Albion Technology & General VCT PLC
As required by the UK Listing Authority's Disclosure and Transparency Rules 4.1 and 6.3, Albion Technology & General VCT PLC today makes public its information relating to the Annual Report and Financial Statements for the year ended 31 December 2012.
This announcement was approved for release by the Board of Directors on 27 March 2013.
This announcement has not been audited.
You will shortly be able to view the Annual Report and Financial Statements for the year to 31 December 2012 (which have been audited) at: www.albion-ventures.co.uk by clicking on 'Our Funds' and then 'Albion Technology & General VCT PLC'. The Annual Report and Financial Statements for the year to 31 December 2012 will be available as a PDF document via a link under the 'Investor Centre' in the 'Financial Reports and Circulars' section. The information contained in the Annual Report and Financial Statements will include information as required by the Disclosure and Transparency Rules, including Rule 4.1.
Investment objectives
Albion Technology & General VCT PLC ("the Company") is a venture capital trust which raised £14.3 million in December 2000 and 2002, and raised a further £35.0 million during 2006 through the launch of a C share issue. The Company has raised a further £3.4m under the Albion VCTs Top Up Offers since January 2011.
The Company offers investors the opportunity to participate in a balanced portfolio of technology and non-technology businesses. The Company's investment portfolio is intended to be split approximately as follows:
- 40 per cent. in unquoted UK technology-related companies; and
- 60 per cent. in unquoted UK non-technology companies.
The Investment Manager pursues a longer term investment approach, with a view to providing shareholders with a strong, predictable dividend flow combined with the prospects of capital growth. This is achieved in two ways. First, by controlling the VCT's exposure to technology risk through ensuring that many of the companies in the non-technology portfolio have property as their major asset, with no external borrowings. Second, by balancing the investment portfolio by sector, so that those areas such as leisure and business services, which are susceptible to changes in consumer sentiment, are complemented by sectors with more predictable long term characteristics, such as healthcare and the environment.
Financial calendar
| Record date for first dividend | 12 April 2013 |
| Payment of first dividend | 30 April 2013 |
| Annual General Meeting | 20 June 2013 |
| Announcement of half-yearly results for the six months ended 30 June 2013 | August 2013 |
| Payment of second dividend subject to Board approval | October 2013 |
Financial highlights
Ordinary shares
| 155.00p | Net asset value plus dividends since launch to 31 December 2012. |
| 5.00p | Tax free dividend per share paid in the year to 31 December 2012. |
| 84.00p | Net asset value per share as at 31 December 2012. |
| 2.50p | First dividend for the year to 31 December 2013 of 2.50 pence per share payable on 30 April 2013. |
| 31 December 2012 (pence per share) | 31 December 2011 (pence per share) | |
| Dividends paid | 5.00 | 5.00 |
| Revenue return | 1.60 | 1.60 |
| Capital return | 2.10 | 0.60 |
| Net asset value | 84.00 | 85.10 |
| Total shareholder net asset value return to 31 December 2012: | ||
| Ordinary shares 31 December 2012 (pence per share) (i) | C shares 31 December 2012 (pence per share) (i)(ii) | |
| Total dividends paid during the year ended: 31 December 2001(iii) | 1.00 | - |
| 31 December 2002 | 2.00 | - |
| 31 December 2003 | 1.50 | - |
| 31 December 2004 | 7.50 | - |
| 31 December 2005 | 9.00 | - |
| 31 December 2006 | 8.00 | 0.50 |
| 31 December 2007 | 8.00 | 2.50 |
| 31 December 2008 (iv) | 16.00 | 4.50 |
| 31 December 2009 | - | 1.00 |
| 31 December 2010 | 8.00 | 3.00 |
| 31 December 2011 | 5.00 | 3.80 |
| 31 December 2012 | 5.00 | 3.90 |
| Total dividends paid to 31 December 2012 | 71.00 | 19.20 |
| Net asset value as at 31 December 2012 | 84.00 | 65.30 |
| Total shareholder net asset return to 31 December 2012 | 155.00 | 84.50 |
In addition to the dividends paid above, the Board has declared a first dividend for the year ending 31 December 2013, of 2.50 pence per Ordinary share to be paid on 30 April 2013 to shareholders on the register at 12 April 2013.
Notes
(i) Excludes tax benefits upon subscription.
(ii) The C shares were converted into Ordinary shares on 31 March 2011, with a conversion factor of 0.7779 Ordinary shares for each C share. The net asset value per share and all dividends paid subsequent to the conversion of the C shares to the Ordinary shares are multiplied by the conversion factor of 0.7779 in respect of the C shares' return, in order to give an accurate picture of the shareholder value since launch relating to the C shares.
(iii) Based on subscription by the first closing on 16 January 2001. Investors subscribing thereafter, up to 30 June 2001 received 0.5 pence per share.
(iv)The Ordinary shares' dividend of 8.0 pence per share for 2009 was paid in advance on 30 December 2008. The C shares' first dividend for 2009 of 1.5 pence per share was also paid in advance on 30 December 2008.
Chairman's statement
Introduction
The results for Albion Technology & General VCT PLC for the year to 31 December 2012, showed further improvement over 2010 and 2011, with a total return of 3.70 pence per share. We believe there should be further progress in the current year.
Investment performance and progress
The investment return benefited from the sale of our five cinema investments, which realised a return of 2.3 times cost. In addition, there were improved performances from Process Systems Enterprise, Opta Sports Data, Lowcosttravel, and an uplift in the third party professional valuation of Radnor House School. Against this there were disappointing reductions in the value of AMS Life Sciences (formerly Xceleron) following the restructuring of the company and Helveta, both of which required further finance and Prime Care Holdings.
During the year, £2.36 million was invested of which £570,000 went to build up further the portfolio of renewable energy investments.
Risks and uncertainties
The outlook for the UK and Global economies continues to be the key risk affecting your Company, neither of which are showing material growth. The task of the Manager is to allocate resources to those sectors and opportunities where growth can continue, despite the broader difficult economic climate. Importantly, however, investment risk is mitigated through a variety of processes including our policy of ensuring that the VCT has a first charge over investee companies' assets wherever possible.
A detailed analysis of the other risks and uncertainties facing the business is set out in note 23 of this announcement. Details of post balance sheet events are set out in note 21 of this announcement. Details of transactions with the Manager are set out in note 5 of this annoucement.
Discount management and share buy-backs
It remains the Board's primary objective to maintain sufficient resources for investment in existing and new investee companies and for the continued payment of dividends to shareholders. Therefore, the Board's policy is to buy back shares in the market, subject to the overall constraint that such purchases are in the VCT's interest.
It is now the Board's intention for such buy-backs to be in the region of a 5 per cent. discount to net asset value, so far as market conditions and liquidity permit. In order to ensure that these conditions are satisfied, the Company will limit the sum available for buy-backs for the 6 month period to 30 June 2013 to £400,000.
Results and dividends
As at 31 December 2012, the net asset value was 84.00 pence per share. The revenue return before taxation was £799,000 compared to £835,000 for the previous year.
The Company will pay a first dividend for the financial year to 31 December 2013 of 2.50 pence per Ordinary share on 30 April 2013 to shareholders on the register on 12 April 2013.
