Pembroke VCT plc
Annual Report 2023

Plain-text annual report

Annual report and financial statements for the year ended 31 March 2023 P E M B R O K E V C T . C O M 22 Financial Highlights Investment Objective Financial Summary Chair’s Statement The Board Key Performance Indicators (KPIs) Investment Portfolio Investment Manager’s Review Investment Review Strategic Report Directors’ Report Directors’ Remuneration Report 3 4 5 7 9 11 15 16 23 42 50 52 Corporate Governance Statement Statement of Directors’ Responsibilities 56 59 Independent Auditor’s Report 61 Income Statement Balance Sheet Statement of Changes in Equity Statement of Cash Flow Notes to the Financial Statements Notice of Annual General Meeting Corporate Information 68 69 70 71 72 85 89 Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Financial Highlights Net asset value per share 0 0 4 1 1 5 0 . 1 p Net asset value total return per share 0 3 1 4 4 5 0 . 1 p Dividend paid per share 4 5 9 p. 0 (2022: 126.0p) (2022: 151.0p) See KPI section on page 11 (2022: 7.0p) 3 Increase of portfolio 5 value over cost2 % 6 3 (2022: 45%) Total value of investments 6 6 9 0 m. £ 0 7 7 1 (2022: £161.4m) Cash invested in six new investments 0 £ 1 0 . 1 2 3 m Cash invested in 12 follow-on investments 3 0 0 £ . 4 1 1 m £ 1 2 1 2 6 . 7 Total cash invested during the year m (2022: £9.5m invested in seven new investments) (2022: £26.9m invested in 21 follow-on investments) (2022: £36.3m) Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 4 Investment Objective Pembroke VCT plc (the “Company”) is a generalist VCT focused on early-stage investments in founder-led businesses. The Company invests in a diversified portfolio of small, principally unquoted companies, and selects those which Pembroke Investment Managers LLP (the “Investment Manager”) believes provide the opportunity for value appreciation. The Investment Manager supports the success of the VCT through fundraising, fund management, marketing, investment management including investment pipeline, portfolio management, and liaising with professional advisors. The Board of Directors of the Company (the “Board”) believes that the Company can benefit from leveraging the previous sector experience of the Investment Manager and also that there are likely to be synergistic advantages from grouping similar businesses. Consequently, most investments fall within one of six sectors: • Wellness • Food, Beverage & Hospitality • Education • Design • Media • Digital Services Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Financial Summary Pembroke VCT plc performance 5 The graph compares the total returns on an investment of 100p in the B Ordinary Shares of the Company for five years (being the minimum holding period under VCT rules), assuming all dividends are reinvested, with the total shareholder return on a notional investment of 100p in two FTSE indices. The FTSE UK Small Cap Total Return index was chosen for comparison purposes as it is the most relevant to the Company’s investment portfolio. FTSE AIM Total Return Index was presented as an additional benchmark illustration. 200p 190p 180p 170p 160p 150p 140p 130p 120p 110p 100p 90p 80p 70p 60p Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 31 Mar 2018 30 Sep 2018 31 Mar 2019 30 Sep 2019 31 Mar 2020 30 Sep 2020 31 Mar 2021 30 Sep 2021 31 Mar 2022 30 Jun 2022 30 Sep 2022 31 Dec 2022 31 Mar 2023 B Ordinary share total return + tax benefits* B Ordinary share total return FTSE AIM total return FTSE UK SmallCap total return * Tax benefits reflect a 30% initial tax credit on invested cost and an assumed 45% marginal income tax exemption on dividends. Financial Summary Portfolio performance vs cost ’ m £ n i s t n u o m a 30.0 28.0 26.0 24.0 22.0 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0 27.7 5.2 2.2 1.3 10.0 0.2 m y G X K l y r e B U X K A M Y L a v i r h T e v a E r a d y C 5.0 s d n a r B s s e n t i F d e t i n U 6.2 K U s y u G e v i F e f i w d i M t r e p x E y M 3.1 s r u o T d o o F t e r c e S 0.2 s t n a r u a t s e R s c u h C 0.3 e l b b u R e h t n i s e i b u R 6 4.0 3.5 0.6 9.3 3.7 4.6 3.9 0.3 4.3 4.9 2.8 0.8 1.6 1.4 0.9 0.7 h c e T n a c u o T t c a r e t n K i o t a l e G y e n k c a H y r e s r u N r o f s i N y f i t r a m S s l a M e i n n A e i n o c a M t a K s d o o G r u o d a b u o r T d u e r F a l l e B s o i d u t S t s i e H a l a T s r a e W t s u J m o o l b o o l B o Z & o R e v e i V t a o B a s p o P s m l i F g n i k l l i t S 0.9 R V o t o R 1.0 0.02 y d d u A e l p o e P d e t a R n o i h s a F i h s i W 0.9 p a M l e t o H 0.2 d e t l o b n U m o o l F 0.4 y l l a i t n e d e r C s s e l p o r D n a l P e n O t a o C g o r F t a e S s d n a r B r e t a w k c e P Wellness Food, Beverage & Hospitality Education Design Media Digital Services All figures in £’m Cost of investment Fair value as at 31 March 2023 Increase in fair value Decrease in fair value Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 7 Chair’s Statement I am pleased to present the annual results for Pembroke VCT plc for the year ended 31 March 2023. Overview The Company recently closed a £32.8 million fundraise. We thank existing shareholders for their continued support and we also welcome our new shareholders. The Company’s net asset value (“NAV”) at 31 March 2023 is £216.1 million (2022: £200.5 million) and continues an upward trend reflecting the underlying fundraising. The increase in the year is after returning £8.3 million to shareholders through dividends. Since the year end the Company has returned a further £10.6 million to shareholders through a £5.9 million share buyback in April 2023 and a further £4.7 million dividend in May 2023. During the period, the Total Return (NAV plus cumulative dividends paid) per share decreased 5.9 pence, or 4%, from 151.0 pence per share to 145.1 pence per share. This is mainly as a result of the Company’s £9.3 million loss in the year to March 2023 (2022: £24.0 million profit) arising from unrealised valuation changes on the investment portfolio. A 5.0 pence per share dividend was paid in 2022, meeting the Company’s annual dividend target for the year to March 2023. Since the year end, a 2.5 pence per share dividend was paid in May 2023 which is already halfway to meeting the Company’s dividend target for the year to March 2024. The Company continues with its policy to pay special dividends when investment exits are achieved. Investment Portfolio Overview The Board is pleased with the overall performance of the investment portfolio given the challenging market conditions in which the underlying companies are operating. Some portfolio companies continue to exceed expectations and attract further, third party, investment at higher valuations. Others have found market conditions challenging. This has, unfortunately, resulted in Stitch & Story going into liquidation and exiting our investment in Second Home at a loss. A number of our portfolio companies have continued to thrive. OnePlan has secured the event planning contract for the 2024 Paris Olympic and Paralympic games with their mapping software used for the 3D plotting of all the venues. Lyma was recently awarded the King’s Award for Innovation and has doubled its turnover in 2022 compared to the year before. Secret Food Tours, which decided to suspend its activities during the Covid-19 Government restrictions, has recovered with revenues now exceeding pre-pandemic levels. These examples of positive business developments illustrate the portfolio’s ability to continue to adapt and grow. During the year the Company invested £11.3 million in six new companies: Auddy, Bloobloom, My Expert Midwife, Ro&Zo, Seatfrog and Vieve. The Company also made follow on investments totalling £11.4 million into 12 portfolio companies to continue our support of their growth. For further details, see the Investment Portfolio and Investment Managers Review on pages 15 to 40. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 8 Chair’s Statement Environmental, Social and Governance (“ESG”) We are proud that the Pembroke portfolio now includes seven registered B Corp companies; LYMA, N Family Club, Troubadour, COAT Paints, Rubies in the Rubble, Beryl and Dropless. The main purpose of a B Corp is to meet standards of social and environmental performance, transparency, and accountability through positive business practices. The Board of Pembroke VCT has kept up to date on ESG reporting requirements within the venture capital sector. We shall continue to develop our strategy and seek to embed ESG at Pembroke VCT and continue to raise its profile with our portfolio companies. In 2022 we became a member of ESG_VC and have shared the ESG_VC framework across the portfolio in order to collect company level ESG data. ESG_VC is a voluntary organisation and provides its members with regular updates, invitations to workshops, training and industry events. The members may also be asked to submit data from across their own portfolio companies using the ESG_VC Measurement Framework. Also in 2022 the Board adopted its ESG responsible investment policy. We will continue to report to shareholders on ESG matters and share case studies, in our newsletters. Dividends & Share Buybacks In the year to March 2023 the Company has paid a total of £8.3 million in dividends. The dividend was 5.0 pence per share in July 2022, following the profitable sale of Me+Em. This meets the 5.0 pence per share annual dividend target for the year ended March 2023; which the Board increased from 3.0 pence per share during 2022. In addition a 2.5 pence per share dividend, totalling £4.7 million was paid to shareholders in May 2023. Shortly after the March 2023 year end, the Company bought back 5,234,964 shares at 112.86 pence per share and for an aggregate consideration of £5.9 million. This price was at a 5% discount to NAV in line with Company policy. As interests in portfolio companies are sold, the Company intends to continue paying special dividends and conducting share buybacks, but always subject to the requirements and best interests of the Company, the rules, and regulations to which it is subject and the Company having sufficient cash resources. VCT Qualifying Status Philip Hare & Associates provides both the Board and the Investment Manager with advice about ongoing compliance with HMRC rules and regulations concerning VCTs. The Board has been advised that Pembroke VCT continues to comply with the HMRC conditions for maintaining its approval as a venture capital trust. Outlook The Company begins the new financial year in a strong position, with £40 million of liquidity to take advantage of new high quality investment opportunities as well as supporting the continued growth of its existing portfolio businesses. To support this the Investment Manager has also continued its own business growth and since April 2022, has increased its team to 15 people with hires across the investment, portfolio and operations teams. Nevertheless, the Board and the Investment Manager are conscious of the current macro-economic environment and the continued inflationary pressures in the UK. Annual General Meeting The Annual General Meeting (“AGM”) will be held at the Company’s offices at 3 Cadogan Gate, London SW1X 0AS on 28 September 2023 at 10.00 a.m. Jonathan Djanogly Chair 29 June 2023 Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 9 The Board Jonathan Djanogly Independent non‑ executive Chair Jonathan is a non-practising solicitor and was, for over ten years, a corporate partner at City law firm SJ Berwin LLP. He specialised in mergers and acquisitions, private equity and joint ventures as well as fund raising on public markets. Jonathan has been a Member of Parliament since 2001, in which capacity he served as a Member of the Trade and Industry Select Committee and currently as a member of the Public Accounts Select Committee. He also served on the Opposition front bench as shadow Solicitor General, as a shadow Minister for Trade and Industry with responsibility for employment law and corporate governance and as a Justice Minister for over two years. Laurence Blackall Independent non‑ executive Director Laurence has had a 30-year career in the information, media and communication industries. After an early career at Virgin and the SEMA Group he was a director of Frost & Sullivan before moving to McGraw Hill where he was a vice-president in its computer and communications group. He then went on to found AIM listed Internet Technology Group plc in 1995 and successfully negotiated its sale in 2000 for a consideration of almost £150 million. Laurence was also instrumental in the creation of Pipex Communications plc. He has interests in a range of leisure and TMT businesses and currently holds a number of directorships in public and private UK companies. Jonathan Djanogly Laurence Blackall Mark Stokes Louise Wolfson David Till Mark Stokes Independent non‑executive Director David Till Non‑ independent non‑ executive Director David Till co-founded the Oakley Capital Group in 2002. David plays a key role within the group and has overall responsibility for operations, finance, due diligence, compliance and fund formation. Oakley Capital Private Equity invests in, and supports, the continued growth and development of some of Europe’s leading companies and seeks to build long-term relationships with talented entrepreneurial founders and managers. Over the past 20 years, Oakley has built expertise in three core sectors: TMT, Digital Consumer and Education, and has strong credentials and networks in these areas. Oakley Capital comprises five mid market private equity funds. The Funds generate strong returns for their Limited Partners as well as Oakley Capital Investments Limited, a listed investment vehicle that invests in Oakley Private Equity Funds. David holds a BA (Hons) in Economics from Essex University. He started his career in the British Army, then later qualified as a chartered accountant with Coopers & Lybrand and worked in industry as a finance director before returning to the profession holding senior M&A roles. Mark Stokes has over 30 years experience in financial services, and 20 years at Executive Committee level. He is currently Chief Commercial Officer at United Trust Bank, and previously held Managing Director positions at Lloyds Corporate and Commercial Banking, Williams & Glyn, and Metro Bank. He has a deep understanding of business strategy, execution, performance management, risk management, and governance. Mark has a broad business experience from a career lending into commercial and SME markets, and consumer and asset finance markets, that includes M&A execution and capital markets fund raising. He has also previously served as a Non-Executive Director Alternate with Motobility Operations Group plc. Mark is a member of the Chartered Institute of Bankers, and has completed their Green and Sustainable Finance certification. Louise Wolfson Independent non‑executive Director Louise Wolfson is a senior corporate lawyer who was previously a partner at Allen & Overy LLP and Pinsent Masons LLP. She has a particular focus on corporate finance transactions, and has wider experience including mergers and acquisitions, joint ventures, strategic investments, capital raisings and listings. Louise currently works as a freelance legal consultant and sits as a tribunal judge hearing social security and immigration appeals. Louise is also a director of Women's Pioneer Housing, a housing association which supports women in West London. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 10 Board Summary Independent NEDs Year appointed Age Experience Qualifications Jonathan Djanogly Nov-12 Laurence Blackall Nov-12 Louise Wolfson Jan-21 Mark Stokes Jan-21 58 72 51 61 Non-Independent L B L CF LC SE CF E LC SE CF LC SE G G G BA(Hons), Qualified Solicitor, ICAEW Corporate Finance Qualification MA Qualified Solicitor CF LC SE IM G Chartered Banker, CBI Green & Sustainable Finance Certificate, IoD Diploma in Company Direction David Till Aug-18 59 CF E LC SE AA IM G Chartered Accountant, FCA L B Legal Banking E Entrepreneur AA Accounting & Audit LC Listed Corporate IM Investment Management CF Corporate Finance SE Senior Executive G Governance Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 11 Key Performance Indicators (KPIs) As a VCT, the Company’s objective is to provide shareholders with an attractive income and capital return by investing its funds in unquoted companies which meet the relevant criteria for VCTs. The Board has agreed upon the following five key performance measures to assess the Company’s success in meeting these objectives. Some of these are classified as alternative performance measures (“APMs”) in line with Financial Reporting Council (“FRC”) guidance. 1. NAV per share; 2. Total return per share; 3. Dividends per share paid in the year: 4. Annual Recurring Costs; and 5. Qualifying percentages under VCT rules 1. NAV per share The NAV per share of the Company is the sum of the underlying assets less the liabilities of the Company divided by the total number of shares in issue. The Company’s target is for the NAV per share to remain level or increase after adjusting for dividends paid. 2. Total return per share This is the most widely used measure of performance in the VCT sector. Total return per share is an APM that is calculated as the NAV per share plus cumulative dividends paid per share. Total return per share enables shareholders to evaluate more clearly the performance of the Company, as it reflects the overall return and value of shareholders’ interest. The Company’s target is for the Total return per share to increase by 3 pence per year from August 2021 (124.1p) which represents one of the hurdles for the Investment Manager to be paid a Performance Incentive Fee (“PIF”) when a profitable exit is achieved. 2023 2022* Reason for movement Total return pence per share: 115.1p 121.0p NAV per share decreased 5.9 pence, or 5%, from 121.0 pence per share to 115.1 pence per share. This is mainly as a result of the Company’s £9.4 million loss in the year to March 2023 (2022: £24.0 million profit) as a result of unrealised valuation changes in the investment portfolio. *Adjusted for dividends paid in the year of 5p. Cumulative dividends paid at the beginning of the period Dividends paid during the year Total dividends paid since launch Closing NAV per share Total return per share Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Target vs actual total return per share 155p 150p 145p 140p 135p PVCT Targets 2023 145.1p 139.6p 2022 151.0p 136.6p 2023 25.0 5.0 30.0 115.1 145.1 2022 18.0 7.0 25.0 126.0 151.0 12 Key Performance Indicators (KPIs) 3. Dividends per share paid in the year The Company has a target of paying an annual dividend of 5.0 pence per share. This dividend target was increased from 3.0 pence per share in 2022. The Company paid 5.0 pence per share (2022: 7.0 pence per share) of dividends in the current period which is consistent with the Board’s target of 5.0 pence per share (2022: 3.0 pence per share) annual dividend. 4. Annual Running Costs The Company is indemnified by the Investment Manager by such amount equal to the excess by which the Annual Running Costs of the Company exceed 0.5% of the Company’s NAV, calculated on an annual basis. The Board monitors its costs carefully (as an APM) and seeks to maintain the Annual Running Costs below 0.5% of NAV. The Board monitors the Annual Running Costs as follows: Target vs Actual Dividend Paid 8p 7p 6p 5p 4p 3p 2p 1p 0p PVCT Targets 2023 5p 5p 2022 7p 3p Annual Running Costs (£’000) Net Asset Value (£’000) Annual Running Costs as a percentage of NAV See Notes 5 and 8. 2023 2022 735 216,080 660 200,585 0.34% 0.33% This is within the Company’s annual limit of 0.5% of NAV.   Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Key Performance Indicators (KPIs) 5. Qualifying percentages under VCT rules* 5. Qualifying percentages under VCT rules* The Company complies with the UK VCT which requires it to maintain the following criteria. E Maximum retention 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 70% 60% 50% 40% 30% 20% 10% 0% PVCT 2022 PVCT 2023 Minimum criteria A 99% 88% 70% B 98% 91% 80% C 85% 83% 70% D (FY2022 Fund raise) 62% 30% D (FY2023 Fund raise) 51% 30% PVCT Minimum criteria * The values on these APMs are computed based on specific HMRC rules and are not in line with any GAAP. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 13 2023 15% 0% 2022 15% 0% PVCT Legend A B C The Company’s income in the period has been derived wholly or mainly (70% plus) from shares or securities. At least 80% of the value of the Company’s investments has been represented throughout the period by shares or securities comprised of qualifying holdings of the company. For funds raised after 5 April 2011, at least 70% by value of the company’s qualifying holdings has been represented throughout the period by holdings of eligible shares. D (FY 2022 Fund Raise) D (FY 2023 Fund Raise) E At least 30% of the funds raised in FY 2021/2022 are invested in qualifying holdings by 31 March 2023. At least 30% of the funds raised in FY 2022/2023 are invested in qualifying holdings by 31 March 2024. The Company has not retained more than 15% of its income from shares and securities. The Company continues to meet the requirements of the VCT rules and is confident there continues to be sufficient investment opportunities to maintain this. Investments Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 15 As at 31 March 2023 As at 31 March 2022 Cost £’000 Fair value £’000 Media Boat Stillking Popsa Roto VR Auddy Subtotal Digital Services Rated People Wishi Unbolted HotelMap Floom Credentially Dropless OnePlan Coat Peckwater Brands Seatfrog Subtotal Total Portfolio before interest Interest* Total Portfolio including interest Other Net Assets Total NAV 3,250 1,452 5,200 1,750 1,800 13,452 641 153 400 1,500 4,560 3,000 4,375 3,750 3,000 4,000 3,000 28,379 130,141 130,141 39,051 169,192 6,950 6,075 14,525 883 1,800 30,233 621 1,143 553 2,400 624 2,625 4,098 7,734 3,562 7,486 3,000 33,846 171,236 5,793 177,029 39,051 216,080 *Added to investments in the Financial Statements % of NAV 3.2% 2.8% 6.7% 0.4% 0.8% 14.0% 0.3% 0.5% 0.3% 1.1% 0.3% 1.2% 1.9% 3.6% 1.6% 3.5% 1.4% 15.7% 79.2% 2.7% 81.9% 18.1% 100.0% Cost £’000 Fair value £’000 3,250 1,452 5,200 1,750 – 11,652 641 153 400 1,500 4,415 3,000 3,750 3,750 3,000 1,000 – 21,610 111,108 111,108 39,140 150,248 6,950 5,720 13,684 774 – 27,128 1,057 1,143 553 1,500 5,914 3,962 3,750 7,426 5,260 4,486 – 35,053 156,587 4,858 161,445 39,140 200,585 % of NAV 3.5% 2.9% 6.8% 0.4% 0.0% 13.5% 0.5% 0.6% 0.3% 0.7% 3.0% 2.0% 1.9% 3.7% 2.6% 2.2% 0.0% 17.5% 78.1% 2.4% 80.5% 19.5% 100.0% Investment Portfolio As at 31 March 2023 Cost £’000 Fair value £’000 % of NAV As at 31 March 2022 Cost £’000 Fair value £’000 % of NAV Wellness United Fitness Brands KX Beryl KXU Lyma Thriva Eave Cydar My Expert Midwife Subtotal Food, Beverage & Hospitality Chilango Five Guys Chucs Restaurants Second Home Sourced Market Secret Food Tours Rubies In The Rubble Hackney Gelato Subtotal Education N is for Nursery Kinteract Stitch & Story Toucantech Smartify Annie Mals Subtotal Design Kat Maconie Troubadour Bella Freud Alexa Chung Heist PlayerLayer JustWears Tala Bloobloom Ro&Zo Vieve Subtotal 5,276 700 553 1,034 2,000 1,330 3,900 3,000 1,500 19,293 635 3,311 2,220 – 7,447 2,000 1,227 3,200 20,040 3,000 3,635 4,100 1,000 1,500 500 13,735 2,850 2,540 4,329 4,122 8,349 5,852 2,000 200 2,500 1,500 1,000 35,242 318 1,654 1,889 790 29,684 6,543 1,684 3,000 1,500 47,062 – 9,498 2,051 – – 5,125 920 3,968 21,562 7,297 2,064 – 1,754 1,500 500 13,115 3,769 3,926 7,094 – 3,429 – 2,000 200 2,500 1,500 1,000 25,418 0.1% 0.8% 0.9% 0.4% 13.7% 3.0% 0.8% 1.4% 0.7% 21.8% 0.0% 4.4% 0.9% 0.0% 0.0% 2.4% 0.4% 1.8% 10.0% 3.4% 1.0% 0.0% 0.8% 0.7% 0.2% 6.1% 1.7% 1.8% 3.3% 0.0% 1.6% 0.0% 0.9% 0.1% 1.2% 0.7% 0.5% 11.8% 5,276 700 553 1,034 2,000 1,330 2,750 3,000 – 16,643 635 3,311 2,220 1,485 7,447 2,000 732 2,700 20,529 5,200 2,935 4,000 1,000 1,000 500 14,635 1,850 2,540 3,227 4,122 6,249 5,852 2,000 200 – – – 26,039 2,891 1,654 1,889 790 19,613 10,376 2,166 3,000 – 42,378 – 8,048 3,762 294 – 1,637 732 2,800 17,272 9,273 2,958 1,592 1,431 1,000 500 16,755 2,550 4,274 6,318 – 2,658 – 2,000 200 – – – 18,000 1.4% 0.8% 0.9% 0.4% 9.8% 5.2% 1.1% 1.5% 0.0% 21.1% 0.0% 4.0% 1.9% 0.1% 0.0% 0.8% 0.4% 1.4% 8.6% 4.6% 1.5% 0.8% 0.7% 0.5% 0.2% 8.4% 1.3% 2.1% 3.2% 0.0% 1.3% 0.0% 1.0% 0.1% 0.0% 0.0% 0.0% 9.0% Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 16 Investment Manager’s Review Portfolio summary and performance The movement in the value of the Company’s portfolio is summarised as: (2.2) 11.4 (5.9) 11.3 171.2 Over the past year, the Investment Manager has focused on helping the portfolio companies to grow while assisting their founders and senior management teams to strategically address operational challenges, cost pressures, challenging market conditions and making key people appointments. Although there are uncertainties for 2023, our portfolio companies continually evolve their strategies to overcome challenges and to take advantage of new opportunities. Today we have 11 portfolio companies that are individually valued above £50 million, compared to only two companies in 2019. This is in addition to the Me+Em exit in 2022 at a £135 million valuation. These companies represent 54% of the total value of our portfolio and illustrates the opportunity within. m £ n i s t n u o m A 185 180 175 170 165 160 155 150 156.6 Valuation at 31 March 2022 New investments Follow-on investments Repayments/ exits Valuation change Valuation at 31 March 2023 Increase Decrease Total Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 17 54% 11 In many of our portfolio companies, there have been significant wins in acquiring direct customers but also striking collaborations and Business-to-Business (B2B) deals; which all contribute to enhancing their growth potential. Our founders and management teams continue to seek new ways to acquire consumers, from collaborations with other brands and influencers through to B2B strategies. For example, Dropless was previously a Direct-to-Customer (D2C) car washing service which is now focused on B2B fleet washing services. We also have a number of portfolio businesses partnering with each other to develop new and scalable income streams. Investment Manager’s Review Companies with >£50m Enterprise Value (EV) m £ n i s t n u o m A 100 90 80 70 60 50 40 30 20 10 0 EV at Exit Exit date PVCT Exit proceeds 48% Pasta Evangelists £37m Jan-21 £4.5m Me&Em Plenish Total £135m Mar-22 £15.4m £24m Apr-21 £8.8m £28.7m Each exit was followed by a dividend. 