ProVen VCT plc: Annual Financial Report

Proven VCT Plc

7 June 2021 at 11:26 am·81-min read

ProVen VCT plc

Annual Financial Report
Year ended 28 February 2021

ProVen VCT plc, managed by Beringea LLP, today announces the final results for the year ended 28 February 2021. These results were approved by the Board of Directors on 3 June 2021.

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

Financial summary

Ordinary Shares as at:	28 February 2021 Pence	29 February 2020 Pence
Net asset value per share	74.8	70.1
Dividends paid since launch	71.75	68.25
Total return (net asset value plus dividends paid since launch)	146.55	138.35
Year on year change in:
Net asset value per share (adjusted for dividends paid in the year)	11.7%	(9.2%)

Chairman’s Statement
I present the Annual Report for ProVen VCT plc (the “Company”) for the year ended 28 February 2021. Following a year of economic and commercial turbulence created by the COVID-19 pandemic, the Company’s investment portfolio has emerged resilient, having been well supported throughout this period by the Investment Manager. This is reflected in the encouraging increase in the total return per share in the year to 28 February 2021.

Results for the year
Over the year, the Company’s Net Asset Value (“NAV”) per share increased from 70.1p at 29 February 2020 to 74.8p at 28 February 2021. The total increase in Shareholder total return (NAV per share plus dividends) was 8.2p, an 11.7% increase on the opening NAV.

The profit on ordinary activities for the year was £14.4 million, or 8.7p per share (2020: loss of £12.0 million, or 8.2p per share), comprising a revenue loss of £1.3 million, or 0.8p per share, (2020: revenue loss of £0.5 million, or 0.2p per share) and a capital profit of £15.7 million, or 9.5p per share (2020: loss of £11.5 million, or 8.0p per share). This capital profit was predominantly driven by an increase in valuation of six companies. The combined valuation movement of these six alone totaled £19.1 million.

The Company normally announces its latest NAV on a quarterly basis, although it may announce new NAVs between the normal quarterly dates if there is a material movement. Following the announcement of the NAV at 30 November 2020 on 20 January 2021, the Company became aware of developments at several portfolio companies which had a material impact on the valuation of the investment portfolio. It therefore announced a new NAV of 73.7p per share as at 28 February 2021 on 18 March 2021. Following discussions with the auditors as part of the year-end audit process, the NAV as at 28 February has been revised to 74.8p per share.

Dividends
During the year ended 28 February 2021, the Company paid a final dividend of 2.0p per share in respect of the year ended 29 February 2020 on 28 August 2020 and an interim dividend of 1.5p per share was paid in respect of the year ended 28 February 2021 on 4 December 2020.

Your Board is proposing a final dividend for the year ended 28 February 2021 of 2.0p per share to be paid on 30 July 2021 to Shareholders on the register at 9 July 2021. With total tax-free dividends of 3.5p per share for the year ended 28 February 2021, this represents cash returned to Shareholders of 5.1% on the opening NAV per share at 1 March 2020 after deducting the prior year final dividend of 2.0p per share.

Portfolio activity and valuation

Following the immediate shock of COVID-19, the Investment Manager has been working closely and proactively with portfolio companies throughout the year. This has included helping portfolio companies to produce revised business plans taking into account the potential impact of the COVID-19 pandemic and identifying appropriate cost savings, arranging multiple seminars for portfolio company management, on topics ranging from managing remote teams to accessing government support schemes, and providing additional investment where appropriate.

BREXIT has also been a background concern for some time with companies assessing how best to prepare and limit its eventual impact on their operations. Fortunately, with only a few portfolio companies dealing in physical goods, and still fewer with mainland European sales, the ending of the transition period on 31 December 2020 has had a limited impact. Nevertheless, those companies where the impact has been greater have been proactive, with one opening a warehouse in Berlin last year in order to be able to continue serving their French and German customers, and another setting up a mainland European subsidiary in order to satisfy the EU regulations specific to their product, therefore enabling them to continue to trade.

As explained in prior years, it takes time for early-stage investments to mature and to reach their potential. Following some significant disposals in the period up to and including the financial year ended 28 February 2019, the Investment Manager has been working to replenish the Company’s portfolio. With five new investee companies in 2019, six in 2020, three in the year ended 28 February 2021 and a further two investments made post year end, more than a third of the portfolio is now less than three years old. However, with an 11.7% increase in total return over the last twelve months, there are signs that the more recent investments are beginning to contribute to the Company’s performance.

As previously mentioned, the 11.7% increase in total return is largely a result of an increase in valuation of six companies in particular. All these companies have experienced an increase in revenue, resulting in a combined valuation uplift of £19.1 million. Inevitably though, these increases were partially offset by falling valuations in some other portfolio companies. There were two particular companies where trading was not as expected, which together resulted in a valuation reduction of £3.7 million. Overall, however, the portfolio showed a positive valuation movement of £17.6 million.

Further information about key developments at existing portfolio companies is given in the Investment Manager’s Review.

Fundraising activities
As communicated in the interim statement, the Company launched a combined offer for subscription with ProVen Growth and Income VCT plc on 27 January 2020 to raise up to £10 million per company, with an over-allotment facility of £10 million per company. Each Board utilised £5 million of the over-allotment facility per company and the offer closed to new applications on 10 March 2020 with £14.2 million of gross proceeds for the Company.

The Company launched a further combined offer for subscription with ProVen Growth and Income VCT plc on 3 December 2020 to raise up to £20 million per company, also with an over-allotment facility of £10 million per company, which the Board has chosen not to utilise to date. The offer closed to new applications on 22 February 2021 with £20 million of gross proceeds for the Company. In determining the extent to which it will utilise an over-allotment facility, the Board has regard to factors such as the level of appetite for the offer, the cash reserves within the Company and any time constraints on the requirement to invest cash under VCT regulations, and the volume of attractive new investment opportunities.

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

During the year, the Company bought back 2,312,011 Ordinary Shares at an average price of 64.9p per share and for an aggregate consideration of £1,500,000. This represented 1.5% 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, Beringea LLP (“Beringea” or the “Investment Manager”), in recruiting and retaining talented investment professionals against competition from other investment management companies. The performance fee structure is designed to align the interests of the Investment Manager with those of Shareholders and encourages capital growth as well as significant payments to Shareholders by means of tax-free dividends, as determined by the Directors. These arrangements are set out in more detail in the Strategic Report.

