REG - Schroder BSC Social - Annual Results
24/10/2024 07:00
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RNS Number : 3857J Schroder BSC Social Impact Trust 24 October 2024
Schroder BSC Social Impact Trust plc (the "Company")
Annual Results
Continuing to tackle poverty and inequality while delivering resilient NAV
total returns
The Company's Annual Financial Report for the year ended 30 June 2024 is being
published in hard copy format and an electronic copy will shortly be available
to download from the Company's website: www.schroders.com/sbsi. Please click
on the following link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/3857J_1-2024-10-23.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/3857J_1-2024-10-23.pdf)
Financial highlights
· NAV per share of 104.13 pence (FY 2023: 104.90 pence)
· NAV total return per share of +1.5% (FY 2023: +0.8%), delivered
against a challenging macro-economic backdrop
· NAV total return per share of 10.2% since inception (2.8%
annualised)
· Dividend made up wholly of a 2.94 pence interest distribution per
share for the year, up 28% from the prior year, in line with our 2-3% dividend
guidance
· £8.6 million of capital (10% of NAV as of 30 Jun 2024) was
re-committed into two new investments, increasing portfolio diversification:
o £3.6 million into Community Energy Together; and
o £5.0 million into Simply Affordable Homes
Impact highlights
· £86 million of capital committed to date to support 194
frontline organisations, positively impacting 400,000 people since inception,
at least 95% of whom are disadvantaged or vulnerable
· 100% of investments align with the UN Sustainable Development
Goals, with the majority of the portfolio aimed at reducing poverty and
inequality (SDGs 1 & 10)
Results Presentation
The Portfolio Managers will present a webinar on the results at 9.00 am today,
Thursday 24 October 2024. This is open to all existing and potential
shareholders, who can sign up for the webinar at:
https://www.schroders.events/SBSI24 (https://www.schroders.events/SBSI24)
Susannah Nicklin, Chair of Schroder BSC Social Impact Trust plc, said:
"I am proud that the Company has again delivered impact in line with its
stated mission in the period, significantly improving the lives of thousands
of people at a time when issues such as deprivation and homelessness are
intensifying. The services of the organisations the Company finances has never
been more crucial, and addressing social issues is high on the government's
agenda.
The year to 30 June 2024 was one of macro-economic and political turbulence,
and the Board and I are therefore pleased to have seen strong investment
income generated from our holdings, allowing us to announce a dividend in line
with our range of guidance. Capital returned to the fund has also been quickly
redeployed into two new investments. With a growing pipeline of opportunities
available, it is an exciting time to be investing in the social impact
sector."
About Schroder BSC Social Impact Trust plc
The Company was launched in December 2020, to enable access to high social
impact investment opportunities in private markets - tackling social
challenges across the UK. The Company manages a diversified portfolio across
asset classes, targeting sustainable returns, demonstrable social impact, and
low correlation to traditional public markets.
About Better Society Capital
Better Society Capital is the UK's leading social impact investor. Our mission
is to grow the amount of money invested in tackling social issues and
inequalities in the UK. We do this by investing our own capital and helping
others invest for impact too.
Since 2012, we have helped build a market that has directed more than £10
billion into social purpose organisations tackling issues from homelessness
and mental health, to childhood obesity and fuel poverty, a more than ten-fold
increase.
Further information about Better Society Capital can be found
at www.bettersocietycapital.com (http://www.bettersocietycapital.com)
About Schroders plc
Schroders is a global investment manager which provides active asset
management, wealth management and investment solutions, with £773.7 billion
(€912.6 billion; $978.1 billion) of assets under management at 30 June 2024.
As a UK listed FTSE100 company, Schroders has a market capitalisation of circa
£6 billion and over 6,000 employees across 38 locations.
Established in 1804, Schroders remains true to its roots as a family-founded
business. The Schroder family continues to be a significant shareholder,
holding approximately 44% of the issued share capital.
Schroders' success can be attributed to its diversified business model,
spanning different asset classes, client types and geographies. The company
offers innovative products and solutions through four core business divisions:
Public Markets, Solutions, Wealth Management, and Schroders Capital, which
focuses on private markets, including private equity, renewable infrastructure
investing, private debt & credit alternatives, and real estate.
Schroders aims to provide excellent investment performance to clients through
active management. This means directing capital towards resilient businesses
with sustainable business models, consistently with the investment goals of
its clients. Schroders serves a diverse client base that includes pension
schemes, insurance companies, sovereign wealth funds, endowments, foundations,
high net worth individuals, family offices, as well as end clients through
partnerships with distributors, financial advisers, and online platforms.
For further information, please contact:
Schroders
Charlotte Banks/Kirsty Preston (press) 020 7658 6000
Natalia de Sousa/Sunny Chou 020 7658 6000
(Schroder Investment Management Limited, Company Secretary)
Better Society Capital
Ian Young, PR & Media iyoung@bettersocietycapital.com (mailto:iyoung@bettersocietycapital.com)
Susanna Hudson, Investor Engagement shudson@bettersocietycapital.com (mailto:shudson@bettersocietycapital.com)
020 3821 5905
Winterflood Securities Limited
Neil Langford 020 3100 0000
Chair's Statement
"It is clear that demand for the services the Company helps to finance is
significant, urgent and unmet. Finding opportunities to spend more wisely on
these issues is at the top of the Government's agenda."
The Schroder BSC Social Impact Trust (the "Company" or "Social Impact Trust")
delivered a robust performance in the year, against a challenging
macro-economic and political backdrop. Capital returned from the portfolio was
quickly re-deployed, the dividend increase reflected maturing investments,
and, vitally, the Company continued to invest in life-changing projects across
the UK, significantly improving the circumstances of thousands of vulnerable
people.
Private investment in delivering impact continues to grow at pace, although
opportunities for investors to direct their capital to organisations
supporting people in the greatest need remain more limited. The Company offers
a unique proposition, allowing investors of all sizes to access high quality,
high impact social investments.
Over its four years of operation, the Company has demonstrated how impact
investing can address social needs while providing resilient financial
returns. As we move forward, the Board hopes to see the Company grow,
enabling increased investment to reach much-needed social solutions.
Navigating a period of economic and political turbulence
After a technical recession in late 2023, the UK economy rebounded in the
first half of 2024 with 0.7% GDP growth January to March followed by a 0.6%
increase April to June. The Consumer Price Index rose by 2% in the period
under review. The Bank of England maintained a 5.25% base rate from August
2023 until it was reduced to 5% after the period end. With inflation appearing
to be stabilising from the peaks of late 2022 further cuts are anticipated in
the coming months.
This was a difficult macro backdrop for the Company, mitigated to some extent
by the portfolio's high proportion of inflation-linked or correlated assets.
Some of the benefits of this are expected to be reflected in the portfolio
performance in the future after a lagged effect.
The snap election in July also led to a lack of clarity on policy and general
uncertainty, generating further macro challenges.
The Labour Party came into power in July 2024, after the period end, and has
recently noted the level of fiscal constraint it faces. However, the
Government's policy priorities, as announced in the King's Speech, align with
several of the Company's areas of focus.
Continuing to tackle poverty, inequality and homelessness
The constraints on public spending are particularly worrying in the face of
worsening problems for UK society. The proportion of people experiencing food
insecurity and material deprivation in 2022-23 has increased significantly
versus a few years ago. Homelessness rose by 16% year-on-year at the end of
2023. The proportion of working-age people reporting long-term health
conditions in the UK has risen to 36%.
It is clear that demand for the services the Company helps to finance is
significant, urgent and unmet. Finding opportunities to invest more wisely on
these issues is at the top of the Government's agenda.
The Company has again demonstrated the results its portfolio can achieve in
these areas this year. The portfolio has positively impacted 400,000 people
since inception, provided affordable, decent homes for 35,000 disadvantaged,
vulnerable and lower-income groups and delivered £217 million (cumulative)
savings through improved and more accessible services. The Company 2024 Impact
Report is available at: https://publications.schroders.com/view/683320694/.
New investments this year saw the Company committing to delivering more
affordable homes to deprived areas, via the Simply Affordable Homes fund
("SAH") (managed by Savills Investment Management), and supporting UK
communities to help deliver a just transition to net zero, via an investment
in a community renewable energy project.
Better Society Capital's role as portfolio manager
The Schroder BSC Social Impact Trust has a portfolio managed by Better Society
Capital ("BSC" or the "Portfolio Manager"), the UK's leading financial
institution dedicated to social impact investing in its home country and an
experienced market-builder.
As part of its wider remit, BSC supports the growth of the social impact
investment market, building relationships and exploring new ways to work
alongside the investment community. For the Company, this means an extensive
pipeline of investible opportunities, as well as deepening the capital pool
engaged in impact investing.
This year, pre-election, BSC was highly engaged with policymakers, and the
team are optimistic that these conversations have been fruitful in building
awareness of the value of social impact investing amongst key decision makers.
The Board hopes to see this greater awareness translating into wider investor
interest and opportunities for private capital to play a helpful role in
tackling difficult social challenges and strengthening communities across the
UK.
Resilient financial performance
For the year ended 30 June 2024, the Company's NAV total return was 1.5%,
leading to a cumulative return of 10.2% since inception. The largest positive
contribution to the return came from investment income (4.0p per share),
partially offset by valuation losses (1.5p per share) principally due to the
write-down in the Bridges Evergreen Holdings ("BEH") disclosed in the Interim
Report along with a provision made for refinancing a Charity Bond. Liquidity
Assets had a positive contribution to NAV per share of 0.6p. While financial
returns did not meet our longer-term ambition, largely due to market
conditions affecting the operating and exit environment, we are pleased to
have seen the Portfolio Manager acting quickly and diligently to proactively
safeguard the long-term financial value of the portfolio, while supporting
fund managers and social enterprises to continue delivering their services.
We are pleased that the Company will pay out substantially all of its income
as a dividend, resulting in a dividend made up wholly of an interest
distribution of 2.94p per share (2023: 2.30p), another significant
year-on-year increase in line with our guidance range, which was raised last
year.
A more detailed analysis of performance and additional information on the
portfolio is included in the Portfolio Manager's Report.
Demonstrating and promoting our unique investor proposition
From inception, we have stated that the Company offers portfolio
diversification, with a differentiated risk/return profile. The Company has
delivered resilient NAV total returns since its inception on 22 December
2020, in a highly volatile market, with an annualised NAV total return per
share of 2.8%.
Another key differentiator of the Company is our deep impact focus. We
therefore see the introduction of the Sustainability Disclosure Requirements
("SDR") as a helpful opportunity to evidence the quality of the Portfolio
Manager's impact-driven investment process. It is the Board's intention that
the Company adopts the "Sustainability Impact" label, given it is in line with
the Company's existing central aims and objectives*.
Significant work has taken place with Schroders (the "Manager" or "AIFM"), the
Portfolio Manager, and professional advisers to date to ensure adoption of
this label. We are currently in dialogue with the FCA in relation to amending
the Company's investment policy, adding additional disclosure to align with
SDR guidance. On FCA approval of the proposed new investment policy, the
change will be put to shareholders at an EGM. Further details are expected to
be included in a Circular containing the Notice of EGM and proposed new
investment policy and objective to be voted on by shareholders.
Investor engagement remains very important to the Company, which is
proactively pursuing opportunities to reach a broader audience and connect
more deeply with its existing shareholders. The management team has been
focusing on developing our marketing materials and articulating better what we
can offer to investors. The Company has a unique ability to share its
experience in impact investing, provide reporting support, thematic case
studies and much more to its investors. We would encourage shareholders to
take advantage of these opportunities, and I would be delighted to hear from
investors about what they most value.
