Annual Report • Dec 31, 2018
Annual Report
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Annual Report and Financial Statements for the year ended 31 December 2018
| Company number | 03654040 |
|---|---|
| Directors | G O Vero FCA, Chairman L M Goleby MA (Cantab) B Larkin LLB P H Reeve MA FCA |
| Country of incorporation | United Kingdom |
| Legal form | Public Limited Company |
| Manager, company secretary, AIFM and registered office |
Albion Capital Group LLP 1 King's Arms Yard London, EC2R 7AF |
| From 1 June 2019: 1 Benjamin Street, Farringdon, London, EX1M 5QG |
|
| Registrar | Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol, BS99 6ZZ |
| Auditor | BDO LLP 55 Baker Street London, W1U 7EU |
| Taxation adviser | Philip Hare & Associates LLP 4 Staple Inn London, WC1V 7QH |
| Legal adviser | Bird & Bird LLP 12 New Fetter Lane London, EC4A 1JP |
| Depository | Ocorian (UK) Limited 11 Old Jewry London, EC2R 8DU |
| Albion Development VCT PLC is a member of The Association of Investment Companies (www.theaic.co.uk). | |
| Shareholder enquiries | For help relating to dividend payments, shareholdings and share certificates please contact Computershare Investor Services PLC: Tel: 0370 873 5853 (UK National Rate call, lines are open 8.30am – 5.30pm; Mon – Fri, calls may be recorded) Website: www.investorcentre.co.uk |
| Shareholders can access holdings and valuation information regarding any of their shares held by Computershare by registering on Computershare's website. |
|
| Financial adviser enquiries | For enquiries relating to the performance of the Company, and information for financial advisers please contact Albion Capital Group LLP: |
| Tel: 020 7601 1850 (lines are open 9.00am – 5.30pm; Mon – Fri, calls are recorded) Email: [email protected] Website: www.albion.capital |
|
| Please note that these contacts are unable to provide financial or taxation advice. |
The Company will invest in a broad portfolio of higher growth businesses with a stronger focus on technology companies across a variety of sectors of the UK economy. Allocation of assets will be determined by the investment opportunities which become available but efforts will be made to ensure that the portfolio is diversified in terms of sector and stage of maturity of company.
Funds held pending investment or for liquidity purposes will be held as cash on deposit or up to 8 per cent. of its assets, at the time of investment, in liquid open-ended equity funds providing income and capital equity exposure (where it is considered economic to do so).
Risk is spread by investing in a number of different businesses within venture capital trust qualifying industry sectors using a mixture of securities. The maximum amount which the Company will invest in a single portfolio company is 15 per cent. of the Company's assets at cost thus ensuring a spread of investment risk. The value of an individual investment may increase over time as a result of trading progress and it is possible that it may grow in value to a point where it represents a significantly higher proportion of total assets prior to a realisation opportunity being available.
The Company's maximum exposure in relation to gearing is restricted to 10 per cent. of the adjusted share capital and reserves.
The Company is a venture capital trust which raised a total of £33.3 million through the issue of shares between 1999 and 2004. The C shares merged with the Ordinary shares in 2007.
A further £6.3 million was raised through an issue of new D shares in 2009/2010. The D shares converted to Ordinary shares on 31 March 2015. D shareholders received 1.4975 Ordinary shares for each D share they owned.
An additional £29.7 million has been raised for the Ordinary shares through the Albion VCTs Top Up Offers since January 2011.
| Record date for first dividend | 3 May 2019 |
|---|---|
| Annual General Meeting | 12 noon on 30 May 2019 |
| Payment of first dividend | 31 May 2019 |
| Announcement of half-yearly results for the six months ending 30 June 2019 | September 2019 |
| Payment of second dividend (subject to Board approval) | 30 September 2019 |
180.5p Total shareholder return per Ordinary share from launch to 31 December 2018 20.3% Total return on opening net asset value for the year ended 31 December 2018 4.5p Target tax-free dividend per Ordinary share for the year ahead (4.0p paid per Ordinary share during the year ended 31 December 2018) 84.7p Net asset value per Ordinary share as at 31 December 2018
Ordinary shares' total shareholder return relative to FTSE All-Share Index total return (in both cases with dividends reinvested) 320
Methodology: The total shareholder return including original amount invested (rebased to 100) assuming that dividends were reinvested at the net asset value of the company at the time that the shares were quoted ex-dividend. Transaction costs are not taken into account. Source: Albion Capital Group LLP
| Ordinary shares | 31 December 2018 (pence per share) |
31 December 2017 | (pence per share) |
|---|---|---|---|
| Opening net asset value | 73.8 | 70.7 | |
| Revenue return | 0.2 | 0.2 | |
| Capital return | 14.8 –––––– |
7.0 –––––– |
|
| Total return | 15.0 | 7.2 | |
| Impact of fundraising | (0.1) | (0.1) | |
| Dividends paid | –––––– | (4.0) | (4.0) –––––– |
| Net asset value | 84.7 | 73.8 |
| Ordinary shares (pence per share)(ii) |
C shares (pence per share)(ii)(iv) |
D shares (pence per share)(ii)(v) |
|
|---|---|---|---|
| Total dividends paid during the year ended: | |||
| 31 December 1999(i) | 1.0 | – | – |
| 31 December 2000 | 2.9 | – | – |
| 31 December 2001 | 4.0 | – | – |
| 31 December 2002 | 4.2 | – | – |
| 31 December 2003(iii) | 4.5 | 0.7 | – |
| 31 December 2004 | 4.0 | 2.0 | – |
| 31 December 2005 | 5.2 | 5.9 | – |
| 31 December 2006 | 3.0 | 4.5 | – |
| 31 December 2007(iv) | 5.0 | 5.3 | – |
| 31 December 2008 | 12.0 | 12.8 | – |
| 31 December 2009 | 4.0 | 4.3 | – |
| 31 December 2010 | 8.0 | 8.6 | 1.0 |
| 31 December 2011 | 5.0 | 5.4 | 2.5 |
| 31 December 2012 | 5.0 | 5.4 | 3.5 |
| 31 December 2013 | 5.0 | 5.4 | 5.0 |
| 31 December 2014 | 5.0 | 5.4 | 5.0 |
| 31 December 2015(v) | 5.0 | 5.4 | 7.5 |
| 31 December 2016 | 5.0 | 5.4 | 7.5 |
| 31 December 2017 | 4.0 | 4.3 | 6.0 |
| 31 December 2018 | 4.0 | 4.3 | 6.0 |
| Total dividends paid to 31 December 2018 | 95.8 | 85.1 | 44.0 |
| Net asset value as at 31 December 2018 | 84.7 | 90.8 | 126.8 |
| Total shareholder return to 31 December 2018 | 180.5 | 175.9 | 170.8 |
In addition to the dividends paid above, the Board has declared a first dividend for the year ending 31 December 2019 of 2.25 pence per Ordinary share payable on 31 May 2019 to shareholders on the register on 3 May 2019.
(i) Assuming subscription for Ordinary shares by the First Closing on 26 January 1999.
(iv) The C shares were converted into Ordinary shares on 31 March 2007, with a conversion ratio of 1.0715 Ordinary shares for each C share. The net asset value per share and all dividends paid subsequent to the conversion of the C shares to the Ordinary shares are multiplied by the conversion factor of 1.0715 in respect of the C shares return, in order to give an accurate picture of the shareholder value since launch relating to the C shares.
Notes
(ii) Excludes tax benefits upon subscription. Total shareholder return for every 100 pence invested on initial allotment.
(iii) Those subscribing for C shares after 30 June 2003 were not entitled to the interim dividend.
(v) The D shares were converted into Ordinary shares on 31 March 2015, with a conversion ratio of 1.4975 Ordinary shares for each D share. The net asset value per share and all dividends paid subsequent to the conversion of the D shares to the Ordinary shares are multiplied by the conversion factor of 1.4975 in respect of the D shares return, in order to give an accurate picture of the shareholder value since launch relating to the D shares.
Geoffrey Vero Chairman
The annual dividend target will be raised by 12.5% to 4.5 pence per Ordinary share ' '
The results for Albion Development VCT PLC for the year to 31 December 2018 showed a pleasing total return of 15.0 pence per Ordinary share (20.3% on opening net asset value), compared to 7.2 pence per Ordinary share for 2017. This is the ninth consecutive year the Company has delivered a positive total return to shareholders and gives us the confidence to increase our annual dividend target from 4.0 pence per share to 4.5 pence per share as is explained further below.
Investment performance and progress The results for the year showed net gains on investments of £12.3 million, against £5.5 million for the previous year. The key element within this includes the uplift on the successful sale of Grapeshot, a digital marketing business, which was sold for around ten times original cost; in addition there were sharp uplifts in the values of Egress, Quantexa, G. Network and Mirada, all of whose businesses have all been revalued following new investment rounds. Radnor House (Sevenoaks), has continued to mature and delivered a considerable uplift following a third party valuation during the year. Against this, there were more modest write-downs against Abcodia, Aridhia, MyMeds&Me and Oviva where trading showed underperformance against expectations.
We had a number of realisations during the year totalling £8.5 million (2017: £4.6 million), of which Grapeshot accounted for £7.6 million. We also realised our holdings in Infinite Ventures (Goathill) and CSS Group. Further details on realisations can be found in the realisations table on page 21.
Meanwhile, £1.6 million was invested in seven new portfolio companies, all of which are targeted to require further investment as the companies prove themselves and grow:
A further £4.1 million was invested in existing portfolio companies, including £910,000 into Egress Software Technologies to support its growth and US expansion, £899,000 into Sandcroft Avenue (trading as PayAsUGym) to support its growth, £440,000 into Locum's Nest to expand its sales team and develop the software platform, £412,000 into
Quantexa which continues to grow at a tremendous rate, and £309,000 in Panaseer to support its growth.
For a review of business and future prospects please see the Strategic report on page 10.
The Company paid dividends totalling 4.0 pence per share during the year ended 31 December 2018 (2017: 4.0 pence per share). For two years now, the total return has comfortably covered the dividend target, and more so the NAV has risen comfortably above 80 pence per share, to 84.7 pence per share as at 31 December 2018 compared to 73.8 pence per share as at 31 December 2017. The total return after tax was £11.2 million compared to £4.9 million in the year to 31 December 2017.
In light of the recent performance, the annual dividend target will be raised by 12.5% to 4.5 pence per Ordinary share. The Company will pay a first dividend for the financial year to 31 December 2019 of 2.25 pence per Ordinary share payable on 31 May 2019 to shareholders on the register on 3 May 2019.
The Board is pleased to announce that, due to its exceptionally strong performance, £420,000 is expected to be paid in respect of the D Share performance incentive to 31 December 2018 (which accounts for 20 per cent. of the performance of the Company as a whole). The total shareholder return for the D shares since launch is 170.8 pence per share, which represents an annualised return of 7.9 per cent.. Further details can be found in the Strategic report on page 12.
Accompanying this Annual Report and Financial Statements is a Circular to shareholders proposing two changes to the management agreement with Albion Capital Group LLP. The first is for the introduction of a new management performance incentive, in order to recognise the changes that have taken place in the financial and regulatory environment over recent years. The second is to reduce the Company's operating expenses by lowering the total expenses cap, above which any additional expenses are borne by the Manager. These changes will be implemented by way of a deed of variation of the Company's existing management agreement and full details of the changes are set out in the Circular. These proposals will be voted on by shareholders under an ordinary resolution at a General Meeting which will follow the forthcoming Annual General Meeting.
Other than investment performance, the key risks facing the Company are from the broader economy, including changes to VCT rules. The outlook for the UK and global economies, and the implications of the withdrawal of the UK from the European Union continue to be the biggest risks for the Company. An assessment has been done on a portfolio company level to assess exposure to Europe, and appropriate actions, where possible, have been implemented. The Manager continues to believe that there is merit in focussing efforts to allocate resources to those sectors and opportunities where growth can be both resilient and sustainable in order to mitigate these risks.
A detailed analysis of the other risks and uncertainties facing the business is shown in the Strategic report on pages 14 and 15.
It remains the Board's primary objective to maintain sufficient resources for investment in existing and new portfolio companies and for the continued payment of dividends to shareholders. Therefore, the Board's policy is to buy back shares in the market, subject to the overall constraint
Total return of 15 pence per Ordinary share (20.3% on opening net asset value) '
Ninth consecutive year the Company has delivered a positive total return ' '
that such purchases are in the Company's interest. It is the Board's intention for such buy-backs to be in the region of a 5 per cent. discount to net asset value, so far as market conditions and liquidity permit.
During the year, the Company purchased 1,253,456 Ordinary shares to be held in treasury at a cost of £921,000 (2017: £855,000), representing 1.6 per cent. of the opening shares in issue.
Details of transactions that took place with the Manager during the year can be found in note 5 and principally relate to the management fee. Albion agreed to reduce that proportion of its management fee relating to the investment in the SVS Albion OLIM UK Equity Income Fund ("OUEIF") by 0.75 per cent. per annum, which represents the management fee charged by OLIM. This avoids double counting of fees and resulted in a reduction of the management fee of £3,000. Further details on the investments in the OUEIF can be found in note 20.
Your Board, in conjunction with the boards of other VCTs managed by Albion Capital Group LLP, launched a prospectus top up offer of new Ordinary shares on 7 January 2019. A Securities Note, which forms part of the prospectus, has been sent to shareholders. The proceeds will be used to provide further resources at a time when a number of attractive investment opportunities are being seen. The first allotment of shares under the Offer will be on 1 April 2019.
The funds raised by each Company pursuant to its Offer will be added to the liquid resources available for investment, putting each Company into a position to take advantage of investment opportunities over the next two to three years. The proceeds of the Offers are being applied in accordance with the respective Companies' investment policies. The Company continues to participate in the Top Up Offers and also benefits from receipts from dividend reinvestment, the net proceeds of which are invested in new investment opportunities and to provide additional working capital in the Company. It is important that the Company continues to have cash available for future investments and the Top Up Offers and dividend reinvestments are important sources of that capital.
2018 has been an excellent year for the portfolio, with strong growth across most sectors and one particularly successful realisation.
Current dealflow is strong, with a number of investments being made in promising businesses in fast growing markets, while the existing portfolio includes companies, where we continue to fund further growth, that are starting to achieve real scale. Although we are not expecting the results for the current year to be as strong as those achieved for 2018, we continue to look at the longer-term future with confidence.
Geoffrey Vero Chairman 25 March 2019
The Company will invest in a broad portfolio of higher growth businesses with a stronger focus on technology companies across a variety of sectors of the UK economy. Allocation of assets will be determined by the investment opportunities which become available but efforts will be made to ensure that the portfolio is diversified in terms of sector and stage of maturity of company.
Funds held pending investment or for liquidity purposes will be held as cash on deposit or up to 8 per cent. of its assets, at the time of investment, in liquid open-ended equity funds providing income and capital equity exposure (where it is considered economic to do so).
Risk is spread by investing in a number of different businesses within venture capital trust qualifying industry sectors using a mixture of securities. The maximum amount which the Company will invest in a single portfolio company is 15 per cent. of the Company's assets at cost, thus ensuring a spread of investment risk. The value of an individual investment may increase over time as a result of trading progress and it is possible that it may grow in value to a point where it represents a significantly higher proportion of total assets prior to a realisation opportunity being available.
The Company's maximum exposure in relation to gearing is restricted to 10 per cent. of the adjusted share capital and reserves.
The following pie chart shows the split of the portfolio valuation by industrial or commercial sector as at 31 December 2018. Details of the principal investments made by the Company are shown in the Portfolio of investments on pages 19 to 21.
Comparatives for 31 December 2017 are shown in brackets Source: Albion Capital Group LLP
Following a change to the company's investment policy at the 2018 Annual General Meeting, a greater focus has been given to growth and technology investments, which will result in a decrease of asset-based investment as a percentage of the portfolio over time.
The current portfolio is well balanced in terms of sector, with renewable energy at 16 per cent., healthcare at 16 per cent., education accounting for 11 per cent., and leisure at 4 per cent. Cash and net current assets have decreased to 17 per cent. of the portfolio and it is anticipated that investments will be deployed into a number of new growth opportunities in line with the amended investment policy.
| Ordinary shares £'000 |
|
|---|---|
| Net revenue return for the year | 181 |
| Net capital gain for the year | 11,037 |
| Total return for the year | |
| ended 31 December 2018 | 11,218 |
| Dividend of 2.0 pence per | |
| share paid on 31 May 2018 | (1,505) |
| Dividend of 2.0 pence per | |
| share paid on 28 September 2018 | (1,503) |
| Unclaimed dividends | 3 |
| Transferred to reserves | 8,213 |
| Net assets as at | |
| 31 December 2018 | 63,378 |
| Net asset value per share | |
| as at 31 December 2018 (pence) | 84.7 |
The Company paid dividends totalling 4.0 pence per Ordinary share (2017: 4.0 pence per Ordinary share). The annual dividend target has now increased by 12.5 per cent. to 4.5 pence per share.
