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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Crown Place VCT Plc | LSE:CRNW | London | Ordinary Share | GB0002577434 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.00 | - |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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As required by the UK Listing Authority's Disclosure and Transparency
Rules 4.1 and 6.3, Crown Place VCT PLC today makes public its
information relating to the Annual Report and Financial Statements for
the year ended 30 June 2015.
This announcement was approved for release by the Board of Directors on
13 October 2015.
This announcement has not been audited.
You will shortly be able to view the Annual Report and Financial
Statements for the year to 30 June 2015 (which have been audited) at:
www.albion-ventures.co.uk by clicking on 'Our Funds' and then 'Crown
Place VCT PLC'. The Annual Report and Financial Statements for the year
to 30 June 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 investment objective and policy of the Company* is to achieve long
term capital and income growth principally through investment in smaller
unquoted companies in the United Kingdom.
In pursuing this policy, the Manager aims to build a portfolio which
concentrates on two complementary investment areas. The first are more
mature or asset-based investments that can provide a strong income
stream combined with a degree of capital protection. These will be
balanced by a lesser proportion of the portfolio being invested in
higher risk companies with greater growth prospects.
*The 'Company' is Crown Place VCT PLC. The 'Group' is the Company
together with its subsidiaries CP1 VCT PLC and CP2 VCT PLC.
Financial calendar
Record date for first dividend 6 November 2015
Annual General Meeting 11.00 am on 12 November 2015
Payment of first dividend 30 November 2015
Announcement of half-yearly results February 2016
for the six months ended 31 December 2015
Payment of second dividend (subject to Board 31 March 2016
approval)
Financial highlights
31.0p Net asset value per share as at 30 June 2015
1.4p Total return per share to shareholders for the year
ended 30 June 2015
4.5% Net asset value total return for the year
2.5p Total tax-free dividends per share paid during the
year ended 30 June 2015
8.4% Tax-free dividend yield on share price (dividend per
annum/share price as at 30 June 2015)
30 June 2015 30 June 2014
pence per share pence per share
Opening net asset value 32.04 32.26
Revenue return 0.73 0.61
Capital return 0.67 1.67
Total return 1.40 2.28
Dividends paid (2.50) (2.50)
Impact from issue of share capital 0.03 -
Closing net asset value 30.97 32.04
Shareholder returns and shareholder value
Crown Place
VCT PLC*
pence per
share
Shareholder return from launch to April 2005
(date that Albion Ventures was appointed investment
manager):
Total dividends paid to 6 April 2005 (i) 24.93
Decrease in net asset value (56.60)
Total shareholder return to 6 April 2005 (31.67)
Shareholder return from April 2005 to 30 June 2015:
Total dividends paid 24.30
Decrease in net asset value (12.43)
Total shareholder return from April 2005 to 30 June
2015 11.87
Shareholder value since launch:
Total dividends paid to 30 June 2015 (i) 49.23
Net asset value as at 30 June 2015 30.97
Total shareholder value as at 30 June 2015 80.20
Current annual dividend objective 2.50
Dividend yield on net asset value as at 30 June 2015 8.1%
Notes
(i) Prior to 6 April 1999, venture capital trusts were able to add 20
per cent. to dividends and figures for the period up until 6 April 1999
are included at the gross equivalent rate actually paid to shareholders.
* Formerly Murray VCT 3 PLC
The above financial summary is for the Company, Crown Place VCT PLC
only. Details of the financial performance of CP1 VCT PLC (previously
Murray VCT PLC) and CP2 VCT PLC (previously Murray VCT 2 PLC), which
have been merged into the Company, can be found on page 62 of the full
Annual Report and Financial Statements.
Total shareholder value since launch:
30 June 2015
(pence per share)
Total dividends paid during the period from launch
to 6 April 2005
(prior to change of manager) 24.93
Total dividends paid during:
the year ended 28 February 2006 1.00
the period ended 30 June 2007* 3.30
the year ended 30 June 2008 2.50
the year ended 30 June 2009 2.50
the year ended 30 June 2010 2.50
the year ended 30 June 2011 2.50
the year ended 30 June 2012 2.50
the year ended 30 June 2013 2.50
the year ended 30 June 2014 2.50
the year ended 30 June 2015 2.50
Total dividends paid to 30 June 2015 49.23
Net asset value as at 30 June 2015 30.97
Total shareholder value as at 30 June 2015 80.20
*16 month period
In addition to the dividends paid above, the Board has declared a first
dividend for the year ending 30 June 2016, of 1.25 pence per Crown Place
VCT PLC share, payable on 30 November 2015 to shareholders on the
register as at 6 November 2015.
Chairman's statement
Introduction
I present the results for Crown Place VCT PLC for the year ended 30 June
2015. The Group achieved a total return of 1.40 pence per share (4.5 per
cent. on average NAV for the year), compared to 2.28 pence per share in
the previous year (7.1 per cent.). Whilst the Company has delivered a
positive return to shareholders for each of the past six years, the
total return for the period was lower than that achieved the previous
year and was impacted by write-downs in certain of the Company's higher
risk growth investments. Nevertheless, the Company has maintained its
regular tax free dividend of 2.50 pence per share for the eighth
consecutive year. This represents a yield of 8.4 per cent. based on the
share price as at 30 June 2015 of 29.75 pence per share.
Results and dividends
As at 30 June 2015, the net asset value was GBP33.0 million or 30.97
pence per share compared to GBP29.0 million or 32.04 pence per share at
30 June 2014. The revenue return before taxation was GBP700,000 compared
to GBP525,000 in the previous year. This increase is due to higher
income from investments, reflecting the new asset based investments made
during the year. The ongoing charges ratio for the year reduced
marginally to 2.6 per cent. (2014: 2.7 per cent.).
During the year, the Company's realised and unrealised capital gains
amounted to GBP1,036,000 compared to GBP1,812,000 in the previous year,
with the unquoted asset-based investments performing well and
accounting for over 100 per cent. of the gains. These were offset by
write downs in parts of the unquoted growth investment portfolio.
Further detail of the Company's financial performance is given in the
Strategic report.
The Board has declared a first dividend for the year ending 30 June 2016
of 1.25 pence per share, payable on 30 November 2015 to shareholders on
the register as at 6 November 2015.
Investment performance
Overall, the UK economic environment remained favourable during the year
with particularly strong activity in the property sector. This
benefited the valuations of the asset-based investments, in particular
those in the healthcare and education sectors but also the London based
health clubs. The historically low level of interest rates contributed
to the increase in valuations, in particular in the renewable energy
sector where the Company's investments benefit from secure long term
income streams. We capitalised on these favourable market conditions by
exiting some of our mature asset-based investments and reinvesting into
new opportunities. The sale of Oakland Care Centre Limited generated a
return of 2.0 times cost over the four year holding period, while the
sale of Orchard Portman Group Limited and Tower Bridge Healthclubs
Limited generated returns of 1.6 times and 2.7 times investment cost
respectively. Together with loan stock repayments, the Company achieved
disposal proceeds of GBP7,364,000 compared to GBP1,188,000 in the
previous year. Further detail of realisations is given on page 19 of
the full Annual Report and Financial Statements.
During the year, your Company continued to benefit from a strong
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investment pipeline which more than doubled the investment rate compared
to the previous year. GBP7,060,000 was invested in new and existing
portfolio companies compared to GBP2,539,000 in the previous year. New
investments included Shinfield Lodge Care Limited (GBP900,000), a
residential care home development near Reading; Exco Intouch Limited
(GBP290,000), a healthcare technology company; and OmPrompt Holdings
Limited (GBP100,000), an enterprise software provider. GBP2,037,000 was
invested in Chonais River Hydro Limited and Gharagain River Hydro
Limited to fund the construction of the assets; GBP1,008,000 was
invested in Radnor House School (Holdings) Limited to support the
acquisition of an independent school in Kent; and GBP690,000 was
invested in Active Lives Care Limited and Ryefield Court Care Limited to
fund the construction of care homes. The Company's committed investment
programme as at 30 June 2015 was GBP3 million, of which GBP2.4 million
is in relation to the three residential care home developments mentioned
above.
Overall, the value of the Company's unquoted investment portfolio,
excluding investments disposed of, increased by GBP907,000 during the
year, driven by the asset-based investments, while that of the small AIM
portfolio fell by GBP79,000.
Amongst the unquoted investments, Radnor House School (Holdings) Limited
continues to make good progress. The acquisition of Combe Bank School
near Sevenoaks, Kent completed in March 2015 and early signs are
positive. The renewable energy investments are also performing well,
with the two hydroelectricity investments generating electricity ahead
of forecast. Construction is progressing on the three care homes, which
are due to open in the first half of 2016. Following the year end, a
number of offers have been received for Kensington Health Club. In the
growth portfolio, Masters Pharmaceuticals and Hilson Moran are growing
profitably, while many of the technology investments are making good
progress in expanding their businesses. The largest negative valuation
movements over the period were Rostima, which reduced by GBP367,000 and
Lowcosttravelgroup, which reduced by GBP351,000. Trading at
Lowcosttravelgroup, an online travel business, is slower than
anticipated. Rostima, a company in which we invested in 2007, provides
staff rostering software for international ports and although a leader
in its field, has had difficulties penetrating a complex market and the
investment is now largely written off.
