Annual Financial Report
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 2012.
This announcement was approved for release by the Board of Directors on 4 April 2013.
This announcement has not been audited.
You will shortly be able to view the Annual Report and Financial Statements for the year to 31 December 2012 (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 2012 will be available as a PDF document via a link under the 'Investor Centre' in the 'Financial Reports and Circulars' section. The information contained in the Annual Report and Financial Statements will include information as required by the Disclosure and Transparency Rules, including Rule 4.1.
Investment objectives
Albion Development VCT PLC (the "Company") is a venture capital trust which raised a total of £33.3 million through an 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 and £3.5 million was raised for the Ordinary shares through the Albion VCTs Top Up Offers in 2011 and 2012. The funds raised will be invested in accordance with the Company's existing investment 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 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 lower risk, often asset-backed investments that provide a strong income stream combined with a protection of capital. These include freehold-based businesses in the leisure sector, such as pubs and health clubs, as well as stable and profitable businesses in other sectors including business services and healthcare. Such investments will constitute the majority of investments by cost.
- In neither category do investee 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 investee company's assets.
Financial calendar
| Record date for first dividend | 3 May 2013 |
| Payment of first dividend | 31 May 2013 |
| Annual General Meeting | 11am 6 June 2013 |
| Announcement of half-yearly results for the six months ending 30 June 2013 | August 2013 |
| Payment of second dividend subject to Board approval | 30 September 2013 |
Financial highlights
Ordinary shares
| 141.75p | Net asset value plus dividends per Ordinary share from launch to 31 December 2012 |
| 5.00p | Total tax free dividends per Ordinary share paid in the year to 31 December 2012 |
| 2.50p | First tax free dividend per Ordinary share declared for the year to 31 December 2013 |
| 74.00p | Net asset value per Ordinary share as at 31 December 2012 |
| 6.0% | Annualised return per Ordinary share since launch including tax relief |
D shares
| 104.90p | Net asset value plus dividends per D share from launch to 31 December 2012 |
| 3.50p | Total tax free dividends per D share paid in the year to 31 December 2012 |
| 2.50p | First tax free dividend per D share declared for the year to 31 December 2013 |
| 97.90p | Net asset value per D share as at 31 December 2012 |
| 17.9% | Annualised return per D share since launch including tax relief |
| Ordinary shares | D shares | |||
| 31 December 2012 pence per share | 31 December 2011 pence per share | 31 December 2012 pence per share | 31 December 2011 pence per share | |
| Dividends paid | 5.00 | 5.00 | 3.50 | 2.50 |
| Revenue return | 1.50 | 1.40 | 1.90 | 1.60 |
| Capital gain | 2.00 | 3.30 | 6.50 | 0.90 |
| Net asset value | 74.00 | 75.50 | 97.90 | 93.00 |
Total shareholder net asset value return to 31 December 2012:
| Ordinary shares 31 December 2012 pence per share (ii) | C shares 31 December 2012 pence per share(ii) | D shares 31 December 2012 pence per share(ii) | |
| Total dividends paid during the year ended: 31 December 1999(i) | 1.00 | - | - |
| 31 December 2000 | 2.90 | - | - |
| 31 December 2001 | 3.95 | - | - |
| 31 December 2002 | 4.20 | - | - |
| 31 December 2003(iii) | 4.50 | 0.75 | - |
| 31 December 2004 | 4.00 | 2.00 | - |
| 31 December 2005 | 5.20 | 5.90 | - |
| 31 December 2006 | 3.00 | 4.50 | - |
| 31 December 2007(iv) | 5.00 | 5.36 | - |
| 31 December 2008 | 12.00 | 12.86 | - |
| 31 December 2009 | 4.00 | 4.29 | - |
| 31 December 2010 | 8.00 | 8.58 | 1.00 |
| 31 December 2011 | 5.00 | 5.36 | 2.50 |
| 31 December 2012 | 5.00 | 5.36 | 3.50 |
| Total dividends paid to 31 December 2012 | 67.75 | 54.96 | 7.00 |
| Net asset value as at 31 December 2012 | 74.00 | 79.29 | 97.90 |
| Total shareholder net asset value return to 31 December 2012 | 141.75 | 134.25 | 104.90 |
In addition to the dividends paid above, the Board has declared a first dividend for the year ending 31 December 2013, of 2.50 pence per Ordinary share and 2.50 pence per D share payable on 31 May 2013 to shareholders on the register at 3 May 2013.
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 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.
Chairman's statement
Introduction
The results for Albion Development VCT PLC for the year to 31 December 2012, showed a total return of 3.5 pence per Ordinary share and 8.4 pence per D share. The return is slightly lower for the Ordinary shares compared with the previous year, though there was a pleasing increase in income. The particularly strong performance of the D shares reflects an uplift in valuation of the asset-based businesses in which we have invested in recent years.
Investment performance and progress
The Ordinary shares investment return benefitted from the sale of our five cinema investments which realised a total return of 2.3 times cost. In addition, there were further improved performances from Process Systems Enterprise, Mirada Medical, Lowcosttravel, Dysis Medical and a further uplift in the third party professional valuation of Radnor House School. Our investment in Nelson House Hospital was sold subsequent to the year end; the total return on this investment (whose proceeds are largely reflected in the year end valuation) amounted to 1.4 times cost, and an annualised return of over 20 per cent. per annum. Against this, there were disappointing reductions in the value of Helveta, which required further finance, and Prime Care Holdings.
During the year, £3.2 million was invested in the Ordinary share portfolio of which £1.7 million went to build up further the portfolio of renewable energy investments. Just over £784,000 was invested in the D share portfolio.
Between them, businesses in the Albion VCTs portfolio of incestments employ over 3,900 people. These companies export more than £110 million of goods and spend in excess of £8 million on research and development annually.
Risks and uncertainties
The outlook for the UK and the global economies continues to be the key risk affecting your Company, neither of which are showing material growth. The task of the Manager is to allocate resources to those sectors and opportunities where growth can continue, despite the broader difficult economic climate. Importantly, however, investment risk is mitigated through a variety of processes including our policy of ensuring that the VCT has a first charge over portfolio companies' assets wherever possible.
A detailed analysis of the other risks and uncertainties facing the business is set out in note 23.
Discount management and share buy-backs
It remains the Board's policy to buy-back shares in the market, subject to the overall constraint that such purchases are in the Company's interest, including the maintenance of sufficient resources for investment in new and existing portfolio companies and the continued payment of dividends to shareholders. It is the Board's intention for such buy-backs to be in the region of 5 per cent. discount to net asset value, so far as market conditions and liquidity permit.
During the year, the Company cancelled 39,396 Ordinary shares from treasury and purchased 765,436 Ordinary shares for cancellation at a cost of £499,000.
Transactions with Manager
Details of transactions that took place with the Manager during the year can be found in note 5.
Post balance sheet events
Details of post balance sheet events can be found in note 21.
Results and dividends
As at 31 December 2012, the net asset value was 74.0 pence per Ordinary share and 97.9 pence per D share. The revenue return before taxation was £613,000 for the Ordinary shares and £164,000 for the D shares compared to previous year's returns of £539,000 for the Ordinary shares and £130,000 for the D shares.
