ProVen Growth and Income VCT plc: Annual Financial Report

ProVen Growth and Income VCT plc

Annual Financial Report
Year Ended 28 February 2023

ProVen Growth and Income VCT plc, managed by Beringea LLP, today announces the final results for the year ended 28 February 2023. These results were approved by the Board of Directors on 9 June 2023.

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

Fund Overview

Ordinary Shares as at:	28 February 2023	28 February 2022
Net asset value per Ordinary Share	54.2p	67.3p
Dividends paid since class launch (originally as ‘C’ Shares)	75.4p	70.7p
Total return (net asset value plus dividends paid since ‘C’ Share class launch)	129.6p	138.0p
Year on year change in:
Net asset value per Ordinary Share (adjusted for dividends paid in the year) Dividends paid/payable in respect of year Dividend yield	(12.4)% 3.25p 5.1%	14.3% 4.75p 7.9%

Chair’s Statement
I am pleased to present the Annual Report for ProVen Growth and Income VCT plc (the “Company”) for the year ended 28 February 2023. The financial year under review was impacted by many macroeconomic and geopolitical challenges. Despite this backdrop, your Company delivered several profitable exits. However, the overall portfolio valuation suffered owing to the significant market volatility, with the valuation of three companies being fully written down in the period. This is reflected in a negative total return (net asset value (“NAV”) per share plus dividends) for the year to 28 February 2023.

Results for the year
For the year, there was a negative total return of 12.4%, which was largely attributable to three significant realised losses in the period, namely MYCS, Festicket and Thread, which together accounted for 6.4% of this loss.

The loss on ordinary activities for the year was £23.8 million, or 8.3p per share (2022: profit of £22.4 million, or 9.4p per share), comprising a revenue loss of £1.2 million, or 0.4p per share (2022: revenue loss of £1.4 million, or 0.6p per share) and a capital loss of £22.6 million, or 7.9p per share (2022: profit of £23.8 million, or 10.0p per share). This capital loss was predominantly driven by realised and unrealised losses in the portfolio of £10.9 million and £9.1 million respectively.

Dividends
During the year ended 28 February 2023, the Company paid final and special dividends of 1.5p and 1.75p per share respectively on 5 August 2022 to Shareholders on the register at 15 July 2022. These dividends were paid in respect of the year ended 28 February 2022. The Company also paid an interim dividend in respect of the year ended 28 February 2023 of 1.5p per share on 2 December 2022 to Shareholders on the register at 11 November 2022.

Your Board is proposing a final dividend for the year ended 28 February 2023 of 1.75p per share to be paid on 4 August 2023 to Shareholders on the register on 7 July 2023. The payment of this dividend will result in an equivalent reduction in the Company’s NAV per share.

The total tax-free dividends of 3.25p per share for the year ended 28 February 2023 represents a cash return to Shareholders of 5.1% on the opening NAV per share at 1 March 2022, after deducting the prior year’s final and special dividends of 3.25p per share in total.

Portfolio activity and valuation
The Company invested a total of £21.4 million in the year (2022: £32.7 million), with six new companies added to the portfolio at a cost of £14.9 million, and follow-on investments totalling £6.5 million in nine existing portfolio companies. This active year of investing has provided further diversification to your Company’s investment portfolio and it is pleasing to note that several of the new additions have already shown strong commercial performance since investment, for example, Lucky Saint and Dash. These additions to the portfolio are discussed in more detail in the Investment Manager’s Review.

The Company also saw strong exit activity within the portfolio, with the partial realisation of Zoovu completing at the beginning of the year, followed by the full realisations of Blis, Sealskinz and Firefly. These companies provided a combined profit against initial cost of £20.8 million. After the year end, two further profitable exits occurred, from Monica Vinader and Aistemos.

The financial year began against a backdrop of economic turbulence due to the invasion of Ukraine by Russia, which set in motion a series of macroeconomic challenges. International supply chains, which had only recently shown signs of recovery following the COVID pandemic, faced huge disruption, affecting both businesses and consumers. In addition, inflation increased to levels not seen for decades, caused primarily by a surge in energy prices. Interest rates increased globally in response and there was a general tightening of liquidity in both debt and equity markets.

These challenges had a significant impact across the portfolio, most notably with three write-downs that have been treated as realised losses in these accounts:

MYCS was adversely impacted by loan providers introducing new lending caps in March 2022, coupled with a sharp decline in consumer confidence. These factors prompted the company to merge with another private equity-backed business. As part of this transaction, the Company disposed of its interest in MYCS for a nominal amount, with potential for some proceeds in the future should the buyer secure a sale for the enlarged group;
Festicket, an online platform which packaged festival tickets together with travel, accommodation and add-ons to provide complete festival experiences, was badly impacted by the COVID-19 pandemic, leaving the company with a weakened balance sheet. An erratic reopening of the festival market in 2021, followed by the failure of several festivals in 2022, resulted in highly challenging cash-flow dynamics for Festicket. This led to the company entering administration during the year; and
Thread, a menswear e-commerce site, had been pursuing a high growth strategy, including an entry into the US market, which had delivered a significant increase in revenues since the Company’s investment. However, increased risk-aversion among investors resulted in Thread being unable to raise further capital to fund its high growth strategy, which led to the business entering administration during the year.

The profits and write-downs referred to above reflect the early-stage, high-growth profile of the investments in your Company's portfolio. Early-stage businesses carry inherent risk, meaning that some will be very successful, and some will fail. When substantial write-downs such as these do occur, your Board conducts extensive reviews with the Investment Manager to understand whether there are any learning points to be applied to future investment activities. The risk of individual investments is balanced by your Company’s diversified portfolio of more than fifty companies. Historically, the successes in the Company’s portfolio have significantly outweighed the losses over the medium term, although past performance is not a guide to the future.

The unsettled market conditions also affected the unrealised portfolio, which fell in value by £9.1 million. The valuations of Papier, an online personalised stationery retailer, and Fnatic, an esports organisation, were particularly affected by declining market comparables (used as a basis for valuations), as well as a softening in trading performance, and together account for an unrealised loss in the period of £10.0 million. Apart from these companies, however, performance across the portfolio has generally been satisfactory.

Fundraising activities
As communicated in the Company’s Half Year Report, a combined offer for subscription with ProVen VCT plc launched on 11 January 2022 to raise up to a total of £20 million per company, with an over-allotment facility of up to a further £20 million per company. It closed to further applications on 12 August 2022 with £29.4 million of gross proceeds raised for the Company.

The Company launched a further combined offer for subscription with ProVen VCT plc on 19 October 2022 to raise up to £20 million per company, with an over-allotment facility of £20 million per company. As at the date of the Annual Report, the current offer has raised £8.3 million of gross proceeds for the Company and has been extended to 28 July 2023 (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 should 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 8,929,292 Ordinary Shares at an average price of 58.5p per share and for an aggregate consideration of £5,222,000. This represented 3.5% 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.

However, at 28 February 2023, the relevant performance hurdles were not met and therefore no performance fee is payable for the year under review.

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.

Environmental, Social & Governance (ESG)
The Board notes the Investment Manager’s commitment to ensuring Environmental, Social and Governance (ESG) principles are high on the agenda for the early-stage companies in which your Company invests. 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
The next AGM of the Company will be held at the offices of Beringea LLP, at Charter House, 55 Drury Lane, London, WC2B 5SQ at 10:30am on Wednesday 12 July 2023. Those intending to attend the AGM are asked to register their intention by emailing info@beringea.co.uk in advance of the meeting.