Risks and uncertainties
The UK economic climate remains favourable, though a number of risks
remain, especially from external economic factors. The Company's
investment portfolio is well diversified and many of the sectors in
which its portfolio companies operate are resilient. Approximately
two-thirds of the unquoted portfolio is invested in companies with
tangible assets, which support their valuation. The majority of the
companies in the portfolio operate in growing markets, many with a
global dimension. It remains the Company's general policy that portfolio
companies should have no external bank borrowings, which reduces
financial risk. Therefore, as the investment portfolio continues to
mature, the prospects overall look positive. A detailed review of risk
management is set out in the Strategic report.
Changes in VCT legislation
The July 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 GBP12m 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. However, the legislation is still being worked on
and we will have a more detailed view of its effect after Royal Assent,
expected, at the latest, in November 2015.
Albion VCTs Prospectus Top Up Offers 2014/2015
The Albion VCTs Prospectus Top Up Offers 2014/2015 launched on 17
November 2014. Under the Offer the Company raised GBP4,271,000 for the
tax year to 5 April 2015 and a further GBP1,271,000 for the tax year to
5 April 2016. The proceeds of the Offer have been used to provide
further resources to the Company at a time when a number of attractive
new investment opportunities are being seen.
Further Top Up Offers are planned for later this year and details are
expected to be sent to shareholders in November 2015.
Dividend re-investment scheme
During the year, the Company raised GBP255,000 from the dividend
re-investment scheme. Through the scheme, shareholders may elect to
reinvest the whole of the dividend received by subscribing for new
shares in the Company. Under current tax rules, shareholders
re-investing their dividends will be eligible for the income and capital
gains tax advantages available to investors subscribing for new shares
in venture capital trusts and will be able to increase their
shareholding in the Company, without incurring dealing costs or stamp
duty. Full details of the scheme and the application form are available
on the Manager's website at: www.albion-ventures.co.uk/ourfunds/CRWN.
Board composition
Karen Brade was appointed Chair of the Audit and Risk Committee on 1
December 2014. In addition, following a formal and competitive
recruitment process, Penny Freer was appointed to the Board on 31
October 2014. Penny's biography is shown on page 15 of the full Annual
Report and Financial Statements. Her broad experience in investment
banking will bring a valuable added perspective to the Board.
Having served on the Board for over 9 years, Rachel Beagles has decided
to retire at the forthcoming Annual General Meeting. I would like to
thank Rachel for her contribution to the Company as an independent
director during this period and as Chair of the Audit and Risk Committee
from 2010 to 2014 and as Senior Independent Director. I am pleased to
announce that after a rigorous recruitment process, James Agnew will be
joining the Board on 1 November 2015. James has extensive experience in
investment banking and private equity fund management and is currently a
partner at Harwood Private Equity.
Outlook
The economic environment in the UK remains favourable for smaller
companies. While many companies are finding it easier than in the
recent past to obtain funding from traditional sources, your Company
continues to find attractive investment opportunities, especially in
sectors such as healthcare, education and technology, where the Manager
has many years of investment experience, expertise and well established
relationships.
Richard Huntingford
Chairman
13 October 2015
Strategic report
Investment objective and policy
The Company's investment objective is to achieve long term capital and
income growth principally through investment in smaller unquoted
companies in the United Kingdom. The Company's investment portfolio is
structured to provide a balance between income and capital growth for
the longer term through a diversified, balanced approach to investment.
The asset-based portfolio, which currently accounts for about two-thirds
of investments, is designed to provide stability and income whilst
maintaining the potential for capital growth. The growth portfolio is
intended to provide diversified exposure through its portfolio of
investments in predominately unquoted UK companies. In neither category
do portfolio companies normally have any external borrowing with a
charge ranking ahead of the Company.
Business model
The Company operates as a Venture Capital Trust. This means that the
Company has no employees other than its Directors and has outsourced the
management of all its operations to Albion Ventures LLP, including
secretarial and administrative services. Further details of the
Management agreement can be found below.
Current and future portfolio sector allocation
The pie chart at the end of this annoucement shows the split of the
portfolio valuation by industrial or commercial sector as at 30 June
2015. The portfolio remains well diversified and as at the year end
comprised 55 investments. There were 24 unquoted asset-based investments
accounting for 56 per cent. of the net asset value of the Company, 28
unquoted growth investments accounting for 28 per cent. of the net asset
value of the Company and 3 AIM quoted investments, accounting for 2 per
cent. of the net asset value of the Company.
Overall, the direction of the portfolio remained unchanged in the past
financial year. The Company continued to increase its exposure to the
less cyclical healthcare, education and renewable energy sectors which
now account for approximately 45 per cent. of the portfolio value.
Looking ahead, the healthcare sector will continue to be a core area of
investment, both in asset-based businesses such as care homes, and in
medical technology. It is not envisaged to increase the number of
investments in the renewable energy portfolio though the revenue
generated by the portfolio will continue to increase, as some of the
projects are yet to make a full year's income contribution. Investment
in education, in the form of Radnor House School, is expected to grow
through the recent acquisition of Combe Bank School and, in time,
through further acquisitions. In addition, a number of the IT companies
in the portfolio have good growth prospects and the Company expects to
continue supporting them, as required.
Results and dividend policy
GBP'000
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Consolidated revenue return for the year ended 30 June 2015 700 Consolidated capital return for the year ended 30 June 2015 639 Dividend of 1.25p per share paid on 28 November 2014 (1,142) Dividend of 1.25p per share paid on 31 March 2015 (1,195) Transferred to reserves (998) Net assets as at 30 June 2015 33,081 Net asset value as at 30 June 2015 (pence per share) 30.97 The Company paid dividends totalling 2.50 pence per share during the year ended 30 June 2015 (2014: 2.50 pence per share). The dividend objective of the Board is to provide Shareholders with a strong, predictable dividend flow, with a dividend target of 2.50 pence per share per year. The Board has declared a first dividend for the year ending 30 June 2016 of 1.25 pence per share. This dividend will be paid on 30 November 2015 to shareholders on the register as at 6 November 2015. As shown in the Consolidated statement of comprehensive income, investment income has increased to GBP1,105,000 (2014: GBP925,000), resulting in an increase of revenue return to GBP700,000 (2014: GBP525,000). The capital return for the year was a profit of GBP639,000 (2014: GBP1,451,000), as a result of net realised gains on disposal of investments, net unrealised gains on investments in particular Kensington Health Club and Radnor House School, unrealised losses on investments in particular Lowcosttravelgroup and Rostima, partially offset by management fees charged to capital. The total return for the year was 1.40 pence per share (2014: 2.28 pence per share). The Consolidated balance sheet, shows that the net asset value has decreased over the year to 30.97 pence per share (2014: 32.04 pence per share), due to the payment of the dividend of 2.50 pence per share during the year, partially offset by the total return for the year of 1.40 pence per share. The consolidated cash flow for the business has been a net inflow of GBP2,540,000 for the year (2014: outflow GBP1,314,000), reflecting cash inflows from operations, disposal proceeds and the issue of Ordinary shares under the Albion VCTs Top Up Offers, offset by dividends paid, new investments in the year and the buy-back of shares. Review of the business A review of the Company's business during the year is set out in the Chairman's statement. The Directors do not foresee any major changes in the activity undertaken by the Company in the current year and have outlined their thoughts on the direction of the portfolio above. The Company continues with its objective to invest in unquoted companies throughout the United Kingdom with a view to providing both capital growth and a reliable dividend income to shareholders over the longer term. 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. The subsidiary undertakings affecting the profits and net assets of the Group in the year are listed in note 11 to the Financial Statements. Update on CP2 VCT PLC CP2 VCT PLC is a wholly-owned subsidiary of the Company. CP2 VCT PLC transferred its business to Crown Place VCT PLC and ceased trading with effect from the date of merger on 12 January 2006. Since then, CP2 VCT PLC has had no further business other than to hold cash and intercompany balances. CP2 VCT PLC had significant tax losses which have been utilised by the Company through group relief. However, as the tax losses are nearly depleted, it is now the intention of the Directors to liquidate CP2 VCT PLC within a period of at least twelve months from the date on which these financial statements are approved. For this reason, the accounts of CP2 VCT PLC have not adopted a going concern basis of preparation. Future prospects The key drivers for returns within the portfolio are those sectors that have exposure to longer term growth trends. These include healthcare in an ageing population, sustainable energy against a background of climate change, and the developing use of information technology in an environment of universal information. The portfolio is well diversified and many investments are underpinned by property and other physical assets. In addition, the great majority of investments are structured to be cash generative in order to provide further support for your Company's dividend. The Board remains confident in the long term prospects of the Company to deliver an attractive return to shareholders. Key performance indicators The Directors believe that the following key performance indicators, which are typical for venture capital trusts and used in its own assessment of the Company, will provide shareholders with sufficient information to assess how effectively the Company has been applying its investment policy to meet its objectives. The Directors are satisfied that the results shown in the following key performance indicators give a good indication that the Company is achieving its investment objective and policy. These are: 1. Increase in total shareholder value The graph on page 9 of the full Annual Report and Financial Statements shows total shareholder value increased by 1.43 pence per share to 80.20 pence per share (2014: 78.77) for the year ended 30 June 2015. 