1.            ACCOUNTING POLICIES (continued)

Consolidation of the Carried Interest Partnership

The Group participates in the carried interest issued by Forward Partners 1 L. P., Forward Partners II L. P., and Forward Partners III L. P. (collectively, 'the Funds') through Forward Partners Carried Interest General Partner Limited's (the 'CI GP') carry rights in the carried interest partner, Forward Partners Carried Interest L.P. (the 'CIP'). The participants in the CIP carry include the CI GP and certain of the Group's employees and others connected to the underlying funds. The CIP has been established to facilitate payments of carried interest from the fund to carried interest participants.

The directors have undertaken a control assessment of the CIP in accordance with IFRS 10 "Consolidated Financial Statements" to consider whether they should consolidate the CIP.

The directors have considered the legal nature of the relationships between the Funds, the CIP and the CIP participants and have determined that the power to control the CIPs (which are entitled to the carried interest from the funds) ultimately resides with the fund investors and that the Group is therefore an agent and not a principal.

This is because the purpose and design of the CIP and the carry rights in the Funds are determined at the outset by the fund's LPA which requires investor agreement and reflects investor expectations to incentivise individuals to enhance performance of the underlying fund. The Group does not primarily benefit as its principal revenue stream is from the gains on the movement in its underlying investment portfolio. While the Group has some power over the Board of the CIP, these powers are limited and represent the best interests of all carried interest holders collectively and hence, these are assessed to be on behalf of the fund investors.

The directors have assessed the payments and the returns the carried interest holders make and receive from their investment in carried interest and have considered whether those carried interest holders who are also employees of the Group were providing a service for the benefit of the Group or the investors in the fund. The directors have concluded that the carried interest represents a separate relationship between the fund investors and the individual employees and that the carried interest represents an investment requiring the individuals to put their own capital at risk and that, after an initial vesting period, continued rights to returns from the investment is not dictated by continuation of employment.

In addition, the directors have also considered the variability of returns from the CIP that currently have value under IFRS 15 "Revenue from contracts with customers" and in doing so have determined that the Group is exposed to limited variable returns of approximately 6% (2021: 6%) with the main beneficiaries of the CIP variable returns being the other participants. The directors concluded that the CIPs are not controlled by the Group and therefore should not be consolidated.

Accounting for merger on formation of the group

Inter-company transactions (including unrealised gains/losses) and balances are eliminated. Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries had been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Immediately prior to the Forward Partners Group Plc's admission to AIM, the company acquired all equity interests in Forward Management Company Limited and its subsidiaries. Forward Partners Management Company Limited became a 100% owned direct subsidiary of Forward Partners Group Plc and was consolidated into these financial statements. For purposes of this transaction Forward Partners Management Company Limited was deemed to be the accounting acquirer, as Forward Partners Group Plc had a majority shareholder post admission who had a controlling interest in the underlying funds that were acquired. Therefore, the consolidated financial statements of the reporting entity, Forward Partners Group Plc, had been prepared as a continuation of the accounting acquirer's financial statements.

Contemporaneous to Forward Partners Group Plc's admission to AIM, the company acquired all the equity interests in Forward Partners 1 L. P., Forward Partners II L. P. and Forward Partners III L. P.. The Funds became 100% owned direct subsidiaries of Forward Partners Group Plc and consolidated into these financial statements.

The day after Forward Partners Group Plc's admission to AIM, the company acquired all equity interests in Forward Partners Venture Advance Ltd. Forward Partners Venture Advance Ltd became a 100% owned direct subsidiary of Forward Partners Group Plc and consolidated into these financial statements.

1.            ACCOUNTING POLICIES (continued)

Accounting for merger on formation of the group (continued)

In preparing these consolidated financial statements, the Group is required to determine whether the transactions fall within the scope of IFRS 3 Business Combinations to determine the appropriate basis for disclosure and the substance of the transaction. It is the directors' view that the transactions fall within the scope exclusion of IFRS 3, as a common control transaction and as such an alternative accounting policy must be selected. In the opinion of the directors, there is no other IFRS that specifically applies to these transactions.

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (paras 10-12) requires the Company to develop and apply an accounting policy suitable to the transaction, in accordance with the particulars laid out in the standard. IAS 8 paragraph 12 also states that "In making the judgement described in paragraph 10, management may also consider the most recent pronouncements of other standard-setting bodies that use a similar conceptual framework to develop accounting standards, other accounting literature and accepted industry practices."

