement
parties paragraph within this Strategic Report). In addition,
risk the Manager has demonstrated to the Board that there
is no undue reliance placed upon any one individual
within Albion Ventures LLP.
Financial By its nature, as a venture capital trust, the Company The Company's policies for managing these risks and
risk is exposed to investment risk (which comprises investment its financial instruments are outlined in full in
price risk and cash flow interest rate risk), credit note 19 to the Financial Statements.
risk and liquidity risk. 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.
Reputational Arises from broader performance and ethical issues, The Board clearly articulates to the Investment Manager
risk including investment in businesses and sectors that its broader aims and standards including those sectors
are inconsistent with the values of Board and the which are consistent with the values of the Board.
VCT or, the Boards of portfolio companies take actions The Board regularly reviews the performance and investment
which similarly are inconsistent with the values of strategy of the Investment Manager. The Investment
the VCT. Manager periodically attends Board meetings of the
VCT's portfolio companies and across the portfolio
receives periodic management information and is alert
to potential threats to reputation.
This Strategic report of the Company for the year ended 31 March 2015
has been prepared in accordance with the requirements of section 414A of
the Companies Act 2006 (the "Act"). The purpose of this report is to
provide Shareholders with sufficient information to enable them to
assess the extent to which the Directors have performed their duty to
promote the success of the Company in accordance with section 172 of the
Act.
On behalf of the Board,
David Watkins
Chairman
25 June 2015
Responsibility statement
In preparing these Financial Statements for the year to 31 March 2015,
the Directors of the Company, being David Watkins, John Kerr, Jeff
Warren and Ebbe Dinesen, 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
2015 for the Company have 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 2015 as required by DTR 4.1.12R;
- the Chairman's statement and Strategic report include a fair review of
the information required by DTR 4.2.7R (indication of important events
during the year ended 31 March 2015 and description of principal risks
and uncertainties that the Company faces); and
- the Chairman's statement and Strategic report includes 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
25 June 2015
Income statement
Year ended 31 March Year ended 31 March
2015 2014
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on investments 3 - 2,569 2,569 - 626 626
Investment income 4 1,989 - 1,989 1,718 - 1,718
Investment management fees 5 (212) (636) (848) (201) (601) (802)
Other expenses 6 (273) - (273) (398) - (398)
Return on ordinary activities
before tax 1,504 1,933 3,437 1,119 25 1,144
Tax (charge)/credit on
ordinary activities 8 (190) 135 (55) (120) 140 20
Return attributable to
shareholders 1,314 2,068 3,382 999 165 1,164
Basic and diluted return
per share (pence)* 10 2.07 3.26 5.33 1.70 0.30 2.00
* 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 the
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 2015 31 March 2014
Note GBP'000 GBP'000
Fixed asset investments 11 38,229 35,580
Current assets
Trade and other debtors 13 166 48
Cash at bank and in hand 17 9,002 7,505
9,168 7,553
Creditors: amounts falling due
within one year 14 (469) (475)
Net current assets 8,699 7,078
Net assets 46,928 42,658
Capital and reserves
Called up share capital 15 714 645
Share premium 8,228 3,525
Capital redemption reserve 7 7
Unrealised capital reserve (2,269) (3,343)
Realised capital reserve 11,522 10,527
Other distributable reserve 28,726 31,297
Total equity shareholders' funds 46,928 42,658
Basic and diluted net asset value
per share (pence)* 16 71.62 71.30
* 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 25 June 2015, and were signed on its behalf by
David Watkins
Chairman
Company number: 03142609
Reconciliation of movements in shareholders' funds
Called-up Capital Unrealised Realised Other
share Share redemption capital capital distributable
capital premium reserve reserve* reserve* reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2014 645 3,525 7 (3,343) 10,527 31,297 42,658
Return for the year - - - 1,442 626 1,314 3,382
Transfer of previously unrealised gains/(losses) on
realisations of investments - - - (368) 368 - -
Purchase of treasury shares - - - - - (760) (760)
Issue of equity 69 4,827 - - - - 4,896
Cost of issue of equity - (124) - - - - (124)
Net dividends paid (note 9) - - - - - (3,125) (3,125)
As at 31 March 2015 714 8,228 7 (2,269) 11,522 28,726 46,928
As at 1 April 2013 603 8 - (4,890) 11,909 34,051 41,681
Return/(loss) for the year - - - 576 (411) 999 1,164
Transfer of previously unrealised gains/(losses) on
realisations of investments - - - 971 (971) - -
Purchase of treasury shares - - - - - (364) (364)
Purchase of shares for cancellation (7) - 7 - - (487) (487)
Issue of equity 49 3,517 - - - - 3,566
Cost of issue of equity - (89) - - - - (89)
Net dividends paid (note 9) - - - - - (2,902) (2,902)
As at 31 March 2014 645 3,525 7 (3,343) 10,527 31,297 42,658
* Included within the aggregate of these reserves is an amount of
GBP37,979,000 (2014: GBP38,481,000) which is considered distributable.
