Annual Financial Report
Albion Enterprise VCT PLC
As required by the UK Listing Authority's Disclosure and Transparency
Rules 4.1 and 6.3, Albion Enterprise VCT PLC today makes public its
information relating to the Annual Report and Financial Statements
for the year ended 31 March 2009.
This announcement was approved by the Board of Directors on 2 July
2009.
This announcement has not been audited.
Please click on the following link to view the full Annual Report and
Financial Statements (which have been audited) for the year to 31
March 2009. The information contained in this link includes
information as required by the Disclosure and Transparency Rules,
including Rule 4.1.
http://hugin.info/141807/R/1326934/312492.pdf
Alternatively you may view the Annual Report and Financial Statements
at: www.albion-ventures.co.uk by clicking on the 'Our Funds' section.
Investment Objectives
The aim of Albion Enterprise VCT ("the Company") is to provide
investors with a regular and predictable source of income, combined
with the prospect of longer term capital growth. Once fully invested,
the Company intends to achieve this by investing up to 50 per cent.
of the net funds raised in an asset-based portfolio of lower risk,
ungeared businesses, principally operating in the leisure sector and
related areas (the ''Asset-Based Portfolio''). The balance of the net
funds raised, other than funds retained for liquidity purposes, will
be invested in a portfolio of higher growth businesses across a
variety of sectors of the UK economy. These will range from lower
risk, income producing businesses to higher risk technology companies
(the ''Growth Portfolio''). Funds awaiting investment in Qualifying
Investments or retained for liquidity purposes will be held in gilts,
on deposit or invested in floating rate notes or similar instruments,
in the latter two cases with banks with a Moody's credit rating of
'A' or above.
The Company's investment portfolio will thus be structured to provide
a balance between income and capital growth for the longer term. The
Asset-Based Portfolio is designed to provide stability and income
whilst still maintaining the potential for capital growth. The Growth
Portfolio is intended to provide highly diversified exposure through
its portfolio of investments in unquoted UK companies.
Financial Calendar
+-------------------------------------------------------------------+
| Annual General Meeting | 11 August 2009 |
| | |
|--------------------------------------------------+----------------|
| Record date for first dividend | 10 July 2009 |
| | |
|--------------------------------------------------+----------------|
| Payment of first dividend | 7 August 2009 |
| | |
|--------------------------------------------------+----------------|
| Announcement of interim results for the six | November 2009 |
| months ended 30 September 2009 | |
| | |
|--------------------------------------------------+----------------|
| Payment of second dividend | January 2010 |
| | |
+-------------------------------------------------------------------+
Financial Highlights
+-------------------------------------------------------------------+
| | 31 March 2009 | 31 March 2009 |
| | (pence per share) | (pence per |
| | | share) |
|-------------------------------+-------------------+---------------|
| Dividends paid per Ordinary | 1.65 | 0.70 |
| share | | |
|-------------------------------+-------------------+---------------|
| Revenue return per Ordinary | 2.10 | 2.80 |
| share | | |
|-------------------------------+-------------------+---------------|
| Capital loss per Ordinary | (5.90) | (2.50) |
| share | | |
|-------------------------------+-------------------+---------------|
| Net asset value per Ordinary | 88.80 | 94.00 |
| share | | |
+-------------------------------------------------------------------+
Net asset value total return to shareholders since launch:
+-------------------------------------------------------------------+
| | | 31 March 2009 |
| | | (pence per share) |
|-------------------------------------------+---+-------------------|
| | | |
|-------------------------------------------+---+-------------------|
| Total dividends paid during the period | | |
| ended 31 March 2008* | | 0.70 |
|-------------------------------------------+---+-------------------|
| Total dividends paid during the year | | |
| ended 31 March 2009* | | 1.65 |
|-------------------------------------------+---+-------------------|
| Total dividends paid to 31 March 2009 | | 2.35 |
|-------------------------------------------+---+-------------------|
| Net asset value as at 31 March 2009 | | 88.80 |
|-------------------------------------------+---+-------------------|
| Total net asset value return to 31 March | | |
| 2009 | | 91.15 |
+-------------------------------------------------------------------+
* The dividend of 0.7 pence per share paid during the period ended 31
March 2008 and first dividend of 0.4 pence per share paid during the
year ended 31 March 2009 were paid to shareholders who subscribed in
the 2006/2007 offer only.
In addition to the above dividends, the Company will pay a first
dividend of 1 penny per share on 7 August 2009 to shareholders on the
register as at 10 July 2009.
Chairman's statement
Introduction
The results for the Company's second period of operation, being the
year to 31 March 2009, reflect the worsening economic environment.
Nevertheless, the Company's total negative return of 3.8 pence per
share (or 4.3 per cent. of net asset value) compares favourably to
the decline in the FTSE All Share Index (including dividends paid) of
29.3 per cent. over the same period. This is principally due to the
fact that the Company still has high levels of cash available for
investment.
Under the Further Offer for subscription launched in December 2007, a
total of 10,567,738 shares were issued on 4 April 2008 at a price of
100 pence each. The net proceeds of the Offer were £9,986,512. These
shares were admitted to the Official List and to the London Stock
Exchange on 7 April 2008.
Investment progress and prospects
A total of £4.3 million was invested in three existing and eight new
investee companies during the year, taking the total portfolio to
sixteen qualifying investments. While trading in many of our
asset-backed, leisure-oriented businesses remains resilient,
valuations have fallen in line with the decline generally in the
commercial property market, particularly for those investments made
during 2007. In addition, there has been slower progress than
expected in some of our growth investments, which has also resulted
in partial write downs. Nevertheless, your Company's policy of
ensuring that it has a first charge, wherever possible, over investee
companies' assets is helping to mitigate the adverse effect of the
economic down-turn. In addition, your Company has considerable cash
resources which will enable it to take advantage of the lower
valuations now becoming apparent.
The current very low interest rates available in the market, however,
lead us to take a cautious view over the income prospects of the
Company in the current year, though we would currently expect a
dividend of not less than 2 pence per share to be paid during the
year.
Recovery of historic VAT
Following a period of lobbying by the Association of Investment
Companies, the welcome review of the position regarding the exemption
of management fees from VAT by H.M. Revenue & Customs in July 2008
has meant that the Manager is able to reclaim historic VAT that it
had previously charged to the Company. A reclaim of historic VAT of
£38,000 (before the deduction of tax) has been credited to the
accounts in respect of the repayment. Further details regarding this
claim, and its disclosure, are shown in note 5 of this announcement.
With effect from 1 October 2008, all management and administration
fees are considered exempt from VAT.
Risks and uncertainties
The strongly negative outlook of the UK economy continues to be the
key risk affecting the Company and, as mentioned above, we are seeing
the effects of this in certain sectors of our portfolio.
