Albion Venture Capital Trust PLC: Half-yearly Financial Report
Albion Venture Capital Trust PLCLEI Code: 213800JKELS32V2OK421As required by the UK Listing Authority’s Disclosure Guidance and Transparency Rule 4.2, Albion Venture Capital Trust PLC today makes public its information relating to the Half-yearly Financial Report (which is unaudited) for the six months to 30 September 2019. This announcement was approved by the Board of Directors on 4 December 2019.The full Half-yearly Financial Report (which is unaudited) for the period to 30 September 2019 will shortly be sent to shareholders and will be available on the Albion Capital Group LLP website by clicking www.albion.capital/funds/AAVC/30Sep2019.pdf.Investment policyAlbion Venture Capital Trust PLC (the “Company”) is a venture capital trust and the investment policy is intended to produce a regular and predictable dividend stream with an appreciation in capital value.Investment policy
The Company will invest in a broad portfolio of smaller, unquoted growth businesses across a variety of sectors including higher risk technology companies. Investments may take the form of equity or a mixture of equity and loans. Allocation of funds will be determined by the investment opportunities which become available but efforts will be made to ensure that the portfolio is diversified both in terms of sector and stage of maturity of company. Funds held pending investment or for liquidity purposes will be held as cash on deposit.Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses within venture capital trust qualifying industry sectors. The maximum amount which the Company will invest in a single portfolio company is 15 per cent. of the Company’s assets at cost, thus ensuring a spread of investment risk. The value of an individual investment may increase over time as a result of trading progress and it is possible that it may grow in value to a point where it represents a significantly higher proportion of total assets prior to a realisation opportunity being available.Gearing
The Company’s maximum exposure in relation to gearing is restricted to 10 per cent. of the adjusted share capital and reserves.Background to the CompanyThe 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 £34.8 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, resulting in a further £14.3 million of net assets.Financial calendarFinancial highlights
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 the Company’s webpage at www.albion.capital/funds/AAVC.In addition to the dividends summarised above, the Directors have declared a second dividend for the year ending 31 March 2020 of 2.50 pence per share, to be paid on 31 January 2020 to shareholders on the register on 3 January 2020.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.Interim management reportIntroduction
The results for Albion Venture Capital Trust PLC (the “Company”) for the six months to 30 September 2019 show a total return of 1.55 pence per share, which is a 2.0% return on opening net asset value per share.Results and dividends
As at 30 September 2019, the net asset value of the Company was £74.0 million or 77.96 pence per share compared to £67.5 million or 79.00 pence per share at 31 March 2019.A first dividend of 2.50 pence per share was paid on 31 July 2019. The Company will pay a second dividend of 2.50 pence per share on 31 January 2020 to shareholders on the register on 3 January 2020, making 5.00 pence per share in total for the full year, in line with the Company’s current annual dividend target.Performance and portfolio update
The period has been a busy one with a number of new investments and disposals during and after the period end.During the period, £2.1 million was invested in five new growth and technology companies and an additional £1.3 million invested after the period end. The new investments, all of which are likely to require further investment as the companies prove themselves and grow, are:Elliptic Enterprises, which provides Anti Money Laundering services to digital asset institutions;Clear Review, a provider of talent management software to mid market enterprises;Limitless Technology, a customer service platform powered by the crowd and machine learning technology;Imandra, a provider of automated software testing and an enhanced learning experience for artificial neural networks; andSymetrica, a designer and manufacturer of radiation detection equipment.We had two significant exits in the period. The boutique Stanwell Hotel near Heathrow was sold generating proceeds of £3.4 million (a return of 0.6 times cost including interest received) and Earnside Energy, our anaerobic digestion plant in Scotland, for proceeds of £1.7 million (a return of 1.3 times cost including interest received). Further information on realisations can be found below.We are also pleased to report that following a reorganisation, our school Radnor House Twickenham, which is trading at mature levels, was sold shortly after the period end generating proceeds of £3.2 million. The Company first invested in Radnor House Twickenham in 2010 and achieved a return of 3.75 times cost (including interest received). The Company has an ongoing investment in Radnor House School (Holdings) Limited which owns Radnor House School Sevenoaks.Our two investments in the pub sector, Bravo Inns and Bravo Inns II, were also sold after the period end generating combined proceeds of £2.3 million. Over the life of our investment, including interest received, we generated a combined return on cost of 1.7 times.The Company’s unrealised and realised gains amounted to £0.9 million for the six months to 30 September 2019. The key movements in the period include: a £285,000 uplift in Radnor House due to an increase in the student roll at Sevenoaks; an uplift of £182,000 on G. Network Communications after an external investment at an increased valuation; and an uplift of £137,000 in Bravo Inns II after a third party valuation undertaken prior to its sale.Split of portfolio by valuation as at 30 September 2019
