invests mainly in unquoted venture

capital holdings, with its remaining

assets invested in a portfolio of equity

investments, quoted investment

funds and bank deposits.

Notes to the financial statements

1. Accounting policies

A summary of the principal accounting policies, all of which have been consistently applied throughout the year and the preceding year, is set out below.

(a) Basis of accounting

The financial statements have been prepared under FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ and in accordance with the Statement of Recommended Practice

‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ issued in July 2022 by the Association of Investment Companies (‘AIC SORP’).

The financial statements are prepared in sterling which is the functional and presentational currency of the Company and rounded to the nearest £000.

The financial statements have been prepared on a going concern basis under the historical cost convention except investments which are stated at their fair value.

The Directors performed an assessment of the Company’s ability to meet its liabilities as they fall due.

In performing this assessment, the Directors took into consideration the uncertain economic outlook

including:

•

the investments and liquid resources held by the Company;

•

the fact that the Company has no debt or capital commitments;

•

the ability of the Company to meet all of its liabilities and ongoing expenses from its assets, including its year-end cash balance;

•

revenue and operating cost forecasts for the forthcoming year;

•

the ability of third-party service providers to continue to provide services; and

•

potential downside scenarios including a fall in the valuation of the investment portfolio or levels of investment income.

Based on this assessment, the Directors are confident that the Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the

financial statements, and therefore determine the going concern basis to be appropriate.

(b) Significant estimates and judgements

Disclosure is required of judgements and estimates made by management in applying the accounting policies that have a significant effect on the financial statements. While estimates are based on best

judgement using information and financial data available, the actual outcome may differ from these estimates.

A price sensitivity analysis is provided in the other price risk sensitivity section of Note 17 on

page 74.

The key estimate in the financial statements is the determination of the fair value of the unlisted investments by the Directors as it significantly impacts the valuation of the unlisted investments at the

balance sheet date.

The fair valuation process involves estimates using inputs that are unobservable.

The key judgement in the valuation of the unquoted investments process is the Directors’

determination of the appropriate application of the International Private Equity and Venture Capital (IPEV)

guidelines to each unlisted investment.

The judgement applied in the selection of the methodology used for determining the fair value of each unlisted investment can have a significant impact upon the

valuation.

(c) Valuation of investments

Purchases and sales of investments are recognised in the financial statements at the date of transaction (trade date).

As permitted by FRS 102 chapters 11 and 12, the Company’s investments are recorded at fair value at the point of acquisition and are measured at subsequent reporting dates at fair value,

with any changes

being recognised in profit or loss. The fair value of the investments held at 31 March 2023 is £80,314,000 (31 March 2022: £77,878,000). In the case of investments quoted on a recognised stock exchange,

fair value is established by reference to the closing bid price on the relevant date or the last traded price, depending on the convention of the exchange on which the investment is quoted. In the case of

unquoted investments, fair value is established in accordance with IPEV guidelines by using measurements of value such as calibrating to the price of recent investment and earnings or revenue multiples;

where no reliable fair value can be estimated using such techniques, unquoted investments are carried at cost subject to provision for impairment where necessary. The key assumption when using the price

of a recent investment as an input to the valuation is that the price obtained remains a reasonable proxy for fair value for a period of time such that an enterprise value can be inferred and subsequently

recalibrated where necessary to take account of changes to either the prevailing market conditions or performance of the investee.

The price of a recent investment is not a default position for establishing

fair value as at the measurement date and when this technique is employed, the resultant valuations are cross-checked for reasonableness by employing an alternative valuation technique. The key

assumptions for the multiples approach are the selection of the most appropriate earnings or revenue measure (historic or forecast) and the selection of the multiple itself which may be influenced by the

multiples achieved by a range of comparable companies in either private or public transactions.

Gains and losses arising from changes in fair value of investments are recognised as part of the capital return within the income statement and allocated to the revaluation reserve. Transaction costs

attributable to the acquisition or disposal of investments are charged to capital return within the income statement.

(d) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and short-term deposits, including short-term highly liquid investments and money market funds readily convertible to known amounts of cash.

(e) Income

Dividends receivable on quoted equity shares are recognised on the ex-dividend date. Dividends receivable on the portfolio of quoted equity investments held for liquidity purposes are recognised on the

date of receipt due to the nature of how this portfolio is managed. Dividends receivable on unquoted equity shares are recognised when the Company’s right to receive payment is established and there is no

reasonable doubt that payment will be received. Fixed income returns on non-equity shares and debt securities are recognised on an effective interest rate basis, provided there is no reasonable doubt that

payment will be received in due course.

