Albion Venture Capital Trust PLC: Annual Financial Report

        
*Albion Venture Capital Trust PLC *
*LEI number: 213800JKELS32V2OK421*

As required by the Financial Conduct Authority's Disclosure Guidance and Transparency Rules 4.1 and 6.3, Albion Venture Capital Trust PLC today makes public its information relating to the Annual Report and Financial Statements for the year ended 31 March 2022.

This announcement was approved for release by the Board of Directors on 29 June 2022.

This announcement has not been audited.

The Annual Report and Financial Statements for the year ended 31 March 2022 (which have been audited), will shortly be sent to shareholders. Copies of the full Annual Report and Financial Statements will be shown via the Albion Capital Group LLP website by clicking www.albion.capital/funds/AAVC/31Mar2022.pdf.

*Investment **policy*

Albion Venture Capital Trust PLC (the “Company”) is a Venture Capital Trust and the investment policy is intended to produce a regular dividend stream with an appreciation in capital value.

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

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

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

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

*Financial calendar*

Record date for first interim dividend 8 July 2022

Payment of first interim dividend
29 July 2022
 
Annual General Meeting Noon on 6 September 2022  
Announcement of Half-yearly results for the six months ending 30 September 2022         December 2022  
Payment of second interim dividend (subject to Board approval) 31 January 2023  

*Financial highlights*

*242.72p*         Total shareholder value – being net asset value plus dividends paid per Ordinary share since launch^†  
*7.6%*         Shareholder return for the year ended 31 March 2022^†  
*25.30**p*         Total tax-free dividend per share paid during the year ended 31 March 2022  
*53.38**p* Net asset value per share as at 31 March 2022

†These are considered Alternative Performance Measures, see notes 2 and 3 in the Strategic report below for further explanation.
*31 March 2022* 31 March 2021 * (**pence** per share)* (pence per share)    
Opening net asset value *73.13* 70.13
Capital return *5.38* 5.64
Revenue return *0.39* 1.46
Total return *5.77* 7.10
Dividends paid *(25.30)* (4.24)
Impact from share capital movements *(0.22)* 0.14
Net asset value *53.38* 73.13
*Ordinary shares*
*(**pence** per share)*
*Total dividends paid to 31 March 2022* *189.34*
Net asset value on 31 March 2022 53.38
*Total shareholder value to 31 March 2022* *242.72*

A more detailed breakdown of the dividends paid per year can be found at www.albion.capital/funds/AAVC under the ‘Dividend History’ section.

The financial highlights above are for Albion Venture Capital Trust PLC Ordinary shares only. Details of the financial performance of the C shares and Albion Prime VCT PLC, which have been merged into the Company, can be found at www.albion.capital/funds/AAVC under the ‘Financial summary for previous funds’ section.

*In addition to the dividends **summarised** above, the Board has declared a first dividend for the year endin**g 31 March 2023 of 1.**3**3 pence per share to be paid on 29 July 2022 to shareholders on the register on 8 July 2022**.*

*Chairman’s statement *

*Introduction*
I am delighted to announce that your Company has achieved a positive total return in total shareholder value of 5.55 pence per share, a 7.6% shareholder return for the year ended 31 March 2022 on the opening net asset value. The Company continues to benefit from the resilience of its portfolio companies, many of whom have shown growth over the past year, despite the ongoing uncertainty of the Covid-19 pandemic, the high levels of inflation both in the UK and across the world, and the war in Ukraine. There is still much uncertainty on how the economy and the markets will be affected by these ongoing disruptions. I am optimistic that our portfolio companies will continue to add value over the longer term, and we can still find new investment opportunities which will increase shareholder value, but inevitably there will be disruption ahead.

*Results and dividends *
As at 31 March 2022, the Net Asset Value (“NAV”) was £63.9 million or 53.38 pence per share, compared to £72.7 million or 73.13 pence per share as at 31 March 2021. The large decrease in the NAV was a result of the payment of total tax-free dividends of 25.30 pence per share during the year. The total return before taxation was £6.0 million compared to £7.3 million for the previous year. The positive progress in several of our portfolio companies is discussed later in this statement and in the Strategic report below.

In line with the variable dividend policy targeting around 5% of NAV per annum, the Company paid interim dividends totalling 3.30 pence per share during the year ended 31 March 2022 (31 March 2021: 4.24 pence per share). As a result of the successful sale of the Company’s three care homes, which generated substantial cash proceeds, the Company also paid special dividends totalling 22.00 pence per share during the year ended 31 March 2022 (31 March 2021: nil).

The Board has declared a first dividend for the year ending 31 March 2023 of 1.33 pence per share to be paid on 29 July 2022 to shareholders on the register on 8 July 2022.

*Investment performance and progress*
During the year, the Company completed the sale of Credit Kudos generating proceeds of £3.0 million and a return on cost of 5.2 times. The Company also sold Phrasee generating proceeds of £1.7 million and a return on cost of 3.2 times. These are both excellent results for the Company.

The results for the year showed net valuation gains on investments of £6.6 million. The key contributors were the uplifts on Cantab Research (T/A Speechmatics) and Elliptic Enterprises, both of which have been revalued after further externally led funding rounds. Phrasee and Credit Kudos also contributed to the valuation gain, due to their sales which completed during the year. However, our investments in Concirrus and Avora have seen write-downs following difficult trading conditions, in part because of the Covid-19 pandemic. We have also written-off our investment in Xperiome which went into administration.

The three largest investments in the Company’s portfolio, being Chonais River Hydro, Cantab Research (T/A Speechmatics) and Elliptic Enterprises, are valued at £9.8 million and represent 15 per cent. of the Company’s NAV.

