ProVen VCT plc: Annual Financial Report

ProVen VCT plc

Annual Financial Report
Year ended 28 February 20 2 2

ProVen VCT plc, managed by Beringea LLP, today announces the final results for the year ended 28 February 2022. These results were approved by the Board of Directors on 9 June 2022.

You may, in due course, view the Annual Financial Report in full at www.provenvcts.co.uk. All other statutory information can also be found there.

Financial summary

Ordinary Shares as at:	2 8 February 20 22 Pence	2 8 February 20 21 Pence
Net asset value per Ordinary Share	76.7	74.8
Dividends paid since launch	75.25	71.75
Total return (net asset value plus dividends paid since launch)	151.95	146.55
Year on year change in:
Net asset value per Ordinary Share (adjusted for dividends paid in the year)	7.2%	11.7%

Chair’s Statement
I am pleased to present the Annual Report for ProVen VCT plc (the “Company”) for the year ended 28 February 2022. Having emerged from the height of the economic instability arising from the COVID-19 pandemic, the Company’s investment portfolio has performed well and delivered several profitable exits following a recovery in M&A activity. This is reflected in the uplift in the total return per share in the year to 28 February 2022.

Results for the year
Over the year, there was an increase in Shareholder total return (net asset value (“NAV”) per share plus dividends) of 7.2%, which was attributable to a net uplift in the value of the unrealised portfolio alongside considerable exit activity in the period.

The profit on ordinary activities for the year was £10.6 million, or 5.7p per share (2021: profit of £14.4 million, or 8.7p per share), comprising a revenue loss of £1.3 million, or 0.7p per share (2021: revenue loss of £1.3 million, or 0.8p per share) and a capital profit of £11.9 million, or 6.4p per share (2021: profit of £15.7 million, or 9.5p per share). This capital profit was predominantly driven by a net uplift of £12.7 million in the value of the unrealised portfolio, including an increase of £8.9 million in Zoovu, a portfolio company subject to a partial disposal soon after the year end.

Dividends
During the year ended 28 February 2022, the Company paid a final dividend of 2.0p per share in respect of the year ended 28 February 2021 on 30 July 2021 and an interim dividend of 1.5p per share in respect of the year ended 28 February 2022 on 10 December 2021.

Your Board is proposing a final dividend for the year ended 28 February 2022 of 2.25p per share to be paid on 5 August 2022 to Shareholders on the register on 15 July 2022. Your Board has also declared a special dividend of 1.5p per share which will be paid on 5 August 2022 to Shareholders on the register on 15 July 2022. This dividend comprises part of the profits crystallised upon the partial disposal of Zoovu.

With total tax-free dividends of 5.25p per share for the year ended 28 February 2022, this represents a cash return to Shareholders of 7.2% on the opening NAV per share at 1 March 2021, after deducting the prior year’s final dividend of 2.0p per share.

The payment of these dividends will result in an equivalent reduction in the Company’s NAV per share.

Portfolio activity and valuation
The Company invested a total of £29.0 million in the year, a record since its inception. Eleven new companies were added to the portfolio, at a cost of £19.2 million, and follow-on investments totalling £9.8 million were made in ten existing portfolio companies. This active year of investing has bolstered the Investment Manager’s (Beringea LLP (“Beringea” or the “Investment Manager”)) ongoing renewal of the portfolio following a significant run of realisations in the period up to 28 February 2019. It is anticipated that this momentum will continue.

The Company also saw strong exit activity within the portfolio, with the realisations of ContactEngine, Response Tap, D30, InSkin Media, and the partial disposal of MPB occurring in the year, quickly followed by the partial disposal of Zoovu and the sale of Exonar which both completed between the year end and the date of the Annual Report.

Alongside the exits referenced above, the value of the unrealised portfolio increased by £12.7 million (including £8.9 million in respect of Zoovu), demonstrating that the portfolio is maturing and contributing to the overall performance of the Company.

While the worst of the COVID-19 pandemic appears to be behind us, further recent turbulence in the wider political landscape means we can expect that some uncertainty will continue. At the time of writing, Russia’s invasion of Ukraine is continuing and its full impact on the UK economy has yet to be felt. One portfolio company, Mycs, an e-commerce seller of modular furniture, has already been directly affected as it sources materials from Ukraine and Belarus. The war could also potentially contribute to other factors which may affect portfolio companies, such as supply chain constraints, increasing energy costs, and declining confidence among both consumers and businesses.

Elsewhere, rising inflation may cause cutbacks in both consumer and business expenditure. This may adversely affect a number of our portfolio companies, for example those operating e-commerce business models or providing software-as-a-service. The Investment Manager is in regular dialogue with portfolio companies to identify challenges as they arise and will continue to monitor the situation closely.

As others have come together during this difficult period to support those affected by the war in Ukraine, companies in the Company’s portfolio have also made a contribution. Lupa Foods, for example, has partnered with other members of the portfolio including Thread and Sealskinz to send food and clothing to the Ukrainian border to contribute to the welfare of the growing number of refugees.

Fundraising activities
The Company launched a combined offer for subscription with ProVen Growth and Income VCT plc on 11 January 2022 to raise up to £20 million per company, with an overallotment facility of £20 million per company. In response to the high level of appetite for the offer, your Board has chosen to utilise the over-allotment facility in full. As at the date of the Annual Report, the offer has raised £32.7 million of gross proceeds for the Company since the year end and has been extended to 12 December 2022 (or such earlier date as the offer is fully subscribed).

Share buybacks
The Company has a policy of buying back shares that become available in the market at a discount of approximately 5% to the latest published net asset value, subject to the Company having sufficient liquidity. The Company retains Panmure Gordon to act as its corporate broker. Shareholders who are considering selling their shares may wish to contact Panmure Gordon who will be able to provide details of the price at which the Company is buying shares.

During the year, the Company bought back 4,762,331 Ordinary Shares at an average price of 71.2p per share and for an aggregate consideration of £3,389,000. This represented 2.8% of the Company’s issued share capital at the start of the year. All shares were subsequently cancelled.

A special resolution to allow the Company to continue to make market purchases of its own shares of up to 14.99% of the share capital for cancellation will be proposed at the forthcoming Annual General Meeting (“AGM”).

Performance Fee

The Company’s performance incentive arrangements are an important aid for the Investment Manager in recruiting and retaining talented investment professionals against competition from other investment management companies. The performance fee structure is designed to align the interests of the Investment Manager with those of Shareholders and encourages capital growth as well as significant payments to Shareholders by means of tax-free dividends, as determined by the Directors. These arrangements are set out in more detail in the Strategic Report section of the Annual Report.

At 28 February 2022, the relevant performance hurdles were met and based on the NAV at that date, a performance fee of £1.0 million is payable. An accrual for this amount has been included in the accounts and is therefore reflected in the NAV per share.

The payment of a performance fee in future years and the amount thereof, if any, will be dependent on both the performance of the Company and the level of dividends paid to Shareholders, as determined by the Directors.

Environmental, Social & Governance (ESG)
The Board notes the Investment Manager’s dedication to ensuring Environmental, Social and Governance (ESG) principles are high on the agenda for the early-stage companies we invest in. Further detail on the Investment Manager’s approach to ESG, including its role as Chair of ESG_VC, can be found in the Investment Manager’s Review.

Annual General Meeting
We are keen to welcome Shareholders in person to our AGM this year, particularly as plans to do so have been affected in recent years by COVID-19 restrictions. The AGM this year will be held in The Tavern Room at RSA House, 8 John Adam Street, London, WC2N 6EZ at 9:30am on Wednesday 20 July 2022 and we encourage Shareholders to attend. Votes may also be cast electronically at www.signalshares.com for those that cannot attend.

We always welcome questions from our Shareholders at the AGM. This year, as in 2021, we also invite Shareholders to send any questions via email in advance of the AGM to info@beringea.co.uk. Questions should be sent by 5:00 pm on Monday 11 July 2022 and answers to the themes in the questions received will be addressed on the website at https://www.provenvcts.co.uk/ ahead of the AGM.

In addition, the Company’s Annual Shareholder Event will return in person in the Autumn. Having seen positive benefits of hosting this event virtually in recent years – notably enabling Shareholders based outside London to attend – the Shareholder Event will also be streamed online (further details below).

Shareholder event
The Company’s Annual Shareholder Event continues to be well received and provides an important opportunity for Shareholders to hear from the Investment Manager on topics such as performance and investment activity, as well as receiving insights and updates from our portfolio companies. For your Board and the Investment Manager, it is also a vital platform for gathering and discussing the views of our Shareholders.

In order to ensure the safety and wellbeing of our Shareholders, employees and portfolio companies, we hosted our second fully digital shareholder day in Autumn 2021, using an online platform to deliver our assessment of fund performance and market conditions, as well as providing an opportunity for you to ask questions of the investment team and hear from portfolio companies.

Given the success of these virtual events, as well as the desire to hold a physical event, plans are afoot for a hybrid event in 2022, allowing the maximum number of Shareholders to attend. This has been scheduled for Wednesday 16 November 2022 and we would encourage you to join us for the session. You should receive a formal invitation alongside the publication of the Annual Report & Accounts, and you can RSVP as either a physical or virtual attendee to events@beringea.co.uk. If you have not received an invitation, then please contact the Beringea team at info@beringea.co.uk.

Regulatory Developments
Shareholders may be aware that in 2015, owing to EU rules in relation to notified state aid, the Government was required to introduce a ‘sunset’ clause into the VCT legislation. Unless legislation to remove the ‘sunset’ clause is enacted, income tax relief will no longer be given to VCT subscriptions made on or after 6 April 2025. Your Company’s status as a VCT will not be affected and tax relief on dividends and capital gains are expected to continue to be available. The industry is working hard to lobby MPs and raise awareness of the issue in order to ensure that VCTs are able to continue their support for early stage UK companies, which has done so much to stimulate UK economic growth, employment and innovation since the VCT scheme was first introduced nearly 30 years ago.

