Annual Financial Report
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 2010.
This announcement was approved by the Board of Directors on 20 May 2010.
This announcement has not been audited.
Please click on the following link to view the full Annual Report and Financial
Statements (which have been audited) for the year to 31 March 2010. The
information contained in this link includes information as required by the
Disclosure and Transparency Rules, including Rule 4.1.
http://hugin.info/141809/R/1417776/368179.pdf
Alternatively you may view the Annual Report and Financial Statements at:
www.albion-ventures.co.uk <
http://www.albion-ventures.co.uk/> by clicking on the
'Our Funds' section.
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 offers tax-paying
investors substantial tax benefits at the time of investment, on payment of
dividends and on the ultimate disposal of the investment. Its investment
strategy is to minimise the risk to investors whilst maintaining an attractive
yield. 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;
and
* a clear strategy for the realisation of each qualifying unquoted investment
within five years or shortly thereafter is identified from the outset.
Financial calendar
+----------------------------------------------------------------+-------------+
|Record date for first dividend | 28 May 2010|
+----------------------------------------------------------------+-------------+
|Record date for first dividend | 21 June 2010|
+----------------------------------------------------------------+-------------+
|Payment of first dividend | 25 June 2010|
+----------------------------------------------------------------+-------------+
|Announcement of half-yearly results for the six months ended 30 |November 2010|
|September 2010 | |
+----------------------------------------------------------------+-------------+
|Payment of second dividend | January 2011|
+----------------------------------------------------------------+-------------+
Financial highlights
+-----------------+-------------------+-------------------+
| | 31 March 2010 | 31 March 2009 |
+-----------------+-------------------+-------------------+
| | (pence per share) | (pence per share) |
+-----------------+-------------------+-------------------+
+-----------------+-------------------+-------------------+
| Dividends paid | 5.0 | 10.0 |
+-----------------+-------------------+-------------------+
| Revenue return | 2.9 | 3.3 |
+-----------------+-------------------+-------------------+
| Capital loss | (1.7) | (18.3) |
+-----------------+-------------------+-------------------+
| Net asset value | 81.6 | 85.3 |
+-----------------+-------------------+-------------------+
+-----------------------------------------------------+---------------+--------+
|Total shareholder net asset value return to 31 March |Ordinary shares|C shares|
|2010 | | |
+-----------------------------------------------------+---------------+--------+
|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|
+-----------------------------------------------------+---------------+--------+
+-----------------------------------------------------+---------------+--------+
|Total dividends paid to 31 March 2010 | 109.80| 98.25|
+-----------------------------------------------------+---------------+--------+
+-----------------------------------------------------+---------------+--------+
|Net asset value as at 31 March 2010 | 81.60| 81.60|
+-----------------------------------------------------+---------------+--------+
+-----------------------------------------------------+---------------+--------+
|Total shareholder net asset value return to 31 March | | |
|2010 | 191.40| 179.85|
+-----------------------------------------------------+---------------+--------+
+-----------------------------------------------------+---------------+--------+
In addition to the dividends summarised above, the Board has declared a first
dividend for the new financial year, of 2.5 pence per share (out of revenue
profits) to be paid on 25 June 2010 to shareholders on the register as at 28 May
2010.
Chairman's statement
Introduction
The results for the year to 31 March 2010 show a welcome return to positive
performance with a total return of 1.2 pence per share before dividends. This is
a marked improvement on the interim stage and reflects not only the easing of
the UK economy out of recession, but also the growing maturity of the investment
portfolio.
Investment performance and progress
The properties held by our portfolio companies are subject to independent third
party professional valuations on an annual basis. Taken as a whole, these have
remained steady over the past year. The cinemas in particular have had a good
period, with an improvement in performance despite the recession. Our portfolio
of hotels, meanwhile, continues to mature with improved performance from The
Place Sandwich and a steady performance from The Crown Hotel Harrogate, though
this was offset by the under-performance against previous years at the Holiday
Inn Express at Stansted Airport, where air traffic is still some way below its
peak. Nevertheless, our Stansted hotel remains strongly profitable and cash
generative and current indications are that the decline in performance is now
beginning to reverse. The Bear Hotel at Hungerford also experienced a more
challenging year but recent profitability has been improving. Our hotel at
Stanwell, between Heathrow's Terminals 4 and 5, has now opened.
Our portfolio of health and fitness clubs continues to show an encouraging
growth in membership and an increase in profitability at its three core landmark
sites of West Kensington, Weybridge and Tower Bridge. The exception to this is
the River Bourne Health Club, which, as mentioned in the Half-yearly Financial
Report, was placed into administration in October 2009, leading the Company to
record a small capital loss.
After the reorganisation of some of the investments, our pub portfolio is now
performing well and most are generating operating profits. This has been further
helped by the investment in Geronimo Inns during the year and the resulting
purchase of four landmark freehold pubs in Central London. This pub group is
performing comfortably above expectations.
The portfolio of residential development companies continues to be wound down;
the only company with units unsold is now G&K Smart Developments VCT Limited
which owns three sites in Yorkshire. An additional provision against the holding
value of this investment has been made. A number of the units have now been sold
and we expect that the rest will be sold during the course of the next 12
months.
In addition to the investment in Geronimo Inns, the key new investment during
the year was in the development of a psychiatric hospital in Taunton. The first
stage was the purchase of an existing care home with planning permission for a
substantial extension. While this continues the theme of healthcare investment
which your Company has pursued since launch in 1996, we regard the psychiatric
area as a new and interesting niche market.
Risks and uncertainties
The outlook for the UK economy continues to be the key risk affecting your
Company, although current indications are that the worst of the recession is now
over. Importantly, your Company remains conservatively financed with no bank
borrowings at either corporate or investee company level, in addition to the
policy of ensuring that the Company has a first charge over investee companies'
assets. Meanwhile, opportunities within our target sectors continue to arise at
attractive valuations, including the healthcare sector which will revert to
being one of our core areas of concentration going forwards.
Further details regarding the risks and uncertainties for the Company as shown
in note 23.
Share buy-backs
It remains the Board's policy to buy back shares in the market, subject to the
overall constraint that such purchases are in the Company's interest, including
the maintenance of sufficient resources for investment in existing and new
investee companies and the continued payment of dividends to shareholders. In
order to balance these different requirements, your Board has restricted the
Company's buy-back policy so as to limit the cash available for share buy-backs.
Accordingly, the Company will now limit the sum available for share buy-backs
for the six month period to 30 September 2010 to £200,000. This compares to a
total value bought in for the previous six months of £139,000. If this limit is
reached, the Board will review its policy in the light of cash available for new
investments and for dividends to existing shareholders.
For the majority of the Company's life, its shares have traded at a discount of
around 10 per cent. or less to net asset value. In the more recent past, the
financial upheavals surrounding the credit crunch have caused this discount to
considerably widen. The apparent improving economic climate today may lead to
reduced selling pressure and increasing net asset values, which, together with
the company's buyback programme, could lead to an improvement in the discount at
which the shares trade.
Cap on Total Expense Ratio ("TER")
In line with market practice, the Board has agreed with the Manager that the
ratio of total expenses (excluding corporation tax, any management performance
incentive and exceptional costs) will be limited to 3.5 per cent. of net assets,
with any excess being borne by the Manager through a deduction from its
management fee. For the year to 31 March 2010, the TER was 2.7 per cent. which
is at the lower end of the Venture Capital Trust industry.
Details regarding related third party transactions are shown in note 22.
Results and dividends
As at 31 March 2010, the net asset value was £28.4 million or 81.6 pence per
share, compared to £29.9 million or 85.3 pence per share as at 31 March 2009.
The revenue return before taxation was £1.0 million compared to £1.5 million for
the year to 31 March 2009. The Company will pay a first dividend of 2.5 pence
per share on 25 June 2010 to those shareholders on the share register on 28 May
2010 which is in line with the Company's current objective of paying dividends
of 5 pence per share annually.
Supporting enterprise and growth
Recent research undertaken by the Association of Investment Companies has
demonstrated that VCT investment provides substantial benefits for UK small
businesses and the economy in at least three ways: first, by creating jobs;
second, by providing additional management skill to support growing businesses;
and finally, by being cost-effective, in that the cost to the public purse is
more than offset by the increased tax returns generated by growing VCT-backed
companies. In common with other VCTs, we would urge the new Government to
continue to encourage VCTs as one of the best ways to support enterprise and
future economic growth.
Change of Director
In line with the FSA rules on the independence of Directors which come into
force as regards VCTs in September 2010, Jonathan Thornton will be retiring from
the Board in September 2010. Jonathan, who has spent much of his career in
private equity and was a main board director of Close Brothers Group plc, has
been a director of the company since its inception in 1996 and I have greatly
valued his wise counsel over the years.
