Annual Financial Report
Albion Venture Capital Trust PLC
As required by the UK Listing Authority's Disclosure and Transparency
Rules 4.1 and 6.3, Albion Venture Capital Trust PLC today makes
public its information relating to the Annual Report and Financial
Statements for the year ended 31 March 2009.
This announcement was approved by the Board of Directors on 25 June
2009.
Please click on the following link to view the full Annual Report and
Financial Statements (which have been audited) for the year to 31
December 2008. The information contained in this link includes
information as required by the Disclosure and Transparency Rules,
including Rule 4.1.
^
http://hugin.info/141809/R/1325130/311551.pdf
Alternatively you may view the Annual Report and Financial Statements
at: www.albion-ventures.co.uk by clicking on the 'Our Funds' section.
Investment Objectives
Albion Venture Capital Trust PLC (the "Company") is a venture capital
trust which raised a total of £39.7 million through an issue of
Ordinary Shares in the spring of 1996 and through an issue of C
Shares in the following year. The C Shares merged with the Ordinary
Shares in 2001. The Company offers tax-paying investors substantial
tax benefits at the time of investment, on payment of dividends and
on the ultimate disposal of the investment. Its investment strategy
is to minimise the risk to investors whilst maintaining an attractive
yield. This is achieved as follows:
* qualifying unquoted investments are predominantly in
specially-formed companies which provide a high level of asset
backing for the capital value of the investment;
* Albion Venture Capital Trust PLC invests alongside selected
partners with proven experience in the sectors concerned;
* investments are normally structured as a mixture of equity and
loan stock. The loan stock represents the majority of the finance
provided and is secured on the assets of the investee company.
Funds managed or advised by Albion Ventures LLP typically own 50
per cent. of the equity of the investee company;
* other than the loan stock issued to funds managed or advised by
Albion Ventures LLP, investee companies do not normally have
external borrowings; and
* a clear strategy for the realisation of each qualifying unquoted
investment within five years or shortly thereafter is identified
from the outset.
Financial Calendar
+-------------------------------------------------------------+
| Annual General Meeting | 27 July 2009 |
|---------------------------------------------+---------------|
| | |
|---------------------------------------------+---------------|
| Record date for first dividend | 3 July 2009 |
|---------------------------------------------+---------------|
| | |
|---------------------------------------------+---------------|
| Payment of first dividend | 31 July 2009 |
|---------------------------------------------+---------------|
| | |
|---------------------------------------------+---------------|
| Announcement of half-yearly results for | November 2009 |
| the six months ended 30 September 2009 | |
|---------------------------------------------+---------------|
| | |
|---------------------------------------------+---------------|
| Payment of second dividend | January 2010 |
+-------------------------------------------------------------+
Financial Highlights
+-------------------------------------------------------------------+
| | 31 March | 31 March |
| | 2009 | 2008 |
|---------------------------------------------+----------+----------|
| | (pence | (pence |
| | per | per |
| | share) | share) |
|---------------------------------------------+----------+----------|
| Dividends paid per Ordinary | | |
| share | 10.00 | 10.00 |
|---------------------------------------------+----------+----------|
| Revenue return per Ordinary share | 3.30 | 4.20 |
|---------------------------------------------+----------+----------|
| Capital loss per Ordinary share | (18.30) | (4.50) |
|---------------------------------------------+----------+----------|
| Net asset value per Ordinary share | 85.30 | 109.90 |
+-------------------------------------------------------------------+
+-------------------------------------------------------------------+
| Total shareholder netasset value | Ordinary shares | C shares |
| return to 31 March 2009 | | |
|--------------------------------------+-----------------+----------|
| Total dividends paid during the year | | |
| ended : 31 March 1997 | 2.00 | - |
|--------------------------------------+-----------------+----------|
| 31 March 1998 | 5.20 | 2.00 |
|--------------------------------------+-----------------+----------|
| 31 March 1999 | 11.05 | 8.75 |
|--------------------------------------+-----------------+----------|
| 31 March 2000 | 3.00 | 2.70 |
|--------------------------------------+-----------------+----------|
| 31 March 2001 | 8.55 | 4.80 |
|--------------------------------------+-----------------+----------|
| 31 March 2002 | 7.60 | 7.60 |
|--------------------------------------+-----------------+----------|
| 31 March 2003 | 7.70 | 7.70 |
|--------------------------------------+-----------------+----------|
| 31 March 2004 | 8.20 | 8.20 |
|--------------------------------------+-----------------+----------|
| 31 March 2005 | 9.75 | 9.75 |
|--------------------------------------+-----------------+----------|
| 31 March 2006 | 11.75 | 11.75 |
|--------------------------------------+-----------------+----------|
| 31 March 2007 | 10.00 | 10.00 |
|--------------------------------------+-----------------+----------|
| 31 March 2008 | 10.00 | 10.00 |
|--------------------------------------+-----------------+----------|
| 31 March 2009 | 10.00 | 10.00 |
|--------------------------------------+-----------------+----------|
| | | |
|--------------------------------------+-----------------+----------|
| Total dividends paid to 31 March | | |
| 2009 | 104.80 | 93.25 |
|--------------------------------------+-----------------+----------|
| | | |
|--------------------------------------+-----------------+----------|
| Net asset value as at 31 March 2009 | 85.30 | 85.30 |
|--------------------------------------+-----------------+----------|
| | | |
|--------------------------------------+-----------------+----------|
| Total shareholder net asset value | | |
| return to 31 March 2009 | 190.10 | 178.55 |
|--------------------------------------+-----------------+----------|
| | | |
+-------------------------------------------------------------------+
In addition to the dividends summarised above, the Board has declared
a first dividend for the new financial year, of 2.5 pence per share
(out of revenue profits) to be paid on 31 July 2009 to shareholders
on the register as at 3 July 2009.
Notes
* Dividends paid before 5 April 1999 were paid to qualifying
shareholders inclusive of the associated tax credit. The
dividends for the
* year to 31 March 1999 were maximised in order to take advantage
of this tax credit.
* A capital dividend of 2.55 pence paid in the year to 31 March
2000 enabled the Ordinary shares and the C shares to merge on an
equal basis.
* All dividends paid by the Company are free of income tax. It is
an Inland Revenue requirement that dividend vouchers indicate the
tax element should dividends have been subject to income tax.
Investors should ignore this figure on their dividend voucher and
need not disclose any income they receive from a VCT on their tax
return.
* The net asset value of the Company is not its share price as
quoted on the official list of the London Stock Exchange. The
share price of the Company can be found in the Investment
Companies - VCTs section of the Financial Times on a daily basis.
Investors are reminded that it is common for shares in VCTs to
trade at a discount to their net asset value.
Chairman's statement
Introduction
The results for the year to 31 March 2009 show the continuing effects
of the recession in the UK. The Company recorded a negative return
of 15.0 pence per share, which, following the total dividends of 10.0
pence per share for the year, has reduced the net asset value to 85.3
pence per share. This was caused principally by a continued decline
in investment valuations in line with the general trends in the
property sector. In addition, income generated by your Company's
investment portfolio declined during the year, partly as a result of
very low interest rates available on cash deposits, and partly due to
trading pressures on some of our investee companies.
Investment progress and prospects
During the year, some £2.5 million was invested in nine existing and
two new investee companies. These are dealt with in more detail in
the Manager's Report below.
The largest contributor to the fall in net asset value was the
further reduction of the valuation of Kew Green VCT (Stansted)
Limited, which owns and operates the "Express by Holiday Inn" hotel
at Stansted Airport. Passenger numbers have been decreasing at
Stansted Airport during the course of the year and the resulting
decline in occupancy, combined with pressure on property values in
general, has resulted in a sharp reduction in value. Nevertheless,
the hotel remains profitable after interest and is generating
sufficient cash to begin the process of repaying the Company's loan
stock investments.
The recession has also affected the trading of a variety of our other
investee companies, including hotels and the residual residential
development businesses. However, despite the negative impact of this
on the Company's revenue profits, the investment portfolio is cash
generative and the current reductions in valuations may represent
value deferred rather than permanently lost, even though valuations
may still come under further pressure in the short term. In addition,
we anticipate that the reduction in valuations currently being seen
will give rise to a number of investment opportunities at attractive
valuations.
