Annual Report • Dec 31, 2011
Annual Report
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In order for us to receive correct information regarding blackline levels and avoid confusion, particularly when requesting retrospective cumulative blacklined proofs, it is important that you understand our procedures and are aware of the real time status of a proof at any one time. The table below shows the history and status of this transaction and its blackline levels.
| Proof No. | Blackline level | Date |
|---|---|---|
| 1 | 0 | 03.04.2012 |
| 2 | 1 | 05.04.2012 |
| 3 | 2 | 10.04.2012 |
| 4 | 3 | 12.04.2012 |
| 5 | 4 | 13.04.2012 |
| 5 | 4 | 16.04.2012 |
| Proof No. | Blackline level | Date |
|---|---|---|
| Job No. | 224845 |
|---|---|
| Proof No. | 5 |
| Date | 16.04.2012 |
Annual Report and Financial Statements for the year ended 31 December 2011
| Company number | 03139019 |
|---|---|
| Directors | R A Field, Chairman T W Chambers M G Fiennes A P M Lamb |
| Manager, company secretary and registered office |
Albion Ventures LLP 1 King's Arms Yard London EC2R 7AF Tel: 020 7601 1850 Fax: 020 7601 1875 Website: www.albion-ventures.co.uk |
| Registrar | Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZZ |
| Auditor and taxation adviser | Grant Thornton UK LLP 30 Finsbury Square London EC2P 2YU |
| Legal adviser | Travers Smith LLP 10 Snow Hill London EC1A 2AL |
| Kings Arms Yard VCT PLC is a member of The Association of Investment Companies. | |
| Shareholder information | For help relating to dividend payments, shareholdings and share certificates please contact Computershare Investor Services PLC: Tel: 0870 873 5858 (UK National Rate call, lines are open 8.30am – 5.30pm; Mon – Fri; calls may be recorded) Website: www.computershare.co.uk Contact information and frequently asked questions: www-uk.computershare.com/Investor/contactus |
| Shareholders can access holdings and valuation information regarding any of their shares held with Computershare by registering on Computershare's website. |
|
| IFA information | For enquiries relating to the performance of the Fund, and for IFA information please contact Albion Ventures LLP (details above) |
| Please note that these contacts are unable to provide financial or taxation advice. |
The Company is a Venture Capital Trust. The investment policy, approved by shareholders at the General Meeting held on 10 February 2011, is intended to produce a regular and predictable dividend stream with an appreciation in capital value as set out below.
On 30 September 2011, the Company acquired the assets and liabilities of Kings Arms Yard VCT 2 PLC ("KAY 2") in exchange for new shares in the Company ("the Merger"). On the same day KAY 2 was placed into members' voluntary liquidation pursuant to a scheme of reconstruction under Section 110 of the Insolvency Act 1986.
All of the assets and liabilities of KAY 2 totalling £16,379,000 were transferred to the Company in exchange for the issue of 99,050,205 new ordinary shares of nominal value 5 pence each in the capital of the Company at a deemed issue price of 16.5349 pence per share. Each KAY 2 shareholder received 1.2806 shares in the Company for each KAY 2 share that they held at the date of the Merger. The total number of shares receivable by each shareholder was rounded down to the nearest whole number of shares.
New share certificates were sent to all shareholders in the Company during October 2011.
| Ex-dividend date for first dividend | 25 April 2012 |
|---|---|
| Record date for first dividend | 27 April 2012 |
| Annual General Meeting | 17 May 2012 |
| Payment date of first dividend | 25 May 2012 |
| Announcement of half-yearly results for the six months ended 30 June 2012 | August 2012 |
| Payment date of second dividend (subject to Board approval) | November 2012 |
| 31 December 2011 (pence per share) |
31 December 2010 (pence per share) |
|
|---|---|---|
| Dividends paid during the year | 0.67 | 5.00 |
| Revenue return | 0.10 | (0.50) |
| Capital return/(loss) | 0.70 | (0.60) |
| Net asset value | 16.70 | 16.60 |
| Total shareholder net asset value return for Kings Arms Yard VCT PLC to 31 December 2011: | ||||
|---|---|---|---|---|
| Total dividends paid from incorporation to 31 December 2010 | ||||
| (the date Albion Ventures LLP became Manager) | 58.66 | |||
| Total dividends paid during the year ended 31 December 2011 | 0.67 –––––––––––– |
|||
| Total dividends paid to 31 December 2011 | 59.33 | |||
| Net asset value as at 31 December 2011 | 16.70 –––––––––––– |
|||
| Total shareholder net asset return to 31 December 2011 | 76.03 –––––––––––– |
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 50.
The Directors propose a first dividend of 0.5 pence per share for the year ended 31 December 2012, which will be paid on 25 May 2012 to shareholders on the register on 27 April 2012.
The bar chart shows the aggregate of the net aset value and cumulative dividends paid to date for Kings Arms Yard VCT PLC only.
Source: Albion Ventures LLP
2011 was the first year for the Company under its new management and I am pleased to report that significant progress has already been made in implementing the new investment strategy that was approved by shareholders on 10 February 2011. This process has been enhanced by the benefits of the Merger with Kings Arms Yard VCT 2 PLC. Satisfactory exits have been achieved for two major and longstanding investments, the small quoted portfolio was again reduced and further exits are being actively pursued. Meanwhile new investments have been made in a number of sectors, particularly environmental and healthcare, and these are set out in more detail in the Manager's report.
The overall effect of a very active year has been a net profit after taxation of £1,060,000 compared with a loss of £1,214,000 in the previous year. The net asset value of each Ordinary share rose from 16.6p on 31 December 2010 to 16.7p on 31 December 2011, following the payment of a dividend of 0.67 pence per share during the year.
The total net asset return (the aggregate of dividends paid to date and net asset value per share) has increased to 76.03 pence per share during 2011 (2010: 75.30 pence per share). The pro-forma combined income for the Company and Kings Arms Yard VCT 2 PLC during the year (see Manager's report for details) was £790,000, an increase of 225 per cent. on the previous year, generating a running yield on closing net assets of 2.3 per cent. This income yield is expected to increase further during the year ahead as the Manager invests in higher yield investments.
Further details on the top ten individual investments are given in the Portfolio companies information on page 12.
As a result of the various disposals, cash and liquid investments at the end of the year were £10,734,000, or 31 per cent. of net asset value, giving the Manager a wide scope for the continued implementation of the Company's new investment policy.
On 31 December 2011, 89 per cent. of total investments were in qualifying holdings. The Board continues to monitor this position very carefully in order to ensure that qualifying investments comfortably exceed the minimum threshold of 70 per cent. required for the Company to continue to benefit from VCT tax status.
As stated in January 2011, it is the Board's intention to establish a sustainable and progressive dividend policy, combined with the prospect of a gradual recovery in capital value. The Board had intended to maintain in 2012 the dividend of 0.67 pence per share that had been established in 2011, but in view of the strong performance and the availability of cash, the Board has resolved to increase its dividend target to 1 penny per share. Accordingly, a first dividend of 0.5 pence will be paid on 25 May 2012 to shareholders on the register on 27 April 2012, with a second dividend of 0.5 pence anticipated to be paid later in the year.
Following approval by shareholders at the General Meeting on 23 September 2011, the Company completed the acquisition of the assets and liabilities of KAY 2 on 30 September 2011. The Merger created a larger Company, adding net assets of £16,379,000 from KAY 2. The Merger is expected to result in material cost savings of approximately £80,000 per annum going forwards. The ratio used for the conversion of KAY 2 shares to shares in the Company was 1.2806. All shareholders were issued with new share certificates during October 2011. Further details regarding the Merger are shown in note 10 to the financial statements.
Budgeted merger costs were £235,000, of which the Company's share, which has been provided for in these accounts, was £124,000. Final figures for the costs of the Merger are not yet available as the liquidation of KAY 2 has not yet been completed, however, the Board expects that the total costs will be in line with the original estimate.
On 3 October 2011, as part of the Merger arrangements, Patrick Reeve, the Managing Partner of Albion Ventures LLP, stepped down from the Board. The Board wishes to express its thanks to Patrick for his contribution during his time as a Director.
The Board is pleased to welcome Thomas Chambers and Alan Lamb, who were directors of Kings Arms Yard VCT 2 PLC and who were appointed Directors of the Company on 3 October 2011. They will be proposed for election at the forthcoming Annual General Meeting. Their biographical details can be found on page 9.
As part of a review of the composition of the Board and Committees following the Merger, Martin Fiennes retired as Audit Committee Chairman and Thomas Chambers was appointed Audit Committee Chairman on 3 October 2011. The Board would like to thank Martin Fiennes for his stewardship of the Audit Committee.
Having completed the Merger and having reviewed the Company's position following the appointment of the new Manager, the Board has decided to reintroduce a policy to buy back shares in the market, subject to the overall constraint that such purchases are in the VCT's interests, including the maintenance of sufficient resources for investment in new and existing investee companies and the continued payment of dividends to shareholders. It is the Board's intention over time for such buy-backs to be in the region of a 10 to 15 per cent. discount to net asset value, so far as market conditions and liquidity permit. It is hoped that this approach, together with the dividend policy, will encourage a more active secondary market in the Company's shares, and thus reduce the discount at which shares trade compared to net asset value.
The cancellation of share capital and of various reserves as authorised by shareholders at the General Meeting on 23 September 2011, was completed on 23 November 2011. The Ordinary shares now have a nominal value of 1 penny per share and the distributable reserves were increased by £20,600,000 as a result of this process.
As part of our commitment to improve services to shareholders, the Company has changed its share registrars to Computershare Investor Services PLC. The Computershare Investor Centre can be found at www.investorcentre.co.uk. Further contact details are shown in the front of these accounts.
Albion Ventures is working with Computershare to further improve shareholder communications, including annual shareholder statements which are due to be sent out in May 2012.
Details of material related party transactions for the year can be found in note 22.
The Annual General Meeting of the Company will be held at the City of London Club, 19 Old Broad Street, London EC2N 1DS at 12.30pm on 17 May 2012. Full details of the business to be conducted at the Annual General Meeting are given in the Notice of the Meeting on page 46 and an explanation for the approvals sought are given on page 20. 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.
The outlook for the UK economy continues to be the key risk affecting your Company. Growth in the UK is stagnant while the prospects for Continental Europe look even more difficult. 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 investee companies' assets wherever possible.
A detailed analysis of the other risks and uncertainties facing the business is shown on page 17.
Despite the difficulties that current conditions present, history has demonstrated that venture capital returns from investments made in periods of low or negative growth tend to exceed those made against an atmosphere of economic optimism. Investment opportunities within our target sectors are currently arising at attractive valuations and the Company's liquidity should allow the Manager to take full advantage of these.
The Board is conscious that no investment strategy is risk free, but believes that the continuance of the investment policy that was adopted in 2011 will, over time, reduce the Company's risk profile and offer the best prospect of a gradual recovery in capital value and a sustainable long term dividend.
Robin Field Chairman 16 April 2012
Albion Ventures took over the management of the former SPARK VCTs on 1 January 2011. Our task was to implement a new investment policy with a view to rebalancing the portfolio, such that approximately 50 per cent. would comprise of investments in asset-backed, lower risk, ungeared businesses, with the balance being in higher growth businesses across a variety of sectors in the UK economy. Behind this restructuring was the intention to support a longer term, sustainable dividend policy, combined with the task of commencing a recovery of capital value.
With this in mind, we have been working on an exit programme for a number of the investments that we inherited, as well as implementing a new investment programme, in order to fulfil the longer term policy objectives.
The first stage was to work on achieving a higher revenue yield from the investment portfolio, including from non-qualifying investments. This has been achieved through keener terms on cash deposits, though not at the price of an increase in risk, whilst merging the two VCTs in order to achieve cost reductions which will start to take effect in the current year. At the same time, we have begun a process of investing in higher yielding qualifying investments in order to provide a further boost to the revenue line.
We set out below a pro-forma statement of total return for the Company and Kings Arms Yard VCT 2 PLC ("KAY 2"). For the year to 31 December 2010, the figures reflect the aggregate of the income statements for the year for the Company and KAY2. For the year to 31 December 2011, the figures are the total of the year for the Company and for the nine months to 30 September 2011 (the date of the Merger) for KAY 2.
As can be seen, there has been a significant increase in the income from the merged VCTs (helped, in part, by a welcome dividend from Elateral Holdings) and at the same time, a decrease in other expenses, which are expected to further decrease in the year ahead.
| KAY and KAY 2 | KAY and KAY 2 | |
|---|---|---|
| Year ended | Year ended | |
| 31 December 2011 | 31 December 2010 | |
| £'000 | £'000 | |
| Investment income | 790 | 243 |
| Investment management fees (1) | (778) | (757) |
| Other expenses | (514) –––––––––––– |
(619) –––––––––––– |
| Revenue return before tax | (502) –––––––––––– |
(1,133) –––––––––––– |
(1) Investment management fees in respect of both KAY and KAY 2 were capped for the year to 31 December 2010. No management fee cap was in place for the Company and KAY2 for the year to 31 December 2011.
Two major disposals were made during 2011, the first being the sale of Level Four Software which realised proceeds of £2.0 million, the second being the sale of Imagesound which realised proceeds of £2.2 million. In addition, with regard to quoted companies, we sold the entire holding in Medigene and reduced our holding in Allergy Therapeutics, realising approximately £160,000.
These total proceeds of just over £4.4 million were used to begin the process of repositioning the portfolio. Just under £1 million was invested in five existing investee companies, with a view to supporting further growth, with a further £2.5 million being invested in new companies. Of this latter amount, £110,000, was invested in Abcodia, a life sciences spin-out from University College London, which possesses the rights to a valuable library of five million biomarkers used for pharmaceutical research. £1.2 million was invested in the management buy-out of Hilson Moran, a long established mechanical and engineering consultancy, while £1.2 million was invested in wind and solar renewable energy projects. It is intended that this latter sector, which will also include hydro and anaerobic digestion projects, will ultimately account for up to 15 per cent. of the Company's portfolio.
Subsequent to the year end, a further £2,357,000 was invested in renewable energy projects, while a further £640,000 was invested to support existing portfolio companies.
The two pie charts set out below outline firstly the different sectors in which the portfolio is currently invested, and secondly, delineates between those investments comprising the original SPARK portfolio, and those that have been made by Albion Ventures in new portfolio companies.
An overview showing the holding period and the revenue profile of each of the top ten investments in the unquoted portfolio (as at 31 December 2011) and which comprise nearly 80 per cent. of the unquoted portfolio is set out below.
| % of total | |||||
|---|---|---|---|---|---|
| Valuation | unquoted | Date of first | Revenue | ||
| £'000 | portfolio | investment | profile | Basis of valuation | |
| UniServity Limited | 3,860 | 16.3 | 2007 | £3m – £5m | Earnings multiple |
| Elateral Holdings Limited | 3,817 | 16.1 | 1999 | £5m – £10m | Revenue multiple |
| Workshare Limited | 2,257 | 9.5 | 2006 | £20m – £25m | Revenue multiple |
| Vivacta Limited | 1,938 | 8.2 | 2006 | Pre revenue | Price of recent investment |
| Cluster Seven Ltd | 1,668 | 7.1 | 2005 | £1m – £3m | Revenue multiple |
| Oxford Immunotec Limited | 1,305 | 5.5 | 2003 | £5m – £10m | Price of recent investment |
| Hilson Moran Holdings Limited | 1,202 | 5.1 | 2011 | £10m – £15m | Cost |
| Haemostatix Limited | 920 | 3.9 | 2006 | Pre revenue | Price of recent investment |
| Atego Group Limited | 868 | 3.7 | 1998 | £5m – £10m | Price of recent investment |
| Sift Limited | 783 –––––––––––– |
3.3 –––––––––––– |
1999 | £5m – £10m | Earnings multiple |
| 18,618 –––––––––––– |
78.7 –––––––––––– |
Our main task in the current year is to continue to increase the level of investment income, to work selectively on exits from the existing investment portfolio and to reinvest the proceeds in line with the Company's new investment policy. With these aims in mind, we are confident of making further progress in 2012.
Manager 16 April 2012
The following are the Directors of the Company, all of whom operate in a non-executive capacity.