In reviewing the scope of the mergers and group formation, including IFRS 3 Business Combinations the directors have determined the selection of an accounting policy analogous to that of the UK's FRS 102 section 19 Business Combinations and Goodwill (merger accounting method) will provide the most relevant, reliable and representative accounting treatment, which reflects the economic substance of the transactions.

In applying merger accounting when preparing these Consolidated Financial Statements, to the extent the carrying value of the assets and liabilities acquired under merger accounting is different to the cost of investment, the difference is recorded in equity within the merger reserve. Under merger accounting the results of the Group entities are combined from the beginning of the comparative period before the merger occurred.

Going concern

The directors have considered the going concern assessment undertaken at Group. The directors have reviewed cash flow forecasts for the Group and considered the impact of economic headwind and market conditions on them, which has included stress testing the Group's cash flow forecasts for severe but plausible downside scenarios and performing a reverse stress test covering the period 12 months from date of signing the financial statements (the going concern assessment period). This period is appropriate due to continued economic uncertainty. The directors have a reasonable expectation that the Group has adequate resources and cash reserves to continue in operational existence over the going concern assessment period even if the resulting economic instability were to have an impact on the portfolio valuations.

After making reasonable enquiries and having considered the matters described above, the directors believe that the Group is a sustainable business, will be able to meet its liabilities as they fall due and will have adequate resources to continue in operational existence from the date of approval of these financial statements for a period of at least 12 months. Accordingly, the directors continue to adopt the going concern basis in preparing the financial statements for the year ended 31 December 2022.

Revenue recognition

Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring services to a customer. For each contract with a customer, the Group: identifies the contract with a customer, identifies the performance obligations in the contract; determines the transaction price which takes into account the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative standalone selling price of each distinct  service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the services promised.

1.            ACCOUNTING POLICIES (continued)

Revenue recognition (continued)

An unbilled receivable (accrued income) is recognised when a performance obligation to a customer is satisfied (and the unconditional right to receive payment is present) but the actual invoice has not been raised and sent to the customer at the year end. Post year end, the invoices are raised and sent to the customer at which point the unbilled receivable is reclassified as trade receivable.

Recruitment fees are recognised as performance conditions detailed in the placement agreement are fulfilled. Portion of the recruitment fees attributable to performance conditions that have not been met are recorded as deferred revenues.

Finance income and costs

Finance costs comprise interest charged on bank loans in the Forward Advances business and lease liabilities.

Segmental reporting

An operating segment is defined as a component of an entity:

●      that engages in business activities from which it could earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity);

●      whose operating results are regularly reviewed by the entity's Chief Operating Decision Makers (CODM) to make decisions about resources to be allocated to the segment and assess its performance; and

●      for which discrete financial information is available.

1.            ACCOUNTING POLICIES (continued)

Segmental reporting (continued)

During the year ended 31 December 2022, the CODM is considered to be the Board of Directors which consists of two executive Directors, three non-executive Directors and two executive Directors of the subsidiaries who are not Directors of Forward Partners Group Plc. The executive Directors take an active role in the operations of the Group on a day-to-day basis

The Group reports its business activities in three areas: venture capitalist services, loan advances and Studio services, which is reported in a manner consistent with the internal reporting to the Board of Directors.

Leases

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:

●      the contract involves the use of an identified asset - this may be specified, explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;

●      the Group has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use; and

●      the Group has the right to operate the asset; or

●      the Group designed the asset in a way that predetermines how and for what purpose it will be used.

At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. The lease liability is measured at amortised cost using the effective interest method. It is re-measured when there is a change in future lease payments.

When the lease liability is re-measured, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in the income statement if the carrying amount of the right-of use asset has been reduced to zero.

Short-term leases and leases of low-value assets

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and low-value assets, including IT equipment. The Group would recognise the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Foreign currencies

Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the date of the Group statement of financial position are reported at the rates of exchange prevailing at that date. All foreign exchange gains and losses are presented in the statement of comprehensive income within the administrative expenses heading.