Albion VCTs Top Up Offers 2012/2013
On 19 October 2012, the Company announced the launch of the Albion VCTs Top Up Offers 2012/2013. In aggregate, the Albion VCTs will be aiming to raise approximately £15 million across six of the VCTs managed by Albion Ventures LLP, of which Albion Technology & General VCT PLC will be aiming to raise approximately £2.5 million. This builds on the success of the previous two Albion VCTs Top Up Offers, which raised £22 million, of which Albion Technology & General VCT's share was £3.1 million.
The proceeds of the Offer will be used to provide further resources to the VCT at a time when a number of attractive new investment opportunities are being seen. An Investor Guide and Offers document has been sent to shareholders and can be obtained from www.albion-ventures.co.uk.
Board changes
It is with great regret that we announced on 25 October 2012 the death of Michael Hart, who had been a director of the Company since its launch in 2000. Michael had been a constant source of wise counsel and we miss him. Modwenna Rees-Mogg joined the board in October 2012. As chief executive of Angel News, Modwenna brings a wealth of entrepreneurial experience to the Board.
Outlook and prospects
Despite the difficult outlook for the UK and Global economies, a number of our companies have real prospects for sustained growth and strong value creation. Meanwhile, we continue to rebalance our investment portfolio to provide more emphasis on areas that we see as being more resilient, in particular renewable energy, which in due course will account for up to 15 per cent. of net assets.
Dr N E Cross
Chairman
27 March 2013
Manager's Report
The sector analysis of Albion Technology & General VCT PLC's investment portfolio as at 31 December 2012 can be seen at the end of this announcement. By valuation, the "general" portfolio, including asset-based investments, now accounts for 55 per cent. of the net asset value, while the technology portfolio accounts for 41 per cent., with cash, liquid resources and other net current assets providing the balance of the portfolio.
The healthcare element of the portfolio now accounts for 21 per cent (2011: 18 per cent.), while the renewable energy portion is now 6 per cent., up from 4 per cent.
Portfolio Review
In the technology portfolio, Process Systems Enterprise, Mirada Medical and DySIS all showed the potential for strong further growth and uplifts in value, while Opta Sports Data showed particular growth following its win of the English Football League contract for the provision of performance data. The key reductions in value within the portfolio were, again, our investments in AMS Life Sciences (formerly Xceleron) (including realised losses on restructuring) and Helveta. The former is now trading profitably, following its restructuring, though the latter still faces difficult market conditions in the Third World countries in which it operates.
In our "general" portfolio, our five cinemas were sold at a profit, including income received, of 2.3 times the original cost of £611,000. Meanwhile, the second year of operation of Radnor House School continued the strong progress of the first year, to justify a further increase in the professional valuation.
Our renewable energy projects meanwhile are producing electricity according to plan and are becoming a strongly cash-generative part of the portfolio.
New investments
During the year £570,000 was invested in renewable energy projects, £665,000 in AMS Life Sciences in order to complete its restructuring and £364,000 to support further growth in Process Systems Enterprise, DySIS and Mi-Pay. In addition, £449,000 was invested in other existing investee companies.
Realisations
In addition to the disposal of the cinemas mentioned above, our investment in Nelson House Hospital was sold subsequent to the year end, realising 1.4 times cost and an annualised return of 21% pa.
Albion Ventures LLP
Manager
27 March 2013
Responsibility statement
In preparing these financial statements for the year to 31 December 2012, the Directors of the Company, being Dr Neil Cross, Lt Gen Sir Edmund Burton, Modwenna Rees-Mogg and Patrick Reeve, confirm that to the best of their knowledge:
- summary financial information contained in this announcement and the full Annual Report and Financial Statements for the year ended 31 December 2012 for the Company has been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law) and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company for the year ended 31 December 2012 as required by DTR 4.1.12.R;
-the Chairman's statement and Manager's Report include a fair review of the information required by DTR 4.2.7R (indication of important events during the year ended 31 December 2012 and description of principal risks and uncertainties that the Company faces); and
-the Chairman's statement and Manager's Report include a fair review of the information required by DTR 4.2.8R (disclosure of related parties transactions and changes therein).
A detailed "Statement of Directors' responsibilities for the preparation of the Company's financial statements" is contained within the full audited Annual Report and Financial Statements.
By order of the Board
Dr N E Cross
Chairman
27 March 2013
Income statement
| Year ended 31 December 2012 | Year ended 31 December 2011 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gains on investments | 3 | - | 1,367 | 1,367 | - | 687 | 687 |
| Investment income | 4 | 1,224 | - | 1,224 | 1,257 | - | 1,257 |
| Investment management fees | 5 | (215) | (644) | (859) | (216) | (647) | (863) |
| Other expenses | 6 | (210) | - | (210) | (206) | - | (206) |
| Return on ordinary activities before tax | 799 | 723 | 1,522 | 835 | 40 | 875 | |
| Tax (charge)/credit on ordinary activities | 8 | (161) | 157 | (4) | (184) | 172 | (12) |
| Return attributable to shareholders | 638 | 880 | 1,518 | 651 | 212 | 863 | |
| Basic and diluted return per share (pence)* | 10 | 1.60 | 2.10 | 3.70 | 1.60 | 0.60 | 2.20 |
* 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 continuing operations.
There are no recognised gains or losses other than the results for the year disclosed above. Accordingly a statement of total recognised gains and losses is not required.
The difference between the reported profit on ordinary activities before tax and the historical profit is due to the fair value movements on investments. As a result a note on historical cost profit and losses has not been prepared.
Balance sheet
| 31 December 2012 | 31 December 2011 | ||
| Note | £'000 | £'000 | |
| Fixed asset investments | 11 | 33,055 | 30,980 |
| Current assets | |||
| Trade and other debtors | 13 | 21 | 195 |
| Current asset investments | 13 | 65 | 1,238 |
| Cash at bank and in hand | 17 | 1,656 | 1,447 |
| 1,742 | 2,880 | ||
| Creditors: amounts falling due within one year | 14 | (338) | (313) |
| Net current assets | 1,404 | 2,567 | |
| Net assets | 34,459 | 33,547 | |
| Capital and reserves | |||
| Called up share capital | 15 | 454 | 21,862 |
| Share premium | 346 | 959 | |
| Capital redemption reserve | 6 | 4,473 | |
| Unrealised capital reserve | (6,678) | (8,001) | |
| Realised capital reserve | 9,435 | 9,246 | |
| Other distributable reserve | 30,896 | 5,008 | |
| Total equity shareholders' funds | 34,459 | 33,547 | |
| Basic and diluted net asset value per share (pence)* | 16 | 84.00 | 85.10 |
* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.