Robin Field (60) (Chairman), appointed 21 January 2009, began his commercial career with Jardine Matheson & Co. in the Far East where he fulfilled a number of managerial roles, including that of general manager of the largest independent shipping agency in Taiwan. He then gained a MBA with distinction at INSEAD, before serving as a strategy consultant with the LEK Partnership. He was chief executive of Filofax Group plc when the company floated on the London Stock Exchange in 1996. He is a non-executive director of a number of private companies.
Thomas Chambers (50) (Chairman of the Audit Committee), appointed 3 October 2011, has over ten years operational experience at mobile operating systems provider Symbian Limited (now part of Nokia Oyj) and at ADSL/fixed line phone provider First Telecom plc. Since 2002, Thomas has had a range of industry, venture capital and government, non-executive and advisory roles giving insight into, in particular, the technology and communications sectors. As CFO of Symbian he played a significant leadership role in the creation of the first Smartphones. He was also CFO of Robert Walters plc which he took through its listing on the London Stock Exchange in 1996. He spent six years in corporate finance at Dresdner Kleinwort Benson Limited after a five year career with Price Waterhouse. He is currently Treasurer and a Council member of the University of Surrey, sits on the advisory board of Green Square Partners LLP and is a non-executive director of a number of private companies.
Martin Fiennes (51), appointed 5 April 2011. Martin is a self-employed corporate finance adviser. He trades as Gatehouse Capital, a technology corporate finance business based in Oxford which specialises in fund-raisings and M&A for UK technology companies. Prior to starting Gatehouse Capital, Martin worked for nine years with Top Technology Ventures where he was responsible for making investments in early stage UK technology companies. Martin has wide experience in marketing and management roles, including as an executive director in a start-up in the leisure sector. He was, until its sale in 2011, a non-executive director of Focus Solutions Group plc. Martin is also a Trustee of the HDH Wills 1965 Charitable Trust.
Alan Lamb (62), appointed 3 October 2011, has broad experience as a manager and entrepreneur in technology businesses, from early stage through to being part of a large public company. He founded Flexion Inc. in 1998 to provide new generation communication systems for smaller businesses. Previously, he founded Airtech Computer Security that grew to become a highly profitable group delivering secure electronic payments solutions. Having sold Airtech to Racal Electronics plc in 1994, he was divisional managing director responsible for banking and communications security business in Europe and the USA. In the last ten years he has focused on developing spin-out companies from UK universities as a mentor, chairman and non-executive director. He formed Blaze Photonics which was sold to Crystal Fibre; and Identum which was sold to Trend Micro. He is currently on the board of Promethean Particles Limited, a supplier of specialist nano-particles; and TTE Systems, which provides high-reliability processors and matched development tools to the aerospace and automotive markets.
All of the Directors are non-executive and independent of the Manager, Albion Ventures LLP and are members of the Audit Committee.
Separate Remuneration and Nomination Committees are not considered appropriate and the Board as a whole is responsible for the appointment and remuneration of Directors.
At the Annual General Meeting, Thomas Chambers and Alan Lamb, who were appointed since the last Annual General Meeting, will retire and be subject to election. Robin Field is due to retire from the Board by rotation in accordance with the Company's Articles of Association and Companies Act 2006 and will offer himself for re-election.
Albion Ventures LLP is authorised and regulated by the Financial Services Authority and is the Manager of Kings Arms Yard VCT PLC. In addition to Kings Arms Yard VCT PLC, Albion Ventures LLP manages a further seven venture capital trusts and currently has total funds under management of approximately £220 million. Albion Ventures LLP was awarded "VCT Manager of the Year" at the "Unquote" British Private Equity Awards 2009, "VCT of the Year" for Albion Development VCT PLC at the 2009 Investor AllStar Awards and "Investor of the Year" at the Independent Healthcare Awards 2011.
The following are specifically responsible for the management and administration of the VCTs managed by Albion Ventures LLP, including Kings Arms Yard VCT PLC:
Patrick Reeve (51), MA, ACA, qualified as a chartered accountant with Deloitte Haskins & Sells before joining Cazenove & Co where he spent three years in the corporate finance department. He joined Close Brothers Group plc in 1989, initially in the development capital subsidiary, where he was a director specialising in the financing of smaller unquoted companies. He joined the corporate finance division in 1991, where he was also a director. He established Albion Ventures LLP (formerly Close Ventures Limited) with the launch of Albion Venture Capital Trust PLC (formerly Close Brothers Venture Capital Trust PLC) in the spring of 1996. He is the Managing Partner of Albion Ventures LLP and is director of Albion Technology & General VCT PLC, Albion Income & Growth VCT PLC, Albion Prime VCT PLC and Albion Enterprise VCT PLC, all managed by Albion Ventures LLP. He is also a director of Healthcare & Leisure Property Limited, for whom Albion Ventures LLP acts as an investment adviser.
Will Fraser-Allen (41), BA (Hons), ACA, qualified as a chartered accountant with Cooper Lancaster Brewers in 1996 and then joined their Corporate Finance Team providing corporate finance advice to small and medium-sized businesses. He joined Albion Ventures LLP (then Close Ventures Limited) in 2001 since when he has focused on leisure and healthcare investing. Will became deputy Managing Partner of Albion Ventures in 2009. Will has a BA in History from Southampton University.
Isabel Dolan (47), BSc (Hons), ACA, MBA, qualified as a chartered accountant with Moore Stephens. From 1993 to 1997 she was Head of Recoveries at the Specialised Lending Services of the Royal Bank of Scotland plc and from 1997 to 2001 she was at 3i plc, latterly as a portfolio director. She joined Albion Ventures LLP (then Close Ventures Limited) in 2005, having previously been finance director for a number of unquoted companies. Isabel became Operations Partner at Albion Ventures LLP in 2009. She has a BSc in Biochemistry with Pharmacology from Southampton University and an MBA from London Business School.
Dr Andrew Elder (41), MA, FRCS, joined Albion Ventures LLP (then Close Ventures Limited) in 2005 and became a Partner in 2009. He initially practised as a surgeon for six years, specialising in neurosurgery, before joining the Boston Consulting Group (BCG) as a consultant in 2001. Whilst at BCG he specialised in healthcare strategy, gaining experience with many large, global clients across the full spectrum of healthcare including biotechnology, pharmaceuticals, service and care providers, software and telecommunications. He has an MA plus Bachelors of Medicine and Surgery from Cambridge University and is a Fellow of the Royal College of Surgeons (England).
Emil Gigov (42), BA (Hons), ACA, graduated from the European Business School, London, with a BA (Hons) Degree in European Business Administration in 1994. He then joined KPMG in their financial services division and qualified as a chartered accountant in 1997. Following this he transferred to KPMG Corporate Finance where he specialised in the leisure, media and marketing services sectors acting on acquisitions, disposals and fundraising mandates. He joined Albion Ventures LLP (then Close Ventures Limited) in 2000 and has since made and exited investments in a number of industry sectors, including healthcare, education, technology, leisure and engineering. Emil became a Partner in Albion Ventures LLP in 2009. David Gudgin (39), BSc (Hons), ACMA, qualified as a management accountant with ICL before spending 3 years at the BBC. In 1999 he joined 3i plc as an investor in European technology based in London and Amsterdam. In 2002 he moved to Foursome Investments (now Frog Capital) as the lead investor of an environmental technology and a later stage development capital fund. David joined Albion Ventures LLP (then Close Ventures Limited) in 2005 and became a Partner in Albion Ventures LLP in 2009. David has a BSc in Economics from Warwick University.
Michael Kaplan (35), BA, MBA. Prior to joining Albion Ventures LLP (then Close Ventures Limited) in 2007, Michael was a project leader with the Boston Consulting Group (BCG) where he focused on the retail and financial services sectors. More recently, Michael was part of BCG's growing Private Equity practice – which provides strategic due diligence to some of the world's biggest PE funds. Prior to his time with BCG, Michael was the chief financial officer for Widevine Technologies, a security software company based in Seattle. Michael has a BA from the University of Washington and an MBA from INSEAD. He became a Partner in Albion Ventures LLP in 2010.
Ed Lascelles (36), BA (Hons), joined Albion Ventures LLP (then Close Ventures Limited) in 2004. Ed began by advising quoted UK companies on IPOs, takeovers and other corporate transactions, first with Charterhouse Securities and then ING Barings. Companies ranged in value from £10 million to £1 billion, across the healthcare and technology sectors among others. After moving to Albion Ventures LLP in 2004, Ed started investing in the technology, healthcare, financial and business services sectors. Ed became a Partner in Albion Ventures LLP in 2009 and is responsible for a number of Albion's technology investments. Ed graduated from University College London with a first class degree in Philosophy.
Dr Christoph Ruedig (35), MA, MBA, joined Albion Ventures LLP as an Investment Manager in October 2011 and primarily focuses on Albion's healthcare investments, alongside Andrew Elder. He initially practised as a radiologist, before spending 3 years at Bain & Company. In 2006 he joined 3i plc working for their Healthcare Venture Capital arm leading investments in biotechnology, pharmaceuticals and medical technology. Most recently he has worked for General Electric UK, where he was responsible for mergers and acquisitions in the medical technology and healthcare IT sectors. He holds a degree in medicine from Ludwig-Maximilians University, Munich and an MBA from INSEAD.
Henry Stanford (46), MA, ACA, qualified as a chartered accountant with Arthur Andersen before joining the corporate finance department of Close Brothers Group in 1992, becoming an assistant director in 1996. He moved to Albion Ventures LLP (then Close Ventures Limited) in 1998. Henry became a Partner in Albion Ventures LLP in 2009. He holds an MA degree in Classics from Oxford University.
Robert Whitby-Smith (37), BA (Hons), MSI, ACA. After graduating in History at Reading University, Robert qualified as a chartered accountant at KPMG and subsequently worked in corporate finance at Credit Suisse First Boston and ING Barings. Since joining Albion Ventures LLP (then Close Ventures Limited) in 2005, Robert has assisted in the workout of three VCT portfolios (Murray VCT PLC, Murray VCT 2 PLC and Murray VCT 3 PLC now renamed Crown Place VCT PLC) formerly managed by Aberdeen Murray Johnston and is responsible for investments in the leisure, manufacturing and technology sectors. Robert became a Partner in Albion Ventures LLP in 2009.
Marco Yu (34), MPhil, MA, MRICS, spent two and a half years at Bouygues (UK), developing cost management systems for PFI schemes, before moving to EC Harris in 2005 where he advised senior lenders on large capital projects. He joined Albion Ventures LLP (then Close Ventures Limited) in 2007 and became an investment manager in Albion Ventures LLP in 2009. Marco graduated from Cambridge University with a first class degree in economics and is a Chartered Surveyor.
| Industry sector |
Voting equity % held |
Voting equity % held by AVL(1) |
Accounting cost(2) £'000 |
Valuation £'000 |
% of fund by value |
Change in value for year(3) £'000 |
|
|---|---|---|---|---|---|---|---|
| Unquoted investments | |||||||
| UniServity Limited | TMT | 36.6 | 36.6 | 3,510 | 3,860 | 11.0 | (82) |
| Elateral Holdings Limited | TMT | 31.8 | 31.8 | 2,243 | 3,817 | 10.9 | 518 |
| Workshare Limited | TMT | 11.3 | 11.3 | 2,011 | 2,257 | 6.5 | 324 |
| Vivacta Limited | Life sciences | 13.3 | 13.3 | 2,060 | 1,938 | 5.5 | 854 |
| Cluster Seven Ltd | TMT | 14.8 | 14.8 | 2,218 | 1,668 | 4.8 | 53 |
| Oxford Immunotec Limited | Life sciences | 4.2 | 4.2 | 1,305 | 1,305 | 3.7 | – |
| Hilson Moran Holdings Limited | Business services | 15.0 | 50.0 | 1,200 | 1,202 | 3.5 | 2 |
| Haemostatix Limited | Life sciences | 18.9 | 18.9 | 1,142 | 920 | 2.6 | (508) |
| Atego Group Limited | TMT | 11.3 | 11.3 | 384 | 868 | 2.5 | 323 |
| Sift Limited | TMT | 31.4 | 31.4 | 2,911 | 783 | 2.2 | (82) |
| Academia Networks Limited | TMT | 5.3 | 5.3 | 351 | 669 | 1.9 | 318 |
| Regenerco Renewable Energy Limited The Street by Street Solar |
Renewable energy | 7.9 | 50.0 | 515 | 517 | 1.5 | 2 |
| Programme Limited | Renewable energy | 8.6 | 50.0 | 515 | 515 | 1.5 | – |
| Antenova Limited | TMT | 12.3 | 12.3 | 1,543 | 496 | 1.4 | (145) |
| Lab M Holdings Limited | Life sciences | 26.4 | 26.4 | 690 | 495 | 1.4 | 55 |
| Perpetuum Limited | TMT | 12.4 | 12.4 | 1,086 | 448 | 1.3 | (335) |
| Xention Limited | Life sciences | 5.9 | 5.9 | 608 | 424 | 1.2 | (184) |
| Celoxica Holdings plc | TMT | 2.9 | 2.9 | 377 | 377 | 1.1 | – |
| Alto Prodotto Wind Limited | Renewable energy | 7.2 | 50.0 | 308 | 311 | 0.9 | 3 |
| Abcodia Limited | Life sciences | 6.7 | 21.4 | 235 | 235 | 0.7 | – |
| We7 Limited | TMT | 2.6 | 2.6 | 863 | 160 | 0.5 | (54) |
| Symetrica Limited | TMT | 2.6 | 2.6 | 152 | 152 | 0.4 | (6) |
| Clear2Pay Limited | TMT | – | – | 129 | 129 | 0.4 | – |
| Xtera Communications Inc | TMT | 1.3 | 1.3 | 85 | 85 | 0.2 | – |
| Teraview Limited | Life sciences | 1.0 | 1.0 | 1,197 | 13 | – | (36) |
| Oxonica PLC | Life sciences | 2.1 | 2.1 | 198 | 10 | – | (10) |
| Total unquoted investments | 27,836 | 23,654 | 67.6 | 1,010 | |||
| Quoted investments | |||||||
| Allergy Therapeutics plc (AIM) | Life sciences | 456 | 125 | 0.4 | – | ||
| Celldex Therapeutics Inc (NASDAQ) | Life sciences | 636 | 178 | 0.5 | (10) | ||
| Total quoted investments | 1,092 | 303 | 0.9 | (10) | |||
| Total investments | 28,928 | 23,957 | 68.5 | 1,000 | |||
| Current asset investment | |||||||
| Royal Bank of Scotland | |||||||
| Group European Commercial | |||||||
| Paper 16/06/11 to 14/06/12 | Collective bond | 1,976 | 1,976 | 5.6 | |||
| Cash and other net assets | 9,065 | 9,053 | 25.9 | ||||
| Net assets | 39,969 | 34,986 | 100.0 |
(1) Equity held by Albion Ventures LLP managed companies.
(2) Amounts shown as accounting cost represent the acquisition cost in the case of investments originally made by the Company and/or the valuation attributed to the investments acquired from Quester VCT 2 plc and Quester VCT 3 plc at the date of the merger in 2005, and those acquired from Kings Arms Yard VCT 2 PLC at the Merger on 30 September 2011, plus any subsequent acquisition costs, as reduced in certain cases by amounts written off as representing an impairment in value.
(3) After adjustment for additions and disposals and merger with Kings Arms Yard VCT 2 PLC on 30 September 2011.
| Realisations in the year to 31 December 2011 | Cost £'000 |
Opening carrying value £'000 |
Disposal proceeds £'000 |
Realised gain/(loss) £'000 |
Gain/(loss) on opening or acquired value £'000 |
|---|---|---|---|---|---|
| Allergy Therapeutics plc (AIM) | 407 | 38 | 72 | (335) | 34 |
| Imagesound plc | 2,848 | 1,632 | 2,193 | (655) | 561 |
| Level Four Software Limited | 2,034 | 1,321 | 2,001 | (32) | (369) |
| MediGene AG (Frankfurt) | 316 | 83 | 88 | (228) | 5 |
| Oxonica PLC (repayment of capital) | 10 | – | 10 | – | 10 |
| Westchester Holdings Limited | |||||
| (formerly Boxman.com plc) | – | – | 104 | 104 | 104 |
| Other disposals | 2,178 | 66 | 8 | (2,190) | (75) |
| 7,793 | 3,140 | 4,476 | (3,336) | 270 |
The top ten fixed asset investments by aggregate value of equity and loan stock are as shown below.