Set out at the bottom of this announcement is the sector split of the investment portfolio as at 30 September 2019. After the sales of The Stanwell Hotel and Earnside Energy, the hotel and renewable energy sectors have reduced by 5% and 4% respectively. Healthcare continues to be our largest sector and accounted for 39% of the Company’s net assets. Growth and technology continues to gradually increase after the five new investments detailed above and now accounts for 5% of the portfolio as at 30 September 2019.New management performance incentiveFollowing the Annual General Meeting on 21 August 2019, a General Meeting was held in which an ordinary resolution was proposed to approve the changes to the Company’s Management Agreement, including a new performance incentive and a reduction in total expenses cap. Details of the proposed changes were set out in a circular sent to shareholders dated 1 July 2019.The Board notes that the resolution was passed with 70.44% of the votes cast in favour of the resolution. However, as more than 20% of shareholders voted against the resolution, in accordance with the UK Corporate Governance Code, the Board is currently undergoing a consultation process with the majority shareholdings that voted against the resolution to understand more fully the reasons for this opposition.An update on this consultation process will be made within six months of the Meeting in accordance with the UK Corporate Governance Code.There is no performance incentive fee accrued as at 30 September 2019.Risks and uncertaintiesOther than investment performance, the key risks facing the Company continue to be from the broader economy, including changes to VCT rules. The upcoming General Election, the outlook for the UK and global economies, and the implications of the withdrawal of the UK from the European Union are considered the biggest risks for the Company. An assessment has been done at a portfolio company level to assess exposure to Europe, and appropriate actions, where possible, have been implemented. The Manager continues to believe that there is merit in focusing efforts to allocate resources to those sectors and opportunities where growth can be both resilient and sustainable in order to mitigate these risks.Other risks and uncertainties remain unchanged and are as detailed in note 13 below.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 remains 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 period to 30 September 2019 was £740,000. In general, 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.Albion VCTs Prospectus Top Up OffersThe Company was pleased to announce on 5 March 2019 that it had reached its £8 million limit under the Albion VCTs Prospectus Top Up Offers 2018/19 which was fully subscribed and closed. Details of shares issued under the Offer can be found in note 8.The proceeds of the Offer are being deployed into new investments as mentioned above and supporting further funding of existing portfolio companies to support growth.The Company announced on 22 October 2019 that it has launched a Prospectus Top Up Offer to raise up to £6 million before issue costs, with a further over-allotment facility of £2 million, of new Ordinary shares for subscription in the 2019/20 and 2020/21 tax years. Full details of the offer are contained in a Prospectus that was published on the same date on the Manager’s website at www.albion.capital/investor-centre/current-offers.Transactions with the ManagerDetails of the transactions that took place with the Manager during the period can be found in note 5. There are no other related party transactions or balances that require disclosure.Fraud warningWe note over recent months an increase in the number of shareholders being contacted in connection with increasingly sophisticated but fraudulent financial scams. This is often by a phone call or an email which normally originates from outside of the UK, often claiming or appearing to come from a corporate finance firm and typically offering to buy your VCT shares at an inflated price. If you are contacted, we recommend that you do not respond with any personal information and say you are not interested.The Manager maintains a page on their website in relation to fraud advice at www.albion.capital/investor-centre/fraud-advice.If you are in any doubt, we recommend that you seek financial advice before taking any action. You can also call Shareholder relations on 020 7601 1850, or email info@albion.capital, if you wish to check whether any claims made are genuine.Outlook and prospects
Whilst the asset based element of the portfolio continues to generate reliable income returns to the Company, many of these businesses are at, or nearing, maturity. The Board sees the growth and technology businesses to be the area where we have the opportunity to generate shareholder value over time, and are encouraged by the investments that have been made into that sector during the period.Richard Glover
Chairman
4 December 2019Responsibility statementThe Directors, Richard Glover, John Kerr, Ann Berresford and Jeff Warren are responsible for preparing the Half-yearly Financial Report. In preparing these condensed Financial Statements for the period to 30 September 2019 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”, give 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.For and on behalf of the BoardRichard Glover
