Albion Technology & General VCT PLC : Annual Fi...
Albion Technology & General VCT PLC
LEI number: 213800TKJUY376H3KN16
As required by the UK Listing Authority's Disclosure Guidance and Transparency Rules 4.1 and 6.3, Albion Technology & General VCT PLC today makes public its information relating to the Annual Report and Financial Statements for the year ended 31 December 2018.
This announcement was approved for release by the Board of Directors on 22 March 2019.
This announcement has not been audited.
The Annual Report and Financial Statements for the year ended 31 December 2018 (which have been audited), will shortly be sent to shareholders. Copies of the full Annual Report and Financial Statements will be shown via the Albion Capital Group LLP website by clicking www.albion.capital/funds/AATG/31Dec18.pdf. The information contained in the Annual Report and Financial Statements will include information as required by the Disclosure Guidance and Transparency Rules, including Rule 4.1.
Investment objective and policy
The Company’s investment objective is to provide investors with a regular and predictable source of dividend income, combined with the prospect of long-term capital growth, through a balanced portfolio of unquoted growth and technology businesses in a qualifying venture capital trust.
Investment policy
The Company will invest in a broad portfolio of unquoted growth and technology businesses. Allocation of assets will be determined by the investment opportunities which become available but efforts will be made to ensure that the portfolio is diversified in terms of sectors and stages of maturity of portfolio companies.
VCT qualifying and non-qualifying investments
Application of the investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue and Customs (“VCT regulations”). The maximum amount invested in any one company is limited to any HMRC annual investment limits. It is intended that normally at least 80 per cent. of the Company's funds will be invested in VCT qualifying investments. The VCT regulations also have an impact on the type of investments and qualifying sectors in which the Company can make investment.
Funds held prior to investing in VCT qualifying assets or for liquidity purposes will be held as cash on deposit, invested in floating rate notes or similar instruments with banks or other financial institutions with high credit ratings or invested in liquid open-ended equity funds providing income and capital equity exposure (where it is considered economic to do so). Investment in such open-ended equity funds will not exceed 7.5 per cent. of the Company’s assets at the time of investment.
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses within VCT qualifying industry sectors using a mixture of securities. The maximum the Company will invest in a single company is 15 per cent. of the Company’s assets at cost at the time of investment. The value of an individual investment is expected to increase over time as a result of trading progress and a continuous assessment is made of investments' suitability for sale. It is possible that individual holdings may grow in value to a point where they represent a significantly higher proportion of total assets prior to a realisation opportunity being available.
Borrowing powers
The Company’s maximum exposure in relation to gearing is restricted to 10 per cent. of the adjusted share capital and reserves. The Directors do not have any intention of utilising long-term gearing.
Background to the Company
The Company is a venture capital trust which raised £14.3 million in December 2000 and 2002, and raised a further £35.0 million during 2006 through the launch of a C share issue. The Company has raised a further £32.2 million under the Albion VCTs Top Up Offers since January 2011.
On 15 November 2013, the Company acquired the assets and liabilities of Albion Income & Growth VCT PLC (“Income & Growth”) in exchange for new shares in the Company (“the Merger”) resulting in a further £28.1 million of net assets.
Financial calendar
| Annual General Meeting | 11.00 am on 4 June 2019 |
| Record date for first dividend | 7 June 2019 |
| Payment of first dividend | 28 June 2019 |
| Announcement of half-yearly results for the six months ending 30 June 2019 | September 2019 |
| Payment of second dividend (subject to Board approval) | 31 December 2019 |
Financial highlights
| 176.4p | Total shareholder return per Ordinary share since launch |
| 9.5p | Total return per share for the year ended 31 December 2018 (13.2% on opening net asset value per share) |
| 4.0p | Total tax free dividend per Ordinary share paid in the year to 31 December 2018 |
| 77.4p | Net asset value per Ordinary share as at 31 December 2018 |
| 2.75% | Ongoing charges ratio for the year ended 31 December 2018 |
| 31 December 2018 (pence per share) | 31 December 2017 (pence per share) | |
| Opening net asset value | 71.9 | 71.6 |
| Revenue return | 0.4 | 0.2 |
| Capital return | 9.1 | 4.1 |
| Total return | 9.5 | 4.3 |
| Dividends paid | (4.0) | (4.0) |
| Net asset value | 77.4 | 71.9 |
| Total shareholder return to 31 December 2018 | Ordinary share (pence per share) | C share (pence per share) (1) | Income & Growth (pence per share) (2) |
| Total dividends paid during the year ended: | |||
| 31 December 2001 | 1.0 | - | - |
| 31 December 2002 | 2.0 | - | - |
| 31 December 2003 | 1.5 | - | - |
| 31 December 2004 | 7.5 | - | - |
| 31 December 2005 | 9.0 | - | 0.6 |
| 31 December 2006 | 8.0 | 0.5 | 2.6 |
| 31 December 2007 | 8.0 | 2.5 | 3.5 |
| 31 December 2008 | 16.0 | 4.5 | 3.5 |
| 31 December 2009 | - | 1.0 | 3.0 |
| 31 December 2010 | 8.0 | 3.0 | 3.0 |
| 31 December 2011 | 5.0 | 3.8 | 3.5 |
| 31 December 2012 | 5.0 | 3.9 | 3.5 |
| 31 December 2013 | 5.0 | 3.9 | 3.5 |
| 31 December 2014 | 5.0 | 3.9 | 3.9 |
| 31 December 2015 | 5.0 | 3.9 | 3.9 |
| 31 December 2016 | 5.0 | 3.9 | 3.9 |
| 31 December 2017 | 4.0 | 3.1 | 3.1 |
| 31 December 2018 | 4.0 | 3.1 | 3.1 |
| Total dividends paid to 31 December 2018 | 99.0 | 41.1 | 44.7 |
| Net asset value as at 31 December 2018 | 77.4 | 60.2 | 60.5 |
| Total shareholder return to 31 December 2018 | 176.4 | 101.3 | 105.2 |
In addition to the dividends summarised above, the Board has declared a first dividend for the year ending 31 December 2019 of 2.0 pence per share to be paid on 28 June 2019 to shareholders on the register on 7 June 2019.
Notes
Total shareholder return for every 100 pence invested on initial allotment. The table above excludes tax benefits upon subscription.
(1) The C shares were converted into Ordinary shares on 31 March 2011. The net asset value per share and all dividends paid subsequent to the conversion of the C shares to the Ordinary shares are multiplied by the conversion factor of 0.7779 in respect of the C shares’ return, in order to give an accurate picture of the shareholder value since launch relating to the C shares.
(2) Albion Income & Growth VCT PLC was merged with Albion Technology & General VCT PLC on 15 November 2013. The net asset value per share and all dividends paid subsequent to the merger of the Income & Growth shares to the Ordinary shares are multiplied by the issue ratio of 0.7813 in respect of the Income & Growth shares’ return, in order to give an accurate picture of the shareholder value since launch relating to the Income & Growth shares. Prior to the merger, Albion Income & Growth VCT PLC had a financial year end of 30 September and as such, the above dividends per share relate to the relevant period.
Chairman’s statement
Introduction
I am pleased to report the results for Albion Technology & General VCT PLC for the year to 31 December 2018. These show a total return of 9.5 pence per share, which is a 13.2 per cent. return on the opening net asset value per share and is excellent progress after a period of divestment under the recovery plan of the last three years.
Investment portfolio
The results for the year showed net gains on investments of just over £10.7 million, against gains of £5.1 million for the previous year. The key elements within this included sharp rises in the values of Quantexa, Mirada, G. Network Communications and Egress Software Technologies as their businesses grow, and a rise in the valuation of Radnor House School, following a third party valuation. In addition, they reflected the successful sale of Grapeshot, a digital marketing business, which was sold for around ten times original cost. Against this, the share price of the AIM-quoted Mi-Pay fell during the period, while slow trading at memsstar contributed to write-downs.
During the year, a total of £4.4 million was deployed into portfolio companies, of which £1.4 million was invested across seven new portfolio companies, all of which are likely to require further investment as the companies prove themselves and grow:
- Phrasee, which uses artificial intelligence to generate language for optimised marketing campaigns;
- Arecor, a biopharmaceuticals business specialising in diabetes care;
- Koru Kids, a provider of an online marketplace connecting parents and childcare;
- uMotif, which has developed patient engagement and data capture software for use in clinical trials and patient support programmes;
- Forward Clinical, a provider of secure mobile messaging services for doctors and care workers;
- ePatient Network (trading as Raremark), a patient engagement and data business focused on rare diseases; and
- Healios, which provides online delivery of mental health therapy services.
A further £3.0 million was invested in existing portfolio companies, including £540,000 in Locum’s Nest, £438,000 in Quantexa and £309,000 in Panaseer. We are also pleased to report that The Evewell (Harley Street), an operator of a women’s health centre focusing on fertility, opened during the year.
