Albion Technology & General VCT PLC : Annual Fi...

Albion Technology & General VCT PLC : Annual Financial Report

Albion Technology & General VCT PLC

LEI number: 213800TKJUY376H3KN16
As required by the UK Listing Authority's Disclosure Guidance and Transparency Rules 4.1 and 6.3, Albion Technology & General VCT PLC today makes public its information relating to the Annual Report and Financial Statements for the year ended 31 December 2020.

This announcement was approved for release by the Board of Directors on 26 March 2021.

This announcement has not been audited.

The Annual Report and Financial Statements for the year ended 31 December 2020 (which have been audited), will shortly be sent to shareholders. Copies of the full Annual Report and Financial Statements will be shown via the Albion Capital Group LLP website by clicking www.albion.capital/funds/AATG/31Dec20.pdf. The information contained in the Annual Report and Financial Statements will include information as required by the Disclosure Guidance and Transparency Rules, including Rule 4.1.

Investment objective and policy
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 a balanced portfolio of predominantly unquoted growth and technology businesses in a qualifying Venture Capital Trust (“VCT”).

Investment policy
The Company will invest in a broad portfolio of unquoted growth and technology businesses. Allocation of assets will be determined by the investment opportunities which become available, but efforts will be made to ensure that the portfolio is diversified in terms of sectors and stages of maturity of portfolio companies.

VCT qualifying and non-qualifying investments
Application of the investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue and Customs (“VCT regulations”). The maximum amount invested in any one company is limited to any HMRC annual investment limits. It is intended that normally at least 80 per cent. of the Company's funds will be invested in VCT qualifying investments. The VCT regulations also have an impact on the type of investments and qualifying sectors in which the Company can make an investment.

Funds held either 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 at the time of investment. 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 of utilising long-term gearing.

Background to the Company
The Company is a VCT which raised £14.3 million in December 2000, 2002 and raised a further £35.0 million during 2006 through the launch of a C share issue. The Company has raised a further £54.7 million 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 in exchange for new shares in the Company resulting in a further £28.1 million of net assets.

Financial calendar


Annual General Meeting	Noon on 27 May 2021
Record date for first dividend	4 June 2021

Payment date of first dividend	30 June 2021
Announcement of Half-yearly results for the six months ending 30 June 2021	September 2021

Financial summary

185.30p	Total shareholder value per Ordinary share since launch

(0.28)p	Total loss per share for the year ended 31 December 2020 (0.3% loss on opening net asset value per share)

12.95p	Total tax-free dividend per Ordinary share paid in the year to 31 December 2020

69.35p	Net asset value per Ordinary share as at 31 December 2020

	31 December 2020 (pence per share)		31 December 2019 (pence per share)

Opening net asset value	82.58		77.40
Capital (loss)/return	*(0.06)*		8.81
Revenue (loss)/return	*(0.22)*		0.47
Total (loss)/return	(0.28)		9.28
Ordinary dividends paid	(3.95)		(4.00)
Special dividend paid	(9.00)		-
Impact from share capital movements	-		(0.10)
Net asset value	69.35		82.58

Total shareholder value to 31 December 2020		Ordinary share (pence per share)

Total dividends paid during the year ended:
31 December 2001		1.00
31 December 2002		2.00
31 December 2003		1.50
31 December 2004		7.50
31 December 2005		9.00
31 December 2006		8.00
31 December 2007		8.00
31 December 2008		16.00
31 December 2009		-
31 December 2010		8.00
31 December 2011		5.00
31 December 2012		5.00
31 December 2013		5.00
31 December 2014		5.00
31 December 2015		5.00
31 December 2016		5.00
31 December 2017		4.00
31 December 2018		4.00
31 December 2019		4.00
31 December 2020		12.95
Total dividends paid to 31 December 2020		115.95
Net asset value as at 31 December 2020		69.35
Total shareholder value to 31 December 2020		185.30

In addition to the dividends summarised above, the Board has declared a first dividend for the year ending 31 December 2021 of 1.73 pence per share to be paid on 30 June 2021 to shareholders on the register on 4 June 2021.

Further details regarding the total shareholder value for C Shares and Albion Income and Growth VCT PLC can be found at www.albion.capital/funds/AATG under the ‘Financial Summary for Previous Funds’ section.

Notes
Total shareholder value for every 100 pence invested on initial allotment. The table above excludes tax benefits upon subscription.

Chairman’s statement

Introduction
In a year which has been difficult for many people and businesses, our portfolio companies have demonstrated resilience and, in many cases, growth, providing products and services that are both innovative and necessary, even in these uncertain times. Against the difficult backdrop occasioned by the pandemic, the results for the Company show a small total loss of 0.28 pence per share for the year ended 31 December 2020. This is a very creditable performance given the challenging economic conditions of the last twelve months.

Results and dividends
As at 31 December 2020, the net asset value was 69.35 pence per share compared to 82.58 pence per share at 31 December 2019. The total loss after tax was £0.3 million compared to £10.2 million total return in the year to 31 December 2019.

The Company paid dividends totalling 12.95 pence per share during the year ended 31 December 2020 (2019: 4.0 pence per share). This year’s dividends included a special dividend of 9.0 pence per share, paid on 30 October 2020, to maintain the Company’s VCT status under HMRC rules following some very successful realisations in the prior year. Notwithstanding the special dividend paid during the year, the dividend objective of the Board is to provide shareholders with a strong, predictable dividend flow.

As set out in the Half-yearly Financial Report to 30 June 2020, the Board considered it appropriate to move to a variable dividend policy targeting an annual dividend yield of around 5%, based on prevailing net asset value rather than at a fixed rate, as had been the case in the past. Semi-annual dividends will be paid, calculated as 2.5% of the most recently announced net asset value when the dividend is declared (in most cases this will be the net asset value announced in the Half-yearly Financial Report or in the Annual Report and Financial Statements). Therefore, the Board has declared a first dividend for the year ending 31 December 2021 of 1.73 pence per share to be paid on 30 June 2021 to shareholders on the register on 4 June 2021.

Investment portfolio
The results for the year showed net gains on investments of £1.5 million, against gains of £11.2 million for the previous year, which were largely driven by unrealised gains across the portfolio. Quantexa increased in value by £2.8 million following an externally led funding round in which we participated, and Proveca increased in value by £1.2 million following strong trading across Europe. Against this, unrealised write-downs were made against our investment in Mirada Medical (£2.7 million) as their direct sales model into hospitals became difficult during the Coronavirus (Covid-19) pandemic, and Black Swan Data (£1.0 million) reflecting a restructure to focus on its data analytics business.

The company had a number of investment realisations in the year: its investment in G. Network Communications was sold for a total return on all monies invested of 3.8 times cost or 31% IRR; and its investment in Clear Review was sold generating a return of 2.1 times cost within a relatively short 16 month holding period. These gains were partially offset by a realised loss on the sale of our holding in the SVS Albion OLIM UK Equity Income Fund. Further details on the above disposals, and other realisations, can be found in the realisations table on page 26 of the full Annual Report and Financial Statements.

During the year, a total of £9.2 million was deployed into portfolio companies, of which £4.4 million was invested across six new portfolio companies, all of which are likely to require further investment as the companies prove themselves and grow:

£1.6 million into Concirrus, a software provider bringing real-time behavioural data analytics to the marine and transport insurance sector;
£1.0 million into The Voucher Market (trading as WeGift), a provider of a cloud platform that enables corporates to purchase digital gift cards and to distribute them to employees and customers;
£1.0 million into Credit Kudos, a challenger credit bureau helping lenders optimise and automate their affordability and risk assessments;
£0.4 million into TransFICC, a provider of connectivity solutions, giving financial institutions access to trading venues via a single API;
£0.3 million into Seldon Technologies, a software company that enables enterprises to deploy machine learning models in production; and
£0.1 million into uMedeor (trading as uMed), a provider of a middleware technology platform that enables life science organisations to conduct medical research programmes.

A further £4.8 million was invested into existing portfolio companies, including £2.0 million into Quantexa, £1.1 million into Oxsensis and £0.4 million into uMotif.

Overall, 26% of the portfolio by value is profitable, measured by earnings before interest, tax and depreciation, with a number of our investments showing strong growth in fast-developing international markets. Given the evolving nature of the portfolio, increasingly the return will be in the form of capital rather than income. As part of portfolio management, the Board always maintains liquidity to meet future potential investments, running costs and, importantly, cash for payment of dividends and to facilitate share buy-backs.

Board composition
The Board announced on 9 July 2020 that, following a formal selection process, Margaret Payn would be appointed to the Board as a non-executive Director with effect from 3 August 2020. Margaret has extensive experience across the financial sector. Most recently, she was appointed as a non-executive Director of JP Morgan Mid Cap Investment Trust plc. The Board welcomes Margaret and looks forward to working with her over the coming years.

I have had the privilege of being Chairman of your Company since its launch in 2000 and I have indicated to the Board that I will retire at the Annual General Meeting in May 2021. I am delighted that Robin Archibald, who has been on the Board as Audit Chairman since 2013, will succeed me as Chairman, and Margaret Payn will succeed Robin as chairman of the Audit Committee.

It has been a huge pleasure to Chair your Company and I would like to thank my fellow Directors (past and present), the Albion management and staff, our advisers and service providers, and all our shareholders for their support over the years.

Risks and uncertainties
The highly uncertain outlook for the UK and Global economies remains the key risk affecting the Company, with the continuing health risk clouding any evaluation of risk and returns for many companies in the developed world. While many of our portfolio companies have shown remarkable resilience during the Coronavirus (Covid-19) pandemic, there are some underlying portfolio companies that continue to be adversely affected by the pandemic. There are also the implications of the UK’s recent departure from the European Union which may adversely affect some of the underlying portfolio companies. The Manager is continually assessing the exposure to these risks for each portfolio company and appropriate actions, where possible, are being implemented.

The Manager has a clear focus to allocate resources to those sectors and opportunities where it believes growth can be both resilient and sustainable, with provision of cash to assist some portfolio companies in these extreme market conditions being a likelihood. The new VCT rules continue to result in the gradual reduction of the asset-based element of the portfolio in favour of growth and technology companies which will inevitably increase volatility over time.

A detailed analysis of the other principal risks and uncertainties facing the business is shown in the Strategic report below.

