Albion Development VCT PLC

As required by the UK Listing Authority's Disclosure and Transparency Rules 4.1 and 6.3, Albion Development VCT PLC today makes public its information relating to the Annual Report and Financial Statements for the year ended 31 December 2014.

This announcement was approved for release by the Board of Directors on 10 March 2015.

This announcement has not been audited.

You will shortly be able to view the Annual Report and Financial Statements for the year to 31 December 2014 (which have been audited) at: www.albion-ventures.co.uk by clicking on 'Our Funds' and then 'Albion Development VCT PLC'. The Annual Report and Financial Statements for the year to 31 December 2014 will be available as a PDF document via a link under the 'Investor Centre' in the 'Financial Reports and Circulars' section. The information contained in the Annual Report and Financial Statements will include information as required by the Disclosure and Transparency Rules, including Rule 4.1.

Investment objectives

Albion Development VCT PLC (the "Company") is a venture capital trust which raised a total of £33.3 million through the issue of shares between 1999 and 2004. The C shares merged with the Ordinary shares in 2007.

A further £6.3 million was raised through an issue of new D shares in 2009/2010 and £9.8 million has been raised for the Ordinary shares through the Albion VCTs Top Up Offers since January 2011. The funds raised have been invested in accordance with the Company's existing investment policy.

The Company's investment policy is intended to provide investors with a regular and predictable source of dividend income combined with the prospects of long term capital growth. This is achieved by establishing a diversified portfolio of holdings in smaller, unquoted companies whilst at the same time selecting and structuring investments in such a way as to reduce the risks normally associated with investment in such companies. It is intended that this will be achieved as follows:

• Through investment in a number of higher risk companies with greater growth prospects in sectors such as software and computer services, and medical technology.

• This is balanced by investment in more stable, often asset-backed investments that provide a strong income stream. These include asset-based businesses in the leisure, healthcare, education and renewable energy sectors, as well as stable and profitable businesses in other sectors. Such investments will constitute the majority of investments by cost.

• In neither category do portfolio companies normally have any external borrowings with a prior charge ranking ahead of the VCT.

• Up to two-thirds of qualifying investments by cost comprise loan stock secured with a first charge on the portfolio company's assets.

Financial calendar

Record date for first dividend	1 May 2015
Payment of first dividend	29 May 2015
Annual General Meeting	12pm on 4 June 2015
Announcement of half-yearly results for the six months ending 30 June 2015	August 2015
Payment of second dividend (subject to Board approval)	30 September 2015

Financial highlights

Ordinary shares

150.8p	Net asset value plus dividends per Ordinary share from launch to 31 December 2014
3.4%	Annualised return since launch before tax relief but after initial issue costs
5.0p	Total tax free dividends per Ordinary share paid in the year to 31 December 2014
73.1p	Net asset value per Ordinary share as at 31 December 2014

D shares

126.5p	Net asset value plus dividends per D share from launch to 31 December 2014
5.0%	Annualised return since launch before tax relief but after initial issue costs
5.0p	Total tax free dividends per D share paid in the year to 31 December 2014
109.5	Net asset value per D share as at 31 December 2014

Financial highlights

	Ordinary shares		D shares
	31 December 2014 pence per share	31 December 2013 pence per share	31 December 2014 pence per share	31 December 2013 pence per share
Dividends paid	5.0	5.0	5.0	5.0
Revenue return	1.0	1.1	3.0	3.0
Capital return	3.0	4.0	4.1	11.4
Net asset value	73.1	74.1	109.5	107.4

Total shareholder net asset value return to 31 December 2014:

	Ordinary shares 31 December 2014 (pence per share) (ii)	C shares 31 December 2014 (pence per share) (ii) (iv)	D shares 31 December 2014 (pence per share)(ii)
Total dividends paid during the year ended: 31 December 1999(i)	1.0	-	-
31 December 2000	2.9	-	-
31 December 2001	3.9	-	-
31 December 2002	4.2	-	-
31 December 2003(iii)	4.5	0.7	-
31 December 2004	4.0	2.0	-
31 December 2005	5.2	5.9	-
31 December 2006	3.0	4.5	-
31 December 2007(iv)	5.0	5.3	-
31 December 2008	12.0	12.8	-
31 December 2009	4.0	4.3	-
31 December 2010	8.0	8.6	1.0
31 December 2011	5.0	5.4	2.5
31 December 2012	5.0	5.4	3.5
31 December 2013	5.0	5.4	5.0
31 December 2014	5.0	5.4	5.0
Total dividends paid to 31 December 2014	77.7	65.7	17.0
Net asset value as at 31 December 2014	73.1	78.3	109.5
Total shareholder return to 31 December 2014	150.8	144.0	126.5

In addition to the dividends paid above, the Board has declared a first dividend for the year ending 31 December 2015, of 2.5 pence per Ordinary share payable on 29 May 2015 to shareholders on the register as at 1 May 2015.

In accordance with the Articles of Association, on 31 March 2015, the D shares will convert to Ordinary shares on the basis of the net assets attributable to the Ordinary shares and the D shares as disclosed in the audited accounts for the year to 31 December 2014 and in accordance with the calculation as described and approved by shareholders' at the Extraordinary General Meeting on 28 October 2009. D shareholders will therefore receive 1.4975 Ordinary shares for each D share they currently own. As such current holders of D shares will receive a dividend of 2.5 pence per Ordinary share held post merger.

Notes
(i) Assuming subscription for Ordinary shares by the First Closing on 26 January 1999.
(ii) Excludes tax benefits upon subscription.
(iii) Those subscribing for C shares after 30 June 2003 were not entitled to the interim dividend.
(iv) The C shares were converted into Ordinary shares on 31 March 2007, with a conversion of 1.0715 Ordinary shares for each C share. The net asset value per share and all dividends paid subsequent to the conversion of the C shares to the Ordinary shares are multiplied by the conversion factor of 1.0715 in respect of the C shares return, in order to give an accurate picture of the shareholder value since launch relating to the C shares.

Chairman's statement

Introduction
The results for Albion Development VCT PLC for the year to 31 December 2014 showed total return of 4.0 pence per Ordinary share and 7.1 pence per D share, against 5.1 pence and 14.4 pence respectively for 2013.

Investment performance and progress
We had three exits in 2014; two were investments which date back to 2001, namely Peakdale Molecular and Consolidated Communications. The former resulted in a total return, including income received, of 2 times cost and the latter resulted in 1.4 times cost. In addition, we sold the successful Tower Bridge Health Club for a total return, including income, of 2.8 times cost. After the year end, our investment in Orchard Portman Group (which owns and operates a psychiatric hospital outside Taunton) was sold at a multiple, including interest income, of 1.6 times cost.

In the meantime, investment activity continued to be strong, with a total of £4.0 million invested for the Ordinary shares and £1.2 million for the D shares. Investments in new companies in the year by both pools of shares comprised  £610,000 in Egress (email encryption products), £400,000 in Grapeshot (search software used in the online advertising market), £650,000 in Omprompt (IT products and services for the automation of order processing) and £840,000 in Exco Intouch (healthcare IT services for monitoring clinical trials).

Companies that performed particularly well during the period, in addition to those which were sold, included Lowcosttravel, which experienced continued international growth; Proveca, which saw strong advances in the development of its pipeline of drugs for paediatric use; and Radnor House School, which continues to grow and has recently agreed to purchase the Combe Bank School near Sevenoaks, which currently has 200 pupils and occupies a 35 acre freehold site.

Against this, the Weybridge Health Club saw a further reduction in its third party professional valuation against the background of a strong competitive environment, while Silent Herdsman and Aridhia Informatics experienced slower progress than hoped for. In addition, our investment in Helveta, which provided timber tracking services for the forest industry, suffered from a withdrawal of international aid to the sector, was placed into administration and the investment written off.

Merger of the Ordinary shares and D shares
As originally planned when the D shares where launched in 2009, the Ordinary shares and the D shares are now due to merge based on their respective net asset values at 31 December 2014. The D shares have had a successful record, with net asset value now at 109.5 pence after having paid dividends of 17 pence per share since launch. The shares will merge on the basis that each holder of a D share will get 1.4975 new Ordinary shares.

Risks and uncertainties
The outlook for the domestic and global economies continues to be the key risk affecting your Company, despite the current growth in the UK. The task of the Manager is to allocate resources to those sectors and investment opportunities where growth can be both resilient and sustainable. Importantly, however, investment risk is mitigated through a variety of processes including our policy of ensuring that the VCT has a first charge over investee companies' assets wherever possible.

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

Discount management and share buy-backs
It remains the Board's primary objective to maintain sufficient resources for investment in existing and new investee companies and for the continued payment of dividends to shareholders. The Board's policy is to buy back shares in the market, subject to the overall constraint that such purchases are in the VCT's interest. It is the Board's intention for such buy-backs to be in the region of a 5 per cent. discount to net asset value, so far as market conditions and liquidity permit. 

During the year, the Company purchased in the market 877,700 Ordinary shares at a cost of £613,000, representing 2.3 per cent. of the opening shares in issue.

Transactions with the Manager
Details of transactions that took place with the Manager during the year can be found in note 5 and principally relate to the management fee.

Results and dividends
As at 31 December 2014, the net asset value was 73.1 pence per Ordinary Share and 109.5 pence per D share.  The Company will pay a first dividend for the financial year to 31 December 2015 of 2.5 pence per Ordinary share on 29 May 2015 to shareholders on the register on 1 May 2015.

Albion VCTs Prospectus Top Up Offers 2014/2015
Your Board, in conjunction with the boards of other VCTs managed by Albion Ventures LLP, launched a prospectus top up offer of new Ordinary shares on 17 November 2014 with Albion Development VCT PLC aiming to raise up to £6 million.

The funds raised by your Company pursuant to its Offer will be added to the liquid resources available for investment so as to put the Company into a position to take advantage of attractive investment opportunities over the next two to three years. Accordingly, the proceeds of the Offer will be applied in accordance with the investment policy. A prospectus has been published and can be obtained from www.albion-ventures.co.uk.

Continuation as a venture capital trust
At the 2015 Annual General Meeting members have the opportunity to confirm that they wish the Company to continue as a venture capital trust. Otherwise the Board is required to make proposals for the reorganisation, reconstruction or the orderly liquidation and winding up of the Company and present these to the members at a general meeting. Those shareholders who have been using their investment in the VCT to defer a capital gain should note that, on a return of capital, that gain would become chargeable at the prevailing rate of capital gains tax.