The Company will pay a first dividend for the financial year to 31 December 2013 of 2.50 pence per Ordinary share and 2.50 pence per D share on 31 May 2013 to shareholders on the register on 3 May 2013.
Albion VCTs Top Up Offers 2012/13
On 19 October 2012, the Company announced the launch of the Albion VCTs Top Up Offers 2012/13. In aggregate, the Albion VCTs will be aiming to raise approximately £15 million across six of the VCTs managed by Albion Ventures LLP, of which Albion Development VCT PLC's share will be approximately £2.5 million. This builds on the success of the previous two Albion VCTs Top Up Offers, which raised £22 million, of which Albion Development VCT's share was £3.2 million.
The proceeds of the Offer will be used to provide further resources to the VCT at a time when a number of attractive new investment opportunities are being seen. An Investor Guide and Offer document have been sent to shareholders and can be obtained from www.albion-ventures.co.uk.
Board change
David Pinckney, who has been a Director since the VCT's launch, has given notice that he will be retiring from the Board at the AGM in June, and on behalf of all shareholders I would like to thank him for his many years of wise counsel. The process for recruiting a replacement has begun.
Outlook and prospects
Despite the difficult outlook for the UK and global economies, a number of our portfolio companies have real prospects for sustained growth and strong value creation. Meanwhile, we continue to rebalance our investment portfolio to provide more emphasis on areas that we see as being more resilient, in particular renewable energy, which in due course will account for up to 20 per cent. of net assets.
Geoffrey Vero
Chairman
4 April 2013
Manager's report
The sector analysis of Albion Development VCT PLC's Ordinary share and D share investment portfolios as at 31 December 2012 are at the end of this announcement.
As at 31 December 2012, the healthcare element (prior to the sale of Nelson House Hospital) accounted for 15 per cent. of Ordinary shares fixed asset investment portfolio (2011: 14 per cent.), while the renewable energy portion is now 12 per cent., up from 7 per cent. at the previous year end. For the D shares, healthcare is now 26 per cent. (2011: 15 per cent.) and renewable energy is 25 per cent. of the portfolio (2011: 27 per cent.). Asset-backed investments account for 56 per cent. and growth investments for 44 per cent. of the Ordinary share fixed asset investment portfolio by valuation (excluding cash and liquid assets). Asset-backed investments account for 82 per cent. and growth investments account for 18 per cent. of the D share fixed asset investment portfolio by valuation (excluding cash and liquid assets).
Portfolio review
Amongst the higher growth and technology investments, Lowcosttravel showed particular growth, despite the difficult retail environment, as purchasers of holidays moved increasingly online. Process Systems Enterprise also showed strong growth and now counts five of the six global oil majors amongst its clients. Opta Sports Data has become the European leader in sports performance data while Mirada Medical, Dysis Medical and Masters showed the potential for strong further growth and uplifts in value.
The key reductions in value within the portfolio were, again, our investments in Helveta, Consolidated and Prime Care. Helveta and Consolidated face difficult market conditions, while growth in Prime Care has been affected by cuts in local authority spending.
In our asset-backed portfolio, our five cinemas were sold at a profit, including income received, of 2.3 times the original cost of £1.5 million. Meanwhile, the second year of operation of Radnor House School continued the strong progress of the first year. The school now has 240 pupils, is profitable, and growth has been sufficient to justify a further increase in the professional valuation.
Our renewable energy projects meanwhile are producing electricity according to plan and are becoming a strongly cash-generative part of the portfolio. Our investment in Nelson House Hospital was also sold subsequent to the year end, realising a total return of 1.4 times cost and an annualised return of over 20 per cent. per annum.
New investments
During the year £1.7 million was invested in renewable energy projects; ultimately this sector will amount to up to 20 per cent. of the combined Ordinary and D share portfolio. Our investments in this sector now cover the four technologies of solar, wind, biogas and hydro. A total of £194,000 was invested in AMS Life Sciences in order to complete its restructuring, and to support further growth in Bravo II, Process Systems Enterprise, Dysis and Mi-Pay. An initial £106,000 and £37,000 was invested for the Ordinary and D share portfolios in Proveca, a developer of paediatric drugs.
Albion Ventures LLP
Manager
4 April 2013
Responsibility Statement
In preparing these financial statements for the year to 31 December 2012, the Directors of the Company, being Geoffrey Vero, David Pinckney, Jonathan Thornton and Andrew Phillipps, 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 2012 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 2012 as required by DTR 4.1.12.R;
- the Chairman's statement and Manager's report include a fair review of the information required by DTR 4.2.7R (indication of important events during the year ended 31 December 2012 and description of principal risks and uncertainties that the Company faces); and
- the Chairman's statement and Manager's report include a fair review of the information required by DTR 4.2.8R (disclosure of related parties transactions and changes therein).
A detailed Statement of Directors' responsibilities for the preparation of the Company's financial statements" is contained within the full audited Annual Report and Financial Statements.
By order of the Board
Geoffrey Vero
Chairman
4 April 2013
Income statement
| Combined Year ended 31 December 2012 | Combined Year ended 31 December 2011 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gains on investments | 3 | - | 1,410 | 1,410 | - | 1,421 | 1,421 |
| Investment income | 4 | 1,177 | - | 1,177 | 1,038 | - | 1,038 |
| Investment management fees | 5 | (165) | (499) | (664) | (162) | (484) | (646) |
| Other expenses | 6 | (235) | - | (235) | (207) | - | (207) |
| Return on ordinary activities before tax | 777 | 911 | 1,688 | 669 | 937 | 1,606 | |
| Tax (charge)/credit on ordinary activities | 8 | (172) | 128 | (44) | (152) | 126 | (26) |
| Return attributable to shareholders | 605 | 1,039 | 1,644 | 517 | 1,063 | 1,580 | |
The accompanying notes form an integral part of these Financial Statements.
The total column of this Income statement represents the profit and loss account of the Company. The supplementary revenue and capital columns have been prepared in accordance with The Association of Investment Companies' Statement of Recommended Practice.
All revenue and capital items in the above statement derive from continuing operations.
There are no recognised gains or losses other than the results for the year disclosed above. Accordingly a Statement of total recognised gains and losses is not required.
The difference between the reported 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.
Disclosure of basic and diluted earnings per share is given in the underlying Ordinary and D share Income statements on the following pages.
Income statement (non-statutory analysis)
| Ordinary shares Year ended 31 December 2012 | Ordinary shares Year ended 31 December 2011 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gains on investments | 3 | - | 921 | 921 | - | 1,289 | 1,289 |
| Investment income | 4 | 928 | - | 928 | 827 | - | 827 |
| Investment management fees | 5 | (132) | (396) | (528) | (129) | (385) | (514) |
| Other expenses | 6 | (183) | - | (183) | (159) | - | (159) |
| Return on ordinary activities before tax | 613 | 525 | 1,138 | 539 | 904 | 1,443 | |
| Tax (charge)/credit on ordinary activities | 8 | (132) | 101 | (31) | (120) | 100 | (20) |
| Return attributable to shareholders | 481 | 626 | 1,107 | 419 | 1,004 | 1,423 | |
| Basic and diluted return per share (pence)* | 10 | 1.50 | 2.00 | 3.50 | 1.40 | 3.30 | 4.70 |
| D shares Year ended 31 December 2012 | D shares Year ended 31 December 2011 | ||||||
| Revenue | Capital | Total | Total | Capital | Total | ||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gains on investments | 3 | - | 489 | 489 | - | 132 | 132 |
| Investment income | 4 | 249 | - | 249 | 211 | - | 211 |
| Investment management fees | 5 | (33) | (103) | (136) | (33) | (99) | (132) |
| Other expenses | 6 | (52) | - | (52) | (48) | - | (48) |
| Return on ordinary activities before tax | 164 | 386 | 550 | 130 | 33 | 163 | |
| Tax (charge)/credit on ordinary activities | 8 | (40) | 27 | (13) | (32) | 26 | (6) |
| Return attributable to shareholders | 124 | 413 | 537 | 98 | 59 | 157 | |
| Basic and diluted return per share (pence)* | 10 | 1.90 | 6.50 | 8.40 | 1.60 | 0.90 | 2.50 |
* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.