10 16% 2 8% 2 11% 3 March 2019 March 2020 March 2021 March 2022 March 2023 Value held in companies >£50m EV Number of companies valued above £50m EV Percentages represent the valuation of companies with >£50m EV compared to the total portfolio (excluding exits). Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023   Investment Manager’s Review 18 • HotelMap has bounced back from the Covid-19 lockdowns to all-time highs. It is currently fundraising to meet the business demands of its expanding market share. • Peckwater has secured funding from TDR Capital and is integrating its business into TDR’s Stonegate pub chain to further accelerate growth. • Peckwater Brands has an EV above £50 million. • Cydar has appointed a new Chair, Kenneth Hitchner, who brings over 30 years of premier healthcare advisory, fundraising and transactional expertise. Kenneth was a member of the Goldman Sachs Global Management committee and was Chair and CEO of the Asia Pacific region from 2013 to 2019. • Smartify has doubled its revenue in 2022 and expanded the business by offering merchandise. • Secret Food Tours has recovered strongly with revenues above pre-pandemic levels and generating positive cash flows. Strong performers in the Pembroke portfolio We would like to highlight that many of our portfolio companies continue to grow and generate positive business developments. With Lyma, Secret Food Tours, Five Guys, HotelMap, and Popsa continuing to grow and leading the group of companies that contribute to valuation increases within our portfolio. We have included some of the strong performers in the Pembroke portfolio: Some portfolio companies are finding the current climate challenging. There are disappointing outcomes for Stitch & Story entering into liquidation in the year and the Company sold its investment in Second Home at a loss. Floom, Thriva, United Fitness Brands, Chucs Restaurants, Coat, Eave, Kinteract, and Credentially encountered obstacles in implementing their growth strategies during the year, which resulted in a decline in valuation. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 • Oneplan has secured the Paris 2024 Olympic • LYMA has expanded its business to the and Paralympic contract, its mapping software will be used for 3D plotting of sports venues and the surrounding areas. US and has doubled its revenue in 2022. The business is aiming to further increase its revenues in 2023 by more than 100%. • The business has more than 5x its • The business is now a certified revenues in 2022 compared to the previous year and continues to gain traction in securing contacts for large events. B corporation. • LYMA has an EV above £100 million. Investment Manager’s Review Current portfolio analysis The following pie charts show the split of the portfolio valuation as at 31 March 2023 and 31 March 2022 by: sector (excluding cash and net assets), stage of investment, the age of companies and value compared to cost. This is a useful way of assessing diversity within the portfolio. 19 Portfolio Valuation by Sector Portfolio Valuation by Age of Company Portfolio Valuation by Stage of the Business Portfolio Valuation Compared to Cost £33.8m   20% £47.1m   27% 2023 £30.2m   18% £21.6m 12% 8% 29% 9% 4% 11% 12% 2023 32% 2023 37% 2023 50% 77% £25.4m 15% £13.1m 8% 31% 17% 12% 9% 16% £17.9m 12% £42.4m   27% £27.1m 17% 2022 2022 2022 29% £17.3m 11% 28% 43% 46% £33.4m 22% £16.8m 11% Wellness Food, Beverages & Hospitality Education Design Media Digital services 1 to 3 years 4 to 6 years 7 to 9 years 10+ years Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Early stage Revenue less than £1m Growth Revenue between £1m and £5m Scale up Revenue between £5m and £50m Mature Revenue over £50m 8% 8% 2022 84% Below cost Above cost At cost 20 Investment Manager’s Review Investment activity The Company invested £11.3 million (2022: £9.5 million) in six (2022: seven) new companies during the year and has invested a further £11.4 million (2022: £26.9 million) across 12 (2022: 21) existing portfolio companies. The six new investments were Auddy, Bloobloom, My Expert Midwife, Ro&Zo, SeatFrog and Vieve, all of which are unquoted, with investments made in the form of new equity shares with full voting rights. Auddy Andrew Craissati launched Auddy in 2020 with three founders from EMI, Netflix and Warner Music and following on from a 20-year fascination with audio (including the founding of Virgin Radio International). Andrew and his co-founders saw, early on, that despite their enthusiasm for the podcast medium, creators, publishers, and organisations all faced considerable challenges due to the complex and fragmented nature of the ecosystem, hence the birth of Auddy. Andrew Craissati and the team around him have built an innovative company that is well-placed to benefit from continuing rapid growth of the podcasting market. Auddy offers its clients the tools and expertise to navigate the complex and fragmented podcasting ecosystem and the fact that Auddy has positioned itself as ‘audio-first’ not ‘audio- only’ provides further upside potential. Bloobloom Abbas and Fares Manai are the founding brothers behind Bloobloom, a company committed to creating affordable eyewear with unique designs using the finest materials with shapes and colours that inspire. They built a team and hand-picked factories to find the ones with the same ethical standards as they have; the ones who care about their employees’ lives, the environment and making top-quality products. Abbas and Fares are building a brand that resonates with consumers, and in doing so Management believes it is important to make a positive impact. The company therefore created Bloobloom’s ‘Pair for Pair’ programme where it donates the cost of a pair of glasses for each pair purchased. It makes this donation to its charity partner Vision for a Nation, an international organisation that supports health ministries to provide local eye care services in Rwanda and Ghana. My Expert Midwife My Expert Midwife was launched in 2016 by registered midwife Lesley Gilchrist, who has experience in both private and NHS care provision, and Claire Charlton a pre- and post-natal baby massage specialist. Lesley also holds a master’s degree in Clinical Research. As Clinical Director and CEO, Lesley leads the new product development agenda focusing on product efficacy, informed by her expert clinical knowledge of what women need during pregnancy, childbirth and recovery. Leslie’s credentials and network allow the company to develop products that truly address a need and in doing so develop deep consumer trust. There is a large opportunity to leverage My Expert Midwife’s brand and continue to grow its product range beyond just pregnancy, lengthening its customer lifetime value and frequency of purchase. Ro&Zo Ro&Zo was founded in October 2020 by Rosie Bowden and Zoe De Abreu who met while working at Cover Up Clothing, a clothing manufacturing company supplying retailers such as Evans and Wallis. Rosie and Zoe are supported by CEO and third co-founder, Rachel Heather who co-founded Cover Up Clothing and plus-sized women’s fashion brand Live Unlimited. Rachel, Rosie, and Zoe make a strong founding team who have built a brand while focusing meticulously on the quality and value of garments to meet the consumer demand for an ‘accessible premium’ price point. Ro&Zo has demonstrated the ability to sell garments with strong margins across all channels and has an opportunity to grow both the online and offline business simultaneously. SeatFrog Iain Griffin and Dirk Stewart founded SeatFrog in 2016 with a mission to build a better future for rail and its passengers with its consumer-facing app. Prior to founding the business Iain and Dirk worked at a digital marketing agency with Iain leading the management team in taking the business into the world’s top five agencies within in three years. While Dirk previously held senior engineering roles, building scalable technology platforms as a Senior Programmer. SeatFrog’s world-class founding and Management team has built a technology platform that is a ‘win-win’ for both train operating companies and consumers. SeatFrog can take a meaningful share of the rail ticket sales market by first engaging with customers via its first-class upgrade and ticket-swapping services and then selling regular tickets. SeatFrog is currently launching its offerings in the UK and across Europe. Vieve Founded by Jamie Genevieve, a professional makeup artist and beauty influencer. She is credited with being one of the most influential voices in the digital beauty space and has a combined reach of over three million followers. Jamie was voted VOGUE Beauty Influencer of the Year 2021 and is a member of the British Beauty Council’s advisory board. Jamie has strong credibility in cosmetics and the community to build a brand that resonates with the consumer. Coupled with the Management team she has built around her to bring the operational rigour and expertise to grow a large brand, Vieve is well-positioned to succeed in a competitive market. Repayments In April 2022, the Company received £2.2 million from N is for Nursery as repayment of its debt investment. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Investment Manager’s Review Current portfolio analysis ESG forms part of the Investment Manager’s investment considerations, and the Investment Manager believes that investing responsibly, seeking to make a positive social and environmental impact, is essential to its long-term success. These factors have been integrated into its investment and asset management processes. The Company, together with its Investment Manager, continues to refine its evaluation of the ESG considerations of all of its investments to comprehensively demonstrate the environmental benefits and social contribution of the Company’s portfolio. We like to invest in companies which have ESG credentials at the heart of what they do. The following companies in our portfolio are registered B Corp organisations. 21 • Aims to become the go-to brand for sustainable condiments. • Every Rubies product makes use of otherwise discarded fruit and vegetables that are not aesthetically pleasing, or under-utilised by-products of food production. To date, the company has prevented 473 tonnes of fruit and vegetables from going to waste, which is over four million pieces of fruit and vegetables. • Recently introduced 100% recycled and recyclable squeezy ketchup bottles into Waitrose, Morrisons and Ocado. • Beryl uses its proprietary technology and other advancements to empower more people to cycle via bike share schemes and e-scooter hire across the UK. • Beryl has become the leading micromobility provider in the UK as it continues to launch its cycle and e-scooter hire schemes in UK cities. • BCP Council recently celebrated riders taking over one million journeys which equates to 138 tonnes of carbon dioxide emissions saved. • Coat is the world’s only Climate Positive Certified paint company. A regenerative business that doesn’t subscribe to greenwashing. Made to order, fresh paint meaning zero waste, fewer harmful ingredients, and bespoke to the customer. • Joining just 0.009% of businesses worldwide, it achieved an impressive B Impact score of 94.8. • Environmental impact is incorporated into the ethos of the Troubadour brand. • Troubadour Goods is a sustainable London based luxury men’s and women’s accessories brand specialising in designing and creating superior handcrafted leather and textile goods, including an affordable range of products. Troubadour has recently opened its first London store in Beak Street, with the entire collection on display. • It partners with its customers to take mutual responsibility for the lifecycle of its products by helping with repairs, reuse, and recycling. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Investment Manager’s Review 22 • LYMA is the first WellTech brand in the world to join the list of B Corp certified companies. • N Family Club is the highest scoring B Corp™ in the UK’s pre-school and primary education sector. • Its game-changing formula is the most scientifically validated nutraceutical ever produced, clinically proven to actively tackle inflammation – the root cause of ageing and disease. Its hand-held home-use skin laser is just as revolutionary and Lyma continues to develop and launch new products. • Founded in 2017, N Family Club set out to rethink early years education – developing a progressive curriculum, building a sector-leading team culture, and a service that adds real value for families. It currently has 21 nurseries across London, Kent, Surrey, Cambridge and the West Midlands, and was rated the highest quality nursery group in the UK by Nursery World earlier this year. N Family Club has further plans to expand across the UK, with a target to reach 80 nurseries by 2025. • Dropless has revolutionised the car wash sector by introducing innovative and eco-conscious methods, providing water-free and environmentally safe alternatives for cleaning domestic and commercial vehicles. • Their efforts have conserved tens of millions of litres of water, and their recognition as a B Corp UK demonstrates their steadfast dedication to fostering beneficial social and environmental change. Since forming their waterless valeting service, they have saved tens of millions of litres of water. • Just Wears is a disruptive, direct-to- consumer brand changing how you think about pants. They received a score of 95.5, which recognises that they provide the most comfortable underwear for their customers in the most sustainable way possible. It also considers their impact elsewhere; such as their diverse workforce, incredible customer service, tree planting, underwear donations, and so much more. Diversity and inclusion The Company with the Investment Manager continue to promote and monitor the diversity and inclusion of its portfolio. Further details can be found in the Strategic Report on page 48. Valuation Investments held by the Company have been valued in accordance with the International Private Equity and Venture Capital (IPEVC) valuation guidelines December 2018 developed by the British Venture Capital Association and other organisations. Through these guidelines, investments are valued as defined at ‘fair value’. In determining fair value, the Investment Manager uses various valuation approaches, including a combination of the price of recent investment and a market-based approach. The market approach ascribes a value to a business interest or shareholding by comparing it to similar businesses, using the principle of substitution: that is, that a prudent purchaser would pay no more for an asset than it would cost to acquire a substitute asset with the same utility and income earning potential. Price of recent value will only be used as fair value after careful consideration of all the facts and circumstances concerning the underlying investment. The portfolio valuations are prepared by the Investment Adviser, before being reviewed and approved by the Board each quarter and subject to audit annually. Further details may be found in the Investment Portfolio and Investment Manager’s Review on pages 15 to 40. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Wellness United Fitness Brands (UFB) is the UK’s first fitness supergroup – offering its portfolio of premium studios accelerated growth, scale and commercial prowess within the industry and beyond. UFB brings together the Boom Cycle, Kobox, Barrecore, and Triyoga fitness brands. Cost Valuation Interest rolled up in fixed income investment £5.3m £0.3m £0.1m Basis of valuation Equity holding Most Recent Round 5.8% 23 21.8% of net assets KX Urban (KXU) is a pay-as-you-go development of the established KX luxury gym brand. It offers a range of gym classes including Hiit & Run, Body Barre, yoga, boxing and spinning within a high-quality gym environment with a healthy food and beverage offering. Cost Valuation Basis of valuation Equity holding £1.0m £0.8m Multiples 10.3% KX Gym, founded in 2002, is a private members’ gym and spa, which includes a restaurant and clubroom, located in Chelsea, London. KX offers members an exclusive holistic approach to wellbeing, incorporating fitness, diet, and relaxation. Cost Valuation Basis of valuation Equity holding £0.7m £1.7m Multiples 11.8% Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 24 Beryl is focused on changing the way cities move. Beryl's focus is on bike-sharing and e-scooter systems in urban environments. Partnering with local authorities such as TFL, Transport for Greater Manchester, Transport for West Midlands, Hackney Council and many more. Cost Valuation Basis of valuation Equity holding £0.6m £1.9m Most recent round 3.5% LYMA is a luxury wellness brand. The company works closely with the world’s leading nutritional scientists, combining intensive R&D with the latest technological advances to produce a unique and high-quality, evidence-based nutritional supplement. It also launched a world-first medical-grade laser that can be used safely at home in conjunction with a newly formulated serum and mist. LYMA has gained a reputation for excellence in the wellness industry and has been recognized with numerous awards and accolades. Cost Valuation Basis of valuation Equity holding £2.0m £29.7m Multiples 19.7% Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Thriva is a proactive healthcare service, which offers at-home blood tests for a range of health markers such as Vitamin B12, Vitamin D, liver function, omega, and iron. Consumers receive the testing kit in the post with NHS-grade results. Post-blood test, Thriva offers a range of supplements they can recommend and offer to consumers based on test results. The company is also working with several government agencies to support their health programs. Cost Valuation Basis of valuation Equity holding £1.3m £6.5m Multiples 5.2% Eave aims to help prevent avoidable deafness through the monitoring of, and protection against, damaging noise levels at work. Its first product is a pair of smart ear defenders designed for the construction industry. Unlike traditional passive hearing protection, these work as part of a complete solution to protect workers from hearing damage, as well as to detect and report noise levels. This hardware and software combination is enabling Eave to pivot to data-driven monitoring. Cost Valuation Interest rolled up in fixed income investment £3.9m £1.7m £35.0k Basis of valuation Equity holding Investment in the year at cost Most recent round 34.4% £1.1m 25 My Expert Midwife (MEM) is a pregnancy, post-birth and baby brand offering award-winning products and midwife-led educational services. My Expert Midwife's products are developed in collaboration with experienced midwives and are designed to be safe and effective for both mother and baby. Cost Valuation Basis of valuation Equity holding Investment in the year at cost £1.5m £1.5m Most recent round 13.6% £1.5m NEW Cydar is a medical software company that improves patient outcomes by providing a ‘sat nav for surgeons’ which uses Artificial Intelligence (AI) to enhance image-guided surgery. The first application of the software is in the field of endovascular surgery. Cydar feeds the data received from these surgeries into the Cydar Surgical Intelligence system which develops a deeper understanding of the variables that affect patient outcomes and aims to improve outcomes going forward. Cost Valuation Basis of valuation Equity holding £3.0m £3.0m Most recent round 6.0% Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Food, Beverage Hospitality 10.0% of net assets 26 Five Guys was founded in the US. The company serves a range of hand-made burgers made with fresh locally sourced beef and cooked on a grill, along with fresh-cut fries, served with unlimited toppings. It now has over 150 outlets in the UK and is expanding in Europe. Cost Valuation Interest rolled up in fixed income investment Basis of valuation Equity holding £3.3m £9.5m £3.3m Multiples 1.0% Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Chucs Restaurants was founded with the goal of creating a unique dining experience that combines Italian-inspired cuisine with a modern, luxurious atmosphere with locations open across West London. Serving Brunch, Lunch and Dinner. The restaurant's concept reflects the style and branding of the Italian Riviera. Cost Valuation Basis of valuation Equity holding £2.2m £2.1m Multiples 25.0% 27 Rubies in the Rubble produces sustainable condiments. Every Rubies product makes use of otherwise discarded ingredients: aesthetically rejected fruit and vegetables, or under-utilised by-products of food production. The business has focused on the OOH (out-of-home) market, whilst also being stocked in leading supermarkets. Their range includes mayo, relishes and ketchup that contains 3x more fruit and 50% less sugar than competitors. Cost Valuation Basis of valuation Equity holding Investment in the year at cost £1.2m £0.9m Most recent round 14.4% £0.5m Secret Food Tours is a rapidly growing food and beverage tour company that has developed a scalable and profitable approach to global expansion. Its flagship events centre on high-end food tours, culinary events, and nightlife tours. The company operates tours across five continents. Cost Valuation Basis of valuation Equity holding £2.0m £5.1m Multiples 20.5% Hackney Gelato produces artisanal gelato that specialises in creating unique and delicious flavours using high-quality, locally sourced ingredients. It was established in 2015 by two chefs, Sam and Enrico, who learnt the craft from the master Gualtieri of Sicily. The brand has quickly become one of the leading suppliers to high-end London restaurants, as well as retail customers through multiple channels including Ocado, Waitrose, Tesco, Whole Foods, Gorillas and independent retail outlets. Hackney Gelato has won 40 Great Taste awards in five years. Cost Valuation Basis of valuation Equity holding Investment in the year at cost £3.2m £4.0m Most recent round 36.1% £0.5m Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Education 28 6.1% of net assets Kinteract is a digital education platform that enables collaboration between teachers, students and parents and provides guidance to aid child development. It is aimed at those throughout the education and learning sector, both in the UK and internationally. Kinteract is delivered through a simple and elegant interface on desktop, tablet and mobile versions, and allows practitioners, parents and students to record events linked to their learning and development collaboratively. N Nursery & Family Club is a 7-day-a-week neighbourhood club, which offers a nursery (N Nursery) during the week and a family club space (N Family Club) at weekends. N Nursery & Family Club is open 51 weeks per year, closing only between Christmas and New Year and, to provide parents with a flexible offering, the nursery is open from 7am to 7pm. The business has more than 30 live sites including its latest additions. Cost Valuation Interest rolled up in fixed income investment £3.6m £2.1m £1.9k Cost Valuation Basis of valuation Basis of valuation Equity holding Investment in the year at cost Most recent round Equity holding 48.8% £0.7m £3.0m £7.3m Most recent round 6.7% Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 29 ToucanTech is a software-as-a-service (SaaS) CRM and