The relevant performance hurdles having been met and based on the NAV at 28 February 2021, a performance fee of £132,000 is payable. An accrual for this amount has been included in the accounts and is therefore reflected in the NAV per share.

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

Annual General Meeting
We are keen to welcome Shareholders in person to our 2021 AGM this year, particularly given the constraints we faced in 2020. At the time of writing, in accordance with the Government’s four-step roadmap out of lockdown, by step 4, which will take place no earlier than 21 June 2021, the Government hopes to be in a position to remove all legal limits on social contact. We are therefore proposing to hold the Annual General Meeting in The Tavern Room at RSA House, 8 John Adam Street, London, WC2N 6EZ at 9:00am on Wednesday 14 July 2021 and to welcome the maximum number of Shareholders we are able within safety constraints and in accordance with government guidelines in force at that time.

However, given the constantly evolving nature of the situation, we want to ensure that we are able to adapt these arrangements efficiently to respond to changes in circumstances. On this basis, we are asking Shareholders to register if they intend to attend the AGM. Should the situation change such that we consider that it is no longer possible for Shareholders to attend the meeting, we will notify Shareholders via email (to the address provided at the time of registration). Should we have to change the arrangements in this way, it is likely that we will not be in a position to accommodate Shareholders beyond the minimum required to hold a quorate meeting which will be achieved through the attendance of director Shareholders. Any updates to the position will also be included on our website at www.provenvcts.co.uk

Shareholders intending to attend the Annual General Meeting are asked to register their intention as soon as practicable by email to info@beringea.co.uk.

We always welcome questions from our Shareholders at the AGM. This year, as in 2020, we also invite Shareholders to send any questions via email in advance of the AGM to info@beringea.co.uk. Questions should be sent by 5:00 pm on Monday 5 July 2021 and answers to the themes in the questions received will be addressed on the website https://www.provenvcts.co.uk/ ahead of the AGM. In addition the Company’s annual Shareholder event will again proceed virtually in the Autumn, in order to reach the maximum number of Shareholders (further details below).

Given the uncertainty, we strongly recommend all Shareholders to submit their votes for the AGM by proxy. We strongly recommend voting electronically at www.signalshares.com as each vote will be counted automatically. Given the continued prevalence of working from home, there is still a risk that votes may not be counted if cast by paper proxy.

Full details of the business to be conducted at the AGM are given in the Notice of the Meeting at the end of this document.

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

In order to ensure the safety and wellbeing of our Shareholders, employees and portfolio companies, we hosted our first fully digital shareholder day in Autumn 2020, using an online platform to deliver our usual insights into fund performance and market conditions, as well as providing an opportunity for you to ask questions of our investment team and hear from our portfolio companies.

Following its success, the continued uncertainty as a result of the COVID-19 pandemic, and with over 300 attendees last year, plans are afoot for a similar event in 2021. This has been scheduled for Wednesday 17 November 2021 and we would encourage you to join us for the session.

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

Outlook
Faced with the challenges of the last year, the Company’s investment portfolio has demonstrated robust performance in the face of adversity. Supported by the Investment Manager’s team, which has been proactive in working with portfolio companies to address the challenges they faced, the portfolio has delivered an aggregate gain on investments of £17.6 million (Realised: £0.035 million; Unrealised: £17.546 million) for the current financial period.

Given the turbulent and unprecedented situation, four supplementary Board meetings were held, in addition to those linked to the usual quarterly reporting cycle, in order to keep the health and performance of the Company’s portfolio under continuous review.

All of the efforts outlined above have ensured that the Company has weathered the COVID-19 storm well and enabled the few companies adversely affected by BREXIT to start 2021 on as sure a footing as possible. Furthermore, the recent successful share offer provides the Company with additional resources to support existing investee companies through any further economic disruption as well as to take advantage of new investment opportunities in the pipeline.

In these recent and difficult times, both the Company and its portfolio have been shown to be adaptable and resilient. Whilst we are mindful that some aspects of the wider economic outlook remain uncertain, for example the possibility of increasing inflation, your Board has been pleased with the Company’s performance throughout the pandemic and remains confident about its future prospects.

Neal Ransome
Chairman

Investment Manager’s Review

Introduction
Following some significant disposals in the period up to and including the financial year ended 28 February 2019, the Investment Manager has been working hard to replenish the Company’s portfolio. Having already added 11 new companies over the preceding two years, a total of £5.2 million was invested in three new portfolio companies and £3.4 million in seven existing portfolio companies during the year ended 28 February 2021, continuing the focus of nurturing a relatively young portfolio to maturity. This was lower than the amount invested in the previous financial year, largely because of the impact of the COVID-19 pandemic. This particularly affected the second and third quarters of 2020, with investment activity picking up significantly in the final quarter of the year. The Company entered the new financial year with a strong pipeline of new investment opportunities, and two new investments, for a total of £3.2 million, were completed in March 2021.

At 28 February 2021, the Company’s venture capital portfolio comprised 48 investments at a cost of £80.1 million and a valuation of £90.1 million, an overall increase of 12.5% on cost.

Since the year end the Company has issued 25,836,664 Ordinary Shares for an aggregate consideration of £20 million under the combined offer for subscription with ProVen Growth and Income VCT plc which launched on 3 December 2020. Share issue costs thereon amounted to £867,000. The Company therefore remains well capitalised to take advantage of new investment opportunities and to support existing portfolio companies where appropriate.

Investment activity
New investments
The Company entered the financial year with a several new investment opportunities at advanced stages, with £2.9 million being invested during the first few months in two new portfolio companies. However, the inflow of new investment opportunities fell sharply in the first quarter as companies then largely put any fundraising plans on hold for several months, while they dealt with the impact of the COVID-19 pandemic and evaluated the potential future impact on their business. Deal flow started to pick up again in the Autumn, but given the time it takes to negotiate, evaluate and complete deals, only one further new investment was completed during the financial year.

The largest new investment for the Company was in Luxury Promise (£2.2 million), a platform to buy and sell pre-owned luxury women’s handbags and accessories. The first tranche was completed in April 2020, with a further investment made in February 2021 following strong performance over the first ten months of the investment.

In March 2020, £1.5million was invested into Commonplace Digital, which is a software-as-a-service platform designed for digital community engagement in new property and infrastructure developments. Its software enables property developers, local authorities, transport planners, and infrastructure developers to gather feedback on projects from citizens and residents. We believe that this company is set for rapid expansion, with the Government having identified the housing and infrastructure sectors as key to the nation’s recovery from COVID-19.