The Board values the opportunity to meet Shareholders in person and I would encourage Shareholders to attend the AGM in person. However, we also understand that attendance in person may not be possible or desirable for all who wish to attend. Therefore, this year, the Company will also offer Shareholders the option to follow proceedings of the meeting online. Any Shareholders who wish to listen to the meeting remotely, should email info@beringea.co.uk for joining instructions.

Please note that Shareholders will not be able to vote or ask questions at the AGM when joining remotely. Shareholders are encouraged, even if they are planning to attend the AGM in person, to exercise their votes by submitting their proxy electronically via their Signal Shares account at www.signalshares.com and to appoint the Chair of the AGM as their proxy with their voting instructions.

Shareholders who wish to submit questions in advance of the AGM may do so via e-mail to info@beringea.co.uk and the Board will respond to questions raised at the meeting.

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, to ask questions of your Board, and to receive insights and updates from the portfolio companies.

During the COVID pandemic these events were conducted virtually. Last year the Investment Manager experimented with a hybrid event. The majority of Shareholders attending last year’s event elected to do so virtually. Consequently, it has been decided that we will revert to hosting a fully virtual event in 2023. This will enable any Shareholder to join without the need for travel into Central London. This has been scheduled for 10:30am to 12.30pm on Thursday, 16 November 2023 and I would encourage you to join us for the session. You can RSVP to events@beringea.co.uk.

VCT 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 extend or remove the Sunset Clause is enacted, income tax relief will no longer be available for new VCT subscriptions made on or after 6 April 2025. The Government announced in September 2022 its commitment to extending the VCT scheme beyond 2025, which the Company welcomed in its Half Year Report and continues to do so.

No further details of how the removal of the Sunset Clause will be enacted have been announced to date. The VCT industry, along with other influential bodies such as the BVCA, continues to press the Government to implement the removal of the Sunset Clause as soon as possible, in order to ensure that VCTs are able to continue their support for early-stage UK companies.

Another development worthy of note is that HMRC has recently started to adopt a stricter interpretation of the Financial Health Test. This is a test in the VCT legislation designed to ensure that VCT funds are only invested in companies of adequate financial health. In the opinion of your Board and the Investment Manager, HMRC’s new interpretation of this test is too rigorous, and is preventing VCTs from providing follow-on funding to some existing portfolio companies. The VCT industry, through the Venture Capital Trust Association, has made representations to HMRC to highlight the potentially damaging effect that their new interpretation of this test is having on UK scale-up businesses.

Consumer Duty
The Financial Conduct Authority (FCA) has established a new consumer duty (the ‘Consumer Duty’), which will come into force in July 2023 for products and services open to retail customers. The Consumer Duty sets higher and clearer standards of consumer protection across financial services, and requires firms to put their customers’ needs first.

VCTs are not directly subject to the new Consumer Duty. However, the Investment Manager as an FCA-regulated firm, is subject to the Consumer Duty and has completed a Consumer Duty review in advance of the new rules coming into effect later this year. The Consumer Duty highlights the FCA’s drive to protect the interests of retail customers and the Board will be monitoring the actions put in place by the Investment Manager to ensure our Shareholders continue to be put at the heart of our business.

Unsolicited Communication with Shareholders
While we are not aware of any instances in the last year, we have in prior years been informed that some Shareholders in ProVen Growth and Income VCT plc have received unsolicited phone calls, 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. 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
While it is disappointing to report a loss for the year under review, your Board is encouraged by the resilience shown by most companies within the portfolio. Despite a very challenging operating environment, most companies in the portfolio have continued to grow their revenues, and exit activity has shown the potential of the portfolio to deliver positive returns in spite of economic headwinds.

At the time of writing there are mixed signals from the economy, with a recession avoided to date but inflation remaining stubbornly high and interest rates likely to rise further. Despite this, the ambitious entrepreneurs in your Company’s portfolio continue to seek out and take advantage of growth opportunities. Your Investment Manager continues to work closely with and support the leadership teams at investee companies to help them navigate the challenges and opportunities of scaling their businesses.

Looking ahead, your Board anticipates that the next twelve months will continue to be challenging but hopes to see some of the economic pressures easing. We remain confident that the Company’s large and diverse portfolio will yield solid growth over the medium-term, and the Investment Manager will continue to identify attractive new investment opportunities to bring into the portfolio, enabling the Company to deliver the target returns to Shareholders.

Marc Vlessing OBE
Chair

Investment Manager’s Review
We are pleased to present our annual review for the year ended 28 February 2023. Through a year that was characterised by economic and geopolitical disruption, the investment rate remained strong with a total of £21.4 million deployed into six new and nine existing portfolio companies. However, challenging market conditions led to the write-downs of three significant holdings, and portfolio valuations overall were tempered by declining market comparables.

The year also saw a good run of investment realisations, with aggregate disposal proceeds of £30.6 million resulting in realised gains over cost of £14.5 million. Against a backdrop of economic uncertainty, this demonstrated the strength of the investment portfolio and the potential for continued returns. Furthermore, the Company completed two more exits shortly after the end of the financial year, with the sales of Monica Vinader and Aistemos completing in March 2023 and returning 11.8x and 1.7x on cost respectively.

However, despite the profits realised on exits during the year, three significant losses, namely MYCS, Festicket and Thread, contributed to a net realised loss for the year of £10.9m, and a total loss of £23.8 million.

At 28 February 2023, the Company’s venture capital portfolio comprised 52 investments at a cost of £114.8 million and a valuation of £116.2 million, an overall increase of 1.2% on cost.

Since the year end, the Company has issued 7,144,716 Ordinary Shares for an aggregate gross consideration of £4.0 million under the combined offer for subscription with ProVen VCT plc which launched on 19 October 2022. Net proceeds for the Company after share issue costs were £3.8 million. This, coupled with the previous offer, means the Company remains well capitalised to take advantage of new investment opportunities and to support existing portfolio companies where appropriate.

Investment activity
New investments
After a record year for new investments in the previous financial year, a high volume of deal flow continued in the period, with a strong pipeline of opportunities translating into £14.9 million of investment into six new portfolio companies in the year. More details on the four largest new investments are given below.

The largest investment in the period was made in June 2022 in WiredScore (£3.5 million), a company that assesses, certifies and improves digital connectivity and smart technology in offices and homes globally.

In December 2022 the Company invested £3.3 million into Dash, a leading brand of sparkling zero-calorie seltzer water infused with flavours from real fruit.

Two further new investments were made in August 2022 for £2.2 million each:

Chattermill, a cloud-based customer experience management solution that helps businesses collect, manage and analyse customer feedback across chats, emails, app store reviews, surveys, social interactions and other channels; and
Lucky Saint, an award-winning alcohol-free beer company.

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

In April 2022, the Company invested £1.2 million into CreativeX as part of a $25m funding round. CreativeX helps marketers measure their digital content against four indicators of long-term brand growth: creative quality, brand consistency, compliance, and representation.

The Company also invested £1.0 million in July 2022 into each of Social Value Portal and Second Nature to support their continued growth. A further £1.0 million was invested into Litta in December 2022.

Other follow-on investments were made in Lumar (formerly Deepcrawl) (£734,000), MYCS (£551,000), Arctic Shores (£459,000), Commonplace (£370,000) and Plum Guide (£88,000).

Investment disposals
The Company experienced an increase in exit activity during the previous financial year and this continued through to 28 February 2023, as detailed below.

