Schroder BSC Social - Final Results
26/10/2021 07:00
RNS Number : 2141Q
Schroder BSC Social Impact Trust
26 October 2021
REPORT AND ACCOUNTS
Schroder BSC Social Impact Trust plc (the "Company") hereby submits its Report and Accounts for the period from incorporation on 24 September 2020 to 30 June 2021, as required by the Financial Conduct Authority's Disclosure Guidance and Transparency Rule 4.1.
Highlights
· Strong progress since launch with IPO proceeds fully committed, ahead of original timetable, into a high-quality and diversified portfolio.
· NAV returns of 6.09%, ahead of target, driven primarily by capital gains.
· Maiden dividend of 0.57p per share, a dividend yield of 0.55% for the period from IPO to 30 June 2021/1.05% annualised (ex-dividend date of 28 October 2021).
· Invested capital already driving positive social outcomes across the UK, with the Company's investments supporting over a hundred frontline organisations.
· Potential for further fundraise in 2021 to invest in an attractive pipeline of investments, that can deliver high social impact in the UK alongside sustainable real returns and low correlation to traditional quoted markets.
The Portfolio Manager will be presenting at a webinar on 9 November 2021 at 11.30 a.m. Shareholders can sign up for the webinar at: https://registration.duuzra.com/form/SBSIAnnual
The Company's Report and Accounts for the period from incorporation on 24 September 2020 to 30 June 2021 is also being published in hard copy format and an electronic copy will shortly be available to download from the Company's website: www.schroders.com/sbsi
Please click on the following link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/2141Q_1-2021-10-25.pdf
The Company has also submitted its Report and Accounts to the National Storage Mechanism. It will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Enquiries:
Gareth Faith
Schroder Investment Management Limited
Tel: 020 7658 5264
Chair's Statement
I am pleased to present the first annual report of Schroder BSC Social Impact Trust plc ("the Company"), covering the period from incorporation on 24 September 2020 to 30 June 2021.
Investment opportunity
Despite decades of economic growth, the UK still struggles with many deep-rooted social issues, including homelessness, uneven health outcomes, rising income inequality and unequal life opportunities. The global pandemic has highlighted the extent of many of these problems as well as creating a number of new societal challenges. The pandemic has also placed further pressure on Government finances at a time when funding in many areas of health and social care had already been drastically reduced over recent years. An increasing number of private and charitable impact-driven organisations are developing investable solutions to these challenges. However, they often lack access to capital to reach more people and improve and increase their impact.
The Company was created to help address this funding gap and builds on Big Society Capital's track record of delivering sustainable financial returns, while having a positive impact on the lives of vulnerable and disadvantaged people across the UK. Big Society Capital (the "Portfolio Manager") manages the Company's portfolio, and Schroders (the "Manager") serves as the AIFM (Alternative Investment Fund Manager, as defined by the Alternative Fund Management Directive), bringing extensive experience as the manager of a large stable of investment trusts, including those investing in private markets. It is a powerful partnership and the Board is confident it can deliver the unique combination of financial and social returns expected by our shareholders.
The Company targets investments in high-need areas aligned to the United Nations Sustainable Development Goals ("SDGs"), such as housing, health and social care. It is our strong belief that understanding and measuring impact can enhance accountability and facilitate more informed decisions about balancing financial and social goals, thus reducing risk and creating long-term value for investors.
Progress since IPO
At the time of the Company's initial public offering ("IPO") and listing on the premium segment of the London Stock Exchange on 22 December 2020, the Company raised £75 million. The Portfolio Manager has made strong progress since launch and committed all IPO proceeds ahead of the originally envisaged 12-month period into high quality assets. As at 30 June 2021 the Company had deployed 66% of its IPO proceeds into 23 investments, supporting over 100 front-line organisations across three broad sectors: High Impact Housing, Debt for Social Enterprises, and Social Outcomes Contracts. The remaining commitments are expected to be called over the coming months with Liquid ESG funds being used to avoid short-term cash drag to investors.
More details on these initial investments including a description of how they are defined can be found in the Portfolio Manager's Report.
Financial performance
The Company has delivered strong shareholder returns since launch. The Company's NAV produced a positive total return of 6.1% in the period, ahead of the performance target of CPI +2%, with returns primarily driven by capital growth. It is also pleasing that the Company's share price has risen since launch with a positive total return of 3.5% to 103.50p per share as at 30 June 2021, which we believe reflects the high level of investor interest in the Company's unique investment strategy.
A more detailed analysis of performance may be found in the Portfolio Manager's Report.
