TIDMAADD
Albion Development VCT PLC
As required by the UK Listing Authority's Disclosure and Transparency
Rules 4.1 and 6.3, Albion Development VCT PLC today makes public its
information relating to the Annual Report and Financial Statements for
the year ended 31 December 2014.
This announcement was approved for release by the Board of Directors on
10 March 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 December 2014 (which have been audited)
at: www.albion-ventures.co.uk by clicking on 'Our Funds' and then
'Albion Development VCT PLC'. The Annual Report and Financial Statements
for the year to 31 December 2014 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 Development VCT PLC (the "Company") is a venture capital trust
which raised a total of GBP33.3 million through the issue of shares
between 1999 and 2004. The C shares merged with the Ordinary shares in
2007.
A further GBP6.3 million was raised through an issue of new D shares in
2009/2010 and GBP9.8 million has been raised for the Ordinary shares
through the Albion VCTs Top Up Offers since January 2011. The funds
raised have been invested in accordance with the Company's existing
investment policy.
The Company's investment policy is intended to provide investors with a
regular and predictable source of dividend income combined with the
prospects of long term capital growth. This is achieved by establishing
a diversified portfolio of holdings in smaller, unquoted companies
whilst at the same time selecting and structuring investments in such a
way as to reduce the risks normally associated with investment in such
companies. It is intended that this will be achieved as follows:
-- Through investment in a number of higher risk companies with greater
growth prospects in sectors such as software and computer services, and
medical technology.
-- This is balanced by investment in more stable, often asset-backed
investments that provide a strong income stream. These include
asset-based businesses in the leisure, healthcare, education and
renewable energy sectors, as well as stable and profitable businesses in
other sectors. Such investments will constitute the majority of
investments by cost.
-- In neither category do portfolio companies normally have any external
borrowings with a prior charge ranking ahead of the VCT.
-- Up to two-thirds of qualifying investments by cost comprise loan stock
secured with a first charge on the portfolio company's assets.
Financial calendar
Record date for first dividend 1 May 2015
Payment of first dividend 29 May 2015
Annual General Meeting 12pm on 4 June 2015
Announcement of half-yearly results for the six months August 2015
ending 30 June 2015
Payment of second dividend (subject to Board approval) 30 September 2015
Financial highlights
Ordinary shares
150.8p Net asset value plus dividends per Ordinary share
from launch to 31 December 2014
3.4% Annualised return since launch before tax relief but
after initial issue costs
5.0p Total tax free dividends per Ordinary share paid in
the year to 31 December 2014
73.1p Net asset value per Ordinary share as at 31 December
2014
D shares
126.5p Net asset value plus dividends per D share from launch
to 31 December 2014
5.0% Annualised return since launch before tax relief but
after initial issue costs
5.0p Total tax free dividends per D share paid in the year
to 31 December 2014
109.5 Net asset value per D share as at 31 December 2014
Financial highlights
Ordinary shares D shares
31 December 2014 31 December 2013 31 December 2014 31 December 2013
pence per share pence per share pence per share pence per share
Dividends
paid 5.0 5.0 5.0 5.0
Revenue
return 1.0 1.1 3.0 3.0
Capital
return 3.0 4.0 4.1 11.4
Net asset
value 73.1 74.1 109.5 107.4
Total shareholder net asset value return to 31 December 2014:
Ordinary
shares C shares D shares
31 December 31 December 31 December
2014 2014 2014
(pence per (pence per (pence per
share) (ii) share) (ii) (iv) share)(ii)
Total dividends paid during the year ended: 31 December
1999(i) 1.0 - -
31 December 2000 2.9 - -
31 December 2001 3.9 - -
31 December 2002 4.2 - -
31 December 2003(iii) 4.5 0.7 -
31 December 2004 4.0 2.0 -
31 December 2005 5.2 5.9 -
31 December 2006 3.0 4.5 -
31 December 2007(iv) 5.0 5.3 -
31 December 2008 12.0 12.8 -
31 December 2009 4.0 4.3 -
31 December 2010 8.0 8.6 1.0
31 December 2011 5.0 5.4 2.5
31 December 2012 5.0 5.4 3.5
31 December 2013 5.0 5.4 5.0
31 December 2014 5.0 5.4 5.0
Total dividends paid to 31 December 2014 77.7 65.7 17.0
Net asset value as at 31 December 2014 73.1 78.3 109.5
Total shareholder return to 31 December 2014 150.8 144.0 126.5
In addition to the dividends paid above, the Board has declared a first
dividend for the year ending 31 December 2015, of 2.5 pence per Ordinary
share payable on 29 May 2015 to shareholders on the register as at 1 May
2015.
In accordance with the Articles of Association, on 31 March 2015, the D
shares will convert to Ordinary shares on the basis of the net assets
attributable to the Ordinary shares and the D shares as disclosed in the
audited accounts for the year to 31 December 2014 and in accordance with
the calculation as described and approved by shareholders' at the
Extraordinary General Meeting on 28 October 2009. D shareholders will
therefore receive 1.4975 Ordinary shares for each D share they currently
own. As such current holders of D shares will receive a dividend of 2.5
pence per Ordinary share held post merger.
Notes
(i) Assuming subscription for Ordinary shares by the First Closing on 26
January 1999.
(ii) Excludes tax benefits upon subscription.
(iii) Those subscribing for C shares after 30 June 2003 were not
entitled to the interim dividend.
(iv) The C shares were converted into Ordinary shares on 31 March 2007,
with a conversion of 1.0715 Ordinary shares for each C share. The net
asset value per share and all dividends paid subsequent to the
conversion of the C shares to the Ordinary shares are multiplied by the
conversion factor of 1.0715 in respect of the C shares return, in order
to give an accurate picture of the shareholder value since launch
relating to the C shares.
Chairman's statement
Introduction
The results for Albion Development VCT PLC for the year to 31 December
2014 showed total return of 4.0 pence per Ordinary share and 7.1 pence
per D share, against 5.1 pence and 14.4 pence respectively for 2013.
Investment performance and progress
We had three exits in 2014; two were investments which date back to
2001, namely Peakdale Molecular and Consolidated Communications. The
former resulted in a total return, including income received, of 2 times
cost and the latter resulted in 1.4 times cost. In addition, we sold the
successful Tower Bridge Health Club for a total return, including income,
of 2.8 times cost. After the year end, our investment in Orchard Portman
Group (which owns and operates a psychiatric hospital outside Taunton)
was sold at a multiple, including interest income, of 1.6 times cost.
In the meantime, investment activity continued to be strong, with a
total of GBP4.0 million invested for the Ordinary shares and GBP1.2
million for the D shares. Investments in new companies in the year by
both pools of shares comprised GBP610,000 in Egress (email encryption
products), GBP400,000 in Grapeshot (search software used in the online
advertising market), GBP650,000 in Omprompt (IT products and services
for the automation of order processing) and GBP840,000 in Exco Intouch
(healthcare IT services for monitoring clinical trials).
Companies that performed particularly well during the period, in
addition to those which were sold, included Lowcosttravel, which
experienced continued international growth; Proveca, which saw strong
advances in the development of its pipeline of drugs for paediatric use;
and Radnor House School, which continues to grow and has recently agreed
to purchase the Combe Bank School near Sevenoaks, which currently has
200 pupils and occupies a 35 acre freehold site.
Against this, the Weybridge Health Club saw a further reduction in its
third party professional valuation against the background of a strong
competitive environment, while Silent Herdsman and Aridhia Informatics
experienced slower progress than hoped for. In addition, our investment
in Helveta, which provided timber tracking services for the forest
industry, suffered from a withdrawal of international aid to the sector,
was placed into administration and the investment written off.
Merger of the Ordinary shares and D shares
As originally planned when the D shares where launched in 2009, the
Ordinary shares and the D shares are now due to merge based on their
respective net asset values at 31 December 2014. The D shares have had a
successful record, with net asset value now at 109.5 pence after having
paid dividends of 17 pence per share since launch. The shares will merge
on the basis that each holder of a D share will get 1.4975 new Ordinary
shares.
Risks and uncertainties
The outlook for the domestic and global economies continues to be the
key risk affecting your Company, despite the current growth in the UK.
The task of the Manager is to allocate resources to those sectors and
investment opportunities where growth can be both resilient and
sustainable. Importantly, however, investment risk is mitigated through
a variety of processes including our policy of ensuring that the VCT has
a first charge over investee companies' assets wherever possible.
A detailed analysis of the other risks and uncertainties facing the
business is shown in the Strategic report.
Discount management and 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. The Board's policy
is to buy back shares in the market, subject to the overall constraint
that such purchases are in the VCT's interest. It is the Board's
intention for 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.