Managing the discount
Despite the Company's resilient NAV and impact performance, and similarly to
the majority of UK investment trusts, its shares continue to trade at a
discount to NAV. The share price total return during the period was -4.8% in
line with broader negative investor sentiment towards UK alternative equities
and during the financial year, the Company traded at an average discount to
NAV of 13.9% and the average discount across the UK investment trust market
was 14.7% and the Company's share price traded at a 16.7% discount to NAV at
the period end, and as of 22 October 2024, the discount had widened to 19.67%.
The discount to NAV over the financial year was indicative of negative
investor sentiment across the sector, particularly towards alternative asset
classes. In tackling this, throughout the year, the Board has remained focused
on articulating the Company's unique proposition through promotional
activities combined with the judicious use of share buybacks.
During the year ended 30 June 2024 the Company bought back 1,575,205 ordinary
shares for a total consideration of £1.4 million. All shares were bought at
a discount to the prevailing NAV and were placed into Treasury for future
re-issue. This has been accretive to the NAV total return per share in the
period by 0.27p per share. While the Board is reluctant to shrink the size of
the Company, we believe the careful use of buybacks has not only been
accretive, but also helped liquidity and demonstrates our confidence in the
portfolio.
In the Prospectus, published at the time of the IPO, the Company undertook to
provide shareholders with the opportunity to vote on the Company's
continuation should the Company's shares trade, on average, at a discount in
excess of 10% to NAV for the two-year period ending 31 December 2023 and in
any subsequent two-year period. The average discount for the two-year period
to 31 December 2023 was 6.7%. The current period under assessment is the
two-year period to 31 December 2025. In the event that a vote was triggered,
shareholders would be provided with the opportunity to vote on whether the
Company should continue in its present form at the AGM in 2026.
Since 30 June 2024 and up to 22 October 2024, a further 496,486 shares have
been bought back and placed in Treasury. At the forthcoming Annual General
Meeting ("AGM") the Board will seek to renew the authorities previously
granted by shareholders to issue or buy back shares. We encourage shareholders
to vote in favour of these resolutions which are described in more detail in
the Notice of AGM in the full set of annual financial statements.
In the longer term, we remain committed to plans to raise funds through share
issuance. This approach will allow us to capitalise on the attractive pipeline
of high impact investments identified by our Portfolio Manager. By deploying
additional capital, we would also be able to positively change the lives of
more people in the UK.
Online presentation
Our Portfolio Manager will be giving a presentation at an investor webinar on
Thursday 24 October 2024 at 9.00 am (which can be signed up to via the
following link: https://www.schroders.events/SBSI24).
AGM
The AGM will be held on 18 December 2024 at 12.00 pm at the offices of
Schroders at 1 London Wall Place, London, EC2Y 5AU. The Portfolio Manager will
give a presentation following the formal business of the AGM, and attendees
will be able to ask questions in person. The presentation will be made
available on the Company's website following the meeting. Details of the AGM
are set out on in this Annual Report.
Board changes
Mike Balfour has served on the Board since the Company's IPO, and having
completed four years in post, will step down from the Board at the conclusion
of this year's AGM. I would like to thank him on behalf of the Board and all
of the Company's stakeholders for his unfailing dedication and meticulousness
as Chairman of the Audit and Risk Committee and for his wisdom as a Board
member. He will be missed.
We are delighted to have appointed Ranjan Ramparia to the Board on 16 October
2024. This followed a thorough search process undertaken by Sapphire Partners
Limited, a specialist recruitment firm. Ms Ramparia is a qualified Chartered
Accountant and experienced business professional with a background in
corporate finance and investment management. On behalf of all the directors,
I welcome Ranjan to the Board. She will succeed Mike Balfour as Chair of the
Audit and Risk Committee.
Outlook - a pivotal moment for social impact investment in the UK
Several factors give me confidence in the outlook for the UK social impact
investment market over the next year, and for the Company. Firstly, the UK
continues to grapple with structural challenges, such as homelessness, an
ageing population and pressures on the health system, as well as a restricted
government budget. We believe that the Company's investments are therefore
extremely valuable, allowing capital to be deployed to organisations
delivering essential, government-mandated services while at the same time
delivering significant financial and social savings.
Secondly, the General Election in July 2024 represented the most significant
political shift for the UK since Brexit. While it is early days, we believe
this represents a significant opportunity to bring communities together and
build partnerships between public sector bodies, private organisations and the
people of the UK. The Schroder BSC Social Impact Trust can play an important
role in this mission, evidencing how innovative solutions implemented and
financed well can benefit everyone involved.
And finally, at the same time the operating environment for social enterprises
shows early signs of improvement. While we remain cautious, inflation looks to
be easing, and the latest Social Enterprise Barometer report, published August
2024, shows a growing number of social enterprises increasing their reserves
compared to a year ago.
While uncertainty continues, the Company remains committed to its goals of
delivering high quality impact and stable financial returns to shareholders
with low correlation to traditional quoted markets. We have an attractive
pipeline of investment opportunities available to us and look forward to the
year ahead as we continue to provide significant social impact for vulnerable
and disadvantaged people across the UK. Our biggest opportunity lies in
effectively engaging with a wider pool of investors and I hope this report
will encourage you to be in touch and learn more.
* For more information on the labelling regime please see FCA policy statement
via this link here: https://www.fca.org.uk/publication/policy/ps23-16.pdf.
Susannah Nicklin
Chair
23 October 2024
Portfolio Manager's Report
Market developments
In the twelve months to 30 June 2024, we have seen a return to stability in
interest rates, with the Bank of England base rate remaining constant at 5.25%
during the period, inflation decreasing to the 2% target and emerging signs of
an economic rebound.
However, lagged and long-term effects of the market disruptions of the
previous 18 months continue to impact the operating environment of companies
in the UK, while we see a continued increase in the number of people affected
by issues like poverty, deprivation(1) and homelessness(2), with negative
repercussions on long term health(3).
The year was also marked by political uncertainty, with the impending election
in the UK leading to lack of clarity on the outlook for the policy
environment.
While a new Labour government came into power in July 2024, after the period
end, the backdrop of a constrained fiscal environment and pressures on public
spending remains, at a time when the need to address social issues continues
to be as urgent as ever.
In this market environment, we have continued to manage the Company's
portfolio to address and mitigate the emerging risks, as well as act on areas
of opportunity.
Looking first at risk management, while our portfolio includes seasoned
companies with decades of experience in delivering UK social impact solutions,
these organisations are not immune to broader market disruptions. We have been
working across our portfolio to help organisations and funds adapt to the
operating environment and new opportunity set.
On financial returns, we have aimed to build a portfolio with a degree of
inflation correlation. While we have previously caveated that some of these
correlations would be partial and/or lagged, we have seen the benefit of
higher interest rates reflected in the increased income from the floating rate
loans; this will be passed on to investors as increased dividend income. From
the last quarter of the financial year ending 30 June 24, we have also
started to see increased income in the High Impact Housing portfolio,
reflecting increases in the Local Housing Allowance effective as of April
2024.
Looking at opportunities, against a challenging exit environment, we have seen
several successful exits and refinancings within the portfolio, which we
detail further in the report. At the portfolio level, we have re-committed
£8.6m of capital during the year (representing 10% of NAV) into new
investments, increasing the diversification of our portfolio with a new
renewable energy investment contributing to the theme we call 'Just Transition
to Net Zero' and growing our High Impact Housing portfolio. We have also seen
capital recycling within the underlying funds. Where capital is returned from
successful exits and refinancings, we often work with our fund managers to
have the proceeds returned to the Company, pending re-deployment into
High Impact Investments, mitigating fee and cash drag for the Company's
investors.
We continue to see high and growing demand for social impact investments, as
evidenced by the growing need in the UK alongside constrained public spending.
The Impact Investing Institute's market sizing report(4) published on 16
September 2024 estimated that the UK impact investing market had grown at a
compound annual growth rate of 10.1% between the beginning of 2021 and end of
2023, to £76.8bn assets under management, significantly outpacing the broader
UK asset management sector, which had an annual growth rate between -2% and 0%
over the same period. Using a narrower definition of the market, Better
Society Capital's market sizing exercise estimated that the UK social impact
investing market grew by a compound annual rate of 15% between the end of 2020
to the end of 2023, to £10bn.
We are also seeing an expanding and maturing pipeline of investment
opportunities, primarily in private markets that are difficult for many
investors to access. We believe the Company remains well positioned to offer
investors access to a mature portfolio of high-quality impact investments
within this expanding opportunity set, as evidenced by our ability to
efficiently recycle capital repaid in the last year.
Performance update
The Net Asset Value (NAV) total return per share for the twelve-month period
to 30 June 2024 was 1.5%. Overall, the Company's total NAV reduced slightly
from £88.75m to £86.46m over the period due to distributions to shareholders
via a dividend payment (£1.93m) and share buy-backs (£1.41m) reducing the
number of shares in issue from 84.60m to 83.02m, offset by the net return of
£1.05m during the year under review.
The Company's NAV per share declined from 104.90p to 104.13p - including the
2.30p dividend payment - with a full performance bridge in the chart in the
full set of annual financial statements.
In the twelve months to 30 June 2024 the Company recorded gross revenue of
£3.49m (2023: £2.77m) and net revenue after fees, costs and expenses of
£2.65m (2023: £1.97m), providing a net revenue return per share of 3.16
pence (2023: 2.32 pence). The Company recorded losses on the fair value of
investments of £0.83m, recognised an impairment provision of £0.41m and
recorded capitalised expenses of £0.36m, resulting in a total gross return of
£2.24m, and a total net return of £1.05m, or 1.25 pence per share.
The Company will pay a dividend made up wholly of an interest distribution of
2.94p per share (2023: 2.30p) on 20 December 2024, which represents a dividend
yield of 2.82% based on the net asset value at 30 June 2024. This is in line
with our guided dividend range of 2-3% yield on net asset value p.a.
The key drivers of financial performance in the twelve-month period to 30 June
2024 were:
• A mix of income and capital gains in the Social Outcomes
Contracts portfolio driven by strong performance of the underlying projects,
with Bridges Social Outcomes Fund II contributing 0.56p to NAV per share;
• A ramp-up of returns in the High Impact Housing portfolio, in
particular valuation gains in the Real Lettings Property Fund, contributing
0.55p to NAV per share, driven by the increases in the Local Housing Allowance
(LHA) effective from 1 April 2024 (with an expected 13% uplift in annual
rental income) and uplifts in the value of its property portfolio;
• BEH had a negative 1.00p contribution to NAV per share, due to a
capital loss on the disposal of AgilityEco, relative to the previously
recorded book value of the investment, as disclosed in the Interim Report. The
full year loss was slightly lower than the (1.10)p per share disclosed in the
Interim Report, thanks to dividend income and continued performance of the
remaining investments.
The Social Impact performance of the portfolio was reported in the Company's
third Impact Report published in July 2024. The report highlighted that since
launch, the Company's investments have reached 400,000 people, 95% of whom are
from disadvantaged, vulnerable or underserved backgrounds; generated £217m in
social outcomes and savings; and funded 35,000 affordable, decent homes.
Portfolio exits and new investments
The Company's capital is fully committed to High Impact Investments (drawn or
pending drawdowns). The Portfolio Manager continuously monitors a pipeline of
additional High Impact Investments to allow efficient recycling of capital
that is returned to the Company via distributions, scheduled maturities or
early exits, and in anticipation of new capital raises should the share price
discount be closed.
During the period under review, £5.9m (7% of NAV) of capital was returned
largely through the Charity Bank Co-investment portfolio, as scheduled
maturities alongside the early repayment of the remaining £2.4m balance of
the Sue Ryder loan, as well as capital returned by the Bridges Social Outcomes
Fund II (£1.9m).