Social impact performance
One of our commitments at the time of the IPO was to provide an easily accessible and informative map to bring to life the "on-the-ground" work done by our investees in towns and cities across the UK. I would like to draw readers' attention to the Portfolio section of the Company's webpage where this map can be found. The interactive map tracks the Company's underlying investments by region, outcome area, asset class and the SDG to which it contributes. Place-based impact investment is a growing trend and we are pleased that your Company's investments are facilitating beneficial change through engagement with local communities across the country.
To ensure that impact considerations are purposefully integrated throughout the investment life cycle, Big Society Capital follows the Operating Principles for Impact Management (the "Principles"). The intention of the Principles is to provide a framework that brings greater discipline and transparency around impact management practices to the impact investing market. Big Society Capital has been a signatory to the Principles since March 2020. Big Society Capital's alignment against the Principles is documented and independently verified in its disclosure and verification statement.
Many investors use the SDGs as a framework to guide their impact investing, and as stated above, the Company maps all investments to the SDGs. The SDGs are a "blueprint to achieve a better and more sustainable future for all." The UN describes them as a "call for action" to "promote prosperity while protecting the planet." They were adopted by all UN Member States in 2015 as part of the 2030 Agenda for Sustainable Development to address global challenges.
Additionally, Schroders and Big Society Capital also endorse and adopt the work of the Impact Management Project, an initiative supported by various standard setting organisations, such as the International Finance Corporation and United Nations Development Programme, which proposes frameworks for measuring and managing impact as well as aligning investments to impact objectives. Big Society Capital, as one of the UK's leading impact investors, has been an advisor to the Impact Management Project since inception, and was involved in the development of its approach. We think it is a great advantage that our Portfolio Manager is able to bring this extensive expertise to its sourcing of opportunities, support for investees and monitoring of impact across the Company's holdings.
More details on the positive social impact created by the Company since launch can be found in the Impact Report on pages 15 to 25 in the Report and Accounts.
Promotion and premium/discount management
The Company has shareholder authority to issue shares under the prospectus. That authority will expire at the Annual General Meeting ("AGM") to be held on 3 December 2021 and it is the Company's intention to issue new ordinary shares following the strong growth in NAV.
At the Company's AGM, resolutions to authorise the Board to issue up to 10% of the issued share capital on a non-pre-emptive basis, and a proposal for authority to purchase up to 14.99% of the Company's issued share capital, will be put forward. Any shares so purchased may be cancelled or held in treasury for potential reissue.
Dividend
The Company will seek to use the investment trust interest streaming regime which enables an investment trust which receives "qualifying interest income" to treat the whole or part of a dividend distribution as an interest distribution. The effect of streaming is to move the point of taxation in respect of the Company's qualifying interest income, from the Company to its investors. For UK income taxpayers it will be taxed as interest received on the date the distributions were made. The potential benefit of splitting the dividend between a normal equity dividend and a streamed interest payment is for investors who are not liable to taxation.
The Board has considered the amount available to distribute to investors and has declared that the Company will pay out substantially all income as a dividend, resulting in a dividend of 0.57p per share, payable to shareholders on the Company's share register as at 29 October 2021. This is consistent with the target dividend communicated to investors at IPO. All of this dividend payment should be treated by shareholders as an interest distribution.
AGM
The AGM will be held on Friday, 3 December 2021 at 12.00 noon at the Company's registered office. Shareholders are encouraged to cast their votes by proxy.
The Portfolio Manager will be presenting at a webinar on 9 November 2021 at 11.30 a.m., to give shareholders the opportunity to hear from them, and to ask questions. Shareholders are encouraged to sign up using this link: https://registration.duuzra.com/form/SBSIAnnual
In addition, the Board would like shareholders to get in touch via the Company Secretary with any questions or comments, so that the Board can answer them in advance of the AGM. The Board will be providing answers to commonly asked questions on the Company's webpage, as well as the answers to questions received from shareholders before the AGM. To email, please use: amcompanysecretary@schroders.com or write to us at the Company's registered office address: Company Secretary, Schroder BSC Social Impact Trust plc, 1 London Wall Place, London, EC2Y 5AU.
For regular news about the Company, shareholders are also encouraged to sign up to the Manager's investment trusts update by visiting the Company's webpage: https://www.schroders.com/en/uk/private-investor/fund-centre/funds-in-focus/investment-trusts/schroders-investment-trusts/never-miss-an-update/
Outlook
The Board is pleased with the initial progress made by the Company in deploying IPO proceeds and delivering against its investment objectives. The investments made have already started to impact lives positively and this impact should continue to grow over time as the Company deploys further capital.