Chairman
4 December 2019Portfolio of investments*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.
** As adjusted for additions and disposals during the period.*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.
** Fair value movements on deferred consideration from previously disposed investments.Condensed income statement*adjusted for treasury sharesComparative figures have been extracted from the unaudited Half-yearly Financial Report for the six months ended 30 September 2018 and the audited statutory accounts for the year ended 31 March 2019.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*excluding treasury sharesComparative figures have been extracted from the unaudited Half-yearly Financial Report for the six months ended 30 September 2018 and the audited statutory accounts for the year ended 31 March 2019.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 4 December 2019, and were signed on its behalf byRichard Glover
Chairman
Company number: 03142609Condensed statement of changes in equity*These reserves amount to £17,155,000 (30 September 2018: £23,234,000; 31 March 2019: £21,201,000) which is considered distributable.Condensed statement of cash flows*The equity dividend paid in the cash flow is different to the dividend disclosed in note 6 due to the non-cash effect of the Dividend Reinvestment Scheme.Notes to the condensed Financial Statements1. Basis of preparation
The condensed Financial Statements have been prepared 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 Statement of Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (“SORP”) issued by The Association of Investment Companies (“AIC”).The preparation of the Financial Statements requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The most critical estimates and judgements relate to the determination of carrying value of investments at fair value through profit and loss (“FVTPL”). The Company values investments by following the International Private Equity and Venture Capital Valuation (“IPEV”) Guidelines and further detail on the valuation techniques used are outlined in note 2 below.This 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 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 IPEV Guidelines. Indicators of fair value are derived using established methodologies including earnings multiples, the level of third party offers received, cost or price of recent investment rounds, net assets and industry valuation benchmarks. Where price of recent investment is used as a starting point for estimating fair value at subsequent measurement dates, this has been benchmarked using an appropriate valuation technique permitted by the IPEV guidelines.● In situations where cost or price of recent investment is used, 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 the performance and/or prospects of the underlying business are significantly below the expectations on which the investment was based;
o 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
o 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.Current assets and payables
Receivables and payables and cash are carried at amortised cost, in accordance with FRS 102. There are no financial liabilities other than payables.Gains and losses on investments
Gains and losses arising from changes in the fair value of the investments are included in the Income statement for the period as a capital item and 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 accrual basis using the rate of interest agreed with the bank.Investment management fee, performance incentive fee and other 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 and performance incentive fees are allocated to the 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; andexpenses which are incidental to the purchase or disposal of an investment are charged through the realised capital reserve.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.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.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 period 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; anddividends 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 smaller companies principally based in the UK.3. Gains on investments4. Investment income5. Investment management feeFurther details of the Management agreement under which the investment management fee is paid is given in the Strategic report on pages 12 and 13 of the Annual Report and Financial Statements for the year ended 31 March 2019.During the period, services of a total value of £672,000 in management fees and £27,000 in administration fees (30 September 2018: £632,000 in management fees and £26,000 in administration fees; 31 March 2019: £1,272,000 in management fees and £52,000 in administration fees), were purchased by the Company from Albion Capital Group LLP. At the financial period end, the amount due to Albion Capital Group LLP in respect of these services disclosed within payables was £365,000 (30 September 2018: £332,000; 31 March 2019: £334,000).Albion Capital Group LLP is, from time to time, eligible to receive arrangement fees and monitoring fees from portfolio companies. During the period to 30 September 2019, fees of £157,000 attributable to the investments of the Company were received pursuant to these arrangements (30 September 2018: £55,000; 31 March 2019: £137,000).Albion Capital Group LLP, its partners and staff hold a total of 505,033 shares in the Company as at 30 September 2019.The Company entered into an offer agreement relating to the Offers with the Company’s investment manager Albion Capital Group LLP, pursuant to which Albion Capital receives a fee of 2.5 per cent. of the gross proceeds of the Offers and out of which Albion Capital will pay the costs of the Offers, as detailed in the Prospectus.6. Dividends
