Albion Venture Capital Trust PLC: Annual Financ...

Albion Venture Capital Trust PLC: Annual Financial Report

Albion Venture Capital Trust PLC
LEI number: 213800JKELS32V2OK421

As required by the UK Listing Authority's Disclosure Guidance and Transparency Rules 4.1 and 6.3, Albion Venture Capital Trust PLC today makes public its information relating to the Annual Report and Financial Statements for the year ended 31 March 2018.

This announcement was approved for release by the Board of Directors on 29 June 2018.

This announcement has not been audited.

The Annual Report and Financial Statements for the year ended 31 March 2018 (which have been audited), will shortly be sent to shareholders. Copies of the full Annual Report and Financial Statements will be avaliable via the Albion Capital Group LLP website by clicking www.albion.capital/funds/AAVC/31Mar2018.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
Albion Venture Capital Trust PLC (the “Company”) is a venture capital trust and its current general investment policy is as follows:

Investment policy
To manage the risk normally associated with investments in smaller, unquoted companies whilst maintaining an attractive yield, through allowing investors the opportunity to participate in a balanced portfolio of asset-based businesses. The Company's investment portfolio will thus be structured with the objective of providing a balance between income and capital growth for the longer term. This is achieved as follows:

Qualifying unquoted investments are predominantly in companies which are asset-based;
The Company invests alongside selected partners with proven experience in the sectors concerned;
Investments are normally structured as a mixture of equity and loan stock. The loan stock represents the majority of the finance provided and is secured on the assets of the portfolio company. Funds managed or advised by Albion Capital Group LLP typically own 50 per cent. of the equity of the portfolio company; and
Other than the loan stock issued to funds managed or advised by Albion Capital Group LLP, the Company's policy remains that its portfolio companies should not normally have external borrowings, and for the Company to have first charge over portfolio companies' assets.

In the November 2017 Autumn Budget, a number of changes to the legislation governing venture capital trusts were announced. Those changes have now been enacted in the Finance Act 2017-19 and further information has been provided in Guidance Notes issued by HM Revenue & Customs. Some of these changes took effect from the date upon which the Finance Act received Royal Assent and others came into force on 6 April 2018. In future, VCTs may no longer offer secured loans to portfolio companies and to qualify for VCT tax reliefs, portfolio companies must satisfy a "risk to capital condition”. This means that the portfolio company must have an objective to grow and develop over the long term and there must be a significant risk that there could be a loss of capital to the VCT of an amount exceeding the net return. The overall aim of HM Treasury is to encourage more high growth investment through VCTs rather than low risk, heavily asset backed investments.

As a result of these changes, and subject to shareholder approval, the Board is now recommending a change to the Company’s general investment policy, as set out below. The updated policy removes references to asset-based companies in which funds managed or advised by Albion Capital Group LLP typically own 50 per cent. of the equity, to loan stock being secured by first charges and to the Company’s policy that portfolio companies should not normally have external borrowings, and so will enable the Company to invest in a broad range of businesses. In the future, the Company will be permitted to provide unsecured loans but on a portfolio basis these may not represent more than 30 per cent. of investments after 5 April 2018, and the interest rate may not exceed a normal commercial rate of return. The proposed new investment policy is as follows:

Proposed new investment policy
The Company will invest in a broad portfolio of smaller, unquoted growth businesses across a variety of sectors including higher risk technology companies. Investments may take the form of equity or a mixture of equity and loans.

Allocation of funds will be determined by the investment opportunities which become available but efforts will be made to ensure that the portfolio is diversified both in terms of sector and stage of maturity of company. Funds held pending investment or for liquidity purposes will be held as cash on deposit.

Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses within venture capital trust qualifying industry sectors. The maximum amount which the Company will invest in a single portfolio company is 15 per cent. of the Company's assets at cost, thus ensuring a spread of investment risk. The value of an individual investment may increase over time as a result of trading progress and it is possible that it may grow in value to a point where it represents a significantly higher proportion of total assets prior to a realisation opportunity being available.

Gearing
The Company's maximum exposure in relation to gearing is restricted to 10 per cent. of the adjusted share capital and reserves.

Background to the Company
The Company is a venture capital trust which raised a total of £39.7 million through an issue of Ordinary shares in the spring of 1996 and through an issue of C shares in the following year. The C shares merged with the Ordinary shares in 2001. The Company has raised a further £26.9 million under the Albion VCTs Top Up Offers since 2011.

On 25 September 2012, the Company acquired the assets and liabilities of Albion Prime VCT PLC (“Prime”) in exchange for new shares in the Company, resulting in a further £14.3 million of net assets.

Financial calendar

Record date for first dividend	13 July 2018
Payment of first dividend	31 July 2018
Annual General Meeting	11:00am on 13 August 2018

Announcement of half-yearly results for the six months ending 30 September 2018	December 2018
Payment of second dividend (subject to Board approval)	31 January 2019

Financial highlights

5.5p	Basic and diluted total return per share for the year ended 31 March 2018

5.0p	Total tax-free dividend per share paid during the year ended 31 March 2018

76.0p	Net asset value per share as at 31 March 2018

225.8p	Total shareholder return since launch to 31 March 2018

6.4

Annualised return since launch (without tax relief)

	31 March 2018	31 March 2017
	(pence per share)	(pence per share)

Dividends paid	5.0	5.0
Revenue return	1.8	1.9
Capital return	3.7	6.8
Net asset value	76.0	75.4

Total shareholder return to 31 March 2018	Ordinary shares (pence per share)
Total dividends paid during the year ended : 31 March 1997	2.00
31 March 1998	5.20
31 March 1999	11.05
31 March 2000	3.00
31 March 2001	8.55
31 March 2002	7.60
31 March 2003	7.70
31 March 2004	8.20
31 March 2005	9.75
31 March 2006	11.75
31 March 2007	10.00
31 March 2008	10.00
31 March 2009	10.00
31 March 2010	5.00
31 March 2011	5.00
31 March 2012	5.00
31 March 2013	5.00
31 March 2014	5.00
31 March 2015	5.00
31 March 2016	5.00
31 March 2017	5.00
31 March 2018	5.00
Total dividends paid to 31 March 2018	149.80

Net asset value as at 31 March 2018	76.00

Total shareholder return to 31 March 2018	225.80

The financial summary above is for the Company, Albion Venture Capital Trust PLC Ordinary shares only. Details of the financial performance of the C shares and Albion Prime VCT PLC, which have been merged into the Company, can be found at the end of this annoucement.

Notes
• Dividends paid before 5 April 1999 were paid to qualifying shareholders inclusive of the associated tax credit. The dividends for the
year to 31 March 1999 were maximised in order to take advantage of this tax credit.
• The net asset value of the Company is not its share price as quoted on the official list of the London Stock Exchange. The share price of the Company can be accessed via a link on the Company’s webpage at www.albion.capital/funds/AAVC under ‘Trust Information’.
•Investors are reminded that it is common for shares in VCTs to trade at a discount to their net asset value as tax reliefs are only obtainable on new subscription.

Chairman’s statement
Introduction
This is my last Chairman’s statement before my retirement and I would like to start by taking the opportunity to thank my fellow Directors, the Manager and our shareholders for all their support over the last 22 years. It has certainly been an enjoyable time for me.