The Company invested £1.5 million into Social Value Portal in July 2020. Social Value Portal is a software-as-a-service platform for public and private sector organisations to quantify the ‘social value’ created through their operations and supply chains. The company was founded in 2014 to provide a tool that could precisely and consistently report social value throughout the economy and is currently benefiting from the rapidly increasing focus on ESG issues. The platform is today used by more than 100 organisations spanning the public, private, and third sectors, including Legal & General, UBS, Barclays, Balfour Beatty, Sheffield City Council, Manchester City Council, and Bristol City Council.

Follow-on investments
The Company has also been active in supporting the development of existing portfolio companies, making follow-on investments in the following seven companies during the year: DeepCrawl (£1.2m), Fnatic (£772,000), Thread (£671,000), Exonar (£318,000), Papier (£184,000), POQ Studio (£150,000) and ContactEngine (£125,000).

Investment disposals
As reported in the interim statement, the Company’s holding in SPC International was sold in May 2020. The Company received £544,000 in disposal proceeds, resulting in a profit against cost of £486,000.

Although the disposal of Chargemaster was completed in a prior year, contingent proceeds of £165,000 were recognised in the current year.

There was also a part-disposal of shares in DeepCrawl which completed at the same time as the follow-on investment in the same company. The proceeds of £288,000 resulted in a profit against cost of £142,000.

Litchfield Media and Rapid Charge Grid repaid £2.175 million and £587,000 of loans to the Company during the year. These companies also made payments of £239,000 in loan note redemption premium and £104,000 in loan note interest respectively.

Key developments at existing portfolio companies
There were notable increases in valuation at six portfolio companies, which together totaled £19.1 million.

Several companies, particularly online retailers and companies in related sectors, benefited from changes in consumer behaviour caused by the COVID-19 pandemic. Zoovu (increase of £4.0 million), Monica Vinader (increase of £3.1 million), My 1st Years (increase of £2.5 million) and Mycs (increase of £2.2 million) all showed significant increases in revenue compared with the prior year. MPB, the online platform for buying and selling pre-owned camera equipment, (increase of £2.6 million) also continued to trade strongly, having opened a warehouse in Berlin in order to continue to serve its French and German customers post-BREXIT. Blis, a location-based advertising company, initially suffered from the effects of the COVID-19 pandemic, but performance has subsequently improved significantly, leading to a valuation increase of £4.6 million.

The increases outlined above were offset by two notable valuation reductions, at Festicket and POQ Studio, which had a combined decrease in valuation of £3.7m.

Festicket, an online platform which packages festival tickets together with travel, accommodation and add-ons to provide complete festival experiences, was badly impacted by the COVID-19 pandemic. Revenue fell significantly compared to the previous year. The valuation reflects the current uncertainty surrounding mass events and travel in both the short and medium term.

POQ Studio, a platform provider for mobile e-commerce apps used mainly by major fashion retailers, has faced difficult trading conditions, struggling to hit its milestones and grow revenue as originally budgeted.

In all, the investment portfolio held at the year-end showed an increase in value of £17.6 million (2020: decrease of £12.1 million). Further detail on the investments is provided in the Investment Portfolio and Review of Investments.

OTHER NEWS AND DEVELOPMENTS
There is a growing need for the Company and the businesses within its portfolio to embrace environmental, social and governance (“ESG”) practices, as employees, customers and investors increasingly scrutinise the sustainability, diversity and corporate citizenship of early-stage companies.

In order to remain ahead of this trend and potential regulatory developments, the Company and the Investment Manager have worked together to consider new policies and processes relating to ESG. This has included significant work on diversity and inclusion, which resulted in certification for the Investment Manager as a Level 1 firm under the Diversity VC Standard, an industry accreditation for diversity and inclusion best practice, as well as a nomination for Diversity and Inclusion Leader of the Year at the Private Equity Awards 2021.

The Investment Manager has also led the creation of an industry initiative – ESG_VC – to support early-stage companies to measure, monitor and maximise their performance against key ESG metrics. This initiative, with the involvement of the British Venture Capital Association, has support from more than 50 venture capital funds, and will enable entrepreneurs in the Company’s portfolio to access resources that drive ESG and commercial improvements.

Post year-end developments
Between 28 February 2021 and the date of this report, the Company issued 25,836,664 Ordinary Shares for an aggregate consideration of £20 million under the combined offer for subscription with ProVen Growth and Income VCT plc which launched on 3 December 2020. Share issue costs thereon amounted to £867,000.

On 22 March 2021, the Company bought back 765,372 Ordinary Shares at a price of 70.02p and for an aggregate consideration of £536,000. All shares were subsequently cancelled.

In March 2021, the Company invested £3.2 million in two new companies, namely Moonshot CVE Holdings Ltd and Utilis SAR Ltd.

£1.4 million was invested in Moonshot, a business with a mission to reach those at risk of violent extremism and offer them an alternative path. From digital capacity building to counter-messaging campaigns, Moonshot uses data-proven techniques to ensure its clients respond to violent extremism effectively all over the world.

We invested £1.8 million in a business called Utilis. The company uses satellite-based technology and a patented algorithm derived from techniques developed to search for water on Mars to detect drinking water pipeline leaks. With the potable leak detection product first commercialised in 2016, over 250 projects have been completed worldwide in countries including the United States, Italy, the UK, Chile, China and South Africa, leading to almost 20,000 leaks verified and saving customers 5,000 million gallons a year.

In April 2021, a further £423,000 was invested in Hygenica. This was to fund a working capital call caused by a surge in demand for the company’s product.

In March 2021, there was a part-disposal of the Company’s holding in MPB. The Company received £2.3 million in disposal proceeds. Having performed well since the initial investment by the Company in February 2018, MPB decided to raise additional capital to accelerate its growth. The Company was unable to participate in this investment round owing to restrictions imposed by the VCT regulations. As part of the funding round, however, the Company had the opportunity to sell some of its existing shares, crystalising a 2.75x return on the initial investment on the shares sold, whilst also retaining 70% of its original holding.

In April 2021, the Company’s holding in Response Tap Limited was also sold. The Company received initial proceeds of £0.7 million. Additional proceeds are expected in the coming months.

