ImmunoBiology Ltd.

Researchers conducted a Phase III trial to test the 100-year-old Bacillus Calmette-Gu rin (BCG) vaccine in people with type 1 diabetes during the COVID-19 pandemic. In new research, investigators at Massachusetts General Hospital (MGH) show that the 100-year-old Bacillus Calmette-Guérin (BCG) vaccine, originally developed to prevent tuberculosis, protects individuals with type 1 diabetes from severe COVID-19 disease and other infectious diseases. Two back-to-back randomized double-blinded placebo-controlled trials found that the BCG vaccine provided continuous protection for nearly the entire COVID-19 pandemic in the US, regardless of the viral variant. "Individuals with type 1 diabetes are highly susceptible to infectious diseases and had worse outcomes when they were infected with the SARS-CoV-2 virus," said senior author Denise Faustman, MD, PhD, director of the Immunobiology Laboratory at MGH and an Associate Professor of Medicine at Harvard Medical School. "Published data from other investigators show mRNA COVID-19 vaccines are not very effective in this group of vulnerable patients. But we've shown that BCG can protect type 1 diabetics from COVID-19 and other infectious diseases." The 18-month Phase III trial, published in iScience, was conducted late in the US pandemic when the highly transmissible Omicron variant was circulating. A 15-month Phase II trial was conducted early in the pandemic; results of that trial were published in Cell Reports Medicine. During the COVID-19 pandemic, several international trials tested if BCG as a single shot, or booster, given to previously BCG-vaccinated adults protected them from infection and COVID-19. This research expanded the large global clinical trial database showing that BCG administered to newborns works as a platform for all infectious disease, maybe for decades. But results from these COVID-19 booster trials in people previously vaccinated with BCG were mixed, with five randomized trials showing efficacy and seven trials showing no benefit. The MGH Phase II and Phase III clinical trials testing BCG differed from other BCG trials in important ways. Instead of receiving one dose of BCG, participants received five or six doses of a particularly potent strain of BCG vaccine. The US participants were followed for a total of 36 months instead of weeks or months. "We know that in people who are naïve to BCG vaccine, the off-target effects can take at least two years to achieve full protection," said Faustman. "Giving multiple doses of the vaccine may speed up that process." And importantly, the US population had never received BCG vaccines, so these clinical trials were not booster trials. "The Phase II and Phase III trials conducted at MGH were unique in that they were the only COVID trials in the world in which the study population had never received a BCG vaccine and was never exposed to TB," said Faustman. "Trials conducted in countries where participants had previously received BCG vaccine as newborns or who had previous exposure to tuberculosis may have obscured any benefit from a BCG booster." The MGH trials enrolled 141 participants with type 1 diabetes; 93 people in the treatment group received five or six doses of BCG vaccine and the 48 individuals in the placebo group received sham vaccine and were followed for 36 months to capture diverse COVID-19 genetic variants and many infectious disease exposures. During the earlier Phase II trial (January 2020 to April 2021) when the virus was more lethal but less transmissible, the BCG vaccine's efficacy was 92%, comparable to the efficacy of the Pfizer and Moderna COVID-19 vaccines in healthy adults. Over the full 34 months of the US COVID-19 pandemic, the BCG vaccine had a significant efficacy of 54.3%. The investigators also found that the BCG-treated participants had lower rates of viral, bacterial, and fungal infections as well as COVID-19 disease itself. The BCG vaccine confers an immunity that likely lasts decades, a clear advantage to the COVID-19 vaccine and vaccines against other infectious diseases, such as influenza, where the duration of effectiveness is only two or three months. "The BCG vaccine offers the prospect of near-lifelong protection against every variant of COVID-19, the flu, respiratory syncytial virus, and other infectious diseases," said Faustman. Some of the BCG-treated participants also received the commercially available COVID-19 vaccines during the Phase III trial. The investigators observed that the Pfizer, Moderna, and Johnson & Johnson vaccines did not protect people with type 1 diabetes against COVID-19. "Our study showed that the BCG vaccine neither increased the efficacy of the COVID-19 vaccine, nor was it harmful to those who received the COVID-19 vaccine," said Faustman. "As the pandemic continues to evolve it will interesting to see if we can work with the FDA to allow access to BCG vaccine for type 1 diabetics, who appear to be particularly at risk for all infectious diseases." This research was supported by The Iacocca Foundation, Boston, MA. Other contributing authors include Willem M. Kühtreiber, Emma R. Hostetter, Grace E. Wolfe, Maya S. Vayshnaw, Rachel Goldstein, Emily R. Bulczynski, Neeshi S. Hullavarad, Joan E. Braley, and Hui Zheng.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL) ACT 2018, AS AMENDED. ON PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN. 23 February 2021 Seneca Growth Capital VCT plc Annual Report and Financial Statements for the year ended 31 December 2020 NAV Update and Notice of Annual General Meeting The Directors are pleased to announce the audited results of the Company for the year ended 31 December 2020. A copy of the Annual Report and Financial Statements will be made available to shareholders shortly, and extracts are now set out below. The Company’s AGM will be a closed meeting as a result of the Covid-19 (“C-19”) pandemic and will be held at 14:00 on Monday, 29 March 2021 at 9 The Parks, Haydock, WA12 0JQ. A copy of the Notice of AGM and Annual Report and Accounts will be available on the Company’s website: Financial Headlines Financial Summary­­­ Financial Calendar The Company’s financial calendar is as follows: 29 March 2021 Annual General Meeting (“AGM”) will be a closed meeting as a result of the Covid-19 (“C-19”) pandemic and will be held at 14:00 at 9 The Parks, Haydock, WA12 0JQ July 2021 Half-yearly results to 30 June 2021 published February 2022 Annual results for the year to 31 December 2021 announced and Annual Report and Financial Statements published For further information, please contact: John Hustler, Seneca Growth Capital VCT Plc at john.hustler@btconnect.com Richard Manley, Seneca Growth Capital VCT Plc at Richard.Manley@senecapartners.co.uk Please note: page references and defined terms included in the extracts below refer to the page numbers and definitions in the Annual Report and Financial Statements. Chairman’s Statement I am pleased to present the 2020 Annual Report on behalf of the Board to shareholders. Overview As shareholders will recall, Seneca have assumed the investment and accounting responsibilities of the Company with effect from August 2018, following which £8.7 million has been raised for the B share pool to 31 December 2020. Since this represents the active investment portfolio, I am reporting on the B share portfolio first and then will give the results of the legacy Ordinary share portfolio. I am pleased to say that, despite the unprecedented circumstances which we are all facing due to the C-19 global pandemic, I am able to report that both the B share and Ordinary share investment portfolios have stood up well to the challenges that they have faced. The Total Return (NAV per share plus cumulative dividends per share) for each share class increased during the year with the B share increasing by 1.8% to 97.8p and the Ordinary share increasing by 15.5% to 95.5p. I am also pleased to be able to report that Seneca continued the development of the B share pool during the year both in terms of fundraising and investment activity. In October 2020, the Company launched its third offer for B shares and allotted an additional £1.5 million of shares in December 2020 taking to £8.7 million the total raised by the B share pool from launch in May 2018 to 31 December 2020. I would like to welcome all new shareholders and thank both existing and new shareholders for their support. The share offer will remain open until 28 May 2021 unless it reaches the target of £10 million with an over-allotment facility of £10 million before then. The Company made six new B share pool investments in the year in addition to achieving one full exit and one partial exit and as a result the Company’s B share pool closed the year with ten investments, an increase of five on the prior year. There were two full, and one partial disposal from the Ordinary share pool. The Ordinary share pool now has just seven investments remaining with AIM quoted Scancell Holdings Plc (“Scancell”) (which encouragingly secured £48 million of new investment in the year) accounting for 66% of the Ordinary share pool’s NAV at the year end. Recent press coverage regarding Scancell’s involvement in a potential C-19 vaccine has led to a significant rise in its share price, which stood at 24.5p at 19 February 2021 compared to our year end value of 13.5p. Further details and an updated unaudited NAV per Ordinary share and B share are included below. With 54% of the B share pool’s NAV as at 31 December 2020 represented by cash and more than 20% of the Ordinary share pool’s NAV, the Company has ended the year well placed to face the challenges and opportunities presented by the ongoing C-19 pandemic and to deliver on the key objectives of continuing to build an attractive portfolio of growth capital investments in the Company’s B share pool whilst also continuing to realise investments in the Ordinary share pool when the opportunity arises. I have set out below the progress made by each of the Company’s share classes during the year. B Share Pool B Shares - Results The key items to impact the NAV of the B share pool during the year were as follows: Two dividends paid during the year totalling 3.0p per B share. The full realisation of one B share pool AIM quoted investment generating a 2.1x return. The partial exit of one B share pool AIM quoted investment generating a 1.6x return. An increase in the valuation of two of the B share pool’s remaining three AIM quoted holdings. A reduction in fair value of one of the B share pool’s seven unquoted company investments as a result of the impact of C-19. The Company’s running costs. The net result of the above was an overall increase in the Total Return per B share to 97.8p as at 31 December 2020 (2019: 96.1p), consisting of a modest reduction in the NAV per B share to 91.8p as at 31 December 2020 (2019: 93.1p), a positive capital return of 5.7p per B share (2019: negative 0.7p) and a negative revenue return of 2.2p per B share (2019: negative 2.5p). Whilst the negative revenue return of 2.2p per B share is principally a result of the impact of the Company’s running costs on the B share pool, shareholders will recall that the Company’s running expenses are capped at 3% of the B share NAV until July 2021 (thereafter the total running costs will continue to be capped at 3% with general expenses being allocated to the Ordinary share pool and the B share pool pro-rata to their respective NAVs). As a result, Seneca reduced their annual management fee for 2020 from £127k to £41k to ensure the Company’s annual running expenses stayed within this 3% limit. The positive capital return of 5.7p per B share noted above was principally due to increases in the share prices of the B share pool’s AIM quoted investments during the year and some harvesting of profit via partial sales of these AIM quoted investments offset by a reduction in the carrying value of one of the B share pool’s unquoted company investments. Full details are disclosed in the Investment Manager’s Report on pages 14 to 27. B Shares - Investment Portfolio Review As at 31 December 2020, the B share portfolio comprised ten companies, three of which are quoted on AIM, at a total net investment cost of £3,794k. As at 31 December 2020 this portfolio was valued at £3,982k. In January 2021, the Company sold 1,750,000 shares in SkinBioTherapeutics Plc (“SkinBio”) which represented 37% of the original holding of 4,677,107 shares, reducing the remaining holding to 2,752,107 shares. These were sold at a net average price of 35.5p per share providing a return in the region of 2.2x on original cost. B Shares – Update and Outlook