1.            ACCOUNTING POLICIES (continued)

Intangible assets

All finite-life intangible assets are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives. Residual values and useful lives are reviewed at each reporting date. In addition, they are subject to impairments testing as described below. Forward Advances software development costs are amortised on a straight-line basis over their useful economic lives.

Management have determined that 5 years is the most appropriate life as the development of the software is expected to service customers for the foreseeable future.

Impairment

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. All property, plant and equipment with a finite life are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the assets or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use, based on an internal discounted cash flow evaluation. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Impairment losses are charged to administrative expenses.

Property, plant and equipment

Property, plant and equipment are stated at cost, net of depreciation and any provision for impairment. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit and loss in the period in which they are incurred.

Depreciation is provided on all property, plant and equipment, other than freehold land, at rates calculated to write off the cost, less estimated residual value, of each asset over the shorter of the expected useful life or lease term, as follows:

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income when the asset is derecognised.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, demand deposits, bank overdrafts, and short-term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value.

1.            ACCOUNTING POLICIES (continued)

Financial instruments           

Recognition and derecognition

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

Classification and initial measurement of financial assets

Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).

Financial assets, other than those designated and effective as hedging instruments, are classified into one of the following categories:

●      amortised cost;

●      fair value through profit or loss (FVTPL); or

●      fair value through other comprehensive income (FVOCI).

In the year presented the Group does not have any financial assets that would be designated as hedging instruments or financial assets categorised as FVOCI.

The classification is determined by both:

●      the entity's business model for managing the financial asset; and

●      the contractual cash flow characteristics of the financial asset.

All revenue and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses.

Subsequent measurement of financial assets

Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):

●      they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and

●      the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.

After initial recognition, these are measured at amortised cost using the effective interest rate (EIR) method. Discounting is omitted where the effect of discounting is immaterial.

The Group's financial assets at amortised cost includes trade receivables, loan receivables on a fixed repayment schedule and a loan to a director included under other current financial assets (Note 8 of the Group's consolidated financial statements).

Financial assets at fair value through profit or loss (FVTPL) are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss. Further, financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL.

1.            ACCOUNTING POLICIES (continued)

Financial instruments (continued)

Impairment of financial assets

Trade Receivables are accounted for under the simplified approach. IFRS 9's impairment requirements use forward-looking information to recognise expected credit losses - the 'expected credit loss (ECL) model'. Instruments within the scope of the requirements included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under IFRS 15, loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss.

The Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.

The Group applies the impairment requirements of IFRS 9. The IFRS 9 impairment model requires a three-stage approach:

●     Stage 1 includes financial instruments that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. For these assets, 12-month expected credit losses ("ECLs") (that is, expected losses arising from the risk of default in the next 12 months) are recognised and interest income is calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance).

●     Stage 2 includes financial instruments that have had a significant increase in credit risk since initial recognition (unless they have low credit risk at the reporting date) but are not credit-impaired. For these assets, lifetime ECLs (that is, expected losses arising from the risk of default over the life of the financial instrument) are recognised, and interest income is still calculated on the gross carrying amount of the asset. The Group assumes there has been a significant increase in credit risk if outstanding amounts on the financial assets exceed 30 days, in line with the rebuttable presumption per IFRS 9 at which point the assets are considered to be stage 2.

●     Stage 3 consists of financial assets that are credit-impaired, which is when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. For these assets, lifetime ECLs are also recognised, but interest income is calculated on the net carrying amount (that is, net of the ECL allowance). The Group defines a default, classified as stage 3, as an asset with any outstanding amounts exceeding a 60-day due date, which reflects the point at which the asset is considered to be credit-impaired.

The Group assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at amortised cost and recognises a loss allowance for such losses at each reporting date. The measurement of ECLs reflects:

●     an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;

●     the time value of money; and

●     reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

Non-current financial assets

Non-current financial assets comprise investments in unquoted equity instruments, quoted equity investments and loan notes (unquoted investments) which are measured at fair value.

Fair value of the underlying portfolio of investments will be estimated using one or more of the below valuation methods at each calendar quarter end:

●      Market approach based on multiples, being principally price-revenue or price-earnings multiples

●      Probability-weighted expected return method (PWERM)

●      Quoted equity investments are based on the bid price at the reporting date.

