REG-Albion Technology & General VCT PLC - Ordinary Shares : Half-yearly report <Origin Href="QuoteRef">AATG.L</Origin>
12/09/2017 10:31
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Albion Technology & General VCT PLC
LEI number: 213800TKJUY376H3KN16
As required by the UK Listing Authority's Disclosure and Transparency Rule
4.2, Albion Technology & General 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 12 September 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/AATG.
Investment objective and policy
Investment objective
The Company's investment objective is to provide investors with a regular and
predictable source of dividend income combined with the prospect of long-term
capital-growth through allowing investors the opportunity to participate in a
balanced portfolio of unquoted technology and non-technology businesses.
Investment policy
It is intended that the Company's investment portfolio will be split
approximately as follows:
* 40 per cent. in unquoted UK technology related companies; and
* 60 per cent. in unquoted UK non-technology companies.
This split is subject to the availability of good quality new investments
arising within the UK technology and non-technology sectors. In neither
categories listed above would portfolio companies normally have any external
borrowing with a charge ranking ahead of the Company. Up to two thirds of
investments (by cost) will comprise loan stock secured with a first charge on
the portfolio company's assets.
The Company pursues a longer term investment approach, with a view to
providing shareholders with a strong, predictable dividend flow, combined with
the prospects of capital growth. This is achieved in two ways. First, by
controlling the Company's exposure to technology risk through ensuring that
many of the companies in the non-technology portfolio have property as their
major asset, with no external borrowings. Second, by balancing the investment
portfolio by sector, so that those areas such as leisure and business
services, which are susceptible to changes in consumer sentiment, are
complemented by sectors with more predictable long-term characteristics, such
as healthcare and the environment.
VCT qualifying investments
In addition to the above, the investment policy is designed to ensure that the
Company continues to qualify and is approved as a VCT by HM Revenue and
Customs. The maximum amount invested in any one company is limited to any HMRC
annual investment limits and, generally, no more than 15 per cent. of the
Company's assets, at cost, are invested in a single company. It is intended
that at least 80 per cent. of the Company's funds will be invested in VCT
qualifying investments.
Non-VCT qualifying investments
Funds held prior to investing in VCT qualifying assets or for liquidity
purposes will be held as cash on deposit, invested in floating rate notes or
similar instruments with banks or other financial institutions with high
credit ratings or invested in liquid open-ended equity funds providing income
and capital equity exposure (where it is considered economic to do so).
Investment in such open-ended equity funds will not exceed 7.5 per cent. of
the Company's assets at the time of investment.
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses within VCT
qualifying industry sectors using a mixture of securities. The maximum the
Company will invest in a single company is 15 per cent. of the Company's
assets at cost. The value of an individual investment is expected to increase
over time as a result of trading progress and a continuous assessment is made
of investments' suitability for sale. It is possible that individual holdings
may grow in value to a point where they represent a significantly higher
proportion of total assets prior to a realisation opportunity being available.
Borrowing powers
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 have
any intention to utilise long-term gearing.
Background to the Company
The Company is a venture capital trust which raised £14.3 million in December
2000 and 2002, and raised a further £35.0 million during 2006 through the
launch of a C share issue. The Company has raised a further £26.4m under the
Albion VCTs Top-Up Offers since January 2011.
On 15 November 2013, the Company acquired the assets and liabilities of Albion
Income & Growth VCT PLC ("Income & Growth") in exchange for new shares in the
Company ("the Merger"). Each Income & Growth shareholder received 0.7813
shares in the Company for each Income & Growth share that they held at the
date of the Merger.
Financial calendar
Record date for third dividend for the year Payment of third dividend Financial year end 1 December 2017 29 December 2017 31 December
Financial summary
Unaudited six months ended 30 June 2017 (pence per share) Unaudited six months ended 30 June 2016 (pence per share) Audited year ended 31 December 2016 (pence per share)
Dividends paid 2.0 3.8 5.0
Revenue return 0.1 0.5 0.8
Capital gain/(loss) 1.9 (1.6) 1.7
Net asset value 71.5 69.2 71.6
Ordinary shares (pence per share) (i) C shares (pence per share) (i)(ii) Albion Income & Growth VCT PLC (pence per share) (i)(iii)
Total shareholder return to 30 June 2017
Total dividends paid during the period ended:
31 December 2001 1.0 - -
31 December 2002 2.0 - -
31 December 2003 1.5 - -
31 December 2004 7.5 - -
31 December 2005 9.0 - 0.6
31 December 2006 8.0 0.5 2.6
31 December 2007 8.0 2.5 3.5
31 December 2008 16.0 4.5 3.5
31 December 2009 - 1.0 3.0
31 December 2010 8.0 3.0 3.0
31 December 2011 5.0 3.8 3.5
31 December 2012 5.0 3.9 3.5
31 December 2013 5.0 3.9 3.5
31 December 2014 5.0 3.9 3.9
31 December 2015 5.0 3.9 3.9
31 December 2016 5.0 3.9 3.9
30 June 2017 2.0 1.6 1.6
Total dividends paid to 30 June 2017 93.0 36.4 40.0
Net asset value as at 30 June 2017 71.5 55.6 55.9
Total shareholder return to 30 June 2017 164.5 92.0 95.9
In addition to the dividends paid above, the Board declared a third dividend
for the year ending 31 December 2017 of 2.0 pence per Ordinary share to be
paid on 29 December 2017 to shareholders on the register on 1 December 2017.