In March 2022, there was a partial disposal of the Company’s holding in Zoovu. The Company received proceeds of £17.5 million, a return of 5.1x against the cost of the shares sold. Having performed well since the initial investment by the Company in August 2017, Zoovu had been exploring options for additional fundraising. It agreed on an offer which saw the Company sell 70% of its holding and roll over its remaining shares. Zoovu also raised additional primary capital to fund further expansion as part of the transaction.

In June 2022, the Company disposed of its entire holding in Blis for proceeds of £7.2 million, in a transaction with Lloyds Development Capital. This resulted in a return against cost of 6.7x.

In November 2022, the Company exited Sealskinz for proceeds of £3.9 million and a return against cost of 1.2x. In January 2023 the Company’s full holding in Firefly Learning was sold for initial proceeds of £0.7 million and the potential for further proceeds in the future.

Unfortunately, MYCS was heavily impacted by adverse market conditions. Following the Russian invasion of Ukraine there was a sharp decline in consumer confidence in the company’s key markets and therefore a slowdown in sales. MYCS’ lenders also introduced new caps on the amount they would advance at the end of March 2022. These two developments led to the company merging with another private equity-backed business. As part of this transaction, the Company disposed of its interest in MYCS for a nominal amount, with potential for some additional proceeds in the future should the buyer secure a sale for the enlarged group. During the year the Company also disposed of its holding in Exonar which had been fully written down in a prior year.

Key developments at existing portfolio companies
The financial year opened with economic turbulence due to the invasion of Ukraine by Russia, which at the time of writing is still ongoing. In addition, inflation increased to levels not seen for decades, with interest rates rising globally in an attempt to moderate this inflation. The valuations of many quoted technology stocks have also declined significantly during a period of correction following the high valuations seen over the last few years.

These factors have had varying levels of impact across the portfolio, most notably with significant write-downs in the valuation of two companies during the period under review, which combined resulted in £7.5 million in realised losses for the Company.

Festicket, an online platform which packaged festival tickets together with travel, accommodation and add-ons to provide complete festival experiences, was badly impacted by the COVID pandemic, leaving the company with a weakened balance sheet. An erratic reopening of the festival market in 2021, followed by the failure of several festivals in 2022, resulted in highly challenging cash-flow dynamics for Festicket. This led to the company entering administration during the year.

Thread, a menswear e-commerce site, had been pursuing a high growth strategy, including an entry into the US market, which had delivered a significant increase in revenues since the Company’s investment. However, increased risk-aversion among investors led to Thread being unable to raise further capital to fund its high growth strategy, which led to the business entering administration during the year.

These two companies have been recognised as realised losses in the Company’s income statement due to them both entering administration during the year.

The valuations of Papier, an online personalised stationery retailer, and Fnatic, an esports organisation, were particularly affected by declining market comparables, as well as a softening in trading performance, and together account for an unrealised loss in the period of £10.0 million. The valuation of Zoovu also fell (decrease of £2.5 million) owing to lower market comparables. Elsewhere in the portfolio, despite the challenges noted above, most companies showed resilience in trading performance during the year.

Notable increases in valuation in the year were seen in Asterra (increase of £2.1 million), Cogora (increase of £1.5 million) and Social Value Portal (increase of £1.5 million). All increases were due to robust trading performance outweighing the impact of weakening market comparables.

Other News & Developments
Portfolio Value-Add Initiative
The Investment Manager’s Portfolio Value-Add Initiative, aimed at supporting companies in overcoming barriers to growth and harnessing commercial opportunities, has developed further in the past year. The initiative is led by Harry Thomas, the Manager’s Portfolio Director, with support from Vanessa Evanson-Goddard (General Counsel), and Henry Philipson (Director of Marketing and Communications). Together, the team provides both ad-hoc and structured support on a range of topics from recruitment to marketing and fundraising.

The Beringea Scale-Up Academy is one of the primary pillars of the Value-Add Initiative, offering a year-round programme of events for portfolio leadership teams. In 2022, the Academy delivered ten webinars to portfolio company senior managers, providing valuable insight and training on topics such as pricing strategy, accessing R&D tax credits, and hiring.

The Investment Manager’s Portfolio Value-Add Initiative also offers a range of services to support portfolio companies in their growth journey. These services include: identifying existing and potential service providers and negotiating group discounts; establishing a central database of information and contacts related to key operational and strategic concerns for companies; hosting in-person and online events for sharing knowledge and ideas; building relationships with external stakeholders, including investors, customers and suppliers; helping to identify potential acquisition or exit opportunities; and encouraging companies to consider and adopt ESG initiatives.

Environmental, Social and Governance
The Investment Manager has further expanded its initiatives focused on driving improved performance across environmental, social and governance (“ESG”) factors.

To evaluate impact and improvement in its internal operations, the Investment Manager has developed an ESG committee responsible for assessing and strengthening the firm’s approach to sustainability, diversity and inclusion, and governance. The Manager has performed particularly strongly in its diversity-focused initiatives, and it is now certified as a Level 2 firm under the Diversity VC Standard, an industry accreditation for diversity and inclusion best practice. The Investment Manager is also a signatory of the Investing in Women Code, submitting annual data on the diversity of companies in the portfolio and investment pipeline.

The Investment Manager’s ongoing role as Chair of ESG_VC, an industry initiative that brings together more than 200 leading VC firms across the UK and Europe, has also provided valuable opportunities for the firm and the portfolio. As a result of its pivotal role within ESG_VC, the Investment Manager was shortlisted among the leading firms for ESG in venture capital at the Real Deals Awards 2022, and Henry Philipson, Director of Marketing and Communications, was named among the Future 40 ESG Innovators.

Post year end developments

Between 28 February 2023 and the date of this report, the Company issued 7,144,716 Ordinary Shares for an aggregate consideration of £4.0 million under the combined offer for subscription with ProVen VCT plc which launched on 19 October 2022. Share issue costs thereon amounted to £0.2 million.

In March 2023, the Company disposed of its holding in Monica Vinader for initial proceeds of £2.4 million, representing an 11.8x return on cost, with potential for future proceeds. A strong performer in the Company’s portfolio for several years, Monica Vinader had been exploring funding options and agreed a strategic sale to Bridgepoint Development Capital IV. After originally investing in Monica Vinader in 2010, the Company sold 60% of its holding in February 2016 for proceeds of £2.0 million and a multiple on cost of 5.2x.

The Company also disposed of its holding in Aistemos in March 2023, with proceeds of £2.9 million, representing a multiple on cost of 1.7x.

Outlook
Despite signs that inflation and energy prices are stabilising, the outlook for the UK economy, and indeed the global economy, continues to be uncertain. While some economic constraints may begin to loosen, there are still challenges ahead as evidenced by the turbulence seen recently in the global banking sector.

Your Company backs young, growing companies, a contingent that can be particularly affected by an unsettled economic environment. Conversely though, smaller companies tend to be agile and innovative, and therefore able to navigate challenges quickly and effectively, and this has been demonstrated in several portfolio companies over the year. We continue to work closely with our portfolio companies to support them through challenges as they arise. Proceeds from the current and previous offers, as well as from successful exit activity over the last twelve months, means we are well placed to provide further investment to the portfolio where appropriate.

We also continue to look for compelling new investment opportunities, and we are well placed to take advantage of these when they arise. Given recent market dynamics, however, we expect the rate of new investment in the current year to be lower than in the year to 28^th February 2023.

