Kings Arms Yard VCT PLC: Annual Financial Report
Kings Arms Yard VCT PLC
As required by the UK Listing Authority's Disclosure and Transparency Rules 4.1 and 6.3, Kings Arms Yard VCT PLC today makes public its information relating to the Annual Report and Financial Statements for the year ended 31 December 2015.
This announcement was approved for release by the Board of Directors on 23 March 2016.
This announcement has not been audited.
You will shortly be able to view the Annual Report and Financial Statements for the year to 31 December 2015 (which have been audited) at: www.albion-ventures.co.uk by clicking on 'Our Funds' and then 'Kings Arms Yard VCT PLC'. The Annual Report and Financial Statements for the year to 31 December 2015 will be available as a PDF document via a link under the 'Investor Centre' in the 'Financial Reports and Circulars' section. The information contained in the Annual Report and Financial Statements will include information as required by the Disclosure and Transparency Rules, including Rule 4.1.
Investment objective
The Company is a Venture Capital Trust. The investment policy 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 investment policy for new investments which over time will rebalance the portfolio such that approximately 50% of the portfolio comprises an asset-backed portfolio of more stable, ungeared businesses, principally operating in the healthcare, environmental and leisure sectors (the "Asset-Backed 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 more stable, 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 Company. 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-Backed 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 high credit ratings assigned by international credit rating agencies.
Financial calendar
| Record date for first dividend | 15 April 2016 |
| Payment date of first dividend | 29 April 2016 |
| Annual General Meeting | 11am on 18 May 2016 |
| Announcement of half-yearly results for the six months ending 30 June 2016 | August 2016 |
| Payment date of second dividend (subject to Board approval) | 31 October 2016 |
Financial highlights
| 20.11p | Net asset value per share as at 31 December 2015. |
| 1.77p | Basic and diluted return per share. |
| 18.25p | Mid-market share price as at 31 December 2015. |
| 1.0p | Total tax free dividends per share paid in the year to 31 December 2015. |
| 0.5p | First tax free dividend per share declared for the year to 31 December 2016 payable on 29 April 2016. |
| 5.5% | Tax free yield on share price (dividend per annum/share price as at 31 December 2015). |
| 9.2% | Return on opening NAV per share as at 31 December 2015. |
| 31 December 2015 (pence per share) | 31 December 2014 (pence per share) | |
| Dividends paid | 1.00 | 1.00 |
| Revenue return | 0.40 | 0.27 |
| Capital return/(loss) | 1.37 | (0.43) |
| Net asset value enhancement as a result of share buy-backs | 0.03 | 0.02 |
| Net asset value | 20.11 | 19.31 |
| Shareholder total return | From launch to 31 December 2010 (pence per share) | 1 January 2011 to 31 December 2015 (pence per share) | From launch to 31 December 2015 (pence per share) |
| Subscription price per share at launch | 100.00 | - | 100.00 |
| Dividends paid | 58.66 | 4.67 | 63.33 |
| (Decrease)/increase in net asset value | (83.40) | 3.51 | (79.89) |
| Shareholder total return | 75.26 | 8.18 | 83.44 |
The Directors have declared a first dividend of 0.5 pence per share for the year ending 31 December 2016, which will be paid on 29 April 2016 to shareholders on the register as at 15 April 2016.
The above financial summary is for the Company, Kings Arms Yard VCT PLC only. Details of the financial performance of the various Quester, SPARK and Kings Arms Yard VCT 2 PLC companies, which have been merged into the Company, can be found on page 62 of the full Annual Report and Financial Statements.
Chairman's statement
Introduction
I am pleased to report a total shareholder return for the year ended 31 December 2015 of 1.77 pence per share. This brings the total aggregate return over the five year period since Albion Ventures was appointed Manager to 50%. New investments totalled £4.4 million in 2015. The divestment of the legacy portfolio continues, with a total of £5.2 million realised from sales during the year, including those of Cluster Seven and Lab M.
Results
Net asset value per share increased from 19.31p as at 31 December 2014 to 20.11p at 31 December 2015 after allowing for the payment of dividends totalling 1 penny per share during the year.
The Company recorded a positive total shareholder return of 1.77 pence per share, or £3.8 million for the year to 31 December 2015, driven partly by a 26% increase in investment income to £1.4 million and partly by positive developments at a number of portfolio companies, including Haemostatix, Hilson Moran, MyMeds&Me, Elateral and our renewable energy businesses, which more than offset the setbacks, including Xention and Oxford Immunotec.
During 2015, £4.4 million was invested into unquoted companies including £0.7 million into renewable energy projects, £1.5 million into the construction of three new care homes, and £2.2 million into the high growth portfolio, predominantly in the healthcare and technology sectors. Further information on all new investments is contained in the Strategic Report. The portfolio now includes thirty investments made since 2011 and the proportion of assets still invested in the legacy portfolio of investments made before 2011 has shrunk to 42%.
The main disposals in the year were the sales of Cluster Seven, Lab M and a reduction in our holding in Oxford Immunotec.
For a review of business and future changes please see the Strategic Report below.
Dividend
We are pleased to declare a first dividend of 0.5p per share to be paid on 29 April 2016 to shareholders on the register on 15 April 2016 and anticipate that a second dividend will be paid later in the year in line with our current dividend target of 1 penny per share.
VCT qualifying status
As at 31 December 2015, 90.5% of total investments were in qualifying holdings. The Board continues to monitor this position very carefully in order to ensure that qualifying investments comfortably exceed the minimum threshold of 70% required for the Company to continue to benefit from VCT tax status.
Changes in VCT legislation
The July 2015 budget introduced a number of changes to VCT legislation, including restrictions over the age of investments, a prohibition on management buyouts or the purchase of existing businesses and an overall lifetime investment cap of £12 million from tax-advantaged funds into any portfolio company. While these changes are significant, the Company has been advised that had they been in place previously they would have affected only a relatively small minority of the investments that we have made into new portfolio companies over recent years. The Board's current view is that there will be no material change in our investment policy as a result.
Albion VCTs Prospectus Top Up Offers 2015/2016
By 29 January 2016, the company had raised £2.7 million (2014: £1.1 million) from a first allotment of shares under the top up share offer launched on 17 November 2015. A second allotment is due on 31 March 2016. In view of the strong demand for the Company's shares the Board announced on 15 February 2016 that it had elected to exercise the over allotment facility referred to in the prospectus thus increasing the maximum amount that may be raised by the Company to £6 million.
Details of the offers are set out in a Prospectus (comprising a Securities Note, Registration Document and Summary) which has been sent to shareholders and these can be downloaded from www.albion-ventures.co.uk.
Discount management and share buy-backs
It remains the Board's policy to buy back shares in the market, subject to the overall constraint that such purchases are in the Company's interest, including the maintenance of sufficient resources for investment in new and existing portfolio companies and the continued payment of dividends to shareholders. It is the Board's intention for such buy-backs to be in the region of a 5% discount to net asset value, so far as market conditions and liquidity permit. During 2015, the Company purchased 6,588,000 Ordinary shares. Further information is shown in note 14. These shares were bought at a discount resulting in a 0.03p uplift in net asset value per share for continuing shareholders. The Boards intends to limit the sum available for share buy-backs for the six month period to 30 June 2016 to £750,000.
Transactions with the Manager
Details of transactions that took place with the Manager during the year can be found in note 4 and principally relate to the management fee.
Performance incentive fee
The Board is pleased to announce that investment performance has exceeded the targets set by shareholders on 24 May 2013. Accordingly a first management performance fee of £242,000 is due for the year ended 31 December 2015.
Further details can be found in the Strategic Report below.
Annual General Meeting
The Annual General Meeting of the Company will be held at the City of London Club, 19 Old Broad Street, London EC2N 1DS at 11.00am on 18 May 2016. Full details of the business to be conducted at the Annual General Meeting are given in the Notice of the Meeting on page 57 of the full Annual Report and Financial Statements.
The Board welcomes your attendance at the meeting as it gives an opportunity for shareholders to ask questions of the Board and Investment Manager. If you are unable to attend the Annual General Meeting in person, we would encourage you to make use of your proxy votes.
Risks and uncertainties
The outlook for the UK economy continues to be the key risk affecting your Company. The Company's investment risk is mitigated through a variety of processes, including our policy of ensuring that the Company has a first charge over portfolio companies' assets wherever possible.
A detailed analysis of the other risks and uncertainties facing the business is shown in the Strategic Report below.
Outlook and prospects
We are encouraged by the investment performance over the last five years, which reflects the positive results achieved by the implementation of the investment strategy instigated by the Board and implemented by the Manager since the start of 2011. Whilst the economic outlook is more uncertain than it has been for some time, as reflected in equity market volatility, the Board continues to have confidence in the long-term prospects of the increasingly diversified and balanced portfolio.
Robin Field
Chairman
23 March 2016
Strategic report
Investment objective and policy
The Company is a Venture Capital Trust. The investment policy 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 investment policy for new investments which over time will rebalance the portfolio such that approximately 50% of the portfolio comprises an asset-backed portfolio of more stable, ungeared businesses, principally operating in the healthcare, environmental and leisure sectors (the "Asset-Backed 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 more stable, 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 Company. 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-Backed 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 high credit ratings assigned by international credit rating agencies.
