Albion Development VCT PLC - Ordinary Shares : ...
Albion Development VCT PLC
As required by the UK Listing Authority's Disclosure and Transparency Rules 4.1 and 6.3, Albion Development VCT PLC today makes public its information relating to the Annual Report and Financial Statements for the year ended 31 December 2015.
This announcement was approved for release by the Board of Directors on 23 March 2016.
This announcement has not been audited.
You will shortly be able to view the Annual Report and Financial Statements for the year to 31 December 2015 (which have been audited) at: www.albion-ventures.co.uk by clicking on 'Our Funds' and then 'Albion Development VCT PLC'. The Annual Report and Financial Statements for the year to 31 December 2015 will be available as a PDF document via a link under the 'Investor Centre' in the 'Financial Reports and Circulars' section. The information contained in the Annual Report and Financial Statements will include information as required by the Disclosure and Transparency Rules, including Rule 4.1.
Investment objective and policy
Albion Development VCT PLC's (the "Company's") investment policy is intended to provide investors with a regular and predictable source of dividend income combined with the prospects of long term capital growth. This is achieved by establishing a diversified portfolio of holdings in smaller, unquoted companies whilst at the same time selecting and structuring investments in such a way as to reduce the risks normally associated with investment in such companies. It is intended that this will be achieved as follows:
- Through investment in a number of higher risk companies with greater growth prospects in sectors such as software and computer services, and medical technology.
- This is balanced by investment in more stable, often asset-backed investments that provide a strong income stream. These include asset-based businesses in the leisure, healthcare, education and renewable energy sectors, as well as stable and profitable businesses in other sectors. Such investments will constitute the majority of investments by cost.
- In neither category do portfolio companies normally have any external borrowings with a prior charge ranking ahead of the VCT.
- Up to two-thirds of qualifying investments by cost comprise loan stock secured with a first charge on the portfolio company's assets.
Background to the Company
The Company is a venture capital trust which raised a total of £33.3 million through the issue of shares between 1999 and 2004. The C shares merged with the Ordinary shares in 2007.
A further £6.3 million was raised through an issue of new D shares in 2009/2010. The D shares converted to Ordinary shares on 31 March 2015 on the basis of their respective audited net asset value per share at 31 December 2014, in line with the original prospectus. Accordingly, D shareholders received 1.4975 Ordinary shares for each D share they owned.
An additional £17.3 million has been raised for the Ordinary shares through the Albion VCTs Top Up Offers since January 2011. The funds raised have been invested in accordance with the Company's existing investment policy.
Financial calendar
| Record date for first dividend | 6 May 2016 |
| Payment of first dividend | 31 May 2016 |
| Annual General Meeting | 12pm on 26 May 2016 |
| Announcement of half-yearly results for the six months ending 30 June 2016 | August 2016 |
| Payment of second dividend (subject to Board approval) | 30 September 2016 |
Financial highlights
Ordinary shares
| 153.9p | Total shareholder return per Ordinary share from launch to 31 December 2015 |
| 4.2% | Total return on opening net asset value for the year ended 31 December 2015 |
| 5.0p | Total tax free dividends per Ordinary share paid in the year to 31 December 2015 |
| 71.1p | Net asset value per Ordinary share as at 31 December 2015 |
Financial highlights
| Ordinary shares | ||||
| 31 December 2015 pence per share | 31 December 2014 pence per share | |||
| Dividends paid | 5.0 | 5.0 | ||
| Revenue return | 1.5 | 1.0 | ||
| Capital return | 1.6 | 3.0 | ||
| Net asset value | 71.1 | 73.1 | ||
Total shareholder return to 31 December 2015:
| Ordinary shares (pence per share) (ii) | C shares (pence per share) (ii) (iv) | D shares (pence per share)(ii) (v) | |
| Total dividends paid during the year ended: 31 December 1999(i) | 1.0 | - | - |
| 31 December 2000 | 2.9 | - | - |
| 31 December 2001 | 3.9 | - | - |
| 31 December 2002 | 4.2 | - | - |
| 31 December 2003(iii) | 4.5 | 0.7 | - |
| 31 December 2004 | 4.0 | 2.0 | - |
| 31 December 2005 | 5.2 | 5.9 | - |
| 31 December 2006 | 3.0 | 4.5 | - |
| 31 December 2007(iv) | 5.0 | 5.3 | - |
| 31 December 2008 | 12.0 | 12.8 | - |
| 31 December 2009 | 4.0 | 4.3 | - |
| 31 December 2010 | 8.0 | 8.6 | 1.0 |
| 31 December 2011 | 5.0 | 5.4 | 2.5 |
| 31 December 2012 | 5.0 | 5.4 | 3.5 |
| 31 December 2013 | 5.0 | 5.4 | 5.0 |
| 31 December 2014 | 5.0 | 5.4 | 5.0 |
| 31 December 2015(v) | 5.0 | 5.4 | 7.5 |
| Total dividends paid to 31 December 2015 | 82.8 | 71.1 | 24.5 |
| Net asset value as at 31 December 2015 | 71.1 | 76.2 | 106.5 |
| Total shareholder return to 31 December 2015 | 153.9 | 147.3 | 131.0 |
In addition to the dividends paid above, the Board has declared a first dividend for the year ending 31 December 2016 of 2.5 pence per Ordinary share payable on 31 May 2016 to shareholders on the register as at 6 May 2016.
Notes
(i) Assuming subscription for Ordinary shares by the First Closing on 26 January 1999.
(ii) Excludes tax benefits upon subscription.
(iii) Those subscribing for C shares after 30 June 2003 were not entitled to the interim dividend.
(iv) The C shares were converted into Ordinary shares on 31 March 2007, with a conversion ratio of 1.0715 Ordinary shares for each C share. The net asset value per share and all dividends paid subsequent to the conversion of the C shares to the Ordinary shares are multiplied by the conversion factor of 1.0715 in respect of the C shares return, in order to give an accurate picture of the shareholder value since launch relating to the C shares.
(v) The D shares were converted into Ordinary shares on 31 March 2015, with a conversion ratio of 1.4975 Ordinary shares for each D share. The net asset value per share and all dividends paid subsequent to the conversion of the D shares to the Ordinary shares are multiplied by the conversion factor of 1.4975 in respect of the D shares return, in order to give an accurate picture of the shareholder value since launch relating to the D shares.
Chairman's statement
Introduction
The results for Albion Development VCT PLC for the year to 31 December 2015 showed total return of 3.1 pence per Ordinary share, against 4.0 pence per Ordinary share and 7.1 pence per D share for 2014.
Investment performance and progress
We had three principal exits in 2015 namely: Orchard Portman Group, Kensington Health Club and Lowcosttravelgroup, which, in total, returned disposal proceeds in excess of £3.0 million. Orchard Portman Group, which owns and operates a psychiatric hospital outside Taunton, was sold at a multiple, including interest income, of 1.6 times cost. The exit of Kensington Health Club achieved a return, including interest, of 1.4 times cost and Lowcosttravelgroup achieved a return, including interest, of 1.7 times cost. In addition, our investment in Rostima Holdings, which provided staff scheduling services for ports and which, although a leader in its field, had difficulty penetrating a complex global market was sold for a nominal sum, realising a loss of £0.3 million. In aggregate, however, these sales were at a slightly lower level than their holding value of £4.4 million at the start of the year, resulting in an aggregate write-down of £0.6 million. The other realisations during the year were mainly made up of loan stock repayments, and more details can be found in the realisations table on page 19 of the full Annual Report and Financial Statements.
Investment activity continued to be strong, with a total of £4.0 million invested during the year in both new investments and continued support for existing investments. Investments in new companies comprised £110,000 in Panaseer Limited, a cybersecurity company offering a visualisations and data integrations platform to the financial services sector; and £84,000 in Dickson Financial Services Limited, a company trading as Innovation Broking offering commercial insurance broking services to the UK SME sector. Notable further investments in existing portfolio companies included £1.6 million in Radnor House School (Holdings) to fund the purchase and development of Combe Bank School in Sevenoaks; £331,000 in Earnside Energy, which provides energy from biogas; and £256,000 in Relayware, a company providing channel partner automation software.
Companies that performed particularly well during the period included; Radnor House School (Holdings) which continues to grow profitably; Exco Intouch, a relatively new investment in the portfolio which is making excellent progress; MyMeds&Me which continues to experience a growing pipeline of potential customers; and Chonais River Hydro which completed construction of a hydropower project in early 2015 and is now successfully generating electricity.
Against this, the valuations in Blackbay and the Weybridge Health Club were reduced in the period as a result of their current trading levels.
For a review of business and future prospects please see the Strategic report.
Merger of the Ordinary shares and D shares
In accordance with the Articles of Association, on 31 March 2015, the D shares converted to Ordinary shares on the basis of the net assets attributable to the Ordinary shares and the D shares as disclosed in the audited accounts for the year ended 31 December 2014 and in accordance with the calculation as described and approved by shareholders' at the Extraordinary General Meeting on 28 October 2009. D shareholders received 1.4975 Ordinary shares for each D share they owned as at 31 March 2015. New certificates were sent to D shareholders in April 2015.
Changes in VCT legislation
The July 2015 budget introduced a number of changes to VCT legislation, including restrictions over the age of investments, a prohibition on management buyouts or the purchase of existing businesses and an overall lifetime investment cap of £12 million from tax-advantaged funds into any portfolio company. While these changes are significant, the Company has been advised that had they been in place previously they would have affected only a relatively small number of the investments that we have made into new portfolio companies over recent years. The Board's current view is that there will be no material change in our investment policy as a result.
