VPC

INVESTMENT MANAGER’S REPORT

REVIEW OF 2023 PERFORMANCE

Last year was another year of economic uncertainty and geopolitical turmoil with the war in Ukraine, tensions between China and the US, and conflict that erupted once more in the Middle East. Supply chains remained under pressure, and consumers in many countries had to contend with a continued cost-of-living crisis, in large part precipitated by persistently high inflation. In response to inflationary pressures, key central banks continued to raise interest rates. The US Federal Reserve increased the federal funds rate four times over the year, from 4.25%-4.5% to 5.25%-5.5%, although it refrained from further rate hikes after July. This pause in further rate hikes gave rise to hopes that rates might be cut in 2024, although statements from Federal Reserve officials have somewhat dampened optimism.

With financing options harder to come by in an environment of higher interest rates, venture capital (“VC”) markets have been subdued, and VC investors have been cautious. The excitement over generative artificial intelligence meant that other technology-focused companies struggled to secure funding. Moreover, the collapse of Silicon Valley Bank and the poor post-flotation performance of several high-profile technology companies added to VC investors’ wariness. Crunchbase reports that VC funding fell to its lowest level for five years in 2023, with a 38% decline from the previous year. Meanwhile, mergers and

acquisitions (“M&A”) fell to their lowest level for a decade.

Similar to 2022, VPC’s strong performance of its asset-backed lending investments was outweighed by weakness in the equity portion of the portfolio in 2023. By year-end, the Company’s asset-backed lending investments represented approximately 73.0% of the total investment portfolio. Here, the Company benefitted from continued increases in short-term interest rates during the year, which underscore the power of variable-rate loans. The remainder of the investment portfolio comprises the Company’s equity interests.

The Company completed the year with a NAV total return of -9.45%, a gross revenue return of +13.93% and a gross capital return of -18.34%. The Company’s revenue return remained in line with expectations, providing a full cash coverage of the 8.00p per share dividend for Shareholders during the year as set out in the IPO Prospectus (the “Target Dividend”). In February 2024, the Company declared its 24th consecutive quarterly dividend payment of 2.00p per share for the three months to 31 December

2023, and the dividend was paid to Shareholders in March 2024.

Although capital returns were negative, the FinTech portfolio continued to produce consistently positive revenue returns. Since the agreement to realise the Company’s assets at the General Meeting held in June 2023, the Investment Manager has achieved the repayment of several asset-backed FinTech investments. These include the positions in Applied Data Finance, LLC, and, after the year-end, Elevate Credit, Inc., and Koalafi (formerly known as West Creek Financial, LLC). In the FinTech equity portfolio, the reduction in unrealised capital returns generally stemmed from marking these investments to year-end exit values, in light of near-to-medium-term exit opportunities and the depressed VC and M&A environment.

For the Company’s eCommerce assets, the ongoing depression of revenue growth and margins in the overall industry played a significant role in the adjustment of the fair market value of equity holdings. This arose as consumers came under pressure from the cost-of-living crisis, and companies had to cope with further disruptions to their supply chains. In certain cases, individual portfolio holdings underperformed expectations, leading to additional adjustments. The Investment Manager is actively working to mitigate the risks associated with this sector of the portfolio, including exploring strategic combinations, among other options. Please see the Subsequent Events section below for additional details on specific strategic combinations. VPC continues to work with its eCommerce Portfolio Companies as they strengthen their balance sheets and evaluate additional strategic combinations in an effort to maximise Shareholder value.

The Company’s positions in legal finance have continued to perform well, and the Investment Manager continues to evaluate exit opportunities for these investments.

At the year-end, the Company accrued ECL reserves of £6.4 million (£16.4 million at 31 December 2022). During the year, certain asset-backed lending investment maturities were extended to reflect changes in the circumstances of the particular investment or the prevailing market conditions. In each case, these extensions were made to preserve value for the Shareholders, as disclosed in the General Meeting Circular.

During the realisation process, VPC will continue to draw on its longstanding reputation and relationships with management teams, industry professionals and experts to determine the most cost-effective distribution mechanisms for maximizing Shareholder value.