For the purposes of the valuation process, the latest portfolio company financial information is used. The accounting information disclosed below is the latest as filed at Companies House.
| UniServity Limited Learning platform solution provider for schools and local authorities. |
|||
|---|---|---|---|
| Website: www.uniservity.com | |||
| Audited results for year ended | 31 July 2011 | Investment information: | |
| £'000 | £'000 | ||
| Turnover | 3,332 | Income recognised in the year – |
|
| Profit before tax | 669 | Accounting cost 3,510 |
|
| Profit after tax | 453 | Valuation 3,860 |
|
| (Net liabilities) | (430) | Voting equity held 36.6% |
|
| Basis of valuation Earnings multiple |
Development and sale of brand marketing automation software.
| Website: www.elateral.com | |||
|---|---|---|---|
| Audited results for year ended | 31 March 2011 | Investment information: | |
| £'000 | £'000 | ||
| Turnover | 6,210 | Income recognised in the year | 359 |
| Profit before tax | 873 | Accounting cost | 2,243 |
| Profit after tax | 699 | Valuation | 3,817 |
| Net assets | 1,189 | Voting equity held | 31.8% |
| Basis of valuation | Revenue multiple |
Development, marketing, selling and supporting document comparison and collaboration software, providing risk management and security.
| Website: www.workshare.com | |||
|---|---|---|---|
| Audited results for year ended | 31 March 2011 | Investment information: | |
| \$'000 | £'000 | ||
| Turnover | 20,559 | Income recognised in the year | – |
| Profit before tax | 1,324 | Accounting cost | 2,011 |
| Profit after tax | 1,303 | Valuation | 2,257 |
| (Net liabilities) | (1,878) | Voting equity held | 11.3% |
Medical diagnostics company developing and commercialising a patented technology for the rapid quantitative detection of immunoassay markers of disease from whole blood at the point of care.
| Website: www.vivacta.com | |||
|---|---|---|---|
| Audited results for year ended | 31 July 2011 | Investment information: | |
| £'000 | £'000 | ||
| Turnover | 621 | Income recognised in the year | – |
| (Loss) before tax | (3,393) | Accounting cost | 2,060 |
| (Loss) after tax | (2,956) | Valuation | 1,938 |
| Net assets | 2,174 | Voting equity held | 13.3% |
| Basis of valuation | Price of recent investment |
Design and development of spreadsheet management software for risk control and compliance.
| Website: www.clusterseven.com | |||
|---|---|---|---|
| Audited results for year ended | 31 December 2010 | Investment information: | |
| £'000 | £'000 | ||
| Turnover | 1,664 | Income recognised in the year | – |
| (Loss) before tax | (308) | Accounting cost | 2,218 |
| (Loss) after tax | (185) | Valuation | 1,668 |
| (Net liabilities) | (3,455) | Voting equity held | 14.8% |
| Basis of valuation | Revenue multiple |
| Basis of valuation | Revenue multiple |
|---|---|
Development and sale of T-cell measurement diagnostic products.
| Website: www.oxfordimmunotec.com | |||
|---|---|---|---|
| Audited results for year ended | 31 December 2010 | Investment information: | |
| £'000 | £'000 | ||
| Turnover | 5,923 | Income recognised in the year | – |
| (Loss) before tax | (7,454) | Accounting cost | 1,305 |
| (Loss) after tax | (7,354) | Valuation | 1,305 |
| Net assets | 5,657 | Voting equity held | 4.2% |
| Basis of valuation | Price of recent investment |
Multi-disciplinary engineering consultancy.
| Website: www.hilsonmoran.com | |||
|---|---|---|---|
| Audited results for year ended | 31 December 2010 | Investment information: | |
| £'000 | £'000 | ||
| Turnover | 14,326 | Income recognised in the year | – |
| (Loss) before tax | (1,516) | Accounting cost | 1,200 |
| (Loss) after tax | (1,516) | Valuation | 1,202 |
| Net assets | 3,953 | Voting equity held | 15.0% |
| Basis of valuation | Cost |
Biopharmaceutical company developing platelet replacement and haemostatic therapies for blood clotting disorders.
| Website: www.haemostatix.com | |||
|---|---|---|---|
| Abbreviated audited results for year ended | 31 March 2011 | Investment information: | |
| £'000 | £'000 | ||
| (Net liabilities) | (3,870) | Income recognised in the year | – |
| Accounting cost | 1,142 | ||
| Valuation | 920 | ||
| Voting equity held | 18.9% | ||
| Basis of valuation | Price of recent investment |
| Atego Group Limited | ||
|---|---|---|
| Mission and safety critical software for automotive, aerospace and defence sectors. | ||
| Website: www.atego.com | ||
| Audited results for the period 19 November 2009 to | 31 December 2010 | Investment information: | |
|---|---|---|---|
| £'000 | £'000 | ||
| Turnover | 8,314 | Income recognised in the year | – |
| (Loss) before tax | (1,318) | Accounting cost | 384 |
| (Loss) after tax | (779) | Valuation | 868 |
| Net assets | 2,167 | Voting equity held | 11.3% |
| Basis of valuation | Price of recent investment |
Web based provision of online business and community management solutions.
| Audited results for year ended | 31 December 2010 | Investment information: | |
|---|---|---|---|
| £'000 | £'000 | ||
| Turnover | 7,326 | Income recognised in the year | 7 |
| (Loss) before tax | (769) | Accounting cost | 2,911 |
| (Loss) after tax | (803) | Valuation | 783 |
| Net assets | 361 | Voting equity held | 31.4% |
| Basis of valuation | Earnings multiple |
Website: www.sift.com
The Directors present their Annual Report and the audited Financial Statements on the affairs of Kings Arms Yard VCT PLC (the "Company") for the year ended 31 December 2011.
The principal activity of the Company during the year is that of a venture capital trust making investments, mainly in unquoted companies. The Company has received approval by HM Revenue & Customs ("HMRC") as a Venture Capital Trust. In the opinion of the Directors, the Company has conducted its affairs so as to enable it to continue to comply with HMRC rules in order to maintain its status under Venture Capital Trust legislation. The Company was not at any time up to the date of this report a close company within the meaning of Section 439 of the Corporation Tax Act 2010.
The Company's ordinary shares of 1 penny are listed on the London Stock Exchange.
Under current tax legislation, shares in the Company provide tax-free capital growth and income distribution, in addition to the income and capital gains tax relief some investors would have obtained when they invested in the original share offers.
The Statement of corporate governance, which is required by DTR 7.2 is set out on pages 22 to 25 and forms part of this Report.
On 30 September 2011, the Company acquired the assets and liabilities of Kings Arms Yard VCT 2 PLC ("KAY 2") in exchange for new shares in the Company ("the Merger"). On the same day KAY 2 was placed into members' voluntary liquidation pursuant to a scheme of reconstruction under Section 110 of the Insolvency Act 1986.
All the assets and liabilities of KAY 2 totalling £16,379,000 were transferred to the Company in exchange for the issue of 99,050,205 new ordinary shares of 5 pence each in the capital of the Company at a deemed issue price of 16.5349 pence per share. Each KAY 2 shareholder received approximately 1.2806 shares in the Company) for each KAY 2 share that they held at the date of the Merger. The total number of shares receivable by each shareholder was rounded down to the nearest whole number of shares.
New share certificates were sent to all shareholders in the Company during October 2011.
The cancellation of share capital and of various reserves as authorised by shareholders at the General Meeting on 23 September 2011 was completed on 23 November 2011. The Ordinary shares now have a nominal value of 1 penny per share and the distributable reserves were increased by £20,600,000 as a result of this process.
Details of the Company's share capital is shown in note 15.
The Company's share capital comprises Ordinary shares which carry a right to receive dividends and each share carries one vote. On a winding up, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings.
The Company currently operates a Dividend Reinvestment Scheme, details of which can be found on www.albionventures.co.uk under the 'Our Funds' section. During the year, the Company issued 47,257 new Ordinary shares under the Dividend Reinvestment Scheme, details of which can be found in note 15.
As at 31 December 2011 and at the date of this Report, the Company was not aware of any beneficial interest exceeding 3 per cent. of any class of the issued share capital and there have been no disclosures in accordance with Disclosure and Transparency Rule 5 made to the Company during the year ended 31 December 2011, and up to the date of this Report.
The table below shows the shareholder profile, including nominee accounts, as at 31 March 2012 for the Company's Ordinary shares of 1 penny:
| Number of | % | % |
|---|---|---|
| shares held | shareholders | share capital |
| 1 – 10,000 | 41.1 | 7.6 |
| 10,001 – 50,000 | 46.5 | 33.8 |
| 50,001 – 100,000 | 8.2 | 18.7 |
| 100,001 – 500,000 | 3.8 | 19.6 |
| 500,001 – 1,000,000 | 0.2 | 4.5 |
| 1,000,001 – 5,000,000 | 0.2 | 15.8 |
The Company is a Venture Capital Trust. The investment policy, approved by shareholders at the General Meeting held on 10 February 2011, is intended to produce a regular and predictable dividend stream with an appreciation in capital value as set out below.
The Company intends to achieve its strategy by adopting an amended investment policy for new investments which over time will rebalance the portfolio such that approximately 50 per cent. of the portfolio comprises an asset-based portfolio of lower risk, ungeared businesses, principally operating in the healthcare, environmental and leisure sectors (the "Asset-Based Portfolio"). The balance of the portfolio, other than funds retained for liquidity purposes, will be invested in a portfolio of higher growth businesses across a variety of sectors of the UK economy. These will range from lower risk, income producing businesses to a limited number of higher risk technology companies (the "Growth Portfolio").
In neither category would portfolio companies normally have any external borrowing with a charge ranking ahead of the VCT. Up to two-thirds of qualifying investments by cost will comprise loan stock secured with a first charge on the portfolio company's assets.
The Company's investment portfolio will thus be structured to provide a balance between income and capital growth for the longer term. The Asset-Based Portfolio is designed to provide stability and income whilst still maintaining the potential for capital growth. The Growth Portfolio is intended to provide highly diversified exposure through its portfolio of investments in unquoted UK companies.
Funds held pending investment or for liquidity purposes will be held as cash on deposit or in floating rate notes or similar instruments with banks or other financial institutions with a Moody's rating of 'A' or above.
The Company's investment allocation and risk diversification policies are substantially driven by the relevant HMRC rules and it is the intention of the Company to apply the following policies in this respect:
(4) At no time in the year will the Company's holdings in any one company exceed 15 per cent. by HMRC value of its investments;
(5) The Company will not retain more than 15 per cent. of its income earned in the year from shares and securities; and
These tests drive a spread of investment risk through disallowing holdings of more than 15 per cent. in one portfolio company. The tests have been carried out and independently reviewed for the year ended 31 December 2011. The Company has complied with all tests and continues to do so.
'Qualifying holdings', for the Company include shares or securities (including loans with a five year or greater maturity period) in companies which operate a 'qualifying trade' wholly or mainly in the United Kingdom. 'Qualifying trade' excludes, amongst other sectors, dealing in property or shares and securities, insurance, banking and agriculture. The Company may not control a portfolio company.
Portfolio company gross assets must not exceed £15 million immediately prior to the investment and £16 million immediately thereafter and there is an annual investment limit of £1 million in each portfolio company.
The Company will co-invest with the other seven VCTs managed by Albion Ventures LLP and allocation to new investments between the Albion Ventures LLP VCTs will be in accordance with the ratio of funds available for investment, subject to the investment policy of each VCT and a limited number of provisions to protect each participating company.
As defined by the Articles of Association, the Company's maximum exposure in relation to gearing is restricted to the amount equal to the Adjusted Capital and Reserves, being £33,938,000 (2010: £17,543,000). Gearing will not normally be employed. As at 31 December 2011, the Company had no borrowings (2010: £nil). The Directors do not currently have any intention to utilise long term gearing.
Details of investments made by the Company and their relevant sectors are shown in the Portfolio of investments and Portfolio companies sections on pages 11 to 13.
A detailed review of the Company's business during the year and future prospects is contained in the Chairman's statement on pages 5 and 6 and Manager's report on pages 7
and 8. Details of significant events which have occurred since the end of the financial year are listed in note 21. Details of related party transactions are shown in note 22.
The Directors do not foresee any major changes in the activity undertaken by the Company in the current year. 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 long term.
The Company has delegated the investment management of the portfolio to Albion Ventures LLP, which is authorised and regulated by the Financial Services Authority. Albion Ventures LLP also provides company secretarial and other accounting and administrative support to the Company. Further details regarding the terms of engagement of the Manager are shown on page 19.
| 125 |
|---|
| (739) |
| 120 |
| 739 –––––––––––– |
| 245 –––––––––––– |
| 935 |
| –––––––––––– |
| 935 –––––––––––– |
| 34,986 –––––––––––– |
| 16.70 |
The Company paid a dividend of 0.67 pence per share during the year ended 31 December 2011 (2010: 5.00 pence per share). The Directors have declared a first dividend of 0.5 pence per share for the year ended 31 December 2012, which will be paid on 25 May 2012 to shareholders on the register on 27 April 2012.
As shown in the Income statement on page 29 of the Financial Statements, investment income has increased to £522,000 (2010: £132,000), mainly due to the receipt of a dividend of £359,000 from a portfolio company. The revenue return to equity holders has risen to £125,000 (2010: loss £581,000) due to the dividend noted above and 75 per cent. of the management fee being reclassified as a capital expense in accordance with a revised policy adopted by the Board.
The capital return for the year was £935,000 (2010: loss £633,000) as a result of an increase in valuations and realised gains, offset by the capitalisation of management fees noted above.
The total return per share was 0.80 pence per share (2010: negative 1.10 pence per share).
The Balance sheet on page 30 of the Financial Statements shows that the net asset value per share has increased over the last year to 16.70 pence per share (2010: 16.60 pence per share) which is due to the profit for the year as noted above less the dividend paid during the year.
The cash flow for the business has been positive for the year due to net proceeds from the sale of investments and cash received from Kings Arms Yard VCT 2 PLC, offset by the purchase of current asset investments and the payment of a dividend.
The Directors believe that the following key performance indicators are the most important for the business.
The bar chart on page 4 shows the shareholder net asset value return for the past five years.
The Company's gross income yield on closing net assets was 1.5 per cent. (2010: 0.7 per cent.) and the gross income yield taking into account income earned by the Company and Kings Arms Yard VCT 2 PLC was 2.3 per cent. (see Manager's report on page 8).
The total expense ratio ("TER") for the year to 31 December 2011 was 2.9 per cent (2010: 3.0 per cent). This TER excludes the costs of issue of shares which have been accounted through against the share premium account (before its cancellation).
The Company continues to comply with HMRC rules in order to maintain its status under Venture Capital Trust legislation as highlighted on page 15.
The Company now operates a policy of buying back shares either for cancellation or for holding in treasury. Details regarding the current policy can be found on page 6 of the Chairman's statement.
The Board considers that the Company faces the following major risks and uncertainties:
Changes in economic conditions, including, for example, interest rates, rates of inflation, industry conditions, competition, political and diplomatic events and other factors could substantially and adversely affect the Company's prospects in a number of ways.
To reduce this risk, in addition to investing in equity in portfolio companies, the Company often invests in secured loan stock and has a policy of not permitting any external bank borrowings within portfolio companies. Additionally, the Manager selects the sector exposure of the portfolio with a view to limiting reliance on consumer led sectors.
This is the risk of investment in poor quality assets which reduces the capital and income returns to shareholders, and negatively impacts on the Company's reputation. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes, are more fragile than larger, long established businesses.
To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its strong track record for investing in this segment of the market. In addition, the Manager operates a formal and structured investment process, which includes an investment committee, comprising investment professionals from the Manager and at least one external investment professional. The Manager also invites, and takes into account, 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. For new investments it is the policy of the Company for portfolio companies to not normally have external borrowings.
The Company's investment valuation method is reliant on the accuracy and completeness of information that is issued by portfolio companies. In particular, the Directors may not be aware of or take into account certain events or circumstances which occur after the information issued by such companies is reported.