Outlook
The unique circumstances of the last financial year created big challenges for all companies. For some, particularly in the leisure and travel sectors, the restrictions imposed by the Government in response to the COVID-19 pandemic have had a serious adverse impact. Fortunately, the Company’s investment portfolio had very little exposure to these sectors. Other companies, particularly those in the online retailing and related sectors, where the Company has a much larger exposure, benefited from changes in consumer behaviour resulting from the COVID-19 pandemic. Overall, the portfolio performed well during the year, with a net valuation gain of £17.6 million.

The current surge in confidence in the UK and US economies is resulting in significantly increased levels of investment activity by private equity firms and M&A activity by corporate acquirors. At the same time, the cohort of companies which we have invested in over the past three to five years is maturing. These factors have resulted in several inbound approaches to our portfolio companies by organisations looking to invest or acquire. We have recently seen a significant investment in MPB from a new investor, combined with a partial realisation. If market conditions continue to be positive, we expect to see more disposals and significant fundraisings by our portfolio companies over the next twelve months.

We continue to see a strong flow of interesting new investment opportunities. However, increasing competition for deals means that valuation expectations are rising rapidly. We remain disciplined in our approach, investing selectively and only where we believe in a company’s long-term prospects and that the pricing will allow us to achieve a good return on the investment.

As we emerge from the second wave of the COVID-19 pandemic, many of the companies in the portfolio remain well-positioned to continue the robust growth we have seen over the last 12 months. We continue to work closely with portfolio companies to help them to fulfil their potential, providing support to management in multiple ways, as well as making further investments where appropriate. While there will continue to be challenges, we believe that overall the Company has a strong portfolio and we are cautiously optimistic about the prospects for the coming year.

Beringea LLP
Investment Manager

Investment activity

Investment activity during the year is summarised as follows:

Additions	Cost £’000
Luxury Promise Limited	2,178
Commonplace Digital Ltd	1,500
Social Value Portal Ltd	1,500
Written Byte Ltd (t/a DeepCrawl)	1,153
Sannpa Limited (t/a Fnatic)	772
Thread, Inc.	671
Exonar Limited	318
Papier Ltd	184
POQ Studio Ltd	150
ContactEngine Limited	125
Total	8,551

Disposals	Cost	Market value at 01/03/20	Disposal proceeds	Realised gain/ (loss) against cost	Realised gain/ (loss) during the year
	£’000	£000	£’000	£’000	£’000
Litchfield Media Limited*	2,175	2,175	2,175	–	–
SPC International Limited	58	546	544	486	(2)
Rapid Charge Grid Limited*	587	587	587	–	–
Written Byte Ltd (t/a DeepCrawl)	146	320	288	142	(32)
Chargemaster plc	–	–	165	165	165
MEL Topco Limited (t/a Maplin)	–	–	4	4	4
Think Limited	–	100	–	–	(100)
Total	2,966	3,728	3,763	797	35

* Loan note repayment

Of the disposals above, Chargemaster plc was realised in a prior period, but proceeds were recognised in the current period in excess of the amounts previously accrued. Think Limited was also realised in a prior period. The realised loss reflects an adjustment to the contingent proceeds value previously recognised.

The proceeds received in respect of MEL Topco Limited (t/a Maplin) reflect a final distribution in respect of the company’s administration in excess of the amounts previously accrued.

As part of the loan repayments in Litchfield Media Limited and Rapid Charge Grid Limited, the Company also received £239,000 in redemption premium and £104,000 in loan note interest respectively.

The Written Byte Ltd (t/a DeepCrawl) disposal was a part-disposal of shares which completed at the same time as the follow-on investment in the same company. The transaction was structured in this way in order to strengthen the Company’s overall position as a shareholder.

The total disposal proceeds outlined above do not match those recorded in the statement of cash flows as the cashflow figure represents total disposal proceeds received, elements of which will have been accrued in prior periods.

Investment Portfolio

as at 28 February 2021

The following investments were held at 28 February 2021:



	Cost	Valuation	Valuation movement in year	% of portfolio by value
	£’000	£’000	£’000
Venture capital investments (by value)
Infinity Reliance Limited(t/a My 1st Years)	4,731	7,685	2,537	6.0%
Zoovu Limited (formerly SmartAssistant)	3,487	7,390	3,987	5.8%
Monica Vinader Limited**	534	6,900	3,086	5.4%
Mycs GmbH	4,595	6,095	2,205	4.8%
Blis Media Limited**	841	5,836	4,634	4.8%
MPB Group Limited	2,511	5,278	2,613	4.2%
Written Byte Limited (t/a DeepCrawl)	2,895	3,976	(150)	3.1%
Thread, Inc.	4,022	3,815	(210)	3.0%
Access Systems, Inc.	3,500	3,795	295	3.0%
ContactEngine Limited	1,391	3,457	372	2.7%
Luxury Promise Limited	2,178	3,244	1,066	2.6%
Rapid Charge Grid Limited*	2,564	2,204	91	1.7%
Sannpa Limited (t/a Fnatic)	1,800	2,054	254	1.6%
Exonar Limited	2,814	2,042	(447)	1.6%
Commonplace Digital Limited	1,500	1,970	470	1.5%
Litchfield Media Limited*	1,405	1,902	8	1.5%
Disposable Cubicle Curtains Limited (t/a Hygenica)**	2,871	1,895	513	1.5%
Aistemos Limited	1,819	1,821	–	1.4%
Papier Ltd	1,534	1,534	–	1.2%
Lupa Foods Limited (formerly Donatantonio Group Limited)	1,077	1,501	(434)	1.2%
Social Value Portal Ltd	1,500	1,500	–	1.2%
Stylescape Limited (t/a EDITED)	1,500	1,500	–	1.2%
Festicket Ltd	3,633	1,471	(2,162)	1.2%
Picasso Labs, Inc. (t/a CreativeX)	630	1,420	790	1.1%
Firefly Learning Limited	1,202	1,215	272	1.0%
Our Path Ltd (t/a Second Nature)	1,200	1,200	–	0.9%
Arctic Shores Limited	1,050	1,050	–	0.8%
Response Tap Limited	1,060	1,037	(875)	0.8%
Honeycomb.TV Limited*	900	878	–	0.7%
Sealskinz Holdings Limited**	834	834	–	0.7%
Been There Done That Global Limited	553	752	(30)	0.5%
D30 Holdings Ltd**	956	720	(206)	0.5%
POQ Studio Ltd	3,802	679	(1,541)	0.5%
Cogora Group Limited**	2,643	519	104	0.4%
	69,532	89,169	17,242	70.1%
Other venture capital investments	10,530	926	304	0.7%
Total venture capital investments	80,062	90,095	17,546	70.8%
Cash at bank and in hand		37,014		29.2%
Total investments		127,109		100.0%