The Company has been an active investor during the year investing a total of £7.8 million. Of this, £3.2 million was invested into six new portfolio companies, all of which are expected to require further investment as the companies prove themselves and grow:

· £0.9 million into NuvoAir Holdings a provider of digital therapeutics and decentralised clinical trials for respiratory conditions;
· £0.8 million into Gravitee TopCo (trading as Gravitee.io) an application programming interface (API) management platform;
· £0.6 million into Brytlyt which uses patented software and artificial intelligence (AI), combined with the superior computation power of graphics processing units (GPUs), to derive insights thousands of times faster than legacy systems;
· £0.5 million into PerchPeek, a digital relocation platform;
· £0.3 million into Accelex Technology, a data extraction and analytics technology for private capital markets; and
· £0.1 million into Regulatory Genome Development, a provider of machine readable structured regulatory content.

A further £4.6 million was invested into existing portfolio companies, the largest being: £1.3 million into Seldon Technologies; £0.7 million into TransFICC; £0.7 million into Elliptic; and £0.7 million into Speechmatics. Software and other technology now accounts for 39% of our portfolio (excluding cash), an increase of 6% from last year.

A full list of the Company’s investments and disposals, including their movements in value for the year, can be found in the Portfolio of investments section on pages 25 and 26 of the full Annual Report and Financial Statements.

*Board Composition*
After serving as a Director since the Company’s launch in 1996, and subsequently as Audit Committee Chairman, John Kerr will be retiring from the Board at the AGM on 6 September 2022. We have valued his contributions and wish him well in the future. Ann Berresford will succeed him as Audit Committee Chairman.

Following a formal selection process, Neeta Patel CBE will be appointed as a non-executive Director with effect from 1 July 2022. Neeta will be bringing over 35 years of experience in the technology sector to the Board and is currently a non-executive director of Allianz Technology Trust, CEO of the Centre for Entrepreneurs, a board advisor for Tech London Advocates and an entrepreneur mentor-in-residence at London Business School.

*Principal and emerging r**isks*
In addition to the risks around Covid-19, which have been a major factor for the past 2 years, the UK is experiencing its highest level of inflation in decades, as well as the uncertainty over the future course, and global impact, of Russia’s invasion of Ukraine. Our investment portfolio, while concentrated mainly in the technology and healthcare sectors, remains diversified in terms of both sub-sector and stage of maturity and, importantly, we believe it to be appropriately valued. While we would expect these valuations to be robust within the tolerance of normal market fluctuations, the potential but, unknown, scale of any further adverse events arising out of the increasingly volatile geopolitical backdrop remain a major risk factor.

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

*Sunset Clause*
In 2015 a VCT “sunset clause” was introduced as a requirement of a EU state aid notification. This provides that income tax relief will no longer be given to subscriptions made on or after 6 April 2025, unless the legislation is amended to make the scheme permanent or the “sunset clause” is extended. Our Manager, Albion Capital, is working, alongside the VCT industry, to demonstrate to Government the importance of VCTs as a source of early-stage capital to support entrepreneurs creating innovative growth businesses employing thousands of people throughout the UK. Given its importance, the Board expects that the VCT scheme will continue to attract Government support.

*Share buy-backs*
It remains the Board’s policy to buy-back shares in the market, subject to the overall constraint that such purchases are in the Company’s interest. This includes the maintenance of sufficient cash resources for investment in new and existing portfolio companies and the continued payment of dividends to shareholders.

It is the Board’s intention that such buy-backs should be at around a 5% discount to net asset value, in so far as market conditions and liquidity permit. The Board continues to review the use of buy-backs and is satisfied that it is an important means of providing market liquidity for shareholders.

Details of the Company’s share buy-backs during the year can be found in note 15.

*Albion VCTs Prospectus Top Up Offers *
Your Board, in conjunction with the boards of the other five VCTs managed by Albion Capital, launched a prospectus top up offer of new Ordinary shares on 6 January 2022. The Board announced on 16 February 2022 that, following strong demand, the Company had reached its £10 million limit under the Offer and was fully subscribed and closed to further applications.

The proceeds are being used to provide support to our existing portfolio companies and to enable us to take advantage of new investment opportunities. The first allotment of the shares under the Offer was on 25 February 2022 and the second allotment was on 13 April 2022. Further details can be found in notes 15 and 19 respectively.

*Annual General **Meeting (“AGM”)*
Based on the success of last year’s live webcast AGM, the Board has decided to adopt a virtual format for the AGM again this year. The AGM will be held at noon on 6 September 2022 via the Lumi platform. Information on how to participate in the live webcast can be found on the Manager’s website www.albion.capital/vct-hub/agms-events.

The Board welcomes questions from shareholders at the AGM and shareholders will be able to ask questions using the Lumi platform during the AGM. Alternatively, shareholders can email their questions to AAVCchair@albion.capital prior to the Meeting.

Shareholders' views are important, and the Board encourages shareholders to vote on the resolutions.

Further details on the format and business to be conducted at the AGM can be found in the Directors’ report on pages 36 and 37 and in the Notice of the Meeting on pages 72 to 75 of the full Annual Report and Financial Statements.

*Outlook and prospects *

The positive results for the year just ended demonstrate the resilience of our portfolio during what were challenging times. I am confident that our portfolio companies are well positioned to grow, despite the uncertainty around the longer-term impact of the pandemic, the current cost of living in the UK and across the world, and an increasingly volatile geopolitical and economic backdrop. The Board believes the Company is well placed to continue to deliver long term value to our shareholders, though remains mindful of the considerable uncertainty over the Global economy.

