Schroder Br.Opps.Tst - Final Results
11/07/2024 07:00
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RNS Number : 9515V Schroder British Opportunities Tst. 11 July 2024
11 July 2024
SCHRODER BRITISH OPPORTUNITITES TRUST PLC
("the "Company")
ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2024
Schroder British Opportunities Trust plc announces its financial results for
the year ended 31 March 2024.
· NAV per share increased 2.5% from 107.32p to 110.05p during the
year under review. This follows an increase in the previous year of 3.1% and
12.3% since inception.
· Over the past 12 months, positive NAV growth has been driven by
fair value gains in the private equity (unquoted) portfolio which has
continued to perform well. The Company has benefited from its focus on the
growth capital and buyout areas of the market, rather than early stage or
pre-IPO.
· The Company's public equity holdings detracted from performance
despite being helped by a take-over bid for City Pub Group by Young & Co's
Brewery.
· The discount to NAV narrowed during the year under review from
36.2% to 27.8%.
· A core focus of our portfolio companies has been executing
business transformation through robust organic growth and acquisitions. 7 out
of the 9 private equity holdings are in line or exceeding performance
expectations.
· Justin Ward and Jemma Bruton have joined the Board as independent
non-executive Directors. Justin Ward will replace Neil England as Chairman
after the AGM on 18 September 2024, following a handover period.
Investor Presentation
The Company's Investment Managers are hosting an annual results presentation
for investors on Tuesday, 16 July 2024 at 09.00 a.m. Investors can register
for the event at: https://www.schroders.events/SBO24.
Neil England, Chairman of Schroder British Opportunities Trust plc commented:
"The current portfolio of innovative, predominantly UK companies are growing
strongly, the majority in line or ahead of expectations. The patient investor
that can look beyond the recent market environment should be well rewarded".
The Company's Report and Accounts for the year ended 31 March 2024 are also
being published in hard copy format and an electronic copy will shortly be
available to download from the Company's website www.schroders.com/sbot.
Enquiries:
Katherine Fyfe 020 7658 6000
Schroder Investment Management Limited
Andy Pearce 020 7658 6000
Schroder Investment Management Limited
Annual Report and Financial Statements for the year ended 31 March 2024
Performance Summary
Net asset value ("NAV") per share return
2.5%
Year ended 31 March 2023: 3.1%
Share price return
16.1%
Year ended 31 March 2023: -18.5%
Share price discount to NAV per share*
27.8%
Year ended 31 March 2023: 36.2%
Shares in issue
73,900,000
Year ended 31 March 2023: 73,900,000
Ongoing charges ratio*
1.40%
Year ended 31 March 2023: 1.47%
Share price
79.50p
Year ended 31 March 2023: 68.50p
Net Cash*^
11,585,000
Year ended 31 March 2023: 7,759,000
^Includes investment in liquidity fund.
Some of the financial measures are classified as Alternative Performance
Measures ("APMs"), as defined by the European Securities and Markets Authority
and are indicated with an asterisk (*). Definitions of these performance
measures, and other terms used in this report, are given on pages 80 and 81
together with supporting calculations, where appropriate.
Investment objective
Schroder British Opportunities Trust plc (the "Company") seeks to deliver
long-term total returns throughout the life of the Company by investing in a
diversified public equity and private equity portfolio of predominantly UK
companies.
Investment policy
The Company will invest in a diversified portfolio of both public equity
investments and private equity investments consisting predominantly of UK
Companies with strong long-term growth prospects. It is anticipated that the
Company's portfolio will typically consist of 30 to 50 holdings and will
target companies with an equity value between approximately £50 million and
£2 billion at the time of initial investment. The Company will focus on
companies which the Portfolio Managers consider to be sustainable from an
environmental, social and governance perspective, supporting at least one of
the goals and/or sub-goals of the United Nations' Sustainable Development
Goals ("SDGs"), or which the Portfolio Manager considers would benefit from
their support in helping them incorporate SDGs into their business planning
and/or in reporting their alignment with SDGs. The Company may, from time to
time, use borrowings for investment and efficient portfolio management
purposes. Gearing will not exceed 10% of Net Asset Value, calculated at the
time of drawdown of the relevant borrowing.
Why invest in the Company?
l A best of British portfolio
With high corporate governance standards and an entrepreneurial
heritage, there are a wealth of innovative opportunities among British
businesses, which can offer strong long-term growth potential.
l Highly experienced managers
Combining Schroder's public equity and private equity investment
expertise in a uniquely compelling investment proposition.
l A broader UK opportunity set
Taking full advantage of both public and private equity markets
means access to an enhanced UK investment universe of high quality, high
growth companies, maximising the opportunity for value creation.
Chairman's Statement
"The current portfolio of innovative, predominantly UK companies are growing
strongly, the majority in line or ahead of expectations. The patient investor
that can look beyond the recent market environment should be well rewarded."
I am pleased to present your Company's fourth annual report and financial
statements since the launch of the Company in 2020. This report covers the
year ended 31 March 2024.
Investment strategy
Your Company invests in a diversified mix of public and private companies,
either based in the UK or generating a significant proportion of their revenue
in the UK. We seek to invest in companies with potential for high growth. Our
objective is to deliver long-term and sustainable capital growth for
shareholders. We are not venture investors. We focus on the growth and later
stage buyout sector where earnings are more predictable but strong growth is
still available.
On 28 November 2023, the FCA published its final policy statement (PS23/16) on
Sustainability Disclosure Requirements and investment labels and, as a result,
the Board is reviewing both the Company's investment policy and the
disclosures it makes in its reporting.
Market
The UK equity market, and investment companies in particular, remains largely
out of favour with investors and UK pension funds. Growth companies who
require cash to fuel that growth saw their ratings suffer as interest rates
increased and that has sustained in many cases, despite forecasts of lower
rates as UK inflation falls back into a lower and more normal range. The
market appears not to discriminate effectively between companies that need
cash and those that don't. The majority of the companies in your Company's
private portfolio are already profitable with positive operating cash flows or
are funded through to that point.
Many commentators predict a market recovery but differ in their opinion on the
likely timing of this. Macro-economic factors such as the Federal Reserve's
approach to managing the US economy, where growth is stronger than Europe and
there is less reason to reduce rates, and the conflicts in Europe and the
Middle East, may well be influential.
Performance
I am pleased to report that your Company's NAV per share increased 2.5% from
107.32p to 110.05p during the year under review. This follows an increase in
the previous year of 3.1% and 12.3% since inception. This steady growth is
despite portfolio valuations being affected by market sentiment towards growth
companies and, in the case of the private portfolio, lower multiples in the
comparator groups used.
Private portfolio
The Company's private equity portfolio has continued to perform well, in part
due to our focus on growth capital and buyout areas of the market in contrast
to venture capital and pre-IPO areas, which have been more negatively impacted
by rising inflation and interest rates. Of the Company's portfolio of nine
private businesses as at 31 March 2024, seven are exceeding or in line with
performance expectations. In aggregate, the companies are demonstrating strong
sales growth (24% LTM sale growth) (1) and robust margins (46% EBITDA margin)
(2), whilst being valued at a discount to public comparables.
The private portfolio represented 65% of the Company's NAV as at 31 March
2024 and produced a fair value gain of 6.3% over the year.
(1)Weighted average sales growth of all of the Company's private equity
portfolio companies (except Graphcore) for the last twelve months (LTM).
(2)Weighted average EBITDA (earnings before interest, taxes, depreciation and
amortizatio) margin of all of the Company's private equity portfolio companies
valued on an EBITDA basis (CFC, Culligan, Learning Curve, Mintec and Pirum).
Public portfolio
Unfortunately the Company's public equity holdings detracted from performance
despite being helped by a take-over bid for City Pub Group by Young & Co's
Brewery, which represents the sixth quoted portfolio company to be bid for
since the Company's inception. Not only does this endorse the strength and
potential of some of our portfolio holdings but it also demonstrates external
interest in growing UK companies.
The public portfolio represented 23.9% of the Company's NAV as at 31 March
2024 and produced a fair value loss of 2.3% over the year.
Further comment on performance and investment activity can be found in the
Investment Managers' Review.
Valuations
Your Board considers its governance role in the valuations process to be of
utmost importance. Public investments are valued at the prevailing market
price and the private portfolio is subject to a valuations process led by
independent non-executive Director Professor Tim Jenkinson, an acknowledged
expert of private equities valuation metrics. Your Board understands that
shareholders are often sceptical of private equity valuations when they can't
be readily verified. The Company is fortunate to have a specialist valuations
team within Schroders, which is independent of the Investment Managers, and
who report their findings directly to the Board. The results reported reflect
their in-depth analysis and a discursive and challenging valuations process.
In all cases, public market comparables are used.
Discount management
The discount to NAV narrowed during the year under review from 36.2% to 27.8%.
Given your Board's confidence in the valuations process, there is little logic
to this discount applying to your Company other than to cite market sentiment
to private equity investment companies generally. It certainly does not
reflect the aggregate operational performance of the Company's unquoted
holdings since inception.
Buy-backs are one of several mechanisms your Board actively considers to
reduce this discount. The use of cash reserves is a matter of regular review.
We aim to balance the benefits of highly accretive buy-backs when discounts
are high against ensuring that we hold appropriate reserves to fund potential
follow-on investments in the private portfolio and capture the best of the new
investment opportunities that we continue to see. Given the current pipeline,
particularly from companies that want to stay private for longer and taking
into consideration the current size of the Company, we have chosen not to buy
back throughout the year.
Company size
Your Company successfully launched in 2020 when the IPO market was very
challenging. Indeed, two other investment company IPOs were withdrawn from the
market shortly before the Company was launched. This impacted the amount
raised and your Board is considering several options to increase the size of
the Company to increase its appeal to wealth managers and to improve its
liquidity.
Dividend
No dividend has been declared or recommended for the year. Your Company is
focused on providing capital growth and has a policy to only pay dividends to
the extent that it is necessary to maintain the Company's investment trust
status.
Board
There have been no changes to the Board during the year. For cost reasons, we
have operated with just three Directors since losing Christopher Keljik last
year, but this was not optimal. Additionally, I have decided to retire and
will not be offering myself for re-election at the forthcoming AGM. We have
therefore recently completed an extensive recruitment process using a
specialist Board recruitment firm to bring Board strength back to four
following my retirement.
I am pleased to welcome Justin Ward and Jemma Bruton to the Board as
independent non-executive Directors. Justin will replace me as Chairman after
the AGM on 18 September 2024, following a handover period.
Justin is a Director and active investment professional with extensive private
equity experience. He is currently a non-executive Director and Committee
Chairman at Hargreave Hale AIM VCT and at The Income & Growth VCT;
following a career at CVC Capital Partners and as a partner at Hermes Private
Equity and Bridgepoint Development Capital.
Jemma is currently co-managing director of Salica Investments Advisory LLP
(formerly Hambro Perks Advisory LLP) and formerly an executive Director at
Goldman Sachs. She also has extensive experience in the private equity
segments targeted by our Company.
It has been my pleasure to Chair your Company since its IPO in 2020 and I
extend my grateful thanks to shareholders for their support and to my Board
colleagues for their diligence and hard work, particularly over the period
where we were such a small team.
Biographical details for each of the Directors can be found on pages 34 and
35.
Presentation from the Investment Managers
The Investment Managers will be presenting at a webinar on Tuesday, 16 July
2024 from 09:00am - 10:00am to provide some insight into their decision making
and the current portfolio. Shareholders are encouraged to register for the
event at: https://www.schroders.com/sbot.
Regular news about the Company can be found on the Company's website:
https://www.schroders.com/sbot.
Annual General Meeting ("AGM")
The AGM will be held on Wednesday, 18 September 2024 at 1.00pm at 1 London
Wall Place, London EC2Y 5AU.
Your Board welcomes shareholders' comments and questions for it or for the
Investment Managers. A short presentation will be given by the investment
management team at the AGM. Please contact us via our Company Secretary's
email: amcompanysecretary@schroders.com or, if you prefer to write in, to: The
Company Secretary, Schroder British Opportunities Trust plc, at the above
address.
Please note that all voting will be on a poll and we encourage all
shareholders to exercise their votes by means of registering them with the
Company's Registrar ahead of the meeting, online or by completing paper proxy
forms, and to appoint the Chairman of the meeting as their proxy. Information
on voting can be found in the Notice of Annual General Meeting on page 77. The
Directors consider that all of the resolutions listed are in the best
interests of the Company and its shareholders and therefore recommend a vote
in favour of each, as the Directors intend to do in respect of their own
holdings.
Outlook
The current economic environment continues to be challenging with many company
valuations trading at close to historic lows. The UK stock market represents
one of the cheapest equity markets in the world and the UK mid-cap sector
looks particularly attractive. Interest rates remain stubbornly high for now
but UK inflation numbers are better which suggests a more positive medium-term
outlook for growth companies. Your Board and the Investment Managers view the
Company's current discount as unjustly high and at some point we expect this
to start to close. The Bank of England may well provide the trigger for this
event in the coming months.
The Schroders Capital team has an extensive general partner ("GP") network
providing an unrivalled access to a range of private company investments. Your
Company offers the public market investor a unique opportunity to gain
exposure to these companies during their growth phase. As at year end, the
total for the Company's cash and liquidity fund investment was £11.6 million.
This financial position enables the Company to be well positioned to take
advantage of opportunities in the pipeline. The number of companies listed on
the London stock exchange has steadily fallen in recent years as an increasing
number of businesses have been taken private or have sought private equity
finance in preference to a UK listing. The Company has full access to the rich
universe of UK public and private investment opportunities and is not limited
to the shrinking investment pool faced by investment companies focusing solely
on UK listed companies.
The current portfolio of innovative, predominantly UK companies are growing
strongly, the majority in line or ahead of expectations. The patient investor
that can look beyond the recent market environment should be well rewarded.
Neil England
Chairman
10 July 2024
Investment Managers' Review
Summary
Market
In the summer months of 2023, the US Federal Reserve and the Bank of England
both concluded their interest rate hiking cycles. Since then, central banks
have maintained a tight monetary policy without the need for further interest
rate increases. This is due to easing inflationary pressures, with goods and
energy prices moderating while services and wage inflation have remained
relatively stable. However, initial expectations of early and significant
interest rate cuts in 2024 have been pushed further into the future and are
expected to be more modest in scale.
After exceeding expectations of weak economic growth in the first half of
2023, the UK economy experienced a slowdown in the second half, entering a
shallow recession with two consecutive quarters of economic contraction.
However, recent data for the early months of 2024 suggests a return to
economic growth, indicating that the recession may be relatively short-lived.
While forecasts anticipate improved UK economic activity, the level of growth
is expected to remain modest. Furthermore, UK inflation moderated in the
second half of the year, aligning the country more closely with other
developed markets.
While the Company's private equity portfolio has continued to perform well in
aggregate, private equity markets have not been immune to economic headwinds
over the past year. As a reminder, our focus is on the small to mid-market
area of the UK private equity landscape, and we hope the following provides
useful insight into recent activity to contextualise the period under review.
According to KPMG's UK mid-market PE snapshot for 2023, deal volumes in this
area declined by 10%, with only 675 transactions completed in 2023, compared
to the 748 completed in 2022. However, the UK private equity market as a whole
saw a greater decline of nearly 20%, with total deals falling from 1,802 in
2022 to 1,451 in 2023. Additionally, UK mid-market exit volumes remained
depressed, with 2023's 181 exits representing the lowest annual amount for
six years. However, 2024 has already brought some optimism, with stabilised
rates and tamed inflation bringing increased certainty, giving dealmakers more
reason to increase activities.
Portfolio performance
Since the Company's IPO in December 2020, the NAV has been resilient despite a
volatile market backdrop. The portfolio's combined exposure to both public and
private equity markets has provided NAV stability since inception. Over the
past 12 months, positive NAV growth has been driven by fair value gains in the
portfolio's private equity (unquoted) allocation, which is illustrated below.
Attribution analysis (£m) for 12 months to 31 March 2024
Money
Quoted Unquoted Market Funds Net cash Other NAV
Value as at 31 March 2023 26.2 47.9 0.0 7.8 (2.6) 79.3
+ Investments 1.1 2.0 11.6 (14.7) - 0.0
- Realisations at value (7.3) 0.0 (1.1) 8.4 - 0.0
+/- Fair value (losses)/gains (0.6) 3.0 0.3 - - 2.7
+/- Costs and other movements - - - (0.7) 0.0 (0.7)
Value as at 31 March 2024 19.4 52.9 10.8 0.8 (2.6) 81.3
Key positive and negative performers over the 12 months to 31 March 2024
Top 5 contributors Contribution % Bottom 5 contributors Contribution %
EasyPark 2.0 Learning Curve -1.9
Cera 1.2 Rapyd -1.9
Culligan 1.2 Watches of Switzerland -1.5
Mintec 1.2 Sosandar -0.6
City Pub Group 1.2 Learning Technologies -0.5
The net asset value increased 2.5% from £79.3 million to £81.3 million over
the period, which comprised:
• Quoted holdings: -0.8%
• Unquoted holdings: 3.8%
• Money Market Funds 0.4%
• Costs and other movements: -0.9%
Private equity holdings
The portfolio's private equity (unquoted) holdings have continued to perform
well in aggregate, with 7 out of the 9 private equity holdings exceeding or in
line with performance expectations. We believe that the Company's private
equity focus on the 'growth capital' and 'buyout' areas of the private equity
landscape, in contrast to venture capital and pre-IPO areas, which have been
more negatively impacted by rising inflation and interest rates, have
contributed to the resilience of the NAV. Looking closer at the past 12
months, trading gains and transactional activity (company events, such as
add-on transactions and financing rounds) at the portfolio companies have
driven gains, despite noticeable valuation multiple contraction that
demonstrates the prudence of the valuation approach applied.
Private equity allocation attribution - 12 months to 31 March 2024
Trading gains and transaction activity have driven performance
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.
Source: Schroders Capital, 2024.
The portfolio's private equity companies (excluding Graphcore) have seen
>1.3x greater sales growth than publicly listed comparable companies,
delivering 24% sales growth vs 18% for public comparables over the past 12
months. At the same time, the portfolio's private equity companies valued on
an EBITDA basis are demonstrating stronger profitability from operations than
public comparables (46% vs 22%). Despite these favourable metrics, these
portfolio companies are being valued at a discount to public comparators, as
illustrated below.
Strong sales growth with strong profitability from operations…
…while valued at a discount to public comparables
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.
Source: Schroders Capital, using latest available data as at 31 March 2024.
(1)For all SBO private equity portfolio companies, except Graphcore, and their
relevant peer group sector-specific public comparables.
(2)For SBO private equity portfolio companies valued on an EBITDA basis (CFC,
Culligan, Learning Curve, Mintec and Pirum) and their relevant peer group
sector-specific public comparables. EBITDA margin is a measure of a company's
operating profit as a percentage of its revenue.
(3)For SBO private equity portfolio companies valued on an EBITDA basis (CFC,
Culligan, Learning Curve, Mintec and Pirum) and their relevant peer group
sector-specific public comparables. EV/EBITDA = Enterprise Value/Earnings
Before Interest, Tax, Depreciation, and Amortisation. EBITDA is a measure of
core corporate profitability. EV/EBITDA is a valuation metric used to compare
relative value of different businesses.
Turning to individual private equity portfolio companies, the most significant
contributor over the year was parking tech company, EasyPark, which has
continued its impressive global growth strategy focused on acquisitions,
strategic partnerships and organic growth. One considerable milestone was
EasyPark's announcement of its intention to acquire Flowbird Group, a deal
that will be highly complementary to its existing business, while extending
the group's global reach.
Digital-first healthcare-at-home company, Cera, has continued to make
substantial progress over the past year. The company completed the successful
delivery of 7.5 million home care visits over the 2023 winter period. This was
underpinned by Cera's AI-powered care model, in which patient symptoms and
health data are used to predict deterioration of patient condition 30 times
quicker than typical methods, enabling Cera to deliver more effective care in
the home and reduce hospitalisation rates by up to 70%, alleviating further
burden on already-overstretched NHS services.
Another important contributor was hydration solutions business, Culligan.
Culligan's vision is to create a global player in water and, in combination
with Waterlogic, is present globally across point-of-use water coolers, bottle
water coolers, conditioning and filters, supported by a sophisticated suite
of technology. The company is focused on driving organic growth in household
and commercial sectors globally through investment in strong premium branding,
leveraging experience and expertise across the group, while expanding retail
channels to drive penetration in homes. As most transformative acquisitions
have now been completed, the ongoing buy and build strategy will be focused on
accretive add ons to strengthen market position.
Independent provider of global commodity price data and market intelligence,
Mintec, has focused on the development of technological capabilities with
regards to forecasting. This includes more than 500 new price forecasts for
commodities, which will enable their clients to better understand future
prices and inform their buying and investment decisions. Additionally, the
company has released version 4.5 of Mintec Analytics, which includes cost
model forecasts. In addition to technological capabilities, the company has
progressed with new hires, including the appointment of a Chief Product
Officer and Chief Revenue Officer, which will strengthen product innovation
and growth.
On the more challenging side, the valuations for both holdings in Learning
Curve and Rapyd have come down over the past year. The valuation of private UK
training and education specialist, Learning Curve Group, was reduced due to
some short-term demand weakness. We believe the longer-term outlook remains
positive. Meanwhile, Rapyd continues to grow its customer base, principally
fuelled by its small and medium-sized customers, while in July 2023,
it announced the acquisition of a substantial part of PayU Global Payment
Organisation, enabling further global expansion across Central and Eastern
Europe and Latin America. While the company continues to perform, the
investment landscape in the payments sector remains challenging, with
comparable listed businesses amending their long-term growth outlooks. As a
result, the valuation multiple applied as at 31 March 2024 has been reduced,
offsetting the company's positive financial performance, leading to a
reduction in valuation over the period.
Public equity (quoted) holdings
Performance was held back by a disappointing calendar Q1 2024 thanks to a
combination of extended rate expectations and some stock specific events.
Regarding the former, short-term volatility is expected due to the portfolio's
concentration in economically/rate sensitive parts of the market, such as
consumer discretionary, industrial, and technology sectors.
Looking closer at the performers over the past 12 months, City Pub Group was a
standout contributor, as shares were boosted after the company received a
take-over bid from Young & Co's Brewery. This represents the sixth quoted
portfolio company to be bid for since the Company's inception. Not only does
this endorse the strength and potential of some of our portfolio holdings but
it also demonstrates external interest in growing UK companies. Meanwhile,
shares of value-added reseller Bytes Technology, online review platform
Trustpilot and train and coach app Trainline did well, following strong
financial results.
Detractors to performance included Watches of Switzerland, whose shares were
initially impacted by the news of Rolex's acquisition of luxury watch retailer
Bucherer and then by a profit warning in early 2024. We continue to monitor
the investment closely. Meanwhile, shares in women's fashion brand Sosandar
fell after the company announced that revenues would be lower than expected
due to its new focus on reducing the level of discounting of its products.
While the share price reaction was disappointing, we support the move to a
multi-channel concept focussed on higher margin customers.
Portfolio diversification
While having notable exposure to software, the portfolio is well-diversified
across a number of growing industry sectors.
Portfolio breakdown by industry as % of total equity investments (as at 31
March 2024)
Portfolio changes
Over the year, we continued to scour both private and public markets for the
brightest growth prospects, focusing on small and mid-sized companies.
Private equity activity
A core focus of our portfolio companies has been executing business
transformation through robust organic growth and acquisitions. To this end, we
made a £1.0 million follow-on investment in CFC to help support the
acquisition of Solution Underwriting (an Australian managing general agent)
and aid continued organic growth efforts, including product innovation. We
also made a £0.7 million follow-on in Learning Curve to bolster its balance
sheet.
Public equity activity
We exited our small holding in Velocys in September due to concerns over its
balance sheet. As mentioned earlier, we also sold our position in City Pub
Group in October following its bid by competitor Young & Co's Brewery Plc.
Post period end
In June 2024, we announced a new private equity investment in HeadFirst, an
international HR tech service provider, operating in 15 European countries.
This represents the tenth private equity investment made by the Company since
inception. The capital invested will be used to finance HeadFirst's
acquisition of managed services and specialist staffing provider Impellam
Group (previously UK AIM listed), to create a world leader in workforce
solutions for STEM (science, technology, engineering, and mathematics) talent.
The Company gained exposure to HeadFirst via Schroders' long-standing
investment partner IceLake. We are pleased to be investing at this important
development milestone for HeadFirst as we believe the combined business has
the potential for significant growth over the coming years.
Outlook
Expectations of the timing of Bank of England interest rates have been pushed
further out, which has likely contributed to the underperformance of listed UK
small and mid-caps relative to large caps so far in 2024. This is important to
note as the Company's public equity portfolio is focused in this area of the
UK market while also having notable exposure to the consumer discretionary
sector, which is sensitive not only to interest rate sentiment but also
consumer confidence. However, we believe that when clearer signs of a
sustained economic recovery materialise and market sentiment substantially
improves, both small and mid-caps, and the consumer sectors of the market,
should be amongst the first areas of the UK market to re-rate. Additionally,
we believe that the UK Chancellor's recent Spring Budget and the announcement
of the creation of a tax-free British ISA, represents a positive development
and could help to narrow the discount at which UK listed companies trade in
aggregate.
Aside from the relative valuation opportunity, with UK equities remaining
unloved relative to world markets in an historical context, they are also
attractive due to their strong balance sheets in aggregate. The valuation
opportunity can also be looked at through the lens of free cash flow yields,
with the UK having a higher yield than many other developed markets, making
investing in the UK a compelling opportunity (illustrated below).
