Albion Development VCT PLC

Annual Report and Financial Statements for the year ended 31 December 2017

Company number	03654040
Directors	G O Vero FCA, Chairman L M Goleby MA (Cantab) B Larkin LLB P H Reeve MA ACA
Country of incorporation	United Kingdom
Legal form	Public Limited Company
Manager, company secretary, AIFM and registered office	Albion Capital Group LLP 1 King's Arms Yard London, EC2R 7AF
Registrar	Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol, BS99 6ZZ
Auditor	BDO LLP 55 Baker Street London, W1U 7EU
Taxation adviser	Philip Hare & Associates LLP 4 Staple Inn London, WC1V 7QH
Legal adviser	Bird & Bird LLP 12 New Fetter Lane London, EC4A 1JP
	Albion Development VCT PLC is a member of The Association of Investment Companies (www.theaic.co.uk).
Shareholder enquiries	For help relating to dividend payments, shareholdings and share certificates please contact Computershare Investor Services PLC: Tel: 0370 873 5854 (UK National Rate call, lines are open 8.30am – 5.30pm; Mon – Fri, calls may be recorded) Website: www.investorcentre.co.uk
	Shareholders can access holdings and valuation information regarding any of their shares held by Computershare by registering on Computershare's website.
Financial adviser enquiries	For enquiries relating to the performance of the Company, and information for financial advisers please contact Albion Capital Group LLP:
	Tel: 020 7601 1850 (lines are open 9.00am – 5.30pm; Mon – Fri, calls may be recorded) Email: [email protected] Website: www.albion.capital
	Please note that these contacts are unable to provide financial or taxation advice.

Investment objective and policy

Albion Development VCT PLC is a venture capital trust and its current general investment policy is as follows:

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-based investments that provide a strong income stream. These include freehold-based businesses in the leisure sector, such as pubs and health clubs, as well as stable and profitable businesses in other sectors including business services and healthcare. 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 Company.
Up to two-thirds of qualifying investments by cost comprise loan stock secured with a first charge on the portfolio company's assets.

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

As a result of these changes, and subject to shareholder approval, the Board is now recommending an update to the Company's general investment policy, as set out below. The updated policy removes references to loan stock being secured by first charges and enables the Company to invest in a broad range of businesses. A further change to the policy will allow a proportion of funds held pending investment or for liquidity purposes to be invested in liquid open-ended equity funds. The new policy is as follows:

Proposed new investment policy

The Company will invest in a broad portfolio of higher growth businesses with a stronger focus on technology companies across a variety of sectors of the UK economy. Allocation of assets will be determined by the investment opportunities which become available but efforts will be made to ensure that the portfolio is diversified in terms of sector and stage of maturity of company.

Funds held pending investment or for liquidity purposes will be held as cash on deposit or up to 8 per cent. of its assets, at the time of investment, in liquid open-ended equity funds providing income and capital equity exposure (where it is considered economic to do so).

Risk diversification and maximum exposures

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

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

Investment objective and policy continued

Background to the Company

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. The D shares converted to Ordinary shares on 31 March 2015 on the basis of their respective audited net asset value per share at 31 December 2014, in line with the original prospectus. Accordingly, D shareholders received 1.4975 Ordinary shares for each D share they owned.

An additional £28.8 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.

Financial calendar

Record date for first dividend	4 May 2018
Annual General Meeting	11.00 am on 29 May 2018
Payment of first dividend	31 May 2018
Announcement of half-yearly results for the six months ending 30 June 2018	August 2018
Payment of second dividend (subject to Board approval)	28 September 2018

Financial highlights

165.6p	Total shareholder return per Ordinary share from launch to 31 December 2017
10.2%	Total return on opening net asset value for the year ended 31 December 2017
4.0p	Target tax-free dividend per Ordinary share for the year ahead (4.0p paid per Ordinary share during the year ended 31 December 2017)
73.8p	Net asset value per Ordinary share as at
	31 December 2017

Ordinary shares' total shareholder return relative to FTSE All-Share Index total return (in both cases with dividends reinvested)

Source: Albion Capital Group LLP

Methodology: The total shareholder return including original amount invested (rebased to 100) assuming that dividends were reinvested at the net asset value of the company at the time that the shares were quoted ex-dividend. Transaction costs are not taken into account.

Financial highlights continued

		Ordinary shares
	31 December 2017 pence per share	31 December 2016 pence per share
Dividends paid	4.0	5.0
Revenue return	0.2	0.9
Capital return	7.0	3.8
Net asset value	73.8	70.7

Total shareholder return to 31 December 2017:

	Ordinary shares	C shares	D shares
	(pence per share)(ii)	(pence per share)(ii)(iv)	(pence per share)(ii)(v)
Total dividends paid during the year ended:
31 December 1999(i)	1.0	–	–
31 December 2000	2.9	–	–
31 December 2001	4.0	–	–
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
31 December 2015(v)	5.0	5.4	7.5
31 December 2016	5.0	5.4	7.5
31 December 2017	4.0	4.3	6.0
Total dividends paid to 31 December 2017	91.8	80.8	38.0
Net asset value as at 31 December 2017	73.8	79.1	110.5
Total shareholder return to 31 December 2017	165.6	159.9	148.5

In addition to the dividends paid above, the Board has declared a first dividend for the year ending 31 December 2018 of 2.0 pence per Ordinary share payable on 31 May 2018 to shareholders on the register on 4 May 2018.

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 ratio 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.

(v) The D shares were converted into Ordinary shares on 31 March 2015, with a conversion ratio of 1.4975 Ordinary shares for each D share. The net asset value per share and all dividends paid subsequent to the conversion of the D shares to the Ordinary shares are multiplied by the conversion factor of 1.4975 in respect of the D shares return, in order to give an accurate picture of the shareholder value since launch relating to the D shares.

Chairman's statement

Geoffrey Vero Chairman

The results for the year showed a pleasing total return of 7.2 pence per share. ' '

Introduction

The results for Albion Development VCT PLC for the year to 31 December 2017 showed a pleasing total return of 7.2 pence per Ordinary share, compared to 4.7 pence per Ordinary share for 2016.

Investment performance and progress The results for the year recorded net gains on investments of £5.5 million, against £2.9 million for the previous year. The key elements within this included sharp uplifts in the values of Grapeshot, which has now moved into profit and is growing in excess of 150% per annum, Radnor House (Sevenoaks), which has continued to mature in line with expectations and has now moved into profit, and Egress Software Technologies, following a recent investment round. Against this, there were writedowns against OmPrompt and Aridhia, as a result of slower than hopedfor progress.

We had a number of realisations during the year totalling £4.6 million (2016: £3.6m), including £1.7 million of proceeds from the sale of Hilson Moran, achieving a return, including interest, of 3 times cost, and also contributing to the net gains on investments for the year. The Company also sold its share in Blackbay and Masters Pharmaceuticals at valuations above the previous holding value, realising total proceeds of £1.7 million. Further details on realisations and loan stock repayments can be found in the realisations table on page 22.

Meanwhile, £4.1 million was invested in six new portfolio companies, comprising MPP Global Solutions (provider of a digital subscription platform), Women's Health (London West One) (developer and operator of a women's health centre with a focus on fertility), G. Network Communications (fibre optic broadband provider in central London), Beddlestead (developer and operator of a dedicated wedding venue in the UK) and Quantexa (a developer of fraud analytics software.) A further £2.7 million was invested in existing portfolio companies, including £812,000 into Egress Software Technologies, to assist with the expansion overseas and new hires, £483,000 into Oviva and £394,000 into Black Swan Data.

For a review of business and future prospects please see the Strategic report on page 12.

Risks and uncertainties

Other than investment performance, the key risks facing the Company are from the broader economy. Despite some continued growth in the UK, the outlook for global economies and the implications of future rises in interest rates are the key risks affecting your Company. The Manager is clear in focussing efforts to allocate resources to those sectors and opportunities where growth can be both resilient and sustainable.

A detailed analysis of the other risks and uncertainties facing the business is shown in the Strategic report on pages 15 and 16.

Board composition

Jonathan Thornton retired from the Board on 3 November 2017 after nineteen years with the Company. I would like to thank him for his excellent work, and many years of wise counsel and service. Lyn Goleby was appointed as a Director on 3 November 2017, bringing a wealth of experience from her various roles across business and within the film and cinema industry, amongst which she was founder and CEO of Picturehouse Cinemas, from which the Company achieved an excellent return.

Chairman's statement continued

Share buy-backs

It remains the Board's primary objective to maintain sufficient resources for investment in existing and new portfolio companies and for the continued payment of dividends to shareholders, including in considering the proposed change to investment policy for nonqualifying investments. Therefore, 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.

During the year, the Company purchased 1,262,000 Ordinary shares to be held in treasury at a cost of £855,000 (2016: £864,000), representing 2.0 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.

Dividends and results

The Company paid dividends totaling 4.0 pence per share during the year ended 31 December 2017 (2016: 5.0 pence per share). The dividend objective of the Board is to provide shareholders with a strong, predictable dividend flow. The Company will target an annual dividend of 4.0 pence per share for the year ending 31 December 2018, and has declared a first dividend for the year ending 31 December 2018 of 2.0 pence per share. This dividend will be paid on 31 May 2018 to shareholders on the register on 4 May 2018.

As at 31 December 2017, the net asset value was 73.8 pence per share compared to 70.7 pence per share at 31 December 2016. The total return after tax was £4.9 million compared to £2.9 million in the year to 31 December 2016.

Update of investment policy

As explained more fully in the Strategic report, the Manager and Board are recommending that the investment policy be updated in light of the November 2017 Autumn Budget and the changes made to the legislation governing venture capital trusts therein. In future, VCTs may no longer offer secured loans to portfolio companies and to qualify for VCT tax reliefs, portfolio companies must satisfy a "risk to capital condition." The updated policy, therefore, removes references to loan stock being secured by first charges, enables the Company to invest in a broad range of businesses and is compliant with current VCT regulations.

A further change to the investment policy is also being recommended to allow funds held pending investment or for liquidity purposes to be invested in liquid open-ended equity funds providing income and capital exposure (where it is considered economic to do so). This will be limited to an amount equal to 8% of the Company's assets at the time of investment.

The acquisition by the Manager of OLIM Investment Managers ("OLIM") in 2016 provides an opportunity to invest in such an open-ended equity fund, which delivers the prospect of an attractive income in a low interest environment together with the prospect of capital growth, with good liquidity and a good performance record. Where the Company's funds are invested in funds managed by OLIM, the Manager will waive part of its management fee so that there is no double charging of fees.

Both changes to the investment policy will be subject to shareholder approval in separate resolutions to be proposed at the Annual General Meeting.

Further details of the changes appear in the Strategic report.

£4.1 million was invested in six new portfolio companies . . . and a further £2.7 million was invested in existing portfolio companies. ' '

Chairman's statement continued

Albion VCTs Prospectus Top Up Offers

In September 2017, the Company announced the launch of the Albion VCTs Prospectus Top Up Offers 2017/18. In aggregate, the Albion VCTs raised £32 million across five of the VCTs managed by Albion Capital Group LLP, with the Company raising £6 million.

The Company is currently engaged in the Albion VCTs Prospectus Top Up Offers 2017/18, and as announced on 26 February 2018, the Company reached its £6 million limit under the offer and is now closed.

The funds raised by each Company pursuant to its Offer has been added to the liquid resources available for investment so as to put each Company into a position to take advantage of attractive investment opportunities over the next two to three years. Accordingly, the proceeds of the Offers are being applied in accordance with the respective Companies' investment policies. The Company continues to participate in the Top Up Offers and also benefits from receipts from dividend reinvestment, the net proceeds of which are invested in new investment opportunities and to provide additional working capital in the Company.

Outlook and prospects

2017 has been a good year for the portfolio, with encouraging returns across sectors and risk groups. Although the new VCT rules will lead to a decline in asset-based investments, the Board is confident that there are a number of excellent prospects within the portfolio, and the Manager will continue to seek out value with a focus on higher-growth innovative businesses.

Geoffrey Vero Chairman 29 March 2018

Strategic report

Albion Development VCT PLC is a venture capital trust and its current general investment policy is as follows:

Investment policy

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-based investments that provide a strong income stream. These include freehold-based businesses in the leisure sector, such as pubs and health clubs, as well as stable and profitable businesses in other sectors including business services and healthcare. 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 Company.
Up to two-thirds of qualifying investments by cost comprise loan stock secured with a first charge on the portfolio company's assets.

As a result of these changes, and subject to shareholder approval, the Board is now recommending an update to the Company's general investment policy, as set out below. The updated policy removes references to loan stock being secured by first charges and enables the Company to invest in a broad range of businesses. A further change to the policy is also being recommended to allow funds held pending investment or for liquidity purposes to be invested in liquid open-ended equity funds. This will be limited to an amount equal to 8 per cent of the Company's assets at the time of investment. This is explained in the 'Management of liquid resources section' below.

The new policy is as follows:

Proposed new investment policy

Risk diversification and maximum exposures

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

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

Management of liquid resources

In November 2016, the Manager acquired OLIM Investment Managers ("OLIM"), a specialist fund manager of UK quoted equities. In view of the very low interest rates earned on the Company's bank deposits, amending the current investment policy would allow cash awaiting investment to be invested in liquid open-ended equity funds including the SVS Albion OLIM UK Equity Income Fund ("OUEIF").

OUEIF is an authorised UK unit trust which has the objective of achieving a return based on a combination of income and capital over the long term, and invests in a diversified portfolio of FTSE-100 and FTSE-250 UK companies. To December 2017, it has shown a total return, comprising income and capital, since launch in 2002 of 246 per cent., and ranks 13 out of 55 of UK equity income funds in its performance over 10 years. Its historic dividend yield is 3.8 per cent..

Any investment in OUEIF, or other liquid open-ended equity funds, will be made as part of the Company's management of surplus liquid funds, and will be limited to an amount of not more than 8 per cent. of the company's net assets, from time to time, though depending on market conditions, it may be much lower than this. The holding will be capable of realisation within 7 days and, in order to avoid double charging, Albion agrees to reduce that proportion of its management fee relating to the investment in the OUEIF by 0.75 per cent., which represents the OUEIF management fee charged by OLIM.

These changes to the investment policy, which are recommended by the Board, are subject to the approval of shareholders. Accordingly resolutions 8 and 9 at the forthcoming Annual General Meeting, which is set out on page 65, will allow shareholders to vote on the changes.

Current portfolio sector allocation

The following pie chart shows the split of the portfolio valuation as at 31 December 2017. Details of the principal investments made by the Company are shown in the Portfolio of investments on pages 20 to 22.

Comparatives for 31 December 2016 are shown in brackets Source: Albion Capital Group LLP

Direction of portfolio

The sector analysis of the Company's investment portfolio shows that IT and software now accounts for 24 per cent. of the portfolio compared to 17 per cent. previously, following the investments deployed into MPP Global Solutions and Quantexa and the valuation uplifts attributable to Grapeshot and Egress Software Technologies.

The current portfolio is well balanced in terms of sector, with renewable energy at 18 per cent., healthcare at 15 per cent., education accounting for 12 per cent., and leisure at 5 per cent. Cash balances have decreased to 21 per cent. of the portfolio and it is anticipated that investments will be deployed into a number of new growth opportunities.

Results and dividend policy

	Ordinary shares £'000
Net revenue return for the year	171
Net capital gain for the year	4,720
Total return for the year
ended 31 December 2017	4,891
Dividend of 2.0 pence per
share paid on 31 May 2017	(1,357)
Dividend of 2.0 pence per
share paid on 29 September 2017	(1,355)
Unclaimed dividends	7
Transferred to reserves	2,186
Net assets as at
31 December 2017	53,346
Net asset value per share
as at 31 December 2017 (pence)	73.8

The Company paid dividends totalling 4.0 pence per Ordinary share (2016: 5.0 pence per Ordinary share).

As described in the Chairman's statement, the Board has declared a first dividend for the year ending 31 December 2018 of 2.0 pence per Ordinary share payable on 31 May 2018 to shareholders on the register on 4 May 2018.

As shown in the Income statement on page 47, the total investment income decreased to £689,000 (2016: £1,114,000). This is in part due to the disposal of income producing investments in recent years as well as capitalising interest (with our agreement) on a number of companies in order to fund further acquisitions. As a result, the revenue return to equity holders has decreased to £171,000 (2016: £549,000).

The total capital return for the year was £4,720,000 (2016: £2,313,000). This is mainly attributable to the successful sale of Hilson Moran Holdings, where a gain on opening value of

Strategic report continued

£0.7 million was realised and unrealised revaluation movements in the Company's investment portfolio, in particular, increases in Grapeshot, Egress Software Technologies and Radnor House School (Holdings), outweighing reductions in OmPrompt Holdings and Aridhia Informatics.

