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Venture capital investments
Portfolio allocation
The split of the investment portfolio between Molten Ventures growth technology investments and the older legacy investments is now as follows:

The newer growth technology investments are now the largest part of the portfolio and this proportion will continue to grow as further funds are raised and invested, and as there are further realisations from the legacy portfolio.

Portfolio activity
Molten Ventures provided the Company with a steady flow of investment opportunities during the year. The Company made nine new investments and four follow-on investments totalling £12.5 million.

There was one investment disposal during the year, being that of IXL PremFina, producing proceeds of £660,000.

Further details on the investment activity can be found in the Investment Manager’s report.

Investment valuations
At the year end, the Company held a portfolio of 35 active investments valued at £76.8 million.

The Board has reviewed the investment valuations at the year end, resulting in a number of movements.

The biggest movement was that of Thought Machine Group Limited, a cloud native banking platform, where the valuation was increased by £7.3 million, driven by a major new funding round which valued the business at approximately £2.3 billion.

Back Office Technology and IESO also supported major uplifts in valuation of £3.1 million and £3.4 million respectively, also as a result of new funding rounds.

Another major increase was in the valuation of the legacy investment in Lyalvale Express, the shotgun cartridge manufacturer. Lyalvale was sold soon after the year end at a sum in line with the uplift of £4.6 million.

On the negative side, the Company holds two significant AIM-quoted investments, both of which suffered a fall in value over the year, totalling £3.2 million.

Overall, the unrealised valuation movements on the portfolio were a net gain of £20.2 million for the year.

Further commentary on the portfolio, together with a schedule of additions, disposals and details of the ten largest investments can be found within the Investment Manager’s Report and Review of Investments.

Dividends
The Board is proposing to pay a standard final dividend of 1.5p per share. Additionally, in view of the disposal of the investment in Lyalvale Express Limited which, as mentioned above, was disposed of after the year end, the Board is also proposing to pay a special dividend of 1.6p per share, bringing the total dividend to 3.1p per share. This dividend will be paid, subject to Shareholder approval, on 26 August 2022 to Shareholders on the register at 22 July 2022.

This will bring the total dividends paid in respect of the year, plus the special dividend, to 4.6p per share.

Shareholders are reminded that the Company has recently introduced a Dividend Reinvestment Scheme (“DRIS”), which allows Shareholders to reinvest their dividends in new shares and obtain income tax relief on that new investment.

Fundraising
The Company launched another successful offer for subscription in November 2021 which reached capacity and closed in January 2022 having raised £29.7 million. A significant proportion of the shares were allotted after the year end, in April 2022.

Earlier in the year, the Company completed another offer for subscription which had launched in February 2021. £19.9 million was raised, with all the shares being allotted in April 2021.

The Company expects to undertake another offer for subscription later this year.

Share Buybacks
The Company has a policy of purchasing its own shares that become available in the market at a discount of approximately 5% to the latest published NAV, subject to regulatory and liquidity constraints.

Any Shareholders who are considering selling their shares will need to use a stockbroker. Such Shareholders should ask their stockbroker to register their interest in selling their shares with Panmure Gordon & Co.

During the year, the Company purchased a total of 2,692,473 shares at an average price of 52.8p per share. Resolution 13 will be proposed at the AGM, to renew the authority for the Company to purchase its own shares.

Directorate
As announced in the Half Yearly Report, Michael Jackson, the founder of Elderstreet Investments Limited, decided to retire from the Board and did not stand for re-election at the last AGM in August. We thank Michael for his considerable contribution as investment manager and director of the Company during the 23 years that he served on the Board, and for facilitating the migration of the management of the Company to Molten Ventures plc. My colleagues and I wish him every happiness and success in his future ventures.

To coincide with Michael’s retirement from the board, Richard Marsh, a senior partner at Molten Ventures plc, the parent company of the Investment Manager, was appointed as a non-executive director to the Company.