Taking into account further proceeds realised since 31 December 2020 as detailed above and in note 17 on page 97 and an overall increase in AIM quoted investment bid prices, the Company is pleased to announce an updated unaudited NAV per B share of 99.4p per B share at 19 February 2021, an increase of 7.6p per B share from the audited NAV of 91.8p per B share as at 31 December 2020 and an overall increase in the Total Return per B share to 105.4p as at 19 February 2021. Shareholders will be pleased to know the Board declared an interim B share dividend of 1.5p per B share on 18 February 2021 to be paid on 14 May 2021 to shareholders on the B share register on 30 April 2021, with an ex-dividend date of 29 April 2021. Seneca continue to work closely with the investee companies in the B share portfolio with the aim of ensuring that the potential impact of C-19 is mitigated and that each investee company has sufficient funds to support their working capital requirements until normal trading and economic conditions return. Seneca remain confident that the portfolio retains its potential to provide attractive returns for B shareholders over the medium term. The Board is pleased with the progress that Seneca have made since their appointment as Investment Manager in 2018, in terms of funds raised, new investments made and relationships with brokers offering new quoted securities and now, exits achieved. Seneca expect to increase the funds raised under the current B share Offer and add new growth capital investments to the B share portfolio during the course of 2021 from, inter alia, the investments they currently have in the later stages of due diligence. Ordinary Share Pool Ordinary Shares - Results Whilst the NAV per Ordinary share decreased by 0.2p from 30.4p to 30.2p during the year, this was after the payment of dividends per Ordinary share totalling 13.0p. A better understanding of the underlying performance of the Company’s Ordinary share portfolio during the year is therefore provided by considering the NAV movement per Ordinary share during the year before dividends which shows an increase of some 12.8p (a 42% increase compared to 31 December 2019). This increase was principally driven by the increase in value of the Ordinary share portfolio’s two AIM quoted investments during the year. The quoted bid price of Scancell shares increased from 7.0p to 13.5p from the start of the financial year to the financial year end. During this period, it was decided to harvest a modest portion of our shareholding and we now hold 12 million shares. Omega benefited from its involvement in a partnership to develop a C-19 antibody test and the share price rose significantly; the Board, therefore, decided it was appropriate to take advantage of this and we sold our entire holding for £987k, generating a profit over original cost of £659k and over our holding value at 31 December 2019 of £666k. As a result of the realisations noted above, your Board were very pleased to be able to pay dividends totalling 13p per Ordinary share during the year with no material adverse impact on the Ordinary pool’s NAV. The Total Return in relation to the Ordinary shares is now 95.5p comprising cumulative distributions of 65.25p per Ordinary share and a residual NAV per Ordinary share of 30.2p as at 31 December 2020. As previously reported, the Board remains focused on identifying exit opportunities for the remainder of the Ordinary share pool investment portfolio, and it was particularly pleasing to have been able to distribute 13p per Ordinary share to shareholders this year with no material adverse impact on the Ordinary share pool’s NAV. Realisations in the last three years have enabled the payment of a total of 41p per Ordinary share in dividends to Ordinary shareholders, representing 64.3% of the NAV per Ordinary share as at 31 December 2017 and we still retain net assets of 30.2p per Ordinary share as at 31 December 2020. Notwithstanding this success, we remain confident that, overall, there remains the opportunity to realise further value for Ordinary shareholders in due course (particularly in relation to our Scancell holding): indeed as noted below, earlier this month we realised a further portion of our Scancell holding. For the time being, we do not currently consider it appropriate to liquidate any further Scancell shares and do not see any other immediate opportunities for realisations, but we continue to monitor the situation closely. Ordinary Shares - Investment Portfolio The remaining Ordinary share portfolio now comprises one AIM quoted holding, Scancell, as referred to above, which has a carrying value of £1,620k as at 31 December 2020, and six unquoted holdings – the carrying value of three of which have been reduced to zero with the combined carrying value of the other three being £521k as at 31 December 2020. Shareholders will note therefore that Scancell represented more than 75% of the value of the Ordinary share portfolio as at 31 December 2020 and as a result the NAV per Ordinary share now fluctuates largely in line with the movement in the Scancell share price. Whilst the Scancell share price showed volatility during 2020, it is not our policy to update the market following each of these fluctuations unless there are considered to be abnormal events (e.g. sale of a significant holding – see below). Your Board therefore recommends that shareholders or prospective shareholders keep the Scancell share price under review and consider its impact on the Ordinary share NAV per share before taking any action in relation to an existing or prospective holding in the Company’s Ordinary shares. Further details in relation to the Ordinary share pool’s investment portfolio are included in the Investment Manager’s Report on pages 28 to 35. Ordinary Shares – Update and Outlook As referred to above, and following recent press coverage, the share price of Scancell has risen significantly from 13.5p at 31 December 2020 and was 24.5p at 19 February 2021. We are pleased that the market is recognising the continuing developments at Scancell and have taken the opportunity to realise a further modest part of our holding by selling 1 million shares at 21.7p per Scancell share. Our current holding is 11 million shares and we continue to believe that there is further upside in this holding. This increase in the share price has given rise to a significant rise in the NAV per Ordinary share. Based on the NAV at 31 December 2020, adjusted solely for the uplift in valuation of our Scancell shares , the Ordinary share unaudited NAV per share was 44.0p at 19 February 2021. The Ordinary share pool retained a cash balance of £527k as at 31 December 2020 in order to make follow-on investments into existing Ordinary share portfolio companies where the Board believes this will protect the Ordinary share pool’s existing investment and/or improve the overall prospects of a timely exit from the investee company. This has been increased to £744k following the recent sale of Scancell shares. Despite several of the Ordinary share pool portfolio companies seeking further funds during the year, we did not consider the terms attractive nor likely to improve the overall prospects for a timely realisation from the investee company and therefore no further Ordinary share pool investments were made. Ordinary shareholders will recall that, following the appointment of Seneca as Investment Manager in August 2018, the Ordinary share pool incurs no running costs until July 2021. Fund Raising During the year the Company has allotted 2,701,500 B shares raising gross proceeds of £2,403k in the process. The current B share Offer will remain open until May 2021. Annual General Meeting The Company’s AGM will be held as a closed meeting at 14.00 on Monday, 29 March 2021 at the Company’s registered address 9 The Parks, Haydock, WA12 0JQ in accordance with the provisions of the Corporate Insolvency and Governance Act 2020. In light of the unprecedented restrictions on movement and gatherings due to the C-19 pandemic, shareholders will not be permitted to attend this year’s AGM and the meeting will take place with either two Directors who hold shares in the Company or one Director and an investment manager from Seneca Partners, who is also a shareholder, present only, to constitute the minimum quorum for the AGM to take place under the Company's articles of association and company law requirements. Shareholders should note that only the formal business set out in the Notice of AGM will be considered at the AGM. Although shareholders will not be permitted to attend the AGM this year there will be a shareholder update presentation by the Investment Manager and a question and answer (“Q&A”) session at 10:00 on 8 March 2021, further details of which are included below and on . Shareholders wishing to vote on any of the matters of business are urged to do so through completion of a proxy form appointing the Chairman of the AGM, which can be submitted to the Company’s Registrar. Proxy forms should be completed and returned in accordance with the instructions thereon and the latest time for the receipt of proxy forms is 14.00 on Saturday, 27 March 2021. Proxy votes can be also be submitted by CREST. All resolutions will be decided by a poll and therefore it is essential that shareholders wishing to vote submit their proxy forms by 14.00 on Saturday, 27 March 2021. Shareholders will have the opportunity to ask questions prior to submitting their proxy votes at the shareholder update presentation on 8 March 2021 as detailed below. The Board has reviewed my performance and has asked me to continue as Chairman. A resolution for my re-election is included in the AGM Notice. Resolutions for the re-election of Alex Clarkson, Richard Manley and Richard Roth are also included in the AGM Notice. The Notice of the AGM includes resolutions empowering the Directors to issue further B shares following the date of the AGM, which will primarily be used for the issue of B shares under a further Offer which we intend to launch for the 2021/2022 tax year. This requires authorisation for the Directors to be able to allot up to a further 35,000,000 B shares. Including these resolutions in the AGM business will avoid the Company having to produce and send out a separate circular to convene a separate general meeting. The Notice of the AGM also includes a resolution to adopt amended Articles of Association which are substantially in the same form as the Company’s current Articles of Association but will allow, inter alia, the holding of partially virtual AGMs and to increase the total remuneration of the Directors to allow for the recruitment of a new non-executive Director. Further details of the differences between the two sets of Articles are set out in the Directors’ Report on pages 48 to 49. A summary of the resolutions to be proposed by the Company at the AGM is included on pages 48 to 49. Shareholder Update Presentation Due to government restrictions impacting shareholders’ ability to attend the 2021 AGM as a result of the C-19 pandemic, a virtual shareholder update presentation will take place at 10:00 on Monday, 8 March 2021. Shareholders can register to attend the presentation by visiting: ·. Further details about the shareholder event can be found on . A Q&A session will take place where shareholders will have the opportunity to submit questions directly which we will seek to answer during the presentation. Questions can be submitted by emailing them to enquiries@senecavct.co.uk. Both the questions and answers will be published on the Company’s website following the presentation. VCT Qualifying Status Philip Hare & Associates LLP provides the Board with advice on the ongoing compliance with HMRC rules and regulations concerning VCTs; they have confirmed that the Company remains within all the appropriate VCT qualifying regulations as at 31 December 2020. In respect of the 80% Qualifying Holdings test, as at the end of December 2020 the percentage is 100% by virtue of a disregard of disposal proceeds, of which there have been £1.1m of relevant share sales (exit proceeds that occurred in the prevailing 12-month period are deducted from the total investments balance). Note, these exit proceeds are only deducted to the point that the test reaches 100% but without these the Company was still well above the 80% qualifying requirement. As at 31 December 2020 39% of funds raised in the year to 31 December 2019 had been invested in qualifying investments for the 30% minimum requirement. Fund Administration Our administration is conducted by Seneca at the Company’s registered address. Neville Registrars