In addition to the sale of Grapeshot, referred to above, we had a number of realisations during the year, including our holdings in sparesFinder, Infinite Ventures (Goathill) and CSS Group. Further details can be found in the realisations table on page 20 of the full Annual Report and Financial Statements.
Overall, 54 per cent. of the portfolio by value is profitable, measured by earnings before interest, depreciation and tax, with a number of our investments showing strong growth in fast-developing international markets.
Results and dividends
As at 31 December 2018, the net asset value was 77.4 pence per share compared to 71.9 pence per share at 31 December 2017. The total return after tax was £9.8 million compared to £4.2 million in the year to 31 December 2017.
The Company paid dividends totalling 4.0 pence per share during the year ended 31 December 2018 (2017: 4.0 pence per share). The dividend objective of the Board is to provide shareholders with a strong, predictable dividend flow. The Company will target an annual dividend of 4.0 pence per share for the year ending 31 December 2019, and has declared a first dividend for the year ending 31 December 2019 of 2.0 pence per share to be paid on 28 June 2019 to shareholders on the register on 7 June 2019. Subject to Board approval, a further dividend for the year ending 31 December 2019 will be paid in December 2019.
Annual General Meeting
Shareholders’ views are regarded highly and the Board encourages shareholders’ to vote on the resolutions within the Notice of Annual General Meeting on page 65 of the full Annual Report and Financial Statements using the proxy form enclosed with the Annual Report and Financial Statements, or electronically at www.investorcentre.co.uk/eproxy. The Board considers carefully the business to be approved at the Annual General Meeting and unanimously recommends voting in favour of all the resolutions being proposed.
Risks and uncertainties
Other than investment performance through stock selection, the key risks facing the Company are from broader economic factors, including changes to VCT rules. The outlook for the UK and global economies continues to be the key risk affecting the Company, and the withdrawal of the UK from the European Union is likely to have an impact on the Company and its investments, although it is difficult to quantify it at this time. The Manager has performed an assessment on a portfolio company basis to assess exposure to Europe, and appropriate actions, where possible, have been implemented.
The Manager has a clear focus to allocate resources to those sectors and opportunities where it believes growth can be both resilient and sustainable. However, the new VCT rules will result in the gradual reduction of the asset-based element of the portfolio in favour of growth and technology companies which will inevitably increase volatility over time.
A detailed analysis of the other principal risks and uncertainties facing the business is shown in the Strategic report below.
Share buy-backs
It remains the Board’s primary objective to maintain sufficient resources for investment in new and existing portfolio companies and for the continued payment of dividends to shareholders. The Board’s policy is to buy back shares in the market, subject to the overall constraint that such purchases are in the Company’s interest. It is the Board’s intention for such buy-backs to be in the region of a 5 per cent. discount to net asset value, so far as market conditions and liquidity permit. The Board continues to review the use of buy-backs and is satisfied that it is an important means of providing market liquidity for shareholders.
Transactions with the Manager
Details of transactions that took place with the Manager during the year can be found in note 5 and principally relate to the investment management fee. As a result of the lowering of the expenses cap in 2015 to 2.75 per cent. of net assets, the investment management fee was reduced by £136,000 in the year (2017: £137,000). Additionally, Albion agreed to reduce that proportion of its management fee relating to the investment in the SVS Albion OLIM UK Equity Income Fund (“OUEIF”) by 0.75 per cent. per annum, which represents the management fee charged by OLIM. This avoids double counting of fees and resulted in a further reduction of the management fee of £15,000 (2017:£3,000). Further details on the investments in the OUEIF can be found in note 20.
Albion VCTs Prospectus Top Up Offers
Your Board, in conjunction with the boards of other VCTs managed by Albion Capital Group LLP, launched a prospectus top up offer of new Ordinary shares on 7 January 2019. A Securities Note, which forms part of the Prospectus, was sent to shareholders. The proceeds of the Offer will be used to provide further resources at a time when a number of attractive investment opportunities are being seen.
The funds raised by the Company pursuant to the Offer will be added to the liquid resources available for investment, putting the Company into a position to take advantage of investment opportunities over the next two to three years. The proceeds of the Offer will be applied in accordance with the Company’s investment policy. The Company continues to participate in the Top Up Offers and also benefits from receipts from dividend reinvestment, the net proceeds of which are invested in new investment opportunities and to provide additional working capital in the Company. It is important that the Company continues to have cash available for future investments and the Top Up Offers and dividend reinvestments are important sources of that capital.
Outlook and prospects
It is encouraging to see strong performance returning to the Company. The portfolio remains well balanced, despite its exposure to an increasing number of early stage technology businesses. However, the portfolio’s ability to grow and add value is shown by a number of our more mature technology investments, whose prospects lead us to look forward to the future with cautious optimism despite a less than propitious and uncertain economic backdrop.
Dr. N E Cross
Chairman
22 March 2019
Strategic report
Investment objective and policy
The Company’s investment objective is to provide investors with a regular and predictable source of dividend income, combined with the prospect of long-term capital growth, through a balanced portfolio of unquoted growth and technology businesses in a qualifying venture capital trust.
The Company will invest in a broad portfolio of unquoted growth and technology businesses. Allocation of assets will be determined by the investment opportunities which become available but efforts will be made to ensure that the portfolio is diversified in terms of sectors and stages of maturity of portfolio companies.
The full investment policy can be found above.
Current portfolio sector allocation
The pie chart at the end of this announcement shows the split of the portfolio valuation by sector as at 31 December 2018. Details of the principal investments made by the Company are shown in the Portfolio of investments on pages 18 to 20 of the full Annual Report and Financial Statements.
Direction of portfolio
Following a change to the company’s investment policy at the 2018 Annual General Meeting, a greater focus has been given to growth and technology investments, which will result in a decrease of asset-based investments as a percentage of the portfolio over time. The change in investment policy, which took into account recent changes in qualifying rules for VCTs, was approved by shareholders with an encouraging 98.9 per cent. of shares voted for the resolution.
The current portfolio is well balanced in terms of sectors, with education accounting for 16 per cent., renewable energy at 16 per cent. and pubs at 7 per cent.. We expect that the IT and other technology and healthcare (including digital healthcare) sectors to continue gradually increasing as a proportion of the portfolio.
| Results and dividends | Ordinary shares |
| £'000 | |
| Net revenue return for the year ended 31 December 2018 | 370 |
| Net capital gain for the year ended 31 December 2018 | 9,389 |
| Total return for the year ended 31 December 2018 | 9,759 |
| Dividend of 2.0 pence per share paid on 29 June 2018 | (2,081) |
| Dividend of 2.0 pence per share paid on 31 December 2018 | (2,055) |
| Transferred to reserves | 5,623 |
| Net assets as at 31 December 2018 | 79,897 |
| Net asset value per share as at 31 December 2018 | 77.4p |
The Company paid dividends of 4.0 pence per share during the year ended 31 December 2018 (2017: 4.0 pence per share). The dividend objective of the Board is to provide shareholders with a strong, predictable dividend flow. The Board has declared a first dividend for the year ending 31 December 2019, of 2.0 pence per share to be paid on 28 June 2019 to shareholders on the register on 7 June 2019.
As shown in the Income statement, investment income has increased to £1,184,000 (2017: £995,000). This is in part due to interest payments recommencing on investments where interest was previously being capitalised in order to fund further growth and dividends received from our holding in the SVS Albion OLIM UK Equity Income Fund. As a result, the revenue return to equity holders has increased to £370,000 (2017: £233,000).
The capital gain for the year was £9,389,000 (2017: £3,958,000). This is mainly attributable to uplifts in valuations for Quantexa (£2,429,000), Radnor House School (Holdings) (£1,264,000), Mirada Medical (£1,404,000) and G. Network Communications (£1,195,000) and the realised gain in the year of £1,785,000 on the sale of Grapeshot. These were partly offset by unrealised losses on memsstar (£885,000) and Mi-Pay Group (£314,000). The total return for the period was 9.5 pence per share (2017: 4.3 pence per share).
The Balance sheet shows that the net asset value per share has increased over the last year to 77.4 pence per share (2017: 71.9 pence per share). The increase in net asset value is attributed to the total return of 9.5 pence per share offset by the payment of 4.0 pence per share of dividends.
The cash outflow for the year reflected the £4.4 million of new and follow on investments, dividends paid of £3.5 million, buy-backs of £1.6 million of shares and a further £0.9 million invested into the SVS Albion OLIM UK Equity Income Fund. This was offset by the issue of new shares under the Albion VCTs Top Up Offers which raised £2.6 million and £5.6 million received from the disposal of investments and receipt of deferred consideration.
Review of business and outlook
A review of the Company’s business during the year and future prospects is contained in the Chairman’s statement above and in this Strategic report.