U nsolici ted Communication with Shareholders
We are aware that a number of Shareholders in ProVen VCT plc have recently received unsolicited phone calls from an international number, in which the caller has sought to discuss their shareholdings. We have previously advised all Shareholders that these calls may be associated with an attempted fraud, and Shareholders should not engage with the caller. If you do receive a suspect call, we strongly suggest that you hang up as soon as possible, and contact the Investment Manager. Scams have unfortunately become more commonplace, particularly during the COVID-19 pandemic. The FCA has published useful guidance for shareholders on how to protect themselves from scams, which you may wish to read. You can find it online at: https://www.fca.org.uk/consumers/protect-yourself-scams.

Outlook
Your Board is delighted with the performance achieved in the investment portfolio over the last twelve months. The portfolio as a whole has emerged from the COVID-19 pandemic in robust shape with the recent run of exits being testament to this. In a number of the remaining portfolio companies, revenues have surged ahead, attributable in part to the change in consumer behaviour initially seen in the pandemic, but which appears to be outlasting it.

In the year, the Company has deployed a substantial £29.0 million of funding to eleven new and ten existing portfolio companies, resulting in a well-diversified portfolio of 53 companies at the year end. It is anticipated that this momentum will continue, and therefore, your Board is pleased that the Company has raised £32.7 million as at the date of the Annual Report & Accounts through its most recent offer for subscription. These additional cash resources will allow your Company to take advantage of new investment opportunities, as well as to provide follow on funding to existing portfolio companies to support their growth.

While performance and activity for the year under review was positive, your Board is conscious of the ongoing economic and geopolitical disruption caused both by increasing inflation and the war in Ukraine. It is likely that the next twelve months will be difficult for both businesses and individuals and we do not expect our portfolio to be unaffected. However, your Board is satisfied that, as demonstrated in the pandemic, the Investment Manager has the resources and expertise required to steer the portfolio through the challenges that lie ahead. We remain confident that the Company is well positioned both to weather the current economic challenges and to deliver solid returns to Shareholders over the coming years.

Neal Ransome
Chair

Investment Manager’s Review
We are pleased to present our annual review for the year ended 28 February 2022. In what was a record year for your Company in terms of investment rate, a total of £19.2 million was invested into eleven new portfolio companies, and £9.8 million into ten existing portfolio companies. This level of investing activity shows that the market has more than recovered from the lull experienced at the height of the COVID-19 pandemic.

The year also saw a strong run of investment realisations, with aggregate disposal proceeds of £9.4 million resulting in realised gains over cost of £3.3 million. Furthermore, the Company entered the new financial year with a strong pipeline of exit opportunities, with the partial sale of Zoovu completing in March 2022. The Company sold 70% of its investment in Zoovu, generating cash proceeds of £13.1 million, and retained the balance. The total value of the Company’s investment at the sale price was £17.0 million, representing a 4.1x return on cost.

At 28 February 2022, the Company’s venture capital portfolio comprised 53 investments at a cost of £102.9 million and a valuation of £124.8 million, an overall increase of 21.3% on cost.

Since the year end, the Company has issued 40,595,362 Ordinary Shares for an aggregate gross consideration of £32.7 million under the combined offer for subscription with ProVen Growth and Income VCT plc which launched on 11 January 2022. Net proceeds for the Company after share issue costs were £31.3 million. The Company therefore remains well capitalised to take advantage of new investment opportunities and to support existing portfolio companies where appropriate.

Investment activity
New investments
As anticipated at the previous year end, we experienced a high volume of deal flow in the period, with a strong pipeline of opportunities translating into £19.2 million of investment into new companies in the year. Eleven companies were added to the portfolio. More details on the three largest new investments are given below.

One of the largest new investments for the Company was made in July 2021 in Plum Guide (£2.7 million), a vacation rental website offering a curated selection of vacation homes and apartments.

In September 2021, the Company invested £2.7 million in Dealroom.co, a database management company offering a global data platform for intelligence on start-ups, innovation, high-growth companies, ecosystems and investment strategies.

Just prior to the year end, in February 2022, the Company invested £2.7 million in YardLink, a construction marketplace solution that simplifies the rental of construction equipment and tools, and the purchase of building materials.

Follow-on investments
The Company has also continued to support the development and growth of existing portfolio companies, providing further funding to ten companies during the year.

The largest of the follow-on investments was into Luxury Promise (£3.5 million), a leading platform for pre-loved luxury products, as part of a total funding round of £8.0 million. The investment will enable the company to accelerate hiring across operating, logistics and finance functions, and expand its unique live shopping platform across the globe.

In early 2022, the Company invested £1.2 million in Papier as part of a significant fundraising round in which Papier raised £36.9 million in Series C funding. Papier, a direct-to-consumer brand that is establishing itself as an innovator in the global stationery market, will use the investment to drive international expansion.

Other follow-on investments were made in CreativeX (£1.1 million), Been There Done That (£1.0 million), Mycs (£0.9 million), Thread (£0.7 million), Zoovu (£0.6 million), Disposable Cubicle Curtains (t/a Hygenica) (£0.4 million), Access Systems (t/a AccessPay) (£0.3 million), and Poq Studio (£0.1 million).

Investment disposals
A surge in M&A activity has been experienced in the period, as predicted in last year’s review. This activity has resulted in
six full exits and one partial exit, as detailed below.

In March 2021, as reported in the Half-Yearly Report, there was a partial disposal of the Company’s holding in MPB, which generated cash proceeds for the Company of £2.3 million. Having performed well since the initial investment by the Company in February 2018, MPB decided to raise additional capital to accelerate its growth. The Company was unable to participate in this investment round owing to restrictions imposed by the VCT regulations. As part of the funding round, however, the Company had the opportunity to sell some of its existing shares, crystallising a 2.8x return on the initial investment in the shares sold, whilst also retaining 70% of its original holding.

The Company’s holding in Response Tap was sold in April 2021 for £1.0 million, resulting in a loss against cost of £0.04 million.

The Company’s holding in ContactEngine was sold in June 2021 for £4.4 million, representing a return of 3.2x on cost.

The Company also disposed of its holdings in D30 and InSkin Media in the year, each achieving a 1.2x return on initial cost.

The Company’s shareholding in Utility Exchange Online was sold in the period. This resulted in a loss against cost of £1.2 million. Also, TVPlayer was dissolved in the period and a loss of £0.2 million was realised. However, fair valuation losses on both of these investments had been recognised in prior periods and these disposals therefore had no impact on the Company’s NAV for the year under review.

Key developments at existing portfolio companies
There were notable increases in the valuation of a number of portfolio companies, six of which are highlighted below.

Zoovu (increase of £8.9 million), Luxury Promise (increase of £2.6 million), MPB (increase of £2.5 million), CreativeX (increase of £2.5 million) and Papier (increase of £2.4 million) all showed material growth in revenue compared with the prior year. Festicket, an online platform which packages festival tickets together with travel, accommodation and add-ons to provide complete festival experiences, suffered in the previous two years due to the worldwide cancellation of events as a result of the pandemic. With the reopening of society across the globe in the last few months, the company has enjoyed a significant upturn in demand, resulting in a valuation increase of £2.4 million on prior year.

The increases outlined above were partly offset by two notable valuation reductions, at Mycs and Exonar, which had a combined decrease in valuation of £5.8 million.

Mycs, an e-commerce company selling modular furniture, operates in a market that has been hit by supply chain issues. Its supply chain has also been disrupted by the war in Ukraine, as Mycs sources some of its materials from Ukraine and Belarus. At the time of writing, the company is investigating alternative sources for the relevant materials.

Exonar, a data mapping software provider, had its value written off by the Company during the year due to a failure to secure some key new contracts. After the Company’s year end, the business was sold to NowVertical Group Inc. in return for shares in the acquiror. Nil value is being attributed to these shares.

In all, the investment portfolio held at the year end showed an increase in value, excluding the cost of any new or follow-on investments, during the year of £15.2 million (2021: increase of £17.6 million).

Other News & Developments
Portfolio Value-Add Initiative
Prompted by the economic turbulence experienced in the last few years, the Investment Manager has established a Portfolio Value-Add Initiative to support companies as they look to develop key areas that will drive their future growth. This group includes key members of the Manager’s Team including Harry Thomas (Investment Manager, Portfolio), Vanessa Evanson-Goddard (General Counsel), James Adams (Head of Talent) and Henry Philipson (Director of Marketing and Communications). One of the key elements of the Value-Add Initiative is the Beringea Scale-Up Academy, an annual programme of events for portfolio leadership teams. In 2021, seven webinars were delivered to portfolio company senior managers, providing insight and training on topics such as SaaS pricing, product strategy and remote working.

Environmental, Social and Governance
Over the past year, the Manager has strengthened the support that it provides to portfolio companies to help them to understand, measure and improve their environmental, social and governance (“ESG”) performance.

The Manager is also playing an industry-leading role in this area as Chair of ESG_VC, a network of more than 150 venture capital firms across the UK and Europe that work together to help early-stage companies to benchmark and improve their ESG performance.

ESG_VC has developed a standardised framework for ESG measurement within these businesses, which has been adopted by a cohort of European venture firms and piloted by more than 225 portfolio companies. ESG_VC has also hosted monthly webinars for portfolio companies on relevant topics such as measuring carbon footprints, surveying for diversity and inclusion, and reducing gender pay gaps.

Completing the ESG_VC Measurement Framework is now part of the annual reporting requested from members of the ProVen VCTs’ portfolio and it is also used as part of the onboarding of new investments. For these companies, the framework has provided a useful structure for building a sustainability strategy. As Annie Aveyard, co-founder and CEO of Plank Hardware, noted: ‘The framework provided by Beringea is now informing our conversations with our board and helping shape our long-term sustainability agenda – ESG will be integral to our next board meeting, and the ESG_VC data will be key to this discussion.’