As described in note 11 of the Financial Statements, the unquoted equity investments, loan stock and debt issued at a discount held by the Company are valued at fair value through profit or loss in accordance with the International Private Equity and Venture Capital Valuation Guidelines. The guidelines set out recommendations, intended to represent current best practice on the valuation of venture capital investments. These investments are valued on the basis of forward looking estimates and judgements about the business itself, its market and the environment in which it operates, together with the state of the mergers and acquisitions market, stock market conditions and other factors. In making these judgements the valuation takes into account all known material facts up to the date of approval of the Financial Statements by the Board.
The Company's current approval as a venture capital trust allows investors to take advantage of tax reliefs on initial investment and ongoing tax free capital gains and dividend income. Failure to meet the qualifying requirements could result in investors losing the tax relief on initial investment and loss of tax relief on any tax-free income or capital gains received. In addition, failure to meet the qualifying requirements could result in a loss of listing of the shares.
To reduce this risk, the Board has appointed the Manager, who has a team with significant experience in venture capital trust management, used to operating within the requirements of the venture capital trust legislation. In addition, to provide further formal reassurance, the Board has appointed Grant Thornton UK LLP as its taxation advisers. Grant Thornton UK LLP report annually 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.
The Company is listed on the London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company's shares, or other penalties
under the Companies Act or from financial reporting oversight bodies.
Board members and the Manager have experience of operating at senior levels within quoted businesses. In addition, the Board and the Manager receive regular updates on new regulation from the Company's Auditor, lawyers and other professional bodies.
Failures in key controls, within the Board or within the Manager's business, could put assets of the Company at risk or result in reduced or inaccurate information being passed to the Board or to shareholders.
The Audit Committee meets with the Manager's Internal Auditor, Littlejohn LLP, when required, and receives a report regarding the last formal internal audit performed on the Manager, and providing opportunity for the Audit Committee to ask specific and detailed questions. The Audit Committee Chairman has met with the internal audit partner of Littlejohn LLP 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 24.
Measures are in place to mitigate information risk in order to ensure the integrity, availability and confidentiality of information used within the business.
The Company is reliant upon the services of Albion Ventures LLP for the provision of investment management and administrative functions. There are provisions within the Management agreement for the change of Manager under certain circumstances (for further detail, see below). In addition, the Manager has demonstrated to the Board that there is no undue reliance placed upon any one individual within Albion Ventures LLP.
By its nature, as a venture capital trust, the Company is exposed to investment risk (which comprises investment price risk and cash flow interest rate risk), credit risk and liquidity risk. The Company's policies for managing these risks and its financial instruments are outlined in full in note 19 to the Financial Statements.
Most of the Company's income and expenditure is denominated in sterling. There is one foreign currency quoted portfolio investment whose value at 31 December 2011 was £178,000 (2010: £140,000). It is therefore unlikely that the Company would be significantly affected by currency fluctuations.
The Company is financed through equity and does not have any borrowings. The Company does not use derivative financial instruments for speculative purposes.
The management and administration of the Company is undertaken by the Manager. Albion Ventures LLP recognises the importance of its environmental responsibilities, monitors its impact on the environment, and designs and implements policies to reduce any damage that might be caused by its activities. Initiatives designed to minimise the Company's impact on the environment include recycling and reducing energy consumption as is shown in the Financial Statements of Albion Ventures LLP.
The Company is managed by Albion Ventures LLP and hence has no employees other than its Directors.
The Directors who held office at the year end, and their interests in the issued shares of 1 penny each of the Company (together with those of their immediate family) at 31 December 2011, are shown below:
| 31 December 2011 | 31 December 2010 | |
|---|---|---|
| R A Field (Chairman) | 208,993 | 48,993 |
| M G Fiennes (appointed | ||
| 5 April 2011) | 83,300 | – |
| T W Chambers (appointed | ||
| 3 October 2011) | 333,781 | – |
| A P M Lamb (appointed | ||
| 3 October 2011) | 118,796 –––––––––––– |
– –––––––––––– |
| 744,870 –––––––––––– |
48,993 –––––––––––– |
|
There have been no changes in the holdings of the Directors between 31 December 2011 and the date of this Report.
All of the Directors' share interests shown above (together with those of their immediate family) were held beneficially and no right to subscribe for shares in the Company was granted to, or exercised by, any Director during the year.
Partners and staff of Albion Ventures LLP hold 208,027 shares in the Company.
Information about the appointment of Directors, their terms and period of appointment and their re-election are given in the Statement of corporate governance on page 22.
Each Director has entered into a deed of indemnity with the Company which indemnifies each Director, subject to the provisions of the Companies Act 2006 and the limitations set out in each deed, against any liability arising out of any claim made against him in relation to the performance of his duties as a Director of the Company. A copy of each deed of indemnity entered into by the Company for each Director is available at the registered office of the Company.
As provided for in the Company's Articles of Association, the Company continues to maintain Directors' and Officers' liability insurance.
The Company and SPARK Venture Management Limited entered into a Termination Agreement on 8 December 2010, under which the Company agreed to pay SPARK Venture Management Limited the management and administration fees due under the Investment Management Agreement for the period until 30 November 2011. This management fee has been calculated by reference to the net asset value of the Company as at 31 December 2010, subject to appropriate adjustments in respect of dividends or realisations made during 2011. SPARK Venture Management Limited and the Company have agreed that the Termination Agreement is in settlement of all claims against each other.
Albion Ventures LLP signed an Investment Management Agreement with the Company on 8 December 2010, which came into effect on 1 January 2011. Under this agreement Albion Ventures LLP provides investment management, company secretarial and administrative services to the Company. Albion Ventures LLP agreed to waive its management and administration fees for the first year to 31 December 2011. Thereafter Albion Ventures LLP will be entitled to an annual management fee of 2 per cent. of net asset value, along with an annual administration fee of £50,000.
Under the terms of the Investment Management Agreement with Albion Ventures LLP, the aggregate payable for management and administration (normal running costs) are subject to an aggregate annual cap of 3 per cent. of the year end closing net asset value, for accounting periods commencing after 31 December 2011.
The Investment Management Agreement is for an initial period expiring on 31 December 2013. Thereafter it 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 per cent. of the amount invested) and to fees charged for the monitoring of investments (up to a maximum of £15,000 per annum). The maximums are increased by the Retail Prices Index each year.
The Company has agreed with Albion Ventures LLP that no performance or incentive fee will be payable to Albion Ventures LLP for any periods prior to 31 December 2012 and thereafter the Board intends to discuss an appropriate incentive arrangement with Albion Ventures LLP which will be subject to approval by shareholders. Accordingly, no performance incentive payments were paid or fall due for the year ended 31 December 2011.
The Company's payment policy is to ensure settlement of supplier invoices in accordance with their standard terms.
The Company's policy is to pay all supplier invoices within 30 days of the invoice date, or as otherwise agreed. As at 31 December 2011, trade creditors totalled £27,000 (2010: £5,000). Creditor days as at 31 December 2011, were 14 days (2010: 2 days).
The Board has evaluated the performance of the Manager based on the delivery of the Merger with Kings Arms Yard VCT 2 PLC, the returns generated by the Company from the sale of existing investments, the continuing achievement of the 70 per cent. investment requirement for Venture Capital Trust status, the writing of new investments, 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 interests of shareholders as a whole, and of the Company, to continue the appointment of the Manager for the forthcoming year.
The Audit Committee annually reviews and evaluates the standard and quality of service provided by the Auditor, Grant Thornton UK LLP, as well as value for money in the provision of these services.
Grant Thornton UK LLP have indicated their willingness to continue as Auditor to the Company and a resolution to re-appoint Grant Thornton UK LLP as Auditor will be proposed at the Annual General Meeting on 17 May 2012.
The Annual General Meeting will be held at the City of London Club, 19 Old Broad Street, London EC2N 1DS at 12.30 pm on 17 May 2012. The Notice of Annual General Meeting is at the end of this document.
The proxy form enclosed with this Annual Report and Financial Statements permits shareholders to disclose votes 'for', 'against' and 'withheld. A 'vote withheld' is not a vote in law and will not be counted in the proportion of the votes for and against the resolution. Summary of proxies lodged at the Annual General Meeting will be published at www.albionventures.co.uk within the 'Our Funds' section by clicking on Kings Arms Yard VCT PLC.
Resolutions relating to the following items of special business will be proposed at the forthcoming Annual General Meeting for which shareholder approval is required in order to comply either with the Companies Act 2006 or the Listing Rules of the Financial Services Authority.
This ordinary resolution proposes to renew the Directors' authority to allot additional shares of the Company up to an aggregate nominal amount of £209,467, which represents approximately 10 per cent. of the issued share capital of the Company. The Directors have no present intention to exercise this authority with the exception of the Dividend Reinvestment Scheme.
This special resolution proposes to renew the Directors' authority to allot equity securities for cash up to an aggregate nominal amount of £209,467 (being 10 per cent. of the Company's current issued share capital) without first being required to offer such securities to existing shareholders. This will enable the Company to operate its Dividend Reinvestment Scheme and also includes the sale on a non pre-emptive basis of any shares the Company holds in treasury for cash. The Directors consider that it may in certain circumstances be in the best interests of the Company to allot shares for cash otherwise than pro rata to existing shareholders.
This special resolution proposes to renew the existing power of the Company to purchase its own shares up to a maximum number of 14.99 per cent. of the total number of shares currently in issue at or between the minimum and maximum prices specified in resolution 10.
The Board considers that it may, in certain circumstances, be advantageous for the Company to be able to purchase its own shares; occasional market purchases by the Company of its own shares can enhance the net asset value per share for the Company's remaining shareholders, and the power will be exercised only if, in the opinion of the Board, a purchase by the Company of its own shares would be in the interests of the Company's shareholders and would enhance the Company's net asset value per share.
No shares were bought back by the Company in the year ended 31 December 2011.
Shares that are bought back under this authority may be cancelled and up to 10 per cent. of shares in issue can be held in treasury.
Under s724-732 of the Companies Act 2006, shares purchased by the Company out of distributable profits can be held as treasury shares, which may then be cancelled or sold for cash. The authority sought by these resolutions is intended to apply equally to shares to be held by the Company as treasury shares in accordance with the Regulations.
This special resolution proposes to permit Directors to sell treasury shares at the higher of the prevailing current share price and the price bought in at.
Resolutions numbered 8 to 11 replace the authorities given to the Directors at the Annual General Meeting on 16 May 2011 and will expire 18 months from the date these resolutions are passed or at the conclusion of the next Annual General Meeting of the Company, whichever is the earlier.
Your Board believes that the passing of the resolutions proposed at the Annual General Meeting are in the best interests of the Company and its shareholders as a whole, and unanimously recommends that you vote in favour of all the proposed resolutions, as the Directors intend to do in respect of their own beneficial shareholdings.
The Directors are responsible for preparing the Directors' report and business review, the Directors' remuneration report and the Financial Statements in accordance with applicable law and regulations. They are also responsible for ensuring the Annual Report includes information required by the Listing Rules of the Financial Services Authority.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have elected to prepare the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that year.
In preparing those Financial Statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions, to disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of corporate and financial information included on the Company's web page on the Manager's website (www.albion-ventures.co.uk). The maintenance and integrity of the Manager's website is, so far as it relates to the Company, the responsibility of the Manager.
The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for any changes that have occurred to the Financial Statements since they were initially presented on the website. Visitors to the website need to be aware that legislation in the United Kingdom governing the preparation and dissemination of the Financial Statements and other information included in annual reports may differ from legislation in other jurisdictions.
Under applicable law and regulations, the Directors are responsible for preparing a Directors' report, Directors' remuneration report and Corporate governance statement that comply with that law and those regulations.
The Directors confirm to the best of their knowledge that:
The names and functions of all the Directors are stated on page 9.
In the case of the persons who are Directors of the Company at the date of approval of this report:
This disclosure is given and should be interpreted in accordance with the provision of s418 of the Companies Act 2006.
By order of the Board
Company Secretary 16 April 2012
This Statement of corporate governance, which is required by DTR 7.2, forms part of the Director's report and business review.
The Financial Services Authority requires all listed companies to disclose how they have applied the principles and complied with the provisions of the UK Corporate Governance Code issued by the Financial Reporting Council ("FRC") in May 2010 ("the Code").
The Board of Kings Arms Yard VCT PLC has also considered the principles and recommendations of the AIC Code of Corporate Governance ("AIC Code") by reference to the AIC Corporate Governance Guide for Investment Companies ("AIC Guide"). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in Section 1 of the Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company.
The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide, will provide better information to shareholders than reporting under the Code alone.
The Board attaches importance to matters set out in the Code and applies its principles. However, as a venture capital trust company, most of the Company's day-to-day responsibilities are delegated to third parties and the Directors are all non-executive. Thus, not all the provisions of the Code are directly applicable to the Company.
The Company has complied with the recommendations of the AIC Code and the relevant provisions of Section 1 of the Code.
The Board consists solely of non-executive directors. Since all Directors are non-executive and day-to-day management responsibilities are sub-contracted to the Manager, the Company does not have a Chief Executive Officer.
Mr Robin Field is the Chairman. All the Directors of the Company are considered independent Directors. The Board will continue to act independently of the Manager and the Directors consider that the size of the Board is adequate to meet the Company's future needs.
The Board has considered whether it is appropriate to appoint a Senior Independent Director and has concluded that, due to the size of the Board, the size of the business and its lack of complexity, it is inappropriate for the time being. The need to appoint a Senior Independent Director is reviewed annually.
The Articles of Association require that all Directors be subject to re-election procedures by rotation at the Annual General Meeting. All Directors will submit themselves for re-election at least once every three years. Directors appointed since an annual general meeting will retire and be subject to election at the next Annual General Meeting and Directors not considered to be independent, or who have served for longer than nine years, will be subject to annual re-election. The Board does not have a policy of limiting the tenure of any Director as the Board does not consider that a Director's length of service reduces his ability to act independently of the Manager. In accordance with the Articles of Association, Mr Robin Field will resign and offer himself for re-election. Mr Thomas Chambers and Mr Alan Lamb, having been appointed since the last Annual General Meeting, will retire and offer themselves for election.
Information regarding the terms of appointment of the non-executive Directors is available on request.
The Directors have a range of business and financial skills which are relevant to the Company; these are described in the Board of Directors section of this Report, on page 10. Directors are provided with key information on the Company's activities, including regulatory and statutory requirements, and internal controls, by the Manager. The Board has access to secretarial advice and compliance services by the Manager, who is responsible for ensuring that Board procedures are followed and applicable procedures complied with. All Directors are able to take independent professional advice in furtherance of their duties if necessary. In accordance with the Code, the Company has in place Directors' & Officers' Liability Insurance.
The Board met five times during 2011 as part of its regular programme of Board meetings. All Directors attended all meetings. The Board also met to discuss the new investment policy, together with the change of name and to discuss and approve the Merger with Kings Arms Yard VCT 2 PLC. A sub-committee of two Directors met to allot shares under the Dividend Reinvestment Scheme.
The Chairman ensures that all Directors receive, in a timely manner, all relevant management, regulatory and financial information. The Board receives and considers reports regularly from the Manager and other key advisers, and ad hoc reports and information are supplied to the Board as required. The Board has a formal schedule of matters reserved for it and the agreement between the Company and its Manager sets out the matters over which the Manager has authority and limits beyond which Board approval must be sought.
The Manager has authority over the management of the investment portfolio, the organisation of custodial, accounting, secretarial and administrative services. The main issues reserved for the Board include:
Performance of the Board and the Directors is assessed on the following:
The Board believes that it has the right balance of independence, skills, experience and knowledge for the effective governance of the Company. The Board considers any skills gaps in existence and takes action to remedy these where necessary.
Directors are offered training, both at the time of joining the Board and on other occasions where required. The Board also undertakes a proper and thorough evaluation of its committees on an annual basis.
In light of the structured performance evaluation, Robin Field, Thomas Chambers and Alan Lamb, all of whom are subject to re-election or election at the forthcoming Annual General Meeting, are considered to be effective and demonstrate strong commitment to the role. The Board believes it to be in the best interest of the Company that they continue in their positions.
Since the Company has no executive directors, the detailed Directors' Remuneration disclosure requirements set out in Listing Rules as they relate to the Code provisions are not considered relevant.