I am pleased to report that the results for the year to 31 March 2018 show a total return of 5.5 pence per share (2017: 8.7 pence per share) and net assets of 76.0 pence per share, compared to 75.4 pence per share at 31 March 2017, after the payment of total tax-free dividends of 5 pence per share for the year.

It is encouraging that the Company’s total return continues for the fourth year running to cover the dividend of 5 pence per share. This has been partly through an increase in the income generated by the investment portfolio, which has risen 8.9 per cent. from the previous year. The principal element, however, has come from capital uplifts: in particular the uplift in the third party valuations of our care homes, hydro projects and schools, together with a pleasing uplift in the valuation of our new fibre optic broadband provider.

Investment performance and progress
During the year we made investments in a start up wedding venue business, a new business setting up a women’s health centre on Harley Street and a company providing fibre optic broadband to businesses in Central London, while selling the Crown Hotel in Harrogate and the Weybridge health and fitness club. Healthcare now accounts for 40 per cent. of the portfolio, while renewable energy accounts for 19 per cent., hotels have reduced to 13 per cent. and education accounts for 9 per cent..

Taking these sectors in turn, our three care homes, Shinfield View, near Reading, Cumnor Hill House on the outskirts of Oxford (owned by Active Lives Care), and Ryefield Court in Hillingdon, West London, have been continuing to build occupancy, leading to further uplifts in the independent third party valuations. Meanwhile our new investment, Women’s Health (London West One), is scheduled to open The Evewell clinic in October 2018.

Our renewable energy investments are now relatively mature, but we completed a significant expansion of our biogas plant, Earnside Energy. Meanwhile the valuations of our Scottish hydro projects have benefited from better than feared outcomes of the business rates review.

As already mentioned, the Crown Hotel in Harrogate was sold during the period, at a small premium to our holding value, realising proceeds for the Company of approximately £3.3 million. Trading at the Holiday Inn Express at Stansted Airport (Kew Green) was strong for the first half of the year, but latterly we have seen some impact from the opening of a competitor hotel in July. Since the year end the business has been refinanced with £6 million bank debt, enabling £2.3 million share premium paid by the Company and other investors to be repaid and £3.4 million loan stock held by the Company and other investors to be redeemed, reducing your Company’s longstanding investment by approximately £4.7 million. The boutique Stanwell Heathrow Hotel has faced increased competition in its market.

In education, Radnor House Twickenham is close to maturity with over 400 pupils while pupil numbers at Radnor House Sevenoaks have been continuing to grow and are now over 400. In addition, MHS 1’s investment in Mount House School, an independent secondary day school in Barnet, North London, currently has 160 pupils.

As regards other sectors, new investments were made in G.Network Communications, a rapidly growing provider of fibre optic broadband to businesses in Central London, and in Beddlestead, a start up wedding venue business which is developing its first location in Wiltshire, expected to open in 2019.

Meanwhile our portfolio of pubs in the North West, within Bravo Inns and Bravo Inns II, continues to expand.

Change of investment policy
In the November 2017 Autumn Budget, a number of changes to the legislation governing venture capital trusts were announced. As explained more fully in the Strategic report, VCTs may no longer offer secured loans and portfolio companies must satisfy a "risk to capital condition”. The overall aim of HM Treasury is to encourage more high growth investment through VCTs rather than heavily asset backed investments. As a result of these changes, the Board has carefully considered the strategic options open to the Company and is now recommending a change to our investment policy, which will enable the Company to invest in a broader range of businesses going forward, including in the higher risk technology sector, and accordingly a resolution to effect the change will be proposed at the forthcoming Annual General Meeting. Albion, in its other VCTs, has had many years of experience investing in early stage high growth businesses. The proposed new investment policy can be found at the beginning of this announcement.

Board composition
As you may know, I have been Chairman of your Company since its launch in 1996 and I will be stepping down on 1 August 2018. Ebbe Dinesen intends to retire at the Annual General Meeting in 2019. I was very pleased to welcome Richard Glover and Ann Berresford to the Board in November and am happy to announce that Richard has agreed to take over from me as Chairman.

As stated in the interim report, Richard has been involved with a number of private equity backed companies over the years, including chief executive roles at BSM Group through its development from a family company to a flotation on the London Stock Exchange and subsequent sale to the RAC, and of a professional educational services business, and chairman roles at a property services business and a retail services group.

Ann qualified as a chartered accountant and has a background in financial management at Clyde Petroleum and Bank of Ireland. She has been a non-executive director at the Bath Building Society and is a non-executive director at Secure Trust Bank.

Reflections
I will be stepping down from my Chairman role after 22 years, and it is perhaps natural that I have a few reflections I would like to share with the Company’s shareholders, many of whom have supported the Company and me for a large part of my tenure.

I became Chairman of what was then called Close Brothers Venture Capital Trust at its initial launch in February 1996. VCTs were an imaginative innovation to encourage small company and entrepreneurial activities through innovative tax strategies. The total capitalisation of all VCTs is now approximately £4.3 billion, so our activities and our performance have in some measure contributed to the establishment of the VCT as an accepted and attractive investment class.

And the investment experience has been good. Our 22 year IRR (ignoring tax breaks) is 6.4% per annum, which puts us first equal in our “vintage” and among the best of all VCTs. I am proud of our Manager and my Board for overseeing such a long term and attractive investment performance.

Our investment management team have been successful investors and early adopters in a number of attractive investment themes. Over the years we have had very attractive investment returns from hotels, nursing homes, residential property development, movie theatres and pubs. More recently, renewable energy and secondary schools have proven to be very successful investment opportunities.

Which is not to say that we have not stumbled along the way, but then you expect that in a portfolio and there are always lessons to be learnt. We did foresee some of the economic stress in 2008 and were in the process of selling some of our hotel assets but those sales were overtaken by the economic crisis before we could conclude them. As always, we might have done better, but I am proud of what we did accomplish and I am highly confident that Richard Glover and your Board will do even better in the coming years.

Share buy-backs
It remains the Board’s primary objective to maintain sufficient resources for investment in existing and new portfolio companies and for the continued payment of dividends to shareholders. Thereafter, it is still the Board’s policy to buy back shares in the market, subject to the overall criterion that such purchases are in the Company’s interest. The total value bought in for the year ended 31 March 2018 was £1,019,000. Subject to the constraints referred to above and subject to first purchasing shares held by the market makers, the Board will target 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.

Results and dividends
As at 31 March 2018, the net asset value was £65.8 million or 76.0 pence per share, compared to £65.5 million or 75.4 pence per share as at 31 March 2017, after the payment of total tax-free dividends of 5 pence per share. The results comprised a total return of 5.5 pence per share for the year (2017: 8.7 pence per share), which is made up of a 1.8 pence per share revenue return (2017: 1.9 pence per share) and a 3.7 pence per share capital return (2017: 6.8 pence per share). The revenue return before taxation was £1.9 million compared to £1.8 million for the year to 31 March 2017. The Company will pay a first dividend of 2.5 pence per share for the year ending 31 March 2019 on 31 July 2018 to shareholders on the register on 13 July 2018, which is in line with the Company’s current objective of paying a dividend of 5 pence per share annually. Thereafter, it is intended that payment of the next dividend will be made at the end of January 2019.

Risks and uncertainties
The outlook for the UK economy continues to be the key risk affecting your Company. The forthcoming withdrawal from the European Union may have an effect on the Company and its investments, although the extent of the effect is not quantifiable at this time.

A detailed analysis of the other risks and uncertainties facing the business is set out on in the Strategic report below.