Review of business and future changes
A detailed review of the Company's business during the year and future prospects is contained in the Chairman's statement.
One of the key aims of the Manager has been to increase the income generated by the investment portfolio to the extent that it more than covers the investment management fee and other charges. This continues to be achieved, with total income for 2015 of £1.41 million against total ongoing costs of £1.12 million. This is equivalent to a gross yield of 3.3% on the average net asset value for the year. As the asset based portfolio increases in the current year, we would expect the Company's income to grow accordingly.
As outlined below, the Company has recorded significant capital uplift during the year. This is led by an uplift of £1.6m across the asset-backed portfolio and £725,000 uplift in the valuation of our holding in Haemostatix, offset by a decline in the valuation of our holding in Xention and in the share price of Oxford Immunotec Global PLC, which is listed on NASDAQ.
Details of significant events which have occurred since the end of the financial year are listed in note 19. Details of transactions with the Manager are shown in note 4.
Results and dividends
| Ordinary shares £'000 | |
| Net revenue return for the year ended 31 December 2015 | 869 |
| Net capital gain for the year ended 31 December 2015 | 2,966 |
| Total return for the year ended 31 December 2015 | 3,835 |
| Dividend of 0.5 pence per share paid on 30 April 2015 | (1,109) |
| Dividend of 0.5 pence per share paid on 30 October 2015 | (1,116) |
| Unclaimed dividends returned to the Company | 30 |
| Transferred to reserves | 1,640 |
| Net assets as at 31 December 2015 | 44,612 |
| Net asset value per share as at 31 December 2015 (pence) | 20.11 |
The Company paid dividends of 1 penny per share during the year ended 31 December 2015 (2014: 1 penny per share). The Directors have declared a first dividend of 0.5 pence per share for the year ending 31 December 2016, which will be paid on 29 April 2016 to shareholders on the register at 15 April 2016.
It is the Company's policy to maintain a sustainable, predictable dividend policy with the current level of annual pay-out set at the time that Albion Ventures took over as Manager at 1 penny per share. The dividend has been more than covered by the total return for the year.
As shown in the Income statement, investment income has increased to £1,412,000 (2014: £1,119,000). The increase in our investment income is due to our investments in our new care homes, dividends from our renewable investments and a dividend from Antenova Limited of £184,000.
The total return for the year has increased to £3,835,000 (2014: loss of £324,000). General expenses decreased slightly during the year to £263,000 (2014: £270,000).
The capital gain for the year was £2,966,000 (2014: loss of £859,000). In line with the accounting policy, a portion of management fees continued to be allocated to capital.
The total return was 1.77 pence per share (2014: loss of 0.16 pence per share).
The Balance sheet shows that the net asset value has increased over the last year to 20.11 pence per share (2014: 19.31 pence per share) which is due to continued strong performance of the asset backed investments, as well as increased valuations in Haemostatix, Hilson Moran, MyMeds&Me and Elateral in the growth sector.
There has been a net cash inflow for the year, mainly due to fundraising during the year, operating activities and disposal of fixed asset investments. This was offset by the purchase of £4.4 million of new investments, the payment of dividends and buy-back of shares.
Current portfolio sector allocation
The two pie charts at the end of this announcement outline firstly the different sectors in which the Company's assets, at carrying value, are currently invested, and secondly, delineates between those investments, at carrying value, by asset class.
Direction of portfolio
During 2015, investments were made to build 3 new residential care homes for the elderly, Active Lives Care, Ryefield Court Care and Shinfield Lodge Care in Oxford, Greater London and Reading respectively. These investments have increased the allocation to healthcare from 9% to 11% and, when combined with investments in two new build hydro projects, have contributed to an increase in the asset-backed element of the portfolio from 32% to 36%.
We anticipate the Healthcare sector increasing in importance, as it is an area that the Manager has targeted for value creation and a good potential source of recurring income. The Company has reached its target percentage for the renewable energy sector, which now accounts for 24% of net assets (18% by cost) compared to 21% at the end of the previous financial year.
Future prospects and direction of portfolio
The Company's performance record reflects the success of the strategy outlined above and has enabled the Company to maintain a predictable stream of dividend payments to shareholders. The Board believes that this model will continue to meet the investment objective and has the potential to continue to deliver attractive returns to shareholders and that a number of investments in the growth portfolio, both old and new, have strong prospects. Further details on the Company's outlook and prospects can be found in the Chairman's statement.
Key performance indicators
The Directors believe that the following key performance indicators, which are typical for venture capital trusts, used in its own assessment of the Company, will provide shareholders with sufficient information to assess how effectively the Company is applying its investment policy to meet its objectives.
1. Shareholder total return relative to FTSE All-Share Index total return
The graph on page 4 of the full Annual Report and Financial Statements shows the strong performance of the Company's shareholder total return against the FTSE All-Share Index total return, with dividends reinvested, from the appointment of Albion Ventures LLP on 1 January 2011. Details on the performance of the net asset value and return per share for the year are given above.
2. Net asset value per share and shareholder total return
Shareholder total return since inception increased by 2.2% to 83.44 pence per share for the year ended 31 December 2015.
3. Dividend distributions
Dividends paid in respect of the year ended 31 December 2015 were 1 penny per share (2014: 1 penny per share), in line with the Board's dividend objective. The cumulative dividend paid since inception is 63.33 pence per share.
4. Ongoing charges
The ongoing charges ratio for the year to 31 December 2015 was 2.6% (2014: 2.7%). The ongoing charges ratio has been calculated using The Association of Investment Companies ("AIC") recommended methodology. This figure shows shareholders the total recurring annual running expenses (including investment management fees charged to capital reserve) as a percentage of the average net assets attributable to shareholders. The Directors expect the ongoing charges ratio for the year ahead to be approximately 2.6%.
VCT regulation
The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC. In order to maintain its status under Venture Capital Trust legislation, a VCT must comply on a continuing basis with the provisions of Section 274 of the Income Tax Act 2007, details of which are provided in the Directors' report on page 23 of the full Annual Report and Financial Statements.
VCT investment is regarded as State aid, and new rules have been introduced under the Finance (No 2) Act 2015 in order for the VCT regime to comply with the EU Risk Finance Guidelines. The changes include:
- a lifetime limit on the amount of State aid funding a portfolio company can receive;
- generally the trade of portfolio companies should be less than seven years old at the time of the first State aid funding; and
- VCTs may not be used by a portfolio company to acquire another trade or business, or shares in another company.
While these changes are significant, the Company has been advised that had they been in place previously they would have affected only a relatively small minority of the investments that we have made into new portfolio companies over recent years. The Board's current view is that there will be no material change in our investment policy as a result.
The relevant tests to measure compliance have been carried out and independently reviewed for the year ended 31 December 2015. These showed that the Company has compiled with all tests and continues to do so.
Investment progress
During the year, there was a very active period of new investment, with a total of £4.4 million invested in new and existing portfolio companies. We continued to bias new investment activity towards asset-backed opportunities with the potential to produce a strong level of income, whilst still investing in companies providing the potential for significant capital growth. A total of £0.7 million was invested during the year into the renewable energy sector; £1.5 million into care homes; and £2.2 million in companies offering the potential of high growth.
Cash and liquid assets at the year end increased to £3.5 million (2014: £0.79 million), representing 7% of net asset value.
New investments were made in 3 companies and totalled £390,000 during the year and included: a care home project - Shinfield Lodge Care Limited (£295,000); a cyber security company - Panaseer Limited (£50,000) and an insurance broking company - Dickson Financial Services Limited (£45,000).
Follow-on investments were made in 26 portfolio companies and totalled £4 million during the year. The largest being £1.2 million into the construction of the two care homes (£825,000 into Active Lives Care Limited and £405,000 into Ryefield Court Care Limited); £550,000 into Chonais Holdings Limited to complete the development of a new hydroelectricity plant in Scotland; and £323,000 into Haemostatix Limited.
During the year Lab M Holdings Limited was sold, realising proceeds of £2.1 million and a gain on cost of £1.2 million; and Cluster Seven Limited was disposed of realising proceeds of £1.9 million with a realised loss of £148,000 on cost. The Company also sold 78,938 Oxford Immnotec Global shares with proceeds of £682,000 and a realised gain of £376,000 on cost. Other realisations can be found in the realisations table on page 19 of the full Annual Report and Financial Statements.
The policy of increasing the income generating capacity of the Company continues to bear fruit. The Company received £1,095,000 of loan stock income during the year representing a rise of 23% on the £892,000 loan stock income received from the portfolio during the previous year.
The pie chart at the end of this announcement outlines the different sectors in which the Company's assets, at carrying value, are currently invested.
Gearing
As defined by the Articles of Association, the Company's maximum exposure in relation to gearing is restricted to the amount equal to the adjusted capital and reserves, being £43,434,000 (2014: £37,905,000). As at 31 December 2015, the Company's actual short term and long term gearing was £nil (2014: £nil). The Directors do not currently have any intention to utilise long term gearing.
Operational arrangements
The Company has delegated the investment management of the portfolio to Albion Ventures LLP, which is authorised and regulated by the Financial Conduct Authority. Albion Ventures LLP also provides company secretarial and other accounting and administrative support to the Company.