The Board as a whole is responsible for the appointment and remuneration of Directors and, given the small size of the Board, separate Remuneration and Nomination Committees are not considered appropriate.
The Audit Committee consists of all Directors. Mr Thomas Chambers is the Chairman of the Audit Committee. In accordance with the Code, at least one member of the Audit Committee has recent and relevant financial experience. The Audit Committee met twice during the year ended 31 December 2011; all members attended.
Written terms of reference have been constituted for the Audit Committee. These are as follows:
● undertaking the duties of the Engagement Committee, and reviewing the performance of the Manager and all matters arising under the Management Agreement.
During the year under review, the Committee discharged the responsibilities described above. Its activities included:
Since the year end, the Chairman of the Audit Committee has met with the Partner in charge of Albion Ventures LLP's internal audit at Littlejohn LLP.
The Committee reviews the performance and continued suitability of the Company's external Auditor on an annual basis. They assess the external Auditor's independence, qualification, extent of relevant experience, effectiveness of audit procedures as well as the robustness of their quality assurance procedures. In advance of each audit, the Committee obtains confirmation from the external Auditor that they are independent and of the level of non-audit fees earned by them and their affiliates.
Where non-audit fee levels are considered significant, the Committee considers the appropriateness of the independence safeguards put in place by the Auditor. Note 5 details the total fees paid to Grant Thornton UK LLP in the financial year to 31 December 2011. The Committee considers Grant Thornton UK LLP to be independent of the Company and that the provision of non-audit services does not threaten the objectivity and independence of the audit. As part of its annual review procedures, the Committee has obtained sufficient assurance from their own evaluation and the audit feedback documentation. Based on the assurance obtained, the Committee has recommended to the Board that Grant Thornton UK LLP is re-appointed and that a resolution to this effect be proposed at the Annual General Meeting.
In accordance with principle C.2 of the Code, the Board has an established process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place throughout the year and continues to be subject to regular review by the Board in accordance with the Internal Control Guidance for Directors in the Code published in September 1999 and updated in 2005 (the "Turnbull guidance"). The Board is responsible for the Company's system of risk management and internal control and for reviewing its effectiveness. However, such a system is designed to manage, rather than eliminate, the risks of failure to achieve the Company's business objectives and can only provide reasonable and not absolute assurance against material mis-statement or loss.
The Board's monitoring covers all controls, including financial, operational and compliance controls, and risk management. The Board receives each year from the Manager a formal report, which details the steps taken to monitor the areas of risk, including those that are not directly the responsibility of the Manager, and which reports the details of any known internal control failures. Steps are, and continue to be, taken to embed the system of internal control and risk management into the operations and culture of the Company and its key suppliers, and to deal with areas of improvement which come to the Manager's and the Board's attention.
The Board has performed a specific assessment for the purpose of this Annual Report. This assessment considers all significant aspects of internal control arising during the year. The Audit Committee assists the Board in discharging its review responsibilities.
The main features of the internal control and risk management system with respect to financial reporting, implemented throughout the year are:
The Board has access to Littlejohn LLP which, as Internal Auditor for Albion Ventures LLP, undertakes periodic examination of the business processes and controls environment at Albion Ventures LLP, and ensures that any recommendations to implement improvements in controls are carried out. Littlejohn LLP report formally to the Board on
an annual basis. The Board will continue to monitor its system of internal control in order to provide assurance that it operates as intended.
In accordance with "Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009" issued by the Financial Reporting Council, the Board has assessed the Company's operation as a going concern. The Company has adequate cash and liquid resources, and the major cash outflows of the Company (namely investments and dividends) are within the Company's control. Accordingly, after making diligent enquiries the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors have adopted the going concern basis in preparing the accounts.
The Board's assessment of liquidity risk and details of the Company's policies for managing its capital and financial risks are shown in note 19. The Company's business activities, together with details of its performance are shown in this Directors' report and business review.
Directors review the disclosure of conflicts of interest annually, with changes reviewed and noted at the beginning of each Board meeting. A Director who has conflicts of interest refers to an independent Director to authorise those conflicts. Procedures to disclose and authorise conflicts of interest have been adhered to throughout the year.
Details regarding the Company's capital structure, substantial interests and Directors' powers to buy and issue shares are detailed in full on pages 14 and 20 of the Directors' report and business review. The Company is not party to any significant agreements that may take effect, alter or terminate upon a change of control of the Company following a takeover bid.
Any amendments to the Company's Articles of Association are by way of a special resolution subject to ratification by shareholders.
The Company's Annual General Meeting on 17 May 2012 will be used as an opportunity to communicate with investors. The Board, including the Chairman of the Audit Committee, will be available to answer questions at the Annual General Meeting.
At the Annual General Meeting, the level of proxies lodged on each resolution, the balance for and against the resolution, and the number of votes withheld, are announced after the resolution has been voted on by a show of hands.
The Annual General Meeting will also include a presentation from the Manager on the portfolio and on the Company, and a presentation from a portfolio company.
Shareholders are able to access the latest information on the Company via the Albion Ventures LLP website www.albionventures.co.uk under the "Our Funds" section.
Any enquiries relating to shareholdings and share certificates or changes to personal details can be directed to Computershare Investor Services PLC:
Tel: 0870 873 5858 (UK National Rate call, lines are open 8.30 am – 5.30 pm; Mon – Fri, calls may be recorded) Website: www.computershare.co.uk
Specific enquiries relating to the performance of the Fund and for IFA information, please contact Albion Ventures LLP:
Tel: 020 7601 1850 (lines are open 9.00 am – 5.30 pm; Mon – Fri, calls may be recorded) Email: [email protected]
The Company's shares are quoted on the London Stock Exchange and should investors, after due consideration of their personal tax position, wish to sell their shares they should approach a broker to undertake the sale. Banks may be able to assist shareholders with a referral to a broker within their banking group.
The Directors consider that, with the exception of the requirement for the appointment of a Senior Independent Director and the appointment of separate Remuneration and Nomination Committees, the Company has complied throughout the year ended 31 December 2011 with all the relevant provisions set out in Section 1 of the Code and with the AIC Code of Corporate Governance. The Company continues to comply with the Code as at the date of this report.
Albion Ventures LLP Company Secretary 16 April 2012
This report is submitted in accordance with Section 420 of the Companies Act 2006 ('the Act'). The report also meets the relevant rules of the Listing Rules of the Financial Services Authority and describes how the Board has applied the principles relating to the Directors' remuneration. As required by the Act, a resolution to approve the report will be proposed at the Annual General Meeting.
The Company's Auditor is required to report on certain information contained within this report (see below). The Auditor's opinion is included within the Auditor's report on page 28.
Since the Company's Board consists solely of non-executive Directors and there are no executive employees, a Remuneration Committee is not considered necessary.
The Company's policy is that fees payable to non-executive Directors should reflect their expertise, responsibilities and time spent on Company matters and should be sufficient to enable candidates of high calibre to be recruited. In determining the level of non-executive remuneration, market equivalents are considered in comparison to the overall activities and size of the Company.
The Company's Articles of Association limit fees payable to the Directors to £80,000 per annum in aggregate and amendment to this is by way of a special resolution subject to ratification by shareholders. Directors' fees payable during the year totalled £49,000 (2010: £45,000) as set out below and in note 6 to the Financial Statements.
It is the intention of the Board that the above remuneration policy will continue to apply in the forthcoming financial year and in subsequent years.
There is no notice period stipulated in the service contracts with any of the Directors. No compensation is payable to Directors on leaving office.
The Company's Articles of Association provide for the resignation and, if approved, re-election of the Directors every three years at the Annual General Meeting. In accordance with the recommendations of the AIC Code, Directors who have served the Company for longer than nine years are subject to annual re-election, and any non-independent Directors are also subject to annual re-election.
Mr Martin Fiennes was appointed a Director on 5 April 2011 and on 3 October 2011, as part of the Merger arrangements, Mr Thomas Chambers and Mr Alan Lamb, who were directors of Kings Arms Yard VCT 2 PLC, were appointed Directors of the Company.
Mr Andrew Carruthers and Mr David Adams retired from the Board on 1 January 2011 and 19 April 2011 respectively. Mr Patrick Reeve also retired from the Board on 3 October 2011 as part of the Merger arrangements.
At the Annual General Meeting to be held on 17 May 2012, Thomas Chambers and Alan Lamb, who were appointed on 3 October 2011 will retire from the Board and be subject to election. Robin Field will also retire by rotation and be subject to re-election.
The Directors consider that total return (defined as the net asset value per share of the Company plus cumulative dividends paid) to shareholders since the date of launch of the Company is the most appropriate indicator of the performance of the Company. The total return (excluding tax benefits of 20p per share) of 76.03p per share, which is shown on page 4, can be compared against the issue price of 105p per share at the date of launch of the fund.
The graph below shows the Company's share price total return against the FTSE All-Share Index total return, in both cases, with dividends reinvested, since 2006. The Directors consider the FTSE All-Shares Index to be the most appropriate benchmark for the Company. Investors should, however, be reminded that shares in VCTs generally trade at a discount to the actual net asset value of the Company.
Source: Albion Ventures LLP
The following items have been audited.
The following table shows an analysis of the remuneration of individual Directors who served during the year, exclusive of national insurance:
| Year ended | Year ended | |
|---|---|---|
| 31 December 2011 | 31 December 2010 | |
| R A Field (Chairman) | 22,500 | 22,500 |
| T W Chambers (appointed | ||
| 3 October 2011)(1) | 4,375 | – |
| M G Fiennes | ||
| (appointed 5 April 2011)(1) | 12,320 | – |
| A P M Lamb | ||
| (appointed 3 October 2011) | 3,750 | – |
| D Y Adams | ||
| (retired 19 April 2011)(1) | 5,810 | 16,621 |
| P H Reeve | ||
| (retired 3 October 2011)(2) | – | – |
| G K Lockwood | ||
| (retired 7 May 2010) | – | 6,154 |
| A B Carruthers (retired | ||
| 31 December 2010)(2) | – –––––––––––– |
– –––––––––––– |
| 48,755 –––––––––––– |
45,275 –––––––––––– |
The Company does not confer any share options, long term incentives or retirement benefits to any Director, nor does it make a contribution to any pension scheme on behalf of the Directors.
Director's remuneration is paid to the Director personally through the Manager's payroll and subsequently recharged to the Company.
In addition to Directors' remuneration, the Company pays an annual premium in respect of Directors' & Officers' Liability Insurance of £10,000 (2010: £7,000). In view of the increase in the net asset value of the Company since the Merger on 30 September 2011, Directors' & Officers' insurance cover has been increased.
An ordinary resolution for the approval of this report will be put to shareholders at the Annual General Meeting on 17 May 2012.
The Directors' remuneration report was approved by the Board of Directors and signed on its behalf by order of the Board.
Company Secretary 1 King's Arms Yard London EC2R 7AF 16 April 2012
We have audited the Financial Statements of Kings Arms Yard VCT PLC for the year ended 31 December 2011 which comprise the Income statement, Balance sheet, Reconciliation of movements in shareholders' funds, Cash flow statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
As explained more fully in the Statement of Directors' responsibilities set out on page 21, the Directors are responsible for the preparation of the Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and to express an opinion on the Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's ("APB's") Ethical Standards for Auditors.
A description of the scope of an audit of Financial Statements is provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm.
In our opinion the Financial Statements:
In our opinion:
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
Under the Listing Rules, we are required to review:
Julian Bartlett (Senior Statutory Auditor) For and on behalf of Grant Thornton UK LLP Statutory Auditor Chartered Accountants 16 April 2012
| Year ended 31 December 2011 | Year ended 31 December 2010 | ||||||
|---|---|---|---|---|---|---|---|
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gains/(losses) on investments | 2 | – | 1,257 | 1,257 | – | (633) | (633) |
| Investment income | 3 | 522 | – | 522 | 132 | – | 132 |
| Recoverable VAT | – | – | – | 49 | – | 49 | |
| Investment management fees | 4 | (107) | (322) | (429) | (412) | – | (412) |
| Other expenses | 5 | (290) –––––––––– |
– –––––––––– |
(290) –––––––––– |
(350) –––––––––– |
– –––––––––– |
(350) –––––––––– |
| Profit/(loss) on ordinary activities before tax | 125 | 935 | 1,060 | (581) | (633) | (1,214) | |
| Tax on ordinary activities | 7 | – –––––––––– |
– –––––––––– |
– –––––––––– |
– –––––––––– |
– –––––––––– |
– –––––––––– |
| Profit/(loss) on ordinary activities after tax | 125 –––––––––– |
935 –––––––––– |
1,060 –––––––––– |
(581) –––––––––– |
(633) –––––––––– |
(1,214) –––––––––– |
|
| Basic and diluted profit/(loss) per share (pence) | 9 | 0.10 –––––––––– |
0.70 –––––––––– |
0.80 –––––––––– |
(0.50) –––––––––– |
(0.60) –––––––––– |
(1.10) –––––––––– |
The accompanying notes on pages 33 to 45 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 return and capital columns have been prepared in accordance with The Association of Investment Companies' Statement of Recommended Practice.
All revenue and capital items in the above statement derive from the continuing operations of the Company up to 30 September 2011 and thereafter includes the return on the assets and activities of Kings Arms Yard VCT 2 PLC after they were acquired by the Company on 30 September 2011.
The Company has only one class of business and derives its income from investments made in shares and securities and from bank deposits.
There are no recognised gains or losses other than the results for the year disclosed above. Accordingly a statement of total recognised gains and losses is not required.
The difference between the reported profit/(loss) on ordinary activities before tax and the historical cost profit/(loss) is due to the fair value movements on investments. As a result, a note on historical cost profits and losses has not been prepared.
| 31 December 2011 | 31 December 2010 | |
|---|---|---|
| Note | £'000 | £'000 |
| Fixed asset investments 11 |
23,957 | 12,350 |
| –––––––––––– | –––––––––––– | |
| Current assets | ||
| Trade and other debtors 13 |
557 | 686 |
| Current asset investments 13 |
1,976 | 3,230 |
| Cash at bank and in hand 17 |
8,758 | 2,216 |
| –––––––––––– 11,291 |
–––––––––––– 6,132 |
|
| Creditors: amounts falling due within one year 14 |
(262) | (199) |
| –––––––––––– | –––––––––––– | |
| Net current assets | 11,029 –––––––––––– |
5,933 –––––––––––– |
| Net assets | 34,986 –––––––––––– |
18,283 –––––––––––– |
| Capital and reserves | ||
| Called-up share capital 15 |
2,095 | 5,519 |
| Share premium | – | 150 |
| Capital redemption reserve | – | 765 |
| Special reserve | 36,945 | 20,524 |
| Investment holding losses | (4,984) | (9,574) |
| Profit and loss account | 930 –––––––––––– |
899 –––––––––––– |
| Total equity shareholders' funds | 34,986 –––––––––––– |
18,283 –––––––––––– |
| Basic and diluted net asset value per share (pence) 16 |
16.70 | 16.60 |
The accompanying notes on pages 33 to 45 form an integral part of these Financial Statements.
The Balance sheet as at 31 December 2011 reflects the acquisition of the assets and liabilities of Kings Arms Yard VCT 2 PLC on 30 September 2011.