Balance sheet
| Combined 31 December 2012 | Combined 31 December 2011 | ||
| Note | £'000 | £'000 | |
| Fixed asset investments | 11 | 22,540 | 21,113 |
| Current assets | |||
| Trade and other debtors | 13 | 282 | 131 |
| Current asset investments | 13 | 530 | 637 |
| Cash at bank and in hand | 17 | 7,131 | 7,195 |
| 7,943 | 7,963 | ||
| Creditors: amounts falling due within one year | 14 | (378) | (262) |
| Net current assets | 7,565 | 7,701 | |
| Net assets | 30,105 | 28,814 | |
| Capital and reserves | |||
| Called up share capital | 15 | 421 | 20,088 |
| Share premium | 392 | 636 | |
| Capital redemption reserve | 2 | 1,917 | |
| Unrealised capital reserve | (2,046) | (3,143) | |
| Realised capital reserve | 3,326 | 2,713 | |
| Other distributable reserve | 28,010 | 6,603 | |
| Total equity shareholders' funds | 30,105 | 28,814 | |
The accompanying notes form an integral part of these Financial Statements.
Disclosure of basic and diluted net asset value per share is given in the underlying Ordinary and D shares Balance sheets on the following pages.
These Financial Statements were approved by the Board of Directors, and authorised for issue on 4 April 2013 and were signed on its behalf by
Geoffrey Vero
Chairman
Company number: 03654040
Balance sheet (non-statutory analysis)
| Ordinary shares 31 December 2012 | Ordinary shares 31 December 2011 | ||
| Note | £'000 | £'000 | |
| Fixed asset investments | 11 | 17,606 | 17,147 |
| Current assets | |||
| Trade and other debtors | 13 | 202 | 101 |
| Current asset investments | 13 | 30 | 137 |
| Cash at bank and in hand | 17 | 6,309 | 5,734 |
| 6,541 | 5,972 | ||
| Creditors: amounts falling due within one year | 14 | (287) | (214) |
| Net current assets | 6,254 | 5,758 | |
| Net assets | 23,860 | 22,905 | |
| Capital and reserves | |||
| Called up share capital | 15 | 357 | 16,912 |
| Share premium | 383 | 631 | |
| Capital redemption reserve | 2 | 1,917 | |
| Unrealised capital reserve | (2,661) | (3,269) | |
| Realised capital reserve | 3,514 | 2,825 | |
| Other distributable reserve | 22,265 | 3,889 | |
| Total equity shareholders' funds | 23,860 | 22,905 | |
| Basic and diluted net asset value per share (pence)* | 16 | 74.00 | 75.50 |
* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.
Balance sheet (non-statutory analysis)
| D shares 31 December 2012 | D shares 31 December 2011 | ||
| Note | £'000 | £'000 | |
| Fixed asset investments | 11 | 4,934 | 3,966 |
| Current assets | |||
| Trade and other debtors | 13 | 80 | 30 |
| Current asset investments | 13 | 500 | 500 |
| Cash at bank and in hand | 17 | 822 | 1,461 |
| 1,402 | 1,991 | ||
| Creditors: amounts falling due within one year | 14 | (91) | (48) |
| Net current assets | 1,311 | 1,943 | |
| Net assets | 6,245 | 5,909 | |
| Capital and reserves | |||
| Called up share capital | 15 | 64 | 3,176 |
| Share premium | 9 | 5 | |
| Unrealised capital reserve | 615 | 126 | |
| Realised capital reserve | (188) | (112) | |
| Other distributable reserve | 5,745 | 2,714 | |
| Total equity shareholders' funds | 6,245 | 5,909 | |
| Basic and diluted net asset value per share (pence)* | 16 | 97.90 | 93.00 |
* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.
Reconciliation of movements in shareholders' funds
Combined
| 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 2012 | 20,088 | 636 | 1,917 | (3,143) | 2,713 | 6,603 | 28,814 |
| Return/(loss) for the year | - | - | - | 1,058 | (19) | 605 | 1,644 |
| Transfer of unrealised losses to realised losses | - | - | - | 39 | (39) | - | - |
| Reduction in share capital and cancellation of capital redemption and share premium reserves** | (20,446) | (1,139) | (2,204) | - | - | 23,789 | - |
| Cancellation of treasury shares | (20) | - | 20 | - | - | - | - |
| Purchase of own shares for cancellation | (269) | - | 269 | - | - | (499) | (499) |
| Issue of equity (net of costs) | 1,068 | 895 | - | - | - | - | 1,963 |
| Transfer from other distributable reserve to realised capital reserve | - | - | - | - | 671 | (671) | - |
| Dividends paid | - | - | - | - | - | (1,817) | (1,817) |
| As at 31 December 2012 | 421 | 392 | 2 | (2,046) | 3,326 | 28,010 | 30,105 |
| 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 2011 | 19,388 | 37 | 1,426 | (5,063) | 2,860 | 9,270 | 27,918 |
| Return for the year | - | - | - | 81 | 982 | 517 | 1,580 |
| Transfer of unrealised losses to realised losses | - | - | - | 1,839 | (1,839) | - | - |
| Purchase of own treasury shares | - | - | - | - | - | (462) | (462) |
| Cancellation of treasury shares | (250) | - | 250 | - | - | - | - |
| Purchase of own shares for cancellation | (241) | - | 241 | - | - | (306) | (306) |
| Issue of equity (net of costs) | 1,191 | 599 | - | - | - | - | 1,790 |
| Transfer from other distributable reserve to realised capital reserve | - | - | - | - | 711 | (711) | - |
| Dividends paid | - | - | - | - | - | (1,705) | (1,705) |
| As at 31 December 2011 | 20,088 | 636 | 1,917 | (3,143) | 2,713 | 6,603 | 28,814 |
* Included within these reserves is an amount of £29,290,000 (2011: £6,173,000) which is considered distributable.
** The reduction in the nominal value of shares from 50 pence to 1 penny and the cancellation of the capital redemption and share premium reserves (as approved by shareholders at the Annual General Meeting held on 15 June 2012 and by order of the Court dated 11 July 2012) has increased the value of distributable reserves.
The special reserve, treasury shares reserve and the revenue reserve have been combined in the Balance sheet to form a single reserve named other distributable reserve for both the current and prior year. The Directors consider the combination of these reserves enhances the clarity of financial reporting. More details regarding treasury shares can be found in note 15.