UK attractively valued versus other developed markets
FY2 Free Cash Flow Yield
Source: Schroders, Fact set. FY2 Free Cash Flow Yield of the FTSE All-Share
Index and MSCI All Country World Index as at 31 March 2024.
As reported in last year's annual report and financial statements, our
analysis shows that market underperformance in the past by UK small and
mid-caps has usually been followed by outperformance over three-to-five year
periods relative to large cap companies in the FTSE 100 Index:
UK small cap performance vs. FTSE 100
Buying on weakness had given the best long-term returns
Source: Schroders, returns are shown for the Numis Small Cap plus AIM ex IT
index vs FTSE 100 index. Based on rolling 12-month performance from 31 March
1991 to 31 March 2024.
Our public equity holdings could be well poised to take advantage of the
subsequent outperformance observed in the past. Furthermore, with these
holdings valued at a 27% discount to their 5-year historic averages, as
measured by their forward price to earnings, they are also attractively valued
on a relative basis (illustrated below).
SBO's public equity valuations, 31 March 2024
Forward Price to Earnings (P/E) of SBO public equity sleeve vs historic
average
Source: Schroders, LSEG Workspace. Analysis reflects 17 of the 22 public
equity holdings that have a positive P/E ratio. 'Historic average' means
either 5 years or the duration the stock has been a listed company, if
shorter.
In terms of market activity, we are currently witnessing small-cap companies
being acquired for large premiums, with some of those premiums perhaps
undervaluing a company's long-term grown prospects. Meanwhile, the demand for
regional equities has been waning and UK small-cap chief executives have grown
frustrated with their depressed share prices, leading to an increase in share
buy-backs. As Investment Managers, we encourage these actions, particularly
when rates remain elevated, and the market appears to respond positively to
such behaviours. We also believe that a significant aspect of the issue lies
in perception, where there may be some simplistic views regarding the
UK equity market or UK capital markets as a whole that tend to dominate the
conversation. It is worth noting that the UK is home to a diverse range of
over 1000 listed companies. However, it is often the top 10 or 20 companies
that receive the most attention and heavily influence the commentary on the
market as a whole.
In private equity markets, with financial engineering unlikely to propel
returns in the near term due to increased interest rates, inflation and
macroeconomic uncertainty, we continue to believe that strategies focused on
identifying companies that exhibit strong underlying financial performance are
poised to do well. This may be achieved by the expansion of product lines,
geographic footprint and professionalising companies to improve profit
margins, for example. This is all easier to do in small and medium-sized
companies, and typically harder to achieve at larger companies, which have
often been through several rounds of private equity or institutional
ownership. An example from the portfolio is Mintec, a highly profitable
software price reporting agency business. In recent years, acquisitions (e.g.
AgriBriefing) have significantly expanded Mintec's profits while accelerating
international growth prospects. Meanwhile, recent additional C-suite hires
have further strengthened the company's senior workforce.
Despite the economic backdrop, we are seeing significant deal flow across a
breadth of opportunities. We have established a formidable network in the UK
(as well as globally) with hard-to-access investment partners, and strongly
believe we are well positioned to seek out the best opportunities for the
Company going forward. We believe the recently announced investment in
HeadFirst, alongside our long-standing investment partner IceLake Capital, is
a good example of this.
The Company's differentiated public-private equity strategy enables us to
continue to invest without boundaries, providing access to a broader
investable universe which differentiates us from other investment trusts.
Schroder Investment Management Limited
10 July 2024
Investment Approach and Process
Investment approach
The Company was launched in December 2020 to invest, initially, in companies
impacted by the Covid-19 pandemic. The focus was on investing in (i) high
growth UK companies looking to maximise their potential as well as in (ii)
mispriced growth opportunities where equity was required to return businesses
to their previous growth trajectory following the disruption caused by the
pandemic. Although the impact of Covid-19 is substantially diminished, there
continues to be no shortage of British companies which fit into the categories
of high or mispriced growth investment opportunities and the Company's
business model continues to be appropriate. The Company combines Schroders'
extensive public and private equity investment experience to access UK company
growth across the life cycle, focusing on small and medium-sized businesses.
The Company is philosophically ownership-agnostic in the sense that its
strategy is to invest in both public and private companies. Furthermore, the
Company believes that investors are best served by an offering that considers
a comprehensive UK equity universe, as publicly listed small and mid-caps
only represent a fraction of company growth in the UK economy.
The Company's portfolio has been constructed from the bottom up, with
investments focused on quality, growing and predominantly profitable
companies, that have strong balance sheets and that can sustainably compound
their earnings over the long run. Typically, these businesses will exhibit
considerable pricing power (which is particularly beneficial in times of
higher inflation), strong management teams, and will already be delivering
strong revenue growth. Where portfolio companies have not yet reached
profitability, the investment team seek out companies that are well-funded and
possess a clear route towards profitability.
Given the high-growth nature of the opportunities targeted, the portfolio will
have notable exposure to software and IT services areas of the market.
However, the portfolio is well-diversified to include other sectors, such as
consumer services, healthcare, leisure and financial services.
The Investment Managers place a high priority on the price paid as a crucial
factor in determining long-term investment returns. To ensure they do not
overpay for growth opportunities, they maintain discipline in the valuation
process. The portfolio focuses on high-growth names that have robust business
models and are well-positioned to benefit from secular tailwinds. These
companies are expected to be either at or near profitability and exhibit
strong growth characteristics, such as increasing customer numbers or
expanding market share.
The team is also aware that market inefficiencies often result in significant
disparities between underlying public equity company fundamentals and market
estimates, which is referred to as the 'growth gap'. Consequently, the team
actively seeks opportunities to exploit this growth gap. They believe that
markets tend to overlook future prospects, rely too heavily on extrapolating
historical growth trends, and overreact to short-term news. When evaluating
potential investments, the team looks for companies that demonstrate a
positive growth gap compared to consensus estimates, along with catalysts that
could lead to a re-rating of the shares, strong valuation support, attractive
risk-reward profiles, and good governance.
In terms of the portfolio's investment strategy, the team aims to invest in UK
small and medium-sized businesses with a market capitalisation range between
£50 million and £2 billion. These companies have the potential to provide
primary capital to support growth. Leveraging Schroders' extensive research
capabilities and long track record in listed equities, particularly in the
small and mid-cap space, the Company is well-positioned to identify and
capitalise on these opportunities.
In terms of the portfolio's private equity allocation, the investment team
focuses on direct and co-investment opportunities that span the growth capital
and small/mid-market buyout areas, where it believes numerous companies exist
with considerable transformation potential, while avoiding areas that the team
believe pose heightened valuation risk (see figure below). The Company's
private equity allocation leverages Schroders Capital's more than 25 years'
experience in private equity investing and 100+ specialist General Partner
relationships to create strong deal flow for high selectivity of direct and
co-investments. Schroders Capital has c.£14 billion of private equity assets
under management (as at 31 December 2023) and was awarded "Co-investor of the
Year" at the RealDeals Private Equity Awards 2023.
The Company does not invest in venture, large/mega buyout or turnaround
companies as it believes such companies involve too much risk; in particular,
late-stage venture and large/mega buyout companies have experienced the
greatest volatility. One example was the increase in late-stage venture
valuations in the dotcom boom which was followed by a significant drop (or
bust) in 2003. A further example was seen in large/mega buyouts between 2006
and 2010, where an increase in valuations prior to the global financial crisis
of 2008 was followed by a significant drop.
Source: Schroders. *Where we denote valuation risk as the risk around the
perceived value of an underlying asset whereas investment risk encompasses a
broader set of risks beyond valuation including but not limited to factors
such as market dynamics, economic conditions and industry specific risks.
The Company's private equity allocation by stage:
Source: Schroders.
Investment process
The Company's portfolio is managed by the Investment Managers, who employ a
collaborative, team-based approach, creating a combination of Schroders'
public and private equity capabilities with oversight in place. The Company
believes that it is appropriate for the Portfolio Managers to separate the
investment process between private and public equity investments to reflect
the clear differences in executing individual investments in the private
versus public equity markets. However, portfolio construction and first-line
risk management are the joint responsibility of the private equity and public
equity investment teams within the Investment Managers, alongside the
Alternative Investment Fund Manager, who has responsibility for the risk
management of the Company, delegated from the Board.
Private equity investment process
The private equity investment process is illustrated below.
The investment team believes that high-quality deal sourcing is fundamental to
long-term success and spends considerable time on this activity by working
closely with its extensive network of specialist GP relationships. Sourcing
efforts are further enhanced by technology, including advanced proprietary
tools, internal databases and third-party information services. An assessment
of whether the investment opportunity meets the key criteria for inclusion in
the Company is undertaken early to ensure a proposal is suitable and conforms
to the investment policy and objectives.
The comprehensive due-diligence process undertaken will include an assessment
of the following for a particular company:
Public equity investment process
The Investment Managers select public equity stocks for the Company based
principally on ideas generated by Schroders' in-house research capability, but
also by making selective use of Schroders' network of contacts, and of
sell-side research.
The Investment Managers conduct an initial screen to narrow down the universe
into high-growth names that have robust business models and are
well-positioned to benefit from secular tailwinds. These companies are
expected to be either at or near profitability and exhibit strong growth
characteristics, such as increasing customer numbers or expanding market
share. The universe is typically characterised by small and medium-sized
businesses with a market capitalisation range between £50 million and £2
billion.
The management team actively seeks opportunities to exploit the 'growth gap'
created by market inefficiencies that create significant disparities between
underlying company fundamentals and market estimates. Inefficient markets tend
to overlook future prospects, rely too heavily on extrapolating historical
growth trends, and overreact to short-term news. This allows the team to
invest in companies that demonstrate a positive growth gap along with
catalysts that could lead to a re-rating of the shares, strong valuation
support, attractive risk-reward profiles, and good governance.
The public equity stock selection process is outlined in the image below.
Source: Schroders. (1)UK listed and/or UK domiciled companies. The 'company
earnings' line in the graph represents the investment team's forecast (as
opposed to the consensus estimates). The team base forecasts on expectations
and beliefs and on reasonable assumptions within the bounds of what
information is available at the time. However, there is no guarantee that any
forecasts or opinions will be realised.
Public equity investments may include the following:
Top 10 Equity Investments
The Company's top 10 equity investment holdings as of 31 March 2024 are set
out below, with overviews of each company and recent updates regarding their
businesses set out on the subsequent pages.
Top 10 equity investments
Fair value as of % of total Fair value as of % of total
Quoted/ 31 March 2023 equity 31 March 2024 equity
Holding unquoted (£'000) investments (£'000) investments
Mintec(1) Unquoted 8,614 11.6 9,591 13.3
Cera EHP Unquoted 6,986 9.5 8,046 11.1
Pirum Systems(1) Unquoted 6,087 8.2 6,884 9.5
Rapyd Financial Network(1) Unquoted 8,399 11.3 6,837 9.5
EasyPark(1) Unquoted 4,492 6.1 6,171 8.5
CFC Underwriting(1) Unquoted 4,098 5.5 5,661 7.8
Culligan(1) Unquoted 5,053 6.9 5,585 7.7
Graphcore Unquoted 1,778 2.4 2,533 3.5
Trainline Quoted 1,408 1.9 2,097 2.9
Learning Curve(1) Unquoted 2,455 3.3 1,556 2.2
Source: Schroders.
(1)The fair value disclosed for the following investments represents the
Company's investment in an intermediary vehicle:
- Mintec held via Synova Merlin LP.
- Pirum Systems held via Bowmark Investment Partnership LP.
- Rapyd Financial Network held via Target Global Fund.
- EasyPark held via Purple Garden Invest (D) AB).
- CFC Underwriting held via Vitruvian Investment Partnership.
- Culligan held via EPIC-1b Fund.
- Learning Curve held via Agilitas Boyd 2020 Co-Invest Fund.
Mintec
(unquoted holding)
Leading provider of food-related commodity pricing and analytics, serving the
global supply chain through its SaaS platform
Mintec enables the world's largest food and manufacturing brands to implement
more efficient and sustainable procurement strategies. They do this through
their cutting-edge Software as a Service platform, Mintec Analytics, which
delivers market prices and analysis for thousands of commodities, food
ingredients and associated materials. Their data and tools empower their
customers to understand prices better, analyse their spend and negotiate with
confidence.
Latest updates:
• The integration of Agribriefing, which Mintec acquired in 2023 to
create a leading global provider of data on agricultural and food markets, has
progressed well with the combination of their extensive, proprietary range of
unique data and market intelligence.
• In terms of product development, Mintec has launched
new algorithmic commodity price forecasts that cover 533 commodities,
expanding clients' capabilities to understand future prices and inform their
buying and investment decisions, while also enhancing Mintec's credentials as
a leading data software business with growing capability in cutting-edge data
science.
• Furthermore, the company has released version 4.5 of Mintec
Analytics, its commodity price data and insights platform, which now provides
clients with precise cost model forecasts to enhance their cost management
strategies. The addition of this capability revolutionises how businesses
navigate the impact of future market volatility on their costs, offering
unparalleled precision in predicting and adapting their strategy to raw
material price fluctuations.
Cera
(unquoted holding)
Europe's largest provider of digital-first home healthcare
Cera is Europe's largest provider of digital-first home healthcare. They are
transforming healthcare by moving services such as care, nursing, telehealth
and repeat medications out of hospitals and into people's own homes through
technology. In combining pioneering technology with their community of
professional carers and nurses, Cera are empowering people to live longer,
better, healthier lives in their own homes.
Latest updates:
• During the 2023 winter period, Cera delivered 7.5 million home
care visits (an important metric of progress), saving the NHS an estimated
£100 million. In just seven years, the company has now delivered 50 million
at-home patient visits.
• The company has continued to make product developments utilising
artificial intelligence. A pilot of its fall prediction AI platform, which
takes information about patients logged by carers on a smartphone app and
assesses their risk of having a fall, demonstrated a 20% reduction in falls.
• Furthermore, Cera launched an AI scheduler platform that matches
patients to community care up to 5x faster. The technology also pairs patients
with carers to better suit their needs and reduces average carer travel time
between patients by up to 50%.
Pirum
(unquoted holding)
A leading provider of post-trade automation and collateral management
technology for the global securities industry
Pirum has created a set of award-winning, highly innovative and flexible
services which are tailored to fully support the complexities of financial
institutions around the world. Pirum provides a secure processing hub which
seamlessly links market participants, allowing them to electronically process
and verify key transaction details. Through easy integration with their
services, Pirum's clients have increased processing efficiency, reduced
operational risk and improved profitability by reducing manual processing.
Latest updates:
• Pirum has continued to make considerable strides with product
development. A key milestone was the introduction of their Securities
Financing Transactions Regulation (SFTR) solution, in collaboration with
S&P Global Market Intelligence Cappitech. This service ensures compliance
with SEC reporting requirements and enhances operational transparency. The new
reporting solution, which has been adopted by over 150 institutions worldwide,
leverages Pirum's existing connectivity with the securities finance, repo and
collateral management ecosystems.
• Furthermore, Pirum launched a borrower automation solution,
enabling full automation of the recall lifecycle with its first clients well
ahead of the May 2024 deadline of T+1 settlement in the US, Canada and Mexico.
• Pirum also successfully tested a distributed ledger technology
(DLT) extension of their securities lending and repo post-trade solution. This
DLT innovation would aim to provide clients with a distributable
golden-record of their trades.
Rapyd
(unquoted holding)
Integrates the world's many payment networks and technologies into a single
platform
Rapyd is the fastest way to power local payments anywhere in the world,
enabling companies across the globe to access markets quicker than ever
before. By utilising Rapyd's payments network and Fintech-as-a-Service
platform, businesses and consumers can engage in local and cross-border
transactions in any market. The Rapyd platform is unifying fragmented payment
systems worldwide by bringing together 900-plus payment methods in over
100 countries.
Latest updates:
• In July 2023, Rapyd announced the acquisition of a substantial
part of PayU Global Payment Organisation for $610 million. The company expects
the acquisition to provide a richer technology stack, expanded geographic
licensing and broader market reach.
• The combined business is expected to deliver transactions in over
100 countries, service over 250,000 merchant clients globally and expand
Rapyd's payments network to over 1,200 payment methods.
EasyPark
(unquoted holding)
Parking tech company that helps drivers to find, manage and pay for both
parking and electric vehicle charging
EasyPark's technology supports its users, cities and parking operators with
parking administration, planning and management. The company has a unique
market coverage with presence in over 20 countries and more than 3,200
cities.
Latest updates:
• In November 2023, EasyPark announced its intention to acquire
Flowbird Group, a global mobility player providing integrated parking and
transportation solutions, as it continues its global growth strategy. The deal
will extend EasyPark's global reach and be highly complementary to its
existing business.
• Flowbird Group operates under the brands Flowbird,
YourParkingSpace, TPARK, Extenso Cloud, and Yellowbrick and offers multiple
mobility solutions, covering equipment and services such as pay and display
machines, software, and park & charge. Flowbird Group also offers
transportation solutions, both within ticketing and open payments for debit
and credit cards, as well as mobile wallets.
CFC
(unquoted holding)
Technology-driven global insurance business
For over 20 years, CFC has built market-leading solutions to some of the
insurance industry's biggest challenges. The company uses technology and data
science to stay one step ahead. From developing cutting-edge insurance
products, pioneering autonomous underwriting, deploying advanced threat
intelligence, to offering unparalleled service to its partners and customers,
CFC is re-imagining the world of specialist insurance.
Latest updates:
• In April 2024, CFC announced the acquisition of Australian
managing general agent, Solution Underwriting, expanding its footprint in
Australia. Solution is a specialist insurance underwriter with a focus on
financial lines insurance products.
• In terms of product innovations, recent highlights have included
the first ever embedded transaction liability insurance product and a
groundbreaking carbon delivery insurance policy.
• CFC also announced a significant upgrade to its packed insurance
policies for professional services businesses. With many SMEs buying a
professional liability policy for the first time due to contractual
obligations with their business partners, CFC's cyber add-on makes it easy for
SMEs to also benefit from market-leading cyber protection at a price they can
afford.
Culligan
(unquoted holding)
Water systems treatment company for homes and businesses across the globe
Culligan is an innovative brand in consumer-focused, sustainable water
solutions and services. It was established in 1936 as a provider of water
softening solutions for residences in Northbrook, Illinois, and has since
grown to become a worldwide leader in water treatment needs, from the simplest
filtration system to complex industrial water solutions.
Latest updates:
• Since its combination with UK-headquartered Waterlogic in 2022 to
create a leader in clean and sustainable drinking water solutions and
services, Culligan has made progress both operationally and through further
acquisitions.
• In January 2024, Culligan announced the acquisition of the
majority of Primo Water's businesses in EMEA, excluding those in the UK,
Portugal and Israel. This transaction enhances the company's scale and
capacity within the EMEA region, broadening its footprint in 12 countries
where it already operates, while entering markets in Poland, Latvia, Lithuania
and Estonia.
Graphcore
(unquoted holding)
Developer of new processors for machine intelligence
Graphcore has developed the Intelligence Processing Unit (IPU), a new type of
microprocessor specifically designed from the ground up to meet the needs of
current and next-generation artificial intelligence ("AI") applications.
Graphcore's proprietary technology combines its advanced semiconductor
hardware, the world's most complex processor, with its powerful software
tools, to dramatically outperform legacy technologies such as graphic
processing units.
Latest updates:
• Graphcore has continued to focus on developing its proprietary
technology and expanding its partnerships.
• In July 2023, the company announced a partnership with cloud
computing provider, Gcore, to open a new AI cloud cluster in Newport, Wales.
Gcore is an international leader in public cloud and edge computing, content
delivery, hosting, and security solutions. The cluster will increase the
number of Graphcore Intelligent Processing Units (IPUs) available to Gcore
customers. Since then, the offering has been extended into the US.
Trainline
(quoted holding)
Europe's leading independent rail platform
Trainline enable millions of travellers to seamlessly search, book and manage
their journeys through their highly rated Trainline website, mobile app and
B2B partner channels.
Latest updates:
• Trainline is a home-grown British tech success that has scaled
beyond domestic borders to become Europe's most downloaded rail app.
• The company is growing strongly in the UK and across the
continent, with international consumer net ticket sales of more than £1
billion (FY 2024).
• Growth is fastest in Spanish domestic travel, with market share
continuing to rise on key routes like Madrid-Barcelona, which is the company's
third most popular route across all countries, including the UK.
Learning Curve
(unquoted holding)
UK training and education specialist
Learning Curve works with further education providers, employers and learners
to help them achieve success. Since 2004, the company has grown both
organically and through acquisition to become one of the largest and most
diverse providers in the country.
Latest updates:
• Learning Curve has made progress with product development in
launching an AI-powered career planning platform (CareersPro) to support
careers guidance, complementing the growth of the company's existing Ed-Tech
solutions. CareersPro is designed to provide individuals, young or old, with
the tools and resources to make informed choices about their education and
career paths.
Investment Portfolio
as at 31 March 2024
Country of
incorporation
(of underlying Total
Quoted/ holding where Industry Fair value investments
Holding unquoted applicable) Sector £'000 %
Schroder Special Situations Fund
Sterling Liquidity Plus Quoted Luxembourg Collective - SICAV 10,795 13.0
Mintec(1) Unquoted United Kingdom Software 9,591 11.6
Cera EHP S.à r.l. Unquoted United Kingdom Health Care Technology 8,046 9.7
Pirum Systems(1) Unquoted United Kingdom Software 6,884 8.3
Rapyd Financial Network(1) Unquoted United Kingdom IT Services 6,837 8.2
EasyPark(1) Unquoted Sweden Software 6,171 7.4
CFC Underwriting(1) Unquoted United Kingdom Insurance 5,661 6.8
Culligan (formerly Waterlogic)(1) Unquoted United Kingdom Diversified Consumer Services 5,585 6.7
Graphcore Unquoted United Kingdom Semi-conductors & Equipment 2,533 3.0
Trainline Quoted United Kingdom Hotels, Restaurants & Leisure 2,097 2.5
Learning Curve(1) Unquoted United Kingdom Diversified Consumer Services 1,556 1.9
Dalata Hotel Quoted Ireland Hotels, Restaurants & Leisure 1,501 1.8
SSP Quoted United Kingdom Hotels, Restaurants & Leisure 1,443 1.7
Trustpilot Quoted United Kingdom Interactive Media & Services 1,378 1.7
Volution Quoted United Kingdom Building products 1,376 1.7
Watches of Switzerland Quoted United Kingdom Specialty Retail 1,326 1.6
Discoverie Quoted United Kingdom Electrical Equipment 1,183 1.4
GB Quoted United Kingdom Software 1,058 1.3
OSB Quoted United Kingdom Financial Services 1,053 1.3
On the Beach Quoted United Kingdom Hotels, Restaurants & Leisure 919 1.1
Judges Scientific Quoted United Kingdom Machinery 899 1.1
Ascential Quoted United Kingdom Media 849 1.0
MaxCyte Quoted United States Life Sciences Tools & Services 799 1.0
Learning Technologies Quoted United Kingdom Professional Services 655 0.8
Bytes Technology Quoted United Kingdom Software 641 0.8
Sosandar Quoted United Kingdom Textiles, Apparel & Luxury Goods 594 0.7
Mobico Quoted United Kingdom Ground Transportation 516 0.6
Luceco Quoted United Kingdom Electrical Equipment 513 0.6
Victorian Plumbling Quoted United Kingdom Specialty Retail 362 0.4
Invinity Energy Systems Quoted Jersey Electrical Equipment 147 0.2
Lendinvest Quoted United Kingdom Financial Services 124 0.1
Total investments(2) 83,092 100.0
The fair value disclosed for the following investments represents the
Company's investment in an intermediary vehicle:
Mintec (held via Synova Merlin LP)
Rapid Financial Network (held via Target Global Fund)
Pirum Systems (held via Bowmark Investment Partnership LP)
Culligan (held via Epic-1b Fund)
EasyPark (held via Purple Garden Invest (D) AB)
CFC Underwriting (held via Vitruvian Investment Partnership LLP)
Learning Curve (held via Agilitas Boyd 2020 Co-invest Fund)
(2)Total investments comprise:
£'000 %
Unquoted 52,864 63.6
Quoted on FTSE 250 11,862 14.3
Collective investment scheme - money market instruments 10,795 13.0
Listed on AIM 4,638 5.6
Quoted on FTSE Allshare 1,432 1.7
Listed on a recognised stock exchange overseas 1,501 1.8
Total 83,092 100.0
Business Review
Purpose, values and culture
Purpose
The Company's purpose is to provide all investors with access to high quality
public and private equity companies focused on sustainable growth, resulting
in long-term shareholder value, in line with the investment objective. The
Board's focus is on long-term growth rather than providing shareholders with
dividend income.
Values
The Company's culture is driven by its values: excellence, integrity and
transparency, with collegial behaviour and constructive, robust challenge. The
values are all centred on achieving returns for shareholders in line with the
Company's investment objective. As the majority of the Directors are
shareholders in the Company, the Directors' interests are aligned with those
of other shareholders in this regard. The Board is responsible for promoting
strong relationships with the Manager and other service providers, as well as
maintaining constructive relationships with shareholders, in order to promote
their best interests.
Culture
The Board is committed to encouraging and actively creating a culture that is
responsive to the views of shareholders and its wider stakeholders. As the
Company has no employees and acts through its service providers, its culture
is represented by the values and behaviour of the Board and third parties to
which it delegates. The Board encourages a culture of constructive challenge
with all key suppliers and transparency with all stakeholders. The Board is
responsible for embedding the Company's culture in its operations.
