TIDMSUPP

RNS Number : 2593B

Schroder UK Public Private Tst plc

30 September 2022

Half Year Report

Schroder UK Public Private Trust plc hereby submits its Half Year Report for the six months ended 30 June 2022 as required by the Financial Conduct Authority's Disclosure Guidance and Transparency Rule 4.2.

The Half Year Report is also available to download from the Company's webpage. Please click on the following link to view the document:

http://www.rns-pdf.londonstockexchange.com/rns/2593B_1-2022-9-29.pdf

The Company has submitted a copy of its Half Year Report to the National Storage Mechanism and it will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

Enquiries:

Schroder Investment Management Limited

   Andrew Pearce (Press)        0207 658 2203 
   John Spedding                      0207 658 3206 

Schroder UK Public Private Trust plc

Half Year Report and Accounts for the six months ended 30 June 2022

Chairman's Statement

Introduction

I am pleased to present my second report as Chairman covering the six month period ending 30 June 2022.

Performance and valuation

During the six month period to 30 June 2022, the net asset value ("NAV") per share decreased by 31.8% from 48.08 pence per share to 32.80 pence per share. The share price decreased by 36.1% from 33.10p to 21.15p in the same period.

The majority of the decline in NAV was a consequence of weakness in the Company's public market holdings in a very challenging period for equity markets. Against a global backdrop of elevated energy costs, disrupted supply chains, sustained inflation and rising interest rates, investor sentiment towards 'growth' stocks fell sharply in the first half of the year. The Company's listed holdings were not immune to these pressures.

The Company's private equity holdings were more resilient against this volatile backdrop, with the exception of Rutherford Health which was fully written off in June 2022. This was previously announced to the market and incorporated into the daily NAV on 6 June 2022.

The decline in the share price of BenevolentAI since the end of June 2022, details of which may be found in note 10 to the accounts, has now been well publicised. On 20 September 2022, the Board announced the discovery of an administrative error by the Company's outgoing AIFM which resulted in the valuation of this holding in the daily indicative unaudited NAV being mis-stated. I would like to assure shareholders that the Board has engaged with all service providers so that this unfortunate incident is not repeated.

More details on performance, valuation and portfolio activity can be found in the Portfolio Manager's Review.

Change of AIFM, Custodian, Fund Administrator and Depositary

The Company announced on 11 July 2022 that, subject to regulatory approvals, Schroder Unit Trusts Limited would replace Link Fund Solutions Limited as Alternative Investment Fund Manager. We are pleased to confirm that regulatory approval has now been received and that this change is effective from 1 October 2022. In addition, the Board has appointed HSBC as Custodian and Depositary, to replace Northern Trust, also effective from 1 October 2022.

Discount management

The share price discount to NAV per share widened from 31.2% to 35.5% during the period.

In the last Annual Report the Board stated that the Company was in a position to consider buying back shares following the repayment of outstanding debt. Given the share price performance and widening discount during the period the Board has been buying back shares since 9 May 2022 and a total of 770,000 shares were bought back for cancellation at a cost of GBP170,000 across 12 transactions during the period. Since the end of the period, the Company has purchased an additional 1,575,000 shares at a cost of GBP307,000 across 21 trades and will continue to be active in the market.

Outlook

It is now over two and a half years since the former Portfolio Manager of the Company resigned and the Board appointed Schroders as Portfolio Manager. While performance has been challenging during this time, significant progress has been made in reducing the prohibitive levels of debt on the balance sheet and rebalancing the portfolio. Through a combination of selective realisations from the legacy portfolio and a number of new investments the Portfolio Manager has stabilised the Company's balance sheet, improved the quality and diversification of the portfolio and ensured its ongoing viability.

The Portfolio Manager has now made eight new private equity investments since taking over management of the Company which includes two investments made post-period. The Portfolio Manager continues to reshape the portfolio and align it with its strategy of aiming to invest in best in class global private companies, at either the venture or growth stage. Importantly the Portfolio Manager also continues to focus on extracting the highest possible value from the positions it inherited and to manage stock-specific issues, working closely with management teams to navigate the current environment.

The recent expansion of the investment mandate has resulted in a global, and thus a wider, pipeline of opportunities. The Company is now in a better position to take advantage of the international deal sourcing capability of Schroders and its encouraging long-term performance record. The Company remains well capitalised and ready to exploit the most attractive of these opportunities.

Despite the unsettled macroeconomic environment, the Portfolio Manager remains optimistic about the long-term prospects for the portfolio. While many areas of private equity will continue to face significant short-term challenges, other areas are likely to be more resilient. This resilience is being shown in a number of our private equity holdings of late. Despite the reasonably short period of time that many of these investments have been held, the Portfolio Manager is encouraged by the operational robustness these businesses are demonstrating despite the prevailing headwinds.

The Board believes that while the period under review has been challenging, the Company is well placed to produce long-term growth in future and to provide a compelling vehicle for both institutional and private investors to gain access to private equity markets.

Tim Edwards

Chairman

30 September 2022

Portfolio Manager's Review

Summary

-- The Company reported a net asset value ("NAV") of 32.80p per share as of 30 June 2022, a decrease of 31.8% relative to the NAV as of 31 December 2021 (48.08p per share) and 17.1% relative to the NAV as of 31 March 2021 (39.57p per share).

-- The largest detractor to performance was gene sequencing company Oxford Nanopore, the Company's largest holding, which declined by 61.8%, generating a market value loss of GBP100.6 million over the half year period (72% of the NAV loss over the period). Since the end of June, the share price has been relatively more stable and the company's operational progress has been encouraging.

-- The Company completed its fifth and sixth new private equity investments in the leading, dedicated renewed technology marketplace, Back Market, and in innovative developer of immunoglobulin E antibodies to treat cancer, Epsilogen, as part of our strategy to invest in ground-breaking companies.

-- As of 30 June 2022, we believe the Company is well placed to benefit from the current depressed valuation environment when making new investments with more than GBP6.7m in cash, an unutilised loan facility, GBP127.7m in public equity investments and a healthy pipeline of global venture/growth stage companies.

Introduction

Economic and market backdrop

The first half of 2022 saw the MSCI All Country World Index's biggest H1 fall since its inception in 1990. The war in Ukraine has exacerbated already present inflationary forces. Europe is facing an acute crisis with energy supplies from Russia under threat. Interest rates around the world have risen as central banks have admitted that inflation is more ingrained, rather than just a series of transient shocks. Incomes are being squeezed; consumer confidence indicators have fallen; and fears of a recession have increased. Meanwhile, global IPO activity almost halved in volume in the first half of 2022.

Despite this challenging backdrop, we remain steadfast in our long-term investment strategy and believe exciting opportunities will continue to present themselves, but at better valuations.

Portfolio composition and valuation reviews

As of 31 December 2021, the Company had 35 portfolio holdings(1) including 11 quoted holdings and 24 unquoted holdings. During the period, the number and composition of holdings was impacted by the following events:

-- New investment in leading, dedicated renewed technology marketplace, Back Market (incorporated as Jung S.A.S).

-- New investment in innovative developer of immunoglobulin E antibodies to treat cancer, Epsilogen Ltd ("Epsilogen").