During the year, the Company purchased in the market 877,700 Ordinary
shares at a cost of GBP613,000, representing 2.3 per cent. of the
opening shares in issue.
Transactions with the Manager
Details of transactions that took place with the Manager during the year
can be found in note 5 and principally relate to the management fee.
Results and dividends
As at 31 December 2014, the net asset value was 73.1 pence per Ordinary
Share and 109.5 pence per D share. The Company will pay a first
dividend for the financial year to 31 December 2015 of 2.5 pence per
Ordinary share on 29 May 2015 to shareholders on the register on 1 May
2015.
Albion VCTs Prospectus Top Up Offers 2014/2015
Your Board, in conjunction with the boards of other VCTs managed by
Albion Ventures LLP, launched a prospectus top up offer of new Ordinary
shares on 17 November 2014 with Albion Development VCT PLC aiming to
raise up to GBP6 million.
The funds raised by your Company pursuant to its Offer will be added to
the liquid resources available for investment so as to put the Company
into a position to take advantage of attractive investment opportunities
over the next two to three years. Accordingly, the proceeds of the Offer
will be applied in accordance with the investment policy. A prospectus
has been published and can be obtained from www.albion-ventures.co.uk.
Continuation as a venture capital trust
At the 2015 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, the Company has paid out dividends of 77.7 pence per
Ordinary share, 65.7 pence per C share and 17.0 pence per D share. Total
returns (net asset value plus dividends, but not counting the upfront
tax benefits) of 150.8 pence per Ordinary share, 144.0 pence per C share
and 126.5 pence per D share have been achieved.
Your Board believes that the 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 ten years, as they intend to vote in respect of their own
shares.
Outlook and prospects
The merger of the two classes of share, combined with the current
fundraising, will create an enlarged investment pool of approaching
GBP40 million. The spread of investments within that pool is unusually
broad and with good prospects for growth, both within the asset-backed
segment and the growth and technology portion. Therefore, despite the
generally muted outlook for economies globally, we believe our portfolio
as a whole has good prospects for sustained growth and value creation.
Geoffrey Vero
Chairman
10 March 2015
Strategic report
Investment objective and policy
Venture Capital Trusts use tax relief to encourage private investors to
help stimulate growth, employment and innovation in the United Kingdom.
The Company's investment policy is intended to provide investors with a
regular and predictable source of dividend income combined with the
prospects of long term capital growth. This is achieved by establishing
a diversified portfolio of holdings in smaller, unquoted companies
whilst at the same time selecting and structuring investments in such a
way as to manage and mitigate the risks normally associated with
investment in such companies. It is intended that this will be achieved
as follows:
-- Through investment in a number of higher risk companies with greater
growth prospects in sectors such as software and computer services, and
medical technology.
-- This is balanced by investment in more stable, often asset-backed
investments that provide a strong income stream. These include
asset-based businesses in the leisure, healthcare, education and
renewable energy sectors, as well as stable and profitable businesses in
other sectors. Such investments will constitute the majority of
investments by cost.
-- In neither category do portfolio companies normally have any external
borrowings with a prior charge ranking ahead of the VCT.
-- Up to two-thirds of qualifying investments by cost comprise loan stock
secured with a first charge on the portfolio company's assets.
Funds held pending investment or for liquidity purposes will be held as
cash on deposit or in floating rate notes or similar instruments with
banks or other financial institutions with high credit ratings assigned
by international credit rating agencies.
Current portfolio sector allocation
As mentioned above, it is intended that the Company's investment
portfolio will be split between higher risk companies with greater
growth prospects, balanced by investment in more stable companies, which
are often asset-backed, that provide a strong income stream combined
with a protection of capital. The pie charts at the end of this
announcement show the split of the portfolio valuation by industrial or
commercial sector as at 31 December 2014. Details of the principal
investments made by the Company are shown in the Portfolio of
investments on pages 17 to 21 of the full Annual Report and Financial
Statements.
Direction of portfolio
The sector analysis of the combined VCT's investment portfolio shows
that IT/Software now accounts for 17 per cent. compared to 18 per cent.
for Ordinary shares and 4 per cent. for D shares in the previous
financial year as a result of a number of new investments made in the IT
sector including Grapeshot and Egress. We would anticipate both the
IT/Software and Healthcare sectors increasing in importance in the
current period, as they are areas that the manager has targeted for
value creation and a good potential source of recurring income.
Renewable energy in the combined portfolio now accounts for 22 per cent.
compared to 18 per cent. for Ordinary shares and 25 per cent. for D
shares at the end of the previous financial year largely due to
revaluation movements throughout the portfolio over the past year. 20
per cent, by cost in aggregate, is the limit set by the Board for
renewable investments, so no further investment is planned in this
sector.
The sector analysis for the combined investment portfolio remain in line
with the Board's target exposure with a view to maintaining a balanced
portfolio of investments as new opportunities arise.
Results and dividend policy
Ordinary D
shares shares Combined
GBP'000 GBP'000 GBP'000
Net revenue return for the year ended 31 December
2014 363 190 553
Realised and unrealised capital gain for the year 1,111 263 1,374
Dividend of 2.5 pence per share paid on 30 May 2014 (911) (159) (1,070)
Dividend of 2.5 pence per share paid on 30 September
2014 (914) (159) (1,073)
Transferred (from)/to reserves (351) 135 (216)
Net assets as at 31 December 2014 27,440 6,995 34,435
Net asset value per share as at 31 December 2014 73.1p 109.5p
The Company paid dividends of 5.0 pence per Ordinary share and 5.0 pence
per D share during the year (2013: 5.00 pence per Ordinary share and 5.0
pence per D share).
As described in the Chairman's statement the Board has declared a first
dividend for the year ending 31 December 2015 of 2.5 pence per Ordinary
share payable on 29 May 2015 to shareholders on the register as at 1 May
2015.
As shown in the Ordinary share's Income statement, the total investment
income increased to GBP855,000 (2013: GBP731,000) due, in part, to
higher interest received on loan stock investments during the year. The
Ordinary share's total revenue return to equity holders has fallen to
GBP363,000 (2013: GBP379,000), due to the non-recurring impairment of
accrued interest (2013: GBPnil).
The Ordinary shares' total capital return for the year was GBP1,111,000
(2013: GBP1,335,000). This is mainly attributable to the unrealised
revaluation movements in the Company's investment portfolio and by
realised gains on disposal of investments, in particular Peakdale
Molecular and Tower Bridge Health Club, offset by management fees
charged to capital.
The Ordinary shares' total return was 4.0 pence per share (2013: 5.1
pence per share). The Ordinary shares' Balance sheet shows that the net
asset value has decreased over the last year to 73.1 pence per share
(2013: 74.1 pence per share). The decrease in net asset value can be
attributed to the payment of 5.0 pence per Ordinary share of dividends
offset by movements in realised and unrealised gains and net revenue
return.
The cash flow for the Ordinary shares and D shares was negative for the
year as a result of a number of new investments made and dividends paid
during the year, partially offset by net cash inflow from operating
activities, the disposal of investments and the issue of Ordinary
shares.
The D shares' Income statement shows a decrease in income to GBP296,000
(2013: GBP328,000) largely due to repayments on loan stock investments
made during the year by Hilson Moran, Masters Pharmaceuticals and Radnor
House School.
The D shares' total capital return was GBP263,000 (2013: GBP726,000)
reflecting the unrealised revaluations in the Company's investment,
offset by management fees charged to capital.
The D shares' total return was 7.1 pence per share (2013: 14.4 pence per
share). The D shares' Balance sheet shows a net asset value of 109.5
pence per share (2013: 107.4 pence per share). The increase in net asset
value can be attributed to the factors described above, notwithstanding
the payment of the dividend of 5.0 pence per D share during the year.
Review of business and outlook
The result for the year to 31 December 2014 show a total return of 150.8
pence per share since launch for Ordinary shares (2013: 146.8 pence per
share) and 126.5 pence per share since launch for D shares (2013: 119.4
pence per share). We believe there should be further progress in the
current year, with selected disposals and new investments, with
particular focus in our core areas of healthcare, IT/Software and
education.
The Directors do not foresee any major changes in the activity
undertaken by the Company in the current year. The Company continues
with its objective to invest in unquoted companies throughout the United
Kingdom with a view to providing both capital growth and a reliable
dividend income to shareholders over the long term.
A detailed review of the Company's business during the year is contained
in the Chairman's statement. 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 key drivers for returns within the portfolio are those sectors that
are involved in the longer-term global trends. These include the
importance of healthcare in an ageing population, sustainable energy
against a background of climate change, education amid the need to
improve the national skills base and the developing use of information
technology in an environment of universal information. The portfolio is
well positioned to take advantage of these changes, with a longer term
aim of total return exceeding dividends.