I am pleased to welcome in his place Jonathan Rounce whom we will propose for
election at the Annual General Meeting. Jonathan is a chartered accountant and
has considerable experience in the leisure industry, including running the
Coopers & Lybrand tourism and leisure consultancy practice and being managing
director of the leisure development interests of Arlington Securities Plc. He
also acted as vice chairman of the West Middlesex University Hospital Trust for
seven years. Further details are set out in the full Annual Report and Financial
Statements on page 9.
Outlook and prospects
Most of our portfolio companies are currently trading encouragingly and whilst
we have some concerns as to the effect on the UK economy of the next Budget, the
increasing maturity and cash generative nature of the majority of our portfolio
companies leads us generally to view their future trading prospects with
cautious optimism. We believe it is likely to be some time, however, before
availability of bank finance allows potential purchasers to be in a position to
acquire investee companies at prices which we would find attractive. In the
meantime the Manager is assessing a number of interesting investment
opportunities, particularly in the healthcare and environmental sectors.
David Watkins
Chairman
20 May 2010
Manager's report
Share portfolio
The sector split of the portfolio by valuation as at 31 March 2010 is shown
below:
http://hugin.info/141809/R/1417776/368180.pdf
Source: Albion Ventures LLP
Investment portfolio
The investment portfolio has weathered the recession in reasonable shape.
Although the income generated for the year to 31 March 2010 was approximately
24.5 per cent. below the level seen in the previous twelve months, much of this
was due to the very low market interest rates from cash held on deposit as well
as lower returns on loan stock investments. Income from the underlying
investments is now on the increase. The Company's income for the six months to
31 March 2010 was some 24.3 per cent. higher than for the six months to 31 March
2009. Income from the health and fitness club investments is increasing as the
membership levels continue to rise, while the hotel portfolio, particularly the
older hotels which have been subject to extensive refurbishment, has also been
able to generate a higher level of income for the Company. Looking forwards, the
opening of Stanwell Hotel next to Heathrow Airport should lead to a further
increase in income for the new financial year, while the reorganisation of the
pub portfolio has also resulted in an enhanced level of income.
Investment activity
The key new investment in the year has been £540,000 into the two Geronimo Pub
companies where, as mentioned in the Chairman's statement, performance has been
particularly strong. In addition, a total of £449,000 has now been invested in
the Taunton Hospital project, which will be developed into a unit catering for
long stay psychiatric patients. We have also exchanged on the site for a new
specialist nursing home in North London, though this is still subject to
planning. In general, we anticipate that the healthcare sector will revert to
being a core area for investment. Other areas under review include a number of
potential investments in the waste to energy and biofuel sectors, where property
forms a large part of the asset and provides backing to long-term supply
contracts. A previously scheduled investment of £1.2 million was also made in
The Stanwell Hotel Limited, £167,000 was invested in four of our cinema
companies to fund the roll out of digital equipment and a further £115,000 was
invested into Bravo Inns II Limited.
A variety of companies have repaid loan stock and equity during the year
including £1,090,000 from residential development companies, £297,000 from our
cinemas, £211,000 from our hotels and £96,000 from our pub companies.
Albion Ventures LLP
Manager
20 May 2010
Responsibility Statement
In preparing these financial statements for the year to 31 March 2010, the
Directors of the Company, being David Watkins, John Kerr, Jonathan Thornton and
Jeff Warren, 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 2010 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 2010 as required by DTR 4.2.R;
-the Chairman's statement and Manager's report include a fair review of the
information required by DTR 4.2.7R (indication of important events during the
year ended 31 March 2010 and description of principal risks and uncertainties
that the Company faces); and
-the Chairman's statement and Manager's report include a fair review of the
information required by DTR 4.2.8R (disclosure of related parties transactions
and changes therein).
A detailed "Statement of Directors' responsibilities for the preparation of the
Company's financial statements" is contained within the full audited Annual
Report and Financial Statements which is attached to this announcement.
By order of the Board
David Watkins
Chairman
Income statement
+---------------------------+----+---------------------+-----------------------+
| | | Year ended 31 March | Year ended 31 March |
| | | 2010 | 2009 |
+---------------------------+----+-------+-------+-----+-------+-------+-------+
| | |Revenue|Capital|Total|Revenue|Capital| Total|
+---------------------------+----+-------+-------+-----+-------+-------+-------+
| |Note| £'000| £'000|£'000| £'000| £'000| £'000|
+---------------------------+----+-------+-------+-----+-------+-------+-------+
|Losses on investments | 3| -| (286)|(286)| -|(6,483)|(6,483)|
+---------------------------+----+-------+-------+-----+-------+-------+-------+
|Investment income | 4| 1,330| -|1,330| 1,761| -| 1,761|
+---------------------------+----+-------+-------+-----+-------+-------+-------+
|Investment management fees | 5| (144)| (433)|(577)| (183)| (549)| (732)|
+---------------------------+----+-------+-------+-----+-------+-------+-------+
|Recovery of VAT | 6| 7| 21| 28| 180| 540| 720|
+---------------------------+----+-------+-------+-----+-------+-------+-------+
|Other expenses | 7| (208)| -|(208)| (249)| -| (249)|
+---------------------------+----+-------+-------+-----+-------+-------+-------+
|Return/(loss) on ordinary | | 985| (698)| 287| 1,509|(6,492)|(4,983)|
|activities before tax | | | | | | | |
+---------------------------+----+-------+-------+-----+-------+-------+-------+
|Tax credit/(charge) on | 9| 18| 120| 138| (329)| 2| (327)|
|ordinary activities | | | | | | | |
+---------------------------+----+-------+-------+-----+-------+-------+-------+
|Return/(loss) attributable | | 1,003| (578)| 425| 1,180|(6,490)|(5,310)|
|to shareholders | | | | | | | |
+---------------------------+----+-------+-------+-----+-------+-------+-------+
|Basic and diluted | | | | | | | |
|return/(loss) per share | 11| 2.9| (1.7)| 1.2| 3.3| (18.3)| (15.0)|
|(pence)* | | | | | | | |
+---------------------------+----+-------+-------+-----+-------+-------+-------+
* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.
The total column of this Income statement represents the profit and loss account
of the Company. The supplementary revenue and capital columns have been prepared
in accordance with the Association of Investment Companies' Statement of
Recommended Practice.
All revenue and capital items in the above statement derive from continuing
operations.
There are no recognised gains or losses other than the results for the year
disclosed above. Accordingly a Statement of total recognised gains and losses is
not required.
The difference between the reported return/(loss) on ordinary activities before
tax and the historical profit/(loss) is due to the fair value movements on
investments. As a result a note on historical cost profit and losses has not
been prepared.
Balance sheet
+---------------------------------------------+----+-------------+-------------+
| | |31 March 2010|31 March 2009|
+---------------------------------------------+----+-------------+-------------+
| |Note| £'000| £'000|
+---------------------------------------------+----+-------------+-------------+
|Fixed asset investments | | | |
+---------------------------------------------+----+-------------+-------------+
|Qualifying | | 25,575| 25,340|
+---------------------------------------------+----+-------------+-------------+
|Non-qualifying | | 639| 675|
+---------------------------------------------+----+-------------+-------------+
|Total fixed asset investments | 12| 26,214| 26,015|
+---------------------------------------------+----+-------------+-------------+
+---------------------------------------------+----+-------------+-------------+
|Current assets | | | |
+---------------------------------------------+----+-------------+-------------+
|Trade and other debtors | 14| 382| 199|
+---------------------------------------------+----+-------------+-------------+
|Current asset investments | | -| 1,463|
+---------------------------------------------+----+-------------+-------------+
|Cash at bank and in hand | 18| 2,103| 2,498|
+---------------------------------------------+----+-------------+-------------+
| | | 2,485| 4,160|
+---------------------------------------------+----+-------------+-------------+
+---------------------------------------------+----+-------------+-------------+
|Creditors: amounts falling due within one | 15| (299)| (305)|
|year | | | |
+---------------------------------------------+----+-------------+-------------+
+---------------------------------------------+----+-------------+-------------+
|Net current assets | | 2,186| 3,855|
+---------------------------------------------+----+-------------+-------------+
+---------------------------------------------+----+-------------+-------------+
|Net assets | | 28,400| 29,870|
+---------------------------------------------+----+-------------+-------------+
+---------------------------------------------+----+-------------+-------------+
|Capital and reserves | | | |
+---------------------------------------------+----+-------------+-------------+
|Called up share capital | 16| 18,050| 18,002|
+---------------------------------------------+----+-------------+-------------+
|Share premium | | 69| 53|
+---------------------------------------------+----+-------------+-------------+
|Capital redemption reserve | | 1,914| 1,914|
+---------------------------------------------+----+-------------+-------------+
|Unrealised capital reserve | | (4,599)| (4,309)|
+---------------------------------------------+----+-------------+-------------+
|Special reserve | | 13,236| 14,110|
+---------------------------------------------+----+-------------+-------------+
|Own treasury shares reserve | | (1,032)| (823)|
+---------------------------------------------+----+-------------+-------------+
|Realised capital reserve | | (295)| (7)|
+---------------------------------------------+----+-------------+-------------+
|Revenue reserve | | 1,057| 930|
+---------------------------------------------+----+-------------+-------------+
|Total equity shareholders' funds | | 28,400| 29,870|
+---------------------------------------------+----+-------------+-------------+
+---------------------------------------------+----+-------------+-------------+
|Basic and diluted net asset value per share | 17| 81.6| 85.3|
|(pence)* | | | |
+---------------------------------------------+----+-------------+-------------+
* excluding treasury shares
The accompanying notes form an integral part of this announcement.