Following changes to the VCT regulations in 2017, asset-based investments will decrease over time as a proportion of the portfolio as a greater emphasis continues to be given to growth and technology investments. It is expected that with the changes in the investment policy and to the VCT regulations, income will become a lower component of total return in future years.
Details of significant events which have occurred since the end of the financial year are listed in note 19. Details of transactions with the Manager are shown in note 5.
Future prospects
As outlined in the Chairman’s statement, the Company’s portfolio remains well balanced across sectors and risk classes. Following a promising result for the year, and the performance of the growth and technology investments in recent years, the Board has confidence in the future performance of the Company. The Manager has a strong pipeline of investment opportunities in which the Company’s cash can be deployed.
Key performance indicators
The Directors believe that the following key performance indicators, which are typical for venture capital trusts, used in its own assessment of the Company, will provide shareholders with sufficient information to assess how effectively the Company is applying its investment policy to meet its objectives. The Directors are satisfied that the results shown in the following key performance indicators give a good indication that the Company is achieving its investment objective and policy. These are:
- Net asset value per share and total shareholder return
Please see the “Total shareholder return to 31 December 2018” table above in the Financial highlights section which shows the NAV per share as at 31 December 2018 and total shareholder return. Total shareholder return is net asset value plus cumulative dividends paid since launch.
Total shareholder return increased by 9.5 pence to 176.4 pence per Ordinary share for the year ended 31 December 2018 (13.2 per cent. on the opening net asset value).
The graph on page 4 of the full Annual Report and Financial Statements reflects the total shareholder return performance of the Company relative to the FTSE All-share Index.
- Dividend distributions
Dividends paid in respect of the year ended 31 December 2018 were 4.0 pence per share (2017: 4.0 pence per share), in line with the Boards dividend objective. Cumulative dividends paid since inception are 99.0 pence per Ordinary share.
- Ongoing charges
As agreed with the Manager in 2015, the ongoing charges ratio for the year to 31 December 2018 was capped at 2.75 per cent. (2017: 2.75 per cent.) from a previous cap of 3 per cent. with any excess over the cap being a reduction in the management fee. The ongoing charges ratio has been calculated using The Association of Investment Companies’ (AIC) recommended methodology. This figure shows shareholders the total recurring annual running expenses (including investment management fees charged to capital reserve) as a percentage of the average net assets attributable to shareholders. The Directors expect the ongoing charges ratio for the year ahead to be 2.75 per cent. (capped at 2.75 per cent.).
The reduction in management fees payable to Albion Capital Group LLP in the year, due to the expense cap, amounted to £136,000 (2017: £137,000).
- VCT regulation
The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC. In order to maintain its status under Venture Capital Trust legislation, a VCT must comply on a continuing basis with the provisions of Section 274 of the Income Tax Act 2007, details of which are provided in the Directors’ report on page 28 of the full Annual Report and Financial Statements.
The relevant tests to measure compliance have been carried out and independently reviewed for the year ended 31 December 2018. These showed that the Company has complied with all tests and continues to do so.
Gearing
As defined by the Articles of Association, the Company’s maximum exposure in relation to gearing is restricted to 10 per cent. of the adjusted share capital and reserves. Although the investment policy permits the Company to borrow, the Directors do not currently have any intention of utilising long-term gearing and have not done so in the past.
Operational arrangements
The Company has delegated the investment management of the portfolio to Albion Capital Group LLP, which is authorised and regulated by the Financial Conduct Authority. Albion Capital Group LLP also provides company secretarial and other accounting and administrative support to the Company under the Management Agreement.
Management agreement
Under the Management agreement, the Manager provides investment management, secretarial and administrative services to the Company. The Management agreement can be terminated by either party on 12 months’ notice and is subject to earlier termination in the event of certain breaches or on the insolvency of either party. The Manager is paid an annual fee equal to 2.5 per cent. of the net asset value of the Company, payable quarterly in arrears. The total annual running costs of the Company, including fees payable to Albion, Directors’ fees, professional fees and the costs incurred by the Company in the ordinary course of business (but excluding any exceptional items and performance fees payable to Albion) are capped at an amount equal to 2.75 per cent. of the Company’s net assets, with any excess being met by Albion by way of a reduction in management fees.
Additionally, Albion agreed to reduce that proportion of its management fee relating to the investment in the SVS Albion OLIM UK Equity Income Fund (“OUEIF”) in order to avoid any double charging for the investment exposure.
The Manager is also entitled to an arrangement fee on investment, payable by each portfolio company, of approximately 2 per cent. of each investment made and monitoring fees where the Manager has a representative on the portfolio company’s board. Further details of the Manager’s fee can be found in note 5.
Management performance incentive
In order to provide the Manager with an incentive to maximise the return to investors, the Manager is entitled to charge an incentive fee in the event that the returns exceed minimum target levels per share.
Under the incentive arrangement, if the net asset value per share at the end of a financial period, when added to the aggregate dividends per share (both revenue and capital) paid to that date, exceeds £1 as increased at the rate of RPI plus 2 per cent. per annum uncompounded from the date of first admission to the Official List of the relevant class of share, then the Manager will be entitled to an incentive fee equal to 15 per cent. of such excess. In the event that the performance of the Company falls short of the target in any period, such shortfall must be made up in future periods before the Manager is entitled to any incentive in respect of such future periods.
The fee if applicable, will be payable annually. No performance fee has arisen during the year (2017: £nil). The performance threshold at 31 December 2018 was 196.5 pence for the Ordinary shares, 169.7 pence for the former C shares and 175.5 pence for the former Income & Growth shares which compare to total returns of 176.4 pence, 101.3 pence and 105.2 pence respectively, based on the latest NAV.
For the previous two years, the Company’s return has exceeded dividends paid, with a return of 9.5 pence per share (13.2 per cent. of opening NAV) in the year to 31 December 2018. However, the total return has fallen short of the hurdle by 20.1 pence per Ordinary share. In recent years the Company has issued substantial new shares under the Top Up Offers and also through the Dividend Reinvestment Scheme. The Company has also bought back substantial shares, with both buyback and issuance altering the equity balance of the Company.
In light of these factors, the Board is intending to review the current performance incentive arrangements to determine their effectiveness and to ensure that Manager incentivisation and objectives are aligned with the interests of the Company.
Investment and co-investment
The Company co-invests with other Albion Capital Group LLP managed venture capital trusts and funds. Allocation of investments is on the basis of an allocation agreement which is based, inter alia, on the ratio of funds available for investment.
Evaluation of the Manager
The Board has evaluated the performance of the Manager based on:
- the returns generated by the Company;
- the continuing achievement of the 70 per cent. (to be 80 per cent. in respect of accounting periods starting on or after 6 April 2019) qualifying holdings investment requirement for venture capital trust status;
- the long term prospects of the current portfolio of investments;
- a review of the Management agreement and the services provided therein; and
- benchmarking the performance of the Manager to other service providers including the performance of other VCTs that the Manager is responsible for managing.
The Board believes that it is in the interests of shareholders as a whole, and of the Company, to continue the appointment of the Manager for the forthcoming year.
Alternative Investment Fund Managers Directive (“AIFMD”)
The Board appointed Albion Capital Group LLP as the Company’s AIFM in June 2014 as required by the AIFMD. The Manager became a full-scope Alternative Investment Fund Manager under the AIFMD on 1 October 2018. As a result, from that date, Ocorian (UK) Limited was appointed as Depository to oversee the custody and cash arrangements and provide other AIFMD duties with respect to the Company.
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the Companies Act 2006 (the “Act”) to detail information about social and community issues, employees and human rights; including any policies it has in relation to these matters and effectiveness of these policies. As an externally managed investment company with no employees, the Company has no policies in these matters and as such these requirements do not apply.
General Data Protection Regulation (“GDPR”)
The General Data Protection Regulation came into effect from 25 May 2018 with the objective of unifying data privacy requirements across the European Union. The Manager, Albion Capital Group LLP, has taken action to ensure that the Manager and the Company are compliant with the regulation.
Further policies
The Company has adopted a number of further policies relating to:
- Environment
- Global greenhouse gas emissions
- Anti-bribery
- Anti-facilitation of tax evasion
- Diversity
and these are set out in the Directors’ report on pages 28 and 29 of the full Annual Report and Financial Statements.