Cash flow statement
Year ended Year ended
31 March 2015 31 March2014
Note GBP'000 GBP'000
Operating activities
Loan stock income received 1,764 1,534
Deposit interest received 76 131
Dividend income received 57 22
Investment management fees paid (828) (817)
Other cash payments (271) (289)
Net cash flow from operating activities 18 798 581
Taxation
UK corporation tax received/(paid) 64 (99)
Capital expenditure and financial investments
Purchase of fixed asset investments (9,042) (5,182)
Disposal of fixed asset investments 8,833 550
Net cash flow from investing activities (209) (4,632)
Equity dividends paid (net of costs of issuing
shares under the Dividend Reinvestment Scheme and
unclaimed dividends) (2,873) (2,719)
Net cash flow before financing (2,220) (6,869)
Financing
Issue of share capital 4,478 3,360
Cost of issue of equity (1) (1)
Purchase of own shares (including costs) (760) (876)
Cost of Merger (paid on behalf of the Company
and Albion Prime VCT PLC) - (5)
Net cash flow from financing 3,717 2,478
Cash flow in the year 17 1,497 (4,391)
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).
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.
Unquoted equity derived instruments
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) are 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 the amortised cost relating to
interest income are reflected in the revenue column of the Income
statement, and hence are reflected in the other distributable reserve,
and 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
movements arising from revaluations of the fair value of the security.
For all unquoted loan stock, whether fully performing, past due or
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
accounted for using the equity method. In these circumstances the
investment is accounted for according to FRS 26 "Financial instruments
Recognition and Measurement" and measured at fair value through profit
and loss.
Current asset investments
Contractual future contingent receipts on the disposal of fixed asset
investments are designated at fair value through profit or loss and are
subsequently measured at fair value.
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 are charged through the realised capital reserve.
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. Deferred tax assets and liabilities are not discounted.
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 other distributable 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.
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 where paid out by capital.
Other distributable reserve
This reserve accounts for movements from the revenue column of the
Income statement, the payment of dividends, the buyback of shares and
other non-capital realised movements.
Dividends
In accordance with FRS 21 "Events after the balance sheet date",
dividends by the Company are accounted for in the period in which the
dividend is paid or approved at the Annual General Meeting.
3. Gains on investments
Year ended Year ended
31 March 2015 31 March 2014
GBP'000 GBP'000
Unrealised gains on fixed asset investments held at
fair value through profit or loss 1,210 1,113
Unrealised reversals of impairments/(impairments)
on
fixed asset investments held at amortised cost 232 (537)
Unrealised gains sub-total 1,442 576
Realised gains on fixed asset investments held
at fair value through profit or loss 1,121 40
Realised gains on fixed asset investments held
at amortised cost 6 10
Realised gains sub-total 1,127 50
2,569 626
Investments measured at amortised cost are unquoted loan stock
investments as described in note 2.
4. Investment income
Year ended Year ended
31 March 2015 31 March 2014
GBP'000 GBP'000
Income recognised on investments held
at fair value through profit or loss
Dividend income 51 27
Income from convertible bonds and discounted
debt 472 203
523 230
Income recognised on investments held
at amortised cost
Return on loan stock investments 1,388 1,369
Bank deposit interest 78 119
1,466 1,488
1,989 1,718
Interest income earned on impaired investments at 31 March 2015 amounted
to GBP306,000 (2014: GBP294,000). These investments are all held at
amortised cost.