Outlook and prospects
Given the changes in VCT legislation, and subject to approval of the requisite resolution at the Annual General Meeting, the Company’s investment policy will change in a material way, so it seems fitting that we should have a new chairman to oversee this important new stage in the Company’s life. The Company’s investment portfolio will transition over time from an asset-based one to a portfolio with a much greater focus on young growth companies. I believe that the Manager has the expertise to effect the transition, given its record in other VCTs it manages, and I wish the Company a very successful future. The last 22 years have seen good returns for shareholders and I have every confidence that the next 22 can be at least as good. Let me finish by just saying “thank you for your support”.

David Watkins
Chairman
29 June 2018

Strategic report
Albion Venture Capital Trust PLC is a venture capital trust and its current general investment objective and policy can be found at the beginning of this announcement.

As a result of changes in The Finance Act 2018, and subject to shareholder approval, the Board is now recommending a change to the Company’s general investment policy. The proposed new investment policy is as follows:

Gearing
The Company's maximum exposure in relation to gearing is restricted to 10 per cent. of the Company’s adjusted share capital and reserves.

Current portfolio sector allocation
The pie chart at the end of this announcement shows the split of the portfolio valuation by sector as at 31 March 2018. Details of the principal investments made by the Company are shown in the Portfolio of investments on pages 21 and 22 of the full Annual Report and Financial Statements.

Direction of portfolio
The sector analysis of the Company’s investment portfolio shows that healthcare now accounts for 40 per cent. of the portfolio, compared to 35 per cent. at the end of the previous financial year, mainly as a result of an uplift in valuations of £1.9 million. Renewable energy accounts for 19 per cent. of the portfolio, increasing from 17 per cent. as a result of uplifts in our hydro schemes. Hotels accounted for 13 per cent. compared to 18 per cent. at the previous year end after the sale of The Crown Hotel in Harrogate and this has been reduced further following the year end as a result of the refinancing of Kew Green VCT (Stansted). Subject to shareholder approval, the change to the investment policy will result in asset-based investments decreasing as a proportion of the portfolio, and a greater emphasis given to growth and technology investments. Further details on the change in investment policy can be found in the Chairman’s statement above.

Results and dividends	Ordinary shares £'000

Net revenue return for the year ended 31 March 2018	1,605
Net capital gain for the year ended 31 March 2018	3,178
Total return for the year ended 31 March 2018	4,783
Dividend of 2.5 pence per share paid on 31 July 2017	(2,179	)
Dividend of 2.5 pence per share paid on 31 January 2018	(2,178	)
Unclaimed dividends returned to the Company	40
Transferred to reserves	466

Net assets as at 31 March 2018	65,779

Net asset value as at 31 March 2018 (pence per share)	76.0

The Company paid dividends totalling 5.0 pence per share during the year ended 31 March 2018 (2017: 5.0 pence per share). The dividend objective of the Board is to provide shareholders with a strong, predictable dividend flow, with a dividend target of 5.0 pence per share per annum.

As noted in the Chairman’s statement, the Board has declared a first dividend of 2.5 pence per share for the year ending 31 March 2019. This dividend will be paid on 31 July 2018 to shareholders on the register on 13 July 2018.

As shown in the Income statement, the Company’s investment income has increased to £2,520,000 (2017: £2,381,000) and the total revenue return to equity holders also increased to £1,605,000 (2017: £1,510,000). Income continues to more than cover on-going expenses. Although total income has increased, revenue return per share has decreased slightly, to 1.8 pence per share (2017: 1.9 pence per share). The capital gain on investments for the year was £3,930,000 (2017: £6,179,000), offset by management fees charged to capital and the related taxation impact, resulting in a capital return of 3.7 pence per share (2017: 6.8 pence per share). The total return was 5.5 pence per share (2017: 8.7 pence per share).

The Balance sheet shows that the net asset value has increased over the last year to 76.0 pence per share (2017: 75.4 pence per share), reflecting the total return exceeding the level of dividends paid during the year.

The cash flow for the Company has been a net outflow of £3,734,000 for the year (2017: inflow £166,000), reflecting dividends paid, new investments in the year and the buy-back of shares, offset by cash inflows from operations and disposal proceeds.

Review of business and future changes
A review of the Company’s business during the year and investment performance and progress is contained in the Chairman’s statement. The healthcare sector performed particularly well again this year with an increase in valuations of £1.9 million. After strong increases in previous years, the renewable energy sector saw further increases of £1.1 million. The education sector saw an increase in valuation of £0.5 million as Radnor House Sevenoaks boosted pupil numbers.

As reported in the Half-yearly Financial Report, recent VCT legislation has led your Board and the Manager to conclude that a purely asset-based investment policy will not be practicable for the longer term. As detailed in the Chairman’s statement, the Board is proposing a change to the investment policy which will result in asset-based investments decreasing as a proportion of the portfolio, and a greater emphasis given to growth and technology investments.

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.

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 Venture Capital Trust 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 29 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 March 2018. These showed that the Company has complied with all tests and continues to do so.

The Finance Act 2018 contained a number of measures that affects all VCTs. These include:

a principles-based test for qualifying companies to ensure that investment activities focuses on higher risk opportunities;
an increase in the proportion of the portfolio invested in qualifying unquoted companies from 70 per cent. to 80 per cent. in respect of accounting periods starting on or after 6 April 2019 (so from 1 April 2020 for this Company); and
VCT loan investments to be unsecured and represent no more than normal commercial terms.

Future prospects
As detailed in the Chairman’s statement, the Board is proposing a change to the investment policy which will result in asset-based investments decreasing as a proportion of the portfolio, and a greater emphasis given to growth and technology investments. This in turn is likely to result in a decline in investment income, and thus the Company’s returns are likely to be more geared to capital rather than revenue.

The Board believes that this model will meet the investment objective and has the potential to deliver attractive returns to shareholders in the future. The Manager has a strong pipeline of investment opportunities in which the Company’s cash can be deployed.

Key performance indicators
The Directors believe that the following key performance indicators, which are typical for venture capital trusts and used by the Board in its assessment of the Company, will provide shareholders with sufficient information to assess how effectively the Company is applying its investment policy to meet its objective. The Directors are satisfied that the results shown in the following key performance indicators give a good indication that the Company is achieving its investment objective and policy. These are:

Total shareholder return relative to FTSE All Share Index total return

The graph on page 5 of the full Annual Report and Financial Statements shows the Company’s total shareholder return against the FTSE All-Share Index total return, in both instances with dividends reinvested.

Net asset value per share and total shareholder return

Net asset value increased by 7.4 per cent. (after adding back the 5.0 pence per share in dividends paid) to 76.0 pence per share for the year ended 31 March 2018.

Total shareholder return increased by 2.5 per cent. to 225.8 pence per share for the year ended 31 March 2018.

Dividend distributions

Dividends paid in respect of the year ended 31 March 2018 were 5.0 pence per share (2017: 5.0 pence per share), in line with the Board’s dividend objective. Cumulative dividends paid since inception amount to 149.8 pence per Ordinary share.

Ongoing charges

The ongoing charges ratio for the year ended 31 March 2018 was 2.4 per cent. (2017: 2.4 per cent.). 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 reserve) as a percentage of the average net assets attributable to shareholders. The Directors expect the ongoing charges ratio for the year ahead to be approximately 2.4 per cent. The cap on total annual normal expenses, including the management fee, is 3.0 per cent. of the average net asset value.