The total return was 7.2 pence per share (2016: 4.7 pence per share). The Balance sheet on page 48 shows that the net asset value has increased over the last year to 73.8 pence per share (2016: 70.7 pence per share). The increase in net asset value can be attributed to the total return of 7.2 pence per share, offset by payment of the 4.0 pence per Ordinary share of dividends.

The cash flow was positive for the year mainly as a result of the disposal of investments and the issue of Ordinary shares, offset by a number of new investments made and dividends paid during the year.

Review of business and future changes

The results for the year to 31 December 2017 show total shareholder return of 165.6 pence per Ordinary share since launch (2016: 158.5 pence per share). We believe there should be further progress in the current year, with selected disposals and new investments, and focus on our core area of IT/Software alongside new growth opportunities.

In light of the new VCT regulations set out in the recent Finance Act, asset-based investments will continue to decrease as a proportion of the portfolio, and greater emphasis will be given to growth and technology investments.

A detailed review of the Company's business during the year is contained in the Chairman's statement on pages 7 and 8.

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

VCT regulation

The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC. In order to maintain its status under Venture Capital Trust legislation, a VCT must comply on a continuing basis with the provisions of Section 274 of the Income Tax Act 2007, details of which are provided in the Directors' report on page 29.

The relevant tests to measure compliance have been carried out and independently reviewed for the year ended 31 December 2017. These showed that the Company has complied with all tests and continues to do so.

The Finance Act 2017 contained a number of measures that affect VCTs; these include:

A principles based test for qualifying companies to ensure that investment activity focuses on higher risk opportunities;
An increase in the proportion of the portfolio invested in qualifying unquoted companies from 70% to 80% in respect of accounting periods started on or after 6 April 2018;
VCT loan investments to be unsecured and represent no more than commercial terms.

Future prospects

The Company is well positioned to seek out and capitalise on new opportunities, and the encouraging return in 2017 gives the Board confidence that we can continue to deliver value to shareholders.

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. The Directors are satisfied that the results shown in the following key performance indicators give a good indication that the Company is achieving its investment objective and policy. These are:

1. Total shareholder return relative to FTSE All-Share Index total return

The graph on page 5 shows the total shareholder 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 in the Chairman's statement.

Strategic report continued

2. Net asset value per share and total shareholder return

*Total shareholder return is net asset value plus cumulative dividends paid since launch to 31 December 2017.

Total return to shareholders increased by 4.5 per cent. to 165.6 pence per Ordinary share for the year ended 31 December 2017 as a result of the positive total return of 7.2 pence per share.

3. Dividend distributions

Dividends paid in respect of the year ended 31 December 2017 were 4.0 pence per share (2016: 5.0 pence per share). Cumulative dividends paid since inception are 91.8 pence per share. The dividend target for the 2018 financial year is 4.0 pence per share as outlined in the Chairman's statement.

4. Ongoing charges

The ongoing charges ratio for the year to 31 December 2017 was 2.7 per cent. (2016: 2.7 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 remain broadly at this current level.

Operational arrangements

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

Management agreement

Under the Management agreement, the Manager provides investment management, secretarial and administrative services to the Company. The Management agreement 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.

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 monitoring 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 6 April 2010. 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 at 31 December 2017, the total return since 1 January 2007 for Ordinary Shares was 136.8 pence and the total return since 6 April 2010 for the former D Shares was 148.5 pence, and the hurdle was 170.2 pence for Ordinary Shares and 150.3 pence for the former D Shares.

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 (2016: nil).

Investment and co-investment

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

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. (80 per cent. from April 2018) qualifying holdings investment requirement for venture capital trust status, the long term prospects of the current portfolio of investments, a review of the Management agreement and the services provided therein, and benchmarking the performance of the Manager to other service providers including the performance of other VCTs that the Manager is responsible for managing. The Board believes that it is in the interests of shareholders as a whole, and of the Company, to continue the appointment of the Manager for the forthcoming year.

Alternative Investment Fund Managers Directive ("AIFMD")

The Board appointed Albion Capital Group LLP as the Company's AIFM as required by the AIFMD.

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.

General Data Protection Regulation

The General Data Protection Regulation ("GDPR") is effective from 25 May 2018 with the objective of unifying data privacy requirements across the European Union. The Manager, Albion Capital Group LLP, is undertaking a data audit to identify personal data to ensure compliance with GDPR by the effective date.

Further policies

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

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

and these are set out in the Directors' report on pages 29 and 30.

Strategic report continued

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 2017 can be found in note 15 of the 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
Investment and performance risk	The risk of investment in poor quality assets, which could reduce the capital and income returns to shareholders, and could negatively impact on the Company's current and future valuations. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes, are more fragile than larger, long established businesses.	To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its track record over many years of making successful investments in this segment of the market. In addition, the Manager operates a formal and structured investment appraisal and review process, which includes an Investment Committee, comprising investment professionals from the Manager and at least one external investment professional. The Manager also invites and takes account of comments from non-executive Directors of the Company on matters discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on portfolio company boards), including the level of diversification in the portfolio, and the Board receives detailed reports on each investment as part of the Manager's report at quarterly board meetings.
VCT approval risk	The Company must comply with section 274 of the Income Tax Act 2007 which enables its investors to take advantage of tax relief on their investment and on future returns. Breach of any of the rules enabling the Company to hold VCT status could result in the loss of that status.	To reduce this risk, the Board has appointed the Manager, which has a team with significant experience in venture capital trust management, used to operating within the requirements of the venture capital trust legislation. In addition, to provide further formal reassurance, the Board has appointed Philip Hare & Associates LLP as its taxation adviser, who report quarterly to the Board to 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 or our professional advisors.
Regulatory and compliance risk	The Company is listed on The London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company's shares, or other penalties under the Companies Act or from financial reporting oversight bodies.	Board members and the Manager have experience of operating at senior levels within or advising quoted companies. In addition, the Board and the Manager receive regular updates on new regulation from its auditor, lawyers and other professional bodies. The Company is subject to compliance checks through the Manager's compliance officer. The Manager reports monthly to its Board on any issues arising from compliance or regulation. These controls are also reviewed as part of the quarterly Board meetings, and also as part of the review work undertaken by the Manager's compliance officer. The report on controls is also evaluated by the internal auditors.
Operational and internal control risk	The Company relies on a number of third parties, in particular the Manager, for the provision of investment management and administrative functions. Failures in key systems and controls within the Manager's business could put assets of the Company at risk or result in reduced or inaccurate information being passed to the Board or to shareholders.	The Company and its operations are subject to a series of rigorous internal controls and review procedures exercised throughout the year. The Audit Committee reviews the Internal Audit Reports prepared by the Manager's internal auditors, PKF Littlejohn LLP and has access to the internal audit partner of PKF Littlejohn LLP to provide an opportunity to ask specific detailed questions in order to satisfy itself that the Manager has strong systems and controls in place including those in relation to business continuity. In addition, the Board regularly reviews the performance of its key service providers, particularly the Manager, to ensure they continue to have the necessary expertise and resources to deliver the Company's investment objective and policies. The Manager and other service providers have also demonstrated to the Board that there is no undue reliance placed upon any one individual.

Strategic report continued

Risk	Possible consequence	Risk management
Economic and political risk	Changes in economic conditions, including, for example, interest rates, rates of inflation, industry conditions, competition, political and diplomatic events and other factors could substantially and adversely affect the Company's prospects in a number of ways.	The Company invests in a diversified portfolio of companies across a number of industry sectors and in addition often invests a mixture of equity and secured loan stock in portfolio companies and has a policy of not normally permitting any external bank borrowings within portfolio companies. At any given time, the Company has sufficient cash resources to meet its operating requirements, including share buy-backs and follow on investments.
Market value of Ordinary shares	The market value of Ordinary shares can fluctuate. The market value of an Ordinary share, as well as being affected by its net asset value and prospective net asset value, also takes into account its dividend yield and prevailing interest rates. As such, the market value of an Ordinary share may vary considerably from its underlying net asset value. The market prices of shares in quoted investment companies can, therefore, be at a discount or premium to the net asset value at different times, depending on supply and demand, market conditions, general investor sentiment and other factors. Accordingly the market price of the Ordinary shares may not fully reflect their underlying net asset value.	The Company operates a share buy-back policy, which is designed to limit the discount at which the Ordinary shares trade to around 5 per cent to net asset value, by providing a purchaser through the Company in absence of market purchasers. From time to time buy-backs cannot be applied, for example when the Company is subject to a close period, or if it were to exhaust any buy-back authorities. New Ordinary shares are issued at sufficient premium to net asset value to cover the costs of issue and to avoid asset value dilution to existing investors.
Reputational risk	The Company relies on the judgement and reputation of the Manager which is itself subject to the risk of loss.	The Board regularly questions the Manager on its ethics, procedures, safeguards and investment philosophy, which should consequently result in the risk to reputation being minimised.

Viability statement

In accordance with the FRC UK Corporate Governance Code published in 2016 and principle 21 of the AIC Code of Corporate Governance, the Directors have assessed the prospects of the Company over three years to 31 December 2020. The Directors believe that three years is a reasonable period in which they can assess the future of the Company to continue to operate and meet its liabilities as they fall due and is also the period used by the Board in the strategic planning process and is considered reasonable for a business of our nature and size. The three year period is also considered the most appropriate given the forecasts that the Board require from the Manager, and the estimated timelines for finding, assessing and completing investments.

The Directors have carried out a robust assessment of the principal risks facing the Company as explained above, including those that could threaten its business model, future performance, solvency or liquidity. The Board also considered the risk management processes in place to avoid or reduce the impact of the underlying risks. The Board focused on the major factors which affect the economic, regulatory and political environment. The Board deliberated over the importance of the Manager and the processes that they have in place for dealing with the principal risks.

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

Taking into account the processes for mitigating risks, monitoring costs, share price discount, the Manager's compliance with the investment objective, policies and business model and the balance of the portfolio the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 31 December 2020.

This Strategic report of the Company for the year ended 31 December 2017 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 29 March 2018

The Board of Directors

The following are the Directors of the Company, all of whom operate in a non-executive capacity:

Geoffrey Vero (Chairman), FCA (appointed 2 July 2007), has spent much of his career in venture capital, serving as a director of Causeway Capital Limited and ABN Amro Private Equity (UK) Limited which invested in small and medium sized unquoted businesses. He is a non-executive Chairman of EPE Special Opportunities PLC and a non-executive director of Numis Corporation PLC, where he chairs the Audit and Risk Committee.

Lyn Goleby, MA (Cantab), (appointed 3 November 2017), qualified as a solicitor at Denton Hall and Burgin and went onto business affairs roles in the film industry before starting an independent career as a film producer. She produced 3 films before the startup of City Screen (which became Picturehouse Cinemas) in 1989. She was on the Board of the UK Cinema Association until Picturehouse was bought by Cineworld in 2012. Lyn has served on various boards including the Film Committee of Arts Council England, Dance East and the Advisory Council of Tate Modern.

Ben Larkin, (appointed 5 December 2016), is a partner at the international law firm, Jones Day. Ben heads up the business reorganisation practice across Europe. Ben has spent the majority of his career advising public and private boards on aspects of corporate governance and has particular expertise in the infrastructure and real estate sectors. Recent mandates include Airwave (the mobile communication network for the UK's emergency services) and National Car Parks. Prior to joining Jones Day, Ben led the BRR division of Berwin Leighton Paisner LLP for 14 years.

Patrick Reeve, MA, ACA (appointed 12 November 2013), qualified as a chartered accountant before joining Cazenove & Co where he spent three years in the corporate finance department. He joined Close Brothers Group in 1989, working in both the development capital and corporate finance divisions before establishing Albion Capital (formerly Albion Ventures) in 1996. He is the managing partner of Albion Capital and is a director of Albion Enterprise VCT PLC and Albion Technology & General VCT PLC, both managed by Albion Capital. He is also chief executive of Albion Community Power PLC, a member of the Audit Committee of the University College London, a director of The Association of Investment Companies, chairman of OLIM Investment Managers, and is on the Council of the BVCA.

All Directors, except for Patrick Reeve, are members of the Audit Committee and Geoffrey Vero is Chairman.

All Directors, except for Patrick Reeve, are members of the Nomination Committee and Geoffrey Vero is Chairman.

All Directors, except for Patrick Reeve, are members of the Remuneration Committee and Ben Larkin is Chairman.

The Manager

Albion Capital Group LLP is authorised and regulated by the Financial Conduct Authority and is the Manager of Albion Development VCT PLC. In addition, it manages a further five venture capital trusts, the UCL Technology Fund and provides administration services to Albion Community Power PLC and Albion Care Communities Limited. Albion Capital, together with its subsidiary, OLIM Limited, currently has total assets under management or administration of approximately £1 billion.

The following are specifically responsible for the management and administration of the venture capital trusts managed by Albion Capital Group LLP:

Patrick Reeve MA, ACA,

details included in the Board of Directors section.

Will Fraser-Allen, BA (Hons), FCA,

qualified as a chartered accountant with Cooper Lancaster Brewers in 1996 and then joined their corporate finance team providing corporate finance advice to small and medium sized businesses. He joined Albion Capital in 2001 since when he has focused on leisure and healthcare investing. Will became deputy managing partner of Albion Capital in 2009. Will has a BA in History from Southampton University.

Adam Chirkowski, MA (Hons),

having graduated in Industrial Economics followed by a Masters in Corporate Strategy, spent five years at N M Rothschild & Sons specialising in mergers and acquisitions, principally in the natural resources and then healthcare sectors, before joining Albion Capital in 2013. He is currently responsible for a number of investments including renewable energy projects, care homes, health clinics, fibre broadband and wedding venues.

Dr. Andrew Elder, MA, FRCS,

initially practised as a surgeon for six years, specialising in neurosurgery, before joining the Boston Consulting Group (BCG) as a consultant in 2001. Whilst at BCG he specialised in healthcare strategy, gaining experience with many large, global clients across the full spectrum of healthcare including biotechnology, pharmaceuticals, service and care providers, software and telecommunications. He joined Albion Capital in 2005 and became a partner in 2009. He has an MA plus Bachelors of Medicine and Surgery from Cambridge University and is a Fellow of the Royal College of Surgeons (England).

Emil Gigov, BA (Hons), FCA,

graduated from the European Business School, London, with a BA (Hons) Degree in European Business Administration in 1994. He then joined KPMG in their financial services division and qualified as a chartered accountant in 1997. Following this he transferred to KPMG Corporate Finance where he specialised in the leisure, media and marketing services sectors acting on acquisitions, disposals and fundraising mandates. He joined Albion Capital in 2000 and has since made and exited investments in a number of industry sectors, including healthcare, education, technology, leisure and engineering. Emil became a partner in Albion Capital in 2009. He is also a director of Albion Care Communities Limited.

David Gudgin, BSc (Hons), ACMA,

qualified as a management accountant with ICL before spending 3 years at the BBC. In 1999 he joined 3i plc as an investor in European technology based in London and Amsterdam. In 2002 he moved to Foursome Investments (now Frog Capital) as the lead investor of an environmental technology and a later stage development capital fund. David joined Albion Capital in 2005 and became a partner in 2009. He is also managing director of Albion Community Power PLC and a director of Albion Care Communities Limited. David has a BSc in Economics from Warwick University.

Vikash Hansrani, BA (Hons), ACA,

qualified as a chartered accountant with RSM Tenon plc and latterly worked in its corporate finance team. He joined Albion Capital in 2010, where he is currently operations partner for the group. He is also finance director of OLIM Limited, was finance director of Albion Community Power PLC, and is also on the AIC's VCT Technical Committee. He has a BA in Accountancy & Finance from Nottingham Business School.

The Manager continued

Robert Henderson, BA (Hons), ACA,

graduated from Newcastle University with a first class degree in business management. Prior to joining Albion Capital in 2015, he qualified as a chartered accountant with KPMG, spending four years working in transactions and restructuring, primarily in turnaround and M&A situations.

Ed Lascelles, BA (Hons),

began by advising quoted UK companies on IPOs, takeovers and other corporate transactions, first with Charterhouse Securities and then ING Barings. Companies ranged in value from £10 million to £1 billion, across the healthcare and technology sectors among others. After moving to Albion Capital in 2004, Ed started investing in the technology, healthcare, financial and business services sectors. Ed became partner in 2009 and is responsible for a number of Albion's technology investments. He graduated from University College London with a first class degree in Philosophy.

Catriona McDonald, BA (Hons),

graduated from Harvard University, majoring in economics. She joined Albion Capital's technology investment team in 2018 having previously worked for Goldman Sachs in both New York and London. At Goldman Sachs, Cat executed several high profile transactions across the product space including leveraged buyouts, IPOs and M&A.