Annual General Meeting
The Board has been considering the current rules around the Covid-19 pandemic on the arrangements for our forthcoming Annual General Meeting (“AGM”). These arrangements may be subject to change and we will keep shareholders up to date on our Manager's website at www.albion.capital/vct-hub/agms-events.

We are required by law to hold an AGM within six months of our financial year end. Whilst the roadmap announced by the government gives a target of no earlier than 21 June 2021 as the date when all legal limits on mixing will be lifted, the Board is hesitant to delay the AGM as the roadmap is clear that data rather than dates are the true driver of restrictions. Our AGM will, therefore, be held at noon on 27 May 2021, at the registered office being 1 Benjamin Street, London, EC1M 5QL.

Full details of the business to be conducted at the Annual General Meeting are given in the Notice of the Meeting on pages 70 to 73 of the full Annual Report and Financial Statements and in the Directors’ report on pages 35 and 36 of the full Annual Report and Financial Statements.

Covid-19 social distancing restrictions will still be in place, and consequently it will not be possible to allow shareholders entry into the building where the AGM is held. The quorum for the meeting is two, therefore two Directors will attend in person to allow the continuation of this AGM. There will also be a representative of Albion Capital Group LLP as Company Secretary. Our Articles of Association do not currently allow hybrid or wholly virtual AGMs, however, as outlined below a resolution is being proposed to allow this in the future.

In order to maintain shareholder engagement, the Board has decided to live stream the AGM, which will include a presentation from the Manager, the formal business of the AGM and answers to questions we receive from shareholders. Registration details for the live stream will be available at www.albion.capital/funds/AATG prior to the Meeting.

We always welcome questions from our shareholders at the AGM, and again this year we request that shareholders submit questions to the Board in advance of the AGM. Shareholders can submit questions up until noon on 26 May 2021 by emailing questions to AATGchair@albion.capital. Following the Meeting, a summary of responses will be published on the Manager’s website at www.albion.capital/funds/AATG. The Board strongly encourages shareholders to return their proxy votes in advance of the meeting.

Shareholders’ views are important, and the Board encourages shareholders to vote on the resolutions using the proxy form enclosed with this Annual Report and Financial Statements, or electronically at www.investorcentre.co.uk/eproxy. The Board has carefully considered the business to be approved at the AGM and recommends shareholders to vote in favour of all the resolutions being proposed.

Virtual and hybrid Annual General Meetings
As noted above, the Company’s Articles of Association do not currently allow for hybrid or virtual meetings. The Coronavirus (Covid-19) pandemic, and the resulting social distancing rules, have brought to the Board’s attention the importance of the ability to continue to interact with shareholders during unprecedented times. A resolution will be proposed at the upcoming AGM to update the Articles of Association to allow the Company to have the flexibility to hold hybrid or virtual meetings in the future, if required.

Share buy-backs
It remains the Board’s primary objective to maintain sufficient resources for investment in new and existing portfolio companies and for the continued payment of dividends to shareholders. The Board’s policy is to buy back shares in the market, subject to the overall constraint that such purchases are in the Company’s interest. 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. The Board continues to review the use of buy-backs and is satisfied that it is an important means of providing market liquidity for shareholders.

Albion VCTs’ Prospectus Top Up Offers
Your Board, in conjunction with the boards of other VCTs managed by Albion Capital Group LLP, launched a prospectus top up offer of new Ordinary shares on 5 January 2021. The Board announced on 17 February 2021 that, following strong demand for the Company’s shares, it had elected to exercise £1.5 million of its £3 million over-allotment facility, taking the total offer to £15.5 million. On 24 February 2021, the Company was pleased to announce that it had reached its £15.5 million limit under its Offer which was fully subscribed and closed to further applications.

The funds raised by the Company pursuant to the Offer will be added to the liquid resources available for investment, putting the Company into a position to take advantage of investment opportunities over the next two to three years. The proceeds of the Offer will be applied in accordance with the Company’s investment policy. The Company continues to participate in the Top Up Offers and also benefits from investors’ participation in the Dividend Reinvestment Scheme; the net proceeds are invested in new investment opportunities and provide additional working capital in the Company. It is important that the Company continues to have cash available for future investments and the Top Up Offers and dividend reinvestments are important sources of that capital.

Outlook and prospects
Whilst there are still uncertainties as to the full extent of the ongoing economic and societal impact of the Coronavirus (Covid-19) pandemic, we are encouraged by the resilience of the portfolio and many of the companies in which we have invested continue to show strong growth. It continues to be our priority to support our existing portfolio and to make new investments in businesses that can innovate and grow despite the healthcare crisis. The Board remains confident that the Company and its portfolio are well positioned to continue to generate long term value for shareholders.

I have very much enjoyed my long tenure as Chairman and look forward to seeing the Company continue to prosper in the years ahead.

Dr. N E Cross
Chairman
26 March 2021

Strategic report

Investment objective and policy
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 a balanced portfolio of unquoted growth and technology businesses in a qualifying VCT.

The Company will invest in a broad portfolio of unquoted growth and technology businesses. Allocation of assets will be determined by the investment opportunities which become available, but efforts will be made to ensure that the portfolio is diversified in terms of sectors and stages of maturity of portfolio companies.

The full investment policy can be found above.

Current portfolio sector allocation
The pie charts at the end of this announcement show the split of the portfolio valuation as at 31 December 2020 by sector, stage of investment and number of employees. This is a useful way of assessing how the Company and its portfolio is diversified across sector, portfolio companies’ maturity measured by revenues and their size measured by the number of people employed. Details of the principal investments made by the Company are shown in the Portfolio of investments on pages 24 to 26 of the full Annual Report and Financial Statements.

Direction of portfolio
The current portfolio remains well-balanced both in terms of stage of investment and sectors, with software and other technology accounting for 43%, healthcare (including digital healthcare) accounting for 16%, renewable energy accounting for 14% and education accounting for 8%. The Company’s holding in software and other technology investments has increased significantly in the year to 43% as we invest in key areas such as cyber security and machine learning applications. Cash levels decreased significantly during the year from 37% to 14% of net asset value due to the large number of investments made and the payment of the special dividend on 30 October 2020. Following the first allotment under the Albion VCTs’ Prospectus Top Up Offers 2020/21 on 26 February 2021, cash has increased as a proportion of the portfolio since the year end.

In line with the Company’s investment policy, investment continues to be made predominately into higher growth technology companies. The Company will support those portfolio companies who require it, as well as capitalise on any new investment opportunities that arise. We therefore expect that investments in the software and other technology and healthcare sectors (including digital healthcare) will continue to increase, and that asset-based investments will decrease over the coming years.

Results and dividends	Ordinary shares
	£'000

Net revenue loss for the year ended 31 December 2020	(248)
Net capital loss for the year ended 31 December 2020	(63)
Total loss for the year ended 31 December 2020	(311)
Dividend of 2.00 pence per share paid on 30 June 2020	(2,201)
Special dividend of 9.00 pence per share paid 30 October 2020	(9,942)
Dividend of 1.95 pence per share paid on 31 December 2020	(2,185)
Transferred from reserves	(14,639)

Net assets as at 31 December 2020	78,028

Net asset value per share as at 31 December 2020	69.35p

The Company paid dividends of 12.95 pence per share during the year ended 31 December 2020 (2019: 4.0 pence per share). The Board has a variable dividend policy which targets an annual dividend yield of around 5% on the prevailing net asset value. The Board has declared a first dividend for the year ending 31 December 2021 of 1.73 pence per share to be paid on 30 June 2021 to shareholders on the register on 4 June 2021.

As shown in the Income statement below, investment income has decreased, as expected, to £604,000 (2019: £1,416,000). This is due to an increase in loan stock where interest is being rolled up, loan stock repayments in the year (and in recent years), and the sale of the Company’s holding in the SVS Albion OLIM UK Equity Income Fund. As a result, there is a revenue loss to equity holders of £248,000 (2019: return of £519,000).

The net capital loss for the year was £63,000 (2019: gain £9,645,000). This is mainly attributable to the portion of the management fee charged through the realised capital reserve partially offset by the gains on investments during the year. Key valuation movements during the year are outlined in the Investment portfolio section of the Chairman's statement. The total loss for the period was 0.28 pence per share (2019: return of 9.28 pence per share).

During the year, the Manager took the decision to dispose of the Company’s investment in the SVS Albion OLIM UK Equity Income Fund following a period of poor performance, with the fund being impacted by the Coronavirus (Covid-19) driven falls of UK quoted equities and the negative outlook for the UK Equity Income sector. It is the Board’s intention that the sale proceeds shall be redeployed into innovative unquoted growth companies where the Company is seeing resilient growth. This has resulted in a disappointing £0.4 million loss on cost, after allowing for dividends received and reduction in management fees over the life of the investment.

The Balance sheet below shows that the net asset value per share has decreased over the last year to 69.35 pence per share (2019: 82.58 pence per share). The decrease in net asset value is principally attributed to the payment of 12.95 pence per share of dividends, including the special dividend of 9.0 pence per share, and the total loss of 0.28 pence per share.

The cash outflow for the year was £21 million (2019: £25 million inflow). This was mainly as a result of the dividends paid of £12.2 million, £9.2 million of new and follow-on investments, and share buy-backs of £1.5 million. The outflow was reduced by £3.5 million received from the disposal of fixed and current asset investments and receipt of deferred consideration. There has been substantial cash inflow post year end as a result of the successful top up offer.

Review of business and outlook
A review of the Company’s business during the year and future prospects is contained in the Chairman’s statement above and in this Strategic report.

As a greater emphasis continues to be given to growth and technology investments, we expect that asset-based investments will continue to decrease over time as a proportion of the portfolio with future returns coming largely from capital gains. Investment income predominantly consists of loan stock interest on our renewable energy investments, which the Company intends to hold for the longer term. As a result, investment income is expected to remain relatively flat over the near term.

Details of significant events which have occurred since the end of the financial year are listed in note 19. Details of transactions with the Manager are shown in note 5.

Future prospects
Whilst there are still uncertainties as to the full extent of the ongoing economic and societal impact of the Coronavirus (Covid-19) pandemic, we are encouraged by the resilience of the portfolio and many of the companies in which we have invested continue to show strong growth. The Board remains confident that the Company and its portfolio are well positioned to continue to generate long term value for shareholders. The Company’s portfolio remains well balanced across sectors and risk classes and the Manager has a strong pipeline of investment opportunities in which the Company’s cash can be deployed.

