Albion Venture Capital Trust PLC
Annual Report and Financial
Statements for the year
ended 31 March 2017
17
Albion Venture Capital Trust PLC
A member of the Association of Investment Companies
This report is printed on Amadeus offset a totally recycled paper produced using 100% recycled waste
at a mill that has been awarded the ISO 14001 certifi cate for environmental management. The pulp is
bleached using a totally chlorine free (TCF) process.
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Contents
Page
2 Company information
3 Investment objective and policy
3 Background to the Company
3 Financial calendar
4 Financial highlights
6 Chairman’s statement
8 Strategic report
14 The Board of Directors
15 The Manager
16 Portfolio of investments
18 Portfolio companies
20 Directors’ report
25 Statement of Directors’ responsibilities
26 Statement of corporate governance
31 Directors’ remuneration report
33 Independent Auditor’s report
38 Income statement
39 Balance sheet
40 Statement of changes in equity
41 Statement of cash flows
42 Notes to the Financial Statements
55 Notice of Annual General Meeting
59 Dividend history for C shares and Albion Prime VCT PLC
Albion Venture Capital Trust PLC 1
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Company information
Company number 03142609
Directors D J Watkins MBA (Harvard), Chairman (US citizen)
J M B L Kerr ACMA
J Warren ACCA
E Dinesen R (Danish) FSR
Country of incorporation United Kingdom
Legal form Public Limited Company
Manager, company secretary, Albion Capital Group LLP
AIFM and registered office 1 King’s Arms Yard
London, EC2R 7AF
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
1st Floor
4 Staple Inn
London, WC1V 7QH
Legal adviser Bird & Bird LLP
15 Fetter Lane
London, EC4A 1JP
Albion Venture Capital Trust PLC is a member of The Association of Investment Companies (www.theaic.co.uk).
Shareholder information For help relating to dividend payments, shareholdings and share certificates
please contact Computershare Investor Services PLC:
Tel: 0370 873 5849 (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 with Computershare by registering on Computershare’s
website.
Financial adviser information For enquiries relating to the performance of the Company, and information for
Email: info@albion.capital
Tel: 020 7601 1850 (lines are open 9.00am – 5.30pm; Mon – Fri; calls may
financial advisers, please contact Albion Capital Group LLP:
Website: www.albion.capital
be recorded)
Please note that these contacts are unable to provide financial or
taxation advice.
2 Albion Venture Capital Trust PLC
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Investment objective and policy
The investment strategy of Albion Venture Capital Trust PLC (the “Company”) is to manage the risk normally associated with
investments in smaller unquoted companies whilst maintaining an attractive yield, through allowing investors the opportunity
to participate in a balanced portfolio of asset-backed businesses. The Company’s investment portfolio will thus be structured
to provide a balance between income and capital growth for the longer term.
This is achieved as follows:
● qualifying unquoted investments are predominantly in specially-formed companies which provide a high level of asset
backing for the capital value of the investment;
● the Company invests alongside selected partners with proven experience in the sectors concerned;
● investments are normally structured as a mixture of equity and loan stock. The loan stock represents the majority of the
finance provided and is secured on the assets of the portfolio company. Funds managed or advised by Albion Capital
Group LLP typically own 50 per cent. of the equity of the portfolio company;
● other than the loan stock issued to funds managed or advised by Albion Capital Group LLP, portfolio companies do not
normally have external borrowings.
The Company offers tax-paying investors substantial tax benefits at the time of investment, on payment of dividends and on
the ultimate disposal of the investment.
As defined by the Articles of Association, the Company’s maximum exposure in relation to gearing is restricted to 10 per cent.
of the adjusted share capital and reserves. The Directors do not currently have any intention to utilise gearing for the Company.
Background to the Company
The Company is a venture capital trust which raised a total of £39.7 million through an issue of Ordinary shares in the spring
of 1996 and through an issue of C shares in the following year. The C shares merged with the Ordinary shares in 2001. The
Company has raised a further £26.9 million under the Albion VCTs Top Up Offers since 2011.
On 25 September 2012, the Company acquired the assets and liabilities of Albion Prime VCT PLC (“Prime”) in exchange for
new shares in the Company. Each Prime shareholder received 0.8801 shares in the Company for each Prime share that they
held at the date of the Merger.
Financial calendar
Record date for first dividend
Payment of first dividend
Annual General Meeting
7 July 2017
31 July 2017
11:00am on 14 August 2017
Announcement of half-yearly results for the six months ended 30 September 2017
December 2017
Payment of second dividend (subject to Board approval)
31 January 2018
Albion Venture Capital Trust PLC 3
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Financial highlights
the year ended 31 March 2017
the year ended 31 March 2017
8.7p Basic and diluted total return per share for
5.0p Total tax-free dividend per share paid during
75.4p Net asset value per share as at 31 March 2017
220.2p Total shareholder return since launch to
7.4% Tax free yield on share price (dividend per
6.4% Annualised return since launch (without tax
annum/share price as at 31 March 2017)
31 March 2017
relief)
Total shareholder return relative to the FTSE All-Share Index total return
(in both cases with dividends reinvested)
)
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400
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7
FTSE All-Share Index total return
Total shareholder return
Source: Albion Capital Group LLP
Methodology: Total shareholder return, including original amount invested (rebased to 100) from launch, assuming that
dividends were reinvested at net asset value of the Company at the time the shares were quoted ex-dividend. Transaction
costs are not taken into account.
4 Albion Venture Capital Trust PLC
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Financial highlights (continued)
31 March 2017 31 March 2016
(pence per share) (pence per share)
Dividends paid 5.0 5.0
Revenue return 1.9 2.0
Capital return 6.8 3.6
Net asset value 75.4 72.0
Total shareholder return to 31 March 2017 Ordinary shares
Total dividends paid during the year ended : 31 March 1997 2.00
31 March 1998 5.20
31 March 1999 11.05
31 March 2000 3.00
31 March 2001 8.55
31 March 2002 7.60
31 March 2003 7.70
31 March 2004 8.20
31 March 2005 9.75
31 March 2006 11.75
31 March 2007 10.00
31 March 2008 10.00
31 March 2009 10.00
31 March 2010 5.00
31 March 2011 5.00
31 March 2012 5.00
31 March 2013 5.00
31 March 2014 5.00
31 March 2015 5.00
31 March 2016 5.00
31 March 2017 5.00
––––––––––––
Total dividends paid to 31 March 2017 144.80
Net asset value as at 31 March 2017 75.40
––––––––––––
Total shareholder return to 31 March 2017 220.20
––––––––––––
The financial summary above is for the Company, Albion Venture Capital Trust PLC Ordinary shares only. Details
of the financial performance of the C shares and Albion Prime VCT PLC, which have been merged into the
Company, can be found on pages 59 and 60.
In addition to the dividends summarised above, the Board has declared a first dividend for the year ending
31 March 2018 of 2.5 pence per share to be paid on 31 July 2017 to shareholders on the register on
7 July 2017.
Notes
● Dividends paid before 5 April 1999 were paid to qualifying shareholders inclusive of the associated tax credit. The dividends for the
year to 31 March 1999 were maximised in order to take advantage of this tax credit.
● All dividends paid by the Company are paid free of income tax to qualifying shareholders. It is an H.M. Revenue & Customs requirement
that dividend vouchers indicate the tax element should dividends have been subject to income tax. Investors should ignore this figure
on their dividend voucher and need not disclose any income they receive from a VCT on their tax return.
● The net asset value of the Company is not its share price as quoted on the official list of the London Stock Exchange. The share price
of the Company can be found in the Investment Companies – VCTs section of the Financial Times on a daily basis. Investors are
reminded that it is common for shares in VCTs to trade at a discount to their net asset value.
Albion Venture Capital Trust PLC 5
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Chairman’s statement
Introduction
The results for the year to 31 March 2017 show a total return
of 8.7 pence per share, against 5.6 pence per share for the
previous year, and net assets of 75.4 pence per share
compared to 72.0 pence per share at 31 March 2016,
following the payment of total tax-free dividends of 5 pence
per share.
With regard to our pubs, our portfolio of units in the North
West, within Bravo Inns and Bravo Inns II, continues to
expand its operations. Meanwhile, The Charnwood Pub
Company (renamed MHS1 Limited) completed the disposal
of its pub portfolio. After the year end, The Weybridge Club
Limited (renamed TWCL Limited) sold the assets of its
business.
It is encouraging that the Company’s total return continues
for the third year to more than cover its dividend of 5 pence
per share. This has been partly through an increase in the
income generated by the investment portfolio, which has
risen 12 per cent. from the previous year. The principal
element, however, has come from capital uplifts; in particular
the uplift in the third party valuations of our care homes.
Investment performance and progress
In general, we have been continuing the task of repositioning
the portfolio, aimed at a reduced reliance on sectors that are
exposed to the consumer and business cycle. Healthcare
now accounts for 35 per cent. of the portfolio, renewable
energy accounts for 17 per cent., while education continues
to account for 7 per cent.. Hotels, meanwhile, have reduced
from 23 per cent. to 18 per cent..
Taking these sectors in turn, Shinfield View, Reading, which
is one of our three care homes, opened in April 2016. Active
Lives Care (trading as Cumnor Hill House), which is based in
Oxford, opened in June 2016; and Ryefield Court, based in
Hillingdon in West London, opened in July 2016. All three
care homes are building towards good levels of occupancy,
at rates significantly higher than originally forecast, leading to
pleasing uplifts in the independent third party valuations.
Our renewable energy investments are now mature, other
than our biogas plant, Earnside Energy, which is currently
expanding its capacity. In general, it is intended to hold these
cash-generative investments for the longer term with the aim
of providing low risk diversification for the investment portfolio
as a whole, combined with a strong source of income.
In education, Radnor House Twickenham now has over 400
pupils while pupil numbers at Radnor House Sevenoaks,
formerly Combe Bank School, have already reached 300.
We continue to review our hotel portfolio with a view to
reducing our exposure further. Trading at the Holiday Inn
Express at Stansted Airport has been strong, but the
valuation has been reduced in light of a new, competing,
hotel opening in the summer. Trading at the Crown hotel in
Harrogate has been similar to prior year while the Stanwell
Hotel has continued to face challenges.
Results and dividends
As at 31 March 2017, the net asset value was £65.5 million
or 75.4 pence per share, compared to £57.0 million or
72.0 pence per share as at 31 March 2016, after the
payment of total tax-free dividends of 5 pence per share. The
results comprised a total return of 8.7 pence per share for the
year (2016: 5.6 pence per share), which is made up of a
1.9 pence per share revenue return (2016: 2.0 pence per
share) and a 6.8 pence per share capital return (2016:
3.6 pence per share). The revenue return before taxation was
£1.8 million compared to £1.7 million for the year to
31 March 2016. The Company will pay a first dividend of
2.5 pence per share for the year ending 31 March 2018 on
31 July 2017 to shareholders on the register on 7 July 2017,
which is in line with the Company’s current objective of
paying a dividend of 5 pence per share annually. Thereafter,
it is intended that payment of the next dividend will be made
at the end of January 2018, which was previously paid to
shareholders in December.
Risks and uncertainties
The outlook for the UK economy, continues to be the key risk
affecting your Company. The forthcoming withdrawal from
the European Union may have an effect on the Company and
its investments, although the extent of the effect is not
quantifiable at this time. However, we would expect the effect
to be felt most in those sectors which are most exposed to
the consumer and business cycle.
The regulatory environment in which the Company operates
has had significant input from rules developed within the
European Union and it is uncertain what changes may occur
in a separate UK regulatory environment.
The Company’s policy remains that its portfolio companies
should not normally have external borrowings and for the
Company normally to have a first charge over portfolio
companies’ assets. The Board and the Manager see this as
an important factor in the control of investment risk.
However, certain portfolio companies may take on external
borrowings, where the Board considers this will offer a
significant benefit to the Company.
A detailed analysis of the other risks and uncertainties facing
the business is set out on pages 12 and 13 of the Strategic
report.
6 Albion Venture Capital Trust PLC
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Chairman’s statement (continued)
Board composition
As you may know, I have been chairman of your Company
since its launch in 1996 and I have indicated to the Board
that I intend to retire at the Annual General Meeting in August
2018. Ebbe Dinesen has indicated that he would also like to
retire, at the Annual General Meeting in 2019. The nomination
committee is therefore in the process of reviewing candidates
and announcements of replacements will be made in due
course. We believe that it will be helpful to have some overlap
of new directors joining the Board before we retire. To
facilitate this, a resolution will be proposed at the Annual
General Meeting to raise the aggregate annual limit for total
Directors’ fees to £150,000, which will facilitate increasing
the Board’s size but will not be used to increase the individual
Director’s fees.
Albion VCTs top up offers
The Company raised approximately £0.3 million during the year
under the Albion VCTs Prospectus Top Up Offers 2015/2016
and approximately £5.6 million under the Albion VCTs
Prospectus Top Up Offers 2016/2017, with a subsequent
£0.3 million after the year end.
The Company announced on 14 June 2017 that, subject to
regulatory approval, it intends to launch a prospectus top up
offer of new ordinary shares for subscription in the
2017/2018 and 2018/2019 tax years. Full details of the Offer
will be contained in a prospectus that is expected to be
published in early September 2017 and will be available on
the Albion Capital website (www.albion.capital).
Share buy-backs
It remains the Board’s primary objective to maintain sufficient
resources for investment in existing and new portfolio
companies and for the continued payment of dividends to
shareholders. Thereafter, it is still the Board’s policy to buy
back shares in the market, subject to the overall criterion that
such purchases are in the Company’s interest. The total value
bought in for the year ended 31 March 2017 was £873,000.
Subject to the constraints referred to above and subject to
first purchasing shares held by the market makers, the Board
will target 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.
to make proposals
Continuation as a venture capital trust
At the 2017 Annual General Meeting shareholders have the
opportunity to confirm that they wish the Company to
continue as a venture capital trust. Otherwise the Board is
required
the reorganisation,
reconstruction or the orderly liquidation and winding up of the
Company and present these to the members at a general
meeting. Those shareholders who have been using their
investment in the VCT to defer a capital gain should note
that, on a return of capital, that gain would become
chargeable at the prevailing rate of capital gains tax.
for
Your Board believes that the Albion VCTs have the potential
to be highly effective long-term investment vehicles, with
strong tax-free dividend streams. Therefore, the Board
recommends that shareholders should vote in favour of the
Company continuing as a venture capital trust, as they intend
to vote in respect of their own shares. Further details
regarding the resolution can be found in the Directors’ report
on page 23.
Outlook and prospects
We are pleased with the progress made during the course of
the year, in particular the building up of our healthcare
portfolio. Looking forward, there are a number of interesting
areas for investment in the pipeline and we would anticipate
further progress in the current year.
David Watkins
Chairman
27 June 2017
Albion Venture Capital Trust PLC 7
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Strategic report
Investment objective and policy
The Company’s investment policy is to provide investors with
the opportunity to participate in a balanced portfolio of
asset-backed businesses. The Company’s investment
portfolio will thus be structured to provide a balance between
income and capital growth for the longer term.
This is achieved as follows:
● qualifying unquoted investments are predominantly in
specially-formed companies which provide a high level
of asset backing for the capital value of the investment;
● the Company invests alongside selected partners with
proven experience in the sectors concerned;
● investments are normally structured as a mixture of
equity and loan stock. The loan stock normally
represents the majority of the finance provided and is
secured on the assets of the portfolio company. Funds
managed or advised by Albion Capital Group LLP
typically own 50 per cent. of the equity of the portfolio
company; and
● other than the loan stock issued to funds managed or
advised by Albion Capital Group LLP, portfolio
companies do not normally have external borrowings.
As defined by the Articles of Association, the Company’s
maximum exposure in relation to gearing is restricted to 10 per
cent. of the adjusted share capital and reserves. The Directors
do not currently have any intention to utilise gearing for the
Company.
Current portfolio sector allocation
The following pie chart shows the split of the portfolio valuation
by industrial or commercial sector as at 31 March 2017.
Details of the principal investments made by the Company are
shown in the Portfolio of investments on pages 16 and 17.
Split of portfolio by sector
Education
7% (7%)
Cash and cash
equivalents
15% (21%)
Renewable
energy
17% (19%)
Other
5% (3%)
Hotels
18% (23%)
Healthcare
35% (22%)
Pubs
3% (5%)
Comparatives for 31 March 2016 are shown in brackets
Source: Albion Capital Group LLP
8 Albion Venture Capital Trust PLC
Direction of portfolio
The sector analysis of the Company’s investment portfolio
shows that healthcare now accounts for 35 per cent. of the
portfolio, compared to 22 per cent. at the end of the previous
financial year, following further investments in the Company’s
three care homes and £6.8 million uplift in valuations. This
may increase further as the care homes approach maturity
and are revalued in the future. Renewable energy accounts
for 17 per cent. of the portfolio, but no new investments are
being made in this sector as they are no longer allowed under
VCT rules. Hotels accounted for 18 per cent. compared to
23 per cent. at the previous year end and the Company is
looking to reduce this further.
