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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 2021.

This announcement was approved for release by the Board of Directors on 21 June 2021.

This announcement has not been audited.

The Annual Report and Financial Statements for the year ended 31 March 2021 (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/31Mar2021.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

Financial highlights

�These are considered APMs, see note 2 on in the Strategic report for further explanation.

�

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 summary above is for the Company, Albion Venture Capital Trust PLC Ordinary shares only. Details of the financial performance of the C shares and Albion Prime VCT PLC, which have been merged into the Company, can be found at 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 ending 31 March 2022 of 1.83 pence per share to be paid on 30 July 2021 to shareholders on the register on 9 July 2021. The Board has also declared a special dividend of 15.00 pence per share, also payable on 30 July 2021 to shareholders on the register on 9 July 2021. Further details can be found in the Chairman�s statement on below.

Chairman�s statement

Introduction
I am delighted to announce that your Company has achieved a positive total return for the year of 7.10 pence per share representing a 10.12% return on opening Net Asset Value (�NAV�). This is against the backdrop of a very challenging year for many businesses as a result of the Coronavirus pandemic which continues to disrupt our economy. This result was primarily due to the sale of the Company�s three care homes for the elderly generating proceeds of �29.6 million in March 2021, which the Manager successfully managed to negotiate with a 2.4x return on exit against the worst conditions the care home sector has experienced in many years. Although the full implications of the Covid-19 pandemic are still unknown, I am optimistic that our portfolio companies will continue to add value, and we can still find new investment opportunities which will increase shareholder value over the longer term.

Results and dividends
As at 31 March 2021, the NAV was �72.7 million or 73.13 pence per share, compared to �70.6 million or 70.13 pence per share as at 31 March 2020, after the payment of total tax-free dividends of 4.24 pence per share. The total return before taxation was �7.3 million compared to a loss of �3.8 million for the previous year. The positive progress of 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, announced last year, the Company paid dividends totalling 4.24 pence per share during the year to 31 March 2021 (31 March 2020: 5.00 pence per share).

The successful sale of the Company�s three care homes generated substantial cash proceeds for the Company. These disposals represented a significant proportion of the Company�s NAV and thus, their disposal has increased the cash balances of the Company to �43.6 million at 31 March 2021, representing 61% of NAV.

It is clear to the Board that whilst it is important for a Venture Capital Trust, which by its nature has illiquid investments, to hold sufficient cash to manage operating costs, to service dividends and buy-backs and, most importantly, to make follow on and new investments as opportunities arise, this must be balanced against the requirements of a Venture Capital Trust to meet a minimum threshold of 80% invested in qualifying investments.

As a result of these significant disposals and the additional liquidity they generated, to maintain the Company�s qualifying VCT status, the Board has concluded that a substantial special dividend should be paid to shareholders. The Board is therefore pleased to declare a special dividend of 15.00 pence per share which will be paid in addition to the first interim dividend for the year ending 31 March 2022 of 1.83 pence per share to be paid on 30 July 2021 to shareholders on the register on 9 July 2021. The combined dividend will result in a total of �16.7 million being paid to shareholders, which is 23% of the 31 March 2021 NAV.

Whilst this reduces the Company�s assets, it provides a significant return to shareholders and, for those that wish to take it, an opportunity to re-invest the combined special dividend and first interim dividend in the Company via the Dividend Reinvestment Scheme (�DRIS�) as described below.

The Board will continue to monitor the Company�s qualifying holdings requirement throughout the year in order to maintain its status under VCT legislation. If required, any additional special dividend will be announced in December 2021 as part of the Half-yearly Report to 30 September 2021. This will provide the Board more time to clarify the Company�s cash position in the context of the HMRC qualifying holdings requirements, which is dependent on several factors, including the new investment rate, the level of share buybacks and the operating expenses of the Company.

Investment realisations
The strong return for the year was primarily driven by a number of successful exits which generated proceeds of �31.9 million for the Company. As noted above, the bulk of the proceeds came from the sale of the Company�s three care homes for the elderly; Active Lives Care, Ryefield Court Care, and Shinfield Lodge Care. The first investments in the homes were made over 5 years ago and the sale generated proceeds of �29.6 million which represents a 2.4x return on cost (including interest received), an excellent result for the Company. The homes were trading at mature occupancy levels.

