Albion Venture Capital Trust PLC
Annual Report 2015

Plain-text annual report

Albion Venture Capital Trust PLC Annual Report and Financial Statements for the year ended 31 March 2015 Albion Venture Capital Trust PLC A member of the Association of Investment Companies This report is printed on Amadeus offset a totally recycled paper produced using 100% recycled waste at a mill that has been awarded the ISO 14001 certifi cate for environmental management. The pulp is bleached using a totally chlorine free (TCF) process. 236915 Albion Venture Cap cov.indd 1 25/06/2015 13:20 236915 Albion Venture Cap pp01-pp05 25/06/2015 13:42 Page 1 Contents Page 2 Company information 3 Investment objective and policy 3 Background to the Company 3 Financial calendar 4 Financial highlights 6 Chairman’s statement 8 Strategic report 14 The Board of Directors 15 The Manager 16 Portfolio of investments 18 Portfolio companies 20 Directors’ report 25 Statement of corporate governance 30 Directors’ remuneration report 32 Independent Auditor’s report 35 Income statement 36 Balance sheet 37 Reconciliation of movements in shareholders’ funds 38 Cash flow statement 39 Notes to the Financial Statements 52 Notice of Annual General Meeting 56 Dividend history for Albion Prime VCT PLC Albion Venture Capital Trust PLC 1 236915 Albion Venture Cap pp01-pp05 25/06/2015 13:42 Page 2 Company information Company number 03142609 Directors D J Watkins MBA (Harvard), Chairman (US citizen) J M B L Kerr ACMA J Warren ACCA E Dinesen R (Danish) FSR Manager, company secretary, Albion Ventures LLP AIFM and registered office 1 King’s Arms Yard London, EC2R 7AF Registrar Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol, BS99 6ZZ Auditor BDO LLP 55 Baker Street London, W1U 7EU Taxation adviser Robertson Hare LLP 1st Floor 4 Staple Inn London, WC1V 7QH Legal adviser Bird & Bird LLP 15 Fetter Lane London, EC4A 1JP Albion Venture Capital Trust PLC is a member of the Association of Investment Companies (www.theaic.co.uk). Shareholder information For help relating to dividend payments, shareholdings and share certificates please contact Computershare Investor Services PLC: Tel: 0870 873 5849 (UK National Rate call, lines are open 8.30am – 5.30pm; Mon – Fri, calls may be recorded) Website: www.investorcentre.co.uk Shareholders can access holdings and valuation information regarding any of their shares held with Computershare by registering on Computershare’s website. Financial adviser information For enquiries relating to the performance of the Company, and information for Tel: 020 7601 1850 (lines are open 9.00am – 5.30pm; Mon – Fri, calls may financial advisers, please contact Albion Ventures LLP: Email: info@albion-ventures.co.uk Website: www.albion-ventures.co.uk be recorded) Please note that these contacts are unable to provide financial or taxation advice. 2 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp01-pp05 25/06/2015 13:42 Page 3 Investment objective and policy The investment strategy of Albion Venture Capital Trust PLC (the “Company”) is 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-backed businesses. The Company’s investment portfolio will thus be structured to provide a balance between income and capital growth for the longer term. This is achieved as follows: ● qualifying unquoted investments are predominantly in specially-formed companies which provide a high level of asset backing for the capital value of the investment; ● 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 Ventures LLP typically own 50 per cent. of the equity of the portfolio company; ● other than the loan stock issued to funds managed or advised by Albion Ventures LLP, portfolio companies do not normally have external borrowings. The Company offers tax-paying investors substantial tax benefits at the time of investment, on payment of dividends and on the ultimate disposal of the investment. 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 £14.5 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. Each Prime shareholder received 0.8801 shares in the Company for each Prime share that they held at the date of the Merger. Financial calendar Record date for first dividend 10 July 2015 Annual General Meeting 11.30 am on 31 July 2015 Payment of first dividend 31 July 2015 Announcement of half-yearly results for the six months ended 30 September 2015 November 2015 Payment of second dividend (subject to Board approval) 31 December 2015 Albion Venture Capital Trust PLC 3 236915 Albion Venture Cap pp01-pp05 25/06/2015 13:42 Page 4 Financial highlights the year ended 31 March 2015 the year ended 31 March 2015 5.3p Basic and diluted total return per share for 5.0p Total tax-free dividend per share paid during 71.6p Net asset value per share as at 31 March 2015 206.4p Net asset value plus dividends since launch to 7.6% Tax free yield on share price (dividend per 6.3% Annualised return since launch (without tax annum/share price as at 31 March 2015) 31 March 2015 relief) Ordinary share net asset value total return relative to the FTSE All-Share Index total return (both with dividends reinvested) 400 350 300 250 200 150 100 ) e r a h s r e p e c n e p ( n r u t e R Mar 96 Mar 97 Mar 98 Mar 99 Mar 00 Mar 01 Mar 02 Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 FTSE All-Share Index total return Ordinary share NAV total return Source: Albion Ventures LLP Methodology: The net asset value return to the shareholder, including original amount invested (rebased to 100) from launch, assuming that dividends were re-invested at net asset value of the Company at the time the shares were quoted ex-dividend. Transaction costs are not taken into account. 4 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp01-pp05 25/06/2015 13:42 Page 5 Financial highlights (continued) 31 March 2015 31 March 2014 (pence per share) (pence per share) Dividends paid 5.00 5.00 Revenue return 2.07 1.70 Capital return 3.26 0.30 Net asset value 71.62 71.30 Total shareholder return to 31 March 2015 Ordinary shares C shares(i) Total dividends paid during the year ended: 31 March 1997 2.00 – 31 March 1998 5.20 2.00 31 March 1999 11.05 8.75 31 March 2000 3.00 2.70 31 March 2001 8.55 4.80 31 March 2002 7.60 7.60 31 March 2003 7.70 7.70 31 March 2004 8.20 8.20 31 March 2005 9.75 9.75 31 March 2006 11.75 11.75 31 March 2007 10.00 10.00 31 March 2008 10.00 10.00 31 March 2009 10.00 10.00 31 March 2010 5.00 5.00 31 March 2011 5.00 5.00 31 March 2012 5.00 5.00 31 March 2013 5.00 5.00 31 March 2014 5.00 5.00 31 March 2015 5.00 5.00 –––––––––––– –––––––––––– Total dividends paid to 31 March 2015 134.80 123.25 Net asset value as at 31 March 2015 71.62 71.62 –––––––––––– –––––––––––– Total shareholder return to 31 March 2015 206.42 194.87 –––––––––––– –––––––––––– (i) The C shares merged with the Ordinary shares on an equal basis in 2001. The financial summary above is for the Company, Albion Venture Capital Trust PLC only. Details of the financial performance of Albion Prime VCT PLC, which has been merged into the Company, can be found on page 56. In addition to the dividends summarised above, the Board has declared a first dividend for the year ending 31 March 2016 of 2.50 pence per share to be paid on 31 July 2015 to shareholders on the register as at 10 July 2015. 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. ● All dividends paid by the Company are paid free of income tax to qualifying shareholders. It is an H.M. Revenue & Customs requirement that dividend vouchers indicate the tax element should dividends have been subject to income tax. Investors should ignore this figure on their dividend voucher and need not disclose any income they receive from a VCT on their tax return. ● 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 found in the Investment Companies – VCTs section of the Financial Times on a daily basis. Investors are reminded that it is common for shares in VCTs to trade at a discount to their net asset value. . Albion Venture Capital Trust PLC 5 236915 Albion Venture Cap pp06-pp17 25/06/2015 13:44 Page 6 Chairman’s statement Introduction The results for the year to 31 March 2015 show a total return of 5.3 pence per share, against 2.0 pence for the previous year and net assets of 71.6 pence per share compared to 71.3 pence per share at 31 March 2014, following the payment of total tax-free dividends of 5 pence per share. The Company raised approximately £2.9 million during the year under the Albion VCTs Top Up Offers 2013/2014 and approximately £1.6 million under the Albion VCTs Prospectus Top Up Offers 2014/2015, with a subsequent £3.6 million after the year end. It is encouraging that the Company’s total return is now more than covering its dividend of 5 pence. This has been partly through an increase in the income generated by the investment portfolio, which has risen 15 per cent. from the previous year. It also shows the benefits from the merger with Albion Prime VCT, which resulted in cost savings of around £120,000 per annum. Perhaps most important though, has been an improvement of the hotel portfolio after a number of years of decline, combined with continued growth in investment areas such as education and renewable energy and a strong showing from our healthcare investments. Investment performance and progress In general, we have been continuing the task of repositioning the portfolio towards greater emphasis on the healthcare and renewable energy sectors, together with a reduced reliance on sectors that are exposed to the consumer and business cycle. Renewable energy currently accounts for just over 20 per cent. of the portfolio, while healthcare accounted for 13 per cent. of the portfolio. Once the three care homes which are currently under construction are completed, however, healthcare will account for close to 30 per cent. of the portfolio. Hotels, meanwhile, have declined to 27 per cent. of the portfolio. The hotel sector has shown some improvement during the year. In particular a strong revival in passenger numbers at Stansted airport has led to increased profitability at Kew Green. The Crown Hotel in Harrogate also had a decent year. Elsewhere in the consumer-facing sector, we saw a successful exit from the Tower Bridge Health Club in November where we received proceeds which, when added to interest income, gave a 2.6x return on our investment. We also saw good growth at our Kensington Club offset by a continued competitive environment at Weybridge. In the Healthcare sector, we sold the successful Oakland Care Centre during the year with total proceeds, including income, amounting to twice cost, while we sold our Taunton Psychiatric hospital (Orchard Portman Group) for 1.6x cost. Meanwhile, we are developing three new care homes in Oxford, Hillingdon and a site just south of Reading. 6 Albion Venture Capital Trust PLC As a result of a strong performance in our renewable energy portfolio, with an uplift in the year of over £1 million, this sector has now reached its target of 20 per cent. of the investment portfolio, though further revaluations may push it slightly above this level. We now have three hydro-electric plants in operation, which between them supply sufficient power for 3,000 homes, in addition to four brownfield wind turbines in Wales, a biogas plant and roof mounted solar panels on domestic buildings. Radnor House School continues to grow with over 400 pupils in place for September 2015. During the year the school also acquired Combe Bank School near Sevenoaks in Kent, which is a Grade I listed house set in over 30 acres of freehold land and which currently has 210 pupils. Education will continue to be an important part of our investment activities. Risks and uncertainties Despite its current growth, the outlook for the UK economy continues to be the key risk affecting your Company. Importantly, however, your Company remains conservatively financed with no bank borrowings. The Company’s policy remains that its portfolio companies should not normally have external borrowings and for the Company to have a first charge over portfolio companies’ assets. The Board and the Manager see this as an important factor in the control of investment risk. However, on an exceptional basis, certain portfolio companies may take on external borrowings, where the Board considers this will offer a significant benefit to the Company. A detailed analysis of the other risks and uncertainties facing the business is set out on pages 12 and 13 of the Strategic report. 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 Company will limit the sum available for share buy-backs for the six month period to 30 September 2015 to £750,000. This compares to a total value bought in for the previous six months to 31 March 2015 of £394,000. 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. 236915 Albion Venture Cap pp06-pp17 25/06/2015 13:44 Page 7 Chairman’s statement (continued) Results and dividends As at 31 March 2015, the net asset value was £46.9 million or 71.6 pence per share, compared to £42.7 million or 71.3 pence per share as at 31 March 2014, after the payment of total tax-free dividends of 5 pence per share. The results comprised 2.1 pence per share revenue return (2014: 1.7 pence per share) and a 3.3 pence per share capital return after taking into account capitalised expenses (2014: 0.3 pence per share). The revenue return before taxation was £1.5 million compared to £1.1 million for the year to 31 March 2014. The Company will pay a first dividend for the year ending 31 March 2016, of 2.5 pence per share on 31 July 2015 to shareholders on the register on 10 July 2015, which is in line with the Company’s current objective of paying a dividend of 5 pence per share annually. Outlook and prospects Trading in a number of our sectors has been promising and we are optimistic that the brighter outlook for the UK economy, combined with the more balanced nature of the current portfolio, should benefit the Company moving forward. David Watkins Chairman 25 June 2015 Albion Venture Capital Trust PLC 7 236915 Albion Venture Cap pp06-pp17 25/06/2015 13:44 Page 8 Strategic report Investment objective and policy The Company’s investment policy is to provide investors with the opportunity to participate in a balanced portfolio of asset- backed businesses. The Company’s investment portfolio will thus be structured to provide a balance between income and capital growth for the longer term. This is achieved as follows: ● qualifying unquoted investments are predominantly in specially-formed companies which provide a high level of asset backing for the capital value of the investment; ● 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 normally represents the majority of the finance provided and is secured on the assets of the portfolio company. Funds managed or advised by Albion Ventures 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 Ventures LLP, portfolio companies do not normally have external borrowings. Current portfolio sector allocation The following pie chart shows the split of the portfolio valuation by industrial or commercial sector as at 31 March 2015. Details of the principal investments made by the Company are shown in the Portfolio of investments on pages 16 and 17. Split of portfolio by sector Education 6% (5%) Cash 19% (17%) Renewable energy 22% (14%) Healthcare 13% (18%) Health and fitness clubs 6% (8%) Pubs 6% (8%) Residential property development 1% (1%) Hotels 27% (29%) Comparatives for 31 March 2014 are shown in brackets Source: Albion Ventures LLP Direction of portfolio The sector analysis of the Company’s investment portfolio shows that renewable energy now accounts for 22 per cent. of the portfolio compared to 14 per cent. at the end of the previous financial year, in line with the Board’s target exposure for the sector. Healthcare has 13 per cent. of the portfolio compared to 18 per cent. at the end of the previous financial year, following two disposals, but, once current care home projects are complete, it is expected to rise to around 30 per cent. 8 Albion Venture Capital Trust PLC Results and dividend £’000 Net revenue return for the year ended 31 March 2015 1,314 Realised and unrealised capital gain for the year 2,068 Dividend of 2.50 pence per share paid on 31 July 2014 (1,576) Dividend of 2.50 pence per share paid on 31 December 2014 (1,590) Unclaimed dividends returned to the Company 41 –––––––––––– Transferred to reserves 257 –––––––––––– Net assets as at 31 March 2015 46,928 –––––––––––– Net asset value per share as at 31 March 2015 71.62p –––––––––––– The Company paid dividends totalling 5.00 pence per share during the year ended 31 March 2015 (2014: 5.00 pence per share). The dividend objective of the Board is to provide Shareholders with a strong, predictable dividend flow, with a dividend target of 5.00 pence per share per year. As noted in the Chairman’s statement, the Board has declared a first dividend of 2.50 pence per share for the year ending 31 March 2016. This dividend will be paid on 31 July 2015 to shareholders on the register as at 10 July 2015. As shown in the Income statement on page 35 of the Financial Statements, the Company’s investment income has increased to £1,989,000 (2014: £1,718,000) and the total revenue return to equity holders also increased to £1,314,000 (2014: £999,000), principally driven by the Company’s successful renewable energy development programme. Revenue return has increased due to increased loan stock interest and the decrease in other expenses, to 2.07 pence per share (2014: 1.70 pence per share). The capital gain on investments for the year was £2,569,000 (2014: £626,000), offset by management fees charged to capital, net of the related taxation impact, resulting in a capital return of 3.26 pence per share (2014: 0.30 pence per share). The total return was 5.33 pence per share (2014: 2.00 pence per share). The Balance sheet on page 36 shows that the net asset value has increased over the last year to 71.62 pence per share (2014: 71.30 pence per share), primarily reflecting the revenue return of 2.07 pence per share and the capital return of 3.26 pence per share, offset by the payment of the 5.00 pence per share dividend during the year. 236915 Albion Venture Cap pp06-pp17 25/06/2015 13:44 Page 9 Strategic report (continued) The cash flow for the Company has been a net inflow of £1,497,000 for the year (2014: outflow £4,391,000), reflecting cash inflows from operations, disposal proceeds and the issue of Ordinary shares under the Albion VCTs Top Up Offers, offset by dividends paid, new investments in the year and the buyback of shares. During the year, unclaimed dividends older than twelve years of £41,000 (2014: £27,000) were returned to the Company in accordance with the terms of the Articles of Association. (including disposals) of £1,031,000 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 on page 6. The healthcare sector performed particularly well again this year with an increase in valuations (2014: £649,000). The renewable energy sector was also strong with an increase in valuations of £1,047,000. The hotel sector, after a number of years of declining valuations, saw an increase of £266,000; and there was an increase in the valuation of Radnor House School of £165,000; and we disposed of one of our health and fitness clubs, at Tower Bridge, with total realised gains of £526,000. The Company continues with its objective to invest in asset-based unquoted companies throughout the United Kingdom, with a view to providing both capital growth and a reliable dividend income to shareholders over the longer term. The Directors do not foresee any major changes in the activity undertaken by the Company in the current year. Future prospects The Company’s performance record reflects the resilience of the strategy outlined above and has enabled the Company to maintain a predictable stream of dividend payments to shareholders. The Board believes that this model will continue to meet the investment objective and has the potential to deliver attractive returns to shareholders in the future. Further details on the Company’s outlook and prospects can be found in the Chairman’s statement on page 7. Key performance indicators The Directors believe that the following key performance indicators, which are typical for venture capital trusts and used in its own 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: 1. Net asset value total return relative to FTSE All Share Index total return The graph on page 4 shows the Company’s net asset value total return against the FTSE All-Share Index total return, in both instances with dividends reinvested. 