Management agreement
Under the Investment Management Agreement, Albion Ventures LLP provides investment management, company secretarial and administrative services to the Company. Albion Ventures LLP is entitled to an annual management fee of 2% of net asset value of the Company, payable quarterly in arrears, along with an annual administration fee of £50,000.
Under the terms of the Investment Management Agreement, the aggregate payable for management and administration (normal running costs) are subject to an aggregate annual cap of 3% of the year end closing net asset value, for accounting periods commencing after 31 December 2011.
The Investment Management Agreement can be terminated by either party on 12 months' notice and is subject to earlier termination in the event of certain breaches or on the insolvency of either party.
In line with common practice, the Manager is entitled to arrangement fees payable by portfolio companies (up to a maximum of 2% of the amount invested) and to fees charged for the monitoring of investments (up to a maximum of £20,000 per company per annum). The maximums are increased by the Retail Prices Index each year.
Performance incentive fee
In order to provide the Manager with an incentive to maximise the return to investors, the Manager is entitled to charge an incentive fee in the event that the returns exceed minimum target levels.
The performance hurdle is equal to the greater of the Starting NAV of 20 pence per share, increased by the increase in RPI plus 2 per cent per annum from the Start Date of 1 January 2014 (calculated on a simple and not compound basis) and the highest Total Return for any earlier period after the Start Date (the 'high watermark'). An annual fee (in respect of each share in issue) of an amount equal to 15 per cent of any excess of the Total Return (this being NAV per share plus dividends paid after the Start Date) as at the end of the relevant accounting period over the performance hurdle will be due to the Manager.
As at 31 December 2015, the total return of the Company since 1 January 2014 (the performance incentive fee start date) was 22.11 pence per share, compared to a performance hurdle rate of 21.36 pence per share. As a result, a performance incentive fee is payable to the manager of £242,000 (2014: nil).
Evaluation of the Manager
The Board has evaluated the performance of the Manager based on the returns generated by the Company from the management and sale of existing investments, the continuing achievement of the 70% investment requirement for Venture Capital Trust status, the making of new investments in accordance with the investment policy, the long term prospects of current investments, a review of the Investment Management agreement and the services provided therein and benchmarking the performance of the Manager to other service providers.
The Board believes that it is in the interests of shareholders as a whole, and of the Company, to continue the appointment of the Manager for the forthcoming year.
Alternative Investment Fund Managers Directive ("AIFMD")
The Board has appointed Albion Ventures LLP as the Company's AIFM as required by the AIFMD.
Discount management and share buy-back policy
It remains the Board's primary objective to maintain sufficient resources for investment in existing and new portfolio companies and for the continued payment of dividends to shareholders. The Board's policy is to buy back shares in the market, subject to the overall constraint that such purchases are in the Company's interest.
It is the Board's intention for such buy-backs to be in the region of a 5% discount to net asset value, so far as market conditions and liquidity permit.
Further details of shares bought back during the year ended 31 December 2015 can be found in note 14 of the Financial Statements.
Social and community issues, employees and human rights
The Board recognises the requirement under section 414c of the Companies Act 2006 (the "Act") to detail information about social and community issues, employees and human rights; including any policies it has in relation to these matters and effectiveness of these policies. As an externally managed investment company with no employees, the Company has no policies in these matters and as such these requirements do not apply.
Further policies
The Company has adopted a number of further policies relating to:
- Environment
- Global greenhouse gas emissions
- Anti-bribery
- Diversity
and these are set out in the Directors' report on page 23 and 24 of the full Annual Report and Financial Statements.
Risk management
The Board carries out a regular review of the risk environment in which the Company operates. The principal risks and uncertainties of the Company as identified by the Board and how they are managed are as follows:
| Risk | Possible consequence | Risk management |
| Economic risk | Changes in economic conditions, including, for example, interest rates, rates of inflation, industry conditions, competition, political and diplomatic events and other factors could substantially and adversely affect the Company's prospects in a number of ways. | To reduce this risk, in addition to investing equity in portfolio companies, the Company often invests in secured loan stock and has a policy of not normally permitting any external bank borrowings within portfolio companies. Additionally, the Manager has been rebalancing the sector exposure of the portfolio with a view to reducing reliance on consumer led sectors. |
| Investment risk | This is the risk of investment in poor quality assets which reduces the capital and income returns to shareholders and negatively impacts on the Company's reputation. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes, are more fragile than larger, long established businesses. The success of investments in certain sectors is also subject to regulatory risk, such as those affecting companies involved in UK renewable energy. | To reduce this risk, the Board places reliance upon the skills and expertise of the Manager in investing in this segment of the market. In addition, the Manager operates a formal and structured investment process, which includes an Investment Committee, comprising investment professionals from the Manager and at least one external investment professional. The Manager also invites and takes account of comments from non-executive Directors of the Company on investments discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on portfolio company boards) and the Board receives detailed reports on each investment as part of the Manager's report at quarterly board meetings. |
| Valuation risk | The Company's investment valuation methodology is reliant on the accuracy and completeness of information that is issued by portfolio companies. In particular, the Directors may not be aware of or take into account certain events or circumstances which occur after the information issued by such companies is reported. | As described in note 1 of the Financial Statements, the unquoted equity investments, loan stock, convertible loan stock and debt issued at a discount held by the Company are designated at fair value through profit or loss and valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines. These guidelines set out recommendations, intended to represent current best practice on the valuation of venture capital investments. These investments are valued on the basis of forward looking estimates and judgments about the business itself, its market and the environment in which it operates, together with the state of the mergers and acquisitions market, stock market conditions and other factors. In making these judgments the valuation takes into account all known material facts up to the date of approval of the Financial Statements by the Board. The values of a number of investments are also underpinned by independent third party professional valuations. |
| VCT approval risk | The Company's current approval as a venture capital trust allows investors to take advantage of tax reliefs on initial investment and ongoing tax free capital gains and dividend income. Failure to meet the qualifying requirements could result in investors losing 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, which has a team with significant experience in venture capital trust management, used to operating within the requirements of the venture capital trust legislation. In addition, to provide further formal reassurance, the Board has appointed Philip Hare & Associates LLP as its taxation adviser. Philip Hare & Associates LLP report quarterly to the Board to independently confirm compliance with the venture capital trust legislation, to highlight areas of risk and to inform on changes in legislation. Each investment in a new portfolio company is also pre-cleared with H.M. Revenue & Customs. |
| Compliance risk | The Company is listed on The London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company's shares, or other penalties under the Companies Act or from financial reporting oversight bodies. | Board members and the Manager have experience of operating at senior levels within or advising quoted businesses. In addition, the Board and the Manager receive regular updates on new regulation from its auditor, lawyers and other professional bodies. The Company is subject to compliance checks via the Manager's Compliance Officer. The Manager reports monthly to its Board on any issues arising from compliance or regulation. These controls are also reviewed as part of the quarterly Manager Board meetings, and also as part of the review work undertaken by the Manager's Compliance Officer. The report on controls is evaluated by Internal Audit during its reports. |
| Internal control risk | Failures in key controls, within the Board or within the Manager's business, could put assets of the Company at risk or result in reduced or inaccurate information being passed to the Board or to shareholders. | The Audit Committee meets with the Manager's Internal Auditor, PKF Littlejohn LLP, when required, receiving a report regarding the last formal internal audit performed on the Manager and providing the opportunity for the Audit Committee to ask specific and detailed questions. Thomas Chambers, Chairman of the Audit Committee, met with the internal audit Partner of PKF Littlejohn LLP in January 2016 to discuss the most recent Internal Audit Report on the Manager. The Manager has a comprehensive business continuity plan in place in the event that operational continuity is threatened. Further details regarding the Board's management and review of the Company's internal controls through the implementation of the Turnbull guidance are detailed on page 30 of the full Annual Report and Financial Statements. Measures are in place to mitigate information risk in order to ensure the integrity, availability and confidentiality of information used within the business. |
| 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 Management agreement paragraph above). In addition, the Manager has demonstrated to the Board that there is no undue reliance placed upon any one individual within Albion Ventures LLP. The Board monitors the performance of other third party service providers annually. |
| Financial risk | By its nature, as a venture capital trust, the Company is exposed to investment risk (which comprises investment price risk and cash flow interest rate risk), credit risk and liquidity risk. | The Company's policies for managing these risks and its financial instruments are outlined in full in note 17 to the Financial Statements. Most of the Company's income and expenditure is denominated in sterling. As at 31 December 2015, the Company held investments denominated in US dollars of £2,451,000 (2014: £3,195,000). It is therefore likely that the Company would be affected by currency fluctuations; however, this is not expected to be material. The Company does not use derivative financial instruments for speculative purposes. |
Viability statement
In accordance with the FRC UK Corporate Governance Code published in September 2014 and principle 21 of the AIC Code of Corporate Governance published by the AIC in February 2015, the Directors have assessed the prospects of the Company over three years to 31 December 2018. The Directors have taken a three year period as the Code does not specify a time period, except it must be longer than 12 months. The Directors believe that three years is a reasonable period in which they can assess the future of the Company to continue to operate and meet its liabilities, as they fall due and that looking to five years would incorporate too much uncertainty and not have any meaningful benefit to shareholders. It is also the period used by the Board in the strategic planning process and is considered reasonable for a business of our nature and size.