5. Investment management fees
Year ended Year ended
31 March 2015 31 March 2014
GBP'000 GBP'000
Investment management fee charged to revenue 212 201
Investment management fee charged to capital 636 601
848 802
Further details of the Management agreement under which the investment
management fee is paid are given in the Strategic report.
During the year, services of a total value of GBP896,000 (2014:
GBP849,000), were purchased by the Company from Albion Ventures LLP;
this includes GBP848,000 (2014: GBP802,000) of investment management fee
and GBP48,000 (2014: GBP47,000) administration fee. At the financial
year end, the amount due to Albion Ventures LLP in respect of these
services disclosed within accruals and deferred income was GBP235,000
(2014: GBP214,000).
Albion Ventures LLP is, from time to time, eligible to receive
transaction fees and Directors' fees from portfolio companies. During
the year ended 31 March 2015, fees of GBP360,000 attributable to the
investments of the Company were received pursuant to these arrangements
(2014: GBP167,000).
Albion Ventures LLP, the Manager, holds 2,534 Ordinary shares as a
result of fractional entitlements arising from the merger of Albion
Prime VCT PLC into Albion Venture Capital Trust PLC on 25 September
2012. In addition, Albion Ventures LLP holds a further 5,301 Ordinary
shares in the Company.
6. Other expenses
Year ended Year ended
31 March 2015 31 March 2014
GBP'000 GBP'000
Directors' fees (inc. NIC) 90 87
Secretarial and administration fee 48 47
Other administrative expenses 110 100
Impairment of accrued interest - 139
Auditor's remuneration for statutory audit services
(exc. VAT) 25 25
273 398
7. Directors' fees
The amounts paid to and on behalf of Directors during the year are as
follows:
Year ended Year ended
31 March 2015 31 March 2014
GBP'000 GBP'000
Directors' fees 83 80
National insurance 7 7
90 87
Further information regarding Directors' remuneration can be found in
the Directors' remuneration report on pages 30 and 31 of the full Annual
Report and Financial Statements.
8. Tax (charge)/credit on ordinary activities
Year ended 31 March 2015 Year ended 31 March 2014
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK corporation tax
in respect of
current year (305) 135 (170) (246) 140 (106)
UK corporation tax
in respect of
prior year 115 - 115 126 - 126
Total (190) 135 (55) (120) 140 20
Factors affecting the tax charge:
Year ended Year ended
31 March 2015 31 March 2014
GBP'000 GBP'000
Return on ordinary activities before taxation 3,437 1,144
Tax on profit at the standard rate of 21%
(2014: 23%) (722) (263)
Factors affecting the charge:
Non-taxable gains 539 144
Income not taxable 11 6
Consortium relief in respect of prior years 115 126
Marginal relief 2 7
(55) 20
The tax charge for the year shown in the Income statement is lower than
the standard rate of corporation tax in the UK of 21 per cent. (2014: 23
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 2015 31 March 2014
GBP'000 GBP'000
First dividend paid on 31 July 2013 - 2.50 pence per
share - 1,469
Second dividend paid on 31 December 2013 - 2.50 pence
per share - 1,460
First dividend paid on 31 July 2014 - 2.50 pence per
share 1,576 -
Second dividend paid on 31 December 2014 - 2.50 pence
per share 1,590 -
Unclaimed dividends (41) (27)
3,125 2,902
In addition to the dividends summarised above, the Board has declared a
first dividend for the year ending 31 March 2016 of 2.50 pence per
share. This dividend will be paid on 31 July 2015 to shareholders on the
register as at 10 July 2015. The total dividend will be approximately
GBP1,767,000.
During the year, unclaimed dividends older than twelve years of
GBP41,000 (2014: GBP27,000) 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 2015 Year ended 31 March 2014
Revenue Capital Total Revenue Capital Total
The return per share has been
based on the following figures:
Return attributable to equity shares
(GBP'000) 1,314 2,068 3,382 999 165 1,164
Weighted average shares in issue
(excluding treasury shares) 63,464,790 58,689,669
Return attributable per equity share
(pence) 2.07 3.26 5.33 1.70 0.30 2.00
The weighted average number of shares is calculated excluding treasury
shares of 5,841,440 (2014: 4,695,440).