Since its launch, the Company has paid out dividends of 77.7 pence per Ordinary share, 65.7 pence per C share and 17.0 pence per D share. Total returns (net asset value plus dividends, but not counting the upfront tax benefits) of 150.8 pence per Ordinary share, 144.0 pence per C share and 126.5 pence per D share have been achieved.

Your Board believes that the Albion VCTs have the potential to be highly effective long-term savings vehicles, with strong tax-free dividend streams.  Therefore, the Board recommends that shareholders should vote in favour of the Company continuing as a venture capital trust for a further ten years, as they intend to vote in respect of their own shares.

Outlook and prospects
The merger of the two classes of share, combined with the current fundraising, will create an enlarged investment pool of approaching £40 million. The spread of investments within that pool is unusually broad and with good prospects for growth, both within the asset-backed segment and the growth and technology portion. Therefore, despite the generally muted outlook for economies globally, we believe our portfolio as a whole has good prospects for sustained growth and value creation. 

Geoffrey Vero
Chairman
10 March 2015

Strategic report

Investment objective and policy
Venture Capital Trusts use tax relief to encourage private investors to help stimulate growth, employment and innovation in the United Kingdom.  The Company's investment policy is intended to provide investors with a regular and predictable source of dividend income combined with the prospects of long term capital growth. This is achieved by establishing a diversified portfolio of holdings in smaller, unquoted companies whilst at the same time selecting and structuring investments in such a way as to manage and mitigate the risks normally associated with investment in such companies. It is intended that this will be achieved as follows:

• Through investment in a number of higher risk companies with greater growth prospects in sectors such as software and computer services, and medical technology.

• This is balanced by investment in more stable, often asset-backed investments that provide a strong income stream. These include asset-based businesses in the leisure, healthcare, education and renewable energy sectors, as well as stable and profitable businesses in other sectors. Such investments will constitute the majority of investments by cost.

• In neither category do portfolio companies normally have any external borrowings with a prior charge ranking ahead of the VCT.

• Up to two-thirds of qualifying investments by cost comprise loan stock secured with a first charge on the portfolio company's assets.

Funds held pending investment or for liquidity purposes will be held as cash on deposit or in floating rate notes or similar instruments with banks or other financial institutions with high credit ratings assigned by international credit rating agencies.

Current portfolio sector allocation
As mentioned above, it is intended that the Company's investment portfolio will be split between higher risk companies with greater growth prospects, balanced by investment in more stable companies, which are often asset-backed, that provide a strong income stream combined with a protection of capital. The pie charts at the end of this announcement show the split of the portfolio valuation by industrial or commercial sector as at 31 December 2014. Details of the principal investments made by the Company are shown in the Portfolio of investments on pages 17 to 21 of the full Annual Report and Financial Statements.

Direction of portfolio
The sector analysis of the combined VCT's investment portfolio shows that IT/Software now accounts for 17 per cent. compared to 18 per cent. for Ordinary shares and 4 per cent. for D shares in the previous financial year as a result of a number of new investments made in the IT sector including Grapeshot and Egress. We would anticipate both the IT/Software and Healthcare sectors increasing in importance in the current period, as they are areas that the manager has targeted for value creation and a good potential source of recurring income.

Renewable energy in the combined portfolio now accounts for 22 per cent.  compared to 18 per cent. for Ordinary shares and 25 per cent. for D shares at the end of the previous financial year largely due to revaluation movements throughout the portfolio over the past year. 20 per cent, by cost in aggregate, is the limit set by the Board for renewable investments, so no further investment is planned in this sector.

The sector analysis for the combined investment portfolio remain in line with the Board's target exposure with a view to maintaining a balanced portfolio of investments as new opportunities arise.

Results and dividend policy

	Ordinary shares	D shares	Combined
	£'000	£'000	£'000
Net revenue return for the year ended 31 December 2014	363	190	553
Realised and unrealised capital gain for the year	1,111	263	1,374
Dividend of 2.5 pence per share paid on 30 May 2014	(911)	(159)	(1,070)
Dividend of 2.5 pence per share paid on 30 September 2014	(914)	(159)	(1,073)
Transferred (from)/to reserves	(351)	135	(216)
Net assets as at 31 December 2014	27,440	6,995	34,435
Net asset value per share as at 31 December 2014	73.1p	109.5p

The Company paid dividends of 5.0 pence per Ordinary share and 5.0 pence per D share during the year (2013: 5.00 pence per Ordinary share and 5.0 pence per D share).

As described in the Chairman's statement the Board has declared a first dividend for the year ending 31 December 2015 of 2.5 pence per Ordinary share payable on 29 May 2015 to shareholders on the register as at 1 May 2015.

As shown in the Ordinary share's Income statement, the total investment income increased to £855,000 (2013: £731,000) due, in part, to higher interest received on loan stock investments during the year. The Ordinary share's total revenue return to equity holders has fallen to £363,000 (2013: £379,000), due to the non-recurring impairment of accrued interest (2013: £nil).

The Ordinary shares' total capital return for the year was £1,111,000 (2013: £1,335,000). This is mainly attributable to the unrealised revaluation movements in the Company's investment portfolio and by realised gains on disposal of investments, in particular Peakdale Molecular and Tower Bridge Health Club, offset by management fees charged to capital.

The Ordinary shares' total return was 4.0 pence per share (2013: 5.1 pence per share). The Ordinary shares' Balance sheet shows that the net asset value has decreased over the last year to 73.1 pence per share (2013: 74.1 pence per share). The decrease in net asset value can be attributed to the payment of 5.0 pence per Ordinary share of dividends offset by movements in realised and unrealised gains and net revenue return.

The cash flow for the Ordinary shares and D shares was negative for the year as a result of a number of new investments made and dividends paid during the year, partially offset by net cash inflow from operating activities, the disposal of investments and the issue of Ordinary shares.

The D shares' Income statement shows a decrease in income to £296,000 (2013: £328,000) largely due   to repayments on loan stock investments made during the year by Hilson Moran, Masters Pharmaceuticals and Radnor House School.

The D shares' total capital return was £263,000 (2013: £726,000) reflecting the unrealised revaluations in the Company's investment, offset by management fees charged to capital.

The D shares' total return was 7.1 pence per share (2013: 14.4 pence per share). The D shares' Balance sheet shows a net asset value of 109.5 pence per share (2013: 107.4 pence per share). The increase in net asset value can be attributed to the factors described above, notwithstanding the payment of the dividend of 5.0 pence per D share during the year.

Review of business and outlook
The result for the year to 31 December 2014 show a total return of 150.8 pence per share since launch for Ordinary shares (2013: 146.8 pence per share) and 126.5 pence per share since launch for D shares (2013: 119.4 pence per share). We believe there should be further progress in the current year, with selected disposals and new investments, with particular focus in our core areas of healthcare, IT/Software and education.

The Directors do not foresee any major changes in the activity undertaken by the Company in the current year. The Company continues with its objective to invest in unquoted companies throughout the United Kingdom with a view to providing both capital growth and a reliable dividend income to shareholders over the long term.

A detailed review of the Company's business during the year is contained in the Chairman's statement. Details of significant events which have occurred since the end of the financial year are listed in note 21. Details of transactions with the Manager are shown in note 5.

Future prospects
The key drivers for returns within the portfolio are those sectors that are involved in the longer-term global trends. These include the importance of healthcare in an ageing population, sustainable energy against a background of climate change, education amid the need to improve the national skills base and the developing use of information technology in an environment of universal information. The portfolio is well positioned to take advantage of these changes, with a longer term aim of total return exceeding dividends.

Conversion of D shares to Ordinary shares
As required under your Company's Articles of Association, the D shares convert into Ordinary shares on the ratio of their respective net asset values per share at 31 December 2014. The conversion is effective from 31 March 2015. Based on their respective net asset values, D shareholders will receive 1.4975 new Ordinary shares for each D share held. New share certificates will be sent out to shareholders by no later than 30 April 2015. Once the new Ordinary share certificates have been dispatched, the D share certificates will have no further value and should be destroyed.

The merged portfolio will comprise investments in 46 companies and will benefit from both the revenue generating maturity of the older companies within the Ordinary share portfolio and the growth potential of the D share portfolio.

Bearing in mind the projected income generation of the enlarged portfolio, combined with available reserves and cash resources, it will continue to be the Company's longer term target to pay out annual dividends of 5 pence per Ordinary share, so far as it is able.

Key performance indicators
The Directors believe that the following key performance indicators, 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. These are:

1. Net asset value total return relative to FTSE All Share Index total return
   The graphs on page 4 of the full Annual Report and Financial Statements shows the net asset value total return against the FTSE All-Share Index total return, in both instances with dividends reinvested. Details on the performance of the net asset value and return per share for the year are shown above.
    
2. Net asset value per share and cumulative net asset value total shareholder return
   Net asset value decreased by 1.3 per cent. to 73.1 pence per Ordinary share and increased by 1.9 per cent. to 109.5 pence per D share for the year ended 31 December 2014.
   Cumulative net asset value total return to shareholders increased by 2.7 per cent. to 150.8 pence per Ordinary share and 5.9 per cent. to 126.5 pence per D share for the year ended 31 December 2014.
    
3. Dividend distributions
   Dividends paid in respect of the year ended 31 December 2014 were 5.0 pence per Ordinary share (2013: 5.0 pence per Ordinary share) and 5.0 pence per D share (2013: 5.0 pence per D share), in line with the Board's dividend objective. Cumulative dividends paid since inception are 77.7 pence per Ordinary share and 17.0 pence per D share.
    
4. Ongoing charges
   The ongoing charges ratio for the year to 31 December 2014 was 2.9 per cent. (2013: 2.9 per cent.). The ongoing charges ratio has been calculated using the Association of Investment Companies' (AIC) recommended methodology. This figure shows shareholders the total recurring annual running expenses (including investment management fees charged to capital reserve) as a percentage of the average net assets attributable to shareholders. The Directors expect the ongoing charges ratio for the next year to be approximately 2.9 per cent.

VCT regulation
The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC. In order to maintain its status under Venture Capital Trust legislation, a VCT must comply on a continuing basis with the provisions of Section 274 of the Income Tax Act 2007, details of which are provided in the Directors' report on page 25 of the full Annual Report and Financial Statements.