Dividend
Your Board is conscious that shareholders value a regular and
predictable dividend flow, and it is pleasing that dividends paid
since the Company was launched in 1996 now amount to 104.8 pence per
Ordinary share. Nevertheless, the current pressure on income and the
lack of further capital profits available for distribution has meant
that the dividend for the new financial year will be reduced from the
historically strong level of 10.0 pence per share that has pertained
for the last three years. Your Board has consequently set a revised
annual dividend objective of 5.0 pence per share going forward,
though shareholders should note that this will be subject to the
Company's trading performance, and the sufficiency of cash resources
to allocate to new investments as well as to dividends.
Recovery of historic VAT
Following a period of lobbying by the Association of Investment
Companies, the welcome review of the position regarding the exemption
of management fees from VAT by HM Revenue & Customs in July 2008 has
meant that the Manager is able to reclaim historic VAT that it had
previously charged to the Company. A reclaim of historic VAT of
£720,000 (before the deduction of tax) has been credited to the
accounts in respect of the repayment. Further details regarding this
claim are shown in note 6 of the Annual Report and Financial
Statements. With effect from 1 October 2008, all management and
administration fees are considered exempt from VAT.
Risks and uncertainties
The strongly negative outlook for the UK economy continues to be the
key risk affecting the Company and, as mentioned above, we are seeing
the effects of this in most of our portfolio. However, your Company
remains conservatively financed, with no bank borrowings either at
corporate or investee company level, in addition to the policy of
ensuring that the Company has a first charge over the investee
companies' assets wherever possible. Your Board considers that these
factors have helped the Company to avoid some of the undoubted risks
in the current macro-economic climate.
Meanwhile, opportunities within our target sectors continue to arise
at attractive valuations, including the healthcare sector which will
be one of our core areas of concentration going forward. A detailed
analysis of the other risks and uncertainties facing the business are
shown in note 12 of this announcement.
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 existing and new investee companies and the
continued payment of dividends to shareholders. In order to balance
these different requirements, the Company's buy-back policy was
amended at the time of the publication of the Half-yearly Report in
November 2008, when it was stated that the Company was limiting the
cash available for share buy-backs. This policy will continue,
particularly in the light of the Company's dividend objective of 5.0
pence per share for the current year, and the Company will now limit
the sums available for share buy-backs for the six month period to 30
September 2009 to £150,000. This compares to a total value bought in
for the previous six months of £215,000. Once this limit has been
reached, the Board will review its policy in the light of cash
available for new investments and for dividends to existing
shareholders. Given the high level of volatility apparent in all
markets, the discount to net asset value per share at which shares
are bought back is likely to continue to be wider than that which
applied historically.
Change of Manager and name change
The business of Close Ventures Limited was acquired by Albion
Ventures LLP from Close Brothers Group plc on 23 January 2009. Albion
Ventures has been formed by the executive directors of Close Ventures
Limited; meanwhile Close Brothers Group plc will continue to have an
investment in the business. The Company's management contract has
been novated from Close Ventures to Albion Ventures under exactly the
same terms as the existing agreement. The investment approach of
Albion Ventures and the investment policy of the Company are also
unchanged, with a continued emphasis on building up a broad portfolio
of investee companies normally with no external bank borrowings,
and the maintenance of a regular dividend yield. As a result of this
change, the Company Secretary has changed to Albion Ventures LLP, and
the Company changed its name from Close Brothers Venture Capital
Trust PLC to Albion Venture Capital Trust PLC at a General Meeting on
27 March 2009.
Shareholder survey
The Manager recently performed a shareholder survey. Questionnaires
were sent to all shareholders and a 26 per cent. response rate (by
number of shareholders) was achieved. Of these shareholders, 90 per
cent were satisfied or very satisfied with the returns generated by
the Company, 79 per cent. intended to hold their shares
indefinitely, and dividend yield was ranked as the most common
feature that investors were looking for in a Venture Capital Trust.
The Board wishes to thank shareholders who took part in the survey,
and will bear in mind the findings. The full survey results will be
available to view on the Manager's website at
www.albion-ventures.co.uk under the 'Our Funds' section.
Results and dividends
As at 31 March 2009, the net asset value was £29.9 million or 85.3
pence per share, compared to £39.2 million or 109.9 pence per share
as at 31 March 2008. The revenue return before taxation was £1.5
million compared to £1.9 million for the year to 31 March 2008. The
Company will pay a dividend of 2.5 pence per share on 31 July 2009 to
those shareholders on the share register on 3 July 2009.
David Watkins
Chairman
25 June 2009
Manager's report
Set out below is the split of the Company's investment portfolio by
sector.
Ordinary share pie chart
http://hugin.info/141809/R/1325130/311525.pdf
Source: Albion Ventures LLP
Investment portfolio
Although all of your Company's hotel investments are showing an
operating profit, the majority have seen a down-turn in trading over
the last year. This has partly been due to specific factors such as
the decline in traffic at Stansted Airport, and partly due to other
factors related to the general slowdown in the business and leisure
environments. Currently, the exception is the Crown Hotel at
Harrogate, where, following the refurbishment of the hotel, trading
continues to grow compared to previous years. Overall, though, these
factors have led to a reduction in income to the Company. In
addition, The Stanwell Hotel is currently closed pending its
refurbishment and reconstruction as a niche airport hotel.
Construction has commenced and the hotel is scheduled to open in
2010.
As previously reported, the residential development investments are
currently being wound down; £2.2 million was received from these
companies during the year and a further £0.9 million has been
received following the year end. Nevertheless this process resulted
in the cessation of interest payments by these companies which has
further reduced the income of the Company.
Meanwhile, trading in our cinemas continues to be strong, with
promising trading performance and improved profitability from
previous years. Membership of our health and fitness clubs continues
to grow, though the valuations have been hit in line with the general
market, while trading in the majority of our pubs remains profitable
at operating level, despite their fall in value. The holding values
of all of the Company's investments in the hotel, cinema, health and
fitness and pub sectors are based on recent valuations of the
relevant assets by independent professional valuers.
New investment activity
Overall, the current recession is providing a number of interesting
investment opportunities at attractive prices. The two investments
in new investee companies made in the year comprise £390,000 in Bravo
Inns II Limited, which has purchased 11 pubs in the North West of
England at prices that are currently generating a strong return on
capital, and £313,000 in Droxford Hospital Limited, which is seeking
to acquire a site in the South of England for development into a
mental hospital. The principal investments into existing investee
companies comprised £1 million in The Stanwell Hotel Limited,
£390,000 in The Place Sandwich VCT Limited and £200,000 in The Crown
Hotel Harrogate Limited.
Although a number of interesting leisure-related opportunities are
being looked at, particular attention is being paid to health-care
related investments in order to provide a counter balance against the
consumer orientated nature of the great majority of the investment
portfolio. Your Company is actively working with partners both in
the mental health and the care sectors with a variety of
opportunities currently under consideration.
Details of related party transactions are shown in note 15 of this
announcement.
Albion Ventures LLP
Manager
25 June 2009
Responsibility Statement
In preparing these financial statements for the year to 31 March
2009, the Directors of the Company, being David Watkins, John Kerr,
Jonathan Thornton and Jeff Warren, confirm that to the best of their
knowledge:
-summary financial information contained in this announcement and the
full Annual Report and Financial Statements for the year ended 31
March 2009 for the Company has been prepared in accordance with
United Kingdom Generally Accepted Accounting Practice (UK Accounting
Standards and applicable law) and give a true and fair view of the
assets, liabilities, financial position and profit and loss of the
Company for the year ended 31 March 2009 as required by DTR 4.2.R;
-the Chairman's Statement and Manager's Report include a fair review
of the information required by DTR 4.2.7R (indication of important
events during the year ended 31 March 2009 and description of
principal risks and uncertainties that the Company faces); and
-the Chairman's Statement and Manager's Report include a fair review
of the information required by DTR 4.2.8R (disclosure of related
parties transactions and changes therein).
A detailed "Statement of Directors' responsibilities for the
preparation of the Company's financial statements" is contained
within the full audited Annual Report and Financial Statements which
is attached to this announcement.
