REG-Kings Arms Yard VCT PLC: Half-yearly report <Origin Href="QuoteRef">KAY.L</Origin>
29/08/2017 15:27
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LEI Code 213800DK8H27QY3J5R45
As required by the UK Listing Authority's Disclosure and Transparency Rule
4.2, Kings Arms Yard VCT PLC today makes public its information relating to
the Half-yearly Financial Report (which is unaudited) for the six months to 30
June 2017. This announcement was approved by the Board of Directors on 29
August 2017.
The full Half-yearly Financial Report (which is unaudited) for the period to
30 June 2017, will shortly be sent to shareholders. Copies of the full
Half-yearly Financial Report will be shown via the Albion Capital Group LLP
website by clicking www.albion.capital/funds/KAY/30Jun2017.pdf.
Investment policy
The Company is a Venture Capital Trust. The investment policy is intended to
produce a regular and predictable dividend stream with an appreciation in
capital value as set out below.
* The Company's investment policy is for approximately 50% of the portfolio to comprise of more stable, ungeared businesses, with the balance, other than funds retained for liquidity purposes, being invested in a portfolio of higher growth businesses across a variety of sectors of the UK economy including higher risk technology companies. The Company's investment portfolio is thus structured to provide a balance between income and capital growth for the longer term.
* Portfolio companies do not normally have any external borrowings with a charge ranking ahead of the Company.
* Funds held pending investment or for liquidity purposes are held as cash on deposit or similar instruments with banks or other financial institutions with high credit ratings assigned by international credit rating agencies.
Under its Articles of Association, the Company's maximum exposure in relation
to gearing is restricted to its adjusted share capital and reserves.
In this way, risk is spread by investing in a number of different businesses
within venture capital trust qualifying industry sectors using a mixture of
securities. The maximum amount which the Company will invest in a single
company is 15 per cent. of the Company's assets at cost, thus ensuring a
spread of investment risk. The value of an individual investment may increase
over time as a result of trading progress and it is possible that it may grow
in value to a point where it represents a significantly higher proportion of
total assets prior to a realisation opportunity being available.
Financial calendar
Record date for second dividend 6 October 2017
Payment date of second dividend 31 October 2017
Financial year end 31 December
Financial highlights
Unaudited Unaudited six months ended 30 June 2016 Audited year ended 31 December 2016
six months ended
30 June 2017
(pence per share) (pence per share) (pence per share)
Revenue return 0.23 0.17 0.29
Capital return/(loss) 0.75 (0.12) 2.03
Dividends paid 0.50 0.50 1.00
Net asset value 21.81 19.66 21.41
Total shareholder return From Launch to 31 December2010 (pence per share) 1 January 2011 to 30 June 2017 (pence per share) From Launch to 30 June 2017 (pence per share)
Subscription price per share at launch 100.00 - 100.00
Dividends paid 58.66 6.17 64.83
(Decrease)/increase in net asset value (83.40) 5.21 (78.19)
Total shareholder return 75.26 11.38 86.64
Current annual dividend objective (pence per share) 1.00
The Directors have declared a second dividend of 0.5 pence per share for the
year ending 31 December 2017, which will be paid on 31 October 2017 to
shareholders on the register on 6 October 2017.
The above financial summary is for the Company, Kings Arms Yard VCT PLC
only. Details of the financial performance of the various Quester, SPARK and
Kings Arms Yard VCT 2 PLC companies, which have been merged into the Company,
can be found at the end of this announcement.
Interim management report
Introduction
We are pleased to report a total return of 0.98 pence per share (4.6% on
opening net asset value) for the six month period to 30 June 2017. This
continues to build on the strong performance the Company has had in recent
years of a 2.32 pence per share return in 2016 and 1.77 pence per share return
in 2015. The Company's income continues to cover the annual operating costs
(management fee and other expenses).
Results
Net asset value increased from 21.41 pence per share at 31 December 2016 to
21.81 pence per share at 30 June 2017, following the payment of a 0.50 pence
per share dividend on 28 April 2017. Both the Asset-Based portfolio and the
Growth portfolio have shown overall improvements including an increase in the
share price of the two quoted stocks held (ErgoMed PLC and Oxford Immunotec
Global PLC).