As part of the Government's wider review of the VCT regime, new rules have been introduced under the Finance Act 2014, which include:

• allowing investors to subscribe for shares via nominee accounts;
• restricting individuals' entitlement to VCT income tax relief where investments have been made within six months of a disposal of shares in the same VCT; and
• preventing VCTs from returning capital that does not relate to profits on investments within three years of the end of the accounting period in which shares were issued to investors.

             
The Directors do not believe that updates to the Finance Act would create a material change in the way the Company is currently run.

The relevant tests to measure compliance have been carried out and independently reviewed for the year ended 31 December 2014. These showed that the Company has compiled with all tests and continues to do so.

Operational arrangements
The Company has delegated the investment management of the portfolio to Albion Ventures LLP, which is authorised and regulated by the Financial Conduct Authority. Albion Ventures LLP also provides company secretarial and other accounting and administrative support to the Company. Further details of the fees paid to the Manager can be found in note 5.

Management agreement
Under the Management agreement, the Manager provides investment management, secretarial and administrative services to the Company. The Management agreement may be terminated by either party on 12 months' notice and is subject to earlier termination in the event of certain breaches or on the insolvency of either party. The Manager is paid an annual fee equal to 2.25 per cent. of the net asset value of the Company paid quarterly in arrears.

Total annual expenses, including the management fee, are limited to 3.0 per cent. of the net asset value.

In line with common practice, the Manager is also entitled to an arrangement fee, payable by each portfolio company, of approximately 2 per cent. on each investment made and also Directors' fees where the Manager has a representative on the portfolio company's board.

Management performance incentive
The management performance incentive structure sets a minimum target level whereby no performance fee is payable to the Manager until the total return exceeds 6.5 pence per share per annum from a base on 1 January 2007 of 98.7 pence for the Ordinary shares and 100 pence for the D shares from the date of first admission of those shares. 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. To the extent that the total return exceeds the threshold over the relevant period, a performance fee will be paid to the Manager of an amount equal to 20 per cent. of the excess. 

As a result of the conversion of the D shares to Ordinary shares, the performance incentive will be amended to accommodate the fact that there will only be one class of share in the future.  Given the fact that the enlarged pool of investments following the merger of the two share classes will be represented by share issues over two very different periods of time, the amended Management performance incentive will therefore be applied against the capital of the Company in proportion to the audited net asset values of the Ordinary shares and the D shares at 31 December 2014 and will be measured against the total return applicable to each of those share classes.

The revised management performance incentive is illustrated as follows:

Share class	Total return at 31 December 2014 (p)	Hurdle rate at 31 December 2014 (p)	Share class % of net assets
Ordinary share	150.8	180.2	80%
D share	126.5	130.9	20%

Any performance fee payable will be calculated based on the above hurdles, escalating at 6.5p per annum, and in respect of the relevant proportion of that share class' share of the Company's net assets as at 31 December 2014.

There was no management performance incentive fee payable during the year (2013: nil).

Evaluation of the Manager
The Board has evaluated the performance of the Manager based on the returns generated by the Company, the continuing achievement of the 70 per cent. investment requirement for venture capital trust status, the long term prospects of current investments, a review of the Management agreement and the services provided therein, and benchmarking the performance of the Manager to other service providers. The Board believes that it is in the interests of shareholders as a whole, and of the Company, to continue the appointment of the Manager for the forthcoming year.

Alternative Investment Fund Managers Directive ("AIFMD")
The Board has considered the impact on your Company of the AIFMD, an EU Directive that came into force in July 2013 to regulate the Managers of Alternative Investment Funds. The Board has appointed Albion Ventures LLP as the Company's AIFM as required by the AIFMD. Albion Ventures LLP's registration as an AIFM was approved by the Financial Conduct Authority on 3 June 2014.

Discount management and share buy-back policy
It remains the Board's primary objective to maintain sufficient resources for investment in existing and new portfolio companies and for the continued payment of dividends to shareholders. The Board's policy is to buy back shares in the market, subject to the overall constraint that such purchases are in the Company's interest.

It is the Board's intention for such buy-backs to be in the region of a 5 per cent. discount to net asset value, so far as market conditions and liquidity permit.

Further details of shares bought back during the year ended 31 December 2014 can be found in note 15 of the 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 policies in these matters and as such these requirements do not apply.

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

• Environment
• Global greenhouse gas emissions
• Anti-bribery
• Diversity

and these are set out in the Directors' report on pages 25 and 26 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. The principal risks and uncertainties of the Company as identified by the Board and how they are managed are as follows:

Risk	Possible consequence	Risk management
Economic risk	Changes in economic conditions, including, for example, interest rates, rates of inflation, industry conditions, competition, political and diplomatic events and other factors could substantially and adversely affect the Company's prospects in a number of ways.	To reduce this risk, in addition to investing equity in portfolio companies, the Company often invests in secured loan stock and has a policy of not normally permitting any external bank borrowings within portfolio companies. Additionally, the Manager has been rebalancing the sector exposure of the portfolio with a view to reducing reliance on consumer led sectors.
Investment risk	This is the risk of investment in poor quality assets which reduces the capital and income returns to shareholders, and negatively impacts on the Company's reputation. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes are more fragile than larger, long established businesses.	To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its strong track record for investing in this segment of the market. In addition, the Manager operates a formal and structured investment process, which includes an Investment Committee, comprising investment professionals from the Manager and at least one external investment professional. The Manager also invites and takes account of comments from non-executive Directors of the Company on investments discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on portfolio company boards) and the Board receives detailed reports on each investment as part of the Manager's report at quarterly board meetings.
Valuation risk	The Company's investment valuation methodology is reliant on the accuracy and completeness of information that is issued by portfolio companies. In particular, the Directors may not be aware of or take into account certain events or circumstances which occur after the information issued by such companies is reported.	As described in note 2 of the Financial Statements, the unquoted equity investments, convertible loan stock and debt issued at a discount held by the Company are designated at fair value through profit or loss and valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines. These guidelines set out recommendations, intended to represent current best practice on the valuation of venture capital investments. These investments are valued on the basis of forward looking estimates and judgments about the business itself, its market and the environment in which it operates, together with the state of the mergers and acquisitions market, stock market conditions and other factors. In making these judgments the valuation takes into account all known material facts up to the date of approval of the Financial Statements by the Board. All other unquoted loan stock is measured at amortised cost. The values of a number of investments are also underpinned by independent third party professional valuations.
VCT approval risk	The Company's current approval as a venture capital trust allows investors to take advantage of tax reliefs on initial investment and ongoing tax free capital gains and dividend income. Failure to meet the qualifying requirements could result in investors losing the tax relief on initial investment and loss of tax relief on any tax-free income or capital gains received. In addition, failure to meet the qualifying requirements could result in a loss of listing of the shares.	To reduce this risk, the Board has appointed the Manager, which has a team with significant experience in venture capital trust management, used to operating within the requirements of the venture capital trust legislation. In addition, to provide further formal reassurance, the Board has appointed Robertson Hare LLP as its taxation adviser. Robertson Hare LLP report quarterly to the Board to independently confirm compliance with the venture capital trust legislation, to highlight areas of risk and to inform on changes in legislation. Each investment in a new portfolio company is also pre-cleared with H.M. Revenue & Customs.
Compliance risk	The Company is listed on The London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company's shares, or other penalties under the Companies Act or from financial reporting oversight bodies.	Board members and the Manager have experience of operating or advising at senior levels within quoted businesses. In addition, the Board and the Manager receive regular updates on new regulation from its auditor, lawyers and other professional bodies.
Internal control risk	Failures in key controls, within the Board or within the Manager's business, could put assets of the Company at risk or result in reduced or inaccurate information being passed to the Board or to shareholders.	The Audit Committee meets with the Manager's Internal Auditor, PKF Littlejohn LLP, when required, receiving a report regarding the last formal internal audit performed on the Manager, and providing the opportunity for the Audit Committee to ask specific and detailed questions. Patrick Reeve, as a member of the Board, met with the internal audit Partner of PKF Littlejohn LLP in January 2015 to discuss the most recent Internal Audit Report on the Manager. The Manager has a comprehensive business continuity plan in place in the event that operational continuity is threatened. Further details regarding the Board's management and review of the Company's internal controls through the implementation of the Turnbull guidance are detailed on page 32 of the full Annual Report and Financial Statements.   Measures are in place to mitigate information risk in order to ensure the integrity, availability and confidentiality of information used within the business.
Reliance upon third parties risk	The Company is reliant upon the services of Albion Ventures LLP for the provision of investment management and administrative functions.	There are provisions within the management agreement for the change of Manager under certain circumstances (for further detail, see the management agreement paragraph within this Strategic Report). In addition, the Manager has demonstrated to the Board that there is no undue reliance placed upon any one individual within Albion Ventures LLP.
Financial risk	By its nature, as a venture capital trust, the Company is exposed to investment risk (which comprises investment price risk and cash flow interest rate risk), credit risk and liquidity risk.	The Company's policies for managing these risks and its financial instruments are outlined in full in note 19 to the Financial Statements.   All of the Company's income and expenditure is denominated in sterling and hence the Company has no foreign currency risk. The Company is financed through equity and does not have any borrowings. The Company does not use derivative financial instruments for speculative purposes.
Reputational risk	Arises from broader performance and ethical issues, including investment in businesses and sectors that are inconsistent with the values of Board and the VCT or, the Boards of investee companies take actions which similarly are inconsistent with the values of the VCT.	The Board clearly articulates to the Investment Manager its broader aims and standards including those sectors which are consistent with the values of the Board. The Board regularly reviews the performance and investment strategy of the Investment Manager. The Investment Manager periodically attends Board meetings of the VCT's investee companies and across the portfolio receives periodic management information and is alert to potential threats to reputation.

This Strategic report of the Company for the year ended 31 December 2014 has been prepared in accordance with the requirements of section 414A of the Companies Act 2006 (the "Act"). The purpose of this report is to provide Shareholders with sufficient information to enable them to assess the extent to which the Directors have performed their duty to promote the success of the Company in accordance with section 172 of the Act.

On behalf of the Board,

Geoffrey Vero
Chairman

10 March 2015

Responsibility Statement
In preparing these financial statements for the year to 31 December 2014, the Directors of the Company, being Geoffrey Vero, Jonathan Thornton, Andrew Phillipps and Patrick Reeve, confirm that to the best of their knowledge: 

- summary financial information contained in this announcement and the full Annual Report and Financial Statements for the year ended 31 December 2014 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 and loss of the Company for the year ended 31 December 2014 as required by DTR 4.1.12.R;

- the Chairman's statement and Strategic report include a fair review of the information required by DTR 4.2.7R (indication of important events during the year ended 31 December 2014 and description of principal risks and uncertainties that the Company faces); and

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

 A detailed "Statement of Directors' responsibilities for the preparation of the Company's financial statements" is contained within the full audited Annual Report and Financial Statements.