Other initiatives adopted by portfolio companies of the ProVen VCTs as a result of work with ESG_VC have included: accessing specialist advisers to create an inclusive culture that attracts and retains staff; sharing best practice between portfolio companies on measuring and reducing carbon footprint; and using a carbon offsetting platform recommended by ESG_VC.

In recognition of this work, the Manager was selected as the winner of the ‘Excellence in ESG’ award by a panel of experts at the annual summit of the British Private Equity & Venture Capital Association. The Manager has also been certified as a Level 1 firm under the Diversity VC Standard, an industry accreditation for diversity and inclusion best practice, and is part of the Future VC programme, which provides internships at venture capital firms for young people from backgrounds underrepresented within the industry.

Post year-end developments
Between 28 February 2022 and the date of the Annual Report & Accounts , the Company has issued 40,595,362 Ordinary Shares for an aggregate gross consideration of £32.7 million under the combined offer for subscription with ProVen Growth and Income VCT plc which launched on 11 January 2022. Net proceeds for the Company after share issue costs were £31.3 million.

In March 2022, there was a partial disposal of the Company’s holding in Zoovu. Having performed well since the initial investment by the Company in August 2017, Zoovu received several offers from potential acquirors. It accepted an offer which saw the Company sell 70% of its holding, realising a profit of £9.6 million, and roll over the remaining shares. The total value of the Company’s investment at the sale price was £17.0 million, representing a 4.1x return on cost.

On 14 March 2022, the Company sold its holding in Exonar to NowVertical Group Inc. in return for shares in the acquiror. Nil
value is being attributed to these shares.

After the year end, the Company made follow-on investments into CreativeX (£1.0 million), as part of a £20 million funding
round, and Mycs (£0.5 million). The Company also made a new investment of £3.7 million into WS HoldCo, PBC, a property technology company.

Between March and May 2022, the Company sold its shares in Netcall plc for an aggregate consideration of £0.2 million.

Rapid Charge Grid repaid £0.6 million of loans to the Company in March 2022. This included £0.1 million in loan note interest.

Finally, following the year end, one portfolio company was adversely impacted by market conditions. Whilst no formal valuation has been completed, the estimated fall in value is in the region of £3.0 million to £3.5 million, as a consequence of loan providers introducing new lending caps in March 2022 and a sharp decline of consumer confidence in the company’s markets. As these conditions were not in existence at the balance sheet date, this is considered to be a non-adjusting post balance sheet event.

Outlook
Following this active period of investment, we continue to see strong deal flow and currently have a number of promising opportunities in the later stages of our investment process. Valuation expectations remain high and therefore we continue to be disciplined in our approach to new opportunities.

The short-term outlook for the UK economy will be dominated by the effects of inflation and the war in Ukraine. Fortunately, only one portfolio company has been directly impacted to date by the conflict. The indirect effects, including additional inflationary pressures, will be felt more broadly over the coming months. This is likely to impact the performance of many companies, including some within our portfolio. We will continue to work closely with our portfolio companies to support them through the challenges as they arise, harnessing the expertise of our Portfolio Value-Add Initiative, and providing additional investment where this is appropriate.

We are pleased that the recent successful fundraising has ensured the Company is well placed not only to take advantage of new investment opportunities, but also to provide further support to the portfolio where required. Despite the continued disruption in the broader economic and political climate, we remain confident that our portfolio has the resilience to survive these challenges and prosper.

Beringea LLP
Investment Manager

Investment activity

Investment activity during the year is summarised as follows:

Additions	Cost £’000
Luxury Promise Limited	3,502
Plu&m Limited (t/a Plum Guide)	2,738
Dealroom.co B.V.	2,707
YardLink Ltd	2,680
EMS Operations (UK) Ltd (t/a Archdesk)	2,581
Utilis Israel Ltd (t/a Asterra)	1,809
Moonshot CVE Ltd	1,388
DeepStream Technologies Limited	1,256
CG Hero Ltd	1,251
Papier Ltd	1,237
Picasso Labs, Inc. (t/a CreativeX)	1,109
Been There Done That Global Limited	998
Litta App Limited	937
Enternships Limited (t/a Learnerbly)	925
Andcrafted Ltd (t/a Plank Hardware)	913
Mycs GmbH	853
Thread, Inc.	740
Zoovu Limited (t/a SmartAssistant)	638
Disposable Cubicle Curtains Limited (t/a Hygenica)	421
Access Systems, Inc. (t/a AccessPay)	237
Poq Studio Ltd	55
Total	28,975

The total cost of additions in the year of £28,975,000 as shown above is lower than the ‘Purchase of investments’ cashflow
figure of £28,982,000 as recorded in the Statement of Cash Flows due to £7,000 of legal costs associated with the purchase
of an investment which were recognised in the previous year but paid in the year under review.

Disposals	Cost	Market value at 01/03/ 2 1	Disposal proceeds	Realised gain/ (loss) against cost	Realised gain/ (loss) during the year
	£’000	£000	£’000	£’000	£’000
ContactEngine Limited	1,391	3,457	4,399	3,008	942
MPB Group Limited	827	1,692	2,283	1,456	591
D30 Holdings Limited	956	720	1,163	207	443
Response Tap Limited	1,060	1,038	1,022	(38)	(16)
InSkin Media Limited	365	_	420	55	420
Utility Exchange Online Limited	1,285	_	84	(1,201)	84
Think Limited	_	_	16	16	16
Chargemaster plc	_	_	10	10	10
TVPlayer Limited	230	_	_	(230)	_
Total	6,114	6,907	9,397	3,283	2,490

Of the disposals above, Think Limited and Chargemaster plc were realised in prior periods, but deferred proceeds were recognised in the current period in excess of the amounts previously accrued.

The disposal proceeds above for ContactEngine Limited and Response Tap Limited include amounts of deferred proceeds which have been recognised in these accounts but have not yet been received.

Total disposal proceeds of £9,397,000 as shown above is higher than the ‘Sale of investments’ cashflow figure of £9,104,000 as recorded in the Statement of Cash Flows. The difference arises due to a deferred proceeds debtor of £343,000 held at the year end, partly offset by a deferred proceeds debtor of £50,000 at the previous year end which was received in the year under review.

Investment Portfolio

as at 2 8 February 20 2 2

The following investments were held at 28 February 2022:



	Cost	Valuation	Valuation movement in year	% of portfolio by value
	£’000	£’000	£’000
Venture capital investments (by value)
Zoovu Limited (t/a SmartAssistant)	4,125	16,901	8,872	11.4%
Luxury Promise Limited	5,680	9,297	2,551	6.3%
Monica Vinader Limited**	534	7,951	1,051	5.4%
Infinity Reliance Limited (t/a My 1st Years)	4,731	6,892	(793)	4.6%
MPB Group Limited	1,684	6,120	2,534	4.1%
Papier Ltd	2,770	5,202	2,432	3.5%
Picasso Labs, Inc. (t/a CreativeX)	1,739	4,989	2,460	3.4%
Blis Global Ltd (formerly Blis Media Limited)**	841	4,769	(1,067)	3.2%
Festicket Ltd	3,633	3,894	2,424	2.6%
Access Systems, Inc. (t/a AccessPay)	3,737	3,804	(228)	2.6%
Thread, Inc.	4,762	3,291	(1,264)	2.2%
Mycs GmbH	5,448	3,229	(3,719)	2.2%
DeepCrawl Holding Company, Inc.	2,895	2,988	(987)	2.0%
Plu&m Limited (t/a Plum Guide)	2,738	2,738	-	1.8%
YardLink Ltd	2,680	2,680	-	1.8%
Dealroom.co B.V.	2,707	2,648	(59)	1.8%
EMS Operations (UK) Ltd (t/a Archdesk)	2,581	2,581	-	1.7%
Social Value Portal Ltd	1,500	2,517	1,017	1.7%
Rapid Charge Grid Limited*	2,564	2,216	12	1.5%
Lupa Foods Limited	1,078	2,153	652	1.5%
Sannpa Limited (t/a Fnatic)	1,801	2,098	44	1.4%
Commonplace Digital Limited	1,500	2,018	49	1.4%
Litchfield Media Limited*	1,405	1,905	3	1.3%
Utilis Israel Ltd (t/a Asterra)	1,809	1,896	88	1.3%
Stylescape Limited (t/a EDITED)	1,500	1,892	392	1.3%
Aistemos Limited	1,819	1,821	-	1.2%
Been There Done That Global Limited	1,551	1,737	(14)	1.2%
Moonshot CVE Ltd	1,388	1,590	202	1.1%
Firefly Learning Limited	1,202	1,439	224	1.0%
Second Nature Healthy Habits Ltd	1,200	1,277	77	0.9%
DeepStream Technologies Limited	1,256	1,256	-	0.8%
CG Hero Ltd	1,251	1,251	-	0.8%
Arctic Shores Limited	1,050	1,050	-	0.7%
Disposable Cubicle Curtains Limited (t/a Hygenica)**	3,292	1,045	(1,271)	0.7%
Litta App Limited	937	937	-	0.6%
Enternships Limited (t/a Learnerbly)	924	924	-	0.6%
Andcrafted Ltd (t/a Plank Hardware)	913	913	-	0.6%
Sealskinz Holdings Limited**	834	834	-	0.6%
Cogora Group Limited**	2,643	623	104	0.4%
Honeycomb.TV Limited*	900	602	(277)	0.4%
	87,602	123,968	15,509	83.6%
Other venture capital investments	15,320	868	(2,836)	0.6%
Total venture capital investments	102,922	124,836	12,673	84.2%
Cash at bank and in hand		23,497		15.8%
Total investments		148,333		100.0%

Valuation movement in the year excludes the cost of investments made in the year. Other venture capital investments at 28 February 2022 comprise:

Buckingham Gate Financial Services Limited, Exonar Limited, InContext Solutions, Inc, Lantum Limited, Macklin Holdings Limited*†, Monmouth Holdings Limited*, Netcall plc*, Poq Studio Ltd, Senselogix Limited, Simplestream Limited**, Skills Matter Limited**, Vigilant Applications Limited* and Whistle Sports, Inc.