By order of the Board
David Watkins
Chairman
25 June 2009
Income Statement
+-----------------------------------------------------------------------------+
| |Year ended 31 March 2009|Year ended 31 March 2008|
|---------------------------+------------------------+------------------------|
| | Revenue|Capital| Total| Revenue|Capital| Total|
|---------------------------+--------+-------+-------+--------+-------+-------|
| | £'000| £'000| £'000| £'000| £'000| £'000|
|---------------------------+--------+-------+-------+--------+-------+-------|
|Losses on investments | -|(6,483)|(6,483)| -|(1,081)|(1,081)|
|---------------------------+--------+-------+-------+--------+-------+-------|
|Investment income | 1,761| -| 1,761| 2,443| -| 2,443|
|---------------------------+--------+-------+-------+--------+-------+-------|
|Investment management | | | | | | |
|fees | (183)| (549)| (732)| (250)| (749)| (999)|
|---------------------------+--------+-------+-------+--------+-------+-------|
|Recovery of VAT | 180| 540| 720| -| -| -|
|---------------------------+--------+-------+-------+--------+-------+-------|
|Other expenses | (249)| -| (249)| (289)| -| (289)|
|---------------------------+--------+-------+-------+--------+-------+-------|
|Return/(loss) on ordinary | | | | | | |
|activities before tax | 1,509|(6,492)|(4,983)| 1,904|(1,830)| 74|
|---------------------------+--------+-------+-------+--------+-------+-------|
|Tax (charge)/credit on | | | | | | |
|ordinary activities | (329)| 2| (327)| (401)| 225| (176)|
|---------------------------+--------+-------+-------+--------+-------+-------|
|Return /(loss) | | | | | | |
|attributable to | | | | | | |
|shareholders | 1,180|(6,490)|(5,310)| 1,503|(1,605)| (102)|
|---------------------------+--------+-------+-------+--------+-------+-------|
| | | | | | | |
|---------------------------+--------+-------+-------+--------+-------+-------|
|Basic and diluted | | | | | | |
|return/(loss) per share | | | | | | |
|(pence) * | 3.3| (18.3)| (15.0)| 4.2| (4.5)| (0.3)|
+-----------------------------------------------------------------------------+
*(excluding treasury shares)
The accompanying notes form an integral part of this announcement.
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 loss 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
+-------------------------------------------------------------------+
| | 31 March 2009 | 31 March 2008 |
| | £'000 | £'000 |
| | | |
|-----------------------------------+---------------+---------------|
| Fixed asset investments | | |
|-----------------------------------+---------------+---------------|
| Qualifying investments | 25,340 | 32,546 |
|-----------------------------------+---------------+---------------|
| Non-qualifying investments | 675 | - |
|-----------------------------------+---------------+---------------|
| Total fixed asset investments | 26,015 | 32,546 |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| Current assets | | |
|-----------------------------------+---------------+---------------|
| Trade and other debtors | 199 | 94 |
|-----------------------------------+---------------+---------------|
| Current asset investments | 1,463 | 1,475 |
|-----------------------------------+---------------+---------------|
| Cash at bank and in hand | 2,498 | 5,409 |
|-----------------------------------+---------------+---------------|
| Total current assets | 4,160 | 6,978 |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| Creditors: amounts falling due | | |
| within one year | (305) | (349) |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| Net current assets | 3,855 | 6,629 |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| | | |
| Net assets | 29,870 | 39,175 |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| Capital and reserves | | |
|-----------------------------------+---------------+---------------|
| Called up share capital | 18,002 | 17,939 |
|-----------------------------------+---------------+---------------|
| Share premium | 53 | - |
|-----------------------------------+---------------+---------------|
| Special reserve | 14,110 | 14,110 |
|-----------------------------------+---------------+---------------|
| Capital redemption reserve | 1,914 | 1,914 |
|-----------------------------------+---------------+---------------|
| Own treasury shares reserve | (823) | (252) |
|-----------------------------------+---------------+---------------|
| Unrealised capital reserve | (4,309) | 2,174 |
|-----------------------------------+---------------+---------------|
| Realised capital reserve | (7) | 1,952 |
|-----------------------------------+---------------+---------------|
| Revenue reserve | 930 | 1,338 |
|-----------------------------------+---------------+---------------|
| | | |
| Shareholders' funds | 29,870 | 39,175 |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| Basic and diluted net asset value | | |
| per share (pence) * | 85.3 | 109.9 |
+-------------------------------------------------------------------+
*(excluding treasury shares)
The accompanying notes form an integral part of this announcement.
Reconciliation of Movement in Shareholders' Funds
+-------------------------------------------------------------------------------------------------------------------+
| |Ordinary| Share| Special| Capital| Own|Unrealised| Realised| Revenue| Total|
| | share|premium|reserve*|redemption|treasury| capital| capital|reserve*| |
| | capital| | | reserve| share| reserve*|reserve *| | |
| | | | | |reserve*| | | | |
|-------------------------------+--------+-------+--------+----------+--------+----------+---------+--------+-------|
| | £'000| £'000| £'000| £'000| £'000| £'000| £'000| £'000| £'000|
|-------------------------------+--------+-------+--------+----------+--------+----------+---------+--------+-------|
| As at 1 April 2008 | 17,939| -| 14,110| 1,914| (252)| 2,174| 1,952| 1,338| 39,175|
|-------------------------------+--------+-------+--------+----------+--------+----------+---------+--------+-------|
|Purchase of own shares for | | | | | | | | | |
|treasury (including expenses) | -| -| -| -| (571)| -| -| -| (571)|
|-------------------------------+--------+-------+--------+----------+--------+----------+---------+--------+-------|
|Capitalised investment | | | | | | | | | |
|management fees | -| -| -| -| -| -| (549)| -| (549)|
|-------------------------------+--------+-------+--------+----------+--------+----------+---------+--------+-------|
|Recovery of VAT capitalised | -| -| -| -| -| -| 540| -| 540|
|-------------------------------+--------+-------+--------+----------+--------+----------+---------+--------+-------|
|Tax on capitalised expenses | -| -| -| -| -| -| 2| -| 2|
|-------------------------------+--------+-------+--------+----------+--------+----------+---------+--------+-------|
|Movement in unrealised | | | | | | | | | |
|appreciation | -| -| -| -| -| (6,483)| -| -|(6,483)|
|-------------------------------+--------+-------+--------+----------+--------+----------+---------+--------+-------|
|Issue of equity (net of costs) | 63| 53| -| -| -| -| -| -| 116|
|-------------------------------+--------+-------+--------+----------+--------+----------+---------+--------+-------|
|Revenue return attributable to | | | | | | | | | |
|shareholders | -| -| -| -| -| -| -| 1,180| 1,180|
|-------------------------------+--------+-------+--------+----------+--------+----------+---------+--------+-------|
|Dividends paid | -| -| -| -| -| -| (1,952)| (1,588)|(3,540)|
|-------------------------------+--------+-------+--------+----------+--------+----------+---------+--------+-------|
| | | | | | | | | | |
|As at 31 March 2009 | 18,002| 53| 14,110| 1,914| (823)| (4,309)| (7)| 930| 29,870|
+-------------------------------------------------------------------------------------------------------------------+
+---------------------------------------------------------------------------------------------------------+
| |Ordinary| Special| Capital| Own|Unrealised| Realised| Revenue| Total|
| | share|reserve*|redemption|treasury| capital| capital|reserve*| |
| | capital| | reserve| share| reserve|reserve *| | |
| | | | |reserve*| | | | |
|-----------------------------+--------+--------+----------+--------+----------+---------+--------+-------|
| | £'000| £'000| £'000| £'000| £'000| £'000| £'000| £'000|
|-----------------------------+--------+--------+----------+--------+----------+---------+--------+-------|
|As at 1 April 2007 | 17,939| 14,110| 1,914| -| 3,737| 4,021| 1,395| 43,116|
|-----------------------------+--------+--------+----------+--------+----------+---------+--------+-------|
|Purchase of own shares for | | | | | | | | |
|treasury (including expenses)| -| -| -| (252)| -| -| -| (252)|
|-----------------------------+--------+--------+----------+--------+----------+---------+--------+-------|
|Capitalised investment | | | | | | | | |
|management fees | -| -| -| -| -| (749)| -| (749)|
|-----------------------------+--------+--------+----------+--------+----------+---------+--------+-------|
|Tax on capitalised investment| | | | | | | | |
|management fees | -| -| -| -| -| 225| -| 225|
|-----------------------------+--------+--------+----------+--------+----------+---------+--------+-------|
|Net realised gains on | | | | | | | | |
|investments in the year | -| -| -| -| -| 482| -| 482|
|-----------------------------+--------+--------+----------+--------+----------+---------+--------+-------|
|Movement in unrealised | | | | | | | | |
|appreciation | -| -| -| -| (1,563)| | -|(1,563)|
|-----------------------------+--------+--------+----------+--------+----------+---------+--------+-------|
|Revenue return attributable | | | | | | | | |
|to shareholders | -| -| -| -| -| -| 1,503| 1,503|
|-----------------------------+--------+--------+----------+--------+----------+---------+--------+-------|
| | | | | | | | | |
|Dividends paid | -| -| -| -| -| (2,028)| (1,560)|(3,588)|
|-----------------------------+--------+--------+----------+--------+----------+---------+--------+-------|
| | | | | | | | | |
|As at 31 March 2008 | 17,939| 14,110| 1,914| (252)| 2,174| 1,952| 1,338| 39,175|
+---------------------------------------------------------------------------------------------------------+
*Included within these reserves is an amount of £9,901,000 (2008:
£17,148,000) which is considered distributable. The Special reserve
has been treated as distributable in determining the amounts
available for distribution.