Results and dividends Ordinary shares
£’000
Net revenue return for the year
ended 31 March 2017 1,510
Net capital gain for the year
ended 31 March 2017 5,501
––––––––––––
Total return for the year
ended 31 March 2017 7,011
Dividend of 2.5 pence per share
paid on 29 July 2016 (1,987)
Dividend of 2.5 pence per share
paid on 30 December 2016 (1,986)
Unclaimed dividends returned to
the Company 9
––––––––––––
Transferred to reserves 3,047
––––––––––––
Net assets as at 31 March 2017 65,475
––––––––––––
Net asset value per share as
at 31 March 2017 (pence) 75.4
––––––––––––
The Company paid dividends totalling 5.0 pence per share
during the year ended 31 March 2017 (2016: 5.0 pence per
share). The dividend objective of the Board is to provide
Shareholders with a strong, predictable dividend flow, with a
dividend target of 5.0 pence per share per year.
As noted in the Chairman’s statement, the Board has
declared a first dividend of 2.5 pence per share for the year
ending 31 March 2018. This dividend will be paid on 31 July
2017 to shareholders on the register on 7 July 2017.
As shown in the Income statement on page 38 of the
Financial Statements, the Company’s investment income has
increased to £2,381,000 (2016: £2,236,000) and the total
revenue return to equity holders also
increased to
£1,510,000 (2016: £1,403,000), principally driven by the
Company’s successful renewable energy development
programme. Income continues to more than cover on-going
expenses. Although total income has increased, revenue
return per share has decreased slightly, to 1.9 pence per
245544 Albion Venture Cap pp06-pp17 27/06/2017 16:44 Page 9
Strategic report (continued)
for
the year was £6,179,000
share (2016: 2.0 pence per share), due to the number of new
shares issued during the year. The capital gain on
investments
(2016:
£3,203,000), offset by management fees charged to capital
and the related taxation impact, resulting in a capital return of
6.8 pence per share (2016: 3.6 pence per share). The total
return was 8.7 pence per share (2016: 5.6 pence per share).
The Balance sheet on page 39 shows that the net asset
value has increased over the last year to 75.4 pence per
share (2016: 72.0 pence per share), reflecting the total return
exceeding the level of dividends paid during the year.
The cash flow for the Company has been a net inflow of
£166,000 for the year (2016: inflow £1,328,000), reflecting
cash inflows from operations, disposal proceeds and the
issue of Ordinary shares under the Albion VCTs Top Up
Offers, offset by dividends paid, new investments in the year
and the buy-back of shares.
During the year, unclaimed dividends older than twelve years
of £9,000 (2016: £22,000) were returned to the Company in
accordance with the terms of the Articles of Association.
Review of business and future changes
A review of the Company’s business during the year and
investment performance and progress is contained in the
Chairman’s statement on page 6. The healthcare sector
performed particularly well again this year with an increase in
valuations of £6,791,000 (2016: £1,517,000). After strong
increases in previous years, the renewable energy sector saw
modest increases overall. The hotel sector saw a decrease of
£944,000 (2016: £524,000 uplift) principally as a result of
caution in the light of new competition for our hotel at
Stansted Airport. The education sector saw an increase in
valuation of £618,000 (2016: £337,000) as Radnor House
Sevenoaks boosted pupil numbers. TWCL Limited
(previously The Weybridge Club Limited) decreased in
valuation by £145,000, which subsequently sold its business
and assets after the year end.
The Company continues with its objective to invest in
asset-based unquoted companies throughout the United
Kingdom, with a view to providing both capital growth and a
reliable dividend income to shareholders over the longer
term. The Directors do not foresee any major changes in the
activity undertaken by the Company in the current year.
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.
VCT regulation
The investment policy is designed to ensure that the
Company continues to qualify and is approved as a VCT by
HMRC. In order to maintain its status under Venture Capital
Trust legislation, a VCT must comply on a continuing basis
with the provisions of Section 274 of the Income Tax Act
2007, details of which are provided in the Directors’ report on
page 21.
To comply with EU State aid obligations, rules were
introduced under the Finance Act (No.2) 2015 and Finance
Act 2016, which include:
● Restrictions over the age of investments;
● A prohibition on management buyouts or the purchase
of existing businesses;
● An overall lifetime investment cap of £12 million from
tax-advantaged funds into any portfolio company; and
● A VCT can only make qualifying investments or certain
specified non-qualifying investments such as money
market securities and short term deposits.
While these changes were significant, the Manager’s
assessment is that had they been in place previously they
would have affected only a relatively small minority of the
investments that we have made into new portfolio companies
over recent years. The Board’s current view is that there will
be no material change in our investment policy as a result.
The relevant tests to measure compliance have been carried
out and independently reviewed for the year ended 31 March
2017. These showed that the Company has complied with all
tests and continues to do so.
Future prospects
The Company’s performance record reflects the resilience of
the strategy outlined above and has enabled the Company to
maintain a predictable stream of dividend payments to
shareholders. The Board believes that this model will
continue to meet the investment objective and has the
potential to deliver attractive returns to shareholders in the
future.
Key performance indicators
The Directors believe that the following key performance
indicators, which are typical for venture capital trusts and
used by the Board in its assessment of the Company, will
provide shareholders with sufficient information to assess
how effectively the Company is applying its investment policy
to meet its objective. The Directors are satisfied that the
results shown in the following key performance indicators
give a good indication that the Company is achieving its
investment objective and policy. These are:
1.Total shareholder return relative to FTSE All Share Index
total return
The graph on page 4 shows the Company’s total shareholder
return against the FTSE All-Share Index total return, in both
instances with dividends reinvested.
Albion Venture Capital Trust PLC 9
245544 Albion Venture Cap pp06-pp17 27/06/2017 16:44 Page 10
Strategic report (continued)
2. Net asset value per share and total shareholder return
Net asset value per share and total shareholder return*
250
200
150
100
95.0
99.9
e
r
a
h
s
r
e
p
r
e
c
n
e
P
191.3
183.7
171.9
159.2
148.5
136.8
127.8
118.4
110.2
205.0
204.7
195.3 197.9
199.0 201.1
190.1
191.4
220.2
211.8
206.4
50
0
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
NAV
Cumulative dividend
* Total shareholder return is net asset value plus cumulative dividends paid since launch to date.
Net asset value increased by 11.7 per cent. (after adding
back the 5.0 pence per share in dividends paid) to
75.4 pence per share for the year ended 31 March 2017.
Total shareholder return increased by 4.0 per cent. to
220.2 pence per share for the year ended 31 March 2017.
3. Dividend distributions
Dividends paid in respect of the year ended 31 March 2017
were 5.0 pence per share (2016: 5.0 pence per share), in line
with the Board’s dividend objective. Cumulative dividends
paid since inception amount to 144.8 pence per Ordinary
share and 133.25 pence per historic C share.
4. Ongoing charges
The ongoing charges ratio for the year to 31 March 2017 was
2.4 per cent. (2016: 2.5 per cent.). The ongoing charges ratio
has been calculated using The Association of Investment
Companies’ (AIC) recommended methodology. This figure
shows shareholders the total recurring annual running
expenses (including investment management fees charged
to capital reserve) as a percentage of the average net assets
attributable to shareholders. The Directors expect the
ongoing charges ratio for the year ahead to be approximately
2.4 per cent. The cap on total annual normal expenses,
including the management fee, is 3.0 per cent. of the net
asset value.
e
r
a
h
s
r
e
p
e
c
n
e
P
150
125
100
75
50
25
0
5.0
1
9
9
7
Dividends paid
144.8
139.8
134.8
129.8
124.8
119.8
114.8
109.8
104.8
94.8
84.8
74.8
67.8
58.8
50.3
42.3
34.8
27.3
18.8
11.0
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
Dividends paid in the period
Cumulative dividend
10 Albion Venture Capital Trust PLC
245544 Albion Venture Cap pp06-pp17 27/06/2017 16:44 Page 11
Strategic report (continued)
Gearing
As defined by the Articles of Association, the Company’s
maximum exposure in relation to gearing is restricted to
10 per cent. of the adjusted share capital and reserves. The
Directors do not currently have any intention to utilise gearing
for the Company. On an exceptional basis, certain portfolio
companies may take on external borrowings, where the
Board considers this will offer a significant benefit to the
Company.
Operational arrangements
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.
Management agreement
Under the Management agreement, the Manager provides
investment management, secretarial and administrative
services to the Company. The Management agreement can
be terminated by either party on 12 months’ notice. The
Management agreement 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
1.9 per cent. of the net asset value of the Company, and an
annual secretarial and administrative fee of £48,711
(2016: £48,087) increased annually by RPI. These fees are
payable quarterly in arrears.
In line with common practice, the Manager is also entitled to
an arrangement fee, payable by each portfolio company, of
approximately 2 per cent. on each investment made and any
applicable monitoring fees.
Management performance incentive
In order to provide the Manager with an incentive to maximise
the return to investors, the Company has entered into a
management performance incentive arrangement with the
Manager. Under the incentive arrangement, the Company will
pay an incentive fee to the Manager of an amount equal to
8 per cent. of the excess total return above 5 per cent. per
annum, paid out annually in cash as an addition to the
management fee. Any shortfall of the target return will be
carried forward into subsequent periods and the incentive fee
will only be paid once all previous and current target returns
have been met.
For the year to 31 March 2017, no incentive fee became due
to the Manager (2016: £nil).
No further performance fee will become due until the hurdle
rate comprising net asset value, plus dividends from
31 March 2004, has been reached. As of 31 March 2017 the
total return from 31 March 2004 amounted to 166.9 pence
per share which compared to the hurdle of 213.3 pence per
share at that date.
Investment and co-investment
The Company co-invests with other venture capital trusts
and funds managed by Albion Capital Group LLP. Allocation
of investments is on the basis of an allocation agreement
which is based, inter alia, on the ratio of funds available for
investment.
Evaluation of the Manager
The Board has evaluated the performance of the Manager
based on the returns generated by the Company, the
continued compliance under venture capital trust legislation,
the long term prospects of current investments, a review of
the Management agreement and the services provided
therein, and benchmarking the performance of the Manager
to other service providers. The Board believes that it is in the
interests of shareholders as a whole, and of the Company, to
continue the appointment of the Manager for the forthcoming
year.
Alternative Investment Fund Managers Directive
(“AIFMD”)
The Board has appointed Albion Capital Group LLP as the
Company’s AIFM as required by the AIFMD.
Social and community issues, employees and
human rights
The Board recognises the requirement under section 414C of
the Companies Act 2006 (the “Act”) to detail information
about social and community issues, employees and human
rights; including any policies it has in relation to these matters
and effectiveness of these policies. As an externally managed
investment company with no employees, the Company has
no policies in these matters and as such these requirements
do not apply.
Further policies
The Company has adopted a number of further policies
relating to:
● Environment
● Global greenhouse gas emissions
● Anti-bribery
● Diversity
and these are set out in the Directors’ report on pages 21
and 22.
Albion Venture Capital Trust PLC 11
245544 Albion Venture Cap pp06-pp17 27/06/2017 16:44 Page 12
Strategic report (continued)
Risk management
The Board carries out a robust assessment of principal risks 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 and
performance risk
Valuation 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 fragile than larger, long
established businesses.
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 investments
discussed at the Investment Committee meetings. Investments are
actively and regularly monitored by the Manager (investment managers
normally sit on portfolio company boards), including the level of
diversification in the portfolio, and the Board receives detailed reports on
each investment as part of the Manager’s report at quarterly board
meetings.
investment
Company’s
The
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
is
reported.
issued by such companies
As described in note 2 of the Financial Statements, the investments
held by the Company are classified at fair value through profit or loss
and valued in accordance with the International Private Equity and
Venture Capital Valuation Guidelines. These guidelines set out
recommendations, intended to represent current best practice on the
valuation of venture capital investments. These investments are valued
on the basis of forward looking estimates and judgements about the
business itself, its market and the environment in which it operates,
together with the state of the mergers and acquisitions market, stock
market conditions and other factors. In making these judgements the
valuation takes into account all known material facts up to the date of
approval of the Financial Statements by the Board. The values of all
investments are at cost (reviewed for impairment) or supported by
independent third party professional valuations.
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 H.M. Revenue & Customs.
Regulatory and
compliance risk
Operational and
internal control
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.
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. On an annual basis, the
Audit Committee chairman meets with the internal audit Partner to provide
an opportunity to ask specific detailed questions in order to satisfy itself
that the Manager has strong systems and controls in place including
those in relation to business continuity.
In addition, the Board regularly reviews the performance of its key service
providers, particularly the Manager, to ensure they continue to have the
necessary expertise and resources to deliver the Company’s investment
objective and policies. The Manager and other service providers have also
demonstrated to the Board that there is no undue reliance placed upon
any one individual within Albion Capital Group LLP.
12 Albion Venture Capital Trust PLC
245544 Albion Venture Cap pp06-pp17 27/06/2017 16:44 Page 13
Strategic report (continued)
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.
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 invests in a diversified portfolio of companies across a
number of industry sectors and in addition often invests a mixture of
equity and secured loan stock in portfolio companies and has a general
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.
The Company operates a share buy-back policy, and the Board targets
such buy-backs to be in the region of a 5 per cent. discount to the most
recently announced net asset value, so far as market conditions and
liquidity permit. 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 its buy-back authorities, which are renewed each year.
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.
Viability statement
In accordance with the FRC UK Corporate Governance Code
published in September 2014 and principle 21 of the AIC
Code of Corporate Governance, the Directors have assessed
the prospects of the Company over three years to 31 March
2020. The Directors believe that three years is a reasonable
period in which they can assess the future of the Company to
continue to operate and meet its liabilities as they fall due, and
is also the period used by the Board in the strategic planning
process and is considered reasonable for a business of our
nature and size. The three year period is considered the most
appropriate given the forecasts that the Board require from
the Manager and the estimated timelines for finding, assessing
and completing investments.
The Directors have carried out a robust assessment of the
principal risks facing the Company as explained above,
including those that could threaten its business model, future
performance, solvency or liquidity. The Board also considered
the risk management processes in place to avoid or reduce
the impact of the underlying risks. The Board focused on the
major factors which affect the economic, regulatory and
political environment. The Board considered the role of the
Manager and the processes that it has in place for dealing with
the principal risks.
The Board assessed the ability of the Company to raise
finance and deploy capital. As explained in this Strategic
report the Company’s income more than covers ongoing
expenses. This income should increase as our asset-backed
investments continue to mature. The portfolio is well balanced
and geared towards long term growth delivering dividends and
capital growth to shareholders. In assessing the prospects of
the Company the Directors have considered the cash flow by
looking at the Company’s income and expenditure projections
and funding pipeline over the assessment period of three
years and they appear realistic.
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 March 2020.
This Strategic report of the Company for the year ended
31 March 2017 has been prepared in accordance with the
requirements of section 414A of the Act. The purpose of this
report is to provide Shareholders with sufficient information to
enable them to assess the extent to which the Directors have
performed their duty to promote the success of the Company
in accordance with section 172 of the Act.
On behalf of the Board,
David Watkins
Chairman
27 June 2017
Albion Venture Capital Trust PLC 13
245544 Albion Venture Cap pp06-pp17 27/06/2017 16:44 Page 14
The Board of Directors
The following are the Directors of the Company, all of whom
operate in a non-executive capacity:
David Watkins MBA (Harvard), Chairman (appointed
9 February 1996)
David Watkins worked for Goldman Sachs from 1972 until
1991 where he was head of Euromarkets Syndication and
Head of European Real Estate. He subsequently joined
Mountleigh Group PLC where he worked as a director on the
restructuring of the business prior to the Group being placed
into administration. After a period operating his own
corporate finance business, he joined Baring Securities in
1994 as Head of Equity Capital Markets - London, before
leaving
into
administration to become Chief Financial Officer and one of
the principal shareholders for The Distinguished Programs
Group LLC, an insurance distribution and underwriting
group. At the end of 2012 he sold his shares in The
Distinguished Programs Group LLC, but remains as Vice
Chairman. From 1986 to 1990, he was a member of the
Council of the London Stock Exchange.
in mid-1995 when the company went
John Kerr ACMA (appointed 9 February 1996)
John Kerr has worked as a venture capitalist and also in
manufacturing and service industries. He held a number of
finance and general management posts in the UK and USA,
before joining SUMIT Equity Ventures, an independent
Midlands based venture capital company, where he was
managing director from 1985 to 1992. He then became chief
executive of Price & Pierce Limited, which acted as the UK
agent for overseas producers of forestry products, before
leaving in 1997 to become finance director of Ambion Brick,
a building materials company bought out from Ibstock PLC.
After retiring in 2002, he now works as a consultant. He is an
external member of the Manager’s investment committee.
Jeff Warren ACCA (appointed 2 October 2007)
Jeff Warren has 30 years’ financial management experience,
including high level corporate governance and regulatory
environment experience. In 1992 he resigned as Finance
Director of Mountleigh Group PLC, which was subsequently
placed into administration, and joined Bristol & West Building
Society as CFO. Following the acquisition of Bristol & West
by Bank of Ireland, he continued as Finance Director until he
was promoted to CEO of Bristol & West PLC in 1999, and
subsequently also took responsibility for the Bank of Ireland
UK Branch network. In 2003 he moved to take on a role at
Group level in Dublin, as Group Chief Development Officer,
reporting to the Bank of Ireland CEO. In 2004 he returned to
the UK and has since held a number of non-executive roles,
including 4 months as a non-executive Director of Courts Plc
until that company was placed into administration in
December 2004.