2. Annual net asset value total return to shareholders The table on page 9 of the full Annual Report and Financial Statements shows annual total return to shareholders has remained positive for the sixth consecutive year at 4.5% (2014: 7.1%) for the year ended 30 June 2015. 3. Dividend distributions Dividends paid in respect of the year ended 30 June 2015 were 2.50 pence per share (2014: 2.50 pence per share), in line with the Board's dividend objective. Cumulative dividends paid since launch (on 18 January 1998) amount to 49.23 pence per share. 4. Ongoing charges The ongoing charges ratio for the year to 30 June 2015 was 2.6 per cent. (2014: 2.7 per cent.). 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 per cent. 5. Running yield The running yield on the portfolio (gross income divided by the average net asset value) for the year to 30 June 2015 was 3.6 per cent. (2014: 3.4 per cent.). 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. The relevant tests to measure compliance have been carried out and independently reviewed for the year ended 30 June 2015. These showed that the Company has complied with all tests and continues to do so. Changes in VCT legislation During the July 2015 summer budget, new conditions were announced that are expected to become effective from Royal Assent in November 2015 (this is subject to State Aid approval from the EU Commission). How these conditions apply to the Company is summarised as follows: 1. no investment made by the Company in a company causes that company to receive more than GBP12 million (GBP20 million if the company is deemed to be a Knowledge Intensive Company) of State Aid investment (including from VCTs) over the company's lifetime; 2. no investment can be made by the Company in a company whose first commercial sale was more than 7 years prior to date of investment, except where previous Risk Finance State Aid was received by the company within 7 years or where a turnover test is satisfied; and 3. no funds received from an investment into a company can be used to acquire another existing business or trade. 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, however the legislation is still being worked on and we will have a more detailed view of its effect after Royal Assent, expected in November 2015. Gearing As defined by the Articles of Association, the Company's maximum exposure in relation to gearing is restricted to 10 per cent. of the adjusted share capital and reserves. The Directors do not currently have any intention to utilise long term gearing. Operational arrangements The Group 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 Group. Further details regarding the terms of engagement of the Manager and the way the Board have evaluated the performance of the Manager are shown below. Management agreement Under the terms of the Management agreement, the Manager is paid an annual fee equal to 1.75 per cent. of the net asset value of the Company plus GBP50,000 fee per annum for administrative and secretarial
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services. Total normal running costs, including the management fee, are
limited to 3.0 per cent. of the net asset value. The Manager is entitled
to an arrangement fee, payable by each portfolio company in which the
Company invests, in the region of 2.0 per cent. on each investment made,
and is also entitled to non-executive director fees when placing an
investment executive from Albion Ventures LLP on the portfolio company
Board.
Further details of fees paid to the Manager can be found in note 4.
The 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.
Management performance incentive
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 per share.
The target level requires that the growth of the aggregate of the net
asset value per share and dividends paid by the Company or declared by
the Board and approved by the shareholders during the relevant period
(both revenue and capital), compared with the previous accounting date,
exceeds the average base rate of the Royal Bank of Scotland plc plus 2.0
per cent. If the target return is not achieved in a period, the
cumulative shortfall is carried forward to the next accounting period
and has to be made up before an incentive fee becomes payable.
There was no management performance incentive fee payable during the
year (2014: nil). As at 30 June 2015 the cumulative shortfall of the
target return was 7.41 pence per share (2014: 7.42 pence per share) and
this amount needs to be made up in the next accounting period before an
incentive fee becomes payable.
Evaluation of the Manager
The Board has evaluated the performance of the Manager based on the
returns generated by the Company, the continuing achievement of the 70
per cent. investment requirement for venture capital trust status, the
long term prospects of current investments, a review of the 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 interest 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.
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 and statements
The Company has adopted a number of further policies and statements
relating to:
-- Environment
-- Global greenhouse gas emissions
-- Anti-bribery
-- Diversity
and these are set out in the Directors' report on pages 23 and 24 of the
full Annual Report and Financial Statements.
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. Thereafter, it is
the Board's policy to buy back shares in the market, subject to the
overall constraint that such purchases are in the VCT's interest and it
is 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.
Further details of shares bought back during the year ended 30 June 2015
can be found in note 14 of the 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 Changes in economic conditions, including, for example, To reduce this risk, in addition to investing equity
risk interest rates, rates of inflation, industry conditions, in portfolio companies, the Company often invests
competition, political and diplomatic events and other in fixed interest secured loan stock and has a policy
factors could substantially and adversely affect the of not normally permitting any external bank borrowings
Company's prospects in a number of ways. 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 This is the risk of investment in poor quality assets To reduce this risk, the Board places reliance upon
risk which reduces the capital and income returns to shareholders, the skills and expertise of the Manager in investing
and negatively impacts on the Company's reputation. in this segment of the market. The Manager invests
By nature, smaller unquoted businesses, such as those in a diversified portfolio of companies, across a
that qualify for venture capital trust purposes, are number of sectors of the economy, thus spreading investment
more fragile than larger, long established businesses. risk. In addition, the Manager operates a formal and
The success of investments in certain sectors is also structured investment process, which includes an Investment
subject to regulatory risk, such as those affecting Committee, comprising investment professionals from
companies involved in UK renewable energy. 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. The Board and the Manager closely
monitor regulatory changes in the sectors in which
the Company is invested.
Valuation The Company's investment valuation methodology is As described in note 1 of the Financial Statements,
risk reliant on the accuracy and completeness of information the unquoted equity investments, convertible loan
that is issued by portfolio companies. In particular, stock and debt issued at a discount held by the Company
the Directors may not be aware of or take into account are designated at fair value through profit or loss
certain events or circumstances which occur after and valued in accordance with the International Private
the information issued by such companies is reported. 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
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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 sensitivity of these assumptions are
commented on further in notes 9 and 18. All other
unquoted loan stock is measured at amortised cost.
The values of a number of investments are also underpinned
by independent third party professional valuations.
VCT approval The Company's current approval as a venture capital To reduce this risk, the Board has appointed the Manager,
risk trust allows investors to take advantage of tax reliefs which has a team with significant experience in venture
on initial investment and ongoing tax-free capital capital trust management, used to operating within
gains and dividend income. Failure to meet the qualifying the requirements of the venture capital trust legislation.
requirements could result in investors losing the In addition, to provide further formal reassurance,
tax relief on initial investment and loss of tax relief the Board has appointed Robertson Hare LLP as its
on any tax-free income or capital gains received. taxation adviser. Robertson Hare LLP report quarterly
In addition, failure to meet the qualifying requirements to the Board to independently confirm compliance with
could result in a loss of listing of the shares. 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.
VCT The Company is required to comply with regular changes The Board receives advice from Robertson Hare LLP
regulatory to VCT specific regulations including the latest ones in respect of these requirements and conducts its
changes relating to European State Aid regulations which are affairs in order to comply with these requirements.
risk enacted by the UK Government. Non-compliance could The Manager engages regularly with policy makers on
result in a loss of VCT status and/or demands for regulation. In addition, the Board places reliance
repayment of State Aid by a portfolio company or by upon the skills and expertise of the Manager in investing
VCT investors. in this segment of the market.
Compliance The Company is listed on The London Stock Exchange Board members and the Manager have experience of operating
risk and is required to comply with the rules of the UK at senior levels within or advising quoted businesses.
Listing Authority, as well as with the Companies Act, In addition, the Board and the Manager receive regular
Accounting Standards and other legislation. Failure updates on new regulation from its auditor, lawyers
to comply with these regulations could result in a and other professional bodies. The Company is subject
delisting of the Company's shares, or other penalties to compliance checks via the Manager's Compliance
under the Companies Act or from financial reporting Officer. The Manager reports monthly to its Board
oversight bodies. 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 Failures in key controls, within the Board or within The Audit and Risk Committee meets with the Manager's
control the Manager's business, could put assets of the Company Internal Auditor, PKF Littlejohn LLP, when required,
risk at risk or result in reduced or inaccurate information receiving a report regarding the last formal internal
being passed to the Board or to shareholders. audit performed on the Manager, and providing the
opportunity for the Audit and Risk Committee to ask
specific and detailed questions. Karen Brade as the
Chairman of the Audit and Risk Committee met with
the internal audit partner of PKF Littlejohn LLP in
January 2015 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 security
risk in order to ensure the integrity, availability
and confidentiality of information used within the
business.