Nevertheless, despite pressures on individual investee companies, the
portfolio as a whole remains cash generative and it remains our
policy to ensure that investee companies have no external bank
borrowings. Meanwhile, investment opportunities continue to arise at
attractive valuations in a variety of sectors. Among these is the
healthcare sector, which is one of our core areas of concentration.
Detailed analysis of the other risks and uncertainties facing the
business is shown in note 12 of this announcement.
Results and dividends
The revenue return after tax was £640,000 enabling total dividends to
be paid of 1.65 pence per share. Net asset value per share at 31
March 2009 was 88.8 pence (31 March 2008: 94.0 pence). Your Board
announces a first dividend for the year of 1 penny per share (2008:
0.4 pence per share) which will be paid on 7 August 2009 to those
shareholders on the register as at 10 July 2009.
Discount management and share buy-backs
It remains the Board's policy to buy back shares in the market,
subject to the overall constraint that such purchases are in the
Company's interest, including the maintenance of sufficient resources
for the investment in existing and new portfolio companies and the
continued payment of dividends to shareholders. Given the high level
of volatility and the adverse movements apparent in all markets, the
discount to net asset value per share at which shares are bought back
will widen from that which has applied historically.
Change of the Manager and name change
The business of Close Ventures Limited was acquired by Albion
Ventures LLP ("Albion Ventures") from Close Brothers Group plc
("Close") on 23 January 2009. Albion Ventures has been formed by the
executive directors of Close Ventures Limited; meanwhile Close will
continue to have an investment in the business. The Company's
management contract has been novated from Close Ventures to Albion
Ventures under exactly the same terms as the existing agreement. The
investment approach of Albion Ventures and the investment policy of
the Company are also unchanged, with a continued emphasis on building
up a broad portfolio of investee companies normally with no external
bank borrowings and the maintenance of a regular dividend yield. As
a result of this change, the Company Secretary has changed to Albion
Ventures LLP, and the Company changed its name from Close Enterprise
VCT PLC to Albion Enterprise VCT PLC at a General Meeting on 20 March
2009.
Patrick Reeve
Director 2 July 2009
Manager's report
An analysis of Albion Enterprise VCT PLC's investment portfolio as at
31 March 2009 is shown below.
Split of portfolio valuation by sector as at 31 March 2009
http://hugin.info/141807/R/1326934/312484.pdf
Source: Albion Ventures LLP
Care has been taken to create a spread across a broad number of
sectors, with those that are asset-backed and consumer based such as
pubs and cinemas, being balanced by higher growth businesses in areas
such as healthcare and environmental sectors.
New investments
New investments made during the year include the following: £430,000
in Dexela Limited, which designs and develops scanners for diagnosing
breast cancer; £457,000 in Prime Care Holdings Limited, which
provides domiciliary care for the elderly in the south of England;
£167,000 in Mirada Medical Limited, which provides software to
integrate medical diagnostics; £555,000 in Forth Photonics Limited,
which provides equipment for detection of cervical cancer; £950,000
in Bravo Inns II Limited, which is purchasing pubs in the north west
of England; £1 million in Droxford Hospital Limited,which is in the
process of acquiring a site for the development of a mental hospital;
and £560,000 in Vibrant Energy Surveys Limited, a provider of
environmental efficiency certificates within the property sector.
As the above chart shows, emphasis is being placed on investments
involved in the healthcare sector as we believe this is one of the
sectors (along with the environmental sector) that is likely to show
a level of resilience in growth in the current difficult economic
climate.
Portfolio review
A number of companies in the portfolio are performing strongly, with
particular growth being shown by Opta Sports Data Limited (which
provides sports analysis for the media sector) and Bravo Inns II
Limited (where a number of public houses were bought recently at
attractive prices). In addition Prime Care Holdings Limited is
showing promising organic growth since we first invested. Against
this, Resorthoppa Limited, which provides transfer services from
airports to hotels within the travel sector, was hit both by
pressures on the travel sector in general and also by the strength of
the euro. This led to the company being merged with
Lowcosttravelgroup Limited, a company in which a number of the other
VCTs managed by Albion Ventures LLP have an investment. In addition,
a partial provision has been made against the investment in Vibrant
Energy Surveys Limited. The company was affected last year by the
severe slow down in residential housing sales and this in turn led to
the restructuring of the company's management.
New investment opportunities
We are already building up a strong and diversified portfolio of
healthcare related businesses. In addition, we aim to ensure that
the environmental sector also forms a sizeable portion of the
Company's investment portfolio. The Company currently has
considerable cash balances, and we continue to review a number of
opportunities at attractive valuations in both these and other areas
such as the leisure sector, where a lack of bank financing has led to
some interesting opportunities for cautious purchasers.
Details of related party transactions are shown in note 15 of this
announcement.
Albion Ventures LLP
Investment Manager 2 July 2009
Responsibility Statement
In preparing these financial statements for the year to 31 March
2009, the Directors of the Company, being Maxwell Packe, Lady Balfour
of Burleigh, Lord St. John of Bletso 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
March 2009 for the Company has been prepared in accordance with
United Kingdom Generally Accepted Accounting Practice (UK Accounting
Standards and applicable law) and give a true and fair view of the
assets, liabilities, financial position and profit and loss of the
Company for the year ended 31 March 2009 as required by DTR 4.2.R;
-the Chairman's Statement and Manager's Report include a fair review
of the information required by DTR 4.2.7R (indication of important
events during the year ended 31 March 2009 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 which
is attached to this announcement.
By order of the Board
Patrick Reeve
Chairman
2 July 2009
Income Statement
+----------------------------------------------------------------------------------+
| | | Year ended |From 7 November 2006 to|
|-----------------------------+----+-----------------------+-----------------------|
| | | 31 March 2009 | 31 March 2008 |
|-----------------------------+----+-----------------------+-----------------------|
| | |Revenue|Capital| Total| Revenue| Capital|Total|
|-----------------------------+----+-------+-------+-------+--------+--------+-----|
| |Note| £'000| £'000| £'000| £'000| £'000|£'000|
|-----------------------------+----+-------+-------+-------+--------+--------+-----|
| | | | | | | | |
|Losses on investments |3 | -|(1,434)|(1,434)| -| (262)|(262)|
|-----------------------------+----+-------+-------+-------+--------+--------+-----|
|Investment income |4 | 1,248| -| 1,248| 1,065| -|1,065|
|-----------------------------+----+-------+-------+-------+--------+--------+-----|
|Investment management fees | | (181)| (542)| (723)| (117)| (352)|(469)|
|-----------------------------+----+-------+-------+-------+--------+--------+-----|
|Recovery of VAT |5 | 10| 28| 38| -| -| -|
|-----------------------------+----+-------+-------+-------+--------+--------+-----|
|Other expenses | | (203)| -| (203)| (175)| -|(175)|
|-----------------------------+----+-------+-------+-------+--------+--------+-----|
| | | | | | | | |
|Return/(loss) on ordinary | | | | | | | |
|activities before tax | | 874|(1,948)|(1,074)| 773| (614)| 159|
|-----------------------------+----+-------+-------+-------+--------+--------+-----|
|Tax (charge)/credit on | | | | | | | |
|ordinary activities |6 | (234)| 153| (81)| (214)| 114|(100)|
|-----------------------------+----+-------+-------+-------+--------+--------+-----|
|Return/(loss) attributable to| | | | | | | |
|shareholders | | 640|(1,795)|(1,155)| 559| (500)| 59|
|-----------------------------+----+-------+-------+-------+--------+--------+-----|
|Basic and diluted | | | | | | | |
|return/(loss) per share | | | | | | | |
|(pence)* |8 | 2.1| (5.9)| (3.8)| 2.8| (2.5)| 0.3|
+----------------------------------------------------------------------------------+
*(excluding treasury shares)
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.