1.            ACCOUNTING POLICIES (continued)

Financial instruments (continued)

When the Price of a Recent Investment ("PoRI"), resulting from an orderly transaction, is an appropriate starting point for estimating fair value, it will be used as a calibration point. For the calibration, adequate consideration will be given to the current facts and circumstances, including, but not limited to, changes in the market or changes in the performance of the investee company.

Where the funds have reason to believe the investee company is about to be wound up or has suffered a significant downturn in prospects, it will write the value down to zero or to whatever value is in our best estimate appropriate. Any gain or loss on revaluation is recognised immediately in the profit and loss account.

The values the funds have assigned to the investments are based upon available information and do not necessarily represent amounts which might ultimately be realised. Due to the inherent uncertainty of the valuation, the estimated fair value may differ significantly from the values that would have been determined had the investments been liquidated and those differences could be material.

The value of the Group's non-current financial assets are held at fair value through profit or loss, any listed investments are valued on the quoted price at the balance sheet date.

Changes in fair value are recognised in the profit and loss.

Trade and other receivables

The Group makes use of a simplified approach in accounting for trade receivables and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix.

The Group assesses impairment of trade receivables on a collective basis as they possess shared credit risk characteristics they have been grouped based on the days past due. Refer to Note 8  of the Group's consolidated financial statements for a detailed analysis of how the impairment requirements of IFRS 9 are applied.

Loan receivables

The Group has determined that loan receivables with fixed repayment obligations are financial assets which are measured at amortised cost. Further, loan receivables with variable repayments and other financial assets are measured at FVTPL" .

Classification and measurement of financial liabilities

The Group's financial liabilities include borrowings and trade and other payables.

Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at FVTPL.

Classification and measurement of financial liabilities continued)

Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss.

All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within finance costs or finance income.

1.            ACCOUNTING POLICIES (continued)

Taxation

Current tax is the tax currently payable based on the taxable profit for the year.

Deferred tax is provided in full on temporary differences between the carrying amounts of assets and liabilities and their tax bases, except when, at the initial recognition of the asset or liability, there is no effect on accounting or taxable profit or loss under a business combination. Deferred tax is determined using tax rates and laws that have been substantially enacted by the statement of financial position date, and that are expected to apply when the temporary difference reverses.

Tax losses available to be carried forward, and other tax credits to the Group, are recognised as deferred tax assets, to the extent that it is probable that there will be future taxable profits against which the temporary differences can be utilised.

Changes in deferred tax assets or liabilities are recognised as a component of the tax expense in the statement of comprehensive income, except where they relate to items that are charged or credited directly to equity, in which case the related deferred tax is also charged or credited directly to equity.

Provisions

These are recognised when the Group has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated.

Provisions are measured at the present value of the expenditure expected to be required to settle the obligation, using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as a finance cost.

Carried interest

The Group has established carried interest plans for the Executive Directors, other members of the investment team and certain other employees (together the "Plan Participants") in respect of any investments and follow-on investments made within the Groups Limited Partnership Funds. Plan Participants will receive, the amounts as set out in the table below of the net realised cash profits from the investments and follow-on investments made over the relevant period once the Group has been repaid the Priority Profit Share (PPS) and received an aggregate amount equal to 6% per annum (the 'hurdle') calculated on a monthly basis, compounded annually on the initial capital and loan funds put into the partnerships to fund the investments and PPS (the 'Preferred Return'). The Plan Participants' return is subject to a "catch-up" in their favour.

Carried interest distribution

The carried interest plans run from inception to cessation of the partnership for Fund I and II and for Fund III the carried interest fee operates in respect of investments made during a 24 month period and related follow-on investments made for a further 36 month period, save that the first carried interest fee shall be in respect of the period from the Group admission to AIM to 31 December 2021.

Carried interest is measured at FVTPL with reference to the performance conditions described above and is accounted for using the Ownership Model. Under the Ownership Model, carried interest is recognised as reallocation of profits of the Funds between the partners. On a consolidated basis, carried interest reserves is eliminated and the portion of carried interest reserve due to external parties is presented as a financial liability of the Group.