Beringea LLP
Investment Manager

Investment activity

Investment activity during the year is summarised as follows:

Additions

	Cost £’000

WS HoldCo, PBC (t/a WiredScore)	3,494
Dash Brands Ltd	3,282
Not Another Beer Co Ltd (t/a Lucky Saint)	2,202
Chattermill Analytics Limited	2,199
Gorillini NV (t/a Gorilla)	1,949
Doctify Limited	1,778
Picasso Labs, Inc. (t/a CreativeX)	1,185
Second Nature Healthy Habits Ltd	1,042
Social Value Portal Ltd	1,042
Litta App Limited	990
DeepCrawl Holding Company, Inc. (t/a Lumar)	734
Mycs GmbH	551
Arctic Shores Limited	459
Commonplace Digital Limited	370
Plu&m Limited (t/a Plum Guide)	88
Total	21,365

The total cost of additions in the year of £21,365,000 as shown above is lower than the ‘Purchase of investments’ cashflow figure of £21,359,000 as recorded in the Statement of Cash Flows due to £6,000 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 £’000	Market value at 01/03/22 £’000	Disposal proceeds £’000	Realised gain/ (loss) against cost £’000	Realised gain/ (loss) during the year £’000
Zoovu Limited (t/a SmartAssistant)	3,449	17,471	17,464	14,015	(7)
Blis Global Ltd	1,083	6,138	7,246	6,163	1,108
Firefly Learning Limited	857	959	737	(120)	(222)
Sealskinz Holdings Limited	3,116	3,116	3,882	766	766
Lupa Foods Limited	357	464	464	107	-
Rapid Charge Grid Limited	220	220	220	-	-
Contact Engine	-	-	41	41	41
Netcall plc	324	335	279	(45)	(56)
InSkin	-	-	119	119	119
Response Tap	-	-	78	78	78
D30	-	-	34	34	34
Exonar Limited	1,602	-	-	(1,602)	-
Mycs GmbH	5,038	6,001	(2)	(5,040)	(6,003)
Total	16,046	34,704	30,562	14,516	(4,142)

Of the disposals above, ContactEngine Limited, Response Tap Limited, InSkin Media Limited and D30 Holdings Limited 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 Blis Global Ltd and Firefly Learning Limited include amounts of deferred proceeds which have been recognised in these accounts but have not yet been received.

Total disposal proceeds of £30,562,000 as shown above is higher than the ‘Sale of investments’ cashflow figure of £30,468,000 as recorded in the Statement of Cash Flows. The difference arises due to a deferred proceeds debtor of
£632,000 held at the year end, partly offset by a loan repayment debtor of £538,000 at the previous year end which was received in the year under review.

Investment Portfolio
As at 28 February 2023
The following investments were held at 28 February 2023:


			Valuation	% of
	Cost	Valuation	movement in year	portfolio by value
	£’000	£’000	£’000
Venture capital investments (by value)
Picasso Labs, Inc. (t/a CreativeX)	4,546	10,794	(1,336)	6.7%
Luxury Promise Limited	6,020	8,268	(1,477)	5.1%
Social Value Portal Ltd	2,542	5,012	1,454	3.1%
Been There Done That Global Limited	3,149	4,825	1,190	3.0%
Papier Ltd	4,703	4,703	(5,524)	2.9%
DeepCrawl Holding Company, Inc. (t/a Lumar)	4,033	4,600	241	2.9%
MPB Group Limited	1,194	4,561	339	2.8%
Utilis Israel Ltd (t/a Asterra)	2,144	4,384	2,136	2.7%
Infinity Reliance Limited (t/a My 1st Years)	2,769	3,974	(645)	2.5%
Second Nature Healthy Habits Ltd	3,842	3,842	(179)	2.4%
WS HoldCo, PBC (t/a WiredScore)	3,494	3,627	133	2.2%
Dash Brands Ltd	3,282	3,282	-	2.0%
Arctic Shores Limited	2,909	3,026	117	1.9%
Aistemos Limited	1,681	2,852	1,173	1.8%
Litchfield Media Limited*	1,420	2,737	1,118	1.7%
Monica Vinader Limited**	204	2,687	(349)	1.7%
Lupa Foods Limited	646	2,597	1,058	1.6%
Zoovu Limited (t/a SmartAssistant)	847	2,579	(2,462)	1.6%
Commonplace Digital Limited	1,870	2,573	185	1.6%
Sannpa Limited (t/a Fnatic)	6,718	2,376	(4,518)	1.5%
YardLink Ltd	2,319	2,319	-	1.4%
Dealroom.co B.V.	2,012	2,255	287	1.4%
EMS Operations Ltd (t/a Archdesk)	2,234	2,234	-	1.4%
Not Another Beer Co Ltd (t/a Lucky Saint)	2,202	2,202	-	1.4%
Chattermill Analytics Limited	2,199	2,199	-	1.4%
Litta App Limited	2,053	2,052	(1)	1.3%
Gorillini NV (t/a Gorilla)	1,949	1,958	9	1.2%
Access Systems, Inc.	1,783	1,935	(66)	1.2%
Cogora Group Limited**	1,320	1,851	1,539	1.1%
Doctify Limited	1,778	1,778	-	1.1%
Stylescape Limited (t/a EDITED)	1,500	1,734	(158)	1.1%
DeepStream Technologies Limited	2,744	1,638	(1,106)	1.0%
Enternships Limited (t/a Learnerbly)	1,575	1,575	-	1.0%
CG Hero Ltd	1,249	1,249	-	0.8%
Moonshot CVE Ltd	1,112	1,178	(96)	0.7%
Plu&m Limited (t/a Plum Guide)	2,851	1,148	(1,702)	0.7%
Andcrafted Ltd (t/a Plank Hardware)	1,087	1,087	-	0.7%
Rapid Charge Grid Limited*	933	799	23	0.5%
Disposable Cubicle Curtains Limited (t/a Hygenica)**	3,561	529	(10)	0.3%
Simplestream	690	465	(310)	0.3%
	95,164	115,484	(8,937)	71.7%
Other venture capital investments	19,623	679	(6,973)	0.4%
Total venture capital investments	114,787	116,163		72.1%
Cash at bank and in hand		45,058		27.9%
Total Investments		161,221		100.0%

Valuation movement in the year excludes the cost of investments made in the year. Other venture capital investments at 28 February 2023 comprise:

Buckingham Gate Financial Services Limited, , Dryden Holdings Limited*, Festicket Ltd, Honeycomb.TV Limited*, InContext Solutions Limited, Lantum Limited, Poq Studio Ltd, Thread, Inc., Senselogix 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.

All venture capital investments are unquoted.

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

Strategic Report
The Directors present the Strategic Report for the year ended 28 February 2023. 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 2023 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 £145.4 million of venture capital investments and ended with £116.2 million spread over a portfolio of 52 companies. Of these companies, 49 investments with a value of £112.9 million were VCT qualifying (or part qualifying).

The loss on ordinary activities after taxation for the year was £23.8 million, comprising a revenue loss of £1.2 million and a capital loss of £22.6 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. Recurring operational expenses for the year ended 28 February 2023, excluding trail commission of £180,000, were £4,011,000, and the average net assets over the year were £168,944,000. Therefore, the Ongoing Charges ratio in respect of the year ended 28 February 2023 was 2.4% (2022: 2.4%) and was within the Company’s cap of 3.6%.

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 in 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 2023, was equal to £161.1 million (2022: £169.6 million). There are no plans for the Company to borrow at the current time.

Maximum exposures
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 document. This investment policy is in line with Chapter 15 of the Listing Rules and Part 6 Income Tax Act 2007.

