Annual Report and Financial Statements for Literacy Capital plc

For the twelve months ended 31 December 2021

Contents

Performance Highlights ........................................................................................................................................ 1

Strategic Report ................................................................................................................................................... 3

Chairman’s Statement .................................................................................................................................................. 4

Investment Manager’s Report ...................................................................................................................................... 5

Charitable Mission ...................................................................................................................................................... 13

Section 172 and stakeholder reporting ...................................................................................................................... 17

Board of Directors .............................................................................................................................................. 19

Corporate Governance ....................................................................................................................................... 21

Directors’ Remuneration Report ......................................................................................................................... 26

Directors’ Report ............................................................................................................................................... 29

Directors' Responsibility Statement .................................................................................................................... 33

Independent Auditors Report ............................................................................................................................. 34

Financial Statements .......................................................................................................................................... 41

Notes to Financial Statements ............................................................................................................................ 45

Additional Information....................................................................................................................................... 63

AIFM Statement (unaudited) .............................................................................................................................. 65

Corporate Information ....................................................................................................................................... 67

Shareholder Information .................................................................................................................................... 68

Throughout the Annual Report and Financial Statements, Literacy Capital plc is also referred to as

“Literacy Capital”, the “Company”, or “BOOK”

Performance Highlights

Focus on helping to build great businesses to generate superior returns

 NAV per ordinary share of 277.2p

o Net assets of £166.3m

, an increase of 94.1% in the twelve months to 31 December 2021

o The FTSE Investment Company Index and FTSE All-Share Index returned 12.8% and 14.5% respectively

over the same period

o The share price closed the year at 295p, a 6.4% premium to net assets, and 84.4% higher than the

price on Admission to the London Stock Exchange on 25 June 2021

 Portfolio companies enjoying strong trading momentum, with active assistance from the Literacy Capital

team to accelerate growth

o Portfolio comprised of buyout, growth capital and fund investments, with significant exposure to

companies delivering strong growth since our investment

o 93% revenue growth and 131% EBITDA growth on a weighted average, Last Twelve Months (“ LTM”)

basis across the eight buyout investments within Literacy Capital’s top 10 direct holdings. These eight

companies represent 69.5% of NAV

 Significant activity and value creation initiatives across the portfolio companies

o Completed three new platform investments in 2021, as well as seven bolt-on acquisitions by our

portfolio companies

o Have helped to build and strengthen the management teams of a number of portfolio companies

through several senior hires

 Reduced cash drag and maturing investments improving the rate of NAV growth, whilst retaining cash to

complete new investments

o £5.2m of available cash plus access to a new £15m RCF arranged to fund new investments and uncalled

fund commitments. Refinancing of certain portfolio companies planned in 2022 to generate further

cash to redeploy or increase Literacy Capital’s equity stake further

o £11.8m of cash realised from the portfolio in 2021, an increase from £6.8m in 2020

o Continue to maintain a strong pipeline of potential, high-quality investments for the future

 Increasing charitable donations, helping disadvantaged children across the UK get a fair chance

o £1,527k of charitable donation accrued in 2021, up from £772k in 2020, in line with the strong growth

in NAV

o Total donations of over £3.4m since inception of Literacy Capital

Performance to 31 December 2021

% total return 3 months 1 year 3 years Since Inception

BOOK Net asset value

+13.0%

+94.1%

+186.2%

+208.0%

BOOK Share Price +1.7% n/a n/a n/a

FTSE Investment Company Index +3.7% +12.8% +61.3% +56.7%

FTSE All-Share Index +3.7% +14.5% +14.5% 1.9%

The NAV currently excludes certain deferred tax liabilities shown in the Company's financial statements, on the basis that these amounts are not

expected to become payable in the future should the Company receive approval of its investment trust status. In the event that the Company does not

receive such approval, the deferred tax liabilities will need to be taken into account in calculating the net asset value per ordinary share going forward

Helping to build great businesses

Our purpose is to invest in and support predominantly UK based companies and to help their management teams

achieve long-term success. Our closed-ended, permanent capital structure means we can be a long-term, highly

ambitious and flexible partner. We are focused on smaller businesses, where our expertise can greatly enhance the

size and value of these companies, contributing to superior returns for BOOK shareholders. We are also proud to have

a charitable mission helping disadvantaged children in the UK learn to read, giving them a fair chance in life.

Richard Pindar, CEO of the Investment Manager and Director of Literacy Capital plc, commented:

“We are pleased with the way in which our largest portfolio companies and investments have traded strongly in 2021

and their prospects remain very positive. The growth and strong performance of certain investments has led BOOK’s

portfolio to be more highly concentrated than many funds. This concentration results from excellent trading

performance and strong uplifts in value of those companies, rather than allocating disproportionate amounts of capital

to these companies. We do not wish to risk large amounts of BOOK’s capital by committing disproportionate amounts

of cash to new investments, but we will look to run winners and avoid selling assets prematurely to enjoy the

substantial upside that this can generate.

We enjoy a high degree of insight and influence in BOOK’s portfolio companies. This involves the monthly, or even

weekly, provision of management information and frequent interaction with the management teams of these

businesses. In many cases, we have appointed several members of these management teams and have the ability to

make changes if we feel it is necessary to improve the prospects of the business. Therefore, while some funds would

be nervous with higher levels of portfolio concentration, the nature of our investments in these private companies

means we are comfortable with the composition of our portfolio. We view this concentration as a positive and as an

opportunity. We hope that their current momentum will enable BOOK to continue outperforming, whilst our receipt

of company data and information in a timely fashion gives us good awareness should this momentum falter. If

required, we have the ability to influence outcomes across our portfolio companies or make any necessary changes.

We are particularly grateful and thankful to all of the management teams and employees of our portfolio companies

for their hard work in 2021. It has been a challenging year for many of them, with the continued impact of Covid-19

and supply chain problems that have affected businesses globally. We thank them for their efforts in 2021 and hope

that many of these issues will ease in 2022.

We are satisfied that the amount of cash realised in 2021 was approximately double the figure achieved in 2020. We

are confident that we will be able to generate more cash from the portfolio to finance new investments, as the

companies continue to grow, trade strongly and generate cash. Alongside the recently agreed £15m Revolving Credit

Facility, we remain confident that BOOK has the capital it needs to deploy into new investment opportunities that are

available to us. This facility will also enable us to manage cash drag, which can reduce shareholder returns.”

Comparison to prior financial year

12 months to/as at 31 Dec 2021 12 months to/as at 31 Dec 2020

Net asset value

£166.3m £85.6m

NAV per ordinary share

1/2

277.2p 142.7p

Capital invested £13.2m £19.6m

Cash realised £11.8m £6.8m

Charitable donation provision £1,527k £772k

The NAV currently excludes certain deferred tax liabilities shown in the Company's financial statements, on the basis that these amounts are not

expected to become payable in the future should the Company receive approval of its investment trust status. In the event that the Company does not

receive such approval, the deferred tax liabilities will need to be taken into account in calculating the net asset value per ordinary share going forward.

For comparability, 31 December 2020 NAV per ordinary share is presented on a fully diluted basis taking account of the 6,000,000 A growth shares

then in issue which have since converted to ordinary shares.

Strategic Report

Literacy Capital plc is an investment company run for private and institutional investors. The Company’s objectives

are:

• To achieve long term capital growth through making investments in accordance with the Investment Policy; and

• To provide a consistent donation to registered charities selected by the Investment Manager with the approval of

the Board (more detail is set out under the Charitable Mission section on page 13).

During 2021, despite Covid-19, the trading and financial performance of most underlying companies held up well with

four standout performers amongst them. Two portfolio companies continued to feel negative effects of Covid-19

throughout the year but these investments make up a very small proportion of the total portfolio and we expect them

both to return to pre-Covid-19 levels of trading in 2022. All of the portfolio companies were securely positioned going

into 2022 and we expect them all to have the liquidity and ability to trade successfully through this year and into 2023.

In the year under review, the net asset value (NAV) of assets under management of the Company increased from

£85.6m to £166.3m.

It is the intention of Literacy Capital plc to apply for investment trust status in 2022. In order to do this, Literacy Capital

plc intends to shorten the initial accounting period in 2022 to three months, so that it runs from 1 January 2022 to 31

March 2022. The following accounting period is then expected to be nine months long and end on 31 December 2022,

in line with previous accounting periods. This additional financial period and statutory audit is being established

because once all conditions to qualify for investment trust status are met, this status only takes effect from the

beginning of the next financial period. As a result, it is the Board’s view that this course of action is in the best interest

of shareholders.

Investment Objective

The Company’s principal activity is to invest in and support small, growing businesses, predominantly UK-businesses.

The Company will also make other investments, in private and public businesses, which may be denominated in foreign

currencies. Its investment policy is set out in full in the Additional Information Section of this annual report.

The Company will invest and manage its assets with the objective of spreading risk. No single investment will represent

more than 20 per cent of Gross Assets, calculated at the time of that investment. The Company will not be required

to dispose of any investment or rebalance its portfolio as a result of a change in the respective value of any of its

investments.

Performance Comparison

The Company uses the FTSE All-Share Closed End Investment Trust Index (“the Index”) as a comparator for the purpose

of monitoring performance and risk but the composition of the Index has no influence on investment decisions. The

Index represents the performance of Investment Trusts from the FTSE UK Index Series. These Investment Trusts

operate in a way and invest in similar types of companies to Literacy Capital plc, and as such the Investment Manager

has deemed the Index to be the best comparator for the company.

Chairman’s Statement

Literacy Capital plc was admitted to trading on the Specialist Fund Segment of the London Stock Exchange's Main

Market on 25 June 2021. I am very pleased to present the Chairman's statement for 2021 which includes six months

as a listed investment company.

The Investment Manager's review following this introduction provides considerable detail regarding our early

investment performance, but, in summary, our first period as a public company has gone well.

Our shares were admitted in June at a price of 160p. On 31 December 2021, our mid-market closing price was 295p

and our shares stood at 301p on 9 March 2022. Indeed, we were named as the best performing investment company

in the UK by Citywire Investment Trust Insider for the second half of 2021, with a share price increase of 52.1%. This

follows being ranked 1st out of 351 investment companies in Q3 2021.

We set up Literacy Capital with the mission to operate differently from 'traditional' private equity. We are a closed-

end fund which means that we have no pressure and (importantly) no incentive to sell high performing investments

prematurely. We can take a very long term view, which is highly attractive to both company vendors (who want

stability for their employees) and the management teams with whom we partner.

We are an active and supportive partner. Investment opportunities do not need to be perfectly formed to be

interesting to us. We are happy to work closely and collegiately with management to improve businesses, to

strengthen teams, to execute buy-and-build strategies and to provide experience, support, advice and confidence.

When we created Literacy Capital, one of our motivations was to help UK smaller companies to thrive and succeed.

Whilst we currently have just 16 companies in our family, they are rewarding us handsomely with their progress, with

material growth in revenues, profits and employment.

We also want to open up private equity as an asset class to be accessed by the many rather than the few. Our listing

allows smaller investors to have an interest in private equity. And we consciously do not charge carried interest, which

means our management fees are amongst the lowest in the sector.