Reliance The Group and the Company are reliant upon the services There are provisions within the Management agreement
upon third of Albion Ventures LLP and other third party service for the change of Manager under certain circumstances
parties providers for the provision of investment management (for further detail, see the Management agreement
risk and administrative functions. paragraph in the Strategic Report). 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 By its nature, as a venture capital trust, the Company The Company's policies for managing these risks and
risk is exposed to investment risk (which comprises investment its financial instruments are outlined in full in
price risk and cash flow interest rate risk), credit note 18 to the Financial Statements.
risk and liquidity risk. All of the Group's income and expenditure is denominated
in sterling and hence the Group has no foreign currency
risk. The Group is financed through equity and does
not have any borrowings. The Group does not use derivative
financial instruments for speculative purposes.
Reputational This arises from broader performance and ethical issues, The Board clearly articulates to the Investment Manager
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risk including investment in businesses and sectors that its broader aims and standards including those sectors
are inconsistent with the values of Board and the which are consistent with the values of the Board.
VCT or, by the Boards of portfolio companies taking The Board regularly reviews the performance and investment
actions which similarly are inconsistent with the strategy of the Investment Manager. The Investment
values of the VCT. Manager periodically attends Board meetings of the
VCT's portfolio companies and across the portfolio
receives periodic management information and is alert
to potential threats to reputation.
This Strategic report of the Company for the year ended 30 June 2015 has
been prepared in accordance with the requirements of section 414A of 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.
On behalf of the Board,
Richard Huntingford
Chairman
13 October 2015
Responsibility Statement
In preparing these financial statements for the year to 30 June 2015,
the Directors of the Company, being Richard Huntingford, Rachel Beagles,
Karen Brade and Penny Freer, 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 30 June 2015
for the Group has been prepared in accordance with International
Financial Reporting Standards, and 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
Group and the Company for the year ended 30 June 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 30 June 2015 and description of principal risks and
uncertainties that the Group and 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 for the preparation
of the Group and the Company's financial statements" is contained within
the full audited Annual Report and Financial Statements.
By order of the Board
Richard Huntingford
Chairman
13 October 2015
Consolidated statement of comprehensive income
Year ended Year ended
30 June 2015 30 June 2014
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on investments 2 - 1,036 1,036 - 1,812 1,812
Investment income and
deposit interest 3 1,105 - 1,105 925 - 925
Investment management
fees 4 (133) (397) (530) (120) (361) (481)
Other expenses 5 (272) - (272) (280) - (280)
Profit before taxation 700 639 1,339 525 1,451 1,976
Taxation 6 - - - - - -
Profit and total
comprehensive income for
the year 700 639 1,339 525 1,451 1,976
Basic and diluted
earnings per Ordinary
share (pence)* 8 0.73 0.67 1.40 0.61 1.67 2.28
* excluding treasury shares
The accompanying notes form an integral part of these Financial
Statements.
The total column of this statement represents the Group's statement of
comprehensive income, prepared in accordance with International
Financial Reporting Standards ('IFRS'). The supplementary revenue and
capital columns are prepared under guidance published by the Association
of Investment Companies.
All revenue and capital items in the above statement derive from
continuing operations and are wholly attributable to the owners of the
parent Company.
Consolidated balance sheet
30 June 2015 30 June 2014
Note GBP'000 GBP'000
Non-current assets
Investments 9 28,531 27,689
Current assets
Trade and other receivables less than one
year 12 788 74
Current asset investments 12 - 42
Cash and cash equivalents 16 4,006 1,466
4,794 1,582
Total assets 33,325 29,271
Current liabilities
Trade and other payables less than one year 13 (244) (221)
Net assets 33,081 29,050
Equity attributable to equityholders
Ordinary share capital 14 11,767 10,006
Share premium 9,234 5,527
Capital redemption reserve 1,415 1,415
Unrealised capital reserve 1,612 657
Realised capital reserve (171) 145
Other distributable reserve 9,224 11,300
Total equity shareholders' funds 33,081 29,050
Basic and diluted net asset value per share
(pence)* 15 30.97 32.04
* 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
authorised for issue on 13 October 2015 and were signed on its behalf by
Richard Huntingford
Chairman
Company number: 03495287
Company balance sheet
30 June 2015 30 June 2014
Note GBP'000 GBP'000
Fixed assets
Fixed asset investments 9 28,531 27,689
Investment in subsidiary undertakings 11 6,619 15,095
35,150 42,784
Current assets
Investment in subsidiary undertakings 11 8,473 -
Trade and other debtors 12 788 74
Current asset investments 12 - 42
Cash at bank and in hand 16 3,950 1,410
13,211 1,526
Creditors: amounts falling due within one
year 13 (15,280) (15,260)
Net current assets (2,069) (13,734)
Net assets 33,081 29,050
Capital and reserves
Ordinary share capital 14 11,767 10,006
Share premium 9,234 5,527
Capital redemption reserve 1,415 1,415
Unrealised capital reserve 1,647 695
Realised capital reserve (380) (64)
Other distributable reserve 9,398 11,471
Total equity shareholders' funds 33,081 29,050
Basic and diluted net asset value per share
(pence)* 15 30.97 32.04
* excluding treasury shares
The Company balance sheet has been prepared in accordance with UK GAAP.
The accompanying notes form an integral part of these Financial
Statements.
These Financial Statements were approved by the Board of Directors, and
authorised for issue on 13 October 2015 and were signed on its behalf by
Richard Huntingford
Chairman
Company number: 03495287
Consolidated statement of changes in equity
Ordinary Capital Unrealised Realised Other
share Share redemption capital capital distributable
capital premium reserve reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 July 2014 10,006 5,527 1,415 657 145 11,300 29,050
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Profit and total comprehensive income - - - 759 (120) 700 1,339
Transfer of previously unrealised losses on sale or
write off of investments - - - 196 (196) - -
Dividends paid - - - - - (2,337) (2,337)
Purchase of shares for treasury (including costs) - - - - - (439) (439)
Issue of equity 1,761 3,860 - - - - 5,621
Cost of issue of equity - (153) - - - - (153)
As at 30 June 2015 11,767 9,234 1,415 1,612 (171) 9,224 33,081
As at 1 July 2013 9,300 3,756 1,283 (1,690) 1,041 13,476 27,166
Profit and total comprehensive income - - - 1,823 (372) 525 1,976
Transfer of previously unrealised losses on sale or
write off of investments - - - 524 (524) - -
Dividends paid - - - - - (2,132) (2,132)
Purchase of shares for treasury (including costs) - - - - - (174) (174)
Purchase of own shares for cancellation (including
costs) (132) - 132 - - (395) (395)
Issue of equity 838 1,845 - - - - 2,683
Cost of issue of equity - (74) - - - - (74)
As at 30 June 2014 10,006 5,527 1,415 657 145 11,300 29,050
The nature of each reserve is described in note 1 below.
Company reconciliation of movements in shareholders' funds
Ordinary Capital Unrealised Realised Other
share Share redemption capital capital distributable
capital premium reserve reserve reserve* reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 July 2014 10,006 5,527 1,415 695 (64) 11,471 29,050
Return for the year - - - 759 (120) 703 1,342
Revaluation of investment in subsidiaries - - - (3) - - (3)
Transfer of previously unrealised losses on disposal
of investments - - - 196 (196) - -
Dividends paid in year - - - - - (2,337) (2,337)
Purchase of shares for treasury (including costs) - - - - - (439) (439)
Issue of equity 1,761 3,860 - - - - 5,621
Cost of issue of equity - (153) - - - - (153)
As at 30 June 2015 11,767 9,234 1,415 1,647 (380) 9,398 33,081
As at 1 July 2013 9,300 3,756 1,283 (167) 832 12,162 27,166
Return for the year - - - 1,823 (372) 2,010 3,461
Revaluation of investment in subsidiaries - - - (1,485) - - (1,485)
Transfer of previously unrealised losses on disposal
of investments - - - 524 (524) - -
Dividends paid in year - - - - - (2,132) (2,132)
Purchase of shares for treasury (including costs) - - - - - (174) (174)
Purchase of own shares for cancellation (including
costs) (132) - 132 - - (395) (395)
Issue of equity 838 1,845 - - - - 2,683
Cost of issue of equity - (74) - - - - (74)
As at 30 June 2014 10,006 5,527 1,415 695 (64) 11,471 29,050
* Included within these reserves is an amount of GBP9,018,000 (2014:
GBP11,407,000) which is considered distributable.
The nature of each reserve is described in note 1 below.