Conversion of D shares to Ordinary shares
As required under your Company's Articles of Association, the D shares
convert into Ordinary shares on the ratio of their respective net asset
values per share at 31 December 2014. The conversion is effective from
31 March 2015. Based on their respective net asset values, D
shareholders will receive 1.4975 new Ordinary shares for each D share
held. New share certificates will be sent out to shareholders by no
later than 30 April 2015. Once the new Ordinary share certificates have
been dispatched, the D share certificates will have no further value and
should be destroyed.
The merged portfolio will comprise investments in 46 companies and will
benefit from both the revenue generating maturity of the older companies
within the Ordinary share portfolio and the growth potential of the D
share portfolio.
Bearing in mind the projected income generation of the enlarged
portfolio, combined with available reserves and cash resources, it will
continue to be the Company's longer term target to pay out annual
dividends of 5 pence per Ordinary share, so far as it is able.
Key performance indicators
The Directors believe that the following key performance indicators,
which are typical for venture capital trusts, 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 objectives. These are:
1. Net asset value total return relative to FTSE All Share Index total
returnThe graphs on page 4 of the full Annual Report and Financial
Statements shows the net asset value total return against the FTSE
All-Share Index total return, in both instances with dividends
reinvested. Details on the performance of the net asset value and return
per share for the year are shown above.
2. Net asset value per share and cumulative net asset value total
shareholder returnNet asset value decreased by 1.3 per cent. to 73.1
pence per Ordinary share and increased by 1.9 per cent. to 109.5 pence
per D share for the year ended 31 December 2014.Cumulative net asset
value total return to shareholders increased by 2.7 per cent. to 150.8
pence per Ordinary share and 5.9 per cent. to 126.5 pence per D share for
the year ended 31 December 2014.
3. Dividend distributionsDividends paid in respect of the year ended 31
December 2014 were 5.0 pence per Ordinary share (2013: 5.0 pence per
Ordinary share) and 5.0 pence per D share (2013: 5.0 pence per D share),
in line with the Board's dividend objective. Cumulative dividends paid
since inception are 77.7 pence per Ordinary share and 17.0 pence per D
share.
4. Ongoing chargesThe ongoing charges ratio for the year to 31 December 2014
was 2.9 per cent. (2013: 2.9 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 next year to be approximately 2.9 per cent.
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
25 of the full Annual Report and Financial Statements.
As part of the Government's wider review of the VCT regime, new rules
have been introduced under the Finance Act 2014, which include:
-- allowing investors to subscribe for shares via nominee accounts;
-- restricting individuals' entitlement to VCT income tax relief where
investments have been made within six months of a disposal of shares in
the same VCT; and
-- preventing VCTs from returning capital that does not relate to profits on
investments within three years of the end of the accounting period in
which shares were issued to investors.
The Directors do not believe that updates to the Finance Act would
create a material change in the way the Company is currently run.
The relevant tests to measure compliance have been carried out and
independently reviewed for the year ended 31 December 2014. These showed
that the Company has compiled with all tests and continues to do so.
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 of the fees paid to the Manager can be found in note 5.
Management agreement
Under the Management agreement, the Manager provides investment
management, secretarial and administrative services to the Company. The
Management agreement may be terminated by either party on 12 months'
notice and 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 2.25 per cent. of the net asset value of the Company
paid quarterly in arrears.
Total annual expenses, including the management fee, are limited to 3.0
per cent. of the net asset value.
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 also Directors' fees where the
Manager has a representative on the portfolio company's board.
Management performance incentive
The management performance incentive structure sets a minimum target
level whereby no performance fee is payable to the Manager until the
total return exceeds 6.5 pence per share per annum from a base on 1
January 2007 of 98.7 pence for the Ordinary shares and 100 pence for the
D shares from the date of first admission of those shares. If the target
return is not achieved in a period, the cumulative shortfall is carried
forward to the next accounting period and has to be made up before an
incentive fee becomes payable. To the extent that the total return
exceeds the threshold over the relevant period, a performance fee will
be paid to the Manager of an amount equal to 20 per cent. of the excess.
As a result of the conversion of the D shares to Ordinary shares, the
performance incentive will be amended to accommodate the fact that there
will only be one class of share in the future. Given the fact that the
enlarged pool of investments following the merger of the two share
classes will be represented by share issues over two very different
periods of time, the amended Management performance incentive will
therefore be applied against the capital of the Company in proportion to
the audited net asset values of the Ordinary shares and the D shares at
31 December 2014 and will be measured against the total return
applicable to each of those share classes.
The revised management performance incentive is illustrated as follows:
Total return Hurdle rate at Share class %
Share class at 31 December 2014 (p) 31 December 2014 (p) of net assets
Ordinary
share 150.8 180.2 80%
D share 126.5 130.9 20%
Any performance fee payable will be calculated based on the above
hurdles, escalating at 6.5p per annum, and in respect of the relevant
proportion of that share class' share of the Company's net assets as at
31 December 2014.
There was no management performance incentive fee payable during the
year (2013: nil).
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 has 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.
Discount management and share buy-back policy
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. The Board's policy
is to buy back shares in the market, subject to the overall constraint
that such purchases are in the Company's interest.
It is the Board's intention for 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.
Further details of shares bought back during the year ended 31 December
2014 can be found in note 15 of the Financial Statements.
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 pages 25 and 26 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 risk Changes in economic conditions, including, for example, To reduce this risk, in addition to investing equity
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 risk This is the risk of investment in poor quality assets To reduce this risk, the Board places reliance upon
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 risk The Company's investment valuation methodology is As described in note 2 of the Financial Statements,
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 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. The values of a number of investments
are also underpinned by independent third party professional
valuations.
VCT approval risk The Company's current approval as a venture capital To reduce this risk, the Board has appointed the Manager,
trust allows investors to take advantage of tax reliefs which has a team with significant experience in venture
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 as its
on any tax-free income or capital gains received. taxation adviser. Robertson Hare LLP report quarterly
In addition, failure to meet the qualifying requirements to the Board to independently confirm compliance with
could result in a loss of listing of the shares. 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 risk The Company is listed on The London Stock Exchange Board members and the Manager have experience of operating
and is required to comply with the rules of the UK or advising at senior levels within 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.
delisting of the Company's shares, or other penalties
under the Companies Act or from financial reporting
oversight bodies.
Internal control Failures in key controls, within the Board or within The Audit Committee meets with the Manager's Internal
risk the Manager's business, could put assets of the Company Auditor, PKF Littlejohn LLP, when required, receiving
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. Patrick Reeve, as a member of the Board,
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 on page 32 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 upon The Company is reliant upon the services of Albion There are provisions within the management agreement
third parties risk Ventures LLP for the provision of investment management for the change of Manager under certain circumstances
and administrative functions. (for further detail, see the management agreement
paragraph within this Strategic Report). In addition,
the Manager has demonstrated to the Board that there
is no undue reliance placed upon any one individual
within Albion Ventures LLP.
Financial risk By its nature, as a venture capital trust, the Company The Company's policies for managing these risks and
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 risk Arises from broader performance and ethical issues, The Board clearly articulates to the Investment Manager
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 investee 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 investee 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 December 2014
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,
Geoffrey Vero
Chairman
10 March 2015
Responsibility Statement
In preparing these financial statements for the year to 31 December
2014, the Directors of the Company, being Geoffrey Vero, Jonathan
Thornton, Andrew Phillipps and Patrick Reeve, 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
December 2014 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 December 2014 as required by DTR 4.1.12.R;
- 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 December 2014 and description of principal
risks and uncertainties that the Company faces); and
- the Chairman's statement and Strategic 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
Geoffrey Vero
Chairman
10 March 2015
Income statement
Combined Combined
Year ended 31 December 2014 Year ended 31 December 2013
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on
investments 3 - 1,817 1,817 - 2,474 2.474
Investment
income 4 1,151 - 1,151 1,059 - 1,059
Investment
management
fees 5 (187) (562) (749) (177) (532) (709)
Other expenses 6 (305) - (305) (196) - (196)
Return on
ordinary
activities
before tax 659 1,255 1,914 686 1,942 2,628
Tax
(charge)/credit
on ordinary
activities 8 (106) 119 13 (114) 119 5
Return
attributable to
shareholders 553 1,374 1,927 572 2,061 2,633
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 return is due to the fair value movements on
investments. As a result a note on historical cost profit and losses has
not been prepared.
Disclosure of basic and diluted earnings per share is given in the
underlying Ordinary and D share Income statements.