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 2015 31 March 2014
GBP'000 GBP'000
Investments held at fair value through profit or loss
Unquoted equity 10,442 11,093
Unquoted debt issued at a discount and convertible
bonds 7,069 5,790
17,511 16,883
Investments held at amortised cost
Unquoted loan stock 20,718 18,697
38,229 35,580
31 March 31 March
2015 2014
GBP'000 GBP'000
Opening valuation 35,580 30,198
Purchases at cost 9,010 5,218
Disposal proceeds (9,026) (359)
Realised gains 1,127 50
Movement in loan stock accrued income 96 (103)
Unrealised gains 1,442 576
Closing valuation 38,229 35,580
Movement in loan stock accrued income
Opening accumulated movement in loan stock accrued
income 165 268
Movement in loan stock accrued income 96 (103)
Closing accumulated movement in loan stock accrued
income 261 165
Movement in unrealised losses
Opening accumulated unrealised losses (3,343) (4,890)
Transfer of previously unrealised (gains)/losses
to realised reserve on realisations of investments (368) 971
Unrealised gains 1,442 576
Closing accumulated unrealised losses (2,269) (3,343)
Historic cost basis
Opening book cost 38,759 34,821
Purchases at cost 9,010 5,218
Sales at cost* (7,530) (1,280)
Closing book cost* 40,239 38,759
*Sales at cost includes realised losses of GBP1,564,000 for The
Charnwood Pub Company Limited and GBP293,000 for Premier Leisure
(Suffolk) Limited which are still held at the Balance sheet date.
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 a 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 31 March
2015 2014
Valuation methodology GBP'000 GBP'000
Cost (reviewed for impairment) 3,176 4,633
Net asset value supported by third party or desktop
valuation 14,335 12,250
17,511 16,883
Fair value investments had the following movements between valuation
methodologies between 31 March 2014 and 31 March 2015:
Change in valuation methodology (2014 to 2015) Value as at Explanatory
31 March 2015 note
GBP'000
Cost (reviewed for impairment) to net asset value 1,898 More recent
supported by third party valuation information
available
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 December 2012 IPEVCV
Guidelines. The Directors believe that, within these parameters, there
are no other methods of valuation which would be reasonable as at 31
March 2015.
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
All of the company's fixed asset investments as at 31 March 2015 which
are valued at fair value through profit or loss are all valued according
to Level 3 methods.
Investments held at fair value through profit or loss (level 3) had the
following movements in the year to 31 March 2015:
31 March 2015 31 March 2014
Convertible Convertible
and and
discounted discounted
Equity bonds Total Equity bonds Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening balance 11,093 5,790 16,883 8,489 2,231 10,720
Additions 1,340 3,107 4,447 415 4,638 5,053
Disposal proceeds (4,875) (200) (5,075) (40) - (40)
Loan stock
conversion - (1,210) (1,210) - - -
Debt/equity swap 590 (590) - 1,257 (1,257) -
Accrued loan
stock interest - 135 135 - (3) (3)
Realised gains 1,121 - 1,121 40 - 40
Unrealised gains 1,173 37 1,210 932 181 1,113
Closing balance 10,442 7,069 17,511 11,093 5,790 16,883
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 level 3
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.