2. Net asset value per share and cumulative net asset value total shareholder return Net asset value increased by 7.5 per cent. (after adding back the 5.00 pence per share in dividends paid) to 71.62 pence per share for the year ended 31 March 2015. Details of significant events which have occurred since the end of the financial year are listed in note 21. Details of transactions with the Manager are shown in note 5. Cumulative NAV total shareholder return increased by 2.6 per cent. to 206.42 pence per share for the year ended 31 March 2015. Net asset value per share and cumulative NAV total shareholder return 250 200 150 100 95.0 99.9 e r a h s r e p r e c n e P 191.3 183.7 171.9 159.2 148.5 136.8 127.8 118.4 110.2 205.0 204.7 190.1 191.4 195.3 197.9 199.0 201.1 206.4 50 0 95.0 94.9 99.2 99.6 100.5 102.0 106.2 108.9 113.1 115.9 116.5 120.2 109.9 85.3 81.6 80.5 78.1 74.2 71.3 71.6 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 NAV Total shareholder return * Total shareholder return is net asset value plus cumulative dividends paid since launch to date. Albion Venture Capital Trust PLC 9 236915 Albion Venture Cap pp06-pp17 25/06/2015 13:44 Page 10 Strategic report (continued) 3. Dividend distributions e r a h s r e p e c n e P 140 120 100 80 60 40 20 0 Dividends paid 109.8 104.8 94.8 84.8 134.8 129.8 124.8 119.8 114.8 74.8 67.8 58.8 50.3 42.3 34.8 27.3 11.0 6 8 9 9 1 5.0 5 7 9 9 1 18.8 7.8 9 9 9 1 8.6 0 0 0 2 7.5 1 0 0 2 7.5 2 0 0 2 8 3 0 0 2 8.5 4 0 0 2 9 5 0 0 2 7 6 0 0 2 10 7 0 0 2 10 8 0 0 2 10 9 0 0 2 5 0 1 0 2 5 1 1 0 2 5 2 1 0 2 5 3 1 0 2 5 4 1 0 2 5 5 1 0 2 Dividends paid in the period Cumulative dividend Dividends paid in respect of the year ended 31 March 2015 were 5.00 pence per share (2014: 5.00 pence per share), in line with the Board’s dividend objective. Cumulative dividends paid since inception amount to 134.80 pence per Ordinary share and 123.25 pence per historic C share. As part of the EU rules relating to State Aid, new rules are being introduced under the Finance Act 2015, which would include the prohibition, under certain circumstances, of investment in companies which have been trading for more than 12 years. 4. Ongoing charges The ongoing charges ratio for the year to 31 March 2015 was 2.5 per cent. (2014: 2.5 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 2.5 per cent. 5. Maintenance of VCT qualifying status The Company continues to comply with H.M. Revenue & Customs (“HMRC”) rules in order to maintain its status under Venture Capital Trust legislation as highlighted below. 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 21. Given the profile of the kind of company that the Company invests in, the Directors do not believe that updates to the Finance Act would create a material change in the way the Company is currently run. However, until the final legislation has been published, this remains a risk for the Company. The relevant tests to measure compliance have been carried out and independently reviewed for the year ended 31 March 2015. These showed that the Company has complied with all tests and continues to do so. 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. On an exceptional basis, certain portfolio companies may take on external borrowings, where the Board considers this will offer a significant benefit to the Company. Operational arrangements The Company has delegated the investment management of the portfolio to Albion Ventures LLP, which is authorised and regulated by the Financial Conduct Authority. Albion Ventures LLP also provides company secretarial and other accounting 10 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp06-pp17 25/06/2015 13:44 Page 11 Strategic report (continued) and administrative support to the Company. Further details regarding the terms of engagement of the Manager and the way the Board has evaluated the performance of the Manager are shown below. 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 £47,658 (2014: £46,539) increased annually by RPI. These fees are payable quarterly in arrears. The cap on total annual normal expenses, including the management fee, have been reduced from 3.5 per cent to 3.0 per cent. of the net asset value. The total annual normal expenses for the year to 31 March 2015 was 2.5 per cent. (2014: 2.5 per cent.). 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 70 per cent. investment requirement for venture capital trust status, the long term prospects of current investments, a review of the Management agreement and 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. the services provided Alternative Investment Fund Managers Directive (“AIFMD”) The Board has considered the impact on your Company of the AIFMD, an EU Directive that came into force in July 2013 to regulate the Managers of Alternative Investment Funds. The Board appointed Albion Ventures LLP as the Company’s AIFM as required by the AIFMD. Albion Ventures LLP’s registration as an AIFM was approved by the Financial Conduct Authority on 3 June 2014. 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 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 2015, no incentive fee became due to the Manager (2014: £nil). Social and community issues, employees and human rights The Board recognises the requirement under section 414C of 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. Further policies The Company has adopted a number of further policies relating to: ● Environment ● Global greenhouse gas emissions ● Anti-bribery ● Diversity and these are set out in the Directors’ report on page 21. 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 2015 the total return from 31 March 2004 amounted to 153.1 pence per share which compared to the hurdle of 193.4 pence per share at that date. Investment and co-investment The Company co-invests with other Albion Ventures LLP venture capital trusts and funds. Allocation of investments is on the basis of an allocation agreement which is based, inter alia, on the ratio of funds available for investment. Albion Venture Capital Trust PLC 11 236915 Albion Venture Cap pp06-pp17 25/06/2015 13:44 Page 12 Strategic report (continued) Risk management The Board carries out a regular review of the risk environment 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 Economic 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. To reduce this risk, in addition to investing equity in portfolio companies, the Company often invests in secured loan stock and has a policy of not normally permitting any external bank borrowings within portfolio companies. Additionally, the Manager has been rebalancing the sector exposure of the portfolio with a view to reducing reliance on consumer led sectors. Investment risk This is the risk of investment in poor quality assets which reduces the capital and income returns to shareholders, and negatively impacts on the Company’s reputation. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes, are more fragile than larger, long established businesses. 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. VCT approval risk The Company’s current approval as a venture capital trust allows investors to take advantage of tax reliefs on initial investment and ongoing tax free capital gains and dividend income. Failure to meet the qualifying requirements could result in investors losing the tax relief on initial investment and loss of tax relief on any tax-free income or capital gains received. In addition, failure to meet the qualifying requirements could result in a loss of listing of the shares. 12 Albion Venture Capital Trust PLC includes an To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its strong track record for investing in this segment of the market. In addition, the Manager operates a formal and structured investment process, which Investment Committee, comprising investment professionals from the Manager and at least one external investment professional. The Manager also from non-executive Directors of the Company on investments discussed at Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on portfolio company boards) and the Board receives detailed reports on each investment as part of the Manager’s report at quarterly board meetings. takes account of comments invites and the As described in note 2 of the Financial Statements, the unquoted equity investments, convertible loan stock and debt issued at a discount 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. 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. All other unquoted loan stock is measured at amortised cost. The values of all investments are at cost (reviewed for impairment) or underpinned by independent third party professional valuations. 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 Robertson Hare LLP (previously PricewaterhouseCoopers LLP) as its taxation adviser. Robertson Hare LLP reports quarterly to the Board to independently confirm 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. 236915 Albion Venture Cap pp06-pp17 25/06/2015 13:44 Page 13 Strategic report (continued) Risk Possible consequence Risk management 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. Internal control risk Failures in key controls, within the Board or within the Manager’s business, could put assets of the Company at risk or result inaccurate reduced or information being passed to the Board or to shareholders. in Board members and the Manager have experience of operating at senior levels within or advising quoted businesses. 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 via 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 Manager Board meetings, and also as part of the review work undertaken by the Manager’s Compliance Officer. The report on controls is evaluated by Internal Audit during its reports. The Audit Committee meets with the Manager’s Internal Auditor, PKF Littlejohn LLP, when required, receiving a report regarding the last formal internal audit performed on the Manager, and providing the opportunity for the Audit Committee to ask specific and detailed questions. John Kerr, as Chairman of the Audit Committee, met with the internal audit Partner of PKF Littlejohn LLP in January 2015 to discuss the most recent Internal Audit Report on the Manager. The Manager has a comprehensive business continuity plan in place in the event that operational continuity is threatened. Further details regarding the Board’s management and review of the Company’s internal controls through the implementation of the Turnbull guidance are detailed on page 28. Measures are in place to mitigate information risk in order to ensure the integrity, availability and confidentiality of information used within the business. Reliance upon third parties risk The Company is reliant upon the services of Albion Ventures LLP for the provision of investment management and administrative functions. There are provisions within the management agreement for the change of Manager under certain circumstances (for further detail, see the Management agreement paragraph on page 11). In addition, the Manager has demonstrated to the Board that there is no undue reliance placed upon any one individual within Albion Ventures LLP. Financial risk By its nature, as a venture capital trust, the Company is exposed to investment risk (which comprises investment price risk and cash flow interest rate risk), credit risk and liquidity risk. The Company’s policies for managing these risks and its financial instruments are outlined in full in note 19 to the Financial Statements. All of the Company’s income and expenditure is denominated in sterling and hence the Company has no foreign currency risk. The Company is financed through equity and does not have any borrowings. The Company does not use derivative financial instruments for speculative purposes. Reputational risk Arises from broader performance and ethical issues, including investment in that are businesses and sectors inconsistent with the values of Board and the VCT or, the Boards of portfolio companies take actions which similarly are inconsistent with the values of the VCT. The Board clearly articulates to the Investment Manager its broader aims and standards including those sectors which are consistent with the values of the Board. The Board regularly reviews the performance and investment strategy of the Investment Manager. The Investment Manager periodically attends Board meetings of the VCT’s portfolio companies and across the portfolio receives periodic management information and is alert to potential threats to reputation. This Strategic report of the Company for the year ended 31 March 2015 has been prepared in accordance with the requirements of section 414A of the Companies Act 2006 (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, David Watkins Chairman 25 June 2015 Albion Venture Capital Trust PLC 13 236915 Albion Venture Cap pp06-pp17 25/06/2015 13:44 Page 14 The Board of Directors The following are the Directors of the Company, all of whom operate in a non-executive capacity: David Watkins MBA (Harvard), Chairman (appointed 9 February 1996) David Watkins worked for Goldman Sachs from 1972 until 1991 where he was head of Euromarkets Syndication and Head of European Real Estate. He subsequently joined Mountleigh Group PLC where he worked as a director on the restructuring of the business prior to the Group being placed into administration. After a period operating his own corporate finance business, he joined Baring Securities in 1994 as Head of Equity Capital Markets – London, before leaving in mid-1995 when the company went into administration to become Chief Financial Officer and one of the principal shareholders of The Distinguished Programs Group LLC, an insurance distribution and underwriting group. At the end of 2012 he sold his shares in The Distinguished Programs Group LLC, but remains as Vice Chairman. From 1986 to 1990, he was a member of the Council of the London Stock Exchange. John Kerr ACMA (appointed 9 February 1996) John Kerr has worked as a venture capitalist and also in manufacturing and service industries. He held a number of finance and general management posts in the UK and USA, before joining SUMIT Equity Ventures, an independent Midlands based venture capital company, where he was managing director from 1985 to 1992. He then became chief executive of Price & Pierce Limited, which acted as the UK agent for overseas producers of forestry products, before leaving in 1997 to become finance director of Ambion Brick, a building materials company bought out from Ibstock PLC. After retiring in 2002, he now works as a consultant. He is an external member of the Manager's investment committee. Jeff Warren ACCA (appointed 2 October 2007) Jeff Warren has 30 years' financial management experience, including high level corporate governance and regulatory environment experience. In 1992 he resigned as Finance Director of Mountleigh Group PLC, which was subsequently placed into administration, and joined Bristol & West Building Society as CFO. Following the acquisition of Bristol & West by Bank of Ireland, he continued as Finance Director until he was promoted to CEO of Bristol & West PLC in 1999, and subsequently also took responsibility for the Bank of Ireland UK Branch network. In 2003 he moved to take on a role at Group level in Dublin, as Group Chief Development Officer, reporting to the Bank of Ireland CEO. In 2004 he returned to the UK and has since held a number of non-executive roles, including 4 months as a non-executive Director of Courts Plc until that company was placed into administration in December 2004. Ebbe Dinesen R (Danish) FSR (appointed 26 September 2012) Ebbe Dinesen qualified as a chartered accountant in Denmark before working in senior positions in the Danish industry. In 1985 he came to the United Kingdom and became CEO of Carlsberg UK in 1987. He later became CEO of Carlsberg- Tetley PLC (now Carlsberg UK) and became executive chairman of that company in 2001. He stepped down in 2006. He was chairman of the British Brewers from 2002 to 2006. Ebbe Dinesen was Danish vice-consul for The Midlands from 1987 to 2006. In 2000 he was knighted by the Queen of Denmark. All Directors are members of the Audit Committee and John Kerr is Chairman. All Directors are members of the Nomination Committee and David Watkins is Chairman. All Directors are members of the Remuneration Committee and Jeff Warren is Chairman. 14 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp06-pp17 25/06/2015 13:44 Page 15 The Manager Albion Ventures LLP is authorised and regulated by the Financial Conduct Authority and is the Manager and AIFM of the Company alongside a further five venture capital trusts and currently has total funds under management of approximately £270 million. The following are specifically responsible for the management and administration of the VCTs managed by Albion Ventures LLP: Patrick Reeve, MA, ACA, qualified as a chartered accountant. He joined Close Brothers Group in 1989, after spending three years at Cazenove & Co., working in both the development capital and corporate finance divisions before founding the venture capital division in 1996. He led the buy- out of this business from Close Brothers in 2009, and re-named it Albion Ventures LLP. He is the managing partner of Albion Ventures LLP, is a director of three of the Albion Venture Capital Trusts, which are managed by Albion Ventures, and is chief executive officer of Albion Community Power PLC. He read modern languages at Oxford University. He is a Member of Council of the BVCA and is a member of the Audit Committee of the University College London. He is also a director of UCL Business PLC, the university technology transfer arm. Will Fraser-Allen, BA (Hons), FCA, qualified as a chartered accountant with Cooper Lancaster Brewers in 1996 and then joined their corporate finance team providing corporate finance advice to small and medium sized businesses. He joined Albion Ventures in 2001 since when he has focused on leisure and healthcare investing. Will became deputy managing partner of Albion Ventures in 2009. Will has a BA in History from Southampton University. Adam Chirkowski, MA, having graduated in Industrial Economics followed by a Masters in Corporate Strategy, spent five years at N M Rothschild & Sons specialising in mergers and acquisitions; principally in the natural resources and then healthcare sectors, before joining Albion Ventures in 2013, where he currently concentrates on renewable energy projects and healthcare. Dr. Andrew Elder, MA, FRCS, initially practised as a surgeon for six years, specialising in neurosurgery, before joining the Boston Consulting Group (BCG) as a consultant in 2001. Whilst at BCG he specialised in healthcare strategy, gaining experience with many large, global clients across the full spectrum biotechnology, pharmaceuticals, service and care providers, software and telecommunications. He joined Albion Ventures in 2005 and became a partner in 2009. He has an MA plus Bachelors of Medicine and Surgery from Cambridge University and is a Fellow of the Royal College of Surgeons (England). Emil Gigov, BA (Hons), FCA, graduated from the European Business School, London, with a BA (Hons) Degree in European Business Administration in 1994. He then joined KPMG in their financial services division and qualified as a chartered accountant in 1997. Following this he transferred to KPMG Corporate Finance where he specialised in the leisure, media and marketing services sectors acting on acquisitions, disposals and fundraising mandates. He joined Albion Ventures in 2000 and has since made and exited investments in a number of industry sectors, including healthcare, education, technology, leisure and engineering. Emil became a partner in Albion Ventures in 2009. David Gudgin, BSc (Hons), ACMA, qualified as a management accountant with ICL before spending 3 years at the BBC. In 1999 he joined 3i plc as an investor in European technology based in London and Amsterdam. In 2002 he moved to Foursome Investments (now Frog Capital) as the lead investor of an environmental technology and a later stage healthcare including of IPOs, leading investments development capital fund. David joined Albion Ventures LLP in 2005 and became a partner in 2009. He is also Managing Director of Albion Community Power PLC. David has a BSc in Economics from Warwick University. Vikash Hansrani, BA (Hons), ACA, qualified as a chartered accountant with RSM Tenon plc and latterly worked in its corporate finance team. He joined Albion Ventures in 2010, where he is currently Finance Director. He is also Finance Director of Albion Community Power PLC. He has a BA in Accountancy & Finance from Nottingham Business School. Robert Henderson, BA (Hons), ACA, graduated from Newcastle University with a first class degree in business management. Prior to joining Albion Ventures in 2015, he qualified as a Chartered Accountant with KPMG, spending four years