Looking forward, the funding gap of capital required to address a broad range of societal challenges seems certain to grow, and at the same time, new sustainable and creative solutions and enterprises are being developed. Therefore, we are confident that the pipeline of opportunities for the Company to invest in will remain robust. Our focus will continue to be on our core areas of social housing, debt for social enterprises and social outcomes contracts, but the Company will continue to utilise the Portfolio Manager's expertise and deep networks in identifying potentially new areas for investment.
It is the intention of the Company to continue to grow in time in order to increase the magnitude of its impact, increase liquidity in its shares, and bring down ongoing costs for shareholders. The Company will continue to consult with its shareholders on its growth plans and will update the market on future fundraising plans in due course.
Susannah Nicklin
Chair
25 October 2021
Portfolio Manager's Report
Market developments
The social issues we set out to address with the Company are as pressing as ever. Although the economic recovery from COVID-19 is under way, the pandemic has exacerbated the underlying structural challenges of UK society. Since the start of the pandemic, people in the lowest pay quintile are more than twice as likely as those in the highest to have lost their job, been furloughed or had hours and pay reduced. NHS waiting lists recently reached 4.7 million people, a 14-year high. At the end of 2020, over 95,000 UK households, including over 121,000 children, were living in temporary accommodation; double the number ten years ago.
Social impact investment, and the areas that we focus on specifically for the Company's portfolio, are one part of the solution to such growing challenges. While we are aware that social impact investment is not a universal solution for social challenges, we are encouraged to see an increasing number of organisations developing investable models that provide successful solutions. There is an expanding universe of opportunities for the Company to make successful investments with a deep impact.
The global impact investing market is made up of diverse investments across a range of asset classes, in both private and publicly listed markets. When the Company was launched, the Global Impact Investing Network had estimated the value of this market at US$715bn.
The Company is exclusively focused on the social impact investment segment in the UK. Over the last decade, this segment has grown significantly, with an annual growth rate of 25 per cent since 2011, the year before Big Society Capital was established. Big Society Capital estimates the total market size has grown from £5.1bn in 2019 to £6.4bn in 2020, an increase of 26% over the year. In late 2020, we estimated, based on underlying market demand and current growth rates, the investable high-impact segment of the UK market would be approximately £10 to £15bn by 2025. From what we have seen so far in 2021, we are confident that this forecast is on track. New funds have come to market and existing ones have raised further capital, because of the coming together of investor demand and an increasing opportunity set of investable high impact enterprises tackling issues such as housing, health & social care and education.
The positive market developments have enabled us to commit the Company's initial capital ahead of schedule to high quality holdings which meet our financial return and impact targets.
Performance update
We are pleased with the progress our portfolio has made since launching the Company in December 2020, with overall performance ahead of plan.
This section outlines the financial performance of the Company, taking into account the period of operation since IPO. In the next set of financial statements, with a full year of performance, we intend to publish a broader set of key performance indicators.
Total return to 30 June 2021 was ahead of expectations, with a total return since IPO of 6.1%. Gains on investments in the period were driven primarily by strong performance in Bridges Evergreen Holdings. This fund comprised part of the seed portfolio purchased from Big Society Capital and benefited from the strong performance of earlier investments, in particular AgilityEco, tackling fuel poverty and New Reflexions, providing children's services. Other assets in the portfolio performed in line with forecasts. Overall, the Company's Net Asset Value rose from £73.7m at IPO to £78.2m at the period end, or 104.3p per share as set out in the NAV bridge below. This represents an increase in NAV of 6.1% since IPO and 4.4% since the last reported NAV as of 31 December 2020.
The portfolio proved resilient during the period, with income from investments stable and increasing in some cases with additional demand for services, despite significant uncertainty created by the ongoing pandemic. The investments targeted by the Company have remained resilient throughout the last 18 months, demonstrating the value of its diversification and revenue streams, with low correlation to economic cycles and mainstream markets. We established the Company with a substantial seed portfolio to help drive initial performance, and it is the seed portfolio assets later in their investment cycle that have driven positive performance in the period.
Importantly, we were able to source and deploy capital into highly attractive investment opportunities that meet our high bar of impact and our target returns more quickly than expected. We committed substantially all the initial capital raised by the end of June 2021, faster than the original 12-month commitment timetable. Two thirds of the net proceeds of the initial public offering had been invested by the end of the reporting period.