We have made two new commitments:
• £3.6m to Community Energy Together Limited ("CETL") (fully
drawn at commitment in December 2023): a community renewable energy project
company, contributing to a 'Just Transition to Net Zero'; and
• £5.0m to SAH (managed by Savills Investment Management) (first
drawdown after period end): SAH aims to deliver affordable homes across the
UK, with a focus on areas with high local authority waiting lists and areas
ranked within the lowest 40% in the Index of Multiple Deprivation. SAH will
invest in and manage a diversified portfolio of affordable housing, comprising
both affordable and social-rent homes as well as shared-ownership homes,
generating government-backed and inflation-linked income streams.
Portfolio cash flows and balance sheet
During the period, net drawdowns for High Impact Investments were £0.62m,
comprising new deployment of capital of £6.47m, and capital repayments of
£5.85m (£3.12m of which are recallable distributions):
• In Debt and Equity for Social Enterprises:
- BEH exited AgilityEco via a sale to M Group Service, delivering a
3.4 times money multiple return on the original BEH investment (2.7 times
since investment by the Company); the proceeds from the exit will be
reinvested in other high impact opportunities; post period end, the fund made
a recallable distribution to investors, pending re-investment by BEH;
- £3.6m was deployed into the Company's new investment in CETL;
- In the Charity Bank Co-investment portfolio, we have received an
early repayment of the Sue Ryder £2.64m loan, and a £1.02m drawdown for the
Abbeyfield York loan;
- The Community Investment Fund made a recallable distribution of
£1.22m following the refinancing of the Resilient Energy Forest of Dean loan,
and a drawdown of £0.64m for new investments, including a new loan to Social
adVentures for the purchase of a detached family home in Salford Greater
Manchester, which has opened a new children's home for three children aged 8
to 18 years;
• In High Impact Housing, £0.86m was drawn by Social and
Sustainable Housing LP and £0.08m by Man GPM RI Community Housing Fund,
deployed towards delivering more affordable and social housing in the UK.
• Within Social Outcomes Contracts, further investment was made
into new and existing projects for the delivery of public services in areas
such as homelessness and healthcare.
(1) Institute for Fiscal Studies, March 2024
(2) The Guardian, Apr 2024
(3) Office for National Statistics, July 2023
(4)
https://www.impactinvest.org.uk/resources/publications/the-uk-impact-investing-market-size-scope-and-potential/
Portfolio allocation
A diversified asset allocation delivering local UK social impact
The Company delivers its investment objective through allocating to
best-in-class social impact managers in private markets - with proven track
records delivering high quality financial returns alongside measurable social
impact for more disadvantaged groups in the UK. Investments that are committed
but not yet drawn by private market funds are held in listed Liquidity Assets
investments to mitigate cash drag during longer drawdown periods.
As of 30 June 2024, total commitments (drawn and undrawn) to High Impact
Investments amounted to 104% of NAV, while the drawn portion of the
commitments was at 90% of NAV ("invested as % of NAV"). Capital awaiting
deployment into High Impact Investments is currently held in Liquidity Assets
(including investment funds and money market funds earning interest in line
with base rates) (11% of NAV).
While current undrawn commitments exceed the amounts held in Liquidity Assets,
this is mainly a reflection of the long drawdown periods of some of our
commitments (in particular in housing), and when matched against expected
capital repayments, we are maintaining appropriate cover for expected
drawdowns.
Providing access to a seasoned high impact portfolio
The Company has built a seasoned high impact portfolio that would be difficult
for shareholders to access directly - through a combination of a seed
portfolio and secondary investments from Better Society Capital, the Portfolio
Manager, as well as its relationships and knowledge of the sector. This
provides a greater allocation to more mature assets that will help drive
future financial and impact performance. The Portfolio Manager's broader
portfolio relationships offer additional fee benefits to Company shareholders
- with 43% of the Company's portfolio with no or discounted management fees -
from co-investments or fee discounts that the Portfolio Manager has
negotiated, often through their role as initial cornerstone investor in funds.
Targeting inflation resilient returns
The Company aims to deliver an asset allocation that is resilient through
periods of rising prices through targeting two-thirds of its asset allocation
to assets that will benefit from inflation. These assets are:
• Property and renewables - with a mix of long dated inflation
linked leases, shorter property leases where value is more driven by property
prices, and smaller investments in community renewables in our Debt and Equity
for Social Enterprises asset class; we also hold renewables investments in our
Liquidity Assets portfolio.
• Mezzanine and equity investments - where the value is driven by
government contracts that have historically moved with inflation.
• Floating rate instruments which benefit from increases in the
base rate (currently base rates are higher than inflation, and are expected to
decrease).
As of 30 June 2024, the Company had committed 66% of its capital to inflation
sensitive assets. The remaining capital committed to high impact investments
was allocated to fixed income securities such as charity bonds and social
outcomes contracts; the Company aims to minimise the duration of these fixed
income assets, to allow reinvestment over time into the prevailing interest
rate environment. Including the investments in Liquidity Assets, the Company's
invested amount in assets that are linked or correlated with inflation is 67%
of its capital.
To date the Company has underperformed its CPI+2% aim, with double digit
inflation levels not being reflected in portfolio returns given lease caps,
increases in discount rates, falls in real value of house prices and lags in
inflation feeding through into new contracts. We expect to see future
returns now benefiting as the lagged impact of higher inflation and interest
rate reductions feed across the portfolio.
Targeting low correlation to mainstream markets
The Company's asset allocation aims to achieve low correlation to mainstream
markets by backing business models that are underpinned by government
expenditure and have been historically resilient through economic cycles. As
of 30 June 2024, 71% of the committed portfolio (55% invested) is underpinned
by government backed revenue streams. These revenue streams are themselves
diversified across policy areas, such as housing, clean energy and fuel
poverty, education, and addressing inequalities/levelling up. This
diversification reduces exposure to individual policy risk, such as the risk
that government or budgetary changes would significantly reduce or withdraw
payments. The Company targets areas with a track record of delivering impact
for more disadvantaged groups and generating savings for the public purse
which provides additional revenue resilience. In the twelve months to 30 June
2024, the Company's share price had a negative correlation with the FTSE All
Share Index of (0.76) (compared to (0.61) in the previous year), and since
Company IPO, the share price had a negative correlation of (0.78) with the
market index.
In a challenging period for financial markets since the IPO in December 2020
the Company's portfolio performance has shown resilience, delivering a NAV
Total Return per share of 10.2% (2.8% annualised).
Recent events
The Company recently won its category at the Best ESG Investment Fund: Impact
(private markets) at the ESG Investing Awards 2024. The Judges commented that
"their clear report card approach following IMP principles was impressive.
Easy to digest a huge amount of information in their impact report. We
particularly liked their reporting of impact metrics including the financials.
This was backed by clear intentionality and approach." The Company was also
shortlisted for the Best Impact Fund at the Sustainable Investment Awards in
September 2024. The Company has won four awards since its launch. Judges have
cited its unique offering of a diversified portfolio delivering deep social
impact for more disadvantaged groups across the UK. We are pleased that the
Company's contribution is being recognised as playing a key role in the
evolution of sustainable investing.
In October 2024 Better Society Capital completed an equity investment into
Resonance Limited ("Resonance"), the parent company of the manager of the Real
Lettings Property Fund in the Company's portfolio, to accelerate Resonance's
growth. The Portfolio Manager now holds 5.2% of the capital of Resonance by
way of non-voting shares. This does not form a part of the Company's
investment portfolio.
Outlook
The start of the Company's new financial year was marked by the UK election,
bringing the Labour Party into power. A common thread remains that social
issues requiring intervention are growing, while public spending remains under
pressure.
We welcome the new government's indications of their intention to work in
partnership with private capital to address the UK's most urgent issues:
• Several public sector investment partnership opportunities are
emerging with opportunities to create social impact. For example, the
Government is launching a National Wealth Fund(5) capitalised with £7.3bn and
a remit to invest in new and growing industries, targeting £3 of private
investment for every £1 of public investment. Great British Energy(6), a
publicly owned national energy company, is also being created, capitalised
with £8.3bn to catalyse up to £60bn of private investment, including funding
to ensure communities own and benefit from clean power projects.
(5)Gov.uk: Chancellor Rachel Reeves is taking immediate action to fix the
foundations of our economy
(6)Gov.uk: Great British Energy founding statement
• Secondly, broader changes to the public sector landscape are
anticipated. For example, the commitment to deliver 1.5 million homes(7) with
incentives for social and affordable housebuilding alongside the promise of
social rent stability. Other favourable changes to the landscape may follow
the pensions review(8) and "Local Growth Plans"(9) which all regional
governments with devolution deals will develop.
Finally, during the pre-election period the new Government was actively
considering how to harness the power of the "impact economy" - social impact
private markets, purpose-driven businesses and philanthropists - to help them
deliver their ambitions once in government(10). Across all areas, the
Portfolio Manager, Better Society Capital, is following developments closely
and engaging where suitable to explore social impact opportunities.
Another important policy development was the launch of the FCA's SDR labelling
regime in July 2024. The framework signals the regulator's commitment to
supporting the integrity and growth of the impact and wider sustainability
investment markets in the UK. We believe transparent labelling and disclosure
of impact products are essential for the impact investment market to grow
healthily. We believe that our deep impact focus is strongly aligned with the
principles of the Sustainability Impact label and, as mentioned in the Chair's
statement, will be seeking shareholder approval for changes to our investment
policy to ensure alignment with the principles and guidance of the labelling
regime*.
As markets stabilise and we gain further clarity on policy, we think the
Company is in a unique position to offer shareholders access to a diversified
portfolio of private investments into organisations delivering high impact
solutions for the most disadvantaged and vulnerable groups in the UK, while
achieving high quality returns with low correlation to traditional quoted
markets.
(7)Gov.uk: Housing targets increased to get Britain building again
(8)Gov.uk: Chancellor vows 'big bang on growth' to boost investment and
savings
(9)Gov.uk: Deputy Prime Minister kickstarts new devolution revolution to boost
local power
(10)https://www.cityam.com/labour-must-partner-with-businesses-in-the-impact-economy/
*For more information on the labelling regime please see FCA policy statement
via this link here: https://www.fca.org.uk/publication/policy/ps23-16.pdf
(https://www.fca.org.uk/publication/policy/ps23-16.pdf)
Portfolio developments
The Company invests primarily in three asset classes that were selected to
give a diversified set of opportunities with low correlation, both with one
another and with mainstream financial developments across all three in the
year under review.