* Non qualifying investment
** Partially non qualifying investment
† Investee company 100% owned by the Company but not consolidated as held exclusively for resale as part of an investment portfolio.

With the exception of Netcall plc which is quoted on AIM, all venture capital investments are unquoted.

All venture capital investments are registered in England and Wales except for DeepCrawl Holding Company, Inc., InContext Solutions, Inc., Picasso Labs, Inc. (t/a CreativeX), Whistle Sports, Inc., Access Systems, Inc and Thread, Inc., which are Delaware registered corporations in the United States of America, Mycs GmbH, which is registered in Germany, Utilis Israel Limited (t/a Asterra), which is registered in Israel, and Dealroom.co B.V., which is registered in the Netherlands.

Strategic Report
The Directors present the Strategic Report for the year ended 28 February 2022. The Board prepared the Annual Report & Accounts in accordance with the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013.

Principal objectives and strategy
The Company’s investment objective is to achieve long-term returns greater than those available from investing in a portfolio of quoted companies, by investing in:

a portfolio of carefully selected qualifying investments in small and medium sized unquoted companies with excellent growth prospects; and
a portfolio of non-qualifying investments permitted for liquidity management purposes,

within the conditions imposed on all VCTs, and to minimise the risk of each investment and the portfolio as a whole.

The Company has been approved by HM Revenue and Customs (“HMRC”) as a Venture Capital Trust in accordance with Part 6 of 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 maintain approval. Approval for the year ended 28 February 2022 is subject to review should there be any subsequent enquiry under corporation tax self-assessment.

The Directors consider that the Company was not, at any time, up to the date of the Annual Report & Accounts, a close company for the purpose of the Income Tax Act 2007.

Business model
The business acts as an investment company, investing in a portfolio of carefully selected smaller companies. The Company operates as a Venture Capital Trust to ensure that its Shareholders can beneﬁt from tax reliefs available and has outsourced the portfolio management and administration duties.

Business review and developments
The Company began the year with £90.1 million of venture capital investments and ended with £124.8 million spread over a portfolio of 53 companies. Of these companies, 47 investments with a value of £121.7 million were VCT qualifying (or part qualifying).

The profit on ordinary activities after taxation for the year was £10.6 million, comprising a revenue loss of £1.3 million and a capital profit of £11.9 million. The Ongoing Charges ratio (which is calculated in line with the AIC methodology as recurring operational expenses excluding performance fees, trail commission and recoverable VAT divided by the Company’s average net assets in the period) is an Alternative Performance Measure used by the Board to monitor expenses. The Ongoing Charges ratio in respect of the year ended 28 February 2022 was 1.8% (2021: 2.3%) and was within the Company’s cap of 3.25%.

The Company’s business review and developments during the year are reviewed further within the Chair’s Statement, Investment Manager’s Review and Review of Investments.

Investment policy
The Company’s investment policy covers several areas as follows:

Qualifying investments
The Company seeks to make investments in VCT Qualifying companies with the following characteristics:

a strong, balanced and well-motivated management team with a proven track record of achievement;
a defensible market position;
good growth potential;
an attractive entry price for the Company; and
a clearly identified route for a profitable realisation within a three to four year period.

The Company invests in companies at various stages of development, including those requiring capital for expansion, but not in start-ups or management buy-outs or businesses seeking to use funding to acquire other businesses. Investments are spread across a range of different sectors.

Other investments
Funds not invested in qualifying investments may be invested in non-qualifying investments permitted for liquidity management purposes, which include cash, alternative investment funds (“AIFs”) and UCITS which may be redeemed on no more than 7 days’ notice, or ordinary shares or securities in a company that are acquired on a regulated market.

Borrowings
It is not the Company’s intention to have any borrowings. The Company, does, however, have the ability to borrow a maximum amount equal to the nominal capital of the Company and its distributable and non-distributable reserves which, at 28 February 2022, was equal to £147.6 million (2021: £127.0 million). There are no plans for the Company to borrow at the current time.

Maximum e xposures
No investment will constitute more than 15% of the Company's portfolio by value at the time of investment.

Listing Rules
In accordance with the Listing Rules:

(i)   the Company may not invest more than 10%, in aggregate, of the value of the total assets of the Company at the time an investment is made in other listed closed-ended investment funds except listed closed-ended investment funds which have published investment policies which permit them to invest no more than 15% of their total assets in other listed closed-ended investment funds;
(ii)   the Company must not conduct any trading activity which is significant in the context of the Company; and
(iii)   the Company must, at all times, invest and manage its assets in a way which is consistent with its objective of spreading investment risk and in accordance with its published investment policy set out in this announcement. This investment policy is in line with Chapter 15 of the Listing Rules and Part 6 Income Tax Act 2007.

Venture C apital T rust R egulations
The Company has engaged Philip Hare & Associates LLP to advise it on compliance with VCT requirements, including evaluation of investment opportunities as appropriate and regular review of the portfolio. Although Philip Hare & Associates LLP works closely with the Investment Manager, they report directly to the Board.

Compliance with the main VCT regulations as at 28 February 2022 and for the year then ended is summarised as follows:

The Company holds at least 80 per cent. of its investments in qualifying companies (as defined by Part 6 of the Income Tax Act 2007)	Complied
At least 70 per cent. (in the case of funds raised after 5 April 2011) of the Company’s qualifying investments (by value) are held in “eligible shares” – (“eligible shares” generally being ordinary share capital)	Complied
The Company’s ordinary share capital has throughout the period been listed on a regulated European market	Complied
No investment in a company constitutes more than 15 per cent. of the Company’s portfolio (by value at time of investment)	Complied
The Company’s income for each financial year is derived wholly or mainly from shares and securities The Company distributes sufficient revenue dividends to ensure that not more than 15 per cent. of the income from shares and securities in any one year is retained	Complied Complied
The Company has not made a prohibited payment to Shareholders derived from an issue of shares since 6 April 2014	Complied
No investment made by the Company causes an investee company to receive more than the permitted investment from State Aid sources (including from VCTs)	Complied
Since 18 November 2015, the Company has not made an investment in a company which exceeds the maximum permitted age requirement The funds invested by the Company in another company since 18 November 2015 have not been used to make a prohibited acquisition	Complied Complied
Since 6 April 2016, the Company has not made a prohibited non-qualifying investment. Of funds raised on or after 1 March 2019, at least 30% has been invested in qualifying holdings by the anniversary of the end of the accounting period in which shares were issued.	Complied Complied

Investment management and administration fees
Beringea provides investment management services to the Company for an annual fee of 2.0% of the net assets per annum. Beringea is also entitled to receive performance incentive fees as described below. The investment management agreement is terminable by either party at any time by one year’s prior written notice. The total fees relating to this service amounted to £3,981,000 (2021: £2,453,000), comprising a management fee of £2,963,000 (2021: £2,321,000) and performance incentive fees as described below of £1,018,000 (2021: £132,000). At the year end, an amount of £1,018,000 (2021: £132,000) was outstanding.

The Board is satisfied with Beringea’s approach and procedures in providing investment management services to the Company. The Directors have therefore concluded that the continuing appointment of Beringea as Investment Manager remains in the best interests of Shareholders.

Throughout the year ended 28 February 2022, Beringea also provided administration services to the Company. In the year, total administration fees amounted to £65,000 (2021: £64,000).

The annual running costs (excluding any performance fees payable) of the Company are subject to a cap of 3.25% of the Company’s net assets at the end of the year. Any running costs in excess of this are borne by Beringea.

Beringea also received arrangement fees in respect of investments made by the Company and other VCTs managed by Beringea totalling £398,000 (2021: £158,000) and monitoring fees of £605,000 (2021: £655,000) during the year ended 28 February 2022. These fees are payable by the investee companies into which the Company invests and are not a direct liability or expense of the Company.

Performance incentive fees
The Investment Manager is entitled to receive an annual performance incentive fee in respect of the shares in issue at
29 February 2012 (the “Original Offer”) and each share offer made by the Company since the Original Offer (each being
a “Relevant Offer”), if the Performance Value of the Relevant Offer achieves a Hurdle Amount.

The “Performance Value” is calculated on an annual basis based on the latest annual audited NAV, plus cumulative dividends and any previous performance fees paid in respect of the Relevant Offer since 29 February 2012.

The “Hurdle Amount” is represented by the higher of: (i) 1.25 times the initial share offer NAV; and (ii) the initial share offer
NAV compounded by the annual Bank of England base rate plus 1%. Please note the hurdle amount for the Original Offer is calculated differently but based on similar principles.

For each Relevant Offer, if the Hurdle Amount is not met, no performance incentive fee will be payable. Once the Hurdle Amount has been met, the performance incentive fee payable in relation to a financial year is 20% of the amount by which the Performance Value exceeds the initial NAV of the Relevant Offer, less any performance fees paid previously.

Performance fees will be reduced, if necessary, to ensure that i) the cumulative performance fee per share payable to the Manager in respect of a Relevant Offer does not exceed 20% of the relevant cumulative dividends paid in respect of that share; and ii) the audited net asset value per share at the relevant financial year end plus the relevant cumulative dividends is at least equal to the relevant respective Hurdle Amount.

Performance fees for the year ended 28 February 2022 amounted to £1,018,000 (2021: £132,000).

Key performance indicators
At each Board meeting, the Directors consider a number of performance measures to assess the Company’s success in meeting its objective of delivering long term returns. Some of these are classified as alternative performance measures (“APMs”) in line with Financial Reporting Council (“FRC”) guidance. The Board believes the Company’s key performance indicators are:

•        total return (net asset value plus dividends paid since launch)*;
•        dividends paid and the dividend yield; and
•        net asset value per share (adjusted for dividends paid in the year)*.

*Classified as an APM.

The total return is calculated as the net asset value per share plus the cumulative dividends paid to date. This is a performance measure of the fund and used to evaluate the total value generated for Shareholders.