The accompanying notes form an integral part of this announcement.
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 loss on ordinary activities
before tax and the historical profit is due to the fair value
movements on investments. As a result a note on historical cost
profit and losses has not been prepared.
Balance Sheet
+-------------------------------------------------------------------+
| | | | |
|---------------------------------+------+---------------+----------|
| | | | 31 March |
| | | 31 March 2009 | 2008 |
|---------------------------------+------+---------------+----------|
| | Note | £'000 | £'000 |
|---------------------------------+------+---------------+----------|
| | | | |
|---------------------------------+------+---------------+----------|
| Fixed asset investments | | 5,804 | 2,847 |
|---------------------------------+------+---------------+----------|
| | | | |
|---------------------------------+------+---------------+----------|
| Current Assets | | | |
|---------------------------------+------+---------------+----------|
| Trade and other debtors | | 30 | 141 |
|---------------------------------+------+---------------+----------|
| Current asset investments | | 12,123 | 1,474 |
|---------------------------------+------+---------------+----------|
| Cash at bank | | 9,319 | 14,363 |
|---------------------------------+------+---------------+----------|
| Total current assets | | 21,472 | 15,978 |
|---------------------------------+------+---------------+----------|
| | | | |
|---------------------------------+------+---------------+----------|
| Creditors: amounts falling due | | | |
| within one year | | (348) | (221) |
|---------------------------------+------+---------------+----------|
| | | | |
|---------------------------------+------+---------------+----------|
| Net current assets | | 21,124 | 15,757 |
|---------------------------------+------+---------------+----------|
| | | | |
|---------------------------------+------+---------------+----------|
| Net assets | | 26,928 | 18,604 |
|---------------------------------+------+---------------+----------|
| | | | |
|---------------------------------+------+---------------+----------|
| Capital and reserves | | | |
|---------------------------------+------+---------------+----------|
| Called up share capital | 9 | 15,180 | 9,897 |
|---------------------------------+------+---------------+----------|
| Special reserve | | 13,473 | 8,787 |
|---------------------------------+------+---------------+----------|
| Treasury shares reserve | | (31) | - |
|---------------------------------+------+---------------+----------|
| Realised capital reserve | | (614) | (238) |
|---------------------------------+------+---------------+----------|
| Unrealised capital reserve | | (1,681) | (262) |
|---------------------------------+------+---------------+----------|
| Revenue reserve | | 601 | 420 |
|---------------------------------+------+---------------+----------|
| Total equity shareholders' | | | |
| funds | | 26,928 | 18,604 |
|---------------------------------+------+---------------+----------|
| | | | |
|---------------------------------+------+---------------+----------|
| Basic and diluted net asset | | | |
| value per share (pence)* | 10 | 88.8 | 94.0 |
+-------------------------------------------------------------------+
*(excluding treasury shares)
The accompanying notes form an integral part of this announcement.
Reconciliation of Movement in Shareholders' Funds
+-------------------------------------------------------------------------------------------------------+
| |Called-up| | |Treasury|Realised|Unrealised| | |
| | share| Share| Special| shares| capital| capital| Revenue| |
| | capital|premium|reserve*|reserve*|reserve*| reserve*|reserve*| Total|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
| | £'000| £'000| £'000| £'000| £'000| £'000| £'000| £'000|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|As at 1 April 2008 | 9,897| -| 8,787| -| (238)| (262)| 420| 18,604|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Issue of share capital | 5,283| 5,283| -| -| -| -| -| 10,566|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Issue costs | -| (580)| -| -| -| -| -| (580)|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Cost of cancellation of share | | | | | | | | |
|premium account | -| -| (17)| -| -| -| -| (17)|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Cancellation of share premium | | | | | | | | |
|account | -|(4,703)| 4,703| -| -| -| -| -|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Capitalised investment | | | | | | | | |
|management fees | -| -| -| -| (542)| -| -| (542)|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Recovery of VAT capitalised | -| -| -| -| 28| -| -| 28|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Tax relief on costs charged to| | | | | | | | |
|capital | -| -| -| -| 153| -| -| 153|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Purchase of own treasury | | | | | | | | |
|shares | -| -| -| (31)| -| -| -| (31)|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Net realised losses on | | | | | | | | |
|investments in the year | -| -| -| -| (15)| -| -| (15)|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Unrealised losses on | | | | | | | | |
|investments | -| -| -| -| -| (1,419)| -|(1,419)|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Revenue return attributable to| | | | | | | | |
|shareholders | -| -| -| -| -| -| 640| 640|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Dividends paid | -| -| -| -| -| -| (459)| (459)|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|As at 31 March 2009 | 15,180| -| 13,473| (31)| (614)| (1,681)| 601| 26,928|
+-------------------------------------------------------------------------------------------------------+
+-------------------------------------------------------------------------------------------------------+
| |Called-up| | |Treasury|Realised|Unrealised| | |
| | share| Share| Special| shares| capital| capital| Revenue| |
| | capital|premium|reserve*|reserve*|reserve*| reserve*|reserve*| Total|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
| | £'000| £'000| £'000| £'000| £'000| £'000| £'000| £'000|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|As at 7 November 2006 | -| -| -| -| -| -| -| -|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Issue of share capital | 9,897| 9,897| -| -| -| -| -| 19,794|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Issue costs | -|(1,089)| -| -| -| -| -|(1,089)|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Cost of cancellation of share | | | | | | | | |
|premium account | -| -| (21)| -| -| -| -| (21)|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Cancellation of share premium | | | | | | | | |
|account | -|(8,808)| 8,808| -| -| -| -| -|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Capitalised investment | | | | | | | | |
|management fees | -| -| -| -| (352)| -| -| (352)|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Tax relief on costs charged to| | | | | | | | |
|capital | -| -| -| -| 114| -| -| 114|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Unrealised losses on | | | | | | | | |
|investments | -| -| -| -| -| (262)| -| (262)|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Revenue return attributable to| | | | | | | | |
|shareholders | -| -| -| -| -| -| 559| 559|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|Dividends paid | -| -| -| -| -| -| (139)| (139)|
|------------------------------+---------+-------+--------+--------+--------+----------+--------+-------|
|As at 31 March 2008 | 9,897| -| 8,787| -| (238)| (262)| 420| 18,604|
+-------------------------------------------------------------------------------------------------------+
Included within these reserves is an amount of £11,748,000 (2008:
£8,707,000) which is considered distributable. The Special reserve
has been treated as distributable in determining the amounts
available for distribution.