Valuation movement in the year excludes the cost of investments made in the year. Other venture capital investments at 28 February 2021 comprise:
Buckingham Gate Financial Services Limited, Incontext Solutions, Inc, Inskin Media Limited, Lantum Limited, Macklin Holdings Limited*†, Monmouth Holdings Limited*, Netcall plc*, Senselogix Limited, Simplestream Limited**, Skills Matter Limited**, TVPlayer Limited, Utility Exchange Online Limited (t/a SwitchmyBusiness.com), Vigilant Applications Limited* and Whistle Sports, Inc..

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

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

All venture capital investments are registered in England and Wales except for InContext Solutions, Inc., Picasso Labs Inc., Whistle Sports, Inc., Access Systems, Inc and Thread, Inc., which are Delaware registered corporations in the United States of America and Mycs GmbH, which is registered in Germany.

Strategic Report

The Directors present the Strategic Report for the year ended 28 February 2021. The Board prepared this report 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 2021 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 this report, a close company within the meaning of Section 414 of the Income and Corporation Taxes Act 1988.

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 £67.6 million of venture capital investments and ended with £90.1 million spread over a portfolio of 48 companies. 43 of these investments with a value of £84.8 million were VCT qualifying (or part qualifying).

The profit on ordinary activities after taxation for the year was £14.4 million, comprising a revenue loss of £1.3 million and a capital profit of £15.7 million. The Ongoing Charges ratio (excluding performance fees and recoverable VAT) as calculated in line with the AIC methodology is an Alternative Performance Measure used by the Board to monitor expenses. The Ongoing Charges ratio in respect of the year ended 28 February 2021 was 2.3% (2020: 2.55%).

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

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

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

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

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

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

Borrowings
It is not the Company’s intention to have any borrowings. The Company, does, however, have the ability to borrow a maximum amount equal to the nominal capital of the Company and its distributable and undistributable reserves which, at 28 February 2021, was equal to £127.0 million (2020: £105.4 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 announcement. 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 2021 and for the year then ended is summarised as follows:

The Company holds at least 80 per cent. of its investments in qualifying companies (as defined by Part 6 of the Income Tax Act 2007)	Complied
At least 70 per cent. (in the case of funds raised after 5 April 2011) of the Company’s qualifying investments (by value) are held in “eligible shares” – (“eligible shares” generally being ordinary share capital)	Complied
At least 10 per cent. of each investment in a qualifying company is held in “eligible shares” (by cost at time of investment)	Complied
No investment in a company constitutes more than 15 per cent. of the Company’s portfolio (by value at time of investment)	Complied
The Company’s income for each financial year is derived wholly or mainly from shares and securities The Company distributes sufficient revenue dividends to ensure that not more than 15 per cent. of the income from shares and securities in any one year is retained	Complied Complied
The Company has not made a prohibited payment to Shareholders derived from an issue of shares since 6 April 2014	Complied
No investment made by the Company causes an investee company to receive more than the permitted investment from State Aid sources (including from VCTs)	Complied
Since 18 November 2015, the Company has not made an investment in a company which exceeds the maximum permitted age requirement The funds invested by the Company in another company since 18 November 2015 have not been used to make a prohibited acquisition	Complied Complied
Since 6 April 2016, the Company has not made a prohibited non-qualifying investment. Of funds raised on or after 1 March 2019, at least 30% has been invested in qualifying holdings by the anniversary of the end of the accounting period in which shares were issued. ¹ As part of the Company’s disposal of Think Limited, the Company received shares in Atom Bank plc. HMRC has agreed to allow the Company a period of time to dispose of these shares.	Complied¹ 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 £2,453,000 (2020: £2,321,000), comprising a management fee of £2,321,000 (2020: £2,291,000) and performance incentive fees as described below of £132,000 (2020: £31,000). At the year- end, an amount of £132,000 (2020: £181,000) 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 2021 Beringea also provided administration services to the Company. In the year, total administration fees amount to £64,000 (2020: £61,000). An amount of £nil (2020: £15,000) remained outstanding at the year end.

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

Beringea also received arrangement fees in respect of investments made by the Company and other VCTs managed by Beringea totaling
£158,000 (2020: £348,000) and monitoring fees of £655,000 (2020: £364,000) during the year ended 28 February 2021. 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
Under the performance fee arrangements, the Investment Manager is entitled to receive a performance incentive fee in relation to each major fundraising (a “Respective Offer”) if, at the end of a financial year, the relevant Respective Offer Performance Value exceeds the relevant Respective Offer Hurdle. In this event the performance incentive fee per Respective Offer Share will be equal to 20 per cent of the amount by which each such Respective Offer Performance Value exceeds the relevant Respective Offer Initial Net Asset Value per Share, less the aggregate amount of any performance incentive fee per Respective Offer Share already paid in respect of that Respective Offer in relation to previous financial years starting after 29 February 2012 (which shall not include Residual PIF).

The Respective Offer Performance Value in respect of the relevant financial year end is the sum of: (i) the audited net asset value per Ordinary Share or Equivalent Ordinary Share for a Respective Offer at that date; (ii) Respective Offer Cumulative Dividends; (iii) all performance fees per Ordinary Share or Equivalent Ordinary Share paid by the shareholders of the Respective Offer in relation to financial years starting after 29 February 2012; and (iv) any Residual PIF Adjustment relating to that Respective Offer (whether relating to that or any previous financial year).

If at the end of a financial year the relevant Respective Offer Performance Value is less than or equal to the Respective Offer Hurdle, no performance fee will be payable on such Respective Offers in respect of that financial year.

The performance fee per Respective Offer Share payable for a financial year will be reduced, if necessary, to ensure that: i) the cumulative performance fee per Respective Offer Share payable to the Investment Manager in respect of a Respective Offer does not exceed 20 per cent. of the relevant Respective Offer Cumulative Dividends; and ii) the audited net asset value per Ordinary Share or Equivalent Ordinary Share at the relevant financial year end plus the relevant Respective Offer Cumulative Dividends plus any Residual PIF Adjustment relating to that Respective Offer is at least equal to the relevant Respective Offer Hurdle.

