Annual Financial Report

Albion Development VCT PLC As required by the UK Listing Authority's Disclosure and Transparency Rules 4.1 and 6.3, Albion Development VCT PLC today makes public the information relating to the Annual Report and Financial Statements for the year ended 31 December 2008. This announcement was approved by the Board of Directors on 16 April 2009. Please click on the following link to view the full Annual Report and Financial Statements (which have been audited) for the year to 31 December 2008. The information contained in this link includes information as required by the Disclosure and Transparency Rules, including Rule 4.1. Annual Report and Financial Statements: http://hugin.info/141803/R/1305716/299927.pdf Alternatively you may view the Annual Report and Financial Statements at www.albion-ventures.co.uk by clicking on the 'Our Funds' section. Investment Objectives Albion Development VCT PLC (the "Company") is a venture capital trust which raised a total of £14.6 million through an issue of shares in 1999, £11.7 million through an issue of 'C' shares in late 2002 and the first half of 2003 and a further £7.0 million through a new 'C' share issue during 2004. The investment strategy of the Company is to establish 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 lower risk, often property based investments that provide a strong income stream to the VCT combined with a protection of capital. 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. * These would be balanced by a smaller number of higher risk companies with greater growth prospects in sectors such as support, software and computer services. * In neither category would investee companies normally have any external borrowings with a prior charge ranking ahead of the VCT. * Up to two-thirds of qualifying investments by cost will comprise loan stock secured with a first charge on the investee company's assets. Financial Calendar Annual General Meeting 28 May 2009 Announcement of interim results for the six months ending 30 June 2009 August 2009 Financial Summary +----------------------------------------------------------------+ | | Year ended | Year ended | | | 31 December 2008 | 31 December 2007 | | | (pence per share) | (pence per share) | |-----------------------+--------------------+-------------------| | | | | |-----------------------+--------------------+-------------------| | Dividends paid | 12.0 | 5.00 | |-----------------------+--------------------+-------------------| | Revenue return | 3.9 | 4.8 | |-----------------------+--------------------+-------------------| | Capital (loss)/return | (8.2) | 6.0 | |-----------------------+--------------------+-------------------| | Net asset value | 84.8 | 100.9 | +----------------------------------------------------------------+ Total shareholder net asset value return to 31 December 2008: +-----------------------------------------------------------------------------------------------+ | | Ordinary| | | | shares| C shares| | | 31| 31| | | December| December| | | 2008| 2008| | | (pence|(pence per| | |per share)| share)| | | (ii)| (ii)| |-------------------------------------------------------------------------+----------+----------| | | | | |-------------------------------------------------------------------------+----------+----------| |Total dividends paid during the period ended 31 December 1999(i) | 1.00| -| |-------------------------------------------------------------------------+----------+----------| | | | | | 31 December 2000 | 2.90| -| |-------------------------------------------------------------------------+----------+----------| | | | | | 31 December 2001 | 3.95| -| |-------------------------------------------------------------------------+----------+----------| | | | | |31 December 2002 | 4.20| -| |-------------------------------------------------------------------------+----------+----------| | | | | |31 December 2003(iii) | 4.50| 0.75| |-------------------------------------------------------------------------+----------+----------| | | | | |31 December 2004 | 4.00| 2.00| |-------------------------------------------------------------------------+----------+----------| | | | | |31 December 2005 | 5.20| 5.90| |-------------------------------------------------------------------------+----------+----------| | | | | |31 December 2006 | 3.00| 4.50| |-------------------------------------------------------------------------+----------+----------| | | | | |31 December 2007(iv) | 5.00| 5.36| |-------------------------------------------------------------------------+----------+----------| | | | | | 31 December 2008(iv) | 12.00| 12.86| |-------------------------------------------------------------------------+----------+----------| | | | | |-------------------------------------------------------------------------+----------+----------| | | | | |-------------------------------------------------------------------------+----------+----------| |Total dividends paid to 31 December 2008 | 45.75| 31.37| |-------------------------------------------------------------------------+----------+----------| |Net asset value as at 31 December 2008(iv) | 84.80| 90.86| |-------------------------------------------------------------------------+----------+----------| |Total shareholder return to 31 December 2008 | 130.55| 122.23| +-----------------------------------------------------------------------------------------------+ A third dividend for the year of 4.0 pence per share was paid on 30 December 2008. It is intended that this third dividend will replace the first dividend for the year ended 31 December 2009. Notes (i) Assuming subscription for Ordinary shares by the First Closing on 26 January 1999. (ii) Excludes tax benefits upon subscription. (iii) Those subscribing for C shares after 30 June 2003 were not entitled to the interim dividend. (iv) The C shares were converted into Ordinary shares on 31 March 2007, with a conversion of 1.0715 Ordinary shares for each C share. The net asset value per share and all dividends paid subsequent to the conversion of the C shares to the Ordinary shares are multiplied by the conversion factor of 1.0715 in respect of the C shares return, in order to give an accurate picture of the shareholder value since launch relating to the C shares. Chairman's Statement Introduction The financial performance for the year to 31 December 2008 reflects the worsening economic environment. The Company saw a total negative return of 4.3 pence per share over the year (2007: 10.8 pence per share positive return) resulting in a decline in net asset value, after the payment of 12.0 pence (2007: 5.0 pence) in dividends to 84.8 pence per share compared to 100.9 pence per share as at 31 December 2007. A decline in the level of market valuation multiples, the growing recession in the general economy, and the cautious view of our investee companies' trading prospects, has led to a general downward pressure on the valuation of investments. Investment progress and prospects A total of £3.1 million was invested in six new investee companies and ten existing investee companies during the year. In addition, it is pleasing that our investment in Grosvenor Health Limited was sold for a capital profit of £3.5 million after having generated a further £1.0 million income on the total investment of £2.2 million. The slowdown in consumer spending has adversely affected trading in, and income generated by, some of our leisure oriented businesses, particularly pubs and health and fitness clubs. This, combined with the historically very low market interest rates, will adversely affect the Company's income in 2009. Nevertheless, we believe that your Company's policy of ensuring that it has a first charge wherever possible over investee companies' assets is helping to mitigate the adverse effects of the severe economic downturn. In addition, your Company's cash resources will enable the VCT to take advantage of the lower valuations now becoming apparent with regard to new investments. Recovery of historic VAT Following a period of lobbying by the Association of Investment Companies, the welcome review of the position regarding the exemption of management fees from VAT by H.M. Revenue & Customs in July 2008 has meant that the Manager is able to reclaim historic VAT that it had previously charged to the Company. A net reclaim of historic VAT of £414,000 (before the deduction of tax) has been credited to the accounts in respect of the repayment. Further details regarding this claim, and its disclosure, are shown in note 5 of this announcement. With effect from 1 October 2008, all management and administration fees are considered exempt from VAT. Risks and uncertainties The strongly negative outlook for the UK economy continues to be the key risk both in valuations, and in reductions in loan stock interest receivable, affecting the Company and, as mentioned above, we are seeing the effects of this in certain sectors of our portfolio. Nevertheless, despite pressure on certain of our investee companies, the portfolio as a whole remains cash generative and it remains our policy for investee companies to have no external bank borrowings. This leads us to anticipate that, over the longer term, the current reductions in valuation represent value deferred rather than value permanently lost, although valuations and income may come under further pressure in the short term. Meanwhile, opportunities within our target sectors continue to arise at attractive valuations, including the healthcare sector which will be one of our core areas of concentration going forward. A detailed analysis of the other risks and uncertainties facing the business are shown in note 12. Results and dividends As at 31 December 2008, the net asset value was £25.4 million or 84.8 