The Directors have carried out a robust assessment of the principal risks facing the Company as explained above, including those that could threaten its business model, future performance, solvency or liquidity. The Board also considered the risk management processes in place to avoid or reduce the impact of the underlying risks. The Board focused on the major factors which affect the economic, regulatory and political environment. The Board deliberated over the importance of the Manager and the processes that it has in place for dealing with the principal risks.
The Board assessed the ability of the Company to raise finance. As explained in this Strategic report the Company's income more than covers on-going expenses. This income should increase as our asset-backed investments continue to mature. The portfolio is well balanced and geared towards long term growth delivering dividends and capital growth to shareholders. In assessing the prospects of the Company the Directors have considered the cash flow by looking at the Company's income and expenditure projections and funding pipeline over the assessment period of three years and they appear realistic.
Taking into account the processes for mitigating risks, monitoring costs, share price discount, the Manager's compliance with the investment objective, policies and business model and the balance of the portfolio the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 31 December 2018.
This Strategic report of the Company for the year ended 31 December 2015 has been prepared in accordance with the requirements of section 414A of the Companies Act 2006 (the "Act"). The purpose of this report is to provide Shareholders with sufficient information to enable them to assess the extent to which the Directors have performed their duty to promote the success of the Company in accordance with section 172 of the Act.
The Strategic report was approved by the Board of Directors on 23 March 2016 and was signed on its behalf by:
Robin Field
Chairman
23 March 2016
Responsibility Statement
In preparing these Financial Statements for the year to 31 December 2015, the Directors of the Company, being Robin Field, Thomas Chambers and Martin Fiennes, confirm that to the best of their knowledge:
- summary financial information contained in this announcement and the full Annual Report and Financial Statements for the year ended 31 December 2015 for the Company has been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law) and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company for the year ended 31 December 2015 as required by DTR 4.1.12.R;
- the Chairman's statement and Strategic report include a fair review of the information required by DTR 4.2.7R (indication of important events during the year ended 31 December 2015 and description of principal risks and uncertainties that the Company faces); and
- the Chairman's statement and Strategic report include a fair review of the information required by DTR 4.2.8R (disclosure of related parties transactions and changes therein).
A detailed "Statement of Directors' responsibilities" is contained on page 26 of the full Annual Report and Financial Statements.
By order of the Board
Robin Field
Chairman
23 March 2016
Income statement
| Year ended 31 December 2015 | Year ended 31 December 2014 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gains/ (losses) on investments | 2 | - | 3,784 | 3,784 | - | (370) | (370) |
| Investment income | 3 | 1,412 | - | 1,412 | 1,007 | 112 | 1,119 |
| Investment management fees | 4 | (212) | (636) | (848) | (200) | (601) | (801) |
| Performance incentive fee | 4 | (60) | (182) | (242) | - | - | - |
| Other expenses | 5 | (263) | - | (263) | (270) | - | (270) |
| Foreign exchange cost | 5 | (8) | - | (8) | (2) | - | (2) |
| Return/(loss) on ordinary activities before tax | 869 | 2,966 | 3,835 | 535 | (859) | (324) | |
| Tax on ordinary activities | 7 | - | - | - | - | - | - |
| Return/(loss) and total comprehensive income attributable to shareholders | 869 | 2,966 | 3,835 | 535 | (859) | (324) | |
| Basic and diluted return/(loss) per share (pence) * | 9 | 0.40 | 1.37 | 1.77 | 0.27 | (0.43) | (0.16) |
* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.
The total column of this Income statement represents the profit and loss account of the Company. The supplementary revenue and capital columns have been prepared in accordance with The Association of Investment Companies' Statement of Recommended Practice.
All revenue and capital items in the above statement derive from the continuing operations of the Company.
The Company has only one class of business and derives its income from investments made in shares and securities and from bank deposits.
There is no other comprehensive income other than the results for the year disclosed above. Accordingly a Statement of total comprehensive income is not required.
The difference between the reported profit/(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 profits and losses has not been prepared.
Balance sheet
| 31 December 2015 | 31 December 2014 | ||
| Note | £'000 | £'000 | |
| Fixed asset | |||
| Investments | 10 | 41,257 | 38,055 |
| Current assets | |||
| Trade and other receivables less than one year | 12 | 388 | 473 |
| Current asset investments | 12 | - | 150 |
| Cash and cash equivalents | 3,518 | 798 | |
| 3,906 | 1,421 | ||
| Total assets | 45,163 | 39,476 | |
| Creditors: amounts falling due within one year | |||
| Trade and other payables less than one year | 13 | (551) | (535) |
| Total assets less current liabilities | 44,612 | 38,941 | |
| Equity attributable to equityholders | |||
| Called up share capital | 14 | 2,533 | 2,265 |
| Share premium | 8,399 | 3,444 | |
| Capital redemption reserve | 11 | 11 | |
| Unrealised capital reserve | 7,170 | 3,981 | |
| Realised capital reserve | 3,830 | 2,978 | |
| Other distributable reserve | 22,669 | 26,262 | |
| Total equity shareholders' funds | 44,612 | 38,941 | |
| Basic and diluted net asset value per share (pence) * | 15 | 20.11 | 19.31 |
* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.
The Financial Statements were approved by the Board of Directors and authorised for issue on 23 March 2016 and were signed on its behalf by:
Robin Field
Chairman
Company number: 03139019
Statement of changes in equity
| Called up share capital | Share premium | Capital redemption reserve | Unrealised capital reserve | Realised capital reserve* | Other distributable reserve* | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| At 31 December 2014 | 2,265 | 3,444 | 11 | 3,981 | 2,978 | 26,262 | 38,941 |
| Return and total comprehensive income for the period | - | - | - | 3,523 | (557) | 869 | 3,835 |
| Transfer of previously unrealised gains on disposal or write off of investments | - | - | - | (334) | 334 | - | - |
| Purchase of own shares for treasury | - | - | - | - | - | (1,192) | (1,192) |
| Issue of equity | 268 | 5,105 | - | - | - | - | 5,373 |
| Cost of issue of equity | - | (150) | - | - | - | - | (150) |
| Transfer from other distributable reserve to realised capital reserve** | - | - | - | - | 1,075 | (1,075) | - |
| Dividends paid | - | - | - | - | - | (2,195) | (2,195) |
| At 31 December 2015 | 2,533 | 8,399 | 11 | 7,170 | 3,830 | 22,669 | 44,612 |
| At 31 December 2013 | 2,099 | 82 | - | 1,711 | 1,352 | 34,018 | 39,262 |
| Loss and total comprehensive income for the period | - | - | - | (279) | (580) | 535 | (324) |
| Transfer of previously unrealised losses on disposal or write off of investments | - | - | - | 2,549 | (2,549) | - | - |
| Purchase of shares for cancellation | (11) | - | 11 | - | - | (214) | (214) |
| Purchase of own shares for treasury | - | - | - | - | - | (1,297) | (1,297) |
| Issue of equity | 177 | 3,448 | - | - | - | - | 3,625 |
| Cost of issue of equity | - | (86) | - | - | - | - | (86) |
| Transfer from other distributable reserve to realised capital reserve** | - | - | - | - | 4,755 | (4,755) | - |
| Dividends paid | - | - | - | - | - | (2,025) | (2,025) |
| At 31 December 2014 | 2,265 | 3,444 | 11 | 3,981 | 2,978 | 26,262 | 38,941 |
*Included within these reserves is an amount of £26,499,000 (2014:£29,240,000) which is considered distributable.
** A transfer of £1,075,000 (2014: £4,755,000) representing gross realised losses on disposal of investments during the year ended 31 December 2015 has been made from the other distributable reserve to the realised capital reserve.
The accompanying notes form an integral part of these Financial Statements.
Unrealised gains and losses arising on investments held at fair value are transferred to the unrealised capital reserve.
Statement of cash flows
| Year ended 31 December 2015 | Year ended 31 December 2014 | ||
| Note | £'000 | £'000 | |
| Cash flow from operating activities | |||
| Investment income received | 1,036 | 829 | |
| Deposit interest received | 37 | 164 | |
| Dividend income received | 282 | 77 | |
| Investment management fee paid | (1,024) | (379) | |
| Other cash payments | (313) | (448) | |
| Exchange rate movement on a part disposal of an asset | (10) | (3) | |
| Net cash flow from operating activities | 16 | 8 | 240 |
| Cash flow from investing activities | |||
| Purchase of fixed asset investments | (4,375) | (8,353) | |
| Disposal of fixed asset investments | 5,250 | 3,899 | |
| Cash received from investments previously sold or written off | - | 30 | |
| Disposal of current asset investments | - | 3,750 | |
| Net cash flow from investing activities | 875 | (674) | |
| Cash flow from financing activities | |||
| Issue of share capital | 14 | 5,059 | 3,450 |
| Cost of issue of equity | (2) | (2) | |
| Purchase of own shares (including costs) | 14 | (1,192) | (1,511) |
| Equity dividends paid* | (2,028) | (1,930) | |
| Net cash flow from financing activities | 1,837 | 7 | |
| Increase/(decrease) in cash and cash equivalents | 2,720 | (427) | |
| Cash and cash equivalents at start of the year | 798 | 1,225 | |
| Cash and cash equivalents at end of the year | 3,518 | 798 | |
| Cash and cash equivalents comprise: | |||
| Cash at bank and in hand | 3,518 | 798 | |
| Cash equivalents | - | - | |
| Total cash and cash equivalents | 3,518 | 798 |
The accompanying notes form an integral part of these Financial Statements.
