Albion Venture Capital Trust PLC : Annual Finan...
As required by the UK Listing Authority's Disclosure and Transparency Rules 4.1 and 6.3, Albion Venture Capital Trust PLC today makes public its information relating to the Annual Report and Financial Statements for the year ended 31 March 2013.
This announcement was approved for release by the Board of Directors on 25 June 2013.
This announcement has not been audited.
You will shortly be able to view the Annual Report and Financial Statements for the year to 31 March 2013 (which have been audited) at: www.albion-ventures.co.uk by clicking on 'Our Funds' and then 'Albion Venture Capital Trust PLC'. The Annual Report and Financial Statements for the year to 31 March 2013 will be available as a PDF document via a link under the 'Investor Centre' in the 'Financial Reports and Circulars' section. The information contained in the Annual Report and Financial Statements will include information as required by the Disclosure and Transparency Rules, including Rule 4.1.
Investment objectives
Albion Venture Capital Trust PLC (the "Company") is a venture capital trust which raised a total of £39.7 million through an issue of Ordinary shares in the spring of 1996 and through an issue of C shares in the following year. The C shares merged with the Ordinary shares in 2001. The Company raised a further £5.4 million under the Albion VCTs Top Up Offers since 2011. The Company merged with Albion Prime VCT PLC on 25 September 2012 (see below).
The Company's investment strategy is to reduce the risk normally associated with investments in smaller unquoted companies whilst maintaining an attractive yield, through allowing investors the opportunity to participate in a balanced portfolio of asset-backed businesses. The Company's investment portfolio will thus be structured to provide a balance between income and capital growth for the longer term.
This is achieved as follows:
qualifying unquoted investments are predominantly in specially-formed companies which provide a high level of asset backing for the capital value of the investment;
Albion Venture Capital Trust PLC invests alongside selected partners with proven experience in the sectors concerned;
investments are normally structured as a mixture of equity and loan stock. The loan stock represents the majority of the finance provided and is secured on the assets of the investee company. Funds managed or advised by Albion Ventures LLP typically own 50 per cent. of the equity of the investee company;
- other than the loan stock issued to funds managed or advised by Albion Ventures LLP, investee companies do not normally have external borrowings.
The Company offers tax-paying investors substantial tax benefits at the time of investment, on payment of dividends and on the ultimate disposal of the investment.
Acquisition of the assets and liabilities of Albion Prime VCT PLC
On 25 September 2012, the Company acquired the assets and liabilities of Albion Prime VCT PLC ("Prime") in exchange for new shares in the Company ("the Merger"). On the same day Prime was placed into members' voluntary liquidation pursuant to a scheme of reconstruction under Section 110 of the Insolvency Act 1986.
All of the assets and liabilities of Prime totalling £14,338,000 were transferred to the Company in exchange for the issue of 19,307,001 new Ordinary shares of nominal value 50 pence each in the capital of the Company at a deemed issue price of 74.2638 pence per share. Each Prime shareholder received 0.8801 shares in the Company for each Prime share that they held at the date of the Merger. The total number of shares receivable by each shareholder was rounded down to the nearest whole number of shares.
New share certificates in the Company were sent to all Albion Prime VCT PLC shareholders during October 2012.
Financial calendar
| Record date for first dividend | 5 July 2013 |
| Annual General Meeting | 29 July 2013 |
| Payment of first dividend | 31 July 2013 |
| Announcement of half-yearly results for the six months ended 30 September 2013 | November 2013 |
| Payment of second dividend subject to Board approval | December 2013 |
Financial highlights
| 199.0p | Net asset value plus dividends from launch to 31 March 2013 |
| 5.0p | Total tax-free dividends per share paid in the year to 31 March 2013 |
| 2.5p | First tax free dividend per share declared for the year to 31 March 2014 |
| 74.2p | Net asset value per share as at 31 March 2013 |
| 6.3% | Annualised return since launch (without tax relief) |
| 31 March 2013 | 31 March 2012 | |
| (pence per share) | (pence per share) | |
| Dividends paid | 5.00 | 5.00 |
| Revenue return | 2.00 | 2.10 |
| Capital return | - | - |
| Enhancement to net asset value as a result of share buy-backs | 0.10 | 0.40 |
| Effect of merger | (0.90) | - |
| Net asset value | 74.20 | 78.00 |
| Total shareholder net asset value return to 31 March 2013 | Ordinary shares | C shares | |
| Total dividends paid during the year ended : | 31 March 1997 | 2.00 | - |
| 31 March 1998 | 5.20 | 2.00 | |
| 31 March 1999 | 11.05 | 8.75 | |
| 31 March 2000 | 3.00 | 2.70 | |
| 31 March 2001 | 8.55 | 4.80 | |
| 31 March 2002 | 7.60 | 7.60 | |
| 31 March 2003 | 7.70 | 7.70 | |
| 31 March 2004 | 8.20 | 8.20 | |
| 31 March 2005 | 9.75 | 9.75 | |
| 31 March 2006 | 11.75 | 11.75 | |
| 31 March 2007 | 10.00 | 10.00 | |
| 31 March 2008 | 10.00 | 10.00 | |
| 31 March 2009 | 10.00 | 10.00 | |
| 31 March 2010 | 5.00 | 5.00 | |
| 31 March 2011 | 5.00 | 5.00 | |
| 31 March 2012 | 5.00 | 5.00 | |
| 31 March 2013 | 5.00 | 5.00 | |
| Total dividends paid to 31 March 2013 | 124.80 | 113.25 | |
| Net asset value as at 31 March 2013 | 74.20 | 74.20 | |
| Total shareholder net asset value return to 31 March 2013 | 199.00 | 187.45 | |
The financial summary above is for the Company, Albion Venture Capital Trust PLC only. Details of the financial performance of Albion Prime VCT PLC, which has been merged into the Company, can be found at the end of this announcement.
In addition to the dividends summarised above, the Board has declared a first dividend for the year ending 31 March 2014 of 2.50 pence per share to be paid on 31 July 2013 to shareholders on the register as at 5 July 2013.
Notes
Dividends paid before 5 April 1999 were paid to qualifying shareholders inclusive of the associated tax credit. The dividends for the year to 31 March 1999 were maximised in order to take advantage of this tax credit.
A capital dividend of 2.55 pence paid in the year to 31 March 2000 enabled the Ordinary shares and the C shares to merge on an equal basis.
All dividends paid by the Company are free of income tax. It is an H.M. Revenue & Customs requirement that dividend vouchers indicate the tax element should dividends have been subject to income tax. Investors should ignore this figure on their dividend voucher and need not disclose any income they receive from a VCT on their tax return.
The net asset value of the Company is not its share price as quoted on the official list of the London Stock Exchange. The share price of the Company can be found in the Investment Companies - VCTs section of the Financial Times on a daily basis. Investors are reminded that it is common for shares in VCTs to trade at a discount to their net asset value.
Chairman's statement
Introduction
The results for the year to 31 March 2013 are the first statutory accounts since the merger of the Company with Albion Prime VCT PLC on 25 September 2012. The results show a total return of 2.00 pence per share before dividends, compared to 2.10 pence per share for the previous year, and a net asset value of 74.20 pence per share compared to 78.00 pence per share at 31 March 2012, following the payment of tax free dividends of 5.00 pence per share for the year. The Company raised approximately £1,033,000 net of costs under the Albion VCTs Linked Top Up Offers 2011/2012 and Albion VCTs Top Up Offers 2012/2013 during the year, with a further £1,940,000 subsequent to the year end.
As a result of the merger with Albion Prime VCT PLC, the Company acquired the investments of that company which were valued at just over £14.3 million. With one minor exception, these were all in companies in which the Company already had a holding. The annual cost savings of approximately £168,000 identified at the time of the merger are expected to be achieved.
Investment performance and progress
Over the past three years, we have been focusing on reducing our exposure to the consumer cycle, and in particular reducing our exposure to the hotel and residential development sectors. At 31 March 2010 these accounted for 59 per cent. of the combined portfolio, whereas now they have reduced to 32 per cent. through a combination of disposals totalling £8,733,000 and a reduction in the holding values of the remaining hotel assets.
As part of this programme, in March 2013 the Bear Hotel in Hungerford was sold, resulting in proceeds of £1,925,000 at the time, with a further £50,000 received following the year end. Overall the Company made a small loss on its investment (receiving total proceeds including interest of 0.9x its investment). Kew Green VCT (Stansted) made loan stock repayments of £159,000 out of cash generated from trading and further proceeds of £192,000 were received from the winding down of the residential development portfolio.
The most significant event was the highly successful disposal in December 2012 of the Company's six cinema investments as part of the sale of the City Screen group to Cineworld plc. Including loan stock repaid shortly before the disposal, the Company received a total of £6,290,000 and made an overall return of approximately 2.6x its investment.