Dividends
Progress to date gives the Board confidence in the sustainability of our
dividend policy and we are therefore pleased to announce a further dividend of
0.50 pence per share to be paid on 31 October 2017, to shareholders on the
register on 6 October 2017. The total dividend per share paid in the last year
of 1.0p represents a tax free yield of 4.8% on the mid-market share price of
20.75 pence per share as at 30 June 2017. The Company continues to offer a
Dividend Reinvestment Scheme which continues to be popular amongst existing
shareholders.
Valuations
As always, the Board has rigorously examined and revalued the portfolio. The
net effect has been an overall gain on investments of £2.5m. The asset
based investments, most of which were subject to recent third party
valuations, have increased in value by £1.64m, while the growth companies
have increased in value by £0.24m. Increases in the share price of Oxford
Immunotec Global PLC and ErgoMed PLC resulted in increases of £0.1m and
£0.4m respectively and an additional £0.1m was from realised gains in the
period. Further details of the portfolio of investments can be found below.
Investment activity
There has been a significant level of investment activity in the six months
ended 30 June 2017. The Company has invested £1.0m into five new portfolio
companies, with the expectation of supporting further funding rounds over time
to support success. In addition, the company invested £0.6m to support
existing portfolio companies scale.
New investments in the period included:
* An investment of £550k (Albion VCTs: £4.0m) to fund the international
expansion of MPP Global Solutions Limited, a provider of cloud subscription
management platform for the media, sports and retail sectors for clients
including Now TV, Philips, Sky, The Times and The Daily Mail;
* An initial amount of £204k (Albion VCTs: £1.5m) to fund the early
expansion of G.Network Communications Limited, a provider of ultra high speed
fibre optic broadband to SME's in central London founded in 2016. The company
has installed high speed broadband in around 25 streets (including Harley
Street and Jermyn Street) and has signed up around 130 SME customers;
* An initial investment of £190k (Albion VCTs: £1.3m), to fund the
development of Quantexa Limited, a cybersecurity software company founded in
2016, using a predictive analytics platform to protect and detect complex
financial crime for the financial services, corporate and government sectors.
In its first year of trading it generated over £1.0m revenue and is expected
to grow very quickly;
* An initial investment of £75k (Albion VCTs: £0.5m) to fund the early
development of Locum's Nest Limited, a platform and mobile application
founded in 2016 which allows NHS Trusts to manage their requirements for locum
doctors in a more efficient and cost effective manner. The company is
operating with 6 NHS Trusts and thousands of shifts have been fulfilled using
the platform;
* An initial investment of £6k (Albion VCTs: £50k) to fund Beddlestead Farm
Limited, a start-up wedding venue business.
In the period, the company sold c.£1.0m of quoted securities in Oxford
Immunotec Global PLC (£0.56m) and ErgoMed PLC (£0.40m). For more information
please see the realisation table below.
Portfolio split as at 30 June 2017
Set out at the bottom of this announcement is the sector diversification of
the portfolio of investments as at 30 June 2017.
Transactions with the Manager
Details of transactions with the Manager for the reporting period can be found
in note 4. Details of related party transactions can be found in note 10.
Albion VCTs Top Up Offers
The Company is pleased to announce that its participation in the Albion VCTs
Prospectus Top Up Offers 2016/2017 was fully subscribed and closed early
raising net proceeds of £5.82m. Further details can be found in note 7. The
proceeds of the Offer are being used to provide further resources at a time
when a number of attractive new investment opportunities are being seen.
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. 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 policy to buy-back shares in the market, subject to the
overall constraint that such purchases are in the Company's interest. This
includes the maintenance of sufficient cash resources for investment in new
and existing portfolio companies and the continued payment of dividends to
shareholders. It is the Board's intention over time for such buy-backs to be
in the region of a 5 per cent. discount to net asset value, so far as market
conditions and liquidity permit.
At 30 June 2017 the Company holds £5.39m in cash and cash equivalents and
£3.46m in readily realisable securities.