Income statement (non-statutory analysis)
Ordinary shares Ordinary shares
Year ended 31 December 2014 Year ended 31 December 2013
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on
investments 3 - 1,471 1,471 - 1,665 1,665
Investment
income 4 855 - 855 731 - 731
Investment
management
fees 5 (148) (446) (594) (141) (422) (563)
Other expenses 6 (259) - (259) (152) - (152)
Return on
ordinary
activities
before tax 448 1,025 1,473 438 1,243 1,681
Tax
(charge)/credit
on ordinary
activities 8 (85) 86 1 (59) 92 33
Return
attributable to
shareholders 363 1,111 1,474 379 1,335 1,714
Basic and
diluted return
per share
(pence)* 10 1.0 3.0 4.0 1.1 4.0 5.1
D shares D shares
Year ended 31 December 2014 Year ended 31 December 2013
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on
investments 3 - 346 346 - 809 809
Investment
income 4 296 - 296 328 - 328
Investment
management
fees 5 (39) (116) (155) (36) (110) (146)
Other expenses 6 (46) - (46) (44) - (44)
Return on
ordinary
activities
before tax 211 230 441 248 699 947
Tax
(charge)/credit
on ordinary
activities 8 (21) 33 12 (55) 27 (28)
Return
attributable to
shareholders 190 263 453 193 726 919
Basic and
diluted return
per share
(pence)* 10 3.0 4.1 7.1 3.0 11.4 14.4
* excluding treasury shares
The accompanying notes form an integral part of these Financial
Statements.
Balance sheet
Combined Combined
31 December 2014 31 December 2013
Note GBP'000 GBP'000
Fixed asset investments 11 29,873 25,997
Current assets
Trade and other debtors 13 201 99
Current asset investments 13 - 36
Cash at bank and in hand 17 4,645 6,210
4,846 6,345
Creditors: amounts falling due
within one year 14 (284) (340)
Net current assets 4,562 6,005
Net assets 34,435 32,002
Capital and reserves
Called up share capital 15 482 441
Share premium 5,560 2,343
Capital redemption reserve 12 8
Unrealised capital reserve 1,954 125
Realised capital reserve 4,500 3,772
Other distributable reserve 21,927 25,313
Total equity shareholders' funds 34,435 32,002
The accompanying notes form an integral part of these Financial
Statements.
Disclosure of basic and diluted net asset value per share is given in
the underlying Ordinary and D shares Balance sheets.
These Financial Statements were approved by the Board of Directors, and
authorised for issue on 10 March 2015 and were signed on its behalf by
Geoffrey Vero
Chairman
Company number: 03654040
Balance sheet (non-statutory analysis)
Ordinary shares Ordinary shares
31 December 2014 31 December 2013
Note GBP'000 GBP'000
Fixed asset investments 11 23,449 20,945
Current assets
Trade and other debtors 13 195 95
Current asset investments 13 - 36
Cash at bank and in hand 17 4,010 4,330
4,205 4,461
Creditors: amounts falling due
within one year 14 (214) (231)
Net current assets 3,991 4,230
Net assets 27,440 25,175
Capital and reserves
Called up share capital 15 418 377
Share premium 5,488 2,304
Capital redemption reserve 12 8
Unrealised capital reserve 544 (987)
Realised capital reserve 4,494 3,731
Other distributable reserve 16,484 19,742
Total equity shareholders' funds 27,440 25,175
Basic and diluted net asset value
per share (pence)* 16 73.1 74.1
* excluding treasury shares
The accompanying notes form an integral part of these Financial
Statements.
Balance sheet (non-statutory analysis)
D shares D shares
31 December 2014 31 December 2013
Note GBP'000 GBP'000
Fixed asset investments 11 6,424 5,052
Current assets
Trade and other debtors 13 6 4
Cash at bank and in hand 17 635 1,880
641 1,884
Creditors: amounts falling due
within one year 14 (70) (109)
571
Net current assets 1,775
Net assets 6,995 6,827
Capital and reserves
Called up share capital 15 64 64
Share premium 72 39
Unrealised capital reserve 1,410 1,112
Realised capital reserve 6 41
Other distributable reserve 5,443 5,571
Total equity shareholders' funds 6,995 6,827
Basic and diluted net asset value
per share (pence)* 16 109.5 107.4
* excluding treasury shares
The accompanying notes form an integral part of these Financial
Statements.
Reconciliation of movements in shareholders' funds
Combined
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 January 2014 441 2,343 8 125 3,772 25,313 32,002
Return for the year - - - 1,254 120 553 1,927
Transfer of unrealised losses to realised losses - - - 575 (575) - -
Cancellation of treasury shares (1) - 1 - - - -
Purchase of shares for cancellation (3) - 3 - - (190) (190)
Purchase of treasury shares - - - - - (423) (423)
Issue of equity (net of costs) 45 3,217 - - - - 3,262
Transfer from other distributable reserve to realised
capital reserve - - - - 1,183 (1,183) -
Dividends paid - - - - - (2,143) (2,143)
As at 31 December 2014 482 5,560 12 1,954 4,500 21,927 34,435
As at 1 January 2013 421 392 2 (2,046) 3,326 28,010 30,105
Return/(loss) for the year - - - 2,253 (191) 572 2,633
Transfer of unrealised gains to realised gains - - - (82) 82 - -
Purchase of shares for treasury - - - - - (261) (261)
Purchase of shares for cancellation (6) - 6 - - (441) (441)
Issue of equity (net of costs) 26 1,951 - - - - 1,977
Transfer from other distributable reserve to realised
capital reserve - - - - 555 (555) -
Dividends paid - - - - - (2,012) (2,012)
As at 31 December 2013 441 2,343 8 125 3,772 25,313 32,002
* Included within these reserves is an amount of GBP26,427,000 (2013:
GBP29,085,000) which is considered distributable.
A transfer of GBP1,183,000 (2013: GBP555,000) representing gross
realised losses on disposal of investments during the year ended 31
December 2014 has been made from the other distributable reserve to the
realised capital reserve.
Reconciliation of movements in shareholders' funds
Ordinary shares (non-statutory analysis)
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 January 2014 377 2,304 8 (987) 3,731 19,742 25,175
Return for the year - - - 913 198 363 1,474
Transfer of unrealised losses to realised losses - - - 618 (618) - -
Cancellation of treasury shares (1) - 1 - - - -
Purchase of shares for cancellation (3) - 3 - - (190) (190)
Purchase of treasury shares - - - - - (423) (423)
Issue of equity (net of costs) 45 3,184 - - - - 3,229
Transfer from other distributable reserve to realised
capital reserve - - - - 1,183 (1,183) -
Dividends paid - - - - - (1,825) (1,825)
As at 31 December 2014 418 5,488 12 544 4,494 16,484 27,440
As at 1 January 2013 357 383 2 (2,661) 3,514 22,265 23,860
Return/(loss) for the year - - - 1,428 (92) 379 1,714
Transfer of unrealised losses to realised losses - - - 246 (246) - -
Purchase of shares for treasury - - - - - (238) (238)
Purchase of shares for cancellation (6) - 6 - - (414) (414)
Issue of equity (net of costs) 26 1,921 - - - - 1,947
Transfer from other distributable reserve to realised
capital reserve - - - - 555 (555) -
Dividends paid - - - - - (1,695) (1,695)
As at 31 December 2013 377 2,304 8 (987) 3,731 19,742 25,175
* Included within these reserves is an amount of GBP20,978,000 (2013:
GBP22,486,000) which is considered distributable.
A transfer of GBP1,183,000 (2013: GBP555,000) representing gross
realised losses on disposal of investments during the year ended 31
December 2014 has been made from the other distributable reserve to the
realised capital reserve.
Reconciliation of movements in shareholders' funds
D shares (non-statutory analysis)
Called-up Unrealised Realised Other
share Share capital capital distributable
capital premium reserve reserve* reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 January
2014 64 39 1,112 41 5,571 6,827
Return/(loss)
for the year - - 341 (78) 190 453
Transfer of
unrealised
gains to
realised
gains - - (43) 43 - -
Issue of equity
(net of
costs) - 33 - - - 33
Dividends paid - - - - (318) (318)
As at 31
December 2014 64 72 1,410 6 5,443 6,995
As at 1 January
2013 64 9 615 (188) 5,745 6,245
Return/(loss)
for the year - - 825 (99) 193 919
Transfer of
unrealised
gains to
realised
gains - - (328) 328 - -
Purchase of
shares for
treasury - - - - (23) (23)
Purchase of
shares for
cancellation - - - - (27) (27)
Issue of equity
(net of
costs) - 30 - - - 30
Dividends paid - - - - (317) (317)
As at 31
December 2013 64 39 1,112 41 5,571 6,827
* Included within these reserves is an amount of GBP5,449,000 (2013:
GBP5,612,000) which is considered distributable.