The directors are continuing to review the composition of the board and, now that the management arrangements have fully transitioned to the Molten Ventures Group, are expected to make some further changes in due course to ensure that the Company is well-equipped for this next phase of its life.

Annual General Meeting (“AGM”)
The AGM will take place at 20 Garrick Street, WC2E 9BT on 18 August 2022 at 11:00 a.m.

Five items of special business are proposed at the AGM:
   one in respect of the authority to buy back shares as noted above;
   three in respect of the authority to allot shares; and
   one in respect of the cancellation of the share premium account and the capital redemption reserve.

The authority to allot shares provides the Board with the opportunity to issue shares under the new Dividend Reinvestment Scheme and consider raising further funds without having to necessarily incur the expense of seeking separate approval via a shareholder circular. Any further fundraising decisions will take account of the level of uninvested funds and the rate of investment.

Cancellation of the share premium account and capital redemption reserve is a process regularly undertaken by VCTs, which provides the Company with flexibility in utilising reserves for share buyback and dividends in future.

Venture Capital Trust Scheme
Shareholders may be aware that the current VCT legalisation includes a “sunset” clause, brought in as part of the EU State Aid rules, that could bring an end to upfront VCT tax relief in 2025, if the scheme is not renewed before that date.

Your board is aware that Molten Ventures is taking an active role in liaising with members of HM Treasury and HM Revenue and Customs to demonstrate how VCT funds have been employed by the Company to support young businesses which require capital to deliver their potential and that this is a valuable source of funding for new enterprises. The Board will encourage the manager to continue to work to this end to ensure that the crucial support that the VCT Scheme provides in addressing the Finance Gap for young British businesses is made clear. We hope to get some positive confirmation of the Government’s future support for the VCT Scheme in due course.

Outlook
The year to 31 March 2022 has started to demonstrate the potential of the technology portfolio that Molten Ventures has been building for the Company over the last few years. With future funds raised, and also realisation proceeds from the legacy portfolio, we expect to add significantly to the portfolio over the coming years.

While the portfolio generally coped well and emerged strongly from the coronavirus pandemic, our young portfolio companies now face the new challenges of rapidly escalating inflation, fears of recession and potential impacts from the conflict in Ukraine. There is no significant exposure to Russia within the portfolio so no direct impact from sanctions. Interest rate rises and the fears of recession have now hit stock markets heavily. The extent to which this will affect business valuations within the young technology sector remains unclear at the stage.

Despite these macro-economic concerns, the Board believes that the Company’s portfolio of technology sector investments is well placed to deliver further attractive returns for investors in the medium to long term.

David Brock
Chairman

INVESTMENT MANAGER’S REPORT

During the year the Draper Esprit VCT plc was rebranded to Molten Ventures VCT plc with a new EPIC code ‘ticker’ MVCT.L and other members of the Molten Ventures group were renamed Molten Ventures plc and Molten EIS, collectively called the ‘Molten funds’.

The co-investment arrangements amongst the Molten funds continues to be positive from both an investment and a fundraising perspective. We refer internally to the VCT having two elements of its portfolio; a new technology portfolio invested alongside other Molten funds and a legacy portfolio assembled before the Molten arrangement.

At the year end the Company recorded a 13.6p increase in the Total Return (net asset value including cumulative dividends), from 157.5p to 171.1p. The NAV per share rose by 13.6p to 60.6p after paying dividends of 3.0p in the year.

The technology portfolio also recorded its first ‘unicorn’, (a company with a valuation over $1 billion), with Thought Machine receiving over $200m (£168 million) of funding from new investors Temasek, the global investment company headquartered in Singapore, with participation from Intesa Sanpaolo and Morgan Stanley. The round valued Thought Machine at $2.7 billion (£2.3 billion).

