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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Kings Arms Yard Vct Plc | LSE:KAY | London | Ordinary Share | GB0007174294 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 19.40 | 18.90 | 19.90 | 19.40 | 19.40 | 19.40 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Investors, Nec | 3.32M | 726k | 0.0014 | 138.57 | 100.91M |
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Kings Arms Yard VCT PLC
As required by the UK Listing Authority's Disclosure and Transparency
Rules 4.1 and 6.3, Kings Arms Yard VCT PLC today makes public its
information relating to the Annual Report and Financial Statements for
the year ended 31 December 2016.
This announcement was approved for release by the Board of Directors on
21 March 2017.
This announcement has not been audited.
You will shortly be able to view the Annual Report and Financial
Statements for the year to 31 December 2016 (which have been audited)
at: www.albion-ventures.co.uk/funds/KAY. The Annual Report and Financial
Statements for the year to 31 December 2016 will be available as a PDF
document via a link under the 'Financial Reports and Circulars' section.
The information contained in the Annual Report and Financial Statements
will include information as required by the Disclosure and Transparency
Rules, including Rule 4.1.
Investment objective
The Company is a Venture Capital Trust. The investment policy is
intended to produce a regular and predictable dividend stream with an
appreciation in capital value as set out below.
-- The Company intends to achieve its strategy by adopting an investment
policy for new investments which over time will rebalance the portfolio
such that approximately 50% of the portfolio comprises an asset-backed
portfolio of more stable, ungeared businesses, principally operating in
the healthcare, environmental and leisure sectors (the "Asset-Backed
Portfolio"). The balance of the portfolio, other than funds retained for
liquidity purposes, will be invested in a portfolio of higher growth
businesses across a variety of sectors of the UK economy. These will
range from more stable, income producing businesses to a limited number
of higher risk technology companies (the "Growth Portfolio").
-- In neither category would portfolio companies have any external borrowing
with a charge ranking ahead of the Company. Up to two-thirds of
qualifying investments by cost will comprise loan stock secured with a
first charge on the portfolio company's assets.
-- The Company's investment portfolio will thus be structured to provide a
balance between income and capital growth for the longer term. The
Asset-Backed Portfolio is designed to provide stability and income whilst
still maintaining the potential for capital growth. The Growth Portfolio
is intended to provide highly diversified exposure through its portfolio
of investments in unquoted UK companies.
-- Funds held pending investment or for liquidity purposes will be held as
cash on deposit or similar instruments with banks or other financial
institutions with high credit ratings assigned by international credit
rating agencies.
Under its Articles of Association, the Company's maximum exposure in
relation to gearing is restricted to 10 per cent. of its adjusted share
capital and reserves.
Financial calendar
Record date for first dividend 7 April 2017
Payment date of first dividend 28 April 2017
Annual General Meeting 11am on 17 May 2017
Announcement of half-yearly results for the six months August 2017
ending 30 June 2017
Payment date of second dividend (subject to Board 31 October 2017
approval)
Financial highlights
21.4p Net asset value per share as at 31 December 2016.
2.3p Basic and diluted total return per share.
20.0p Mid-market share price as at 31 December 2016.
1.0p Total tax free dividends per share paid in the year
to 31 December 2016.
0.5p First tax free dividend per share declared for the
year to 31 December 2017 payable on 28 April 2017.
5.0% Tax free dividend yield on share price (dividend per
annum/share price as at 31 December 2016).
11.5% Total return on opening NAV per share as at 31 December
2016.
31 December 2016 31 December 2015
(pence per share) (pence per share)
Revenue return 0.29 0.40
Capital return 2.03 1.37
Dividends paid 1.00 1.00
Net asset value 21.41 20.11
From launch to 1 January 2011 to From launch to
Total shareholder 31 December 2010 31 December 2016 31 December 2016
return (pence per share) (pence per share) (pence per share)
Subscription price
per share at
launch 100.00 - 100.00
Dividends paid 58.66 5.67 64.33
(Decrease)/increase
in net asset value (83.40) 4.81 (78.59)
Total shareholder
return 75.26 10.48 85.74
The Directors have declared a first dividend of 0.5 pence per share for
the year ending 31 December 2017, which will be paid on 28 April 2017 to
shareholders on the register on 7 April 2017.
The above financial summary is for the Company, Kings Arms Yard VCT PLC
only. Details of the financial performance of the various Quester,
SPARK and Kings Arms Yard VCT 2 PLC companies, which have been merged
into the Company, can be found on page 60 of the full Annual Report and
Financial Statements.
Chairman's statement
Introduction
We are pleased to report a total shareholder return of 2.32 pence per
share or 11.5% on opening net asset value for the year ended 31 December
2016. Investments during the year totalled GBP5.9 million of which
GBP1.7 million were in new portfolio companies. The divestment of the
legacy portfolio continues, with GBP3.1 million of the GBP3.5 million in
realisations during the year being legacy companies, including those of
Haemostatix and a reduction in our holding in Oxford Immunotec.
Results
Net asset value per share increased from 20.11p as at 31 December 2015
to 21.41p at 31 December 2016 after allowing for the payment of
dividends totalling 1 penny per share during the year.
The Company recorded a positive total shareholder return of 2.32 pence
per share, or GBP5.7 million for the year to 31 December 2016, driven by
positive developments at a number of portfolio companies, including
Antenova, Proveca, Active Lives Care and Ryefield Court Care.
As always, the Board has rigorously reassessed the carrying value of all
portfolio investments and has reduced those wherever trading performance
or market conditions made this necessary. Nevertheless, as the overall
outcome shows, positive movements have significantly outweighed the
setbacks.
During 2016, GBP5.9 million was invested into unquoted companies
including GBP0.8 million into renewable energy projects, GBP3.0 million
into the construction of three new care homes, and GBP2.1 million into
the high growth portfolio, predominantly in the healthcare and
technology sectors. Further information on all new investments is
contained in the Strategic report. The portfolio now includes thirty
five investments made since 2011 and the proportion of assets still
invested in the legacy portfolio of investments made before 2011 has
shrunk to 35% (2015: 42%).
For a detailed review of these disposals and other developments in the
business please see the Strategic report below.
Dividend
We are pleased to declare a first dividend of 0.5p per share to be paid
on 28 April 2017 to shareholders on the register on 7 April 2017 and
anticipate that a second dividend will be paid later in the year in line
with our current dividend target of 1 penny per share.
VCT qualifying status
As at 31 December 2016, 89% (2015: 90.5%) of total investments were in
qualifying holdings. The Board continues to monitor this and all the
VCT qualification requirements very carefully in order to ensure that
qualifying investments comfortably exceed the minimum threshold of 70%
required for the Company to continue to benefit from VCT tax status.
Albion VCTs Prospectus Top Up Offers 2016/2017
By 31 January 2017, the Company had raised GBP3.8 million from a first
allotment of shares under the top up share offer launched on 29 November
2016. As a result of the strong demand for the Company's shares, the
Board was able to announce on 22 February 2017 that subscription had
reached its GBP6 million limit under the prospectus offer and was now
closed. The next allotment will be on 28 March 2017.
Share buy-backs
It remains the Board's policy to buy back shares in the market, subject
to the overall constraint that such purchases are in the Company's
interest, including the maintenance of sufficient resources for
investment in new and existing portfolio companies and the continued
payment of dividends to shareholders. It is the Board's intention for
such buy-backs to be in the region of a 5% discount to net asset value,
so far as market conditions and liquidity permit. During 2016, the
Company purchased 4,912,000 Ordinary shares at an average price of 18.41
pence per share. Further information is shown in note 14.
Transactions with the Manager
Details of transactions that took place with the Manager during the year
can be found in note 4 and principally relate to the management and
incentive fees.
Performance incentive fee
The Board is pleased to announce that investment performance has
exceeded the targets set by shareholders on 24 May 2013. Accordingly a
management performance fee of GBP513,000 is due for the year ended 31
December 2016 following the fee of GBP242,000 earned in the previous
year.
Further details can be found in the Strategic report below.
Annual General Meeting
The Annual General Meeting of the Company will be held at the City of
London Club, 19 Old Broad Street, London, EC2N 1DS at 11.00am on 17 May
2017. Full details of the business to be conducted at the Annual
General Meeting are given in the Notice of the Meeting on pages 55 and
56 of the full Annual Report and Financial Statements.
The Board welcomes your attendance at the meeting as it gives an
opportunity for shareholders to ask questions of the Board and
Investment Manager. If you are unable to attend the Annual General
Meeting in person, we would encourage you to make use of your proxy
votes.
Risks and uncertainties
The outlook for the UK economy continues to be the key risk affecting
your Company. The Company's investment risk is mitigated through a
variety of processes, including our policy of ensuring that the Company
has a first charge over portfolio companies' assets wherever possible.
A detailed analysis of the other risks and uncertainties facing the
business is shown in the Strategic report below.
