Half-yearly report

Kings Arms Yard VCT PLC As required by the UK Listing Authority's Disclosure and Transparency Rule 4.2, Kings Arms Yard VCT PLC today makes public its information relating to the Half- yearly Financial Report (which is unaudited) for the six months to 30 June 2011. This announcement was approved by the Board of Directors on 22 August 2011.  The full Half-yearly Financial Report (which is unaudited) for the period to 30 June 2011, will shortly be sent to shareholders. Copies of the full Half- yearly Financial Report will be shown via the Albion Ventures LLP websitewww.albion-ventures.co.uk under the "Our Funds" section by clicking on Kings Arms Yard VCT PLC and looking under the Financial Reports and Circulars section for the Half-yearly Financial Report to 30 June 2011. Investment policy The Company is a Venture Capital Trust.  The new investment policy, approved by shareholders at the General Meeting held on 10 February 2011, is intended to produce a regular and predictable dividend stream with an appreciation in capital value as set out below. -         The Company intends to achieve its strategy by adopting an amended investment policy for new investments which over time will rebalance the portfolio such that approximately 50 per cent. of the portfolio comprises an asset-based portfolio of lower risk, ungeared businesses, principally operating in the healthcare, environmental and leisure sectors (the "Asset-Based Portfolio").  The balance of the portfolio, other than funds retained for liquidity purposes, will be invested in a portfolio of higher growth businesses across a variety of sectors of the UK economy.  These will range from lower risk, income producing businesses to a limited number of higher risk technology companies (the "Growth Portfolio"). -         In neither category would portfolio companies normally have any external borrowing with a charge ranking ahead of the VCT.  Up to two thirds of qualifying investments by cost will comprise loan stock secured with a first charge on the portfolio company's assets. -         The Company's investment portfolio will thus be structured to provide a balance between income and capital growth for the longer term.  The Asset- Based Portfolio is designed to provide stability and income whilst still maintaining the potential for capital growth.  The Growth Portfolio is intended to provide highly diversified exposure through its portfolio of investments in unquoted UK companies. -        Funds held pending investment or for liquidity purposes will be held as cash on deposit or in floating rate notes or similar instruments with banks or other financial institutions with a Moody's rating of 'A' or above. Financial calendar Financial year end 31 December Interim Report date 30 June Announcement of interim results for the six months ended 30 June  22 August 2011 2011 Financial highlights Unaudited Unaudited Audited six months ended six months ended year ended   30 June 2011 30 June 2010 31 December 2010   (pence per share) (pence per share) (pence per share) -------------------------------------------------------------------------------- Net asset value 16.0 18.8 16.6 Dividends Dividends paid during the period 0.67 4.0 5.0 Cumulative dividend paid to 30 June 2011 59.3 57.7 58.7 Total net asset value return(1) To shareholders of Kings Arms Yard VCT PLC (formerly SPARK VCT plc) 75.3 76.5 75.3 Total net asset value return including tax benefits(2) 95.3 96.5 95.3 Total net asset value return to former shareholders of: Quester VCT 2 plc, per 100p invested in shares of that company(3) 61.3 62.3 61.2 Total net asset value return including tax benefits(2) 81.3 82.3 81.2 Quester VCT 3 plc, per 100p invested in shares of that company (4) 35.1 36.3 35.1 Total net asset value return including tax benefits (2) 55.1 56.3 55.1 Notes (1)Net asset value plus cumulative dividend per share to ordinary shareholders in the Company since the launch of the Company (then called Quester VCT plc) in April 1996. (2)Return after 20 per cent. income tax relief but excluding capital gains deferral. (3)Total return to original shareholders in Quester VCT 2 plc, launched in March 1998, which was merged with the Company (then called Quester VCT plc) in June 2005, the share exchange ratio for former shareholders in Quester VCT 2 plc being 1.0249. (4)Total return to original shareholders in Quester VCT 3 plc, launched in February 2000, which was merged with the Company (then called Quester VCT plc) in June 2005, the share exchange ratio for former shareholders in Quester VCT 3 plc being 0.9816. Chairman's statement Overview I am pleased to be able to report to shareholders on the first period of trading under our new Managers.  Our new investment strategy was adopted at the General Meeting on 10 February 2011 and the Managers have subsequently been active in implementing this.  As reported in my last statement of 19 April 2011, progress has been made in rationalising the small quoted portfolio.  Since then this process has continued and the exit of MediGene AG has been completed.  Progress has been made toward the disposal of certain of our unquoted investments, with the sale of Imagesound plc completing at book value after 30 June 2011. New investments have been made in two existing businesses and in a new bio-marker library business.  A number of interesting investment opportunities have been identified of which two are in progress. The deterioration in market sentiment over recent weeks has not so far had any significant effect on the value of our, largely unquoted, portfolio.  