These financial statements were approved by the Board of Directors, and
authorised for issue on 20 May 2010 and were signed on its behalf by
David Watkins
Chairman
Company number: 3142609
Reconciliation of movement in shareholders' funds
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
| |Called-up| | Capital|Unrealised| | Own|Realised| | |
| | share| Share|redemption| capital| Special|treasury| capital| Revenue| Total|
| | |premium| reserve| reserve*|reserve*| share|reserve*|reserve*| |
| | capital| | | | |reserve*| | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
| | £'000| £'000| £'000| £'000| £'000| £'000| £'000| £'000| £'000|
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|As at 1 | 18,002| 53| 1,914| (4,309)| 14,110| (823)| (7)| 930| 29,870|
|April 2009 | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Net realised| | | | | | | | | |
|gains on | -| -| -| -| -| -| 51| -| 51|
|investments | | | | | | | | | |
|in the year | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Unrealised | | | | | | | | | |
|losses on | -| -| -| (337)| -| -| -| -| (337)|
|investments | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Transfer of | | | | | | | | | |
|previously | | | | | | | | | |
|unrealised | -| -| -| 47| -| -| (47)| -| -|
|losses on | | | | | | | | | |
|sale of | | | | | | | | | |
|investments | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Capitalised | | | | | | | | | |
|investment | -| -| -| -| -| -| (433)| -| (433)|
|management | | | | | | | | | |
|fee | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Capitalised | | | | | | | | | |
|recoverable | -| -| -| -| -| -| 21| -| 21|
|VAT | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Tax on | | | | | | | | | |
|capitalised | -| -| -| -| -| -| 120| -| 120|
|management | | | | | | | | | |
|fees | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Purchase of | | | | | | | | | |
|own treasury| -| -| -| -| -| (209)| -| -| (209)|
|shares | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Issue of | | | | | | | | | |
|equity (net | 48| 16| -| -| -| -| -| -| 64|
|of costs) | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Revenue | | | | | | | | | |
|return | | | | | | | | | |
|attributable| -| -| -| -| -| -| -| 1,003| 1,003|
|to | | | | | | | | | |
|shareholders| | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Dividends | -| -| -| -| (874)| -| -| (876)|(1,750)|
|paid | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|As at 31 | 18,050| 69| 1,914| (4,599)| 13,236| (1,032)| (295)| 1,057| 28,400|
|March 2010 | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
| |Called-up| | Capital|Unrealised| | Own|Realised| | |
| | share| Share|redemption| capital| Special|treasury| capital| Revenue| Total|
| | |premium| reserve| reserve*|reserve*| share|reserve*|reserve*| |
| | capital| | | | |reserve*| | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
| | £'000| £'000| £'000| £'000| £'000| £'000| £'000| £'000| £'000|
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|As at 1 | 17,939| -| 1,914| 2,174| 14,110| (252)| 1,952| 1,338| 39,175|
|April 2008 | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Unrealised | | | | | | | | | |
|losses on | -| -| -| (6,483)| -| -| -| -|(6,483)|
|investments | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Capitalised | | | | | | | | | |
|investment | -| -| -| -| -| -| (549)| -| (549)|
|management | | | | | | | | | |
|fee | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Capitalised | | | | | | | | | |
|recoverable | -| -| -| -| -| -| 540| -| 540|
|VAT | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Tax on | | | | | | | | | |
|capitalised | -| -| -| -| -| -| 2| -| 2|
|management | | | | | | | | | |
|fees | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Purchase of | | | | | | | | | |
|own treasury| -| -| -| -| -| (571)| -| -| (571)|
|shares | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Issue of | | | | | | | | | |
|equity (net | 63| 53| -| -| -| -| -| -| 116|
|of costs) | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Revenue | | | | | | | | | |
|return | | | | | | | | | |
|attributable| -| -| -| -| -| -| -| 1,180| 1,180|
|to | | | | | | | | | |
|shareholders| | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|Dividends | -| -| -| -| -| -| (1,952)| (1,588)|(3,540)|
|paid | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
|As at 31 | 18,002| 53| 1,914| (4,309)| 14,110| (823)| (7)| 930| 29,870|
|March 2009 | | | | | | | | | |
+------------+---------+-------+----------+----------+--------+--------+--------+--------+-------+
* Included within these reserves is an amount of £8,367,000 (2009: £9,901,000)
which is considered distributable. The Special reserve has been treated as
distributable in determining the amounts available for distribution.
Cash flow statement
+---------------------------------------------+----+-------------+-------------+
| | | Year ended| Year ended|
| | | | |
| | |31 March 2010|31 March 2009|
+---------------------------------------------+----+-------------+-------------+
| |Note| £'000| £'000|
+---------------------------------------------+----+-------------+-------------+
|Operating activities | | | |
+---------------------------------------------+----+-------------+-------------+
|Investment income received | | 1,248| 1,648|
+---------------------------------------------+----+-------------+-------------+
|Deposit interest received | | 50| 235|
+---------------------------------------------+----+-------------+-------------+
|Dividend income received | | 43| 88|
+---------------------------------------------+----+-------------+-------------+
|Investment management fees paid | | (620)| (813)|
+---------------------------------------------+----+-------------+-------------+
|Recovery of VAT | | 243| 562|
+---------------------------------------------+----+-------------+-------------+
|Other cash payments | | (254)| (262)|
+---------------------------------------------+----+-------------+-------------+
|Net cash inflow from operating activities | 19| 710| 1,458|
+---------------------------------------------+----+-------------+-------------+
+---------------------------------------------+----+-------------+-------------+
|Taxation | | | |
+---------------------------------------------+----+-------------+-------------+
|UK corporation tax paid | | (251)| (271)|
+---------------------------------------------+----+-------------+-------------+
+---------------------------------------------+----+-------------+-------------+
|Capital expenditure and financial investments| | | |
+---------------------------------------------+----+-------------+-------------+
|Purchase of fixed asset investments | | (2,156)| (2,503)|
+---------------------------------------------+----+-------------+-------------+
|Disposal of fixed asset investments | | 1,701| 2,394|
+---------------------------------------------+----+-------------+-------------+
|Net cash outflow from investing activities | | (455)| (109)|
+---------------------------------------------+----+-------------+-------------+
+---------------------------------------------+----+-------------+-------------+
|Management of liquid resources | | | |
+---------------------------------------------+----+-------------+-------------+
|Disposal of current asset investment | | 1,496| -|
+---------------------------------------------+----+-------------+-------------+
|Net cash inflow from liquid resources | | 1,496| -|
+---------------------------------------------+----+-------------+-------------+
+---------------------------------------------+----+-------------+-------------+
|Equity dividends paid | | | |
+---------------------------------------------+----+-------------+-------------+
|(net of cost of shares issued under the | 10| (1,672)| (3,416)|
|dividend reinvestment scheme) | | | |
+---------------------------------------------+----+-------------+-------------+
|Net cash outflow before financing | | (172)| (2,338)|
+---------------------------------------------+----+-------------+-------------+
+---------------------------------------------+----+-------------+-------------+
|Financing | | | |
+---------------------------------------------+----+-------------+-------------+
|Purchase of own shares | 16| (209)| (571)|
+---------------------------------------------+----+-------------+-------------+
|Cost of issue of share capital | | (14)| (2)|
+---------------------------------------------+----+-------------+-------------+
|Net cash outflow from financing | | (223)| (573)|
+---------------------------------------------+----+-------------+-------------+
+---------------------------------------------+----+-------------+-------------+
|Cash outflow in the year | 18| (395)| (2,911)|
+---------------------------------------------+----+-------------+-------------+
Notes to the Financial Statements
1. Accounting convention
The Financial Statements have been prepared in accordance with the historical
cost convention, modified to include the revaluation of investments, in
accordance with applicable United Kingdom law and accounting standards and with
the Statement of Recommended Practice "Financial Statements of Investment Trust
Companies and Venture Capital Trusts" ("SORP") issued by the Association of
Investment Companies ("AIC") in January 2009. Accounting policies have been
applied consistently in current and prior periods.
