TIDMAAIG
Albion Income & Growth VCT PLC
As required by the UK Listing Authority's Disclosure and Transparency Rules 4.1
and 6.3, Albion Income & Growth VCT PLC today makes public its information
relating to the Annual Report and Financial Statements for the year ended 30
September 2012.
This announcement was approved for release by the Board of Directors on 18
December 2012.
This announcement has not been audited.
You will shortly be able to view the Annual Report and Financial Statements for
the year to 30 September 2012 (which have been audited) at: www.albion-
ventures.co.uk by clicking on 'Our Funds' and then 'Albion Income & Growth VCT
PLC'. The Annual Report and Financial Statements for the year to 30 September
2012 will be available as a PDF document via a link under the 'Investor Centre'
in the 'Financial Reports and Circulars' section. The information contained in
the Annual Report and Financial Statements will include information as required
by the Disclosure and Transparency Rules, including Rule 4.1.
Investment objectives
Albion Income & Growth VCT PLC (the "Company") is a Venture Capital Trust which
raised GBP45 million under the Offer for Subscription which closed in March 2005.
The Company raised a further GBP3.2m under the Albion VCTs Linked Top Up Offers
in 2011 and 2012.
The Company aims to provide investors with a regular and predictable source of
income combined with the prospect of long term capital growth.
The Company allows investors the opportunity to participate in a balanced
portfolio of high growth businesses and lower risk, asset-based companies. It is
intended that the Company's investment portfolio will be split approximately as
follows:
* 45 per cent. to be invested in unquoted higher growth businesses, including
early stage technology;
* 45 per cent. to be invested in unquoted asset-based businesses in the
leisure sector; and
* 10 per cent. to be held in floating rate securities, cash deposits and
gilts.
Financial calendar
Record date for first dividend 4 January 2013
Payment of first dividend 31 January 2013
Annual General Meeting 5 February 2013
Announcement of half-yearly results for the six months ended May 2013
31 March 2013
Payment of second dividend subject to Board approval June 2013
Financial highlights
+-----------------------------------------------------------------------+
89.20p|Net asset value plus dividends since launch to 30 September 2012 |
+-----------------------------------------------------------------------+
+-----------------------------------------------------------------------+
3.50p |Tax free dividend per share paid in the year to 30 September 2012 |
+-----------------------------------------------------------------------+
+-----------------------------------------------------------------------+
66.00p|Net asset value per share as at 30 September 2012 |
+-----------------------------------------------------------------------+
+-----------------------------------------------------------------------+
1.75p |First tax free dividend per share declared for the year to 30 September|
|2013 |
+-----------------------------------------------------------------------+
+-------------------------------------------------------------------------+
| 30 September 2012 30 September 2011 |
| |
| (pence per share) (pence per share) |
| |
| |
| |
| Net asset value per share 66.00 64.20 |
| |
| Dividends paid 3.50 3.50 |
| |
| Revenue return per share 1.30 1.20 |
| |
| Capital gain/(loss) per share 3.80 (1.60) |
+-------------------------------------------------------------------------+
Total shareholder net asset value return to 30 September 2012:
=------------------------------------------------------------------------------
(pence per share)
Total dividends paid during the period 30 September 2005(i)
ended: 0.65
Total dividends paid during the year 30 September 2006
ended: 2.60
30 September 2007 3.45
30 September 2008 3.50
30 September 2009 3.00
30 September 2010 3.00
30 September 2011 3.50
30 September 2012 3.50
------------------
Total dividends paid to 30 September
2012 23.20
Net asset value as at 30 September 2012 66.00
------------------
Total shareholder net asset value return to 30 September
2012 89.20
------------------
In addition to the dividends summarised above, the Board has declared a first
dividend for the new financial year of 1.75 pence per share to be paid on 31
January 2013 to shareholders on the register as at 4 January 2013.
Notes
(i) Investors subscribing by 31 December 2004 and remaining on the register
on 1 July 2005 were entitled to a dividend of 0.65 pence per share.
Investors subscribing thereafter were not entitled to the first interim
dividend.
(ii) These figures exclude tax benefits upon subscription of 40 per cent.
income tax relief.
(iii) All dividends paid by the Company are free of income tax. It is an H M
Revenue & Customs requirement that dividend vouchers indicate the tax
element should dividends have been subject to income tax. Investors
should ignore this figure on their dividend voucher and need not
disclose any income they receive from a VCT on their tax return.
(iv) The net asset value of the Company is not its share price as quoted on
the official list of the London Stock Exchange. The share price of the
Company can be found in the Investment Companies - VCTs section of the
Financial Times on a daily basis. Investors are reminded that it is
common for shares in VCTs to trade at a discount to their net asset
value, partly as a result of the initial tax reliefs which are non-
transferable.
Chairman's statement
Introduction
The year to 30 September 2012 saw a welcome positive total return of 5.10 pence
per share. The revenue return per share was 1.30 pence, an uplift from 1.20
pence the previous year, while the capital return was 3.80 pence per share,
compared to a negative return of 1.60 pence for the previous year. The main
reason for the uplift was a positive trading performance by many of our
portfolio companies, despite the difficulties in the broader economic
environment.
Investment performance and progress
Following the three successful disposals in the year to 30 September 2011, other
than the disposal of Evolutions Group as reported last year, there were no major
disposals during the year under review. However, following the year end, the
VCT disposed of its three cinema investments (at Brixton, Exeter and Norwich)
for the total consideration of GBP2.1 million, against a cost of GBP1.0 million.
The VCT has also received a strong income stream for these investments over
recent years, resulting in the total return, comprising capital and income, of
over twice cost.
The largest write-up was for Lowcosttravelgroup, which saw its value increase by
GBP1.2 million over the period, as well as Radnor House School ( GBP285,000) and
Process Systems Enterprise ( GBP244,000). The largest faller was AMS Sciences
(formerly Xceleron) which was written down by GBP515,000, following the
restructuring and further refinancing.
A total of GBP3.5 million was invested in a number of existing and two new
portfolio companies. In line with the current focus of our investment activity,
22 per cent. of the funds invested during the year were in the renewable energy
sector. In conjunction with the healthcare sector, which accounted for 30 per
cent., we see both as core areas for growth in the future.
Risks and uncertainties
The outlook for the UK and the international economies continues to be the key
risk affecting your company. Limited, if any, growth in the UK and recession in
the Eurozone will impact a number of the markets in which our portfolio
companies operate. However, your Company's balanced mix of asset-based and high
growth investments is designed to be a reasonably resilient portfolio and
investment risk is further mitigated through our policy of ensuring that
portfolio companies do not normally have external bank borrowings.
A more detailed analysis of risks and uncertainties is set out in note 23 of
this announcement. Details of post balance sheet events are set out in note 21
of this announcement.
Share buy-backs and share price discount
It remains the Company's policy to buy back shares in the market subject to the
overall constraint that such purchases are in the Company's interest. This
includes the maintenance of sufficient resources for investment in new and
existing portfolio companies, and in continued payment of dividends to
shareholders. It is now 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.
Related party transactions
Details of material related party transactions for the reporting period can be
found in note 22.
Albion VCTs Top Up Offers 2012/2013
Your Board, in conjunction with the boards of five of the other VCTs managed by
Albion Ventures LLP, has recently launched its third top up offer as part of the
Albion VCTs Top Up Offers 2012/2013. Albion Income & Growth VCT PLC will be
aiming to raise approximately GBP2.5 million. The proceeds will be used to provide
further resources at a time when a number of attractive investment opportunities
are being seen. An Investor Guide and Offers Document will be sent to
shareholders shortly.
Results and dividends
As at 30 September 2012, the net asset value of the Company was GBP27.96 million
compared to GBP26.72 million at 30 September 2011. The revenue return before
taxation was GBP632,000 compared to GBP663,000 for the year to 30 September 2011.