Key Performance Indicators (“KPIs”) and Alternative Performance Measures (“APMs”)
The Directors believe that the following KPIs and APMs, which are typical for VCTs, used in the Board’s assessment of the Company, will provide shareholders with sufficient information to assess how effectively the Company is applying its investment policy to meet its objectives. The Directors are satisfied that the results shown in the following KPIs and APMs give a good indication that the Company is achieving its investment objective and policy. These are:

1. Net asset value per share and total shareholder value

Please see the “Total shareholder value to 31 December 2020” table above in the Financial summary section which shows the NAV per share as at 31 December 2020 and total shareholder value. Total shareholder value is net asset value plus cumulative dividends paid since launch.

Total shareholder value decreased by 0.28 pence to 185.30 pence per Ordinary share for the year ended 31 December 2020 (0.3 per cent. on the opening net asset value). This is a very respectable performance given the challenging economic conditions of the last twelve months.

The graph on page 4 of the full Annual Report and Financial Statements reflects the total shareholder value performance of the Company relative to the FTSE All-share Index.

2. Movement in shareholder value in the year †

2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
2.9%	4.6%	8.0%	2.5%	(4.7%)	3.6%	6.0%	13.2%	11.9%	(0.3%)

Source: Albion Capital Group LLP

† Calculated as the movement in total shareholder value for the year divided by the opening net asset value.

The returns to Shareholders who have acquired shares through the C share issue in 2006 and the merger with Albion Income & Growth VCT in 2013 are shown on the Company’s Webpage on the Manager’s website at www.albion.capital/funds/AATG under “Financial Summary for Previous Funds”. Shareholders who have acquired shares through Top Up Offers, the dividend reinvestment scheme or in the market outside the corporate events will be able to calculate their own returns based on the price at which they acquired their shares, the dividends they have received since the purchase and the current net asset value of their holding.

3. Dividend distributions
Dividends paid in respect of the year ended 31 December 2020 were 12.95 pence per share (2019: 4.0 pence per share); 3.95 pence per share in ordinary dividends and a 9.0 pence per share special dividend. During the year, the Board changed to a variable dividend policy. Further details of the dividend policy can be found in the Chairman’s statement above. Cumulative dividends paid since inception are 115.95 pence per Ordinary share.

4. Ongoing charges
As agreed with the Manager in 2015, the ongoing charges ratio for the year ended 31 December 2020 was capped at 2.75 per cent. (2019: 2.75 per cent.) with any excess over the cap being a reduction in the management fee. The ongoing charges ratio has been calculated using The Association of Investment Companies’ (AIC) recommended methodology. This figure shows shareholders the total recurring annual running expenses (including investment management fees charged to capital reserves) as a percentage of the average net assets attributable to shareholders. The Directors expect the ongoing charges ratio for the year ahead to be 2.75 per cent. (capped at 2.75 per cent.).

The reduction in management fees payable to Albion Capital Group LLP in the year, due to the expense cap, amounted to £78,000 (2019: £136,000).

5. VCT regulation*
The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC. In order to maintain its status under VCT legislation, a VCT must comply on a continuing basis with the provisions of Section 274 of the Income Tax Act 2007, details of which are provided in the Directors’ report on page 33 of the full Annual Report and Financial Statements.

The relevant tests to measure compliance have been carried out and independently reviewed for the year ended 31 December 2020. These confirmed that the Company has complied with all tests and continues to do so.

*VCT compliance is not a numerical measure of performance and thus cannot be defined as an APM.

Gearing
As defined by the Articles of Association, the Company’s maximum exposure in relation to gearing is restricted to 10 per cent. of the adjusted share capital and reserves. Although the investment policy permits the Company to borrow, the Directors do not currently have any intention of utilising long-term gearing and have not done so in the past.

Operational arrangements
The Company has delegated the investment management of the portfolio to Albion Capital Group LLP, which is authorised and regulated by the Financial Conduct Authority. Albion Capital Group LLP also provides company secretarial and other accounting and administrative support to the Company under the Management agreement, as well as acting as the Company’s Alternative Investment Fund Manager (“AIFM”).

Management agreement
Under the Management agreement, the Manager provides investment management, secretarial and administrative services to the Company. The Management agreement can be terminated by either party on 12 months’ notice and is subject to earlier termination in the event of certain breaches or on the insolvency of either party. The Manager is paid an annual fee equal to 2.5 per cent. of the net asset value of the Company, payable quarterly in arrears. The total annual running costs of the Company, including fees payable to Albion Capital Group LLP, Directors’ fees, professional fees and the costs incurred by the Company in the ordinary course of business (but excluding any exceptional items and performance fees payable to Albion Capital Group LLP) are capped at an amount equal to 2.75 per cent. of the Company’s net assets, with any excess being met by Albion Capital Group LLP by way of a reduction in management fees.

Additionally, Albion Capital Group LLP agreed to reduce that proportion of its management fee relating to the investment in the SVS Albion OLIM UK Equity Income Fund (“OUEIF”) in order to avoid any double charging of fees for the investment exposure. The investment in the OUEIF was disposed of during the year, and therefore there is no continuing exposure.

In some instances, the Manager is entitled to an arrangement fee, payable by a portfolio company in which the Company invests, in the region of 2.0 per cent. of the investment made, and also monitoring fees where the Manager has a representative on the portfolio company’s board. Further details of the Manager’s fee can be found in note 5.

Management performance incentive
In order to provide the Manager with an incentive to maximise the return to investors, the Manager is entitled to charge an incentive fee in the event that the returns exceed minimum target levels per share.

Under the incentive arrangement, if the net asset value per share at the end of a financial period, when added to the aggregate dividends per share (both revenue and capital) paid to that date, exceeds £1 (increased at the rate of RPI plus 2 per cent. per annum uncompounded from the date of first admission to the Official List of the relevant class of share), then the Manager will be entitled to an incentive fee equal to 15 per cent. of such excess. In the event that the performance of the Company falls short of the target in any period, such shortfall must be made up in future periods before the Manager is entitled to any incentive in respect of such future periods.

The fee if applicable, will be payable annually. No performance fee has arisen during the year (2019: £nil). There has been no performance fee paid since the year ended 31 December 2005. The performance threshold at 31 December 2020 was 202.92 pence for the Ordinary shares, 176.12 pence for the former C shares and 181.92 pence for the former Income & Growth shares which compares to total returns of 185.30 pence, 108.20 pence and 112.09 pence respectively, based on the latest NAV.

Investment and co-investment
The Company co-invests with other Albion Capital Group LLP managed VCTs and funds. Allocation of investments is on the basis of an allocation agreement which is based, inter alia, on the ratio of cash available for investment in each of the entities and the HMRC VCT qualifying tests.

Liquidity Management
The Board examines regularly both the liquidity of the Company’s shares in the secondary market, which is substantially influenced by the use of share buy back and share issuance, and the liquidity of the Company’s portfolio. The nature of investments in a venture capital portfolio is longer term and these are relatively illiquid in the short term. Consequently, the Company maintains sufficient liquidity in cash and near cash assets to cover the operating costs of the Company and to meet dividend payments and share buy-backs, as well as to have the capacity to make fresh investments when the opportunities arise. Although the Company is authorised to borrow, in practice it does not borrow. The Board has no intention that the Company should borrow given the nature of the Company’s investments, a number of which have their own gearing. Management of liquidity is one of the key operational areas that the Board discusses regularly with the Manager.

Evaluation of the Manager
The Board has evaluated the performance of the Manager based on:

the returns generated by the Company;
the continuing achievement of the 80 per cent. qualifying holdings investment requirement for VCT status;
the long term prospects of the current portfolio of investments;
the management of treasury, including use of share buy-backs and participation in fund raising;
a review of the Management agreement and the services provided therein;
benchmarking the performance of the Manager to other service providers, including the performance of other VCTs that the Manager is responsible for managing: and
the contribution made by the administration and secretarial team to the operation of the Company.

The Board believes that it is in the interests of shareholders as a whole, and of the Company, to continue the appointment of the Manager for the forthcoming year.

Alternative Investment Fund Managers Directive (“AIFMD”)
The Board appointed Albion Capital Group LLP as the Company’s AIFM in 2014 as required by the AIFMD. The Manager became a full-scope AIFM under the AIFMD in 2018. As a result, from that date, Ocorian Depositary (UK) Limited was appointed as Depositary to oversee the custody and cash arrangements and provide other AIFMD duties with respect to the Company. This provides another degree of oversight over the custody of the Company’s assets.

Companies Act 2006 Section 172 Reporting
Under Section 172 of the Companies Act 2006, the Board has a duty to promote the success of the Company for the benefit of its members as a whole, having regard to the interests of other stakeholders in the Company, such as suppliers, and to do so with an understanding of the impact on the community and environment and with high standards of business conduct, which includes acting fairly between members of the Company.

The Board is very conscious of these wider responsibilities in the way it promotes the Company’s culture and ensures, as part of its regular oversight, that the integrity of the Company’s affairs is foremost in the way the activities are managed and promoted. This includes regular engagement with the wider stakeholders of the Company and being alert to issues that might damage the Company’s standing in the way that it operates. The Board works very closely with the Manager in reviewing how stakeholder issues are handled, ensuring good governance and responsibility in managing the Company’s affairs, as well as visibility and openness in how the affairs are conducted.

The Board considers its significant stakeholder groups to be its Shareholders; suppliers, including direct agents of the Company such as the Manager to whom most executive functions are delegated; the community and the environment in the way that investments are made and managed. The Board also considers the portfolio companies to be stakeholders in the long-term success of the Company. By the nature of venture capital investment, the Manager is closely involved with all the portfolio companies.

The Company’s shareholders are key to the success of the Company. The Board seeks to create value for shareholders by generating strong and sustainable returns to provide shareholders with regular dividends and the prospect of capital growth. During the year, the Board approved a new dividend policy, further details of which can be found above in the Chairman’s statement. The new variable dividend policy has the advantage of avoiding unsustainably high dividends if the net asset value falls, whilst rewarding shareholders more immediately if the net asset value rises.

During the year, the Board declared a special dividend of 9.00 pence per share, which was paid on 30 October 2020 to shareholders on the register on 9 October 2020. The Board made the decision to pay this special dividend following a review of the foreseeable cash requirements of the Company. While it is important for a venture capital fund, which by its nature has illiquid investments, to hold sufficient cash to manage operating costs, to service dividends and buy backs and, most importantly, to make follow on and new investments when they arise, this had to be balanced against meeting the requirement of a Venture Capital Trust to be invested in qualifying investments. The holding of cash is not a qualifying investment for these purposes, and therefore the special dividend was declared given the significant cash balances following a number of disposals in the year ended 31 December 2019.