pence per share compared to £30.9 million or 100.9 pence per share as at 31 December 2007. Excluding the impact of the recovery of historic VAT, the Revenue return before taxation was £1.6 million, a slight reduction on the previous year of £1.8 million, predominantly due to a lower return on loan stock investments during the year. The valuation of investments declined by 15.0 per cent. during the year against the opening value as at 31 December 2007, compared to a decrease in the FTSE All-Share index of 32.8 per cent. over the same period. Following the successful sale of the investment in Grosvenor Health Limited at the end of May, the Board decided to pay a third dividend for the year to 31 December 2008, amounting to 4.0 pence per share. This was paid on 30 December 2008 and brought the total dividends paid for the year to 12.0 pence per share. It is intended, however, that this third dividend will replace the first dividend for the year to 31 December 2009. Thus shareholders will only receive one dividend in the current financial year to 31 December 2009, which is likely to be paid in September 2009 following the announcement of the Half-yearly Financial Report. Discount management and share buy-backs It remains the Board's policy to buy back shares in the market, subject to the overall constraint that such purchases are in the VCT's interest, including the maintenance of sufficient resources for the investment in existing and new investee companies and the continued payment of dividends to shareholders. Given the high level of volatility apparent in all markets, the discount to net asset value per share at which shares are bought back will widen from that which has applied historically. Proposed change to the Company's Articles of Association At the forthcoming Annual General Meeting, special resolutions will be proposed to adopt new Articles of Association in order to update the Company's existing Articles of Association (the "Current Articles") and to take account of the changes that have been brought into force by the Companies Act 2006. Whilst the Company will be incorporating the new provisions of the Companies Act 2006 in relation to electronic and/or website communications, it does not yet intend to communicate with its shareholders via such means. A summary of the principal changes that are proposed to be made to the Current Articles by resolutions 10 and 11 is contained in the Directors' Report and Business Review within the Annual Report and Financial Statements. Change of Manager and name change The Board supported the Manager in the acquisition of the business of Close Ventures Limited ("Close Ventures") by Albion Ventures LLP ("Albion Ventures") from Close Brothers Group plc ("Close") on 23 January 2009. Albion Ventures has been formed by the executive directors of Close Ventures. Meanwhile Close will continue to have an investment in the business. The Company's management contract has been novated from Close Ventures to Albion Ventures under exactly the same terms as the existing agreement. The investment approach of Albion Ventures and the investment policy of the Company are also unchanged, with a continued emphasis on building up a broad portfolio of investee companies normally with no external bank borrowings and the maintenance of a regular dividend yield. As a result of this change, the Company Secretary has changed to Albion Ventures LLP. Following the vote in favour of the resolution at the General Meeting on 24 March 2009, the Company has changed its name to Albion Development VCT PLC. Details of post balance sheet events and related party transactions are shown in notes 14 and 15 of this announcement. Geoffrey Vero Chairman 16 April 2009 Manager's Report An analysis of Albion Development VCT PLC's investment portfolio as at 31 December 2008 is shown below. Care has been taken to create a spread across a broad number of sectors, with those that are asset-based and consumer facing, such as pubs, health and fitness clubs and cinemas, being balanced by higher growth businesses in the business services, healthcare, IT and environmental sectors. Split of portfolio valuation by sector as at 31 December 2008 The following is the sector split of the portfolio by valuation as at 31 December 2008: http://hugin.info/141803/R/1305716/299924.pdf Source: Albion Ventures LLP New investments During the year the VCT invested £1.9 million in new qualifying investments. New investments include £320,000 in Bravo Inns II Limited, an owner and operator of pubs in the North West area of England; £216,000 in Vibrant Energy Surveys Limited, a provider of energy saving certificates; £675,000 in Droxford Hospital Limited, a low security mental health hospital in the process of being developed; £140,000 in Opta Sports Data Limited, a provider of Europe-wide sporting statistics and information to a broad variety of media; £270,000 in Prime Care Holdings Limited, a domiciliary care operator based on the South Coast; and finally £240,000 in Ivivo Limited, a developer of medical imaging software. In addition, the Company invested a total of £1.2 million in ten existing investee companies, mainly in the IT and medical technology sectors. These tended to be in promising businesses, but where growth had been slower than anticipated. The cumulative new investments represent 16.2 per cent. of the opening portfolio valuation (adjusted for exits). As noted in the Chairman's Statement, the sale of Grosvenor Health Limited during the year generated strong profits for your Company, equivalent to an annualised return of 36.0 per cent. and net disposal proceeds of £6.2 million. Portfolio review The investment portfolio declined in value by 15.0 per cent. during the year against the opening portfolio as at 31 December 2007, mainly as a result of unrealised write downs reflecting the current difficult trading environment. This fall is compared to a decrease in the FTSE All-Share index of 32.8 per cent. over the same period. Investments in the pub sector have been devalued as the sector continues to struggle while in other areas, in particular IT services, we have seen encouraging profits. The main areas of decline, other than the pub sector, were Evolutions Television Limited, where following strong performance last year, revenues came under pressure due to the general downturn in the television market; the Weybridge and Kensington health and fitness clubs, where despite continued growth in membership in affluent areas, valuations were affected by the general downturn in the commercial property sector; and Peakdale Molecular Limited, a provider of research and chemical compounds to major pharmaceutical companies, which is experiencing difficult trading conditions and a fall in its property value. We are working closely with our portfolio companies as they take proactive measures to limit the impact of the downturn. It is our intention going forward to concentrate particularly on the healthcare and environmental sectors as we believe that these are likely to provide a greater degree of resilience during the current recession. Patrick Reeve Albion Ventures LLP 16 April 2009 Manager Responsibility Statement In preparing these financial statements for the year to 31 December 2008, the Directors of the Company, being Mr Geoffrey Vero, Mr Andrew Phillipps, Mr David Pinckney and Mr Jonathan Thornton, confirm that to the best of their knowledge: -summary financial information contained in this announcement and the full Annual Report and Financial Statements for the year ended 31 December 2008 for the Company has been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law) and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company for the year ended 31 December 2008 as required by DTR 4.2.R; -the Chairman's Statement and Manager's Report include a fair review of the information required by DTR 4.2.7R (indication of important events during the year ended 31 December 2008 and description of principal risks and uncertainties that the Company faces); and -the Chairman's Statement and Manager's Report include a fair review of the information required by DTR 4.2.8R (disclosure of related parties transactions and changes therein). A detailed "Statement of Directors' responsibilities for the preparation of the Company's financial statements" is contained within the full audited Annual Report and Financial Statements which is attached to this announcement. By order of the Board Geoffrey Vero Chairman 16 April 2009 Income Statement +----------------------------------------------------------------------------+ | | Year ended | Year ended | | |-----------------------+---------------------| | | 31 December 2008 | 31 December 2007 | | |-----------------------+---------------------| | |Revenue|Capital| Total|Revenue|Capital|Total| | |-------+-------+-------+-------+-------+-----| | | £'000| £'000| £'000| £'000| £'000|£'000| |------------------------------+-------+-------+-------+-------+-------+-----| |(Losses)/profits on | | | | | | | |investments | -|(2,326)|(2,326)| -| 2,304|2,304| |------------------------------+-------+-------+-------+-------+-------+-----| |Investment income | 1,978| -| 1,978| 2,206| -|2,206| |------------------------------+-------+-------+-------+-------+-------+-----| |Investment management fees | (184)| (547)| (731)| (214)| (641)|(855)| |------------------------------+-------+-------+-------+-------+-------+-----| |Recovery of VAT | 104| 310| 414| -| -| -| |------------------------------+-------+-------+-------+-------+-------+-----| |Other expenses | (224)| -| (224)| (209)| -|(209)| |------------------------------+-------+-------+-------+-------+-------+-----| |Return/(loss) on ordinary | | | | | | | |activities before tax | 1,674|(2,563)| (889)| 1,783| 