The following table shows the total return, annual return shown as the net asset value per share, dividends paid per annum and the dividend yield.



	28/02/2018	28/02/2019	29/02/2020	28/02/2021	28/02/2022
Total return	135.7	145.95	138.35	146.55	151.95
Increase/(decrease) in net asset value per share (adjusted for dividends paid in the year)¹	2.7%	10.3%	(9.2%)	11.7%	7.2%
Dividends paid per share	9.5p	27.75p	4.5p	3.5p	3.5p
Dividend yield²	8.9%	27.8%	5.5%	5.1%	4.7%³

¹ Calculated as the change in total return in the year divided by the opening net asset value.

² Calculated as the total dividends paid in the year divided by the opening net asset value.

³ The Dividend yield shown above for the year ended 28 February 2022 of 4.7% is calculated as per the description in note 2 above. This differs from the dividend yield of 7.2% shown in the Chair’s Statement which is calculated as dividends paid in respect of the year ended 28 February 2022 divided by the opening net asset value adjusted for the 2.0p final dividend paid on 30 July 2021 in respect of the year ended 28 February 2021. Dividends paid in respect of the year ended 28 February 2022 are an interim dividend of 1.5p per share paid on 10 December 2021 and the proposed final and
special dividends of 2.25p and 1.5p respectively, which will be paid (subject to Shareholder approval for the final dividend) on 5 August 2022.

The change in net asset value per share (adjusted for dividends paid in the year) is defined as an APM and the Board considers it to be the primary measure of shareholder value.

The key performance indicators are discussed further in the Chair’s Statement and the Investment Manager’s Review.

Principal risks and uncertainties
The principal ﬁnancial risks faced by the Company, which include market price risk, interest rate risk, credit risk and liquidity risk (being minimal), are summarised within the notes to the ﬁnancial statements.

In addition to these risks, the Company, as a fully listed Company on the London Stock Exchange and as a Venture Capital Trust, operates in a complex regulatory environment and, therefore, also faces a number of non-financial principal risks. A breach of the VCT Regulations could result in the loss of VCT status, the loss of tax reliefs currently available to Shareholders and the Company being subject to capital gains tax. Serious breaches of other regulations, such as the Listing Rules of the Financial Conduct Authority and the Companies Act 2006, could lead to suspension from the Stock Exchange and damage to the Company’s reputation.

The Company has also made a number of its initial investments in a foreign currency; most often in Euro or US Dollars. Furthermore, as not all companies’ operations are restricted to the UK, some companies may function, in part, in a currency other than GBP. The portfolio is therefore exposed, to some extent, to foreign exchange risk and specifically that of transaction risk and translation risk.

The Company invests in small and immature businesses and there is a risk that the performance of these individual businesses negatively impacts the performance of the Company. The Investment Manager follows a rigorous process in vetting and careful structuring of new investments and, after an investment is made, close monitoring of the businesses.

The Board reviews and agrees policies for managing each of these risks. The Directors receive reports annually from the Investment Manager on the compliance of systems to manage these risks, and place reliance on the Investment Manager to give updates in the intervening periods.

The risks faced by the Company have remained unchanged since the beginning of the financial year though the Board is cognizant of the ongoing economic and geopolitical disruption caused both by increasing inflation and the war in Ukraine. The Board is aware of the strains this can put on some investee companies and therefore continues to keep a watchful eye on the health of the portfolio.

Viability statement
The Board has assessed the Company’s prospects over the three-year period to 28 February 2025. A three-year period has been considered appropriate as it broadly aligns with the time frame during which the Investment Manager will be required to invest 80% of the funds from the most recent offer for subscription in qualifying investments.

In order to support this statement, the Board has carried out a robust assessment of the principal and emerging risks faced by the Company, as detailed above, including those risks associated with the COVID-19 pandemic and the war in Ukraine, and considered the availability of mitigating factors.

The Board considers that the primary risk faced by the Company is compliance with the VCT rules and although there are a number of mitigating factors such as a robust deal identification and diligence process, an experienced investment team and consultation with the Company’s VCT status advisers to ensure that investments made comply with the VCT rules, these factors cannot mitigate the risk that insufficient qualifying investments are identified to ensure ongoing compliance with the VCT rules.

Accordingly, the amount required to invest in qualifying holdings to maintain compliance with the VCT rules was a major consideration in the Board’s analysis. Together with the expected liabilities of the Company for the three years to 28 February 2025, the Board considered the forecast cash requirements against the expected cash position, taking into account a level of assumed investment realisations and investment income during the period.

Based on the assessment of the above considerations on the cash flow forecasts, the Board has determined that the Company will be able to continue in operation, maintain compliance with the VCT rules and meet its liabilities as they fall due for the three years to 28 February 2025.

Section 172 Statement
Section 172 of the Companies Act 2006 requires the Directors of the Company to act in a way that they consider, in good faith, will most likely promote the success of the Company for the beneﬁt of the members as a whole. In doing so, the Directors should have regard (amongst other matters) to:
•        the likely consequences of any decision in the long term;
•        the interests of the Company’s employees;
•        the need to foster the Company’s business relationships with suppliers, customers and others;
•        the impact of the Company’s operations on the community and the environment;
•        the desirability of the Company maintaining a reputation for high standards of business conduct; and
•        the need to act fairly as between members of the Company.

The Board considers its signiﬁcant stakeholder groups to be its Shareholders, its suppliers (including the Investment Manager to whom most executive functions are delegated) and its portfolio companies. The Company is an externally managed investment company with no employees and no customers in the traditional sense and, therefore, there is nothing to report in relation to these relationships. The Company takes a number of steps to understand the views of its key stakeholders and considers these, along with the matters set out above, in Board discussions and decision making.

Shareholders
The Company’s Shareholders are key to the success of the Company and the Board engages and communicates with Shareholders by various means. The Company encourages all Shareholders to attend its annual shareholder event, which last year was held virtually on 17 November 2021 and attended by over 300 Shareholders, and gives Shareholders the opportunity to ask questions of the Board and the Investment Manager and also hear from some of our portfolio companies. Following the success of last year’s event, plans are in motion for a hybrid event in 2022. Invitations to this event will be distributed alongside publication of the Annual Report & Accounts. The event has been scheduled for Wednesday 16 November 2022.

The Board also encourages all Shareholders to vote on the resolutions at the Annual General Meeting. In light of the ‘social distancing’ measures and the legislation proposed to allow companies to hold general meetings safely, last year’s AGM was held as a closed AGM and Shareholders were unfortunately unable to attend. We are pleased to report that this year sees a return to a more traditional format with the next AGM of the Company being held in the Tavern Room at RSA House, 8 John Adam Street, London, WC2N 6EZ at 9.30am on Wednesday 20 July 2022.

As a result of the shareholder event, together with other communications with Shareholders and advisors, the Company has received useful feedback which allows the Board to understand the nature of stakeholder concerns better. The Board works very closely with the Investment Manager in reviewing how stakeholder issues are handled, ensuring good governance and responsibility in managing the Company’s affairs. Ultimately, the Directors’ decisions are intended to achieve the Company’s principal objective of long term returns for Shareholders greater than those available from investing in a portfolio of quoted companies. In addition, the Board has continued to maintain the existing arrangements for payments of dividends, dividend
re-investment and buy-backs in order to give predictable income returns and liquidity to Shareholders when requested.

Suppliers
The Company’s suppliers, and in particular Beringea as Investment Manager, are the cornerstone of the Company’s business. There is regular contact with the Investment Manager and members of the Investment Manager’s senior management team attend all of the Company’s Board meetings.

Portfolio Companies
The Investment Manager provides updates to the Board on the entire portfolio at least quarterly. Furthermore, the Investment Manager continuously supports the portfolio via a host of practices, including, but not limited to, having a representative of the Investment Manager on the Board of portfolio companies, where necessary, and support with talent acquisition. The Investment Manager recently established a Portfolio Value-Add Initiative to support companies as they look to develop key areas that will drive their future growth. This group includes key members of the Manager’s Team including Harry Thomas (Investment Manager, Portfolio), Vanessa Evanson-Goddard (General Counsel), James Adams (Head of Talent) and Henry Philipson (Director of Marketing and Communications). One of the key elements of the Value-Add Initiative is the Beringea Scale-Up Academy, an annual programme of events for portfolio leadership teams. In 2021, seven webinars were delivered to portfolio company senior managers, providing insight and training on topics such as SaaS pricing, product strategy and remote working.

E nvironmental, Social , Human Rights Policy and Greenhouse Emissions
The Board seeks to conduct the Company’s affairs responsibly and maintain high standards in respect of ethical, environmental, governance and social issues. The Board recognises the requirement under section 414C of the Companies Act 2006 to detail information about social and community issues, employees and human rights; including any policies it has in relation to these matters and effectiveness of these policies.

As an externally managed investment company with no employees, the Company has no formal policies in these matters. However, the Company and the Investment Manager recognise the growing need for the Company and the businesses within its portfolio to embrace environmental, social and governance (“ESG”) practices and are working together to consider new policies and processes relating to ESG. This has included significant work on diversity and inclusion, which resulted in certification for the Investment Manager as a Level 1 firm under the Diversity VC Standard, an industry accreditation for diversity and inclusion best practice, as well as a nomination for Diversity and Inclusion Leader of the Year at the Private Equity Awards 2021.

The Investment Manager has also led the creation of an industry initiative – ESG_VC – to support early-stage companies to measure, monitor and maximise their performance against key ESG metrics. This initiative, with the involvement of the British Venture Capital Association, has support from more than 150 venture capital funds, and will enable entrepreneurs in the Company’s portfolio to access resources that drive ESG and commercial improvements.

On a general note, the Board considers that the Company’s investment operations create employment, aid economic growth, generate tax revenues and produce wealth, thus benefiting the community and the economy more generally. Where appropriate, the investment proposals considered by the Investment Manager and the Board also include any relevant information on any social, employee, ethical or environmental matters relevant to that investment.