The Board temporarily suspended buy-backs on 18 March 2020 due to the increasing uncertainty of the net asset value at the time. Buy-backs were resumed from 22 April 2020 after the announcement of the Interim Management Statement which included the net asset value for 31 March 2020. The buy-back policy is an important means of providing market liquidity for shareholders. This action demonstrated acting in shareholders’ best interests, both for those wishing to sell their shares and for continuing shareholders, by ensuring that there was a contemporary net asset value in the market to operate buy-backs against, following the advent of the health crisis and its impact on asset values.

Shareholders’ views are important. The Board encourages Shareholders to vote on the resolutions at the Annual General Meeting (“AGM”). The Company’s AGM is used typically as an opportunity to communicate with investors, including through a presentation made by the investment management team. However, due to the impact of the Coronavirus (Covid-19) pandemic, special circumstances are required for this year’s AGM and further details are above in the Chairman’s statement. Details of the AGM can be found in the Directors’ report on page 35 of the full Annual Report and Financial Statements.

Shareholders are also encouraged to attend the annual Shareholders’ Seminar. The seminars include some of the portfolio companies sharing insights into their businesses and also have presentations from Albion executives on some of the key factors affecting the investment outlook, as well as a review of the past year and the plans for the year ahead. Details of the seminar events are placed on the Manager’s website. Representatives of the Board attend the seminars.

The Company is an externally managed investment company with no employees, and as such has nothing to report in relation to employee engagement but does keep close attention to how the Board operates as a cohesive and competent unit. The Company also has no customers in the traditional sense and, therefore, there is nothing to report in relation to relationships with customers.

The Company’s suppliers are fundamental to the operations of the Company, particularly Albion Capital Group LLP as the Manager, given that day-to-day management responsibilities are sub-contracted to the Manager. The Board takes close account of how the Manager operates, with very close contact during the year and not just at scheduled Board meetings. Details of the Manager’s and Board’s responsibilities can be found in the Statement of corporate governance on pages 38 to 42 of the full Annual Report and Financial Statements.

The contractual arrangements with all the principal suppliers to the Company are reviewed regularly and formally once a year, alongside the performance of the suppliers in acquitting their responsibilities. The performance of the Manager in managing the portfolio and in providing company secretarial, administration and accounting services is reviewed in detail each year; this review includes reviewing comparator engagement terms and portfolio performance. Further details on the evaluation of the Manager, and the decision to continue the appointment of the Manager for the forthcoming year, can be found in this report.

The portfolio companies are considered key stakeholders, not least because they are principal drivers of value for the Company. As discussed in the Environmental, Social and Governance (“ESG”) section below, the portfolio companies’ impact on their stakeholders is also important to the Company. In most cases, an Albion executive has a place on the board of a portfolio company, in order to help with both business operation decisions, as well as good ESG practice.

The Board receives reports on ESG factors within its portfolio from Albion Capital Group LLP as it is a signatory of the UN Principles for Responsible Investment (“UN PRI”). Further details of this are set out below. ESG, without its specific definition, has always been at the heart of the responsible investing that the Company engages in and in how the Company conducts itself with all of its stakeholders.

The Board, although non-executive, is fully engaged in both oversight and the general strategic direction of the Company. During the year the Board’s main strategic discussions focussed around cash management and deployment of cash for future investments, dividends and share buy-backs, resulting in the decision to participate in the Albion VCTs’ Top Up Offers 2020/21. During the year, the Board held a further meeting in addition to its scheduled quarterly meetings to discuss the effect of the Coronavirus (Covid-19) pandemic on the Company’s portfolio and to monitor the resilience of the various agents to the Company.

Environmental, Social, and Governance (“ESG”)
The Company’s Manager, Albion Capital Group LLP, takes the concept of sustainable and responsible investment very seriously for existing investments made and in reviewing new investment opportunities. In turn, the Board is kept appraised of ESG issues in connection with both the portfolio and in how Company affairs are conducted more generally as a regular part of Board oversight.

Albion Capital Group LLP is a signatory of the UN PRI. The UN PRI is the world’s leading proponent of responsible investment, working to understand the investment implications of ESG factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions.

The Board and Manager have exercised conscious principles in making responsible investments throughout the life of the Company, not least in providing finance for promising companies in a variety of important sectors such as technology, healthcare and renewable energy. In making the investments, the Manager is directly involved in the oversight and governance of these investments, including ensuring standards of reporting and visibility on business practices, all of which are reported to the Board of the Company. By its nature, not least in making qualifying investments which fulfil the criteria set by HMRC, the Company has focused on sustainable and longer-term investment propositions, some of which will fail (in the nature of all small companies), but some of which will grow and serve important societal demands. One of the most important drivers of performance is the quality of the investment portfolio, which goes beyond the individual valuations and examines the prospects of each of the portfolio companies, as well as the sectors in which they operate – all requiring a longer-term view.

In the nature of venture capital investment, Albion Capital Group LLP is more intimately involved in the affairs of portfolio companies than might be the case for funds invested in listed securities. As such, Albion Capital Group LLP is in a position to influence good governance and behaviour in the portfolio companies, many of which are relatively small companies without the support of a larger company’s administration and advisory infrastructure.

The Company adheres to the principles of the AIC Code of Corporate Governance and is also aware of other governance and corporate conduct guidance which it meets as far as practical, including in the constitution of a diversified and independent board capable of providing constructive challenge but also, through its experience of the Company, continuity over the longer-term investments the Company makes.

The Company's portfolio is currently invested in healthcare, renewable energy, education, software and other technology (which includes cyber security and data protection), and business services, with the most significant percentage of the Company’s portfolio invested in sectors and companies which would be seen by many measures to be both sustainable and socially aware based on the services they render.

Albion Capital Group LLP incorporates ESG considerations into its investment decisions. These form part of its process to create value for investors and develop sustainable long-term strategies for portfolio companies. Albion Capital Group LLP reports ESG criteria to UN PRI (annually) and to the Board quarterly.

ESG principles are integrated at the pre-investment, investment and exit stages. This is reflected in transparency of reporting, governance principles adopted by the Company and the portfolio companies, and increasingly in the positive environmental or socially impactful nature of investments made. Albion Capital Group LLP, where relevant, considers climate-specific issues in its investment policies and activities. However, as the majority of the Company’s portfolio consists of small (2-250 Full Time Employees), private, typically software companies with limited environmental impact, climate change is not considered to be a significant risk, and actions are proportionate to that risk.

Pre-investment stage
An exclusion list is used to rule out investments in unsustainable areas, or in areas which might be perceived as socially detrimental. ESG due diligence is performed on each potential portfolio company to identify any sustainability risks associated with the investment. Identified sustainability risks are ranked from low to high and are reported to the relevant investment committee. The investment committee considers each potential investment. If sustainability risks are identified, mitigations are assessed and, if necessary, mitigation plans are put in place. If this is not deemed sufficient, the committee would consider the appropriate level and structure of funding to balance the associated risks. If this is not possible, investment committee approval will not be provided, and the investment will not proceed.

Investment stage
All new and existing portfolio companies are asked to report against an ESG Balanced Score Card annually. The ESG Balanced Score Card contains a number of sustainability factors against which a portfolio company will be assessed in order to determine the potential sustainability risks and opportunities arising from the investment. The score cards form part of the Manager’s internal review meetings alongside discussions around other risk factors, and any outstanding issues are addressed in collaboration with the portfolio companies’ senior management.

Exit stage
Albion Capital Group LLP aim to ensure that good ESG practices remain in place following exit. For example, by ensuring that the company creates a self-sustaining ESG management system during our period of ownership, wherever feasible.

Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the Companies Act 2006 (the “Act”) to detail information about social and community issues, employees and human rights; including any policies it has in relation to these matters and effectiveness of these policies. As an externally managed investment company with no employees, the Company has no requirement for formal policies in these matters, however, it is at the core of its responsible investment as detailed above.

General Data Protection Regulation (“GDPR”)
The General Data Protection Regulation has the objective of unifying data privacy requirements across the European Union, and continues to apply in the United Kingdom after Brexit. The Manager continues to take action to ensure that the Manager and the Company are compliant with the regulation.

Further policies
The Company has adopted a number of further policies relating to:

Environment
Global greenhouse gas emissions
Anti-bribery
Anti-facilitation of tax evasion
Diversity

These are set out in the Directors’ report on page 34 of the full Annual Report and Financial Statements.

Risk management
The Board carries out a regular review of the risk environment in which the Company operates, together with changes to the environment and individual risks. The Board also identifies emerging risks which might affect the Company. In the period covered by this report the most noticeable risk has been the global Coronavirus (Covid-19) pandemic which has impacted not only public health and mobility but also has had an adverse impact on global traded markets, the full effect of which is likely to be uncertain for some time. Throughout the last year the Board has continued to keep close attention to the resilience of the portfolio, the Company and the circumstance of its agents, and will continue to do so given the unusual working conditions during the Coronavirus (Covid-19) pandemic.