Risk management
The Board carries out a regular review of the risk environment in which the Company operates. The principal risks and uncertainties of the Company as identified by the Board and how they are managed are as follows:
| Risk | Possible consequence | Risk management |
| Investment and performance risk | The risk of investment in poor quality assets, which could reduce the capital and income returns to shareholders, and could negatively impact on the Company’s current and future valuations. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes, are more volatile than larger, long established businesses. Investments in open-ended equity funds result in exposure to market risk through movements in price per unit. | To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its track record over many years of making successful investments in this segment of the market. In addition, the Manager operates a formal and structured investment appraisal and review 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 matters discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on portfolio company boards), including the level of diversification in the portfolio, and the Board receives detailed reports on each investment as part of the Manager’s report at quarterly board meetings. The Board and Manager regularly reviews the deployment of cash resources into equity markets, the extent of exposure and performance of the exposure. |
| VCT approval risk | The Company must comply with section 274 of the Income Tax Act 2007 which enables its investors to take advantage of tax relief on their investment and on future returns. Breach of any of the rules enabling the Company to hold VCT status could result in the loss of that status. | To reduce this risk, the Board has appointed the Manager, which has a team with significant experience in venture capital trust management, used to operating within the requirements of the venture capital trust legislation. In addition, to provide further formal reassurance, the Board has appointed Philip Hare & Associates LLP as its taxation adviser, who 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. Each investment in a portfolio company is also pre-cleared with our professional advisers or H.M. Revenue & Customs. |
| Regulatory and 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 or advising quoted companies. In addition, the Board and the Manager receive regular updates on new regulation, including legislation on the management of the Company, from its auditor, lawyers and other professional bodies. The Company is subject to compliance checks through the Manager’s compliance officer. The Manager reports monthly to its Board on any issues arising from compliance or regulation. These controls are also reviewed as part of the quarterly Board meetings, and also as part of the review work undertaken by the Manager’s compliance officer. The report on controls is also evaluated by the internal auditors. |
| Market value of Ordinary shares | The market value of Ordinary shares can fluctuate. The market value of an Ordinary share, as well as being affected by its net asset value and prospective net asset value, also takes into account its dividend yield and prevailing interest rates. As such, the market value of an Ordinary share may vary considerably from its underlying net asset value. The market prices of shares in quoted investment companies can, therefore, be at a discount or premium to the net asset value at different times, depending on supply and demand, market conditions, general investor sentiment and other factors, including the ability to exercise share buybacks. Accordingly the market price of the Ordinary shares may not fully reflect their underlying net asset value. | The Company operates a share buyback policy, which is designed to limit the discount at which the Ordinary shares trade to around 5 per cent. to net asset value, by providing a purchaser through the Company in absence of market purchasers. From time to time buy-backs cannot be applied, for example when the Company is subject to a close period, or if it were to exhaust and could not renew any buyback authorities. New Ordinary shares are issued at sufficient premium to net asset value to cover the costs of issue and to avoid asset value dilution to existing investors. |
| Operational and internal control risk | The Company relies on a number of third parties, in particular the Manager, for the provision of investment management and administrative functions. Failures in key systems and controls 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 Company and its operations are subject to a series of rigorous internal controls and review procedures exercised throughout the year, and receives reports from the Manager on internal controls and risk management, including on matters relating to cyber security. The Audit Committee reviews the Internal Audit Reports prepared by the Manager’s internal auditors, PKF Littlejohn LLP. On an annual basis, the Audit Committee chairman meets with the internal audit partner to provide an opportunity to ask specific detailed questions in order to satisfy itself that the Manager has strong systems and controls in place including those in relation to business continuity and cyber security. From 1 October 2018, Ocorian (UK) Limited were appointed as Depository to oversee the custody and cash arrangements and provide other AIFMD duties. The Board reviews the quarterly reports prepared by Ocorian (UK) Limited to ensure that Albion Capital is adhering to its duties as a full-scope Alternative Investment Fund Manager under the AIFMD. In addition, the Board regularly reviews the performance of its key service providers, particularly the Manager, to ensure they continue to have the necessary expertise and resources to deliver the Company’s investment policy. The Manager and other service providers have also demonstrated to the Board that there is no undue reliance placed upon any one individual. |
| Economic and political 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. | The Company invests in a diversified portfolio of companies across a number of industry sectors and in addition often invests a mixture of instruments in portfolio companies and has a policy of not normally permitting any external bank borrowings within portfolio companies. At any given time, the Company has sufficient cash resources to meet its operating requirements, including share buy backs and follow on investments. |
Viability statement
In accordance with the FRC UK Corporate Governance Code published in 2016 and principle 21 of the AIC Code of Corporate Governance, the Directors have assessed the prospects of the Company over three years to 31 December 2021. The Directors believe that three years is a reasonable period in which they can assess the future of the Company to continue to operate and meet its liabilities as they fall due and is also the period used by the Board in the strategic planning process and is considered reasonable for a business of our nature and size. The three year period is considered the most appropriate given the forecasts that the Board require from the Manager and the estimated timelines for finding, assessing and completing investments.
The Directors have carried out a robust assessment of the principal risks facing the Company as explained above, including those that could threaten its business model, future performance, solvency or liquidity. The Board also considered the risk management processes in place to avoid or reduce the impact of the underlying risks. The Board focused on the major factors which affect the economic, regulatory and political environment. The Board deliberated over the importance of the Manager and the processes that they have in place for dealing with the principal risks.
The Board assessed the ability of the Company to raise finance and deploy capital. The portfolio is well balanced after the process of reducing the proportion of the portfolio’s holdings of older investments. In assessing the prospects of the Company, the Directors have considered the cash flow by looking at the Company’s income and expenditure projections and funding pipeline over the assessment period of three years and they appear realistic.
Taking into account the processes for mitigating risks, monitoring costs, share price discount, the Manager’s compliance with the investment objective, policies and business model and the balance of the portfolio the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 31 December 2021.
This Strategic report of the Company for the year ended 31 December 2018 has been prepared in accordance with the requirements of section 414A of the Act. The purpose of this report is to provide shareholders with sufficient information to enable them to assess the extent to which the Directors have performed their duty to promote the success of the Company in accordance with section 172 of the Act.
On behalf of the Board,
Dr. N E Cross
Chairman
22 March 2019
Responsibility Statement
In preparing these financial statements for the year to 31 December 2018, the Directors of the Company, being Dr Neil Cross, Robin Archibald, Mary Anne Cordeiro, Modwenna Rees-Mogg and Patrick Reeve, confirm that to the best of their knowledge:
- summary financial information contained in this announcement and the full Annual Report and Financial Statements for the year ended 31 December 2018 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 or loss of the Company; and
-the Chairman's statement and Strategic report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties it faces.
We consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced, and understandable and provide the information necessary for shareholders to assess the Company’s position, performance, business model and strategy.
A detailed "Statement of Directors' responsibilities” is contained on page 32 within the full audited Annual Report and Financial Statements.
On behalf of the Board,
Dr N E Cross
Chairman
22 March 2019
Income statement
| Year ended 31 December 2018 | Year ended 31 December 2017 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Note | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| Gains on investments | 3 | - | 10,709 | 10,709 | - | 5,145 | 5,145 |
| Investment income | 4 | 1,184 | - | 1,184 | 995 | - | 995 |
| Investment management fees | 5 | (460) | (1,379) | (1,839) | (410) | (1,231) | (1,641) |
| Other expenses | 6 | (295) | - | (295) | (308) | - | (308) |
| Profit on ordinary activities before tax | 429 | 9,330 | 9,759 | 277 | 3,914 | 4,191 | |
| Tax (charge)/credit on ordinary activities | 8 | (59) | 59 | - | (44) | 44 | - |
| Profit and total comprehensive income attributable to shareholders | 370 | 9,389 | 9,759 | 233 | 3,958 | 4,191 | |
| Basic and diluted return per share (pence)* | 10 | 0.4 | 9.1 | 9.5 | 0.2 | 4.1 | 4.3 |
* 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.