1.            ACCOUNTING POLICIES (continued)

Carried interest (continued)

Carried Interest is calculated based on the valuation of the Company's investments as at the year end, assuming all the investments were converted to cash at that point and net of selling costs. The actual amount payable will be dependent on the amount and timing of the actual realisations of the portfolio investments. At each valuation date, carried interest balance is adjusted to reflect the impact of investment valuation on the amount of carried interest to be payable. A decrease in the fair value of the investment portfolio at valuation date would result in a decline in the carried interest value. At a consolidated level, this would result in a credit adjustment to the total carried interest expense recognised for the Group.

Based on the investment valuations as at 31 December 2022 the hurdle has not been met by the Funds, on an unrealised basis, as such carried interest has not been provided for in the year (2021: £11.3m). A credit adjustment of £11.3m (2021: debit adjustment of £5.7m) to carried interest has been charged to profit and loss to bring total carried interest provision to Nil (2021: £11.3m). This will only be payable if the hurdle is met on a realised basis and a carried interest fee is paid by the Group to the Plan Participants. The carried interest arrangements have been set up with aim of incentivising employees of the Group and aligning them with shareholders through participation in the realised investment profits of the Group. The Remuneration Committee determine the allocation of the carried interest amongst employees of the Group. Each carried interest plan is subject to good and bad leaver provisions. Any unvested carried interest resulting from a Plan Participant becoming a leaver can be reallocated by the Remuneration Committee. Non-executive Directors of the Company are not eligible to participate in the carried interest arrangements.

Merger reserve

To the extent the carrying value of the assets and liabilities acquired under merger accounting is different to the cost of investment, the difference is recorded in equity within the merger reserve, along with an adjustment to reflect the share capital and share premium of the legal parent. Under merger accounting the results of the Group entities are combined from the beginning of the comparative period before the merger occurred. Comparatives are restated on a combined basis and adjustments made as necessary to achieve consistency of accounting principles.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. The proceeds of share issues, received net of any directly attributable transaction costs, are credited to share capital at nominal value and the excess credited to the share premium account.

Retained earnings represent the accumulated profits and losses, less dividends since the Group was formed.

Employee benefits and Pensions

The Group supports various personal pension arrangements and is auto-enrolment compliant. Payments are made to individual defined contribution pension schemes. Agreed contributions are charged to the statement of comprehensive income as they become payable.

Employees (including directors) of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions). The Group has not issued any cash-settled awards during the year.

Equity-settled transactions

The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model, further details of which are given in Note 16 of the Group's consolidated financial statements.

That cost is recognised in employee benefits expense (Note 15 of the Group's consolidated financial statements), together with a corresponding increase in equity (retained earnings), over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

1.            ACCOUNTING POLICIES (continued)

Share based payments

Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group's best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.

No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not been met.

When the terms of an equity-settled award are modified, the minimum expense recognised is the grant date fair value of the unmodified award, provided the original vesting terms of the award are met. An additional expense, measured as at the date of modification, is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee. Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately through profit or loss. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share (further details are given in Note 3).

Financial Risk Management

Financial risk

The Group's activities expose it to a variety of financial risks. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

Risk management is carried out by the board which evaluate and manage financial risks in close co-operation with the managing directors of the subsidiary companies.  The Group:

●      regularly reviews credit extended to customers with appropriate action being taken to minimise the cost of bad debts;

●      balances risk and return when assessing where to place cash surplus to the Group's immediate requirements; and

●      keeps open options to employ debt finance to ensure that the Group has sufficient funds for continuing operations and planned expansions.

Market risk

The Group is exposed to market risk through its use of financial instruments and specifically to interest rate risk, currency risk, and certain other price risks, which result from both its operating and investing activities. The Group has interest-bearing assets which are subject to a fixed rate of interest. Thus, the Group is exposed to interest rate risk, which is not expected to have a significant impact on profit or loss or equity. The Group considers its exposure to currency risk as minimal.

Foreign exchange risk

Most of the Group's transactions are carried out in GBP. Exposures to currency exchange rates arise from the Group's portfolio company investments in overseas companies, which are primarily denominated in US dollars (USD) and Euros (EUR). The Group has two non-current asset investments dominated in US dollars (USD). These investments will have revenues dominated in US dollars (USD), which could impact the fair value, albeit do not have a direct impact on the Group's operations. The Group monitors its exposure to foreign exchange risks on a regular basis but its exposure to date has been de-minimis and the cost of any FX hedging strategy is not deemed cost effective.