Ebbe Dinesen R (Danish) FSR (appointed
26 September 2012)
Ebbe Dinesen qualified as a chartered accountant in
Denmark before working in senior positions in the Danish
industry. In 1985 he came to the United Kingdom and
became CEO of Carlsberg UK in 1987. He later became CEO
of Carlsberg-Tetley PLC (now Carlsberg UK) and became
executive chairman of that company in 2001. He stepped
down in 2006. He was chairman of the British Brewers from
2002 to 2006. Ebbe Dinesen was Danish vice-consul for The
Midlands from 1987 to 2006. In 2000 he was knighted by the
Queen of Denmark.
All Directors are members of the Audit Committee and John
Kerr is Chairman.
All Directors are members of the Nomination Committee and
David Watkins is Chairman.
All Directors are members of the Remuneration Committee
and Jeff Warren is Chairman.
14 Albion Venture Capital Trust PLC
245544 Albion Venture Cap pp06-pp17 27/06/2017 16:44 Page 15
The Manager
Albion Capital Group LLP (previously Albion Ventures LLP), is
authorised and regulated by the Financial Conduct Authority
and is the Manager of Albion Venture Capital Trust PLC. In
addition, it manages a further five venture capital trusts, the
UCL Technology Fund and provides administration services
to Albion Community Power PLC and Albion Care
Communities Limited. Albion, together with its subsidiary,
OLIM Limited, currently has total assets under management
or administration of approximately £1 billion.
The following are specifically responsible for the management
and administration of the VCTs managed by Albion Capital
Group LLP:
Patrick Reeve, MA, ACA, qualified as a chartered
accountant before joining Cazenove & Co where he spent
three years in the corporate finance department. He joined
Close Brothers Group plc in 1989, working in both the
development capital and corporate finance divisions before
establishing Albion Capital (formerly Albion Ventures LLP). He
is the managing partner of Albion Capital and is a director of
Albion Technology & General VCT PLC, Albion Enterprise
VCT PLC and Albion Development VCT PLC, all managed by
Albion Capital. He is also chief executive of Albion
Community Power PLC, Chairman of OLIM Limited, a
member of the Audit Committee of University College
London, a director of The Association of Investment
Companies, and is on the Council of the BVCA.
Will Fraser-Allen, BA (Hons), FCA, qualified as a chartered
accountant with Cooper Lancaster Brewers in 1996 and then
joined their corporate finance team providing corporate
finance advice to small and medium sized businesses. He
joined Albion Capital in 2001 since when he has focused on
leisure and healthcare investing. Will became deputy
managing partner of Albion Capital in 2009. Will has a BA in
History from Southampton University.
Dr. Andrew Elder, MA, FRCS,
initially practised as a
surgeon for six years, specialising in neurosurgery, before
joining the Boston Consulting Group (BCG) as a consultant in
2001. Whilst at BCG he specialised in healthcare strategy,
gaining experience with many large, global clients across the
full spectrum of healthcare
including biotechnology,
pharmaceuticals, service and care providers, software and
telecommunications. He joined Albion Capital in 2005 and
became a partner in 2009. He has an MA plus Bachelors of
Medicine and Surgery from Cambridge University and is a
Fellow of the Royal College of Surgeons (England).
Emil Gigov, BA (Hons), FCA, is a Partner at Albion Capital
and leads Albion’s investments in social care and education.
He joined Albion Capital in 2000 and over the years has
made and managed numerous investments in the software,
engineering, business services and leisure sectors. Emil’s
early career was with KPMG, where he qualified as a
chartered accountant in 1997 and spent three years in
KPMG’s corporate finance team, with a particular focus on
media and leisure businesses. Emil is a trustee of the Radnor
Charitable Trust, an education charity he helped establish in
2011.
David Gudgin, BSc (Hons), ACMA, qualified as a
management accountant with ICL before spending 3 years at
the BBC. In 1999 he joined 3i plc as an investor in European
technology based in London and Amsterdam. In 2002 he
moved to Foursome Investments (now Frog Capital) as the
lead investor of an environmental technology and a later
stage development capital fund. David joined Albion Capital
Group LLP in 2005 and became a partner in 2009. He is also
Managing Director of Albion Community Power PLC. David
has a BSc in Economics from Warwick University.
Vikash Hansrani, BA (Hons), ACA, qualified as a chartered
accountant with RSM Tenon plc and latterly worked in its
corporate finance team. He joined Albion Capital in 2010,
where he is currently Operations Partner. He is also Finance
Director of Albion Community Power PLC and OLIM Limited.
He has a BA in Accountancy & Finance from Nottingham
Business School.
Ed Lascelles, BA (Hons), has been investing with Albion
since 2004 and oversees many of the technology
investments in the VCTs as well as the physical sciences and
engineering investment for the UCL Technology Fund. Prior
to Albion, Ed worked at ING Barings advising UK public
companies on M&A, IPOs and fundraisings in the technology,
healthcare and financial services sectors. Ed graduated from
University College London with a first class degree in
Philosophy.
leading
investments
Dr. Christoph Ruedig, MBA,
initially practiced as a
radiologist, before spending 3 years at Bain & Company. In
2006 he joined 3i plc working for their Healthcare Venture
Capital arm
in biotechnology,
pharmaceuticals and medical technology. Most recently he
has worked for General Electric UK, where he was
responsible for mergers and acquisitions in the medical
technology and healthcare IT sectors. He joined Albion
Capital in 2011 and became a partner in 2014. He holds a
degree in medicine from Ludwig-Maximilians University,
Munich and an MBA from INSEAD.
Henry Stanford, MA, ACA, qualified as a chartered
accountant with Arthur Andersen before joining the corporate
finance department of Close Brothers Group in 1992,
becoming an assistant director in 1996. He moved to Albion
Capital in 1998, where he has been responsible for much of
the asset based portfolio. Henry became a partner in Albion
Capital in 2009. He holds an MA degree in Classics from
Oxford University.
Robert Whitby-Smith, BA (Hons), FCA, MCSI began his
career at KPMG and moved on to Credit Suisse First Boston
and ING Barings where he advised a number of businesses
on capital raising and M&A activity. Robert joined Albion
Capital in 2005 and became a partner in 2009. Robert is
responsible for investments in the technology, advanced
manufacturing and business services sectors. Robert holds
an honours degree in History from the University of Reading
and is a Chartered Accountant and a member of the
Chartered Institute for Securities and Investment.
Albion Venture Capital Trust PLC 15
245544 Albion Venture Cap pp06-pp17 27/06/2017 16:44 Page 16
Portfolio of investments
As at 31 March 2017 As at 31 March 2016
% voting
rights held Change in
by all Cumulative Cumulative value
% Albion* Accounting movement Accounting movement for the
voting managed cost** in value Value cost** in value Value year
Portfolio company rights companies £’000 £’000 £’000 £’000 £’000 £’000 £’000***
Healthcare
Shinfield Lodge Care Limited 35.3 50.0 6,425 4,088 10,513 5,400 1,329 6,729 2,760
Active Lives Care Limited 22.2 50.0 4,530 2,227 6,757 3,320 198 3,518 2,029
Ryefield Court Care Limited 23.6 50.0 3,540 2,124 5,664 2,287 122 2,409 2,002
Total investment in the
healthcare sector 14,495 8,439 22,934 11,007 1,649 12,656 6,791
Hotels
Kew Green VCT (Stansted) Limited 45.2 50.0 5,910 767 6,677 6,315 1,603 7,918 (837)
The Crown Hotel Harrogate Limited 24.1 50.0 4,245 (1,151) 3,094 4,245 (1,288) 2,957 137
The Stanwell Hotel Limited 39.2 50.0 5,069 (2,783) 2,286 5,069 (2,539) 2,530 (244)
Total investment in the
hotel sector 15,224 (3,167) 12,057 15,629 (2,224) 13,405 (944)
Renewable energy
Chonais River Hydro Limited 9.2 50.0 3,074 767 3,841 3,074 641 3,715 126
Earnside Energy Limited 9.5 50.0 1,531 112 1,643 509 36 545 76
Gharagain River Hydro Limited 11.5 50.0 1,363 162 1,525 1,363 487 1,850 (326)
The Street by Street Solar
Programme Limited 6.5 50.0 675 372 1,047 676 279 955 93
Alto Prodotto Wind Limited 7.4 50.0 662 364 1,026 670 354 1,024 11
Infinite Ventures (Goathill) Limited 11.5 31.0 480 152 632 480 107 587 45
Regenerco Renewable
Energy Limited 4.5 50.0 451 177 628 451 127 578 51
Dragon Hydro Limited 7.3 30.0 311 162 473 311 156 467 6
AVESI Limited 7.4 50.0 242 80 322 242 53 295 27
Greenenerco Limited 3.9 50.0 135 66 201 135 76 211 (9)
Total investment in the
renewable energy sector 8,924 2,414 11,338 7,911 2,316 10,227 100
Education
Radnor House School
(Holdings) Limited 7.1 50.0 2,381 1,935 4,316 2,523 1,317 3,840 618
Total investment in
the education sector 2,381 1,935 4,316 2,523 1,317 3,840 618
Pubs
Bravo Inns II Limited 6.4 50.0 1,085 132 1,217 1,085 51 1,136 81
Bravo Inns Limited 7.6 50.0 751 (170) 581 751 (160) 591 (9)
Total investment in the
pub sector 1,836 (38) 1,798 1,836 (109) 1,727 72
Other
MHS 1 Limited (previously The
Charnwood Pub Company Limited) 14.8 50.0 1,026 (2) 1,024 1,196 (156) 1,040 (16)
TWCL Limited (previously
The Weybridge Club Limited) 14.3 50.0 1,083 (326) 757 2,242 (1,343) 899 (145)
Erin Solar Limited 18.6 50.0 520 (11) 509 520 (11) 509 –
Harvest AD Limited – – 307 – 307 307 – 307 –
G&K Smart Developments
VCT Limited 42.9 50.0 276 (20) 256 276 (40) 236 20
Premier Leisure (Suffolk) Limited 9.9 47.4 175 (6) 169 175 (6) 169 –
Beddlestead Farm Limited 8.0 50.0 8 – 8 – – – –
Total other investments 3,395 (365) 3,030 4,716 (1,556) 3,160 (141)
Total fixed asset investments 46,255 9,218 55,473 43,622 1,393 45,015 6,496
* Albion Capital Group LLP
** Amounts shown as accounting cost represent the acquisition cost in the case of investments originally made by the Company and/or the fair value attributed
to the investments acquired from Albion Prime VCT PLC on the Merger on 25 September 2012.
*** As adjusted for additions and disposals during the year.
16 Albion Venture Capital Trust PLC
245544 Albion Venture Cap pp06-pp17 27/06/2017 16:44 Page 17
Portfolio of investments (continued)
Total change in value of investments for the year 6,496
Movement in loan stock accrued interest (331)
Unrealised gains sub-total 6,165
Realised gain in current year 14
Total gains on investments as per Income statement 6,179
Accounting Opening Disposal Total realised Gain on
Fixed asset investment realisations during cost* carrying value proceeds gain/(loss) opening value
the year to 31 March 2017 £’000 £’000 £’000 £’000 £’000
Kew Green VCT (Stansted) Limited 405 405 405 – –
Radnor House School (Holdings) Limited 142 142 142 – –
Escrow adjustments*** – – 14 14 14
Alto Prodotto Wind Limited 8 10 10 2 –
The Street by Street Solar Programme Limited 1 1 1 – –
TWCL Limited (previously The Weybridge Club Limited)** 1,162 – – (1,162) –
MHS 1 Limited (previously The Charnwood
Pub Company Limited) ** 170 – – (170) –
Total 1,888 558 572 (1,316) 14
*The cost includes the original cost from Albion Venture Capital Trust PLC and the carried over value on merger from Albion Prime VCT PLC as at 25 September 2012.
**The accounting cost as shown above is after deducting realised losses of £1,162,000 for TWCL Limited (previously The Weybridge Club Limited) and £170,000 for
MHS 1 Limited (previously The Charnwood Pub Company Limited) which are still held at the Balance sheet date.
*** Fair value movements on deferred consideration from previously disposed investments.
Albion Venture Capital Trust PLC 17
245544 Albion Venture Cap pp18-pp19 27/06/2017 16:48 Page 18
Portfolio companies
The top ten investments by value are below.
The most recently audited results are included for each portfolio company where applicable. Valuations are often based upon
the most recent information available, which may include management accounts. The audited results are therefore not
necessarily the figures used for the valuation.
Shinfield Lodge Care Limited
The company owns and operates the 66 bedroom care home, Shinfield View, in Reading, which opened in
April 2016.
Abbreviated results: year to 31 December 2015
£’000 Investment information £’000
Income recognised in the year 335
Total cost 6,425
Total valuation 10,513
1,090 Voting rights 35.3 per cent.
Net assets
Basis of valuation: Valuation supported by third party or desktop valuation Voting rights for all Albion managed companies 50.0 per cent.
Website:
www.shinfieldview.com
Active Lives Care Limited
The company owns and operates the 75 bedroom care home, Cumnor Hill House, in Oxford, which opened in
June 2016.
Abbreviated results: period to 31 December 2015
£’000 Investment information £’000
Income recognised in the year 437
Total cost 4,530
Total valuation 6,757
Net assets 1,373 Voting rights 22.2 per cent.
Basis of valuation: Valuation supported by third party or desktop valuation Voting rights for all Albion managed companies 50.0 per cent.
Website: www.cumnorhillhouse.uk
Kew Green VCT (Stansted) Limited
The company developed and operates a limited service hotel under the “Holiday Inn Express”
brand at Stansted Airport on a 125 year lease. The hotel opened in January 2005 with 183
bedrooms. A 71 bedroom extension opened in July 2007, taking the hotel to 254 bedrooms.
Audited results: year to 31 August 2016
£’000 Investment information £’000
Turnover 5,344 Income recognised in the year 334
EBITDA 1,170 Total cost 5,910
Profit before tax 427 Total valuation 6,677
Net assets 4,873 Voting rights 45.2 per cent.
Basis of valuation: Valuation supported by third party or desktop valuation Voting rights for all Albion
Website: www.expressstanstedairport.co.uk managed or advised companies 50.0 per cent.
Ryefield Court Care Limited
The company owns and operates the 60 bed care home, Ryefield court, in Hillingdon, Middlesex which opened in
July 2016.
Abbreviated results: year to 30 April 2016
£’000 Investment information £’000
Income recognised in the year 179
Total cost 3,540
Total valuation 5,664
Net assets 1,004 Voting rights 23.6 per cent.
Basis of valuation: Valuation supported by third party or desktop valuation Voting rights for all Albion managed companies 50.0 per cent.
Website: www.ryefieldcourt.uk
Radnor House School (Holdings) Limited
Radnor House is a group of co-educational independent day schools with sites in South West London and near
Sevenoaks in Kent. The group provides personalised education to students aged 5-18 and has the capacity to
accommodate some 1,000 children.
Audited results: year to 31 August 2016
£’000 Investment information £’000
Turnover 9,821 Income recognised in the year 176
EBITDA 1,009 Total cost 2,381
Loss before tax (972) Total valuation 4,316
Net assets 25,337 Voting rights 7.1 per cent.
Basis of valuation: Valuation supported by third party or desktop valuation Voting rights for all Albion managed companies 50.0 per cent.
Website: www.radnorhouse.org
18 Albion Venture Capital Trust PLC
245544 Albion Venture Cap pp18-pp19 27/06/2017 16:48 Page 19
Portfolio companies (continued)
Chonais River Hydro Limited
The company owns and operates a 2 megawatt hydro-power scheme in the Scottish Highlands.
Audited results: year to 30 September 2016
£’000 Investment information £’000
Turnover – Income recognised in the year 276
EBITDA (11) Total cost 3,074
Loss before tax (11) Total valuation 3,841
Net liabilities (47) Voting rights 9.2 per cent.
Basis of valuation: Valuation supported by third party or desktop valuation Voting rights for all Albion managed companies 50.0 per cent.
The Crown Hotel Harrogate Limited
The company acquired the historic 114 bedroom Crown Hotel in Harrogate, Yorkshire in November 2005. A substantial
refurbishment was carried out and the hotel is once again recognised as one of the leading hotels in Harrogate.
Audited results: year to 31 March 2016
£’000 Investment information £’000
Turnover 2,691 Income recognised in the year 58
EBITDA 335 Total cost 4,245
Loss before tax (922) Total valuation 3,094
Net liabilities (8,362) Voting rights 24.1 per cent.
Basis of valuation: Valuation supported by third party or desktop valuation Voting rights for all Albion
Website: www.crownhotelharrogate.com managed or advised companies 50.0 per cent.
The Stanwell Hotel Limited
The company acquired the 19 bedroom Stanwell Hall Hotel near Heathrow in August 2007. Planning consent was
subsequently obtained to extend the hotel to 52 bedrooms and the hotel re-opened at the end of April 2010.
Audited results: year to 31 August 2016
£’000 Investment information £’000
Turnover 1,311 Income recognised in the year 41
EBITDA 50 Total cost 5,069
Loss before tax (838) Total valuation 2,286
Net liabilities (6,950) Voting rights 39.2 per cent.
Basis of valuation: Valuation supported by third party or desktop valuation Voting rights for all Albion managed companies 50.0 per cent.