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. The Directors do not currently have any intention to utilise gearing for the Company.

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.

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. The Management agreement 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 1.9 per cent. of the net asset value of the Company, and an annual secretarial and administrative fee of £50,000 (2017: £49,000) increased annually by RPI. These fees are payable quarterly in arrears.

In line with common practice, the Manager is also entitled to an arrangement fee, payable by each portfolio company, of approximately 2 per cent. on each new investment made and any applicable monitoring fees.

Management performance incentive
In order to provide the Manager with an incentive to maximise the return to investors, the Company has entered into a management performance incentive arrangement with the Manager. Under the incentive arrangement, the Company will pay an incentive fee to the Manager of an amount equal to 8 per cent. of the excess total return above 5 per cent. per annum, paid out annually in cash as an addition to the management fee. Any shortfall of the target return will be carried forward into subsequent periods and the incentive fee will only be paid once all previous and current target returns have been met.

For the year to 31 March 2018, no incentive fee became due to the Manager (2017: £nil).

No further performance fee will become due until the hurdle rate comprising net asset value, plus dividends from 31 March 2004, has been reached. As of 31 March 2018 the total return from 31 March 2004 amounted to 172.5 pence per share which compared to the hurdle of 192.3 pence per share at that date.

Investment and co-investment
The Company co-invests with other venture capital trusts and funds managed by Albion Capital Group LLP. Allocation of investments is on the basis of an allocation agreement which is based, inter alia, on the ratio of funds available for investment.

Evaluation of the Manager
The Board has evaluated the performance of the Manager based on the returns generated by the Company, the continued compliance under venture capital trust legislation, the long term prospects of current investments, a review of the Management agreement and the services provided therein, and benchmarking the performance of the Manager to other service providers. 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 has appointed Albion Capital Group LLP as the Company’s AIFM as required by the AIFMD.

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 policies in these matters and as such these requirements do not apply.

General Data Protection Regulation
The General Data Protection Regulation (“GDPR”) was effective from 25 May 2018 with the objective of unifying data privacy requirements across the European Union. The Manager, Albion Capital Group LLP, has taken 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

and these are set out in the Directors’ report on pages 29 and 30 of the full Annual Report and Financial Statements.

Risk management
The Board carries out a robust assessment of principal risks in which the Company operates. 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 and performance risk	The risk of investment in poor quality assets, which could reduce the capital and income returns to shareholders, and could negatively impact on the Company’s current and future valuations. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes, are more fragile than larger, long established businesses.	To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its track record over many years of making successful investments in this segment of the market. In addition, the Manager operates a formal and structured investment appraisal and review process, which includes an Investment Committee, comprising investment professionals from the Manager and at least one external investment professional. The Manager also invites and takes account of comments from non-executive Directors of the Company on matters discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on portfolio company boards), including the level of diversification in the portfolio, and the Board receives detailed reports on each investment as part of the Manager’s report at quarterly board meetings.
Valuation risk	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.	As described in note 2 of the Financial Statements, the investments held by the Company are classified at fair value through profit or loss and valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines. These guidelines set out recommendations, intended to represent current best practice on the valuation of venture capital investments. These investments are valued on the basis of forward looking estimates and judgements about the business itself, its market and the environment in which it operates, together with the state of the mergers and acquisitions market, stock market conditions and other factors. In making these judgements the valuation takes into account all known material facts up to the date of approval of the Financial Statements by the Board. The values of all investments are at cost or price of recent investment (reviewed for impairment) or supported by independent third party professional valuations.
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 venture capital trust management, used to operating within the requirements of the venture capital trust legislation. In addition, to provide further formal reassurance, the Board has appointed Philip Hare & Associates LLP as its taxation adviser, who report quarterly to the Board to confirm independently compliance with the venture capital trust legislation, to highlight areas of risk and to inform on changes in legislation. Each investment in a new portfolio company is also pre-cleared with H.M. Revenue & Customs or our professional advisers.
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 from its auditor, lawyers and other professional bodies. The Company is subject to compliance checks through the Manager’s compliance officer. The Manager reports monthly to its Board on any issues arising from compliance or regulation. 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.
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 put 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. The Audit Committee reviews the Internal Audit Reports prepared by the Manager’s internal auditors, PKF Littlejohn LLP. On an annual basis, the Audit Committee Chairman meets with the internal audit partner to provide an opportunity to ask specific detailed questions in order to satisfy itself that the Manager has strong systems and controls in place including those in relation to business continuity. In addition, the Board regularly reviews the performance of its key service providers, particularly the Manager, to ensure they continue to have the necessary expertise and resources to deliver the Company’s investment objective and policies. The Manager and other service providers have also demonstrated to the Board that there is no undue reliance placed upon any one individual.
Economic and political risk	Changes in economic conditions, including, for example, interest rates, rates of inflation, industry conditions, competition, political and diplomatic events and other factors could substantially and adversely affect the Company’s prospects in a number of ways.	The Company invests in a diversified portfolio of companies across a number of industry sectors and in addition often invests a mixture of instruments in portfolio companies. At any given time, the Company has sufficient cash resources to meet its operating requirements, including share buy-backs and follow on investments.
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 and prospective net asset value, also takes into account its dividend yield and prevailing interest rates. As such, the market value of an Ordinary share may vary considerably from its underlying net asset value. The market prices of shares in quoted investment companies can, therefore, be at a discount or premium to the net asset value at different times, depending on supply and demand, market conditions, general investor sentiment and other factors. Accordingly the market price of the Ordinary shares may not fully reflect their underlying net asset value.	The Company operates a share buyback policy, which is designed to limit the discount at which the Ordinary shares trade to around 5 per cent. to net asset value, by providing a purchaser through the Company in absence of market purchasers. From time to time buy-backs cannot be applied, for example when the Company is subject to a close period, or if it were to exhaust any buyback authorities. New Ordinary shares are issued at sufficient premium to net asset value to cover the costs of issue and to avoid asset value dilution to existing investors.

Viability statement
In accordance with the FRC UK Corporate Governance Code published in 2016 and principle 21 of the AIC Code of Corporate Governance, the Directors have assessed the prospects of the Company over three years to 31 March 2021. The Directors believe that three years is a reasonable period in which they can assess the future 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 our nature and size. The three year period is considered the most appropriate given the forecasts that the Board require from the Manager and the estimated timelines for finding, assessing and completing investments.

The Directors have carried out a robust assessment of the 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 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. The Board considered the role of the Manager and the processes that it has in place for dealing with the principal risks.

The Board assessed the ability of the Company to raise finance and deploy capital. 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, share price discount, 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 March 2021.

This Strategic report of the Company for the year ended 31 March 2018 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.

For and on behalf of the Board,

David Watkins
Chairman
29 June 2018

Responsibility statement
In preparing these Financial Statements for the year to 31 March 2018, the Directors of the Company, being David Watkins, John Kerr, Ann Berresford, Ebbe Dinesen, Richard Glover and Jeff Warren, 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 March 2018 for the Company have 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 for the year ended 31 March 2018 as required by DTR 4.1.12R;

- the Chairman's statement and Strategic report include a fair review of the information required by DTR 4.2.7R (indication of important events during the year ended 31 March 2018 and description of principal risks and uncertainties that the Company faces); and

- the Chairman's statement and Strategic report include a fair review of the information required by DTR 4.2.8R (disclosure of related parties transactions and changes therein).