Also, in March 2013, the Company's investment in Nelson House Hospital was sold for £856,000, generating a 1.4x return on its investment. Further proceeds of £101,000 were received from the pub portfolio and Tower Bridge Health Clubs made loan stock repayments of £100,000 out of cash generated from trading.
Meanwhile the Company, together with Albion Prime VCT PLC prior to the merger, invested or committed £0.6 million in one new and three existing investee companies. The new investment comprised a commitment of £314,000 in Dragon Hydro, which is developing a hydroelectricity scheme in Wales; while the investments in existing companies comprised £150,000 in Bravo Inns II, to assist it in expanding its successful portfolio of pubs in the North West; £94,000 in The Stanwell Hotel near Heathrow, to enable it to develop further its boutique offering; and £75,000 scheduled investment in Nelson House Hospital prior to its subsequent disposal.
Following lower than budgeted levels of profitability, the Company saw a substantial fall in the third party professional valuations of its three remaining hotel investments, as well as falls in one of its health and fitness clubs and its Midlands based pub company. However, there was a further significant rise in the value of Oakland Care Centre's Bayfield Court care home in Chingford, together with uplifts in a number of its renewable energy investments and in Radnor House School in Twickenham. Taking into account the net realised gains of just over £1 million in the year, principally from the sale of the cinema portfolio, overall net gains on investments in the year amounted to approximately £0.4 million.
Significant new investments in the pipeline include a hydroelectricity project in Scotland and a new care home in Oxfordshire. It is the Company's intention to increase its investment in the renewable energy sector from its current level of 7 per cent. to a target of 15 per cent. as the Board believes that this is a complementary area for diversification of risk combined with strong income generation. Meanwhile, despite the successful disposal of Nelson House Hospital, healthcare remains a core focus for investment.
Board composition
On 25 September 2012, as part of the merger arrangements, Jonathan Rounce stepped down from the Board, and Ebbe Dinesen, who was a director of Albion Prime VCT PLC, was appointed in his place. We would like to thank Jonathan for his excellent contribution.
Risks and uncertainties
We remain cautious over the short and medium term prospects for the UK economy, particularly given the continuing weakness in the Eurozone. Importantly, however, your Company remains conservatively financed with no bank borrowings having a prior charge at either corporate or investee company level. This is in addition to the policy of ensuring that the Company has a first charge over investee companies' assets.
A detailed analysis of the other risks and uncertainties facing the business is set out in note 24.
Share buy-backs
It remains the Board's primary objective to maintain sufficient resources for investment in existing and new investee companies and for the continued payment of dividends to shareholders. Thereafter, it is still the Board's policy to buy back shares in the market, subject to the overall criterion that such purchases are in the Company's interest. The Company will limit the sum available for share buy-backs for the six month period to 30 September 2013 to £500,000. This compares to a total value bought in for the previous six months of £385,000. Subject to the constraints referred to above, and subject to first purchasing shares held by the market makers, the Board will target such buy-backs to be in the region of a 5 per cent. discount to net asset value, so far as market conditions and liquidity permit.
Transactions with Manager
Details of transactions that took place with the Manager during the year can be found in note 5.
Results and dividends
As at 31 March 2013, the net asset value was £41.70 million or 74.20 pence per share, compared to £28.40 million or 78.00 pence per share as at 31 March 2012, after the payment of tax-free dividends of 5.00 pence per share. The results comprised 2.00 pence per share revenue return (2012: 2.10 pence per share) and a flat capital return after taking into account capitalised expenses (2012: also flat). The revenue return before taxation was £1,114,000 compared to £933,000 for the year to 31 March 2012. The Company will pay a first dividend of 2.50 pence per share on 31 July 2013 to those shareholders on the share register on 5 July 2013, which is in line with the Company's current objective of paying dividends of 5.00 pence per share annually.
Outlook and prospects
While the outlook for the UK economy remains subdued, trading within the majority of our investee companies has been relatively resilient. Following the successful disposals in the year to 31 March 2013, the Company is now focusing on making new investments, particularly in the renewable energy and healthcare sectors.
David Watkins
Chairman
25 June 2013
Manager's report
Investment portfolio
Following the merger of the Company with Albion Prime VCT PLC on 25 September 2012 and the subsequent disposals of the cinema portfolio in December 2012 and The Bear Hotel in Hungerford and Nelson House Hospital in March 2013, the sector split of the portfolio by valuation as at 31 March 2013 are set out at the end of this announcement.
Investment activity
In December 2012 the Company sold its six cinema investments, comprising the Cambridge Arts Picturehouse, the Picturehouse at FACT in Liverpool, the Greenwich Picturehouse, the Ritzy in Brixton, the Exeter Picturehouse and Cinema City in Norwich, a portfolio which the Company had built up and developed in conjunction with City Screen Limited over a 13 year period since 1999. The cinemas were sold as part of the sale of the City Screen group to Cineworld plc which intends to keep the Picturehouse cinemas as a separate division in its business. The Company received net proceeds of £5,702,000 from the sale, in addition to which £588,000 loan stock had been repaid shortly beforehand, giving total proceeds of £6,290,000 compared to a combined holding value in the Company's and Albion Prime VCT's accounts at 31 March 2012 of £5,258,000. Taking into account loan stock, other income and loan stock repayments over the course of the investment, the two VCTs received a combined total return of £11,139,000, compared to cost of £3,932,000.
In March 2013, in accordance with the Company's strategy of reducing its hotel portfolio, the Bear Hotel in Hungerford was sold to Greene King, resulting in proceeds of £1,925,000 at the time and a further £50,000 following the year end. The combined holding value in the Company's and Albion Prime VCT's accounts at 31 March 2012 was £2,111,000. Taking into account loan stock income over the course of the investment, the two VCTs received a combined total return of £3,014,000, compared to cost of £3,255,000. Following this disposal and the successful sale of the Bell Hotel in Sandwich in 2011, and in part due to the reduction in valuations of the remaining hotel assets, hotels have reduced from 52 per cent. of the combined portfolio at 31 March 2010 to 31 per cent. at 31 March 2013.
Also in March 2013, the Company's investment in Nelson House Hospital, which had opened in April 2012, was sold to Care UK for £856,000 compared to cost of £698,000. Taking into account loan stock income, the total combined return was £917,000 and the Company also benefited from the surrender of some tax losses.
Also disposed of during the year were Wickenhall Mill VCT's residential development site, an investment inherited from Albion Prime VCT, resulting in proceeds of £60,000; and GB Pub Company VCT's final pub, resulting in the return of £12,000.
Meanwhile the Company, together with Albion Prime VCT PLC prior to the merger, committed a total investment of £314,000 in Dragon Hydro, which is developing a hydroelectricity scheme in Wales, continuing the theme of building up the Company's renewable energy portfolio. In addition, follow-on investments were made of £150,000 in Bravo Inns II, to assist it in expanding its successful portfolio of pubs in the North West; £94,000 in The Stanwell Hotel near Heathrow, to enable it to develop further its boutique offering; and a £75,000 scheduled investment in Nelson House Hospital prior to its subsequent disposal. Significant new investments in the pipeline include a hydroelectricity project in Scotland and a new care home in Oxfordshire.
Investment portfolio review
In the hotel portfolio, the Holiday Inn Express at Stansted Airport was adversely affected by a poor Olympic period and the opening of new competition nearby, which resulted in a reduction in the independent valuation. Nevertheless, it repaid £159,000 loan stock to the Company and £87,000 to Albion Prime VCT PLC during the year. It is expected that the hotel's performance will start to improve as passenger numbers increase following the sale of the airport by BAA to Manchester Airport Group at the end of February 2013. The Crown Hotel in Harrogate marginally increased its revenues over the year, but the business mix and cost pressures led to a reduced operating profit, resulting in a decline in valuation. The Stanwell Hotel near Heathrow's Terminal 5 continued to improve its product, and operating profit is gradually increasing, although at a much slower pace than hoped for and it also saw a lower valuation.
In the healthcare sector, Oakland Care Centre's Bayfield Court care home in Chingford, which opened in October 2011, reached full occupancy during the year and this led to a substantial uplift in valuation. The psychiatric hospital near Taunton operated by Orchard Portman is now also nearing capacity and this will gradually expand into the care home on the same site operated by its sister company Taunton Hospital.
In the health and fitness portfolio, the 37o health and fitness club near Tower Bridge continued to trade strongly and repaid £100,000 loan stock to the Company, as well as £21,000 to Albion Prime VCT PLC prior to the merger, and this enjoyed a pleasing uplift in valuation. Membership also grew over the year at both the Weybridge Club and the 37o health and fitness club at Kensington Olympia. There was a slight increase in the independent valuation of the Weybridge Club, but a lower valuation was attributed to the 37o health and fitness club at Kensington Olympia.
