Blackfinch Spring VCT plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Companies House Number 12166417
Committed
Blackfinch Spring VCT Annual Report and Financial Statements
2
Highlights
Investment Objective
Chairman’s Statement
The Board
Investment Manager’s Review
Investment Portfolio
Strategic Report
Directors’ Report
Statement of Corporate Governance
Statement of Directors’ Responsibilities
Directors’ Remuneration Report
Independent Auditor’s Report
Income Statement
Statement of Changes in Equity
Balance Sheet
Statement of Cash Flows
Notes to the Financial Statements
Directors and Advisers
Notice of Annual General Meeting
03
03
04
06
08
12
36
54
57
63
Contents
20 April 2022
65
69
81
83
85
86
87
101
102
Blackfinch Spring VCT Annual Report and Financial Statements
3
20 April 2022
Highlights
Offer for Subscription
In the year ended 31 December 2021, the Company’s offers for subscription
raised £8,113,233 (2020: £3,973,416), with the issue of 8,721,908 (2020:
3,911,937) shares.
Investments
The Company made 13 qualifying investments in the period, for a total of
£5.1m and adding 11 companies to its portfolio. A loss of £0.5m was realised
on the investment in portfolio company Movebubble Limited, which is being
liquidated (further details are contained in the Chairman’s Statement below).
However, there was an unrealised gain of £1.2m on other investments, which
resulted in a net increase in investment value of £0.6m up to £7.0m overall.
Net Asset Value (“NAV”) Movement
The NAV per share dropped back from 94.08p to 93.08p, a much smaller
reduction than last year, as the investment gain above helped offset both the
effect of continued operational costs and the realised loss on Movebubble.
Dividends
No dividends have been paid or are proposed this early in the life of the Company.
Investment Objective
The objective of the Company is to invest in early-stage technology-enabled
companies with a strong focus on research and development and innovation,
which gives the potential for high growth. Investments are targeted in unquoted
companies where there is likely to be a reasonable prospect of a trade sale or
clear exit strategy in due course.
Summary Data
Net Asset Value (“NAV”)
Shares in issue
NAV per ordinary share
Share price
Year ended 31/12/2021
£11,759,947
12,633,843
93.08p
85.00p
Period ended 31/12/20
£3,680,389
3,911,937
94.08p
93.00p
Blackfinch Spring VCT Annual Report and Financial Statements
4
Chairman’s
Statement
I am pleased to be writing to Shareholders to present
the Report and Accounts annual review for Blackfinch
Spring VCT plc (the ‘Company’) for the year ended 31
December 2021.
Accelerated fundraising
During the year the Company allotted a further 8,721,908
shares, raising £8.1m which was more than double the
£3.9m in the sixteen-month period to the end of December
2020. These figures include the first allotment of the
Company’s third offer, which opened on 3 September
2021. It is very encouraging to see this increased
confidence in the Company’s ability to deliver returns
through investments in technology-enabled start-ups.
An expanding portfolio
Investment activity has increased even more significantly
in the year. Investments have been made into a further
eleven innovative businesses, taking the portfolio from
just three companies at the start of the year to a total of
14. This expansion has greatly enhanced diversification,
with companies representing a broad range of technology
sectors from sleep and workplace wellbeing, to marketing
and business supply chain management. In total, £6.3m
has now been invested – £5.1m of it in this period –
appreciably more than the £3.7m total value of assets
at the start of the year.
Emerging from COVID-19
The shocks of repeated COVID-19 lockdowns continued
to exert significant influence on many early-stage
businesses, particularly in the early part of the year.
Portfolio company Movebubble had performed strongly
in the first lockdown of 2020 ahead of our investment,
but as we reported last year it was hit much harder in the
second at the end of the year, which led to the departure
of its founding CEO early in 2021. The Investment
Manager provided extensive support, quickly helping
secure the appointment of an experienced new CEO, and
your Company provided a small additional investment
alongside other investors to fund a recovery plan.
Unfortunately, despite good progress in many areas of
the business, revenue continued to decline. A proposed
rescue deal for further investment in the autumn fell
through and regrettably the business is going to be
liquidated. A £0.55m loss on the full cost of investment
has been realised.
More positively, other portfolio companies either saw
sustained growth throughout the pandemic or have
already recovered strongly. Whilst COVID-19 may still be
affecting our lives, with the exception of Movebubble the
innovative early-stage businesses in our portfolio have
proved their resilience and are already helping to build
the post-pandemic future.
First investment gains
It is particularly encouraging to see the performance of the
portfolio companies starting to feed through to increased
investment values. As expected, in the first part of the
year in which all investments were held at cost, the NAV
per share declined in line with costs from 94.08p to a low
of 89.46p at the end of the third quarter. However, the
20 April 2022
Blackfinch Spring VCT Annual Report and Financial Statements
5
revaluations at the end of the fourth quarter delivered an
aggregate investment return of £0.62m despite the loss
on Movebubble. Ten companies increased in value, with
the increase in each case being driven by revenue growth.
Notable increases were in Spotless Water, up 54% over
the year, and Cyclr and Startpulsing, up 39% and 37%
respectively. Overall, the NAV per share has consequently
started to increase and is back up to 93.08p.
A healthy pipeline
The Investment Manager reports a strong pipeline of
additional investment opportunities as we head into 2022.
They include high-growth businesses that are new to
the manager, as well as follow-on funding for firms that
have already proven themselves in either the Company’s
portfolio or the manager’s earlier stage Enterprise
Investment Scheme (“EIS”) portfolios. Details of some
are given on page 30 to 35. It is likely that several deals
will close in the next quarter.
Outlook
The Company has made excellent progress towards its
objectives over the last year. The Investment Manager
has also continued to strengthen the capacity and
expertise of its team. While the war in Ukraine is creating
global uncertainty, a review of the Company’s portfolio
showed there to be no direct impact from the conflict. It
nonetheless remains a risk given the impact on supply
chains and economies around the world. However, with
strong inflows from the current offer as we head into 2022,
good overall growth across the portfolio, and an exciting
pipeline of innovative new technology-enabled businesses
seeking investment, the overall prospects for the next
year are positive. As your company scales up, benefits will
be seen in economies of scale and diversification. I look
forward to the next report to Shareholders.
Peter LR Hewitt, JP, FCSI
Non-executive Chairman
20 April 2022
Companies House Number - 12166417
For any matters relating to your
shareholding in the Company,
please contact The City
Partnership (UK) Limited on
01484 240 910, or by email at
registrars@city.uk.com. For any
other matters please contact
Blackfinch Investments Limited
(“Blackfinch”) on 01542 717 070
or by email at:
enquiries@blackfinch.com.
Blackfinch maintains a website
for the Company:
www.blackfinch.ventures/vct
20 April 2022
Blackfinch Spring VCT Annual Report and Financial Statements
6
The Board
Peter Lionel Raleigh Hewitt (Non-executive Chairman):
Peter has been a director of 13 public companies over the last 30 years, chairing 7 of these including 7 years as Chairman
and CEO of an AIM quoted construction and facilities management business, which he founded and built from zero
to £25m turnover and 400 people in 4 years. He is Co-Chairman and co-founder of Universal Defence and Security
Solutions Limited, Chairman of Vordere Limited and a non-executive director of Terra Mater Renewables Investments AB.
Peter is a former Alderman of the City of London and inaugural Chairman of the City’s £20m Social Investment Fund,
creating investment strategy and policy. Peter is also an individually Chartered Fellow of the Chartered Securities Institute;
a Justice of the Peace on the supplemental list and an Honorary Group Captain in 601 (County of London) Squadron,
RAuxAF, where his role is to partner with the SLT of the RAF.
Kate Jones:
Kate’s career spans senior investment leadership and Board roles in the financial services industry including the Pension
Protection Fund, JP Morgan, BlackRock, Schroders and M&G. She began her career as a portfolio manager at Prudential
M&G before playing an instrumental role in the growth of BlackRock’s Solutions business where she built and led the
portfolio management function with responsibility for over £300bn of assets.
She is Non-Executive Chair at the Pension Protection Fund and Non-Executive Chairman of JPMorgan Funds Limited.
Working with senior executives in multiple sectors across the UK., Kate is also the co-founder of executive coaching
business &become.
Reuben Wilcock:
Reuben’s expertise in advising early-stage companies has developed through a background spanning academia,
technology start-ups and startup acceleration. He has founded or co-founded four technology start-ups including Joulo,
a smart home energy spinout which won the 2013 British Gas Connected Homes award and was acquired by Quby in
2014, and Bar Analytics, an IoT start-up that enables global brands to monitor beer quality and sales.
With a PhD in Electronics, Reuben has extensive product design experience with deep technical knowledge of hardware,
software and manufacturing. He is an inventor on five patents and named author on over 45 peer reviewed publications
20 April 2022
Blackfinch Spring VCT Annual Report and Financial Statements
7
ranging from integrated circuit design to genetic algorithms. Before joining Blackfinch, Reuben was a leading figure in
entrepreneurship at the University of Southampton where he sat on its IP Panel for five years, guiding
the commercialisation of research innovations through licensing and spinouts.
Reuben is a Royal Academy of Engineering award winning entrepreneur, and the lifetime membership that affords has
offered visibility of some of the most innovative university spinouts in the UK. In 2015 Reuben founded and ran the Future
Worlds accelerator, mentoring over 250 entrepreneurs and 50 companies over a four-year period. Companies included
5G silicon IP spinout Accelercomm, AI computer vision company Aura Vision, IoT transport startup Route Reports and
HGV data analytics company Dynamon. Whilst at Future Worlds, Reuben also developed the business plan and was the
execution partner for the Z21 Fund, run in partnership with the Solent LEP.
20 April 2022
Investment
Manager’s
Review
Following the COVID-19 challenges of 2020 we
have been delighted at the high quality of innovative
technology-enabled businesses seeking investment in
the last year. We have been able to be highly selective
while still investing in 11 new companies across a wide
range of different sectors. The increase in portfolio
size and diversification has significantly reduced
concentration risk.
Three of the new investments were into existing Blackfinch EIS portfolio
companies that the Ventures team had been tracking closely for some time.
Kokoon, for example, is a business offering innovative technology to help
the huge number of people who struggle to sleep. Blackfinch had supported
it in selling its first product and in developing a more usable, lower-cost
version. The Company has now invested following the successful launch
of this new product.
Whilst the other seven companies were new to Blackfinch, they were all co-
investments with the EIS Portfolios. This co-investment enabled the Company
to gain access to larger, more attractive deals than would have been possible on
its own. All were into companies with a clear track record of delivery that offer
exciting prospects for growth and returns. Two of these new companies have
already been approached by potential acquirers, although such approaches
have not been progressed as the potential for longer-term returns is greater.
The one disappointment has been portfolio company Movebubble, which
had faced significant lockdown challenges that led to the departure of its
founding CEO. The Ventures team provided extensive support, quickly securing
the appointment of an experienced new CEO and helping set a new strategy
for growth backed by a small additional investment. He did well at restoring the
value delivered to customers but still struggled to rebuild revenue. We proposed
a rescue deal but ultimately Movebubble has been unable to raise sufficient
additional funding. A loss of £550k on the investment has been realised.
However, other portfolio companies have more than compensated, with good
revenue growth leading to a £1.2m increase in investment value.
Blackfinch Spring VCT Annual Report and Financial Statements
8
20 April 2022
Increases were delivered by ten companies, which had collectively seen their
revenue grow 42% since the investments were made. The biggest increase of
£247k – over 50% of the cost of investment – came from Spotless Water which
not surprisingly was a 2020 investment that had longer to grow. However,
other companies are catching up, notably Cyclr and Startpulsing, which had
increases of £196k and £184k respectively based on particularly rapid revenue
growth. We consequently remain confident in the outlook for the portfolio.
As a signatory to the Principles for Responsible Investment (PRI), Blackfinch
has continued to incorporate Environmental, Social & Governance (ESG)
considerations in all its investment activity. ESG concerns long-term risks and
opportunities that are well aligned with the Company’s long-term objectives.
It is also increasingly attracting high-quality start-ups that share these values.
One of the newer portfolio companies is CultureShift, which has a clear mission
to tackle workplace bullying and harassment, and in doing so is delivering
impressive financial growth. The portfolio as a whole is increasingly set to
change the way we live and work for the better.
Our Ventures team has been further strengthened during the year, with
the addition of several Venture Partners and an experienced director in the
investment team. Another senior member of the investment team is set to
join at the start of 2022 to help manage the growing portfolio. With increased
capacity in the team, and no shortage of highly promising start-ups feeding
through, I have high hopes for the year ahead.
Richard Cook
Founder and CEO, Blackfinch Investments Limited
20 April 2022
Blackfinch Spring VCT Annual Report and Financial Statements
9
20 April 2022
Investment Manager’s Review
Environmental, Social and Governance Policy (“ESG”)
Blackfinch Spring VCT Annual Report and Financial Statements
10
The Blackfinch Ventures team believes every one of
our portfolio companies should make at least a small
net positive contribution to the world, and that doing so
in a responsible, sustainable manner not only benefits
society and the planet but also reduces long-term
investment risk.
Public sentiment is increasingly concerned with social practices, with the
environment in general, and with climate change in particular. Companies
that ignore such issues face an ever-greater risk of losing both customers and
talented employees. Good governance underpins management of these risks
alongside more conventional business ones, maximising the prospects of long-
term sustainable success for individual companies and the investments made
in them. To this end Blackfinch Ventures applies a formal ESG Policy to the
investments they make on behalf of the Company.
Environmental considerations include not just climate change but also
reducing pollution and waste, and the sustainability of raw materials. The
Social element means actively working towards a healthier and higher quality
of life for all stakeholders, including employees and customers; it includes
human rights, diversity, data privacy, and fair working practices. Governance
is concerned not just with management structures and risk analysis, but with a
culture of transparency, honesty, and integrity. We assess these aspects both
from formal due diligence questions and from conversations with founders,
employees, and customers.
Investing in growing, technology-enabled businesses that address real-world
needs naturally leads us to support those that are set to change the way we live
and work for the better. However, we do not take this for granted and assess
each company in several respects: its central purpose, what it really does in
20 April 2022
Blackfinch Spring VCT Annual Report and Financial Statements
11
pursuit of that purpose, the manner of conducting its business, and importantly
the attitude of its team. Few early-stage companies have formal ESG policies
of their own, but they must recognise the importance of the principles involved
and place them above short-term business gain.
Whilst all portfolio companies aim to deliver an economic benefit – creating jobs
and growing the economy – some additionally have an explicit environmental or
social purpose. Transreport democratises access to public transport for people
with limited mobility by making it easy for them to book assistance throughout
their journeys; and Cultureshift is similarly finding very strong demand
for its platform to help large organisations tackle workplace bullying and
harassment. Other companies provide such benefits indirectly. For example,
Brooklyn Vendor Assurance includes the capability in its platform to help large
companies manage their suppliers’ ESG performance and progress.
20 April 2022
Investment Manager’s Review
Investment Portfolio
Blackfinch Spring VCT Annual Report and Financial Statements
12
Investment
Brooklyn Supply Chain Solutions Ltd
Client Share Ltd
Cultureshift Communications Ltd
Cyclr Systems Limited
Edozo Limited
Illuma Technology Ltd
Kokoon Technology Ltd
Movebubble Limited
Odore Limited
Spotless Water Ltd
Startpulsing Limited
Tended Ltd
Transreport Limited
Watchmycompetitor.com Ltd
Total fixed asset investments
Net current assets
Net assets
Cost £
500,000
400,000
500,000
500,000
200,000
700,000
200,000
549,997
430,000
500,000
459,278
200,000
500,000
700,000
6,339,275
4,798,422
11,137,697
Valuation £
527,720
462,418
624,376
695,943
227,534
736,685
200,000
-
430,000
684,289
706,055
200,000
647,155
819,350
6,961,525
4,798,422
11,759,947
% of total
assets value
4.5
3.9
5.3
5.9
1.9
6.3
1.7
-
3.7
5.8
6.0
1.7
5.5
7.0
59.2
40.8
100.0
Cost £
-
-
-
-
-
-
-
399,997
-
459,278
-
-
400,000
-
1,259,275
2,421,114
3,680,389
Valuation £
-
-
-
-
-
-
-
399,997
-
459,278
-
-
400,000
-
1,259,275
2,421,114
3,680,389
% of total
assets value
-
-
-
-
-
-
-
10.87
-
12.48
-
-
10.87
-
34.225
65.78
100.00
As at 31 December 2021 As at 31 December 2020
20 April 2022
Blackfinch Spring VCT Annual Report and Financial Statements
13
Three investments had been made in the previous year; two received small
follow-on investments in the first half of this year. The remaining 11 investments
were into new companies, of which three originated as Blackfinch EIS Portfolio
companies, while the remainder were new co-investments with the Blackfinch
EIS Portfolios.