Venture capital trust regulations
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 2023 and for the year then ended is summarised as follows:

(i) 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
(ii) 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
(iii) the Company’s ordinary share capital has throughout the period been listed on a regulated European market;	Complied
(iv) no investment in a company constitutes more than 15 per cent. of the Company’s portfolio (by value at time of investment);	Complied
(v) the Company’s income for each financial year is derived wholly or mainly from shares and securities;	Complied
(vi) 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
(vii) the Company has not made a prohibited payment to Shareholders derived from an issue of shares since 6 April 2014;	Complied
(viii) 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
(ix) since 18 November 2015, the Company has not made an investment in a company which exceeds the maximum permitted age requirement;	Complied
(x) the funds invested by the Company in another company since 18 November 2015 have not been used to make a prohibited acquisition;	Complied
(xi) since 6 April 2016, the Company has not made a prohibited non-qualifying investment; and (xii) 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 the 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 £3,444,000 (2022: £5,386,000), comprising a management fee of £3,444,000 (2022: £3,256,000) and performance incentive fees as described below of £nil (2022: £2,130,000). At the year end, an amount of £nil (2022: £2,130,000) 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 2023, Beringea also provided administration services to the Company. In the year, total administration fees amounted to £63,000 (2022: £58,000).

The annual running costs (excluding any performance fees payable) of the Company are subject to a cap of 3.6% 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 £305,000 (2022: £348,000) and director and monitoring fees of £501,000 (2022: £605,000) during the year ended 28 February 2023. 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 Investment Manager in respect of a Relevant Offer does not exceed 20% of the relevant cumulative dividends paid in respect of that share; ii) the cumulative performance fee per share payable to the Investment Manager in respect of a Relevant Offer does not exceed 50% of the amount by which the Relevant Offer Performance Value exceeds the Relevant Offer Hurdle; and iii) 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 2023 amounted to £nil (2021: £2,130,000).

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;
• change in net asset value per share (adjusted for dividends paid in the year)*;
• ongoing charges ratio*; and
• VCT compliance.

*Classified as an APM.

The total return is calculated by 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 movement in net asset value per share, dividends paid in respect of each year and the dividend yield.

	28/02/2019	29/02/2020	28/02/2021	28/02/2022	28/02/2023
Total return	129.3	123.0	129.2	138.0	129.6
Change in net asset value per share (adjusted for dividends paid in the year)¹
Opening NAV per share (p)	72.1	68.4	58.6	61.5	67.3
Closing NAV per share (p)	68.4	58.6	61.5	67.3	54.2
(Decrease)/increase in NAV per share (p)	(3.7)	(9.8)	2.9	5.8	(13.1)
Dividends paid per share in the year (p)	6.5	3.5	3.3	3.0	4.75
Increase/(decrease) in NAV per share (adjusted for dividends paid in the year) (p)	2.8	(6.3)	6.2	8.8	(8.35)
Increase/(decrease) in NAV per share (adjusted for dividends paid in the year) (%)	3.9%	(9.2)%	10.6%	14.3%	(12.4)%
Dividends
Opening NAV per share (p)	72.1	68.4	58.6	61.5	67.3
Less: final/special dividend(s) paid per share in relation to prior year (p)	2.5	2.0	1.75	1.5	3.25
Adjusted opening NAV per share (p)	69.6	66.4	56.85	60.0	64.05
Dividends paid and payable in respect of year(p)
Dividends paid per share	6.5	3.25	3.0	4.75	3.25
Dividend yield²	9.3%	4.9%	5.3%	7.9%	5.1%

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 respect of the financial year divided by the opening net asset value, adjusted for the final dividend paid in respect of the previous year.

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.

Risk and risk management
The Board carries out a regular review of the risk environment in which the Company operates, and reviews the mitigating controls and actions applicable to those risks. In the period the most noticeable change to the risks faced by the Company have been as a result of the economic turbulence due to the invasion of Ukraine by Russia and rising interest rates and inflation globally. The full impacts of these risks are likely to continue to be uncertain for some time.

Emerging risks
The Board also discusses emerging risks as they arise and puts in place appropriate procedures to monitor and, where possible, mitigate the effects of these emerging risks on the Company and the portfolio. The following are some of the potential emerging risks the Investment Manager and the Board are currently monitoring:

• adverse changes in global macroeconomic environment; and
• geo-political instability.

Principal risks

Risk	Mitigation	Change during period
Investment risk By nature, companies that qualify for venture capital trust purposes have a higher level of risk than larger quoted companies and poor performance could reduce returns for Shareholders through downward valuations.	The Directors place reliance on the Investment Manager’s experience and expertise in adding new companies to the portfolio. The Investment Manager has a rigorous and robust formal process in selecting new companies which includes financial and legal due diligence and review by an Investment Committee made up of senior investors, whilst also drawing on the expertise of the Directors. In addition, a member of the Manager’s team is usually appointed to the board of each portfolio company on investment. The Board reviews the investment portfolio and its performance at least on a quarterly basis.	Increased due to the economic and geopolitical disruption referred to above.
VCT qualifying status A breach of the VCT rules and loss of approval as a VCT could lead to Shareholders losing tax benefits associated with VCT investments.	VCT qualification monitoring reports are prepared by the Administration Manager and approved by the Board on a quarterly basis. On a bi-annual basis, the Company’s VCT status adviser reports to the Audit Committee in relation to compliance with the VCT legislation. The report for the year ended 28 February 2023 showed compliance with all aspects of the VCT regulations. The Investment Manager regularly liaises with the Company’s VCT status adviser in relation to VCT qualification on individual investments and addresses any recommended actions to ensure compliance.	No change
Valuation The companies within the portfolio are valued in accordance with the International Private Equity and Venture Capital (IPEV) guidelines but establishing fair value can be difficult and is reliant on the accuracy and completeness of information provided.	The unquoted investment valuations are prepared by the Investment Manager and agreed by the Board on a quarterly basis although new valuations may be prepared and agreed as required in the event of a material movement in the valuations. On an annual basis, at the year end, the Company’s Auditor, BDO LLP, reports to, and discusses with, the Audit Committee their findings and any concerns arising from their review of the investment valuations.	Increased due to the economic and geopolitical disruption referred to above.
Legislative and Regulatory The Company operates in a complex regulatory environment, failure to comply could lead to suspension from the Stock Exchange, penalties and damage to the Company’s reputation. A change in VCT regulation could also restrict the ability for the Company to invest.	The Investment Manager ensures that it hires suitably qualified members of staff who are experienced with regulatory requirements and relevant accounting standards and the Investment Manager and the Company Secretary have procedures in place to ensure recurring Listing Rules requirements are met. Legislative and regulatory developments are also kept under review with the Company’s solicitor and specialist compliance consultants. The Investment Manager is also a member of the Venture Capital Trust Association which engages with the Government to help shape future legislation.	No change
Economic Economic changes such as the war in Ukraine, higher interest rates, economic recession, social upheaval from events such as COVID and Brexit and change in Government could affect trading conditions for smaller companies and consequently the value of the Company’s qualifying investments.	The Board and Investment Manager continuously assess the resilience of the portfolio, and ongoing discussions and planning are held with the portfolio companies to provide assistance and support, particularly during periods of economic uncertainly. The Company has a clear investment policy and a diversified portfolio operating in a range of sectors which helps to mitigate against sector specific impacts. Additionally, ensuring adequate liquidity to cope with unexpected pressures on the finances of the portfolio and allow the Company to make follow-on investments where suitable is an important part of the risk mitigation in times of economic uncertainty.	Increased due to the high levels of inflation, rising interest rates and the geopolitical risks from the invasion of Ukraine.
Operational The Company is reliant on a number of third parties, in particular the Investment Manager, for management and administration services. Failure of the operational systems and controls of third parties could result in an inability to provide accurate reporting and monitoring.	The Investment Manager has a documented business continuity plan, which provides for back-up services in the event of a system breakdown. The Investment Manager’s systems are protected against viruses and other cyber-attacks and appropriate insurances are maintained. The Board reviews the performance of all service providers at least annually and the Investment Manager conducts due diligence on all new service providers to ensure that third parties have adequate operational systems in place.	No change
Cyber security & IT Outsourcing and the increase in remote working could give rise to cyber and data security risk. Failure in key IT systems and controls might lead to business interruption, loss of data or loss of access to systems.	The Investment Manager has significant cybersecurity controls, including two factor authentication, email protection software, monitored firewalls and staff regularly receive training in relation to their cybersecurity obligations. Due diligence is conducted on service providers including a review of controls, to reduce the risk of business interruption due to insufficient cyber security controls of third parties. The Investment Manager has a robust cyber insurance to ensure that financial liabilities are mitigated in the event of a cyber-attack.	No change
ESG Failure to comply with current and future requirements and recommended practices could result in reduced investor attraction which may affect the level of capital the Company has available to meet its investment objectives.	The Investment Manager has further expanded its initiatives focused on driving improved performance across environmental, social and governance (“ESG”) factors, both internally and across the portfolio. To evaluate impact and improvement in its internal operations, the Investment Manager has developed an ESG committee responsible for assessing and strengthening the firm’s approach to sustainability, diversity and inclusion, and governance.	No change
Foreign exchange The Company has made a number of its initial investments in a foreign currency; most often in Euros or US Dollars. Furthermore, 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 Investment Manager and the Board regularly review the exposure to foreign currency movement to make sure the level of risk is appropriately managed. Investments are primarily made in GBP, EUR and USD so exposure is limited to a small number of currencies. On realisation of investments held in foreign currencies, cash is translated to GBP shortly after receiving the proceeds to limit the amount of time exposed to foreign currency fluctuations.	No change
Liquidity The Company invests into smaller unquoted companies, which are inherently illiquid as there is no readily available market for these shares. Therefore, these may be difficult to realise for their fair market value at short notice.	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. 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.	No change