1,663|3,446| |------------------------------+-------+-------+-------+-------+-------+-----| |Tax (charge)/credit on | | | | | | | |ordinary activities | (487)| 70| (417)| (292)| 210| (82)| |------------------------------+-------+-------+-------+-------+-------+-----| |Return/(loss) attributable to | | | | | | | |shareholders | 1,187|(2,493)|(1,306)| 1,491| 1,873|3,364| |------------------------------+-------+-------+-------+-------+-------+-----| |Basic and diluted | | | | | | | |return/(loss) per share | | | | | | | |(pence)* | 3.9| (8.2)| (4.3)| 4.8| 6.0| 10.8| +----------------------------------------------------------------------------+ *excluding treasury shares The accompanying notes form an integral part of this announcement. The total column of this Income Statement represents the profit and loss account of the Company. The supplementary revenue and capital columns have been prepared in accordance with the Association of Investment Companies' Statement of Recommended Practice. All revenue and capital items in the above statement derive from continuing operations. There are no recognised gains or losses other than the results for the year disclosed above. Accordingly a Statement of Total Recognised Gains and Losses is not required. The difference between the reported loss on ordinary activities before tax and the historical profit is due to the fair value movements on investments. As a result a Note on Historical Cost Profit and Losses has not been prepared. Balance Sheet +-------------------------------------------------------------------+ | | 31 December | 31 December | | | 2008 | 2007 | |---------------------------------------+-------------+-------------| | | £'000 | £'000 | |---------------------------------------+-------------+-------------| | Fixed asset investments | | | |---------------------------------------+-------------+-------------| | Qualifying | 17,434 | 23,278 | |---------------------------------------+-------------+-------------| | Non-qualifying | 856 | 944 | |---------------------------------------+-------------+-------------| | Total fixed asset investments | 18,290 | 24,222 | |---------------------------------------+-------------+-------------| | | | | |---------------------------------------+-------------+-------------| | Current Assets | | | |---------------------------------------+-------------+-------------| | Trade and other debtors | 708 | 133 | |---------------------------------------+-------------+-------------| | Current asset investments | 3,014 | 3,004 | |---------------------------------------+-------------+-------------| | Cash at bank and in hand | 3,790 | 3,991 | |---------------------------------------+-------------+-------------| | | 7,512 | 7,128 | |---------------------------------------+-------------+-------------| | | | | |---------------------------------------+-------------+-------------| | Creditors: amounts falling due within | | | | one year | (369) | (463) | |---------------------------------------+-------------+-------------| | | | | |---------------------------------------+-------------+-------------| | Net current assets | 7,143 | 6,665 | |---------------------------------------+-------------+-------------| | | | | |---------------------------------------+-------------+-------------| | Net assets | 25,433 | 30,887 | |---------------------------------------+-------------+-------------| | | | | |---------------------------------------+-------------+-------------| | Capital and reserves | | | |---------------------------------------+-------------+-------------| | Called up share capital | 16,307 | 16,219 | |---------------------------------------+-------------+-------------| | Share premium | 3,266 | 3,208 | |---------------------------------------+-------------+-------------| | Special reserve | 9,223 | 9,223 | |---------------------------------------+-------------+-------------| | Capital redemption reserve | 1,183 | 1,183 | |---------------------------------------+-------------+-------------| | Own treasury shares reserve | (2,272) | (1,610) | |---------------------------------------+-------------+-------------| | Realised capital reserve | 2,459 | 1,474 | |---------------------------------------+-------------+-------------| | Unrealised capital reserve | (5,622) | 129 | |---------------------------------------+-------------+-------------| | Revenue reserve | 889 | 1,061 | |---------------------------------------+-------------+-------------| | Total equity shareholders' funds | 25,433 | 30,887 | |---------------------------------------+-------------+-------------| | | | | |---------------------------------------+-------------+-------------| | Net asset value per share (pence)* | 84.8 | 100.9 | +-------------------------------------------------------------------+ * excluding treasury shares The accompanying notes form an integral part of this announcement. Reconciliation of Movement in Shareholders' Funds +--------------------------------------------------------------------------------------------------------------------+ | | | | | | Own| | | | | | |Called-up| | | Capital|treasury|Realised|Unrealised| | | | | share| Share| Special|redemption| share| capital| capital| Revenue| | | | capital|premium|reserve*| reserve|reserve*|reserve*| reserve|reserve*| Total| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | £'000| £'000| £'000| £'000| £'000| £'000| £'000| £'000| £'000| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| |As at 1 Januuary 2008 | 16,219| 3,208| 9,223| 1,183| (1,610)| 1,474| 129| 1,061| 30,887| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Net realised gains on | | | | | | | | | | |investments in the year | -| -| -| -| -| 3,425| -| -| 3,425| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Capitalised investment | | | | | | | | | | |management fees | -| -| -| -| -| (547)| -| -| (547)| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Tax relief on costs charged to | | | | | | | | | | |capital | -| -| -| -| -| 70| -| -| 70| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Recoverable VAT capitalised | -| -| -| -| -| 310| -| -| 310| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Purchase of own treasury shares | -| -| -| -| (662)| -| -| -| (662)| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Movement in unrealised | | | | | | | | | | |appreciation | -| -| -| -| -| -| (5,751)| -|(5,751)| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Issue of equity (net of costs) | 88| 58| -| -| -| -| -| -| 146| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Revenue return attributable to | | | | | | | | | | |shareholders | -| -| -| -| -| -| -| 1,187| 1,187| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Dividends paid | -| -| -| -| -| (2,273)| -| (1,359)|(3,632)| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| |As at 31 December 2008 | 16,307| 3,266| 9,223| 1,183| (2,272)| 2,459| (5,622)| 889| 25,433| +--------------------------------------------------------------------------------------------------------------------+ +--------------------------------------------------------------------------------------------------------------------+ | | | | | | Own| | | | | | |Called-up| | | Capital|treasury|Realised|Unrealised| | | | | share| Share| Special|redemption| share| capital| capital| Revenue| | | | capital|premium|reserve*| reserve|reserve*|reserve*| reserve|reserve*| Total| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | £'000| £'000| £'000| £'000| £'000| £'000| £'000| £'000| £'000| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| |As at 1 January 2007 | 15,581| 3,208| 9,889| 1,173| (388)| (1,144)| 1,652| 323| 30,294| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Conversion of C shares to | | | | | | | | | | |Ordinary shares | 648| -| (648)| -| -| -| -| -| -| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Net realised gains on | | | | | | | | | | |investments in the year | -| -| -| -| -| 3,827| -| -| 3,827| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Capitalised investment | | | | | | | | | | |management and performance fees | -| -| -| -| -| (641)| -| -| (641)| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Tax relief on costs charged to | | | | | | | | | | |capital | -| -| -| -| -| 210| -| -| 210| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Purchase of own treasury shares | -| -| -| -| (1,222)| -| -| -|(1,222)| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Cancellation of own shares | (10)| -| (18)| 10| -| -| -| -| (18)| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Movement in unrealised | | | | | | | | | | |appreciation | -| -| -| -| -| -| (1,523)| -|(1,523)| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Revenue return attributable to | | | | | | | | | | |shareholders | -| -| -| -| -| -| -| 1,491| 1,491| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| | | | | | | | | | | | |Dividends paid | -| -| -| -| -| (777)| -| (754)|(1,531)| |--------------------------------+---------+-------+--------+----------+--------+--------+----------+--------+-------| |As at 31 December 2007 | 16,219| 3,208| 9,223| 1,183| (1,610)| 1,474| 129| 1,061| 30,887| +--------------------------------------------------------------------------------------------------------------------+ * Included within these reserves is an amount of £10,299,000 (2007: £10,148,000) which is considered distributable. The Special reserve has been treated as distributable in determining the amounts available for distribution. Cash Flow Statement +-------------------------------------------------------------------+ | | Year ended | Year ended | | | 31 December | 31 December | | | 2008 | 2007 | | | £'000 | £'000 | |-------------------------------------+--------------+--------------| | Operating activities | | | |-------------------------------------+--------------+--------------| | Investment income received | 1,487 | 1,266 | |-------------------------------------+--------------+--------------| | Deposit interest received | 296 | 377 | |-------------------------------------+--------------+--------------| | Dividends received | 62 | - | |-------------------------------------+--------------+--------------| | Other income received | 203 | 72 | |-------------------------------------+--------------+--------------| | Investment management fees paid | (1,015) | (610) | |-------------------------------------+--------------+--------------| | Other cash (payments)/receipts | (252) | 153 | |-------------------------------------+--------------+--------------| | Net cash inflow from operating | | | | activities | 781 | 1,258 | |-------------------------------------+--------------+--------------| | | | | |-------------------------------------+--------------+--------------| | Taxation | | | |-------------------------------------+--------------+--------------| | UK corporation tax paid | (271) | - | |-------------------------------------+--------------+--------------| | | | | |-------------------------------------+--------------+--------------| | Capital expenditure and financial | | | | investments | | | |-------------------------------------+--------------+--------------| | Purchase of qualifying fixed asset | | | | investments | (3,261) | (3,833) | |-------------------------------------+--------------+--------------| | Purchase of non-qualifying fixed | | | | asset investments | (33) | - | |-------------------------------------+--------------+--------------| | Purchase of current asset | | | | investment | (50) | - | |-------------------------------------+--------------+--------------| | Disposal of qualifying fixed asset | | | | investments | 6,769 | 4,975 | |-------------------------------------+--------------+--------------| | Disposal of non-qualifying fixed | | | | asset investments | - | 136 | |-------------------------------------+--------------+--------------| | Net cash inflow from investing | | | | activities | 3,425 | 1,278 | |-------------------------------------+--------------+--------------| | | | | |-------------------------------------+--------------+--------------| | Equity dividends paid | | | |-------------------------------------+--------------+--------------| | Dividends paid | (3,632) | (1,540) | |-------------------------------------+--------------+--------------| | Net cash inflow before financing | 303 | 996 | |-------------------------------------+--------------+--------------| | | | | |-------------------------------------+--------------+--------------| | Financing | | | |-------------------------------------+--------------+--------------| | Cancellation of shares | - | (18) | |-------------------------------------+--------------+--------------| | Purchase of own shares | (662) | (1,223) | |-------------------------------------+--------------+--------------| | Issue of share capital (net of | | | | costs) | 158 | - | |-------------------------------------+--------------+--------------| | Net cash outflow from financing | (504) | (1,241) | |-------------------------------------+--------------+--------------| | | | | |-------------------------------------+--------------+--------------| | Cash outflow in the year | (201) | (245) | +-------------------------------------------------------------------+ Notes to the Financial Statements 1. Accounting convention The financial statements have been prepared in accordance with the historical cost convention, modified to include the revaluation of investments, in accordance with applicable United Kingdom law and accounting standards and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" ("SORP") issued by the Association of Investment Companies ("AIC") in January 2009. Albion Development VCT PLC has decided to adopt the principles of the January 2009 SORP earlier than the mandatory date. Accounting policies have been applied consistently in current and prior periods. The financial statements are prepared under the historical cost convention, modified by the revaluation of certain investments. 2. Accounting policies Investments Quoted and unquoted equity investments In accordance with FRS 26 "Financial Instruments Recognition and Measurement", quoted and unquoted equity investments are designated as fair value through profit or loss ("FVTPL"). Investments listed on recognised exchanges are valued at the closing bid prices at the end of the accounting period. Unquoted investments' fair value is determined by the Directors in accordance with the International Private Equity and Venture Capital Valuation Guidelines (IPEVCV guidelines). Fair value movements on equity investments and gains and losses arising on the disposal of investments are reflected in the capital column of the Income Statement in accordance with the AIC SORP and realised gains or losses on the sale of investments will be reflected in the Realised capital reserve, and unrealised gains or losses arising from the revaluation of investments will be reflected in the Unrealised capital reserve. Unquoted loan stock Unquoted loan stock is classified as loans and receivables in accordance with FRS 26 and carried at amortised cost using the Effective Interest Rate method ("EIR") less impairment. Movements in respect of capital provisions are reflected in the capital column of the Income Statement and are reflected in the Realised capital reserve following sale, or in the Unrealised capital reserve on revaluation. Loan stocks which are not impaired or past due are considered fully performing in terms of contractual interest and capital repayments and the Board does not consider that there is a current likelihood of a shortfall on security cover for these assets. For unquoted loan stock, the amount of the impairment is the difference between the asset's cost and the present value of estimated future cash flows, discounted at the effective interest rate. Floating rate notes In accordance with FRS 26, floating rate notes are designated as fair value through profit or loss ("FVTPL"). Floating rate notes are valued at market bid price at the balance sheet date. Floating rate notes are classified as current asset investments as they are investments held for the short term and comparative classification in the Balance Sheet has been restated accordingly. Warrants, convertibles and unquoted equity derived instruments Warrants, convertibles and unquoted equity derived instruments are only valued if their exercise or contractual conversion terms would allow them to be exercised or converted as at the balance sheet date, and if there is additional value to the Company in exercising or converting as at the balance sheet date. Otherwise these instruments are held at nil value. The valuation techniques used are those used for the underlying equity investment. Investments are recognised as financial assets on legal completion of the investment contract and are de-recognised on legal completion of the sale of an investment. Dividend income is not recognised as part of the fair value movement of an investment, but is recognised separately as investment income through the Revenue reserve when a share becomes ex-dividend. Loan stock accrued interest is recognised in the Balance Sheet as part of the carrying value of the loans and receivables at the end of each reporting period. It is not the Company's policy to exercise control or significant influence over investee companies. Therefore in accordance with the exemptions under FRS 9 "Associates and joint ventures", those undertakings in which the Company holds more than 20 per cent. of the equity are not regarded as associated undertakings. Investment income Quoted and unquoted equity income Dividend income is included in revenue when the investment is quoted ex-dividend. Unquoted Loan stock and other preferred income Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis using an effective interest rate over the life of the financial instrument. Income which is not capable of being received within a reasonable period of time is reflected in the capital value of the investment. Bank interest income Interest income is recognised on an accruals basis using the rate of interest agreed with the bank. Floating rate note income Floating rate note income is recognised on an accruals basis using the interest rate applicable to the floating rate note at that time. Investment management fees and other expenses All expenses have been accounted for on an accruals basis. Expenses are charged through the Revenue account except the following which are charged through the Realised capital reserve: * 75 per cent. of Management fees are allocated to the capital account to the extent that these relate to an enhancement in the value of the investments and in line with the Board's expectation that over the long term 75 per cent. of the Company's investment returns will be in the form of capital gains; and * expenses which are incidental to the purchase or disposal of an investment are charged through the Realised capital reserve. Performance incentive fee In the event that a performance incentive fee crystallises, the fee will be allocated between Revenue and Realised capital reserves based upon the proportion to which the calculation of the fee is attributable to revenue and capital returns. Taxation Taxation is applied on a current basis in accordance with FRS 16 "Current tax". Taxation associated with capital expenses is applied in accordance with the SORP. In accordance with FRS 19 "Deferred tax", deferred taxation is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. The specific nature of taxation of venture capital trusts means that it is unlikely that any deferred tax will arise. The Directors have considered the requirements of FRS 19 and do not believe that any provision should be made. Reserves Realised capital reserves The following are disclosed in this reserve: * gains and losses compared to cost on the realisation of investments; * expenses, together with the related taxation effect, charged in accordance with the above policies; and * dividends paid to equity holders. Unrealised capital reserves Increases and decreases in the valuation of investments held at the year end, against cost, are included in this reserve. Special reserve The cancellation of the share premium account has created a special reserve that can be used to fund market purchases and subsequent cancellation of own shares, to cover gross realised losses, and for other distributable purposes. 