The Directors have declared a second dividend for the year ending 31 March 2020 of 2.50 pence per share (total approximately £2,374,000), payable on 31 January 2020 to shareholders on the register on 3 January 2020.7. Basic and diluted return per shareThe weighted average number of shares is calculated after adjusting for treasury shares of 12,525,188 (30 September 2018: 10,630,188; 31 March 2019: 11,517,188).There are no convertible instruments, derivatives or contingent share agreements in issue so basic and diluted return per share are the same.8. Called up share capitalDuring the period to 30 September 2019 the Company purchased 1,008,000 Ordinary shares (nominal value of £10,080) to be held in treasury (30 September 2018: 900,000; 31 March 2019: 1,787,000) at a cost of £740,000 (30 September 2018: £650,000; 31 March 2019: £1,300,000) representing 0.9 per cent. of the shares in issue as at 30 September 2019.The total number of Ordinary shares held in treasury as at 30 September 2019 was 12,525,188 (30 September 2018: 10,630,188; 31 March 2019: 11,517,188) representing 11.7 per cent. of the share capital as at 30 September 2019.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 period:Under the terms of the Albion VCTs Prospectus Top Up Offers 2018/19, the following new Ordinary shares of nominal value 1 penny each were allotted during the period to 30 September 2019:9. Commitments and contingenciesAs at 30 September 2019, the Company had no financial commitments (30 September 2018: £36,000; 31 March 2019: £nil).There are no contingencies or guarantees of the Company as at 30 September 2019 (30 September 2018 and 31 March 2019: £nil).10. Post balance sheet eventsSince 30 September 2019 the Company has had the following post balance sheet events:Following a reorganisation of Radnor House School (Holdings) Limited, Radnor House Twickenham was sold generating proceeds of £3.2 million;Sale of Bravo Inns Limited and Bravo Inns II Limited generating combined proceeds of £2.3 million;Investment of £1,144,000 in Cantab Research Limited (T/A Speechmatics);Investment of £110,000 in Healios Limited; andInvestment of £60,000 in uMotif Limited.The Company announced on 22 October 2019 that it has launched a Prospectus Top Up Offer to raise up to £6 million before issue costs, with a further over-allotment facility of £2 million, of new Ordinary shares for subscription in the 2019/20 and 2020/21 tax years. Full details of the offer are contained in a Prospectus that was published on the same date on the Manager’s website at www.albion.capital/investor-centre/current-offers.11. Related party transactionsOther than transactions with the Manager as described in note 5, there are no other related party transactions.12. Going concernThe Board’s assessment of liquidity risk remains unchanged since the last Annual Report and Financial Statements for the year ended 31 March 2019, and is detailed on page 62 of those accounts.The Company has adequate cash and liquid resources. The portfolio of investments is diversified in terms of sector, and the major cash outflows of the Company (namely investments, dividends and share buy-backs) 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 for the foreseeable future. For this reason, the Directors have adopted the going concern basis in preparing this Half-yearly Financial Report and this is in accordance with the Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued by the Financial Reporting Council in September 2014.13. Risks and uncertaintiesIn addition to the risks and uncertainties outlined in the Interim management report, the Board considers that the Company faces the following major risks and uncertainties:1. Investment, performance and valuation riskThe risk of investment in poor quality assets, which could reduce returns to shareholders, and could negatively impact on the Company’s current and future valuations. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes, are more volatile than larger, long established businesses. The Company’s investment valuation methodology is reliant on the accuracy and completeness of information that is issued by portfolio companies. In particular, the Directors may not be aware of or take into account certain events or circumstances which occur after the information issued by such companies is reported.To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its track record over many years of making successful investments in this segment of the market. In addition, the Manager operates a formal and structured investment appraisal and review process, which includes an Investment Committee, comprising investment professionals from the Manager and at least one external investment professional. The Manager also invites and takes account of comments from non-executive Directors of the Company on matters discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on portfolio company boards), including the level of diversification in the portfolio, and the Board receives detailed reports on each investment as part of the Manager’s report at quarterly board meetings. As described in note 2, 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 investments are at cost or price of recent investment (reviewed for impairment), net assets, offer price, or supported by independent third party professional valuations.2. VCT approval riskThe 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 and are 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 confirm independently compliance with the venture capital trust legislation, to highlight areas of risk and to inform on changes in legislation. Each investment in a new portfolio company is also pre-cleared with our professional advisers or H.M. Revenue & Customs.3. Regulatory and compliance riskThe 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 and any issues arising from compliance or regulation are reported to its own board on a monthly basis. 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.4. Operational and internal control riskThe 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 place 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, and receives reports from the Manager on internal controls and risk management, including matters relating to cyber security. 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. From 1 October 2018, Ocorian (UK) Limited was appointed as Depository to oversee the custody and cash arrangements and provide other AIFMD duties. The Board reviews the quarterly reports prepared by Ocorian (UK) Limited to ensure that Albion Capital is adhering to its duties as a full-scope Alternative Investment Fund Manager under the AIFMD. In addition, the Board regularly reviews the performance of its key service providers, particularly the Manager, to ensure they continue to have the necessary expertise and resources to deliver the Company’s investment objective and policies. The Manager and other service providers have also demonstrated to the Board that there is no undue reliance placed upon any one individual.5. Economic and political riskChanges in economic conditions, including, for example, interest rates, rates of inflation, industry conditions, competition, political and diplomatic events and other factors could substantially and adversely affect the Company’s prospects in a number of ways.The Company invests