As noted in the Strategic report, the level of investment in the
renewable energy sector has increased to 22 per cent. The majority of
the renewable investments are valued using a third party valuation. The
underlying valuation of these investments is dependent on the
discounting of future cash flows over a period of approximately 25 years
and is thus sensitive to changes in a number of assumptions, the most
significant being the discount rate used. The Directors do not consider
that a change in the discount by one per cent., up or down, would result
in a material 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
portfolio 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 portfolio companies as at 31
March 2015 as described below:
Company Country of Principal activity % class and voting
incorporation rights
Kew Green VCT Great Britain Hotel owner and 45.2% Ordinary
(Stansted) Limited operator shares
G&K Smart Great Britain Residential 42.9% Ordinary
Developments VCT property developer shares
Limited
The Stanwell Hotel Great Britain Hotel owner and 39.2% Ordinary
Limited operator shares
Shinfield Lodge Great Britain Care home for 25.0% Ordinary
Care Limited elderly residents shares
The Crown Hotel Great Britain Hotel owner and 24.1% Ordinary
Harrogate Limited operator shares
Green Highland Great Britain Hydroelectric power 20.8% Ordinary
Renewables generator shares
(Ledgowan) Limited
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 2015 31 March 2014
Trade and other debtors GBP'000 GBP'000
Prepayments and accrued income 13 17
Other debtors 83 12
UK corporation tax receivable 70 19
166 48
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 2015 31 March 2014
GBP'000 GBP'000
Trade creditors 12 13
UK Corporation tax payable 170 -
Other creditors - 192
Accruals and deferred income 287 270
469 475
The Directors consider that the carrying amount of creditors is not
materially different to their fair value.
15. Called up share capital
31 March 31 March
2015 2014
GBP'000 GBP'000
Allotted, called up and fully paid
71,365,088 Ordinary shares of 1p each (2014:
64,490,852) 714 645
Voting rights
65,523,648 Ordinary shares of 1p each (net of treasury
shares)
(2014: 59,795,412)
The Company purchased 1,146,000 Ordinary shares (2014: 543,000) to be
held in treasury at a cost of GBP760,000 (2014: GBP364,000) representing
1.6 per cent. of its issued share capital as at 31 March 2015. The
shares purchased for treasury were funded from other distributable
reserve.
During the year the Company did not purchase any shares for cancellation
(2014: 729,000 shares at a cost of GBP487,000).
The Company holds a total of 5,841,440 shares (2014: 4,695,440) in
treasury, representing 8.2 per cent. of the issued Ordinary share
capital as at 31 March 2015.
Under the terms of the Dividend Reinvestment Scheme Circular dated 10
July 2008, the following Ordinary shares of nominal value 1 penny per
share were allotted during the year:
Aggregate
Number nominal
Date of of shares value of Net consideration Issue price Opening market price
allotment allotted shares received (pence per on allotment date
GBP'000 GBP'000 share) (pence per share)
31 July
2014 203,480 2 138 68.80 67.25
31 December
2014 228,179 2 151 67.42 66.00
431,659 4 289
During the year the following Ordinary shares were allotted under the
Albion VCTs Top Up Offers 2013/2014, the Albion VCTs Prospectus Top Up
Offers 2013/2014 and the Albion VCTs Prospectus Top Up Offers 2014/2015:
Aggregate
Number nominal Net
Date of of shares value of consideration Issue price Opening market price
allotment allotted shares received (pence per on allotment date
GBP'000 GBP'000 share) (pence per share)
5 April
2014 17,201 - 12 72.40 67.25
5 April
2014 18,621 - 13 72.80 67.25
5 April
2014 2,648,140 26 1,878 73.10 67.25
4 July 2014 10,187 - 7 72.80 67.25
4 July 2014 5,464 - 4 73.20 67.25
4 July 2014 560,309 6 400 73.60 67.25
30
September
2014 871,469 9 604 71.50 67.25
30 January
2015 832,852 8 562 69.20 65.50
30 January
2015 1,478,334 15 997 68.80 65.50
6,442,577 64 4,477
16. Basic and diluted net asset value per share
31 March 2015 31 March 2014
Basic and diluted net asset value per share
(pence) 71.62 71.30
The basic and diluted net asset value 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 65,523,648 Ordinary
shares (2014: 59,795,412).
There are no convertible instruments, derivatives or contingent share
agreements in issue.