By order of the Board
Geoffrey Vero
Chairman
10 March 2015

Income statement

		Combined Year ended 31 December 2014			Combined Year ended 31 December 2013
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments	3	-	1,817	1,817	-	2,474	2.474
Investment income	4	1,151	-	1,151	1,059	-	1,059
Investment management fees	5	(187)	(562)	(749)	(177)	(532)	(709)
Other expenses	6	(305)	-	(305)	(196)	-	(196)
Return on ordinary activities before tax		659	1,255	1,914	686	1,942	2,628
Tax (charge)/credit on ordinary activities	8	(106)	119	13	(114)	119	5
Return attributable to shareholders		553	1,374	1,927	572	2,061	2,633

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.

All revenue and capital items in the above statement derive from continuing operations.

There are no recognised gains or losses other than the results for the year disclosed above, accordingly a Statement of total recognised gains and losses is not required.

The difference between the reported return on ordinary activities before tax and the historical return is due to the fair value movements on investments. As a result a note on historical cost profit and losses has not been prepared.

Disclosure of basic and diluted earnings per share is given in the underlying Ordinary and D share Income statements.

Income statement (non-statutory analysis)

		Ordinary shares Year ended 31 December 2014			Ordinary shares Year ended 31 December 2013
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments	3	-	1,471	1,471	-	1,665	1,665
Investment income	4	855	-	855	731	-	731
Investment management fees	5	(148)	(446)	(594)	(141)	(422)	(563)
Other expenses	6	(259)	-	(259)	(152)	-	(152)
Return on ordinary activities before tax		448	1,025	1,473	438	1,243	1,681
Tax (charge)/credit on ordinary activities	8	(85)	86	1	(59)	92	33
Return attributable to shareholders		363	1,111	1,474	379	1,335	1,714
Basic and diluted return per share (pence)*	10	1.0	3.0	4.0	1.1	4.0	5.1
		D shares Year ended 31 December 2014			D shares Year ended 31 December 2013
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments	3	-	346	346	-	809	809
Investment income	4	296	-	296	328	-	328
Investment management fees	5	(39)	(116)	(155)	(36)	(110)	(146)
Other expenses	6	(46)	-	(46)	(44)	-	(44)
Return on ordinary activities before tax		211	230	441	248	699	947
Tax (charge)/credit on ordinary activities	8	(21)	33	12	(55)	27	(28)
Return attributable to shareholders		190	263	453	193	726	919
Basic and diluted return per share (pence)*	10	3.0	4.1	7.1	3.0	11.4	14.4

* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.

Balance sheet  

		Combined 31 December 2014	Combined 31 December 2013
	Note	£'000	£'000
Fixed asset investments	11	29,873	25,997
Current assets
Trade and other debtors	13	201	99
Current asset investments	13	-	36
Cash at bank and in hand	17	4,645	6,210
		4,846	6,345
Creditors: amounts falling due within one year	14	(284)	(340)
Net current assets		4,562	6,005
Net assets		34,435	32,002
Capital and reserves
Called up share capital	15	482	441
Share premium		5,560	2,343
Capital redemption reserve		12	8
Unrealised capital reserve		1,954	125
Realised capital reserve		4,500	3,772
Other distributable reserve		21,927	25,313
Total equity shareholders' funds		34,435	32,002

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

Disclosure of basic and diluted net asset value per share is given in the underlying Ordinary and D shares Balance sheets.

These Financial Statements were approved by the Board of Directors, and authorised for issue on 10 March 2015 and were signed on its behalf by

Geoffrey Vero
Chairman

Company number: 03654040

Balance sheet   (non-statutory analysis)

		Ordinary shares 31 December 2014	Ordinary shares 31 December 2013
	Note	£'000	£'000
Fixed asset investments	11	23,449	20,945
Current assets
Trade and other debtors	13	195	95
Current asset investments	13	-	36
Cash at bank and in hand	17	4,010	4,330
		4,205	4,461
Creditors: amounts falling due within one year	14	(214)	(231)
Net current assets		3,991	4,230
Net assets		27,440	25,175
Capital and reserves
Called up share capital	15	418	377
Share premium		5,488	2,304
Capital redemption reserve		12	8
Unrealised capital reserve		544	(987)
Realised capital reserve		4,494	3,731
Other distributable reserve		16,484	19,742
Total equity shareholders' funds		27,440	25,175
Basic and diluted net asset value per share (pence)*	16	73.1	74.1

* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.

Balance sheet   (non-statutory analysis)

		D shares 31 December 2014	D shares 31 December 2013
	Note	£'000	£'000
Fixed asset investments	11	6,424	5,052
Current assets
Trade and other debtors	13	6	4
Cash at bank and in hand	17	635	1,880
		641	1,884
Creditors: amounts falling due within one year	14	(70)	(109)
		571
Net current assets			1,775
Net assets		6,995	6,827
Capital and reserves
Called up share capital	15	64	64
Share premium		72	39
Unrealised capital reserve		1,410	1,112
Realised capital reserve		6	41
Other distributable reserve		5,443	5,571
Total equity shareholders' funds		6,995	6,827
Basic and diluted net asset value per share (pence)*	16	109.5	107.4

* excluding treasury shares
The accompanying notes form an integral part of these Financial Statements.

Reconciliation of movements in shareholders' funds
Combined

	Called-up share capital	Share premium	Capital redemption reserve	Unrealised capital reserve	Realised capital reserve*	Other distributable reserve*	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
As at 1 January 2014	441	2,343	8	125	3,772	25,313	32,002
Return for the year	-	-	-	1,254	120	553	1,927
Transfer of unrealised losses to realised losses	-	-	-	575	(575)	-	-
Cancellation of treasury shares	(1)	-	1	-	-	-	-
Purchase of shares for cancellation	(3)	-	3	-	-	(190)	(190)
Purchase of treasury shares	-	-	-	-	-	(423)	(423)
Issue of equity (net of costs)	45	3,217	-	-	-	-	3,262
Transfer from other distributable reserve to realised capital reserve	-	-	-	-	1,183	(1,183)	-
Dividends paid	-	-	-	-	-	(2,143)	(2,143)
As at 31 December 2014	482	5,560	12	1,954	4,500	21,927	34,435
As at 1 January 2013	421	392	2	(2,046)	3,326	28,010	30,105
Return/(loss) for the year	-	-	-	2,253	(191)	572	2,633
Transfer of unrealised gains to realised gains	-	-	-	(82)	82	-	-
Purchase of shares for treasury	-	-	-	-	-	(261)	(261)
Purchase of shares for cancellation	(6)	-	6	-	-	(441)	(441)
Issue of equity (net of costs)	26	1,951	-	-	-	-	1,977
Transfer from other distributable reserve to realised capital reserve	-	-	-	-	555	(555)	-
Dividends paid	-	-	-	-	-	(2,012)	(2,012)
As at 31 December 2013	441	2,343	8	125	3,772	25,313	32,002

* Included within these reserves is an amount of £26,427,000 (2013: £29,085,000) which is considered distributable.

A transfer of £1,183,000 (2013: £555,000) representing gross realised losses on disposal of investments during the year ended 31 December 2014 has been made from the other distributable reserve to the realised capital reserve.

Reconciliation of movements in shareholders' funds
Ordinary shares (non-statutory analysis)

	Called-up share capital	Share premium	Capital redemption reserve	Unrealised capital reserve	Realised capital reserve*	Other distributable reserve*	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
As at 1 January 2014	377	2,304	8	(987)	3,731	19,742	25,175
Return for the year	-	-	-	913	198	363	1,474
Transfer of unrealised losses  to realised losses	-	-	-	618	(618)	-	-
Cancellation of treasury shares	(1)	-	1	-	-	-	-
Purchase of shares for cancellation	(3)	-	3	-	-	(190)	(190)
Purchase of treasury shares	-	-	-	-	-	(423)	(423)
Issue of equity (net of costs)	45	3,184	-	-	-	-	3,229
Transfer from other distributable reserve to realised capital reserve	-	-	-	-	1,183	(1,183)	-
Dividends paid	-	-	-	-	-	(1,825)	(1,825)
As at 31 December 2014	418	5,488	12	544	4,494	16,484	27,440
As at 1 January 2013	357	383	2	(2,661)	3,514	22,265	23,860
Return/(loss) for the year	-	-	-	1,428	(92)	379	1,714
Transfer of unrealised losses  to realised losses	-	-	-	246	(246)	-	-
Purchase of shares for treasury	-	-	-	-	-	(238)	(238)
Purchase of shares for cancellation	(6)	-	6	-	-	(414)	(414)
Issue of equity (net of costs)	26	1,921	-	-	-	-	1,947
Transfer from other distributable reserve to realised capital reserve	-	-	-	-	555	(555)	-
Dividends paid	-	-	-	-	-	(1,695)	(1,695)
As at 31 December 2013	377	2,304	8	(987)	3,731	19,742	25,175

           
* Included within these reserves is an amount of £20,978,000 (2013: £22,486,000) which is considered distributable.

A transfer of £1,183,000 (2013: £555,000) representing gross realised losses on disposal of investments during the year ended 31 December 2014 has been made from the other distributable reserve to the realised capital reserve.

Reconciliation of movements in shareholders' funds
D shares (non-statutory analysis)

	Called-up share capital	Share premium	Unrealised capital reserve	Realised capital reserve*	Other distributable reserve*	Total
	£'000	£'000	£'000	£'000	£'000	£'000
As at 1 January 2014	64	39	1,112	41	5,571	6,827
Return/(loss) for the year	-	-	341	(78)	190	453
Transfer of unrealised gains to realised gains	-	-	(43)	43	-	-
Issue of equity (net of costs)	-	33	-	-	-	33
Dividends paid	-	-	-	-	(318)	(318)
As at 31 December 2014	64	72	1,410	6	5,443	6,995
As at 1 January 2013	64	9	615	(188)	5,745	6,245
Return/(loss) for the year	-	-	825	(99)	193	919
Transfer of unrealised gains to realised gains	-	-	(328)	328	-	-
Purchase of shares for treasury	-	-	-	-	(23)	(23)
Purchase of shares for cancellation	-	-	-	-	(27)	(27)
Issue of equity (net of costs)	-	30	-	-	-	30
Dividends paid	-	-	-	-	(317)	(317)
As at 31 December 2013	64	39	1,112	41	5,571	6,827

* Included within these reserves is an amount of £5,449,000 (2013: £5,612,000) which is considered distributable.