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. In its assessment of the Company’s activities as a going concern, the Board has reviewed the risks to future performance and considered the potential impacts of those on the Company’s future ability to continue as a going concern. The Company’s cash resources are currently healthy, and the portfolio of investments is diverse and not reliant on any one sector. All significant cash outflows, including dividends, share buybacks and investments, are all within the Company’s control. Therefore, the Board expects that the Company has sufficient cash resources to withstand any reasonable stress scenario, for example if the Company was unable to raise further funds, and believes that it is appropriate to continue to adopt the going concern basis of accounting in preparing these financial statements.

Viability statement
The Board has assessed the Company’s prospects over the three-year period to 28 February 2026. 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 current economic landscape 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 2026, 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. The Board has also considered stress scenarios whereby no proceeds upon the realisation of investments are received and no further funds are raised.

Based on the assessment of the above considerations on the cash flow forecasts and stress scenarios, 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 2026.

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 as a hybrid event on 16 November 2022 and attended by approximately 200 Shareholders and which gives Shareholders the opportunity to ask questions of the Board and the Investment Manager and hear from some of the Company’s portfolio companies. Following the success of last year’s event and our previous virtual events, plans are in motion for a virtual event in 2023, allowing the maximum number of Shareholders to attend. The event has been scheduled for 10.30am to 12.30pm on Thursday, 16 November 2023.

The Board also encourages all Shareholders to attend and vote on the resolutions proposed at the Annual General Meeting, which this year will be held at 10:30am on Wednesday 12 July 2023 at the offices of Beringea LLP, at Charter House, 55 Drury Lane, London WC2B 5SQ. We are pleased to report that this year the Company will also offer Shareholders the option to follow proceedings of the meeting online. Please note that Shareholders will not be able to vote or ask questions at the AGM when joining remotely and therefore Shareholders are encouraged to vote electronically before the deadline of 10:30am on 10 July 2023.

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 Shareholder 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.

The Board recognises the value of the buyback scheme and approves the level of buyback authority on a quarterly basis within the maximum authority provided by the Shareholders annually at the AGM. The buyback policy has been offered to Shareholders throughout the period under review, providing Shareholders with liquidity should they wish to sell their shares.

The Board also understands the importance of tax free dividends to Shareholders and takes this into consideration when making the decision to pay dividends to Shareholders. During the period under review, the Company paid an interim dividend in respect of the year ended 28 February 2023 of 1. 5p per share on 2 December 2022 and is proposing a final dividend for the year ended 28 February 2023 of 1.75p per share to be paid on 4 August 2023 to Shareholders on the register on 7 July 2023. The total tax-free dividends of 3.25p per share for the year ended 28 February 2023 represents a cash return to Shareholders of 5.1% on the opening NAV per share at 1 March 2022 (after deducting the prior year’s final and special dividends of 3.25p per share in total). This cash return is in line with the target dividend yield of 5% per annum which, although not guaranteed, when achieved can provide predictable income returns and create value for Shareholders. The Board is not proposing a special dividend for the year ended 28 February 2023, principally due to the level of realised losses during the year.

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 boards of most of our material portfolio companies. The Investment Manager’s Portfolio Value-Add Initiative has developed further in the past year, supporting companies in overcoming barriers to growth and harnessing commercial opportunities. The initiative is led by Harry Thomas, the firm’s Portfolio Director, with support from Vanessa Evanson-Goddard (General Counsel), and Henry Philipson (Director of Marketing and Communications). Together, the team provides both ad-hoc and structured support on a range of topics from recruitment to marketing and fundraising.

Environmental, 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 need for the Company and the businesses within its portfolio to embrace environmental, social and governance (“ESG”) practices. The Investment Manager has played a pivotal role in the creation of ESG_VC and its development of a standardised framework for evaluating ESG within early-stage companies, which has been endorsed by the British Private Equity and Venture Capital Association (BVCA). Completing the ESG_VC Measurement Framework is now part of the annual reporting requested from members of the ProVen VCTs’ portfolio, it is used as part of the onboarding of new investments, and it is used to inform resources and events for the portfolio.

The Investment Manager’s ongoing role as Chair of ESG_VC, which now brings together more than 200 leading VC firms across the UK and Europe, has also provided valuable opportunities for the firm and the portfolio. As a result of its role within ESG_VC, the Investment Manager was shortlisted among the leading firms for ESG in venture capital at the Real Deals Awards 2022, and Henry Philipson, Director of Marketing and Communications, was named among the Future 40 ESG Innovators.

To evaluate impact and improvement in its internal operations, the Investment Manager has an ESG committee responsible for assessing and strengthening the firm’s approach to sustainability, diversity and inclusion, and governance. The firm has performed particularly strongly in its diversity-focused initiatives, and it is now certified as a Level 2 firm under the Diversity VC Standard, an industry accreditation for diversity and inclusion best practice. The Investment Manager is also a signatory of the Investing in Women Code, submitting annual data on the diversity of companies in the portfolio and investment pipeline.