The one investment made in December has been held at cost, while two other
investments made in the second half of the year have also seen no change in
value as judged by their progress against milestones. Movebubble Limited has
realised a loss of the full investment value of £549,997, as explained on page 12.
However, the remaining 10 investments which have all been valued based on
a financial multiple have each increased in value, with an aggregate unrealised
gain of £1,172,247.
20 April 2022
Trading as Brooklyn Vendor Assurance, the company has created a platform
that allows the world’s largest businesses to manage all aspects of their
supplier contracts. The solution promotes governance throughout an
organisation in areas including risks, performance, ESG, and compliance.
Brooklyn’s customers include large enterprises such as Danske Bank and
Sainsburys, the product being unique in catering for the very complex needs
of the world’s largest organisations who spend millions on compliance and
governance each year.
* Revenue and profit are not publicly available because only abbreviated
accounts are filed at Companies House.
Company sector
Stage
Asset class
Net assets 31/12/20
Net assets 31/12/19
Revenue and profit
Cost of investment
Value of investment
Basis of valuation
Equity held by Blackfinch Spring VCT
Initial investment date
Supply Chain Tech
Scale-up
Equity
£(395,338)
£(93,764)
n/a *
£500,000
£527,720
Revenue Multiple
6.5%
March 2021
Blackfinch Spring VCT Annual Report and Financial Statements
14
Investment Manager’s Review
Investment Portfolio
20 April 2022
Clientshare specialises in increasing the strength of relationships between
buyers and suppliers through its easy-to-use online technology platform. Its
service governance offering targets information gaps in professional contracts
and relationships, increasing customer retention, and reducing churn.
Clientshare is helping define the ‘Service Governance Space’ and its customers
include large enterprises such as EY, HP and Compass Group.
* Revenue and profit are not publicly available because only abbreviated
accounts are filed at Companies House.
Company sector
Stage
Asset class
Net assets 31/12/20
Net assets 31/12/19
Revenue and profit
Cost of investment
Value of investment
Basis of valuation
Equity held by Blackfinch Spring VCT
Initial investment date
Service Governance Tech
Scale-up
Equity
£192,174
£179,255
n/a *
£400,000
£462,418
Revenue Multiple
6.3%
March 2021
Blackfinch Spring VCT Annual Report and Financial Statements
15
Investment Manager’s Review
Investment Portfolio
20 April 2022
Culture Shift is a purpose-driven company that is on a mission to improve
workplace mental health, equality and wellbeing. Its software-as-a-service
platform allows the reporting and effective management of incidents of bullying
and harassment, whilst analytics and insights help companies reduce the
frequency of such incidents and improve their overall culture. Having already
established a major position amongst universities, Culture Shift is making
strong inroads into other sectors.
* Revenue and profit are not publicly available because only abbreviated
accounts are filed at Companies House.
Company sector
Stage
Asset class
Net assets 31/03/2021
Net assets 31/03/2020
Revenue and profit
Cost of investment
Value of investment
Basis of valuation
Equity held by Blackfinch Spring VCT
Initial investment date
HR Tech
Scale-up
Equity
£264,464
£980,938
n/a *
£500,000
£624,376
Revenue Multiple
7.7%
August 2021
Blackfinch Spring VCT Annual Report and Financial Statements
16
Investment Manager’s Review
Investment Portfolio
20 April 2022
Cyclr has a plug-and-play solution that helps software companies connect
their product to data from third-party platforms. The solution avoids having to
develop these ‘integrations’ from scratch, enabling clients to satisfy requests
for new integrations far faster and at a fraction of the cost of developing them
internally. Cyclr’s elegant solution to this problem is applicable globally,
connects to over 300 of the world’s most popular platforms, and its graphical,
no-code approach sets it apart from the competition.
* Revenue and profit are not publicly available because only abbreviated
accounts are filed at Companies House.
Company sector
Stage
Asset class
Net assets 30/11/20
Net assets 30/11/19
Revenue and profit
Cost of investment
Value of investment
Basis of valuation
Equity held by Blackfinch Spring VCT
Initial investment date
Software Tech
Scale-up
Equity
£(136,294)
£124,753
n/a *
£500,000
£695,943
Revenue Multiple
6.5%
March 2021
Blackfinch Spring VCT Annual Report and Financial Statements
17
Investment Manager’s Review
Investment Portfolio
20 April 2022
Edozo has created an online web platform that increases the accuracy and
efficiency of commercial property research and valuation. Its innovative
mapping tool can highlight boundaries in a single click and its valuation
database is organically populated by a growing customer list. The company’s
long-term goal is to develop a completely automated commercial property
valuation tool.
* Revenue and profit are not publicly available because only abbreviated
accounts are filed at Companies House.
Company sector
Stage
Asset class
Net assets 31/12/20
Net assets 31/12/19
Revenue and profit
Cost of investment
Value of investment
Basis of valuation
Equity held by Blackfinch Spring VCT
Initial investment date
Property Tech
Scale-up
Equity
£1,228,999
£1,537,364
n/a *
£200,000
£227,534
Revenue Multiple
2.4%
June 2021
Blackfinch Spring VCT Annual Report and Financial Statements
18
Investment Manager’s Review
Investment Portfolio
20 April 2022
Illuma is a digital advertising company that offers advanced technology
designed to select the best websites on which to deploy adverts to generate
the highest response rates. Its artificial intelligence learns in real-time,
determining the optimum context in which to place any given advert. It does
so ethically without the use of cookies or users’ personal data, unlike many
competing technologies which it regularly outperforms in benchmark tests.
* Revenue and profit are not publicly available because only abbreviated
accounts are filed at Companies House.
Company sector
Stage
Asset class
Net assets 31/12/20
Net assets 31/12/19
Revenue and profit
Cost of investment
Value of investment
Basis of valuation
Equity held by Blackfinch Spring VCT
Initial investment date
Advertising Tech
Scale-up
Equity
£356,132
£562,520
n/a *
£700,000
£736,685
Revenue Multiple
9.6%
August 2021
Blackfinch Spring VCT Annual Report and Financial Statements
19
Investment Manager’s Review
Investment Portfolio
20 April 2022
Kokoon is a sleep technology company whose well designed noise-cancelling
headphones include bio-sensors that measure when you fall asleep,
automatically fading out audio and introducing masking white noise to protect
against disturbances. The connected app offers guided audio content,
developed with sleep scientists, to help improve sleep and relaxation, helping
users switch off. The company recently launched an award-winning new in-ear
version of its headphones.
* Revenue and profit are not publicly available because only abbreviated
accounts are filed at Companies House.
Company sector
Stage
Asset class
Net assets 31/12/21
Net assets 31/12/20
Revenue and profit
Cost of investment
Value of investment
Basis of valuation
Equity held by Blackfinch Spring VCT
Initial investment date
Sleep Tech
Scale-up
Equity
£177,799
£(483,166)
n/a *
£200,000
£200,000
Milestone progress
1.8%
July 2021
Blackfinch Spring VCT Annual Report and Financial Statements
20
Investment Manager’s Review
Investment Portfolio
20 April 2022
Odore is a subscription platform that provides brands with a unique insight into
customer intentions and shopping habits. The company collects data from
consumers that can be used to create personalised campaigns for particular
demographics, thereby increasing conversion and retention rates. The data
collected is a combination of web analytics coupled with ‘zero party’ data that a
customer intentionally and proactively shares with the brand.
* Revenue and profit are not publicly available because only abbreviated
accounts are filed at Companies House.
Company sector
Stage
Asset class
Net assets 31/03/21
Net assets 31/03/20
Revenue and profit
Cost of investment
Value of investment
Basis of valuation
Equity held by Blackfinch Spring VCT
Initial investment date
Marketing Tech
Scale-up
Equity
£539,865
£73,283
n/a *
£430,000
£430,000
New investment
4.3%
December 2021
Blackfinch Spring VCT Annual Report and Financial Statements
21
Investment Manager’s Review
Investment Portfolio
20 April 2022
Spotless Water offers the UK’s first self-service, technology-driven, ultra-pure
water distribution network. Its platform allows window-cleaning businesses
to fill up on ultra-pure water at easy-access filling stations across the UK.
Incredibly, this industry uses 40 million litres a day and additional verticals
include car cleaning, dentistry, and even aquariums.
* Revenue and profit are not publicly available because only abbreviated
accounts are filed at Companies House.
Company sector
Stage
Asset class
Net assets 30/04/21
Net assets 30/04/20
Revenue and profit
Cost of investment
Value of investment
Basis of valuation
Equity held by Blackfinch Spring VCT
Initial investment date
Water Tech
Scale-up
Equity
£1,448,638
£809,853
n/a *
£459,278
£706,055
Revenue Multiple
3.8%
October 2020
Blackfinch Spring VCT Annual Report and Financial Statements
22
Investment Manager’s Review
Investment Portfolio
20 April 2022
Startpulsing Ltd, trading as OnePulse, allows global brands to gain feedback
on ideas in real time from a community of thousands. With responses coming
in minutes, it helps companies carefully tailor their products and campaigns
to ensure that customers are happy and engaged. It also allows consumers to
directly impact the decision making of companies they use every day whilst
earning money and staying on top of product releases.
* Revenue and profit are not publicly available because only abbreviated
accounts are filed at Companies House.
Company sector
Stage
Asset class
Net assets 31/07/21
Net assets 31/07/20
Revenue and profit
Cost of investment
Value of investment
Basis of valuation
Equity held by Blackfinch Spring VCT
Initial investment date
Marketing Tech
Scale-up
Equity
£618,340
£(1,527,737)
n/a *
£500,000
£684,289
Revenue Multiple
7.1%
March 2021
Blackfinch Spring VCT Annual Report and Financial Statements
23
Investment Manager’s Review
Investment Portfolio
20 April 2022
Tended designs intelligent personal safety wearables. Its patent-pending
technology uses machine learning to automatically monitor a user’s safety
and alert a key contact in the event of an accident or emergency. It saw
considerable success during the pandemic with a reliable social distancing
product, but now focuses primarily on the safety of lone workers in large
organisations.
* Revenue and profit are not publicly available because only abbreviated
accounts are filed at Companies House.
Company sector
Stage
Asset class
Net assets 30/06/21
Net assets 30/06/20
Revenue and profit
Cost of investment
Value of investment
Basis of valuation
Equity held by Blackfinch Spring VCT
Initial investment date
Safety Tech
Scale-up
Equity
£(427,400)
£5,720
n/a *
£200,000
£200,000
Milestone progress
3.0%
September 2021
Blackfinch Spring VCT Annual Report and Financial Statements
24
20 April 2022
Investment Manager’s Review
Investment Portfolio
Transreport’s innovative technology platform makes it easy for people with
reduced mobility to book and receive the special assistance they need for a
journey. As well as this Passenger Assist app, the firm has developed a suite of
products targeting the rail industry’s digital transformation, and it has a strong
vision to address journeys spanning rail, air and road. The Company invested
a further £100,000 in the final phase of Transreport’s overall funding round of
£2.3m and to avoid a dilution of its shareholding in this promising business.
* Revenue and profit are not publicly available because only abbreviated
accounts are filed at Companies House.
Company sector
Stage
Asset class
Net assets 30/12/20
Net assets 30/12/19
Revenue and profit
Cost of investment
Value of investment
Basis of valuation
Equity held by Blackfinch Spring VCT
Initial investment date
Transport Tech
Scale-up
Equity
£1,359,165
£473,764
n/a *
£500,000
£647,155
Revenue Multiple
6.0%
December 2020
Blackfinch Spring VCT Annual Report and Financial Statements
25
20 April 2022
Investment Manager’s Review
Investment Portfolio
WatchMyCompetitor is a business intelligence software-as-a-service company
that tells customers what their competitors are doing, from price adjustments
to product launches and leadership changes. Its dashboard summarises
current insights, whilst daily feeds – automatically generated but curated by
a human analyst – keep customers on top of any rapidly changing market.
* Revenue and profit are not publicly available because only abbreviated
accounts are filed at Companies House.
Company sector
Stage
Asset class
Net assets 31/12/2020
Net assets 31/12/2021
Revenue and profit
Cost of investment
Value of investment
Basis of valuation
Equity held by Blackfinch Spring VCT
Initial investment date
Market Intelligence Tech
Scale-up
Equity
£37,221
£94,678
n/a *
£700,000
£819,350
Revenue Multiple
7.7%
August 2021
Blackfinch Spring VCT Annual Report and Financial Statements
26
20 April 2022
Investment Manager’s Review
Investment Portfolio
By the end of the reporting period, 42% of the Company’s £11.9m assets
were held in cash while 58% was invested in qualifying portfolio companies.
A full break-down is shown in the chart below. The thirteen investments also
represent full investment of the total amount raised during the financial period
ending 2020, meaning the VCT has hit both the VCT investment rules, which
require the VCT to invest 30% of funds in qualifying investments by the end of
the next financial period (2022) and 80% of funds in qualifying investments by
the end of the following financial period (2023).
Investment Manager’s Review
Portfolio Statistics
Blackfinch Spring VCT Annual Report and Financial Statements
27
20 April 2022
The thirteen investments to date are in distinct industry sectors, illustrating
the diversification that is being built into the portfolio. We plan to continue this
diversification with the next investments.
Blackfinch Spring VCT Annual Report and Financial Statements
28
20 April 2022
The portfolio has a B2B focus, but some investments target B2B alongside B2C.
Kokoon is currently the only portfolio company with a B2C focus.
The Company holds a small stake in each of its portfolio companies, each
currently 1.5–9%. This range is larger than last year, representing the wider
spread of investment amounts into individual companies. Whilst the portfolio
continues to be built out and diversified it is likely that forthcoming investments
will be of a similar size and equity holding, although the range is likely to
continue to increase over time.
Blackfinch Spring VCT Annual Report and Financial Statements
29
20 April 2022
Investment Manager’s Review
Pipeline Overview
A company with impressively consistent growth that has developed an
employee relationship platform. It is led by an exceptionally capable founder
who has an impressive track record founding and exiting three previous start-
ups. The company’s platform has clearly differentiated market positioning and
is steadily accumulating more and more customers.
Company sector
Stage
Asset class
HR Tech
Scale-up
Equity
Company 1
Blackfinch Spring VCT Annual Report and Financial Statements
30
The Investment Manager continues to benefit from a solid pipeline of opportunities. Some
of the new companies being considered for investment are described below, though it is
likely that not all will complete as they move further through the evaluation process.
20 April 2022
Investment Manager’s Review
Pipeline Overview
Company sector
Stage
Asset class
Electric Car Tech
Scale-up
Equity
Blackfinch Spring VCT Annual Report and Financial Statements
31
A dynamic business facilitating the rapid roll-out of home electric car chargers.
Its online platform connects manufacturers, installers and end-customers,
making it quicker and cheaper to get a charger at home, with much less hassle.
The founder has prior experience running and exiting a successful start-up in a
similar space, and he is growing this new business impressively quickly.
Company 2
20 April 2022
Investment Manager’s Review
Pipeline Overview
Company sector
Stage
Asset class
Customer Service Tech
Scale-up
Equity
Blackfinch Spring VCT Annual Report and Financial Statements
32
An innovative company developing artificial intelligence-powered
conversational tools, primarily chatbots, to enhance customer service.
Its platform is simple to set up, requiring no technical expertise, and even
suggests improvements as it learns what is asked. In the front-line of customer
service, it is delivering instant service while saving considerable cost.
Company 3
20 April 2022
Investment Manager’s Review
Pipeline Overview
Company sector
Stage
Asset class
eCommerce Tech
Scale-up
Equity
Blackfinch Spring VCT Annual Report and Financial Statements
33
An exciting early-stage company already delivering big benefits to
eCommerce businesses, with its simple, centralised software tools to manage
customer messages across multiple channels including shopping platforms
and social media. The founders have excellent experience in the space and
have already delivered very consistent initial growth.
Company 4
20 April 2022
Investment Manager’s Review
Pipeline Overview
Company sector
Stage
Asset class
Market Research Tech
Scale-up
Equity
Blackfinch Spring VCT Annual Report and Financial Statements
34
20 April 2022
A high-growth market research business led by experienced founders with an
excellent record of successful exits. They offer a sophisticated online platform
that gives enterprises accurate information about consumer habits directly
from those consumers’ phones. Individuals are incentivised to provide their
data and are always explicitly in control of what they do share.
Company 5
Investment Manager’s Review
Pipeline Overview
Company sector
Stage
Asset class
Recruitment Tech
Scale-up
Equity
Blackfinch Spring VCT Annual Report and Financial Statements
35
20 April 2022
An impressive recruitment technology business with an online platform built
for the retail and hospitality sectors. Its modern CV-less app has strong appeal
to the target Gen Z workforce. It’s run by a highly tenacious founder who
successfully navigated the dire impacts of the pandemic to achieve superb
growth and several major enterprise customer sign-ups in the last year.