Risks and uncertainties
The outlook for the UK and global economies continues to be the key risk
affecting the Company. The withdrawal of the UK from the European Union is
likely to have an impact on the Company and its investments, although it is
difficult to quantify at this time. Overall investment risk, however, is
mitigated through a variety of processes, including our policies of first
ensuring that the Company has a first charge over portfolio companies' assets
wherever possible, and second of aiming to achieve balance in the portfolio
through the inclusion of sectors that are less exposed to the business
consumer cycles.
Other risks and uncertainties remain unchanged and are detailed in note 12.
Outlook
Your Board remains cautious on the economic outlook but positive on the long
term prospects of the portfolio. The portfolio is well diversified by company
(over 50 portfolio companies), sector, and stage. The Board believes the
portfolio offers significant long-term growth potential which will be
determined primarily by the success of the underlying businesses rather than
the macroeconomic environment.
Robin Field
Chairman
29 August 2017
Responsibility statement
The Directors, Robin Field, Thomas Chambers and Martin Fiennes, are
responsible for preparing the Half-yearly Financial Report. In preparing these
condensed Financial Statements for the period to 30 June 2017 we, the
Directors of the Company, confirm that to the best of our knowledge:
(a) the condensed set of Financial Statements, which has been prepared in
accordance with Financial Reporting Standard 104 "Interim Financial
Reporting", gives a true and fair view of the assets, liabilities, financial
position and profit and loss of the Company as required by DTR 4.2.4R;
(b) the Interim management report, includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months and description of principal risks and uncertainties for the remaining
six months of the year); and
(c) the Interim management report, includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions and
changes therein).
This Half-yearly Financial Report has not been audited or reviewed by the
Auditor.
By order of the Board
Robin Field
Chairman
29 August 2017
Portfolio of investments
The following is a summary of fixed asset investments as at 30 June 2017:
Fixed asset investments % Cost ((1)) Cumulative Value Change in
voting £'000 movement £'000 value for the
rights in value period ((2))
£'000 £'000
Asset-based unquoted investments
Active Lives Care Limited 20.3 4,140 2,075 6,215 838
Ryefield Court Care Limited 18.7 2,800 1,722 4,522 587
Chonais River Hydro Limited 6.5 2,428 511 2,939 4
The Street by Street Solar Programme Limited 10.0 1,040 611 1,651 87
Alto Prodotto Wind Limited 11.1 988 557 1,545 28
Regenerco Renewable Energy Limited 9.8 988 385 1,373 12
Dragon Hydro Limited 17.2 736 361 1,097 (17)
Bravo Inns II Limited 5.0 800 140 940 40
Shinfield Lodge Care Limited 2.9 535 341 876 74
Earnside Energy Limited 5.2 835 8 843 (7)
Gharagain River Hyrdo Limited 5.0 620 71 691 (2)
AVESI Limited 14.8 484 163 647 5
Greenenerco Limited 8.6 296 156 452 (11)
G.Network Communications Limited 4.5 204 - 204 -
Erin Solar Limited 5.7 160 (6) 154 (3)
Infinite Ventures (Goathill) Limited 2.7 112 33 145 7
Harvest AD Limited(i) - 70 (1) 69 (1)