*Richard Glover*
Chairman
29 June 2022

*Strategic report*

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

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

The full investment policy can be found on page 3 of the full Annual Report and Financial Statements.

*Current portfolio analysis*
The pie charts at the end of this announcement show the split of the portfolio valuation as at 31 March 2022 by: sector; sector (excluding cash and net assets); stage of investment; and number of employees. This is a useful way of assessing how the Company and its portfolio is diversified across sector, portfolio companies’ maturity measured by revenues and their size measured by the number of people employed. Details of the principal investments made by the Company are shown in the Portfolio of investments on pages 25 and 26 of the full Annual Report and Financial Statements.

*Direction of portfolio*
The cash balance has decreased mainly due to the two special dividends totalling £22 million that were paid out to shareholders and further investments into higher growth technology companies during the year. The percentage of cash remains high at the year end, however this is largely a result of the allotment of £9 million of shares under the Top Up Offers in February 2022, as well as an additional £5 million from the disposals of Credit Kudos and Phrasee which both completed in March 2022. The shift away from asset-based companies continues, and the Company will continue to invest these funds into higher growth technology companies, including digital healthcare. The Manager has a significant speciality in software and other technology investing, which can be seen as a growing part of the portfolio, represented by a 10% increase this year. Healthcare technology is another area of particular strength, which has increased by 5%.

Further details on portfolio companies can be found in the Portfolio of investments on page 25 of the full Annual Report and Financial Statements.
*Results and dividends*

*Ordinary shares*
*£'000*      
Net capital return for the year ended 31 March 2022 5,554  
Net revenue return for the year ended 31 March 2022 407  
*Total return for the year ended 31 March 2022* *5,96**1*  
First interim and first special dividend of 16.83 pence per share paid on 30 July 2021 (16,728)  
Second special dividend of 7.00 pence per share paid on 31 December 2021 (7,141)  
Second interim dividend of 1.47 pence per share paid on 31 January 2022 (1,523)  
Unclaimed dividends returned to the Company 10  
*Transferred from* * reserves* *(19,42**1**)*      
Net assets as at 31 March 2022 63,937      
*Net asset value as at 31 March 2022 (pence per share)* *53.38*  

The Company paid dividends totalling 25.30 pence per share during the year ended 31 March 2022 (2021: 4.24 pence per share). This included two special dividends of 15.00 pence per share and 7.00 pence per share paid to shareholders on 30 July 2021 and 31 December 2021, respectively. The Board has declared a first dividend for the year ending 31 March 2023, of 1.33 pence per share to be paid on 29 July 2022 to shareholders on the register on 8 July 2022.

As shown in the Company’s Income statement on page 54 of the full Annual Report and Financial Statements, the total return for the year was 5.77 pence per share (2021: 7.10 pence per share). The total investment income decreased to £1,037,000 (2021: £2,467,000), which was primarily due to the care homes sale in March 2021. The Company will continue to receive income from its renewable energy portfolio for the foreseeable future, however investment income is expected to be much lower over the next few years. The revenue return to equity holders has subsequently decreased to £407,000 (2021: £1,468,000).

The capital return on investments for the year of £6,553,000 (2021: £6,508,000), has been discussed in the Chairman’s statement above. The net asset value of the Company has decreased to 53.38 pence per share (2021: 73.13 pence per share), which was primarily due to the two special dividends totalling 22.00 pence per share paid to shareholders during the year. Whilst this reduced the Company’s assets, it provided a significant return to shareholders and more detail on these special dividends can be found in the Annual Report and Financial Statements for the year ended 31 March 2021 and the Half-yearly Financial report to 30 September 2021.

There was a net cash outflow for the Company of £18,894,000 for the year (2021: net inflow of £21,782,000), resulting from the payment of two special and interim dividends, the investment in fixed asset investments, operating activities and the buy-back of shares, offset by the issue of shares under the Albion VCTs Top Up Offers 2021/2022 and the disposal of fixed asset investments.

*Review of business and future changes*
A detailed review of the Company’s business during the year is contained in the Chairman’s statement. The total return before tax for the year was £6.0 million (2021: £7.3 million).

There is a continuing focus on growing the healthcare (including digital healthcare) and software and other technology sectors. The majority of these investment returns are delivered through equity and capital gains and therefore we expect our investment income to continually reduce in future years.

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

*Future prospects*
The Company’s portfolio remains well balanced across sectors and risk classes, and has largely weathered the pandemic so far. Although there remains much uncertainty, the Manager has a strong pipeline of investment opportunities in which the Company’s cash can be deployed. The Board considers that the current portfolio and the pipeline of opportunities should enable the Company to maintain a predictable stream of dividend payments to shareholders, as well as delivering long term growth for shareholders.

*Key performance indicators (“KPIs”) and Alternative Performance Measures (“APMs”)*
The Directors believe that the following KPIs (some of which are APMs), which are typical for Venture Capital Trusts, 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 objectives. The Directors are satisfied that the results shown in the following KPIs and APMs give a good indication that the Company is achieving its investment objective and policy. These are:
     1.   Total shareholder value relative to FTSE All Share Index total return
The graph on page 4 of the full Annual Report and Financial Statements shows the Company’s total shareholder value relative to the FTSE All-Share Index total return, with dividends reinvested. The FTSE All-Share index is considered a reasonable benchmark as the Company is classed as a generalist UK VCT investor, and this index includes over 600 companies listed in the UK, including small-cap, covering a range of sectors. Details on the performance of the net asset value and return per share for the year are shown in the Chairman’s statement above.
     2.    Net asset value per share and total shareholder value
Total shareholder value increased by 5.55 pence to 242.72 pence per share for the year ended 31 March 2022.