As described in the Chairman's statement, the Board has declared a first dividend for the year ending 31 December 2019 of 2.25 pence per Ordinary share payable on 31 May 2019 to shareholders on the register on 3 May 2019.
As shown in the Income statement on page 46, the total investment income increased to £881,000 (2017: £689,000). This is substantially due to the resumption of loan stock interest payments from our solar renewable portfolio companies part way during the year. The revenue return to equity holders has increased marginally to £181,000 (2017: £171,000).
The total capital return for the year was £11,037,000 (2017: £4,720,000). This is mainly attributable to the successful sale of Grapeshot, where proceeds received resulted in a return of circa ten times cost, the sharp uplifts due to new investment rounds in Egress Software Technologies, Quantexa, G. Network Communications and Mirada, coupled with the upwards valuation of Radnor House School (Holdings) following a third party revaluation. This was offset by the reductions in Abcodia, Aridhia Informatics, Oviva and MyMeds&Me, however the results for the year have been very encouraging when looking at the portfolio as a whole.
The total return was 15.0 pence per share (2017: 7.2 pence per share). The Balance sheet on page 47 shows that the net asset value has increased over the year to 84.7 pence per share (2017: 73.8 pence per share) due to the realisations and increased valuations as mentioned above. The increase in net asset value can be attributed to the total return of 15.0 pence per share, offset by payment of the 4.0 pence per Ordinary share of dividends.
There was a net cash outflow for the year mainly as a number of new investments made, including into the SVS Albion OLIM UK Equity Income Fund, and dividends paid during the year, offset by the disposal of Grapeshot and the issue of Ordinary shares under the Top Up Offers.
The results for the year to 31 December 2018 show total shareholder return of 180.5 pence per Ordinary share since launch (2017: 165.6 pence per share). We believe there should be further progress in the current year, with selected disposals and new investments, and focus on our core area of IT/Software alongside new growth opportunities.
Following changes to the VCT regulations in 2017, asset-based investments will decrease over time as a proportion of the portfolio as a greater emphasis continues to be given to growth and technology investments.
A detailed review of the Company's business during the year is contained in the Chairman's statement on pages 6 and 7.
Details of significant events which have occurred since the end of the financial year are listed in note 19. Details of transactions with the Manager are shown in note 5.
The Company is well positioned to seek out and capitalise on new opportunities, and the very encouraging return in 2018 gives the Board confidence that we can continue to deliver value to shareholders.
The Directors believe that the following key performance indicators, which are typical for venture capital trusts, used in its own assessment of the Company, will provide shareholders with sufficient information to assess how effectively the Company is applying its investment policy to meet its objectives. The Directors are satisfied that the results shown in the following key performance indicators give a good indication that the Company is achieving its investment objective and policy. These are:
The graph on page 4 shows the total shareholder return against the FTSE All-Share Index total return, in both instances with dividends reinvested. Details on the performance of the net asset value and return per share for the year are shown in the Chairman's statement.
*Total shareholder return is net asset value plus cumulative dividends paid since launch to 31 December 2018.
Total return to shareholders increased by 20.3 per cent. on opening net asset value to 180.5 pence per Ordinary share for the year ended 31 December 2018 as a result of the positive total return of 15.0 pence per share.
Dividends paid in respect of the year ended 31 December 2018 were 4.0 pence per share (2017: 4.0 pence per share). Cumulative dividends paid since inception are 95.8 pence per share. The annual dividend target for the 2019 financial year has increased to 4.5 pence per Ordinary share as outlined in the Chairman's statement.
The ongoing charges ratio for the year to 31 December 2018 was 2.6 per cent. (2017: 2.7 per cent.). The ongoing charges ratio has been calculated using The Association of Investment Companies' (AIC) recommended methodology. This figure shows shareholders the total recurring annual running expenses (including investment management fees charged to capital reserve) as a percentage of the average net assets attributable to shareholders. From 1 January 2019, subject to the passing of the resolution at the forthcoming General Meeting, the ongoing charges cap will reduce from 3.0 per cent. to 2.5 per cent.. Further details are included in the Circular that has been sent to shareholders as well as the Chairman's Statement.
The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC. In order to maintain its status under Venture Capital Trust legislation, a VCT must comply on a continuing basis with the provisions of Section 274 of the Income Tax Act 2007, details of which are provided in the Directors' report on page 28.
The relevant tests to measure compliance have been carried out and independently reviewed for the year ended 31 December 2018. These showed that the Company has complied with all tests and continues to do so.
The Company has delegated the investment management of the portfolio to Albion Capital Group LLP, which is authorised and regulated by the Financial Conduct Authority. Albion Capital Group LLP also provides company secretarial and other accounting and administrative support to the Company.
Under the Management agreement, the Manager provides investment management, secretarial and administrative services to the Company. The Management agreement may 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 paid an annual fee equal to 2.25 per cent. of the net asset value of the Company paid quarterly in arrears.
Additionally, Albion agreed to reduce that proportion of its management fee relating to the investment in the SVS Albion OLIM UK Equity Income Fund ("OUEIF") by 0.75 per cent. per annum, which represents the OUEIF management fee charged by OLIM to avoid any double charging for the investment exposure.
Total annual expenses, including the management fee, are currently limited to 3.0 per cent. of the net asset value, and subject to the passing of the resolution at the General Meeting, Albion have agreed to reduce the ongoing charges cap from 3.0 per cent. to 2.5 per cent..
The Manager is also entitled to an arrangement fee, payable by each portfolio company, of approximately 2 per cent. on each investment made and also monitoring fees where the Manager has a representative on the portfolio company's board.
The Company's current management performance incentive structure sets a minimum target level whereby no performance fee is payable to the Manager until the total return exceeds 6.5 pence per share per annum from a base on 1 January 2007 of 98.7 pence for the Ordinary shares and 100 pence for the D shares from 6 April 2010. If the target return is not achieved in a period, the cumulative shortfall is carried forward to the next accounting period and has to be made up before an incentive fee becomes payable. To the extent that the total return exceeds the threshold over the relevant period, a performance fee will be paid to the Manager of an amount equal to 20 per cent. of the excess.
Any performance fee payable will be calculated based on the above hurdles, escalating at 6.5p per annum, and in respect of the relevant proportion of that share class' share of the Company's net assets as at 31 December 2014.
As at 31 December 2018, the total return since 6 April 2010 for the former D Shares was 170.8 pence, and the hurdle was 156.8 pence, resulting in an excess of 14.0 pence per share. As a result, a performance incentive fee is payable to the Manager of £420,000 (2017: £nil).
For the previous two years, the Company's return has exceeded dividends paid, with a return of 15.0 pence per share (20.3% of opening NAV) in the year to 31 December 2018. However, the total return for Ordinary shares has fallen short of the hurdle by 25.0 pence per share. In light of this, the Board have agreed with the Manager that the two existing current management performance incentive arrangements for the Ordinary shares and the former D shares will be merged into one all-encompassing arrangement so that the Manager is both properly incentivised and its objectives are aligned with those of the Company.
Accompanying these accounts is a Circular to shareholders containing details of the new management performance incentive which, subject to approval by shareholders at the forthcoming General Meeting by way of an ordinary resolution, will replace the existing incentive arrangements.
The Company co-invests with other Albion Capital Group LLP managed venture capital trusts and funds. Allocation of investments is on the basis of an allocation agreement which is based, inter alia, on the ratio of funds available for investment.
The Board has evaluated the performance of the Manager based on the returns generated by the Company, the continuing achievement of the 70 per cent. (to be 80 per cent. in respect of accounting periods starting on or after 6 April 2019) qualifying holdings investment requirement for venture capital trust status, the long term prospects of the current portfolio of investments, a review of the Management agreement and the services provided therein, and benchmarking the performance of the Manager to other service providers including the performance of other VCTs that the Manager is responsible for managing. 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 Board appointed Albion Capital Group LLP as the Company's AIFM in June 2014 as required by the AIFMD. The Manager became a full-scope Alternative Investment Fund Manager under the AIFMD on 1 October 2018. As a result, from that date, Ocorian (UK) Limited was appointed as Depository to oversee the custody and cash arrangements and provide other AIFMD duties with respect to the Company.
The Board recognises the requirement under section 414C of the Act to detail information about social and community issues, employees and human rights; including any policies it has in relation to these matters and effectiveness of these policies. As an externally managed investment company with no employees, the Company has no policies in these matters and as such these requirements do not apply.
The General Data Protection Regulation came into effect on 25 May 2018 with the objective of unifying data privacy requirements across the European Union. The Manager, Albion Capital Group LLP, has taken action to ensure that the Manager and the Company are compliant with the regulation.
The Company has adopted a number of further policies relating to:
and these are set out in the Directors' report on pages 28 and 29.
It remains the Board's primary objective to maintain sufficient resources for investment in existing and new portfolio companies and for the continued payment of dividends to shareholders. The Board's policy is to buy back shares in the market, subject to the overall constraint that such purchases are in the Company's interest.
It is the Board's intention for such buy-backs to be in the region of a 5 per cent. discount to net asset value, so far as market conditions and liquidity permit.
Further details of shares bought back during the year ended 31 December 2018 can be found in note 15 of the Financial Statements.
The Board carries out a regular review of the risk environment in which the Company operates. The principal risks and uncertainties of the Company as identified by the Board and how they are managed are as follows:
| Risk | Possible consequence | Risk management |
|---|---|---|
| Investment performance and performance risk |
The risk of investment in poor quality assets, which could reduce the capital and income returns to shareholders, and could negatively impact on the Company's current and future valuations. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes, are more volatile than larger, long established businesses. The Company's investment valuation methodology is reliant on the accuracy and completeness of information that is issued by portfolio companies. In particular, the Directors may not be aware of or take into account certain events or circumstances which occur after the information issued by such companies is reported. |
To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its track record over many years of making successful investments in this segment of the market. In addition, the Manager operates a formal and structured investment appraisal and review process, which includes an Investment Committee, comprising investment professionals from the Manager and at least one external investment professional. The Manager also invites and takes account of comments from non-executive Directors of the Company on matters discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on portfolio company boards), including the level of diversification in the portfolio, and the Board receives detailed reports on each investment as part of the Manager's report at quarterly board meetings. The unquoted investments held by the Company are designated at fair value through profit or loss and valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines. These guidelines set out recommendations, intended to represent current best practice on the valuation of venture capital investments. The valuation takes into account all known material facts up to the date of approval of the Financial Statements by the Board. |
| VCT approval risk |
The Company must comply with section 274 of the Income Tax Act 2007 which enables its investors to take advantage of tax relief on their investment and on future returns. Breach of any of the rules enabling the Company to hold VCT status could result in the loss of that status. |
To reduce this risk, the Board has appointed the Manager, which has a team with significant experience in venture capital trust management, used to operating within the requirements of the venture capital trust legislation. In addition, to provide further formal reassurance, the Board has appointed Philip Hare & Associates LLP as its taxation adviser, who report quarterly to the Board to independently confirm compliance with the venture capital trust legislation, to highlight areas of risk and to inform on changes in legislation. Each investment in a new portfolio company is also pre-cleared with our professional advisers or H.M. Revenue & Customs. |
| Regulatory and compliance risk |
The Company is listed on The London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company's shares, or other penalties under the Companies Act or from financial reporting oversight bodies. |
Board members and the Manager have experience of operating at senior levels within or advising quoted companies. In addition, the Board and the Manager receive regular updates on new regulation from its auditor, lawyers and other professional bodies. The Company is subject to compliance checks through the Manager's compliance officer. The Manager reports monthly to its Board on any issues arising from compliance or regulation. These controls are also reviewed as part of the quarterly Board meetings, and also as part of the review work undertaken by the Manager's compliance officer. The report on controls is also evaluated by the internal auditors. |
| Operational and internal control risk |
The Company relies on a number of third parties, in particular the Manager, for the provision of investment management and administrative functions. Failures in key systems and controls 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 Company and its operations are subject to a series of rigorous internal controls and review procedures exercised throughout the year. The Audit Committee reviews the Internal Audit Reports prepared by the Manager's internal auditors, PKF Littlejohn LLP and has access to the internal audit partner of PKF Littlejohn LLP to provide an opportunity to ask specific detailed questions in order to satisfy itself that the Manager has strong systems and controls in place including those in relation to business continuity. From 1 October 2018, Ocorian (UK) Limited were appointed as Depository to oversee the custody and cash arrangements and provide other AIFMD duties. The Board reviews the quarterly reports prepared by Ocorian (UK) Limited to ensure that Albion Capital is adhering to its policies and procedures as required by the AIFMD. In addition, the Board regularly reviews the performance of its key service providers, particularly the Manager, to ensure they continue to have the necessary expertise and resources to deliver the Company's investment objective and policies. The Manager and other service providers have also demonstrated to the Board that there is no undue reliance placed upon any one individual. |
| Risk | Possible consequence | Risk management |
|---|---|---|
| Economic and political risk |
Changes in economic conditions, including, for example, interest rates, rates of inflation, industry conditions, competition, political and diplomatic events and other factors could substantially and adversely affect the Company's prospects in a number of ways. |
The Company invests in a diversified portfolio of companies across a number of industry sectors and in addition often invests a mixture of instruments in portfolio companies and has a policy of not normally permitting any external bank borrowings within portfolio companies. At any given time, the Company has sufficient cash resources to meet its operating requirements, including share buy-backs and follow on investments. |
| Market value of Ordinary shares |
The market value of Ordinary shares can fluctuate. The market value of an Ordinary share, as well as being affected by its net asset value and prospective net asset value, also takes into account its dividend yield and prevailing interest rates. As such, the market value of an Ordinary share may vary considerably from its underlying net asset value. The market prices of shares in quoted investment companies can, therefore, be at a discount or premium to the net asset value at different times, depending on supply and demand, market conditions, general investor sentiment and other factors. Accordingly the market price of the Ordinary shares may not fully reflect their underlying net asset value. |
The Company operates a share buy-back policy, which is designed to limit the discount at which the Ordinary shares trade to around 5 per cent to net asset value, by providing a purchaser through the Company in absence of market purchasers. From time to time buy-backs cannot be applied, for example when the Company is subject to a close period, or if it were to exhaust any buy-back authorities. New Ordinary shares are issued at sufficient premium to net asset value to cover the costs of issue and to avoid asset value dilution to existing investors. |
| Reputational risk |
The Company relies on the judgement and reputation of the Manager which is itself subject to the risk of loss. |
The Board regularly questions the Manager on its ethics, procedures, safeguards and investment philosophy, which should consequently result in the risk to reputation being minimised. |
In accordance with the FRC UK Corporate Governance Code published in 2016 and principle 21 of the AIC Code of Corporate Governance, the Directors have assessed the prospects of the Company over three years to 31 December 2021. The Directors believe that three years is a reasonable period in which they can assess the future of the Company to continue to operate and meet its liabilities as they fall due and is also the period used by the Board in the strategic planning process and is considered reasonable for a business of our nature and size. The three year period is also considered the most appropriate given the forecasts that the Board require from the Manager, and the estimated timelines for finding, assessing and completing investments.
The Directors have carried out a robust assessment of the principal risks facing the Company as explained above, including those that could threaten its business model, future performance, solvency or liquidity. The Board also considered the risk management processes in place to avoid or reduce the impact of the underlying risks. The Board focused on the major factors which affect the economic, regulatory and political environment. The Board deliberated over the importance of the Manager and the processes that they have in place for dealing with the principal risks.
The Board assessed the ability of the Company to raise finance and deploy capital. The portfolio is well balanced and geared towards long term growth, delivering dividends and capital growth to shareholders. In assessing the prospects of the Company, the Directors have considered the cash flow by looking at the Company's income and expenditure projections and funding pipeline over the assessment period of three years and they appear realistic.
Taking into account the processes for mitigating risks, monitoring costs, share price discount, the Manager's compliance with the investment objective, policies and business model and the balance of the portfolio the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 31 December 2021.
This Strategic report of the Company for the year ended 31 December 2018 has been prepared in accordance with the requirements of section 414A of the Companies Act 2006 (the "Act"). The purpose of this report is to provide shareholders with sufficient information to enable them to assess the extent to which the Directors have performed their duty to promote the success of the Company in accordance with section 172 of the Act.
