Income & Growth VCT : Annual Report for year ending 30 September 2022

The Income

& Growth VCT plc

A Venture Capital Trust

Annual Report & Financial Statements for the year ended 30 September 2022

The Income & Growth VCT plc ("the Company") is a Venture Capital Trust ("VCT") listed on the London Stock Exchange. Its investment portfolio is advised by Gresham House Asset Management Limited ("Gresham House", "Investment Adviser").

Contents

Financial Highlights and Performance Summary	1
Chair's Statement	2
Strategic Report	5
-	Company objective and business model	5
-	Summary of VCT regulation	5
-	Performance	7
-	Investment Adviser's Review	11
	-  Principal Investments in the Portfolio	18
	-  Investment Portfolio Summary	22
-	Investment Policy	28
-	Other Key Policies	28
-	Stakeholder Engagement and Directors' Duties	29
-	Principal Risks	31
-	Going concern and Viability Statement	33
Reports of the Directors	34
Board of Directors	34
Directors' Report	35
Corporate Governance Statement	39
Report of the Audit Committee	41
Directors' Remuneration Report	43
Statement of the Directors' Responsibilities	46
Independent Auditor's Report	47
Financial Statements	52
Information for Shareholders	77
Shareholder Information	77
Timeline of the Company	78
Performance Data at 30 September 2022	80
Glossary of Terms	83
Notice of the Annual General Meeting	84
Corporate Information	87

YOUR PRIVACY

We are committed to protecting and respecting your privacy. To understand how we collect, use and otherwise process personal data relating to you, or that you provide to us, please read our privacy notice, which can be found at www.incomeandgrowthvct.co.uk

Financial Highlights

For the financial year ended 30 September 2022

As at 30 September 2022:

Net assets: £108.42 million

Net asset value per share: 83.73 pence

• There was a negative Net asset value ("NAV") total return (including dividends)1 per share of (8.7)%.
• Share price total return1 per share was (3.8)%2 (as per London Stock Exchange mid-price on balance sheet date of 30 September 2022).
• Dividends paid/payable in respect of the year total 8.00 pence per share. This brings cumulative dividends paid1 to Shareholders in respect of the past five years to 43.00 pence per share.
• The Company realised investments totalling £11.56 million of cash proceeds and generated net realised gains in the year of £2.32 million.
• Net unrealised losses of £(13.16) million in the year.
• £7.33 million was invested into four new companies and eight follow-on investments.

1. - Definitions of key terms and alternative performance measures shown above and throughout this report are provided in the Glossary of terms on page 83.
2. - Further details on the share price total return are shown in the Performance section of the Strategic Report on page 7.

Performance Summary

The table below shows the recent past performance of the Company's existing class of shares for each of the last five years.

	Reporting date	Net	NAV	Share	Cumulative	Cumulative total return	Dividends
		assets	per	price1	dividends	per share to	paid and
			share		paid per	Shareholders2	proposed
					share	(NAV	(Share	per share in
						respect of
						basis)	price
	As at					each year
						basis)
	30 September
	(£m)	(p)	(p)	(p)	(p)	(p)	(p)
								8.003
2022	108.42	83.73	81.50	144.50	228.23	226.00
2021	119.09	100.45	93.00	136.50	236.95	229.50	9.00
2020	83.13	70.06	59.50	131.50	201.56	191.00	14.00
2019	81.73	79.12	75.50	113.00	192.12	188.50	6.00
2018	82.58	78.32	69.50	108.00	186.32	177.50	6.00

1. Source: Panmure Gordon & Co (mid-market price).
2. Cumulative total return per share comprises the NAV per share (NAV basis) or the mid-market price per share (share price basis) plus cumulative dividends paid since launch of the current share class. The details of the share price total return per share calculation are shown in the Strategic Report on page 7.
3. Dividends paid and proposed per share in respect of 2022 include the second interim dividend referred to below.

Dividends payable after the 30 September 2022 year-end

A second interim dividend of 4.00 pence per share was paid on 7 November 2022, to Shareholders on the Register on 23 September 2022.

Detailed performance data for each of the Mobeus VCT's fundraisings is provided in the Performance Data Appendix on pages 80 to 82. The tables, which give cumulative total return per share information for each allotment date on both a NAV and share price basis, are also available on the Company's website at www.incomeandgrowthvct.co.ukwhere they can be downloaded by clicking on "table" under "Reviewing the performance of your investment".

Financial Highlights and Performance Summary

Annual Report & Financial Statements 2022	The Income & Growth VCT plc	1

Chair's Statement

Chair's Statement

Overview

This Company's financial year has been notable for the significant geopolitical economic and political disruption both domestically and internationally. The end of the 2021 calendar year; was a high watermark in many technology and growth markets, and since then we have experienced a number of significant global events such as the illegal Russian invasion of Ukraine, the return of inflation to 40-year highs and political turmoil in the UK and across Europe. All of this has led to increased volatility across global markets and a material downward re-rating of growth stocks.

Despite the events set out above and the widely reported cost of living increases, the fundraise, launched for applications on 17 October 2022 secured the full £22 million sought (including £8 million over-allotment). This was a strong demonstration of confidence in the Company by investors.