3.   Movement in shareholder value in the year^†The graph on page 5 of the full Annual Report and Financial Statements shows the Company’s total shareholder return over the previous ten years, five years, three years and the past year, and the annual returns for the same period are detailed out below.

*2013* *2014* *2015* *2016* *2017* *2018* *2019* *2020* *2021* *2022*
1.4% 2.8% 7.4% 7.5% 11.8% 7.4% 10.5% (4.9)% 10.3% 7.6%

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

The table above shows that total shareholder value has continued to increase over the last 10 years, with an average return of 6.2% per annum.

4.   Dividend distributions
The chart that follows shows the dividends paid in each year and the cumulative dividends paid since launch.

Dividends paid in respect of the year ended 31 March 2022 were 25.30 pence per share (2021: 4.24 pence per share). This included the payment of two special dividends amounting to 22.00 pence per share (2021: nil). Cumulative dividends paid since inception amount to 189.34 pence per Ordinary share.

5.   Ongoing charges
The ongoing charges ratio for the year ended 31 March 2022 was 2.44% (2021: 2.37%). 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 increase to approximately 2.50% due to the reduction in the net asset value of the Company after the payment of the significant special dividends. The cap on the ongoing charges ratio is 2.50%.

6.    VCT compliance*
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 34 of the full Annual Report and Financial Statements.

The relevant tests to measure compliance have been carried out and independently reviewed for the year ended 31 March 2022. These showed that the Company has complied with all tests and continues to do so.

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

*Gearing*
As defined by the Articles of Association, the Company’s maximum exposure in relation to gearing is restricted to 10 per cent. of the adjusted share capital and reserves. The Directors do not currently have any intention to utilise gearing for the Company.

*Operational arrangements*
The Company has delegated the investment management of the portfolio to the Manager, Albion Capital Group LLP, which is authorised and regulated by the Financial Conduct Authority. The Manager also provides company secretarial and other accounting and administrative support to the Company.

**Management agreement**
Under the Management agreement, the Manager provides investment management, secretarial and administrative services to the Company. The Management agreement can be terminated by either party on 12 months’ notice. The Management agreement is subject to earlier termination in the event of certain breaches or on the insolvency of either party. The Manager is paid an annual fee equal to 1.9 per cent. of the net asset value of the Company, and an annual secretarial and administrative fee of £55,000 (2021: £54,000) increased annually by RPI. These fees are payable quarterly in arrears. Total annual expenses, including the management fee, are limited to 2.5% of the net asset value.

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

*Management performance incentive*
In order to align the interests of the Manager and the shareholders with regards to generating positive returns, the Manager is entitled to charge an incentive fee in the event that the returns exceed minimum target levels.

The performance hurdle requires that the growth of the aggregate of the net asset value per share and dividends paid by the Company compared with the previous accounting date exceeds RPI plus 2%. The hurdle will be calculated every year, based on the previous year’s closing NAV per Share. The starting NAV is 79.00 pence per share, being the audited net asset value at 31 March 2019. If the target return is not achieved in a period, the cumulative shortfall is carried forward to the next accounting period and has to be made up before an incentive fee becomes payable.

There was no management performance incentive fee payable during the year. As at 31 March 2022 the cumulative shortfall of the target return was 5.18 pence per share (31 March 2021: shortfall of 2.72 pence per share) and this amount needs to be made up in following accounting periods before an incentive fee becomes payable.

**Investment and co-investment**
The Company co-invests with other Venture Capital Trusts and funds managed by the Manager. Allocation of investments is on the basis of an allocation agreement which is based, inter alia, on the ratio of funds available for investment.

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

· the returns generated by the Company;
· the continuing achievement of the 80 per cent. qualifying holdings investment requirement for VCT status;
· the long term prospects of the current portfolio of investments;
· a review of the Management agreement and the services provided therein; and
· benchmarking the performance of the Manager to other service providers including the performance of other VCTs that the Manager is responsible for managing.The Board believes that it is in the interests of shareholders as a whole, and of the Company, to continue the appointment of the Manager for the forthcoming year.

**Alternative Investment Fund Managers Directive (“AIFMD”)**
The Board appointed the Manager as the Company’s AIFM in 2014 as required by the AIFMD. The Manager is a full-scope Alternative Investment Fund Manager under the AIFMD. Ocorian Depositary (UK) Limited is the appointed Depositary and oversees the custody and cash arrangements and provides other AIFMD duties with respect to the Company.

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

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

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

The table below sets out the key stakeholders, details how the Board has engaged with these key stakeholders, and the effect of these considerations on the Company’s decisions and strategies during the year.

*Stakeholders* *Engagement with Stakeholder* *Outcome and decisions based on engagement*
Shareholders The key methods of engaging with Shareholders are as follows:

· Annual General Meeting (“AGM”)
· Shareholder seminar
· Annual Report and Financial Statements, Half-yearly financial report, and Interim management statements
· RNS announcements for all key decisions including the publication of a Prospectus
· Website redesigned in the year to make it more user accessible