A transfer of £671,000 (2011: £711,000) representing gross realised losses on disposal of investments during the year ended 31 December 2012 has been made from the other distributable reserve to the realised capital reserve.
Reconciliation of movements in shareholders' funds
Ordinary shares (non-statutory analysis)
| 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 2012 | 16,912 | 631 | 1,917 | (3,269) | 2,825 | 3,889 | 22,905 |
| Return for the year | - | - | - | 569 | 57 | 481 | 1,107 |
| Transfer of unrealised losses to realised losses | - | - | - | 39 | (39) | - | - |
| Reduction of share capital and cancellation of capital redemption and share premium reserves** | (17,327) | (1,129) | (2,204) | - | - | 20,660 | - |
| Cancellation of treasury shares | (20) | - | 20 | - | - | - | - |
| Purchase of own shares for cancellation | (269) | - | 269 | - | - | (499) | (499) |
| Issue of equity (net of costs) | 1,061 | 881 | - | - | - | - | 1,942 |
| Transfer from other distributable reserve to realised capital reserve | - | - | - | - | 671 | (671) | - |
| Dividends paid | - | - | - | - | - | (1,595) | (1,595) |
| As at 31 December 2012 | 357 | 383 | 2 | (2,661) | 3,514 | 22,265 | 23,860 |
| 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 2011 | 16,220 | 37 | 1,426 | (5,083) | 2,924 | 6,496 | 22,020 |
| (Loss)/return for the year | - | - | - | (25) | 1,029 | 419 | 1,423 |
| Transfer of unrealised losses to realised losses | - | - | - | 1,839 | (1,839) | - | - |
| Purchase of own treasury shares | - | - | - | - | - | (462) | (462) |
| Cancellation of treasury shares | (250) | - | 250 | - | - | - | - |
| Purchase of own shares for cancellation | (241) | - | 241 | - | - | (306) | (306) |
| Issue of equity (net of costs) | 1,183 | 594 | - | - | - | - | 1,777 |
| Transfer from other distributable reserve to realised capital reserve | - | - | - | - | 711 | (711) | - |
| Dividends paid | - | - | - | - | - | (1,547) | (1,547) |
| As at 31 December 2011 | 16,912 | 631 | 1,917 | (3,269) | 2,825 | 3,889 | 22,905 |
* Included within these reserves is an amount of £23,118,000 (2011: £3,445,000) which is considered distributable.
** The reduction in the nominal value of shares from 50 pence to 1 penny and the cancellation of the capital redemption and share premium reserves (as approved by shareholders at the Annual General Meeting held on 15 June 2012 and by order of the Court dated 11 July 2012) has increased the value of distributable reserves.
The special reserve, treasury shares reserve and the revenue reserve have been combined in the Balance sheet to form a single reserve named other distributable reserves for both the current and prior year. The Directors consider the combination of these reserves enhances the clarity of financial reporting. More details regarding treasury shares can be found in note 15.
A transfer of £671,000 (2011: £711,000) representing gross realised losses on disposal of investments during the year ended 31 December 2012 has been made from the other distributable reserve to the realised capital reserve.
Reconciliation of movements in shareholders' funds
D shares (non-statutory analysis)
| Called-up share capital | Share premium | Unrealised capital reserve | Realised capital reserve* | Other distributable reserve* | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| As at 1 January 2012 | 3,176 | 5 | 126 | (112) | 2,714 | 5,909 |
| Return/(loss) for the year | - | - | 489 | (76) | 124 | 537 |
| Reduction in share capital and cancellation of share premium reserve** | (3,119) | (10) | - | - | 3,129 | - |
| Issue of equity (net of costs) | 7 | 14 | - | - | - | 21 |
| Dividends paid | - | - | - | - | (222) | (222) |
| As at 31 December 2012 | 64 | 9 | 615 | (188) | 5,745 | 6,245 |
| Called-up share capital | Share premium | Unrealised capital reserve | Realised capital reserve* | Other distributable reserve* | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| As at 1 January 2011 | 3,168 | - | 20 | (64) | 2,774 | 5,898 |
| Return/(loss) for the year | - | - | 106 | (47) | 98 | 157 |
| Issue of equity (net of costs) | 8 | 5 | - | - | - | 13 |
| Dividends paid | - | - | - | - | (158) | (158) |
| As at 31 December 2011 | 3,176 | 5 | 126 | (112) | 2,714 | 5,909 |
* Included within these reserves is an amount of £5,557,000 (2011: £2,602,000) which is considered distributable.
** The reduction in the nominal value of shares from 50 pence to 1 penny and the cancellation of the share premium reserve (as approved by shareholders at the Annual General Meeting held on 15 June 2012 and by order of the Court dated 11 July 2012) has increased the value of distributable reserves.
The special reserve, treasury shares reserve and the revenue reserve have been combined in the Balance sheet to form a single reserve named other distributable reserve for both the current and prior year. The Directors consider the combination of these reserves enhances the clarity of financial reporting. More details regarding treasury shares can be found in note 15.
Cash flow statement
| Note | Combined Year ended 31 December 2012 £'000 | Combined Year ended 31 December 2011 £'000 | ||
| Operating activities | ||||
| Loan stock income received | 1,144 | 873 | ||
| Deposit interest received | 104 | 93 | ||
| Dividend income received | - | 19 | ||
| Other income received | - | 1 | ||
| Investment management fees paid | (657) | (643) | ||
| Other cash payments | (224) | (224) | ||
| Net cash flow from operating activities | 18 | 367 | 119 | |
| Taxation | ||||
| UK corporation tax (paid)/recovered | (24) | 125 | ||
| Capital expenditure and financial investments | ||||
| Purchase of fixed asset investments | (4,124) | (5,311) | ||
| Disposal of fixed asset investments | 3,904 | 4,932 | ||
| Purchase of current asset investments | - | (500) | ||
| Disposal of current asset investments | 171 | - | ||
| Net cash flow from investing activities | (49) | (879) | ||
| Equity dividends paid | ||||
| Dividends paid (net of cost of shares issued under the Dividend Reinvestment Scheme) | (1,678) | (1,585) | ||
| Net cash flow before financing | (1,384) | (2,220) | ||
| Financing | ||||
| Issue of share capital (net of costs) | 1,824 | 1,671 | ||
| Purchase of own shares (including costs) | 15 | (504) | (768) | |
| Net cash flow from financing | 1,320 | 903 | ||
| Cash flow in the year | 17 | (64) | (1,317) |
Cash flow statement (non-statutory analysis)
| Note | Ordinary shares Year ended 31 December 2012 £'000 | Ordinary shares Year ended 31 December 2011 £'000 | ||
| Operating activities | ||||
| Loan stock income received | 906 | 755 | ||
| Deposit interest received | 70 | 55 | ||
| Dividend income received | - | 19 | ||
| Other income received | - | 1 | ||
| Investment management fees paid | (523) | (511) | ||
| Other cash payments | (175) | (174) | ||
| Net cash flow from operating activities | 18 | 278 | 145 | |
| Taxation | ||||
| UK corporation tax (paid)/recovered | (31) | 125 | ||
| Capital expenditure and financial investments | ||||
| Purchase of fixed asset investments | (3,304) | (3,131) | ||
| Disposal of fixed asset investments | 3,618 | 4,906 | ||
| Disposal of current asset investments | 171 | - | ||
| Net cash flow from investing activities | 485 | 1,775 | ||
| Equity dividends paid | ||||
| Dividends paid (net of cost of shares issued under Dividend Reinvestment Scheme) | (1,477) | (1,441) | ||
| Net cash flow before financing | (745) | 604 | ||
| Financing | ||||
| Issue of share capital (net of costs) | 1,824 | 1,671 | ||
| Purchase of own shares | 15 | (504) | (768) | |
| Net cash flow from financing | 1,320 | 903 | ||
| Cash flow in the year | 17 | 575 | 1,507 |
Cash flow statement (non-statutory analysis)
| Note | D shares Year ended 31 December 2012 £'000 | D shares Year ended 31 December 2011 £'000 | ||
| Operating activities | ||||
| Loan stock income received | 238 | 118 | ||
| Deposit interest received | 34 | 38 | ||
| Investment management fees paid | (134) | (132) | ||
| Other cash payments | (49) | (50) | ||
| Net cash flow from operating activities | 18 | 89 | (26) | |
| UK corporation tax received | 7 | - | ||
| Capital expenditure and financial investments | ||||
| Purchase of fixed asset investments | (820) | (2,180) | ||