The Directors have carried out a robust assessment of the Company’s disclosures below that describe the principal risks and emerging uncertainties and explain how they are being managed or mitigated. The principal risks and uncertainties of the Company as identified by the Board and how they are managed are as follows:

Risk	Possible consequence	Risk management
Investment, performance and valuation risk	The risk of investment in poor quality businesses, which could reduce the returns to shareholders and could negatively impact the Company’s current and future valuations. By nature, smaller unquoted businesses, such as those that qualify for VCT 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 for all investments, and at least one external investment professional for investments greater than £1 million in aggregate across all the Albion managed VCTs. 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. The Board and Manager regularly review the deployment of investments and cash resources available to the Company in assessing liquidity required for servicing the Company’s buy-backs, dividend payments and operational expenses. The unquoted investments held by the Company are designated at fair value through profit or loss and valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines as updated in 2018. These guidelines set out recommendations intended to represent current best practice on the valuation of venture capital investments. The valuation takes into account all known material facts up to the date of approval of the Financial Statements by the Board.
VCT approval risk	The 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 VCT management which is used to operating within the requirements of the VCT 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 independently confirm compliance with the VCT legislation, to highlight areas of risk and to inform on changes in legislation. Each investment in a portfolio company is also pre-cleared with our professional advisers or H.M. Revenue & Customs. The Company monitors closely the extent of qualifying holdings and addresses this as required.
Regulatory and compliance risk	The Company is listed on The London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company’s shares, or other penalties under the Companies Act or from financial reporting oversight bodies.	Board members and the Manager have experience of operating at senior levels within, or advising, quoted companies. In addition, the Board and the Manager receive regular updates on new regulation, including legislation on the management of the Company, 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.
Market value of Ordinary shares	The market value of Ordinary shares can fluctuate. The market value of an Ordinary share, as well as being affected by its net asset value (“NAV”) and prospective NAV, 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 NAV. The market prices of shares in quoted investment companies can, therefore, be at a discount or premium to the NAV at different times, depending on supply and demand, market conditions, general investor sentiment and other factors, including the ability to exercise share buybacks. Accordingly, the market price of the Ordinary shares may not fully reflect their underlying NAV.	The Company operates a share buy-back policy, which aims to limit the discount at which the Ordinary shares trade to around 5 per cent. to NAV, 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 and could not renew any buyback authorities. New Ordinary shares are issued at sufficient premium to NAV to cover the costs of issue and to avoid asset value dilution to existing investors.
Operational and internal control risk	The 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 its internal controls and risk management, including on 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 the Committee that the Manager has strong systems and controls in place including those in relation to business continuity and cyber security. Ocorian Depositary (UK) Limited is appointed as Depositary to oversee the custody and cash arrangements and provide other AIFMD duties. The Board reviews the quarterly reports prepared by Ocorian Depositary (UK) Limited to ensure that Albion Capital Group LLP is adhering to its duties as a full-scope AIFM 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 policy and remain compliant with regulations. The Manager and other service providers have also demonstrated to the Board that there is no undue reliance placed upon any one individual.
Economic, political and social risk	Changes in economic conditions, including, for example, interest rates, rates of inflation, industry conditions, competition, political and diplomatic events, such as the impact of Brexit, and other factors could substantially and adversely affect the Company’s prospects in a number of ways. This also includes risks of social upheaval, including from infection and population re-distribution. The current significant exogenous risk to the Company, the wider population and economy, is the Coronavirus (Covid-19) pandemic.	The Company invests in a diversified portfolio of companies across a number of industry sectors and in addition often invests in a mixture of instruments in portfolio companies and has a policy of minimising any external bank borrowings within 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. In common with most commercial operations, exogenous risks over which the Company has no control are always a risk and the Company does what it can to address these risks where possible, not least as the nature of the investments the Company makes are long term. The Board and Manager are continuously assessing the resilience of the portfolio, the Company and its operations and the robustness of the Company’s external agents during the Coronavirus (Covid-19) pandemic, as well as considering longer term impacts on how the Company might be positioned in how it invests and operates. Ensuring liquidity in the portfolio to cope with exigent and unexpected pressures on the finances of the portfolio and the Company is an important part of the risk mitigation in these uncertain times.

Viability statement
In accordance with the FRC UK Corporate Governance Code published in 2018 and provision 36 of the AIC Code of Corporate Governance, the Directors have assessed the prospects of the Company over the three years to 31 December 2023. The Directors believe that three years is a reasonable period in which they can assess the future ability of the Company to continue to operate and meet its liabilities as they fall due and is also the period used by the Board in the strategic planning process and is considered reasonable for a business of this nature and size. The three year period is considered the most appropriate given the forecasts that the Board requires from the Manager and the estimated timelines for finding, assessing and completing investments. The three year period also takes account of the potential impact of any new regulations, should they be imposed, and how they may affect the Company over the longer term, as well as the availability of cash, but the assessment cannot take into account the full extent of the exogenous risks that may impact on global economies at the date of these accounts.

The Directors have carried out a robust assessment of the emerging and principal risks facing the Company as explained above, including those that could threaten its business model, future performance, solvency or liquidity. The Board also considered the procedures in place to identify emerging risks and the risk management processes in place to avoid or reduce the impact of the underlying risks. The Board focused on the major factors which affect the economic, regulatory and political environment, including any potential impact from Brexit. The Board, after careful consideration, believes that Brexit will have no major impact on the going concern of the Company, primarily due to the markets our portfolio companies target, which in most cases are the UK and increasingly, the US, for our software and technology businesses. Portfolio companies targeting European markets have also shown resilience so far. The Coronavirus (Covid-19) pandemic remains the largest uncertainty with the potential to affect the Company. In light of this continuing uncertainty, robust stress tested cashflows, process resilience and contingencies have been examined in trying to deal with the principal risks faced by the Company.

The Board assessed the ability of the Company to raise finance and deploy capital, as well as the existing cash resources of the Company. The portfolio is well balanced and geared towards long term growth, delivering dividends and capital growth to shareholders. In assessing the prospects of the Company, the Directors have considered the cash flow by looking at the Company’s income and expenditure projections and funding pipeline over the assessment period of three years and they appear realistic.

Taking into account the processes for mitigating risks, monitoring costs, implementing share buy-backs and issuance of new shares, the Manager’s compliance with the investment objective, policies and business model and the balance of the portfolio, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 31 December 2023.

This Strategic report of the Company for the year ended 31 December 2020 has been prepared in accordance with the requirements of Section 414A of the Act. The purpose of this report is to provide shareholders with sufficient information to enable them to assess the extent to which the Directors have performed their duty to promote the success of the Company in accordance with Section 172 of the Act.

On behalf of the Board,

Dr. N E Cross
Chairman
26 March 2021

Responsibility Statement
In preparing these financial statements for the year to 31 December 2020, the Directors of the Company, being Dr Neil Cross, Robin Archibald, Mary Anne Cordeiro, Margaret Payn, Modwenna Rees-Mogg and Patrick Reeve, confirm that to the best of their knowledge:

- summary financial information contained in this announcement and the full Annual Report and Financial Statements for the year ended 31 December 2020 for the Company has been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law) and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

-the Chairman's statement and Strategic report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties it faces.

We consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced, and understandable and provide the information necessary for shareholders to assess the Company’s position, performance, business model and strategy.

A detailed "Statement of Directors' responsibilities” is contained on page 37 within the full audited Annual Report and Financial Statements.

On behalf of the Board,

Dr N E Cross
Chairman
26 March 2021

Income statement

		Year ended 31 December 2020			Year ended 31 December 2019
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£’000	£’000	£’000	£’000	£’000	£’000
Gains on investments	3	-	1,453	1,453	-	11,170	11,170
Investment income	4	604	-	604	1,416	-	1,416
Investment management fee	5	(505)	(1,516)	(2,021)	(529)	(1,587)	(2,116)
Other expenses	6	(347)	-	(347)	(306)	-	(306)
(Loss)/profit on ordinary activities before tax		(248)	(63)	(311)	581	9,583	10,164
Tax (charge)/credit on ordinary activities	8	-	-	-	(62)	62	-
(Loss)/profit and total comprehensive income attributable to shareholders		(248)	(63)	(311)	519	9,645	10,164
Basic and diluted (loss)/ return per share (pence)*	10	(0.22)	(0.06)	(0.28)	0.47	8.81	9.28

* adjusted for treasury shares

The accompanying notes form an integral part of these Financial Statements.

The total column of this 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.

Balance sheet

		31 December 2020	31 December 2019
	Note	£’000	£’000
Fixed asset investments	11	65,152	57,468

Current assets
Current asset investments	13	-	2,193
Trade and other receivables	13	2,038	527
Cash and cash equivalents		11,451	32,468
		13,489	35,188

Total assets		78,641	92,656

Payables: amounts falling due within one year
Trade and other payables less than one year	14	(613)	(634)

Total assets less current liabilities		78,028	92,022

Equity attributable to equity holders
Called-up share capital	15	1,307	1,296
Share premium		37,036	34,949
Capital redemption reserve		48	28
Unrealised capital reserve		13,595	13,708
Realised capital reserve		23,617	23,567
Other distributable reserve		2,425	18,474
Total equity shareholders’ funds		78,028	92,022
Basic and diluted net asset value per share (pence)*	16	69.35	82.58

* excluding treasury shares

The accompanying notes form an integral part of these Financial Statements.

These Financial Statements were approved by the Board of Directors, and were authorised for issue on 26 March 2021 and were signed on its behalf by

Dr. N E Cross
Chairman
Company number: 04114310

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
As at 1 January 2020	1,296	34,949	28	13,708	23,567	18,474	92,022
Return/(loss) and total comprehensive income for the year	-	-	-	1,233	(1,296)	(248)	(311)
Transfer of previously unrealised gains on disposal of investments	-	-	-	(1,346)	1,346	-	-
Purchase of shares for cancellation	(20)	-	20	-	-	(1,473)	(1,473)
Issue of equity	31	2,138	-	-	-	-	2,169
Cost of issue of equity	-	(51)	-	-	-	-	(51)
Dividends paid	-	-	-	-	-	(14,328)	(14,328)
As at 31 December 2020	1,307	37,036	48	13,595	23,617	2,425	78,028
As at 1 January 2019	1,187	26,621	28	16,697	10,933	24,431	79,897
Return and total comprehensive income for the year	-	-	-	1,387	8,258	519	10,164
Transfer of previously unrealised gains on disposal of investments	-	-	-	(4,376)	4,376	-	-
Purchase of shares for treasury	-	-	-	-	-	(2,016)	(2,016)
Issue of equity	109	8,547	-	-	-	-	8,656
Cost of issue of equity	-	(219)	-	-	-	-	(219)
Dividends paid	-	-	-	-	-	(4,460)	(4,460)
As at 31 December 2019	1,296	34,949	28	13,708	23,567	18,474	92,022

* These reserves amount to £26,042,000 (2019: £42,041,000) which is considered distributable.