Debt and Equity for Social Enterprises
Lending and some preference shares to typically large and well-established
charities and social enterprises to help fund expansion projects to scale
operations and impact including:
- Health and Social Care
- Community Facilities and Services
- Fuel Poverty
High Impact Housing
Investment to increase the number of safe, secure and genuinely affordable
homes for more disadvantaged groups, diversified across:
- Transitional Supported Housing
- General Needs Social and Affordable Housing
- Specialist Supported Housing
Social Outcome Contracts
Outcomes Contracts, where private capital enables a consortium of expert
charities and social enterprises to deliver outcomes for Government
commissioned contracts across:
- Family Therapy and Children's Services
- Homelessness
- Adult Health and Social Care
High Impact Portfolio*
Date of Value at Undrawn Contribution to SBSI
Company 30 June 2024 Value as commitment total return (last 12 TVPI(11) DPI(11) Value
High Impact Portfolio Vintage investment (£)** % of NAV (£) months) (pps) IRR***
Charity Bond Portfolio 2013-2022 2020 14,521,294 17% 0 0.34 1.12 0.29
Bridges Evergreen Holdings 2016 2020 11,482,341 13% 0 (1.00) 1.23 0.13
Community Investment Fund 2014 2022 4,916,495 6% 577,621 0.21 1.25 0.29
Charity Bank Co-Investment Facility 2019-2022 2020 3,779,085 4% 0 0.45 1.13 0.59 5.3%
Community Together Energy Limited 2023 2023 3,699,762 4% 0 0.20 1.04 0.02
Triodos Bank UK Bond Issue 2020 2020 2,516,712 3% 0 0.12 1.14 0.13
Total 40,915,690 47% 577,621 0.32 1.15 0.27
UK Affordable Housing Fund 2018 2020 10,371,849 12% 0 0.34 1.08 0.04
Social and Sustainable Housing 2019 2020 9,494,109 11% 494,664 0.38 1.05 0.04
Man GPM RI Community Housing Fund 2021 2021 8,168,443 9% 1,993,815 (0.00) 1.03 0.01
Resonance Real Lettings Property Fund 2013 2020 5,779,341 7% 0 0.55 1.26 0.27 3.4%
Simply Affordable Homes 2024 2024 0 0% 5,000,000 0.00 0.00 0.00
Total 33,813,742 39% 7,488,478 1.27 1.09 0.07
Bridges Social Outcomes Fund II 2018 2020 2,721,686 3% 4,108,037 0.56 1.26 0.63 High single
Total 2,721,686 3% 4,108,037 0.56 1.26 0.63 digit****
Total 77,451,118 90% 12,174,137 2.15 1.13 0.21 4.8%
Asset class: Debt and Equity for Social Enterprises
Many impact-led social enterprises need capital to grow and increase their
impact, as well as to satisfy their existing working capital requirements. The
Company's portfolio is designed to include a diversified set of investments,
including charity bonds, asset-backed lending and portfolios of secured loans,
and funds that invest in established social enterprises via mezzanine debt
and/or equity. The underlying charities and social enterprises deliver
interventions to support the most disadvantaged or vulnerable members of
society, in areas such as health and social care, and often benefit from
government backed revenue streams.
As of 30 June 2024, the value of investments in this asset class was £40.9
million (47% of 30 June 2024 NAV). The Company has committed £41.5 million
(48% of NAV) to investments in this asset class, £0.58 million (1% of NAV) of
which remains undrawn at the year end.
BEH run by Bridges Fund Management, is a long-term capital vehicle that makes
equity investments into highly impactful businesses. Post period end, the fund
was converted from an evergreen to a closed ended structure, to be re-named as
the Bridges Inclusive Growth Fund. The fund will continue its strategy of
providing patient, flexible capital to impact-led businesses that deliver
measurable social outcomes for vulnerable groups in the UK.
As of 30 June 2024, the Company's investment was valued at £11.5m (13% of
NAV) and was 100% drawn, funding investments into the Ethical Housing Company
& New Reflexions (following the AgilityEco exit earlier in the year).
BEH's financial performance was below target driven by valuation losses
following the AgilityEco exit, resulting in a 1p decline in the Company's NAV
per share in the period. While the write-down was disappointing, the sale of
the AgilityEco investment delivered a 3.4x money multiple and 40% gross IRR
over the holding period by Bridges, and proceeds from the disposal have been
distributed to investors post period end, to be recallable for re-investment
into new impactful investments.
BEH's impact performance remains strong: the portfolio provides a range of
essential services including 98 affordable homes provided to 222 people moving
from poor-quality accommodation or insecure tenancy agreements, of whom 59%
were homeless or at risk of homelessness when applying, and 19,439 days of
quality care, education and therapy in the year for young people with complex
needs.
The Charity Bond Portfolio managed by Rathbones supports larger UK charities
seeking to raise capital via the public and private bond markets, providing an
alternative source of funding to bank finance. As of 30 June 2024, the
Company's investment was valued at £14.5 million (17% of NAV). The portfolio
is invested in nine bonds (both listed and unlisted) issued by charities and
social enterprises through the Allia C&C and Triodos Crowdfunding
platforms, predominantly delivering care and housing services with government
revenue. The portfolio delivered a 4.38% yield for the period delivering a
0.34p contribution to Company NAV per share. One bond in the portfolio, for
Thera Trust, agreed a new repayment schedule due to cash flow challenges, and
as a result we have taken a partial provision against the holding which
adjusted it to 0.5p per share, and reduced the Company's NAV by 0.4 pence per
share - the charity has continued to pay the coupon on its bonds as due. Other
bonds in the portfolio continue to perform to plan. Impact performance across
the Charity Bond Portfolio companies in the year included over 10,000
affordable homes provided, intensive support including care, education,
training, employability and housing provision to more than 3,200 people with
health conditions or special educational needs, as well as 10,000 rural
properties connected with broadband.
The Community Investment Fund (CIF) managed by Social and Sustainable Capital
provides secured loans to charities and social enterprises focused on
community renewable energy, social housing, and family support in the
community. A high proportion of revenue comes from government mandated
sources. As of 30 June 2024, the Company's investment was valued at £4.9
million (6% of NAV). During the period the Fund contributed 0.21p to Company
NAV per share from income and capital gains. Impact performance in the period
included 1,004 people reached by 11 social organisations providing essential
services, including housing, care and training.
The Charity Bank Co-investment Portfolio comprises three secured loans with a
total value as of 30 June 2024 of £3.8 million (4% of NAV), following the
loan repayment from Sue Ryder in the period. Working with Charity Bank, the
portfolio invests in low loan to value ratio (average 39%) loans to housing
and care providers Abbeyfield South Downs, Uxbridge United Welfare Trust and
Abbeyfield York. All loans are priced at a margin over the Bank of England
base rate and delivered a 0.45p contribution to Company NAV per share over the
period under review. Impact performance in the year includes the provision of
89 units of accommodation for the elderly at social rents.
CETL is a community renewable energy project company, contributing to a 'Just
Transition to Net Zero'. The investment is in the form of a junior loan of
£3.6 million, alongside Better Society Capital and Power to Change. The Loan
has a five-year term and targets an internal rate of return of 8.2% (fixed
coupon of 7% p.a. and additional rolled up interest paid at exit). The
investment is strongly aligned with the Company's investment thesis,
delivering positive social outcomes for communities alongside a good risk
adjusted financial return. CETL is a partnership of five community
organisations that have acquired seven cross-collateralised solar farm assets
across the UK. These solar farms benefit from government backed subsidies
(Feed-in-Tariffs and Renewables Obligation Certificate schemes) and the assets
are funded on a cross-collateralised basis for scale and risk-sharing. As of
30 June 2024, the Company's investment was valued at £3.7 million (4% of NAV)
and was 100% drawn. During the period, the investment contributed 0.20p to
Company NAV per share. On impact, CETL is forecast to generate total community
benefit funds in the region of £20m over the assets' lifetime of 20-25 years.
The Company's investment in a private bond issued by Triodos Bank UK Ltd was
valued as of 30 June 2024 at £2.5 million (3% of NAV). Triodos Bank is a
leading lender to sustainability and social impact focused organisations. This
includes social housing, healthcare, education, renewable energy, arts and
culture, and community projects. The bond issue enables Triodos Bank to
continue to grow its loan book and contribute to the resilience and growth of
charities and social enterprises. Triodos Bank UK remains well capitalised and
with good liquidity (Equity Ratio of 22.4% and a total capital ratio of 23.0%
as of 31 December 2023). The bond contributed 0.12p to Company NAV per share.
The impact performance included 135 housing projects financed in year.
Asset class: High Impact Housing
The portfolio is invested in affordable and social housing, which is intended
to address the housing needs of a wide spectrum of people, who are often those
on the lowest incomes and the most vulnerable. We invest across a range of
asset types, from long-term inflation-linked lease contracts with high-quality
counterparties to shorter leases to address specific issues, such as
homelessness or the housing needs of survivors of domestic abuse.
Counterparties include Registered Providers of social housing (such as housing
associations) and charities with long-standing track records, deep expertise
in addressing specific issues, and strong local relationships with authorities
and beneficiaries.
In addressing these needs, we seek to deliver returns that are often supported
by the government-backed housing benefit system. This has led to a lower
historical correlation to mainstream markets and insulation from the sharper
price movements in the private housing market. The portfolio has a diversified
exposure to rental streams and is experiencing a mix of increases in the
current environment.
The UK Affordable Housing and the Man GPM RI Community Housing funds have
mainly seen rents increase driven by index-linked leases (capped at 7% for
social rent for the fiscal year from April 2023 to April 2024). This cap was
removed in April 2024, and the funds will benefit from rent increases of 7.7%
until April 2025. The Social and Sustainable Housing (SASH) portfolio is
primarily "Exempt Accommodation" for high need groups which has seen rents
increasing in line with inflation. The Real Lettings Portfolio is primarily
Local Housing Allowance income, which has been increased by an average of 13%
across the fund's portfolio, following several years of being frozen.
Furthermore, we note some of the challenges being experienced by listed Social
Property REITs - often linked to the short operating history and limited
delivery experience of property counterparties. We are not seeing any
comparable issues in our High Impact Housing investments - with 100% of rent
due by June 2024 collected.
As of 30 June 2024, the value of investments in this asset class is £33.8
million (39% of 30 June 2024 NAV). The Company has committed £41.3 million
(48% of NAV) to investments in this asset class, £7.5 million (9% of NAV) of
which remains undrawn at the year end, including £5 million committed to
Simply Affordable Homes.
The UK Affordable Housing Fund, managed by CBRE Investment Management, aims to
increase the supply of sustainable and affordable homes in the UK for people
unable to purchase or rent in the open market. The fund targets a total return
greater than 6% (with an annual target income distribution yield of 4% from
income producing assets) net of all costs over the long term. The Company's
investment is fully deployed and valued at £10.4 million (12% of NAV). The
fund contributed 0.34p to Company NAV per share growth due to a greater
proportion of assets becoming income producing, as well as property valuations
increasing through rent review uplifts. In terms of impact performance as of
Q2 2024, the Fund has so far delivered over 2,500 homes, potentially housing
over 8,500 people.
The Real Lettings Property Fund, managed by Resonance Impact Investments
Limited, provides high quality accommodation and support for people previously
homeless or at risk of homelessness, in its 259 homes across London. The fund
leases the properties to experienced housing partners (Notting Hill Genesis,
Capital Letter and St. Mungo's) who manage the tenancies and support tenants,
helping them access support services and become part of local communities. The
fund has an overall target return of 6% and a 3.5% annual cash yield.
Following the uplift of LHA rates to match the lowest 30% of private rents as
of 1 April 2024, the fund's annual rental income is expected to increase by
13%. As of 30 June, the Company's investment was valued at £5.8 million (7%
of NAV). During the period the fund contributed 0.55p to Company NAV per share
from rental income and capital gains. On impact performance, as of the end of
June 2024, 630 people (358 adults and 272 children) were being housed by the
fund. Furthermore, research by Alma Economics commissioned by BSC estimated
that the fund generated £12.1m of public value in 202312, through reduced
costs of public services, temporary accommodation and through improved tenant
well-being.
The Man GPM RI Community Housing Fund aims to help address the UK's housing
crisis through the provision of new affordable rental and shared ownership
homes. The fund has a target of 70% of homes to be affordable and delivered in
mixed-tenure communities, and is currently on track to achieve 90% of its
homes being affordable. These homes will be predominantly leased to local
housing associations to deliver customer and asset management services. The
fund seeks to achieve returns driven by long-term inflation-linked income
streams, with a stabilised yield of 5% from income producing assets. During
the period, the fund drew down £0.72 million and as of 30 June 2024 the
Company's investment was valued at £8.2 million (9% of NAV). The fund had a
net breakeven contribution to Company NAV per share performance in the period,
mainly due to income and capital gains from stabilised assets in the portfolio
being offset by higher costs due to developer insolvencies. The fund is now
substantially committed, which is ahead of schedule - 3 years since the fund's
first close in April 2021 versus the forecast investment period of five years.