working in Transactions & Restructuring primarily in turnaround and M&A situations. Ed Lascelles, BA (Hons), began by advising quoted UK companies on takeovers and other corporate transactions, first with Charterhouse Securities and then ING Barings. Companies ranged in value from £10 million to £1 billion, across the healthcare and technology sectors among others. After moving to Albion Ventures in 2004, Ed started investing in the technology, healthcare, financial and business services sectors. Ed became partner in 2009 and is responsible for a number of Albion’s technology investments. He graduated from University College London with a first class degree in Philosophy. Dr. Christoph Ruedig, MBA, initially practiced as a radiologist, before spending 3 years at Bain & Company. In 2006 he joined 3i plc working for their Healthcare Venture Capital arm in biotechnology, pharmaceuticals and medical technology. Most recently he has worked for General Electric UK, where he was responsible for mergers and acquisitions in the medical technology and healthcare IT sectors. He joined Albion Ventures in 2011 and became a partner in 2014. He holds a degree in medicine from Ludwig-Maximilians University, Munich and an MBA from INSEAD. Henry Stanford, MA, ACA, qualified as a chartered accountant with Arthur Andersen before joining the corporate finance department of Close Brothers Group in 1992, becoming an assistant director in 1996. He moved to Albion Ventures in 1998, where he has been responsible for much of the asset based portfolio. Henry became a partner in Albion Ventures in 2009. He holds an MA degree in Classics from Oxford University. Robert Whitby-Smith, BA (Hons), FCA. After graduating in History at Reading University, Robert qualified as a chartered accountant at KPMG and subsequently worked in corporate finance at Credit Suisse First Boston and ING Barings. Since joining in 2005, Robert has assisted in the workout of portfolios formerly managed by other fund managers (now named Crown Place VCT PLC and Kings Arms Yard VCT PLC) and is responsible for investments primarily in the advanced manufacturing, digital media and technology sectors. Robert became a partner in Albion Ventures in 2009. Marco Yu, MPhil, MA, MRICS, spent two and a half years at Bouygues (UK), before moving to EC Harris in 2005 where he advised senior lenders on large capital projects. Since joining Albion Ventures in 2007, Marco has been involved in hotel, cinema, pub, residential property and garden centre investments and is, more recently, responsible for a number of renewable energy investments. He became an Investment Director in 2014. Marco graduated from Cambridge University with a first class degree in economics and is a Chartered Surveyor. Albion Venture Capital Trust PLC 15 236915 Albion Venture Cap pp06-pp17 25/06/2015 13:44 Page 16 Portfolio of investments As at 31 March 2015 As at 31 March 2014 % voting Change in rights held Cumulative Cumulative value % by all AVL* Accounting movement Accounting movement for the voting managed cost** in value Value cost** in value Value year*** Portfolio company rights companies £’000 £’000 £’000 £’000 £’000 £’000 £’000 Hotels Kew Green VCT (Stansted) Limited 45.2 50.0 6,723 758 7,481 6,723 656 7,379 102 The Crown Hotel Harrogate Limited 24.1 50.0 4,245 (1,219) 3,026 4,245 (1,329) 2,916 110 The Stanwell Hotel Limited 39.2 50.0 4,677 (2,285) 2,392 4,677 (2,339) 2,338 54 Total investment in the hotel sector 15,645 (2,746) 12,899 15,645 (3,012) 12,633 266 Renewable energy Chonais Holdings Limited 16.1 50.0 3,074 361 3,435 1,611 6 1,617 356 Green Highland Renewables (Ledgowan) Limited 20.8 50.0 1,363 268 1,631 387 – 387 268 Alto Prodotto Wind Limited 7.4 50.0 670 309 979 670 231 901 78 The Street by Street Solar Programme Limited 6.5 50.0 676 249 925 676 163 839 86 Regenerco Renewable Energy Limited 4.5 50.0 451 108 559 427 36 463 73 Erin Solar Limited 18.6 50.0 520 (12) 508 520 3 523 (14) Infinite Ventures (Goathill) Limited 11.5 31.0 480 – 480 – – – – TEG Biogas (Perth) Limited 4.9 50.0 404 74 478 306 23 329 51 Dragon Hydro Limited 7.3 30.0 311 158 469 311 61 372 97 Harvest AD Limited n/a**** n/a 307 – 307 307 – 307 – AVESI Limited 7.4 50.0 242 49 291 230 16 246 34 Greenenerco Limited 3.9 50.0 135 67 202 135 49 184 18 Total investment in the renewable energy sector 8,633 1,631 10,264 5,580 588 6,168 1,047 Healthcare Shinfield Lodge Care Limited 25.0 29.2 3,000 24 3,024 – – – 24 Active Lives Care Limited 14.5 33.8 1,800 68 1,868 1,800 – 1,800 68 Ryefield Court Care Limited 10.7 23.7 991 40 1,031 – – – 40 Total investment in the healthcare sector 5,791 132 5,923 1,800 – 1,800 132 Education Radnor House School (Holdings) Limited 7.1 50.0 2,125 981 3,106 1,381 850 2,231 165 Total investment in the education sector 2,125 981 3,106 1,381 850 2,231 165 Pubs The Charnwood Pub Company Limited + 14.8 50.0 1,850 (429) 1,421 3,532 (1,889) 1,643 (104) Bravo Inns II Limited 6.4 50.0 1,085 24 1,109 1,085 38 1,123 (13) Bravo Inns Limited 7.6 50.0 589 (158) 431 589 (156) 433 (3) Total investment in the pub sector 3,524 (563) 2,961 5,206 (2,007) 3,199 (120) Health and fitness clubs Kensington Health Clubs Limited 9.8 50.0 1,905 (548) 1,357 1,889 (800) 1,089 251 The Weybridge Club Limited 14.3 50.0 2,165 (850) 1,315 2,136 (650) 1,486 (201) Total investment in the health and fitness club sector 4,070 (1,398) 2,672 4,025 (1,450) 2,575 50 Residential property development G&K Smart Developments VCT Limited 42.9 50.0 276 (40) 236 276 (40) 236 – Total investment in the residential property development sector 276 (40) 236 276 (40) 236 – Other leisure Premier Leisure (Suffolk) Limited + 9.9 47.4 175 (7) 168 468 (298) 170 (2) Total investment in the other leisure sector 175 (7) 168 468 (298) 170 (2) Total fixed asset investments 40,239 (2,010) 38,229 34,381 (5,369) 29,012 1,538 * Albion Ventures LLP ** Amounts shown as accounting cost represent the acquisition cost in the case of investments originally made by the Company and/or the fair value attributed to the investments acquired from Albion Prime VCT PLC on the Merger on 25 September 2012, as adjusted for changes in value since acquisition. *** As adjusted for additions and disposals during the year. **** Loan stock investment only + The accounting cost as shown above is after deducting realised losses of £1,564,000 for The Charnwood Pub Company Limited and £293,000 for Premier Leisure (Suffolk) Limited which are still held at the Balance sheet date. The comparative cost and valuations for 31 March 2014 do not agree to the Annual Report and Financial Statements for the year ended 31 March 2014 as the above list does not include brought forward investments that were fully disposed of in the year. 16 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp06-pp17 25/06/2015 13:44 Page 17 Portfolio of investments (continued) Total change in value of investments for the year 1,538 Movement in loan stock accrued interest (96) Unrealised gains sub-total 1,442 Realised gain in current year 1,127 Total gains on investments as per Income statement 2,569 Accounting Opening Disposal Total realised Gain on Fixed asset investment realisations during cost* carrying value proceeds gain/(loss) opening value the year to 31 March 2015 £’000 £’000 £’000 £’000 £’000 Oakland Care Centre Limited 3,535 5,147 5,750 2,215 603 Orchard Portman Group (Taunton Hospital Limited) 1,314 1,574 1,870 556 296 Tower Bridge Health Clubs Limited 347 668 873 526 205 Radnor House School Limited (loan stock repayment and redemption premium) 54 89 95 41 6 The Bear Hungerford Limited*** – – 16 16 16 Infinite Ventures (Goathill) Limited (loan stock repayment) 200 200 200 – – The Dunedin Pub Company VCT Limited (loan stock repayment) 75 73 74 (1) 1 Premier Leisure (Suffolk) Limited** 293 – – (293) – The Charnwood Pub Company Limited** (loan stock repayment) 1,712 148 148 (1,564) – Total 7,530 7,899 9,026 1,496 1,127 * The cost includes the original cost from Albion Venture Capital Trust PLC and the carried over value on merger from Albion Prime VCT PLC as at 25 September 2012. ** The accounting cost as shown above represents realised losses of investments still held at the Balance sheet date. *** This refers to additional proceeds from the sale which was realised in the prior year. Albion Venture Capital Trust PLC 17 236915 Albion Venture Cap pp18-pp19 25/06/2015 13:44 Page 18 Portfolio companies The top ten investments held by the Company, by total aggregate value of equity and loan stock are as shown below. The most recently audited results are included for each portfolio company. Valuations are often based upon the most recent information available, which may include management accounts. The audited results are therefore not necessarily the figures used for the valuation. Kew Green VCT (Stansted) Limited The company developed and operates a limited service hotel under the “Holiday Inn Express” brand at Stansted Airport on a 125 year lease. The hotel opened in January 2005 with 183 bedrooms. A 71 bedroom extension opened in July 2007, taking the hotel to 254 bedrooms. Abbreviated audited results: year to 31 August 2014 £’000 Investment information £’000 Turnover 4,144 Income recognised in the year 426 EBITDA 890 Total cost 6,723 Profit before tax 104 Total valuation 7,481 Net assets 4,344 Voting rights 45.2 per cent. Basis of valuation: Net asset value supported by third party valuation Voting rights for all AVL managed companies 50.0 per cent. Website: www.expressstanstedairport.co.uk Chonais Holdings Limited A company that owns and operates a 2 megawatt hydro-power scheme in the Scottish Highlands. Abbreviated audited results: period to 30 September 2014 £’000 Investment information £’000 Turnover 5 Income recognised in the year 168 EBITDA (4) Total cost 3,074 Loss before tax (1) Total valuation 3,435 Net assets 2,702 Voting rights 16.1 per cent. Basis of valuation: Net asset value supported by third party valuation Voting rights for all AVL managed companies 50.0 per cent. Radnor House School (Holdings) Limited Radnor House is a group of co-educational independent day schools with sites in South West London and Sevenoaks in Kent. The group provides personalised education to students aged 3-18 and has the capacity to accommodate some 1,000 children. Audited results: year to 31 August 2014 £’000 Investment information £’000 Turnover 5,017 Income recognised in the year 127 EBITDA 1,721 Total cost 2,125 Profit before tax 852 Total valuation 3,106 Net assets 323 Voting rights 7.1 per cent. Basis of valuation: Net asset value supported by third party valuation Voting rights for all AVL managed companies 50.0 per cent. Website: www.radnorhouse.org The Crown Hotel Harrogate Limited The company acquired the historic 114 bedroom Crown Hotel in Harrogate, Yorkshire in November 2005. A substantial refurbishment was carried out and the hotel is once again recognised as one of the leading hotels in Harrogate. Audited results: year to 31 March 2014 £’000 Investment information £’000 Turnover 2,834 Income recognised in the year 195 EBITDA 448 Total cost 4,245 Loss before tax (708) Total valuation 3,026 Net liabilities (7,438) Voting rights 24.1 per cent. Basis of valuation: Net asset value supported by third party valuation Voting rights for all AVL managed companies 50.0 per cent. Website: www.crownhotelharrogate.com Shinfield Lodge Care Limited The company will own and operate a care home in Shinfield, Berkshire. The acquisition of the site completed on 6 March 2015. Investment information £’000 Income recognised in the year 25 The company was incorporated on 14 October 2014 and has Total cost 3,000 not yet filed accounts at Companies House Total valuation 3,024 Voting rights 25.0 per cent. Cost Voting rights for all AVL managed companies 29.2 per cent. Basis of valuation 18 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp18-pp19 25/06/2015 13:44 Page 19 Portfolio companies (continued) The Stanwell Hotel Limited The company acquired the 19 bedroom Stanwell Hall Hotel near Heathrow in August 2007. Planning consent was subsequently obtained to extend the hotel to 52 bedrooms and the hotel re-opened at the end of April 2010. Audited results: year to 31 August 2014 £’000 Investment information £’000 Turnover 1,426 Income recognised in the year – EBITDA 143 Total cost 4,677 Loss before tax (718) Total valuation 2,392 Net liabilities (5,359) Voting rights 39.2 per cent. Basis of valuation: Net asset value supported by third party valuation Voting rights for all AVL managed companies 50.0 per cent. Website: www.thestanwell.com Active Lives Care Limited A company that is developing and will operate a purpose built elderly care home offering 72 bedrooms in Cumnor Hill, Oxford. Investment information £’000 Income recognised in the year 68 The company was incorporated on 8 November 2013 and has Total cost 1,800 not yet filed accounts at Companies House. Total valuation 1,868 Voting rights 14.5 per cent. Basis of valuation: Cost Voting rights for all AVL managed companies 33.8 per cent. Green Highlands Renewables (Ledgowan) Limited The Company will operate a 1MW hydroelectricity plant near Ledgowan in Western Scotland. Abbreviated audited results: year to 30 September 2014 £’000 Investment information £’000 Turnover – Income recognised in the year 81 EBITDA (11) Total cost 1,363 Loss before tax (12) Total valuation 1,631 Net assets 919 Voting rights 20.8 per cent. Basis of valuation Net asset value supported by third party valuation Voting rights for all AVL managed companies 50.0 per cent. The Charnwood Pub Company Limited The company which owns and operates 9 freehold public houses in central England. Abbreviated audited results: 31 March 2014 £’000 Investment information £’000 Turnover 3,515 Income recognised in the year – EBITDA (18) Total cost* 1,850 Loss before tax (543) Total valuation 1,421 Net liabilities (2,289) Voting rights 14.8 per cent. Basis of valuation: Net asset value supported by third party valuation Voting rights for all AVL managed companies 50.0 per cent. Website: www.charnwoodpubco.co.uk *An amount of £1,564,000 has been written off during the year. Kensington Health Clubs Limited The company has developed a 29,000 square foot health and fitness club on a 999 year lease in West London which opened in December 2007. Audited results: year to 30 September 2014 £’000 Investment information £’000 Turnover 1,957 Income recognised in the year 64 EBITDA 530 Total cost 1,905 Loss before tax (826) Total valuation 1,357 Net liabilities (2,446) Voting rights 9.8 per cent. Basis of valuation: Net asset value supported by third party valuation Voting rights for all AVL managed companies 50.0 per cent. Website: olympia.thirtysevendegrees.co.uk Net assets of portfolio companies where a recent third party valuation has taken place, may have a higher valuation in Albion Venture Capital Trust PLC’s accounts than in their own, where the portfolio company does not have a policy of revaluing its fixed assets. Albion Venture Capital Trust PLC 19 236915 Albion Venture Cap pp20-pp31 25/06/2015 13:43 Page 20 Directors’ report The Directors submit their Annual Report and the audited Financial Statements on the affairs of Albion Venture Capital Trust PLC (the “Company”) for the year ended 31 March 2015. BUSINESS REVIEW Principal activity and status The principal activity of the Company is that of a venture capital trust. It has been approved by H.M. Revenue & Customs (‘HMRC’) as a venture capital trust in accordance with the Income Tax Act 2007 and, in the opinion of the Directors, the Company has conducted its affairs so as to enable it to continue to obtain such approval. 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 and further details of this can be found on page 21 of this Directors’ report. Approval for the year ended 31 March 2015 is subject to review should there be any subsequent enquiry under corporation tax self assessment. The Company is not a close company for taxation purposes and its shares are listed on the official list of The London Stock Exchange. Under current tax legislation, shares in the Company provide tax-free capital growth and income distribution, in addition to the income tax relief some investors would have obtained when they invested in the original share offers. Capital structure Details of the issued share capital, together with details of the movements in the Company’s issued share capital during the year are shown in note 15. The Ordinary shares are designed for individuals who are professionally advised private investors, seeking, over the long term, investment exposure to a diversified portfolio of unquoted investments. The investments are spread over a number of sectors, to produce a regular and predictable source of income, combined with the prospect of longer term capital growth. All Ordinary shares (except for treasury shares, which have no right to dividend) rank pari passu for voting rights and each Ordinary share is entitled to one vote. The Directors are not aware of any restrictions on the transfer of shares or on voting rights. Shareholders are entitled to receive dividends and the return on capital on winding up or other return on capital based on the surpluses attributable to the shares. Issue and buy-back of Ordinary shares During the year the Company issued a total of 6,874,236 Ordinary shares (2014: 4,902,202), of which 6,442,577 Ordinary shares (2014: 4,608,012) were issued under the 20 Albion Venture Capital Trust PLC issued under Albion VCTs Top Up Offers; and 431,659 Ordinary shares (2014: 294,190) were the Company’s Dividend Reinvestment Scheme. The Company is currently engaged in the Albion VCTs Prospectus Top Up Offers 2014/2015 for which a prospectus has been published, copies of which are available on the Company’s website at www.albion-ventures.co.uk. The Company operates a policy of buying back shares either for cancellation or for holding in treasury. Details regarding the current buy-back policy can be found on page 6 of the Chairman’s statement. Substantial interests and shareholder profile As at 31 March 2015 and at the date of this report, the Company was not aware of any shareholder who had a beneficial interest exceeding 3 per cent. of voting rights (2014: J M Finn Nominees 3.04 per cent.). There have been no in accordance with Disclosure Rule and disclosures Transparency Rule 5 made to the Company during the year ended 31 March 2015, and to the date of this report. Future developments of the business Details on the future developments of the business can be found on page 7 of the Chairman’s statement and on page 9 of the Strategic report. Results and dividends Detailed information on the results and dividends for the year ended 31 March 2015 can be found in the Strategic report on pages 8 and 9. Going concern In accordance with Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009, issued by the Financial Reporting Council, the Board has assessed the Company’s operation as a going concern. The Company has significant cash and liquid resources, its portfolio of investments is well diversified in terms of sector, and the major cash outflows of the Company (namely investments, buy-backs and dividends) are within the Company’s control. Accordingly, after making diligent enquiries the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors have adopted the going concern basis in preparing the accounts. The Board’s assessment of liquidity risk and details of the Company’s policies for managing its capital and financial risks are shown in note 19. The Company’s business activities, together with details of its performance are shown in the Strategic report and this Directors’ report. 236915 Albion Venture Cap pp20-pp31 25/06/2015 13:43 Page 21 Directors’ report (continued) Post balance sheet events Details of events that have occurred since 31 March 2015 are shown in note 21. Principal risks and uncertainties A summary of the principal risks faced by the Company is set out on pages 12 to 13 of the Strategic report. 