Statement of cash flows

	Year ended 31 December 2020	Year ended 31 December 2019
	£’000	£’000
Cash flow from operating activities
Loan stock income received	511	1,360
Dividend income received	108	183
Deposit interest received	58	56
Investment management fee paid	(2,062)	(2,079)
Other cash payments	(344)	(291)
Corporation tax paid	-	-
Net cash flow from operating activities	(1,729)	(771)

Cash flow from investing activities
Purchase of current asset investments	(4)	-
Purchase of fixed asset investments	(9,158)	(7,022)
Disposal of current asset investments	1,616	-
Disposal of fixed asset investments	1,936	31,142
Net cash flow from investing activities	(5,610)	24,120


Cash flow from financing activities
Issue of share capital	-	7,804
Cost of issue of equity	(47)	(17)
Dividends paid*	(12,158)	(3,794)
Purchase of own shares (including costs)	(1,473)	(2,016)
Net cash flow from financing activities	(13,678)	1,977


(Decrease)/increase in cash and cash equivalents	(21,017)	25,326
Cash and cash equivalents at start of period	32,468	7,142
Cash and cash equivalents at end of period	11,451	32,468

*The dividends paid shown in the cash flow are different to the dividends disclosed in note 9 as a result of the non-cash effect of the Dividend Reinvestment Scheme.

Notes to the Financial Statements

1. Basis of preparation
The Financial Statements have been prepared in accordance with applicable United Kingdom law and accounting standards, including Financial Reporting Standard 102 (“FRS 102”), 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 Financial Statements have been prepared on a going concern basis and further details can be found in the Directors’ report on pages 32 and 33 of the full Annual Report and Financial Statements.

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”) in accordance with FRS 102 sections 11 and 12. The Company values investments by following the International Private Equity and Venture Capital Valuation (“IPEV”) Guidelines as updated in 2018 and further detail on the valuation techniques used are outlined in note 2 below.

Company information can be found on page 2 of the full Annual Report and Financial Statements.

2. Accounting policies
Fixed and current 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, revenue multiples, the level of third party offers received, cost or prices 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:
- 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.

Current assets and payables
Receivables (including debtors due after more than one year), payables and cash are carried at amortised cost, in accordance with FRS 102. Debtors due after more than one year meet the definition of a financing transaction held at amortised cost, and interest will be recognised through capital over the credit period using the effective interest method. There are no financial liabilities other than payables.

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 expected 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 fee, performance incentive fee and expenses
All expenses have been accounted for on an accruals basis. Expenses are charged through the other distributable reserve except the following which are charged through the realised capital reserve:

75 per cent. of management fees and performance incentive fees, if any, 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; and
expenses 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
Called-up share capital
This reserve accounts for the nominal value of the shares.

Share premium
This reserve accounts for the difference between the price paid for the Company’s shares and the nominal value of those 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 year end against cost are included in this reserve.

Realised capital reserve
The following are disclosed in this reserve:

gains and losses compared to cost on the realisation of investments, or permanent diminutions in value;
expenses, together with the related taxation effect, charged in accordance with the above policies; and
dividends paid to equity holders where paid out by capital.

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/(losses) on investments

	Year ended 31 December 2020 £’000	Year ended 31 December 2019 £’000
Unrealised gains on fixed asset investments	1,233	1,115
Unrealised gains on current asset investments	-	272
Realised gains on fixed asset investments	801	9,783
Realised losses on current asset investments	(581)	-
	1,453	11,170

4. Investment income

	Year ended 31 December 2020 £’000	Year ended 31 December 2019 £’000
Loan stock interest	510	1,105
Dividend income	39	253
Bank deposit interest	55	58
	604	1,416

5. Investment management fees

	Year ended 31 December 2020 £’000	Year ended 31 December 2019 £’000
Investment management fee charged to revenue	505	529
Investment management fee charged to capital	1,516	1,587
	2,021	2,116

Further details of the Management agreement under which the investment management fee is paid are given in the Strategic report above.

During the year, services of a total value of £2,021,000 (2019: £2,116,000) were purchased by the Company from Albion Capital Group LLP in respect of management fees. At the financial year end, the amount due to Albion Capital Group LLP in respect of these services disclosed as accruals was £477,000 (2019: £518,000). The total annual running costs of the Company are capped at an amount equal to 2.75 per cent. of the Company’s net assets, with any excess being met by Albion Capital Group LLP by way of a reduction in management fees. During the year, the management fee was reduced by £78,000 as a result of this cap (2019: £136,000).

During the year, the Company was not charged by Albion Capital Group LLP in respect of Patrick Reeve’s services as a Director (2019: nil).

Albion Capital Group LLP, its partners and staff (including Patrick Reeve) held 1,462,348 Ordinary shares in the Company as at 31 December 2020.

Albion Capital Group LLP is, from time-to-time, eligible to receive arrangement fees and monitoring fees from portfolio companies. During the year ended 31 December 2020, fees of £237,000 attributable to the investments of the Company were received by Albion Capital Group LLP pursuant to these arrangements (2019: £241,000).

During the year, £4,000 (2019: £nil) was invested into the SVS Albion OLIM UK Equity Income Fund (“OUEIF”) as part of the Company’s management of surplus liquid funds. To avoid double charging, Albion Capital Group LLP agreed to reduce its management fee relating to the investment in the OUEIF by 0.75 per cent. per annum, which represents the OUEIF management fee charged by OLIM. This resulted in a further reduction of the management fee of £9,000 (2019: £16,000). During the year, the Company disposed of its investment in the OUEIF. Full details of the disposal can be found in the Portfolio of investments on page 26 of the full Annual Report and Financial Statements.

6. Other expenses

	Year ended 31 December 2020 £’000	Year ended 31 December 2019 £’000
Directors’ fees (including NIC)	119	108
Auditor’s remuneration for statutory audit services (excluding VAT)	34	31
Tax services	19	23
Other administrative expenses	175	144
	347	306

7. Directors’ fees
The amounts paid to and on behalf of the Directors during the year are as follows:

	Year ended 31 December 2020 £’000	Year ended 31 December 2019 £’000
Directors’ fees	110	100
National insurance	9	8
	119	108

The Company’s key management personnel are the non-executive Directors. Further information regarding Directors’ remuneration can be found in the Directors’ remuneration report on pages 43 to 45 of the full Annual Report and Financial Statements.

8. Tax on ordinary activities

	Year ended 31 December 2020 £’000	Year ended 31 December 2019 £’000
UK corporation tax charge payable	-	-

Factors affecting the tax charge:

	Year ended 31 December 2020 £’000	Year ended 31 December 2019 £’000
(Loss)/return on ordinary activities before taxation	(311)	10,164

Tax charge on (loss)/profit at the average companies rate of 19% (2019: 19%)	(59)	1,931

Factors affecting the charge:
Non-taxable gains	(276)	(2,122)
Income not taxable	(7)	(48)
Excess management expenses carried forward	342	239
	-	-

The tax charge for the year shown in the Income statement is lower than the average companies rate of corporation tax in the UK of 19 per cent. (2019: 19 per cent.). The differences are explained above.

Notes

(i) Venture Capital Trusts are not subject to corporation tax on capital gains.
(ii) Tax relief on expenses charged to capital has been determined by allocating tax relief to expenses by reference to the applicable corporation tax rate and allocating the relief between revenue and capital in accordance with the SORP.

(iii) The Company has excess management expenses of £5,407,000 (2019: £3,606,000) that are available for offset against future profits. A deferred tax asset of £1,027,000 (2019: £613,000) has not been recognised in respect of these losses as they will be recoverable only to the extent that the Company has sufficient future taxable profits.

9. Dividends

	Year ended 31 December 2020 £’000	Year ended 31 December 2019 £’000

Dividend of 2.00p per share paid on 28 June 2019	-	2,237
Dividend of 2.00p per share paid on 31 December 2019	-	2,223
Dividend of 2.00p per share paid on 30 June 2020	2,201	-
Special dividend of 9.00p per share paid on 30 October 2020	9,942	-
Dividend of 1.95p per share paid on 31 December 2020	2,185	-
	14,328	4,460

In addition to the dividends summarised above, the Board has declared a first dividend for the year ending 31 December 2021 of 1.73 pence per share. The dividend will be paid on 30 June 2021 to shareholders on the register on 4 June 2021. The total dividend will be approximately £2,312,000. All dividends are paid out of the other distributable reserve as shown in the Balance sheet.

10. Basic and diluted (loss)/return per share

	Year ended 31 December 2020			Year ended 31 December 2019
	Revenue	Capital	Total	Revenue	Capital	Total

(Loss)/profit attributable to equity shares (£’000)	(248)	(63)	(311)	519	9,645	10,164
Weighted average shares in issue (adjusted for treasury shares)		110,981,864		109,562,226
(Loss)/return attributable per equity share (pence)	(0.22)	(0.06)	(0.28)	0.47	8.81	9.28

The weighted average number of shares is calculated adjusted for treasury shares of 18,196,470 (2019: 18,196,470).

There are no convertible instruments, derivatives or contingent share agreements in issue, and therefore no dilution affecting the return/(loss) per share. The basic return/(loss) per share is therefore the same as the diluted return/(loss) per share.

11. Fixed asset investments

Investments held at fair value through profit or loss	31 December 2020 £’000	31 December 2019 £’000
Unquoted equity and preference shares	45,891	40,332
Quoted equity	-	135
Unquoted loan stock	19,261	17,001
	65,152	57,468

	31 December 2020 £’000	31 December 2019 £’000
Opening valuation	57,468	70,737
Purchases at cost	10,375	8,043
Disposal proceeds	(4,724)	(31,956)
Realised gains	801	9,783
Movement in loan stock accrued income	(1)	(255)
Unrealised gains	1,233	1,115
Closing valuation	65,152	57,468

Movement in loan stock accrued income
Opening accumulated loan stock accrued income	88	343
Movement in loan stock accrued income	(1)	(255)
Closing accumulated loan stock accrued income	87	88

Movement in unrealised gains
Opening accumulated unrealised gains	13,727	16,988
Transfer of previously unrealised gains to realised reserve on disposal of investments	(1,413)	(4,376)
Movement in unrealised gains	1,233	1,115
Closing accumulated unrealised gains	13,547	13,727

Historic cost basis
Opening book cost	43,653	53,406
Purchases at cost	10,375	8,043
Sales at cost	(2,510)	(17,796)
Closing book cost	51,518	43,653

Purchases and disposals detailed above do not agree to the Statement of cash flows due to restructuring of investments, conversion of convertible loan stock and settlement receivables and payables.

The Company does not hold any assets as the result of the enforcement of security during the period and believes that the carrying values for both those valued below cost and past due assets are covered by the value of security held for these loan stock investments.