Cash Flow Statement
+-------------------------------------------------------------------+
| | | | From |
| | | | 7 November |
| | | Year ended | 2006 |
| | | 31 March | To 31 March |
| | | 2009 | 2008 |
| | Note | £'000 | £'000 |
|--------------------------------+------+-------------+-------------|
| Operating activities | | | |
|--------------------------------+------+-------------+-------------|
| Investment income received | | 776 | 138 |
|--------------------------------+------+-------------+-------------|
| Deposit interest received | | 311 | 903 |
|--------------------------------+------+-------------+-------------|
| Investment management fees | | | |
| paid | | (527) | (408) |
|--------------------------------+------+-------------+-------------|
| Other cash payments | | (188) | (239) |
|--------------------------------+------+-------------+-------------|
| Net cash inflow from operating | | | |
| activities | 11 | 372 | 394 |
|--------------------------------+------+-------------+-------------|
| | | | |
|--------------------------------+------+-------------+-------------|
| Taxation | | | |
|--------------------------------+------+-------------+-------------|
| UK corporation tax paid | | (126) | - |
|--------------------------------+------+-------------+-------------|
| | | | |
|--------------------------------+------+-------------+-------------|
| Capital expenditure and | | | |
| financial investments | | | |
|--------------------------------+------+-------------+-------------|
| Purchase of investments | | (4,286) | (3,078) |
|--------------------------------+------+-------------+-------------|
| Net cash outflow from | | | |
| investing activities | | (4,286) | (3,078) |
|--------------------------------+------+-------------+-------------|
| | | | |
|--------------------------------+------+-------------+-------------|
| Management of liquid resources | | | |
|--------------------------------+------+-------------+-------------|
| Purchase of current asset | | | |
| investments | | (22,544) | (1,497) |
|--------------------------------+------+-------------+-------------|
| Disposal of current asset | | | |
| investments | | 11,933 | - |
|--------------------------------+------+-------------+-------------|
| Net cash outflow from liquid | | | |
| resources | | (10,611) | (1,497) |
|--------------------------------+------+-------------+-------------|
| | | | |
|--------------------------------+------+-------------+-------------|
| Equity dividends paid | | | |
|--------------------------------+------+-------------+-------------|
| Dividends paid | 7 | (459) | (139) |
|--------------------------------+------+-------------+-------------|
| Net cash outflow before | | | |
| financing | | (15,110) | (4,320) |
|--------------------------------+------+-------------+-------------|
| | | | |
|--------------------------------+------+-------------+-------------|
| Financing | | | |
|--------------------------------+------+-------------+-------------|
| Issue of ordinary share | | | |
| capital | | 10,568 | 19,794 |
|--------------------------------+------+-------------+-------------|
| Purchase of own shares | | (24) | - |
|--------------------------------+------+-------------+-------------|
| Expenses of issue of ordinary | | | |
| share capital | | (478) | (1,111) |
|--------------------------------+------+-------------+-------------|
| Net cash inflow from financing | | 10,066 | 18,683 |
|--------------------------------+------+-------------+-------------|
| | | | |
|--------------------------------+------+-------------+-------------|
| Cash (outflow)/inflow in the | | | |
| year | | (5,044) | 14,363 |
+-------------------------------------------------------------------+
Notes to the announcement
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 Companies" ("SORP") issued by the
Association of Investment Companies ("AIC") in January 2009. Albion
Enterprise VCT PLC has decided to adopt the principles of the January
2009 SORP earlier than the mandatory date. Accounting policies have
been applied consistently in current and prior periods except for the
classification of floating rate notes as explained below.
2. Accounting policies
Fixed and current asset investments
Unquoted equity investments
In accordance with FRS 26 "Financial Instruments Measurement",
unquoted equity investments are designated as fair value through
profit or loss ("FVTPL"). 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 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, convertibles and unquoted equity derived instruments
Warrants, convertibles and unquoted equity derived instruments are
only valued if their exercise or contractual conversion terms would
allow them to be exercised or converted as at the balance sheet date,
and 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 and Euro commercial paper
Unquoted loan stock and Euro commercial paper are classified as loans
and receivables in accordance with FRS 26 and carried at amortised
cost using the Effective Interest Rate method ("EIR") less
impairment. Movements in the amortised cost relating to interest
income are reflected in the revenue column of the Income Statement,
and hence are reflected in the 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 on
revaluation.
Loan stocks which are not impaired or past due are considered fully
performing in terms of contractual interest and capital repayments
and the Board does not consider that there is a current likelihood of
a shortfall on security cover for 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 effective interest rate.
Unquoted loan stocks are classified as fixed asset investments in the
balance sheet.
Floating rate notes
In accordance with FRS 26, floating rate notes are designated as
FVTPL. Floating rate notes are valued at market bid price at the
balance sheet date.
Floating rate notes and Euro commercial paper are classified as
current asset investments as they are investments held for the short
term and comparative classification in the Balance Sheet has been
restated accordingly.
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.
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.
It is not the Company's policy to exercise control or significant
influence over investee companies. Therefore 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 are not regarded as associated undertakings.
Investment income
Unquoted equity income
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.
Unquoted loan stock, Euro commercial paper income and other
preferred income
The 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 accrual basis using the rate of
interest agreed with the bank.
Floating rate note income
Floating rate note income is recognised on an accruals basis using
the interest rate applicable to the floating rate note at that time.
Treasury gilt edged stock income
Treasury gilt income is recognised on an accruals basis using the
interest rate applicable to the treasury gilt.
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 to the extent that these relate to an enhancement in the
value of the investments. 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.
Under the terms of the Management Agreement, total expenses including
management fees and excluding performance fees will not exceed 3.5
per cent. of net asset value per annum.
Taxation
Taxation is applied on a current basis in accordance with FRS 16
"Current tax". Taxation associated with capital expenses is applied
in accordance with the SORP. In accordance with FRS 19 "Deferred
tax", deferred taxation is provided in full on timing differences
that result in an obligation at the balance sheet date to pay more
tax or a right to pay less tax, at a future date, at rates expected
to apply when they crystallise based on current tax rates and law.
Timing differences arise from the inclusion of items of income and
expenditure in taxation computations in periods different from those
in which they are included in the financial statements.
Deferred tax assets are recognised to the extent that it is regarded
as more likely than not that they will be recovered.
The specific nature of taxation of venture capital trusts means that
it is unlikely that any deferred tax will arise. The Directors have
considered the requirements of FRS 19 and do not believe that any
provision should be made.
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.