Consolidated cashflow statement
Year ended Year ended
30 June 30 June
2015 2014
Note GBP'000 GBP'000
Operating activities
Investment income received 965 880
Deposit interest received 30 18
Dividend income received 51 29
Investment management fees paid (512) (473)
Other cash payments (282) (267)
Net cash flow from operating activities 17 252 187
Cash flow from investing activities
Purchase of non-current asset investments (7,006) (2,539)
Disposal of non-current asset investments 7,187 1,129
Net cash flow from investing activities 181 (1,410)
Cash flow from financing activities
Issue of share capital 4,614 2,449
Equity dividends paid (2,078) (1,966)
Cost of issue of equity (4) (5)
Purchase of shares for treasury (425) (174)
Purchase of shares for cancellation - (395)
Net cash flow used in financing activities 2,107 (91)
Increase/(decrease) in cash and cash
equivalents 2,540 (1,314)
Cash and cash equivalents at the start of the
year 1,466 2,780
Cash and cash equivalents at the end of the
year 16 4,006 1,466
Company cashflow statement
Year ended Year ended
30 June 30 June
2015 2014
Note GBP'000 GBP'000
Operating activities
Loan stock income received 965 880
Deposit interest received 30 18
Dividend income received 1,866 3,416
Investment management fees paid (512) (473)
Intercompany interest paid (1,815) (3,387)
Other cash payments (282) (267)
Net cash flow from operating activities 17 252 187
Taxation
UK corporation tax paid - -
Capital expenditure and financial investments
Purchase of fixed asset investments (7,006) (2,539)
Disposal of fixed asset investments 7,187 1,129
Net cash flow from investing activities 181 (1,410)
Equity dividends paid
Dividends paid (2,078) (1,966)
Net cash flow before financing (1,645) (3,189)
Financing activities
Issue of share capital 4,614 2,449
Cost of issue of equity (4) (5)
Purchase of own shares for treasury (including
costs) (425) (174)
Purchase of own shares for cancellation (including
costs) - (395)
Net cash flow from financing 4,185 1,875
Cash flow in the year 16 2,540 (1,314)
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Notes to the Financial Statements
1. Accounting policies
The following policies refer to the Group and the Company except where
noted. References to International Financial Reporting Standards
('IFRS') relate to the Group Financial Statements and United Kingdom
Generally Accepted Accounting Practice ('UK GAAP') relate to the Company
Financial Statements.
Basis of accounting
The Financial Statements have been prepared in accordance with
International Financial Reporting Standards ('EU IFRS') as adopted by
the European Union (and therefore comply with Article 4 of the EU IAS
regulation), in the case of the Group, and in accordance with UK GAAP in
the case of the Company.
Both the Group and the Company Financial Statements also apply the
Statement of Recommended Practice: "Financial Statements of Investment
Companies and Venture Capital Trusts" ('SORP') issued by the Association
of Investment Companies ("AIC") in January 2009, in so far as this does
not conflict with IFRS. The Financial Statements have been prepared in
accordance with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS and UK GAAP. These Financial Statements
are presented in Sterling to the nearest thousand. Accounting policies
have been applied consistently in current and prior periods.
At the balance sheet date, the following International Accounting
Standards and interpretations were in issue but not yet effective:
-- IFRS 9 Financial Instruments (effective for annual periods beginning on
or after 1 January 2018) (the amendments to IFRS 9 are not yet endorsed
for use in the EU, expected endorsement is not yet determined)
-- IFRS 10 / IAS 28 Sale or contribution of assets between an investor and
its associate or joint venture (effective for annual periods beginning on
or after 1 January 2016)
-- IFRS 11 Accounting for Acquisitions of Interest in Joint Operations
(effective for annual periods beginning on or after 1 January 2016)
-- IFRS 14 Regulatory Deferral Accounts (effective for annual periods
beginning on or after 1 January 2016)
-- IFRS 15 Revenue from Contracts with Customers (effective for annual
periods beginning on or after 1 January 2018) (the amendments to IFRS 15
are not yet endorsed for use in the EU, expected endorsement is not yet
determined)
-- IAS 16 / IAS 41 Clarification of Acceptable Methods of Depreciation and
Amortisation (effective for annual periods beginning on or after 1
January 2016)
-- IAS 27 Equity Method in Separate Financial Statements (effective for
annual periods beginning on or after 1 January 2016)
The above International Accounting Standards and interpretations have
not been applied in this Annual Report and Financial Statements and are
not expected to have any material impact on the Financial Statements
although some changes may be required to the format of the Financial
Statements and disclosures.
Basis of consolidation
The Group consolidated Financial Statements incorporate the Financial
Statements of the Company for the year ended 30 June 2015 and the
entities controlled by the Company (its subsidiaries), for the same
period. Where necessary, adjustments are made to the Financial
Statements of subsidiaries to bring the accounting policies into line
with those used by the Group. All intra-group transactions, balances,
income and expenses are eliminated on consolidation.
As permitted by Section 408 of the Companies Act 2006, the Company has
not presented its own profit and loss account. The amount of the
Company's profit before tax for the year dealt with in the accounts of
the Group is GBP1,342,000 (2014: GBP3,461,000).
Segmental reporting
The Directors are of the opinion that the Group and the Company are
engaged in a single operating segment of business, being investment in
equity and debt. The Group and the Company report to the Board which
acts as the chief operating decision maker. The Group invests in smaller
companies principally based in the UK.
Business combinations
The acquisition of subsidiaries is accounted for using the purchase
method in the Group Financial Statements. The cost of the acquisition is
measured at the aggregate of the fair values, at the date of exchange,
of assets given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the subsidiaries, plus
any costs directly attributable to the business combination. The
subsidiary's identifiable assets, liabilities and contingent liabilities
that meet the conditions for recognition under IFRS 3 "Business
Combinations" are recognised at their fair value at the acquisition
date.
Estimates
The preparation of the Group's and Company's Financial Statements
requires estimates, assumptions and judgments to be made, which affect
the reported results and balances. Actual outcomes may differ from these
estimates, with a consequential impact on the results of future periods.
Those estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are those used to determine the fair
value of investments at fair value through the profit or loss.
Reasonable possible alternative assumptions have been considered,
details of which are given in note 9.
The valuation of investments held at fair value through profit or loss
or measured in assessing any impairment of loan stocks is determined by
using valuation techniques. The Group and the Company use judgments to
select a variety of methods and makes assumptions that are mainly based
on market conditions and portfolio company performance at each balance
sheet date.
Investment in subsidiaries
Investments in subsidiaries are revalued at the balance sheet date based
on the underlying net assets of the subsidiary undertakings. Revaluation
movements are recognised in the unrealised reserve.
CP2 VCT PLC is a wholly-owned subsidiary of the Company. CP2 VCT PLC
transferred its business to Crown Place VCT PLC and ceased trading with
effect from the date of merger on 12 January 2006. Since then, CP2 VCT
PLC has had no further business other than to hold cash and intercompany
balances. CP2 VCT PLC had significant tax losses which have been
utilised by the Company through group relief. However, as the tax losses
are nearly depleted, it is now the intention of the Directors to
liquidate CP2 VCT PLC within a period of at least twelve months from the
date on which these financial statements are approved. For this reason,
the accounts of CP2 VCT PLC have not adopted a going concern basis of
preparation.
The above decision will not affect CP1 VCT PLC, which will continue to
be a wholly supported subsidiary company.
Non-current asset investments
Quoted and unquoted equity investments, debt issued at a discount, and
convertible bonds
In accordance with IAS 39 'Financial Instruments: Recognition and
Measurement', and 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 International Private Equity and Venture Capital Valuation
Guidelines (IPEVCV guidelines).
Fair value movements and gains and losses arising on the disposal of
investments are reflected in the capital column of the Statement of
comprehensive income in accordance with the AIC SORP. Realised gains or
losses on the sale of investments will be reflected in the realised
capital reserve, and unrealised gains or losses arising from the
revaluation of investments will be reflected in the unrealised capital
reserve.
Warrants and unquoted equity derived instruments
Warrants and unquoted equity derived instruments are only valued if
there is deemed to be additional value to the Company in exercising or
converting as at the balance sheet date. Otherwise these instruments are
held at nil value. The valuation techniques used are those used for the
underlying equity investment.
Unquoted loan stock
Unquoted loan stock (excluding debt issued at a discount and convertible
bonds) is classified as loans and receivables as permitted by IAS 39 and
FRS 26 and measured at amortised cost using the effective interest rate
method less impairment. Movements in the amortised cost relating to
interest income are reflected in the revenue column of the Statement of
comprehensive income, and hence are reflected in the other distributable
reserve, and movements in respect of capital provisions are reflected in
the capital column of the Statement of comprehensive income 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, 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 held less estimated selling costs.
Investments are recognised as financial assets on legal completion of
the investment contract and are de-recognised on legal completion of the
sale of an investment.
Loan stock accrued interest is recognised in the Balance sheet as part
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of the carrying value of the loans and receivables at the end of each
reporting period.
In accordance with the exemptions under IAS 28 "Investments in
associates" and FRS 9 "Associates and joint ventures", those
undertakings in which the Group or 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 as fair value through profit and loss and are
subsequently measured at fair value.
Investment income
Quoted and unquoted equity income
Dividends receivable on quoted equity shares are recognised on the
ex-dividend date. Income receivable on unquoted equity is recognised
when the Company's right to receive payment and expected settlement is
established.
Unquoted loan stock income
Fixed returns on non-equity shares and debt securities are recognised on
a time apportionment basis using an effective interest rate over the
life of the financial instrument. Income which is not capable of being
received within a reasonable period of time is reflected in the capital
value of the investment.
Bank interest income
Interest income is recognised on an accruals basis using the rate of
interest agreed with the bank.
Investment management fees, performance incentive fees and other
expenses
All expenses have been accounted for on an accruals basis. Expenses are
charged through the revenue column of the Statement of comprehensive
income, except for management fees and performance incentive fees which
are allocated in part to the capital column of the Statement of
comprehensive income, to the extent that these relate to the maintenance
or enhancement in the value of the investments and in line with the
Board's expectation that over the long term 75 per cent. of the Group's
investment returns will be in the form of capital gains.