Balance sheet
| 31 December 2018 | 31 December 2017 | ||
| Note | £’000 | £’000 | |
| Fixed asset investments | 11 | 70,737 | 60,724 |
| Current assets | |||
| Current asset investments | 13 | 1,921 | 1,372 |
| Trade and other receivables less than one year | 13 | 664 | 930 |
| Cash and cash equivalents | 7,142 | 10,154 | |
| 9,727 | 12,456 | ||
| Total assets | 80,464 | 73,180 | |
| Payables: amounts falling due within one year | |||
| Trade and other payables less than one year | 14 | (567) | (532) |
| Total assets less current liabilities | 79,897 | 72,648 | |
| Equity attributable to equity holders | |||
| Called up share capital | 15 | 1,187 | 1,143 |
| Share premium | 26,621 | 23,469 | |
| Capital redemption reserve | 28 | 28 | |
| Unrealised capital reserve | 16,697 | 9,692 | |
| Realised capital reserve | 10,933 | 8,549 | |
| Other distributable reserve | 24,431 | 29,767 | |
| Total equity shareholders’ funds | 79,897 | 72,648 | |
| Basic and diluted net asset value per share (pence)* | 16 | 77.4 | 71.9 |
* 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 were authorised for issue on 22 March 2019 and were signed on its behalf by
Dr. N E Cross
Chairman
Company number: 04114310
Statement of changes in equity
| Called up share capital | Share premium | Capital redemption reserve | Unrealised capital reserve | Realised capital reserve* | Other distributable reserve* | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| As at 1 January 2018 | 1,143 | 23,469 | 28 | 9,692 | 8,549 | 29,767 | 72,648 |
| Return and total comprehensive income for the year | - | - | - | 8,910 | 479 | 370 | 9,759 |
| Transfer of previously unrealised gains on disposal of investments | - | - | - | (1,905) | 1,905 | - | - |
| Purchase of shares for treasury | - | - | - | - | - | (1,570) | (1,570) |
| Issue of equity | 44 | 3,233 | - | - | - | - | 3,277 |
| Cost of issue of equity | - | (81) | - | - | - | - | (81) |
| Dividends paid | - | - | - | - | - | (4,136) | (4,136) |
| As at 31 December 2018 | 1,187 | 26,621 | 28 | 16,697 | 10,933 | 24,431 | 79,897 |
| As at 1 January 2017 | 1,007 | 46,585 | 28 | 4,625 | 9,658 | 2,523 | 64,426 |
| Return/(loss) and total comprehensive income for the year | - | - | - | 4,750 | (792) | 233 | 4,191 |
| Transfer of previously unrealised losses on disposal of investments | - | - | - | 317 | (317) | - | - |
| Purchase of shares for treasury | - | - | - | - | - | (1,719) | (1,719) |
| Issue of equity | 136 | 9,750 | - | - | - | - | 9,886 |
| Cost of issue of equity | - | (245) | - | - | - | - | (245) |
| Cancellation of Share premium** | - | (32,621) | - | - | - | 32,621 | - |
| Dividends paid | - | - | - | - | - | (3,891) | (3,891) |
| As at 31 December 2017 | 1,143 | 23,469 | 28 | 9,692 | 8,549 | 29,767 | 72,648 |
* These reserves amount to £35,364,000 (2017: £38,316,000) which is considered distributable.
** In the year to 31 December 2017, following approval by shareholders and the High Court, an amount of £32,620,666 was reclassified to the other distributable reserve.
Statement of cash flows
| Year ended 31 December 2018 | Year ended 31 December 2017 | |
| £’000 | £’000 | |
| Cash flow from operating activities | ||
| Loan stock income received | 1,098 | 921 |
| Dividend income received | 119 | 74 |
| Deposit interest received | 25 | 7 |
| Investment management fees paid | (1,803) | (1,569) |
| Other cash payments | (293) | (295) |
| Corporation tax received | - | 1 |
| Net cash flow from operating activities | (854) | (861) |
| Cash flow from investing activities | ||
| Purchase of current asset investments | (910) | (1,350) |
| Purchase of fixed asset investments | (4,354) | (6,623) |
| Disposal of fixed asset investments | 5,621 | 8,202 |
| Net cash flow from investing activities | 357 | 229 |
| Cash flow from financing activities | ||
| Issue of ordinary share capital | 2,606 | 9,072 |
| Cost of issue of equity | (15) | (3) |
| Dividends paid | (3,536) | (3,318) |
| Purchase of own shares (including costs) | (1,570) | (1,717) |
| Net cash flow from financing activities | (2,515) | 4,034 |
| (Decrease)/increase in cash and cash equivalents | (3,012) | 3,402 |
| Cash and cash equivalents at start of period | 10,154 | 6,752 |
| Cash and cash equivalents at end of period | 7,142 | 10,154 |
| Cash and cash equivalents comprise | ||
| Cash at bank and in hand | 7,142 | 10,154 |
| Cash equivalents | - | - |
| Total cash and cash equivalents | 7,142 | 10,154 |
Notes to the Financial Statements
1. Basis of preparation
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, including Financial Reporting Standard 102 (“FRS 102”), 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”).
The preparation of the Financial Statements requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The most critical estimates and judgements relate to the determination of carrying value of investments at fair value through profit and loss (“FVTPL”). The Company values investments by following the International Private Equity and Venture Capital Valuation (“IPEV”) Guidelines and further detail on the valuation techniques used are outlined in note 2 below.
Company information can be found on page 2 of the full Annual Report and Financial Statements.
2. Accounting policies
Fixed and current asset investments
The Company’s business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment policy, and information about the portfolio is provided internally on that basis to the Board.
In accordance with the requirements of FRS 102, those undertakings in which the Company holds more than 20 per cent. of the equity as part of an investment portfolio are not accounted for using the equity method. In these circumstances the investment is measured at FVTPL.
Upon initial recognition (using trade date accounting) investments, including loan stock, are classified by the Company as FVTPL and are included at their initial fair value, which is cost (excluding expenses incidental to the acquisition which are written off to the Income statement).
Subsequently, the investments are valued at ‘fair value’, which is measured as follows:
- Investments listed on recognised exchanges, including liquid open-ended equity funds, are valued at their bid prices at the end of the accounting period or otherwise at fair value based on published price quotations;
- Unquoted investments, where there is not an active market, are valued using an appropriate valuation technique in accordance with the IPEV Guidelines. Indicators of fair value are derived using established methodologies including earnings multiples, the level of third party offers received, prices of recent investment rounds, net assets and industry valuation benchmarks. Where the Company has an investment in an early stage enterprise, the price of a recent investment round is often the most appropriate approach to determining fair value. In situations where a period of time has elapsed since the date of the most recent transaction, consideration is given to the circumstances of the portfolio company since that date in determining fair value. This includes consideration of whether there is any evidence of deterioration or strong definable evidence of an increase in value. In the absence of these indicators, the investment in question is valued at the amount reported at the previous reporting date. Examples of events or changes that could indicate a diminution include:
- the performance and/or prospects of the underlying business are significantly below the expectations on which the investment was based;
- a significant adverse change either in the portfolio company’s business or in the technological, market, economic, legal or regulatory environment in which the business operates; or
- market conditions have deteriorated, which may be indicated by a fall in the share prices of quoted businesses operating in the same or related sectors.
Investments are recognised as financial assets on legal completion of the investment contract and are de-recognised on legal completion of the sale of an investment.
Dividend income is not recognised as part of the fair value movement of an investment, but is recognised separately as investment income through the other distributable reserve when a share becomes ex-dividend.
Receivables, payables and cash are carried at amortised cost, in accordance with FRS 102. There are no financial liabilities other than payables.
Investment income
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 when the Company’s right to receive payment and expected settlement is established. Where interest is rolled up and/or payable at redemption then it is recognised as income unless there is reasonable doubt as to its receipt.
Bank interest income
Interest income is recognised on an accruals basis using the rate of interest agreed with the bank.
Investment management fees, performance incentive fees and expenses
All expenses have been accounted for on an accruals basis. Expenses are charged through the other distributable reserve except the following which are charged through the realised capital reserve:
- 75 per cent. of management fees and performance incentive fees are allocated to the realised capital reserve. 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.
Taxation
Taxation is applied on a current basis in accordance with FRS 102. Current tax is tax payable (refundable) in respect of the taxable profit (tax loss) for the current period or past reporting periods using the tax rates and laws that have been enacted or substantively enacted at the financial reporting date. Taxation associated with capital expenses is applied in accordance with the SORP.
Deferred tax is provided in full on all timing differences at the reporting date. Timing differences are differences between taxable profits and total comprehensive income as stated in the Financial Statements that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the Financial Statements. As a VCT the Company has an exemption from tax on capital gains. The Company intends to continue meeting the conditions required to obtain approval as a VCT in the foreseeable future. The Company therefore, should have no material deferred tax timing differences arising in respect of the revaluation or disposal of investments and the Company has not provided for any deferred tax.
Reserves
Share premium
This reserve accounts for the difference between the price paid for shares and the nominal value of the shares, less issue costs.
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is diminished through the repurchase and cancellation of the Company’s own shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at the year end against cost are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
- gains and losses compared to cost on the realisation of investments;
- expenses, together with the related taxation effect, charged in accordance with the above policies; and
- dividends paid to equity holders.
Other distributable reserve
The special reserve, treasury share reserve and the revenue reserve were combined in 2012 to form a single reserve named other distributable reserve.
This reserve accounts for movements from the revenue column of the Income statement, the payment of dividends, the buy-back of shares and other non-capital realised movements.
Dividends
Dividends by the Company are accounted for in the period in which the dividend is paid or approved at the Annual General Meeting.
Segmental reporting
The Directors are of the opinion that the Company is engaged in a single operating segment of business, being investment in smaller companies principally based in the UK.