Cash flow statement
Combined Combined
Year ended Year ended
31 December 2014 31 December 2013
Note GBP'000 GBP'000
Operating activities
Loan stock income received 1,012 983
Deposit interest received 67 122
Dividend income received 53 25
Investment management fees paid (736) (699)
Other cash payments (195) (216)
Net cash flow from operating activities 18 201 215
Taxation
UK corporation tax paid - (24)
Capital expenditure and financial investments
Purchase of fixed asset investments (5,157) (3,697)
Disposal of fixed asset investments 2,814 2,809
Disposal of current asset investments 71 512
Net cash flow from investing activities (2,272) (376)
Equity dividends paid
Dividends paid (net of cost of shares issued under
the Dividend Reinvestment Scheme) (1,909) (1,846)
Net cash flow before financing (3,980) (2,031)
Financing
Issue of share capital (net of costs) 3,029 1,812
Purchase of own shares (including costs) 15 (614) (702)
Net cash flow from financing 2,415 1,110
Cash flow in the year 17 (1,565) (921)
Cash flow statement (non-statutory analysis)
Ordinary Ordinary
shares shares
Year ended Year ended
31 December 2014 31 December 2013
Note GBP'000 GBP'000
Operating activities
Loan stock income received 741 686
Deposit interest received 55 83
Dividend income received 39 23
Investment management fees paid (582) (556)
Other cash payments (152) (166)
Net cash flow from operating activities 18 101 70
Taxation
UK corporation tax recovered/(paid) 28 (24)
Capital expenditure and financial investments
Purchase of fixed asset investments (3,969) (3,124)
Disposal of fixed asset investments 2,658 1,486
Disposal of current asset investments 71 12
Net cash flow from investing activities (1,240) (1,626)
Equity dividends paid
Dividends paid (net of cost of shares issued under
Dividend Reinvestment Scheme) (1,624) (1,559)
Net cash flow before financing (2,735) (3,139)
Financing
Issue of share capital (net of costs) 3,029 1,812
Purchase of own shares (including costs) 15 (614) (652)
Net cash flow from financing 2,415 1,160
Cash flow in the year 17 (320) (1,979)
Cash flow statement (non-statutory analysis)
D shares D shares
Year ended Year ended
31 December 2014 31 December 2013
Note GBP'000 GBP'000
Operating activities
Loan stock income received 271 297
Deposit interest received 12 39
Dividend income received 14 2
Investment management fees paid (154) (143)
Other cash payments (43) (50)
Net cash flow from operating activities 18 100 145
Taxation
UK corporation tax paid (28) -
Capital expenditure and financial investments
Purchase of fixed asset investments (1,188) (573)
Disposal of fixed asset investments 156 1,323
Disposal of current asset investments - 500
Net cash flow from investing activities (1,032) 1,250
Equity dividends paid
Dividends paid (net of cost of shares issued under
the Dividend Reinvestment Scheme) (285) (287)
Net cash flow before financing (1,245) 1,108
Financing
Purchase of own shares (including costs) 15 - (50)
Net cash flow from financing - (50)
Cash flow in the year 17 (1,245) 1,058
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
Quoted and unquoted equity investments, debt issued at a discount, and
convertible bonds
In accordance with FRS 26 "Financial Instruments Recognition and
Measurement", quoted and unquoted equity, debt issued at a discount and
convertible bonds are designated as fair value through profit or loss
("FVTPL"). Investments listed on recognised exchanges are valued at the
closing bid prices at the end of the accounting period. Unquoted
investments' 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.
Warrants and unquoted equity derived instruments
Warrants and unquoted equity derived instruments are only valued if
there is deemed to be 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 debt issued at a discount and convertible
bonds) is classified as loans and receivables as permitted by FRS 26 and
measured at amortised cost using the effective interest rate method 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 for 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 movement 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 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
or loss.
Current asset investments
Contractual future contingent receipts on disposal of fixed asset
investments are designated at fair value through profit or loss and are
subsequently measured at fair value.
Fixed term deposits are classified as current asset investments as they
are investments held for the short term.
Investment income
Unquoted equity income
Dividend income is included in revenue when the investment is quoted
ex-dividend.
Unquoted loan stock income
Fixed returns on non-equity shares and debt securities are recognised on
a time apportionment basis using an 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 accruals 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 column of the Income statement except the
following which are charged through the realised capital reserve:
-- 75 per cent. of management fees are allocated to the capital account 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 or is
provided for, 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.
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.
Reserves
Share premium reserve
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
The special reserve, treasury share reserve and the revenue reserve were
combined in 2012 to form a single reserve named other distributable
reserve.
This reserve accounts for movements from the revenue column of the
Income statement, the payment of dividends, the buy-back of shares and
other non-capital realised movements.
D shares
Until such time that D shares are converted into Ordinary shares, all
investments and returns attributable to this class of share will be
separately identifiable from the existing Ordinary shares. All residual
expenses will be allocated in the ratio of the respective Net Asset
Values of each class of share.
3. Gains on investments
Year ended Year ended
31 December 2014 31 December 2013
Ordinary D Ordinary D
shares shares Total shares shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Unrealised gains on fixed asset investments held at
fair value through profit or loss 953 318 1,271 1,344 773 2,117
Unrealised (impairments)/reversals of impairments
on fixed asset investments held at amortised cost (40) 23 (17) 78 52 130
913 341 1,254 1,422 825 2,247
Unrealised gains on current asset investments held
at fair value through profit or loss - - - 6 - 6
Unrealised gains sub-total 913 341 1,254 1,428 825 2,253
Realised gains/(losses) on investments held at fair
value through profit or loss 423 - 423 286 (23) 263
Realised gains/(losses) on investments held at amortised
cost 97 5 102 (49) 7 (42)
520 5 525 237 (16) 221
Realised gains on current asset investments held at
fair value through profit or loss 38 - 38 - - -
Realised gains/(losses) sub-total 558 5 563 237 (16) 221
1,471 346 1,817 1,665 809 2,474
Investments measured at amortised cost are unquoted loan stock
investments as described in note 2.
4. Investment income
Year ended Year ended
31 December 2014 31 December 2013
Ordinary D Ordinary D
shares shares Total shares shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income recognised on investments held at fair value
through profit or loss
Dividend income 37 14 51 25 2 27
Income from convertible bonds and discounted debt 348 115 463 206 94 300
385 129 514 231 96 327
Income recognised on investments held at amortised
cost
Bank deposit interest 55 11 66 72 23 95
Return on loan stock investments 415 156 571 428 209 637
470 167 637 500 232 732
855 296 1,151 731 328 1,059
Interest income earned on impaired investments at 31 December 2014
amounted to GBP104,000 (2013: GBP122,000). These investments are all
held at amortised cost.
5. Investment management fees
Year ended Year ended
31 December 2014 31 December 2013
Ordinary D Ordinary D
shares shares Total shares shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management fee charged to revenue 148 39 187 141 36 177
Investment management fee charged to capital 446 116 562 422 110 532
594 155 749 563 146 709
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 GBP749,000 (2013:
GBP709,000) were purchased by the Company from Albion Ventures LLP in
respect of management fees. At the financial year end, the amount due to
Albion Ventures LLP disclosed as accruals was GBP193,000 (2013:
GBP180,000).
During the year, the Company was not charged by Albion Ventures LLP in
respect of Patrick Reeve's services as a Director (2013: GBPnil).
Albion Ventures LLP is, from time to time, eligible to receive
transaction fees and Directors' fees from portfolio companies. During
the year ended 31 December 2014, fees of GBP212,000 attributable to the
investments of the Company were received pursuant to these arrangements
(2013: GBP176,000).
Albion Ventures LLP holds 331 fractional entitlement shares of the
Company as a result of the conversion of C shares to Ordinary shares in
March 2007. These shares will be sold for the benefit of the Company at
a future date.
Albion Ventures LLP also holds 23,536 Ordinary shares as a result of the
failure of an original subscriber to pay cleared funds on initial
subscription.
6. Other expenses
Year ended Year ended
31 December 2014 31 December 2013
Ordinary D Ordinary D
shares shares Total shares shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Directors' fees (including NIC) 52 14 66 60 15 75
Other administrative expenses 84 26 110 72 24 96
Impairment of accrued interest 102 - 102 - - -
Auditor's remuneration for statutory audit services
(excluding VAT) 21 6 27 20 5 25
259 46 305 152 44 196
The impairment of accrued interest expense is considered to be
non-reccurring and therefore is excluded from the calculation of the
ongoing charges ratio as noted in the Strategic report.