Risks and uncertainties
The outlook for the domestic and global economies continues to be the key risk affecting your Company, despite the current growth in the UK. The task of the Manager is to allocate resources to those sectors and investment opportunities where growth can be both resilient and sustainable. Importantly, however, investment risk is mitigated through a variety of processes including our policy of ensuring that the VCT has a first charge over investee companies' assets wherever possible.
A detailed analysis of the other risks and uncertainties facing the business is shown in the Strategic report.
Discount management and share buy-backs
It remains the Board's primary objective to maintain sufficient resources for investment in existing and new investee companies and for the continued payment of dividends to shareholders. The Board's policy is to buy back shares in the market, subject to the overall constraint that such purchases are in the VCT's interest. It is the Board's intention for such buy-backs to be in the region of a 5 per cent. discount to net asset value, so far as market conditions and liquidity permit.
During the year, the Company purchased 951,000 Ordinary shares to be held in treasury at a cost of £649,000, representing 2.3 per cent. of the opening shares in issue.
Transactions with the Manager
Details of transactions that took place with the Manager during the year can be found in note 5 and principally relate to the management fee.
Results and dividends
As at 31 December 2015, the net asset value was 71.1 pence per Ordinary Share (2014: 73.1 pence per Ordinary share). The Company will pay a first dividend for the financial year to 31 December 2016 of 2.5 pence per Ordinary share on 31 May 2016 to shareholders on the register on 6 May 2016.
Although not achieved this year, it remains a core aim of the Board to ensure dividends paid by the Company are covered by the total return per share.
Albion VCTs Prospectus Top Up Offers
The Albion VCTs Prospectus Top Up Offers 2014/2015 closed on 30 September 2015, the total raised by the Company under this Offer was £5.8 million. The total raised under the Offers made by each of the Albion VCT's which participated was £34.7 million.
In November 2015, the Company announced the launch of the Albion VCTs Prospectus Top Up Offers 2015/2016. In aggregate, the Albion VCTs will be aiming to raise up to £36 million across six of the VCTs managed by Albion Ventures LLP. The Board is pleased to announce that it has reached its £6 million limit under its Offer, which as of 23 March 2016 is fully subscribed and has now closed.
The funds raised by your Company pursuant to its Offer will be added to the liquid resources available for investment so as to put the Company into a position to take advantage of attractive investment opportunities over the next two to three years. Accordingly, the proceeds of the Offer will be applied in accordance with the investment policy.
Outlook and prospects
Although the total return for the year is lower than we were hoping for, the portfolio remains well balanced, with strong asset-based investments, including in renewable energy, complementing a number of promising high growth businesses, including those investments in technology. We remain positive on the long term prospects of the Company.
Geoffrey Vero
Chairman
23 March 2016
Strategic report
Investment objective and policy
The Company's investment policy is intended to provide investors with a regular and predictable source of dividend income combined with the prospects of long term capital growth. This is achieved by establishing a diversified portfolio of holdings in smaller, unquoted companies whilst at the same time selecting and structuring investments in such a way as to manage and mitigate the risks normally associated with investment in such companies. It is intended that this will be achieved as follows:
- Through investment in a number of higher risk companies with greater growth prospects in sectors such as software and computer services, and medical technology.
- This is balanced by investment in more stable, often asset-backed investments that provide a strong income stream. These include asset-based businesses in the leisure, healthcare, education and renewable energy sectors, as well as stable and profitable businesses in other sectors. Such investments will constitute the majority of investments by cost.
- In neither category do portfolio companies normally have any external borrowings with a prior charge ranking ahead of the VCT.
- Up to two-thirds of qualifying investments by cost comprise loan stock secured with a first charge on the portfolio company's assets.
Funds held pending investment or for liquidity purposes will be held as cash on deposit or in floating rate notes or similar instruments with banks or other financial institutions with high credit ratings assigned by international credit rating agencies.
Current portfolio sector allocation
As mentioned above, it is intended that the Company's investment portfolio will be split between higher risk companies with greater growth prospects, balanced by investment in more stable companies, which are often asset-backed, that provide a strong income stream combined with a protection of capital. The pie chart at the end of this announcement shows the split of the portfolio valuation by industrial or commercial sector as at 31 December 2015. Details of the principal investments made by the Company are shown in the Portfolio of investments on pages 17 to 19 of the full Annual Report and Financial Statements.
Direction of portfolio
The sector analysis of the Company's investment portfolio shows that health and fitness clubs now accounts for 2 per cent. compared to 5 per cent. in the previous financial year as a result of the disposal of the investment in Kensington Health Club. Similarly, travel and retail now accounts for 1 per cent. of the portfolio compared to 6 per cent previously, as a result of the disposal of Lowcosttravelgroup. Continued development of Radnor House School (Holdings), including the acquisition of Combe Bank School in Sevenoaks, Kent has increased the education sector by 4 per cent. in the financial year. The IT and Healthcare sectors are anticipated to be of increasing importance in the current period, as they are areas that the Manager has targeted for value creation and a good potential source of recurring income.
The sector analysis for the investment portfolio remain in line with the Board's target exposure with a view to maintaining a balanced portfolio of investments as new opportunities arise.
Results and dividend policy
| Ordinary shares | |||
| £'000 | |||
| Net revenue return for the year | 769 | ||
| Net capital gain for the year | 850 | ||
| Total return for the year ended 31 December 2015 | 1,619 | ||
| Dividend of 2.5 pence per share paid on 29 May 2015 | (1,335) | ||
| Dividend of 2.5 pence per share paid on 30 September 2015 | (1,347) | ||
| Transferred from reserves | (1,063) | ||
| Net assets as at 31 December 2015 | 38,900 | ||
| Net asset value per share as at 31 December 2015 (pence) | 71.1 |
The Company paid dividends of 5.0 pence per Ordinary share (2014: 5.0 pence per Ordinary share).
As described in the Chairman's statement, the Board has declared a first dividend for the year ending 31 December 2016 of 2.5 pence per Ordinary share payable on 31 May 2016 to shareholders on the register as at 6 May 2016.
As shown in the Income statement, the total investment income increased to £1,335,000 (2014: £1,151,000) due, in part, to higher interest received on loan stock investments during the year. The total revenue return to equity holders has increased to £769,000 (2014: £553,000), due in part to the aforementioned 16 per cent. increase in investment income.
The total capital return for the year was £850,000 (2014: £1,374,000). This is mainly attributable to the unrealised revaluation movements in the Company's investment portfolio, in particular, increases in Radnor House School (Holdings), Exco Intouch and Chonais River Hydro, outweighing reductions in Blackbay and Weybridge. The net upward movement in unrealised gains were offset slightly by net realised losses in the year on the disposal of Lowcosttravelgroup and Rostima Holdings.
The total return was 3.1 pence per share (2014: 4.0 pence per share). The balance sheet shows that the net asset value has decreased over the last year to 71.1 pence per share (2014: 73.1 pence per share). The decrease in net asset value can be attributed to the payment of 5.0 pence per Ordinary share of dividends offset by movements in realised and unrealised gains and net revenue return.
The cash flow was positive for the year as a result of net cash inflow from operating activities, the disposal of investments and the issue of Ordinary shares, offset by a number of new investments made and dividends paid during the year.
Review of business and outlook
The results for the year to 31 December 2015 show total shareholder return of 153.9 pence per Ordinary share since launch (2014: 150.8 pence per share). We believe there should be further progress in the current year, with selected disposals and new investments, and particular focus in our core areas of healthcare and IT/software.
The Directors do not foresee any major changes in the activity undertaken by the Company in the current year. The Company continues with its objective to invest in unquoted companies throughout the United Kingdom with a view to providing both capital growth and a reliable dividend income to shareholders over the long term.
A detailed review of the Company's business during the year is contained in the Chairman's statement. Details of significant events which have occurred since the end of the financial year are listed in note 21. Details of transactions with the Manager are shown in note 5.
VCT regulation
The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC. In order to maintain its status under Venture Capital Trust legislation, a VCT must comply on a continuing basis with the provisions of Section 274 of the Income Tax Act 2007, details of which are provided in the Directors' report on page 23 of the full Annual Report and Financial Statements.
As part of the Government's wider review of the VCT regime, new rules have been introduced under the Finance Act (No.2) 2015 which received Royal Assent on 18 November 2015, which include:
- Restrictions over the age of investments;
- A prohibition on management buyouts or the purchase of existing businesses; and
- An overall lifetime investment cap of £12 million from tax-advantaged funds into any portfolio company.
While these changes are significant, the Company has been advised that had they been in place previously they would have affected only a relatively small number of the investments that we have made into new portfolio companies over recent years. The Board's current view is that there will be no material change in our investment policy as a result.
The relevant tests to measure compliance have been carried out and independently reviewed for the year ended 31 December 2015. These showed that the Company has complied with all tests and continues to do so.
Future prospects
The key drivers for returns within the portfolio are those sectors that are involved in longer-term global trends. These include the importance of healthcare in an ageing population, sustainable energy against a background of climate change, education amid the need to improve the national skills base and the developing use of information technology in an environment of universal information. The portfolio is well positioned to take advantage of these changes, with a longer term aim of total return exceeding dividends.
Conversion of D shares to Ordinary shares
The D shares were converted into Ordinary shares on 31 March 2015, with a conversion ratio of 1.4975 Ordinary shares for each D share. The net asset value per share and all dividends paid subsequent to the conversion of the D shares to the Ordinary shares are multiplied by the conversion factor of 1.4975 in respect of the D shares return, in order to give an accurate picture of the shareholder value since launch relating to the D shares.