Dr. Christoph Ruedig, MBA,

initially practiced as a radiologist, before spending 3 years at Bain & Company. In 2006 he joined 3i plc working for their Healthcare Venture Capital arm leading investments in biotechnology, pharmaceuticals and medical technology. Most recently he has worked for General Electric UK, where he was responsible for mergers and acquisitions in the medical technology and healthcare IT sectors. He joined Albion Capital in 2011 and became a partner in 2014. He holds a degree in medicine from Ludwig-Maximilians University, Munich and an MBA from INSEAD.

Henry Stanford, MA, ACA,

qualified as a chartered accountant with Arthur Andersen before joining the corporate finance department of Close Brothers Group in 1992, becoming an assistant director in 1996. He moved to Albion Capital in 1998, where he has been responsible for much of the asset based portfolio. Henry became a partner in Albion Capital in 2009. He holds an MA degree in Classics from Oxford University.

Nadine Torbey, MSC, BEng,

graduated from the American University of Beirut with a Bachelor in Electrical and Computer Engineering and followed this with a MSc. in Innovation Management and Entrepreneurship from Brown University. She joined Albion Capital's technology investment team in 2018 from Berytech Fund Management, Lebanon. Her career to date has involved many aspects of tech investing including experience in a wide variety of digital platforms, big data management, virtual reality and digital networks.

Robert Whitby-Smith, BA (Hons), FCA, MCI,

began his career at KPMG and moved on to Credit Suisse First Boston and ING Barings where he advised a number of businesses on capital raising and M&A activity. After moving to Albion Capital in 2005, Robert started investing in software and tech enabled services, and became a partner in 2009. Robert holds an honours degree in History from the University of Reading and is a Chartered Accountant and a member of the Chartered Institute for Securities and Investment. He is also a director of OLIM Investment Managers.

Marco Yu, MPhil, MA, MRICS,

spent two and a half years at Bouygues (UK), before moving to EC Harris in 2005 where he advised senior lenders on large capital projects. Since joining Albion Capital in 2007 Marco has been involved in hotel, cinema, pub, residential property and garden centre investments and is, more recently, responsible for a number of renewable energy investments. Marco graduated from Cambridge University with a first class degree in economics and is a Chartered Surveyor.

Portfolio of investments

The following is a summary of investments as at 31 December 2017:

				As at 31 December 2017			As at 31 December 2016
	% voting	% voting rights of Albion* managed	Cost	Cumulative movement in value	Value	Cost	Cumulative movement in value	Value	Change in value for the year**
Unquoted investments	rights	companies	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Radnor House School (Holdings) Limited	8.8	50.0	2,772	3,179	5,951	2,860	2,533	5,393	646
Grapeshot Limited	3.9	14.2	806	3,017	3,823	676	239	915	2,778
Egress Software Technologies Limited	7.6	27.3	1,422	1,794	3,216	610	1,146	1,756	648
Proveca Limited	11.8	49.9	1,084	1,331	2,415	1,084	1,202	2,286	129
Chonais River Hydro Limited	4.6	50.0	1,705	405	2,110	1,705	357	2,062	48
The Street by Street Solar Programme Limited	12.4	50.0	1,291	774	2,065	1,291	630	1,921	144
Regenerco Renewable Energy Limited	11.9	50.0	1,204	610	1,814	1,204	456	1,660	154
Bravo Inns II Limited	6.7	50.0	1,080	242	1,322	1,080	129	1,209	113
Alto Prodotto Wind Limited	9.4	50.0	829	469	1,298	840	450	1,290	26
Earnside Energy Limited	6.8	50.0	1,089	176	1,265	1,089	183	1,272	(7)
Mirada Medical Limited	7.8	45.0	659	593	1,252	606	499	1,105	94
MPP Global Solutions Limited	3.4	13.5	1,000	–	1,000	–	–	–	–
Women's Health (London West One) Limited	7.6	40.0	933	–	933	–	–	–	–
Zift Channel Solutions Inc.	1.9	7.4	885	–	885	–	–	–	–
Beddlestead Limited	8.8	50.0	850	–	850	–	–	–	–
G. Network Communications Limited	9.1	50.0	850	–	850	–	–	–	–
MyMeds&Me Limited	4.5	19.2	546	293	839	546	259	805	34
Albion Investment Properties Limited	68.2	100.0	929	(99)	830	929	(91)	838	(8)
Oviva AG	3.7	15.9	643	159	802	159	1	160	159
OmPrompt Holdings Limited	7.4	28.3	864	(189)	675	650	27	677	(216)
Convertr Media Limited	6.3	27.0	700	(49)	651	583	–	583	(49)
Black Swan Data Limited	1.8	12.4	609	–	609	215	–	215	–
Aridhia Informatics Limited	6.0	22.3	1,054	(530)	524	963	(315)	648	(216)
TWCL Limited (previously The Weybridge Club Limited)	9.4	50.0	518	(15)	503	701	(226)	475	28
AVESI Limited	10.5	50.0	340	147	487	340	111	451	36
The Q Garden Company Limited	16.6	50.0	466	(1)	465	466	–	466	(1)
Process Systems Enterprise Limited	1.4	20.7	131	291	422	131	282	413	9
Panaseer Limited	2.8	10.2	248	148	396	110	–	110	148
DySIS Medical Limited	3.8	26.9	949	(580)	369	803	(441)	362	(141)
Dragon Hydro Limited	5.5	30.0	233	117	350	233	119	352	(2)
Secured by Design Limited	2.2	10.0	330	1	331	330	1	331	–
Quantexa Limited	2.8	11.9	315	–	315	–	–	–	–
Sandcroft Avenue Limited	2.8	9.2	292	14	306	150	(20)	130	34
Cisiv Limited	7.3	28.9	566	(274)	292	566	(276)	290	2
Abcodia Limited	4.7	19.5	649	(383)	266	604	(345)	259	(37)
MHS1 Limited	3.3	50.0	231	–	231	231	–	231	–
memsstar Limited	2.8	44.7	108	121	229	124	41	165	135
Greenenerco Limited	4.0	50.0	136	70	206	140	78	218	(7)
Bravo Inns Limited	2.6	50.0	267	(79)	188	267	(83)	184	4

Portfolio of investments continued

				As at 31 December 2017			As at 31 December 2016
Unquoted investments	% voting rights	% voting rights of Albion* managed companies	Cost £'000	Cumulative movement in value £'000	Value £'000	Cost £'000	Cumulative movement in value £'000	Value £'000	Change in value for the year** £'000
Oxsensis Limited	1.3	18.2	238	(96)	142	224	(125)	99	41
Dickson Financial Services Limited	8.4	30.0	84	44	128	84	31	115	13
Premier Leisure (Suffolk) Limited	6.2	47.4	109	15	124	109	22	131	(7)
Erin Solar Limited	4.3	50.0	120	(6)	114	120	(3)	117	(3)
Locum's Nest Limited	2.4	10.9	110	–	110	–	–	–	–
InCrowd Sports Limited	1.6	6.8	72	–	72	72	–	72	–
Infinite Ventures (Goathill) Limited	0.8	31.0	32	10	42	32	4	36	6
CSS Group Limited	2.7	15.0	33	9	42	33	(2)	31	11
Elements Software Limited	0.6	4.5	3	(3)	–	3	(3)	–	–
Total unquoted fixed asset investments			30,384	11,725	42,109	22,963	6,870	29,833	4,746

		As at 31 December 2017		As at 31 December 2016
Quoted investments	Cost £'000	Cumulative movement in value £'000	Value £'000	Cost £'000	Cumulative movement in value £'000	Value £'000	Change in value for the year** £'000
Mi-Pay Group PLC	823	(646)	177	823	(528)	295	(118)
ComOps Limited	11	(6)	5	11	(2)	9	(4)
Total quoted investments	834	(652)	182	834	(530)	304	(122)
Total fixed asset investments	31,218	11,073	42,291	23,797	6,340	30,137	4,624

Total change in value of investments for the year	4,624
Movement in accrued loan stock interest	67
Unrealised gains sub-total	4,691
Realised gains in current year	823
Total gains on investments as per Income statement	5,514

* Albion Capital Group LLP

** As adjusted for additions and disposals during the year; including realised gains/(losses).

The comparative cost and valuations for 31 December 2016 do not agree to the Annual Report and Financial Statements for the year ended 31 December 2016 as the above list does not include brought forward investments that were fully disposed of in the year.

Portfolio of investments continued

Fixed asset investment realisations in the year to 31 December 2017	Cost £'000	Opening carrying value £'000	Disposal proceeds £'000	Total realised gain/(loss) £'000	Gain/(loss) on opening value £'000
Disposals:
Hilson Moran Holdings Limited	231	1,085	1,768	1,537	683
Blackbay Limited	836	1,006	1,166	330	160
Relayware Limited	767	764	757	(10)	(7)
Masters Pharmaceuticals Limited	316	519	524	208	5
AMS Sciences Limited	222	158	158	(64)	–

Loan stock repayments/restructuring:
Radnor House School (Holdings) Limited	88	88	88	–	–
Oxsensis Limited	33	44	47	14	3
memsstar Limited	16	72	44	28	(28)
Aridhia Informatics Limited	27	27	31	4	4
Alto Prodotto Wind Limited	11	17	17	6	–
Greenenerco Limited	4	6	6	2	–

Escrow adjustments and other:
Escrow adjustments**	–	–	3	3	3
TWCL Limited*	183	–	–	(183)	–
Total realisations	2,734	3,786	4,609	1,875	823

* The accounting cost as shown above represents realised losses of investments still held at the Balance sheet date.

** These comprise fair value movements on deferred consideration on previously disposed investments.

Portfolio companies

Geographical locations

Portfolio of 48 unquoted companies employing over 1,200 people across the United Kingdom.

Three companies featured in the Sunday Times Hiscox Tech Track 100 of Britain's

The top ten investments by value are as follows:

Website: www.radnorhouse.org

Audited results: year to 31 August 2017	£'000	Investment information	£'000
Turnover	11,487	Income recognised in the year	264
EBITDA	1,489	Total cost	2,772
Loss before tax	(552)	Total valuation	5,951
Net assets	30,951	Voting rights	8.8 per cent.

Radnor House School (Holdings) Limited

Radnor House operates two independent schools in Twickenham and Sevenoaks. The Twickenham school trades at near mature levels with more than 400 children on the roll. The school in Sevenoaks, which was acquired in 2015 as a turnaround opportunity, is now growing strongly with over 400 children on the roll and further capacity to expand. Both schools aim to deliver a personalised education experience to each student with a focus on learning. The curriculum and co-curricular activities are designed to give each child a wide range of academic and other skills and prepare him or her for a dynamic and rapidly changing world.

Audited results: year to 31 August 2017	£'000	Investment information	£'000
Turnover	11,487	Income recognised in the year	264
EBITDA	1,489	Total cost	2,772
Loss before tax	(552)	Total valuation	5,951
Net assets	30,951	Voting rights	8.8 per cent.
Basis of valuation:	Third party valuation – earnings multiple	Voting rights for all Albion managed companies	50.0 per cent.

Grapeshot Limited

Grapeshot provides contextual intelligence to digital marketers and publishers, using complex algorithms to integrate with the leading marketing, publishing and media platforms and to transform data into relevant, actionable insights that can be used to inform, enhance and precisely target customer acquisition and retention campaigns. Grapeshot operates out of offices in London, New York, Chicago, San Francisco, Cambridge, Sydney and Singapore and the company plans to open offices in Toronto, Miami, LA, Paris, Germany and Japan.

Website: www.grapeshot.com

Turnover
FBITDA
Loss before tax
Net assets
Basis of valuation:

E UUU
9.045
(1.207)
(1.699)
4.367
Revenue multiple

£'000	Investment information	£'000
9,045	Income recognised in the year	–
(1,207)	Total cost	806
(1,699)	Total valuation	3,823
4,367	Voting rights	3.9 per cent.
Revenue multiple	Voting rights for all Albion managed companies	14.2 per cent.

Website: www.egress.com

Audited results: year to
31 December 2016	£'000	Investment information	£'000
Turnover	5,442	Income recognised in the year	–
EBITDA	(762)	Total cost	1,422
Loss before tax	(901)	Total valuation	3,216
Net liabilities	(1,613)	Voting rights	7.6 per cent.

Egress Software Technologies Limited

Egress has developed a cloud-based secure communication platform that offers encrypted services including email, file transfer, document collaboration and archiving. Egress's early customers came from the public sector, but are now spread across all verticals where there is a need for enhanced data security, including the financial services, health and legal sectors.

31 December 2016	£'000	Investment information	£'000
Turnover	5,442	Income recognised in the year	–
EBITDA	(762)	Total cost	1,422
Loss before tax	(901)	Total valuation	3,216
Net liabilities	(1,613)	Voting rights	7.6 per cent.
Basis of valuation	Price of recent investment	Voting rights for all Albion managed companies	27.3 per cent.

Proveca Limited

Proveca is a pharmaceutical company focused on children's medicines. Currently 50-90% of the medicines children take are in the wrong format and/or are not licensed for their use. Proveca is addressing a significant need in developing drugs that are specifically formulated for children, taking advantage of a supportive regulatory regime and market protection throughout Europe. Its first product for chronic drooling, Sialanar, was launched in 2017. It has a pipeline of drugs focused on neurology, cardiovascular and other therapeutic areas that it expects to reach the market over the next 2 to 5 years.

Website: www.proveca.co.uk

Filleted audited results:

year to 31 July 2016	£'000	Investment information	£'000
Net liabilities	(2,379)	Income recognised in the year	8
Basis of valuation:	Price of recent investment	Total cost	1,084
		Total valuation	2,415
		Voting rights	11.8 per cent.
		Voting rights for all Albion managed companies	49.9 per cent.

Chonais River Hydro Limited

Chonais River Hydro is a 2MW hydropower scheme near Loch Carron in the Scottish Highlands. It is a run-of-river scheme, taking water from a small river via an intake on the mountainside. The scheme is low visual impact with the only visible components being a small intake and a powerhouse, both of which are built using local material. It generates enough electricity to power about 2,000 homes. It benefits from inflation-protected renewable subsidies for a period of 20 years. The scheme was commissioned in 2014 and has been generating successfully since.

Filleted audited results: year to
30 September 2016	£'000	Investment information	£'000
Turnover	–	Income recognised in the year	157
EBITDA	(11)	Total cost	1,705
Loss before tax	(12)	Total valuation	2,110
Net liabilities	(47)	Voting rights	4.6 per cent.
Basis of valuation	Third party valuation – discounted cash flow	Voting rights for all Albion managed companies	50.0 per cent.

Investment information	f'000
Income recognised in the year	157
Total cost	1.705
Total valuation	2.110
Voting rights	4.6 per cent.
Voting rights for all Albion managed companies	50.0 per cent.

Website: www.engensa.com

The Street by Street Solar Programme Limited

Street by Street owns and operates solar PV systems on circa 600 privately owned homes in England and Wales. It provides free and clean electricity to those homes, and benefits from inflation-protected renewable subsidies for a period of 20 to 25 years. Most of the PV systems were commissioned in 2011 and 2012.

Filleted audited results: year to

Net liabilities
Basis of
valuation:

30 November 2016 £'000		Investment information:	£'000
Net liabilities	(86)	Income recognised in the year	–
Basis of	Third party	Total cost	1,291
valuation:	valuation –	Total valuation	2,065
	discounted	Voting rights	12.4 per cent.
	cash flow	Voting rights for all Albion
		managed companies	50.0 per cent.

Regenerco Renewable Energy Limited Website: www.regenerco.co.uk

Regenerco Renewable Energy owns and operates solar PV systems on 15 commercial properties and circa 570 council owned homes in Cambridgeshire. It provides free and clean electricity to those homes and benefits from inflation-protected renewable subsidies for a period of 20 to 25 years. Most of the PV systems on commercial properties were commissioned in 2011 and 2012, and council housing in 2013.

Filleted audited results: year to
31 December 2016 £'000		Investment information:	£'000
Net assets	37	Income recognised in the year	–
Basis of	Third party
valuation:	valuation –	Total cost	1,204
	discounted	Total valuation	1,814
	cash flow	Voting rights	11.9 per cent.
		Voting rights for all Albion
		managed companies	50.0 per cent.

Bravo Inns II Limited

Website: www.bravoinns.com

Bravo Inns II Ltd was formed in September 2007 to acquire freehold pubs in the North of England. The Bravo strategy is to acquire closed and underinvested sites, undertaking high quality refurbishments before trading as wet-led community pubs. The estate currently consists of 31 sites and the Bravo team are looking to add 2-3 sites a year to grow the estate.

Filleted audited results: year to 31 March 2017		Investment information:	£'000
Net assets	4,667	Income recognised in the year	3

Filleted audited results: year to 31 March 2017 £'000 Investment information:	£'000
Net assets 4,667 Income recognised in the year	3
Basis of valuation: Third party valuation – earnings multiple Total cost	1,080
Total valuation	1,322
Voting rights	6.7 per cent.
Voting rights for all Albion managed companies	50.0 per cent.