The Company will pay a first dividend for the financial year to 30 September
2013 of 1.75 pence per share on 31 January 2013 to shareholders on the register
on 4 January 2013.
Board changes
As announced in the Half-yearly Financial Report for the six months to 31 March
2012, John Kerr retired from the Board on 30 September 2012 and was replaced as
chairman of the Audit Committee by Robin Archibald. The Board thanks John for
his service to the Company over the last 8 years.
Outlook
Despite the difficult economic climate, there are a number of companies within
the investment portfolio that have grown considerably since we first invested.
They operate in dynamic markets and have the potential for considerable further
growth. These include companies in the telecommunications, medical technology
and IT sectors, which benefit from a diversified international client base. In
the coming year we anticipate further realisations combined with a continuing
concentration on growth in income-generating investments, supported by an
increasing exposure to the renewable energy sector.
Friedrich Ternofsky
Chairman
18 December 2012
Manager's report
The sector split for the Company's investment portfolio as at 30 September 2012
can be seen at the end of this announcement.
The asset-based portfolio now accounts for 53 per cent. of net assets with the
growth portfolio accounting for 43 per cent. and cash at 4 per cent. Following
the year end, and after adjusting for the disposal of our three cinemas, cash
and liquid assets rose to 13 per cent. of the net assets. We continue our work
to expand the renewable energy portion of the portfolio, which now accounts for
5 per cent. of assets, compared with our stated target of 15 per cent..
New investments
During the year the company invested GBP340,000 in two new investments and GBP3.1
million in a number of existing portfolio companies. A number of the
investments were made in the renewable energy sector, where we invested in solar
and wind projects.
Existing portfolio
The successful sale of our three cinemas, at Brixton, Exeter and Norwich, took
place after the year end and realised proceeds of GBP2.1 million, a total return
of twice cost. Elsewhere within the asset-based portfolio, strong trading
resulted in an uplift in Radnor House, which now has 240 pupils at the start of
its second year of operation, and has moved into the black on an operating
profit basis. It was recently awarded seven "outstandings" in its first Ofsted
report. In the growth portfolio, Lowcosttravelgroup saw continued strong
growth, despite a hard market for the sector as a whole. Process Systems
Enterprise, meanwhile, also saw continued strong growth and the development of
its new product to provide safety assistance for offshore oil platforms is a
particularly promising initiative.
As mentioned in the last annual report, our investment in Xceleron (now renamed
AMS Sciences) required further financing, which took place in stages over the
course of the year. Trading at the company, which refocused its operations in
the USA, has now stabilised and the company has seen a gradual increase in its
order book since its restructuring. Oxsensis saw a decline in its valuation.
In general, we are pleased with the progress that a number of our portfolio
companies are making; we continue to work closely with them in order to maximise
the return for shareholders.
Albion Ventures LLP
Manager
18 December 2012
Responsibility Statement
In preparing these financial statements for the year to 30 September 2012, the
Directors of the Company, being Friedrich Ternofsky, Robin Archibald, Mary Anne
Cordeiro 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 30 September 2012 for
the Company has been prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (UK Accounting Standards and applicable law) and
give a true and fair view of the assets, liabilities, financial position and
profit and loss of the Company for the year ended 30 September 2012 as required
by DTR 4.1.12.R;
-the Chairman's statement and Manager's report include a fair review of the
information required by DTR 4.2.7R (indication of important events during the
year ended 30 September 2012 and description of principal risks and
uncertainties that the Company faces); and
-the Chairman's statement and Manager's report include a fair review of the
information required by DTR 4.2.8R (disclosure of related parties transactions
and changes therein).
A detailed "Statement of Directors' responsibilities for the preparation of the
Company's financial statements" is contained within the full audited Annual
Report and Financial Statements.
By order of the Board
Friedrich Ternofsky
Chairman
18 December 2012
Income statement
+-----------------------+----+------------------------+------------------------+
| | |Year ended 30 September |Year ended 30 September |
| | | 2012 | 2011 |
+-----------------------+----+-------+-------+--------+-------+-------+--------+
| | |Revenue|Capital| Total|Revenue|Capital| Total|
+-----------------------+----+-------+-------+--------+-------+-------+--------+
| |Note| GBP'000| GBP'000| GBP'000| GBP'000| GBP'000| GBP'000|
+-----------------------+----+-------+-------+--------+-------+-------+--------+
|Gains/(losses) on | | | | | | | |
|investments |3 | -| 1,994| 1,994| -| (294)| (294)|
| | | | | | | | |
|Investment income |4 | 1,052| -| 1,052| 1,049| -| 1,049|
| | | | | | | | |
|Investment management | | | | | | | |
|fees |5 | (171)| (515)| (686)| (172)| (518)| (690)|
| | | | | | | | |
|Other expenses |6 | (249)| -| (249)| (214)| -| (214)|
| | +-------+-------+--------+-------+-------+--------+
|Return/(loss) on | | | | | | | |
|ordinary activities | | | | | | | |
|before tax | | 632| 1,479| 2,111| 663| (812)| (149)|
| | | | | | | | |
|Tax (charge)/credit on | | | | | | | |
|ordinary activities |8 | (107)| 124| 17| (155)| 136| (19)|
| | +-------+-------+--------+-------+-------+--------+
|Return/(loss) | | | | | | | |
|attributable to | | | | | | | |
|shareholders | | 525| 1,603| 2,128| 508| (676)| (168)|
| | +-------+-------+--------+-------+-------+--------+
|Basic and diluted | | | | | | | |
|return/(loss) per share| | | | | | | |
|(pence)* |10 | 1.30| 3.80| 5.10| 1.20| (1.60)| (0.40)|
+-----------------------+----+-------+-------+--------+-------+-------+--------+
* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.
The total column of this Income statement represents the profit and loss account
of the Company. The supplementary revenue and capital columns have been prepared
in accordance with the Association of Investment Companies' Statement of
Recommended Practice.
All revenue and capital items in the above statement derive from continuing
operations.
There are no recognised gains or losses other than the results for the year
disclosed above. Accordingly a Statement of total recognised gains and losses is
not required.
The difference between the reported return/(loss) on ordinary activities before
tax and the historical profit/(loss) is due to the fair value movements on
investments. As a result a note on historical cost profits and losses has not
been prepared.
Balance sheet
+-------------------------------------+----+-----------------+-----------------+
| | |30 September 2012|30 September 2011|
+-------------------------------------+----+-----------------+-----------------+
| |Note| GBP'000| GBP'000|
+-------------------------------------+----+-----------------+-----------------+
|Fixed asset investments | | | |
| | | | |
|Qualifying | | 26,412| 22,391|
| | | | |
|Non-qualifying | | 554| 1,933|
| | +-----------------+-----------------+
|Total fixed asset investments | 11| 26,966| 24,324|
| | | | |
| | | | |
| | | | |
|Current assets | | | |
| | | | |
|Trade and other debtors | 13| 25| 18|
| | | | |
|Current asset investments | 13| 25| 469|
| | | | |
|Cash at bank and in hand | 17| 1,216| 2,176|
| | +-----------------+-----------------+
| | | 1,266| 2,663|
| | | | |
| | | | |
| | | | |
|Creditors: amounts falling due within| | | |
|one year | 14| (267)| (267)|
| | +-----------------+-----------------+
| | | | |
| | | | |
|Net current assets | | 999| 2,396|
| | +-----------------+-----------------+
| | | | |
|Net assets | | 27,965| 26,720|
| | +-----------------+-----------------+
| | | | |
| | | | |
|Capital and reserves | | | |
| | | | |
|Called up share capital | 15| 470| 23,108|
| | | | |
|Share premium | | 1,139| 455|
| | | | |
|Capital redemption reserve | | 10| 963|
| | | | |
|Unrealised capital reserve | | (4,209)| (8,476)|
| | | | |
|Realised capital reserve | | (1,288)| (1,427)|
| | | | |
|Other distributable reserve | | 31,843| 12,097|
| | +-----------------+-----------------+
|Total equity shareholders' funds | | 27,965| 26,720|
| | +-----------------+-----------------+
| | | | |
| | | | |
|Basic and diluted net asset value per| | | |
|share (pence)* | 16| 66.00| 64.20|
+-------------------------------------+----+-----------------+-----------------+
* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.