Performance fees for the year ended 28 February 2021 amounted to £132,000 (2020: £nil).

Residual PIF
In consideration of the Investment Manager’s performance in managing the Original Ordinary Share Portfolio (prior to 2012), a performance incentive fee linked to the profit achieved on the future disposal of two investments from this portfolio, Espresso Group Limited and Think Limited, will be payable, known as the “Residual PIF”. This performance incentive fee was equal to 20% of the aggregate profit realised on the sale of Espresso Group Limited and Think Limited, subject to a maximum fee of £673,000 (being 20% of the aggregate unrealised profit on these investments as at 31 August 2011). An amount equal to £31,000 was paid to Beringea LLP in relation to the realised gain achieved on the disposal of Think Limited that completed during the prior year. This brought the total fee paid to £673,000. There are no further amounts due to the Investment Manager in relation to the Residual PIF.

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. The key performance indicators for the Company are compared against the results published by the Association of Investment Companies (“AIC”). The Board believes the Company’s key performance indicators are:

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

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 net asset value per share, dividends paid per annum and the dividend yield.



	28/02/2017	28/02/2018	28/02/2019	29/02/2020	28/02/2021
Total return	132.8	135.7	145.95	138.35	146.55
Net asset value per share (adjusted for dividends paid in the year)*	12.0%	2.7%	10.3%	(9.2%)	11.7%
Dividends paid per share	6.5p	9.5p	27.75p	4.5p	3.5p
Dividend yield**	6.5%	8.9%	27.8%	5.5%	5.1%

* Calculated as the change in total return in the year divided by the opening net asset value.
** Calculated as the total dividends paid in the year divided by the opening net asset value.

The Net Asset Value per share is deﬁned as an Alternative Performance Measure and the Board considers it to be the primary measure of shareholder value.

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

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

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

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

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

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

The risks faced by the Company have remained unchanged since the beginning of the financial year. As outlined elsewhere in this document, the COVID-19 pandemic continues to exercise its unique influence on the UK and other economies. The Board, as it has done since the initial outbreak, is aware of the strains this can put on some investee companies and therefore continues to keep a watchful eye on the health of the portfolio.

Viability statement
The Board has assessed the Company’s prospects over the three year period to 29 February 2024. A three year period has been considered appropriate as it broadly aligns with the time frame during which the Investment Manager will be required to invest 80% of the funds from the most recent offer for subscription in qualifying investments.

In order to support this statement, the Board has carried out a robust assessment of the principal and emerging risks faced by the Company, as detailed above, including those risks associated with the COVID-19 pandemic and BREXIT, 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 29 February 2024, the Board considered the forecast cash requirements against the expected cash position, taking into account a level of assumed investment realisations and investment income during the period.

Based on the assessment of the above considerations on the cash flow forecasts, the Board has determined that the Company will be able to continue in operation, maintain compliance with the VCT rules and meet its liabilities as they fall due for the three years to 29 February 2024.

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 virtual shareholder event, which last year was held on 17 November 2020 and attended by over 300 Shareholders, and gives Shareholders the opportunity to ask questions of the Board and the Investment Manager and also hear from some of our portfolio companies. Following the success of last year’s event, plans are afoot for a similar event in 2021. Invitations to this digital event will be distributed in due course. This has been scheduled for Wednesday 17 November 2021.

The Board also encourages all Shareholders to vote on the resolutions at the Annual General Meeting. In light of the ‘social distancing’ measures and the legislation proposed to allow companies to hold general meetings safely, last year’s AGM was held as a closed AGM and Shareholders were unfortunately unable to attend. We are pleased to report that this year hopefully (regulations permitting) sees a return to a more traditional format with the next AGM of the Company being held in the Tavern Room at RSA House, 8 John Adam Street, London, WC2N 6EZ at 9.00am on Wednesday 14 July 2021. For further details, please see the Chairman’s Statement and the Notice of the Meeting at the end of the document.

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

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. Since the outbreak of the Coronavirus pandemic, the Board has been in more frequent communication with the Investment Manager to ensure an appropriate and transparent response.

Portfolio Companies
The Investment Manager provides updates to the Board on the entire portfolio at least quarterly. In light of the COVID-19 pandemic, there have also been four additional Board meetings in order to keep the health and performance of the portfolio under continuous review during the first turbulent months. Furthermore, in addition to the Investment Manager’s usual monitoring of portfolio companies, in the weeks immediately following the start of the outbreak in Europe, the Investment Manager worked closely with the leadership teams of portfolio companies to ensure that they were prepared for the disruption which followed.

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 growing need for the Company and the businesses within its portfolio to embrace environmental, social and governance (“ESG”) practices and are working together to consider new policies and processes relating to ESG. This has included significant work on diversity and inclusion, which resulted in certification for the Investment Manager as a Level 1 firm under the Diversity VC Standard, an industry accreditation for diversity and inclusion best practice, as well as a nomination for Diversity and Inclusion Leader of the Year at the Private Equity Awards 2021.

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.

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 and as such these requirements do not apply.

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.

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

Directors’ remuneration
It is a requirement under Companies Act 2006 for Shareholders to approve the Directors’ remuneration policy every three years, or sooner if the Company wishes to make changes to the policy. No changes are being proposed to the Directors’ remuneration policy. However, as the policy was last approved at the Annual General Meeting of the Company on 11 July 2018, an ordinary resolution will be proposed at the Company’s Annual General Meeting to approve the Directors’ remuneration policy.

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

Despite the economic and social disruption caused by the COVID-19 pandemic, the Directors do not foresee any major changes in the activity undertaken by the Company in the coming year. The Company continues with its objective to invest in unquoted companies throughout the United Kingdom or with a presence in the United Kingdom, with a view to providing both capital growth and dividend income to Shareholders over the long term whilst maintaining VCT qualifying status.