Cash flow statement

		Note	Combined Year ended 31 December 2014 £'000	Combined Year ended 31 December 2013 £'000
Operating activities
Loan stock income received			1,012	983
Deposit interest received			67	122
Dividend income received			53	25
Investment management fees paid			(736)	(699)
Other cash payments			(195)	(216)
Net cash flow from operating activities		18	201	215
Taxation
UK corporation tax paid			-	(24)
Capital expenditure and financial investments
Purchase of  fixed asset investments			(5,157)	(3,697)
Disposal of  fixed asset investments			2,814	2,809
Disposal of current asset investments			71	512
Net cash flow from investing activities			(2,272)	(376)
Equity dividends paid
Dividends paid  (net of cost of shares issued under the Dividend Reinvestment Scheme)			(1,909)	(1,846)
Net cash flow before financing			(3,980)	(2,031)
Financing
Issue of share capital (net of costs)			3,029	1,812
Purchase of own shares (including costs)		15	(614)	(702)
Net cash flow from financing			2,415	1,110
Cash flow in the year		17	(1,565)	(921)

Cash flow statement (non-statutory analysis)

		Note	Ordinary shares Year ended 31 December 2014 £'000	Ordinary shares Year ended 31 December 2013 £'000
Operating activities
Loan stock income received			741	686
Deposit interest received			55	83
Dividend income received			39	23
Investment management fees paid			(582)	(556)
Other cash payments			(152)	(166)
Net cash flow from operating activities		18	101	70
Taxation
UK corporation tax recovered/(paid)			28	(24)
Capital expenditure and financial investments
Purchase of  fixed asset investments			(3,969)	(3,124)
Disposal of  fixed asset investments			2,658	1,486
Disposal of current asset investments			71	12
Net cash flow from investing activities			(1,240)	(1,626)
Equity dividends paid
Dividends paid (net of cost of shares issued under Dividend Reinvestment Scheme)			(1,624)	(1,559)
Net cash flow before financing			(2,735)	(3,139)
Financing
Issue of share capital (net of costs)			3,029	1,812
Purchase of own shares (including costs)		15	(614)	(652)
Net cash flow from financing			2,415	1,160
Cash flow in the year		17	(320)	(1,979)

Cash flow statement (non-statutory analysis)

		Note	D  shares Year ended 31 December 2014 £'000	D  shares Year ended 31 December 2013 £'000
Operating activities
Loan stock income received			271	297
Deposit interest received			12	39
Dividend income received			14	2
Investment management fees paid			(154)	(143)
Other cash payments			(43)	(50)
Net cash flow from operating activities		18	100	145
Taxation UK corporation tax paid			(28)	-
Capital expenditure and financial investments
Purchase of  fixed asset investments			(1,188)	(573)
Disposal of  fixed asset investments			156	1,323
Disposal of current asset investments			-	500
Net cash flow from investing activities			(1,032)	1,250
Equity dividends paid
Dividends paid (net of cost of shares issued under the Dividend Reinvestment Scheme)			(285)	(287)
Net cash flow before financing			(1,245)	1,108
Financing
Purchase of own shares (including costs)		15	-	(50)
Net cash flow from financing			-	(50)
Cash flow in the year		17	(1,245)	1,058

Notes to the Financial Statements

1. Accounting convention
The Financial Statements have been prepared in accordance with the historical cost convention, modified to include the revaluation of investments, in accordance with applicable United Kingdom law and accounting standards and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ("SORP") issued by The Association of Investment Companies ("AIC") in January 2009. Accounting policies have been applied consistently in current and prior periods.

2. Accounting policies
Investments
Quoted and unquoted equity investments, debt issued at a discount, and convertible bonds
In accordance with FRS 26 "Financial Instruments Recognition and Measurement", quoted and unquoted equity, debt issued at a discount and convertible bonds are designated as fair value through profit or loss ("FVTPL"). Investments listed on recognised exchanges are valued at the closing bid prices at the end of the accounting period. Unquoted investments' fair value is determined by the Directors in accordance with the International Private Equity and Venture Capital Valuation Guidelines (IPEVCV guidelines).

Fair value movements and gains and losses arising on the disposal of investments are reflected in the capital column of the Income statement in accordance with the AIC SORP. Realised gains or losses on the sale of investments will be reflected in the realised capital reserve, and unrealised gains or losses arising from the revaluation of investments will be reflected in the unrealised capital reserve.

Warrants and unquoted equity derived instruments
Warrants and unquoted equity derived instruments are only valued if there is deemed to be additional value to the Company in exercising or converting as at the balance sheet date. Otherwise these instruments are held at nil value. The valuation techniques used are those used for the underlying equity investment.

Unquoted loan stock
Unquoted loan stock (excluding debt issued at a discount and convertible bonds) is classified as loans and receivables as permitted by FRS 26 and measured at amortised cost using the effective interest rate method less impairment. Movements in the amortised cost relating to interest income are reflected in the revenue column of the Income statement, and hence are reflected in the other distributable reserve, and movements in respect of capital provisions are reflected in the capital column of the Income statement and are reflected in the realised capital reserve following sale, or in the unrealised capital reserve for movements arising from revaluations of the fair value of the security.

For all unquoted loan stock, whether fully performing, past due or impaired, the Board considers that the fair value is equal to or greater than the security value of these assets. For unquoted loan stock, the amount of the movement is the difference between the asset's cost and the present value of estimated future cash flows, discounted at the original effective interest rate. The future cash flows are estimated based on the fair value of the security less estimated selling costs.

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

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

Loan stock accrued interest is recognised in the Balance sheet as part of the carrying value of the loans and receivables at the end of each reporting period.

In accordance with the exemptions under FRS 9 "Associates and joint ventures", those undertakings in which the Company holds more than 20 per cent. of the equity as part of an investment portfolio are not accounted for using the equity method. In these circumstances the investment is accounted for according to FRS 26 "Financial instruments Recognition and Measurement" and measured at fair value through profit or loss.

Current asset investments
Contractual future contingent receipts on disposal of fixed asset investments are designated at fair value through profit or loss and are subsequently measured at fair value.

Fixed term deposits are classified as current asset investments as they are investments held for the short term.

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

Unquoted loan stock income
Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis using an effective interest rate over the life of the financial instrument. Income which is not capable of being received within a reasonable period of time is reflected in the capital value of the investment.

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

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

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

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

Taxation
Taxation is applied on a current basis in accordance with FRS 16 "Current tax". Taxation associated with capital expenses is applied in accordance with the SORP. In accordance with FRS 19 "Deferred tax", deferred taxation is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.

Dividends
In accordance with FRS 21 "Events after the balance sheet date", dividends by the Company are accounted for in the period in which the dividend is paid or approved at the Annual General Meeting.

Reserves
Share premium reserve
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 where paid out by capital.

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

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

D shares
Until such time that D shares are converted into Ordinary shares, all investments and returns attributable to this class of share will be separately identifiable from the existing Ordinary shares. All residual expenses will be allocated in the ratio of the respective Net Asset Values of each class of share.

3. Gains on investments

	Year ended 31 December 2014			Year ended 31 December 2013
	Ordinary shares	D shares	Total		Ordinary shares	D shares	Total
	£'000	£'000	£'000		£'000	£'000	£'000
Unrealised gains on fixed asset investments held at fair value through profit or loss	953	318	1,271		1,344	773	2,117
Unrealised (impairments)/reversals of impairments on fixed asset investments held at amortised cost	(40)	23	(17)		78	52	130
	913	341	1,254		1,422	825	2,247
Unrealised gains on current asset investments held at fair value through profit or loss	-	-	-		6	-	6
Unrealised gains sub-total	913	341	1,254		1,428	825	2,253
Realised gains/(losses) on investments held at fair value through profit or loss	423	-	423		286	(23)	263
Realised gains/(losses) on investments held at amortised cost	97	5	102		(49)	7	(42)
	520	5	525		237	(16)	221
Realised gains on current asset investments held at fair value through profit or loss	38	-	38		-	-	-
Realised gains/(losses) sub-total	558	5	563		237	(16)	221
	1,471	346	1,817		1,665	809	2,474

Investments measured at amortised cost are unquoted loan stock investments as described in note 2.

4. Investment income

	Year ended 31 December 2014			Year ended 31 December 2013
	Ordinary shares £'000	D shares £'000	Total £'000	Ordinary shares £'000	D shares £'000	Total £'000
Income recognised on investments held at fair value through profit or loss
Dividend income	37	14	51	25	2	27
Income from convertible bonds and discounted debt	348	115	463	206	94	300
	385	129	514	231	96	327
Income recognised on investments held at amortised cost
Bank deposit interest	55	11	66	72	23	95
Return on loan stock investments	415	156	571	428	209	637
	470	167	637	500	232	732
	855	296	1,151	731	328	1,059

Interest income earned on impaired investments at 31 December 2014 amounted to £104,000 (2013: £122,000). These investments are all held at amortised cost.

5. Investment management fees

	Year ended 31 December 2014			Year ended 31 December 2013
	Ordinary shares £'000	D shares £'000	Total £'000	Ordinary shares £'000	D shares £'000	Total £'000
Investment management fee charged to revenue	148	39	187	141	36	177
Investment management fee charged to capital	446	116	562	422	110	532
	594	155	749	563	146	709

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

During the year, services of a total value of £749,000 (2013: £709,000) were purchased by the Company from Albion Ventures LLP in respect of management fees. At the financial year end, the amount due to Albion Ventures LLP disclosed as accruals was £193,000 (2013: £180,000).

During the year, the Company was not charged by Albion Ventures LLP in respect of Patrick Reeve's services as a Director (2013: £nil).

Albion Ventures LLP is, from time to time, eligible to receive transaction fees and Directors' fees from portfolio companies. During the year ended 31 December 2014, fees of £212,000 attributable to the investments of the Company were received pursuant to these arrangements (2013: £176,000).

Albion Ventures LLP holds 331 fractional entitlement shares of the Company as a result of the conversion of C shares to Ordinary shares in March 2007. These shares will be sold for the benefit of the Company at a future date.