7. Directors' fees
The amounts paid to and on behalf of Directors during the year are as
follows:
Year ended Year ended
31 December 2014 31 December 2013
Ordinary D Ordinary D
shares shares Total shares shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Directors' fees 49 13 62 57 14 71
National insurance 3 1 4 3 1 4
52 14 66 60 15 75
Further information can be found in the Directors' remuneration report
on page 35 of the full Annual Report and Financial Statements.
8. Tax (charge)/credit on ordinary activities
The Company's combined tax credit of GBP13,000 (2013 credit: GBP5,000)
is analysed between the two share classes as follows:
Year ended Year ended
31 December 2014 31 December 2013
Revenue Capital Total Revenue Capital Total
Combined GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK corporation tax in respect of current year (128) 119 (9) (147) 119 (28)
UK corporation tax in respect of prior years 22 - 22 33 - 33
(106) 119 13 (114) 119 5
Year ended Year ended
31 December 2014 31 December 2013
Revenue Capital Total Revenue Capital Total
Ordinary shares GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK corporation tax in respect of current year (86) 86 - (92) 92 -
UK corporation tax in respect of current year (42) 33 (9) (55) 27 (28)
UK corporation tax in respect of prior years 21 - 21 - - -
(21) 33 12 (55) 27 (28)
Year ended Year ended
Factors affecting the tax credit/(charge): 31 December 2014 31 December 2013
Ordinary D Ordinary D
shares shares Total shares shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Profit on ordinary activities before taxation 1,473 441 1,914 1,681 947 2,628
Tax on profit at the standard rate of 21.50 per cent.
(2013: 23.25 per cent.) (317) (95) (412) (390) (220) (610)
Factors affecting the charge:
Gains on investments not subject to tax 317 74 391 384 188 572
Non-taxable income 8 3 11 6 - 6
Unutilised management expenses (8) 8 - - - -
Marginal relief - 1 1 - 4 4
Adjustment in respect of prior years 1 21 22 33 - 33
1 12 13 33 (28) 5
The tax credit for the year shown in the Income statement is lower than
the standard rate of corporation tax in the UK of 21.50 per cent. (2013:
23.25 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
years.
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 December 2014 31 December 2013
Ordinary shares GBP'000 GBP'000
Dividend of 2.5p per Ordinary share paid on 31 May
2013 - 841
Dividend of 2.5p per Ordinary share paid on 30 September
2013 - 854
Dividend of 2.5p per Ordinary share paid on 30 May
2014 911 -
Dividend of 2.5p per Ordinary share paid on 30 September
2014 914 -
1,825 1,695
Year ended Year ended
31 December 2013 31 December 2013
D shares GBP'000 GBP'000
Dividend of 2.5p per D share paid on 31 May 2013 - 159
Dividend of 2.5p per D share paid on 30 September
2013 - 158
Dividend of 2.5p per D share paid on 30 May 2014 159 -
Dividend of 2.5p per D share paid on 30 September
2014 159 -
318 317
In addition to the dividends summarised above, the Board has declared a
first dividend of 2.5 pence per Ordinary share for the year ending 31
December 2015, payable on 29 May 2015 to shareholders on the register as
at 1 May 2015. The current holders of D shares will receive a dividend
of 2.5 pence per Ordinary share held post merger. The total dividend
will be approximately GBP1,227,000.
10. Basic and diluted return per share
Year ended Year ended
31 December 2014 31 December 2013
Ordinary shares Revenue Capital Total Revenue Capital Total
The return per share has been based
on the following figures:
Return attributable to equity shares
(GBP'000) 363 1,111 1,474 379 1,335 1,714
Weighted average shares in issue
(excluding treasury shares) 36,282,578 33,589,482
Return attributable per equity share
(pence) 1.0 3.0 4.0 1.1 4.0 5.1
The weighted average number of Ordinary shares is calculated excluding
the treasury shares of 4,306,700 (2013: 3,769,000).
Year ended Year ended
31 December 2014 31 December 2013
D shares Revenue Capital Total Revenue Capital Total
The return per share has been based
on the following figures:
Return attributable to equity
shares (GBP'000) 211 263 453 193 726 919
Weighted average shares in issue
(excluding treasury shares) 6,369,555 6,355,743
Return attributable per equity
share (pence) 3.0 4.1 7.1 3.0 11.4 14.4
The weighted average number of D shares is calculated excluding the
treasury shares of 25,625 (2013: 25,625).
There are no convertible instruments, derivatives or contingent share
agreements in issue so basic and diluted return per share are the same.
11. Fixed asset investments
The classification of investments by nature of instruments is as
follows:
31 December 2014 31 December 2013
Ordinary D Ordinary D
shares Shares Total shares shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments held at fair value
through profit or loss
Unquoted equity and
preference shares 9,416 2,933 12,349 8,264 1,972 10,236
Quoted equity 401 - 401 - - -
Discounted debt and
convertible loan
stock 6,313 1,793 8,106 5,008 1,531 6,539
16,130 4,726 20,856 13,272 3,503 16,775
Investments held
at amortised cost
Unquoted loan stock 7,319 1,698 9,017 7,673 1,549 9,222
23,449 6,424 29,873 20,945 5,052 25,997
Ordinary D
shares shares Combined
GBP'000 GBP'000 GBP'000
Opening valuation as at 1 January 2014 20,945 5,052 25,997
Purchases at cost 3,957 1,185 5,142
Disposal proceeds (2,812) (156) (2,968)
Realised gains 520 5 525
Movement in loan stock accrued income (74) (3) (77)
Unrealised gains 913 341 1,254
Closing valuation as at 31 December 2014 23,449 6,424 29,873
Movement in loan stock accrued income
Opening accumulated movement in loan stock accrued
income 186 25 211
Movement in loan stock accrued income (74) (3) (77)
Closing accumulated movement in loan stock accrued
income as at 31 December 2014 112 22 134
Movement in unrealised gains
Opening accumulated unrealised (losses)/gains (1,200) 1,112 (88)
Transfer of previously unrealised gains/(losses) on
disposal 654 (43) 611
Movement in unrealised gains 913 341 1,254
Closing accumulated unrealised gains as at 31 December
2014 367 1,410 1,777
Historic cost basis
Opening book cost 21,959 3,914 25,873
Purchases at cost 3,957 1,185 5,142
Sales at cost (2,946) (107) (3,053)
Closing book cost as at 31 December 2014 22,970 4,992 27,962
Purchases and disposals detailed above do not agree to the Cash flow
statement due to restructuring of investments, conversion of convertible
loan stock and settlement debtors and creditors.
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.
A schedule of disposals during the year is shown on pages 19 and 21 of
the full Annual Report and Financial Statements.
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 shares, convertible loan stock and debt
issued at a discount are all valued according to Level 3 valuation
methods.
The Ordinary shares' Level 3 investments had the following movements in
the year to 31 December 2014:
31 December 2014 31 December 2013
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 8,264 5,008 13,272 5,490 3,534 9,024
Additions 2,000 1,395 3,395 965 2,032 2,997
Disposals (1,775) (3) (1,778) (363) (372) (735)
Realised gains/(losses) 663 (240) 423 107 179 286
Debt/equity conversion and representation of convertible
bond and debt - - - 772 (425) 347
Transfer to Level 1 (772) (164) (936) - - -
Unrealised gains 1,036 288 1,324 1,293 51 1,344
Accrued loan stock interest - 29 29 - 9 9
Closing balance 9,416 6,313 15,729 8,264 5,008 13,272
The D shares' Level 3 investments had the following movements in the
year to 31 December 2014:
31 December 2014 31 December 2013
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 1,972 1,531 3,503 1,471 1,184 2,655
Additions 711 193 904 262 331 593
Disposals - - - (499) - (499)
Realised losses - - - (23) - (23)
Unrealised gains 250 68 318 761 12 773
Accrued loan
stock interest - 1 1 - 4 4
Closing balance 2,933 1,793 4,726 1,972 1,531 3,503
Investments held at fair value through profit or loss are valued in
accordance with the IPEVCV guidelines as follows:
31 December 2014 31 December 2013
Ordinary D Ordinary D
shares shares Total shares shares Total
Valuation methodology GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net asset value supported by third party valuation 4,509 2,580 7,089 4,339 2,205 6,544
Cost and price of recent investment (reviewed for
impairment) 4,749 959 5,708 3,912 780 4,692
Revenue multiple 2,839 220 3,059 2,377 - 2,377
Earnings multiple 2,143 613 2,756 2,146 518 2,664
Agreed offer price 1,489 354 1,843 498 - 498
15,729 4,726 20,455 13,272 3,503 16,775
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 68 per cent. of the Ordinary
shares' and 82 per cent. of the D shares' Level 3 investments (by
valuation) is based on third party independent evidence, recent
investment price, agreed offer price and cost, the Directors believe
that changes to reasonable possible alternative assumptions for the
valuation of the remainder of the portfolio could lead to a significant
change in the fair value of the Ordinary shares portfolio. The impact of
these changes could result in an increase in the valuation of
investments by GBP373,000 or a decrease in investments by GBP410,000 for
the Ordinary share portfolio. The Directors do not believe that changes
to reasonable possible alternative input assumptions for the D share
portfolio would have a significant impact.