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 as follows: (1) The Company’s income must be derived wholly or mainly from shares and securities; (2) At least 70 per cent. of the HMRC value of its investments must have been represented throughout the year by shares or securities that are classified as ‘qualifying holdings’; (3) At least 30 per cent. by HMRC value of its total qualifying holdings must have been represented throughout the year by holdings of ‘eligible shares’. For funds raised after 5 April 2011 the figure is 70 per cent.; (4) At the time of investment, or addition to an investment, the Company’s holdings in any one company (other than another VCT) must not have exceeded 15 per cent. by HMRC value of its investments; (5) The Company must not have retained greater than 15 per cent. of its income earned in the year from shares and securities; (6) The Company’s shares, throughout the year, must have been listed on a regulated European market. These tests drive a spread of investment risk through disallowing holdings of more than 15 per cent. in any portfolio company. The tests have been carried out and independently reviewed for the year ended 31 March 2015. The Company has complied with all tests and continues to do so. ‘Qualifying holdings’ include shares or securities (including loans with a five year or greater maturity period) in companies which operate a ‘qualifying trade’ wholly or mainly in the United Kingdom. Eligible shares must comprise at least 10 per cent. by HMRC value of the total of the shares and securities that the Company holds in any one portfolio company. ‘Qualifying trade’ excludes, amongst other sectors, dealing in property or shares and securities, insurance, banking and agriculture. Details of the sectors in which the Company is invested can be found in the pie chart on page 8. Portfolio company gross assets must not exceed £15 million immediately prior to the investment and £16 million immediately thereafter. No company may receive more than £5 million in aggregate from all state-aided providers of risk capital, including VCTs, in the 12 month period up to and including the most recent such investment. Environment The management and administration of the Company is undertaken by the Manager, Albion Ventures LLP. Albion Ventures LLP recognises the importance of its environmental responsibilities, monitors its impact on the environment, and designs and implements policies to reduce any damage that might be caused by its activities. Initiatives designed to minimise the Company’s impact on the environment include recycling and reducing energy consumption. Global greenhouse gas emissions The Company has no greenhouse gas emissions to report from the operations of the Company, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors’ Reports) regulations 2013, including those within our underlying investment portfolio. Anti-bribery policy The Company has adopted a zero tolerance approach to bribery, and will not tolerate bribery under any circumstances in any transaction the Company is involved in. Albion Ventures LLP reviews the anti-bribery policies and procedures of all portfolio companies. Diversity The Board currently consists of four male Directors. The Board’s policy on the recruitment of new directors is to attract a range of backgrounds, skills and experience and to ensure that appointments are made on the grounds of merit against clear and objective criteria and to bear in mind gender and other diversity within the Board. More details on the Directors can be found in the Board of Directors section on page 14. The Manager has an equal opportunities policy and currently employees 13 men and 10 women. Employees The Company is managed by Albion Ventures LLP and hence has no employees other than its Directors. Albion Venture Capital Trust PLC 21 236915 Albion Venture Cap pp20-pp31 25/06/2015 13:43 Page 22 Directors’ report (continued) Directors The Directors who held office throughout the year, and their interests in the shares of the Company (together with those of their immediate family) are shown in the Directors’ remuneration report on page 30. All Directors are members of the Audit Committee, of which John Kerr is Chairman. Directors’ indemnity Each Director has entered into a Deed of Indemnity with the Company which indemnifies each Director, subject to the provisions of the Companies Act 2006 and the limitations set out in each deed, against any liability arising out of any claim made against him in relation to the performance of his duties as a Director of the Company. A copy of each Deed of Indemnity entered into by the Company for each Director is available at the registered office of the Company. Re-election of Directors Directors’ retirement and re-election is subject to the Articles of Association and the UK Corporate Governance Code. At the forthcoming Annual General Meeting, David Watkins and John Kerr will retire and offer themselves for re-election as both have been Directors of the Company for more than nine years. The Board does not consider that the length of service reduces their ability to act independently of the Manager. Advising ordinary retail investors The Company currently conducts its affairs so that its shares can be recommended by financial intermediaries to ordinary retail investors in accordance with the FCA’s rules in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future. The FCA’s restrictions which apply to non-mainstream investment products do not apply to the Company’s shares because they are shares in a VCT which, for the purposes of the new rules relating to non-mainstream investment products, are excluded securities and may be promoted to ordinary retail investors without restriction. Auditor The Audit Committee annually reviews and evaluates the standard and quality of service provided by the Auditor, as well as value for money in the provision of these services. A resolution to re-appoint BDO LLP will be put to the Annual General Meeting. Annual General Meeting The Annual General Meeting will be held at the City of London Club, 19 Old Broad Street, London EC2N 1DS at 11:30 am on 31 July 2015. The notice of the Annual General Meeting is at the end of this document. 22 Albion Venture Capital Trust PLC The proxy form enclosed with this Annual Report and Financial Statements permits shareholders to disclose votes ‘for’, ‘against’, and ‘withheld’. A ‘vote withheld’ is not a vote in law and will not be counted in the proportion of the votes for and against the resolution. A summary of proxies lodged at the Annual General Meeting will be published at www.albion-ventures.co.uk within the ‘Our Funds’ section by clicking on Albion Venture Capital Trust PLC. Resolutions relating to the following items of special business will be proposed at the forthcoming Annual General Meeting for which shareholder approval is required in order to comply either with the Companies Act or the Listing Rules of the Financial Conduct Authority. Authority to allot shares Ordinary resolution number 7 will request the authority to allot up to an aggregate nominal amount of £153,047 representing approximately 20 per cent. of the issued Ordinary share capital of the Company as at the date of this report. The Directors current intention is to allot shares under the Dividend Reinvestment Scheme and any Albion VCTs Top Up Offers. The Company currently holds 5,841,440 Ordinary treasury shares representing 8.2 per cent. of the total Ordinary share capital in issue as at 31 March 2015. This resolution replaces the authority given to the Directors at the Annual General Meeting in 2014. The authority sought at the forthcoming Annual General Meeting will expire 18 months from the date this resolution is passed or at the conclusion of the next Annual General Meeting of the Company, whichever is earlier. Dis-application of pre-emption rights Special resolution number 8 will request the authority for the Directors to allot equity securities for cash without first being required to offer such securities to existing members. This will include the sale on a non pre-emptive basis of any shares the Company holds in treasury for cash. The authority relates to a maximum aggregate of £153,047 of the nominal value of the share capital representing approximately 20 per cent. of the issued Ordinary share capital of the Company as at the date of this Report. This resolution replaces the authority given to the Directors at the Annual General Meeting in 2014. The authority sought at the forthcoming Annual General Meeting will expire 18 months from the date this resolution is passed or at the conclusion of the next Annual General Meeting of the Company, whichever is earlier. Members should note that this resolution also relates to treasury shares. 236915 Albion Venture Cap pp20-pp31 25/06/2015 13:43 Page 23 Directors’ report (continued) Purchase of own shares Special resolution number 9 will request the authority to purchase approximately 14.99 per cent. of the Company's issued Ordinary share capital at, or between, the minimum and maximum prices specified in resolution 9. Shares bought back under this authority may be cancelled. The Board believes that it is helpful for the Company to continue to have the flexibility to buy its own shares and this resolution seeks authority from shareholders to do so. This resolution would renew the 2014 authority, which was on similar terms. During the financial year under review, the Company purchased 1,146,000 Ordinary shares for treasury at an aggregate consideration of £760,000, including stamp duty, representing 1.6 per cent. of the issued share capital of the Company as at 31 March 2015. The authority sought at the Annual General Meeting will expire 18 months from the date this resolution is passed or at the conclusion of the next Annual General Meeting, whichever is earlier. Treasury shares Under the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 (the “Regulations”), shares purchased by the Company out of distributable profits can be held as treasury shares, which may then be cancelled or sold for cash. The authority sought by these resolutions is intended to apply equally to shares to be held by the in accordance with Company as the Regulations. treasury shares Special resolution number 10 will request the authority to permit Directors to sell treasury shares at the higher of the prevailing current share price and the price at which they were bought in at. Recommendation The Board believes that the passing of the resolutions above is in the best interests of the Company and its shareholders as a whole, and unanimously recommends that you vote in favour of these resolutions, as the Directors intend to do in respect of their own shareholdings. Directors’ responsibilities The Directors are responsible for preparing the Strategic report, the Directors' report, the Directors' remuneration report and the Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have elected to prepare the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these Financial Statements the Directors are required to: ● select suitable accounting policies and then apply them consistently; ● make judgements and accounting estimates that are reasonable and prudent; ● state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the Financial Statements; ● prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; and ● prepare a Strategic report, a Director’s report and Director’s remuneration report which comply with the requirements of the Companies Act 2006. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Following reviews of the Annual Report and Financial Statements and consideration of the key areas of risk identified, the Directors have concluded that, as a whole, the Annual Report and Financial Statements are fair, balanced and understandable and that they provide the information necessary for shareholders to assess the Company’s performance, business model and strategy. Website publication The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial Statements are published on the Company’s webpage on the Investment Manager’s website (www.albion-ventures.co.uk) in accordance with legislation in the United Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance and Albion Venture Capital Trust PLC 23 Disclosure of information to the Auditor In the case of the persons who are Directors of the Company at the date of approval of this report: ● so far as each of the Directors are aware, there is no relevant audit information of which the Company’s Auditor is unaware; and ● each of the Directors has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that that information. the Company’s Auditor is aware of This disclosure is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006. By Order of the Board Albion Ventures LLP Company Secretary 1 King’s Arms Yard London, EC2R 7AF 25 June 2015 236915 Albion Venture Cap pp20-pp31 25/06/2015 13:43 Page 24 Directors’ report (continued) integrity of the Manager’s website is, so far as it relates to the Company, the responsibility of the Manager. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for any changes that have occurred to the Financial Statements since they were initially presented on the website. Directors’ responsibilities pursuant to Disclosure Rule and Transparency Rule 4 of the UK Listing Authority The Directors confirm to the best of their knowledge: ● that the Financial Statements have been prepared in accordance with UK Generally Accepted Accounting Practice and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and ● that the Annual Report includes 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 that it faces. 24 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp20-pp31 25/06/2015 13:43 Page 25 Statement of corporate governance Background The Financial Conduct Authority requires all listed companies to disclose how they have applied the principles and complied with the provisions of the UK Corporate Governance Code (the “Code”) issued by the Financial Reporting Council (“FRC”) in September 2012. The updated UK Corporate Governance Code was published in September 2014 and will be effective for periods beginning 1 April 2015. The Company will therefore be required to comply with the new Code in the next financial year. The updated Code integrates and replaces the current guidance for Directors on internal controls, going concern and liquidity risk and places additional responsibilities on the Board and the Audit Committee. Steps are being taken to ensure compliance with all relevant parts of the updated Code. The Board has also considered the principles and recommendations of the AIC Code of Corporate Governance (“AIC Code”) by reference to the AIC Corporate Governance Guide for Investment Companies (“AIC Guide”). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code, as well and recommendations on issues that are of specific relevance to the Company. additional principles setting out as The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide the UK Corporate incorporates Governance Code), will provide better information to shareholders than reporting under the Code alone. (which The Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK Corporate Governance Code, except as set out below. Application of the Principles of the Code The Board attaches importance to matters set out in the Code and applies its principles. However, as a venture capital trust company, most of the Company’s day-to-day responsibilities are delegated to third parties and the Directors are all non-executive. Thus, not all the provisions of the Code are directly applicable to the Company. Board of Directors The Board consists solely of independent non-executive Directors. Since all Directors are non-executive and day-to-day management responsibilities are sub-contracted to the Manager, the Company does not have a Chief Executive Officer. David Watkins is the Chairman and Jeff Warren is the Senior Independent Director. John Kerr is an external member of the Investment Committee of Albion Ventures LLP. The Board has reviewed and approved this role and concluded it does not affect his independence. David Watkins and John Kerr have both been Directors of the Company for more than nine years and, in accordance with the recommendations of the AIC code, are subject to annual re-election. The Board does not have a policy of limiting the tenure of any Director as the Board does not consider that a Director’s length of service reduces his ability to act independently of the Manager. The Directors have a range of business and financial skills which are relevant to the Company; these are described in the Board of Directors section of this Report, on page 14. Directors are provided with key information on the Company’s activities, including regulatory and statutory requirements, and internal controls, by the Manager. The Board has direct access to secretarial advice and compliance services by the Manager, who is responsible for ensuring that Board procedures are followed and applicable procedures complied with. All Directors are able to take independent professional advice in furtherance of their duties if necessary. In accordance with the UK Corporate Governance Code, the Company has in place Directors’ & Officers’ Liability Insurance. The Directors have considered diversity in relation to the composition of the Board and have considered that its membership is diverse in relation to its experience and balance of skills. Further details on the policy regarding the recruitment of new directors can be found in the Nomination Committee section on page 28. The Board met four times during the year as part of its regular programme of Board meetings. All of the Directors attended each meeting. A sub-committee of the Board comprising at least two Directors met during the year to allot shares issued under the Dividend Reinvestment Scheme and the Albion VCTs Top Up Offers. A sub-committee of the Board also met during the year to approve the terms and contents of the Offer Documents under the Albion VCTs Prospectus Top Up Offers 2014/2015. The Chairman ensures that all Directors receive, in a timely manner, all relevant management, regulatory and financial information. The Board receives and considers reports regularly from the Manager and other key advisers, and ad hoc reports and information are supplied to the Board as required. Albion Venture Capital Trust PLC 25 236915 Albion Venture Cap pp20-pp31 25/06/2015 13:43 Page 26 Statement of corporate governance (continued) The Board has a formal schedule of matters reserved for it and the agreement between the Company and its Manager sets out the matters over which the Manager has authority and limits beyond which Board approval must be sought. The Manager has authority over the management of the investment portfolio, the organisation of custodial services, accounting, secretarial and administrative services. The main issues reserved for the Board include: ● the appointment, evaluation, removal and remuneration of the Manager; ● the consideration and approval of future developments or changes to the investment policy, including risk and asset allocation; ● consideration of corporate strategy and corporate events that arise; ● application of the principles of the UK Corporate Governance Code, corporate governance and internal control; ● review of sub-committee recommendations, including the the appointment and remuneration of the Auditor; to shareholders recommendation for ● evaluation of non-audit services provided by the external Auditor; ● approval of the appropriate dividend to be paid to shareholders, the performance of the Company, including monitoring of the discount of the net asset value and the share price; ● share buy-back and treasury share policy; and ● monitoring shareholder profile and considering shareholder communications. It is the responsibility of the Board to present an Annual Report that is fair, balanced and understandable, which provides the information necessary for shareholders to assess the performance, strategy and business model of the Company. Committees’ and Directors’ performance evaluation Performance of the Board and the Directors is assessed on the following: ● attendance at Board and Committee meetings; ● the contribution made by individual Directors at, and outside of, Board and Committee meetings; and ● completion of a detailed internal assessment process and annual performance evaluation conducted by the Chairman. The Senior Independent Director reviews the Chairman’s annual performance evaluation. The evaluation process has identified that the Board works well together and has the right balance of skills, experience, independence and knowledge of the Company amongst the 26 Albion Venture Capital Trust PLC Directors. Diversity within the Board is achieved through the appointment of directors with different sector backgrounds and skills. Directors are offered training, both at the time of joining the Board and on other occasions where required. The Board also undertakes a proper and thorough evaluation of its committees on an annual basis. Directors’ retirement and re-election is subject to the Articles of Association and the AIC Code. Directors are subject to re- election every three years and Directors who have served longer than nine years and non-independent Directors, to re- election every year. In light of the structured performance evaluation, David Watkins and John Kerr, who are subject to re-election at the forthcoming Annual General