A detailed "Statement of Directors' responsibilities" is contained on page 32 within the full audited Annual Report and Financial Statements.

By Order of the Board

David Watkins
Chairman
29 June 2018

Income statement

		Year ended 31 March 2018						Year ended 31 March 2017
		Revenue		Capital		Total		Revenue		Capital		Total
	Note	£’000		£’000		£’000		£’000		£’000		£’000
Gains on investments	3	-		3,930		3,930		-		6,179		6,179
Investment income	4	2,520		-		2,520		2,381		-		2,381
Investment management fees	5	(310	)	(928	)	(1,238	)	(283	)	(848	)	(1,131	)
Other expenses	6	(332	)	-		(332	)	(296	)	-		(296	)
Profit on ordinary activities before tax		1,878		3,002		4,880		1,802		5,331		7,133
Tax (charge)/credit on ordinary activities	8	(273	)	176		(97	)	(292	)	170		(122	)
Profit and total comprehensive income attributable to shareholders		1,605		3,178		4,783		1,510		5,501		7,011
Basic and diluted return per share (pence)*	10	1.8		3.7		5.5		1.9		6.8		8.7

* excluding 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 March 2018		31 March 2017
	Note	£’000		£’000

Fixed asset investments	11	59,451		55,473

Current assets
Trade and other receivables less than one year	13	136		140
Cash and cash equivalents		6,762		10,496
		6,898		10,636

Total assets		66,349		66,109

Payables: amounts falling due within one year
Trade and other payables less than one year	14	(570	)	(634	)


Total assets less current liabilities		65,779		65,475

Equity attributable to equity holders
Called up share capital	15	962		951
Share premium		25,475		24,630
Capital redemption reserve		7		7
Unrealised capital reserve		13,789		8,623
Realised capital reserve		6,755		8,743
Other distributable reserve		18,791		22,521
Total equity shareholders’ funds		65,779		65,475

Basic and diluted net asset value per share (pence)*	16	76.0		75.4

* 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 authorised for issue on 29 June 2018, and were signed on its behalf by

David Watkins
Chairman

Company number: 03142609

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 April 2017	951	24,630		7	8,623	8,743		22,521		65,475
Return/(loss) and total comprehensive income for the year	-	-		-	3,736	(558	)	1,605		4,783
Transfer of previously unrealised losses on realisations of investments	-	-		-	1,430	(1,430	)	-		-
Purchase of treasury shares	-	-		-	-	-		(1,019	)	(1,019	)
Issue of equity	12	856		-	-	-		-		868
Cost of issue of equity	-	(11	)	-	-	-		-		(11	)
Net dividends paid (note 9)	-	-		-	-	-		(4,317	)	(4,317	)
As at 31 March 2018	962	25,475		7	13,789	6,755		18,791		65,779
As at 1 April 2016	861	18,374		7	1,128	10,737		25,848		56,955
Return/(loss) and total comprehensive income for the year	-	-		-	6,165	(664	)	1,510		7,011
Transfer of previously unrealised losses on realisations of investments	-	-		-	1,330	(1,330	)	-		-
Purchase of treasury shares	-	-		-	-	-		(873	)	(873	)
Issue of equity	90	6,422		-	-	-		-		6,512
Cost of issue of equity	-	(166	)	-	-	-		-		(166	)
Net dividends paid (note 9)	-	-		-	-	-		(3,964	)	(3,964	)
As at 31 March 2017	951	24,630		7	8,623	8,743		22,521		65,475

* These reserves amount to £25,546,000 (2017: £31,264,000) which is considered distributable.

Statement of cash flows

	Year ended 31 March 2018		Year ended 31 March 2017
	£’000		£’000
Cash flow from operating activities
Loan stock income received	2,124		1,941
Deposit interest received	7		69
Dividend income received	34		45
Investment management fees paid	(1,236	)	(1,091	)
Other cash payments	(321	)	(302	)
Corporation tax paid	(147	)	(127	)
Net cash flow from operating activities	461		535

Cash flow from investing activities
Purchase of fixed asset investments	(3,027	)	(4,521	)
Disposal of fixed asset investments	3,410		572
Net cash flow from investing activities	383		(3,949	)

Cash flow from financing activities
Issue of share capital	268		7,809
Cost of issue of equity	(2	)	(2	)
Dividends paid	(3,755	)	(3,424	)
Purchase of own shares (including costs)	(1,089	)	(803	)
Net cash flow from financing activities	(4,578	)	3,580

(Decrease)/increase in cash and cash equivalents	(3,734	)	166
Cash and cash equivalents at start of period	10,496		10,330
Cash and cash equivalents at end of period	6,762		10,496

Cash and cash equivalents comprise
Cash at bank	6,762		10,496
Cash equivalents	-		-
Total cash and cash equivalents	6,762		10,496

Notes to the Financial Statements
1. Basis of preparation
The Financial Statements have been prepared in accordance with the historical cost convention, modified to include the revaluation of investments, in accordance with applicable United Kingdom law and accounting standards, including Financial Reporting Standard 102 (“FRS 102”), and with the 2014 Statement of Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (“SORP”) issued by The Association of Investment Companies (“AIC”).

The preparation of the Financial Statements requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The most critical estimates and judgements relate to the determination of carrying value of investments at fair value through profit and loss (“FVTPL”). The Company values investments by following the International Private Equity and Venture Capital Valuation (“IPEVCV”) Guidelines and further detail on the valuation techniques used are outlined in note 2 below.

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

2. Accounting policies
Fixed asset investments

The Company’s business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment policy, and information about the portfolio is provided internally on that basis to the Board.

In accordance with the requirements of FRS 102, those undertakings in which the Company holds more than 20 per cent. of the equity as part of an investment portfolio are not accounted for using the equity method. In these circumstances the investment is measured at FVTPL.

Upon initial recognition (using trade date accounting) investments, including loan stock, are classified by the Company as FVTPL and are included at their initial fair value, which is cost (excluding expenses incidental to the acquisition which are written off to the income statement).

Subsequently, the investments are valued at ‘fair value’, which is measured as follows:

Investments listed on recognised exchanges are valued at their bid prices at the end of the accounting period or otherwise at fair value based on published price quotations;
Unquoted investments, where there is not an active market, are valued using an appropriate valuation technique in accordance with the IPEVCV Guidelines. Indicators of fair value are derived using established methodologies including earnings multiples, the level of third party offers received, prices of recent investment rounds, net assets and industry valuation benchmarks. Where the Company has an investment in an early stage enterprise, the price of a recent investment round is often the most appropriate approach to determining fair value. In situations where a period of time has elapsed since the date of the most recent transaction, consideration is given to the circumstances of the portfolio company since that date in determining fair value. This includes consideration of whether there is any evidence of deterioration or strong definable evidence of an increase in value. In the absence of these indicators, the investment in question is valued at the amount reported at the previous reporting date. Examples of events or changes that could indicate a diminution include:
- the performance and/or prospects of the underlying business are significantly below the expectations on which the investment was based;
- a significant adverse change either in the portfolio company’s business or in the technological, market, economic, legal or regulatory environment in which the business operates; or
- market conditions have deteriorated, which may be indicated by a fall in the share prices of quoted businesses operating in the same or related sectors.

Investments are recognised as financial assets on legal completion of the investment contract and are de-recognised on legal completion of the sale of an investment.