-- Rutherford Health plc ("Rutherford Health") announced the withdrawal of its shares from trading on the AQSE Growth Market. Subsequently, the company was revalued to no value after its Board resolved to wind-up the company. The Schroders' investment team spent a considerable amount of time working with the company to improve its financial situation and operational performance and explore alternatives but the wind-up could not be avoided.

   --   Sale of Seedrs Ltd ("Seedrs"). 

-- BenevolentAI completed its business combination with Odyssey Acquisition S.A. ("Odyssey"), a Euronext Amsterdam-listed investment company.

As of 30 June 2022, the Company ended the period with 34 holdings(2) including 11 quoted holdings and 23 unquoted holdings. All the Company's quoted holdings were valued using unadjusted quoted prices. For the unquoted holdings, Link Fund Solutions Limited ("LFS"), the Company's Alternative Investment Fund Manager (AIFM), conducted a full valuation review to determine the fair value of the portfolio as of 30 June 2022.

(1) Excluding 9 holdings with no value. (2) Excluding 11 holdings with no value.

Recent developments

Since 30 June 2022, volatility in the performance of its earlier stage, loss-making public companies has continued, including Oxford Nanopore (-7.5%(1) ), BenevolentAI (-47.5%(1) ), Immunocore (+16.9%(1) ) and IDEX Biometrics (-40.7%(1) ). The Company's more mature public equity holdings have been more stable, including Spirent Communications (+5.6%(1) ) and Johnson Matthey (-3.1%(1) ).

The decline in the share price of BenevolentAI since the end of June 2022, details of which may be found in note 10 to the accounts, has now been well publicised. The Portfolio Management team is supporting the Board so that the administrative error by the Company's outgoing AIFM, which caused the daily indicative unaudited NAV to be mis-stated, will not be repeated following the transition of the AIFM role to Schroder Unit Trusts Limited.

In August, the Company completed two further new private equity life sciences investments, representing combined commitments of GBP3.7 million. Further details of these new investments are expected to be disclosed shortly. These two new companies, combined with the earlier investment in Epsilogen, form the first three investments of our dedicated life sciences sub-strategy. Our aim is to build a diversified portfolio of 6-8 healthcare therapeutics companies addressing key unmet medical needs with a focus on oncology and the treatment of solid tumours. We plan to make small initial investments (up to GBP3 million), build a diversified portfolio, implement prudent capital reserving (up to an additional GBP3 million) and target an aggregated portfolio to represent 10% of total investments. We believe this approach balances the risk-return trade-off of this high potential, yet high risk, sector.

(1) Share price performance between 30 June 2022 and 23 September 2022.

Financial Performance

 
 Attribution                                    Net 
 Analysis                Public   Private   (debt)/ 
 (GBPm)                  equity    equity      cash   Other       NAV 
 Value at 31.12.21        243.3     197.6     (2.9)   (1.1)     436.9 
 + Investments                -      13.9    (13.9)       -         - 
 - Realisations 
  at 
 value                   (12.2)    (13.6)      25.8       -         - 
 +/- Fair value 
  gains/ 
 (losses)               (116.3)    (28.5)         -       -   (144.8) 
 +/- FX gains/ 
 (losses)                   1.5       6.2         -       -       7.7 
 +/- Reclassified 
 holdings                  11.4    (11.4)         -       -         - 
 +/- Costs and other 
 movements                    -         -     (2.3)     0.3     (2.0) 
 Value at 30.06.22        127.7     164.2       6.7   (0.8)     297.8 
 

Source: Link Fund Solutions, the Company's AIFM, as of 30 June 2022.

The NAV as of 30 June 2022 was GBP297.8 million or 32.80p per share, a decrease of 31.8% compared with the NAV as of 31 December 2021 and of 17.1% compared with 31 March 2022.

The half year NAV decrease of -31.8% comprised:

   --   Public equity holdings: -26.6% 
   --   Private equity holdings: -6.5% 
   --   Foreign exchange: +1.8% 
   --   Costs and other movements: -0.5% 

The Company's public equity holdings saw a decrease in value of 47.8% contributing -26.6% to the half year decrease in NAV. The largest negative contributor was Oxford Nanopore Technology. The company's share price declined 61.8% over the half year period, 43.0% and 33.1% over the first and second quarters respectively, resulting in a total loss of GBP100.6 million. Factors affecting the stock included a broader sectoral rotation from growth to value stocks and fears of a potential stock overhang following the expiry of the post-IPO lockup period at the end of March. From an operational perspective the company continued to expand its commercialisation capabilities. Revenue guidance for the core business of GBP145-160m for 2022 and GBP190-220m for 2023 was reiterated in September 2022, demonstrating board and management confidence in continued commercial momentum.

The share price of IDEX Biometrics, the Norwegian developer of biometric cards, declined 59.2% over the period, a loss of GBP7.0 million. IDEX has continued to deliver on their commercial plans with three commercial launches of bank cards utilising its biosensor technology in H1, with a further 8-10 launches expected over the course of 2022. However, the revenue growth arising from these launches has been slower than anticipated, and the company remains unprofitable, so the stock has been affected by the wider market rotation from growth to value.

The Company's private equity holdings saw a decrease in value of 14.4% contributing -6.5% to the half year decrease in NAV. The largest negative contributor to unquoted performance was Rutherford Health, which was fully written-off in June 2022 following news that the company's Board had resolved to wind-up the company and appoint the official receiver as liquidator. The revaluation resulted in a fair value loss of GBP23.6 million. The company is reported as an unquoted holding following withdrawal of its shares from trading on the AQSE Growth Market on 24 January 2022. Since assuming portfolio management of the Company, the Schroders investment team had spent a considerable amount of time working with Rutherford to improve its financial situation and operational performance but the wind-up could not be avoided. A number of factors contributed to Rutherford's failure, but the flawed expansion strategy pursued by the company in the initial development phase from 2015 to 2019 laid the ground for an unsustainable funding need.

The largest positive contributor to performance was BenevolentAI, which was revalued following completion of its business combination with Odyssey Acquisition S.A. ("Odyssey"), a Euronext Amsterdam-listed investment company. As of 30 June 2022, the Company's holding in BenevolentAI was valued at GBP32.7 million based on a share price of EUR8.00, an increase of GBP4.3 million relative to the holding value of as of 31 December 2021 (GBP28.5 million). However, since the period end, BenevolentAI's share price has declined 47.5% to EUR4.20 per share, as of 23 September 2022.

The only other private equity holding that experienced a fair value gain or loss of greater than GBP5 million over the period was Atom Bank. The Company's AIFM, Link Fund Solutions, revalued the holding down to reflect deterioration in the U.K. economic and public market backdrop.

Valuation of new investments

The subset of companies in the portfolio which represent the new private equity holdings since our appointment as Portfolio Manager saw a small decrease in value which was immaterial in the context of the overall portfolio. The AIFM reduced the valuations of Revolut and Back Market to reflect the performance of their respective listed market peers which are used as the basis of the Company's ongoing valuations. Despite what we see as a much-needed correction in the valuation of high growth public companies, both businesses are delivering operationally at an underlying level, and we remain encouraged by their long-term operational and financial outlook, which should far outweigh any contraction in value of comparable businesses - a factor anticipated in our original investment case.