Reserves
Realised capital reserves
The following are disclosed in this reserve:
* gains and losses compared to cost on the realisation of
investments; and
* expenses, together with the related taxation effect, charged in
accordance with the above policies.
Unrealised capital reserves
Increases and decreases in the valuation of investments held at the
year end, against cost are disclosed in this reserve.
Special reserve
This reserve was created on the cancellation of the Company's share
premium account, is distributable and amongst other purposes can be
used for making market purchases and effecting tender offers of
Ordinary shares, offsetting of losses to enable the Company to pay
dividends, or can be used for the same purposes that the Company
could use a Share premium account.
Treasury shares reserve
This reserve accounts for amounts by which the distributable reserves
of the Company are diminished through the repurchase of the Company's
own shares for treasury.
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. Losses on investments
+-------------------------------------------------------------------+
| | | | | From |
| | | | | 7 November |
| | | | Year ended | 2006 |
| | | | 31 March | to 31 March |
| | | | 2009 | 2008 |
|------------------+-----------------+---+------------+-------------|
| | | | £'000 | £'000 |
|------------------------------------+---+------------+-------------|
| Unrealised losses on fixed | | | | |
| asset investments held at fair | | | | |
| value through profit or loss | | | | |
| account | | | (1,251) | (240) |
|--------------------------------+---+---+------------+-------------|
| | | | | |
|--------------------------------+---+---+------------+-------------|
| Unrealised losses on | | | | |
| investments held at amortised | | | | |
| cost | | | (108) | - |
|--------------------------------+---+---+------------+-------------|
| Unrealised losses on fixed | | | | |
| asset investments | | | (1,359) | (240) |
|--------------------------------+---+---+------------+-------------|
| | | | | |
|--------------------------------+---+---+------------+-------------|
| Unrealised losses on current | | | | |
| asset investments held at fair | | | | |
| value through profit or loss | | | | |
| account | | | (60) | (22) |
|--------------------------------+---+---+------------+-------------|
| Unrealised losses sub total | | | (1,419) | (262) |
|--------------------------------+---+---+------------+-------------|
| Realised losses on current | | | | |
| asset investments held at fair | | | | |
| value through profit or loss | | | | |
| account | | | (15) | - |
|--------------------------------+---+---+------------+-------------|
| Realised losses sub total | | | (15) | - |
|--------------------------------+---+---+------------+-------------|
| | | | | |
|--------------------------------+---+---+------------+-------------|
| Total | | | (1,434) | (262) |
+-------------------------------------------------------------------+
Investments valued on amortised cost basis are unquoted loan stock
investments as described in note 2.
4. Investment income
+-------------------------------------------------------------------+
| | | From |
| | Year ended | 7 November 2006 |
| | 31 March | to 31 March |
| | 2009 | 2008 |
|------------------------------------+------------+-----------------|
| | £'000 | £'000 |
|------------------------------------+------------+-----------------|
| Income recognised on investments | | |
| held at fair value through profit | | |
| or loss | | |
|------------------------------------+------------+-----------------|
| Floating rate note interest | 317 | 61 |
|------------------------------------+------------+-----------------|
| Bank deposit interest | 312 | 913 |
|------------------------------------+------------+-----------------|
| Treasury gilt edged stock interest | 348 | - |
|------------------------------------+------------+-----------------|
| | 977 | 974 |
|------------------------------------+------------+-----------------|
| Income recognised on investments | | |
| held at amortised cost | | |
|------------------------------------+------------+-----------------|
| Return on loan stock investments | 159 | 91 |
|------------------------------------+------------+-----------------|
| Euro commercial paper interest | 112 | - |
|------------------------------------+------------+-----------------|
| | 1,248 | 1,065 |
+-------------------------------------------------------------------+
Interest income earned on impaired investments at 31 March 2009
amounted to £41,000 (2008: nil). These investments are held at
amortised cost.
5. Recovery of VAT
HMRC issued a business briefing on 24 July 2008 which permitted the
recovery of historic VAT that had been charged on management fees,
and which made these fees exempt from VAT with effect from 1 October
2008.
The Manager, Albion Ventures LLP has made a claim for the historic
VAT that Albion Enterprise VCT PLC has paid on management fees.
During the year, the Company received a historic VAT payment of
£94,000 (before the deduction of tax) prior to off-setting an
increase in management fees of £56,000 due as a result of the
increase in the net asset value for the respective periods and
resultant recovery of fees subject to an expense cap.
A net sum of £38,000 has been recognised as a separate item in the
Income Statement, allocated between revenue and capital return in the
same proportion as that which the original VAT has been charged. An
additional tax charge of £11,000 is payable on this recovery of
historic VAT and this is reflected in the tax charge shown in the
Income Statement.
It is possible that further amounts may be recoverable in due course;
however, the Directors are at this stage unable to quantify the
amounts involved.
6. Tax charge/(credit) on ordinary activities
+---------------------------------------------------------------------+
| | |From 7 November 2006 to|
| |Year ended 31 March 2009| 31 March 2008 |
|--------------------+------------------------+-----------------------|
| | Revenue| Capital| Total| Revenue| Capital|Total|
| | £'000| £'000| £'000| £'000| £'000|£'000|
|--------------------+--------+--------+------+--------+--------+-----|
|UK corporation tax | | | | | | |
|in respect of the | | | | | | |
|current year | 234| (153)| 81| 214| (114)| 100|
|--------------------+--------+--------+------+--------+--------+-----|
| | | | | | | |
+---------------------------------------------------------------------+
The UK government changed the rate of UK corporation tax rate from 30
per cent. to 28 per cent. with effect from 1 April 2008. The tax
charge for the year is lower than the standard rate of corporation
tax of 28 per cent. (2008: 30 per cent.). The differences are
explained below.
+-------------------------------------------------------------------+
| | | From |
| | Year ended | 7 November 2006 to |
| | 31 March | 31 March |
| | 2009 | 2008 |
| | £'000 | £'000 |
|---------------------------------+------------+--------------------|
| (Loss)/return on ordinary | (1,074) | 159 |
| activities before tax | | |
|---------------------------------+------------+--------------------|
| Tax on (loss)/profit at the | (300) | 48 |
| standard rate | | |
|---------------------------------+------------+--------------------|
| Factors affecting the charge: | | |
|---------------------------------+------------+--------------------|
| Capital losses not subject to | | |
| taxation | 401 | 79 |
|---------------------------------+------------+--------------------|
| Marginal relief | (20) | (27) |
|---------------------------------+------------+--------------------|
| | 81 | 100 |
+-------------------------------------------------------------------+
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 of 28 per cent. 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.