During the year the team completed twelve new investments totalling £12.5 million. This comprised eight new investments totalling £9.2 million alongside four follow-on investments totalling £3.3 million, and the VCT received a holding for no cost in Cauldron Entertainment, a spin out company from Thought Machine. There was one exit IXL Premfina which returned £660k or 0.87x cost.

Post the year end we are delighted to report the sale of Lyalvale Express Limited from the legacy portfolio. This investment returned £8.67 million, a 4.58x multiple on cost, and an overall IRR of 15.9% (calculated using gains and income received during the holding period). As a result of this successful exit the board has approved a special dividend of 1.6p to shareholders on the register as of 22 July 2022.

At the year-end, Molten technology companies represented 70.6% of the portfolio and legacy companies 29.4%. On an adjusted basis following the Lyalvale exit mentioned above, the legacy portfolio represents only 23.4% of which 20.1% is held in two significant investments.
Within the Molten portfolio nine new investments, alongside the Molten funds, were made into the following companies:

*Cauldron was a zero cost holding as a spin-out from portfolio company, Thought Machine

These investments were all made alongside Molten funds and often included other corporate and venture capital investors. This corroborates the strategy of investing alongside a strong syndicate of investors and enables Molten Ventures VCT to invest its funds into the ‘scale up’ funding gap that was highlighted in the Government’s Patient Capital Review (2017). In all of these new investments, with the exception of Cauldron, a member of the Molten Ventures group is a representative on the portfolio company board. At the year end the total Molten funds technology portfolio consisted of 28 active companies.

Within the year, four of the technology portfolio companies have attracted sizeable follow-on investments at attractive valuations gains. Thought Machine mentioned previously raised a further $200m.

IESO, the digital mental health company, raised a further $53m led by the US investment firm Morningside, with further new investment from Sony Innovation Fund and existing shareholders IP Group, Molten Ventures and Ananda Impact Ventures, to take its DTx solutions through regulatory approvals and to market in the UK and US.

Hadean Supercomputing, building distributed, spatial and scalable computing, raised a further £15 million from existing investors, including the VCT, to accelerate growth. In 2022 Hadean secured contracts with GamesCoin and BAE Systems.

PrimaryBid, a regulated capital markets technology platform connecting public companies to their communities during fundraisings, raised a further $190m in a round led by SoftBank, via its Vision Fund 2.

On the downside, provisions have been made for a small number of private companies and the two meaningful AIM companies in the legacy portfolio. These have suffered from the general public market downturn. However, these provisions and AIM valuation reductions are relatively small at under 6% of the year end NAV against gains of 24.3%.

In the recent successful fund-raising offer, which closed on the 8th April 2022, the VCT allotted £29.7 million of Ordinary Shares and the process of investing these funds is underway.

With Environmental, Social and Governance (“ESG”) becoming an ever increasing focus, we remind our Shareholders that the parent company of the investment manager, Molten Ventures plc, has continued to progress its ESG roadmap, including:
  being awarded the Diversity VC Standard Level 1 certification,
  becoming a signatory of the Investing in Women Code,
  establishing an ESG Committee of the Board (in addition to the ESG Working Group),
  completing its first year of Task Force on Climate-Related Financial Disclosures (“TCFD”) reporting,
  approval of its Board Diversity and Inclusion Policy,
  Investment Team ESG training; and
  engaging with the portfolio companies on their own ESG activities.

The parent company ESG policy is available to view on the Molten Ventures plc website via the link below: https://investors.moltenventures.com/sustainability. During the year the VCT also invested into two climate related companies, Global Satellite Vu and Cervest.

Post the year end, the manager was invited to join the VCT Association (VCTA) which represents 13 of the largest VCT fund managers and makes up over 90% of the £6.6bn VCT industry. Recently the VCTA has submitted its response to the Treasury Select Committee inquiry into the UK’s Venture Capital industry, which addresses the effectiveness of tax incentives, the ability of firms to source financing to scale up, regulatory efficiency, and how the industry can support the UK economy post-Covid.