Foreign exchange

Over the half year period, the fair value of investments denominated in the United States Dollar (USD), Euro (EUD), Swiss Franc (CHF) and Australian Dollar (AUD) benefited from the depreciation in the value of the British pound sterling (GBP). Whereas the investment in IDEX Biometrics, denominated in Norwegian Krone (NOK), was marginally negatively impacted by the appreciation of GBP. Overall, changes in foreign exchange rates contributed +1.8% to the half year change in NAV.

Cash and debt

As of 30 June 2022, the Company held GBP6.7 million in cash with no funds drawn from the loan facility.

Top 10 Holdings

The Company's top ten holdings as of 30 June 2022 compared with the respective holding as of 31 December 2021.

 
                            Value      % of        Value      % of 
                         as of 31     total     as of 30     total 
                         December   invest-         June   invest- 
                        (GBP'000)     ments    (GBP'000)     ments 
 Oxford Nanopore          162,641     36.9%       62,069     21.3% 
 Atom Bank                 46,209     10.5%       38,090     13.1% 
 BenevolentAI              28,484      6.5%       32,734     11.2% 
 AMO Pharma                11,668      2.6%       16,151      5.5% 
 Reaction Engines          12,500      2.8%       12,500      4.3% 
 Federated Wireless         8,618      2.0%       12,481      4.3% 
 Ada Health                 9,905      2.2%       10,155      3.5% 
 HP Environmental 
 Technologies Fund         10,667      2.4%       10,006      3.4% 
 Nexeon                     7,788      1.8%        8,770      3.0% 
 Immunocore                21,044      4.8%        8,564      2.9% 
 

Source: Link Fund Solutions, the Company's AIFM, as of 30 June 2022.

Oxford Nanopore

Technology company at the forefront of next generation DNA sequencing instrumentation

Oxford Nanopore Technologies ("ONT") has developed a new generation of nanopore-based electronic systems for the analysis of single molecules, including DNA, RNA and proteins. The handheld MinION(TM) device, the high-throughput PromethION(TM) and the GridION(TM) system are used in scientific research, personalised medicine, crop science, security and defence and environmental applications.

-- Stock performance disappointed over the period reflecting changes in the market backdrop including growth to value rotation, aversion to negative free cashflow businesses, and weaker operating performance reported at peers.

-- ONT reported its results for the six months to 30 June in September with good underlying progress:

o Revenues for Life Science Research Tools ("LSRT", the main business line) up 34% year-on-year to GBP70.6 million

o Gross margin for the LSRT business increased to 54.8%, a good outturn given supply chain strains and increased component costs

o Reiterated 2022 LSRT revenue guidance of GBP145-160 million, representing 20% growth and a strengthening of mix, with slightly reduced expectations for Covid related revenues, and stronger growth from target customers

o Reiterated 2023 revenue guidance of GBP190-220 million

o Closing cash balance of greater than GBP600 million which should be more than adequate to fund the business to profitability

Atom Bank

Leading UK app-only challenger bank

Atom Bank is the UK's first bank built exclusively for mobile. It is redefining what a bank should be, making things easier, more transparent and better value in a world of finance. Atom currently offers savings accounts, mortgages and business loans.

-- In July 2022, Atom released details of its operating performance to 31st March 2022 detailing positive progress on multiple fronts including:

o After recording its first month of operating profit in Q1 FY22, Atom has recorded operating profits for the remaining three quarters of the year to 31st March 2022

o Net interest margin (NIM) rose significantly to 127bps (compared to 54bps in 2021) driven by lending growth across the residential and business portfolio

o Income grew by over 200%, with costs increasing by just 6%, reflecting Atom's focus on automation and cost management, whilst continuing to offer great rates to both savers and borrowers

o Growth in income is attributed to increases in the loan book across both business and residential lending, with Atom's total loan book reaching GBP3.3 billion (up from GBP2.7 billion in FY21)

o Ended the financial year with a Trust Pilot score of 4.6/5, an App Store rating of 4.7/5 and a customer Net Promoter Score of +87

o Over six months on from the introduction of a four-day week with no loss of pay in November 2021, employees are reporting being happier and healthier, with increased employee engagement and decreased sickness and attrition levels.

BenevolentAI

Healthcare technology company applying artificial intelligence for drug discovery and development

BenevolentAI creates and applies artificial intelligence (AI) and machine learning to transform the way medicines are discovered and developed. Benevolent integrates its technology into every step of the drug discovery process from hypothesis generation to late-stage clinical development. The Benevolent Platform(R) is used by scientists and technologists to find new ways to treat disease, improve the efficacy and lower the development time and costs of new treatments.

-- Expanded collaboration with AstraZeneca to four disease areas, identifying three novel targets for their drug development portfolio.

   --   In-house pipeline grew to 13 named programmes identified by the Benevolent Platform. 

-- Completed Business Combination with Odyssey Acquisition S.A. on 22nd April 2022 raising gross proceeds of EUR225 million.

-- As at H1 2022, held sufficient cash on balance sheet to cover costs to Q4 2024, without including any future capital from licensing or collaboration agreements.

-- Listed stock trades on very thin volumes. Post-listing lock ups expire in mid-October, and options for improving liquidity in the stock are being explored.

AMO Pharma

Developer of drugs to treat rare or orphan diseases

AMO Pharma is a biopharmaceutical company working to identify and advance promising therapies for the treatment of serious and debilitating diseases in patient populations with significant areas of unmet need, including rare, debilitating childhood onset neurogenetic disorders with limited or no treatment options. The company is developing AMO-02 for congenital myotonic dystrophy, AMO-01 for Phelan McDermid Syndrome and AMO-04 for Rett Syndrome and related disorders.

-- Announced additional investment from existing shareholders to progress the REACH-CDM study, a double-blind, placebo-controlled, randomized clinical trial to assess the efficacy and safety of AMO-02 (tideglusib) for the treatment of congenital myotonic dystrophy.

-- I n December 2021, AMO Pharma announced activation of additional clinical trial sites in Australia and New Zealand for the REACH-CDM trial and confirmed that more than two-thirds of patients had been enrolled in the trial. The REACH-CDM trial will enroll a total of 56 patients. Upon completion of the trial, patients will have the opportunity to transition to the REACH-CDM X study, a 52-week open-label study designed to evaluate the long-term safety and efficacy of AMO-02.

Reaction Engines

Developer of high-performance engine technologies to enable space and hypersonic travel

Reaction Engines is developing a Synergistic Air Breathing Rocket Engines (SABRE) to enable a step-change in space and hypersonic travel through advancements in performance and efficiency. Multiple applications are being spun off from this core vision across an array of commercial industries.