| Disposal of fixed asset investments | 286 | 26 | ||
| Purchase of current asset investments | - | (500) | ||
| Net cash flow from investing activities | (534) | (2,654) | ||
| Equity dividends paid | ||||
| Dividends paid (net of cost of shares issued under the Dividend Reinvestment Scheme) | (201) | (144) | ||
| Net cash flow before financing | (639) | (2,824) | ||
| Cash flow in the year | 17 | (639) | (2,824) |
Notes to the Financial Statements
1. Accounting convention
The financial statements have been prepared in accordance with the historical cost convention, modified to include the revaluation of investments, in accordance with applicable United Kingdom law and accounting standards and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ("SORP") issued by The Association of Investment Companies ("AIC") in January 2009. Accounting policies have been applied consistently in current and prior periods, however to enhance clarity of financial reporting, during the year the special reserve, treasury share reserve and revenue reserve have been combined to create a single reserve named Other distributable reserve. This has also been applied to prior periods.
2. Accounting policies
Investments
Unquoted equity investments, debt issued at a discount, and convertible bonds
In accordance with FRS 26 "Financial Instruments Recognition and Measurement", unquoted equity, debt issued at a discount and convertible bonds are designated as fair value through profit or loss ("FVTPL"). Unquoted investments' fair value is determined by the Directors in accordance with the International Private Equity and Venture Capital Valuation Guidelines (IPEVCV guidelines).
Fair value movements and gains and losses arising on the disposal of investments are reflected in the capital column of the Income statement in accordance with the AIC SORP. Realised gains or losses on the sale of investments will be reflected in the realised capital reserve, and unrealised gains or losses arising from the revaluation of investments will be reflected in the unrealised capital reserve.
Warrants and unquoted equity derived instruments
Warrants and unquoted equity derived instruments are only valued if there is deemed to be additional value to the Company in exercising or converting as at the balance sheet date. Otherwise these instruments are held at nil value. The valuation techniques used are those used for the underlying equity investment.
Unquoted loan stock
Unquoted loan stock (excluding debt issued at a discount and convertible bonds) is classified as loans and receivables as permitted by FRS 26 and measured at amortised cost using the effective interest rate method less impairment. Movements in the amortised cost relating to interest income are reflected in the revenue column of the Income statement, and hence are reflected in the other distributable reserve, and movements in respect of capital provisions are reflected in the capital column of the Income statement and are reflected in the realised capital reserve following sale, or in the unrealised capital reserve for impairments arising from revaluations of the fair value of the security.
For all unquoted loan stock, whether fully performing, past due or impaired, the Board considers that the fair value is equal to or greater than the security value of these assets. For unquoted loan stock, the amount of the impairment is the difference between the asset's cost and the present value of estimated future cash flows, discounted at the original effective interest rate. The future cash flows are estimated based on the fair value of the security less estimated selling costs.
Investments are recognised as financial assets on legal completion of the investment contract and are de-recognised on legal completion of the sale of an investment.
Dividend income is not recognised as part of the fair value movement of an investment, but is recognised separately as investment income through the other distributable reserve when a share becomes ex-dividend.
Loan stock accrued interest is recognised in the Balance sheet as part of the carrying value of the loans and receivables at the end of each reporting period.
In accordance with the exemptions under FRS 9 "Associates and joint ventures", those undertakings in which the Company holds more than 20 per cent. of the equity as part of an investment portfolio are not accounted for using the equity method.
Current asset investments
Contractual future contingent receipts on disposal of fixed asset investments are designated at fair value through profit or loss and are subsequently measured at fair value.
Fixed term deposits are classified as current asset investments as they are investments held for the short term. These are designated as loans and receivables and measured at amortised cost, which is considered to be equivalent to fair value.
Investment income
Unquoted equity income
Dividend income is included in the revenue column when the investment is quoted ex-dividend.
Unquoted loan stock income
Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis using an effective interest rate over the life of the financial instrument. Income which is not capable of being received within a reasonable period of time is reflected in the capital value of the investment.
Bank interest income
Interest income is recognised on an 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 revenue capital reserve 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, the fee will be allocated between revenue and realised capital reserves based upon the proportion to which the calculation of the fee is attributable to revenue and capital returns.
Taxation
Taxation is applied on a current basis in accordance with FRS 16 "Current tax". Taxation associated with capital expenses is applied in accordance with the SORP. In accordance with FRS 19 "Deferred tax", deferred taxation is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.
Dividends
In accordance with FRS 21 "Events after the balance sheet date", dividends declared by the Company are accounted for in the period in which the dividend has been paid or approved by shareholders in annual general meeting.
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.
Other distributable reserve
The special reserve, treasury share reserve and the revenue reserve have been combined to form a single reserve named Other distributable reserve.
This reserve accounts for the movements from the revenue column of the Income statement, the payment of dividends, the buy-back of shares and other non capital realised movements.
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.
D shares
Until such time that D shares are converted into Ordinary shares, all investments and returns attributable to this class of share will be separately identifiable from the existing Ordinary shares. All residual expenses will be allocated in the ratio of the respective Net Asset Values of each class of share.
3. Gains on investments
| Year ended 31 December 2012 | Year ended 31 December 2011 | ||||||
| Ordinary shares | D shares | Total | Ordinary shares | D shares | Total | ||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Unrealised gains/(losses) on fixed asset investments held at fair value through profit or loss | 569 | 390 | 959 | 266 | (272) | (6) | |
| Unrealised (impairments)/reversals of impairments on fixed asset investments held at amortised cost | (30) | 99 | 69 | (291) | 378 | 87 | |
| 539 | 489 | 1,028 | (25) | 106 | 81 | ||
| Unrealised gains on current asset investments held at fair value through profit or loss account | 30 | - | 30 | - | - | - | |
| Unrealised gains/(losses) sub-total | 569 | 489 | 1,058 | (25) | 106 | 81 | |
| Realised gains on investments held at fair value through profit or loss account | 337 | - | 337 | 224 | - | 224 | |
| Realised (losses)/gains on investments held at amortised cost | (19) | - | (19) | 1,090 | 26 | 1,116 | |
| 318 | - | 318 | 1,314 | 26 | 1,340 | ||
| Realised gains on current asset investments held at fair value through profit or loss account | 34 | - | 34 | - | - | - | |
| Realised gains sub total | 352 | - | 352 | 1,314 | 26 | 1,340 | |
| 921 | 489 | 1,410 | 1,289 | 132 | 1,421 | ||
Investments measured at amortised cost are unquoted loan stock investments as described in note 2.