On impact performance, 318 homes have been completed as of December 2023, with
an estimated 1,242 people housed to date.
The Social and Sustainable Housing LP (SASH), managed by Social and
Sustainable Capital, provides investment to high-performing social sector
organisations with local knowledge and networks, and a strong track record of
managing transitional supported housing for vulnerable individuals. They may
include survivors of domestic violence, children leaving the care system,
ex-offenders, asylum seekers, people with complex mental health issues and
people with addiction issues. SASH makes flexible secured loans which
participate in changes in property prices and rental incomes - generated from
government-backed rental payments with a target net return of 6%. During the
period, the fund drew down £0.86 million and as of 30 June 2024, the
Company's investment was valued at £9.5 million (11% of NAV). The fund
contributed 0.38p to Company NAV per share growth during the period with the
fund still in its investment period and deployment on track. On impact
performance the fund has supported 888 adults and 236 children in the year
into housing while contributing more consistent and higher quality service
provision.
Simply Affordable Homes (SAH), managed by Savills Investment Management, seeks
to deliver affordable homes across the UK, by using its established strategic
partnerships with high quality housing associations, developers, and
housebuilders, through a mix of acquiring existing stock and delivering new
build homes. The fund will invest in and manage a diversified portfolio of
affordable housing, comprising both affordable and social-rent homes as well
as shared-ownership homes, generating government-backed and inflation-linked
income streams. The fund aims to deliver strong impact in line with the
Company's Impact Thesis and Theory of Change: properties will be affordable
rented (20% or higher discount to market rates), social-rent or shared
ownership homes, with a focus on areas with high local authority waiting lists
and delivering high quality well-built sustainable homes. Furthermore, the
fund operates under enhanced governance frameworks and a sustainable
investment strategy, targeting high environmental standards and progressing
towards Net Zero Carbon by 2040. As a new commitment in the period, the fund
had its first drawdown post period end, with the fund still in its investment
period.
Asset class: Social Outcomes Contracts
Social outcomes contracts (SOCs) aim to help the government achieve better
life outcomes for vulnerable people and better value for public funds. They
are public sector contracts designed to overcome challenges in the way that
public services have traditionally been managed. The providers of these
services are being paid for achieving specified and measurable outcomes rather
than prescribed inputs. Investment is used to cover the upfront costs incurred
to deliver the service, which ultimately produces the desired social outcomes.
We look to invest in a pool of outcomes contracts that is diversified across
central and local government commissioners and different policy areas. As of
30 June 2024, the value of investments in this asset class was £2.7 million
(3% of NAV). The Company received distributions of £1.9 million during the
year. Following these distributions, the Company's remaining exposure to
assets in this asset class is £6.8 million (8% of NAV), of which
£4.1 million (5% of NAV) is undrawn at year end. Bridges Social Outcomes
Fund II, managed by Bridges Fund Management and Bridges Outcomes Partnerships,
invests in social outcomes contracts, receiving payments when outcomes are
delivered and thereby ensuring that payment is aligned with measurable
improvements in the lives of participants. The fund has a mid-single digit
return target. During the period, the fund drew down a further £0.22 million.
The fund contributed 0.56p to Company NAV per share performance during the
period with overall achievement of outcomes and outcomes payments running in
line with plan. So far, the fund has supported 30,233 people across
homelessness prevention, education, employment and family care services,
achieving £87 million outcomes payments to date.
Liquidity Assets
The Company manages its committed but uncalled capital through Liquidity
Assets, which aim to provide sufficient liquidity to meet impact investment
commitments while earning commensurate returns. This allocation can be held as
cash or invested in money market funds, bond funds, real assets investment
trusts and other liquidity investments that align with the Company's liquidity
requirements, meet high sustainability standards and comply with the Company's
investment policy. As of 30 June 2024, the Company held £9.5 million in
Liquidity Assets, with one redemption in the period (highlighted in grey), as
detailed in the table below.
*Totals may not sum due to rounding.
Our Liquidity Assets portfolio, representing 11% of NAV, contributed 0.55p per
share to the Company's total NAV during the period. The positive performance
was achieved by robust dividend and interest income from underlying
investments, as the portfolio benefited from overweighting floating rate
credit. During the financial year, partial withdrawals from the portfolio were
made to fund High Impact portfolio drawdowns.
The existing portfolio at year end continues to reflect a focus on generating
positive real returns by capturing spreads over cash returns through dividends
from investments with strong sustainability credentials. As interest rate cuts
approach and the economic cycle matures, the existing portfolio continues to
maintain flexibility through diversified duration exposures while managing
immediate liquidity needs through money market funds and cash.
Hermina Popa, Jeremy Rogers
Better Society Capital
23 October 2024
Principal and emerging risks and uncertainties
The Board, through its delegation to the Audit and Risk Committee, is
responsible for the Company's system of risk management and internal control
and for reviewing its effectiveness. 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. Both principal and emerging
risks and the monitoring system are subject to robust assessment at least
annually.
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, Portfolio Manager, depositary and the
registrar are tested annually by independent external auditors. The reports
are reviewed by the Audit and Risk Committee.
During the year, the Board discussed and monitored a number of risks which
could potentially impact the Company's ability to meet its strategic
objectives. The Board received updates from the Manager, Portfolio Manager,
Company Secretary and other service providers on emerging risks that could
affect the Company, where appropriate.
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
robust assessment at least annually. The most recent assessment took place in
October 2024. The Committee concluded that the Company's risk management and
internal control systems remain effective with no significant control failings
or weaknesses identified.
The "Change" column on the right highlights the Audit and Risk Committee's
assessment of any increases or decreases in risk during the year after
mitigation and management. The arrows show the risks as increased or
decreased, and sideway arrows show risks as stable.
Risk Mitigation and management Change
Strategic risk The appropriateness of the Company's investment remit is regularly reviewed áâ
and the success of the Company in meeting its stated objectives is monitored.
Investment objective is out of line with the requirements of investors or
demand for the shares is not as great as the supply leading to a persistently Market feedback and share price information is monitored with regular
large discount. communication with the Company's broker.
The Board actively supports continued marketing and promotional activities.
Such activities are the result of a collaboration of the Board and the
Company's Manager as well as the Portfolio Manager. A target list of potential
shareholders is monitored and updated.
The Board monitors the Company's share price relative to its NAV and will buy
back shares when the Company trades at a discount. Commensurately, the Board
will issue shares when it trades as a premium to NAV.
Continuity risk The Portfolio Manager has extensive experience and a track record in ã
accurately timing the exits of private equity investments. The Board will
If in the two-year period ending on 31 December 2023, and in any two-year regularly monitor the position to ensure that any alternative proposals to be
period following such date, the Company's ordinary shares have traded, on made to shareholders, which will add value to investors, are put forward at an
average, at a discount in excess of 10% to Net Asset Value per Share, the appropriate time.
directors will propose an ordinary resolution at the Company's next annual
general meeting that the Company continues its business as presently The Board is in regular contact with BSC and Schroders and would make a
constituted (the "Continuation Resolution"). judgement ahead of the vote on the best course to be navigated.
The current period under assessment is the two-year period to 31 December If the Continuation Resolution is not passed, the directors will put forward
2025. In the event that a vote was triggered shareholders would be provided proposals for the reconstruction or reorganisation of the Company, bearing in
with the opportunity to vote on whether the Company should continue in its mind the liquidity of the Company's investments, as soon as reasonably
present form at the AGM in 2026. practicable following the date on which the Continuation Resolution is not
passed.
Investment management risks The Board monitors investment performance, investment risk and portfolio ã
activity at each quarterly meeting.
Poor investment performance against objective.
The AIFM and Portfolio Manager are subject to an annual review of their
suitability as conducted by the Management Engagement Committee, alongside an
annual presentation by the AIFM's Risk and internal audit functions.
The Portfolio Manager has extensive experience in selecting private Social
Impact Investments and has a robust investment process.
The Portfolio Manager makes investments according to a tested and robust
process and based on the goal of achieving the target return. A pipeline of
opportunities is vetted and reviewed, and significant care is taken in
selecting high-quality investments. The Portfolio Manager receives regular
management information and engages regularly with investees to monitor and
ensure performance to plan.
If performance is unsatisfactory over a prolonged period the Board will seek
to replace the AIFM and/or the Portfolio Manager.
Whilst the stated investment return objective has yet to be met, it remains
the ambition of the Board, the Manager, and the Portfolio Manager to achieve
this.
Poor social impact performance against objective. The Board reviews impact and publishes an annual impact report. áâ
The AIFM and Portfolio Manager are subject to an annual review of their
suitability as conducted by the Management Engagement Committee.
The Portfolio Manager has extensive experience in selecting private social
impact investments and has a robust investment process which ensures that the
anticipated positive impact of investee companies is realistic and achievable.
The Portfolio Manager undertakes robust investment analysis on the context of
proposals, impact outcomes, financial drivers, and associated risks. The
Portfolio Manager receives regular management information and engages
regularly with investees to monitor and ensure performance to plan.
If performance is unsatisfactory over a prolonged period the Board will seek
to replace the AIFM and/or the Portfolio Manager.
Liquidity risk The Portfolio Manager is experienced in managing social impact investments and áâ
seeks to accurately time the realisation of Company's investments.
Liquidity risks which include those risks resulting from holding private
equity investments as well as not being able to participate in follow-on Concentration limits imposed on single investments to minimise the size of
fund-raises through lack of available capital which could result in dilution positions.
of an investment as well as risks relating to investment commitments and
capital calls. The Portfolio Manager can sell Liquidity Assets to meet investment commitments
and capital calls. The Portfolio Manager will monitor and manage cash flows
and expected capital calls.
The Portfolio Manager will seek to manage cash-flow such that the Company will
be able to participate in follow-on fund-raises where appropriate.
Valuation risk Contracts with investee companies and funds are drafted to include obligations áâ
to provide information to the Portfolio Manager in a timely manner, where
Private equity investments are more difficult to value than publicly traded possible.
securities.
The Portfolio Manager and AIFM have extensive track records of valuing
A lack of open market data and reliance on investee company projections may privately held investments.
also make it more difficult to estimate fair value on a timely basis.
A valuation policy has been agreed by the AIFM and Portfolio Manager and
includes a robust process for the valuation of assets, including consideration
of the valuations provided by investee companies and the methodologies they
have used. Any changes to this policy must be approved by the Audit and Risk
Committee.
The Audit and Risk Committee reviews all valuations of unlisted investments
and challenges the methodologies used by the Portfolio Manager and AIFM. The
Audit and Risk Committee may also appoint an independent party to complete a
valuation of the Company's assets.
Valuation of investments is a focus for BDO, the external auditor.
Cybersecurity risks The Board receives controls reports from its key service providers which áâ
describe the protective measures they take as well as their business recovery
Each of the Company's service providers is at risk of cyber attack, data theft plans. In addition, the Board receives an annual presentation from the Manager
or disruption to their infrastructure which could have an effect on the on cyber risk.
services they provide to the Company.
While the risk of financial loss by the Company is probably small, the risk of
reputational damage and the risk of loss of control of sensitive information
is more significant, for instance a GDPR breach. Many of the Company's service
providers and the Board often have sensitive information regarding
transactions or pricing and information regarded as inside information in
regulatory terms. Data theft or data corruption per se is regarded as a lower
order risk as relevant data is held in multiple locations.