The Financial Statements were approved by the Board of Directors and authorised for issue on 16 April 2012 and were signed on its behalf by:
Robin Field
Chairman
Company number: 03139019
| Called- up share capital £'000 |
Share premium account £'000 |
Capital redemp- tion reserve £'000 |
Special reserve £'000 |
Invest- ment holding losses £'000 |
Profit and loss account £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|---|
| At 31 December 2010 | 5,519 | 150 | 765 | 20,524 | (9,574) | 899 | 18,283 |
| Recognised losses on investments | – | – | – | – | – | 270 | 270 |
| Realisation of prior years' net recognised losses on investments |
– | – | – | – | 3,603 | (3,603) | – |
| Investment holding profit on valuation of investments |
– | – | – | – | 987 | – | 987 |
| Transfer from special reserve to profit and loss account** |
– | – | – | (4,179) | – | 4,179 | – |
| Capitalised investment management fee | – | – | – | – | – | (322) | (322) |
| Shares issued under the Dividend Reinvestment Scheme |
2 | 5 | – | – | – | – | 7 |
| Shares issued to acquire net assets of Kings Arms Yard VCT 2 PLC including costs |
4,953 | 11,425 | – | – | – | – | 16,378 |
| Share issue costs | – | (124) | – | – | – | – | (124) |
| Reduction in share capital and reserves* | (8,379) | (11,456) | (765) | 20,600 | – | – | – |
| Gain on ordinary activities after taxation | – | – | – | – | – | 125 | 125 |
| Net Dividends paid | – –––––––––– |
– –––––––––– |
– –––––––––– |
– –––––––––– |
– –––––––––– |
(619) –––––––––– |
(619) –––––––––– |
| At 31 December 2011 | 2,095 | – | – | 36,945 | (4,984) | 930 | 34,986 |
| At 31 December 2009 | –––––––––– 5,519 |
–––––––––– 150 |
–––––––––– 765 |
–––––––––– 22,685 |
–––––––––– (7,941) |
–––––––––– 3,852 |
–––––––––– 25,030 |
| Realisation of prior years' net recognised losses on investments |
– | – | – | – | 576 | (576) | – |
| Transfer from special reserve to profit and loss account |
– | – | – | (2,161) | – | 2,161 | – |
| Investment holding loss on valuation of investments |
– | – | – | – | (2,209) | 2,209 | – |
| Loss on ordinary activities after taxation | – | – | – | – | – | (1,214) | (1,214) |
| Dividends | – –––––––––– |
– –––––––––– |
– –––––––––– |
– –––––––––– |
– –––––––––– |
(5,533) –––––––––– |
(5,533) –––––––––– |
| At 31 December 2010 | 5,519 –––––––––– |
150 –––––––––– |
765 –––––––––– |
20,524 –––––––––– |
(9,574) –––––––––– |
899 –––––––––– |
18,283 –––––––––– |
The accompanying notes on pages 33 to 45 form an integral part of these Financial Statements.
* The reduction in the nominal value of shares from 5 pence to 1 penny, the cancellation of the Capital redemption reserve and the cancellation of the Share premium account (as approved by shareholders at the General Meeting held on 23 September 2011 and by the order of the Court dated 23 November 2011) has increased the value of the existing special reserve account which is distributable.
** A transfer of £4,179,000 (which comprises £3,440,000 representing realised losses on disposal of investments during the year and £739,000 for dividend purposes) has been made from the special reserve to the profit and loss account during the year (2010: £2,161,000).
Unrealised gains and losses arising on investments held at fair value are transferred to the investment holding losses reserve.
The total distributable reserves are £32,891,000 (2010: £11,849,000), comprising the special reserve and the profit and loss account, less net investment holding losses.
| Year ended | Year ended | |
|---|---|---|
| 31 December 2011 | 31 December 2010 | |
| Notes | £'000 | £'000 |
| Net cash flow from operating activities 18 |
(205) | (524) |
| Taxation | ||
| UK corporation tax recovered/(paid) | – | – |
| Capital expenditure and financial investments | ||
| Purchase of fixed asset investments 11 |
(3,131) | (536) |
| Disposal of fixed asset investments 11 |
4,235 | 2,139 |
| Cash received from investments previously sold or written off | 324 –––––––––––– |
– –––––––––––– |
| Net cash flow from investing activities | 1,428 | 1,603 |
| Management of liquid resources | ||
| Purchase of current asset investments | (985) | – |
| Disposal of current asset investments | 3,230 –––––––––––– |
3,480 –––––––––––– |
| Net cash flow from liquid resources | 2,245 | 3,480 |
| Equity dividends paid (net of costs of shares issued under Dividend | ||
| Reinvestment Scheme)* 8 |
(706) –––––––––––– |
(5,533) –––––––––––– |
| Net cash flow before financing | 2,762 –––––––––––– |
(974) –––––––––––– |
| Financing | ||
| Cash acquired from Kings Arms Yard VCT 2 PLC on Merger 10 |
3,953 | – |
| Cost of Merger (paid on behalf of the Company and Kings Arms Yard | ||
| VCT 2 PLC) | (173) –––––––––––– |
– –––––––––––– |
| Net cash flow from financing | 3,780 –––––––––––– |
– –––––––––––– |
| Cash flow in the year 17 |
6,542 –––––––––––– |
(974) –––––––––––– |
The accompanying notes on pages 33 to 45 form an integral part of these Financial Statements.
Details of material non-cash transactions can be found in notes 10 and 11.
* The equity dividends paid in the cash flow are different to the dividend posted to reserves due to the release of dividend creditors recoverable by the Company, and the non-cash effect of the Dividend Reinvestment Scheme.
A summary of the principal accounting policies, which have been applied consistently in the current and in prior periods, is set out below. With effect from 1 January 2011, the Board has made the decision to allocate management fees between capital and income. Previously all such expenses were charged to income.
The Financial Statements have been prepared in accordance with the historical cost convention, except for the measurement of fair value of investments, and in accordance with applicable UK law and accounting standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ("SORP") issued by The Association of Investment Companies ("AIC") in January 2009. The accounts are prepared on a going concern basis.
The Company's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment policy, and information about the portfolio is provided internally on that basis to the Board.
Upon initial recognition (using trade date accounting) investments are designated by the Company as 'at fair value through profit or loss' and are included at their initial fair value, which is cost (excluding expenses incidental to the acquisition which are written off to the income statement).
Subsequently, the investments are valued at 'fair value', which is measured as follows:
Unquoted investments, where there is not an active market, are valued using an appropriate valuation technique in accordance with the September 2009 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;
It is not the Company's policy to exercise control or significant influence over portfolio companies. Therefore, in accordance with the exemptions under FRS 9 "Associates and Joint Ventures", those undertakings in which the Company holds more than 20 per cent., but less than 50 per cent., of the equity of an investment company, and the investment company is not a subsidiary, are not regarded as associated undertakings.
In accordance with FRS 26, units held in funds used for cash management are designated as fair value through profit and loss. These investments are classified as current asset investments as they are investments held for the short term.
Gains and losses arising from changes in the fair value of the investments are included in the Income statement for the year as a capital item and are allocated to Investment holding losses.
Dividends receivable on quoted equity shares are recognised on the ex-dividend date. Income receivable on unquoted equity and non-equity shares and loan notes is recognised when the Company's right to receive payment and expect settlement is established. Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis (including amortisation of any premium or discount to redemption) so as to reflect the effective interest rate, provided there is no reasonable doubt that payment will be received in due course. Income from fixed interest securities and deposit interest is included on an effective interest basis.
All expenses, including expenses incidental to the acquisition or disposal of an investment, are accounted for on an accruals basis and are charged wholly to the income statement except for 75 per cent. of management fees which are allocated to capital to the extent that these relate to an enhancement in the value of the investments. 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.
Costs associated with the issue of shares are charged to the share premium account. Costs associated with the buy back of shares are charged to the special reserve.
Taxation is applied on a current basis in accordance with FRS 16 "Current tax". Taxation associated with capital expenses is applied in accordance with the SORP. In accordance with FRS 19 "Deferred tax", deferred taxation is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the Financial Statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered.
The Directors have considered the requirements of FRS 19 and do not believe that any provision should be made for deferred tax.
The currency of the primary economic environment in which the Company operates (the functional currency) is pounds Sterling ("Sterling"), which is also the presentational currency of the Company. Transactions involving currencies other than Sterling are recorded at the exchange rate ruling on the transaction date. At each Balance sheet date, monetary items and non-monetary assets and liabilities that are measured at fair value, which are denominated in foreign currencies, are retranslated at the closing rates of exchange. Exchange differences arising on settlement of monetary items and from retranslating at the Balance sheet date of investments and other financial instruments measured at fair value through profit or loss, and other monetary items, are included in the Income statement. Exchange differences relating to investments and other financial instruments measured at fair value are subsequently included in Investment holding losses.
This reserve accounts for the difference between the price paid for shares and the nominal value of the shares, less issue costs.
This reserve accounts for amounts by which the issued share capital is diminished through the repurchase and cancellation of the Company's own shares.
Increases and decreases in the valuation of investments held at the year end against cost are included in this reserve.
The reduction in the nominal value of shares, the cancellation of the share premium and capital redemption reserves has created a special reserve that can be used to fund market purchases and subsequent cancellation of own shares, to cover gross realised losses, and for other distributable purposes.
In accordance with FRS 21 "Events after the balance sheet date", dividends declared by the Company and payable to equity shareholders are accounted for in the period in which the dividend has been paid or approved by shareholders at an annual general meeting.
| 2. Gains/(losses) on investments |
Year ended | Year ended |
|---|---|---|
| ------------------------------------- | ------------ | ------------ |
| 31 December 2011 | 31 December 2010 | |
|---|---|---|
| £'000 | £'000 | |
| Unrealised gains/(losses) on fixed asset investments held | ||
| at fair value through profit or loss | 993 | (2,209) |
| Unrealised loss on deferred consideration | ||
| held at fair value through profit or loss | (6) –––––––––––––– |
– –––––––––––––– |
| Unrealised gain/(loss) subtotal | 987 –––––––––––––– |
(2,209) –––––––––––––– |
| Realised gains on fixed asset investments held at fair value | ||
| through profit or loss (includes escrow receipts from previously | ||
| sold investments and distributions from investments in liquidation) | 270 –––––––––––––– |
1,576 –––––––––––––– |
| 1,257 –––––––––––––– |
(633) –––––––––––––– |
| Investment income | Year ended | Year ended |
|---|---|---|
| 31 December 2011 | 31 December 2010 | |
| £'000 | £'000 | |
| Income recognised on investments held at fair value through profit or loss | ||
| Dividends | 359 | – |
| Listed fixed interest securities | 13 | 3 |
| Loans to venture capital portfolio companies | 67 | 91 |
| Other income | 10 –––––––––––––– |
22 –––––––––––––– |
| 449 | 116 | |
| Income recognised on investments measured at amortised cost | ||
| Bank deposit interest | 73 –––––––––––––– |
16 –––––––––––––– |
| 522 | 132 | |
| –––––––––––––– | –––––––––––––– |
Interest income earned on impaired investments at 31 December 2011 was £nil (2010: £nil).
| 4. | Investment management fees | Year ended 31 December 2011 £'000 |
Year ended 31 December 2010 £'000 |
|---|---|---|---|
| Investment management fees charged to revenue | 107 | 412 | |
| Investment management fees charged to capital | 322 | – | |
| –––––––––––––– 429 –––––––––––––– |
–––––––––––––– 412 –––––––––––––– |
With effect from 1 January 2011, 75 per cent. of management fees are allocated to the realised capital reserve. This is in line with the revised policy adopted by the Board and 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.
In accordance with the Termination Agreement dated 8 December 2010, investment management fees were paid to SPARK Venture Management Limited. Albion Ventures LLP received no management fees during the year.
| 5. | Other expenses | Year ended | Year ended |
|---|---|---|---|
| 31 December 2011 | 31 December 2010 | ||
| £'000 | £'000 | ||
| Administrative and secretarial services | 77 | 68 | |
| Directors' remuneration (note 6) | 46 | 49 | |
| Auditor's remuneration | |||
| – Fees payable for audit of the Financial Statements | 23 | 18 | |
| – Fees payable for other services relating to tax | 4 | 15 | |
| Legal and professional expenses | 27 | 83 | |
| Insurance | 10 | 19 | |
| Management fees payable to OLIM Limited | – | 1 | |
| Irrecoverable VAT | 26 | 35 | |
| Other expenses | 77 –––––––––––––– |
62 –––––––––––––– |
|
| 290 –––––––––––––– |
350 –––––––––––––– |
||
The Auditor was also paid £2,500 for a review of investment valuations as part of the preparation of the Prospectus for the issue of shares for the Merger between the Company and Kings Arms Yard VCT 2 PLC. This expense, together with the other expenses of the Merger, have been charged to the Share premium account (before its cancellation).
In accordance with the Termination Agreement dated 8 December 2010, administrative and secretarial fees were paid to SPARK Venture Management Limited. Albion Ventures LLP received no administrative and secretarial fees during the year.
| 6. | Directors' fees | Year ended | Year ended |
|---|---|---|---|
| 31 December 2011 | 31 December 2010 | ||
| £'000 | £'000 | ||
| Amount payable to Directors | 49 | 45 | |
| National insurance | 2 | 4 | |
| Tax and national insurance recovered from past directors | (5) –––––––––––––– |
– –––––––––––––– |
|
| 46 | 49 | ||
| –––––––––––––– | –––––––––––––– |
Further information regarding Directors' remuneration can be found in the Directors' remuneration report on page 26.
| Tax on ordinary activities | Year ended | Year ended |
|---|---|---|
| 31 December 2011 | 31 December 2010 | |
| £'000 | £'000 | |
| UK Corporation tax payable | – –––––––––––––– |
– –––––––––––––– |
| Reconciliation of profit/(loss) on ordinary activities to taxation charge | Year ended | Year ended |
| 31 December 2011 | 31 December 2010 | |
| £'000 | £'000 | |
| Profit/(loss) on ordinary activities before taxation | 1,060 –––––––––––––– |
(1,214) –––––––––––––– |
| Tax (charge)/credit on profit/(loss) at standard UK corporation tax | ||
| rate of 26% (2010: 28%) | (281) | 340 |
| Effects of: | ||
| Non taxable gains/(losses) | 333 | (177) |
| Non taxable income | 95 | – |
| Unutilised management expenses | (147) | (163) |
| –––––––––––––– – |
–––––––––––––– – |
|
| –––––––––––––– | –––––––––––––– |
The UK government changed the rate of corporation tax from 28 per cent. to 26 per cent. with effect from 1 April 2011. The effective rate of tax for the year ended 31 December 2011 is 26.5 per cent. (90 days at 28 per cent. and 275 days at 26 per cent.). The tax charge for the year shown in the income statement is lower than the standard rate of corporation tax for the reasons shown above.
The Company has excess trading losses of £9,189,000 (2010: £8,632,000) that are available for offset against future profits. A deferred tax asset of £2,388,000 (2010: £2,420,000) 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.
The Directors have declared a first dividend of 0.5 pence per share for the year ended 31 December 2012, which will amount to approximately £1,047,000. This dividend will be paid on 25 May 2012 to shareholders on the register on 27 April 2012.
| 9. | Earnings per share Year ended 31 December 2011 |
Year ended 31 December 2010 | |||||
|---|---|---|---|---|---|---|---|
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Return/(loss) attributable to equity shares (£'000) | 125 | 935 | 1,060 | (581) | (663) | (1,214) | |
| Weighted average shares in issue (excluding treasury shares) | 135,360,943 | 110,370,135 | |||||
| Return/(loss) attributable per equity share (pence) | 0.10 | 0.70 | 0.80 | (0.50) | (0.60) | (1.10) |
There is no dilution effect in respect of the year ended 31 December 2011 (2010: nil).
On 30 September 2011, the following assets and liabilities of Kings Arms Yard VCT 2 PLC ("KAY 2") were transferred to the Company in exchange for the issue to KAY 2 shareholders of 99,050,205 shares in the Company, at an issue price of 16.5349 pence per share:
| £'000 |
|---|
| 11,422 |
| 175 |
| 991 |
| 3,953 |
| (162) –––––––––––––– |
| 16,379 –––––––––––––– |
On the same day, Kings Arms Yard VCT 2 PLC was placed into members' voluntary liquidation pursuant to a scheme of reconstruction under section 110 of the Insolvency Act 1986.
The net asset values ("NAVs") per share of each fund used for the purposes of conversion at the calculation date of 29 September 2011 were 16.5349 and 21.1746 for the Company and KAY 2 respectively. The conversion ratio for each KAY 2 share was 1.2806 shares for each Kings Arms Yard VCT PLC share.