Website: www.infiniterenewables.com Alto Prodotto Wind Limited

Alto Prodotto owns and operates three 500kW wind turbines in brown field areas of Wales, powering local business like a roof tile factory. It generates enough electricity to power about 1,500 homes. It benefits from inflation-protected renewable subsidies for a period of 20 years. The first two turbines were commissioned in 2012 and the third in 2014.

Filleted audited results: year

to 31 March 2017	£'000	Investment information	£'000
Net assets	1,577	Income recognised in the year	97
Basis of	Third party	Total cost	829
valuation:	valuation –	Total valuation	1,298
	discounted	Voting rights	9.4 per cent.
	cash flow	Voting rights for all Albion
		managed companies	50.0 per cent.

Earnside Energy Limited

Earnside Energy owns and operates an anaerobic digestion ("AD") plant and composting facility in Perthshire in Scotland. The AD plant, which has recently undergone a significant expansion programme, turns waste food into electricity and produces digestate for use as an agricultural fertiliser, while the composting facility produces compost from co-mingled food and garden waste. The combined facility is capable of processing c. 75,000 tonnes of waste per annum.

Audited results: year to

31 December 2016 £'000		Investment information	£'000
Turnover	2,608	Income recognised in the year	–
EBITDA	372	Total cost	1,089
Loss before tax	(722)	Total valuation	1,265
Net assets	803	Voting rights	6.8 per cent.
Basis of	Third party	Voting rights for all Albion
valuation:	valuation –	managed companies	50.0 per cent.
	discounted
	cash flow

Investment information	€'000
Income recognised in the year
Total cost	1.089
Total valuation	1.265
Voting rights	6.8 per cent.
Voting rights for all Albion
managed companies	50.0 per cent.

Website: www.earnsideenergy.com

Directors' report

The Directors submit their Annual Report and the audited Financial Statements on the affairs of Albion Development VCT PLC (the "Company") for the year ended 31 December 2017. The Statement of corporate governance on pages 34 to 38 forms a part of the Directors' report.

BUSINESS REVIEW

Principal activity and status

The principal activity of the Company is that of a venture capital trust. It has been approved by H.M. Revenue & Customs ("HMRC") as a venture capital trust in accordance with the Income Tax Act 2007 and, in the opinion of the Directors, the Company has conducted its affairs so as to enable it to continue to obtain such approval. Approval for the year ended 31 December 2017 is subject to review should there be any subsequent enquiry under corporation tax self-assessment.

The Company is not a close company for taxation purposes and its shares are premium listed on the official list of the London Stock Exchange.

Under current tax legislation, shares in the Company provide taxfree capital growth and income distribution, in addition to the income tax relief some investors would have obtained when they invested in the original share offers.

Capital structure

Details of the issued share capital, together with details of the movements in the Company's issued share capital during the year are shown in note 15.

The Company's share capital comprises Ordinary shares. The Ordinary shares are designed for individuals who are professionally advised private investors seeking, over the long term, investment exposure to a diversified portfolio of unquoted investments. The investments are spread over a number of sectors, to produce a regular and predictable source of income, combined with the prospect of longer term capital growth.

All Ordinary shares (except for treasury shares which have no right to dividend and no voting rights) rank pari passu for dividends and voting rights. Each Ordinary share is entitled to one vote. The Directors are not aware of any restrictions on the transfer of shares or on voting rights.

Shareholders are entitled to receive dividends and are entitled to the return on capital on winding up or other return on capital based on the surpluses attributable to the shares.

Issue and buy-back of Ordinary shares

During the year the Company issued a total of 10,641,522 Ordinary shares (2016: 8,170,039 Ordinary shares) under the Albion VCTs Top Up Offers and 610,463 Ordinary shares (2016: 747,892 Ordinary shares) under the Company's Dividend Reinvestment Scheme. Further information on the share capital is detailed in note 15.

The Company operates a policy of buying back shares either for cancellation or for holding in treasury. Details regarding the current buy-back policy can be found on page 8 of the Chairman's statement.

Substantial interests and shareholder profile

As at 31 December 2017 and at the date of this Report, the Company was not aware of any shareholder who had a beneficial interest exceeding 3 per cent. of voting rights. There have been no disclosures in accordance with Disclosure Guidance and Transparency Rule 5 made to the Company during the year ended 31 December 2017, and up to the date of this Report.

Future developments of the business

Details on the future developments of the business can be found on page 9 of the Chairman's statement and on page 12 of the Strategic report.

Results and dividends

Detailed information on the results and dividends for the year ended 31 December 2017 can be found in the Strategic report on pages 11 to 12.

Going concern

In accordance with the Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued by the Financial Reporting Council in September 2014, the Board has assessed the Company's operation as a going concern. The Company has significant cash and liquid resources, its portfolio of investments is well diversified in terms of sector and the major cash outflows of the Company (namely investments, buy-backs and dividends) are within the Company's control. Accordingly, after making diligent enquiries the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence over a period of at least twelve months from the date of approval of the Financial Statements. For this reason, the Directors have considered it appropriate to adopt the going concern basis of accounting.

Directors' report continued

The Board's assessment of liquidity risk and details of the Company's policies for managing its capital and financial risks are shown in note 17. The Company's business activities, together with details of its performance are shown in the Strategic report and this Directors' report.

Post balance sheet events

Details of events that have occurred since 31 December 2017 are shown in note 19.

Principal risks and uncertainties

A summary of the principal risks faced by the Company is set out on pages 15 and 16 of the Strategic report.

VCT regulation

(1) The Company's income must be derived wholly or mainly from shares and securities;
(2) At least 70 per cent. of the HMRC value of its investments must have been represented throughout the year by shares or securities that are classified as 'qualifying holdings';
(3) At least 30 per cent. by HMRC value of its total qualifying holdings must have been represented throughout the year by holdings of 'eligible shares'. For funds raised after 5 April 2011 the figure is 70 per cent.;
(4) At the time of investment, or addition to an investment, the Company's holdings in any one company (other than another VCT) must not have exceeded 15 per cent. by HMRC value of its investments;
(5) The Company must not have retained greater than 15 per cent. of its income earned in the year from shares and securities;
(6) The Company's shares, throughout the year, must have been listed on a regulated European market;
(7) An investment in any company must not cause that company to receive more than £5 million in State aid risk finance in the 12 months up to the date of the investment, nor more than £12 million in total (£20 million for a "knowledge intensive" company);
(8) The Company must not invest in a company whose trade is more than seven years old (ten years for a "knowledge intensive" company) unless the company previously received State aid risk finance in its first seven years, or a turnover test is satisfied;
(9) The Company's investment in another company must not be used to acquire another business, or shares in another company; and
(10) The Company may only make qualifying investments or certain non-qualifying investments permitted by section 274 of the Income Tax Act 2007.

These tests drive a spread of investment risk through disallowing holdings of more than 15 per cent. in any portfolio company. The tests have been carried out and independently reviewed for the year ended 31 December 2017. The Company has complied with all tests and continues to do so.

'Qualifying holdings' include shares or securities (including loans with a five year or greater maturity period) in companies which operate a 'qualifying trade' wholly or mainly in the United Kingdom. Eligible shares must comprise at least 10 per cent. by HMRC value of the total of the shares and securities that the Company holds in any one portfolio company. 'Qualifying trade' excludes, amongst other sectors, dealing in property or shares and securities, insurance, banking and agriculture. Details of the sectors in which the Company is invested can be found in the pie chart on page 11.

A "knowledge intensive" company is one which is carrying out significant amounts of R&D from which the greater part of its business will be derived, or where those R&D activities are being carried out by staff with certain higher educational attainments.

Portfolio company gross assets must not exceed £15 million immediately prior to the investment and £16 million immediately thereafter.

The Finance Act 2017 contained a number of measures that affect all VCTs which will be phased in over the coming years. Further details of some of the changes introduced can be found in the Strategic report on page 12.

Environment

The management and administration of the Company is undertaken by the Manager. Albion Capital Group LLP recognises the importance of its environmental responsibilities, monitors its impact on the environment, and designs and implements policies to reduce any damage that might be caused by its activities. Initiatives designed to minimise the Company's impact on the environment include recycling and reducing energy consumption.

Global greenhouse gas emissions

The Company has no greenhouse gas emissions to report from the operations of the Company, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) regulations 2013, including those within our underlying investment portfolio.

Anti-bribery policy

The Company has adopted a zero tolerance approach to bribery, and will not tolerate bribery under any circumstances in any transaction the Company is involved in.

Albion Capital Group LLP reviews the anti-bribery policies and procedures of all portfolio companies.

Anti-facilitation of tax evasion policy

The Company has adopted a zero tolerance approach with regards to the facilitation of criminal tax evasion and has put in place a robust risk assessment procedure to ensure compliance. The Board reviews this policy and the prevention procedures in place for all associates on a regular basis.

Diversity

The Board currently consists of three male directors and one female director. The Board's policy on the recruitment of new Directors is to attract a range of backgrounds, skills and experience and to ensure that appointments are made on the grounds of merit against clear and objective criteria and bear in mind gender and other diversity within the Board.

More details on the Directors can be found in the Board of Directors section on page 17.

The Manager has an equal opportunities policy and currently employees 12 men and 16 women.

Packaged Retail and Insurance-based Investment Products ("PRIIPs")

Investors should be aware that the PRIIPs Regulation requires the Manager, as PRIIP manufacturer, to prepare a Key Information Document ("KID") in respect of the Company. This KID must be made available by the Manager to retail investors prior to them making any investment decision and is available on the Company's webpage on the Manager's website. The Company is not responsible for the information contained in the KID and investors should note that the procedures for calculating the risks, costs and potential returns are prescribed by the law. The figures in the KID may not reflect the expected returns for the Company and anticipated performance returns cannot be guaranteed.

Employees

The Company is managed by Albion Capital Group LLP and hence has no employees. The Board consists solely of non-executive Directors.

Directors

The Directors who held office throughout the year, and their interests in the shares of the Company (together with those of their immediate family) are shown in the Directors' remuneration report on page 40.

All Directors, except Patrick Reeve, are members of the Audit Committee of which Geoffrey Vero is Chairman.

Patrick Reeve, as managing partner of Albion Capital Group LLP, is deemed to have an interest in the Management agreement and Management performance incentive to which the Company is party.

Directors' indemnity

Each Director has entered into a Deed of Indemnity with the Company which indemnifies each Director, subject to the provisions of the Companies Act 2006 and the limitations set out in each deed, against any liability arising out of any claim made against him in relation to the performance of his or her duties as a Director of the Company. A copy of each Deed of Indemnity entered into by the Company for each Director is available at the registered office of the Company.

Advising ordinary retail investors

The Company currently conducts its affairs so that its shares can be recommended by financial intermediaries to ordinary retail investors in accordance with the FCA's rules in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future. The FCA's restrictions which apply to non-mainstream investment products do not apply to the Company's shares because they are shares in a VCT which, for the purposes of the rules relating to non-mainstream investment products, are excluded securities and may be promoted to ordinary retail investors without restriction.

Re-election and election of Directors

Directors' retirement and re-election is subject to the Articles of Association and the UK Corporate Governance Code. At the forthcoming Annual General Meeting, Geoffrey Vero, having served as a Director for longer than nine years, will retire and offer himself for re-election. Patrick Reeve is not considered to be independent, as he is the managing partner of the Manager, Albion Capital Group LLP, and will therefore also retire and offer himself for re-election at the forthcoming Annual General Meeting. As Lyn Goleby has been appointed since the last Annual General Meeting, she will resign and be subject to election at the forthcoming Annual General Meeting. Jonathan Thornton retired as a Director on 3 November 2017.

Auditor

The Audit Committee annually reviews and evaluates the standard and quality of service provided by the Auditor, as well as value for money in the provision of these services. A competitive tender was conducted in July 2017. Further details of this evaluation can be found in the Audit Committee section of the Statement of corporate governance. A resolution to re-appoint BDO LLP will be put to the Annual General Meeting.

Annual General Meeting

The Annual General Meeting will be held at the City of London Club, 19 Old Broad Street, London, EC2N 1DS at 11.00 am on 29 May 2018. The notice of the Annual General Meeting is at the end of this document.

The proxy form enclosed with this Annual Report and Financial Statements permits shareholders to disclose votes 'for', 'against', and 'withheld'. A 'vote withheld' is not a vote in law and will not be counted in the proportion of the votes for and against the resolution. A summary of proxies lodged at the Annual General Meeting will be published at www.albion.capital/funds/AADV under the 'Financial Reports and Circulars' section.

Resolutions relating to the following items of special business will be proposed at the forthcoming Annual General Meeting for which shareholder approval is required in order to comply either with the Companies Act or the Listing Rules of the Financial Conduct Authority.

Change to the general investment policy

Ordinary resolution 8 proposes that the Company's investment policy be amended to enable the Company to comply with new VCT qualifying requirements as explained further in the Strategic report.

Change to the investment policy – non-VCT qualifying investments

Ordinary resolution 9 proposes that the Company's investment policy be amended to enable the Company to invest funds held prior to investment in liquid open-ended equity funds as explained further in the Strategic report.

Authority to allot shares

Ordinary resolution number 10 will request the authority to allot up to an aggregate nominal amount of £164,078 representing approximately 20 per cent. of the issued Ordinary share capital as at the date of this Report.

During the year, Ordinary shares were allotted as described in detail in note 15.

The Directors current intention is to allot shares under any Albion VCTs Share Offers and the Dividend Reinvestment Schemes. The Company currently holds 7,818,700 Ordinary shares in treasury representing 9.8 per cent. of the Ordinary share capital in issue as at 31 December 2017.

This resolution replaces the authority given to the Directors at the Annual General Meeting in 2017. The authority sought at the forthcoming Annual General Meeting will expire 15 months from the date that this resolution is passed or at the conclusion of the next Annual General Meeting of the Company, whichever is earlier.

Disapplication of pre-emption rights

Special resolution number 11 will request authority for Directors to allot equity securities for cash without first being required to offer such securities to existing members. This will include the sale on a non pre-emptive basis of any shares the Company holds in treasury for cash. The authority relates to a maximum aggregate of £164,078 of the nominal value of the share capital representing approximately 20 per cent. of the issued Ordinary share capital of the Company as at the date of this Report.

This resolution replaces the authority given to the Directors at the Annual General Meeting in 2017. The authority sought at the forthcoming Annual General Meeting will expire 15 months from the date this resolution is passed or at the conclusion of the next Annual General Meeting of the Company, whichever is earlier. Members should note that this resolution also applies to treasury shares.

Purchase of own shares

Special resolution number 12 will request the authority to purchase approximately 14.99 per cent. of the Company's issued Ordinary share capital at, or between, the minimum and maximum prices specified in resolution 12. Shares bought back under this authority may be cancelled or held in treasury.

The Board believes that it is helpful for the Company to continue to have the flexibility to buy its own shares and this resolution seeks authority from shareholders to do so.

This resolution would renew the 2017 authority, which was on similar terms. During the financial year under review, the Company purchased 1,262,000 Ordinary shares for treasury, at an aggregate consideration of £855,000 representing 1.6 per cent. of called up share capital. No Ordinary shares were purchased for cancellation.

The authority sought at the forthcoming Annual General Meeting will expire 15 months from the date this resolution is passed or at the conclusion of the next Annual General Meeting of the Company, whichever is earlier.

Treasury shares

Under the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 (the "Regulations"), shares purchased by the Company out of distributable profits can be held as treasury shares, which may then be cancelled or sold for cash. The authority sought by these resolutions is intended to apply equally to shares to be held by the Company as treasury shares in accordance with the Regulations.

Special resolution number 13 will request the authority to permit Directors to sell treasury shares at the higher of the prevailing share price and the price bought in at.

Directors' report continued

Recommendation

The Board believes that the passing of the resolutions above is in the best interests of the Company and its shareholders as a whole, and unanimously recommends that you vote in favour of these resolutions, as the Directors intend to do in respect of their own shareholdings.

Disclosure of information to Auditor

In the case of the persons who are Directors of the Company at the date of approval of this report:

so far as each of the Directors are aware, there is no relevant audit information of which the Company's Auditor is unaware; and
each of the Directors has taken all the steps that he/she ought to have taken as a Director to make himself/herself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

This disclosure is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.

By Order of the Board

Albion Capital Group LLP Company Secretary

1 King's Arms Yard London, EC2R 7AF 29 March 2018

Statement of Directors' responsibilities

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have elected to prepare the Company's Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice ("UK GAAP") (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for the Company for that period.

In preparing these Financial Statements, the Directors are required to:

select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether they have been prepared in accordance with UK GAAP subject to any material departures disclosed and explained in the Financial Statements; and
prepare a Directors' report, a Strategic report and Directors' remuneration report which comply with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the Annual Report and Financial Statements, taken as a whole, are fair, balanced, and understandable and provide the information necessary for shareholders to assess the Company's position, performance, business model and strategy.