Key performance indicators
The Directors believe that the following key performance indicators, which are typical for venture capital trusts, used in its own assessment of the Company, will provide shareholders with sufficient information to assess how effectively the Company is applying its investment policy to meet its objectives. The Directors are satisfied that the results shown in the following key performance indicators give a good indication that the Company is achieving its investment objective and policy. These are:
- Net asset value total return relative to FTSE All-Share Index total return
The graph on page 4 of the full Annual Report and Financial Statements shows the net asset value total return against the FTSE All-Share Index total return, in both instances with dividends reinvested. Details on the performance of the net asset value and return per share for the year are shown above. - Net asset value per share and total shareholder return
The graph on page 10 of the full Annual Report and Financial Statements shows the total return to shareholders increased by 2.0% to 153.9 pence per share for the year ended 31 December 2015 as a result of the positive total return of 3.1 pence per share.
Net asset value decreased by 2.7% to 71.1 pence per share. - Dividend distributions
The graph on page 10 of the full Annual Report and Financial Statements shows dividends paid in respect of the year ended 31 December 2015 were 5.0 pence per share (2014: 5.0 pence per Ordinary share), in line with the Board's dividend objective. Cumulative dividends paid since inception are 82.8 pence per share. - Ongoing charges
The ongoing charges ratio for the year to 31 December 2015 was 2.8 per cent. (2014: 2.9 per cent.). The ongoing charges ratio has been calculated using The Association of Investment Companies' (AIC) recommended methodology. This figure shows shareholders the total recurring annual running expenses (including investment management fees charged to capital reserve) as a percentage of the average net assets attributable to shareholders. The Directors expect the ongoing charges ratio for the next year to be approximately 2.8 per cent.
Gearing
As defined by the Articles of Association, the Company's maximum exposure in relation to gearing is restricted to 10 per cent. of the adjusted share capital and reserves. The Directors do not currently have any intention to utilise long term gearing.
Operational arrangements
The Company has delegated the investment management of the portfolio to Albion Ventures LLP, which is authorised and regulated by the Financial Conduct Authority. Albion Ventures LLP also provides company secretarial and other accounting and administrative support to the Company. Further details of the fees paid to the Manager can be found in note 5.
Management agreement
Under the Management agreement, the Manager provides investment management, secretarial and administrative services to the Company. The Management agreement may be terminated by either party on 12 months' notice and is subject to earlier termination in the event of certain breaches or on the insolvency of either party. The Manager is paid an annual fee equal to 2.25 per cent. of the net asset value of the Company paid quarterly in arrears.
Total annual expenses, including the management fee, are limited to 3.0 per cent. of the net asset value.
In line with common practice, the Manager is also entitled to an arrangement fee, payable by each portfolio company, of approximately 2 per cent. on each investment made and also Directors' fees where the Manager has a representative on the portfolio company's board.
Management performance incentive
The management performance incentive structure sets a minimum target level whereby no performance fee is payable to the Manager until the total return exceeds 6.5 pence per share per annum from a base on 1 January 2007 of 98.7 pence for the Ordinary shares and 100 pence for the D shares from 6 April 2010. If the target return is not achieved in a period, the cumulative shortfall is carried forward to the next accounting period and has to be made up before an incentive fee becomes payable. To the extent that the total return exceeds the threshold over the relevant period, a performance fee will be paid to the Manager of an amount equal to 20 per cent. of the excess.
As at 31 December 2015, the total return since 1 January 2007 for Ordinary Shares was 125.1 pence and the total return since 6 April 2010 for the former D Shares was 131.0 pence, and the hurdle was 157.2 pence for Ordinary Shares and 137.3 pence for the former D Shares.
Any performance fee payable will be calculated based on the above hurdles, escalating at 6.5p per annum, and in respect of the relevant proportion of that share class' share of the Company's net assets as at 31 December 2015.
There was no management performance incentive fee payable during the year (2014: nil).
Investment and co-investment
The Company co-invests with other Albion Ventures LLP venture capital trusts and funds. Allocation of investments is on the basis of an allocation agreement which is based, inter alia, on the ratio of funds available for investment.
Evaluation of the Manager
The Board has evaluated the performance of the Manager based on the returns generated by the Company, the continuing achievement of the 70 per cent. investment requirement for venture capital trust status, the long term prospects of current investments, a review of the Management agreement and the services provided therein, and benchmarking the performance of the Manager to other service providers. The Board believes that it is in the interests of shareholders as a whole, and of the Company, to continue the appointment of the Manager for the forthcoming year.
Alternative Investment Fund Managers Directive ("AIFMD")
The Board appointed Albion Ventures LLP as the Company's AIFM as required by the AIFMD.
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the Act to detail information about social and community issues, employees and human rights; including any policies it has in relation to these matters and effectiveness of these policies. As an externally managed investment company with no employees, the Company has no policies in these matters and as such these requirements do not apply.
Further policies
The Company has adopted a number of further policies relating to:
- Environment
- Global greenhouse gas emissions
- Anti-bribery
- Diversity
and these are set out in the Directors' report on pages 23 and 24 of the full Annual Report and Financial Statements.
Discount management and share buy-back policy
It remains the Board's primary objective to maintain sufficient resources for investment in existing and new portfolio companies and for the continued payment of dividends to shareholders. The Board's policy is to buy back shares in the market, subject to the overall constraint that such purchases are in the Company's interest.
It is the Board's intention for such buy-backs to be in the region of a 5 per cent. discount to net asset value, so far as market conditions and liquidity permit.
Further details of shares bought back during the year ended 31 December 2015 can be found in note 15 of the Financial Statements.
Risk management
The Board carries out a regular review of the risk environment in which the Company operates. The principal risks and uncertainties of the Company as identified by the Board and how they are managed are as follows:
| Risk | Possible consequence | Risk management |
| Economic risk | Changes in economic conditions, including, for example, interest rates, rates of inflation, industry conditions, competition, political and diplomatic events and other factors could substantially and adversely affect the Company's prospects in a number of ways. | To reduce this risk, in addition to investing equity in portfolio companies, the Company often invests in secured loan stock and has a policy of not normally permitting any external bank borrowings within portfolio companies. Additionally, the Manager has been rebalancing the sector exposure of the portfolio with a view to reducing reliance on consumer led sectors. |
| Investment risk | This is the risk of investment in poor quality assets which reduces the capital and income returns to shareholders, and negatively impacts on the Company's reputation. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes are more fragile than larger, long established businesses. | To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its strong track record for investing in this segment of the market. In addition, the Manager operates a formal and structured investment process, which includes an Investment Committee, comprising investment professionals from the Manager and at least one external investment professional. The Manager also invites and takes account of comments from non-executive Directors of the Company on investments discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on portfolio company boards) and the Board receives detailed reports on each investment as part of the Manager's report at quarterly board meetings. |
| Valuation risk | The Company's investment valuation methodology is reliant on the accuracy and completeness of information that is issued by portfolio companies. In particular, the Directors may not be aware of or take into account certain events or circumstances which occur after the information issued by such companies is reported. | As described in note 2 of the Financial Statements, the investments held by the Company are designated at fair value through profit or loss and valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines. These guidelines set out recommendations, intended to represent current best practice on the valuation of venture capital investments. These investments are valued on the basis of forward looking estimates and judgments about the business itself, its market and the environment in which it operates, together with the state of the mergers and acquisitions market, stock market conditions and other factors. In making these judgments the valuation takes into account all known material facts up to the date of approval of the Financial Statements by the Board. The values of a number of investments are also underpinned by independent third party professional valuations and the Board critically reviews key valuations on a quarterly basis. |
| VCT 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 any tax relief received. In addition, failure to meet the qualifying requirements could result in a loss of listing of the shares. | To reduce this risk, the Board has appointed the Manager, which has a team with significant experience in venture capital trust management, used to operating within the requirements of the venture capital trust legislation. In addition, to provide further formal reassurance, the Board has appointed Philip Hare & Associates LLP as its taxation adviser. Philip Hare & Associates 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. Each investment in a new portfolio company is also pre-cleared with H.M. Revenue & Customs. |
| Compliance risk | The Company is listed on The London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company's shares, or other penalties under the Companies Act or from financial reporting oversight bodies. | Board members and the Manager have experience of operating at senior levels within or advising quoted businesses. In addition, the Board and the Manager receive regular updates on new regulation from its auditor, lawyers and other professional bodies. The Company is subject to compliance checks via the Manager's Compliance Officer. The Manager reports monthly to its Board on any issues arising from compliance or regulation. These controls are also reviewed as part of the quarterly Manager Board meetings, and also as part of the review work undertaken by the Manager's Compliance Officer. The report on controls is evaluated by Internal Audit during its reports. |
| Internal control risk | Failures in key controls, within the Board or within the Manager's business, could put assets of the Company at risk or result in reduced or inaccurate information being passed to the Board or to shareholders. | The Audit Committee meets with the Manager's Internal Auditor, PKF Littlejohn LLP, when required, receiving a report regarding the last formal internal audit performed on the Manager, and providing the opportunity for the Audit Committee to ask specific and detailed questions. Jonathan Thornton, as Chairman of the Audit Committee, met with the internal audit Partner of PKF Littlejohn LLP in January 2016 to discuss the most recent Internal Audit Report on the Manager. The Manager has a comprehensive business continuity plan in place in the event that operational continuity is threatened. Further details regarding the Board's management and review of the Company's internal controls through the implementation of the Turnbull guidance are detailed on pages 29 and 30 of the full Annual Report and Financial Statements. Measures are in place to mitigate information risk in order to ensure the integrity, availability and confidentiality of information used within the business. |
| Financial risk | By its nature, as a venture capital trust, the Company is exposed to investment risk (which comprises investment price risk and cash flow interest rate risk), credit risk and liquidity risk. | The Company's policies for managing these risks and its financial instruments are outlined in full in note 19 to the Financial Statements. All of the Company's income and expenditure is denominated in sterling and hence the Company has no foreign currency risk. The Company is financed through equity and does not have any borrowings. The Company does not use derivative financial instruments for speculative purposes. |
| Reputational risk | Arises from broader performance and ethical issues, including investment in businesses and sectors that are inconsistent with the values of the Board and the VCT or, the Boards of portfolio companies take actions which similarly are inconsistent with the values of the VCT. | The Board clearly articulates to the Investment Manager its broader aims and standards including those sectors which are consistent with the values of the Board. The Board regularly reviews the performance and investment strategy of the Investment Manager. The Investment Manager periodically attends Board meetings of the VCT's portfolio companies and across the portfolio receives periodic management information and is alert to potential threats to reputation. |
Viability statement
In accordance with the FRC UK Corporate Governance Code published in September 2014 and principle 21 of the AIC Code of Corporate Governance published by the AIC in February 2015, the Directors have assessed the prospects of the Company over three years to 31 December 2018. The Directors have taken a three year period as the Code does not specify a time period, but it must be longer than 12 months. The Directors believe that three years is a reasonable period in which they can assess the future of the Company to continue to operate and meet its liabilities as they fall due and that looking to five years would incorporate too much uncertainty and not have any meaningful benefit to shareholders. It is also the period used by the Board in the strategic planning process and is considered reasonable for a business of our nature and size.