Unquoted fixed asset investments are valued at fair value in accordance with the IPEV guidelines as follows:

Valuation methodology	31 December 2020 £’000	31 December 2019 £’000
Cost and price of recent investment (reviewed for impairment or uplift)	30,244	32,087
Revenue multiple	12,507	1,845
Third party valuation – discounted cash flow	10,937	11,113
Third party valuation – earnings multiple	5,955	4,729
Net assets	2,869	5,487
Earnings multiple	1,962	2,072
Discounted offer price	678	-
	65,152	57,333

When using the cost or price of a recent investment in the valuations, the Company looks to re-calibrate this price at each valuation point by reviewing progress within the investment, comparing against the initial investment thesis, assessing if there are any significant events or milestones that would indicate the value of the investment has changed and considering whether a market-based methodology (i.e. using multiples from comparable public companies) or a discounted cashflow forecast would be more appropriate.

The main inputs into the calibration exercise, and for the valuation models using multiples, are revenue, EBITDA and P/E multiples (based on the most recent revenue, EBITDA or earnings achieved and equivalent corresponding revenue, EBITDA or earnings multiples of comparable companies), quality of earnings assessments and comparability difference adjustments. Revenue multiples are often used, rather than EBITDA or earnings, due to the nature of the Company’s investments, being in growth and technology companies which are not normally expected to achieve profitability or scale for a number of years. Where an investment has achieved scale and profitability the Company would normally then expect to switch to using an EBITDA or earnings multiple methodology.

In the calibration exercise and in determining the valuation for the Company’s equity instruments, comparable trading multiples are used. In accordance with the Company’s policy, appropriate comparable companies based on industry, size, developmental stage, revenue generation and strategy are determined and a trading multiple for each comparable company identified is then calculated. The multiple is calculated by dividing the enterprise value of the comparable group by its revenue, EBITDA or earnings. The trading multiple is then adjusted for considerations such as illiquidity, marketability and other differences, advantages and disadvantages between the portfolio company and the comparable public companies based on company specific facts and circumstances.

Fair value investments had the following movements between valuation methodologies:

Change in valuation methodology (2019 to 2020)	31 December 2020 £’000	Explanatory note

Price of recent investment to revenue multiple	9,711	More appropriate valuation methodology
Net assets to third party valuation - earnings multiple	1,396	Third party valuation undertaken
Price of recent investment to discounted offer price	678	Third party offer received
Cost and Price of recent investment to net assets	305	Covid-19 impact on portfolio company has led to revaluation
Bid price to net assets	135	Company delisted and in liquidation
Revenue multiple to net assets	5	Covid-19 impact on portfolio company has led to revaluation

The valuation will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEV Guidelines. The Directors believe that, within these parameters, there are no other more relevant methods of valuation which would be reasonable as at 31 December 2020.

FRS 102 and the SORP requires the Company to disclose the inputs to the valuation methods applied to its investments measured at FVTPL in a fair value hierarchy. The table below sets out fair value hierarchy definitions using FRS102 s.11.27.

Fair value hierarchy	Definition
Level 1	Unadjusted quoted prices in an active market
Level 2	Inputs to valuations are from observable sources and are directly or indirectly derived from prices
Level 3	Inputs to valuations not based on observable market data

Quoted investments are valued according to Level 1 valuation methods. Unquoted equity, preference shares and loan stock are all valued according to Level 3 valuation methods.

Investments held at fair value through profit or loss (Level 3) had the following movements:

	31 December 2020	31 December 2019
	£’000	£’000
Opening balance	57,333	69,938
Purchases at cost*	10,510	8,043
Disposals proceeds	(4,724)	(31,917)
Movement in loan stock accrued income	(1)	(255)
Realised gains	801	10,409
Unrealised gains	1,233	1,115
Closing balance	65,152	57,333

*Additions do not agree to the cash flow due to £1,487,000 of loan stock conversions and non-cash consideration, and £135,000 of delisted investments in the year.

FRS 102 requires the Directors to consider the impact of changing one or more of the inputs used as part of the valuation process to reasonable possible alternative assumptions. 69 per cent. of the portfolio of investments, consisting of equity and loan stock, is based on recent investment price, discounted offer price, net assets and cost, and as such the Board believe that changes to reasonable possible alternative input assumptions (by adjusting the earnings and revenue multiples) for the valuation of the remainder of the portfolio could lead to a significant change in the fair value of the portfolio. Therefore, for the remainder of the portfolio, the Board has adjusted the inputs for a number of the largest portfolio companies (by value) resulting in a total coverage of 86 per cent. of the portfolio of investments. The main inputs considered for each type of valuation is as follows:

Valuation technique	Portfolio company sector	Input	Base Case*	Change in input	Change in fair value of investments (£’000)	Change in NAV (pence per share)
Revenue multiple	Software and other technology	Revenue multiple	5.4x	+0.5	226	0.20
				-0.5	(226)	(0.20)
Revenue multiple	Healthcare (including digital healthcare)	Revenue multiple	4.5x	+0.5	381	0.34
				-0.5	(381)	(0.34)
Third party valuation – discounted cash flow	Renewable energy	Discount rate	5.75%	+0.5%	(245)	(0.22)
				-0.5%	270	0.24
Third party valuation – earnings multiple	Education	Earnings multiple	11x	+1.0	149	0.13
				-1.0	(149)	(0.13)

* As detailed in the accounting policies above, the base case is based on market comparables, discounted where appropriate for marketability, in accordance with the IPEV guidelines.

The impact of these changes could result in an overall increase in the valuation of the equity investments by £1,026,000 (2.2%) or a decrease in the valuation of equity investments by £1,001,000 (2.2%).

12. Significant interests
The principal activity of the Company is to select and hold a portfolio of investments. Although the Company, through the Manager, will, in some cases, be represented on the Board of the portfolio company, it will not take a controlling interest or become involved in the management. The size and structure of the companies with unquoted securities may result in certain holdings in the portfolio representing a participating interest without there being any partnership, joint venture or management consortium agreement. The investments listed below are held as part of an investment portfolio and therefore, as permitted by FRS 102 section 14.4B, they are measured at FVTPL and not accounted for using the equity method.

The Company has interests of greater than 20 per cent. of the nominal value of any class of the allotted shares in the portfolio companies as at 31 December 2020 as described below:

Company	Registered postcode	Profit/(loss) before tax £’000	Net assets/(liabilities) £’000	Result for year ended	% class and share type	% total voting rights

Albion Investment Properties Limited	EC1M 5QL, UK	n/a*	(706)	31 December 2019	31.8% A Ordinary	31.8%
MHS 1 Limited	EC1M 5QL, UK	(1,086)	(8,965)	31 August 2020	22.5% Ordinary	22.5%
memsstar Limited	EH3 9EP, UK	644	2,577	31 December 2019	67.3% A Ordinary	30.1%
Premier Leisure (Suffolk) Limited	EC1M 5QL, UK	n/a*	(1,506)	31 August 2020	25.8% Ordinary	25.8%
The Q Garden Company Limited	EC1M 5QL, UK	n/a*	(4,595)	31 August 2020	33.4% A Ordinary	33.4%

*The company files filleted accounts which does not disclose this information.

13. Current assets

Current asset investments	31 December 2020	31 December 2019
	£’000	£’000
SVS Albion OLIM UK Equity Income Fund	-	2,193

Current asset investments at 31 December 2019 consisted of cash invested in SVS Albion OLIM UK Equity Income Fund and was capable of realisation within 7 days. These fell into the level 1 fair value hierarchy as defined in note 11. The Company disposed of its investment in the SVS Albion OLIM UK Equity Income Fund. Further details can be found in the Portfolio of investments section on page 26 of the full Annual Report and Financial Statements.

Trade and other receivables	31 December 2020	31 December 2019
	£’000	£’000
Prepayments and accrued income	25	22
Other receivables	1	73
Deferred consideration under one year	111	432
Deferred consideration over one year	1,901	-
	2,038	527

The deferred consideration over one year relates to the sale of G.Network Communications Limited in December 2020. These proceeds are receivable in January 2024, and have been discounted to present value at the prevailing market rate, including a provision for counterparty risk. This constitutes a financing transaction and has been accounted for using the policy disclosed in note 2.

The Directors consider that the carrying amount of receivables is not materially different to their fair value.

14. Payables: amounts falling due within one year

	31 December 2020	31 December 2019
	£’000	£’000
Trade payables	33	15
Accruals and deferred income	580	619
	613	634

The Directors consider that the carrying amount of payables is not materially different to their fair value.

15. Called-up share capital

Allotted, called-up and fully paid	£’000
129,624,437 Ordinary shares of 1 penny each at 31 December 2019	1,296
3,117,737 Ordinary shares of 1 penny each issued during the year	31
2,031,283 Ordinary shares of 1 penny each cancelled during the year	(20)
130,710,891 Ordinary shares of 1 penny each at 31 December 2020	1,307

18,196,470 Ordinary shares of 1 penny each held in treasury at 31 December 2019	(182)
18,196,470 Ordinary shares of 1 penny each held in treasury at 31 December 2020	(182)

Voting rights of 112,514,421 Ordinary shares of 1 penny each at 31 December 2020	1,125

The Company purchased 2,031,283 Ordinary shares to be cancelled (2019: 2,678,000 to be held in treasury) at a cost of £1,473,000 including stamp duty (2019: £2,016,000) during the year ended 31 December 2020. Total share buy backs in 2020 represents 1.6 per cent. (2019: 2.1 per cent.) of called-up share capital.

The Company holds a total of 18,196,470 shares (2019: 18,196,470) in treasury representing 13.9 per cent. (2019: 14.0 per cent.) of the issued Ordinary share capital at 31 December 2020.

Under the terms of the Dividend Reinvestment Scheme, the following new Ordinary shares of nominal value 1 penny each were allotted during the year:

Date of allotment	Number of shares allotted	Aggregate nominal value of shares (£’000)	Issue price (pence per share)	Net invested (£’000)	Opening market price on allotment date (pence per share)
30 June 2020	421,235	4	75.37	302	72.00
30 October 2020	2,197,279	22	68.85	1,495	65.50
31 December 2020	499,223	5	67.80	321	64.50
	3,117,737	31		2,118

16. Basic and diluted net asset value per share

	31 December 2020	31 December 2019
	(pence per share)	(pence per share)
Basic and diluted net asset value per share	69.35	82.58

The basic and diluted net asset value per share at the year end is calculated in accordance with the Articles of Association and is based upon total shares in issue (less treasury shares) of 112,514,421 at 31 December 2020 (2019: 111,427,967).