Outlook and prospects
We are encouraged by the investment performance during 2016 and over the
last five years. Whilst the economic outlook is more uncertain than it
has been for some time, as is reflected in equity market volatility, the
Board continues to have confidence in the long-term prospects of the
increasingly diversified and balanced portfolio, and in the ability of
our Manager to secure and nurture appropriate new investment
opportunities.
Robin Field
Chairman
21 March 2017
Strategic report
Investment objective and policy
The Company is a Venture Capital Trust. The investment policy is
intended to produce a regular and predictable dividend stream with an
appreciation in capital value as set out below.
The Company intends to achieve its strategy by adopting an investment
policy for new investments which over time will rebalance the portfolio
such that approximately 50% of the portfolio comprises an asset-backed
portfolio of more stable, ungeared businesses, principally operating in
the healthcare, environmental and leisure sectors (the "Asset-Backed
Portfolio"). At 31 December 2016 the Asset-Backed Portfolio represented
42% of net assets (2015: 36%). The balance of the portfolio, other than
funds retained for liquidity purposes, will be invested in a portfolio
of higher growth businesses across a variety of sectors of the UK
economy. These will range from more stable, income producing businesses
to a limited number of higher risk technology companies (the "Growth
Portfolio").
In neither category would portfolio companies have any external
borrowing with a charge ranking ahead of the Company. Up to two-thirds
of qualifying investments by cost will comprise loan stock secured with
a first charge on the portfolio company's assets.
The Company's investment portfolio will thus be structured to provide a
balance between income and capital growth for the longer term. The
Asset-Backed Portfolio is designed to provide stability and income
whilst still maintaining the potential for capital growth. The Growth
Portfolio is intended to provide highly diversified exposure through its
portfolio of investments in unquoted UK companies.
Funds held pending investment or for liquidity purposes will be held as
cash on deposit or similar instruments with banks or other financial
institutions with high credit ratings assigned by international credit
rating agencies.
Under its Articles of Association, the Company's maximum exposure in
relation to gearing is restricted to 10 per cent. of its adjusted share
capital and reserves.
Review of business and future changes
One of the key aims of the Manager has been to increase the income
generated by the investment portfolio to the extent that it more than
covers the ongoing investment management fee and other charges. This
continues to be achieved, with total income for 2016 of GBP1.37m against
total ongoing costs of GBP1.26m. The investment income generated is
equivalent to a gross yield of 2.8% on the average net asset value for
the year. As the Asset-Backed Portfolio increases in the current year,
we would expect the Company's income to grow accordingly.
As outlined below, the Company has recorded significant capital uplift
during the year. This is led by an uplift of GBP2.6m across the
Asset-Backed Portfolio, GBP2.5m in the Growth Portfolio and GBP0.9m in
the quoted investments. Key individual investment movements included
GBP1.8m uplift in the valuation of our holding in Antenova Limited,
GBP1.3m uplift in Proveca Limited, GBP1.1m uplift in Active Lives Care
Limited and GBP1.0m uplift in Ryefield Court Care Limited, offset by a
decline in the valuation of our holding in Elateral Group Limited of
GBP1.6m and Sift Limited of GBP0.8m.
Details of significant events which have occurred since the end of the
financial year are listed in note 18. Details of transactions with the
Manager are shown in note 4.
Results and dividends
Ordinary shares
GBP'000
Net revenue return for the year ended 31 December
2016 719
Net capital gain for the year ended 31 December 2016 4,958
Total return for the year ended 31 December 2016 5,677
Dividend of 0.5 pence per share paid on 29 April 2016 (1,256)
Dividend of 0.5 pence per share paid on 31 October
2016 (1,244)
Transferred to reserves 3,177
Net assets as at 31 December 2016 53,010
Net asset value per share as at 31 December 2016 (pence) 21.41
The Company paid dividends of 1 penny per share during the year ended 31
December 2016 (2015: 1 penny per share). The Directors have declared a
first dividend of 0.5 pence per share for the year ending 31 December
2017, which will be paid on 28 April 2017 to shareholders on the
register on 7 April 2017.
It is the Company's policy to maintain a sustainable, predictable
dividend policy with the current level of annual pay-out set at the time
that Albion Ventures took over as Manager at 1 penny per share. The
dividend has been more than covered by the total return for the year.
As shown in the Income statement, investment income has remained
relatively flat at GBP1,370,000 (2015: GBP1,412,000) although loan stock
income increased to GBP1,257,000 (2015: GBP1,095,000). The capital gain
for the year was significantly higher at GBP4,958,000 (2015:
GBP2,966,000).
The total return for the year has increased to GBP5,677,000 (2015:
GBP3,835,000), equating to a total return of 2.32 pence per share (2015:
1.77 pence per share).
The Balance sheet shows that the net asset value has increased over the
last year to 21.41 pence per share (2015: 20.11 pence per share) which
is due to continued strong performance of the asset-backed investments,
as well as increased valuations in Antenova, Proveca, Anthropics and
Oxford Immunotec in the growth sector.
There has been a net cash outflow for the year, mainly due to
investments of GBP5.9 million, the payment of dividends and buy-back of
shares. This was offset by the fundraising during the year, investment
income and disposal of legacy investments.
Current portfolio sector allocation
The two pie charts at the end of this announcement outline firstly the
different sectors in which the Company's assets, at carrying value, are
currently invested, and secondly, delineates between those investments,
at carrying value, by asset class.
Direction of portfolio
During 2016, investments were made to build 3 new residential care homes
for the elderly, Active Lives Care, Ryefield Court Care and Shinfield
Lodge Care in Oxford, Greater London and Reading respectively. These
investments have increased the allocation to healthcare from 11% to 19%
and, when combined with an investment in an anaerobic digestion plant,
have contributed to an increase in the asset-backed element of the
portfolio from 36% to 42%.
We anticipate the healthcare sector increasing in importance, as it is
an area that the Manager has targeted for value creation and a good
potential source of recurring income. The Company has reached its target
percentage for the renewable energy sector, which now accounts for 22%
of net assets compared to 24% at the end of the previous financial year.
Future prospects
The Company's performance record reflects the success of the strategy
outlined above and has enabled the Company to maintain a predictable
stream of dividend payments to shareholders. The Board believes that
this model will continue to meet the investment objective and has the
potential to continue to deliver attractive returns to shareholders and
that a number of investments in the Growth Portfolio, both old and new,
have strong prospects. Further details on the Company's outlook and
prospects can be found in the Chairman's statement.
Key performance indicators
The Directors believe that the following key performance indicators,
which are typical for venture capital trusts, used in their own
assessment of the Company, will provide shareholders with sufficient
information to assess how effectively the Company is applying its
investment policy to meet its objectives. 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. Total shareholder return relative to FTSE All-Share Index total
return
The graph on page 4 of the full Annual Report and Financial Statements
shows the strong performance of the Company's total shareholder return
against the FTSE All-Share Index total return, with dividends reinvested,
from the appointment of Albion Ventures LLP on 1 January 2011. Details
on the performance of the net asset value and return per share for the
year are given above.
2. Net asset value per share and total shareholder return
Total shareholder return since inception increased by 2.8% to 85.74
pence per share for the year ended 31 December 2016.
3. Dividend distributions
Dividends paid in respect of the year ended 31 December 2016 were 1
penny per share (2015: 1 penny per share), in line with the Board's
dividend objective. The cumulative dividend paid since inception is
64.33 pence per share.
4. Ongoing charges
The ongoing charges ratio for the year to 31 December 2016 was 2.5%
(2015: 2.6%). 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 2.5%.
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
22 of the full Annual Report and Financial Statements.
As part of the Government's wider review of the VCT regime, new rules
have been introduced under the Finance Act (No.2) 2015 and Finance Act
2016, which include:
-- Restrictions over the age of investments;
-- A prohibition on management buyouts or the purchase of existing
businesses;
-- An overall lifetime investment cap of GBP12 million from tax-advantaged
funds into any portfolio company; and
-- A VCT can only make qualifying investments or certain specified
non-qualifying investments such as money market securities and short term
deposits.
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 and the
application of it as a result.
Investment progress
During the year, there was a very active period of new investment, with
a total of GBP5.9 million invested in new and existing portfolio
companies. We continued to bias new investment activity towards
asset-backed opportunities with the potential to produce a strong level
of income, whilst still investing in companies providing the potential
for significant capital growth. A total of GBP0.8 million was invested
during the year into the renewable energy sector; GBP2.9 million into
care homes; and GBP2.2 million in companies offering the potential of
high growth.
Cash and liquid assets at the year-end decreased to GBP1.8 million
(2015: GBP3.5 million), representing 3.3% of net asset value.
New investments were made in 6 companies and totalled GBP1.7 million
during the year and included: an anaerobic digestion company - Earnside
Energy Limited (GBP835,000); a digital marketing software company -
Convertr Media Limited (GBP284,000); an automotive technology research
company - Secured By Design Limited (GBP260,000); a predictive analytics
company - Black Swan Data Limited (GBP170,000); a medical nutritional
therapy company - Oviva AG (GBP91,000); and a sports marketing company -
InCrowd Sports Limited (GBP36,000).