The Board engages with its outsourced service providers to safeguard the
Company's interests and ensure our service providers meet the standards
expected by the Company. As part of this ongoing monitoring, the Board
receives reporting from its service providers with respect to their
anti-bribery and corruption policies; Modern Slavery Act 2015 statements;
diversity policies; and greenhouse gas and energy usage reporting, to ensure
they are in line with expectations.
Business model
The Company is a listed investment trust, that has outsourced its operations
to third party service providers. The Company's strategy is to meet its
investment objective to deliver long-term returns throughout the life of the
Company by investing in a diversified public equity and private equity
portfolio of predominantly UK companies. The Articles of Association of the
Company require the Directors to put forward, at a general meeting of the
Company to be held in the year 2028 but in any event no later than 31 May
2028, a winding-up resolution to place the Company into voluntary liquidation,
unless alternative proposals have been approved by shareholders.
The Board has appointed the Manager, Schroder Unit Trusts Limited, to
implement the investment strategy and to manage the Company's assets in line
with the appropriate restrictions placed on it by the Board, including limits
on the type and relative size of holdings which may be held in the portfolio
and on the use of gearing, cash, derivatives and other financial instruments
as appropriate. The terms of the appointment are described more completely in
the Directors' Report including delegation to the Investment Managers. The
Manager also promotes the Company using its sales and marketing teams. The
Board and Manager work together to deliver the Company's investment objective,
as demonstrated in the diagram below.
Investment trust status
The Company carries on business as an investment trust. Its shares are listed
and admitted to trading on the premium segment of the main market of the
London Stock Exchange. It has been approved by HM Revenue & Customs as an
investment trust in accordance with section 1158 of the Corporation Tax Act
2010, by way of a one-off application and it is intended that the Company will
continue to conduct its affairs in a manner which will enable it to retain
this status.
The Company is domiciled in the UK and is an investment company within the
meaning of section 833 of the Companies Act 2006. The Company is not a "close"
company for taxation purposes.
Investment model
Investment objective
The Company's investment objective is to deliver long-term total returns
throughout the life of the Company by investing in a diversified public equity
and private equity portfolio of predominantly UK Companies.
Investment policy
The Company will invest in a diversified portfolio of both public equity
investments and private equity investments consisting predominantly of UK
Companies with strong long- term growth prospects.
It is anticipated that the Company's portfolio will typically consist of
30 to 50 holdings and will target companies with an equity value between
approximately £50 million and £2 billion at the time of initial investment.
The Company will focus on companies which the Portfolio Managers consider to
be sustainable from an environmental, social and governance perspective,
supporting at least one of the goals and/or sub-goals of the United Nations'
SDGs, or which the Portfolio Managers consider would benefit from their
support in helping them incorporate SDGs into their business planning and/or
in reporting their alignment with SDGs.
The Company may, from time to time, use borrowings for investment and
efficient portfolio management purposes. Gearing will not exceed 10% of Net
Asset Value, calculated at the time of drawdown of the relevant borrowing.
In accordance with its investment objective, the Company invests in
a diversified portfolio with the aim of spreading investment risk, which is
monitored by the Board and the Manager.
The key restrictions imposed on the Manager, at the time of committment, are
that:
(a) no more than 10% of NAV may be invested in any investee company;
(b) the Company's portfolio shall comprise no fewer than 30 holdings;
(c) no more than 20% of NAV may be invested in investee companies which are
not UK Companies;
(d) the Company may not take a controlling stake in any investee company,
whether directly or indirectly, and:
- in respect of public equity investments, the Company may own no more
than 10% of the total voting rights of any investee company;
- in respect of private equity investments, the Company may own no more
than 20% of the enterprise value of any investee company; and
(e) the Company will not invest more than 10% in aggregate of gross assets
in other listed closed-ended investment funds, except that this restriction
shall not apply to investments in listed closed-ended investment funds which
themselves have stated investment policies to invest no more than 15% of their
gross assets in other listed closed-ended investment funds. Additionally, the
Company will itself not invest more than 15% of its gross assets in other
investment companies or investment trusts which are listed on the Official
List.
As set out on page 22, the investment portfolio comprised 31 holdings at 31
March 2024. The largest holding in an investee company was Mintec at 11.6%.
The Company currently holds most of its liquid assets in the Schroder Special
Situation Fund Sterling Liquidity Plus, which represented 13% of total
investments at 31 March 2024.
Key Performance Indicators ("KPIs")
The Board reviews performance, using a number of key measures, to monitor and
assess the Company's success in achieving its objective. Further comment on
performance can be found in the Chairman's statement. The following KPIs are
used:
• NAV performance;
• Share price discount and premium;
• Share price total return; and
• Ongoing charges ratio.
Some KPIs are Alternative Performance Measures.
Further details can be found on the inside cover and page 1 and definitions of
these terms on pages 80 and 81.
NAV performance
The Directors regard the Company's NAV performance as being the overall
measure of value, delivered to shareholders over the long-term. The Company's
NAV per share at 31 March 2024 was 110.05p (31 March 2023:107.32p). During
the year the Company's NAV per share rose by 2.5%. Since IPO the NAV per share
has increased by 12.3%. A full description of performance during the year
under review is contained in the Investment Managers' Review.
Share price discount and premium
The Board recognises that it is in the interests of shareholders to maintain a
share price as close as possible to the NAV per share, whilst acknowledging
the challenge this brings to a Company with a substantial portfolio of
unquoted investments. The Board regularly reviews the level of
discount/premium of the Company's share price to the net asset value per share
and considers ways in which share price performance may be enhanced, including
the effectiveness of share buy-backs, where appropriate. The discount at which
the Company's shares traded to NAV improved by 8.4 percentage points during
the year from 36.2% at 31 March 2023 to 27.8% at 31 March 2024.
Share price total return
The Directors also regard the Company's share price total return to be a key
indicator of performance. This reflects share price growth of the Company
which the Board recognises is important to investors. During the year the
Company's share price increased by 16.1% from 68.50p at 31 March 2023 to
79.50p at 31 March 2024.
Ongoing charges
The Company monitors operating expenses on a regular basis. The ongoing
charges at 31 March 2024 were 1.40% (31 March 2023: 1.47%). The calculation is
shown in the definition of terms and performance measures on page 81. The
Board seeks to manage and where possible to improve the ongoing charges ratio
and to this end the Management Engagement Committee regularly reviews its
service provider fee rates.
Promotion
The Company promotes its shares to a broad range of investors including
discretionary wealth managers, private investors, financial advisers and
institutions which have the potential to be long-term supporters of the
investment strategy. The Company seeks to achieve this through its Manager and
Corporate Broker, which promote the shares of the Company through regular
contact with both current and potential shareholders.
These activities consist of investor lunches, one-on-one meetings, regional
road shows and attendance at conferences for professional investors. In
addition, the Company's shares are supported by the Manager's wider marketing
of investment companies targeted at all types of investors. This includes
maintaining close relationships with adviser and execution-only platforms,
advertising in the trade press, maintaining relationships with financial
journalists and the provision of digital information on Schroders' website.
The Board also seeks active engagement with investors, and meetings with the
Chairman are offered to investors when appropriate.
Shareholders are encouraged to sign up to the Manager's Investment Trusts
update, to receive information on the Company directly
https://www.schroders.com/en-gb/uk/individual/never-miss-an-update/.
Stakeholder engagement
Section 172 of the Companies Act 2006
During the year, the Board discharged its duty under section 172 of the
Companies Act 2006 to promote the success of the Company for the benefit of
its members as a whole, having regard to the interests of its stakeholders.
The Board has identified its key stakeholders as the Company's shareholders,
the Investment Manager, other service providers and the investee companies.
The Board takes a long-term view of the consequences of its decisions, and
aims to maintain a reputation for high standards of business conduct and fair
treatment among the Company's shareholders. The Board notes that the Company
has no employees and the impact of its own operations on the environment and
local community is through the impact its service providers or investee
companies have.
Fulfilling this duty naturally supports the Company in achieving its
investment objective and helps to ensure that all decisions are made in
a responsible way. In accordance with the requirements of the Companies
(Miscellaneous Reporting) Regulations 2018, the Directors explain below how
they have individually and collectively discharged their duties under section
172 of the Companies Act 2006 over the course of the year and key decisions
made during the year and related engagement activities.
Stakeholder Significance Engagement 2023/24 application
Shareholders Regular communication with existing and prospective shareholders ensures that - AGM: The Company welcomes attendance and participation from The AGM was held in person in 2023 and the Board, along with the Investment
the Board is cognisant of investor priorities and addresses any concerns shareholders at the AGM. Shareholders have the opportunity to meet the Manager, look forward to meeting and interacting with shareholders at the
raised. Directors and the Investment Manager and ask questions at the AGM. The Board forthcoming AGM in September 2024.
values the feedback it receives from shareholders which is incorporated into
Clear communication of the Company's strategy and performance against its Board discussions. The Company's web pages host the annual and half year reports. The Company
investment objective can help maintain demand for the Company's shares and
publishes quarterly fact sheets which are available on the Company's web pages
promote an investor base that is interested in a long-term holding in the - Publications: The annual and half year results presentations are along with the opportunity to view past webinars and sign up to receive a
Company. available on the Company's web pages with their availability announced via the newsletter to receive regular updates on the Company.
London Stock Exchange. Daily and quarterly NAV updates are issued to provide
shareholders with transparent information on the Company's portfolio. Feedback The Chairman of the Board met with its major shareholders during the year and
and/or questions received from shareholders enable the Company to evolve its since the year end. Their views were taken into consideration as part of the
reporting which, in turn, helps to deliver transparent and understandable Board's duty to ensure their interests were taken into account.
updates.
The Investment Manager engaged with a number of its investors during the year
- Shareholder communication: The Manager communicates with shareholders and regular feedback was provided to the Board. A number of promotional
periodically. All investors are offered the opportunity to meet the Chairman, activities were undertaken during the year including Investment Manager
Senior Independent Director, or other Board members without using the Manager interviews, a capital markets event, webinars and coverage in key
or Company Secretary as a conduit, by writing to the Company's registered publications.
office. The Board also corresponds with shareholders by letter and email. The
Board receives regular feedback from its Broker on investor engagement and The Board continued to work with Kepler on promoting the Company through its
sentiment. research notes which are published twice a year (following the publication of
the Company's half year and annual results).
- Investor Relations updates: At every Board meeting, the Directors
receive updates on share trading activity, share price performance and any
shareholders' feedback, as well as any publications or comments in the press.
To gain a deeper understanding of the views of its shareholders and potential
investors, the Investment Manager also undertakes investor roadshows
throughout the year.
The Investment Manager The Investment Manager is the most significant service provider of the The Investment Manager attends all Board and certain Committee meetings in Representatives of the Portfolio Manager, including at least one of the
Company, and a description of its role can be found in the Investment order to update the Directors on the performance of the investments and the Portfolio Managers, attended each Board meeting to provide an update on the
Manager's Review on pages 6 to 12. implementation of the investment strategy and objective. investment portfolio along with presenting on macro-economic issues.
The Investment Manager's performance is critical for the Company to deliver Important components in the Board's collaboration with the Investment Manager The Board held a strategy session at which the Board and Investment Manager
its investment strategy successfully and meet its objective to achieve are: discussed key issues outside the normal Board reporting framework.
long-term capital growth through investing in a diversified global portfolio
of private and public equity companies. - Encouraging open discussion with the Investment Manager; The Management Engagement Committee reviewed the performance of the Manager,
its remuneration and the discharge of its contractual obligations.
Engagement with the Company's Investment Manager is necessary to review - Recognising that the interests of shareholders and the Investment
whether it is achieving the Company's objectives and adhering to the Company's Manager (as well as of its other clients) are, for the most part aligned,
policies and to understand the risks and opportunities. adopting a tone of constructive challenge, balanced when those interests are
not fully congruent by robust negotiation of the Investment Manager's terms of
engagement; and
- Drawing on Directors' individual experience to support the Investment
Manager by holding it to account regarding investment strategy, and
challenging where necessary.
Other service providers In order to operate as an investment trust with a premium listing on the The Board maintains regular contact with its key external providers, both The Board engaged regularly with service providers as well as carrying out a
London Stock Exchange, the Company relies on a diverse range of advisers and through the Board and Committee meetings, where service providers are review of the service providers' business continuity plans and additional
outsourced service providers. To ensure the smooth operation of the Company, periodically invited to attend, as well as outside of the regular meeting cyber security provisions.
the Board engages with key service providers to ensure they are delivering cycle. Their advice, as well as their needs and views, are routinely taken
their services in line with their contractual obligations. into account and the need to foster business relationships with key service Under delegated authority from the Board, the Management Engagement Committee
providers is central to Directors' decision-making as the Board of an reviewed all material third party service providers and their fees. The Board
externally managed investment trust. considered the ongoing appointments and fees of its service providers to be in
the best interests of the Company and its shareholders as a whole and will
continue to monitor their progress in the year ahead.
The Directors were invited to attend an internal controls briefing session
which assessed the internal controls of certain key service providers
including the Company's Depositary and Custodian, HSBC, the Company's
Registrar, Equiniti, and Schroders Group Internal Audit.
Investee companies The Investment Manager focuses on investing in those companies it believes can The Investment Management team conducts face-to-face and/or virtual meetings The Board received regular updates on engagement with investee companies from
compound in value over the long term. with the management teams of all investee companies to understand current the Investment Manager at its Board meetings.
trading and prospects for their businesses, and to ensure that their
As an investment trust with no trading activity and an outsourced business investment principles and approach are understood. During the year, the Investment Manager engaged with many of its investee
model, the Company has no direct social, community or environmental
companies and voted at shareholder meetings.
responsibilities, however, the Board monitors activities of investee companies The Investment Manager has discretionary powers to exercise the Company's
through its delegation to the Investment Manager. voting rights on resolutions proposed by the investee companies within the
Company's portfolio. The Investment Manager report to the Board on stewardship
(including voting) issues and the Board will question the rationale for voting
decisions made.
By active engagement and exercising voting rights, the Investment Manager
actively works with companies to improve corporate standards, transparency and
accountability.
Examples of stakeholder consideration during the year
The Directors were particularly mindful of stakeholder considerations in
reaching the following key decisions during the year ended 31 March 2024:
• the Board and Management Engagement Committee undertook reviews of
the Investment Manager and the Company's third-party service providers and
agreed that their continued appointment and fees remained in the best
interests of the Company and its shareholders.
• the Board continued to consider Board succession planning and
undertook a recruitment process, subsequent to year-end. Since the retirement
of Christopher Keljik, the Board has operated with three Directors. However,
as set out in the Chairman's statement, Neil England intends to step down at
the AGM and the Board agreed that it would like to build Board strength back
up to four. Two Directors were appointed in July 2024 and are being put
forward for election at the upcoming AGM. The appointments broaden the Board's
composition and it is intended that Justin Ward will replace Neil England as
Chairman.
• The Board decided to form a new Valuations Committee. This
decision recognised the importance of the Board's oversight role on valuations
and the need for shareholders to have confidence in the outcomes.
Responsible investment
The Manager is compliant with the UK Stewardship Code and its application with
the principles therein is reported on its website:
www.schroders.com/en/about-us/corporate-responsibility/sustainability/interpret/.
Corporate and social responsibility
The Board recognises the Company's duty with respect to corporate and social
responsibility and engages with its outsourced service providers and other
stakeholders to safeguard the Company's interests. As part of this ongoing
monitoring, the Board receives reports from its service providers with respect
to their diversity policies; anti-bribery and corruption policies; Modern
Slavery Act 2015 statements; financial crime policies; and greenhouse gas and
energy usage reporting.
Diversity policy
The Board has adopted a diversity and inclusion policy which seeks to promote
diversity of gender, social and ethnic backgrounds, cognitive and personal
strengths. The Board recognises the value of diversity and when considering
new appointments, the Board endeavours to ensure that it has the capabilities
required to be effective and oversee the Company's strategic priorities. This
includes an appropriate range, balance and diversity of skills, experience and
knowledge. The Company is committed to ensuring that any vacancies arising are
filled by the best qualified candidates and appointments will always be made
on merit alone.
Statement on Board diversity - gender and ethnic background
The Board has made a commitment to consider diversity when reviewing the
composition of the Board and notes the Listing Rules requirements (LR
9.8.6R(9) and (11)) regarding the targets on Board diversity:
• at least 40% of individuals on the Board are women;
• at least one senior Board position is held by a woman; and
• at least one individual on the Board is from a minority ethnic
background.
The FCA defines senior Board positions as Chairman, Chief Executive Officer
("CEO"), Chief Financial Officer ("CFO") or Senior Independent Director
("SID"). As an investment trust with no executive officers, the Company has no
CEO or CFO. The Board has reflected the senior positions of the Chairman of
the Board and the SID in its diversity tables below.
The Board has chosen to align its diversity reporting reference date with the
Company's financial year end and proposes to maintain this alignment for
future reporting periods. The following information has been provided by each
Director through the completion of a questionnaire.
As at 31 March 2024, the Company met one of the three criteria for at least
one senior Board position to be held by a woman. The target in relation to the
number of women on the Board has now been addressed with the appointment of
Jemma Bruton. The target for at least one individual on the Board to be from a
minority ethnic background was not met and the Board is conscious that while
the Directors are all independent and have a diverse range of views and
experience, its small composition will make these targets challenging to fully
implement.
The below tables set out the gender and ethnic diversity composition of the
Board as at 31 March 2024.
Gender identity
Number of
Number of Percentage senior
Board of the positions on
members Board the Board
Men 2 66.66 1
Women 1 33.33 1
Not specified/prefer not
to say - - -
Ethnic background
Number of
Number of Percentage senior
Board of the positions on
members Board the Board
White British or other White (including minority-white groups) 3 100 2
Mixed/Multiple Ethnic Groups - - -
Asian/Asian British - - -
Black/African/Caribbean/Black British - - -
Other ethnic group, including Arab - - -
Not specified/prefer not to say - - -
Since the end of the period two Directors have been appointed and information
on their gender and ethnic diversity will be included in the next annual
report and financial statements.
Financial crime policy
The Company continues to be committed to carrying out its business fairly,
honestly and openly operates a financial crime policy covering bribery and
corruption, tax evasion, money laundering, terrorist financing and sanctions,
as well as seeking confirmations that the Company's service providers'
policies are operating soundly.
Modern Slavery Act 2015
As an investment trust, the Company does not provide goods or services in the
normal course of business and does not have customers. Accordingly, the
Directors consider that the Company is not required to make any slavery or
human trafficking statement under the Modern Slavery Act 2015.
Climate
Greenhouse gas emissions and energy usage
As the Company outsources its operations to third parties, it consumed less
than 40,000 kWh during the year and so has no greenhouse gas emissions, energy
consumption or energy efficiency action to report.
Taskforce for Climate-Related Financial Disclosures ("TCFD")
The Company, as an investment trust, is exempt from the requirement to report
against TCFD regulation. However, the Company's Investment Manager produces an
annual product level disclosure consistent with the TCFD. This can be found
here:
https://mybrand.schroders.com/m/44863c680e83c467/original/TCFD-GB97406M-Schroder-British-Opportunities-Trust-20231231.pdf.
Principal and emerging risks and uncertainties
The Board, through its delegation to the Audit and Risk Committee, is
responsible for establishing a process for identifying, managing and
monitoring emerging and principal risks of the Company and monitoring the
Company's financial internal control systems. The Board has adopted
a detailed matrix of principal risks affecting the Company's business as an
investment trust and has established associated policies and processes
designed to manage and, where possible, mitigate those risks, which are
monitored by the Audit and Risk Committee on an ongoing basis. This system
assists the Board in determining the nature and extent of the risks it is
willing to take in achieving the Company's strategic objectives. The above is
considered noting that the Company has no employees and has delegated all
operations to third party service providers.
Risk assessment and internal controls review by the Board
Risk assessment includes consideration of the scope and quality of the systems
of internal control operating within key service providers, and ensures
regular communication of the results of monitoring by such providers to the
Audit and Risk Committee, including the incidence of significant control
failings or weaknesses that have been identified at any time and the extent to
which they have resulted in unforeseen outcomes or contingencies that may have
a material impact on the Company's performance or condition. The internal
control environment of the Manager, the Depositary and the Registrar are
tested annually by independent external auditors. The reports are reviewed by
the Audit and Risk Committee.
Although the Board believes that it has a robust framework of internal control
in place this can provide only reasonable, and not absolute, assurance against
material financial misstatement or loss and is designed to manage, not
eliminate, risk. Actions taken by the Board and, where appropriate, its
Committees, to manage and mitigate the Company's principal and emerging risks
and uncertainties are set out in the table below.
Both the principal and emerging risks and uncertainties and the monitoring
system are subject to assessment at least annually. The last assessment took
place in February 2024.
During the year, the Board discussed and monitored a number of risks that
could potentially impact the Company's ability to meet its strategic
objectives. The Board receives updates from the Investment Manager, Company
Secretary and other service providers on emerging risks that could affect the
Company. The Board was mindful of the evolving global environment during the
year; and the risks posed by volatile markets; geopolitical uncertainty; and
inflation and interest rates levels which could affect the asset class.
However, these are not factors which explicitly impacted the Company's
performance.
No significant control failings or weaknesses were identified from the Audit
and Risk Committee's ongoing risk assessment throughout the financial year and
up to the date of this report. Having received the relevant reports, the Board
is satisfied that the internal controls operated by the Company's service
providers are operating effectively.
Actions taken by the Board and, where appropriate, its Committees, to manage
and mitigate the Company's principal risks and uncertainties are set out in
the table below. The "Change" column on the right highlights at a glance the
Board's assessment of any increases or decreases in risk during the year after
mitigation and management. The arrows show the risks as increased, decreased,
or unchanged.
Risk Mitigation and management Change
Strategic
Investment objective and promotion The appropriateness of the Company's investment remit is regularly reviewed á â
and the Board monitors the success of the Company in meeting its stated
The Company's investment objective may become out of line with the objectives.
requirements of investors, or the Company's investment strategy may not be
sufficiently differentiated from other products resulting in the Company being
subscale and shares trading at a discount.
Company lifespan The private equity Investment Managers have extensive experience and a track á â
record of accurately timing the exits of private equity investments.
The Articles of Association of the Company require the Directors to put
forward, at a general meeting of the Company to be held in the year 2028 but The Board will ensure that any alternative proposals to be made to
in any event no later than 31 May 2028, a winding-up resolution to place the shareholders are put forward at an appropriate time.
Company into voluntary liquidation, unless alternative proposals have been
approved by shareholders.
In the event that no alternative proposals are put forward to shareholders, or
such proposals are not approved by shareholders, the Company will commence
winding up in 2028. It could take several years until all of the Company's
private equity investments are disposed of and any final distribution of
proceeds made to shareholders.
Market
Market volatility The Investment Managers adopt an active management approach and focus on á â
sustainable businesses capable of generating long-term returns for
Underlying investee companies within the Company's portfolio may experience shareholders.
fluctuations in their operating results due to fluctuations in the market or
general economic conditions (including changes to interest rates, inflation, The Board receives quarterly reports from the Investment Managers on the
geopolitical and ESG related regulations, including those related to climate performance of the Company's investments and the market outlook.
change). These would in turn affect the performance of the Company.
In addition, market pricing risk can affect the valuation of both the Company
and investee company share prices.
Regulatory
Change of regulation The Board and Manager monitor proposed changes to tax rules and report to the á â
Board thereon.
The Company benefits from the current exemption for investment trusts from UK
tax on chargeable gains. Any change to HMRC's rules or taxation of investee
companies could affect the Company's ability to provide returns to
shareholders.
Investment
Valuation Contracts are drafted to include obligations to provide information with á â
regard to investee companies in a timely manner, where possible.
Private equity investments are generally less liquid and more difficult to
value than publicly traded companies. A lack of open market data and reliance The Manager has an extensive track record of valuing privately held
on investee company projections may also make it more difficult to estimate investments.
fair value on a timely basis. Failure by the Company to disclose how the
investment process integrates consideration of ESG factors (including climate The Valuations Committee reviews all valuations of unquoted investments on a
change) could lead to potential valuation issues in the underlying investee quarterly basis and the Audit and Risk Committee challenges methodologies used
companies. by the Investment Managers.
The consideration of ESG factors (including climate change) is integrated into
the investment process and reported at Board meetings.
Liquidity Concentration limits are imposed on single investments to minimise the size of á â
positions.
Liquidity risks include those risks resulting from holding private equity
investments as well as not being able to participate in follow-on fundraises The Investment Managers consider liquidity risk when selecting investments.
through lack of available capital which could result in dilution of an
investment. The Investment Managers will seek to manage cashflow such that the Company
will be able to participate in follow up fundraisings where appropriate. The
Board receives quarterly reports from the Manager on the portfolio's
liquidity.
NAV discount The Board monitors the NAV and receives regular updates. Although the Company á â
has not bought-back any shares during the period the Board does have a
The Company's shares may not trade in line with NAV, depending on factors such discount/premium policy and considers whether share buy-backs would be for the
as supply and demand for the Company's shares, market conditions and general benefit of the Company as a whole including its shareholders. In order to
investor sentiment. The operation of the Company's policy to manage any consider a buy-back the Board would need to take into account relevant
discount could result in the Company's operating charges ratio becoming factors and circumstances at the time.
excessive.
The Board monitors marketing and distribution activity regularly.
Key person The Board regularly considers key man risk and seeks assurances concerning the á â
depth of expertise of the investment management teams which manage the
The Company's investment portfolio is managed by the Portfolio Managers and, Company's portfolio.
in particular, is led by four key individuals. Loss of an Investment Manager
could affect performance and market sentiment leading to a widening discount The Board receives assurances from the Manager regarding the Investment
of the share price compared with the NAV. Manager's incentive arrangements and succession planning.