Meeting, are considered to be effective Directors who demonstrate strong commitment to the role. The Board believes it to be in the best interest of the Company to re-elect these Directors at the forthcoming Annual General Meeting. Remuneration Committee Jeff Warren is Chairman of the Remuneration Committee and all of the Directors are members of this Committee. The Committee meets once a year and held one formal meeting during the year which was fully attended by all the Directors. be found on The terms of reference for the Remuneration Committee the Company’s website at can www.albion-ventures.co.uk within the ‘Our Funds’ section by clicking on Albion Venture Capital Trust PLC and looking under the Corporate Governance section. Audit Committee The Audit Committee consists of all Directors and John Kerr is Chairman. In accordance with the Code, all members of the Audit Committee have recent and relevant financial experience and therefore it is considered appropriate for the whole Board to be part of the Audit Committee. The Committee met twice during the year ended 31 March 2015; all members attended. Written terms of reference have been constituted for the Audit Committee and can be found on the Company’s website at www.albion-ventures.co.uk within the ‘Our Funds’ section by clicking on Albion Venture Capital Trust PLC and looking under the Corporate Governance section. During the year under review, the Committee discharged its responsibilities including: 236915 Albion Venture Cap pp20-pp31 25/06/2015 13:43 Page 27 Statement of corporate governance (continued) ● formally reviewing the Annual Report and Financial Statements, the Half-yearly Report, the Interim Management Statements and the associated announcements, with particular focus on the main areas critical judgement accounting policies; and on requiring ● reviewing the effectiveness of the internal controls system and examination of the Internal Controls Report produced by the Manager; ● meeting with the external Auditor and reviewing their findings; ● reviewing the performance of the Manager and making recommendations regarding their re-appointment to the Board; ● highlighting the key risks and specific issues relating to the Financial Statements including the reasonableness of valuations, compliance with accounting standards and UK law, corporate governance and listing and disclosure rules as well as going concern. These issues were addressed through detailed review, discussion and challenge by the Board of these matters, as well as by reference to underlying technical information; ● advising the Board on whether the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy; and ● reporting to the Board on how it has discharged its responsibilities. Financial Statements The Audit Committee has initial responsibility for reviewing the Financial Statements and reporting on any significant issues that arise in relation to the audit of the Financial Statements as outlined below. The Audit Committee considered whether these issues were properly considered at the planning stage of the audit and such issues were discussed with the external Auditor at the planning stage of the audit and at the completion of the audit of the Financial Statements. No major conflicts arose between the Audit Committee and the external Auditor in respect of their work during the period. The key accounting and reporting issues considered by the Committee were: The valuation of the Company’s investments Valuations of investments are prepared by the Investment Manager. The Audit Committee reviewed the estimates and judgements made in relation to these investments and were satisfied that they were appropriate. The Audit Committee also discussed the controls in place over the valuation of investments. The Committee recommended investment valuations to the Board for approval. Revenue recognition The revenue generated from loan stock interest and dividend income has been considered by the Audit Committee as part of its review of the Annual Report as well as a quarterly review of the management accounts prepared by the Manager. The Audit Committee has considered the controls in place over revenue recognition to ensure that amounts received are in line with expectation and budget. Following rigorous reviews of the Annual Report and Financial Statements and consideration of the key areas of risk identified, the Audit Committee and Board has concluded that, as a whole, the Financial Statements are fair, balanced and understandable and that they provide the information necessary for shareholders to assess the Company’s performance, business model and strategy. Relationship with the External Auditor The Audit Committee reviews the performance and continued suitability of the Company’s external Auditor on an annual basis. They assess the external Auditor’s independence, qualification, extent of relevant experience, effectiveness of audit procedures as well as the robustness of their quality assurance procedures. In advance of each audit, the Committee obtains confirmation from the external Auditor that they are independent and of the level of non-audit fees earned by them and their affiliates. No non-audit services were provided during the financial year ended 31 March 2015. As part of its work, the Audit Committee has undertaken a formal evaluation of the external Auditor against the following criteria; – Qualification – Expertise – Resources – Effectiveness – Independence – Leadership In order to form a view of the effectiveness of the external audit process, the Committee took into account information from the Manager regarding the audit process, the formal documentation issued to the Audit Committee and the Board by the external Auditor regarding the external audit for the year ended 31 March 2015, and assessments made by individual Directors. In 2007 the Audit Committee undertook a tendering exercise for provision of audit services. As a result of this process, BDO LLP was appointed as Auditor with effect from 2008. The Audit Committee annually reviews and evaluates the Albion Venture Capital Trust PLC 27 236915 Albion Venture Cap pp20-pp31 25/06/2015 13:43 Page 28 Statement of corporate governance (continued) standard and quality of service provided by the Auditor, as well as value for money in the provision of these services. The current audit engagement partner has served five years in this role following the completion of the 31 March 2015 audit. The Audit Engagement rotation requirement allows a maximum rotation period of five years, and therefore a new audit engagement partner will be assigned to the audit for the year ending 31 March 2016. Based on the assurance obtained, the Audit Committee recommended to the Board a resolution to re-appoint BDO LLP as Auditor at the forthcoming Annual General Meeting. Nomination Committee The Nomination Committee consists of all Directors, with David Watkins as Chairman. The Board’s policy on the recruitment of new directors is to attract a range of backgrounds, skills and experience and to ensure that appointments are made on the grounds of merit against clear and objective criteria and bear in mind gender and other diversity within the Board. The nomination committee did not meet during the year. be found on The terms of reference for the Nomination Committee can the Company’s website at www.albion-ventures.co.uk within the ‘Our Funds’ section by clicking on Albion Venture Capital Trust PLC and looking under the Corporate Governance section. Internal control In accordance with the UK Corporate Governance Code, the Board has an established process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place throughout the year and continues to be subject to regular review by the Board in accordance with the Internal Control Guidance for Directors in the UK Corporate Governance Code published in September 1999 and updated in 2005 (the “Turnbull guidance”). The Board is responsible for the Company’s system of internal control and for reviewing its effectiveness. However, acknowledging that such a system is designed to manage, rather than eliminate, the risks of failure to achieve the Company’s business objectives, such controls can only provide reasonable and not absolute assurance against material misstatement or loss. details the steps taken to monitor the areas of risk, including those that are not directly the responsibility of the Manager, and which reports the details of any known internal control failures. Steps continue to be taken to embed the system of internal control and risk management into the operations and culture of the Company and its key suppliers, and to deal with areas of improvement which come to the Manager’s and the Audit Committee’s attention. The Board, through the Audit Committee, has performed a specific assessment for the purpose of this Annual Report and Financial Statements. This assessment considers all significant aspects of internal control arising during the year. The Audit Committee assists the Board in discharging its review responsibilities. The main features of the internal control system with respect to financial reporting, implemented throughout the year are: ● segregation of duties between the preparation of valuations and recording in accounting records; ● independent third party valuations of the majority of the asset-backed investments within the portfolio are undertaken annually; ● reviews of valuations are carried out by the Managing Partner and reviews of financial reports are carried out by the Finance Director of Albion Ventures LLP; ● bank and stock reconciliations are carried out monthly the in accordance with the Manager by FCA requirements; ● all published financial reports are reviewed by Albion Ventures LLP Compliance department; ● the Board reviews financial information; and ● a separate Audit Committee of the Board reviews financial information due to be published. As the Board has delegated the investment management and administration to Albion Ventures LLP, the Board feels that it is not necessary to have its own internal audit function. Instead, it has access to PKF Littlejohn LLP, which, as internal Auditor for Albion Ventures LLP undertakes periodic examination of the business processes and controls environment at Albion Ventures LLP, and ensures that any recommendations to implement improvements in controls are carried out. During the year, the Audit Committee and the Board reviewed internal audit reports prepared by PKF Littlejohn LLP. The Board and the Audit Committee will continue to monitor its system of internal control in order to provide assurance that it operates as intended. The Board, assisted by the Audit Committee, monitors all controls, including financial, operational and compliance controls, and risk management. The Audit Committee receives each year from the Manager a formal report, which Conflicts of interest Directors review the disclosure of conflicts of interest annually, with changes reviewed and noted at the beginning of each Board meeting. A Director who has conflicts of 28 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp20-pp31 25/06/2015 13:43 Page 29 Statement of corporate governance (continued) interest has two independent Directors authorise those conflicts. Procedures to disclose and authorise conflicts of interest have been adhered to throughout the year. Shareholders can access holdings and valuation information regarding any of their shares held with Computershare by registering on Computershare’s website. Capital structure and Articles of Association Details regarding the Company’s capital structure, substantial interests and Directors’ powers to buy and issue shares are detailed in full on pages 20, 22 and 23 of the Directors’ report. The Company is not party to any significant agreements that may take effect, alter or terminate upon a change of control of the Company following a takeover bid. For enquiries relating to the performance of the Company, and for financial advisers’ information please contact Albion Ventures LLP: Tel: 020 7601 1850 (lines are open 9.00am – 5.30pm; Mon-Fri, calls may be recorded) Email: info@albion-ventures.co.uk Website: www.albion-ventures.co.uk Any amendments to the Company’s Articles of Association are by way of a special resolution subject to ratification by shareholders. Please note that these contacts are unable to provide financial or taxation advice. Relationships with shareholders The Company’s Annual General Meeting on 31 July 2015, will be used as an opportunity to communicate with investors. The Board, including the Chairman of the Audit Committee, will be available to answer questions at the Annual General Meeting. At the Annual General Meeting, the level of proxies lodged on each resolution, the balance for and against the resolution, and the number of votes withheld, are announced after the resolution has been voted on by a show of hands. The Annual General Meeting will also include a presentation from the Manager on the portfolio and on the Company, and a presentation from a portfolio company. Shareholders are able to access the latest information on the Company via the Albion Ventures LLP website www.albion- ventures.co.uk under the “Our Funds” section. The Company’s share buy-back programme operates in the market through brokers. In order to sell shares, as they are quoted on the London Stock Exchange, investors should approach a broker to undertake the sale. Banks may be able to assist shareholders with a referral to a broker within their banking group. Statement of compliance The Directors consider that the Company has complied throughout the year ended 31 March 2015 with all the relevant provisions set out in the Code issued in September 2012 and with the AIC Code of Corporate Governance. The Company continues to comply with the Code as at the date of this report. For help relating to dividend payments, shareholdings and share certificates please contact Computershare Investor Services PLC: David Watkins Chairman 25 June 2015 Tel: 0870 873 5849 (UK National Rate call, lines are open 8.30am – 5.30pm; Mon – Fri, calls may be recorded) Website: www.investorcentre.co.uk Albion Venture Capital Trust PLC 29 236915 Albion Venture Cap pp20-pp31 25/06/2015 16:44 Page 30 Directors’ remuneration report Introduction This report is submitted in accordance with Section 420 of the Companies Act 2006 and describes how the Board has applied the principles relating to the Directors’ remuneration. An Ordinary resolution will be proposed at the Annual General Meeting of the Company to be held on 31 July 2015 for the approval of the Annual Remuneration Report as set out below. The current Remuneration Policy was approved by the Shareholders (98.0 per cent. of shareholders voted for and 2.0 per cent. voted against the resolution) at the Annual General Meeting held on 25 July 2014, and it will remain in place for a three year period. The Company’s independent Auditor, BDO LLP, is required to give its opinion on certain information included in this report as indicated. The Auditor’s opinion is included in the Independent Auditor’s Report. Annual statement from the Chairman of the Remuneration Committee The Remuneration Committee comprises all of the Directors with Jeff Warren as Chairman. The Remuneration Committee met once during the year to review Directors responsibilities and salaries against the market and concluded that the current level of remuneration was appropriate. Directors’ remuneration policy The Company’s policy is that fees payable to non-executive Directors should reflect their expertise, responsibilities and time spent on Company matters. In determining the level of non-executive remuneration, market equivalents are considered in comparison to the overall activities and size of the Company. There is no performance related pay criteria applicable to non-executive Directors. This policy will continue for the year ended 31 March 2016. An ordinary the Directors’ Remuneration Policy will be put to shareholders at least once every three years. to approve resolution forthcoming Annual General Meeting David Watkins and John Kerr will retire and be proposed for re-election. None of the Directors have a service contract with the Company, and as such there is no policy on termination payments. There is no notice period and no payments for loss of office were made during the period. On being appointed to the Board, Directors receive a letter from the Company setting out the terms of their appointment and their specific duties and responsibilities. The Company has no employees other than the Directors. Shareholders’ views in respect of Directors’ remuneration are regarded highly and the Board encourages Shareholders’ to attend its Annual General Meeting in order to communicate their thoughts, which it takes into account where appropriate when formulating its policy. At the last Annual General Meeting, 98.0 per cent. of shareholders voted for and 2.0 per cent. voted against the resolution approving the Directors’ Remuneration Report which shows significant Shareholder support. Directors The Directors who held office throughout the year and their interests in the shares of the Company (together with those of their immediate family) are as follows: 31 March 2015 31 March 2014 (Number of shares) (Number of shares) D J Watkins 10,000 10,000 J M B L Kerr 13,109 13,109 J Warren 20,000 20,000 E Dinesen 22,633 21,180 There have been no changes in the holdings of the Directors between 31 March 2015 and the date of this Report. There are no guidelines or requirements in respect of Directors share holdings. The following items have not been audited. Partners and staff of Albion Ventures LLP hold a total of 163,596 shares in the Company as at 31 March 2015. The maximum level of non-executive Directors’ remuneration is £100,000 per annum which is fixed by the Company’s Articles of Association. Partners and staff of Albion Ventures LLP were issued with a further 26,880 shares under the Albion VCTs Prospectus Top Up Offers 2014/2015 on 2 April 2015. The Company’s Articles of Association provide for the resignation and, if approved, re-election of the Directors every three years at the Annual General Meeting. In accordance with the recommendations of the AIC Code, Directors who have served the Company for longer than nine years are subject to annual re-election, and any non-independent Directors are also subject to annual re-election. At the Annual report on remuneration The remuneration of individual Directors’ is determined by the Remuneration Committee within the framework set by the Board. The Committee comprises all Directors, and is chaired by Jeff Warren. The Committee meets at least once a year and met once during the year under review with full attendance from all of its members. 30 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp20-pp31 25/06/2015 13:43 Page 31 Directors’ remuneration report (continued) It is responsible for reviewing the remuneration of the Directors and the Company’s remuneration policy to ensure that it reflects the duties, responsibilities and value of time spent by the Directors on the business of the Company and makes recommendations to the Board accordingly. Directors’ remuneration The following items have been audited. The following table shows an analysis of the remuneration of individual Directors, exclusive of National Insurance: 2015 2014 £’000 £’000 D J Watkins 20 20 J M B L Kerr 23 20 J Warren 20 20 E Dinesen 20 20 –––––––––––– –––––––––––– 83 80 –––––––––––– –––––––––––– There are no options, issued or exercisable, in the Company which would distort the graphical representation that follows. Ordinary share price total return relative to the FTSE All-Share Index (in both cases with dividends reinvested) 400 350 300 250 200 150 100 ) e r a h s r e p e c n e p ( n r u t e R Mar 96 Mar 97 Mar 98 Mar 99 Mar 00 Mar 01 Mar 02 Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 FTSE AII-Share Index total return Ordinary share price total return Source: Albion Ventures LLP Methodology: The share price return to the shareholder, including original amount invested (rebased to 100), assuming that dividends were re-invested at the share price of the Company at the time the shares were quoted ex-dividend. Transaction costs are not taken into account. During the year, John Kerr’s remuneration increased by £3,000 to reflect the increase in the amount of work required as Audit Committee Chairman. The Company does not confer any share options, long term incentives or retirement benefits to any Director, nor does it make a contribution to any pension scheme on behalf of the Directors. Directors pay compared to distribution to shareholders 2015 2014 Percentage £’000 £’000 change Directors fees 83 80 3.75 Total distribution to shareholders including dividends and share buybacks 3,926 3,780 3.86 Each Director of the Company was remunerated personally through the Manager’s payroll which has been recharged to the Company. By Order of the Board In addition to Directors’ remuneration, the Company pays an annual premium in respect of Directors’ & Officers’ Liability Insurance of £9,192 (2014: £10,213). Albion Ventures LLP Company Secretary Performance graph The graph that follows shows the Company’s share price total return against the FTSE All-Share Index total return, in both instances with dividends reinvested, since launch. The Directors consider the FTSE All-Share Index to be the most appropriate benchmark for the Company. Investors should, however, be reminded that shares in VCTs generally trade at a discount to the actual net asset value of the Company. 