The sale of G.Network Communications was also completed in December 2020, with a strong headline total return on all monies invested of 3.8x cost, although the terms of the sale will see proceeds being received in three years� time. In the current year, this still reflects a substantial �1.1 million of realised gains. In addition to this, Clear Review was sold during the year, generating 2.1x return on cost. Further details on realisations can be found in the table on page 26 of the full Annual Report and Financial Statements.

Investment performance and progress
Some of our portfolio companies have performed well despite the Covid-19 pandemic and this, including realised gains on disposals, has contributed to the total uplift in value of �6.5 million to the Company�s investments for the year. Our women�s health clinic, The Evewell (Harley Street), has been trading well following its re-opening in May 2020 and contributed to a �1.0 million uplift for the year. Other investments with uplifts in the year were Phrasee (�0.9 million) which continues to trade well and Healios (�0.3 million) which has been revalued due to a recent funding round.

Not surprisingly our hotel at Stansted Airport, owned by Kew Green (VCT) Stansted, continues to be affected by the ongoing international travel disruption caused by the Covid-19 pandemic. As a result of this, the valuation has been written down by a further �0.5 million. In addition to this, the valuation of Avora has been written down by �0.5 million due to its progress being behind plan.

The Company has been an active investor during the year with �5.0 million invested into portfolio companies, of which �3.5 million was invested across five new portfolio companies, all of which are expected to require further investment as the companies prove themselves and grow. These are:

• �1.3 million into Threadneedle Software Holdings (trading as Solidatus), a provider of data lineage software to enterprise customers in regulated sectors, which allows them to rapidly discover, visualise, catalogue and understand how data flows through their systems;
• �0.9 million into Seldon Technologies, a software company that enables enterprises to deploy Machine Learning models in production;
• �0.7 million into The Voucher Market (trading as WeGift), a cloud platform that enables corporates to purchase digital gift cards and to distribute them to employees and customers;
• �0.3 million into uMedeor (trading as uMed), a software platform that enables life science organisations to use patient data, in a compliant way, to recruit participants for clinical trials; and
• �0.3 million into TransFICC, a provider of a connectivity solution, connecting financial institutions with trading venues via a single API.

Following these new and follow on investments made, software and other technology now accounts for 33% of our portfolio (excluding cash), an increase from 22% 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.��

Risks and uncertainties
The wide reaching implications of the Covid-19 crisis continues to be the key risk facing the Company, including its impact on the UK and Global economies. There may still also be further potential implications of the UK�s departure from the European Union which may adversely affect our underlying portfolio companies. The Manager is continually assessing the exposure to such risks for each portfolio company, and where possible appropriate mitigating actions are being taken.

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

Dividend Reinvestment Scheme (�DRIS�)

The Company continues to offer a DRIS whereby shareholders can elect to receive dividends in the form of new shares. For shareholders not currently in the DRIS, the Company is offering shareholders the option to elect for a one-off sign up to have this combined special dividend and first interim dividend reinvested into new shares through the DRIS. Shareholders can take advantage of this by emailing [email protected] before midday on 14 July 2021. To elect for the reinvestment, please ensure your email contains your full name, Shareholder Reference Number, telephone number and confirms you have read the DRIS terms and conditions.

By re-investing the combined special dividend and first interim dividend in the capital of the Company, shareholders would be expected to broadly maintain the level of relative income they have been receiving from the Company under the variable dividend policy. The terms and conditions for the DRIS can be found on the Company�s webpage on the Manager�s website at www.albion.capital/funds/AAVC under the Fund reports section.

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.

Annual General Meeting

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

We are required by law to hold an AGM within six months of our financial year end. Whilst the roadmap announced by the government gives a new delayed target of 19 July 2021 as the date all legal limits on mixing will be lifted, it is clear that data rather than dates are the true driver of restrictions. The Board is also acutely aware that this is a fast-moving situation, with new variants further complicating any removal on restrictions in the short and medium term. Given the level of uncertainty still being experienced and likely to continue throughout 2021, and noting the success of last year�s live streamed AGM with some 3 times more engagement than in previous years, in the interests of continued caution, the Board has decided to repeat the process again this year. The AGM will be held at noon on 7 September 2021, at the registered office being 1 Benjamin Street, London, EC1M 5QL. Shareholders will be able to attend the event via the free platform, Hopin.