Operational
Reliance on service providers Experienced third party service providers are employed by the Company under á â
appropriate terms and conditions and with agreed service level specifications.
The Company has no employees and the Directors have been appointed on a Service level agreements include clauses which set out the notice periods for
non-executive basis. The Company is therefore reliant upon the performance of termination.
third-party service providers.
The Board receives regular reports from its service providers and the
Failure of any of the Company's service providers to perform in accordance Management Engagement Committee reviews the performance of key service
with the terms of its appointment, to protect against breaches of the providers at least annually.
Company's legal and regulatory obligations such as data protection, or to
perform its obligations at all as a result of insolvency, fraud, breaches of The Audit and Risk Committee reviews reports on the external audits of the
cyber security, failures in business continuity plans or other causes, could internal controls of certain key service providers.
have a material detrimental impact on the operation of the Company.
The AIFM, the Investment Managers, the Depositary, the Company Secretary and
the Administrator perform services that are integral to the operation of the
Company and any of the Company's service providers could terminate their
contract.
Viability statement
The Directors have assessed the viability of the Company over the five year
period ending 31 March 2029, taking into account the Company's position at 31
March 2024 and the potential impact of the principal risks and uncertainties
it faces for the review period. This is further detailed in the Chairman's
Statement, Investment Manager's Review and principal risks and uncertainties
sections of this report. The Board believes that a period of five years
reflects a suitable time horizon for strategic planning, the investment cycle
of private equity and the longer-term view taken by the Investment Managers
and investors; this period is in line with the Company's Key Information
Document. If no alternatives are proposed a resolution to wind up the Company
is required to be put to shareholders before 31 May 2028. However, there is no
expectation that alternative proposals regarding the continuation of the
Company will not be put forward to shareholders, or such proposals will not be
approved by shareholders in 2028.
In line with FRS102, investments are valued at fair value, which for the
Company are quoted bid prices for investments in active markets at the
statement of financial position date and therefore reflect market
participants' views of emerging risks on the investments held. For private
equity valuations, market comparables are used which take into account the
risks affecting similar investments.
As an investment trust, the Company is entitled to beneficial treatment with
regard to chargeable gains. Any change to such taxation arrangements could
affect the Company's viability as an effective investment vehicle. In their
assessment of the prospects for the Company over the next five years, the
Directors have assumed that the Company will continue to adopt the same
investment objective, that the Company's performance will continue to be
attractive to shareholders and that the Company will continue to meet the
requirements so as to retain its status as an investment trust.
The Directors have considered each of the Company's principal risks and
uncertainties detailed on pages 29 to 31. The Directors have also considered a
significant fall in equity markets on the value of the Company's investment
portfolio. The Directors have, furthermore, considered the Company's
projections of income and expenditure as well as any commitments to provide
funding to investee companies. They have noted that the Company's investment
portfolio will continue to comprise a significant proportion of highly liquid
listed equities which can be readily realised and that a substantial
proportion of the Company's operating expenses vary with the value of the
investment portfolio. As stated in the Going Concern statement, the Company is
a closed-end investment trust and there is no requirement to redeem or buy
back shares. A stress test to evaluate the consequences of a 50% reduction in
the market value of the Company's investments over the five year period has
also been evaluated.
Having considered all the Company's resources, strategy, risks and
probabilities, the Board has a reasonable expectation that the Company will
continue to operate and meet its liabilities as they fall due, over the next
five years.
Going concern
The Directors have assessed the principal risks and uncertainties (including
whether there were any emerging risks) and the matters referred to in the
viability statement. The Directors have considered the liquidity of the
Company's portfolio of listed investments, the Company's cash balances and the
forecast income and expenditure flows as well as commitments to provide
further funding to the Company's private equity investee companies; the
Company currently has no borrowings. A substantial proportion of the Company's
expenditure varies with the value of the investment portfolio. In the event
that there is insufficient cash to meet the Company's liabilities, one option
would be to liquidate the listed investments in the portfolio and the
Directors have reviewed the average days to liquidate the listed investments.
By order of the Board
Schroder Investment Management Limited
Company Secretary
10 July 2024
Neil England
Status: Independent
non-executive
Chairman and Chairman of the Nomination Committee
Length of service: appointed as a Director and Chairman in November 2020.
Experience: Neil has held a number of leadership roles in various sectors
including food, FMCG (fast moving consumer goods), distribution, technology
and financial services. Neil was Vice President of Mars Incorporated; Group
Chief Executive at The Albert Fisher Group Plc and Group Commercial Director
at Gallaher Group plc. Neil has been Chairman of a number of companies
including ITE Group plc, BlackRock Emerging Europe Plc and six private
businesses. He is currently the Chairman of Augmentum Fintech plc
(a specialist venture capital investment company) and a non-executive
Director of a private equity backed leisure business.
Neil has extensive international business expertise in public and private
companies varying in size from start-ups to global corporations. He is an
experienced Chairman. Neil remained free from conflict and had sufficient time
available to discharge his duties effectively.
Committee membership: Audit and Risk, Management Engagement, Valuations, and
Nomination (Chairman) Committees.
Current remuneration: £44,500 per annum.
Number of shares held: 55,000
Diana Dyer Bartlett
Status: Senior Independent non-executive Director and Chairman of the Audit
and Risk Committee
Length of service: appointed as a Director in November 2020.
Experience: After qualifying as a chartered accountant with Deloitte Haskins
& Sells, Diana spent five years in investment banking with Hill Samuel.
Since then she has held a number of executive roles including as finance
Director of various venture capital and private equity backed businesses and
listed companies involved in software, financial services, renewable energy
and coal mining. She was also Company Secretary of Tullett Prebon plc and
Collins Stewart Tullett plc. Diana is currently Chairman of Smithson
Investment Trust plc and Audit Committee Chairman of Mid Wynd International
Investment Trust plc.
Diana has a strong financial background and her experience with both listed
and unlisted companies makes her a valuable member of the Board. Diana
remained free from conflict and had sufficient time available to discharge her
duties effectively.
Committee membership: Audit and Risk (Chairman), Management Engagement,
Valuations, and Nomination Committees.
Current remuneration: £39,000 per annum.
Number of shares held: 46,345
Tim Jenkinson
Status: Independent non-executive Director and Chairman of the Management
Engagement Committ and Valuations Committee
Length of service: appointed as a Director in November 2020.
Experience: Tim is Professor of Finance at the Saïd Business School,
University of Oxford, Director of the Oxford Private Equity Institute and one
of the founders of the Private Equity Research Consortium. Tim's research has
won many awards. He is a Professorial Fellow at Keble College, University of
Oxford and a Research Associate of the European Corporate Governance
Institute. Tim is a partner at the European economic consulting firm Oxera. He
has previously held Board positions in PSource Structured Debt Limited, the US
financial services firm DFC Global Corporation and the German utility
comparison firm, Verivox GmbH. Tim was a Specialist Advisor to the Culture,
Media and Sport Select Committee of the UK Parliament.
Tim is an experienced researcher and lecturer, teaching courses on private
equity, entrepreneurial finance, and valuation. Tim remained free from
conflict and had sufficient time available to discharge his duties
effectively.
Committee membership: Audit and Risk, Management Engagement (Chairman),
Valuations (Chairman), and Nomination Committees.
Current remuneration: £39,000 per annum.
Number of shares held: 6,609
Jemma Bruton
Status: Independent non-executive Director
Length of service: appointed as a Director in July 2024.
Experience: Jemma, an economics graduate from Cambridge and an INSEAD MBA,
held a number of senior positions at Goldman Sachs, latterly as Executive
Director, Leveraged Finance. She is currently co-managing director at Salica
Investments Advisory LLP (formerly Hambro Perks Advisory LLP), and leads their
activities on origination, execution and portfolio management. She has
extensive experience in venture investing and financing and works closely with
a number of high growth private companies in the UK and Europe.
Committee membership: Audit and Risk, Management Engagement, Valuations, and
Nomination Committees.
Current remuneration: £33,000 per annum.
Number of shares held: Nil
Justin Ward
Status: Independent non-executive Director
Length of service: appointed as a Director in July 2024.
Experience: Justin is a Chartered Accountant with considerable investment
experience and is a private equity specialist. He led and managed growth
equity and private equity buyout transactions at CVC Capital Partners and as a
partner at Hermes Private Equity and Bridgepoint Development Capital. He is an
active angel investor and has served on the Board of a number of private
companies as a non-executive Director. Justin is currently a non-executive
Director and Chairman of the Investment Committee at The Income & Growth
VCT plc and a non-executive Director and Chairman of the Audit Committee at
Hargreave Hale AIM VCT plc.
Committee membership: Audit and Risk, Management Engagement, Valuations, and
Nomination Committees.
Current remuneration: £33,000 per annum.
Number of shares held: Nil
Directors' Report
The Directors submit their annual report and financial statements of the
Company for the year ended 31 March 2024.
Corporate governance statement
The Company is committed to high standards of corporate governance and has
implemented a framework for corporate governance which it considers to be
appropriate for an investment trust.
The Financial Conduct Authority requires all UK listed companies to disclose
how they have applied the principles and complied with the provisions of the
UK Corporate Governance Code 2018 (the "UK Code") issued by the Financial
Reporting Council ("FRC"). The UK Code is available on the FRC's website:
www.frc.org.uk.
The Company is a member of the Association of Investment Companies ("AIC"),
which has published its own Code of Corporate Governance to recognise the
special circumstances of investment trusts (www.theaic.co.uk) as endorsed by
the FRC. The Board has considered the principles and provisions of the AIC
Code of Corporate Governance 2019 (the "AIC Code"), which addresses those set
out in the UK Code, as well as setting out additional provisions on issues
that are of specific relevance to the Company as an investment trust.
The AIC Code also includes an explanation of how the principles and provisions
set out in the UK Code are adapted to make them relevant for investment
companies.
The Board considers that reporting against the principles and provisions of
the AIC Code provides more relevant information to shareholders.
The Board confirms that the Company has complied throughout the year under
review with the relevant principles and provisions of the AIC Code.
The UK Code includes provisions relating to:
- the role of executive Directors and senior management;
- executive Directors' remuneration;
- the need for an internal audit function;
- the requirement to establish a Remuneration Committee.
All of the Company's day-to-day management and administrative functions are
outsourced to third parties and the Company has no executive Directors,
employees or internal operations. The Company has not therefore reported
further in respect of these provisions.
The Nomination Committee fulfils the function of the Remuneration Committee
and considers any change in the Directors' remuneration policy. As the Company
does not have any executive Directors it was not deemed appropriate to
establish a separate Committee. As permitted under the AIC Code, the Chairman
is a member of the Audit and Risk Committee. An explanation as to why this is
considered appropriate is set out in the Audit and Risk Committee Report on
page 39.
Directors and officers
Chairman
The Chairman is an independent non-executive Director who is responsible for
the leadership of the Board and ensuring its effectiveness in all aspects of
its role. The Chairman's other significant commitments are detailed on page
34. Neil England will be stepping down at the forthcoming AGM and Justin Ward
will be appointed to replace him as Chairman. He has no conflicting
relationships.
Senior Independent Director ("SID")
The SID acts as a sounding board for the Chairman, meets with major
shareholders as appropriate, provides a channel for any shareholder concerns
regarding the Chairman and takes the lead in the annual evaluation of the
Chairman by the independent Directors.
Company Secretary
Schroder Investment Management Limited provides company secretarial support to
the Board and is responsible for assisting the Chairman with Board meetings
and advising the Board with respect to governance. The Company Secretary also
manages the relationship with the Company's service providers, except for the
Manager. Shareholders wishing to lodge questions in advance of the AGM are
invited to do so by writing to the Company Secretary at the address given on
the outside back cover or by email to: amcompanysecretary@schroders.com.
Role and operation of the Board
The Board is the Company's governing body; it sets the Company's strategy and
is collectively responsible to shareholders for its long-term success. The
Board is responsible for appointing and subsequently monitoring the activities
of the Manager and other service providers to ensure that the investment
objective of the Company continues to be met. The Board monitors that the
Manager is adhering to the investment restrictions set by the Board and acting
within the parameters set by it in respect of any gearing. The Business Review
on pages 23 and 24 sets out further detail of how the Board reviews the
Company's strategy, risk management and internal controls and also includes
other information required for the Directors' Report, and is incorporated by
reference.
A formal schedule of matters specifically reserved for decision by the Board
has been defined and a procedure adopted for Directors, in the furtherance of
their duties, to take independent professional advice at the expense of the
Company.
The Chairman ensures that all Directors receive relevant management,
regulatory and financial information in a timely manner and that they are
provided, on a regular basis, with key information on the Company's policies,
regulatory requirements and internal controls. The Board meets at least
quarterly and receives and considers reports regularly from the Manager and
other key advisers and ad hoc reports and information are supplied to the
Board as required.
Matters considered by the Board include: the setting and monitoring of
investment strategy; approval of borrowings and/or cash positions; review of
investment performance; the level of premium or discount of the Company's
shares to NAV per share and promotion of the Company; and services provided by
third parties. Additional meetings of the Board are arranged as required.
The Board has approved a policy on Directors' conflicts of interest. Under
this policy, Directors are required to disclose all actual and potential
conflicts of interest to the Board as they arise for consideration and
approval. The Board may impose restrictions or refuse to authorise such
conflicts if deemed appropriate. No Directors have any connections with the
Manager, shared directorships with other Directors or material interests in
any contract which is significant to the Company's business.
Committees
In order to assist the Board in fulfilling its governance responsibilities, it
has delegated certain functions to Committees. The roles and responsibilities
of these Committees, together with details of work undertaken during the year
under review, are outlined in the following pages.
The reports of the Audit and Risk Committee, Valuations Committee, Management
Engagement Committee and Nomination Committee are incorporated into and form
part of the Directors' Report. Each Committee's effectiveness was assessed,
and judged to be satisfactory, as part of the Board's annual review of the
Board and its Committees (apart from the Valuations Committee which was
established in September 2023).
Key service providers
The Board has adopted an outsourced business model and has appointed the
following key service providers:
Manager
The Company is an Alternative Investment Fund as defined by the AIFM Directive
and has appointed Schroder Unit Trusts Limited ("SUTL") as the Manager in line
with the terms of an Alternative Investment Fund Manager ("AIFM") agreement.
The AIFM agreement, which is governed by the laws of England and Wales, can be
terminated by either party on six months' notice or on immediate notice in the
event of certain breaches or the insolvency of either party. As at the date of
this report no such notice had been given by either party.
SUTL is authorised and regulated by the FCA and provides portfolio management,
risk management, accounting and company secretarial services to the Company
under the AIFM agreement. The Manager also provides general marketing support
for the Company and manages relationships with key investors, in conjunction
with the Chairman, other Board members or the Corporate Broker as appropriate.
The Manager has delegated investment management, accounting, administration
and company secretarial services to another wholly owned subsidiary of
Schroders plc, Schroder Investment Management Limited ("SIM"). The Company
Secretary has an independent reporting line to the Manager and distribution
functions within Schroders. The Manager has in place appropriate professional
indemnity cover.
Private investments are managed by Schroders' specialist private equity team,
Schroders Capital. Schroders Capital has over 20 years' experience
successfully investing in companies, both directly via direct co-investment
and through funds. They manage over £94 billion of assets across several
specialist strategies.
The Schroders Group manages £760.4 billion (as at 31 March 2024) on behalf of
institutional and retail investors, financial institutions and high net worth
clients from around the world, invested in a broad range of asset classes
across equities, fixed income, multi-asset and alternatives.
Fees payable to the Manager
The AIFM is entitled to receive from the Company a management fee calculated
and paid quarterly in arrears, on the last Business Day of March, June,
September and December, at an annual rate of 0.6% per annum of the quarterly
cum income NAV. The AIFM will also be entitled to receive a performance fee,
the sum of which will be equal to 15% of the amount by which the "PE Portfolio
Total Return" at the end of a "Calculation Period" exceeds a hurdle of 10% per
annum.
"PE Portfolio" shall mean the Company's private equity investments and any
public equity investments which, at the time of investment, constituted
private equity investments.
"PE Portfolio Total Return" shall mean realised and unrealised gains and
losses on the PE Portfolio during the Calculation Period, plus any dividends
paid during the Calculation Period, minus any management fee or dealing costs
payable in respect of the PE Portfolio during the Calculation Period,
expressed as a percentage of the time weighted invested capital of the PE
Portfolio.
If a performance fee shall be payable in accordance with the above, it shall
only be paid in full if the "Payment Amount" is greater than the performance
fee.
"Listed Value Change" means the aggregate price increase or decrease
attributable to each PE Portfolio Investment in listed shares that are held at
the end of the relevant Calculation Period.
"Payment Amount" means the sum of: (i) aggregate net realised profits on PE
Portfolio Investments since the start of the relevant Calculation Period; (ii)
plus an amount equal to each IPO Unrealised Gain where the IPO of the relevant
PE Portfolio Investment takes place during the relevant Calculation Period;
(iii) if Listed Value Change is positive in respect of the Calculation Period,
then plus an amount equal to the Listed Value Change or, if Listed Value
Change is negative in respect of that Calculation Period, minus an amount
equal to the "Listed Value Change"; and (iv) plus the aggregate amount of all
dividends or other income received from PE Portfolio investments of the
Company in that Calculation Period. If the NAV has decreased any accrued
performance fee is carried forward and becomes payable in the next period in
which the NAV increases.
"Calculation Period" means each financial period ending on the Company's
accounting reference date, except that: (i) the first Calculation Period shall
be the period commencing on Initial Admission and ending on 30 June 2021; and
(ii) the final Calculation Period shall be the period commencing on the day
after the Company's then accounting reference date and ending on the
winding-up date.
The accrued performance fee shall only be payable by the Company in respect of
a Calculation Period if the Company's net asset value per share has increased
over that Calculation Period.
The Company may make private equity investments through underlying investment
vehicles in respect of which the AIFM or other members of the Schroders group
may receive fees. In such circumstances, the AIFM will not charge any fees to
the Company in respect of such investment. In addition, the AIFM will take all
reasonable steps to ensure that any fee charged by an underlying investment
vehicle does not exceed a fee that is approximately 15% on gains over a hurdle
that is, as far as reasonably practicable, commensurate with the Performance
Hurdle. The AIFM shall also be entitled to a company secretarial and
administrative fee from the Company, equal to the lower of: (i) 0.2% per annum
of the quarterly cum income Net Asset Value; and (ii) £250,000 per annum,
paid quarterly in arrears on the last Business Day of March, June, September
and December.
Details of all amounts payable to the Manager are set out in note 18 to the
accounts on page 69.
Depositary
HSBC Bank plc, which is authorised by the Prudential Regulation Authority and
regulated by the Financial Conduct Authority ('FCA') and the Prudential
Regulation Authority, carries out certain duties of a Depositary specified in
the AIFM Directive including, in relation to the Company:
- safekeeping of the assets of the Company which are entrusted to it;
- cash monitoring and verifying the Company's cash flows; and
- oversight of the Company and the Manager.
The Company, the Manager and the Depositary may terminate the depositary
agreement at any time by giving 90 days' notice in writing. The Depositary may
only be removed from office when a new Depositary is appointed by the Company.
Registrar
Equiniti Limited ("Equiniti") has been appointed as the Company's Registrar.
Equiniti's services to the Company include share register maintenance
(including the issuance, transfer and cancellation of shares as necessary),
acting as agent for the payment of any dividends, management of company
meetings (including the registering of proxy votes and scrutineer services as
necessary), handling shareholder queries and correspondence and processing
corporate actions.
Share capital and substantial share interests
As at 31 March 2024, the Company had 73,900,000 ordinary shares of 1p in
issue. 1,100,000 shares were held in treasury. Accordingly, the total number
of voting rights in the Company at 31 March 2024 was 73,900,000. Details of
changes to the Company's share capital during the year are given in note 13 to
the accounts on page 67.
The Board will be seeking approval from shareholders to buy-back shares,
reissue shares held in treasury and issue new shares, as more particularly
described in the AGM notice and Annual General Meeting - Recommendations
section.
All shares in issue rank equally with respect to voting, dividends and any
distribution on winding up.
The Company has received notifications in accordance with the FCA's Disclosure
Guidance and Transparency Rule 5.1.2R of the below interests in 3% or more of
the voting rights attaching to the Company's issued share capital.
The Company is reliant on investors to comply with these regulations, and
certain investors may be exempted from providing these. As such, this should
not be relied on as an exhaustive list of shareholders holding above 3% of the
Company's voting rights.
%
As at of total
31 March voting
2024 rights
Schroders plc 21,151,994 28.62%
East Riding Of Yorkshire Council 15,000,000 20.30%
Following the year end and at the date of this report, there have been no
changes.
Revenue, final dividend and dividend policy
The net revenue loss for the year, after finance costs and taxation, was
£722,000, equivalent to a revenue loss per ordinary share of 0.98 pence.
The Company's intention is to look for overall return rather than seeking any
particular level of dividend income. Subject to the requirement to make
distributions to maintain investment trust status, any dividends and other
distributions paid by the Company will be made at the discretion of the Board.
The payment of any such dividends or other distributions (if any) will depend
on the Company's ability to generate realised profits and to acquire
investments which pay dividends, its financial condition, its current and
anticipated cash needs, its costs and net proceeds on sale of its investments,
legal and regulatory restrictions and such other factors as the Board may deem
relevant from time to time. As such, investors should have no expectation that
dividends or distributions will be paid at all.
The Company has adopted a policy of allocating all operating costs to revenue
reserves rather than apportioning any to the capital reserve. This policy is
expected to result in a revenue loss being reported in most accounting
periods.
The Directors do not propose the payment of a dividend in respect of the year
ended 31 March 2024 (2023: nil).
Provision of information to the Auditor
The Directors at the date of approval of this report confirm that, so far as
each of them is aware, there is no relevant audit information of which the
Company's auditor is unaware; and each Director has taken all the steps that
he or she ought to have taken as a Director in order to make himself or
herself aware of any relevant audit information and to establish that the
Company's auditor is aware of that information.
Directors' attendance at meetings
The number of scheduled meetings of the Board and its Committees held during
the year and the attendance of individual Directors is shown below.
Audit Management
and Risk Engagement Nomination Valuation
Director Board Committee Committee Committee Committee
Neil England 4/4 3/3 1/1 2/2 2/2
Diana Dyer Bartlett 4/4 3/3 1/1 2/2 2/2
Tim Jenkinson 4/4 3/3 1/1 2/2 2/2
Directors' and officers' liability insurance and indemnities
Directors' and officers' liability insurance cover was in place for the
Directors throughout the year. The Company's Articles of Association provide,
subject to the provisions of UK legislation, an indemnity for Directors in
respect of costs which they may incur relating to the defence of any
proceedings brought against them arising out of their positions as Directors,
in which they are acquitted or judgment is given in their favour by the court.
This indemnity is a qualifying third party indemnity policy and was in place
throughout the year under review for each Director and to the date of this
report.
Company status
The Articles of Association require the Directors to put forward, at a general
meeting of the Company to be held in the year 2028 but in any event no later
than 31 May 2028, a winding-up resolution to place the Company into voluntary
liquidation, unless alternative proposals have been approved by shareholders.
Post balance sheet event
In June 2024 the Company announced the completion of a new private equity
investment in HeadFirst, an international HR tech service provider. The
invested capital will be utilised to finance HeadFirst's acquisition of
Impellam Group, a managed services and specialist staffing provider.
By order of the Board
Schroder Investment Management Limited
Company Secretary
10 July 2024
Audit and Risk Committee Report
The responsibilities and work carried out by the Audit and Risk Committee
during the year are set out below. The duties, which include monitoring the
integrity of the Company's financial reporting and internal controls, may be
found in the terms of reference which are set out on the Company's webpages:
https://www.schroders.com/sbot.
Due to the size of the Board, all Directors are members of the Committee.
Diana Dyer Bartlett is the Chairman of the Committee. The Board has satisfied
itself that at least one of the Committee's members has recent and relevant
financial experience and that the Committee as a whole has competence relevant
to the sector in which the Company operates. The AIC Code permits the Chairman
of the Board to be a member of the Audit Committee of an investment trust. As
the Board is small, having consisted, until July 2024, of only three members
and recognising Neil England's significant experience, it is considered
appropriate for the Chairman of the Board, who was independent on appointment,
to be a member of the Committee.
Approach
Risk management and internal controls Financial reports and valuation Audit
Principal and emerging risks and uncertainties Report and financial statements Audit results
To establish a process for identifying, assessing, managing and monitoring the To monitor the integrity of the report and financial statements of the Company To discuss any matters arising from the audit and recommendations made by the
principal and emerging risks of the Company and to explain how these are and any formal announcements relating to the Company's financial performance auditor.
managed or mitigated. and valuation.
The Committee is responsible for reviewing the adequacy and effectiveness of
the Company's internal controls and the whistleblowing procedures operated by
the AIFM and other services providers.
Going concern and viability Auditor appointment, independence and performance
To review the position and make recommendations to the Board in relation to To make recommendations to the Board, in relation to the appointment,
whether it considers it appropriate to adopt the going concern basis of re-appointment, effectiveness, and any non-audit services by the auditor and
accounting in preparing its annual and half-yearly report and financial removal of the external auditor. To review their independence, and to
statements. recommend to the Board their remuneration. To review the audit plan and
engagement letter.
The Committee is also responsible for reviewing the disclosures made by the
Company in the viability statement.