website-builder used by schools, charities and companies to run their communities. It allows organisations to manage marketing, fundraising, alumni communications and events in one easy-to-use, vertically integrated platform. ToucanTech has created a user-friendly, cost-effective community management software platform that encompasses a wide range of features. Smartify is an award-winning digital platform used by some of the world’s most popular art and cultural institutions to bring their content to life. Smartify gives its users access to audio tours, a ‘Shazam for art’ feature covering over 2 million artworks, and a suite of distance learning tools which have been produced in association with the world’s leading cultural institutions. Smartify was launched in 2017 by Tate trustee Anna Lowe and digital entrepreneur Thanos Kokkiniotis. The company’s app is the #1 UK museum app. Annie Mals was incorporated in 2021 by Emily Samuels, an award-winning charity fundraiser and Oxbridge classics graduate. Emily has drafted a series of 15-20 illustrated children’s books for 4-6-year-olds. The first book has been published with the rest to follow. Emily plans to license the characters for television animation and short-form YouTube content with toys, clothing, and accessories in the proposed pipeline. Cost Valuation Basis of valuation Equity holding £1.0m £1.8m Cost Valuation Multiples Interest rolled up in fixed income investment £1.5m £1.5m £20.0k Cost Valuation Basis of valuation 12.2% Basis of valuation Most recent round Equity holding £0.5m £0.5m Most recent round 20.0% Equity holding Investment in the year at cost 20.0% £0.5m Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 30 Design Troubadour Goods is a sustainable London based luxury men’s and women’s accessories brand specialising in designing and creating superior handcrafted leather and textile goods, including an affordable range of products. Troubadour has recently opened its first London store in Beak Street, with the entire collection on display. Cost Valuation Interest rolled up in fixed income investment £2.5m £3.9m £0.2m Basis of valuation Equity holding Most recent round 37.3% 11.8% of net assets Kat Maconie designs and manufactures distinctive ladies’ boots and shoes which are sold online, in department stores and boutiques globally. The brand's signature style is characterised by bold colours, unique prints, and innovative design details, such as patterns and metallic accents. The company has stores in London and Puerto Rico. Cost Valuation Interest rolled up in fixed income investment £2.9m £3.8m £0.4m Basis of valuation Equity holding Investment in the year at cost Most Recent Round 31.6% £1.0m Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Bella Freud is a fashion designer label producing a range of high-end men’s and women’s clothing and homeware. The collections are available at the Flagship store on Chiltern Street in London, online and through a range of luxury retail boutiques and department stores in the UK, and around the world. Bella Freud's mission is to create clothing and accessories that are both stylish and comfortable, and that reflect the brand's unique, irreverent spirit. Cost Valuation Interest rolled up in fixed income investment £4.3m £7.1m £0.2m Basis of valuation Equity holding Investment in the year at cost Most recent round 46.4% £1.1m 31 NEW Bloobloom sells premium glasses and sunglasses at a fair price, via a seamless buying experience. Bloobloom sells direct-to-consumer (DTC) both online and offline through a growing store network and offers a free Home Try On service for online customers who select five styles to be sent to their homes. The business is rolling out stores over London as they continue to grow. Cost Valuation Basis of valuation Equity holding Investment in the year at cost £2.5m £2.5m Most Recent Round 14.1% £2.5m Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Heist is a UK-based fashion brand that specialises in creating high-quality, comfortable, and stylish hosiery for women. The company was founded with the goal of rethinking the traditional hosiery industry. Heist uses innovative materials and design techniques to create hosiery that is both comfortable and stylish, with features like a waistband that does not roll down, a seamless design that eliminates bulges, and a range of skin-tone shades that are inclusive. The company also places a strong emphasis on sustainability, using recycled materials and reducing waste in their production process. Cost Valuation Interest rolled up in fixed income investment £8.3m £3.4m £0.2m Basis of valuation Equity holding Investment in the year at cost Most recent round 40.2% £2.1m 32 NEW Ro&Zo is a womenswear brand selling accessible, trend-led pieces that flatter women of all ages and sizes. Ro&Zo’s key product categories include dresses and occasion wear, alongside a range of tops, trousers, and loungewear, all of which are designed to be versatile, comfortable, and fashionable. Cost Valuation Basis of valuation Equity holding Investment in the year at cost £1.5m £1.5m Most recent round 21.4% £1.5m Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 33 VIEVE is an online first, female cosmetics brand founded by Jamie Genevieve, a professional makeup artist and beauty influencer. Jamie has a cult following of over three million social media followers, was voted beauty influencer of the year in 2021 by VOGUE and is a member of the British Beauty Council’s advisory board. JustWears is a men’s basics brand looking to disrupt a £31 billion category that is dominated by stagnant legacy brands and unsustainable products. JustWears is currently selling its maiden product, men’s underwear. The brand prides itself on the use of innovative materials, with a focus on ergonomic designs and comfort, made using sustainable, biodegradable, high-performance fabrics. We Are Tala (TALA) is a sustainable activewear brand focused on ‘Gen Z’ (the generation that was born between 1997 and 2012) females. TALA was founded by fitness influencer Grace Beverley, who has amassed a loyal social media following of over a million followers on her personal Instagram account. Cost Valuation Basis of valuation Equity holding Investment in the year at cost £1.0m £1.0m Cost Valuation £2.0m £2.0m Cost Valuation Most recent round Basis of valuation Most recent round Basis of valuation 3.8% £1.0m Equity holding 15.3% Equity holding £0.2m £0.2m Most recent round 1.2% NEW Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Media 14.0% of net assets NEW 34 Boat International Media provides information and data services across traditional print, digital media, and high-quality events. Boat's superyacht database leverages its large collection of information on superyachts and the industry. Cost Valuation Interest rolled up in fixed income investment Basis of valuation Equity holding £3.3m £7.0m £1.1m Multiples 17.9% Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Auddy was launched in 2021 to help companies and build and distribute audio content whilst carefully placing targeted advertisements (ads) therein. Auddy delivers end-to-end premium audio podcast publishing solutions for both creators and organisations. The business is focused on targeted audiences, highly responsive advertising solutions and deep analytics. Cost Valuation Basis of valuation Equity holding Investment in the year at cost £1.8m £1.8m Most Recent Round 8.7% £1.8m Popsa is a photobook app that, using proprietary machine learning algorithms, has reduced the time it takes for customers to produce photobooks from 2 hours to an average of just 5 minutes. Popsa operates in a billion-dollar global industry that has been built on a clunky and frustrating process. By automating the selection of a customer's most relevant photos, Popsa's disruptive software removes this frustration. Cost Valuation Basis of valuation Equity holding £5.2m £14.5m Multiples 18.0% Stillking Films is a prolific producer of commercials, TV series, feature films and music videos. The company has created commercials for almost all Dow Jones and FTSE advertisers. They have co-produced several successful feature films, including Spider-Man: Far from Home, The Falcon and the Winter Soldier, Casino Royale and created music videos for artists including Beyoncé, Kanye West, Blur, Madonna, and One Direction. Cost Valuation Basis of valuation Equity holding £1.5m £6.1m Multiples 4.9% Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 35 Roto VR’s flagship product is an interactive virtual reality (VR) chair. The chair synchs what users feel with what they see, by auto rotating wherever the user looks. This phenomenon known as gravitational presence is achieved by incorporating accelerometers, gyroscopes and magnetometers inside the Roto Head tracker; a small device that clips onto the user’s own VR headset. The Company has developed a VR immersion chair which boasts a smaller form factor allowing consumers to enter the VR world with the same benefits as the VR chair. Cost Valuation Basis of valuation Equity holding £1.8m £0.9m Most recent round 22.1% Digital services 36 15.7% of net assets Rated People, founded in 2005, is one of the UK’s leading online marketplaces for homeowners to find tradesmen for home improvement jobs. Trust pilot review Rated People at “Excellent” with a rating of 4.4 out of 5. Cost Valuation Basis of valuation Equity holding £0.6m £0.6m Multiples 1.1% Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Wishi is an innovative fashion technology business that brings together personal styling and online wardrobe management functionality to help fully exploit an individual’s current wardrobe and provide new clothing suggestions personalized to their look. The business has recently launched its first white-label partnership with a major international online fashion retailer. Cost Valuation Basis of valuation Equity holding £0.2m £1.1m Most recent round 1.2% 37 HotelMap is a worldwide platform for managing hotel bookings exclusively for business events such as conferences, professional congresses, conventions, and trade shows. The company seeks to exploit the advantages associated with hotel booking for business events by creating a completely autonomous on-demand platform. HotelMap aims to become the dominant global brand in the sector, enabling the platform to aggregate buying power with hotel suppliers because of its ability to manoeuvre the world’s largest audience of business event delegates to HotelMap’s official hotels. Cost Valuation Basis of valuation Equity holding £1.5m £2.4m Most recent round 5.2% Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Unbolted provides a platform for peer-to-peer secured lending, offering short-term liquidity to individuals seeking bridging facilities, or advance sale loans for personal or small business use. In late 2019, the company launched their first mortgage product to complement the asset-back lending product. Cost Valuation Basis of valuation Equity holding £0.4m £0.6m Multiples 5.9% 38 Credentially aims to ease the administrative burden placed on both medical and clerical staff when applying for and filling job vacancies in Health and Social Care. This application process is resource-intensive and can take up to six months. To reduce this burden, Credentially has developed software that automates the sign-up, verification, and ongoing compliance of employees in Health and Social Care. With the success in the UK market, they are currently expanding in the US. Cost Valuation Basis of valuation Equity holding £3.0m £2.6m Most recent round 17.5% Floom is a curated global marketplace platform for independent florists; its mission is to become the primary destination for customers looking to send flowers worldwide. It also encompasses FloomX which provides a complete back-office function for independent florists to make their work more streamlined, efficient, and enjoyable. Floom is expanding its US operations by collaborating with small independent florists and working to secure increased subscriptions. Cost Valuation Interest rolled up in fixed income investment Basis of valuation Equity holding Investment in the year at cost £4.6m £0.6m £7.0k Market Value 24.4% £0.1m Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Dropless has developed an eco-friendly, non-hazardous nano car cleaning solution which has helped save over 200 litres of water every wash. The company launched a scratch and dent repair service in 2020 and the Dropless Hydroloop, the world’s first closed-loop HGV and LCV wash system. They have grown rapidly, expanding beyond London to Bristol and Manchester through its regional B2B customers. Cost Valuation Interest rolled up in fixed income investment £4.4m £4.1m £0.2m Basis of valuation Equity holding Investment in the year at cost Most recent round 22.6% £0.6m 39 OnePlan has built a collaborative, easy-to-use, real-time platform for event and venue planning. OnePlan combines the world’s best selection of 2D, 3D, satellite, and aerial maps into its platform to provide planners with fully customizable solutions to suit their event planning needs. The user-friendly design allows employees of all skill levels to use the platform without specialist training. The company has recently been awarded a contract for planning the 2024 Olympic and Paralympic Games in Paris. Cost Valuation Basis of valuation Equity holding £3.8m £7.7m Most recent round 14.1% COAT Paints is a paint brand disrupting a market dominated by ageing incumbents. COAT provides premium, environmentally friendly paint at a cost approximately 20% lower than its direct competitors. Coat’s entire range is water-based and solvent-free, low VOC (volatile organic compounds), 100% vegan and 100% animal cruelty-free. Cost Valuation Interest rolled up in fixed income investment Basis of valuation Equity holding £3.0m £3.6m £35.9k Multiples 27.7% Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 40 Seatfrog is a two-sided technology business with a mission to build a better future for rail operators and their passengers with its consumer-facing application. Seatfrog provides enterprise software to train operating companies that increases revenue, creates new incremental revenue sources and improves customer satisfaction scores. Together, Seatfrog’s consumer app aims to provide rail passengers with a superior customer experience as the only app that allows one to buy a ticket, upgrade to first-class and switch to any train. Cost Valuation Basis of valuation Equity holding Investment in the year at cost £3.0m £3.0m Most recent round 11.5% £3.0m NEW Peckwater Brands develops virtual food brands for delivery- only restaurant franchises which are operated by existing restaurant owners allowing them to increase their revenue from their existing kitchens. Since its commercial launch in 2020, Peckwater has developed multiple brands, ranging from Korean fried chicken and wings to a plant-based hot dog brand in partnership with Unilever. Cost Valuation Basis of valuation Equity holding Investment in the year at cost £4.0m £7.5m Most recent round 11.6% £3.0m Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Statutory Reports Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 42 Strategic Report This report has been prepared by the Directors in accordance with the requirements of s414 of the Companies Act 2006 and incorporates the Financial Highlights, Chair’s Statement and Investment Portfolio section. The aim of the Strategic Report is to provide shareholders with the ability to assess how the Directors have performed their duty to promote the success of the Company for shareholders’ collective benefit. Investment overview The Investment objective of the Company is to generate tax-free capital gains and income on investors’ funds through investment, primarily in companies that are founder led, whilst mitigating risk appropriately within the framework of the structural requirements imposed on all VCTs. Investment policy Investment objectives The Company will seek to invest in a diversified portfolio of smaller companies, principally unquoted companies but possibly also including stocks quoted on AIM or Aquis, selecting companies which the Investment Manager believes provide the opportunity for value appreciation. Pending investment in suitable Qualifying Investments, the Investment Manager will invest in investments intended to generate a positive return, which may include certain money market securities, gilts, listed securities and cash deposits. The Company will continue to hold up to 20% of its net assets in such products after it is fully invested under the VCT rules. Investment strategy For its “qualifying investments” (being investments which comprise Qualifying Investments for a venture capital trust as defined in Chapter 4 Part 6 of the Income Tax Act 2007) (“Qualifying Investments”), the Company is expected to invest primarily in unquoted companies, although it may also invest in companies whose shares are traded on AIM or Aquis. The Company will invest in a diverse range of businesses, predominantly those which the Investment Manager considers are capable of organic growth and, in the long term, sustainable cash flow generation. It is likely that investment will be biased towards founder led and innovative businesses with an established brand or where brand development opportunities exist. The Company will invest in a small portfolio of carefully selected Qualifying Investments where the Investment Manager should be able to exert influence over key elements of each investee company’s strategy and operations. The companies may be at any stage in their development from start-up to established businesses. It is anticipated that, at any time, up to 20% of investments will be held in non-VCT qualifying investments, recognising that no single investment will represent more than 15% of net assets (at the time of investment). Until suitable Qualifying Investments are identified, up to 20% of the net proceeds of any offer will be invested in other funds, with the balance being invested in other investments which may include certain money market securities, and cash deposits. Asset allocation Qualifying Investment portfolio Under current VCT legislation, the Company must at all times hold at least 80% of its funds in Qualifying Investments. Funds raised in a period of up to three years are excluded from this requirement, but at least 30% of funds raised in any accounting period must be invested in Qualifying Investments by the anniversary of the end of the accounting period in which those funds were raised. For its Qualifying Investments, the Company will invest primarily in companies whose shares are not traded on any exchange, although it may also invest in companies whose shares are traded on AIM or Aquis, and will invest up to a maximum of 15% (at the time of investment) in any single Qualifying Investment. The Investment Manager will seek to construct a portfolio comprising a diverse range of businesses. It is expected that a substantial proportion of the Qualifying Investments will be in the form of ordinary shares, and in some cases preference shares or loans. Non‑Qualifying Investment portfolio Under current VCT legislation, the Company must have invested at least 80% of funds raised in Qualifying Investments within three years of the funds being raised (70% until 31 March 2020). However, this programme of investment in Qualifying Investments will take time to complete; thus in the first three years following a fund raise, a considerable proportion of those funds will need to be invested elsewhere, in Non-Qualifying Investments such as certain money market securities, listed securities and cash deposits. At any time after the end of the three years of initial investment in Qualifying Investments, the Company will hold no more than 20% of its funds in Non-Qualifying Investments. The portfolio of Non-Qualifying Investments will be managed with the intention of generating a positive return. Until suitable Qualifying Investments are identified, up to 20% of the net proceeds of any offer will be invested in other funds, with the balance being invested in other investments which may include money market securities and cash deposits. Risk diversification The Directors will control the overall risk of the portfolio by ensuring that the Company has exposure to a diversified range of unquoted companies, in particular, through targeting a variety of sectors. The Company may invest in a diverse range of securities: unquoted Qualifying Investments will typically be structured as a combination of ordinary shares, preference shares, convertible shares and loans. In order to limit concentration risk in the portfolio, at the time of investment no more than 15% by value of the relevant share pool of the Company will be invested in any single portfolio company. Further, at the time the investment is made, no more than 10% in aggregate of the NAV of the Company may be invested in other listed closed-ended investment funds. Borrowing In common with many other VCTs, although currently the Board does not intend that the Company will borrow funds, the Company has the ability to borrow funds provided that the aggregate principal amount outstanding at any time does not exceed 25% of the value of the adjusted capital and reserves of the Company at the time the borrowings are incurred. In summary, this is when the aggregate of (a) the issued share capital, plus (b) any amount standing to the credit of the Company’s reserves less (c) any distributions declared and intangible assets and adjusting for any variation to the above since the date of the relevant balance sheet. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 43 Strategic Report Business review A detailed review of the Company’s development and performance during the year and consideration of its future prospects may be obtained by reference to this Report, the Chair’s Statement (pages 7 and 8) and the Investment Manager’s Review (pages 16 to 22. Details of the investments made by the Company are given in the Investment Portfolio section (pages 23 to 40). A summary of the Company’s key financial measures is given on pages 5 and 6. The Directors consider the following Key Performance Indicators (KPIs) to assess whether the Company is achieving its strategic objectives: • NAV per share (page 11) • Total return per share (page 11) • Dividends per share paid in the year (page 12) • Annual Running Costs (page 12) • Qualifying percentages under VCT rules (page 13) The Directors believe these measures help shareholders assess how effectively the Company is applying its investment policy and are satisfied the results give a good indication of whether the Company is achieving its investment objectives and policy. The KPIs are established industry measures and have been discussed in detail in the Chair’s Statement and Investment Manager’s Review on pages 7 & 8 and 16 to 22. Management agreement Pembroke Investment Managers LLP (the “Investment Manager”), which is authorised and regulated by the Financial Conduct Authority to conduct investment business, is the Investment Manager of the Company under the terms of an investment management agreement entered into on 15 February 2013, novated to the Investment Manager on 1 July 2014 and varied on 1 March 2013, 3 October 2014, 1 December 2017 and 16 July 2020 (the “IMA”). Pursuant to the IMA, the Investment Manager provides discretionary and advisory investment management services to the Company in respect of its portfolio of investments. The Investment Manager acts as the Alternative Investment Fund Manager to the Company. The Investment Manager provides services in accordance with the IMA for which it receives a management fee of 2% of the Company’s NAV. The effect of the cost cap is to restrict the management fee to 2% of NAV less the extent to which the Company’s ordinary course annual costs and expenses exceed 0.5% of NAV. The cost cap does not apply to costs and expenses which are not in the ordinary course of the Company's business (for example, costs related to a share offer, any performance incentive fee and costs) and expenses outside an agreed list of standard ordinary course costs. Contrary to many other Investment Managers, the Investment Manager does not take any arrangement fees, or exit fees from any of the portfolio companies or the Company itself. From April 2023, the Investment Manager has introduced a portfolio support fee, payable by the portfolio companies, up to a maximum of £30,000 per year for the first three years, for new investments where the overall investment cost is in excess of £1 million. As is customary in the venture capital industry, the Investment Manager will be incentivised with a performance fee to align the interests of the Investment Manager and shareholders. At a General Meeting held on 14 August 2020, a Deed of Amendment & Restatement dated 16 July 2020 was approved thereby revising the IMA and introducing a revised performance incentive fee, which can only be paid once a profitable exit has been achieved. The key features of the revised fee are: • performance incentive fees are only payable to the Manager if the Company’s cumulative realised investment gains are greater than its cumulative realised investment losses. This high watermark net realised investment gain approach requires all realised investment losses, past and future, to be recovered before any performance incentive fees are paid; • a Total Return hurdle of 3 pence per year from 14 August 2020 must be achieved before a performance incentive fee is paid to the Manager; • the relevant performance incentive fees remain unchanged at 20%, of the amount by which cumulative realised investment gains exceed cumulative realised investment losses, less previous performance incentive fees paid to the Manager; • the relevant performance incentive fees will be calculated at each financial year end and half year balance sheet dates using information disclosed in the relevant year end or half year financial statements; • unless all the above conditions are met, no performance incentive fee will be payable to the Manager. The adopted Deed of Amendment & Restatement also revised the duration of the Investment Manager’s appointment under the IMA. Under the pre-14 August 2020 IMA, there was another three years to run on the initial fixed ten year term (after which the IMA would be terminated on one-year’s notice by either the Company or the Manager). It was resolved to revise these arrangements so that although the Company’s current assets and funds would continue to be subject to a one year rolling notice period, in future the Manager would have the benefit of a five-year term in relation to any new funds (“New Funds”) raised by the Company (and any investments acquired from New Funds). This would revert to a rolling term with termination on one year’s notice by either the Company or the Manager after the expiry of the relevant five-year period, although notice to terminate in respect of New Funds given by the Manager would not take effect until such time as the Manager ceases to manage any New Funds. The Directors are of the opinion that the Investment Manager continues to raise, invest and manage funds for the Company successfully and that the continuing appointment of the Investment Manager on the terms agreed is in the interests of all shareholders. Venture Capital Trust status The Company was granted approval as a Venture Capital Trust by HM Revenue & Customs under s274 of the Income Tax Act 2007. The Directors have managed the affairs of the Company in compliance with this section throughout the year under review and intend to continue to do so. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 44 Strategic Report Risk management The Board has carried out a robust assessment of the principal and emerging risks facing the Company through a risk management programme whereby it continually identifies the principal risks and uncertainties faced by the Company, including those that would threaten its business model, future performance, solvency or liquidity and reviews both the nature and effectiveness of the internal controls adopted to protect the Company from such risks as far as is possible. The principal risks facing the Company are Venture Capital Trust status risk and investment valuation and liquidity risk. The Investment Manager is also a member of the Venture Capital Trust Association whose aim is to promote and preserve the contributions of the VCT sector to the UK investment community and UK economy. The tax rules, or their interpretation, in relation to an investment in the Company and/or the rates of tax may change during the life of the Company and may apply retrospectively, which may adversely affect an investment in the Company. In 2015 a sunset clause for VCT income tax relief was introduced. This provides that income tax relief will no longer be given to subscriptions made on or after 6 April 2025, unless the legislation is renewed by an HM Treasury order. HM Treasury continue to indicate their support for extending or renewing this clause. The Company is monitoring this risk and the potential impact on the Company. Principal Risks Description and Potential Negative Impact Controls & Mitigation Venture Capital Trust status risk The risk of breaching HMRC VCT Compliance rules poses significant consequences, including the potential loss of our VCT status and exemption on capital gains. Such a breach could require Pembroke to provide compensation to affected funds, leading to financial liabilities and straining of resources. Moreover, the loss of capital gains exemption could have further detrimental effects on the Company's financial position and investor confidence. To mitigate the risk of breaching VCT rules, we have implemented the following measures: Collaborative Monitoring: Our Investment Manager liaises with Philip Hare & Associates to assess the VCT status of potential investee companies before making any investments. Quarterly VCT Status Reports: Philip Hare & Associates provides comprehensive reports on our VCT status to the Board every quarter. Rigorous Review: We carefully review estimated income and proposed dividends and share buybacks to ensure compliance with VCT regulations. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Strategic Report 45 Principal Risks Description and Potential Negative Impact Controls & Mitigation Investment valuation and liquidity risk PVCT faces the risk of errors, process failures, or incorrect assumptions in valuing its portfolio holdings, particularly since the majority of its assets are invested in unquoted companies. Valuing such companies can be inherently challenging under the IPEV guidelines. Having to liquidate these holdings in a non optimal moment may produce lower than expected returns given their lack of liquidity. Loss of Value for Investors: Inaccurate valuations can result in decreased investment value, potentially impacting investor returns and satisfaction. Poor Market Track Record and Fundraising Challenges: Valuation issues can contribute to a poor track record, making it more challenging for PVCT to attract new investment opportunities and secure future fundraising. Reduced Distributable Reserves due to Loss-Making Exits: Loss-making exits can diminish PVCT's distributable reserves, affecting the availability of funds for shareholder distributions. Damage to Reputation and Fundraising Ability: Valuation inaccuracies can harm PVCT's reputation, making it harder to attract new investors and establish valuable partnerships for future fundraising. Litigation Risks from Investors: Inaccurate valuations may expose PVCT to the risk of litigation from investors who suffer losses or perceive wrongdoing, potentially resulting in financial and reputational consequences. Valuations prepared by PIM, following IPEV guidelines are reviewed and approved quarterly by PVCT Board, with annual audit. The Investment Manager's performance is formally reviewed annually and informally at each board meeting, incentivised through an exit-based performance incentive scheme (and not based on valuations during the investment hold period). The Investment Manager maintains hands-on portfolio management, monitoring businesses monthly as a minimum. These measures promote accurate valuations, oversight by the Board of the Company, aligned incentives for successful exits, and a proactive portfolio management. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Strategic Report 46 Principal Risks Description and Potential Negative Impact Controls & Mitigation Economic risk PVCT faces various market and economic risks that can impact its valuation and investment performance: To mitigate the market and economic risks, PVCT has implemented the following measures: Economic conditions and interest rate movements can impact smaller companies' valuations, potentially reducing PVCT's asset value. Inflation, geopolitical uncertainty, and interest rate changes can increase NAV volatility. There is a heightened emphasis on assessing the medium-term impact of inflation on asset valuations, particularly considering the short-term drivers such as higher energy prices and increasing costs. Events like the war in Ukraine, COVID-19 pandemic, Brexit, economic recessions, supply shortages, or currency and interest rate movements may affect trading conditions for smaller companies and the value of PVCT's investments. Movements in UK stock market indices can affect PVCT's investment valuations, as well as the company's own share price and discount to net asset value. Operational risk PVCT monitors various operational risks, including fraud, business continuity, external reporting, delegation, key person risk, conflicts, outsourcing, cyber threats, marketing, systems, and controls. By proactively addressing these risks, PVCT aims to prevent breaches or issues that could negatively impact the accuracy of financial statements and the overall value for investors. Regular Reporting: The Board receives quarterly reports from the Investment Manager, ensuring ongoing monitoring and oversight of the portfolio's performance and market conditions. Diversified Portfolio: PVCT maintains a diversified portfolio within sub-sectors, aiming to minimise the impact of market cyclicality. This diversification strategy helps spread the risk and provides stability during different market conditions. Adequate Liquidity Levels: PVCT ensures it maintains adequate liquidity levels to address any potential stress situations that may arise within the portfolio companies. This approach enables PVCT to support its investments during challenging market scenarios. Proactive Portfolio Follow-up: PVCT's portfolio companies receive regular follow-up and support from the Investment Manager. This proactive approach ensures ongoing engagement and monitoring of portfolio companies' performance, reducing the likelihood of adverse impacts. PVCT regularly reviews the performance of the mitigation strategy to the aforementioned risks. Some controls and mitigations are cited below: Segregation of duties, and initial and ongoing due diligence monitoring of third parties to prevent Fraud. Business continuity assessment conducted at a group level to test response effectiveness. Conflict policy, and governance protocols to manage conflict risks. The Investment Manager monitors the key service providers with periodic compliance and performance reviews. The Board reviews the assessment. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Strategic Report 47 Principal Risks Description and Potential Negative Impact Controls & Mitigation Social, environmental, community and human rights issues The Company recognises the significance of social, environmental, community, and human rights issues and conducts assessments of the environmental practices of its investments to mitigate risks related to employee welfare, community engagement, and ethical business conduct to mitigate any potential reputational risk while safeguarding the valuation of PVCT's NAV. However, as an externally managed investment company without direct employees, it does not currently have specific policies dedicated to these matters, which is not considered a risk. Nonetheless, the Company remains committed to promoting and supporting these issues throughout its portfolio companies. Loss of key people: Sufficient number of Board members and employees (at all levels) within the Investment Manager with diversity of skills to allow for adequate cover. Gender Diversity: The Company has five Directors, including one female, demonstrating a commitment to gender diversity in its leadership. Electronic Communication and Payments: The Company promotes the wider adoption of electronic communication and electronic payments among its shareholders, aiming to reduce paper usage and environmental impact. Recycled Paper: For printed documents that are still necessary, the Company uses recycled paper, contributing to sustainable practices. While the Company does not have specific policies, it takes actions to address social, environmental, community, and human rights concerns within its capacity and encourages responsible practices within its portfolio companies. PVCT has implemented the following measures to address key person risk: Sufficient Board Members: PVCT ensures that it has an adequate number of Board members to provide cover and redundancy in case of key person departures. This helps maintain continuity and expertise within the Company. Diverse Skills: PVCT seeks to have a diverse range of skills among its Board members and among the Investment Manager's employees. This diversity of skills ensures that there are individuals capable of stepping in and providing necessary expertise if key personnel are no longer available. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Strategic Report Pembroke Diversity & Inclusion As part of the Company, the Board and with the Investment Manager’s commitment to promote ESG reporting; the following pie chart analyses the Diversity & Inclusion Summary of the Company’s Portfolio, the Board, and the Investment Manager. 48 Pembroke Investment Manager 15 persons Investment Committee 4 persons Portfolio Companies (% are based on the value of investment) Founders C-Suite Pembroke VCT Board 5 persons 20% 40% 60% 80% 75% 25% 32% 47% 53% 68% 100% 20% 100% 5% 17% 80% 95% 83% Male Female Ethnically diverse White Note: Female founder composition is based on having at least one female founder. C-Suite composition is based on having at least one female member. Ethnic diversity definition is based on gov.uk definition. Founder diversity is based on having at least one ethnically diverse founder. C-Suite diversity, including founders, is based on having at least one ethnically diverse member. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 N O I T I S O P M O C Y T I S R E V D I Strategic Report 49 Statement on long‑term viability In accordance with the UK Corporate Governance Code in 2018 (the “2018 Code”), the Directors have considered their obligation to assess the viability of the Company over a period longer than the 12 months from the date of approval of the Financial Statements required by the going concern basis of accounting. The Directors have carried out a robust assessment of the prospects of the Company for the period to 31 March 2028, taking into account the Company’s current position and principal risks, and are of the opinion that, at the time of approving the Financial Statements there is a reasonable expectation that the Company will be able to continue in operation and meet liabilities as they fall due. The Board carried out robust stress testing of cash flows, which included paying out dividends, performing share buybacks, making new investments, supporting our current portfolio with funding and fundraising. The Directors consider that for the purpose of this exercise a five-year period is an appropriate time frame, as it allows for reasonable forecasts to be made to allow the Board to provide shareholders with reasonable assurance over the viability of the Company. In making their assessment the Directors have taken into account the nature of the Company’s business and investment policy, its risk management policies, the diversification of its portfolio and the Company’s cash position. The Board has additionally considered the ability of the VCT to comply with the ongoing conditions to ensure it maintains its VCT qualifying status under the current investment policy. Alternative Investment Fund Managers Directive (“AIFMD”) In July 2013 the AIFMD was implemented, a European directive affecting the regulation of VCTs. The Company has appointed its Investment Manager as its AIFM. The Company’s Investment Manager was entered on the register of small registered UK AIFMs in February 2014. As an AIFM, the Investment Manager is required to submit an annual report to the FCA setting out various information relating mainly to the Company’s investments, principal exposures and liquidity. By Order of the Board The City Partnership (UK) Limited Company Secretary 29 June 2023 Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Directors’ Report This Directors’ report incorporates the Corporate governance statement on pages 56 to 58 and the Statement of Directors Responsibilities on page 59. Principal activity and status The Company is registered as a public limited company in England and Wales under registration number 08307631. The Directors have managed and intend to continue to manage the Company’s affairs in such a manner as to comply with s274 of the Income Tax Act 2007. Directors The Directors of the Company during the period under review were Jonathan Djanogly, Laurence Blackall, Mark Stokes, Louise Wolfson and David Till. Brief biographical details of the Directors are given on pages 9 and 10. Shareholder UBS Private Banking Nominees Ltd to attend and speak at general meetings, to appoint proxies and to exercise voting rights. There are no restrictions on the voting rights attaching to the Company’s shares or the transfer of securities in the Company. Substantial shareholdings The directors are aware of one substantial shareholding representing 3 per cent or more of the Company's issued share capital as at 31 March 2023 and the date of this report. As of 31 March 2023 No. B Ord shares held % of shares in issue As of 22 June 2023 No. B Ord shares held % of shares in issue 17,891,873 9.5335 16,977,144 8.9540 Share capital There were 187,673,741 shares in issue at the year end. During the year 27,351,962 shares were allotted under Offers for subscription at an average price of 123.28 pence per share raising £33.7 million before deducting issue costs. 1,087,132 shares were allotted under the FlexiDRIS at an average price of 121.00 pence per share raising £1.3 million. Since the year end, 6,484,330 shares have been issued under Offer for subscription and 681,627 shares have been allotted under the FlexiDRIS, refer to Note 25 on page 84 for further details. The Company will consider requests to buy back shares but is mindful that investment in the Company was promoted as comparatively long term with venture capital portfolios typically taking from five to seven years to mature. The Directors review these requests around the financial year end and half year. During the year to 31 March 2023 5,234,964 shares were bought back by the Company. The rights and obligations attaching to the Company’s shares are set out in the Company’s Articles of Association, copies of which can be obtained from Companies House. The holders of shares are entitled to receive dividends when declared, to receive the Company’s report and accounts, Independent auditor A resolution to reappoint BDO LLP as Independent Auditor will be proposed at the forthcoming AGM. Accountability and audit The Statement of Directors' Responsibilities in respect of the Financial Statements is set out on page 59 of this report. The report of the Independent Auditor is set out on pages 61 to 66 of this report. The Directors who were in office on the date of approval of these Financial Statements have confirmed that, as far as they were aware, there is no relevant audit information of which the auditor is unaware. Each of the Directors has taken all the steps they ought to have taken as Directors in order to make themselves aware of any relevant audit information that has been communicated to the auditor. Future developments The primary focus will continue to be on the development of an investment portfolio which will deliver attractive returns over the medium to longer term. The Company will continue to provide support for the ongoing development of investee companies and the Company’s Investment Manager will continue to work closely with all investee companies towards accelerating their growth and identifying possible Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 50 exits in the short to mid-term. Further details on the Company’s future prospects may be found in the Outlook paragraph in the Chair’s Statement on page 8. Details of post balance sheet events may be found at Note 25 to the Financial Statements. Going concern In accordance with FRC Guidance for Directors on going concern and liquidity risk, the Directors have assessed the prospects of the Company and are of the opinion that, at the time of approving the Financial Statements, the Company has adequate resources to continue in business for at least 12 months from the date of approval of the Financial Statements. In reaching this conclusion the Directors took into account the nature of the Company’s business and Investment Policy, its risk management policies, the diversification of its portfolio and the cash holdings. They have also reviewed the budgets and forecasts, which have been subject to liquidity stress tests performed by the Investment Manager, and consider that the Company has adequate financial resources to enable it to continue in operational existence for the foreseeable future. The Company’s business activities, together with the factors likely to affect its future development, performance and position including the financial, and operational related risks the Company is exposed to are set out in the Strategic Report on pages 42 to 47. As a consequence, the Directors have a reasonable expectation that the Company has sufficient cash to continue to operate and the Company is well placed to manage its business risks successfully and meet its liabilities as they fall due despite the current economic climate. Thus, the Directors believe it is appropriate to continue to apply the going concern basis in preparing the Financial Statements. Financial instruments Information on the principal financial instruments held by the Company, including details about risk management, may be found in the Investment Review forming part of the Strategic report and at Note 21 to the Financial statements. 