Beddlestead Farm Limited 6.0 6 - 6 -
Total asset-based unquoted investments 17,242 7,127 24,369 1,641
1. Early stage investment of convertible loan stock.
High growth unquoted investments
Elateral Group Limited 37.7 4,194 (168) 4,026 (649)
Proveca Limited 15.1 1,304 1,664 2,968 60
Antenova Limited 28.7 1,733 1,124 2,857 133
Anthropics Technologies Limited 14.9 19 1,720 1,739 376
Egress Software Technologies Limited 4.3 430 1,264 1,694 457
Hilson Moran Holdings Limited 10.4 301 1,300 1,601 185
Perpetuum Limited 15.0 2,073 (652) 1,421 -
MyMeds&Me Limited 7.0 848 412 1,260 21
Academia Inc. 3.2 351 894 1,245 (58)
Grapeshot Limited 2.6 518 572 1,090 413
Edo Consulting Limited (Formerly Sift Digital Limited) 38.6 923 112 1,035 (37)
Sift Limited 42.1 2,306 (1,566) 740 (300)
OmPrompt Holdings Limited 10.2 945 (247) 698 (284)
MPP Global Solutions Limited 1.9 550 - 550 -
Symetrica Limited 3.5 389 135 524 (235)
Celoxica Holdings plc 4.4 513 (144) 369 -
Mirada Medical Limited 1.1 303 32 335 23
Relayware Limited 1.0 324 (3) 321 (2)
Black Swan Data Limited 0.9 293 - 293 -
Convertr Media Limited 3.1 284 - 284 -
Aridhia Informatics Limited 2.2 354 (75) 279 39
Secured By Design Limited 1.7 260 - 260 -
Abcodia Limited 4.3 548 (313) 235 -
The Wentworth Wooden Jigsaw Company Limited 5.4 - 214 214 93
Quantexa Limited 1.7 190 - 190 -
Panaseer Limited 1.3 113 29 142 29
Cisiv Limited 2.8 216 (105) 111 -
Sandcroft Avenue Limited (T/A payasugym.com) 1.3 120 (16) 104 -
Oviva AG 1.2 91 - 91 -
Locum's Nest Limited 1.6 75 - 75 -
Dickson Financial Services Limited 4.5 45 22 67 5
InCrowd Sports Limited 0.8 36 - 36 -
Xention Limited 10.6 38 (28) 10 (26)
Ario Pharma Limited 3.6 24 (23) 1 -
De Novo Pharmaceuticals Limited 0.0 - 1 1 -
Furzeland Limited 0.0 - 1 1 -
Keronite Limited 1.1 - 1 1 -
Lectus Therapeutics Limited 4.5 - 1 1 -
Oxonica Limited 2.1 1 - 1 -
TeraView Limited 1.0 1 - 1 -
Total high growth unquoted investments 20,713 6,158 26,871 243
Total unquoted investments 37,955 13,285 51,240 1,884
Quoted investments
Oxford Immunotec Global PLC (NASDAQ) 551 1,280 1,831 115
ErgoMed PLC 1,173 453 1,626 360
Total quoted investments 1,724 1,733 3,457 475
Total fixed asset investments 39,679 15,018 54,697 2,359
Total change in value of investments for the period 2,359
Movement in loan stock accrued interest 36
Unrealised gains sub-total 2,395
Realised gains in current period 132
Total gains on investments as per Income statement 2,527
(1) Amounts shown as cost represent the acquisition cost in the case of
investments originally made by the Company and/or the valuation attributed to
the investments acquired from Quester VCT 2 plc and Quester VCT 3 plc at the
date of the merger in 2005, and those acquired from Kings Arms Yard VCT 2 PLC
at the merger on 30 September 2011, plus any subsequent acquisition costs, as
reduced in certain cases by amounts written off as representing an impairment
value.
(2) The above column shows the movement in the year from the opening balance
as at 1 January 2017 to the closing balance as at 30 June 2017 after
adjustments for additions and disposals.
Realisations and loan stock repayments in the period to 30 June 2017 Cost Opening Disposal Realised Gain on
£'000 carrying proceeds gain on opening
value £'000 cost or
£'000 £'000 acquired
value
£'000
Oxford Immunotec Global PLC 175 544 560 385 16
ErgoMed PLC 294 317 404 110 87
Haemostatix Limited (additional escrow) - - 26 26 26
Alto Prodotto Wind Limited (loan stock repayment) 10 15 15 5 -
Greenenerco Limited (loan stock repayment) 3 5 5 2 -
Silent Herdsman Holdings Limited ( escrow adjustment) - - 3 3 3
Total 482 881 1,013 531 132
Condensed income statement
Unaudited Unaudited six months ended 30 June 2016 Audited year ended 31 December 2016
six months ended
30 June 2017
Note Revenue Capital Total Revenue £'000 Capital £'000 Total £'000 Revenue £'000 Capital £'000 Total £'000
£'000 £'000 £'000
Gains on investments 2 - 2,527 2,527 - 59 59 - 6,076 6,076
Investment income 3 940 - 940 661 - 661 1,370 - 1,370
Investment management fees 4 (142) (427) (569) (118) (355) (473) (244) (733) (977)
Performance incentive fee 4 (32) (95) (127) - - - (128) (385) (513)
Other expenses (152) - (152) (133) - (133) (279) - (279)
Profit/(loss) on ordinary activities before tax 614 2,005 2,619 410 (296) 114 719 4,958 5,677
Tax on ordinary activities - - - - - - - - -
Profit/(loss) and total comprehensive income attributable to shareholders 614 2,005 2,619 410 (296) 114 719 4,958 5,677
Basic and diluted return/(loss) per share (pence) 6 0.23 0.75 0.98 0.17 (0.12) 0.05 0.29 2.03 2.32
The accompanying notes form an integral part of this Half-yearly Financial
Report.