These Financial Statements were approved by the Board of Directors, and were authorised for issue on 27 March 2013 and were signed on its behalf by
Dr N E Cross
Chairman
Company number: 4114310
Reconciliation of movements in shareholders' funds
| Called-up share capital | Share premium | Capital redemption reserve | Unrealised capital reserve* | Realised capital reserve* | Other distributable reserve* | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| As at 1 January 2012 | 21,862 | 959 | 4,473 | (8,001) | 9,246 | 5,008 | 33,547 |
| Return/(loss) for the period | - | - | - | 1,440 | (560) | 638 | 1,518 |
| Transfer of previously unrealised losses on sale of investments | - | - | - | (117) | 117 | - | - |
| Purchase of shares for cancellation | (1) | - | 1 | - | - | (49) | (49) |
| Purchase of own shares for treasury | - | - | - | - | - | (453) | (453) |
| Cancellation of treasury shares | (54) | - | 54 | - | - | - | - |
| Issue of deferred share** | 4,073 | - | (4,073) | - | - | - | - |
| Reduction in share capital and cancellation of deferred share, capital redemption and share premium reserves** | (26,369) | (1,598) | (449) | - | - | 28,416 | - |
| Issue of equity (net of costs) | 943 | 986 | - | - | - | - | 1,929 |
| Transfer from other distributable reserve to realised capital reserve*** | - | - | - | - | 632 | (632) | - |
| Dividends paid | - | - | - | - | - | (2,033) | (2,033) |
| As at 31 December 2012 | 454 | 346 | 6 | (6,678) | 9,435 | 30,896 | 34,459 |
| As at 1 January 2011 | 24,772 | 294 | 400 | (9,312) | 4,278 | 13,659 | 34,091 |
| Return/(loss) for the period | - | - | - | 259 | (47) | 651 | 863 |
| Transfer of previously unrealised losses on sale of investments | - | - | - | 1,052 | (1,052) | - | - |
| Transfer on conversion of C Shares | (4,073) | - | 4,073 | - | - | - | - |
| Purchase of own shares for treasury | - | - | - | - | - | (1,251) | (1,251) |
| Issue of equity (net of costs) | 1,163 | 665 | - | - | - | - | 1,828 |
| Transfer from other distributable reserve to realised capital reserve*** | - | - | - | - | 6,067 | (6,067) | - |
| Dividends paid | - | - | - | - | - | (1,985) | (1,985) |
| As at 31 December 2011 | 21,862 | 959 | 4,473 | (8,001) | 9,246 | 5,008 | 33,547 |
* Included within these reserves is an amount of £33,653,000 (2011: £6,253,000) which is considered distributable.
** The reduction in the nominal value of shares from 50 pence to 1 penny, the cancellation of the deferred share, capital redemption and share premium reserves (as approved by shareholders at the General Meeting held on 22 June 2012 and by order of the Court dated 11 July 2012) has increased the value of the other distributable reserve.
*** A transfer of £632,000 representing gross realised losses on disposal of investments during the year ended 31 December 2012 (2011: £1,676,000 gross realised losses and £4,391,000 historical capital dividends paid) has been made from the other distributable reserve to the realised capital reserve.
The special reserve, treasury share reserve and the revenue reserve have been combined in the Balance sheet to form a single reserve named other distributable reserve for both the current and prior year. The Directors consider that the combination of these reserves enhances the clarity of financial reporting. More details regarding treasury shares can be found in note 15.
Cash flow statement
| Year ended 31 December 2012 | Year ended 31 December 2011 | ||
| Note | £'000 | £'000 | |
| Operating activities | |||
| Loan stock income received | 1,225 | 1,355 | |
| Deposit interest received | 19 | 42 | |
| Dividend income received | - | 14 | |
| Investment management fees paid | (847) | (875) | |
| Other cash payments | (216) | (232) | |
| Net cash flow from operating activities | 18 | 181 | 304 |
| Taxation | |||
| UK corporation tax (paid)/recovered | (9) | 154 | |
| Capital expenditure and financial investments | |||
| Purchase of fixed asset investments | (2,338) | (5,780) | |
| Disposal of fixed asset investments | 1,685 | 4,280 | |
| Purchase of current asset investment | - | (1,000) | |
| Disposal of current asset investments | 1,295 | 1,000 | |
| Net cash flow from investing activities | 642 | (1,500) | |
| Equity dividends paid (net of costs of issuing shares under the Dividend Reinvestment Scheme) | (1,854) | (1,820) | |
| Net cash flow before financing | (1,040) | (2,862) | |
| Financing | |||
| Issue of share capital (net of issue costs) | 1,751 | 1,665 | |
| Purchase of own shares | 15 | (502) | (1,251) |
| Net cash flow from financing | 1,249 | 414 | |
| Cash flow in the year | 17 | 209 | (2,448) |
Notes to the Financial Statements
1. Accounting convention
The Financial Statements have been prepared in accordance with the historical cost convention, modified to include the revaluation of investments, in accordance with applicable United Kingdom law and accounting standards and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ("SORP") issued by The Association of Investment Companies ("AIC") in January 2009. Accounting policies have been applied consistently in current and prior periods, however to enhance clarity of financial reporting, during the year the special reserve, treasury share reserve and revenue reserve have been presented as a single reserve named other distributable reserve. This has also been applied to prior periods.
2. Accounting policies
Fixed and current asset investments
Unquoted equity investments, debt issued at a discount and convertible bonds
In accordance with FRS 26 "Financial Instruments Recognition and Measurement", quoted and unquoted equity, debt issued at a discount and convertible bonds are designated as fair value through profit or loss ("FVTPL"). Investments listed on recognised exchanges are valued at the closing bid prices at the end of the accounting period. Unquoted investments' fair value is determined by the Directors in accordance with the September 2009 International Private Equity and Venture Capital Valuation Guidelines (IPEVCV guidelines).
Fair value movements on equity investments and gains and losses arising on the disposal of investments are reflected in the capital column of the Income statement in accordance with the AIC SORP. Realised gains or losses on the sale of investments will be reflected in the realised capital reserve, and unrealised gains or losses arising from the revaluation of investments will be reflected in the unrealised capital reserve.
Warrants and unquoted equity derived instruments
Warrants and unquoted equity derived instruments are only valued if there is additional value to the Company in exercising or converting as at the balance sheet date. Otherwise these instruments are held at nil value. The valuation techniques used are those used for the underlying equity investment.
Unquoted loan stock
Unquoted loan stock (excluding convertible bonds and debt issued at a discount) are classified as loans and receivables as permitted by FRS 26 and measured at amortised cost using the Effective Interest Rate method less impairment. Movements in amortised cost relating to interest income are reflected in the revenue column of the Income statement, and hence are reflected in the other distributable reserve, and movements in respect of capital provisions are reflected in the capital column of the Income statement and are reflected in the realised capital reserve following sale, or in the unrealised capital reserve for impairments arising from revaluations of the fair value of the security.
For all unquoted loan stock, whether fully performing, past due or impaired, the Board considers that the fair value is equal to or greater than the security value of these assets. For unquoted loan stock, the amount of the impairment is the difference between the asset's cost and the present value of estimated future cash flows, discounted at the original effective interest rate. The future cash flows are estimated based on the fair value of the security less the estimated selling costs.
Investments are recognised as financial assets on legal completion of the investment contract and are de-recognised on legal completion of the sale of an investment.
In accordance with the exemptions under FRS 9 "Associates and joint ventures", those undertakings in which the Company holds more than 20 per cent. of the equity as part of an investment portfolio are not accounted for using the equity method.