in a diversified portfolio of companies across a number of industry sectors and in addition often invests a mixture of instruments in portfolio companies. At any given time, the Company has sufficient cash resources to meet its operating requirements, including share buy-backs and follow on investments.6. Market value of Ordinary sharesThe market value of Ordinary shares can fluctuate. The market value of an Ordinary share, as well as being affected by its net asset value and prospective net asset value, also takes into account its dividend yield and prevailing interest rates. As such, the market value of an Ordinary share may vary considerably from its underlying net asset value. The market prices of shares in quoted investment companies can, therefore, be at a discount or premium to the net asset value at different times, depending on supply and demand, market conditions, general investor sentiment and other factors. Accordingly the market price of the Ordinary shares may not fully reflect their underlying net asset value.The Company operates a share buyback policy, which is designed to limit the discount at which the Ordinary shares trade to around 5 per cent. to net asset value, by providing a purchaser through the Company in absence of market purchasers. From time to time buy-backs cannot be applied, for example when the Company is subject to a close period, or if it were to exhaust any buyback authorities. New Ordinary shares are issued at sufficient premium to net asset value to cover the costs of issue and to avoid asset value dilution to existing investors.14. Other informationThe information set out in this Half-yearly Financial Report does not constitute the Company’s statutory accounts within the terms of section 434 of the Companies Act 2006 for the periods ended 30 September 2019 and 30 September 2018, and is unaudited. The information for the year ended 31 March 2019 does not constitute statutory accounts within the terms of section 434 of the Companies Act 2006 but is derived from the audited statutory accounts for the financial year, which have been delivered to the Registrar of Companies. The Auditor reported on those accounts; their report was unqualified and did not contain a statement under s498 (2) or (3) of the Companies Act 2006.15. PublicationThis Half-yearly Financial Report is being sent to shareholders and copies will be made available to the public at the registered office of the Company, Companies House, the National Storage Mechanism and also electronically at www.albion.capital/funds/AAVC, where the Report can be accessed as a PDF document in the ‘Financial Reports and Circulars’ section.AttachmentPortfolio sector split
The Company will invest in a broad portfolio of smaller, unquoted growth businesses across a variety of sectors including higher risk technology companies. Investments may take the form of equity or a mixture of equity and loans. Allocation of funds will be determined by the investment opportunities which become available but efforts will be made to ensure that the portfolio is diversified both in terms of sector and stage of maturity of company. Funds held pending investment or for liquidity purposes will be held as cash on deposit.Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses within venture capital trust qualifying industry sectors. The maximum amount which the Company will invest in a single portfolio company is 15 per cent. of the Company’s assets at cost, thus ensuring a spread of investment risk. The value of an individual investment may increase over time as a result of trading progress and it is possible that it may grow in value to a point where it represents a significantly higher proportion of total assets prior to a realisation opportunity being available.Gearing
The Company’s maximum exposure in relation to gearing is restricted to 10 per cent. of the adjusted share capital and reserves.Background to the CompanyThe 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 £34.8 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, resulting in a further £14.3 million of net assets.Financial calendarFinancial highlights
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 the Company’s webpage at www.albion.capital/funds/AAVC.In addition to the dividends summarised above, the Directors have declared a second dividend for the year ending 31 March 2020 of 2.50 pence per share, to be paid on 31 January 2020 to shareholders on the register on 3 January 2020.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.Interim management reportIntroduction
The results for Albion Venture Capital Trust PLC (the “Company”) for the six months to 30 September 2019 show a total return of 1.55 pence per share, which is a 2.0% return on opening net asset value per share.Results and dividends
As at 30 September 2019, the net asset value of the Company was £74.0 million or 77.96 pence per share compared to £67.5 million or 79.00 pence per share at 31 March 2019.A first dividend of 2.50 pence per share was paid on 31 July 2019. The Company will pay a second dividend of 2.50 pence per share on 31 January 2020 to shareholders on the register on 3 January 2020, making 5.00 pence per share in total for the full year, in line with the Company’s current annual dividend target.Performance and portfolio update
The period has been a busy one with a number of new investments and disposals during and after the period end.During the period, £2.1 million was invested in five new growth and technology companies and an additional £1.3 million invested after the period end. The new investments, all of which are likely to require further investment as the companies prove themselves and grow, are:Elliptic Enterprises, which provides Anti Money Laundering services to digital asset institutions;Clear Review, a provider of talent management software to mid market enterprises;Limitless Technology, a customer service platform powered by the crowd and machine learning technology;Imandra, a provider of automated software testing and an enhanced learning experience for artificial neural networks; andSymetrica, a designer and manufacturer of radiation detection equipment.We had two significant exits in the period. The boutique Stanwell Hotel near Heathrow was sold generating proceeds of £3.4 million (a return of 0.6 times cost including interest received) and Earnside Energy, our anaerobic digestion plant in Scotland, for proceeds of £1.7 million (a return of 1.3 times cost including interest received). Further information on realisations can be found below.We are also pleased to report