One positive and as yet, we believe, still planned outcome from the so-called'mini-budget' of the previous Chancellor of the Exchequer in September, was the commitment from the UK Government to extend the VCT 'sunset clause' beyond the end date of 5 April 2025, however it should be noted that no further detail has been provided at this stage and is also likely to require parliamentary approval. This clause was due to expire in 2025 and would have meant that investor income tax relief would have no longer been available on new VCT subscriptions.

Performance

The Company's NAV total fell by (8.7)% for the year ended 30 September 2022 (versus a gain of + 50.5% in 2020/21).

The negative NAV total return for the year was principally comprised of unrealised falls in the value of investments still held, tempered somewhat by the successful exits from Media Business Insight ("MBI") and Vian Marketing Limited (trading as Red Paddle).

The reduction in the valuation of the portfolio has been driven primarily by lower benchmark market comparables and to a lesser extent by falls in trading performance of investee companies. This is because markets are already factoring in the impact of inflation and higher interest rates on consumer spending and business investment. These factors are likely to impact portfolio company trading over time.

At the year-end, the Company was ranked 2nd out of 39 Generalist VCTs over five years and 9th out of 31 over ten

years, in the Association of Investment Companies' analysis of NAV Cumulative Total Return. Shareholders should note that, due to the lag in the disclosed performance figures available each quarter, the AIC ranking figures do not fully reflect the final NAV movement to 30 September 2022, or those of our peers.

Dividends

The Board intends to continue to target the Investment Adviser with providing an attractive dividend stream to Shareholders and was pleased to declare two interim dividends of 4.00 pence per share each totalling 8.00 pence in respect of the year ended

30 September 2022 exceeding the Company's annual target of 6.00 pence per share.

The first interim dividend was paid on 8 July 2022, to Shareholders on the Register on 6 June 2022 and the second interim dividend was paid on 7 November 2022 to those Shareholders on the Register on

23 September 2022. These dividend payments brought cumulative dividends paid per share since inception in 2004 to 148.5 pence.

The Company's ongoing target of paying a dividend of at least 6.00 pence per share in respect of each financial year has been achieved and often exceeded in each of the last eleven financial years.

It should be noted that the continued movement of the portfolio to a larger share of younger growth capital investments could lead to increased volatility, which may affect the return in any given year. Shareholders should also note that there may continue to be circumstances where the Company is required to pay dividends in order to maintain its regulatory status as a VCT, for example, to stay above the minimum percentage of assets required to be held in qualifying investments. Such dividends may cause the Company's NAV per share to reduce by a corresponding amount.

Dividend Investment Scheme

The Company's Dividend Investment Scheme ("DIS") provides Shareholders with the opportunity to reinvest their cash dividends into new shares in the Company at the latest published NAV per share. New VCT shares attract the same tax reliefs as shares purchased through an Offer for Subscription. A total of 1,901,145 (2021: 1,178,669) Ordinary shares were allotted as a result of dividends paid during the year resulting in £1.81 million (2021: £1.06 million) being retained by the Company.

Shareholders wishing to take advantage of the scheme for any future dividends can join the DIS by completing a mandate form available on the Company's website, under the 'Dividends' heading, at: www.incomeandgrowthvct.co.uk, or alternatively, Shareholders can opt-out by contacting Link Group, using their details provided under Corporate Information on page 87.

Investment Portfolio

The portfolio movements across the year were as follows:

				£m
	Portfolio value at 30 September 2021	88.15
	New and follow-on investments			7.33
	Disposal proceeds			(11.56)
	Net realised gains	2.32
	Net unrealised losses	(13.16)
	Net investment portfolio losses			(10.84)
	Portfolio value at 30 September 2022	73.08

In the face of the current testing environment, particularly during the final quarter of the financial year following the mini-budget, the Investment Adviser has started to see the impact on trading of a number of investee companies of a decline in consumer confidence. As a result, there was a fall of £10.84 million in the overall value of the portfolio across year to 30 September 2022 (2021: increase of £43.64 million), or a fall of (12.3)% on a like-for-like basis compared to the opening value of the portfolio at 1 October 2021. Notably, included within the fall of £10.84 million above, Virgin Wines declined by £9.67 million. Virgin Wines, an AIM-listed investment which has suffered from the negative sentiment of its sector, in spite of positive news flows from the company itself and the relative outperformance versus its peers.

The negative NAV total return for the year was principally comprised of unrealised falls in the value of investments still held of £13.16 million, primarily Virgin Wines, MyTutor and Buster & Punch mitigated to some extent by the successful exits from Media Business Insight and Red Paddle contributing to net realised gains of £2.32 million.

In November 2021, the Company's entire holding in Red Paddle was realised, generating proceeds of £5.52 million, taking proceeds received over the life of the investment of £6.50 million, a

2	The Income & Growth VCT plc	Annual Report & Financial Statements 2022

multiple on cost of 5.4x and an IRR of 33.2%. In June 2022, the Company realised its investment in MBI generating proceeds of £6.02 million from the sale (including loan repayments made earlier in the year). This contributed to returns received amounting to £8.23 million, a 2.2x multiple of cost and an IRR of 13.7% over the life of this investment.