1 King’s Arms Yard London, EC2R 7AF 25 June 2015 Albion Venture Capital Trust PLC 31 236915 Albion Venture Cap pp32-pp38 25/06/2015 13:42 Page 32 Independent Auditor’s report to the Members of Albion Venture Capital Trust PLC Our opinion on the financial statements In our opinion the Albion Venture Capital Trust PLC financial statements for the year ended 31 March 2015, which have been prepared by the directors in accordance with applicable law and United Kingdom Accounting Standards: ● give a true and fair view of the state of the company’s affairs as at 31 March 2015 and of its profit for the year then ended; ● have been properly prepared in accordance with United Kingdom Accounting Standards; and ● have been prepared in accordance with the requirements of the Companies Act 2006. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. What our opinion covers Our audit opinion on the financial statements covers the: ● Income Statement; ● Balance Sheet; ● Reconciliation of Movements in Shareholders’ Funds; ● Cash Flow Statement; and ● related notes Respective responsibilities of directors and auditor As explained more fully in the report of the directors, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the FRC’s Ethical Standards for Auditors. A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s (FRC) website at www.frc.org.uk/auditscopeukprivate Our approach Our audit approach was developed by obtaining an understanding of the Company’s activities, the key functions undertaken on behalf of the Board by the Investment Manager and Administrator and, the overall control environment. Based on this understanding we assessed those aspects of the company’s transactions and balances which were most likely to give rise to a material misstatement. Below are those risks which we considered to have the greatest impact on our audit strategy and our audit response: Risk area Audit response Valuation of investments: Valuation of investments is a key accounting estimate where there is an inherent risk of management override arising from the investment valuations the being Investment Manager, who is remunerated based on the net asset value of the company. prepared by We considered the design and implementation of controls in place over the valuation of investments and also reviewed the assumptions and underlying evidence supporting the year end valuations. In doing so, we reviewed the valuation reports prepared by the Investment Manager for all unquoted investments considering whether, in our professional judgement, the methodology is the most appropriate in the circumstances under the IPEV guidelines and, for a risk-determined sample of the investments we: ● Re-performed the calculation of the investment valuation; ● Verified key inputs to the valuation to independent information; ● Benchmarked key inputs and estimates to independent information and our own research; 32 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp32-pp38 25/06/2015 13:42 Page 33 Independent Auditor’s report to the Members of Albion Venture Capital Trust PLC (continued) Risk area Audit response Revenue recognition: Revenue consists of loan stock interest, dividends receivable from portfolio companies and interest earned cash balances. Revenue is a under presumed International Standards on Auditing (UK & Ireland). recognition risk ● Where appropriate, performed sensitivity analyses on the valuation calculations where, in our opinion, there was sufficient evidence to suggest reasonable alternative inputs might exist; ● Challenged the Investment Manager regarding significant judgements made; and ● Considered the economic environment in which the investment operates to identify factors that could impact the investment valuation. ● We assessed the design and the implementation of the controls relating to revenue recognition and we developed expectations for interest income receivable based on loan instruments and investigated any variations in amounts recognised to ensure they were valid; ● We considered whether the accounting policy had been applied correctly by management in determining provisions against income where recovery is considered doubtful, considering management information relevant to the ability of the portfolio company to service the loan and the reasons for any arrears of loan interest; ● We reviewed the recognition and classification of any accrued income, considering the appropriateness of the classification of income between revenue and capital in the Income Statement; and ● We tested dividends receivable to cash received, as well as to supporting documentation and management accounts of the portfolio companies. The Audit Committee’s consideration of their key issues is set out on page 27. Materiality in context We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. For planning, we consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. Importantly, misstatements below this level will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the Financial Statements. The application of these key considerations gives rise to two levels of materiality, the quantum and purpose of which are tabulated below. Materiality measure Purpose Key considerations and benchmarks Financial statement materiality Assessing whether the financial statements as a whole present a true and fair view ● The value of net assets ● The level of judgement inherent in Quantum (£) 760,000 the valuation ● The range of reasonable alternative valuation ● Revenue return before taxation 150,000 Specific materiality – classes of transactions and balances which impact on net realised returns Assessing those classes of transactions, balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Albion Venture Capital Trust PLC 33 236915 Albion Venture Cap pp32-pp38 25/06/2015 13:42 Page 34 Independent Auditor’s report to the Members of Albion Venture Capital Trust PLC (continued) We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £10,000, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. Opinion on other matters prescribed by the Companies Act 2006 In our opinion: ● the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006; ● the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and ● the information given in the Corporate Governance Statement set out on pages 28 and 29 of the annual report with respect to internal control and risk management systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements. Matters on which we are required to report by exception Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is: ● materially inconsistent with the information in the audited financial statements; or ● apparently materially incorrect based on, or materially inconsistent with, our knowledge of the company acquired in the course of performing our audit; or ● is otherwise misleading. In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the directors’ statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the Audit Committee which we consider should have been disclosed. Under the Companies Act 2006 we are required to report to you if, in our opinion: ● adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or ● the financial statements and the part of the directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or ● certain disclosures of directors’ remuneration specified by law are not made; or ● we have not received all the information and explanations we require for our audit; or ● a Corporate Governance Statement has not been prepared by the company. Under the Listing Rules we are required to review: ● the Directors’ statement, set out on page 20, in relation to going concern; and ● the part of the corporate governance statement relating to the company’s compliance with the provisions of the UK Corporate Governance Code specified for our review. We have nothing to report in respect of these matters. Rhodri Whitlock (Senior statutory auditor) For and on behalf of BDO LLP, statutory auditor London United Kingdom 25 June 2015 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). 34 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp32-pp38 25/06/2015 13:42 Page 35 Income statement Year ended 31 March 2015 Year ended 31 March 2014 Revenue Capital Total Revenue Capital Total Note £’000 £’000 £’000 £’000 £’000 £’000 Gains on investments 3 – 2,569 2,569 – 626 626 Investment income 4 1,989 – 1,989 1,718 – 1,718 Investment management fees 5 (212) (636) (848) (201) (601) (802) Other expenses 6 (273) – (273) (398) – (398) –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– Return on ordinary activities before tax 1,504 1,933 3,437 1,119 25 1,144 Tax (charge)/credit on ordinary activities 8 (190) 135 (55) (120) 140 20 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– Return attributable to shareholders 1,314 2,068 3,382 999 165 1,164 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– Basic and diluted return per share (pence)* 10 2.07 3.26 5.33 1.70 0.30 2.00 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– * excluding treasury shares The accompanying notes on pages 39 to 51 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. All revenue and capital items in the above statement derive from the continuing operations. There are no recognised gains or losses other than the results for the year disclosed above. Accordingly a statement of total recognised gains and losses is not required. The difference between the reported return on ordinary activities before tax and the historical profit is due to the fair value movements on investments. As a result a note on historical cost profit and losses has not been prepared. Albion Venture Capital Trust PLC 35 236915 Albion Venture Cap pp32-pp38 25/06/2015 13:42 Page 36 Balance sheet 31 March 2015 31 March 2014 Note £’000 £’000 Fixed asset investments 11 38,229 35,580 Current assets Trade and other debtors 13 166 48 Cash at bank and in hand 17 9,002 7,505 –––––––––––– –––––––––––– 9,168 7,553 Creditors: amounts falling due within one year 14 (469) (475) –––––––––––– –––––––––––– Net current assets 8,699 7,078 –––––––––––– –––––––––––– Net assets 46,928 42,658 –––––––––––– –––––––––––– Capital and reserves Called up share capital 15 714 645 Share premium 8,228 3,525 Capital redemption reserve 7 7 Unrealised capital reserve (2,269) (3,343) Realised capital reserve 11,522 10,527 Other distributable reserve 28,726 31,297 –––––––––––– –––––––––––– Total equity shareholders’ funds 46,928 42,658 –––––––––––– –––––––––––– Basic and diluted net asset value per share (pence)* 16 71.62 71.30 –––––––––––– –––––––––––– * excluding treasury shares The accompanying notes on pages 39 to 51 form an integral part of these Financial Statements. These Financial Statements were approved by the Board of Directors and authorised for issue on 25 June 2015, and were signed on its behalf by David Watkins Chairman Company number: 03142609 36 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp32-pp38 25/06/2015 13:43 Page 37 Reconciliation of movements in shareholders’ funds Called-up Capital Unrealised Realised Other share Share redemption capital capital distributable capital premium reserve reserve* reserve* reserve* Total £’000 £’000 £’000 £’000 £’000 £’000 £’000 As at 1 April 2014 645 3,525 7 (3,343) 10,527 31,297 42,658 Return for the year – – – 1,442 626 1,314 3,382 Transfer of previously unrealised gains/(losses) on realisations of investments – – – (368) 368 – – Purchase of treasury shares – – – – – (760) (760) Issue of equity 69 4,827 – – – – 4,896 Cost of issue of equity – (124) – – – – (124) Net dividends paid (note 9) – – – – – (3,125) (3,125) –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– As at 31 March 2015 714 8,228 7 (2,269) 11,522 28,726 46,928 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– As at 1 April 2013 603 8 – (4,890) 11,909 34,051 41,681 Return/(loss) for the year – – – 576 (411) 999 1,164 Transfer of previously unrealised gains/(losses) on realisations of investments – – – 971 (971) – – Purchase of treasury shares – – – – – (364) (364) Purchase of shares for cancellation (7) – 7 – – (487) (487) Issue of equity 49 3,606 – – – – 3,655 Cost of issue of equity – (89) – – – – (89) Net dividends paid (note 9) – – – – – (2,902) (2,902) –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– As at 31 March 2014 645 3,525 7 (3,343) 10,527 31,297 42,658 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– * Included within the aggregate of these reserves is an amount of £37,979,000 (2014: £38,481,000) which is considered distributable. Albion Venture Capital Trust PLC 37 236915 Albion Venture Cap pp32-pp38 25/06/2015 13:43 Page 38 Cash flow statement Year ended Year ended 31 March 2015 31 March 2014 Note £’000 £’000 Operating activities Loan stock income received 1,764 1,534 Deposit interest received 76 131 Dividend income received 57 22 Investment management fees paid (828) (817) Other cash payments (271) (289) –––––––––––– –––––––––––– Net cash flow from operating activities 18 798 581 Taxation UK corporation tax received/(paid) 64 (99) Capital expenditure and financial investments Purchase of fixed asset investments (9,042) (5,182) Disposal of fixed asset investments 8,833 550 –––––––––––– –––––––––––– Net cash flow from investing activities (209) (4,632) Equity dividends paid (net of costs of issuing shares under the Dividend Reinvestment Scheme and unclaimed dividends) (2,873) (2,719) –––––––––––– –––––––––––– Net cash flow before financing (2,220) (6,869) –––––––––––– –––––––––––– Financing Issue of share capital 4,478 3,360 Cost of issue of equity (1) (1) Purchase of own shares (including costs) (760) (876) Cost of Merger (paid on behalf of the Company and Albion Prime VCT PLC) – (5) –––––––––––– –––––––––––– Net cash flow from financing 3,717 2,478 –––––––––––– –––––––––––– Cash flow in the year 17 1,497 (4,391) –––––––––––– –––––––––––– 38 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:41 Page 39 Notes to the Financial Statements 1. Accounting convention 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 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”) in January 2009. Accounting policies have been applied consistently in current and prior periods. 2. Accounting policies Investments Unquoted equity investments, debt issued at a discount and convertible bonds In accordance with FRS 26 “Financial Instruments Recognition and Measurement”, unquoted equity, debt issued at a discount and convertible bonds are designated as fair value through profit or loss (“FVTPL”). Fair value is determined by the Directors in accordance with the International Private Equity and Venture Capital Valuation Guidelines (IPEVCV guidelines). Fair value movements and gains and losses arising on the disposal of investments are reflected in the capital column of the Income statement in accordance with the AIC SORP. Realised gains or losses on the sale of investments will be reflected in the realised capital reserve, and unrealised gains or losses arising from the revaluation of investments will be reflected in the unrealised capital reserve. Unquoted equity derived instruments Unquoted equity derived instruments are only valued if there is additional value to the Company in exercising or converting as at the balance sheet date. Otherwise these instruments are held at nil value. The valuation techniques used are those used for the underlying equity investment. Unquoted loan stock Unquoted loan stock (excluding convertible bonds and debt issued at a discount) are classified as loans and receivables as permitted by FRS 26 and measured at amortised cost using the Effective Interest Rate method (“EIR”) less impairment. Movements in the amortised cost relating to interest income are reflected in the revenue column of the Income statement, and hence are reflected in the other distributable reserve, and movements in respect of capital provisions are reflected in the capital column of the Income statement and are reflected in the realised capital reserve following sale, or in the unrealised capital reserve on movements arising from revaluations of the fair value of the security. For all unquoted loan stock, whether fully performing, past due or impaired, the Board considers that the fair value is equal to or greater than the security value of these assets. For unquoted loan stock, the amount of the impairment is the difference between the asset’s cost and the present value of estimated future cash flows, discounted at the original effective interest rate. The future cash flows are estimated based on the fair value of the security held less estimated selling costs. 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 revenue reserve when a share becomes ex-dividend. Loan stock accrued interest is recognised in the Balance sheet as part of the carrying value of the loans and receivables at the end of each reporting period. In accordance with the exemptions under FRS 9 “Associates and joint ventures”, 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 accounted for according to FRS 26 “Financial instruments Recognition and Measurement” and measured at fair value through profit and loss. Current asset investments Contractual future contingent receipts on the disposal of fixed asset investments are designated at fair value through profit or loss and are subsequently measured at fair value. Investment income Unquoted 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 on a time apportionment basis using the effective interest rate over the life of the financial instrument. Income which is not capable of being received within a reasonable period of the capital value of the investment. is reflected time in Bank interest income Interest income is recognised on an accrual 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 revenue account 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. Albion Venture Capital Trust PLC 39 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:41 Page 40 Notes to the Financial Statements (continued) 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 This reserve accounts for movements from the revenue column of the Income statement, the payment of dividends, the buyback non-capital of realised movements. shares other and Dividends In accordance with FRS 21 “Events after the balance sheet date”, dividends by the Company are accounted for in the period in which the dividend is paid or approved at the Annual General Meeting. 2. Accounting policies (continued) Performance incentive fee In the event that a performance incentive fee crystallises, the fee will be allocated between revenue 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 16 “Current tax”. Taxation associated with capital expenses is applied in accordance with the SORP. In accordance with FRS 19 “Deferred tax”, deferred taxation is provided in full on timing differences that result in an obligation at the Balance sheet date to pay more tax or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the Financial Statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted. Reserves Share premium account This reserve accounts for the difference between the price paid for shares and the nominal value of the shares, less issue costs and transfers to the other distributable reserve. 40 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:41 Page 41 Notes to the Financial Statements (continued) 3. Gains on investments Year ended Year ended 31 March 2015 31 March 2014 £’000 £’000 Unrealised gains on fixed asset investments held at fair value through profit or loss 1,210 1,113 Unrealised reversals of impairments/(impairments) on fixed asset investments held at amortised cost 232 (537) –––––––––––––– –––––––––––––– Unrealised gains sub-total 1,442 576 –––––––––––––– –––––––––––––– Realised gains on fixed asset investments held at fair value through profit or loss 1,121 40 Realised gains on fixed asset investments held at amortised cost 6 10 –––––––––––––– –––––––––––––– Realised gains sub-total 1,127 50 –––––––––––––– –––––––––––––– 2,569 626 –––––––––––––– –––––––––––––– Investments measured at amortised cost are unquoted loan stock investments as described in note 2. 