Company 6
Strategic Report
Investment Policy, Strategy and Objectives
Blackfinch Spring VCT Annual Report and Financial Statements
36
Investment Policy
The Company will focus its investment in unquoted companies with some or all
of the following characteristics:
• Early-stage and technology-enabled with a focus on research and
development
• The capability to grow quickly through disrupting their markets
• Strong performance against previous investment round milestones
The Company’s portfolio companies will be:
• requiring investment of at least £0.2 million
• entering large growing markets and have the potential for high return
multiples
• generally able to show evidence of product-market-fit
Investment Strategy
The Company will invest in early-stage technology-enabled companies with
a strong focus on research and development and innovation, which gives the
potential for high growth alongside reasonable exit timescales and underpinned
by clear ESG values. To be considered for investment, companies must be
capable of growth through disrupting large growing markets, typically of at least
£1bn, and be capable of achieving significant exit multiples. Highly regulated
industries, for example medical technology, are considered only in exceptional
cases due to the timescales involved in bringing products to market.
A key premise of the strategy is identifying companies that have already
delivered convincingly on the milestones associated with any previous
investment rounds. Companies will need to show evidence of product-market-
20 April 2022
fit through traction, often in the form of revenue, which is a strong indicator
they are past the inflection point of their growth curve. They will also need to
demonstrate an ability to control the acquisition of new customers, typically
verifying the success of campaigns through carefully monitored growth metrics.
Companies showing these characteristics have a higher chance of efficient,
quantified growth, which is a key ingredient for future success.
When assessing investment opportunities, strong emphasis is placed on the
founding team who must be highly motivated, driven, and have a track record
of making excellent decisions under pressure. This team must complement
each other in their skills, which should, in aggregate, cover the core operating
areas of the company. Their interests must be strongly aligned to increasing
the valuation of the company and their own shareholding or options, rather than
only short term personal remuneration. The team’s work ethic is constantly
assessed as is their responsiveness, as a measure of how prepared they are
for the challenges of entering the next stage of their company’s growth. Every
company that is selected for potential investment will have to pass through
a comprehensive due diligence exercise which aims to test its innovations,
financials and VCT eligibility. A relevant technical expert will spend a day with
the company to assess the proposition and status, from high level architecture
to low level code and designs. Analysts model the company’s performance
and growth, and a VCT tax specialist will typically be instructed to determine
whether the investment is expected to be VCT qualifying.
Diversification is intended to be achieved across both sector and stage, with
the Company planning to invest in a broad range of high-calibre technology
enabled opportunities across many sectors. Although Series A is preferred, the
Company diversifies stage risk by balancing earlier opportunities with those
slightly further along their traction curve. This approach gives the potential for
significant returns whilst mitigating the effect of companies that underperform
or fail. The Company will typically invest in opportunities that are bringing
disruptive innovations to large growing markets and are capable of significant
exit multiples.
The Investment Manager’s existing Blackfinch Ventures EIS Portfolio service
creates a strong opportunity for follow-on co-investment. If approved by the
Board and compliant with VCT Rules, these opportunities should benefit from
Blackfinch Spring VCT Annual Report and Financial Statements
37
20 April 2022
a higher chance of success due to a deep understanding of the proposition
and growth data from previous years as a portfolio company. Co-investments
of this nature may be made at different times and on different terms to those
of Blackfinch Ventures EIS Portfolios. Where co-investments are made
simultaneously, an allocation policy determines the proportion of the overall
investment made by each of the EIS Portfolios and the Company, with approval
required from the Investment Committee and in some cases the Investment
Manager’s Conflicts Committee. Approval of this Conflicts Committee is
also required in handling any subsequent conflict between the funds for
the investment.
Where possible, the Investment Manager will look to lead on the investment
round to ensure that timescales and due diligence are within its control. This
approach reduces technology, company and compliance risk and, for founders,
the speed and confidence of execution is attractive, resulting in a pick of the
better opportunities. By the nature of focussing on early-stage investments,
the Company will often co-invest with other investment firms and will look to
secure strong working relationships with those firms during and after the deal
making process.
The Investment Manager will not appoint its own manager or partner as the
NED on the board of its portfolio companies. Instead, where appropriate it aims
to appoint the NED from its network of Venture Partners who are experienced
founders, industry leaders and experts bought together for this purpose. These
Venture Partners add meaningful value through their experience and network,
and founders are increasingly citing this approach as a key differentiator. The
Investment Manager’s portfolio team work with the Venture Partners, and also
collect monthly financial and KPI data from the companies.
Qualifying Investments
Qualifying Investments comprise investments in companies which are carrying
out a qualifying trade (as defined under the relevant VCT legislation), and have
a permanent establishment in the UK, although some may trade overseas. The
Qualifying Companies in which investments are made must have no more than
£15 million of gross assets immediately prior to the investment (or £16 million
immediately after the investment), fewer than 250 employees (or fewer than
Blackfinch Spring VCT Annual Report and Financial Statements
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20 April 2022
500 employees in the case of a Knowledge Intensive Company) and generally
cannot have been trading for more than seven years (or ten years in the case
of a Knowledge Intensive Company) at the time of the Company’s investment.
Several other conditions must be met for an investment to be classed as a VCT
Qualifying Investment.
The Company intends to invest the net proceeds of the Offer in acquiring a
portfolio of Qualifying Investments complying with VCT legislation. At least
30% of the funds raised will be invested in Qualifying Investments within 12
months of the end of the Company’s accounting period in which the relevant
Shares were allotted, and at least 80% of its net assets will, by the start of the
Company’s accounting period in which the third anniversary of the date the
relevant shares are allotted falls and continuously thereafter, be invested in
Qualifying Investments.
Non-Qualifying Investments
No non-qualifying investments were made during the year. Funds not invested
in Qualifying Investments were held in cash.
Subject to the rules applicable to VCTs, funds not employed in Qualifying
Investments may nonetheless be invested in a limited range of investments
for the purposes of liquidity management, specifically in listed shares, shares
or units in alternative investment funds and UCITS (each of which must be
redeemable on seven days’ notice by the investor) and short-term cash
deposits. These may generate limited additional returns for investors and
mitigate against a rise in value of competing companies. Such investments
are subject to market fluctuations.
Borrowing Policy
The Company has no present intention of utilising gearing as a strategy for
improving or enhancing returns. Under the Company’s Articles of Association,
the borrowings of the Company will not, without the previous sanction of the
Company in general meeting, exceed 25% of the aggregate total amount
received from time to time on the subscription of shares in the Company.
Blackfinch Spring VCT Annual Report and Financial Statements
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20 April 2022
Share Buyback Policy
The shares are traded on the London Stock Exchange’s main market for
listed securities. Although it is likely that there will be an illiquid market for
such shares and, in such circumstances, shareholders may find it difficult to
sell their shares in the market, the Company intends to pursue an active buy
back policy to improve the liquidity in the Shares where the Company may
repurchase shares which shareholders wish to sell at a discount of 5-10%
to the latest published Net Asset Value per Share, subject to applicable
regulations, market conditions at the time and the Company having both the
necessary funds and distributable cash resources available for the purpose.
The making and timing of any share buybacks will remain at the absolute
discretion of the Board. The Directors expect that there will be limited demand
for share buybacks from shareholders within the first five years because
the only sellers are likely to be deceased shareholders’ estates and those
Shareholders whose circumstances have changed (to such extent that they
are willing to repay the 30% income tax relief in order to gain access to the
net proceeds of the sale).
Dividend policy
The Company intends but cannot guarantee to pay: (1) a regular annual
dividend commencing not earlier than in the financial year beginning 1
January 2024 equivalent to 5% of the Company’s Net Asset Value and
(2) special dividends, where appropriate, from the proceeds of successful
exits of portfolio companies that are not reinvested. The Company’s ability
to pay dividends is subject to the existence of realised profits, legislative
requirements and the available cash reserves of the Company. No forecast
or projection is implied or inferred.
Blackfinch Spring VCT Annual Report and Financial Statements
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20 April 2022
Blackfinch Spring VCT Annual Report and Financial Statements
41
Key Performance Indicators (“KPIs”)
and Alternative Performance Measures (“APMs”)
The objective of the Company is to provide long-term
returns where shares are invested for at least five years,
whilst enabling shareholders to benefit from available VCT
tax reliefs. The KPIs and APMs monitored by the Board
towards that objective are:
a. Total Return relative to amount subscribed.
b. The increase in the value of investments.
c. Operational expenses as a proportion of
shareholders’ funds.
d. Ongoing charges ratio, as defined below.
Total Return is the NAV plus dividends paid. With no
dividends having yet been paid it is equivalent to the
NAV. The effect of operational costs caused a reduction
through much of the year, but it increased again with the
first investment gains in the final quarter. It ended 1p down
at 93.08p per share compared to 94.08p at the start of
the year. Total Return is expected to be the best overall
measure of long-term performance, particularly as it
reflects dividend payments as well as current NAV.
The increase in value of investments will reflect
performance within a year, though making it more
subject to external market factors during that year.
The net increase in the year was £622,250 compared to
£0 in the previous period. The increase included a realised
loss of £549,997 from Movebubble and an aggregate
unrealised gain of £1,172,247 from all other investments.
Operational expenses in the period were 3.5% of
shareholder funds, benefitting from the Investment
Manager’s fee cap, and unchanged from the previous
year. The ongoing charges ratio is the annualised
operating costs divided by the average NAV over the
period. It includes all operating costs expected to be
regularly incurred, be they of a capital or revenue nature,
and that are payable by the Company, but excludes the
costs of acquisition or disposal of investments, financing
charges, and gains or losses on investments.
The Company’s share price over the period is shown
in the graph on page 68. The overall future prospects
and outlook for the VCT are discussed in the Chairman’s
Statement.
The Board also closely monitors the measures defined
by HMRC for its VCT tests, such as those discussed in
Portfolio Statistics on pages 27 to 29, to ensure that the
Company will continue to qualify as a VCT.
Ongoing
Charges Figure
Year to 31
December 2021(%)
6.94
Period to 31
December 2020(%)
7.50
20 April 2022
Blackfinch Spring VCT Annual Report and Financial Statements
42
Key Contracts
Investment Management Agreement
An agreement (the “Investment Management Agreement”) dated 10
December 2020 and made between the Company and Blackfinch whereby
Blackfinch will, with effect from the commencement date, be appointed as
the Company’s Investment Manager to provide discretionary investment
management services to the Company in respect of its portfolio of Qualifying
Investments and Non-Qualifying Investments. Blackfinch will receive an
annual fee equal to 2.5% of the Net Asset Value (plus VAT if applicable)
payable quarterly in arrears, the first payment to be made in respect of the
period from the Effective Date until the termination of the Investment Advisory
Agreement. Blackfinch is entitled to reimbursement of expenses incurred in
performing its duties under the agreement, and will also be entitled to receive
and retain transaction and introductory fees, directors’ fees, monitoring
fees, consultancy fees, corporate finance fees, syndication fees, exit fees and
commissions in relation to portfolio companies.
The appointment of the Investment Manager in relation to the investment
management services commenced on the Effective Date and will continue
unless and until terminated by either party giving to the other not less than 12
months’ notice in writing, such notice not to take effect before the end of the
fifth anniversary following the last allotment of Shares pursuant to an offer for
subscription made by the Company. The Investment Management Agreement
is subject to earlier termination by either party in certain circumstances.
The Investment Manager has agreed to indemnify the Company by such
amount as is equal to the excess by which the Annual Running Expenses of
the Company exceeds 3.5% of the Net Asset Value, calculated on an annual
basis The provision by the Investment Manager of discretionary investment
management services is subject to the overall control, direction and
supervision of the Directors.
Performance Incentive
As is customary in the venture capital industry, Blackfinch Investments
is incentivised with a performance related incentive payable in relation to
each accounting period, subject to the Performance Value per Share being
20 April 2022
Blackfinch Spring VCT Annual Report and Financial Statements
43
20 April 2022
Key Contracts
at least 130p at the end of the relevant accounting period. The amount of
the performance incentive fee is equal to 20% of the amount by which the
Performance Value per Share at the end of an accounting period exceeds the
High Water Mark (being the higher of 130p and the highest Performance Value
per Share at the end of any previous accounting period), and multiplied by
the number of Shares in issue at the end of the relevant period. The Directors
believe that the performance incentive structure provides a strong incentive for
the Investment Manager to make distributions as high and as soon as possible.
The Performance Value per Share is defined as the total of:
i. the Net Asset Value,
ii. all performance incentive fees previously paid or accrued by the VCT to
Blackfinch as investment adviser for all previous accounting periods, and
iii. the cumulative amount of dividends paid by the VCT before the relevant
accounting reference date. This includes the amount of those dividends in
respect of which the exdividend date has passed as at that date, divided by
the number of shares in issue in the VCT on the relevant date.
Administration Agreement
Under the terms of the administration agreement dated 11 November 2019,
Blackfinch agreed to provide certain administration services, company
secretarial services and fund accounting services to the Company. In
exchange for these services, the Company has agreed to pay to Blackfinch
an annual fee of either 0.3% of Net Asset Value or £60,000 (plus VAT if
applicable), whichever is higher. This agreement will continue until either
party chooses to terminate after giving the other part no less than 12 months’
notice of termination in writing. Termination should not take effect before
the end of the fifth anniversary following the last offer for subscription made
by the Company, but the agreement is subject to early termination in certain
circumstances, such as in the event of certain breaches or the insolvency of
either party.
Receiving Agent Agreement
Under the terms of the receiving agent agreement dated 2 September 2021,
Blackfinch agreed to provide receiving agent services to the Company.
Blackfinch Spring VCT Annual Report and Financial Statements
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20 April 2022
In exchange for these services, the Company has agreed to pay to Blackfinch
an annual fee of £13,000 (plus VAT if applicable). This agreement will continue
until either party chooses to terminate after giving the other part no less than
30 days’ notice of termination in writing. The agreement is subject to early
termination in certain circumstances, such as in the event of certain breaches
or the insolvency of either party.
Investment management services and Administration
Blackfinch is paid an annual fee of 2.5% of Net Asset Value (plus VAT if
applicable) for the investment advisory services it provides to the Company.
The fee is payable quarterly in arrears. The Company is responsible for its
normal third party costs including (without limitation) listing fees, audit and
taxation services, legal fees, sponsor fees, registrars’ fees, receiving agent fees,
Directors’ fees and other incidental costs. Blackfinch has agreed to cap the total
Annual Running Expenses plus any Execution-Only Intermediary Ongoing Fee
payments to a maximum of 3.5% of Net Assets and any excess above this will
be borne by Blackfinch. A maximum of 75% of the Company’s management
expenses will be capable of being charged against capital reserves with the
balance charged against revenues.
Custody Agreement
A Custody Agreement dated 11 November 2019 between the Company and
Blackfinch under which Blackfinch agrees to hold securities in certificated form
on behalf of the Company as custodian for an annual fee of £5,000 plus VAT,
terminable by either party giving to the other not less than 12 months’ notice
in writing, such notice not to take effect before the end of the fifth anniversary
following the last allotment of shares pursuant to an offer for subscription made
by the Company, but subject to early termination in certain circumstances.
As required by the Listing Rules, the Directors can confirm that, in their
opinion it is in the best interests of the shareholders as a whole to continue the
appointment of Blackfinch Investments Limited as the Investment Manager and
Administrator. In order to come to a conclusion, the Directors have taken into
account the length of notice period, performance to date and the standard of
service received.
Key Contracts
Blackfinch Spring VCT Annual Report and Financial Statements
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20 April 2022
The Board and the Audit Committee have an ongoing
process for identifying, evaluating and monitoring the
principal and emerging risks facing the Company. The
Board has listed below details of these including the
measures taken in order to mitigate these risks as far
as practicable.
VCT status qualifying risk
The Company must comply with section 274 of the Income Tax Act 2007,
this act enables investors to take advantage of tax relief on their investment
and future returns when investing in a VCT. If the Company breaches any of
the rules in section 274, this could result in the loss of VCT status. Breaches
could also result in investors becoming liable to pay income tax on dividends
received from the Company and in some circumstances, investors may have
to repay the initial income tax relief on their investment. The most prevalent
risks to VCT status at this time are if the VCT fails to invest 80% of its funds
into Qualifying Investments by the second anniversary of the end of the
accounting period in which the Company issued the shares, or if any
investee company loses its qualifying status.
Working closely with the Board, Blackfinch as the Investment Manager keeps
track of the VCT’s qualifying status to ensure it remains qualifying. Regular
reports are provided to and discussed with the Board, the Board reviews the
status of the VCT tests on a quarterly basis. Philip Hare & Associates has also
been appointed as Tax Adviser to provide monitoring reports to the Board
twice yearly.
Investment, performance and valuation risk
The Company will mainly invest in early stage technology enabled VCT
qualifying companies. These companies by their nature entail a higher level
of risk, are more volatile and will be less liquid than holding larger quoted
companies. There may also be constraints on the realisation of investments
to maintain the VCT tax status of the Company.