· Shareholders’ views are important and the Board encourages Shareholders to exercise their right to vote on the resolutions at the AGM. The Company’s AGM is typically used as an opportunity to communicate with investors, including through a presentation made by the investment management team. In light of the Covid-19 pandemic, the Board took the decision to update the Company’s Articles of Association to allow for virtual/hybrid events in order for the 2022 AGM to be live streamed for Shareholders. The Board was able to take questions from Shareholders at the AGM enabling maximum shareholder engagement in the absence of a face-to-face event. Following last year’s success and the overwhelming positive feedback from shareholders, the Board has decided that this year’s AGM will again be held as a virtual event to facilitate shareholder participation.
· Shareholders are also encouraged to attend the annual Shareholders’ Seminar. Last year’s event took place on 12 November 2021. The seminar included Quantexa and Healios sharing insights into their businesses and also presentations from Albion executives on some of the key factors affecting the investment outlook, as well as a review of the past year and the plans for the year ahead. Representatives of the Board attend the seminar. The Board considers this an important interactive event and invites shareholders to attend this year’s event scheduled for 23 November 2022 at the Royal College of Surgeons. To reserve a place, email info@albion.capital.
· The Board recognises the importance to Shareholders of maintaining a share buy-back policy, in order to provide market liquidity, and considered this when establishing the current policy. The Board closely monitors the discount to the net asset value to ensure this is in the region of 5%.
· The Board seeks to create value for Shareholders by generating strong and sustainable returns to provide shareholders with regular dividends and the prospect of capital growth. The Board takes this into consideration when making the decision to pay dividends to Shareholders. The variable dividend policy has been enacted, and has resulted in a dividend yield of 4.5% on opening net asset value. In addition to the regular dividend policy, a first special dividend of 15.00 pence per share was paid on 30 July 2021 and a second special dividend of 7.00 pence per share was paid on 31 December 2021. A total of 25.30 pence of dividends were paid during the year, which was 34.6% of the opening net asset value.
· During the year, the decision to publish a Prospectus was taken, in order to raise more funds for deployment into new and existing portfolio companies. The Board carefully considered whether further funds were required, whether the VCT tests would continue to be met, and whether it would be in the interest of Shareholders, before agreeing to publish the Prospectus. On allotment, the decision was made to use an issue price formula on the prevailing net asset value to ensure there was no dilution to existing Shareholders.
· Cash management and liquidity of the Company are key quarterly discussions amongst the Board, with focus on deployment of cash for future investments, dividends and share buy-backs.
· The Board decided to propose a special resolution at the 2021 AGM to increase the Company’s distributable reserves by way of a reduction of share premium account and capital redemption reserve. This resolution was approved with 99.5% of Shareholders voting in favour of the resolution.

Suppliers The key suppliers are:

· Corporate broker
· VCT taxation adviser
· Depositary
· Registrar
· Auditor
· Lawyer

· The Manager is in regular contact with the suppliers and the contractual arrangements with all the principal suppliers to the Company are reviewed regularly and formally once a year, alongside the performance of the suppliers in acquitting their responsibilities.
· The Board reviews the performance of the providers annually in line with the Manager, and was satisfied with their performance.

Manager The performance of Albion Capital Group LLP is essential to the long term success of the Company, including achieving the investment policy and generating returns to shareholders, as well as the impact the Company has on Environment, Social and Governance practice. · The Manager meets with the Board at least quarterly to discuss the performance of the Company, and is in regular contact in between these meetings, e.g. to share investment papers for new and follow-on investments. All strategic decisions are discussed in detail and minuted, with an open dialogue between the Board and the Manager.
· The performance of the Manager in managing the portfolio and in providing company secretarial, administration and accounting services is reviewed in detail each year, which includes reviewing comparator engagement terms and portfolio performance. Further details on the evaluation of the Manager, and the decision to continue the appointment of the Manager for the forthcoming year, can be found in this report.
· Details of the Manager’s responsibilities can be found in the Statement of corporate governance on pages 39 and 40 of the full Annual Report and Financial Statements.

During the year, the Board has reviewed the current Management Agreement, and a new agreement was signed which updated the agreement for new regulatory requirements, such as GDPR and AIFMD, but did not change any commercial terms with the Manager.
Portfolio companies The portfolio companies are considered key stakeholders, not least because they are principal drivers of value for the Company. However, as discussed in the Environmental, Social and Governance (“ESG”) report on pages 19 to 21 of the full Annual Report and Financial Statements, the portfolio companies’ impact on their stakeholders is also important to the Company. · The Board aims to have a diversified portfolio in terms of sector and stage of investment. Further details of this can be found in the pie charts at the end of this announcement.
· In most cases, an Albion executive has a place on the board of a portfolio company, in order to help with both business operation decisions, as well as good ESG practices.
· The Manager ensures good dialogue with portfolio companies, and often puts on events in order to help portfolio companies benefit from the Albion network.
· Albion Capital has a Talent Platform which focuses on aligning growth strategy with leadership team hiring, leadership development, and organisational scaling in our portfolio companies. By assessing their leadership potential, identifying and strengthening portfolio company management teams, the Talent platform helps early-stage businesses accelerate their growth to scale into category defining businesses, which ultimately benefits VCT investors.

Community and environment The Company, with no employees, has no effect itself on the community and environment. However, as discussed above, the portfolio companies’ ESG impact is extremely important to the Board. · The Board receives reports on ESG factors within its portfolio from the Manager as it is a signatory of the United Nations Principles for Responsible Investment (“UN PRI”). Further details of this are set out in the ESG report on pages 19 to 21 of the full Annual Report and Financial Statements. ESG, without its specific definition, has always been at the heart of the responsible investing that the Company engages in and in how the Company conducts itself with all of its stakeholders.

*Environmental, Social, and Governance (“ESG”) report*
The Board and the Company’s Manager, Albion Capital Group LLP, take ESG very seriously and more detail can be found on this in the ESG report on pages 19 to 21 of the full Annual Report and Financial Statements.

*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 formal policies in these matters, however, it is at the core of its responsible investment strategy as detailed above.