Website: www.thestanwell.com
Earnside Energy Limited
The Company owns and operates an anaerobic digestion and composting plant near Perth, Scotland.
Audited results: year to 31 December 2015
£’000 Investment information
£’000
Turnover 2,090 Income recognised in the year 112
EBITDA 1,609 Total cost 1,531
Profit before tax 743 Total valuation 1,643
Net assets 565 Voting rights 9.5 per cent.
Basis of valuation: Valuation supported by third party or desktop valuation Voting rights of all Albion managed companies 50.0 per cent.
(cid:3)
Gharagain River Hydro Limited
The company operates a 1MW hydroelectricity plant near Ledgowan in Western Scotland.
Audited results: year to 30 September 2016
£’000 Investment information £’000
Turnover – Income recognised in the year 119
EBITDA (5) Total cost 1,363
Loss before tax (5) Total valuation 1,525
Net assets 197 Voting rights 11.5 per cent.
Basis of valuation: Valuation supported by third party or desktop valuation Voting rights for all Albion managed companies 50.0 per cent.
Website: www.greenhighland.co.uk
Net assets of portfolio companies where a recent third party valuation has taken place may have a higher valuation in Albion Venture
Capital Trust PLC’s accounts than in their own, where the portfolio company does not have a policy of revaluing its fixed assets.
Albion Venture Capital Trust PLC 19
245544 Albion Venture Cap pp20-pp32 27/06/2017 16:50 Page 20
Directors’ report
The Directors submit their Annual Report and the audited
Financial Statements on the affairs of Albion Venture Capital
Trust PLC (the “Company”) for the year ended 31 March
2017.
BUSINESS REVIEW
Principal activity and status
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. 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 and further details
of this can be found on page 21 of this Directors’ report.
Approval for the year ended 31 March 2017 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
tax-free 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.
Capital structure
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 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 or voting rights) rank pari passu for voting
rights and 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 the return
on capital on winding up or other return on capital based on
the surpluses attributable to the shares.
20 Albion Venture Capital Trust PLC
Issue and buy-back of Ordinary shares
During the year the Company issued a total of 8,974,488
Ordinary shares (2016: 14,716,851), of which 8,221,867
Ordinary shares (2016: 14,107,902) were issued under the
Albion VCTs Top Up Offers; and 752,621 Ordinary shares
(2016: 608,949) were issued under the Company’s Dividend
Reinvestment Scheme. The Company engaged in the Albion
VCTs Prospectus Top Up Offers 2016/2017 which closed on
9 February 2017, as it was fully subscribed having reached
its £6m limit under the offer pursuant to the Prospectus
dated 29 November 2016.
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 page 7 of the
Chairman’s statement.
Substantial interests and shareholder profile
As at 31 March 2017 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 Rule and Transparency Rule 5 made to the
Company during the year ended 31 March 2017, and to the
date of this report.
Future developments of the business
Details on the future developments of the business can be
found on page 7 of the Chairman’s statement and on page 9
of the Strategic report.
Results and dividends
Detailed information on the results and dividends for the year
ended 31 March 2017 can be found in the Strategic report
on pages 8 and 9.
Going concern
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
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.
(namely
245544 Albion Venture Cap pp20-pp32 27/06/2017 16:50 Page 21
Directors’ report (continued)
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.
Post balance sheet events
Details of events that have occurred since 31 March 2017 are
shown in note 19.
Principal risks and uncertainties
A summary of the principal risks faced by the Company is set
out on pages 12 and 13 of the Strategic report.
Maintenance of VCT qualifying status
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:
(1) The Company’s income must be derived wholly or
mainly from shares and securities;
(2) At least 70 per cent. of the HMRC value of its
investments must have been represented throughout
the year by shares or securities that are classified as
‘qualifying holdings’;
(3) At least 30 per cent. by HMRC value of its total
qualifying holdings must have been represented
throughout the year by holdings of ‘eligible shares’. For
funds raised after 5 April 2011 the figure is 70 per cent;
(4) At the time of investment, or addition to an investment,
the Company’s holdings in any one company (other
than another VCT) must not have exceeded
15 per cent. by HMRC value of its investments;
(5) The Company must not have retained greater than
15 per cent. of its income earned in the year from
shares and securities;
(6) The Company’s shares, throughout the year, must have
been listed on a regulated European market;
(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
(£20 million 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 a turnover test is satisfied;
(9) The Company’s investment in another company must
not be used to acquire another business, or shares in
another company; and
(10) The Company may only make qualifying investments or
investments permitted by
certain non-qualifying
Section 274 of the Income Tax Act 2007.
These tests drive a spread of investment risk through
prohibiting 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 March 2017. 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 8.
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.
Environment
The management and administration of the Company is
undertaken by the Manager, Albion Capital Group LLP. 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
reducing energy
consumption.
recycling and
include
Global greenhouse gas emissions
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.
Albion Venture Capital Trust PLC 21
245544 Albion Venture Cap pp20-pp32 27/06/2017 16:50 Page 22
Directors’ report (continued)
Anti-bribery policy
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.
Diversity
The Board currently consists of four male Directors. 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 to 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 14.
The Manager has an equal opportunities policy and currently
employees 12 men and 12 women.
Employees
The Company is managed by Albion Capital Group LLP and
hence has no employees other than its Directors.
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 32.
Directors’ indemnity
Each Director has entered into a Deed of Indemnity with the
Company which indemnifies each Director, subject to the
provisions of the Companies Act 2006 and the limitations set
out in each deed, against any liability arising out of any claim
made against him in relation to the performance of his duties
as a Director of the Company. A copy of each Deed of
Indemnity entered into by the Company for each Director is
available at the registered office of the Company.
Re-election of Directors
Directors’ retirement and re-election is subject to the Articles
of Association and the UK Corporate Governance Code. At
the forthcoming Annual General Meeting, David Watkins,
John Kerr and Jeff Warren will retire and offer themselves for
re-election as they have been Directors of the Company for
more than nine years. The Board does not consider that the
length of service reduces their ability to act independently of
the Manager.
22 Albion Venture Capital Trust PLC
Advising ordinary retail investors
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
non-mainstream 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 new rules relating to non-
mainstream investment products, are excluded securities and
may be promoted to ordinary retail investors without restriction.
Auditor
The external audit was last put out to tender in 2007 when
the current auditor, BDO LLP, was appointed for the year
ended 31 March 2008. Following the implementation of EU
Audit Reform, Albion Venture Capital Trust PLC is required to
conduct a selection process for the appointment of the
external auditor every 10 years. Accordingly, the Audit
Committee has begun to undertake a selection process for
the appointment of the external auditor for the financial year
ending 31 March 2018 so as to ensure auditor independence
and continued quality of judgement. The Company can
confirm that there are no contractual obligations that restrict
the Company’s choice of external auditor.
The Directors expect to have completed the selection process
by the date of the AGM and to appoint the auditor immediately
after that. Resolution 7 in the notice of meeting gives authority
to the Directors to make that appointment and resolution 8
authorises the Directors to agree the auditor’s remuneration.
Such appointment will continue until the next AGM.
Annual General Meeting
The Annual General Meeting will be held at the City of
London Club, 19 Old Broad Street, London EC2N 1DS at
11:00am on 14 August 2017. 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/AAVC 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.
245544 Albion Venture Cap pp20-pp32 27/06/2017 16:50 Page 23
Directors’ report (continued)
Continuation as a venture capital trust and
amendment of Article 136
Ordinary resolution number 9 proposes the continuation of
the Company as a venture capital trust. Under the Articles of
Association of the Company, the Directors are required to
procure that an ordinary resolution to approve the
continuation of the Company as a venture capital trust is
proposed at the Annual General Meeting in 2017 and every
five years thereafter. The Directors consider that it is more
usual in the VCT market for resolutions of this nature to be
proposed every 10 years and accordingly resolution 10 in the
Notice of AGM is a special resolution to amend Article 136 to
provide for the continuation resolution to be proposed in
2027 and every 10 years thereafter.
Increase in Directors’ aggregate remuneration
Ordinary resolution number 11 proposes that the limit for the
overall level of Directors’ remuneration under the Company’s
Articles of Association increases from £100,000 to £150,000
with effect from 1 September 2017. The Directors are
currently paid director’s fees aggregating £92,000 per
annum. There is no current intention to increase individual
Director’s fees but the new level proposed under the Articles
of Association provides extra flexibility in the case, for
example, of additional Board members being appointed prior
to the retirement of existing Directors.
Authority to allot shares
Ordinary resolution number 12 will request the authority to
allot up to an aggregate nominal amount of £190,845
representing approximately 20 per cent. of the issued
Ordinary share capital of the Company as at the date of this
report.
The Directors’ current intention is to allot shares under the
Dividend Reinvestment Scheme and any Albion VCTs Top Up
Offers. The Company currently holds 8,263,188 Ordinary
treasury shares which represents 8.8 per cent. of the total
Ordinary share capital in issue as at 31 March 2017.
This resolution replaces the authority given to the Directors at
the Annual General Meeting in 2016. The authority sought at
the
forthcoming Annual General Meeting will expire
18 months from the date this resolution is passed or at the
conclusion of the next Annual General Meeting of the
Company, whichever is earlier.
Disapplication of pre-emption rights
Special resolution number 13 will request the authority for the
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 £190,845 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 2016. The authority sought at
forthcoming Annual General Meeting will expire
the
18 months from the date this resolution is passed or at the
conclusion of the next Annual General Meeting of the
Company, whichever is earlier.
Purchase of own shares
Special resolution number 14 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 14. Shares
bought back under this authority may be cancelled.
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 2016 authority, which was
on similar terms. During the financial year under review, the
Company purchased 1,308,748 Ordinary shares for treasury
of nominal value of £13,000 at an aggregate consideration of
£873,000, including stamp duty, representing 1.4 per cent. of
the issued share capital of the Company as at 31 March
2017. The maximum nominal value of treasury shares held
during the year was £83,000.
The authority sought at the Annual General Meeting will
expire 18 months from the date this resolution is passed or
at the conclusion of the next Annual General Meeting,
whichever is earlier.
Treasury shares
Under the Companies (Acquisition of Own Shares) (Treasury
Shares) Regulations 2003, shares purchased by the
Company out of distributable profits can be held as treasury
shares, which may then be cancelled or sold for cash. The
authority sought by this resolution is intended to apply
equally to shares to be held by the Company as treasury
shares.
Special resolution number 15 will request the authority to
permit Directors to sell treasury shares at the higher of the
prevailing current share price and the price at which they
were bought in at.
Albion Venture Capital Trust PLC 23
245544 Albion Venture Cap pp20-pp32 27/06/2017 16:50 Page 24
Directors’ report (continued)
Recommendation
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.
Disclosure of information to the Auditor
In the case of the persons who are Directors of the Company
at the date of approval of this report:
● so far as each of the Directors are aware, there is no
relevant audit information of which the Company’s
Auditor is unaware; and
● each of the Directors has taken all the steps that he
ought to have taken as a Director to make himself aware
of any relevant audit information and to establish that
the Company’s Auditor is aware of that information.
This disclosure is given and should be interpreted in
accordance with the provisions of s418 of the Companies
Act 2006.
For and on behalf of the Board
Albion Capital Group LLP
Company Secretary
1 King’s Arms Yard
London, EC2R 7AF
27 June 2017
24 Albion Venture Capital Trust PLC
245544 Albion Venture Cap pp20-pp32 27/06/2017 16:50 Page 25
Statement of Directors’ responsibilities
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
(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.
(“UK GAAP”)
In preparing these Financial Statements, the Directors are
required to:
● select suitable accounting policies and then apply them
consistently;
and dissemination of Financial Statements, which may vary
from legislation in other jurisdictions. The maintenance and
integrity 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 and
Transparency Rule 4 of the UK Listing Authority
The Directors confirm to the best of their knowledge:
● The Financial Statements have been prepared in
accordance with UK GAAP and give a true and fair
view of the assets, liabilities, financial position and profit
of the Company.
● The Annual Report includes a fair review of the
development and performance of the business and the
financial position of the Company, together with a
description of the principal risks and uncertainties that
it faces.
● make judgements and accounting estimates that are
reasonable and prudent;
By Order of the Board
David Watkins
Chairman
27 June 2017
● state whether they have been prepared in accordance
with UK GAAP subject to any material departures
disclosed and explained in the Financial Statements;
and
● prepare a Directors’ report, a Strategic report and
Directors’ remuneration report which comply with the
requirements of the Companies Act 2006.
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 and performance, business model and strategy.
Website publication
The Directors are responsible for ensuring the Annual Report
and Financial Statements are made available on a
website. Financial Statements are published on the
the Manager’s website
Company’s webpage on
(www.albion.capital/funds/AAVC)
in accordance with
legislation in the United Kingdom governing the preparation
Albion Venture Capital Trust PLC 25
245544 Albion Venture Cap pp20-pp32 27/06/2017 16:50 Page 26
Statement of corporate governance
subject to annual re-election. The Board does not have a
policy of limiting the tenure of any Director as the Board does
not consider that a Director’s length of service reduces his
ability to act independently of the Manager.
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 14.
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 direct 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 considered that its
membership is diverse in relation to its experience and
balance of skills. Further details on the policy regarding the
recruitment of new directors can be found in the Nomination
Committee section on page 29.
The Board met four times during the year as part of its regular
programme of Board meetings. All of the Directors attended
all meetings, except for David Watkins who was absent for
one meeting. A sub-committee of the Board comprising at
least two Directors met during the year to allot shares issued
under the Dividend Reinvestment Scheme and the Albion
VCTs Top Up Offers. A sub-committee of the Board also met
during the year to approve the terms and contents of the
Offer Documents under the Albion VCTs Prospectus Top Up
Offers 2016/2017.
The Chairman ensures that all Directors receive, in a timely
manner, all relevant management, regulatory and financial
information. The Board receives and considers reports
regularly from the Manager and other key advisers, and ad
hoc reports and information are supplied to the Board as
required. The Board has a formal schedule of matters
reserved for it and the agreement between the Company and
its Manager sets out the matters over which the Manager has
authority and limits beyond which Board approval must be
sought.
Background
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 September 2014.
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
and
recommendations on issues that are of specific relevance to
the Company.
additional principles
setting
out
as
The Board considers that reporting against the principles and
recommendations of the AIC Code, and by reference to the
AIC Guide
the UK Corporate
incorporates
Governance Code), will provide better information to
shareholders than reporting under the Code alone.
(which
The Company has complied with the recommendations of
the AIC Code and the relevant provisions of the UK
Corporate Governance Code, except as set out below.
Application of the Principles of the Code
The Board attaches importance to matters set out in the
Code and applies its principles. However, as a venture capital
the Company’s day-to-day
trust company, most of
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.
Board of Directors
The Board consists solely of independent non-executive
Directors. Since all Directors are non-executive and
day-to-day management responsibilities are sub-contracted
to
the Company does not have a
the Manager,
Chief Executive Officer.
David Watkins is the Chairman and Jeff Warren is the Senior
Independent Director.
John Kerr is an external member of the Investment
Committee of Albion Capital Group LLP. The Board has
reviewed and approved this role and concluded it does not
affect his independence.
David Watkins, John Kerr and Jeff Warren have all been
Directors of the Company for more than nine years and, in
accordance with the recommendations of the AIC code, are
26 Albion Venture Capital Trust PLC
245544 Albion Venture Cap pp20-pp32 27/06/2017 16:50 Page 27
Statement of corporate governance (continued)
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:
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.
● the appointment, evaluation, removal and remuneration
of the Manager;
● the consideration and approval of future developments
or changes to the investment policy, including risk and
asset allocation;
● consideration of corporate strategy and corporate
events that arise;
● application of the principles of the UK Corporate
Governance Code, corporate governance and internal
control;
● review of sub-committee recommendations, including
the
the
appointment and remuneration of the Auditor;
to shareholders
recommendation
for
● evaluation of non-audit services provided by the
external Auditor;
● approval of the appropriate dividend to be paid to
shareholders;
● reviewing the performance of the Company, including
monitoring of the discount of the net asset value and
the share price;
● share buy-back and treasury share policy; and
● monitoring shareholder profile and considering
shareholder communications.
It is the responsibility of the Board to present an Annual
Report and Financial Statements that are fair, balanced and
understandable, which provides the information necessary
for shareholders to assess the position, performance,
strategy and business model of the Company.
Committees’ and Directors’ performance evaluation
Performance of the Board and the Directors is assessed on
the following:
● attendance at Board and Committee meetings;
● the contribution made by individual Directors at, and
outside of, Board and Committee meetings; and
● completion of a detailed internal assessment process
and annual performance evaluation conducted by the
Chairman. The Senior Independent Director reviews
the Chairman’s annual performance evaluation.
The evaluation process has identified that the Board works
well together and has the right balance of skills, experience,
independence and knowledge for the effective governance of
the Company. Diversity within the Board is achieved through
the appointment of directors with different sector
backgrounds and skills.
Directors’ retirement and re-election is subject to the Articles
of Association and the AIC Code. Directors are subject to
re-election every three years and Directors who have served
longer than nine years and non-independent Directors, to
re-election every year.