Economic, policy, and market risk The risk profile of the portfolio is considered and appropriate strategies to áâ
mitigate any negative impact of substantial changes in markets and government
Changes in general economic and market conditions, such as interest rates, policies are discussed with the Portfolio Manager.
inflation rates, industry conditions, tax laws, political events and trends
can substantially and adversely affect the value of investments. Policy risk is mitigated by working with organisations that have been
successfully operating for several decades, navigating different policy
Market risk includes the potential impact of events which are outside the environments, and making investments that benefit from some element of asset
Company's control, such as pandemics, civil unrest and wars. backing and engagement with all major political parties on social impact
investments through the Portfolio Manager.
Policy risk includes the potential negative impact of changes in UK government
policies that affect the business models, revenue streams or have other
material implications for investees.
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. This includes 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.
No significant control failings or weaknesses were identified from the Audit
and Risk Committee's ongoing risk assessment which has been in place
throughout the financial year and up to the date of this report. The Board is
satisfied that it has undertaken a detailed review of the risks facing the
Company.
A full analysis of the financial risks facing the Company is set out in note
20 to the accounts in the full set of annual financial statements.
Statement of Directors' Responsibilities
Directors' responsibilities
The directors are responsible for preparing the annual report and accounts in
accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each
financial period. Under that law the directors have prepared the financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (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;
- prepare a directors' report, a strategic report and directors'
remuneration report which comply with the requirements of the Companies Act
2006; 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 directors are responsible for ensuring the annual report and the financial
statements are made available on a website. Financial statements are published
on the Company's website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and integrity of
the Company's website is the responsibility of the Manager. The directors'
responsibilities also extend to the ongoing integrity of the financial
statements contained therein.
Directors' statement
Each of the directors, whose names and functions are listed in the full set of
annual financial statements, 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 annual report and accounts includes a fair review of the
development and performance of the business and the financial position of the
Company, together with a description of the principal risks and uncertainties
that it faces; and
- the annual report and accounts, 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
Susannah Nicklin
Chair
23 October 2024
Income Statement
for the year ended 30 June 2024
2024 2023
Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Losses on investments held at fair value through profit or loss 2 - (833) (833) - (1,020) (1,020)
Impairment provision on investments held at amortised cost - (413) (413) - - -
Income from investments 3 3,320 - 3,320 2,695 - 2,695
Other interest receivable and similar income 3 167 - 167 77 - 77
Gross return/(loss) 3,487 (1,246) 2,241 2,772 (1,020) 1,752
Investment management fees 4 (340) (340) (680) (334) (334) (668)
Administrative expenses 5 (497) - (497) (464) - (464)
Transaction costs - (15) (15) - - -
Net return/(loss) before taxation 2,650 (1,601) 1,049 1,974 (1,354) 620
Taxation 6 - - - - - -
Net return/(loss) after taxation 2,650 (1,601) 1,049 1,974 (1,354) 620
Return/(loss) per share (pence) 7 3.16 (1.91) 1.25 2.32 (1.59) 0.73
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/(loss) 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 year (2023:
none).
The notes in the full set of annual financial statements form an integral part
of these accounts.
Statement of Changes in Equity
for the year ended 30 June 2024
Called-up
share Share Special Capital Revenue
capital premium reserve reserves reserve Total
Note £'000 £'000 £'000 £'000 £'000 £'000
At 30 June 2022 853 10,571 72,993 4,373 1,126 89,916
Repurchase of the Company's own shares into treasury - - (674) - - (674)
Net (loss)/return after taxation - - - (1,354) 1,974 620
Dividends paid in the year 8 - - - - (1,109) (1,109)
At 30 June 2023 853 10,571 72,319 3,019 1,991 88,753
Repurchase of the Company's own shares into treasury - - (1,409) - - (1,409)
Net (loss)/return after taxation - - - (1,601) 2,650 1,049
Dividends paid in the year 8 - - - - (1,934) (1,934)
At 30 June 2024 13 853 10,571 70,910 1,418 2,707 86,459
The notes in the full set of annual financial statements form an integral part
of these accounts.
Balance Sheet
at 30 June 2024
2024 2023
Note £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 9 62,321 64,199
Investments held at amortised cost 9 20,532 22,583
82,853 86,782
Current assets
Debtors 10 562 401
Current asset investments* 3,106 1,715
Cash at bank and in hand* 514 374
4,182 2,490
Current liabilities
Creditors: amounts falling due within one year 11 (576) (519)
Net current assets 3,606 1,971
Total assets less current liabilities 86,459 88,753
Net assets 86,459 88,753
Capital and reserves
Called-up share capital 12 853 853
Share premium 13 10,571 10,571
Special reserve 13 70,910 72,319
Capital reserves 13 1,418 3,019
Revenue reserve 13 2,707 1,991
Total equity shareholders' funds 86,459 88,753
Net asset value per share (pence) 14 104.13 104.90
*Cash at bank and in hand in the Balance Sheet has been restated to exclude
investments in money market funds of £1.7m for the year ended 30 June 2023
and disclose them separately as current asset investments, to conform with
those required by the Companies Act - Statutory format of the Balance Sheet.
There is no impact on other line items in the Balance Sheet nor on total
current assets.
These accounts were approved and authorised for issue by the Board of
Directors on 23 October 2024 and signed on its behalf by:
Susannah Nicklin
Chair
The notes in the full set of annual financial statements form an integral part
of these accounts.
Registered in England and Wales as a public company limited by shares
Company registration number: 12902443
Cash Flow Statement
for the year ended 30 June 2024
2024 2023
Note £'000 £'000
Net cash inflow from operating activities 15 1,957 1,116
Investing activities
Purchases of investments (6,415) (7,833)
Sales of investments 9,306 9,279
Net cash inflow from investing activities 2,891 1,446
Net cash inflow before financing 4,848 2,562
Financing activities
Dividend paid (1,934) (1,109)
Repurchase of the Company's own shares into treasury (1,383) (674)
Net cash outflow from financing activities (3,317) (1,783)
Net cash inflow in the year 1,531 779
Cash and cash equivalents at the beginning of the year 2,089 1,310
Net cash inflow in the year 1,531 779
Cash and cash equivalents at the end of the year 3,620 2,089
Cash and cash equivalents comprise:
Money market funds 3,106 1,715
Cash at bank and in hand 514 374
Cash and cash equivalents at the end of the year 3,620 2,089
Included in net cash inflow from operating activities are dividends received
amounting to £1,013,000 (year ended 30 June 2023: £860,000), income from
debt securities amounting to £1,955,000 (year ended 30 June 2023:
£1,236,000) and other interest receivable and similar income amounting to
£33,000 (year ended 30 June 2023: £70,000).
The notes in the full set of annual financial statements form an integral part
of these accounts.
Notes to the Accounts
1. Accounting policies
(a) Basis of accounting
Schroder BSC Social Impact 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.
The accounts 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", and with the
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. All of the Company's operations are of a
continuing nature.
The accounts have been prepared on a going concern basis under the historical
cost convention, as modified by the revaluation of investments held at fair
value. The Directors believe that the Company has adequate resources to
continue operating until 31 October 2025, which is at least 12 months from the
date of approval of these accounts. In forming this opinion, the Directors
have taken into consideration: the controls and monitoring processes in place;
the Company's level of debt, undrawn commitments and other payables; the low
level of operating expenses, comprising largely variable costs which would
reduce pro rata in the event of a market downturn; the Company's cash flow
forecasts and the liquidity of the Company's investments. In forming this
opinion, the Directors have also considered any potential impact of climate
change, and the risk/impact of elevated and sustained inflation and interest
rates on the viability of the Company. The Company has additionally performed
stress tests which confirm that a 50% fall in the market prices of the
portfolio would not affect the Board's conclusions in respect of going
concern.
The accounts are presented in sterling and amounts have been rounded to the
nearest thousand.
The accounting policies applied to these accounts are consistent with those
applied in the accounts for the year ended 30 June 2023.
Certain judgements, estimates and assumptions have been required in valuing
the Company's investments and these are detailed in note 19 in the full set of
annual financial statements.
(b) 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.
Investments with a fixed coupon and redemption amount are valued at amortised
cost less any impairments in accordance with FRS 102. Other financial assets
are managed and their 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. Upon initial
recognition, these investments are designated by the Company as "held at fair
value through profit or loss", included initially at cost and subsequently at
fair value using the methodology below. This valuation process is consistent
with International Private Equity and Venture Capital Guidelines issued in
December 2022, which are intended to set out current best practice on the
valuation of Private Capital investments.
(i) Quoted bid prices for investments traded in active markets.
(ii) The price of a recent investment, where there is considered to have
been no material change in fair value.
(iii) Where it is felt that a milestone has been reached or a target
achieved, the Company may use the price of a recent investment adjusted to
reflect that change.
(iv) Investments in funds may be valued using the NAV per unit with an
appropriate discount or premium applied to arrive at a unit price.
(v) Price earning multiples, based on comparable businesses.
(vi) Industry benchmarks, where available.
(vii) Discounted Cash Flow techniques, where reliable estimates of cash flows
are available.
The above valuation methodologies are deemed to reflect the impact of climate
change risk on the investments held.
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.
(c) Accounting for reserves
Gains and losses on sales of investments and the management fee or finance
costs allocated to capital, are included in the Income Statement and dealt
with in capital reserves. Increases and decreases in the valuation of
investments held at the year end and impairment losses of investments, are
included in the Income Statement and in capital reserves within "Investment
holding gains and losses".
For shares that are repurchased and held in treasury, the full cost is charged
to the Special reserve.
(d) 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.
Income from limited partnerships will be included in revenue on the income
declaration date.
Income from fixed interest debt securities is recognised using the effective
interest method.
Deposit interest outstanding at the year end is calculated and accrued on a
time apportionment basis using market rates of interest.
(e) Expenses
All expenses are accounted for on an accruals basis. Expenses are allocated
wholly to the revenue column of the Income Statement with the following
exceptions:
- The management fee is allocated 50% to revenue and 50% to capital in
line with the Board's expected long-term split of revenue and capital return
from the Company's investment portfolio.
- Expenses incidental to the purchase of an investment are charged to
capital. These expenses are commonly referred to as transaction costs and
comprise brokerage commission and stamp duty. Details of transaction costs are
given in note 9(c) in the full set of annual financial statements.
The underlying costs incurred by the Company's investments in collective funds
are not included in the various expense disclosures.
(f) Finance costs
Finance costs, including any premiums payable on settlement or redemption and
direct issue costs, are accounted for on an accruals basis using the effective
interest method and in accordance with FRS 102.
Finance costs are allocated 50% to revenue and 50% to capital in line with the
Board's expected long-term split of revenue and capital return from the
Company's investment portfolio.
(g) Financial instruments
Cash at bank and in hand comprises cash held in the bank. Current asset
investments comprise investments in money market funds and highly liquid
investments which are readily convertible to a known amount of cash and are
subject to insignificant risk of changes in value. 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 initially measured at fair value and
subsequently measured at amortised cost. They are recorded at the proceeds
received net of direct issue costs. The Company had no bank loans or
overdrafts at 30 June 2024 (2023: nil).
(h) Taxation
Taxation on ordinary activities comprises amounts expected to be received or
paid.
Tax relief is allocated to expenses charged to the capital column of the
Income Statement on the "marginal basis". On this basis, if taxable income is
capable of being entirely offset by revenue expenses, then no tax relief is
transferred to the capital column.
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.
As the Company continues to meet the conditions required to retain its status
as an Investment Trust, any capital gains or losses arising on the revaluation
or disposal of investments are exempt.
(i) Value added tax ("VAT")
Expenses are disclosed inclusive of the related irrecoverable VAT.