In the pub portfolio, The Charnwood Pub Company repaid £84,000 loan stock following the sale of one of its pubs and now operates 10 food-led pubs in central England, but saw declines in the independent valuation of its remaining units. Bravo Inns and Bravo Inns II continued to grow their wet-led estate in the North-West and now operate 31 units, which saw a small increase in valuation.
In the renewable energy sector, the Company now has seven investments, in solar, wind, anaerobic digestion and hydroelectricity companies. The three solar companies, The Street by Street Solar Programme, Regenerco Renewable Energy and AVESI have now installed photovoltaic panels on over 1,500 residential buildings in the Thames Valley and Cambridgeshire as well as 7 commercial premises. Alto Prodotto Wind has successfully erected two single unit wind turbines on industrial sites in Wales and is intending to install a third, while Greenenerco is also installing a wind turbine in Wales. TEG Biogas (Perth) operates an anaerobic digestion plant in Scotland, converting food waste to energy; and construction is under way on Dragon Hydro's hydroelectricity scheme in Wales. The more mature investments were revalued and saw a combined uplift of £0.3 million.
Radnor House School in Twickenham is now in its second year of operation with over 250 pupils, up from 140 when it opened and enjoys a strong reputation with good growth prospects. As a result it was again valued upwards. Meanwhile G&K Smart Developments VCT returned £132,000 to the Company following the sale of two of the five houses it is constructing at Pudsey in Yorkshire.
Albion Ventures LLP
Manager
25 June 2013
Responsibility Statement
In preparing these financial statements for the year to 31 March 2013, the Directors of the Company, being David Watkins, John Kerr, Jeff Warren and Ebbe Dinesen, confirm that to the best of their knowledge:
- summary financial information contained in this announcement and the full Annual Report and Financial Statements for the year ended 31 March 2013 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 2013 as required by DTR 4.1.12.R;
- the Chairman's statement and Manager's report include a fair review of the information required by DTR 4.2.7R (indication of important events during the year ended 31 March 2013 and description of principal risks and uncertainties that the Company faces); and
the Chairman's statement and Manager's report include a fair review of the information required by DTR 4.2.8R (disclosure of related parties transactions and changes therein).
A detailed "Statement of Directors' responsibilities for the preparation of the Company's financial statements" is contained within the full audited Annual Report and Financial Statements.
By order of the Board
David Watkins
Chairman
25 June 2013
Income statement
| Year ended 31 March 2013 | Year ended 31 March 2012 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gains on investments | 3 | - | 384 | 384 | - | 310 | 310 |
| Investment income | 4 | 1,563 | - | 1,563 | 1,314 | - | 1,314 |
| Investment management fees | 5 | (171) | (514) | (685) | (143) | (428) | (571) |
| Other expenses | 6 | (278) | - | (278) | (238) | - | (238) |
| Return/(loss) on ordinary activities before tax | 1,114 | (130) | 984 | 933 | (118) | 815 | |
| Tax (charge)/credit on ordinary activities | 8 | (183) | 129 | (54) | (188) | 118 | (70) |
| Return/(loss) attributable to shareholders | 931 | (1) | 930 | 745 | - | 745 | |
| Basic and diluted return per share (pence)* | 11 | 2.00 | - | 2.00 | 2.10 | - | 2.10 |
* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.
The total column of this Income statement represents the profit and loss account of the Company. The supplementary revenue and capital columns have been prepared in accordance with The Association of Investment Companies' Statement of Recommended Practice.
All revenue and capital items in the above statement derive from the continuing operations of the Company, including the returns on the assets and activities of Albion Prime VCT PLC after they were acquired by the company on 25 September 2012.
There are no recognised gains or losses other than the results for the year disclosed above. Accordingly a statement of total recognised gains and losses is not required.
The difference between the reported return/(loss) on ordinary activities before tax and the historical profit/(loss) is due to the fair value movements on investments. As a result a note on historical cost profit and losses has not been prepared.
Balance sheet
| 31 March 2013 | 31 March 2012 | ||
| Note | £'000 | £'000 | |
| Fixed asset investments | 12 | 30,198 | 25,945 |
| Current assets | |||
| Trade and other debtors | 14 | 24 | 10 |
| Current asset investments | 14 | 50 | - |
| Cash at bank and in hand | 18 | 11,896 | 2,956 |
| 11,970 | 2,966 | ||
| Creditors: amounts falling due within one year | 15 | (487) | (525) |
| Net current assets | 11,483 | 2,441 | |
| Net assets | 41,681 | 28,386 | |
| Capital and reserves | |||
| Called up share capital | 16 | 603 | 19,733 |
| Share premium | 8 | 1,005 | |
| Capital redemption reserve | - | 1,914 | |
| Unrealised capital reserve | (4,890) | (3,067) | |
| Realised capital reserve | 11,909 | 10,087 | |
| Other distributable reserve | 34,051 | (1,286) | |
| Total equity shareholders' funds | 41,681 | 28,386 | |
| Basic and diluted net asset value per share (pence)* | 17 | 74.20 | 78.00 |
* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.
These Financial Statements were approved by the Board of Directors and authorised for issue on 25 June 2013, and were signed on its behalf by
David Watkins
Chairman
Company number: 3142609
Reconciliation of movements in shareholders' funds
| 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 April 2012 | 19,733 | 1,005 | 1,914 | (3,067) | 10,087 | (1,286) | 28,386 | |
| (Loss)/return for the year | - | - | - | (694) | 693 | 931 | 930 | |
| Transfer of previously unrealised gains on disposal of investments | - | - | - | (1,129) | 1,129 | - | - | |
| Purchase of treasury shares | - | - | - | - | - | (720) | (720) | |
| Issue of equity (net of costs) | 772 | 383 | - | - | - | - | 1,155 | |
| Reduction in share capital and cancellation of capital redemption and share premium reserves** | (29,556) | (5,955) | (1,914) | - | - | 37,425 | - | |
| Shares issued to acquire net assets of Albion Prime VCT PLC (net of merger costs) *** | 9,654 | 4,575 | - | - | - | - | 14,229 | |
| Net dividends paid (note 9) | - | - | - | - | - | (2,299) | (2,299) | |
| As at 31 March 2013 | 603 | 8 | - | (4,890) | 11,909 | 34,051 | 41,681 | |
| As at 1 April 2011 | 18,886 | 538 | 1,914 | (3,871) | 10,891 | 403 | 28,761 | |
| (Loss)/ return for the year | - | - | - | (13) | 13 | 745 | 745 | |
| Transfer of previously unrealised losses on disposal of investment | - | - | - | 817 | (817) | - | - | |
| Purchase of treasury shares | - | - | - | - | - | (663) | (663) | |
| Issue of equity (net of costs) | 847 | 467 | - | - | - | - | 1,314 | |
| Net dividends paid (note 9) | - | - | - | - | - | (1,771) | (1,771) | |
| As at 31 March 2012 | 19,733 | 1,005 | 1,914 | (3,067) | 10,087 | (1,286) | 28,386 | |
* Included within the aggregate of these reserves is an amount of £41,070,000 (2012: £5,734,000) which is considered distributable.
** The reduction in the nominal value of shares from 50 pence to 1 penny, the cancellation of capital redemption and share premium reserves (as approved by shareholders at the General Meeting held on 17 September 2012 and by order of the Court dated 30 January 2013) has increased the value of the other distributable reserve.
***The assets and liabilities transferred through the acquisition of Albion Prime VCT PLC are shown in note 10. In addition, £109,000 of the merger costs attributable to Albion Venture Capital Trust PLC has been deducted from the share premium account in so far as they relate to the issue of new shares.
The special reserve, treasury share reserve and the revenue reserve have been combined in the Balance sheet to form a single reserve named other distributable reserve for both the current and prior year. The Directors consider that the combination of these reserves enhances the clarity of financial reporting. More details regarding treasury shares can be found in note 16.
Cash flow statement
| Year ended 31 March 2013 | Year ended 31 March 2012 | ||
| Note | £'000 | £'000 | |
| Operating activities | |||
| Loan stock income received | 1,416 | 1,244 | |
| Deposit interest received | 66 | 37 | |
| Investment management fees paid | (629) | (571) | |
| Other cash payments | (281) | (261) | |
| Net cash flow from operating activities | 19 | 572 | 449 |
| Taxation | |||
| UK corporation tax (paid)/received | (161) | 205 | |
| Capital expenditure and financial investments | |||
| Purchase of fixed asset investments | (420) | (2,618) | |
| Disposal of fixed asset investments | 9,624 | 3,000 | |
| Net cash flow from investing activities | 9,204 | 382 | |
| Equity dividends paid (net of costs of issuing shares under the Dividend Reinvestment Scheme and unclaimed dividends) | (2,210) | (1,635) | |
| Net cash flow before financing | 7,405 | (599) | |
| Financing | |||
| Cash acquired from Albion Prime VCT PLC | 10 | 1,450 | - |
| Cost of Merger (paid on behalf of the Company and Albion Prime VCT PLC) | (253) | - | |
| Purchase of treasury shares | 16 | (695) | (663) |
| Issue of share capital (net of costs) | 1,033 | 1,247 | |
| Net cash flow from financing | 1,535 | 584 | |
| Cash flow in the year | 18 | 8,940 | (15) |
Notes to the Financial Statements
1. Accounting convention
The Financial Statements have been prepared in accordance with the historical cost convention, modified to include the revaluation of investments, in accordance with applicable United Kingdom law and accounting standards and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ("SORP") issued by The Association of Investment Companies ("AIC") in January 2009. Accounting policies have been applied consistently in current and prior periods, however to enhance clarity of financial reporting, during the year the special reserve, treasury share reserve and revenue reserve have been presented as a single reserve named other distributable reserve. This has also been applied to the prior period.