Issue costs
Issue costs associated with the allotment of share capital have been
deducted from the share premium account.
Taxation
Taxation is applied on a current basis in accordance with IAS 12 "Income
taxes" and FRS 16 "Current tax". Taxation associated with capital
expenses is applied in accordance with the SORP. Deferred taxation is
provided in full on timing differences (in accordance with FRS 16), and
temporary differences (in accordance with IAS 12) 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. Temporary differences
(FRS 16) arise from differences between the carrying amounts of assets
and liabilities for financial reporting and the amounts used for
taxation purposes. Timing differences (IAS 12) 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
probable that future taxable profit will be available against which
unused tax losses and credits can be utilised. Deferred tax assets and
liabilities are not discounted.
Dividends
In accordance with IAS 10 and FRS 21 "Events after the balance sheet
date", dividends are accounted for in the period in which the dividend
is paid or approved at the Annual General Meeting.
Reserves
Share premium reserve
This reserve accounts for the difference between the price paid for the
Company's shares and the nominal value of those 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
This reserve accounts for movements from the revenue column of the
Statement of Comprehensive Income, the payment of dividends, the
buy-back of shares and other non-capital realised movements.
2. Gains on investments
Year ended Year ended
30 June 2015 30 June 2014
GBP'000 GBP'000
Unrealised gains on investments held at fair value
through profit or loss 185 1,780
Reversal of impairments on investments measured at
amortised cost 574 22
Unrealised gains on non-current asset investments
sub-total 759 1,802
Unrealised gains on current asset investments held
at fair value through
profit or loss - 21
Unrealised gains on investments 759 1,823
Realised gains on investments held at fair value through
profit or loss 487 -
Realised losses on investments measured at amortised
cost (216) (11)
Realised gains/(losses) on non-current asset investments
sub-total 271 (11)
Realised gains on current asset investments held at
fair value through profit or loss 6 -
Realised gains/(losses) on investments 277 (11)
1,036 1,812
Investments measured at amortised cost are unquoted loan stock
investments as described in note 9.
3. Investment income and deposit interest
Year ended Year ended
30 June 2015 30 June 2014
GBP'000 GBP'000
Income recognised on investments held at fair value
through profit or loss
UK dividend income 51 29
Interest on convertible bonds and debt issued at a
discount 295 145
346 174
Income recognised on investments measured at amortised
cost
Return on loan stock investments 729 732
Bank deposit interest 30 19
759 751
1,105 925
Interest income earned on impaired investments at 30 June 2015 amounted
to GBP205,000 (2014: GBP172,000). These investments are all held at
amortised cost.
4. Investment management fees
Year ended 30 June 2015 Year ended 30 June 2014
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management fee 133 397 530 120 361 481
Further details of the Management agreement under which the investment
management fee is paid are given in the Strategic report.
During the year, services of a total value of GBP580,000 (2014:
GBP531,000) were purchased by the Company from Albion Ventures LLP
comprising GBP530,000 in respect of management fees (2014: GBP481,000)
and GBP50,000 in respect of administration fees (2014: GBP50,000). At
the financial year end, the amount due to Albion Ventures LLP in respect
of these services disclosed as accruals and deferred income was
GBP156,500 (administration fee accrual: GBP12,500, management fee
accrual GBP144,000) (2014: GBP139,500).
Albion Ventures LLP is, from time to time, eligible to receive
transaction fees and Directors' fees from portfolio companies. During
the year ended 30 June 2015 fees of GBP211,000 attributable to the
investments of the Company were received pursuant to these arrangements
(2014: GBP67,000).
Albion Ventures LLP holds 1,256 Ordinary shares as a result of
fractional entitlements arising on the merger of Crown Place VCT PLC,
CP1 VCT PLC and CP2 VCT PLC on 13 January 2006. In addition, Albion
Ventures LLP holds a further 48,761 Ordinary shares in the Company.
5. Other expenses
Year ended Year ended
30 June 2015 30 June 2014
GBP'000 GBP'000
Directors' remuneration 75 75
National insurance on Directors' remuneration 6 6
Auditor's remuneration:
- audit of the statutory Financial Statements (excluding
VAT) 26 26
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- the auditing of accounts of associates of the Company
pursuant to legislation (excluding VAT) 5 5
Impairment of accrued interest - 10
Other expenses 160 158
272 280
Further information regarding Directors' remuneration can be found in
the audited section of the Directors' remuneration report on page 33 of
the full Annual Report and Financial Statements.
6. Taxation
Year ended 30 June 2015 Year ended 30 June 2014
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
- - - - - -
UK corporation tax charge
The tax charge for the year shown in the Statement of comprehensive
income is lower than the standard rate of corporation tax of 21 per
cent. to 31 March 2015 and 20 per cent. from 1 April 2015 (average rate
of 20.75 per cent.) (2014: average rate of 22.50 per cent.). The
differences are explained below:
Year ended Year ended
30 June 2015 30 June 2014
GBP'000 GBP'000
Profit before taxation 1,339 1,976
Profit multiplied by the standard rate of corporation
tax (278) (445)
Effect of capital gains not subject to taxation 215 408
Effect of income not subject to taxation 11 7
Utilisation of tax losses 52 30
- -
No provision for deferred tax has been made in the current or prior
accounting period. The Company and Group have not recognised a deferred
tax asset of GBP3,037,000 (2014: GBP2,725,000) in respect of unutilised
management expenses and non-trading deficits as it is not considered
sufficiently probable that there will be taxable profits against which
to utilise these expenses in the foreseeable future. The Group has not
recognised a further deferred tax asset of GBP302,000 (2014: GBP664,000)
in respect of unutilised management expenses and deficits arising from
non-trading relationships which would only be used if its subsidiaries
made significant profits.
7. Dividends
Year ended Year ended
30 June 2015 30 June 2014
GBP'000 GBP'000
First dividend paid on 28 November 2014
(29 November 2013) (1.25 pence per share) 1,142 1,053
Second dividend paid on 31 March 2015
(31 March 2014) (1.25 pence per share) 1,195 1,079
2,337 2,132
In addition to the dividends paid above, the Board has declared a first
dividend for the year ending 30 June 2016, of 1.25 pence per share. This
will be paid on 30 November 2015 to shareholders on the register as at 6
November 2015. The total dividend will be approximately GBP1,362,000.
8. Basic and diluted return per share
Year ended 30 June 2015 Year ended 30 June 2014
Revenue Capital Total Revenue Capital Total
Return attributable to equity shares (GBP'000) 700 639 1,339 525 1,451 1,976
Weighted average shares (excluding treasury shares) 95,555,497 86,017,237
Return attributable per Ordinary share (pence) (basic
and diluted) 0.73 0.67 1.40 0.61 1.67 2.28
The return per share has been calculated excluding treasury shares of
10,852,410 (2014: 9,376,410).
There are no convertible instruments, derivatives or contingent share
agreements in issue, and therefore no dilution affecting the return per
share. The basic return per share is therefore the same as the diluted
return per share.
9. Non-current asset investments
30 June 2015 30 June 2014
GBP'000 GBP'000
Group and Company
Investments held at fair value through profit or
loss
Unquoted equity and preference shares 10,467 12,161
Quoted equity 701 896
Discounted debt and convertible loan stock 7,277 3,635
18,445 16,692
Investments measured at amortised cost
Unquoted loan stock 10,086 10,997
28,531 27,689
30 June 2015 30 June 2014
GBP'000 GBP'000
Opening valuation 27,689 24,567
Purchases at cost 7,060 2,539
Disposal proceeds (7,316) (1,188)
Realised gains/(losses) 271 (11)
Movement in loan stock accrued income 69 (20)
Unrealised gains 759 1,802
Closing valuation 28,531 27,689
Movement in loan stock accrued income
Opening accumulated movement in loan stock accrued
income 62 82
Movement in loan stock accrued income 69 (20)
Closing accumulated movement in loan stock accrued
income 131 62
Movement in unrealised gains
Opening accumulated unrealised gains/(losses) 549 (1,777)
Transfer of previously unrealised gains to realised
reserves on disposal (1,305) (227)
Transfer of previously unrealised losses to realised
reserves on investments written off but still held 1,542 751
Movement in unrealised gains 759 1,802
Closing accumulated unrealised gains 1,545 549
Historic cost basis
Opening book cost 27,079 26,262
Purchases at cost 7,060 2,539
Disposals at cost (5,383) (945)
Cost of investments written off but still held (1,901) (777)
Closing book cost 26,855 27,079
Closing cost is net of amounts of GBP1,901,000 (2014:
GBP1,881,000) written off in respect of investments
still held at the balance sheet date.
The Directors believe that the carrying value of loan stock measured at
amortised cost is not materially different to fair value. The Company
does not hold any assets as the result of the enforcement of security
during the year, and believes that the carrying values for both impaired
and past due assets are covered by the value of security held for these
loan stock investments.