These Financial Statements were approved by the Board of Directors, and
authorised for issue on 18 December 2012 and were signed on its behalf by
Friedrich Ternofsky
Chairman
Company number: 5132495
Reconciliation of movements in shareholders' funds
+-------------+--------+-------+----------+----------+--------+-------------+-------+
| | Called-| Share| Capital|Unrealised|Realised| Other| Total|
| | up|premium|redemption| capital| capital|distributable| |
| | share| | reserve| reserve*|reserve*| reserve*| |
| | capital| | | | | | |
| +--------+-------+----------+----------+--------+-------------+-------+
| | GBP'000| GBP'000| GBP'000| GBP'000| GBP'000| GBP'000| GBP'000|
+-------------+--------+-------+----------+----------+--------+-------------+-------+
|As at 1 | 23,108| 455| 963| (8,476)| (1,427)| 12,097| 26,720|
|October 2011 | | | | | | | |
| | | | | | | | |
|Return/(loss)| -| -| -| 2,560| (957)| 525| 2,128|
|for the | | | | | | | |
|period | | | | | | | |
| | | | | | | | |
|Transfer of | -| -| -| 1,707| (1,707)| -| -|
|previously | | | | | | | |
|unrealised | | | | | | | |
|losses on | | | | | | | |
|disposal of | | | | | | | |
|investments | | | | | | | |
| | | | | | | | |
|Reduction in |(22,604)| -| -| -| -| 22,604| -|
|share | | | | | | | |
|capital** | | | | | | | |
| | | | | | | | |
|Cancellation | -| (539)| (1,344)| -| -| 1,883| -|
|of capital | | | | | | | |
|redemption | | | | | | | |
|and share | | | | | | | |
|premium | | | | | | | |
|reserves** | | | | | | | |
| | | | | | | | |
|Purchase of | (381)| -| 381| -| -| (990)| (990)|
|shares for | | | | | | | |
|cancellation | | | | | | | |
| | | | | | | | |
|Cancellation | (10)| -| 10| -| -| -| -|
|of treasury | | | | | | | |
|shares | | | | | | | |
| | | | | | | | |
|Issue of | 357| 1,223| -| -| -| -| 1,580|
|equity (net | | | | | | | |
|of costs) | | | | | | | |
| | | | | | | | |
|Transfer from| -| -| -| -| 2,803| (2,803)| -|
|special | | | | | | | |
|reserve to | | | | | | | |
|realised | | | | | | | |
|capital | | | | | | | |
|reserve | | | | | | | |
| | | | | | | | |
|Dividends | -| -| -| -| -| (1,473)|(1,473)|
|paid | | | | | | | |
+-------------+--------+-------+----------+----------+--------+-------------+-------+
|As at 30 | 470| 1,139| 10| (4,209)| (1,288)| 31,843| 27,965|
|September | | | | | | | |
|2012 | | | | | | | |
+-------------+--------+-------+----------+----------+--------+-------------+-------+
+-------------+--------+-------+----------+----------+--------+-------------+-------+
|As at 1 | 22,306| 12| 460| (8,524)| (3,939)| 17,270| 27,585|
|October 2010 | | | | | | | |
| | | | | | | | |
|(Loss)/return| -| -| -| (1,347)| 671| 508| (168)|
|for the year | | | | | | | |
| | | | | | | | |
|Transfer of | -| -| -| 1,395| (1,395)| -| -|
|previously | | | | | | | |
|unrealised | | | | | | | |
|losses on | | | | | | | |
|disposal of | | | | | | | |
|investments | | | | | | | |
| | | | | | | | |
|Purchase of | (503)| -| 503| -| -| (593)| (593)|
|shares for | | | | | | | |
|cancellation | | | | | | | |
| | | | | | | | |
|Purchase of | -| -| -| -| -| (379)| (379)|
|treasury | | | | | | | |
|shares | | | | | | | |
| | | | | | | | |
|Issue of | 1,305| 443| -| -| -| -| 1,748|
|equity (net | | | | | | | |
|of costs) | | | | | | | |
| | | | | | | | |
|Transfer from| -| -| -| -| 3,418| (3,418)| -|
|special | | | | | | | |
|reserve to | | | | | | | |
|realised | | | | | | | |
|capital | | | | | | | |
|reserve | | | | | | | |
| | | | | | | | |
|Dividends | -| -| -| -| (181)| (1,291)|(1,472)|
|paid | | | | | | | |
+-------------+--------+-------+----------+----------+--------+-------------+-------+
|As at 30 | 23,108| 455| 963| (8,476)| (1,427)| 12,097| 26,720|
|September | | | | | | | |
|2011 | | | | | | | |
+-------------+--------+-------+----------+----------+--------+-------------+-------+
* Included within these reserves is an amount of GBP26,346,000 (2011: GBP2,194,000)
which is considered distributable.
** The reduction in the nominal value of shares from 50 pence to 1 penny, the
cancellation of the capital redemption and share premium reserves (as approved
by shareholders at the Annual General Meeting held on 6 February 2012 and by
order of the Court dated 22 February 2012) has increased the value of the other
distributable reserve.
The special reserve, treasury share reserve and the revenue reserve have been
combined in the balance sheet to form a single reserve named other distributable
reserve for both the current and prior year. The Directors consider the
presentation of a single reserve to enhance the clarity of financial reporting.
More details regarding treasury shares can be found in note 15.
A transfer of GBP2,803,000 representing gross realised losses on disposal of
investments during the year ended 30 September 2012 has been made from the other
distributable reserve to the realised capital reserve.
Cash flow statement
+-------------------------------------+----+-----------------+-----------------+
| | | Year ended| Year ended|
| | |30 September 2012|30 September 2011|
+-------------------------------------+----+-----------------+-----------------+
| |Note| GBP'000| GBP'000|
+-------------------------------------+----+-----------------+-----------------+
|Operating activities | | | |
| | | | |
|Investment income received | | 1,182| 1,064|
| | | | |
|Deposit interest received | | 22| 25|
| | | | |
|Investment management fees paid | | (679)| (692)|
| | | | |
|Other cash payments | | (249)| (229)|
| | +-----------------+-----------------+
|Net cash flow from operating | | | |
|activities | 18| 276| 168|
| | +-----------------+-----------------+
| | | | |
| | | | |
|Taxation | | | |
| | | | |
|UK corporation tax paid | | (19)| (13)|
| | +-----------------+-----------------+
| | | | |
| | | | |
|Capital expenditure and financial | | | |
|investments | | | |
| | | | |
|Purchase of fixed asset investments | | (3,298)| (1,762)|
| | | | |
|Disposal of fixed asset investments | | 2,475| 2,086|
| | | | |
|Disposal of current asset investment | | 506| -|
| | +-----------------+-----------------+
|Net cash flow from investing | | | |
|activities | | (317)| 324|
| | +-----------------+-----------------+
| | | | |
|Equity dividends paid | | | |
|Dividends paid (net of cost of shares| | | |
|issued | | | |
|under the dividend reinvestment | | | |
|scheme) | | (1,371)| (1,395)|
| | +-----------------+-----------------+
| | | | |
| | +-----------------+-----------------+
|Net cash flow before financing | | (1,431)| (916)|
| | +-----------------+-----------------+
| | | | |
| | | | |
|Financing | | | |
| | | | |
|Issue of share capital (net of issue | | | |
|costs) | | 1,486| 1,671|
| | | | |
|Purchase of own shares | | (1,015)| (947)|
| | +-----------------+-----------------+
|Net cash flow from financing | | 471| 724|
| | | | |
| | | | |
| | +-----------------+-----------------+
|Cash flow in the year | 17| (960)| (192)|
+-------------------------------------+----+-----------------+-----------------+
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, however to enhance clarity of
financial reporting, during the year the special reserve, treasury share reserve
and revenue reserve have been presented as a single reserve named other
distributable reserve. This has also been applied to prior periods.