The Directors have carried out a robust assessment of the principal risks facing the Company as explained above, including those that could threaten its business model, future performance, solvency or liquidity. The Board also considered the risk management processes in place to avoid or reduce the impact of the underlying risks. The Board focused on the major factors which affect the economic, regulatory and political environment. The Board deliberated over the importance of the Manager and the processes that they have in place for dealing with the principal risks.
The Board assessed the ability of the Company to raise finance. As explained in this Strategic report the Company's income more than covers on-going expenses which going forward should increase as our asset-backed investments continue to mature. The portfolio is well balanced and geared towards long term growth delivering dividends and capital growth to shareholders. In assessing the prospects of the Company the Directors have considered the cash flow by looking at the Company's income and expenditure projections and funding pipeline over the assessment period of three years and they appear realistic.
Taking into account the processes for mitigating risks, monitoring costs, share price discount, the Manager's compliance with the investment objective, policies and business model and the balance of the portfolio, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 31 December 2018.
This Strategic report of the Company for the year ended 31 December 2015 has been prepared in accordance with the requirements of section 414A of the Companies Act 2006 (the "Act"). The purpose of this report is to provide Shareholders with sufficient information to enable them to assess the extent to which the Directors have performed their duty to promote the success of the Company in accordance with section 172 of the Act.
On behalf of the Board,
Geoffrey Vero
Chairman
23 March 2016
Responsibility statement
In preparing these Financial Statements for the year to 31 December 2015, the Directors of the Company, being Geoffrey Vero, Jonathan Thornton, Andrew Phillipps and Patrick Reeve, confirm that to the best of their knowledge:
- summary financial information contained in this announcement and the full Annual Report and Financial Statements for the year ended 31 December 2015 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 December 2015 as required by DTR 4.1.12.R;
- the Chairman's statement and Strategic report include a fair review of the information required by DTR 4.2.7R (indication of important events during the year ended 31 December 2015 and description of principal risks and uncertainties that the Company faces); and
- the Chairman's statement and Strategic report include a fair review of the information required by DTR 4.2.8R (disclosure of related parties transactions and changes therein).
By order of the Board
Geoffrey Vero
Chairman
23 March 2016
Income statement
| Ordinary shares | Combined Ordinary and D shares | ||||||
| year ended 31 December 2015 | year ended 31 December 2014 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gains on investments | 3 | - | 1,367 | 1,367 | - | 1,817 | 1,817 |
| Investment income | 4 | 1,335 | - | 1,335 | 1,151 | - | 1,151 |
| Investment management fees | 5 | (215) | (646) | (861) | (187) | (562) | (749) |
| Other expenses | 6 | (202) | - | (202) | (305) | - | (305) |
| Return on ordinary activities before tax | 918 | 721 | 1,639 | 659 | 1,255 | 1,914 | |
| Tax (charge)/credit on ordinary activities | 8 | (149) | 129 | (20) | (106) | 119 | 13 |
| Return and total comprehensive income attributable to shareholders | 769 | 850 | 1,619 | 553 | 1,374 | 1,927 | |
| Basic and diluted return per share (pence)* | |||||||
| - Ordinary shares | 10 | 1.5 | 1.6 | 3.1 | 1.0 | 3.0 | 4.0 |
| - D shares | - | - | - | 3.0 | 4.1 | 7.1 | |
| - Proforma combined Ordinary and D shares** | - | - | - | 1.2 | 3.0 | 4.2 | |
* excluding treasury shares
** Proforma basic and diluted return per share assuming the D shares had converted to Ordinary shares at 1 January 2014, further details are provided in note 10.
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.
There is no other comprehensive income other than the results for the year disclosed above, accordingly a Statement of total comprehensive income is not required.
The difference between the reported profit on ordinary activities before tax and the historical profit is due to the fair value movements on investments. As a result a note on historical cost profit and losses has not been prepared.
Balance sheet
| Ordinary shares | Combined Ordinary and D shares | ||
| 31 December 2015 | 31 December 2014 | ||
| Note | £'000 | £'000 | |
| Fixed asset | |||
| Investments | 11 | 31,565 | 29,873 |
| Current assets | |||
| Trade and other receivables less than one year | 13 | 685 | 201 |
| Cash at bank and in hand | 6,972 | 4,645 | |
| 7,657 | 4,846 | ||
| Total assets | 39,222 | 34,719 | |
| Creditors: amounts falling due within one year | |||
| Trade and other payables less than one year | 14 | (322) | (284) |
| Total assets less current liabilities | 38,900 | 34,435 | |
| Equity attributable to equityholders | |||
| Called up share capital | 15 | 600 | 482 |
| Share premium | 11,652 | 5,560 | |
| Capital redemption reserve | 12 | 12 | |
| Unrealised capital reserve | 4,883 | 1,954 | |
| Realised capital reserve | 4,820 | 4,500 | |
| Other distributable reserve | 16,933 | 21,927 | |
| Total equity shareholders' funds | 38,900 | 34,435 | |
| Basic and diluted net asset value per share (pence)* | |||
| - Ordinary shares | 16 | 71.1 | 73.1 |
| - D shares | - | 109.5 |
* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.
These Financial Statements were approved by the Board of Directors, and authorised for issue on 23 March 2016 and were signed on its behalf by
Geoffrey Vero
Chairman
Company number: 03654040
Statement of changes in equity
| Called up share capital | Share premium | Capital redemption reserve | Unrealised capital reserve | Realised capital reserve* | Other distributable reserve* | Total | |||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||
| As at 1 January 2015 | 482 | 5,560 | 12 | 1,954 | 4,500 | 21,927 | 34,435 | ||
| Return/(loss) and total comprehensive income for the period | - | - | - | 1,971 | (1,121) | 769 | 1,619 | ||
| Transfer of unrealised losses on disposal of investments | - | - | - | 958 | (958) | - | - | ||
| Purchase of shares for treasury | - | - | - | - | - | (649) | (649) | ||
| Issue of equity | 118 | 6,275 | - | - | - | (33) | 6,360 | ||
| Cost of issue of equity | - | (183) | - | - | - | (183) | |||
| Transfer from other distributable reserve to realised capital reserve** | - | - | - | - | 2,399 | (2,399) | - | ||
| Dividends paid | - | - | - | - | - | (2,682) | (2,682) | ||
| As at 31 December 2015 | 600 | 11,652 | 12 | 4,883 | 4,820 | 16,933 | 38,900 | ||
| As at 1 January 2014 | 441 | 2,343 | 8 | 125 | 3,772 | 25,313 | 32,002 | ||
| Return and total comprehensive income for the period | - | - | - | 1,254 | 120 | 553 | 1,927 | ||
| Transfer of unrealised losses on disposal of investments | - | - | - | 575 | (575) | - | - | ||
| Cancellation of treasury shares | (1) | - | 1 | - | - | - | - | ||
| Purchase of shares for cancellation | (3) | - | 3 | - | - | (190) | (190) | ||
| Purchase of treasury shares | - | - | - | - | - | (423) | (423) | ||
| Issue of equity | 45 | 3,310 | - | - | - | - | 3,355 | ||
| Cost of issue of equity | - | (93) | - | - | - | - | (93) | ||
| Transfer from other distributable reserve to realised capital reserve** | - | - | - | - | 1,183 | (1,183) | - | ||
| Dividends paid | - | - | - | - | - | (2,143) | (2,143) | ||
| As at 31 December 2014 | 482 | 5,560 | 12 | 1,954 | 4,500 | 21,927 | 34,435 | ||
* Included within these reserves is an amount of £21,753,000 (2014: £26,427,000) which is considered distributable.
**A transfer of £2,399,000 (2014: £1,183,000) representing gross realised losses on disposal of investments during the year ended 31 December 2015 has been made from the other distributable reserve to the realised capital reserve.