Follow-on investments were made in 16 portfolio companies and totalled
GBP4.2 million during the year. The largest being GBP2.7 million into
the construction of the two care homes (GBP1.4 million into Active Lives
Care Limited and GBP1.3 million into Ryefield Court Care Limited);
GBP374,000 into Proveca Limited and GBP300,000 into Elateral Group
Limited.
During the year the Company sold its shares in Haemostatix for a mixture
of cash and shares in AiM listed ErgoMed PLC and sold its entire
holdings in Silent Herdsman realising proceeds of GBP146,000 with a
realised loss on cost of GBP6,000. The Company also sold 100,000 Oxford
Immunotec Global shares with proceeds of GBP1,061,000 and a realised
gain of GBP672,000 on cost. Other realisations can be found in the
realisations table on page 18 of the full Annual Report and Financial
Statements.
The policy of increasing the income generating capacity of the Company
continues to bear fruit. The Company received GBP1,257,000 of loan stock
income during the year representing a rise of 15% on the GBP1,095,000
loan stock income received from the portfolio during the previous year.
The first pie chart at the end of this announcement outlines the
different sectors in which the Company's assets, at carrying value, are
currently invested.
Gearing
As defined by the Articles of Association, the Company's maximum
exposure in relation to gearing is restricted to 10% of the adjusted
capital and reserves, being GBP51,680,000 (2015: GBP43,434,000). As at
31 December 2016, the Company had no actual short term and long term
gearing (2015: GBPnil). The Directors do not currently have any
intention to utilise long term gearing.
Operational arrangements
The Company has delegated the investment management of the portfolio to
Albion Ventures LLP, which is authorised and regulated by the Financial
Conduct Authority. Albion Ventures LLP also provides company secretarial
and other accounting and administrative support to the Company.
Management agreement
Under the Investment Management Agreement, Albion Ventures LLP provides
investment management, company secretarial and administrative services
to the Company. Albion Ventures LLP is entitled to an annual management
fee of 2% of net asset value of the Company, payable quarterly in
arrears, along with an annual administration fee of GBP50,000.
Under the terms of the Investment Management Agreement, the aggregate
payable for management and administration (normal running costs) are
subject to an aggregate annual cap of 3% of the year end closing net
asset value, for accounting periods commencing after 31 December 2011.
The Investment Management Agreement can be terminated by either party on
12 months' notice and is subject to earlier termination in the event of
certain breaches or on the insolvency of either party.
The Manager is entitled to arrangement fees payable by portfolio
companies (up to a maximum of 2% of the amount invested) and to fees
charged for the monitoring of investments (up to a maximum of GBP20,000
per company per annum).
Performance incentive fee
In order to provide the Manager with an incentive to maximise the return
to investors, the Manager is entitled to charge an incentive fee in the
event that the returns exceed minimum target levels.
The performance hurdle is equal to the greater of the Starting NAV of 20
pence per share, increased by the increase in RPI plus 2 per cent per
annum from the Start Date of 1 January 2014 (calculated on a simple and
not compound basis) and the highest Total Return for any earlier period
after the Start Date (the 'high watermark'). An annual fee (in respect
of each share in issue) of an amount equal to 15 per cent of any excess
of the Total Return (this being NAV per share plus dividends paid after
the Start Date) as at the end of the relevant accounting period over the
performance hurdle will be due to the Manager.
As at 31 December 2016, the total return of the Company since 1 January
2014 (the performance incentive fee start date) was 24.41 pence per
share, compared to a performance hurdle rate of 23.01 pence per share.
As a result, a performance incentive fee is payable to the Manager of
GBP513,000 (2015: GBP242,000).
Evaluation of the Manager
The Board has evaluated the performance of the Manager based on the
returns generated by the Company from the management and sale of
existing investments, the continuing achievement of the 70% investment
requirement for Venture Capital Trust status, the making of new
investments in accordance with the investment policy, the long term
prospects of current investments, a review of the Investment Management
agreement and the services provided therein and benchmarking the
performance of the Manager to other service providers.
The Board believes that it is in the interests of shareholders as a
whole, and of the Company, to continue the appointment of the Manager
for the forthcoming year.
Alternative Investment Fund Managers Directive ("AIFMD")
The Board has appointed Albion Ventures LLP as the Company's AIFM as
required by the AIFMD.
Share buy-back policy
It remains the Board's primary objective to maintain sufficient
resources for investment in existing and new portfolio companies and for
the continued payment of dividends to shareholders. The Board's policy
is to buy back shares in the market, subject to the overall constraint
that such purchases are in the Company's interest.
It is the Board's intention for such buy-backs to be in the region of a
5% discount to net asset value, so far as market conditions and
liquidity permit.
Further details of shares bought back during the year ended 31 December
2016 can be found in note 14.
Social and community issues, employees and human rights
The Board recognises the requirement under section 414c of the Companies
Act 2006 (the "Act") to detail information about social and community
issues, employees and human rights; including any policies it has in
relation to these matters and effectiveness of these policies. As an
externally managed investment company with no employees, the Company has
no policies in these matters and as such these requirements do not
apply.
Further policies
The Company has adopted a number of further policies relating to:
-- Environment
-- Global greenhouse gas emissions
-- Anti-bribery
-- Diversity
and these are set out in the Directors' report on pages 22 and 23 of the
full Annual Report and Financial Statements.
Risk management
The Board carries out a regular review of the risk environment in which
the Company operates. The principal risks and uncertainties of the
Company as identified by the Board and how they are managed are as
follows:
Risk Possible consequence Risk management
Investment The risk of investment in poor quality assets, which To reduce this risk, the Board places reliance upon
and could reduce the capital and income returns to shareholders, the skills and expertise of the Manager and its track
performance and could negatively impact on the Company's current record over many years of making successful investments
risk and future valuations. in this segment of the market. In addition, the Manager
By nature, smaller unquoted businesses, such as those operates a formal and structured investment appraisal
that qualify for venture capital trust purposes, are and review process, which includes an Investment Committee,
more fragile than larger, long established businesses. comprising investment professionals from the Manager
and at least one external investment professional.
The Manager also invites and takes account of comments
from non-executive Directors of the Company on investments
discussed at the Investment Committee meetings. Investments
are actively and regularly monitored by the Manager
(investment managers normally sit on portfolio company
boards), including the level of diversification in
the portfolio, and the Board receives detailed reports
on each investment as part of the Manager's report
at quarterly board meetings.
VCT The Company must comply with section 274 of the Income To reduce this risk, the Board has appointed the Manager,
approval Tax Act 2007 which enables its investors to take advantage which has a team with significant experience in venture
risk of tax relief on their investment and on future returns. capital trust management, used to operating within
Breach of any of the rules enabling the Company to the requirements of the venture capital trust legislation.
hold VCT status could result in the loss of that status. In addition, to provide further formal reassurance,
the Board has appointed Philip Hare & Associates LLP
as its taxation adviser, who report quarterly to the
Board to independently confirm compliance with the
venture capital trust legislation, to highlight areas
of risk and to inform on changes in legislation. Each
investment in a new portfolio company is also pre-cleared
with H.M. Revenue & Customs.
Regulatory The Company is listed on The London Stock Exchange Board members and the Manager have experience of operating
and and is required to comply with the rules of the UK at senior levels within or advising quoted companies.
compliance Listing Authority, as well as with the Companies Act, In addition, the Board and the Manager receive regular
risk 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 through 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
Board meetings, and also as part of the review work
undertaken by the Manager's Compliance Officer. The
report on controls is also evaluated by the internal
auditors.
Operational The Company relies on a number of third parties, in The Company and its operations are subject to a series
and particular the Manager, for the provision of investment of rigorous internal controls and review procedures
internal management and administrative functions. Failures exercised throughout the year.
control in key systems and controls within the Manager's business The Audit Committee reviews the Internal Audit Reports
risk could put assets of the Company at risk or result prepared by the Manager's internal auditors, PKF Littlejohn
in reduced or inaccurate information being passed LLP. On an annual basis, the Audit Committee chairman
to the Board or to shareholders. meets with the internal audit Partner to provide an
opportunity to ask specific detailed questions in
order to satisfy itself that the Manager has strong
systems and controls in place including those in relation
to business continuity and cyber security.
In addition, the Board regularly reviews the performance
of its key service providers, particularly the Manager,
to ensure they continue to have the necessary expertise
and resources to deliver the Company's investment
objective and policies. The Manager and other service
providers have also demonstrated to the Board that
there is no undue reliance placed upon any one individual
within Albion Ventures LLP.
Economic Changes in economic conditions, including, for example, The Company invests in a diversified portfolio of
and interest rates, rates of inflation, industry conditions, companies across a number of industry sectors and
political competition, political and diplomatic events and other in addition often invests a mixture of equity and
risk factors could substantially and adversely affect the secured loan stock in portfolio companies and has
Company's prospects in a number of ways. a policy of not normally permitting any external bank
borrowings within portfolio companies.