Notes
(i) Excludes tax benefits upon subscription.
(ii) The C shares were converted into Ordinary shares on 31 March 2011. The
net asset value per share and all dividends paid subsequent to the conversion
of the C shares to the Ordinary shares are multiplied by the conversion factor
of 0.7779 in respect of the C shares' return, in order to give an accurate
picture of the shareholder value since launch relating to the C shares.
(iii) Albion Income & Growth VCT PLC was merged with Albion Technology &
General VCT PLC on 15 November 2013. The net asset value per share and all
dividends paid subsequent to the merger of the Income & Growth shares to the
Ordinary shares are multiplied by the issue ratio of 0.7813 in respect of the
Income & Growth shares' return, in order to give an accurate picture of the
shareholder value since launch relating to the Income & Growth shares. Prior
to the merger, Albion Income & Growth VCT PLC had a financial year end of 30
September and as such, the above dividends per share relate to the relevant
period.
Interim management report
Introduction
The results for Albion Technology & General VCT PLC for the six months to 30
June 2017 showed a total return of 2.0 pence per share, compared to a loss of
1.1 pence per share for the interim period the previous year. Net asset
value at 30 June 2017 was 71.5 pence per share.
Performance and portfolio update
These interim results, on top of the total return of 2.5 pence per share for
the year ended 31 December 2016, reflect the continued progress in
repositioning the portfolio which began in 2014. The return was driven
principally by strong performance in the technology sector, which led to
material revaluations in memsstar and Oxsensis. Against this, the share price
of the AIM-quoted Mi-Pay fell during the period. The disposal programme of
the pre-2009 investments continues, with the disposal of AMS Sciences,
Blackbay and Masters Pharmaceuticals during the period. This takes the
proportion of investments made before 2009 down to 22 per cent. of the
portfolio.
Investments in four new companies have been made during the period, all of
which should result in further investment as the companies prove themselves
and grow. These are MPP Global Solutions (provider of a cloud platform to
measure and manage e-commerce), G. Network Communications (provider of
ultra-high speed fibre optic broadband to SME's in central London), Quantexa
(predictive analytics services to protect and detect complex financial crime)
and Locum's Nest (digital platform for NHS Trusts to manage their requirements
for locum doctors). Amongst our other investments, we provided a further
£367,000 to DySIS Medical.
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.
Results and dividends
As at 30 June 2017, the net asset value was 71.5 pence per share (30 June
2016: 69.2 pence per share; 31 December 2016: 71.6 pence per share).
It was announced on 22 November 2016 that the Company's dividend target was
changing from 5.0 pence per share to 4.0 pence per share and in the 31
December 2016 Annual Report and Financial Statements that it would move from
paying quarterly dividends to semi-annual dividends.
A first dividend of 1 penny per share was paid on 31 January 2017, with a
second dividend of 1 penny per share paid on 30 June 2017. The next payment
is 2.0 pence per share on 29 December 2017, to shareholders on the register on
1 December 2017. Thereafter, it is the Board's intention that two dividends
are payable per annum in June and December.
Liquidity management
The Company aims to hold between 15 to 20 per cent. of its net asset value in
cash and liquid assets so that it is in a position to invest in new private
equity opportunities when they arise. Following shareholder approval at the
Annual General Meeting for the modification to the investment policy, the
Company is able to invest part of its liquidity in an open-ended equity fund,
delivering strong income and the potential for capital growth without any
double charging of fees, pending deployment in suitable private equity
opportunities. Investments of £1,050,000 in SVS Albion OLIM UK Equity Income
Fund were made after the period end.