The extent to which it may affect the trading of portfolio companies, the opportunity of realising existing investments or the opportunity for suitable new investments is not yet clear. Investment Performance and Progress In the six months to 30 June 2011, total net asset value return per share has remained at 75.3 p per share which is the same level as at 31 December 2010.  Net assets per share at 30 June 2011 stood at 16.0p compared to 16.6p as at 31 December 2010 since when shareholders have received a tax free dividend of 0.67p per share. The movement in net assets is summarised in the table below:     Bonds and net Investments current assets Total pence per £'000 £'000 £'000 share -------------------------------------------------------------------------------- Net asset value at 31 December 2010 12,350 5,933 18,283 16.6 Net gains on disposal 36   (12)   24   0.0 Income net of operating expenses - (256) (256) (0.2) Net gain on valuation of investments 280 (13) 267 0.2 Net investments 282   (282)   -   - ------------- ---------------- -------- ---------- Net assets before dividends 12,948   5,370   18,318   16.6 Dividends paid, less amounts reinvested - (623) (623) (0.6) ------------- ---------------- -------- ---------- Net asset value at 30 June 2011 12,948 4,747 17,695 16.0 ------------- ---------------- -------- ---------- The distribution of assets by sector as at 30 June 2011 is shown in the pie chart attached to the end of this announcement. Source: Albion Ventures LLP Risks and uncertainties The outlook for the UK and the global economies continue to be the key risk facing your Company.  Many of our investments operate in international markets where the continuing concerns over debt and currencies seem certain to have an effect on the general business environment.  Nevertheless, a number of our companies have strong positions in resilient markets, while the process of rebalancing the portfolio and an increase in lower risk investments, with no bank borrowings, is continuing. Other risks and uncertainties remain in the Annual Report and Financial Statement for the year ended 31 December 2010 and as detailed in note 13. Proposed merger with Kings Arms Yard VCT 2 PLC As announced on 16 May 2011, it is proposed that Kings Arms Yard 2 VCT PLC will merge with your Company through a scheme of reconstruction pursuant to section 110 of the Insolvency Act 1986, which will be subject to approval as detailed in the Company's Circular and Prospectus which will shortly be sent to shareholders.  If the appropriate resolutions are passed, Kings Arms Yard VCT 2 PLC will be placed in members' voluntary liquidation with all of its assets and liabilities being transferred to the Company and Kings Arms Yard VCT 2 PLC shareholders will receive new shares in Kings Arms Yard VCT PLC on the basis of the relative net asset values of the two companies as adjusted for material movements for each fund before the effective date. Full details are to be found in the Company's Prospectus and Circular which will soon be dispatched to all shareholders. Related party transactions Details of material related party transactions for the reporting period can be found in note 10 of this Half-yearly Financial Report. Results and dividends We believe that the Company is moving toward a sounder footing, but it would be premature to suggest any permanent improvement yet.  Our overall dividend intentions remain unchanged and we will review the prospect of a final dividend once full year performance has been achieved. Outlook The performance of quoted markets has been very weak in recent weeks.  The extent to which this expresses, or is likely to lead to, an underlying economic malaise is not yet clear, but there are clearly major issues to be tackled at a macro-economic level.  Under these conditions it is difficult to make positive forward looking statements, but your Board is confident that the Company is being managed in a manner that offers it the best prospect of a positive future. Robin Field Chairman 22 August 2011 Responsibility statement The Directors, Robin Field, Martin Fiennes and Patrick Reeve, are responsible for preparing the Half-yearly Financial Report.  The Directors have chosen to prepare this Half-yearly Financial Report for the Company in accordance with United Kingdom Generally Accepted Accounting Practice ("UK GAAP"). In preparing these summarised financial statements for the period to 30 June 2011, we the Directors of the Company, confirm that to the best of our knowledge: (a) the summarised set of financial statements has been prepared in accordance with the pronouncement on interim reporting issued by the Accounting Standards Board; (b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); (c) the summarised set of financial statements gives a true and fair view in accordance with UK GAAP of the assets, liabilities, financial position and profit and loss of the Company for the six months ended 30 June 2011 and comply with UK GAAP and Companies Act 2006 and; (d) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein). The accounting policies applied to the Half-yearly Financial Report have been consistently applied in current and prior periods and are those applied in the Annual Report and Financial Statements for the year ended 31 December 2010. This Half-yearly Financial Report has not been audited or reviewed by the Auditor. By order of the Board Robin Field Chairman 22 August 2011 Portfolio of investments The following is a summary of fixed asset investments as at 30 June 2011: +-----------------+------+-----------+---------------+---------------+---------+ | | | | | Cumulative| | | | | Equity %| Accounting| movement| | | |Equity| held by| Cost(2)| in value|Valuation| |  |% held| AVL(1)| £'000| £'000| £'000| +-----------------+------+-----------+---------------+---------------+---------+ |Unquoted | | | | | | |investments |  |  |  |  |  | | | | | | | | |Imagesound plc | | | | | | |(3) | 11.7| 12.2| 2,848| (653)| 2,195| | | | | | | | |Elateral Holdings| | | | | | |Limited | 23.4| 36.7| 1,009| 1,092| 2,101| | | | | | | | |UniServity | | | | | | |Limited | 20.5| 49.2| 1,208| 436| 1,644| | | | | | | | |Level Four | | | | | | |Software Holdings| | | | | | |Limited (3) | 12.9| 24.9| 984| 144| 1,128| | | | | | | | |Cluster Seven | | | | | | |Limited(3) | 9.0| 14.8| 1,569| (552)| 1,017| | | | | | | | |Haemostatix | | | | | | |Limited | 13.0| 21.1| 584| 317| 901| | | | | | | | |Workshare Limited| 1.8| 11.3| 696| (22)| 674| | | | | | | | |Sift Limited (3) | 22.5| 31.4| 2,658| (2,014)| 644| | | | | | | | |Vivacta Limited | 8.1| 13.3| 1,572| (1,042)| 530| | | | | | | | |Lab M Holdings | | | | | | |Limited | 26.4| 26.4| 690| (195)| 495| | | | | | | | |Atego Group | | | | | | |Limited | 11.3| 11.3| 120| 359| 479| | | | | | | | |Perpetuum Limited| 7.5| 12.4| 847| (473)| 374| | | | | | | | |Antenova Limited | 5.3| 12.3| 1,307| (1,114)| 193| | | | | | | | |We7 Limited | 9.2| 13.0| 816| (702)| 114| | | | | | | | |Abcodia Limited | 3.1| 21.4| 110| -| 110| | | | | | | | |Symetrica Limited| 2.4| 3.4| 108| -| 108| | | | | | | | |Academia Networks| | | | | | |Limited | 4.1| 5.8| 103| -| 103| | | | | | | | |TeraView Limited | 4.8| 9.6| 1,172| (1,147)| 25| | | | | | | | |Oxonica Limited | 1.5| 2.1| 195| (188)| 7| | | | | | | | |Skinkers Limited | 4.0| 5.2| 1,178| (1,178)| -| +-----------------+------+-----------+---------------+---------------+---------+ |Total unquoted | | | | | | |investments |  |  | 19,774| (6,932)| 12,842| +-----------------+------+-----------+---------------+---------------+---------+ |Quoted | | | | | | |investments |  |  |  |  |  | | | | | | | | |Allergy | | | | | | |Therapeutics plc | | | | | | |(AIM) | 0.3| 0.9| 365| (307)| 58| | | | | | | | |Celldex | | | | | | |Therapeutics Inc.| | | | | | |(NASDAQ) | 0.2| 0.5| 504| (456)| 48| +-----------------+------+-----------+---------------+---------------+---------+ |Total quoted | | | | | | |investments |  |  | 869| (763)| 106| +-----------------+------+-----------+---------------+---------------+---------+ |Total investments|  |  | 20,643| (7,695)| 12,948| | | | | | | | |Cash and other | | | | | | |net assets |  |  |  |  | 4,747| +-----------------+------+-----------+---------------+---------------+---------+ |Net assets |  |  |  |  | 17,695| +-----------------+------+-----------+---------------+---------------+---------+ (1)Equity held by Albion Ventures LLP managed companies. (2)Amounts shown as accounting cost represent the acquisition cost in the case of investments originally made by the Company and/or the valuation attributed to the investments acquired from Quester VCT 2 plc and Quester VCT 3 plc at the date of the merger in 2005, plus any subsequent acquisition costs, as reduced in certain cases by amounts written off as representing an impairment in value. (3)Includes Loan Stock. Summary income statement +--------------+----+---------------------+---------------------+-----------------------+ |  |  | Unaudited | Unaudited | Audited | | | | six months ended | six months ended | year ended | | | | 30 June 2011 | 30 June 2010 | 31 December 2010 | +--------------+----+-------+-------+-----+-------+-------+-----+-------+-------+-------+ | | |Revenue|Capital|Total|Revenue|Capital|Total|Revenue|Capital| Total| |  |Note| £'000| £'000|£'000| £'000| £'000|£'000| £'000| £'000| £'000| +--------------+----+-------+-------+-----+-------+-------+-----+-------+-------+-------+ |Gains/(losses)| | | | | | | | | | | |on valuation | | | | | | | | | | | |of investments| | | | | | | | | | | |at fair value | | | | | | | | | | | |through profit| | | | | | | | | | | |and loss |  | -| 267| 267| -| (249)|(249)| -|(2,209)|(2,209)| | | | | | | | | | | | | |  |  |  |  |  |  |  |  |  |  |  | | | | | | | | | | | | | |Profit on | | | | | | | | | | | |disposals of | | | | | | | | | | | |investments at| | | | | | | | | | | |fair value | | | | | | | | | | | |through profit| | | | | | | | | | | |and loss |  | -| 24| 24| -| 655| 655| -| 1,576| 1,576| | | | | | | | | | | | | |  |  |  |  |  |  |  |  |  |  |  | | | | | | | | | | | | | |Investment | | | | | | | | | | | |income | 3| 77| -| 77| 59| -| 59| 132| -| 132| | | | | | | | | | | | | |  |  |  |  |  |  |  |  |  |  |  | | | | | | | | | | | | | |Recoverable | | | | | | | | | | | |VAT |  | -| -| -| 49| -| 49| 49| -| 49| | | | | | | | | | | | | |  |  |  |  |  |  |  |  |  |  |  | | | | | | | | | | | | | |Investment | | | | | | | | | | | |management | | | | | | | | | | | |fees |  | (181)| -|(181)| (243)| -|(243)| (412)| -| (412)| | | | | | | | | | | | | |  |  |  |  |  |  |  |  |  |  |  | | | | | | | | | | | | | |Other expenses|  | (152)| -|(152)| (170)| -|(170)| (350)| -| (350)| | | +-------+-------+-----+-------+-------+-----+-------+-------+-------+ |(Loss)/profit | | | | | | | | | | | |on ordinary | | | | | | | | | | | |activities | | | | | | | | | | | |before tax |  | (256)| 291| 35| (305)| 406| 101| (581)| (633)|(1,214)| | | | | | | | | | | | | |Tax on | | | | | | | | | | | |ordinary | | | | | | | | | | | |activities |  | -| -| -| -| -| -| -| -| -| +--------------+----+-------+-------+-----+-------+-------+-----+-------+-------+-------+ |(Loss)/profit | | | | | | | | | | | |on ordinary | | | | | | | | | | | |activities | | | | | | | | | | | |after tax |  | (256)| 291| 35| (305)| 406| 101| (581)| (633)|(1,214)| +--------------+----+-------+-------+-----+-------+-------+-----+-------+-------+-------+ |Basic and | | | | | | | | | | | |diluted | | | | | | | | | | | | (loss)/return| | | | | | | | | | | |per share | | | | | | | | | | | |(pence) | 5| (0.2)| 0.3| 0.1| (0.3)| 0.4| 0.1| (0.5)| (0.6)| (1.1)| +--------------+----+-------+-------+-----+-------+-------+-----+-------+-------+-------+ Comparative figures have been extracted from the unaudited Half-yearly Financial Report for the six months ended 30 June 2010 and the audited statutory accounts for the year ended 31 December 2010. The accompanying notes form an integral part of this Half-yearly Financial Report. The total column of this Summary 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.  