On behalf of the Board,
Geoffrey Vero Chairman 25 March 2019
The following are the Directors of the Company, all of whom operate in a non-executive capacity:
Geoffrey Vero (Chairman), FCA (appointed 2 July 2007), has spent much of his career in venture capital, serving as a director of Causeway Capital Limited and ABN Amro Private Equity (UK) Limited which invested in small and medium sized unquoted businesses. He is the non-executive Chairman of EPE Special Opportunities PLC .
Lyn Goleby, MA (Cantab), (appointed 3 November 2017), qualified as a solicitor at Denton Hall and Burgin (now Dentons) and went onto business affairs roles in the film industry before starting an independent career as a film producer. She produced 3 films before the startup of City Screen (which became Picturehouse Cinemas) in 1989. She was on the Board of the UK Cinema Association until Picturehouse was bought by Cineworld in 2012. Lyn has served on various boards including the Film Committee of Arts Council England, Dance East and the Advisory Council of Tate Modern.
Ben Larkin, (appointed 5 December 2016), is a partner at the international law firm, Jones Day. Ben heads up the business reorganisation practice across Europe. Ben has spent the majority of his career advising public and private boards on aspects of corporate governance and has particular expertise in the infrastructure and real estate sectors. Recent mandates include Airwave (the mobile communication network for the UK's emergency services) and National Car Parks. Prior to joining Jones Day, Ben led the BRR division of Berwin Leighton Paisner LLP for 14 years.
Patrick Reeve, MA, FCA (appointed 12 November 2013), is currently the managing partner of Albion Capital and will be changing to part-time chairman on 1 April 2019. He is a director of Albion Enterprise VCT, Albion Technology & General VCT, Albion Community Power Limited and chairman of OLIM Investment Managers. He is also a member of the Audit Committee of University College London, and a director of the Association of Investment Companies and is on the Council of the British Venture Capital Association. Patrick joined Close Brothers Group plc in 1989 befoe establishing Albion Capital (formerly Albion Ventures LLP, formerly Close Ventures Limited) in 1996. Prior to Close he qualified as a chartered accountant before joining Cazenove & Co.
All Directors, except for Patrick Reeve, are members of the Audit Committee and Geoffrey Vero is Chairman.
All Directors, except for Patrick Reeve, are members of the Nomination Committee and Geoffrey Vero is Chairman.
All Directors, except for Patrick Reeve, are members of the Remuneration Committee and Ben Larkin is Chairman.
Albion Capital Group LLP, is authorised and regulated by the Financial Conduct Authority and is the Manager of Albion Development VCT PLC. In addition, it manages a further five venture capital trusts, the UCL Technology Fund and provides administration services to Albion Community Power Limited and Albion Care Communities Limited. Albion Capital, together with its subsidiary, OLIM Investment Managers, currently has total assets under management or administration of approximately £1 billion. Albion Capital has recently won two awards: Investor Allstars Venture Capital Trust of the Year 2018 and Growth Investor of the Year 2018.
The following are specifically responsible for the management and administration of the venture capital trusts managed by Albion Capital Group LLP:
details included in the Board of Directors section
is currently the deputy managing partner of Albion Capital and will become managing partner on 1 April 2019. He has 16 years' experience investing in healthcare, leisure, media and technology enabled businesses. He joined Albion in 2001 and became deputy managing partner in 2009. Prior to joining Albion, Will qualified in 1996 as a chartered accountant with Cooper Lancaster Brewers and has a BA in History from Southampton University.
is head of healthcare investing, and from 1 April 2019 will become deputy managing partner. He joined Albion in 2005 and became a partner in 2009. Prior to Albion Andrew was a strategy consultant specialising in healthcare at the Boston Consulting Group. He originally graduated with an MA plus Bachelors of Medicine and Surgery from Cambridge University and practised as a surgeon for six years specialising in neurosurgery. He is a Fellow of the Royal College of Surgeons (England).
is an investment director at Albion Capital currently concentrating on renewable energy projects, healthcare and investments in the asset backed portfolio. Prior to joining Albion in 2013, Adam spent five years working in corporate finance at Rothschild, he graduated from Nottingham University with a first class degree in Industrial Economics and a masters in Corporate Strategy and Governance.
is a partner of Albion Capital with over 20 years' experience as an advisor and investor in a number of industry sectors, including technology, media, engineering, healthcare, education and leisure. Emil joined Albion in 2000 and became a partner in 2009. In his early career, Emil worked on acquisitions, disposals and fundraising mandates at KPMG Corporate Finance having joined their financial services division and qualified as a chartered accountant in 1997. Emil graduated from the European Business School, London, with a BA (Hons) Degree in European Business Administration.
is a partner of Albion Capital specialising in renewable energy projects, and investments in the asset backed portfolio. He is also managing director of Albion Community Power Limited and a director of Albion Care Communities Limited. David joined Albion in 2005 and became a partner in 2009. Prior to Albion, he was the lead investor of an environmental technology and a later stage development capital fund at Foursome Investments (now Frog Capital). Before Frog Capital he joined 3i plc as an investor in European technology based in London and Amsterdam having previously qualified as a management accountant with ICL before spending 3 years at the BBC. David has a BSc in Economics from Warwick University.
is the operations partner of Albion Capital. Vikash oversees the finance and administration of the funds under Albion's management and is also the finance director of Olim Limited and is on the AIC's VCT Technical Committee. He was also previously the finance director of Albion Community Power Limited. He joined Albion in 2010 having qualified as a chartered accountant with RSM working latterly in its corporate finance team. He has a BA in Accountancy & Finance from Nottingham Business School.
is a partner at Albion Capital and is head of technology investing. Ed joined Albion in 2004 and became a partner in 2009. He began his career advising public companies on fundraising and takeovers, first with Charterhouse Securities and then ING Barings, covering the healthcare and technology sectors among others. He graduated from University College London with a first class degree in Philosophy.
is an investment associate at Albion Capital specialising in technology investing. Cat joined Albion in 2018. Prior to joining Albion she worked for Goldman Sachs in both New York and London where she executed several high profile transactions including leveraged buyouts, IPOs and M&A. Cat graduated from Harvard University, majoring in Economics.
is a partner at Albion Capital specialising in healthcare investing. Christoph joined Albion Capital in 2011 and became a partner in 2014. Prior to joining Albion he worked at General Electric UK, where he was responsible for mergers and acquisitions in the medical technology and healthcare IT sectors following a role in the Healthcare Venture Capital arm of 3i plc where he led investments in biotechnology, pharmaceuticals and medical technology. Christoph initially practiced as a radiologist, before spending 3 years at Bain & Company. He holds a degree in Medicine from Ludwig-Maximilians University, Munich and an MBA from INSEAD.
is a partner at Albion Capital and has been responsible for much of the asset based portfolio. Henry joined Albion in 1998 and became a partner in 2009. Prior to joining Albion he qualified as a chartered accountant with Arthur Andersen before joining the corporate finance department of Close Brothers Group. Henry holds an MA degree in Classics from Oxford University. He will be retiring from a full-time role on 1 April 2019.
is an investment associate at Albion Capital specialising in technology investing. Nadine joined Albion in 2018 from Berytech Fund, Beirut, one of the first VC funds in the Middle East. Her career to date has involved many aspects of tech investing including experience in a wide variety of digital platforms, big data management, virtual reality and digital networks. She graduated from the American University of Beirut with a Bachelor in Electrical and Computer Engineering, followed this with a MSc. in Innovation Management and Entrepreneurship from Brown University.
is a partner at Albion Capital specialising in software investing. Robert joined Albion Capital in 2005 and became a partner in 2009. Previously Robert worked in corporate finance for Credit Suisse, KPMG and ING Barings, after qualifying as a chartered accountant.
is an investment manager at Albion Capital specialising in technology investing. Jay joined Albion in 2019 from Bain & Company, where he had been a consultant since 2016 advising private equity and sovereign wealth funds on acquisitions of European technology, financial and business services companies. Prior to this he graduated from London Business School with an MBA having spent eight years as a broker at ICAP Securities.
is an investment director at Albion Capital specialising in alternative energy investing and the asset backed portfolio. Marco joined Albion in 2007. Prior to Albion he was with EC Harris where he advised senior lenders on large capital projects having spent two and a half years at Bouygues (UK). Marco graduated from Cambridge University with a first class degree in Economics and is a Chartered Surveyor.
The following is a summary of investments as at 31 December 2018:
| As at 31 December 2018 | As at 31 December 2017 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| % voting rights of Albion* |
Cumulative movement |
Cumulative movement |
Change in value for the |
||||||
| Unquoted investments | % voting rights |
managed companies |
Cost £'000 |
in value £'000 |
Value £'000 |
Cost £'000 |
in value £'000 |
Value £'000 |
year** £'000 |
| Radnor House School (Holdings) Limited | 8.8 | 50.0 | 2,728 | 3,906 | 6,634 | 2,772 | 3,179 | 5,951 | 727 |
| Egress Software Technologies Limited | 6.9 | 24.7 | 2,332 | 4,115 | 6,447 | 1,422 | 1,794 | 3,216 | 2,321 |
| Quantexa Limited | 2.9 | 12.3 | 727 | 2,283 | 3,010 | 315 | – | 315 | 2,283 |
| Proveca Limited | 11.3 | 47.9 | 1,084 | 1,553 | 2,637 | 1,084 | 1,331 | 2,415 | 222 |
| Chonais River Hydro Limited | 4.6 | 50.0 | 1,705 | 671 | 2,376 | 1,705 | 405 | 2,110 | 266 |
| The Street by Street Solar Programme Limited |
12.4 | 50.0 | 1,291 | 943 | 2,234 | 1,291 | 774 | 2,065 | 169 |
| Mirada Medical Limited | 7.6 | 44.0 | 659 | 1,352 | 2,011 | 659 | 593 | 1,252 | 759 |
| Regenerco Renewable Energy Limited | 11.9 | 50.0 | 1,204 | 707 | 1,911 | 1,204 | 610 | 1,814 | 97 |
| G. Network Communications Limited | 4.7 | 25.7 | 850 | 968 | 1,818 | 850 | – | 850 | 968 |
| Bravo Inns II Limited | 6.7 | 50.0 | 1,080 | 349 | 1,429 | 1,080 | 242 | 1,322 | 107 |
| Earnside Energy Limited | 6.8 | 50.0 | 1,089 | 295 | 1,384 | 1,089 | 176 | 1,265 | 119 |
| Alto Prodotto Wind Limited | 9.4 | 50.0 | 801 | 549 | 1,350 | 829 | 469 | 1,298 | 93 |
| Convertr Media Limited | 6.3 | 27.0 | 875 | 384 | 1,259 | 700 | (49) | 651 | 433 |
| Sandcroft Avenue Limited | 6.6 | 22.0 | 1,191 | 47 | 1,238 | 292 | 14 | 306 | 33 |
| MPP Global Solutions Limited | 3.4 | 13.5 | 1,000 | – | 1,000 | 1,000 | – | 1,000 | – |
| Zift Channel Solutions Inc. | 1.6 | 6.4 | 885 | 114 | 999 | 885 | – | 885 | 114 |
| The Evewell (Harley Street) Limited (previously Women's Health |
|||||||||
| (London West One) Limited) | 7.5 | 40.0 | 933 | – | 933 | 933 | – | 933 | – |
| MyMeds&Me Limited | 9.9 | 42.1 | 940 | (50) | 890 | 546 | 293 | 839 | (205) |
| Albion Investment Properties Limited | 68.2 | 100.0 | 929 | (61) | 868 | 929 | (99) | 830 | 38 |
| Beddlestead Limited | 8.6 | 49.0 | 850 | (2) | 848 | 850 | – | 850 | (2) |
| Black Swan Data Limited | 1.8 | 12.4 | 848 | – | 848 | 609 | – | 609 | – |
| Panaseer Limited | 3.2 | 11.6 | 557 | 214 | 771 | 248 | 148 | 396 | 66 |
| Cisiv Limited | 7.7 | 30.9 | 686 | (27) | 659 | 566 | (274) | 292 | 247 |
| Oviva AG | 3.7 | 15.9 | 643 | 5 | 648 | 643 | 159 | 802 | (154) |
| OmPrompt Holdings Limited | 9.5 | 36.7 | 864 | (278) | 586 | 864 | (189) | 675 | (89) |
| Locum's Nest Limited | 6.3 | 28.8 | 550 | 33 | 583 | 110 | – | 110 | 33 |
| Secured by Design Limited | 2.2 | 10.0 | 330 | 204 | 534 | 330 | 1 | 331 | 203 |
| DySIS Medical Limited | 2.8 | 20.3 | 1,037 | (508) | 529 | 949 | (580) | 369 | 102 |
| AVESI Limited | 10.5 | 50.0 | 340 | 158 | 498 | 340 | 147 | 487 | 11 |
| TWCL Limited | 9.4 | 50.0 | 518 | (28) | 490 | 518 | (15) | 503 | (13) |
| The Q Garden Company Limited | 16.6 | 50.0 | 466 | (1) | 465 | 466 | (1) | 465 | – |
| Process Systems Enterprise Limited Phrasee Limited |
1.3 2.0 |
20.7 11.0 |
131 410 |
326 – |
457 410 |
131 – |
291 – |
422 – |
35 – |
| 1,054 | (674) | (144) | |||||||
| Aridhia Informatics Limited Dragon Hydro Limited |
6.0 5.5 |
22.3 30.0 |
225 | 138 | 380 363 |
1,054 233 |
(530) 117 |
524 350 |
21 |
| Abcodia Limited | 4.7 | 19.5 | 809 | (523) | 286 | 649 | (383) | 266 | (140) |
| Arecor Limited | 1.7 | 8.3 | 280 | – | 280 | – | – | – | – |
| InCrowd Sports Limited | 2.9 | 12.2 | 252 | 24 | 276 | 72 | – | 72 | 24 |
| Koru Kids Limited | 2.2 | 9.7 | 272 | – | 272 | – | – | – | – |
| As at 31 December 2018 | As at 31 December 2017 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Unquoted investments | % voting rights |
% voting rights of Albion* managed companies |
Cost £'000 |
Cumulative movement in value £'000 |
Value £'000 |
Cost £'000 |
Cumulative movement in value £'000 |
Value £'000 |
Change in value for the year** £'000 |
| MHS1 Limited | 3.3 | 50.0 | 231 | – | 231 | 231 | – | 231 | – |
| Greenenerco Limited | 4.0 | 50.0 | 130 | 89 | 219 | 136 | 70 | 206 | 20 |
| uMotif Limited | 1.2 | 6.2 | 200 | – | 200 | – | – | – | – |
| Forward Clinical Limited | 1.8 | 9.2 | 190 | – | 190 | – | – | – | – |
| Bravo Inns Limited | 2.6 | 50.0 | 267 | (86) | 181 | 267 | (79) | 188 | (7) |
| Innovation Broking Group Limited (previously Dickson Financial Services Limited) |
8.4 | 30.0 | 84 | 62 | 146 | 84 | 44 | 128 | 18 |
| Oxsensis Limited | 1.3 | 18.2 | 238 | (96) | 142 | 238 | (96) | 142 | – |
| memsstar Limited | 2.8 | 44.7 | 98 | 39 | 137 | 108 | 121 | 229 | (82) |
| ePatient Network Limited | 1.5 | 8.4 | 135 | – | 135 | – | – | – | – |
| Premier Leisure (Suffolk) Limited | 6.2 | 47.4 | 109 | 16 | 125 | 109 | 15 | 124 | 1 |
| Erin Solar Limited | 4.3 | 50.0 | 120 | (5) | 115 | 120 | (6) | 114 | 1 |
| Healios Limited | 1.0 | 5.2 | 100 | – | 100 | – | – | – | – |
| Elements Software Limited | 0.6 | 4.5 | 3 | (3) | – | 3 | (3) | – | – |
| Total unquoted investments | 35,330 | 17,202 | 52,532 | 29,513 | 8,689 | 38,202 | 8,695 | ||
| Quoted investments | |||||||||
| Mi-Pay Group PLC | 823 | (698) | 125 | 823 | (646) | 177 | (52) | ||
| Tambla Limited (previously ComOps Limited) | 11 | (5) | 6 | 11 | (6) | 5 | 1 | ||
| Total quoted investments | 834 | (703) | 131 | 834 | (652) | 182 | (51) | ||
| Total fixed asset investments | 36,164 | 16,499 | 52,663 | 30,347 | 8,037 | 38,384 | 8,644 |
* Albion Capital Group LLP
** As adjusted for additions and disposals during the year; including realised gains/(losses).
The comparative cost and valuations for 31 December 2017 do not agree to the Annual Report and Financial Statements for the year ended 31 December 2017 as the above list does not include brought forward investments that were fully disposed of in the year.
| Total change in value of investments for the year | 8,644 |
|---|---|
| Movement in accrued loan stock interest | 73 |
| Unrealised gains on fixed asset investments sub-total | 8,717 |
| Unrealised losses on current asset investments | (157) |
| Realised gains in current year | 3,766 |
| Total gains on investments as per Income statement |
| As at 31 December 2018 | As at 31 December 2017 | ||||||
|---|---|---|---|---|---|---|---|
| Current asset investments | Cost £'000 |
Cumulative movement in value £'000 |
Value £'000 |
Cost £'000 |
Cumulative movement in value £'000 |
Value £'000 |
Change in value for the year £'000 |
| SVS Albion OLIM UK Equity Income Fund | 1,400 | (157) | 1,243 | – | – | – | (157) |
| Total current asset investments | 1,400 | (157) | 1,243 | – | – | – | (157) |
| Fixed asset investment realisations in the year to 31 December 2018 |
Cost £'000 |
Opening carrying value £'000 |
Disposal proceeds £'000 |
Total gain/(loss) £'000 |
Gain/(loss) realised on opening value £'000 |
|---|---|---|---|---|---|
| Disposals: | |||||
| Grapeshot Limited | 806 | 3,824 | 7,625 | 6,819 | 3,801 |
| Infinite Ventures (Goathill) Limited | 32 | 42 | 44 | 12 | 2 |
| CSS Group Limited | 33 | 42 | 10 | (23) | (32) |
| Loan stock repayments, restructuring and other: | |||||
| MyMeds&Me Limited | 400 | 540 | 540 | 140 | – |
| DySIS Medical Limited | 206 | 231 | 238 | 32 | 7 |
| Radnor House School (Holdings) Limited | 44 | 44 | 44 | – | – |
| Alto Prodotto Wind Limited | 27 | 41 | 41 | 14 | – |
| memsstar Limited | 10 | 10 | 10 | – | – |
| Greenenerco Limited | 6 | 8 | 8 | 2 | – |
| Dragon Hydro Limited | 8 | 8 | 8 | – | – |
| Escrow adjustments* | – | – | (12) | (12) | (12) |
| Total realisations | 1,572 | 4,790 | 8,556 | 6,984 | 3,766 |
* These comprise fair value movements on deferred consideration on previously disposed investments.