By order of the Board

Beringea LLP
Company Secretary of ProVen VCT plc

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

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

In preparing theﬁnancial statements, the Directors are required to:

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

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

The Directors are responsible for keeping adequate accounting records that are suﬃcient to show and explain the Company’s transactions, to disclose with reasonable accuracy at any time the ﬁnancial position of the Company and to enable them to ensure that the ﬁnancial statements comply with the requirements of the Companies Act 2006. The maintenance and integrity of the Company’s website is the responsibility of the directors. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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

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

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

Income Statement

for the year ended 28 February 2021

	Year ended 28 February 2021			Year ended 29 February 2020
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Income	26	–	26	597	–	597
Realised gains on investments	–	35	35	–	2,266	2,266
Unrealised gain / (loss) on investments	–	17,546	17,546	–	(12,066)	(12,066)
	26	17,581	17,607	597	(9,800)	(9,203)

Investment management fees	(580)	(1,741)	(2,321)	(573)	(1,718)	(2,291)
Performance incentive fees	–	(132)	(132)	–	(31)	(31)
Other expenses	(723)	(4)	(727)	(525)	(11)	(536)
FX Translation	–	(35)	(35)	–	30	30

(Loss)/return on ordinary activities before tax	(1,277)	15,669	14,392	(501)	(11,530)	(12,031)

Tax on ordinary activities	-	-	-	-	-	-
(Loss)/return attributable to equity shareholders	(1,277)	15,669	14,392	(501)	(11,530)	(12,031)


Basic and diluted (loss)/return per share	(0.8p)	9.5p	8.7p	(0.2p)	(8.0p)	(8.2p)

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 2021

Year Ended 28 February 2021

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

Contributions by and distributions to owners:
Issue of new shares (includes DRIS)	2,185	–	(502)	13,006	–	–	–	14,689
Share buybacks	(231)	231	(1,507)	–	–	–	–	(1,507)
Dividends paid (includes DRIS)	–	–	(5,953)	–	–	–	–	(5,953)
Total contributions by and distributions to owners	1,954	231	(7,962)	13,006	–	–	–	7,229
Other movements:
Transfer of previously unrealised gains now realised	–	–	–	–	(662)	662	–	–
FX translation	–	–	–	–	–	–	(35)	(35)
Total other movements	–	–	–	–	(662)	662	(35)	(35)
At 28 February 2021	16,982	590	42,765	52,739	13,915	3,440	(3,451)	126,980

Year ended 29 February 2020

	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 2019	10,504	102	60,820	3,367	6,799	6,412	(1,668)	86,336
Comprehensive Income for the year:
Management fees allocated as capital expenditure	–	–	–	–	–	(1,718)	–	(1,718)
Legal fees allocated as capital expense	–	–	–	–	–	(11)	–	(11)
Realised gain on investments	–	–	–	–	–	2,266	–	2,266
Unrealised loss on investments	–	–	–	–	(12,066)	–	–	(12,066)
Loss after tax	–	–	–	–	–	–	(501)	(501)
Performance fee	–	–	–	–	–	(31)	–	(31)
Total comprehensive loss	–	–	–	–	(12,066)	506	(501)	(12,061)

Contributions by and distributions to owners:
Issue of new shares (includes DRIS)	4,781	–	(1,418)	36,366	–	–	–	39,729
Share buybacks	(257)	257	(1,888)	–	–	–	–	(1,888)
Dividends paid (includes DRIS)	–	–	(6,787)	–	–	–	–	(6,787)
Total contributions by and distributions to owners	4,524	257	(10,093)	36,366	–	–	–	31,054
Other movements:
Transfer of previously unrealised gains now realised	–	–	–	–	2,298	(2,298)	–	–
FX translation	–	–	–	–	–	–	30	30
Total other movements	–	–	–	–	2,298	(2,298)	30	30
At 29 February 2020	15,028	359	50,727	39,733	(2,969)	4,620	(2,139)	105,359

The special reserve, capital reserve – realised and revenue reserve are all distributable reserves. Reserves available for distribution therefore amount to £42,754,000 (2020: £53,208,000).

During the year the Company repurchased 2,312,011 shares (2020: 2,573,632) with a nominal value of £231,201 (2020: £257,363). All shares were subsequently cancelled.

The composition of each of these reserves is explained below:

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

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

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

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

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

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

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

Gains and losses on realisation of investments;
Permanent diminution in value of investments;
Transaction costs incurred in the acquisition of investments;
75% of the investment manager’s fee expense and 100% of any performance incentive fee payable; and
Other capital expenses and charges.

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

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

Statement of Financial Position as at 28 February 2021	28 February 2021	29 February 2020
	Total	Total
	£’000	£’000
Fixed assets
Investments	90,095	67,626

Current assets
Debtors	304	2,355
Cash at bank and in hand	37,014	36,310
	37,318	38,665
Creditors: amounts falling due within one year	(433)	(932)
Net current assets	36,885	37,733
Total assets less current liabilities	126,980	105,359

Capital and reserves
Called up share capital	16,982	15,028
Capital redemption reserve	590	359
Special reserve	42,765	50,727
Share premium reserve	52,739	39,733
Revaluation reserve	13,915	(2,969)
Capital reserve – realised	3,440	4,620
Revenue reserve	(3,451)	(2,139)
Total equity shareholders’ funds	126,980	105,359
Basic and diluted net asset value per share	74.8p	70.1p

Statement of Cash Flows
for the year ended 28 February 2021

	Year ended 28 February 2021	Year ended 29 February 2020
	Total	Total
	£’000	£’000
(Loss)/return on ordinary activities before taxation	14,392	(12,031)
Loss/(Gain) on investments	(17,581)	9,800
Increase in prepayments, accrued income and other debtors	447	(92)
(Decrease)/Increase in accruals and other creditors	(66)	(5,388)
Net cash used in operating activities	(2,808)	(7,711)

Cash flows from investing activities
Purchase of investments	(8,551)	(10,888)
Sale of investments	5,268	3,810
Net cash from investing activities	(3,283)	(7,078)

Cash flows from financing activities
Proceeds from share issues	14,201	39,999
Share issue costs	(502)	(1,418)
Purchase of own shares	(1,941)	(1,740)
Equity dividends paid	(4,963)	(5,639)
Net cash used in financing	6,795	31,202

Increase/(Decrease) in cash and cash equivalents	704	16,413
Cash at beginning of year	36,310	19,897
Cash at end of year	37,014	36,310

‘Net cash used in operating activities’ includes interest received of £396,000 (2020: £594,000) and dividends received of £1,000 (2020: £3,000). No interest was paid during the period.

Notes to the Announcement

for the year ended 28 February 2021
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 revised in December 2018.

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 foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements.