* The equity dividends paid shown in the cash flow are different to the dividends disclosed in note 8 as a result of the non-cash effect of the Dividend Reinvestment Scheme.
Notes to the Financial Statements
1. Accounting policies
Basis of accounting
The Financial Statements have been prepared in accordance with the historical cost convention, modified to include the revaluation of investments, in accordance with applicable United Kingdom law and accounting standards, including Financial Reporting Standard 102 ("FRS 102"), and with the 2014 Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ("SORP") issued by The Association of Investment Companies ("AIC"). This is the first period in which the Financial Statements have been prepared under FRS 102 which became mandatory for companies with a financial year beginning on or after 1 January 2015. The transition to FRS 102 has not led to a material change in value and so has not led to a restatement of comparatives.
The preparation of the financial statements requires management to make judgments and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The most critical estimates and judgments relate to the determination of carrying value of investments at fair value through profit and loss ("FVTPL"). The Company values investments by following the IPEVCV Guidelines and further detail on the valuation techniques used are outlined below.
Fixed asset investments
The Company's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment policy, and information about the portfolio is provided internally on that basis to the Board.
In accordance with the requirements of FRS 102, those undertakings in which the Company holds more than 20% of the equity as part of an investment portfolio are not accounted for using the equity method. In these circumstances the investment is measured at FVTPL.
Upon initial recognition (using trade date accounting) investments, including loan stock, are designated by the Company as FVTPL and are included at their initial fair value, which is cost (excluding expenses incidental to the acquisition which are written off to the Income statement).
Subsequently, the investments are valued at 'fair value', which is measured as follows:
- Investments listed on recognised exchanges are valued at their bid prices at the end of the accounting period or otherwise at fair value based on published price quotations;
- Unquoted investments, where there is not an active market, are valued using an appropriate valuation technique in accordance with the IPEVCV Guidelines. Indicators of fair value are derived using established methodologies including earnings multiples, the level of third party offers received, prices of recent investment rounds, net assets and industry valuation benchmarks. Where the Company has an investment in an early stage enterprise, the price of a recent investment round is often the most appropriate approach to determining fair value. In situations where a period of time has elapsed since the date of the most recent transaction, consideration is given to the circumstances of the portfolio company since that date in determining fair value. This includes consideration of whether there is any evidence of deterioration or strong definable evidence of an increase in value. In the absence of these indicators, the investment in question is valued at the amount reported at the previous reporting date. Examples of events or changes that could indicate a diminution include:
- the performance and/or prospects of the underlying business are significantly below the expectations on which the investment was based;
- a significant adverse change either in the portfolio company's business or in the technological, market, economic, legal or regulatory environment in which the business operates; or
- market conditions have deteriorated, which may be indicated by a fall in the share prices of quoted businesses operating in the same or related sectors.
Investments are recognised as financial assets on legal completion of the investment contract and are de-recognised on legal completion of the sale of an investment.
Dividend income is not recognised as part of the fair value movement of an investment, but is recognised separately as investment income through the Income statement when a share becomes ex-dividend.
Trade, other receivables and Creditors
Trade, other receivables and creditors are initially recorded at FVTPL including transaction costs and subsequently at amortised cost.
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 unrealised capital reserve.
Investment income
Unquoted equity income
Dividend income is included in revenue when the investment is quoted ex-dividend.
Unquoted loan stock and other preferred income
Fixed returns on non-equity shares and debt securities are recognised when the Company's right to receive payment and expect settlement is established. Where interest is rolled up and/or payable at redemption then it is recognised as income unless there is reasonable doubt as to its receipt.
Bank interest income
Interest income is recognised on an accruals basis using the rate of interest agreed with the bank.
Investment management fees and other expenses
All expenses have been accounted for on an accruals basis. Expenses are charged through the other distributable reserve except the following which are charged through the realised capital reserve:
- 75 per cent. of management fees are allocated to the realised capital reserve. 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
Any performance incentive fee will be allocated between other distributable and realised capital reserves based upon the proportion to which the calculation of the fee is attributable to revenue and capital returns.
Taxation
Taxation is applied on a current basis in accordance with FRS 102. Current tax is tax payable (refundable) in respect of the taxable profit (tax loss) for the current period or past reporting periods using the tax rates and laws that have been enacted or substantively enacted at the financial reporting date. Taxation associated with capital expenses is applied in accordance with the SORP.
Deferred tax is provided in full on all timing differences at the reporting date. Timing differences are differences between taxable profits and total comprehensive income as stated in the financial statements that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements. As a VCT the Company has an exemption from tax on capital gains. The Company intends to continue meeting the conditions required to obtain approval as a VCT in the foreseeable future. The Company therefore, should have no material deferred tax timing differences arising in respect of the revaluation or disposal of investments and the Company has not provided for any deferred tax.
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 Income statement. Exchange differences relating to investments and other financial instruments measured at fair value are subsequently included in the Investment holding reserve.
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 other distributable reserve.
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is diminished through the repurchase and cancellation of the Company's own shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at the year end against cost are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
- gains and losses compared to cost on the realisation of investments;
- expenses, together with the related taxation effect, charged in accordance with the above policies; and
- dividends paid to equity holders.
Other distributable reserve
The special reserve, treasury share reserve and the revenue reserve were combined in 2012 to form a single reserve named other distributable reserve.
This reserve accounts for movements from the revenue column of the Income statement, the payment of dividends, the buy-back of shares and other non-capital realised movements.
Dividends
Dividends by the Company are accounted for in the period in which the dividend is paid or approved at the Annual General Meeting.
| 2. Gains/(losses) on investments | Year ended 31 December 2015 £'000 | Year ended 31 December 2014 £'000 | ||
| Unrealised gains/(losses) on fixed asset investments held at fair value through profit or loss | 3,523 | (329) | ||
| Unrealised gains on current asset investments held at fair value through profit or loss | - | 50 | ||
| Unrealised gains/(losses) sub-total | 3,523 | (279) | ||
| Realised gains/(losses) on fixed asset investments held at fair value through profit or loss | 251 | (156) | ||
| Realised gains in respect of escrow receipts from previously sold investments and distributions from investments in liquidation | 10 | 65 | ||
| Realised gain/(losses) sub-total | 261 | (91) | ||
| 3,784 | (370) | |||
| 3. Investment income | Year ended 31 December 2015 £'000 | Year ended 31 December 2014 £'000 | ||
| Income recognised on investments held at fair value through profit or loss | ||||
| Interest from loans to portfolio companies | 1,095 | 892 | ||
| Dividends | 282 | 176 | ||
| Bank deposit interest | 35 | 51 | ||
| 1,412 | 1,119 | |||
| Interest income earned on impaired investments at 31 December 2015 was £nil (2014: £nil). | ||||
| 4. Investment management and performance incentive fees | Year ended 31 December 2015 £'000 | Year ended 31 December 2014 £'000 | ||
| Investment management fees charged to revenue | 212 | 200 | ||
| Investment management fees charged to capital | 636 | 601 | ||
| Performance incentive fee charged to revenue | 60 | - | ||
| Performance incentive fee charged to capital | 182 | - | ||
| 1,090 | 801 | |||
Further details of the Management agreement under which the investment management fee is paid are given in the Strategic report.
During the year, services with a value of £848,000 (2014: £801,000) and £50,000 (2014: £50,000) were purchased by the Company from Albion Ventures LLP in respect of management and administration fees respectively. A performance incentive fee with a value of £242,000 has been disclosed within the Income statement. At the financial year end, the amount due to Albion Ventures LLP in respect of these services disclosed as accruals was £468,000 (2014: £426,000).
Albion Ventures LLP is, from time to time, eligible to receive transaction fees and Directors' fees from portfolio companies. During the year ended 31 December 2015 Albion Ventures LLP received transaction fees from 24 portfolio companies and Directors' fees from 32 portfolio companies. Portfolio companies held by Kings Arms Yard share of these fees were transactions fees of £52,000 and Directors' fees of £137,000 (2014: transaction fees: £199,000; Directors fees: £95,000).