Limited (“Neville”) continue to maintain the shareholder register. All information in respect of both share classes including Annual Reports and notices of meetings can be found on our website . We would remind shareholders who have not opted for electronic communications that this is more efficient and ecologically friendly than receiving paper copies by post and therefore encourage you to contact Neville, whose details are on page 101, to advise them of your wish to switch to electronic communication. Auditor UHY Hacker Young LLP have audited the Company’s annual results for the year ending 31 December 2020, and shareholders will be asked to reappoint them at the AGM for the audit of the accounts for the year ending 31 December 2021. Future Prospects We are pleased that Seneca have continued to develop the portfolio of B share pool investee companies during the year. The B share portfolio includes a mix of both unquoted and AIM quoted investments and whilst progress of these investments to date has been generally positive, the Board and Seneca remain acutely aware of the need to continue to work at close quarters with all B share portfolio companies as they navigate the challenges ahead resulting from the C-19 pandemic. We also note that Seneca expect to see an increase in the number of businesses seeking investment to support their growth plans over the next 12 months as a result of the C-19 pandemic. With over £4.5 million of cash on the B share pool balance sheet at 31 December 2020. Seneca believe they are very well placed to continue to support the existing B share investment portfolio as well as adding attractive new growth capital investments to the B share portfolio from the strong pipeline of opportunities presented to them. We therefore look forward to the continued development of the B share portfolio in due course. Your Board continues to view the future of our Company with confidence. John Hustler Chairman 22 February 2021 Investment Manager’s Report We are pleased to set out in this section further details in relation to the development of both the B and Ordinary share pools and their respective investee companies during 2020. The B Share Pool Fundraising Our second B share offer was concluded in July 2020, bringing total funds raised to £7.2 million and our fund-raising efforts have since continued under our third B share Offer that was launched in October 2020, with £1.5 million being raised under this third Offer as at 31 December 2020. We were encouraged by the funds raised in the two months immediately following launch and remain focused on increasing the size of the B share pool, which will in turn allow us to increase the number and diversity of new investments that we make. Performance and Dividends Despite the unprecedented economic climate and general turmoil of financial markets occasioned by the C-19 pandemic, we are pleased with the development of the B share portfolio, with six additional investments being made in the year. We are also pleased to report an increase in the NAV Total Return per B share, from 96.1p at 31 December 2019 to 97.8p as at 31 December 2020. This increase in NAV Total Return per B share was the result of a slight reduction in the B share NAV as at 31 December 2020 (which fell to 91.8p per B share (2019: 93.1p)) which was more than explained by the payment of two B share dividends totalling 3.0p during the year. These two B share dividends paid during the year were in line with the Company’s ambition to continue to pay dividends on the B shares and it should be noted that the Company has sufficient distributable reserves to enable the continued declaration of B share dividends over the medium term subject to Board approval, the B share pool investment pipeline and liquidity levels. AIM Quoted Investments With the AIM market demonstrating a heightened level of volatility during the year as a result of the impact of C-19, we took the opportunity to realise just over half of the B share pool’s shareholding in OptiBiotix plc (“OptiBiotix”) (an investment made during the year), selling 400,000 shares and realising a gain of £92k on the disposal (1.6x cash return in just 2 months following the original investment). We also sold our full holding in Genedrive (another investment made in the year) which is the B share pool’s first full exit and generated a profit of £136k versus original cost (2.1x cash return). We were also encouraged that the during the year we saw an increase in the bid price of the two largest B share pool AIM quoted investments: the SkinBio share price increased to 22.0p as at 31 December 2020 (a 57% increase from 14p as at 31 December 2019) and the OptiBiotix share price increased to 57.0p as at 31 December 2020 (a 42.5% increase from the cost price of 40p per share). Co-investing With Seneca EIS Funds More generally we continue to develop Seneca’s position in the market as an active growth capital investor and as at 31 December 2020, we have raised and deployed c.£100 million of EIS and VCT investment funds into over 50 SME companies, through over 100 funding rounds, since we undertook our first EIS investment in 2012. This includes £8.7 million raised to date by the B share pool. The ten investments in the B share portfolio had a value of £3,982k as at 31 December 2020 and are co-investments with EIS funds also managed by Seneca. We believe that the opportunity for the Company’s B share pool to co-invest with EIS funds that are also managed by Seneca provides the B share pool with a number of advantages including being able to participate in a higher number of investments, of a larger scale, into more established businesses than would be possible for the B share pool on a standalone basis. Further, as a result of our position in the UK market as an active growth capital investor we maintain a strong pipeline of investment opportunities, particularly in the North of England, with a focus on well managed businesses with strong leadership teams that can demonstrate established and proven concepts in addition to growth potential. We aim to invest in both unquoted and AIM quoted companies and are pleased to have completed three additional AIM quoted investments in the year. Investee Company Updates We are very happy with the development of the B share investment portfolio. As noted above, we are delighted to have been able to include some AIM quoted investments in these early investments and are also very happy that by 31 December 2020 we had already been able to exit some of these at a profit so early in the development of those businesses (1 full exit and 2 partial exits). These early profits have supported the performance of the B share pool NAV at the same time as we continue to develop the unquoted company investment portfolio. We are excited about the potential that lies with the B share investment portfolio and have included updates in relation to all of the B share pool investee companies later in this Investment Manager’s Report but wanted to highlight in particular the progress being made by B share pool investee companies SilkFred Limited (“SilkFred”) and SkinBio below and also comment on the reduction in fair value introduced against the carrying value of Qudini. SilkFred SilkFred is an online marketplace which specialises in independent ladies’ fashion brands. The B share pool invested £500k in SilkFred in December 2018 and the business made strong progress throughout the first year of our investment building a strong reputation and brand in the “event driven” fashion space. As you would expect however, this left the business exposed to the impact of the C-19 pandemic in 2020 which brought about a fall in sales levels as a result of the reduction in the number of celebrations and events which previously drove the company’s growth. Notwithstanding this, SilkFred’s recovery from the UK’s first lockdown was swift and Gross Marketplace Value (total sales value sold through the SilkFred platform) during the summer months of 2020 actually exceeded that of 2019. The business traded well for the rest of the year, remaining profitable throughout, buoyed by the loyalty shown by the customer base. The management team continue to view their market position positively and are looking to the future with confidence, particularly in anticipation of the return of their core markets as the UK emerges from lockdown. We too, are excited about SilkFred’s future. SkinBio SkinBio is an AIM quoted life science company focused on skin health and the B share pool invested £750k in February 2019 at 16p per share. The business made excellent progress during 2020 including raising c£4.45m of funds from new and existing investors, successfully accelerating the project timeline for its food supplement programme and gaining commercial interest for its MediBiotix™ and CleanBiotix™ programmes. The SkinBio share price closed on 31 December 2020 at 22p per share. Having initially invested in SkinBio in February 2019, we sold 175,000 shares in early June 2019 at a profit of c1.5x original cost reducing the remaining holding to 4,502,107 shares. We did not sell any shares in 2020; however following the 31 December 2020 year end, the positive progress being made by SkinBio translated into further increases in the share price and we are pleased to report that we have taken the opportunity to take some profit from this investment. We sold 1,750,000 shares in January 2021 (37% of the B share pool’s original holding of 4,677,107 shares) reducing the remaining holding to 2,752,107 shares. These were sold at a net average price of 35.5p per share providing a return in the region of 2.2x on original cost. The business is well funded, is targeting a valuable market with unmet cosmetic and clinical needs and we remain confident of SkinBio’s long-term prospects of success. Qudini Qudini is a UK based market leading provider of queue management software for enterprise brands. It generates the vast majority of its revenue from bricks and mortar retailers. Given the level of uncertainty caused in this core market by C-19, we took the prudent decision to reduce the carrying value of the B share pool’s investment in Qudini by 40% as at 30 June 2020. Whilst there has been some improvement in the trading performance of Qudini in H2 2020, some uncertainty remains over the future of its core bricks and mortar retail market. Therefore, we have maintained the 40% reduction in fair value and this investment was held at 60% of cost as at 31 December 2020. Investments made after the Year End and outlook Following the year end we also completed an additional unquoted company investment into Solascure Ltd (“Solascure”) for £500k. Solascure is an early stage wound care specialist which was originally spun out of (and continues to work alongside) world leading German biotech company BRAIN engaged in the development of a new-to-market wound care product. Solascure is also backed by strategic investor Eva Pharma and the business will commence their first clinical trial in 2021. Solascure’s Aurase product is a gel-based product that efficiently and gently cleans wounds, making the healing process much more straightforward. We look forward to continuing to increase the funds raised for the B share pool under the current Offer and with several new investment opportunities in the later stages of due diligence, we expect to add to the portfolio of B share investee companies in the coming months. Investment Portfolio – B shares *Partial exit B Share Pool – Investment Portfolio – Top Six Unquoted Investments by value as at 31 December 2020 1. Fabacus Holdings Limited 2. SilkFred Limited 3. Old St Labs Limited 4. Ten80 Group Limited 5. Qudini Limited 6. Bright Network (UK) Limited B Share Pool - Investment Portfolio – AIM Quoted Investments as at 31 December 2020 1. SkinBioTherapeutics Plc 2. OptiBiotix Health Plc 3. Abingdon Health plc B Share Pool – Investment Portfolio – Post-balance sheet Investments as at 22 February 2021 1. Solascure Ltd The Ordinary Share Pool Shareholders will recall that whilst Seneca is the Company’s Investment Manager, responsibility for the management of the Ordinary share pool investments continues to rest with those remaining members of the Board of Directors who were serving at the point of Seneca’s appointment on 23 August 2018, which now includes John Hustler and Richard Roth. AIM Quoted Investments The Ordinary share pool’s largest investment is AIM quoted Scancell and this represented 37% of the Ordinary share pool’s NAV as at 31 December 2019 when the Scancell share price was 7.0p. During the year, the Scancell share price almost doubled and ended the year at 