4. Investment income Year ended Year ended 31 March 2015 31 March 2014 £’000 £’000 Income recognised on investments held at fair value through profit or loss Dividend income 51 27 Income from convertible bonds and discounted debt 472 203 –––––––––––––– –––––––––––––– 523 230 Income recognised on investments held at amortised cost Return on loan stock investments 1,388 1,369 Bank deposit interest 78 119 –––––––––––––– –––––––––––––– 1,466 1,488 –––––––––––––– –––––––––––––– 1,989 1,718 –––––––––––––– –––––––––––––– Interest income earned on impaired investments at 31 March 2015 amounted to £306,000 (2014: £294,000). These investments are all held at amortised cost. 5. Investment management fees Year ended Year ended 31 March 2015 31 March 2014 £’000 £’000 Investment management fee charged to revenue 212 201 Investment management fee charged to capital 636 601 –––––––––––––– –––––––––––––– 848 802 –––––––––––––– –––––––––––––– Further details of the Management agreement under which the investment management fee is paid are given in the Strategic report on page 11. During the year, services of a total value of £896,000 (2014: £849,000), were purchased by the Company from Albion Ventures LLP; this includes £848,000 (2014: £802,000) of investment management fee and £48,000 (2014: £47,000) administration fee. At the financial year end, the amount due to Albion Ventures LLP in respect of these services disclosed within accruals and deferred income was £235,000 (2014: £214,000). Albion Ventures LLP is, from time to time, eligible to receive transaction fees and Directors’ fees from portfolio companies. During the year ended 31 March 2015, fees of £360,000 attributable to the investments of the Company were received pursuant to these arrangements (2014: £167,000). Albion Ventures LLP, the Manager, holds 2,534 Ordinary shares as a result of fractional entitlements arising from the merger of Albion Prime VCT PLC into Albion Venture Capital Trust PLC on 25 September 2012. In addition, Albion Ventures LLP holds a further 5,301 Ordinary shares in the Company. Albion Venture Capital Trust PLC 41 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:41 Page 42 Notes to the Financial Statements (continued) 6. Other expenses Year ended Year ended 31 March 2015 31 March 2014 £’000 £’000 Directors’ fees (inc. NIC) 90 87 Secretarial and administration fee 48 47 Other administrative expenses 110 100 Impairment of accrued interest – 139 Auditor’s remuneration for statutory audit services (exc. VAT) 25 25 –––––––––––––– –––––––––––––– 273 398 –––––––––––––– –––––––––––––– 7. Directors’ fees The amounts paid to and on behalf of Directors during the year are as follows: Year ended Year ended 31 March 2015 31 March 2014 £’000 £’000 Directors’ fees 83 80 National insurance 7 7 –––––––––––––– –––––––––––––– 90 87 –––––––––––––– –––––––––––––– Further information regarding Directors’ remuneration can be found in the Directors’ remuneration report on page 31. 8. Tax (charge)/credit on ordinary activities Year ended 31 March 2015 Year ended 31 March 2014 Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000 UK corporation tax in respect of current year (305) 135 (170) (246) 140 (106) UK corporation tax in respect of prior year 115 – 115 126 – 126 ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– Total (190) 135 (55) (120) 140 20 ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– Factors affecting the tax charge: Year ended Year ended 31 March 2015 31 March 2014 £’000 £’000 Return on ordinary activities before taxation 3,437 1,144 –––––––––––––– –––––––––––––– Tax on profit at the standard rate of 21% (2014: 23%) (722) (263) Factors affecting the charge: Non-taxable gains 539 144 Income not taxable 11 6 Consortium relief in respect of prior years 115 126 Marginal relief 2 7 –––––––––––––– –––––––––––––– (55) 20 –––––––––––––– –––––––––––––– The tax charge for the year shown in the Income statement is lower than the standard rate of corporation tax in the UK of 21 per cent. (2014: 23 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. 42 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:41 Page 43 Notes to the Financial Statements (continued) 9. Dividends Year ended Year ended 31 March 2015 31 March 2014 £’000 £’000 First dividend paid on 31 July 2013 – 2.50 pence per share – 1,469 Second dividend paid on 31 December 2013 – 2.50 pence per share – 1,460 First dividend paid on 31 July 2014 – 2.50 pence per share 1,576 – Second dividend paid on 31 December 2014 – 2.50 pence per share 1,590 – Unclaimed dividends (41) (27) –––––––––––––– –––––––––––––– 3,125 2,902 –––––––––––––– –––––––––––––– In addition to the dividends summarised above, the Board has declared a first dividend for the year ending 31 March 2016 of 2.50 pence per share. This dividend will be paid on 31 July 2015 to shareholders on the register as at 10 July 2015. The total dividend will be approximately £1,767,000. During the year, unclaimed dividends older than twelve years of £41,000 (2014: £27,000) 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 2015 Year ended 31 March 2014 Revenue Capital Total Revenue Capital Total The return per share has been based on the following figures: Return attributable to equity shares (£’000) 1,314 2,068 3,382 999 165 1,164 Weighted average shares in issue (excluding treasury shares) 63,464,790 58,689,669 Return attributable per equity share (pence) 2.07 3.26 5.33 1.70 0.30 2.00 ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– The weighted average number of shares is calculated excluding treasury shares of 5,841,440 (2014: 4,695,440). 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 2015 31 March 2014 £’000 £’000 Investments held at fair value through profit or loss Unquoted equity 10,442 11,093 Unquoted debt issued at a discount and convertible bonds 7,069 5,790 –––––––––––––– –––––––––––––– 17,511 16,883 –––––––––––––– –––––––––––––– Investments held at amortised cost Unquoted loan stock 20,718 18,697 –––––––––––––– –––––––––––––– 38,229 35,580 –––––––––––––– –––––––––––––– Albion Venture Capital Trust PLC 43 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:41 Page 44 Notes to the Financial Statements (continued) 11. Fixed asset investments (continued) 31 March 2015 31 March 2014 £’000 £’000 Opening valuation 35,580 30,198 Purchases at cost 9,010 5,218 Disposal proceeds (9,026) (359) Realised gains 1,127 50 Movement in loan stock accrued income 96 (103) Unrealised gains 1,442 576 –––––––––––––– –––––––––––––– Closing valuation 38,229 35,580 –––––––––––––– –––––––––––––– Movement in loan stock accrued income Opening accumulated movement in loan stock accrued income 165 268 Movement in loan stock accrued income 96 (103) –––––––––––––– –––––––––––––– Closing accumulated movement in loan stock accrued income 261 165 –––––––––––––– –––––––––––––– Movement in unrealised losses Opening accumulated unrealised losses (3,343) (4,890) Transfer of previously unrealised (gains)/losses to realised reserve on realisations of investments (368) 971 Unrealised gains 1,442 576 –––––––––––––– –––––––––––––– Closing accumulated unrealised losses (2,269) (3,343) –––––––––––––– –––––––––––––– Historic cost basis Opening book cost 38,759 34,821 Purchases at cost 9,010 5,218 Sales at cost* (7,530) (1,280) –––––––––––––– –––––––––––––– Closing book cost* 40,239 38,759 –––––––––––––– –––––––––––––– * Sales at cost includes realised losses of £1,564,000 for The Charnwood Pub Company Limited and £293,000 for Premier Leisure (Suffolk) Limited which are still held at the Balance sheet date. The Directors believe that the carrying value of loan stock measured at amortised cost is not materially different to fair value. 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 equity investments and convertible and discounted debts are valued in accordance with the IPEVCV guidelines as follows: 31 March 2015 31 March 2014 Valuation methodology £’000 £’000 Cost (reviewed for impairment) 3,176 4,633 Net asset value supported by third party or desktop valuation 14,335 12,250 –––––––––––––– –––––––––––––– 17,511 16,883 –––––––––––––– –––––––––––––– Fair value investments had the following movements between valuation methodologies between 31 March 2014 and 31 March 2015: Value as at 31 March 2015 Change in valuation methodology (2014 to 2015) £’000 Explanatory note Cost (reviewed for impairment) to net asset value 1,898 More recent information available supported by third party valuation The valuation method used will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the December 2012 IPEVCV Guidelines. The Directors believe that, within these parameters, there are no other methods of valuation which would be reasonable as at 31 March 2015. 44 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:41 Page 45 Notes to the Financial Statements (continued) 11. Fixed asset investments (continued) The amended FRS 29 ‘Financial Instruments: Disclosures’ requires the Company to disclose the valuation methods applied to its investments measured at fair value through profit or loss in a fair value hierarchy according to the following definitions: Fair value hierarchy Definition of valuation method Level 1 Unadjusted quoted (bid) prices applied Level 2 Inputs to valuation are from observable sources and are directly or indirectly derived from prices Level 3 Inputs to valuations not based on observable market data All of the company’s fixed asset investments as at 31 March 2015 which are valued at fair value through profit or loss are all valued according to Level 3 methods. Investments held at fair value through profit or loss (level 3) had the following movements in the year to 31 March 2015: 31 March 2015 31 March 2014 Convertible and Convertible and discounted discounted Equity bonds Total Equity bonds Total £’000 £’000 £’000 £’000 £’000 £’000 Opening balance 11,093 5,790 16,883 8,489 2,231 10,720 Additions 1,340 3,107 4,447 415 4,638 5,053 Disposal proceeds (4,875) (200) (5,075) (40) – (40) Loan stock conversion – (1,210) (1,210) – – – Debt/equity swap 590 (590) – 1,257 (1,257) – Accrued loan stock interest – 135 135 – (3) (3) Realised gains 1,121 – 1,121 40 – 40 Unrealised gains 1,173 37 1,210 932 181 1,113 –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– Closing balance 10,442 7,069 17,511 11,093 5,790 16,883 –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– FRS 29 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. After due consideration and noting that the valuation methodology applied to 100 per cent. of the level 3 investments (by valuation) is based on cost or independent third party market information, the Directors do not believe that changes to reasonable possible alternative assumptions for the valuation of the portfolio as a whole would lead to a significant change in the fair value of the portfolio. As noted in the Strategic report, the level of investment in the renewable energy sector has increased to 22 per cent. The majority of the renewable investments are valued using a third party valuation. The underlying valuation of these investments is dependent on the discounting of future cash flows over a period of approximately 25 years and is thus sensitive to changes in a number of assumptions, the most significant being the discount rate used. The Directors do not consider that a change in the discount by one per cent., up or down, would result in a material change in the fair value of the portfolio. 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 2015 as described below: Country of % class and Company incorporation Principal activity voting rights Kew Green VCT (Stansted) Limited Great Britain Hotel owner and operator 45.2% Ordinary shares G&K Smart Developments VCT Limited Great Britain Residential property developer 42.9% Ordinary shares The Stanwell Hotel Limited Great Britain Hotel owner and operator 39.2% Ordinary shares Shinfield Lodge Care Limited Great Britain Care home for elderly residents 25.0% Ordinary shares The Crown Hotel Harrogate Limited Great Britain Hotel owner and operator 24.1% Ordinary shares Green Highland Renewables (Ledgowan) Limited Great Britain Hydroelectric power generator 20.8% Ordinary shares The investments listed above are held as part of an investment portfolio, and therefore, as permitted by FRS 9, they are measured at fair value and not accounted for using the equity method. Albion Venture Capital Trust PLC 45 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:42 Page 46 Notes to the Financial Statements (continued) 13. Current assets 31 March 2015 31 March 2014 Trade and other debtors £’000 £’000 Prepayments and accrued income 13 17 Other debtors 83 12 UK corporation tax receivable 70 19 –––––––––––––– –––––––––––––– 166 48 –––––––––––––– –––––––––––––– The Directors consider that the carrying amount of debtors is not materially different to their fair value. 14. Creditors: amounts falling due within one year 31 March 2015 31 March 2014 £’000 £’000 Trade creditors 12 13 UK Corporation tax payable 170 – Other creditors – 192 Accruals and deferred income 287 270 –––––––––––––– –––––––––––––– 469 475 –––––––––––––– –––––––––––––– The Directors consider that the carrying amount of creditors is not materially different to their fair value. 15. Called up share capital 31 March 2015 31 March 2014 £’000 £’000 Allotted, called up and fully paid 71,365,088 Ordinary shares of 1p each (2014: 64,490,852) 714 645 –––––––––––––– –––––––––––––– Voting rights 65,523,648 Ordinary shares of 1p each (net of treasury shares) (2014: 59,795,412) The Company purchased 1,146,000 Ordinary shares (2014: 543,000) to be held in treasury at a cost of £760,000 (2014: £364,000) representing 1.6 per cent. of its issued share capital as at 31 March 2015. The shares purchased for treasury were funded from other distributable reserve. During the year the Company did not purchase any shares for cancellation (2014: 729,000 shares at a cost of £487,000). The Company holds a total of 5,841,440 shares (2014: 4,695,440) in treasury, representing 8.2 per cent. of the issued Ordinary share capital as at 31 March 2015. Under the terms of the Dividend Reinvestment Scheme Circular dated 10 July 2008, the following Ordinary shares of nominal value 1 penny per share were allotted during the year: Aggregate Net Opening nominal value consideration market price Number of of shares received Issue price on allotment date Date of allotment shares allotted £’000 £’000 (pence per share) (pence per share) 31 July 2014 203,480 2 138 68.80 67.25 31 December 2014 228,179 2 151 67.42 66.00 –––––––––––––– –––––––––––––– –––––––––––––– 431,659 4 289 –––––––––––––– –––––––––––––– –––––––––––––– 46 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:42 Page 47 Notes to the Financial Statements (continued) 15. Called up share capital (continued) During the year the following Ordinary shares were allotted under the Albion VCTs Top Up Offers 2013/2014, the Albion VCTs Prospectus Top Up Offers 2013/2014 and the Albion VCTs Prospectus Top Up Offers 2014/2015: Aggregate Net Opening nominal value consideration market price Number of of shares received Issue price on allotment date Date of allotment shares allotted £’000 £’000 (pence per share) (pence per share) 5 April 2014 17,201 – 12 72.40 67.25 5 April 2014 18,621 – 13 72.80 67.25 5 April 2014 2,648,140 26 1,878 73.10 67.25 4 July 2014 10,187 – 7 72.80 67.25 4 July 2014 5,464 – 4 73.20 67.25 4 July 2014 560,309 6 400 73.60 67.25 30 September 2014 871,469 9 604 71.50 67.25 30 January 2015 832,852 8 562 69.20 65.50 30 January 2015 1,478,334 15 997 68.80 65.50 –––––––––––––– –––––––––––––– –––––––––––––– 6,442,577 64 4,477 –––––––––––––– –––––––––––––– –––––––––––––– 16. Basic and diluted net asset value per share 31 March 2015 31 March 2014 Basic and diluted net asset value per share (pence) 71.62 71.30 –––––––––––––– –––––––––––––– 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 65,523,648 Ordinary shares (2014: 59,795,412). There are no convertible instruments, derivatives or contingent share agreements in issue. 17. Analysis of changes in cash during the year Year ended Year ended 31 March 2015 31 March 2014 £’000 £’000 Opening cash balances 7,505 11,896 Net cash flow 1,497 (4,391) –––––––––––––– –––––––––––––– Closing cash balances 9,002 7,505 –––––––––––––– –––––––––––––– 18. Reconciliation of net return on ordinary activities before taxation to net cash flow from operating activities Year ended Year ended 31 March 2015 31 March 2014 £’000 £’000 Revenue return on ordinary activities before taxation 1,504 1,119 Investment management fee charged to capital (636) (601) Movement in accrued amortised loan stock interest (96) 103 Decrease/(increase) in debtors 5 (8) Increase/(decrease) in creditors 21 (32) –––––––––––––– –––––––––––––– Net cash flow from operating activities 798 581 –––––––––––––– –––––––––––––– 19. 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 on page 6 of the Chairman’s statement. The Company’s financial instruments comprise equity and loan stock investments in unquoted companies, contingent receipts on disposal of fixed assets investments, cash balances and short term debtors and creditors 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 creditors. The Company does not use any derivatives for the management of its balance sheet. Albion Venture Capital Trust PLC 47 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:42 Page 48 Notes to the Financial Statements (continued) 19. Capital and financial instruments risk management (continued) 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 16. 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 £38,229,000 (2014: £35,580,000). Fixed asset investments form 81 per cent. of the net asset value as at 31 March 2015 (2014: 83 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 and the fact that they are usually secured, have a lower level of price volatility than equity. Details of the industries in which investments have been made are contained in the Portfolio of investments section on page 16. 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 29 “Financial Instruments: Disclosures”, 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 and current asset investments (keeping all other variables constant) would increase or decrease the net asset value and return for the year by £3,830,000 (2014: £3,558,000). 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 one percentage point in all interest rates would have increased total return before tax for the year by approximately £62,000 (2014: £80,000). 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 6.30 per cent. (2014: 5.80 per cent.). The weighted average period to maturity for the fixed rate assets is approximately 4.8 years (2014: 3.3 years). 48 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:42 Page 49 Notes to the Financial Statements (continued) 19. Capital and financial instruments risk management (continued) The Company’s financial assets and liabilities, all denominated in pounds sterling, consist of the following: 31 March 2015 31 March 2014 Non- Non- Fixed Floating interest Fixed Floating interest rate rate bearing Total rate rate bearing Total £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Unquoted equity – – 10,442 10,442 – – 11,093 11,093 Convertible and discounted bonds 6,483 279 307 7,069 3,378 279 2,133 5,790 Unquoted loan stock 20,718 – – 20,718 18,697 – – 18,697 Debtors* – – 91 91 – – 24 24 Current liabilities* – – (299) (299) – – (475) (475) Cash – 9,002 – 9,002 – 7,505 – 7,505 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– Total net assets 27,201 9,281 10,541 47,023 22,075 7,784 12,775 42,634 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– * The debtors 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 debtors, investment in unquoted loan stock, and through the holding of cash on deposit with banks. The Manager evaluates credit risk on loan stock prior to investment, and as part of its ongoing monitoring of investments. In doing this, it takes into account the extent and quality of any security held. Typically loan stock instruments have a first fixed charge or a fixed and floating charge over the assets of the 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 debtors) and other risks, both at the time of initial investment and at quarterly Board meetings. The Company’s total gross credit risk as at 31 March 2015 was limited to £27,787,000 (2014: £24,487,000) of unquoted loan stock instruments (all of which is secured on the assets of the portfolio company), £9,002,000 cash deposits with banks (2014: £7,505,000) and £83,000 of other debtors (2014: £12,000). The credit profile of the unquoted loan stock is described under liquidity risk below. The cost, impairment and carrying value of impaired loan stocks held at amortised cost are as follows: 31 March 2015 31 March 2014 Cost Impairment Carrying value Cost Impairment Carrying value £’000 £’000 £’000 £’000 £’000 £’000 Impaired loan stock 13,603 (3,494) 10,109 13,750 (3,601) 10,149 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– Impaired loan stock instruments have a first fixed charge or a fixed and floating charge over the assets of the portfolio company and the Board consider the security value to be the carrying value. 