4. Investment income
| Year ended 31 December 2012 | Year ended 31 December 2011 | |||||
| Ordinary shares £'000 | D shares £'000 | Total £'000 | Ordinary shares £'000 | D shares £'000 | Total £'000 | |
| Income recognised on investments held at fair value through profit or loss | ||||||
| Dividend income | - | - | - | 19 | - | 19 |
| Income from convertible bonds and discounted debt | 159 | 87 | 246 | 37 | 54 | 91 |
| 159 | 87 | 246 | 56 | 54 | 110 | |
| Income recognised on investments held at amortised cost | ||||||
| Bank deposit interest | 72 | 31 | 103 | 71 | 56 | 127 |
| Return on loan stock investments | 697 | 131 | 828 | 700 | 101 | 801 |
| 769 | 162 | 931 | 771 | 157 | 928 | |
| 928 | 249 | 1,177 | 827 | 211 | 1,038 | |
Interest income earned on impaired investments at 31 December 2012 amounted to £233,000 (2011: £98,000). These investments are all held at amortised cost.
5. Investment management fees
| Year ended 31 December 2012 | Year ended 31 December 2011 | |||||
| Ordinary shares £'000 | D shares £'000 | Total £'000 | Ordinary shares £'000 | D shares £'000 | Total £'000 | |
| Investment management fee charged to revenue | 132 | 33 | 165 | 129 | 33 | 162 |
| Investment management fee charged to capital | 396 | 103 | 499 | 385 | 99 | 484 |
| 528 | 136 | 664 | 514 | 132 | 646 | |
Further details of the Management agreement under which the investment management fee is paid are given in the Directors' report on page 21 of the Annual Report and Financial Statements.
The Manager, Albion Ventures LLP, is party to a management agreement from the Company (details disclosed on page 21 of the Annual Report and Financial Statements). During the year, services of a total value of £664,000 (2011: £646,000) 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 disclosed as accruals was £169,000 (2011: £162,000).
During the year the Company raised new funds through the Albion VCTs Linked Top Up Offers 2011/2012 and the Albion VCTs Top Up Offers 2012/2013 as detailed in note 15. The total cost of the issue of these shares was 5.5 per cent. of the sums subscribed. Of these costs, amounts of £6,740 and £663 respectively were paid to the Manager, Albion Ventures LLP in respect of receiving agent services. There were no sums outstanding in respect of receiving agent services at the year end.
Albion Ventures LLP holds 331 fractional entitlement shares of the Company as a result of the conversion of C shares to Ordinary shares in March 2007. These shares will be sold for the benefit of the Company at a future date.
Albion Ventures LLP also holds 14,000 Ordinary shares having subscribed for them as a result of the failure of an original subscriber to pay cleared funds on initial subscription.
6. Other expenses
| Year ended 31 December 2012 | Year ended 31 December 2011 | |||||
| Ordinary shares | D shares | Total | Ordinary shares | D shares | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Directors' fees (including NIC) | 69 | 18 | 87 | 69 | 19 | 88 |
| Other administrative expenses | 95 | 29 | 124 | 73 | 23 | 96 |
| Auditor's remuneration for statutory audit services (excluding VAT) | 19 | 5 | 24 | 17 | 6 | 23 |
| 183 | 52 | 235 | 159 | 48 | 207 | |
7. Directors' fees
The amounts paid to and on behalf of Directors during the year are as follows:
| Year ended 31 December 2012 | Year ended 31 December 2011 | |||||
| Ordinary shares | D shares | Total | Ordinary shares | D shares | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Directors' fees | 65 | 17 | 82 | 64 | 18 | 82 |
| National insurance | 4 | 1 | 5 | 5 | 1 | 6 |
| 69 | 18 | 87 | 69 | 19 | 88 | |
Further information can be found in the Directors' remuneration report on page 30 of the Annual report and Financial Statements.
8. Tax (charge)/credit on ordinary activities
The Company's combined tax charge of £44,000 (2011: £26,000) is analysed between the two share classes as follows:
| Year ended 31 December 2012 | Year ended 31 December 2011 | |||||
| Ordinary shares | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 |
| UK corporation tax in respect of current year | (149) | 101 | (48) | (128) | 100 | (28) |
| UK corporation tax in respect of prior years | 17 | - | 17 | 8 | - | 8 |
| (132) | 101 | (31) | (120) | 100 | (20) | |
Factors affecting the tax charge:
| Ordinary shares | Year ended 31 December 2012 £'000 | Year ended 31 December 2011£'000 |
| Profit on ordinary activities before taxation | 1,138 | 1,443 |
| Tax on profit at the standard rate of 24.5 per cent. (2011: 20 per cent.) | (279) | (292) |
| Factors affecting the charge: | ||
| Non-taxable profits | 226 | 260 |
| Non-taxable income | - | 4 |
| Non-deductible expenses | (4) | - |
| Marginal relief | 9 | - |
| Adjustment in respect of prior years | 17 | 8 |
| (31) | (20) |
| Year ended 31 December 2012 | Year ended 31 December 2011 | |||||
| D shares | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 |
| UK corporation tax in respect of current year | (40) | 27 | (13) | (32) | 26 | (6) |
Factors affecting the tax charge:
| D shares | Year ended 31 December 2012 £'000 | Year ended 31 December 2011 £'000 |
| Profit on ordinary activities before taxation | 550 | 163 |
| Tax on profit at the standard rate of 24.5 per cent. (2011: 20 per cent.) | (135) | (33) |
| Factors affecting the charge: | ||
| Non-taxable profits | 120 | 27 |
| Non-deductible expenses | (1) | - |
| Marginal relief | 3 | - |
| (13) | (6) |
The tax charge for the year shown in the Income statement is lower than the standard rate of corporation tax in the UK of 24.5 per cent. (2011: 20 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 2012 | Year ended 31 December 2011 | |
| Ordinary shares | £'000 | £'000 |
| Dividend of 2.5p per Ordinary share paid on 31 May 2011 | - | 776 |
| Dividend of 2.5p per Ordinary share paid on 30 September 2011 | - | 771 |
| Dividend of 2.5p per Ordinary share paid on 31 May 2012 | 799 | - |
| Dividend of 2.5p per Ordinary share paid on 30 September 2012 | 796 | - |
| 1,595 | 1,547 |
| Year ended 31 December 2012 | Year ended 31 December 2011 | |
| D shares | £'000 | £'000 |
| Dividend of 1.25p per D share paid on 31 May 2011 | - | 79 |
| Dividend of 1.25p per D share paid on 30 September 2011 | - | 79 |
| Dividend of 1.75p per D share paid on 31 May 2012 | 111 | - |
| Dividend of 1.75p per D share paid on 30 September 2012 | 111 | - |
| 222 | 158 |
In addition to the dividends summarised above, the Board has declared a first dividend of 2.50 pence per Ordinary share and 2.50 pence per D share for the year ending 31 December 2013. This dividend will be paid on 31 May 2013 to shareholders on the register as at 3 May 2013. This dividend totals approximately £806,000 for Ordinary shares and £159,000 for D shares.