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

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

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

Key judgements

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

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

The methodology applied takes account of the nature, facts and circumstances of the individual investment and uses reasonable data, market inputs, assumptions and estimates in order to ascertain fair value. Methodologies are applied consistently from year to year except where a change results in a better estimate of fair value.
Where an investee company has gone into receivership or liquidation, or the loss in value below cost is considered to be permanent, or there is little likelihood of a recovery from a company in administration, the loss on the investment, although not physically disposed of, is treated as being realised.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Deferred taxation, which is not discounted, is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law.

Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered.

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

Cash
Cash comprises cash on hand and demand deposits.

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

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

2. Basic and diluted return per share

	Year ended 28 February 2021	Year ended 29 February 2020
Revenue (loss)/ return per share based on:
Net (loss)/ revenue after taxation (£’000)	(1,277)	(501)

Weighted average number of shares in issue	164,391,561	145,634,014

Pence per share	(0.8)	(0.2)

Capital return per share based on:
Net capital gain for the financial year (£‘000)	15,669	(11,530)

Weighted average number of shares in issue	164,391,561	145,634,014

Pence per share	9.5	(8.0)

Total return per share based on:
Total return for the financial year (£‘000)	14,392	(12,031)

Weighted average number of shares in issue	164,391,561	145,634,014

Pence per share	8.7	(8.2)

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

			2021			2020
	Shares in Issue		Net asset value			Net asset value
	2021	2020		pence per share	£’000		pence per share	£’000
Ordinary Shares	169,820,219	150,278,338		74.8p	126,980		70.1p	105,359

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

4. Principal risks and management objectives

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

Market risks;
Credit risk; and
Liquidity risk.

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

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

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

Market price risk; and
Interest rate risk.

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

At 28 February 2021, the AIM-quoted portfolio was valued at £321,000 (2020: £171,000).

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

20% movement in AIM-quoted investments		2021		2020
	Impact on net assets	Impact on NAV per share	Impact on net assets	Impact on NAV per share
	£’000	pence	£’000	Pence
AIM-quoted investments	64	0.0p	34	0.0p

At 28 February 2021, the unquoted portfolio was valued at £89,774,000 (2020: £67,455,000).

As many of the Company’s unquoted investments are valued using revenue or earnings multiples of comparable companies or sectors, a fall in share prices generally would impact on the valuation of the unquoted portfolio. A 20% movement in the valuations of all of the unquoted investments held by the Company would have an effect as follows:

20% movement in unquoted investment valuations		2021		2020
	Impact on net assets	Impact on NAV per share	Impact on net assets	Impact on NAV per share
	£’000	Pence	£’000	Pence
Unquoted investments	17,955	10.6p	13,491	9.0p

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

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

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

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

	Average	Average period	2021	2020
	interest rate	until maturity	£’000	£’000
Fixed rate	6.3%	196days	8,040	9,349
Floating rate	0.3%	0 days	37,157	36,494
No interest rate			81,783	59,516
			126,980	105,359

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

Based on the assumption that the yield of all ﬂoating rate ﬁnancial instruments would change by an amount equal to the movement in prevailing interest rates, it is estimated that an increase of 1% in interest rates would have increased total return before taxation for the year by £372,000 (2020: £365,000). Given the low level of interest rates through the year, a further decrease is not considered likely.

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

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

	2020	2020
	£’000	£’000
Cash and cash equivalents	37,014	36,310
Interest, dividends and other receivables	200	542
	37,214	36,852

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

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

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

Liquidity risk
Liquidity risk is the risk that the Company encounters diﬃculties in meeting obligations associated with its ﬁnancial liabilities. Liquidity risk may also arise from either the inability to sell ﬁnancial instruments when required at their fair values or from the inability to generate cash inﬂows as required. The Company generally maintains a relatively low level of creditors relative to cash balances (£433,000 relative to cash balances of £37.0 million at 28 February 2021) and has no borrowings.

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

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

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

The carrying value of loan stock investments (as opposed to the contractual cash ﬂows) held at 29 February 2020, which is analysed by expected maturity date, is as follows:

As at 28 February 2021	Not later	Between	Between	Between	More
	than 1	1 and 2	2 and 3	3 and 5	than 5
	Year	Years	Years	years	years	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Fully performing loan stock	1,065	–	732	-	1,087	2,884
Past due loan stock	5,299	–	–	–	-	5,299
	6,364	–	732	-	1,087	8,183

As at 29 February 2020
Fully performing loan stock	7,178	–	–	732	384	8,294
Past due loan stock	–	–	–	–	1,169	1,169
	7,178	–	–	732	1,553	9,463

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

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

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

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

2021

2020

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

£’000

AIM quoted

321

–

321

171

–

171

Loan notes

–

8,183

–

9,463

Unquoted investments

–

81,591

–

57,992

321

–

89,774

90,095

171

–

67,455

67,626

There have been no movements between levels during the financial year to 28 February 2021.

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 2020	9,463	57,992	67,455
Movements in the Income Statement:
Gains in the Income Statement	8	17,524	17,531

Purchases at cost	1,474	7,077	8,551
Sales proceeds	(2,762)	(1,002)	(3,763)
Balance at 28 February 2021	8,183	81,591	89,774

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

5. Post balance sheet events

Between 28 February 2021 and the date of this report, the Company issued 25,836,664 Ordinary Shares for an aggregate consideration of £20 million under the combined offer for subscription with ProVen Growth and Income VCT plc which launched on 3 December 2020. Share issue costs thereon amounted to £867,000.

On 22 March 2021, the Company bought back 765,372 Ordinary Shares at a price of 70.02p and for an aggregate consideration of £536,000. All shares were subsequently cancelled.

In March 2021, the Company invested £3.2 million in two new companies, namely Moonshot CVE Holdings Ltd and Utilis SAR Ltd.

In April 2021, a further £423,000 was invested in Hygenica. This was to fund a working capital call caused by a surge in demand for the company’s product.

In April 2021, the Company’s holding in Response Tap Limited was also sold. The Company received initial proceeds of £0.7 million. Additional proceeds are expected in the coming months.

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 2021, but has been extracted from the statutory financial statements for the year ended 28 February 2021, which were approved by the Board of Directors on 3 June 2021 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 29 February 2020 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 2021 will be made available to Shareholders shortly. Copies will be available for download from www.provenvcts.co.uk

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ProVen VCT plc: Annual Financial Report

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