We are highly aligned with shareholders as a whole. Very unusually, the investment team that is responsible for

investing shareholder's money, their family members and the Board of Directors collectively own over 50% of Literacy

Capital itself. We are not looking to make money by gathering assets or charging fees. We are simply seeking to build

great companies which will translate directly into creating value for all shareholders.

We believe we can make money for shareholders. But our work is also driven by a hunger to positively impact as many

young children as possible. The UK suffers significant literacy problems with some 200,000 children leaving primary

school each year unable to read to the required standard. This has a hugely detrimental impact on each child's future.

We want every child to read. And this is the reason why we have and will continue to donate 0.9% of our net assets

each year to literacy charities across the UK. This work is being led particularly by Bookmark Reading, a charity which

is now supporting thousands of young children each year, with core funding provided by Literacy Capital.

We have started well. But more importantly, we are now shareholders in some first class businesses, led by highly

talented teams. We are confident that our portfolio of companies will drive significant value for shareholders over

both the short and long term.

Paul Pindar

Chairman

11 March 2022

Investment Manager’s Report

BOOK Performance Highlights For The Year

277.2p

£166.3m

NAV per ord. share

1/2

(31 Dec 2020: 142.7p)

£m NAV

(31 Dec 2020: £85.6m)

£13.2m

£11.8m

Capital invested

(2020: £19.6m)

Cash realised

(2020: £6.8m)

+84.4%

£1,527k

Shareholder total return

(since listing on 25 June 2021)

2021 charitable donation

provision

(2020: £772k)

BOOK Performance Overview

We are very pleased with BOOK’s performance and progress in 2021. On 31 December 2021, net asset value (NAV)

was £166.3 million, or 277.2p per share, an increase of 94.1% (after all costs and charitable donations) since 31

December 2020.

Growth in net assets in 2021 was driven by uplifts across a number of portfolio companies. Of the 14 direct investments

held at the end of 2020, seven of them delivered a return to BOOK of at least 100% in 2021. Of these seven

investments, three generated a return in excess of 200% in the year. These uplifts were driven by a combination of

strong growth in profitability, cash generation and a number of transactions involving BOOK investee businesses with

third-party investors at material premiums.

During this period, Literacy Capital plc was also introduced to the London Stock Exchange (“LSE”). It was admitted on

25 June 2021 at a price of 160p per share. Following BOOK’s admission to the LSE, the share price closed on 31

December 2021 at 295p, an increase of more than 84% in a little over six months.

BOOK’s operating costs in the period amounted to £3.0m (2020: £1.1m). The year-on-year increase was driven by a

larger Investment Management fee expense, owing to the uplift in NAV, as well as one off costs associated with

introducing Literacy Capital plc to the LSE.

Cash proceeds received by BOOK in 2021 were materially higher than those received in 2020. This was as a result of

an increasingly mature portfolio with companies achieving greater levels of scale, profitability and cash generation.

This increase was deliberate in order to manage capital within BOOK efficiently and to increase the amount of available

cash to fund new investment opportunities.

The NAV currently excludes deferred tax liabilities shown in the Company’s financial statements, on the basis that these amounts are not expected to become

payable in the future should the Company receive approval of its investment trust status. In the event that the Company does not receive such status, the

deferred tax liabilities will need to be taken into account in calculating the net asset value per ordinary share going forward.

For comparability, 31 December 2020 NAV per ordinary share is presented on a fully diluted basis taking account of the 6,000,000 A growth shares then in issue

which converted to ordinary shares upon the listing. Both the NAV per share figures for 2020 and 2021 are divisible by 60 million shares.

Breakdown of Net Asset Value at 31 December 2021

Companies / assets Date of Investment Carrying value % of NAV

Grayce

Recruits, trains and deploys graduates into large corporates

Jul 18 £41.2m 24.8%

RCI Health Group

Provider of healthcare and specialist clinical services

Sep 18

£32.3m

19.4%

Butternut Box

Healthy, subscription-based, direct-to-consumer pet food

Jan 18 £14.2m 8.5%

Kernel Global

Recruitment for roles within financial services

Jun 18 £12.8m 7.7%

Vanilla Electronics

Outsourced supply chain management of electronic

components

Jun 20 £7.6m 4.6%

Top 5 investments

£108.1m

65.0%

Wifinity

Wi-fi provider to hard-to-reach campus locations

Dec 17 £6.7m 4.0%

Antler Homes

Housebuilder in the Southeast of England

Jun 18 £6.5m 3.9%

Hanmere

Manufacturer of polythene packaging products

Dec 17 £5.3m 3.2%

Cross Rental Services

Provider of refrigeration & catering and climate control

equipment

Nov 21 £5.0m 3.0%

EPM

Software and consulting business to the transport sector

Feb 20 £4.8m 2.9%

Top 10 investments

£136.4m

82.0%

Private equity fund interests

£11.0m

6.6%

Other direct investments

£16.2m

9.8%

Cash (net of donation provision and other working capital items)

£2.7m

1.6%

Net asset value

£166.3m

100%

The NAV currently excludes deferred tax liabilities shown in the Company’s financial statements, on the basis that these amounts are not expected to become

payable in the future should the Company receive approval of its investment trust status. In the event that the Company does not receive such status, the

deferred tax liabilities will need to be taken into account in calculating the net asset value per ordinary share going forward.

Portfolio Company Overview

The trading performance and financial condition of the portfolio remained very strong in 2021. The rate of growth in

sales and EBITDA of BOOK’s largest investments accelerated as the year progressed.

By the end of year, annual sales growth amongst the eight buyout investments within Literacy’s top ten investments

reached 93% and EBITDA growth was even stronger at 131%. Some of this growth was contributed by six bolt-on

acquisitions that these eight companies completed. However, excluding the impact of any acquisitions, these figures

were 53% and 83% respectively, demonstrating their strong organic growth.

The smallest increase in EBITDA year-on-year across any of these eight companies was 90%. In the top five

investments, both Grayce and Kernel Global grew EBITDA more than 100%, entirely organically, without any

acquisitions in the year. This is a material improvement compared to their growth rates at the point that we invested.

Literacy Capital’s portfolio companies also created hundreds of additional jobs and opportunities during the year for

people across the UK. The total headcount at the end of 2021 for the ten companies that comprise BOOK’s largest

investments stood at 3,029. This compared to 1,460 employees for the same ten companies a year earlier, an increase

of 107%.

Literacy’s top five investments comprise 65.0% of NAV, meaning their performance will have a significant impact on

BOOK’s overall performance. All five of these businesses are trading well and making pleasing progress. We expect

these companies to continue contributing strong results in 2022.

Literacy Capital’s majority holdings in Grayce and RCI Group are particularly important to the portfolio, given their

weighting. During 2021, both experienced EBITDA growth in excess of 100% year-on-year. Their momentum and

financial position remain very resilient, and we believe that they can continue to drive strong returns and

outperformance for BOOK.

The private equity fund commitments will remain a small part of the portfolio. BOOK has made four commitments to

funds (one in 2017, two in 2018 and one in the first half of 2021). We do not expect any further drawdowns from the

three 2017 and 2018 vintage funds to which BOOK made commitments. In total, these three funds completed 85

transactions, with just six of these currently valued below cost and none at less than 0.9x cost, demonstrating the

quality of the managers selected.

Portfolio companies’ use of leverage remains highly conservative (just under 1.3x EBITDA on a weighted average basis)

and much lower than investments of traditional private equity fund managers typically employ. This is to provide

flexibility to BOOK’s portfolio companies and to allow them to invest without needing to comply with onerous

covenants. Low gearing, sales growth and operational improvement is our priority, rather than excessive leverage or

financial engineering. This figure has fluctuated between 1x and 1.5x during 2021, as we have refinanced certain

companies to manage and generate liquidity within BOOK.

Top Five Investments

BOOK’s portfolio is relatively highly concentrated, with the top five direct investments equating to 65.0% of the

portfolio, while the ten largest direct investments represent 82.0% of net assets.

The Investment Manager is happy with this concentration given the high degree of knowledge and control it has over

the assets. This involves receiving management information from the companies on a weekly or monthly basis,

providing significant comfort and insight regarding current trading and future performance. It also involves being able

to influence and select the key members of management in these companies. This degree of intimate knowledge and

involvement is far greater than investors can hope to achieve investing in public businesses.

Many of the larger direct investments are a high proportion of total net assets due to their strong performance and

significant uplifts in their valuation. We are pleased to have significant exposure to strongly performing assets and are

happy to run winners, rather than sell assets prematurely.

Given the level of investment and hires required to raise the rates of growth and ambitions of many of the companies

BOOK invests in, it can be a year or two before these improvements turn into meaningful uplifts in value. Once this

growth comes, it can translate into substantial uplifts in the value of BOOK’s stakes reasonably swiftly.

Company

Date of

Investment

31 Dec 2021

carrying value

31 Dec 2021

% of NAV

Total cash

realised

Accumulated

return

∆ in Accum. return

since 31 Dec 2020

Grayce

Jul 18

£41.2m

24.8%

£1.9m

£43.1m

£29.8m

RCI Group

Sep 18

£32.3m

19.4%

£6.9m

£39.2m

£22.9m

Butternut Box

Jan 18

£14.2m

8.5%

£14.2m

£7.8m

Kernel Global

Jun 18

£12.8m

7.7%

£0.7m

£13.5m

£9.9m

Vanilla Electronics

Jun 20

£7.6m

4.6%

£0.0m

£7.6m

£4.7m

Grayce - www.grayce.co.uk

Grayce recruits, trains and employs graduates from top universities for deployment into large corporates, providing

the graduates that they hire with high-quality training, employment and experience.

The original transaction in July 2018 was to facilitate the exit for one of the founders who was stepping down. To assist

with this transition a new senior management team was brought into the business in stages. Between BOOK’s initial

investment and the end of 2020, a new Chairman, CEO, CFO and Sales Director were appointed, with a new COO also

appointed in January 2022, constructing a talented team that can scale and run a business of much greater size.

On 31 March 2018, analyst headcount was 105 with total headcount of 120. By the end of 2021, these figures had

reached 548 and 618 respectively, demonstrating the significant growth and investment that has been injected into

the business since BOOK’s investment and success in creating opportunities for talented, ambitious graduates.

RCI Group

RCI is primarily a provider of healthcare services and data analytics. The group provides its specialist services to the

police, NHS, custodial settings and the courts.

BOOK’s original investment in September 2018 helped two of the four founders achieve their retirement plans. To

ease this transition and ensure the business had strong leadership, a new CEO and CFO joined the business at

completion of the transaction. Within nine months, they were joined by a new Business Development Director and

Operations Director, to create a strong team and platform for growth. This platform was then used to acquire

complementary businesses and broaden the service offering to customers. Three acquisitions were completed

between December 2019 and March 2021.

Since BOOK’s investment, revenue has increased from less than £15m in 2018 to an expected £40m in 2022, following

the acquisitions and increased service offering. EBITDA margins have also been improved materially following

investment into greater usage of data analytics and an expansion of the group’s technology offering, improving the

quality of customer’s insights.