5
10 4
6
7
8
1
Portfolio of 54 companies employing over 1,800 people predominantly in the United Kingdom
2
1
3
9
8 renewable energy companies generating approximately 24GWh per annum, capable of powering 7,200 typical households
IT/software Healthcare Renewable energy Education Business and support services Pubs and other leisure Numbers indicate top 10 investments by value
Website: www.radnorhouse.org
Radnor House operates two independent schools in Twickenham and Sevenoaks. The Twickenham school trades at near mature levels with more than 400 children on the roll. The school in Sevenoaks, which was acquired in 2015 as a turnaround opportunity, is now growing strongly with over 400 children on the roll and further capacity to expand. Both schools aim to deliver a personalised education experience to each student with a focus on learning. The curriculum and co-curricular activities are designed to give each child a wide range of academic and other skills and prepare him or her for a dynamic and rapidly changing world.
| Audited results: year to 31 August 2018 | £'000 | Investment information | £'000 |
|---|---|---|---|
| Turnover | 12,952 | Income recognised in the year | 312 |
| EBITDA | 2,194 | Total cost | 2,728 |
| Profit before tax | 40 | Total valuation | 6,634 |
| Net assets | 37,636 | Voting rights | 8.8 per cent. |
| Audited results: year to 31 August 2018 | £'000 | Investment information | £'000 |
|---|---|---|---|
| Turnover | 12,952 | Income recognised in the year | 312 |
| EBITDA | 2,194 | Total cost | 2,728 |
| Profit before tax | 40 | Total valuation | 6,634 |
| Net assets | 37,636 | Voting rights | 8.8 per cent. |
| Basis of valuation | Third party valuation – earnings multiple | Voting rights for all Albion managed companies | 50.0 per cent. |
Website: www.egress.com
Egress has developed a cloud-based secure communication platform that offers encrypted services including email, file transfer, document collaboration and archiving. Egress's early customers came from the public sector, but are now spread across all verticals where there is a need for enhanced data security, including the financial services, health and legal sectors.
| Audited results year to |
|||
|---|---|---|---|
| 31 December 2017 | £'000 | Investment information | £'000 |
| Turnover | 9,403 | Income recognised in the year | – |
| LBITDA | (1,121) | Total cost | 2,332 |
| Loss before tax | (1,222) | Total valuation | 6,447 |
| Net liabilities | (501) | Voting rights | 6.9 per cent. |
| Basis of | Cost and | Voting rights for all | |
| valuation | price of recent | Albion managed | |
| investment | companies | 24.7 per cent. | |
| (reviewed for | |||
| impairment | |||
| or uplift) |
Website: www.quantexa.com
| Audited results: year to | ||||
|---|---|---|---|---|
(reviewed for impairment or uplift)
Quantexa has developed a big data analytics platform which offers entity resolution and network analytics at massive scale in real time. The initial market focus has been on detecting financial crime for the banking sector, where Quantexa can materially improve processes such as KYC and AML checks as well as financial investigations. Albion funds have invested alongside HSBC.
| 31 March 2018 | £'000 | Investment information | £'000 |
|---|---|---|---|
| Turnover | 5,018 | Income recognised in the year | – |
| LBITDA | (1,471) | Total cost | 727 |
| Loss before tax | (1,539) | Total valuation | 3,010 |
| Net assets | 2,069 | Voting rights | 2.9 per cent. |
| Basis of valuation | Cost and price of recent investment | Voting rights for all Albion managed companies | 12.3 per cent. |
Proveca is a pharmaceutical company focused on children's medicines. Currently 50-90% of the medicines children take are in adult format and/or are not licensed for their use. Proveca is addressing a significant need in developing drugs that are specifically formulated for children, taking advantage of a supportive regulatory regime and market protection throughout Europe. Its first product, Sialanar, for chronic drooling was launched in 2017. It has a pipeline of drugs focused on neurology, cardiovascular and other therapeutic areas that it expects to reach the market over the next 2 to 5 years.
Website: www.proveca.co.uk
| year to 31 July 2017 | £'000 | Investment information | £'000 |
|---|---|---|---|
| Net liabilities | (3,717) | Income recognised in the year | – |
| Basis of valuation | Cost and price of recent investment | Total cost | 1,084 |
| (reviewed for impairment or uplift) | Total valuation | 2,637 | |
| Voting rights | 11.3 per cent. | ||
| Voting rights for all Albion managed companies | 47.9 per cent. |
Filleted audited results: year to
Chonais River Hydro is a 2MW hydropower scheme near Loch Carron in the Scottish Highlands. It is a runof-river scheme, taking water from a small river via an intake on the mountainside. The scheme is low visual impact with the only visible components being a small intake and a powerhouse, both of which are built using local material. It generates enough electricity to power about 2,000 homes. It benefits from inflationprotected renewable subsidies for a period of 20 years. The scheme was commissioned in 2014 and has been generating successfully since.
| 30 September 2017 | £'000 | Investment information | £'000 |
|---|---|---|---|
| Net liabilities | (57) | Income recognised in the year | 157 |
| Basis of valuation | Third party valuation – | Total cost | 1,705 |
| discounted cash flow | Total valuation | 2,376 | |
| Voting rights | 4.6 per cent. | ||
| Voting rights for all Albion managed companies | 50.0 per cent. |
Street by Street owns and operates solar PV systems on circa 600 privately owned homes in England and Wales. It provides free and clean electricity to those homes, and benefits from inflation-protected renewable subsidies for a period of 20 to 25 years. Most of the PV systems were commissioned in 2011 and 2012.
| valuation | valuation – | Total valuation | 2,234 |
|---|---|---|---|
| discounted | Voting rights | 12.4 per cent. | |
| cash flow | Voting rights for all Albion | ||
| managed companies | 50.0 per cent. |
Website: www.mirada-medical.com
Mirada Medical develops medical imaging software that can identify tumours in medical images, and helps clinicians plan radiotherapy treatment of the cancer. By combining deep learning technology with a thorough understanding of the challenges faced in oncology today, Mirada is leading the development of next generation imaging software and decision support products. These products improve consistency and productivity while enabling clinicians to deliver more personalised care.
| investment |
|---|
| (reviewed for |
| impairment or uplift) |
| 31 December 2017 | £'000 | Investment information: | £'000 |
|---|---|---|---|
| Turnover | 4,437 | Income recognised in the year | 35 |
| LBITDA | (303) | Total cost | 659 |
| Loss before tax | (610) | Valuation | 2,011 |
| Net liabilities | (1,834) | Voting rights | 7.6 per cent. |
| Basis of | Cost and price | Voting rights for all Albion | |
| valuation | of recent | managed companies | 44.0 per cent. |
Filleted audited results: year to 31 December 2017 £'000 Investment information: £'000 Net liabilities (192) Income recognised in the year 73 Basis of valuation Third party valuation – discounted cash flow Total cost 1,204
Regenerco Renewable Energy owns and operates solar PV systems on 15 commercial properties and circa 570 council owned homes in Cambridgeshire. It provides free and clean electricity to those homes and benefits from inflation-protected renewable subsidies for a period of 20 to 25 years. Most of the PV systems on commercial properties were commissioned in 2011 and 2012, and council housing in 2013.
| Total valuation | 1,911 |
|---|---|
| Voting rights | 11.9 per cent. |
| Voting rights for all Albion managed companies | 50.0 per cent. |
G.Network is a fibre optic broadband provider focused on the provision of fibre broadband to SMEs in central London. Albion funds invested £4.675m in total in 2017. The Company was founded in March 2016. The Albion funds have been used to ramp up the build out of street units, as well as building the team, predominantly a dedicated sales and marketing team to sign up customers.
| 31 March 2018 | £'000 | Investment information: | £'000 |
|---|---|---|---|
| Net liabilities | (381) | Income recognised in the year | – |
| Basis of | Cost and price | Total cost | 850 |
| valuation | of recent | Valuation | 1,818 |
| investment | Voting rights | 4.7 per cent. | |
| (reviewed for | Voting rights for all Albion | ||
| impairment | managed companies | 25.7 per cent. | |
| or uplift) | |||
Website: www.g.network Website: www.bravoinns.com
Bravo Inns II Ltd was formed in September 2007 to acquire freehold pubs in the North of England. The Bravo strategy is to acquire closed and underinvested sites, undertaking high quality refurbishments before trading as wet-led community pubs. The estate currently consists of 31 sites and the Bravo team are looking to add 2-3 sites a year to grow the estate.
| Filleted audited results: year to 31 March 2018 |
£'000 | Investment information: | £'000 |
|---|---|---|---|
| Net assets | 4,955 | Income recognised in the year | 5 |
| Basis of | Third party | Total cost | 1,080 |
| valuation | valuation – | Total valuation | 1,429 |
| earnings | Voting rights | 6.7 per cent. | |
| multiple | Voting rights for all Albion | ||
| managed companies | 50.0 per cent | ||
The Directors submit their Annual Report and the audited Financial Statements on the affairs of Albion Development VCT PLC (the "Company") for the year ended 31 December 2018. The Statement of corporate governance on pages 33 to 37 forms a part of the Directors' report.
The principal activity of the Company is that of a Venture Capital Trust. It has been approved by H.M. Revenue & Customs ("HMRC") as a venture capital trust in accordance with the Income Tax Act 2007 and, in the opinion of the Directors, the Company has conducted its affairs so as to enable it to continue to obtain such approval. Approval for the year ended 31 December 2018 is subject to review should there be any subsequent enquiry under corporation tax self-assessment.
The Company is not a close company for taxation purposes and its shares are premium listed on the official list of the London Stock Exchange.
Under current tax legislation, shares in the Company provide taxfree capital growth and income distribution, in addition to the income tax relief some investors would have obtained when they invested in the original share offers.
Details of the issued share capital, together with details of the movements in the Company's issued share capital during the year are shown in note 15.
The Company's share capital comprises Ordinary shares. The Ordinary shares are designed for individuals who are professionally advised private investors seeking, over the long term, investment exposure to a diversified portfolio of unquoted investments. The investments are spread over a number of sectors, to produce a regular and predictable source of income, combined with the prospect of longer term capital growth.
All Ordinary shares (except for treasury shares which have no right to dividend and no voting rights) rank pari passu for dividends and voting rights. Each Ordinary share is entitled to one vote. The Directors are not aware of any restrictions on the transfer of shares or on voting rights.
Shareholders are entitled to receive dividends and are entitled to the return of capital on winding up or other return of capital based on the surpluses attributable to the shares.
During the year the Company issued a total of 3,083,024 Ordinary shares (2017: 10,641,522 Ordinary shares) under the Albion VCTs Top Up Offers and 641,886 Ordinary shares (2017: 610,643 Ordinary shares) under the Company's Dividend Reinvestment Scheme. Further information on the share capital is detailed in note 15.
Your Board, in conjunction with the boards of other VCTs managed by Albion Capital Group LLP, launched a prospectus top up offer of new Ordinary shares on 7 January 2019. A Securities Note, which forms part of the prospectus, has been sent to shareholders. The proceeds will be used to provide further resources at a time when a number of attractive investment opportunities are being seen.
The Company operates a policy of buying back shares either for cancellation or for holding in treasury. Details regarding the current buy-back policy can be found on pages 7 and 8 of the Chairman's statement.
As at 31 December 2018 and at the date of this Report, the Company was not aware of any shareholder who had a beneficial interest exceeding 3 per cent. of voting rights. There have been no disclosures in accordance with Disclosure Guidance and Transparency Rule 5 made to the Company during the year ended 31 December 2018, and up to the date of this Report.
Details on the future developments of the business can be found on page 8 of the Chairman's statement and on page 10 of the Strategic report.
Detailed information on the results and dividends for the year ended 31 December 2018 can be found in the Strategic report on pages 9 and 10.
In accordance with the Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued by the Financial Reporting Council in September 2014, the Board has assessed the Company's operation as a going concern. The Company has significant cash and liquid resources, its portfolio of investments is well diversified in terms of sector and the major cash outflows of the Company (namely investments, buy-backs 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 over a period of at least twelve months from the date of approval of the Financial Statements. For this reason, the Directors have considered it appropriate to adopt the going concern basis of accounting.
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 17. The Company's business activities, together with details of its performance are shown in the Strategic report and this Directors' report.
Details of events that have occurred since 31 December 2018 are shown in note 19.
A summary of the principal risks faced by the Company is set out on pages 14 and 15 of the Strategic report.
The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC. In order to maintain its status under Venture Capital Trust legislation, a VCT must comply on a continuing basis with the provisions of Section 274 of the Income Tax Act 2007 as follows:
(7) An investment in any company must not cause that company to receive more than £5 million in State aid risk finance in the 12 months up to the date of the investment, nor more than £12 million in total (the limits are £10 million and £20 million respectively for a "knowledge intensive" company);
(8) The Company must not invest in a company whose trade is more than seven years old (ten years for a "knowledge intensive" company) unless the company previously received State aid risk finance in its first seven years, or the company is entering a new market and a turnover test is satisfied;
These tests drive a spread of investment risk through preventing holdings of more than 15 per cent. in any portfolio company. The tests have been carried out and independently reviewed for the year ended 31 December 2018. The Company has complied with all tests and continues to do so.
'Qualifying holdings' 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. Eligible shares must comprise at least 10 per cent. by HMRC value of the total of the shares and securities that the Company holds in any one portfolio company. 'Qualifying trade' excludes, amongst other sectors, dealing in property or shares and securities, insurance, banking and agriculture. Details of the sectors in which the Company is invested can be found in the pie chart on page 9.
A "knowledge intensive" company is one which is carrying out significant amounts of R&D from which the greater part of its business will be derived, or where those R&D activities are being carried out by staff with certain higher educational attainments.
Portfolio company gross assets must not exceed £15 million immediately prior to the investment and £16 million immediately thereafter.
The management and administration of the Company is undertaken by the Manager. Albion Capital Group 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.
The Company has no greenhouse gas emissions to report from the operations of the Company, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) regulations 2013, including those within our underlying investment portfolio.
The Company has adopted a zero tolerance approach to bribery, and will not tolerate bribery under any circumstances in any transaction the Company is involved in.
Albion Capital Group LLP reviews the anti-bribery policies and procedures of all portfolio companies.
The Company has a zero tolerance approach with regards to the facilitation of criminal tax evasion and has in place a robust risk assessment procedure to ensure compliance. The Board reviews this policy and the prevention procedures in place for all associates on a regular basis.