Principal and
Emerging Risks
Blackfinch Spring VCT Annual Report and Financial Statements
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20 April 2022
The Board and Investment Manager aim to minimise the investment risk
attached to the investment portfolio as a whole by ensuring that a robust
and structured selection, monitoring and realisation process is in place.
Diversification is intended to be achieved across both sector and stage, the
latter by balancing earlier opportunities with those slightly further along
their traction curve. The investment portfolio is reviewed by the Board and
Investment Manager together on a regular basis.
The Company’s investment valuation methodology is reliant on the portfolio
companies issuing accurate and complete information. In particular,
the Directors may not be aware of or take into account certain events or
circumstances which may happen after the information issued by such
companies is reported. The unquoted investments held by the Company are
designated at fair value through profit or loss and valued in accordance with
the International Private Equity and Venture Capital Valuation Guidelines as
updated in 2018. These guidelines set out recommendations, intended to
represent current best practice on the valuation of venture capital investments.
The valuation takes into account all known material facts up to the date of
approval of the Financial Statements by the Board.
Regulatory and compliance risk
The Company is authorised as a self-managed Alternative Invest Fund
Manager (AIFM) under the Alternative Investment Fund Managers Directive
(“AIFMD”), and it must abide by the Prospectus and Transparency Directives.
The Company is also required to comply with the Companies Act 2006, the
rules of the UK Listing Authority, and United Kingdom Accounting Standards.
If the Company breaches any of these it could lead to number of detrimental
outcomes including but not limited to suspension of the Company’s Stock
Exchange listing, reputational damage, or financial penalties.
The day to day running of the Company is overseen by Blackfinch. The
Board is updated at Board Meetings at least quarterly on all regulatory
and compliance matters and take specific legal action when required. The
Board and the Investment Manager employ third parties to ensure that the
Company complies with all its regulatory obligations, these parties include
Principal and
Emerging Risks
Blackfinch Spring VCT Annual Report and Financial Statements
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20 April 2022
Howard Kennedy as Sponsor and Legal Adviser, City Partnership as Company
Secretary and Philip Hare & Associates as Tax Adviser. The Investment
Manager also employs a team of compliance specialists who support the
Board in ensuring that the Company is compliant.
Operational and Internal control risk
There is a risk of failure of the systems and controls of any of the Company’s
advisers, leading to an inability to service shareholder needs adequately,
provide accurate reporting and accounting, and to ensure the Company is
complying with all VCT legislation rules. To mitigate these risks, the Company
relies on a number of third parties, in particular the Investment Manager to
provide it with necessary services such as Sponsor, Company Secretary,
Receiving Agent, Registrar, Solicitors and Tax Advisers. There is a risk of failure
of the systems and controls of any of the Company’s advisers, leading to an
inability to service shareholder needs adequately, provide accurate reporting
and accounting and to ensure the Company is complying with all VCT
legislation rules. The Board regularly reviews the system of internal controls,
both financial and non-financial operated by the Company and key third-party
advisers. These include controls designed to ensure that the VCT’s assets
are safeguarded, that third parties have adequate controls in place to prevent
data protection and cyber security failings, and that proper accounting records
are maintained. In addition, the Board regularly reviews the performance of its
service providers to ensure that they continue to have the necessary expertise
and resources to provide the expected level of service.
Economic, political and other external factors
The valuation of investment companies in the portfolio may be affected by
economic, political and other external factors such as a movement in interest
rates, Britain leaving the EU, labour shortages, rising inflation, rising energy
costs, the ongoing Coronavirus outbreak, or Russia’s invasion of Ukraine.
The Company aims to invest in a diversified portfolio across a range of stages
and sectors and also maintains cash to ensure it can provide follow-on
investments when companies require it.
The Board and the Investment Manager are continually assessing the
implications of the aforementioned economic, political and external factors
Principal and
Emerging Risks
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20 April 2022
which have an impact on the UK and Global economies. This ensures that
exposure to the risks for each portfolio company are addressed and where
needed action is taken to minimise the risk.
The economic and political environment as well as external factors are kept
under constant review and the investment strategy is adapted as far as
possible to mitigate emerging risks.
Governance risk
The Directors of the Company are aware that an ineffective Board could have
a negative impact on the Company. The Board recognises the importance of
effective leadership and board composition and this is ensured by completing
an annual evaluation process, with action taken if required. City Partnership
is appointed as Company Secretary to monitor corporate governance best
practice.
Cash flow risk
The Investment Manager closely and continually monitors the availability
of cash resources. Cash flow forecasts and budgets are presented to and
reviewed by the Board on a regular basis to ensure that the risk of insufficient
cash to meet financial obligations is minimised.
Principal and
Emerging Risks
Section 172 Statement
Section 172 of the Companies Act 2006 requires the Directors of the Company to act in a way that they consider, in good
faith, will most likely promote the success of the Company for the benefit of the members as a whole. In doing so, the
Directors should have regard (amongst other matters) to:
• the likely consequences of any decision in the long term;
• the interests of the Company’s employees;
• the need to foster the Company’s business relationships with suppliers, customers and others;
• the impact of the Company’s operations on the community and the environment;
• the desirability of the Company maintaining a reputation for high standards of business conduct; and
• the need to act fairly as between members of the Company.
The Board considers its significant stakeholder groups to be its Shareholders, its third-party advisers and its portfolio
companies. The Company takes several steps to understand the views of its key stakeholders and considers these,
along with the matters set out above, in Board discussions and decision making.
The Company has no employees (other than its Directors) and no customers in a traditional sense and therefore there is
nothing to report in relation to these relationships. In line with normal practice for Venture Capital Trusts, the day to day
management and administration is delegated to the relevant third parties. The Board regularly engages with the third
parties to set, approve and oversee the execution of the agreed business strategy and related policies. Ad hoc meetings
and communications are convened where necessary to address specific issues such as the Coronavirus pandemic to
ensure an appropriate and transparent response is formulated.
The Board’s principal concern is the interest of the Company’s Shareholders taken as a whole, the Board engages and
communicates with Shareholders by various means. At the Annual General Meeting Shareholders will be given the
opportunity to engage with the Board and the Investment Manager and hear from some of the portfolio companies. All
Shareholders will be encouraged to vote on the resolutions at the Annual General Meeting.
During the year, after carefully considering the volume and quality of investment opportunities being seen by the
Investment Manager, the Board issued a prospectus on 3 September 2021 to raise up to £20 million with an over-
allotment facility of £10 million.
Given the significance of maintaining the Company’s VCT status to the Company’s objectives of maximising the net
Blackfinch Spring VCT Annual Report and Financial Statements
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20 April 2022
asset value return and of delivering attractive tax-free dividends to shareholders, the Board monitors the Company’s
compliance with the relevant HMRC Regulations at each of its meetings. The Board also reviews at each meeting the
risks to which the Company is exposed and the internal controls designed to reduce the probability of such risks arising
and to mitigate the effect if they should occur.
The Board works closely with the Investment Manager in reviewing how stakeholder issues are handled, ensuring good
governance and responsibility in managing the Company’s affairs. As well as having a Director from the Investment
Manager on the Board of the VCT, key stakeholders from the Investment Manager also attend Board meetings. The
Investment Manager has therefore been well informed of any decisions the Board has made during the period and as a
result has had opportunity to discuss the impact these decisions may make, the Investment Manager provides updates
to the Board on the entire portfolio at least quarterly and this has happened more regularly with the outbreak of the
Coronavirus pandemic. The Investment Manager works closely with management teams to ensure that they continue to
evaluate and react accordingly to the evolving situation.
Environmental, Social, Governance, Human Rights and Community Issues
The Board seeks to carry out the Company’s affairs in a responsible manner and maintain high standards in respect
of environmental, governance and social issues. The Company is required by law to provide details of environmental,
employee, human rights, social and community issues. As a VCT the Company does not have any employees and as
a result does not maintain specific policies in relation to these matters. The Company does, however, encourage the
Investment Manager to consider these issues, where appropriate, with regard to investment decisions.
The Board considers that the Company’s investment operations create employment, aid economic growth, generate
tax revenues and produce wealth, thus benefiting the community and the economy more generally. When considering
portfolio companies, the Investment Manager strives to ensure that each one makes at least a small positive, sustainable
contribution to the world.
In assessing any potential investment or portfolio companies, the following are considered:
1. The central purpose of the business: this must be worthwhile at least in some small way. An economic benefit is
worthwhile. For example, a business-to-business company that saves other businesses money would generally
qualify. (This is unless, for example, its customers were mainly in a high-risk sector, e.g. gambling.)
2. What the business does – and plans to do – in pursuit of its purpose.
3. How the business is conducted, especially for governance.
4. The attitude of the team – the board and especially the founders – and their commitment to ESG.
The Investment Manager’s ESG policy commits it to ensuring that environmental impact, social responsibility, and
good governance are properly considered in making and managing all its investments. A detailed assessment is made
of ESG in each company, which is then included in the Investment Committee Paper for approval; it will list any relevant
risks and mitigation plans. The Investment Manager engages with the Company’s portfolio companies in relation to
their corporate governance practices and in developing their policies on environmental, social and community issues on
an ongoing basis. Further details on how the Investment Manager incorporates ESG into its investment processes and
assesses the potential investment risks can be found within the Blackfinch Ventures ESG Policy at
https://blackfinch.com/esg.
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20 April 2022
Environment Policy & Greenhouse Gas Emissions
Blackfinch Spring VCT Annual Report and Financial Statements
51
As a VCT with no physical assets, property, employees or operations, the
Company has no direct environmental responsibilities, nor is it directly
responsible for the emission of greenhouse gases under the Companies
Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013.
The Company does not fall within the scope of The Companies (Directors’
Report) and Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018 effective as of 1 April 2019 which implements the
Government’s policy on Streamlined Energy and Carbon Reporting,
replacing the Carbon Reduction Commitment Scheme.
The 2018 Regulations require companies that have consumed over 40,000
kilowatt-hours of energy to include energy and carbon information in their
Directors’ Report, however, the Company has no direct carbon usage therefore
there are no disclosures to make in this respect. Therefore, the Board has
no specific environmental policy. The Company does however recognise the
need to conduct its business, including investment decisions, in a manner
that is responsible to the environment wherever possible.
20 April 2022
VCT
Regulations
Blackfinch Spring VCT Annual Report and Financial Statements
52
The Company has engaged Philip Hare & Associates LLP to advise it on
compliance with VCT requirements, including evaluation of investment
opportunities as appropriate and regular review of the portfolio. Although
Philip Hare & Associates LLP works closely with the Investment Manager, they
report directly to the Board. Compliance with the main VCT regulations as at 31
December 2021 and for the period then ended is summarised as follows:
a. The Company’s income in the period has been derived wholly or mainly
(70% plus) from shares or securities.
b. The Company has not retained more than 15% of its income from shares
and securities.
c. The Company has not made a prohibited payment to shareholders.
d. At least 80% by value of the Company’s investments has been represented
throughout the period by shares or securities comprised in qualifying
holdings of the Company.
e. At least 70% by value of the Company’s qualifying holdings has been
represented throughout the period by holdings of eligible shares
f. At least 30% of the funds raised are invested in qualifying holdings by
the anniversary of the end of the accounting period in which those funds
are raised.
g. No holding in any company has at any time in the period represented more
than 15% by value of the Company’s investments at the time of investment.
h. The Company’s ordinary capital has throughout the period been listed on a
regulated European market.
i. The Company has not made an investment in a company which causes it to
receive more than the permitted investment from State Aid sources.
j. Since 17 November 2015, the Company has not made an investment in a
company which exceeds the maximum permitted age requirement.
k. Since 17 November 2015, funds invested by the Company in another
company have not been used to make a prohibited acquisition.
l. Since 6 April 2016, the Company has not made a prohibited non-qualifying
investment.
20 April 2022
Statement on Long-Term Viability
In accordance with provision 4.27 of The UK Corporate Governance Code published
by the Financial Reporting Council in July 2018 (the “Code”), the Directors consider
the Annual Report and accounts to be fair, balanced, and understandable.
In line with provision 4.31 of the Code the Directors have assessed the Company’s prospects over the five-year period to
31 December 2026. This period has been considered appropriate for a business of this nature and size, because it is the
minimum recommended investment period and the period for which investors are required to hold their shares in order
to retain tax relief.
The Directors have carried out a robust assessment of the principal and emerging risks faced by the Company,
considering its business model, future performance, solvency and liquidity. They deliberated over the Company’s ability
to maintain its VCT status with HM Revenue and Customers, and over the valuation of investments. The impact of the
Coronavirus pandemic, the effects of Brexit, rising inflation and labour shortages have been considered. Given the extent
of available resources, the Board particularly assessed the ability of the Company to raise finance, as well as its ability
to deploy capital. It reviewed income and expenditure projections, and examined robust stress-tested cash flows to
understand the impact of different scenarios. It also assessed the Investment Manager and the processes in place for
dealing with risks and identifying emerging threats. A detailed risk register is monitored and reviewed by the Board at
every Board meeting.
The Board has determined that the Company will be able to continue in operation, maintain compliance with the
VCT rules and meet its liabilities as they fall due for a period of at least five years from the accounts approval date.
Other Disclosures
The Board of the Company is made up of three Directors, two of which are male and one is female. The Company has
no employees.
On behalf of the Board
Peter LR Hewitt, JP, FCSI
Non-executive Chairman
20 April 2022
Companies House Number - 12166417
Blackfinch Spring VCT Annual Report and Financial Statements
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20 April 2022
Directors’ Report
The Statement of Corporate Governance on pages 57 to 62 forms part of the
Directors’ Report.
Principal Activity and Status
The Company is registered as a public limited company under the Companies Act 2006 (Registration number 12166417).
The address of the registered office is 1350-1360 Montpellier Court, Gloucester Business Park, Brockworth, Gloucester
GL3 4AH. The Company is a generalist VCT focused on investments in early stage technology-enabled companies with
a focus on research and development and innovation. A review of the Company’s business during the year is contained in
the Chairman’s Statement and Investment Manager’s Review.
Directors
The Directors of the Company during the period under review were Peter Hewitt, Kate Jones, Reuben Wilcock.
The Company indemnifies its directors and officers and has purchased insurance to cover its Directors.
Dividend
The Directors envisage that dividends will commence in the financial year beginning 1 January 2024, equivalent to 5%
of the Company’s Net Asset Value per share. The ability to pay the intended dividends may also be constrained by, in
particular, the existence of realised profits, regulations and the available cash reserves of the Company.
Share Capital
As shown in note 16 to the financial statements, the Company has only one class of share, being ordinary shares of 1p each.
Buy back and Issue of ordinary shares
No shares were bought back by the Company during the period, at the year-end authority remained for the Company to
buy back 1,893,813 (2020: 586,399) shares. There were 12,633,843 ordinary shares in issue at the year end. During the
year a total of 8,721,908 ordinary shares in the Company were issued as a result of offers for subscription at an average
price of 93.02 pence per share raising £8.1 m.
Blackfinch Spring VCT Annual Report and Financial Statements
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20 April 2022
Capital Disclosures
The rights and obligations attached to the Company’s ordinary shares are set out in the Company’s Articles of
Association, copies of which can be obtained from Companies House. The Company has one class of share, ordinary
shares, which carry no right to fixed income. The holders of ordinary shares are entitled to receive dividends when
declared, to receive the Company’s report and accounts, to attend and speak at general meetings, to appoint proxies
and to exercise voting rights. There are no restrictions on the voting rights attaching to the Company’s shares or the
transfer of securities in the Company.
Co-Investment Allocation Policy
Given the Investment Manager’s considerable experience of, and exposure to, the EIS investment sector, the Board
has reviewed and is satisfied with the revised co-investment allocation policy from Blackfinch Investments Limited.
Annual General Meeting (“AGM”)
The Notice of the Annual General Meeting is on pages 102 to 103 of these financial statements.
A resolution is proposed to re-elect Kate Jones as a Director of the Company. The Board has chosen not to comply
with the Provision of the UK Corporate Governance Code for the annual re-election of all directors. The Board believes
that given the size and early stage of the Company, annual re-election would be inappropriate. However, the Board
has decided that each of its two independent Directors will stand for re-election every second year with only one such
Director standing in any given year. Reuben Wilcock, as a non-independent Director is subject to annual re-election in
accordance with the Listing Rules.
The Notice of AGM includes the following resolutions:
• Resolution 7, an ordinary resolution, is proposed to ensure the Directors retain the authority to allot shares in
the Company until the date of the 2023 Annual General meeting up to an aggregate nominal amount of £400,000
(representing approximately 272 per cent of the issued ordinary share capital of the Company as at 1 April 2022).
• Resolution 8, a special resolution, is proposed to empower the Directors to allot shares under the authority granted by
resolution 7 without regard to any rights of pre-emption on the part of the existing shareholders.