The Company has only one class of business and derives its income from investments made in shares and securities and from bank deposits. There are no recognised gains or losses other than the results for the periods 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 cost profit/(loss) is due to the fair value movements on investments. As a result a note on historical cost profit and losses has not been prepared. Summary balance sheet +------------------------------------------------------------------------------+ | Unaudited Unaudited Audited| | 30 June 2011 30 June 2010 31 December 2010| |   Note £'000   £'000   £'000| +------------------------------------------------------------------------------+ |Fixed asset investments   12,948   14,154   12,350| | -------------- -------------- -----------------+ |             | | | |Current assets            | | | |Trade and other debtors   472   761   686| | | |Current asset investments   989   3,722   3,230| | | |Cash at bank and in hand 8 3,367   2,428   2,216| | -------------- -------------- -----------------+ |    4,828   6,911   6,132 | | |             | | | |Creditors: amounts falling | |due within one year   (81)   (364)   (199)| | -------------- -------------- -----------------+ |             | | | |Net current assets   4,747   6,547   5,933| | -------------- -------------- -----------------+ |             | | | |Net assets   17,695   20,701   18,283| | -------------- -------------- -----------------+ |             | | | |Capital and reserves            | | | |Called-up share capital 6 5,521   5,519   5,519| | | |Share premium   155   150   150| | | |Capital redemption reserve   765   765   765| | | |Special reserve   18,222   21,524   20,524| | | |Investment holding losses   (7,709)   (7,431)   (9,574)| | | |Profit and loss account   741   174   899| | -------------- -------------- -----------------+ |             | | | |Total equity shareholders' | |funds   17,695   20,701   18,283| | -------------- -------------- -----------------+ |             | | | |Basic and diluted net | |asset value per share | |(pence)   16.0   18.8   16.6| +------------------------------------------------------------------------------+ Comparative figures have been extracted from the unaudited Half-yearly Financial Report for the six months ended 30 June 2010 and the audited statutory accounts for the year ended 31 December 2010. The accompanying notes form an integral part of this Half-yearly Financial Report. These financial statements were approved by the Board of Directors, and authorised for issue on 22 August 2011 and were signed on its behalf by Robin Field Chairman Company number: 3139019 Summary reconciliation of movements in shareholders' funds +-------------+--------+--------+-----------+-------+----------+-------+-------+ | | | | | | | Profit| | | | Called-| Share| Capital| |Investment| and| | | |up share| premium| redemption|Special| holding| loss| | |  | capital| account| reserve|reserve| losses|account| Total| | | | | | | | | | |  | £'000| £'000| £'000| £'000| £'000| £'000| £'000| +-------------+--------+--------+-----------+-------+----------+-------+-------+ |1 January | | | | | | | | |2011 | | | | | | | | |(audited) | 5,519| 150| 765| 20,524| (9,574)| 899| 18,283| | | | | | | | | | |Realisation | | | | | | | | |of prior | | | | | | | | |years' net | | | | | | | | |   recognised| | | | | | | | |losses on | | | | | | | | |  | | | | | | | | | investments | -| -| -| -| 1,598|(1,598)| -| | | | | | | | | | |Transfer from| | | | | | | | |special | | | | | | | | |reserve to | | | | | | | | |   profit and| | | | | | | | |loss account | -| -| -|(2,302)| -| 2,302| -| | | | | | | | | | |Investment | | | | | | | | |holding gain | | | | | | | | |on | | | | | | | | |   valuation | | | | | | | | |of | | | | | | | | |investments | -| -| -| -| 267| (267)| -| | | | | | | | | | |Issue of | | | | | | | | |equity (net | | | | | | | | |of costs) | 2| 5| -| -| -| -| 7| | | | | | | | | | |Loss on | | | | | | | | |ordinary | | | | | | | | |activities | | | | | | | | |after | | | | | | | | |   taxation | -| -| -| -| -| 35| 35| | | | | | | | | | |Dividends | | | | | | | | |paid | -| -| -| -| -| (630)| (630)| +-------------+--------+--------+-----------+-------+----------+-------+-------+ |As at 30 June| | | | | | | | |2011 | | | | | | | | |(unaudited) | 5,521| 155| 765| 18,222| (7,709)| 741| 17,695| +-------------+--------+--------+-----------+-------+----------+-------+-------+ |1 January | | | | | | | | |2010 | | | | | | | | |(audited) | 5,519| 150| 765| 22,685| (7,941)| 3,852| 25,030| | | | | | | | | | |Realisation | | | | | | | | |of prior | | | | | | | | |years' net | | | | | | | | |   recognised| | | | | | | | |losses on | | | | | | | | |  | | | | | | | | | investments | -| -| -| -| 759| (759)| -| | | | | | | | | | |Transfer from| | | | | | | | |special | | | | | | | | |reserve to | | | | | | | | |   profit and| | | | | | | | |loss account | -| -| -|(1,161)| -| 1,161| -| | | | | | | | | | |Investment | | | | | | | | |holding loss | | | | | | | | |on | | | | | | | | |   valuation | | | | | | | | |of | | | | | | | | |investments | -| -| -| -| (249)| 249| -| | | | | | | | | | |Profit on | | | | | | | | |ordinary | | | | | | | | |activities | | | | | | | | |   after | | | | | | | | |taxation | -| -| -| -| -| 101| 101| | | | | | | | | | |Dividends | | | | | | | | |paid | -| -| -| -| -|(4,430)|(4,430)| +-------------+--------+--------+-----------+-------+----------+-------+-------+ |As at 30 June| | | | | | | | |2010 | | | | | | | | |(unaudited) | 5,519| 150| 765| 21,524| (7,431)| 174| 20,701| +-------------+--------+--------+-----------+-------+----------+-------+-------+ |1 January | | | | | | | | |2010 | | | | | | | | |(audited) | 5,519| 150| 765| 22,685| (7,941)| 3,852| 25,030| | | | | | | | | | |Realisation | | | | | | | | |of prior | | | | | | | | |years' net | | | | | | | | |   recognised| | | | | | | | |losses on | | | | | | | | |  | | | | | | | | | investments | -| -| -| -| 576| (576)| -| | | | | | | | | | |Transfer from| | | | | | | | |special | | | | | | | | |reserve to | | | | | | | | |   profit and| | | | | | | | |loss account | -| -| -|(2,161)| -| 2,161| -| | | | | | | | | | |Investment | | | | | | | | |holding loss | | | | | | | | |on | | | | | | | | |   valuation | | | | | | | | |of | | | | | | | | |investments | -| -| -| -| (2,209)|(2,209)| -| | | | | | | | | | |Loss on | | | | | | | | |ordinary | | | | | | | | |activities | | | | | | | | |after | | | | | | | | |   taxation | -| -| -| -| -|(1,214)|(1,214)| | | | | | | | | | |Dividends | | | | | | | | |paid | -| -| -| -| -|(5,533)|(5,533)| +-------------+--------+--------+-----------+-------+----------+-------+-------+ |As at 31 | | | | | | | | |December | | | | | | | | |2010 | | | | | | | | |(audited) | 5,519| 150| 765| 20,524| (9,574)| 899| 18,283| +-------------+--------+--------+-----------+-------+----------+-------+-------+ The total distributable reserves are £11,254,000 (30 June 2010: £14,267,000; 31 December 2010: £11,849,000), comprising the special reserve and the profit and loss account, less net investment holdings losses. Summary cash flow statement +------------------------------------------------------------------------------+ | Unaudited Unaudited Audited| | six months six months year ended| | ended ended 31 December| | 30 June 2011 30 June 2010 2010| |   Note £'000   £'000   £'000| +------------------------------------------------------------------------------+ |Net cash flow from | |operating activities 7 (254)   (445)   (524)| | ----------------- ----------------- ---------------+ |             | | | |Taxation            | | | |UK corporation tax | |recovered/(paid)   -   -   -| | | |             | | | |Financial investments            | | | |Purchase of fixed | |asset investments   (452)   (168)   (536)| | | |Purchase of current | |asset investments   (985)   -   -| | | |Disposal of fixed | |asset investments   326   1,266   2,139| | | |Disposal of current | |asset investments   3,235   2,988   3,480| | | |Amounts recovered from | |investments previously | |written off   -   27   -| | ----------------- ----------------- ---------------+ |             | | | |Net cash flow from | |investing activities   2,124   4,113   5,083| | | |             | | | |Equity dividends paid | |(net of costs of | |issuing shares under | |the Dividend | |Reinvestment Scheme)   (718)   (4,430)   (5,533)| | ----------------- ----------------- ---------------+ |             | | | |Net cash flow before | |financing   1,152   (762)   (974)| | ----------------- ----------------- ---------------+ |             | | | |Financing            | | | |Costs of issue of | |share capital   (1)   -   -| | ----------------- ----------------- ---------------+ |             | | | |Net cash flow from | |financing   (1)   -   -| | ----------------- ----------------- ---------------+ |             | | | |Cash flow in the | |period 8 1,151   (762)   (974)| | ----------------- ----------------- ---------------+ |             | +------------------------------------------------------------------------------+ The accompanying notes form an integral part of this Half-yearly Financial Report. Notes to the unaudited summarised financial statements 1. Accounting convention The Financial Statements have been prepared in accordance with the historical cost convention, except for the measurement of fair value of investments, and in accordance with applicable UK 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. The accounts are prepared on a going concern basis. 2. Accounting policies Fixed asset investments The Company's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth.  This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment policy, and information about the portfolio is provided internally on that basis to the Board. Upon initial recognition (using trade date accounting) investments are designated by the Company as 'at fair value through profit or loss' and are included at their initial fair value, which is cost (excluding expenses incidental to the acquisition which are written off to the profit and loss account). Subsequently, the investments are valued at 'fair value', which is measured as follows: -        Investments listed on recognised exchanges are valued at their bid prices at the end of the accounting period or otherwise at fair value based on published price quotations; -        Unquoted investments, where there is not an active market, are valued using an appropriate valuation technique in accordance with the International Private Equity and Venture Capital Valuation guidelines.  Indicators of fair value are derived using established methodologies including earnings multiples, prices of recent investment rounds, net assets and industry valuation benchmarks.  Where the Company has an investment in an early stage enterprise, the price of a recent investment round is often the most appropriate approach to determining fair value.  