(j) Dividends payable
In accordance with FRS 102, dividends payable are included in the accounts in
the year in which they are paid. Part, or all of any dividend declared may be
designated as an "interest distribution", calculated in accordance with the
investment trust income streaming rules and paid without deduction of any
income tax.
2. Losses on investments held at fair value through profit or loss
2024 2023
£'000 £'000
Losses on sales of investments based on historic cost (192) (642)
Amounts recognised in investment holding losses in the previous year in 304 537
respect of investments sold in the year
Gains/(losses) on sales of investments based on the carrying value at the 112 (105)
previous balance sheet date
Net movement in investment holding losses (945) (915)
Losses on investments held at fair value in the current year through profit (833) (1,020)
and loss
3. Income from investments
2024 2023
£'000 £'000
Income from investments
UK dividends 854 1,133
Overseas dividends 173 163
Interest income from debt securities and other financial assets 2,293 1,399
3,320 2,695
Other interest receivable and similar income
Deposit interest 147 37
Other income 20 40
167 77
Total income 3,487 2,772
4. Investment management fees
2024 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fees 340 340 680 334 334 668
The bases for calculating the investment management fees are set out in the
Report of the Directors in the full set of annual financial statements and
details of all amounts payable to the managers are given in note 17 in the
full set of annual financial statements.
5. Administrative expenses
2024 2023
£'000 £'000
Other administrative expenses 292 261
Directors' fees(1) 139 141
Auditor's remuneration for the audit of the Company's annual accounts(2) 66 62
497 464
(1)Full details are given in the remuneration report in the full set of annual
financial statements.
(2)Includes VAT amounting to £12,000 (2023: £12,000).
6. Taxation
(a) Analysis of tax charge for the year
2024 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Taxation for the year - - - - - -
The Company has no corporation tax liability for the year ended 30 June 2024
(2023: nil).
(b) Factors affecting tax charge for the year
2024 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net return/(loss) before taxation 2,650 (1,601) 1,049 1,974 (1,354) 620
Net return/(loss) before taxation multiplied by the Company's applicable rate 663 (400) 263 405 (278) 127
of corporation tax for the year of 25% (2023: 20.5%)
Effects of:
Capital losses on investments - 311 311 - 210 210
Income not chargeable to corporation tax (225) - (225) - - -
Tax deductible interest distribution (610) - (610) (405) 68 (337)
Expenses not utilised in the current period 172 85 257 - - -
Expenses not deductible for corporation tax purposes - 4 4 - - -
Taxation on ordinary activities - - - - - -
UK Corporation Tax rate has increased from 19% to 25% with effect from 1 April
2023.
(c) Deferred taxation
The Company has an unrecognised deferred tax asset of £590,000
(2023:£330,000) based on a prospective corporation tax rate of 25%
(2023:25%). The main rate of corporation tax increased to 25% for fiscal years
beginning on or after 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 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.
7. Return per share
2024 2023
£'000 £'000
Revenue return 2,650 1,974
Capital loss (1,601) (1,354)
Total return 1,049 620
Weighted average number of shares in issue during the year 83,834,790 85,132,892
Revenue return per share (pence) 3.16 2.32
Capital loss per share (pence) (1.91) (1.59)
Total return per share (pence) 1.25 0.73
There are no dilutive instruments, the return per share is actual return.
8. Dividends
2024 2023
£'000 £'000
2023 interim dividend of 2.30p (2022: 1.30p) paid out of revenue profits(1) 1,934 1,109
2024 2023
£'000 £'000
2024 interim dividend of 2.94p (2023: 2.30p), to be paid out of revenue 2,439 1,946(1)
profits
(1)The 2023 interim dividend amounted to £1,946,000. However the amount
actually paid was £1,934,000, as shares were repurchased into treasury after
the accounting date but prior to the dividend record date.
The 2024 interim dividend is made up wholly of an interest distribution of
2.94p. The 2023 dividend of 2.30p was split between a 2.16p interest
distribution and a 0.14p equity dividend.
The interim dividend amounting to £2,439,000 (2023: £1,946,000) is the
amount used for the basis of determining whether the Company has satisfied the
distribution requirements of Section 1158 of the Corporation Tax Act 2010. The
revenue available for distribution by way of dividend for the year is
£2,650,000 (2023: £1,974,000).
9. Fixed assets
(a) Movement in investments
2024 2023
Investments Investments
held at Investments held at Investments
fair value held at fair value held at
through amortised through amortised
profit or loss cost Total profit or loss cost Total
£'000 £'000 £'000 £'000 £'000 £'000
Opening book cost 59,844 22,583 82,427 62,267 21,832 84,099
Opening investment holding gains 4,355 - 4,355 4,733 - 4,733
Opening fair value 64,199 22,583 86,782 67,000 21,832 88,832
Purchases at cost 5,603 1,020 6,623 7,269 980 8,249
Sales proceeds (6,648) (2,658) (9,306) (9,050) (229) (9,279)
Impairment losses on investments held at amortised cost - (413) (413) - - -
Losses on investments held at fair value through profit or loss (833) - (833) (1,020) - (1,020)
Closing fair value 62,321 20,532 82,853 64,199 22,583 86,782
Closing book cost 58,607 20,532 79,139 59,844 22,583 82,427
Closing investment holding gains 3,714 - 3,714 4,355 - 4,355
Closing fair value 62,321 20,532 82,853 64,199 22,583 86,782
The Company received £9,306,000 (2023: £9,279,000) from disposal of
investments in the year. The book cost of these investments when they were
purchased was £9,911,000 (2023: £9,921,000). These investments have been
revalued over time and until they were sold any unrealised gains/losses were
included in the value of the investments.
(b) Unquoted investments, including investments quoted in
inactive markets
Material revaluations of unquoted investments during the year ended 30 June
2024
Opening Closing
valuation valuation
at 30 June at 30 June
2023 Purchases Revaluation Distributions 2024
£'000 £'000 £'000 £'000 £'000
Investment
Bridges Evergreen Capital LP 12,750 - (1,268) - 11,482
Resonance Real Lettings Property Fund LP 5,476 - 303 - 5,779
Bridges Social Outcomes Fund II LP 4,271 219 134 (1,902) 2,722
Material revaluations of unquoted investments during the year ended 30 June
2023
Opening Closing
valuation valuation
at 30 June at 30 June
2022 Purchases Revaluation Distributions 2023
£'000 £'000 £'000 £'000 £'000
Investment
Bridges Evergreen Capital LP 14,451 - (1,701) - 12,750
Man GPM RI Community Housing 1 LP 5,202 2,930 397 (383) 8,146
UK Affordable Housing Fund 9,848 - 351 - 10,199
Material disposals of unquoted investments during the year
2024
Book Sales Realised
cost proceeds gain/(loss)
£'000 £'000 £'000
Investment
Charity Bank Co Invest Portfolio: Sue Ryder FRN 04/12/2043 2,440 2,440 -
Bridges Social Outcomes Fund II LP 1,902 1,902 -
Community Investment Fund 1,220 1,220 -
2023
Book Sales Realised
cost proceeds gain/(loss)
£'000 £'000 £'000
Investment
Resonance Real Lettings Property Fund LP 990 990 -
(c) Transaction costs
The following transaction costs, comprising stamp duty and legal fees, were
incurred in the year:
2024 2023
£'000 £'000
On acquisitions 15 -
10. Current assets
Debtors
2024 2023
£'000 £'000
Dividends and interest receivable 545 382
Other debtors 17 19
562 401
The Directors consider that the carrying amount of debtors approximates to
their fair value.
11. Current liabilities
Creditors: amounts falling due within one year
2024 2023
£'000 £'000
Repurchase of the Company's own shares into treasury awaiting settlement 26 -
Other creditors and accruals 550 519
576 519
The Directors consider that the carrying amount of creditors falling due
within one year approximates to their fair value.
12. Called-up share capital
2024 2023
£'000 £'000
Ordinary Shares of 1p each, allotted, called up and fully paid:
Opening balance of 84,604,866 (2023: 85,316,586) shares 846 853
Repurchase of 1,575,205 (2023: 711,720) shares into treasury (16) (7)
Subtotal of 83,029,661 (2023: 84,604,866) shares 830 846
2,286,925 (2023: 711,720) shares held in treasury 23 7
Closing balance(1) 853 853
(1)Represents 85,316,586 (2023: 85,316,586) shares of 1p each, including
2,286,925 (2023: 711,720) held in treasury.
During the year, the Company repurchased 1,575,205 of its own shares, nominal
value £15,752 to hold in treasury, representing 1.86% of the shares
outstanding at the beginning of the year. The total consideration paid for
these shares amounted to £1,409,000. The reason for these purchases was to
seek to manage the volatility of the share price discount to NAV per share.
13. Reserves
Year ended 30 June 2024
Capital reserves
Gains and Investment
losses on holding
Share Special sales of gains and Revenue
premium(1) reserve(2) investments(3) losses(4) reserve(5)
£'000 £'000 £'000 £'000 £'000
Opening balance 10,571 72,319 (1,336) 4,355 1,991
Gains on sales of investments based on the carrying value at the previous - - 112 - -
balance sheet date
Net movement in investment holding losses - - - (945) -
Transfer on disposal of investments - - (304) 304 -
Impairment losses on investments - - (413) - -
Repurchase of the Company's own shares into treasury - (1,409) - - -
Management fees allocated to capital - - (340) - -
Transaction costs - - (15) - -
Dividends paid - - - - (1,934)
Retained revenue for the year - - - - 2,650
Closing balance 10,571 70,910 (2,296) 3,714 2,707
(1)Share premium is a non distributable reserve and represents the amount
by which the fair value of the consideration received from shares issued
exceeds the nominal value of shares issued.
(2)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.
(3)This is a realised (distributable) capital reserve and may be
distributed as dividends or used to repurchase the Company's own shares.
(4)This is an undistributable reserve which consists of unrealised gains
and losses as a result of revaluations of investments held as at year end.
(5)The revenue reserve may be distributed as dividends or used to
repurchase the Company's own shares.
Year ended 30 June 2023
Capital reserves
Gains and Investment
losses on holding
Share Special sales of gains and Revenue
premium(1) reserve(2) investments(3) losses(4) reserve(5)
£'000 £'000 £'000 £'000 £'000
Opening balance 10,571 72,993 (360) 4,733 1,126
Losses on sales of investments based on the carrying value at the previous - - (105) - -
balance sheet date
Net movement in investment holding losses - - - (915) -
Transfer on disposal of investments - - (537) 537 -
Repurchase of the Company's own shares into treasury - (674) - - -
Management fees allocated to capital - - (334) - -
Dividends paid - - - - (1,109)
Retained revenue for the year - - - - 1,974
Closing balance 10,571 72,319 (1,336) 4,355 1,991
The Company's Articles of Association permit dividend distributions out of
realised capital profits. Total distributable reserves as at 30 June 2024 were
£71,321,000 (30 June 2023: £72,974,000).
(1)Share premium is a non distributable reserve and represents the amount
by which the fair value of the consideration received from shares issued
exceeds the nominal value of shares issued.
(2)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.
(3)This is a realised (distributable) capital reserve and may be
distributed as dividends or used to repurchase the Company's own shares.
(4)This is an undistributable reserve which consists of unrealised gains
and losses as a result of revaluations of investments held as at year end.
(5)The revenue reserve may be distributed as dividends or used to
repurchase the Company's own shares.