2. Accounting policies
Fixed and current asset investments
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 September 2009 International Private Equity and
Venture Capital Valuation Guidelines (IPEVCV guidelines).
Fair value movements on equity investments and gains and losses arising on the
disposal of investments are reflected in the capital column of the Income
statement in accordance with the AIC SORP. Realised gains or losses on the sale
of investments will be reflected in the realised capital reserve, and unrealised
gains or losses arising from the revaluation of investments will be reflected in
the unrealised capital reserve.
Warrants and unquoted equity derived instruments
Warrants and unquoted equity derived instruments are only valued if there is
additional value to the Company in exercising or converting as at the balance
sheet date. Otherwise these instruments are held at nil value. The valuation
techniques used are those used for the underlying equity investment.
Unquoted loan stock
Unquoted loan stock (excluding convertible bonds and debt issued at a discount)
are 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 amortised cost relating to interest income are reflected in the
revenue column of the Income statement, and hence are reflected in the revenue
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 impairments
arising from revaluations of the fair value of the security.
For all unquoted loan stock, whether fully performing, re-negotiated, past due
or impaired, the Board considers that the fair value is equal to or greater than
the security value of these assets. For unquoted loan stock, the amount of the
impairment is the difference between the asset's cost and the present value of
estimated future cash flows, discounted at the original effective interest rate.
The future cash flows are estimated based on the fair value of the security less
the 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.
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.
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.
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.
Investment income
Unquoted equity income
Dividend income is included in revenue when the investment is quoted ex-
dividend.
Unquoted loan stock and other preferred income
Fixed returns on non-equity shares and debt securities are recognised on a time
apportionment basis using 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 expenses
All expenses have been accounted for on an accruals basis. Expenses are charged
through the revenue account except the following which are charged through the
realised capital reserve:
* 75 per cent. of management fees are allocated to the capital account. This
is in line with the Board's expectation that over the long term 75 per cent.
of the Company's investment returns will be in the form of capital gains;
and
* expenses which are incidental to the purchase or disposal of an investment
are charged through the realised capital reserve.
Performance incentive fee
In the event that a performance incentive fee crystallises, the fee will be
allocated between revenue and realised capital reserves based upon the
proportion to which the calculation of the fee is attributable to revenue and
capital returns.
Taxation
Taxation is applied on a current basis in accordance with FRS 16 "Current tax".
Taxation associated with capital expenses is applied in accordance with the
SORP. In accordance with FRS 19 "Deferred tax", deferred taxation is provided in
full on timing differences that result in an obligation at the balance sheet
date to pay more tax or a right to pay less tax, at a future date, at rates
expected to apply when they crystallise based on current tax rates and law.
Timing differences arise from the inclusion of items of income and expenditure
in taxation computations in periods different from those in which they are
included in the Financial Statements. Deferred tax assets are recognised to the
extent that it is regarded as more likely than not that they will be recovered.
Deferred tax assets and liabilities are not discounted.
Reserves
Share premium account
This reserve accounts for the difference between the price paid for shares and
the nominal value of the shares, less issue costs and transfers to 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.
Other distributable reserve
The special reserve, treasury share reserve and the revenue reserve have been
presented as a single reserve named other distributable reserve.
The special reserve was created through the cancellation of the share premium
account, capital redemption reserve and reduction in share capital, and can be
used to fund market purchases and subsequent cancellation of own shares, to
cover gross realised losses, and for other distributable purposes.
The treasury share reserve accounts for amounts by which the distributable
reserves of the Company are diminished through the repurchase of the Company's
own shares for treasury.
Realised capital reserve
The following are disclosed in this reserve:
* gains and losses compared to cost on the realisation of investments;
* expenses, together with the related taxation effect, charged in accordance
with the above policies; and
* dividends paid to equity holders.
Dividends
In accordance with FRS 21 "Events after the balance sheet date", dividends
declared by the Company are accounted for in the period in which the dividend
has been paid or approved by shareholders in an Annual General Meeting.
3. Gains/(losses) on investments Year ended Year ended
30 September 2012 30 September 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Unrealised gains/(losses) on fixed asset
investments held at fair value through
profit or loss account 2,210 (1,630)
Unrealised reversal of impairments on
fixed asset investments held at amortised
cost 325 283
------------------------------------
Unrealised gains/(losses) on fixed asset
investments sub-total 2,535 (1,347)
Unrealised gains on current assets held at
fair value through profit or loss account 25 -
------------------------------------
Unrealised gains/(losses) sub-total 2,560 (1,347)
Realised (losses)/gains on fixed asset
investments held at fair value through
profit or loss account (611) 218
Realised gains on fixed asset investments
held at amortised cost 9 835
------------------------------------
Realised (losses)/gains on fixed asset
investments sub-total (602) 1,053
Realised gains on current asset
investments held at fair value through
profit or loss account 36 -
------------------------------------
Realised (losses)/gains sub-total (566) 1,053
------------------------------------
1,994 (294)
------------------------------------
Investments measured at amortised cost are unquoted loan stock investments as
described in note 2.
4. Investment income
Year ended Year ended
30 September 2012 30 September 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Income recognised on investments held at
fair value through profit or loss
Income from convertible bonds and
discounted debt 53 -
------------------------------------
53 -
Income recognised on investments held at
amortised cost
Return on loan stock investments 981 1,018
Bank deposit interest 18 31
------------------------------------
999 1,049
------------------------------------
1,052 1,049
------------------------------------
Interest income earned on impaired investments at 30 September 2012 amounted to
GBP109,000 (2011: GBP105,000).
5. Investment management fees
Year ended 30 September Year ended 30 September
2012 2011
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=---------------------------------------------------------------------------
Investment management fee 171 515 686 172 518 690
--------------------------------------------------
Further details of the management agreement under which the investment
management fee is paid are given in the Directors' report on page 20 of the full
Annual Report and Financial Statements.
6. Other expenses
Year ended Year ended
30 September 2012 30 September 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Directors' fees (including VAT and NIC) 106 106
Other administrative expenses 104 71
Tax services 16 15
Auditor's remuneration for statutory audit
services (excluding VAT) 23 22
------------------------------------
249 214
------------------------------------
7. Directors' fees
The amounts paid to Directors during the year are as follows:
Year ended Year ended
30 September 2012 30 September 2011
GBP'000 GBP'000
=-----------------------------------------------------------------------
Directors' fees 95 95
National insurance and/or VAT 11 11
----------------------------------------
106 106
----------------------------------------
Further information regarding Directors' remuneration can be found in the
Directors' remuneration report on page 28 of the full Annual Report and
Financial Statements.
8. Tax (charge)/credit on ordinary activities
Year ended 30 September Year ended 30 September
2012 2011
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=------------------------------------------------------------------------------
UK corporation tax in
respect of current year (148) 124 (24) (165) 136 (29)
UK corporation tax in
respect of prior year
(consortium relief) 41 - 41 10 - 10
--------------------------------------------------
Total (107) 124 17 (155) 136 (19)
--------------------------------------------------
Factors affecting the tax (charge)/credit:
Year ended Year ended
30 September 2012 30 September 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Return/(loss) on ordinary activities
before taxation 2,111 (149)
------------------------------------
Tax (charge)/credit on profit at the
standard rate of 25 per cent. (2011: 27
per cent.) (528) 31
Factors affecting the charge:
Non-taxable gains/(losses) 498 (60)
Consortium relief in respect of prior
years and other adjustments 41 10
Marginal relief 6 -
------------------------------------
17 (19)
------------------------------------
The tax charge for the year shown in the Income statement is lower than the
small companies rate of corporation tax in the UK of 20 per cent. (2011: 20 per
cent.). The differences are explained above.