At the time of publication of the Annual Report, the net IPO proceeds are fully committed, following the signing of a £2m secured loan to Abbeyfield York Society, a charity for older people providing housing that enhances quality of life. The loan is a co-investment with Charity Bank and is part of the Debt for Social Enterprises asset class.
Portfolio allocation
In the period from IPO to 30 June 2021, the Company recorded gross revenue return of £0.8m and net revenue after fees, costs and expenses of £0.44m, a net revenue return per share of 0.58 pence. The Company also recorded gains on the fair value of investments of £4.2m, resulting in a total gross return of £5.0m, and total net return of £4.5m, or 5.98 pence per share.
The Company will pay out a dividend of 0.57p per share, or dividend yield of 0.55% for the period from IPO to 30 June 2021/1.05% annualised. This is in line with the guidance in the IPO prospectus of an expected dividend yield in the region of 1-2% p.a.
One of our key aims is for the Company to provide investors with a diversified mix of high-impact assets, that have a low correlation to traditional quoted financial markets. We achieve this in part by backing business models that are underpinned by government expenditure that does not fluctuate in line with economic cycles. At the end of the period, 79% of the committed portfolio is underpinned by government backed revenue streams. These revenue streams are themselves diversified across policy areas, such as housing, clean energy and energy poverty, education, redressing 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 (e.g. housing or other benefits). We target areas with a track record of delivering impact for more disadvantaged groups and generating savings for the public purse which provide additional revenue resilience.
Our target is to provide a Net Asset Value total return of CPI plus 2% per annum, once the portfolio is fully invested and averaged over a rolling three- to five-year period, net of fees. We target a significant degree of inflation linkage (such as leases indexed to CPI) and correlation (such as government payments that have historically moved with inflation) in the revenues that underpin returns.
We have also made good progress with our approach to measuring and managing social impact. This is an essential part of how we manage the portfolio, and we are committed to continuous development of this process and to bringing the impact of our investments to life for our shareholders. Please see the dedicated Impact section on pages 15 to 25 of the Report and Accounts for further detail.
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 markets. We have been pleased to see positive developments across all three in the period.
Asset Class: Debt for Social Enterprises
Many impact-led social enterprises need capital so they can 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 debt products, including asset-backed lending, mezzanine debt (including some equity) and charity bonds. The underlying charities and social enterprises deliver interventions which often support the most disadvantaged or vulnerable members of society, in areas such as health and social care, which benefit from government backed revenue streams.
As of 30 June 2021, the Company had committed £33m to investments in this asset class (45% of net IPO proceeds); the current value of investments in this asset class is £36m (45% of NAV).
Initial Seed Portfolio Review
The existing social enterprise debt investments have contributed well to the Company's overall performance in the period.
Evergreen Holdings, run by Bridges Fund Management is a £50m+ long-term capital vehicle that makes subordinated debt, mezzanine and equity investments into mission-led businesses. The fund targets a 5% yield alongside capital growth. Total return in the period was particularly strong driven to a large degree by strong earnings growth at AgilityEco, a leading provider of fuel poverty, energy efficiency and low carbon services across the UK. New Reflexions, a leading provider of residential care to children with complex needs, also had strong trading performance and contributed to the overall valuation uplift. The Evergreen team made one new investment, into learning and skills provider Skills Training UK. It works with funding partners in central and local Government to offer a diversified range of apprenticeships, traineeships, adult skills and employability courses that support 16-24 year-olds and adult learners, many of whom are from disadvantaged communities.
The Charity Bond Portfolio managed by Rathbones supports larger UK charities seeking to raise significant amounts of capital via the public and private bond markets, providing an alternative source of funding to bank finance. The portfolio is invested in nine bonds (both listed and unlisted) issued by charities and social enterprises. The total portfolio value is £15m, which has been fully committed and drawn, delivering an annualised yield of 4.5%. Bond issuers have repaid capital and interest in line with schedule and no defaults have been reported.
The Company holds three secured loans within the Charity Bank Co-investment Portfolio, totalling £5.1m. The portfolio is fully committed and 75% drawn. Working with Charity Bank, the portfolio supports housing and care related investments in Sue Ryder, Abbeyfield South Downs and Uxbridge. Overall, the three facilities are performing well, with no material change in credit quality, provisioning, security or repayment profile. The facilities are secured with low loans to value and floating interest rates with a current annualised yield of 2.4%.
New investments since IPO
Shortly after the IPO, in December 2020, the Company made a £2.5m investment in the inaugural private bond issue by Triodos Bank UK Ltd, 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. The bond has a ten-year duration, callable by Triodos Bank at year five. It pays a fixed 4% coupon, which will reset to base rate +3.9% at year five, if not called.