New share certificates were sent to all shareholders during October 2011.
| Summary of fixed asset investments | 31 December 2011 | 31 December 2010 |
|---|---|---|
| £'000 | £'000 | |
| Unquoted equity | 19,412 | 9,784 |
| Unquoted loan stock | 4,242 | 2,354 |
| Quoted equity | 303 –––––––––––––– |
212 –––––––––––––– |
| 23,957 –––––––––––––– |
12,350 –––––––––––––– |
| 31 December 2011 £'000 |
31 December 2010 £'000 |
|
|---|---|---|
| Opening valuation | 12,350 | 14,870 |
| Purchases at cost | 3,375 | 536 |
| Investments acquired from Kings Arms Yard VCT 2 PLC | 11,422 | – |
| Disposal proceeds | (4,460) | (2,423) |
| Realised gains | 270 | 1,576 |
| Movement in loan stock accrued income | 7 | – |
| Unrealised gains/(losses) | 993 | (2,209) |
| Closing valuation | –––––––––––––– 23,957 –––––––––––––– |
–––––––––––––– 12,350 –––––––––––––– |
| Movement in loan stock accrued income | ||
| Opening accumulated movement in loan stock accrued income | – | – |
| Movement in loan stock accrued income | 7 –––––––––––––– |
– –––––––––––––– |
| Closing accumulated movement in loan stock accrued income | 7 –––––––––––––– |
– –––––––––––––– |
| Movement in unrealised losses | ||
| Opening accumulated unrealised losses | (9,574) | (7,941) |
| Transfer of previously unrealised losses to realised reserve on disposal of investments | 3,603 | 576 |
| Movement in unrealised gains/(losses) | 993 –––––––––––––– |
(2,209) –––––––––––––– |
| Closing accumulated unrealised losses | (4,978) –––––––––––––– |
(9,574) –––––––––––––– |
| Historic cost basis | 31 December 2011 £'000 |
31 December 2010 £'000 |
|---|---|---|
| Opening book cost | 21,924 | 22,811 |
| Purchases at cost | 3,375 | 536 |
| Investments acquired from Kings Arms Yard VCT 2 PLC | 11,422 | – |
| Sales at cost | (7,793) –––––––––––––– |
(1,423) –––––––––––––– |
| Closing book cost | 28,928 –––––––––––––– |
21,924 –––––––––––––– |
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 in the cashflow statement may not equal purchases and disposals in the table above due to settlement debtors and creditors and the receipt of consideration totalling £129,000 from the sale of investments as shares, rather than in cash.
All fixed asset investments are held at fair value through profit or loss. Loan stocks valued at £2,445,000 yield a fixed rate of interest.
The Company does not hold any assets as the result of the enforcement of security during the period, and believes that the carrying values for both impaired and past due assets are covered by the value of security held for these loan stock investments.
Unquoted investments are valued in accordance with the IPEVCV guidelines as follows:
| 31 December 2011 | £'000 | 31 December 2010 £'000 |
|---|---|---|
| Revenue multiple | 8,336 | 7,152 |
| Price of recent investment | 7,109 | 1,679 |
| Earnings multiple | 5,267 | 2,963 |
| Cost reviewed for impairment | 2,932 | – |
| Net assets | 10 | – |
| Cost reviewed for recent performance | – | 325 |
| Expected distribution | – –––––––––––––– |
19 –––––––––––––– |
| 23,654 –––––––––––––– |
12,138 –––––––––––––– |
| Value as at 31 December 2011 |
|||||
|---|---|---|---|---|---|
| Revenue multiple to earnings multiple | 3,860 | Business making trading profits | |||
| Earnings multiple to price of recent investment | 868 | More recent information available | |||
| Cost reviewed for impairment to price of recent investment | 829 | More recent information available | |||
| Revenue multiple to cost reviewed for impairment | 152 | Decline in performance | |||
| Revenue multiple to price of recent investment | 13 | More recent information available | |||
| Expected distribution to net assets | 10 | Scale back of business |
The valuation will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the September 2009 IPEVCV Guidelines. The Directors believe that the methods used are the most appropriate methods of valuation as at 31 December 2011.
FRS 29 'Financial Instruments: Disclosures' requires the Company to disclose the inputs to the valuation methods applied to its investments at fair value through profit or loss in a fair value hierarchy according to the following definitions:
| Fair value hierarchy | Definition |
|---|---|
| Level 1 | Unadjusted quoted (bid) prices applied where an active market exists |
| Level 2 | Inputs to valuation are from observable sources and are directly or indirectly derived from prices |
| Level 3 | Inputs to valuations not based on observable market data |
Fixed asset investments at fair value through profit or loss as at 31 December 2011 are categorised in accordance with FRS 29 as follows:
| 31 December 2011 | ||||
|---|---|---|---|---|
| Level 1 | Level 2 | Level 3 | ||
| £'000 | £'000 | £'000 | £'000 | |
| Unquoted equity | 19,412 | – | – | 19,412 |
| Unquoted loan stock | 4,242 | – | – | 4,242 |
| Quoted equity | 303 –––––––––––––– |
303 –––––––––––––– |
– –––––––––––––– |
– –––––––––––––– |
| 23,957 –––––––––––––– |
303 –––––––––––––– |
– –––––––––––––– |
23,654 –––––––––––––– |
Fixed asset investments at fair value through profit or loss as at 31 December 2010 are categorised in accordance with FRS 29 as follows:
| 31 December 2010 | ||||
|---|---|---|---|---|
| £'000 | Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
|
| Unquoted equity | 9,784 | – | – | 9,784 |
| Unquoted loan stock | 2,354 | – | – | 2,354 |
| Quoted equity | 212 –––––––––––––– |
212 –––––––––––––– |
– –––––––––––––– |
– –––––––––––––– |
| 12,350 –––––––––––––– |
212 –––––––––––––– |
– –––––––––––––– |
12,138 –––––––––––––– |
| 31 December 2011 31 December 2010 | ||
|---|---|---|
| £'000 | £'000 | |
| Opening valuation | 12,138 | 14,440 |
| Purchases at cost | 3,375 | 536 |
| Investments acquired from Kings Arms Yard VCT 2 PLC | 11,200 | – |
| Disposal proceeds | (4,294) | (2,335) |
| Realised net gains on disposal | 833 | 1,569 |
| Movement in loan stock accrued income | 7 | – |
| Investment holding gains/(losses) | 395 –––––––––––––– |
(2,072) –––––––––––––– |
| Closing valuation | 23,654 –––––––––––––– |
12,138 –––––––––––––– |
FRS29 requires the Directors to consider the impact of changing one or more of the inputs used as part of the valuation process. The valuation methodology applied to 58 per cent. of the unquoted portfolio (Level 3) is neither price of recent investment nor cost. The Directors believe that changes to reasonable possible alternative assumptions for the valuation of this part of the portfolio could result in an increase of £1.8m or a decrease of £1.2m in the valuation of the unquoted investments.
The principal activity of the Company is to select and hold a portfolio of investments in quoted and unquoted securities. Although the Company, through the Manager, will, in some cases, be represented on the board of the portfolio company, it will not 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 per cent. 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 2011 as described below. All of the companies are incorporated in Great Britain.
| Company | Class of share | Number of shares held |
Proportion of class held |
|---|---|---|---|
| Elateral Holdings Limited | Ordinary shares | 17,380,462 | 31.8% |
| Lab M Holdings Limited | A Ordinary shares | 2,280,000 | 100.0% |
| B Ordinary shares | 600 | 60.0% | |
| Preferred ordinary shares | 389,940 | 52.3% | |
| Sift Limited | Ordinary shares | 16,828,131 | 29.8% |
| A Ordinary shares | 3,199,455 | 28.4% | |
| B Ordinary shares | 4,872,240 | 42.4% | |
| UniServity Limited | Ordinary shares | 24,605 | 14.3% |
| A Ordinary shares | 86,152 | 100.0% | |
| B Ordinary shares | 44,500 | 100.0% |
As permitted by FRS 9, the investments listed above are held as part of an investment portfolio, and their value to the Company is as part of a portfolio of investments. Therefore, these investments are not considered to be associated undertakings.
| Trade and other debtors | 31 December 2011 | 31 December 2010 |
|---|---|---|
| £'000 | £'000 | |
| Other debtors | 513 | 628 |
| Prepayments and accrued income | 44 –––––––––––––– |
58 –––––––––––––– |
| 557 –––––––––––––– |
686 –––––––––––––– |
The Directors consider that the carrying amount of debtors is not materially different to their fair value.
| Current asset investments | 31 December 2011 | 31 December 2010 |
|---|---|---|
| £'000 | £'000 | |
| The Royal Bank of Scotland Global Treasury Funds plc | – | 3,230 |
| UBS RBS Group European Commercial Paper 16/06/11 to 14/06/12 | 1,976 –––––––––––––– |
– –––––––––––––– |
| 1,976 –––––––––––––– |
3,230 –––––––––––––– |
Current asset investments represent money held for investment. The fair value hierarchy applied to this current asset investment is Level 1 (see page 39 for definitions).
| 14. | Creditors: amounts falling due within one year | 31 December 2011 | |
|---|---|---|---|
| £'000 | £'000 | ||
| Trade creditors | 27 | 5 | |
| Accruals | 108 | 76 | |
| Other creditors | 127 –––––––––––––– |
118 –––––––––––––– |
|
| 262 –––––––––––––– |
199 –––––––––––––– |
The Directors consider that the carrying amount of creditors is not materially different to their fair value.
| 15. | Called up share capital | 31 December 2011 | 31 December 2010 | |
|---|---|---|---|---|
| £'000 | £'000 | |||
| Allotted, issued and fully paid and voting rights: | ||||
| 209,467,597 Ordinary shares of 1 penny (2010: 110,370,135 Ordinary shares of 5 pence) | 2,095 –––––––––––––– |
5,519 –––––––––––––– |
No shares were bought back for cancellation by the Company during the year ended 31 December 2011 (2010: nil).
The nominal value of the Ordinary shares was reduced from 5 pence to one penny on 23 November 2011 following approval by shareholders at the General Meeting on 23 September 2011.
Under the terms of the Dividend Reinvestment Scheme, the following Ordinary shares of nominal value 5 pence per share were allotted during the year:
| Aggregate | Net | Opening market price per share |
|||
|---|---|---|---|---|---|
| Number of | nominal value | Issue price | consideration | on allotment date | |
| Date of allotment | shares allotted | (£) | of shares (pence per share) | received (£) |
(pence per share) |
| 24 June 2011 | 47,257 | 2,363 | 15.93 | 5,165 | 7.75 |
The Company issued 99,050,250 Ordinary shares to former shareholders in Kings Arms Yard VCT 2 PLC as part of the Merger as explained in note 10.
The net asset value per share as at 31 December 2011 of 16.70 pence (2010: 16.60 pence) is based on net assets of £34,986,000 (2010: £18,283,000) divided by the 209,467,597 ordinary shares in issue at that date (2010: 110,370,135).
| 17. | Analysis of changes in cash during the year | 31 December 2011 £'000 |
31 December 2010 £'000 |
|---|---|---|---|
| Opening cash balances Net cash flow |
2,216 6,542 |
3,190 (974) |
|
| Closing cash balances | ––––––––––––– 8,758 ––––––––––––– |
––––––––––––– 2,216 ––––––––––––– |
| activities | 31 December 2011 | 31 December 2010 |
|---|---|---|
| £'000 | £'000 | |
| Profit/(loss) on ordinary activities before tax | 125 | (1,214) |
| Capitalised investment management fees | (322) | 633 |
| Movement in accrued loan stock interest | 7 | – |
| Decrease in debtors | 113 | 58 |
| Decrease in creditors | (128) ––––––––––––– |
(1) ––––––––––––– |
| Net cash flow from operating activities | (205) ––––––––––––– |
(524) ––––––––––––– |
The Company's capital comprises Ordinary shares as described in note 15. The Company is permitted to buy back its own shares for cancellation or treasury purposes and this policy is described in more detail on page 20.
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 cashflow, 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:
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.
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 11 to 13. Investment risk is the exposure of the Company to the revaluation and devaluation of investments. The main driver of investment risk is the operational and financial performance of the portfolio company and the dynamics of market quoted comparators. The Manager receives management accounts from portfolio companies, and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment risk.
The Manager and the Board formally review investment risk (which includes market price risk), both at the time of initial investment and at quarterly Board meetings.
The Board monitors the prices at which sales of investments are made to ensure that profits to the Company are maximised, and that valuations of investments retained within the portfolio appear sufficiently prudent and realistic compared to prices being achieved in the market for sales of unquoted investments.
The maximum investment risk as at the balance sheet date is the value of the fixed and current asset investment portfolio which is £25,933,000 (2010: £15,580,000). Fixed and current asset investments form 74 per cent. of the net asset value as at 31 December 2011 (2010: 85 per cent.).
More details regarding the classification of fixed and current asset investments are shown in notes 11 and 13.
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 and quoted companies in accordance with the investment policy set out on page 14. 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. 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 on page 8 of the Manager's report.
As required under FRS 29 "Financial Instruments: Disclosures", the Board is required to illustrate by way of a sensitivity analysis the degree of exposure to market risk. The Board considers that the value of the fixed and current asset investment portfolio is sensitive to a 10 per cent. change based on the current economic climate. The impact of a 10 per cent. change has been selected as this is considered reasonable given the current level of volatility observed both on a historical basis and future expectations.
The sensitivity of a 10 per cent. increase or decrease in the valuation of the fixed and current asset investment portfolio (keeping all other variables constant) would increase or decrease the net asset value and return for the year by £2,593,000.
The Company is unlikely to be significantly affected by currency fluctuations. Revenue received in currencies other than sterling is converted into sterling on or shortly after the date of receipt as are any proceeds from the disposal of foreign currency investments.
At the year ended 31 December 2011, the Company held investments denominated in currencies other than sterling of £178,000 (2010: £140,000).
It is the Company's policy to accept a degree of interest rate risk on its financial assets through the effect of interest rate changes. On the basis of the Company's analysis, it is estimated that a rise of one percentage point in all interest rates would have increased total return before tax for the year by approximately £63,000 (2010: £82,000). Furthermore, it is considered that a fall of interest rates below current levels during the year would have been unlikely.
The weighted average interest rate applied to the Company's fixed rate fixed asset investments during the year was approximately 0.7 per cent. (2010: 3.3 per cent.). The weighted average period to expected maturity for the fixed rate fixed assets is approximately 9.5 years (2010: 2.2 years).
The Company's financial assets and liabilities as at 31 December 2011, denominated in pounds sterling, consist of the following:
| 31 December 2011 Non- |
31 December 2010 Non |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| Fixed rate £'000 |
Floating rate £'000 |
interest bearing £'000 |
Total £'000 |
Fixed rate £'000 |
Floating rate £'000 |
interest bearing £'000 |
Total £'000 |
||
| Unquoted equity | – | – | 19,412 | 19,412 | – | – | 9,784 | 9,784 | |
| Quoted equity | – | – | 303 | 303 | – | – | 212 | 212 | |
| Unquoted | |||||||||
| loan stock | 2,245 | 200 | 1,797 | 4,242 | 1,246 | 143 | 965 | 2,354 | |
| Debtors | – | – | 557 | 557 | – | – | 686 | 686 | |
| Current liabilities | – | – | (262) | (262) | – | – | (199) | (199) | |
| Cash and liquid | |||||||||
| investments | 8,423 ––––––––––––– |
2,311 ––––––––––––– |
– ––––––––––––– |
10,734 ––––––––––––– |
– ––––––––––––– |
5,446 ––––––––––––– |
– ––––––––––––– |
5,446 ––––––––––––– |
|
| Total net assets | 10,668 ––––––––––––– |
2,511 ––––––––––––– |
21,807 ––––––––––––– |
34,986 ––––––––––––– |
1,246 ––––––––––––– |
5,589 ––––––––––––– |
11,448 ––––––––––––– |
18,283 ––––––––––––– |
Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Company is exposed to credit risk through its debtors, investment in unquoted loan stock, quoted corporate bonds and through the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock instruments prior to investment and as part of its ongoing monitoring of investments. In doing this, it takes into account the extent and quality of any security held. In the past loan stock may or may not have a fixed or floating charge, which may or may not have been subordinated, over the assets of the portfolio company. However, for new investments typically loan stock instruments will have a first fixed charge or a fixed and floating charge over the assets of the portfolio company in order to mitigate the gross credit risk.
The Manager receives management accounts from investee companies, and members of the investment management team often sit on the boards of unquoted investee 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 2011 was limited to £4,242,000 (2010: £2,354,000) of unquoted loan stock instruments, £1,976,000 (2010: nil) of UBS RBS Group ECP 16/06/11 to 16/06/12 quoted corporate bonds, and £8,758,000 (2010: £2,216,000 plus £3,230,000 RBS Global Treasury Fund) cash on deposit with banks.