In light of the structured performance evaluation, David
Watkins, John Kerr and Jeff Warren who are subject to
re-election at the forthcoming Annual General Meeting, are
considered to be effective Directors who demonstrate strong
commitment to the role. The Board believes it to be in the
best interest of the Company to re-elect these Directors at
the forthcoming Annual General Meeting.
Remuneration Committee
Jeff Warren is Chairman of the Remuneration Committee and
all of the Directors are members of this Committee. The
Committee meets once a year and held one formal meeting
during the year which was attended by all the Directors.
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/AAVC under
the
Corporate Governance section.
Audit Committee
The Audit Committee consists of all Directors and John Kerr
is Chairman. In accordance with the Code, all members of
the Audit Committee have recent and relevant financial
experience and therefore it is considered appropriate for the
whole Board to be part of the Audit Committee. The
Committee met twice during the year ended 31 March 2017;
all members attended all meetings, except for David Watkins
who was absent for one meeting.
Written terms of reference have been constituted for the
the
Audit Committee and can be
the Manager’s website at
Company’s webpage on
www.albion.capital/funds/AAVC under
the Corporate
Governance section.
found on
During the year under review, the Committee discharged its
responsibilities including:
● formally reviewing the Annual Report and Financial
Statements, the Half-yearly Report, the Interim
Management Statements and
the associated
announcements, with particular focus on the main
Albion Venture Capital Trust PLC 27
245544 Albion Venture Cap pp20-pp32 27/06/2017 16:50 Page 28
Statement of corporate governance (continued)
areas requiring judgement and on critical accounting
policies;
● reviewing the effectiveness of the internal controls
system and examination of the Internal Controls Report
produced by the Manager;
● meeting with the external Auditor and reviewing their
findings;
● reviewing the performance of the Manager and making
recommendations regarding their re-appointment to
the Board;
● highlighting the key risks and specific issues relating to
the Financial Statements including the reasonableness
of valuations, compliance with accounting standards
and UK law, corporate governance and listing and
disclosure rules as well as going concern. These issues
were addressed through detailed review, discussion
and challenge by the Board of these matters, as well as
by reference to underlying technical information;
● advising the Board on whether the Annual Report and
Financial Statements, taken as a whole, is fair,
balanced and understandable and provides the
information necessary for shareholders to assess the
Company’s position, performance, business model and
strategy; and
● reporting to the Board on how it has discharged its
responsibilities.
Financial Statements
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 such issues were
discussed with the external Auditor at the planning stage of
the audit and at 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:
The valuation of the Company’s investments
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.
28 Albion Venture Capital Trust PLC
Revenue recognition
The revenue generated from loan stock interest and dividend
income has been considered by the Audit Committee as part
of its review of the Annual Report 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 rigorous reviews of the Annual Report and Financial
Statements and consideration of the key areas of risk
identified, the Audit Committee and Board has concluded
that, as a whole, 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.
Relationship with the External Auditor
The Audit Committee reviews the performance and
continued suitability of the Company’s external Auditor on an
annual basis. They assess
the external Auditor’s
independence, qualification, extent of relevant experience,
effectiveness of audit procedures as well as the robustness
of their quality assurance procedures. In advance of each
audit, the Committee obtains confirmation from the external
Auditor that they are independent and of the level of non-
audit fees earned by them and their affiliates. No non-audit
services were provided during the financial year ended 31
March 2017.
As part of its work, the Audit Committee has undertaken a
formal evaluation of the external Auditor against the following
criteria;
– Qualification
– Expertise
– Resources
– Effectiveness
– Independence
– Leadership
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 March 2017, and assessments made by
individual Directors.
The core legislation mandates that the maximum period for
which a firm can be appointed auditor of a public interest
entity is 10 years. Member states can choose to make this
period shorter, or they can choose to allow extensions: to 20
245544 Albion Venture Cap pp20-pp32 27/06/2017 16:50 Page 29
Statement of corporate governance (continued)
years if a competitive tender is held at the 10 year point, or
to 24 years in the case of a joint audit appointment. Transition
arrangements vary depending on the length of time auditors
have been incumbent. BDO first acted as auditors for the
year ended 31 March 2008 and therefore the last year BDO
can act as auditor before a mandatory tender process is
required is 31 March 2017. Accordingly, the Audit Committee
has begun to undertake a selection process for the
appointment of the external auditor for the financial year
ending 31 March 2018 so as to ensure auditor independence
and continued quality of judgement. The Company can
confirm that there are no contractual obligations that restrict
the Company’s choice of external auditor. 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.
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
and Financial Statements. This assessment considers all
significant aspects of internal control arising during the year.
The Audit Committee assists the Board in discharging its
review responsibilities.
Nomination Committee
The Nomination Committee consists of all Directors, with
David Watkins as Chairman.
The main features of the internal control system with respect
to financial reporting are:
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.
The nomination committee did not meet during the year.
The 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/AAVC under the Corporate
Governance section.
Internal control
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, acknowledging that such a system is designed to
manage, rather than eliminate, the risks of failure to achieve
the Company’s business objectives, such controls 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
● segregation of duties between the preparation of
valuations and recording in accounting records;
● independent third party valuations of the majority of the
asset-backed investments within the portfolio are
undertaken annually;
● reviews of valuations are carried out by the Managing
Partner and reviews of financial reports are carried out
by the Operations Partner of Albion Capital Group LLP;
● bank and stock reconciliations are carried out monthly
in accordance with the FCA
by the Manager
requirements;
● all published financial reports are reviewed by Albion
Capital Group LLP Compliance department;
● the Board reviews financial information; and
● a separate Audit Committee of the Board reviews
financial information due to be published.
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, it 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 Audit Committee
and the Board reviewed internal audit reports prepared by
PKF Littlejohn LLP. 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.
Albion Venture Capital Trust PLC 29
245544 Albion Venture Cap pp20-pp32 27/06/2017 16:50 Page 30
Statement of corporate governance (continued)
Conflicts of interest
Directors review the disclosure of conflicts of interest
annually, with changes reviewed and noted at the beginning
of each Board meeting. A Director who has conflicts of
interest has two independent Directors authorise those
conflicts. Procedures to disclose and authorise conflicts of
interest have been adhered to throughout the year.
Capital structure and Articles of Association
Details regarding the Company’s capital structure, substantial
interests and Directors’ powers to buy and issue shares are
detailed in full on pages 20 and 23 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.
Relationships with shareholders
The Company’s Annual General Meeting on 14 August 2017
will be used as an opportunity to communicate with
investors. The Board, including the Chairman of the Audit
Committee, will be available to answer questions at the
Annual General Meeting.
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.
Statement of compliance
The Directors consider that, with the exception of the
requirement for the appointment of a Chief Executive Officer,
the Company has complied throughout the year ended
31 March 2017 with all the relevant provisions set out in the
Code and with the AIC Code of Corporate Governance. The
Company continues to comply with the Code as at the date
of this report.
By order of the Board
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.
David Watkins
Chairman
27 June 2017
30 Albion Venture Capital Trust PLC
245544 Albion Venture Cap pp20-pp32 27/06/2017 16:50 Page 31
Directors’ remuneration report
Introduction
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.
Ordinary resolutions will be proposed at the Annual General
Meeting of the Company to be held on 14 August 2017 for
the approval of the Directors’ Remuneration Policy and the
Annual Remuneration Report as set out below.
The Company’s independent Auditor, BDO LLP, is required to
give its opinion on certain information included in this report
as indicated. The Auditor’s opinion is included in the
Independent Auditor’s Report.
Annual statement from the Chairman of the
Remuneration Committee
The Remuneration Committee comprises all of the Directors
with Jeff Warren 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 2015, remained appropriate and so
proposed no increase for the forthcoming year.
Directors’ remuneration policy
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
remuneration, market equivalents are
non-executive
considered in comparison to the overall activities and size of
the Company. There is no performance related pay criteria
applicable to non-executive Directors.
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 David Watkins,
John Kerr and Jeff Warren will retire and be proposed for re-
election.
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.
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, 97.9 per cent. of shareholders voted for the
resolution approving the Directors’ Remuneration Report
which shows significant Shareholder support.
Annual report on remuneration
The remuneration of individual Directors’ is determined by the
Remuneration Committee within the framework set by the
Board.
This policy was last voted on at the 2014 Annual General
Meeting where 98.0 per cent. of shareholders voted for the
resolution approving the Directors’ Remuneration Policy
which shows significant Shareholder support.
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 maximum level of non-executive Directors’ remuneration
is £100,000 per annum which is fixed by the Company’s
Articles of Association. To allow for additional Board
members being appointed prior to the retirement of existing
Directors,
it is intended that the maximum level of
non-executive Directors’ remuneration is increased so as not
to exceed £150,000 per annum in aggregate with effect from
1 September 2017. There is no current intention to increase
existing Director’s fees. This will be proposed as an ordinary
resolution at the forthcoming Annual General Meeting. Details
regarding this proposed change can be seen on page 23 of
the Directors’ report.
Directors’ remuneration
The following items have been audited.
The following table shows an analysis of the remuneration of
individual Directors, exclusive of National Insurance:
2017 2016
£’000 £’000
D J Watkins 24 21
J M B L Kerr 24 24
J Warren 22 21
E Dinesen 22 21
–––––––––––– ––––––––––––
92 87
–––––––––––– ––––––––––––
Albion Venture Capital Trust PLC 31
245544 Albion Venture Cap pp20-pp32 27/06/2017 16:50 Page 32
Directors’ remuneration report (continued)
Subject to the passing of resolution 11, the Directors’
remuneration for the year ending 31 March 2018 is expected
to be £114,000.
There are no options, issued or exercisable, in the Company
which would distort the graphical representation that follows.
Ordinary share price total return relative to the FTSE All-Share Index total return
(in both cases with dividends reinvested)
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 £7,052 (2016: £7,683).
Directors’ interests
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 as follows:
31 March 2017 31 March 2016
(Number of shares) (Number of shares)
D J Watkins 10,000 10,000
J M B L Kerr 13,109 13,109
J Warren 20,000 20,000
E Dinesen 36,552 25,426
There have been no changes in the holdings of the Directors
between 31 March 2017 and the date of this Report.
)
e
r
a
h
s
r
e
p
e
c
n
e
p
(
n
r
u
t
e
R
200
180
160
140
120
100
80
60
40
20
0
Apr
07
Mar
08
Mar
09
Mar
10
Mar
11
Mar
12
Mar
13
Mar
14
Mar
15
Mar
16
Mar
17
FTSE AII-Share Index total return
Ordinary share price total return
Source: Albion Capital Group LLP
Methodology: The Ordinary share price total return to the shareholder, including original
amount invested (rebased to 100), assuming that dividends were reinvested at the share
price of the Company at the time the shares were quoted ex-dividend. Transaction costs
are not taken into account.
Directors’ pay compared to distribution to shareholders
2017 2016 Percentage
£’000 £’000 change
Total dividend
distribution to
shareholders 3,964 3,571 11.0%
Share buybacks 873 733 19.1%
Total Directors fees 92 87 5.7%
The following items have not been audited.
By Order of the Board
Albion Capital Group LLP, its Partners and staff hold a total of
304,941 shares in the Company as at 31 March 2017.
Performance graph
The graph that follows shows the Company’s Ordinary share
price total return against the FTSE All-Share Index total
return, in both instances with dividends reinvested, since
launch. 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.
David Watkins
Director
27 June 2017
32 Albion Venture Capital Trust PLC
245544 Albion Venture Cap pp33-pp37 27/06/2017 16:52 Page 33
Independent Auditor’s report to the
Members of Albion Venture Capital Trust PLC
Our opinion on the Financial Statements
In our opinion the Albion Venture Capital Trust plc Financial Statements for the year ended 31 March 2017, which have been
prepared by the Directors in accordance with 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):
● give a true and fair view of the state of the Company’s affairs as at 31 March 2017 and its profit for the year then ended;
● have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
● have been prepared in accordance with the requirements of the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
What our opinion covers
Our audit opinion on the Financial Statements covers the:
● Income Statement;
● Balance Sheet;
● Statement of Changes in Equity;
● Statement of Cash Flows; and
● related notes
Respective responsibilities of Directors and auditor
As explained more fully in the report of the Directors, the Directors are responsible for the preparation of the Financial
Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on
the Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors.
A description of
www.frc.org.uk/auditscopeukprivate.
the scope of an audit of Financial Statements
is provided on
the FRC’s website at
An overview of the scope of the audit including our assessment of the risk of material misstatement
Our audit approach was developed by obtaining an understanding of the Company’s activities, the key functions undertaken
on behalf of the Board by the Manager and Administrator 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 valuation of investments and revenue recognition were the risks that had the greatest impact on our audit strategy and
scope, including the allocation of resources in the audit.
Investments
The valuation of investments is a key accounting estimate where there is an inherent risk of management override arising from
the investment valuations being prepared by the Manager, who is remunerated based on the net asset value of the Company.
We performed initial analytical procedures to determine 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. A breakdown of the investment portfolio
by nature of instrument type and valuation method is shown below.
Albion Venture Capital Trust PLC 33
245544 Albion Venture Cap pp33-pp37 27/06/2017 16:52 Page 34
Independent Auditor’s report to the
Members of Albion Venture Capital Trust PLC (continued)
Investment Portfolio by Type
Unquoted equity
(39%)
Unquoted loan stock
(61%)
Unquoted Investments – Valuation Method
Cost (1%)
Net assets
(2%)
3rd party
valuation
(97%)
We tested a sample of 91% of the unquoted investment portfolio.
3% of the unquoted portfolio is based on valuations using net assets or cost (where the investment was recently acquired).
For such investments, we verified the cost or net assets to supporting documentation and reviewed the Manager’s
determination of whether there were any reasons why the valuation and the valuation methodology did not remain appropriate
at 31 March 2017.
The remaining 97% of the portfolio is valued with reference to more subjective techniques, and are supported by a third party
valuation: 18% using discounted cash flows and 79% using earnings multiples.
For detailed testing we:
● Considered whether the valuation methodology is the most appropriate in the circumstances under the International
Private Equity and Venture Capital Valuation (“IPEV”) Guidelines.
● Re-performed the calculation of the multiples based investment valuations.
● Where a valuation has been performed by a third party, we assessed management’s expert, the quality of their work and
their qualifications, as well as challenged the basis of inputs and assumptions used by the expert, as well as any updates
to the valuation made by the manager.
● Verified and benchmarked key inputs and estimates to independent information and our own research.
● Challenged the assumptions inherent in the valuation of unquoted investments, and we assessed the impact of the
estimation uncertainty concerning these assumptions and the disclosure of these uncertainties in the Financial
Statements.
● Considered the economic environment in which the investment operates to identify factors that could impact the
investment valuation.
● Considered the need to develop our own point estimate where alternative assumptions could reasonably be applied and
considered the overall impact of such sensitisations on the portfolio of investments in determining whether the valuations
as a whole are reasonable and unbiased.
34 Albion Venture Capital Trust PLC
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Independent Auditor’s report to the
Members of Albion Venture Capital Trust PLC (continued)
For a risk-weighted sample of loans held at fair value, we:
● Vouched security held to documentation.
● Considered the assumption that fair value is not significantly different to cost by challenging the assumption that there
is no significant movement in the market interest rate since acquisition and considering the “unit of account” concept.
● Reviewed the treatment of accrued redemption premium/other fixed returns in line with the SORP.
The chart below depicts the coverage of our audit work across the entire portfolio:
Investments by value
Analytical
procedures
(9%)
Detailed testing
(91%)
Revenue
Revenue consists of dividends receivable from the portfolio companies and interest earned on loans to portfolio companies
and cash balances. Revenue recognition is a significant audit risk as it is one of the key drivers of dividend returns to investors.
In particular, in unquoted companies, dividends receivable can be difficult to predict.
We assessed the design and the implementation of the controls relating to revenue recognition and we developed
expectations for interest income receivable based on loan instruments and investigated any variations in amounts recognised
to ensure they were valid.
We also reviewed the recognition and classification of accrued fixed income receipts to ascertain whether it meets the
definition of realised income, considering management information relevant to the ability of the portfolio Company to service
the loan and the reasons for any arrears of loan interest.
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 tested the
categorisation of dividends received from the portfolio companies between the revenue and capital.
The audit committee’s consideration of their key issues is set out on pages 27 and 28.
Materiality in context
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.
The application of these key considerations gives rise to two levels of materiality, the quantum and purpose of which are
tabulated below.
Albion Venture Capital Trust PLC 35
245544 Albion Venture Cap pp33-pp37 27/06/2017 16:52 Page 36
Independent Auditor’s report to the
Members of Albion Venture Capital Trust PLC (continued)
Materiality
measure
Financial statement
materiality – Based
on 2% of invested
assets
Specific materiality
– classes of
transactions and
balances which
impact on revenue
profits – Based on
10% of the
revenue return
before tax
Purpose
Key considerations and
benchmarks
Assessing whether the Financial Statements
as a whole present a true and fair view
● The value of investments
● The level of judgement inherent in
Quantum
(£)
1,110,000
the valuation
● The range of reasonable alternative
valuation
● The level of net income return
180,000
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
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £13,000 as well
as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
Opinion on other matters prescribed by the Companies Act 2006
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:
● the information given in the strategic report and directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
● the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.