Website publication

The Directors are responsible for ensuring the Annual Report and Financial Statements are made available on a website. Financial Statements are published on the Company's webpage on the Manager's website (www.albion.capital/funds/AADV) in accordance with legislation in the United Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance of the Company's webpage is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the Financial Statements contained therein.

Directors' responsibilities pursuant to Disclosure Guidance and Transparency Rule 4 of the UK Listing Authority The Directors confirm to the best of their knowledge:

The Financial Statements have been prepared in accordance with UK GAAP and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company.
The Annual Report includes a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the Board

Geoffrey Vero Chairman 29 March 2018

Background

The Financial Conduct Authority requires all companies listed on a regulated market to disclose how they have applied the principles and complied with the provisions of the UK Corporate Governance Code (the "Code") issued by the Financial Reporting Council ("FRC") in 2016.

The Board of Albion Development VCT PLC has also considered the principles and recommendations of the AIC Code of Corporate Governance ("AIC Code") by reference to the AIC Corporate Governance Guide for Investment Companies ("AIC Guide"). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company.

The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Corporate Governance Code), will provide better information to shareholders than reporting under the Code alone.

The Company has complied with the recommendations of the AIC Code and the relevant provisions of the Code, except as set out below.

Application of the Principles of the Code

The Board attaches importance to matters set out in the Code and applies its principles. However, as a venture capital trust company, most of the Company's day-to-day responsibilities are delegated to third parties and the Directors are all non-executive. Thus, not all the provisions of the Code are directly applicable to the Company.

Board of Directors

The Board consists solely of non-executive Directors. Since all Directors are non-executive and day-to-day management responsibilities are sub-contracted to the Manager, the Company does not have a Chief Executive Officer.

Geoffrey Vero is the Chairman of the Company, and he, Lyn Goleby and Ben Larkin are considered independent Directors. Ben Larkin is the Senior Independent Director. Patrick Reeve is not an independent Director as he is managing partner of Albion Capital Group LLP, the Manager.

Geoffrey Vero has been a Director of the Company for more than nine years and, in accordance with the recommendations of the AIC code, is subject to annual re-election. The Board does not have a policy of limiting the tenure of any Director as the Board does not consider that a Director's length of service reduces his or her ability to act independently of the Manager. Patrick Reeve is also subject to annual re-election as he is not considered to be an independent Director. As Lyn Goleby has been appointed since the last Annual General Meeting, she will resign and be subject to election at the forthcoming Annual General Meeting. Jonathan Thornton retired as a Director on 3 November 2017.

The Directors have a range of business and financial skills which are relevant to the Company; these are described in the Board of Directors section of this Report, on page 17. Directors are provided with key information on the Company's activities, including regulatory and statutory requirements, and internal controls, by the Manager. The Board has access to secretarial advice and compliance services by the Manager, who is responsible for ensuring that Board procedures are followed and applicable procedures complied with. All Directors are able to take independent professional advice in furtherance of their duties if necessary. In accordance with the UK Corporate Governance Code, the Company has in place Directors' & Officers' Liability Insurance.

The Directors have considered diversity in relation to the composition of the Board and have concluded that its membership is diverse in relation to experience and balance of skills. Further details on the recruitment of new directors can be found in the Nomination Committee section on page 37.

The Board met four times during 2017 as part of its regular programme of Board meetings. In addition, and in accordance with best practice, a further meeting took place without the Manager present. All of the Directors attended each meeting, except Lyn Goleby who joined the Board on 3 November 2017. A sub-committee comprising at least two Directors met during the year to allot shares issued under the Dividend Reinvestment Scheme and the various Albion VCTs Top Up Offers. A sub-committee comprising at least two Directors also met during the year to approve the terms and contents of the Offer documents under the Albion VCTs Prospectus Top Up Offers 2017/18.

The Chairman ensures that all Directors receive, in a timely manner, all relevant management, regulatory and financial information. The Board receives and considers reports regularly from the Manager and other key advisers, with ad hoc reports and information supplied to the Board as required. The Board has a formal schedule of matters reserved for it and the agreement between the Company and its Manager sets out the matters over which the Manager has authority and limits beyond which Board approval must be sought.

continued

The Manager has authority over the management of the investment portfolio, the organisation of custodial services, accounting, secretarial and administrative services. The main issues reserved for the Board include:

the appointment, evaluation, removal and remuneration of the Manager;
the consideration and approval of future developments or changes to the investment policy, including risk and asset allocation;
consideration of corporate strategy and corporate events that arise;
application of the principles of the UK Corporate Governance Code, corporate governance and internal control;
review of sub-committee recommendations, including the recommendation to shareholders for the appointment and remuneration of the Auditor;
evaluation of non-audit services provided by the external Auditor;
approval of the appropriate dividend to be paid to shareholders;
the performance of the Company, including monitoring of the discount of the net asset value and the share price;
share buy-back and treasury share policy; and
monitoring shareholder profile and considering shareholder communications.

It is the responsibility of the Board to present an Annual Report and Financial Statements that is fair, balanced and understandable, which provides the information necessary for shareholders to assess the position, performance, strategy and business model of the Company.

Committees' and Directors' performance evaluation

Performance of the Board and the Directors is assessed on the following bases:

attendance at Board and Committee meetings;
the contribution made by individual Directors at, and outside of, Board and Committee meetings; and
completion of a detailed internal assessment process and annual performance evaluation conducted by the Chairman. The Senior Independent Director reviews the Chairman's annual performance evaluation.

The evaluation process has identified that the Board works well together and has the right balance of skills, experience, independence and knowledge of the Company amongst the Directors. Diversity within the Board is achieved through the appointment of directors with different backgrounds and skills.

Directors are offered training, both at the time of joining the Board and on other occasions where required. The Board also undertakes a proper and thorough evaluation of its committees on an annual basis.

In light of the structured performance evaluation, Patrick Reeve and Geoffrey Vero, both of whom are subject to re-election at the forthcoming Annual General Meeting, and Lyn Goleby who is subject to election at the forthcoming Annual General Meeting are considered to be effective Directors and demonstrate strong commitment to the role; on this basis, the Board believes it to be in the best interests of the Company to appoint these Directors at the forthcoming Annual General Meeting.

Remuneration Committee

The Remuneration Committee consists of all Directors except Patrick Reeve, with Ben Larkin as Chairman. The Committee held one formal meeting during the year, which was fully attended by all the members of the Committee, except Lyn Goleby who joined the Board on 3 November 2017.

The terms of reference for the Remuneration Committee can be found on the Company's webpage on the Manager's website at www.albion.capital/funds/AADV under the Corporate Governance section.

Audit Committee

Following the retirement of Jonathan Thornton, who was Audit Committee chairman, Geoffrey Vero was appointed as Chairman. The Directors acknowledge that the Company does not comply with the Code in its recommendation that the Chairman of a Company should not Chair the Audit Committee, but have deemed it appropriate that Geoffrey Vero is chairman of both the Audit Committee and the Board of the Company as a result of the depth of his experience in this area.

The Audit Committee consists of all Directors, except Patrick Reeve, and Geoffrey Vero is Chairman. In accordance with the Code, the members of the Audit Committee have recent and relevant financial experience. The Committee met twice during the year ended 31 December 2017; all members attended, except Lyn Goleby who joined on 3 November 2017.

continued

Written terms of reference have been constituted for the Audit Committee and can be found on the Company's webpage on the Manager's website at www.albion.capital/funds/AADV under the Corporate Governance section.

During the year under review, the Committee discharged its responsibilities including:

formally reviewing the Annual Report and Financial Statements, the Half-yearly Financial Report, the Interim Management Statements which the Company will continue to publish and the associated announcements, with particular focus on the main areas requiring judgement and on critical accounting policies;
reviewing the effectiveness of the internal controls system and examination of the Internal Controls Report produced by the Manager;
meeting with the external Auditor and reviewing their findings;
reviewing the performance of the Manager and making recommendations regarding their re-appointment to the Board;
highlighting the key risks and specific issues relating to the Financial Statements including the reasonableness of valuations, compliance with accounting standards and UK law, corporate governance and listing and disclosure rules as well as going concern. These issues were addressed through detailed review, discussion and challenge by the Board of these matters, as well as by reference to underlying technical information;
advising the Board on whether the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position, performance, business model and strategy; and
reporting to the Board on how it has discharged its responsibilities.

Financial Statements

The Audit Committee has initial responsibility for reviewing the Financial Statements and reporting on any significant issues that arise in relation to the audit of the Financial Statements as outlined below. The Audit Committee considered whether these issues were properly considered at the planning stage of the audit and the issues were discussed with the external Auditor prior to the completion of the audit of the Financial Statements. No major conflicts arose between the Audit Committee and the external Auditor in respect of their work during the period.

The key accounting and reporting issues considered by the Committee were:

The valuation of the Company's investments Valuations of investments are prepared by the Manager. The Audit Committee reviewed the estimates and judgements made in relation to these investments and were satisfied that they were appropriate. The Audit Committee also discussed the controls in place over the valuation of investments. The Committee recommended investment valuations to the Board for approval.

Revenue recognition The revenue generated from loan stock interest and dividend income has been considered by the Audit Committee as part of its review of the Financial Statements as well as a quarterly review of the management accounts prepared by the Manager. The Audit Committee has considered the controls in place over revenue recognition to ensure that amounts received are in line with expectation and budget.

Following detailed reviews of the Annual Report and Financial Statements and consideration of the key areas of risk identified, the Board as a whole have concluded that the Financial Statements are fair, balanced and understandable and that they provide the information necessary for shareholders to assess the Company's position, performance, business model and strategy.

Relationship with the external Auditor

The Committee reviews the performance and continued suitability of the Company's external Auditor on an annual basis. They assess the external Auditor's independence, qualification, extent of relevant experience, effectiveness of audit procedures as well as the robustness of their quality assurance procedures. In advance of each audit, the Committee obtains confirmation from the external Auditor that they are independent and of the level of non-audit fees earned by them and their affiliates. There were no non-audit fees charged to the Company during the year.

As part of its work, the Audit Committee has undertaken a formal evaluation of the external Auditor against the following criteria;

Qualification
Expertise
Resources
Effectiveness
Independence
Leadership

In order to form a view of the effectiveness of the external audit process, the Committee took into account information from the Manager regarding the audit process, the formal documentation

issued to the Audit Committee and the Board by the external Auditor regarding the external audit for the year ended 31 December 2017, and assessments made by individual Directors.

During the year, the Audit Committee undertook a competitive tender process for appointment of the external auditor for the financial year ending 31 December 2017, so as to ensure auditor independence and continued quality of judgement. The core legislation mandates that the maximum period for which a firm can be appointed auditor of a public interest entity is 10 years. Member states can choose to make this period shorter, or they can choose to allow extensions: to 20 years if a competitive tender is held at the 10 year point. BDO first acted as Auditor for the year ended 31 December 2008. The Company can confirm that there are no contractual obligations that restrict the Company's choice of external auditor. After the tender process, it was decided to maintain BDO LLP as the external auditor of the Company. The Audit Committee will continue to review and evaluate the standard and quality of service provided by the Auditor, as well as value for money in the provision of these services on an annual basis.

Based on the assurance obtained, the Audit Committee recommended to the Board a resolution to re-appoint BDO LLP as Auditor at the forthcoming Annual General Meeting.

Nomination Committee

The Nomination Committee consists of all Directors, apart from Patrick Reeve, with Geoffrey Vero as Chairman.

The Board's policy on the recruitment of new Directors is to attract a range of backgrounds, skills and experience and to ensure that appointments are made on the grounds of merit against clear and objective criteria and bear in mind gender and other diversity within the Board.

The Nomination Committee met during the year, and following a detailed interview and referencing process, the Nomination Committee recommended the appointment of Lyn Goleby as a Director.

Terms of reference for the Nomination Committee can be found on the Company's webpage on the Manager's website at www.albion.capital/funds/AADV under the Corporate Governance section.

Internal control

In accordance with the UK Corporate Governance Code, the Board has an established process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place throughout the year and continues to be subject to regular review by the Board in accordance with the FRC guidance "Risk Management, Internal Control and Related Financial and Business Reporting". The Board is responsible for the Company's system of internal control and for reviewing its effectiveness. However, such a system is designed to manage, rather than eliminate the risks of failure to achieve the Company's business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

The Board, assisted by the Audit Committee, monitors all controls, including financial, operational and compliance controls, and risk management. The Audit Committee receives each year from the Manager a formal report, which details the steps taken to monitor the areas of risk, including those that are not directly the responsibility of the Manager, and which reports the details of any known internal control failures. Steps continue to be taken to embed the system of internal control and risk management into the operations and culture of the Company and its key suppliers, and to deal with areas of improvement which come to the Manager's and the Audit Committee's attention.

The Board, through the Audit Committee, has performed a specific assessment for the purpose of this Annual Report. This assessment considers all significant aspects of internal control arising during the year. The Audit Committee assists the Board in discharging its review responsibilities.

The main features of the internal control system with respect to financial reporting, implemented throughout the year are:

segregation of duties between the preparation of valuations and recording into accounting records;
independent third party valuations of the majority of the asset-based investments within the portfolio are undertaken annually;
reviews of valuations are carried out by the managing partner and reviews of financial reports are carried out by the operations partner of Albion Capital Group LLP;
bank reconciliations are carried out monthly, and stock reconciliations are carried out six-monthly, by the Manager in accordance with the FCA requirements;
all published financial reports are reviewed by Albion Capital Group LLP compliance department;
the Board reviews financial information; and
a separate Audit Committee of the Board reviews published financial information.

During the year, as the Board has delegated the investment management and administration to Albion Capital Group LLP, the Board feels that it is not necessary to have its own internal

continued

audit function. Instead, the Board had access to PKF Littlejohn LLP, which, as internal Auditor for Albion Capital Group LLP, undertakes periodic examination of the business processes and controls environment at Albion Capital Group LLP, and ensures that any recommendations to implement improvements in controls are carried out. During the year, the Board reviewed internal audit reports prepared by PKF Littlejohn LLP, and have access to the internal audit partner of PKF Littlejohn LLP. The Board will continue to monitor its system of internal control in order to provide assurance that it operates as intended.

Conflicts of interest

Directors review the disclosure of conflicts of interest annually, with any changes reviewed and noted at the beginning of each Board meeting. A Director who has conflicts of interest has two independent Directors authorise those conflicts. Procedures to disclose and authorise conflicts of interest have been adhered to throughout the year.

Capital structure and Articles of Association

Details regarding the Company's capital structure, substantial interests and Directors' powers to buy and issue shares are detailed in full on pages 28 and 31 of the Directors' report. The Company is not party to any significant agreements that may take effect, alter or terminate upon a change of control of the Company following a takeover bid.

Any amendments to the Company's Articles of Association are by way of a special resolution subject to ratification by shareholders.

Relationships with shareholders

The Company's Annual General Meeting on 29 May 2018 will be used as an opportunity to communicate with investors, and the Board, including the Chairman of the Audit Committee, will be available to answer questions. At the Annual General Meeting, the level of proxies lodged on each resolution, the balance for and against the resolution, and the number of votes withheld, are announced after the resolution has been voted on by a show of hands.

The Annual General Meeting will also include a presentation from the Manager on the portfolio and on the Company, and a presentation from a portfolio company.

Shareholders and financial advisers are able to obtain information on holdings and performance using the contact details provided on page 2.

The Company's share buy-back programme operates in the market through brokers. In order to sell shares, as they are quoted on the London Stock Exchange, investors should approach a broker to undertake the sale. Banks may be able to assist shareholders with a referral to a broker within their banking group.

Statement of compliance

The Directors consider that, with the exception of the requirement for the appointment of a Chief Executive Officer and Geoffrey Vero being Chairman of both the Company and the Audit Committee, the Company has complied throughout the year ended 31 December 2017 with all the relevant provisions set out in the Code and with the AIC Code of Corporate Governance. The Company continues to comply with the Code, as at the date of this Report.

By Order of the Board

Geoffrey Vero Chairman 29 March 2018

Directors' remuneration report

Introduction

This report is submitted in accordance with Section 420 of the Companies Act 2006 and describes how the Board has applied the principles relating to the Directors' remuneration.

An Ordinary resolution will be proposed at the Annual General Meeting of the Company for the approval of the Annual Remuneration Report as set out below.

The current Remuneration Policy was approved by shareholders (95.2% of shareholders voted for the resolution) at the Annual General Meeting held on 25 May 2017 and will remain in place for a three year period. It will next be put to shareholders at the 2020 AGM.

The Company's independent Auditor, BDO LLP, is required to give its opinion on certain information included in this report, as indicated below. The Auditor's opinion is included in the Independent Auditor's Report.

Annual statement from the Chairman of the Remuneration Committee

The Remuneration Committee comprises all of the Directors excluding Patrick Reeve, with Ben Larkin as Chairman.