ä
The Committee identified no significant internal control issues during the
Committee's review of the Company's principal risks and uncertainties. The
below table sets out how the Committee discharged its duties during the year
and up until the approval of this report. The Committee met three times during
the year. Further details on attendance can be found on page 38. An evaluation
of the Committee's effectiveness and review of its terms of reference was
performed in March 2024 and the next will be completed as part of the Board
and Committee evaluation process in the next reporting year.
Application during the year
Risk management and internal controls Financial reports Audit
Service provider controls Valuation and existence of holdings Meetings with the auditor
The operational controls maintained by the Manager, Administrator, Depositary Considered reports from the Manager and Depository, including quarterly The auditor attended meetings to present their audit plan and the findings of
and Registrar were reviewed and included consideration of: reports and one at the year end. The Committee has reviewed the Valuation the audit.
methodologies used for both public and private investments which supports the
- a summary, prepared by the AIFM, following review, of the internal work undertaken by the Valuations Committee to review and report on the The Committee met the auditor without representatives of the Manager present.
controls reports prepared bi-annually by HSBC in respect of its European revaluations undertaken on the unquoted holdings during the period and
Traditional Fund Services, Global Custody Services and Information Technology challenge the considerations and key assumptions made where appropriate, to
Services operations; ensure that the valuations are reliable.
- a summary, prepared by the AIFM following review, of the internal The Committee continued to consider the IPEV guidelines and their implications
controls reports prepared annually by SIM; and for the Company's valuations.
- the Assurance Report on internal controls of Equiniti Share
Registration Services.
Internal controls and risk management Recognition of investment income Effectiveness of the independent audit process and auditor performance
Consideration of internal controls at a briefing session which assessed the Reviewed consideration of dividends received against forecast and the Evaluated the effectiveness of the independent audit firm and process prior to
internal controls of certain key service providers including the Company's allocation of special dividends. making a recommendation that it should be re-appointed at the forthcoming AGM.
Depositary and Custodian, HSBC, the Company's Registrar, Equiniti, and
Evaluated the auditor's performance against agreed criteria including:
Schroders Group Internal Audit. The Committee took steps to gain an understanding of the processes to record qualification; knowledge, expertise and resources; independence policies;
investment income so that dividends paid by any investee companies held at any effectiveness of audit planning; adherence to auditing standards; and overall
time during the year, had been recorded and, where appropriate, collected. competence was considered, alongside feedback from the Manager on the audit
process. Professional scepticism of the auditor was questioned and the
Committee was satisfied with the auditor's replies.
Compliance with the investment trust qualifying rules in S1158 of the Calculation of the investment management fee and performance fee Auditor independence
Corporation Tax Act 2010
Confirmed that the performance and management fees have been calculated in Ernst & Young LLP has provided audit services to the Company since it was
Consideration of the Manager's report confirming compliance. accordance with the AIFM agreement. Consideration of methodology used to appointed on 19 May 2021. This is the fourth period that Ernst & Young LLP
calculate the fees, matched against the criteria set out in the AIFM will be undertaking the Company's audit.
agreement.
The auditors are required to rotate the senior statutory auditor every five
years. This is the fourth period that the senior statutory auditor, Caroline
Mercer, has conducted the audit of the Company's report and financial
statements. The auditors were appointed due to their experience.
There are no contractual obligations restricting the choice of external
auditors.
ä
Application during the year
Risk management and internal controls Financial reports Audit
Overall accuracy of the report and financial statements Audit results
Consideration of the draft report and financial statements and the letter from Met with and reviewed a comprehensive report from the auditor which detailed
the Manager in support of the letter of representation to the auditor. the results of the audit, compliance with regulatory requirements, safeguards
that have been established, and on their own internal quality control
procedures.
Principal risks Fair, balanced and understandable Provision of non-audit services by the auditor
Reviewed the principal and emerging risks together with key risk mitigations. Reviewed the report and financial statements to advise the Board whether it The Committee has reviewed the FRC's Guidance on Audit Committees and has
The Committee considered the Company's risk appetite statement. was fair, balanced and understandable. formulated a policy on the provision of non-audit services by the Company's
auditor. The Committee has determined that the Company's appointed auditor
Reviewed whether performance measures were reflective of the business, whether will not be considered for the provision of certain non-audit services, such
there was adequate commentary on the Company's strengths and weaknesses and as accounting and preparation of the report and financial statements, internal
that the report and financial statements, were taken as a whole and consistent audit and custody. The auditor may, if required, provide other non-audit
with the Board's view of the operation of the Company. services which will be judged on a case-by-case basis however, they did not do
so during the reporting period.
The Committee was satisfied that this did not affect the independence or
objectivity of the auditor.
ä
Recommendations made to, and approved by, the Board:
The Committee recommended that the Board approve the half year report and the
annual report and financial statements. The Committee recommended that the
going concern presumption be adopted in the report and financial statements
and the explanations set out in the viability statement.
As a result of the work performed, the Committee has concluded that the report
for the year ended 31 March 2024, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to
assess the Company's position, performance, business model and strategy, and
has reported on these findings to the Board. The Board's conclusions in this
respect are set out in the Statement of Directors' Responsibilities on page
49.
Having reviewed the performance of the auditors as described above, the
Committee considered it appropriate to recommend the firm's re-appointment.
Resolutions to re-appoint Ernst & Young LLP as auditor to the Company, and
to authorise the Directors to determine their remuneration will be proposed at
the AGM.
The Committee considered and reviewed the Company's compliance with the
investment trust qualifying rules in s1158 of the Corporation Tax Act 2010
noting that there was no requirement to pay a dividend under this section.
Diana Dyer Bartlett
Audit and Risk Committee Chairman
10 July 2024
Management Engagement Committee Report
The Management Engagement Committee is responsible for: (1) the monitoring and
oversight of the Manager's performance and fees, and confirming the Manager's
ongoing suitability, and (2) reviewing and assessing the Company's other
service providers, including reviewing their fees. All Directors are members
of the Committee. Tim Jenkinson is the Chairman of the Committee. Its terms of
reference are available on the Company's webpage:
https://www.schroders.com/sbot. The Committee held one scheduled meeting
during the year.
Approach
Oversight of the Manager Oversight of the Manager
The Committee: The Committee reviews the performance of the following service providers on at
least an annual basis:
· reviews the Manager's performance, over the short and long term.
· Depositary and Custodian;
· considers the reporting it has received from the Manager
throughout the year and the reporting from the Manager to the shareholders. · Corporate Broker; and
· assesses management fees including the performance fee on an · Registrar.
absolute and relative basis, receiving input from the Company's Broker,
including peer group and industry figures, as well as the structure of the The Committee receives a report from the Company Secretary on ancillary
fees. service providers, and considers any recommendations.
· reviews the appropriateness of the Manager's contract, including The Committee reviews all key service providers other than the external
terms such as notice period. auditor, whose performance is reviewed by the Audit and Risk Committee.
· assesses whether the Company receives appropriate administrative,
accounting, company secretarial and marketing support from the Manager.
ä
Application during the year
The Committee undertook a detailed review of the Manager's performance and The Committee conducted its annual review of service providers who were deemed
agreed that it has the appropriate depth and quality of resource to deliver satisfactory. A detailed review of the Depositary and Custodian took place.
superior returns over the longer term.
The Committee undertook an evaluation of the Manager, Registrar, and
The Committee also reviewed the terms of the AIFM agreement, including the fee Depositary and Custodian's internal controls.
structure.
The Committee reviewed the other services provided by the Manager and agreed
they were satisfactory.
ä
Recommendations made to, and approved by, the Board:
• That the ongoing appointment of the Manager on the terms of the AIFM
agreement, including the fee, was in the best interests of shareholders as a
whole.
• That the Company's service providers' performance and fees remained
satisfactory.
Nomination Committee Report
The Nomination Committee is responsible for: (1) the recruitment, selection
and induction of Directors; (2) their assessment during their tenure; (3) the
Board's succession planning; and (4) Directors' fee. All Directors are members
of the Committee. Neil England is the Chairman of the Committee. Its terms of
reference are available on the Company's webpage:
https://www.schroders.com/sbot. The Committee held two scheduled meetings
during the year.
Oversight of Directors
Approach
Selection and induction Board evaluation and Directors' fees Succession
· Committee prepares a job specification for each role, and an · Committee assesses each Director annually, and considers if an · The Board's succession policy is that Directors' tenure will be
independent recruitment firm is appointed. For the Chairman of Committees, the external evaluation is appropriate. for no longer than nine years, except in exceptional circumstances, and that
Committee considers current Board members too.
each Director will be subject to annual re-election at the AGM.
· Evaluation focuses on whether each Director continues to
· Job specification outlines the knowledge, professional skills, demonstrate commitment to their role and provides a valuable contribution to · Committee reviews the Board's current and future needs at least
personal qualities and experience requirements. the Board during the year, taking into account time commitment, independence, annually. Should any need be identified the Committee will initiate the
conflicts and training needs. selection process.
· Potential candidates assessed against the Company's diversity
policy. · Following the evaluation, the Committee provides a recommendation · Committee oversees the handover process for retiring Directors.
to shareholders with respect to the annual re-election of Directors at the
· Committee discusses the long list, invites a number of candidates AGM.
for interview and makes a recommendation to the Board.
· All Directors retire at the AGM and their re-election is subject
· Committee reviews the induction and training of new Directors. to shareholder approval.
· Committee reviews Directors' fees, taking into account
comparative data and reports to shareholders.
· Any proposed changes to the remuneration policy for Directors
discussed and reported to shareholders.
ä
Approach
Selection and induction Board evaluation and Directors' fees Succession
· Following a rigorous selection process using an independent The Committee assesses each Director annually, and considers if an external · In anticipation of Neil England's retirement at the forthcoming
external recruitment agency, Nurole, Justin Ward and Jemma Bruton were evaluation is appropriate. AGM, the Committee discussed appointing a suitable replacement having regard
appointed to the Board with effect from 1 July 2024. Nurole has no connection
to the current Board's composition, diversity and efficacy. Following
with the Company or any of the Directors. · Evaluation focuses on whether each Director continues to consideration, it was agreed that Justin Ward would be a suitable candidate
demonstrate commitment to their role and provides a valuable contribution to to act as Chairman upon Neil's retirement.
· The Committee noted that, as part of the appointment process, the the Board during the reporting period, taking into account time commitment,
new Directors would engage in an induction programme with the Manager and its independence, conflicts and training needs. · Following consideration the Board agreed that it was required to
various operating functions as well as other key service providers.
strengthen numbers by increasing its number back to four Directors.
· Following the evaluation, the Committee provides a recommendation
· Justin Ward and Jemma Bruton will stand for election as Directors to shareholders with respect to the annual re-election of Directors at the · The Committee believes it is important for the Board to have the
at the forthcoming AGM, as set out in resolutions five and six of the Notice AGM. appropriate skills and diversity and will continue to review composition and
of Annual General Meeting.
succession plans with these in mind.
· All Directors retire at the AGM and their re-election is subject
· Other independent external recruitment agencies were also to shareholder approval. · Jemma's appointment will aid in strengthening the Board and will
approached to provide proposals.
enable the Board to meet its gender diversity target.
· Committee reviews Directors' fees, taking into account
comparative data and reports to shareholders.
· Any proposed changes to the remuneration policy for Directors
discussed and reported to shareholders.
ä
Recommendations made to, and approved by, the Board:
• That all Directors continue to demonstrate commitment to their roles,
provide a valuable contribution to the deliberations of the Board,
remuneration of the Directors remains appropriate and Directors remain free
from conflicts with the Company and its Directors contribute to the long-term
sustainable success of the Company, and should all be recommended for election
or re-election by shareholders at the AGM. Neil England will step down at the
forthcoming AGM and will not be standing for re-election.
• That Directors' fees be increased by 5% per annum (rounded to the
nearest £500).
• The Director's Remuneration Report and Remuneration Policy be put to
shareholders as ordinary resolutions at the forthcoming AGM.
• That Nurole be engaged to assist in the search for the new
non-executive Director positions.
• That in order to strengthen the Board numbers to four and in light of
Neil England's imminent departure as Chairman, that Justin Ward and Jemma
Bruton be appointed as a non-executive Directors with effect from 1 July 2024
and that their election as non-executive Directors be proposed, and
recommended to shareholders for approval at the forthcoming AGM.
Valuations Committee Report
During the financial year the Board decided to form a Valuations Committee to
take on some of the valuation responsibilities previously undertaken by the
Audit and Risk Committee. This decision recognised the importance of the
Board's oversight role on valuations and the need for shareholders to have
confidence in the outcomes determined by the Committee. The Committee was
established in September 2023 and held two meetings during the remaining
period of the year.
The Valuations Committee is responsible for reviewing, and where necessary,
challenging the valuations carried out by out by the specialist in-house
valuations team. This team operates independently to the Investment Management
team. Tim Jenkinson is the Chairman and the other Directors are members of the
Committee. Its terms of reference are available on the Company's webpage:
https://www.schroders.com/sbot.
Approach
Valuation and existence of holdings
The Committee: · formulates valuation policies for investments of the Company,
considers whether independent valuation of the portfolio is required and
· meets at least four times a year to consider the private equity approves the valuations for both public and private investments; and
quarterly NAV revaluations. The Committee also considers the public equity
holdings (where necessary) to ensure complete oversight of the entire · considered reports from the Manager at each meeting.
portfolio;
ä
Application for the year
The Committee met with the Manager's valuation team at each meeting and The Committee challenged the multiples that had been used and reviewed the
reviewed the basis on which each investment had been valued. usage of market comparables.
The Committee reviewed and recommended valuation inputs for quarterly NAV The Committee discussed the ongoing progress of investee companies to
calculations. understand how this would have an effect on valuations.
ä
Recommendations made to, and approved by, the Board:
The Committee recommended that the Board approve the quarterly and half year
valuations. Post the period end the Committee also provided recommendations in
respect of the year end valuation to support the annual report and financial
statements.
Directors' Remuneration Report
Introduction
The remuneration policy below is currently in force and is subject to
a binding vote every three years. The next vote will take place at the
forthcoming AGM and the current policy provisions will apply until that date.
An ordinary resolution to approve the Directors' remuneration policy will be
put to shareholders at the AGM (no changes are proposed). The Directors'
report on remuneration is subject to an annual advisory vote. An ordinary
resolution to approve this report will be put to shareholders at the
forthcoming AGM.
At the AGM held on 30 November 2021, 99.99% of the votes cast (including votes
cast at the Chairman's discretion) in respect of approval of the Directors'
Remuneration Policy were in favour, while 0.01% were against and 10,000 votes
were withheld.
At the AGM held on 27 September 2023, 99.71% of the votes cast (including
votes at the Chairman's discretion) in respect of approval of the Director's
Remuneration Report were in favour, while 0.29% were against.
Directors' remuneration policy
It is the Board's policy to determine the level of Directors' remuneration
having regard to amounts payable to non-executive Directors in the industry
generally, the role that individual Directors fulfil in respect of Board and
Committee responsibilities, and time committed to the Company's affairs,
taking into account the aggregate limit of fees set out in the Company's
Articles of Association. This aggregate level of Directors' fees is currently
set at £500,000 per financial year and any increase in this level requires
approval by the Board and the Company's shareholders.
The Chairman of the Board, the Chair of the Audit and Risk Committee and the
Chairman of the Valuations Committee each receive fees to reflect their
additional responsibilities. Directors' fees are set at a level to recruit and
retain individuals of sufficient calibre, with the level of knowledge,
experience and expertise necessary, and to promote the success of the Company
in reaching its short and long-term strategic objectives.
The Board and its Committees comprise non-executive Directors. No Director
past or present has an entitlement to a pension from the Company and the
Company has not, and does not intend, to operate a share scheme for Directors
or to award any share options or long-term performance incentives to any
Director. No Director has a service contract with the Company; however,
Directors have a letter of appointment. Directors do not receive exit payments
and are not provided with any compensation for loss of office. No other
payments are made to Directors other than the reimbursement of reasonable
out-of-pocket expenses incurred in attending to the Company's business.
Any Director who performs services which in the opinion of the Directors are
outside the scope of the ordinary duties of a Director, may be paid additional
remuneration to be determined by the Directors, subject to the previously
mentioned fee cap.
Implementation of policy
The terms of Directors' letters of appointment are available for inspection at
the Company's registered office address during normal business hours and
during the AGM at the location of such meeting.
The Board did not seek the views of shareholders in setting this remuneration
policy. Any comments on the policy received from shareholders would be
considered on a case by case basis.
As the Company does not have any employees, no employee pay and employment
conditions were taken into account when setting this remuneration policy and
no employees were consulted in its construction.
Directors' fees are reviewed annually and take into account research from
third parties on the fee levels of Directors of peer group companies,
inflation, as well as industry norms and factors affecting the time commitment
expected of the Directors. New Directors are subject to the provisions set out
in this remuneration policy.
Directors' report on remuneration
This report sets out how the remuneration policy was implemented during the
year ended 31 March 2024.
Fees paid to Directors
The following amounts were paid by the Company to Directors for their services
in respect of the year ended 31 March 2024. Directors' remuneration is all
fixed; they do not receive any variable remuneration.
Fees Taxable benefits(1) Total
Year ended Year ended Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March 31 March 31 March
2024 2023 2024 2023 2024 2023
Directors £ £ £ £ £ £
Neil England (Chairman) 43,250 42,003 - - 43,250 42,003
Diana Dyer Bartlett 37,875 36,753 - - 37,875 36,753
Tim Jenkinson 35,250 31,502 - 44 35,250 31,546
Christopher Keljik(2) - 28,827 - - - 28,827
116,375 139,085 - 44 116,375 139,129
(1)Comprise amounts reimbursed for expenses incurred in carrying out business
for the Company, and which have been grossed up to include PAYE and NI
contributions.
(2)Resigned from the Board on 28 February 2023.
The information in the above table has been audited.
Consideration of matters relating to Directors' remuneration
The determination of the Directors' fees is considered by the Nomination
Committee who make recommendations to the Board and during the period
recommended a 5% increase (rounded to the nearest £500) to commence from 1
October 2023.
Directors' remuneration was last reviewed by the Nomination Committee and the
Board in September 2023. The members of the Board at the time that
remuneration levels were considered are set out on page 47. Although no
external advice was sought in considering the levels of Directors' fees,
information on fees paid to Directors of other investment companies managed by
Schroders and peer group companies provided by the Manager and Corporate
Broker was taken into consideration as was independent third party research.
Change in annual remuneration payable
Change in fee
Change in annual Change in annual over the
fee over the year fee over the year nine month period
ended 31 March ended 31 March ended 31 March
2024 2023 2022
Directors % % %(1)
Neil England (Chairman) 3.0 2.5 2.6
Diana Dyer Bartlett 3.1 3.9 3.4
Tim Jenkinson 11.7 4.6 0.3
Christopher Keljik(2) - - (1.8)
(1)Calculated based on annualised fees for the nine months ended 31 March 2022
and seven months ended 30 June 2021.
(2)Resigned from the Board on 28 February 2023.
The table below compares the remuneration payable to Directors, to
distributions made to shareholders during the year under review and the prior
period. In considering these figures, shareholders should take into account
the Company's investment objective.
Distributions to shareholders (share buy-backs) vs Directors' remuneration
Year ended Year ended
31 March 31 March
2024 2023
£'000 £'000 % Change
Remuneration payable to Directors 116 139 (11.5)
Distributions paid to shareholders (share buy-backs) - 808 (100.0)
Performance graph since 1 December 2020 (launch date)
Share price return versus FTSE 250 ex-Investment Trusts Index(1) total return
for the period from launch date on 1 December 2020, to 31 March 2024.
( )
(1)Source: Morningstar. Rebased to 100 at 1 December 2020. The FTSE 250 ex
Investment Trusts Index has been selected as an appropriate comparison as it
best represents the companies that the Manager uses to select investment
opportunities. Companies within this index represent the growth
characteristics that the Manager seeks to meet the long term investment
objective of delivering returns to shareholders.
Directors' share interests
The Company's Articles of Association do not require Directors to own shares
in the Company. The interests of Directors, who held office at the end of the
year, including those of connected persons, at the beginning and end of the
financial year under review, are set out below.
At 31 March At 31 March
2024(1) 2023(1)
Neil England 55,000 55,000
Diana Dyer Bartlett 46,345 46,345
Tim Jenkinson 6,609 6,609
Christopher Keljik(2) - 172,601
(1)Ordinary shares of 1p each.
(2)Resigned from the Board on 28 February 2023.
The information in the above table has been audited.
On behalf of the Board
Neil England
Chairman
10 July 2024
Statement of Directors' Responsibilities
Directors' Responsibilities
The Directors are responsible for preparing the annual report and financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors have prepared the report and
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards, comprising Financial
Reporting Standard (FRS) 102 "The Financial Reporting Standard applicable in
the UK and Republic of Ireland" and applicable law). Under company law, the
Directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the Company and
of the return or loss of the Company for that period. In preparing these
financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and accounting estimates that are reasonable and
prudent;
- state whether applicable UK Accounting Standards, comprising FRS 102,
have been followed, subject to any material departures disclosed and explained
in the financial statements;
- notify the Company's shareholders in writing about the use of
disclosure exemptions in FRS 102, used in the preparation of the financial
statements; and
- prepare the financial statements on a going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements and the Directors'
Remuneration Report comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
The Manager is responsible for the maintenance and integrity of the webpage
dedicated to the Company. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors' Statement
Each of the Directors, whose names and functions are listed on pages 34 and
35, confirm that to the best of their knowledge:
- the financial statements, which have been prepared in accordance with
United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law), give a true and fair view of the
assets, liabilities, financial position and net return of the Company;
- the Strategic Report contained in the report and financial statements
includes a fair review of the development and performance of the business and
the position of the Company, together with a description of the principal
risks and uncertainties that it faces; and
- the annual report and financial statements, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
On behalf of the Board
Neil England
Chairman
10 July 2024
Independent Auditors Report
Opinion
We have audited the financial statements of Schroder British Opportunities
Trust plc for the year ended 31 March 2024 which comprise the Statement of
Comprehensive Income, the Statement of Changes in Equity, the Statement of
Financial Position, the Cash Flow Statement and the related notes 1 to 24
including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable
law and United Kingdom Accounting Standards including FRS 102 "The Financial
Reporting Standard applicable in the UK and Republic of Ireland" (United
Kingdom Generally Accepted Accounting Practice).
In our opinion, the financial statements:
• give a true and fair view of the Company's affairs as at 31 March
2024 and of its profit for the year then ended;
• have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion
Independence
We are independent of the Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK,
including the FRC's Ethical Standard as applied to public interest entities,
and we have fulfilled our other ethical responsibilities in accordance with
these requirements.
The non-audit services prohibited by the FRC's Ethical Standard were not
provided to the Company and we remain independent of Company in conducting the
audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the Company's ability to continue to adopt the going concern
basis of accounting included:
· Confirming our understanding of the Company's going concern
assessment process and engaging with the Directors and the Company Secretary
to determine if all key factors that we have become aware of during our audit
were considered in their assessment.
· Inspecting the directors' assessment of going concern, including the
revenue forecast, for the period to 31 July 2025 which is at least twelve
months from the date the financial statements were authorised for issue.
· Reviewing the factors and assumptions, including the impact of the
current economic environment and other significant events that could give risk
to market volatility, as applied to the revenue forecast and the liquidity
assessment of the investments. We considered the appropriateness of the
methods used to calculate the revenue forecast and the liquidity assessment
and determined, through testing of the methodology and calculations, that the
methods, inputs and assumptions utilised were appropriate to be able to make
an assessment for the Company.
· Considering the mitigating factors included in the revenue forecasts
that are within the control of the Company. We reviewed the Company's
assessment of the liquidity of investments held and evaluated the Company's
ability to sell those investments in order to cover working capital
requirements as a result of the Company operating at a revenue loss.
· Considering the commitments that have been made with respect to the
purchase of unquoted investments to ensure that these have been appropriately
taken account of when preparing the forecast.
· Reviewing the Company's going concern disclosures included in the
annual report in order to assess that the disclosures were appropriate and in
conformity with the reporting standards.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Company's ability to continue
as a going concern for a period to 31 July 2025, which is at least 12 months
from when the financial statements are authorised for issue.
In relation to the Company' reporting on how they have applied the UK
Corporate Governance Code, we have nothing material to add or draw attention
to in relation to the directors' statement in the financial statements about
whether the directors considered it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
However, because not all future events or conditions can be predicted, this
statement is not a guarantee as to the Company's ability to continue as a
going concern.
Overview of our audit approach
Key audit matters · Risk of incorrect valuation or ownership of the investment
portfolio
· Risk of incorrect calculation of the performance fee
Materiality · Overall materiality of £0.81m (2023: £0.79m) which represents
1% (2023:1%) of shareholders' funds.
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation
of performance materiality determine our audit scope for the Company. This
enables us to form an opinion on the financial statements. We take into
account size, risk profile, the organisation of the company and effectiveness
of controls, the potential impact of climate change and changes in the
business environment when assessing the level of work to be performed.
Climate change
There has been increasing interest from stakeholders as to how climate change
will impact Companies. The Company has determined that the impact from climate
change could affect the Company's investment valuations and overall investment
process. This is explained in the principal risks and uncertainties section on
page 30 which forms part of the "Other information," rather than the audited
financial statements. Our procedures on these unaudited disclosures therefore
consisted solely of considering whether they are materially inconsistent with
the financial statements or our knowledge obtained in the course of the audit
or otherwise appear to be materially misstated.