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. Liquidity risk Liquid assets are held as cash on current, deposit or short term money market accounts. Under the terms of its Articles, the Company has the ability to borrow up to 10 per cent. of its adjusted capital and reserves of the latest published audited balance sheet, which amounts to £4,516,000 as at 31 March 2015 (2014: £4,110,000). Albion Venture Capital Trust PLC 49 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:42 Page 50 Notes to the Financial Statements (continued) 19. Capital and financial instruments risk management (continued) The Company has no committed borrowing facilities as at 31 March 2015 (2014: £nil) and had cash balances of £9,002,000 (2014: £7,505,000). 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 £469,000 for the year to 31 March 2015 (2014: £475,000). The carrying value of loan stock investments at 31 March 2015 as analysed by expected maturity dates is as follows: Fully performing Impaired Past due Total Redemption date £’000 £’000 £’000 £’000 Less than one year 1,513 1,421 211 3,145 1-2 years 285 8,688 3,737 12,710 2-3 years 105 – – 105 3-5 years 4,523 – – 4,523 Greater than 5 years 3,523 – 3,781 7,304 –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– Total 9,949 10,109 7,729 27,787 –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– Loan stock categorised as past due includes: ● Loan stock with a carrying value of £7,220,000 yielding an average of 10.17 per cent. on cost which has loan stock interest past due between 2 and 5 months; and ● Loan stock with a carrying value of £509,000 which has loan stock interest past due of greater than 12 months but less than 2 years. The carrying value of loan stock investments held at amortised cost at 31 March 2014 as analysed by expected maturity dates is as follows: Fully performing Impaired Past due Total Redemption date £’000 £’000 £’000 £’000 Less than one year 443 1,716 375 2,534 1-2 years 2,355 604 3,862 6,821 2-3 years 1,375 7,829 65 9,269 3-5 years 3,061 – – 3,061 Greater than 5 years 2,376 – 426 2,802 ––––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– Total 9,610 10,149 4,728 24,487 –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– 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 2015 are stated at fair value as determined by the Directors, with the exception of loans and receivables included within investments, cash, debtors and creditors which are carried at amortised cost, as permitted by FRS 26. The Directors believe that the current carrying value of loan stock is not materially different to the fair value. There are no financial liabilities other than creditors. 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. 20. Commitments and contingencies The company had the following financial commitment in respect of the following investments: ● Shinfield Lodge Care Limited, £3,000,000 ● Ryefield Court Care Limited, £2,358,000 ● Active Lives Care Limited, £2,090,000 ● Radnor House School (Holdings) Limited, £451,000 ● Dragon Hydro Limited, £3,000 There are no contingent liabilities or guarantees given by the Company as at 31 March 2015 (31 March 2014: nil). 50 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:42 Page 51 Notes to the Financial Statements (continued) 21. Post balance sheet events Since 31 March 2015 the Company has had the following post balance sheet events: ● Investment of £250,000 in Ryefield Court Care Limited ● Investment of £150,000 in Active Lives Care Limited Shares issued under the Albion VCTs Prospectus Top Up Offers 2014/2015: Aggregate Net nominal value consideration Number of of shares received Issue price Date of allotment shares allotted £’000 £’000 (pence per share) Opening market price on allotment date (pence per share) 2 April 2015 5,158,657 52 3,568 71.30 –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– 65.50 –––––––––––––– 22. Related party transactions Other than transactions with the Manager as disclosed in note 5, there are no related party transactions or balances requiring disclosure. Albion Venture Capital Trust PLC 51 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:42 Page 52 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Annual General Meeting of Albion Venture Capital Trust PLC (the “Company”) will be held at the City of London Club, 19 Old Broad Street, London EC2N 1DS on 31 July 2015 at 11:30 am for the following purposes: To consider and, if thought fit, to pass the following resolutions, of which numbers 1 to 7 will be proposed as ordinary resolutions and numbers 8 to 10 as special resolutions. Ordinary Business 1. To receive and adopt the Company’s accounts for the year ended 31 March 2015 together with the report of the Directors and Auditor. 2. To approve the Directors’ remuneration report for the year ended 31 March 2015. 3. To re-elect David Watkins as a Director of the Company. 4. To re-elect John Kerr as a Director of the Company. 5. To re-appoint BDO LLP as Auditor of the Company to hold office from conclusion of the meeting to the conclusion of the next meeting at which audited accounts are to be laid. 6. To authorise the Directors to agree the Auditor’s remuneration. Special Business 7. Authority to allot shares That the Directors be generally and unconditionally authorised in accordance with section 551 of the Companies Act 2006 (the “Act”) to allot shares of nominal value 1 penny per share in the Company up to an aggregate nominal amount of £153,047 representing 20 per cent. of the total Ordinary share capital, provided that this authority shall expire 18 months from the date that this resolution is passed, or at the conclusion of the next Annual General Meeting, whichever is earlier, but so that the Company may, before the expiry of such period, make an offer or agreement which would or might require shares to be allotted after the expiry of such period and the Directors may allot shares pursuant to such an offer or agreement as if the authority had not expired. 8. Authority for the disapplication of pre-emption rights That, subject to and conditional on the passing of resolution number 7, the Directors be empowered, pursuant to section 570 of the Act, to allot equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authority conferred by resolution number 7 as if section 561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity securities: (a) in connection with an offer of such securities by way of rights issue; (b) in connection with any Dividend Reinvestment Scheme introduced and operated by the Company; (c) in connection with any top up offer; and (d) otherwise than pursuant to paragraphs (a) to (c) above, up to an aggregate nominal amount of £153,047 for Ordinary shares. This authority shall expire 18 months from the date that this resolution is passed or, if earlier, the conclusion of the next Annual General Meeting of the Company, save that the Company may, before such expiry, make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement as if this power had not expired. This power applies in relation to a sale of treasury shares as if all references in this resolution to an allotment included any such sale and in the first paragraph of the resolution the words “pursuant to the authority conferred by resolution number 7” were omitted in relation to such a sale. 52 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:42 Page 53 Notice of Annual General Meeting (continued) “Rights issue” means an offer of equity securities to holders of shares in the capital of the Company on the register on a record date fixed by the Directors in proportion as nearly as may be to the respective numbers of Ordinary shares held by them, but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient to deal with any treasury shares, fractional entitlements or legal or practical issues arising under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory or any other matter. 9. Authority to purchase own shares That the Company be generally and unconditionally authorised to make market purchases (within the meaning of section 693(4) of the Act) of Ordinary shares of 1 penny each in the capital of the Company (“Ordinary shares”), on such terms as the Directors think fit, and where such shares are held as treasury shares, the Company may use them for the purposes set out in section 727 of the Act, provided that: (a) the maximum aggregate number of shares hereby authorised to be purchased is 14.99 per cent. of the issued Ordinary share capital of the Company as at the date of the passing of this resolution; (b) the minimum price which may be paid for a share shall be 1 penny (exclusive of expenses); (c) (d) the maximum price (exclusive of expenses) which may be paid for a share shall be an amount being not more than the higher of (i) 105 per cent. of the average of the middle market quotations (as derived from the Daily Official List of the London Stock Exchange) for the shares for the five business days immediately preceding the date of purchase and (ii) the higher of the price of the last independent trade and the highest current independent bid relating to a share on the trading venue where the purchase is carried out; and unless previously varied, revoked or renewed, the authority hereby conferred shall expire 18 months from the date that this resolution is passed or, if earlier, at the conclusion of the Annual General Meeting of the Company to be held after the passing of this resolution, save that the Company may, at any time prior to such expiry, enter into a contract or contracts to purchase shares under such authority which would or might be completed or executed wholly or partly after the expiration of such authority and may make a purchase of shares pursuant to any such contract or contracts as if the authority conferred hereby had not expired. Under section 724-732 of the Act, Ordinary shares purchased by the Company out of distributable profits can be held as treasury shares, which may then be cancelled or sold for cash. The authority sought by this special resolution is intended to apply equally to shares to be held by the Company as treasury shares in accordance with the Regulations. 10. Authority to sell treasury shares That the Directors be empowered to sell treasury shares at the higher of the prevailing current share price and the price bought in at. By order of the Board Albion Ventures LLP Company Secretary Registered office 1 King’s Arms Yard London, EC2R 7AF 25 June 2015 Albion Venture Capital Trust PLC is registered in England and Wales with number 03142609 Albion Venture Capital Trust PLC 53 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:42 Page 54 Notice of Annual General Meeting (continued) Notes 1. Members entitled to attend, speak and vote at the Annual General Meeting (“AGM”) may appoint a proxy or proxies (who need not be a member of the Company) to exercise these rights in their place at the meeting. A member may appoint more than one proxy, provided that each proxy is appointed to exercise the rights attached to different shares. Proxies may only be appointed by: ● completing and returning the Form of Proxy enclosed with this Notice to Computershare Investor Services PLC, The Pavilion, Bridgwater Road, Bristol, BS99 6ZZ; ● going to www.investorcentre.co.uk and following the instructions provided there; or ● by having an appropriate CREST message transmitted, if you are a user of the CREST system (including CREST personal members). Return of the Form of Proxy will not preclude a member from attending the meeting and voting in person. A member may not use any electronic address provided in the Notice of this meeting to communicate with the Company for any purposes other than those expressly stated. To be effective the Form of Proxy must be completed in accordance with the instructions and received by the Registrars of the Company by 11.30 am on 29 July 2015. 2. Any person to whom this Notice is sent who is a person nominated under section 146 of the Companies Act 2006 (‘the Act’) to enjoy information rights (a “Nominated Person”) may, under an agreement between him or her and the member by whom he or she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the AGM. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he or she may, under any such agreement, have a right to give instructions to the member as to the exercise of voting rights. The statement of rights of members in relation to the appointment of proxies in note 1 above does not apply to Nominated Persons. The rights described in that note can only be exercised by members of the Company. 3. To be entitled to attend and vote at the AGM (and for the purpose of the determination by the Company of the votes they may cast), members must be registered in the register of members of the Company at 11.30 am on 29 July 2015 (or, in the event of any adjournment, on the date which is two working days before the time of the adjourned meeting). Changes to the register of members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting. 4. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for this AGM and any adjournment(s) by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK and Ireland Limited’s specifications, and must contain the information required for such instruction, as described in the CREST Manual (available via www.euroclear.com/CREST). The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent by 11.30 am on 29 July 2015. For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp applied to the message by the CREST Application Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK and Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider, to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. 5. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member provided that they do not do so in relation to the same shares. 6. A copy of this Notice, and other information regarding the meeting, as required by section 311A of the Act, is available from www.albion-ventures.co.uk under the “Our Funds” section. 7. Any member attending the meeting has the right to ask questions. The Company must cause to be answered any such question relating to the business being dealt with at the meeting but no such answer need be given if (a) to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information, (b) the answer has already been given on a website in the form of an answer to a question, or (c) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered. 8. Copies of contracts of service and letters of appointment between the Directors and the Company will be available for inspection at the Registered Office of the Company during normal business hours from the date of this Notice until the conclusion of the meeting, and at the place of the meeting for at least 15 minutes prior to the meeting until its conclusion. In addition, a copy of the Articles of Association will be available for inspection at the Company’s registered office from the date of the Notice until the conclusion of the meeting, and at the place of the meeting for at least 15 minutes prior to the meeting until its conclusion. 54 Albion Venture Capital Trust PLC 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:42 Page 55 Notice of Annual General Meeting (continued) 9. Under section 527 of the Act members meeting the threshold requirements set out in that section have the right to require the Company to publish on a website a statement setting out any matter relating to: (i) the audit of the Company’s accounts (including the Auditor’s report and the conduct of the audit) that are to be laid before the AGM: or (ii) any circumstances connected with an Auditor of the Company ceasing to hold office since the previous meeting at which the annual accounts and reports were laid in accordance with section 437 of the Act. The Company may not require the members requesting any such website publication to pay its expenses in complying with section 527 and 528 of the Act. Where the Company is required to place a statement on a website under section 527 of the Act, it must forward the statement to the Company’s Auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the AGM includes any statement that the Company has been required under section 527 of the Act to publish on a website. 10. Members satisfying the thresholds in Section 338 of the Companies Act 2006 may require the Company to give, to members of the Company entitled to receive notice of the AGM, notice of a resolution which those members intend to move (and which may properly be moved) at the AGM. A resolution may properly be moved at the AGM unless (i) it would, if passed, be ineffective (whether by reason of any inconsistency with any enactment of the Company’s constitution or otherwise); (ii) it is defamatory of any person; or (iii) it is frivolous or vexatious. The business which may be dealt with at the AGM includes a resolution circulated pursuant to this right. A request made pursuant to this right may be in hard copy or electronic form, must identify the resolution of which notice is to be given, must be authenticated by the person(s) making it and must be received by the Company not later than 6 weeks before the date of the AGM. 11. Members satisfying the thresholds in Section 388A of the Companies Act 2006 may request the Company to include in the business to be dealt with at the AGM any matter (other than a proposed resolution) which may properly be included in the business at the AGM. A matter may properly be included in the business at the AGM unless (i) it is defamatory of any person or (ii) it is frivolous or vexatious. A request made pursuant to this right may be in hard copy or electronic form, must identify the matter to be included in the business, must be accompanied by a statement setting out the grounds for the request, must be authenticated by the person(s) making it and must be received by the Company not later than 6 weeks before the date of the AGM. 12. As at 23 June 2015 being the latest practicable date prior to the publication of this Notice, the Company’s issued share capital consists of 76,523,745 Ordinary shares with a nominal value of 1 penny each. The Company also holds 5,841,440 Ordinary shares in treasury. Therefore, the total voting rights in the Company as at 23 June 2015 are 70,682,305. Albion Venture Capital Trust PLC 55 236915 Albion Venture Cap pp39-pp56.qxp 25/06/2015 13:42 Page 56 Dividend history for Albion Prime VCT PLC now merged with Albion Venture Capital Trust PLC (unaudited) Proforma(i) Albion Prime VCT PLC Total proforma shareholder return to 31 March 2015 (pence per share) Total dividends paid during the year ended 31 March 1998 1.10 31 March 1999(ii) 6.40 31 March 2000 1.50 31 March 2001 4.25 31 March 2002 2.75 31 March 2003 2.00 31 March 2004 1.25 31 March 2005 2.20 31 March 2006 4.50 31 March 2007 4.00 31 March 2008 5.00 31 March 2009 4.50 31 March 2010 2.00 31 March 2011 3.00 31 March 2012 3.00 31 March 2013 3.70 31 March 2014 4.40 31 March 2015 4.40 –––––––––––– Total dividends paid to 31 March 2015 59.95 Proforma net asset value as at 31 March 2015 63.03 –––––––––––– Total proforma shareholder return to 31 March 2015 122.98 –––––––––––– Notes (i) The proforma shareholder returns presented above 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 2015. Albion Prime VCT PLC was merged with Albion Venture Capital Trust PLC on 25 September 2012. This pro-forma 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. (ii) 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. (iii) 56 Albion Venture Capital Trust PLC Perivan Financial Print 236915 Albion Venture Capital Trust PLC Annual Report and Financial Statements for the year ended 31 March 2015 Albion Venture Capital Trust PLC A member of the Association of Investment Companies This report is printed on Amadeus offset a totally recycled paper produced using 100% recycled waste at a mill that has been awarded the ISO 14001 certifi cate for environmental management. The pulp is bleached using a totally chlorine free (TCF) process. 236915 Albion Venture Cap cov.indd 1 25/06/2015 13:20 

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