Cash Flow Statement
+-------------------------------------------------------------------+
| | | |
| | Year ended 31 | Year ended 31 |
| | March 2009 | March 2008 |
|-----------------------------------+---------------+---------------|
| | £'000 | £'000 |
|-----------------------------------+---------------+---------------|
| Operating activities | | |
|-----------------------------------+---------------+---------------|
| Investment income received | 1,648 | 1,845 |
|-----------------------------------+---------------+---------------|
| Deposit interest received | 235 | 479 |
|-----------------------------------+---------------+---------------|
| Other income | 88 | 143 |
|-----------------------------------+---------------+---------------|
| Investment management fees paid | (813) | (1,079) |
|-----------------------------------+---------------+---------------|
| Recovery of VAT | 562 | - |
|-----------------------------------+---------------+---------------|
| Administrative expenses paid | (262) | (279) |
|-----------------------------------+---------------+---------------|
| Net cash inflow from operating | | |
| activities | 1,458 | 1,109 |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| Taxation | | |
|-----------------------------------+---------------+---------------|
| UK corporation tax paid | (271) | (155) |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| Capital expenditure and financial | | |
| investments | | |
|-----------------------------------+---------------+---------------|
| Purchase of fixed asset | | |
| investments | (2,503) | (5,011) |
|-----------------------------------+---------------+---------------|
| Disposal of fixed asset | | |
| investments | 2,394 | 2,240 |
|-----------------------------------+---------------+---------------|
| Net cash outflows from investing | | |
| activities | (109) | (2,771) |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| Equity dividends paid | (3,416) | (3,588) |
|-----------------------------------+---------------+---------------|
| Net cash outflow before financing | (2,338) | (5,405) |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| Financing | | |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| Purchase of own shares for | | |
| treasury | (571) | (252) |
|-----------------------------------+---------------+---------------|
| Costs of shares issued under | | |
| Dividend | | |
| Reinvestment Scheme | (2) | - |
|-----------------------------------+---------------+---------------|
| Net cash outflows from financing | (573) | (252) |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| Cash outflow in the year | (2,911) | (5,657) |
+-------------------------------------------------------------------+
Notes to the announcement
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 Companies" ("SORP") issued by the
Association of Investment Companies ("AIC") in January 2009. Albion
Venture Capital Trust PLC has decided to adopt the principles of the
January 2009 SORP earlier than the mandatory date. Accounting
policies have been applied consistently in current and prior periods
except for the reclassification of FRNs as explained below.
2. Accounting policies
Fixed and current asset investments
Unquoted equity investments
In accordance with FRS 26 "Financial Instruments Recognition and
Measurement", unquoted equity investments are designated at 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 on equity investments and gains and losses
arising on the disposal of investments are reflected in the capital
column of the Income Statement in accordance with the AIC SORP.
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 are reflected in the
Unrealised capital reserve.
Unquoted loan stock
Unquoted loan stock is classified as loans and receivables in
accordance with FRS 26 and carried at amortised cost using the
Effective Interest Rate method ("EIR") less impairment. Movements in
the amortised cost relating to interest income are reflected in the
revenue column of the Income Statement, and hence are reflected in
the Revenue reserve. Movements in respect of capital provisions are
reflected in the capital column of the Income Statement and are
reflected in the Realised capital reserve following sale, or in the
Unrealised capital reserve on revaluation.
Loan stocks which are not impaired or past due are considered fully
performing in terms of contractual interest and capital repayments
and the Board does not consider that there is a current likelihood of
a shortfall on security cover for these assets. For unquoted loan
stock, the amount of the impairment is the difference between the
asset's cost and the present value of estimated future cash flows,
discounted at the effective interest rate.
Warrants, convertibles and unquoted equity derived instruments
Warrants, convertibles and unquoted equity derived instruments are
only valued if their exercise or contractual conversion terms would
allow them to be exercised or converted as at the balance sheet date
and if there is additional value to the Company in exercising or
converting as at the balance sheet date. Otherwise these instruments
are held at nil value. The valuation techniques used are those used
for the underlying equity investment.
Floating rate notes
In accordance with FRS 26, floating rate notes are designated as fair
value through profit or loss ("FVTPL"). Floating rate notes are
valued at market bid price at the balance sheet date. Floating rate
notes are classified as current asset investments as they are
investments held for the short term and comparative classification in
the Balance Sheet has been restated accordingly.
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.
Loan stock accrued interest is recognised in the Balance Sheet as
part of the carrying value of the loans and receivables at the end of
each reporting period.
It is not the Company's policy to exercise control or significant
influence over investee companies. Therefore in accordance with the
exemptions under FRS 9 "Associates and joint ventures", those
undertakings in which the Company holds more than 20 per cent. of the
equity are not regarded as associate undertakings.
Investment income
Unquoted equity income
Dividend income is not recognised as part of the fair value movement
of an investment, but is recognised separately as investment income
through the Revenue reserve when a share becomes ex-dividend.
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.
Floating rate note income
Floating rate note income is recognised on an accruals basis using
the interest rate applicable to the floating rate note at that time.
Investment management fees and other expenses
All expenses have been accounted for on an accruals basis. Expenses
are charged through the Revenue account except the following which
are charged through the Realised capital reserve:
* 75 per cent. of management fees are allocated to the capital
account to the extent that these relate to an enhancement in the
value of the investments. This is in line with the Board's
expectation that over the long term 75 per cent. of the Company's
investment returns will be in the form of capital gains; and
* expenses which are incidental to the purchase or disposal of an
investment are charged through the Realised capital reserve.
Performance incentive fee
In the event that a performance incentive fee crystallises, the fee
will be allocated between Revenue and Realised capital reserves (net
of corporation tax) based upon the proportion to which the
calculation of fee is attributable to revenue and capital returns.
Taxation
Taxation is applied on a current basis in accordance with FRS 16
"Current tax". Taxation associated with capital expenses is applied
in accordance with the SORP. In accordance with FRS 19 "Deferred
tax", deferred taxation is provided in full on timing differences
that result in an obligation at the balance sheet date to pay more
tax or a right to pay less tax, at a future date, at rates expected
to apply when they crystallise based on current tax rates and law.
Timing differences arise from the inclusion of items of income and
expenditure in taxation computations in periods different from those
in which they are included in the financial statements. Deferred tax
assets are recognised to the extent that it is regarded as more
likely than not that they will be recovered.
The specific nature of taxation of venture capital trusts means that
it is unlikely that any deferred tax will arise. The Directors have
considered the requirements of FRS 19 and do not believe that any
provision should be made.
Reserves
Share premium account
This reserve accounts for the difference between the price paid for
shares and the nominal value of the shares, less issue costs and
transfers to the Special reserve.
Special reserve
The cancellation of the Share premium account has created a Special
reserve that can be used to fund market purchases and subsequent
cancellation of own shares, to cover gross realised losses, and for
other distributable purposes.
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.
Own treasury shares reserve
This reserve accounts for amounts by which the distributable reserves
of the Company are diminished through the repurchase of the Company's
own shares for treasury.