Current asset investments
Contractual future contingent receipts on the disposal of fixed asset investments are designated at fair value through profit or loss and are subsequently measured at fair value.
Dividend income is not recognised as part of the fair value movement of an investment, but is recognised separately as investment income through the revenue reserve when a share becomes ex-dividend.
Loan stock accrued interest is recognised in the Balance sheet as part of the carrying value of the loans and receivables at the end of each reporting period.
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 on a time apportionment basis using an effective interest rate over the life of the financial instrument. Income which is not capable of being received within a reasonable period of time is reflected in the capital value of the investment.
Bank interest income
Interest income is recognised on an accruals basis using the rate of interest agreed with the bank.
Investment management fees and 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
In the event that a performance incentive fee crystallises, the 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 16 "Current tax". Taxation associated with capital expenses is applied in accordance with the SORP. In accordance with FRS 19 "Deferred tax", deferred taxation is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the Financial Statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.
Reserves
Share premium account
This reserve accounts for the difference between the price paid for shares and the nominal value of the shares, less issue costs and transfers to the 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 have been combined as 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 buyback of shares and other non capital realised movements.
Dividends
In accordance with FRS 21 "Events after the balance sheet date", dividends declared by the Company are accounted for in the period in which the dividend has been paid or approved by shareholders in an Annual General Meeting.
3. Gains on investments
| Year ended 31 December 2012 £'000 | Year ended 31 December 2011 £'000 | |
| Unrealised gains/(losses) on fixed asset investments held at fair value through profit or loss account | 1,363 | (138) |
| Unrealised reversals of impairments on fixed asset investments held at amortised cost | 12 | 397 |
| Unrealised gains on fixed asset investments sub-total | 1,375 | 259 |
| Unrealised gains on current assets held at fair value through profit or loss account | 65 | - |
| Unrealised gains sub-total | 1,440 | 259 |
| Realised losses on fixed asset investments held at fair value through profit or loss account | (136) | (147) |
| Realised gains on fixed asset investments held at amortised cost | - | 580 |
| Realised (losses)/gains on fixed asset investments sub-total | (136) | 433 |
| Realised gains/(losses) on current asset investments held at fair value through profit or loss account | 63 | (5) |
| Realised (losses)/gains sub-total | (73) | 428 |
| 1,367 | 687 |
Investments measured at amortised cost are unquoted loan stock investments as described in note 2.
4. Investment income
| Year ended 31 December 2012 £'000 | Year ended 31 December 2011 £'000 | |
| Income recognised on investments held at fair value through profit or loss | ||
| Dividend income | - | 14 |
| Floating rate note interest | - | 11 |
| Income from convertible bonds and discounted debt | 135 | 95 |
| 135 | 120 | |
| Income recognised on investments held at amortised cost | ||
| Return on loan stock investments | 1,076 | 1,103 |
| Bank deposit interest | 13 | 34 |
| 1,089 | 1,137 | |
| 1,224 | 1,257 |
Interest income earned on impaired investments at 31 December 2012 amounted to £496,000 (2011: £219,000). These investments are all held at amortised cost.
5. Investment management fees
| Year ended 31 December 2012 £'000 | Year ended 31 December 2011 £'000 | |
| Investment management fee charged to revenue | 215 | 216 |
| Investment management fee charged to capital | 644 | 647 |
| 859 | 863 |
Further details of the Management agreement under which the investment management fee is paid are given in the Directors' report on page 20 of the full Annual Report and Financial Statements.
During the year, services of a total value of £859,000 (2011: £863,000) were purchased by the Company from Albion Ventures LLP in respect of management fees. At the financial year end, the amount due to Albion Ventures LLP in respect of these services disclosed as accruals was £216,000 (2011: £201,000).
Patrick Reeve is the Managing Partner of the Manager, Albion Ventures LLP. During the year, the Company was charged by Albion Ventures LLP £19,000 (including VAT) in respect of his services as a Director (2011: £21,000). At the year end, the amount due to Albion Ventures LLP in respect of these services disclosed as accruals was £3,500 (2011: £5,000).
Albion Ventures LLP, the Manager, holds 1,012 Ordinary shares as a result of fractional entitlements arising from the conversion of C shares into Ordinary shares on 31 March 2011.
During the year the Company raised new funds through the Albion VCTs Linked Top Up Offers 2011/2012 and Albion VCTs Top Up Offers 2012/2013 as described in note 15. The total cost of the issue of these shares was 5.5 per cent. of the sums subscribed. Of these costs, an amount of £6,740 and £663 respectively was paid to the Manager, Albion Ventures LLP in respect of receiving agent services. There were no sums outstanding in respect of receiving agent services at the year end.
6. Other expenses
| Year ended 31 December 2012 £'000 | Year ended 31 December 2011 £'000 | |
| Directors' fees (including VAT and NIC) | 78 | 78 |
| Other administrative expenses | 89 | 82 |
| Tax services | 19 | 19 |
| Auditor's remuneration for statutory audit services (excluding VAT) | 24 | 24 |
| Auditor's remuneration for other services (excluding VAT) | - | 3 |
| 210 | 206 |
The £3,000 in Auditor's remuneration for other services relates to work done on the merger of Ordinary shares with C shares in 2011.
7. Directors' fees
The amounts paid to and on behalf of the Directors during the year are as follows:
| Year ended 31 December 2012 £'000 | Year ended 31 December 2011 £'000 | |
| Directors' fees | 70 | 70 |
| National insurance and/or VAT | 8 | 8 |
| 78 | 78 |
Further information regarding Directors' remuneration can be found in the Directors' remuneration report on pages 28 and 29 of the full Annual Report and Financial Statements.
8. Tax charge on ordinary activities
| Year ended 31 December 2012 £'000 | Year ended 31 December 2011 £'000 | |
| UK corporation tax in respect of current year | (31) | (35) |
| UK corporation tax in respect of prior year | 27 | 23 |
| (4) | (12) |
Factors affecting the tax charge:
| Year ended 31 December 2012 £'000 | Year ended 31 December 2011 £'000 | |
| Return on ordinary activities before taxation | 1,522 | 875 |
| Tax charge on profit at the small companies rate | (304) | (175) |
| Factors affecting the charge: | ||
| Non-taxable gains | 273 | 137 |
| Non-taxable income | - | 3 |
| Consortium relief in respect of prior years | 27 | 23 |
| (4) | (12) |
The tax charge for the year shown in the Income statement is lower than the small companies rate of corporation tax in the UK of 20 per cent. (2011: 20 per cent.). The differences are explained above.
Consortium relief is recognised in the accounts in the period in which the claim is submitted to HMRC and is shown as tax in respect of prior year.