13.5p. In view of this increasing share price, the Company took the opportunity to realise some profit and sold a small portion of our Scancell shares during the year (1,049,730 shares (8%) were sold from a holding at the start of the year of 13,049,730 shares) realising £127k and generating a profit versus original cost of £64k (a 2x return on the original investment) and a profit versus the 31 December 2019 carrying value of £54k. The Ordinary share pool’s remaining stake in Scancell of 12,000,000 shares increased by £780k during the year to stand at a value of £1,620k as at 31 December 2020. The Ordinary share pool’s investment in AIM quoted Omega gained significant traction in the year following its involvement in a partnership to develop a C-19 antibody test. The share price rose substantially from its 31 December 2019 price when it was 14p and this allowed the Company to sell the Ordinary share pool’s entire holding of 2,293,868 Omega shares in the year for a total of £987k. This generated a profit versus original cost of £659k (a 3x return on the original investment) and similarly a profit of £666k versus its 31 December 2019 value. Unquoted Investments With regard to the Ordinary share pool’s unquoted investments, the carrying value of OR Productivity Limited (“ORP”) and Fuel 3D Technologies Limited (“Fuel 3D”) were both reduced as a result of fundraises by these companies in 2020. In the case of ORP, the dilutive impact of the funds raised are such that the Company reduced the carrying value to £nil for the Ordinary share pool’s investment in ORP as at 31 December 2020 (31 December 2019 carrying value: £233k) and in the case of Fuel 3D the carrying value has been reduced to bring it in line with the price of their 2020 fundraise. Although the Ordinary share pool has maintained the value of Arecor Ltd at the price of the last fundraising in 2018, it continues to make excellent technical and commercial progress. Performance and Dividends As a result of the above AIM quoted investee company realisations, the Ordinary share pool was able to pay dividends totalling 13p per Ordinary share during the period. The Total Return in relation to the Ordinary shares is now 95.5p comprising cumulative distributions of 65.25p per Ordinary share and a residual NAV per Ordinary share of 30.2p as at 31 December 2020. As noted in the Chairman’s statement, the Company is focussed on realising assets in the Ordinary share pool at the appropriate time with the proceeds then being distributed to Ordinary shareholders as dividends – it is therefore noteworthy that in the 3 years to 31 December 2020 the Company has paid out dividends totalling 41p per Ordinary share (equivalent to 64.3% of the NAV per Ordinary share of 63.8p as at 31 December 2017) and the Ordinary share pool also retains NAV per Ordinary share of 30.2p as at 31 December 2020. Investment Portfolio – Ordinary shares *Partial exit **Dissolved 24 January 2020 Ordinary Share Pool – Investment Portfolio – All Six Unquoted Investments by value as at 31 December 2020 1. Arecor Limited 2. Fuel 3D Technologies Limited 3. Insense Limited 4. OR Productivity Limited 5. ImmunoBiology Limited 6. Microarray Limited Ordinary Share Pool – Investment Portfolio – AIM Quoted Investment as at 31 December 2020 1. Scancell plc Richard Manley Seneca Partners Limited 22 February 2021 Directors’ Report The Directors present their Report and the audited Financial Statements for the year ended 31 December 2020. The Directors consider that the Annual Report and Financial Statements, taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy. Review of Business Activities The Directors are required by section 417 of the Companies Act 2006 to include a Business Review to shareholders. This is set out on page 36 and forms part of the Strategic Report. The purpose of the Business Review is to inform members of the Company and help them assess how the Directors have performed their duty under section 172 of the Companies Act 2006 (duty to promote the success of the Company). The Company’s section 172 Statement on page 6, the Chairman's Statement on page 8 to 13, and the Investment Manager’s Report on pages 14 to 35 also form part of the Strategic Report. The purpose of this review is to provide shareholders with a snapshot summary setting out the business objectives of the Company, the Board’s strategy to achieve those objectives, the risks faced, the regulatory environment and the key performance indicators used to measure performance. Directors’ Shareholdings – Ordinary shares The Directors of the Company during the period and their interests (in respect of which transactions are notifiable under Disclosure and Transparency Rule 3.1.2R) in the issued Ordinary shares of 1p are shown in the table below: All of the Directors’ shares were held beneficially. There have been no changes in the Directors’ Ordinary share interests between 31 December 2020 and the date of this report. Directors’ Shareholdings – B Shares The Directors of the Company during the period and their interests (in respect of which transactions are notifiable under Disclosure and Transparency Rule 3.1.2R) in the issued B shares of 1p are shown in the table below: All of the Directors’ B shares were held beneficially. There have been no changes in the Directors’ B share interests between 31 December 2020 and the date of this report. Directors’ and Officers’ Liability Insurance The Company has maintained directors’ and officers’ liability insurance cover on behalf of the Directors, Company Secretary and Investment Manager. Whistleblowing The Board has approved a Whistleblowing Policy for the Company, its Directors and any employees, consultants and contractors, to allow them to raise concerns, in confidence, in relation to possible improprieties in matters of financial reporting and other matters. Bribery Act The Board has approved an Anti-Bribery Policy to ensure full compliance with the Bribery Act 2010 and to ensure that the highest standards of professional and ethical conduct are maintained. Management Seneca as the Company’s Investment Manager is responsible for the management of the Company’s B share pool investments. Responsibility for the management of the Ordinary share pool investments has been delegated to those members of the current Board of Directors who served immediately prior to 23 August 2018, namely John Hustler and Richard Roth. The strategies and policies which govern the Investment Manager have been set by the Board in accordance with section 172 of the Companies Act 2006. Corporate Governance Statement The Board has considered the principles and recommendations of the 2019 AIC Code. The Company’s Corporate Governance policy is set out on pages 50 to 54. The 2019 AIC Code is available on the AIC website ( ). It includes an explanation of how the 2019 AIC Code adapts the Principles and Provisions set out in the UK Corporate Governance Code (the “UK Code”) to make them relevant for investment companies. The Company has complied with the recommendations of the 2019 AIC Code and the relevant provisions of the UK Corporate Governance Code, except as set out below: The Company does not have a Chief Executive Officer or a Senior Independent Director. The Board does not consider this necessary as it does not have any executive directors. New Directors do not receive a formal induction on joining the Board, though they do receive one tailored to them on an individual basis. The Company conducts a formal review as to whether there is a need for an internal audit function. However, the Directors do not consider that an internal audit would be an appropriate control for this VCT at this time. The Company does not have a Remuneration Committee as it does not have any executive directors. The Company does not have a Nomination Committee as these matters are dealt with by the Board. For the reasons set out in the AIC Guide, and as explained in the UK Corporate Governance Code, the Board considers the above provisions are not relevant to the position of the Company, being an investment company run by the Board and managed by the Investment Manager. In particular, all of the Company’s day-to-day administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. Directors Biographical details of the Directors are shown on page 42. In accordance with the Articles of Association and good governance, all four Directors will retire and offer themselves for re-election at the forthcoming AGM. The Board is satisfied that, following individual performance appraisals, the Directors who are retiring continue to be effective and demonstrate commitment to their roles and therefore offer themselves for re-election with the support of the Board. Further details regarding the Company’s succession planning are set out in the Corporate Governance policy on pages 51 to 52. The Board did not identify any conflicts of interest between the Chairman’s interest and those of the shareholders, especially with regard to the relationship between the Chairman and the Investment Manager. No concerns about the operation of the Board or the Company were raised by any Director during the period and had any been raised they would be mentioned in the minutes or in writing to the Chairman to be circulated to the Board in accordance with Provision 5.2 of the 2019 AIC Code. The Board is cognisant of shareholders’ preference for Directors not to sit on the boards of too many listed companies (“over-boarding”). The Board is satisfied that all Directors have the time to focus on the requirements of the Company. International Financial Reporting Standards As the Company is not part of a group it is not mandatory for it to comply with International Financial Reporting Standards (“IFRS”). The Company does not anticipate that it will voluntarily adopt IFRS. The Company has adopted Financial Reporting Standard 102 – The Financial Reporting Standard Applicable in the United Kingdom and the Republic of Ireland. Environmental, Social and Governance (“ESG”) Practices The Board recognises the requirement under section 414c of the Companies Act 2006 to detail information about environmental matters (including the impact of the Company’s business on the environment), employee and human rights, social and community issues, including information about any policies it has in relation to these matters and effectiveness of these policies. Given the size and nature of the Company’s activities and the fact that it has no employees and only four non-executive Directors, the Board considers there is limited scope to develop and implement environmental, social and community policies, but recognises the importance of including consideration for such matters in investment decisions. The Board has taken into account the requirement of section 172(1) of the Companies Act 2006 and the importance of ESG matters when making decisions which could impact shareholders, stakeholders and the wider community. The Company’s Section 172(1) statement has been provided in the Strategic Report on page 6, where the Directors consider the information to be of strategic importance to the Company. The Company seeks to ensure that its business is conducted in a manner that is responsible to the environment. The management and administration of the Company is undertaken by the Investment Manager who recognises the importance of its environmental responsibilities, monitors its impact on the environment and implements policies to reduce any negative environmental impact and which promote environmental sustainability. The Investment Manager recognises that managing investments on behalf of clients involves taking into account a wide set of responsibilities in addition to seeking to maximise financial returns for investors. Industry practice in this area has been evolving rapidly and the Company seeks to be an active participant by working to define and strengthen its principles accordingly. This involves both integrating ESG considerations into the Investment Manager’s investment decision-making process as a matter of course, and also signing up to major external bodies who are leading influencers in the formation of industry best practice. The following is an outline of the kinds of ESG considerations that the Investment Manager is taking into account as part of its investment process. Environmental Seneca, as part of its commercial due diligence practices and ongoing monitoring, examines potential issues which could arise from supply chains, climate change and environmental policy compliance. The Investment Manager looks for management teams who are aware of the issues and are proactive in responding