Unrealised capital reserves
Increases and decreases in the valuation of investments held at the
year end against cost, are disclosed in this reserve.
Realised capital reserves
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
* capital dividends paid to equity holders.
Dividends
In accordance with FRS 21 "Events after the balance sheet date",
dividends declared by the Company are accounted for in the period in
which the dividend has been paid or approved by shareholders in an
Annual General Meeting.
3. Losses on investments
+-------------------------------------------------------------------+
| | Year ended 31 | Year ended 31 |
| | March 2009 | March 2008 |
|-----------------------------------+---------------+---------------|
| | £'000 | £'000 |
|-----------------------------------+---------------+---------------|
| Unrealised losses on fixed asset | | |
| investments held at fair value | | |
| through profit or loss account | (5,355) | (1,521) |
|-----------------------------------+---------------+---------------|
| Unrealised impairments on fixed | | |
| asset investments held at | | |
| amortised cost | (1,142) | (20) |
|-----------------------------------+---------------+---------------|
| | | |
| | (6,497) | (1,541) |
|-----------------------------------+---------------+---------------|
| Movement in loan stock | | |
| capitalised accrued interest | 24 | - |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| Unrealised losses on fixed asset | | |
| investments | (6,473) | (1,541) |
|-----------------------------------+---------------+---------------|
| Unrealised losses on current | | |
| asset investments | (10) | (22) |
|-----------------------------------+---------------+---------------|
| Unrealised losses sub total | (6,483) | (1,563) |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| Realised gains on fixed asset | | |
| investments | | |
| held at fair value through | | |
| profit or loss account | - | 482 |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| Realised gains | - | 482 |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| Total | (6,483) | (1,081) |
+-------------------------------------------------------------------+
Investments valued on amortised cost basis are unquoted loan stock
investments as described in note 2.
4. Investment income
+-------------------------------------------------------------------+
| | Year ended | Year ended |
| | 31 March 2009 | 31 March 2008 |
|-----------------------------------+---------------+---------------|
| | £'000 | £'000 |
|-----------------------------------+---------------+---------------|
| Income recognised on investments | | |
| held at fair value through profit | | |
| or loss | | |
|-----------------------------------+---------------+---------------|
| Floating rate note interest | 76 | 61 |
|-----------------------------------+---------------+---------------|
| Bank interest | 150 | 390 |
|-----------------------------------+---------------+---------------|
| Other income | 54 | 95 |
|-----------------------------------+---------------+---------------|
| | 280 | 546 |
|-----------------------------------+---------------+---------------|
| Income recognised on investments | | |
| held at amortised cost | | |
|-----------------------------------+---------------+---------------|
| Return on loan stock investments | 1,481 | 1,897 |
|-----------------------------------+---------------+---------------|
| | | |
|-----------------------------------+---------------+---------------|
| | 1,761 | 2,443 |
+-------------------------------------------------------------------+
Interest income earned on impaired investments at 31 March 2009
amounted to £231,000 (2008: £10,000). These investments are held at
amortised cost.
5. Recovery of VAT
HMRC issued a business briefing on 24 July 2008 which permitted the
recovery of historic VAT that had been charged on management fees,
and which made these fees exempt from VAT with effect from 1 October
2008.
The Manager, Albion Ventures LLP has made a claim for the historic
VAT that Albion Venture Capital Trust PLC has paid on management
fees. A sum of £720,000 has been recognised as a separate item in the
Income Statement, allocated between revenue and capital return in the
same proportion as that which the original VAT has been charged. An
additional tax charge of £201,000 for Ordinary shares is payable on
this recovery of historic VAT and this is reflected within the total
tax charge shown in the Income Statement.
It is possible that further amounts may be recoverable in due course;
however the Directors are at this stage unable to quantify the
amounts involved.
6. Tax charge/(credit) on ordinary activities
+----------------------------------------------------------------------------------------------------------+
| | Year ended 31 March 2009| Year ended 31 March 2008|
|--------------------------------------------------+---------------------------+---------------------------|
| | Revenue| Capital| Total| Revenue| Capital| Total|
|--------------------------------------------------+---------+---------+-------+---------+---------+-------|
| | £'000| £'000| £'000| £'000| £'000| £'000|
|--------------------------------------------------+---------+---------+-------+---------+---------+-------|
|UK corporation tax in respect of the current year | 423| (2)| 421| 571| (225)| 346|
|--------------------------------------------------+---------+---------+-------+---------+---------+-------|
|UK corporation tax in respect of prior year | (94)| -| (94)| (170)| -| (170)|
|--------------------------------------------------+---------+---------+-------+---------+---------+-------|
|Total | 329| (2)| 327| 401| (225)| 176|
+----------------------------------------------------------------------------------------------------------+
The UK government changed the rate of UK corporation tax rate from 30
per cent. to 28 per cent. with effect from 1 April 2008. The
effective rate of tax for the year to 31 March 2009 is 28 per cent.
The tax charge for the year shown in the Income statement is lower
than the standard rate of corporation tax in the UK of 28 per cent.
(2008: 30 per cent.). The differences are explained below:
Factors affecting the tax charge:
+-------------------------------------------------------------------+
| | | Year |
| | | ended |
| | Year ended | 31 |
| | 31 March | March |
| | 2009 | 2008 |
|----------------------------------------------+------------+-------|
| | £'000 | £'000 |
|----------------------------------------------+------------+-------|
| (Loss)/return on ordinary activities before | | |
| tax | (4,983) | 74 |
|----------------------------------------------+------------+-------|
| | | |
|----------------------------------------------+------------+-------|
| Tax on profit at the standard | | |
| rate | (1,395) | 22 |
|----------------------------------------------+------------+-------|
| Factors affecting the charge: | | |
|----------------------------------------------+------------+-------|
| Consortium relief in respect of prior | | |
| years | (94) | (170) |
|----------------------------------------------+------------+-------|
| Capital losses not subject to taxation | 1,816 | 324 |
|----------------------------------------------+------------+-------|
| | 327 | 176 |
+-------------------------------------------------------------------+
Of the total tax charge of £327,000, a sum of £201,000 relates to the
taxation effect of the recovery of VAT as described in note 6.
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 of 28 per cent. (2008: 30 per cent.) and
allocating the relief between the revenue and capital in accordance
with the SORP.
(iii) No deferred tax asset or liability has arisen in the year.
7. Dividends
+-------------------------------------------------------------------+
| | Year ended 31 March 2009 | Year ended 31 March 2008 |
|-----------+---------------------------+---------------------------|
| | Revenue | Capital | Total | Revenue | Capital | Total |
|-----------+---------+---------+-------+---------+---------+-------|
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
|-----------+---------+---------+-------+---------+---------+-------|
| First | | | | | | |
| dividend | | | | | | |
| paid on 5 | | | | | | |
| April | | | | | | |
| 2007 - 5 | | | | | | |
| pence per | | | | | | |
| share | - | - | - | 663 | 1,131 | 1,794 |
|-----------+---------+---------+-------+---------+---------+-------|
| Second | | | | | | |
| dividend | | | | | | |
| paid on 4 | | | | | | |
| January | | | | | | |
| 2008 - 5 | | | | | | |
| pence per | | | | | | |
| share | - | - | - | 897 | 897 | 1,794 |
|-----------+---------+---------+-------+---------+---------+-------|
| First | | | | | | |
| dividend | | | | | | |
| paid on | | | | | | |
| 15 August | | | | | | |
| 2008 - 5 | | | | | | |
| pence per | | | | | | |
| share | - | 1,776 | 1,776 | - | - | - |
|-----------+---------+---------+-------+---------+---------+-------|
| Second | | | | | | |
| dividend | | | | | | |
| paid on 9 | | | | | | |
| January | | | | | | |
| 2009 - 5 | | | | | | |
| pence per | | | | | | |
| share | 1,588 | 176 | 1,764 | - | - | - |
|-----------+---------+---------+-------+---------+---------+-------|
| | 1,588 | 1,952 | 3,540 | 1,560 | 2,028 | 3,588 |
+-------------------------------------------------------------------+
In addition to the dividends summarised above, the Board has declared
a first dividend for the year ending 31 March 2010 of 2.5 pence per
share, (paid out of revenue profits). This dividend will be paid
on 31 July 2009 to shareholders on the register as at 3 July 2009.