Albion Ventures LLP also holds 23,536 Ordinary shares as a result of the failure of an original subscriber to pay cleared funds on initial subscription.

6. Other expenses

	Year ended 31 December 2014			Year ended 31 December 2013
	Ordinary shares	D shares	Total	Ordinary shares	D shares	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Directors' fees (including NIC)	52	14	66	60	15	75
Other administrative expenses	84	26	110	72	24	96
Impairment of accrued interest	102	-	102	-	-	-
Auditor's remuneration for statutory audit services (excluding VAT)	21	6	27	20	5	25
	259	46	305	152	44	196

The impairment of accrued interest expense is considered to be non-reccurring and therefore is excluded from the calculation of the ongoing charges ratio as noted in the Strategic report.

7. Directors' fees

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

	Year ended 31 December 2014			Year ended 31 December 2013
	Ordinary shares	D shares	Total	Ordinary shares	D shares	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Directors' fees	49	13	62	57	14	71
National insurance	3	1	4	3	1	4
	52	14	66	60	15	75

Further information can be found in the Directors' remuneration report on page 35 of the full Annual Report and Financial Statements.

8. Tax (charge)/credit on ordinary activities

The Company's combined tax credit of £13,000 (2013 credit: £5,000) is analysed between the two share classes as follows:

	Year ended 31 December 2014			Year ended 31 December 2013
Combined	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
UK corporation tax in respect of current year	(128)	119	(9)	(147)	119	(28)
UK corporation tax in respect of prior years	22	-	22	33	-	33
	(106)	119	13	(114)	119	5
	Year ended 31 December 2014			Year ended 31 December 2013
Ordinary shares	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
UK corporation tax in respect of current year	(86)	86	-	(92)	92	-
UK corporation tax in respect of prior years	1	-	1	33	-	33
	(85)	86	1	(59)	92	33
	Year ended 31 December 2014			Year ended 31 December 2013
D shares	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
UK corporation tax in respect of current year	(42)	33	(9)	(55)	27	(28)
UK corporation tax in respect of prior years	21	-	21	-	-	-
	(21)	33	12	(55)	27	(28)
Factors affecting the tax credit/(charge):	Year ended 31 December 2014			Year ended 31 December 2013
	Ordinary shares	D shares	Total	Ordinary shares	D shares	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Profit on ordinary activities before taxation	1,473	441	1,914	1,681	947	2,628
Tax on profit at the standard rate of 21.50 per cent. (2013: 23.25 per cent.)	(317)	(95)	(412)	(390)	(220)	(610)
Factors affecting the charge:
Gains on investments not subject to tax	317	74	391	384	188	572
Non-taxable income	8	3	11	6	-	6
Unutilised management expenses	(8)	8	-	-	-	-
Marginal relief	-	1	1	-	4	4
Adjustment in respect of prior years	1	21	22	33	-	33
	1	12	13	33	(28)	5

The tax credit for the year shown in the Income statement is lower than the standard rate of corporation tax in the UK of 21.50 per cent. (2013: 23.25 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 years.

Notes

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

9. Dividends

	Year ended 31 December 2014	Year ended 31 December 2013
Ordinary shares	£'000	£'000
Dividend of 2.5p per Ordinary share paid on 31 May 2013	-	841
Dividend of 2.5p per Ordinary share paid on 30 September 2013	-	854
Dividend of 2.5p per Ordinary share paid on 30 May 2014	911	-
Dividend of 2.5p per Ordinary share paid on 30 September 2014	914	-
	1,825	1,695
	Year ended 31 December 2013	Year ended 31 December 2013
D shares	£'000	£'000
Dividend of 2.5p per D share paid on 31 May 2013	-	159
Dividend of 2.5p per D share paid on 30 September 2013	-	158
Dividend of 2.5p per D share paid on 30 May 2014	159	-
Dividend of 2.5p per D share paid on 30 September 2014	159	-
	318	317

In addition to the dividends summarised above, the Board has declared a first dividend of 2.5 pence per Ordinary share for the year ending 31 December 2015, payable on 29 May 2015 to shareholders on the register as at 1 May 2015. The current holders of D shares will receive a dividend of 2.5 pence per Ordinary share held post merger. The total dividend will be approximately £1,227,000.

10. Basic and diluted return per share

	Year ended 31 December 2014			Year ended 31 December 2013
Ordinary shares	Revenue	Capital	Total	Revenue	Capital	Total
The return per share has been based on the following figures:
Return attributable to equity shares (£'000)	363	1,111	1,474	379	1,335	1,714
Weighted average shares in issue (excluding treasury shares)	36,282,578			33,589,482
Return attributable per equity share (pence)	1.0	3.0	4.0	1.1	4.0	5.1

The weighted average number of Ordinary shares is calculated excluding the treasury shares of 4,306,700 (2013: 3,769,000).

	Year ended 31 December 2014			Year ended 31 December 2013
D shares	Revenue	Capital	Total	Revenue	Capital	Total
The return per share has been based on the following figures:
Return attributable to equity shares (£'000)	211	263	453	193	726	919
Weighted average shares in issue (excluding treasury shares)	6,369,555			6,355,743
Return attributable per equity share (pence)	3.0	4.1	7.1	3.0	11.4	14.4

The weighted average number of D shares is calculated excluding the treasury shares of 25,625 (2013: 25,625).

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

The classification of investments by nature of instruments is as follows:

	31 December 2014					31 December 2013
	Ordinary  shares £'000			D Shares £'000	Total £'000	Ordinary shares £'000	D shares £'000	Total £'000
Investments held at fair value through profit or loss
Unquoted equity and preference shares			9,416	2,933	12,349	8,264	1,972	10,236
Quoted equity			401	-	401	-	-	-
Discounted debt and convertible loan stock		6,313		1,793	8,106	5,008	1,531	6,539
		16,130		4,726	20,856	13,272	3,503	16,775
Investments held at amortised cost
Unquoted loan stock		7,319		1,698	9,017	7,673	1,549	9,222
		23,449		6,424	29,873	20,945	5,052	25,997

		Ordinary shares £'000	D shares £'000	Combined £'000
Opening valuation as at 1 January 2014		20,945	5,052	25,997
Purchases at cost		3,957	1,185	5,142
Disposal proceeds		(2,812)	(156)	(2,968)
Realised gains		520	5	525
Movement in loan stock accrued income		(74)	(3)	(77)
Unrealised gains		913	341	1,254
Closing valuation as at 31 December 2014		23,449	6,424	29,873
Movement in loan stock accrued income
Opening accumulated movement in loan stock accrued income		186	25	211
Movement in loan stock accrued income		(74)	(3)	(77)
Closing accumulated movement in loan stock accrued income as at 31 December 2014		112	22	134
Movement in unrealised gains
Opening accumulated unrealised (losses)/gains		(1,200)	1,112	(88)
Transfer of previously unrealised gains/(losses) on disposal		654	(43)	611
Movement in unrealised gains		913	341	1,254
Closing accumulated unrealised gains as at 31 December 2014		367	1,410	1,777
Historic cost basis
Opening book cost		21,959	3,914	25,873
Purchases at cost		3,957	1,185	5,142
Sales at cost		(2,946)	(107)	(3,053)
Closing book cost as at 31 December 2014		22,970	4,992	27,962

Purchases and disposals detailed above do not agree to the Cash flow statement due to restructuring of investments, conversion of convertible loan stock and settlement debtors and creditors.

The Directors believe that the carrying value of loan stock measured at amortised cost is not materially different to fair value. The Company does not hold any assets as the 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.

A schedule of disposals during the year is shown on pages 19 and 21 of the full Annual Report and Financial Statements.

FRS 29 'Financial Instruments: Disclosures' requires the Company to disclose the valuation methods applied to its investments measured at fair value through profit or loss in a fair value hierarchy according to the following definitions;

Fair value hierarchy	Definition of valuation method
Level 1	Unadjusted quoted (bid) prices applied
Level 2	Inputs to valuation are from observable sources and are directly or indirectly derived from prices
Level 3	Inputs to valuations not based on observable market data

Unquoted equity, preference shares, convertible loan stock and debt issued at a discount are all valued according to Level 3 valuation methods.

The Ordinary shares' Level 3 investments had the following movements in the year to 31 December 2014:

	31 December 2014			31 December 2013
	Equity	Convertible and discounted bonds	Total	Equity	Convertible and discounted bonds	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Opening balance	8,264	5,008	13,272	5,490	3,534	9,024
Additions	2,000	1,395	3,395	965	2,032	2,997
Disposals	(1,775)	(3)	(1,778)	(363)	(372)	(735)
Realised gains/(losses)	663	(240)	423	107	179	286
Debt/equity conversion and representation of convertible bond and debt	-	-	-	772	(425)	347
Transfer to Level 1	(772)	(164)	(936)	-	-	-
Unrealised gains	1,036	288	1,324	1,293	51	1,344
Accrued loan stock interest	-	29	29	-	9	9
Closing balance	9,416	6,313	15,729	8,264	5,008	13,272

The D shares' Level 3 investments had the following movements in the year to 31 December 2014:

	31 December 2014			31 December 2013
	Equity	Convertible and discounted bonds	Total	Equity	Convertible and discounted bonds	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Opening balance	1,972	1,531	3,503	1,471	1,184	2,655
Additions	711	193	904	262	331	593
Disposals	-	-	-	(499)	-	(499)
Realised losses	-	-	-	(23)	-	(23)
Unrealised gains	250	68	318	761	12	773
Accrued loan stock interest	-	1	1	-	4	4
Closing balance	2,933	1,793	4,726	1,972	1,531	3,503

Investments held at fair value through profit or loss are valued in accordance with the IPEVCV guidelines as follows:

	31 December 2014			31 December 2013
Valuation methodology	Ordinary shares £'000	D shares £'000	Total £'000	Ordinary shares £'000	D shares £'000	Total £'000
Net asset value supported by third party valuation	4,509	2,580	7,089	4,339	2,205	6,544
Cost and price of recent investment (reviewed for impairment)	4,749	959	5,708	3,912	780	4,692
Revenue multiple	2,839	220	3,059	2,377	-	2,377
Earnings multiple	2,143	613	2,756	2,146	518	2,664
Agreed offer price	1,489	354	1,843	498	-	498
	15,729	4,726	20,455	13,272	3,503	16,775

FRS 29 requires the Directors to consider the impact of changing one or more of the inputs used as part of the valuation process to reasonable possible alternative assumptions. After due consideration and noting that the valuation methodology applied to 68 per cent. of the Ordinary shares' and 82 per cent. of the D shares' Level 3 investments (by valuation) is based on third party independent evidence, recent investment price, agreed offer price and cost, the Directors believe that changes to reasonable possible alternative assumptions for the valuation of the remainder of the portfolio could lead to a significant change in the fair value of the Ordinary shares portfolio. The impact of these changes could result in an increase in the valuation of investments by £373,000 or a decrease in investments by £410,000 for the Ordinary share portfolio. The Directors do not believe that changes to reasonable possible alternative input assumptions for the D share portfolio would have a significant impact.