2. Accounting policies
Investments
Unquoted equity investments
In accordance with FRS 26 "Financial Instruments Recognition and Measurement",
unquoted equity investments are designated as fair value through profit or loss
("FVTPL"). Unquoted investments' fair value is determined by the Directors in
accordance with the International Private Equity and Venture Capital Valuation
Guidelines (IPEVCV guidelines). The September 2009 revisions to the IPEVCV
guidelines have not had a material impact on the portfolio.
Fair value movements on equity investments and gains and losses arising on the
disposal of investments are reflected in the capital column of the Income
statement in accordance with the AIC SORP and 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 loan stock
Unquoted loan stock is classified as loans and receivables in accordance with
FRS 26 and carried at amortised cost using the Effective Interest Rate method
("EIR") less impairment. Movements in respect of capital provisions are
reflected in the capital column of the Income statement and are reflected in the
realised capital reserve following sale, or in the unrealised capital reserve on
revaluation.
For all unquoted loan stock, fully performing, renegotiated, 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 effective interest rate.
Floating rate notes
In accordance with FRS 26, floating rate notes are designated as fair value
through profit or loss and are valued at market bid price at the balance sheet
date. Floating rate notes are classified as current asset investments as they
are investments held for the short term.
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.
It is not the Company's policy to exercise control or significant influence over
investee companies. Therefore, in accordance with the exemptions under FRS 9
"Associates and joint ventures", those undertakings in which the Company holds
more than 20 per cent. of the equity are not regarded as associated
undertakings.
Investment income
Unquoted equity income
Dividend income is 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.
Floating rate note income
Floating rate note income is recognised on an accrual basis using the interest
rate applicable to the floating rate note at that time.
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
ï‚Ÿ 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
ï‚Ÿ expenses which are incidental to the purchase or disposal of an investment.
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 specific nature of taxation of venture capital trusts means that it is
unlikely that any deferred tax will arise. The Directors have considered the
requirements of FRS 19 and do not believe that any provision should be made.
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 special
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.
Special reserve
The cancellation of the share premium account has created a special reserve that
can be used to fund market purchases and subsequent cancellation of own shares,
to cover gross realised losses, and for other distributable purposes.
Own treasury shares reserve
This reserve accounts for amounts by which the distributable reserves of the
Company are diminished through the repurchase of the Company's own shares for
treasury.
Realised capital reserve
The following are disclosed in this reserve:
ï‚Ÿ gains and losses compared to cost on the realisation of investments;
ï‚Ÿ expenses, together with the related taxation effect, charged in accordance
with the above policies; and
ï‚Ÿ dividends paid to equity holders.
Dividends
In accordance with FRS 21 "Events after the balance sheet date", dividends
declared by the Company are accounted for in the period in which the dividend
has been paid or approved by shareholders in an Annual General Meeting.
3. Losses on investments
+-----------------------------+-----------------------+------------------------+
| | Year ended 31 March| |
| | 2010|Year ended 31 March 2009|
+-----------------------------+-----------------------+------------------------+
| | £'000| £'000|
+-----------------------------+-----------------------+------------------------+
|Unrealised (losses) on fixed | | |
|asset investments held at | (67)| (5,331)|
|fair value through profit or | | |
|loss account | | |
+-----------------------------+-----------------------+------------------------+
|Unrealised impairments on | | |
|fixed asset investments held | (270)| (1,142)|
|at amortised cost | | |
+-----------------------------+-----------------------+------------------------+
|Unrealised losses on fixed | (337)| (6,473)|
|asset investments | | |
+-----------------------------+-----------------------+------------------------+
+-----------------------------+-----------------------+------------------------+
|Unrealised (losses) on | | |
|current asset investments | -| (10)|
|held at fair value through | | |
|profit or loss account | | |
+-----------------------------+-----------------------+------------------------+
|Unrealised losses sub-total | (337)| (6,483)|
+-----------------------------+-----------------------+------------------------+
+-----------------------------+-----------------------+------------------------+
|Realised gains on fixed asset| | |
|investments held at fair | 4| -|
|value through profit or loss | | |
|account | | |
+-----------------------------+-----------------------+------------------------+
|Realised gains on fixed asset| | |
|investments held at amortised| 14| -|
|cost | | |
+-----------------------------+-----------------------+------------------------+
|Realised gains on current | | |
|asset investments held at | 33| -|
|fair value through profit or | | |
|loss account | | |
+-----------------------------+-----------------------+------------------------+
|Realised gains sub-total | 51| -|
+-----------------------------+-----------------------+------------------------+
|Total | (286)| (6,483)|
+-----------------------------+-----------------------+------------------------+
Investments valued on amortised cost basis are unquoted loan stock investments
as described in note 2.
4. Investment income
+------------------------------+-----------------------+-----------------------+
| | Year ended 31 March| Year ended 31 March|
| | 2010| 2009|
+------------------------------+-----------------------+-----------------------+
| | £'000| £'000|
+------------------------------+-----------------------+-----------------------+
|Income recognised on | | |
|investments held at fair value| | |
|through profit or loss | | |
+------------------------------+-----------------------+-----------------------+
|Dividend income | 43| 54|
+------------------------------+-----------------------+-----------------------+
|Floating rate note interest | 13| 76|
+------------------------------+-----------------------+-----------------------+
|Bank deposit interest | 31| 150|
+------------------------------+-----------------------+-----------------------+
|Other income | 6| -|
+------------------------------+-----------------------+-----------------------+
| | 93| 280|
+------------------------------+-----------------------+-----------------------+
|Income recognised on | | |
|investments held at amortised | | |
|cost | | |
+------------------------------+-----------------------+-----------------------+
|Return on loan stock | 1,237| 1,481|
|investments | | |
+------------------------------+-----------------------+-----------------------+
| | 1,330| 1,761|
+------------------------------+-----------------------+-----------------------+
Interest income earned on impaired investments at 31 March 2010 amounted to
£343,000 (2009: £231,000). These investments are all held at amortised cost.
5. Investment management fees
+-------------------------+---------------------+---------------------+
| | Year ended 31 March| Year ended 31 March|
| | 2010| 2009|
+-------------------------+-------+-------+-----+-------+-------+-----+
| |Revenue|Capital|Total|Revenue|Capital|Total|
+-------------------------+-------+-------+-----+-------+-------+-----+
| | £'000| £'000|£'000| £'000| £'000|£'000|
+-------------------------+-------+-------+-----+-------+-------+-----+
| | 144| 433| 577| 183| 549| 732|
|Investment management fee| | | | | | |
+-------------------------+-------+-------+-----+-------+-------+-----+
Further details of the Management agreement under which the investment
management fee is paid are given in the Directors' report and enhanced business
review on page 20 of the full Annual Report and Financial Statements.
6. Recovery of Value Added Tax
HMRC issued a business briefing on 24 July 2008 which permitted the recovery of
historic VAT that had been charged on management fees, and which made these fees
exempt from VAT with effect from 1 October 2008.
The Manager, Albion Ventures LLP has made a further claim for the historic VAT
that Albion Venture Capital Trust PLC has paid
on management fees. A sum of £28,000 (2009: £720,000) has been recognised as a
separate item in the Income statement, allocated between revenue and capital
return in the same proportion as that which the original VAT had been charged.
An additional tax charge of £8,000 (2009: £201,000) is payable on this recovery
of historic VAT and this is reflected within the total tax charge shown in the
Income statement.
7. Other expenses
+--------------------------------+----------------------+----------------------+
| | Year ended 31 March| Year ended 31 March|
| | 2010| 2009|
+--------------------------------+----------------------+----------------------+
| | £'000| £'000|
+--------------------------------+----------------------+----------------------+
|Directors' fees (including VAT | 86| 85|
|and NIC) | | |
+--------------------------------+----------------------+----------------------+
|Other administrative expenses | 84| 126|
+--------------------------------+----------------------+----------------------+
|Tax services | 14| 14|
+--------------------------------+----------------------+----------------------+
|Auditors' remuneration for | 24| 24|
|statutory audit services | | |
+--------------------------------+----------------------+----------------------+
| | 208| 249|
+--------------------------------+----------------------+----------------------+
Administration fees of £39,955 excluding VAT (2009: £39,000) were paid by the
Company in the year to Albion Ventures LLP.