to them. Social Seneca seeks to avoid unequivocal social negatives, such as profiting from forced labour within its investment portfolio and to support positive impacts which will more likely find support from customers and see rising demand. Seneca does not tolerate modern slavery or human trafficking within its business operations and takes a risk-based approach in respect of our portfolio companies. Seneca actively engages with portfolio companies and their boards to discuss material risks, ranging from business and operational risks to environmental and social risks. Governance Seneca examines and, where appropriate, engages with companies on board membership, remuneration, conflicts of interest such as related party transactions, and business leadership and culture. In addition, the Company, as a matter of course, exercises its voting rights when possible. Greenhouse Gas (“GHG”) Emissions and Streamlined Energy & Carbon Reporting (“SECR”) Under the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 (‘the 2013 Regulations’) and the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, quoted companies of any size are required under Part 15 of the Companies Act 2006 to disclose information relating to their energy use and GHG emissions. All of the Company’s activities are outsourced to third parties. The Company therefore has no greenhouse gas emissions to report from its operations, nor does it have direct responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013 and the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. For the same reasons as set out above, the Company considers itself to be a low energy user under the SECR regulations and therefore is not required to disclose energy and carbon information. A low energy user is defined as an organisation that uses 40 MWh or less during the reporting period. Going Concern The Company’s business activities and the factors likely to affect its future performance and financial position are set out in the Chairman’s Statement and Investment Manager’s Report on pages 8 to 13 and pages 14 to 35. Further details on the management of the principal risks are set out on pages 39 to 40 and financial risks may be found in note 16 to the Financial Statements. The Board receives regular reports from Seneca who acts as both the Investment Manager and the Administration Manager, and the Directors believe that, as no material uncertainties leading to significant doubt about going concern have been identified, it is appropriate to continue to adopt the going concern basis in preparing the Financial Statements. The assets of the Company consist mainly of securities, four of which are AIM quoted, relatively liquid and readily accessible, as well as more than £5 million of cash as at 31 December 2020 (47% of net assets). After reviewing the Company’s forecasts and expectations, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company therefore continues to adopt the going concern basis in preparing its Financial Statements. The Company is also facing risks resulting from the impact of the C-19 pandemic. The Company’s Board and Investment Manager are focused on ensuring that investee companies are taking the required actions to minimise the potential impact that the C-19 pandemic could have on them. The Board and Seneca will continue to review risks posed by C-19 and keep those risks under regular review but do not consider the pandemic to have any impact on the Company’s own ability to continue as a going concern. Share Capital As disclosed on page 99 the Board has authority to make market purchases of the Company’s own B shares. No shares were purchased by the Company during the year (2019: nil). At the last AGM held on 28 April 2020, the Board received authority to allot up to 35,000,000 B shares in connection with any offer(s) for subscription (and any subsequent top up offer of B shares) and up to 405,800 Ordinary shares (for any miscellaneous offers of such shares), which represented approximately 479% of the Company’s issued B share capital and approximately 5% of its issued Ordinary share capital as at 28 April 2020. During the year, the Company did not issue any Ordinary shares (2019: nil). During the year, the Company issued 2,701,500 B shares raising £2.4 million before expenses (2019: 2,325,078 shares and £2.3 million) No further shares have been issued between 31 December 2020 and the date of this report. The Company’s issued Ordinary share capital as at 31 December 2020 was 8,115,376 Ordinary shares of 1p each (31 December 2019: 8,115,376 Ordinary shares of 1p each) and 9,062,948 B shares of 1p each (31 December 2019: 6,361,448 B shares of 1p each). The total number of shares in issue for both the Ordinary shares and B shares of 1p each as at 31 December 2020 and 19 February 2021 was 17,178,324 (31 December 2019: 14,476,824) with each share having one vote. In accordance with Schedule 7 of the Large and Medium Size Companies and Groups (Accounts and Reports) Regulations 2008, as amended, the Directors disclose the following information: The Company’s capital structure and voting rights are summarised above, and there are no restrictions on voting rights nor any agreement between holders of securities that result in restrictions on the transfer of securities or on voting rights; There exist no securities carrying special rights with regard to the control of the Company; The rules concerning the appointment and replacement of directors, amendment of the Articles of Association and powers to issue or buy back of the Company’s shares are contained in the Articles of Association of the Company and the Companies Act 2006; The Company does not have an employee share scheme; There are no agreements to which the Company is party that may affect its control following a takeover bid; and There are no agreements between the Company and its Directors providing for compensation for loss of office that may occur following a takeover bid or for any other reason, apart from their normal notice period and any fees potentially due under the performance fee arrangements set out on page 58 and note 6. Substantial Shareholdings At 31 December 2020 and at the date of this report, there was one holding of 3% and over of the Company’s ordinary share capital. This holding related to Share Nominees Ltd and amounted to 3.34%. Annual General Meeting The Notice convening the 2021 AGM of the Company is set out at the end of this document (and a form of proxy in relation to the meeting is enclosed separately). Part of the business of the AGM will be to consider resolutions in relation to the following matters: Resolutions 3 to 6 will seek the re-election of the existing four members of the Board as non-executive Directors of the Company. Resolution 7 will seek the re-appointment of UHY Hacker Young LLP as Independent Auditor to the Company. Resolution 8 will seek authorisation to determine the auditor’s remuneration. Resolution 9 will authorise the Directors to allot further B shares and Ordinary shares. This will enable the Directors until the next AGM to allot up to 35,000,000 B shares in connection with any offer(s) for subscription (and any subsequent top up offer of B shares) and up to 405,800 Ordinary shares (for any miscellaneous offers of such shares), representing approximately 386% of the Company’s issued B share capital and approximately 5% of its issued Ordinary share capital as at 19 February 2021. Resolution 10 will authorise the Board, pursuant to the Act, to make one or more market purchases of up to 14.99% of the issued B share capital of the Company from time to time. The price paid must not be less than 1p per B share, nor more than 5% above the average middle market price of a B share for the preceding five business days. Any B shares bought back under this authority may be cancelled by the Board. Resolution 11 will, under sections 570 of the Act, disapply pre-emption rights in respect of any allotment of the B shares and/or Ordinary shares authorised under Resolution 9. Resolution 12 will adopt amended Articles of Association which are substantially in the same form as the Company’s current Articles of Association save that: existing Clause 146 regarding Unclaimed Dividends has been deleted and replaced with a new Clause 146 which provides the authorisation for all dividends, interest or other sum payable and unclaimed for 12 months after having become payable to be invested or otherwise made use of by the Board for the benefit of the Company until claimed and the Company shall not be constituted a trustee in respect thereof. All dividends unclaimed for a period of six years after having been declared or become due for payment shall (if the Board so resolves) be forfeited and shall cease to remain owing by the Company; and existing Clauses 53 to 56 (including the insertion of new Clauses 55A and 56A) have been amended to include the ability for the Company to hold partially virtual general meetings. Existing Clause 102 will be amended to authorise an increase in the total remuneration payable to the Directors to £100,000 to allow for the appointment of a new non-executive Director. The Directors intend to use the authorities in Resolutions 9 and 11 for the purposes of the current Offer and a further offer for subscription of B shares. The Directors have no current intention to utilise the authority in relation to the Ordinary shares. Copies of the Articles of Association of the Company (including a mark-up of the new articles of association proposed to be adopted pursuant to resolution 12) will be available for inspection at the registered office of the Company during usual business hours on any weekday (Saturday and Public Holidays excluded) from the date of this notice, until the end of the Annual General Meeting and at the place of the Annual General Meeting for at least 15 minutes prior to and during the meeting. However, given that shareholders will be unable to attend the AGM this year, the Articles of Association will also be available on the Company’s website at . Recommendation The Board believes that the passing of the resolutions above are in the best interests of the Company and its shareholders as a whole and unanimously recommends that you vote in favour of these resolutions as the Directors intend to do in respect of their beneficial shareholdings. By Order of the Board Craig Hunter Company Secretary 22 February 2021 Combined Income Statement There was no other Comprehensive Income recognised during the year The ‘Total’ column of the income statement and statement of comprehensive income is the profit and loss account of the Company; the supplementary revenue return and capital return columns have been prepared under guidance published by the Association of Investment Companies. All revenue and capital items in the above statement derive from continuing operations. The Company has only one class of business and derives its income from investments made in shares and securities and from bank and money market funds. The Company has two share classes, the Ordinary share and B share class. The Company has no recognised gains or losses other than the results for the year as set out above. The accompanying notes are an integral part of the Financial Statements. Ordinary Share Income Statement (non-statutory analysis) B Share Income Statement (non-statutory analysis) Combined Statement of Changes in Equity The accompanying notes are an integral part of the Financial Statements. Ordinary Shares - Statement of Changes in Equity B Shares - Statement of Changes in Equity *At fair value through profit and loss The accompanying notes are an integral part of the Financial Statements. The statements were approved by the Directors and authorised for issue on 22 February 2021 and are signed on their behalf by: John Hustler Chairman Company No: 04221489 *At fair value through profit and loss *At fair value through profit and loss Combined Statement of Cash Flows The accompanying notes are an integral part of the Financial Statements. Ordinary Shares Statement of Cash Flows (non-statutory analysis) B Shares Statement of Cash Flows (non-statutory analysis) Notes to the Financial Statements 1. Principal Accounting Policies Basis of preparation The Financial Statements have been prepared under the historical cost convention, except for the measurement at fair value of certain financial instruments, and in accordance with UK Generally Accepted Accounting Practice (“GAAP”), including FRS 102 and with the Companies Act 2006 and the Statement of Recommended Practice (SORP) ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts (revised 2019)’. The principal