Notes
| (i) | Venture Capital Trusts are not subject to corporation tax on capital gains. |
| (ii) | Tax relief on expenses charged to capital has been determined by allocating tax relief to expenses by reference to the applicable corporation tax rate and allocating the relief between revenue and capital in accordance with the SORP. |
| (iii) | No deferred tax asset or liability has arisen in the year. |
9. Dividends
| Year ended 31 December 2012 £'000 | Year ended 31 December 2011 £'000 | |
| Ordinary shares' dividend of 2.50p per share paid on 28 April 2011 | - | 998 |
| Ordinary shares' dividend of 2.50p per share paid on 28 October 2011 | - | 987 |
| Ordinary shares' dividend of 2.50p per share paid on 30 April 2012 | 1,018 | - |
| Ordinary shares' dividend of 2.50p per share paid on 31 October 2012 | 1,015 | - |
| 2,033 | 1,985 |
In addition to the dividends summarised above, the Board has declared a first dividend for the year ending 31 December 2013 of 2.50 pence per Ordinary share. This dividend will be paid on 30 April 2013 to shareholders on the register as at 12 April 2013. The total dividend will be approximately £1,026,000.
10. Basic and diluted return per share
| Year ended 31 December 2012 | Year ended 31 December 2011 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| Return attributable to equity shares (£'000) | 638 | 880 | 1,518 | 651 | 212 | 863 |
| Weighted average shares in issue (excluding treasury shares) | 40,576,647 | 39,764,003 | ||||
| Return attributable per equity share (pence) | 1.60 | 2.10 | 3.70 | 1.60 | 0.60 | 2.20 |
The weighted average number of shares is calculated excluding treasury shares of 4,341,070 (2011: 4,290,372).
There are no convertible instruments, derivatives or contingent share agreements in issue, and therefore no dilution affecting the return per share. The basic return per share is therefore the same as the diluted return per share.
11. Fixed asset investments
| 31 December 2012 £'000 | 31 December 2011 £'000 | |
| Investments held at fair value through profit or loss | ||
| Unquoted equity and preference shares | 11,624 | 10,659 |
| Discounted debt and convertible loan stock | 5,257 | 3,546 |
| 16,881 | 14,205 | |
| Investments held at amortised cost | ||
| Unquoted loan stock | 16,174 | 16,775 |
| 33,055 | 30,980 |
| 31 December 2012 £'000 | 31 December 2011 £'000 | |
| Opening valuation | 30,980 | 29,387 |
| Purchases at cost | 2,515 | 7,410 |
| Disposal proceeds | (1,677) | (6,117) |
| Realised (losses)/gains | (136) | 433 |
| Movement in loan stock accrued income | (3) | (160) |
| Transfer of unrealised gains to current asset investments | - | (232) |
| Unrealised gains | 1,375 | 259 |
| Closing valuation | 33,055 | 30,980 |
| Movement in loan stock accrued income | ||
| Opening accumulated movement in loan stock accrued income | 279 | 439 |
| Movement in loan stock accrued income | (3) | (160) |
| Closing accumulated movement in loan stock accrued income | 276 | 279 |
| Movement in unrealised losses | ||
| Opening accumulated unrealised losses | (8,281) | (9,366) |
| Transfer of previously unrealised losses to realised reserve on disposal of investments | 116 | 1,058 |
| Transfer of unrealised gains to current asset investments | - | (232) |
| Movement in unrealised gains | 1,375 | 259 |
| Closing accumulated unrealised losses | (6,790) | (8,281) |
| Historic cost basis | ||
| Opening book cost | 38,982 | 38,314 |
| Purchases at cost | 2,515 | 7,410 |
| Sales at cost | (1,927) | (6,742) |
| Closing book cost | 39,569 | 38,982 |
Purchases and disposals detailed above do not agree to the Cash flow statement due to restructuring of investments, conversion of convertible loan stock and settlement debtors and creditors.
The Directors believe that the carrying value of loan stock measured at amortised cost is not materially different to fair value. The Company does not hold any assets as the result of the enforcement of security during the period, and believes that the carrying values for both impaired and past due assets are covered by the value of security held for these loan stock investments.
Unquoted equity investments and convertible and discounted debt are valued at fair value in accordance with the IPEVCV guidelines as follows:
| Valuation methodology | 31 December 2012 £'000 | 31 December 2011 £'000 |
| Cost and price of recent investment (reviewed for impairment) | 2,054 | 2,725 |
| Net asset value supported by third party or desktop valuation | 2,341 | 1,875 |
| Earnings multiple | 4,565 | 3,899 |
| Revenue multiple | 6,864 | 5,706 |
| Agreed offer or agreed new investment price | 1,057 | - |
| 16,881 | 14,205 |
Full valuations are prepared by independent RICS qualified surveyors in full compliance with the RICS Red Book. Desk-top reviews are carried out by similarly RICS qualified surveyors by updating previously prepared full valuations for current trading and market indices.
Fair value investments had the following movements between valuation methodologies between 31 December 2011 and 31 December 2012:
| Change in valuation methodology (2011 to 2012) | Value as at 31 December 2012 £'000 | Explanatory note |
| Cost and price of recent investment (reviewed for impairment) to net asset value supported by third party valuation | 721 | More recent information available |
| Revenue multiple to agreed offer or agreed new investment price | 693 | Agreed new investment price |
| Earnings multiple to revenue multiple | 584 | Temporary trading losses |
| Cost and price of recent investment (reviewed for impairment) to agreed offer or agreed new investment price | 364 | Agreed offer price |
| Cost and price of recent investment (reviewed for impairment) to earnings multiple | 23 | Improvement in investment performance |
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 September 2009 IPEVCV Guidelines. The Directors believe that, within these parameters, there are no other possible methods of valuation which would be reasonable as at 31 December 2012.
The amended FRS 29 'Financial Instruments: Disclosures' 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 1 | Unadjusted quoted (bid) prices applied |
| Level 2 | Inputs to valuation are from observable sources and are directly or indirectly derived from prices |
| Level 3 | Inputs to valuations not based on observable market data |
All of the Company's fixed asset investments as at 31 December 2012 which are valued at fair value through profit or loss, are valued according to Level 3 methods (2011: Level 3).
Investments held at fair value through profit or loss (Level 3) had the following movements in the year to 31 December 2012:
| 31 December 2012 | 31 December 2011 | |||||
| Equity | Convertible and discounted bonds | Total | Equity | Convertible and discounted bonds | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Opening balance | 10,659 | 3,546 | 14,205 | 10,218 | 2,933 | 13,151 |
| Additions | 826 | 1,260 | 2,086 | 2,612 | 1,674 | 4,286 |
| Disposals | (614) | (23) | (637) | (2,626) | (89) | (2,715) |
| Realised gains/(losses) | 210 | (346) | (136) | 930 | (1,077) | (147) |
| Debt/equity swap and representation of convertible bond and debt | 643 | (643) | - | (232) | - | (232) |
| Unrealised gains/(losses) on equity investments | (100) | 1,463 | 1,363 | (243) | 105 | (138) |
| Closing balance | 11,624 | 5,257 | 16,881 | 10,659 | 3,546 | 14,205 |
FRS 29 requires the Directors to consider the impact of changing one or more of the inputs used as part of the valuation process to reasonable possible alternative assumptions. The valuation methodology applied to 32 per cent. of the equity, discounted debt and convertible bond investments (by valuation) is based on third-party independent evidence, recent investment price and agreed offer price. The Directors believe that changes to reasonable possible alternative assumptions for the valuation of the portfolio could result in an increase in the valuation of investments by £827,000 or a decrease in the valuation of investments by £755,000.