8. Directors' fees
The amounts paid to Directors during the year are as follows:
+-----------------------------+------------------------+-----------------------+
| | | Year ended 31 March|
| |Year ended 31 March 2010| 2009|
+-----------------------------+------------------------+-----------------------+
| | £'000| £'000|
+-----------------------------+------------------------+-----------------------+
|Directors' fees | 80| 80|
+-----------------------------+------------------------+-----------------------+
|National insurance and/or VAT| 6| 5|
+-----------------------------+------------------------+-----------------------+
| | 86| 85|
+-----------------------------+------------------------+-----------------------+
Further information regarding Directors' remuneration can be found on the
Directors' remuneration report on pages 29 and 29 of the full Annual Report and
Financial Statements.
9. Tax (credit)/charge on ordinary activities
+----------------------------------+---------------------+---------------------+
| | Year ended 31 March| Year ended 31 March|
| | 2010| 2009|
+----------------------------------+-------+-------+-----+-------+-------+-----+
| |Revenue| | |Revenue|Capital| |
| | |Capital|Total| | |Total|
| | £'000| | | £'000| £'000| |
| | | £'000|£'000| | |£'000|
+----------------------------------+-------+-------+-----+-------+-------+-----+
| | | | | | | |
|UK corporation tax in respect of | 256| (120)| 136| 423| (2)| 421|
|current year | | | | | | |
+----------------------------------+-------+-------+-----+-------+-------+-----+
|UK corporation tax in respect of | (274)| -|(274)| (94)| -| (94)|
|prior year | | | | | | |
+----------------------------------+-------+-------+-----+-------+-------+-----+
|Total | (18)| (120)|(138)| 329| (2)| 327|
+----------------------------------+-------+-------+-----+-------+-------+-----+
Factors affecting the tax charge:
+--------------------------------------------------+-------------+-------------+
| | Year ended| Year ended|
| | | |
| |31 March 2010|31 March 2009|
| | | |
| | £'000| £'000|
+--------------------------------------------------+-------------+-------------+
|Return/(loss) on ordinary activities before | 287| (4,983)|
|taxation | | |
+--------------------------------------------------+-------------+-------------+
+--------------------------------------------------+-------------+-------------+
|Tax on profit at the standard rate | 80| (1,395)|
+--------------------------------------------------+-------------+-------------+
+--------------------------------------------------+-------------+-------------+
|Factors affecting the charge: | | |
+--------------------------------------------------+-------------+-------------+
|Non-taxable losses | 80| 1,816|
+--------------------------------------------------+-------------+-------------+
|Non-taxable income | (13)| -|
+--------------------------------------------------+-------------+-------------+
|Consortium relief in respect of prior years | (274)| (94)|
+--------------------------------------------------+-------------+-------------+
|Marginal relief | (11)| -|
+--------------------------------------------------+-------------+-------------+
| | (138)| 327|
+--------------------------------------------------+-------------+-------------+
The tax charge for the year shown in the Income statement is lower than the
standard rate of corporation tax in the UK of 28 per cent. (2009: 28 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 in the note above as tax in respect of prior
year.
Notes
(i) Venture Capital Trusts are not subject to corporation tax on capital
gains.
Tax relief on expenses charged to capital has been determined by
(ii) 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.
10. Dividends
+--------------------------------------------------+-------------+-------------+
| | Year ended| Year ended|
| | | |
| |31 March 2010|31 March 2009|
+--------------------------------------------------+-------------+-------------+
| | Total| Total|
| | | |
| | £'000| £'000|
+--------------------------------------------------+-------------+-------------+
+--------------------------------------------------+-------------+-------------+
|First dividend paid on 15 August 2008 - 5 pence | -| 1,776|
|per share | | |
+--------------------------------------------------+-------------+-------------+
|Second dividend paid on 9 January 2009 - 5 pence | -| 1,764|
|per share | | |
+--------------------------------------------------+-------------+-------------+
|First dividend paid 31 July 2009 - 2.5 pence per | 876| -|
|share | | |
+--------------------------------------------------+-------------+-------------+
|Second dividend paid 6 January 2010 - 2.5 pence | 874| -|
|per share | | |
+--------------------------------------------------+-------------+-------------+
| | 1,750| 3,540|
+--------------------------------------------------+-------------+-------------+
In addition to the dividends summarised above, the Board has declared a first
dividend for the year ending 31 March 2011 of 2.5 pence per share. This dividend
will be paid on 25 June 2010 to shareholders on the register as at 28 May 2010.
The total dividend will be approximately £870,000.
11. Basic and diluted return/(loss) per share
+-------------+--------------------------------+--------------------------------+
| | Year ended 31 March 2010| Year ended 31 March 2009|
+-------------+----------+----------+----------+----------+----------+----------+
| | Revenue| | | Revenue| Capital| |
| | | Capital| Total| | | Total|
+-------------+----------+----------+----------+----------+----------+----------+
|The return | | | | | | |
|per share has| | | | | | |
|been based on| | | | | | |
|the following| | | | | | |
|figures: | | | | | | |
+-------------+----------+----------+----------+----------+----------+----------+
|Return/(loss)| | | | | | |
|attributable | | | | | | |
|to equity | 1,003| (578)| 425| 1,180| (6,490)| (5,310)|
|shares | | | | | | |
|(£'000) | | | | | | |
+-------------+----------+----------+----------+----------+----------+----------+
|Weighted | | | | | | |
|average | | | | | | |
|shares in | | | | | | |
|issue |34,978,284|34,978,284|34,978,284|35,364,875|35,364,875|35,364,875|
|(excluding | | | | | | |
|treasury | | | | | | |
|shares) | | | | | | |
+-------------+----------+----------+----------+----------+----------+----------+
|Return/(loss)| | | | | | |
|attributable | 2.9| (1.7)| 1.2| 3.3| (18.3)| (15.0)|
|per equity | | | | | | |
|share (pence)| | | | | | |
+-------------+----------+----------+----------+----------+----------+----------+
The weighted average number of shares is calculated excluding treasury shares of
1,303,278 (2009: 975,586).
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 2010|31 March 2009|
| | | |
| | £'000| £'000|
+--------------------------------------------------+-------------+-------------+
|Qualifying unquoted equity and preference share | 7,245| 7,214|
|investments | | |
+--------------------------------------------------+-------------+-------------+
|Qualifying unquoted loan stock investments | 18,330| 18,126|
+--------------------------------------------------+-------------+-------------+
|Non-qualifying investments | 639| 675|
+--------------------------------------------------+-------------+-------------+
|Total | 26,214| 26,015|
+--------------------------------------------------+-------------+-------------+
The classification of investments by nature of investments is as follows:
+---------------------------------------+---------------+---------------+
| | 31 March 2010 | 31 March 2009 |
| | | |
| | £'000 | £'000 |
+---------------------------------------+---------------+---------------+
| Unquoted equity and preference shares | 7,684 | 7,576 |
+---------------------------------------+---------------+---------------+
| Unquoted loan stock | 18,530 | 18,439 |
+---------------------------------------+---------------+---------------+
| Total | 26,214 | 26,015 |
+---------------------------------------+---------------+---------------+
+---------------+------------+-----------+--------------+--------------+-------+
| | Qualifying| |Non-qualifying| | |
| | equity and| Qualifying| equity and|Non-qualifying| |
| | preference| loan stock| preference| loan stock| Total|
| | share|investments| share| investments| |
| | investments| | investments| | £'000|
| | | £'000| | £'000| |
| | £'000| | £'000| | |
+---------------+------------+-----------+--------------+--------------+-------+
|Opening | | | | | |
|valuation as at| 7,214| 18,439| 362| -| 26,015|
|1 April 2009 | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Purchases at | 658| 1,396| -| 200| 2,254|
|cost | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Disposal | (545)| (1,156)| -| -|(1,701)|
|proceeds | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Realised gains | 4| 14| -| -| 18|
+---------------+------------+-----------+--------------+--------------+-------+
|Debt/equity | 58| (58)| -| -| -|
|swap | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Movement in | | | | | |
|loan stock | -| 5| -| -| 5|
|accrued income | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Unrealised | (144)| (310)| 77| -| (377)|
|gains/(losses) | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Closing | | | | | |
|valuation as at| 7,245| 18,330| 439| 200| 26,214|
|31 March 2010 | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
+---------------+------------+-----------+--------------+--------------+-------+
|Movement in | | | | | |
|loan stock | | | | | |
|accrued income | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Opening | | | | | |
|accumulated | | | | | |
|movement in | -| 175| -| -| 175|
|loan stock | | | | | |
|accrued income | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Movement in | | | | | |
|loan stock | -| 5| -| -| 5|
|accrued income | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Closing | | | | | |
|accumulated | | | | | |
|movement in | -| 180| -| -| 180|
|loan stock | | | | | |
|accrued income | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
+---------------+------------+-----------+--------------+--------------+-------+
|Movement in | | | | | |
|unrealised | | | | | |
|losses | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Opening | | | | | |
|accumulated | (3,301)| (1,162)| 186| -|(4,277)|
|unrealised | | | | | |
|(losses)/gains | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Transfer of | | | | | |
|previously | | | | | |
|unrealised | | | | | |
|losses to | (1)| 56| -| -| 55|
|realised | | | | | |
|reserve on | | | | | |
|disposal of | | | | | |
|investments | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Movement in | | | | | |
|unrealised | (144)| (310)| 77| -| (377)|
|losses | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Closing | | | | | |
|accumulated | (3,446)| (1,416)| 263| -|(4,599)|
|unrealised | | | | | |
|losses | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
+---------------+------------+-----------+--------------+--------------+-------+
|Historic cost | | | | | |
|basis | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Opening book | 10,515| 19,426| 176| -| 30,117|
|cost | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Purchases at | 658| 1,396| -| 200| 2,254|
|cost | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Sales at cost | (540)| (1,198)| -| -|(1,738)|
+---------------+------------+-----------+--------------+--------------+-------+
|Debt/equity | 58| (58)| -| -| -|
|swap | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
|Closing book | 10,691| 19,566| 176| 200| 30,633|
|cost | | | | | |
+---------------+------------+-----------+--------------+--------------+-------+
Fixed asset investments held at fair value through the profit or loss account
total £7,684,000 (2009: £7,576,000). Investments held at amortised cost total
£18,530,000 (2009: £18,439,000). There has been no re-designation of fixed asset
investments during the year.