Full details of the business to be conducted at the Annual General Meeting are given in the Notice of the Meeting on pages 69 and 70 and in the Directors� report on pages 35 and 36 of the full Annual Report and Financial Statements.

As with last year�s AGM, the Directors will attend in person to meet the quorum and allow the continuation of this AGM. There will also be a representative of Albion Capital Group LLP as Company Secretary. At least two weeks prior to the AGM registration details will be sent to all shareholders who have an email address registered with Computershare. Shareholders who do not have an email address registered with Computershare should get in touch with [email protected] for information. In order to maximise shareholder engagement, the AGM will include a presentation from the Manager, the formal business of the AGM and answering questions we receive from shareholders.

Shareholders can submit their questions to the Board in advance of the AGM up until noon on 6 September 2021 by emailing [email protected]. Alternatively there is a facility on the Hopin platform to submit questions whilst attending the event. The Chairman will cover as many questions as possible in the time allocated. Following the AGM, a summary of responses will be published on the Managers website at www.albion.capital/funds/AAVC.

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

Outlook and prospects

As a result of the significant investment disposals and special dividend detailed above, the Board undertook a detailed review of the various options available to the Company for the best interests of shareholders as a whole. Through this detailed review, the Board concluded that it was in the best interest of shareholders to continue to operate as a smaller independent VCT and grow its NAV through continued positive investment performance and future fundraisings. The Company has delivered strong returns for shareholders over 25 years, and we continue to invest in exciting businesses that have not only shown resilience through the current healthcare pandemic, but in many cases growth, with many of our companies continuing to provide products and services that are considered innovative and essential by their customers. Having successfully sold our first technology investment during the year in Clear Review, which generated a 2.1 times return in the space of 17 months, this illustrated the potential future returns we could deliver to shareholders through focussing on our investment policy over the medium to long term.

Over time our portfolio will be both diversified and targeted at sectors such as software and healthcare which have proved resilient during the Covid-19 pandemic. Although there is still much uncertainty around the longer-term impact of the pandemic, I am confident that our portfolio companies are well positioned to grow, providing products and services critical to their customers, and therefore well placed to continue to deliver long term value to our shareholders.

Richard Glover
Chairman
21 June 2021

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 above.

Current portfolio analysis
The pie charts at the end of this announcement show the split of the portfolio valuation as at 31 March 2021 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, investee 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
During the year the Company sold a number of its asset-backed businesses which has resulted in asset-based investments decreasing as a proportion of the portfolio. The cash proceeds received from the disposals during the year was �30.6 million. These disposals have resulted in cash and cash equivalents accounting for 61% of the net asset value as at 31 March 2021 (2020: 30%). As outlined in the Chairman�s statement, a first interim dividend and a special dividend have been declared for a total of 16.83 pence per share. The quantum of this dividend is c.�16.7 million (23% of the net assets) and will be paid to shareholders on 30 July 2021.

In line with the Company�s investment policy, the majority of the remaining funds will be invested into healthcare (including digital healthcare) and software and other technology businesses. These areas represent 48% of the portfolio (excluding cash) and we expect this percentage to continue to increase in the coming years.

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

The Company paid dividends totalling 4.24 pence per share during the year ended 31 March 2021 (2020: 5.00 pence per share). The Board has declared a first dividend for the year ending 31 March 2022, of 1.83 pence per share, and a special dividend of 15.00 pence per share to be paid on 30 July 2021 to shareholders on the register on 9 July 2021.

As shown in the Company�s Income statement, the total return for the year was 7.10 pence per share (2020: loss of 4.10 pence per share). Investment income decreased to �2,467,000 (2020: �2,858,000). 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 as a result of the care homes sale.