In situations where a period of time has elapsed since the date of the most recent transaction, consideration is given to the circumstances of the investee company since that date in determining fair value.  This includes consideration of whether there is any evidence of deterioration or strong definable evidence of an increase in value.  In the absence of these indicators, the investment in question is valued at the amount reported at the previous reporting date.  Examples of events or changes that could indicate a diminution include: -        the performance and/or prospects of the underlying business are significantly below the expectations on which the investment was based; -        a significant adverse change either in the investee company's business or in the technological, market, economic, legal or regulatory environment in which the business operates; or -        market conditions have deteriorated, which may be indicated by a fall in the share prices of quoted businesses operating in the same or related sectors. 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., but less than 50 per cent., of the equity of an investment company, and the investment company is not a subsidiary, are not regarded as associated undertakings. Current asset investments In accordance with FRS 26, units held in funds used for cash management are designated as fair value through profit and loss.  These investments are classified as current asset investments as they are investments held for the short term and comparative classification in the Balance sheet and Cash flow statements have been represented accordingly. Gains and losses on Investments Gains and losses arising from changes in the fair value of the investments are included in the Income statement for the year as a Capital item and are allocated to Investment holding losses. Investment income Dividends receivable on quoted equity shares are recognised into account on the ex-dividend date.  Income receivable on unquoted equity and non-equity shares and loan notes is recognised when the Company's right to receive payment and expect settlement is established.  Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis (including amortisation of any premium or discount to redemption) so as to reflect the effective interest rate, provided there is no reasonable doubt that payment will be received in due course.  Income from fixed interest securities and deposit interest is included on an effective interest rate basis. Expenses All expenses, including expenses incidental to the acquisition or disposal of an investment, are accounted for on an accruals basis and are charged wholly to the profit and loss account.  Costs associated with the issue of shares are charged to the share premium account.  Costs associated with the buy back of shares are charged to the special reserve. All other expenses, including management fees, are presented within the Revenue column of the Income statement. Taxation Corporation tax is applied to profits chargeable to corporation tax, if any, at the applicable rate for the period.  The Company has not provided for deferred tax on any capital gains or losses arising on the revaluation or disposal of investments as these items are not subject to tax whilst the Company maintains its Venture Capital Trust status.  The Company intends to continue to meet the conditions required for it to hold approved Venture Capital Trust status for the foreseeable future.  Deferred tax assets in respect of surplus management expenses are only recognised to the extent that such assets are likely to be recoverable against future taxable profits of the Company. Foreign exchange The currency of the primary economic environment in which the Company operates (the functional currency) is pounds sterling ("Sterling"), which is also the presentational currency of the Company.  Transactions involving currencies other than Sterling are recorded at the exchange rate ruling on the transaction date.  At each Balance sheet date, monetary items and non-monetary assets and liabilities that are measured at fair value, which are denominated in foreign currencies, are retranslated at the closing rates of exchange.  Exchange differences arising on settlement of monetary items and from retranslating at the Balance sheet date of investments and other financial instruments measured at fair value through profit or loss, and other monetary items, are included in the Profit and loss account.  Exchange differences relating to investments and other financial instruments measured at fair value are subsequently included in the transfer to the Investment holding losses. Dividends Dividends payable to equity shareholders are recognised when they are paid, or have been approved by shareholders at an Annual General Meeting. 3.        Investment income   Unaudited Unaudited  Audited six months ended six months ended year ended 30 June 2011 30 June 2010 31 December 2010 £'000   £'000   £'000 -------------------------------------------------------------------------------- Interest recognised on investments held at fair value through profit or loss Interest on listed fixed interest securities -   3   3 Interest on loans to venture capital investee companies 42   38   91 Other income 10   12   22 ------------------ ------------------ -----------------   52   53   116 Interest recognised on investments held at amortised cost Bank deposit interest 25   6   16 ------------------ ------------------ -----------------   77   59   132 ------------------ ------------------ ----------------- 4.        