Additions of £2,156,000 included in the Cash flow statement differ from the
additions of £2,254,000 shown in the note above due to an investment settlement
debtor of £58,000 in respect of Bravo Inns II Limited and, in addition, £40,000
of unrealised gains that was capitalised from Pelican Inn Limited when the pub
portfolio was consolidated to form the Charnwood Pub Company Limited as
disclosed below.
There was one complete disposal during the year of Youngs VCT Limited totalling
£540,000; there were no realised gains or losses on disposal. Partial loan stock
repayments during the year were made by Prime VCT Limited (£550,000), two pub
investments (£96,000), three City Screen cinemas (£297,000) and hotels also
repaid loan stock (£211,000). The Company also received £7,000 from River Bourne
Health Club Limited, which is in administration. These receipts total £1,701,000
disclosed in the Cash flow statement and in the disposal proceeds in the note
above.
In September 2009, Albion Venture Capital Trust PLC exchanged its shareholdings
in Welland Inns VCT Limited (formerly Clear Pub Company VCT Limited), Novello
Pub Limited and Pelican Inn Limited for a shareholding in Charnwood Pub Company
Limited. The reorganisation resulted in the pubs being managed by a single
management team.
Fixed asset investment class valuation methodologies
Unquoted loan stock investments are valued on an amortised cost basis. Loan
stock using a fixed interest rate total £18,468,000 (2009: £18,216,000). Loan
stocks with a floating rate of interest total £62,000 (2009: £223,000).
The Directors believe that the carrying value of loan stock valued using
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.
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.|
+--------------------+---------------------------------------------------------+
Unquoted equity and preference share investments are all valued according to
Level 3 valuation methods.
The unquoted equity investments valued at fair value through profit or loss
(level 3) had the following movements in the year to 31 March 2010:
+-----------------------------------------+---------------+
| | 31 March 2010 |
+-----------------------------------------+---------------+
| | £'000 |
+-----------------------------------------+---------------+
| Opening balance | 7,576 |
+-----------------------------------------+---------------+
| Additions | 716 |
+-----------------------------------------+---------------+
| Disposals | (545) |
+-----------------------------------------+---------------+
| Realised gains | 4 |
+-----------------------------------------+---------------+
| Unrealised losses on equity investments | (67) |
+-----------------------------------------+---------------+
| Closing balance | 7,684 |
+-----------------------------------------+---------------+
Unquoted equity investments are valued in accordance with the IPEVCV guidelines
as follows:
+------------------------------+-----------------------+-----------------------+
| | Year ended 31 March| Year ended 31 March|
| | 2010| 2009|
+------------------------------+-----------------------+-----------------------+
|Valuation methodology | £'000| £'000|
+------------------------------+-----------------------+-----------------------+
| | 1,450| 2,221|
|Cost (reviewed for impairment)| | |
+------------------------------+-----------------------+-----------------------+
|Net asset value supported by | 6,234| 5,355|
|third party valuation | | |
+------------------------------+-----------------------+-----------------------+
| | 7,684| 7,576|
+------------------------------+-----------------------+-----------------------+
There have been no changes in valuation methodologies of unquoted equity
investments between 31 March 2009 and 31 March 2010.
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 possible methods of valuation which
would be reasonable as at 31 March 2010.
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 81 per cent. of the equity investments (by valuation), is
based on cash or 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 2010
as described below:
+-----------------+------------------+----------------+-------------+----------+
| | Country of | Principal | % class and | % total |
| Company | incorporation | activity | share type | voting |
| | | | | rights |
+-----------------+------------------+----------------+-------------+----------+
| | |Residential |50.0% | |
|Prime VCT Limited|Great Britain |property |Ordinary |50.0% |
| | |developer |shares | |
+-----------------+------------------+----------------+-------------+----------+
|City Screen | | |50.0% | |
|(Cambridge) |Great Britain |Art house cinema|Ordinary |50.0% |
|Limited | | |shares | |
+-----------------+------------------+----------------+-------------+----------+
|G&K Smart | |Residential |42.9% | |
|Developments VCT |Great Britain |property |Ordinary |42.9% |
|Limited | |developer |shares | |
+-----------------+------------------+----------------+-------------+----------+
|Chase Midland VCT| |Residential |38.1% | |
|Limited |Great Britain |property |Ordinary |38.1% |
| | |developer |shares | |
+-----------------+------------------+----------------+-------------+----------+
|Kew Green VCT | |Hotel owner and |28.2% | |
|(Stansted) |Great Britain |operator |Ordinary |28.2% |
|Limited | | |shares | |
+-----------------+------------------+----------------+-------------+----------+
|The Bear | |Hotel owner and |26.1% | |
|Hungerford |Great Britain |operator |Ordinary |26.1% |
|Limited | | |shares | |
+-----------------+------------------+----------------+-------------+----------+
|The Place | |Hotel owner and |25.0% | |
|Sandwich VCT |Great Britain |operator |Ordinary |25.0% |
|Limited | | |shares | |
+-----------------+------------------+----------------+-------------+----------+
|The Stanwell | |Hotel owner and |23.8% | |
|Hotel Limited |Great Britain |operator |Ordinary |23.8% |
| | | |shares | |
+-----------------+------------------+----------------+-------------+----------+
As permitted by FRS 9, the investments listed above are held as part of an
investment portfolio, and their value to the Company is as part of a portfolio
of investments. Therefore these investments are not considered to be associated
undertakings.
14. Current assets include the following:
+--------------------------------+---------------+---------------+
| | 31 March 2010 | 31 March 2009 |
+--------------------------------+---------------+---------------+
| Debtors | £'000 | £'000 |
+--------------------------------+---------------+---------------+
| | 2 | 2 |
| Prepayments and accrued income | | |
+--------------------------------+---------------+---------------+
| Recoverable VAT | - | 193 |
+--------------------------------+---------------+---------------+
| UK corporation tax repayable | 380 | - |
+--------------------------------+---------------+---------------+
| Other debtors | - | 4 |
+--------------------------------+---------------+---------------+
| | 382 | 199 |
+--------------------------------+---------------+---------------+
The Directors consider that the carrying amount of debtors is not materially
different to their fair value.
The Company does not hold any current asset investments (2009: Nationwide
floating rate note £1,463,000). Floating rates notes can be converted to cash
within five working days.
15. Creditors: amounts falling due within one year
+------------------------------+---------------+---------------+
| | 31 March 2010 | 31 March 2009 |
+------------------------------+---------------+---------------+
| | £'000 | £'000 |
+------------------------------+---------------+---------------+
| Trade creditors | 5 | 39 |
+------------------------------+---------------+---------------+
| UK corporation tax payable | - | 12 |
+------------------------------+---------------+---------------+
| Accruals and deferred income | 294 | 254 |
+------------------------------+---------------+---------------+
| | 299 | 305 |
+------------------------------+---------------+---------------+
The Directors consider that the carrying amount of creditors is not materially
different to their fair value.