In summary it has been a good year for the VCT with the technology portfolio showing some strong growth, and a profitable realisation from the legacy portfolio post the year end. Looking forward, despite the geopolitical risk in Europe, slowing economic growth and increasing expectations of a prolonged period of higher inflation, the manager remains confident that over the medium to longer term technology assets have the ability to show increasing asset values through rapid growth, their potential for market leadership in new and valuable markets, and valuation of intellectual property. It continues to be our priority to support our existing portfolio and to make new investments in businesses that can innovate and grow despite the macro-economic headwinds.

Elderstreet Investments Limited
Part of the Molten Ventures Group

REVIEW OF INVESTMENTS

Portfolio of investments
The following investments were held at 31 March 2022. All companies are registered in England and Wales, with the exception of Fulcrum Utility Services Limited, which is registered in the Cayman Islands.

*         Quoted on AIM

All venture capital investments are unquoted unless otherwise stated

¹ These companies have also received investment from other funds managed by the Molten Ventures Group (Molten Ventures Plc and Molten Ventures EIS) as at 31 March 2022.

Investment movements for the year ended 31 March 2022
ADDITIONS

DISPOSALS

* Adjusted for purchases in the year where applicable

Directors’ responsibilities statement

The Directors are responsible for preparing the Report of the Directors, the Strategic Report, the Directors’ Remuneration Report and the financial statements in accordance with applicable law and regulations. They are also responsible for ensuring that the Annual Report 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), including Financial Reporting Standard 102, the financial reporting standard applicable in the UK and Republic of Ireland (FRS 102).

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 these financial statements, the Directors are required to:
  select suitable accounting policies and then apply them consistently;
  make judgements 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 director’s report, a strategic report and director’s remuneration report which comply with the requirements of the Companies Act 2006.

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

Each of the Directors considers that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company’s position, business model and strategy.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements and other information included in annual reports may differ from legislation in other jurisdictions.

INCOME STATEMENT
for the year ended 31 March 2022

All Revenue and Capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. The total column within the Income Statement represents the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards (“FRS 102”). The supplementary revenue and capital return columns are prepared in accordance with the Statement of Recommended Practice issued in October 2019 by the Association of Investment Companies (“AIC SORP”).

STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2022

BALANCE SHEET
at 31 March 2022

STATEMENT OF CASH FLOWS
for the year ended 31 March 2022

NOTES

1. Accounting policies
General information

Molten Ventures VCT plc (“the Company”) is a venture capital trust established under the legislation introduced in the Finance Act 1995 and is domiciled in the United Kingdom and incorporated in England and Wales. The Company is a premium listed entity on the London Stock Exchange.

Basis of accounting
The Company has prepared its financial statements in accordance with the Financial Reporting Standard 102 (“FRS 102”) and in accordance with the Statement of Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” issued in October 2019 (“SORP”) and with the Companies Act 2006.

Going concern
After reviewing the Company’s forecasts and projections, the Directors have a reasonable expectation that the major cash outflows of the Company (most notably investments, share buybacks and dividends) are within the Company’s control and therefore the Company has sufficient cash to meet its expenses and liabilities when they fall due. The impact of COVID-19 has been considered, more detail on these considerations can be found within the Corporate Governance report. As such, the Board confirms that the Company has adequate resources to continues in operational existence for at least 12 months from the date of approval of the financial statements. The Company therefore continues to adopt the going concern basis in preparing its financial statements as noted further within the Corporate Governance report.

Presentation of Income Statement
In order to better reflect the activities of a venture capital trust, and in accordance with the SORP, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The net revenue 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 are designated as “fair value through profit or loss” assets, upon acquisition, 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.

Listed fixed income investments and investments quoted on AIM and the Main Market are measured using bid prices in accordance with the International Private Equity and Venture Capital Valuation Guidelines (“IPEV”).

