Albion Prime VCT Albion Prime VCT PLC : Annual -10-
29 June 2012 - 3:24AM
UK Regulatory
all interest rates would have increased total return before tax for the year by
approximately GBP12,000 (2011: GBP13,000). On the basis of the Company's analysis,
it is considered that further falls in interest rates would not have a
significant impact.
The weighted average interest rate applied to the Company's fixed rate assets
during the year was approximately 5.9 per cent. (2011: 6.1 per cent.). The
weighted average period to maturity for the fixed rate assets is approximately
2.5 years (2011: 2.1 years).
The Company's financial assets and liabilities as at 31 March 2012, all
denominated in pounds sterling, consist of the following:
31 March 2012 31 March 2011
Non- Non-
Floating interest Floating interest
Fixed rate bearing Total Fixed rate bearing Total
rate rate
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=------------------------------------------------------------------------------
Unquoted
equity - - 3,489 3,489 - - 3,486 3,486
Unquoted loan
stock 10,009 - - 10,009 10,000 27 - 10,027
Debtors* - - 4 4 - - 56 56
Current
liabilities* - - (159) (159) - - (194) (194)
Cash 378 1,026 - 1,404 791 746 - 1,537
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Total net
assets 10,387 1,026 3,334 14,747 10,791 773 3,348 14,912
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*The debtors and current liabilities do not reconcile to the balance sheet as
prepayments and tax payable are not included in the above table.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into with the
Company. The Company is exposed to credit risk through its debtors, investment
in unquoted loan stock, and through the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock prior to investment, and as part
of its ongoing monitoring of investments. In doing this, it takes into account
the extent and quality of any security held. Typically loan stock instruments
have a first fixed charge or a fixed and floating charge over the assets of the
investee company in order to mitigate the gross credit risk. The Manager
receives management accounts from investee companies, and members of the
investment management team often sit on the boards of unquoted investee
companies; this enables the close identification, monitoring and management of
investment specific credit risk.
The Manager and the Board formally review credit risk (including debtors) and
other risks, both at the time of initial investment and at quarterly Board
meetings.
The Company's total gross credit risk as at 31 March 2012 is limited to
GBP10,009,000 (2011: GBP10,027,000) of unquoted loan stock instruments (all of which
is secured on the assets of the investee company), GBP1,404,000 (2011: GBP1,537,000)
cash deposits with banks and GBP4,000 debtors (2011: GBP56,000).
The credit profile of unquoted loan stock is described under liquidity risk.
The cost, impairment and carrying value of impaired loan stocks at 31 March
2012 and 31 March 2011 are as follows:
31 March 2012 31 March 2011
Cost Impairment Carrying value Cost Impairment Carrying value
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=------------------------------------------------------------------------------
Impaired loan
stock 5,622 (1,576) 4,046 3,060 (1,039) 2,021
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Impaired loan stock instruments have a first fixed charge or a fixed and
floating charge over the assets of the investee company and the Board consider
that the security value to be the carrying value.
As at the balance sheet date, the cash held by the Company is held with the
Royal Bank of Scotland plc, Lloyds TSB Bank Plc, Scottish Widows Bank plc (part
of Lloyds Banking Group) and Barclays Bank plc. Credit risk on cash transactions
is mitigated by transacting with counterparties that are regulated entities
subject to regulatory supervision, with Moody's credit ratings of at least A or
equivalent as assigned by international credit-rating agencies.
The Company has an informal policy of limiting counterparty banking and floating
rate note exposure to a maximum of 20 per cent. of net asset value for any one
counterparty.
Liquidity risk
Liquid assets are held as cash on current, deposit or short term money market
accounts. Under the terms of its Articles, the Company has the ability to borrow
up to 10 per cent. of its adjusted capital and reserves of the latest published
audited Balance sheet, which amounts to GBP1,467,000 (2011: GBP1,491,000) as at 31
March 2012.
The Company has no committed borrowing facilities as at 31 March 2012 (2011:
GBPnil) and cash balances of GBP1,404,000 (2011: GBP1,537,000). The main cash outflows
are for new investments, which are within the control of the Company. The
Manager formally reviews the cash requirements of the Company on a monthly
basis, and the Board on a quarterly basis as part of its review of management
accounts and forecasts. All the Company's financial liabilities are short term
in nature and total GBP242,000 (2011: GBP194,000) at 31 March 2012.
The carrying value of loan stock investments at 31 March 2012, as analysed by
expected maturity dates, was as follows:
Past due
Fully performing loan
stock loan stock Impaired loan stock Total
Redemption date GBP'000 GBP'000 GBP'000 GBP'000
=------------------------------------------------------------------------------
Less than one year 506 1,525 1,244 3,275
1-2 years 1,456 109 1,893 3,458
2-3 years 134 98 784 1,016
3-5 years 1,223 215 125 1,563
5+ years 627 70 - 697
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Total 3,946 2,017 4,046 10,009
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* Loan stock categorised as past due includes:
* Loan stock with a carrying value of GBP13,000 yielding 14.6 per cent. which
has capital past due by 11 months, and loan stock with a carrying value of
GBP97,000 yielding 14.6 per cent. on cost which has capital past due by 17
months;
* Loan stock with a carrying value of GBP372,000 which has interest overdue for
less than 3 months yielded 4.9 per cent. on cost;
* Loan stock with a carrying value of GBP1,525,000 had loan stock interest past
due by 36 months (through not paying all of its contractual interest).
However, these investments have yielded 7.3 per cent. on cost during the
year;
* Loan stock with a carrying value of GBP10,000 had loan stock interest past due
by 14 months.
The carrying value of loan stock investments at 31 March 2011, as analysed by
the expected maturity dates, was as follows:
Renegotiated Past due
Fully loan stock
performing loan loan Impaired
stock GBP'000 stock loan stock Total
Redemption date GBP'000 GBP'000 GBP'000 GBP'000
=------------------------------------------------------------------------------
Less than one
year 45 474 1,984 229 2,732
1-2 years 13 - 868 170 1,051
2-3 years 89 - 3,376 760 4,225
3-5 years 959 - 198 862 2,019
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Total 1,106 474 6,426 2,021 10,027
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In view of the information shown, the Board considers that the Company is
subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Company's financial assets and liabilities as at 31 March 2012 are
stated at fair value as determined by the Directors, with the exception of loans
and receivables included within investments, cash, debtors and creditors, which
are carried at amortised cost, in accordance with FRS 26. The Directors believe
that the current carrying value of loan stock is not materially different to the
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