16. Called up share capital
+--------------------------------------------------+-------------+-------------+
| |31 March 2010|31 March 2009|
| | | |
| | £'000| £'000|
+--------------------------------------------------+-------------+-------------+
|Authorised | | |
+--------------------------------------------------+-------------+-------------+
|68,000,000 Ordinary shares of 50p each (2009: | 34,000| 34,000|
|68,000,000) | | |
+--------------------------------------------------+-------------+-------------+
+--------------------------------------------------+-------------+-------------+
|Allotted, called up and fully paid | | |
+--------------------------------------------------+-------------+-------------+
|36,099,232 Ordinary shares of 50p each (2009: | 18,050| 18,002|
|36,003,835) | | |
+--------------------------------------------------+-------------+-------------+
+--------------------------------------------------+-------------+-------------+
|Shares in issue | | |
+--------------------------------------------------+-------------+-------------+
|34,795,954 Ordinary shares of 50p each (net of | | |
|treasury shares) (2009: 35,028,249) | | |
+--------------------------------------------------+-------------+-------------+
+--------------------------------------------------+-------------+-------------+
The Company purchased 327,692 Ordinary shares (2009: 731,040) to be held in
treasury at a cost of £209,000 (2009: £571,000) representing 0.9 per cent of the
shares in issue (excluding treasury shares) as at 31 March 2010. The shares
purchased for treasury were funded from the Own treasury shares reserve.
The Company holds a total of 1,303,278 shares (2009: 975,586) in treasury,
representing 3.6 per cent. of the Ordinary share capital in issue as at 31 March
2010.
Under the terms of the Dividend Reinvestment Scheme Circular dated 10 July
2008, the following Ordinary shares of nominal value 50 pence were allotted
during the year.
+-------------+-----------+------------+----------------+---------+------------+
| | | Aggregate| | | Opening|
| Date of| Number of| nominal| Consideration| Issue|market price|
| allotment| shares| value of| received| price|per share on|
| | allotted| shares| | | allotment|
| | | | | | date|
+-------------+-----------+------------+----------------+---------+------------+
| | | | | (pence| (pence per|
| | | £'000| £'000| per| share)|
| | | | | share)| |
+-------------+-----------+------------+----------------+---------+------------+
| 31 July 2009| 47,215| 24| 39| 82.8| 67.8|
+-------------+-----------+------------+----------------+---------+------------+
| 6 January| | | | 79.4| |
| 2010| 48,182| 24| 38| | 57.8|
+-------------+-----------+------------+----------------+---------+------------+
17. Basic and diluted net asset value per share
+--------------------------------------------------+-------------+-------------+
| |31 March 2010|31 March 2009|
+--------------------------------------------------+-------------+-------------+
+--------------------------------------------------+-------------+-------------+
|Basic and diluted net asset values per share | 81.6| 85.3|
|(pence) | | |
+--------------------------------------------------+-------------+-------------+
The basic and diluted net asset values per share at the year end are calculated
in accordance with the Articles of Association and are based upon total shares
in issue less the treasury shares of 34,795,954 Ordinary shares (2009:
35,028,249).
There are no convertible instruments, derivatives or contingent share agreements
in issue. The Company's policy is to sell treasury shares at a price greater
than the purchase price hence the net asset value per share on a diluted basis
would be equal to or greater than the basic net asset value, depending on the
actual price achieved for selling the treasury shares.
18. Analysis of changes in cash during the year
+-----------------------+--------------------------+--------------------------+
| | Year ended 31 March 2010 | Year ended 31 March 2009 |
+-----------------------+--------------------------+--------------------------+
| | £'000 | £'000 |
+-----------------------+--------------------------+--------------------------+
| Opening cash balances | 2,498 | 5,409 |
+-----------------------+--------------------------+--------------------------+
| Net cash outflow | (395) | (2,911) |
+-----------------------+--------------------------+--------------------------+
| Closing cash balances | 2,103 | 2,498 |
+-----------------------+--------------------------+--------------------------+
19. Reconciliation of net return on ordinary activities before taxation to net
cash inflow from operating activities
+-----------------------------------+---------------------+--------------------+
| | Year ended 31 March| Year ended 31 March|
| | 2010| 2009|
+-----------------------------------+---------------------+--------------------+
| | £'000| £'000|
+-----------------------------------+---------------------+--------------------+
|Revenue return on ordinary | 985| 1,509|
|activities before taxation | | |
+-----------------------------------+---------------------+--------------------+
|Investment management fee charged | (433)| (549)|
|to capital | | |
+-----------------------------------+---------------------+--------------------+
|Recoverable VAT capitalised | 21| 540|
+-----------------------------------+---------------------+--------------------+
|Movement in accrued amortised loan | 5| 167|
|stock interest | | |
+-----------------------------------+---------------------+--------------------+
|Decrease/(increase) in debtors | 197| (151)|
+-----------------------------------+---------------------+--------------------+
|Decrease in creditors | (65)| (58)|
+-----------------------------------+---------------------+--------------------+
|Net cash inflow from operating | 710| 1,458|
|activities | | |
+-----------------------------------+---------------------+--------------------+
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 in the Chairman's statement .
The Company's financial instruments comprise equity and loan stock investments
in unquoted companies, floating rate notes, 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:
ï‚Ÿ Investment (or market) risk (which comprises investment price and cash flow
interest rate risk);
ï‚Ÿ credit risk; and
ï‚Ÿ 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 and in quoted
investments, details of which are shown on pages 11 to 12 of the full Annual
Report and Financial Statements. Investment risk is the exposure of the Company
to the revaluation and devaluation of investments. The main driver of investment
risk is the operational and financial performance of the 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 and current asset investment portfolio which is £26,214,000 (2009:
£27,478,000). Fixed and current asset investments form 92.3 per cent. of the net
asset value as at 31 March 2010 (2009: 92.0 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 11 to 12 of the full
Annual Report and Financial Statements and in the Manager's report.
Valuations are based on the most appropriate valuation methodology for an
investment within its market, with regard to the financial
health of the investment and the IPEVCV Guidelines.
As required under FRS 29 "Financial Instruments: Disclosures", the Board is
required to illustrate by way of a sensitivity analysis the
degree of exposure to market risk. The Board considers that the value of the
fixed 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 £2,621,000
(2009: £2,748,000).
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 considered that further falls in interest rates
would not have a significant impact.
The weighted average interest rate applied to the Company's fixed rate assets
during the year was approximately 6.4 per cent. (2009: 7.5 per cent.). The
weighted average period to maturity for the fixed rate assets is approximately
2.0 years (2009: 1.3 years).
The Company's financial assets and liabilities as at 31 March 2010, all
denominated in pounds sterling, consist of the following:
+-----------+-----------------------------------+-----------------------------------+
| | 31 March 2010 | 31 March 2009 |
+-----------+------+--------+------------+------+------+--------+------------+------+
| | |Floating|Non-interest| Total| |Floating|Non-interest| Total|
| | Fixed| rate| bearing| | Fixed| rate| bearing| |
| | rate| | | £'000| rate| | | £'000|
| | £'000| £'000| £'000| | £'000| £'000| £'000| |
+-----------+------+--------+------------+------+------+--------+------------+------+
| | | | | | | | | |
|Unquoted | -| -| 7,684| 7,684| -| -| 7,576| 7,576|
|equity | | | | | | | | |
+-----------+------+--------+------------+------+------+--------+------------+------+
|Unquoted |18,468| 62| -|18,530|18,216| 223| -|18,439|
|loan stock | | | | | | | | |
+-----------+------+--------+------------+------+------+--------+------------+------+
|Floating | -| -| -| -| -| 1,463| -| 1,463|
|rate notes | | | | | | | | |
+-----------+------+--------+------------+------+------+--------+------------+------+
|Debtors | -| -| 382| 382| -| -| 199| 199|
+-----------+------+--------+------------+------+------+--------+------------+------+
|Current | -| -| (299)| (299)| -| -| (305)| (305)|
|liabilities| | | | | | | | |
+-----------+------+--------+------------+------+------+--------+------------+------+
|Cash | -| 2,103| -| 2,103| -| 2,498| -| 2,498|
+-----------+------+--------+------------+------+------+--------+------------+------+
|Total net |18,468| 2,165| 7,767|28,400|18,216| 4,184| 7,470|29,870|
|assets | | | | | | | | |
+-----------+------+--------+------------+------+------+--------+------------+------+
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 floating rate notes and cash
on deposit with banks.