-- Reaction Engines, Rolls-Royce, the Royal Air Force's Rapid Capabilities Office (RCO), the UK Government's Defence Science and Technology Laboratory (Dstl) and the UK's National Security Strategic Investment Fund (NSSIF) have announced new details of their joint programme to deliver significant enhancements to UK defence capabilities through the development of innovative hypersonic technologies

-- Started a new testing campaign to expand the performance envelope of the high-Mach enabling technology through the Foreign Comparative Testing (FCT) Program at the Department of Defense, supported by the Air Force Research Laboratory (AFRL)

-- Awarded the Technology and Innovation Award at the rescheduled 2021 Motorsport Industry Association Awards at the Energy Efficient Motorsport Show in Birmingham in recognition of the company's innovative adaptation of SABRE technology for the motorsport industry.

-- Honeywell (NASDAQ: HON) and Reaction Engines signed a memorandum of understanding to collaborate on the development of thermal management technologies as a critical enabler to reduce aircraft emissions, regardless of the fuel type used in the aircraft.

Investment Activity

Realisations

During the six-months to 30 June 2022, the Company made realisations totalling GBP25.8 million.

The Company completed the sale of its holding in Seedrs Limited ("Seedrs") to a global institutional investment management firm in March receiving cash proceeds of GBP12.0 million. For further information regarding the transaction, investors can refer to the original announcement made by the Company on the 1st December 2021.

The Company received its first distribution of GBP1.5 million from the HP Environmental Technologies Fund following the acquisition of portfolio company, Driivz, by Vontier Corporation, a global industrial technology company focused on transportation and mobility solutions.

As Portfolio Manager, we also trimmed the Company's public equity holdings in Immunocore and Plenti Group to fund new private equity investments and repayment of the bank overdraft.

New Investments

During the six-month period to 30 June 2022, the Company made two new private equity investments totalling GBP11.5 million.

Back Market

In January 2022, the Company invested EUR12.0 million (GBP10.0 million) in Back Market (incorporated as Jung S.A.S.), as part of its $510 million Series E funding round. The round was led by Sprints Capital, together with Eurazeo Growth, Aglaé Ventures, General Atlantic, and Generation Investment Management. The Company invested alongside its co-investment partner, Sprints Capital, via a single asset fund, Sprints Capital Ellison LP.

Launched in 2014, Back Market is the leading dedicated renewed technology marketplace. The company brings high-quality professionally refurbished electronic devices and appliances to customers in 16 countries including the United Kingdom, the United States, France, Germany, Italy, Spain, Belgium, Austria, the Netherlands, and more recently, Portugal, Japan, Finland, Ireland, Greece, Slovakia, and Sweden. The Series E round underpins Back Market's ambitious vision and allows the company to build on its position as the leading marketplace exclusively dedicated to the sale of expertly refurbished electronics. Back Market is determined to make circular technology mainstream by delivering an experience even better than buying new.

Epsilogen

In March 2022, the Company committed GBP3.0 million to innovative developer of immunoglobulin E antibodies to treat cancer, Epsilogen, as part of its GBP30.75 million Series B funding round. The round was led by a new investor, Novartis Venture Fund, and joined by new investors 3B Future Health Fund, British Patient Capital and Caribou Property. The new syndicate joins founding Series A investor Epidarex Capital and Series A investor ALSA Ventures both of whom also committed further capital in the Series B fundraising.

Epsilogen is an innovative developer of immunoglobulin E (IgE) antibodies to treat cancer. IgE's natural function is to provide immunological defence against certain parasites. This functionality makes it an ideal treatment of solid tumours due to its strong potency, enhanced tumour access and long tissue half-life. Epsilogen's lead product candidate, MOv18 IgE, is the first therapeutic IgE antibody to enter the clinic and encouraging data from a phase I trial demonstrated MOv18 IgE to be safe and well tolerated with early signs of clinical activity also seen. Epsilogen is also developing a proprietary IGEGTM antibody platform combining elements from both IgE and IgG antibodies into novel and proprietary antibody molecules with enhanced functionality.

As of 30 June 2022, the Company had invested GBP1.5 million of its total commitment of GBP3.0 million. The undrawn commitment of GBP1.5 million is expected to be called in two subsequent tranches in the first quarter of 2023 and in the first quarter of 2024.

Follow-on investments

During the period, the Company made two small follow-investments in its existing private equity holdings, totalling GBP2.4 million.

The Company invested a small amount in Rutherford Health to extend its runway while in the process of trying to secure long-term funding. This investment formed part of a restructuring plan which included the recruitment of a new leadership team to preserve some value of the significant historical investment made by the Company into Rutherford over the preceding years. While the new leadership team vigorously pursued multiple options over the last months to save the business, it could ultimately not correct the inherited severe underlying challenges in the business.

In January 2022, the Company invested GBP0.1 million in Freevolt Group Limited ("Freevolt") as part of an internal funding round designed to extend runway to the point that commercial revenues begin to build. Freevolt was previously known as Drayson Holdco 2 Limited.

Source: Portfolio companies including information disclosed publicly on their websites.

Strategy and portfolio construction

The portfolio of new private equity investments has started to take shape with eight investments(1) completed across all three of our core sub-strategies: venture, growth and life sciences, outlined below.

The Company's investment strategy is focused on pursuing investment opportunities in private companies at the venture and growth-stage with the potential to deliver 2x to 5x returns over the medium term. We are targeting companies with best-in-class products or services, with high disruption potential, poised for significant growth, managed by world class management teams and backed by high-quality, value-add co-investors with a track record of building great businesses. The investment team source deals both directly and as co-investments alongside the world's leading venture capital firms, benefitting from Schroders Capital's 25-year history of investing in venture capital funds in the US, Europe and Asia, which has delivered an "indirect" portfolio of over 5,000 venture and growth companies globally.

The Company will target an approximate 75% allocation to private equity in the portfolio, with around 25% in public equities. Most public holdings will be a consequence of private holdings having gone on to IPO, which will enable the Company to capture the full lifetime value of portfolio companies and avoid the need to sell at this offering stage.

While several unlisted stock specific situations still remain from the inherited portfolio and we continue to focus on maximising return potential from these for shareholders, the Company is now in a far more stable position. We have capital available to continue to make investments as we continue to rebalance the portfolio. We are excited about the prospects for the future now that the hard work put in by the team since taking over management of the Company is beginning to bear fruit.

(1) Including two new investments completed in August 2022.

Outlook

The global economy has faced an increasing number of headwinds since the start of this year, including the war in Ukraine, the energy crisis, rising inflation, rising interest rates, record debt levels and supply chain shortages to name but a few. The consequence of which has been a significant correction in global stock markets and contraction in M&A activity. Schroders' economists are expecting the US, UK and eurozone economies to go into recession and the outlook for the global economy is gloomy.

Despite this challenging backdrop, we believe the Company is well-placed to capitalise on new investment opportunities in the private markets with its new global strategy. The extended geographical focus allows us to leverage our network and invest in the best opportunities, when viewed on a risk return basis, no matter where they are in the world. While we recognise that private equity is not immune to the forces which are buffeting all financial assets at present, we believe that some parts of the market are likely to face more difficult times, while others are likely to be more resilient, even with opportunities to thrive.

With the firepower available, we believe we are well placed to make new investments and benefit from the current depressed valuation environment. As of 30 June 2022, the Company had GBP6.7 million in cash, an unutilised loan facility (up to GBP40 million) and GBP127.7 million in public equity investments from which to make new investments. We also have a healthy pipeline of global venture/growth stage companies from which to consider potential investment.