Statement regarding the Directors’ assessment of principal risks, going concern and longer term viability of the
Company
We have nothing material to add or to draw attention to in relation to:
● the Directors’ confirmation in the Annual Report that they have carried out a robust assessment of the principal risks
facing the entity, including those that would threaten its business model, future performance, solvency or liquidity;
● the disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated;
● the Directors’ statement in the Financial Statements about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them and their identification of any material uncertainties to the entity’s ability
to continue to do so over a period of at least twelve months from the date of approval of the Financial Statements; and
● the Directors’ explanation in the Annual Report as to how they have assessed the prospects of the entity, over what
period they have done so and why they consider that period to be appropriate, and their statement as to whether they
have a reasonable expectation that the entity will be able to continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications
or assumptions.
36 Albion Venture Capital Trust PLC
245544 Albion Venture Cap pp33-pp37 27/06/2017 16:52 Page 37
Independent Auditor’s report to the
Members of Albion Venture Capital Trust PLC (continued)
Matters on which we are required to report by exception
Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the Annual Report is:
● materially inconsistent with the information in the audited Financial Statements; or
● apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company acquired in the
course of performing our audit; or
● is otherwise misleading.
In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired
during the audit and the Directors’ statement that they consider the Annual Report is fair, balanced and understandable and
whether the Annual Report appropriately discloses those matters that we communicated to the Audit Committee which we
consider should have been disclosed.
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.
Under the Companies Act 2006 we are required to report to you if, in our opinion:
● adequate accounting records have not been kept, or returns adequate for our audit have not been received from
branches not visited by us; or
● the Financial Statements and the part of the Directors’ remuneration report to be audited are not in agreement with the
accounting records and returns; or
● certain disclosures of Directors’ remuneration specified by law are not made; or
● we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review:
● the Directors’ statements, set out on page 20, in relation to going concern and on page 13 in relation to longer-term
viability; and
● the part of the corporate governance statement relating to the Company’s compliance with the provisions of the UK
Corporate Governance Code specified for review by the auditor in accordance with Listing Rule 9.8.10 R(2).
We have nothing to report in respect of these matters.
Vanessa-Jayne Bradley (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
27 June 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Albion Venture Capital Trust PLC 37
245544 Albion Venture Cap pp38-pp41 27/06/2017 16:54 Page 38
Income statement
Year ended 31 March 2017 Year ended 31 March 2016
Revenue Capital Total Revenue Capital Total
Note £’000 £’000 £’000 £’000 £’000 £’000
Gains on investments 3 – 6,179 6,179 – 3,203 3,203
Investment income 4 2,381 – 2,381 2,236 – 2,236
Investment management fees 5 (283) (848) (1,131) (246) (739) (985)
Other expenses 6 (296) – (296) (287) – (287)
–––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
Profit on ordinary activities before tax 1,802 5,331 7,133 1,703 2,464 4,167
Tax (charge)/credit on ordinary activities 8 (292) 170 (122) (300) 148 (152)
–––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
Profit and total comprehensive
income attributable to shareholders 1,510 5,501 7,011 1,403 2,612 4,015
–––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
Basic and diluted return
per share (pence)* 10 1.9 6.8 8.7 2.0 3.6 5.6
–––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
* excluding treasury shares
The accompanying notes on pages 42 to 54 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.
38 Albion Venture Capital Trust PLC
245544 Albion Venture Cap pp38-pp41 27/06/2017 16:54 Page 39
Balance sheet
31 March 2017 31 March 2016
Note £’000 £’000
Fixed asset investments 11 55,473 45,015
Current assets
Trade and other receivables less than one year 13 140 2,139
Cash and cash equivalents 10,496 10,330
–––––––––––– ––––––––––––
10,636 12,469
–––––––––––– ––––––––––––
Total assets 66,109 57,484
Creditors: amounts falling due within one year
Trade and other payables less than one year 14 (634) (529)
–––––––––––– ––––––––––––
Total assets less current liabilities 65,475 56,955
–––––––––––– ––––––––––––
Equity attributable to equityholders
Called up share capital 15 951 861
Share premium 24,630 18,374
Capital redemption reserve 7 7
Unrealised capital reserve 8,623 1,128
Realised capital reserve 8,743 10,737
Other distributable reserve 22,521 25,848
–––––––––––– ––––––––––––
Total equity shareholders’ funds 65,475 56,955
–––––––––––– ––––––––––––
Basic and diluted net asset value per share (pence)* 16 75.4 72.0
–––––––––––– ––––––––––––
* excluding treasury shares
The accompanying notes on pages 42 to 54 form an integral part of these Financial Statements.
These Financial Statements were approved by the Board of Directors and authorised for issue on 27 June 2017, and were
signed on its behalf by
David Watkins
Chairman
Company number: 03142609
Albion Venture Capital Trust PLC 39
245544 Albion Venture Cap pp38-pp41 27/06/2017 16:54 Page 40
Statement of changes in equity
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 April 2016 861 18,374 7 1,128 10,737 25,848 56,955
Return/(loss) and total
comprehensive income
for the year – – – 6,165 (664) 1,510 7,011
Transfer of previously unrealised
gains/(losses) on realisations
of investments – – – 1,330 (1,330) – –
Purchase of treasury shares – – – – – (873) (873)
Issue of equity 90 6,422 – – – – 6,512
Cost of issue of equity – (166) – – – – (166)
Net dividends paid (note 9) – – – – – (3,964) (3,964)
–––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
As at 31 March 2017 951 24,630 7 8,623 8,743 22,521 65,475
–––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
As at 1 April 2015 714 8,228 7 (2,269) 11,522 28,726 46,928
Return and total comprehensive
income for the year – – – 2,343 269 1,403 4,015
Transfer of previously unrealised
gains/(losses) on realisations
of investments – – – 1,054 (1,054) – –
Purchase of treasury shares – – – – – (733) (733)
Issue of equity 147 10,423 – – – – 10,570
Cost of issue of equity – (277) – – – – (277)
Net dividends paid (note 9) – – – – – (3,549) (3,549)
–––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
As at 31 March 2016 861 18,374 7 1,128 10,737 25,848 56,955
–––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
* These reserves amount to £31,264,000 (2016: £36,585,000) which is considered distributable.
40 Albion Venture Capital Trust PLC
245544 Albion Venture Cap pp38-pp41 27/06/2017 16:54 Page 41
Statement of cash flows
Year ended Year ended
31 March 2017 31 March 2016
£’000 £’000
Cash flow from operating activities
Loan stock income received 1,941 2,028
Deposit interest received 69 115
Dividend income received 45 81
Investment management fees paid (1,091) (938)
Other cash payments (302) (273)
Corporation tax paid (127) (99)
–––––––––––– ––––––––––––
Net cash flow from operating activities 535 915
Cash flow from investing activities
Purchase of fixed asset investments (4,521) (6,430)
Disposal of fixed asset investments 572 2,786
–––––––––––– ––––––––––––
Net cash flow from investing activities (3,949) (3,644)
Cash flow from financing activities
Issue of share capital* 7,809 7,886
Cost of issue of equity (2) (2)
Dividends paid (3,424) (3,094)
Purchase of own shares (including costs) (803) (733)
–––––––––––– ––––––––––––
Net cash flow from financing activities 3,580 4,057
Increase in cash and cash equivalents 166 1,328
Cash and cash equivalents at start of period 10,330 9,002
–––––––––––– ––––––––––––
Cash and cash equivalents at end of period 10,496 10,330
Cash and cash equivalents comprise
Cash at bank and in hand 10,496 10,330
Cash equivalents – –
–––––––––––– ––––––––––––
Total cash and cash equivalents 10,496 10,330
–––––––––––– ––––––––––––
*An amount of £1,988,000 relating to shares subscribed and allotted on 31 March 2016 was received during the current year.
Albion Venture Capital Trust PLC 41
245544 Albion Venture Cap pp42-pp54 27/06/2017 16:57 Page 42
Notes to the Financial Statements
1. Basis of preparation
The Financial Statements have been prepared in accordance
with the historical cost convention, modified to include the
revaluation of investments, in accordance with applicable
United Kingdom law and accounting standards, including
Financial Reporting Standard 102 (“FRS 102”), and with the
2014 Statement of Recommended Practice “Financial
Statements of Investment Trust Companies and Venture
Capital Trusts” (“SORP”) issued by The Association of
Investment Companies (“AIC”).
The preparation of the Financial Statements requires
management to make judgements and estimates that affect
the application of policies and reported amounts of assets,
liabilities, income and expenses. The most critical estimates
and judgements relate to the determination of carrying value
of investments at fair value through profit and loss (FVTPL).
the
The Company values
International Private Equity and Venture Capital Valuation
(“IPEVCV”) Guidelines and further detail on the valuation
techniques used are outlined in note 2 below.
investments by
following
Information about the Company can be found on page 2.
2. Accounting policies
Fixed asset investments
The Company’s business is investing in financial assets with a
view to profiting from their total return in the form of income
and capital growth. This portfolio of financial assets is
managed and its performance evaluated on a fair value basis,
in accordance with a documented investment policy, and
information about the portfolio is provided internally on that
basis to the Board.
In accordance with the requirements of FRS 102, those
undertakings in which the Company holds more than
20 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:
● Investments listed on recognised exchanges are valued
at their bid prices at the end of the accounting period
or otherwise at fair value based on published price
quotations;
● Unquoted investments, where there is not an active
market, are valued using an appropriate valuation
technique in accordance with the IPEVCV Guidelines.
Indicators of fair value are derived using established
methodologies including earnings multiples, the level of
third party offers received, prices of recent investment
rounds, net assets and industry valuation benchmarks.
Where the Company has an investment in an early
stage enterprise, the price of a recent investment round
is often the most appropriate approach to determining
fair value. In situations where a period of time has
42 Albion Venture Capital Trust PLC
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:
o
o
o
the performance and/or prospects of the
underlying business are significantly below the
expectations on which the investment was
based;
a significant adverse change either in the
the
portfolio company’s business or
legal or
technological, market, economic,
regulatory environment in which the business
operates; or
in
market conditions have deteriorated, which may
be indicated by a fall in the share prices of
quoted businesses operating in the same or
related sectors.
Investments are recognised as financial assets on legal
completion of the investment contract and are de-recognised
on legal completion of the sale of an investment.
Dividend income is not recognised as part of the fair value
movement of an investment, but is recognised separately as
investment income through the other distributable reserve
when a share becomes ex-dividend.
Receivables and payables and cash are carried at amortised
cost, in accordance with FRS 102. There are no financial
liabilities other than creditors.
Investment income
Equity income
Dividend income is included in revenue when the investment
is quoted ex-dividend.
Unquoted loan stock and other preferred income
Fixed returns on non-equity shares and debt securities are
recognised when the Company’s right to receive payment and
expect settlement is established. Where interest is rolled up
and/or payable at redemption then it is recognised as income
unless there is reasonable doubt as to its receipt.
Bank interest income
Interest income is recognised on an accrual basis using the
rate of interest agreed with the bank.
245544 Albion Venture Cap pp42-pp54 27/06/2017 16:57 Page 43
Notes to the Financial Statements (continued)
2. Accounting policies (continued)
Investment management fees and other expenses
Reserves
Share premium account
All expenses have been accounted for on an accruals basis.
Expenses are charged through the other distributable reserve
except the following which are charged through the realised
capital reserve:
● 75 per cent. of management fees are allocated to the
capital account to the extent that these relate to an
enhancement in the value of the investments and in line
with the Board’s expectation that over the long term
75 per cent. of the Company’s investment returns will
be in the form of capital gains; and
● expenses which are incidental to the purchase or
disposal of an investment are charged through the
realised capital reserve.
This reserve accounts for the difference between the price
paid for shares and the nominal value of the shares, less issue
costs.
Capital redemption reserve
This reserve accounts for amounts by which the issued share
capital is diminished through the repurchase and cancellation
of the Company’s own shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held
at the year end against cost are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
Performance incentive fee
In the event that a performance incentive fee crystallises, the
fee will be allocated between other distributable and realised
capital reserves based upon the proportion to which the
calculation of the fee is attributable to revenue and capital
returns.
● gains and losses compared to cost on the realisation of
investments;
● expenses, together with the related taxation effect,
charged in accordance with the above policies; and
● dividends paid to equity holders where paid out by
Taxation
Taxation is applied on a current basis in accordance with FRS
102. Current tax is tax payable (refundable) in respect of the
taxable profit (tax loss) for the current period or past reporting
periods using the tax rates and laws that have been enacted
or substantively enacted at the financial reporting date.
Taxation associated with capital expenses is applied in
accordance with the SORP.
Deferred tax is provided in full on all timing differences at the
reporting date. Timing differences are differences between
taxable profits and total comprehensive income as stated in
the financial statements that arise from the inclusion of income
and expenses in tax assessments in periods different from
those in which they are recognised in the financial statements.
As a VCT the Company has an exemption from tax on capital
gains. The Company intends to continue meeting the
conditions required to obtain approval as a VCT in the
foreseeable future. The Company therefore, should have no
material deferred tax timing differences arising in respect of
the revaluation or disposal of investments and the Company
has not provided for any deferred tax.
capital.
Other distributable reserve
The Special reserve, Treasury share reserve and the Revenue
reserve were combined in 2012 to form a single reserve
named other distributable reserve.
This reserve accounts for movements from the revenue
column of the Income statement, the payment of dividends,
the buy-back of shares and other non-capital realised
movements.
Dividends
Dividends by the Company are accounted for in the period in
which the dividend is paid or approved at the Annual General
Meeting.
Segmental reporting
The Directors are of the opinion that the Company is engaged
in a single operating segment of business, being investment in
equity and debt. The Company invests in smaller companies
principally based in the UK.
Albion Venture Capital Trust PLC 43
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Notes to the Financial Statements (continued)
3. Gains on investments
Year ended Year ended
31 March 2017 31 March 2016
£’000 £’000
Unrealised gains on fixed asset investments 6,165 2,343
Realised gains on fixed asset investments 14 860
–––––––––––––– ––––––––––––––
Gains on investments 6,179 3,203
–––––––––––––– ––––––––––––––
4. Investment income
Year ended Year ended
31 March 2017 31 March 2016
£’000 £’000
Income recognised on investments
Loan stock interest and other fixed returns 2,277 2,039
Dividend income 45 81
Bank deposit interest 59 116
–––––––––––––– ––––––––––––––
2,381 2,236
–––––––––––––– ––––––––––––––
Interest income earned on impaired investments at 31 March 2017 amounted to £120,000 (2016: £208,000).
All of the Company’s income is derived from operations in the United Kingdom.
5. Investment management fees
Year ended Year ended
31 March 2017 31 March 2016
£’000 £’000
Investment management fee charged to revenue 283 246
Investment management fee charged to capital 848 739
–––––––––––––– ––––––––––––––
1,131 985
–––––––––––––– ––––––––––––––
Further details of the Management agreement under which the investment management fee is paid are given in the Strategic report on
page 11.
During the year, services of a total value of £1,180,000 (2016: £1,033,000), were purchased by the Company from Albion Capital Group
LLP; this includes £1,131,000 (2016: £985,000) of investment management fee and £49,000 (2016: £48,000) secretarial and
administration fee. At the financial year end, the amount due to Albion Capital Group LLP in respect of these services disclosed within
accruals and deferred income was £323,000 (2016: £282,000).
As at 31 March 2017 Albion Capital Group LLP holds 25,096 Ordinary shares in the Company.
6. Other expenses
Year ended Year ended
31 March 2017 31 March 2016
£’000 £’000
Directors’ fees (inc. NIC) 100 93
Secretarial and administration fee 49 48
Auditor’s remuneration for statutory audit services (exc. VAT) 26 27
Other administrative expenses 121 119
–––––––––––––– ––––––––––––––
296 287
–––––––––––––– ––––––––––––––
44 Albion Venture Capital Trust PLC
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Notes to the Financial Statements (continued)
7. Directors’ fees
The amounts paid to and on behalf of Directors during the year are as follows:
Year ended Year ended
31 March 2017 31 March 2016
£’000 £’000
Directors’ fees 92 87
National insurance 8 6
–––––––––––––– ––––––––––––––
100 93
–––––––––––––– ––––––––––––––
The Company’s key management personnel are the Directors. Further information regarding Directors’ remuneration can be found in
the Directors’ remuneration report on page 31.
8. Tax charge/(credit) on ordinary activities
Year ended 31 March 2017 Year ended 31 March 2016
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
UK corporation tax in respect of
current year 351 (170) 181 324 (148) 176
UK corporation tax in respect of
prior year (59) – (59) (24) – (24)
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total 292 (170) 122 300 (148) 152
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Factors affecting the tax charge:
Year ended Year ended
31 March 2017 31 March 2016
£’000 £’000
Return on ordinary activities before taxation 7,133 4,167
–––––––––––––– ––––––––––––––
Tax on profit at the standard rate of 20% (2016: 20%) 1,426 833
Factors affecting the charge:
Non-taxable gains (1,236) (640)
Income not taxable (9) (17)
Consortium relief in respect of prior years (59) (24)
–––––––––––––– ––––––––––––––
122 152
–––––––––––––– ––––––––––––––
The tax charge for the year shown in the Income statement is lower than the standard rate of corporation tax in the UK of 20 per cent.
(2016: 20 per cent.). The differences are explained above.