10. Basic and diluted return per share
| Year ended 31 December 2012 | Year ended 31 December 2011 | |||||
| Ordinary shares | Revenue | Capital | Total | Revenue | Capital | Total |
| The return per share has been based on the following figures: | ||||||
| Return attributable to equity shares (£'000) | 481 | 626 | 1,107 | 419 | 1,004 | 1,423 |
| Weighted average shares in issue (excluding treasury shares) | 31,651,285 | 30,630,649 | ||||
| Return attributable per equity share (pence) | 1.50 | 2.00 | 3.50 | 1.40 | 3.30 | 4.70 |
The weighted average number of Ordinary shares is calculated excluding the treasury shares of 3,428,000 (2011: 3,467,396).
| Year ended 31 December 2012 | Year ended 31 December 2011 | |||||
| D shares | Revenue | Capital | Total | Revenue | Capital | Total |
| The return per share has been based on the following figures: | ||||||
| Return attributable to equity shares (£'000) | 124 | 413 | 537 | 98 | 59 | 157 |
| Weighted average shares in issue (excluding treasury shares) | 6,363,334 | 6,342,448 | ||||
| Return attributable per equity share (pence) | 1.90 | 6.50 | 8.40 | 1.60 | 0.90 | 2.50 |
There are no D shares held in treasury.
There are no convertible instruments, derivatives or contingent share agreements in issue so basic and diluted return per share are the same.
11. Fixed asset investments
The classification of investments by nature of instruments is as follows:
| Ordinary shares | D shares | ||||||
| 31 December 2012 £'000 | 31 December 2011 £'000 | 31 December 2012 £'000 | 31 December 2011 £'000 | ||||
| Investments held at fair value through profit or loss | |||||||
| Unquoted equity, warrants and preference shares | 5,490 | 5,776 | 1,471 | 1,053 | |||
| Discounted debt and convertible loan stock | 3,534 | 1,581 | 1,184 | 1,138 | |||
| 9,024 | 7,357 | 2,655 | 2,191 | ||||
| Investments held at amortised cost | |||||||
| Unquoted loan stock | 8,582 | 9,790 | 2,279 | 1,775 | |||
| 17,606 | 17,147 | 4,934 | 3,966 | ||||
| Ordinary shares £'000 | D shares £'000 | Combined £'000 | ||||
| Opening valuation as at 1 January 2012 | 17,147 | 3,966 | 21,113 | |||
| Purchases at cost | 3,232 | 784 | 4,016 | |||
| Disposal proceeds | (3,580) | (286) | (3,866) | |||
| Realised gains | 318 | - | 318 | |||
| Movement in loan stock accrued income | (50) | (19) | (69) | |||
| Unrealised gains | 539 | 489 | 1,028 | |||
| Closing valuation as at 31 December 2012 | 17,606 | 4,934 | 22,540 | |||
| Movement in loan stock accrued income | ||||||
| Opening accumulated movement in loan stock accrued income | 288 | 38 | 326 | |||
| Movement in loan stock accrued income | (50) | (19) | (69) | |||
| Closing accumulated movement in loan stock accrued income as at 31 December 2012 | 238 | 19 | 257 | |||
| Movement in unrealised (losses)/gains | ||||||
| Opening accumulated unrealised (losses)/gains | (3,541) | 126 | (3,415) | |||
| Transfer of previously unrealised losses on disposal | 134 | - | 134 | |||
| Movement in unrealised gains | 539 | 489 | 1,028 | |||
| Closing accumulated unrealised (losses)/gains as at 31 December 2012 | (2,868) | 615 | (2,253) | |||
| Historic cost basis | ||||||
| Opening book cost | 20,399 | 3,802 | 24,201 | |||
| Purchases at cost | 3,232 | 784 | 4,016 | |||
| Sales at cost | (3,396) | (286) | (3,682) | |||
| Closing book cost as at 31 December 2012 | 20,235 | 4,300 | 24,535 | |||
The Directors believe that the carrying value of loan stock measured at amortised cost is not materially different to fair value. The Company does not hold any assets as the result of the enforcement of security during the year, 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.
Additions and disposal proceeds included in the cash flow statement differ from the amounts shown in the note above, due to deferred consideration, settlement creditors and the restructuring of investments.
A schedule of realisations during the year is shown on pages 12 and 13 of the Annual Report and Financial Statements.
The amended FRS 29 'Financial Instruments: Disclosures' requires the Company to disclose the valuation methods applied to its investments measured at fair value through profit or loss in a fair value hierarchy according to the following definitions;
| Fair value hierarchy | Definition of valuation method |
| Level 1 | Unadjusted quoted (bid) prices applied |
| Level 2 | Inputs to valuation are from observable sources and are directly or indirectly derived from prices |
| Level 3 | Inputs to valuations not based on observable market data |
Unquoted equity, preference shares, convertible loan stock and debt issued at a discount are all valued according to Level 3 valuation methods.
The Ordinary shares' Level 3 investments had the following movements in the year to 31 December 2012:
| 31 December 2012 | 31 December 2011 | |||||
| Equity | Convertible and discounted bonds | Total | Equity | Convertible and discounted bonds | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Opening balance | 5,776 | 1,581 | 7,357 | 5,199 | 937 | 6,136 |
| Additions | 976 | 1,320 | 2,296 | 3,126 | 846 | 3,972 |
| Disposals | (1,462) | (68) | (1,530) | (2,586) | (525) | (3,111) |
| Realised gains/(losses) | 400 | (63) | 337 | 222 | - | 222 |
| Debt/equity conversion | 24 | (24) | - | - | - | - |
| Transfer to current asset investments | - | - | - | (137) | - | (137) |
| Unrealised (losses)/gains | (224) | 793 | 569 | (48) | 314 | 266 |
| Accrued loan stock interest | - | (5) | (5) | - | 9 | 9 |
| Closing balance | 5,490 | 3,534 | 9,024 | 5,776 | 1,581 | 7,357 |
The D shares' Level 3 investments had the following movements in the year to 31 December 2012:
| 31 December 2012 | 31 December 2011 | |||||
| Equity | Convertible and discounted bonds | Total | Equity | Convertible and discounted bonds | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Opening balance | 1,053 | 1,138 | 2,191 | 530 | 44 | 574 |
| Additions | 53 | 63 | 116 | 795 | 699 | 1,494 |
| Disposals | (25) | - | (25) | - | - | - |
| Unrealised gains/(losses) | 390 | - | 390 | (272) | 378 | 106 |
| Accrued loan stock interest | - | (17) | (17) | - | 17 | 17 |
| Closing balance | 1,471 | 1,184 | 2,655 | 1,053 | 1,138 | 2,191 |
Investments held at fair value through profit or loss are valued in accordance with the IPEVCV guidelines as follows:
| 31 December 2012 | 31 December 2011 | |||||
| Valuation methodology | Ordinary shares £'000 | D shares £'000 | Total £'000 | Ordinary shares £'000 | D shares £'000 | Total £'000 |
| Cost (reviewed for impairment) | 2,760 | 1,233 | 3,993 | 1,529 | 1,715 | 3,244 |
| Net asset value supported by third party valuation | 1,154 | 656 | 1,810 | 1,815 | 412 | 2,227 |
| Recent investment price (reviewed for impairment) | 96 | - | 96 | 448 | - | 448 |
| Earnings multiple | 2,248 | 243 | 2,491 | 2,188 | 64 | 2,252 |
| Revenue multiple | 2,226 | - | 2,226 | 1,377 | - | 1,377 |
| Agreed sale price/offer price | 540 | 523 | 1,063 | - | - | - |
| 9,024 | 2,655 | 11,679 | 7,357 | 2,191 | 9,548 | |
Full third party valuations are prepared by independent RICS qualified surveyors in full compliance with the RICS Red Book. Desk top reviews are carried out by similarly RICS qualified surveyors by updating previously prepared full valuations for current trading and market indices.