The Ordinary shares' unquoted equity instruments had the following
movements between investment methodologies between 31 December 2013 and
31 December 2014:
Change in valuation methodology Value as at Explanatory
(2013 to 2014) 31 December 2014 note
GBP'000
Net asset value supported by 633 Agreed offer
third party valuation to agreed offer price price
Cost (reviewed for impairment) 268 Agreed offer
to agreed offer price price
Cost (reviewed for impairment) 240 More relevant
to revenue multiple valuation
methodology
Cost (reviewed for impairment) 97 Third party
to net asset value supported by valuation has
third party valuation recently
taken place
The D shares' unquoted equity instruments had the following movements
between investment methodologies between 31 December 2013 and 31
December 2014:
Change in valuation methodology Value as at Explanatory
(2013 to 2014) 31 December 2014 note
GBP'000
Cost (reviewed for impairment) 93 Agreed offer
to agreed offer price price
Cost (reviewed for impairment) 60 More relevant
to revenue multiple valuation
methodology
Net asset value supported by 60 Agreed offer
third party valuation to agreed offer price price
Cost (reviewed for impairment) 8 Third party
to net asset value supported by valuation has
third party valuation recently
taken place
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 IPEVCV Guidelines. The
Directors believe that, within these parameters, there are no other
possible methods of valuation which would be reasonable as at 31
December 2014.
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 day-to-day management of a portfolio company. 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 December 2014, as described below:
% total
voting rights
Country of Principal % class and held by the
Company incorporation activity share type Company
Albion
Investment Owner of
Properties residential 48.4% A
Limited Great Britain property Ordinary 48.4%
Mobile data 34.9% A
Blackbay Limited Great Britain solutions Ordinary 7.4%
International
Masters specialist
Pharmaceuticals distributor of 21.1% A
Limited Great Britain pharmaceuticals Ordinary 4.4%
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 are not accounted for using the equity method.
13. Trade and other debtors and current asset investments
31 December 2014 31 December 2013
Ordinary D Ordinary D
Trade and shares shares Total shares shares Total
other debtors GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Prepayments and accrued income 14 3 17 17 4 21
UK corporation tax receivable 1 - 1 14 - 14
Other debtors 180 3 183 64 - 64
195 6 201 95 4 99
31 December 2014 31 December 2013
Ordinary D Ordinary D
Current asset shares shares Total shares shares Total
investments GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Contingent future receipts on disposal of fixed asset
investments - - - 36 - 36
- - - 36 - 36
The fair value hierarchy applied to contingent future receipts on
disposal of fixed asset investments is Level 3.
The only movements in current asset investments during the year was the
deferred receipts on disposal of fixed asset investments.
14. Creditors: amounts falling due within one year
31 December 2014 31 December 2013
Ordinary D Ordinary D
shares shares Total shares shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Accruals 200 51 251 184 50 234
UK corporation tax
payable - 2 2 - 28 28
Other creditors 14 17 31 47 31 78
214 70 284 231 109 340
15. Called up share capital
31 December 2014 31 December 2013
Ordinary D Ordinary D
shares shares Total shares shares Total
Allotted, called up and fully paid shares of 1 penny
each
Number of shares 41,834,205 6,413,822 48,248,027 37,728,166 6,381,604 44,109,770
Nominal value of allotted shares (GBP'000) 418 64 482 377 64 441
Voting rights (net of treasury shares) 37,527,505 6,388,197 43,915,702 33,959,166 6,355,979 40,315,145
The Company purchased 272,000 Ordinary shares (2013: 605,000) for
cancellation at a cost of GBP190,000 (2013: GBP414,000). The Company
purchased no D shares for cancellation (2013: 31,587 at a cost of
GBP27,000).
The Company purchased 605,700 Ordinary shares (2013: 341,000) at a cost
of GBP424,000 (2013: GBP238,000) to be held in treasury during the year.
The Company purchased no D shares to be held in treasury (2013: 25,625
at a cost of GBP23,000). The Company cancelled 68,000 Ordinary shares
from treasury (2013: nil).
The Company holds a total of 4,306,700 Ordinary shares in treasury,
representing 10.3 per cent. of the issued Ordinary share capital as at
31 December 2014. The Company holds a total of 25,625 D shares in
treasury, representing 0.4 per cent. of the issued D share capital as at
31 December 2014.
Under the terms of the Ordinary shares' Dividend Reinvestment Scheme,
the following Ordinary shares of nominal value 1 penny each were
allotted during the year.
Opening market
Net consideration price on allotment
Date of Number of Issue price received date
allotment shares issued (pence per share) GBP'000 (pence per share)
30 May
2014 139,680 72.20 98 70.00
30
September
2014 149,111 70.80 102 70.00
288,791 200
During the year, the Company issued the following new Ordinary shares of
nominal value 1 penny each under the Albion VCTs Top Up Offers 2013/2014
and Albion VCT Prospectus Top Up Offers 2013/2014:
Opening market
Net consideration price on allotment
Date of Number of Issue price received date
allotment shares issued (pence per share) GBP'000 (pence per share)
31 January
2014 549,339 74.4 401 69.5
31 January
2014 543,338 74.8 396 69.5
31 January
2014 20,352 73.7 15 69.5
5 April 2014
(Prospectus) 804,293 76.4 596 70.0
5 April 2014 585,294 76.4 434 70.0
5 April 2014 218,784 76.0 162 70.0
5 April 2014 62,024 75.7 46 70.0
4 July 2014
(Prospectus) 367,381 74.5 266 70.0
4 July 2014 30,139 74.5 22 70.0
4 July 2014 10,062 73.7 7 70.0
4 July 2014 5,398 74.1 4 70.0
30 September
2014
(Prospectus) 960,844 73.0 680 70.0
4,157,248 3,029
Under the terms of the D shares' Dividend Reinvestment Scheme, the
following D shares of nominal value 1 penny each were allotted during
the year.
Opening market
Net consideration price on allotment
Date of Number of Issue price received date
allotment shares issued (pence per share) GBP'000 (pence per share)
30 May
2014 15,927 107.1 17 100.0
30
September
2014 16,291 105.0 16 100.0
32,218 33
16. Basic and diluted net asset values per share
31 December 2014 31 December 2013
Ordinary Ordinary
shares D shares shares D shares
(pence per share) (pence per share) (pence per share) (pence per share)
Basic
and
diluted
net
asset
values
per
share 73.1 109.5 74.1 107.4
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 37,527,505 Ordinary
shares (2013: 33,959,166) and 6,388,197 D shares (2013: 6,355,979) as at
31 December 2014.
17. Analysis of changes in cash during the year
Year ended 31 December 2014 Year ended 31 December 2013
Ordinary Ordinary
shares D shares Total shares D shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening cash
balances 4,330 1,880 6,210 6,309 822 7,131
Net cash
flow (320) (1,245) (1,565) (1,979) 1,058 (921)
Closing cash
balances 4,010 635 4,645 4,330 1,880 6,210
18. Reconciliation of net return on ordinary activities before taxation
to net cash flow from operating activities
Year ended Year ended
31 December 2014 31 December 2013
Ordinary D Ordinary D
shares shares Total shares shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue return on ordinary activities
before taxation 448 211 659 438 248 686
Investment management fee charged
to capital (446) (116) (562) (422) (110) (532)
Movement in accrued loan stock
interest 74 3 77 52 (6) 46
Decrease/(increase)
in debtors 3 (1) 2 7 15 22
Increase/(decrease)
in creditors 22 3 25 (5) (2) (7)
Net cash flow from
operating activities 101 100 201 70 145 215
19. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares and D 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 on page 24 of the Directors' report in the full Annual
Report and Financial Statements.
The Company's financial instruments comprise equity and loan stock
investments in unquoted companies, cash balances and 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.
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 17 to 21 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 unquoted 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 asset and current asset investment portfolio (excluding fixed
term deposits) which, for Ordinary shares is GBP23,449,000 (2013:
GBP20,981,000) and for D shares GBP6,424,000 (2013: GBP5,052,000). Fixed
asset and current asset investments form 85 per cent. of the Ordinary
shares' and 92 per cent. of the D shares' net asset value as at 31
December 2014 (2013: 83 per cent. Ordinary shares; 74 per cent. D
shares).
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 up to
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.