Albion Ventures LLP holds 84,185 (2014: 43,199) Ordinary shares in the Company.
| 5. Other expenses | Year ended 31 December 2015 £'000 | Year ended 31 December 2014 £'000 | |
| Administrative and secretarial services to the Manager | 50 | 50 | |
| Directors' fees (note 6) | 65 | 63 | |
| Auditor's remuneration for statutory audit services (excluding VAT) | 24 | 22 | |
| Legal and professional expenses | - | 17 | |
| Other expenses | 124 | 118 | |
| 263 | 270 | ||
| Foreign exchange cost | 8 | 2 | |
| 271 | 272 | ||
| 6. Directors' fees | Year ended 31 December 2015 £'000 | Year ended 31 December 2014 £'000 | |
| Amount payable to Directors | 60 | 67 | |
| National insurance | 5 | 6 | |
| Tax and national insurance provision released for past directors | - | (10) | |
| 65 | 63 | ||
| Further information regarding Directors' remuneration can be found in the Directors' remuneration report on pages 32 and 33 of the full Annual Report and Financial Statements. | |||
| 7. Tax on ordinary activities | Year ended 31 December 2015 £'000 | Year ended 31 December 2014 £'000 | |
| UK Corporation tax payable | - | - | |
| Reconciliation of profit on ordinary activities to taxation charge | Year ended 31 December 2015 £'000 | Year ended 31 December 2014 £'000 | |
| Return/(loss) on ordinary activities before taxation | 3,835 | (324) | |
| Tax (charge)/credit on profit/ (loss) at the standard UK corporation tax rate of 20.25% (2014: 21.5%) | (776) | 70 | |
| Effects of: | |||
| Non-taxable gain/(losses) | 766 | (55) | |
| Non-taxable income | 57 | 14 | |
| Non-deductible expenses | - | (1) | |
| Unutilised management expenses | (47) | (28) | |
| - | - | ||
The UK government changed the rate of corporation tax from 21% to 20% with effect from 1 April 2015. The effective rate of tax for the year ended 31 December 2015 is 20.25% (91 days at 21% and 275 days at 20%). The tax charge for the year shown in the Income statement is lower than the standard rate of corporation tax for the reasons shown above.
The Company has excess management expenses of £10,279,000 (2014: £10,047,000) that are available for offset against future profits. A deferred tax asset of £2,056,000 (2014: £2,009,000) has not been recognised in respect of those losses as they will be recoverable only to the extent that the Company has sufficient future taxable profits.
| 8. Dividends | Year ended 31 December 2015 £'000 | Year ended 31 December 2014 £'000 |
| First dividend of 0.5 pence per share paid on 30 April 2014 | - | 1,017 |
| Second dividend of 0.5 pence per share paid on 31 October 2014 | - | 1,014 |
| First dividend of 0.5 pence per share paid on 30 April 2015 | 1,109 | - |
| Second dividend of 0.5 pence per share paid on 30 October 2015 | 1,116 | - |
| Unclaimed dividends returned to Company | (30) | (6) |
| 2,195 | 2,025 |
The Directors have declared a first dividend of 0.5 pence per share for the year ending 31 December 2016, which will amount to approximately £1,178,000. This dividend will be paid on 29 April 2016 to shareholders on the register at 15 April 2016.
| 9. Basic and diluted return/(loss) per share | ||||||
| Year ended 31 December 2015 | Year ended 31 December 2014 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| Return/(loss) attributable to shareholders (£'000) | 869 | 2,966 | 3,835 | 535 | (859) | (324) |
| Weighted average shares in issue (excluding treasury shares) | 216,878,531 | 199,680,249 | ||||
| Return/(loss) attributable per equity share (pence) | 0.40 | 1.37 | 1.77 | 0.27 | (0.43) | (0.16) |
The weighted average number of Ordinary shares is calculated excluding the treasury shares of 31,463,000 (2014: 24,875,000).
There are no convertible instruments, derivatives or contingent share agreements in issue so basic and diluted return/(loss) per share are the same.
| 10. Fixed asset investments Summary of fixed asset investments | 31 December 2015 £'000 | 31 December 2014 £'000 |
| Investments held at fair value through profit or loss Unquoted equity | 22,148 | 19,290 |
| Unquoted loan stock | 16,658 | 15,575 |
| Quoted equity | 2,451 | 3,190 |
| 41,257 | 38,055 | |
| 31 December 2015 £'000 | 31 December 2014 £'000 | |
| Opening valuation | 38,055 | 33,904 |
| Purchases at cost | 4,373 | 8,223 |
| Disposal proceeds | (5,164) | (3,553) |
| Realised gains/(losses) | 261 | (156) |
| Movement from/(to) current asset investments | 150 | (150) |
| Movement in loan stock accrued income | 59 | 66 |
| Movement in unrealised gains/(losses) | 3,523 | (279) |
| Closing valuation | 41,257 | 38,055 |
| Movement in loan stock accrued income | ||
| Opening accumulated movement in loan stock accrued income | 128 | 62 |
| Movement in loan stock accrued income | 59 | 66 |
| Closing accumulated movement in loan stock accrued income | 187 | 128 |
| Movement in unrealised gains | ||
| Opening accumulated unrealised gains | 4,069 | 1,698 |
| Transfer of previously unrealised gains to realised reserve on disposal of investments | (1,111) | (2,195) |
| Transfer of previously unrealised losses to realised reserve on investments written off but still held | 778 | 4,744 |
| Movement (from)/to current asset investments | (100) | 100 |
| Movement in unrealised gains/(losses) | 3,523 | (279) |
| Closing accumulated unrealised gains | 7,158 | 4,069 |
| Historical cost basis | ||
| Opening book cost | 33,858 | 32,144 |
| Purchases at cost | 4,373 | 8,223 |
| Sales at cost | (3,791) | (5,062) |
| Cost of investments written off but still held | (778) | (1,196) |
| Movement from/(to) current asset investments | 250 | (250) |
| Closing book cost | 33,912 | 33,858 |
Closing cost is net of amounts of £1,974,000 (2014: £1,196,000) written off in respect of investments still held at balance sheet date.
Amounts shown as cost represent the acquisition cost in the case of investments made by the Company and/or the valuation attributed to the investments acquired from other VCTs at the dates of merger, plus any subsequent acquisition cost.
Purchases and disposals detailed above may not agree to purchases and disposals in the Cash flow statement due to restructuring of investments, conversion of convertible loan stock and settlement debtors and creditors.
| Unquoted investment valuation methodologies Unquoted investments are valued in accordance with the IPEVCV guidelines as follows: | ||
| Valuation Methodologies | 31 December 2015 £'000 | 31 December 2014 £'000 |
| Net assets supported by third party valuation | 12,869 | 7,694 |
| Revenue multiple | 7,802 | 8,564 |
| Price of recent investment (reviewed for impairment) | 6,434 | 3,440 |
| Earnings multiple | 5,815 | 6,370 |
| Cost reviewed for impairment | 4,336 | 8,797 |
| Discount to offer price | 1,550 | - |
| 38,806 | 34,865 | |
Third party valuations are prepared by PricewaterhouseCoopers and independent RICS qualified surveyors in full compliance with the RICS Red Book.
Fair value investments had the following movements between valuation methodologies between 31 December 2014 and 31 December 2015.
| Change in valuation methodology (2014 to 2015) | Value as at 31 December 2015 £'000 | Explanatory Note | |
| Cost reviewed for impairment to net assets supported by third party valuation | 3,807 | Third party valuations prepared | |
| Cost reviewed for impairment to price of recent investment | 2,174 | Investment round has recently taken place | |
| Price of recent investment to discount to offer price | 1,550 | Third party offer received | |
| Discount to offer price to price of recent investment | 1,191 | Investment round has recently taken place | |
| Revenue multiple to price of recent investment | 1,121 | Investment round has recently taken place | |
| Cost reviewed for impairment to revenue multiple | 1,062 | More relevant valuation methodology | |
| Price of recent investment to revenue multiple | 369 | More relevant valuation methodology | |
| Revenue multiple to bid price | 228 | Recently listed on NASDAQ | |
| Earnings multiple to revenue multiple | 227 | More relevant valuation methodology | |
The valuation will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEVCV Guidelines. The Directors believe that, within these parameters, the methods used are the most appropriate methods of valuation as at 31 December 2015.
FRS 102 and the SORP requires the Company to disclose the inputs to the valuation methods applied to its investments measured at fair value through profit or loss in a fair value hierarchy according to the following definitions:
| Fair value hierarchy | Definition |
| Level A | Quoted prices in an active market |
| Level B | Price of a recent transaction for identical instruments |
| Level C (i) | Inputs to valuations are from observable sources and are directly or indirectly derived from prices |
| Level C (ii) | Inputs to valuations not based on observable market data |
Quoted NASDAQ investments are valued according to Level A valuation methods. Unquoted equity, preference shares, and loan stock are all valued according to Level C (ii) valuation methods.
| Level 'C' reconciliation | 31 December 2015 £'000 | 31 December 2014 £'000 |
| Opening valuation | 34,865 | 29,349 |
| Purchases at cost | 4,373 | 8,223 |
| Unrealised gains | 3,802 | 778 |
| Movement in loan stock accrued income | 59 | 66 |
| Transfer to Level 'A'* | (228) | - |
| Realised net gains/(losses) on disposal | 267 | (75) |
| Movement from/(to) current asset investments | 150 | (150) |
| Disposal proceeds | (4,482) | (3,326) |
| Closing valuation | 38,806 | 34,865 |
* During the year Xtera Communications Inc was quoted on NASDAQ and transferred to Level 'A' fair value hierarchy
FRS 102 requires the Directors to consider the impact of changing one or more of the inputs used as part of the valuation process to reasonable possible alternative assumptions. The valuation methodology applied to 65% of the unquoted portfolio (Level 'C') is based on third party independent evidence, price of recent investment, discount to offer price and cost reviewed for impairment. The Directors believe that changes to reasonable possible alternative assumptions for the valuation of the largest investments of the remaining part of the portfolio could result in an increase of £1,627,000 or a decrease of £1,530,000 in the valuation of the unquoted investments.