Butternut Box – www.butternutbox.com

Butternut Box was founded in 2017 as a direct to consumer subscription dog food business. It has recently expanded

its operations outside of just the UK, with sales in Ireland and the Netherlands too.

BOOK completed a growth investment into Butternut Box in January 2018, as part of a £5 million investment round,

to help the founders to expand operations and scale the business more quickly. In March 2021, the company opened

a new manufacturing site in Doncaster to significantly increase capacity and improve efficiency. Most recently, the

company completed a £40 million funding round in August 2021, led by L Catterton (www.lcatterton.com

BOOK is a small minority investor so has less control over this investment and the timing of any exit. However, BOOK

is co-invested alongside investors that require and are focused on an exit in the medium term.

Kernel Global - www.kernel-global.com

Kernel Global is the holding company for two recruitment businesses that trade under the names Dartmouth Partners,

which focuses on private equity, corporate finance, wealth management, finance and legal, and Pure Search, which

has a primary focus on tax, as well as other finance roles.

BOOK’s original investment was in June 2018 to support the founder of Dartmouth. He founded the business in 2012

and needed support to scale the business and strengthen its management team. A new Chairman and CFO joined in

the early part of 2020, plus a new Head of International in May 2021. The business also acquired Pure in September

2019 and opened an office in Paris, which gives the group a broad footprint in several financial centres, including New

York, Hong Kong, London and Frankfurt.

At the point that BOOK invested Dartmouth had 54 staff and net fee income of around £7 million. By the end of 2021,

group headcount and LTM net fee income exceeded 220 and £30 million respectively.

Vanilla Electronics - www.vanillaelectronics.com

Vanilla was a family business founded in 2002 by father-and-son. It provides supply chain management solutions to

customers, from design, procurement, kitting and manufacture. By outsourcing this process to a UK business, it can

improve resilience and efficiency, whilst lowering costs, for Vanilla’s end customers.

Vince was looking to retire from Vanilla, while Dan wanted an investor that could add experience and support in

helping to develop his business. To support the growth of the business following BOOK’s investment in June 2020, a

new CFO joined, as well as a new COO and CCO in Q3 2021. In 2021, two acquisitions were also completed, increasing

the group’s technical expertise and broadening its product and service offering to customers.

Since BOOK’s investment, sales have approximately doubled, with margins also significantly improved following

greater focus on delivering greater efficiencies and higher value activities for customers.

Movement in valuation of BOOK’s investments

£m

12 months to 31 Dec 2021

12 months to 31 Dec 2020

Opening Investments

76.7

45.8

Direct investments 10.5 18.1

Fund drawdowns 2.7 1.5

Total new investments

13.2

19.6

Proceeds from direct investments (10.8) (6.6)

Proceeds from fund investments (1.0) (0.2)

Cash proceeds received

(11.8)

(6.8)

Valuation Movement 85.5 18.2

Closing Investments 163.6 76.7

Valuation Movement % (of Opening Portfolio)

111.4%

39.9%

New Investments

We have continued to make new direct investments and grew our portfolio of companies to 16 by the end of 2021 (up

from 13 at the end of 2020). We have also provided additional funding to existing portfolio companies, where this has

been necessary to fund bolt-on acquisitions or to fund organic growth initiatives.

In 2021, BOOK invested a total of £13.2 million. £10.5 million of this amount was invested into BOOK’s direct

investments, with £8.9 million invested into three new portfolio companies and the balance of £1.6 million into the

existing portfolio. Within the total amount invested in the year, £2.7 million was invested to fund drawdowns from

third-party private equity funds. Given we do not expect to receive any further drawdowns from three of BOOK’s four

commitments, we expect the amounts drawn by private equity funds to fall in 2022, despite the new fund commitment

earlier in 2021. This fund is a successor to one that BOOK had previously made a commitment. BOOK’s investment is

denominated in Euros and free of all management fees and carried interest.

In April, we completed one new investment, acquiring a minority stake in TheVeganKind (TVK), an online retailer of

vegan products. Based in Glasgow, TVK’s mission is “to make a vegan lifestyle accessible to all, providing world class

customer service and offering the widest range of products to show how simple it is to live life vegan”. We look forward

to supporting the team and helping them to expand TVK further.

In July, BOOK acquired a majority stake in Oxygen Freejumping, an operator of trampoline parks, with four sites across

the UK. Oxygen is based in Acton and we have helped to strengthen the existing team, adding three new senior team

members since our investment. Our investment provides the business with fresh capital to enhance and expand its

offering, after a difficult period following the sector’s closure due to Covid-19.

In November, Literacy completed a co-investment acquiring a small minority stake in Cross Rental Services, a provider

of refrigeration & catering and climate control rental equipment. Literacy is a co-investor alongside Elysian Capital, a

mid-market private equity firm, who led the buyout of the business in August. Prior to BOOK’s investment, Cross also

completed the acquisition of All Seasons Hire from HSS Hire Group plc in September.

BOOK’s portfolio companies completed a total of seven bolt-on acquisitions in 2021, across RCI Group, Vanilla

Electronics, Hanmere, EPM and Flight Calibration. These acquisitions are expected to assist the businesses to scale

more quickly, benefiting their customers and adding value to Literacy Capital’s investment.

Realisation Activity

Cash received by Literacy Capital in 2021 increased to £11.8 million, a material uplift to the £6.8 million received in

2020. This significant increase was largely generated by the portfolio without selling assets. Fund distributions rose

materially demonstrating the growing maturity of the 2017/18 fund vintages. This is encouraging, as it signifies the

portfolio companies’ growth and increasing maturity, plus by avoiding asset sales we have not reduced BOOK’s asset

base, which could have reduced the portfolio’s ability to generate gains in the future.

Balance Sheet and Financing

BOOK maintained a cash balance of £5.2 million at the end of 2021 (down from £9.7 million a year earlier). The cash

needs of the Company were managed carefully and comfortably through the period. Cash proceeds broadly matched

cash outflows for investment in the year, as Literacy Capital retains the ability to generate cash from its portfolio

companies. Whilst it is clearly essential to retain sufficient liquidity to meet financial obligations and have the ability

to fund new investment opportunities, having a large cash balance is also not ideal as this would create a drag on

returns for shareholders. Prior to year end the Company closed a £15m Revolving Credit Facility (“RCF”) which

remained undrawn at 31.12.2021. The RCF provides BOOK with additional capital to invest as new, high quality,

opportunities arise.

At the end of 2021, the proportion of net assets invested reached 98%. This has increased over time and compares to

93% on 30 June 2021 and 89% on 31 December 2020.

£m 31 Dec 2021 31 Dec 2020

Investments 163.6 76.7

Cash 5.2 9.7

Donation Provision (2.0) (0.7)

Other working capital (0.6) -

Net assets

166.3

85.6

Undrawn Fund Commitments by Currency Exposure

The table below shows a total of £5.0 million of outstanding obligations to fund commitments on 31 December 2021,

however we do not expect further drawdowns from three of the four funds to which BOOK has commitments. If we

discount these three funds, the total outstanding commitment would fall to £3.4 million (all callable in Euros).

Regardless of whether the full £5.0 million is called or not, BOOK can comfortably fund these drawdowns from existing

cash reserves and headroom in its Revolving Credit Facility.

£m 31 Dec 2021 31 Dec 2020

Sterling £0.3 £0.9

Euro

£3.6 £0.7

US Dollar

£1.1 £1.9

Total outstanding commitments £5.0 £3.5

Foreign currencies were converted to GBP at the prevailing rates on 31 December 2021

The NAV currently excludes deferred tax liabilities shown in the Company’s financial statements, on the basis that these amounts are not expected to become

payable in the future should the Company receive approval of its investment trust status. In the event that the Company does not receive such status, the

deferred tax liabilities will need to be taken into account in calculating the net asset value per ordinary share going forward.

Activity Since the Period End

BOOK received £5.7 million in cash from Grayce in January 2022, following a refinancing and dividend from this

company. Two days later, the Company reinvested £3.5 million of this to acquire additional equity in RCI from minority

shareholders, to increase BOOK’s stake in this business further. Also in January, the Company made a further

investment in TheVeganKind totalling £1.0m. In February 2022, BOOK also made a further investment in Antler Homes,

amounting to £1.7m.

No new investments or other transactions completed in the period since the end of 2021.

Outlook

We are very pleased with the progress made by the portfolio in 2021 and the momentum that they continue to display.

We believe that there continue to be significant opportunities to further improve and add value to these businesses.

We are most pleased with the strength of the teams within the portfolio companies that we have been able to

assemble. We are grateful for their hard work, commitment and talent, which has helped to create opportunities and

growth in many of these businesses across the UK. There is always more work to do but many of these teams are now

extremely strong and well-balanced, positioning these businesses for continued strong performance.

Through our extensive networks, we continue to see a large number of private businesses that are looking for a partner

who can support them in the way that Literacy Capital can. We expect to complete more direct investments in 2022,

helping more businesses to expand, and their employees to thrive and maximise their potential.

We are also proud that our charitable donations in 2021 increased so significantly, expanding the range and size of

charitable activities that we can support. This donation is 0.9% of year-end NAV, so will continue to increase in line

with NAV. We hope that BOOK can make an even more substantial positive impact on disadvantaged children as it

continues to scale.

Charitable Mission

In addition to Literacy Capital plc’s investment objectives and strategy, it also has a charitable mission.

Literacy Capital plc makes an annual donation equivalent to 0.9% of the Company’s net asset value at each year end,

thereby providing consistent, long-term and growing charitable donations as the Company increases in size. In 2021,

the total provision recognised for donations to charities focussing on improving literacy was £1,527k, up from £772k

in 2020. We expect the donations that accrued in 2021 will be paid across 2022 and 2023.

Since the creation of Literacy Capital in 2017, more than £3.4m in total has either been paid or set aside for donation.

The aim is to advance the education of children in the United Kingdom, in particular by promoting or supporting the

development of reading.

Annual charitable donation provision (£k)

2018

£532k

2019 £621k

2020

£772k

2021

£1,527k

Total charitable donation provision £3,452k

A number of charities focused on supporting children have

received donations. The most significant beneficiary of Literacy

Capital’s charitable support to date is Bookmark Reading Charity

(www.bookmarkreading.org

). Bookmark delivers volunteer-led

reading support to primary school children aged 5-9 in

communities across the country, both online and in person. The

charity uses technology to increase its social impact, digitally

matching volunteers with children that are at risk of falling behind

with their reading.

By combining their technology with commercial understanding,

Bookmark aims to tackle the UK literacy problem at scale in an

efficient and cost-effective manner. Having launched in 2018, the charity is in a period of significant growth and

Bookmark volunteers are now supporting children in 160 schools across England. With their scalable model, Bookmark

has ambitious plans to support 25,000 children over the next three years and Literacy Capital is proud to support their

mission.

Another beneficiary is The Children’s Book Project (www.childrensbookproject.co.uk

), which

provides books to children to tackle ‘book poverty’ and to give children the opportunity to learn.