51 Directors’ Report Section 172 Statement: Directors’ duty to promote the success of the Company This section sets out the Company’s Section 172 Statement and should be read in conjunction with the other contents of the Strategic Report. The Directors have a duty to promote the success of the Company for the benefit of its members as a whole. In fulfilling this duty, the Directors have regard to a number of matters including: • the likely consequences of any decision in the long term; • the interests of the Company’s employees; • the need to foster business relationships with suppliers, customers and others; • the impact of the Company’s operations on the community and the environment; • the desirability of the Company maintaining a reputation for high standards of business conduct; and • the need to act fairly between members of the Company. As an externally managed investment company, the Company does not have employees. Its main stakeholders therefore comprise the shareholders, the Investment Manager, investee companies and a small number of service providers. Shareholders The Board places great importance on communication with its shareholders and encourages shareholders to attend the AGM and welcomes communication from shareholders as described more fully on page 58 in the Corporate Governance Statement. Investment Manager The investment management services are fundamental to the long-term success of the Company through the pursuit of the investment objectives. The Board’s decisions are intended to achieve the Company’s objective to invest in a diversified portfolio of smaller, principally unquoted companies which the Investment Manager believes provide the opportunity for value creation. The Board regularly monitors the Company’s performance in relation to its investment objectives and seeks to maintain a constructive working relationship with the Investment Manager. Representatives of the Investment Manager attend each quarterly board meeting and provide an update on the performance of companies in the portfolio. Investee companies The Company’s performance is directly linked to the performance of its underlying investee companies and accordingly communication with those companies is regarded as very important. The Investment Manager has a director on the board of many, but not all, of the portfolio companies and communicates with all of them irrespective of this on a regular basis. Investments also carry information rights so that the Company is provided with reporting updates at least quarterly. Regulators As a UK listed company the Board and Investment Manager comply with the Companies Act, HMRC, UK Accounting Standards and FCA regulatory requirements in addition to the Alternative Investment Fund Managers Directive, to ensure the Company can continue to trade. The Company continued to comply with these regulations throughout the year and to the date of this Report. Key decision making The Board has policies for dividends, share buybacks and the dividend reinvestment scheme which are discussed regularly and also discusses fundraising each year to ensure funds are available for investment where opportunities exist with new or existing investee companies. The Board also discusses the cash balances, distributable reserves and the VCT rules to ensure the Company can pay stable dividends for investors, with additional special dividends linked to investment realisations and conduct share buybacks. Other service providers Certain providers such as registrar, receiving agent, tax adviser, auditor, lawyers and others contract directly with the Company and do work on its behalf. Some providers such as the distributor provide their services to the Company via a contract with the Investment Manager. The quality of the provision of these services is considered by the Directors at Board meetings. The Board’s primary focus in promoting the long-term success of the Company for the benefit of the shareholders as a whole is to direct the Company with a view to achieving the investment objective in a manner consistent with its stated investment policy and strategy. Global greenhouse gas emissions The Company has no direct greenhouse gas emissions or energy consumption to report from its operations, being an externally managed investment company. The Company does not fall within the scope of The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 effective as of 1 April 2019 which implements the Government’s policy on Streamlined Energy and Carbon Reporting, replacing the Carbon Reduction Commitment Scheme. The 2018 Regulations require companies that have consumed over 40,000 kilowatt-hours of energy to include energy and carbon information in their Directors’ Report. This does not apply to the Company as it qualifies as a low energy user. Listing Rule 9.8.4 requires the Company to include certain information in a single identifiable section of the Annual Report or a cross reference table indicating where this information is set out. The Directors confirm that there are no disclosures required to be made in this regard. By Order of the Board The City Partnership (UK) Limited Company Secretary 29 June 2023 Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 52 Terms of appointment None of the Directors has a service contract with the Company. On being appointed, all Directors received a letter from the Company setting out the terms of their appointment, details of the fees payable and their specific duties and responsibilities. A Director’s appointment may be terminated by the Director or by the Company on the expiry of three months’ notice in writing given by the Director or the Company as the case may be. No arrangements have been entered into between the Company and the Directors to entitle any of the Directors to compensation for loss of office. The letters of appointment are available for inspection on request from the Company Secretary. The Company’s Articles of Association provide that the Directors will be subject to election at the first annual general meeting after their appointment and at least every three years thereafter. Brief biographical details of the Directors are given on pages 9 and 10. Directors’ Remuneration Report This report has been prepared by the Directors in accordance with The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended) (the “Regulations”). An ordinary resolution for the approval of the Directors’ Annual Report on Remuneration will be put to members at the forthcoming AGM. The Company’s auditor, BDO LLP, is required to give its opinion on certain information included in this report. The disclosures which have been audited are indicated as such. The auditor’s opinion on these and other matters is set out in their report on pages 61 to 66. Annual statement from the Chair of the Company Jonathan Djanogly and Laurence Blackall began their term on 27 November 2012, David Till was appointed as a Director of the Company on 28 August 2018. Mark Stokes and Louise Wolfson were appointed as Directors on 1 January 2021. The Board resolved that, with effect from 1 April 2020, the Chair’s annual fee would be increased to £30,000 (from £20,000) and the annual fee for other Directors would be increased to £25,000 (from £15,000). David Till has waived his annual fee with effect from 1 April 2020. The Company has introduced a Remuneration and Nomination Committee which shall meet as required, and at least, annually. The committee will review the appointments to the Board and its committees and the levels of director remuneration. Directors’ remuneration policy This statement of the Directors’ Remuneration Policy took effect following approval by shareholders at the annual general meeting held on 30 September 2020 when 98.9% of those who voted, voted to approve the Policy. A resolution to approve the Directors’ Remuneration Policy will be put to shareholders every three years. At this year’s annual general meeting, shareholders are being invited to approve the continuation of the Policy described below. The Board has not retained external advisors in relation to remuneration matters but has access to information about directors’ fees paid by other companies of a similar size and nature and this is used as a reference when setting the Directors’ remuneration. Shareholders’ views in respect of the directors’ remuneration are communicated at the Company’s AGM and are taken into consideration in formulating the Directors’ Remuneration Policy. The Board has not received any views from the Company’s shareholders in respect of the levels of Directors’ remuneration. The Board considers that Directors’ fees should reflect the time commitment required and the high level of responsibility borne by Directors, and should be broadly comparable to the fees paid by similar companies while ensuring that the fees payable are appropriate to retain individuals of sufficient calibre to lead the Company in achieving its short and long-term strategy. The Company’s Articles of Association, further to a resolution passed at a General Meeting held on 14 August 2020, place an overall annual limit of £150,000 (£100,000 pre-14 August 2020) on Directors’ remuneration. None of the Directors is eligible for pension benefits, share options, bonuses or other benefits in respect of their services as non-executive Directors of the Company. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Directors’ Remuneration Report Directors’ annual report on remuneration Directors’ fees for the year (audited) The fees payable to individual Directors in respect of the year ended 31 March 2023 are shown in the table below. Director Jonathan Djanogly Laurence Blackall Mark Stokes* Louise Wolfson* David Till** Total annual fee £ Total fee paid for the year ended 31.03.23 £ Total fee paid for the year ended 31.03.22 £ 30,000 25,000 25,000 25,000 Nil 30,000 25,000 25,000 25,000 Nil 30,000 25,000 25,000 25,000 Nil *Mark Stokes and Louise Wolfson were appointed to the Board on 1 January 2021. **David Till waived his annual fee with effect from 1 April 2020. No taxable benefits were paid to the Directors, no pension related benefits were paid to the Directors and no monies or other assets were received or receivable by the Directors for the relevant financial year. There were no fees payable to past Directors or payments made for loss of office. There is no comparative information in respect of employee remuneration as the Company has no employees. Fees are not specifically related to the Directors’ performance, either individually or collectively. 53 Relative importance of spend on pay The table below shows the total remuneration paid to the Directors and shareholder distributions in the year to 31 March 2023 and the prior year. There were no outstanding balances due at the year end. Total Directors’ fees Dividend Share Buy Back Total Directors’ fees as a percentage of dividend & buyback Year ended 31.03.23 £ Year ended 31.03.22 £ Percentage change 105,000 8,310,106 – 1.3% 105,000 9,290,670 9,802,771 0.6% – (11%) – 0.7% Directors’ shareholdings (audited) The beneficial interests of the Directors in the shares of the Company at the year-end were as follows: As at 31.03.23 As at 31.03.22 Director Jonathan Djanogly Laurence Blackall Mark Stokes Louise Wolfson David Till shares held 75,992 307,942 17,888 16,753 494,612 % of shares in issue 0.041 0.164 0.010 0.009 0.264 shares held 75,992 307,942 17,178 8,250 410,437 % of shares in issue 0.048 0.193 0.011 0.005 0.258 The Company confirms that it has not set out any formal requirements or guidelines for a Director to own shares in the Company. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Directors’ Remuneration Report 54 Company performance The Board is responsible for the Company’s investment strategy and performance, although the management of the Company’s investment portfolio is delegated to the Investment Manager through a management agreement. The Directors consider that a comparison of investment performance against the FTSE UK Small Cap Total Return Index is the best available metric, although readers should note that the differences between the scale, capital structure and liquidity of investments in the two differ markedly.  The graph opposite illustrates the Company’s  net asset value per share and total return per share both before and after the VCT tax benefits* with the total return from a notional investment of 100p in the FTSE UK Small Cap Total Return Index over the same period. At the AGM held on 29 September 2022, 99.09% of the votes cast were for, 0.91% of the votes cast were against, and 37,336 shares were withheld in respect of, the resolution approving the Directors’ remuneration report. On behalf of the Board Jonathan Djanogly Director 29 June 2023 * Tax benefits include a 30% initial tax credit on invested cost and an assumed 45% marginal income tax exemption on dividends. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Pembroke VCT plc B Ordinary shares 210p 205p 200p 195p 190p 185p 180p 175p 170p 165p 160p 155p 150p 145p 140p 135p 130p 125p 120p 115p 110p 105p 100p 95p 90p 31 Mar 2015 30 Sep 2015 31 Mar 2016 30 Sep 2016 31 Mar 2017 30 Sep 2017 31 Mar 2018 30 Sep 2018 31 Mar 2019 30 Sep 2019 31 Mar 2020 30 Sep 2020 31 Mar 2021 30 Sep 2021 31 Mar 2022 31 Mar 2023 Pembroke VCT B Total Return per Ord Share (inc. tax benefits) Pembroke VCT B Total Return per Ord Share Pembroke VCT B NAV per Share FTSE UK Small Cap TR Index Governance Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Corporate Governance Statement 56 The Directors of Pembroke VCT plc confirm that the Company has taken appropriate action to enable it to comply with the Principles of the UK Corporate Governance Code (the “2018 Code”) issued by the Financial Reporting Council in 2018 which is publicly available at https://www.frc.org. uk/directors/corporate-governance-and-stewardship/ ukcorporate-governance-code. Apart from the matters referred to in the following paragraph, the requirements of the Code were complied with throughout the year ended 31 March 2023. The Directors consider that the annual report and accounts, taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position, performance, business model and strategy. The Company complies with all the provisions of the 2018 Code save that: (i) the Company does not conduct on an annual basis a formal review as to whether there is a need for an internal audit function, as the Directors do not consider that an internal audit would be an appropriate control for a venture capital trust; (ii) as all the Directors are non-executive and in light of the responsibilities delegated to the Investment Manager, its VCT status adviser and Company Secretary, the Company has not appointed a chief executive, deputy Chair or a senior independent non-executive Director; and (iii) in view of its non-executive nature, to ensure continuity of experience amongst members of the Board and the requirement under the Articles that all Directors are subject to election by shareholders at the first annual general meeting after their appointment and thereafter at every third annual general meeting, the Board considers that it is not appropriate for the Directors to be subject to annual re-election or appointed for a fixed term. David Till, who is not an independent Director, is subject to annual re-election under the Listing Rules. Full details of duties and obligations of the Directors are provided at the time of appointment and are supplemented by further details as necessary. There is no formal induction programme for Directors but any newly appointed Director will be given a comprehensive introduction to the Company’s business, including meeting the Company’s advisers. Board of Directors The Company has a Board of five non-executive Directors, four of whom are considered to be independent. The fifth Director, David Till, is also a member of the Investment Manager. In accordance with the Listing Rules, David Till is subject to annual re-election by shareholders. The Company has no employees. All non-executive Directors have signed letters confirming the terms of their appointment as non-executive Directors. These are all dated with effect from 1 January 2021. Directors are provided with key information on the Company’s activities including regulatory and statutory requirements and internal controls by the Company’s VCT status adviser, Philip Hare & Associates LLP, and by the Company Secretary, The City Partnership (UK) Limited. The Board has direct access to corporate governance advice and compliance services through the Company Secretary, which is responsible for ensuring that Board procedures are followed and compliance requirements are met. All Directors may take independent professional advice in furtherance of their duties as necessary. The Board is responsible to shareholders for the proper management of the Company and looks to meet on at least four occasions each year. It has formally adopted a schedule of matters which must be brought to it for decision, thus ensuring that it maintains full and effective control over appropriate strategic, financial, operational and compliance issues. Those matters include the appointment or removal of the Investment Manager and monitoring the performance of the Investment Manager and investee companies. The Chair and the Company Secretary establish the agenda for each Board meeting and all necessary papers are distributed in advance of the meetings. The Board has considered the recommendations of the Code concerning diversity and welcomes initiatives aimed at increasing diversity generally. The Board believes, however, that all appointments should be made on merit rather than positive discrimination. The policy of the Board is that maintaining an appropriate balance around the Board table through a diverse mix of skills, experience, knowledge and background is of paramount importance and all forms of diversity are a significant element of this. Board performance The Board aims to carry out performance evaluations of the Board and its committees and, consequently, individual Directors each year. Owing to the size of the Company, the fact that all Directors are non-executive and the costs involved, external facilitators will not be used in the evaluation. A performance evaluation of the Board, the Audit & Valuations Committee and individual Directors was led by Jonathan Djanogly. The Directors concluded that the balance of skills is appropriate and all Directors contribute fully to discussion in an open, constructive and objective way. With the additional two new Directors in January 2021 the size and composition of the Board is considered adequate for the effective governance of the Company. As all Directors have acted in the interests of the Company throughout the period of their appointment and demonstrated commitment to their roles the Board recommends those presenting themselves be re-elected at the AGM. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 57 Committee is satisfied that the key areas of risk and judgment have been appropriately addressed in the Financial Statements and that the significant assumptions used in determining the value of assets and liabilities have been properly appraised and are sufficiently robust. The Audit & Valuations Committee has managed the relationship with the auditor and assessed the effectiveness of the audit process. When assessing the effectiveness of the process for the period under review the Committee considered the auditor’s technical knowledge and that they have a clear understanding of the business of the Company; that the audit team is appropriately resourced; that the auditor provided a clear explanation of the scope and strategy of the audit and maintained independence and objectivity. As part of the review of auditor effectiveness and independence, BDO LLP has confirmed that it is independent of the Company and has complied with applicable auditing standards. BDO LLP does not provide any non-audit services to the Company and the Audit & Valuations Committee must approve the appointment of the external auditor for any non-audit services. BDO LLP was appointed by the Board as auditor in February 2020 following a tender process, therefore the current partner has served for four year ends. The Board notes that statutory audit retendering is required after an auditor has been in place for ten years. Corporate Governance Statement Audit & Valuations Committee The Audit & Valuations Committee operates within clearly defined written terms of reference which are available on request from the Company Secretary. The Audit & Valuations Committee comprises three independent Directors. The members of the committee are Laurence Blackall (Chair), Mark Stokes and Louise Wolfson. A quorum shall be two members. During the year ended 31 March 2023 and up to the date of signing the Annual Report and Financial Statements, the Audit & Valuations Committee discharged its responsibilities by: • Reviewing the content and monitoring the integrity of the Financial Statements of the Company, including the fair value of investments as determined by the Investment Manager, calculation of the management fee and allocation of expenses between revenue and capital, and making recommendations to the Board; • Reviewing the Company’s accounting policies; • Reviewing internal controls and assessing the effectiveness of those controls in minimising the impact of key risks; • Reviewing and approving the statements to be included in the Annual Report concerning the internal control and risk management; • Reviewing the need to appoint an internal audit function; • Reviewing and approving the Independent Auditor’s terms of engagement, including remuneration; • Reviewing and monitoring the independence and objectivity of the auditor and the effectiveness of the audit process; • Reviewing and approving the Independent Auditor’s audit plan; • Recommending to the Board and shareholders the annual reappointment of and fee payable to BDO LLP; and • Reviewing the arrangements for staff of the Investment Manager to raise concerns in confidence about possible improprieties in financial reporting or other matters and ensuring that those arrangements allow proportionate and independent investigation of such matters and appropriate follow-up actions. The key areas of risk identified by the Audit & Valuations Committee in relation to the business activities and Financial Statements of the Company are: • Compliance with HM Revenue & Customs rules – in particular s274 of the Income Tax Act 2007 – to maintain the Company’s VCT status; and • Valuation of unquoted investments. These risks were discussed with the Investment Manager at the Audit & Valuations Committee meeting before sign-off of the Financial Statements. The Committee concluded: Venture Capital status – the Investment Manager confirmed to the Audit & Valuations Committee that the conditions for maintaining the Company’s status had been complied with throughout the year. Valuation of unquoted investments – the Investment Manager confirmed to the Audit & Valuations Committee that the basis of valuation for unquoted companies was in accordance with published industry guidelines, taking account of the latest available information about investee companies and current market data. The valuation of unquoted investments is discussed regularly at Board meetings, Directors are also consulted about material changes to these valuations between Board meetings. The Audit & Valuations Committee examined the Investment Manager’s confirmation and considered it appropriate. The Investment Manager and auditor confirmed to the Audit & Valuations Committee that they were not aware of any material misstatements. Having reviewed the Company’s Financial Statements and reports received from the Investment Manager and auditor, the Audit & Valuations Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Corporate Governance Statement 58 Remuneration & Nomination Committee The Remuneration & Nomination Committee operates within clearly defined written terms of reference which are available on request from the Company Secretary. The Remuneration & Nomination Committee comprises three independent Directors. The members of the committee are Louise Wolfson (Chair), Laurence Blackall, Jonathan Djanogly and Mark Stokes. A quorum shall be two members. The Committee shall meet at least once a year and otherwise as required. Attendance at Board and committee meetings During the year ended 31 March 2023 there were: • Four full Board meetings – additional Board meetings were held as required to address specific issues including an offer for subscription and quarterly net asset values • Two Audit & Valuations Committee meetings; and • Two Remuneration & Nomination Committee meeting; and • Two Management Engagement Committee meetings. The Directors’ attendance at these meetings is noted below. Director Board Jonathan Djanogly Laurence Blackall Mark Stokes Louise Wolfson David Till 4 4 4 4 3 Audit & Valuations Committee Remuneration & Nomination Committee Management Engagement Committee 2 2 2 2 n/a 2 2 2 2 n/a 2 2 2 2 n/a Management Engagement Committee The Management Engagement Committee operates within clearly defined written terms of reference which are available on request from the Company Secretary. The Management Engagement Committee comprises four independent Directors. The members of the committee are Jonathan Djanogly (Chair), Laurence Blackall, Mark Stokes and Louise Wolfson. A quorum shall be two members. The Committee met for the first time on 29 September 2022 and shall meet at least once a year and otherwise as required. Internal control The Board has established a process for the identification, evaluation and management of the significant risks faced by the Company. The Board acknowledges that it is responsible for the Company’s internal control systems and for reviewing their effectiveness. Internal controls are designed to manage the particular needs of the Company and the risks to which it is exposed. The internal control systems aim to ensure the maintenance of proper accounting records, the reliability of the financial information on which business decisions are made and which is used for publication, and that the assets of the Company are safeguarded. They can by their nature provide only reasonable and not absolute assurance against material misstatement or loss. The financial controls operated by the Board include the authorisation of investments and regular reviews of both the financial results and investment performance. The Board has delegated to third parties the provision of investment management services, VCT status advisory services, broking services, day-to-day accounting, company secretarial and administration services, receiving agent and share registration services. Each of these contracts was entered into after full and proper consideration by the Board of the quality and cost of services offered. The Board receives and considers regular reports from the Investment Manager. Ad hoc reports and information are supplied to the Board as required. The Board keeps under review the terms of the agreement with the Investment Manager. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Review of internal control The process adopted by the Board for identifying, evaluating and managing the risks faced by the Company includes an annual review of the control systems. The review covers a consideration of the significant risks in each of three areas: statutory and regulatory compliance; financial reporting; and investment strategy and performance. Each risk is considered with regard to: the likelihood of occurrence, the probable impact on the Company, and the controls exercised at source, through reporting and at Board level. The Board has identified no problems with the Company’s internal controls. Relations with shareholders The Board welcomes the views of shareholders and puts a premium on effective communication with the Company’s members. Shareholders are encouraged to attend the Company’s Annual General Meeting where the Directors and representatives of the Company’s advisers will be available to answer any questions members may have. The Board also communicates with shareholders through the half-yearly and annual reports and financial statements which will include a Chair’s Statement and an Investment Manager’s report both of which are reviewed and approved by the Board to ensure that they present a fair assessment of the Company’s position and future prospects. The Company distributes individual investor statements to shareholders annually in February. The Company also provides an Investor Hub, https://pembroke-vct.cityhub. uk.com, where shareholders and their financial intermediaries can view the indicative shareholding valuations, transaction history, dividend history and deal with a range of administration matters. The Investment Manager also produces regular newsletters which are circulated to shareholders and their financial intermediaries. On behalf of the Board Jonathan Djanogly Director 29 June 2023 59 Statement of Directors’ Responsibilities The directors are responsible for preparing the annual report and the financial statements in accordance with UK adopted international accounting standards and applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare 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 and company and of the profit or loss for the and company for that period. In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • • • state whether they have been prepared in accordance with UK adopted international accounting standards, subject to any material departures disclosed and explained in the financial statements prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the company will continue in business; prepare a directors’ report, a strategic report and directors’ remuneration report which comply with the requirements of the Companies Act 2006. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the annual report and accounts, taken as a whole, are fair, balanced, and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy. Website publication The directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the company's website is the responsibility of the directors. The directors' responsibility also extends to the ongoing integrity of the financial statements contained therein. Directors’ responsibilities pursuant to DTR4 The Directors confirm to the best of their knowledge: • • The financial statements have been prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit and loss of the company. The annual report includes a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that they face. On behalf of the Board Jonathan Djanogly Director 29 June 2023 Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Auditor’s Report Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Independent Auditor’s Report to the members of Pembroke VCT plc 61 Opinion on the financial statements In our opinion the financial statements: • give a true and fair view of the state of the Company’s affairs as at 31 March 2023 and of its loss for the year then ended; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of Pembroke VCT Plc (the ‘Company’) for the year ended 31 March 2023 which comprise the Income Statement, the Balance Sheet, the Statement of Changes in Equity, the Statement of Cash Flow 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 United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to the audit committee. Independence Following the recommendation of the audit committee, we were appointed by the Board of Directors to audit the financial statements for the year ended 31 March 2020 and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is four years, covering the years ended 31 March 2020 to 31 March 2023. We remain independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Company. Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Company’s ability to continue to adopt the going concern basis of accounting included: • Obtaining the VCT compliance reports prepared by management’s expert during the year and as at year end Overview and reviewing the calculations therein to check that the Company was meeting its requirements to retain VCT status; • Reviewing and challenging the forecasted cash flows that support the Directors’ assessment of going concern taking into account the current levels of cash and considering the discretionary nature of the Company’s significant cash outflows; and • Calculating the financial ratios to consider the financial health of the Company. 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. In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. Key audit matters Valuation of unquoted investments Materiality Company financial statements as a whole £3,540,000 (2022: £3,220,000) based on 2% (2022: 2%) of gross investments. 2023 2022   Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Independent Auditor’s Report 62 An overview of the scope of our audit Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company’s system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. This matter was 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 this matter. Key Audit Matter: Valuation of unquoted investments (Notes 4 and 12 to the financial statements) We consider the valuation of investments to be the most significant audit area as there is a high level of estimation uncertainty involved in determining the unquoted investment valuations; consisting of both equity and loan stock instruments. There is also an inherent risk of management override arising from the unquoted investment valuations being prepared by the Investment Manager, who is remunerated based on the value of the net assets of the fund, as shown in note 7. For these reasons we considered the valuation of unquoted investments to be a key audit matter. How the scope of our audit addressed the key audit matter Our sample for the testing of unquoted investments was stratified according to risk considering, inter alia, the value of individual investments, the nature of the investment, the extent of the fair value movement and the subjectivity of the valuation technique. For all investments in our sample we: • Considered whether the valuation methodology was the most appropriate in the circumstances under the International Private Equity and Venture Capital Valuation (“IPEV”) Guidelines and the applicable accounting standards. Where there has been a change in valuation methodology from prior year, we assessed whether the change was appropriate. • Considered the change in market multiples and discount rate applied from prior year and if these were supported by the performance of the underlying investment. • Verified that the valuation was based on recent financial information and reviewed the arithmetic accuracy of the valuation. Further for a sample of 86% of the investments by value of investment holdings, our procedures included the following: • Re-performing the calculation of the multiples-based investment valuations. • Verifying and benchmarking key inputs and estimates to independent information and our own research and against metrics from the most recent investments. • Challenging and corroborating the inputs to the valuation with reference to management information of investee companies, market data and our understanding and assessing the impact of estimation uncertainty concerning these assumptions. • Considering the economic environment in which the investment operates to identify factors that could impact the investment valuation. • For investments valued using cost (where the investment was recently acquired), the price of a recent investment, or an offer to acquire the investee company, we checked the cost or third party offer to supporting evidence, reviewed the calibration of fair value and considered the Investment Manager’s determination of whether there were any reasons why the valuation and the valuation methodology was not appropriate at 31 March 2023. For a sample of loans held at fair value included above, we: • Checked security held to supporting documentation. • Considered the carrying value of the loan with regard to the “unit of account” concept. • Reviewed the treatment of accrued redemption premium/ other fixed returns in line with the Statement of Recommended Practice. Key observations Based on the procedures performed we noted the methodology and assumptions used to value unquoted investments to be appropriate. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Independent Auditor’s Report Our application of materiality We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: Company Financial Statements 2022 2023 Materiality £3,540,000 £3,220,000 Basis for determining materiality 2% of gross investments Rationale for the benchmark applied In setting materiality, we have had regard to the nature and disposition of the investment portfolio. Given that the VCT’s portfolio is comprised of unquoted investments which would typically have a wider spread of reasonable alternative possible valuations, we have applied a percentage of 2% of gross investments. Performance materiality £2,300,000 £2,090,000 Basis for determining performance materiality 65% of materiality Rationale for the percentage applied for performance materiality The level of performance materiality applied was set after having considered a number of factors including the expected total value of known and likely misstatements and the level of transactions in the year. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 63 Lower testing threshold While the majority of long-term returns are expected to arise from capital, we note that ongoing costs and revenue returns are still important to users of the financial statements, despite being considerably smaller in magnitude. As a result, we determined a lower testing threshold for those items impacting revenue return of £250,000 (2022: £250,000) based on 5% of expenditure (2022: 5% of expenditure). Reporting threshold We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £70,000 (2022: £60,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. Other information The Directors are responsible for the other information. The other information comprises the information included in the annual report and financial statements other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Corporate governance statement The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit. Independent Auditor’s Report Going concern and longer‑term viability • The Directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified; and • The Directors’ explanation as to their assessment of the Company’s prospects, the period this assessment covers and why the period is appropriate. Other Code provisions • Directors' statement on fair, balanced and understandable; • Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks; • The section of the annual report that describes the review of effectiveness of risk management and internal control systems; and • The section describing the work of the Audit Committee. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 64 Other Companies Act 2006 reporting Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below. Strategic report and Directors’ report 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. In the 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. Directors’ remuneration In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. Matters on which we are required to report by exception 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, or returns adequate for our audit have not been received from branches not visited by us; or • the 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. Independent Auditor’s Report Responsibilities of Directors As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due 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. Extent to which the audit was capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: Non‑compliance with laws and regulations We gained an understanding of the Company and the industry in which it operates and held discussions with the investment manager and those charged with governance in order to obtain and understand of the Company’s policies and procedures regarding compliance with laws and regulations. We have therefore considered the significant laws and regulations to be the Companies Act 2006, the FCA listing and DTR rules, the principles of the UK Corporate Governance Code, industry practice represented by the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts (“the SORP”) and updated in 2022 with consequential amendments and the applicable financial reporting framework. We also considered the Company’s qualification as a VCT under UK tax legislation. 65 Our procedures in respect of the above included: • Obtaining an understanding of the control environment in monitoring compliance with laws and regulations; • Agreement of the financial statement disclosures to underlying supporting documentation; • Enquiries of the investment manager and those charged with governance relating to the existence of any non-compliance with laws and regulations; • Obtaining the VCT compliance reports prepared by management’s expert during the year and as at year end and reviewing their calculations to check that the Company was meeting its requirements to retain VCT status; and • Reviewing minutes of meeting of those charged with governance for the year for instances of non-compliance with laws and regulations. Fraud We assessed the susceptibility of the financial statement to material misstatement including fraud. Our risk assessment procedures included: • Enquiry with the investment manager and those charged with governance regarding any known or suspected instances of fraud; • Obtaining an understanding of the Company’s policies and procedures relating to: – Detecting and responding to the risks of fraud; and – Internal controls established to mitigate risks related to fraud. • Review of minutes of meeting of those charged with governance for any known or suspected instances of fraud; • Discussion amongst the engagement team as to how and where fraud might occur in the financial statements; and • Considering performance incentive schemes and performance targets and the related financial statement areas impacted by these. Based on our risk assessment, we considered the areas most susceptible to fraud to be the valuation of unquoted investments and management override of controls. Our procedures in respect of the above included: • The procedures set out in the Key Audit Matters section above; • Obtaining independent evidence to support the ownership of a sample of investments; • Recalculating investment management fees in total; • Obtaining independent confirmation of bank balances; and • Reviewing the appropriateness of journals posted in the preparation of the financial statements by agreeing to supporting documentation and evaluating whether there was evidence of bias by the Investment Manager and Directors that represented a risk of material misstatement due to fraud. BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Independent Auditor’s Report 66 We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to have appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Vanessa-Jayne Bradley (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor London, United Kingdom 29 June 2023 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Financial Statements Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Income Statement for the year ended 31 March 2023 For the year ended 31 March 2023 (audited) Realised/unrealised gains on investments Income Interest write-offs Investment Manager’s fees Other expenses (Loss)/profit before tax Tax (Loss)/profit attributable to equity shareholders Return per share (pence) The total column of this Income Statement represents the profit and loss account of the Company, prepared in accordance with Financial Reporting Standard 102 (“FRS 102”). The supplementary revenue and capital return columns are prepared in accordance with the Statement of Recommended Practice, “Financial Statements of Investment Trust Companies and Venture Capital Trusts" (‘the SORP’) and updated in 2022 with consequential amendments. A separate Statement of Comprehensive Income has not been prepared as all comprehensive income is included in the Income Statement. All the items above derive from continuing operations of the Company. For the year ended 31 March 2022 (audited) Realised/unrealised gains on investments Income Interest write-offs Investment Manager’s fees Performance Incentive fee Other expenses (Loss)/profit before tax Tax The notes on pages 72 to 84 are an integral part of the Financial Statements. (Loss)/profit attributable to equity shareholders Return per share (pence) Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 68 Note 12 6 7 8 9 11 Note 12 6 7 7 8 9 11 Revenue £’000 1,826 (339) (1,037) (735) (285) – (285) (0.1) Revenue £’000 – 2,204 (569) (835) – (1,186) (386) – (386) (0.3) Capital £’000 (5,861) – – (3,112) – (8,973) – (8,973) (5.3) Capital £’000 27,755 – – (2,506) (377) (378) 24,494 – 24,494 19.6 Total £’000 (5,861) 1,826 (339) (4,149) (735) (9,258) – (9,258) (5.4) Total £’000 27,755 2,204 (569) (3,341) (377) (1,564) 24,108 – 24,108 19.3 Balance Sheet as at 31 March 2023 The Financial Statements were approved by the Directors and authorised for issue on 29 June 2023 and signed on their behalf by: Jonathan Djanogly Director Fixed assets Investments Current assets Debtors Funds held by Administrator Cash at bank and in hand Creditors: amounts falling due within one year Net current assets Creditors: amounts falling due after more than one year Net assets Capital and reserves Called up share capital Share premium account Capital redemption reserve Special reserves Capital reserves Revenue reserves Total shareholders’ funds Company registered number: 08307631 Net asset value per B Ordinary share (pence) The notes on pages 72 to 84 are an integral part of the Financial Statements. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 69 Note 31.03.23 £’000 31.03.22 £’000 12 14 15 16 17, 18 18 18 18 18 18 19 177,029 161,445 329 7,903 32,489 40,721 (692) 40,029 (978) 1,580 – 39,612 41,192 (1,427) 39,765 (625) 216,080 200,585 1,877 106,909 97 67,796 40,261 (860) 1,592 74,131 97 76,106 49,234 (575) 216,080 200,585 115.1 126.0 Statement of Changes in Equity for the year ended 31 March 2023 For the year ended 31 March 2023 Opening balance as at 1 April 2022 Investment disposal Total comprehensive income for the period Shares issued (Note 17) Share issue expenses Share reorganization Share premium cancellation Transfer of distributable reserves (Note 18) Dividends paid Non-distributable reserves Distributable reserves Restricted Unrestricted Called up share capital £’000 Share premium £’000 Capital redemption reserve £’000 Capital reserve £’000 Special reserve * £’000 Special reserve £’000 Capital * reserve £’000 Revenue reserve £’000 1,592 – – 285 – – – – – 74,131 – – 34,749 (1,971) – – – – 63,248 97 – 5,291 – (5,575) – – – – – – – – – – – – 64,098 – – – – – – (12,185) – – – – 12,185 – (8,310) 12,008 (14,014) – (5,291) – (3,398) (575) – (285) – – – – – – – – – – – – 70 Total reserves £’000 200,585 – (9,258) 35,034 (1,971) – – – (8,310) Closing balance as at 31 March 2023 1,877 106,909 97 62,964 51,913 15,883 (22,703) (860) 216,080 For the year ended 31 March 2022 Opening balance as at 1 April 2021 Investment disposal Total comprehensive income for the period 1,142 – – 11,722 – – 2 36,367 – (18,296) – 40,628 76,145 – – 19,103 (11,627) – 18,296 – (16,134) (188) – (386) 132,666 – 24,108 Transfer of unrealised losses to realised losses for period to 31 March 2021 Shares issued (Note 17) Share issue expenses Share bought back Transfer of distributable reserves (Note 18) Dividends paid – – – 4,549 – – (4,549) 544 64,726 – (2,317) – – – (95) – – – – 95 – – 97 – – – – – – – – (12,047) – – – (9,852) 12,047 (9,290) – – – – – – – – – – – – 65,270 (2,317) (9,852) – (9,290) 63,248 64,098 12,008 (14,014) (575) 200,585 The notes on pages 72 to 84 are an integral part of the Financial Statements. Closing balance as at 31 March 2022 1,592 74,131 Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 *Special reserve is available for distribution, subject to the restrictions tabled in Note 18 of the financial statements. Statement of Cash Flow for the year ended 31 March 2023 Operating activities Investment income received Deposit and similar interest received Prior year disposal receipt (Me+Em) Investment Manager’s fees paid Performance incentive fee Directors’ fees Other cash payments Net cash outflow from operating activities Cash flows from investing activities Purchase of investments Disposal of investments Long term loan made Long term loans repaid Net cash outflow from investing activities Net cash outflow before financing Cash flows from financing activities Share issue proceeds Share issue expenses Share buybacks paid Equity dividend paid Net cash inflow from financing (Decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period 71 Year ended 31.03.23 £’000 Year ended 31.03.22 £’000 Note 20 12 12 12 349 205 1,000 (4,965) – (144) (679) (4,234) (20,573) 7 (2,145) 2,200 (20,511) (24,745) 25,534 (917) – (6,995) 17,622 (7,123) 39,612 32,489 402 3 – (2,327) (377) (115) (1,293) (3,707) (27,170) 22,574 (9,150) 834 (12,912) (16,619) 65,271 (2,317) (9,852) (9,291) 43,811 27,192 12,420 39,612 The notes on pages 72 to 84 are an integral part of the Financial Statements. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 72 Notes to the Financial Statements 1. Company information The Company is a Public Limited Company incorporated in England and Wales. The registered address is 3 Cadogan Gate, London SW1X 0AS. The principal activity is investing in unlisted growth companies. 2. Basis of preparation These Financial Statements have been prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 – 'The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland' ('FRS 102'), and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (‘the SORP’) and updated in 2022 with consequential amendments, to the extent that they do not conflict with International Accounting Standards in conformity with the Companies Act 2006. The Financial Statements have been prepared on the historical cost basis except for the modification to a fair value basis for certain financial instruments as specified in the accounting policies below. The Financial Statements are prepared in pounds sterling, which is the functional currency of the company. 3. Going concern In accordance with FRC Guidance for Directors on going concern and liquidity risk, the Directors have assessed the prospects of the Company and are of the opinion that, at the time of approving the Financial Statements, the Company has adequate resources to continue in business for at least 12 months from the date of approval of the Financial Statements. In reaching this conclusion the Directors took into account the nature of the Company’s business and Investment Policy, its risk management policies, the diversification of its portfolio and the cash holdings. They have also reviewed the budgets and forecasts, which have been subject to liquidity stress tests performed by the Investment Manager, and consider that the Company has adequate financial resources to enable it to continue in operational existence for the foreseeable future. Therefore, the Company continues to adopt the going concern basis in preparing these Financial Statements. 4. Significant judgements and estimates The preparation of the Financial Statements may require the Board to make judgements and estimates that affect the application of policies and reported amounts of assets. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 The carrying value of the unquoted fixed asset investments requires estimates to determine fair values. Estimates are based on historical experience and other assumptions that are considered reasonable under the circumstances. However, because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the investments existed. The availability of valuation techniques and observable inputs can vary from investment to investment and are affected by a wide variety of factors, including the type of investment, whether the investment is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the transaction. All unquoted investments are valued in accordance with the International Private Equity and Venture Capital Valuation (“IPEV”) Guidelines December 2018, this relies on subjective estimates such as appropriate sector earnings multiples, forecast results of investee companies and liquidity or marketability of the investments held. Although the estimates and the assumptions applied are under continuous review to ensure that the fair values are appropriately stated there is a risk that the carrying value of an unquoted investment may require material adjustment either within the next year or in the longer term. More information related to the unquoted investment and their valuations is included in Note 12 and the Investment Manager’s Review. No judgements have been applied in selection and application of this accounting policy. 