The Remuneration Committee met once during the year to review Directors' responsibilities and salaries against the market and concluded that the current level of remuneration, which was increased in 2016, remained appropriate and so proposed no increase for the forthcoming year.

Directors' remuneration policy

The Company's policy is that fees payable to non-executive Directors should reflect their expertise, responsibilities and time spent on Company matters. In determining the level of nonexecutive remuneration, market equivalents are considered in comparison to the overall activities and size of the Company. There is no performance related pay criteria applicable to nonexecutive Directors.

None of the Directors have a service contract with the Company, and as such there is no policy on termination payments. There is no notice period and no payments for loss of office were made during the period. On being appointed to the Board, Directors receive a letter from the Company setting out the terms of their appointment and their specific duties and responsibilities. The Company has no employees other than the Directors.

The maximum level of non-executive Directors' remuneration is £100,000 per annum which is fixed by the Company's Articles of Association.

The Company's Articles of Association provide for the resignation and, if approved, re-election of the Directors every three years at the Annual General Meeting. In accordance with the recommendations of the AIC Code, Directors who have served the Company for longer than nine years are subject to annual re-election, and any non-independent Directors are also subject to annual re-election. At the forthcoming Annual General Meeting, Patrick Reeve and Geoffrey Vero will retire and be proposed for re-election. As Lyn Goleby has been appointed since the last Annual General Meeting, she will resign and be subject to election at the forthcoming Annual General Meeting. Jonathan Thornton retired as a Director on 3 November 2017.

Shareholders' views in respect of Directors' remuneration are regarded highly and the Board encourages shareholders to attend its Annual General Meeting in order to communicate their thoughts, which it takes into account where appropriate when formulating its policy. At the last Annual General Meeting, 93.4% of shareholders voted for the resolution approving the Directors' remuneration report, which shows significant shareholder support.

Annual report on remuneration

The remuneration of individual Directors is determined by the Remuneration Committee within the framework set by the Board. The Committee meets at least once a year and met once during the year under review with full attendance from all of its members, except Lyn Goleby who joined on 3 November 2017.

It is responsible for reviewing the remuneration of the Directors and the Company's remuneration policy to ensure that it reflects the duties, responsibilities and value of time spent by the Directors on the business of the Company and makes recommendations to the Board accordingly.

Directors' remuneration

The following items have been audited.

The following table shows an analysis of the remuneration of individual Directors, who were in office during the year, exclusive of National Insurance:

	31 December	31 December
	2017 £'000	2016 £'000
Lyn Goleby
(appointed 3 November 2017)	3.5	–
Ben Larkin	22.0	2.0
Andrew Phillipps
(resigned 17 March 2017)	5.5	22.0
Patrick Reeve	–	–
Jonathan Thornton
(resigned 3 November 2017)	19.2	23.0
Geoffrey Vero	24.0	24.0
	74.2	71.0

The Company does not confer any share options, long term incentives or retirement benefits to any Director, nor does it make a contribution to any pension scheme on behalf of the Directors.

Each Director of the Company was remunerated personally through the Manager's payroll which has been recharged to the Company.

In addition to Directors' remuneration, the Company pays an annual premium in respect of Directors' & Officers' Liability Insurance of £6,817 (2016: £6,798).

The Directors' remuneration for the year ending 31 December 2018 is expected to be £68,000.

Directors

The Directors and their interests in the shares of the Company (together with those of their immediate family) are shown below:

	31 December	31 December
	2017	2016
Lyn Goleby
(appointed 3 November 2017)	–	N/A
Ben Larkin	143,089	–
Andrew Phillipps
(resigned 17 March 2017)	N/A	175,979
Patrick Reeve	160,435	141,354
Jonathan Thornton
(resigned 3 November 2017)	N/A	112,627
Geoffrey Vero	41,394	41,394
Total	344,918	471,354

There have been no changes in the holdings of the Directors between 31 December 2017 and the date of this Report.

There are no guidelines or requirements in respect of Directors' share holdings.

The following items have not been audited.

Albion Capital Group LLP, its partners and staff (including Patrick Reeve) hold 492,350 Ordinary shares in the Company.

Performance graph

The following graph shows the Company's share price total return relative to the FTSE All-Share Index total return, in both instances with dividends reinvested, since 1 January 2008. The Directors consider the FTSE All-Share Index to be the most appropriate benchmark for the Company as it contains a large range of sectors within the UK economy similar to a generalist VCT. Investors should, however, be reminded that shares in VCTs generally trade at a discount to the actual net asset value of the Company.

There are no options, issued or exercisable, in the Company which would distort the graphical representation that follows.

Directors' remuneration report continued

Source: Albion Capital Group LLP

Methodology: The share price return to the shareholder, including original amount invested (rebased to 100) from 1 January 2008, assuming that dividends were reinvested at the share price of the Company at the time the shares were quoted ex-dividend. Transaction costs are not taken into account.

Directors' pay compared to distribution to shareholders

	2017	2016	Percentage
	£'000	£'000	increase/(decrease)
Total distribution to shareholders including dividends	2,705	3,136	(13.7)
Share buybacks	855	864	(1.0)
Total Directors' fees	74.2	71.0	4.5

By Order of the Board

Geoffrey Vero Director 29 March 2018

Independent auditor's report to the members of Albion Development VCT PLC

Opinion

We have audited the financial statements of Albion Development VCT plc (the "company") for the year ended 31 December 2017 which comprise the income statement, the balance sheet, the statement of changes in equity and the statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

give a true and fair view of the state of the company's affairs as at 31 December 2017 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice;
have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to principal risks, going concern and viability statement

We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs (UK) require us to report to you whether we have anything material to add or draw attention to:

• the disclosures in the annual report that describe the principal risks and explain how they are being managed or mitigated;

the directors' confirmation in the annual report that they have carried out a robust assessment of the principal risks facing the company, including those that would threaten its business model, future performance, solvency or liquidity;
the directors' statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements and the directors' identification of any material uncertainties to the company's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
whether the directors' statement relating to going concern required under the Listing Rules in accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or
the directors' explanation in the annual report as to how they have assessed the prospects of the company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Independent auditor's report to the members of Albion Development VCT PLC continued

Key Audit Matter	Audit response
Valuation of investments (Note 2 and 11 to the financial statements)	We tested a sample of 83% of the unquoted investment portfolio by value of investment holdings.
There is a high level of estimation uncertainty involved in determining the unquoted investment valuations.	We performed preliminary analytical procedures to determine our investment sample and the extent of our work considering, inter alia, the value of individual investments, the nature of the investment and the extent of the fair value movement.
The Investment Manager's fee is based on the value of the net assets of the fund, as shown in note 5.	42% of the unquoted portfolio is based on valuations using net assets (i.e. cash held), cost (where the investment was recently acquired), or the price of a recent investment. For such investments, we checked the cost or net assets to supporting documentation and considered the Investment Manager's determination of whether there were any reasons why the valuation and the valuation methodology was not appropriate at 31 December 2017.
As the Investment Manager is responsible for valuing investments for the financial statements, there is a potential risk of overstatement of investment valuations. The existence of an expense cap in the management agreement enhances this risk.	The remaining 58% of the investment portfolio is valued with reference to more subjective techniques with 41% supported by a valuation performed by a third party (23% based on discounted cash flows and 18% using earnings multiples). The remaining 17% of the portfolio is valued using multiples of revenue or earnings, as described in note 11. Our detailed testing for such investments, performed on all investments within our sample comprised: • Forming a determination of whether the valuation methodology is the most appropriate in the circumstances under the International Private Equity and Venture Capital Valuation ("IPEV") Guidelines obtaining management explanations • Re-performed the calculation of the multiples-based investment valuations • Where a valuation has been performed by a third party management's expert, we assessed the competence and capabilities of that expert, the quality of their work and their qualifications, as well as challenging the basis of inputs and assumptions used by the expert (i.e. discount rates and earnings multiples). We also considered any updates for subsequent information to the valuation made by the investment manager and obtained appropriate evidence for those changes • Benchmarked key inputs and estimates to independent information and our own research • Challenged the assumptions inherent in the valuation of unquoted investments and assessed the impact of the estimation uncertainty concerning these assumptions and the disclosure of these uncertainties in the Financial Statements • Considered the economic environment in which the investment operates to identify factors that could impact the investment valuation • Developed our own point estimates where alternative assumptions could reasonably be applied and considered the overall impact of such sensitisations on the portfolio of investments in determining whether the valuations as a whole are reasonable and unbiased. For investments not included in our detailed testing, we performed the following procedures where relevant: • Considered whether the valuation had been prepared by a suitably qualified individual • Considered whether a valid IPEV methodology had been adopted • Considered whether the valuation used up to date trading information For a sample of loans held at fair value, we: • Vouched security held to documentation • Considered the assumption that fair value is not significantly different to cost by challenging the assumption that there is no significant movement in the market interest rate since acquisition and considering the "unit of account" concept (i.e. the investment as a whole) • Reviewed the treatment of accrued redemption premium/other fixed returns in line with the SORP

Independent auditor's report to the members of Albion Development VCT PLC continued

Key Audit Matter Audit response

Revenue recognition (Note 2 and 4 to the financial statements)

Revenue consists primarily of interest earned on loans to investee companies, as well as dividends receivable from investee companies.

Revenue recognition is considered to be a significant risk, particularly the assessment of the recoverability of loan interest income, and the completeness of dividends, as it is one of the key drivers of dividend returns to investors.

Income arises from unquoted investments and can be difficult to predict. It is often a key factor in demonstrating the performance of the portfolio.

We developed expectations for interest income receivable based on loan instruments and investigated any variations in amounts recognised to ensure they were valid.

We also reviewed the recognition and classification of accrued fixed income receipts to ascertain whether it meets the definition of realised income, considering management information relevant to the ability of the portfolio company to service the loan and the reasons for any arrears of loan interest.

In respect of dividends receivable, we compared actual income to expectations set based on independent published data or management information from the investee company on dividends declared by the portfolio companies held.

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. For planning, we consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. Importantly, misstatements below this level will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the Financial Statements.

We determined final materiality for the financial statements as a whole to be £850,000 based on 2% of the value of investments. On the basis of our risk assessment, together with our assessment of the control environment, our judgement is that performance materiality for the financial statements should be 75% of materiality, namely £635,000. Our objective in adopting this approach was to ensure that total detected and undetected audit differences do not exceed our final materiality of £850,000 for the financial statements as a whole.

Materiality measure	Purpose	Key considerations and benchmarks	Quantum (£)
Financial statement materiality (2% value of investments)	Assessing whether the financial statements as a whole present a true and fair view. We consider this to be the key measurement for shareholders.	• The value of investments • The level of judgement inherent in the valuation • The range of reasonable alternative valuation	850,000
Specific materiality – classes of transactions and balances which impact on revenue profits (10% gross expenditure)	Assessing those classes of transactions, balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.	• The level of net income return	130,000

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £7,500, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds

An overview of the scope of our audit

Our audit approach was developed by obtaining an understanding of the company's activities, the key functions undertaken by the Board and the overall control environment. Based on this understanding we assessed those aspects of the Company's transactions and balances which were most likely to give rise to a material misstatement.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:

Fair, balanced and understandable the statement given by the directors that they consider the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the company's performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
Audit committee reporting the section describing the work of the audit committee does not appropriately address matters communicated by us to the audit committee; or

• Directors' statement of compliance with the UK Corporate Governance Code – the parts of the directors' statement required under the Listing Rules relating to the company's compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, the part of the directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and directors' report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements and the part of the directors' remuneration report to be audited are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit

Independent auditor's report to the members of Albion Development VCT PLC continued

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Other matters which we are required to address

Following the recommendation of the audit committee, we were appointed by the Board of Directors to audit the financial statements for the year ended 31 December 2008 and subsequent financial periods. We were reappointed as auditors in respect of the year ended 31 December 2017 by the Board. The period of total uninterrupted engagement is 10 years, covering the years ending 31 December 2008 to 31 December 2017.

The non-audit services prohibited by the FRC's Ethical Standard were not provided to the company and we remain independent of the company in conducting our audit.

Our audit opinion is consistent with the additional report to the audit committee.

Vanessa-Jayne Bradley (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor London United Kingdom 29 March 2018

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Income statement

			Year ended 31 December 2017			Year ended 31 December 2016
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments	3	–	5,514	5,514	–	2,911	2,911
Investment income	4	689	–	689	1,114	–	1,114
Investment management fees	5	(273)	(818)	(1,091)	(239)	(717)	(956)
Other expenses	6	(221)	–	(221)	(210)	–	(210)
Profit on ordinary activities
before tax		195	4,696	4,891	665	2,194	2,859
Tax (charge)/credit on ordinary
activities	8	(24)	24	–	(116)	119	3
Profit and total comprehensive
income attributable to
shareholders		171	4,720	4,891	549	2,313	2,862
Basic and diluted return
per share (pence)*	10	0.2	7.0	7.2	0.9	3.8	4.7

* excluding treasury shares.

The accompanying notes on pages 51 to 64 form an integral part of these Financial Statements.

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

Balance sheet

		31 December 2017	31 December 2016
	Note	£'000	£'000
Fixed asset investments	11	42,291	33,798

Current assets
Trade and other receivables less than one year	13	477	441
Cash and cash equivalents		10,955	10,153
		11,432	10,594
Total assets		53,723	44,392
Creditors: amounts falling due within one year
Trade and other payables less than one year	14	(377)	(307)
Total assets less current liabilities		53,346	44,085
Equity attributable to equityholders
Called up share capital	15	801	689
Share premium		25,704	17,886
Capital redemption reserve		12	12
Unrealised capital reserve		10,892	7,253
Realised capital reserve		5,844	4,763
Other distributable reserve		10,093	13,482
Total equity shareholders' funds		53,346	44,085
Basic and diluted net asset value per share (pence)*	16	73.8	70.7

* excluding treasury shares.

The accompanying notes on pages 51 to 64 form an integral part of these Financial Statements.

These Financial Statements were approved by the Board of Directors, and authorised for issue on 29 March 2018 and were signed on its behalf by

Geoffrey Vero Chairman

Company number: 03654040

Statement of changes in equity

	Called up		Capital	Unrealised	Realised	Other
	share	Share	redemption	capital		capital distributable
	capital	premium	reserve	reserve	reserve*	reserve*	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
As at 1 January 2017	689	17,886	12	7,253	4,763	13,482	44,085
Profit and total comprehensive
income for the period	–	–	–	4,691	29	171	4,891
Transfer of unrealised gains on
disposal or write off of investments	–	–	–	(1,052)	1,052	–	–
Purchase of shares for treasury	–	–	–	–	–	(855)	(855)
Issue of equity	112	8,005	–	–	–	–	8,117
Cost of issue of equity	–	(187)	–	–	–	–	(187)
Dividends paid	–	–	–	–	–	(2,705)	(2,705)
As at 31 December 2017	801	25,704	12	10,892	5,844	10,093	53,346

As at 1 January 2016	600	11,652	12	4,883	4,820	16,933	38,900
Profit and total comprehensive income
for the period	–	–	–	1,690	623	549	2,862
Transfer of unrealised losses on disposal
or write off of investments	–	–	–	680	(680)	–	–
Purchase of shares for treasury	–	–	–	–	–	(864)	(864)
Issue of equity	89	6,389	–	–	–	–	6,478
Cost of issue of equity	–	(155)	–	–	–	–	(155)
Dividends paid	–	–	–	–	–	(3,136)	(3,136)
As at 31 December 2016	689	17,886	12	7,253	4,763	13,482	44,085

* These reserves amount to £15,937,000 (2016: £18,245,000) which is considered distributable.

Statement of cash flows

	Year ended	Year ended
	31 December 2017	31 December 2016
	£'000	£'000
Cash flow from operating activities
Loan stock income received	647	767
Deposit interest received	7	96
Dividend income received	72	74
Investment management fees paid	(1,039)	(926)
Other cash payments	(217)	(217)
Corporation tax received/(paid)	3	(20)
Net cash flow from operating activities	(527)	(226)

Cash flow from investing activities
Purchase of fixed asset investments	(6,787)	(2,715)
Disposal of fixed asset investments	3,746	3,797
Net cash flow from investing activities	(3,041)	1,082
Cash flow from financing activities
Issue of share capital	7,503	5,820
Cost of issue of shares	(3)	–
Equity dividends paid	(2,275)	(2,631)
Purchase of own shares (including costs)	(855)	(864)
Net cash flow from financing activities	4,370	2,325
Increase in cash and cash equivalents	802
		3,181
Cash and cash equivalents at start of period	10,153	6,972
Cash and cash equivalents at end of period	10,955	10,153

Cash and cash equivalents comprise:
Cash at bank and in hand	10,955	10,153
Cash equivalents	–	–
Total cash and cash equivalents	10,955	10,153

Notes to the Financial Statements

1. Basis of preparation

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

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

Company information is shown on page 2.