Considerable economic and social barriers mean that book ownership is unachievable for

thousands of children across the country. By the age of 11, children from ‘book poor’ homes

have fallen an average of 12 months behind their peers in terms of their literacy and languages

skills.

The Children’s Book Project seeks to address the disparity in book ownership across the UK. The charity gifts books

directly to children from deprived communities with few or no books of their own and works closely with their schools

and community organisations to put on celebratory book gifting events that support the widest engagement. These

further children’s aspirations, develop literacy skills and help support mental well-being. The organisation wants all

children to see book reading as an activity that they can participate in and in turn, work towards a future where their

outcomes are dictated by their potential, not their socio-economic background.

The ambition is to create communities of engaged,

enthusiastic and ambitious, young book owners with an

equal chance of fulfilling their academic potential to their

peers, married with considerable energy and commitment

of staff in each of the 400+ organisations that CBP

supports. With their help and that of the volunteer base,

CBP’s ambition is to gift 1.5 million books by 2025.

Other charities to benefit include the following:

• Teach First (www.teachfirst.org.uk

) which works to improve the chances of children from a disadvantaged

background achieving good grades and maximising their potential;

• The Magic Breakfast (www.magicbreakfast.com) which aims to end hunger as a barrier to education in UK

schools through providing healthy breakfasts to children living with food insecurity.

Why Literacy?

There are currently 7.1 million adults (or 16.4% of the total adult population) in England that struggle to read and face

challenges daily as a result of this. Every year, it is estimated that 200,000 children leave primary school not meeting

the expected standard in reading

. Following school closures as a result of Covid-19, this problem has worsened and

disadvantaged children are the worst affected. It is now being reported that the pandemic has reversed the past

decade’s progress to narrow the attainment gap

The longer-term consequences of this are hugely damaging, for both the child and for society more widely. For

instance:

• one in six children who do not read well by age 7 will drop out of school, a rate six times higher than proficient

readers

• annually, it costs an average of £40,000 to incarcerate one individual, and approximately 46% of the UK prison

population has literacy skills no higher than those expected from an 11-year-old

• in addition to the financial and social costs of crime and time in prison, the economic cost of low literacy has

been estimated at £36 billion per year to the UK economy

• poor literacy can lead to limited job prospects, poor health, low self-esteem, and even reduced life expectancy;

and

• adults with poor literacy skills are more likely to be unemployed and, as a parent, are less likely to be able to

support their child's learning

It is well-acknowledged that literacy is fundamental to ensuring inclusive and equitable education, and promoting

lifelong learning. When helping someone to develop their literacy skills, it can empower them to access better

opportunities and break the cycle of disadvantage.

Helping children to develop the reading skills they need for a fair chance in life can be done relatively quickly and

inexpensively. It is one of the most cost-effective ways to reduce young offending and raise their potential, delivering

a very high return on this investment in themselves and society.

Department for Education

Education Endowment Foundation

Centre for Education and Youth

National Literacy Trust

World Literacy Foundation

Business model and strategy for achieving objectives

Literacy Capital plc is run by its Board of Directors comprising four independent non-executive Directors and two non-

independent non-executive Directors. Five of the Directors are male and one is female. The Board is responsible for

the overall stewardship of the Company, including investment strategy and corporate governance. Biographies and

roles of the Directors can be found on page 19.

The Directors have a duty to promote success of the Company and to act in the best interests of shareholders. The

Directors believe that the best way to achieve this is to maintain a strong, open and transparent relationship with

Investment Manager, Literacy Capital Asset Management LLP (“LCAM”). LCAM is a Full Scope UK AIFM and was

appointed the Company’s Investment Manager on 1 April 2020. The scope of LCAM’s work was agreed with the

Company’s Directors prior to its appointment.

LCAM will look to identify compelling opportunities for investments in under-served parts of the market. It has and

will continue to seek to invest in UK-based businesses, with a core focus on those generating £1m to £5m EBITDA,

representing an area of the market which LCAM’s management team have significant, relevant expertise and where

the team feel the greatest returns for shareholders can be generated. In turn, these gains will help to deliver

meaningful and increasing annual donations to charities.

Principal business risks and uncertainties

The principal risks and uncertainties with the business are as described below:

Brexit: The impact of Brexit has not had and is not expected to have a material impact on our investment activity nor

the trading activity of the underlying portfolio companies. The portfolio companies are predominantly focused on

offering their services and products to the UK market. Mitigation: Where companies have had any short-term

uncertainty, they have focused on managing cash effectively in order to maintain a strong position in their respective

markets over the long-term.

Covid-19 Coronavirus: Since the start of the pandemic, Covid-19 has adversely impacted global commercial activities.

While Literacy Capital plc was fortunate not to have been adversely affected financially, it clearly had an impact on

operations and working arrangements. Our portfolio companies, given their diverse operations, have also been

impacted in different ways. Having navigated 2020 well, and being securely positioned going into 2021, the portfolio

as a whole performed well throughout the year. Mitigation: The Directors continue to monitor developments relating

to Covid-19 but do not believe there is any financial impact to the Financial Statements as at 31 December 2021 as a

result of this event.

Investment and liquidity: The Company’s investments are in small, unquoted companies, which by their nature entail

a higher level of risk and lower liquidity than investments in large, quoted companies. Mitigation: Risk is limited by

closely monitoring individual holdings. The board reviews the performance of the portfolio on a quarterly basis.

Financial risk: Most of the company’s investments involve a medium to long term commitment and many are relatively

illiquid. There is a risk that the company could run out of available cash reserves. Mitigation: The Company seeks to

ensure the availability of cash reserves to match the forecast cashflow of the Company. The Company is also able to

draw on its £15m committed revolving credit facility, which was undrawn at year end.

Economic risk: Events, such as economic recession, may affect the performance and valuation of portfolio companies

and their ability to access adequate financial resources, as well as affecting the company’s net asset value. A further

way that the portfolio company could be affected is any material change in the amount of private capital looking to

invest in private businesses. Any change is unlikely to have a significant impact on the company, as additional capital

could lead to more competition when sourcing new investments but would also likely invest the value of the existing

portfolio. The same would apply vice versa. Mitigation: The Company invests in a diversified portfolio of investments

spanning various sectors as well as ensuring that the portfolio companies maintain sufficient cash reserves to be able

to support their short to medium term obligations.

Tax risk: It is expected that Literacy Capital plc will be approved as a UK resident investment trust in 2022 enabling the

Company to obtain an exemption from paying tax on its capital profits, amongst other benefits. It is the Company’s

intention to maintain this status indefinitely. However, whilst not expected to occur, if investment trust status were

to be lost or not obtained, the vast majority of BOOK’s capital profits would remain exempt from tax, due to the

Substantial Shareholding Exemption that could automatically be sought on the sale of many of its assets. At the end

of 2021, it is estimated that approximately 78% of the portfolio’s investments by value would be exempt from tax

regardless of maintaining investment trust status.

Climate Change: We have assessed climate-related risks but have determined that climate change is a low risk in the

short term. We are aware that the Government may take action to reduce carbon emissions through the introduction

of further taxes, but the Company is sufficiently solvent to meet these if introduced. Changes in weather conditions

are unlikely to affect the Company. The Investment Manager and the majority of the portfolio companies have

demonstrated that they can operate despite severe disruption and in alternative locations, as demonstrated by Covid-

19 and the associated lockdowns. As an externally managed investment company with no employees, the Company

does not have any greenhouse emissions to report from its operations and therefore is expected to have little climate-

related impact on the environment.

Key performance indicators

Literacy Capital plc takes a long-term view on its investments and the Board assesses its performance against the

following Key Performance Indicators:

• Share price and net asset value per share against the FTSE Investment Company Index and FTSE All-Share Index,

details of which are shown under Performance Highlights on page 1.

• The portfolio return of the period, details of which are shown on page 1.

Going Concern

The Board has assessed the financial position and prospects of the Company over the next 12 months, whilst

considering the additional risks and uncertainties caused by continuing Covid-19 pandemic.

On 31 December 2021 Literacy Capital plc had cash reserves of £5.2 million (2020: £9.7 million), as well as access to a

£15 million revolving credit facility (“RCF”), committed by Investec Bank plc until the end of 2024. The total cash

available to the Company is far in excess of its operating costs for the foreseeable future (including both its charitable

donations and any Investment Management fees), plus any commitments to the portfolio or fund commitments. The

provision relating to outstanding donations to be paid is £2.0 million.

The only material obligations that BOOK has relate to undrawn amounts to its four fund commitments, amounting to

£5.0m. However, £1.6 million of this amount, relates to three funds whose investment periods have expired or where

their managers have since raised successor funds. As a result, BOOK has just one fund commitment where further

drawdowns are expected. This fund is highly unlikely to draw 100% of BOOK’s committed amount and is expected to

draw capital once per year in December, giving BOOK good visibility over the timing and quantum of future capital

calls. Several of BOOK’s portfolio companies are highly profitable and cash generative, so it has the ability to generate

further cash from the portfolio to build its cash reserves in due course if this is required by the Company.

The Directors do not believe there are any significant risks and uncertainties likely to impact the ability of the Company

to continue in business and believe that it has adequate resources to operate for at least twelve months from the date

of approval of the financial statements, and so for this reason, the Company continues to adopt the going concern

basis in preparing the accounts.

Viability Statement

In accordance with the Companies Act 2006, the Board has considered the viability of Literacy Capital plc over a greater

period than the 12 months required by the ‘going concern’ basis of accounting.

The Board considers the Company, as a permanent capital vehicle, to be a long term investment company but, for the

purposes of this viability statement, has decided that a period of five years is an appropriate period over which to

report. The Board considers this a period where it can reasonably assess the Company’s prospects, without the

additional uncertainties of looking out further into the future.

The Board has carried out a thorough assessment of the Principal Business Risks and Uncertainties facing the Company,

noted above in the Strategic Report, including those that would threaten its business model and future performance.

Based on the results of the assessment, the Directors expect that the company will be able to continue its operations

and meet its financial liabilities over a five year period from the date of signing of these accounts.

Environmental, Human Rights, Employee, Social and Community Issues

The Board recognises its requirement under the Companies Act 2006 to detail information surrounding environmental,

human rights, employee, social and community matters, including the Company’s policies and their effectiveness.

However, as Literacy Capital plc has no employees and all of its functions are delegated to third-party services

providers, these requirements do not apply to the Company and so the Company has not reported further in respect

of this requirement, or in regards to the Modern Slavery Act 2015.

Section 172 and stakeholder reporting

Under section 172 of the Companies Act 2006 (the “CA 2006”), the Directors have a duty to promote the success of

the company for the benefit of Shareholders as a whole. In doing so, the Directors have regard to matters set out in

section 172(1) of the CA 2006 as follows:

Stakeholder

Benefits of Engagement with Stakeholders

How the Board of Directors and Investment

Manager have engaged with the Stakeholder

Investors

Communicating regularly and clearly on the

Company’s performance can help to keep the

share price premium or discount narrow, which is

a benefit to shareholders.

The Board places a high degree of importance

on engagement with

existing and potential

shareholders and treating all individuals fairly.