The capital return on investments for the year of �6,508,000 (2020: loss of �4,925,000), has been discussed in the Chairman�s statement. This has led to an increase in net asset value to 73.13 pence per share (2020: 70.13 pence per share), which can be seen on the Balance sheet. This increase in net asset value is after taking account of the payment of 4.24 pence per share of dividends during the year.

There was a net cash inflow for the Company of �21,782,000 for the year (2020: net inflow of �15,577,000), from the disposal of fixed asset investments, offset by the investment in fixed asset investments, dividends paid, operating activities and the buy-back of shares.

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 �7.3 million (2020: loss of �3.8 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, coupled with the sale of our three care homes, we expect our investment income to significantly 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
After the payment of a substantial special dividend, 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 and 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.

������2.��� Net asset value per share and total shareholder value

Total shareholder value increased by 7.24 pence per Ordinary share for the year ended 31 March 2021 (gain of 10.3 per cent. on opening net asset value).

������3.���Shareholder value in the year^�

Source: Albion Capital Group LLP

^�Methodology: Shareholder return is calculated by the movement in total shareholder value for the year divided by the opening net asset value.

������4.���Dividend distributions

Dividends paid in respect of the year ended 31 March 2021 were 4.24 pence per share (2020: 5.00 pence per share). Cumulative dividends paid since inception amount to 164.04 pence per Ordinary share.

������5.���Ongoing charges

The ongoing charges ratio for the year ended 31 March 2021 was 2.4% (2020: 2.4%). 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 slightly to approximately 2.5% due to the reduction in the net asset value of the Company after the payment of the significant special dividend. The cap on the ongoing charges ratio is 2.5%.

������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 33 of the full Annual Report and Financial Statements.

The relevant tests to measure compliance have been carried out and independently reviewed for the year ended 31 March 2021. 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 Albion Capital Group LLP, which is authorised and regulated by the Financial Conduct Authority. Albion Capital Group LLP also provides company secretarial and other accounting and administrative support to the Company.

Management agreement
Under the Management agreement, the Manager provides investment management, secretarial and administrative services to the Company. The Management agreement can be terminated by either party on 12 months� notice. The Management agreement is subject to earlier termination in the event of certain breaches or on the insolvency of either party. The Manager is paid an annual fee equal to 1.9 per cent. of the net asset value of the Company, and an annual secretarial and administrative fee of �54,000 (2020: �53,000) 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 2021 the cumulative shortfall of the target return was 2.72 pence per share (31 March 2020: shortfall of 7.53 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 Albion Capital Group LLP. Allocation of investments is on the basis of an allocation agreement which is based, inter alia, on the ratio of funds available for investment.

Evaluation of the Manager
The Board has evaluated the performance of the Manager based on the returns generated by the Company, the continuing achievement of the 80 per cent. qualifying holdings investment requirement for Venture Capital Trust 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 Albion Capital Group LLP 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 stakeholders the Board considers most relevant, 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.

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

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

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

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

The Company adheres to the principles of the AIC Code of Corporate Governance and is also aware of other governance and corporate conduct guidance which it meets as far as practical, including in the constitution of a diversified and independent Board capable of providing constructive challenge.

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

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

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

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

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

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

Social and community issues, employees and human rights

The Board recognises the requirement under section 414C of the 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.

Further policies
The Company is not required to have any formal policies, however it has adopted a number of further policies relating to:

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

and these are set out in the Directors� report on pages 33 and 34 of the full Annual Report and Financial Statements.

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

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 risk has been the global pandemic which has impacted not only public health and mobility but also has had an adverse impact on the economy, the full impact of which is likely to be uncertain for some time.

The Directors have carried out a robust assessment of the Company�s principal risks and uncertainties, and explain how they are being mitigated as follows. They are satisfied that there has not been a material change in the Company�s exposure against each of the identified risks below.

Viability statement
In accordance with the FRC UK Corporate Governance Code published in 2018 and principle 36 of the AIC Code of Corporate Governance, the Directors have assessed the prospects of the Company over three years to 31 March 2024. The Directors believe that three years is a reasonable period in which they can assess the future of the Company to continue to operate and meet its liabilities as they fall due and is also the period used by the Board in the strategic planning process and is considered reasonable for a business of our nature and size. The three year period is considered the most appropriate given the forecasts that the Board requires from the Manager and the estimated timelines for finding, assessing and completing investments. The three year period also takes account of the potential impact of new regulations, should they be imposed, and how they may impact the Company over the longer term, and the availability of cash, but cannot take into account the full extent of the exogenous risks that are impacting on global economies at the date of these accounts.