The Board currently consists of three male directors and one female director. The Board's policy on the recruitment of new Directors is to attract a range of backgrounds, skills and experience and to ensure that appointments are made on the grounds of merit against clear and objective criteria and bear in mind gender and other diversity within the Board.
More details on the Directors can be found in the Board of Directors section on page 16.
The Manager has an equal opportunities policy and currently employs 13 men and 16 women.
Investors should be aware that the PRIIPs Regulation requires the Manager, as PRIIP manufacturer, to prepare a Key Information Document ("KID") in respect of the Company. This KID must be made available by the Manager to retail investors prior to them making any investment decision and is available on the Company's webpage on the Manager's website. The Company is not responsible for the information contained in the KID and investors should note that the procedures for calculating the risks, costs and potential returns are prescribed by the law. The figures in the KID may not reflect the expected returns for the Company and anticipated performance returns cannot be guaranteed.
Under the Alternative Investment Fund Manager Regulations 2013 (as amended) the Company is a UK AIF and from 1 October 2018 the Manager is a full scope UK AIFM. Ocorian (UK) Limited provides depositary services under the AIFMD.
The AIFMD outlines the required information which has to be made available to investors prior to investing in an AIF and directs that material changes to this information be disclosed in the Annual Report of the AIF. There were no material changes in the year.
There are no assets of the Company which are subject to special arrangements arising from their illiquid nature.
The Manager has a remuneration policy which meets the requirements of the AIFMD Remuneration Code and associated Financial Conduct Authority guidance.
The Manager has a Remuneration Committee (comprised of four partners) which decides upon the remuneration of partners and staff, taking into account the performance of the Manager generally as well as individual performance.
Annual partner and staff appraisals are carried out in order to assess individual performance against agreed objectives within the broader framework of Albion Capital's performance. Financial and non-financial criteria are taken into account when assessing performance. Variable remuneration will be based on a combination of the assessment of the performance of the individual, the Manager and the Manager's funds. The Manager does not link an individual's rewards to the success of individual portfolio investments but rather to the success of the Manager and its Funds as a whole.
The Remuneration Committee ensures an appropriate balance between fixed and variable components of remuneration of staff. In determining variable remuneration current and future risks are taken into account and variable remuneration is adjusted where appropriate. The Manager does not pay any guaranteed variable remuneration. Taking into account the amount of variable remuneration as a proportion of total remuneration and the size, nature and lack of complexity of the Manager's organisation and its activities, remuneration is not subject to deferral or performance adjustments.
The Manager has a policy which is designed to identify and manage conflicts of interest to the extent that these cannot be avoided and this applies to all staff.
The Company is managed by Albion Capital Group LLP and hence has no employees. The Board consists solely of non-executive Directors.
The Directors who held office throughout the year, and their interests in the shares of the Company (together with those of their immediate family) are shown in the Directors' remuneration report on page 39.
All Directors, except Patrick Reeve, are members of the Audit Committee of which Geoffrey Vero is Chairman.
Patrick Reeve, as managing partner of Albion Capital Group LLP, is deemed to have an interest in the Management agreement and Management performance incentive to which the Company is party.
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 or her in relation to the performance of his or her 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.
The Company currently conducts its affairs so that its shares can be recommended by financial intermediaries to ordinary retail investors in accordance with the FCA's rules in relation to nonmainstream investment products and intends to continue to do so for the foreseeable future. The FCA's restrictions which apply to non-mainstream investment products do not apply to the Company's shares because they are shares in a VCT which, for the purposes of the rules relating to non-mainstream investment products, are excluded securities and may be promoted to ordinary retail investors without restriction.
Directors' retirement and re-election is subject to the Articles of Association and the UK Corporate Governance Code. At the forthcoming Annual General Meeting, Geoffrey Vero, having served as a Director for longer than nine years, will retire and offer himself for re-election. Patrick Reeve is not considered to be independent, as he is the managing partner of the Manager, Albion Capital Group LLP, and will therefore also retire and offer himself for re-election at the forthcoming Annual General Meeting.
The Audit Committee annually reviews and evaluates the standard and quality of service provided by the Auditor, as well as value for money in the provision of these services. A resolution to re-appoint BDO LLP will be put to the Annual General Meeting.
The Annual General Meeting will be held at the City of London Club, 19 Old Broad Street, London, EC2N 1DS at 12:00 noon on 30 May 2019. The notice of the 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. A summary of proxies lodged at the Annual General Meeting will be published at www.albion.capital/funds/AADV under the 'Financial Reports and Circulars' section.
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 or the Listing Rules of the Financial Conduct Authority.
Ordinary resolution number 7 will request the authority to allot up to an aggregate nominal amount of £167,721 representing approximately 20 per cent. of the issued Ordinary share capital as at the date of this Report.
During the year, Ordinary shares were allotted as described in detail in note 15.
The Directors current intention is to allot shares under any Albion VCTs Share Offers and the Dividend Reinvestment Schemes. The Company currently holds 9,072,156 Ordinary shares in treasury representing 10.8 per cent. of the Ordinary share capital in issue as at 31 December 2018.
This resolution replaces the authority given to the Directors at the Annual General Meeting in 2018. The authority sought at the forthcoming Annual General Meeting will expire 15 months from the date that this resolution is passed or at the conclusion of the next Annual General Meeting of the Company, whichever is earlier.
Special resolution number 8 will request authority for Directors to allot equity securities for cash without first being required to offer such securities to existing members. This will include the sale on a non pre-emptive basis of any shares the Company holds in treasury for cash. The authority relates to a maximum aggregate of £167,721 of the nominal value of the share capital representing approximately 20 per cent. of the issued Ordinary share capital of the Company as at the date of this Report.
This resolution replaces the authority given to the Directors at the Annual General Meeting in 2018. The authority sought at the forthcoming Annual General Meeting will expire 15 months from the date this resolution is passed or at the conclusion of the next Annual General Meeting of the Company, whichever is earlier. Members should note that this resolution also applies to treasury shares.
Special resolution number 9 will request the authority to purchase approximately 14.99 per cent. of the Company's issued Ordinary share capital at, or between, the minimum and maximum prices specified in resolution 9. Shares bought back under this authority may be cancelled or held in treasury.
The Board believes that it is helpful for the Company to continue to have the flexibility to buy its own shares and this resolution seeks authority from shareholders to do so.
This resolution would renew the 2018 authority, which was on similar terms. During the financial year under review, the Company purchased 1,253,456 Ordinary shares for treasury representing 1.5 per cent. of called up share capital, at an aggregate consideration of £921,000. No Ordinary shares were purchased for cancellation.
The authority sought at the forthcoming Annual General Meeting will expire 15 months from the date this resolution is passed or at the conclusion of the next Annual General Meeting of the Company, whichever is earlier.
Under the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 (the "Regulations"), 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.
Special resolution number 10 will request the authority to permit Directors to sell treasury shares at the higher of the prevailing share price and the price bought in at.
The Board believes that the passing of the resolutions above is in the best interests of the Company and its shareholders as a whole, and unanimously recommends that you vote in favour of these resolutions, as the Directors intend to do in respect of their own shareholdings.
As outlined in the Circular that has been sent to shareholders along with the Annual Report and Financial Statements, the Board are recommending that the current performance incentive arrangements be amended, and the Company's operating expenses will be reduced by lowering the total expenses cap. This requires the approval of shareholders at a General Meeting, where an ordinary resolution will propose a deed of variation to the Management Agreement between the Company and the Manager.
The General Meeting will be held at the City of London Club, 19 Old Broad Street, London, EC2N 1DS following the conclusion of the Annual General Meeting on 30 May 2019. The notice of the General Meeting is included in the Circular that has been sent to shareholders along with the Annual Report and Financial Statements.
The proxy form enclosed with this Circular permits shareholders to disclose a vote '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. A summary of proxies lodged at the General Meeting will be published at www.albion.capital/funds/AADV under the 'Financial Reports and Circulars' section.
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 provisions of s418 of the Companies Act 2006.
By Order of the Board
Albion Capital Group LLP Company Secretary
1 King's Arms Yard London, EC2R 7AF 25 March 2019
The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have elected to prepare the Company's Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice ("UK GAAP") (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 for the Company for that period.
In preparing these 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 and disclose with reasonable accuracy at any time the financial position of the Company and 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 for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the Annual Report and Financial Statements, taken as a whole, are fair, balanced, and understandable and provide the information necessary for shareholders to assess the Company's position, performance, business model and strategy.
The Directors are responsible for ensuring the Annual Report and Financial Statements are made available on a website. Financial Statements are published on the Company's webpage on the Manager's website (www.albion.capital/funds/AADV) in accordance with legislation in the United Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance of the Company's webpage is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the Financial Statements contained therein.
Directors' responsibilities pursuant to Disclosure Guidance and Transparency Rule 4 of the UK Listing Authority The Directors confirm to the best of their knowledge:
For and on behalf of the Board
Geoffrey Vero Chairman 25 March 2019
The Financial Conduct Authority requires all companies listed on a regulated market to disclose how they have applied the principles and complied with the provisions of the UK Corporate Governance Code (the "Code") issued by the Financial Reporting Council ("FRC") in 2016.
The Board 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 the UK Corporate Governance 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 (which incorporates the UK Corporate Governance Code), will provide better information to shareholders than reporting under the Code alone.
The Company has complied with the recommendations of the AIC Code and the relevant provisions of the Code, except as set out below.
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 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.
Geoffrey Vero is the Chairman of the Company, and he, Lyn Goleby and Ben Larkin are considered independent Directors. Ben Larkin is the Senior Independent Director. Patrick Reeve is not an independent Director as he is managing partner of Albion Capital Group LLP, the Manager.
Geoffrey Vero has been a Director of the Company for more than nine years and, in accordance with the recommendations of the AIC code, is 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 or her ability to act independently of the Manager. Patrick Reeve is also subject to annual re-election as he is not considered to be an independent Director.
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 16. 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 UK Corporate Governance Code, the Company has in place Directors' & Officers' Liability Insurance.
The Directors have considered diversity in relation to the composition of the Board and have concluded that its membership is diverse in relation to experience and balance of skills. Further details on the recruitment of new directors can be found in the Nomination Committee section on page 36.
The Board met four times during 2018 as part of its regular programme of Board meetings. In addition, and in accordance with best practice, a further meeting took place without the Manager present. All of the Directors attended each meeting. A sub-committee comprising at least two Directors met during the year to allot shares issued under the Dividend Reinvestment Scheme and the various Albion VCTs Top Up Offers. Following the year end, a sub-committee comprising at least two Directors also met during the year to approve the terms and contents of the Offer documents under the Albion VCTs Prospectus Top Up Offers 2018/19.
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, with ad hoc reports and information 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 services, accounting, secretarial and administrative services. The main issues reserved for the Board include:
It is the responsibility of the Board to present an Annual Report and Financial Statements that is fair, balanced and understandable, which provides the information necessary for shareholders to assess the position, performance, strategy and business model of the Company.
Performance of the Board and the Directors is assessed on the following bases:
The evaluation process has identified that the Board works well together and has the right balance of skills, experience, independence and knowledge of the Company amongst the Directors. Diversity within the Board is achieved through the appointment of directors with different backgrounds and skills.
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, Patrick Reeve and Geoffrey Vero, both of whom are subject to re-election at the forthcoming Annual General Meeting are considered to be effective Directors and demonstrate strong commitment to the role; on this basis, the Board believes it to be in the best interests of the Company to appoint these Directors at the forthcoming Annual General Meeting.
The Remuneration Committee consists of all Directors except Patrick Reeve, with Ben Larkin as Chairman. The Committee held one formal meeting during the year, which was fully attended by all the members of the Committee.
The terms of reference for the Remuneration Committee can be found on the Company's webpage on the Manager's website at www.albion.capital/funds/AADV under the Corporate Governance section.
The Directors acknowledge that the Company does not comply with the Code in its recommendation that the Chairman of a Company should not Chair the Audit Committee, but have deemed it appropriate that Geoffrey Vero is chairman of both the Audit Committee and the Board of the Company as a result of the depth of his experience in this area.
The Audit Committee consists of all Directors, except Patrick Reeve, and Geoffrey Vero is Chairman. In accordance with the Code, the members of the Audit Committee have recent and relevant financial experience. The Committee met twice during the year ended 31 December 2018; all members attended.
Written terms of reference have been constituted for the Audit Committee and can be found on the Company's webpage on the Manager's website at www.albion.capital/funds/AADV under the Corporate Governance section.
During the year under review, the Committee discharged its responsibilities including:
The Audit Committee has initial responsibility for reviewing the Financial Statements and reporting on any significant issues that arise in relation to the audit of the Financial Statements as outlined below. The Audit Committee considered whether these issues were properly considered at the planning stage of the audit and the issues were discussed with the external Auditor prior to the completion of the audit of the Financial Statements. No major conflicts arose between the Audit Committee and the external Auditor in respect of their work during the period.
The key accounting and reporting issues considered by the Committee were:
Valuations of investments are prepared by the Manager. The Audit Committee reviewed the estimates and judgements made in relation to these investments and were satisfied that they were appropriate. The Audit Committee also discussed the controls in place over the valuation of investments. The Committee recommended investment valuations to the Board for approval.
The revenue generated from loan stock interest and dividend income has been considered by the Audit Committee as part of its review of the Financial Statements as well as a quarterly review of the management accounts prepared by the Manager. The Audit Committee has considered the controls in place over revenue recognition to ensure that amounts received are in line with expectation and budget.
Following detailed reviews of the Annual Report and Financial Statements and consideration of the key areas of risk identified, the Board as a whole have concluded that the Financial Statements are fair, balanced and understandable and that they provide the information necessary for shareholders to assess the Company's position, performance, business model and strategy.
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 nonaudit fees earned by them and their affiliates. There were no nonaudit fees charged to the Company during the year.
As part of its work, the Audit Committee has undertaken a formal evaluation of the external Auditor against the following criteria;
In order to form a view of the effectiveness of the external audit process, the Committee took into account information from the Manager regarding the audit process, the formal documentation
issued to the Audit Committee and the Board by the external Auditor regarding the external audit for the year ended 31 December 2018, and assessments made by individual Directors.
In 2017, The Audit Committee undertook a tendering exercise for provision of audit services. As a result of this process, BDO LLP was retained as Auditor. BDO first acted as Auditor for the year ended 31 December 2008 and this will be year 11 of their tenure. The Audit Committee annually reviews and evaluates the standard and quality of service provided by the Auditor, as well as value for money in the provision of these services.
Based on the assurance obtained, the Audit Committee recommended to the Board a resolution to re-appoint BDO LLP as Auditor at the forthcoming Annual General Meeting.
The Nomination Committee consists of all Directors, apart from Patrick Reeve, with Geoffrey Vero as Chairman.
The Board's policy on the recruitment of new Directors is to attract a range of backgrounds, skills and experience and to ensure that appointments are made on the grounds of merit against clear and objective criteria and bear in mind gender and other diversity within the Board.
Terms of reference for the Nomination Committee can be found on the Company's webpage on the Manager's website at www.albion.capital/funds/AADV under the Corporate Governance section.
In accordance with the UK Corporate Governance 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 FRC guidance "Risk Management, Internal Control and Related Financial and Business Reporting". The Board is responsible for the Company's system of 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 misstatement or loss.
The Board, assisted by the Audit Committee, monitors all controls, including financial, operational and compliance controls, and risk management. The Audit Committee 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 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 Audit Committee's attention.
The Board, through the Audit Committee, 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 system with respect to financial reporting, implemented throughout the year are:
During the year, as the Board has delegated the investment management and administration to Albion Capital Group LLP, the Board feels that it is not necessary to have its own internal audit function. Instead, the Board has access to PKF Littlejohn LLP, which, as internal Auditor for Albion Capital Group LLP, undertakes periodic examination of the business processes and controls environment at Albion Capital Group LLP, and ensures that any recommendations to implement improvements in controls are carried out. During the year, the Board reviewed internal audit reports prepared by PKF Littlejohn LLP, and have access to the internal audit partner of PKF Littlejohn LLP. The Board will continue to monitor its system of internal control in order to provide assurance that it operates as intended.
In addition to this, Ocorian (UK) Limited, the Company's external Depositary from 1 October 2018, provides cash monitoring, asset
verification, and oversight services to the Company and reports to the Board on a quarterly basis.
The Board and the Audit Committee will continue to monitor its system of internal control in order to provide assurance that it operates as intended.