Statement of cash flows
| Note | Ordinary shares Year ended 31 December 2015 £'000 | Combined Ordinary and D shares Year ended 31 December 2014 £'000 | |
| Cash flow from operating activities | |||
| Loan stock income received | 1,076 | 1,012 | |
| Deposit interest received | 64 | 67 | |
| Dividend income received | 82 | 53 | |
| Investment management fees paid | (835) | (736) | |
| Other cash payments | (213) | (195) | |
| Net cash flow from operating activities | 17 | 174 | 201 |
| Cash flow from investing activities | |||
| Purchase of fixed asset investments | (3,995) | (5,157) | |
| Disposal of fixed asset investments | 3,302 | 2,814 | |
| Disposal of current asset investments | - | 71 | |
| Net cash flow from investing activities | (693) | (2,272) | |
| Cash flow from financing activities | |||
| Issue of share capital | 5,807 | 3,029 | |
| Cost of issue of shares (including D share conversion) | (17) | (7) | |
| Equity dividends paid | (2,295) | (1,902) | |
| Purchase of own shares (including costs) | 15 | (649) | (614) |
| Net cash flow from financing activities | 2,846 | 506 | |
| Increase/(decrease) in cash and cash equivalents | 2,327 | (1,565) | |
| Cash and cash equivalents at start of period | 4,645 | 6,210 | |
| Cash and cash equivalents at end of period | 6,972 | 4,645 | |
| Cash and cash equivalents comprise: | |||
| Cash at bank and in hand | 6,972 | 4,645 | |
| Cash equivalents | - | - | |
| Total cash and cash equivalents | 6,972 | 4,645 |
Notes to the Financial Statements
1. Basis of preparation
The Financial Statements have been prepared in accordance with the historical cost convention, modified to include the revaluation of investments, in accordance with applicable United Kingdom law and accounting standards, including Financial Reporting Standard 102 ("FRS 102"), and with the 2014 Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ("SORP") issued by The Association of Investment Companies ("AIC"). This is the first period in which the Financial Statements have been prepared under FRS 102 which became mandatory for companies with a financial year beginning on or after 1 January 2015. On adoption of, and in accordance with, FRS 102, loans and receivables previously measured at amortised cost using the effective interest rate method less impairment have been classified at fair value through profit and loss ("FVTPL"). This has not led to a material change in value and so has not led to a restatement of comparatives, please see transition note 18 for further details.
The preparation of the Financial Statements requires management to make judgments and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The most critical estimates and judgments relate to the determination of carrying value of investments at FVTPL. The Company values investments by following the IPEVCV Guidelines and further detail on the valuation techniques used are in note 2 below.
2. Accounting policies
Fixed asset investments
The Company's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment policy, and information about the portfolio is provided internally on that basis to the Board.
In accordance with the requirements of FRS 102, those undertakings in which the Company holds more than 20 per cent. of the equity as part of an investment portfolio are not accounted for using the equity method. In these circumstances the investment is measured at FVTPL.
Upon initial recognition (using trade date accounting) investments, including loan stock, are classified by the Company as FVTPL and are included at their initial fair value, which is cost (excluding expenses incidental to the acquisition which are written off to the income statement).
Subsequently, the investments are valued at 'fair value', which is measured as follows:
- Investments listed on recognised exchanges are valued at their bid prices at the end of the accounting period or otherwise at fair value based on published price quotations;
- Unquoted investments, where there is not an active market, are valued using an appropriate valuation technique in accordance with the IPEVCV Guidelines. Indicators of fair value are derived using established methodologies including earnings and revenue multiples, the level of third party offers received, prices of recent investment rounds, net assets and industry valuation benchmarks. Where the Company has an investment in an early stage enterprise, the price of a recent investment round is often the most appropriate approach to determining fair value. In situations where a period of time has elapsed since the date of the most recent transaction, consideration is given to the circumstances of the portfolio company since that date in determining fair value. This includes consideration of whether there is any evidence of deterioration or strong definable evidence of an increase in value. In the absence of these indicators, the investment in question is valued at the amount reported at the previous reporting date. Examples of events or changes that could indicate a diminution include
- the performance and/or prospects of the underlying business are significantly below the expectations on which the investment was based;
- a significant adverse change either in the portfolio company's business or in the technological, market, economic, legal or regulatory environment in which the business operates; or
- market conditions have deteriorated, which may be indicated by a fall in the share prices of quoted businesses operating in the same or related sectors.
Investments are recognised as financial assets on legal completion of the investment contract and are de-recognised on legal completion of the sale of an investment.
Dividend income is not recognised as part of the fair value movement of an investment, but is recognised separately as investment income through the other distributable reserve when a share becomes ex-dividend.
Debtors and creditors and cash are carried at amortised cost, in accordance with FRS 102. There are no financial liabilities other than creditors.
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 when the Company's right to receive payment and expect settlement is established. Where interest is rolled up and/or payable at redemption then it is recognised as income unless there is reasonable doubt as to its receipt.
Bank interest income
Interest income is recognised on an accruals basis using the rate of interest agreed with the bank.
Investment management fees and other expenses
All expenses have been accounted for on an accruals basis. Expenses are charged through the revenue column of the Income statement except the following which are charged through the realised capital reserve:
- 75 per cent. of management fees are allocated to the capital account in line with the Board's expectation that over the long term 75 per cent. of the Company's investment returns will be in the form of capital gains; and
- expenses which are incidental to the purchase or disposal of an investment are charged through the realised capital reserve.
Performance incentive fee
In the event that a performance incentive fee crystallises or is provided for, 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 102. Current tax is tax payable (refundable) in respect of the taxable profit (tax loss) for the current period or past reporting periods using the tax rates and laws that have been enacted or substantively enacted at the financial reporting date. Taxation associated with capital expenses is applied in accordance with the SORP.
Deferred tax is provided in full on all timing differences at the reporting date. Timing differences are differences between taxable profits and total comprehensive income as stated in the Financial Statements that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the Financial Statements. As a VCT the Company has an exemption from tax on capital gains. The Company intends to continue meeting the conditions required to obtain approval as a VCT in the foreseeable future. The Company therefore, should have no material deferred tax timing differences arising in respect of the revaluation or disposal of investments and the Company has not provided for any deferred tax.
Reserves
Share premium reserve
This reserve accounts for the difference between the price paid for shares and the nominal value of the shares, less issue costs and transfers to the other distributable reserve.
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is diminished through the repurchase and cancellation of the Company's own shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at the year end against cost, are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
- gains and losses compared to cost on the realisation of investments;
- expenses, together with the related taxation effect, charged in accordance with the above policies; and
- dividends paid to equity holders where paid out by capital.
Other distributable reserve
The special reserve, treasury share reserve and the revenue reserve were combined in 2012 to form a single reserve named other distributable reserve.
This reserve accounts for movements from the revenue column of the Income statement, the payment of dividends, the buy-back of shares and other non-capital realised movements.
Dividends
Dividends by the Company are accounted for in the period in which the dividend is paid or approved at the Annual General Meeting.
3. Gains on investments
| Ordinary shares | Combined Ordinary and D shares | |
| Year ended 31 December 2015 £'000 | year ended 31 December 2014 £'000 | |
| Unrealised gains on fixed asset investments | 1,971 | 1,254 |
| Unrealised gains sub-total | 1,971 | 1,254 |
| Realised (losses)/gains on fixed asset investments | (604) | 525 |
| Realised gains on current asset investments | - | 38 |
| Realised (losses)/gains sub-total | (604) | 563 |
| 1,367 | 1,817 |
4. Investment income
| Ordinary shares | Combined Ordinary and D shares | |
| Year ended 31 December 2015 £'000 | year ended 31 December 2014 £'000 | |
| Income recognised on investments | ||
| Loan stock interest and other fixed returns | 1,186 | 1,034 |
| UK dividend income | 82 | 51 |
| Bank deposit interest | 67 | 66 |
| 1,335 | 1,151 |
Interest income earned on impaired investments at 31 December 2015 amounted to £45,000 (2014: £104,000).
5. Investment management fees
| Combined Ordinary and D shares | ||
| Ordinary shares Year ended 31 December 2015 £'000 | Year ended 31 December 2014 £'000 | |
| Investment management fee charged to revenue | 215 | 187 |
| Investment management fee charged to capital | 646 | 562 |
| 861 | 749 |
Further details of the Management agreement under which the investment management fee is paid are given in the Strategic report.
During the year, services of a total value of £861,000 (2014: £749,000) were purchased by the Company from Albion Ventures LLP in respect of management fees. At the financial year end, the amount due to Albion Ventures LLP in respect of these services disclosed as accruals was £219,000 (2014: £193,000).
During the year, the Company was not charged by Albion Ventures LLP in respect of Patrick Reeve's services as a Director (2014: £nil).
Albion Ventures LLP, the Manager, holds 39,236 Ordinary shares in the Company.
Albion Ventures LLP is, from time to time, eligible to receive transaction fees and Directors' fees from portfolio companies. During the year ended 31 December 2015, fees of £179,000 attributable to the investments of the Company were received by Albion Ventures LLP pursuant to these arrangements (2014: £212,000).
6. Other expenses
| Ordinary shares | Combined Ordinary and D shares | |
| Year ended 31 December 2015 £'000 | year ended 31 December 2014 £'000 | |
| Directors' fees (including NIC) | 67 | 66 |
| Other administrative expenses | 108 | 110 |
| Auditor's remuneration for statutory audit services (excluding VAT) | 27 | 27 |
| Impairment of accrued interest | - | 102 |
| 202 | 305 |
7. Directors' fees
The amounts paid to and on behalf of the Directors during the year are as follows:
| Ordinary shares | Combined Ordinary and D shares | |
| year ended 31 December 2015 £'000 | year ended 31 December 2014 £'000 | |
| Directors' fees | 62 | 62 |
| National insurance | 5 | 4 |
| 67 | 66 |
Further information regarding Directors' remuneration can be found in the Directors' remuneration report on pages 31 and 32 of the full Annual Report and Financial Statements.