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

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

Taking into account the processes for mitigating risks, monitoring costs, share buy-backs and issuance, the Manager�s compliance with the investment objective, policies and business model and the balance of the portfolio, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 31 March 2024.

This Strategic report of the Company for the year ended 31 March 2021 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
21 June 2021

Responsibility statement

In preparing these Financial Statements for the year to 31 March 2021, 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 2021 for the Company has been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law) and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
• the Chairman�s statement and Strategic report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties it faces.

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

A detailed �Statement of Directors� responsibilities� is contained on page 37 of the full Annual Report and Financial Statements.

For and on behalf of the Board

Richard Glover

Chairman

21 June 2021

Income statement

* adjusted for treasury shares

The accompanying notes below 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

* excluding treasury shares

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

These Financial Statements were approved by the Board of Directors and authorised for issue on 21 June 2021, and were signed on its behalf by

Richard Glover
Chairman
Company number: 03142609

Statement of changes in equity

* These reserves amount to �27,260,000 (2020: �16,818,000) which is considered distributable.� � � � �

Statement of cash flows

*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.

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 page 32 of the full Annual Report and Financial Statements.

The preparation of the Financial Statements requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The most critical estimates and judgements relate to the determination of carrying value of investments at Fair Value Through Profit and Loss (�FVTPL�) in accordance with FRS 102 sections 11 and 12. The Company values investments by following the International Private Equity and Venture Capital Valuation (�IPEV�) Guidelines as updated in 2018 and further detail on the valuation techniques used are outlined in note 2 below.

Company information 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 and industry valuation benchmarks. Where price of recent investment is used as a starting point for estimating fair value at subsequent measurement dates, this has been benchmarked using an appropriate valuation technique permitted by the IPEV guidelines.
• In situations where cost or price of recent investment is used, consideration is given to the circumstances of the portfolio company since that date in determining fair value. This includes consideration of whether there is any evidence of deterioration or strong definable evidence of an increase in value. In the absence of these indicators, the investment in question is valued at the amount reported at the previous reporting date. Examples of events or changes that could indicate a diminution include:
  • the performance and/or prospects of the underlying business are significantly below the expectations on which the investment was based;
  • a significant adverse change either in the portfolio company�s business or in the technological, market, economic, legal or regulatory environment in which the business operates; or
  • market conditions have deteriorated, which may be indicated by a fall in the share prices of quoted businesses operating in the same or related sectors.

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

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

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

Gains and losses on investments
Gains and losses arising from changes in the fair value of the investments are included in the Income statement for the year as a capital item and allocated to the unrealised capital reserve.

Investment income
Equity income
Dividend income is included in revenue when the investment is quoted ex-dividend.

Unquoted loan stock
Fixed returns on non-equity shares and debt securities are recognised when the Company�s right to receive payment and expect settlement is established. Where interest is rolled up and/or payable at redemption then it is recognised as income unless there is reasonable doubt as to its receipt.

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

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

• 75 per cent. of management fees and performance incentive fees are allocated to the realised capital reserve. This is in line with the Board�s expectation that over the long term 75 per cent. of the Company�s investment returns will be in the form of capital gains; and
• expenses which are incidental to the purchase or disposal of an investment are charged through the realised capital reserve.

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

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

Reserves
Called-up share capital
This reserve accounts for the nominal value of the Company�s shares.

Share premium
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.

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.

Other distributable reserve
The special reserve, treasury share reserve and the revenue reserve were combined in 2012 to form a single reserve named other distributable reserve.

This reserve accounts for movements from the revenue column of the Income statement, the payment of dividends, the buy-back of shares and other non-capital realised movements.

Dividends
Dividends by the Company are accounted for in the period in which the dividend is paid or approved at the Annual General Meeting.

