Albion Prime VCT Albion Prime VCT PLC : Annual -11-
28 Juin 2012 - 7:24PM
UK Regulatory
fair value. There are no financial liabilities other than creditors. The
Company's financial liabilities are all non-interest bearing. It is the
Directors' opinion that the book value of the financial liabilities is not
materially different to the fair value and all are payable within one year.
20. Commitments and contingencies
As at 31 March 2012, the Company was not committed to making any investments.
There are no contingent liabilities or guarantees given by the Company as at 31
March 2012 (31 March 2011: nil).
21. Post balance sheet events
Since 31 March 2012 the Company has had the following post balance sheet events:
* Investment of GBP50,000 in Bravo Inns II Limited;
* Investment of GBP14,000 in Nelson House Hospital Limited;
* The following Ordinary shares of nominal value 1 penny per share were
allotted under the Albion VCTs Linked Top Up Offer 2011/2012:
Opening
Aggregate market price
Number of nominal Net per share on
Date of shares value of consideration Issue allotment
allotment allotted shares received price date
(pence
per (pence per
GBP'000 GBP'000 share) share)
=------------------------------------------------------------------------------
5 April 2012 599,533 6 418 73.8 52.5
31 May 2012 67,348 1 47 73.8 52.0
-------------------------------------------
666,881 7 465
-------------------------------------------
* On 16 May 2012, the Company announced that they had reached an agreement in
principle to merge with Albion Venture Capital Trust plc. Details can be
found in the Chairman's statement.
22. Related party transactions
The Manager, Albion Ventures LLP, is considered to be a related party by virtue
of the fact that Patrick Reeve, a Director of the Company, is also the Managing
Partner of the Manager. The Manager is party to a management agreement from the
Company. During the year, services of a total value of GBP272,000 (2011: GBP268,000)
were purchased by the Company from Albion Ventures LLP in relation to management
fees and GBP28,000 (2011: GBP28,000) purchased in relation to company secretarial
and administration services. At the financial year end, the amount due to Albion
Ventures LLP disclosed as accruals and deferred income was GBP74,000 (2011:
GBP75,000).
During the year the Company raised new funds through the Albion VCTs Linked Top
Up Offers as detailed in note 15. The total cost of the issue of these shares
was 5.5% of the sums subscribed. Of these costs, an amount of GBP4,500 (2011:
GBP3,450) was paid to the Manager, Albion Ventures LLP in respect of receiving
agent services. There were no sums outstanding in respect of receiving agent
services at 31 March 2012.
During the year, the Company was charged by Albion Ventures LLP GBP15,000
(excluding VAT) in respect of Patrick Reeve's services as a Director (2011:
GBP15,000). At the year end, the amount due to Albion Ventures LLP in respect of
these services disclosed as accruals and deferred income was GBP4,000 (2011:
GBP4,000).
23. Principal risks and uncertainties
In addition to the current economic risks outlined in the Chairman's statement,
the Board considers that the Company faces the following major risks and
uncertainties:
1. Economic 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.
To reduce this risk, in addition to investing equity in portfolio companies, the
Company often invests in secured loan stock and has a policy of not normally
permitting any external bank borrowings within portfolio companies.
Additionally, the Manager has been rebalancing the sector exposure of the
portfolio with a view to reducing reliance on consumer led sectors.
2. Investment risk
This is the risk of investment in poor quality assets which reduces the capital
and income returns to shareholders, and negatively impacts on the Company's
reputation. By nature, smaller unquoted businesses, such as those that qualify
for venture capital trust purposes, are more fragile than larger, long
established businesses.
To reduce this risk, the Board places reliance upon the skills and expertise of
the Manager and their strong track record for investing in this segment of the
market. In addition, the Manager operates a formal and structured investment
process, which includes an Investment Committee, comprising investment
professionals from the Manager and at least one external investment
professional. The Manager also takes account of comments from all 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 investee company boards) and the Board
receives detailed reports on each investment as part of the Manager's report at
quarterly board meetings. It is the policy of the Company for portfolio
companies to not normally have external bank borrowings.
3. Valuation risk
The Company's investment valuation method is reliant on the accuracy and
completeness of information that is issued by portfolio companies. In
particular, the Directors may not be aware of or take into account certain
events or circumstances which occur after the information issued by such
companies is reported.
As described in note 2 of the Financial Statements, the unquoted equity
investments, convertible loan stock and debt issued at a discount held by the
Company are designated at fair value through profit or loss and valued in
accordance with the International Private Equity and Venture Capital Valuation
Guidelines. These guidelines set out recommendations, intended to represent
current best practice on the valuation of venture capital investments. These
investments are valued on the basis of forward looking estimates and judgments
about the business itself, its market and the environment in which it operates,
together with the state of the mergers and acquisitions market, stock market
conditions and other factors. In making these judgments the valuation takes into
account all known material facts up to the date of approval of the Financial
Statements by the Board. All other unquoted loan stock is measured at amortised
cost.
4. Venture Capital Trust approval risk
The Company's current approval as a venture capital trust allows investors to
take advantage of tax reliefs on initial investment and ongoing tax free capital
gains and dividend income. Failure to meet the qualifying requirements could
result in investors losing the tax relief on initial investment and loss of tax
relief on any tax free income or capital gains received. In addition, failure to
meet the qualifying requirements could result in a loss of listing of the
shares.
To reduce this risk, the Board has appointed the Manager, who has significant
experience in venture capital trust management, and is used to operating within
the requirements of the venture capital trust legislation. In addition, to
provide further formal reassurance, the Board has appointed
PricewaterhouseCoopers LLP as its taxation advisor. PricewaterhouseCoopers LLP
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.
5. Compliance risk
The Company is listed on The London Stock Exchange and is required to comply
with the rules of the UK Listing Authority, as well as with the Companies Act,
Accounting Standards and other legislation. Failure to comply with these
regulations could result in a delisting of the Company's shares, or other
penalties under the Companies Act or from financial reporting oversight bodies.
Board members and the Manager have experience of operating at the most senior
levels within quoted businesses. In addition, the Board and the Manager receive
regular updates on new regulation from its auditor, lawyers and other
professional bodies.
6. Internal control risk
Failures in key controls, within the Board or within the Manager's business,
could put assets of the Company at risk or result in reduced or inaccurate
information being passed to the Board or to shareholders.
The Audit Committee meets with the Manager's internal auditor, Littlejohn LLP,
when required, receiving a report regarding the last formal internal audit
performed on the Manager, and providing the opportunity for the Audit Committee
to ask specific and detailed questions. Ebbe Dinesen, as Audit Committee
Chairman, met with the internal audit Partner of Littlejohn LLP in January 2012
to discuss the most recent Internal Audit Report on the Manager. The Manager has
a comprehensive business continuity plan in place in the event that operational
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