Dividends   Unaudited Unaudited  Audited six months ended six months ended year ended 30 June 2011 30 June 2010 31 December 2010 £'000   £'000   £'000 -------------------------------------------------------------------------------- Final dividend of 4 pence per share paid on    11 June 2010 in respect of the year ended    31 December 2009 -   4,430   4,430 Interim dividend of 1 penny per share paid on    24 September 2010 in respect of the year ended    31 December 2010 -   -   1,103 Final dividend of 0.67 pence per share paid on    24 June 2011 in respect of the year ended    31 December 2010 739   -   - Dividends recovered (109)   -   - ------------------ ------------------ -----------------   630   4,430   5,533 ------------------ ------------------ ----------------- 5.        Basic and diluted return per share Return per share has been calculated on 110,371,963 Ordinary shares (30 June 2010 and 31 December 2010: 110,370,135) being the weighted average number of shares in issue for the period. 6.        Share Capital   Unaudited Unaudited Audited 30 June 2011 30 June 2010 31 December 2010 £'000   £'000   £'000 -------------------------------------------------------------------------------- Authorised: 200,000,000 Ordinary shares of 5 pence each (30 June 2010 and 31 December 2010: 200,000,000) 10,000   10,000   10,000 -------------- -------------- ----------------- Allotted, issued and fully paid: 110,417,392 Ordinary shares of 5 pence each (30 June 2010 and 31 December 2010: 110,370,135) 5,521   5,519   5,519 -------------- -------------- ----------------- During the period from 1 January to 30 June 2011, the Company issued the following New Ordinary shares of 5 pence each under the terms of the Dividend Reinvestment Scheme Circular dated 19 April 2011: Mid market price Number of Issue price on issue date Net proceeds Date of allotment shares issued (pence per share) (pence per share) £'000 -------------------------------------------------------------------------------- 24 June 2011 47,257 15.93 7.75 8 No shares were bought back by the Company during the period ended 30 June 2011. 7.        Reconciliation of profit/(loss) on ordinary activities before taxation to net cash flow from operating activities    Audited Unaudited Unaudited year ended six months ended six months ended 31 December 30 June 2011 30 June 2010 2010 £'000   £'000   £'000 -------------------------------------------------------------------------------- Profit/(loss) on ordinary activities before tax 35   101   (1,214) (Gain)/loss on investments at fair value through profit or loss (291)   (406)   633 Decrease/(increase) in debtors 28   (304)   58 (Decrease)/increase in creditors (26)   164   (1) ------------------ ------------------ ---------------- Net cash flow from operating activities (254)   (445)   (524) ------------------ ------------------ ---------------- 8.        Analysis of change in cash during the period   Unaudited Unaudited Audited six months ended six months ended year ended 30 June 2011 30 June 2010 31 December 2010 £'000   £'000   £'000 ---------------------------------------------------------------------------- Opening cash balances 2,216   3,190   3,190 Net cash flow 1,151   (762)   (974) ------------------ ------------------ ----------------- Closing cash balances 3,367   2,428   2,216 ------------------ ------------------ ----------------- 9.        Post balance sheet events         Since 30 June 2011, the Company has completed the following material transactions: -        Disposal of Imagesound plc for £2,195,000 in July 2011.         -        Investment in Atego Group Limited of £264,000 in August 2011; 10.        Related party disclosures The Manager, Albion Ventures LLP, is considered to be a related party by virtue of the fact that Patrick Reeve, a Director of the Company, is also the Managing Partner of the Manager.  The Manager is party to a management agreement with the Company (details disclosed on pages 35 and 36 of the Annual Report and Financial Statements for the year ended 31 December 2010).  Albion Ventures LLP has agreed to waive its management and administration fees for the first year to 31 December 2011.  Patrick Reeve has agreed to waive his entitlement to Directors' fees for all accounting periods until further notice. During the period, the previous Manager, SPARK Venture Management Limited, continued to be entitled to the management and administration fees under the terms of the Termination Agreement and fees totalling £217,000 (30 June 2010: £277,000; 31 December 2010: £480,000) were paid by the Company to SPARK Venture Management Limited. At the financial period end, an amount of less than £1,000 (31 December 2010: £6,000) reflected prepayments to SPARK Venture Management Limited.  At 30 June 2010, an amount of £41,000 was included in accruals in respect of fees due to SPARK Venture Management Limited.         There are no other related party transactions or balances requiring disclosure. 11.        Going concern The Board's assessment of liquidity risk remains unchanged since the Annual Report and Financial Statements for the year ended 31 December 2010 and is detailed on page 18 of those accounts. The Company has significant cash and liquid resources, and the major cash outflows of the Company (namely investments and dividends) are within the Company's control.  Accordingly, after making diligent enquiries the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.  For this reason, the Directors have adopted the going concern basis in preparing the accounts in accordance with "Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009", published by the Financial Reporting Council. 12.        