Risks, uncertainties and prospects
The prospective exit of the UK from the EU is having a dampening effect on
consumer and business confidence and it remains wise to prepare for a renewed
economic slowdown in the UK. 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 and consumer
cycles. In addition, the current consultation entitled "Financing growth in
innovative firms" may result in changes to VCT legislation in the next budget.
Other principal risks and uncertainties remain unchanged and are as detailed
in note 13.
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 constraint
that such purchases are in the Company's interest. In order to ensure that
this condition is satisfied, the Company will limit the sum available for
buy-backs for the 6 month period to 31 December 2017 to £1m. It is the
Board's intention for such buy-backs to be in the region of a 5 per cent.
discount to net asset value, so far as market conditions and liquidity permit.
Albion VCTs Top-Up Offers
The Company was pleased to announce on 22 February 2017 that it had reached
its £6m limit under the Albion VCTs Prospectus Top-Up Offers 2016/2017. On 6
September 2017 the Company announced the publication of a prospectus in
relation to an offer for subscription for new Ordinary Shares. The Company is
aiming to raise circa £6 million out of a target of £32 million in aggregate
that the Albion VCTs are seeking to raise. The Manager continues to see a
number of attractive investment opportunities into which offer proceeds can be
deployed in due course. A Securities Note, which forms part of the Prospectus,
is being sent to shareholders.
Transactions with the Manager
Details of the transactions that took place with the Manager in the period can
be found in note 5.
Outlook
The Board is encouraged by the progress made in repositioning the investment
portfolio, by the prospects in many of our portfolio companies and in the
outlook for fresh investment opportunities. We expect further progress in the
second half of the year, both in terms of performance and in the making of new
investments in growth sectors.
Dr N E Cross
Chairman
12 September 2017
Responsibility statement
The Directors, Dr. Neil Cross, Robin Archibald, Mary Anne Cordeiro, Modwenna
Rees-Mogg and Patrick Reeve, 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
Dr N E Cross
Chairman
12 September 2017
Portfolio of investments
As at 30 June 2017
Technology investments % voting rights Cost £'000 Cumulative movement in value £'000 Value £'000 Change in value for the period* £'000
Process Systems Enterprise Limited 13.9 2,160 2,429 4,589 195
memsstar Limited 30.1 1,157 1,266 2,423 1,274
Mirada Medical Limited 14.6 978 1,055 2,033 264
Oxsensis Limited 13.9 1,696 (226) 1,470 518
Proveca Limited 7.2 729 720 1,449 33
DySIS Medical Limited 10.5 2,369 (1,251) 1,118 (165)
Mi-Pay Group plc 21.6 4,163 (3,087) 1,076 (718)
MPP Global Solutions Limited 3.2 950 - 950 -
Relayware Limited 2.8 895 (14) 881 (7)
sparesFinder Limited 12.0 613 245 858 -
Grapeshot Limited 1.9 390 400 790 299
Egress Software Technologies Limited 2.0 200 588 788 212
Convertr Media Limited 7.0 650 - 650 -
Aridhia Informatics Limited 5.1 822 (186) 636 90
MyMeds&Me Limited 2.1 260 125 385 9
Black Swan Data Limited 1.1 362 - 362 -
Quantexa Limited 3.0 335 - 335 -
Panaseer Limited 2.8 248 65 313 65
Cisiv Limited 7.4 574 (280) 294 1
Abcodia Limited 3.2 409 (234) 175 -
Oviva AG 2.2 165 - 165 -
Palm Tree Technology Limited 0.5 320 (156) 164 -
OmPrompt Holdings Limited 2.3 210 (55) 155 (63)
Locum's Nest Limited 3.0 135 - 135 -
InCrowd Sports Limited 1.9 84 - 84 -
ComOps Limited 1.0 68 (20) 48 (8)
Sandcroft Avenue Limited 0.6 50 (7) 43 -
Elements Software Limited 3.3 19 (19) - -
Total technology investments 21,011 1,358 22,369 1,999
*As adjusted for additions and disposals during the period.