Directors review the disclosure of conflicts of interest annually, with any changes reviewed and noted at the beginning of each Board meeting. A Director who has conflicts of interest has two independent Directors 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 27, 30 and 31 of the Directors' report. 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 30 May 2019 will be used as an opportunity to communicate with investors, and the Board, including the Chairman of the Audit Committee, will be available to answer questions. 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 and financial advisers are able to obtain information on holdings and performance using the contact details provided on page 2.
The Company's share buy-back programme operates in the market through brokers. In order to sell shares, as they are quoted on the London Stock Exchange, investors 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 Geoffrey Vero being Chairman of both the Company and the Audit Committee, the Company has complied throughout the year ended 31 December 2018 with all the relevant provisions set out in the Code and with the AIC Code of Corporate Governance.
By Order of the Board
Geoffrey Vero Chairman 25 March 2019
This report is submitted in accordance with Section 420 of the Companies Act 2006 and describes how the Board has applied the principles relating to the Directors' remuneration.
An Ordinary resolution will be proposed at the Annual General Meeting of the Company for the approval of the Annual Remuneration Report as set out below.
The current Remuneration Policy was approved by shareholders (95.2% of shareholders voted for the resolution, 4.8% voted against the resolution, and of the total votes cast, 100,021 votes were withheld (being 0.1% of total voting rights)) at the Annual General Meeting held on 25 May 2017 and will remain in place for a three year period. It will next be put to shareholders at the 2020 AGM.
The Company's independent Auditor, BDO LLP, is required to give its opinion on certain information included in this report, as indicated below. The Auditor's opinion is included in the Independent Auditor's Report.
The Remuneration Committee comprises all of the Directors excluding Patrick Reeve, with Ben Larkin as Chairman.
The Remuneration Committee met once during the year to review Directors' responsibilities and salaries against the market and concluded that the current level of remuneration, which was increased in 2016, remained appropriate and so proposed no increase for the forthcoming year.
The Company's policy is that fees payable to non-executive Directors should reflect their expertise, responsibilities and time spent on Company matters. In determining the level of nonexecutive remuneration, market equivalents are considered in comparison to the overall activities and size of the Company. There is no performance related pay criteria applicable to non-executive Directors.
None of the Directors have a service contract with the Company, and as such there is no policy on termination payments. There is no notice period and no payments for loss of office were made during the period. On being appointed to the Board, Directors receive a letter from the Company setting out the terms of their appointment and their specific duties and responsibilities. The Company has no employees other than the Directors.
The maximum level of non-executive Directors' remuneration is £100,000 per annum which is fixed by the Company's Articles of Association.
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. At the forthcoming Annual General Meeting, Patrick Reeve and Geoffrey Vero will retire and be proposed for re-election.
Shareholders' views in respect of Directors' remuneration are regarded highly and the Board encourages shareholders to attend its Annual General Meeting in order to communicate their thoughts, which it takes into account where appropriate when formulating its policy. At the last Annual General Meeting, 94.4% of shareholders voted for the resolution approving the Directors' remuneration report, 5.6% of shareholders voted against the resolution and of the total votes cast, 161,129 were withheld (being 0.2% of total voting rights), which shows significant shareholder support.
The remuneration of individual Directors is determined by the Remuneration Committee within the framework set by the Board. The Committee meets at least once a year and met once during the year under review with full attendance from all of its members.
It is responsible for reviewing the remuneration of the Directors and the Company's remuneration policy to ensure that it reflects the duties, responsibilities and value of time spent by the Directors on the business of the Company and makes recommendations to the Board accordingly.
The following items have been audited.
The following table shows an analysis of the remuneration of individual Directors, who were in office during the year, exclusive of National Insurance:
| 31 December | 31 December | |
|---|---|---|
| 2018 | 2017 | |
| £'000 | £'000 | |
| Lyn Goleby | ||
| (appointed 3 November 2017) | 22.0 | 3.5 |
| Ben Larkin | 22.0 | 22.0 |
| Andrew Phillipps | ||
| (resigned 17 March 2017) | – | 5.5 |
| Patrick Reeve | – | – |
| Jonathan Thornton | ||
| (resigned 3 November 2017) | – | 19.2 |
| Geoffrey Vero | 24.0 | 24.0 |
| 68.0 | 74.2 |
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.
Each Director of the Company was remunerated personally through the Manager's payroll which has been recharged to the Company.
In addition to Directors' remuneration, the Company pays an annual premium in respect of Directors' & Officers' Liability Insurance of £6,860 (2017: £6,817).
The Directors' remuneration for the year ending 31 December 2019 is expected to be £68,000.
The Directors and their interests in the shares of the Company (together with those of their immediate family) are shown below:
| 31 December | 31 December | |
|---|---|---|
| 2018 | 2017 | |
| Lyn Goleby | ||
| (appointed 3 November 2017) | – | – |
| Ben Larkin | 150,567 | 143,089 |
| Patrick Reeve | 166,363 | 160,435 |
| Geoffrey Vero | 41,394 | 41,394 |
| Total | 358,324 | 344,918 |
There have been no changes in the holdings of the Directors between 31 December 2018 and the date of this Report.
There are no guidelines or requirements in respect of Directors' share holdings.
The following items have not been audited.
Albion Capital Group LLP, its partners and staff hold 484,207 Ordinary shares in the Company.
The graph that follows shows the Company's share price total return relative to the FTSE All-Share Index total return, in both instances with dividends reinvested, since 1 January 2009. The Directors consider the FTSE All-Share Index to be the most appropriate benchmark for the Company as it contains a large range of sectors within the UK economy similar to a generalist VCT. Investors should, however, be reminded that shares in VCTs generally trade at a discount to the actual net asset value of the Company.
There are no options, issued or exercisable, in the Company which would distort the graphical representation that follows.
Source: Albion Capital Group LLP
Methodology: The share price return to the shareholder, including original amount invested (rebased to 100) from 1 January 2009, assuming that dividends were re-invested at the share price of the Company at the time the shares were quoted ex-dividend. Transaction costs are not taken into account.
| 2018 | 2017 | Percentage | |
|---|---|---|---|
| £'000 | £'000 | increase/(decrease) | |
| Total distribution to shareholders including dividends | 3,005 | 2,705 | 11.1 |
| Share buybacks | 921 | 855 | 7.7 |
| Total Directors' fees | 68.0 | 74.2 | (8.4) |
By Order of the Board
Geoffrey Vero Director 25 March 2019
We have audited the financial statements of Albion Development VCT Plc (the "company") for the year ended 31 December 2018 which comprise the Income Statement, the Balance Sheet, the Statement of Changes in Equity, the Statement of Cash Flows and Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs (UK) require us to report to you whether we have anything material to add or draw attention to:
the directors' confirmation in the annual report that they have carried out a robust assessment of the principal risks facing the company, including those that would threaten its business model, future performance, solvency or liquidity;
the directors' statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements and the directors' identification of any material uncertainties to the company's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
to the financial statements)
There is a high level of estimation uncertainty involved in determining the unquoted investment valuations.
The Investment Manager's fee is based on the value of the net assets of the fund, as shown in note 5.
As the Investment Manager is responsible for valuing investments for the financial statements, there is a potential risk of overstatement of investment valuations. The existence of an expense cap in the management agreement enhances this risk.
Valuation of investments (Note 2 and 11 We tested a sample of 79% of the unquoted investment portfolio by value of investment holdings.
We performed preliminary analytical procedures to determine our investment sample and the extent of our work considering, inter alia, the value of individual investments, the nature of the investment and the extent of the fair value movement.
57% of the unquoted portfolio is based on valuations using net assets, cost (where the investment was recently acquired), the price of a recent transaction, or an offer to acquire the investee company. For such investments, we checked the cost, recent investment price, net assets or third party offer to supporting documentation and considered the Investment Manager's determination of whether there were any reasons why the valuation and the valuation methodology was not appropriate at 31 December 2018.
The remaining 43% of the unquoted investment portfolio is valued with reference to more subjective techniques with 33% supported by a valuation performed by a third party expert (17% based on discounted cash flows and 16% using earnings multiples). The remaining 10% of the portfolio is valued using multiples of revenue or earnings, as described in note 11.
Our detailed testing for such investments, performed on all investments within our sample comprised:
For investments not included in our detailed testing, we performed the following procedures where relevant:
For a sample of loans held at fair value, we:
Revenue recognition (Note 2 and 4 to the financial statements)
Revenue consists primarily of interest earned on loans to investee companies, as well as dividends receivable from investee companies.
Revenue recognition is considered to be a significant risk, particularly the assessment of the recoverability of loan interest income, and the completeness of dividends, as it is one of the key drivers of dividend returns to investors.
Income arises from unquoted investments and can be difficult to predict. It is often a key factor in demonstrating the performance of the portfolio.
We developed expectations for interest income receivable based on loan instruments and investigated any variations in amounts recognised to ensure they were valid.
In respect of dividends receivable, we compared actual income to expectations set based on independent published data or management information from the investee company on dividends declared by the portfolio companies held.
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. For planning, we consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. Importantly, misstatements below this level will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the Financial Statements.
We determined final materiality for the financial statements as a whole to be £1,053,000 based on 2% of the value of investments. On the basis of our risk assessment, together with our assessment of the control environment, our judgement is that performance materiality for the financial statements should be 75% of materiality, namely £789,000. Our objective in adopting this approach was to ensure that total detected and undetected audit differences do not exceed our final materiality of £1,053,000 for the financial statements as a whole.
| Materiality measure | Purpose | Key considerations and benchmarks | Quantum (£) |
|---|---|---|---|
| Financial statement materiality. (2% of investments) |
Assessing whether the financial statements as a whole present a true and fair view. |
• The value of non-current investments • The level of judgement inherent in the valuation • The range of reasonable alternative valuations |
£1,053,000 (2017: £850,000) |
| Performance materiality. |
Lower level of materiality applied in performance of the audit when determining the nature and extent of testing applied to individual balances and classes of transactions. |
• Financial statement materiality • Risk and control environment |
£789,000 (2017: £637,000) |
| Specific materiality – classes of transactions and balances which impact on revenue. (10% of revenue income) |
Assessing those classes of transactions, balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. |
• Level of revenue income |
£88,000 (2017: £130,000 based on level of net income return) |
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £21,000, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
Our audit approach was developed by obtaining an understanding of the company's activities, the key functions undertaken by the Board and the overall control environment. Based on this understanding we assessed those aspects of the company's transactions and balances which were most likely to give rise to a material misstatement.
The Directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.
In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:
• Directors' statement of compliance with the UK Corporate Governance Code – the parts of the directors' statement required under the Listing Rules relating to the company's compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.
In our opinion, the part of the directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Following the recommendation of the audit committee, we were appointed by the Board of Directors to audit the financial statements for the year ended 31 December 2008 and subsequent financial periods. We were reappointed as auditors in respect of the year ended 31 December 2018 by the Board. The period of total uninterrupted engagement is 11 years, covering the years ending 31 December 2008 to 31 December 2018.
The non-audit services prohibited by the FRC's Ethical Standard were not provided to the company and we remain independent of the company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee.
Vanessa-Jayne Bradley (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor London United Kingdom 25 March 2019
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
| Year ended 31 December 2018 | Year ended 31 December 2017 | ||||||
|---|---|---|---|---|---|---|---|
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gains on investments | 3 | – | 12,326 | 12,326 | – | 5,514 | 5,514 |
| Investment income | 4 | 881 | – | 881 | 689 | – | 689 |
| Investment management fees | 5 | (334) | (1,004) | (1,338) | (273) | (818) | (1,091) |
| Performance incentive fee | 5 | (105) | (315) | (420) | – | – | – |
| Other expenses | 6 | (231) | – | (231) | (221) | – | (221) |
| Profit on ordinary activities | |||||||
| before tax | 211 | 11,007 | 11,218 | 195 | 4,696 | 4,891 | |
| Tax (charge)/credit on ordinary | |||||||
| activities | 8 | (30) | 30 | – | (24) | 24 | – |
| Profit and total comprehensive | |||||||
| income attributable to | |||||||
| shareholders | 181 | 11,037 | 11,218 | 171 | 4,720 | 4,891 | |
| Basic and diluted return | |||||||
| per share (pence)* | 10 | 0.2 | 14.8 | 15.0 | 0.2 | 7.0 | 7.2 |
* excluding treasury shares.
The accompanying notes on pages 50 to 63 form an integral part of these Financial Statements.
The total column of this Income statement represents the profit and loss account of the Company. The supplementary revenue and capital columns have been prepared in accordance with The Association of Investment Companies' Statement of Recommended Practice.
| 31 December 2018 | 31 December 2017 | ||
|---|---|---|---|
| Note | £'000 | £'000 | |
| Fixed asset investments | 11 | 52,663 | 42,291 |
| Current assets | |||
| Current asset investments | 13 | 1,243 | – |
| Trade and other receivables less than one year | 13 | 1,128 | 477 |
| Cash and cash equivalents | 9,189 | 10,955 | |
| 11,560 | 11,432 | ||
| Total assets | 64,223 | 53,723 | |
| Payables: amounts falling due within one year | |||
| Trade and other payables less than one year | 14 | (845) | (377) |
| Total assets less current liabilities | 63,378 | 53,346 | |
| Equity attributable to equityholders | |||
| Called up share capital | 15 | 839 | 801 |
| Share premium | 28,406 | 25,704 | |
| Capital redemption reserve | 12 | 12 | |
| Unrealised capital reserve | 16,234 | 10,892 | |
| Realised capital reserve | 11,539 | 5,844 | |
| Other distributable reserve | 6,348 | 10,093 | |
| Total equity shareholders' funds | 63,378 | 53,346 | |
| Basic and diluted net asset value per share (pence)* | 16 | 84.7 | 73.8 |
* excluding treasury shares.
The accompanying notes on pages 50 to 63 form an integral part of these Financial Statements.
These Financial Statements were approved by the Board of Directors, and authorised for issue on 25 March 2019 and were signed on its behalf by
Geoffrey Vero Chairman
Company number: 03654040
| Called up | Capital | Unrealised | Realised | Other | |||
|---|---|---|---|---|---|---|---|
| share | Share | redemption | capital | capital distributable | |||
| capital | premium | reserve | reserve | reserve* | reserve* | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| As at 1 January 2018 | 801 | 25,704 | 12 | 10,892 | 5,844 | 10,093 | 53,346 |
| Profit and total comprehensive | |||||||
| income for the period | – | – | – | 8,560 | 2,477 | 181 | 11,218 |
| Transfer of unrealised gains on | |||||||
| disposal of investments | – | – | – | (3,218) | 3,218 | – | – |
| Purchase of shares for treasury | – | – | – | – | – | (921) | (921) |
| Issue of equity | 38 | 2,761 | – | – | – | – | 2,799 |
| Cost of issue of equity | – | (59) | – | – | – | – | (59) |
| Dividends paid | – | – | – | – | – | (3,005) | (3,005) |
| As at 31 December 2018 | 839 | 28,406 | 12 | 16,234 | 11,539 | 6,348 | 63,378 |
| As at 1 January 2017 | 689 | 17,886 | 12 | 7,253 | 4,763 | 13,482 | 44,085 |
| Profit and total comprehensive income | |||||||
| for the period | – | – | – | 4,691 | 29 | 171 | 4,891 |
| Transfer of unrealised gains on disposal | |||||||
| or write off of investments | – | – | – | (1,052) | 1,052 | – | – |
| Purchase of shares for treasury | – | – | – | – | – | (855) | (855) |
| Issue of equity | 112 | 8,005 | – | – | – | – | 8,117 |
| Cost of issue of equity | – | (187) | – | – | – | – | (187) |
| Dividends paid | – | – | – | – | – | (2,705) | (2,705) |
| As at 31 December 2017 | 801 | 25,704 | 12 | 10,892 | 5,844 | 10,093 | 53,346 |
* These reserves amount to £17,887,000 (2017: £15,937,000) which is considered distributable.
| Year ended 31 December 2018 £'000 |
Year ended 31 December 2017 £'000 |
|
|---|---|---|
| Cash flow from operating activities | ||
| Loan stock income received | 809 | 647 |
| Deposit interest received | 38 | 7 |
| Dividend income received | 56 | 72 |
| Investment management fees paid | (1,284) | (1,039) |
| Other cash payments | (227) | (217) |
| Corporation tax received | – | 3 |
| Net cash flow from operating activities | (608) | (527) |
| Cash flow from investing activities | ||
| Purchase of current asset investments | (1,400) | – |
| Purchase of fixed asset investments | (5,722) | (6,787) |
| Disposal of fixed asset investments | 7,154 | 3,746 |
| Net cash flow from investing activities | 32 | (3,041) |
| Cash flow from financing activities | ||
| Issue of share capital | 2,244 | 7,503 |
| Cost of issue of shares | (3) | (3) |
| Equity dividends paid | (2,510) | (2,275) |
| Purchase of own shares (including costs) | (921) | (855) |
| Net cash flow from financing activities | (1,190) | 4,370 |
| (Decrease)/increase in cash and cash equivalents | (1,766) | 802 |
| Cash and cash equivalents at start of period | 10,955 | 10,153 |
| Cash and cash equivalents at end of period | 9,189 | 10,955 |
| Cash and cash equivalents comprise: | ||
| Cash at bank and in hand | 9,189 | 10,955 |
| Cash equivalents | – | – |
| Total cash and cash equivalents | 9,189 | 10,955 |
The Financial Statements have been prepared in accordance with applicable United Kingdom law and accounting standards, including Financial Reporting Standard 102 ("FRS 102"), 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").