Risks and uncertainties The Board considers that the Company faces the following major risks and uncertainties: 1. Investment risk This is the risk of investment in poor quality assets which reduces the capital and income returns to shareholders, and negatively impacts on the Company's reputation. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes, are more fragile than larger, long established businesses. To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its strong track record for investing in this segment of the market. In addition, the Manager operates a formal and structured investment process, which includes an Investment Committee, comprising investment professionals from the Manager and at least one external investment professional. The Manager also invites comments from non-executive Directors of the Company on investments discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on investee company boards) and the Board receives detailed reports on each investment as part of the Manager's report at quarterly board meetings. 2. Venture Capital Trust approval risk The Company's current approval as a venture capital trust allows investors to take advantage of tax reliefs on initial investment and ongoing tax free capital gains and dividend income. Failure to meet the qualifying requirements could result in investors losing the tax relief on initial investment and loss of tax relief on any tax-free income or capital gains received. In addition, failure to meet the qualifying requirements could result in a loss of listing of the shares. To reduce this risk, the Board has appointed the Manager, who has a team with significant experience in venture capital trust management, used to operating within the requirements of the venture capital trust legislation. In addition, to provide further formal reassurance, the Board has appointed Grant Thornton UK LLP as its taxation advisors. Grant Thornton UK LLP report to the Board to independently confirm compliance with the venture capital trust legislation, to highlight areas of risk and to inform on changes in legislation. 3. Compliance risk The Company is listed on The London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company's shares, or other penalties under the Companies Act or from financial reporting oversight bodies. Board members and the Manager have experience of operating at senior levels within quoted businesses. In addition, the Board and the Manager receive regular updates on new regulation from its auditors, lawyers and other professional bodies. 4. Internal control risk Failures in key controls, within the Board or within the Manager's business, could put assets of the Company at risk or result in reduced or inaccurate information being passed to the Board or to shareholders. The Audit Committee will meet with the Manager's internal auditors Littlejohn LLP at least once a year, receiving a report regarding the last formal internal audit performed on the Manager, and providing the opportunity for the Audit Committee to ask specific and detailed questions. 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 24 of the Annual Report and Financial Statements for the year ended 31 December 2010.  Measures are in place to mitigate information risk in order to ensure the integrity, availability and confidentiality of information used within the business. 5. Reliance upon third parties risk The Company is reliant upon the services of Albion Ventures LLP for the provision of investment management and administrative functions. There are provisions within the management agreement for the change of Manager under certain circumstances (for further detail, see the investment management agreement details in note 4 of the Annual Report and Financial Statements for the year ended 31 December 2010). In addition, the Manager has demonstrated to the Board that there is no undue reliance placed upon any one individual within Albion Ventures LLP. 6. Financial risks By its nature, as a venture capital trust, the Company is exposed to investment risk (which comprises investment price risk and cash flow interest rate risk), credit risk and liquidity risk. The Company's policies for managing these risks and its financial instruments are outlined in full in note 19 to the Annual Report and Financial Statements for the year ended 31 December 2010. 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.        Other information The information set out in this Half-yearly Financial Report does not constitute the Company's statutory accounts within the terms of section 434 of the Companies Act 2006 for the periods ended 30 June 2011 and 30 June 2010, and is unaudited.  The information for the year ended 31 December 2010 does not constitute statutory accounts within the terms of section 434 of the Companies Act 2006 and is derived from the statutory accounts for that financial year, which have been delivered to the Registrar of Companies.  The Auditor reported on those accounts; their report was unqualified and did not contain a statement under s498 (2) or (3) of the Companies Act 2006. 14.        Publication This Half-yearly Financial Report is being sent to shareholders and copies will be made available to the public at the registered office of the Company, Companies House, the National Storage Mechanism and also electronically atwww.albion-ventures.co.uk under the 'Our Funds' section by clicking on Kings Arms Yard VCT PLC, and looking in the Financial Reports and Circulars section for the Half-yearly Financial Report to 30 June 2011. Distribution of assets by sector at 30 June 2011: http://hugin.info/145558/R/1540235/470882.pdf This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Kings Arms Yard VCT PLC via Thomson Reuters ONE [HUG#1540235]

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