As at 30 June 2017
Non-technology investments % voting rights Cost £'000 Cumulative movement in value £'000 Value £'000 Change in value for the period* £'000
Radnor House School (Holdings) Limited 15.3 5,415 3,873 9,288 76
Chonais River Hydro Limited 15.7 2,169 944 3,113 201
Bravo Inns II Limited 15.1 2,639 353 2,992 111
Earnside Energy Limited 12.7 2,059 198 2,257 (17)
Bravo Inns Limited 28.8 2,411 (548) 1,863 (24)
Gharagain River Hydro Limited 18.5 1,526 265 1,791 (6)
MHS 1 Limited (Previously The Charnwood Pub Company Limited) 22.5 1,565 (3) 1,562 (3)
TWCL Limited (Previously The Weybridge Club Limited) 25.2 1,501 (51) 1,450 71
The Street by Street Solar Programme Limited 8.1 895 436 1,331 70
Regenerco Renewable Energy Limited 7.9 822 291 1,113 9
Hilson Moran Holdings Limited 6.2 265 696 961 111
Alto Prodotto Wind Limited 6.9 683 259 942 4
The Q Garden Company Limited 33.4 934 5 939 5
Infinite Ventures (Goathill) Limited 9.6 400 119 519 24
Premier Leisure (Suffolk) Limited 25.8 454 65 519 (25)
Erin Solar Limited 15.7 440 (18) 422 (8)
Secured by Design Limited 2.7 410 - 410 -
Albion Investment Properties Limited 31.8 434 (35) 399 8
AVESI Limited 8.0 259 87 346 2
G. Network Communications Limited 7.5 337 - 337 -
Harvest AD Limited 0.0 210 (3) 207 (3)
CSS Group Limited 10.0 188 4 192 55
Greenenerco Limited 3.1 109 56 165 (6)
Dickson Financial Services Limited 6.0 60 29 89 7
Beddlestead Farm Limited 10.0 10 - 10 -
Total non-technology investments 26,195 7,022 33,217 662
Total investments 47,206 8,380 55,586 2,661
* As adjusted for additions and disposals during the period.
Total change in value of investments for the period Movement in loan stock accrued interest 2,661 67
Unrealised gains on fixed asset investments 2,728
Realised losses on fixed asset investments (per the table below) (346)
Total gains on investments as per income statement 2,382
Investment realisations and loan stock repayments in the period to 30 June 2017 Cost £'000 Opening carrying value £'000 Disposal proceeds £'000 Total realised (loss)/gain £'000 Gain/(loss) on opening value £'000
Disposals:
Blackbay Limited 4,213 3,652 3,699 (514) 47
AMS Sciences Limited 2,016 1,555 1,504 (512) (51)
Masters Pharmaceuticals Limited 452 681 687 235 6
Loan stock repayments:
memsstar Limited 165 606 321 156 (285)
Radnor House School (Holdings) Limited 153 153 153 - -
Alto Prodotto Wind Limited 7 11 11 4 -
Greenenerco Limited 1 2 2 1 -
Escrow adjustments and other:
TWCL Limited (Previously The Weybridge Club Limited)+ 375 - - (375) -
Escrow Adjustments - - (63) (63) (63)
Total 7,382 6,660 6,314 (1,068) (346)
+ The accounting cost as shown above represents realised losses of investments
still held at the Balance Sheet date.
Condensed income statement
Unaudited six months ended 30 June 2017 Unaudited six months ended 30 June 2016 Audited year ended 31 December 2016
Note Revenue £'000 Capital £'000 Total £'000 Revenue £'000 Capital £'000 Total £'000 Revenue £'000 Capital £'000 Total £'000
Gains/(losses) on investments 3 - 2,382 2,382 - (1,023) (1,023) - 2,419 2,419
Investment income 4 493 - 493 881 - 881 1,570 - 1,570
Investment management fees 5 (197) (591) (788) (183) (549) (732) (369) (1,108) (1,477)
Other expenses (152) - (152) (139) - (139) (284) - (284)
Profit/(loss) on ordinary activities before tax 144 1,791 1,935 559 (1,572) (1,013) 917 1,311 2,228
Tax (charge)/credit on ordinary activities (18) 18 - (102) 102 - (166) 167 1
Profit/(loss) and total comprehensive income attributable to shareholders 126 1,809 1,935 457 (1,470) (1,013) 751 1,478 2,229
Basic and diluted return/(loss) per share (pence)* 7 0.1 1.9 2.0 0.5 (1.6) (1.1) 0.8 1.7 2.5
* excluding treasury shares
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 accompanying notes form an integral part of this Half-yearly Financial
Report.