8. Tax (charge)/credit on ordinary activities
| Ordinary shares | Combined Ordinary and D shares | |
| Year ended 31 December 2015 £'000 | year ended 31 December 2014 £'000 | |
| UK corporation tax charge in respect of current year | (39) | (9) |
| UK corporation tax credit in respect of prior years | 19 | 22 |
| (20) | 13 |
Factors affecting the tax charge:
| Ordinary shares | Combined Ordinary and D shares | |
| Year ended 31 December 2015 £'000 | year ended 31 December 2014 £'000 | |
| Return on ordinary activities before taxation | 1,639 | 1,914 |
| Tax charge on profit at the small companies rate of 20 per cent. (2014: 21.50 per cent.) | (328) | (412) |
| Factors affecting the charge: | ||
| Non-taxable gains | 273 | 391 |
| Income not taxable | 16 | 11 |
| Marginal relief | - | 1 |
| Adjustment in respect of prior years | 19 | 22 |
| (20) | 13 |
The tax (charge)/credit for the year shown in the Income statement is lower than the small companies rate of corporation tax in the UK of 20 per cent. (2014: standard companies rate of 21.50 per cent.). The differences are explained above.
Consortium relief is recognised in the accounts in the period in which the claim is submitted to HMRC and is shown as tax in respect of prior years.
Notes
(i) Venture Capital Trusts are not subject to corporation tax on capital gains.
(ii) Tax relief on expenses charged to capital has been determined by allocating tax relief to expenses by reference to the applicable corporation tax rate and allocating the relief between revenue and capital in accordance with the SORP.
(iii) No deferred tax asset or liability has arisen in the year.
9. Dividends
| Year ended 31 December 2015 | Year ended 31 December 2014 | ||
| Ordinary shares | Ordinary shares | D shares | |
| £'000 | £'000 | £'000 | |
| Dividend of 2.5p per Ordinary share paid on 30 May 2014 | - | 911 | - |
| Dividend of 2.5p per D share paid on 30 May 2014 | - | - | 159 |
| Dividend of 2.5p per Ordinary share paid on 30 September 2014 | - | 914 | - |
| Dividend of 2.5p per D share paid on 30 September 2014 | - | - | 159 |
| Dividend of 2.5p per Ordinary share paid on 29 May 2015 | 1,335 | - | - |
| Dividend of 2.5p per Ordinary share paid on 30 September 2015 | 1,347 | - | - |
| 2,682 | 1,825 | 318 | |
In addition to the dividends summarised above, the Board has declared a first dividend of 2.5 pence per Ordinary share for the year ending 31 December 2016, payable on 31 May 2016 to shareholders on the register as at 6 May 2016. The total dividend will be approximately £1,477,000.
10. Basic and diluted return per share
| Year ended 31 December 2015 | |||||
| Revenue | Capital | Total | |||
| Return attributable to equity shares (£'000) | 769 | 850 | 1,619 | ||
| Weighted average shares in issue (excluding treasury shares) | 52,626,429 | ||||
| Return attributable per equity share (pence) | 1.5 | 1.6 | 3.1 | ||
| Year ended 31 December 2014 | ||||||||
| Ordinary shares | D shares | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | |||
| Return attributable to equity shares (£'000) | 363 | 1,111 | 1,474 | 190 | 263 | 453 | ||
| Weighted average shares in issue (excluding treasury shares) | 36,282,578 | 6,369,555 | ||||||
| Return attributable per equity share (pence) | 1.0 | 3.0 | 4.0 | 3.0 | 4.1 | 7.1 | ||
The weighted average number of Ordinary shares is calculated excluding the treasury shares of 5,257,700 (2014: 4,306,700).
There are no convertible instruments, derivatives or contingent share agreements in issue so basic and diluted return per share are the same.
As per the requirements of IAS 33 'Earnings per Share', a proforma combined Ordinary and D shares return attributable per equity share has been calculated. This calculation is based on retrospectively assuming the D shares had converted to Ordinary shares on 1 January 2014 and therefore the combined return attributable to equity shares for the year ended 31 December 2014 of £1,927,000 is divided by 45,820,987, (being the total of 36,282,578 weighted average Ordinary shares in issue plus 6,369,555 weighted average D shares in issue multiplied by the conversion ratio of 1.4975) to achieve a total return of 4.2 pence per share.
11. Fixed asset investments
| Ordinary shares | Combined Ordinary and D shares | |
| 31 December 2015 £'000 | 31 December 2014 £'000 | |
| Investments held at fair value through profit or loss | ||
| Unquoted equity and preference shares | 13,777 | 12,349 |
| Quoted equity | 394 | 401 |
| Unquoted loan stock | 17,394 | 17,123 |
| 31,565 | 29,873 |
| Ordinary shares | Combined Ordinary and D shares | |
| 31 December 2015 £'000 | 31 December 2014 £'000 | |
| Opening valuation | 29,873 | 25,997 |
| Purchases at cost | 4,007 | 5,142 |
| Disposal proceeds | (3,792) | (2,968) |
| Realised (losses)/gains | (604) | 525 |
| Movement in loan stock accrued income | 110 | (77) |
| Unrealised gains | 1,971 | 1,254 |
| Closing valuation | 31,565 | 29,873 |
| Movement in loan stock accrued income | ||
| Opening accumulated movement in loan stock accrued income | 134 | 211 |
| Movement in loan stock accrued income | 110 | (77) |
| Closing accumulated movement in loan stock accrued income | 244 | 134 |
| Movement in unrealised gains | ||
| Opening accumulated unrealised gains | 1,777 | (88) |
| Transfer of previously unrealised (gains)/losses to realised reserve on disposal of investments | (1,072) | 611 |
| Transfer of previously unrealised losses to realised reserves on investments written off but still held | 2,030 | - |
| Movement in unrealised gains | 1,971 | 1,254 |
| Closing accumulated unrealised gains | 4,706 | 1,777 |
| Historic cost basis | ||
| Opening book cost | 27,962 | 25,873 |
| Purchases at cost | 4,007 | 5,142 |
| Sales at cost | (3,325) | (3,053) |
| Cost of investments written off but still held | (2,030) | - |
| Closing book cost | 26,614 | 27,962 |
Purchases and disposals detailed above do not agree to the Cash flow statement due to restructuring of investments, conversion of convertible loan stock and settlement debtors and creditors.
The Company does not hold any assets as the result of the enforcement of security during the period, and believes that the carrying values for both impaired and past due assets are covered by the value of security held for these loan stock investments.
Unquoted fixed asset investments are valued at fair value in accordance with the IPEVCV guidelines as follows:
| Ordinary shares | Combined Ordinary and D shares | |
| Valuation methodology | 31 December 2015 £'000 | 31 December 2014 £'000 |
| Net asset value supported by third party or desktop valuation | 16,804 | 12,925 |
| Revenue multiple | 6,812 | 4,169 |
| Cost and price of recent investment (reviewed for impairment) | 5,418 | 6,866 |
| Earnings multiple | 1,902 | 3,426 |
| Discount to third party offer | 235 | 2,086 |
| 31,171 | 29,472 |
Fair value investments had the following movements between valuation methodologies between 31 December 2014 and 31 December 2015:
| Change in valuation methodology (2014 to 2015) | Value as at 31 December 2015 £'000 | Explanatory note |
| Cost (reviewed for impairment) to revenue multiple | 2,678 | More relevant valuation methodology |
| Cost (reviewed for impairment) to net asset value supported by third party valuation | 2,063 | Third party valuation has recently taken place |
| Discount to third party offer to price of recent investment (reviewed for impairment) | 792 | Agreed new investment price |
The valuation will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEVCV Guidelines. The Directors believe that, within these parameters, there are no other possible methods of valuation which would be reasonable as at 31 December 2015.
FRS 102 and the SORP requires the Company to disclose the inputs to 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 |
| Level A | Quoted prices in an active market |
| Level B | Price of a recent transaction for identical instruments |
| Level C (i) | Inputs to valuations are from observable sources and are directly or indirectly derived from prices |
| Level C (ii) | Inputs to valuations not based on observable market data |
Quoted AIM investments are valued according to Level A valuation methods. Unquoted equity, preference shares and loan stock are all valued according to Level C (ii) valuation methods.
Investments held at fair value through profit or loss (Level C (ii)) had the following movements in the year to 31 December 2015:
| Ordinary shares | Combined Ordinary and D shares | |||||
| 31 December 2015 | 31 December 2014 | |||||
| Equity | Unquoted Loan stock | Total | Equity | Unquoted loan stock | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Opening balance | 12,349 | 17,123 | 29,472 | 10,236 | 6,539 | 16,775 |
| Adjustment to fair value** | - | - | - | - | 9,017 | 9,017 |
| Opening balance (adjusted to fair value) | 12,349 | 17,123 | 29,472 | 10,236 | 15,556 | 25,792 |
| Additions | 1,123 | 2,821 | 3,944 | 2,711 | 1,588 | 4,299 |
| Disposals | (1,690) | (2,102) | (3,792) | (1,775) | (3) | (1,778) |
| Transfer to Level A* | - | - | - | (772) | (164) | (936) |
| Accrued loan stock interest | - | 110 | 110 | - | 30 | 30 |
| Realised (losses)/gains | (467) | (137) | (604) | 663 | (240) | 423 |
| Debt/equity swap and restructurings | 480 | (480) | - | - | - | - |
| Unrealised gains | 1,982 | 59 | 2,041 | 1,286 | 356 | 1,642 |
| Closing balance | 13,777 | 17,394 | 31,171 | 12,349 | 17,123 | 29,472 |
* Mi-Pay Group plc was quoted on AiM and transferred to Level A fair value hierarchy
** As per FRS 102 adoption the unquoted loan stock balance for 2014 has been adjusted to include £9,017,000 of investments at fair value that were previously held under amortised cost.