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, two of whom are male and two of whom are 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. The Directors’ remuneration policy that was approved at the AGM of the Company on 14 July 2021 received the following votes at that AGM:

Voting	Votes received	Percentage
Votes for	8,719,931	90.07%
Votes for – discretion	488,989	5.05%
Votes against	472,666	4.88%
Votes received	9,681,586	100.00%
Votes withheld	293,992

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. As noted in the Chair's Statement, unless legislation to extend or remove the Sunset Clause is enacted, income tax relief will no longer be available for new VCT subscriptions made on or after 6 April 2025. However, the Government announced in September 2022 its commitment to extending the VCT scheme beyond 2025, and the Directors look forward to receiving details from the Government in due course of how the removal of the Sunset Clause will be enacted.

By order of the Board

Beringea LLP
Company Secretary of ProVen Growth and Income VCT plc

Directors’ responsibilities
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 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 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 UK 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 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 28 February 2023

Year ended 28 February 2023

Year ended 28 February 2022

Revenue

Capital

Total

Revenue

Capital

Total

£’000

Income

383

–

383

122

–

122

Realised (losses) / gains on investments

–

(10,907)

–

5,113

Unrealised (losses) / gains on investments

–

(9,143)

–

23,340

383

(20,050)

(19,667)

122

28,453

28,575

Investment management fees

(861)

(2,583)

(3,444)

(814)

(2,442)

(3,256)

Performance incentive fees

–

(2,130)

Other expenses

(746)

(1)

(747)

(743)

(6)

(749)

FX Translation

–

(Loss)/return on ordinary activities before tax

(1,224)

(22,634)

(23,858)

(1,435)

23,875

22,440

Tax on ordinary activities

–

(Loss)/return attributable to equity shareholders

(1,224)

(22,634)

(23,858)

(1,435)

23,875

22,440

Basic and diluted (loss)/return per share

(0.4p)

(7.9p)

(8.3p)

(0.6p)

10.0p

9.4p

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 28 February 2023

	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 2022	4,081	190	40,200	76,198	38,737	15,206	(5,048)	169,564
Comprehensive Income for the year:
Management fees allocated as capital expenditure	–	–	–	–	–	(2,583)	–	(2,583)
Legal fees allocated as capital expense	–	–	–	–	–	–	–	–
Realised loss on investments	–	–	–	–	–	(10,907)	–	(10,907)
Unrealised loss on investments	–	–	–	–	(9,143)	–	–	(9,143)
Loss after tax	–	–	–	–	–	–	(1,224)	(1,224)
Total comprehensive loss	–	–	–	–	(9,143)	(13,490)	(1,224)	(23,857)

Contributions by and distributions to owners:
Issue of new shares (includes DRIS) (net of share issue costs)	878	–	(1,423)	34,906	–	–	–	34,361
Share buybacks	(145)	145	(5,248)	–	–	–	–	(5,248)
Dividends paid (includes DRIS)	–	–	(13,752)	–	–	–	–	(13,752)
Total contributions by and distributions to owners	733	145	(20,423)	34,906	–	–	–	15,361
Other movements:
Transfer of previously unrealised gains now realised	–	–	–	–	(15,868)	15,868	–	–
FX translation	–	–	–	–	–	–	–	–
Total other movements	–	–	–	–	(15,868)	15,868	–	–
At 28 February 2023	4,814	335	19,777	111,104	13,726	17,584	(6,272)	161,068

Year ended 28 February 2022

	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	3,598	129	50,992	55,656	16,463	13,605	(3,613)	136,830
Comprehensive Income for the year:
Management fees allocated as capital expenditure	–	–	–	–	–	(2,442)	–	(2,442)
Legal fees allocated as capital expense	–	–	–	–	–	(6)	–	(6)
Realised gain on investments	–	–	–	–	–	5,113	–	5,113
Unrealised gain on investments	–	–	–	–	23,340	–	–	23,340
Loss after tax	–	–	–	–	–	–	(1,435)	(1,435)
Performance fee	–	–	–	–	–	(2,130)	–	(2,130)
Total comprehensive profit	–	–	–	–	23,340	535	(1,435)	22,440

Contributions by and distributions to owners:
Issue of new shares	544	–	(900)	20,542	–	–	–	20,186
Share buybacks	(61)	61	(2,293)	–	–	–	–	(2,293)
Dividends paid (includes DRIS)	–	–	(7,599)	–	–	–	–	(7,599)
Total contributions by and distributions to owners	483	61	(10,792)	20,542	–	–	–	10,294
Other movements:
Transfer of previously unrealised gains now realised	–	–	–	–	(1,066)	1,066	–	–
Total other movements	–	–	–	–	(1,066)	1,066	–	–
At 28 February 2022	4,081	190	40,200	76,198	38,737	15,206	(5,048)	169,564

The special reserve, capital reserve-realised and revenue reserve are all distributable reserves. Reserves available for distribution therefore amount to £31,090,000 (2022: £50,358,000). During the year, the Company repurchased 8,929,292 shares (2022: 3,831,711) with a nominal value of £144,541 (2022: £62,025). 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. The special reserve is currently wholly distributable as it does not contain any capital arising from shares issued less than three years ago.

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.

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 28 February 2023

	28 February 2023	28 February 2022
Fixed assets	£’000	£’000
Investments	116,163	145,410

Current assets
Debtors	852	746
Cash at bank and in hand	45,058	25,890
	45,910	26,636
Creditors: amounts falling due within one year	(1,005)	(2,482)

Net current assets	44,905	24,154

Total assets less current liabilities	161,068	169,564

Capital and reserves
Called up share capital	4,814	4,081
Capital redemption reserve	335	190
Special reserve	19,777	40,200
Share premium reserve	111,104	76,198
Revaluation reserve	13,726	38,737
Capital reserve – realised	17,584	15,206
Revenue reserve	(6,272)	(5,048)

Total equity shareholders’ funds	161,068	169,564
Basic and diluted net asset value per share	54.2p	67.3p

Statement of Cash Flows
for the year ended 28 February 2023

	Year ended 28 February 2023	Year ended 28 February 2022
	Total	Total
	£’000	£’000
(Loss)/return on ordinary activities before taxation	(23,858)	22,440
Loss/(gain) on investments	20,050	(28,453)
(Increase)/decrease in prepayments, accrued income and other debtors	(10)	140
(Decrease) / increase in accruals and other creditors	(2,123)	2,152
Net cash outflow from operating activities	(5,941)	(3,721)

Cash flows from investing activities
Purchase of investments	(21,359)	(32,663)
Sale of investments	30,468	15,310
Net cash inflow/(outflow) from investing activities	9,109	(17,353)

Cash flows from financing activities
Proceeds from share issues	33,683	19,955
Share issue costs	(1,278)	(899)
Purchase of own shares	(4,758)	(2,293)
Equity dividends paid	(11,648)	(6,468)
Net cash inflow from financing activities	15,999	10,295

Increase/(decrease) in cash and cash equivalents	19,167	(10,779)
Cash at beginning of year	25,890	36,669
Cash at end of year	45,057	25,890

‘Net cash used in operating activities’ includes interest received of £225,000 (2022: £260,000) and dividends received of £nil (2022: £6,000). No interest was paid during the year (2022: £nil).

Notes to the Announcement

for the year ended 28 February 2023

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 July 2022.

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. In its assessment of the Company’s activities as a going concern, the Board has reviewed the risks to future performance and considered the potential impacts of those on the Company’s future ability to continue as a going concern. The Company’s cash resources are currently healthy, and the portfolio of investments is diverse and not reliant on any one sector. All significant cash outflows, including dividends, share buybacks and investments, are within the Company’s control. Therefore, the Board expects that the Company has sufficient cash resources to withstand any reasonable stress scenario, for example if the Company was unable to raise further funds, and believes that it is appropriate to 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 arms-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 than 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.