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 30 June 2017 £'000 Unaudited 30 June 2016 £'000 Audited 31 December 2016 £'000
Fixed asset investments 55,586 53,517 57,021
Current assets
Trade and other receivables less than one year 667 896 1,096
Cash and cash equivalents 13,882 8,987 6,752
14,549 9,883 7,848
Total assets 70,135 63,400 64,869
Creditors: amounts falling due within one year Trade and other payables less than one year (566) (484) (443)
Total assets less current liabilities 69,569 62,916 64,426
Equity attributable to equity holders
Called up share capital 8 1,094 1,004 1,007
Share premium 52,587 46,423 46,585
Capital redemption reserve 28 28 28
Unrealised capital reserve 8,075 (872) 4,625
Realised capital reserve 8,017 12,207 9,658
Other distributable reserve (232) 4,126 2,523
Total equity shareholders' funds 69,569 62,916 64,426
Basic and diluted net asset value per share (pence)* 71.5 69.2 71.6
* excluding treasury shares
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 accompanying notes form an integral part of this Half-yearly Financial
Report.
These Financial Statements were approved by the Board of Directors and
authorised for issue on 12 September 2017 and were signed on its behalf by
Dr N E Cross
Chairman
Company number: 04114310
Condensed statement of changes in equity
Called up share capital Share premium Capital redemption reserve Unrealised capital reserve Realised capital reserve* Other distributable reserve* Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2017 1,007 46,585 28 4,625 9,658 2,523 64,426
Profit/(loss) and total comprehensive income for the period - - - 2,728 (919) 126 1,935
Transfer of previously unrealised losses on disposal of investments - - - 722 (722) - -
Purchase of own shares for treasury - - - - - (1,003) (1,003)
Issue of equity 87 6,176 - - - - 6,263
Cost of issue of equity - (174) - - - - (174)
Dividends paid - - - - - (1,878) (1,878)
At 30 June 2017 1,094 52,587 28 8,075 8,017 (232) 69,569
At 1 January 2016 919 40,171 28 (424) 13,229 7,868 61,791
(Loss)/profit and total comprehensive income for the period - - - (479) (991) 457 (1,013)
Transfer of previously unrealised losses on disposal of investments - - - 31 (31) - -
Purchase of own shares for treasury - - - - - (874) (874)
Issue of equity 85 6,411 - - - - 6,496
Cost of issue of equity - (159) - - - - (159)
Dividends paid - - - - - (3,325) (3,325)
At 30 June 2016 1,004 46,423 28 (872) 12,207 4,126 62,916
At 1 January 2016 919 40,171 28 (424) 13,229 7,868 61,791
Profit/(loss) and total comprehensive income for the period - - - 1,937 (459) 751 2,229
Transfer of previously unrealised losses on disposal of investments - - - 3,112 (3,112) - -
Purchase of own shares for treasury - - - - - (1,638) (1,638)
Issue of equity 88 6,574 - - - - 6,662
Cost of issue of equity - (160) - - - - (160)
Dividends paid - - - - - (4,458) (4,458)
At 31 December 2016 1,007 46,585 28 4,625 9,658 2,523 64,426
*These reserves amount to £7,785,000 (30 June 2016: £15,461,000; 31 December
2016: £12,181,000) which is considered distributable.
Condensed statement of cash flows
Unaudited six months ended 30 June 2017 £'000 Unaudited six months ended 30 June 2016 £'000 Audited year ended 31 December 2016 £'000
Cash flow from operating activities
Loan stock income received 492 729 1,185
Deposit interest received 3 37 80
Dividend income received 57 50 76
Investment management fees paid (722) (696) (1,413)
Other cash payments (170) (131) (281)
Corporation tax received/(paid) 2 - (32)
Net cash flow from operating activities (338) (11) (385)
Cash flow from investing activities
Purchase of fixed asset investments (2,555) (1,855) (3,821)
Disposal of fixed asset investments 6,745 1,196 3,044
Net cash flow from investing activities 4,190 (659) (777)
Cash flow from financing activities
Issue of ordinary share capital 5,817 5,869 5,869
Cost of issue of equity (2) (3) (8)
Dividends paid (1,602) (2,852) (3,818)
Purchase of own shares (including costs) (935) (866) (1,638)
Net cash flow from financing activities 3,278 2,148 405
Increase/(decrease) in cash and cash equivalents 7,130 1,478 (757)
Cash and cash equivalents at start of period 6,752 7,509 7,509
Cash and cash equivalents at end of period 13,882 8,987 6,752
Cash and cash equivalents comprise:
Cash at bank and in hand 13,882 8,987 6,752
Cash equivalents - - -
Total cash and cash equivalents 13,882 8,987 6,752
Notes to the condensed Financial Statements
1. Basis of preparation
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 in note 2 below.
The Half-yearly Financial 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 full Half-yearly Financial
Report.
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 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
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 accruals basis using the rate of interest
agreed with the bank.
Investment management fees and expenses
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