Dividend income is not recognised as part of the fair value movement of an investment, but is recognised separately as investment income through the other distributable reserve when a share becomes ex-dividend.

Receivables and payables and cash are carried at amortised cost, in accordance with FRS 102. There are no financial liabilities other than 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 expect settlement is established. Where interest is rolled up and/or payable at redemption then it is recognised as income unless there is reasonable doubt as to its receipt.

Bank interest income
Interest income is recognised on an accruals basis using the rate of interest agreed with the bank.

Investment management fees and other expenses
All expenses have been accounted for on an accruals basis. Expenses are charged through the other distributable reserve except the following which are charged through the realised capital reserve:

75 per cent. of management fees are allocated to the capital account to the extent that these relate to an enhancement in the value of the investments and in line with the Board’s expectation that over the long term 75 per cent. of the Company’s investment returns will be in the form of capital gains; and
expenses which are incidental to the purchase or disposal of an investment are charged through the realised capital reserve.

Performance incentive fee
In the event that a performance incentive fee crystallises, the fee will be allocated between other distributable and realised capital reserves based upon the proportion to which the calculation of the fee is attributable to revenue and capital returns.

Taxation
Taxation is applied on a current basis in accordance with FRS 102. Current tax is tax payable (refundable) in respect of the taxable profit (tax loss) for the current period or past reporting periods using the tax rates and laws that have been enacted or substantively enacted at the financial reporting date. Taxation associated with capital expenses is applied in accordance with the SORP.

Deferred tax is provided in full on all timing differences at the reporting date. Timing differences are differences between taxable profits and total comprehensive income as stated in the Financial Statements that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the Financial Statements. As a VCT the Company has an exemption from tax on capital gains. The Company intends to continue meeting the conditions required to obtain approval as a VCT in the foreseeable future. The Company therefore, should have no material deferred tax timing differences arising in respect of the revaluation or disposal of investments and the Company has not provided for any deferred tax.

Reserves
Share premium
This reserve accounts for the difference between the price paid for shares and the nominal value of the shares, less issue costs.

Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is diminished through the repurchase and cancellation of the Company’s own shares.

Unrealised capital reserve
Increases and decreases in the valuation of investments held at the year end against cost are included in this reserve.

Realised capital reserve
The following are disclosed in this reserve:

gains and losses compared to cost on the realisation of investments;
expenses, together with the related taxation effect, charged in accordance with the above policies; and
dividends paid to equity holders 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 equity and debt. The Company invests in smaller companies principally based in the UK.

3. Gains on investments

	Year ended 31 March 2018	Year ended 31 March 2017
	£’000	£’000
Unrealised gains on fixed asset investments	3,736	6,165
Realised gains on fixed asset investments	194	14
Gains on investments	3,930	6,179

4. Investment income

	Year ended 31 March 2018	Year ended 31 March 2017
	£’000	£’000
Income recognised on investments
Loan stock interest and other fixed returns	2,479	2,277
Dividend income	34	45
Bank deposit interest	7	59
	2,520	2,381

Interest income earned on impaired investments at 31 March 2018 amounted to £1,000 (2017: £120,000).

All of the Company’s income is derived from operations in the United Kingdom.

5. Investment management fees

	Year ended 31 March 2018 £’000	Year ended 31 March 2017 £’000
Investment management fee charged to revenue	310	283
Investment management fee charged to capital	928	848
	1,238	1,131

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

During the year, services of a total value of £1,288,000 (2017: £1,180,000), were purchased by the Company from Albion Capital Group LLP; this includes £1,238,000 (2017: £1,131,000) of investment management fee and £50,000 (2017: £49,000) secretarial and administration fee. At the financial year end, the amount due to Albion Capital Group LLP in respect of these services disclosed within accruals and deferred income was £325,000 (2017: £323,000).

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 March 2018, fees of £169,000 attributable to the investments of the Company were received by Albion Capital Group LLP pursuant to these arrangements (2017: £100,000).

Albion Capital Group LLP, its partners and staff hold a total of 366,227 shares in the Company as at 31 March 2018.

6. Other expenses

	Year ended 31 March 2018	Year ended 31 March 2017
	£’000	£’000
Directors’ fees (inc. NIC)	119	100
Auditor’s remuneration for statutory audit services (exc. VAT)	28	26
Secretarial and administration fee	50	49
Other administrative expenses	135	121
	332	296

7. Directors’ fees

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

	Year ended 31 March 2018	Year ended 31 March 2017
	£’000	£’000
Directors’ fees	110	92
National insurance	9	8
	119	100

The Company’s key management personnel are the Directors. Further information regarding Directors’ remuneration can be found in the Directors’ remuneration report on page 39 of the full Annual Report and Financial Statements.

8. Tax charge/(credit) on ordinary activities

	Year ended 31 March 2018						Year ended 31 March 2017
	Revenue £’000		Capital £’000		Total £’000		Revenue £’000		Capital £’000		Total £’000
UK corporation tax in respect of current year	350		(176	)	174		351		(170	)	181
UK corporation tax in respect of prior year	(77	)	-		(77	)	(59	)	-		(59	)
Total	273		(176	)	97		292		(170	)	122

Factors affecting the tax charge:

	Year ended 31 March 2018 £’000		Year ended 31 March 2017 £’000
Return on ordinary activities before taxation	4,880		7,133

Tax on profit at the standard rate of 19% (2017: 20%)	927		1,426

Factors affecting the charge:
Non-taxable gains	(747	)	(1,236	)
Income not taxable	(6	)	(9	)
Consortium relief in respect of prior years	(77	)	(59	)
	97		122

The tax charge for the year shown in the Income statement is lower than the standard rate of corporation tax in the UK of 19 per cent. (2017: 20 per cent.). The differences are explained above.

Consortium relief is recognised in the accounts in the period in which the claim is submitted to HMRC and is shown as tax in respect of prior year.

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)          No deferred tax asset or liability has arisen in the year.

9. Dividends
	Year ended 31 March 2018			Year ended 31 March 2017
	£’000			£’000
Dividend of 2.5p per share paid on 29 July 2016		-		1,987
Dividend of 2.5p per share paid on 30 December 2016		-		1,986
Dividend of 2.5p per share paid on 31 July 2017		2,179		-
Dividend of 2.5p per share paid on 31 January 2018		2,178		-
Unclaimed dividends		(40	)	(9	)
		4,317		3,964

In addition to the dividends summarised above, the Board has declared a first dividend for the year ending 31 March 2019 of 2.5 pence per share to be paid on 31 July 2018 to shareholders on the register on 13 July 2018. The total dividend will be approximately £2,163,000. All dividends are paid from the other distributable reserve.

During the year, unclaimed dividends older than twelve years of £40,000 (2017: £9,000) were returned to the Company in accordance with the terms of the Articles of Association.

10. Basic and diluted return per share

	Year ended 31 March 2018			Year ended 31 March 2017
	Revenue	Capital	Total	Revenue	Capital	Total
The return per share has been based on the following figures:
Return attributable to equity shares (£’000)	1,605	3,178	4,783	1,510	5,501	7,011
Weighted average shares in issue (excluding treasury shares)		87,117,574			80,525,974
Return attributable per equity share (pence)	1.8	3.7	5.5	1.9	6.8	8.7

The weighted average number of shares is calculated excluding treasury shares of 9,730,188 (2017: 8,263,188).