Consortium relief is recognised in the accounts in the period in which the claim is submitted to HMRC and is shown as tax in respect
of prior year.
Notes
(i)
(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
Venture Capital Trusts are not subject to corporation tax on capital gains.
and allocating the relief between revenue and capital in accordance with the SORP.
(iii) No deferred tax asset or liability has arisen in the year.
Albion Venture Capital Trust PLC 45
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Notes to the Financial Statements (continued)
9. Dividends
Year ended Year ended
31 March 2017 31 March 2016
£’000 £’000
First dividend paid on 31 July 2015 – 2.5 pence per share – 1,789
Second dividend paid on 31 December 2015 – 2.5 pence per share – 1,782
First dividend paid on 29 July 2016 – 2.5 pence per share 1,987 –
Second dividend paid on 30 December 2016 – 2.5 pence per share 1,986 –
Unclaimed dividends (9) (22)
–––––––––––––– ––––––––––––––
3,964 3,549
–––––––––––––– ––––––––––––––
In addition to the dividends summarised above, the Board has declared a first dividend for the year ending 31 March 2018 of 2.5 pence
per share. This dividend will be paid on 31 July 2017 to shareholders on the register on 7 July 2017. The total dividend will be
approximately £2,179,000. All dividends are paid out of revenue from the other distributable reserve.
During the year, unclaimed dividends older than twelve years of £9,000 (2016: £22,000) were returned to the Company in accordance
with the terms of the Articles of Association.
10. Basic and diluted return per share
Year ended 31 March 2017 Year ended 31 March 2016
Revenue Capital Total Revenue Capital Total
The return per share has been based
on the following figures:
Return attributable to
equity shares (£’000) 1,510 5,501 7,011 1,403 2,612 4,015
Weighted average shares
in issue (excluding treasury shares) 80,525,974 72,020,718
Return attributable per equity
share (pence) 1.9 6.8 8.7 2.0 3.6 5.6
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
The weighted average number of shares is calculated excluding treasury shares of 8,263,188 (2016: 6,954,440).
There are no convertible instruments, derivatives or contingent share agreements in issue, and therefore no dilution affecting the return
per share. The basic return per share is therefore the same as the diluted return per share.
11. Fixed asset investments
31 March 2017 31 March 2016
£’000 £’000
Investments held at fair value through profit or loss
Unquoted equity 21,900 15,163
Unquoted loan stock 33,573 29,852
–––––––––––––– ––––––––––––––
55,473 45,015
–––––––––––––– ––––––––––––––
46 Albion Venture Capital Trust PLC
245544 Albion Venture Cap pp42-pp54 27/06/2017 16:57 Page 47
Notes to the Financial Statements (continued)
11. Fixed asset investments (continued)
31 March 2017 31 March 2016
£’000 £’000
Opening valuation 45,015 38,229
Purchases at cost 4,521 6,430
Disposal proceeds (572) (2,852)
Realised gains 14 860
Movement in loan stock accrued income 331 4
Unrealised gains 6,165 2,343
–––––––––––––– ––––––––––––––
Closing valuation 55,473 45,015
–––––––––––––– ––––––––––––––
Movement in loan stock accrued income
Opening accumulated movement in loan stock accrued income 265 261
Movement in loan stock accrued income 331 4
–––––––––––––– ––––––––––––––
Closing accumulated movement in loan stock accrued income 596 265
–––––––––––––– ––––––––––––––
Movement in unrealised gains/(losses)
Opening accumulated unrealised losses 1,128 (2,269)
Transfer of previously unrealised losses to realised reserve on realisations of investments 1,330 1,054
Unrealised gains 6,165 2,343
–––––––––––––– ––––––––––––––
Closing accumulated unrealised gains 8,623 1,128
–––––––––––––– ––––––––––––––
Historic cost basis
Opening book cost 43,622 40,239
Purchases at cost 4,521 6,430
Sales at cost* (1,888) (3,047)
–––––––––––––– ––––––––––––––
Closing book cost* 46,255 43,622
–––––––––––––– ––––––––––––––
*Included in the sales at cost is the cost after deducting realised losses of £1,162,000 for TWCL Limited (previously The Weybridge Club Limited) and
£170,000 for MHS 1 Limited (previously The Charnwood Pub Company Limited) which are still held at the Balance sheet date.
The Company does not hold any assets as a result of the enforcement of security during the period, and believes that the carrying
values for both impaired and past due assets are covered by the value of security held for these loan stock investments.
Unquoted fixed asset investments are valued at fair value in accordance with the IPEVCV guidelines as follows:
31 March 2017 31 March 2016
£’000 £’000
Valuation methodology
Cost (reviewed for impairment) 823 6,743
Valuation supported by third party or desktop valuation 54,650 38,272
–––––––––––––– ––––––––––––––
55,473 45,015
–––––––––––––– ––––––––––––––
Full valuations are prepared by independent RICS qualified surveyors in full compliance with the RICS Red Book. Desk-top reviews are
carried out by similarly RICS qualified surveyors by updating previously prepared full valuations for current trading and market indices.
Fair value investments had the following movements between valuation methodologies between 31 March 2016 and 31 March 2017:
Value as at
31 March 2017
Change in valuation methodology (2016 to 2017) £’000 Explanatory note
Cost (reviewed for impairment) to Valuation supported 9,113 Third party valuation has recently taken place
by third party or desktop valuation
The valuation will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health
of the investment and the IPEVCV Guidelines. The Directors believe that, within these parameters, there are no other possible methods
of valuation which would be reasonable as at 31 March 2017.
Albion Venture Capital Trust PLC 47
245544 Albion Venture Cap pp42-pp54 27/06/2017 16:57 Page 48
Notes to the Financial Statements (continued)
11. Fixed asset investments (continued)
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,
which has been adopted early.
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
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 March 2017:
31 March 2017 31 March 2016
Unquoted Unquoted
Equity loan stock Total Equity loan stock Total
£’000 £’000 £’000 £’000 £’000 £’000
Opening balance 15,163 29,852 45,015 10,442 27,787 38,229
Additions 896 3,625 4,521 1,684 4,746 6,430
Disposal proceeds (14) (558) (572) (721) (2,131) (2,852)
Debt/equity swap 150 (150) – – – –
Accrued loan stock interest – 331 331 – 4 4
Realised gains 14 – 14 722 138 860
Unrealised gains 5,691 474 6,165 3,036 (693) 2,343
–––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– ––––––––––––––
Closing balance 21,900 33,573 55,473 15,163 29,852 45,015
–––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– ––––––––––––––
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. 61 per cent. of the portfolio of investments is based on cost 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 for the valuations of the remainder of the portfolio companies could result in an increase
in the valuation of investments by £791,000 or a decrease in the valuation of investments by £834,000. For valuations based on third
party valuations, the Board considers that the most significant inputs are earnings multiples and market value per room for care homes;
which have been adjusted to drive the above sensitivities.
48 Albion Venture Capital Trust PLC
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Notes to the Financial Statements (continued)
12. Significant interests
The principal activity of the Company is to select and hold a portfolio of investments in unquoted securities. Although the Company,
through the Manager, will, in some cases, be represented on the board of the portfolio company, it will not take a controlling interest
or become involved in the management. The size and structure of the companies with unquoted securities may result in certain holdings
in the portfolio representing a participating interest without there being any partnership, joint venture or management consortium
agreement. The Company has interests of greater than 20 per cent. of the nominal value of any class of the allotted shares in the
portfolio companies as at 31 March 2017 as described below:
Company
Kew Green VCT (Stansted)
Limited
G&K Smart Development VCT
Limited
The Stanwell Hotel Limited
Shinfield Lodge Care Limited
The Crown Hotel Harrogate
Limited
Ryefield Court Care Limited
Active Lives Care Limited
Country of
incorporation
Profit/(loss)
before tax
£’000
Net assets/
(liabilities)
£’000
Results for
year ended:
% class and
share type
% total
voting
rights
Great Britain
427
4,873
31 August 2016
45.2% Ordinary 45.2%
Great Britain
n/a*
319
31 December 2015
42.9% Ordinary 42.9%
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
(838)
n/a*
(922)
n/a*
n/a*
(6,950)
1,090
(8,362)
1,004
1,373
31 August 2016
31 December 2015
31 March 2016
39.2% Ordinary 39.2%
35.3% Ordinary 35.3%
24.1% Ordinary 24.1%
30 April 2016
31 December 2015
23.6% Ordinary 23.6%
22.2% Ordinary 22.2%
*The company files abbreviated accounts which do not disclose this information.
13. Current assets
31 March 2017 31 March 2016
Trade and other receivables £’000 £’000
Prospectus Top Up Offers proceeds* – 1,988
Other receivables 96 112
UK corporation tax receivable 35 24
Prepayments and accrued income 9 15
–––––––––––––– ––––––––––––––
140 2,139
–––––––––––––– ––––––––––––––
*This relates to shares subscribed and allotted on 31 March 2016 with monies received after that date.
The Directors consider that the carrying amount of receivables is not materially different to their fair value.
14. Creditors: amounts falling due within one year
31 March 2017 31 March 2016
£’000 £’000
Trade payables 78 18
UK Corporation tax payable 181 176
Accruals and deferred income 375 335
–––––––––––––– ––––––––––––––
634 529
–––––––––––––– ––––––––––––––
The Directors consider that the carrying amount of creditors is not materially different to their fair value.
Albion Venture Capital Trust PLC 49
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Notes to the Financial Statements (continued)
15. Called up share capital
£’000
Allotted, called up and fully paid
86,081,939 Ordinary shares of 1 penny each at 31 March 16 861
8,974,488 Ordinary shares of 1 penny each issued during the year 90
––––––––––––––
95,056,427 Ordinary shares of 1 penny each at 31 March 2017 951
––––––––––––––
6,954,440 Ordinary shares of 1 penny each held in treasury at 31 March 2016 (70)
1,308,748 Ordinary shares purchased during the year to be held in treasury (13)
––––––––––––––
8,263,188 Ordinary shares of 1 penny each held in treasury at 31 March 2017 (83)
––––––––––––––
86,793,239 Ordinary shares of 1 penny each in circulation* at 31 March 2017 868
––––––––––––––
* Carrying one vote each
The Company purchased 1,308,748 Ordinary shares (2016: 1,113,000) to be held in treasury at a nominal value of £13,000 and a cost
of £873,000 (2016: £733,000) representing 1.4 per cent. of its issued share capital as at 31 March 2017. The shares purchased for
treasury were funded from the other distributable reserve.
The Company holds a total of 8,263,188 shares (2016: 6,954,440) in treasury at a nominal value of £83,000, representing 8.7 per cent.
of the issued Ordinary share capital as at 31 March 2017.
Under the terms of the Dividend Reinvestment Scheme Circular dated 10 July 2008, the following new Ordinary shares of nominal value
1 penny per share were allotted during the year:
Aggregate Opening
nominal value Net market price
Number of of shares invested Issue price on allotment date
Date of allotment shares allotted £’000 £’000 (pence per share) (pence per share)
29 July 2016 374,773 4 259 69.5 66.5
30 December 2016 377,848 4 265 70.4 67.9
–––––––––––––– –––––––––––––– ––––––––––––––
752,621 8 524
–––––––––––––– –––––––––––––– ––––––––––––––
During the year the following new Ordinary shares were allotted under the Albion VCTs Prospectus Top Up Offers 2015/2016 and the
Albion VCTs Prospectus Top Up Offers 2016/2017:
Aggregate Net Opening
nominal value consideration market price
Number of of shares received Issue price on allotment date
Date of allotment shares allotted £’000 £’000 (pence per share) (pence per share)
6 April 2016 107,001 1 76 72.8 66.5
6 April 2016 245,265 2 173 72.0 66.5
6 April 2016 9,897 – 7 72.4 66.5
31 January 2017 1,516,754 15 3,307 71.9 67.0
31 January 2017 542,522 5 1,069 72.3 67.0
31 January 2017 4,695,695 47 382 72.6 67.0
28 March 2017 1,104,733 11 807 75.3 68.0
–––––––––––––– –––––––––––––– ––––––––––––––
8,221,867 82 5,821
–––––––––––––– –––––––––––––– ––––––––––––––
16. Basic and diluted net asset value per share
31 March 2017 31 March 2016
Basic and diluted net asset value per share (pence) 75.4 72.0
The basic and diluted net asset value 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 86,793,239 Ordinary shares (2016: 79,127,499).
There are no convertible instruments, derivatives or contingent share agreements in issue.
50 Albion Venture Capital Trust PLC
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Notes to the Financial Statements (continued)
17. Capital and financial instruments risk management
The Company’s capital comprises Ordinary shares as described in note 15. The Company is permitted to buy-back its own shares for
cancellation or treasury purposes, and this is described in more detail on page 7 of the Chairman’s statement.
The Company’s financial instruments comprise equity and loan stock investments in unquoted companies, cash balances and short
term receivables and payables which arise from its operations. The main purpose of these financial instruments is to generate cash
flow 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:
● Investment (or market) risk (which comprises investment price and cash flow interest rate risk);
● credit risk; and
● liquidity risk.
The Board regularly reviews and agrees policies for managing each of these risks. There have been no changes in the nature of the
risks that the Company has faced during the past year and, apart from where noted below, there have been no changes in the
objectives, policies or processes for managing risks during the past year. The key risks are summarised below.
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern, so that it
can continue to provide returns for shareholders and to provide an adequate return to shareholders by allocating its capital to assets
commensurate with the level of risk.
By its nature, the Company has an amount of capital, at least 70 per cent. (as measured under the tax legislation) of which is and must
be, and remain, invested in the relatively high risk asset class of small UK companies within three years of that capital being subscribed.
The Company accordingly has limited scope to manage its capital structure in the light of changes in economic conditions and the risk
characteristics of the underlying assets. Subject to this overall constraint upon changing the capital structure, the group may adjust the
amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets if so required to maintain a
level of liquidity to remain a going concern.
Although, as the Investment Policy implies, the Board would consider levels of gearing, there are no current plans to do so. It regards
the net assets of the Company as the Company’s capital, as the levels of liabilities are small and the management of them is not directly
related to managing the return to shareholders. There has been no change in this approach from the previous year.
Investment risk
As a venture capital trust, it is the Company’s specific nature to evaluate and control the investment risk of its portfolio in unquoted
investments, details of which are shown on page 16. 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 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 investment portfolio which is £55,473,000 (2016:
£45,015,000). Fixed asset investments form 85 per cent. of the net asset value as at 31 March 2017 (2016: 79 per cent.).
More details regarding the classification of fixed asset investments are shown in note 11.
Investment price risk
Investment price risk is the risk that the fair value of future investment cash flows will fluctuate due to factors specific to an investment
instrument or to a market in similar instruments. To mitigate the investment price risk for the Company as a whole, the strategy of the
Company is to invest in a broad spread of industries with approximately two-thirds of the unquoted investments comprising debt
securities, which, owing to the structure of their yield and the fact that they are usually secured, have a lower level of price volatility than
equity. Details of the industries in which investments have been made are contained in the Portfolio of investments section on page 16
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 IPEVCV Guidelines.
Albion Venture Capital Trust PLC 51
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Notes to the Financial Statements (continued)
17. Capital and financial instruments risk management (continued)
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. 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 £5,547,000 (2016: £4,502,000).
Interest rate risk
It is the Company’s policy to accept a degree of interest rate risk on its financial assets through the effect of interest rate changes. On
the basis of the Company’s analysis, it is estimated that a rise of one percentage point in all interest rates would have increased total
return before tax for the year by approximately £74,000 (2016: £122,000). 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 7.0 per cent.
(2016: 6.7 per cent.). The weighted average period to maturity for the fixed rate assets is approximately 4.6 years (2016: 4.7 years).
The Company’s financial assets and liabilities, all denominated in pounds sterling, consist of the following:
31 March 2017 31 March 2016
Non- Non-
Fixed Floating interest Fixed Floating interest
rate rate bearing Total rate rate bearing Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Unquoted equity – – 21,900 21,900 – – 15,163 15,163
Unquoted loan stock* 32,987 279 307 33,573 29,116 279 457 29,852
Receivables ** – – 96 96 – – 2,110 2,110
Current liabilities** – – (452) (452) – – (353) (353)
Cash – 10,496 – 10,496 – 10,330 – 10,330
––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
32,987 10,775 21,851 65,613 29,116 10,609 17,377 57,102
––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
*Including convertible loan stock and debt issued at a discount
** The receivables and current liabilities do not reconcile to the Balance sheet as prepayments and tax receivable/(payable) are not included in the above
table.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered
into with the Company. The Company is exposed to credit risk through its receivables, investment in unquoted loan stock, and through
the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock prior to investment and as part of its ongoing monitoring of investments. In doing this,
it takes into account the extent and quality of any security held. Typically loan stock instruments have a first fixed charge or a fixed and
floating charge over the assets of the portfolio company in order to mitigate the gross credit risk. The Manager receives management
accounts from portfolio companies, and members of the investment management team often sit on the boards of 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 as at 31 March 2017 was limited to £33,573,000 (2016: £29,852,000) of unquoted loan stock
instruments (all of which is secured on the assets of the portfolio company), £10,496,000 cash deposits with banks (2016:
£10,330,000) and £96,000 of other receivables (2016: £2,100,000).
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 credit-
rating agencies.