At any given time, the Company has sufficient cash
resources to meet its operating requirements, including
share buy back and follow on investments.
Market The market value of Ordinary shares can fluctuate. The Company operates a share buyback policy, which
value of The market value of an Ordinary share, as well as is designed to limit the discount at which the Ordinary
Ordinary being affected by its net asset value and prospective shares trade to around 5 per cent to net asset value,
shares net asset value, also takes into account its dividend by providing a purchaser through the Company in absence
yield and prevailing interest rates. As such, the of market purchasers. From time to time buyback cannot
market value of an Ordinary share may vary considerably be applied, for example when the Company is subject
from its underlying net asset value. The market prices to a close period, or if it were to exhaust its buyback
of shares in quoted investment companies can, therefore, authorities, which are renewed each year.
be at a discount or premium to the net asset value New Ordinary shares are issued at sufficient premium
at different times, depending on supply and demand, to net asset value to cover the costs of issue and
market conditions, general investor sentiment and to avoid asset value dilution to existing investors.
other factors. Accordingly the market price of the
Ordinary shares may not fully reflect their underlying
net asset value.
Viability statement
In accordance with the FRC UK Corporate Governance Code published in
September 2014 and principle 21 of the AIC Code of Corporate Governance,
the Directors have assessed the prospects of the Company over three
years to 31 December 2019. The Directors believe that three years is a
reasonable period in which they can assess the future of the Company to
continue to operate and meet its liabilities as they fall due and is
also the period used by the Board in the strategic planning process and
is considered reasonable for a business of our nature and size. The
three year period is considered the most appropriate given the forecasts
that the Board require from the Manager and the estimated timelines for
finding, assessing and completing investments.
The Directors have carried out a robust assessment of the principal
risks facing the Company as explained above, including those that could
threaten its business model, future performance, solvency or liquidity.
The Board also considered the risk management processes in place to
avoid or reduce the impact of the underlying risks. The Board focused on
the major factors which affect the economic, regulatory and political
environment. The Board deliberated over the importance of the Manager
and the processes that they have in place for dealing with the principal
risks.
The Board assessed the ability of the Company to raise finance. As
explained in this Strategic report the Company's income more than covers
on-going expenses, and this income should increase as our asset-backed
investments continue to mature. The portfolio is well balanced and
geared towards long term growth delivering dividends and capital growth
to shareholders. In assessing the prospects of the Company, the
Directors have considered the cash flow by looking at the Company's
income and expenditure projections and funding pipeline over the
assessment period of three years and they appear realistic.
In considering the viability of the Company, the Board took into account
factors including the processes for mitigating risks, monitoring costs,
managing share price discount, the Manager's compliance with the
investment objective, policies and business model and the balance of the
portfolio. The Directors have concluded that there is a reasonable
expectation that the Company will be able to continue in operation and
meet its liabilities as they fall due over the three year period to 31
December 2019.
This Strategic report of the Company for the year ended 31 December 2016
has been prepared in accordance with the requirements of section 414A of
the Companies Act 2006 (the "Act"). The purpose of this report is to
provide Shareholders with sufficient information to enable them to
assess the extent to which the Directors have performed their duty to
promote the success of the Company in accordance with section 172 of the
Act.
On behalf of the Board
Robin Field
Chairman
21 March 2017
Responsibility Statement
In preparing these Financial Statements for the year to 31 December
2016, the Directors of the Company, being Robin Field, Thomas Chambers
and Martin Fiennes, confirm that to the best of their knowledge:
- summary financial information contained in this announcement and the
full Annual Report and Financial Statements for the year ended 31
December 2016 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 of the Company for
the year ended 31 December 2016 as required by DTR 4.1.12R;
-the Chairman's statement and Strategic report include a fair review of
the information required by DTR 4.2.7R (indication of important events
during the year ended 31 December 2016 and description of principal
risks and uncertainties that the Company faces); and
-the Chairman's statement and Strategic report include a fair review of
the information required by DTR 4.2.8R (disclosure of related parties
transactions and changes therein).
A detailed "Statement of Directors' responsibilities" is contained on
page 26 of the full Annual Report and Financial Statements.
By order of the Board
Robin Field
Chairman
21 March 2017
Income statement
Year ended 31 December Year ended 31 December
2016 2015
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on investments 2 - 6,076 6,076 - 3,784 3,784
Investment income 3 1,370 - 1,370 1,412 - 1,412
Investment management fee 4 (244) (733) (977) (212) (636) (848)
Performance incentive fee 4 (128) (385) (513) (60) (182) (242)
Other expenses 5 (279) - (279) (271) - (271)
Profit on ordinary activities before tax 719 4,958 5,677 869 2,966 3,835
Tax on ordinary activities 7 - - - - - -
Profit and total comprehensive income attributable
to shareholders 719 4,958 5,677 869 2,966 3,835
Basic and diluted return per share (pence) * 9 0.29 2.03 2.32 0.40 1.37 1.77
* excluding treasury shares
The accompanying notes form an integral part of these Financial
Statements.
The total column of this Income statement represents the profit and loss
account of the Company. The supplementary revenue and capital columns
have been prepared in accordance with The Association of Investment
Companies' Statement of Recommended Practice.
Balance sheet
31 31
December December
2016 2015
Note GBP'000 GBP'000
Fixed assets investments 10 51,601 41,257
Current assets
Trade and other receivables less than one year 12 476 388
Cash and cash equivalents 1,788 3,518
2,264 3,906
Total assets 53,865 45,163
Creditors: amounts falling due within one year
Trade and other payables less than one year 13 (855) (551)
Total assets less current liabilities 53,010 44,612
Equity attributable to equityholders
Called up share capital 14 2,840 2,533
Share premium 14,218 8,399
Capital redemption reserve 11 11
Unrealised capital reserve 12,526 7,170
Realised capital reserve 3,432 3,830
Other distributable reserve 19,983 22,669
Total equity shareholders' funds 53,010 44,612
Basic and diluted net asset value per share (pence)
* 15 21.41 20.11
* excluding treasury shares
The accompanying notes form an integral part of these Financial
Statements.
The Financial Statements were approved by the Board of Directors and
authorised for issue on 21 March 2017 and were signed on its behalf by:
Robin Field
Chairman
Company number: 03139019
Statement of changes in equity
Called
up Unrealised Realised Other
share Share capital capital distributable
capital premium Capital redemption reserve reserve reserve* reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2015 2,533 8,399 11 7,170 3,830 22,669 44,612
Profit and total comprehensive income for the period - - - 5,718 (760) 719 5,677
Transfer of previously unrealised gains on disposal
or write off of investments - - - (362) 362 - -
Purchase of own shares for treasury - - - - - (905) (905)
Issue of equity 307 5,981 - - - - 6,288
Cost of issue of equity - (162) - - - - (162)
Dividends paid - - - - (2,500) (2,500)
At 31 December 2016 2,840 14,218 11 12,526 3,432 19,983 53,010
At 31 December 2014 2,265 3,444 11 3,981 2,978 26,262 38,941
Profit and total comprehensive income for the period - - - 3,523 (557) 869 3,835
Transfer of previously unrealised gains on disposal
or write off of investments - - - (334) 334 - -
Purchase of own shares for treasury - - - - - (1,192) (1,192)
Issue of equity 268 5,105 - - - - 5,373
Cost of issue of equity - (150) - - - - (150)
Transfer from other distributable reserve to realised
capital reserve - - - - 1,075 (1,075) -
Dividends paid - - - - - (2,195) (2,195)
At 31 December 2015 2,533 8,399 11 7,170 3,830 22,669 44,612
*These reserves amount to GBP23,415,000 (2015: GBP26,499,000) which is
considered distributable.
The accompanying notes form an integral part of these Financial
Statements.
Statement of cash flows
Year ended Year ended
31 December 2016 31 December 2015
Note GBP'000 GBP'000
Cash flow from operating
activities
Investment income received 902 1,036
Deposit interest received 32 37
Dividend income received 84 282
Investment management fee paid (994) (1,024)
Performance incentive fee paid (242) -
Other cash payments (227) (313)
Exchange rate movement on a part
disposal of an asset 7 (10)
Net cash flow from operating
activities (438) 8
Cash flow from investing
activities
Purchase of fixed asset
investments (5,935) (4,375)
Disposal of fixed asset
investments 1,918 5,250
Net cash flow from investing
activities (4,017) 875
Cash flow from financing
activities
Issue of share capital 14 5,880 5,059
Cost of issue of equity (2) (2)
Purchase of own shares (including
costs) 14 (905) (1,192)
Equity dividends paid* (2,248) (2,028)
Net cash flow from financing
activities 2,725 1,837
(Decrease)/increase in cash and
cash equivalents (1,730) 2,720
Cash and cash equivalents at start
of the year 3,518 798
Cash and cash equivalents at end
of the year 1,788 3,518
Cash and cash equivalents
comprise:
Cash at bank and in hand 1,788 3,518
Cash equivalents - -
Total cash and cash equivalents 1,788 3,518
* The equity dividends paid shown in the cash flow are different to the
dividends disclosed in note 8 as a result of the non-cash effect of the
Dividend Reinvestment Scheme.