Schroder Investment Management Limited

30 September 2022

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. The securities shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell.

Investment Portfolio

As at 30 June 2022

The 20 largest investments account for 92.9% of total investments by value (31 December 2021: 93.6%).

 
                                                                                        Total 
                                                                      Fair value  investments 
Holding                          Quoted/unquoted     Industry sector     GBP'000            % 
------------------------------  ----------------  ------------------  ----------  ----------- 
Oxford Nanopore                           Quoted         Health Care      62,069         21.3 
------------------------------  ----------------  ------------------  ----------  ----------- 
Atom Bank                               Unquoted          Financials      38,090         13.1 
------------------------------  ----------------  ------------------  ----------  ----------- 
BenevolentAl                              Quoted         Health Care      32,734         11.2 
------------------------------  ----------------  ------------------  ----------  ----------- 
AMO Pharma                              Unquoted         Health Care      16,151          5.5 
------------------------------  ----------------  ------------------  ----------  ----------- 
Reaction Engines                        Unquoted         Industrials      12,500          4.3 
------------------------------  ----------------  ------------------  ----------  ----------- 
Federated Wireless                      Unquoted          Technology      12,481          4.3 
------------------------------  ----------------  ------------------  ----------  ----------- 
Ada Health                              Unquoted         Health Care      10,155          3.5 
------------------------------  ----------------  ------------------  ----------  ----------- 
HP Environmental Technologies 
 Fund                                   Unquoted         Industrials      10,006          3.4 
------------------------------  ----------------  ------------------  ----------  ----------- 
Nexeon                                  Unquoted         Industrials       8,770          3.0 
------------------------------  ----------------  ------------------  ----------  ----------- 
Immunocore                                Quoted         Health Care       8,564          2.9 
------------------------------  ----------------  ------------------  ----------  ----------- 
Sprints Capital Ellison                 Unquoted          Technology       8,098          2.8 
------------------------------  ----------------  ------------------  ----------  ----------- 
Genomics                                Unquoted         Health Care       8,018          2.7 
------------------------------  ----------------  ------------------  ----------  ----------- 
Revolut LLP                             Unquoted          Financials       6,843          2.3 
------------------------------  ----------------  ------------------  ----------  ----------- 
Spirent Communications                    Quoted          Technology       5,918          2.0 
------------------------------  ----------------  ------------------  ----------  ----------- 
Attest Technologies                     Unquoted   Business Services       5,748          2.0 
------------------------------  ----------------  ------------------  ----------  ----------- 
Tessian                                 Unquoted          Technology       5,543          1.9 
------------------------------  ----------------  ------------------  ----------  ----------- 
OcuTerra                                Unquoted         Health Care       4,985          1.7 
------------------------------  ----------------  ------------------  ----------  ----------- 
Cequr                                   Unquoted         Health Care       4,951          1.7 
------------------------------  ----------------  ------------------  ----------  ----------- 
IDEX Biometrics ASA                       Quoted          Technology       4,810          1.7 
------------------------------  ----------------  ------------------  ----------  ----------- 
Johnson Matthey                           Quoted         Industrials       4,634          1.6 
------------------------------  ----------------  ------------------  ----------  ----------- 
Kymab                                   Unquoted         Health Care       4,566          1.6 
------------------------------  ----------------  ------------------  ----------  ----------- 
Petershill Partners                       Quoted          Financials       4,390          1.5 
------------------------------  ----------------  ------------------  ----------  ----------- 
Autolus Therapeutics                      Quoted         Health Care       3,777          1.3 
------------------------------  ----------------  ------------------  ----------  ----------- 
Industrial Heat                         Unquoted         Industrials       2,030          0.7 
------------------------------  ----------------  ------------------  ----------  ----------- 
American Financial Exchange             Unquoted          Financials       1,864          0.7 
------------------------------  ----------------  ------------------  ----------  ----------- 
Epsilogen                               Unquoted         Health Care       1,464          0.5 
------------------------------  ----------------  ------------------  ----------  ----------- 
Mafic                                   Unquoted         Industrials         983          0.3 
------------------------------  ----------------  ------------------  ----------  ----------- 
Novabiotics                             Unquoted         Health Care         605          0.2 
------------------------------  ----------------  ------------------  ----------  ----------- 
ReNeuron Group                            Quoted         Health Care         556          0.2 
------------------------------  ----------------  ------------------  ----------  ----------- 
Plenti Group                              Quoted          Financials         150          0.1 
------------------------------  ----------------  ------------------  ----------  ----------- 
Xeros Technology                          Quoted         Industrials         139            - 
------------------------------  ----------------  ------------------  ----------  ----------- 
RM2 International                       Unquoted         Industrials         133            - 
------------------------------  ----------------  ------------------  ----------  ----------- 
Freevolt (formerly Drayson)             Unquoted          Technology          85            - 
------------------------------  ----------------  ------------------  ----------  ----------- 
Econic                                  Unquoted         Industrials          47            - 
------------------------------  ----------------  ------------------  ----------  ----------- 
Metaboards                              Unquoted          Technology           -            - 
------------------------------  ----------------  ------------------  ----------  ----------- 
Sphere Medical                          Unquoted         Health Care           -            - 
------------------------------  ----------------  ------------------  ----------  ----------- 
Mereo BioPharma Group                     Quoted         Health Care           -            - 
------------------------------  ----------------  ------------------  ----------  ----------- 
Halosource                              Unquoted         Industrials           -            - 
------------------------------  ----------------  ------------------  ----------  ----------- 
Bodle Technologies                      Unquoted          Technology           -            - 
------------------------------  ----------------  ------------------  ----------  ----------- 
Origin                                  Unquoted         Health Care           -            - 
------------------------------  ----------------  ------------------  ----------  ----------- 
Rutherford Health                       Unquoted         Health Care           -            - 
------------------------------  ----------------  ------------------  ----------  ----------- 
Lignia Wood                             Unquoted         Industrials           -            - 
------------------------------  ----------------  ------------------  ----------  ----------- 
Oxsybio                                 Unquoted         Health Care           -            - 
------------------------------  ----------------  ------------------  ----------  ----------- 
Spin Memory                             Unquoted          Technology           -            - 
------------------------------  ----------------  ------------------  ----------  ----------- 
Kind Consumer                           Unquoted    Consumer Staples           -            - 
------------------------------  ----------------  ------------------  ----------  ----------- 
Total investments(1)                                                     291,857        100.0 
--------------------------------------------------------------------  ----------  ----------- 
 
(1) Total investments 
 comprise: 
                                                                         GBP'000            % 
------------------------------  ----------------  ------------------  ----------  ----------- 
Unquoted                                                                 164,116         56.2 
--------------------------------------------------------------------  ----------  ----------- 
Listed on the London Stock Exchange                                       77,011         26.4 
--------------------------------------------------------------------  ----------  ----------- 
Listed on a recognised stock exchange overseas                            50,035         17.2 
--------------------------------------------------------------------  ----------  ----------- 
Quoted on AIM                                                                695          0.2 
--------------------------------------------------------------------  ----------  ----------- 
Total                                                                    291,857        100.0 
--------------------------------------------------------------------  ----------  ----------- 
 

Half Year Report

Principal Risks and Uncertainties

The Board has determined that the key risks for the Company are general economic and market risk, portfolio concentration risk, performance risk, general and specific portfolio valuation risk, investee company specific risk, gearing risk, portfolio manager and key man risk, outsourced service provider risk, currency risk and cyber risk. These risks are set out on pages 29 to 33 of the Annual Report and Accounts for the year ended 31 December 2021.