The Ordinary shares' unquoted equity instruments had the following movements between investment methodologies between 31 December 2013 and 31 December 2014:

Change in valuation methodology (2013 to 2014)	Value as at 31 December 2014 £'000	Explanatory note
Net asset value supported by third party valuation to agreed offer price	633	Agreed offer price
Cost (reviewed for impairment) to agreed offer price	268	Agreed offer price
Cost (reviewed for impairment) to revenue multiple	240	More relevant valuation methodology
Cost (reviewed for impairment) to net asset value supported by third party valuation	97	Third party valuation has recently taken place

The D shares' unquoted equity instruments had the following movements between investment methodologies between 31 December 2013 and 31 December 2014:

Change in valuation methodology (2013 to 2014)	Value as at 31 December 2014 £'000	Explanatory note
Cost (reviewed for impairment) to agreed offer price	93	Agreed offer price
Cost (reviewed for impairment) to revenue multiple	60	More relevant valuation methodology
Net asset value supported by third party valuation to agreed offer price	60	Agreed offer price
Cost (reviewed for impairment) to net asset value supported by third party valuation	8	Third party valuation has recently taken place

The valuation method used will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEVCV Guidelines. The Directors believe that, within these parameters, there are no other possible methods of valuation which would be reasonable as at 31 December 2014.

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 day-to-day 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 Company has interests of greater than 20 per cent. of the nominal value of any class of the allotted shares in the portfolio companies as at 31 December 2014, as described below:

Company	Country of incorporation	Principal activity	% class and share type	% total voting rights held by the Company
Albion Investment Properties Limited	Great Britain	Owner of residential property	48.4% A Ordinary	48.4%
Blackbay Limited	Great Britain	Mobile data solutions	34.9% A Ordinary	7.4%
Masters Pharmaceuticals Limited	Great Britain	International specialist distributor of pharmaceuticals	21.1% A Ordinary	4.4%

The investments listed above are held as part of an investment portfolio and therefore, as permitted by FRS 9, they are measured at fair value and are not accounted for using the equity method.

13. Trade and other debtors and current asset investments

	31 December 2014			31 December 2013
Trade and other debtors	Ordinary shares £'000	D shares £'000	Total £'000	Ordinary shares £'000	D shares £'000	Total £'000
Prepayments and accrued income	14	3	17	17	4	21
UK corporation tax receivable	1	-	1	14	-	14
Other debtors	180	3	183	64	-	64
	195	6	201	95	4	99
	31 December 2014			31 December 2013
Current asset investments	Ordinary shares £'000	D shares £'000	Total £'000	Ordinary shares £'000	D shares £'000	Total £'000
Contingent future receipts on disposal of fixed asset investments	-	-	-	36	-	36
	-	-	-	36	-	36

The fair value hierarchy applied to contingent future receipts on disposal of fixed asset investments is Level 3.

The only movements in current asset investments during the year was the deferred receipts on disposal of fixed asset investments.

14. Creditors: amounts falling due within one year

	31 December 2014			31 December 2013
	Ordinary shares £'000	D shares £'000	Total £'000	Ordinary shares £'000	D shares £'000	Total £'000
Accruals	200	51	251	184	50	234
UK corporation tax payable	-	2	2	-	28	28
Other creditors	14	17	31	47	31	78
	214	70	284	231	109	340

15. Called up share capital

	31 December 2014			31 December 2013
	Ordinary shares	D shares	Total	Ordinary shares	D shares	Total
Allotted, called up and fully paid shares of 1 penny each
Number of shares	41,834,205	6,413,822	48,248,027	37,728,166	6,381,604	44,109,770
Nominal value of allotted shares (£'000)	418	64	482	377	64	441
Voting rights (net of treasury shares)	37,527,505	6,388,197	43,915,702	33,959,166	6,355,979	40,315,145

The Company purchased 272,000 Ordinary shares (2013: 605,000) for cancellation at a cost of £190,000 (2013: £414,000). The Company purchased no D shares for cancellation (2013: 31,587 at a cost of £27,000).

The Company purchased 605,700 Ordinary shares (2013: 341,000) at a cost of £424,000 (2013: £238,000) to be held in treasury during the year. The Company purchased no D shares to be held in treasury (2013: 25,625 at a cost of £23,000). The Company cancelled 68,000 Ordinary shares from treasury (2013: nil).

The Company holds a total of 4,306,700 Ordinary shares in treasury, representing 10.3 per cent. of the issued Ordinary share capital as at 31 December 2014.  The Company holds a total of 25,625 D shares in treasury, representing 0.4 per cent. of the issued D share capital as at 31 December 2014.  

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

Date of allotment	Number of shares issued	Issue price (pence per share)	Net consideration received £'000	Opening market price on allotment date (pence per share)
30 May 2014	139,680	72.20	98	70.00
30 September 2014	149,111	70.80	102	70.00
	288,791		200

During the year, the Company issued the following new Ordinary shares of nominal value 1 penny each under the Albion VCTs Top Up Offers 2013/2014 and Albion VCT Prospectus Top Up Offers 2013/2014:

Date of allotment	Number of shares issued	Issue price (pence per share)	Net consideration received £'000	Opening market price on allotment date (pence per share)
31 January 2014	549,339	74.4	401	69.5
31 January 2014	543,338	74.8	396	69.5
31 January 2014	20,352	73.7	15	69.5
5 April 2014 (Prospectus)	804,293	76.4	596	70.0
5 April 2014	585,294	76.4	434	70.0
5 April 2014	218,784	76.0	162	70.0
5 April 2014	62,024	75.7	46	70.0
4 July 2014 (Prospectus)	367,381	74.5	266	70.0
4 July 2014	30,139	74.5	22	70.0
4 July 2014	10,062	73.7	7	70.0
4 July 2014	5,398	74.1	4	70.0
30 September 2014 (Prospectus)	960,844	73.0	680	70.0
	4,157,248		3,029

Under the terms of the D shares' Dividend Reinvestment Scheme, the following D shares of nominal value 1 penny each were allotted during the year.

Date of allotment	Number of shares issued	Issue price (pence per share)	Net consideration received £'000	Opening market price on allotment date (pence per share)
30 May 2014	15,927	107.1	17	100.0
30 September 2014	16,291	105.0	16	100.0
	32,218		33

16. Basic and diluted net asset values per share

	31 December 2014		31 December 2013
	Ordinary shares (pence per share)	D shares (pence per share)	Ordinary shares (pence per share)	D shares (pence per share)
Basic and diluted net asset values per share	73.1	109.5	74.1	107.4

The basic and diluted net asset values per share at the year end are calculated in accordance with the Articles of Association and are based upon total shares in issue (less treasury shares) of 37,527,505 Ordinary shares (2013: 33,959,166) and 6,388,197 D shares (2013: 6,355,979) as at 31 December 2014.

17. Analysis of changes in cash during the year

	Year ended 31 December 2014			Year ended 31 December 2013
	Ordinary shares £'000	D shares £'000	Total £'000	Ordinary shares £'000	D shares £'000	Total £'000
Opening cash balances	4,330	1,880	6,210	6,309	822	7,131
Net cash flow	(320)	(1,245)	(1,565)	(1,979)	1,058	(921)
Closing cash balances	4,010	635	4,645	4,330	1,880	6,210

18. Reconciliation of net return on ordinary activities before taxation to net cash flow from operating activities

	Year ended 31 December 2014			Year ended 31 December 2013
	Ordinary shares £'000	D shares £'000	Total £'000	Ordinary shares £'000	D shares £'000	Total £'000
Revenue return on ordinary activities before taxation	448	211	659	438	248	686
Investment management fee charged to capital	(446)	(116)	(562)	(422)	(110)	(532)
Movement in accrued loan stock interest	74	3	77	52	(6)	46
Decrease/(increase) in debtors	3	(1)	2	7	15	22
Increase/(decrease) in creditors	22	3	25	(5)	(2)	(7)
Net cash flow from operating activities	101	100	201	70	145	215

19. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares and D 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 24 of the Directors' report in the full Annual Report and Financial Statements.

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

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

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

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

Investment risk
As a venture capital trust, it is the Company's specific nature to evaluate and control the investment risk of its portfolio in unquoted investments, details of which are shown on pages 17 to 21 of the full Annual Report and Financial Statements. Investment risk is the exposure of the Company to the revaluation and devaluation of investments. The main driver of investment risk is the operational and financial performance of the portfolio company and the dynamics of market quoted comparators. The Manager receives management accounts from portfolio companies and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment risk.

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

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

The maximum investment risk as at the Balance sheet date is the value of the fixed asset and current asset investment portfolio (excluding fixed term deposits) which, for Ordinary shares is £23,449,000 (2013: £20,981,000) and for D shares £6,424,000 (2013: £5,052,000). Fixed asset and current asset investments form 85 per cent. of the Ordinary shares' and 92 per cent. of the D shares' net asset value as at 31 December 2014 (2013: 83 per cent. Ordinary shares; 74 per cent. D shares).

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

Investment price risk
Investment price risk is the risk that the fair value of future investment cash flows will fluctuate due to factors specific to an investment instrument or to a market in similar instruments. To mitigate the investment price risk for the Company as a whole, the strategy of the Company is to invest in a broad spread of industries with up to two-thirds of the unquoted investments comprising debt securities, which, owing to the structure of their yield and the fact that they are usually secured, have a lower level of price volatility than equity.

Valuations are based on the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEVCV Guidelines.

As required under FRS 29 "Financial Instruments: Disclosures", the Board is required to illustrate by way of a sensitivity analysis the degree of exposure to market risk. The Board considers that the value of the fixed and current asset investment portfolio is sensitive to a 10 per cent. change based on the current economic climate. The impact of a 10 per cent. change has been selected as this is considered reasonable given the current level of volatility observed both on a historical basis and future expectations.