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. Own treasury shares held reserve This reserve accounts for amounts by which the distributable reserves of the Company are diminished through the repurchase of the Company's own shares for treasury. Share premium reserve This reserve accounts for the difference between the price paid for shares and the nominal value of the shares, less issue costs and transfers to the Special reserve. Dividends In accordance with FRS 21 "Events after the balance sheet date", dividends declared by the Company are accounted for in the period in which the dividend has been paid or approved by shareholders in an Annual General Meeting. 3. (Losses)/gains on investments +-------------------------------------------------------------------+ | | Year ended | Year ended | | | 31 December | 31 December | | | 2008 | 2007 | |---------------------------------------+-------------+-------------| | | £'000 | £'000 | |---------------------------------------+-------------+-------------| | Unrealised (losses)/gains on fixed | | | | asset investments held at fair value | | | | through profit or loss account | (3,117) | 763 | |---------------------------------------+-------------+-------------| | Unrealised impairments on fixed | | | | asset investments held at amortised | | | | cost | (379) | (231) | |---------------------------------------+-------------+-------------| | Reversal of previously unrealised | | | | gains on sale of investments | (2,217) | (2060) | |---------------------------------------+-------------+-------------| | Unrealised losses on fixed asset | | | | investments | (5,713) | (1,528) | |---------------------------------------+-------------+-------------| | | | | |---------------------------------------+-------------+-------------| | Unrealised (losses)/gains on current | | | | asset investments held at fair value | | | | through profit or loss account | (38) | 5 | |---------------------------------------+-------------+-------------| | Unrealised losses | (5,751) | (1,523) | |---------------------------------------+-------------+-------------| | | | | |---------------------------------------+-------------+-------------| | Realised gains on investments held at | | | | fair value through profit or loss | | | | account | 3,425 | 3,827 | |---------------------------------------+-------------+-------------| | Realised gains sub total | 3,425 | 3,827 | |---------------------------------------+-------------+-------------| | | | | |---------------------------------------+-------------+-------------| | Total | (2,326) | 2,304 | +-------------------------------------------------------------------+ Investments valued on amortised cost basis are unquoted loan stock investments. 4. Investment income and deposit interest +-------------------------------------------------------------------+ | | Year ended | Year ended | | | 31 December | 31 December | | | 2008 | 2007 | |---------------------------------------+-------------+-------------| | | £'000 | £'000 | |---------------------------------------+-------------+-------------| | Income recognised on investments held | | | | at fair value through profit or loss | | | |---------------------------------------+-------------+-------------| | Dividend income | 62 | 76 | |---------------------------------------+-------------+-------------| | Management fees received from equity | | | | investments | 10 | 20 | |---------------------------------------+-------------+-------------| | Floating rate note interest | 186 | 177 | |---------------------------------------+-------------+-------------| | Bank deposit interest | 291 | 199 | |---------------------------------------+-------------+-------------| | Other income | 4 | - | |---------------------------------------+-------------+-------------| | | 553 | 472 | |---------------------------------------+-------------+-------------| | | | | |---------------------------------------+-------------+-------------| | Income recognised on investments held | | | | at amortised cost | | | |---------------------------------------+-------------+-------------| | Return on loan stock investments | 1,425 | 1,734 | |---------------------------------------+-------------+-------------| | | 1,978 | 2,206 | +-------------------------------------------------------------------+ Interest income earned on impaired investments at 31 December 2008 amounted to £83,000 (2007: £46,000). These investments are all held at amortised cost. 5. Recovery of Value Added Tax HMRC issued a business briefing on 24 July 2008 which permitted the recovery of historic VAT that had been charged on management fees, and which made these fees exempt from VAT with effect from 1 October 2008. The Manager, Albion Ventures LLP has made a claim for the historic VAT that Albion Development VCT PLC has paid on management fees. Since the balance sheet date the Company has received a historic VAT payment if £414,000 (before the deduction of tax). £414,000 has been recognised as a separate item in the Income statement, allocated between revenue and capital return in the same proportion as that which the original VAT has been charged. An additional tax charge of £113,000 is payable on this recovery of historic VAT and this is reflected in the tax charge shown in the Income statement. It is possible that further amounts may be recoverable in due course; however, the Directors are at this stage unable to quantify the amounts involved. 6. Tax charge on ordinary activities +---------------------------------------------------------------------+ | | Year ended | Year ended | | | 31 December 2008 | 31 December 2007 | |-------------------------+---------------------+---------------------| | | | | | | | | | |Revenue|Capital|Total|Revenue|Capital|Total| | | £'000| £'000|£'000| £'000| £'000|£'000| |-------------------------+-------+-------+-----+-------+-------+-----| | | | | | | | | |UK corporation tax in | | | | | | | |respect of current year | 460| (70)| 390| 510| (210)| 300| |-------------------------+-------+-------+-----+-------+-------+-----| |UK corporation tax in | | | | | | | |respect of prior years | 27| -| 27| (218)| -|(218)| |-------------------------+-------+-------+-----+-------+-------+-----| |Total | 487| (70)| 417| 292| (210)| 82| +---------------------------------------------------------------------+ Factors affecting the tax charge: +-------------------------------------------------------------------+ | | Year ended | Year ended | | | 31 December | 31 December | | | 2008 | 2007 | |---------------------------------------+-------------+-------------| | | £'000 | £'000 | |---------------------------------------+-------------+-------------| | (Loss)/return on ordinary activities | (889) | | | before taxation | | 3,446 | |---------------------------------------+-------------+-------------| | | | | |---------------------------------------+-------------+-------------| | Tax on profit at the standard rate | (253) | 1,034 | |---------------------------------------+-------------+-------------| | Factors affecting the charge: | | | |---------------------------------------+-------------+-------------| | Non-taxable losses/(gains) | 663 | (699) | |---------------------------------------+-------------+-------------| | Marginal relief | (2) | (12) | |---------------------------------------+-------------+-------------| | Dividends received | (18) | (23) | |---------------------------------------+-------------+-------------| | Adjustment in respect of prior year | 27 | | | consortium relief | | (218) | |---------------------------------------+-------------+-------------| | | 417 | 82 | |---------------------------------------+-------------+-------------| | | | | +-------------------------------------------------------------------+ The UK government changed the rate of UK corporation tax rate from 30 per cent. to 28 per cent. with effect from 1 April 2008. The effective rate of tax for the year to 31 December 2008 is 28.5 per cent. (91 days at 30 per cent. and 275 days at 28 per cent.). The tax charge for the year shown in the Income Statement is higher than the standard rate of corporation tax in the UK of 28 per cent. (2007: 30 per cent.). The differences are explained above. 