The preparation of the Financial Statements requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The most critical estimates and judgements relate to the determination of carrying value of investments at Fair Value Through Profit and Loss ("FVTPL"). The Company values investments by following the International Private Equity and Venture Capital Valuation Guidelines ("IPEV") Guidelines and further detail on the valuation techniques used are in note 2 below.
Company information is shown on page 2.
The Company's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment policy, and information about the portfolio is provided internally on that basis to the Board.
In accordance with the requirements of FRS 102, those undertakings in which the Company holds more than 20 per cent. of the equity as part of an investment portfolio are not accounted for using the equity method. In these circumstances the investment is measured at FVTPL.
Upon initial recognition (using trade date accounting) investments, including loan stock, are classified by the Company as FVTPL and are included at their initial fair value, which is cost (excluding expenses incidental to the acquisition which are written off to the Income statement).
Subsequently, the investments are valued at 'fair value', which is measured as follows:
accordance with the IPEV 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:
Investments are recognised as financial assets on legal completion of the investment contract and are de-recognised on legal completion of the sale of an investment.
Dividend income is not recognised as part of the fair value movement of an investment, but is recognised separately as investment income through the other distributable reserve when a share becomes ex-dividend.
Receivables, payables and cash are carried at amortised cost, in accordance with FRS 102. There are no financial liabilities other than payables.
Dividend income is included in revenue when the investment is quoted ex-dividend.
Fixed returns on non-equity shares and debt securities are recognised when the Company's right to receive payment and expect settlement is established. Where interest is rolled up and/or payable at redemption then it is recognised as income unless there is reasonable doubt as to its receipt.
Interest income is recognised on an accruals basis using the rate of interest agreed with the bank.
All expenses have been accounted for on an accruals basis. Expenses are charged through the other distributable reserve except the following which are charged through the realised capital reserve:
Taxation is applied on a current basis in accordance with FRS 102. Current tax is tax payable (refundable) in respect of the taxable profit (tax loss) for the current period or past reporting periods using the tax rates and laws that have been enacted or substantively enacted at the financial reporting date. Taxation associated with capital expenses is applied in accordance with the SORP.
Deferred tax is provided in full on all timing differences at the reporting date. Timing differences are differences between taxable profits and total comprehensive income as stated in the Financial Statements that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the Financial Statements. As a VCT the Company has an exemption from tax on capital gains. The Company intends to continue meeting the conditions required to obtain approval as a VCT in the foreseeable future. The Company therefore, should have no material deferred tax timing differences arising in respect of the revaluation or disposal of investments and the Company has not provided for any deferred tax.
This reserve accounts for the difference between the price paid for the Company's shares and the nominal value of those shares, less issue costs and transfers to the other distributable reserve.
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 following are disclosed in this reserve:
The special reserve, treasury share reserve and the revenue reserve were combined in 2012 to form a single reserve named other distributable reserve.
This reserve accounts for movements from the revenue column of the Income statement, the payment of dividends, the buy-back of shares and other non-capital realised movements.
Dividends by the Company are accounted for in the period in which the dividend is paid or approved at the Annual General Meeting.
The Directors are of the opinion that the Company is engaged in a single operating segment of business, being investment in equity and debt in smaller companies principally based in the UK.
| Year ended | |
|---|---|
| 31 December 2018 31 December 2017 |
|
| £'000 | £'000 |
| 8,717 | 4,691 |
| (157) | – |
| 3,766 | 823 –––––––––––––––––– |
| 12,326 | 5,514 –––––––––––––––––– |
| –––––––––––––––––– –––––––––––––––––– |
| Year ended | ||
|---|---|---|
| 31 December 2018 | ||
| £'000 | £'000 | |
| Loan stock interest and other fixed returns | 787 | 611 |
| UK dividend income | 56 | 72 |
| Bank deposit interest | 38 –––––––––––––––––– |
6 –––––––––––––––––– |
| 881 –––––––––––––––––– |
689 –––––––––––––––––– |
| Year ended | ||
|---|---|---|
| 31 December 2018 | 31 December 2017 | |
| £'000 | £'000 | |
| Investment management fee charged to revenue | 334 | 273 |
| Investment management fee charged to capital | 1,004 | 818 |
| Performance incentive fee charged to revenue | 105 | – |
| Performance incentive fee charged to capital | 315 –––––––––––––––––– |
– –––––––––––––––––– |
| 1,758 –––––––––––––––––– |
1,091 –––––––––––––––––– |
Further details of the Management agreement under which the investment management fee is paid are given in the Strategic report on page 12.
During the year, services of a total value of £1,338,000 (2017: £1,091,000) were purchased by the Company from Albion Capital Group LLP in respect of management fees. In addition, a performance incentive fee with a value of £420,000 (2017: £nil) has been disclosed in the Income statement. At the financial year end, the amount due to Albion Capital Group LLP in respect of these services disclosed as accruals was £775,000 (2017: £300,000).
During the year, the Company was not charged by Albion Capital Group LLP in respect of Patrick Reeve's services as a Director (2017: £nil).
Albion Capital Group LLP, its partners and staff hold 484,207 Ordinary shares in the Company.
Albion Capital Group LLP is, from time to time, eligible to receive arrangement fees and monitoring fees from portfolio companies. During the year ended 31 December 2018, fees of £190,000 attributable to the investments of the Company were received by Albion Capital Group LLP pursuant to these arrangements (2017: £222,000).
Additionally, following approval at the 2018 Annual General Meeting of the investment policy which permitted investment of working capital in open-ended funds to obtain equity returns, an amount of £1,400,000 was invested in the SVS Albion OLIM UK Equity Income Fund ("OUEIF") as part of the Company's management of surplus liquid funds. To avoid double charging, Albion agreed to reduce its management fee relating to the investment in the OUEIF by 0.75 per cent. per annum, which represents the OUEIF management fee charged by OLIM. This resulted in a reduction of the management fee of £3,000 (2017: £nil).
| Year ended | Year ended | |
|---|---|---|
| 31 December 2018 | 31 December 2017 | |
| £'000 | £'000 | |
| Directors' fees (including NIC) | 74 | 82 |
| Auditor's remuneration for statutory audit services (excluding VAT) | 28 | 28 |
| Other administrative expenses | 129 –––––––––––––––––– |
111 –––––––––––––––––– |
| 231 –––––––––––––––––– |
221 –––––––––––––––––– |
The amounts paid to the Directors during the year are as follows:
| Year ended 31 December 2018 |
||
|---|---|---|
| £'000 | £'000 | |
| Directors' fees | 68 | 74 |
| National insurance | 6 –––––––––––––––––– |
8 –––––––––––––––––– |
| 74 –––––––––––––––––– |
82 –––––––––––––––––– |
The Company's key management personnel are the Directors. Further information regarding Directors' remuneration can be found in the Directors' remuneration report on pages 39 and 40.
| Year ended | Year ended | |
|---|---|---|
| 31 December 2018 | 31 December 2017 | |
| £'000 | £'000 | |
| UK corporation tax charge in respect of current year | – –––––––––––––––––– |
– –––––––––––––––––– |
| – –––––––––––––––––– |
– –––––––––––––––––– |
|
| Year ended | Year ended | |
| 31 December 2018 | 31 December 2017 | |
| Factors affecting the tax charge: | £'000 | £'000 |
| Return on ordinary activities before taxation | 11,218 –––––––––––––––––– |
4,891 –––––––––––––––––– |
| Tax charge on profit at the average companies rate of 19 per cent. (2017: 19.25 per cent.) | 2,131 | 942 |
| Factors affecting the charge: | ||
| Non-taxable gains | (2,342) | (1,061) |
| Income not taxable | (11) | (14) |
| Excess management expenses carried forward | 222 –––––––––––––––––– |
133 –––––––––––––––––– |
| – –––––––––––––––––– |
– –––––––––––––––––– |
|
The tax charge for the year shown in the Income statement is lower than the average companies rate of corporation tax in the UK of 19 per cent. (2017: 19.25 per cent.). The differences are explained above.
Notes
(i) Venture Capital Trusts are not subject to corporation tax on capital gains.
(ii) Tax relief on expenses charged to capital has been determined by allocating tax relief to expenses by reference to the applicable corporation tax rate and allocating the relief between revenue and capital in accordance with the SORP.
(iii) The Company has excess management expenses of £1,983,000 (2017: £814,000) that are available for offset against future profits. A deferred tax asset of £337,000 (2017: £138,000) has not been recognised in respect of these losses as they will be recoverable only to the extent that the Company has sufficient future taxable profits.
| Year ended | Year ended | |
|---|---|---|
| 31 December 2018 | 31 December 2017 | |
| £'000 | £'000 | |
| Dividend of 2.0p per Ordinary share paid on 31 May 2017 | – | 1,357 |
| Dividend of 2.0p per Ordinary share paid on 29 September 2017 | – | 1,355 |
| Dividend of 2.0p per Ordinary share paid on 31 May 2018 | 1,505 | – |
| Dividend of 2.0p per Ordinary share paid on 28 September 2018 | 1,503 | – |
| Unclaimed dividends | (3) –––––––––––––––––– |
(7) –––––––––––––––––– |
| 3,005 –––––––––––––––––– |
2,705 –––––––––––––––––– |
|
In addition to the dividends summarised above, the Board has declared a first dividend of 2.25 pence per Ordinary share for the year ending 31 December 2019, payable on 31 May 2019 to shareholders on the register on 3 May 2019. The total dividend will be approximately £1,683,000.
| Year ended 31 December 2018 | Year ended 31 December 2017 | |||||
|---|---|---|---|---|---|---|
| Revenue | Capital | Total | Revenue | Capital | Total | |
| Profit attributable to equity shares (£'000) | 181 | 11,037 | 11,218 | 171 | 4,720 | 4,891 |
| Weighted average shares in issue | ||||||
| (excluding treasury shares) | 74,732,976 | 67,848,906 | ||||
| Return attributable per equity share (pence) | 0.2 | 14.8 | 15.0 | 0.2 | 7.0 | 7.2 |
The weighted average number of Ordinary shares is calculated excluding the treasury shares of 9,072,156 (2017: 7,818,700).
There are no convertible instruments, derivatives or contingent share agreements in issue so basic and diluted return per share are the same.
| 31 December 2018 | 31 December 2017 | |
|---|---|---|
| £'000 | £'000 | |
| Investments held at fair value through profit or loss | ||
| Unquoted equity and preference shares | 34,327 | 23,491 |
| Unquoted loan stock | 18,205 | 18,618 |
| Quoted equity | 131 –––––––––––––––––– |
182 –––––––––––––––––– |
| 52,663 –––––––––––––––––– |
42,291 –––––––––––––––––– |
|
| 31 December 2018 | 31 December 2017 | |
| £'000 | £'000 | |
| Opening valuation | 42,291 | 33,798 |
| Purchases at cost | 6,518 | 7,655 |
| Disposal proceeds | (8,556) | (4,609) |
| Realised gains | 3,766 | 823 |
| Movement in loan stock accrued income | (73) | (67) |
| Unrealised gains | 8,717 –––––––––––––––––– |
4,691 –––––––––––––––––– |
| Closing valuation | 52,663 –––––––––––––––––– |
42,291 –––––––––––––––––– |
| Movement in loan stock accrued income | ||
| Opening accumulated movement in loan stock accrued income | 357 | 424 |
| Movement in loan stock accrued income | (73) –––––––––––––––––– |
(67) –––––––––––––––––– |
| Closing accumulated movement in loan stock accrued income | 284 –––––––––––––––––– |
357 –––––––––––––––––– |
| Movement in unrealised gains | ||
| Opening accumulated unrealised gains | 10,716 | 7,077 |
| Transfer of previously unrealised gains to realised reserve on disposal of investments | (3,218) | (1,235) |
| Transfer of previously unrealised losses to realised reserves on investments written off but still held | – | 183 |
| Movement in unrealised gains | 8,717 –––––––––––––––––– |
4,691 –––––––––––––––––– |
| Closing accumulated unrealised gains | 16,215 –––––––––––––––––– |
10,716 –––––––––––––––––– |
| Historic cost basis | ||
| Opening book cost | 31,218 | 26,297 |
| Purchases at cost | 6,518 | 7,655 |
| Sales at cost | (1,572) | (2,551) |
| Cost of investments written off but still held | – –––––––––––––––––– |
(183) –––––––––––––––––– |
| Closing book cost | 36,164 –––––––––––––––––– |
31,218 –––––––––––––––––– |
Purchases and disposals detailed above do not agree to the Statement of cash flows due to restructuring of investments, conversion of convertible loan stock and settlement debtors and creditors.
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 those valued below cost and past due assets are covered by the value of security held for these loan stock investments.
Unquoted fixed asset investments are valued at fair value in accordance with the IPEV guidelines as follows:
| Valuation methodology | 31 December 2018 £'000 |
31 December 2017 £'000 |
|---|---|---|
| Cost and price of recent investment (reviewed for impairment or uplift) | 27,717 | 15,337 |
| Third party valuation – discounted cash flow | 8,951 | 9,636 |
| Third party valuation – earnings multiple | 8,244 | 7,460 |
| Revenue multiple | 3,272 | 7,136 |
| Net assets | 2,293 | 2,268 |
| Contracted sale price | 1,384 | – |
| Earnings multiple | 671 –––––––––––––––––– |
272 –––––––––––––––––– |
| 52,532 –––––––––––––––––– |
42,109 –––––––––––––––––– |
Fair value investments had the following movements between valuation methodologies between 31 December 2017 and 31 December 2018:
| Value as at 31 December 2018 |
||
|---|---|---|
| Change in valuation methodology (2017 to 2018) | £'000 | Explanatory note |
| Revenue multiple to price of recent investment | 2,011 | Recent external funding round |
| Third party valuation – discounted cash flow to contracted sales price | 1,384 | Third party offer accepted |
| Cost reviewed for impairment or uplift to earnings multiple | 534 | More relevant valuation methodology |
The valuation will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEV Guidelines. The Directors believe that, within these parameters, there are no other possible methods of valuation which would be reasonable as at 31 December 2018.
FRS 102 and the SORP requires the Company to disclose the inputs to the valuation methods applied to its investments measured at fair value through profit or loss in a fair value hierarchy. The table below sets out fair value hierarchy definitions using FRS102 s.11.27.
| Fair value hierarchy | Definition |
|---|---|
| Level 1 | Unadjusted quoted prices in an active market |
| Level 2 | Inputs to valuations are from observable sources and are directly or indirectly derived from prices |
| Level 3 | Inputs to valuations not based on observable market data |
Quoted investments are valued according to Level 1 valuation methods. Unquoted equity, preference shares and loan stock are all valued according to Level 3 valuation methods.
Investments held at fair value through profit or loss (Level 3) had the following movements in the year to 31 December 2018:
| 31 December 2018 £'000 |
31 December 2017 £'000 |
|
|---|---|---|
| Opening balance | 42,109 | 33,494 |
| Additions | 6,518 | 7,655 |
| Disposals | (8,556) | (4,609) |
| Accrued loan stock interest | (73) | (67) |
| Realised gains | 3,766 | 823 |
| Unrealised gains | 8,768 –––––––––––––––––– |
4,813 –––––––––––––––––– |
| Closing balance | 52,532 –––––––––––––––––– |
42,109 –––––––––––––––––– |
FRS 102 requires the Directors to consider the impact of changing one or more of the inputs used as part of the valuation process to reasonable possible alternative assumptions. 78 per cent. of the portfolio of investments is based on cost, recent investment price, net assets, contracted sale price or is loan stock, and as such the Board considers that the assumptions used for their valuations are the most reasonable. The Directors believe that changes to reasonable possible alternative assumptions (by adjusting the revenue and earnings multiples) for the valuations of the remainder of the portfolio companies could result in an increase in the valuation of investments by £486,000 or a decrease in the valuation of investments by £478,000. For valuations based on earnings and revenue multiples, the Board considers that the most significant input is the price/earnings ratio; for valuations based on third party valuations, the Board considers that the most significant inputs are price/earnings ratio, discount factors and market values for buildings; which have been adjusted to drive the above sensitivities.