2. Accounting policies
Investments
Unquoted equity investments, debt issued at a discount and convertible bonds
In accordance with FRS 26 "Financial Instruments Recognition and Measurement", unquoted equity, debt issued at a discount and convertible bonds are designated as fair value through profit or loss ("FVTPL"). Fair value is determined by the Directors in accordance with the International Private Equity and Venture Capital Valuation Guidelines (IPEVCV guidelines).
Fair value movements and gains and losses arising on the disposal of investments are reflected in the capital column of the Income statement in accordance with the AIC SORP. Realised gains or losses on the sale of investments will be reflected in the realised capital reserve, and unrealised gains or losses arising from the revaluation of investments will be reflected in the unrealised capital reserve.
Unquoted equity derived instruments
Unquoted equity derived instruments are only valued if there is additional value to the Company in exercising or converting as at the balance sheet date. Otherwise these instruments are held at nil value. The valuation techniques used are those used for the underlying equity investment.
Unquoted loan stock
Unquoted loan stock (excluding convertible bonds and debt issued at a discount) are classified as loans and receivables as permitted by FRS 26 and measured at amortised cost using the Effective Interest Rate method ("EIR") less impairment. Movements in the amortised cost relating to interest income are reflected in the revenue column of the Income statement, and hence are reflected in the other distributable reserve, and movements in respect of capital provisions are reflected in the capital column of the Income statement and are reflected in the realised capital reserve following sale, or in the unrealised capital reserve on impairment from revaluations of the fair value of the security.
For all unquoted loan stock, fully performing, past due and impaired, the Board considers that the fair value is equal to or greater than the security value of these assets. For unquoted loan stock, the amount of the impairment is the difference between the asset's cost and the present value of estimated future cash flows, discounted at the original effective interest rate. The future cash flows are estimated based on the fair value of the security held less estimated selling costs.
Investments are recognised as financial assets on legal completion of the investment contract and are de-recognised on legal completion of the sale of an investment.
Dividend income is not recognised as part of the fair value movement of an investment, but is recognised separately as investment income through the revenue reserve when a share becomes ex-dividend.
Loan stock accrued interest is recognised in the Balance sheet as part of the carrying value of the loans and receivables at the end of each reporting period.
In accordance with the exemptions under FRS 9 "Associates and joint ventures", those undertakings in which the Company holds more than 20 per cent. of the equity as part of an investment portfolio are not accounted for using the equity method.
Current asset investments
Contractual future contingent receipts on the disposal of fixed asset investments are designated at fair value through profit or loss and are subsequently measured at fair value.
Acquisition of assets and liabilities from Albion Prime VCT PLC
On 25 September 2012, the Company acquired the assets and liabilities of Albion Prime VCT PLC, the transaction being accounted for as an asset acquisition. The income and costs for the period up to 24 September 2012 and the comparable period for last year, reflect the activities of the Company before the acquisition and after that date reflect those of the Company as enlarged by the acquisition. Further information is contained in Note 10.
Investment income
Unquoted equity income
Dividend income is included in revenue when the investment is quoted ex-dividend.
Unquoted loan stock and other preferred income
Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis using the effective interest rate over the life of the financial instrument. Income which is not capable of being received within a reasonable period of time is reflected in the capital value of the investment.
Bank interest income
Interest income is recognised on an accrual basis using the rate of interest agreed with the bank.
Investment management fees and other expenses
All expenses have been accounted for on an accruals basis. Expenses are charged through the revenue account except the following which are charged through the realised capital reserve:
75 per cent. of management fees are allocated to the capital account to the extent that these relate to an enhancement in the value of the investments and in line with the Board's expectation that over the long term 75 per cent. of the Company's investment returns will be in the form of capital gains; and
expenses which are incidental to the purchase or disposal of an investment.
Total recurring expenses including management fees and excluding performance fees will not exceed 3.5 per cent. of net asset value of the Company at year end.
Performance incentive fee
In the event that a performance incentive fee crystallises, the fee will be allocated between revenue and realised capital reserves based upon the proportion to which the calculation of the fee is attributable to revenue and capital returns.
Taxation
Taxation is applied on a current basis in accordance with FRS 16 "Current tax". Taxation associated with capital expenses is applied in accordance with the SORP. In accordance with FRS 19 "Deferred tax", deferred taxation is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the Financial Statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered.
The Directors have considered the requirements of FRS 19 and do not believe that any provision for deferred tax should be made.
Reserves
Share premium account
This reserve accounts for the difference between the price paid for shares and the nominal value of the shares, less issue costs and transfers to the other distributable reserve.
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is diminished through the repurchase and cancellation of the Company's own shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at the year end against cost are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
gains and losses compared to cost on the realisation of investments;
expenses, together with the related taxation effect, charged in accordance with the above policies; and
dividends paid to equity holders.
Other distributable reserve
The special reserve, treasury share reserve and the revenue reserve have been combined as 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 buyback of shares and other non capital realised movements.
Dividends
In accordance with FRS 21 "Events after the balance sheet date", dividends declared by the Company are accounted for in the period in which the dividend has been paid or approved by shareholders in an Annual General Meeting.
3. Gains on investments
| Year ended 31 March 2013 | Year ended 31 March 2012 | |
| £'000 | £'000 | |
| Unrealised gains on fixed asset investments held at fair value through profit or loss | 293 | 782 |
| Impairments on fixed asset investments held at amortised cost | (987) | (795) |
| Unrealised losses sub-total | (694) | (13) |
| Realised gains on fixed asset investments held at fair value through profit or loss | 1,133 | 283 |
| Realised (losses)/gains on fixed asset investments held at amortised cost | (105) | 40 |
| Realised gains on fixed asset investments sub-total | 1,028 | 323 |
| Realised gains on current asset investments held at fair value through profit or loss | 50 | - |
| Realised gains sub-total | 1,078 | 323 |
| 384 | 310 |
Investments measured at amortised cost are unquoted loan stock investments as described in note 2.
4. Investment income
| Year ended 31 March 2013 | Year ended 31 March 2012 | |
| £'000 | £'000 | |
| Income recognised on investments held at fair value through profit or loss | ||
| Income from convertible bonds and discounted debt | 112 | 22 |
| 112 | 22 | |
| Income recognised on investments held at amortised cost | ||
| Return on loan stock investments | 1,379 | 1,250 |
| Bank deposit interest | 72 | 42 |
| 1,451 | 1,292 | |
| 1,563 | 1,314 |
Interest income earned on impaired investments at 31 March 2013 amounted to £311,000 (2012: £323,000). These investments are all held at amortised cost.
5. Investment management fees
| Year ended 31 March 2013 £'000 | Year ended 31 March 2012 £'000 | |
| Investment management fee charged to revenue | 171 | 143 |
| Investment management fee charged to capital | 514 | 428 |
| 685 | 571 |
Further details of the Management agreement under which the investment management fee is paid are given in the Directors' report on page 21 of the Annual Report and Financial Statements.
During the year, services of a total value of £730,000 (2012: £615,000), were purchased by the Company from Albion Ventures LLP; this includes £685,000 (2012: £571,000) of investment management fee and £45,000 (2012: £44,000) administration fee. At the financial year end, the amount due to Albion Ventures LLP in respect of these services disclosed within accruals and deferred income was £201,000 (2012: £142,000).
Albion Ventures LLP is, from time to time, eligible to receive transaction fees and Directors' fees from portfolio companies. During the year ended 31 March 2013, fees of £87,000 attributable to the investments of the Company were received pursuant to these arrangements (2012: £109,000).
Albion Ventures LLP, the Manager, holds 2,534 Ordinary shares as a result of fractional entitlements arising from the merger of Albion Prime VCT PLC into Albion Venture Capital Trust PLC on 25 September 2012. These shares will be sold and the proceeds retained for the benefit of the Company.