Our audit effort in considering climate change was focused on the adequacy of
the Company's disclosures in the financial statements as set out in Note 1c
and conclusion that there was no further impact of climate change to be taken
into account. The quoted investments are valued based on market pricing as
required by FRS 102 and the unquoted investments are valued using a variety of
techniques consistent with the recommendations set out in the International
Private Equity and Venture Capital (IPEV) guidelines which also reflect each
investment's exposure to climate change risk. We also challenged the
directors' considerations of climate change in their assessment of viability
and associated disclosures.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in our opinion thereon, and we do not
provide a separate opinion on these matters.
Risk Our response to the risk Key observations communicated to the Audit Committee
Incorrect valuation or ownership of the investment portfolio (as described on We have performed the following procedures: The results of our procedures identified no material misstatements in relation
page 40 in the Audit and Risk Committee Report and as per the accounting
to the risk of incorrect valuation or ownership of the investment portfolio.
policy set out on page 62) We obtained an understanding of the Portfolio Manager's and the
Administrator's processes and controls surrounding legal title and valuation
The value of the investment portfolio at 31 March 2024 was £83.09m (2023: of quoted and unquoted investments by performing walkthrough procedures.
£74.13m) consisting of quoted investments with an aggregate value of £30.23m
(2023: £26.17m) and unquoted investments with an aggregate value of £52.86m For all quoted investments in the portfolio, we compared the market prices and
(2023: £47.96m). exchange rates applied to an independent pricing vendor and recalculated the
investment valuations as at the year end.
The valuation of the assets held in the investment portfolio is the key driver
of the Company's net asset value and total return. Incorrect investment We confirmed with the Administrator that there were no investments with stale
pricing, or a failure to maintain proper legal title to the investments held prices for the quoted investments as at the year end and therefore no stale
by the Company could have a significant impact on the portfolio valuation and pricing report produced. We obtained the market prices, from an independent
the return generated for shareholders. pricing vendor, for 5 business days pre and post the year end date and
calculated the day-on-day movement and confirmed there are no stale prices.
The fair value of quoted investments is determined by reference to bid prices
which are at close of business on the reporting date. We compared the Company's quoted and unquoted investment holdings at 31 March
2024 to independent confirmations received directly from the Company's
Unquoted investments are valued at fair value by the Directors following a Custodian and Depositary.
detailed review and appropriate challenge of the valuations proposed by
Schroder Capital (the "Portfolio Manager"). The unquoted investment policy We obtained confirmations directly from independent third parties with respect
applies methodologies consistent with the International Private Equity and to the unquoted investments held by the Company.
Venture Capital Valuation guidelines ('IPEV').
We engaged our team of valuation specialists to review the valuations of all
The valuation of the unquoted investments, and the resultant impact on the unquoted investments which included completing the following procedures:
unrealised gains/(losses), is the area requiring the most significant
judgement and estimation in the preparation of the financial statements and · Reviewing the valuation papers for the year ended 31 March 2024
has been classified as an area of fraud risk as highlighted below on page 57. to gain an understanding of, and comment on, the valuation methodologies and
assumptions used;
· Assessing whether the valuations have been performed in line with
general valuation approaches as set out in UK GAAP and the International
Private Equity and Venture capital ('IPEV') guidelines;
· Assessing the appropriateness of data inputs and challenging the
assumptions used to support the valuations;
· Assessing other facts and circumstances, such as market movements
and comparative company information, that have an impact on the fair market
value of the investments; and
· Performing comparative calculations to assess whether the
valuation conclusions are reasonable and within an independently calculated
acceptable valuation range.
We recalculated the unrealised gains/losses on unquoted investments as at the
year-end using the book-cost reconciliation and reviewed the fair value
hierarchy disclosure for consistency with our understanding of the investments
held.
For purchases of unquoted investments made during the period, we obtained
supporting documents from the Portfolio Manager and agreed these to the
purchase cost per the accounting records and to bank statements.
We corroborated a sample of inputs used in the valuation to underlying
supporting information.
Where relevant, we obtained the most recent reporting produced by the general
partners and compared these to the Company's valuations as at 31 March 2024
to ensure consistencies in the assumptions or data inputs used.
Incorrect calculation of the performance fee (as described on page 40 in the We have performed the following procedures: The results of our procedures identified no material misstatements in relation
Audit and Risk Committee Report and as per the accounting policy set out on
to the risk of incorrect calculation of the performance fee.
page 63) We obtained an understanding of the Portfolio Manager's and the
Administrator's processes surrounding the calculation of performance fees by
The Manager is entitled to a performance fee, the sum of which will be equal performing walkthrough procedures.
to 15% of the amount by which the Private Equity Portfolio Total Return at the
end of the calculation period exceeds the performance hurdle. We tested the mathematical accuracy of the calculation and verified that the
calculation was in accordance with the Investment Management Agreement.
The amount of performance fee accrued as at 31 March 2024 was £1.67m (2024:
£1.67m). We verified the inputs used to external support and audited valuations data.
As the inputs to the performance fee are dependent on the valuations of the We reviewed the payment conditions of the performance fee and verified that no
unquoted investments, there is a risk that the valuation of unquoted conditions were met during the year. As such, there is no performance fee
investments is overstated resulting in a higher performance fee due to the charge for the current period.
Portfolio Manager.
There have been no changes to the areas of audit focus raised in the above
risk table from the prior year.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in
evaluating the effect of identified misstatements on the audit and in forming
our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the
aggregate, could reasonably be expected to influence the economic decisions of
the users of the financial statements. Materiality provides a basis for
determining the nature and extent of our audit procedures.
We determined materiality for the Company to be £0.81 million (2023: £0.79
million), which is 1% (2023: 1%) of shareholders' fund. We believe that
Shareholders' funds provides us with materiality aligned to key measure of the
Company's performance.
Performance materiality
The application of materiality at the individual account or balance level.
It is set at an amount to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements exceeds
materiality.
On the basis of our risk assessments, together with our assessment of the
Company's overall control environment, our judgement was that performance
materiality was 75% (2023: 75%) of our planning materiality, namely £0.61m
(2023: £0.59m).
Given the importance of the distinction between revenue and capital for
investment trusts, we have also applied a separate testing threshold for the
revenue column of the Statement of Comprehensive Income which is usually
calculated as 5% of net revenue before tax. In the case of the Company, as
there is a net loss before tax, we have set our revenue testing threshold in
line with the reporting threshold which is calculated as 5% of planning
materiality and is £0.04m (2023: £0.04m).
Reporting threshold
An amount below which identified misstatements are considered as being clearly
trivial.
We agreed with the Audit Committee that we would report to them all
uncorrected audit differences in excess of £0.04m (2023: £0.04m), which is
set at 5% of planning materiality, as well as differences below that threshold
that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative
measures of materiality discussed above and in light of other relevant
qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report.
Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in this report, we do
not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of the other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors' remuneration report to be audited
has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors'
report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
• the strategic report and directors' reports have been prepared in
accordance with applicable legal requirements;
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company and its
environment obtained in the course of the audit, we have not identified
material misstatements in the strategic report or directors' report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not visited by us;
or
· the financial statements and the part of the Directors'
Remuneration Report to be audited are not in agreement with the accounting
records and returns; or
· certain disclosures of directors' remuneration specified by law
are not made; or
· we have not received all the information and explanations we
require for our audit.
Corporate Governance Statement
We have reviewed the directors' statement in relation to going concern,
longer-term viability and that part of the Corporate Governance Statement
relating to the Company's compliance with the provisions of the UK Corporate
Governance Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each
of the following elements of the Corporate Governance Statement is materially
consistent with the financial statements or our knowledge obtained during the
audit:
· Directors' statement with regards to the appropriateness of
adopting the going concern basis of accounting and any material uncertainties
identified set out on page 32
· Directors' explanation as to its assessment of the Company's
prospects, the period this assessment covers and why the period is appropriate
set out on page 32
· Director's statement on whether it has a reasonable expectation
that the Company will be able to continue in operation and meets its
liabilities set out on page 32
· Directors' statement on fair, balanced and understandable set out
on page 49
· Board's confirmation that it has carried out a robust assessment
of the emerging and principal risks set out on page 29
· The section of the annual report that describes the review of
effectiveness of risk management and internal control systems set out on page
40; and;
· The section describing the work of the Audit and Risk Committee
set out on page 39
Responsibilities of directors
As explained more fully in the directors' responsibilities statement set out
on page 49, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Company or
to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect irregularities, including fraud. The risk of not detecting a
material misstatement due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion. The
extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud
rests with both those charged with governance of the Company and management.
· We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Company and determined that the most
significant are Kingdom Generally Accepted Accounting Practice, the Companies
Act 2006, the Listing Rules, the UK Corporate Governance Code, the Association
of Investment Companies' (the 'AIC') Code of Corporate Governance, the AIC's
Statement of Recommended Practice, Section 1158 of the Corporation Tax Act
2010 and The Companies (Miscellaneous Reporting) Regulations 2018.
· We understood how the Company is complying with those frameworks
through discussions with the Audit and Risk Committee and Company Secretary
and review of board and committee minutes and review of papers provided to the
Audit and Risk Committee.
· We assessed the susceptibility of the Company's financial
statements to material misstatement, including how fraud might occur by
considering the key risks impacting the financial statements. We identified
fraud risks with respect to the incorrect valuation of the unquoted
investments and the resulting impact on unrealised gains/(losses) and
incorrect calculation of the performance fee. Further discussion of our
approach is set out in the section on key audit matters above.
· Based on this understanding we designed our audit procedures to
identify non-compliance with such laws and regulations. Our procedures
involved review of the reporting to the directors with respect to the
application of the documented policies and procedures and review of the
financial statements to ensure compliance with reporting requirements of the
Company.
A further description of our responsibilities for the audit of the financial
statements is located on the
Financial Reporting Council's website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms part
of our auditor's report.
Other matters we are required to address
Following the recommendation from the Audit and Risk Committee, we were
appointed by the Company on 19 May 2021 to audit the financial statements for
the year ending 30 June 2021 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and
reappointments is 4 years, covering the periods ending 30 June 2021 and 31
March 2022 to the year ending 31 March 2024.
The audit opinion is consistent with the additional report to the Audit and
Risk Committee.
Use of our report
This report is made solely to the Company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company's members those matters we
are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's members as a
body, for our audit work, for this report, or for the opinions we have
formed.
Caroline Mercer (Senior statutory auditor)
for and on behalf of
Ernst & Young LLP, Statutory Auditor
Edinburgh
10 July 2024
Statement of Comprehensive Income
for the year ended 31 March 2024
2024 2023
Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments held at fair value through profit or loss 3 - 2,738 2,738 - 3,198 3,198
Gains on foreign exchange - - - - 16 16
Income from investments 4 267 - 267 392 - 392
Other interest receivable and similar income 4 98 - 98 77 - 77
Gross return 365 2,738 3,103 469 3,214 3,683
Investment management fee 5 (432) - (432) (458) - (458)
Performance fee 5 - - - - (555) (555)
Administrative expenses 6 (655) - (655) (650) - (650)
Transaction costs 10 - - - - (4) (4)
Net (loss)/return before finance costs and taxation (722) 2,738 2,016 (639) 2,655 2,016
Finance costs - - - - - -
Net (loss)/return before taxation (722) 2,738 2,016 (639) 2,655 2,016
Taxation 7 - - - - - -
Net (loss)/return after taxation (722) 2,738 2,016 (639) 2,655 2,016
(Loss)/return per share 9 (0.98)p 3.71p 2.73p (0.86)p 3.57p 2.71p
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 return after taxation is also the total comprehensive income
for the year.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the period.
The notes on pages 62 to 73 form an integral part of these accounts.
Statement of Changes in Equity
for the year ended 31 March 2024
Called-up
share Special Capital Revenue
capital reserve reserves reserve Total
£'000 £'000 £'000 £'000 £'000
At 31 March 2022 750 72,765 5,598 (1,010) 78,103
Repurchase of the Company's own shares into treasury - (808) - - (808)
Net return/(loss) after taxation - - 2,655 (639) 2,016
At 31 March 2023 750 71,957 8,253 (1,649) 79,311
Net return/(loss) after taxation - - 2,738 (722) 2,016
At 31 March 2024 750 71,957 10,991 (2,371) 81,327
The notes on pages 62 to 73 form an integral part of these accounts.
Statement of Financial Position
at 31 March 2024
2024 2023
Note £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 10 83,092 74,128
Current assets
Debtors 11 15 151
Cash and cash equivalents 11 790 7,759
805 7,910
Current liabilities
Creditors: amounts falling due within one year 12 (900) (1,543)
Net current liabilities (95) 6,367
Total assets less current liabilities 82,997 80,495
Creditors: amounts falling due after more than one year
Performance fee (1,670) (1,184)
Net assets 81,327 79,311
Capital and reserves
Called-up share capital 13 750 750
Capital reserves 14 82,948 80,210
Revenue reserve 14 (2,371) (1,649)
Total equity shareholders' funds 81,327 79,311
Net asset value per share 15 110.05p 107.32p
The accounts were approved and authorised for issue by the Board of Directors
on 10 July 2024 and signed on its behalf by:
Neil England
Chairman
The notes on pages 62 to 73 form an integral part of these accounts.
Registered in England and Wales as a public company limited by shares
Company registration number: 12892325
Cash Flow Statement
for the year ended 31 March 2024
2024 2023
Note £'000 £'000
Net cash outflow from operating activities 16 (743) (662)
Investing activities
Purchases of investments (14,658) (19,840)
Sales of investments 8,432 13,601
Net cash outflow from investing activities (6,226) (6,239)
Net cash outflow before financing (6,969) (6,901)
Financing activities
Repurchase of Ordinary shares into treasury - (808)
Net cash outflow from financing activities - (808)
Net cash outflow in the year (6,969) (7,709)
Cash at bank and in hand at the beginning of the year 7,759 15,452
Net cash outflow in the year (6,969) (7,709)
Exchange movements - 16
Cash at bank and in hand at the end of the year 790 7,759
Included under operating activities are dividends received during the period
amounting to £376,000 (year ended 31 March 2023: £362,000) and interest
receipts amounting to £111,000 (year ended 31 March 2023 : £62,000).
The notes on pages 62 to 73 form an integral part of these accounts.
Notes to the Financial Statements
1. Accounting period
The Company changed its accounting date to 31 March, commencing 1 July 2021.
Comparative figures are provided for the full year, with reference to the
previous accounting period. References may be made to 2022, which comparatives
will only cover a nine-month period.
2. Accounting policies
(a) Basis of accounting
Schroder British Opportunities Trust plc (the "Company") is registered in
England and Wales as a public company limited by shares. The Company's
registered office is 1 London Wall Place, London EC2Y 5AU, United Kingdom.
The financial statements are prepared in accordance with the Companies Act
2006, United Kingdom Generally Accepted Accounting Practice ("UK GAAP"), in
particular in accordance with Financial Reporting Standard (FRS) 102 "The
Financial Reporting Standard applicable in the UK and Republic of Ireland".
The financial statements are prepared in accordance with Statement of
Recommended Practice "Financial Statements of Investment Trust Companies and
Venture Capital Trusts" (the "SORP") issued by the Association of Investment
Companies in July 2022, except for certain financial information required by
paragraph 82(c) regarding unquoted holdings with a value greater than 5% of
the portfolio or included in the top 10, where information is not publicly
available. All of the Company's operations are of a continuing nature.
The financial statements have been prepared on a going concern basis under the
historical cost convention, with the exception of investments and derivative
financial instruments measured at fair value through profit or loss. The
Directors believe that the Company has adequate resources to continue
operating for the period to 31 July 2025, which is at least 12 months from the
date of approval of these financial statements. In forming this opinion, the
Directors have taken into consideration: the controls and monitoring processes
in place; the Company's other payables; the level of operating expenses,
comprising largely variable costs which would reduce pro rata in the event of
a market downturn; the Company's revenue forecasts and the liquidity of the
Company's investments. In forming this opinion, the Directors have also
considered the Company's principal risks, including climate change. Further
details of Directors' considerations are given in the Going Concern Statement,
Viability Statement and under the Principal and Emerging Risks heading on page
39. The financial statements have been prepared on the assumption that
approval as an investment trust will continue to be granted.
The financial statements are presented in sterling and amounts have been
rounded to the nearest thousand.
The accounting policies applied to these financial statements are consistent
with those applied in the financial statements for the year ended 31 March
2023.
(b) Use of judgements, estimates and assumptions
The preparation of the financial statements requires management to make
estimates and assumptions that affect the application of accounting policies
and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates. The resulting accounting estimates
and assumptions will, by definition, seldom equal the related actual results.
Judgements, estimates and underlying assumptions are reviewed on an on-going
basis. Revisions to accounting estimates are recognised in the period in which
the estimates are revised and in any future periods affected.
The key judgements, estimates and assumptions in the accounts are the
determination of the fair values of the unquoted investments by the Investment
Manager for consideration by the Directors. These estimates are key, as they
significantly impact the valuation of the unquoted investments at the year
end. The fair valuation process involves estimation using subjective inputs
that are unobservable (for which market data is unavailable). The key
judgements, estimates and assumptions are described in note 21 on page 72.
Fair value estimates are cross-checked to alternative estimation methods where
possible to improve the robustness of the estimates. The risk of an over or
under estimation of fair values is greater when methodologies are applied
using more subjective inputs.
(c) Valuation of investments
The Company's business is investing in financial assets with a view to
profiting from their total return in the form of income and capital growth.
This portfolio of financial assets is managed and its performance evaluated on
a fair value basis, in accordance with a documented investment objective and
information is provided internally on that basis to the Company's Board of
Directors. Accordingly, upon initial recognition the investments are
recognised by the Company as "held at fair value through profit or loss".
Investments are included initially at transaction price, excluding expenses
incidental to purchase which are written off to capital at the time of
acquisition. Subsequently the investments are valued at fair value, using the
methodology below. This valuation process is consistent with International
Private Equity and Venture Capital ("IPEV") guidelines issued in December
2022, which are intended to set out current best practice on the valuation of
Private Equity investments.
(i) Investments traded in active markets are valued using quoted bid
prices.
(ii) Investments which are not traded in an active market are valued using
the price of a recent investment, where there is considered to have been no
material change in fair value.
(iii) Where (ii) is no longer considered appropriate, investments are valued
at the price used in a material arm's length transaction by an independent
third party, and where there is no impact on the rights of existing
shareholders.
(iv) In the absence of (iii), one of the following methods may be used:
- Revenue or EBITDA multiples, based on listed investments in the
relevant sector but adjusted for lack of marketability
- Recent transaction prices adjusted for the company's performance
against key milestones.
- Option price modelling.
(v) Investments in funds are valued using the NAV per unit with an
appropriate discount or premium applied to arrive at a unit price.
Purchases and sales of quoted investments are accounted for on a trade date
basis. Purchases and sales of unquoted investments are recognised when the
related contract becomes unconditional.
In line with FRS102 the Company's listed investments are valued at fair value,
which are quoted bid prices for investments in active markets at the
accounting date and therefore reflect market participants view of climate
change risk on the investments held. The Company's unquoted investments at 31
March 2024 were valued using a variety of techniques consistent with the
recommendations set out in IPEV guidelines. Valuations of all unquoted
investments are cross-checked for reasonableness using alternative methods
such as: prices of recent transactions, earnings multiples, probability
weighted expected returns or option pricing models as appropriate, and are
therefore deemed to reflect market participants view of climate change risk on
the investments held.
(d) Accounting for reserves
Gains and losses on sales of investments are included in the Statement of
Comprehensive Income and in capital reserves within "Gains and losses on sales
of investments". Increases and decreases in the valuation of investments held
at the year end are included in the Statement of Comprehensive Income and in
capital reserves within "Holding gains and losses on investments".
Foreign exchange gains and losses on cash and deposit balances are included in
the Statement of Comprehensive Income and in capital reserves.
(e) Income
Dividends receivable are included in revenue on an ex-dividend basis except
where, in the opinion of the Board, the dividend is capital in nature, in
which case it is included in capital.
Overseas dividends are included gross of any withholding tax.
Deposit interest outstanding at the period end is calculated and accrued on a
time apportionment basis using market rates of interest.
(f) Expenses
All expenses are accounted for on an accruals basis. Expenses are allocated
wholly to revenue column of the Statement of Comprehensive Income with the
following exceptions:
- Any performance fee is allocated 100% to capital.
- Expenses incidental to the purchase or sale of an investment are
charged to capital. These expenses are commonly referred to as transaction
costs and mainly comprise brokerage commission. Details of transaction costs
are given in note 10 on page 66.
(g) Cash and cash equivalents
Cash at bank and in hand may comprise cash and demand deposits which are
readily convertible to a known amount of cash and are subject to insignificant
risk of changes in value.
(h) Financial instruments
Other debtors and creditors do not carry any interest, are short-term in
nature and are accordingly stated at nominal value, with debtors reduced by
appropriate allowances for estimated irrecoverable amounts.
Bank loans and overdrafts are measured at transaction price, which is the
proceeds received net of direct issue costs. After initial recognition,
subsequent measurement is based on amortised cost.
(i) Taxation
The tax charge for the period includes a provision for all amounts expected to
be received or paid.
Deferred tax is provided on all timing differences that have originated but
not reversed by the accounting date.
Deferred tax liabilities are recognised for all taxable timing differences but
deferred tax assets are only recognised to the extent that it is probable that
taxable profits will be available against which those timing differences can
be utilised.
Deferred tax is measured at the tax rate which is expected to apply in the
periods in which the timing differences are expected to reverse, based on tax
rates that have been enacted or substantively enacted at the balance sheet
date and is measured on an undiscounted basis.
(j) Value added tax ("VAT")
Expenses are disclosed inclusive of the related irrecoverable VAT.
(k) Foreign currency
In accordance with FRS 102, the Company is required to determine a functional
currency, being the currency in which the Company predominantly operates. The
Board, having regard to the currency of the Company's share capital and the
predominant currency in which its shareholders operate, has determined that
sterling is the functional currency and the currency in which the financial
statements are presented.
Transactions denominated in foreign currencies are converted at actual
exchange rates as at the date of the transaction. Monetary assets, liabilities
and equity investments, denominated in foreign currencies at the year end are
translated at the rates of exchange prevailing at 4.00 p.m. on the accounting
date.
(l) Repurchases of shares into treasury and subsequent reissues
The cost of repurchasing the Company's own shares into treasury, including the
related stamp duty and transaction cost is dealt with in the Statement of
Changes in Equity. Share repurchase transactions are accounted for on a trade
date basis.
The sales proceeds of treasury shares reissued are treated as a realised
profit up to the amount of the weighted average price of those shares and is
transfered to capital reserves. Any excess of sales proceeds over the purchase
price transferred to "share premium".
3. Gains/(losses) on investments held at fair value through profit
or loss
2024 2023
£'000 £'000
(Losses)/gains on sales of investments based on historic cost (1,282) 889
Amounts recognised in investment holding gains and losses in the previous year 1,641 327
in respect of investments sold in the year
Gains on sales of investments based on the carrying value at the previous 359 1,216
balance sheet date
Unrealised gain recognised in respect of investments continuing to be held 2,379 1,982
Gains on investments held at fair value through profit and loss 2,738 3,198
4. Income from investments
2024 2023
£'000 £'000
Income from investments
UK dividends 252 374
Overseas dividends 15 18
267 392
Other interest receivable and similar income:
Deposit interest 98 77
98 77
Total income 365 469
5. Investment management fee and performance fee
2024 2023
£'000 £'000
Revenue:
Investment management fee 432 458
Capital:
Performance fee - 555
The bases for calculating the investment management and performance fees are
set out in the Directors' Report on page 37 and details of all amounts payable
to the Manager are given in note 18 on page 69.
6. Administrative expenses
2024 2023
£'000 £'000
Other administrative expenses 233 185
Company secretarial and administrative fee payable to Schroders 158 180
Directors' fees(1) 116 139
Auditor's remuneration for the audit of the Company's annual accounts(2) 148 146
655 650
(1)Full details are given in the remuneration report on pages 46 to 48.
(2)Includes VAT amounting to £24,000 (2023: £24,000).
7. Taxation
(a) Analysis of tax charge for the period
2024 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Taxation - - - - - -
The Company has no corporation tax liability for the year ended 31 March 2024
(period ended 31 March 2023: nil).
(b) Factors affecting tax charge for the period
2024 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net return before taxation (722) 2,738 2,016 (639) 2,655 2,016
Net return before taxation multiplied by the Company's applicable rate of (181) 685 504 (121) 504 383
corporation tax for the year of 25.0% (year ended 31 March 2023: 19.0%)
Effects of:
Capital gains on investments - (685) (685) - (569) (569)
Income not chargeable to corporation tax (67) - (67) (71) - (71)
Expenses not deductible for corporation tax purposes - - - - 1 1
Unrelieved management expenses 248 - 248 192 64 256
Taxation for the year - - - - - -
(c) Deferred taxation
The Company has an unrecognised deferred tax asset of £1,285,000 (2023:
£983,000) based on a prospective corporation tax rate of 25% (year ended 31
March 2023: 25%). The main rate of corporation tax has increased to 25% for
the fiscal year beginning on 1 April 2023. This deferred tax asset has arisen
due to the cumulative excess of deductible expenses over taxable income. Given
the composition of the Company's portfolio, it is not likely that this asset
will be utilised in the foreseeable future and therefore no asset has been
recognised in the accounts.
Given the Company's intention to meet the conditions required to retain its
status as an Investment Trust Company, no provision has been made for deferred
tax on any capital gains or losses arising on the revaluation or disposal of
investments.
8. Dividends
The Company has reported a revenue loss after taxation of £722,000 (year
ended 31 March 2023: £639,000) for the year and accordingly there is no
requirement to pay a dividend under Section 1158 of the Corporation Tax Act
2010.