• Resolution 9, a special resolution, is proposed to renew the existing share buyback authority to ensure that authority
to buy back shares is in place until the date of the 2023 Annual General Meeting.
Auditor
A resolution to appoint BDO LLP as auditor of the Company will be proposed at the AGM.
Substantial Shareholdings
Blackfinch Spring VCT Annual Report and Financial Statements
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20 April 2022
Name of shareholder
Transact Nominees Limited
Richard Hensman
Robert Carter
Christopher Brown
Robert Lewis
No of ordinary shares held
672,846
201,523
200,000
197,749
196,766
% of shares in issue
5.33
1.60
1.58
1.57
1.56
31 December 2021
Going Concern
The Directors have made an assessment of the Company’s ability to continue as a going concern and are satisfied that
the Company has adequate resources to continue in business for the foreseeable future (being a period of 12 months
from the date these financial statements were approved). In reaching this conclusion the Directors took into account the
nature of the Company’s business and Investment Policy, its risk management policies, its investments, and the cash
holdings. As at 31 December 2021 the Company held cash balances with a value of £4,966,027. Cash flow projections
show the Company has sufficient funds to meet all its expected expenditure for the foreseeable future. The Directors
have reviewed the portfolio of qualifying investments and expect the Company to continue to satisfy the conditions of
VCT compliance. Businesses in this increasingly diversified portfolio are performing well, and the Company has the
resources to provide additional short-term funding to those that require it. Thus, the Directors believe it is appropriate
to continue to apply the going concern basis in preparing the financial statements.
Accountability and Audit
The independent auditor’s report is set out on pages 69 to 80 of this report. The Directors who were in office on the date
of approval of these Annual Report and Financial Statements have confirmed that, as far as they were aware, there is
no relevant audit information of which the auditor is unaware. Each of the Directors has taken all the steps they ought to
have taken as Directors in order to make themselves aware of any relevant audit information and to establish that it has
been communicated to the auditor.
Financial Instruments
The Company’s financial instruments comprise investments held by the VCT, equity, cash balances and liquid resources
including debtors and creditors.
Indemnity Payments
There are no qualifying indemnity payments made on behalf of the Directors.
Risk Management
Further details, including details about risk management, are set out in the Strategic Report and in note 19 on pages 97
to 98. Social, environmental and carbon reporting disclosures are included in the Strategic Report.
Future Developments
Significant events which have occurred after the year end are detailed in note 21 on page 99. Future developments
which could affect the Company are discussed in the outlook section of the Chairman’s Statement and in the Investment
Manager’s Review.
On behalf of the Board
Peter LR Hewitt, JP, FCSI
Non-executive Chairman
20 April 2022
Companies House Number - 12166417
Blackfinch Spring VCT Annual Report and Financial Statements
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20 April 2022
Statement of Corporate Governance
The Board is committed to the principle
and application of sound corporate
governance and confirms that the
Company has taken steps, appropriate
to a venture capital trust and relevant
to its size and operational complexity
to comply with the provisions and
recommendations of The UK Corporate
Governance Code published by the
Financial Reporting Council in July 2018
(the “Code”). The Code can be found on
the website of the FRC at www.frc.org.uk.
The Directors acknowledge the section headed “Reporting
on the Code” in the preamble to the Code which recognises
that an alternative to complying with a provision may be
justified in particular circumstances based on a range
of factors, including the size, complexity, history and
ownership structure of a company. Accordingly, the
provisions of the Code have been complied with save that (i)
the Company does not have a senior independent director
(although the Chairman is an independent director), (ii)
the Company will not conduct on an annual basis a formal
review as to whether there is a need for an internal audit
function as the Directors do not consider that an internal
audit would be an appropriate control for a VCT, (iii) as all
of the Directors are non-executive and not anticipated to
change during the life of the Company, it is not considered
appropriate to appoint a nomination or remuneration
committee and (iv) other than Reuben Wilcock, who as an
employee of the Investment Manager is not considered
independent therefore is obliged to resign and stand for
re-election as a Director on an annual basis pursuant to
the Listing Rules, the Directors will not stand for re-election
on an annual basis. The Company’s Articles require that
all Directors must retire at or before the third AGM after
the AGM at which they were last elected to hold office.
The Board considers that these provisions are not relevant
to the position of the Company due to the size and
specialised nature of the Company, the fact that all
directors are non-executive and the costs involved.
The directors consider the annual report and financial
statements taken as a whole is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Company’s position,
performance, business model and strategy.
The Board
The Board has overall responsibility for the Company’s
affairs, including determining its investment policy and
having overall control, direction, and supervision of the
Investment Manager. An investment management
agreement between the Company and Blackfinch
Investments Limited sets out the matters over which
the Investment Manager has authority. This includes
monitoring of the Company’s assets. All other matters,
including strategy, investment and dividend policies and
corporate governance proceedings are reserved for the
approval of the Board. The Board meets at least quarterly
and additional meetings are arranged as necessary.
Blackfinch Spring VCT Annual Report and Financial Statements
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20 April 2022
Full and timely information is provided to the Board to
enable it to function effectively and to allow the Directors to
discharge their responsibilities. In addition, the Directors
are responsible for ensuring that the policies and operations
are in the best interests of all the Company’s shareholders
and that the best interests of creditors and suppliers to
the Company are properly considered. The Chairman
and the company secretary establish the agenda for each
Board meeting. The necessary papers for each meeting
are distributed well in advance of each meeting ensuring
all Directors receive accurate, timely and clear information.
The Board has direct access to corporate governance
and compliance services through the company secretary
which is responsible for ensuring that Board procedures are
followed and compliance requirements are met.
The Board comprises three non-executive Directors, two
of whom act independently of the Investment Manager.
Accordingly, the majority of the Board, including the
Chairman, are independent of the Investment Manager.
The Directors have a wide range of investment, business,
financial skills and knowledge relevant to the Company’s
business. Brief biographical details of each Director are
set out on pages 6 to 7.
The Company may by ordinary resolution appoint any
person who is willing to act as a Director, either to fill a
vacancy or as an additional Director. Directors are initially
appointed until the following Annual General Meeting
when, under the Company’s Articles of Association, it is
required that they be elected by shareholders. Thereafter,
the Company’s Articles require that all Directors must retire
at or before the third AGM after the AGM at which they
were last elected to hold office. Subject to the performance
evaluation carried out each year, the Board will agree
whether it is appropriate for a Director to seek a further
term. The Board, when making a recommendation, will
take into account the ongoing requirements of The UK
Corporate Governance Code, including the need to refresh
the Board and its Committees. The Board seeks to maintain
a balance of skills and the Directors are satisfied that as
currently composed the balance of experience and skills
of the individual directors is appropriate for the Company.
The Directors also have access as required to independent
professional advice.
No Director has a contract of service with the Company.
All of the Directors have been provided with letters of
appointment, copies of which are available for inspection
on request at the Company’s registered office and at the
annual general meeting.
The Board is committed to ensuring that the Company is
run in the most effective manner. The Board monitors the
diversity of all Directors to ensure an appropriate level of
experience and qualification. The Board believes in the
value and importance of diversity in the boardroom but
does not consider it appropriate or in the best interests of
the Company to set prescriptive targets. When making new
appointments the Board takes into account other demands
on directors’ time and prior to appointment significant
commitments would be disclosed. There are no specific
guidelines set on length of directors’ service, including
the Chairman, as the Board believes that continuity of
experience is most important.
Independence of Directors
The Board regularly reviews the independence of each
Director and of the Board as a whole in accordance with the
guidelines in the Code. Reuben Wilcock, as an employee
of Blackfinch Investments is not considered independent.
Directors’ interests are noted at the start of each Board
meeting and any Director would not participate in the
discussion concerning any investment in which he or she
had an interest. The Board does not consider that length
of service will necessarily compromise the independence
or effectiveness of Directors and no limit has been placed
on the overall length of service. The Board considers that
continuity and experience can be of significant benefit to
the Company and its shareholders. The Board believes
that Peter Hewitt and Kate Jones have demonstrated that
they are independent in character and judgment and there
are no relationships or circumstances which could affect
their objectivity.
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20 April 2022
Board Performance
The Directors, in consultation with the Company Secretary, carried out an informal evaluation of the performance of the
Board, the audit committee and individual Directors. The review concluded that all were performing effectively.
The Board also assessed and monitored its own culture, including its policies, practices and behaviour and was satisfied
it is aligned with the Company’s purpose, values and strategy
The Board resolved that a formal evaluation process will be introduced in 2022 and confirmed its earlier decision that, due
to the size of the Company, the fact that all Directors are non-executive and the costs involved, external facilitators would
not be used in the evaluation.
Investment Manager and Advisers’ Performance
The Board reviewed the performance of the Investment Manager and the Company’s other advisers and was satisfied that
all were performing effectively.
Board and Committee Meetings
The following table sets out the Directors’ attendance at full Board and audit committee meetings held during the period
ended 31 December 2021.
The Board is in regular contact with the Investment Manager between Board meetings.
Board Committees
The Board has not established a nomination or remuneration committee as they consider the Board to be small and
comprises non-executive Directors. Appointments of new Directors and Directors’ remuneration are dealt with by the
full Board.
Report of the Audit Committee
The audit committee comprises the two independent non-executive Directors, Kate Jones (Audit Chair) and Peter
Hewitt. Due to the small size of the Board and his independence and experience the Board believes it is appropriate
Blackfinch Spring VCT Annual Report and Financial Statements
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20 April 2022
Director
Peter Hewitt
Kate Jones
Reuben Wilcock*
Held
4
4
4
Attended
3
4
4
Held
3
3
3
Attended
3
3
3
Board Meetings Audit Committee Meetings
*Reuben Wilcock was appointed to the Board on 18 September 2020 and is not a member of the audit committee but attends the audit committee meetings.
that the chairman of the board is a member of the audit committee. The Board is also satisfied that the committee as
a whole has competence relevant to the venture capital trust sector and the requisite skills and experience to fulfil the
responsibilities of the audit committee and meets the requirements of the Code as to recent and relevant
financial experience.
The committee meets at least twice a year. The Company’s auditors may be required to attend such meetings.
The Committee will prepare a report each year addressed to shareholders for inclusion in the Company’s annual
report and accounts. The duties of the committee are:
• to monitor and make recommendations to the Board in relation to the Company’s published financial statements and
other formal announcements relating to the Company’s financial performance;
• to monitor and make recommendations to the Board on internal control and risk management systems; and
• to make recommendations to the Board in relation to the appointment of the external auditor, to monitor its
independence and objectivity, the level of audit fees and to discuss with the external auditor the nature and scope
of the audit.
Copies of the terms of reference of the audit committee can be found on the Company’s website:
https://blackfinch.ventures/vct.
During the period ended 31 December 2021 the audit committee met three times and:
• reviewed the financial statements released by the Company (including the half-yearly report);
• reviewed the appropriateness of the Company’s accounting policies;
• reviewed the internal controls operated by the Investment Manager and assessed the effectiveness of those controls
in minimising the impact of key risks; and
• reviewed the external auditor’s terms of engagement, independence and fees; and
• reviewed the external auditor’s comprehensive report to the committee on the annual financial statements.
The Directors carried out a robust assessment of the principal risks facing the Company and concluded that the key
areas of risk which threaten the business model, future performance, solvency or liquidity of the Company are:
• compliance with HM Revenue & Customs to maintain the Company’s VCT status; and
• valuation of investments.
These matters are monitored regularly by the Investment Manager and reviewed by the Board at every Board meeting.
They were also discussed with the Investment Manager and the auditor at the audit committee meeting held to discuss
these annual financial statements.
The committee concluded:
VCT status – the Investment Manager confirmed to the audit committee that the conditions for maintaining the
Company’s status had been complied with throughout the period. The Company’s VCT status is also reviewed by the
Company’s tax adviser, Philip Hare & Associates, as described on page 52.
Valuation of investments - the Investment Manager confirmed to the audit committee that the basis of valuation for
unquoted companies was in accordance with published industry guidelines. The valuation of unquoted companies
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20 April 2022
takes account of the latest available information about investee companies and current market data. A comprehensive
report on the valuation of unquoted investments is presented and discussed at every Board meeting; Directors are also
consulted about material changes to those valuations between Board meetings.
Having reviewed the reports received from the Investment Manager, the audit committee is satisfied that the key areas of
risk and judgement have been properly addressed in the financial statements and that the significant assumptions used
in determining the value of assets and liabilities have been properly appraised and are sufficiently robust.
Relationship with the Auditor
The audit committee is responsible for overseeing the relationship with the external auditor, assessing the effectiveness
of the external audit process and making recommendations on the appointment and removal of the external auditor.
When assessing the effectiveness of the process for the year under review the Committee considered the auditor’s
technical knowledge and that it has a clear understanding of the business of the Company; that the audit team is
appropriately resourced; that the auditor provided a clear explanation of the scope and strategy of the audit and that the
auditor maintained independence and objectivity. As part of the review of auditor effectiveness and independence, BDO
LLP has confirmed that it is independent of the Company and has complied with applicable auditing standards. BDO
LLP does not provide any non-audit services to the Company. BDO LLP has held office as auditor since the inception
of the Company. Public interest entities are required to put the external audit contract out to tender at least every ten
years. BDO LLP has held office as auditor for two years; in accordance with ethical standards the engagement partner is
rotated after at most five years, and the current partner has served for two years.
Following the review as noted above the audit committee is satisfied with the performance of BDO LLP and recommends
the services of BDO LLP to the shareholders in view both of that performance and the firm’s extensive experience in
auditing VCTs.
Internal control and Risk management
The Board acknowledges that it is responsible for the Company’s internal control systems and for reviewing their
effectiveness. In accordance with the Code, the audit committee has established an ongoing process for identifying,
evaluating and managing the significant risks faced by the Company. The internal control systems aim to ensure the
maintenance of proper accounting records, the reliability of the financial information upon which business decisions
are made and which is used for publication, and that the assets of the Company are safeguarded. Internal controls
can only provide reasonable and not absolute assurance against material misstatement or loss. The financial controls
operated by the Board include the authorisation of the investment strategy and regular reviews of the results and
investment performance.
The Board has delegated contractually to third parties, as set out on pages 42 to 44, the management of the investment
portfolio, the custodial services, including the safeguarding of the assets and the day-to-day accounting, company
secretarial and administration requirements. The Board receives and considers regular reports from the Investment
Manager. Ad hoc reports and information are supplied to the Board as required. It remains the role of the Board to keep
under review the terms of the investment management agreement with the Investment Manager.
Regular review of the control systems is carried out which covers consideration of the key risks. Each risk is considered
with regard to the controls exercised at Board level, reporting by service providers and controls relied upon.
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The company secretary reviews the annual statutory accounts to ensure compliance with Companies Acts and the Code
and the audit committee reviews financial information prior to its publication. Quarterly management accounts are
produced for review and approval by the Investment Manager and the Board.
Shareholder Reporting
The Directors believe that communication with shareholders is important. Shareholders have access to a copy of the
Company’s annual report and accounts (expected to be published each April and a copy of the Company’s half-yearly
report (expected to be published each August). These will be made available on Blackfinch’s website. Shareholders and
their advisers (if applicable) will also receive updated reports from the Company and the Investment Manager on the
progress of the Company.
In order to reduce the administrative burden and cost of communicating with shareholders, the Company intends to
publish all notices, documents and information to be sent to shareholders generally on Blackfinch’s website (https://
blackfinch.ventures/vct). Increased use of electronic communications will deliver significant savings to the Company in
terms of administration, printing and postage costs, as well as speeding up the provision of information to shareholders.
The reduced use of paper will also have environmental benefits. Shareholders will be notified when documents are
published on Blackfinch’s website, such notification will be delivered electronically (or by post where no email address
has been provided for that purpose).
The Company welcomes the views of shareholders and places great importance on communication with its
shareholders. Shareholders will have the opportunity to meet the Board at the annual general meeting. All shareholders
are welcome to attend the meeting and to ask questions of the Directors. The Board is also happy to respond to any
written queries made by shareholders during the course of the year. All communication from shareholders is recorded
and reviewed by the Board to ensure that shareholder enquiries are promptly and adequately resolved.
On behalf of the Board
Peter LR Hewitt, JP, FCSI
Non-executive Chairman
20 April 2022
Companies House Number - 12166417
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Statement
Of Directors’
Responsibilities
The Directors are responsible for preparing the Annual
Report and the Financial Statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare financial statements for
each financial year. Under that law the Directors have prepared the financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law). Under
company law the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs of the
Company and of the profit or loss for the Company for that year.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
• state whether they have been prepared in accordance with applicable
UK accounting standards, subject to any material departures disclosed
and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business; and
• prepare a Strategic Report, a Directors’ Report and Directors’ Remuneration
Report which comply with the requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the Company’s transactions and disclose
with reasonable accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the assets
of the company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for ensuring that the Annual Report and
accounts, taken as a whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the Company’s position,
performance, business model and strategy.