Segmental reporting
The Directors are of the opinion that the Company is engaged in a single operating segment of business, being investment in smaller companies principally based in the UK.

3. Gains/(losses) on investments

4. Investment income

5. Investment management fee

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

During the year, services of a total value of �1,401,000 (2020: �1,413,000), were purchased by the Company from Albion Capital Group LLP; this includes �1,347,000 (2020: �1,360,000) of investment management fee and �54,000 (2020: �53,000) of secretarial and administration fee. At the financial year end, the amount due to Albion Capital Group LLP in respect of these services disclosed within payables was �359,000 (2020: �349,000).

Albion Capital Group LLP is, from time to time, eligible to receive arrangement fees and monitoring fees from portfolio companies. During the year ended 31 March 2021, fees of �193,000 attributable to the investments of the Company were received by Albion Capital Group LLP pursuant to these arrangements (2020: �232,000).

Albion Capital Group LLP, its partners and staff hold a total of 912,780 shares in the Company as at 31 March 2021.

In October 2019, the Company entered into an offer agreement relating to the Offers with the Company�s investment manager Albion Capital Group LLP (�Albion�), pursuant to which Albion received a fee of 2.5 per cent. of the gross proceeds of the Offers and out of which Albion paid the costs of the Offers, as detailed in the Prospectus.

6. Other expenses

7. Directors� fees

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

The Company�s key management personnel are the Directors. Further information regarding Directors� remuneration can be found in the Directors� remuneration report on page 44 of the full Annual Report and Financial Statements.

8. Tax charge/(credit) on ordinary activities
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Factors affecting the tax charge:

The tax charge for the year shown in the Income statement is lower than the standard rate of corporation tax in the UK of 19 per cent. (2020: 19 per cent.). The differences are explained above.

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

Notes

(i) ��������Venture Capital Trusts are not subject to corporation tax on capital gains.
(ii) ��������Tax relief on expenses charged to capital has been determined by allocating tax relief to expenses by reference to the applicable corporation tax rate and allocating the relief between revenue and capital in accordance with the SORP.
(iii) ��������No deferred tax asset or liability has arisen in the year.

9. Dividends

In addition to the dividends summarised above, the Board has declared a first dividend for the year ending 31 March 2022 of 1.83 pence per share to be paid on 30 July 2021 to shareholders on the register on 9 July 2021. The total dividend will be approximately �1,819,000.

The Board has also declared a special dividend of 15.00 pence per share, payable on 30 July 2021 to shareholders on the register on 9 July 2021. The total dividend will be approximately �14,909,000.

During the year, unclaimed dividends older than twelve years of �23,000 (2020: �22,000) were returned to the Company in accordance with the terms of the Articles of Association and have been accounted for on an accruals basis.

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

The weighted average number of shares is calculated after adjusting for treasury shares of 17,153,431 (2020: 14,084,031).

There are no convertible instruments, derivatives or contingent share agreements in issue so basic and diluted return per share are the same.

11. Fixed asset investments

�

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

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

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

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

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

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

Fair value investments had the following movements between valuation methodologies between 31 March 2020 and 31 March 2021:

The valuation will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEV Guidelines. The Directors believe that, within these parameters, there are no other more relevant methods of valuation which would be reasonable as at 31 March 2021.

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

All fixed asset investments (unquoted equity, preference shares and loan stock) are valued according to Level 3 valuation methods. The Level 3 valuation movements are therefore the same as the fixed asset investment valuation movements above.

FRS 102 requires the Directors to consider the impact of changing one or more of the inputs used as part of the valuation process to reasonable possible alternative assumptions. 75% of the portfolio of investments, consisting of equity and loan stock, is based on recent investment price, net assets and cost. For the remainder of the portfolio, the Board has considered the reasonable possible alternative input assumptions on the valuation of the portfolio and believes that changes to the inputs (by adjusting the discounts rates, earnings and revenue multiples) could lead to a change in fair value of the portfolio. The Board has reviewed the Manager�s adjusted inputs for a number of the largest portfolio companies (by value) which covers 18% of the portfolio. This has resulted in a total coverage of 93% of the portfolio of investments. The main inputs considered for each type of valuation is as follows:

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

The impact of these changes could result in an overall increase in the valuation of the equity investments by �636,000 (3.6%) or a decrease in the valuation of equity investments by �767,000 (4.4%).