(f) Expenses

All expenses are accounted for on an accruals basis. Expenses are charged to revenue return within the income statement except that:

•

expenses which are incidental to the acquisition or disposal of an investment are allocated to capital return as incurred; and

•

expenses are split and allocated partly to capital return where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated, and accordingly the

basic element of the investment management fee has been allocated 25% to revenue return and 75% to capital return, in order to reflect the Directors’ expected long-term view of the nature of the

investment returns of the Company. The performance-related element of the investment management fee is charged 100% to capital return.

(g) Revenue and capital

The revenue column of the income statement includes all income and revenue expenses of the Company. The capital column includes realised and unrealised gains and losses on investments and that part

of the investment management fee which is allocated to capital return.

(h) Taxation

UK corporation tax payable is provided on taxable profits at the current rate. The tax charge for the year is allocated between revenue return and capital return on the ‘marginal basis’ as recommended in the

SORP. Provision is made for deferred taxation on all timing differences calculated at the current rate of tax relevant to the benefit or liability.

(i) Dividends payable

Dividends payable are recognised as distributions in the financial statements when the Company’s liability to make payment has been established.

( j) Provisions

A provision is recognised in the balance sheet when the Company has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to

settle the obligation. No provision is established where a reliable estimate of the obligation cannot be made. Provisions are allocated to revenue or capital depending on the nature of the circumstances.

(k) Share capital account

The share capital account represents the nominal value of all shares issued by the Company

(l) Share premium

The share premium account represents the value paid by shareholders for shares above the nominal value.

(m) Capital redemption reserve

The capital redemption reserve is a non-distributable reserve into which amounts are transferred following the redemption or purchase of a company’s own shares.

(n) Revaluation reserve

Changes in the fair value of investments are dealt with in this reserve.

(o) Capital reserve

The following are accounted for in the capital reserve: gains or losses on the realisation of investments;

the cost of repurchasing ordinary shares, including stamp duty and transaction costs; and other

capital charges and credits charged to this account in accordance with the above policies.

(p) Revenue reserve

The revenue reserve comprises the retained earnings of a business from profits made in the current and prior periods.

(q) Segmental reporting

The Company has a single operating segment carrying out the investment activity of the Company. All venture investments are based in the UK.

2. Income

Year ended

31 March

2023

£000

Year ended

31 March

2022

£000

Investment income:

Dividends from unquoted companies

2

181

Dividends from quoted companies

146

120

Interest receivable:

Bank deposits*

262

3

Loans to unquoted companies

167

1,002

Listed interest-bearing investments

21

8

598

1,314

* Denotes income arising from investments not designated as fair value through profit or loss at the time of acquisition.

3. Investment management fee

Year ended

31 March 2023

Year ended

31 March 2022

Revenue

£000

Capital

£000

Total

£000

Revenue

£000

Capital

£000

Total

£000

Basic investment management fee

505

1,514

2,019

541

1,621

2,162

Performance-related fee

–

–

–

–

–

–

505

1,514

2,019

541

1,621

2,162

Mercia Fund Management Limited (Mercia) provides investment management, secretarial and administrative services to the Company under an agreement dated 20 December 1999, which may be

terminated at any time by not less than twelve months’ notice being given by either party.

The Manager receives a basic management fee, payable quarterly in advance, at the rate of 2.06% per annum of net assets calculated half-yearly as at 31 March and 30 September.

The fee due on the value

of liquid assets above the threshold of £20 million attracts a reduced rate of 1% per annum. The Manager bears the cost of the fees of Brewin Dolphin for managing the listed interest-bearing and equity

portfolios.

The Manager also provides administrative and secretarial services to the Company for a fee of £67,000 per annum (linked to the movement in the RPI).

This fee is included in other expenses

(see Note 4).

The Manager is entitled to receive a performance-related management fee equivalent to 12% of the amount, if any, by which the total return in each financial year (expressed as a percentage of opening

net asset value) exceeds a performance hurdle.

The hurdle is a composite rate based on (a) 7% on average long-term investments, (b) the higher of

(i) base rate plus 1% and (ii) 2.5% on average cash and

interest bearing investments, (c) base rate plus 4% on average listed equity investments during the year.

The hurdle rate for the year ended 31 March 2023 was 6.2% (year ended 31 March 2022: 6.0%).