7. Dividends
+-------------------------------------------------------------------+
| | | From 7 November 2006 to |
| | Year ended 31 March 2009 | 31 March 2008 |
|-----------+---------------------------+---------------------------|
| | Revenue | Capital | Total | Revenue | Capital | Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
|-----------+---------+---------+-------+---------+---------+-------|
| Dividend | | | | | | |
| of 0.7p | | | | | | |
| per share | | | | | | |
| paid on | | | | | | |
| 28 | | | | | | |
| December | | | | | | |
| 2007 | - | - | - | 139 | - | 139 |
|-----------+---------+---------+-------+---------+---------+-------|
| Dividend | | | | | | |
| of 0.4p | | | | | | |
| per share | | | | | | |
| paid on | | | | | | |
| 15 August | | | | | | |
| 2008 | 79 | - | 79 | - | - | - |
|-----------+---------+---------+-------+---------+---------+-------|
| Dividend | | | | | | |
| of 1.25p | | | | | | |
| per share | | | | | | |
| paid on 9 | | | | | | |
| January | | | | | | |
| 2009 | 380 | - | 380 | - | - | - |
|-----------+---------+---------+-------+---------+---------+-------|
| | 459 | - | 459 | 139 | - | 139 |
+-------------------------------------------------------------------+
In addition to the dividends summarised above, the Directors have
declared a first revenue dividend for the year ending 31 March 2010
of 1 penny per share to be paid on 7 August 2009 to shareholders on
the register as at 10 July 2009.
8. Basic and diluted return/(loss) per share
+-------------------------------------------------------------------------+
| | |From 7 November 2006 to|
| |Year ended 31 March 2009| 31 March 2008 |
|------------------------+------------------------+-----------------------|
| | Revenue|Capital| Total| Revenue| Capital|Total|
|------------------------+--------+-------+-------+--------+--------+-----|
|Return/(loss) | | | | | | |
|attributable to equity | | | | | | |
|shares (£'000) | 640|(1,795)|(1,155)| 559| (500)| 59|
|------------------------+--------+-------+-------+--------+--------+-----|
|Return/(loss) | | | | | | |
|attributable per | | | | | | |
|Ordinary share (pence) | | | | | | |
|(basic and diluted) | 2.1| (5.9)| (3.8)| 2.8| (2.5)| 0.3|
+-------------------------------------------------------------------------+
Return per share has been calculated on 30,266,779 shares (2008:
19,793,147), being the weighted average number of shares in issue for
the year, excluding treasury shares of 43,300 (2008: nil).
There are no convertible instruments, derivatives or contingent share
agreements in issue for Albion Enterprise VCT PLC hence there are no
dilution affects to the return per share. The basic return per share
is therefore the same as the diluted return per share.
9. Called up share capital
+-------------------------------------------------------------------+
| | 31 March | 31 March |
| | 2009 | 2008 |
| | £'000 | £'000 |
|---------------------------------------------+----------+----------|
| Authorised | | |
|---------------------------------------------+----------+----------|
| 50,000,000 shares of 50p each (2008: | | |
| 50,000,000) | 25,000 | 25,000 |
|---------------------------------------------+----------+----------|
| | | |
| Allotted, called up and fully paid | | |
|---------------------------------------------+----------+----------|
| 30,360,885 shares of 50p each (2008: | | |
| 19,793,147) | 15,180 | 9,897 |
|---------------------------------------------+----------+----------|
| | | |
| Allotted, called up and fully paid | | |
| excluding treasury shares | | |
|---------------------------------------------+----------+----------|
| 30,317,585 shares of 50p each (2008: | | |
| 19,793,147) | 15,159 | 9,897 |
+-------------------------------------------------------------------+
The Company purchased 43,300 shares (2008: nil) to be held in
treasury at a cost of £31,000 (2008: £nil) representing 0.1 per cent.
of the shares in issue (excluding treasury shares) as at 1 April
2008. The shares purchased for treasury were funded from the Treasury
shares reserve. The Company holds a total of 43,300 shares
representing 0.1 per cent. of the shares in issue (excluding treasury
shares) as at 31 March 2009.
At the Extraordinary General Meeting on 19 December 2007, an Ordinary
resolution was approved to increase the Company's authorised share
capital from £20,000,000 to £25,000,000 by the creation of 10,000,000
Ordinary shares of 50p each. These shares were used for the Further
Offer for Subscription which closed on 4 April 2008.
On 4 April 2008, 10,567,738 shares with a nominal value of 50 pence
each, (total nominal value of £5,283,869) were allotted in accordance
with the terms of the Offer for Subscription dated 23 November 2007.
These were issued at a total value of 100 pence each. These shares
were admitted to the Official List of the UK Listing Authority on 7
April 2008.
+-------------------------------------------------------------------+
| Date of | Number of | Aggregate | Consideration | Opening |
| allotment | shares | nominal | received | market price |
| | allotted | value of | £'000 | per share on |
| | | shares | | allotment |
| | | £'000 | | date |
| | | | | pence per |
| | | | | share |
|-----------+------------+-----------+---------------+--------------|
| 4 April | 10,567,738 | 5,284 | 10,568 | 100.0 |
| 2008 | | | | |
+-------------------------------------------------------------------+
10. Basic and diluted net asset value per share
+-------------------------------------------------------------------+
| | | | 31 March | 31 March |
| | | | 2009 | 2008 |
|-----------------------------------------+---+----------+----------|
| Basic and diluted net asset value | | | | |
| per share attributable (pence) | | | 88.8 | 94.0 |
+-------------------------------------------------------------------+
The net asset value per share at the year end is calculated in
accordance with the Articles of Association and is based upon total
shares in issue less treasury shares of 30,317,585 shares (2008:
19,793,147) at 31 March 2009.
The Company's policy is to sell treasury shares at a price greater
than the purchase price hence the net asset value per share on a
diluted basis would be equal to or greater than the basic net asset
value per share, depending on the actual price achieved for selling
the treasury shares.
11. Reconciliation of net return on ordinary activities before
taxation to net cash inflow from operating activities
+-------------------------------------------------------------------+
| | | | | From |
| | | | Year ended | 7 November 2006 |
| | | | 31 March | to 31 March |
| | | | 2008 | 2008 |
| | | | £'000 | £'000 |
|----------------------------+---+---+------------+-----------------|
| Revenue return on ordinary | | | | |
| activities before taxation | | | 874 | 773 |
|----------------------------+---+---+------------+-----------------|
| Investment management fee | | | | |
| charged to capital | | | (542) | (352) |
|----------------------------+---+---+------------+-----------------|
| Recovery of VAT charged to | | | | |
| capital | | | 28 | - |
|----------------------------+---+---+------------+-----------------|
| Movement in accrued | | | | |
| amortised loan stock | | | | |
| interest | | | (30) | (8) |
|----------------------------+---+---+------------+-----------------|
| Increase in debtors | | | (128) | (141) |
|----------------------------+---+---+------------+-----------------|
| Decrease in creditors | | | 170 | 122 |
|----------------------------+---+---+------------+-----------------|
| Net cash inflow from | | | | |
| operating activities | | | 372 | 394 |
+-------------------------------------------------------------------+
12. 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:
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 their 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 external investment professionals. The Manager also
invites comments from all non-executive Directors on investments
discussed at the Investment Committee meetings. Investments are
actively and regularly monitored by the Manager (investment managers
normally sit on investee company boards) and the Board receives
detailed reports on each investment as part of the Manager's report
at quarterly board meetings.