2. Accounting policies

Fixed asset investments

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

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

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

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

• Investments listed on recognised exchanges are valued at their bid prices at the end of the accounting period or otherwise at fair value based on published price quotations;

• Unquoted investments, where there is not an active market, are valued using an appropriate valuation technique in accordance with the IPEVCV Guidelines. Indicators of fair value are derived using established methodologies including earnings multiples, the level of third party offers received, prices of recent investment rounds, net assets and industry valuation benchmarks. Where the Company has an investment in an early stage enterprise, the price of a recent investment round is often the most appropriate approach to determining fair value. In situations where a period of time has elapsed since the date of the most recent transaction, consideration is given to the circumstances of the portfolio company since that date in determining fair value. This includes consideration of whether there is any evidence of deterioration or strong definable evidence of an increase in value. In the absence of these indicators, the investment in question is valued at the amount reported at the previous reporting date. Examples of events or changes that could indicate a diminution include:

the performance and/or prospects of the underlying business are significantly below the expectations on which the investment was based;
a significant adverse change either in the portfolio company's business or in the technological, market, economic, legal or regulatory environment in which the business operates; or
market conditions have deteriorated, which may be indicated by a fall in the share prices of quoted businesses operating in the same or related sectors.

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

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

Debtors, creditors and cash are carried at amortised cost, in accordance with FRS 102. There are no financial liabilities other than creditors.

2. Accounting policies (continued)

Investment income

Equity income

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

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

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

Investment management fees and other expenses

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

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

Performance incentive fee

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

Taxation

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

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

Reserves

Share premium This reserve accounts for the difference between the price paid for the Company's shares and the nominal value of those 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, or permanent diminutions in value;
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 buyback of shares and other non-capital realised movements.

Dividends

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

Segmental reporting

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

3. Gains on investments

	Year ended	Year ended
	31 December 2017	31 December 2016
	£'000	£'000
Unrealised gains on fixed asset investments	4,691	1,690
Realised gains on fixed asset investments	823 ––––––––––––––––––	1,221 ––––––––––––––––––
	5,514 ––––––––––––––––––	2,911 ––––––––––––––––––
4. Investment income
	Year ended	Year ended
	31 December 2017	31 December 2016
	£'000	£'000
Loan stock interest and other fixed returns	611	949
UK dividend income	72	74
Bank deposit interest	6 ––––––––––––––––––	91 ––––––––––––––––––
	689 ––––––––––––––––––	1,114 ––––––––––––––––––

No interest income was earned on impaired investments during the year (2016: £42,000).

5. Investment management fees

	Year ended
	31 December 2017	31 December 2016
	£'000	£'000
Investment management fee charged to revenue	273	239
Investment management fee charged to capital	818 ––––––––––––––––––	717 ––––––––––––––––––
	1,091 ––––––––––––––––––	956 ––––––––––––––––––

Further details of the Management agreement under which the investment management fee is paid are given in the Strategic report on page 14.

During the year, services of a total value of £1,091,000 (2016: £956,000) were purchased by the Company from Albion Capital Group LLP in respect of management fees. At the financial year end, the amount due to Albion Capital Group LLP in respect of these services disclosed as accruals was £300,000 (2016: £248,000).

During the year, the Company was not charged by Albion Capital Group LLP in respect of Patrick Reeve's services as a Director (2016: £nil).

Albion Capital Group LLP, its partners and staff (including Patrick Reeve) hold 492,350 Ordinary Shares in the Company.

Albion Capital Group LLP is, from time to time, eligible to receive arrangement fees and monitoring fees from portfolio companies. During the year ended 31 December 2017, fees of £222,000 attributable to the investments of the Company were received by Albion Capital Group LLP pursuant to these arrangements (2016: £150,000).

6. Other expenses

	Year ended	Year ended
	31 December 2017	31 December 2016
	£'000	£'000
Directors' fees (including NIC)	82	76
Auditor's remuneration for statutory audit services (excluding VAT)	28	26
Other administrative expenses	111 ––––––––––––––––––	108 ––––––––––––––––––
	221 ––––––––––––––––––	210 ––––––––––––––––––
7. Directors' fees
	Year ended	Year ended

	31 December 2017	31 December 2016
	£'000	£'000
Amount payable to Directors	74	71
National insurance	8 ––––––––––––––––––	5 ––––––––––––––––––
	82	76 ––––––––––––––––––
	––––––––––––––––––

The Company's key management personnel are the Directors. Further information regarding Directors' remuneration can be found in the Directors' remuneration report on pages 40 and 41.

8. Tax on ordinary activities

	Year ended	Year ended
	31 December 2017	31 December 2016
	£'000	£'000
UK corporation tax charge in respect of current year	–	–
UK corporation tax credit in respect of prior years	– ––––––––––––––––––	(3) ––––––––––––––––––
	– ––––––––––––––––––	(3) ––––––––––––––––––

Factors affecting the tax charge:

	Year ended	Year ended
	31 December 2017	31 December 2016
	£'000	£'000
Return on ordinary activities before taxation	4,891 ––––––––––––––––––	2,859 ––––––––––––––––––
Tax charge on profit at the average companies rate of 19.25 per cent. (2016: 20 per cent.)	942	572
Factors affecting the charge:
Non-taxable gains	(1,061)	(582)
Income not taxable	(14)	(15)
Excess management expenses carried forward	133	25
Adjustment in respect of prior years	– ––––––––––––––––––	(3) ––––––––––––––––––
	– ––––––––––––––––––	(3) ––––––––––––––––––

8. Tax on ordinary activities (continued)

The tax (credit)/charge for the year shown in the Income statement is lower than the average companies rate of corporation tax in the UK of 19.25 per cent. (2016: 20 per cent.). The differences are explained above.

Consortium relief is recognised in the accounts in the period in which the claim is submitted to HMRC and is shown as tax in respect of prior 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) The Company has excess management expenses of £814,000 (2016: £123,000) that are available for offset against future profits. A deferred tax asset of £138,000 (2016: £25,000) has not been recognised in respect of these losses as they will be recoverable only to the extent that the Company has sufficient future taxable profits.

9. Dividends

	Year ended	Year ended
	31 December 2017	31 December 2016
	£'000	£'000
Dividend of 2.5p per Ordinary share paid on 31 May 2016	–	1,572
Dividend of 2.5p per Ordinary share paid on 30 September 2016	–	1,564
Dividend of 2.0p per Ordinary share paid on 31 May 2017	1,357	–
Dividend of 2.0p per Ordinary share paid on 29 September 2017	1,355	–
Unclaimed dividends	(7) ––––––––––––––––––	– ––––––––––––––––––
	2,705 ––––––––––––––––––	3,136 ––––––––––––––––––

In addition to the dividends summarised above, the Board has declared a first dividend of 2.0 pence per Ordinary share for the year ending 31 December 2018, payable on 31 May 2018 to shareholders on the register on 4 May 2018. The total dividend will be approximately £1,484,000.

10. Basic and diluted return per share

	Year ended 31 December 2017			Year ended 31 December 2016
	Revenue	Capital	Total	Revenue	Capital	Total
Profit attributable to equity shares (£'000)	171	4,720	4,891	549	2,313	2,862
Weighted average shares in issue
(excluding treasury shares)		67,848,906			61,380,295
Return attributable per equity share (pence)	0.2	7.0	7.2	0.9	3.8	4.7

The weighted average number of Ordinary shares is calculated excluding the treasury shares of 7,818,700 (2016: 6,556,700).

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

	31 December 2017	31 December 2016
	£'000	£'000
Investments held at fair value through profit or loss
Unquoted equity and preference shares	23,491	15,322
Unquoted loan stock	18,618	18,172
Quoted equity	182 ––––––––––––––––––	304 ––––––––––––––––––
	42,291 ––––––––––––––––––	33,798 ––––––––––––––––––
	31 December 2017	31 December 2016
	£'000	£'000
Opening valuation	33,798	31,565
Purchases at cost	7,655	2,715
Disposal proceeds	(4,609)	(3,575)
Realised gains	823	1,221
Movement in loan stock accrued income	(67)	182
Unrealised gains	4,691 ––––––––––––––––––	1,690 ––––––––––––––––––
Closing valuation	42,291 ––––––––––––––––––	33,798 ––––––––––––––––––
Movement in loan stock accrued income
Opening accumulated movement in loan stock accrued income	424	242
Movement in loan stock accrued income	(67) ––––––––––––––––––	182 ––––––––––––––––––
Closing accumulated movement in loan stock accrued income	357 ––––––––––––––––––	424 ––––––––––––––––––
Movement in unrealised gains
Opening accumulated unrealised gains	7,077	4,706
Transfer of previously unrealised gains to realised reserve on disposal of investments	(1,235)	(540)
Transfer of previously unrealised losses to realised reserves on investments written off but still held	183	1,221
Movement in unrealised gains	4,691 ––––––––––––––––––	1,690 ––––––––––––––––––
Closing accumulated unrealised gains	10,716 ––––––––––––––––––	7,077 ––––––––––––––––––
Historic cost basis
Opening book cost	26,297	26,614
Purchases at cost	7,655	2,715
Sales at cost	(2,551)	(1,812)
Cost of investments written off but still held	(183) ––––––––––––––––––	(1,221) ––––––––––––––––––
Closing book cost	31,218 ––––––––––––––––––	26,297 ––––––––––––––––––

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

The Company does not hold any assets as 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.

11. Fixed asset investments (continued)

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

	31 December 2017	31 December 2016
Valuation methodology	£'000	£'000
Cost and price of recent investment (reviewed for impairment or uplift)	15,337	8,304
Third party valuation – discounted cash flow	9,636	9,226
Third party valuation – earnings multiple	7,460	6,786
Revenue multiple	7,136	5,195
Net assets	2,268	1,909
Earnings multiple	272	1,916
Discount to third party offer	– ––––––––––––––––––	158 ––––––––––––––––––
	42,109 ––––––––––––––––––	33,494 ––––––––––––––––––

Fair value investments had the following movements between valuation methodologies between 31 December 2016 and 31 December 2017:

	Value as at 31 December 2017
Change in valuation methodology (2016 to 2017)	£'000	Explanatory note
Revenue multiple to price of recent investment	3,216	Recent external funding round
Price of recent investment to revenue multiple	129	More relevant valuation methodology

The valuation will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEVCV Guidelines. The Directors believe that, within these parameters, there are no other possible methods of valuation which would be reasonable as at 31 December 2017.

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

Fair value hierarchy	Definition
Level 1	Unadjusted quoted prices in an active market
Level 2	Inputs to valuations are from observable sources and are directly or indirectly derived from prices
Level 3	Inputs to valuations not based on observable market data

Quoted investments are valued according to Level 1 valuation methods. Unquoted equity, preference shares and loan stock are all valued according to Level 3 valuation methods.

Investments held at fair value through profit or loss (Level 3) had the following movements in the year to 31 December 2017:

	31 December 2017				31 December 2016
	Equity £'000	Loan stock £'000	Total £'000	Equity £'000	Loan stock £'000	Total £'000
Opening balance	15,322	18,172	33,494	13,777	17,394	31,171
Additions	5,120	2,535	7,655	1,775	940	2,715
Disposals	(2,587)	(2,022)	(4,609)	(1,896)	(1,679)	(3,575)
Accrued loan stock interest	–	(67)	(67)	–	182	182
Realised gains/(losses)	842	(19)	823	675	546	1,221
Debt/equity swap and restructurings	393	(393)	–	5	(5)	–
Unrealised gains	4,401	412	4,813	986	793	1,779
Closing balance	23,491	18,618	42,109	15,322	18,172	33,494

11. Fixed asset investments (continued)

FRS 102 requires the Directors to consider the impact of changing one or more of the inputs used as part of the valuation process to reasonable possible alternative assumptions. 69 per cent. of the portfolio of investments is based on cost, recent investment price or is loan stock, and as such the Board considers that the assumptions used for their valuations are the most reasonable. The Directors believe that changes to reasonable possible alternative assumptions (by adjusting the revenue and earnings multiples) for the valuations of the remainder of the portfolio companies could result in an increase in the valuation of investments by £816,000 or a decrease in the valuation of investments by £698,000. For valuations based on earnings and revenue multiples, the Board considers that the most significant input is the price/earnings ratio; for valuations based on third party valuations, the Board considers that the most significant inputs are price/earnings ratio, discount factors and market values for buildings; which have been adjusted to drive the above sensitivities.

12. Significant interests

The principal activity of the Company is to select and hold a portfolio of investments in unquoted securities. Although the Company, through the Manager, will, in some cases, be represented on the board of the portfolio company, it will not take a controlling interest or become involved in the management. The size and structure of the companies with unquoted securities may result in certain holdings in the portfolio representing a participating interest without there being any partnership, joint venture or management consortium agreement. The investments listed below are held as part of an investment portfolio and therefore, as permitted by FRS 102 section 9.9B, they are measured at fair value through profit and loss and not consolidated as subsidiaries.

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 2017 as described below:

							% total voting
Company	Registered postcode	Profit/(loss) before tax £'000	Net assets/ (liabilities) £'000	Result for year ended	Principal activity	% class and share type	rights held by the Company
Albion Investment				31 December	Former owner of
Properties Limited	EC2R 7AF, UK	n/a*	(767)	2016	residential property	68.2% A Ordinary	68.2%

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

13. Current assets

Trade and other receivables less than one year	31 December 2017 £'000	31 December 2016 £'000
Prepayments and accrued income	16	15
Corporation tax receivable	–	3
Other debtors	461 ––––––––––––––––––	423 ––––––––––––––––––
	477 ––––––––––––––––––	441 ––––––––––––––––––

14. Creditors: amounts falling due within one year

	31 December 2017	31 December 2016
	£'000	£'000
Accruals and deferred income	369	303
Trade creditors	8 ––––––––––––––––––	4 ––––––––––––––––––
	377 ––––––––––––––––––	307 ––––––––––––––––––

15. Called up share capital

Allotted, called up and fully paid shares:	£'000
68,883,574 Ordinary shares of 1 penny each at 31 December 2016	689
11,251,985 Ordinary shares of 1 penny each issued during the year	112
80,135,559 Ordinary shares of 1 penny each at 31 December 2017	801
6,556,700 Ordinary shares of 1 penny each held in treasury at 31 December 2016	(66)
1,262,000 Ordinary shares of 1 penny each purchased during the year to be held in treasury	(12)
7,818,700 Ordinary shares of 1 penny each held in treasury at 31 December 2017	(78)
Voting rights of 72,316,859 Ordinary shares of 1 penny each at 31 December 2017	723

The Company purchased 1,262,000 Ordinary shares (2016: 1,299,000) at a cost of £855,000 including stamp duty (2016: £864,000) to be held in treasury during the year to 31 December 2017. Total share buy backs in 2017 represents 1.6 per cent. (2016: 1.9 per cent.) of called-up share capital as at 31 December 2017.

The Company holds a total of 7,818,700 shares (2016: 6,556,700) in treasury representing 9.8 per cent. (2016: 9.5 per cent.) of the issued Ordinary share capital at 31 December 2017.

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

		Opening
Date of allotment	Number of shares allotted	nominal value of shares (£'000)	Issue price (pence per share)	Net invested (£'000)	market price on allotment date (pence per share)
31 May 2017	298,848	3	72.0	214	68.5
29 September 2017	311,615 ––––––––––––––––––––––––––	3	69.3	214 ––––––––––––	68.5
	610,463 ––––––––––––––––––––––––––	6		428 ––––––––––––

15. Called up share capital (continued)

Under the terms of the Albion VCTs Prospectus Top Up Offers 2016/2017, the following new Ordinary shares of nominal value 1 penny each, were allotted during the year:

	Number of shares	Aggregate nominal value of shares	Issue price (pence	Net consideration received	Opening market price on allotment date (pence
Date of allotment	allotted	(£'000)	per share)	(£'000)	per share)
31 January 2017	1,203,858	12	70.4	831	64.8
31 January 2017	621,281	6	70.7	428	64.8
31 January 2017	3,549,732	36	71.1	2,448	64.8
7 April 2017	20,981	–	72.2	15	67.5
7 April 2017	26,227	–	72.6	18	67.5
7 April 2017	200,424 ––––––––––––––––––––––––––	2	72.9	142 ––––––––––––	67.5
	5,622,503 ––––––––––––––––––––––––––	56		3,882 ––––––––––––

Albion VCTs Prospectus Top Up Offers 2017/18

On 6 September 2017 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. Under the terms of the offer, the following new Ordinary shares of nominal value 1 penny each were allotted during the year.