that following a reorganisation, our school Radnor House Twickenham, which is trading at mature levels, was sold shortly after the period end generating proceeds of £3.2 million. The Company first invested in Radnor House Twickenham in 2010 and achieved a return of 3.75 times cost (including interest received). The Company has an ongoing investment in Radnor House School (Holdings) Limited which owns Radnor House School Sevenoaks.Our two investments in the pub sector, Bravo Inns and Bravo Inns II, were also sold after the period end generating combined proceeds of £2.3 million. Over the life of our investment, including interest received, we generated a combined return on cost of 1.7 times.The Company’s unrealised and realised gains amounted to £0.9 million for the six months to 30 September 2019. The key movements in the period include: a £285,000 uplift in Radnor House due to an increase in the student roll at Sevenoaks; an uplift of £182,000 on G. Network Communications after an external investment at an increased valuation; and an uplift of £137,000 in Bravo Inns II after a third party valuation undertaken prior to its sale.Split of portfolio by valuation as at 30 September 2019
Set out at the bottom of this announcement is the sector split of the investment portfolio as at 30 September 2019. After the sales of The Stanwell Hotel and Earnside Energy, the hotel and renewable energy sectors have reduced by 5% and 4% respectively. Healthcare continues to be our largest sector and accounted for 39% of the Company’s net assets. Growth and technology continues to gradually increase after the five new investments detailed above and now accounts for 5% of the portfolio as at 30 September 2019.New management performance incentiveFollowing the Annual General Meeting on 21 August 2019, a General Meeting was held in which an ordinary resolution was proposed to approve the changes to the Company’s Management Agreement, including a new performance incentive and a reduction in total expenses cap. Details of the proposed changes were set out in a circular sent to shareholders dated 1 July 2019.The Board notes that the resolution was passed with 70.44% of the votes cast in favour of the resolution. However, as more than 20% of shareholders voted against the resolution, in accordance with the UK Corporate Governance Code, the Board is currently undergoing a consultation process with the majority shareholdings that voted against the resolution to understand more fully the reasons for this opposition.An update on this consultation process will be made within six months of the Meeting in accordance with the UK Corporate Governance Code.There is no performance incentive fee accrued as at 30 September 2019.Risks and uncertaintiesOther than investment performance, the key risks facing the Company continue to be from the broader economy, including changes to VCT rules. The upcoming General Election, the outlook for the UK and global economies, and the implications of the withdrawal of the UK from the European Union are considered the biggest risks for the Company. An assessment has been done at a portfolio company level to assess exposure to Europe, and appropriate actions, where possible, have been implemented. The Manager continues to believe that there is merit in focusing efforts to allocate resources to those sectors and opportunities where growth can be both resilient and sustainable in order to mitigate these risks.Other risks and uncertainties remain unchanged and are as detailed in note 13 below.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 remains 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 period to 30 September 2019 was £740,000. In general, 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.Albion VCTs Prospectus Top Up OffersThe Company was pleased to announce on 5 March 2019 that it had reached its £8 million limit under the Albion VCTs Prospectus Top Up Offers 2018/19 which was fully subscribed and closed. Details of shares issued under the Offer can be found in note 8.The proceeds of the Offer are being deployed into new investments as mentioned above and supporting further funding of existing portfolio companies to support growth.The Company announced on 22 October 2019 that it has launched a Prospectus Top Up Offer to raise up to £6 million before issue costs, with a further over-allotment facility of £2 million, of new Ordinary shares for subscription in the 2019/20 and 2020/21 tax years. Full details of the offer are contained in a Prospectus that was published on the same date on the Manager’s website at www.albion.capital/investor-centre/current-offers.Transactions with the ManagerDetails of the transactions that took place with the Manager during the period can be found in note 5. There are no other related party transactions or balances that require disclosure.Fraud warningWe note over recent months an increase in the number of shareholders being contacted in connection with increasingly sophisticated but fraudulent financial scams. This is often by a phone call or an email which normally originates from outside of the UK, often claiming or appearing to come from a corporate finance firm and typically offering to buy your VCT shares at an inflated price. If you are contacted, we recommend that you do not respond with any personal information and say you are not interested.The Manager maintains a page on their website in relation to fraud advice at www.albion.capital/investor-centre/fraud-advice.If you are in any doubt, we recommend that you seek financial advice before taking any action. You can also call Shareholder relations on 020 7601 1850, or email info@albion.capital, if you wish to check whether any claims made are genuine.Outlook and prospects
Whilst the asset based element of the portfolio continues to generate reliable income returns to the Company, many of these businesses are at, or nearing, maturity. The Board sees the growth and technology businesses to be the area where we have the opportunity to generate shareholder value over time, and are encouraged by the investments that have been made into that sector during the period.Richard Glover
Chairman
4 December 2019Responsibility statementThe Directors, Richard Glover, John Kerr, Ann Berresford and Jeff Warren are responsible for preparing the Half-yearly Financial Report. In preparing these condensed Financial Statements for the period to 30 September 2019 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”, give 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.For and on behalf of the BoardRichard Glover