The Company produces a quarterly factsheet

swiftly

to provide relevant information on a

timely basis. The emphasis is on publishing net

asset value performance and portfolio

updates. Information is made public

simultaneously

for all readers via the

company’s website and RNS announcements.

The Investment Manager has a share dealing

policy in place to prevent insiders trading on

information.

The Company has provisions to assess fairness

of director salaries to avoid the directors

favouring themselves at the expense of

external shareholders.

Following a review of the impact on investors,

it is the intention of the Company to apply for

Investment Trust status in 2022. One benefit of

gaining the status is that it allows the Company

to obtain an exemption from paying tax on its

capital profits, therefore reducing the

Company’s expenses, which is an advantage

for investors.

Service

Providers

The Company has engaged with several service

providers to fulfil operational

or financial

reporting matters. The Investment Manager

ensures that

work is completed in line with

agreements to ensure that

the Company’s

ongoing obligations are met.

The Investment Manager is in regular

correspondence

with the Company’s third

party service providers

and will periodically

discuss business development updates or

working efficiencies.

The Company’s Management Engagement

Committee reviews the work, actions and

judgements

of the Investment Manager at

least annually. The Board consider

s the

Investment Manager

to be the Company’s

most important service provider.

Portfolio

Companies

By gaining a better understanding of the

performance of the portfolio companies and the

factors that may increase performance, areas

where the Investment M

anager can assist are

easily identified, as well as helping to identify and

mitigate potential risks to the businesses.

The Investment Manager engages regularly

with the portfolio companies and, typically on

a monthly basis,

receives detailed

management accounts and board packs, which

the Company’s

Board reviews once per

quarter. There

have been several instances

where the Investment Manager has identified

skills gaps within senior management teams of

portfolio companies and has assisted in finding

suitable individuals fill the roles.

Literacy

Charities

The Company is committed to donating 0.9% of its

net assets at year end to literacy charities in the

UK (see page 13). By supporting the charities and

working alongside them, the Company can ensure

that the donations are being used as efficiently as

possible.

Applications for funding can be made through

the Company’s website, which are then

reviewed by the Investment Manager. Prior to

any donations being made, KPIs are typically

agreed with the charity,

which are then

reviewed by the Investment Manager on an

ongoing basis.

The Strategic Report has been approved by the Board and signed on its behalf by:

Paul Pindar

Chairman

On behalf of the Board of Directors

11 March 2022

Board of Directors

Paul Pindar

Non-executive Chairman of Literacy Capital plc and Chairman of Literacy Capital Asset Management LLP

Paul formerly served as CEO of Capita, which he co-founded in 1987 and grew from 33 people to 62,000 by his

retirement in February 2014. Then, it had an enterprise value of £8.5 billion and was the 52

most valuable listed UK

company. He is also a founder investor and non-executive Chairman of Purplebricks, the UK’s largest online estate

agency. Within three years, the business started trading, expanded internationally and completed an IPO on AIM. Paul

has served as Chairman of four other VC and PE-backed businesses since 2014.

Paul is a member of the Company’s Audit Committee. As Chairman of the Investment Manager, Literacy Capital Asset

Management LLP, Paul’s role is focused on the Company and assisting its portfolio companies maximise their potential,

whilst also assessing new investment opportunities. Paul is not deemed to be an independent director.

Richard Pindar

Non-executive Director of Literacy Capital plc and CEO of Literacy Capital Asset Management LLP

Richard is ACA qualified with the ICAEW and has a background in investing, private equity and acting as a consultant

to private equity owned businesses. He previously worked at Lonsdale Capital Partners, a lower midmarket private

equity firm, and started his career in Transaction Services and M&A Corporate Finance at KPMG.

Richard is a member of the Company’s Audit Committee. As CEO of the Investment Manager, Literacy Capital Asset

Management LLP, Richard’s role is focused on the Company and assisting its portfolio companies maximise their

potential, whilst also assessing new investment opportunities. Richard is not deemed to be an independent director.

Simon Downing

Independent Non-Executive Director of Literacy Capital plc

Simon is the founder and Executive Chairman of Civica, which he created in 2000 with backing from Alchemy Partners.

Since then, the business has grown to over 5,000 employees and operates in ten countries. It is one of the largest

specialist software companies in Europe and is valued at more than £1 billion following its most recent private equity

transaction led by Partners Group. He has been Chairman of four other private IT services businesses in the past six

years and is current Chairman of Audiotonix Limited and Senior Non-Executive Director at Purplebricks Group plc. He

was previously a Senior Adviser to OMERS Private Equity, which has more than $12 billion of private equity assets

under management.

Simon is the Chair of the Company’s Management Engagement Committee and is a member of the Audit Committee.

Kevin Dady

Independent Non-Executive Director of Literacy Capital plc

Kevin was formerly CEO and is currently Executive Chairman of IRIS, a large software business majority owned by

HgCapital, since December 2015. IRIS has grown significantly during his tenure and he recently took it through a £1.3

billion private equity buyout. He was formerly Managing Director of the Professional Services division of Capita where,

in nine years, he grew EBITDA from £50 million to £150 million.

Kevin is a member of the Company’s Management Engagement Committee and the Audit Committee.

Christopher Sellers

Independent Non-Executive Director of Literacy Capital plc

Chris is currently Group CEO of RCI Health Group and Chairman of Grayce which are both Literacy Capital plc portfolio

companies. He formerly spent 12 years at Capita plc before leaving in January 2018 which included being a member

of the Group Board as Head of Business Development as well as six years as Executive Sales Director. Prior to joining

Capita he spent 14 years as a consultant, Business Development Director and Managing Director, having originally

trained as an engineer with Shell.

Chris is a member of the Company’s Management Engagement Committee and Audit Committee.

Rachel Murphy

Independent Non-Executive Director of Literacy Capital plc

Rachel is the founding Director of RJM Consulting, which works with public and private companies, providing

consultancy services, corporate finance advice and coaching to board level executives. Previously, she was a member

of the investment team at the private equity firm Alchemy Partners for six years. She has also been a non-executive of

several private equity owned businesses and held finance roles at Diageo and Shell.

Rachel is the Chair of the Company’s Audit Committee and is a member of the Management Engagement Committee.

Corporate Governance

Introduction from the Chairman

I am pleased to introduce this year’s Corporate Governance Statement. In this statement the Company reports on its

compliance with the AIC’s Code of Corporate Governance (the “AIC Code”) and sets out how the Board has operated

during the past year. The Board of Directors is accountable to shareholders for the governance of Literacy Capital plc

and is committed to maintaining the highest standard of corporate governance for the long-term success of the

Company.

Compliance with the AIC’s Code of Corporate Governance

The Board has considered the Principles and Provisions of the AIC’s Code of Corporate Governance. The AIC Code

adapts the Principles set out in the UK Corporate Governance Code issued by the Financial Reporting Council (the ‘‘UK

Code’’) to make them more relevant for investment companies, as well as setting out additional principles and

recommendations which are better tailored to investment companies.

The Board of Directors considers that reporting against the AIC Code provides more suitable information to

shareholders than if it had adopted the UK Code. A copy of the AIC Code can be obtained from the AIC’s website

(www.theaic.co.uk). It includes an explanation of how the AIC Code adapts the principles and provisions set out in the

UK Code to make them relevant for investment companies. It is also worth noting that as the Company is listed on the

Specialist Fund Segment it does not have the same corporate governance requirements as companies with a premium

listing.

The Company complied throughout the year, and continues to comply with the Principles and Provisions of the AIC

Code, except as set out below;

• Provisions 11 and 12: The Board does not consider it necessary for the Chair to be independent. The Chair has

significant relevant experience to carry out the role, and as the largest shareholder of the Company, is aligned with

the Board and shareholders as a whole to act in the best interests of the Company. The Management Engagement

Committee, comprised of the four independent Directors, has been established to review the performance of the

Company’s Investment Manager and will continue to take into account the Chair’s non-independence.

• Provision 14: Due to the size of the Company and its Board, it is not considered necessary for a senior independent

Director to be appointed, as it operates in union. If a shareholder expresses dissatisfaction with the Chair’s

behaviour or performance, the independent non-executive Directors will meet without the Chair present.

• Provision 22 and 28: The Board has not established a separate Nomination Committee due to the size of the

Company. All Directors are involved in the appointment of new members save for when the appointment of a new

Chair is discussed, where the existing Chair would not be involved.

• Provision 24: The Board has chosen not to adopt a policy on tenure of the Chair. The Board recognises the value

of refreshing its membership regularly but prefers to retain flexibility to assess the balance of skill and experience

of the Board as a whole. Given that the Chair was one of the founders of the Company, his significant shareholding

and his contribution to adding value to its portfolio, it is not considered appropriate by the Board to limit his

tenure. The Directors believe that this policy is in line with their responsibility to act in the interests of protecting

and creating long-term shareholder value, as well as corporate governance guidelines applicable to companies

listed on the Specialist Fund Segment.

• Provision 26 and 27: Given the experience of the Directors as a collective, combined with the minimal complexity

of the Company’s business, size and recent listing, a regular internal and external evaluation of the Board’s

performance is not considered necessary at this time. There has been no internal or external evaluation of the

Board to date.

• Provision 29: The Audit Committee is not fully independent as the two Non-Independent Directors also sit on the

Committee, which the Company considers appropriate given the size and nature of the business, as well as their

knowledge of the Company.

The Board

The Board’s principal task is to maintain effective stewardship of the Company’s affairs and be collectively responsible

for the long-term success of the Company, generating continued value for shareholders.

The Company has four scheduled Board meetings a year with additional meetings arranged as necessary. For each

meeting, the Directors follow a formal agenda circulated by the Company Secretary in advance. In addition, the

Investment Manager provides financial information and other relevant information, and the Company’s depositary,

INDOS Financial, provides its quarterly report.

At each of the four scheduled Board meetings, members of the Investment Manager are in attendance to present the

financial information and other reports relating to both the Company and the portfolio, to the Directors, as well as to

address any queries.

The Board and the Investment Manager operate in a supportive and open environment, and ad hoc communication

between the two parties is maintained between meetings.

The following table sets out how many of the four scheduled 2021 board meetings the Directors attended;

Director

Scheduled meetings attended

Paul Pindar

Richard Pindar

Simon Downing

Kevin Dady

Christopher Sellers

Rachel Murphy

Richard Pindar and Rachel Murphy were appointed Directors in March and April 2021 respectively, after the first scheduled board meeting had taken place.

Richard attended the first board meeting in 2021 in his capacity as CEO of the Investment Manager, prior to being re-appointed as a Director. Richard was previously

a Director from September 2017 to March 2020.

Internal control and risk management

The Company’s internal control systems ensure that accurate and reliable financial reporting is produced and

maintained. Key controls include clearly defined lines of accountability and delegation of authority, as well as policies

and procedures that cover financial reporting.

A risk matrix has been produced containing the risks identified and the controls in place to monitor them. The risks

are assessed on the likelihood of them happening, the impact on the business if they were to occur and the

effectiveness of controls in place. The principal risks that have been identified are set out on page 15.