Comparative figures have been extracted from the unaudited Half-yearly
Financial Report for the six months ended 30 June 2016 and the audited
statutory accounts for the year ended 31 December 2016.
The total column of this condensed 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.
Condensed balance sheet
Note Unaudited Unaudited 30 June 2016 £'000 Audited 31 December 2016 £'000
30 June 2017
£'000
Fixed asset investments 54,697 44,425 51,601
Current assets
Trade and other receivables less than one year 66 618 476
Cash and cash equivalents 5,388 4,267 1,788
5,454 4,885 2,264
Total assets 60,151 49,310 53,865
Creditors: amounts falling due within one year
Trade and other payables less than one year (605) (383) (855)
Total assets less current liabilities 59,546 48,927 53,010
Equity attributable to equity holders
Called up share capital 7 3,127 2,833 2,840
Share premium 19,899 14,103 14,218
Capital redemption reserve 11 11 11
Unrealised capital reserve 14,523 7,217 12,526
Realised capital reserve 3,440 3,488 3,432
Other distributable reserve 18,546 21,275 19,983
Total equity shareholders' funds 59,546 48,927 53,010
Basic and diluted net asset value per share (pence)* 21.81 19.66 21.41
*excluding treasury shares
The accompanying notes form an integral part of this Half-yearly Financial
Report.
Comparative figures have been extracted from the unaudited Half-yearly
Financial Report for the six months ended 30 June 2016 and the audited
statutory accounts for the year ended 31 December 2016.
These Financial Statements were approved by the Board of Directors, and
authorised for issue on 29 August 2017 and were signed on its behalf by
Robin Field
Chairman
Company number: 03139019
Condensed statement of changes in equity
Called up Share Capital Unrealised Realised Other Total
share premium redemption capital capital distributable
capital reserve reserve reserve* reserve*
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2017 2,840 14,218 11 12,526 3,432 19,983 53,010
Profit/(loss) and total comprehensive income for the period - - - 2,395 (390) 614 2,619
Transfer of previously unrealised gains on disposal of investments - - (398) - -
- 398
Purchase of own shares for treasury - - - - - (676) (676)
Issue of equity 287 5,853 - - - - 6,140
Cost of issue of equity - (172) - - - - (172)
Dividends paid - - - - - (1,375) (1,375)
At 30 June 2017 3,127 19,899 11 14,523 3,440 18,546 59,546
At 1 January 2016 2,533 8,399 11 7,170 3,830 22,669 44,612
Profit/(loss) and total comprehensive income for the period - - - 5 (301) 410 114
Transfer of previously unrealised losses on disposal of investments - - - 41 (41) - -
Purchase of own shares for treasury - - - - - (548) (548)
Issue of equity 300 5,863 - - - - 6,163
Cost of issue of equity - (159) - - - - (159)
Dividends paid - - - - - (1,256) (1,256)
At 30 June 2016 2,833 14,103 11 7,217 3,488 21,275 48,927
At 1 January 2016 2,533 8,399 11 7,170 3,830 22,669 44,612
Profit/(loss) and total comprehensive income for the period - - - 5,718 (760) 719 5,677
Transfer of previously unrealised gains on disposal or write off of investments - - - (362) 362 - -
Purchase of own shares for treasury - - - - - (905) (905)
Issue of equity 307 5,981 - - - - 6,288
Cost of issue of equity - (162) - - - - (162)
Dividends paid - - - - - (2,500) (2,500)
At 31 December 2016 2,840 14,218 11 12,526 3,432 19,983 53,010
*The total distributable reserves are £21,986,000 (30 June 2016:
£24,763,000; 31 December 2016: £23,415,000).