The table below shows the investment portfolio categorised by valuation methodology, as well as the range of market comparables used in reaching the closing valuations. The table also shows the possible outcomes if different ranges of multiples were used in valuing the portfolio.

Valuation basis	Range of market comparables	Valuation as at 28 February 2023 £’000	Range of market comparables when reduced by 15%	Valuation outcome £’000	Range of market comparables when increased by 15%	Valuation outcome £’000
Multiple of revenue or EBITDA	1.0x – 8.7x	86,372	0.9x – 7.4x	76,040	1.1x – 10.0x	101,757
Price of recent investment	n/a	18,832	n/a	18,832	n/a	18,832
Price of recent offer	n/a	7,422	n/a	7,422	n/a	7,422
Net asset value	n/a	3,537	n/a	3,537	n/a	3,537
Total		116,163		105,831		130,548

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 and are settled in a short timeframe.

2. Basic and diluted return per share

	Year ended 28 February 2023	Year ended 28 February 2022
Revenue loss per share based on:
Net revenue loss after taxation (£’000)	(1,224)	(1,435)

Weighted average number of shares in issue	287,122,476	238,055,965

Pence per share	(0.4p)	(0.6p)

Capital (loss)/return per share based on:
Net capital (loss)/return for the financial year (£‘000)	(22,634)	23,875

Weighted average number of shares in issue	287,122,476	238,055,965

Pence per share	(7.9p)	10.0p

Total (loss)/return per share based on:
Total (loss)/return for the financial year (£‘000)	(23,858)	22,440

Weighted average number of shares in issue	287,122,476	238,055,965

Pence per share	(8.3p)	9.4p

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

2023

2022

Shares in issue

Net asset value

2023

2022

Pence per share

£’000

Pence per share

£’000

Ordinary Shares

297,414,345

252,090,729

54.2

161,068

67.3

169,564

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 return 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.

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 2023, the Company had no AIM-quoted portfolio companies and therefore the AIM-quoted portfolio was valued at £nil (2022: £337,000).

At 28 February 2023, the unquoted portfolio was valued at £116,163,000 (2022: £145,073,000). As many of the Company’s unquoted investments are valued using revenue or earnings multiples of comparable companies or sectors, a fall in listed share prices generally would impact on the valuation of the unquoted portfolio. A 15% movement in the multiples used to reach the valuations of the unquoted investments held by the Company would have an effect as follows:

Valuation basis	Range of market comparables	Valuation as at 28 February 2023 £’000	Range of market comparables when reduced by 15%	Valuation outcome £’000	Range of market comparables when increased by 15%	Valuation outcome £’000
Multiple of revenue or EBITDA	1.0x – 8.7x	86,732	0.9x – 7.4x	76,040	1.1x – 10.0x	101,757
Price of recent investment	n/a	18,832	n/a	18,832	n/a	18,832
Price of recent offer	n/a	7,422	n/a	7,422	n/a	7,422
Net asset value	n/a	3,537	n/a	3,537	n/a	3,537
Total		116,163		105,121		130,351

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. The Company holds one class of loan with a portfolio company where the interest is partly based on LIBOR. As this loan is past due and is not being repaid, nor is it expected to be repaid in the near future, the Company has not yet renegotiated the interest terms of this loan since the transition from LIBOR. Should there be an expectation that the loan will be repaid, the Company will renegotiate the interest terms before repayment occurs.
“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	2023	2022
	interest rate	until maturity	£’000	£’000
Fixed rate	6.8%	815 days	6,456	10,929
Floating rate	0.6%	18 days	45,747	25,962
No interest rate			108,865	132,673
			161,068	169,564

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 or decrease of 1% in interest rates would have increased or decreased total return before taxation for the year by £457,000 (2022: £260,000).

Foreign Exchange risk
The Company has made a number of its initial investments in a foreign currency; most often in Euros or US Dollars, though these costs are recorded in their GBP equivalents on the relevant transaction dates. 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 Investment Manager and the Board regularly review the exposure to foreign currency movement to make sure the level of risk is appropriately managed. On realisation of investments held in foreign currencies, cash is translated to GBP shortly after receiving the proceeds to limit the amount of time exposed to foreign currency fluctuations.

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 is exposed to credit risk as follows:

	2023	2022
	£’000	£’000
Cash and cash equivalents	45,057	28,890
Interest, dividends and other receivables	177	165
	45,234	26,055

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

For the year ended 28 February 2023, cash was 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. Following the year end, in order to take advantage of recent increases in interest rates, cash balances have been placed in high quality liquidity funds held with JP Morgan, Morgan Stanley and UBS. 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 maintains a relatively low level of creditors (£1.0 million relative to cash balances of £45.1 million at 28 February 2023) 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 notes, 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) at 28 February 2023 as analysed by expected maturity date is as follows:

	Not later	Between	Between	Between	More
	than 1	1 and 2	2 and 3	3 and 5	than	Total
	years	years	years	years	5 years	Total
As at 28 February 2023	£’000	£’000	£’000	£’000	£’000	£’000
Fully performing loan stock	–	491	2,521	3,260	–	6,272
Past due loan stock	–	874	–	–	–	874
	–	1,365	2,521	3,260	–	7,146

As at 28 February 2022
Fully performing loan stock	3,044	274	–	3,667	–	6,985
Past due loan stock	4,015	–	–	–	–	4,015
	7,059	274	–	3,667	–	11,000

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 liabilities recorded at amortised cost, which includes short term debtors and creditors, is considered by 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.

2023

2022

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

£’000

AIM quoted

–

337

–

337

Loan notes

–

7,146

–

11,000

Unquoted investments

–

109,017

–

134,073

–

116,163

337

–

145,073

145,410

There have been no movements between levels during the financial year to 28 February 2023.

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 2022	11,000	134,073	145,073
Movements in the income statement:
Gains/ (Losses) in the income statement	2,918	(22,909)	(19,992)

Reclassification at value	(1,891)	1,891	-
Purchases at cost	1,042	20,323	21,365
Sales proceeds	(5,923)	(24,360)	(30,283)
Balance at 28 February 2023	7,146	109,017	116,163

There is an element of judgement in the choice of assumptions for unquoted investments and if different assumptions were used, different valuations would have been attributed to certain investments.

5. Post balance sheet events

Between 28 February 2023 and the date of the Annual Report & Accounts, the Company issued 7,144,716 Ordinary Shares for an aggregate consideration of £4.0 million under the combined offer for subscription with ProVen VCT plc which launched on 19 October 2022. Share issue costs thereon amounted to £0.2 million.

In March 2023, the Company disposed of its holding in Monica Vinader for initial proceeds of £2.4 million, representing an 11.8x return on cost at 28 February 2023, with potential for future proceeds. A strong performer in the Company’s portfolio for several years, Monica Vinader had been exploring funding options and agreed a strategic sale to Bridgepoint Development Capital IV. After originally investing in Monica Vinader in 2010, the Company sold 60% of its holding in February 2016 for proceeds of £2.0 million and a multiple on cost of 5.2x.

The Company also disposed of its holding in Aistemos in March 2023, with proceeds of £2.9 million, representing a multiple on cost of 1.7x.

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 2023, but has been extracted from the statutory financial statements for the year ended 28 February 2023, which were approved by the Board of Directors on 9 June 2023 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 2022 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 2023 will be made available to Shareholders shortly. Copies will be available for download from www.proveninvestments.co.uk in due course.

- End