The Board reviews financial information produced by the Investment Manager on at least a quarterly basis. Some

functions are delegated to third parties, but the Investment Manager and Directors receive assurances from the

suppliers regarding their internal controls and systems.

Board Committees

Audit Committee: Please see below on this page for the Report of the Audit Committee.

Management Engagement Committee: Comprised of the four independent Directors and chaired by Simon Downing,

the Committee meets at least one a year for the purpose of reviewing the actions and judgements of the Investment

Manager, as well as monitoring and reviewing the performance of the Company’s other services providers. The

Committee will also consider annually if any changes are needed to the Investment Management Agreement.

Remuneration Committee: As all Directors are non-executive, and owing to the relatively small size of Literacy Capital

plc, the Company does not have a Remuneration Committee. Please see page 26 for the Directors’ Remuneration

Report.

Nominations Committee: Due to the size of the Company, the Directors deemed it not necessary to form a separate

Nominations Committee. All Directors are involved in the appointment new members to the Board. When making an

appointment, the Board considers the existing composition of the Board to determine areas which require

strengthening.

Conflicts of Interest

It is the responsibility of each individual Director to avoid a conflict of interest situation arising. Any conflicts arising

must be reported to the Board and are then considered by the other Directors, and if necessary, approved or not

approved. A conflicted Director is not allowed to take part in any relevant discussions or decisions and is not counted

when determining whether a meeting is quorate.

Paul Pindar and Richard Pindar are both Directors of Literacy Capital plc, as well as being Designated Members of the

Investment Manager, which can lead to conflicts of interest. However, given their significant shareholdings in the

Company, it is not expected that any material or real conflict of interest shall arise, as their priority and financial

incentivise shall remain to preserve and create value for the Company’s shareholders. If any changes are required to

the Investment Management Agreement with the Investment Manager, these will be voted on by the Independent

Directors of the Company only.

Company Secretary

Literacy Capital Asset Management LLP, as Company Secretary, is responsible for ensuring that Board and Committee

procedures are followed, that applicable regulations are complied with and any relevant filings are made.

Report of the Audit Committee

Audit Committee

The Audit Committee is comprised of all Directors, with Rachel Murphy acting as Chair. The experience and biographies

of the Directors is set out under the Board of Directors section on page 19. The Committee operates within written

terms of reference which clearly set out its authority and duty.

The principal roles and responsibilities of the Audit Committee are as follows;

• to monitor in discussion with the auditors the integrity of the financial statements of the company, and any formal

announcements relating to the company’s financial performance, reviewing significant financial reporting

judgements contained in them;

• to review the company’s internal financial controls and, unless expressly addressed by a separate board risk

committee composed of independent Directors, or by the board itself, to review the company’s internal control

and risk management systems;

• to consider annually whether there is a need for an internal audit function and make a recommendation to the

board;

• to make recommendations to the board, for it to put to the shareholders for their approval in general meeting, in

relation to the appointment, re-appointment and removal of the external auditor and to approve the

remuneration and terms of engagement of the external auditor;

• to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit

process, taking into consideration relevant UK professional and regulatory requirements;

• to develop and implement policy on the engagement of the external auditor to supply non-audit services, taking

into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm; and

to report to the board, identifying any matters in respect of which it considers that action or improvement is

needed and making recommendations as to the steps to be taken;

• to review arrangements by which Directors of the company or its key service providers may, in confidence, raise

concerns about possible improprieties in matters of financial reporting or other matters and ensure that

arrangements are in place for the proportionate and independent investigation to such matters with appropriate

follow-up action.

The Committee meets at least twice each year, to review drafts of the Annual and Interim Reports and Financial

Statements. Only members of the Committee have the right to attend Committee meetings. However, representatives

from the Independent Auditor, Investment Manager and Administrator may be invited to attend all or any part of any

meeting as and when appropriate and necessary. In addition, the Chair meets with the Independent Auditor twice a

year, during the planning stage of the audit as well as during the completion phase.

Audit

The Audit Committee is responsible for overseeing the relationship with the external Auditor, including approval of

their terms of engagement, assessing their independence and objectivity and overall effectiveness of the audit

process.

Mazars LLP has been the Company’s Auditor since 2019. The Audit Committee reviews their performance annually by

considering a range of factors, including quality of work and independence. The Audit Engagement Partner rotates

every five years in accordance with ethical guidelines and 2021 is the third year for the current partner. The Board has

responsibility for agreeing the audit fees with the Auditor.

No significant issues were reported by the Audit Committee in the year.

Risk Management and Internal Controls

The Board is responsible for the Company’s risk management and internal controls. The Audit Committee has

considered the need for an internal audit function, but due to the size and complexity of the Company, does not deem

this necessary at present.

The Company engages a wide range of third-party service providers. The Management Engagement Committee

monitors the performance of all key service providers, including giving consideration to their internal controls. No

significant control issues have been identified by the Company.

Voting Rights

All ordinary shares have the same voting rights, preferences and no restrictions on the distribution of dividends and

the repayment of capital. Further information is set out in the Share Capital section within the Directors’ Report on

page 30.

Directors’ Remuneration Report

As the majority of Directors are non-executive, the Company does not have a Remuneration Committee. The

determination of the Directors’ fees is dealt with by the whole Board.

Directors’ Remuneration and Interests

The four Independent Directors all receive fixed salaries. As Paul Pindar and Richard Pindar are both non-independent

Directors of the Company and Members of the Investment Manager, it has been agreed that neither will receive any

remuneration from the Company.

The remuneration paid to the Directors during the year to 31 December 2021, along with each of their shareholdings

in the Company at 31 December 2021, is set out in the table below:

Director

Gross Salary

(1 January –

30 June 2021)

Gross Salary

(1 July –

31 December 2021)

Company

Pension

Contributions

Ordinary Shares held

in the Company at

31 December 2021

Ordinary Shares

held in the Company

at 10 March 2022

Paul Pindar & spouse

17,000,000

Richard Pindar

6,425,000

Simon Downing

£5,000

£12,000

3,250,000

Kevin Dady

£5,000

£12,000

688,679

Christopher Sellers

£5,000

£12,000

235,000

310,000

Rachel Murphy

£6,000

£12,000

£267

62,500

The remuneration paid to the Directors during the prior year to 31 December 2020, along with each of their

shareholdings in the Company at 31 December 2020, is set out in the table below:

Director

Gross Salary (1 January

– 31 December 2020)

Company Pension

Contributions

Ordinary Shares held

in the Company

Paul Pindar & spouse

14,437,500

Richard Pindar

£31,250

3,587,500

Simon Downing

£10,000

3,000,000

Kevin Dady

£10,000

438,679

Christopher Sellers

£10,000

100,000

1.This salary represents Richard’s Pindar remuneration as an employee of the Company from 1 January 2020 to 31 March 2020. On 1 April 2020 the management

of the Company was assigned to Literacy Capital Asset Management LLP, at which point Richard ceased to be an employee of the Company.

Simon Downing, Kevin Dady and Christopher Sellers were all appointed as Directors prior to 1 January 2021. Richard

Pindar and Rachel Murphy were appointed on 19 March 2021 and 1 April 2021 respectively.

The salaries of the non-executive Directors increased from 1 July 2021, following the listing of Literacy Capital plc, from

£10,000 to £24,000 per annum. Rachel Murphy was appointed on 1 April but her salary was £24,000 from her date of

appointment, meaning the four non-executive Directors were paid different amounts in Q1 2021, prior to the

successful introduction of Literacy Capital plc to the Specialist Fund Segment.

From 1 July 2021, Simon Downing, Kevin Dady, Christopher Sellers and Rachel Murphy’s remuneration was the same

as one another and their remuneration will be unchanged in 2022.

Directors’ Remuneration Policy

The Board’s policy (which will be put to shareholders for approval at the Company’s annual general meeting) is that

fees should be sufficient to attract and retain Directors capable of managing the Company and enhancing shareholder

value. Remuneration is benchmarked in line with market practice and takes into account the experience of the

Directors as well as the time required to undertake the role. It is not the Company’s policy to include an element of

performance related pay; all fees are paid in cash rather than any other instrument. The Board has reviewed the policy

for the year ahead and has concluded that key features of the policy remain appropriate.

Non-Executive Directors may accept appointments as Directors of other companies and retain any fees paid to them,

although the Directors are required to notify the Company where any conflicts arise.

Independent Non-Executive Directors do not have service contracts but on being appointed are provided with a letter

of appointment containing a notice period of three months which the Board considers appropriate based on the size

and nature of the Company.

There were no Non-Executive Directors who left the Company during the year ended 31.12.2021 and therefore no

payments in respect of compensation for the loss of office were paid or payable to any Director (2020: Nil). Any loss

of office payment will be approved by the Board. Any payment will be made on a discretionary and case-by-case basis.

Any payments made beyond contractual and statutory obligations would be exceptional in nature due to additional

obligations taken on by the departing Non-Executive Director and always benchmarked against market practice.

Annual Report on Remuneration

Following a review of the level of Director’s fees for the forthcoming year the Board concluded that the amount should

remain unchanged at £24,000 for each of the Non-Executive Directors. The Directors’ remuneration will be reviewed

by the Board on an annual basis.

Company Performance

The graph below compares the Company’s share price return since Admission to the London Stock Exchange on 25

June 2021, compared to the total shareholder return on a notional investment in the FTSE All-Share Closed End

Investment Index. This index represents a comparable broad equity market index and is the Company’s comparator,

as explained within the ‘Performance Comparison’ section on page 3. An explanation of the performance of the

Company for the year ended 31 December 2021 is given in the Chairman’s Statement and Investment Manager’s

Report from page 4.

100

120

140

160

180

200

Total Return

Share Price Total Return since 25 June 2021

BOOK FTSE All-Share Closed End Investment Trust

Investor Relations

The Company’s Annual Report and Financial Statements as well as the Interim Report and Financial Statements contain

a detailed review of Literacy Capital plc’s performance and changes to the portfolio.

The quarterly factsheets, published typically on the final Thursday of January, April, July and October, contain updated

information in a more summarised form, are available on the Company’s website (www.literacycapital.com).

The Company’s Directors are available to speak with shareholders. They can be contacted via the registered office of

the Company (see Corporate Information section on page 67).

Directors’ Report

Status of the company

Literacy Capital plc is an investment company as defined by section 833 of the Companies Act 2006 and is registered

and domiciled in England (number 10976145).

Reporting Period

This Annual Report has been prepared for the year to 31 December 2021.

Results and Dividends

Profit for the year, after taxation, amounted to £78.9m (2020: £16.7m). No dividend is recommended to be paid in

respect of the year ended 31 December 2021. During the year, the total donation expenses incurred for charitable

causes amounted to £1,526,943 (2020: £771,740). Additional funds have been set aside in the year for donation, as

described below within the ‘Charitable causes’ section.

Dividend Policy

The Directors intend to manage the Company’s affairs to achieve Shareholder returns through capital growth rather

than income. Therefore, it should not be expected that the Company will pay dividends to Shareholders in the ordinary

course, although the Company retains the right to pay dividends at the discretion of Directors.

If the Company obtains Investment Trust status as planned in 2022, it will be required to distribute 85% of its net

income annually, which may lead to dividends being paid in future periods.