Additions and disposal proceeds included in the cash flow statement
differ from the amounts shown in the note above, due to deferred
consideration and settlement creditors and the restructuring of
investments.
A schedule of disposals during the year is shown on page 19 of the full
Annual Report and Financial Statements.
IFRS 13 'Fair value measurement' and IFRS 7 'Financial Instruments:
Disclosures' requires the Company to disclose the valuation methods
applied to its investments measured at fair value through profit or loss
in a fair value hierarchy according to the following definitions:
Fair value hierarchy Definition of valuation method
Level 1 Unadjusted quoted (bid) prices applied
Level 2 Inputs to valuation are from observable sources and
are directly or indirectly derived from prices
Level 3 Inputs to valuations are not based on observable market
data
Quoted AIM investments are valued according to Level 1 valuation
methods. Unquoted equity, preference shares, convertible loan stock and
debt issued at a discount are all valued according to Level 3 valuation
methods.
The Company's investments measured at fair value through profit or loss
(Level 3) had the following movements in the year to 30 June 2015:
30 June 2015 30 June 2014
Discounted Discounted
debt and debt and
convertible convertible
Equity loan stock Total Equity loan stock Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening balance 12,161 3,635 15,796 9,582 2,824 12,406
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Additions 1,137 4,260 5,397 773 1,337 2,110
Disposal
proceeds (3,819) (611) (4,430) (193) (293) (486)
Transfer to
Level 1 - - - (473) (193) (666)
Representation
of convertible
debt - - - - 417 417
Debt/equity
conversion 299 (120) 179 342 (342) -
Realised
gains/(losses) 734 (15) 719 (12) 12 -
Unrealised
(losses)/gains (45) 73 28 2,142 (131) 2,011
Accrued loan
stock
interest - 55 55 - 4 4
Closing balance 10,467 7,277 17,744 12,161 3,635 15,796
Unquoted investments held at fair value through profit or loss are
valued in accordance with the IPEVCV guidelines as follows:
30 June 2015 30 June 2014
Investment valuation methodology GBP'000 GBP'000
Net asset value supported by independent valuation 9,124 6,000
Earnings multiple 1,356 1,990
Net asset value 2,112 2,288
Recent investment price 1,368 548
Cost (reviewed for impairment) 1,282 2,313
Revenue multiple 1,189 1,664
Agreed sale price/Offer price 1,313 993
17,744 15,796
Level 3 valuations include inputs based on non-observable market data.
IFRS 13 requires an entity to disclose quantitative information about
the significant unobservable inputs used. Of the Company's Level 3
investments, 14 per cent are held on an Earnings or Revenue multiple
basis, which have significant judgement applied to the valuation inputs.
The table below sets out the range of Earnings and Revenue multiples and
discounts applied. The remainder of Level 3 investments are held at cost
(reviewed for impairment), recent investment price, net asset value
(supported by independent valuation) or net assets.
Support services Healthcare (growth) Software
Earnings multiples
PE multiple range 7.7-11.0 17.0 -
Marketability discount range 8% - 27% 50% -
Revenue Multiples
Revenue multiple range - 1.2 - 1.5 2.5
Marketability discount range - 50% 15%
IFRS 13 and IFRS 7 requires the Directors to consider the impact of
changing one or more of the inputs used as part of the valuation process
to reasonable possible alternative assumptions. After due consideration
and noting that the valuation methodology applied to 74 per cent. of the
Level 3 investments (by valuation) is based on third party independent
evidence, recent investment price, agreed sale price/offer price and
cost, the Directors believe that changes to reasonable possible
alternative input assumptions (a reasonable discount to the earnings or
revenue multiple) for the valuation of the remainder of the portfolio
could lead to a significant change in the fair value of the portfolio.
The impact of these changes could result in an increase in the valuation
of the equity investments by GBP496,000 or a decrease in the valuation
of equity investments by GBP509,000.
The unquoted equity instruments had the following movements between
investment methodologies between 30 June 2014 and 30 June 2015:
Value as at Explanatory note
Change in investment valuation methodology (2014 to 30 June 2015
2015) GBP'000
Earnings multiple to offer price 664 Agreed offer price
Cost to net asset value supported by independent 489 More relevant valuation methodology following commencement
valuation of operations
Cost to price of recent investment 333 More appropriate following recent investment round
Cost to offer price 117 Agreed offer price
Cost to revenue multiple 58 More relevant valuation methodology
The valuation method used will be the most appropriate valuation
methodology for an investment within its market, with regard to the
financial health of the investment and the IPEVCV Guidelines. The
Directors believe that, within these parameters, there are no other
possible methods of valuation which would be reasonable as at 30 June
2015.
10. Significant interests
The principal activity of the Group 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 of a portfolio company. The size and
structure of the companies with unquoted securities may result in
certain holdings in the portfolio representing a participating interest
without there being any partnership, joint venture or management
consortium agreement.
The Company has interests of greater than 20 per cent. of the nominal
value of any class of the allotted shares in the portfolio companies as
at 30 June 2015 as described below:
% total
Country of % class and share voting
Company incorporation Principal activity type rights
ELE Advanced Manufacturer of precision engineering components for
Technologies the industrial gas turbine, aerospace and automotive
Limited Great Britain markets 74.3% B Ordinary 41.9%
56.7% B Ordinary/A
Preference and B
Uctal Limited Great Britain TV production company Preference 24.2%
The investments listed above are held as part of an investment portfolio
and therefore, as permitted by IAS 28 and FRS 9, they are measured at
fair value and not accounted for using the equity method.
11. Investments in subsidiary undertakings
30 June 2015
CP1 VCT PLC CP2 VCT PLC Total
GBP'000 GBP'000 GBP'000
Carrying value as at 1 July 2014 6,622 8,473 15,095
Movement in subsidiary net assets (3) - (3)
Carrying value as at 30 June 2015 6,619 8,473 15,092
30 June 2014
CP1 VCT PLC CP2 VCT PLC Total
GBP'000 GBP'000 GBP'000
Carrying value as at 1 July 2013 7,299 9,281 16,580
Movement in subsidiary net assets (677) (808) (1,485)
Carrying value as at 30 June 2014 6,622 8,473 15,095
The subsidiary companies currently hold cash and intercompany balances.
Both CP1 VCT PLC and CP2 VCT PLC are wholly owned by Crown Place VCT PLC
as follows:
30 June 2015
CP1 VCT PLC CP2 VCT PLC
Nominal value of shares held GBP6,382,746 GBP8,219,350
Percentage of total voting rights held 100% 100%
30 June 2014
CP1 VCT PLC CP2 VCT PLC
Nominal value of shares held GBP6,382,746 GBP8,219,350
Percentage of total voting rights held 100% 100%
12. Trade and other receivables/debtors and current asset investments
30 June 2015 30 June 2014
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Trade and other receivables/debtors less than one
year 788 788 74 74
30 June 2015 30 June 2014
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Contingent future receipts on disposal of fixed asset
investments - - 42 42
The fair value hierarchy applied to contingent future receipts on
disposal of fixed asset investments is Level 3.
13. Trade and other payables/creditors
30 June 2015 30 June 2014
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Amounts falling due within one year:
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Amounts due to subsidiary undertakings - 15,036 - 15,039
Other payables 23 23 21 21
Accruals 221 221 200 200
244 15,280 221 15,260
Interest is chargeable on intercompany balances at a rate of 12 per
cent. per annum. Intercompany balances are payable on demand. The
subsidiaries' current business is to hold cash and intercompany
balances.
14. Ordinary share capital
30 June 2015 30 June 2014
GBP'000 GBP'000
Allotted, called up and fully paid
117,667,064 Ordinary shares of 10p each (2014:
100,057,224) 11,767 10,006
Voting rights
106,814,654 Ordinary shares of 10p each (2014:
90,680,814)
The Company did not purchase any Ordinary shares for cancellation during
the year (2014: 1,317,000 Ordinary shares at a total cost of
GBP395,000).
The Company purchased 1,476,000 Ordinary shares for treasury (2014:
582,000) during the year at a total cost of GBP439,000 (2014:
GBP174,000).
The total number of shares held in treasury as at 30 June 2015 was
10,852,410 (2014: 9,376,410) representing 9.2 per cent. of the shares in
issue as at 30 June 2015.