FRS 102 requires the Directors to consider the impact of changing one or more of the inputs used as part of the valuation process to reasonable possible alternative assumptions. The valuation methodology applied to 72 per cent. of the equity and unquoted loan stock investments (by valuation) is based on third-party independent evidence, cost, recent investment price and agreed offer price. The Directors believe that changes to reasonable possible alternative assumptions (by adjusting up and down the revenue and earnings multiples) for the valuations of Exco Intouch Limited, Process System Enterprise Limited, Blackbay Limited and Mirada Medical Limited could result in an increase in the valuation of investments by £883,000 or a decrease in the valuation of investments by £642,000.
12. Significant interests
The principal activity of the Company is to select and hold a portfolio of investments in unquoted securities. Although the Company, through the Manager, will, in some cases, be represented on the board of the portfolio company, it will not take a controlling interest or become involved in the management. The size and structure of the companies with unquoted securities may result in certain holdings in the portfolio representing a participating interest without there being any partnership, joint venture or management consortium agreement. The investments listed below are held as part of an investment portfolio and therefore, as permitted by FRS 102 section 9.9B, they are measured at fair value through profit and loss and not accounted for using the equity method.
The Company has interests of greater than 20 per cent. of the nominal value of any class of the allotted shares in the portfolio companies as at 31 December 2015 as described below:
| Company | Country of incorporation | Profit/(loss) before tax £'000 | Net assets/ (liabilities) £'000 | Result for year ended | Principal activity | % class and share type | % total voting rights held by the Company |
| Albion Investment Properties Limited | Great Britain | n/a* | (969) | 31 December 2014 | Owner of residential property | 48.4% A Ordinary | 48.4% |
| Blackbay Limited | Great Britain | (1,747) | (4,141) | 31 December 2014 | Mobile data solutions | 34.9% A Ordinary | 7.4% |
| Masters Pharmaceuticals Limited | Great Britain | 186 | 429 | 31 December 2014 | International specialist distributor of pharmaceuticals | 21.1% A Ordinary | 4.2% |
* The company files abbreviated accounts which does not disclose this information.
13. Current assets
| Ordinary shares | Combined Ordinary and D shares | |
| Trade and other receivables less than one year | 31 December 2015 | 31 December 2014 |
| £'000 | £'000 | |
| Prepayments and accrued income | 19 | 17 |
| Corporation tax receivable | 19 | 1 |
| Other debtors | 647 | 183 |
| 685 | 201 |
14. Creditors: amounts falling due within one year
| Ordinary shares | Combined Ordinary and D shares | |
| 31 December 2015 | 31 December 2014 | |
| £'000 | £'000 | |
| Accruals and deferred income | 266 | 251 |
| Trade creditors | 17 | 31 |
| UK corporation tax payable | 39 | 2 |
| 322 | 284 |
15. Called up share capital
| 31 December 2015 £'000 | 31 December 2014 £'000 | ||
| Allotted, called up and fully paid shares | |||
| 59,965,643 Ordinary shares of 1 penny each (2014: 41,834,205 Ordinary shares) | 600 | 418 | |
| Nil D shares (2014: 6,413,822 D shares) | - | 64 | |
Voting rights
54,707,943 Ordinary shares of 1 penny each (net of treasury shares) (2014: 37,527,505 Ordinary shares and 6,388,197 D shares of 1 penny each (net of treasury shares)).
The D shares converted to Ordinary shares on 31 March 2015 at a ratio of 1.4975 Ordinary shares for each D share. As a result, 6,388,197 D shares were cancelled and 9,566,325 Ordinary shares were issued at a total nominal value of £95,663.
The Company purchased 951,000 Ordinary shares (2014: 605,700) at a cost of £649,000 including stamp duty (2014: £424,000) to be held in treasury during the year to 31 December 2015. The Company cancelled 25,625 D shares from treasury before the conversion of D shares to Ordinary shares.
The Company did not purchase any Ordinary shares for cancellation (2014: 272,000 Ordinary shares at a cost of £190,000).
The Company holds a total of 5,257,700 Ordinary shares in treasury (2014: 4,306,700), representing 8.8 per cent. of the issued Ordinary share capital as at 31 December 2015 (2014: 10.3 per cent.).
Under the terms of the Ordinary shares' Dividend Reinvestment Scheme, the following Ordinary shares of nominal value 1 penny each were allotted during the year:
Date of allotment | Number of shares issued | Aggregate nominal amount of shares (£'000) | Issue price (pence per share) | Net consideration received (£'000) | Opening market price on allotment date (pence per share) |
| 29 May 2015 | 256,848 | 3 | 71.75 | 181 | 69.0 |
| 30 September 2015 | 283,909 | 3 | 71.20 | 200 | 69.0 |
| 540,757 | 381 |
Under the terms of the Albion VCTs Prospectus Top Up Offers 2014/2015, the following Ordinary shares of nominal value 1 penny each, were allotted during the year:
| Date of allotment | Number of shares issued | Aggregate nominal amount of shares (£'000) | Issue price (pence per share) | Net consideration received (£'000) | Opening market price on allotment date (pence per share) |
| 30 January 2015 | 1,287,521 | 13 | 72.9 | 920 | 70.0 |
| 30 January 2015 | 693,078 | 7 | 73.2 | 495 | 70.0 |
| 2 April 2015 | 4,323,601 | 43 | 75.4 | 3,162 | 69.0 |
| 30 June 2015 | 761,410 | 8 | 74.0 | 547 | 69.0 |
| 30 June 2015 | 39,242 | - | 73.3 | 28 | 69.0 |
| 30 June 2015 | 11,321 | - | 73.6 | 8 | 69.0 |
| 30 September 2015 | 908,183 | 9 | 73.5 | 647 | 69.0 |
| 8,024,356 | 80 | 5,807 |
16. Basic and diluted net asset value per share
| 31 December 2015 (pence per share) | 31 December 2014 (pence per share) | ||
| Basic and diluted net asset value per Ordinary share | 71.1 | 73.1 | |
| Basic and diluted net asset value per D share | - | 109.5 |
The basic and diluted net asset values per share at the year end are calculated in accordance with the Articles of Association and are based upon total shares in issue (less treasury shares) of 54,707,943 Ordinary shares as at 31 December 2015 (2014: 37,527,505 Ordinary shares and 6,388,197 D shares).
17. Reconciliation of net return on ordinary activities before taxation to net cash flow from operating activities
| Ordinary shares | Combined Ordinary and D shares | |
| Year ended 31 December 2015 £'000 | Year ended 31 December 2014 £'000 | |
| Revenue return on ordinary activities before taxation | 918 | 659 |
| Investment management fee charged to capital | (646) | (562) |
| Movement in accrued loan stock interest | (110) | 77 |
| (Increase)/decrease in debtors | (2) | 2 |
| Increase in creditors | 14 | 25 |
| Net cash flow from operating activities | 174 | 201 |
18. First time adoption of FRS 102
In the prior year Financial Statements, unquoted loan stock (excluding convertible bonds and debt issued at a discounted) were classified as loans and receivables as permitted by FRS 26 and measured at amortised cost using the Effective Interest Rate method less impairment. This is the first year of application of FRS 102 and if FRS 102 had been applied in the prior year and unquoted loan stock had been valued at "fair value" this would have seen a reduction in value of loan stock by £35,000 which would have been a 0.2% difference as a percentage of total loan stock valuation (£17,123,000). As the first time adoption of FRS 102 had no material impact, no restatement of comparatives is necessary.
19. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in note 15. The Company is permitted to buy back its own shares for cancellation or treasury purposes, and this is described in more detail on page 22 of the Directors' report in the full Annual Report and Financial Statements.
The Company's financial instruments comprise equity and loan stock investments in quoted and unquoted companies, cash balances and debtors and creditors which arise from its operations. The main purpose of these financial instruments is to generate cashflow and revenue and capital appreciation for the Company's operations. The Company has no gearing or other financial liabilities apart from short term creditors. The Company does not use any derivatives for the management of its Balance sheet.
The principal risks arising from the Company's operations are:
- Investment (or market) risk (which comprises investment price and cash flow interest rate risk);
- credit risk; and
- liquidity risk.
The Board regularly reviews and agrees policies for managing each of these risks. There have been no changes in the nature of the risks that the Company has faced during the past year, and apart from where noted below, there have been no changes in the objectives, policies or processes for managing risks during the past year. The key risks are summarised below.
Investment risk
As a venture capital trust, it is the Company's specific nature to evaluate and control the investment risk of its portfolio in quoted and unquoted investments, details of which are shown on pages 17 to 19 of the full Annual Report and Financial Statements. Investment risk is the exposure of the Company to the revaluation and devaluation of investments. The main driver of investment risk is the operational and financial performance of the portfolio company and the dynamics of market quoted comparators. The Manager receives management accounts from portfolio companies and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment risk.
The Manager and the Board formally review investment risk (which includes market price risk), both at the time of initial investment and at quarterly Board meetings.
The Board monitors the prices at which sales of investments are made to ensure that profits to the Company are maximised, and that valuations of investments retained within the portfolio appear sufficiently prudent and realistic compared to prices being achieved in the market for sales of unquoted investments.
The maximum investment risk as at the Balance sheet date is the value of the fixed asset investment portfolio which is £31,565,000 (2014: £29,873,000). Fixed asset and current asset investments form 81 per cent. of the net asset value as at 31 December 2015 (2014: 87 per cent.).
More details regarding the classification of fixed asset investments are shown in note 11.
Investment price risk
Investment price risk is the risk that the fair value of future investment cash flows will fluctuate due to factors specific to an investment instrument or to a market in similar instruments. To mitigate the investment price risk for the Company as a whole, the strategy of the Company is to invest in a broad spread of industries with up to 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 17 to 19 of the full Annual Report and Financial Statements and in the Strategic 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 102 section 34.29, the Board is required to illustrate by way of a sensitivity analysis the degree of exposure to market risk. The Board considers that the value of the fixed 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. (2014: 10 per cent.) increase or decrease in the valuation of the fixed asset investments (keeping all other variables constant) would increase or decrease the net asset value and return for the year by £3,156,500 (2014: £2,987,000).