11. Significant holdings
The principal activity of the Company is to select and hold a portfolio of investments in quoted and unquoted securities. Although the Company, through the Manager, will, in some cases, be represented on the board of the portfolio company, it will not ordinarily take a controlling interest or become involved in the management. The size and structure of companies with unquoted securities may result in certain holdings in the portfolio representing a participating interest without there being any partnership, joint venture or management consortium agreement. The investments listed below are held as part of an investment portfolio and therefore, as permitted by FRS 102 section 9.9B, they are measured at fair value and are not accounted for using the equity method.
The Company has interests of greater than 20% of the nominal value of any class (some of which are non-voting) of the allotted shares in the portfolio companies as at 31 December 2015 as described below:
| Company | Country of incorporation | Profit/(loss) before tax | Net assets/(liabilities) | Number of shares held | % class and share type | % total voting rights |
| Academia Inc | United States of America | n/a | n/a | 774,400 | 23.2% Preferred shares | 5.3% |
| Antenova Limited | Great Britain | n/a* | 1,338,000 | 9,226,988 | 22.2% Preferred shares | 28.7% |
| Elateral Group Holdings Limited | Great Britain | (3,388,000) | (6,311,000) | 17,380,462 | 37.7% Ordinary shares | 37.7% |
| Haemostatix Limited | Great Britain | n/a* | (9,145,000) | 5,764,407 | 33.3% Preferred shares | 33.3% |
| Proveca Limited | Great Britain | n/a* | (1,128,603) | 40,289 | 35.8% D Ordinary shares | 16.4% |
| Sift Limited | Great Britain | 365,000 | 1,245,000 | 33,671,618 | 42.1% Ordinary shares | 42.1% |
*The company files abbreviated accounts at Companies House which does not disclose this information.
| 12. Current asset | ||
| Trade and other receivables less than one year | 31 December 2015 £'000 | 31 December 2014 £'000 |
| Trade and other receivables less than one year | 369 | 457 |
| Prepayments and accrued income | 19 | 16 |
| 388 | 473 | |
| The Directors consider that the carrying amount of receivables is not materially different to their fair value. | ||
| Current asset investments | 31 December 2015 £'000 | 31 December 2014 £'000 |
| UniServity Limited | - | 150 |
| - | 150 | |
| The equity in Uniservity Limited was disposed of during the year. | ||
| 13. Creditors: amounts falling due within one year | 31 December 2015 £'000 | 31 December 2014 £'000 |
| Trade creditors | 17 | 246 |
| Accruals | 522 | 271 |
| Other creditors | 12 | 18 |
| 551 | 535 | |
| The Directors consider that the carrying amount of creditors is not materially different to their fair value. | ||
| 14. Called up share capital | 31 December 2015 £'000 | 31 December 2014 £'000 |
| Allotted, issued and fully paid: | ||
| 253,303,558 Ordinary shares of 1 penny (2014: 226,503,705) | 2,533 | 2,265 |
Voting rights
221,840,558 Ordinary shares of 1 penny (net of 31,463,000 treasury shares) (2014: 201,628,705).
The Company operates a share buy-back programme, as detailed in the Chairman's statement. During the year the Company purchased 6,588,000 Ordinary shares (2014: 6,995,000) representing 2.6% of the issued Ordinary share capital as at 31 December 2015, at a cost of £1,192,000 (2014: £1,297,000), including stamp duty, to be held in treasury. The Company holds a total of 31,463,000 Ordinary shares in treasury, representing 12% of the issued Ordinary share capital as at 31 December 2015. The Company did not purchase any Ordinary shares for cancellation as at 31 December 2015 (2014: 1,134,000 at a cost of £214,000).
Under the terms of the Dividend Reinvestment Scheme, Circular dated 19 April 2011, the following Ordinary shares of nominal value 1 penny per share were allotted during the year:
| Date of allotment | Number of shares allotted | Aggregate nominal value of shares (£'000) | Issue price (pence per share) | Net consideration received (£'000) | Opening market price on allotment date (pence per share) |
| 30 April 2015 | 411,322 | 4 | 18.81 | 75 | 18.00 |
| 30 October 2015 | 468,940 | 5 | 19.40 | 89 | 18.50 |
| 880,262 | 9 | 164 |
During the period from 1 January 2015 to 31 December 2015, the Company issued the following new Ordinary shares of nominal value 1 penny each under the Albion VCT Prospectus Top Up Offers 2014/2015:
| Date of allotment | Number of shares allotted | Aggregate nominal value of shares (£'000) | Issue price (pence per share) | Net consideration received (£'000) | Opening market price on allotment date (pence per share) |
| 30 January 2015 | 3,630,710 | 36 | 19.90 | 708 | 18.00 |
| 30 January 2015 | 2,026,810 | 20 | 20.00 | 395 | 18.00 |
| 2 April 2015 | 14,511,698 | 145 | 20.00 | 2,816 | 17.88 |
| 30 June 2015 | 118,239 | 1 | 20.10 | 23 | 18.50 |
| 30 June 2015 | 41,253 | 1 | 20.20 | 8 | 18.50 |
| 30 June 2015 | 2,859,491 | 29 | 20.30 | 563 | 18.50 |
| 30 September 2015 | 2,731,390 | 27 | 20.60 | 546 | 18.50 |
| 25,919,591 | 259 | 5,059 |
15. Basic and diluted net asset value per share
The basic and diluted net asset value per share as at 31 December 2015 of 20.11 pence (2014: 19.31 pence) are based on net assets of £44,612,000 (2014: £38,941,000) divided by the 221,840,558 shares in issue (net of treasury shares) at that date (2014: 201,628,705).
| 16. Reconciliation of net return on ordinary activities before taxation to net cash flow from operating activities | ||
| 31 December 2015 £'000 | 31 December 2014 £'000 | |
| Revenue return on ordinary activities before tax | 869 | 535 |
| Foreign exchange rate movement | 8 | 2 |
| Investment management fees allocated to capital | (636) | (601) |
| Performance incentive fee charged to capital | (182) | - |
| Movement in accrued loan stock interest | (59) | (66) |
| (Increase)/decrease in debtors | (7) | 127 |
| Increase in creditors | 15 | 243 |
| Net cash flow from operating activities | 8 | 240 |
17. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in note 14. The Company is permitted to buy back its own shares for cancellation or treasury purposes and this policy is described in more detail in the Chairman's statement.
The Company's financial instruments comprise equity and loan stock investments in unquoted and quoted companies, cash balances and liquid cash instruments and short term debtors and creditors which arise from its operations. The main purpose of these financial instruments is to generate cash flow, 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 financial instrument risks arising from the Company's operations are:
- investment (or market) risk (which comprises investment price, foreign currency on investments 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 there have been no changes in the objectives, policies or processes for managing risks during the past year. The key risks are summarised below.
Investment risk
As a venture capital trust, it is the Company's specific nature to evaluate and control the investment risk in its portfolio in unquoted and quoted investments, details of which are shown on pages 18 and 19 of the full Annual Report and Financial Statements. Investment risk is the exposure of the Company to the revaluation and devaluation of investments. The main driver of investment risk is the operational and financial performance of the portfolio company and the dynamics of market quoted comparators. The Manager receives management accounts from portfolio companies and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment risk.
The Manager and the Board formally review investment risk (which includes market price risk), both at the time of initial investment and at quarterly Board meetings.
The Board monitors the prices at which sales of investments are made to ensure that profits to the Company are maximised and that valuations of investments retained within the portfolio appear sufficiently fair and realistic compared to prices being achieved in the market for sales of unquoted investments.
The maximum investment risk as at the Balance sheet date is the value of the fixed asset investment portfolio which is £41,257,000 (2014: £38,055,000). Fixed asset investments form 92% of the net asset value as at 31 December 2015 (2014: 98%).
More details regarding the classification of fixed asset investments are shown in note 10.
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. As a venture capital trust the Company invests in unquoted companies in accordance with the investment policy set out above. The management of risk within the venture capital portfolio is addressed through careful investment selection, by diversification across different industry segments, by maintaining a wide spread of holdings in terms of financing stage and by limitation of the size of individual holdings. Furthermore, new unquoted investments are often made with up to two-thirds of the 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. The Directors monitor the Manager's compliance with the investment policy, review and agree policies for managing this risk and monitor the overall level of risk on the investment portfolio on a regular basis.
Valuations are based on the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEVCV guidelines. Details of the sectors in which the Company is currently invested are shown in the pie chart at the end of this announcement.
As required under FRS 102 s.11, 12 and 34 the Board is required to illustrate by way of a sensitivity analysis the degree of exposure to market risk. The Board considers that the value of the fixed asset investment portfolio is sensitive to a 10% change based on the current economic climate. The impact of a 10% 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% increase or decrease in the valuation of the fixed asset investment portfolio (keeping all other variables constant) would increase or decrease the net asset value and return for the year by £4,126,000 (2014: £3,806,000).
Foreign currency risk
Foreign currency risk is the risk of exposure to movements in foreign exchange rates relative to sterling.