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

11. Fixed asset investments

	31 March 2018 £’000	31 March 2017 £’000
Investments held at fair value through profit or loss Unquoted equity	25,717	21,900
Unquoted loan stock	33,734	33,573
	59,451	55,473

	31 March 2018 £’000		31 March 2017 £’000
Opening valuation	55,473		45,015
Purchases at cost	3,027		4,521
Disposal proceeds	(3,334	)	(572	)
Realised gains	194		14
Movement in loan stock accrued income	355		331
Unrealised gains	3,736		6,165
Closing valuation	59,451		55,473

Movement in loan stock accrued income
Opening accumulated movement in loan stock accrued income	596		265
Movement in loan stock accrued income	355		331
Closing accumulated movement in loan stock accrued income	951		596

Movement in unrealised gains/(losses)
Opening accumulated unrealised gains	8,623		1,128
Transfer of previously unrealised losses to realised reserve on realisations of investments	1,430		1,330
Unrealised gains	3,736		6,165
Closing accumulated unrealised gains	13,789		8,623

Historic cost basis
Opening book cost	46,255		43,622
Purchases at cost	3,027		4,521
Sales at cost*	(4,570	)	(1,888	)
Closing book cost*	44,712		46,255

*Included in the sales at cost is the cost after deducting realised losses of £282,000 for TWCL Limited which is still held at the Balance sheet date.

The Company does not hold any assets as a result of the enforcement of security during the period, and believes that the carrying values for both impaired 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 IPEVCV guidelines as follows:

	31 March 2018	31 March 2017
Valuation methodology	£’000	£’000
Third party valuation - earnings multiple	41,015	41,105
Third party valuation – discounted cash flow	12,500	11,338
Net assets	3,094	2,207
Cost (reviewed for impairment) or price of recent investment	2,842	823
	59,451	55,473

Fair value investments had the following movements between valuation methodologies between 31 March 2017 and 31 March 2018:

Change in valuationmethodology (2017 to 2018)	Value as at 31 March 2018 £’000	Explanatory note
Cost (reviewed for impairment) to net assets	809	More appropriate valuation methodology

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 IPEVCV Guidelines. The Directors believe that, within these parameters, there are no other possible methods of valuation which would be reasonable as at 31 March 2018.

FRS 102 and the SORP requires the Company to disclose the inputs to the valuation methods applied to its investments measured at fair value through profit or loss 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

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 March 2018		31 March 2017
	£’000		£’000
Opening balance	55,473		45,015
Additions	3,027		4,521
Disposal proceeds	(3,334	)	(572	)
Accrued loan stock interest	355		331
Realised gains	194		14
Unrealised gains	3,736		6,165
Closing balance	59,451		55,473

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. 59 per cent. of the portfolio of investments is based on cost, recent price of investment, net assets or is loan stock, and as such the Board considers that the assumptions used for their valuations are the most reasonable. The Directors believe that changes to reasonable possible alternative assumptions for the valuations of the remainder of the portfolio companies could result in an increase in the valuation of investments by £707,000 or a decrease in the valuation of investments by £602,000. For valuations based on third party valuations, the Board considers that the most significant inputs are earnings multiples and market value per room for care homes; which have been adjusted to drive the above sensitivities.

12. Significant interests
The principal activity of the Company is to select and hold a portfolio of investments in unquoted securities. 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 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 March 2018 as described below:

Company	Registered postcode	Profit/(loss) before tax £’000	Net (liabilities) /assets £’000		Results for year ended:	% class and share type	% total voting rights
Active Lives Care Limited	EC2R 7AF	n/a*	(178	)	31 December 2016	22.2% Ordinary	22.2	%
G&K Smart Development VCT Limited	EC2R 7AF	n/a*	282		31 December 2016	50.0% Ordinary	50.0	%
Kew Green VCT (Stansted) Limited	EC2R 7AF	573	5,340		31 August 2017	45.2% Ordinary	45.2	%
Ryefield Court Care Limited	EC2R 7AF	n/a*	(447	)	30 April 2017	23.6% Ordinary	23.6	%
Shinfield Lodge Care Limited	EC2R 7AF	n/a*	730		31 December 2016	35.3% Ordinary	35.3	%
The Stanwell Hotel Limited	EC2R 7AF	n/a*	(7,914	)	31 August 2017	39.2% Ordinary	39.2	%

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

13. Current assets

	31 March 2018	31 March 2017
Trade and other receivables	£’000	£’000
Other receivables	51	96
UK corporation tax receivable	77	35
Prepayments and accrued income	8	9
	136	140

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 March 2018	31 March 2017
	£’000	£’000
Trade payables	12	78
UK Corporation tax payable	174	181
Accruals and deferred income	384	375
	570	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
95,056,427 Ordinary shares of 1 penny each at 31 March 2017	951
1,186,774 Ordinary shares of 1 penny each issued during the year	12
96,243,201 Ordinary shares of 1 penny each at 31 March 2018	962

8,263,188 Ordinary shares of 1 penny each held in treasury at 31 March 2017	(83	)
1,467,000 Ordinary shares purchased during the year to be held in treasury	(15	)
9,730,188 Ordinary shares of 1 penny each held in treasury at 31 March 2018	(97	)

*86,513,013 Ordinary shares of 1 penny each in circulation at 31 March 2018**	865

* Carrying one vote each

The Company purchased 1,467,000 Ordinary shares (2017: 1,308,748) to be held in treasury at a cost of £1,019,000 (2017: £873,000) representing 1.5 per cent. (2017: 1.4 per cent.) of its issued share capital as at 31 March 2018. The shares purchased for treasury were funded from the other distributable reserve.

The Company holds a total of 9,730,188 shares (2017: 8,263,188) in treasury at a nominal value of £97,000, representing 10.1 per cent. of the issued Ordinary share capital as at 31 March 2018.

Under the terms of the Dividend Reinvestment Scheme Circular dated 10 July 2008, the following new Ordinary shares of nominal value 1 penny per share were allotted during the year:

Date of allotment	Number of shares allotted	Aggregate nominal value of shares	Issue price (pence per	Net invested	Opening market price on allotment date
		£’000	share)	£’000	(pence per share)
31 July 2017	402,670	4	72.9	292	71.0
31 January 2018	418,126	4	71.6	298	68.5
	820,796	8		590

During the year the following new Ordinary shares of nominal value 1 penny per share were allotted under the Albion VCTs Prospectus Top Up Offers 2016/2017:

Date of allotment	Number of shares allotted	Aggregate nominal value of shares	Issue price (pence per	Net consideration received	Opening market price on allotment date
		£’000	share)	£’000	(pence per share)
7 April 2017	52,543	1	74.5	38	68.0
7 April 2017	29,427	-	74.9	22	68.0
7 April 2017	284,008	3	75.3	207	68.0
	365,978	4		267

16. Basic and diluted net asset value per share

	31 March 2018	31 March 2017
Basic and diluted net asset value per share (pence)	76.0	75.4

The basic and diluted net asset value per share at the year end are calculated in accordance with the Articles of Association and are based upon total shares in issue (less treasury shares) of 86,513,013 Ordinary shares (2017: 86,793,239).

There are no convertible instruments, derivatives or contingent share agreements in issue.

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 in the Chairman’s statement.

The Company’s financial instruments comprise equity and loan stock investments in unquoted companies, cash balances and short term 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 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 unquoted investments, details of which are shown on page 21 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 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 unquoted investments.