Comparative figures have been extracted from the unaudited Half-yearly
Financial Report for the six months ended 30 June 2016 and the audited
statutory accounts for the year ended 31 December 2016.
Condensed statement of cash flows
Unaudited Unaudited six months ended 30 June 2016 £'000 Audited year ended 31 December 2016 £'000
six month
ended
30 June 2017
£'000
Cash flow from operating activities
Investment income received 594 480 902
Deposit interest received 1 18 32
Dividend income received 337 46 84
Investment management fees paid (526) (450) (994)
Performance incentive fee paid (513) (242) (242)
Other cash payments (129) (135) (227)
Exchange rate movement on a part disposal of an asset (7) 4 7
Net cash flow from operating activities (243) (279) (438)
Cash flow from investing activities
Purchase of fixed asset investments (1,573) (3,873) (5,935)
Disposal of fixed asset investments 1,422 651 1,918
Net cash flow from investing activities (151) (3,222) (4,017)
Cash flow from financing activities
Issue of share capital 5,824 5,880 5,880
Cost of issue of equity - - (2)
Purchase of own shares (including costs) (602) (499) (905)
Equity dividends paid* (1,228) (1,131) (2,248)
Net cash flow from financing activities 3,994 4,250 2,725
Increase/(decrease) in cash and cash equivalents 3,600 749 (1,730)
Cash and cash equivalents at start of period 1,788 3,518 3,518
Cash and cash equivalents at end of period 5,388 4,267 1,788
Cash and cash equivalents comprise:
Cash at bank and in hand 5,388 4,267 1,788
Cash equivalents - - -
Total cash and cash equivalents 5,388 4,267 1,788
* The dividend paid in the cash flow is different to the dividend disclosed in
note 5 due to the non-cash effect of the Dividend Reinvestment Scheme.
The accompanying notes form an integral part of this Half-yearly Financial
Report.
Comparative figures have been extracted from the unaudited Half-yearly
Financial Report for the six months ended 30 June 2016 and the audited
statutory accounts for the year ended 31 December 2016.
Notes to the condensed Financial Statements
1. Basis of accounting
The condensed 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"), Financial
Reporting Standard 104 - Interim Financial Reporting ("FRS 104"), and with the
2014 Statement of Recommended Practice "Financial Statements of Investment
Trust Companies and Venture Capital Trusts" ("SORP") issued by The Association
of Investment Companies ("AIC").
The preparation of the Financial Statements requires management to make
judgements and estimates that affect the application of policies and reported
amounts of assets, liabilities, income and expenses. The most critical
estimates and judgements relate to the determination of carrying value of
investments at fair value through profit and loss ("FVTPL"). The Company
values investments by following the IPEVCV Guidelines and further detail on
the valuation techniques used are outlined below.
The half-yearly report has not been audited, nor has it been reviewed by the
auditor pursuant to the FRC's guidance on Review of interim financial
information.
Company information can be found on page 2 of the Half-yearly Financial
Report.
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 elapsed since the date of the
most recent transaction, consideration is given to the circumstances of the
portfolio company since that date in determining fair value. This includes
consideration of whether there is any evidence of deterioration or strong
definable evidence of an increase in value. In the absence of these
indicators, the investment in question is valued at the amount reported at the
previous reporting date. Examples of events or changes that could indicate a
diminution include: * the performance and/or prospects of the underlying
business are significantly below the expectations on which the investment was
based;
* a significant adverse change either in the portfolio company's business or
in the technological, market, economic, legal or regulatory environment in
which the business operates; or
* market conditions have deteriorated, which may be indicated by a fall in the
share prices of quoted businesses operating in the same or related sectors.
Investments are recognised as financial assets on legal completion of the
investment contract and are de-recognised on legal completion of the sale of
an investment.