Chairman
4 December 2019Portfolio of investments*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.
** As adjusted for additions and disposals during the period.*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.
** Fair value movements on deferred consideration from previously disposed investments.Condensed income statement*adjusted for treasury sharesComparative figures have been extracted from the unaudited Half-yearly Financial Report for the six months ended 30 September 2018 and the audited statutory accounts for the year ended 31 March 2019.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*excluding treasury sharesComparative figures have been extracted from the unaudited Half-yearly Financial Report for the six months ended 30 September 2018 and the audited statutory accounts for the year ended 31 March 2019.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 4 December 2019, and were signed on its behalf byRichard Glover
Chairman
Company number: 03142609Condensed statement of changes in equity*These reserves amount to £17,155,000 (30 September 2018: £23,234,000; 31 March 2019: £21,201,000) which is considered distributable.Condensed statement of cash flows*The equity dividend paid in the cash flow is different to the dividend disclosed in note 6 due to the non-cash effect of the Dividend Reinvestment Scheme.Notes to the condensed Financial Statements1. Basis of preparation
The condensed Financial Statements have been prepared 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 Statement of Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (“SORP”) issued by The Association of Investment Companies (“AIC”).The preparation of the Financial Statements requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The most critical estimates and judgements relate to the determination of carrying value of investments at fair value through profit and loss (“FVTPL”). The Company values investments by following the International Private Equity and Venture Capital Valuation (“IPEV”) Guidelines and further detail on the valuation techniques used are outlined in note 2 below.This 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 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 IPEV Guidelines. Indicators of fair value are derived using established methodologies including earnings multiples, the level of third party offers received, cost or price of recent investment rounds, net assets and industry valuation benchmarks. Where price of recent investment is used as a starting point for estimating fair value at subsequent measurement dates, this has been benchmarked using an appropriate valuation technique permitted by the IPEV guidelines.● In situations where cost or price of recent investment is used, 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 the performance and/or prospects of the underlying business are significantly below the expectations on which the investment was based;
o 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
o 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.Current assets and payables
Receivables and payables and cash are carried at amortised cost, in accordance with FRS 102. There are no financial liabilities other than payables.Gains and losses on investments
Gains and losses arising from changes in the fair value of the investments are included in the Income statement for the period as a capital item and 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 accrual basis using the rate of interest agreed with the bank.Investment management fee, performance incentive fee and other 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 and performance incentive fees are allocated to the 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; andexpenses which are incidental to the purchase or disposal of an investment are charged through the realised capital reserve.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.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.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 period 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; anddividends 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 smaller companies principally based in the UK.3. Gains on investments4. Investment income5. Investment management feeFurther details of the Management agreement under which the investment management fee is paid is given in the Strategic report on pages 12 and 13 of the Annual Report and Financial Statements for the year ended 31 March 2019.During the period, services of a total value of £672,000 in management fees and £27,000 in administration fees (30 September 2018: £632,000 in management fees and £26,000 in administration fees; 31 March 2019: £1,272,000 in management fees and £52,000 in administration fees), were purchased by the Company from Albion Capital Group LLP. At the financial period end, the amount due to Albion Capital Group LLP in respect of these services disclosed within payables was £365,000 (30 September 2018: £332,000; 31 March 2019: £334,000).Albion Capital Group LLP is, from time to time, eligible to receive arrangement fees and monitoring fees from portfolio companies. During the period to 30 September 2019, fees of £157,000 attributable to the investments of the Company were received pursuant to these arrangements (30 September 2018: £55,000; 31 March 2019: £137,000).Albion Capital Group LLP, its partners and staff hold a total of 505,033 shares in the Company as at 30 September 2019.The Company entered into an offer agreement relating to the Offers with the Company’s investment manager Albion Capital Group LLP, pursuant to which Albion Capital receives a fee of 2.5 per cent. of the gross proceeds of the Offers and out of which Albion Capital will pay the costs of the Offers, as detailed in the Prospectus.6. Dividends
The Directors have declared a second dividend for the year ending 31 March 2020 of 2.50 pence per share (total approximately £2,374,000), payable on 31 January 2020 to shareholders on the register on 3 January 2020.7. Basic and diluted return per shareThe weighted average number of shares is calculated after adjusting for treasury shares of 12,525,188 (30 September 2018: 10,630,188; 31 March 2019: 11,517,188).There are no convertible instruments, derivatives or contingent share agreements in issue so basic and diluted return per share are the same.8. Called up share capitalDuring the period to 30 September 2019 the Company purchased 1,008,000 Ordinary shares (nominal value of £10,080) to be held in treasury (30 September 2018: 900,000; 31 March 2019: 1,787,000) at a cost of £740,000 (30 September 2018: £650,000; 31 March 2019: £1,300,000) representing 0.9 per cent. of the shares in issue as at 30 September 2019.The total number of Ordinary shares held in treasury as at 30 September 2019 was 12,525,188 (30 September 2018: 10,630,188; 31 March 2019: 11,517,188) representing 11.7 per cent. of the share capital as at 30 September 2019.