The maximum investment risk as at the balance sheet date is the value of the fixed investment portfolio which is £59,451,000 (2017: £55,473,000). Fixed asset investments form 90 per cent. of the net asset value as at 31 March 2018 (2017: 85 per cent.).

More details regarding the classification of fixed asset investments are shown in note 11.

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. To mitigate the investment price risk for the Company as a whole, the strategy of the Company is to invest in a broad spread of industries with approximately two-thirds of the unquoted investments comprising debt securities, which, owing to the structure of their yield, have a lower level of price volatility than equity. Details of the industries in which investments have been made are contained in the Strategic report.

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 IPEVCV Guidelines.

As required under FRS 102 section 34.29, the Board is required to illustrate by way of a sensitivity analysis the degree of exposure to market risk. The Board considers that the value of the fixed asset investment portfolio is sensitive to a 10 per cent. change based on the current economic climate. The impact of a 10 per cent. change has been selected as this is considered reasonable given the current level of volatility observed both on a historical basis and future expectations.

The sensitivity of a 10 per cent. increase or decrease in the valuation of the fixed asset investments (keeping all other variables constant) would increase or decrease the net asset value and return for the year by £5,945,000 (2017: £5,547,000).

Interest rate risk
It is the Company’s policy to accept a degree of interest rate risk on its financial assets through the effect of interest rate changes. On the basis of the Company’s analysis, it is estimated that a rise of 1 per cent. in all interest rates would have increased total return before tax for the year by approximately £70,000 (2017: £74,000). Furthermore, it is 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 fixed rate assets during the year was approximately 7.6 per cent. (2017: 7.0 per cent.). The weighted average period to maturity for the fixed rate assets is approximately 4.9 years (2017: 4.6 years).

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

	31 March 2018						31 March 2017
	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	-	-	25,717		25,717		-	-	21,900		21,900
Unquoted loan stock	32,279	281	1,174		33,734		32,987	279	307		33,573
Receivables *	-	-	51		51		-	-	96		96
Current liabilities*	-	-	(396	)	(396	)	-	-	(452	)	(452	)
Cash	-	6,762	-		6,762		-	10,496	-		10,496
	32,279	7,043	26,546		65,868		32,987	10,775	21,851		65,613

* The receivables and current liabilities do not reconcile to the Balance sheet as prepayments and tax receivable/(payable) are not included in the above table.

Credit risk
Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Company is exposed to credit risk through its 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. Typically loan stock instruments have a first fixed charge or a fixed and floating charge 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 often sit on the boards of 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 March 2018 was limited to £33,734,000 of unquoted loan stock instruments (2017: £33,573,000), £6,762,000 cash deposits with banks (2017: £10,496,000) and £51,000 of other receivables (2017: £96,000).

As at the balance sheet date, the cash held by the Company is 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 is 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 the unquoted loan stock is described under liquidity risk.

Liquidity risk
Liquid assets are held as cash on current short term deposit accounts. Under the terms of its Articles, the Company has the ability to borrow up to 10 per cent. of its adjusted capital and reserves of the latest published audited Balance sheet, which amounts to £6,362,000 as at 31 March 2018 (2017: £6,330,000).

The Company has no committed borrowing facilities as at 31 March 2018 (2017: £nil) and had cash balances of £6,762,000 (2017: £10,496,000). The main cash outflows are for new investments, buy-back of shares 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 £570,000 for the year to 31 March 2018 (2017: £634,000).

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

	31 March 2018				31 March 2017
Redemption date	Fully performing £’000	Past due £’000	Impaired £’000	Total £’000	Fully performing £’000	Past due £’000	Impaired £’000	Total £’000
Less than one year	4,480	981	4,093	9,554	4,498	426	7,326	12,250
1-2 years	4,785	-	-	4,785	417	-	-	417
2-3 years	4,332	124	184	4,640	4,541	-	-	4,541
3-5 years	2,726	961	-	3,687	5,334	978	416	6,728
5+ years	7,649	3,419	-	11,068	6,719	2,918	-	9,637
Total	23,972	5,485	4,277	33,734	21,509	4,322	7,742	33,573

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

Impaired loan stock has a cost of £6,443,000 (2017: £10,145,000).

In view of the information shown, the Board considers that the Company is subject to low liquidity risk.

Fair values of financial assets and financial liabilities
All the Company’s financial assets and liabilities as at 31 March 2018 are stated at fair value as determined by the Directors, with the exception of receivables and 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 at 31 March 2018.

There are no contingent liabilities or guarantees given by the Company as at 31 March 2018 (31 March 2017: nil).

19. Post balance sheet events
Since 31 March 2018 the Company has had the following post balance sheet events:

Repayment of £4,676,000 in relation to loan stock and share premium from Kew Green VCT (Stansted) Limited;
Investment of £120,000 in uMotif Limited; and
Investment of £65,000 in Healios Limited.

20. Related party transactions
Other than transactions with the Manager as disclosed in note 5, there are no related party transactions or balances 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 March 2018 and 31 March 2017, 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 March 2018, 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 s498 (2) or (3) of the Companies Act 2006.

The Company's Annual General Meeting will be held at The City of London Club, 19 Old Broad Street, London, EC2N 1DS on 13 August 2018 at 11:00am.

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/AAVC, where the Report can be accessed as a PDF document via a link in the 'Financial Reports and Circulars' section.

Dividend history for Albion Venture Capital Trust PLC ‘C Shares’ and Albion Prime VCT PLC (unaudited)

Total shareholder return to 31 March 2018	C shares (pence per share)	Proforma Albion Prime VCT PLC (pence per share)
Total dividends paid during the year ended : 31 March 1998	2.00	1.10
31 March 1999	8.75	6.40
31 March 2000	2.70	1.50
31 March 2001	4.80	4.25
31 March 2002	7.60	2.75
31 March 2003	7.70	2.00
31 March 2004	8.20	1.25
31 March 2005	9.75	2.20
31 March 2006	11.75	4.50
31 March 2007	10.00	4.00
31 March 2008	10.00	5.00
31 March 2009	10.00	4.50
31 March 2010	5.00	2.00
31 March 2011	5.00	3.00
31 March 2012	5.00	3.00
31 March 2013	5.00	3.70
31 March 2014	5.00	4.40
31 March 2015	5.00	4.40
31 March 2016	5.00	4.40
31 March 2017	5.00	4.40
31 March 2018	5.00	4.40
Total dividends paid to 31 March 2018	138.25	73.15

Net asset value as at 31 March 2018	76.00	66.89

Total shareholder return to 31 March 2018	214.25	140.04

Notes
• The Ordinary shares and the C shares merged on an equal basis.

• The proforma shareholder returns presented above for Albion Prime VCT PLC are based on the dividends paid to shareholders before the merger and the pro-rata net asset value per share and pro-rata dividends per share paid to 31 March 2018. This proforma is based upon 0.8801 Albion Venture Capital Trust PLC shares for every Albion Prime VCT PLC share which merged with Albion Venture Capital Trust PLC on 25 September 2012.

• Dividends paid before 5 April 1999 were paid to qualifying shareholders inclusive of the associated tax credit. The dividends for the year to 31 March 1999 were maximised in order to take advantage of this tax credit.

• The above table excludes the tax benefits investors received upon subscription for shares in the Company.

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Albion Venture Capital Trust (AAVC)

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