Corporate Governance

The Corporate Governance Report, which forms part of the Director’s Report, is set out on page 21.

Stakeholder Engagement

Under Section 172 of the Companies Act 2006, Directors are required to act in good faith and in a way most likely to

promote the success of the Company. The Company’s key stakeholder groups, and how the Company engages with

them is set out within the Strategic report on page 17.

Streamlined Energy and Carbon Reporting

As an externally managed investment company with no employees, which seeks to invest in UK-based businesses the

Company does not have any greenhouse emissions to report from its operations nor does it have the responsibility for

any other emission producing sources under the Companies Act 2006 (Strategic Report and Directors’ Report)

Regulations 2013, including those within the Company’s underlying investment portfolio. As the Company did not

consumer more than 40,000 kWh of energy during the past year, it qualifies as a low energy user and is exempt from

reporting under the Streamlined Energy and Carbon Reporting regulations.

Diversity and Inclusion

The Company recognises the benefits that diversity can bring to the Board, and places great importance on ensuring

that Board membership reflects this. The Board believes that a range of experience, age, background and skills helps

to create an environment of effective and successful decision making.

The Company does not employ any staff and so has therefore deemed that a diversity policy is not necessary.

Investment Manager

Literacy Capital Asset Management LLP (”LCAM” or the ”Investment Manager”) is the manager of the Company. LCAM

is authorised as an Alternative Investment Fund Manager and is regulated by the Financial Conduct Authority. The

Investment Manager provides Investment management, company secretarial and general administrative services to

the Company under a management agreement.

The management fee charged for the year was 0.9% of the Company’s net assets at year end. Further information

around cost disclosures can be found in the Company’s Key Information Document on the ‘Reports and Results’ section

of the Company’s website.

The Management Engagement Committee meets to review the activities and performance of the Investment Manager

on at least an annual basis. The Board reviews the Company’s investment record over the short and long-term periods,

taking into account factors including the Net Asset Value per share and the share price. The Board also considers the

performance of the manager in carrying out its company secretarial and general administrative functions.

Based on this review of the Manager’s performance and noting also the distinct and differentiated investment

approach of the Manager, the Management Engagement Committee has concluded that the continuing appointment

of the investment manager on the terms agreed is in the interests of its shareholders as a whole.

Charitable Causes

Literacy Capital plc has a unique charitable mission. More than one in four children in England leave primary school

unable to read well, which results in adverse, long-term consequences for the child and society. The Company aims to

assist in the education of children in the UK, in particular by promoting and supporting the development of literacy.

The Company makes and will continue to make an annual donation equating to 0.9 per cent of the Company’s Net

Asset Value at year end to charities, thereby providing consistent, long-term charitable donations. The amount

reserved for donation for the year ending 31.12.2021 is £1.53m. The Company has donated or reserved for donation

more than £3.4m as at the end of 2021.

The Directors believe that the commercial knowledge and experience the Investment Manager has in backing small

companies and supporting their growth, enables the Company and the charities it supports to make a significant social

impact in an efficient and cost-effective way.

Share Capital

At 31 December 2021, 60,000,000 ordinary shares of £0.001 each were in issue and fully paid. All ordinary shares have

the same voting rights, preferences and no restrictions on the distribution of dividends and the repayment of capital.

49,950,000 deferred shares amounting to £49,950 were outstanding at 31 December 2021. All deferred shares have

no voting rights, and are not entitled to the distribution of dividends and the repayment of capital.

The rights attached to the shares are set out in the Articles of the Company. There are no restrictions on the transfer

of ordinary shares or special controls rights in relation to the Company’s shares. The Company is not aware of any

agreements between holders of securities that may result in restrictions on the transfer of securities or on voting

rights.

In accordance with the Market Abuse Regulation, Directors and Members of the Investment Manager are required to

seek approval before dealing in the Company’s shares.

Warrants to subscribe for ordinary shares in Literacy Capital plc have been issued to certain Members of the

Investment Manager. Paul Pindar and Richard Pindar, the only individuals to be both Directors of the Company and

Members of the Investment Manager, have not been and will not be allocated any Warrants.

The Warrants are designed to provide long-term incentivisation for Members of the Investment Manager. The terms

of the Warrants state that they give right to be exercised into Ordinary Shares in a time period between the third and

tenth anniversaries of their respective issue date.

As at 31.12.2021, 302,500 warrants were in issue, which will all vest at certain points in 2024. 250,000 were issued

with an exercise price of 160p, with the remaining 52,500 issued with an exercise price of 286p.

Subsequent Events

BOOK received £5.7 million in cash from Grayce in January 2022, following a refinancing and dividend from this

company. Two days later, the Company reinvested £3.5 million of this to acquire additional equity in RCI from minority

shareholders, to increase BOOK’s stake in this business further. Also in January, the Company made a further

investment in TheVeganKind totalling £1.0m. In February 2022, BOOK also made a further investment in Antler Homes,

amounting to £1.7m.

No new investments or other transactions completed in the period since the end of 2021.

Composition of the Board

The Board currently comprises four independent non-executive Directors, and two non-independent, non-executive

Directors. Paul Pindar is Chair of the Board, Rachel Murphy is Chair of the Audit Committee and Simon Downing is

Chair of the Management Engagement Committee. Five of the Directors are male and one is female. The Company

holds a Directors and Officers indemnity insurance policy for the benefit of all Directors.

Disclosure of Information to Auditors

Each of the persons who are Directors at the time when this Directors' report is approved has confirmed that: so far

as the Director is aware, there is no relevant audit information of which the Company's auditors are unaware, and the

Directors have taken all the steps that ought to have been taken as a Director in order to be aware of any relevant

audit information and to establish that the company's auditors are aware of that information.

Information Disclosed in the Strategic Report

In accordance with section 414C(11) the Company has chosen to set out in the Company’s strategic report information

required to be contained in the Directors’ report in relation to risk management and future developments of the

Company. This information is set out within the Strategic Report from page 3.

Related Party Transactions

Details in respect of the Company's related party transactions during the period are included in note 22 to the financial

statements.

This report was approved by the Board and signed on its behalf by:

Paul Pindar

Chairman

On behalf of the Board of Directors

11 March 2022

Directors' Responsibility Statement

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with

applicable law and regulation.

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 UK-adopted international accounting standards.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a

true and fair view of the state of affairs of the Company and of the profit or loss of the company for that period. In

preparing the financial statements, the Directors are required to:

• Select suitable accounting policies and then apply them consistently;

• Make judgements and estimates that are reasonable and prudent;

• State whether they have been prepared in accordance with International Accounting Standards in conformity with

the requirements of the Companies Act 2006, subject to any material departures disclosed and explained in the

financial statements;

• Assess the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going

concern; and

• Use the going concern basis of accounting unless they either intend to liquidate the company or to cease

operations or have no realistic alternative but to do so.

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 responsible for

such internal control as they determine is necessary to enable the preparation of financial statements that are free

from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as

are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other

irregularities.

Paul Pindar

Chairman

On behalf of the Board of Directors

11 March 2022

Independent Auditors Report to the Members of Literacy Capital plc

Opinion

We have audited the financial statements of Literacy Capital plc (the ‘company’) for the year ended 31 December 2021

which comprise the Statement of comprehensive income, the Statement of financial position, the Statement of

changes in equity, the Statement of cash flows, and 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 UK-adopted

international accounting standards and as applied in accordance with the provisions of the Companies Act 2006.

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 company’s profit

for the year then ended;

• have been properly prepared in accordance with UK-adopted international accounting standards; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

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 are 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 entities and public interest entities and we have fulfilled our other ethical responsibilities in

accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our opinion.

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 audit procedures to evaluate the directors’ assessment of the company's ability to continue to adopt the going

concern basis of accounting included but were not limited to:

• Undertaking an initial assessment at the planning stage of the audit to identify events or conditions that may cast

significant doubt on the company’s ability to continue as a going concern;

• Making enquiries of the directors to understand the period of assessment considered by them, the assumptions

they considered and the implication of those when assessing the company’s future financial performance;

• Challenging the appropriateness of the directors’ key assumptions in their cash flow forecasts, as described, by

reviewing supporting and contradictory evidence in relation to these key assumptions;

• Evaluating the appropriateness of the directors’ disclosures in the financial statements on going concern.

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.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant

sections of this report.

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) 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.

We summarise below the key audit matter in forming our opinion above, together with an overview of the principal

audit procedures performed to address this matter and our key observations arising from those procedures.

This matter, together with our findings, were communicated to those charged with governance through our Audit

Completion Report.

Key Audit Matter How our scope addressed this matter

Valuation of the investments portfolio

Please refer to note 5.1 “Critical judgements in

applying the Company’s accounting policies”

and note 12 “Financial instruments” in the

financial statements for details of critical

judgements and estimates in valuation of the

investments. Also refer to the accounting policy

for the valuation of investments described in

note 3.4 (“Measurement”).

The company has a significant portfolio of

investments totalling £163.6m as of 31

December 2021. These are measured at fair

value, which is determined in accordance with

IFRS 13, Fair Value Measurement and the

International Private Equity and Venture Capital

Valuation Guidelines by using measurements of

value such as price of recent transactions

subsequently calibrated, earnings multiples and

net assets. Therefore, t

he valuation

methodologies incorporate a significant level of

judgement to ascertain fair value under each

method.

There is therefore a risk that inappropriate

judgements made under each methodology

may lead to a material misstatement of the

investment values.

Our audit procedures included, but were not limited to:

•

Understanding and evaluating management’s process and

controls around investment recording and valuation ;

• We engaged our internal valuation experts to perform below

procedures:

considering whether the techniques and

methodologies applied for valuing investments were

in accordance with published guidance, principally

the requirements of IFRS 13, Fair Value Measurement

and the International Private Equity and Venture

Capital Valuation Guidelines. This included reviewing

and challenging the principles and assumptions used

in the valuation of investments under each

methodology;

o For investments valued on an earnings multiples basis

performing a review of the EBITDA multiples used and

assess whether the multiples applied by management

are within a reasonable ran

ge of fair value in

comparison to market transactions;

o For investments valued using the recent transaction

method, obtaining an understanding of the

circumstances surrounding the transaction and

whether it was considered to be carried out on an

arms-length basis and therefore suitable as an input

to the valuation; and

We therefore identified valuation of

investments as a key audit matter as it had a

significant effect on our overall audit strategy

and allocation of resources.

o For fund investments valued by third party fund

managers considering the appropriateness of the

methodology used and confirmed net asset value to

third party confirmations.

• For all investments we obtained direct confirmations from

investee companies and third party fund managers, as

appropriate, and verified the accuracy and completeness of

source data used in management’s valuation calculations and

reviewed the valuation model for mathematical accuracy.

•

We reviewed subsequent events for any information that

could impact the valuations as at the year-end

•

We have reviewed the reasonableness of disclosures of

investments in accordance with relevant accounting

standards, including considerations of the potential effect of

changing one or more inputs to reasonably possible

alternative valuation assumptions, including within the

sensitivity disclosures prepared by the entity.