17. Analysis of changes in cash during the year
Year ended Year ended
31 March 2015 31 March 2014
GBP'000 GBP'000
Opening cash balances 7,505 11,896
Net cash flow 1,497 (4,391)
Closing cash balances 9,002 7,505
18. Reconciliation of net return on ordinary activities before taxation
to net cash flow from operating activities
Year ended Year ended
31 March 2015 31 March 2014
GBP'000 GBP'000
Revenue return on ordinary activities before
taxation 1,504 1,119
Investment management fee charged to capital (636) (601)
Movement in accrued amortised loan stock
interest (96) 103
Decrease/(increase) in debtors 5 (8)
Increase/(decrease) in creditors 21 (32)
Net cash flow from operating activities 798 581
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, contingent receipts on disposal of
fixed assets investments, cash balances and short term debtors and
creditors which arise from its operations. The main purpose of these
financial instruments is to generate cash flow 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.
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 page 16 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 portfolio company and the dynamics of market quoted comparators.
The Manager receives management accounts from portfolio companies, and
members of the investment management team often sit on the boards of
portfolio 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 GBP38,229,000 (2014:
GBP35,580,000). Fixed asset investments form 81 per cent. of the net
asset value as at 31 March 2015 (2014: 83 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 page 16 of
the full Annual Report and Financial Statements.
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 GBP3,830,000 (2014: GBP3,558,000).
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 GBP62,000 (2014: GBP80,000).
Furthermore, it is considered that a fall of interest rates below
current levels during the year would have been very unlikely.
The weighted average effective interest rate applied to the Company's
fixed rate assets during the year was approximately 6.30 per cent.
(2014: 5.80 per cent.). The weighted average period to maturity for the
fixed rate assets is approximately 4.8 years (2014: 3.3 years).
The Company's financial assets and liabilities, all denominated in
pounds sterling, consist of the following:
31 March 2015 31 March 2014
Fixed Floating Non-interest Fixed Floating Non-interest
rate rate bearing Total rate rate bearing Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Unquoted equity - - 10,442 10,442 - - 11,093 11,093
Convertible and
discounted bonds 6,483 279 307 7,069 3,378 279 2,133 5,790
Unquoted loan
stock 20,718 - - 20,718 18,697 - - 18,697
Debtors * - - 91 91 - - 24 24
Current
liabilities* - - (299) (299) - - (475) (475)
Cash - 9,002 - 9,002 - 7,505 - 7,505
Total net assets 27,201 9,281 10,541 47,023 22,075 7,784 12,775 42,634
* The debtors and current liabilities do not reconcile to the balance
sheet as prepayments and tax receivable/ (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 portfolio company in order to
mitigate the gross credit risk. The Manager receives management accounts
from portfolio companies, and members of the investment management team
often sit on the boards of portfolio 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 2015 was limited to
GBP27,787,000 (2014: GBP24,487,000) of unquoted loan stock instruments
(all of which is secured on the assets of the portfolio company),
GBP9,002,000 cash deposits with banks (2014: GBP7,505,000) and GBP83,000
of other debtors (2014: GBP12,000).
The credit profile of the unquoted loan stock is described under
liquidity risk below.
The cost, impairment and carrying value of impaired loan stocks held at
amortised cost are as follows:
31 March 2015 31 March 2014
Cost Impairment Carrying value Cost Impairment Carrying value
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Impaired
loan
stock 13,603 (3,494) 10,109 13,750 (3,601) 10,149
Impaired loan stock instruments have a first fixed charge or a fixed and
floating charge over the assets of the portfolio 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
Lloyds Bank plc, Scottish Widows Bank plc (part of Lloyds Banking Group),
Barclays Bank plc and National Westminster Bank plc. Credit risk on cash
transactions is mitigated by transacting with counterparties that are
regulated entities subject to prudential supervision, with high credit
ratings 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
GBP4,516,000 as at 31 March 2015 (2014: GBP4,110,000).
The Company has no committed borrowing facilities as at 31 March 2015
(2014: GBPnil) and had cash balances of GBP9,002,000 (2014:
GBP7,505,000). 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 GBP469,000 for
the year to 31 March 2015 (2014: GBP475,000).