8. Basic and diluted return/(loss) per share
+---------------------------------------------------------------------------------------------------------+
| | Year ended 31 March 2009| Year ended 31 March 2008|
|------------------------------+--------------------------------+-----------------------------------------|
| | Revenue| Capital| Total| Revenue| Capital| Total|
|------------------------------+----------+----------+----------+-------------+-------------+-------------|
|The return per share has been | | | | | | |
|based | | | | | | |
|on the following figures: | | | | | | |
|------------------------------+----------+----------+----------+-------------+-------------+-------------|
|Return/(loss) attributable to | | | | | | |
|equity | 1,180| (6,490)| (5,310)| 1,503| (1,605)| (102)|
|shares (£'000) | | | | | | |
|------------------------------+----------+----------+----------+-------------+-------------+-------------|
|Weighted average shares in | | | | | | |
|issue |35,364,875|35,364,875|35,364,875|35,807,404 |35,807,404 |35,807,404 |
|(excluding treasury | | | | | | |
|shares) | | | | | | |
|------------------------------+----------+----------+----------+-------------+-------------+-------------|
|Return/(loss) attributable per| | | | | | |
|equity | 3.3| (18.3)| (15.0)| 4.2| (4.5)| (0.3)|
|share (pence) | | | | | | |
+---------------------------------------------------------------------------------------------------------+
The weighted average number of shares is calculated excluding the
treasury shares of 975,586 (2008: 244,546).
There are no convertible instruments, derivatives or contingent share
agreements in issue, and therefore no dilution affecting the return
per share. The basic return per share is therefore the same as the
diluted return per share.
9. Called up share capital
+-------------------------------------------------------------------+
| | 31 March 2009 | 31 March 2008 |
|-----------------------------------+---------------+---------------|
| | £'000 | £'000 |
|-----------------------------------+---------------+---------------|
| Authorised | | |
| 68,000,000 Ordinary shares of 50p | | |
| each (2008: 68,000,000) | 34,000 | 34,000 |
|-----------------------------------+---------------+---------------|
| Allotted, called up and fully | | |
| paid | | |
| 36,003,835 Ordinary shares of 50p | | |
| each (2008: 35,878,229) | 18,002 | 17,939 |
|-----------------------------------+---------------+---------------|
| Allotted, called up and fully | | |
| paid excluding treasury shares | | |
| 35,028,249 Ordinary shares of 50p | | |
| each (2008: 35,633,683) | 17,514 | 17,817 |
+-------------------------------------------------------------------+
The Company purchased 731,040 Ordinary shares (2008: 244,546) to be
held in treasury at a total cost of £571,000 (2008: £252,000)
representing 2.1 per cent. of shares in issue (excluding treasury
shares) as at 31 March 2009. The shares purchased for treasury were
purchased through the Own treasury shares reserve. The total number
of shares held in treasury as at 31 March 2009 was 975,586 (2008:
244,546) representing 2.8 per cent. of the Ordinary share capital in
issue (excluding treasury shares) as at 31 March 2009.
Under the terms of the Dividend Reinvestment Scheme Circular dated 10
July 2008, the following Ordinary shares of nominal value 50 pence
were allotted during the year:
+----------------------------------------------------------------------+
| | |Aggregate|Issue| | |
| |Number of| nominal|price| |Opening market price|
| | shares| value of| per|Consideration| per share on|
| | allotted| shares|share| received| allotment|
|---------+---------+---------+-----+-------------+--------------------|
| | | |pence| | |
|Allotment| | | per| | |
|date | | £'000|share| £'000| pence per share|
|---------+---------+---------+-----+-------------+--------------------|
|15 August| | | | | |
|2008 | 49,832| 25|104.9| 52| 89.0|
|---------+---------+---------+-----+-------------+--------------------|
|9 January| | | | | |
|2009 | 75,774| 38| 95.0| 72| 62.5|
+----------------------------------------------------------------------+
10. Basic and diluted net asset value per Ordinary share
+-------------------------------------------------------------------+
| | 31 March 2009 | 31 March 2008 |
|-----------------------------------+---------------+---------------|
| Net asset value per share | | |
| attributable (pence) | 85.3 | 109.9 |
+-------------------------------------------------------------------+
The net asset value per share at the year end is calculated in
accordance with the Articles of Association and is based upon net
assets of £29,870,000 (2008: £39,175,000) and the total number of
shares in issue at 31 March 2009 (excluding treasury shares) of
35,028,249 (2008: 35,633,683).
There are no convertible instruments, derivatives or contingent share
agreements in issue. The Company's policy is to sell treasury shares
at a price greater than the purchase price hence the net asset value
per share on a diluted basis would be equal to or greater than the
basic net asset value per share, depending on the actual price
achieved for selling the treasury shares.
11. Reconciliation of revenue return on ordinary activities before
taxation to net cash inflow from operating activities
+-------------------------------------------------------------------+
| | Year ended 31 | Year ended 31 |
| | March 2009 | March 2008 |
|-----------------------------------+---------------+---------------|
| | £'000 | £'000 |
|-----------------------------------+---------------+---------------|
| Revenue return on ordinary | | |
| activities | | |
| before tax | 1,509 | 1,904 |
|-----------------------------------+---------------+---------------|
| Investment management fees | | |
| charged | | |
| to capital | (549) | (749) |
|-----------------------------------+---------------+---------------|
| Recovery of VAT capitalised | 540 | - |
|-----------------------------------+---------------+---------------|
| Movement in accrued amortised | | |
| loan | | |
| stock interest | 167 | (53) |
|-----------------------------------+---------------+---------------|
| (Increase)/decrease in debtors | (151) | 53 |
|-----------------------------------+---------------+---------------|
| (Decrease) in creditors | (58) | (46) |
|-----------------------------------+---------------+---------------|
| Net cash inflow from operating | | |
| activities | 1,458 | 1,109 |
+-------------------------------------------------------------------+
12. Principal risks and uncertainties
In addition to the current economic risks outlined in the Chairman's
Statement, the Board considers that the Company faces the following
major risks and uncertainties:
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 their 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 external investment professionals. The Manager also
invites comments from all non-executive Directors on investments
discussed at the Investment Committee meetings. Investments are
actively and regularly monitored by the Manager (investment managers
normally sit on investee company boards) and the Board receives
detailed reports on each investment as part of the Manager's report
at quarterly board meetings.
Venture Capital Trust approval risk
The Company's current approval as a venture capital trust allows
investors to take advantage of tax reliefs on initial investment and
ongoing tax free capital gains and dividend income. Failure to meet
the qualifying requirements could result in investors losing the tax
relief on initial investment and loss of tax relief on any tax free
income or capital gains received. In addition, failure to meet the
qualifying requirements could result in a loss of listing of the
shares.
To reduce this risk, the Board has appointed the Manager, who has a
team with significant experience in venture capital trust management,
used to operating within the requirements of the venture capital
trust legislation. In addition, to provide further formal
reassurance, the Board has appointed PricewaterhouseCoopers LLP as
its taxation advisors. PricewaterhouseCoopers LLP report quarterly to
the Board to independently confirm compliance with the venture
capital trust legislation, to highlight areas of risk and to inform
on changes in legislation.
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 considerable experience of
operating at senior levels within quoted businesses. In addition, the
Board and the Manager receive regular updates on new regulation from
its auditors, lawyers and other professional bodies.
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 will meet with the Manager's internal auditors
Littlejohn at least once a year, receiving a report regarding the
last formal internal audit performed on the Manager, and providing
the opportunity for the Audit Committee to ask specific and detailed
questions. In the past year the Board has met with the Head of
Internal Audit of Close Brothers Group on a similar basis. The
Manager has a comprehensive business continuity plan in place in the
event that operational continuity is threatened. Further details
regarding the Board's management and review of the Company's internal
controls through the implementation of the Turnbull guidance are
detailed on page 29 of the audited Annual Report and Financial
Statement which is attached to this announcement.
Measures are in place to mitigate information risk in order to ensure
the integrity, availability and confidentiality of information used
within the business.
Reliance upon third parties risk
The Company is reliant upon the services of Albion Ventures LLP for
the provision of investment management and administrative functions.