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Statement
Of Directors’
Responsibilities
Website Publication
The Directors are responsible for ensuring the annual report and the financial
statements are made available on a website, this website is maintained by
the Investment Manager on behalf of the Company. Financial statements are
published on the Company’s website in accordance with legislation in the
United Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions. The
maintenance and integrity of the Company’s website is the responsibility of the
Directors. The Directors’ responsibility also extends to the ongoing integrity of
the financial statements contained therein.
Directors’ Responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
• the financial statements which have been prepared in accordance with UK
Generally Accepted Accounting Practice give a true and fair view of the
assets, liabilities, financial position and profit and loss of the Company; and
• the Annual Report includes a fair review of the development and
performance of the business and the financial position of the Company,
together with a description of the principal risks and uncertainties that
it faces.
The Board considers the annual report and accounts, taken as a whole,
are fair, balanced and understandable and that it provides the necessary
information for shareholders to assess the Company’s performance, business
model and strategy.
On behalf of the Board
Peter LR Hewitt, JP, FCSI
Non-executive Chairman
20 April 2022
Companies House Number - 12166417
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20 April 2022
Directors’ Remuneration Report
Introduction
This report has been prepared in accordance with the requirements of the Companies Act 2006 and The Large and
Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (the “Regulations”).
Ordinary resolutions for the approval of the Directors’ Remuneration Policy and the Directors’ Annual Report on
remuneration will be put to members at the Company’s AGM to be held on 8 June 2022.
The Company’s auditor, BDO LLP, is required to give its opinion on certain information included in this report. The
disclosures which have been audited are indicated as such. The auditor’s opinion on these and other matters is included
in the Independent Auditor’s Report on pages 69 to 80.
Annual Statement from the Chairman of the Company
Directors’ fees are reviewed annually and are set by the Board to attract individuals with the appropriate range of skills
and experience. In determining the level of fees their duties and responsibilities are considered, together with the level of
time commitment required in preparing for and attending meetings. Directors fees have not changed in the period.
Directors’ Remuneration Policy
The Board as a whole considers Directors’ remuneration and, as such, a remuneration committee has not been
established. The Board’s policy is that the remuneration of non-executive Directors should reflect the experience of the
Board as a whole, be fair and comparable with that of other companies that are similar in size and nature to the Company
and have similar objectives and structures. Directors’ fees are set with a view to attracting and retaining the Directors
required to oversee the Company effectively and to reflect the specific circumstances of the Company, the duties
and responsibilities of the Directors and the value and amount of time committed to the Company’s affairs. It is the
intention of the Board that, unless any revision to this policy is deemed necessary, this policy will continue to apply in the
forthcoming and subsequent financial years. The Board has not received any views from the Company’s shareholders in
respect of the levels of Directors’ remuneration.
The Directors are not eligible for bonuses, pension benefits, share options, long-term incentive schemes or other
benefits. No arrangements have been entered into between the Company and the Directors to entitle any of the
Directors to compensation for loss of office.
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Directors’ Annual Report on Remuneration
Terms of appointment
No Director has a contract of service with the Company. Each of the Directors entered into an agreement with the
Company dated 11 November 2019 (in the case of Kate Jones and Peter Hewitt) and 18 September 2020 (in the case
of Reuben Wilcock) whereby he or she is required to devote such time to the affairs of the Company as the Board
reasonably requires consistent with their role as non-executive Director. Peter Hewitt is entitled to receive an annual fee
of £20,000 (plus VAT if applicable), Kate Jones is entitled to receive an annual fee of £18,000 (plus VAT if applicable)
and for the services to be provided by Reuben Wilcock, Blackfinch is entitled to receive an annual fee of £12,000
(plus VAT if applicable). Each party can terminate the agreement by giving to the other at least six months’ notice
in writing to expire at any time after the date 15 months from the respective commencement dates. No benefits are
payable on termination. Directors are subject to election by shareholders at the first annual general meeting after their
appointment. The Company’s Articles of Association provide for a maximum level of total remuneration of £100,000
per annum in aggregate.
Directors are remunerated exclusively by fixed fees and do not receive bonuses, share options, long term incentives,
pension or other benefits. There is no comparative information in respect of employee remuneration as the Company
has no employees.
Directors’ fees for the year (Audited)
The fees payable to individual Directors in respect of the year ended 31 December 2021 are shown in the table below.
*Directors fees were not payable and did not accrue until the first allotment of shares under the offer for subscription.
The aggregated amount of NI contribution paid on directors’ remuneration totalled to £2,245 (2020: £1,010).
Contributions paid on remuneration of Peter Hewitt and Kate Jones were £1,233 and £1,012 respectively (2020: £505
and £505).
**Reuben Wilcock, who is an employee of the Investment Manager, was appointed to the Board and Richard Cook retired
from the Board on 18 September 2020.
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Director
Peter Hewitt
Kate Jones
Reuben Wilcock**
Richard Cook**
Total annual
fixed fee
(£)
20,000
18,000
-
12,000
48,000
Total fixed fee for
period ended 31
December 2021
(£)
19,841
18,000
-
12,000
49,841
Total annual
fixed fee
(£)
18,000
18,000
12,000
-
48,000
Total fixed fee for
period ended
31 December 2020*
(£)
13,708
13,708
4,300
4,337
36,053
Annual change
of total fixed fee paid
(%)
44.7%
31.3%
-
176.7%
38.2%
Relative importance of spend on pay
The table below shows the remuneration paid to Directors and shareholder distributions in the year ended
31 December 2021:
Directors’ shareholdings (Audited)
The Directors who held office at 31 December 2021 and their interests in the shares of the Company (including beneficial
and family interests) were:
Subsequent to the Company’s year end no shares were allotted to any of the directors.
The Company confirms that it has not set out any formal requirements or guidelines for a Director to own shares in
the Company.
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20 April 2022
Total dividend paid to shareholders
Total repurchase of own shares
Total directors’ fees
2021 (£)
-
-
49,841
Peter Hewitt
Kate Jones
Reuben Wilcock
Shares held
5,038
-
3,282
% of issued share
capital
0.04
-
0.03
31 December 2021
2020 (£)
-
-
36,053
Shares held
5,000
-
-
% of issued share
capital
0.13
-
-
31 December 2020
Company Performance
The Board is responsible for the Company’s investment strategy and performance, although the management of the
Company’s investment portfolio is delegated to the Investment Manager through the management agreement. The
graph below compares the Company’s share price to the FTSE Small Cap index for the period from the launch of the
Company. This index was chosen as the benchmark for investment performance because its constituents are smaller
UK listed companies and therefore closest to the small private companies within the Company.
Shareholder Voting
At the last Annual General Meeting, 100 per cent of shareholders who exercised their voting rights voted for the
resolution approving the Directors’ Remuneration Report, showing significant shareholder approval.
On behalf of the Board
Peter LR Hewitt, JP, FCSI
Non-executive Chairman
20 April 2022
Companies House Number - 12166417
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69
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Independent Auditor’s Report
to the members of Blackfinch Spring VCT plc
Opinion on the financial statements
In our opinion the financial statements:
• give a true and fair view of the state of the Company’s affairs as at
31 December 2021 and of the loss for the year then ended;
• have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice;
have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements of Blackfinch Spring VCT plc (the
‘Company’) for the year ended 31 December 2021 which comprise the Income
Statement, the Statement of Changes in Equity, the Balance Sheet, the
Statement of Cash Flows and the notes to the financial statements, including
a summary of significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable law and
United Kingdom Accounting Standards, including Financial Reporting
Standard The Financial Reporting Standard applicable in the UK and Republic
of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion. Our audit opinion is consistent with the additional report to the
audit committee.
Independence
Following the recommendation of the audit committee, we were appointed
by the Board of Directors to audit the financial statements for the year ending
31 December 2020 and subsequent financial periods. The period of total
uninterrupted engagement including retenders and reappointments is 2 years,
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20 April 2022
covering the years ending 31 December 2020 to 31 December 2021. We remain
independent of the Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance with these
requirements. The non-audit services prohibited by that standard were not
provided to the Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’
use of the going concern basis of accounting in the preparation of the financial
statements is appropriate. Our evaluation of the Directors’ assessment of the
Company’s ability to continue to adopt the going concern basis of accounting
included:
• Obtaining the VCT compliance reports prepared by management’s expert
during the year and as at year end and reviewing the calculations therein to
ensure that the Company was meeting its requirements to retain VCT status;
• Consideration of the Company’s expected future compliance with VCT
legislation, the absence of bank debt, contingencies and commitments and
any market or reputational risks;
• Reviewing the forecasted cash flows that support the Directors’ assessment
of going concern, challenging assumptions and judgements made in the
forecasts, and assessing them for reasonableness. In particular, we
considered the available cash resources relative to the forecast expenditure
which was assessed against the prior year for reasonableness; and
• Evaluating management’s method of assessing the going concern in light
of market volatility.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or collectively,
may cast significant doubt on the Company’s ability to continue as a going
concern for a period of at least twelve months from when the financial
statements are authorised for issue.
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In relation to the Company’s reporting on how it has applied the UK Corporate
Governance Code, we have nothing material to add or draw attention to in
relation to the Directors’ statement in the financial statements about whether
the Directors considered it appropriate to adopt the going concern basis of
accounting.
Our responsibilities and the responsibilities of the Directors with respect to
going concern are described in the relevant sections of this report.
Overview
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Company and
its environment, including the Company’s system of internal control, and
assessing the risks of material misstatement in the financial statements. We
also addressed the risk of management override of internal controls, including
assessing whether there was evidence of bias by the Directors that may have
represented a risk of material misstatement.
Key audit matters
Key audit matters are those matters that, in our professional judgement,
were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key audit matters
Materiality
Valuation unquoted investments of 2021, 2020
Company financial statements as a whole
£236,000 (2020: £72,000) based on 2%
(2020: 2%) of Net assets
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Key Audit Matter
Valuation of unquoted
investments (Note 1 and
Note 12)
How the scope of our audit addressed the key audit matter
Our sample for the testing of unquoted investments was
stratified according to risk considering, inter alia, the value
of individual investments, the nature of the investment, the
extent of the fair value movement and the subjectivity of the
valuation technique.
For all Investments in our sample we:
• Challenged whether the valuation methodology was the
most appropriate in the circumstances under the International
Private Equity and Venture Capital Valuation (“IPEV”)
Guidelines and the applicable accounting standards.
• Recalculated the value attributable to the Company, having
regard to the application of enterprise value across the capital
structures of the investee companies.
For investments sampled that were valued using less
subjective valuation techniques (cost and price of recent
investment reviewed for changes in fair value) we:
• Verified the cost or price of recent investment to supporting
documentation;
• Considered whether the investment was an arm’s length
transaction through reviewing the parties involved in the
transaction and checking whether or not they were already
investors of the investee Company;
• Considered whether there were any indications that the cost
or price of recent investment was no longer representative of
fair value considering, inter alia, the current performance of
the investee company and the milestones and assumptions
set out in the investment proposal; and
• Considered whether the price of recent investment is
supported by alternative valuation techniques.
We consider the valuation
of investments to be the
most significant audit area
as there is a high level of
estimation uncertainty
involved in determining
the unquoted investment
valuations.
There is an inherent risk
of management override
arising from the unquoted
investment valuations
being prepared by the
Investment Manager, who
is remunerated based on
the net asset value of the
Company.
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Key Audit Matter
How the scope of our audit addressed the key audit matter
For investments sampled that were valued using more
subjective techniques (revenue multiples and progress
against milestones) we:
• Challenged and corroborated the inputs to the valuation
with reference to management information of investee
companies, market data and our own understanding
and assessed the impact of the estimation uncertainty
concerning these assumptions and the disclosure of these
uncertainties in the financial statements;
• Reviewed the historical financial statements and any recent
management information available to support assumptions
about maintainable revenues used in the valuations;
• Considered the revenue applied and the discounts applied
by reference to observable listed company market data; and
• Challenged the consistency and appropriateness of
adjustments made to such market data in establishing the
revenue multiple applied in arriving at the valuations adopted.
Where appropriate, we performed a sensitivity analysis by
developing our own point estimate where we considered
that alternative input assumptions could reasonably have
been applied and we considered the overall impact of such
sensitivities on the portfolio of investments in determining
whether the valuations as a whole are reasonable and free
from bias.
Key observations
Based on the procedures performed we consider the
investment valuations to be appropriate considering the
level of estimation uncertainty.
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Our application of materiality
We apply the concept of materiality both in planning and performing our audit,
and in evaluating the effect of misstatements. We consider materiality to be
the magnitude by which misstatements, including omissions, could influence
the economic decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability that any
misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the
financial statements as a whole and performance materiality as follows:
Materiality
Basis for determining materiality
Rationale for the benchmark applied
Performance materiality
Basis for determining performance
materiality
Company Financial statements
2020 £
236
2% of Net assets
177
Company Financial statements
2020 £
72
2% of Net assets
46
In setting materiality, we have had regard to the nature and disposition
of the investment portfolio. Given that the VCT’s portfolio is comprised
of unquoted investments which would typically have a wider spread of
reasonable alternative possible valuations, we have applied a percentage of
2% of net assets adjusted for significant fundraising in the year.
75% (2020: 64%) of planning materiality. The level of performance materiality
applied was set after having considered a number of factors including the
expected total value of known and likely misstatements and the level of
transactions in the year. Performance materiality has increased as this is no
longer a first year audit and we consider the likelihood of misstatement to be low.
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20 April 2022
Lower testing threshold
We determined that for Revenue return before tax, a misstatement of less
than materiality for the financial statements as a whole, could influence users
of the financial statements as it is a measure of the Company’s performance
of income generated from its investments after expenses. As a result, we
determined a lower testing threshold for those items impacting revenue return
of £52,000 (2020: £13,000) based on 10% of total expenditure (2020: 10% of
total expenditure).
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual
audit differences in excess of £11,800 (2020: £1,000). We also agreed to report
differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
Other information
The directors are responsible for the other information. The other information
comprises the information included in the Annual Report and Financial
Statements other than the financial statements and our auditor’s report
thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report,
we do not express any form of assurance conclusion thereon. Our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit, or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this gives rise
to a material misstatement in the financial statements themselves. If, based on
the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to
going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the Company’s compliance with the provisions of the UK
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20 April 2022
Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that
each of the following elements of the Corporate Governance Statement is
materially consistent with the financial statements or our knowledge obtained
during the audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors’ Responsibilities, the
Directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due t
o fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate the Company
or to cease operations, or have no realistic alternative but to do so.
Going concern and longer-term viability
Other Code provisions
• The Directors’ statement with regards to the appropriateness of
adopting the going concern basis of accounting and any material
uncertainties identified; and
• The Directors’ explanation as to their assessment of the Company’s
prospects, the period this assessment covers and why the period is
appropriate.
• Directors’ statement on fair, balanced and understandable;
• Board’s confirmation that it has carried out a robust assessment of
the emerging and principal risks;
• The section of the annual report that describes the review of
effectiveness of risk management and internal control systems; and
• The section describing the work of the audit committee.
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Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken
on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws
and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
We gained an understanding of the legal and regulatory framework applicable
to the Company and the industry in which it operates from enquiries with
management and from our sector knowledge, and considered the risk of acts
by the Company which were contrary to applicable laws and regulations,
including fraud. These included but were not limited to compliance with
Companies Act 2006, the FCA listing and DTR rules, the principles of the
AIC Code of Corporate Governance, industry practice represented by the
AIC SORP, FRS 102, and qualification as a VCT under UK tax legislation as
any breach of this would lead to the Company losing various deductions and
exemptions from corporation tax.
Our procedures included:
• Agreement of the financial statement disclosures to underlying supporting
documentation;
• Enquiries of management and those charged with governance relating to any
known or suspected non-compliance with laws and regulations;
• Obtaining the VCT compliance reports prepared by management’s expert
during the year and as at year end and reviewing their calculations to check
that the Company was meeting its requirements to retain VCT status; and
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20 April 2022
• Reviewing minutes of board meetings and legal correspondence and
invoices throughout the period for instances of non-compliance with laws
and regulations and fraud.
We assessed the susceptibility of the financial statement to material
misstatement including fraud and considered the fraud risk areas to be the
valuation of unquoted investments and management override of controls.
Our tests included, but were not limited to:
• The procedures set out in the Key Audit Matters section above;
• Obtaining independent evidence to support the ownership of all investments;
• Recalculating investment management fees in total;
• Obtaining independent confirmation of bank balances; and
• Testing journals which met a defined risk criteria by agreeing to supporting
documentation and evaluating whether there was evidence of bias by
the Investment Manager and Directors that represented a risk of material
misstatement due to fraud.
We also communicated relevant identified laws and regulations and potential
fraud risks to all engagement team members and remained alert to any
indications of fraud or non-compliance with laws and regulations throughout
the audit.