Concentration risk

The principal concentration risk for the Group arises from its significant cash holding in a single banking institution which exposes it to potential losses should the bank fails. As at 31 December 2022, the Group had cash balance of £17.2m (2021: £31.1m) held between Barclays Bank UK Plc and Silicon Valley Bank, split 33% and 67% respectively (2021: 18% and 82% respectively). The Group monitors the performance of the banks it has relationships with and is able to mitigate the risk through holding active accounts in other banking institutions.

1.            ACCOUNTING POLICIES (continued)

Financial Risk Management (continued)

Credit risk

Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to credit risk from financial assets including cash and cash equivalents held at banks, trade and other receivables and financial assets.

Liquidity risk

The Group keeps open avenues for securing debt finance to ensure that funds may be called upon if and when needed for operations and payments due in respect of acquisitions. The board monitors the Group's liquidity position on the basis of expected cash flow on a regular basis. The following table analyses the Group's financial liabilities, which will be settled on a net basis, into relevant maturity groupings, based on the remaining period to maturity at 31 December. The amounts disclosed are the contractual undiscounted cash flows:

Capital risk

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns to shareholders. The Group defines capital as loans, share capital plus reserves. As a Small authorised UK AIFM, the Group has a capital requirement of £5k or 6/52 expenditure, whichever is higher, in line with Chapter 5 of the Interim Prudential sourcebook for Investment Businesses (IPRU-INV). The board monitors levels of cash and any excess levels have historically been used for acquisition.

Other pricing sensitivities

The Group is exposed to other price risk in respect of its listed equity securities and within the use of the multiples-based valuation method of investments (Note 2). The investments in listed and unlisted equity securities are considered long-term, strategic investments. In accordance with the Group's policies, no specific hedging activities are undertaken in relation to these investments. The investments are continuously monitored and voting rights arising from these equity instruments are utilised in the Group's favour.

2.            SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The Group may be required to make estimates and assumptions concerning the future. These estimates and judgements are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The principal areas where judgement has been exercised are as follows:

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

Non-current financial assets

The Group's Non-current financial assets held at fair value through profit or loss represent our investments in the equity of quoted and unquoted companies which are very thinly traded and for which no market exists. These investments are measured at fair value through profit or loss at the year end. The Group's valuation of investments measured at fair value through profit or loss is therefore dependent upon estimations of the valuation of the underlying portfolio companies.

The fair value of unlisted securities is established with reference to the International Private Equity and Venture Capital Valuation Guidelines December 2022 as well as the IPEV Board, Special Valuation Guidance issued on 31 March 2020 in response to the Covid-19 crisis ("IPEV Guidelines"). An assessment will be made at each measurement date as to the most appropriate valuation methodology.

The Group invests in early-stage and growth technology companies. Given the nature of these investments, there are often no current or short-term future earnings or positive cash flows. Consequently, although not considered to be the default valuation technique, the appropriate approach to determine fair value may be based on a methodology with reference to observable market data, being the price of the most recent transaction. Fair value estimates that are based on observable market data will be of greater reliability than those based on estimates and assumptions and accordingly where there have been recent investments by third parties, the price of that investment will generally provide a basis of the valuation. Recent transactions may include post year-end as well as pre year-end transactions depending on the nature and timing of these transactions.

If this methodology is used, its initial use and the length of period for which it remains appropriate to use the calibration of last round price depends on the specific circumstances of the investment, and the Group will consider whether this basis remains appropriate each time valuations are reviewed. In addition, the inputs to the valuation model (e.g. revenue, comparable peer group, product roadmap) will be recalibrated to assess the appropriateness of the methodology used in relation to the market performance and technical/product milestones since the round and the company's trading performance relative to the expectations of the round.

The Group considers alternative methodologies in the IPEV Guidelines, being principally price-revenue or price-earnings multiples, depending upon the stage of the asset, requiring management to make assumptions over the timing and nature of future revenues and earnings when calculating fair value. When using multiples, we consider public traded multiples in similar lines of business, which are adjusted based on the relative growth potential and risk profile of the subject company versus the market and to reflect the degree of control and lack of liquidity.

Where a fair value cannot be estimated reliably, the investment is reported at the carrying value at the previous reporting date unless there is evidence that the investment has since been impaired.