The accompanying notes form an integral part of these Financial
Statements.
Notes to the Financial Statements
1. Accounting policies
Basis of accounting
The Financial Statements have been prepared in accordance with the
historical cost convention, modified to include the revaluation of
investments, in accordance with applicable United Kingdom law and
accounting standards, including Financial Reporting Standard 102 ("FRS
102"), and with the 2014 Statement of Recommended Practice "Financial
Statements of Investment Trust Companies and Venture Capital Trusts"
("SORP") issued by The Association of Investment Companies ("AIC").
The preparation of the Financial Statements requires management to make
judgements and estimates that affect the application of policies and
reported amounts of assets, liabilities, income and expenses. The most
critical estimates and judgements relate to the determination of
carrying value of investments at fair value through profit and loss
("FVTPL"). The Company values investments by following the IPEVCV
Guidelines and further detail on the valuation techniques used are
outlined below.
Company information can be found on page 2 of the full Annual Report and
Financial Statements.
Fixed asset investments
The Company's business is investing in financial assets with a view to
profiting from their total return in the form of income and capital
growth. This portfolio of financial assets is managed and its
performance evaluated on a fair value basis, in accordance with a
documented investment policy, and information about the portfolio is
provided internally on that basis to the Board.
In accordance with the requirements of FRS 102, those undertakings in
which the Company holds more than 20% of the equity as part of an
investment portfolio are not accounted for using the equity method. In
these circumstances the investment is measured at FVTPL.
Upon initial recognition (using trade date accounting) investments,
including loan stock, are designated by the Company as FVTPL and are
included at their initial fair value, which is cost (excluding expenses
incidental to the acquisition which are written off to the Income
statement).
Subsequently, the investments are valued at 'fair value', which is
measured as follows:
-- Investments listed on recognised exchanges are valued at their bid prices
at the end of the accounting period or otherwise at fair value based on
published price quotations;
-- Unquoted investments, where there is not an active market, are valued
using an appropriate valuation technique in accordance with the IPEVCV
Guidelines. Indicators of fair value are derived using established
methodologies including earnings multiples, the level of third party
offers received, prices of recent investment rounds, net assets and
industry valuation benchmarks. Where the Company has an investment in an
early stage enterprise, the price of a recent investment round is often
the most appropriate approach to determining fair value. In situations
where a period of time has elapsed since the date of the most recent
transaction, consideration is given to the circumstances of the portfolio
company since that date in determining fair value. This includes
consideration of whether there is any evidence of deterioration or strong
definable evidence of an increase in value. In the absence of these
indicators, the investment in question is valued at the amount reported
at the previous reporting date. Examples of events or changes that could
indicate a diminution include:
-- the performance and/or prospects of the underlying business are
significantly below the expectations on which the investment was based;
-- a significant adverse change either in the portfolio company's business
or in the technological, market, economic, legal or regulatory
environment in which the business operates; or
-- market conditions have deteriorated, which may be indicated by a fall in
the share prices of quoted businesses operating in the same or related
sectors.
Investments are recognised as financial assets on legal completion of
the investment contract and are de-recognised on legal completion of the
sale of an investment.
Dividend income is not recognised as part of the fair value movement of
an investment, but is recognised separately as investment income through
the Income statement when a share becomes ex-dividend.
Debtors and creditors and cash are carried at amortised cost, in
accordance with FRS 102. There are no financial liabilities other than
creditors.
Gains and losses on investments
Gains and losses arising from changes in the fair value of the
investments are included in the Income statement for the year as a
capital item and are allocated to unrealised capital reserve.
Investment income
Equity income
Dividend income is included in revenue when the investment is quoted
ex-dividend.
Unquoted loan stock and other preferred income
Fixed returns on non-equity shares and debt securities are recognised
when the Company's right to receive payment and expect settlement is
established. Where interest is rolled up and/or payable at redemption
then it is recognised as income unless there is reasonable doubt as to
its receipt.
Bank interest income
Interest income is recognised on an accruals basis using the rate of
interest agreed with the bank.
Investment management fees and other expenses
All expenses have been accounted for on an accruals basis. Expenses are
charged through the other distributable reserve except the following
which are charged through the realised capital reserve:
-- 75 per cent. of management fees are allocated to the realised capital
reserve. This is in line with the Board's expectation that over the long
term 75 per cent. of the Company's investment returns will be in the form
of capital gains; and
-- expenses which are incidental to the purchase or disposal of an
investment are charged through the realised capital reserve.
Performance incentive fee
Any performance incentive fee will be allocated between other
distributable and realised capital reserves based upon the proportion to
which the calculation of the fee is attributable to revenue and capital
returns.
Taxation
Taxation is applied on a current basis in accordance with FRS 102.
Current tax is tax payable (refundable) in respect of the taxable profit
(tax loss) for the current period or past reporting periods using the
tax rates and laws that have been enacted or substantively enacted at
the financial reporting date. Taxation associated with capital expenses
is applied in accordance with the SORP.
Deferred tax is provided in full on all timing differences at the
reporting date. Timing differences are differences between taxable
profits and total comprehensive income as stated in the financial
statements that arise from the inclusion of income and expenses in tax
assessments in periods different from those in which they are recognised
in the financial statements. As a VCT the Company has an exemption from
tax on capital gains. The Company intends to continue meeting the
conditions required to obtain approval as a VCT in the foreseeable
future. The Company therefore, should have no material deferred tax
timing differences arising in respect of the revaluation or disposal of
investments and the Company has not provided for any deferred tax.
Foreign exchange
The currency of the primary economic environment in which the Company
operates (the functional currency) is pounds Sterling ("Sterling"),
which is also the presentational currency of the Company. Transactions
involving currencies other than Sterling are recorded at the exchange
rate ruling on the transaction date. At each Balance sheet date,
monetary items and non-monetary assets and liabilities that are measured
at fair value, which are denominated in foreign currencies, are
retranslated at the closing rates of exchange. Exchange differences
arising on settlement of monetary items and from retranslating at the
Balance sheet date of investments and other financial instruments
measured at FVPTL, and other monetary items, are included in the Income
statement. Exchange differences relating to investments and other
financial instruments measured at fair value are subsequently included
in the unrealised capital reserve.
Reserves
Share premium account
This reserve accounts for the difference between the price paid for
shares and the nominal value of the shares, less issue costs.
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is
diminished through the repurchase and cancellation of the Company's own
shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at the
year-end against cost are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
-- gains and losses compared to cost on the realisation of investments;
-- expenses, together with the related taxation effect, charged in
accordance with the above policies; and
-- dividends paid to equity holders.
Other distributable reserve
The special reserve, treasury share reserve and the revenue reserve were
combined in 2012 to form a single reserve named other distributable
reserve.
This reserve accounts for movements from the revenue column of the
Income statement, the payment of dividends, the buy-back of shares and
other non-capital realised movements.
Dividends
Dividends by the Company are accounted for in the period in which the
dividend is paid or approved at the Annual General Meeting.
Year ended Year ended
31 December 31 December
2016 2015
2. Gains on investments GBP'000 GBP'000
Unrealised gains on fixed asset investments 5,718 3,523
Realised gains on fixed asset investments 358 261
6,076 3,784
Year ended Year ended
31 December 31 December
2016 2015
3. Investment income GBP'000 GBP'000
Income recognised on investments
Interest from loans to portfolio companies 1,257 1,095
Dividends 84 282
Bank deposit interest 29 35
1,370 1,412
Year ended Year ended
31 December 31 December
4. Investment management and performance incentive 2016 2015
fees GBP'000 GBP'000
Investment management fee charged to revenue 244 212
Investment management fee charged to capital 733 636
Performance incentive fee charged to revenue 128 60
Performance incentive fee charged to capital 385 182
1,490 1,090
Further details of the Management agreement under which the investment
management fee and performance incentive fee are paid is given in the
Strategic report.
During the year, services with a value of GBP977,000 (2015: GBP848,000)
and GBP50,000 (2015: GBP50,000) were purchased by the Company from
Albion Ventures LLP in respect of management and administration fees
respectively. A performance incentive fee with a value of GBP513,000
(2015: GBP242,000) has been disclosed within the Income statement. At
the financial year end, the amount due to Albion Ventures LLP in respect
of these services disclosed as accruals was GBP786,000 (2015:
GBP468,000).
Albion Ventures LLP is, from time to time, eligible to receive
transaction fees and monitoring fee from portfolio companies. During
the year ended 31 December 2016 Albion Ventures LLP received transaction
fees from 19 portfolio companies and monitoring fees from 30 portfolio
companies. Kings Arms Yard's share of these fees were, transactions fees
of GBP53,000 and monitoring fees of GBP120,000 (2015: transaction fees:
GBP52,000; monitoring fees: GBP137,000).