accounting policies have remained materially unchanged from those set out in the Company’s 2019 Annual Report and Financial Statements. A summary of the principal accounting policies is set out below. The Company is a public company and is limited by shares. The Company held all fixed asset investments at fair value through profit or loss. Accordingly, all interest income, fee income, expenses and gains and losses on investments are attributable to assets held at fair value through profit or loss. The most important policies affecting the Company’s financial position are those related to investment valuation and require the application of subjective and complex judgements, often as a result of the need to make estimates about the effects of matters that are inherently uncertain and may change in subsequent periods. These are discussed in more detail below. Going Concern The assets of the Company consist mainly of securities, four of which are AIM quoted, quite liquid and readily accessible, as well as cash. As at 31 December 2020, 47% of net assets was cash. After reviewing the Company’s forecasts and expectations, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company therefore continues to adopt the going concern basis in preparing its Financial Statements. In addition to the above, the Company is also facing risks resulting from the impact of the C-19 pandemic. The Company’s Board and Investment Manager are focused on ensuring that investee companies are taking the required actions to minimise the potential impact that the C-19 pandemic could have on them. The Board and Seneca will continue to review risks posed by C-19 and keep those risks under regular review. Key judgements and estimates The preparation of the Financial Statements requires the Board to make judgements and estimates regarding the application of policies affecting the reported amounts of assets, liabilities, income and expenses. Estimates and assumptions mainly relate to the fair valuation of the fixed asset investments particularly unquoted investments. Estimates are based on historical experience and other assumptions that are considered reasonable under the circumstances. The estimates and the assumptions are under continuous review with particular attention paid to the carrying value of the investments. Investments are regularly reviewed to ensure that the fair values are appropriately stated. Unquoted investments are valued in accordance with current International Private Equity and Venture Capital Valuation (IPEV) guidelines, which can be found on their website at , although this does rely on subjective estimates such as appropriate sector earnings or revenue multiples, forecast results of investee companies, asset values of investee companies and liquidity or marketability of the investments held. The material factors affecting the returns and net assets attributable to shareholders of the different share classes are the valuations of the Ordinary and B share pools and ongoing general expenses. Although the Directors believe that the assumptions concerning the business environment and estimate of future cash flows are appropriate, changes in estimates and assumptions could result in changes in the stated values. This could lead to additional changes in fair value in the future. Functional and presentational currency The Financial Statements are presented in Sterling (£). The functional currency is also Sterling (£). Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. Fixed asset investments The Company’s principal financial assets are its investments and the policies in relation to those assets are set out below. Purchases and sales of investments are recognised in the Financial Statements at the date of the transaction (trade date). These investments will be managed and their performance evaluated on a fair value basis and information about them is provided internally on that basis to the Board. Accordingly, as permitted by FRS 102, the investments are measured as being fair value through profit or loss on the basis that they qualify as a group of assets managed, and whose performance is evaluated, on a fair value basis in accordance with a documented investment strategy. The Company's investments are measured at subsequent reporting dates at fair value. 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 upon convention of the exchange on which the investment is quoted. In the case of AIM quoted investments this is the closing bid price. In the case of unquoted investments, fair value is established by using measures of value such as the price of recent transactions, earnings or revenue multiples, discounted cash flows and net assets. These are consistent with the IPEV guidelines. 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 capital reserve - holding gains/(losses). In the preparation of the valuations of assets the Directors are required to make judgements and estimates that are reasonable and incorporate their knowledge of the performance of the investee companies. Fair value hierarchy Paragraph 34.22 of FRS 102 regarding financial instruments that are measured in the balance sheet at fair value requires disclosure of fair value measurements dependent on whether the stock is quoted and the level of the accuracy in the ability to determine its fair value. The fair value measurement hierarchy is as follows: For quoted investments: Level 1: quoted prices in active markets for an identical asset. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held is the bid price at the Balance Sheet date. Level 2: where quoted prices are not available (or where a stock is normally quoted on a recognised stock exchange that no quoted price is available), the price of a recent transaction for an identical asset, providing there has been no significant change in economic circumstances or a significant lapse in time since the transaction took place. The Company held no such investments in the current or prior year. For investments not quoted in an active market: Level 3: the fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable data (eg: the price of recent transactions, earnings/revenue multiple, discounted cash flows and/or net assets) where it is available and rely as little as possible on entity specific estimates. There have been no transfers between these classifications in the year (2019: none). The change in fair value for the current and previous year is recognised through the profit and loss account. Current asset investments No current asset investments were held at 31 December 2020 or 31 December 2019. Should current assets be held, 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 capital reserve - gains/(losses) on disposal. Income Investment income includes interest earned on bank balances and from unquoted loan note securities, and dividends. Fixed returns on debt are recognised on a time apportionment basis so as to reflect the effective yield, provided it is probable that payment will be received in due course. The Company has not generated any income in 2020 (2019: £nil). Expenses All expenses are accounted for on an accruals basis. Expenses are charged wholly to revenue with the exception of the performance and management fee. The performance fee is charged 100% to the capital reserve and the investment management fee charged to the B shares has been split 25% revenue and 75% capital, in line with industry practice and to reflect the Board’s estimated split of investment returns which will be achieved by the Company’s B shares over the long term. Expenses and liabilities not specific to a share class are allocated to the B share pool for a period of three years from 1 July 2018 in line with the Articles of Association. Revenue and capital The revenue column of the Income Statement includes all income and revenue expenses of the Company. The capital column includes gains and losses on disposal and holding gains and losses on investments, as well as those expenses that have been charged as capital costs. 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 appropriate capital reserve on the basis of whether they are realised or unrealised at the Balance Sheet date. Taxation Current tax is recognised for the amount of income tax payable in respect of the taxable profit for the current or past reporting periods using the applicable tax rate. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue return on the "marginal" basis as recommended in the SORP. Deferred tax is recognised on an undiscounted basis in respect of all timing differences that have originated but not reversed at the balance sheet date, except as otherwise indicated. Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Financial instruments The Company’s principal financial assets are its investments and its cash and the policies in relation to those assets are set out above. Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities. Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Capital management is monitored and controlled using the internal control procedures set out on page 53 of this report. The capital being managed includes equity and fixed-interest investments, cash balances and liquid resources including debtors and creditors. The Company does not have any externally imposed capital requirements. Reserves Called up equity share capital represents the nominal value of shares that have been issued. Share premium account includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium. Special distributable reserve includes cancelled share premium and capital redemption reserves available for distribution and may be used to cover dividend payments. Capital reserve – holding gains and losses created when the Company revalues the investments still held during the period with any gains or losses arising being credited/ charged to the Capital reserve. Capital reserve – gains and losses on disposal created when an investment is sold. Any balance held in the Capital reserve – holding gains and losses is transferred to the Capital reserve – realised gains and losses on disposal and recognised as a movement in reserves. Revenue reserve – represents the aggregate value of accumulated realised profits (excluding capital profits), less losses and dividends. Dividends Payable Dividends payable are recognised as distributions in the Financial Statements when the Company’s liability to make payment has been established. This liability is established for interim dividends when they are declared by the Board, and for final dividends when they are approved by shareholders. 2. Income Investment income includes interest earned on bank balances and dividends. The Company has not generated any income in the period and as such we have not included any segmental reporting. In the event the Company had generated income, we would disclose information about the Company’s operating segments and the geographical areas in which they operate, which is currently in the United Kingdom. 3. Investment Management Fees for B shares Seneca is entitled to an annual management fee of 2% of the weighted net asset value of the B share pool (2019: 2%) and, with effect from 1 August 2019, is also entitled to an annual fee of £9,000 (plus VAT, if applicable) in relation to management accounting services. These fees are payable quarterly in arrears. Seneca will also be entitled to certain monitoring fees from investee companies and the Board reviews the amounts (please see note 19). Seneca are also entitled to receive a performance related incentive fee (the “Performance Incentive Fee”) in relation to the B share pool of an amount equal to 20% of the shareholder proceeds arising, provided that the payment of such a fee shall also be conditional upon (i) a return being generated on the B share pool for B shareholders in respect of that performance period of more than 5% per annum (pro-rated if that period is less than a year) and (ii) that such a return calculated for the period from 23 August 2018 to the end of the relevant performance period exceeds 5% per annum. Shareholder proceeds are all amounts paid by way of dividend or other distributions, share buy backs, proceeds on a sale or liquidation of the Company in relation to the B shares and calculated on a per share basis, and any other proceeds or value received or deemed to be received by the holders of the relevant shares (excluding any income tax relief on subscription). For the avoidance of doubt, no Performance Incentive Fee will be payable to the extent that the shareholder proceeds paid by the Company to the holders of the B shares have been justified by reference to distributable reserves otherwise attributable to the Ordinary share pool (as permitted in accordance with the Articles). For a three-year period with effect from 1 July 2018, expenses of the Company are capped at 3% of the weighted average net asset value of the B shares, including the management fee (but excluding any performance fee). Following this initial period, expenses are capped at 3% across both the Ordinary share pool and the B share pool pro-rata to their respective net asset values. The Investment Manager will indemnify the Company for any excess over the cost cap, with an amount equal to such excess either being paid by Seneca to the Company or refunded by way of a reduction to its fees. Accordingly, Seneca reduced its management fee by £86,000 in the year to 31 December 2020 (2019: reduced by £75,000). Expenses are charged wholly to revenue with the exception of the (net) investment management fee which has been charged 75% to the capital reserve in line with industry practice and the performance fee. 4. Other Expenses All expenses were charged to the Ordinary shares for the period to 30 June 2018. In line with the offer for subscription for B shares, and following the initial allotment of B shares on 23 August 2018, all the Company’s general expenses are chargeable to the B share pool for a period of three years from 1 July 2018 (subject to the cost cap discussed in note 3). Any expenditure related specifically to assets in one pool is chargeable to that pool. It should be noted that the only items specifically relating to the Ordinary share pool relate to a £2k legal fee (2019: £4k credit of released accruals for advisory fees). 