Except with respect to a degree of uncertainty relating to continued geo-political and market volatility and heightened service provider risk as AIFM, Depositary and Administrator services transition across to the new providers, the Company's principal risks and uncertainties, and their mitigation, have not materially changed during the six months to 30 June 2022 or since the Annual Report was published on 21 April 2022.

Going concern

The Board has considered the Company's principal risks and uncertainties (including whether there are any emerging risks); has scrutinised the detailed cash flow forecast prepared by the Portfolio Manager; and considered their assessment of the likelihood and quantum of funds which could be raised from sales of investments. As a result, the Board is comfortable that the Company will have sufficient liquid funds to pay operating expenses.

The Board has also considered the provisions in the revolving credit facility, and have taken into account that the loan was undrawn as at the date of these financial statements. On this basis, the Board considers it appropriate to adopt the going concern basis of accounting in preparing the Company's accounts.

Related party transactions

There have been no transactions with related parties that have materially affected the financial position or the performance of the Company during the six months ended 30 June 2022.

Directors' responsibility statement

The Directors confirm that, to the best of their knowledge, this set of condensed financial statements has been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, in particular with Financial Reporting Standard 104 "Interim Financial Reporting" and with the Statement of Recommended Practice, "Financial Statements of Investment Companies and Venture Capital Trusts" issued in April 2021 and that this Interim Management Report includes a fair review of the information required by 4.2.7R and 4.2.8R of the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.

Income Statement

for the six months ended 30 June 2022 (unaudited)

 
                                (Unaudited)                  (Unaudited)                 (Audited) 
                             For the six months           For the six months            For the year 
                             ended 30 June 2022           ended 30 June 2021         ended 31 December 
                                                                                            2021 
                       Revenue    Capital      Total  Revenue  Capital    Total  Revenue  Capital    Total 
                       GBP'000    GBP'000    GBP'000  GBP'000  GBP'000  GBP'000  GBP'000  GBP'000  GBP'000 
(Losses)/gains 
 on investments 
 held at fair 
 value through 
 profit or loss              -  (137,192)  (137,192)        -   54,554   54,554        -  124,583  124,583 
Gains/(losses) 
 on foreign exchange         -         72         72        -    (120)    (120)        -    (466)    (466) 
Income from 
 investments               258          -        258       57        -       57      112        -      112 
---------------------  -------  ---------  ---------  -------  -------  -------  -------  -------  ------- 
Gross return/(loss)        258  (137,120)  (136,862)       57   54,434   54,491      112  124,117  124,229 
Portfolio management 
 fee                   (1,175)          -    (1,175)  (1,537)        -  (1,537)  (3,019)        -  (3,019) 
Administrative 
 expenses                (647)          -      (647)    (784)        -    (784)  (1,448)        -  (1,448) 
---------------------  -------  ---------  ---------  -------  -------  -------  -------  -------  ------- 
Net (loss)/return 
 before finance 
 costs and taxation    (1,564)  (137,120)  (138,684)  (2,264)   54,434   52,170  (4,355)  124,117  119,762 
Finance costs            (202)          -      (202)    (863)        -    (863)    (960)        -    (960) 
---------------------  -------  ---------  ---------  -------  -------  -------  -------  -------  ------- 
Net (loss)/return 
 before taxation       (1,766)  (137,120)  (138,886)  (3,127)   54,434   51,307  (5,315)  124,117  118,802 
Taxation                     -          -          -        -        -        -        -        -        - 
---------------------  -------  ---------  ---------  -------  -------  -------  -------  -------  ------- 
Net (loss)/return 
 after taxation        (1,766)  (137,120)  (138,886)  (3,127)   54,434   51,307  (5,315)  124,117  118,802 
---------------------  -------  ---------  ---------  -------  -------  -------  -------  -------  ------- 
(Loss)/return 
 per share             (0.20)p   (15.09)p   (15.29)p  (0.34)p    5.99p    5.65p  (0.58)p   13.66p   13.08p 
 

The "Total" column of this statement is the profit and loss account of the Company. The "Revenue" and "Capital" columns represent supplementary information prepared under guidance issued by The Association of Investment Companies. The Company has no other items of other comprehensive income, and therefore the net (loss)/return on ordinary activities after taxation is also the total comprehensive (loss)/return for the period.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.

Statement of Changes in Equity

for the six months ended 30 June 2022 (unaudited)

for the six months ended 30 June 2022 (unaudited)

 
                                                     Capital 
                              Called-up    Share  Redemption    Capital   Revenue 
                          share capital  premium    reserves   reserves   reserve      Total 
                                GBP'000  GBP'000     GBP'000    GBP'000   GBP'000    GBP'000 
At 31 December 2021               9,086  891,017           -  (439,105)  (24,127)    436,871 
Purchase of shares 
 for cancellation                   (8)        -           8      (170)         -      (170) 
Net loss after taxation               -        -           -  (137,120)   (1,766)  (138,886) 
------------------------  -------------  -------  ----------  ---------  --------  --------- 
At 30 June 2022                   9,078  891,017           8  (576,395)  (25,893)    297,815 
------------------------  -------------  -------  ----------  ---------  --------  --------- 
 

for the six months ended 30 June 2021 (unaudited)

 
                                                 Capital 
                          Called-up    Share  Redemption    Capital   Revenue 
                      share capital  premium    reserves   reserves   reserve    Total 
                            GBP'000  GBP'000     GBP'000    GBP'000   GBP'000  GBP'000 
At 31 December 2020           9,086  891,017           -  (563,222)  (18,812)  318,069 
Net return/(loss) 
 after taxation                   -        -           -     54,434   (3,127)   51,307 
--------------------  -------------  -------  ----------  ---------  --------  ------- 
At 30 June 2021               9,086  891,017           -  (508,788)  (21,939)  369,376 
--------------------  -------------  -------  ----------  ---------  --------  ------- 
 

for the year ended 31 December 2021 (audited)

 
                                                 Capital 
                          Called-up    Share  Redemption    Capital   Revenue 
                      share capital  premium    reserves   reserves   reserve    Total 
                            GBP'000  GBP'000     GBP'000    GBP'000   GBP'000  GBP'000 
At 31 December 2020           9,086  891,017           -  (563,222)  (18,812)  318,069 
Net return/(loss) 
 after taxation                   -        -           -    124,117   (5,315)  118,802 
--------------------  -------------  -------  ----------  ---------  --------  ------- 
At 31 December 2021           9,086  891,017           -  (439,105)  (24,127)  436,871 
--------------------  -------------  -------  ----------  ---------  --------  ------- 
 

Statement of Financial Position

at 30 June 2022 (unaudited)