Albion Ventures LLP holds 88,543 (2015: 84,185) Ordinary shares in the
Company.
Year ended Year ended
31 December 31 December
2016 2015
5. Other expenses GBP'000 GBP'000
Administrative and secretarial services to the
Manager 50 50
Directors' fees (note 6) 72 65
Auditor's remuneration for statutory audit services
(excluding VAT) 24 24
Other expenses 126 124
272 263
Foreign exchange cost 7 8
279 271
Year ended Year ended
31 December 2016 31 December 2015
6. Directors' fees GBP'000 GBP'000
Amount payable to Directors 66 60
National insurance 6 5
72 65
The Company's key management personnel are the Directors. Further
information regarding Directors' remuneration can be found in the
Directors' remuneration report on pages 32 and 33 of the full Annual
Report and Financial Statements.
Year ended Year ended
31 December 2016 31 December 2015
7. Tax on ordinary activities GBP'000 GBP'000
UK Corporation tax payable - -
Year ended Year ended
Reconciliation of profit on ordinary activities to 31 December 2016 31 December 2015
taxation charge GBP'000 GBP'000
Return on ordinary activities before taxation 5,677 3,835
Tax charge on profit at the standard UK corporation
tax rate of 20% (2015: effective rate 20.25%) 1,135 776
Effects of:
Non-taxable gain (1,215) (766)
Non-taxable income (17) (57)
Unutilised management expenses 97 47
- -
The tax charge for the year shown in the Income statement is lower than
the small company's rate of corporation tax in the UK of 20 per cent.
(2015: effective rate 20.25 per cent.). The differences are explained
above.
The Company has excess management expenses of GBP10,764,000 (2015:
GBP10,279,000) that are available for offset against future profits. A
deferred tax asset of GBP1,830,000 (2015: GBP2,056,000) has not been
recognised in respect of those losses as they will be recoverable only
to the extent that the Company has sufficient future taxable profits.
Year ended Year ended
31 December 2016 31 December 2015
8. Dividends GBP'000 GBP'000
First dividend of 0.5 pence per share paid on 30 April
2015 - 1,109
Second dividend of 0.5 pence per share paid on 30
October 2015 - 1,116
First dividend of 0.5 pence per share paid on 29 April
2016 1,256 -
Second dividend of 0.5 pence per share paid on 31
October 2016 1,244 -
Unclaimed dividends returned to Company - (30)
2,500 2,195
The Directors have declared a first dividend of 0.5 pence per share for
the year ending 31 December 2017, which will amount to approximately
GBP1,330,000. This dividend will be paid on 28 April 2017 to
shareholders on the register on 7 April 2017.
9. Basic and diluted return per share
Year ended 31 December Year ended 31 December
2016 2015
Revenue Capital Total Revenue Capital Total
Profit attributable to shareholders (GBP'000) 719 4,958 5,677 869 2,966 3,835
Weighted average shares in issue (excluding treasury
shares) 244,550,634 216,878,531
Return attributable per equity share (pence) 0.29 2.03 2.32 0.40 1.37 1.77
The weighted average number of Ordinary shares is calculated excluding
the treasury shares of 36,375,000 (2015: 31,463,000).
There are no convertible instruments, derivatives or contingent share
agreements in issue so basic and diluted return per share are the same.
31 December 31 December
10. Fixed asset investments 2016 2015
Summary of fixed asset investments GBP'000 GBP'000
Investments held at fair value through profit or loss
Unquoted equity 27,094 22,148
Unquoted loan stock 20,664 16,658
Quoted equity 3,843 2,451
51,601 41,257
31 December 31 December
2016 2015
GBP'000 GBP'000
Opening valuation 41,257 38,055
Purchases at cost 7,405 4,373
Disposal proceeds (3,493) (5,164)
Realised gains 358 261
Movement from current asset investments - 150
Movement in loan stock accrued income 355 59
Movement in unrealised gains 5,718 3,523
Closing valuation 51,601 41,257
Movement in loan stock accrued income
Opening accumulated movement in loan stock accrued
income 187 128
Movement in loan stock accrued income 355 59
Closing accumulated movement in loan stock accrued
income 543 187
Movement in unrealised gains
Opening accumulated unrealised gains 7,158 4,069
Transfer of previously unrealised gains to realised
reserve on disposal of investments (362) (1,111)
Transfer of previously unrealised losses to realised
reserve on investment written off but still held - 778
Movement from current asset investments - (100)
Movement in unrealised gains 5,718 3,523
Closing accumulated unrealised gains 12,514 7,158
Historical cost basis
Opening book cost 33,912 33,858
Purchases at cost 7,405 4,373
Sales at cost (2,772) (3,791)
Cost of investments written off but still held - (778)
Movement from current asset investments - 250
Closing book cost 38,544 33,912
Closing cost is net of amounts of GBP1,974,000 (2015: GBP1,974,000)
written off in respect of investments still held at the Balance sheet
date.
Amounts shown as cost represent the acquisition cost in the case of
investments made by the Company and/or the valuation attributed to the
investments acquired from other VCTs at the dates of merger, plus any
subsequent acquisition cost.
Purchases and disposals detailed above may not agree to purchases and
disposals in the Statement of cash flows due to restructuring of
investments, conversion of convertible loan stock and settlement debtors
and creditors.
Unquoted investment valuation methodologies
Unquoted investments are valued in accordance with
the IPEVCV guidelines as follows:
31 December 2016 31 December 2015
Valuation Methodologies GBP'000 GBP'000
Net assets supported by third party valuation 22,317 12,869
Price of recent investment (reviewed for impairment
or uplift) 8,662 6,434
Earnings multiple 7,736 5,815
Revenue multiple 6,913 7,802
Cost reviewed for impairment or uplift 2,130 4,336
Discount to offer price - 1,550
47,758 38,806
Third party valuations are prepared by PricewaterhouseCoopers and
independent RICS qualified surveyors in full compliance with the RICS
Red Book.
Fair value investments had the following movements between valuation
methodologies between 31 December 2015 and 31 December 2016.
Change in valuation methodology Value as at Explanatory Note
(2015 to 2016) 31 December 2016
GBP'000
Cost reviewed for impairment to net assets supported 3,776 Third party valuations
by third party valuation prepared
Revenue multiple to price of recent investment 324 Investment round has
recently taken place
Cost reviewed for impairment to price of recent 104 Investment round has
investment recently taken place
Cost reviewed for impairment to earnings multiple 62 More relevant valuation
methodology
The valuation will be the most appropriate valuation methodology for an
investment within its market, with regard to the financial health of the
investment and the IPEVCV Guidelines. The Directors believe that,
within these parameters, the methods used are the most appropriate
methods of valuation as at 31 December 2016.
FRS 102 and the SORP requires the Company to disclose the inputs to the
valuation methods applied to its investments measured at fair value
through profit or loss in a fair value hierarchy according to the
following definitions:
The table below sets out fair value measurements using FRS 102 s11.27
fair value hierarchy, which has been adopted early. The Company has one
class of assets, being at fair value through profit and loss.
Fair value hierarchy Definition
Level 1 The unadjusted quoted price in an active market
Level 2 Inputs to valuations are from observable sources and
are directly or indirectly derived from prices
Level 3 Inputs to valuations not based on observable market
data
Quoted NASDAQ and LSE investments are valued according to Level 1
valuation methods. Unquoted equity, preference shares, and loan stock
are all valued according to Level 3 valuation methods.
31 December 2016 31 December 2015
Level 3 reconciliation GBP'000 GBP'000
Opening valuation 38,806 34,865
Purchases at cost 5,938 4,373
Unrealised gains 4,792 3,802
Movement in loan stock accrued income 355 59
Transfer to Level 1* - (228)
Realised net gains on disposal 201 267
Movement from current asset investments - 150
Disposal proceeds (2,334) (4,482)
Closing valuation 47,758 38,806
* During the year ended 31 December 2015 Xtera Communications Inc. was
quoted on NASDAQ and transferred to Level 1 fair value hierarchy.
FRS 102 requires the Directors to consider the impact of changing one or
more of the inputs used as part of the valuation process to reasonable
possible alternative assumptions. 58 per cent. of the portfolio of
investments is based on cost, recent investment price or is loan stock,
and as such the Board considers that the assumptions used for their
valuations are the most reasonable. The Directors believe that changes
to reasonable possible alternative assumptions (by adjusting the revenue
and earnings multiples) for the valuations of the remainder of the
portfolio companies could result in an increase in the valuation of
investments by GBP1,706,000 or a decrease in the valuation of
investments by GBP1,352,000.
For valuations based on earnings and revenue multiples, the Board
considers that the most significant input is the price/earnings ratio;
for valuations based on third party valuations, the Board considers that
the most significant inputs are price/earnings ratio, discount factors
and market value per room for care homes; which have been adjusted to
drive the above sensitivities.