The carrying value of loan stock investments at 31 March 2015 as
analysed by expected maturity dates is as follows:
Fully performing Impaired Past due Total
Redemption date GBP'000 GBP'000 GBP'000 GBP'000
Less than one year 1,513 1,421 211 3,145
1-2 years 285 8,688 3,737 12,710
2-3 years 105 - - 105
3-5 years 4,523 - - 4,523
Greater than 5 years 3,523 - 3,781 7,304
Total 9,949 10,109 7,729 27,787
Loan stock categorised as past due includes:
-- Loan stock with a carrying value of GBP7,220,000 yielding an average of
10.17 per cent. on cost which has loan stock interest past due between 2
and 5 months; and
-- Loan stock with a carrying value of GBP509,000 which has loan stock
interest past due of greater than 12 months but less than 2 years.
The carrying value of loan stock investments held at amortised cost at
31 March 2014 as analysed by expected maturity dates is as follows:
Fully performing Impaired Past due Total
Redemption date GBP'000 GBP'000 GBP'000 GBP'000
Less than one year 443 1,716 375 2,534
1-2 years 2,355 604 3,862 6,821
2-3 years 1,375 7,829 65 9,269
3-5 years 3,061 - - 3,061
Greater than 5 years 2,376 - 426 2,802
Total 9,610 10,149 4,728 24,487
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 2015
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
The company had the following financial commitment in respect of the
following investments:
-- Shinfield Lodge Care Limited, GBP3,000,000
-- Ryefield Court Care Limited, GBP2,358,000
-- Active Lives Care Limited, GBP2,090,000
-- Radnor House School (Holdings) Limited, GBP451,000
-- Dragon Hydro Limited, GBP3,000
There are no contingent liabilities or guarantees given by the Company
as at 31 March 2015 (31 March 2014: nil).
21. Post balance sheet events
Since 31 March 2015 the Company has had the following post balance sheet
events:
-- Investment of GBP250,000 in Ryefield Court Care Limited
-- Investment of GBP150,000 in Active Lives Care Limited
Shares issued under the Albion VCTs Prospectus Top Up Offers 2014/2015:
Number Aggregate
Date of of shares nominal value Net consideration Issue price Opening market price
allotment allotted of shares received (pence per on allotment date
GBP'000 GBP'000 share) (pence per share)
2 April
2015 5,158,657 52 3,568 71.30 65.50
22. Related party transactions
Other than transactions with the Manager as disclosed in note 5, there
are no related party transactions or balances requiring disclosure.
23. 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 years ended 31 March 2015 and 31 March 2014,
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 2015, which will be, delivered to the Registrar of Companies. The
Auditor reported on those accounts; the 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 31 July 2015 at 11.30am.
24. 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.
Dividend history for Albion Prime VCT PLC now merged with Albion Venture
Capital Trust PLC (unaudited)
Proforma(i)
Albion Prime
VCT PLC
Total proforma shareholder return to 31 March 2015 (pence per share)
Total dividends paid during the year
ended 31 March 1998 1.10
31 March 1999(ii) 6.40
31 March 2000 1.50
31 March 2001 4.25
31 March 2002 2.75
31 March 2003 2.00
31 March 2004 1.25
31 March 2005 2.20
31 March 2006 4.50
31 March 2007 4.00
31 March 2008 5.00
31 March 2009 4.50
31 March 2010 2.00
31 March 2011 3.00
31 March 2012 3.00
31 March 2013 3.70
31 March 2014 4.40
31 March 2015 4.40
Total dividends paid to 31 March 2015 59.95
Proforma net asset value as at 31 March 2015 63.03
Total proforma shareholder return to 31 March 2015 122.98
Notes
1. The proforma shareholder returns presented above are based on the
dividends paid to shareholders before the merger and the pro-rata net
asset value per share and pro-rata dividends per share paid to 31 March
2015. Albion Prime VCT PLC was merged with Albion Venture Capital Trust
PLC on 25 September 2012. This pro-forma is based upon 0.8801 Albion
Venture Capital Trust PLC shares for every Albion Prime VCT PLC share
which merged with Albion Venture Capital Trust PLC on 25 September 2012.
2. 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.
3. The above table excludes the tax benefits investors received upon
subscription for shares in the Company.
AAVC Split of investment portfolio by sector:
http://hugin.info/141809/R/1931551/694642.pdf
This announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Albion Venture Capital Trust PLC via Globenewswire
HUG#1931551
http://www.closeventures.co.uk
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