The Company has an informal policy of limiting counterparty banking and floating rate note exposure to a maximum of 20 per cent. of
net asset value for any one counterparty.
The credit profile of the unquoted loan stock is described under liquidity risk.
52 Albion Venture Capital Trust PLC
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Notes to the Financial Statements (continued)
17. Capital and financial instruments risk management (continued)
Liquidity risk
Liquid assets are held as cash on current short term deposit accounts. 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
£6,330,000 as at 31 March 2017 (2016: £5,497,000).
The Company has no committed borrowing facilities as at 31 March 2017 (2016: £nil) and had cash balances of £10,496,000 (2016:
£10,330,000). 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 the Company’s financial liabilities are short term in
nature and total £634,000 for the year to 31 March 2017 (2016: £529,000).
The carrying value of loan stock investments at 31 March 2017 as analysed by expected maturity dates is as follows:
Fully
performing Impaired Past due Total
Redemption date £’000 £’000 £’000 £’000
Less than one year 4,498 7,326 426 12,250
1-2 years 417 – – 417
2-3 years 4,541 – – 4,541
3-5 years 5,334 416 978 6,728
Greater than 5 years 6,719 – 2,918 9,637
–––––––––––––– –––––––––––––– –––––––––––––– ––––––––––––––
Total 21,509 7,742 4,322 33,573
–––––––––––––– –––––––––––––– –––––––––––––– ––––––––––––––
Loan stock can be past due as a result of interest or capital not being paid in accordance with contractual terms.
The average annual interest yield on the total cost of past due loan stock is 11.2 per cent. (2016: 12.1 per cent.).
Impaired loan stock has a cost of £10,145,000 (2016: £11,065,000).
The carrying value of loan stock investments at 31 March 2016 as analysed by expected maturity dates is as follows:
Fully
performing Impaired Past due Total
Redemption date £’000 £’000 £’000 £’000
Less than one year 4,875 7,732 383 12,990
1-2 years 101 – – 101
2-3 years 407 – – 407
3-5 years 7,693 292 105 8,090
Greater than 5 years 5,437 – 2,827 8,264
–––––––––––––– –––––––––––––– –––––––––––––– ––––––––––––––
Total 18,513 8,024 3,315 29,852
–––––––––––––– –––––––––––––– –––––––––––––– ––––––––––––––
In view of the information shown, the Board considers that the Company is subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Company’s financial assets and liabilities as at 31 March 2017 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.
18. Commitments and contingencies
The Company had no financial commitments in respect of investments at 31 March 2017.
There are no contingent liabilities or guarantees given by the Company as at 31 March 2017 (31 March 2016: nil).
Albion Venture Capital Trust PLC 53
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Notes to the Financial Statements (continued)
19. Post balance sheet events
Since 31 March 2017 the Company has had the following post balance sheet events:
● Investment of £228,000 in G. Network Communications Limited.
In addition, TWCL Limited (previously The Weybridge Club Limited) disposed of its business and assets.
New Ordinary shares issued under the Albion VCTs Prospectus Top Up Offers 2016/2017:
Aggregate Net
nominal value consideration
Number of of shares received Issue price
Date of allotment shares allotted £’000 £’000 (pence per share)
Opening
market price on
allotment date
(pence per share)
7 April 2017 52,543 1 38 74.5
7 April 2017 29,427 – 22 74.9
7 April 2017 284,008 3 207 75.3
–––––––––––––– –––––––––––––– ––––––––––––––
365,978 4 267
–––––––––––––– –––––––––––––– ––––––––––––––
68.0
68.0
68.0
20. Related party transactions
Other than transactions with the Manager as disclosed in note 5, there are no related party transactions or balances requiring
disclosure.
54 Albion Venture Capital Trust PLC
245544 Albion Venture Cap pp55-end 27/06/2017 16:58 Page 55
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the Annual General Meeting of Albion Venture Capital Trust PLC (the “Company”) will be held
at the City of London Club, 19 Old Broad Street, London EC2N 1DS on 14 August 2017 at 11:00 am for the following purpose:
To consider and, if thought fit, to pass the following resolutions, of which numbers 1 to 9 and 11 and 12 will be proposed as
ordinary resolutions and numbers 10 and 13 to 15 as special resolutions.
Ordinary Business
1. To receive and adopt the Company’s accounts for the year ended 31 March 2017 together with the report of the
Directors and Auditor.
2. To approve the Directors’ remuneration policy for the year ended 31 March 2017.
3. To approve the Directors’ remuneration report for the year ended 31 March 2017.
4. To re-elect David Watkins as a Director of the Company.
5. To re-elect John Kerr as a Director of the Company.
6. To re-elect Jeff Warren as a Director of the Company.
7. To authorise the Directors to appoint an auditor of the Company following the completion of the selection process for
the appointment of an external auditor.
8. To authorise the Directors to agree the Auditor’s remuneration.
Special Business
9. Continuation as a venture capital trust
To continue as a venture capital trust until the Annual General Meeting of the Company in 2027, subject to the passing
of resolution number 10.
10. Amendment of Article 136
That existing Article 136 in the Articles of Association of the Company be deleted and the following new Article 136 be
inserted “At the Annual General Meeting of the Company in 2027 and, if the Company has not been wound-up or unitised
or re-organised at each tenth Annual General Meeting of the Company thereafter, the Directors shall procure that an
ordinary resolution will be proposed to the effect that the Company shall continue in being as a venture capital trust.”
11. Increase in Directors’ aggregate remuneration
That under Article 79 of the Articles of the Company, the authority for the total amount of the ordinary remuneration that
all Directors may be paid should be increased to an amount not exceeding £150,000 per year in aggregate.
12. Authority to allot shares
That the Directors be generally and unconditionally authorised in accordance with section 551 of the Companies Act
2006 (the “Act”) to allot shares of nominal value 1 penny per share in the Company up to an aggregate nominal amount
of £190,845 representing approximately 20 per cent. of the total Ordinary share capital, provided that this authority shall
expire 18 months from the date that this resolution is passed, or at the conclusion of the next Annual General Meeting,
whichever is earlier, but so that the Company may, before the expiry of such period, make an offer or agreement which
would or might require shares to be allotted after the expiry of such period and the Directors may allot shares pursuant
to such an offer or agreement as if the authority had not expired.
13. Authority for the disapplication of pre-emption rights
That, subject to the authority and conditional on the passing of resolution number 12, the Directors be empowered,
pursuant to section 570 of the Act, to allot equity securities (within the meaning of section 560 of the Act) for cash
pursuant to the authority conferred by resolution number 12 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.
Albion Venture Capital Trust PLC 55
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Notice of Annual General Meeting (continued)
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.
14. Authority to purchase own shares
That the Company be generally and unconditionally authorised to make market purchases (within the meaning of section
693(4) of the Act) of Ordinary shares of 1 penny each in the capital of the Company (“Ordinary shares”), on such terms
as the Directors think fit, and where such shares are held as treasury shares, the Company may use them for the
purposes set out in section 727 of the Act, provided that:
(a)
(b)
(c)
(d)
the maximum aggregate number of shares hereby authorised to be purchased is 14.99 per cent. of the issued
Ordinary share capital of the Company as at the date of the passing of this resolution;
the minimum price which may be paid for a share shall be 1 penny (exclusive of expenses);
the maximum price (exclusive of expenses) which may be paid for a share shall be an amount being not more than
the higher of (i) 105 per cent. of the average of the middle market quotations (as derived from the Daily Official List
of the London Stock Exchange) for the shares for the five business days immediately preceding the date of
purchase and (ii) the higher of the price of the last independent trade and the highest current independent bid
relating to a share on the trading venue where the purchase is carried out; and
unless previously varied, revoked or renewed, the authority hereby conferred shall expire 18 months from the date
that this resolution is passed or, if earlier, at the conclusion of the Annual General Meeting of the Company to be
held after the passing of this resolution, save that the Company may, at any time prior to such expiry, enter into a
contract or contracts to purchase shares under such authority which would or might be completed or executed
wholly or partly after the expiration of such authority and may make a purchase of shares pursuant to any such
contract or contracts as if the authority conferred hereby had not expired.
Under the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 (the “Regulations”), Ordinary
shares purchased by the Company out of distributable profits can be held as treasury shares, which may then be
cancelled or sold for cash. The authority sought by this special resolution is intended to apply equally to shares to be
held by the Company as treasury shares in accordance with the Regulations.
15. Authority to sell treasury shares
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
Albion Capital Group LLP
Company Secretary
Registered office
1 King’s Arms Yard
London, EC2R 7AF
27 June 2017
Albion Venture Capital Trust PLC is registered in England and Wales with number 03142609
56 Albion Venture Capital Trust PLC
245544 Albion Venture Cap pp55-end 27/06/2017 16:58 Page 57
Notice of Annual General Meeting (continued)
Notes
1. Members entitled to attend, speak and vote at the Annual General Meeting (“AGM”) may appoint a proxy or proxies (who need
not be a member of the Company) to exercise these rights in their place at the meeting. A member may appoint more than one
proxy, provided that each proxy is appointed to exercise the rights attached to different shares. Proxies may only be appointed
by:
● completing and returning the Form of Proxy enclosed with this Notice to Computershare Investor Services PLC,
The Pavilion, Bridgwater Road, Bristol, BS99 6ZZ;
● going to www.investorcentre.co.uk and following the instructions provided there; or
● by having an appropriate CREST message transmitted, if you are a user of the CREST system (including CREST personal
members).
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 11.00 am on 10 August 2017.
2. Any person to whom this Notice is sent who is a person nominated under section 146 of the Companies Act 2006 (‘the Act’)
to enjoy information rights (a “Nominated Person”) may, under an agreement between him or her and the member by whom
he or she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the AGM. If a
Nominated Person has no such proxy appointment right or does not wish to exercise it, he or she may, under any such
agreement, have a right to give instructions to the member as to the exercise of voting rights.
The statement of rights of members in relation to the appointment of proxies in note 1 above does not apply to Nominated
Persons. The rights described in that note can only be exercised by members of the Company.
3. To be entitled to attend and vote at the AGM (and for the purpose of the determination by the Company of the votes they may
cast), members must be registered in the register of members of the Company at 11.00 am on 10 August 2017 (or, in the event
of any adjournment, on the date which is two working days before the time of the adjourned meeting). Changes to the register
of members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the
meeting.
4. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so
for this AGM and any adjournment(s) by using the procedures described in the CREST Manual. CREST personal members or
other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer
to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action 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 11.00am on 10 August 2017. 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 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.
5. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of
its powers as a member provided that they do not do so in relation to the same shares.
6. A copy of this Notice, and other information regarding the meeting, as required by section 311A of the Act, is available from
www.albion.capital/funds/AAVC under the “Fund reports” section.
7. Any member attending the meeting has the right to ask questions. The Company must cause to be answered any such
question relating to the business being dealt with at the meeting but no such answer need be given if (a) to do so would interfere
unduly with the preparation for the meeting or involve the disclosure of confidential information, (b) the answer has already been
given on a website in the form of an answer to a question, or (c) it is undesirable in the interests of the Company or the good
order of the meeting that the question be answered.
8. Copies of contracts of service and letters of appointment between the Directors and the Company will be available for
inspection at the Registered Office of the Company during normal business hours from the date of this Notice until the
conclusion of the meeting, and at the place of the meeting for at least 15 minutes prior to the meeting until its conclusion. In
addition, a copy of the Articles of Association will be available for inspection at the Company’s registered office from the date
Albion Venture Capital Trust PLC 57
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Notice of Annual General Meeting (continued)
of the Notice until the conclusion of the meeting, and at the place of the meeting for at least 15 minutes prior to the meeting
until its conclusion.
9. Under section 527 of the Act members meeting the threshold requirements set out in that section have the right to require the
Company to publish on a website a statement setting out any matter relating to: (i) the audit of the Company’s accounts
(including the Auditor’s report and the conduct of the audit) that are to be laid before the AGM: or (ii) any circumstances
connected with an Auditor of the Company ceasing to hold office since the previous meeting at which the annual accounts and
reports were laid in accordance with section 437 of the Act. The Company may not require the members requesting any such
website publication to pay its expenses in complying with section 527 and 528 of the Act. Where the Company is required to
place a statement on a website under section 527 of the Act, it must forward the statement to the Company’s Auditor not later
than the time when it makes the statement available on the website. The business which may be dealt with at the AGM includes
any statement that the Company has been required under section 527 of the Act to publish on a website.
10. Members satisfying the thresholds in Section 338 of the Companies Act 2006 may require the Company to give, to members
of the Company entitled to receive notice of the AGM, notice of a resolution which those members intend to move (and which
may properly be moved) at the AGM. A resolution may properly be moved at the AGM unless (i) it would, if passed, be ineffective
(whether by reason of any inconsistency with any enactment of the Company’s constitution or otherwise); (ii) it is defamatory of
any person; or (iii) it is frivolous or vexatious. The business which may be dealt with at the AGM includes a resolution circulated
pursuant to this right. A request made pursuant to this right may be in hard copy or electronic form, must identify the resolution
of which notice is to be given, 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.
11. Members satisfying the thresholds in Section 388A of the Companies Act 2006 may request the Company to include in the
business to be dealt with at the AGM any matter (other than a proposed resolution) which may properly be included in the
business at the AGM.
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.
12. As at 23 June 2017 being the latest practicable date prior to the publication of this Notice, the Company’s issued share capital
consists of 95,422,405 Ordinary shares with a nominal value of 1 penny each. The Company also holds 8,263,188 Ordinary
shares in treasury. Therefore, the total voting rights in the Company as at 23 June 2017 are 87,159,217.
58 Albion Venture Capital Trust PLC
245544 Albion Venture Cap pp55-end 27/06/2017 16:58 Page 59
Dividend history for Albion Venture Capital
Trust PLC ‘C Shares’ (unaudited)
Total shareholder return to 31 March 2017 C shares
(pence per share)
Total dividends paid during the year ended: 31 March 1998 2.00
31 March 1999 8.75
31 March 2000 2.70
31 March 2001 4.80
31 March 2002 7.60
31 March 2003 7.70
31 March 2004 8.20
31 March 2005 9.75
31 March 2006 11.75
31 March 2007 10.00
31 March 2008 10.00
31 March 2009 10.00
31 March 2010 5.00
31 March 2011 5.00
31 March 2012 5.00
31 March 2013 5.00
31 March 2014 5.00
31 March 2015 5.00
31 March 2016 5.00
31 March 2017 5.00
––––––––––––
Total dividends paid to 31 March 2017 133.25
Net asset value as at 31 March 2017 75.40
––––––––––––
Total shareholder return to 31 March 2017 208.65
––––––––––––
Notes
● Dividends paid before 5 April 1999 were paid to qualifying shareholders inclusive of the associated tax credit. The dividends for the
year to 31 March 1999 were maximised in order to take advantage of this tax credit.
● All dividends paid by the Company are free of income tax. It is an H.M. Revenue & Customs requirement that dividend vouchers indicate
the tax element should dividends have been subject to income tax. Investors should ignore this figure on their dividend voucher and
need not disclose any income they receive from a VCT on their tax return.
● The Ordinary Shares and the C Shares merged on an equal basis.
Albion Venture Capital Trust PLC 59
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Dividend history for Albion Prime VCT PLC now merged
with Albion Venture Capital Trust PLC (unaudited)
Proforma
Albion Prime VCT PLC
Total proforma shareholder return to 31 March 2017 (pence per share)
Total dividends paid during the year ended: 31 March 1998 1.10
31 March 1999 6.40
31 March 2000 1.50
31 March 2001 4.25
31 March 2002 2.75
31 March 2003 2.00
31 March 2004 1.25
31 March 2005 2.20
31 March 2006 4.50
31 March 2007 4.00
31 March 2008 5.00
31 March 2009 4.50
31 March 2010 2.00
31 March 2011 3.00
31 March 2012 3.00
31 March 2013 3.70
31 March 2014 4.40
31 March 2015 4.40
31 March 2016 4.40
31 March 2017 4.40
––––––––––––
Total dividends paid to 31 March 2017 68.75
Proforma net asset value as at 31 March 2017 66.36
––––––––––––
Total proforma shareholder return to 31 March 2017 135.11
––––––––––––
Notes
● The proforma shareholder returns presented above are based on the dividends paid to shareholders before the merger and the pro-
rata net asset value per share and pro-rata dividends per share paid to 31 March 2017. This proforma is based upon 0.8801 Albion
Venture Capital Trust PLC shares for every Albion Prime VCT PLC share which merged with Albion Venture Capital Trust PLC on
25 September 2012.
● Dividends paid before 5 April 1999 were paid to qualifying shareholders inclusive of the associated tax credit. The dividends for the
year to 31 March 1999 were maximised in order to take advantage of this tax credit.
● The above table excludes the tax benefits investors received upon subscription for shares in the Company.
60 Albion Venture Capital Trust PLC
Perivan Financial Print 245544
Albion Venture Capital Trust PLC
Annual Report and Financial
Statements for the year
ended 31 March 2017
17
Albion Venture Capital Trust PLC
A member of the Association of Investment Companies
This report is printed on Amadeus offset a totally recycled paper produced using 100% recycled waste
at a mill that has been awarded the ISO 14001 certifi cate for environmental management. The pulp is
bleached using a totally chlorine free (TCF) process.
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