Whilst as a UK quoted company the VCT is required to report on its Greenhouse Gas (GHG) Emissions for any direct emissions, as it outsources all of its activities and does not have any physical assets, property, employees or operations, it is not responsible for any direct emissions. As a result, total energy emissions are less than 40,000 kWh and the additional Streamlined Energy and Carbon Reporting (SECR) disclosures have not been made.

Directors and senior management
The Company had four non-executive Directors at the year end, three of whom are male and one of whom is female. The Company has no employees and the same was true of the previous year.

Directors’ remuneration
It is a requirement under Companies Act 2006 for Shareholders to approve the Directors’ remuneration policy every three years, or sooner if the Company wishes to make changes to the policy. No changes are being proposed to the Directors’ remuneration policy.

Future prospects
The Company’s future prospects are set out in the Chair’s Statement and Investment Manager’s Review.

The Directors do not foresee any major changes in the activity undertaken by the Company in the coming year. The Company continues with its objective to invest in unquoted companies throughout the United Kingdom or with a presence in the United Kingdom, with a view to providing both capital growth and dividend income to Shareholders over the long term whilst maintaining VCT qualifying status.

By order of the Board

Beringea LLP
Company Secretary of ProVen VCT plc

Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and the ﬁnancial statements in accordance with applicable law and regulations. They are also responsible for ensuring that the Annual Report and Accounts includes information required by the Listing Rules of the Financial Conduct Authority.

Company law requires the Directors to prepare ﬁnancial statements for each ﬁnancial year. Under that law the Directors have elected to prepare the ﬁnancial statements in accordance with United Kingdom Generally Accepted Accounting Practice (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 of the Company for that period.

In preparing the ﬁnancial statements, the Directors are required to:

select suitable accounting policies and then apply them consistently;
make judgments and accounting estimates that are reasonable and prudent;
state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the ﬁnancial statements;
prepare the ﬁnancial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; and
prepare a directors’ report, a strategic report and directors’ remuneration report which comply with the Companies Act 2006.

The Board considers that the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and that they provide the information necessary for Shareholders to assess the Company’s performance, business model and strategy.

The Directors are responsible for keeping adequate accounting records that are suﬃcient to show and explain the Company’s transactions, to disclose with reasonable accuracy at any time the ﬁnancial position of the Company and to enable them to ensure that the ﬁnancial statements comply with the requirements of the Companies Act 2006. The maintenance and integrity of the Company’s website is the responsibility of the directors. 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.

Directors’ responsibilities pursuant to the Disclosure and Transparency Rule 4
Each of the Directors confirms that to the best of each person’s knowledge:

the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
the Directors’ Report, Chair’s Statement, Strategic Report, Investment Manager’s Review and Review of Investments include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

Statement as to disclosure of information to the Auditor
The Directors in oﬃce at the date of the Report have conﬁrmed, as far as they are aware, that there is no relevant audit information of which the Auditor is unaware. Each of the Directors have conﬁrmed that they have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that it has been communicated to the Auditor. This conﬁrmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

The Directors’ Report, which has been approved by the Board, includes all relevant information required to be disclosed under LR9.8.4R.

Income Statement

for the year ended 2 8 February 20 2 2

	Year ended 2 8 February 20 2 2			Year ended 2 8 February 20 21
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Income	199	–	199	26	–	26
Realised gains on investments	–	2,490	2,490	–	35	35
Unrealised gains on investments	–	12,673	12,673	–	17,546	17,546
	199	15,163	15,362	26	17,581	17,607

Investment management fees	(741)	(2,222)	(2,963)	(580)	(1,741)	(2,321)
Performance incentive fees	–	(1,018)	(1,018)	–	(132)	(132)
Other expenses	(736)	(3)	(739)	(723)	(4)	(727)
FX Translation	–	–	–	–	(35)	(35)

(Loss)/return on ordinary activities before tax	(1,278)	11,920	10,642	(1,277)	15,669	14,392

Tax on ordinary activities	-	-	-	-	-	-
(Loss)/return attributable to equity shareholders	(1,278)	11,920	10,642	(1,277)	15,669	14,392


Basic and diluted (loss)/ return per share	(0.7p)	6.4p	5.7p	(0.8p)	9.5p	8.7p

All revenue and capital movements in the year relate to continuing operations. No operations were acquired or discontinued during the year. The total column within the Income Statement represents the Income Statement of the Company, prepared in accordance with the accounting policies detailed in note 1 to the ﬁnancial statements. The supplementary revenue and capital columns are presented for information purposes in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies.

A Statement of Comprehensive Income has not been prepared as no items have been recognised in ‘other comprehensive income’ in the current or prior year as shown.

Statement of Changes in Equity

for the year ended 2 8 February 20 2 2

Year Ended 28 February 202 2

	Called up share capital £'000	Capital redemption reserve £'000	Special reserve £ '000	Share Premium reserve £'000	Revaluation reserve £'000	Capital reserve- realised £'000	Revenue reserve £ '000	Total £ '000
At 1 March 2021	16,982	590	42,765	52,739	13,915	3,440	(3,451)	126,980
Comprehensive Income for the year:
Management fees allocated as capital expenditure	–	–	–	–	–	(2,222)	–	(2,222)
Legal fees allocated as capital expense	–	–	–	–	–	(3)	–	(3)
Realised gain on investments	–	–	–	–	–	2,490	–	2,490
Unrealised gain on investments	–	–	–	–	12,673	–	–	12,673
Loss after tax	–	–	–	–	–	–	(1,278)	(1,278)
Performance fee	–	–	–	–	–	(1,018)	–	(1,018)
Total comprehensive return	–	–	–	–	1 2,67 3	( 753 )	(1,27 8 )	10,64 2

Contributions by and distributions to owners:
Issue of new shares (includes DRIS) (net of share issue costs)	2,732	–	(866)	18,279	–	–	–	20,145
Share buybacks	(476)	476	(3,406)	–	–	–	–	(3,406)
Dividends paid (includes DRIS)	–	–	(6,777)	–	–	–	–	(6,777)
Total contributions by and distributions to owners	2,256	476	(11,04 9 )	18,279	–	–	–	9,96 2
Other movements:
Transfer of previously unrealised gains now realised	–	–	–	–	(1,795)	1,795	–	–
FX translation	–	–	–	–	–	–	–	–
Total other movements	–	–	–	–	(1,795)	1,795	–	–
At 28 February 2022	19,238	1,066	31,71 6	71,018	24,79 3	4,482	(4,729)	147,584

Year ended 2 8 February 20 2 1

	Called up share capital £'000	Capital redemption reserve £'000	Special reserve £ '000	Share Premium reserve £'000	Revaluation reserve £'000	Capital reserve- realised £'000	Revenue reserve £ '000	Total £ '000
At 1 March 2020	15,028	359	50,727	39,733	(2,969)	4,620	(2,139)	105,359
Comprehensive Income for the year :
Management fees allocated as capital expenditure	–	–	–	–	–	(1,741)	–	(1,741)
Legal fees allocated as capital expense	–	–	–	–	–	(4)	–	(4)
Realised gain on investments	–	–	–	–	–	35	–	35
Unrealised gain on investments	–	–	–	–	17,546	–	–	17,546
Loss after tax	–	–	–	–	–	–	(1,277)	(1,277)
Performance fee	–	–	–	–	–	(132)	–	(132)
Total comprehensive return	–	–	–	–	17,546	(1,842)	(1,277)	14,427

Contributions by and distributions to owners:
Issue of new shares (includes DRIS) (net of share issue costs)	2,185	–	(502)	13,006	–	–	–	14,689
Share buybacks	(231)	231	(1,507)	–	–	–	–	(1,507)
Dividends paid (includes DRIS)	–	–	(5,953)	–	–	–	–	(5,953)
Total contributions by and distributions to owners	1,954	231	(7,962)	13,006	–	–	–	7,229
Other movements:
Transfer of previously unrealised gains now realised	–	–	–	–	(662)	662	–	–
FX translation	–	–	–	–	–	–	(35)	(35)
Total other movements	–	–	–	–	(662)	662	(35)	(35)
At 2 8 February 202 1	16,982	590	42,765	52,739	13,915	3,440	(3,451)	126,980

The special reserve, capital reserve-realised and revenue reserve are all distributable reserves. Reserves available for
distribution therefore amount to £31,469,000 (2021: £42,754,000). During the year the Company repurchased 4,762,331
shares (2021: 2,312,011) with a nominal value of £476,233 (2021: £231,201). All shares were subsequently cancelled.

The composition of each of these reserves is explained below:

Called up share capital - The nominal value of shares issued, increased for subsequent share issues either via an offer for subscription or the Company’s dividend reinvestment scheme, or reduced due to shares bought back by the Company for cancellation.

Capital redemption reserve - The nominal value of shares bought back and cancelled.

Special reserve – The Company has previously cancelled its share premium reserve and capital redemption reserve to create a special reserve that can assist in writing off losses, which in turn enhances the ability for a company to make distributions and implement share buybacks. This is the distributable reserve which is currently used to fund shares bought back by the Company for cancellation and share issue costs on shares issued under an Offer for Subscription. Dividends that are classified as capital may be paid from this reserve.

Share premium reserve - This reserve contains the excess of gross proceeds over the nominal value of shares allotted under offers for subscription and the Company’s dividend reinvestment scheme, to the extent that it has not been cancelled.

Revaluation reserve - Increases and decreases in the valuation of investments held at the year-end are accounted for in this reserve, except to the extent that the diminution is deemed permanent.

In accordance with stating all investments at fair value through profit and loss, all such movements through both revaluation and capital reserve – realised are shown within the Income Statement for the year.

Capital reserve – realised - The following are accounted for in this reserve:

gains and losses on realisation of investments;
permanent diminution in value of investments;
transaction costs incurred in the acquisition of investments;
75% of the investment manager’s fee expense and 100% of any performance incentive fee payable; and
other capital expenses and charges.