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,
and is 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.
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 considerable experience of
operating at senior levels within quoted businesses. In addition, the
Board and the Manager receive regular updates on new regulation from
its auditors, lawyers and other professional bodies.
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 will meet with the Manager's internal auditors
Littlejohn at least once a year, 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. In the past year the Board has met with the Head of
Internal Audit of Close Brothers Group on a similar basis. 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 28 of the audited Annual Report and Financial
Statement which is attached to this announcement.
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 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. 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 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 13 below.
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.
13. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in note
9. The Company is permitted to buy back its own shares for
cancellation or treasury purposes, and this is described in more
detail on page 23 of the Directors' Report and Enhanced Business
Review within the full Annual Report and Financial Statements which
is attached to this announcement.
The Company's financial instruments comprise equity and loan stock
investments in unquoted companies, floating rate notes, Euro
Commercial Paper, cash balances, short term debtors and creditors
which arise from its operations. The main purpose of these financial
instruments is to generate cashflow, 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. Investment risk is the exposure of the Company to the
revaluation and devaluation of investments. The main driver of
investment risk is the operational and financial performance of the
investee companies and the dynamics of market quoted comparators. The
Manager receives management accounts from investee companies, and
members of the investment management team often sit on the boards of
unquoted investee companies; this enables the close identification,
monitoring and management of investment risk.
The Manager and the Board formally review investment risk (which
includes market price risk), both at the time of initial investment
and at quarterly Board meetings.
The Board monitors the prices at which sales of investments are made
to ensure that profits to the Company are maximised, and that
valuations of investments retained within the portfolio appear
sufficiently prudent and realistic compared to prices being achieved
in the market for sales of unquoted investments.
The maximum investment risk as at the balance sheet date is the value
of the fixed and current asset investment portfolio which is
£17,927,000 (2008: £4,321,000). Fixed and current asset investments
form 67 per cent. of the Ordinary share net asset value as at 31
March 2009 (2008: 23 per cent.).
More details regarding the classification of fixed and current asset
investments are shown in notes 12 and 14 of the Annual Report and
Financial Statements attached to this announcement.
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 sectors in which investments
have been made are contained in the Portfolio of Investments section
of the Annual Report and Financial Statements and in the Manager's
Report above.
In accordance with the IPEVCV Guidelines, in the absence of a more
appropriate methodology, investments held for less than 12 months are
valued at cost. Thereafter, the valuation will move to 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 reasonable possible alternative methods of
valuation of the investments as at 31 March 2009.
As required under FRS 29, 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 fixed and current asset investments (keeping all
other variables constant) would increase or decrease the net asset
value by £1,793,000 (2008: £432,000).
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 fall
of one percentage point in all interest rates would have reduced
total return before tax for the year by approximately £191,000 (2008:
£177,000).
The weighted average interest rate applied to the Company's fixed
rate assets during the year was approximately 6.6 per cent. (2008:
10.1 per cent.). The weighted average period to maturity for the
fixed rate assets is approximately 2.74 years (2008: 4.3 years).
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, floating
rate notes, Euro Commercial Paper and through the holding of cash on
deposit with banks.
The Manager evaluates credit risk on loan stock, floating rate note
instruments 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 investee company in order
to mitigate the gross credit risk. The Manager receives management
accounts from investee companies, and members of the investment
management team often sit on the boards of unquoted investee
companies; this enables the close identification, monitoring and
management of investment-specific credit risk.
Floating rate note investments, Euro Commercial Paper and bank
deposits are held with banks which have a Moody's credit rating of at
least 'A'. 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 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 at 31 March 2009 was limited to
£3,180,000 (2008: £1,268,000) of unquoted loan stock instruments,
£9,319,000 (2008: £14,363,000) cash deposits with banks and
£12,123,000 (2008: £1,474,000) held in floating rate notes and Euro
Commercial Paper. An analysis of the performance of unquoted loan
stock by redemption date if given under liquidity risk below.
As at the balance sheet date, the cash held by the Company is held
with the Royal Bank of Scotland plc, Bank of Scotland plc, Lloyds TSB
Bank plc and HSBC plc. Credit risk on cash transactions is mitigated
by transacting with counterparties that are regulated entities
subject to prudential supervision, with Moody's credit ratings of at
least 'A' or equivalent as assigned by international credit-rating
agencies.
Liquidity risk
Liquid assets are held as cash on current account, cash on deposit or
short term money market account, as Euro Commercial Paper and as
floating rate notes. Under the terms of its Articles, the Company has
the ability to borrow up to 10 per cent. of its net assets, which
amounts to £2,693,000 (2008: £1,860,000) as at 31 March 2009.
The Company has no committed borrowing facilities as at 31 March 2009
(2008: nil) and had cash balances of £9,319,000 (2008: £14,363,000),
together with £8,174,000 (2008: £1,474,000) invested in floating rate
notes and £3,949,000 (2008: nil) invested in Euro Commercial Paper,
which are considered to be readily realisable within the timescales
required to make cash available for investment. The main cash
outflows are for new investments, buy-back of shares and dividend
payments, which are within the control of the Company. The Manager
formally reviews the cash requirements of the Company on a monthly
basis, and the Board on a quarterly basis as part of its review of
management accounts and forecasts. All the Company's financial
liabilities are short term in nature and total £348,000 (2008:
£221,000) at 31 March 2009.
In view of this, the Board considers that the Company is subject to
low liquidity risk.
The carrying value of loan stock investments held at amortised cost
at 31 March 2009 is analysed by the expected maturity dates as
follows:
+-------------------------------------------------------------------+
| | | | Impaired | |
| | Fully performing | Renegotiated | loan | |
| Redemption | loan stock | loan stock | stock | Total |
| date | £'000 | £'000 | £'000 | £'000 |
|------------+--------------------+--------------+----------+-------|
| 3-5 years | 2,592 | - | 588 | 3,180 |
|------------+--------------------+--------------+----------+-------|
| | | | | |
+-------------------------------------------------------------------+
The carrying value of loan stock investments held at amortised cost
as at 31 March 2008 is analysed by the expected maturity dates as
follows:
+-------------------------------------------------------------------+
| | | | Impaired | |
| | Fully performing | Renegotiated | loan | |
| Redemption | loan stock | loan stock | stock | Total |
| date | £'000 | £'000 | £'000 | £'000 |
|------------+--------------------+--------------+----------+-------|
| 3-5 years | 1,084 | 184 | - | 1,268 |
|------------+--------------------+--------------+----------+-------|
| | | | | |
+-------------------------------------------------------------------+
The cost, impairment and carrying value of impaired loan stocks held
at amortised cost at 31 March 2009 and 31 March 2008 are as follows:
+--------------------------------------------------------------------------+
| | 31 March 2009 | 31 March 2008 |
|----------+-------------------------------+-------------------------------|
| | Cost| Impairment| Carrying| Cost| Impairment| Carrying|
| | | | value| | | value|
|----------+-------+------------+----------+-------+------------+----------|
| | £'000| £'000| £'000| £'000| £'000| £'000|
|----------+-------+------------+----------+-------+------------+----------|
|Impaired | | | | | | |
|loan stock| 706| (118)| 588| -| -| -|
+--------------------------------------------------------------------------+
Impaired loan stock instruments have a first fixed charge or a fixed
and floating charge over the assets of the investee company and the
Board estimate that the security value approximates to the carrying
value.