Dividend income is not recognised as part of the fair value movement of an
investment, but is recognised separately as investment income through the
income statement when a share becomes ex-dividend.
Debtors and creditors and cash are carried at amortised cost, in accordance
with FRS 102. There are no financial liabilities other than creditors.
Gains and losses on investments
Gains and losses arising from changes in the fair value of the investments are
included in the Condensed income statement for the period as a capital item
and are allocated to the unrealised capital reserve.
Investment income
Equity income
Dividend income is included in revenue when the investment is quoted
ex-dividend.
Unquoted loan stock and other preferred income
Fixed returns on non-equity shares and debt securities are recognised when the
Company's right to receive payment and expect settlement is established. Where
interest is rolled up and/or payable at redemption then it is recognised as
income unless there is reasonable doubt as to its receipt.
Bank interest income
Interest income is recognised on an accruals basis using the rate of interest
agreed with the bank.
Investment management fees and expenses
All expenses have been accounted for on an accruals basis. Expenses are
charged through the other distributable reserve except the following which are
charged through the realised capital reserve:
* 75 per cent. of management fees are allocated to realised capital reserve.
This is in line with the Board's expectation that over the long term 75 per
cent. of the Company's investment returns will be in the form of capital
gains; and
* expenses which are incidental to the purchase or disposal of an investment
are charged through the realised capital reserve.
Performance incentive fee
Any performance incentive fee will be allocated between other distributable
and realised capital reserves based upon the proportion to which the
calculation of the fee is attributable to revenue and capital returns.
Taxation
Taxation is applied on a current basis in accordance with FRS 102. Current tax
is tax payable (refundable) in respect of the taxable profit (tax loss) for
the current period or past reporting periods using the tax rates and laws that
have been enacted or substantively enacted at the financial reporting date.
Taxation associated with capital expenses is applied in accordance with the
SORP.
Deferred tax is provided in full on all timing differences at the reporting
date. Timing differences are differences between taxable profits and total
comprehensive income as stated in the financial statements that arise from the
inclusion of income and expenses in tax assessments in periods different from
those in which they are recognised in financial statements. As a VCT the
Company has an exemption from tax on capital gains. The Company intends to
continue meeting the conditions required to obtain approval as a VCT in the
foreseeable future. The Company therefore, should have no material deferred
tax timing differences arising in respect of the revaluation or disposal of
investments and the Company has not provided for any deferred tax.
Foreign exchange
The currency of the primary economic environment in which the Company operates
(the functional currency) is pounds Sterling ("Sterling"), which is also the
presentational currency of the Company. Transactions involving currencies
other than Sterling are recorded at the exchange rate ruling on the
transaction date. At each Balance sheet date, monetary items and
non-monetary assets and liabilities that are measured at fair value, which are
denominated in foreign currencies, are retranslated at the closing rates of
exchange. Exchange differences arising on settlement of monetary items and
from retranslating at the Balance sheet date of investments and other
financial instruments measured at fair value through profit or loss, and other
monetary items, are included in the Income statement. Exchange differences
relating to investments and other financial instruments measured at fair value
are subsequently included in the unrealised capital reserve.
Reserves
Share premium
This reserve accounts for the difference between the price paid for shares and
the nominal value of the shares, less issue costs and transfers to other
distributable reserve.
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is
diminished through the repurchase and cancellation of the Company's own
shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at the year end
against cost are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
* gains and losses compared to cost on the realisation of investments;
* expenses, together with the related taxation effect, charged in accordance
with the above policies; and
* dividends paid to equity holders.
Other distributable reserve
The special reserve, treasury share reserve and the revenue reserve were
combined in 2012 to form a single reserve named other distributable reserve.
This reserve accounts for movements from the revenue column of the Income
statement, the payment of dividends, the buy-back of shares and other
non-capital realised movements.
Dividends
Dividends by the Company are accounted for in the period in which the dividend
is paid or approved at the Annual General Meeting.
Segmental reporting
The Directors are of the opinion that the Company is engaged in a single
operating segment of business, being investment in equitRecent news on Albion KAY VCT
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