5. Accounting policies A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is set out below. a) Investments The Company did not hold any listed investments at any time during the reporting period. Investments in unlisted companies are held at fair value through profit or loss by the Directors. Information about the portfolio is provided internally to the Directors on that basis and the Directors consider the basis to be consistent with the Company’s investment strategy. Investments held by the Company have been valued in accordance with the International Private Equity and Venture Capital Valuation (“IPEV”) Guidelines December 2018. The portfolio valuations are prepared by the Investment Manager and subsequently reviewed and approved by the Board. In determining fair value, the Investment Manager uses various valuation methods, including a combination of the price of recent investment and market-based approach. The market-based approach ascribes a value to a business interest or 73 Notes to the Financial Statements 5. Accounting policies (continued) shareholding by comparing it to similar businesses, using the principle of substitution: that is, that a prudent purchaser would pay no more for an asset than it would cost to acquire a substitute asset with the same utility and income earning potential. The price of recent investment will only be used as fair value after careful consideration of all the facts and circumstances concerning the underlying investment. substitute asset with the same utility and income earning potential. The price of recent investment will only be used as fair value after careful consideration of all the facts and circumstances concerning the underlying investment. When using the cost or price of recent investment in the valuations, the Company looks to ‘re-calibrate’ this price at each valuation point by reviewing progress within the investment, comparing against the initial investment thesis, assessing if there are any significant events or milestones that would indicate the value of the investment has changed and considering whether a market-based methodology (i.e. using multiples from comparable public companies) or a discounted cashflow forecast would be more appropriate. The main inputs into the calibration exercise, and for the valuation models using multiples, are revenue, EBITDA and P/E multiples (based on the most recent revenue, EBITDA or earnings achieved and equivalent corresponding revenue, EBITDA or earnings multiples of comparable companies), quality of earnings assessments and comparability difference adjustments. Revenue multiples are often used, rather than EBITDA or earnings, due to the nature of the Company’s investments, being in growth and early-stage companies which are not normally expected to achieve profitability or scale for a number of years. Where an investment has achieved scale and profitability, the Company would normally then expect to switch to using an EBITDA or earnings multiple methodology. In the calibration exercise and in determining the valuation for the Company’s equity instruments, comparable trading multiples are used. In accordance with the Company’s policy, appropriate comparable companies based on industry, size, developmental stage, revenue generation and strategy are determined and a trading multiple for each comparable company identified is then calculated. The multiple is calculated by dividing the enterprise value of the comparable group by its revenue, EBITDA or earnings. The trading multiple is then adjusted for considerations such as illiquidity, marketability and other differences, advantages and disadvantages between the portfolio company and the comparable public companies based on company specific facts and circumstances. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Realised surpluses or deficits on the disposal of investments are taken to realised capital reserves, and unrealised surpluses and deficits on the revaluation of investments are taken to unrealised capital reserves. Those venture capital investments that may be categorised as associated undertakings are carried at fair value as determined by the Directors in accordance with the Company’s normal policy. Carrying investments at fair value is specifically permitted under FRS102 Section 14.4. b) Income Dividends receivable on unlisted equity shares are brought into account when the Company’s right to receive payment is established and it is probable that payment will be received. Special dividends receivable are treated as a revenue receipt or a capital receipt depending on the facts and circumstances of each particular case. Fixed returns on non-equity shares and debt securities are recognised on an accruals basis using the effective interest method. Such amounts are recognised in the revenue column provided that it is probable that payment will be received in due course. c) Expenses All expenses, including “Annual Running Costs”, are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the income statement, all expenses have been accounted for as revenue items except as follows: Expenses are split and presented partly as capital items where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated, and accordingly the investment management fee is currently allocated 25% to revenue and 75% to capital, which reflects the Directors’ expected long-term view of the nature of the investment returns of the Company. “Annual Running Costs” are the annual costs and expenses incurred by or on behalf of the Company in the ordinary course of its business, excluding the management fees payable to the Manager and including, but not limited to, the following items: (i) (ii) auditor’s fees; administration, accounting and company secretarial fees; (iii) share registrars’ fees; (iv) London Stock Exchange fees; (v) printing and mailing costs in respect of the year-end audited accounts, interim accounts and circulars to shareholders; 74 Notes to the Financial Statements 5. Accounting policies (continued) (vi) fees in respect of regulatory announcements made through a Regulatory Information Service; (vii) insurance premiums; and (viii) remuneration of the Board (including employers’ national insurance contributions); (ix) compliance and advisory fees; and (x) market/organisational subscriptions together with any irrecoverable value-added tax on those annual costs and expenses. d) Performance fees Performance fees predominantly relate to the capital performance of the portfolio and are therefore charged 100% to capital. Performance fees are accrued and a liability is recognised when they are likely to be payable and can be reliably measured. e) Debtors Short-term debtors (including short-term loans) are measured at amortised cost, less any impairment. f) Creditors Short and long-term creditors are measured at amortised cost. g) Taxation Current tax is recognised for the amount of corporation tax payable in respect of the taxable profit for the current or past reporting periods using the tax rates and laws that have been enacted or substantively enacted by the reporting date. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue return on the “marginal” basis as recommended in the SORP. Any tax relief obtained in respect of management fees allocated to capital is reflected in the capital column of the Statement of Comprehensive Income and a corresponding amount is charged against the revenue column. The tax relief is the amount by which corporation tax payable is reduced as a result of these capital expenses. Deferred tax is recognised in respect of all timing differences at the reporting date, except as otherwise indicated. Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Deferred tax is calculated using the tax rates and laws that have been enacted or substantively enacted by the reporting date that are expected to apply to the reversal of the timing difference. No asset or liability has been recognised for deferred tax in relation to capital gains or losses on revaluing investments as the Company is exempt from corporation tax in relation to capital gains or losses as a result of qualifying as a Venture Capital Trust. The tax expense/(income) is presented either in the Income Statement or Statement of Changes in Equity depending on the transaction that resulted in the tax expense/ (income). Deferred tax liabilities are presented within provisions for liabilities and deferred tax assets within debtors. h) Financial instruments The Company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments. The Company’s financial instruments comprise its investment portfolio, cash balances and most debtors and creditors. These financial assets and financial liabilities are carried either at fair value or, in the case of debtors, creditors and cash, using amortised cost. i) Cash and cash equivalents Cash comprises cash and demand deposits. Cash equivalents, which include bank overdrafts, are short term, highly liquid investments that are readily convertible to known amounts of cash, are subject to insignificant risks of changes in value, and are held for the purpose of meeting short term cash commitments. 6. Income Interest receivable – revenue – from bank deposits – from loan stock Dividends receivable Other income 2023 £’000 205 1,438 175 8 1,826 2022 £’000 3 2,030 149 22 2,204 Notes to the Financial Statements 7. Investment Manager’s fees Annual management fee Performance fee Total 2023 £’000 4,149 – 4,149 2022 £’000 3,341 377 3,718 Pembroke Investment Managers LLP has been appointed as the Company’s Investment Manager. This appointment shall continue until terminated by the expiry of not less than 12 months’ notice in writing given by either party. The appointment may also be terminated in circumstances of material breach by either party. The annual management fee is 2% of net assets calculated quarterly. The performance fee is based on investment exits and only payable on a profitable exit and subject to further conditions. Details of the appointment can be found in the Strategic Report on page 43. 75 8. Other expenses Other expenses include: Annual Running Costs Company secretarial fees and administration fees Directors’ remuneration Legal and professional fees Printing and stationery Auditor’s remuneration – audit of Statutory Financial Statements Insurance Employer’s NI on Directors’ remuneration London Stock Exchange fees Registrar fees Other costs Irrecoverable VAT Total Annual Running Costs Trail commission payable on funds raised Other costs Total costs and expenses 2023 £’000 2022 £’000 170 105 111 62 68 45 9 9 18 56 82 735 – – 146 105 115 61 46 45 10 7 7 51 67 660 525 379 735 1,564 The Company has no employees other than the Directors. Information relating to Directors’ remuneration can be found in the audited section of the Directors’ Remuneration Report on page 53. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Notes to the Financial Statements 9. Tax a) Analysis of tax charge Current year charge: Revenue charge Credited to capital return Current tax charge (Note 9b) Prior year charge: Revenue charge Credited to capital return Total current and prior year tax charge b) Factors affecting tax charge for the year Profit/(loss) on ordinary activities before taxation Effect of: Corporation tax at 19% (2022: 19%) Non-taxable gains/(losses) on investments Non-taxable dividends Current year losses carried forward Other movements Tax charge for year (Note 9a) 2023 £’000 2022 £’000 10. Dividends paid Dividends recognised as distributions paid to equity holders during the year: – – – – – – 2023 £’000 (9,258) (1,759) 1,113 (33) 676 3 – – – – – – – 2022 £’000 24,108 – 4,580 (5,274) (28) 722 – – Special dividend on B Ordinary shares for the year ended 31 March 2021 of 4.0 pence per share Final dividend on B Ordinary shares for the year ended 31 March 2021 of 3.0 pence per share Interim dividend on B Ordinary shares for the year ended 31 March 2022 of 5.0 pence per share (made of cash paid and DRIS) Dividends paid or payable in respect of the financial year: Interim dividend on B Ordinary shares for the year ended 31 March 2022 of 5.0 pence per share Interim dividend on B Ordinary shares for the year ended 31 March 2023 of 2.5 pence per share (made of cash paid and DRIS) – payable on 30 May 2023 All dividends are paid from the distributable special reserve. 76 2023 £’000 – – 8,310 8,310 2022 £’000 5,118 4,172 – 9,290 2023 £’000 2022 £’000 – 8,310 4,723 4,723 – 8,310 There is no potential liability to deferred tax. No deferred tax asset has been recognised on surplus expenses carried forward as it is not envisaged that any such tax will be recovered in the foreseeable future. The total losses carried forward are £13,378,211 (2022: £9,822,741) and the value of the unrecognised deferred tax in relation to these is £3,344,553 (2022: £2,455,685). This is calculated using a corporation tax rate of 25% (2022:25%) which is the rate at which it is deemed that any losses would be utilised. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Notes to the Financial Statements 11. Return per share 12. Investments 77 Revenue 2023 Capital Earnings per share (pence) (0.1) (5.3) Total (5.4) Revenue 2022 Capital (0.3) 19.6 Total 19.3 Basic revenue return per share is based on the net loss after taxation of £284,791 (2022: £386,288 loss) and on 170,716,018 (2022: 125,054,507) shares, being the weighted average number of shares in issue during the year. Basic capital return per share is based on the net capital loss after taxation of £8,973,206 (2022: £24,493,606 gain) and on 170,716,018 (2022: 125,054,507) shares, being the weighted average number of shares in issue during for the year. Movements in investments during the year are summarised as follows: Opening valuation: Cost at 31 March 2022 (after realised losses) Unrealised gains at 31 March 2022 Unrealised losses on loan notes at 31 March 2022 Interest rolled up in fixed income investments Valuation at 31 March 2022 Movements in the year: Purchases at cost Loans repaid Loans converted to equity Unrealised losses Realised losses on disposals Interest rolled up in fixed income investments Interest received Shares £’000 Loan stock £’000 Total £’000 77,971 63,534 – – 15,081 – – 4,859 93,052 63,534 – 4,859 141,505 19,940 161,445 20,573 – 2,750 (283) (5,485) – – 2,145 (2,200) (2,750) – (100) 1,053 (119) 22,718 (2,200) – (283) (5,585) 1,053 (119) Total movements in year 17,555 (1,971) 15,584 Closing valuation: Cost at 31 March 2023 (after realised losses) Unrealised gains at 31 March 2023 Unrealised losses on loan notes at 31 March 2023 Interest rolled up in fixed income investments 95,809 63,251 – – 12,177 – – 5,792 107,986 63,251 – 5,792 Valuation at 31 March 2023 159,060 17,969 177,029 As at 31 March 2023, the Company had no arrangements in place to dispose of any investments. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 78 Notes to the Financial Statements 12. Investments (continued) During the year, the following changes in valuation of unquoted shares were considered material: Carrying value at 31.03.22 £’000 2,891 19,613 10,376 9,273 1,592 2,658 5,720 13,684 7,426 5,260 4,486 – – – – – – Additions in the year £’000 Increase/ (decrease) in valuation £’000 Carrying value at 31.03.23 £’000 – – – – – 1,000 – – – – 3,000 1,150 1,500 1,800 2,500 1,500 3,000 (2,573) 10,071 (3,833) (1,976) (1,592) (229) 355 841 308 (1,698) – 534 – – – – – 318 29,684 6,543 7,297 – 3,429 6,075 14,525 7,734 3,562 7,486 1,684 1,500 1,800 2,500 1,500 3,000 United Fitness Brands Lyma Thriva N is for Nursery Stitch & Story Heist Stillking Popsa OnePlan Coat Peckwater Brands Eave My Expert Midwife Auddy BlooBloom Ro&Zo Seatfrog The Company is required to report the category of fair value measurements used in determining the value of its investments, to be disclosed by the source of inputs, using a three-level hierarchy: Quoted market prices in active markets – “Level 1” Inputs to Level 1 fair values are quoted prices in active markets for identical assets. An active market is one in which quoted prices are readily and regularly available and those prices represent actual and regular occurring market transactions on an arm’s length basis. The Company has no investments classified in this category. Valued using models with significant observable market parameters – “Level 2” Inputs to Level 2 fair values are inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly. The Company has no investments classified in this category. Valued using models with significant unobservable market parameters – “Level 3” Inputs to Level 3 fair values are unobservable inputs for the asset. Unobservable inputs may have been used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset at the measurement date (or market information for the inputs to any valuation models). As such, unobservable inputs reflect the assumptions the Company considers that market participants would use in pricing the asset. The Company’s unquoted equities and loan stock are classified within this category. As explained in Note 5, unquoted investments are valued in accordance with the IPEV guidelines. The fair value of all investments is assessed by the Company and, where appropriate, a revaluation against cost is made. The basis of revaluation may be based on a sales or profit multiple, or on market information that supersedes that held at the time of acquiring the investment. Details of the basis of revaluation are included in the Investment Manager’s Review on pages 23 to 40 Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 79 Notes to the Financial Statements 13. Significant interests As at the balance sheet date the company held significant investments amounting to 20% or more of the equity capital of an undertaking and voting rights, in the following companies: Company Legal name Holdings* Kinteract Bella Freud Sourced Market Heist Troubadour Hackney Gelato Stitch & Story PlayerLayer Eave Kat Maconie Coat Alexa Chung Chucs Restaurants Dropless Roto VR Floom Ro&Zo Secret Food Tours Annie Mals Smartify Lyma Popsa Boat Make It Plain Ltd Bella Freud Ltd SP Market Limited Carousel Ventures Limited Troubadour Goods Limited Hackney Gelato Limited Stitch & Story Ltd Dreamsport Limited Eartex Ltd Kat Maconie Limited Coat Trading Ltd Alpha Charlie Ltd Chucs Restaurants Limited Dropless Ltd Roto VR Ltd Floom Ltd Ro&Z0 Limited Essor Ltd Annie Mals Limited Smartify Holdings Ltd Lyma Life Limited Popsa Holdings Limited Boat International Business Limited 48.8% 46.4% 40.5% 40.2% 37.3% 36.1% 34.5% 34.5% 34.4% 31.6% 27.7% 24.5% 25.0% 22.6% 22.1% 24.4% 21.4% 20.5% 20.0% 20.0% 19.7% 18.0% 17.9% Equity investment Ordinary £'000 Preference £'000 Investment in loan stock £'000 500 3,379 1,630 748 1,740 3,200 4,000 5,852 2,650 1,820 3,000 4,122 2,220 2,375 1,750 – 1,500 2,000 500 1,000 2,000 5,200 2 2,635 – 2,250 6,500 – – – – 1,250 – – – – – – 4,415 – – – – – – 1,698 500 950 3,550 1,100 800 – 100 – – 1,030 – – – 2,000 – 145 – – – 500 – – 1,550 Total £'000 3,635 4,329 7,430 8,349 2,540 3,200 4,100 5,852 3,900 2,850 3,000 4,122 2,220 4,375 1,750 4,560 1,500 2,000 500 1,500 2,000 5,200 3,250 * The percentage of equity held for these companies is the fully diluted figure. ** The financial information is derived from publicly available Report and accounts, where available. In addition to the reported net assets (above), the following information on turnover and operating profit is publicly available for Popsa and Boat. Details of holdings may be found in the Investment Manager’s Review and Investment Portfolio on pages 15 to 40. Financial Information** Year ended Net Assets £'000 Location 31 December 2021 31 March 2022 In liquidation 31 March 2021 31 December 2021 31 August 2022 In liquidation In administration 31 March 2022 31 March 2022 31 March 2022 31 March 2022 30 June 2021 31 December 2021 31 August 2022 31 December 2022 30 November 2021 31 January 2022 No available report & accs 31 December 2022 31 December 2021 31 December 2021 31 December 2021 766 913 – 8,994 (605) 749 – – (207) (1,171) (379) (301) 1,047 555 799 1,746 (548) 1,126 – 1,117 2,892 12,029 (4,409) Melton Mowbray, UK London, UK London, UK London, UK London, UK London, UK Manchester, UK Manchester, UK London, UK Kent, UK London, UK London, UK London, UK London, UK Borehamwood, UK London, UK Waltham Cross, Herts, UK Dorset, UK Manchester, UK London, UK London, UK Surbiton, Surrey, UK London, UK Year ended Financial Information (£'000) Turnover Operating profit Popsa Boat 31 December 2021 31 December 2021 25,354 8,351 (3,746) (1,216) Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 80 Notes to the Financial Statements 14. Debtors Amounts falling due within one year: Prepayments and accrued income Other debtors 15. Creditors: amounts falling due within one year Sundry creditors and accruals 2023 £’000 66 263 329 2023 £’000 692 16. Creditors: amounts falling due after more than one year 2023 £’000 978 Non-current creditors 17. Called up share capital Allotted, called-up and fully paid at 1 April 2022: Issued during the year Shares purchased for cancellation At 31 March 2023 Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 2022 £’000 141 1,439 1,580 2022 £’000 1,427 2022 £’000 625 Total shares ’000 159,234 28,440 – 187,674 As at 31 March 2023, there were 187,673,741 (2022: 159,234,647) shares allotted, called up and fully paid. During the year, the Company issued 28,439,094 shares under an offer for subscription and the Dividend Re-Investment Scheme as detailed below: Allotted, called up and fully paid: 5 April 2022 12 April 2022 13 May 2022 29 July 2022 (DRIS) 5 October 2022 26 October 2022 14 December 2022 31 January 2023 28 February 2023 31 March 2023 No of shares (’000) 3,568 1,963 1,437 1,087 2,104 2,701 4,093 2,655 2,180 6,652 Nominal value £’000 Consideration received £’000 36 20 14 11 21 27 41 27 22 66 4,558 2,487 1,820 1,315 2,543 3,270 4,959 3,236 2,680 8,166 28,440 285 35,034 After the year end, the Company bought back for cancellation, 5,234,964 shares, in April 2023. 18. Reserves Called-up share capital represents the nominal value of shares that have been issued. Share premium account includes any premiums received on issue of share capital less any transaction costs associated with the issuing of shares and any amounts transferred to the special reserve. The capital redemption reserve accounts for amounts by which the issued share capital is diminished through the repurchase and cancellation of the Company’s own shares. Capital reserves includes all current and prior period realised and unrealised movements in the fair value of investments and all costs which are considered capital in nature. As at 31 March 2023 there were realised losses of £22,703,902 (2022 Losses: £14,014,128) and £62,963,602 of unrealised, non-distributable gains (2022: £63,247,034). 81 Notes to the Financial Statements 18. Reserves (continued) 20. Reconciliation of profit before taxation to net cash outflow from Revenue reserve includes all current and prior period retained profits and losses. The balance on the account is distributable. Special reserve includes amounts transferred from the share premium account on 26 March 2014 and 22 December 2020. Special reserve is a distributable reserve that is subject to certain restrictions under the VCT rules. The restricted distributable reserves will become unrestricted on the following dates: Date 1 April 2021 1 April 2022 1 April 2023 1 April 2024 Amount £’000 12,047 12,185 44,343 7,570 19. Net asset value per share The net asset values per share at the year-end were as follows: 2023 Net asset values attributable 2022 Net asset values attributable Net assets (£’000) Net assets per share (p) Net assets (£’000) Net assets per share (p) B Ordinary Shares 216,080 115.1 200,585 126.0 Net asset value per B Ordinary share is based on net assets at the year end and on 187,673,741 (2022: 159,234,647) B Ordinary shares, being the number of B Ordinary shares in issue at the year end. operating activities Profit/(loss) before taxation for the year Net (gain)/loss on investments Decrease/(increase) in debtors (excluding share issue proceeds and short-term loans) Increase in interest rolled up in fixed income investments Increase in creditors and accruals (excluding share issue expenses, short-term loans and fixed asset investment balances) Net cash outflow from operating activities 2023 £’000 (9,258) 5,861 67 (933) 2022 £’000 24,108 (27,755) (86) (1,240) 29 1,265 (4,234) (3,707) 21. Financial instruments The Company’s financial instruments comprise: (i) Equity and fixed-interest investments that are held in accordance with the Company’s investment objectives as set out in the Directors’ Report; and (ii) Cash, liquid resources, short term debtors and creditors that arise directly from the Company’s operations. Investments are made in a combination of equity and loans. Surplus funds are held on bank deposit. It is not the Company’s policy to trade in financial instruments or derivatives. Fixed asset investments are valued at fair value through profit or loss. Unquoted investments are valued by the Directors using rules consistent with International Private Equity and Venture Capital Association (“IPEV”) guidelines. The fair value of all other financial assets and liabilities is represented by their carrying value in the balance sheet. Further details of the bases on which financial instruments, including investments, are held may be found at Notes 5 and 12 and in the Investment Manager’s Review on pages 16 to 40. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Notes to the Financial Statements 21. Financial instruments (continued) Credit risk 82 The Company has exposure to credit risk in respect of its loan stock investments. This risk is managed through the due diligence process adopted when making loan investments to unquoted companies and through regular monitoring of the investee companies by the Investment Manager. The selection of credit institution at which to hold cash balances is made by the Investment Manager and monitored by the Board. The credit risk is managed by ensuring cash is held with an institution or institutions with a Standard & Poors’ long-term credit rating of BBB or better. The maximum exposure to credit risk at the balance sheet date was £58,690,000 (2022: £61,919,000). The Company has banking relationships with Barclays Bank plc and Metro Bank plc. Investment valuation risk The Board manages the investment valuation risk inherent in the Company’s portfolio by maintaining an appropriate spread of risk and by ensuring full and timely access to relevant information from the Investment Manager. The Board reviews the investment performance and financial results, as well as compliance with the Company’s investment objectives. The Board seeks to ensure that an appropriate proportion of the Company’s portfolio is invested in cash and readily realisable securities which are sufficient to meet any funding commitments which may arise. The Company does not use derivative instruments to hedge against market risk. The equity and fixed interest stocks of the Company’s unquoted investee companies are not traded and, as such, their prices are more uncertain than those of more frequently traded stocks. It is estimated that a 30% fall in the carrying value of the Company’s unquoted investments would reduce profit before tax for the year and the Company’s net asset value per share by £53,109,000 and 28.3p (2022: £48,434,000 and 30.4p) respectively. A 30% estimate is considered to be an appropriate illustration given historical volatility and market expectations of future performance. The Company held the following categories of financial instruments at 31 March 2023: Assets at fair value through profit or loss: Equity investments Loan stock Assets measured at amortised cost: Cash at bank Funds held by Administrator * Other debtors Short term loans Liabilities measured at amortised cost: Creditors 2023 Cost £’000 Fair value £’000 2022 Cost £’000 Fair value £’000 113,090 15,836 159,060 17,969 92,477 18,631 141,505 19,940 32,489 7,903 329 – 32,489 7,903 329 – 39,612 – 1,580 – 39,612 – 1,580 – (1,670) (1,670) (2,052) (2,052) 167,977 216,080 150,248 200,585 * Funds held by Administrator related to the allotment on 31 March 2023. Payment has been received on 11 April 2023. Loans to investee companies are treated as fair value through profit or loss and are included in the investment portfolio. Unquoted investments account for 100% of the investment portfolio by value. The investment portfolio has a 100% concentration of risk towards small UK based, sterling denominated companies and represents 82% (2022: 81%) of net assets at the year end. All financial liabilities due within one year and expected to be settled within six months of the period and in accordance with normal credit terms. The main risks arising from the Company’s financial instruments are credit risk, investment valuation risk, interest rate risk, foreign exchange risk on portfolio companies own cash flows, and liquidity risk. All assets and liabilities are denominated in sterling, hence there is no currency risk. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Notes to the Financial Statements 21. Financial instruments (continued) Interest rate risk The Company’s financial assets include loan stock and bank deposits which are interest bearing, at a mix of fixed and variable rates. As a result, the Company is exposed to interest rate risk due to fluctuations in prevailing levels of market interest rates. The Board seeks to mitigate this risk through regular monitoring of the Company’s interest-bearing investments. The Company does not use derivative instruments to hedge against interest rate risk. As at 31 March 2023, the Company’s financial assets by value, excluding short-term debtors and creditors which are not exposed to interest rate risk, comprised: Financial assets £’000 % Weighted average interest rate % Interest rate Fixed term years Venture capital investments Ordinary shares Loan stock interest Loan stock interest Loan stock interest Loan stock interest Loan stock interest Loan stock interest Loan stock Loan stock Loan stock Loan stock Loan stock Loan stock Loan stock Loan stock Loan stock Loan stock 155,860 65 50 19 1 2 3 290 500 4,237 2,356 250 500 500 500 150 200 74.5 – – – – – – 0.1 0.2 2 1.1 0.1 0.2 0.2 0.2 0.1 0.1 n/a Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed n/a 9 10 8 8 8 8 9 8 12 9 8 10 8 8 8 8 n/a n/a n/a n/a n/a n/a n/a 5 5 5 5 5 5 5 5 5 5 Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Financial assets Loan stock Loan stock interest Loan stock Loan stock Loan stock Loan stock Loan stock Loan stock Loan stock Loan stock Loan stock Loan stock Loan stock interest Loan stock interest Loan stock interest Loan stock Loan stock Loan stock interest Loan stock interest Loan stock Loan stock Loan stock Loan stock Loan stock interest Loan stock Loan stock Loan stock Bank deposits 83 Weighted average interest rate % Interest rate Fixed term years Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Floating Floating Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Floating 8 8 12 12 10 10 10 8 8 10 10 8 12 11.5 11.5 8 8 7 10 8 12 8 8 8 12 10 8 0.15 5 5 5 5 5 5 5 5 5 5 5 5 5 n/a n/a 5 5 n/a n/a 5 5 5 5 5 5 5 5 n/a £’000 250 2 155 165 187 429 137 186 183 345 305 342 99 3 1 134 879 101 106 1104 2,643 2,197 785 36 152 100 520 32,489 % 0.1 – 0.1 0.1 0.1 0.2 0.1 0.1 0.1 0.2 0.1 0.2 – – – 0.1 0.4 0.1 0.1 0.5 1.3 1 0.4 – 0.1 0.1 0.2 15.5 209,518 100.00 Notes to the Financial Statements 21. Financial instruments (continued) 24. Related parties 84 The Company retains Pembroke Investment Managers LLP (“PIM”) as its Investment Manager. David Till, a non-executive Director of the Company, is a member of PIM. During the year ended 31 March 2023, £4,148,992 was payable to PIM for Investment Manager services of which £242,239 was owed to PIM at the year end (2022: £3,341,514, of which £1,058,506 was owed at the year end). The remuneration and shareholdings of the Directors, who are key management personnel of the Company, is disclosed in the Directors’ Remuneration Report on page 53. 25. Events after the reporting period Non‑adjusting events Since the Company’s year end, the following transactions have taken place: • The Company bought back 5,234,964 B Ordinary Shares at 112.86p. • The Company has made investments of £1,800,000 in HotelMap.com Ltd, £2,000,000 in Appraise Me Ltd, £375,000 in Dropless Ltd, £1,999,993 in COAT Trading Ltd and £99,996 in Rubies in the Rubble Ltd. • 4,228,714 shares were allotted under the share offer on 5 April 2023 • 655,547 shares were allotted under the share offer on 6 April 2023 • 1,600,069 shares were allotted under the share offer on 28 April 2023 • 681,627 shares were allotted under the Company’s Flexible Dividend Reinvestment Scheme. It is estimated that, if the floating interest rate fell to 0%, pre-tax profit for the year would fall by 0.53% (2022: 0.25%) on an annualised basis. The risk from future fluctuations in interest rate movements should be mitigated by the Company’s intention to complete its investment strategy and to hold a majority of its investments in instruments which are not directly exposed to market interest rate changes. Liquidity risk The investments in equity and fixed interest stocks of unquoted companies that the Company holds are not traded and thus are not readily realisable. At times, the Company may be unable to realise its investments at their carrying values because of an absence of willing buyers. The Company’s ability to sell investments may also be constrained by the requirements set down for VCTs. To counter such liquidity risk, sufficient cash and money market funds are held to meet running costs and other commitments. 22. Management of capital The Board of Directors considers the Company’s net assets to be its capital and the Company does not have any externally imposed capital requirements. The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern, satisfy the relevant HMRC requirements and provide at least adequate returns for shareholders. As a VCT, the Company must have, and must continue to have, within three years of raising its capital at least 80% by value of its investments in VCT qualifying holdings which are a relatively high risk asset class of small UK companies. In satisfying this requirement, the Company’s capital management scope is restricted. Subject to this restriction, the Company directs investment policy and may adjust dividends, return capital to shareholders, issue new shares or sell assets to maintain the level of liquidity to remain a going concern. 23. Geographical analysis The operations of the Company are wholly in the United Kingdom. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 85 Notice of Annual General Meeting Notice is hereby given that the tenth annual general meeting of Pembroke VCT plc will be held at 10.00 a.m. on Thursday, 28 September 2023 at 3 Cadogan Gate, London SW1X 0AS for the purpose of considering and, if thought fit, passing the following resolutions (of which, resolutions 1 to 8 will be proposed as ordinary resolutions and resolutions 9 to 12 will be proposed as special resolutions). It is the Board’s opinion that all resolutions are in the best interests of shareholders as a whole and the Board recommends that shareholders should vote in favour of all resolutions. Any shareholder who is in doubt as to what action to take should consult an appropriate independent financial adviser authorised under the Financial Services and Markets Act 2000. If you have sold or transferred all your shares in the Company, please forward this document to the purchaser, transferee, stockbroker or other agent through whom the sale or transfer was effected, for transmission to the purchaser or transferee. If you are unable to attend in person, please consider viewing the live stream of the AGM which the Board has arranged. To do so, please send an email to agm@pembrokevct.com stating your wish to view the live stream. You will then be sent access details. The deadline for requesting access to the stream is 21 September 2023. The Board also encourages the submission by those who are unable to attend in person of questions on either the Company or the portfolio to the Board via email to agm@pembrokevct.com by 21 September 2023, being one week prior to the date of the AGM. Answers will be published on the Company’s website at the time of the AGM. Ordinary Resolutions 1. To receive the Directors’ and the Independent Auditor’s Reports and the Company’s Financial Statements for the year ended 31 March 2023. 2. To receive and approve the Directors’ Remuneration Report for the year ended 31 March 2023. 3. To approve the Directors’ Remuneration Policy 4. To re appoint BDO LLP as auditor of the Company to hold office until the conclusion of the next annual general meeting at which accounts are laid before the Company. 5. To authorise the Directors to fix the remuneration of the auditor. 6. To re-elect David Till as a Director of the Company. 7. That, in accordance with article 147 of the Company‘s articles of association (the “Articles”) and in addition to existing authorities, the Directors of the Company be and are hereby generally and unconditionally authorised in accordance with section 551 of the Companies Act 2006 (the “Act”) to exercise all the powers of the Company to allot and issue the following B Ordinary shares of 1 pence each in the capital of the Company (“B Ordinary Shares”) pursuant to the terms and conditions of the dividend investment scheme adopted by the Company on 3 December 2015 and in connection with any dividend declared or paid in the period commencing on the date of this resolution 7 and ending on the later of the date of the Company’s next annual general meeting or the date falling 15 months after the date of the passing of this resolution: B Ordinary Shares up to an aggregate nominal amount representing 10% of the issued B Ordinary Share capital from time to time (approximately 18,960,473 B Ordinary Shares at the date of this notice). 8. That, in addition to any existing authorities, in accordance with section 551 of the Act, the Directors be and are hereby generally and unconditionally authorised to exercise all the powers of the Company to allot: a. B Ordinary Shares up to an aggregate nominal amount of £600,000 in connection with offer(s) for subscription; and b. B Ordinary Shares up to an aggregate nominal amount representing 20% of the issued B Ordinary Shares from time to time; and that, in connection with the use of the authority, the Directors may pay commission(s) including in the form of fully or partly paid shares in accordance with article 9 of the Articles and provided that this authority shall, unless renewed, extended, varied or revoked by the Company, expire on the later of the date of the Company’s next annual general meeting or the date falling 15 months after the date of the passing of this resolution save that the Company may, before such expiry, make offers or agreements which would or might require B Ordinary Shares to be allotted and the Directors may allot B Ordinary Shares in pursuance of such offers or agreements notwithstanding that the authority conferred by this resolution has expired. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 86 Notice of Annual General Meeting Special Resolutions 9. That, in accordance with section 570(1) of the Act, the Directors be and are hereby given power to allot or make offers or agreements to allot equity securities (as defined in section 560 of the Act) for cash pursuant to the authorities conferred by resolution 7 above as if section 561 of the Act did not apply to any such allotment, and so that: a. Reference to the allotment in this resolution shall be construed with section 560 of the Act; and b. The power conferred by this resolution shall enable the Company to make offers or agreements before the expiry of said power which would or might require equity securities to be allotted after the expiry of the said power and the Directors may allot equity securities of such offers or agreements notwithstanding the expiry of such power. 10. That, in accordance with section 570(1) of the Act, the Directors be and are hereby given power to allot or make offers or agreements to allot equity securities (as defined in section 560 of the Act) for cash pursuant to the authorities conferred by resolution 8 above as if section 561 of the Act did not apply to any such allotment, and so that: a. Reference to the allotment in this resolution shall be construed with section 560 of the Act, and b. The power conferred by this resolution shall enable the Company to make offers or agreements before the expiry of the said power which would or might require equity securities to be allotted after the expiry of the said power and the Directors may allot equity securities in pursuance of such offers or agreements notwithstanding the expiry of such power. 11. That, subject to the approval of the High Court of Justice, the amount standing to the credit of the share premium account of the Company as at 31 March 2023, be and is hereby cancelled at the date the court order is made confirming such cancellation. 12. That the Company be and is hereby generally and unconditionally authorised within the meaning of section 701 of the Act to make market purchases of B Ordinary Shares provided that: (i) the maximum number of B Ordinary Shares hereby authorised to be purchased is an amount equal to 14.99% of the issued B Ordinary Share capital of the Company from time to time; (ii) the minimum price which may be paid for a B Ordinary Share is 1 pence per share, the nominal amount thereof; (iii) the maximum price which may be paid for a B Ordinary Share is an amount equal to the higher of (a) 105% of the average of the middle market quotation per B Ordinary Share taken from the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which such B Ordinary Share is to be purchased and (b) the amount stipulated by Article 5(6) of the Market Abuse Regulation. (iv) the authority hereby conferred shall (unless previously renewed or revoked) expire on the earlier of the AGM of the Company to be held in 2024 and the date which is 15 months after the date on which this resolution is passed; and (v) the Company may make a contract or contracts to purchase its own B Ordinary Shares under this authority before the expiry of the authority which will or may be executed wholly or partly after the expiry of the authority, and may make a purchase of its own B Ordinary Shares in pursuance of any such contract or contracts as if the authority conferred hereby had not expired. By Order of the Board The City Partnership (UK) Limited Company Secretary 29 June 2023 Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 87 Appointment of proxy using hard copy Form of Proxy 5. These notes explain how to direct your proxy to vote on the resolutions or withhold their vote. To appoint a proxy using the Form of Proxy, the form must be: • completed and signed; • sent or delivered to The City Partnership (UK) Limited, The Mending Rooms, Park Valley House, Park Valley Mills, Meltham Road, Huddersfield HD4 7BH; and • received by The City Partnership (UK) Limited no later than 10.00 a.m. on 26 September 2023 in respect of the Annual General Meeting or, if the meeting is adjourned, by no later than 48 hours prior to the adjourned Annual General Meeting. In the case of a member which is a company, the Form of Proxy must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the Form of Proxy is signed (or a duly certified copy of such power or authority) must be included with the Form of Proxy. Electronic appointment of proxies 6. As an alternative to completing the hard copy Form of Proxy, you can appoint a proxy electronically via the registrar’s on-line Proxy Voting App which may be found by copying https://proxy-pembroke.cpip.io into your browser. You will need your City Investor Number (CIN) and your Access Code which may be found either on the Form of Proxy or in the email sent to you. For an electronic proxy appointment to be valid, your appointment must be received by The City Partnership (UK) Limited no later than 48 hours prior to the time of the meeting, i.e. by 10.00 a.m. on 26 September 2023. Notice of Annual General Meeting continued Notes Entitlement to vote The right to vote at the Annual General Meeting is determined by reference to the register of members 48 hours before the time of the Annual General Meeting. Accordingly, to be entitled to vote, Shareholders must be entered in the register of members by close of business on 26 September 2023. Appointment of proxies 1. As a member of the Company, you are entitled to appoint a proxy to exercise all or any of your rights to attend, speak and vote at the Annual General Meeting. For this purpose, you may use the Form of Proxy which will have been sent to you unless you opted for electronic communications. As an alternative to completing the hard copy Form of Proxy, Shareholders can appoint a proxy electronically on-line, as explained below. If you opted for electronic communications, then you will have been sent an email which includes information on how to appoint a proxy electronically on-line. You can only appoint a proxy using the procedures set out in these notes. 2. A proxy does not need to be a member of the Company. Details of how to appoint the chair of the meeting or another person as your proxy using the Form of Proxy are set out in these notes. 3. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, please complete a Form of Proxy for each proxy specifying which of your shares the proxy will be acting in respect of. 4. If you do not give your proxy an indication of how to vote on the resolutions, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the meeting. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 88 • By sending an e-mail to proxies@city.uk.com with a signed revocation attached to the email such that the revocation would have been valid had it been sent by ordinary mail. This email address should not be used for any other purpose unless expressly stated. • By amending your proxy vote via the Proxy Voting App which may be found by copying https://proxy-pembroke.cpip.io into your browser. Whichever method is used, the revocation notice must be received by the Company no later than 10.00 a.m. on 26 September 2023 in respect of the Annual General Meeting or, if the meeting is adjourned, by no later than 48 hours prior to the adjourned Annual General Meeting. If you attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject to the paragraph directly below, your proxy appointment will remain valid. Communication 10. Except as provided above, members who have general queries about the meeting should contact the Company Secretary by post at The City Partnership (UK) Limited, The Mending Rooms, Park Valley House, Park Valley Mills, Meltham Road, Huddersfield HD4 7BH, or by email at enquiries@city.uk.com (no other methods of communication will be accepted). You may not use any electronic address provided either: • in the notice of the Annual General Meeting; or • any related documents (including the Form of Proxy), to communicate with the Company for any purposes other than those expressly stated. Notice of Annual General Meeting continued Notes Appointment of proxy by joint members 7. In the case of joint shareholders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s register of members in respect of the joint holding (the first- named being the most senior). Changing proxy instructions 8. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off time for receipt of proxy appointments (see above) also applies in relation to amended instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded. Where you have appointed a proxy using the hard copy Form of Proxy and would like to change the instructions using another hard copy Form of Proxy, please contact The City Partnership (UK) Limited, The Mending Rooms, Park Valley House, Park Valley Mills, Meltham Road, Huddersfield HD4 7BH. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence. Termination of proxy appointments 9. In order to revoke a proxy instruction you will need to inform the Company using one of the following methods: • By sending a signed hard copy notice clearly stating your intention to revoke your proxy appointment to The City Partnership (UK) Limited, The Mending Rooms, Park Valley House, Park Valley Mills, Meltham Road, Huddersfield HD4 7BH. In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be included with the revocation notice. Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 89 Independent Auditor BDO LLP 55 Baker Street London W1U 7EU VCT Status Adviser Philip Hare & Associates LLP Suite C, First Floor 4-6 Staple Inn London WC1V 7QH Corporate Information Directors (all non‑executive) Independent Jonathan Simon Djanogly (Chair) Laurence Charles Neil Blackall Mark Stokes Louise Wolfson Non‑independent David John Till All of the registered office and principal place of business 3 Cadogan Gate London SW1X 0AS www.pembrokevct.com Investment Manager Pembroke Investment Managers LLP 3 Cadogan Gate London SW1X 0AS Bankers Barclays Bank plc 1st Floor, 99 Hatton Garden London EC1N 8DN Metro Bank PLC One Southampton Row London WC1B 5HA Lawyers Howard Kennedy LLP 1 London Bridge London SE1 9BG Registrar The City Partnership (UK) Limited The Mending Rooms Park Valley Mills Meltham Road Huddersfield HD4 7BH Company Secretary The City Partnership (UK) Limited 110 George Street Edinburgh EH2 4LH Reporting calendar for the year ending 31 March 2024 Results announced: Interim – November 2023 Annual – June 2024 Pembroke VCT plc Annual Report and Financial Statements for the year ended 31 March 2023 Designed by & inc. 3 Cadogan Gate, London SW1X 0AS Incorporated in England and Wales with registered number 08307631 

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