11. Significant holdings
The principal activity of the Company is to select and hold a portfolio
of investments in unquoted securities. Although the Company, through
the Manager, will, in some cases, be represented on the board of the
portfolio company, it will not ordinarily take a controlling interest or
become involved in the management. The size and structure of companies
with unquoted securities may result in certain holdings in the portfolio
representing a participating interest without there being any
partnership, joint venture or management consortium agreement.
The Company has interests of greater than 20% of the nominal value of
any class (some of which are non-voting) of the allotted shares in the
portfolio companies as at 31 December 2016 as described below. The
investments listed below are held as part of an investment portfolio and
therefore, as permitted by FRS 102, they are measured at fair value and
are not accounted for using the equity method.
Number of % total
Country of Profit/(loss) Net assets/ shares % class and voting
Company incorporation before tax (liabilities) held share type rights
Academia United States 23.2% Preferred
Inc. of America n/a n/a 774,400 shares 3.2%
Active
Lives
Care 20.3% Ordinary
Limited Great Britain n/a* 1,373,000 1,095,430 shares 20.3%
Antenova 22.0% Preferred
Limited Great Britain n/a* 1,038,000 9,226,988 shares 28.7%
Elateral
Group 37.7% Ordinary
Limited Great Britain (3,110,000) (5,759,000) 17,380,462 shares 37.7%
35.8% D
Proveca Ordinary
Limited Great Britain n/a* (2,378,000) 40,289 shares 16.4%
Sift
Digital 38.6% Ordinary
Limited Great Britain n/a* (403,000) 33,671,618 shares 38.6%
Sift 42.1% Ordinary
Limited Great Britain 181,000 1,795,000 33,671,618 shares 42.1%
*The company files abbreviated accounts which does not disclose this
information.
12. Trade and other receivables less than one year
31 December 2016 31 December 2015
GBP'000 GBP'000
Trade and other receivables less than one
year 459 369
Prepayments and accrued income 17 19
476 388
The Directors consider that the carrying amount of debtors is not
materially different to their fair value.
31 December 2016 31 December 2015
13. Creditors: amounts falling due within one year GBP'000 GBP'000
Trade creditors 5 17
Accruals 838 522
Other creditors 12 12
855 551
The Directors consider that the carrying amount of creditors is not
materially different to their fair value.
14. Called up share capital
Allotted, called up and fully paid GBP'000
253,303,558 Ordinary shares of 1 penny each at 31
December 2015 2,533
30,690,246 Ordinary shares of 1 penny each issued
during the year 307
283,993,804 Ordinary shares of 1 penny each at 31
December 2016 2,840
31,463,000 Ordinary shares of 1 penny each held in
treasury at 31 December 2015 (315)
4,912,000 Ordinary shares purchased during the year
to be held in treasury (49)
36,375,000 Ordinary shares of 1 penny each held in
treasury at 31 December 2016 (364)
247,618,804 Ordinary shares of 1 penny each in circulation*
at 31 December 2016 2,476
*Carrying one vote each
During the year the Company purchased 4,912,000 Ordinary shares (2015:
6,588,000) representing 1.7% of the issued Ordinary share capital as at
31 December 2016, at a cost of GBP905,000 (2015: GBP1,192,000),
including stamp duty, to be held in treasury. The Company holds a total
of 36,375,000 Ordinary shares in treasury, representing 12.8% of the
issued Ordinary share capital as at 31 December 2016.
Under the terms of the Dividend Reinvestment Scheme, Circular dated 19
April 2011, the following new Ordinary shares of nominal value 1 penny
per share were allotted during the year:
Aggregate Opening market
nominal price on
Number of value Issue price allotment date
shares of shares (pence per Net invested (pence per
Date of allotment allotted (GBP'000) share) (GBP'000) share)
29 April 2016 636,545 6 19.61 123 18.50
31 October 2016 649,493 6 19.16 123 18.50
1,286,038 12 246
During the period from 1 January 2016 to 31 December 2016, the Company
issued the following new Ordinary shares of nominal value 1 penny each
under the Albion VCT Prospectus Top Up Offers 2015/2016:
Aggregate
nominal Opening market
value Issue price Net consideration price on allotment
Number of shares of shares (pence per received date
Date of allotment allotted (GBP'000) share) (GBP'000) (pence per share)
29 January 2016 8,861,834 89 20.20 1,754 18.25
29 January 2016 4,851,404 48 20.30 961 18.25
31 March 2016 15,306,074 153 20.80 3,088 18.25
6 April 2016 175,236 2 20.60 35 18.25
6 April 2016 44,280 - 20.70 9 18.25
6 April 2016 165,380 2 20.80 33 18.25
29,404,208 294 5,880
15. Basic and diluted net asset value per share
The basic and diluted net asset value per share as at 31 December 2016
of 21.41 pence (2015: 20.11 pence) are based on net assets of
GBP53,010,000 (2015: GBP44,612,000) divided by the 247,618,804 shares in
issue (net of treasury shares) at that date (2015: 221,840,558).
16. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in note 14.
The Company is permitted to buy back its own shares for cancellation or
treasury purposes and this policy is described in more detail in the
Chairman's statement.
The Company's financial instruments comprise equity and loan stock
investments in unquoted and quoted companies, cash balances and liquid
cash instruments and short term debtors and creditors which arise from
its operations. The main purpose of these financial instruments is to
generate cash flow, revenue and capital appreciation for the Company's
operations. The Company has no gearing or other financial liabilities
apart from short term creditors. The Company does not use any
derivatives for the management of its Balance sheet.
The principal financial instrument risks arising from the Company's
operations are:
-- investment (or market) risk (which comprises investment price, foreign
currency on investments and cash flow interest rate risk);
-- credit risk; and
-- liquidity risk.
The Board regularly reviews and agrees policies for managing each of
these risks. There have been no changes in the nature of the risks that
the Company has faced during the past year and there have been no
changes in the objectives, policies or processes for managing risks
during the past year. The key risks are summarised below.
Investment risk
As a venture capital trust, it is the Company's specific nature to
evaluate and control the investment risk in its portfolio in unquoted
and quoted investments, details of which are shown on pages 17 and 18 of
the full Annual Report and Financial Statements. Investment risk is the
exposure of the Company to the revaluation and devaluation of
investments. The main driver of investment risk is the operational and
financial performance of the portfolio company and the dynamics of
market quoted comparators. The Manager receives management accounts
from portfolio companies and members of the investment management team
often sit on the boards of unquoted portfolio companies; this enables
the close identification, monitoring and management of investment risk.
The Manager and the Board formally review investment risk (which
includes market price risk), both at the time of initial investment and
at quarterly Board meetings.
The Board monitors the prices at which sales of investments are made to
ensure that profits to the Company are maximised and that valuations of
investments retained within the portfolio appear sufficiently fair and
realistic compared to prices being achieved in the market for sales of
unquoted investments.
The maximum investment risk as at the Balance sheet date is the value of
the fixed asset investment portfolio which is GBP51,601,000 (2015:
GBP41,257,000). Fixed asset investments form 97% of the net asset value
as at 31 December 2016 (2015: 92%).
More details regarding the classification of fixed asset investments are
shown in note 10.
Investment price risk
Investment price risk is the risk that the fair value of future
investment cash flows will fluctuate due to factors specific to an
investment instrument or to a market in similar instruments. As a
venture capital trust the Company invests in unquoted companies in
accordance with the investment policy set out on page 8 of the full
Annual Report and Financial Statements. The management of risk within
the venture capital portfolio is addressed through careful investment
selection, by diversification across different industry segments, by
maintaining a wide spread of holdings in terms of financing stage and by
limitation of the size of individual holdings. Furthermore, new
unquoted investments are often made with up to two-thirds of the
investments comprising debt securities, which, owing to the structure of
their yield and the fact that they are usually secured, have a lower
level of price volatility than equity. The Directors monitor the
Manager's compliance with the investment policy, review and agree
policies for managing this risk and monitor the overall level of risk on
the investment portfolio on a regular basis.
Valuations are based on the most appropriate valuation methodology for
an investment within its market, with regard to the financial health of
the investment and the IPEVCV guidelines. Details of the sectors in
which the Company is currently invested are shown in the pie chart at
the end of this announcement.
As required under FRS 102 the Board is required to illustrate by way of
a sensitivity analysis the degree of exposure to market risk. The Board
considers that the value of the fixed asset investment portfolio is
sensitive to a 10% change based on the current economic climate. The
impact of a 10% change has been selected as this is considered
reasonable given the current level of volatility observed both on a
historical basis and future expectations.
The sensitivity of a 10% increase or decrease in the valuation of the
fixed asset investment portfolio (keeping all other variables constant)
would increase or decrease the net asset value and return for the year
by GBP5,160,000 (2015: GBP4,126,000).
Foreign currency risk
Foreign currency risk is the risk of exposure to movements in foreign
exchange rates relative to sterling.
The majority of the Company's assets are denominated in sterling;
however, the Company is exposed to US dollars through its investment in
a US dollar denominated security. No hedging of the currency exposure
is currently undertaken. The Manager monitors the Company's exposure
and reports to the Board on a regular basis.