For unquoted instruments, fair value is established using the IPEV. The valuation methodologies for unquoted entities used by the IPEV to ascertain the fair value of an investment are as follows:
  Multiples;
  Industry valuation benchmarks;
  Discounted cash flows or earnings (of underlying business);
  Discounted cash flows (from the investment);
  Net assets; and
  Calibrating to the price of a recent investment.

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 as explained in the investment accounting policy above.

Where an investee company has gone into receivership, liquidation, or administration (where there is little likelihood of recovery), the loss on the investment, although not physically disposed of, is treated as being realised. Permanent impairments in the value of investments are deemed to be realised losses and held within the Capital Reserve – Realised.

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

Investments (continued)
It is not the Company’s policy to exercise significant influence over investee companies. Therefore, the results of these companies are not incorporated in the Income Statement, except to the extent of any income accrued. This is in accordance with the SORP and FRS 102 sections 14 and 15 that do not require portfolio investments to be accounted for using the equity method of accounting.

Calibration to price of recent investment requires a level of judgment to be applied in assessing and reviewing any additional information available since the last investment date. The Board and Adviser consider a range of factors in order to determine if there is any indication of decline in value or evidence of increase in value since the recent investment date. If no such indications are noted the price of the recent investment will be used as the fair value for the investment.

Examples of signals which could indicate a movement in value are: -
Changes in results against budget or in expectations of achievement of technical milestones patents/testing/ regulatory approvals)
Significant changes in the market of the products or in the economic environment in which it operates
Significant changes in the performance of comparable companies
Internal matters such as fraud, litigation or management structure.

In respect of disclosures required by the SORP for the 10 largest investments held by the Company, the most recent publicly available accounts information, either as filed at Companies House, or announced to the London Stock Exchange, is disclosed. In the case of unlisted investments, this may be abbreviated information only.

Judgement in applying accounting policies and key sources of estimation uncertainty
The key estimates in the financial statements is the determination of the fair value of the unquoted investments by the Directors as it impacts the valuation of the unquoted investments at the balance sheet date.

Of the Company’s assets measured at fair value, it is possible to determine their fair values within a reasonable range of estimates. The fair value of an investment upon acquisition is deemed to be cost. Thereafter, investments are measured at fair value in accordance with FRS 102 sections 11 and 12, together with the IPEV.

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

Interest income is accrued on a timely basis, by reference to the principal outstanding and at the effective interest rate applicable and only where there is reasonable certainty of collection. Where previously accrued income is considered unrecoverable a corresponding bad debt expense is recognised.

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 as a capital item.
  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. The Company has adopted the policy of allocating investment manager’s fees, 75% to capital and 25% to revenue as permitted by the SORP. The allocation is in line with the Board’s expectation of long term returns from the Company’s investments in the form of capital gains and income respectively.
  Performance incentive fees arising are treated as a capital item.

Taxation
The tax effects on 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 which arise.

Deferred taxation is not discounted and 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 accounts.

A deferred tax asset is only recognised to the extent that it is probable there will be taxable profits in the future against which the asset can be offset.

Other debtors and other creditors

Other debtors (including accrued income) and other creditors are included within the accounts at amortised cost.

Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with banks with an original maturity of three months or less.

Dividends
Dividends payable are recognised as distributions in the financial statements when the company’s liability to make payment has been established, typically once declared by the Board or approved by Shareholders at the AGM.

Issue costs
Issue costs in relation to the shares issued are deducted from the special reserve.

Reportable segments
The Company has one reportable segment as the sole activity of the Company is to operate as a VCT and all of the Company’s resources are allocated to this activity.

2. Basic and diluted return per share

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. Financial instruments

The Company’s financial instruments comprise investments held at fair value through profit and loss, being equity and loan stock investments in quoted companies and unquoted companies; loans and receivables, being cash deposits and short-term debtors; and financial liabilities, being creditors arising from its operations. The main purpose of these financial instruments is to generate cash flow, revenue and capital appreciation for the Company’s operations. The Company has no gearing or other financial liabilities apart from short-term creditors and does not use any derivatives.