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 of a portfolio company. 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 investment listed below is held as part of an investment portfolio and therefore, as permitted by FRS 102 section 9.9B, it is measured at fair value through profit and loss and not accounted for using the equity method.

The Company has interests of greater than 20 per cent. of the nominal value of any class (some of which are non-voting) of the allotted shares in the portfolio companies as at 31 March 2021 as described below.

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

13. Current assets

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

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

14. Payables: amounts falling due within one year

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

15. Called-up share capital

* Carrying one vote each

The Company purchased 3,069,400 Ordinary shares (2020: 2,566,843) to be held in treasury at a cost of �2,043,000 (2020: �1,866,000) representing 2.6 per cent. (2020: 2.2 per cent.) of its issued share capital as at 31 March 2021. The shares purchased for treasury were funded from the other distributable reserve.

The Company holds a total of 17,153,431 shares (2020: 14,084,031) in treasury at a nominal value of �172,000, representing 14.7 per cent. of the issued Ordinary share capital as at 31 March 2021.

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

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During the year, the Company issued the following new Ordinary shares of nominal value 1 penny each under the Albion VCTs Prospectus Top Up Offers 2019/20:

16. Basic and diluted net asset value per share

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 (adjusted for treasury shares) of 99,396,094 Ordinary shares (2020: 100,705,508).

17. Capital and financial instruments risk management
The Company�s capital comprises Ordinary shares as described in note 15. The Company is permitted to buy back its own shares for cancellation or treasury purposes, and this is described in more detail on page 36 of the full Annual Report and Financial Statements in the Directors� report.

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

The principal risks arising from the Company�s operations are:

• Market and investment 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 there have been no changes in the objectives, policies or processes for managing risks during the past year. The key risks are summarised below.

Market risk
As a Venture Capital Trust, it is the Company�s specific nature to evaluate the market risk of its portfolio in unquoted companies, details of which are shown on page 25 of the full Annual Report and Financial Statements. Market risk is the exposure of the Company to the revaluation and devaluation of investments as a result of macroeconomic changes. The main driver of market risk is the dynamics of market quoted comparators, as well as the financial and operational performance of portfolio companies. The Board seeks to reduce this risk by having a spread of investments across a variety of sectors. More details on the sectors the Company invests in can be found in the pie chart at the end of this announcement.

The Manager and the Board formally review market 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.

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

The sensitivity of a 10% increase or decrease in the valuation of the fixed asset investment portfolio (keeping all other variables constant) would increase or decrease the net asset value and return for the year by �2,836,000. Further sensitivity analysis on fixed asset investments is included in note 11.

Investment risk (including investment price risk)
Investment risk (including 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. The management of risk within the venture capital portfolio is addressed through careful investment selection, by diversification across different industry segments, by maintaining a wide spread of holdings in terms of financing stage and by limitation of the size of individual holdings. The Manager receives management accounts from portfolio companies and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment risk. The Directors monitor the Manager�s compliance with the investment policy, review and agree policies for managing this risk and monitor the overall level of risk on the investment portfolio on a regular basis.

Valuations are based on the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEV Guidelines. Details of the industries in which investments have been made are contained in the pie chart at the end of this announcement.

The maximum investment risk on the balance sheet date is the value of the fixed asset investment portfolio which is �28,355,000 (2020: �49,243,000). Fixed asset investments form 39 per cent. of the net asset value on 31 March 2021 (2020: 70 per cent.).

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 was estimated that a rise of 1 per cent. in all interest rates would have increased total return before tax for the year by approximately �327,000 (2020: �222,000). Furthermore, it was considered that a fall of interest rates below current levels during the year would have been unlikely.

The weighted average effective interest rate applied to the Company�s fixed rate assets during the year was approximately 11.9 per cent. (2020: 12.8 per cent.). The weighted average period to maturity for the fixed rate assets is approximately 6.9 years (2020: 6.0 years).