5. Directors’ Remuneration Richard Manley, a director of the Investment Manager, has elected to waive his Director’s fee, until the Company’s operating costs are less than the expenses cost cap. As part of the Board’s regular review of Directors’ fees, it was determined that Richard Roth’s Director’s fee would increase to £20,000 per annum inclusive of all expenses with effect from 1 October 2020 to reflect the work performed by him in respect of his role as Chairman of the Audit Committee. It was also decided that Richard Roth would receive a one-off payment of £2,500 in respect of the work he performed as part of this role for the period prior to 1 October 2020. Apart from this, none of the Directors received any other remuneration from the Company during the year. Directors’ emoluments include remuneration and employers’ National Insurance contributions. Certain Directors may become entitled to receive a share of the performance incentive fee related to the Ordinary share pool as detailed in the Directors’ Remuneration Report on page 58 and in note 6. The Company has no employees other than non-executive Directors. The average number of non-executive Directors in the year was four (2019: four). 6. Performance Fees for Ordinary shares The performance incentive fees are calculated separately on the Ordinary shares and the B shares. Performance incentive fees in relation to the Ordinary shares are potentially payable to past and current members of the CAC. The current members of the CAC are John Hustler and Richard Roth. The CAC entered into an agreement to take over management of the Company’s investments on 30 July 2007 (the “2007 Agreement”), and at that time, a revised performance incentive scheme was implemented, such that its members would be entitled to 20% of all cash returns above the initial net cost to subscribing shareholders of 80p (the “Accrued Performance Incentive Fee”). On 7 October 2015, the performance incentive fee structure was further amended as follows. In respect of the period to 31 December 2014, the Accrued Performance Incentive Fee on the Ordinary share class of up to £702,000 shall be payable to James Otter (a former director of the Company who was also a member of the CAC), Charles Breese (a former director of the Company who was also a member of the CAC) and John Hustler, in equal proportions (with the liability to pay a director his share of such fee being extinguished if the fee is due for payment five years after his ceasing to be a member of the CAC. Such extinguished fees are credited back to the Company). The liability to pay James Otter his share of any potential Accrued Performance Incentive Fee was extinguished on 7 October 2020 - the fifth anniversary of his ceasing to be a member of the CAC. No payment has, or will be paid, to James Otter under these schemes as the required shareholder distributions had not been made in time. The fee of £17,667 that had been accrued at 31 December 2019 for his potential benefit has been credited back to the Company, with the total potential liability for the Company now reduced from £702,000 to £468,000. As a result of the reduction in the Accrued Performance Incentive Fee by one third, the amount of the Accrued Performance Incentive Fee shall be 16.67% of any dividends and capital distributions returned to shareholders, which in total exceed the sum of 80p per Ordinary share (the "Hurdle"). This includes dividends paid to date on the Ordinary shares, being 65.25p per share. As a result of this, for every £1 potentially distributable in excess of the Hurdle, 80p shall be distributed to shareholders and 13.33p shall be paid as the Accrued Performance Incentive Fee, with 6.67p (being one third of the original 20p) retainable by the Company up until an amount of 114.65p per Ordinary share has been distributed to Ordinary shareholders, after which no further payment is payable in respect of the Accrued Performance Incentive Fee or otherwise under the terms of the 2007 Agreement (as amended). The Accrued Performance Incentive Fee shall be paid at the same time as payments are made to the Ordinary shareholders. All distributions by way of dividends and capital distributions in relation to the Ordinary share class shall count towards the Accrued Performance Incentive Fee and where non-cash dividends are declared, the Company's auditors shall assess their value by reference to a distribution per share. Following payment in full of the Accrued Performance Incentive Fee, a further performance incentive fee may become payable to the CAC in relation to the period after 7 October 2015 (the, “Further Performance Incentive Fee”). Following the amendment on 7 October 2015, any returns above the 31 December 2014 levels are subject to a further hurdle (the “Further Hurdle”), and the Further Performance Incentive Fee reduces the share to the CAC to 10% of sums returned to Ordinary shareholders by way of dividends and capital distributions of whatever nature, which in total exceed the Further Hurdle (excluding any initial tax relief on the subscription for the Ordinary shares). The "Base Figure" for the Further Hurdle shall be 90.4p per Ordinary share and shall be increased by a sum equal to notional interest thereon, at the rate of 1.467% per quarter from 1 January 2015, compounded with quarterly rests. For the purposes of determining the increase in the Base Figure, the amount on which notional interest is to accrue in each quarter shall be reduced by the amount of all sums returned to Ordinary shareholders by way of dividends and capital distributions in the previous quarter. Shareholders will need to have received distributions of 114.65p per Ordinary share, together with the amount to take account of notional interest as calculated above, before any Further Performance Incentive Fee is payable. As at 31 December 2020, the Total Gross Return in respect of the Ordinary shares is 97.85p, and so 3.57p per Ordinary share, totalling £290,000 would have accrued, though only two thirds of the Accrued Performance Incentive Fee, 2.38p per Ordinary share totalling £193,000, has been accrued as part of this liability as a result of James Otter’s liability being extinguished as detailed above, resulting in the remainder being retainable by the Company (31 December 2019: 83.25, 0.65p and £53,000). Assuming no dividends are paid on the Ordinary shares in 2021, the Total Gross Return would need to exceed 163.3p at 31 December 2021 before any Further Performance Incentive Fee could be due, and at that time, it would be 10% of any dividends or capital distributions made above this threshold. If the Further Performance Incentive Fee is not triggered (as it has not been in this financial year) the Further Hurdle, net of dividends paid, increments by a compound annual growth rate of 6%, applied quarterly as described above. If the CAC consider it necessary to engage external advisors in support of managing its portfolio, the costs of this will be borne by the Ordinary share pool. The Further Performance Incentive Fee shall be divided among such members of the CAC (past, present and future) who have been members of that committee since the 7 October 2015, on a pro rata basis, linked to the relative amount of time since the date of the 7 October 2015 agreement for which each individual has been a member of the CAC. An individual will not be entitled to payment of any of Further Performance Incentive Fee if he ceased to be a member of the CAC in certain conditions, or ceased to be a member of the CAC more than five years before the payment of any amount of Further Performance Incentive Fee becomes due and any such fees will be credited back to the Company. For the purposes of the Further Performance Incentive Fee, the method of determining distributions will follow that used in calculating the Accrued Performance Incentive Fee. 7. Tax on Ordinary Activities The corporation tax charge for the period was £nil (2019: £nil). The tax charge is calculated on return on ordinary activities before taxation at the applicable rate of 19.0% (2019: 19.0%) The company has excess management expenses of £2,896,000 (2019: £2,755,000) to carry forward to offset against future taxable profits. Approved VCTs are exempt from tax on capital gains within the Company. Since the Directors intend that the Company will continue to conduct its affairs so as to maintain its approval as a VCT, no current deferred tax has been provided in respect of any capital gains or losses arising on the revaluation or disposal of investments. 8. Earnings per Share The earnings per Ordinary share is based on 8,115,376 (31 December 2019: 8,115,376) shares, being the weighted average number of Ordinary shares in issue during the year, and a return for the year totalling £1,045,000 (31 December 2019: (£547,000)). The earnings per B share is based on 7,248,338 (31 December 2019: 5,269,973) shares, being the weighted average number of B shares in issue during the year, and a return for the year totalling £252,000 (31 December 2019: (£168,000)). There are no potentially dilutive capital instruments in issue and, therefore, no diluted returns per share figures are relevant. The basic and diluted earnings per share are therefore identical. 9. Net Asset Value per Share The calculation of NAV per Ordinary share as at 31 December 2020 is based on 8,115,376 Ordinary shares in issue at that date (31 December 2019: 8,115,376). The calculation of NAV per B share as at 31 December 2020 is based on 9,062,948 B shares in issue at that date (31 December 2019: 6,361,448). 