Our audit procedures were designed to respond to risks of material
misstatement in the financial statements, recognising that the risk of not
detecting a material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery, misrepresentations or through collusion.
There are inherent limitations in the audit procedures performed and the
further removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less likely we are to
become aware of it.
A further description of our responsibilities is available on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
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Use of our report
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the Company’s
members as a body, for our audit work, for this report, or for the opinions we
have formed.
Peter Smith (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
20 April 2022
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
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Income Statement
for the year ended 31 December 2021
Blackfinch Spring VCT Annual Report and Financial Statements
81
Return on investments
Investment Manager’s fee
Incidental investments expenses
Other expenses
(Loss)/profit before taxation
Taxation
(Loss)/profit attributable to equity shareholders
Return per share (pence)
Ordinary shares (pence)
Note
12
7
8
9
10
11
Revenue
(£)
(549,997)
(60,699)
-
(290,625)
(901,321)
(901,321)
(9.30)
Capital
(£)
1,172,247
(182,095)
7,500
-
997,652
997,652
10.30
Total
(£)
622,250
(242,794)
7,500
(290,625)
96,331
96,331
1.00
20 April 2022
Financial Statements
for the sixteen month period ended 31 December 2020
Blackfinch Spring VCT Annual Report and Financial Statements
82
Investment Manager’s fee
Incidental investments expenses
Other expenses
Loss before taxation
Taxation
Loss attributable to equity shareholders
Return per share (pence)
Ordinary shares (pence)
Note
7
8
9
10
11
Revenue
(£)
(17,129)
-
(195,407)
(212,536)
-
(212,536)
(5.87)
Capital
(£)
(51,386)
(7,500)
-
(58,886)
-
(58,886)
(1.63)
Total
(£)
(68,515)
(7,500)
(195,407)
(271,422)
-
(271,422)
(7.50)
20 April 2022
Income Statement
The total column of this Income Statement represents the profit and loss
account of the Company, prepared in accordance with Financial Reporting
Standard 102 (“FRS 102”). The supplementary revenue and capital return
columns are prepared in accordance with the Statement of Recommended
Practice, “Financial Statements of Investment Trust Companies and
Venture Capital Trusts” (“SORP”) revised in November 2014 and updated
in April 2021. A separate Statement of Comprehensive Income has not been
prepared as all comprehensive income is included in the Income Statement.
All the items above derive from continuing operations of the Company.
The notes on pages 87 to 100 are an integral part of the financial statements.
Statement of Changes in Equity
for the year ended 31 December 2021
Blackfinch Spring VCT Annual Report and Financial Statements
83
Opening balance as
at 1 January 2021
Total comprehensive
income for the period
Contributions by and
distributions to owners:
Shares issued
Share issue expenses
Redeemable preference
shares issued
Closing balance as at
31 December 2021
Called up share
capital £
89,119
-
-
87,219
-
(50,000)
126,338
Share premium
£
3,862,692
-
-
8,026,013
(80,005)
-
11,808,700
Non-distributable reserves Distributable reserves
20 April 2022
Total
Capital Reserve
£
-
1,172,247
-
1,172,247
Capital Reserve
£
(58,886)
-
(724,592)
-
-
-
(783,478)
Revenue Reserve
£
(212,536)
-
(351,324)
-
-
-
(563,860)
Total Reserves
£
3,680,389
-
96,331
8,113,232
(80,005)
(50,000)
11,759,947
Statement of Changes in Equity
for the sixteen month period ended 31 December 2020
Blackfinch Spring VCT Annual Report and Financial Statements
84
Total comprehensive
income for the period
Contributions by and
distributions to owners:
Shares issued
Share issue expenses
Redeemable preference
shares issued
Closing balance as at
31 December 2020
Called up share
capital £
-
39,119
-
50,000
89,119
Non-distributable reserves Distributable reserves*
20 April 2022
Total
Share premiem
£
-
3,892,124
(29,432)
-
3,862,692
Capital reserve
£
-
-
-
-
-
Capital reserve
£
(58,886)
-
-
-
(58,886)
Revenue reserve
£
(212,536)
-
-
-
(212,536)
Total reserves
£
(271,422)
3,931,243
(29,432)
50,000
3,680,389
*There were no unrealised movements during the period, and the
distributable reserve were £Nil.
The notes on pages 87 to 100 are an integral part of the financial statements.
Balance Sheet
as at 31 December 2021
Blackfinch Spring VCT Annual Report and Financial Statements
85
Fixed assets
Investments
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current assets
Net assets
Capital and reserves
Called up share capital
Share premium account
Redeemable preference shares
Capital reserves
Revenue reserves
Total shareholders’ funds
Net asset value per Ordinary share (pence)
Note
12
14
15
16
16
18
31 December 2021 £
6,961,525
3,261
4,966,027
4,969,288
(107,866)
4,798,422
11,759,947
126,338
11,808,700
-
938,766
(1,113,857)
11,759,947
93.08
The Financial Statements were approved by the Directors and authorised for issue on 20 April 2022 and signed on their
behalf by:
Peter LR Hewitt, JP, FCSI
Non-executive Chairman
20 April 2022
Companies House Number - 12166417
The notes on pages 87 to 100 are an integral part of the financial statements.
20 April 2022
31 December 2020 £
1,259,275
41,067
2,471,633
2,512,700
(91,586)
2,421,114
3,680,389
39,119
3,862,692
50,000
(58,886)
(212,536)
3,680,389
94.08
Statement of Cash Flow
for the year ended 31 December 2021
Blackfinch Spring VCT Annual Report and Financial Statements
86
Operating activities
Investment Manager’s fees paid
Cash paid to Directors
Other cash payments
Net cash outflow from operating activities
Cash flows from investing activities
Purchase of investments
Net cash outflow from investing activities
Net cash outflow before financing
Cash flows from financing activities
Proceeds from share issues
Share issue costs
Net cash inflow from financing
Increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Reconciliation of profit before taxation to net cash
outflow from operating activities
Loss before taxation for the period
Net gain on investments
Decrease in debtors
Increase in creditors and accruals
Net cash outflow from operating activities
Year ended 31 Dec 2021
(£)
(231,334)
(54,741)
(172,758)
(458,833)
(5,080,000)
(5,080,000)
(5,538,833)
8,113,232
(80,005)
8,033,227
2,494,394
2,471,633
4,966,027
96,331
(622,250)
(12,194)
79,280
(458,833)
The notes on pages 87 to 100 are an integral part of the financial statements.
20 April 2022
Notes
12
16-month period ended
31 Dec 2020 (£)
(54,613)
(24,053)
(92,237)
(170,903)
(1,259,275)
(1,259,275)
(1,430,178)
3,931,243
(29,432)
3,901,811
2,471,633
-
2,471,633
(271,422)
-
8,933
91,586
(170,903)
Notes To The Financial Statements
1. Company information
The Company is a Public Limited Company incorporated in England and Wales. The registered address is 1350-1360
Montpelier Court, Gloucester Business Park, Gloucester, England, GL3 4AH. The principal activity is investing in
un-listed growth companies.
The Company was incorporated on 20 August 2019.
2. Basis of preparation
These Financial Statements have been prepared in accordance with applicable United Kingdom accounting standards,
including Financial Reporting Standard 102 – ‘The Financial Reporting Standard applicable in the United Kingdom
and Republic of Ireland’ (‘FRS 102’), and with the Companies Act 2006 and in accordance with the SORP issued by
the Association of Investment Companies (“AIC”) in April 2021. The Financial Statements have been prepared on the
historical cost basis except for the modification to a fair value basis for certain financial instruments as specified in the
accounting policies below.
The Financial Statements are prepared in pounds sterling, which is the functional currency of the company. Monetary
amounts in these financial statements are rounded to the nearest pound.
3. Going concern
The Board of Directors is satisfied that the Company has adequate availability to continue as a going concern and are
satisfied that the Company has adequate resources to continue in business for the foreseeable future (being a period
of 12 months from the date these Financial Statements were approved). In reaching this conclusion the Directors took
into the account the nature of the Company’s business and Investment Policy, its risk management policies, and the
cash holdings. Thus, the Directors believe it is appropriate to continue to apply the going concern basis in preparing the
financial statements.
4. Segmental reporting
The Directors are of the opinion that the Company is engaged in a single segment of business, being investment
business.
Blackfinch Spring VCT Annual Report and Financial Statements
87
20 April 2022
Blackfinch Spring VCT Annual Report and Financial Statements
88
5. Significant judgements and estimates
The preparation of the Financial Statements may require the Board to make judgements and estimates that affect the
application of policies and reported amounts of assets, liabilities and income and expenses. Estimates and assumptions
mainly relate to the fair value 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 attention paid to the carrying value of the investments.
More information related to the unquoted investment and their valuations is included in note 12 and the Investments
Manager’s Review on page 8.
6. Accounting policies
A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is set
out below.
a.Investments
The Company did not hold any listed investments at any time during the reporting period. Investments in unlisted
companies are held at fair value through profit or loss. Information about the portfolio is provided internally to
the Directors on that basis and the Directors consider the basis to be consistent with the Company’s investment
strategy. The fair value of unquoted investments is assessed by the Directors with reference to the International
Private Equity and Venture Capital Valuation Guidelines December 2018 (“IPEVCV guidelines”) which include the
following techniques:
(i) Where a value is indicated by a material arms-length transaction by an independent third party in the shares
of a company within the last twelve months. This value will be used only if, after careful consideration of all the
facts and circumstances it is considered the best measure of fair value.
(ii) In the absence of (i), and depending upon both the subsequent trading performance and investment
structure of an investee company, the valuation basis will usually move to either:
a) an earnings multiple basis. The shares may be valued by applying a suitable price-earnings ratio to
that company’s historical, current, or forecast post-tax earnings before interest and amortisation, or to
the revenues (the ratio used being based on a comparable sector but the resulting value being adjusted
to reflect points of difference identified by the Investment Manager compared with the sector including,
inter alia, a lack of marketability); or
b) an assessment of other relevant, objective evidence.
(iii)Where an earnings multiple or other objective evidence is not appropriate and overriding factors apply,
discounted cash flow or net asset valuation bases may be applied.
b. Expenses
All expenses are accounted for on an accruals basis. In respect of analysis between revenue and capital items
presented within the income statement, all expenses have been accounted for as revenue except as follows:
Expenses are split and presented partly as capital items where a connection with the maintenance or enhancement
of the value of the investments held can be demonstrated, and accordingly the investment management fee is
currently allocated 25% to revenue and 75% to capital, which reflects the Directors’ expected long-term view of the
20 April 2022
Blackfinch Spring VCT Annual Report and Financial Statements
89
nature of the investment returns of the Company.
Expenses which are incidental to the purchase of an investment are charged through the capital reserve.
c. Cash at bank and in hand
Cash and cash equivalents are basic financial assets and comprise bank deposits repayable on up to three months’
notice.
d. Financial instruments
The Company has applied the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial
Instruments Issues’ of FRS102 to all of its financial instruments. Financial instruments are recognised in the
Company’s balance sheet when the Company becomes part to the contractual provisions of the instrument. Basic
financial assets, which include debtors, are measured at transaction price. Basic financial liabilities, including
creditors, are measured at amortised cost.
e. Equity
Called up share capital
Equity instruments (ordinary shares and redeemable preference shares) issued by the Company are recorded at the
nominal amount.
Share premium
The share premium account is a non-distributable reserve which represents the price paid for shares and the
nominal value of the shares, less issue costs.
Distributable capital reserve
The following are disclosed in this reserve;
- gains and losses on the disposed of investments;
- increase and decrease in the value of investments held at the year-end; and
- expenses allocated to this reserve in accordance with the above policies
Revenue reserve
The revenue reserve represents accumulated profits and losses, and any surplus profit is distributable by way of
dividends.
f. 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 tax rates and laws that that have been enacted or substantively enacted by the reporting
date. 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.
Any tax relief obtained in respect of management fees allocated to capital is reflected in the capital column of the
Statement of Comprehensive Income and a corresponding amount is charged against the revenue column. The tax
relief is the amount by which corporation tax payable is reduced as a result of these capital expenses.
20 April 2022
Blackfinch Spring VCT Annual Report and Financial Statements
90
Deferred tax is recognised in respect of all timing differences at the reporting 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.
Deferred tax is calculated using the tax rates and laws that that have been enacted or substantively enacted by the
reporting date that are expected to apply to the reversal of the timing difference.
The tax expense/(income) is presented either in the Income Statement or Statement of Changes in Equity
depending on the transaction that resulted in the tax expense/(income). Deferred tax liabilities are presented within
provisions for liabilities and deferred tax assets within debtors.
7. Investment Manager’s fee
Blackfinch Investments Limited has been appointed as the Company’s Investment Manager. This appointment shall
continue for a period of a period of five years following the allotment of any Ordinary shares until terminated by the
expiry of not less than 12 months’ notice in writing given by either party. The appointment may also be terminated in
circumstances of material breach by either party.
Details of the appointment may be found in the Strategic Report on pages 42 to 44.
8. Incidental investment expenses
Philip Hare & Associates LLP has been providing advice on compliance with VCT requirements, including evaluation of
the investment’s opportunities.
Expenses incurred during the year ended 31 December 2020 have been fully reimbursed by Blackfinch Spring Limited.
Details of the appointment may be found in the VCT regulations on pages 52.
20 April 2022
Blackfinch Investments
Limited
Revenue £
60,699
Capital £
182,095
Year ended 31
December 2021
Total £
242,794
Philip Hare & Associates LLP
Period ended 31 December 2020
Total £
7,500
Revenue £
17,129
Capital £
51,386
Period ended 31
December 2020
Total £
68,515
Year ended 31 December 2021
Total £
(7,500)
Blackfinch Spring VCT Annual Report and Financial Statements
91
9. Other expenses
Other expenses include:
The Company has no employees other than the Directors.
Information relating to Director’s remuneration can be found in the audited section of the Director’s Remuneration
Report on page 65.
10. Taxation
a) Analysis of charge for the period
b) Factors affecting the tax charge for the period
Directors’ remuneration fees
Administration fees
Registrars and receiving agent fee
Auditors remuneration – audit of Statutory Financial Statements
Other professional fees
Other costs
Irrecoverable VAT
Total
2020 (£)
36,053
46,027
18,812
26,000
30,273
232
38,010
195,407
20 April 2022
Profit/(loss) on ordinary activities before taxation
Profit/(loss) before taxation multiplied by standard
rate of corporation tax of 19% (2020: 19%)
Effect of:
UK dividends received
Current year losses carried forward
Losses brought forward
Deferred taxation not recognised
Tax charge for the period (Note 10a)
20201(£)
55,452
60,000
8,043
35,000
63,143
411
68,576
290,625
Period ended 31
December
Year ended 31
December
Charge for the period
Period ended 31 December 2020
Total £
-
Year ended 31 December 2021
Total £
-
Period ended 31 December 2020
Total £
(271,422)
(51,570)
-
(271,422)
-
-
Year ended 31 December 2021
Total £
96,331
18,303
-
(525,919)
(271,422)
-
-
No asset or liability has been recognised for deferred tax in relation to capital gains or losses on revaluing investments
as the Company is exempt from corporation tax in relation to capital gains or losses as a result of qualifying as a Venture
Capital Trust.
No deferred tax asset has been recognised on surplus expenses carried forward as it is not envisaged that any such tax
will be recovered in the foreseeable future. The value of the unrecognised deferred tax asset is £199,335 (2020: £51,570)
based on losses carried forward of £797,341 (2020: £271,422).
11. Return per share
The Company has no securities that would have a dilutive effect and hence basic and diluted earnings per ordinary share
are the same.
The Company has no potentially dilutive shares and consequently, basic and diluted earnings per ordinary share are
equivalent in the year ended 31 December 2021.
Blackfinch Spring VCT Annual Report and Financial Statements
92
20 April 2022
Revenue
Capital
Total
Earnings per
share pence
(9.30)
10.30
1.00
Net loss
(£)
(351,324)
997,652
96,331
Weighted
average shares
9,687,562
9,687,562
9,687,562
Earnings per
share pence
(5.87)
(1.63)
(7.50)
Net loss
(£)
(212,536)
(58,886)
(271,422)
Weighted
average shares
3,619,335
3,619,335
3,619,335
2021 2020
The Company is required to report the category of fair value measurements used in determining the value of its
investments, to be disclosed by the source of inputs, using a three-level hierarchy:
Level 1: quoted prices in active markets for identical assets or liabilities. The fair value of financial instruments traded
in active markets is based on quoted market prices at the balance sheet date. A market is defined as a market in which
transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an
ongoing basis. The quoted market price used for financial assets held by the Company is the current bid price. These
instruments are included in level 1 and comprise AIM quoted investments and other fixed income securities classified
as held at fair value through profit or loss.
The Company has no investments classified in this category.