Date of allotment	Number of shares allotted	Aggregate nominal value of shares (£'000)	Issue price (pence per share)	Net consideration received (£'000)	Opening market price on allotment date (pence per share)
17 November 2017	1,917,314	19	73.2	1,382	68.5
17 November 2017	744,376	7	73.6	537	68.5
17 November 2017	2,357,329 ––––––––––––––––––––––––––	24	74.0	1,701 ––––––––––––	68.5
	5,019,019 ––––––––––––––––––––––––––	50		3,620 ––––––––––––

16. Basic and diluted net asset value per share

	31 December 2017	31 December 2016
	(pence per share)	(pence per share)
Basic and diluted net asset value per Ordinary share	73.8 ––––––––––––––––––	70.7 ––––––––––––––––––

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 72,316,859 Ordinary shares as at 31 December 2017 (2016: 62,326,874).

17. Capital and financial instruments risk management

The Company's capital comprises Ordinary shares as described in note 15. The Company is permitted to buy back its own shares for cancellation or treasury purposes, and this is described in more detail on page 28 of the Directors' report.

The Company's financial instruments comprise equity and loan stock investments in quoted and 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.

17. Capital and financial instruments risk management (continued)

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

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

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

Investment risk

As a venture capital trust, it is the Company's specific nature to evaluate and control the investment risk of its portfolio in quoted and unquoted investments, details of which are shown on pages 20 to 22. 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 investment portfolio which is £42,291,000 (2016: £33,798,000). Fixed asset investments form 79 per cent. of net asset value as at 31 December 2017 (2016: 77 per cent.).

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

Investment price risk

Investment price risk is the risk that the fair value of future investment cash flows will fluctuate due to factors specific to an investment instrument or to a market in similar instruments. To mitigate the investment price risk for the Company as a whole, the strategy of the Company is to invest in a broad spread of industries with 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. Details of the industries in which investments have been made are contained in the Portfolio of investments section on pages 20 to 22 and in the Strategic report.

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

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

The sensitivity of a 10 per cent. (2016: 10 per cent.) increase or decrease in the valuation of the fixed asset investments (keeping all other variables constant) would increase or decrease the net asset value and return for the year by £4,229,100 (2016: £3,379,800).

17. Capital and financial instruments risk management (continued) Interest rate risk

The Company is exposed to fixed and floating rate interest rate risk on its financial assets through the effect of interest rate changes. On the basis of the Company's analysis, it is estimated that a rise of 1 per cent. in all interest rates would have increased total return before tax for the year by approximately £101,000 (2016: £89,000). 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 4.3 per cent. (2016: 6.2 per cent.). The weighted average period to maturity for the fixed rate assets is approximately 5.1 years (2016: 5.9 years).

31 December 2017 31 December 2016 Non- Non- Fixed Floating interest Floating interest rate rate bearing Total Fixed rate rate bearing Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Unquoted equity – – 23,491 23,491 – – 15,322 15,322 Quoted equity – – 182 182 – – 304 304 Unquoted loan stock 17,576 210 832 18,618 17,345 209 618 18,172 Debtors* – – 462 462 – – 423 423 Current liabilities – – (377) (377) – – (307) (307) Cash – 10,955 – 10,955 – 10,153 – 10,153 Total 17,576 11,165 24,590 53,331 17,345 10,362 16,360 44,067

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

*The debtors do not reconcile to the Balance sheet as prepayments and tax refundable are not included in the above table.

Credit risk

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

The Manager evaluates credit risk on loan stock 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.

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 at 31 December 2017 was limited to £18,618,000 (2016: £18,172,000) of unquoted loan stock instruments (all are secured on the assets of the portfolio company), £10,955,000 (2016: £10,153,000) of cash deposits with banks and £477,000 (2016: £441,000) of other debtors.

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

17. Capital and financial instruments risk management (continued)

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

The cost, impairment and carrying value of impaired loan stock in the portfolio held at fair value through profit and loss are as follows:

		31 December 2017			31 December 2016
	Cost		Impairment Carrying value	Cost	Impairment	Carrying value
	£'000	£'000	£'000	£'000	£'000	£'000
Impaired loan stock	1,846	(97)	1,749	2,987	(645)	2,342

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 £5,186,000 as at 31 December 2017 (2016: £4,273,000).

The Company had no committed borrowing facilities as at 31 December 2017 (2016: nil) and the Company had cash and fixed term deposit balances of £10,955,000 (2016: £10,153,000). The main cash outflows are for new investments, buy-back of shares and dividend payments, which are within the control of the Company. The Manager formally reviews the cash requirements of the Company on a monthly basis, and the Board on a quarterly basis, as part of its review of management accounts and forecasts. All of the Company's financial liabilities are short term in nature and total £377,000 (2016: £307,000).

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

31 December 2017					31 December 2016
	Fully	Fully
	performing	Impaired	Past due	Total	performing	Impaired	Past due	Total
Redemption date	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Less than one year	3,343	843	1,366	5,552	3,946	1,351	634	5,931
1-2 years	615	830	502	1,947	1,035	968	243	2,246
2-3 years	1,835	76	467	2,378	777	–	221	998
3-5 years	3,351	–	–	3,351	3,013	23	52	3,088
Greater than 5 years	4,379	–	1,011	5,390	4,214	–	1,695	5,909
Total	13,523	1,749	3,346	18,618	12,985	2,342	2,845	18,172

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

The average annual interest yield on the total cost of past due loan stock is 5.9 per cent. (2016: 8.4 per cent.).

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.

17. Capital and financial instruments risk management (continued)

Fair values of financial assets and financial liabilities

All the Company's financial assets and liabilities as at 31 December 2017 are stated at fair value as determined by the Directors, with the exception of debtors and creditors and cash which are carried at amortised cost, in accordance with FRS 102. There are no financial liabilities other than creditors. The Company's financial liabilities are all non-interest bearing. It is the Directors' opinion that the book value of the financial liabilities is not materially different to the fair value and all are payable within one year.

18. Contingencies and commitments

As at 31 December 2017, the Company had no financial commitments (2016: £nil).

There were no contingent liabilities or guarantees given by the Company as at 31 December 2017 (2016: £nil).

19. Post balance sheet events

Since the year end, the Company had the following material investment transactions:

Investment of £310,000 in Panaseer Limited; and
Investment of £261,000 in Koru Kids Limited.

Albion VCTs Prospectus Top Up Offers 2017/18

Under the terms of the Albion VCTs Prospectus Top Up Offers 2017/18, the following new Ordinary shares of nominal value 1 penny each were allotted since the year end:

		Opening
		nominal			market price
		value Issue price		consideration	on allotment
	Number of	of shares	(pence	received	date (pence
Date of allotment	shares allotted	(£'000)	per share)	(£'000)	per share)
31 January 2018	1,903,510	190	74.0	1,373	68.5

20. 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.

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the Annual General Meeting of Albion Development VCT PLC (the "Company") will be held at the City of London Club, 19 Old Broad Street, London EC2N 1DS on 29 May 2018 at 11.00am for the following purposes:

To consider and, if thought fit, to pass the following resolutions, of which numbers 1 to 9 will be proposed as ordinary resolutions and numbers 10 to 13 as special resolutions.

Ordinary Business

1. To receive and adopt the Company's accounts for the year ended 31 December 2017 together with the report of the Directors and Auditor.
2. To approve the Directors' remuneration report for the year ended 31 December 2017.
3. To elect Lyn Goleby as a Director of the Company.
4. To re-elect Geoffrey Vero as a Director of the Company.
5. To re-elect Patrick Reeve as a Director of the Company.
6. To re-appoint BDO LLP as Auditor of the Company to hold office from conclusion of the meeting to the conclusion of the next meeting at which the audited accounts are to be laid.
7. To authorise the Directors to agree the Auditor's remuneration.

Special Business

8. Change to the general investment policy

That the Company's investment policy be amended by replacing the wording under the heading "Investment policy" in the current policy with the following:

"The Company will invest in a broad portfolio of higher growth businesses with a stronger focus on technology companies across a variety of sectors of the UK economy; efforts will be made to ensure that the portfolio is diversified in terms of sector and stage of maturity of company."

9. Change to the investment policy – non-VCT qualifying investments

That the Company's investment policy be amended by the insertion of the following paragraph:

Non-VCT qualifying investments

10. Authority to allot shares

That the Directors be generally and unconditionally authorised in accordance with section 551 of the Companies Act 2006 (the "Act") to allot shares in the Company up to an aggregate nominal amount of £164,078 for Ordinary shares provided that this authority shall expire 15 months from the date that this resolution is passed, or, if earlier, the conclusion of the next Annual General Meeting of the Company but so that the Company may, before such expiry, make an offer or agreement which would or might require shares to be allotted or rights to subscribe for or convert securities into shares to be granted after such expiry and the Directors may allot shares or grant rights to subscribe for or convert securities into shares pursuant to such an offer or agreement as if this authority had not expired.

11. Authority for the disapplication of pre-emptive rights

That, subject to the authority and conditional on the passing of resolution number 10, the Directors be empowered, pursuant to section 570 of the Act, to allot equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authority conferred by resolution number 10 and/or sell Ordinary shares held by the Company as treasury shares for cash as if section 561(1) of the Act did not apply to any such allotment or sale.

Notice of Annual General Meeting continued

Under this power the Directors may impose any limits or restrictions and make any arrangements which they deem necessary or expedient to deal with any treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or laws of, any territory or other matter, arising under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory or any other matter.

This power shall expire 15 months from the date that this resolution is passed or, if earlier, the conclusion of the next Annual General Meeting of the Company, save that the Company may, before such expiry, make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement as if this power had not expired.

12. Authority to purchase own shares

That, the Company be generally and unconditionally authorised to make market purchases (within the meaning of Section 693(4) of the Act) of Ordinary shares of 1 penny each in the capital of the Company, on such terms as the Directors think fit, provided always that:

(a) the maximum number of shares hereby authorised to be purchased is 12,012,320 representing 14.99 per cent. of the issued Ordinary share capital of the Company as at the date of this Notice;
(b) the minimum price, exclusive of any expenses, which may be paid for an Ordinary share is 1 penny;
(c) the maximum price, exclusive of any expenses, which may be paid for each Ordinary share is an amount equal to the higher of (a) 105 per cent. of the average of the middle market quotations for an Ordinary share, as derived from the London Stock Exchange Daily Official List, for the five business days immediately preceding the day on which the Ordinary share is purchased; and (b) the amount stipulated by Article 5(1) of the Buy-back and Stabilisation Regulation 2003;
(d) the authority hereby conferred shall, unless previously revoked, varied or renewed, expire 15 months from the date that this resolution is passed or, if earlier, at the conclusion of the next Annual General Meeting; and
(e) the Company may make a contract or contracts to purchase Ordinary shares under this authority before the expiry of the authority which will or may be executed wholly or partly after the expiry of the authority, and may make a purchase of shares in pursuance of any such contract or contracts as if the authority conferred hereby had not expired.

13. Authority to sell treasury shares

That the Directors be empowered to sell treasury shares at the higher of the prevailing current share price and the price bought in at.

By Order of the Board

Albion Capital Group LLP Company Secretary Registered office 1 King's Arms Yard London, EC2R 7AF 29 March 2018

Albion Development VCT PLC is registered in England and Wales with company number 03654040

Notice of Annual General Meeting continued

Notes

1. Members entitled to attend, speak and vote at the Annual General Meeting ("AGM") may appoint a proxy or proxies (who need not be a member of the Company) to exercise these rights in their place at the meeting. A member may appoint more than one proxy, provided that each proxy is appointed to exercise the rights attached to different shares. Proxies may only be appointed by:
completing and returning the Form of Proxy enclosed with this Notice to Computershare Investor Services PLC, The Pavilion, Bridgwater Road, Bristol, BS99 6ZY;
going to www.investorcentre.co.uk/eproxy and following the instructions provided there; or
by having an appropriate CREST message transmitted, if you are a user of the CREST system (including CREST personal members).

Return of the Form of Proxy will not preclude a member from attending the meeting and voting in person. A member may not use any electronic address provided in the Notice of this meeting to communicate with the Company for any purposes other than those expressly stated.

To be effective the Form of Proxy must be completed in accordance with the instructions and received by the Registrars of the Company by 11.00am on 24 May 2018.

1. Any person to whom this Notice is sent who is a person nominated under section 146 of the Companies Act 2006 ('the Act') to enjoy information rights (a "Nominated Person") may, under an agreement between him or her and the member by whom he or she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the AGM. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he or she may, under any such agreement, have a right to give instructions to the member as to the exercise of voting rights. The statement of rights of members in relation to the appointment of proxies in note 1 above does not apply to Nominated Persons. The rights described in that note can only be exercised by members of the Company.
1. To be entitled to attend and vote at the AGM (and for the purpose of the determination by the Company of the votes they may cast), members must be registered in the register of members of the Company at 11.00am on 24 May 2018 (or, in the event of any adjournment, on the date which is two working days before the time of the adjourned meeting). Changes to the register of members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting.
1. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for this AGM and any adjournment(s) by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.

In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a "CREST Proxy Instruction") must be properly authenticated in accordance with Euroclear UK and Ireland Limited's specifications, and must contain the information required for such instruction, as described in the CREST Manual (available via www.euroclear.com/CREST). The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer's agent by 11.00am on 24 May 2018. For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp applied to the message by the CREST Application Host) from which the issuer's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.

CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK and Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider, to procure that his or her CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.

Notice of Annual General Meeting continued

1. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member provided that they do not do so in relation to the same shares.
1. A copy of this Notice, and other information regarding the meeting, as required by section 311A of the Act, is available from www.albion.capital/funds/AADV under the 'Financial Reports and Circulars' section.
1. Any member attending the meeting has the right to ask questions. The Company must cause to be answered any such question relating to the business being dealt with at the meeting but no such answer need be given if (a) to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information, (b) the answer has already been given on a website in the form of an answer to a question, or (c) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.
1. Copies of contracts of service and letters of appointment between the Directors and the Company, together with the Register of Directors' Interests in the ordinary shares of the Company, will be available for inspection at the Registered Office of the Company during normal business hours from the date of this Notice until the conclusion of the meeting, and at the place of the meeting for at least 15 minutes prior to the meeting until its conclusion. In addition, a copy of the Articles of Association will be available for inspection at the Company's registered office from the date of the Notice until the conclusion of the meeting, and at the place of the meeting for at least 15 minutes prior to the meeting until its conclusion.
1. Under section 527 of the Act members meeting the threshold requirements set out in that section have the right to require the Company to publish on a website a statement setting out any matter relating to: (i) the audit of the Company's accounts (including the Auditor's report and the conduct of the audit) that are to be laid before the AGM: or (ii) any circumstances connected with an Auditor of the Company ceasing to hold office since the previous meeting at which the annual accounts and reports were laid in accordance with section 437 of the Act. The Company may not require the members requesting any such website publication to pay its expenses in complying with section 527 and 528 of the Act. Where the Company is required to place a statement on a website under section 527 of the Act, it must forward the statement to the Company's Auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the AGM includes any statement that the Company has been required under section 527 of the Act to publish on a website.
1. Members satisfying the thresholds in Section 338 of the Companies Act 2006 may require the Company to give, to members of the Company entitled to receive notice of the AGM, notice of a resolution which those members intend to move (and which may properly be moved) at the AGM. A resolution may properly be moved at the AGM unless (i) it would, if passed, be ineffective (whether by reason of any inconsistency with any enactment of the Company's constitution or otherwise); (ii) it is defamatory of any person; or (iii) it is frivolous or vexatious. The business which may be dealt with at the AGM includes a resolution circulated pursuant to this right. A request made pursuant to this right may be in hard copy or electronic form, must identify the resolution of which notice is to be given, must be authenticated by the person(s) making it and must be received by the Company not later than 6 weeks before the date of the AGM.
1. Members satisfying the thresholds in Section 388A of the Companies Act 2006 may request the Company to include in the business to be dealt with at the AGM any matter (other than a proposed resolution) which may properly be included in the business at the AGM.

A matter may properly be included in the business at the AGM unless (i) it is defamatory of any person or (ii) it is frivolous or vexatious. A request made pursuant to this right may be in hard copy or electronic form, must identify the matter to be included in the business, must be accompanied by a statement setting out the grounds for the request, must be authenticated by the person(s) making it and must be received by the Company not later than 6 weeks before the date of the AGM.

As at 27 March 2018 (being the latest practicable date prior to the publication of this Notice), the Company's issued share capital consists of 82,039,069 Ordinary shares. The Company holds 7,818,700 shares in treasury. Therefore, the total voting rights in the Company as at 27 March 2018 are 74,220,369.

A member of the Association of Investment Companies

This report is printed on Amadeus offset a totally recycled paper produced using 100% recycled waste at a mill that has been awarded the ISO 14001 certificate for environmental management. The pulp is bleached using a totally chlorine free (TCF) process.

AI Terminal

ALBION DEVELOPMENT VCT PLC

4781_10-k_2017-12-31_4f491c35-125f-4181-9129-7d343e5f7df2.pdf

Albion Development VCT PLC

Contents

Page

Company information

Investment objective and policy