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 of 30 per cent. and allocating the relief between revenue and capital in accordance with the SORP. (iii) No deferred tax asset or liability has arisen in the year. 7. Dividends +-------------------------------------------------------------------+ | | Year ended | Year ended | | | 31 December 2008 | 31 December 2007 | |-----------+---------------------------+---------------------------| | | | | | | | | | | Revenue | Capital | Total | Revenue | Capital | Total | | | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |-----------+---------+---------+-------+---------+---------+-------| | Dividend | | | | | | | | of 2.5p | | | | | | | | (1.25p | | | | | | | | capital | | | | | | | | and 1.25p | | | | | | | | revenue) | | | | | | | | per share | | | | | | | | paid on | | | | | | | | 16 May | | | | | | | | 2008 | 383 | 383 | 766 | - | - | - | |-----------+---------+---------+-------+---------+---------+-------| | Dividend | | | | | | | | of 5.5p | | | | | | | | (4.75p | | | | | | | | capital | | | | | | | | and 0.75p | | | | | | | | revenue) | | | | | | | | per share | | | | | | | | paid on 3 | | | | | | | | October | | | | | | | | 2008 | 228 | 1,440 | 1,668 | - | - | - | |-----------+---------+---------+-------+---------+---------+-------| | Dividend | | | | | | | | of 4.0p | | | | | | | | (1.5p | | | | | | | | capital | | | | | | | | and 2.5p | | | | | | | | revenue) | | | | | | | | per share | | | | | | | | paid on | | | | | | | | 30 | | | | | | | | December | | | | | | | | 2008 | 748 | 450 | 1,198 | - | - | - | |-----------+---------+---------+-------+---------+---------+-------| | Dividend | | | | | | | | of 1.5p | | | | | | | | (from | | | | | | | | revenue) | | | | | | | | per share | | | | | | | | paid on 9 | | | | | | | | May 2007 | - | - | - | 478 | - | 478 | |-----------+---------+---------+-------+---------+---------+-------| | Dividend | | | | | | | | of 1.0p | | | | | | | | (from | | | | | | | | revenue) | | | | | | | | per share | | | | | | | | paid on 5 | | | | | | | | October | | | | | | | | 2007 | - | - | - | 276 | - | 276 | |-----------+---------+---------+-------+---------+---------+-------| | Dividend | | | | | | | | of 2.5p | | | | | | | | (from | | | | | | | | capital) | | | | | | | | per share | | | | | | | | paid on 5 | | | | | | | | October | | | | | | | | 2007 | - | - | - | - | 777 | 777 | |-----------+---------+---------+-------+---------+---------+-------| | | 1,359 | 2,273 | 3,632 | 754 | 777 | 1,531 | +-------------------------------------------------------------------+ 8. Basic and diluted return/(loss) per share +-------------------------------------------------------------------+ | | Year ended | Year ended | | | 31 December 2008 | 31 December 2007 | |-----------+---------------------------+---------------------------| | | | | | | | | | | Revenue | Capital | Total | Revenue | Capital | Total | | | pence | pence | pence | pence | pence | pence | |-----------+---------+---------+-------+---------+---------+-------| | Ordinary | | | | | | | | shares | | | | | | | | (pence | | | | | | | | per | | | | | | | | share) | 3.9 | (8.2) | (4.3) | 4.8 | 6.0 | 10.8 | +-------------------------------------------------------------------+ Revenue return per Ordinary share is based upon the net revenue return attributable to shareholders for the year of £1,187,000 (2007: £1,491,000) in respect of the weighted average number of shares in issue during the year, being 30,366,813 (2007: 31,229,055), excluding Treasury shares of 2,619,715 (2007: 1,838,323). Capital loss per Ordinary share is based upon the net capital loss attributable to shareholders for the year of £2,493,000 (2007: profit £1,873,000) in respect of the same weighted average number of shares as for the revenue return above. There are no convertible instruments, derivatives or contingent share agreements in issue, and therefore no dilution affecting the return per share. The basic return per share is therefore the same as the diluted return per share. 9. Called up share capital +-------------------------------------------------------------------+ | | 31 December | 31 December | | | 2008 | 2007 | | | £'000 | £'000 | |---------------------------------------+-------------+-------------| | Authorised | | | |---------------------------------------+-------------+-------------| | 50,000,000 Ordinary shares of 50p | | | | each (2007: 50,000,000) | 25,000 | 25,000 | |---------------------------------------+-------------+-------------| | | | | |---------------------------------------+-------------+-------------| | Allotted, called up and fully paid | | | |---------------------------------------+-------------+-------------| | 32,613,482 Ordinary shares of 50p | | | | each (2007: 32,438,309) | 16,307 | 16,219 | |---------------------------------------+-------------+-------------| | | | | |---------------------------------------+-------------+-------------| | Allotted, called up and fully paid | | | | excluding Treasury shares | | | |---------------------------------------+-------------+-------------| | 29,993,767 Ordinary shares of 50p | | | | each (2007:30,599,986) | 14,997 | 14,609 | |---------------------------------------+-------------+-------------| | | | | +-------------------------------------------------------------------+ The Company purchased 781,392 Ordinary shares (2007: 1,395,286) to be held in treasury at a cost of £662,000 (2007: £1,223,000) representing 2.6 per cent of the shares in issue (excluding treasury shares) as at 31 December 2008. The shares purchased for treasury were funded from the Own treasury shares reserve. The Company holds a total of 2,619,715 Ordinary shares in treasury, representing 8.7 per cent. of the Ordinary shares in issue (excluding treasury shares) as at 31 December 2008. Under the Dividend Reinvestment Scheme Circular published 27 August 2008, the following shares of 50 pence nominal value were allotted. +-------------------------------------------------------------------+ | | | | | | | | | | | Opening | | | | | | market price | | | | Aggregate | | per share on | | | | nominal | | allotment | | | Number of | value of | Consideration | date | | Date of | shares | shares | received | pence per | | allotment | allotted | £'000 | £'000 | share | |-----------+-----------+-----------+---------------+---------------| | 3 October | | | | | | 2008 | 90,818 | 45 | 88 | 85.0 | |-----------+-----------+-----------+---------------+---------------| | 30 | | | | | | December | | | | | | 2008 | 84,355 | 42 | 72 | 73.5 | +-------------------------------------------------------------------+ 10. Net asset value per share +-------------------------------------------------------+ | | 31 December | 31 December | | | 2008 | 2007 | |---------------------------+-------------+-------------| | | pence | pence | |---------------------------+-------------+-------------| | Net asset value per share | 84.8 | 100.9 | +-------------------------------------------------------+ The net asset values per share at the year end is calculated in accordance with the Articles of Association and is based upon total shares in issue less the treasury shares of 29,993,767 (2007: 30,599,986) in issue at 31 December 2008. 11. Reconciliation of net return on ordinary activities before taxation to net cash inflow from operating activities +-------------------------------------------------------------------+ | | Year ended | Year ended | | | 31 December | 31 December | | | 2008 | 2007 | |---------------------------------------+-------------+-------------| | | | | | | £'000 | £'000 | |---------------------------------------+-------------+-------------| | Revenue return on ordinary activities | | | | before taxation | 1,674 | 1,783 | |---------------------------------------+-------------+-------------| | Investment management fee charged to | | | | capital | (547) | (604) | |---------------------------------------+-------------+-------------| | Performance incentive fee charged to | | | | capital | - | (37) | |---------------------------------------+-------------+-------------| | Recovery of VAT charged to capital | 310 | - | |---------------------------------------+-------------+-------------| | Movement in accrued amortised loan | | | | stock interest | 64 | (505) | |---------------------------------------+-------------+-------------| | (Increase)/decrease in debtors | (481) | 276 | |---------------------------------------+-------------+-------------| | (Decrease)/increase in creditors | (239) | 345 | |---------------------------------------+-------------+-------------| | Net cash inflow from operating | | | | activities | 781 | 1,258 | +-------------------------------------------------------------------+ 12. Principal risks and uncertainties In addition to the current economic risks outlined in the Chairman's Statement, the Board considers that the Company faces the following major risks and uncertainties: Investment risk This is the risk of investment in poor quality assets which reduces the capital and income returns to shareholders, and negatively impacts on the Company's reputation. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes, are more fragile than larger, long established businesses. To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and their strong track record for investing in this segment of the market. In addition, the Manager operates a formal and structured investment process, which includes an Investment Committee, comprising investment professionals from the Manager and external investment professionals. The Manager also invites comments from all non-executive Directors on investments discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on investee company boards) and the Board receives detailed reports on each investment as part of the Manager's report at quarterly board meetings. Venture Capital Trust approval risk The Company's current approval as a venture capital trust allows investors to take advantage of tax reliefs on initial investment and ongoing tax free capital gains and dividend income. Failure to meet the qualifying requirements could result in investors losing the tax relief on initial investment and loss of tax relief on any tax free income or capital gains received. In addition, failure to meet the qualifying requirements could result in a loss of listing of the shares. To reduce this risk, the Board has appointed the Manager, who 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 PricewaterhouseCoopers LLP as its taxation advisors. PricewaterhouseCoopers LLP report quarterly to the Board to independently confirm compliance with the venture capital trust legislation, to highlight areas of risk and to inform on changes in legislation. 