17. Capital and financial instruments risk management
The Company’s capital comprises Ordinary shares as described in note 15. The Company is permitted to buy back its own shares for cancellation or treasury purposes, and this is described in more detail above in the Chairman’s statement.

The Company’s financial instruments comprise equity and loan stock investments in quoted and unquoted companies, cash balances, receivables and payables which arise from its operations. The main purpose of these financial instruments is to generate cash flow and revenue and capital appreciation for the Company’s operations. The Company has no gearing or other financial liabilities apart from short term payables. The Company does not use any derivatives for the management of its Balance sheet.

The principal financial risks arising from the Company’s operations are:

investment (or market) risk (which comprises investment price and cash flow interest rate risk);
credit risk; and
liquidity risk.

The Board regularly reviews and agrees policies for managing each of these risks. There have been no changes in the nature of the risks that the Company has faced during the past year, and apart from where noted below, there have been no changes in the objectives, policies or processes for managing risks during the past year. The key risks are summarised below.

Investment risk
As a Venture Capital Trust, it is the Company’s specific nature to evaluate and control the investment risk of its portfolio in quoted and unquoted investments, details of which are shown pages 24 to 26 of the full Annual Report and Financial Statements. Investment risk is the exposure of the Company to the revaluation and devaluation of investments. The main driver of investment risk is the operational and financial performance of the portfolio company and the dynamics of market quoted comparators. The Manager receives management accounts from portfolio companies, and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment risk.

The Manager and the Board formally review investment risk (which includes market price risk), both at the time of initial investment and at quarterly Board meetings.

The Board monitors the prices at which sales of investments are made to ensure that profits to the Company are maximised, and that valuations of investments retained within the portfolio appear sufficiently prudent and realistic compared to prices being achieved in the market for sales of quoted and unquoted investments.

The maximum investment risk as at the Balance sheet date is the value of the fixed asset investment portfolio which is £65,152,000 (2019: fixed and current asset investments: £59,661,000). Fixed asset investments form 83 per cent. of the net asset value as at 31 December 2020 (2019: fixed and current asset investments: 65 per cent.).

More details regarding the classification of fixed and current asset investments are shown in notes 11 and 13.

Investment price risk
Investment price risk is the risk that the fair value of future investment cash flows will fluctuate due to factors specific to an investment instrument or to a market in similar instruments. As a Venture Capital Trust, the Company invests in accordance with the investment policy set out above. The management of risk within the venture capital portfolio is addressed through careful investment selection, by diversification across different industry segments, by maintaining a wide spread of holdings in terms of financing stage and by limitation of the size of individual holdings. The Directors monitor the Manager’s compliance with the investment policy, review and agree policies for managing this risk and monitor the overall level of risk on the investment portfolio on a regular basis.

Valuations are based on the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEV Guidelines. Details of the industries in which investments have been made are contained in the Portfolio of investments section on pages 24 to 26 of the full Annual Report and Financial Statements and in the Strategic report.

As required under FRS 102 the Board is required to illustrate by way of a sensitivity analysis the extent to which the assets are exposed to market risk. The Board considers that the value of the fixed asset investment portfolio is sensitive to a change of 10% based on the current economic climate. The impact of a 10% change has been selected as this is considered reasonable given the current level of volatility observed. When considering the appropriate level of sensitivity to be applied, the Board has considered both historic performance and future expectations.

The sensitivity of a 10% increase or decrease in the valuation of the fixed asset investment portfolio (keeping all other variables constant) would increase or decrease the net asset value and return for the year by £6,515,000. Further sensitivity analysis on fixed asset investments is included in note 11.

Interest rate risk
The Company is exposed to fixed and floating rate interest rate risk on its financial assets. On the basis of the Company’s analysis, it was estimated that a rise of half a percentage point in all interest rates would have decreased the loss before tax for the year by approximately £116,000 (2019: £147,000). Furthermore, it was considered that a fall of interest rates below current levels during the year would have been very unlikely.

The weighted average effective interest rate applied to the Company’s unquoted loan stock during the year was approximately 3.2 per cent. (2019: 4.6 per cent.). The weighted average period to maturity for the unquoted loan stock is approximately 3.9 years (2019: 3.9 years).

The Company’s financial assets and liabilities, all denominated in pounds sterling, consist of the following:

	31 December 2020				31 December 2019
	Fixed rate £’000	Floating rate £’000	Non-interest bearing £’000	Total £’000	Fixed rate £’000	Floating rate £’000	Non-interest bearing £’000	Total £’000
Unquoted equity	-	-	45,891	45,891	-	-	40,332	40,332
Quoted equity	-	-	-	-	-	-	135	135
Unquoted loan stock	18,297	-	964	19,261	15,939	-	1,062	17,001
Current asset investments	-	-	-	-	-	-	2,193	2,193
Receivables*	-	-	2,013	2,013	-	-	509	509
Current liabilities	-	-	(613)	(613)	-	-	(634)	(634)
Cash	-	11,451	-	11,451	-	32,468	-	32,468
Total	18,297	11,451	48,255	78,003	15,939	32,468	43,597	92,004

*The receivables do not reconcile to the Balance sheet as prepayments 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 receivables, 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. For loan stock investments made prior to 6 April 2018, which account for 62.8 per cent. of loan stock value, typically loan stock instruments will have a fixed or floating charge, which may or may not be subordinated, over the assets of the portfolio company in order to mitigate the gross credit risk.

The Manager receives management accounts from portfolio companies, and members of the investment management team sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment specific credit risk.

The Manager and the Board formally review credit risk (including receivables) 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 December 2020 was limited to £19,261,000 (2019: £17,001,000) of unquoted loan stock instruments, £11,451,000 (2019: £32,468,000) cash deposits with banks and £2,038,000 (2019: £527,000) of other receivables.

At the Balance sheet date, the cash held by the Company was held with Lloyds Bank plc, Scottish Widows Bank plc (part of Lloyds Banking Group), Barclays Bank plc and National Westminster Bank plc. Credit risk on cash transactions was mitigated by transacting with counterparties that are regulated entities subject to prudential supervision, with high credit ratings 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.

The credit profile of unquoted loan stock is described under liquidity risk below.

Liquidity risk
Liquid assets are held as cash on current account, on deposit, in bonds or short term money market account. 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 £7,572,000 as at 31 December 2020 (2019: £8,979,000).

The Company has no committed borrowing facilities as at 31 December 2020 (2019: £nil). The Company had cash balances of £11,451,000 (2019: £32,468,000) and no current asset investments (2019: £2,193,000), which are considered to be readily realisable within the timescales required to make cash available for investment. The main cash outflows are for new investments, share buy-backs and dividend payments, 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 £613,000 as at 31 December 2020 (2019: £634,000).

The carrying value of loan stock investments analysed by expected maturity dates is as follows:

	31 December 2020				31 December 2019
Redemption date	Fully performing £’000	Valued below cost £’000	Past due £’000	Total £’000	Fully performing £’000	Valued below cost £’000	Past due £’000	Total £’000
Less than one year	2,266	2,341	1,673	6,280	2,438	4,427	732	7,597
1-2 years	2,036	26	79	2,141	595	76	-	671
2-3 years	195	92	-	287	1,900	26	-	1,926
3-5 years	7,012	-	65	7,077	2,964	156	-	3,120
5+ years	3,097	-	379	3,476	3,264	-	423	3,687
Total	14,606	2,459	2,196	19,261	11,161	4,685	1,155	17,001

Loan stock can be past due as a result of interest or capital not being paid in accordance with contractual terms.

The cost of loan stock investments valued below cost is £3,033,000 (2019: £5,409,000).

In view of the factors identified above, 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 December 2020 are stated at fair value as determined by the Directors, with the exception of receivables (including debtors due after more than one year), payables and cash which are carried at amortised cost, in accordance with FRS 102. There are no financial liabilities other than payables. The Company’s financial liabilities are all non-interest bearing. It is the Directors’ opinion that the book value of the financial liabilities is not materially different to the fair value and all are payable within one year.

18. Commitments and contingencies
The Company had no financial commitments in respect of investments as at 31 December 2020 (2019: nil).

There were no contingent liabilities or guarantees given by the Company as at 31 December 2020 (2019: nil).

19. Post balance sheet events
Since 31 December 2020 the Company has had the following post balance sheet events:

Investment of £1,014,000 in a new portfolio company, Threadneedle Software Holding Limited (T/A Solidatus);
Disposal of OmPrompt Holdings Limited for proceeds of £678,000;
Disposal of SBD Automotive Limited for proceeds of £567,000; and
Investment of £418,000 in an existing portfolio company, Healios Limited.

Since 31 December 2020, the Company issued the following new Ordinary shares of nominal value 1 penny each under the Albion VCTs’ Prospectus Top Up Offers 2020/21:

Date of allotment	Number of shares allotted	Aggregate nominal value of shares (£’000)	Issue price (pence per share)	Net consideration received (£’000)	Opening market price on allotment date (pence per share)
26 February 2021	2,059,020	21	70.30	1,426	66.00
26 February 2021	520,699	5	70.70	361	66.00
26 February 2021	18,541,660	185	71.70	12,854	66.00
	21,121,379	211		14,641

20. Related party transactions
The Company has entered into an offer agreement relating to the Top Up Offers 2020/21 with the Company’s Manager, Albion Capital Group LLP (“Albion”), pursuant to which Albion will receive a fee of 2.5 per cent. of the gross proceeds of the Offer and out of which Albion will pay the costs of the Offer, as detailed in the Prospectus.

Other than transactions with the Manager as disclosed in note 5, the Directors’ remuneration disclosed in the Directors’ remuneration report on pages 43 to 45 of the full Annual Report and Financial Statements, and that disclosed above, there are no other related party transactions requiring disclosure.

21. Other Information
The information set out in this announcement does not constitute the Company's statutory accounts within the terms of Section 434 of the Companies Act 2006 for the years ended 31 December 2020 and 31 December 2019, and is derived from the statutory accounts for those financial years, which have been, or in the case of the accounts for the year ended 31 December 2020, which will be, delivered to the Registrar of Companies. The Auditor reported on those accounts; the reports were unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

22. Publication
The full audited Annual Report and Financial Statements are 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/AATG, where the Report can be accessed as a PDF document via a link in the 'Financial Reports and Circulars' section.

Attachment

Split of Portfolio by sector, stage of investment and number of employees

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Albion Technology & General VCT (AATG)

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