The sensitivity of a 10 per cent. (2013: 10 per cent.) increase or decrease in the valuation of the fixed asset and current asset investments (keeping all other variables constant) would increase or decrease the net asset value and return for the year of Ordinary shares by £2,345,000 (2013: £2,098,000) and £642,000 (2013: £505,000) for the D shares.

Interest rate risk
It is the Company's policy to accept a degree of interest rate risk on its financial assets through the effect of interest rate changes. On the basis of the Company's analysis, it is estimated that a rise of one percentage point in all interest rates would have increased total return before tax for the year by approximately £29,000.  Furthermore, it is considered that a fall of interest rates below current levels during the year would have been very unlikely.

The weighted average effective interest rate applied to the Company's fixed rate assets during the year was approximately 6.5 per cent. for the Ordinary shares (2013: 4.5 per cent.) and 9.7 per cent. for the D shares (2013: 8.4 per cent.).

The weighted average period to maturity for the fixed rate assets is approximately 5.5 years (2013: 4.6 years) for Ordinary shares and 6.5 years for D shares (2013: 7.5 years).

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

Ordinary shares

	31 December 2014				31 December 2013
	Fixed rate £'000	Floating rate £'000	Non-interest bearing £'000	Total £'000	Fixed rate £'000	Floating rate £'000	Non-interest bearing £'000	Total £'000
Unquoted equity	-	-	9,416	9,416	-	-	8,264	8,264
Quoted equity	-	-	401	401	-	-	-	-
Convertible and discounted bonds	5,239	-	1,074	6,313	4,070	-	938	5,008
Unquoted loan stock	5,441	-	1,878	7,319	7,450	209	14	7,673
Debtors*	-	-	185	185	-	-	71	71
Current asset investments	-	-	-	-	-	-	36	36
Current liabilities*	-	-	(214)	(214)	-	-	(231)	(231)
Cash	-	4,010	-	4,010	486	3,844	-	4,330
	10,680	4,010	12,740	27,430	12,006	4,053	9,092	25,151

D shares

	31 December 2014				31 December 2013
	Fixed rate £'000	Floating rate £'000	Non-interest bearing £'000	Total £'000	Fixed rate £'000	Floating rate £'000	Non-interest bearing £'000	Total £'000
Unquoted equity	-	-	2,933	2,933	-	-	1,972	1,972
Discounted debt and convertible bonds	1,793	-	-	1,793	1,531	-	-	1,531
Unquoted loan stock	1,698	-	-	1,698	1,549	-	-	1,549
Debtors*	-	-	3	3	-	-	2	2
Current liabilities*	-	-	(68)	(68)	-	-	(81)	(81)
Cash	-	635	-	635	450	1,430	-	1,880
	3,491	635	2,868	6,994	3,530	1,430	1,893	6,853

*The debtors and current liabilities do not reconcile to the balance sheets as prepayments and tax receivable/(payable) are not included in the above tables.

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

The Manager evaluates credit risk on loan stock 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. Typically loan stock instruments have a first fixed charge or a fixed and floating charge over the assets of the portfolio company in order to mitigate the gross credit risk. The Manager receives management accounts from portfolio companies, and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment-specific credit risk.

Bank deposits are held with banks which have a high rating with international credit rating agencies. The Company has an informal policy of limiting counterparty banking exposure to a maximum of 20 per cent. of net asset value for any one counterparty.

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

The Company's total gross credit risk for Ordinary shares at 31 December 2014 was limited to £13,632,000 (2013: £12,681,000) of unquoted loan stock instruments (all are secured on the assets of the portfolio company), £4,010,000 (2013: £4,330,000) of cash deposits with banks and £180,000 (2013: £64,000) of other debtors.

The Company's total gross credit risk for D shares at 31 December 2014 was limited to £3,491,000 (2013: £3,080,000) of unquoted loan stock instruments (all are secured on the assets of the portfolio company), £635,000 (2013: £1,880,000) of cash and fixed term deposits with banks and £3,000 (2013: £nil) of other debtors.

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

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

The Ordinary shares' cost, impairment and carrying value of impaired loan stocks are as follows:

	31 December 2014			31 December 2013
Ordinary shares	Cost £'000	Impairment £'000	Carrying value £'000	Cost £'000	Impairment £'000	Carrying value £'000
Impaired loan stock	4,849	(1,539)	3,310	4,150	(1,617)	2,533

There are no impaired loan stock instruments for D shares.

Impaired loan stock instruments have a first fixed charge or a fixed and floating charge over the assets of the portfolio company and the Board consider the security value approximates to the carrying value.

Liquidity risk
Liquid assets are held as cash on current account, cash 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 £3,321,000 (2013: £3,097,000) as at 31 December 2014.

The Company had no committed borrowing facilities in regard to Ordinary shares or D shares as at 31 December 2014 (2013: nil) and the Company had cash and fixed term deposit balances of £4,010,000 (2013: £4,330,000) for Ordinary shares and £635,000 (2013: £1,880,000) for D shares. 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. With the exception of corporation tax payable, all of the Company's financial liabilities are short term in nature and total £214,000 (2013: £231,000) for Ordinary shares and £70,000 (2013: £109,000) for D shares.

The carrying value of Ordinary shares' loan stock investments at 31 December 2014, analysed by expected maturity dates is as follows:

Redemption date	Fully performing £'000	Impaired £'000	Past due £'000	Total £'000
Less than one year	2,374	1,982	431	4,787
1-2 years	950	1,306	131	2,387
2-3 years	427	-	-	427
3-5 years	1,835	22	-	1,857
Greater than 5 years	3,369	-	805	4,174
	8,955	3,310	1,367	13,632

Loan stock categorised as past due for the Ordinary shares includes;
             

• loan stock valued at £431,000  yielding an average 7.4 per cent. which has interest past due by less than 12 months;
• loan stock valued at £131,000  yielding an average 7.6 per cent. has interest past due by greater than 12 months but less than 2 years;
• loan stock valued at £805,000 yielding an average 13.0 per cent has interest past due by  greater than 12 months but less than 3 years.

The carrying value of Ordinary shares' loan stock investments at 31 December 2013, analysed by expected maturity dates is as follows:

Redemption date	Fully performing £'000	Impaired £'000	Past due £'000	Total £'000
Less than one year	1,681	1,205	1,383	4,269
1-2 years	1,158	1,242	510	2,910
2-3 years	1,187	41	-	1,228
3-5 years	1,085	45	9	1,139
Greater than 5 years	2,523	-	612	3,135
	7,634	2,533	2,514	12,681

The carrying value of D shares' loan stock investments at 31 December 2014, analysed by expected maturity dates is as follows:

Redemption date	Fully performing £'000	Impaired £'000	Past due £'000	Total £'000
Less than one year	966	-	205	1,171
1-2 years	217	-	103	320
2-3 years	68	-	-	68
3-5 years	872	-	-	872
Greater than 5 years	1,060	-	-	1,060
	3,183	-	308	3,491

Loan stock categorised as past due for the D shares includes;

• Loan stock valued at £205,000 yielding an average 14.9 per cent. which has interest past due by less than 12 months;
• loan stock valued at £103,000 yielding an average 7.0 per cent. has interest past due by greater than 12 months but less than 2 years;

The carrying value of D shares' loan stock investments at 31 December 2013, analysed by expected maturity dates is as follows:

Redemption date	Fully performing £'000	Impaired £'000	Past due £'000	Total £'000
Less than one year	-	-	-	-
1-2 years	1,248	-	-	1,248
2-3 years	345	-	-	345
3-5 years	442	-	-	442
Greater than 5 years	517	-	528	1,045
	2,552	-	528	3,080

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 of the Company's financial assets and liabilities as at 31 December 2014 are stated at fair value as determined by the Directors, with the exception of loans and receivables included within investments, cash, fixed term deposits, debtors and creditors, which are measured at amortised cost, as permitted by FRS 26. In the opinion of the Directors, the amortised cost of loan stock is not materially different to the fair value. There are no financial liabilities other than creditors. The Company's financial liabilities are all non-interest bearing. It is the Directors' opinion that the book value of the financial liabilities is not materially different from the fair value and all are payable within one year.

20. Contingencies and commitments
The Company had the following financial commitments in respect of investments:

• Proveca Limited; £119,000
• Cisiv Limited; £96,000
• MyMeds&Me Limited; £47,000
• Dragon Hydro Limited; £2,500

21. Post balance sheet events
Since the year end, the Company had the following material investment transactions:

• Proceeds of £1,319,000 from the disposal of Orchard Portman Group (Taunton Hospital Limited);
• Investment of £64,000 in Regenerco Limited;
• Investment of £53,500 in Cisiv Limited;
• Investment of £51,000 in Mi-Pay Group PLC;
• Investment of £52,000 in Silent Herdsman Holdings Limited; and
• Investment of £17,000 in AVESI Limited.

Albion VCTs Prospectus Top Up Offers 2014/2015
On 17 November 2014 the Company announced the publication of a prospectus in relation to an offer for subscription for new Ordinary shares. A Securities Note, which forms part of the prospectus, has been sent to shareholders.

A copy of the prospectus may be obtained from www.albion-ventures.co.uk.

The following Ordinary shares of nominal value 1 penny per share were allotted under the Offers since the period end:

Date of allotment	Number of shares allotted	Issue price (pence per share)	Net consideration received (£'000)	Opening market price on allotment date (pence per share)
30 January 2015	1,287,521	72.9	920	70.0
30 January 2015	693,078	73.2	495	70.0
	1,980,599		1,415

22. Related party transactions
Other than transactions with the Manager as disclosed in note 5, there are no other related party transactions or balances requiring disclosure.

23. Other information 
The information set out in this announcement does not constitute the Company's statutory accounts within the terms of section 434 of the Companies Act 2006 for the years ended 31 December 2014 and 31 December 2013, and is derived from the statutory accounts for those financial years, which have been, or in the case of the accounts for the year ended 31 December 2014, which will be, delivered to the Registrar of Companies. The Auditor reported on those accounts; the reports were unqualified and did not contain a statement under s498 (2) or (3) of the Companies Act 2006.

The Company's Annual General Meeting will be held at The City of London Club, 19 Old Broad Street, London, EC2N 1DS on 4 June 2015 at 12.00pm.

24. 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-ventures.co.uk under the 'Our Funds' section, by clicking on 'Albion Development VCT PLC', where the Report can be accessed as a PDF document via a link under the 'Investor Centre' in the 'Financial Reports and Circulars' section.

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