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 quoted businesses. In addition, the Board and the Manager receive regular updates on new regulation from its auditors, lawyers and other professional bodies. Internal control risk Failures in key controls, within the Board or within the Manager's business, could put assets of the Company at risk or result in reduced or inaccurate information being passed to the Board or to shareholders. The Audit Committee will meet with the Manager's internal auditors Littlejohn at least once a year, receiving a report regarding the last formal internal audit performed on the Manager, and providing the opportunity for the Audit Committee to ask specific and detailed questions. In the past year the Board has met with the Head of Internal Audit of Close Brothers Group on a similar basis. The Manager has a comprehensive business continuity plan in place in the event that operational continuity is threatened. Measures are in place to mitigate information risk in order to ensure the integrity, availability and confidentiality of information used within the business. Reliance upon third parties risk The Company is reliant upon the services of Albion Ventures LLP for the provision of investment management and administrative functions. There are provisions within the Management Agreement for the change of Manager under certain circumstances. In addition, the Manager has demonstrated to the Board that there is no undue reliance placed upon any one individual within Albion Ventures LLP. Financial risks By its nature, as a venture capital trust, the Company is exposed to investment risk (which comprises investment price risk and cash flow interest rate risk), credit risk and liquidity risk. The Company's policies for managing these risks and its financial instruments are outlined in full in note 13 below. All of the Company's income and expenditure is denominated in sterling and hence the Company has no foreign currency risk. The Company is financed through equity and does not have any borrowings. The Company does not use derivative financial instruments. 13. Capital and financial instruments risk management The Company's capital comprises Ordinary shares as described in note 9. The Company is permitted to buy-back its own shares for cancellation or treasury purposes, and this is described in more detail in the Directors' Report and Business Review within the Annual Report and Financial Statements. The Company's financial instruments comprise equity and loan stock investments in AIM listed and unquoted companies, floating rate notes, cash balances and short term debtors and creditors which arise from its operations. The main purpose of these financial instruments is to generate revenue and capital appreciation for the Company's operations. The Company has no gearing or other financial liabilities apart from short term creditors. The Company does not use any derivatives for the management of its balance sheet. The principal risks arising from the Company's operations are: * Investment (or market) risk (which comprises investment price and cash flow interest rate risk); * credit risk; and * liquidity risk. The Board regularly reviews and agrees policies for managing each of these risks. There have been no changes in the nature of the risks that the Company has faced during the past year, and apart from where noted below, there have been no changes in the objectives, policies or processes for managing risks during the past year. The key risks are summarised below. Investment risk As a venture capital trust, it is the Company's specific nature to evaluate and control the investment risk of its portfolio in unquoted and in quoted investments. 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 investee company and overall fall in equity values. The Manager receives management accounts from investee companies, and members of the investment management team often sit on the boards of unquoted investee companies; this enables the close identification, monitoring and management of investment risk. The Manager and the Board formally reviews investment risk (which includes market price risk), both at the time of initial investment and at quarterly Board meetings. The Board monitors the prices at which sales of investments are made to ensure that profits to the Company are maximised, and that valuations of investments retained within the portfolio appear sufficiently prudent and realistic compared to prices being achieved in the market for sales of unquoted investments. The maximum investment risk as at the balance sheet date is the value of the fixed asset and current asset investment portfolio which is £21,304,000 (2007: £27,226,000). Fixed asset and current asset investments form 84 per cent. of the net asset value as at 31 December 2008 (2007: 88 per cent.). More details regarding the classification of fixed asset investments and current asset investments are shown in note 12 and note 14 of the Annual Report and Financial Statements. 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 a investment instrument or to a market in similar instruments. To mitigate the investment price risk for the Company as a whole, the strategy of the Company is to invest in a broad spread of industries with approximately two-thirds of the unquoted investments comprising debt securities, which, owing to the structure of their yield and the fact that they are usually secured, have a lower level of price volatility than equity. Details of the industries in which investments have been made are contained in the Manager's Report. In accordance with the IPEVCV Guidelines, in the absence of a more appropriate methodology, investments held for less than 12 months are valued at cost. Thereafter, the valuation will move to 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 reasonable possible alternative methods of valuation of the investments as at 31 December 2008. As required under FRS 29 "Financial Instruments: Disclosures", the Board is required to illustrate by way of a sensitivity analysis the degree of exposure to market risk. The Board considers that the value of the fixed and current asset investment portfolio is sensitive to a 10 per cent. change based on the current economic climate. The impact of a 10 per cent. change has been selected as this is considered reasonable given the current level of volatility observed both on a historical basis and future expectations. The sensitivity of a 10 per cent. increase or decrease in the valuation of the fixed and current asset investments (keeping all other variables constant) would increase or decrease the net asset value and return for the year of Ordinary shares by £2,130,000 (2007: £2,723,000). Cash flow interest rate risk It is the Company's policy to accept a degree of interest rate risk on its financial assets through the effect of interest rate changes. On the basis of the Company's analysis, it is estimated that a fall of one percentage point in all interest rates would have reduced total return before tax for the year by approximately 12 per cent. (2007: 1 per cent.). The weighted average interest rate applied to the Company's fixed rate assets during the year was approximately 8 per cent. (2007: 10 per cent.). The weighted average period to maturity for the fixed rate assets is approximately 2.4 years (2007: 3.4 years). 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 floating rate notes and cash on deposit with banks. The Manager evaluates credit risk on loan stock and floating rate note 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 investee company in order to mitigate the gross credit risk. The Manager receives management accounts from investee companies, and members of the investment management team often sit on the boards of unquoted investee companies; this enables the close identification, monitoring and management of investment specific credit risk. Bank deposits and floating rate note investments are held with banks which have a Moody's credit rating of at least 'A'. The Company has an informal policy of limiting counterparty banking and floating rate note exposure to a maximum of 20 per cent. of net asset value for any one counterparty. The 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 2008 is limited to £13,498,000 (2007: £14,392,000) of unquoted loan stock instruments, £3,014,000 (2007: £3,004,000) of floating rate notes and £3,790,000 (2007: £3,991,000) cash deposits with banks. In the case of asset-based investments, security is held as a first charge over the underlying assets of the investee company, and in the case of high growth investments, security is held as fixed and floating charge over the business and assets of the company; in most cases, this is as a first charge. As at the balance sheet date, the cash held by the Company is held with the Royal Bank of Scotland plc, Bank of Scotland plc, LloydsTSB plc and BNP Paribas Securities Services Custody Bank Limited. Credit risk on cash transactions is mitigated by transacting with counterparties that are regulated entities subject to regulatory supervision, with Moody's credit ratings of at least 'A' or equivalent as assigned by international credit-rating agencies. The Company held one floating rate note with Citigroup Inc. as at the balance sheet date, totalling £3,014,000 which matured on 26 March 2009. Liquidity risk Liquid assets are held as cash on current account, cash on deposit or short term money market account and as floating rate notes. 