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
and current 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. (2013: 10 per cent.) increase or
decrease in the valuation of the fixed asset and current asset
investments (keeping all other variables constant) would increase or
decrease the net asset value and return for the year of Ordinary shares
by GBP2,345,000 (2013: GBP2,098,000) and GBP642,000 (2013: GBP505,000)
for the D shares.
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 GBP29,000. 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 6.5 per cent. for
the Ordinary shares (2013: 4.5 per cent.) and 9.7 per cent. for the D
shares (2013: 8.4 per cent.).
The weighted average period to maturity for the fixed rate assets is
approximately 5.5 years (2013: 4.6 years) for Ordinary shares and 6.5
years for D shares (2013: 7.5 years).
The Company's financial assets and liabilities, all denominated in
pounds sterling, consist of the following:
Ordinary shares
31 December 2014 31 December 2013
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 - - 9,416 9,416 - - 8,264 8,264
Quoted equity - - 401 401 - - - -
Convertible
and
discounted
bonds 5,239 - 1,074 6,313 4,070 - 938 5,008
Unquoted loan
stock 5,441 - 1,878 7,319 7,450 209 14 7,673
Debtors* - - 185 185 - - 71 71
Current asset
investments - - - - - - 36 36
Current
liabilities* - - (214) (214) - - (231) (231)
Cash - 4,010 - 4,010 486 3,844 - 4,330
10,680 4,010 12,740 27,430 12,006 4,053 9,092 25,151
D shares
31 December 2014 31 December 2013
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 - - 2,933 2,933 - - 1,972 1,972
Discounted
debt and
convertible
bonds 1,793 - - 1,793 1,531 - - 1,531
Unquoted loan
stock 1,698 - - 1,698 1,549 - - 1,549
Debtors* - - 3 3 - - 2 2
Current
liabilities* - - (68) (68) - - (81) (81)
Cash - 635 - 635 450 1,430 - 1,880
3,491 635 2,868 6,994 3,530 1,430 1,893 6,853
*The debtors and current liabilities do not reconcile to the balance
sheets as prepayments and tax receivable/(payable) are not included in
the above tables.
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 and other similar
instruments 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
unquoted portfolio companies; this enables the close identification,
monitoring and management of investment-specific credit risk.
Bank deposits are held with banks which have a high rating with
international credit rating agencies. The Company has an informal policy
of limiting counterparty banking exposure to a maximum of 20 per cent.
of net asset value for any one counterparty.
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 for Ordinary shares at 31 December
2014 was limited to GBP13,632,000 (2013: GBP12,681,000) of unquoted loan
stock instruments (all are secured on the assets of the portfolio
company), GBP4,010,000 (2013: GBP4,330,000) of cash deposits with banks
and GBP180,000 (2013: GBP64,000) of other debtors.
The Company's total gross credit risk for D shares at 31 December 2014
was limited to GBP3,491,000 (2013: GBP3,080,000) of unquoted loan stock
instruments (all are secured on the assets of the portfolio company),
GBP635,000 (2013: GBP1,880,000) of cash and fixed term deposits with
banks and GBP3,000 (2013: GBPnil) of other debtors.
As at the Balance sheet date, the cash and fixed term deposits held by
the Company are held with Lloyds Bank plc, Scottish Widows Bank plc
(part of Lloyds Banking Group plc), 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 credit profile of unquoted loan stock is described under liquidity
risk shown below.
The Ordinary shares' cost, impairment and carrying value of impaired
loan stocks are as follows:
31 December 2014 31 December 2013
Carrying Carrying
Ordinary Cost Impairment value Cost Impairment value
shares GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Impaired loan
stock 4,849 (1,539) 3,310 4,150 (1,617) 2,533
There are no impaired loan stock instruments for D shares.
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 approximates to the carrying value.
Liquidity risk
Liquid assets are held as cash on current account, cash on deposit or
short term money market account. 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 GBP3,321,000 (2013: GBP3,097,000) as at 31 December
2014.
The Company had no committed borrowing facilities in regard to Ordinary
shares or D shares as at 31 December 2014 (2013: nil) and the Company
had cash and fixed term deposit balances of GBP4,010,000 (2013:
GBP4,330,000) for Ordinary shares and GBP635,000 (2013: GBP1,880,000)
for D shares. 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. With the exception
of corporation tax payable, all of the Company's financial liabilities
are short term in nature and total GBP214,000 (2013: GBP231,000) for
Ordinary shares and GBP70,000 (2013: GBP109,000) for D shares.
The carrying value of Ordinary shares' loan stock investments at 31
December 2014, 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 2,374 1,982 431 4,787
1-2 years 950 1,306 131 2,387
2-3 years 427 - - 427
3-5 years 1,835 22 - 1,857
Greater than 5 years 3,369 - 805 4,174
8,955 3,310 1,367 13,632
Loan stock categorised as past due for the Ordinary shares includes;
-- loan stock valued at GBP431,000 yielding an average 7.4 per cent. which
has interest past due by less than 12 months;
-- loan stock valued at GBP131,000 yielding an average 7.6 per cent. has
interest past due by greater than 12 months but less than 2 years;
-- loan stock valued at GBP805,000 yielding an average 13.0 per cent has
interest past due by greater than 12 months but less than 3 years.
The carrying value of Ordinary shares' loan stock investments at 31
December 2013, 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 1,681 1,205 1,383 4,269
1-2 years 1,158 1,242 510 2,910
2-3 years 1,187 41 - 1,228
3-5 years 1,085 45 9 1,139
Greater than 5 years 2,523 - 612 3,135
7,634 2,533 2,514 12,681
The carrying value of D shares' loan stock investments at 31 December
2014, 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 966 - 205 1,171
1-2 years 217 - 103 320
2-3 years 68 - - 68
3-5 years 872 - - 872
Greater than 5 years 1,060 - - 1,060
3,183 - 308 3,491
Loan stock categorised as past due for the D shares includes;
-- Loan stock valued at GBP205,000 yielding an average 14.9 per cent. which
has interest past due by less than 12 months;
-- loan stock valued at GBP103,000 yielding an average 7.0 per cent. has
interest past due by greater than 12 months but less than 2 years;
The carrying value of D shares' loan stock investments at 31 December
2013, 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 - - - -
1-2 years 1,248 - - 1,248
2-3 years 345 - - 345
3-5 years 442 - - 442
Greater than 5 years 517 - 528 1,045
2,552 - 528 3,080
In view of the availability of adequate cash balances and the repayment
profile of loan stock investments, the Board considers that the Company
is subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All of the Company's financial assets and liabilities as at 31 December
2014 are stated at fair value as determined by the Directors, with the
exception of loans and receivables included within investments, cash,
fixed term deposits, debtors and creditors, which are measured at
amortised cost, as permitted by FRS 26. In the opinion of the Directors,
the amortised cost 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 from the fair value and all are payable within
one year.
20. Contingencies and commitments
The Company had the following financial commitments in respect of
investments:
-- Proveca Limited; GBP119,000
-- Cisiv Limited; GBP96,000
-- MyMeds&Me Limited; GBP47,000
-- Dragon Hydro Limited; GBP2,500
21. Post balance sheet events
Since the year end, the Company had the following material investment
transactions:
-- Proceeds of GBP1,319,000 from the disposal of Orchard Portman Group
(Taunton Hospital Limited);
-- Investment of GBP64,000 in Regenerco Limited;
-- Investment of GBP53,500 in Cisiv Limited;
-- Investment of GBP51,000 in Mi-Pay Group PLC;
-- Investment of GBP52,000 in Silent Herdsman Holdings Limited; and
-- Investment of GBP17,000 in AVESI Limited.
Albion VCTs Prospectus Top Up Offers 2014/2015
On 17 November 2014 the Company announced the publication of a
prospectus in relation to an offer for subscription for new Ordinary
shares. A Securities Note, which forms part of the prospectus, has been
sent to shareholders.
A copy of the prospectus may be obtained from www.albion-ventures.co.uk.
The following Ordinary shares of nominal value 1 penny per share were
allotted under the Offers since the period end:
Opening market
Net consideration price on allotment
Date of Number of Issue price received date
allotment shares allotted (pence per share) (GBP'000) (pence per share)
30 January
2015 1,287,521 72.9 920 70.0
30 January
2015 693,078 73.2 495 70.0
1,980,599 1,415
22. Related party transactions
Other than transactions with the Manager as disclosed in note 5, there
are no other 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 December 2014 and 31 December
2013, 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 December 2014, 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 4 June 2015 at 12.00pm.
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 Development VCT 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.
Portfolio sector allocation - 31 December 2014:
http://hugin.info/142961/R/1901071/675865.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 Development VCT PLC - D Shares via Globenewswire
HUG#1901071
http://www.closeventures.co.uk
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