 
                                              (Unaudited)  (Unaudited)    (Audited) 
                                                  30 June      30 June  31 December 
                                                     2022         2021         2021 
                                        Note      GBP'000      GBP'000      GBP'000 
Fixed Assets 
--------------------------------------  ----  -----------  -----------  ----------- 
Investments held at fair value 
 through profit or loss                    4      291,857      341,953      440,899 
--------------------------------------  ----  -----------  -----------  ----------- 
Current Assets 
Debtors                                               247       28,002          171 
Cash at bank and in hand                            6,729        1,291       19,077 
--------------------------------------  ----  -----------  -----------  ----------- 
                                                    6,976       29,293       19,248 
--------------------------------------  ----  -----------  -----------  ----------- 
Current liabilities 
Creditors: amounts falling due 
 within one year                           5      (1,018)      (1,870)      (1,276) 
--------------------------------------  ----  -----------  -----------  ----------- 
Net current assets                                  5,958       27,423       17,972 
--------------------------------------  ----  -----------  -----------  ----------- 
Total assets less current liabilities             297,815      369,376      458,871 
--------------------------------------  ----  -----------  -----------  ----------- 
Creditors: amounts falling due 
 after more than one year                  6            -            -     (22,000) 
--------------------------------------  ----  -----------  -----------  ----------- 
Net assets                                        297,815      369,376      436,871 
--------------------------------------  ----  -----------  -----------  ----------- 
Capital and reserves 
Called-up share capital                    7        9,078        9,086        9,086 
Share premium                                     891,017      891,017      891,017 
Capital redemption reserves                             8            -            - 
Capital reserves                                (576,395)    (508,788)    (439,105) 
Revenue reserve                                  (25,893)     (21,939)     (24,127) 
--------------------------------------  ----  -----------  -----------  ----------- 
Total equity shareholders' funds                  297,815      369,376      436,871 
--------------------------------------  ----  -----------  -----------  ----------- 
Net asset value per share                  8       32.80p       40.65p       48.08p 
 

Cash Flow Statement

for the six months ended 30 June 2022 (unaudited)

 
                                              (Unaudited)   (Unaudited)    (Audited) 
                                              For the six   For the six      For the 
                                             months ended  months ended   year ended 
                                                  30 June       30 June  31 December 
                                                     2022          2021         2021 
                                                  GBP'000       GBP'000      GBP'000 
Cash flows from operating activities 
(Loss)/return before finance costs 
 and taxation                                   (138,684)        52,170      119,762 
Adjustments for: 
Losses/(gains) on investments held 
 at fair value through profit or loss             137,192      (54,554)    (124,583) 
Increase in debtors                                  (76)          (33)        (145) 
Decrease in creditors                               (200)         (614)      (1,231) 
-------------------------------------------  ------------  ------------  ----------- 
Net cash flow from operating activities           (1,768)       (3,031)      (6,197) 
-------------------------------------------  ------------  ------------  ----------- 
Cash flows from investment activities 
Purchases of investments                         (13,853)      (14,774)     (61,199) 
Proceeds from sales of investments                 25,703       120,584      166,035 
-------------------------------------------  ------------  ------------  ----------- 
Net cash flow from investment activities           11,850       105,810      104,836 
-------------------------------------------  ------------  ------------  ----------- 
Cash flows from financing activities 
Purchase of shares for cancellation                 (159)             -            - 
Finance costs                                       (271)         (835)        (909) 
Bank loan drawn down                                    -             -       22,000 
Repayment of bank loan                           (22,000)     (107,032)    (107,032) 
-------------------------------------------  ------------  ------------  ----------- 
Net cash flow from financing activities          (22,430)     (107,867)     (85,941) 
-------------------------------------------  ------------  ------------  ----------- 
Change in cash and cash equivalents              (12,348)       (5,088)       12,698 
Cash and cash equivalents at the beginning 
 of the period                                     19,077         6,379        6,379 
-------------------------------------------  ------------  ------------  ----------- 
Cash and cash equivalents at the end 
 of the period                                      6,729         1,291       19,077 
-------------------------------------------  ------------  ------------  ----------- 
 

Notes to the Accounts

   1.      Financial Statements 

The information contained within the accounts in this half year report has not been audited or reviewed by the Company's independent auditor.

The figures and financial information for the year ended 31 December 2021 are extracted from the latest published accounts of the Company and do not constitute statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditor which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

   2.      Accounting Policies 

Basis of accounting

The accounts have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, in particular with Financial Reporting Standard 104 "Interim Financial Reporting" and with the Statement of Recommend Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" issued by the Association of Investment Companies in April 2021.

All of the Company's operations are of a continuing nature.

The accounting policies applied to these accounts are consistent with those applied in the accounts for the year ended 31 December 2021. In particular, the policy on valuation of investments is consistent with that detailed in note 1(b) to the accounts for the year ended 31 December 2021, presented on pages 64 and 65 of the annual report.

   3.      (Loss)/return per share 
 
                                         (Unaudited)   (Unaudited)    (Audited) 
                                         For the six   For the six      For the 
                                        months ended  months ended   year ended 
                                             30 June       30 June  31 December 
                                                2022          2021         2021 
                                             GBP'000       GBP'000      GBP'000 
Revenue loss                                 (1,766)       (3,127)      (5,315) 
Capital (loss)/return                      (137,120)        54,434      124,117 
--------------------------------------  ------------  ------------  ----------- 
Total (loss)/return                        (138,886)        51,307      118,802 
--------------------------------------  ------------  ------------  ----------- 
Weighted average number of shares in 
 issue during the period                 908,544,238   908,639,238  908,639,238 
Revenue loss per share                       (0.20)p       (0.34)p      (0.58)p 
Capital (loss)/return per share             (15.09)p         5.99p       13.66p 
--------------------------------------  ------------  ------------  ----------- 
Total basic and diluted (loss)/return 
 per share                                  (15.29)p         5.65p       13.08p 
--------------------------------------  ------------  ------------  ----------- 
 

The basic and diluted (loss)/return per share is the same because there are no dilutive instruments in issue.

   4.      Investments held at fair value through profit or loss 
   (a)     Movement in investments 
 
                                         (Unaudited)   (Unaudited)    (Audited) 
                                         For the six   For the six      For the 
                                        months ended  months ended   year ended 
                                             30 June       30 June  31 December 
                                                2022          2021         2021 
                                             GBP'000       GBP'000      GBP'000 
Opening book cost                            622,857       759,715      759,715 
Opening investment holding losses          (181,958)     (338,563)    (338,563) 
--------------------------------------  ------------  ------------  ----------- 
Opening fair value                           440,899       421,152      421,152 
Purchases at cost                             13,853        42,255       88,680 
Sales proceeds                              (25,703)     (176,008)    (193,516) 
(Losses)/gains on investments held 
 at fair value through profit or loss      (137,192)        54,554      124,583 
--------------------------------------  ------------  ------------  ----------- 
Closing fair value                           291,857       341,953      440,899 
--------------------------------------  ------------  ------------  ----------- 
Closing book cost                            604,401       615,744      622,857 
Closing investment holding losses          (312,544)     (273,791)    (181,958) 
--------------------------------------  ------------  ------------  ----------- 
Closing fair value                           291,857       341,953      440,899 
--------------------------------------  ------------  ------------  ----------- 
 

The Company received GBP25,703,000 (30 June 2021: GBP176,008,000; 31 December 2021: GBP193,516,000) from investments sold in the period. The book cost of the investments when they were purchased was GBP32,309,000 (30 June 2021: GBP186,226,000; 31 December 2021: GBP225,538,000). These investments have been revalued over time and, until they were sold, any unrealised gains/losses were included in the fair value of the investments.