FRS 29 requires the Directors to consider the impact of changing one or more of the inputs used as part of the valuation process to reasonable possible alternative assumptions. After due consideration and noting that the valuation methodology applied to 50 per cent. of the Ordinary shares' and 91 per cent. of the D shares' Level 3 investments (by valuation) is based on third party independent evidence, recent investment price, agreed sale price/offer price and cost, the Directors believe that changes to reasonable possible alternative assumptions for the valuation of the remainder of the portfolio could lead to a significant change in the fair value of the Ordinary shares portfolio. The impact of these changes could result in an increase in the valuation of investments by £644,000 or a decrease in investments by £595,000 for the Ordinary share portfolio. The Directors do not believe that changes to reasonable possible alternative input assumptions for the D share portfolio would have a significant impact.
The Ordinary shares' unquoted equity instruments had the following movements between investment methodologies between 31 December 2011 and 31 December 2012:
| Change in valuation methodology (2011 to 2012) | Value as at 31 December 2012 £'000 | Explanatory note |
| Cost (reviewed for impairment) to net asset value supported by third party valuation | 205 | Third party valuation has recently taken place |
| Earnings multiple to revenue multiple | 509 | Temporary trading losses |
| Net asset value supported by third party valuation to agreed sale price/offer price | 11 | Proceeds awaited from exit |
| Revenue multiple to agreed sale price/offer price | 347 | Investment round has recently taken place |
| Cost (reviewed for impairment) to earnings multiple | 74 | Company is generating profits |
| Cost (reviewed for impairment) to agreed sale price/offer price | 182 | Proceeds awaited from exit |
The D shares unquoted equity instruments had the following movements between investment methodologies between 31 December 2011 and 31 December 2012:
| Change in valuation methodology (2011 to 2012) | Value as at 31 December 2012 £'000 | Explanatory note |
| Cost (reviewed for impairment) to earnings multiple | 39 | Company is generating profits |
| Cost (reviewed for impairment) to net asset value supported by third party valuation | 144 | Third party valuation has recently taken place |
| Cost (reviewed for impairment) to agreed sale price/offer price | 523 | Proceeds awaited from exit |
The valuation method used will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the 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 2012.
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 day-to-day management of a portfolio company. The size and structure of the companies with unquoted securities may result in certain holdings in the portfolio representing a participating interest without there being any partnership, joint venture or management consortium agreement.
The Company has interests of greater than 20 per cent. of the nominal value of any class of the allotted shares in the portfolio companies as at 31 December 2012, as described below:
| Company | Country of incorporation | Principal activity | % class and share type | % total voting rights |
| Evolutions Group Limited | Great Britain | Owner and lessor of property | 46.7% A Ordinary | 46.7% |
| The Q Garden Company Limited | Great Britain | Garden centre operator | 33.2% A Ordinary 10.8% Ordinary | 16.6% |
| Consolidated PR Limited | Great Britain | Public relations agency | 50.0% A Ordinary | 21.7% |
| Albion Investment Properties Limited | Great Britain | Owner of residential property | 48.4% A Ordinary | 48.4% |
| Blackbay Limited | Great Britain | Mobile data solutions | 21.1% A Ordinary | 7.4% |
| Masters Pharmaceuticals Limited | Great Britain | International specialist distributor of pharmaceuticals | 21.1% A Ordinary | 3.5% |
| Peakdale Molecular Limited | Great Britain | Researcher, processor and supplier of chemical compounds | 23.0% Ordinary | 8.9% |
The investments listed above are held as part of an investment portfolio and therefore, as permitted by FRS 9, they are measured at fair value and are not accounted for using the equity method.
13. Trade and other debtors and current asset investments
| 31 December 2012 | 31 December 2011 | |||||
| Trade and other debtors | Ordinary shares £'000 | D shares £'000 | Total £'000 | Ordinary shares £'000 | D shares £'000 | Total £'000 |
| Prepayments and accrued income | 24 | 20 | 44 | 23 | 23 | 46 |
| UK corporation tax receivable | - | - | - | - | 7 | 7 |
| Other debtors | 178 | 60 | 238 | 78 | - | 78 |
| 202 | 80 | 282 | 101 | 30 | 131 | |
| 31 December 2012 | 31 December 2011 | |||||
| Current asset investments | Ordinary shares £'000 | D shares £'000 | Total £'000 | Ordinary shares £'000 | D shares £'000 | Total £'000 |
| Contingent future receipts on disposal of fixed asset investments | 30 | - | 30 | 137 | - | 137 |
| Close Brothers Bank Limited fixed term deposit | - | 500 | 500 | - | 500 | 500 |
| 30 | 500 | 530 | 137 | 500 | 637 | |
The fair value hierarchy applied to contingent future receipts on disposal of fixed asset investments is Level 3. These receipts may not crystallise within 12 months.
The only movements in current asset investments during the year was the deferred receipts on disposal of fixed asset investments.
14. Creditors: amounts falling due within one year
| 31 December 2012 | 31 December 2011 | |||||
| Ordinary shares £'000 | D shares £'000 | Total £'000 | Ordinary shares £'000 | D shares £'000 | Total £'000 | |
| Accruals and deferred income | 180 | 48 | 228 | 179 | 46 | 225 |
| UK corporation tax payable | 31 | 13 | 44 | 30 | - | 30 |
| Other creditors | 76 | 30 | 106 | 5 | 2 | 7 |
| 287 | 91 | 378 | 214 | 48 | 262 | |
15. Called up share capital
| 31 December 2012 | 31 December 2011 | |||||
| Ordinary shares | D shares | Total | Ordinary shares | D shares | Total | |
| Allotted, called up and fully paid shares of 1 penny each (2011: 50 pence each) | ||||||
| Number of shares | 35,678,200 | 6,377,976 | 42,056,176 | 33,823,795 | 6,352,652 | 40,176,447 |
| Nominal value of allotted shares (£'000) | 357 | 64 | 421 | 16,912 | 3,176 | 20,088 |
| Voting rights (net of treasury shares) | 32,250,200 | 6,377,976 | 38,628,176 | 30,356,399 | 6,352,652 | 36,709,051 |
The Annual General Meeting on 15 June 2012 granted the Company authority to reduce the nominal value of its shares from 50 pence to 1 penny, and to cancel its capital
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