3. Gains on investments
| Year ended 31 December 2018 £’000 | Year ended 31 December 2017 £’000 | |
| Unrealised gains on fixed asset investments | 9,271 | 4,728 |
| Unrealised (losses)/gains on current asset investments | (361) | 22 |
| Realised gains on fixed asset investments | 1,799 | 395 |
| 10,709 | 5,145 |
4. Investment income
| Year ended 31 December 2018 £’000 | Year ended 31 December 2017 £’000 | |
| Loan stock interest and other fixed returns | 1,039 | 915 |
| UK dividend income | 119 | 74 |
| Bank deposit interest | 26 | 6 |
| 1,184 | 995 |
Interest income earned on investments valued below cost at 31 December 2018 amounted to £8,000 (2017: £3,000).
5. Investment management fees
| Year ended 31 December 2018 £’000 | Year ended 31 December 2017 £’000 | |
| Investment management fee charged to revenue | 460 | 410 |
| Investment management fee charged to capital | 1,379 | 1,231 |
| 1,839 | 1,641 |
Further details of the Management agreement under which the investment management fee is paid are given in the Strategic report.
During the year, services of a total value of £1,839,000 (2017: £1,641,000) were purchased by the Company from Albion Capital Group LLP in respect of management fees. At the financial year end, the amount due to Albion Capital Group LLP in respect of these services disclosed as accruals was £482,000 (2017: £446,000). The total annual running costs of the Company are capped at an amount equal to 2.75 per cent. of the Company’s net assets, with any excess being met by Albion by way of a reduction in management fees. During the year, the management fee was reduced by £136,000 as a result of this cap (2017: £137,000).
During the year, the Company was not charged by Albion Capital Group LLP in respect of Patrick Reeve’s services as a Director (2017: nil).
Albion Capital Group LLP, its partners and staff (including Patrick Reeve) hold 991,925 Ordinary shares in the Company.
Albion Capital Group LLP is, from time to time, eligible to receive arrangement fees and monitoring fees from portfolio companies. During the year ended 31 December 2018, fees of £214,000 attributable to the investments of the Company were received by Albion Capital Group LLP pursuant to these arrangements (2017: £305,000).
During the period, an amount of £910,000 (2017: £1,350,000) was invested in the SVS Albion OLIM UK Equity Income Fund (“OUEIF”) as part of the Company’s management of surplus liquid funds. To avoid double charging, Albion agreed to reduce its management fee relating to the investment in the OUEIF by 0.75 per cent. per annum, which represents the OUEIF management fee charged by OLIM. This resulted in a further reduction of the management fee of £15,000 (2017: £3,000).
6. Other expenses
| Year ended 31 December 2018 £’000 | Year ended 31 December 2017 £’000 | |
| Directors’ fees (including NIC) | 101 | 101 |
| Auditor’s remuneration for statutory audit services (excluding VAT) | 28 | 28 |
| Tax services | 21 | 17 |
| Other administrative expenses | 145 | 162 |
| 295 | 308 |
7. Directors’ fees
The amounts paid to and on behalf of the Directors during the year are as follows:
| Year ended 31 December 2018 £’000 | Year ended 31 December 2017 £’000 | |
| Directors’ fees | 93 | 93 |
| National insurance | 8 | 8 |
| 101 | 101 |
The Company’s key management personnel are the Directors. Further information regarding Directors’ remuneration can be found in the Directors’ remuneration report on pages 38 to 40 of the full Annual Report and Financial Statements.
8. Tax on ordinary activities
| Year ended 31 December 2018 £’000 | Year ended 31 December 2017 £’000 | |
| UK corporation tax charge payable | - | - |
Factors affecting the tax charge:
| Year ended 31 December 2018 £’000 | Year ended 31 December 2017 £’000 | |
| Return on ordinary activities before taxation | 9,759 | 4,191 |
| Tax charge on profit at the average companies rate of 19.00% (2017: 19.25%) | 1,854 | 807 |
| Factors affecting the charge: | ||
| Non-taxable gains | (2,035) | (990) |
| Income not taxable | (23) | (14) |
| Non-deductible expenses | - | 5 |
| Excess management expenses carried forward | 204 | 192 |
| - | - |
The tax charge for the year shown in the Income statement is lower than the average companies rate of corporation tax in the UK of 19 per cent. (2017: 19.25 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) The Company has excess management expenses of £2,348,000 (2017: £1,268,000) that are available for offset against future profits. A deferred tax asset of £446,000 (2017: £216,000) has not been recognised in respect of these losses as they will be recoverable only to the extent that the Company has sufficient future taxable profits.
9. Dividends
| Year ended 31 December 2018 £’000 | Year ended 31 December 2017 £’000 | |
| Dividend of 1p per share paid on 31 January 2017 | - | 900 |
| Dividend of 1p per share paid on 30 June 2017 | - | 978 |
| Dividend of 2p per share paid on 29 December 2017 | - | 2,013 |
| Dividend of 2p per share paid on 29 June 2018 | 2,081 | - |
| Dividend of 2p per share paid on 31 December 2018 | 2,055 | - |
| 4,136 | 3,891 |
In addition to the dividends summarised above, the Board has declared a first dividend for the year ending 31 December 2019 of 2 pence per share. The dividend will be paid on 28 June 2019 to shareholders on the register on 7 June 2019. The total dividend will be approximately £2,064,000. All dividends are paid out of the other distributable reserve as shown on the Balance sheet.
10. Basic and diluted return per share
| Year ended 31 December 2018 | Year ended 31 December 2017 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| Profit attributable to equity shares (£’000) | 370 | 9,389 | 9,759 | 233 | 3,958 | 4,191 |
| Weighted average shares in issue (excluding treasury shares) | 103,202,241 | 96,895,249 | ||||
| Return attributable per equity share (pence) | 0.4 | 9.1 | 9.5 | 0.2 | 4.1 | 4.3 |
The weighted average number of shares is calculated excluding treasury shares of 15,518,470 (2017: 13,268,070).
There are no convertible instruments, derivatives or contingent share agreements in issue, and therefore no dilution affecting the return per share. The basic return per share is therefore the same as the diluted return per share.
11. Fixed asset investments
| 31 December 2018 £’000 | 31 December 2017 £’000 | |
| Investments held at fair value through profit or loss | ||
| Unquoted equity and preference shares | 43,611 | 32,338 |
| Quoted equity | 799 | 1,106 |
| Unquoted loan stock | 26,327 | 27,280 |
| 70,737 | 60,724 |
| 31 December 2018 £’000 | 31 December 2017 £’000 | |
| Opening valuation | 60,724 | 57,021 |
| Purchases at cost | 5,211 | 7,861 |
| Disposal proceeds | (6,206) | (9,265) |
| Realised gains | 1,799 | 395 |
| Movement in loan stock accrued income | (62) | (16) |
| Unrealised gains | 9,271 | 4,728 |
| Closing valuation | 70,737 | 60,724 |
| Movement in loan stock accrued income | ||
| Opening accumulated movement in loan stock accrued income | 405 | 421 |
| Movement in loan stock accrued income | (62) | (16) |
| Closing accumulated movement in loan stock accrued income | 343 | 405 |
| Movement in unrealised gains | ||
| Opening accumulated unrealised gains | 9,622 | 4,577 |
| Transfer of previously unrealised (gains)/losses to realised reserve on disposal of investments | (1,905) | 317 |
| Movement in unrealised gains | 9,271 | 4,728 |
| Closing accumulated unrealised gains | 16,988 | 9,622 |
| Historic cost basis | ||
| Opening book cost | 50,697 | 52,023 |
| Purchases at cost | 5,211 | 7,861 |
| Sales at cost | (2,502) | (9,187) |
| Closing book cost | 53,406 | 50,697 |
Purchases and disposals detailed above do not agree to the Statement of cash flows due to restructuring of investments, conversion of convertible loan stock and settlement receivables and payables.
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 those valued below cost and past due assets are covered by the value of security held for these loan stock investments.
Unquoted fixed asset investments are valued at fair value in accordance with the IPEV guidelines as follows:
| Valuation methodology | 31 December 2018 £’000 | 31 December 2017 £’000 |
| Cost and price of recent investment (reviewed for impairment or uplift) | 24,948 | 13,841 |
| Third party valuation - earnings multiple | 16,707 | 15,380 |
| Third party valuation – discounted cash flow | 10,654 | 11,891 |
| Revenue multiple | 7,543 | 10,403 |
| Net assets | 5,487 | 5,485 |
| Contracted sale price | 2,482 | - |
| Earnings multiple | 2,117 | 2,618 |
| 69,938 | 59,618 |
Where the cost or price of recent investment has been used the valuer has assessed whether changes or events subsequent to the relevant transaction would imply a change in the investment’s fair value.