Under the terms of the Dividend Reinvestment Scheme Circular dated 26
February 2009, the following Ordinary shares of nominal value 10 pence
were allotted during the year:
Opening market
Aggregate Net price on
Number of nominal value Issue price consideration allotment
Allotment shares of shares (pence per received (pence per
date allotted (GBP'000) share) (GBP'000) share)
28
November
2014 389,584 39 30.79 118 30.00
31 March
2015 450,741 45 31.03 137 29.75
840,325 84 255
Under the terms of the Albion VCTs Top Up Offers 2013/2014 and Albion
VCTs Prospectus Top Up Offers 2013/2014, the following Ordinary shares
of nominal value 10 pence were issued during the year:
Opening market
Aggregate Net price on
Number of nominal value Issue price consideration allotment
Allotment shares of shares (pence per received (pence per
date allotted (GBP'000) share) (GBP'000) share)
4 July 2014 23,321 2 31.80 7 30.00
4 July 2014 12,538 1 31.90 4 30.00
4 July 2014 101,104 10 32.10 32 30.00
4 July 2014
(prospectus) 953,781 95 32.10 297 30.00
1,090,744 109 340
Under the terms of the Albion VCTs Prospectus Top Up Offers 2014/2015,
the following Ordinary shares of nominal value 10 pence were issued
during the year:
Opening market
Aggregate Net price on
Number of nominal value Issue price consideration allotment
Allotment shares of shares (pence per received (pence per
date allotted (GBP'000) share) (GBP'000) share)
30 January
2015 2,763,025 276 31.80 861 30.00
30 January
2015 1,451,111 145 32.00 453 30.00
2 April
2015 9,525,629 953 32.00 2,957 29.75
30 June
2015 1,790,544 179 32.00 556 29.75
30 June
2015 112,824 11 31.70 35 29.75
30 June
2015 35,638 4 31.80 11 29.75
15,678,771 1,568 4,873
15. Basic and diluted net asset value per share
The Group and Company net asset value attributable to the Ordinary
shares at the year end was as follows:
30 June 2015 30 June 2014
Net asset value per share attributable (pence) 30.97 32.04
The net asset value per share at the year end is calculated in
accordance with the Articles of Association and is based upon total
shares in issue less treasury shares of 106,814,654 shares (2014:
90,680,814) as at 30 June 2015.
There are no convertible instruments, derivatives or contingent share
agreements in issue.
16. Analysis of changes in cash during the year
30 June 2015 30 June 2014
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Opening cash balances 1,466 1,410 2,780 2,723
Net cash flow 2,540 2,540 (1,314) (1,314)
Closing cash balances 4,006 3,950 1,466 1,410
17. Reconciliation of revenue return before taxation to net cash flow
from operating activities
Year ended Year ended
30 June 2015 30 June 2014
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Revenue return before tax 700 700 525 525
Capitalised expenses (397) (397) (361) (361)
(Decrease)/increase in accrued amortised loan stock
interest (69) (69) 20 20
Decrease in receivables - - - -
Increase in payables 18 18 3 3
Net cash flow from operating activities 252 252 187 187
18. Capital and financial instruments risk management
The following policies are with reference to both the Company and the
Group except where 'the Company' is used below.
The Group'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 is described in more detail in the Strategic
report.
The Group's financial instruments comprise equity and loan stock
investments in unquoted companies, equity in AIM quoted companies,
contingent receipts on disposal of fixed asset investments, cash
balances, debtors and creditors which arise from its operations. The
main purpose of these financial instruments is to generate revenue and
capital appreciation for the Group's operations. The Group has no
gearing or other financial liabilities apart from short term creditors.
The Group does not use any derivatives for the management of its balance
sheet.
The principal risks arising from the Group'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 Group has faced during the past year, and apart from where noted
below, there have been no changes in the objectives, policies or
processes for managing risks during the past year. The key risks are
summarised as follows:
Investment risk
As a venture capital trust, it is the Group's specific nature to
evaluate and control the investment risk of its portfolio in unquoted
and quoted companies, details of which are shown on pages 17 to 19 of
the full Annual Report and Financial Statements. Investment risk is the
exposure of the Group to the revaluation and devaluation of investments.
The main driver of investment risk is the operational and financial
performance of the portfolio companies 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 Group 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 non-current and current asset investment portfolio which is
GBP28,531,000 (2014: GBP27,731,000). Non-current and current asset
investments form 86 per cent. of the net asset value as at 30 June 2015
(2014: 95 per cent.).
More details regarding the classification of non-current investments are
shown in note 9.
Investment price risk
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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 Group as a whole, the strategy of the
Group is to invest in a broad spread of industries with approximately
two-thirds of the unquoted investments comprising debt securities, which,
owing to the structure of their yield and the fact that they are usually
secured, have a lower level of price volatility than equity. Details of
the industries in which investments have been made are contained in the
Portfolio of investments section on pages 17 to 19 of the full Annual
Report and Financial Statements and in the Strategic report.
The valuation method used will be the most appropriate valuation
methodology for an investment within its market, with regard to the
financial health of the investment and the IPEVCV Guidelines.
As required under IFRS 7 and FRS 29, 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 non-current 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. (2014: 10 per cent.) increase or
decrease in the valuation of the non-current and current asset
investments (keeping all other variables constant) would increase or
decrease the net asset value and return for the year by GBP2,853,100
(2014: GBP2,773,100).
Interest rate risk
It is the Group'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 Group's analysis, it is estimated that a rise of half a
percentage point in all interest rates would be immaterial due to the
level of fixed rate loan stock held within the portfolio. On the basis
of the Company's analysis, it is considered that further falls in
interest rates would be highly unlikely.
The weighted average interest rate applied to the Group's fixed rate
assets during the year was approximately 5.1 per cent. (2014: 5.7 per
cent.). The weighted average period to maturity for the fixed rate
assets is approximately 3.6 years (2014: 4.2 years).
The Group's financial assets and liabilities as at 30 June 2015, all
denominated in pounds sterling, consist of the following:
30 June 2015 30 June 2014
Fixed Floating Non- Fixed Floating Non-
rate rate interest Total rate rate interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Unquoted loan stock (including convertible loan stock
and discounted bonds) 15,290 - 2,073 17,363 14,128 - 504 14,632
Equity - - 11,168 11,168 - - 13,057 13,057
Receivables* - - 772 772 - - 59 59
Current asset investments - - - - - - 42 42
Payables - - (244) (244) - - (221) (221)
Cash - 4,006 - 4,006 - 1,466 - 1,466
15,290 4,006 13,769 33,065 14,128 1,466 13,441 29,035
*The receivables do not reconcile to the balance sheet as prepayments
are not included in the above table.
The Company's financial assets and liabilities as at 30 June 2015, all
denominated in pounds sterling, consist of the following:
30 June 2015 30 June 2014
Fixed Floating Non- Fixed Floating Non-
rate rate interest Total rate rate interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Unquoted loan stock (including convertible loan stock
and discounted bonds) 15,290 - 2,073 17,363 14,128 - 504 14,632
Equity** - - 11,168 11,168 - - 13,057 13,057
Debtors* - - 772 772 - - 59 59
Current asset investments - - - - - - 42 42
Current liabilities (15,036) - (244) (15,280) (15,039) - (221) (15,260)
Cash - 3,950 - 3,950 - 1,410 - 1,410
254 3,950 13,769 17,973 (911) 1,410 13,441 13,940
*The receivables do not reconcile to the balance sheet as prepayments
are not included in the above table.
** The equity does not reconcile to the balance sheet as investments in
subsidiaries are excluded from 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 Group. The Group is exposed to credit risk through its
debtors, investment in unquoted loan stock, and cash on deposit with
banks.
The Manager evaluates credit risk on loan stock and other similar
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. 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 often sit on the boards of
unquoted portfolio companies; this enables the close identification,
monitoring and management of investment-specific credit risk.
Bank deposits are held with banks with high credit ratings assigned by
international credit rating agencies. The Group has an informal policy
of limiting counterparty banking exposure to a maximum of 20 per cent.
of net asset value for any one counterparty.
The Manager and the Board formally review credit risk (including
receivables) and other risks, both at the time of initial investment and
at quarterly Board meetings.
The Group's total gross credit risk at 30 June 2015 was limited to
GBP17,363,000 (2014: GBP14,632,000) of unquoted loan stock instruments
(all are secured on the assets of the portfolio company), GBP4,006,000
(2014: GBP1,466,000) of cash deposits with banks and GBP772,000 (2014:
GBP99,000) of deferred consideration and receivables.
The Company's total gross credit risk at 30 June 2015 was limited to
GBP17,363,000 (2014: GBP14,632,000) of unquoted loan stock instruments
(all are secured on the assets of the portfolio company), GBP3,950,000
(2014: GBP1,410,000) of cash deposits with banks and GBP772,000 (2014:
GBP99,000) of deferred consideration and receivables.
As at the balance sheet date, the cash held by the Group is held with
Lloyds Bank Plc, Scottish Widows Bank plc (part of Lloyds Banking Group),
National Westminster Bank plc and Barclays 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 credit profile of unquoted loan stock is described under liquidity
risk shown below.
The cost, impairment and carrying value of impaired loan stocks at 30
June 2015 and 30 June 2014 are as follows:
30 June 2015 30 June 2014
Carrying Carrying
Cost Impairment value Cost Impairment value
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Impaired loan
stock 5,738 (549) 5,189 6,793 (1,914) 4,879
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
estimate that the security value approximates to the carrying value.
Liquidity risk
Liquid assets are held as cash on current account and cash on deposit or
short term money market account. Under the terms of its Articles, the
Group has the ability to borrow up to the amount of its adjusted capital
and reserves of the latest published audited consolidated balance sheet,
which amounts to GBP31,719,000 (2014: GBP27,903,000) as at 30 June 2015.
(MORE TO FOLLOW) Dow Jones Newswires
October 13, 2015 11:32 ET (15:32 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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