Level 2: 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 market data where it is available and rely as little
as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the
instrument is included in level 2.
The Company has no investments classified in this category.
Level 3: the fair value of financial instruments that are not traded in an active market (for example, investments in
unquoted companies) is determined by using valuation techniques such as revenue or earnings multiples. If one or
more of the significant inputs is not based on observable market data, the instrument is included in level 3.
All of the Company’s investments fall into this category at 31 December 2021.
Blackfinch Spring VCT Annual Report and Financial Statements
93
20 April 2022
Movements in period:
Purchased at cost
Unrealised gains/(losses)
Valuation at 31 December 2020
Movements in the period:
Purchases at cost
Unrealised gains
Realised losses
Total movements in period
Closing valuation:
Cost at 31 December 2020
Unrealised gains at 31 December 2021
Realised losses at 31 December 2021
Valuation at 31 December 2021
Shares (£)
1,259,275
-
1,259,275
5,080,000
-1,172,247
(549,997)
5,702,250
-
1,172,247
(549,997)
6,961,525
12. Investments
Movements in investments during the period are summarised as follow:
Valuation methodology
Revenue multiple
Progress against milestones
Held at investment cost
Total value of investments
£6,131,525
£400,000
£430,000
Most investments were valued using a multiple of revenue. Two investments were valued according to progress against
milestones, and the investment made in December was held at cost. The overall value of investments according to these
different methods is shown in the table below.
Blackfinch Spring VCT Annual Report and Financial Statements
94
20 April 2022
13. Significant interest
Details of holdings may be found in the Investment Manager’s Review and Investment Portfolio on pages 12 to 26.
14. Debtors
15. Creditors
Blackfinch Spring VCT Annual Report and Financial Statements
95
20 April 2022
Investment
Brooklyn Supply Chain Solutions Ltd
Client Share Ltd
Cultureshift Communications Ltd
Cyclr Systems Limited
Edozo Limited
Illuma Technology Ltd
Kokoon Technology Ltd
Movebubble Limited
Odore Limited
Spotless Water Ltd
Startpulsing Limited
Tended Ltd
Transreport Limited
Watchmycompetitor.com Ltd
Total Equity held by Blackfinch EIS Portfolios
(%)
13.0
13.3
3.8
13.1
18.4
5.5
16.8
11.6
3.2
8.5
14.1
38.0
9.0
3.3
Equity held by the Company
(%)
6.5
6.3
7.7
6.5
2.4
9.6
1.8
8.8
4.3
3.8
7.1
3.0
6.0
7.7
Amounts falling due within one year:
Prepayments
Other debtors
Total
2020 (£)
3,567
37,500
41,067
2021 (£)
1,717
1,544
3,261
Amounts falling due within one year:
Trade creditors
Other creditors
Accruals
Total
2020 (£)
4,454
9,530
77,602
91,586
2021 (£)
-
9,500
161,366
170,866
16. Called up share capital
During the year, the Company issued 8,721,908 Ordinary and redeemable shares.
The redeemable preference shares:
• carry the rights to receive a fixed cumulative preferential dividend from the revenue profits of the Company which
are available for distribution and which the Directors determine to distribute by way of dividend in priority to any
dividend payable on the ordinary shares at the rate of 0.1% per annum (exclusive of any imputed tax credit available to
shareholders) on the nominal amount thereof, but confer no other right to a dividend;
• confer no right to receive notice of, or to attend or vote at general meetings, except where the rights of holders of
redeemable preference shares are to be varied or abrogated;
• on a winding up confer the rights to be paid out of the assets of the Company available for distribution the nominal
amount paid up to such shares pari passu with, and in proportion to, the amount of capital paid to the holders of the
ordinary shares, but do not confer any right to participate in any surplus assets of the Company; and
• are capable of being redeemed by the Company at any time and on their redemption the holders thereof shall,
subject to the provisions of the Act, be paid sum equivalent to the amount paid on each redeemable preference
share held and each redeemable preference share which is redeemed shall thereafter be cancelled without any further
resolution or consent.
On 5 November 2019 the Company allotted and issued 50,000 redeemable preference shares of £1.00 each to
Blackfinch Investments Limited. These 50,000 redeemable preference shares were paid up, fully redeemed and
subsequently cancelled on 15 February 2021.
17. Reserves
Called up share capital represents the nominal value of the shares that have been issued.
Share premium account includes any premiums received on issue of share capital less any transaction costs associated
with the issuing of shares and any amounts transferred to the special reserve.
Capital reserves includes all costs which are considered capital in nature. As at 31 December 2021 there were realised
losses of £783,478 (2020: losses £58,886), and unrealised gains of £1,172,247 (2020: £Nil)
Revenue reserve includes all retained profits and losses. The balance on the account is distributable.
Blackfinch Spring VCT Annual Report and Financial Statements
96
20 April 2022
Ordinary shares (1p shares)
Allotted, issued, and fully paid during the period:
Ordinary shares
Redeemable preference shares
Total
2021
Number
12,633,843
-
12,633,843
2021
(£)
126,338
-
126,338
2020
Number
3,911,937
5,000,000
3,961,937
2020
(£)
39,119
50,000
89,119
18. Net Asset Value per Ordinary Share
19. Financial Instruments
The Company’s financial instruments comprise equity, cash balances and liquid resources including debtors and creditors.
The Company holds financial assets in accordance with its investment policy to invest in qualifying investments.
The Company held the following categorises of financial instruments at 31 December 2021:
Blackfinch Investments Limited reviews the value of the investments in the Blackfinch Spring VCT portfolio on a
quarterly basis. Valuations are determined in accordance with the most recent IPEV (International Private Equity and
Venture Capital) Valuation Guidelines.
When an investment has been made recently, the value of that investment is based on its cost, reviewed for impairment
or uplift. This valuation is also calibrated with the most appropriate choice of a market-based multiple or discounted
cash flow analysis, and considering any significant triggers or events that may affect it. This same valuation model will
typically be used to value the investment when there has been no recent investment to provide firm evidence of the
market price of an investment, subject to a review to confirm it is still most appropriate. Adjustments consistent with the
IPEV guidelines may be made to the resulting company valuation if deemed appropriate by the board.
The Company’s technology-enabled thesis means that many portfolio companies invest for long-term growth and will
not reach sustained profitability for some years. Consequently, a revenue multiple will often be the most appropriate
market-based methodology to use for the calibration and valuation models. However, the Company would expect to
switch to an earnings multiple when an investment has achieved the scale required for consistent profitability.
Blackfinch Spring VCT Annual Report and Financial Statements
97
20 April 2022
Ordinary share
NAV per share
pence
93.08
Net assets (£)
11,759,947
2021
Ordinary shares
12,633,843
NAV per share
pence
94.08
Net assets (£)
3,680,389
2020
Ordinary shares
3,911,937
Assets at fair value through profit or loss:
Equity investments
Assets measured at amortised cost:
Cash at bank
Other debtors
Liabilities measured at amortised cost:
Creditors
Accruals
Cost (£)
6,339,275
4,966,027
1,544
(9,500)
(161,366)
11,135,980
Fair value (£)
6,961,525
4,966,027
1,544
(9,500)
(161,366)
11,758,230
Cost (£)
1,259,275
2,471,633
37,500
(13,984)
(77,602)
3,676,822
Fair value (£)
1,259,275
2,471,633
37,500
(13,984)
(77,602)
3,676,822
2021 2020
In the valuation models and calibration exercise, comparable trading multiples are selected, based on the most
relevant combination of sector, size, growth rate, developmental stage, and strategy. The multiple for each company is
calculated by dividing the enterprise value of the comparable by its revenue or earnings as appropriate, and adjusting for
other considerations such as illiquidity, territories served, and other company specific circumstances.
Further details of the bases on which financial instruments, including investments, are held may be found in Notes 6 and
12 and in the Investment Manager’s Review on pages 8 to 35.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment
that it has entered into with the Company. The Company is exposed to credit risk through its debtors, creditors and
cash held with bank.
Credit risk arising on transactions with debtors and creditors relates to transactions awaiting settlement. Risk related
to unsettled transactions is considered to be small due to the short settlement period involved.
At 31 December 2021, cash held by the Company was held by the Lloyds Bank. Bankruptcy or insolvency of the bank
may cause the Company’s rights with respect to the cash held by it to be delayed or limited. Should the credit quality
or the financial position of the bank deteriorate significantly the Company has the ability to move the cash holdings to
another bank.
Interest risk
The Company has some exposure to interest rates as a result of interest earned on bank deposits. Other financial
assets and other liabilities attract no interest.
Investment valuation risk
The Board tracks the investment valuation risk inherent in the Company’s portfolio on the risk register that is reviewed
quarterly. It maintains an appropriate spread of risk and ensures full and timely access to relevant information from the
Investment Manager. The Company does not use derivative instruments to hedge against market risk. The equity of
the Company’s unquoted investee companies are not traded and, as such, their prices are more uncertain than those of
more frequently traded stocks.
Investment valuations are derived from investee company valuations. It is estimated that a 30% fall in the carrying value
of the Company’s unquoted investments would reduce profit before tax for the year and the Company’s net asset value
per share by £1.9m and 15.05p respectively. Such a drop is considered to be an appropriate illustration given historical
volatility and market expectations of future performance.
Liquidity risk
The Company’s financial instruments include investments in unlisted equity investments which are not traded in an
organised public market, and require a mid to long term commitment, which generally may be illiquid. The Company
retains a portion of the portfolio in cash in order to finance new investment opportunities.
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20. Capital Management Policies and Procedures
The Company’s capital management objectives are:
• to ensure that it will be able to continue as a going concern;
• to satisfy the relevant HMRC requirements; and
• to maximise the income and capital return to its shareholders.
As a VCT, the Company must hold at least 80% of its assets by value in Qualifying Investments by the second
anniversary of the end of the accounting period in which the Company issued the shares. In addition, at least 30% of
all new funds raised by the Company must be invested in Qualifying Investments within 12 months of the end of the
accounting period in which the Company issued the shares. Qualifying Investments will be made in companies which are
carrying out a qualifying trade, and have a permanent establishment in the UK, although some may trade overseas.
The Company will target an annual dividend equivalent to 5% of its Net Asset Value, and special dividends, where
appropriate, from the proceeds of successful exits of portfolio companies that are not reinvested. It is envisaged that
dividends will not be paid before 2024 and will be subject to the existence of realised profits, legislative requirements,
and the available cash reserves of the Company.
21. Post Balance Sheet Events
Non-adjusting event
Since 31st December 2021 the Company has completed the following additional investment transactions:
• investment of £400,000 in Brooklyn Supply Chain Solutions Ltd;
• investment of £300,000 in Client Share Ltd;
• investment of £800,000 in Cyclr Systems Limited;
• investment of £400,000 in Measure Protocol Limited;
• investment of £600,000 in Placed Recruitment Limited;
• investment of £700,000 in Startpulsing Limited;
• investment of £1,000,000 in Staffcircle Ltd; and
• investment of £270,000 in Transreport Limited.
22. Contingencies, Guarantees and Financial Commitments
Under the terms of the Investment Advisory Agreement, the running expenses of the Company which are provided for
in an annual budget approved by both the Board and the Investment Manager are restricted to a maximum of 3.50% of
the Net Asset Value of the Company. Such excess, if occurred, is to be either paid by the Investment Manager or to be
refunded by way of a reduction to its annual investments advisory fee.
The running expenses incurred in the year were 3.51% of the total Net Asset Value as at 31 December 2021 (2020: 3.40%).
There were no other contingencies or guarantees as at 31 December 2021 (2020: none).
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23. Related Parties and Transactions with the Investment Manager
The Company retains Blackfinch Investments Limited as its Investment Manager. In addition to the investment adviser
fee Blackfinch Investments Limited also receives a secretarial and administration fee of £60,000 per annum, paid
quarterly. Details of the agreement with the Investment Manager are set out on pages 42 to 43.
The remuneration and shareholdings of the Directors, who are key management personnel of the Company, is disclosed
in the Directors’ Remuneration Report on pages 65 to 68.
24. Geographical Analysis
The operation of the Company is wholly in the United Kingdom.
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Directors and Advisers
Directors (all non-executive)
Peter Lionel Raleigh Hewitt (Chairman)
Katie Jones
Dr Reuben Wilcock
All of:
Registered Office at
1350-1360 Montpellier Court
Gloucester Business Park
Brockworth, Gloucester
Gloucestershire, GL3 4AH
VCT Tax Adviser
Philip Hare & Associates LLP
Hamilton House, 1 Temple Avenue
London, EC4Y 0HA
Solicitors and Sponsor
Howard Kennedy Corporate Services LLP
No. 1 London Bridge
London, SE1 9BG
Auditor
BDO LLP
55 Baker Street
London, W1U 7EU
Registrars and Receiving Agent
The City Partnership (UK) Limited
The Mending Rooms
Park Valley Mills,
Meltham Road
Huddersfield, HD4 7BH
Investment Manager, Promoter
and Administrator
Blackfinch Investments Limited
1350-1360 Montpellier Court
Gloucester Business Park
Brockworth, Gloucester
Gloucestershire, GL3 4AH
Secretary
The City Partnership (UK) Limited
The Mending Rooms
Park Valley Mills
Meltham Road
Huddersfield, HD4 7BH
Blackfinch Spring VCT plc
(Registered in England and Wales with registered number 12166417)
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Annual General Meeting of Blackfinch Spring VCT plc (“the Company”) will be held
at 10am on 8 June 2022 for the purposes of considering and, if thought fit, passing the following resolutions, resolutions
1 to 7 as ordinary resolutions and resolutions 8 and 9 as special resolutions:
Ordinary Resolutions
1. To receive and adopt the Directors’ Report and Financial Statements of the Company for the financial year ended 31
December 2021 together with the Independent Auditor’s Report thereon.
2. To approve the Directors’ Remuneration Report for the year ended 31 December 2021 other than the part of such
report containing the Directors’ Remuneration Policy.
3. To appoint BDO LLP as auditor of the Company from the conclusion of the AGM until the conclusion of the next AGM
of the Company to be held in 2023 at which financial statements are laid before the Company.
4. To authorise the directors to fix the remuneration of the auditor
5. To re-elect Kate Jones as a director of the Company.
6. To re-elect Reuben Wilcock as a director of the Company in accordance with the Listing Rules.
7. That, the Directors be and hereby are generally and unconditionally authorised in accordance with Section 551 of
the CA 2006 to exercise all of the powers of the Company to allot shares in the Company or to grant rights to subscribe
for or to convert any security into shares in the Company up to an aggregate nominal value of £400,000, representing
approximately 272% of the issued share capital of the Company as at 1 April 2022, being the latest practical date prior to
publication of this document, provided that the authority conferred by this Resolution 7 shall expire at the conclusion of
the Company’s next annual general meeting or on the expiry of fifteen months following the passing of this Resolution 7,
whichever is the later (unless previously renewed, varied or revoked by the Company in general meeting).
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20 April 2022
Special Resolutions
8. That, the Directors be and hereby are empowered pursuant to Section 570(1) of CA 2006 to allot or make offers or
agreements to allot equity securities (which expression shall have the meaning ascribed to it in Section 560(1) of CA
2006) for cash pursuant to the authority given in accordance with Section 551 of CA 2006 by Resolution 8 above as if
Section 561(1) of CA 2006 did not apply to such allotments, provided that the power provided by this Resolution 8 shall
expire at the conclusion of the Company’s next annual general meeting or on the expiry of fifteen months following the
passing of this Resolution 8, whichever is the later (unless previously renewed, varied or revoked by the Company in
general meeting).
9. That, the Company be and is hereby authorised to make one or more market purchases (within the meaning of section
693(4) of the CA 2006) of Ordinary Shares provided that:
9.1 the maximum aggregate number of Ordinary Shares authorised to be purchased is an amount equal to 14.99% of the
issued Ordinary Shares;
9.2 the minimum price which may be paid for an Ordinary Share is their nominal value;
9.3 the maximum price which may be paid for an Ordinary Share is an amount equal to the higher of (i) 105% of the
average of the middle market quotation per Share taken from the London Stock Exchange daily official list for the five
Business Days immediately preceding the day on which such Ordinary Share is to be purchased; and (ii) the amount
stipulated by the UK version of Article 5(6) of Market Abuse Regulation (596/2014/EU); and
9.4 unless renewed, the authority hereby conferred shall expire either at the conclusion of the annual general meeting
of the Company following the passing of this Resolution 10 or on the expiry of fifteen months from the passing of this
Resolution 10, whichever is the later, save that the Company may, prior to such expiry, enter into a contract to purchase
Ordinary Shares which will or may be completed or executed wholly or partly after such expiry.
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IMPORTANT INFORMATION
Capital at Risk. Blackfinch Spring VCT Plc, 1350-1360 Montpellier Court, Gloucester Business Park,
Gloucester, GL3 4AH. Registered company in England and Wales Company no. 12166417.