Fair value investments had the following movements between valuation methodologies between 31 December 2017 and 31 December 2018:
| Change in valuationmethodology (2017 to 2018) | 31 December 2018 £’000 | Explanatory note |
| Revenue multiple to price of recent investment | 3,356 | Recent external funding round |
| Third party valuation – discounted cash flow to contracted sale price | 2,482 | Third party offer accepted |
| Cost to earnings multiple | 663 | More appropriate valuation methodology |
The valuation will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEV Guidelines. The Directors believe that, within these parameters, there are no other possible methods of valuation which would be reasonable as at 31 December 2018.
FRS 102 and the SORP requires the Company to disclose the inputs to the valuation methods applied to its investments measured at FVTPL in a fair value hierarchy. The table below sets out fair value hierarchy definitions using FRS102 s.11.27.
| Fair value hierarchy | Definition |
| Level 1 | Unadjusted quoted prices in an active market |
| Level 2 | Inputs to valuations are from observable sources and are directly or indirectly derived from prices |
| Level 3 | Inputs to valuations not based on observable market data |
Quoted investments are valued according to Level 1 valuation methods. Unquoted equity, preference shares and loan stock are all valued according to Level 3 valuation methods.
Investments held at fair value through profit or loss (Level 3) had the following movements:
| 31 December 2018 | 31 December 2017 | |||
| £’000 | £’000 | |||
| Opening balance | 59,618 | 55,171 | ||
| Purchases at cost | 5,211 | 7,861 | ||
| Disposals proceeds | (6,206) | (9,265) | ||
| Movement in loan stock accrued income | (62) | (16) | ||
| Realised gains | 1,799 | 395 | ||
| Unrealised gains | 9,578 | 5,472 | ||
| Closing balance | 69,938 | 59,618 | ||
FRS 102 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. 67 per cent. of the portfolio of investments is based on cost, recent investment price, net assets or is loan stock, and as such the Board considers that the assumptions used for their valuations are the most reasonable. The Directors believe that changes to reasonable possible alternative assumptions (by adjusting the revenue and earnings multiples) for the valuations of the remainder of the portfolio companies could result in an increase in the valuation of investments by £1,389,000 or a decrease in the valuation of investments by £1,360,000. For valuations based on earnings and revenue multiples, the Board considers that the most significant input is the price/earnings ratio; for valuations based on third party valuations, the Board considers that the most significant inputs are price/earnings ratio, discount factors and market values for buildings; which have been adjusted to drive the above sensitivities.
12. Significant interests
The principal activity of the Company is to select and hold a portfolio of investments. 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 investments listed below are held as part of an investment portfolio and therefore, as permitted by FRS 102 section 14.4B, they are measured at FVTPL and not accounted for using the equity method.
The Company has interests of greater than 20 per cent. of the nominal value of any class of the allotted shares in the portfolio companies as at 31 December 2018 as described below:
| Company | Registered postcode | Profit/(loss) before tax £’000 | Net assets/(liabilities) £’000 | Result for year ended | % class and share type | % total voting rights | |||
| Albion Investment Properties Limited | EC2R 7AF, UK | n/a* | (762) | 31 December 2017 | 31.8% A Ordinary | 31.8% | |||
| Bravo Inns Limited | WA4 1AG , UK | n/a* | (785) | 31 March 2018 | 28.8% Ordinary | 28.8% | |||
| MHS 1 Limited | EC2R 7AF, UK | n/a* | (3,916) | 31 March 2017 | 22.5% Ordinary | 22.5% | |||
| memsstar Limited | EH3 9EP, UK | 847 | 1,523 | 31 December 2017 | 67.3% A Ordinary | 30.1% | |||
| Premier Leisure (Suffolk) Limited | EC2R 7AF, UK | n/a* | (1,484) | 30 June 2017 | 25.8% Ordinary | 25.8% | |||
| The Q Garden Company Limited | EC2R 7AF, UK | n/a* | (4,595) | 31 August 2017 | 33.4% A Ordinary | 33.4% | |||
| TWCL Limited | EC2R 7AF, UK | n/a* | (3,454) | 30 September 2017 | 25.2% Ordinary | 25.2% | |||
*The company files filleted accounts which does not disclose this information.
13. Current assets
| Current asset investments | 31 December 2018 | 31 December 2017 |
| £’000 | £’000 | |
| SVS Albion OLIM UK Equity Income Fund | 1,921 | 1,372 |
Current asset investments at 31 December 2018 consist of cash invested in SVS Albion OLIM UK Equity Income Fund and is capable of realisation within 7 days. These fall into the level 1 fair value hierarchy as defined in note 11.
| Trade and other receivables less than one year | 31 December 2018 | 31 December 2017 |
| £’000 | £’000 | |
| Prepayments and accrued income | 19 | 20 |
| Other receivables | 5 | 2 |
| Deferred consideration | 640 | 908 |
| 664 | 930 |
The Directors consider that the carrying amount of receivables is not materially different to their fair value.
14. Payables: amounts falling due within one year
| 31 December 2018 | 31 December 2017 | |
| £’000 | £’000 | |
| Trade payables | 6 | 5 |
| Accruals and deferred income | 561 | 527 |
| 567 | 532 |
The Directors consider that the carrying amount of payables is not materially different to their fair value.
15. Called up share capital
| Allotted, called up and fully paid | £’000 |
| 114,269,311 Ordinary shares of 1 penny each at 31 December 2017 | 1,143 |
| 4,442,278 Ordinary shares of 1 penny each issued during the year | 44 |
| 118,711,589 Ordinary shares of 1 penny each at 31 December 2018 | 1,187 |
| 13,268,070 Ordinary shares of 1 penny each held in treasury at 31 December 2017 | (133) |
| 2,250,400 Ordinary shares purchased during the year to be held in treasury | (23) |
| 15,518,470 Ordinary shares of 1 penny each held in treasury at 31 December 2018 | (155) |
| 103,193,119 Ordinary shares of 1 penny each in circulation* at 31 December 2018 | 1,032 |
* Carrying one vote each
The Company purchased 2,250,400 Ordinary shares (2017: 2,563,000) to be held in treasury at a cost of £1,570,000 including stamp duty (2017: £1,719,000) during the period to 31 December 2018. Total share buy backs in 2018 represents 1.9 per cent. (2017: 2.5 per cent.) of called-up share capital.
The Company holds a total of 15,518,470 shares (2017: 13,268,070) in treasury representing 13.1 per cent. (2017: 11.6 per cent.) of the issued Ordinary share capital at 31 December 2018.
Under the terms of the Dividend Reinvestment Scheme, the following new Ordinary shares of nominal value 1 penny each were allotted during the year:
| Date of allotment | Number of shares allotted | Aggregate nominal value of shares (£’000) | Issue price (pence per share) | Net invested (£’000) | Opening market price on allotment date (pence per share) |
| 29 June 2018 | 424,973 | 4 | 72.7 | 296 | 69.00 |
| 31 December 2018 | 391,272 | 4 | 75.9 | 294 | 74.00 |
| 816,245 | 8 | 590 |
During the period to 31 December 2018, the Company issued the following new Ordinary shares of nominal value 1 penny each under the Albion VCTs Prospectus Top Up Offers 2017/18:
| Date of allotment | Number of shares allotted | Aggregate nominal valueof shares (£’000) | Issue price (pence per share) | Net consideration received (£’000) | Opening market price on allotment date (pence per share) |
| 31 January 2018 | 1,815,597 | 18 | 73.6 | 1,303 | 67.25 |
| 5 April 2018 | 1,541,406 | 15 | 73.8 | 1,109 | 65.00 |
| 11 April 2018 | 83,144 | 1 | 73.0 | 60 | 65.00 |
| 11 April 2018 | 7,901 | - | 73.4 | 6 | 65.00 |
| 11 April 2018 | 177,985 | 2 | 73.8 | 128 | 65.00 |
| 3,626,033 | 36 | 2,606 |
16. Basic and diluted net asset value per share
| 31 December 2018 | 31 December 2017 | |
| (pence per share) | (pence per share) | |
| Basic and diluted net asset value per Ordinary share | 77.4 | 71.9 |
The basic and diluted 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 103,193,119 at 31 December 2018 (2017: 101,001,241).
17. Capital and financial instruments risk management
The Company’s capital comprises Ordinary shares as described in note 15. The Company is permitted to buy back its own shares for cancellation or treasury purposes and this is described in more detail in the Chairman’s statement.
The Company’s financial instruments comprise equity and loan stock investments in quoted and unquoted companies, cash balances, receivables and payables which arise from its operations. The main purpose of these financial instruments is to generate cash flow and revenue and capital appreciation for the Company’s operations. The Company has no gearing or other financial liabilities apart from short term payables. The Company does not use any derivatives for the management of its Balance sheet.
The principal financial 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 quoted and unquoted investments, details of which are shown on pages 18 to 20 of the full Annual Report and Financial Statements. Investment risk is the exposure of the Company to the revaluation and devaluation of investments. The main driver of investment risk is the operational and financial performance of the portfolio company and the dynamics of market quoted comparators. The Manager receives management accounts from portfolio companies, and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment risk.