*General Data Protection Regulation *
The General Data Protection Regulation has the objective of unifying data privacy requirements across the European Union. GDPR forms part of the UK law after Brexit, now known as UK GDPR. The Manager continues to take action to ensure that the Manager and the Company are compliant with the regulation.

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

· Environment
· Global greenhouse gas emissions
· Anti-bribery
· Anti-facilitation of tax evasion
· Diversityand these are set out in the Directors’ report on page 35 of the full Annual Report and Financial Statements.

*Risk management*

The Board carries out a regular review of the risk environment in which the Company operates, together with changes to the environment and individual risks. The Board also identifies emerging risks which might impact on the Company. In the period the most noticeable risks have been the global pandemic and the invasion of Ukraine which have impacted not only public health and mobility but also had an adverse impact on the economy, the full impact of which is likely to be uncertain for some time.

The Board has carried out a robust assessment of the Company’s principal risks and uncertainties and seeks to mitigate these risks through regular reviews of performance and monitoring progress and compliance. The Board applies the principles detailed in the Financial Reporting Council’s Guidance on Risk Management, Internal Control and Related Financial and Business Reporting, in the mitigation and management of these risks. More information on specific mitigation measures for the principal risks and uncertainties are explained below:

*Risk* *Possible consequence * *Risk assessment during the year* *Risk management*
Investment, performance and valuation risk Investment in smaller unquoted growth businesses carries a higher degree of risk and is more volatile than investing in larger, long-established businesses. This could negatively impact shareholder returns.

The Company relies on the judgement and reputation of the Manager to provide strong investment returns and valuations for shareholders.

The Company’s investment valuation methodology is based on fair value, which for smaller unquoted growth businesses can be difficult to determine due to the lack of observable market data and the limitation of external reference points. Increased (due to high levels of inflation and the geopolitical risks following the invasion of Ukraine). The Board places reliance upon the skills and expertise of the Manager and its track record of making successful investments in higher growth technology businesses. The Manager operates a structured investment appraisal and due diligence process. This includes a review from one external investment professional and comments from non-executive Directors of the Company on matters discussed at the Investment Committee meetings.

Investments are monitored by the Manager, through monthly portfolio updates and typically an investment manager sitting on portfolio company boards. The Board receives detailed reports on each investment and their valuation as part of their quarterly board meetings.

Review and oversight by the non-executive Directors ensures that the risk to the Company’s and Manager’s reputation is kept to a minimum.

Investments are valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines, which represent current best practice for investment valuation and are reviewed by the Manager’s Valuation Committee.

These procedures ensure that this increased risk continues to be mitigated where possible.
VCT approval and regulatory change risk Any breach of section 274 of the Income Tax Act 2007, including any legislative changes, could result in the loss of the Company’s HMRC qualifying status and tax reliefs for investors.

No change. The Company’s VCT qualifying status is monitored monthly by the Manager and quarterly by the Board. The Board has appointed Philip Hare & Associates LLP as its taxation adviser, who independently confirms compliance, highlights areas of risk and informs on any legislative changes, including those which may arise from the withdrawal from the European Union.
Regulatory and compliance risk The Company is listed on The London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company’s shares, or other penalties under the Companies Act or from financial reporting oversight bodies. No change. The Board and the Manager receive regular updates on new regulation, including legislation on the management of the Company, from its auditor, lawyers and other professional bodies. The Company is subject to compliance checks through the Manager’s compliance officer, and any issues arising from compliance or regulation are reported to its own board on a monthly basis. The Board ensures the Company is compliant as part of its quarterly Board meetings.

The Board reviews the quarterly reports prepared by Ocorian Depositary (UK) Limited (the Company’s Depositary) to ensure the Manager is adhering to the AIFMD requirements.
Operational and internal control risk (including cyber and data security) The Company relies on a number of third parties, in particular the Manager, for the provision of investment management and administrative functions. Failures in key IT systems and controls within the Manager’s business could place assets of the Company at risk, resulting in inaccurate information being passed to the Board or shareholders. This could additionally result in losses for the Company and its shareholders. No change. The Company’s operations and IT systems are subject to rigorous internal controls which are reviewed on a regular basis and reported to the Board.

The Audit Committee reviews the Internal Audit Reports prepared by the Manager’s internal auditors, Azets, and has access to their internal audit partner to whom it can ask specific detailed questions in order to satisfy itself that the Manager has strong systems and controls in place including those in relation to risk management, business continuity and cyber security.

The Board reviews the systems and processes (including cyber and data security) in place for the Company’s key suppliers to ensure that there is an appropriate risk mitigation in place.
Economic and political risk Events such as the Covid-19 pandemic, the impact of Brexit, an economic recession, fluctuation in inflation and interest rates, or significant political events could adversely affect the companies within the portfolio and consequently the Company’s net asset value.

Increased (due to high levels of inflation and the geopolitical risks from the invasion of Ukraine). The Company invests in a diversified portfolio of c.38 companies, predominantly in the United Kingdom, and has a policy of minimising any external bank borrowings within portfolio companies.
Exogenous risks over which the Company has no control are always a risk and the Company does what it can to address these risks. The inherent long-term nature of the portfolio helps to mitigate these exogenous risks.
The Board and Manager are continuously assessing the resilience of the portfolio as a result of the ongoing economic and political risks, to ascertain where support is required. The Company has sufficient cash resources to cope with any such exigent and unexpected pressures. Exposure is relatively small to at-risk sectors that include leisure, hospitality, retail and travel (3% of NAV).
The Company’s investment policy and the Board’s scrutiny of the investment portfolio ensures that this increased risk continues to be mitigated where possible.Liquidity risk The Company may not have sufficient cash available to meet its financial obligations.