Loan stock investments disclosed above as renegotiated would
otherwise have been disclosed as past due.
Fair values of financial assets and financial liabilities
All the Company's financial assets and liabilities as at 31 March
2009 are stated at fair value as determined by the Directors, with
the exception of loans and receivables included within investments,
which are carried at amortised cost, in accordance with FRS 26. In
the opinion of the Directors 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 and that the
Company is subject to low liquidity risk as a result of nil gearing
and strong cash balances.
The Company's financial assets and liabilities as at 31 March 2009,
all denominated in pounds sterling, consist of the following:
+----------------------------------------------------------------------------------------------------+
| | 31 March 2009 | 31 March 2008 |
|-------------+-------------------------------------------+------------------------------------------|
| | | | | | | | | |
| | Fixed| Floating| | | Fixed| Floating| | |
| | rate| rate| Non-interest| Total| rate| rate| Non-interest| Total|
| | £'000| £'000| £'000| £'000| £'000| £'000| £'000| £'000|
|-------------+--------+----------+--------------+--------+-------+----------+--------------+--------|
| | | | | | | | | |
|Floating rate| | | | | | | | |
|notes | -| 8,174| -| 8,174| -| 1,474| -| 1,474|
|-------------+--------+----------+--------------+--------+-------+----------+--------------+--------|
|Euro | | | | | | | | |
|Commercial | | | | | | | | |
|Paper | 3,949| -| -| 3,949| -| -| -| -|
|-------------+--------+----------+--------------+--------+-------+----------+--------------+--------|
|Unquoted loan| | | | | | | | |
|stock | 2,299| 881| -| 3,180| 1,268| -| -| 1,268|
|-------------+--------+----------+--------------+--------+-------+----------+--------------+--------|
|Unquoted | | | | | | | | |
|equity | -| -| 2,624| 2,624| -| -| 1,579| 1,579|
|-------------+--------+----------+--------------+--------+-------+----------+--------------+--------|
|Debtors | -| -| 30| 30| -| -| 141| 141|
|-------------+--------+----------+--------------+--------+-------+----------+--------------+--------|
|Current | | | | | | | | |
|liabilities | -| -| (348)| (348)| -| -| (221)| (221)|
|-------------+--------+----------+--------------+--------+-------+----------+--------------+--------|
|Cash | 4,500| 4,819| -| 9,319| 5,000| 9,363| -| 14,363|
|-------------+--------+----------+--------------+--------+-------+----------+--------------+--------|
|Total net | | | | | | | | |
|assets | 10,748| 13,874| 2,306| 26,928| 6,268| 10,837| 1,499| 18,604|
+----------------------------------------------------------------------------------------------------+
14. Post balance sheet events
Since 31 March 2009 the Company has completed the following
investments and disposals:
* Investment in Welland Inns VCT Limited of £12,000
* Investment in Bravo Inns II Limited of £125,000
* Investment in Mi-Pay Limited of £94,000
* Investment in 1Kingsarmsyard Income & Growth VCT Limited of
£56,000
15. Related party transactions
The Manager, Albion Ventures LLP, is considered to be a related party
by virtue of the fact that Patrick Reeve, a Director of the Company,
is also a Partner of the Manager. The Manager is party to a
Management Agreement from the Company. During the year, services of a
total value of £723,000 (2008: £469,000) were purchased by the
Company from Albion Ventures LLP. At the financial year end, the
amount due to Albion Ventures LLP disclosed as accruals and deferred
income was £219,000 (2008: £62,000).
Albion Ventures LLP has reclaimed VAT from HMRC as described in note
5. A sum of £38,000 has been recognised in the Income Statement for
the year reflecting a gross receipt of £94,000, less a creditor for
£56,000 in respect of related historic management fees to be paid to
Albion Ventures LLP.
Patrick Reeve, is a Director of the Company, and is also the Managing
Partner of Albion Ventures LLP, which is the Manager of the Fund.
During the year, the Company was charged £20,000 (including VAT) by
Albion Ventures LLP in respect of Patrick Reeve's services as a
Director (2008: £19,000). At the year end, the amount due to Albion
Ventures LLP in respect of these services disclosed as accruals and
deferred income was £5,000 (2008: £5,000).
Buybacks of Ordinary shares during the year were transacted through
Winterflood Securities Limited, a subsidiary of Close Brothers Group
plc, which, up to 23 January 2009, was the ultimate parent company of
the Manager. Details of buy-backs during the year can be found in
note 9.
During the year, fundraising fees of £581,000 were paid to Close
Investments Limited, a subsidiary of Close Brothers Group plc, in
association with the Further Offer for Subscription in April 2008.
Maxwell Packe is the chairman of the Board and a shareholder in
Vibrant Energy Surveys Limited, a company in which Albion Enterprise
VCT PLC is invested. During the year, Vibrant Energy Surveys Limited
paid Albion Enterprise VCT PLC loan stock interest of £3,000. During
the year, the Company invested £560,000 in Vibrant Energy Surveys
Limited. At the year end, the Company held equity with a value of
nil, and loan stock with a value of £107,000.
16. Other information
The information set out in this announcement does not constitute the
Company's statutory accounts within the terms of section 240 of the
Companies Act 1985 for the periods ended 31 March 2009 and 31 March
2008, and is derived from the statutory accounts for these periods,
which have been, or in the case of the accounts for the year ended 31
March 2009, which will be, delivered to the Registrar of Companies.
The auditors reported on those accounts; their reports were
unqualified and did not contain a statement under s237 (2) or (3) of
the companies Act 1985.
The Company's Annual General Meeting will be held at The City of
London Club, 19 Old Broad Street, London, EC2N 1DS on 11 August 2009
at 12 noon.
17. Publication
The full audited Annual Report and Financial Statements is being sent
to shareholders and copies will be made available to the public at
the registered office of the Company, Companies House, the FSA
viewing facility and also electronically at
www.albion-ventures.co.uk.
2 July 2009
For further information, please contact:
Patrick Reeve of Albion Ventures LLP
Tel: 020 7601 1850
---END OF MESSAGE---
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