Dividends that are classified as capital may be paid from this reserve.

Revenue reserve - Income and expenses that are revenue in nature are accounted for in this reserve together with the related tax effect, as well as dividends paid that are classified as revenue in nature.

Statement of Financial Position as at 2 8 February 20 2 2	2 8 February 20 2 2	2 8 February 20 21
	Total	Total
	£’000	£’000
Fixed assets
Investments	124,836	90,095

Current assets
Debtors	576	304
Cash at bank and in hand	23,497	37,014
	24,073	37,318
Creditors: amounts falling due within one year	(1,325)	(433)
Net current assets	22,748	36,885
Total assets less current liabilities	147,584	1 26,980

Capital and reserves
Called up share capital	19,238	16,982
Capital redemption reserve	1,066	590
Special reserve	31,716	42,765
Share premium reserve	71,018	52,739
Revaluation reserve	24,793	13,915
Capital reserve – realised	4,482	3,440
Revenue reserve	(4,729)	(3,451)
Total equity shareholders’ funds	147,584	1 26,980
Basic and diluted net asset value per share	76.7p	74.8p

Statement of Cash Flows
for the year ended 2 8 February 20 2 2

	Year ended 2 8 February 20 2 2	Year ended 2 8 February 20 21
	Total	Total
	£’000	£’000
Return on ordinary activities before taxation	10,642	14,392
Gain on investments	(15,163)	(17,581)
Decrease in prepayments, accrued income and other debtors	21	447
Increase/decrease in accruals and other creditors	894	(66)
Net cash outflow from operating activities	(3,606)	(2,808)

Cash flows from investing activities
Purchase of investments	(28,982)	(8,551)
Sale of investments	9,104	5,268
Net cash outflow from investing activities	(19,878)	(3,283)

Cash flows from financing activities
Proceeds from share issues	19,909	14,201
Share issue costs	(867)	(502)
Purchase of own shares	(3,402)	(1,941)
Equity dividends paid	(5,673)	(4,963)
Net cash inflow from financing activities	9,967	6,795

(Decrease)/Increase in cash and cash equivalents	(13,517)	704
Cash at beginning of year	37,014	36,310
Cash at end of year	23,497	37,014

‘Net cash used in operating activities’ includes interest received of £282,000 (2021: £396,000) and dividends received of £4,000 (2021: £1,000). No interest was paid during the period.

Notes to the Announcement

for the year ended 2 8 February 20 2 2
1. Accounting policies

Basis of preparation
The Company has prepared its ﬁnancial statements under Financial Reporting Standard 102 (“FRS102”) and in accordance with the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ (the “SORP”) issued by the Association of Investment Companies (“AIC”), which was updated in April 2021.

The ﬁnancial statements are prepared under the historical cost convention except for the revaluation of certain ﬁnancial instruments measured at fair value.

The following accounting policies have been applied consistently throughout the period.

Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company has adequate resources to continue in operational existence for the twelve months from the date of sign off of these financial statements. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements.

Presentation of Income Statement
In order to better reﬂect the activities of an investment company and, in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue return attributable to equity Shareholders is the measure the Directors believe appropriate in assessing the Company’s compliance with certain requirements set out in Part 6 of the Income Tax Act 2007.

Investments
Investments, including equity and loan stock, are recognised at their trade date and measured at “fair value through proﬁt or loss” due to investments being managed and performance evaluated on a fair value basis. A ﬁnancial asset is designated within this category if it is both acquired and managed, with a view to selling after a period of time, in accordance with the Company’s documented investment policy. The fair value of an investment upon acquisition is deemed to be cost. Thereafter investments are measured at fair value in accordance with International Private Equity and Venture Capital Valuation Guidelines (“IPEV Guidelines”) issued in December 2018, together with sections 11 and 12 of FRS102.

Publicly traded investments are measured using bid prices in accordance with the IPEV Guidelines.

Key judgements
The valuation methodologies used by the Directors for estimating the fair value of unquoted investments are as follows:

where a company is in the early stage of development, the estimate of fair value is based on market data and assumptions as to the potential outcomes, benchmarked against alternative valuation methodologies during this time;
where a company is well established after an appropriate period, the investment may be valued by applying a suitable earnings, revenue or transaction multiple to that company’s maintainable earnings or revenue. The multiple used is based on comparable listed companies, transaction data or a sector but discounted to reflect factors such as the different sizes of the comparable businesses, different growth rates and the lack of marketability of unquoted shares;
where a value is indicated by a material arm’s-length transaction by a third party in the shares of the company the valuation will normally be based on this, whilst also being benchmarked against alternative valuation methodologies;
where alternative methods of valuation, such as net assets of the business, are more appropriate then such methods may be used; and
where repayment of the equity is not probable, redemption premiums will be recognised.

The methodology applied takes account of the nature, facts and circumstances of the individual investment and uses reasonable data, market inputs, assumptions and estimates in order to ascertain fair value. Methodologies are applied consistently from year to year except where a change results in a better estimate of fair value.

Where an investee company has gone into receivership or liquidation, or the loss in value below cost is considered to be permanent, or there is little likelihood of a recovery from a company in administration, the loss on the investment, although not physically disposed of, is treated as being realised.

All investee companies are held as part of an investment portfolio and measured at fair value. Therefore, it is not the policy for investee companies to be consolidated and any gains or losses arising from changes in fair value are included in the Income Statement for the period as a capital item.

Gains and losses arising from changes in fair value are included in the Income Statement for the year as a capital item and transaction costs on acquisition or disposal of the investment are expensed.

Investments are derecognised when the contractual rights to the cash ﬂows from the asset expire or the Company transfers the asset and substantially all the risks and rewards of ownership of the asset to another entity.

Key estimates
The key estimates involved in determining the fair value of a company can include:
•        identifying a relevant basket of market comparables;
•        deducing the discount to take on those market comparables;
•        determining reoccurring revenue;
•        determining reoccurring earnings; or
•        identifying surplus cash.

Fair value
Fair value is defined as the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction. The Company has categorised its financial instruments that are measured subsequent to initial recognition at fair value, using the fair value hierarchy as follows:

Level 1: The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable (i.e., developed using market data) for the asset or liability, either directly or indirectly.

Level 3: Inputs are unobservable (i.e., for which market data is unavailable) for the asset or liability.

Income
Dividend income from investments is recognised when the shareholders’ rights to receive payment has been established, normally the ex-dividend date.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable and only where there is reasonable certainty of collection in the foreseeable future. Income which is not capable of being received within a reasonable period of time is reflected in the capital value of the investments. A provision is made for any fixed income not expected to be received.

Expenses
All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Income Statement, all expenses have been presented as revenue items except as follows:

expenses which are incidental to the acquisition of an investment are deducted from the Capital Account;
expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment;
expenses are split and presented partly as capital items where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated. Accordingly, the investment management fee has been allocated 25% to revenue and 75% to capital in order to reflect the Directors’ expected long-term view of the nature of the investment returns of the Company; and
performance incentive fees are treated as a capital item.

Taxation
The tax effects of different items in the Income Statement are allocated between capital and revenue on the same basis as the particular item to which they relate using the Company’s effective rate of tax for the accounting period.

Due to the Company’s status as a venture capital trust and the continued intention to meet the conditions required to comply with Part 6 of the Income Tax Act 2007, no provision for taxation is required in respect of any realised or unrealised appreciation of the Company’s investments.

Deferred taxation, which is not discounted, 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.

Share issue costs
Expenses in relation to share issues are deducted from the Special Reserve.

Cash
Cash comprises cash on hand and demand deposits.

Debtors
Short term debtors are initially measured at transaction price. Subsequent remeasurement deducts any impairment from the transaction price.

Creditors
Short term trade creditors are initially and subsequently measured at the transaction price.

2. Basic and diluted return per share

	Year ended 2 8 February 202 2	Year ended 28 February 2021
Revenue loss per share based on:
Net loss after taxation (£’000)	(1,278)	(1,277)

Weighted average number of shares in issue	186,421,327	164,391,561

Pence per share	(0.7)	(0.8)

Capital return per share based on:
Net capital return for the financial year (£‘000)	11,920	15,669

Weighted average number of shares in issue	186,421,327	164,391,561

Pence per share	6.4	9.5

Total return per share based on:
Total return for the financial year (£‘000)	10,642	14,392

Weighted average number of shares in issue	186,421,327	164,391,561

Pence per share	5.7	8.7

As the Company has not issued any convertible securities or share options, there is no dilutive effect on return per share. The return per share disclosed therefore represents both basic and diluted return per share.

3. Basic and diluted net asset value per share

			20 2 2			20 2 1
	Shares in Issue		Net asset value			Net asset value
	20 2 2	20 2 1		pence per share	£’000		pence per share	£’000
Ordinary Shares	192,378,178	169,820,219		76.7p	147,584		74.8p	126,980

As the Company has not issued any convertible securities or share options, there is no dilutive effect on net asset value per share. The net asset value per share disclosed therefore represents both basic and diluted net asset value per share.

4. Principal risks and management objectives

The Company’s investment activities expose the Company to a number of risks associated with financial instruments and the sectors in which the Company invests. The principal financial risks arising from the Company’s operations are:

Market risks;
Credit risk; and
Liquidity risk.

The Board regularly reviews these risks and the policies in place for managing them. There have been no significant changes to the nature of the risks that the Company is exposed to over the year and there have also been no significant changes to the policies for managing those risks during the year. The risk management policies used by the Company in respect of the principal financial risks and a review of the financial instruments held at the year end are provided below:

Market risks
As a VCT, the Company is exposed to market risks in the form of potential losses and gains that may arise on the investments it holds. The management of these market risks is a fundamental part of investment activities undertaken by the Investment Manager and overseen by the Board. The Investment Manager monitors investments through regular contact with the management of investee companies, regular review of management accounts and other financial information and attendance at investee company board meetings. This enables the Investment Manager to manage the investment risk in respect of individual investments. Market risk is also mitigated by holding a portfolio diversified across several business sectors and asset classes.