During the year the Company raised new funds through the Albion VCTs Linked Top Up Offers 2011/2012 and the Albion VCTs Top Up Offers 2012/2013 as described in note 16. The total cost of the issue of shares on 19 December 2012 was 5.5 per cent. of the sums subscribed. Of these costs, an amount of £3,854 (2012: £4,456) was paid to the Manager, Albion Ventures LLP in respect of receiving agent services. There were no sums outstanding in respect of receiving agent services at the year end.
6. Other expenses
| Year ended 31 March 2013 | Year ended 31 March 2012 | |
| £'000 | £'000 | |
| Directors' fees (including NIC) | 87 | 87 |
| Secretarial and administration fee | 45 | 44 |
| Other administrative expenses | 105 | 68 |
| Tax services | 15 | 16 |
| Auditor's remuneration for statutory audit services (exc. VAT) | 26 | 23 |
| 278 | 238 |
7. Directors' fees
The amounts paid to and on behalf of Directors during the year are as follows:
| Year ended 31 March 2013 | Year ended 31 March 2012 | |
| £'000 | £'000 | |
| Directors' fees | 80 | 80 |
| National insurance | 7 | 7 |
| 87 | 87 |
Further information regarding Directors' remuneration can be found in the Directors' remuneration report on page 30 of the Annual Report and Financial Statements.
8. Tax (charge)/credit on ordinary activities
| Year ended 31 March 2013 | Year ended 31 March 2012 | |||||
| Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | |
| UK corporation tax in respect of current year | (264) | 129 | (135) | (234) | 118 | (116) |
| UK corporation tax in respect of prior year | 81 | - | 81 | 46 | - | 46 |
| Total | (183) | 129 | (54) | (188) | 118 | (70) |
Factors affecting the tax charge:
| Year ended 31 March 2013 £'000 | Year ended 31 March 2012 £'000 | |
| Return on ordinary activities before taxation | 984 | 815 |
| Tax on profit at the standard rate of 24% (2012:26%) | (236) | (212) |
| Factors affecting the charge: | ||
| Non-taxable gains | 92 | 81 |
| Consortium relief in respect of prior years | 81 | 46 |
| Marginal relief | 9 | 15 |
| (54) | (70) |
The tax charge for the year shown in the Income statement is lower than the standard rate of corporation tax in the UK of 24 per cent. (2012: 26 per cent.). The differences are explained above.
Consortium relief is recognised in the accounts in the period in which the claim is submitted to HMRC and is shown as tax in respect of prior year.
Notes
(i) Venture Capital Trusts are not subject to corporation tax on capital gains.
(ii) Tax relief on expenses charged to capital has been determined by allocating tax relief to expenses by reference to the applicable corporation tax rate and allocating the relief between revenue and capital in accordance with the SORP.
(iii) No deferred tax asset or liability has arisen in the year.
9. Dividends
| Year ended 31 March 2013 | Year ended 31 March 2012 | |||||
| £'000 | £'000 | |||||
| First dividend paid on 29 July 2011 - 2.50 pence per share | - | 897 | ||||
| Second dividend paid on 30 December 2011 - 2.50 pence per share | - | 888 | ||||
| First dividend paid 31 July 2012 - 2.50 pence per share | 928 | - | ||||
| Second dividend paid 31 December 2012 - 2.50 pence per share | 1,404 | - | ||||
| Unclaimed dividends | (33) | (14) | ||||
| 2,299 | 1,771 | |||||
In addition to the dividends summarised above, the Board has declared a first dividend for the year ending 31 March 2014 of 2.50 pence per share. This dividend will be paid on 31 July 2013 to shareholders on the register as at 5 July 2013. The total dividend will be approximately £1,400,000
During the year, unclaimed dividends older than twelve years of £33,000 (2012: £14,000) were returned to the Company in accordance with the terms of the Articles of Association.
10. Acquisition of the assets and liabilities of Albion Prime VCT PLC
On 25 September 2012, the following assets and liabilities of Albion Prime VCT PLC ("Prime") were transferred to the Company in exchange for the issue to Prime shareholders of 19,307,001 shares in the Company, at an issue price of 74.2638 pence per share:
| £'000 | ||
| Fixed asset investments | 13,123 | |
| Debtors | 16 | |
| Cash at bank and in hand | 1,450 | |
| Creditors | (162) | |
| Merger costs | (89) | |
| 14,338 |
Shareholders should note that under accounting standards, the calculation of the net asset value per share uses the total shares in issue (less treasury shares), whereas the calculation of the total return uses the weighted average shares in issue during the period. Due to the amount of shares issued during the year as a result of the merger with Albion Prime VCT PLC, the difference between the total shares in issue (less treasury shares) and the weighted average share in issue during the period has resulted in the total return per share being higher than if the shares in issue (less treasury shares) had been applied to the movement in the Balance sheet since merger. This difference in the number of shares for each respective calculation will converge over time.
On 25 September 2012, Prime was placed into members' voluntary liquidation pursuant to a scheme of reconstruction under section 110 of the Insolvency Act 1986.
The net asset values ("NAVs") per share of each fund used for the purposes of conversion at the calculation date of 24 September 2012 were 74.2638 pence per share and 65.3663 pence per share for the Company and Prime respectively. The conversion ratio for each Prime share was 0.8801 Albion Venture Capital Trust PLC share for each Prime share.
New share certificates were sent to all Prime shareholders during October 2012.
11. Basic and diluted return per share
| Year ended 31 March 2013 | Year ended 31 March 2012 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| The return per share has been based on the following figures: | ||||||
| Return/(loss) attributable to equity shares (£'000) | 931 | (1) | 930 | 745 | - | 745 |
| Weighted average shares in issue (excluding treasury shares) | 46,973,203 | 35,974,300 | ||||
| Return attributable per equity share (pence) | 2.00 | - | 2.00 | 2.10 | - | 2.10 |
The weighted average number of shares is calculated excluding treasury shares of 4,152,440 (2012: 3,079,373).
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.
12. Fixed asset investments
| 31 March 2013 £'000 | 31 March 2012 £'000 | |
| Investments held at fair value through profit or loss Unquoted equity | 8,489 | 8,490 |
| Unquoted debt issued at a discount and convertible bonds | 2,231 | 1,315 |
| 10,720 | 9,805 | |
| Investments held at amortised cost | ||
| Unquoted loan stock | 19,478 | 16,140 |
| 30,198 | 25,945 |
| £'000 | ||||||
| Opening valuation | 25,945 | |||||
| Purchases at cost | 13,472 | |||||
| Disposal proceeds | (9,623) | |||||
| Realised gains | 1,028 | |||||
| Movement in loan stock accrued income | 70 | |||||
| Unrealised losses | (694) | |||||
| Closing valuation | 30,198 | |||||
| Movement in loan stock accrued income | ||||||
| Opening accumulated movement in loan stock accrued income | 198 | |||||
| Movement in loan stock accrued income | 70 | |||||
| Closing accumulated movement in loan stock accrued income | 268 | |||||
| Movement in unrealised losses | ||||||
| Opening accumulated unrealised losses | (3,067) | |||||
| Transfer of previously unrealised gains to realised reserve on disposal of investments | (1,129) | |||||
| Movement in unrealised losses | (694) | |||||
| Closing accumulated unrealised losses | (4,890) | |||||
| Historic cost basis | ||||||
| Opening book cost | 28,814 | |||||
| Purchases at cost | 13,472 | |||||
| Sales at cost | (7,464) | |||||
| Closing book cost | 34,821 | |||||
Fixed asset investments held at fair value through profit or loss total £10,720,000 (2012: £9,805,000). Investments held at amortised cost total £19,478,000 (2012: £16,140,000).
The amounts shown for the purchase of fixed assets included in the cash flow statement differ from the amount shown above due to the addition of fixed asset investments carried over from the portfolio of Albion Prime VCT PLC of £13,123,000. Further details of the acquisition can be found in note 10.
Unquoted loan stock investments (excluding debt issued at a discount) are measured at amortised cost. Loan stocks using a fixed interest rate total £19,478,000 (2012: £16,076,000). Loan stocks with a floating rate of interest are nil (2012: £64,000).
The Directors believe that the carrying value of loan stock measured at amortised cost is not materially different to fair value.
The Company does not hold any assets as the result of the enforcement of security during the period, and believes that the carrying values for both impaired and past due assets are covered by the value of security held for these loan stock investments.Unquoted equity investments and convertible and discounted debts are valued in accordance with the IPEVCV guidelines as follows:
| 31 March 2013 | 31 March 2012 | |
| Valuation methodology | £'000 | £'000 |
| Cost (reviewed for impairment) | 506 | 1,909 |
| Net asset value supported by independent desktop reviews | - | 23 |
| Net asset value supported by third party valuation | 10,214 | 7,873 |
| 10,720 | 9,805 |
Fair value investments had the following movements between valuation methodologies between 31 March 2012 and 31 March 2013:
| Change in valuationmethodology (2012 to 2013) | Value as at 31 March 2013 £'000 | Explanatory note |
| Cost and price of recent investment to net asset value | 910 | More recent information available |
The valuation method used will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the September 2009 IPEVCV Guidelines. The Directors believe that, within these parameters, there are no other methods of valuation which would be reasonable as at 31 March 2013.