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
30 September 2012 30 September 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
First dividend paid on 31 January 2011 -
1.75 pence per share - 728
Second dividend paid on 30 June 2011 -
1.75 pence per share - 744
First dividend paid on 31 January 2012 -
1.75 pence per share 729 -
Second dividend paid on 29 June 2012 -
1.75 pence per share 744 -
------------------------------------
1,473 1,472
------------------------------------
In addition to the dividends summarised above, the Board has declared a first
dividend for the year ending 30 September 2013 of 1.75 pence per share. This
dividend will be paid on 31 January 2013 to shareholders on the register as at
4 January 2013. The total dividend will be approximately GBP742,000.
10. Basic and diluted return/(loss) per share
Year ended 30 September Year ended 30 September
2012 2011
Revenue Capital Total Revenue Capital Total
=------------------------------------------------------------------------------
Return/(loss) attributable
to equity shares ( GBP'000) 525 1,603 2,128 508 (676) (168)
Weighted average shares in
issue (excluding treasury
shares) 42,136,209 41,597,268
Return/(loss) attributable
per equity share (pence) 1.30 3.80 5.10 1.20 (1.60) (0.40)
The weighted average number of shares is calculated excluding treasury shares of
4,550,867 (2011: 4,570,867).
There are no convertible instruments, derivatives or contingent share agreements
in issue, and therefore no dilution affecting the return per share. The basic
return per share is therefore the same as the diluted return per share.
11. Fixed asset investments
30 September 2012 30 September 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Investments held at fair value through
profit or loss
Unquoted equity and preference shares 9,682 8,017
Discounted debt and convertible loan
stock 3,672 2,136
---------------------------------------
13,354 10,153
---------------------------------------
Investments held at amortised cost
Unquoted loan stock 13,612 14,171
---------------------------------------
26,966 24,324
---------------------------------------
GBP'000
=------------------------------------------------------------------------------
Opening valuation as at 1 October 2011 24,324
Purchases at cost 3,457
Disposal proceeds (2,577)
Realised losses (602)
Movement in loan stock accrued income (171)
Unrealised gains 2,535
--------
Closing valuation as at 30 September 2012 26,966
--------
Opening accumulated movement in loan stock accrued income 550
Movement in loan stock accrued income (171)
--------
Closing accumulated movement in loan stock accrued income 379
--------
Movement in unrealised losses
Opening accumulated unrealised losses (8,945)
Transfer of previously unrealised losses to realised reserve on
disposal of investments 2,176
Movement in unrealised losses 2,535
--------
Closing accumulated unrealised losses (4,234)
--------
Historic cost basis
Opening book cost 32,719
Purchases at cost 3,457
Sales at cost (5,355)
--------
Closing book cost 30,821
--------
Additions and disposals included in the Cash flow statement do not agree with
the purchases and disposals above due to restructuring of investments,
conversion of convertible loan stock into equity 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.
Investments held at fair value through profit or loss are valued in accordance
with the IPEVCV guidelines as follows:
30 September 2012 30 September 2011
Valuation methodology GBP'000 GBP'000
=------------------------------------------------------------------------------
Cost and price of recent investment
(reviewed for impairment) 1,757 1,365
Net asset value supported by third party
or desktop valuation 1,544 1,579
Earnings multiple 2,896 2,593
Revenue multiple 5,756 3,457
Agreed sale price/Offer price 1,401 1,159
------------------------------------
13,354 10,153
------------------------------------
Full valuations are prepared by independent RICS qualified surveyors in full
compliance with the RICS Red Book. Desk-top reviews are carried out by similarly
RICS qualified surveyors by updating previously prepared full valuations for
current trading and market indices.
The unquoted equity investments had the following movements between valuation
methodologies between 30 September 2011 and 30 September 2012:
+--------------------------+------------------------+--------------------------+
|Change in investment|Carrying value as at 30 |Explanatory note |
|methodology (2011 to 2012)| September 2012 | |
+--------------------------+------------------------+--------------------------+
|Net asset value supported| 1,401 |More recent information|
|by third party valuation| |available |
|to offer price | | |
+--------------------------+------------------------+--------------------------+
|Earnings multiple to| 979 |Temporary trading losses |
|revenue multiple | | |
+--------------------------+------------------------+--------------------------+
|Cost and price of recent| 449 |Improvement in investment|
|investment (reviewed for| |performance |
|impairment) to earning| | |
|multiple | | |
+--------------------------+------------------------+--------------------------+
|Cost and price of recent| 73 |More recent information|
|investment (reviewed for| |available |
|impairment) to net asset| | |
|value | | |
+--------------------------+------------------------+--------------------------+
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 reasonable methods of valuation which would be
reasonable as at 30 September 2012.
The amended FRS 29 'Financial Instruments: Disclosures' requires the Company to
disclose the valuation methods applied to its investments measured at fair value
through profit or loss in a fair value hierarchy according to the following
definitions:
+--------------------+---------------------------------------------------------+
|Fair value hierarchy|Definition of valuation method |
+--------------------+---------------------------------------------------------+
|Level 1 |Unadjusted quoted (bid) prices applied |
+--------------------+---------------------------------------------------------+
|Level 2 |Inputs to valuation are from observable sources and are|
| |directly or indirectly derived from prices |
+--------------------+---------------------------------------------------------+
|Level 3 |Inputs to valuations not based on observable market data.|
+--------------------+---------------------------------------------------------+
All of the Company's investments valued at fair value through the profit or loss
are valued according to Level 3 valuation methods.
Investments valued at fair value through profit or loss (level 3) had the
following movements in the year to 30 September 2012:
30 September 2012 30 September 2011
Convertible Convertible
and discounted and
bonds discounted
Equity Total Equity bonds Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=------------------------------------------------------------------------------
Opening balance 8,017 2,136 10,153 7,865 2,168 10,033
Additions 1,180 1,585 2,765 1,890 767 2,657
Disposals (1,163) - (1,163) (1,657) - (1,657)
Realised 15 (626) (611) 218 - 218
gains/(losses)
Debt/equity swap
and 532
representation of
convertible bond
and debt 621 (621) - - 532
Unrealised 1,012 1,198 2,210 (300) (1,330) (1,630)
gains/(losses) on
equity
investments
-------------------------------------------------------------
Closing balance 9,682 3,672 13,354 8,017 2,136 10,153
-------------------------------------------------------------
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. The valuation methodology applied to 35 per cent. of
the equity and convertible bond investments (by valuation) are based on third
party independent evidence and recent investment price and therefore the
Directors do not consider that reasonably possible alternative input assumptions
could be used in respect of these investments. For the remainder of the
portfolio, the Directors believe that changes to reasonable possible alternative
input assumptions for the valuation of the portfolio could result in an increase
in the valuation of investments by GBP706,000 or a decrease in the valuation of
investments by GBP806,000.
12. Significant interests
The principal activity of the Company is to select and hold a portfolio of
investments in unquoted securities. Although the Company, through the Manager,
will, in some cases, be represented on the board of the portfolio company, it
will not take a controlling interest or become involved in the management. The
size and structure of the companies with unquoted securities may result in
certain holdings in the portfolio representing a participating interest without
there being any partnership, joint venture or management consortium agreement.
The Company has interests of greater than 20 per cent. of the nominal value of
any class of the allotted shares in the portfolio companies as at 30 September
2012 as described below:
% total
Country of Principal % class and voting
Company incorporation activity share type rights
=------------------------------------------------------------------------------
AMS Sciences Bio-analytical 23.9%
Limited Great Britain services Ordinary 23.9%
CS (Norwich) 20.0%
Limited Great Britain Cinema Ordinary 20.0%
The investments listed above are held as part of an investment portfolio and
therefore, as permitted by FRS 9, they are measured at fair value and not
accounted for using the equity method.