The key market risks to which the Company is exposed are:

Market price risk; and
Interest rate risk.

Market price risk
Market price risk arises from uncertainty about the future prices and valuations of ﬁnancial instruments held in accordance with the Company’s investment objectives. It represents the potential loss that the Company might suﬀer through market price movements in respect of quoted investments and also changes in the fair value of unquoted investments that it holds.

At 28 February 2022, the AIM-quoted portfolio was valued at £298,000 (2021: £321,000).

The Company’s sensitivity to ﬂuctuations in the share prices of its AIM-quoted investments is summarised below. A 20% movement in the share price of all of the AIM-quoted investments held by the Company would have an eﬀect as follows:

2 0% movement in AIM-quoted investments		20 2 2		20 2 1
	Impact on net assets	Impact on NAV per share	Impact on net assets	Impact on NAV per share
	£’000	pence	£’000	Pence
AIM-quoted investments	60	0.0p	64	0.0p

At 28 February 2022, the unquoted portfolio was valued at £124,538,000 (2021: £89,774,000). As many of the Company’s unquoted investments are valued using revenue or earnings multiples of comparable companies or sectors, a fall in share prices generally would impact on the valuation of the unquoted portfolio. A 20% movement in the valuations of all of the unquoted investments held by the Company would have an effect as follows:

2 0% movement in unquoted investment valuations		20 2 2		20 2 1
	Impact on net assets	Impact on NAV per share	Impact on net assets	Impact on NAV per share
	£’000	Pence	£’000	Pence
Unquoted investments	24,908	12.9p	17,955	10.6p

The sensitivity analysis for unquoted valuations above assumes that each of the sub-categories of ﬁnancial instruments (ordinary shares, preference shares and loan stocks) held by the Company produces an overall movement of 20%. Shareholders should note that equal correlation between these sub-categories is unlikely to be the case in reality, particularly in the case of loan stock instruments. Where share prices are falling, the equity instrument could fall in value before the loan stock instrument.

Interest rate risk
The Company is exposed to interest rate risk on floating-rate financial assets through the effect of changes in prevailing interest rates. The Company receives interest on its cash deposits at a rate agreed with its bankers. Investments in loan stock attract interest predominately at fixed rates. A summary of the interest rate profile of the Company’s financial instruments is shown below.

There are three categories in respect of interest which are attributable to the financial instruments held by the Company as follows:

“Fixed rate” assets represent investments with predetermined yield targets and comprise certain loan note investments.
“Floating rate” assets predominantly bear interest at rates linked to Bank of England base rate or LIBOR and comprise cash at bank and certain loan note investments.
“No interest rate” assets do not attract interest and comprise equity investments, certain loan note investments, loans and receivables (excluding cash at bank) and other financial liabilities.

	Average	Average period	20 2 2	20 2 1
	interest rate	until maturity	£’000	£’000
Fixed rate	6.2%	494 days	9,291	8,040
Floating rate	0.3%	0 days	23,669	37,157
No interest rate			114,624	81,783
			147,584	126,980

The Company monitors the level of income received from ﬁxed, ﬂoating and non-interest bearing assets and, if appropriate, may make adjustments to the allocation between the categories, in particular, should this be required to ensure compliance with the VCT regulations.

Based on the assumption that the yield of all ﬂoating rate ﬁnancial instruments would change by an amount equal to the movement in prevailing interest rates, it is estimated that an increase of 1% in interest rates would have increased total return before taxation for the year by £237,000 (2021: £372,000). Given the low level of interest rates through the year, a further decrease is not considered likely.

Credit risk
Credit risk is the risk that a counterparty to a financial instrument is unable to discharge a commitment to the Company made under that instrument. The Company is exposed to credit risk through its investments in cash deposits and debtors. Credit risk relating to loan stock investee companies is considered to be part of market risk.

The Company’s exposure to credit risk is summarised as follows:

	20 2 2	20 2 1
	£’000	£’000
Cash and cash equivalents	23,497	37,014
Interest, dividends and other receivables	185	200
	23,682	37,214

The management of credit risk associated with interest, dividends and other receivables is covered within the investment management procedures.

Cash is mainly held by the Royal Bank of Scotland plc, rated A and A+ by Standard and Poor’s and Fitch, respectively, and is also ultimately part-owned by the UK Government. Consequently, the Directors consider that the risk proﬁle associated with cash deposits is low.

There have been no changes in fair value during the year that are directly attributable to changes in credit risk.

Liquidity risk
Liquidity risk is the risk that the Company encounters diﬃculties in meeting obligations associated with its ﬁnancial liabilities. Liquidity risk may also arise from either the inability to sell ﬁnancial instruments when required at their fair values or from the inability to generate cash inﬂows as required. The Company generally maintains a relatively low level of creditors relative to cash balances (£1.3 million relative to cash balances of £23.5 million at 28 February 2022) and has no borrowings.

The Company always holds suﬃcient levels of funds as cash in order to meet expenses and other cash outﬂows as required. For these reasons, the Board believes that the Company’s exposure to liquidity risk is minimal.

The Company’s liquidity risk is managed by the Investment Manager in line with guidance agreed with the Board and is reviewed by the Board at regular intervals.

Although the Company’s investments are not held to meet the Company’s liquidity requirements, the table below shows an analysis of the loan stock, highlighting the length of time that it could take the Company to realise its loan stock assets if it were required to do so.

The carrying value of loan stock investments (as opposed to the contractual cash ﬂows) held at 28 February 2022, which is analysed by expected maturity date, is as follows:

As at 2 8 February 20 2 2	Not later	Between	Between	Between	More
	than 1	1 and 2	2 and 3	3 and 5	than 5
	Year	Years	Years	years	years	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Fully performing loan stock	4,111	640	-	2,551	-	7,302
Past due loan stock	2,161	-	-	-	-	2,161
	6,272	640	-	2,551	-	9,463

As at 2 8 February 20 2 1
Fully performing loan stock	1,065	–	732	–	1,087	2,884
Past due loan stock	5,299	–	–	–	–	5,299
	6,364	–	732	–	1,087	8,183

Of the loan stock classified as “past due” above, the full amount relates to the principal of loan notes where the principal has passed its maturity date.

Fair Value of Financial Instruments
Fair value measurements recognised in the balance sheet
Investments are valued at fair value as determined using the measurement policies described in note 1. The carrying value of financial assets and financial liabilities recorded at amortised cost, which includes short term debtors and creditors, is considered by the Directors to be equivalent to their fair value.

The Company has categorised its financial instruments that are measured subsequent to initial recognition at fair value, using the fair value hierarchy as follows:

Level 1        Reflects financial instruments quoted in an active market.
Level 2        Reflects financial instruments that have been valued using inputs, other than quoted prices, that are observable.
Level 3        Reflects financial instruments that have been valued using valuation techniques with unobservable inputs.

20 2 2

20 2 1

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

£’000

AIM quoted

298

–

298

321

–

321

Loan notes

–

9,463

–

8,183

Unquoted investments

–

115,075

–

81,591

298

–

124,538

124,836

321

–

89,774

90,095

There have been no movements between levels during the financial year to 28 February 2022.

Reconciliation of fair value for Level 3 financial instruments held at the year end:

	Loan Notes	Unquoted Equity	Total
	£’000	£’000	£’000
Balance at 1 March 2021	8,183	81,591	89,774
Movements in the Income Statement:
Gains in the Income Statement	454	14,732	15,186

Purchases at cost	1,982	26,993	28,975
Sales proceeds Reclassification at value	– (1,156)	(9,397) 1,156	(9,397) -
Balance at 28 February 2022	9,463	115,075	124,538

There is an element of judgement in the choice of assumptions for unquoted investments and it is possible that, if different assumptions were used, different valuations could have been attributed to certain of the VCT’s investments.

5. Post balance sheet events

Between 28 February 2022 and the date of the Annual Report & Accounts, the Company issued 40,595,362 Ordinary Shares for an aggregate consideration of £32.7 million under the combined offer for subscription with ProVen Growth and Income VCT plc which launched on 11 January 2022. Share issue costs thereon amounted to £1.4 million.

In March 2022, there was a part-disposal of the Company’s holding in Zoovu Limited. The Company received £13.1 million in disposal proceeds. Having performed well since the initial investment by the Company in August 2017, Zoovu had been
exploring fundraising options and agreed on an offer which saw the Company sell 70% and roll over the remaining shares at a new valuation, resulting in an overall return of 4.1x on initial cost.

On 14 March 2022, the Company sold its holding in Exonar to NowVertical Group Inc. in return for shares in the acquiror. Nil value is being attributed to these shares.

After the year end, the Company made follow-on investments into CreativeX (£1.0 million), as part of a £20 million funding round, and Mycs (£0.5 million). The Company also made a new investment of £3.7 million into WS HoldCo, PBC, a property technology company.

Between March and May 2022, the Company sold its shares in Netcall plc for an aggregate consideration of £0.2 million.

Rapid Charge Grid repaid £0.6 million of loans to the Company in March 2022. This included £0.1 million in loan note interest.

Announcement based on audited accounts
The financial information set out in this announcement does not constitute the Company's statutory financial statements in accordance with section 434 Companies Act 2006 for the year ended 28 February 2022, but has been extracted from the statutory financial statements for the year ended 28 February 2022, which were approved by the Board of Directors on 9 June 2022 and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The Independent Auditor's Report on those financial statements was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006.

The statutory accounts for the year ended 28 February 2021 have been delivered to the Registrar of Companies and received an Independent Auditors report which was unqualified and did not contain any emphasis of matter nor statements under S498(2) and (3) of the Companies Act 2006.

A copy of the full annual report and financial statements for the year ended 28 February 2022 will be made available to Shareholders shortly. Copies will be available for download from www.provenvcts.co.uk

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