Following the year-end, Andersen EV, the electric charger provider, was forced into administration as a result of a substantial deterioration in its trading conditions. This has resulted in a realised loss of £0.71 million recognised in the year under review. This is particularly disappointing as the Company, alongside the other Mobeus VCTs made a follow on investment into the company in May of this year. The Company had secured some impressive clients and funding was provided to drive product development in a premium brand which operated in the emerging electric car charging market. However, over the summer months, a sour combination of global supply issues and the removal of Government consumer support for the purchase of EV chargers quickly impacted the company's ability to continue trading and so necessitated the appointment of administrators shortly after the Company's year-end.

Investment activity during the year has been robust, with four new and eight follow-on investments completed, totalling £7.33 million. The Company invested a total of £2.69 million into four new investments:

Proximity Insight	retail technology
	software
Bidnamic	a marketing
	technology business
Orri Limited	an intensive day care
	provider for adults
	with eating disorders
FocalPoint	a GPS enhancement
	software supplier

In addition, eight follow-on investments totalling £4.64 million were made into:

Caledonian	a provider of UK
Leisure	leisure and
	experience breaks
Northern Bloc	a dairy and allergen-
	free ice cream brand
Andersen EV	a provider of
	premium EV chargers
Vivacity	an AI and Urban
	Traffic Control
	business
Bleach London	a hair colourants
	brand

ActiveNav	a provider of
	enterprise-level file
	analysis software
Preservica	a seller of proprietary
	digital archiving
	software
RotaGeek	a workforce
	management
	software business

We expect follow-on investments to continue to be a significant feature of the growth capital investments as they strive to achieve scale and move towards profitability. Follow-on investment requests will be subject to scrutiny and certain criteria being met, including the HMRC Financial Health Test.

During such uncertain times, management of the portfolio is critical and the Investment Adviser is focused on deploying its Talent Managment team to support investments.

Shareholders should be aware that an effective tightening of HMRC policy and practice to a technical aspect of the VCT financing rules is now resulting in the restriction of potential follow-on investments to support companies, where more than half their subscribed share capital has been lost. In a small number of cases, this may result in the Company not being able to follow its money even where a compelling business case exists therefore affecting the growth prospects of these businesses.

After the year end, the Company realised its equity holding in Equip Outdoor Technologies Holdings Limited ("EOTH") for £7.34 million (including preference dividends). These proceeds have contributed to returns received over the life of this investment of £9.54 million, which is a multiple on cost of 6.9x to date. The Company has retained its interest yielding loan stock.

Revenue Account

The results for the year are set out in the Income Statement on page 52 and show a revenue return (after tax) of 1.23 pence per share (2021: 0.77 pence per share).

The revenue return for the year of £1.53 million has increased from last year's figure of £0.91 million. This is primarily the result of significant loan interest arrears that were not previously recognised that were received upon the sale of MBI as well as higher receivable dividends from EOTH.

Fundraising

In January 2022, the Company completed a fundraise of £10 million for

the 2021/2022 tax year which was fully subscribed in less than 24 hours. This level of demand was pleasing, but the Board was aware that a number of investors were left disappointed having not been able to subscribe. Later in the year, upon considering the future cash requirements of the VCT and the potential demand for the Company's shares, the Board approved a further fundraise for the 2022/23 tax year. Having provided a period of time between the launch of the prospectus and acceptance of applications, the Board was pleased that the initial amount of £14m (as well as an over- allotment facility of a further £8m), launched early in October 2022, was fully subscribed by 13 December 2022 and is therefore no longer taking applications. Your Company welcomes both new and existing shareholders. Those investors who invested when the over-allotment facility had been utilised, have yet to receive their shares which are due to be allotted in January 2023 and certificates dispatched shortly afterwards.

The fundraising launched in October 2022 was to ensure that the Company retained adequate levels of liquidity to continue to take advantage of new investment opportunities and fund further expansion of the businesses in its investment portfolio, seek the delivery of attractive returns for its Shareholder, including the payment of dividends, over the medium term, and buy back its shares from those Shareholders who may wish to sell their shares. It is not the intention of the Board to conduct another fundraise in 2023.

Liquidity

Cash and liquidity fund balances as at

30 September 2022 amounted to £34.78 million representing 32.1% of net assets. After the year-end, following the payment of a 4.00 pence per share dividend and the successful fundraise, the pro-forma level of liquidity is £52.55 million (41.6% of net assets). The Board continues to monitor credit risk in respect of its cash and near cash resources and to prioritise the security and protection of the Company's capital.

Share buy-backs

During the year to 30 September 2022, the Company bought back and cancelled 1,166,089 of its own shares (2021: 1,285,499), representing 1% (2021: 1.1%) of the shares in issue at the beginning of the year, at a total cost of £1.03 million (2021: £1.05 million), inclusive of expenses.

Chair's Statement

Annual Report & Financial Statements 2022	The Income & Growth VCT plc	3