There are provisions within the Management Agreement for the change
of Manager under certain circumstances. In addition, the Manager has
demonstrated to the Board that there is no undue reliance placed upon
any one individual within Albion Ventures LLP.
Financial risks
By its nature, as a venture capital trust, the Company is exposed to
investment risk (which comprises investment price risk and cash flow
interest rate risk), credit risk and liquidity risk. The Company's
policies for managing these risks and its financial instruments are
outlined in full in note 13 below.
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.
13. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in note
9. The Company is permitted to buy back its own shares for
cancellation or treasury purposes, and this is described in more
detail in the Directors' Report and Enhanced Business Review within
the full audited Annual Report and Financial Statement which is
attached to this announcement.
The Company's financial instruments comprise equity and loan stock
investments in unquoted companies, floating rate notes, cash balances
and short term debtors and creditors which arise from its operations.
The main purpose of these financial instruments is to generate
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 as follows:
Investment risk
As a venture capital trust, it is the Company's specific nature to
evaluate and control the investment risk in its portfolio in unquoted
companies. Investment risk is the exposure of the Company to the
revaluation and devaluation of investments. The main driver of
investment risk is the operational and financial performance of the
investee company and the market dynamics of market quoted
comparators. The Manager receives management accounts from investee
companies, and members of the investment management team often sit on
the boards of unquoted investee companies; this enables the close
identification, monitoring and management of investment risk.
The Manager and the Board formally reviews investment risk (which
includes market price risk), both at the time of initial investment
and at quarterly Board meetings.
The Board monitors the prices at which sales of investments are made
to ensure that profits to the Company are maximised, and that
valuations of investments retained within the portfolio appear
sufficiently prudent and realistic compared to prices being achieved
in the market for sales of unquoted investments.
The maximum investment risk as at the balance sheet date is the value
of the fixed and current asset investment portfolio which is
£27,478,000 (2008: £34,021,000). Fixed and current asset investments
form 92.0 per cent. of the net asset value as at 31 March 2009 (2008:
86.8 per cent.).
More details regarding the classification of fixed asset investments
are shown in Notes 12 and 14 of the Annual Report and Financial
Statements.
Investment price risk
Investment price risk is the risk that the fair value of future
investment cash flows will fluctuate due to factors specific to an
investment instrument or to a market in similar instruments. To
mitigate the investment price risk for the Company as a whole, the
strategy of the Company is to invest in a broad spread of industries
with approximately two-thirds of the unquoted investments comprising
debt securities, which, owing to the structure of their yield and the
fact that they are usually secured, have a lower level of price
volatility than equity. Details of the industries in which
investments have been made are contained in the Portfolio of
Investments section of the Annual Report and Financial Statements ad
in the Manager's Report above.
In accordance with the IPEVCV Guidelines, in the absence of a more
appropriate methodology, investments held for less than 12 months are
valued at cost. Thereafter, the valuation will move to 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 reasonable possible alternative methods of
valuation of the investments as at 31 March 2009.
As required under FRS 29 "Financial Instruments: Disclosures", the
Board is required to illustrate by way of a sensitivity analysis the
degree of exposure to market risk. The Board considers that the value
of the fixed and current asset investment portfolio is sensitive to a
10 per cent. change based on the current economic climate. The impact
of 10 per cent. change has been selected as this is considered
reasonable given the current level of volatility observed both on a
historical basis and future expectations.
The sensitivity of a 10 per cent. increase or decrease in the
valuation of the fixed and current asset investments (keeping all
other variables constant) would increase or decrease the net asset
value and return for the year by £2,748,000 (2008: £3,402,000).
Cash flow interest rate risk
It is the Company's policy to accept a degree of interest rate risk
on its financial assets through the effect of interest rate changes.
On the basis of the Company's analysis, it is estimated that a fall
of one percentage point in all interest rates would have reduced
total return before tax for the year by approximately £57,000 (2008
:£81,000).
The weighted average interest rate applied to the Company's fixed
rate assets during the year was approximately 7.5 per cent. (2008:
9.4 per cent.). The weighted average period to maturity for the fixed
rate assets is approximately 1.3 years (2008: 0.8 years).
Credit risk
Credit risk is the risk that the counterparty to a financial
instrument will fail to discharge an obligation or commitment that it
has entered into with the Company. The Company is exposed to credit
risk through its debtors, investment in unquoted loan stock, and
through the holding of floating rate notes and cash on deposit with
banks.
The Manager evaluates credit risk on loan stock instruments and
floating rate notes prior to investment, and as part of its ongoing
monitoring of investments. In doing this, it takes into account the
extent and quality of any security held. Typically loan stock
instruments have a first fixed charge or a fixed and floating charge
over the assets of the investee company in order to mitigate the
gross credit risk. The Manager receives management accounts from
investee companies, and members of the investment management team
often sit on the boards of unquoted investee companies; this enables
the close identification, monitoring and management of
investment-specific credit risk.
Bank deposits and floating rate notes are held with banks or
financial institutions which have a Moody's credit rating of at least
'A'. In light of the current economic uncertainties, the Company has
adopted an informal policy of limiting counterparty banking and
floating rate note exposure to a maximum of 20 per cent. of net asset
value for any one counterparty.
The Manager and the Board formally review credit risk (including
debtors) and other risks, both at the time of initial investment and
at quarterly Board meetings.
The Company's total gross credit risk as at 31 March 2009 is limited
to £18,439,000 (2008: £20,344,000) of unquoted loan stock
instruments, £2,498,000 cash deposits with banks (2008: £5,409,000),
and £1,463,000 of floating rate notes (2008: £1,475,000). An analysis
of the performance of unquoted loan stock by redemption date is given
under Liquidity risk below.
As at the balance sheet date, the cash held by the Company was held
with the Royal Bank of Scotland plc, BNP Paribas Services Custody
Bank Limited, Bank of Scotland plc and Lloyds TSB Bank plc. The
floating rate note is held with Nationwide Building Society. Credit
risk on cash transactions is mitigated by transacting with
counterparties that are regulated entities subject to regulatory
supervision, with high credit ratings assigned by international
credit rating agencies.
Liquidity risk
Liquid assets are held as cash on current account, cash on deposit or
short term money market account and as floating rate notes. Under the
terms of its Articles, the Company has the ability to borrow up to
the amount of 10 per cent. of its adjusted capital and reserves of
the latest published audited balance sheet, which amounts to
£2,987,000 as at 31 March 2009 (2008: £3,918,000).
The Company has no committed borrowing facilities as at 31 March 2009
(2008: £nil) and had cash balances of £2,498,000 (2008: £5,409,000)
and floating rate notes valued at £1,463,000 (2008: £1,475,000).
Floating rate notes are considered to be readily realisable within
the timescales required to make cash available for investment. The
main cash outflows are for new investments, buy-back of shares and
dividend payments, which are within the control of the Company. The
Manager formally reviews the cash requirements of the Company on a
monthly basis, and the Board on a quarterly basis as part of its
review of management accounts and forecasts. All the Company's
financial liabilities are short term in nature and total £305,000 for
the year to 31 March 2009 (2008: £303,000).
In view of this, the Board considers that the Company is subject to
low liquidity risk.