Interest rate risk
It is the Company's policy to accept a degree of interest rate risk on its financial assets through the effect of interest rate changes. On the basis of the Company's analysis, it is estimated that a rise of one percentage point in all interest rates would have increased total return before tax for the year by approximately £35,000. Furthermore, it is considered that a fall of interest rates below current levels during the year would have been very unlikely.
The weighted average effective interest rate applied to the Company's fixed rate assets during the year was approximately 7.4 per cent. for the Ordinary shares (2014: 6.5 per cent. for Ordinary shares and 9.7 per cent. for D shares). The weighted average period to maturity for the fixed rate assets is approximately 6.5 years (2014: 5.5 years for Ordinary shares and 6.5 years for D shares).
The Company's financial assets and liabilities, all denominated in pounds sterling, consist of the following:
| Ordinary shares | Combined Ordinary and D shares | |||||||
| 31 December 2015 | 31 December 2014 | |||||||
| Fixed rate £'000 | Floating rate £'000 | Non-interest bearing £'000 | Total £'000 | Fixed rate £'000 | Floating rate £'000 | Non-interest bearing £'000 | Total £'000 | |
| Unquoted equity | - | - | 13,777 | 13,777 | - | - | 12,349 | 12,349 |
| Quoted equity | - | - | 394 | 394 | - | - | 401 | 401 |
| Unquoted loan stock | 16,889 | - | 505 | 17,394 | 14,171 | - | 2,952 | 17,123 |
| Debtors* | - | - | 655 | 655 | - | - | 188 | 188 |
| Current liabilities* | - | - | (283) | (283) | - | - | (282) | (282) |
| Cash | - | 6,972 | - | 6,972 | - | 4,645 | - | 4,645 |
| Total | 16,889 | 6,972 | 15,048 | 38,909 | 14,171 | 4,645 | 15,608 | 34,424 |
*The debtors and current liabilities do not reconcile to the balance sheet as prepayments and tax payable/refundable are not included in the above table.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Company is exposed to credit risk through its debtors, investment in unquoted loan stock, and through the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock and other similar instruments prior to investment, and as part of its ongoing monitoring of investments. In doing this, it takes into account the extent and quality of any security held. Typically loan stock instruments have a first fixed charge or a fixed and floating charge over the assets of the portfolio company in order to mitigate the gross credit risk. The Manager receives management accounts from portfolio companies, and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment-specific credit risk.
The Manager and the Board formally review credit risk (including debtors) and other risks, both at the time of initial investment and at quarterly Board meetings.
The Company's total gross credit risk for Ordinary shares at 31 December 2015 was limited to £17,394,000 (2014: £17,123,000) of unquoted loan stock instruments (all are secured on the assets of the portfolio company), £6,972,000 (2014: £4,645,000) of cash deposits with banks and £647,000 (2014: £183,000) of other debtors.
As at the balance sheet date, the cash held by the Company is held with Lloyds Bank plc, Scottish Widows Bank plc (part of Lloyds Banking Group), Barclays Bank plc and National Westminster Bank plc. Credit risk on cash transactions is mitigated by transacting with counterparties that are regulated entities subject to prudential supervision, with high credit ratings assigned by international credit-rating agencies.
The Company has an informal policy of limiting counterparty banking exposure to a maximum of 20 per cent. of net asset value for any one counterparty.
The credit profile of unquoted loan stock is described under liquidity risk shown below.
The cost, impairment and carrying value of impaired loan stocks in the Ordinary share portfolio held at fair value through profit and loss at 31 December 2015 and 31 December 2014 are as follows:
| 31 December 2015 | 31 December 2014 | |||||
| Cost £'000 | Impairment £'000 | Carrying value £'000 | Cost £'000 | Impairment £'000 | Carrying value £'000 | |
| Impaired loan stock | 3,287 | (865) | 2,422 | 4,849 | (1,539) | 3,310 |
Impaired loan stock instruments have a first fixed charge or a fixed and floating charge over the assets of the portfolio company and the Board consider the security value approximates to the carrying value.
Liquidity risk
Liquid assets are held as cash on current account, cash on deposit or short term money market account. Under the terms of its Articles, the Company has the ability to borrow up to 10 per cent. of its adjusted capital and reserves of the latest published audited Balance sheet, which amounts to £3,742,000 (2014: £3,321,000) as at 31 December 2015.
The Company had no committed borrowing facilities as at 31 December 2015 (2014: nil) and the Company had cash and fixed term deposit balances of £6,972,000 (2014: £4,645,000). 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. With the exception of corporation tax payable, all of the Company's financial liabilities are short term in nature and total £283,000 (2014: £282,000).
The carrying value of loan stock investments at 31 December 2015, analysed by expected maturity dates is as follows:
| Redemption date | Fully performing £'000 | Impaired £'000 | Past due £'000 | Total £'000 |
| Less than one year | 3,676 | 1,910 | 7 | 5,593 |
| 1-2 years | 714 | 475 | - | 1,189 |
| 2-3 years | 340 | - | 629 | 969 |
| 3-5 years | 3,326 | 37 | 425 | 3,788 |
| Greater than 5 years | 4,250 | - | 1,605 | 5,855 |
| 12,306 | 2,422 | 2,666 | 17,394 |
Loan stock categorised as past due includes;
- loan stock valued at £988,000 yielding an average 8.3 per cent. which has interest past due by less than 12 months;
- loan stock valued at £1,154,000 yielding an average 1.9 per cent. has interest past due by greater than 12 months but less than 2 years;
- loan stock valued at £524,000 has interest past due between 2 and 3 years.
The carrying value of the combined Ordinary shares and D shares loan stock investments at 31 December 2014, analysed by expected maturity dates is as follows:
| Redemption date | Fully performing £'000 | Impaired £'000 | Past due £'000 | Total £'000 |
| Less than one year | 3,340 | 1,982 | 636 | 5,958 |
| 1-2 years | 1,167 | 1,306 | 234 | 2,707 |
| 2-3 years | 495 | - | - | 495 |
| 3-5 years | 2,707 | 22 | - | 2,729 |
| Greater than 5 years | 4,429 | - | 805 | 5,234 |
| 12,138 | 3,310 | 1,675 | 17,123 |
In view of the availability of adequate cash balances and the repayment profile of loan stock investments, the Board considers that the Company is subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Company's financial assets and liabilities as at 31 December 2015 are stated at fair value as determined by the Directors, with the exception of debtors and creditors and cash which are carried at amortised cost, in accordance with FRS 102. There are no financial liabilities other than creditors. The Company's financial liabilities are all non-interest bearing. It is the Directors' opinion that the book value of the financial liabilities is not materially different to the fair value and all are payable within one year.
20. Contingencies and commitments
The Company had the following financial commitments in respect of investments:
- Grapeshot Limited: £117,000
- Aridhia Informatics Limited: £69,000
- DySIS Medical Limited: £28,000
21. Post balance sheet events
Since the year end, the Company had the following material investment transactions:
- Disposal of Silent Herdsman Holdings Limited for £350,000, of which, £112,000 is deferred and held in escrow;
- Investment of £119,000 in Proveca Limited;
- Investment of £91,000 in Earnside Energy Limited;
- Investment of £72,000 in InCrowd Sports Limited;
- Investment of £69,000 in Aridhia Informatics Limited;
- Investment of £28,000 in DySIS Medical Limited; and
- Investment of £18,000 in The Weybridge Club Limited.
On 17 November 2015 the Company announced the publication of a prospectus in relation to an offer for subscription for new Ordinary shares. A Securities Note, which forms part of the prospectus, has been sent to shareholders.
The following Ordinary shares of nominal value 1 penny each were allotted under the Offers after 31 December 2015:
| Date of allotment | Number of shares allotted | Aggregate nominal value of shares (£'000) | Issue price (pence per share) | Net consideration received (£'000) | Opening market price on allotment date (pence per share) |
| 29 January 2016 | 2,807,295 | 28 | 72.8 | 2,003 | 68.3 |
| 29 January 2016 | 1,581,367 | 16 | 73.2 | 1,129 | 68.3 |
| 4,388,662 | 44 | 3,132 |
The Board is pleased to announce that it has reached its £6 million limit under its Offer, which as of 23 March 2016 is fully subscribed and has now closed.
22. Related party transactions
Other than transactions with the Manager as disclosed in note 5, there are no other related party transactions or balances requiring disclosure.
23. Other information
The information set out in this announcement does not constitute the Company's statutory accounts within the terms of section 434 of the Companies Act 2006 for the years ended 31 December 2015 and 31 December 2014, and is derived from the statutory accounts for those financial years, which have been, or in the case of the accounts for the year ended 31 December 2015, which will be, delivered to the Registrar of Companies. The Auditor reported on those accounts; the reports were unqualified and did not contain a statement under s498 (2) or (3) of the Companies Act 2006.
The Company's Annual General Meeting will be held at The City of London Club, 19 Old Broad Street, London, EC2N 1DS on 26 May 2016 at 12.00pm.
24. Publication
The full audited Annual Report and Financial Statements are being sent to shareholders and copies will be made available to the public at the registered office of the Company, Companies House, the National Storage Mechanism and also electronically at www.albion-ventures.co.uk under the 'Our Funds' section, by clicking on 'Albion Development VCT PLC', where the Report can be accessed as a PDF document via a link under the 'Investor Centre' in the 'Financial Reports and Circulars' section.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Albion Development VCT PLC - Ordinary Shares via Globenewswire
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