In all cases, valuations are based on the judgement of the Directors after consideration of the above and upon available information believed to be reliable, which may be affected by conditions in the financial markets. Due to the inherent uncertainty of the investment valuations, the estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. Due to this uncertainty, the Group may not be able to sell its investments at the carrying value in these financial statements when it desires to do so or to realise what it perceives to be fair value in the event of a sale.

2.         SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (continued)

Provision for expected credit losses of financial assets

On 24 August 2022 the Directors announced their intention to wind down the Advances business, and from this date the business ceased offering new loans, however the Directors intend for the business to continue to operate for the purposes of recovering all receivables and settling its liabilities as they fall due.

The assessment of the information correlation between recent trading history, forward looking information, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group's recent credit loss experience and forecast of economic conditions may also not be representative of customer's actual default in the future. The information about the ECLs on the Group's financial assets is disclosed in Note 8 & 9  of the Group's consolidated financial statements.

Accounting for merger on formation of the group

As disclosed in the Group's accounting policies the Group is required to apply a suitable accounting policy to account for the formation of the Group. IAS 8 para 12 specifically states '…management may also consider the most recent pronouncements of other standard-setting bodies that use a similar conceptual framework to develop accounting standards, other accounting literature and accepted industry practices…". Accordingly, managements considerations in formulating the accounting policy are a significant accounting judgement.

Accounting for merger on formation of the group (continued)

The Group was formed in July 2021 to bring together the investment management company and the funds it managed into a new venture capital investment group realising the vision of members of the Management team which was shared with key investors. Management consider that Forward Partners Management Company Limited was the accounting acquirer of Forward Partners Group Plc as the latter did not trade, nor was it considered a business, prior to the merger and the transaction was not one that is subject to common control.

In relation to the merger of Forward Partners 1 Limited Partnership, Forward Partners II Limited Partnership, Forward Partners III Limited Partnership with Forward Partners Group Plc management applied merger accounting on the basis that the transaction was one under common control. Management elected to present the numbers on a retrospective presentation method, so that it is consistent with the accounting treatment for Forward Management Company Limited.

Management also considered that the transaction to acquire Forward Advances took place under common control and therefore have applied the same policy as those for the funds. Up until Forward Advances was acquired in 2021, the company was held as an investment at fair value within the fund, Forward Partners II Limited Partnership. From the date of the transaction, management considered that the Forward Partners Venture Advance Ltd is no longer an investment held at fair value, as its purpose was to enable the Group to offer revenue-based financing to its customers as an alternative to venture capital funding.

Assessment of whether Forward Advances meet the definition of a discontinued operation

Following the announcement of Forward Advances' Directors of their intention to wind down the business, the business ceased offering new loans, but continues to operate for the purposes of recovering all receivables and settling its liabilities as they fall due. We have considered whether Forward Advances meet the definition of a discontinued operation in line with IFRS 5 and note that the operation cannot be classified as discontinued until the final interest payment has been collected, which is the point that the revenue-generating activity ceases.

3.         EARNINGS PER SHARE & NAV PER SHARE

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Group by the weighted average number of ordinary shares in issue during the year.

*NAV (Net Asset Value)

The basic and diluted EPS are the same as there are no dilutive financial instruments.

4.         ULTIMATE CONTROLLING PARTY

Forward Partners Group Plc, incorporated in England and Wales, is the ultimate parent company of the Group. The ultimate beneficiary, and the largest shareholder is Blackrock International Limited, which holds 70.4% of the issued share capital of Forward Partners Group Plc.

5.         EVENTS AFTER THE REPORTING DATE

The recent banking crisis triggered by Silicon Valley Bank's (SVB) collapse in March 2023 and the recent increase in interest rates has made securing additional funding and credit lines particularly challenging for fintech lending companies. In particular, Koyo is most at risk as it has appointed advisors to secure their future. As a result, it is likely Koyo's valuation of £2.3m, representing 2.9% of the portfolio fair value, will be fully written down by the interim date.

Shortly before the Bank of England's 10th March statement announcing its intention to place SVB into an insolvency procedure, 92% of the funds the Group held with SVB were transferred to Barclays Bank Plc. The Group is currently reviewing its banking facilities in light of the recent banking crisis with a view to ensuring their cash is only held with tier 1 institutions.