13. Trade and other debtors and current asset investments
30 September 2012 30 September 2011
Trade and other debtors GBP'000 GBP'000
=------------------------------------------------------------------------
Prepayments and accrued income 14 18
UK corporation tax receivable 11 -
----------------------------------------
Trade and other debtors 25 18
----------------------------------------
The Directors consider that the carrying amount of debtors is not materially
different to their fair value.
30 September 2012 30 September 2011
Current asset investments GBP'000 GBP'000
=------------------------------------------------------------------------------
Contingent future receipts on disposal of
fixed asset investments 25 469
------------------------------------
The fair value hierarchy applied to contingent future receipts on disposal of
fixed asset investments is Level 3 (see above for definitions). These receipts
may not crystallise within 12 months.
14. Creditors: amounts falling due within one year
30 September 2012 30 September 2011
GBP'000 GBP'000
=----------------------------------------------------------------------
Trade creditors 8 7
Other creditors 35 24
UK corporation tax payable - 25
Accruals and deferred income 224 211
----------------------------------------
267 267
----------------------------------------
The Directors consider that the carrying amount of creditors is not materially
different to their fair value.
15. Called up share capital
30 September
30 September 2012 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Allotted, called up and fully paid
46,954,802 Ordinary shares of 1p each (2011:
46,215,450 Ordinary shares of 50p each) 470 23,108
-------------------------------
Voting rights
42,403,935 Ordinary shares of 1p each (net of
treasury shares) (2011: 41,644,583 Ordinary
shares of 50p each)
Following the Annual General Meeting on 6 February 2012 the Company obtained
authority to reduce the nominal value of its shares from 50 pence to one penny,
and to cancel its capital redemption and share premium reserves, as approved by
the Court on 22 February 2012. The purpose of these actions was to increase the
distributable reserves available to the Company for the payment of dividends,
the buy back of shares, and for other corporate purposes. The effects of these
transactions were to reduce the ordinary share capital by GBP22,604,000, the
capital redemption reserve by GBP1,344,000 and the share premium reserve by
GBP539,000.
The Company purchased 1,741,861 Ordinary shares (2011: 1,006,505) for
cancellation at a cost of GBP990,000 (2011: GBP593,000) representing 3.7 per cent.
of the allotted, called up and fully paid shares as at 30 September 2012.
The Company did not purchase any shares for treasury during the year (2011:
638,218 at a cost of GBP379,000).
The Company cancelled 20,000 Ordinary shares (2011: nil) from other
distributable reserves at a weighted average cost of 69.30 pence per share,
leaving a balance of 4,550,867 shares (2011: 4,570,867) Ordinary shares in
treasury, representing 9.7 per cent. of the Ordinary share capital in issue as
at 30 September 2012.
Under the terms of the Dividend Reinvestment Scheme Circular dated 22 December
2008, the following Ordinary shares were allotted during the year:
Opening
Aggregate market price
Number of nominal Net per share on
Date of shares value of Issue consideration allotment
allotment allotted shares price received date
(pence
per (pence per
GBP'000 share) GBP'000 share)
31 January 62.40
2012 72,170 36 43 57.0
29 June 2012 89,959 1 64.25 51 57.0
-------------------------- ------------------
162,129 37 94
-------------------------- ------------------
During the year the following Ordinary shares were allotted under the Albion
VCTs Linked Top Up Offers 2011/2012:
Opening
Aggregate market price
Number of nominal Net per share on
Date of shares value of Issue consideration allotment
allotment allotted shares price received date
(pence
per (pence per
GBP'000 share) GBP'000 share)
=------------------------------------------------------------------------------
10 January
2012 604,807 302 66.00 378 57.0
20 March
2012 642,773 6 67.40 410 57.0
5 April 2012 984,698 10 67.40 627 54.0
31 May 2012 106,806 1 69.80 71 54.5
--------------------------- ------------------
2,339,084 319 1,486
--------------------------- ------------------
16. Basic and diluted net asset values per share
30 September 2012 30 September 2011
=------------------------------------------------------------------------------
Basic and diluted net asset values per
share (pence) 66.00 64.20
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 the treasury shares, of 42,403,935 Ordinary shares (2011:
41,644,583).
There are no convertible instruments, derivatives or contingent share agreements
in issue. Although the Company holds treasury shares, the Directors do not
currently intend to re-issue these shares hence it is not anticipated that there
would be a dilution effect through the holding of treasury shares.
17. Analysis of changes in cash during the year
Year ended 30 September
Year ended 30 September 2012 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Opening cash balances 2,176 2,368
Net cash flow (960) (192)
---------------------------------------------------------
Closing cash balances 1,216 2,176
---------------------------------------------------------
18. Reconciliation of net return on ordinary activities before taxation to net
cash flow from operating activities
Year ended 30 Year ended 30
September 2012 September 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Revenue return on ordinary
activities before taxation 632 663
Investment management fee
charged to capital (515) (518)
Movement in accrued amortised
loan stock interest 171 46
Decrease/(increase) in debtors 2 (6)
Decrease in creditors (14) (17)
----------------------------------------------
Net cash flow from operating
activities 276 168
----------------------------------------------
19. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in note 15. The
Company is permitted to buy back its own shares for cancellation or treasury
purposes, and this policy is described in more detail in the Chairman's
statement.
The Company's financial instruments comprise equity and loan stock investments
in unquoted companies, cash balances and short and long term debtors and
creditors which arise from its operations. The main purpose of these financial
instruments is to generate cashflow and revenue and capital appreciation for the
Company's operations. The Company has no gearing or other financial liabilities
apart from short term creditors. The Company does not use any derivatives for
the management of its balance sheet.
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 in its portfolio of unquoted and quoted investments,
details of which are shown on pages 10 to 12 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 usually
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
investment portfolio which is GBP26,991,000 (2011: GBP24,793,000). The investment
portfolio forms 96.5 per cent. of the net asset value as at 30 September 2012
(2011: 92.8 per cent.).
More details regarding the classification of fixed asset investments are shown
in note 11.
Investment price risk
Investment price risk is the risk that the fair value of future investment cash
flows will fluctuate due to factors specific to an investment instrument or to a
market in similar instruments. To mitigate the investment price risk for the
Company as a whole, the strategy of the Company is to invest in a broad spread
of industries with approximately two-thirds of the unquoted investments
comprising debt securities, which, owing to the structure of their yield and the
fact that they are usually secured, have a lower level of price volatility than
equity. Details of the industries in which investments have been made are
contained in the Portfolio of investments section on pages 10 to 12 of the full
Annual Report and Financial Statements and in the Manager's report.
Valuations are based on the most appropriate valuation methodology for an
investment within its market, with regard to the financial
health of the investment and the IPEVCV Guidelines.
As required under FRS 29 "Financial Instruments: Disclosures", the Board is
required to illustrate by way of a sensitivity analysis the
degree of exposure to market risk. The Board considers that the value of the
fixed 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. increase or decrease in the valuation of the
investment portfolio (keeping all other variables constant) would increase or
decrease the net asset value and return for the year by GBP2,699,000 (2011:
GBP2,479,000).
Cash flow interest rate risk
It is the Company's policy to accept a degree of interest rate risk on its
financial assets through the effect of interest rate changes. On the basis of
the Company's analysis, it is estimated that a rise of half a percentage point
in all interest rates would have increased total return before tax for the year
by approximately GBP6,000. On the basis of the Company's analysis, it is
considered that further falls in interest rates would not have a significant
impact.