Investment and revenue received in currencies other than sterling is
converted into sterling on or shortly after the date of investment or
receipt of revenue as are any proceeds from the disposal of a foreign
currency investment.
As at 31 December 2016, the Company held an investment denominated in US
dollars of GBP2,260,000 (2015: GBP2,451,000).
During the year to 31 December 2016, sterling depreciated by 16.75%
(2015: depreciated by 4.72%) against the US dollar.
Interest rate risk
The Company is exposed to fixed and floating rate interest rate risk on
its financial assets. On the basis of the Company's analysis, it is
estimated that a rise of one percentage point in all interest rates
would have increased total return before tax for the year by
approximately GBP31,000 (2015: GBP34,000). Furthermore, it is
considered that a fall of interest rates below current levels during the
year would have been unlikely.
The weighted average effective interest rate applied to the Company's
fixed rate fixed asset investments during the year was approximately
7.3% (2015: 7.3%). The weighted average period to maturity for the
fixed rate fixed asset investments is approximately 5.6 years (2015: 6.4
years).
The Company's financial assets and liabilities as at 31 December 2016,
denominated in pounds sterling, consist of the following:
31 December 2016 31 December 2015
Floating rate Non-interest bearing Total Floating rate Non-interest bearing Total
Fixed rate GBP'000 GBP'000 GBP'000 GBP'000 Fixed rate GBP'000 GBP'000 GBP'000 GBP'000
Unquoted
equity - - 27,094 27,094 - - 22,148 22,148
Quoted
equity - - 3,843 3,843 - - 2,451 2,451
Unquoted
loan stock 19,273 661 730 20,664 11,982 661 4,015 16,658
Debtors * - - 459 459 - - 372 372
Current
liabilities - - (855) (855) - - (551) (551)
Cash - 1,788 - 1,788 - 3,518 - 3,518
Total net
assets 19,273 2,449 31,271 52,993 11,982 4,179 28,435 44,596
* The debtors do not reconcile to the Balance sheet as prepayments are
not included in the above table.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument
will fail to discharge an obligation or commitment that it has entered
into with the Company. The Company is exposed to credit risk through its
debtors, investment in unquoted loan stock and through the holding of
cash on deposit with banks.
The Manager evaluates credit risk on loan stock instruments prior to
investment and as part of its ongoing monitoring of investments. In
doing this, it takes into account the extent and quality of any security
held. In the past loan stock may or may not have a fixed or floating
charge, which may or may not have been subordinated, over the assets of
the portfolio company. However, for new investments, typically loan
stock instruments will have a first fixed charge or a fixed and floating
charge over the assets of the portfolio company in order to mitigate the
gross credit risk.
The Manager receives management accounts from portfolio companies and
members of the investment management team often sit on the boards of
unquoted portfolio companies; this enables the close identification,
monitoring and management of investment specific credit risk.
The Manager and the Board formally review credit risk (including
debtors) and other risks, both at the time of initial investment and at
quarterly Board meetings.
The Company's total gross credit risk at 31 December 2016 was limited to
GBP20,664,000 (2015: GBP16,658,000) of unquoted loan stock instruments,
GBP1,788,000 (2015: GBP3,518,000) cash on deposit with banks and
GBP459,000 (2015: GBP372,000) of other debtors.
The Company does not hold any assets as the result of the enforcement of
security during the year and believes that the carrying values for past
due assets are covered by the value of security held for these loan
stock investments.
As at the Balance sheet date, cash and liquid investments held by the
Company are held with the National Westminster Bank plc, Scottish Widows
Bank plc (part of Lloyds Banking Group plc), Barclays Bank plc and UBS
Wealth Management AG. Credit risk on cash transactions is mitigated by
transacting with counterparties that are regulated entities subject to
regulatory supervision, with high credit ratings assigned by
international credit-rating agencies.
The credit profile of unquoted loan stock is described under liquidity
risk below.
Liquidity risk
Liquid assets are held as cash on current account, deposit or short term
money market accounts or similar instruments. Under the terms of its
Articles, the Company has the ability to borrow an amount equal to its
adjusted capital and reserves of the latest published audited Balance
sheet.
The Company has no committed borrowing facilities as at 31 December 2016
(2015: GBPnil) and had cash, before its current fundraising (raising
GBP3.8 million in January 2017) of GBP1,788,000 (2015: GBP3,518,000).
The Company had no investment commitments as at 31 December 2016 (2015:
GBP2,396,000).
There are no externally imposed capital requirements other than the
minimum statutory share capital requirements for public limited
companies.
The main cash outflows are for new investments, the buy-back of shares
and dividend payments, which are within the control of the Company. The
Manager formally reviews the cash requirements of the Company on a
monthly basis, and the Board on a quarterly basis as part of its review
of management accounts and forecasts. The Company's financial
liabilities at 31 December 2016 are short term in nature and total
GBP855,000 (2015: GBP551,000).
The carrying value of loan stock investments analysed by expected
maturity dates is as follows:
31 December 2016 31 December 2015
Fully Fully Past
Redemption performing Past due Impaired Total performing due Impaired Total
date GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Less than
one year 1,119 - - 1,119 2,081 - - 2,081
1-2 years 1,577 - - 1,577 1,147 - - 1,147
2-3 years 6,113 - - 6,113 1,417 - - 1,417
3-5 years 4,135 - - 4,135 5,340 - - 5,340
5 + years 5,735 1,985 - 7,720 5,520 1,153 - 6,673
Total 18,679 1,985 - 20,664 15,505 1,153 - 16,658
Loan stock can be past due as a result of interest or capital not being
paid in accordance with contractual terms. This includes:
-- loan stock valued at GBP1,985,000 yielding an average of 13% which has
interest past due by less than one year.
In view of the factors identified above, the Board considers that the
Company is subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All of the Company's financial assets and liabilities as at 31 December
2016 are stated at fair value as determined by the Directors. There are
no financial liabilities other than short term trade and other payables.
The Company's financial liabilities are all non-interest bearing. It is
the Directors' opinion that the book value of the financial liabilities
is not materially different to the fair value and all are payable within
one year and that the Company is subject to low financial risk as a
result of having nil gearing and positive cash balances.
17. Commitments, contingencies and guarantees
As at 31 December 2016, the Company had no financial commitments (2015:
GBP2,396,000).
There were no contingent liabilities or guarantees given by the Company
as at 31 December 2016 (2015: GBPnil).
18. Post balance sheet events
Since the year end, the Company made the following investments:
-- Investment of GBP190,000 in Quantexa Limited
-- Investment of GBP123,000 in Black Swan Data Limited
-- Investment of GBP6,000 in Beddlestead Farm Limited
Albion VCT Prospectus Top Up Offers 2016/2017
On 29 November 2016 the Company announced the publication of a
prospectus in relation to an offer for subscription for new Ordinary
shares. A Securities Note, which forms part of the prospectus, has been
sent to shareholders.
The following new Ordinary shares of nominal value 1 penny each were
allotted under the Offers after 31 December 2016:
Aggregate
nominal Net Opening market
Number of value of Issue price Consideration price on
Date of shares shares (pence per Received allotment date
allotment allotted (GBP'000) share) GBP'000 (pence per share)
31 January
2017 4,249,243 42 20.90 870 19.00
31 January
2017 1,647,857 16 21.00 338 19.00
31 January
2017 12,460,938 125 21.10 2,550 19.00
18,358,038 3,758
As a result of the strong demand for the Company's shares the Board was
able to announce on 22 February 2017 that subscription had reached its
GBP6 million limit under the prospectus offer and is now closed.
19. Related party transactions
Other than transactions with the Manager as disclosed in note 4, there
are no related party transactions or balances requiring disclosure.
20. Other Information
The information set out in this announcement does not constitute the
Company's statutory accounts within the terms of section 434 of the
Companies Act 2006 for the years ended 31 December 2016 and 31 December
2015, and is derived from the statutory accounts for those financial
years, which have been, or in the case of the accounts for the year
ended 31 December 2016, which will be, delivered to the Registrar of
Companies. The Auditor reported on those accounts; the reports were
unqualified and did not contain a statement under s498 (2) or (3) of the
Companies Act 2006.
The Company's Annual General Meeting will be held at The City of London
Club, 19 Old Broad Street, London, EC2N 1DS on 17 May 2017 at 11.00am.
21. Publication
The full audited Annual Report and Financial Statements are being sent
to shareholders and copies will be made available to the public at the
registered office of the Company, Companies House, the National Storage
Mechanism and also electronically at www.albion-ventures.co.uk/funds/KAY,
where the Report can be accessed as a PDF document via a link under the
'Financial Reports and Circulars' section.
LEI Code 213800DK8H27QY3J5R45
Current Portfolio Sector Analysis:
http://hugin.info/145558/R/2089410/788977.pdf
This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients. The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Kings Arms Yard VCT PLC via Globenewswire http://www.sparkventures.com
(END) Dow Jones Newswires
March 22, 2017 08:29 ET (12:29 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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