9. Return/(loss) per share
2024 2023
£'000 £'000
Revenue loss (722) (639)
Capital gain 2,738 2,655
Total return 2,016 2,016
Weighted average number of shares in issue during the year 73,900,000 74,376,633
Revenue loss per share (0.98)p (0.86)p
Capital return per share 3.71p 3.57p
Total return per share 2.73p 2.71p
10. Investments held at fair value through profit or loss
(a) Movement in investments
2024 2023
£'000 £'000
Opening book cost 66,328 59,200
Opening investment holding gains 7,800 5,491
Opening fair value 74,128 64,691
Purchases at cost 14,658 19,840
Sales proceeds (8,432) (13,601)
Gains on investments held at fair value through profit or loss 2,738 3,198
Closing fair value 83,092 74,128
Closing book cost 71,272 66,328
Closing investment holding gains 11,820 7,800
Closing fair value 83,092 74,128
(b) Material revaluations of unquoted investments
Year ended 31 March 2024
Opening Closing
valuation valuation
2023 Purchases Sales Revaluation 2024
£'000 £'000 £'000 £'000 £'000
Investment
Rapyd Financial Network 8,399 - - (1,562) 6,837
Cera EHP S.à r.l. 6,986 51 - 1,009 8,046
Mintec 8,614 - - 977 9,591
Pirum Systems 6,087 - - 797 6,884
Culligan 5,053 26 - 506 5,585
EasyPark 4,492 50 - 1,629 6,171
CFC Underwriting 4,098 1,170 - 393 5,661
Learning Curve 2,455 675 - (1,574) 1,556
Graphcore 1,778 - - 755 2,533
47,962 1,972 - 2,930 52,864
Year ended 31 March 2023
Opening Closing
valuation valuation
2022 Purchases Sales Revaluation 2023
£'000 £'000 £'000 £'000 £'000
Investment
Rapyd Financial Network 8,565 - - (166) 8,399
Cera EHP S.à r.l. 4,509 407 - 2,070 6,986
Mintec - 6,304 - 2,310 8,614
Pirum Systems - 5,752 - 335 6,087
Culligan 6,045 38 (2,384) 1,354 5,053
EasyPark 2,775 30 - 1,687 4,492
CFC Underwriting - 2,610 - 1,488 4,098
Learning Curve 2,336 8 - 111 2,455
Graphcore 3,178 - - (1,400) 1,778
27,408 15,149 (2,384) 7,789 47,962
(c) Material disposals of unquoted investments
There were no disposals of unquoted investments in the year ended 31 March
2024 (31 March 2023: £2,384,000).
(d) Transaction costs
The following transaction costs, comprising stamp duty and brokerage
commission and legal fees, were incurred in the year:
2024 2023
£'000 £'000
On acquisitions
Stamp duty and brokerage commission 5 18
Legal fees - 4
On disposals
Brokerage commission 4 5
9 27
11. Current assets
Debtors
2024 2023
£'000 £'000
Dividends and interest receivable 11 133
Other debtors 4 18
15 151
The Directors consider that the carrying amount of debtors approximates to
their fair value.
Cash and cash equivalents
The carrying amount of cash, amounting to £790,000 (2023: £7,759,000),
represents its fair value.
12. Current liabilities
Creditors: amounts falling due within one year
2024 2023
£'000 £'000
Other creditors and accruals 900 1,056
Performance fee payable - 487(1)
900 1,543
(1)The performance fee payable at 31 March 2023 was included in Creditors:
amounts falling due within one year. This £487,000 has been reclassified in
the current year as Creditors: amounts falling due after more than one year as
there is a conditional deferment for payment on these fees.
The Directors consider that the carrying amount of creditors falling due
within one year approximates to their fair value.
13. Called-up share capital
2024 2023
£'000 £'000
Ordinary Shares allotted, called up and fully paid:
73,900,000 (2023: 75,000,000) shares of 1p each: 739 750
Repurchase of nil (2023: 1,100,000) shares into treasury - (11)
Subtotal of 73,900,000 (2023: 73,900,000) shares 739 739
1,100,000 (2023: 1,100,000) shares held in treasury 11 11
Closing balance(1) 750 750
(1)Represents 75,000,000 (2023: 75,000,000) shares of 1p each, including
1,100,000 (2023: 1,100,000) held in treasury.
14. Reserves
Capital reserves
Special Gains and Investment
distributable losses holding
capital on sales of gains and Revenue
reserve(1) investments(2) losses(3) reserve(4)
£'000 £'000 £'000 £'000
At 31 March 2023 71,957 453 7,800 (1,649)
Gains on sales of investments based on the carrying value at the previous
balance sheet date
- 359 - -
Unrealised gain recognised in respect of investments continuing to be held - - 2,379 -
Transfer on disposal of investments - (1,641) 1,641 -
Performance fee allocated to capital - - - -
Retained revenue for the year - - - (722)
At 31 March 2024 71,957 (829) 11,820 (2,371)
Capital reserves
Special Gains and Investment
distributable losses holding
capital on sales of gains and Revenue
reserve(1) investments(2) losses(3) reserve(4)
£'000 £'000 £'000 £'000
At 31 March 2022 72,765 319 5,279 (1,010)
Gains on sales of investments based on the carrying value at the previous - 1,216 - -
balance sheet date
Net movement in investment holding gains and losses - - 1,982 -
Transfer on disposal of investments - (539) 539 -
Realised gains on foreign exchange balances - 16 - -
Repurchase of the Company's own shares into treasury (808) - - -
Performance fee allocated to capital - (555) - -
Transaction costs - (4) - -
Retained loss for the period - - - (639)
At 31 March 2023 71,957 453 7,800 (1,649)
The Company's Articles of Association permit dividend distributions out of
realised capital profits.
(1)This is a distributable capital reserve arising from the cancellation of
the share premium, and may be distributed as dividends or used to repurchase
the Company's own shares.
(2)This is a realised (distributable) capital reserve and may be distributed
as dividends or used to repurchase the Company's own shares.
(3)This reserve may include some holding gains/(losses) on liquid investments
(which may be deemed to be realised) and other amounts which are unrealised.
An analysis has not been made between those amounts that are realised (and may
be distributed as dividends or used to repurchase the Company's own shares)
and those that are unrealised.
(4)A credit balance on the revenue reserve may be distributed as dividends or
used to repurchase the Company's own shares.
15. Net asset value per share
2024 2023
Net assets attributable to shareholders (£'000) 81,327 79,311
Shares in issue at the year end 73,900,000 73,900,000
Net asset value per share 110.05p 107.32p
16. Reconciliation of total return on ordinary activities before
finance costs and taxation to net cash outflow from operating activities
2024 2023
£'000 £'000
Net loss before taxation 2,016 2,016
Less capital return before taxation (2,738) (2,655)
Increase/(decrease) in prepayments and accrued income 122 (45)
Increase in other debtors 14 9
(Decrease)/increase in creditors and performance fee payable (157) 572
Performance fee and transaction costs allocated to capital - (559)
Net cash outflow from operating activities (743) (662)
17. Uncalled capital commitments
At 31 March 2024, the Company had uncalled capital commitments amounting to
£3,726,000 (31 March 2023: £5,476,000) in respect of follow-on investments,
which may be called by investee companies, subject to their achievement of
certain milestones and objectives.
18. Transactions with the Manager
Under the terms of the Alternative Investment Fund Manager Agreement, the
Manager is entitled to receive a management fee, a company secretarial and
administrative fee, and a performance fee. Details of the bases of these
calculations are given in the Directors' Report on page 37.
The management fee paid in respect of the year ended 31 March 2024 amounted to
£432,000 (year ended 31 March 2023: £458,000), and the whole of this amount
was outstanding at the year end. Any investments in funds managed or advised
by the Manager or any of its associated companies, are excluded from the
assets used for the purpose of the calculation and therefore incur no fee.
There were £10,795,000 held in such investments at the year end (year ended
31 March 2023 : nil).
A performance fee provision amounting to nil (year ended 31 March 2023:
£555,000) has been included in these accounts. No performance fee has been
paid to date and the whole amount of £1,670,000 (31 March 2023: £1,184,000)
is carried forward until such time as it may be paid under the terms of the
AIFM Agreement.
The company secretarial and administrative fee payable for the year amounted
to £158,000 (year ended 31 March 2023: £180,000). Company secretarial and
administration fees amounting to £181,000 (31 March 2023: £420,000) were
outstanding at the year end.
No Director of the Company served as a Director of any company within the
Schroders Group at any time during the year.
19. Related party transactions
Details of the remuneration payable to Directors are given in the Directors'
Remuneration Report on page 47 and details of Directors' shareholdings are
given in the Directors' Remuneration Report on page 48. Details of
transactions with the Manager are given in note 18 above. There have been no
other transactions with related parties during the year (period ended 31 March
2023: nil).
20. 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.
Details of the Company's policy for valuing investments and derivative
instruments are given in note 2(b) on page 62 and 2(c) on pages 62 and 63.
Level 3 investments have been valued in accordance with note 2(c) (i) - (v).
The Company's unquoted investments at 31 March 2024 were valued using a
variety of techniques consistent with the recommendations set out in the
International Private Equity and Venture Capital guidelines (IPEV). For
investments held directly or via an intermediary vehicle, the Company has
established its own estimate utilising widely accepted valuation methods.
The determination of fair value by the Manager involves key assumptions
dependent upon the valuation technique used. The Company uses the following
techniques, which are all consistent with the IPEV Guidelines. The primary
technique is the "Multiples" approach. This involves subjective inputs and
therefore presents a greater risk of over or under estimation, particularly in
the absence of a recent transaction. The key assumption in the Multiples
approach is that the selection of comparable companies provides a reasonable
basis for identifying the relationship between enterprise value and revenue to
apply in the determination of fair value. Typically between 5 and 10
comparable companies will be selected for each investment depending on how
many relevant comparable companies are identified. The resultant revenue or
earnings multiples derived will vary depending on how many relevant comparable
companies are identified and the industries they operate in and vary in the
range of 2.5 times to 32.5 times (based on various enterprise valuation
metrics). The price of a recent investment may also be used as an appropriate
calibration for estimating fair value. Other judgements and assumptions may
include: discounts applied due to reduced liquidity; probabilities assigned to
potential exit via sale or IPO; and judgements relating to the achievement of
performance targets and milestones.
Valuation techniques include the following, along with the associated range of
inputs where relevant, and the total amount valued using each method.
2024 2023
Multiple Value Multiple Value
range £'000 range £'000
Revenue multiple 2.5 to 10.8 21,054 2.4 to 12.1 19,877
EBITDA multiple 9.8 to 32.5 29,277 9.0 to 33.5 26,307
Probability Weighted Expected Return Method ("PWERM") n/a 2,533
Black-Scholes-Merton-Model n/a 1,778
Total 52,864 47,962
Valuations are cross-checked for reasonableness to alternative
multiples-based, income approaches, option pricing models or benchmark index
movements as appropriate.
At 31 March 2024, the Company's investment portfolio and derivative financial
instruments were categorised as follows:
2024
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments in equities - quoted 19,433 10,795 - 30,228
Investments in equities - unquoted - - 52,864 52,864
Total 19,433 10,795 52,864 83,092
The Level 2 asset relates to the holding in Schroders Special Situations -
Sterling Liquidity Plus Fund.
At 31 March 2023, the Company's investment portfolio and derivative financial
instruments were categorised as follows:
2023
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments in equities - quoted 26,166 - - 26,166
Investments in equities - unquoted - - 47,962 47,962
Total 26,166 - 47,962 74,128
There have been no transfers between Levels 1, 2 or 3 during the year (period
ended 31 March 2023: nil).
Movements in fair value measurements included in Level 3 during the period are
as follows:
2024 2023
£'000 £'000
Opening fair value of Level 3 Investments 47,962 27,408
Purchases at cost 1,972 15,149
Sales proceeds - (2,384)
Net gains on investments 2,930 7,789
Closing fair value of Level 3 investments 52,864 47,962
Closing book cost 32,288 30,803
Closing investment holding gains 20,576 17,159
Closing fair value of Level 3 investments 52,864 47,962
21. Financial instruments' exposure to risk and risk management
policies
The Company's objectives are set out on the inside front cover of this report.
In pursuing these objectives, the Company is exposed to a variety of financial
risks that could result in a reduction in the Company's net assets or a
reduction in the profits available for dividends.
These financial risks include market risk (comprising interest rate risk and
other price risk), liquidity risk and credit risk. The Directors' policy for
managing these risks is set out below. The Board has oversight of the
Company's risk management policy. The Company has no significant exposure to
foreign exchange risk on monetary items.
The Company's classes of financial instruments may comprise the following:
- investments in shares of quoted and unquoted companies which are held
in accordance with the Company's investment objective;
- short-term debtors, creditors and cash arising directly from its
operations;
- bank loans or overdrafts for investment purposes and for efficient
portfolio management; and
- derivatives used for investment purposes, efficient portfolio
management or currency hedging.
(a) Market risk
The fair value or future cash flows of a financial instrument held by the
Company may fluctuate because of changes in market prices. This market risk
comprises two elements: interest rate risk and other price risk. Information
to enable an evaluation of the nature and extent of these two elements of
market risk is given in parts (i) and (ii) of this note, together with
sensitivity analyses where appropriate. The Board reviews and agrees policies
for managing these risks. The Manager assesses the exposure to market risk
when making each investment decision and monitors the overall level of market
risk on the whole of the investment portfolio on an ongoing basis.
(i) Interest rate risk
Interest rate movements may affect the level of income receivable on cash
balances and the interest payable on any loans or overdrafts when interest
rates are re-set.
Management of interest rate risk
Liquidity and borrowings are managed with the aim of increasing returns to
shareholders. The Company may borrow from time to time, but gearing will not
exceed 10% of net asset value at the time of drawing. Gearing is defined as
borrowings less cash, expressed as a percentage of net assets. However, the
Company has not used any loans or overdrafts during the year (2023: nil).
Interest rate exposure
The exposure of financial assets and financial liabilities to floating
interest rates, giving cash flow interest rate risk when rates are re-set, is
shown below:
2024 2023
£'000 £'000
Exposure to floating interest rates:
Cash at bank and in hand 790 7,759
The floating rate assets comprise cash deposits on call. Sterling cash
deposits at call earn interest at floating rates based on Sterling Overnight
Index Average rates ("SONIA").
The above year end amount is broadly representative of the exposure to
interest rates during the year.
Interest rate sensitivity
The following table illustrates the sensitivity of the return after taxation
for the year and net assets to a 0.25% increase or decrease in interest rates
in regards to the Company's monetary financial assets and financial
liabilities. This level of change is considered to be a reasonable
illustration based on observation of current market conditions. The
sensitivity analysis is based on the Company's monetary financial instruments
held at the accounting date with all other variables held constant.
2024 2023
0.25% 0.25% 0.25% 0.25%
increase decrease increase decrease
in rate in rate in rate in rate
£'000 £'000 £'000 £'000
Income statement - return after taxation
Revenue return 2 (2) 19 (19)
Capital return - - - -
Total return after taxation 2 (2) 19 (19)
Net assets 2 (2) 19 (19)
(ii) Other price risk
Other price risk includes changes in market prices which may affect the value
of investments.
Management of other price risk
The Board meets on at least four occasions each year to consider the asset
allocation of the portfolio and the risk associated with particular industry
sectors. The investment management team has responsibility for monitoring the
portfolio, which is selected in accordance with the Company's investment
objective and seeks to ensure that individual stocks meet an acceptable
risk/reward profile. The Board may authorise the Manager to enter derivative
transactions for efficient portfolio management.
Market price risk exposure
The Company's total exposure to changes in market prices at the year end
comprises the following:
2024 2023
£'000 £'000
Investments held at fair value through profit or loss 83,092 74,128
The above data is broadly representative of the exposure to market price risk
during the year.
Concentration of exposure to market price risk
A sector and geographical analysis of the Company's investments is given on
page 22. This shows a concentration of exposure to economic conditions in the
United Kingdom. In addition, the Company's holds 9 investments (31 March 2023:
9) investments amounting to approximately £52.9 million (31 March 2023:
£48.0 million), or 63.6% (31 March 2023: 58.8%) of NAV, whose valuation is
deemed to be potentially volatile, due to the valuation techniques which have
sensitive inputs.
Market price risk sensitivity
The following table illustrates the sensitivity of the return after taxation
for the year and net assets to an increase or decrease of 20% in the fair
values of the Company's investments. This level of change is considered to be
a reasonable illustration based on observation of current market conditions.
The sensitivity analysis is based on the Company's exposure through equity
investments and includes the impact on the management fee and performance fee,
but assumes that all other variables are held constant.
2024 2023
20% 20% 20% 20%
increase in decrease in increase in decrease in
fair value fair value fair value fair value
£'000 £'000 £'000 £'000
Income statement - return after taxation
Revenue return (100) 100 (89) 89
Capital return 16,698 (16,698) 14,826 (14,826)
Total return after taxation and net assets 16,598 (16,598) 14,737 (14,737)
Percentage change in net asset value 20.3% (20.3%) 18.6% (18.6%)
(b) Liquidity risk
This is the risk that the Company will encounter difficulty in meeting its
obligations associated with financial liabilities that are settled by
delivering cash or another financial asset.
Management of the risk
At the year end, the Company's assets included quoted "public equity
investments" amounting to £30,228,000 (31 March 2023: £26,166,000), which
can be sold to meet ongoing funding requirements. Additionally, the Company
had less liquid, "private equity investments" amounting to £53,262,000 (31
March 2023: £45,047,000) and cash balances amounting to £790,000 (31 March
2023 : £7,759,000).
Liquidity risk exposure
Contractual maturities of financial liabilities, based on the earliest date on
which payment can be required are as follows:
2024 2023
Three More Three More
months than one months than one
or less year Total or less year Total
£'000 £'000 £'000 £'000 £'000 £'000
Creditors
Other creditors and accruals 900 1,670(1) 2,570 1,543 1,184 2,727
900 1,670 2,570 1,543 1,184 2,727
(1)As above note 12, the performance fee payable in the prior year of
£487,000 has been reclassified in the current year as Creditors: amounts
falling due after more than one year as there is a conditional deferment for
payment on these fees.
(c) Credit risk
Credit risk is the risk that the failure of the counterparty to a transaction
to discharge its obligations under that transaction could result in loss to
the Company.
Management of credit risk
This risk is not significant and is managed as follows:
Portfolio dealing
The credit ratings of broker counterparties is monitored by the AIFM and
limits are set on exposure to any one broker.
Cash
Counterparties are subject to daily credit analysis by the Manager. Cash
balances will only be deposited with reputable banks with high quality credit
ratings.
Exposure to the Custodian
The Custodian of the Company's assets is HSBC Bank plc which has long-term
Credit Ratings of AA- with Fitch and A1 with Moody's. The Company's
investments are held in accounts which are segregated from the Custodian's own
trading assets. If the Custodian were to become insolvent, the Company's right
of ownership of its investments is clear and they are therefore protected.
However the Company's cash balances are all deposited with the Custodian as
banker and held on the Custodian's balance sheet. Accordingly, in accordance
with usual banking practice, the Company will rank as a general creditor to
the Custodian in respect of cash balances.
Credit risk exposure
The amounts shown in the statement of financial position under debtors and
cash at bank and in hand represent the maximum exposure to credit risk at the
year end. No debtors are past their due date and none have been provided for.
(d) Fair values of financial assets and financial liabilities
All financial assets and liabilities are either carried in the statement of
financial position at fair value, or at a reasonable approximation of fair
value.
22. Capital management policies and procedures
The Company's capital management objectives are to ensure that it will be able
to continue as a going concern, and to maximise the income and capital return
to its equity shareholders.
The Company's capital structure comprises the following:
2024 2023
£'000 £'000
Equity
Called-up share capital 750 750
Reserves 80,577 78,561
Total equity 81,327 79,311
The Board, with the assistance of the Manager, monitors and reviews the broad
structure of the Company's capital on an ongoing basis. This review will
include:
- the possible use of gearing, which will take into account the
Manager's views on the market;
- the potential benefit of repurchasing the Company's own shares for
cancellation or holding in treasury, which will take into account the share
price discount;
- the opportunity for issue of new shares; and
- the amount of dividend to be paid, in excess of that which is required
to be distributed.
23. Post balance sheet events
In June 2024 the Company announced the completion of a new private equity
investment in HeadFirst, an international HR tech service provider. The
invested capital will be utilised to finance HeadFirst's acquisition of
Impellam Group, a managed services and specialist staffing provider.
24. Disclosures regarding material unquoted holdings (comprising more
than 5% of the portfolio and/or included in the top ten holdings)
Holding Description of Class of Cost of the Fair value Fair value Total income
its business shares held investment 2024 2023 received in
£'000 £'000 £'000 the year
£'000
Mintec Provides market intelligence, commodity prices and price forecasts across the Ordinary 6,304 9,591 8614 -
agri-food supply chain
Cera EHP S à r l Provides home care services for elderly people Ordinary 3,450 8,046 8,046 -
Rapyd Financial Network Global Fintech company Ordinary 3,297 6,837 8,399 -
Pirum Systems Provides a secure processing hub which seamlessly links market participants Ordinary 5,752 6,884 6087 -
together, allowing them to electronically process and verify key transaction
details
EasyPark Digital parking, electrical vehicle charging and mobility services Ordinary 2,047 6,171 4,492 -
CFC Underwriting Specialist in insurance for cyber security and tech insurance for IT Ordinary 3,780 5,661 4098 -
consultants
Culligan Global provider of purified drinking water dispensers Ordinary 1,820 5,585 5,053 -
Graphcore Provider of training and education services for adults Ordinary 4,000 2,533 1,778 -
The Company has not included certain disclosures required by paragraph 82(c)
of the SORP. In particular, turnover, pre-tax profit and attributable net
assets, because it is not publicly available.
Annual General Meeting - Recommendations
The following information relates to the notice of Annual General Meeting
("AGM") of the Company which is convened for 18 September 2024 at 1.00 p.m.
The formal Notice of Meeting is set out on page 77.
The following information is important and requires your immediate attention.
If you are in any doubt about the action you should take, you should consult
an independent financial adviser, authorised under the Financial Services and
Markets Act 2000. If you have sold or transferred all of your ordinary shares
in the Company, please forward this document with its accompanying proxy form
at once to the purchaser or transferee, or to the stockbroker, bank or other
agent through whom the sale or transfer was effected, for onward transmission
to the purchaser or transferee.
Ordinary business
Resolutions 1 to 11 are all ordinary resolutions. Resolution 1 is a required
resolution. Resolution 2 relates to the Directors' Remuneration Policy.
Resolution 3 concerns the Directors' Report on Remuneration, on pages 46 to
48. Resolution 4 concerns the authorisation of the Directors to determine that
no final dividend for the year ended 31 March 2024 will be paid. Resolutions 5
and 6 invite shareholders to elect Jemma Bruton and Justin Ward as Directors
of the Company for the first time. Resolutions 7 and 8 invite shareholders to
re-elect Diana Dyer Bartlett and Tim Jenkinson as Directors until the next
AGM, following the recommendations of the Nomination Committee, set out on
page 44 (their biographies are set out on pages 34 and 35). Neil England will
not be standing for re-election so no resolution has been proposed in this
regard. Resolutions 9 and 10 concern the re-appointment and remuneration of
the Company's auditor, discussed in the Audit and Risk Committee report on
pages 39 to 41.
Special business
Resolution 11: Directors' authority to allot shares (ordinary resolution) and
resolution 12: power to disapply pre-emption rights (special resolution)
The Directors are seeking authority to allot a limited number of treasury
shares and unissued ordinary shares for cash without first offering them to
existing shareholders in accordance with statutory pre-emption procedures.
Appropriate resolutions will be proposed at the forthcoming AGM and are set
out in full in the Notice of AGM. An ordinary resolution will be proposed to
authorise the Directors to allot shares up to a maximum aggregate nominal
amount of £73,900 (being 10% of the issued share capital (excluding any
shares held in treasury) as at 10 July 2024).
A special resolution will be proposed to authorise the Directors to allot
shares up to a maximum aggregate nominal amount of £73,900 (being 10% of the
issued share capital as at 10 July 2024) on a non pre-emptive basis. This
authority includes shares that the Company sells or transfers that have been
held in treasury. The Directors do not intend to allot ordinary shares or sell
treasury shares, on a non pre-emptive basis, pursuant to this authority other
than to take advantage of opportunities in the market as they arise and only
if they believe it to be advantageous to the Company as a whole. Shares issued
or treasury shares reissued, under this authority, will be at a price that is
equal to or greater than the Company's NAV per share, plus any applicable
costs, as at the latest practicable date before the allotment of such shares.
If approved, both of these authorities will expire at the conclusion of the
AGM in 2025 unless renewed, varied or revoked earlier.
Resolution 13: authority to make market purchases of the Company's own shares
(special resolution)
On 27 September 2023, a special resolution was passed to give the Company
authority to make market purchases of up to 14.99% of the ordinary shares. So
far, no shares have been bought back under this authority.
The Directors will continue to monitor the level of the discount and consider
the merits of further buy-backs, which should be accretive in nature when
discounts are wide.
However, any decision to buy back shares will be influenced by such factors
as: market conditions; the small size of the Company; the illiquid nature of
the private equity holdings; the need to retain cash for investment
opportunities; and the level of the Company's borrowing, if any. A special
resolution will be proposed at the forthcoming AGM to give the Company
authority to make market purchases of up to 14.99% of the ordinary shares in
issue as at 10 July 2024 (excluding treasury shares). The Directors will
continue to monitor the level. The Directors consider that any purchase would
be for the benefit of the Company and its shareholders. Any shares so
purchased would be cancelled or held in treasury for potential reissue.