14. Net asset value per share
2024 2023
Net assets attributable to shareholders (£'000) 86,459 88,753
Shares in issue at the year end 83,029,661 84,604,866
Net asset value per share (pence) 104.13 104.90
15. Reconciliation of total return on ordinary activities before finance
costs and taxation to net cash inflow from operating activities
2024 2023
£'000 £'000
Total return before taxation 1,049 620
Add capital loss before taxation 1,601 1,354
Less accumulation dividends(1) (208) (416)
Increase in accrued income (163) (189)
Decrease/(increase) in other debtors 2 (6)
Increase in other creditors 31 87
Management fee and transaction costs allocated to capital (355) (334)
Net cash inflow from operating activities 1,957 1,116
(1)Accumulation dividends are capitalised to investments.
16. Uncalled capital commitments
At 30 June 2024, the Company had uncalled capital commitments amounting to
£12,174,000 (2023: £8,749,000) in respect of follow-on investments, which
may be drawn down or called by investee entities, subject to agreed notice
periods.
17. Transactions with the Manager
Under the terms of the Alternative Investment Fund Manager Agreement, the
Manager is entitled to receive a management fee. Details of the basis of the
calculation are given in the Directors' Report in the full set of annual
financial statements.
The fee payable to the Manager in respect of the year ended 30 June 2024
amounted to £624,000 (2023: £614,000), of which £307,000 (2023: £307,000)
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.
Under the terms of the Investment Management Agreement, the Manager may
reclaim from the Company certain expenses paid by the Manager on behalf of the
Company to HSBC in connection with accounting and administrative services
provided to the Company. These charges amounted to £79,000 for the year ended
30 June 2024 (2023: £66,000), of which £66,000 (2023: same) was outstanding
at the year end.
No Director of the Company served as a Director of any company within the
Schroder Group at any time during the year, or prior period.
In accordance with the terms of a discretionary mandate between the Company,
Better Society Capital Limited, Rathbone Investment Management Limited and The
Charity Bank Limited are entitled to receive a management fee for portfolio
management services relating to certain of the Company's investments.
Details of the basis of the calculation are given in the Directors' Report in
the full set of annual financial statements. The fee payable to Rathbone in
respect of the year ended 30 June 2024 amounted to £54,000 (2023: £55,000),
of which £13,000 (2023: £13,000) was outstanding at the year end. The fee
payable to The Charity Bank Limited in respect of the year ended 30 June 2024
amounted to £2,000 (2023: £nil), of which £nil was outstanding at the year
end (2023: same).
18. Related party transactions
Details of the remuneration payable to Directors are given in the Directors'
Remuneration Report in the full set of annual financial statements and details
of Directors' shareholdings are given in the Directors' Remuneration Report in
the full set of annual financial statements Details of transactions with the
Managers are given in note 17 above.
During the year ended 30 June 2024, there has been a smaller related party
transaction for the purposes of the Listing Rules as then in force in relation
to the debt investment in CETL. The Company's debt investment in CETL, valued
at £3.5 million and comprising 4.1% of the Company's investment portfolio as
of 30 June 2024, was made by way of the sale of a £3.6 million direct junior
loan to CETL previously owned by the Portfolio Manager. After the sale, the
Portfolio Manager holds a £2.4 million investment in the same entity through
a junior loan, compared to £6.0 million before the sale.
19. 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 certain investments held in 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 are given in note 1(b)
in the full set of annual financial statements. Level 3 investments have been
valued in accordance with note 1(b)(ii) to (vii).
The Company's unlisted investments held at fair value are valued using a
variety of techniques consistent with the recommendations set out in the
International Private Equity and Venture Capital guidelines. Investments in
third-party managed funds were valued by reference to the most recent net
asset value provided by the relevant manager. The valuation methods adopted by
third-party managers include using comparable company multiples, net asset
values, assessment of comparable company performance and assessment of
milestone achievement at the investee. For certain investments, such as High
Impact Housing, the third-party manager may appoint external valuers to
periodically value the underlying portfolio of assets. The valuations of
third-party managed funds will also be subject to an annual audit. The
valuations of all investments are considered by the Portfolio Manager and
recommended to the AIFM, who in turn recommends them to the Company. Where it
is deemed appropriate, the Portfolio Manager may recommend an adjusted
valuation to the extent that the adjusted valuation represents the Portfolio
Manager's view of fair value.
At 30 June, the Company's investment held at fair value, were categorised as
follows:
2024 2023
£'000 £'000
Level 1 5,928 9,342
Level 2 - -
Level 3 56,393 54,857
Total 62,321 64,199
There have been no other transfers between Levels 1, 2 or 3 during the year
(2023: nil).
Movements in fair value measurements included in Level 3 during the year are
as follows:
2024 2023
£'000 £'000
Opening book cost 49,908 44,693
Opening investment holding gains 4,949 5,460
Opening fair value of Level 3 investments 54,857 50,153
Purchases at cost 5,392 6,957
Sales proceeds (3,193) (1,742)
Net losses on investments (663) (511)
Closing fair value of Level 3 investments 56,393 54,857
Closing book cost 52,107 49,908
Closing investment holding gains 4,286 4,949
Closing fair value of Level 3 investments 56,393 54,857
20. 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 coordinates 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 collective funds, listed and unlisted bonds, debts,
shares of quoted and unquoted companies which are held in accordance with the
Company's investment objective;
- debtors, creditors, short-term deposit and cash arising directly
from its operations;
- bank loans used for investment purposes; and
- derivatives used for 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
investments carrying a floating interest rate coupon, cash balances and
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 20% of net asset value at the time of drawing. Gearing is defined as
borrowings less cash, expressed as a percentage of net assets. The Company has
arranged an overdraft facility subject to a limit of £5 million, which
expires on 30 November 2024, with HSBC Bank plc but it has not been utilised
during the year or prior year.
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:
Investments carrying a floating interest rate coupon 3,966 5,603
Current asset investments 3,106 1,715
Cash at bank and in hand 514 374
7,586 7,692
Sterling cash balances at call earn interest at floating rates based on the
Sterling Overnight Interest Average rates ("SONIA").
The above period end amounts are broadly representative of the exposure to
interest rates during the year and prior year.
Interest rate sensitivity
The following table illustrates the sensitivity of the return after taxation
for the year and net assets to a 0.75% (2023: 0.75%) 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
0.75% 0.75% 0.75% 0.75%
increase decrease increase decrease
in rate in rate in rate in rate
£'000 £'000 £'000 £'000
Income statement - return after taxation
Revenue return 57 (57) 58 (58)
Capital return - - - -
Total return after taxation 57 (57) 58 (58)
Net Assets 57 (57) 58 (58)
(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 portfolio 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 the purpose of currency hedging, although non-sterling
exposures are expected to be limited.
Market price risk exposure
The Company's total exposure to changes in market prices at 30 June comprises
the following:
2024 2023
£'000 £'000
Investments held at fair value through profit or loss 62,321 64,199
The above data is broadly representative of the exposure to market price risk
during the year.
Concentration of exposure to market price risk
An analysis of the Company's investments is given in the full set of annual
financial statements. This shows a concentration of exposure to the social
housing sector in the United Kingdom.
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 10% 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 to the underlying
investments and includes the impact on the management fee but assumes that all
other variables are held constant.
2024 2023
10% increase 10% decrease 10% increase 10% decrease
in fair value in fair value in fair value in fair value
£'000 £'000 £'000 £'000
Income statement - return after taxation
Revenue return (25) 25 (26) 26
Capital return 6,207 (6,207) 6,394 (6,394)
Total return after taxation and net assets 6,182 (6,182) 6,368 (6,368)
Percentage change in net asset value (%) 7.2 (7.2) 7.2 (7.2)
(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
The Portfolio Manager monitors the cash position to ensure sufficient funds
are available to meet the Company's financial obligations. For this purpose,
the Portfolio Manager may retain up to 20% of net assets in Liquid Assets,
other liquid investments and a reserve of cash. The Company has also arranged
an overdraft facility with HSBC Bank plc.
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 Three
months months
or less Total or less Total
£'000 £'000 £'000 £'000
Creditors: amounts falling due within one year
Other creditors and accruals (576) (576) (519) (519)
(576) (576) (519) (519)
(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.
Credit risk exposure
The Company is exposed to credit risk principally from debt securities held,
off balance sheet commitments, loans and receivables and cash deposits.
Portfolio dealing
The credit ratings of broker counterparties are monitored by the AIFM and
limits are set on exposure to any one broker.
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 Aa3 with Moody's.
Any assets held by the custodian will be 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 those 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.
Exposure to debt securities
The Portfolio Manager's investment process ensures that potential investments
are subject to robust analysis, appropriate due diligence and approval by an
investment committee. Pre-investment checks are made to prevent breach of the
Company's investment limits, which are designed to ensure a diversified
portfolio to manage risk. Debt securities are subject to continuous monitoring
and quarterly reports are presented to the Board.
Credit risk exposure
The following amounts shown in the Balance Sheet, represent the maximum
exposure to credit risk at the year end:
2024 2023
Balance Maximum Balance Maximum
sheet exposure sheet exposure
£'000 £'000 £'000 £'000
Fixed assets
Investments held at fair value through profit 62,321 3,540 64,199 -
Investments held at amortised cost (debt securities) 20,532 20,532 22,583 22,583
Current assets
Debtors 562 562 401 401
Current asset investments 3,106 3,106 1,715 1,715
Cash at bank and in hand 514 514 374 374
87,035 28,254 89,272 25,073
At 30 June 2024, the Company had an off-balance sheet credit exposure
consisting of uncalled capital commitments which amounted to £12,174,000
(2023: £8,749,000) in respect of follow-on investments.
(d) Fair values of financial assets and financial liabilities
All financial assets and liabilities are either carried in the balance sheet
at fair value, or the balance sheet amount is a reasonable approximation of
fair value.
21. 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 853 853
Reserves 85,606 87,900
Total equity 86,459 88,753
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.
22. Events after the accounting date that have not been reflected in the
financial statements
There have been no events we are aware of since the balance sheet date which
either require changes to be made to the figures included in the financial
statements or to be disclosed by way of note.
23. Status of results announcement
2024 Financial Information
The figures and financial information for 2024 are extracted from the Annual
Report and Financial Statements for the year ended 30th June 2024 and do not
constitute the statutory accounts for that year. The Annual Report and
Financial Statements include the Report of the Independent Auditors which is
unqualified and does not contain a statement under either section 498(2) or
section 498(3) of the Companies Act 2006. The Annual Report and Accounts will
be delivered to the Register of Companies in due course.
2023 Financial Information
The figures and financial information for 2023 are extracted from the
published Annual Report and Financial Statements for the year ended 30th June
2023 and do not constitute the statutory accounts for the year. The Annual
Report and Financial Statements have been delivered to the Registrar of
Companies and included the Report of the Independent Auditors which was
unqualified and did not contain a statement under either section 498(2) or
section 498(3) of the Companies Act 2006.
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
23 October 2024
For further information:
Natalia de Sousa or Sunny Chou
Schroder Investment Management Limited
E-mail: AMCompanySecretary@Schroders.com
(mailto:AMCompanySecretary@Schroders.com)
Issued by Schroder Investment Management Limited. Registration No 1893220
England.
Authorised and regulated by the Financial Conduct Authority. For regular
updates by e-mail please register online at www.schroders.com
(https://url.uk.m.mimecastprotect.com/s/t7puCxn15T1LlkKtvh4FyxHrZ?domain=schroders.com/)
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ENDS
A copy of the 2024 Annual Report will shortly be submitted to the FCA's
National Storage Mechanism and will be available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
The 2024Annual Report will shortly be available on the Company's website
at www.schroders.com/SBSI
(https://protect-eu.mimecast.com/s/KiDaC3QwvHLPPRfqceyJ?domain=schroders.com)
where up-to-date information on the Company, including daily NAV and share
prices, factsheets and portfolio in formation can also be found.
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