The fair value of investments is determined using the detailed accounting policy. Loans and receivables and other financial liabilities, as set out in the Balance Sheet, are stated at amortised cost, which the Directors consider is equivalent to fair value.

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

The key investment risks to which the Company is exposed are:
  Investment price risk; and
  Interest rate risk.

The Company has undertaken sensitivity analysis on its financial instruments, split into the relevant component parts, taking into consideration the economic climate at the time of review in order to ascertain the appropriate risk allocation.

Investment price risk
Investment 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 investment price movements in respect of quoted investments, and changes in the fair value of unquoted investments that it holds.

Interest rate risk
The Company accepts exposure 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 and on liquidity funds at rates based on the underlying investments. Investments in loan notes and fixed interest investments attract interest predominately at fixed rates. A summary of the interest rate profile of the Company’s investments is shown below.

Interest rate risk profile of financial assets and financial liabilities
There are three levels of interest which are attributable to the financial instruments as follows:

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

The Company monitors the level of income received from fixed, floating and non-interest rate 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.

The Bank of England base rate has been 0.1% per annum since March 2020. Any potential change in the base rate, at the current level, would have an immaterial impact on the net assets and Total Return of the Company.

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 holdings of loan notes in investee companies, investments in fixed income securities, cash deposits and debtors.

The Manager manages credit risk in respect of loan notes with a similar approach as described under interest rate risk above. In addition, the credit risk is partially mitigated by registering floating charges over the assets of certain investee companies. The strength of this security in each case is dependent on the nature of the investee company’s business and its identifiable assets. The level of security is a key means of managing credit risk. Similarly, the management of credit risk associated interest, dividends and other receivables is covered within the investment management procedures.

Cash is mainly held at Bank of Scotland plc, with a balance also maintained at Royal Bank of Scotland plc, both of which are A-rated financial institutions. 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 can be directly attributable to changes in credit risk.

As at 31 March 2022, there were no loan notes where, although the principal remains within term, the investee company is not fully servicing the interest obligations under the loan note and is in arrears. (31 March 2021: £nil)

As at 31 March 2022 there were no loan stock balances whereby the principal amount had passed its maturity date (31 March 2021: £nil).

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 normally has a relatively low level of creditors (31 March 2022: £351,000, 31 March 2021: £81,000) and has no borrowings. The Company always holds sufficient levels of funds as cash and readily realisable investments in order to meet expenses and other cash outflows as they arise. 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.

4. Related party transactions
Nicholas Lewis is a partner of Downing LLP, which provides administration services to the Company. During the year, £90,000 (2020: £65,000) was due to Downing LLP in respect of these services. As at 31 March 2022, £5,000 (2021: £nil) was outstanding and payable.

Richard Marsh is an employee of Molten Ventures plc, the parent company of Elderstreet Investments Limited. Elderstreet Investments Limited provided investment management services to the Company. During the year, £1.7million (2021: £921,000) was due in respect of these services. No performance incentive fees were due to Elderstreet Investments Limited in respect of the year under review (2021: £nil). As at 31 March 2022, £198,000 (2021: £nil) was outstanding and payable.

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 31 March 2022 but has been extracted from the statutory financial statements for the year ended 31 March 2022 which were approved by the Board of Directors on 15 July 2022 and will be delivered to the Registrar of Companies. 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 31 March 2021 have been delivered to the Registrar of Companies and received an Independent Auditors report which was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006.

A copy of the full annual report and financial statements for the year ended 31 March 2022 will be printed and posted to shareholders shortly. Copies will also be available to the public at the registered office of the Company at St. Magnus House, 3 Lower Thames Street, London EC3R 6HD and will be available for download from www.moltenventures.com and www.downing.co.uk.