Purchases and sales for the period ended 30 June 2021 and the year ended 31 December 2021, include non-cash transactions in relation to Athenex and Kuur.

   (b)     Unquoted investments, including investments quoted in inactive markets 

Material revaluations of unquoted investments during the period (unaudited)

 
                        Opening                 Closing 
                      valuation               valuation 
                             at                      at 
                    31 December    Valuation    30 June 
                        2021(1)   adjustment       2022 
                        GBP'000      GBP'000    GBP'000 
Rutherford Health        21,312     (21,312)          - 
Atom Bank                46,209      (8,119)     38,090 
------------------  -----------  -----------  --------- 
 

(1) Based on the closing holding at opening prices.

Material disposals of unquoted investments during the period

 
                                                  Gain 
                                              based on 
                       Carrying               carrying 
                       value at               value at 
                    31 December     Sales  31 December 
         Book cost         2021  Proceeds         2021 
           GBP'000      GBP'000   GBP'000      GBP'000 
Seedrs      10,470       11,271    12,000          729 
-------  ---------  -----------  --------  ----------- 
 
   5.      Creditors: amounts falling due within one year 
 
                               (Unaudited)  (Unaudited)    (Audited) 
                                   30 June      30 June  31 December 
                                      2022         2021         2021 
                                   GBP'000      GBP'000      GBP'000 
Other creditors and accruals         1,018        1,870        1,276 
-----------------------------  -----------  -----------  ----------- 
                                     1,018        1,870        1,276 
-----------------------------  -----------  -----------  ----------- 
 

The directors consider that the carrying amount of creditors falling due within one year approximates to their fair value.

   6.      Creditors: amounts falling due after more than one year 
 
            (Unaudited)  (Unaudited)    (Audited) 
                30 June      30 June  31 December 
                   2022         2021         2021 
                GBP'000      GBP'000      GBP'000 
Bank loan             -            -       22,000 
----------  -----------  -----------  ----------- 
                      -            -       22,000 
----------  -----------  -----------  ----------- 
 

The bank loan at 31 December 2021 was drawn on the Company's facility with The Northern Trust Company, and was fully repaid during the period.

   7.      Called-up share capital 
 
                                      (Unaudited)   (Unaudited)    (Audited) 
                                      For the six   For the six      For the 
                                     months ended  months ended   year ended 
                                          30 June       30 June  31 December 
                                             2022          2021         2021 
                                          GBP'000       GBP'000      GBP'000 
Ordinary shares allotted, called 
 up and fully paid: 
Ordinary shares of 1p each: 
Opening balance of 908,639,238 
 (30 June 2021 and 31 December 
 2021: same) shares                         9,086         9,086        9,086 
770,000 (30 June 2021 and 31 
 December 2021: nil) shares bought 
 back and cancelled                           (8)             -            - 
-----------------------------------  ------------  ------------  ----------- 
Closing balance of 907,869,238 
 (30 June 2021 and 31 December 
 2021: 908,639,238) shares                  9,078         9,086        9,086 
-----------------------------------  ------------  ------------  ----------- 
 
   8.      Net asset value per share 
 
                                          (Unaudited)  (Unaudited)    (Audited) 
                                              30 June      30 June  31 December 
                                                 2022         2021         2021 
Net assets attributable to shareholders 
 (GBP'000)                                    297,815      369,376      436,871 
Shares in issue at the period 
 end                                      907,869,238  908,639,238  908,639,238 
----------------------------------------  -----------  -----------  ----------- 
Net asset value per share                      32.80p       40.65p       48.08p 
----------------------------------------  -----------  -----------  ----------- 
 
   9.      Disclosures regarding financial instruments measured at fair value 

The Company's financial instruments within the scope of FRS 102 that are held at fair value comprise its investment portfolio.

FRS 102 requires that financial instruments held at fair value are categorised into a hierarchy consisting of the three levels below. A fair value measurement is categorised in its entirety on the basis of the lowest level input that is significant to the fair value measurement.

Level 1 - valued using unadjusted quoted prices in active markets for identical assets.

Level 2 - valued using observable inputs other than quoted prices included within Level 1.

Level 3 - valued using inputs that are unobservable.

The Company's investment portfolio was categorised as follows:

 
                                    30 June 2022 (unaudited) 
                               Level 1  Level 2  Level 3    Total 
                               GBP'000  GBP'000  GBP'000  GBP'000 
Investments in 
 equities        - quoted      127,741        -        -  127,741 
 - unquoted                          -        -  164,116  164,116 
 ------------                  -------  -------  -------  ------- 
Total                          127,741        -  164,116  291,857 
----------------  -----------  -------  -------  -------  ------- 
 
 

During the period ended 30 June 2022, BenevolentAI GBP39,634,000 transferred from Level 3 to Level 1 following its IPO on Euronext Amsterdam Stock Exchange.

 
                                   30 June 2021 (unaudited) 
                              Level 1  Level 2  Level 3    Total 
                              GBP'000  GBP'000  GBP'000  GBP'000 
Investments in 
 equities        - quoted      53,953        -   33,889   87,842 
 - unquoted                         -        -  254,111  254,111 
 ---------------------------  -------  -------  -------  ------- 
Total                          53,953        -  288,000  341,953 
----------------------------  -------  -------  -------  ------- 
 

During the period ended 30 June 2021, Immunocore GBP23,410,000 transferred from Level 3 to Level 1 following its IPO on the NASDAQ.

 
                                  31 December 2021 (audited) 
                              Level 1  Level 2  Level 3    Total 
                              GBP'000  GBP'000  GBP'000  GBP'000 
Investments in 
 equities        - quoted     222,031        -   21,312  243,343 
 - unquoted                         -        -  197,556  197,556 
 ---------------------------  -------  -------  -------  ------- 
Total                         222,031        -  218,868  440,899 
----------------------------  -------  -------  -------  ------- 
 

During the year ended 31 December 2021, Immunocore GBP21,044,000 and Oxford Nanopore GBP162,641,000 transferred from Level 3 to Level 1 following their IPOs on the NASDAQ and London Stock Exchange respectively.

10. Events after the interim date that have not been reflected in the financial statements for the interim period

There has been a sharp fall in the market price of BenevolentAI after the interim date. At 27 September, the price had fallen to Eur 4.18 per share, valuing the Company's holding at GBP17,740,000. This is GBP14,994,000 lower than the valuation included in these interim accounts and would reduce the Company's NAV per share by 1.65p.

The directors have evaluated the period since the interim date and have not noted any other events which have not been reflected in the financial statements.

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September 30, 2022 02:00 ET (06:00 GMT)

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