The Company’s portfolio is primarily in smaller unquoted companies, which are inherently illiquid as there is no readily available market, and thus it may be difficult to realise their fair value at short notice. No change. The Board reviews the Company’s three year cash flow forecasts on a quarterly basis. These include potential investment realisations (which are closely monitored by the Manager), Top Up Offers, dividend payments and operational expenditure. This ensures that there are sufficient cash resources available for the Company’s liabilities as they fall due.Environmental, social and governance (“ESG”) risk An insufficient ESG policy could lead to an increased negative impact on the environment, including the Company’s carbon footprint.

Non-compliance with reporting requirements could lead to a fall in demand from investors, reputational damage and penalties. Increased (due to the new guidance issued on climate change reporting and increased importance to stakeholders). The Manager is a signatory of the UN PRI and the Board is kept appraised of the evolving ESG policies at quarterly Board meetings.

Full details of the specific procedures and risk mitigation can be found in the ESG report on pages 19 to 21 of the full Annual Report and Financial Statements.

These procedures ensure that this increased risk continues to be mitigated where possible.

**Viability statement**

In accordance with the FRC UK Corporate Governance Code published in 2018 and provision 36 of the AIC Code of Corporate Governance, the Directors have assessed the prospects of the Company over three years to 31 March 2025. The Directors believe that three years is a reasonable period in which they can assess the ability of the Company to continue to operate and meet its liabilities as they fall due. This is the period used by the Board as part of its strategic planning process, which includes: the estimated timelines for finding, assessing and completing investments; the potential impact of any new regulations; and the availability of cash.

The Board has carried out a robust assessment of the principal and emerging risks facing the Company, including those that could threaten its business model, future performance, solvency or liquidity, and focused on the major factors which affect the economic, regulatory and political environment. The Board carefully assessed, and were satisfied with, the risk management processes in place to avoid or reduce the impact of these risks. The Board has carried out robust stress testing of cashflows which included assessing the resilience of portfolio companies, including the requirement for any future financial support, and evaluating the impact of high inflation, both within the Company and within its portfolio.

The Board has additionally considered the ability of the Company to comply with the ongoing conditions to ensure it maintains its VCT qualifying status under its current investment policy. As a result of the Board’s quarterly valuation reviews, it has concluded that the portfolio is well balanced and geared towards delivering long term growth and strong returns to shareholders.

The Board has concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 31 March 2025. The Board is mindful of the ongoing risks and will continue to ensure that appropriate safeguards are in place, in addition to monitoring the quarterly cashflow forecasts to ensure the Company has sufficient liquidity.

This Strategic report of the Company for the year ended 31 March 2022 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.

*Richard Glover*
Chairman
29 June 2022

*Statement of Directors’ responsibilities*

In preparing these Financial Statements for the year to 31 March 2022, the Directors of the Company, being Richard Glover, John Kerr, Ann Berresford and Richard Wilson, confirm to the best of their knowledge:

· summary financial information contained in this announcement and the full Annual Report and Financial Statements for the year ended 31 March 2022 for the Company has been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law) and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and· the Chairman’s statement and Strategic report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties it faces.
We consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced, and understandable and provide the information necessary for shareholders to assess the Company’s position, performance, business model and strategy.

A detailed “Statement of Directors’ responsibilities” is contained on page 38 of the full Annual Report and Financial Statements.

For and on behalf of the Board

*Richard Glover*

Chairman

29 June 2022

*Income statement *
  *Year ended 31 March 2022* Year ended 31 March 2021   *Revenue* *Capital* *Total* Revenue Capital Total *Note* *£’000* *£’000* *£’000* £’000 £’000 £’000Gains on investments 3 *-* *6,553* *6,553* - 6,508 6,508
Investment income 4 *1,037* *-* *1,037* 2,467 - 2,467
Investment Manager’s fees* 5 *(122)* *(1,097)* *(1,219)* (337) (1,010) (1,347)
Other expenses 6 *(411)* *-* *(411)* (363) - (363)
*Profit on ordinary activities before tax*   *504* *5,456* *5,960* 1,767 5,498 7,265
Tax (charge)/credit on ordinary activities 8 *(97)* *98* *1* (299) 192 (107)
*Profit and total comprehensive income attributable to shareholders*   *407* *5,554* *5,961* 1,468 5,690 7,158
*Basic and diluted return per share (pence)*** 10 *0.39* *5.38* *5.77* 1.46 5.64 7.10

*For more information on the allocation between revenue and capital please see the accounting policies below.

** Adjusted for treasury shares

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

The total column of this Income statement represents the profit and loss account of the Company. The supplementary revenue and capital columns have been prepared in accordance with The Association of Investment Companies’ Statement of Recommended Practice.