The majority of the Company's assets are denominated in sterling; however, the Company is exposed to US dollars through its investment in US dollar denominated securities. No hedging of the currency exposure is currently undertaken. The Manager monitors the Company's exposure and reports to the Board on a regular basis.
Investment and revenue received in currencies other than sterling is converted into sterling on or shortly after the date of investment or receipt of revenue as are any proceeds from the disposal of a foreign currency investment.
As at 31 December 2015, the Company held investments denominated in US dollars of £2,451,000 (2014: £3,190,000).
During the year to 31 December 2015, sterling depreciated by 4.72% (2014: depreciated by 5.79%) against the US dollar.
Interest rate risk
It is the Company's policy to accept a degree of interest rate risk on its financial assets through the effect of interest rate changes. On the basis of the Company's analysis, it is estimated that a rise of one percentage point in all interest rates would have increased total return before tax for the year by approximately £34,000 (2014: £56,000). Furthermore, it is considered that a fall of interest rates below current levels during the year would have been unlikely.
The weighted average effective interest rate applied to the Company's fixed rate fixed asset investments during the year was approximately 7.3% (2014: 7.8%). The weighted average period to maturity for the fixed rate fixed asset investments is approximately 6.4 years (2014: 6.5 years).
The Company's financial assets and liabilities as at 31 December 2015, denominated in pounds sterling, consist of the following:
| 31 December 2015 | 31 December 2014 | |||||||
| Fixed rate £'000 | Floating rate £'000 | Non-interest bearing £'000 | Total £'000 | Fixed rate £'000 | Floating rate £'000 | Non-interest bearing £'000 | Total £'000 | |
| Unquoted equity | - | - | 22,148 | 22,148 | - | - | 19,290 | 19,290 |
| Quoted equity | - | - | 2,451 | 2,451 | - | - | 3,190 | 3,190 |
| Unquoted loan stock | 11,982 | 661 | 4,015 | 16,658 | 12,387 | 661 | 2,527 | 15,575 |
| Receivables * | - | - | 372 | 372 | - | - | 457 | 457 |
| Current liabilities | - | - | (551) | (551) | - | - | (535) | (535) |
| Cash and current asset investments | - | 3,518 | - | 3,518 | 150 | 798 | - | 948 |
| Total net assets | 11,982 | 4,179 | 28,435 | 44,596 | 12,537 | 1,459 | 24,929 | 38,925 |
* The receivables do not reconcile to the Balance sheet as prepayments are not included in the above table.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Company is exposed to credit risk through its debtors, investment in unquoted loan stock, quoted corporate bonds and through the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock instruments prior to investment and as part of its ongoing monitoring of investments. In doing this, it takes into account the extent and quality of any security held. In the past loan stock may or may not have a fixed or floating charge, which may or may not have been subordinated, over the assets of the portfolio company. However, for new investments, typically loan stock instruments will have a first fixed charge or a fixed and floating charge over the assets of the portfolio company in order to mitigate the gross credit risk.
The Manager receives management accounts from portfolio companies and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment specific credit risk.
The Manager and the Board formally review credit risk (including debtors) and other risks, both at the time of initial investment and at quarterly Board meetings.
The Company's total gross credit risk at 31 December 2015 was limited to £16,658,000 (2014: £15,575,000) of unquoted loan stock instruments, £3,518,000 (2014: £798,000) cash on deposit with banks and £372,000 (2014: £457,000) of other debtors.
The Company does not hold any assets as the result of the enforcement of security during the year and believes that the carrying values for past due assets are covered by the value of security held for these loan stock investments.
As at the Balance sheet date, cash and liquid investments held by the Company are held with the National Westminster Bank plc, Scottish Widows Bank plc (part of Lloyds Banking Group plc), Barclays Bank plc and UBS Wealth Management AG. 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.
The credit profile of unquoted loan stock is described under liquidity risk below.
Liquidity risk
Liquid assets are held as cash on current account, deposit or short term money market accounts or similar instruments. Under the terms of its Articles, the Company has the ability to borrow an amount equal to its adjusted capital and reserves of the latest published audited Balance sheet.
The Company has no committed borrowing facilities as at 31 December 2015 (2014: £nil) and had cash, before its current fundraising of £3,518,000 (2014: £798,000) and no current asset investments (2014: £150,000). Against this the Company has an investment commitment as at 31 December 2015 of £2,396,000 (2014: £923,000).
There are no externally imposed capital requirements other than the minimum statutory share capital requirements for public limited companies.
The main cash outflows are for new investments, the 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. The Company's financial liabilities at 31 December 2015 are short term in nature and total £551,000 (2014: £535,000).
The carrying value of loan stock investments analysed by expected maturity dates is as follows:
| 31 December 2015 | 31 December 2014 | |||||||
| Redemption date | Fully performing loan stock £'000 | Past due loan stock £'000 | Impaired loan stock £'000 | Total £'000 | Fully performing loan stock £'000 | Past due loan stock £'000 | Impaired loan stock £'000 | Total £'000 |
| Less than one year | 2,081 | - | - | 2,081 | 1,907 | 1,195 | - | 3,102 |
| 1-2 years | 1,147 | - | - | 1,147 | 296 | - | - | 296 |
| 2-3 years | 1,417 | - | - | 1,417 | 1,217 | - | - | 1,217 |
| 3-5 years | 5,340 | - | - | 5,340 | 4,771 | - | - | 4,771 |
| 5 + years | 5,520 | 1,153 | - | 6,673 | 5,917 | 272 | - | 6,189 |
| Total | 15,505 | 1,153 | - | 16,658 | 14,108 | 1,467 | - | 15,575 |
Loan stock can be past due as a result of interest or capital not being paid in accordance with contractual terms. This includes:
- loan stock valued at £1,153,000 yielding an average of 13% which has interest past due by less than one year.
In view of the factors identified above, the Board considers that the Company is subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All of the Company's financial assets and liabilities as at 31 December 2015 are stated at fair value as determined by the Directors. There are no financial liabilities other than short term trade and other payables. 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 financial risk as a result of having nil gearing and positive cash balances.
18. Commitments, contingencies and guarantees
As at 31 December 2015, the Company had the following financial commitments totalling £2,396,000 (2014: £923,000), which are expected to be invested during the next 12 months:
- £1,191,000 Ryefield Court Care Limited;
- £913,000 Active Lives Care Limited;
- £205,000 Shinfield Lodge Care Limited;
- £62,000 Grapeshot Limited; and
- £25,000 Aridhia Informatics Limited.
There were no contingent liabilities or guarantees given by the Company as at 31 December 2015 (2014: £nil).
19. Post balance sheet events
Since the year end, the Company made the following investments:
- Disposal of Silent Herdsman Holdings Limited for £138,000 of which £44,000 is deferred and held in escrow;
- Investment of £350,000 in Ryefield Court Care Limited;
- Investment of £299,000 in Perpetuum Limited;
- Investment of £295,000 in Active Lives Care Limited;
- Investment of £179,000 in Proveca Limited
- Investment of £155,000 in Shinfield Lodge Care Limited;
- Investment of £36,000 in InCrowd Sports Limited; and
- Investment of £25,000 in Aridhia Informatics Limited.
Albion VCT Prospectus Top Up Offers 2015/2016
On 17 November 2015 the Company announced the publication of a prospectus in relation to an offer for subscription for new Ordinary shares. A Securities Note, which forms part of the prospectus, has been sent to shareholders.
A copy of the prospectus may be obtained from www.albion-ventures.co.uk.
The following Ordinary shares of nominal value 1 penny were allotted under the Offers after 31 December 2015:
| Date of allotment | Number of shares allotted | Aggregate nominal value of shares (£'000) | Issue price (pence per share) | Net consideration received £'000 | Opening market price on allotment date (pence per share) |
| 29 January 2016 | 8,861,834 | 89 | 20.20 | 1,754 | 18.25 |
| 29 January 2016 | 4,851,404 | 49 | 20.30 | 961 | 18.25 |
| 13,713,238 | 137 | 2,715 |
20. Related party transactions
Other than transactions with the Manager as disclosed in note 4, there are no related party transactions or balances requiring disclosure.
21. Other Information
The information set out in this announcement does not constitute the Company's statutory accounts within the terms of section 434 of the Companies Act 2006 for the years ended 31 December 2015 and 31 December 2014, and is derived from the statutory accounts for those financial years, which have been, or in the case of the accounts for the year ended 31 December 2015, which will be, delivered to the Registrar of Companies. The Auditor reported on those accounts; the reports were unqualified and did not contain a statement under s498 (2) or (3) of the Companies Act 2006.
The Company's Annual General Meeting will be held at The City of London Club, 19 Old Broad Street, London, EC2N 1DS on 18 May 2016 at 11.00am.
22. Publication
The full audited Annual Report and Financial Statements are being sent to shareholders and copies will be made available to the public at the registered office of the Company, Companies House, the National Storage Mechanism and also electronically at www.albion-ventures.co.uk under the 'Our Funds' section, by clicking on 'Kings Arms Yard VCT PLC', where the Report can be accessed as a PDF document via a link under the 'Investor Centre' in the 'Financial Reports and Circulars' section.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Kings Arms Yard VCT PLC via Globenewswire
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