The carrying value of loan stock investments held at amortised cost
at 31 March 2009 is analysed by the expected maturity dates as
follows:
+--------------------------------------------------------------------+
| | 31 March 2009 |
|--------------------+-----------------------------------------------|
| | | | | | |
|--------------------+----------+------------+-----+----------+------|
| | Fully|Renegotiated| Past| Impaired| Total|
|Redemption date |performing| loan stock| due|loan stock| |
| |loan stock| | loan| | |
| | | |stock| | |
|--------------------+----------+------------+-----+----------+------|
| | £'000| £'000|£'000| £'000| £'000|
|--------------------+----------+------------+-----+----------+------|
|Less than one year | 900| 2,071| -| -| 2,971|
|--------------------+----------+------------+-----+----------+------|
|1-2 years | 1,161| 4,520| -| 2,448| 8,129|
|--------------------+----------+------------+-----+----------+------|
|2-3 years | 799| 480| -| 2,014| 3,293|
|--------------------+----------+------------+-----+----------+------|
|3-4 years | 34| 670| -| 1,579| 2,283|
|--------------------+----------+------------+-----+----------+------|
|4-5 years | 583| 890| -| 290| 1,763|
|--------------------+----------+------------+-----+----------+------|
|Total | 3,477| 8,631| -| 6,331|18,439|
+--------------------------------------------------------------------+
The carrying value of loan stock investments held at amortised cost
as at 31 March 2008 is analysed by the expected maturity dates as
follows:
+-----------------------------------------------------------------------+
| | 31 March 2008 |
|----------+------------------------------------------------------------|
|Redemption| Fully performing|Renegotiated|Past due| Impaired| Total|
|date | loan| loan stock| loan|loan stock| |
| | stock| |stock(i)| | |
|----------+--------------------+------------+--------+----------+------|
| | £'000| £'000| £'000| £'000| £'000|
|----------+--------------------+------------+--------+----------+------|
|Less than | | | | | |
|one year | 3,698| 1,869| 1,442| -| 7,009|
|----------+--------------------+------------+--------+----------+------|
|1-2 years | 639| 1,518| 704| -| 2,861|
|----------+--------------------+------------+--------+----------+------|
|2-3 years | 460| 3,150| 707| 86| 4,403|
|----------+--------------------+------------+--------+----------+------|
|3-5 years | 2,184| 3,135| 714| 38| 6,071|
|----------+--------------------+------------+--------+----------+------|
| | | | | | |
|----------+--------------------+------------+--------+----------+------|
|Total | 6,981| 9,672| 3,567| 124|20,344|
+-----------------------------------------------------------------------+
(i) Interest and capital is overdue.
The cost, impairment and carrying value of impaired loan stocks held
at amortised cost at 31 March 2009 and 31 March 2008 are as follows:
+--------------------------------------------------------------------------+
| | 31 March 2009 | 31 March 2008 |
|----------+-------------------------------+-------------------------------|
| | Cost| Impairment| Carrying| Cost| Impairment| Carrying|
| | | | value| | | value|
|----------+-------+------------+----------+-------+------------+----------|
| | £'000| £'000| £'000| £'000| £'000| £'000|
|----------+-------+------------+----------+-------+------------+----------|
|Impaired | | | | | | |
|loan stock| 7,469| (1,138)| 6,331| 189| (65)| 124|
+--------------------------------------------------------------------------+
Impaired loan stock instruments have a first fixed charge or a fixed
and floating charge over the assets of the investee company and the
Board estimate that the security value approximates to the carrying
value.
There was no overdue loan stock interest as at 31 March 2009 which
had not been renegotiated. Loan stock with a carrying value of
£3,567,000 owed loan stock interest of £67,000 as at 31 March 2008
which was one month overdue. The interest owed as at 31 March 2008
was repaid in 2009 and is no longer outstanding.
Loan stock investments disclosed above as renegotiated would
otherwise have been disclosed as past due.
Fair values of financial assets and financial liabilities
All the Company's financial assets and liabilities as at 31 March
2009 are stated at fair value as determined by the Directors, with
the exception of loans and receivables included within investments,
which are carried at amortised cost, in accordance with FRS 26. The
Directors believe that the current carrying value of loan stock is
not materially different to the fair value. There are no financial
liabilities other than creditors. The Company's financial liabilities
are all non-interest bearing. It is the Directors' opinion that the
book value of the financial liabilities is not materially different
to the fair value and all are payable within one year and that the
Company is subject to low liquidity risk as a result of nil gearing
and strong cash balances.
The Company's financial assets and liabilities as at 31 March 2009,
all denominated in pounds sterling, consist of the following:
+---------------------------------------------------------------------------------------------+
| | 31 March 2009 | 31 March 2008 |
|-------------+---------------------------------------+---------------------------------------|
| | Fixed| Floating| Non-| Total| Fixed| Floating| Non-| Total|
| | rate| rate| interest| | rate| rate| interest| |
| | | | bearing| | | | bearing| |
|-------------+--------+----------+----------+--------+--------+----------+----------+--------|
| | £'000| £'000| £'000| £'000| £'000| £'000| £'000| £'000|
|-------------+--------+----------+----------+--------+--------+----------+----------+--------|
|Unquoted | | | | | | | | |
|equity | -| -| 7,576| 7,576| -| -| 12,202| 12,202|
|-------------+--------+----------+----------+--------+--------+----------+----------+--------|
|Unquoted loan| | | | | | | | |
|stock | 18,216| 223| -| 18,439| 20,344| -| -| 20,344|
|-------------+--------+----------+----------+--------+--------+----------+----------+--------|
|Floating rate| | | | | | | | |
|notes | -| 1,463| -| 1,463| -| 1,475| -| 1,475|
|-------------+--------+----------+----------+--------+--------+----------+----------+--------|
|Debtors | -| -| 199| 199| -| -| 94| 94|
|-------------+--------+----------+----------+--------+--------+----------+----------+--------|
|Current | | | | | | | | |
|liabilities | -| -| (305)| (305)| -| -| (349)| (349)|
|-------------+--------+----------+----------+--------+--------+----------+----------+--------|
|Cash | -| 2,498| -| 2,498| -| 5,409| -| 5,409|
|-------------+--------+----------+----------+--------+--------+----------+----------+--------|
|Total net | | | | | | | | |
|assets | 18,216| 4,184| 7,470| 29,870| 20,344| 6,884| 11,947| 39,175|
+---------------------------------------------------------------------------------------------+
14. Post balance sheet events
Since 31 March 2009 the Company has completed the following
investments and disposals:
* April 2009: Investment of £26,000 in Welland Inns VCT Limited
* April 2009: Investment of £25,000 in Welland Inns VCT (Hotels)
Limited
* April 2009: Part disposal of £100,000 in City Screen (Cambridge)
Limited
* April 2009: Part disposal of £175,000 in Prime VCT Limited
* May 2009: Investment of £25,000 in Bravo Inns II Limited
* May 2009: Disposal of £540,000 in Youngs VCT Limited
* June 2009: Part disposal of £40,000 in Kew Green VCT (Stansted)
Limited
* June 2009: Part disposal of £175,000 in Prime VCT Limited
15. Related party transactions
The Manager, Albion Ventures LLP, could be considered to be a related
party by virtue of the fact that it is party to a Management
Agreement from the Company. During the year, services of a total
value of £771,000 (2008: £1,043,000), were purchased by the Company
from Albion Ventures LLP; this includes £732,000 investment
management fee and £40,000 administration fee (including VAT). At the
financial year end, the amount due to Albion Ventures LLP in respect
of these services disclosed as accruals and deferred income was
£185,000 (2008: £241,000).
Albion Ventures LLP has reclaimed VAT from HMRC as described in note
6. A sum of £720,000 has been recognised in the Income Statement for
the year reflecting a gross receipt of £563,000, a debtor from Albion
Ventures LLP of £193,000, less a creditor for £36,000 in respect of
related prior year historic management and performance fees to be
paid to Albion Ventures LLP.
Buy-backs of shares for treasury during the year were transacted
through Winterflood Securities Limited, a subsidiary of Close
Brothers Group plc which up to 23 January 2009 was the parent company
of Albion Ventures LLP (formerly Close Ventures Limited). A total of
731,040 shares were purchased for treasury (2008: 244,546 shares) at
an average price of 78 pence per share (2008: 102.5 pence per share).
There are no other related party transactions or balances requiring
disclosure.
16. Other information
The information set out in this announcement does not constitute the
Company's statutory accounts within the terms of section 240 of the
Companies Act 1985 for the periods ended 31 March 2009 and 31 March
2008, and is derived from the statutory accounts for the financial
year, which have been or in the case of the accounts for the year
ended 31 March 2009, which will be, delivered to the Registrar of
Companies. The auditors reported on those accounts; their reports
were unqualified and did not contain a statement under s237 (2) or
(3) of the companies Act 1985.
The Company's Annual General Meeting will be held at The Worshipful
Company of Coopers, Coopers' Hall, 13 Devonshire Square, London EC2M
4TH on 27 July 2009 at 12 noon.
17. Publication
The full audited Annual Report and Financial Statements is being sent
to shareholders and copies will be made available to the public at
the registered office of the Company, Companies House, the FSA
viewing facility and also electronically at
www.albion-ventures.co.uk.
25 June 2009
For further information, please contact:
Patrick Reeve of Albion Ventures LLP
Tel: 020 7601 1850
---END OF MESSAGE---
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