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 period:Under the terms of the Albion VCTs Prospectus Top Up Offers 2018/19, the following new Ordinary shares of nominal value 1 penny each were allotted during the period to 30 September 2019:9. Commitments and contingenciesAs at 30 September 2019, the Company had no financial commitments (30 September 2018: £36,000; 31 March 2019: £nil).There are no contingencies or guarantees of the Company as at 30 September 2019 (30 September 2018 and 31 March 2019: £nil).10. Post balance sheet eventsSince 30 September 2019 the Company has had the following post balance sheet events:Following a reorganisation of Radnor House School (Holdings) Limited, Radnor House Twickenham was sold generating proceeds of £3.2 million;Sale of Bravo Inns Limited and Bravo Inns II Limited generating combined proceeds of £2.3 million;Investment of £1,144,000 in Cantab Research Limited (T/A Speechmatics);Investment of £110,000 in Healios Limited; andInvestment of £60,000 in uMotif Limited.The Company announced on 22 October 2019 that it has launched a Prospectus Top Up Offer to raise up to £6 million before issue costs, with a further over-allotment facility of £2 million, of new Ordinary shares for subscription in the 2019/20 and 2020/21 tax years. Full details of the offer are contained in a Prospectus that was published on the same date on the Manager’s website at www.albion.capital/investor-centre/current-offers.11. Related party transactionsOther than transactions with the Manager as described in note 5, there are no other related party transactions.12. Going concernThe Board’s assessment of liquidity risk remains unchanged since the last Annual Report and Financial Statements for the year ended 31 March 2019, and is detailed on page 62 of those accounts.The Company has adequate cash and liquid resources. The portfolio of investments is diversified in terms of sector, and the major cash outflows of the Company (namely investments, dividends and share buy-backs) 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 for the foreseeable future. For this reason, the Directors have adopted the going concern basis in preparing this Half-yearly Financial Report and this is in accordance with the Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued by the Financial Reporting Council in September 2014.13. Risks and uncertaintiesIn addition to the risks and uncertainties outlined in the Interim management report, the Board considers that the Company faces the following major risks and uncertainties:1. Investment, performance and valuation riskThe risk of investment in poor quality assets, which could reduce returns to shareholders, and could negatively impact on the Company’s current and future valuations. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes, are more volatile than larger, long established businesses. The Company’s investment valuation methodology is reliant on the accuracy and completeness of information that is issued by portfolio companies. In particular, the Directors may not be aware of or take into account certain events or circumstances which occur after the information issued by such companies is reported.To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its track record over many years of making successful investments in this segment of the market. In addition, the Manager operates a formal and structured investment appraisal and review process, which includes an Investment Committee, comprising investment professionals from the Manager and at least one external investment professional. The Manager also invites and takes account of comments from non-executive Directors of the Company on matters discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on portfolio company boards), including the level of diversification in the portfolio, and the Board receives detailed reports on each investment as part of the Manager’s report at quarterly board meetings. As described in note 2, 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 investments are at cost or price of recent investment (reviewed for impairment), net assets, offer price, or supported by independent third party professional valuations.2. VCT approval riskThe 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 and are 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 confirm independently compliance with the venture capital trust legislation, to highlight areas of risk and to inform on changes in legislation. Each investment in a new portfolio company is also pre-cleared with our professional advisers or H.M. Revenue & Customs.3. Regulatory and compliance riskThe 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 and any issues arising from compliance or regulation are reported to its own board on a monthly basis. 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.4. Operational and internal control riskThe 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 place 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, and receives reports from the Manager on internal controls and risk management, including matters relating to cyber security. 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. From 1 October 2018, Ocorian (UK) Limited was appointed as Depository to oversee the custody and cash arrangements and provide other AIFMD duties. The Board reviews the quarterly reports prepared by Ocorian (UK) Limited to ensure that Albion Capital is adhering to its duties as a full-scope Alternative Investment Fund Manager under the AIFMD. In addition, the Board regularly reviews the performance of its key service providers, particularly the Manager, to ensure they continue to have the necessary expertise and resources to deliver the Company’s investment objective and policies. The Manager and other service providers have also demonstrated to the Board that there is no undue reliance placed upon any one individual.5. Economic and political riskChanges in economic conditions, including, for example, interest rates, rates of inflation, industry conditions, competition, political and diplomatic events and other factors could substantially and adversely affect the Company’s prospects in a number of ways.The Company invests in a diversified portfolio of companies across a number of industry sectors and in addition often invests a mixture of instruments in portfolio companies. At any given time, the Company has sufficient cash resources to meet its operating requirements, including share buy-backs and follow on investments.6. Market value of Ordinary sharesThe market value of Ordinary shares can fluctuate. The market value of an Ordinary share, as well as being affected by its net asset value and prospective net asset value, also takes into account its dividend yield and prevailing interest rates. As such, the market value of an Ordinary share may vary considerably from its underlying net asset value. The market prices of shares in quoted investment companies can, therefore, be at a discount or premium to the net asset value at different times, depending on supply and demand, market conditions, general investor sentiment and other factors. Accordingly the market price of the Ordinary shares may not fully reflect their underlying net asset value.The Company operates a share buyback policy, which is designed to limit the discount at which the Ordinary shares trade to around 5 per cent. to net asset value, by providing a purchaser through the Company in absence of market purchasers. From time to time buy-backs cannot be applied, for example when the Company is subject to a close period, or if it were to exhaust any buyback authorities. New Ordinary shares are issued at sufficient premium to net asset value to cover the costs of issue and to avoid asset value dilution to existing investors.14. Other informationThe information set out in this Half-yearly Financial Report does not constitute the Company’s statutory accounts within the terms of section 434 of the Companies Act 2006 for the periods ended 30 September 2019 and 30 September 2018, and is unaudited. The information for the year ended 31 March 2019 does not constitute statutory accounts within the terms of section 434 of the Companies Act 2006 but is derived from the audited statutory accounts for the financial year, which have been delivered to the Registrar of Companies. The Auditor reported on those accounts; their report was unqualified and did not contain a statement under s498 (2) or (3) of the Companies Act 2006.15. PublicationThis Half-yearly Financial Report is being sent to shareholders and copies will be made available to the public at the registered office of the Company, Companies House, the National Storage Mechanism and also electronically at www.albion.capital/funds/AAVC, where the Report can be accessed as a PDF document in the ‘Financial Reports and Circulars’ section.AttachmentPortfolio sector split