Our observations

Based on the work performed and evidence obtained, we found

that the valuation of investments portfolio as at 31 December

2021 to be reasonable and performed in accordance with the

guidelines stated above.

Our Application of Materiality and an Overview of the Scope of the Audit

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for

materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the

nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and

in evaluating the effect of misstatements, both individually and on the financial statements as a whole. Based on our

professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall materiality £1,658,384

How we determined it Approximately 1% net assets

Rationale for benchmark applied

Net assets have been identified as the principal benchmark within the

financial statements as it is considered to be the focus of the shareholders.

1% of net assets has been chosen to reflect the level of understanding of the

stakeholders of the company in

relation to the inherent uncertainties

around accounting estimates and judgments, principally in relation to

investment valuation.

Performance materiality

Performance materiality is set to reduce to an appropriately low level the

probability that the ag

gregate of uncorrected and undetected

misstatements in the financial statements exceeds materiality for the

financial statements as a whole.

On the basis of our risk assessments, together with our assessment of the

overall control environment, our judgment was that we set performance

materiality at £1,160,869.

Reporting threshold We agreed with the directors that we would report to them misstatements

identified during our audit above £49,752 as well as misstatements below

that amount that, in our view, warranted reporting for qualitative reasons.

As part of designing our audit, we assessed the risk of material misstatement in the financial statements, whether due

to fraud or error, and then designed and performed audit procedures responsive to those risks. In particular, we looked

at where the directors made subjective judgements, such as assumptions on significant accounting estimates,

principally in relation to valuation of investments.

We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the

financial statements as a whole. We used the outputs of our risk assessment, our understanding of the company, their

environment, controls, and critical business processes, to consider qualitative factors to ensure that we obtained

sufficient coverage across all financial statement line items.

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. The directors are responsible for the other information. 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 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.

Opinions on Other Matters Prescribed by the Companies Act 2006

In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance

with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Strategic Report and the Directors’ Report for the financial year for which the

financial statements are prepared is consistent with the financial statements; and

• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal

requirements.

Matters on which we are Required to Report by Exception

In light of the knowledge and understanding of the company and its environment obtained in the course of the audit,

we have not identified material misstatements in the Strategic Report or the Directors’ Report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires

us to report to you if, in our opinion:

• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not

been received from branches not visited by us; or

• the Company financial statements and the part of the Directors’ remuneration report to be audited are not in

agreement with the accounting records and returns; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Responsibilities of Directors

As explained more fully in the directors’ responsibilities statement set out on page 33, 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 to 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.

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.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

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.

Based on our understanding of the company and their industry, we considered that non-compliance with the following

laws and regulations might have a material effect on the financial statements: anti-money laundering regulation,

general data protection regulation and the Listing Rules.

To help us identify instances of non-compliance with these laws and regulations, and in identifying and assessing the

risks of material misstatement in respect to non-compliance, our procedures included, but were not limited to:

• Gaining an understanding of the legal and regulatory framework applicable to the company, the industry in which

they operate, and considering the risk of acts by the company which were contrary to the applicable laws and

regulations, including fraud;

• Inquiring of the directors, management and, where appropriate, those charged with governance, as to whether

the company is in compliance with laws and regulations, and discussing their policies and procedures regarding

compliance with laws and regulations;

• Reviewing minutes of directors’ meetings in the year; and

• Discussing amongst the engagement team the laws and regulations listed above, and remaining alert to any

indications of non-compliance.

We also considered those laws and regulations that have a direct effect on the preparation of the financial statements,

such as tax legislation and the Companies Act 2006.

In addition, we evaluated the directors’ and management’s incentives and opportunities for fraudulent manipulation

of the financial statements, including the risk of management override of controls, and determined that the principal

risks related to posting manual journal entries to manipulate financial performance, management bias through

judgements and assumptions in significant accounting estimates, in particular in relation to valuation of investments,

and significant one-off or unusual transactions.

Our procedures in relation to fraud included but were not limited to:

• Making enquiries of the directors and management on whether they had knowledge of any actual, suspected or

alleged fraud;

• Gaining an understanding of the internal controls established to mitigate risks related to fraud;

• Discussing amongst the engagement team the risks of fraud; and

• Addressing the risks of fraud through management override of controls by performing journal entry testing.

The primary responsibility for the prevention and detection of irregularities, including fraud, rests with both those

charged with governance and management. As with any audit, there remained a risk of non-detection of irregularities,

as these may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls.

The risks of material misstatement that had the greatest effect on our audit are discussed in the “Key audit matters”

section of this report.

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.

Other Matters which we are Required to Address

Following the recommendation of the audit committee, we were appointed by the Board of Directors on 23 January

2020 to audit the financial statements for the year ended 31 December 2019 and subsequent financial periods. The

period of total uninterrupted engagement is 3 years, covering the years ended 31 December 2019 to 31 December

2021.

The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the company and we remain

independent of the company in conducting our audit.

Our audit opinion is consistent with our additional report to the audit committee.

Use of the Audit 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.

Stephen Brown (Senior Statutory Auditor)

for and on behalf of Mazars LLP

Chartered Accountants and Statutory Auditor

The Pinnacle

160 Midsummer Boulevard

Milton Keynes

MK9 1FF

Date: 11 March 2022

Financial Statements

Statement of comprehensive income

For the year ended 31 December 2021

For the year ended

31 December 2021

For the year ended

31 December 2020

Total

Note

Gains on investments

Gain on fair value on investments

81,475,045

15,844,203

Realised gain on disposal of investments

4,094,913

2,353,809

Gains for the period on investments

85,569,958

18,198,012

Investment income

3,527

241,030

Operating income

129,421

Total

3,572

370,451

Total income

85,573,530

18,568,463

Expenses

Operating expenses

(2,997,377)

(1,067,101)

Total operating expenses

(2,997,377)

(1,067,101)

Charitable donations

(1,526,943)

(771,740)

Net foreign exchange loss

(3,039)

(3,672)

Profit for the period before taxation

81,046,171

16,725,950

Tax expense

(2,112,742)

(71,208)

Profit for the period

78,933,429

16,654,742

Other comprehensive income

Total comprehensive income

78,933,429

16,654,742

Earnings per share for profit attributable to

the ordinary shareholders of the company:

Basic earnings per share

131.56

30.84

Diluted earnings per share

130.90

30.84

The accompanying notes form an integral part of these financial statements.

Statement of financial position

As at 31 December 2021

Company number: 10976145

31 December 2021

31 December 2020

Note

Non-current assets

Tangible asset

2,589

Investments

163,643,809

76,736,366

163,643,809

76,738,955

Current assets

Trade and other receivables

556,281

61,222

Cash and cash equivalents

5,202,210

9,725,688

Unpaid share capital debtors

49,950

5,808,441

9,836,860

Current Liabilities

Trade and other payables

1,137,310

181,763

Corporation tax payable

29,888

Accrual for charitable donation

1,344,476

694,142

2,481,786

905,793

Net current assets

3,326,655

8,931,067

Non-current liabilities

Accrual for charitable donation

619,000

Deferred tax liabilities

2,366,874

618,861

Total non-current liabilities

2,985,874

618,861

Net assets

163,984,590

85,051,161

Capital and reserves

Share capital

109,950

Share premium

53,946,000

Retained earnings

109,928,640

30,995,211

Total share capital & reserves

163,984,590

85,051,161

The accompanying notes form an integral part of these financial statements.

The financial statements were approved and authorised for issue by the Board of Directors on 11-03-2022 and were

signed on its behalf by:

Paul Pindar

Director

11-03-2022

Statement of changes in equity

For the year ended 31 December 2021

Share capital

premium

Retained

earnings

Total

Balance at 31 December 2020

109,950

53,946,000

30,995,211

85,051,161

Profit for the period

78,933,429

Other comprehensive income for the year

Total comprehensive income for the

period

78,933,429

Contributions by and distributions to

owners

Issue of ordinary shares

Total transactions with owners

Balance as at 31 December 2021

109,950

53,946,000

109,928,640

163,984,590

Share capital

premium

Retained

earnings

Total

Balance at 31 December 2019

109,950

53,946,000

14,340,469

68,396,419

Profit for the period

16,654,742

Other comprehensive income for the

period

- - -

Total comprehensive income for the

period

- -

16,654,742

Contributions by and distributions to

owners

Issue of new shares

Total transactions with owners

Balance at 31 December 2020

109,950

53,946,000

30,995,211

85,051,161

Statement of Cash flows

For the year ended 31 December 2021

Note

For the year

ended

31 December 2021

For the year

ended

31 December 2020

Cash flows from operating activities

£ £

Cash inflow/(outflow) from operating activity

Loan notes interest received

60,486

240,627

Management fee received

74,818

Rechargeable expenses

2,309

Bank interest received

69,135

Management fee paid

(1,317,163)

(586,700)

Payroll expenses

(67,306)

(135,280)

Other operating expenditures

(1,545,074)

(197,899)

Charitable donations paid

(257,609) (674,539)

Net cash used in operating activities

(3,126,666)

(1,207,529)

Cash flows from investing activities

Cash inflow/(outflow) from investing activities

Purchase of Investments

(13,203,261)

(19,559,145)

Cash realised from investments

11,805,193

6,823,836

Net cash used in investing activities

(1,397,348)

(12,735,309)

Net decrease in cash and cash equivalents

(4,524,014)

(13,942,838)

Cash and cash equivalents - opening balance

9,725,688

23,652,370

Effect of exchange rate fluctuations on cash and

cash equivalents

536 16,156

Cash and cash equivalents - closing balance

5,202,210

9,725,688

The accompanying notes form an integral part of these financial statements.

Notes to Financial Statements

For the year ended 31 December 2021

1. Reporting to entity

Literacy Capital plc (the ”Company”) is a public limited company, limited by shares, incorporated in United Kingdom.

The Company's registered office is 3rd Floor, Charles House, 5-11 Regent Street St James's, London, SW1Y 4LR. Literacy

Capital plc is a closed-end investment company focused on investing in and supporting small, growing UK businesses

and helping their management teams to achieve long-term success.

2. Basis of preparation

These financial statements have been prepared in accordance with UK-Adopted international accounting standards

and as applied in accordance with the provisions of the Companies Act 2006.

Details of the Company's accounting policies, including changes during the period, are included in Note 3.

In preparing these financial statements, management has made judgements, estimates and assumptions that affect

the application of the Company accounting policies and the reported amounts of assets, liabilities, income and

expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised

prospectively.

The areas where judgements and estimates have been made in preparing the financial statements and their effect are

disclosed in Note 5.

The purpose of the Company is to invest into predominantly UK businesses, and then to grow them to generate a

positive return for its investors. In the most parts, this return will be generated through capital appreciation, but may

also be through the generation of investment income. Once an investment has been made, it is actively managed on

an ongoing basis. In addition, the performance of the Company’s investments is evaluated using the most recently

available financial information from each of the investee companies. The investments are always valued on a fair value

basis. On this basis, the Directors assessed that the Company meets the definition of an investment entity per IFRS 10

and therefore shall measure the investment in subsidiaries at fair value through profit or loss in accordance with IFRS