The weighted average interest rate applied to the Company's fixed rate assets
during the year was approximately 6.1 per cent. (2011: 5.6 per cent.). The
weighted average period to expected maturity for the fixed rate assets is
approximately 2.5 years (2011: 2.1 years).
The Company's financial assets and liabilities as at 30 September 2012, all
denominated in pounds sterling, consist of the following:
30 September 2012 30 September 2011
Non- Non-
Fixed Floating interest Fixed Floating 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 - - 9,682 9,682 - - 8,017 8,017
Unquoted
loan stock 15,346 - 1,938 17,284 15,930 - 377 16,307
Debtors* - - 3 3 - - 18 18
Current
asset
investments - - 25 25 - - 469 469
Current
liabilities - - (267) (267) - - (267) (267)
Cash 738 478 - 1,216 1,671 505 - 2,176
------------------------------------------------------------------
16,084 478 11,381 27,943 17,601 505 8,614 26,720
------------------------------------------------------------------
*The debtors do not necessarily reconcile to the balance sheet as prepayments
and tax receivable are not included in the above table.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into with the
Company. The Company is exposed to credit risk through its debtors, investment
in loan stocks, and through the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock and floating rate note
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.
The Manager and the Board formally review credit risk (including debtors) and
other risks, both at the time of initial investment and at quarterly Board
meetings.
The Company's total gross credit risk as at 30 September 2012 was limited to
GBP17,284,000 (2011: GBP16,307,000) of unquoted loan stock instruments (all are
secured on the assets of the portfolio company), GBP25,000 of current asset
investments (2011: GBP469,000) and GBP1,216,000 cash deposits with banks (2011:
GBP2,176,000).
As at the balance sheet date, the cash held by the Group is held with the Royal
Bank of Scotland plc, Lloyds TSB Bank Plc, Scottish Widows Bank plc (part of
Lloyds Banking Group) and Barclays Bank plc. Credit risk on cash transactions is
mitigated by transacting with counterparties that are regulated entities subject
to prudential supervision, with high credit ratings assigned by international
credit-rating agencies.
The Company has an informal policy of limiting counterparty banking and floating
rate note exposure to a maximum of 20 per cent. of net asset value for any one
counterparty.
The credit profile of unquoted loan stock is described under liquidity risk on
below.
The cost, impairment and carrying value of impaired loan stocks held at
amortised cost at 30 September 2012 and 30 September 2011 are as follows:
30 September 2012 30 September 2011
Cost Impairment Carrying value Cost Impairment Carrying value
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=------------------------------------------------------------------------------
Impaired loan
stock 5,425 (2,224) 3,201 6,034 (2,287) 3,747
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 estimate
that the security value approximates to the carrying value.
Liquidity risk
Liquid assets are held as cash on current, deposit or short term money market
accounts or similar instruments. 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
GBP2,796,000 as at 30 September 2012 (2011: GBP2,672,000).
The Company has no committed borrowing facilities as at 30 September 2012 (2011:
GBPnil) and had cash balances of GBP1,216,000 (2011: GBP2,176,000). The main cash
outflows are for new investments, the buy-back of shares and dividend payments,
which are within the control of the Company. The Manager formally reviews the
cash requirements of the Company on a monthly basis, and the Board on a
quarterly basis as part of its review of management accounts and forecasts. All
the Company's financial liabilities are short term in nature and total GBP267,000
for the year to 30 September 2012 (2011: GBP267,000).
The carrying value of loan stock investments at 30 September 2012 as analysed by
expected maturity dates is as follows:
Fully performing Impaired loan Past due loan
loan stock stock stock Total
Redemption date GBP'000 GBP'000 GBP'000 GBP'000
=------------------------------------------------------------------------------
Less than one year 1,047 737 3,181 4,965
1-2 years 2,781 2,029 2,188 6,998
2-3 years 1,397 179 305 1,881
3-5 years 1,207 256 611 2,074
+5 years 1,253 - 113 1,366
------------------------------------------------------------
7,685 3,201 6,398 17,284
------------------------------------------------------------
Loan stocks can be past due as a result of interest or capital not being paid in
accordance with contractual terms.
Loan stock categorised as past due includes:
Loan stock with a carrying value of GBP512,000 had capital past due of between 12
to 24 months and yielded an average of 14.6 per cent. interest on cost.
Loan stock with a carrying value of GBP977,000 had loan stock interest past due of
less than 12 months and yielded an average of 5.6 per cent. interest on cost.
Loan stock with a carrying value of GBP4,358,000 had loan stock interest past due
greater than 12 months (through not paying all of its contractual interest),
however has yielded 7.6 per cent. on cost during the year.
Loan stock with no interest received and carrying values of GBP246,000 had loan
stock interest due of less than 12 months, GBP23,000 had loan stock interest past
due of 2 years, and GBP282,000 had loan stock interest past due of 7 years.
The carrying value of loan stock investments at 30 September 2011 as analysed by
expected maturity dates is as follows:
Fully performing Impaired loan Past due loan
loan stock stock stock Total
Redemption date GBP'000 GBP'000 GBP'000 GBP'000
=------------------------------------------------------------------------------
Less than one year 2,038 920 4,631 7,589
1-2 years 821 120 89 1,030
2-3 years 861 2,086 718 3,665
3-5 years 1,956 621 1,167 3,744
+5 years 162 - 117 279
------------------------------------------------------------
5,838 3,747 6,722 16,307
------------------------------------------------------------
In view of the information shown, the Board considers that the Company is
subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Company's financial assets and liabilities as at 30 September 2012 are
stated at fair value as determined by the Directors, with the exception of loans
and receivables included within investments, debtors and creditors and cash,
which are measured at amortised cost, as permitted by FRS 26. The Directors
believe that the current carrying value of loan stock is not materially
different to the fair value. There are no financial liabilities other than
creditors. The Company's financial liabilities are all non-interest bearing. It
is the Directors' opinion that the book value of the financial liabilities is
not materially different to the fair value and all are payable within one year.
20. Commitments and contingencies
As at 30 September 2012, the Company had the following financial commitments in
respect of investments:
* AMS Sciences Limited; GBP72,000
21. Post balance sheet events
Since 30 September 2012 the Company has had the following material post balance
sheet events:
* Investment of GBP32,000 in Rostima Holdings Limited
* Repayment of GBP150,000 loan stock received from CS (Norwich) Limited
* Repayment of GBP137,000 loan stock received from CS (Brixton) Limited
* Cash of GBP2,100,000 received from the disposal of investments in CS (Norwich)
Limited, CS (Brixton) Limited and CS (Exeter) Limited.
* On 19 October 2012 the Company announced the launch of the Albion VCTs Top
Up Offers 2012/2013. In aggregate, the Albion VCTs will be aiming to raise
up to GBP15 million across six of the VCTs managed by Albion Ventures LLP, of
which Albion Income & Growth VCT PLC will be aiming to raise approximately
GBP2.5m. The maximum amount raised by each of the Albion VCTs will be 10 per
cent. of its issued share capital (over any one 12 month period, and
including any shares issued under Dividend Reinvestment Schemes) or EUR5
million, being the amount that they may issue under the Prospectus Rules
without the publication of a full prospectus.
The proceeds of the Offers will be used to provide further resources to the
Albion VCTs at a time when a number of attractive new investment
opportunities are being seen. An Investor Guide and Offers document will be
sent to shareholders in December 2012.
22. Related party transactions
The Manager, Albion Ventures LLP, is considered to be a related party by virtue
of the fact that Patrick Reeve, who is the Managing Partner of Albion Ventures
LLP, the Manager, is a Director of the Company. During the year, investment
management fees of a total value of GBP686,000 (2011: GBP690,000), were purchased by
the Company from Albion Ventures LLP. At the financial year end, the amount due
to Albion Ventures LLP in respect of these services disclosed within accruals
and deferred income was GBP168,000 (2011: GBP161,000).