12. Significant interests
The principal activity of the Company is to select and hold a portfolio of investments in unquoted securities. Although the Company, through the Manager, will, in some cases, be represented on the board of the portfolio company, it will not take a controlling interest or become involved in the management. The size and structure of the companies with unquoted securities may result in certain holdings in the portfolio representing a participating interest without there being any partnership, joint venture or management consortium agreement. The Company has interests of greater than 20 per cent. of the nominal value of any class of the allotted shares in the portfolio companies as at 31 December 2012 as described below:
| Company | Country of incorporation | Principal activity | % class and share type | % total voting rights |
| Albion Investment Properties Limited | Great Britain | Owner of residential property | 22.6% A Ordinary | 22.6% |
| Blackbay Limited | Great Britain | Mobile data solutions | 24.3% A Ordinary | 8.5% |
| Consolidated PR Limited | Great Britain | Public relations agency | 50.0% A Ordinary | 21.7% |
| Evolutions Group Limited | Great Britain | In liquidation | 22.3% A Ordinary | 22.3% |
| Prime Care Holdings Limited | Great Britain | Domiciliary care services | 31.2% A Ordinary | 15.6% |
| The Q Garden Company Limited | Great Britain | Garden centre operator | 33.4% A Ordinary | 33.4% |
The investments listed above are held as part of an investment portfolio and therefore, as permitted by FRS 9, they are measured at fair value and not accounted for using the equity method.
13. Current assets
| Trade and other debtors | 31 December 2012 | 31 December 2011 |
| £'000 | £'000 | |
| Prepayments and accrued income | 15 | 15 |
| Other debtors | 6 | 180 |
| 21 | 195 |
The Directors consider that the carrying amount of debtors is not materially different to their fair value.
| 31 December 2012 | 31 December 2011 | |
| Current asset investments | £'000 | £'000 |
| Contingent future receipts from the disposal of fixed asset investments | 65 | 232 |
| Royal Skandia Collective Bond | - | 1,006 |
| 65 | 1,238 |
The fair value hierarchy applied to contingent future receipts on disposal of fixed asset investments is Level 3. These receipts may not crystallise within 12 months. The fair value hierarchy applied to bonds and floating rate notes is Level 1 (see above for definitions).
14. Creditors: amounts falling due within one year
| 31 December 2012 | 31 December 2011 | |
| £'000 | £'000 | |
| Trade creditors | 6 | 1 |
| Accruals and deferred income | 280 | 267 |
| UK corporation tax payable | 23 | 28 |
| Other creditors | 29 | 17 |
| 338 | 313 |
The Directors consider that the carrying amount of creditors is not materially different to their fair value.
15. Called up share capital
| 31 December 2012 £'000 | 31 December 2011 £'000 | |
| Allotted, called up and fully paid | ||
| 45,365,688 Ordinary shares of 1p each (2011: 43,723,776 Ordinary shares of 50p each) | 454 | 21,862 |
Voting rights
41,024,618 Ordinary shares of 1p each (net of treasury shares) (2011: 39,433,404 Ordinary shares of 50p each in issue (net of treasury shares)).
Following approval by shareholders at the General Meeting on 22 June 2012, 1 deferred share with a nominal value of £4,073,164 (2011: nil) was issued during the year in order to formally effect the merger of the C shares with the Ordinary shares, which took place in the prior year. The deferred share has no voting rights, no right to receive a dividend or any other form of income from the Company.
The Company also obtained authority to reduce the nominal value of its shares from 50 pence to 1 penny, and to cancel its capital redemption reserve, share premium reserve and deferred share. This was approved by the Court on 11 July 2012. This restructuring increased the distributable reserves available to the Company for the payment of dividends, the buy-back of shares and for other corporate purposes. The effect of these transactions were to reduce the Ordinary share capital by £26,369,006, capital redemption reserve by £449,243 and share premium reserves by £1,598,100.
The Company purchased 75,936 Ordinary shares (2011: nil) for cancellation at a cost of £49,000 (2011: nil).
The Company purchased 650,070 Ordinary shares (2011: 1,357,000 Ordinary shares and 337,300 C shares) to be held in treasury at a cost of £453,000 (2011: £1,251,000). The shares purchased for treasury were funded from the other distributable reserve.
The Company cancelled 599,372 Ordinary shares (2011: nil) from the other distributable reserve at a weighted average cost of 78.50 pence per share, leaving a balance of 4,341,070 Ordinary shares in treasury (2011: 4,290,372 Ordinary shares), representing 9.6 per cent. of the share capital as at 31 December 2012.
Under the terms of the Dividend Reinvestment Scheme, the following Ordinary shares were allotted in the year to 31 December 2012:
| Date of allotment | Number of Ordinary shares allotted | Aggregate nominal value of shares (£'000) | Issue price (pence per share) | Net consideration received (£'000) | Opening market price per share on allotment date (pence per share) |
| 30 April 2012 | 119,999 | 60 | 82.60 | 93 | 65.00 |
| 31 October 2012 | 116,312 | 1 | 80.80 | 85 | 68.00 |
| 236,311 | 61 | 178 |
Under the terms of the Albion VCTs Linked Top Up Offers 2011/2012, the following shares 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 per share on allotment date (pence per share) |
| 10 January 2012 | 449,000 | 225 | 88.90 | 378 | 76.00 |
| 20 March 2012 | 487,304 | 244 | 88.90 | 410 | 73.00 |
| 5 April 2012 | 736,583 | 368 | 90.10 | 627 | 73.00 |
| 31 May 2012 | 84,429 | 42 | 88.30 | 71 | 65.00 |
| 1,757,316 | 879 | 1,486 |
Under the terms of the Albion VCTs Top Up Offers 2012/2013, the following shares 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 per share on allotment date (pence per share) |
| 19 December 2012 | 323,593 | 3 | 86.50 | 265 | 68.00 |
16. Basic and diluted net asset value per share
| 31 December 2012 | 31 December 2011 | |
| (pence per share) | (pence per share) | |
| Basic and diluted net asset value per Ordinary share | 84.00 | 85.10 |
The basic and diluted net asset values per share at the year end are calculated in accordance with the Articles of Association and are based upon total shares in issue (less treasury shares) of 41,024,618 Ordinary shares (2011: 39,433,404 Ordinary shares) at 31 December 2012.
17. Analysis of changes in cash during the year
| Year ended 31 December 2012 £'000 | Year ended 31 December 2011 £'000 | |
| Opening cash balances | 1,447 | 3,895 |
| Net cash flow | 209 | (2,448) |
| Closing cash balances | 1,656 | 1,447 |
18. Reconciliation of net return on ordinary activities before taxation to net cash flow from operating activities
| Year ended 31 December 2012 £'000 | Year ended 31 December 2011 £'000 | |
| Revenue return on ordinary activities before taxation | 800 | 835 |
| Investment management fee charged to capital | (643) | (647) |
| Movement in accrued amortised loan stock interest | 3 | 160 |
| (Increase)/decrease in debtors | (5) | 1 |
| Increase/(decrease) in creditors | 26 | (45) |
| Net cash flow from operating activities | 181 | 304 |
19. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in note 15. The Company is permitted to buy back its own shares for cancellation or treasury purposes and this is described in more detail in the Chairman's statement.