The Manager and the Board formally review investment risk (which includes market price risk), both at the time of initial investment and at quarterly Board meetings.
The Board monitors the prices at which sales of investments are made to ensure that profits to the Company are maximised, and that valuations of investments retained within the portfolio appear sufficiently prudent and realistic compared to prices being achieved in the market for sales of quoted and 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 £72,658,000 (2017: £62,096,000). Fixed and current asset investments form 91 per cent. of the net asset value as at 31 December 2018 (2017: 85 per cent.).
More details regarding the classification of fixed and current asset investments are shown in notes 11 and 13.
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. As a venture capital trust the Company invests in accordance with the investment policy set out above. The management of risk within the venture capital portfolio is addressed through careful investment selection, by diversification across different industry segments, by maintaining a wide spread of holdings in terms of financing stage and by limitation of the size of individual holdings. The Directors monitor the Manager’s compliance with the investment policy, review and agree policies for managing this risk and monitor the overall level of risk on the investment portfolio on a regular basis.
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 IPEV Guidelines. Details of the industries in which investments have been made are contained in the Portfolio of investments section on pages 18 to 20 of the full Annual Report and Financial Statements and in the Strategic report.
As required under FRS 102 section 34.29, 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 and return for the year by £7,266,000 (2017: £6,210,000).
Interest rate risk
The Company is exposed to fixed and floating rate interest rate risk on its financial assets. On the basis of the Company’s analysis, it is estimated that a rise of 1% in all interest rates would have increased total return before tax for the year by approximately £93,000 (2017: £97,000). Furthermore, it is considered that a fall of interest rates below current levels during the year would have been very unlikely.
The weighted average effective interest rate applied to the Company’s unquoted loan stock during the year was approximately 4.2 per cent. (2017: 3.6 per cent.). The weighted average period to maturity for the unquoted loan stock is approximately 2.7 years (2017: 3.3 years).
The Company’s financial assets and liabilities, all denominated in pounds sterling, consist of the following:
| 31 December 2018 | 31 December 2017 | |||||||
| Fixed rate £’000 | Floating rate £’000 | Non-interest bearing £’000 | Total £’000 | Fixed rate £’000 | Floating rate £’000 | Non-interest bearing £’000 | Total £’000 | |
| Unquoted equity | - | - | 43,611 | 43,611 | - | - | 32,338 | 32,338 |
| Quoted equity | - | - | 799 | 799 | - | - | 1,106 | 1,106 |
| Unquoted loan stock | 25,594 | - | 733 | 26,327 | 25,948 | - | 1,332 | 27,280 |
| Current asset investments | - | - | 1,921 | 1,921 | - | - | 1,372 | 1,372 |
| Receivables* | - | - | 646 | 646 | - | - | 911 | 911 |
| Current liabilities | - | - | (567) | (567) | - | - | (532) | (532) |
| Cash | - | 7,142 | - | 7,142 | - | 10,154 | - | 10,154 |
| Total | 25,594 | 7,142 | 47,143 | 79,879 | 25,948 | 10,154 | 36,527 | 72,629 |
*The receivables do not reconcile to the Balance sheet as prepayments 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 receivables, investment in unquoted loan stock, and through the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock prior to investment, and as part of its ongoing monitoring of investments. In doing this, it takes into account the extent and quality of any security held. For loan stock investments made prior to 6 April 2018, which account for 98.8 per cent. of loan stock value, typically loan stock instruments will have a fixed or floating charge, which may or may not be subordinated, 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 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 receivables) and other risks, both at the time of initial investment and at quarterly Board meetings.
The Company’s total gross credit risk as at 31 December 2018 was limited to £26,327,000 (2017: £27,280,000) of unquoted loan stock instruments, £7,142,000 (2017: £10,154,000) cash deposits with banks and £664,000 (2017: £930,000) of other receivables.
As at the Balance sheet date, the cash held by the Company is held with Lloyds Bank plc, Scottish Widows Bank plc (part of Lloyds Banking Group), Barclays Bank plc and National Westminster Bank plc. Credit risk on cash transactions is mitigated by transacting with counterparties that are regulated entities subject to prudential supervision, with high credit ratings assigned by international credit-rating agencies.
The Company has an informal policy of limiting counterparty banking and floating rate note exposure to a maximum of 20 per cent. of net asset value for any one counterparty.
The credit profile of unquoted loan stock is described under liquidity risk below.
Liquidity risk
Liquid assets are held as cash on current account, on deposit, in bonds or short term money market account. Under the terms of its Articles, the Company has the ability to borrow up to 10 per cent. of its adjusted capital and reserves of the latest published audited Balance sheet, which amounts to £7,783,000 as at 31 December 2018 (2017: £7,059,000).
The Company has no committed borrowing facilities as at 31 December 2018 (2017: £nil). The Company had cash balances of £7,142,000 (2017: £10,154,000). The main cash outflows are for new investments, share buy-backs 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 £567,000 as at 31 December 2018 (2017: £532,000).
The carrying value of loan stock investments analysed by expected maturity dates is as follows:
| 31 December 2018 | 31 December 2017 | |||||||
| Redemption date | Fully performing £’000 | Valued below cost £’000 | Past due £’000 | Total £’000 | Fully performing £’000 | Valued below cost £’000 | Past due £’000 | Total £’000 |
| Less than one year | 6,273 | 6,443 | 1,654 | 14,370 | 5,621 | 6,596 | 1,886 | 14,103 |
| 1-2 years | 2,887 | - | 545 | 3,432 | 196 | 26 | 845 | 1,067 |
| 2-3 years | 684 | 76 | 883 | 1,643 | 2,869 | - | 528 | 3,397 |
| 3-5 years | 3,046 | 159 | - | 3,205 | 3,762 | - | 800 | 4,562 |
| 5+ years | 3,256 | - | 421 | 3,677 | 3,237 | - | 914 | 4,151 |
| Total | 16,146 | 6,678 | 3,503 | 26,327 | 15,685 | 6,622 | 4,973 | 27,280 |
Loan stock can be past due as a result of interest or capital not being paid in accordance with contractual terms.
The cost of loan stock investments valued below cost is £7,284,000 (2017: £6,840,000).
In view of the factors identified above, the Board considers that the Company is subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Company’s financial assets and liabilities as at 31 December 2018 are stated at fair value as determined by the Directors, with the exception of receivables and payables and cash which are carried at amortised cost, in accordance with FRS 102. There are no financial liabilities other than payables. 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.
18. Commitments and contingencies
The Company had no financial commitments in respect of investments at 31 December 2018 (2017: nil).
There were no contingent liabilities or guarantees given by the Company as at 31 December 2018 (2017: nil).
19. Post balance sheet events
Since 31 December 2018 the Company has had the following post balance sheet events:
- Investment of £400,000 in a new portfolio company, Avora Limited;
- Investment of £200,000 in an existing portfolio company, Beddlestead Limited;
- Investment of £121,000 in an existing portfolio company, Mirada Medical Limited; and
- Investment of £104,000 in an existing portfolio company, Convertr Media Limited.
On 7 January 2019 the Company announced the publication of a prospectus in relation to an offer for subscription for new Ordinary shares. A Securities Note, which forms part of the Prospectus, has been sent to shareholders. The first allotment is expected on 1 April 2019.
20. Related party transactions
During the year, a total of £910,000 (2017: £1,350,000) was invested into the SVS Albion OLIM UK Equity Income Fund (“OUEIF”), a fund managed by OLIM Limited which is part of the Albion Group.
Albion agreed to reduce that proportion of its management fee relating to the investment in the OUEIF by 0.75 per cent. per annum, which represents the OUEIF management fee charged by OLIM; this resulted in a reduction of the management fee of £15,000 (2017: £3,000).
The Company has entered into an offer agreement relating to the Offers with the Company’s investment manager Albion Capital Group LLP (“Albion”), pursuant to which Albion will receive a fee of 2.5 per cent. of the gross proceeds of the Offers and out of which Albion will pay the costs of the Offers, as detailed in the Prospectus.
Other than transactions with the Manager as disclosed in note 5 and that disclosed above, there are no other related party transactions requiring disclosure.
21. Other Information
The information set out in this announcement does not constitute the Company's statutory accounts within the terms of section 434 of the Companies Act 2006 for the years ended 31 December 2018 and 31 December 2017, and is derived from the statutory accounts for those financial years, which have been, or in the case of the accounts for the year ended 31 December 2018, which will be, delivered to the Registrar of Companies. The Auditor reported on those accounts; the reports were unqualified and did not contain a statement under s498 (2) or (3) of the Companies Act 2006.
22. 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.capital/funds/AATG, where the Report can be accessed as a PDF document via a link in the 'Financial Reports and Circulars' section.
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