The Company�s financial assets and liabilities, all denominated in Sterling, consist of the following:

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

Credit risk
Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Company is exposed to credit risk through its receivables, investment in unquoted loan stock, and through the holding of cash on deposit with banks.

The Manager evaluates credit risk on loan stock and other similar instruments prior to investment, and as part of its ongoing monitoring of investments. In doing this, it takes into account the extent and quality of any security held. For loan stock investments made prior to 6 April 2018, which account for 83.8 per cent. of loan stock by value, typically loan stock instruments have a fixed or floating charge, which may or may not have been subordinated, over the assets of the portfolio company in order to mitigate the gross credit risk.

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

The Manager and the Board formally review credit risk (including receivables) and other risks, both at the time of initial investment and at quarterly Board meetings.

The Company�s total gross credit risk as at 31 March 2021 was limited to �10,792,000 of unquoted loan stock instruments (2020: �23,470,000), �43,562,000 cash deposits with banks (2020: �21,782,000) and �1,561,000 of other receivables (2020: �252,000).

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

The Company has an informal policy of limiting counterparty banking and floating rate note exposure to a maximum of 20 per cent. of net asset value for any one counterparty.

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

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 estimate that the security value approximates to the carrying value.

Liquidity risk
Liquid assets are held as cash on current account, on deposit or short term money market account. Under the terms of its Articles, the Company has the ability to borrow up to 10 per cent. of its adjusted capital and reserves of the latest published audited Balance sheet, which amounts to �5,596,000 as at 31 March 2021 (2020: �6,809,000).

The Company has no committed borrowing facilities as at 31 March 2021 (2020: �nil) and had cash balances of �43,562,000 (2020: �21,782,000). 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 �790,000 for the year to 31 March 2021 (2020: �649,000).

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

Loan stock can be past due as a result of interest or capital not being paid in accordance with contractual terms. The cost of loan stock valued below cost is �1,045,000 (2020: �1,026,000).

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

In view of the availability of adequate cash balances and the repayment profile of loan stock investments, 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 2021 are stated at fair value as determined by the Directors, with the exception of receivables, payables and cash which are carried at amortised cost. There are no financial liabilities other than payables. The Company�s financial liabilities are all non-interest bearing. It is the Directors� opinion that the book value of the financial liabilities is not materially different to the fair value and all are payable within one year.

18. Commitments and contingencies
The Company had no financial commitments in respect of investments at 31 March 2021 (2020: �nil).

There are no contingent liabilities or guarantees given by the Company as at 31 March 2021 (2020: �nil).

19. Post balance sheet events
Since 31 March 2021 the Company has had the following post balance sheet events:

• Investment of �813,000 in a new portfolio company, an open sources API management platform that enables enterprises to manage their APIs through their lifecycle (from design to publishing to controlling access and security);
• Investment of �736,000 in a new portfolio company, a provider of digital therapeutics and decentralised clinical trials for respiratory conditions;
• Investment of �564,000 in an existing portfolio company, uMotif Limited; and
• Investment of �309,000 in a new portfolio company, Accelex Technology Limited (T/A Accelex).

20. Related party transactions
Other than transactions with the Manager as disclosed in note 5, and the Directors� remuneration disclosed in the Directors� remuneration report on page 44 of the full Annual Report and Financial Statements, there are no other related party transactions or balances requiring disclosure.

21. Other information

The information set out in this announcement does not constitute the Company�s statutory accounts within the terms of section 434 of the Companies Act 2006 for the years ended 31 March 2021 and 31 March 2020, and is derived from the statutory accounts for those financial years, which have been, or in the case of the accounts for the year ended 31 March 2021, which will be, delivered to the Registrar of Companies. The Auditor reported on those accounts; the reports were unqualified and did not contain a statement under s498 (2) or (3) of the Companies Act 2006.

22. Publication

The full audited Annual Report and Financial Statements are being sent to shareholders and copies will be made available to the public at the registered office of the Company, Companies House, the National Storage Mechanism and also electronically at www.albion.capital/funds/AAVC/31Mar2021.pdf.

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Attachment

• Split of portfolio by sector, sector (excluding cash), stage of investment and number of employees