The Company's financial instruments comprise equity and loan stock investments in unquoted companies, cash balances and debtors and creditors which arise from its operations. The main purpose of these financial instruments is to generate cashflow and revenue and capital appreciation for the Company's operations. The Company has no gearing or other financial liabilities apart from short term creditors. The Company does not use any derivatives for the management of its Balance sheet.
The principal risks arising from the Company's operations are:
- Investment (or market) risk (which comprises investment price and cash flow interest rate risk);
- credit risk; and
- liquidity risk.
The Board regularly reviews and agrees policies for managing each of these risks. There have been no changes in the nature of the risks that the Company has faced during the past year, and apart from where noted below, there have been no changes in the objectives, policies or processes for managing risks during the past year. The key risks are summarised below.
Investment risk
As a venture capital trust, it is the Company's specific nature to evaluate and control the investment risk of its portfolio in unquoted and in quoted investments, details of which are shown on pages 10 to 12 of the full Annual Report and Financial Statements. Investment risk is the exposure of the Company to the revaluation and devaluation of investments. The main driver of investment risk is the operational and financial performance of the portfolio company and the dynamics of market quoted comparators. The Manager receives management accounts from portfolio companies, and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment risk.
The Manager and the Board formally review investment risk (which includes market price risk), both at the time of initial investment and at quarterly Board meetings.
The Board monitors the prices at which sales of investments are made to ensure that profits to the Company are maximised, and that valuations of investments retained within the portfolio appear sufficiently prudent and realistic compared to prices being achieved in the market for sales of unquoted investments.
The maximum investment risk as at the balance sheet date is the value of the fixed and current asset investment portfolio which is £33,120,000 (2011: £32,218,000). Fixed and current asset investments form 96 per cent. of the net asset value as at 31 December 2012 (2011: 96 per cent.).
More details regarding the classification of fixed and current asset investments are shown in notes 11 and 13.
Investment price risk
Investment price risk is the risk that the fair value of future investment cash flows will fluctuate due to factors specific to an investment instrument or to a market in similar instruments. To mitigate the investment price risk for the Company as a whole, the strategy of the Company is to invest in a broad spread of industries with up to two-thirds of the unquoted investments comprising debt securities, which, owing to the structure of their yield and the fact that they are usually secured, have a lower level of price volatility than equity. Details of the industries in which investments have been made are contained in the Portfolio of investments section on pages 10 to 12 of the full Annual Report and Financial Statements and in the Manager's Report.
Valuations are based on the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEVCV Guidelines.
As required under FRS 29 "Financial Instruments: Disclosures", the Board is required to illustrate by way of a sensitivity analysis the degree of exposure to market risk. The Board considers that the value of the fixed and current asset investment portfolio is sensitive to a 10 per cent. change based on the current economic climate. The impact of a 10 per cent. change has been selected as this is considered reasonable given the current level of volatility observed both on a historical basis and future expectations.
The sensitivity of a 10 per cent. increase or decrease in the valuation of the fixed and current asset investments (keeping all other variables constant) would increase or decrease the net asset value and return for the year by £3,312,000 (2011: £3,222,000).
Cash flow interest rate risk
It is the Company's policy to accept a degree of interest rate risk on its financial assets through the effect of interest rate changes. On the basis of the Company's analysis, it is estimated that a rise of one percentage point in all interest rates would have increased total return before tax for the year by approximately £16,000 (2011: £30,000). Furthermore, it is considered that a fall of interest rates below current levels during the year would have been very unlikely.
The weighted average interest rate applied to the Company's unquoted loan stock during the year was approximately 5.3 per cent. (2011: 5.2 per cent.). The weighted average period to maturity for the unquoted loan stock is approximately 2.5 years (2011: 2.6 years).
The Company's financial assets and liabilities as at 31 December 2012, all denominated in pounds sterling, consist of the following:
| 31 December 2012 | 31 December 2011 | |||||||
| 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 | - | - | 11,624 | 11,624 | - | - | 10,659 | 10,659 |
| Unquoted loan stock* | 17,913 | 348 | 3,170 | 21,431 | 18,450 | 526 | 1,345 | 20,321 |
| Debtors** | - | - | 8 | 8 | - | - | 183 | 183 |
| Current asset investments | - | - | 65 | 65 | 1,006 | - | 232 | 1,238 |
| Current liabilities** | - | - | (315) | (315) | - | - | (285) | (285) |
| Cash | 1,249 | 407 | - | 1,656 | 143 | 1,304 | - | 1,447 |
| Total | 19,162 | 755 | 14,552 | 34,469 | 19,599 | 1,830 | 12,134 | 33,563 |
*Including convertible loan stock and debt issued at a discount.
**The debtors and current liabilities do not reconcile to the balance sheet as prepayments and tax payable are not included in the above table.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Company is exposed to credit risk through its debtors, investment in unquoted loan stock, and through the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock prior to investment, and as part of its ongoing monitoring of investments. In doing this, it takes into account the extent and quality of any security held. Typically loan stock instruments have a first fixed charge or a fixed and floating charge over the assets of the portfolio company in order to mitigate the gross credit risk. The Manager receives management accounts from portfolio companies, and members of the investment management team 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 as at 31 December 2012 was limited to £21,431,000 (2011: £20,321,000) of unquoted loan stock instruments (all are secured on the assets of the portfolio company) and £1,656,000 (2011: £1,447,000) cash deposits with banks.
As at the balance sheet date, the cash held by the Company is held with the Royal Bank of Scotland plc, Lloyds TSB Bank plc, Scottish Widows Bank plc (part of Lloyds Banking Group), Barclays Bank plc and National Westminster Bank plc. Credit risk on cash transactions is mitigated by transacting with counterparties that are regulated entities subject to prudential supervision, with high credit ratings assigned by international credit-rating agencies.
The Company has an informal policy of limiting counterparty banking and floating rate note exposure to a maximum of 20 per cent. of net asset value for any one counterparty.
The credit profile of unquoted loan stock is described under liquidity risk below.
The cost, impairment and carrying value of impaired loan stocks in the Ordinary share portfolio held at amortised cost at 31 December 2012 and 31 December 2011 are as follows:
| 31 December 2012 | 31 December 2011 | |||||
| Cost £'000 | Impairment £'000 | Carrying value £'000 | Cost £'000 | Impairment £'000 | Carrying value £'000 | |
| Impaired loan stock | 10,845 | (3,487) | 7,358 | 9,079 | (3,441) | 5,638 |
Impaired loan stock instruments have a first fixed charge or a fixed and floating charge over the assets of the portfolio company and the Board deem the security value to be the carrying value.
Liquidity risk
Liquid assets are held as cash on current account, on deposit, in bonds or short term money market account. Under the terms of its Articles, the Company has the ability to borrow up to 10 per cent. of its adjusted capital and reserves of the latest published audited Balance sheet, which amounts to £3,343,000 as at 31 December 2012 (2011: £3,254,000).