10. Fixed Asset Investments Ordinary Shares B Shares Further details of the fixed asset investments held by the Company are shown within the Investment Manager’s Report on pages 14 to 35. All investments are initially measured at their transaction price. Subsequently, at each reporting date, the investments are valued at fair value through profit or loss, and all capital gains or losses on investments are so measured. Unquoted fixed asset investments are valued at fair value in accordance with the IPEV guidelines. The changes in fair value of such investments recognised in these Financial Statements are treated as unrealised holding gains or losses. The launch of the B Share pool took place relatively recently in August 2018, and all but one of the B Share unquoted investments have taken place in the two years ending 31 December 2020. As these companies are at an early stage of the investment cycle, it is the Board’s view that the most appropriate valuation methodology is to hold the B Share unquoted investments at cost or in line with the price of the most recent investment received by the investee company. This is consistent with the approach adopted for the valuation of the Ordinary share pool’s unquoted investments. When using this methodology however, a detailed assessment of the respective value of each portfolio company is also performed in order to gain the necessary comfort as to whether a fair value reduction or uplift is in fact required. This process involves a review of the progress made by each investee company, recent developments in the M&A market and comparisons to listed competitors across all relevant key performance indicators. Further, all of these are considered in the context of the exit equity waterfall structure as detailed in each investee company’s articles of association. FRS 102 requires the Directors to consider the impact of changing one or more of the assumptions used as part of the valuation process to reasonable possible alternative assumptions. As noted above, whilst the methodologies adopted for the 31 December 2020 investee company valuations are not based on revenue or earnings multiples, the Board do consider revenue multiple based valuation methodologies in support of the valuations adopted where relevant. In view of the FRS 102 requirement, the Board have considered the impact that introducing reasonable alternative assumptions to this revenue multiple based valuation methodology could have on the value of the Company’s investment pool as at 31 December 2020. As a result of this analysis the Board have concluded that such reasonable possible alternative assumptions could result in an increase in the valuation of the B share pool unquoted investments by £81,000 or a decrease in the valuation of B share pool investments by £48,000. It was considered that only one B share portfolio company was relevant for this exercise due to its more mature trading profile. It was not considered that any of the Ordinary share pool portfolio companies were relevant for this exercise. Throughout this exercise, and in determining the value of the Company’s equity investments where trading multiples are considered, multiples used are reviewed and compared to industry peers, based on size, stage of development, revenue generation and growth rate, as well as their wider strategy and market position. These multiples are calculated in the traditional manner, by dividing the enterprise value of the comparable group by its revenue, EBITDA or earnings depending on what is the norm in a particular sector driven by how acquisitions in that sector are typically valued. The trading multiple is then adjusted for considerations such as illiquidity, marketability and other differences, advantages and disadvantages between the portfolio company and the comparable public companies based on company specific facts and circumstances. 11. Debtors 12. Creditors The amount falling due after more than one year relates to the potential liability for a performance fee on the Ordinary share portfolio. More details are in note 6. The awaiting B share issue included in the combined and B share cash flow statements shows the movement in cash awaiting B share issue in the year since the prior year end. 13. Share Capital The capital of the Company is managed in accordance with its investment policy with a view to the achievement of its investment objective as set on page 4. During the year, the Company did not issue, nor buy back, any Ordinary shares. The Company issued a total of 2,701,500 B shares at prices between 79.5 to 94.7p per B share during the year. These were issued pursuant to the offer for subscription for B shares launched on 16 July 2019 and a further offer for subscription for B shares launched on 13 October 2020 to raise, in aggregate, up to £10 million with an over-allotment facility of up to a further £10 million (before issue costs). The Company has not bought back any B shares. The total proceeds received for the shares issued in the period was £2,390k (net of facilitated fees, gross of Seneca’s promoter fee) for the B share pool. Share Rights As regards Income: shareholders shall be entitled to receive such dividends as the Directors resolve to pay out in accordance with the Articles. Under the Articles of the Company, all the assets of the Company and all the liabilities of the Company will be allocated either to the Ordinary share pool or the B share pool. The Ordinary shares will be entitled to the economic benefit of the assets allocated to the Ordinary share pool and the B shares will be entitled to the economic benefit of assets allocated to the B share pool. Therefore, although the rules in the CA 2006 and elsewhere in relation to the payment of distributions will be applicable to the Company on a company-wide basis, the income arising on the portfolios will belong to one or the other of the share classes depending on which portfolio generated the income. As regards Capital: similarly, the capital assets of the Company will be allocated to either the Ordinary share pool or the B share pool. On a return of capital on a winding-up or on a return of capital (other than on a purchase by the Company of its shares) the surplus capital shall be divided amongst the holders of the relevant share class pro rata according to the number of shares of the relevant class held and the aggregate entitlements of that share class. The Ordinary shares will not be entitled to any capital assets held in the B share pool and the B shares will not be entitled to any capital assets held in the Ordinary share pool. In relation to the purchase by the Company of its shares, the purchase of Ordinary shares may only be financed by assets in the Ordinary share pool and the purchase of the B shares may only be financed by assets in the B share pool. As regards voting and general meetings: subject to disenfranchisement in the event of noncompliance with a statutory notice requiring disclosure as to beneficial ownership, each shareholder present in person or by proxy shall on a poll have one vote for each share of which he/she is the holder. The Ordinary shareholders may not be entitled to vote on certain matters which concern the B share class only and vice versa. As regards Redemption: none of the B shares or the Ordinary shares are redeemable. The Articles provide that reserves (whether created upon the cancellation of the share premium account arising from the issue of Ordinary shares or B shares or otherwise) may also be used for the benefit of the other share class. While this will not transfer any net asset value between the different share classes, it will permit those reserves to be treated as distributable profits on a Company-wide basis such that on an accounting basis dividends and share buybacks in respect of both share classes may be facilitated by the availability of those reserves. 14. Movement in Shareholders’ Funds The analysis of changes in equity by the various reserves are shown in the Statement of Changes in Equity on page 73. When the Company revalues its investments during the period, any gains or losses arising are credited/charged to the Income Statement. Changes in fair value of investments held are then transferred to the capital reserve - holding gains/(losses). When an investment is sold any balance held on the capital reserve - holding gains/(losses) reserve is transferred to the capital reserve – gains/(losses) on disposal as a movement in reserves. The purpose of the special distributable reserve was to create a reserve which will be capable of being used by the Company to pay dividends and for the purpose of making repurchases of its own shares in the market with a view to narrowing the discount at which the Company’s shares trade to net asset value, providing shareholder authority has been granted. Distributable reserves are represented by the special distributable reserve, the capital reserve gains/(losses) on disposal and the revenue reserve reduced by negative holding reserves (if any) which total £5,429,000 as at 31 December 2020 (2019: £5,433,000). Although the distributable reserves total £5,429,000 as at 31 December 2020, only £2,002,000 is actually able to be distributed as the reserves contain £3,427,000 from the cancellation of the share premium account on the newly issued B shares, which cannot be distributed until the beginning of 2022 without breaching VCT rules. An interim capital dividend of 8 pence per Ordinary share for the year to 31 December 2020 was paid on 28 August 2020. A further interim capital dividend of 5 pence per Ordinary share for the year to 31 December 2020 was paid on 30 October 2020. An interim dividend of 1.5 pence per B share for the year to 31 December 2020 was paid on 15 May 2020. A second interim dividend of 1.5 pence per B share for the year to 31 December 2020 was paid on 24 December 2020. 15. Financial Instruments The Company's financial instruments comprise equity investments, cash balances and liquid resources including creditors. Classification of financial instruments The Company held the following categories of financial instruments, all of which are included in the balance sheet at fair value, at 31 December 2020 and 31 December 2019: Fixed asset investments (see note 10) are valued at fair value. Unquoted investments are carried at fair value as determined by the Directors in accordance with the IPEV guidelines. The fair value of all other financial assets and liabilities is represented by their carrying value in the balance sheet. The Directors believe that the fair value of the assets held at the year-end is equal to their book value. The Company’s creditors are initially recognised at fair value, which is usually the transaction price, and then thereafter at amortised cost. 16. Financial Risk Management In carrying on its investment activities, the Company is exposed to various types of risk associated with the financial instruments and markets in which it invests. The most significant types of financial risk facing the Company are market risk, credit risk and liquidity risk. The Company's approach to managing these risks is set out below together with a description of the nature and amount of the financial instruments held at the balance sheet date. Market risk The Company’s strategy for managing investment risk is determined with regard to the Company’s investment objective, as outlined on page 4. The management of market risk is part of the investment management process. The Company's portfolio is managed with regard to the possible effects of adverse price movements and with the objective of maximising overall returns to shareholders in the medium term. Investments in unquoted companies, by their nature, usually involve a higher degree of risk than investments in companies quoted on a recognised stock exchange, though the risk can be mitigated to a certain extent by diversifying the portfolio across business sectors and asset classes. The overall disposition of the Company's assets is regularly monitored by the Board. Details of the Company’s investment portfolio at the balance sheet date are set out on pages 14 to 35. 29.4% (2019: 34.5%) by value of the Company’s net assets comprise investments in unquoted companies held at fair value. The valuation methods used by the Company include the application of a price/earnings ratio derived from listed companies with similar characteristics, and consequently the value of the unquoted element of the portfolio can be indirectly affected by price movements on the London Stock Exchange. A 10% overall increase in the valuation of the unquoted investments at 31 December 2020 would have increased net assets and the total return for the year by £317,000 (2019: £290,000) disregarding the impact of the performance fee; an equivalent change in the opposite direction would have reduced net assets and the total return for the year by the same amount. 27.4% (2019: 22.2%) by value of the Company’s net assets comprises equity securities quoted on AIM. A 10% increase in the bid price of these securities as at 31 December 2020 would have increased net assets and the total return for the year by £296,000 (2019: £186,000) disregarding the impact of the performance fee; a corresponding fall would have reduced net assets and the total return for the year by the same amount. Credit risk There were no significant concentrations of credit risk to counterparties at 31 December 2020 or 31 December 2019. Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Board carries out a regular review of counterparty risk. The carrying values of financial assets represent the maximum credit risk exposure at the balance sheet date. Liquidity risk The Company’s financial assets include investments in unquoted equity securities which are not traded on a recognised stock exchange and which generally are illiquid. They also include investments in AIM-quoted companies, which, by their nature, involve a higher degree of risk than investments on the main market. As a result, the Company may not be able to realise som

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