The amended FRS 29 'Financial Instruments: Disclosures' requires the Company to disclose the valuation methods applied to its investments measured at fair value through profit or loss in a fair value hierarchy according to the following definitions:
| Fair value hierarchy | Definition of valuation method |
| Level 1 | Unadjusted quoted (bid) prices applied |
| Level 2 | Inputs to valuation are from observable sources and are directly or indirectly derived from prices |
| Level 3 | Inputs to valuations not based on observable market data. |
All of the company's fixed asset investments as at 31 March 2013 which are valued at fair value through profit or loss, are all valued according to Level 3 methods.
Investments held at fair value through profit or loss (level 3) had the following movements in the year to 31 March 2013:
| Equity | 31 March 2013 Convertible and discounted bonds | Total | Equity | 31 March 2012 Convertible and discounted bonds | Total | |||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||
| Opening balance | 8,490 | 1,315 | 9,805 | 8,231 | 119 | 8,350 | ||
| Additions | 3,187 | 913 | 4,100 | 720 | 797 | 1,517 | ||
| Disposal proceeds | (4,662) | - | (4,662) | (1,127) | - | (1,127) | ||
| Realised gains | 1,184 | - | 1,184 | 283 | - | 283 | ||
| Unrealised gains | 290 | 3 | 293 | 383 | 399 | 782 | ||
| Closing balance | 8,489 | 2,231 | 10,720 | 8,490 | 1,315 | 9,805 |
Desk top reviews are carried out by independent RICS qualified surveyors by updating previously prepared full valuations for current trading and market indices. Full valuations are prepared by similarly qualified surveyors, but in full compliance with the RICS Red Book.
FRS 29 requires the Directors to consider the impact of changing one or more of the inputs used as part of the valuation process to reasonable possible alternative assumptions. After due consideration and noting that the valuation methodology applied to 100 per cent. of the equity investments (by valuation) is based on cost or independent third party market information, the Directors do not believe that changes to reasonable possible alternative assumptions for the valuation of the portfolio as a whole would lead to a significant change in the fair value of the portfolio.
13. Significant interests
The principal activity of the Company is to select and hold a portfolio of investments in unquoted securities. Although the Company, through the Manager, will, in some cases, be represented on the board of the investee company, it will not take a controlling interest or become involved in the management. The size and structure of the companies with unquoted securities may result in certain holdings in the portfolio representing a participating interest without there being any partnership, joint venture or management consortium agreement. The Company has interests of greater than 20 per cent. of the nominal value of any class of the allotted shares in the investee companies as at 31 March 2013 as described below:
| Company | Country of incorporation | Principal activity | % class and voting rights |
| G&K Smart Developments VCT Limited | Great Britain | Residential property developer | 42.9% Ordinary shares |
| Kew Green VCT (Stansted) Limited | Great Britain | Hotel owner and operator | 45.2% Ordinary shares |
| The Stanwell Hotel Limited | Great Britain | Hotel owner and operator | 39.2% Ordinary shares |
| Oakland Care Centre Limited | Great Britain | Care home | 31.6% Ordinary shares |
| The Crown Hotel Harrogate Limited | Great Britain | Hotel owner and operator | 24.1% Ordinary shares |
The investments listed above are held as part of an investment portfolio, and therefore, as permitted by FRS 9, they are measured at fair value and not accounted for using the equity method.
14. Current assets
| 31 March 2013 | 31 March 2012 | |
| Trade and other debtors | £'000 | £'000 |
| Prepayments and accrued income | 24 | 10 |
| 24 | 10 |
The Directors consider that the carrying amount of debtors is not materially different to their fair value.
| 31 March 2013 | 31 March 2012 | |
| Current asset investments | £'000 | £'000 |
| Contingent future receipts from the disposal of fixed asset investments | 50 | - |
| 50 | - |
The fair value hierarchy applied to contingent future receipts on disposal of fixed asset investments is Level 3.
15. Creditors: amounts falling due within one year
| 31 March 2013 | 31 March 2012 | |
| £'000 | £'000 | |
| Trade creditors | 40 | 31 |
| UK Corporation tax payable | 100 | 175 |
| Accruals and deferred income | 347 | 319 |
| 487 | 525 |
The Directors consider that the carrying amount of creditors is not materially different to their fair value.
16. Called up share capital
| 31 March 2013 | 31 March 2012 | ||||
| £'000 | £'000 | ||||
| Allotted, called up and fully paid | |||||
| 60,317,650 Ordinary shares of 1p each (2012: 39,467,119 Ordinary shares of 50p each) | 603 | 19,733 | |||
| Voting rights | |||||
| 56,165,210 Ordinary shares of 1p each (net of treasury shares) (2012: 36,387,746 Ordinary shares of 50p each) | |||||
The Company purchased 1,073,067 Ordinary shares (2012: 1,036,100) to be held in treasury at a cost of £720,000 (2012: £663,000) representing 1.8 per cent. of the shares in issue (excluding treasury shares) as at 31 March 2013. The shares purchased for treasury were funded from other distributable reserve.
The Company holds a total of 4,152,440 shares (2012: 3,079,373) in treasury, representing 6.9 per cent. of the issued Ordinary share capital as at 31 March 2013.
The Company issued 19,307,001 Ordinary shares to former shareholders of Albion Prime VCT PLC, at an issue price of 74.2638p, as part of the merger explained in note 10.
Under the terms of the Dividend Reinvestment Scheme Circular dated 10 July 2008, the following Ordinary shares were allotted during the year:
| Date of allotment | Number of shares allotted | Aggregate nominal value of shares | Net consideration received | Issue price incl. issue costs (pence per | Opening market price per share on allotment date |
| £'000 | £'000 | share) | (pence per share) | ||
| 31 July 2012 | 81,242 | 41 | 50 | 75.50 | 67.00 |
| 31 December 2012 | 109,447 | 55 | 72 | 73.50 | 74.00 |
| 190,689 | 96 | 122 |
During the year the following Ordinary shares were allotted under the Albion VCT's Linked Top Up Offers 2011/2012 and the Albion VCT's Top Up Offers 2012/2013:
| Date of allotment | Number of shares allotted | Aggregate nominal value of shares | Net consideration received | Issue price incl. issue costs (pence per | Opening market price per share on allotment date |
| £'000 | £'000 | share) | (pence per share) | ||
| 5 April 2012 | 791,924 | 396 | 621 | 83.80 | 66.00 |
| 31 May 2012 | 88,960 | 44 | 71 | 83.80 | 63.00 |
| 19 December 2012 | 471,957 | 236 | 341 | 77.80 | 74.00 |
| 1,352,841 | 676 | 1,033 |
17. Basic and diluted net asset values per share
| 31 March 2013 | 31 March 2012 | |
| Basic and diluted net asset values per share (pence) | 74.20 | 78.00 |
The basic and diluted net asset values per share at the year end are calculated in accordance with the Articles of Association and are based upon total shares in issue (less treasury shares) of 56,165,210 Ordinary shares (2012: 36,387,746).
There are no convertible instruments, derivatives or contingent share agreements in issue.
18. Analysis of changes in cash during the year
| Year ended 31 March 2013 £'000 | Year ended 31 March 2012 £'000 | |
| Opening cash balances | 2,956 | 2,971 |
| Net cash flow | 8,940 | (15) |
| Closing cash balances | 11,896 | 2,956 |
19. Reconciliation of net return on ordinary activities before taxation to net cash flow from operating activities
| Year ended 31 March 2013 | Year ended 31 March 2012 | |
| £'000 | £'000 | |
| Revenue return on ordinary activities before taxation | 1,114 | 933 |
| Investment management fee charged to capital | (514) | (428) |
| Movement in accrued amortised loan stock interest | (70) | (38) |
| Increase in debtors | (13) | (1) |
| Increase/(decrease) in creditors | 55 | (17) |
| Net cash flow from operating activities | 572 | 449 |
20. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in note 16. The Company is permitted to buy-back its own shares for cancellation or treasury purposes, and this is described in more detail on page 7 of the Chairman's statement of the Annual Report and Financial Statements.
The Company's financial instruments comprise equity and loan stock investments in unquoted companies, contingent receipts on disposal of fixed assets investments, cash balances and short term debtors and creditors which arise from its operations. The main purpose of these financial instruments is to generate cashflow and revenue and capital appreciation for the Company's operations. The Company has no gearing or other financial liabilities apart from short term creditors. The Company does not use any derivatives for the management of its balance sheet.