*Balance sheet*        
  *31 March 2022* 31 March 2021 *Note* *£’000* £’000      
*Fixed asset investments* 11 *37,604* 28,355      
*Current assets*      
Trade and other receivables 13 *1,926* 1,561
Cash and cash equivalents   *24,668* 43,562   *26,594* 45,123      
*Total assets*   *64,198* 73,478      
*Payables: amounts falling due within one year*      
Trade and other payables 14 *(261)* (790)            
*Total assets **less** current liabilities*   *63,937* 72,688      
*Equity attributable to equity holders*      
Called-up share capital 15 *1,369* 1,165
Share premium   *10,047* 40,668
Capital redemption reserve   *22* 7
Unrealised capital reserve   *6,550* 3,588
Realised capital reserve   *7,693* 21,829
Other distributable reserve   *38,256* 5,431
*Total equity shareholders’ funds*   *63,937* 72,688      
*Basic and diluted net asset value per share (pence)** 16 *53.38* 73.13      

*Excluding treasury shares

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

These Financial Statements were approved by the Board of Directors and authorised for issue on 29 June 2022, and were signed on its behalf by:

*Richard Glover*
Chairman

Company number: 03142609

*Statement of changes in equity*
*Called-up share*
*capital* *Share premium* *Capital redemption reserve* *Unrealised capital reserve* *Realised capital reserve** *Other distributable reserve** *Total* *£’000* *£’000* *£’000* *£’000* *£’000* *£’000* *£’000*
*At 1 April 2021* *1,165* *40,668* *7* *3,588* *21,829* *5,431* *72,688*
Return and total comprehensive income for the year *-* *-* *-* *3,784* *1,770* *407* *5,961*
Transfer of previously unrealised gains on realisations of investments *-* *-* *-* *(822)* *822* *-* *-*
Purchase of shares for cancellation *(39)* *-* *39* *-* *-* *(2,013)* *(2,013)*
Issue of equity *243* *12,694* *-* *-* *-* *-* *12,937*
Cost of issue of equity *-* *(254)* *-* *-* *-* *-* *(254)*
Reduction of share premium and capital redemption reserve *-* *(43,061)* *(24)* *-* *-* *43,085* *-*
Net dividends paid (note 9) *-* *-* *-* *-* *(16,728)* *(8,654)* *(25,382)*
*At 31 March 2022* *1,369* *10,047* *22* *6,550* *7,693* *38,256* *63,937*
At 1 April 2020 1,148 39,477 7 13,178 6,549 10,269 70,628
Return and total comprehensive income for the year - - - 1,831 3,859 1,468 7,158
Transfer of previously unrealised gains on realisations of investments - - - (11,421) 11,421 - -
Purchase of treasury shares - - - - - (2,043) (2,043)
Issue of equity 17 1,225 - - - - 1,242
Cost of issue of equity - (34) - - - - (34)
Net dividends paid (note 9) - - - - - (4,263) (4,263)
At 31 March 2021 1,165 40,668 7 3,588 21,829 5,431 72,688

*Included within these reserves is an amount of £26,804,000 (2021: £27,260,000) which is considered distributable. Over the next four years an additional £17,585,000 will become distributable. This is due to the HMRC requirement that the Company cannot use capital raised in the past three years to make a payment or distribution to shareholders. On 1 April 2022, £567,000 became distributable in line with this.

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

*Statement of cash flows*
*Year ended *
*31 March 2022* Year ended
31 March 2021 *£’000* £’000
*Cash flow from operating activities*    
Loan stock income received *978* 2,985
Deposit interest received *4* 14
Dividend income received *7* 24
Investment Manager’s fees paid *(1,434)* (1,337)
Other cash payments *(389)* (378)
UK Corporation tax paid *(42)* (204)
*Net cash flow from operating activities* *(876)* 1,104    
*Cash flow from investing activities*    
Purchase of fixed asset investments *(7,771)* (5,040)
Disposal of fixed asset investments *4,649* 30,620
*Net cash flow from investing activities* *(3,122)* 25,580    
*Cash flow from financing activities*    
Issue of share capital *8,941* 668
Cost of issue of equity *(35)* (17)
Dividends paid* *(21,589)* (3,714)
Purchase of own shares (including costs) *(2,213)* (1,841)
*Net cash flow from financing activities* *(14,896)* (4,904)    
*(Decrease)/increase in cash and cash equivalents* *(18,894)* 21,780
Cash and cash equivalents at start of the year *43,562* 21,782
*Cash and cash equivalents at end of the year* *24,668* 43,562

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

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

*Notes to the Financial Statements*

**1. Basis of preparation**
The Financial Statements have been prepared in accordance with applicable United Kingdom law and accounting standards, including Financial Reporting Standard 102 (“FRS 102”), and with the Statement of Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (“SORP”) issued by The Association of Investment Companies (“AIC”). The Financial Statements have been prepared on a going concern basis and further details can be found in the Directors’ report on pages 33 and 34 of the full Annual Report and Financial Statements.

The preparation of the Financial Statements requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The most critical estimates and judgements relate to the determination of carrying value of investments at Fair Value Through Profit and Loss (“FVTPL”) in accordance with FRS 102 sections 11 and 12. The Company values investments by following the International Private Equity and Venture Capital Valuation (“IPEV”) Guidelines as updated in 2018 and further detail on the valuation techniques used are outlined below.

Company information is shown on page 2 of the full Annual Report and Financial Statements.

**2. Accounting policies**
**Fixed asset investments**

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

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

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

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

· Investments listed on recognised exchanges are valued at their bid prices at the end of the accounting period or otherwise at fair value based on published price quotations.· Unquoted investments, where there is not an active market, are valued using an appropriate valuation technique in accordance with the IPEV Guidelines. Indicators of fair value are derived using established methodologies including earnings multiples, the level of third party offers received, cost or price of recent investment rounds, net assets, discounted cash flows and industry valuation benchmarks. Where price of recent investment is used as a starting point for estimating fair value at subsequent measurement dates, this has been benchmarked using an appropriate valuation technique permitted by the IPEV guidelines.· In situations where cost or price of recent investment is used, consideration is given to the circumstances of the portfolio company since that date in determining fair value. This includes consideration of whether there is any evidence of deterioration or strong definable evidence of an increase in value. In the absence of these indicators, the investment in question is valued at the amount reported at the previous reporting date. Examples of events or changes that could