The principal activity of the Company is to select and hold a portfolio of investments in unquoted securities. Although the Company, through the Manager, will, in some cases, be represented on the board of the portfolio company, it will not take a controlling interest or become involved in the management. The size and structure of the companies with unquoted securities may result in certain holdings in the portfolio representing a participating interest without there being any partnership, joint venture or management consortium agreement. The investment listed below is held as part of an investment portfolio and therefore, as permitted by FRS 102 section 9.9B, it is measured at fair value through profit and loss and not consolidated as a subsidiary.
The Company has interests of greater than 20 per cent. of the nominal value of any class of the allotted shares in the portfolio companies as at 31 December 2018 as described below:
| Registered address | Aggregate capital and |
% total voting | Profit/(loss) | |||
|---|---|---|---|---|---|---|
| Company | and country of incorporation |
Principal activity |
reserves £'000 |
% class and share type |
rights held by the Company |
before tax £'000 |
| Albion Investment Properties Limited |
EC2R 7AF, UK | Former owner of residential property |
(762) | 68.2% A Ordinary |
68.2% | n/a* |
* The company files filleted accounts which does not disclose this information.
| 31 December 2018 | 31 December 2017 | |
|---|---|---|
| Current asset investments | £'000 | £'000 |
| SVS Albion OLIM UK Equity Income Fund | 1,243 –––––––––––––––––– |
– –––––––––––––––––– |
Current asset investments at 31 December 2018 consist of cash invested in SVS Albion OLIM UK Equity Income Fund and is capable of realisation within 7 days. These fall into the level 1 fair value hierarchy as defined in note 11.
| 31 December 2018 | 31 December 2017 | |
|---|---|---|
| Trade and other receivables less than one year | £'000 | £'000 |
| Prepayments and accrued income | 16 | 16 |
| Other receivables | 1,112 –––––––––––––––––– |
461 –––––––––––––––––– |
| 1,128 –––––––––––––––––– |
477 –––––––––––––––––– |
The Directors consider that the carrying amount of receivables is not materially different to their fair value.
| 31 December 2018 | 31 December 2017 |
|---|---|
| £'000 | £'000 |
| 836 | 369 |
| 9 | 8 –––––––––––––––––– |
| 845 | 377 –––––––––––––––––– |
| –––––––––––––––––– –––––––––––––––––– |
The Directors consider that the carrying amount of payables is not materially different to their fair value.
| Allotted, called up and fully paid shares: | £'000 | |
|---|---|---|
| 80,135,559 Ordinary shares of 1 penny each at 31 December 2017 | 801 | |
| 3,724,910 Ordinary shares of 1 penny each issued during the year | 38 | |
| 83,860,469 Ordinary shares of 1 penny each at 31 December 2018 | 839 | |
| 7,818,700 Ordinary shares of 1 penny each held in treasury at 31 December 2017 | (78) | |
| 1,253,456 Ordinary shares of 1 penny each purchased during the year to be held in treasury | (13) | |
| 9,072,156 Ordinary shares of 1 penny each held in treasury at 31 December 2018 | (91) | |
| Voting rights of 74,788,313 Ordinary shares of 1 penny each at 31 December 2018 |
The Company purchased 1,253,456 Ordinary shares (2017: 1,262,000) at a cost of £921,000 including stamp duty (2017: £855,000) to be held in treasury during the year to 31 December 2018. Total share buy backs in 2018 represents 1.5 per cent. (2017: 1.6 per cent.) of called-up share capital as at 31 December 2018.
The Company holds a total of 9,072,156 shares (2017: 7,818,700) in treasury representing 10.8 per cent. (2017: 9.8 per cent.) of the issued Ordinary share capital at 31 December 2018.
Under the terms of the Dividend Reinvestment Scheme, the following new Ordinary shares of nominal value 1 penny each were allotted during the year:
| Date of allotment | Number of shares allotted |
Aggregate nominal value of shares (£'000) |
Issue price (pence per share) |
Net invested (£'000) |
Opening market price on allotment date (pence per share) |
|---|---|---|---|---|---|
| 31 May 2018 | 324,995 | 3 | 76.2 | 246 | 72.5 |
| 28 September 2018 | 316,891 –––––––––––––––––––––––––– |
3 | 78.9 | 250 –––––––––––– |
77.0 |
| 641,886 –––––––––––––––––––––––––– |
6 | 496 –––––––––––– |
Under the terms of the Albion VCTs Prospectus Top Up Offers 2017/18, the following new Ordinary shares of nominal value 1 penny each, were allotted during the year:
| Aggregate nominal |
Opening market price |
||||
|---|---|---|---|---|---|
| Number of shares allotted |
value of shares (£'000) |
(pence | received (£'000) |
on allotment date (pence per share) |
|
| 1,903,510 | 19 | 74.0 | 1,373 | 68.5 | |
| 964,862 | 10 | 75.7 | 712 | 68.5 | |
| 76,930 | 1 | 75.0 | 57 | 67.0 | |
| 7,692 | – | 75.4 | 6 | 67.0 | |
| 130,030 | 1 | 75.7 | 96 | 67.0 | |
| 3,083,024 | 31 | 2,244 –––––––––––– |
|||
| –––––––––––––––––––––––––– –––––––––––––––––––––––––– |
Net Issue price consideration per share) –––––––––––– |
| 31 December 2018 | 31 December 2017 | |
|---|---|---|
| (pence per share) | (pence per share) | |
| Basic and diluted net asset value per Ordinary share | 84.7 –––––––––––––––––– |
73.8 –––––––––––––––––– |
The basic and diluted net asset values per share at the year end are calculated in accordance with the Articles of Association and are based upon total shares in issue (less treasury shares) of 74,788,313 Ordinary shares as at 31 December 2018 (2017: 72,316,859).
The Company's capital comprises Ordinary shares as described in note 15. The Company is permitted to buy back its own shares for cancellation or treasury purposes, and this is described in more detail on page 27 of the Directors' report.
The Company's financial instruments comprise equity and loan stock investments in quoted and unquoted companies, cash balances and receivables and payables which arise from its operations. The main purpose of these financial instruments is to generate cashflow and revenue and capital appreciation for the Company's operations. The Company has no gearing or other financial liabilities apart from short term payables. The Company does not use any derivatives for the management of its Balance sheet.
The principal 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 apart from where noted below, there have been no changes in the objectives, policies or processes for managing risks during the past year. The key risks are summarised below.
As a venture capital trust, it is the Company's specific nature to evaluate and control the investment risk of its portfolio in quoted and unquoted investments, details of which are shown on pages 19 to 21. 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 £53,906,000 (2017: £42,291,000). Fixed asset and current asset investments form 85 per cent. of net asset value as at 31 December 2018 (2017: 79 per cent.).
More details regarding the classification of fixed asset investments are shown in note 11.
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. 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 IPEV Guidelines. Details of the industries in which investments have been made are contained in the Portfolio of investments section on pages 19 to 21 and in the Strategic report.
Valuations are based on the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEV Guidelines.
As required under FRS 102 section 34.29, the Board is required to illustrate by way of a sensitivity analysis the degree of exposure to market risk. The Board considers that the value of the fixed 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. (2017: 10 per cent.) increase or decrease in the valuation of the fixed asset investments (keeping all other variables constant) would increase or decrease the net asset value and return for the year by £5,390,600 (2017: £4,229,100).
The Company is exposed to fixed and floating rate 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 1 per cent. in all interest rates would have increased total return before tax for the year by approximately £139,000 (2017: £101,000). Furthermore, it is considered that a fall of interest rates below current levels during the year would have been very unlikely.
The weighted average effective interest rate applied to the Company's fixed rate assets during the year was approximately 5.3 per cent. (2017: 4.3 per cent.). The weighted average period to maturity for the fixed rate assets is approximately 5.1 years (2017: 5.1 years).
The Company's financial assets and liabilities, all denominated in pounds sterling, consist of the following:
| 31 December 2018 | 31 December 2017 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Fixed rate £'000 |
Floating rate £'000 |
Non- interest bearing £'000 |
Total £'000 |
Fixed rate £'000 |
Floating rate £'000 |
Non- interest bearing £'000 |
Total £'000 |
||
| Unquoted equity | – | – | 34,327 | 34,327 | – | – | 23,491 | 23,491 | |
| Quoted equity | – | – | 131 | 131 | – | – | 182 | 182 | |
| Unquoted loan stock | 17,542 | 201 | 462 | 18,205 | 17,576 | 210 | 832 | 18,618 | |
| Current asset investments | – | – | 1,243 | 1,243 | – | – | – | – | |
| Receivables* | – | – | 1,114 | 1,114 | – | – | 462 | 462 | |
| Current liabilities | – | – | (845) | (845) | – | – | (377) | (377) | |
| Cash | – | 9,189 | – | 9,189 | – | 10,955 | – | 10,955 | |
| Total | 17,542 | 9,390 | 36,432 | 63,364 | 17,576 | 11,165 | 24,590 | 53,331 |
*The receivables do not reconcile to the Balance sheet as prepayments are not included in the above table.
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 receivables, investment in unquoted loan stock, and through the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock and other similar instruments prior to investment, and as part of its ongoing monitoring of investments. In doing this, it takes into account the extent and quality of any security held. For loan stock investments made prior to 6 April 2018, which account for 98.7 per cent. of loan stock by value, typically loan stock instruments have a first fixed charge or a fixed and floating charge over the assets of the portfolio company in order to mitigate the gross credit risk. The Manager receives management accounts from portfolio companies, and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment-specific credit risk.
The Manager and the Board formally review credit risk (including receivables) and other risks, both at the time of initial investment and at quarterly Board meetings.
The Company's total gross credit risk at 31 December 2018 was limited to £18,205,000 (2017: £18,618,000) of unquoted loan stock instruments, £9,189,000 (2017: £10,955,000) of cash deposits with banks and £1,128,000 (2017: £477,000) of other receivables.
As at the Balance sheet date, the cash held by the Company is held with Lloyds Bank plc, Scottish Widows Bank plc (part of Lloyds Banking Group), Barclays Bank plc and National Westminster Bank plc. Credit risk on cash transactions is mitigated by transacting with counterparties that are regulated entities subject to prudential supervision, with high credit ratings assigned by international creditrating agencies.
The Company has an informal policy of limiting counterparty banking exposure to a maximum of 20 per cent. of net asset value for any one counterparty.
The credit profile of unquoted loan stock is described under liquidity risk shown below.
Liquid assets are held as cash on current account, cash on deposit or short term money market account. Under the terms of its Articles, the Company has the ability to borrow up to 10 per cent. of its adjusted capital and reserves of the latest published audited Balance sheet, which amounts to £6,169,000 as at 31 December 2018 (2017: £5,186,000).
The Company had no committed borrowing facilities as at 31 December 2018 (2017: nil) and the Company had cash and fixed term deposit balances of £9,189,000 (2017: £10,955,000). The main cash outflows are for new investments, 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. All of the Company's financial liabilities are short term in nature and total £845,000 (2017: £377,000).
The carrying value of loan stock investments, analysed by expected maturity dates is as follows:
| 31 December 2018 | 31 December 2017 | |||||||
|---|---|---|---|---|---|---|---|---|
| Valued | Valued | |||||||
| Fully | below | Fully | below | |||||
| performing | cost | Past due | Total | performing | cost | Past due | Total | |
| Redemption date | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Less than one year | 1,996 | 911 | 1,311 | 4,218 | 3,343 | 843 | 1,366 | 5,552 |
| 1-2 years | 2,704 | 171 | 1,484 | 4,359 | 615 | 830 | 502 | 1,947 |
| 2-3 years | 677 | 112 | 116 | 905 | 1,835 | 76 | 467 | 2,378 |
| 3-5 years | 2,645 | 222 | – | 2,867 | 3,351 | – | – | 3,351 |
| 5 + years | 5,741 | – | 115 | 5,856 | 4,379 | – | 1,011 | 5,390 |
| Total | 13,763 | 1,416 | 3,026 | 18,205 | 13,523 | 1,749 | 3,346 | 18,618 |
Loan stock can be past due as a result of interest or capital not being paid in accordance with contractual terms.
The cost of loan stock investments valued below cost is £1,746,000 (2017: £1,846,000).
In view of the availability of adequate cash balances and the repayment profile of loan stock investments, the Board considers that the Company is subject to low liquidity risk.
All the Company's financial assets and liabilities as at 31 December 2018 are stated at fair value as determined by the Directors, with the exception of receivables and payables and cash which are carried at amortised cost, in accordance with FRS 102. There are no financial liabilities other than payables. The Company's financial liabilities are all non-interest bearing. It is the Directors' opinion that the book value of the financial liabilities is not materially different to the fair value and all are payable within one year.
As at 31 December 2018, the Company had no financial commitments (2017: £nil).
There were no contingent liabilities or guarantees given by the Company as at 31 December 2018 (2017: £nil).
Since the year end, the Company had the following material investment transactions:
On 7 January 2019 the Company announced the publication of a prospectus in relation to an offer for subscription for new Ordinary shares. A Securities Note, which forms part of the prospectus, has been sent to shareholders.
In November 2016, Albion acquired OLIM Investment Managers ("OLIM"), a specialist fund manager of UK quoted equities. During the year, a total of £1,400,000 (2017: £nil) was invested into the SVS Albion OLIM UK Equity Income Fund ("OUEIF") following shareholder approval at the 2018 Annual General Meeting, with a further £600,000 invested after the year end.
Albion agreed to reduce that proportion of its management fee relating to the investment in the OUEIF by 0.75 per cent. per annum, which represents the OUEIF management fee charged by OLIM; this resulted in a reduction of the management fee of £3,000 (2017: £nil).
Other than transactions with the Manager as disclosed in note 5 and that discussed above, there are no other related party transactions or balances requiring disclosure.
NOTICE IS HEREBY GIVEN that the Annual General Meeting of Albion Development VCT PLC (the "Company") will be held at the City of London Club, 19 Old Broad Street, London EC2N 1DS on 30 May 2019 at 12:00 noon for the following purposes:
To consider and, if thought fit, to pass the following resolutions, of which numbers 1 to 7 will be proposed as ordinary resolutions and numbers 8 to 10 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 shares in the Company up to an aggregate nominal amount of £167,721 for Ordinary shares provided that this authority shall expire 15 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 such 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 this authority had not expired.
That, subject to the authority and conditional on the passing of resolution number 7, the Directors be empowered, pursuant to sections 570 and 573 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 7 and/or sell Ordinary shares held by the Company as treasury shares for cash as if section 561(1) of the Act did not apply to any such allotment or sale.
Under this power the Directors may impose any limits or restrictions and make any arrangements which they deem necessary or expedient to deal with any treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or laws of, any territory or other matter, arising under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory or any other matter.
This power shall expire 15 months from the date that this resolution is passed or, if earlier, the conclusion of the next Annual General Meeting of the Company, 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 this power had not expired.
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, on such terms as the Directors think fit, provided always that:
(a) the maximum aggregate number of Ordinary shares hereby authorised to be purchased is 12,570,684 or, if lower, such number of Ordinary shares as shall equal 14.99 per cent. of the issued Ordinary share capital of the Company as at the date of the passing of this resolution (excluding any Ordinary shares held in treasury);
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 25 March 2019
Albion Development VCT PLC is registered in England and Wales with company number 03654040
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 12:00 noon on 28 May 2019.
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, at www.investorcentre.co.uk/eproxy. Shareholders can use this service to vote or appoint a proxy online. The same voting deadline of 12:00 noon on 28 May 2019 applies as if you were using your Personalised Voting Form to vote or appoint a proxy by post to vote for you. Shareholders who hold their shares electronically may submit their votes through CREST, by submitting the appropriate and authenticated CREST message so as to be received by the Company's registrar not later than 48 hours before the start of the meeting. Instructions on how to vote through CREST can be found by accessing the following website: www.euroclear.com/CREST. Shareholders should not show this information to anyone unless they wish to give proxy instructions on their behalf.
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 12:00 noon on 28 May 2019. 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 providers 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 or her 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.
A matter may properly be included in the business at the AGM unless (i) it is defamatory of any person or (ii) it is frivolous or vexatious. A request made pursuant to this right may be in hard copy or electronic form, must identify the matter to be included in the business, must be accompanied by a statement setting out the grounds for the request, must be authenticated by the person(s) making it and must be received by the Company not later than 6 weeks before the date of the AGM.
A member of the Association of Investment Companies
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