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 £2,543,000 (2007: £3,089,000) as at 31 December 2008. The Company has no committed borrowing facilities as at 31 December 2008 (2007: £nil). At that date, the Company had cash balances of £3,790,000 (2007: £3,991,000) with £3,014,000 (2007: £3,004,000) invested in floating rate notes, which are considered to be readily realisable within the timescales required to make cash available for investment. The main cash outflows are for new investments, share buy-backs and dividends, which are considered to be within the control of the Company. The Manager formally reviews the cash requirements of the Company on a monthly basis, and the Board on a quarterly basis as part of its review of management accounts and forecasts. All the Company's financial liabilities are short term in nature and total £369,000 (2007: £463,000) as at 31 December 2008. In view of this, the Board considers that the Company is subject to low liquidity risk. Fair values of financial assets and financial liabilities All the Company's financial assets and liabilities as at 31 December 2008 are stated at fair value as determined by the Directors, with the exception of loans and receivables included within investments, which are carried at amortised cost, in accordance with FRS 26. The Directors believe that the current carrying value of loan stock is not materially different to the fair value. There are no financial liabilities other than creditors. The Company's financial liabilities are all non-interest bearing. It is the Directors' opinion that the book value of the financial liabilities is not materially different to the fair value and all are payable within one year. The Company's financial assets and liabilities as at 31 December 2008, all denominated in pounds sterling, consist of the following: +----------------------------------------------------------------------------------------------------+ | | 31 December 2008 | 31 December 2007 | |-------------+-------------------------------------------+------------------------------------------| | | | | | | | | | | | | Fixed| Floating| Non-interest| | Fixed| Floating| Non-interest| | | | rate| rate| bearing| Total| rate| rate| bearing| Total| | | £'000| £'000| £'000| £'000| £'000| £'000| £'000| £'000| |-------------+--------+----------+--------------+--------+-------+----------+--------------+--------| | | | | | | | | | | |Unquoted | | | | | | | | | |equity | -| -| 3,599| 3,599| -| -| 8,783| 8,783| |-------------+--------+----------+--------------+--------+-------+----------+--------------+--------| |Quoted equity| -| -| 1,193| 1,193| -| -| 1,047| 1,047| |-------------+--------+----------+--------------+--------+-------+----------+--------------+--------| |Unquoted loan| | | | | | | | | |stock | 13,049| 449| -| 13,498| 9,888| 4,504| -| 14,392| |-------------+--------+----------+--------------+--------+-------+----------+--------------+--------| |Debtors | -| -| 708| 708| -| -| 133| 133| |-------------+--------+----------+--------------+--------+-------+----------+--------------+--------| |Current | | | | | | | | | |liabilities | -| -| (369)| (369)| -| -| (463)| (463)| |-------------+--------+----------+--------------+--------+-------+----------+--------------+--------| |Floating rate| | | | | | | | | |notes | -| 3,014| -| 3,014| -| 3,004| -| 3,004| |-------------+--------+----------+--------------+--------+-------+----------+--------------+--------| |Cash | -| 3,790| -| 3,790| -| 3,991| -| 3,991| |-------------+--------+----------+--------------+--------+-------+----------+--------------+--------| |Total net | | | | | | | | | |assets | 13,049| 7,253| 5,131| 25,433| 9,888| 11,499| 9,500| 30,887| +----------------------------------------------------------------------------------------------------+ The carrying value of loan stock investments held at amortised cost at 31 December 2008 as follows: +--------------------------------------------------------------------+ | | | Past| | | | | | | due| | | | | | Fully performing| loan|Renegotiated| Impaired| | |Redemption| loan stock|stock| loan stock|loan stock| Total| |date | £'000|£'000| £'000| £'000| £'000| |----------+--------------------+-----+------------+----------+------| | | | | | | | |Less than | | -| | | | |one year | 3,238| | -| 401| 3,639| |----------+--------------------+-----+------------+----------+------| |1-2 years | 737| -| 1,278| 450|2, 465| |----------+--------------------+-----+------------+----------+------| |2-3 years | 1,258| -| 552| 562| 2,372| |----------+--------------------+-----+------------+----------+------| |3-5 years | 3,268| -| 1,113| 641| 5,022| |----------+--------------------+-----+------------+----------+------| |Total | 8,501| -| 2,943| 2,054|13,498| +--------------------------------------------------------------------+ The carrying value of loan stock investments held at amortised cost at 31 December 2007 as follows: +--------------------------------------------------------------------+ | | | Past| | | | | | | due| | | | | | | loan| | | | | | Fully performing|stock|Renegotiated| Impaired| | |Redemption| loan stock| (i)| loan stock|loan stock| Total| |date | £'000|£'000| £'000| £'000| £'000| |----------+--------------------+-----+------------+----------+------| | | | | | | | |Less than | | -| | | | |one year | 36| | -| -| 36| |----------+--------------------+-----+------------+----------+------| |1-2 years | 4,560| -| -| -| 4,560| |----------+--------------------+-----+------------+----------+------| |2-3 years | 1,484| -| 476| 595| 2,555| |----------+--------------------+-----+------------+----------+------| |3-5 years | 3,026| 434| 3,260| 521| 7,241| |----------+--------------------+-----+------------+----------+------| |Total | 9,106| 434| 3,736| 1,116|14,392| +--------------------------------------------------------------------+ (i) Interest (not capital) is overdue. The below table details the carrying value of loan stock that owed £2,000 in overdue loan stock at 31 December 2007. This interest was repaid in 2008 and is no longer outstanding. +------------------------------------------------+ | | 31 December | 31 December | | | 2008 | 2007 | | Redemption date | £'000 | £'000 | |--------------------+-------------+-------------| | Less than 3 months | - | - | |--------------------+-------------+-------------| | 3-6 months | - | - | |--------------------+-------------+-------------| | 6-9 months | - | - | |--------------------+-------------+-------------| | 9-12 months | - | - | |--------------------+-------------+-------------| | More than 1 year | - | 434 | |--------------------+-------------+-------------| | Total | - | 434 | +------------------------------------------------+ 14. Post balance sheet events Since 31 December 2008 the Company has had the following post balance sheet events: * Repayment of VAT as outlined in note 5, including interest * Investment in Forth Photonics Limited of £210,000 * Investment in Xceleron Limited of £17,066 * Investment in Vibrant Energy Surveys Limited of £24,276 * Investment in the Dunedin Pub Company VCT Limited of £6,500 * The Company's investment in Resorthoppa Limited was acquired by Lowcosttravelgroup Limited, another investment held by the Company, on 22 January 2009 * The business of Close Ventures Limited, the Manager, was acquired by Albion Ventures LLP from Close Brothers Group plc on 23 January 2009 * Change of name from Close Brothers Development VCT PLC to Albion Development VCT PLC as approved by a General Meeting on 24 March 2009 15. Related party transactions The Manager, Albion Ventures LLP (formerly Close Ventures Limited), is considered to be a related party by virtue of the fact that it is party to a management agreement from the Company. During the year, services of a total value of £731,000 (2007: £855,000) were purchased by the Company from Albion Ventures LLP. At the financial year end, the amount due to Albion Ventures LLP disclosed as accruals and deferred income was £49,000 (2007: £278,000). Albion Ventures LLP has reclaimed VAT from HMRC as described in note 5. A sum of £414,000 has been recognised in the Income Statement for the year reflecting a gross receipt of £488,000, less a creditor for £74,000 in respect of related historic management and performance fees to be paid to Albion Ventures LLP. During the year 781,392 treasury shares were purchased at an average price of 84.2 pence per share through Winterflood Securities Limited, a subsidiary of Close Brothers Group plc. There are no other related party transactions or balances requiring disclosure. 16. Other information The information set out in this announcement does not constitute the Company's statutory accounts within the terms of section 240 of the Companies Act 1985 for the periods ended 31 December 2008 and 31 December 2007, and is derived from the statutory accounts for the financial year, which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their reports were unqualified and did not contain a statement under s237 (2) or (3) of the Companies Act 1985. The Company's Annual General Meeting will be held at The Worshipful Company of Coopers, Coopers' Hall, 13 Devonshire Square, London EC2M 4TH on 28 May 2009 at 2.30pm. 17. Publication The full audited Annual Report and Financial Statements is being sent to shareholders and copies will be made available to the public at the registered office of the Company, Companies House, the FSA viewing facility and also electronically at www.albion-ventures.co.uk. 16 April 2009 For further information, please contact: Patrick Reeve of Albion Ventures LLP Tel: 020 7601 1850 ---END OF MESSAGE--- http://hugin.info/141803/R/1305716/299924.pdf http://hugin.info/141803/R/1305716/299927.pdf This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.

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