The principal risks arising from the Company's operations are:
Investment (or market) risk (which comprises investment price and cash flow interest rate risk);
credit risk; and
liquidity risk.
The Board regularly reviews and agrees policies for managing each of these risks. There have been no changes in the nature of the risks that the Company has faced during the past year and, apart from where noted below, there have been no changes in the objectives, policies or processes for managing risks during the past year. The key risks are summarised below.
Investment risk
As a venture capital trust, it is the Company's specific nature to evaluate and control the investment risk of its portfolio in unquoted investments, details of which are shown on pages 12 to 13 of the 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 investee company 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 investment portfolio which is £30,198,000 (2012: £25,945,000). Fixed asset investments form 72.5 per cent. of the net asset value as at 31 March 2013 (2012: 91.4 per cent.).
More details regarding the classification of fixed asset investments are shown in note 12.
Investment price risk
Investment price risk is the risk that the fair value of future investment cash flows will fluctuate due to factors specific to an investment instrument or to a market in similar instruments. To mitigate the investment price risk for the Company as a whole, the strategy of the Company is to invest in a broad spread of industries with approximately two-thirds of the unquoted investments comprising debt securities, which, owing to the structure of their yield and the fact that they are usually secured, have a lower level of price volatility than equity. Details of the industries in which investments have been made are contained in the Portfolio of investments section on pages 12 and 13 of the Annual Report and Financial Statements and in the Manager's report.
Valuations are based on the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEVCV Guidelines.
As required under FRS 29 "Financial Instruments: Disclosures", the Board is required to illustrate by way of a sensitivity analysis the degree of exposure to market risk. The Board considers that the value of the fixed 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 £3,025,000 (2012: £2,595,000).
Cash flow interest rate risk
It is the Company's policy to accept a degree of interest rate risk on its financial assets through the effect of interest rate changes. On the basis of the Company's analysis, it is estimated that a rise of one percentage point in all interest rates would have increased total return before tax for the year by approximately £55,000 (2012: £24,000). Furthermore, it is considered that a fall of interest rates below current levels during the year would have been very unlikely.
The weighted average interest rate applied to the Company's fixed rate assets during the year was approximately 6.30 per cent. (2012: 6.40 per cent.). The weighted average period to maturity for the fixed rate assets is approximately 3.16 years (2012: 2.60 years).
The Company's financial assets and liabilities as at 31 March 2013, all denominated in pounds sterling, consist of the following:
| 31 March 2013 | 31 March 2012 | |||||||
| 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 | - | - | 8,489 | 8,489 | - | - | 8,490 | 8,490 |
| Convertible and discounted bonds | 1,866 | - | 365 | 2,231 | - | - | 1,315 | 1,315 |
| Unquoted loan stock | 19,478 | - | - | 19,478 | 16,076 | 64 | - | 16,140 |
| Current asset investments | - | - | 50 | 50 | - | - | - | - |
| Debtors * | - | - | 20 | 20 | - | - | 8 | 8 |
| Current liabilities* | - | - | (387) | (387) | - | - | (350) | (350) |
| Cash | 11,217 | 679 | - | 11,896 | 1,479 | 1,477 | - | 2,956 |
| Total net assets | 32,561 | 679 | 8,537 | 41,777 | 17,555 | 1,541 | 9,463 | 28,559 |
* The debtors and current liabilities do not reconcile to the balance sheet as prepayments and tax payable are not included in the above table.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Company is exposed to credit risk through its debtors, investment in unquoted loan stock, and through the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock prior to investment, and as part of its ongoing monitoring of investments. In doing this, it takes into account the extent and quality of any security held. Typically loan stock instruments have a first fixed charge or a fixed and floating charge over the assets of the 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.
The Manager and the Board formally review credit risk (including debtors) and other risks, both at the time of initial investment and at quarterly Board meetings.
The Company's total gross credit risk as at 31 March 2013 was limited to £21,709,000 (2012: £17,455,000) of unquoted loan stock instruments (all of which is secured on the assets of the investee company), £11,896,000 cash deposits with banks (2012: £2,956,000) £50,000 current asset investments (2012: nil) and £24,000 debtors (2012: £10,000).
The credit profile of the unquoted loan stock is described under liquidity risk below.
The cost, impairment and carrying value of impaired loan stocks held at amortised cost at 31 March 2013 and 31 March 2012 are as follows:
| 31 March 2013 | 31 March 2012 | |||||
| Cost £'000 | Impairment £'000 | Carrying value £'000 | Cost £'000 | Impairment £'000 | Carrying value £'000 | |
| Impaired loan stock | 11,907 | (3,021) | 8,886 | 9,104 | (2,345) | 6,759 |
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 consider the security value to be the carrying value.
As at the balance sheet date, the cash held by the Company is held with the Royal Bank of Scotland plc, Lloyds TSB Bank plc, Scottish Widows Bank plc (part of Lloyds Banking Group), Barclays Bank plc and National Westminster Bank plc. Credit risk on cash transactions is mitigated by transacting with counterparties that are regulated entities subject to prudential supervision, with high credit ratings assigned by international credit-rating agencies.
The Company has an informal policy of limiting counterparty banking and floating rate note exposure to a maximum of 20 per cent. of net asset value for any one counterparty.
Liquidity risk
Liquid assets are held as cash on current, deposit or short term money market accounts. Under the terms of its Articles, the Company has the ability to borrow up to 10 per cent. of its adjusted capital and reserves of the latest published audited balance sheet, which amounts to £4,168,000 as at 31 March 2013 (2012: £2,842,000).
The Company has no committed borrowing facilities as at 31 March 2013 (2012: £nil) and had cash balances of £11,896,000 (2012: £2,956,000). The main cash outflows are for new investments, buy-back of shares and dividend payments, which are within the control of the Company. The Manager formally reviews the cash requirements of the Company on a monthly basis, and the Board on a quarterly basis as part of its review of management accounts and forecasts. All the Company's financial liabilities are short term in nature and total £487,000 for the year to 31 March 2013 (2012: £490,000).
The carrying value of loan stock investments at 31 March 2013 as analysed at each year end by expected maturity dates is as follows:
| Redemption date | Fully performing £'000 | Impaired £'000 | Past due £'000 | Total £'000 | |
| Less than one year | 355 | - | 471 | 826 | |
| 1-2 years | 109 | 2,241 | 3,846 | 6,196 | |
| 2-3 years | 2,345 | - | 296 | 2,641 | |
| 3-5 years | 1,904 | 6,645 | 2,164 | 10,713 | |
| Greater than 5 years | 1,103 | - | 230 | 1,333 | |
| Total | 5,816 | 8,886 | 7,007 | 21,709 |
Loan stock categorised as past due includes:
Loan stock with a carrying value of £4,049,000 had loan stock interest past due for less than 12 months (through not paying all of its contractual interest). This investment has yielded 11.6 per cent. on cost during the year;
Loan stock with a carrying value of £529,000 which has interest overdue for 12 months yielded nil on cost;
Loan stock with a carrying value of £365,000 which has interest overdue for 2 years and less than 3 years yielded nil on cost;
Loan stock with a carrying value of £1,926,000 had capital past due greater than 3 years and less than 5 years. This investment has yielded 5 per cent. on cost during the year;
Loan stock with a carrying value of £138,000 had capital past due greater than 5 years. This investment has yielded nil on cost during the year.
The carrying value of loan stock investments held at amortised cost at 31 March 2012 as analysed by expected maturity dates is as follows:
| Redemption date | Fully performing £'000 | Impaired £'000 | Past due £'000 | Total £'000 |
| Less than one year | 1,326 | 788 | - | 2,114 |
| 1-2 years | 2,782 | 4,041 | 1,797 | 8,620 |
| 2-3 years | 249 | 1,623 | 701 | 2,573 |
| 3-5 years | 2,777 | 307 | 781 | 3,865 |
| Greater than 5 years | - | - | 283 | 283 |
| Total | 7,134 | 6,759 | 3,562 | 17,455 |
In view of the information shown, the Board considers that the Company is subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Company's financial assets and liabilities as at 31 March 2013 are stated at fair value as determined by the Directors, with the exception of loans and receivables included within investments, cash, debtors and creditors which are carried at amortised cost, as permitted by FRS 26. The Directors believe that the current carrying value of loan stock is not materially different to the fair value. There are no financial liabilities other than creditors. The Company's financial liabilities are all non-interest bearing. It is the Directors' opinion that the book value of the financial liabilities is not materially different to the fair value and all are payable within one year.
21. Commitments and contingencies
The company had the following financial commitment in respect of the following investment:
Dragon Hydro Limited, £173,000
There are no contingent liabilities or guarantees given by the Company as at 31 March 2013 (31 March 2012: nil).