As at the balance sheet date, cash and liquid investments held by the Company are held with The Royal Bank of Scotland plc, Scottish Widows Bank plc (part of Lloyds Banking Group plc), Standard Life Cash Savings (part of 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 cost, impairment and carrying value of impaired loan stocks held at fair value at 31 December 2011 and 31 December 2010 are as follows:
| 31 December 2011 | 31 December 2010 | |||||
|---|---|---|---|---|---|---|
| Carrying | Carrying | |||||
| Cost | Impairment | value | Cost | Impairment | value | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Impaired loan stock | 764 | 303 | 461 | – | – | – |
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 2011 (2010: £nil) and had cash and liquid asset balances of £10,734,000 (2010: £5,446,000).
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 2011 are short term in nature and total £262,000 (2010: £199,000).
The carrying value of loan stock investments analysed by expected maturity dates is as follows:
| 31 December 2011 | 31 December 2010 | |||||||
|---|---|---|---|---|---|---|---|---|
| Fully | Past due | Impaired | Fully | Past due | Impaired | |||
| performing | loan | loan | performing | loan | loan | |||
| Redemption | loan stock | stock | stock | Total | loan stock | stock | stock | Total |
| date | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Less than | ||||||||
| one year | 129 | – | – | 129 | – | – | – | – |
| 1-2 years | – | – | – | – | 1,796 | – | – | 1,796 |
| 2-3 years | 1,207 | – | 461 | 1,668 | 169 | – | – | 169 |
| 3-5 years | 1,102 | – | – | 1,102 | 246 | 143 | – | 389 |
| 5 + years | 1,343 ––––––––––––– |
– ––––––––––––– |
– ––––––––––––– |
1,343 ––––––––––––– |
– ––––––––––––– |
– ––––––––––––– |
– ––––––––––––– |
– ––––––––––––– |
| Total | 3,781 ––––––––––––– |
– ––––––––––––– |
461 ––––––––––––– |
4,242 ––––––––––––– |
2,211 ––––––––––––– |
143 ––––––––––––– |
– ––––––––––––– |
2,354 ––––––––––––– |
In view of the factors identified above, the Board considers that the Company is subject to low liquidity risk.
All the Company's financial assets and liabilities as at 31 December 2011 are stated at fair value as determined by the Directors. There are no financial liabilities other than creditors. The Company's financial liabilities are all non-interest bearing. It is the Directors' opinion that the book value of the financial liabilities is not materially different to the fair value and all are payable within one year.
As at 31 December 2011, there was a commitment of £148,000 (2010: £nil) in respect of further funding to be provided to an existing portfolio company.
There were no contingent liabilities or guarantees given by the Company as at 31 December 2011 (2010: £nil).
Since 31 December 2011, the Company has had the following material post balance sheet events:
During the year to 31 December 2011, the Manager, Albion Ventures LLP, was considered to be a related party by virtue of the fact that Patrick Reeve, who had been a Director of the Company until 3 October 2011, is also Managing Partner of the Manager. The Company was not charged any fees by Albion Ventures LLP in respect of Patrick Reeve's services as a Director as any remuneration normally paid for such services had been waived by Albion Ventures LLP.
The Manager is party to an Investment management agreement from the Company as disclosed on page 19 of this Report. As part of this agreement, Albion Ventures LLP received no investment management, administration or secretarial fees during the year. In accordance with the Termination Agreement dated 8 December 2010, investment management fees, administration and secretarial fees were paid to SPARK Venture Management Limited up to 30 November 2011.
Albion Ventures LLP is, from time to time, eligible to receive transaction fees and Directors' fees from investee companies. During the year ended 31 December 2011, fees of £82,000 attributable to the investments of the Company were received pursuant to these arrangements (SPARK Venture Management Limited 2010: £40,000).
Albion Ventures LLP holds 1,084 shares as a result of the fractional entitlements arising from the Merger of Kings Arms Yard VCT 2 PLC on 30 September 2011.
There are no other related party transactions or balances requiring disclosure.
NOTICE IS HEREBY GIVEN that the Annual General Meeting of Kings Arms Yard VCT PLC (the "Company") will be held at the City of London Club, 19 Old Broad Street, London EC2N 1DS on 17 May 2012 at 12.30 p.m. for the following purposes:
To consider and, if thought fit, to pass the following resolutions, of which numbers 1 to 8 will be proposed as ordinary resolutions and numbers 9 to 11 as special resolutions.
That the Directors be generally and unconditionally authorised in accordance with section 551 of the Companies Act 2006 (the "Act") to allot Ordinary shares of nominal value 1 penny per share in the Company up to a maximum aggregate nominal amount of £209,467 provided that this authority shall expire 18 months from the date that this resolution is passed, or, if earlier, the conclusion of the next Annual General Meeting of the Company but so that the Company may, before the expiry, make an offer or agreement which would or might require shares to be allotted or rights to subscribe for or convert securities into shares to be granted after such expiry and the Directors may allot shares or grant rights to subscribe for or convert securities into shares pursuant to such an offer or agreement as if the authority had not expired.
That, subject to and conditional on the passing of resolution number 8, the Directors be empowered, pursuant to section 570 of the Act, to allot equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authority conferred by resolution number 8 as if section 561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity securities:
and that this authority shall expire 18 months from the date that this resolution is passed or, if earlier, the conclusion of the next Annual General Meeting, save that the Company may, before such expiry, make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement as if the power had not expired.
In this resolution, "rights issue" means an offer of equity securities open for acceptance for a period fixed by the Directors to holders on the register on a fixed record date in proportion as nearly as may be to their respective holdings, but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient to deal with any fractional entitlements or legal or practical difficulties under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory.
This power applies in relation to a sale of treasury shares which is an allotment of equity securities by virtue of section 560(2)(b) of the Act as if in the first paragraph of the resolution the words "subject to and conditional on the passing of Resolution number 8" were omitted in relation to such a sale.
That, the Company be generally and unconditionally authorised to make market purchases (within the meaning of Section 693(4) of the Act) of Ordinary shares of 1 penny each in the capital of the Company ("Ordinary shares"), on such terms as the Directors think fit, and where such shares are held as treasury shares, the Company may use them for the purposes set out in section 727 of the Act, provided that:
Under s724-732 of the Companies Act 2006, shares purchased by the Company out of distributable profits can be held as treasury shares, which may then be cancelled or sold for cash. The authority sought by this special resolution number 10 is intended to apply equally to shares to be held by the Company as treasury shares in accordance with the Regulations.
That the Directors be empowered to sell treasury shares at the higher of the prevailing current share price and the price bought in at.
By order of the Board
Company Secretary Registered office 1 King's Arms Yard London, EC2R 7AF 16 April 2012
Registered in England and Wales with number 03139019
Return of the Form of Proxy will not preclude a member from attending the meeting and voting in person. A member may not use any electronic address provided in the Notice of this meeting to communicate with the Company for any purposes other than those expressly stated.
To be effective the Form of Proxy must be completed in accordance with the instructions and received by the Registrars of the Company by 12.30 pm on 15 May 2012.
In accordance with good governance practice, the Company is offering shareholders use of an online service, offered by the Company's registrar, Computershare Investor Services PLC, at www.computershare.co.uk. Shareholders can use this service to vote or appoint a proxy online. The same voting deadline of 12.30 pm on 15 May 2012 applies as if you were using your Personalised Voting Form to vote or appoint a proxy by post to vote for you. Shareholders will need to use the unique personal Holder ID that is printed in their Form of Proxy. Shareholders should not show this information to anyone unless they wish to give proxy instructions on their behalf.
The statement of rights of members in relation to the appointment of proxies in note 1 above does not apply to Nominated Persons. The rights described in that note can only be exercised by members of the Company.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a "CREST Proxy Instruction") must be properly authenticated in accordance with Euroclear UK and Ireland Limited's specifications, and must contain the information required for such instruction, as described in the CREST Manual (available via www.euroclear.com/CREST). The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer's agent by 12.30 pm on 15 May 2012. For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp applied to the message by the CREST Application Host) from which the issuer's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service provider(s) should note that Euroclear UK and Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider, to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
| 31 December 2011 (pence per share) |
31 December 2010 (pence per share) |
31 December 2009 (pence per share) |
||
|---|---|---|---|---|
| Net asset value of Kings Arms Yard VCT PLC | 16.7 | 16.6 | 22.7 | |
| Dividends paid to shareholders of Kings Arms Yard VCT PLC Dividends paid during the year |
––––––––––––– 0.67 |
––––––––––––– 5.0 |
––––––––––––– – |
|
| Cumulative dividend paid to 31 December 2011 | 59.33 | 58.7 | 53.7 | |
| Total net asset value return(1) (per 105p invested) To shareholders of Kings Arms Yard VCT PLC |
––––––––––––– | ––––––––––––– | ––––––––––––– | |
| (formerly SPARK VCT plc; Quester VCT plc) | 76.03 | 75.3 | 76.4 | |
| Total net asset value return including tax benefits(2) | 97.03 ––––––––––––– |
95.3 ––––––––––––– |
96.4 ––––––––––––– |
|
| Total net asset value return to former shareholders of: | ||||
| Quester VCT 2 plc, per 100p invested in shares of that company |
||||
| Total net asset value return Total net asset return including tax benefits(2) |
61.99 81.99 |
61.2 81.2 |
62.3 82.3 |
|
| Quester VCT 3 plc, per 100p invested in | ––––––––––––– | ––––––––––––– | ––––––––––––– | |
| shares of that company | ||||
| Total net asset value return | 35.82 | 35.1 | 36.1 | |
| Total net asset return including tax benefits(2) | 55.82 ––––––––––––– |
55.1 ––––––––––––– |
56.1 ––––––––––––– |
|
| Quester VCT 4 plc (renamed SPARK VCT 2 plc and then Kings Arms Yard VCT 2 PLC), per 100p invested in shares of that company |
||||
| Total net asset value return | 30.29 | 31.5 | 37.9 | |
| Total net asset return including tax benefits(2) | 50.29 ––––––––––––– |
51.5 ––––––––––––– |
57.9 ––––––––––––– |
|
| Quester VCT 5 plc (renamed SPARK VCT 3 plc), per 100p invested in shares of that company |
||||
| Total net asset value return | 27.81 | 39.4 | 48.8 | |
| Total net asset return including tax benefits(2) | 47.81 ––––––––––––– |
59.4 ––––––––––––– |
68.8 ––––––––––––– |
(1) Net asset value plus cumulative dividend per share to ordinary shareholders in the Company since the launch of the Company (then called Quester VCT plc) in April 1996.
(2) Return after 20 per cent. income tax relief but excluding capital gains deferral.
The total returns stated are applicable only to subscribers of shares at the time of each companies launch. They do not represent the return to subsequent subscribers or purchasers of shares.
Source: Albion Ventures LLP
| June 2005 | QVCT2 and QVCT3 merged into QVCT |
|---|---|
| June 2008 | All Quester names changed to SPARK QVCT became SPARK VCT plc (SVCT) QVCT4 became SPARK VCT2 plc (SVCT2) QVCT5 became SPARK VCT3 (SVCT3) |
| November 2008 | SVCT3 merged into SVCT2 |
| January 2011 | Albion Ventures became Manager |
| February 2011 | All SPARK names changed to Kings Arms Yard SVCT became Kings Arms Yard VCT PLC (KAY) SVCT2 became Kings Arms Yard VCT2 PLC (KAY2) |
| September 2011 | KAY2 merged into KAY |
Dividends paid to shareholders of Kings Arms Yard VCT PLC launched in 1996 (formerly SPARK VCT plc; Quester VCT plc).
| (pence per share) | |
|---|---|
| 31 January 1997 | 0.937 |
| 31 January 1998 | 2.547 |
| 31 January 1999 | 2.875 |
| 31 January 2000 | 7.110 |
| 31 January 2001 | 26.650 |
| 31 January 2002 | 1.350 |
| 28 February 2006 | 1.250 |
| 28 February 2007 | 3.910 |
| 31 December 2007 | 4.220 |
| 31 December 2008 | 2.810 |
| 31 December 2010 | 5.000 |
| 31 December 2011 | 0.670 ––––––––––––––––––– |
| Total dividends paid to 31 December 2011 | 59.329 |
| Net asset value as at 31 December 2011 | 16.700 ––––––––––––––––––– |
| Total net asset value return to 31 December 2011 | 76.029 ––––––––––––––––––– |
QVCT2 was launched in 1998 and was merged with Kings Arms Yard VCT PLC (formerly SPARK VCT plc and originally Quester VCT PLC) in June 2005 with a share exchange ratio of 1.0249 QVCT shares for each QVCT2 share.
| (pence per share) | |
|---|---|
| 28 February 1999 | 1.000 |
| 28 February 2000 | 3.065 |
| 28 February 2001 | 20.500 |
| 28 February 2002 | 2.000 |
| 28 February 2006 | 1.281 |
| 28 February 2007 | 4.007 |
| 31 December 2007 | 4.325 |
| 31 December 2008 | 2.880 |
| 31 December 2010 | 5.125 |
| 31 December 2011 | 0.687 ––––––––––––––––––– |
| Total dividends paid to 31 December 2011 | 44.870 |
| Net asset value as at 31 December 2011 | 17.116 ––––––––––––––––––– |
| Total net asset value return to 31 December 2011 | 61.990 ––––––––––––––––––– |
QVCT3 was launched in 2000 and was merged with Kings Arms Yard VCT PLC (formerly SPARK VCT plc and originally Quester VCT PLC) in June 2005 with a share exchange ratio of 0.9816 QVCT shares for each QVCT3 share.
| (pence per share) | |
|---|---|
| 28 February 2001 | 0.750 |
| 28 February 2002 | 1.000 |
| 28 February 2003 | 0.150 |
| 28 February 2006 | 1.227 |
| 28 February 2007 | 3.838 |
| 31 December 2007 | 4.142 |
| 31 December 2008 | 2.758 |
| 31 December 2010 | 4.908 |
| 31 December 2011 | 0.658 ––––––––––––––––––– |
| Total dividends paid to 31 December 2011 | 19.431 |
| Net asset value as at 31 December 2011 | 16.393 ––––––––––––––––––– |
| Total net asset value return to 31 December 2011 | 35.824 ––––––––––––––––––– |
QVCT4 was launched in 2000 and was renamed SPARK VCT 2 plc and then Kings Arms Yard VCT 2 PLC ("KAY2"). KAY2 merged with Kings Arms Yard VCT PLC (KAY) in September 2011 with a share exchange ratio of 1.2806 KAY shares for each KAY2 share.
| (pence per share) | |
|---|---|
| 31 October 2002 | 1.750 |
| 31 October 2003 | 1.150 |
| 31 October 2005 | 1.000 |
| 31 October 2006 | 1.000 |
| 31 December 2007 | 1.000 |
| 31 December 2008 | 1.000 |
| 31 December 2010 | 1.000 |
| 31 December 2011 | 1.000 ––––––––––––––––––– |
| Total dividends paid to 31 December 2011 | 8.900 |
| Net asset value as at 31 December 2011 | 21.386 ––––––––––––––––––– |
| Total net asset value return to 31 December 2011 | 30.286 ––––––––––––––––––– |
QVCT5 was launched in 2002 and was renamed SPARK VCT 3 plc and merged with SPARK VCT 2 plc (originally QVCT4) in November 2008 with a share exchange ratio of 1.4613 SVCT2 shares for each SVCT3 share. The merged company was then renamed KAY2. KAY2 merged with Kings Arms Yard VCT PLC in September 2011 with a share exchange ratio of 1.2806 KAY shares for each KAY2 share.
| (pence per share) | |
|---|---|
| 31 December 2003 | 0.500 |
| 31 December 2004 | 1.000 |
| 31 December 2006 | 1.000 |
| 31 December 2007 | 1.000 |
| 31 December 2010 | 1.461 |
| 31 December 2011 | 1.461 ––––––––––––––––––– |
| Total dividends paid to 31 December 2011 | 6.423 |
| Net asset value as at 31 December 2011 | 21.386 ––––––––––––––––––– |
| Total net asset value return to 31 December 2011 | 27.809 ––––––––––––––––––– |
Kings Arms Yard VCT PLC
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