If renewed, this authority will lapse at the conclusion of the AGM in 2025
unless renewed, varied or revoked earlier.
Resolution 14: notice period for general meetings (special resolution)
Resolution 14 set out in the Notice of AGM is a special resolution and will,
if passed, allow the Company to hold general meetings (other than annual
general meetings) on a minimum notice period of 14 clear days, rather than 21
clear days as required by the Companies Act 2006. The approval will be
effective until the Company's next AGM to be held in 2025. The Directors will
only call general meetings on 14 clear days' notice when they consider it to
be in the best interests of the Company's shareholders and will only do so if
the Company offers facilities for all shareholders to vote by electronic means
and when the matter needs to be dealt with expediently.
Recommendations
The Board considers that the resolutions relating to the above items of
business are in the best interests of shareholders as a whole. Accordingly,
the Board unanimously recommends to shareholders that they vote in favour of
the resolutions to be proposed at the forthcoming AGM, as they intend to do in
respect of their own beneficial holdings.
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of Schroder British
Opportunities Trust plc will be held on 18 September 2024 at 1.00 p.m. at 1
London Wall Place, London EC2Y 5AU to consider the following resolutions, of
which resolutions 1 to 11 will be proposed as ordinary resolutions, and
resolutions 12 to 14 will be proposed as special resolutions:
1. To receive the Directors' Report and the audited accounts for the year
ended 31 March 2024.
2. To approve the Directors' Remuneration Policy.
3. To approve the Directors' Report on Remuneration for the year ended 31
March 2024.
4. To authorise the Directors to determine that no final dividend for the
year ended 31 March 2024 will be paid.
5. To approve the election of Jemma Bruton as a Director of the Company.
6. To approve the election of Justin Ward as a Director of the Company.
7. To approve the re-election of Diana Dyer Bartlett as a Director of the
Company.
8. To approve the re-election of Tim Jenkinson as a Director of the
Company.
9. To re-appoint Ernst & Young LLP as auditor to the Company.
10. To authorise the Directors to determine the remuneration of Ernst &
Young LLP as auditor to the Company.
11. To consider, and if thought fit, pass the following resolution as an
ordinary resolution:
"THAT in addition to all existing authorities, the Directors be generally and
unconditionally authorised pursuant to section 551 of the Companies Act 2006
(the "Act") to exercise all the powers of the Company to allot relevant
securities (within the meaning of section 551 of the Act) up to an aggregate
nominal amount of £73,900 (being 10% of the issued ordinary share capital,
excluding treasury shares, at 10 July 2024) for a period expiring (unless
previously renewed, varied or revoked by the Company in general meeting) at
the conclusion of the Annual General Meeting of the Company in 2025, but that
the Company may make an offer or agreement which would or might require
relevant securities to be allotted after expiry of this authority and the
Board may allot relevant securities in pursuance of that offer or agreement."
12. To consider and, if thought fit, to pass the following resolution as a
special resolution:
"That, subject to the passing of Resolution 11 set out above, the Directors be
and are hereby empowered, pursuant to Section 571 of the Act, to allot equity
securities (including any shares held in treasury) (as defined in section
560(1) of the Act) pursuant to the authority given in accordance with section
551 of the Act by the said Resolution 11 and/or where such allotment
constitutes an allotment of equity securities by virtue of section 560(2) of
the Act as if Section 561(1) of the Act did not apply to any such allotment,
provided that this power shall be limited to the allotment of equity
securities up to an aggregate nominal amount of £73,900, (representing 10% of
the aggregate nominal amount of the share capital in issue, excluding treasury
shares at 10 July 2024); and where equity securities are issued pursuant to
this power they will only be issued at a price which is equal or greater than
the Company's NAV per share as at the latest practicable date before the
allotment; and provided that this power shall expire at the conclusion of the
next Annual General Meeting of the Company but so that this power shall enable
the Company to make offers or agreements before such expiry which would or
might require equity securities to be allotted after such expiry."
13. To consider and, if thought fit, to pass the following resolution as a
special resolution:
"THAT the Company be and is hereby generally and unconditionally authorised in
accordance with Section 701 of the Companies Act 2006 (the "Act") to make
market purchases (within the meaning of Section 693 of the Act) of ordinary
shares of 1p each in the capital of the Company ("Share") at whatever discount
the prevailing market price represents to the prevailing net asset value per
Share provided that:
(a) the maximum number of Shares which may be purchased is 11,077,610,
representing 14.99% of the Company's issued ordinary share capital as at 10
July 2024 (excluding treasury shares);
(b) the maximum price (exclusive of expenses) which may be paid for a Share
shall not exceed the higher of;
i) 105% of the average of the middle market quotations for the Shares as
taken from the London Stock Exchange Daily Official List for the five business
days preceding the date of purchase; and
ii) the higher of the last independent bid and the highest current
independent bid on the London Stock Exchange;
(c) the minimum price (exclusive of expenses) which may be paid for a Share
shall be 1p, being the nominal value per Share;
(d) this authority hereby conferred shall expire at the conclusion of the
next Annual General Meeting of the Company in 2025 (unless previously renewed,
varied or revoked by the Company prior to such date);
(e) the Company may make a contract to purchase Shares under the authority
hereby conferred which will or may be executed wholly or partly after the
expiration of such authority and may make a purchase of Shares pursuant to any
such contract; and
(f) any Shares so purchased will be cancelled or held in treasury."
14. To consider and, if thought fit, to pass the following resolution as a
special resolution:
"THAT a general meeting, other than an annual general meeting, may be called
on not less than 14 clear days' notice."
By order of the Board Registered Office:
Schroder Investment Management Limited 1 London Wall Place,
Company Secretary London EC2Y 5AU
10 July 2024 Registered Number: 12892325
Explanatory Notes to the Notice of Meeting
1. Ordinary shareholders are entitled to attend, speak and vote at the
meeting and to appoint one or more proxies, who need not be a shareholder, as
their proxy to exercise all or any of their rights to attend, speak and vote
on their behalf at the meeting.
A proxy form is enclosed. Shareholders are encouraged to appoint the Chairman
as proxy. If you wish to appoint a person other than the Chairman as your
proxy, please insert the name of your chosen proxy holder in the space
provided at the top of the form. If the proxy is being appointed in relation
to less than your full voting entitlement, please enter in the box next to the
proxy holder's name the number of shares in relation to which they are
authorised to act as your proxy. If left blank your proxy will be deemed to be
authorised in respect of your full voting entitlement (or if this proxy form
has been issued in respect of a designated account for a shareholder, the
full voting entitlement for that designated account). Additional forms of
proxy can be obtained by contacting the Company's Registrars, Equiniti
Limited, on +44 (0) 800 032 0641. (If calling from outside of the UK, please
ensure the country code is used), or you may photocopy the attached proxy
form. Please indicate in the box next to the proxy holder's name the number of
shares in relation to which they are authorised to act as your proxy. Please
also indicate by ticking the box provided if the proxy instruction is one of
multiple instructions being given.
Completion and return of a proxy form will not preclude a shareholder from
attending the Annual General Meeting and voting in person.
On a vote by show of hands, every ordinary shareholder who is present in
person has one vote and every duly appointed proxy who is present has one
vote. On a poll vote, every ordinary shareholder who is present in person or
by way of a proxy has one vote for every share of which he/she is a holder.
Voting will be by poll.
The "Vote Withheld" option on the proxy form is provided to enable you to
abstain on any particular resolution. However it should be noted that a "Vote
Withheld" is not a vote in law and will not be counted in the calculation of
the proportion of the votes 'For' and 'Against' a resolution. A proxy form
must be signed and dated by the shareholder or his or her attorney duly
authorised in writing. In the case of joint holdings, any one holder may sign
this form. The vote of the senior joint holder who tenders a vote, whether in
person or by proxy, will be accepted to the exclusion of the votes of the
other joint holder and for this purpose seniority will be determined by the
order in which the names appear on the Register of Members in respect of the
joint holding. To be valid, proxy form(s) must be completed and returned to
the Company's Registrars, Equiniti Limited, Aspect House, Spencer Road,
Lancing, West Sussex BN99 6DA, in the enclosed envelope together with any
power of attorney or other authority under which it is signed or a copy of
such authority certified notarially, to arrive no later than 48 hours before
the time fixed for the meeting, or an adjourned meeting. It is possible for
you to submit your proxy votes online by going to Equiniti's Shareview
website, www.shareview.co.uk, and logging in to your Shareview Portfolio. Once
you have logged in, simply click 'View' on the 'My Investments' page and then
click on the link to vote and follow the on-screen instructions. If you have
not yet registered for a Shareview Portfolio, go to www.shareview.co.uk and
enter the requested information. It is important that you register for a
Shareview Portfolio with enough time to complete the registration and
authentication processes. Please note that to be valid, your proxy
instructions must be received by Equiniti no later than 1.00 p.m. on
16 September 2024. If you have any difficulties with online voting, you
should contact the shareholder helpline on +44 (0) 800 032 0641. If calling
from outside of the UK, please ensure the country code is used.
If an ordinary shareholder submits more than one valid proxy appointment, the
appointment received last before the latest time for receipt of proxies will
take precedence. Shareholders may not use any electronic address provided
either in this Notice of Annual General Meeting or any related documents to
communicate with the Company for any purposes other than expressly stated.
Representatives of shareholders that are corporations will have to produce
evidence of their proper appointment when attending the Annual General
Meeting.
2. Any person to whom this notice is sent who is a person nominated under
section 146 of the Companies Act 2006 to enjoy information rights (a
"Nominated Person") may, under an agreement between him or her and the
shareholder by whom he or she was nominated, have a right to be appointed (or
to have someone else appointed) as a proxy for the Annual General Meeting. If
a Nominated Person has no such proxy appointment right or does not wish to
exercise it, he or she may, under any such agreement, have a right to give
instructions to the shareholder as to the exercise of voting rights.
The statement of the rights of ordinary shareholders in relation to the
appointment of proxies in note 1 above does not apply to Nominated Persons.
The rights described in that note can only be exercised by ordinary
shareholders of the Company.
3. Pursuant to Regulation 41 of the Uncertificated Securities Regulations
2001, the Company has specified that only those shareholders registered in the
Register of members of the Company at 6.30 p.m. on 16 September 2024, or 6.30
p.m. two days prior to the date of an adjourned meeting, shall be entitled to
attend and vote at the meeting in respect of the number of shares registered
in their name at that time. Changes to the Register of Members after 6.30 p.m.
on 16 September 2024 shall be disregarded in determining the right of any
person to attend and vote at the meeting.
4. CREST members who wish to appoint a proxy or proxies through the CREST
electronic proxy appointment service may do so by using the procedures
described in the CREST manual. The CREST manual can be viewed at
www.euroclear.com. A CREST message appointing a proxy (a "CREST proxy
instruction") regardless of whether it constitutes the appointment of a proxy
or an amendment to the instruction previously given to a previously appointed
proxy must, in order to be valid, be transmitted so as to be received by the
issuer's agent (ID RA19) by the latest time for receipt of proxy appointments.
5. If you are an institutional investor, you may be able to appoint
a proxy electronically via the Proxymity platform, a process which has been
agreed by the Company and approved by the Registrar. For further information
regarding Proxymity, please go to www.proxymity.io. Your proxy must be lodged
by 1.00 p.m. on 16 September 2024 in order to be considered valid. Before you
can appoint a proxy via this process you will need to have agreed to
Proxymity's associated terms and conditions. It is important that you read
these carefully as you will be bound by them, and they will govern the
electronic appointment of your proxy.
6. Copies of the terms of appointment of the non-executive Directors and a
statement of all transactions of each Director and of their family interests
in the shares of the Company, will be available for inspection by any member
of the Company at the registered office of the Company during normal business
hours on any weekday (English public holidays excepted) and at the Annual
General Meeting by any attendee, for at least 15 minutes prior to, and during,
the Annual General Meeting. None of the Directors has a contract of service
with the Company.
7. The biographies of the Directors offering themselves for election and
re-election and are set out on pages 34 and 35 of the Company's report and
financial statements for the year ended 31 March 2024.
8. As at 10 July 2024, 75,000,000 ordinary shares of 1 pence each were in
issue (1,100,000 were held in treasury). Therefore the total number of voting
rights of the Company as at 10 July 2024 was 73,900,000.
9. A copy of this Notice of Meeting, which includes details of shareholder
voting rights, together with any other information as required under Section
311A of the Companies Act 2006, is available from the Company's webpage,
https://www.schroders.com/sbot.
10. Pursuant to Section 319A of the Companies Act, the Company must cause to
be answered at the Annual General Meeting any question relating to the
business being dealt with at the AGM which is put by a member attending the
meeting, except in certain circumstances, including if it is undesirable in
the interests of the Company or the good order of the meeting that the
question be answered or if to do so would involve the disclosure of
confidential information. Shareholders are asked to send their questions by
post or by email (amcompanysecretary@schroders.com).
11. Members satisfying the thresholds in section 527 of the Companies Act
2006 can require the Company to publish a statement on its website setting
out any matter relating to:
(a) the audit of the Company's Accounts (including the auditors report and
the conduct of the audit) that are to be laid before the Meeting; or
(b) any circumstance connected with an auditor of the Company ceasing to
hold office since the last AGM, that the members propose to raise at the
Meeting. The Company cannot require the members requesting the publication to
pay its expenses. Any statement placed on the website must also be sent to the
Company's auditors no later than the time it makes its statement available on
the website. The business which may be dealt with at the meeting includes any
statement that the Company has been required to publish on its website.
12. The Company's privacy policy is available on its webpages.
https://www.schroders.com/sbot. Shareholders can contact Equiniti for details
of how Equiniti processes their personal information as part of the AGM.
Definitions of Terms and Alternative Performance Measures
The terms and performance measures below are those commonly used by investment
companies to assess values, investment performance and operating costs.
Numerical calculations are given where relevant. Some of the financial
measures below are classified Alternative Performance Measures ("APMs") as
defined by the European Securities and Markets Authority. Under this
definition, APMs include a financial measure of historical financial
performance or financial position, other than a financial measure defined or
specified in the applicable financial reporting framework. APMs have been
marked with an *.
Investment policy
The Company will invest in a diversified portfolio of both public equity
investments and private equity investments consisting predominantly of UK
Companies with strong long-term growth prospects.
"Public equity investments" mean any investments in any of the following
categories (a), (b) and (c) below (although it is envisaged that the Company
will predominantly focus on those of an equity and/or quasi-equity nature as
set out under categories (a) and (b) below):
(a) ordinary shares or similar securities issued by an issuer which are
traded on any of the following:
(i) any "regulated market" as defined in MiFID II and as listed in the
register of regulated markets within the EEA maintained by the European
Securities and Markets Authority from time to time; or
(ii) any "recognised investment exchange" as recognised by the FCA under
Part XVIII of FSMA; or
(iii) any "recognised overseas investment exchange" as recognised by the FCA
under Part XVIII of FSMA;
(b) securities or other instruments giving the right to acquire or sell any
of the securities referred to in (a) above, including without limitation
warrants, options, futures, convertible bonds and convertible loan notes; and
(c) preference shares issued by an issuer referred to in (a) above.
"Private equity investments" mean any investments in any of the following
categories (w), (x), (y) and (z) below (although it is envisaged that the
Company will predominantly focus on those of an equity and/or quasi-equity
nature as set out under categories (w) and (x) below):
(w) shares in companies and other securities/units/interests equivalent to
shares in companies, partnerships (including limited partnership interests) or
other entities, provided that they are not already captured under the
definition of "public equity investments" above;
(x) securities, derivatives or other instruments giving the right to acquire
or sell any of the shares/securities/units/ interests referred to in (w)
above, including without limitation warrants, options, futures, contingent
value rights, convertible bonds, convertible loan notes, convertible loan
stocks or convertible preferred equity;
(y) preference shares issued by an issuer referred to in (w) above; and
(z) debt-based investments not otherwise covered above, including loan
stock, payment-in-kind instruments and shareholder loans.
It is anticipated that the Company's portfolio will typically consist
of 30 to 50 holdings and will target companies with an equity value between
approximately £50 million and £2 billion at the time of initial investment.
The Company will focus on companies which the Manager considers to be
sustainable from an environmental, social and governance perspective,
supporting at least one of the goals and/or sub-goals of the United Nations'
Sustainable Development Goals ("SDGs"), or which the Manager considers would
benefit from their support in helping them incorporate SDGs into their
business planning and/or in reporting their alignment with SDGs.
"UK Companies" means companies which are incorporated, headquartered or have
their principal business activities in the United Kingdom, and companies
headquartered outside the United Kingdom which derive, or are expected to
derive, a significant proportion of their revenues or profits from the United
Kingdom.
Net asset value ("NAV") per share
The NAV per share of 110.05p (31 March 2023: 107.32p) represents the net
assets attributable to equity shareholders of £81,327,000 (31 March 2023:
£79,311,000) divided by the 73,900,000 (31 March 2023: 73,900,000) shares in
issue at the year end.
Discount/premium*
The amount by which the share price of an investment trust is lower (discount)
or higher (premium) than the NAV per share. If shares are trading at a
discount, investors would be paying less than the value attributable to the
shares by reference to the underlying assets. A premium or discount is
generally the consequence of supply and demand for the shares on the stock
market. The discount or premium is expressed as a percentage of the NAV per
share. The discount at the year end amounted to 27.8% (31 March 2023: 36.2%),
as the closing share price at 79.5p (31 March 2023: 68.5p) was 27.8%
(31 March 2023: 36.2%) lower than the closing NAV of 110.05p (31 March 2023:
107.32p).
Gearing/(net cash)*
The gearing percentage reflects the amount of borrowings (that is, bank loans
or overdrafts) that the Company has used to invest in the market. This figure
is indicative of the extra amount by which shareholders' funds would move if
the Company's investments were to rise or fall. Gearing is defined as:
borrowings used for investment purposes, less cash and investment in liquidity
fund, expressed as a percentage of net assets. A negative figure so
calculated is termed a "Net cash" position.
At the year end, the Company had no loans or overdrafts, and thus was in a net
cash position, calculated as follows:
31 March 31 March
2024 2023
£'000 £'000
Borrowings used for investment
purposes, less cash (11,585) (7,759)
Net assets 81,327 79,311
Net cash (14.2)% (9.8)%
Ongoing charges*
The Ongoing Charges ("OGC") figure is a measure of the ongoing operating cost
of the Company. It is calculated in accordance with the AIC's recommended
methodology, and represents total annualised operating expenses payable
including any management fee, but excluding any finance costs, transaction
costs and performance fee provision, expressed as a percentage of the average
daily net asset values during the year. For the year ended 31 March 2024,
operating expenses amounted to £1,087,000 (year ended 31 March 2023:
£1,108,000). This produces an OGC figure of 1.40% (year ended 31 March 2023:
1.47%), when expressed as a percentage of the average daily net asset values
during the year of £77.5 million (year ended 31 March 2023:
£75.3 million).
Leverage*
For the purpose of the UK Alternative Investment Fund Managers (AIFM)
Directive, leverage is any method which increases the Company's exposure,
including the borrowing of cash and the use of derivatives. It is expressed as
the ratio of the Company's exposure to its net asset value and is required to
be calculated both on a "Gross" and a "Commitment" method. Under the Gross
method, exposure represents the sum of the absolute values of all positions,
so as to give an indication of overall exposure. Under the Commitment method,
exposure is calculated in a similar way, but after netting off hedges which
satisfy certain strict criteria.
The Company's leverage ratio calculation and exposure limits as required by
the AIFMD are published on the Company's webpages. The Company is also
required to periodically publish its actual leverage exposures. As at 31 March
2024 these were:
Maximum Actual
Leverage exposure ratio ratio
Gross method 2.50% 0.99%
Commitment method 2.00% 1.00%
Shareholder Information
Webpages and share price information
The Company has dedicated webpages, which may be found at
https://www.schroders.com/sbot. The webpages have been designed to be used as
the Company's primary method of electronic communication with shareholders.
They contain details of the Company's share price and copies of annual reports
and other documents published by the Company as well as information on the
Directors, terms of reference of Committees and other governance arrangements.
In addition, the webpages contain links to announcements made by the Company
to the market, Equiniti's shareview service and Schroders' website. There is
also a section entitled "How to Invest".
The Company releases its NAV per share on both a cum and ex-income basis,
diluted where applicable, to the market on a daily basis.
Share price information may also be found in the Financial Times and at the
Company's webpages.
Association of Investment Companies
The Company is a member of the Association of Investment Companies. Further
information on the Association can be found on its website, www.theaic.co.uk.
Individual Savings Account ("ISA") status
The Company's shares are eligible for stocks and shares ISAs.
Non-Mainstream Pooled Investments status
The Company currently conducts its affairs so that its shares can be
recommended by IFAs to ordinary retail investors in accordance with the FCA's
rules in relation to non-mainstream investment products and intends to
continue to do so for the foreseeable future. The Company's shares are
excluded from the FCA's restrictions which apply to non-mainstream investment
products because they are shares in an investment trust.
Financial calendar
Results announced July
Annual General Meeting September
Half year results announced December
Financial year end March
Alternative Investment Fund Managers Directive ("AIFMD") disclosures
The AIFMD, as transposed into the FCA Handbook in the UK, requires that
certain pre-investment information be made available to investors in
Alternative Investment Funds (such as the Company) and also that certain
regular and periodic disclosures are made. This information and these
disclosures may be found either below, elsewhere in this annual report, or in
the Company's AIFMD information disclosure document published on the Company's
webpages.
Remuneration disclosures
Quantitative remuneration disclosures to be made in this annual report in
accordance with FCA Handbook rule FUND3.3.5 may also be found in the Company's
AIFMD information disclosure document published on the Company's web pages.
Publication of Key Information Document ("KID") by the AIFM
Pursuant to the Packaged Retail and Insurance-based Products ("PRIIPs")
Regulation, the Manager, as the Company's AIFM, is required to publish a short
KID on the Company. KIDs are designed to provide certain prescribed
information to retail investors, including details of potential returns under
different performance scenarios and a risk/reward indicator. The Company's KID
is available on its webpages.
How to invest
There are a number of ways to easily invest in the Company. The Manager has
set these out at www.schroders.com/invest-in-a-trust/.
Complaints
The Company has adopted a policy on complaints and other shareholder
communications which ensures that shareholder complaints and communications
addressed to the Company Secretary, the Chairman or the Board are, in each
case, considered by the Chairman and the Board.
Warning to shareholders
Companies are aware that their shareholders have received unsolicited
telephone calls or correspondence concerning investment matters. These are
typically from overseas-based 'brokers' who target UK shareholders, offering
to sell them what often turn out to be worthless or high risk shares or
investments.
These operations are commonly known as 'boiler rooms'. These 'brokers' can be
very persistent and extremely persuasive.
Shareholders are advised to be wary of any unsolicited advice, offers to buy
shares at a discount or offers of free company reports. If you receive any
unsolicited investment advice:
• Make sure you get the correct name of the person and organisation
• Check that they are properly authorised by the FCA before getting
involved by visiting https://register.fca.org.uk
• Report the matter to the FCA by calling 0800 111 6768 or visiting
https://fca.org.uk/consumers/report-scam-unauthorised-firm
• Do not deal with any firm that you are unsure about
If you deal with an unauthorised firm, you will not be eligible to receive
payment under the Financial Services Compensation Scheme.
The FCA provides a list of unauthorised firms of which it is aware, which can
be accessed at
https://www.fca.org.uk/consumers/unauthorised-firms- individuals#list.
More detailed information on this or similar activity can be found on the FCA
website at https://www.fca.org.uk/consumers/protect- yourself-scams.
Information about the Company
https://www.schroders.com/sbot (https://www.schroders.com/sbot)
Directors
Neil England (Chairman)
Diana Dyer Bartlett
Jemma Bruton
Tim Jenkinson
Justin Ward
Registered Office
1 London Wall Place
London EC2Y 5AU
Advisers
Alternative Investment Fund Manager (the "AIFM" or "Manager")
Schroder Unit Trusts Limited
1 London Wall Place
London EC2Y 5AU
Investment Managers
Schroder Investment Management Limited
1 London Wall Place
London EC2Y 5AU
Schroders Capital Management (Switzerland) AG
Affolternstrausse 56, CH-8050
Zurich, Switzerland
Company Secretary
Schroder Investment Management Limited
1 London Wall Place
London EC2Y 5AU
Email: amcompanysecretary@schroders.com
Depositary and Custodian
HSBC Bank plc
8 Canada Square
London E14 5HQ
Corporate Broker
Peel Hunt LLP
100 Liverpool Street
London EC2MY 2AT
Independent Auditors
Ernst & Young LLP
Atria One
144 Morrison Street
Edinburgh EH3 8EX
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Shareholder helpline: 0800 032 0641(1)
Website: www.shareview.co.uk
(1)Calls to this number are free of charge from UK landlines.
Communications with shareholders are mailed to the address held on the
register. Any notifications and enquiries relating to shareholdings, including
a change of address or other amendment should be directed to Equiniti Limited
at the above address and telephone number above.
Other information
Shareholder enquiries
General enquiries about the Company should be addressed to the Company
Secretary at the Company's Registered Office.
Dealing Codes
ISIN: GB00BN7JZR28
SEDOL: BN7JZR2
Ticker: SBO
Global Intermediary Identification Number (GIIN)
QML9TQ.99999.SL.826
Legal Entity Identifier (LEI)
5493003UY8LIHFW6HM02
Privacy notice
The Company's privacy notice is available on its web pages.
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