22. Post balance sheet events
Since 31 March 2013 the Company has had the following post balance sheet events:
Investment of £25,000 in Bravo Inns II Limited
Investment of £85,000 in Dragon Hydro Limited
Investment of £63,000 in The Stanwell Hotel Limited
The following Ordinary shares of nominal value 1 penny per share were allotted under the Albion VCTs Top Up Offers 2012/2013:
| Date of allotment | Number of shares allotted | Aggregate nominal value of shares | Net consideration received | Issue price incl. issue costs (pence per | Opening market price per share on allotment date |
| £'000 | £'000 | share) | (pence per share) | ||
| 5 April 2013 | 2,505,191 | 25 | 1,866 | 76.80 | 69.00 |
| 12 June 2013 | 99,020 | 1 | 74 | 76.80 | 67.50 |
23. Related party transactions
There are no related party transactions or balances requiring disclosure.
24. Principal risks and uncertainties
In addition to the current economic risks outlined in the Chairman's statement, the Board considers that the Company faces the following major risks and uncertainties:
1. Economic risk
Changes in economic conditions, for example, interest rates, rates of inflation, industry conditions, competition, political and diplomatic events and other factors could substantially and adversely affect the Company's prospects in a number of ways.
To reduce this risk, in addition to investing equity in portfolio companies, the Company often invests in secured loan stock and has a policy of not permitting any external bank borrowings within portfolio companies. Additionally, the Manager has been rebalancing the sector exposure of the portfolio with a view to reducing reliance on consumer led sectors.
2. Investment risk
This is the risk of investment in poor quality assets which reduces the capital and income returns to shareholders, and negatively impacts on the Company's reputation. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes, are more fragile than larger, long established businesses.
The success of investments in certain sectors is also subject to regulatory risk, such as those affecting companies involved in UK renewable energy.
To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its strong track record for investing in this segment of the market. In addition, the Manager operates a formal and structured investment process, which includes an Investment Committee, comprising investment professionals from the Manager and at least one external investment professional. The Manager also invites, and takes account of, comments from non-executive Directors of the Company on investments discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on investee company boards) and the Board receives detailed reports on each investment as part of the Manager's report at quarterly board meetings. It is the policy of the Company for portfolio companies to not normally have external borrowings.
The Board and the Manager closely monitor regulatory changes within the sectors invested in.
3.Valuation risk
The Company's investment valuation method is reliant on the accuracy and completeness of information that is issued by portfolio companies. In particular, the Directors may not be aware of or take into account certain events or circumstances which occur after the information issued by such companies is reported.
As described in note 2 of the Financial Statements, the unquoted equity investments, convertible loan stock and debt issued at a discount held by the Company are designated at fair value through profit or loss and valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines. These guidelines set out recommendations, intended to represent current best practice on the valuation of venture capital investments. These investments are valued on the basis of forward looking estimates and judgements about the business itself, its market and the environment in which it operates, together with the state of the mergers and acquisitions market, stock market conditions and other factors. In making these judgements the valuation takes into account all known material facts up to the date of approval of the Financial Statements by the Board. All other unquoted loan stock is measured at amortised cost.
4. Venture Capital Trust approval risk
The Company's current approval as a venture capital trust allows investors to take advantage of tax reliefs on initial investment and ongoing tax free capital gains and dividend income. Failure to meet the qualifying requirements could result in investors losing the tax relief on initial investment and loss of tax relief on any tax-free income or capital gains received. In addition, failure to meet the qualifying requirements could result in a loss of listing of the shares.
To reduce this risk, the Board has appointed the Manager, 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 PricewaterhouseCoopers LLP as its taxation advisers. PricewaterhouseCoopers LLP report quarterly to the Board to independently confirm compliance with the venture capital trust legislation, to highlight areas of risk and to inform on changes in legislation.
5. Compliance risk
The Company is listed on The London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company's shares, or other penalties under the Companies Act or from financial reporting oversight bodies.
Board members and the Manager have experience of operating at senior levels within quoted businesses. In addition, the Board and the Manager receive regular updates on new regulation from its auditor, lawyers and other professional bodies.
6. Internal control risk
Failures in key controls, within the Board or within the Manager's business, could put assets of the Company at risk or result in reduced or inaccurate information being passed to the Board or to shareholders.
The Audit Committee meets with the Manager's Internal Auditor, Littlejohn LLP, when required, receiving a report regarding the last formal internal audit performed on the Manager, and providing the opportunity for the Audit Committee to ask specific and detailed questions. John Kerr, as Audit Committee Chairman, met with the internal audit Partner of Littlejohn LLP in February 2013 to discuss the most recent Internal Audit Report on the Manager. The Manager has a comprehensive business continuity plan in place in the event that operational continuity is threatened. Further details regarding the Board's management and review of the Company's internal controls through the implementation of the Turnbull guidance are detailed on page 28 of the Annual Report and Financial Statements.
Measures are in place to mitigate information risk in order to ensure the integrity, availability and confidentiality of information used within the business.
7. Reliance upon third parties risk
The Company is reliant upon the services of Albion Ventures LLP for the provision of investment management and administrative functions. There are provisions within the management agreement for the change of Manager under certain circumstances (for more detail, see the management agreement paragraph on page 21 of the Annual Report and Financial Statements). In addition, the Manager has demonstrated to the Board that there is no undue reliance placed upon any one individual within Albion Ventures LLP.
8. Financial risks
By its nature, as a venture capital trust, the Company is exposed to investment risk (which comprises investment price risk and cash flow interest rate risk), credit risk and liquidity risk. The Company's policies for managing these risks and its financial instruments are outlined in full in note 20 to the Financial Statements.
All of the Company's income and expenditure is denominated in sterling and hence the Company has no foreign currency risk. The Company is financed through equity and does not have any borrowings. The Company does not use derivative financial instruments for speculative purposes.
25. Other information
The information set out in this announcement does not constitute the Company's statutory accounts within the terms of section 434 of the Companies Act 2006 for the years ended 31 March 2013 and 31 March 2012, and is derived from the statutory accounts for those financial years, which have been, or in the case of the accounts for the year ended 31 March 2013, which will be, delivered to the Registrar of Companies. The Auditor reported on those accounts; the reports were unqualified and did not contain a statement under s498 (2) or (3) of the Companies Act 2006.
The Company's Annual General Meeting will be held at The City of London Club, 19 Old Broad Street, London, EC2N 1DS on 29 July 2013 at 11.00am.
26. Publication
The full audited Annual Report and Financial Statements are being sent to shareholders and copies will be made available to the public at the registered office of the Company, Companies House, the National Storage Mechanism and also electronically at www.albion-ventures.co.uk under the 'Our Funds' section, by clicking on 'Albion Venture Capital Trust PLC', where the Report can be accessed as a PDF document via a link under the 'Investor Centre' in the 'Financial Reports and Circulars' section.
Dividend history for Albion Prime VCT PLC now merged with Albion Venture Capital Trust PLC
| Total shareholder net asset value return to 31 March 2013 | Proforma(i) Albion Prime VCT PLC (pence per share) | ||
| Total dividends paid during the period ended | 31 March 1998 | 1.10 | |
| 31 March 1999(ii) | 6.40 | ||
| 31 March 2000 | 1.50 | ||
| 31 March 2001 | 4.25 | ||
| 31 March 2002 | 2.75 | ||
| 31 March 2003 | 2.00 | ||
| 31 March 2004 | 1.25 | ||
| 31 March 2005 | 2.20 | ||
| 31 March 2006 | 4.50 | ||
| 31 March 2007 | 4.00 | ||
| 31 March 2008 | 5.00 | ||
| 31 March 2009 | 4.50 | ||
| 31 March 2010 | 2.00 | ||
| 31 March 2011 | 3.00 | ||
| 31 March 2012 | 3.00 | ||
| 31 March 2013 | 3.70 | ||
| Total dividends paid to 31 March 2013 | 51.15 | ||
| Proforma net asset value as at 31 March 2013 | 65.30 | ||
| Total proforma shareholder net asset value return to 31 March 2013 | 116.45 | ||
Notes
i. The proforma shareholder returns presented above are based on the dividends paid to shareholders before the merger and the pro-rata net asset value per share and pro-rata dividends per share paid to 31 March 2013. Albion Prime VCT PLC was merged with Albion Venture Capital Trust PLC on 25th September 2012. This pro-forma is based upon 0.8801 Albion Venture Capital Trust PLC shares for every Albion Prime VCT PLC share which merged with Albion Venture Capital Trust PLC on 25 September 2012.
ii. Dividends paid before 5 April 1999 were paid to qualifying shareholders inclusive of the associated tax credit. The dividends for the year to 31 March 1999 were maximised in order to take advantage of this tax credit.
iii. The above table excludes the tax benefits investors received upon subscription for shares in the Company.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: Albion Venture Capital Trust PLC via Thomson Reuters ONE
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