The Company has no committed borrowing facilities as at 31 December 2012 (2011: £nil). The Company had cash balances of £1,656,000 (2011: £1,447,000). The main cash outflows are for new investments, share buy-backs and dividend payments, which are within the control of the Company. The Manager formally reviews the cash requirements of the Company on a monthly basis, and the Board on a quarterly basis as part of its review of management accounts and forecasts. All the Company's financial liabilities are short term in nature and total £338,000 as at 31 December 2012 (2011: £313,000).
The carrying value of loan stock investments at 31 December 2012, as analysed by expected maturity dates was as follows:
| Redemption date | Fully performing loan stock £'000 | Impaired loan stock £'000 | Past due loan stock £'000 | Total £'000 |
| Less than one year | 1,318 | 4,324 | 1,870 | 7,512 |
| 1-2 years | 2,051 | 2,490 | 567 | 5,108 |
| 2-3 years | 955 | 96 | 779 | 1,830 |
| 3-5 years | 3,403 | 448 | 1,536 | 5,387 |
| +5 years | 1,460 | - | 134 | 1,594 |
| Total | 9,187 | 7,358 | 4,886 | 21,431 |
Loan stock can be past due as a result of interest or capital not being paid in accordance with contractual terms.
Loan stock categorised as past due includes:
- Loan stock with a carrying value of £3,364,000 which has interest overdue for less than 12 months yielded 3.9 per cent. on cost;
- Loan stock with a carrying value of £313,000 had loan stock interest past due greater than 12 months and less than 2 years (through not paying all of its contractual interest). This investment has yielded 9.6 per cent. on cost during the year;
- Loan stock with a carrying value of £861,000 had loan stock interest past due greater than 2 years and less than 5 years (through not paying all of its contractual interest). This investment has yielded 7.0 per cent. on cost during the year;
- Loan stock with a carrying value of £125,000 yielding 12.7 per cent. which has capital past due between 1 and 3 years;
- Loan stock with a carrying value of £223,000 had capital past due of 7 years and yielded 8.8 per cent. on cost;
The carrying value of loan stock investments at 31 December 2011, as analysed by expected maturity dates, was as follows:
| Redemption date | Fully performing loan stock £'000 | Impaired loan stock £'000 | Past due loan stock £'000 | Total £'000 |
| Less than one year | 938 | 1,255 | 1,689 | 3,882 |
| 1-2 years | 2,424 | 1,625 | 2,256 | 6,305 |
| 2-3 years | 958 | 1,995 | 149 | 3,102 |
| 3-5 years | 4,926 | 763 | 693 | 6,382 |
| +5 years | 433 | - | 217 | 650 |
| Total | 9,679 | 5,638 | 5,004 | 20,321 |
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 the Company's financial assets and liabilities as at 31 December 2012 are stated at fair value as determined by the Directors, with the exception of loans and receivables included within investments, debtors and creditors and cash which are carried at amortised cost, in accordance with FRS 26. The Directors believe that the current carrying value of loan stock is not materially different to the fair value. There are no financial liabilities other than creditors. The Company's financial liabilities are all non-interest bearing. It is the Directors' opinion that the book value of the financial liabilities is not materially different to the fair value and all are payable within one year.
20. Commitments and contingencies
The Company had the following financial commitments in respect of investments:
- DySIS Medical Limited, £32,000.
21. Post balance sheet events
Since 31 December 2012 the Company has had the following post balance sheet events:
- Investment of £33,000 in The Q Garden Company Limited;
- Investment of £32,000 in DySIS Medical Limited;
- Investment of £25,000 in Rostima Holdings Limited;
- Investment of £122,000 in Mi-Pay Limited;
- Cash of £779,000 received from the disposal of the investment in Nelson House Hospital Limited.
22. Related Party Transactions
There are no related party transactions or balances requiring disclosure.
23. Principal risks and uncertainties
In addition to the current economic risks outlined in the Chairman's statement, the Board considers that the Company faces the following major risks and uncertainties:
1. 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.
2. Investment risk
This is the risk of investment in poor quality assets which reduces the capital and income returns to shareholders, and negatively impacts on the Company's reputation. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes, are more fragile than larger, long established businesses.
To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its strong track record for investing in this segment of the market. In addition, the Manager operates a formal and structured investment process, which includes an Investment Committee, comprising investment professionals from the Manager and at least one external investment professional. The Manager also invites and takes account of comments from non-executive Directors of the Company on investments discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on portfolio company boards) and the Board receives detailed reports on each investment as part of the Manager's report at quarterly board meetings. It is the policy of the Company for portfolio companies to not normally have external borrowings.
3. Valuation risk
The Company's investment valuation methodology is reliant on the accuracy and completeness of information that is issued by portfolio companies. In particular, the Directors may not be aware of or take into account certain events or circumstances which occur after the information issued by such companies is reported.
As described in note 2 of the Financial Statements, the unquoted equity investments, 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 judgements 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 judgements the valuation takes into account all known material facts up to the date of approval of the Financial Statements by the Board. All other unquoted loan stock is measured at amortised cost.
4. Venture Capital Trust approval risk
The Company's current approval as a venture capital trust allows investors to take advantage of tax reliefs on initial investment and ongoing tax free capital gains and dividend income. Failure to meet the qualifying requirements could result in investors losing the tax relief on initial investment and loss of tax relief on any tax-free income or capital gains received. In addition, failure to meet the qualifying requirements could result in a loss of listing of the shares.
To reduce this risk, the Board has appointed the Manager, who has a team with significant experience in venture capital trust management, used to operating within the requirements of the venture capital trust legislation. In addition, to provide further formal reassurance, the Board has appointed PricewaterhouseCoopers LLP as its taxation advisor. PricewaterhouseCoopers LLP report quarterly to the Board to independently confirm compliance with the venture capital trust legislation, to highlight areas of risk and to inform on changes in legislation.
5. Compliance risk
The Company is listed on The London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company's shares, or other penalties under the Companies Act or from financial reporting oversight bodies.
Board members and the Manager have experience of operating at senior levels within quoted businesses. In addition, the Board and the Manager receive regular updates on new regulation from its auditor, lawyers and other professional bodies.
6. 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, 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. Modwenna Rees-Mogg, as a member of the Audit Committee, met with the internal audit Partner of Littlejohn LLP in February 2013 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 25 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.
7. 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 on page 20 of the full Annual Report and Financial Statements). In addition, the Manager has demonstrated to the Board that there is no undue reliance placed upon any one individual within Albion Ventures LLP.
8. Financial risks
By its nature, as a venture capital trust, the Company is exposed to investment risk (which comprises investment price risk and cash flow interest rate risk), credit risk and liquidity risk. The Company's policies for managing these risks and its financial instruments are outlined in full in note 19 to the Financial Statements.
All of the Company's income and expenditure is denominated in sterling and hence the Company has no foreign currency risk. The Company is financed through equity and does not have any borrowings. The Company does not use derivative financial instruments for speculative purposes.
24. 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 2012 and 31 December 2011, 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 2012, 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 20 June 2013 at 11.00am.
25. Publication
The full audited Annual Report and Financial Statements are being sent to shareholders and copies will be made available to the public at the registered office of the Company, Companies House, the National Storage Mechanism and also electronically at www.albion-ventures.co.uk under the 'Our Funds' section, by clicking on 'Albion Technology & General 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.