The Manager evaluates credit risk on loan stock and floating rate note
instruments prior to investment, and as part of its ongoing monitoring of
investments. In doing this, it takes into account the extent and quality of any
security held. Typically loan stock instruments have a first fixed charge or a
fixed and floating charge over the assets of the 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 2010 was limited to
£18,530,000 (2009: £18,439,000) of unquoted loan stock instruments, £2,103,000
cash deposits with banks (2009: £2,498,000) and no floating rate notes (2009:
£1,463,000).
The cost, impairment and carrying value of impaired loan stocks held at
amortised cost at 31 March 2010 and 31 March 2009 are as follows:
+--------------+-------------------------------+-------------------------------+
| | Year ended 31 March 2010| Year ended 31 March 2009|
+--------------+-----+----------+--------------+-----+----------+--------------+
| | Cost|Impairment|Carrying value| Cost|Impairment|Carrying value|
| | | | | | | |
| |£'000| £'000| £'000|£'000| £'000| £'000|
+--------------+-----+----------+--------------+-----+----------+--------------+
|Impaired loan| | | | | | |
|stock |7,608| (1,408)| 6,200|7,469| (1,138)| 6,331|
+--------------+-----+----------+--------------+-----+----------+--------------+
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, HSBC plc, Bank of Scotland plc,
Standard Life, Scottish Widows Bank plc and BNP Paribas Securities Services
Custody Bank Limited. Credit risk on cash transactions is mitigated by
transacting with counterparties that are regulated entities subject to
regulatory supervision, with Moody's credit ratings of at least 'A' or
equivalent as assigned by international credit-rating agencies.
As at the year end the Company held no floating rate notes (2009: one Nationwide
floating rate note 07/06/2010 value £1,463,000).
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 £2,840,000 as at 31 March 2010 (2009:
£2,987,000).
The Company has no committed borrowing facilities as at 31 March 2010 (2009:
£nil) and had cash balances of £2,103,000 (2009: £2,498,000) and no floating
rate notes (2009: £1,463,000). 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 £299,000 for the year to 31 March 2010 (2009:
£305,000).
The carrying value of loan stock investments held at amortised cost at 31 March
2010 as analysed at each year end by expected maturity dates is as follows:
+------------------+---------------------+-----------+------------------+------+
| |Fully performing loan| Past due| Impaired loan| |
| | stock| | stock| Total|
|Redemption date | |loan stock*| | |
| | £'000| | £'000| £'000|
| | | £'000| | |
+------------------+---------------------+-----------+------------------+------+
| | -| -| 1,567| 1,567|
|Less than one year| | | | |
+------------------+---------------------+-----------+------------------+------+
|1-2 years | 1,758| 1,901| 740| 4,399|
+------------------+---------------------+-----------+------------------+------+
|2-3 years | 935| 2,386| 301| 3,622|
+------------------+---------------------+-----------+------------------+------+
|3-5 years | 3,948| 1,402| 3,592| 8,942|
+------------------+---------------------+-----------+------------------+------+
|Total | 6,641| 5,689| 6,200|18,530|
+------------------+---------------------+-----------+------------------+------+
*investments shown as past due are fully performing in terms of interest
payments
The carrying value of loan stock investments held at amortised cost at 31 March
2009 as analysed by expected maturity dates is as follows:
+-----------------+-----------------+-------------------+---------------+------+
| | Fully performing| Renegotiated loan| Impaired loan| Total|
|Redemption date | loan stock| stock| stock| |
| | | | | £'000|
| | £'000| £'000| £'000| |
+-----------------+-----------------+-------------------+---------------+------+
| | | | | |
|Less than one | 900| 2,071| -| 2,971|
|year | | | | |
+-----------------+-----------------+-------------------+---------------+------+
|1-2 years | 1,161| 4,520| 2,448| 8,129|
+-----------------+-----------------+-------------------+---------------+------+
|2-3 years | 799| 480| 2,014| 3,293|
+-----------------+-----------------+-------------------+---------------+------+
|3-5 years | 617| 1,560| 1,869| 4,046|
+-----------------+-----------------+-------------------+---------------+------+
|Total | 3,477| 8,631| 6,331|18,439|
+-----------------+-----------------+-------------------+---------------+------+
Loan stock investments disclosed above as renegotiated would otherwise have been
disclosed as past due.
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 2010 are
stated at fair value as determined by the Directors, with the exception of loans
and receivables included within investments, which are carried at amortised
cost, in accordance with FRS 26. 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. Post balance sheet events
Since 31 March 2010 the Company has had the following post balance sheet events:
 April 2010: Investment of £123,000 in The Stanwell Hotel Limited
 April 2010: Repayment of £55,000 of loan stock in Kew Green VCT (Stansted)
Limited
22. Related party transactions
The Manager, Albion Ventures LLP, could be considered to be a related party by
virtue of the fact that it is party to a Management
agreement from the Company (details disclosed on page 20 of the full Annual
Report and Financial Statements). During the year, services of a total value of
£617,000 (2009: £771,000), were purchased by the Company from Albion Ventures
LLP; this includes £577,000 investment management fee and £39,955 administration
fee (including VAT). At the financial year end, the amount due to Albion
Ventures LLP in respect of these services disclosed within accruals and deferred
income was £175,000 (2009: £185,000).
Albion Ventures LLP has reclaimed VAT from HMRC as described in note 6. A
receipt of £28,000 (2009: £720,000) has been recognised in the Income statement
for the year in respect of related historic management fees paid to Albion
Ventures LLP.
There are no other related party transactions or balances requiring disclosure.
23. Principal risks and uncertainties
In addition to the current economic risks outlined in the Chairman's statement,
the Board considers that the Company faces the following major risks and
uncertainties:
1. Investment risk
This is the risk of investment in poor quality assets which reduces the capital
and income returns to shareholders, and negatively impacts on the Company's
reputation. By nature, smaller unquoted businesses, such as those that qualify
for venture capital trust purposes, are more fragile than larger, long
established businesses.
To reduce this risk, the Board places reliance upon the skills and expertise of
the Manager and its strong track record for investing in this segment of the
market. In addition, the Manager operates a formal and structured investment
process, which includes an Investment Committee, comprising investment
professionals from the Manager and at least one external investment
professional. The Manager also invites comments from all non-executive Directors
on investments discussed at the Investment Committee meetings. Investments are
actively and regularly monitored by the Manager (investment managers normally
sit on investee company boards) and the Board receives detailed reports on each
investment as part of the Manager's report at quarterly board meetings.
2. Venture Capital Trust approval risk
The Company's current approval as a venture capital trust allows investors to
take advantage of tax reliefs on initial investment and ongoing tax free capital
gains and dividend income. Failure to meet the qualifying requirements could
result in investors losing the tax relief on initial investment and loss of tax
relief on any tax-free income or capital gains received. In addition, failure to
meet the qualifying requirements could result in a loss of listing of the
shares.
To reduce this risk, the Board has appointed the Manager, who has a team with
significant experience in venture capital trust management, used to operating
within the requirements of the venture capital trust legislation. In addition,
to provide further formal reassurance, the Board has appointed
PricewaterhouseCoopers LLP as its taxation advisors. PricewaterhouseCoopers LLP
report quarterly to the Board to independently confirm compliance with the
venture capital trust legislation, to highlight areas of risk and to inform on
changes in legislation.
3. 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 auditors, lawyers and other professional
bodies.
4. 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 auditors Littlejohn LLP at
least once a year, receiving a report regarding the last formal internal audit
performed on the Manager, and providing the opportunity for the Audit Committee
to ask specific and detailed questions. During the year the Board met with the
Partner at Littlejohn LLP internal audit to discuss the most recent Internal
Audit Report completed 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 26 of the full Annual Report and Financial Statement.
Measures are in place to mitigate information risk in order to ensure the
integrity, availability and confidentiality of information used within the
business.
5. 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 20). In addition, the Manager has demonstrated to the Board that there
is no undue reliance placed upon any one individual within Albion Ventures LLP.
6. 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 Annual
Report and 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.
Key financial risks are noted in note 20 above.
24. Other information
The information set out in this announcement does not constitute the Company's
statutory accounts within the terms of section 434 of the Companies Act 2006 for
the periods ended 31 March 2010 and 31 March 2009, 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 31Â March 2010, which will be, delivered to
the Registrar of Companies. The Auditors reported on those accounts; their
reports were unqualified and did not contain a statement under 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 21 June 2010 at 2pm.
25. Publication
The full audited Annual Report and Financial Statements is being sent to
shareholders and copies will be made available to the public at the registered
office of the Company, Companies House, the FSA viewing facility and also
electronically at www.albion-ventures.co.uk
<
http://www.albion-ventures.co.uk/>Â under the 'Our Funds' section.
[HUG#1417783]
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