During the year, the Company was charged GBP18,500 by Albion Ventures LLP in
respect of Patrick Reeve's services as a Director (excluding VAT) (2011:
GBP18,500). At the year end, the amount due to Albion Ventures LLP in respect of
these services disclosed as accruals and deferred income was GBP5,550 (2011:
GBP5,550).
During the year the Company raised new funds through the Albion VCTs Linked Top
Up Offers 2011/2012 as detailed in note 15. The total cost of the issue of these
shares was 5.5 per cent. of the sums subscribed. Of these costs, an amount of
GBP6,740 (2011: GBP3,450) was paid to the Manager, Albion Ventures LLP in respect of
receiving agent services. There were no sums outstanding in respect of receiving
agent services at the year end.
During the year, the Company purchased 1,591,816 Ordinary shares at a total cost
of GBP902,000 (2011: GBP972,000) using the services of Winterflood Securities
Limited a company of which Robin Archibald is head of corporate finance and
broking. These transactions were at arms length and in line with market
practices. At the year end, the amount due to Winterflood Securities Limited in
respect of share buy-backs and disclosed in other creditors was GBPnil. (2011:
GBP24,000).
There are no other related party transactions or balances requiring disclosure.
23. Principal risks and uncertainties
In addition to the current economic risks outlined in the Chairman's statement,
the Board considers that the Company faces the following major risks and
uncertainties:
1. Economic risk
Changes in economic conditions, including, for example, interest rates, rates of
inflation, industry conditions, competition, political and diplomatic events and
other factors could substantially and adversely affect the Company's prospects
in a number of ways.
To reduce this risk, in addition to investing equity in portfolio companies, the
Company often invests in secured loan stock and has a policy of not normally
permitting any external bank borrowings within portfolio companies.
Additionally, the Manager has been rebalancing the sector exposure of the
portfolio with a view to reducing reliance on consumer led sectors.
2. Investment risk
This is the risk of investment in poor quality assets which reduces the capital
and income returns to shareholders, and negatively impacts on the Company's
reputation. By nature, smaller unquoted businesses, such as those that qualify
for venture capital trust purposes, are more fragile than larger, long
established businesses.
To reduce this risk, the Board places reliance upon the skills and expertise of
the Manager and its strong track record for investing in this segment of the
market. In addition, the Manager operates a formal and structured investment
process, which includes an Investment Committee, comprising investment
professionals from the Manager and at least one external investment
professional. The Manager also invites, and takes account of, comments from non-
executive Directors of the Company on investments discussed at the Investment
Committee meetings. Investments are actively and regularly monitored by the
Manager (investment managers normally sit on portfolio company boards) and the
Board receives detailed reports on each investment as part of the Manager's
report at quarterly board meetings. It is the policy of the Company for
portfolio companies to not normally have external borrowings.
3. Valuation risk
The Company's investment valuation method is reliant on the accuracy and
completeness of information that is issued by portfolio companies. In
particular, the Directors may not be aware of or take into account certain
events or circumstances which occur after the information issued by such
companies is reported.
As described in note 2 of the Financial Statements, the unquoted equity
investments, convertible loan stock and debt issued at a discount held by the
Company are valued at fair value through profit or loss in accordance with the
International Private Equity and Venture Capital Valuation Guidelines. These
guidelines set out recommendations, intended to represent current best practice
on the valuation of venture capital investments. These investments are valued on
the basis of forward looking estimates and judgements about the business itself,
its market and the environment in which it operates, together with the state of
the mergers and acquisitions market, stock market conditions and other factors.
In making these judgements the valuation takes into account all known material
facts up to the date of approval of the Financial Statements by the Board. All
other unquoted loan stock is measured at amortised cost.
4. Venture Capital Trust approval risk
The Company's current approval as a venture capital trust allows investors to
take advantage of tax reliefs on initial investment and ongoing tax free capital
gains and dividend income. Failure to meet the qualifying requirements could
result in investors losing the tax relief on initial investment and loss of tax
relief on any tax-free income or capital gains received. In addition, failure to
meet the qualifying requirements could result in a loss of listing of the
shares.
To reduce this risk, the Board has appointed the Manager, who has a team with
significant experience in venture capital trust management, used to operating
within the requirements of the venture capital trust legislation. In addition,
to provide further formal reassurance, the Board has appointed
PricewaterhouseCoopers LLP as its taxation advisors. PricewaterhouseCoopers LLP
report quarterly to the Board to independently confirm compliance with the
venture capital trust legislation, to highlight areas of risk and to inform on
changes in legislation.
5. Compliance risk
The Company is listed on The London Stock Exchange and is required to comply
with the rules of the UK Listing Authority, as well as with the Companies Act,
Accounting Standards and other legislation. Failure to comply with these
regulations could result in a delisting of the Company's shares, or other
penalties under the Companies Act or from financial reporting oversight bodies.
Board members and the Manager have experience of operating at senior levels
within quoted businesses. In addition, the Board and the Manager receive regular
updates on new regulation from its auditor, lawyers and other professional
bodies.
6. Internal control risk
Failures in key controls, within the Board or within the Manager's business,
could put assets of the Company at risk or result in reduced or inaccurate
information being passed to the Board or to shareholders.
The Audit Committee meets with the Manager's Internal Auditor, Littlejohn LLP,
when required, receiving a report regarding the last formal internal audit
performed on the Manager, and providing the opportunity for the Audit Committee
to ask specific and detailed questions. During the year the Chairman of the
Audit Committee met with the internal audit Partner of Littlejohn LLP to discuss
the most recent Internal Audit Report on the Manager. The Manager has a
comprehensive business continuity plan in place in the event that operational
continuity is threatened. Further details regarding the Board's management and
review of the Company's internal controls through the implementation of the
Turnbull guidance are detailed on page 25 of the full Annual Report and
Financial Statements.
Measures are in place to mitigate information risk in order to ensure the
integrity, availability and confidentiality of information used within the
business.
7. Reliance upon third parties risk
The Company is reliant upon the services of Albion Ventures LLP for the
provision of investment management and administrative functions. There are
provisions within the management agreement for the change of Manager under
certain circumstances (for further detail, see the management agreement
paragraph on page 20 of the full Annual Report and Financial Statements). In
addition, the Manager has demonstrated to the Board that there is no undue
reliance placed upon any one individual within Albion Ventures LLP.
8. Financial risks
By its nature, as a venture capital trust, the Company is exposed to investment
risk (which comprises investment price risk and cash flow interest rate risk),
credit risk and liquidity risk. The Company's policies for managing these risks
and its financial instruments are outlined in full in note 19.
All of the Company's income and expenditure is denominated in sterling and hence
the Company has no foreign currency risk. The Company is financed through equity
and does not have any borrowings. The Company does not use derivative financial
instruments for speculative purposes.
24. Other information
The information set out in this announcement does not constitute the Company's
statutory accounts within the terms of section 434 of the Companies Act 2006 for
the years ended 30 September 2012 and 30 September 2011, and is derived from
the statutory accounts for those financial years, which have been, or in the
case of the accounts for the year ended 30 September 2012, which will be,
delivered to the Registrar of Companies. The Auditor reported on those accounts;
their reports were unqualified and did not contain a statement under s498 (2) or
(3) of the Companies Act 2006.
The Company's Annual General Meeting will be held at The City of London Club,
19 Old Broad Street, London, EC2N 1DS on 5 February 2013 at 11:00 am.
25. Publication
The full audited Annual Report and Financial Statements are being sent to
shareholders and copies will be made available to the public at the registered
office of the Company, Companies House, the National Storage Mechanism and also
electronically at www.albion-ventures.co.uk under the 'Our Funds' section, by
clicking on 'Albion Income & Growth 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
Pie Chart at 30 September 2012:
http://hugin.info/141810/R/1665925/540585.pdf
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Albion Income & Growth VCT PLC via Thomson Reuters ONE
[HUG#1665925]
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