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 and inflation-linked 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.
As of 30 June 2021, the Company had committed £30m to investments in this asset class (41% of net IPO proceeds), of which £13m has been invested (17% of NAV).
Initial Seed Portfolio Review
The high-impact housing investments in the portfolio have continued to deliver in line with our strategy.
The UK Affordable Housing Fund raised £244m at launch in 2018. Its objective is to deliver a positive social impact by contributing to the supply of sustainable and affordable homes for people unable to purchase or rent in the open market. The fund achieves this by providing equity financing for Registered Providers, where the assets are owned by the fund and managed for the long term by the Registered Provider through leases of 10 to 25 years. The fund has invested or committed £210m (86% of its initial capital commitments) and raised a further £137m in the first half of 2021, bringing total client commitments to £381m. This reflects the strong performance so far and the robust pipeline of opportunities that the manager has identified. The fund aims to produce 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 Real Lettings Property Fund, managed by Resonance, is a £57m fund operated in partnership with leading homelessness charity St Mungo's. It provides homes for people in temporary accommodation or at risk of homelessness by purchasing ordinary homes and leasing them to St Mungo's. In doing so, the fund helps people to be more independent. The fund is fully invested and at the end of the reporting period had housed 971 tenants (including 515 children) to date, in 259 properties. Quarterly profit grew during the period, largely due to an increase in Local Housing Authority rates from 1 April. The fund continues to generate a cash yield of 3% and a life to date net internal rate of return ("IRR") of 5%, in line with its financial projections.
New investments since IPO
We committed £5m to the Man GPM RI Community Housing Fund, which is addressing the UK's housing crisis through the provision of new affordable housing. The fund aims to deliver 3,500 new homes in mixed-tenure communities, predominantly leased to UK councils and housing associations, and seeks to achieve returns driven by long-term, inflation-linked income streams. The fund is targeting 8-10% net IRR with a stabilised yield of 6% from income producing assets.
We also made a follow-on commitment of £5m to the Social and Sustainable Housing LP (SASH), following the first £5m commitment acquired through the initial portfolio in December 2020. SASH 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 IRR of 6%.
In addition to these investments, a key development in the period was our publication of two reports from the initiative we are leading with social advisory firm The Good Economy Partnership. The initiative aims to establish new consistent and transparent impact management norms in UK affordable housing investment and build greater ability to assess and compare impact performance and understand impact risk.
Asset Class: Social Outcomes Contracts
Social outcomes contracts 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 outcomes rather than prescribed inputs, using investment 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 2021, the Company had committed £8m to investments in this asset class (11% of net IPO proceeds), of which £3m has been invested (4% of NAV).
Initial Seed Portfolio Review
There is one fund holding in the portfolio and there were no new fund investments in the period. Significant future growth in the social outcomes contract market will be determined by central government spending decisions that we expect to be made in late 2021. We will assess the potential for further investments once that position is clear.
The £35m Social Outcomes Fund II managed by Bridges Fund Management invests in social outcomes contracts, receiving payments when outcomes are delivered and thereby ensuring that payment is completely aligned with measurable improvements in the lives of participants.
The fund is 50% committed, with three out of nine of the underlying contracts being written up in value in the period. These contracts have already supported over 6,000 individuals with complex needs. The fund has a good pipeline of social outcome contract investments, is currently ahead of plan on the delivery of social outcomes and on track to deliver its target IRR of 6%, net of all costs.
Asset Class: Liquid ESG Investments
The Company includes a Liquid ESG allocation of up to 20% of net assets, which can be invested in bond funds, real estate investment trusts, infrastructure trusts and other liquid investments that align with the Company's liquidity requirements, meet high ESG requirements and are compliant with the Company's investment policy. As at 30 June 2021, we had invested a total £11.0m in four funds, detailed in the table below.
| Liquid ESG Investments | Invested |
| £'000 | |
| Edentree Responsible and Sustainable | |
| Sterling Bond Fund | 1,993 |
| Rathbone Ethical Bond Fund | 2,099 |
| Threadneedle UK Social Bond Fund | 3,186 |
| Twenty Four Sustainable Short Term | |
| Bond Income (Vontobel Fund) | 3,625 |
| Total Liquid ESG Investments | 10,903 |
| Risk | Mitigation and management |
| Strategic risks | |
| The Company's investment objectives may become out of line with the requirements of investors, or the Company's investment strategy might not lead to the Company achieving its investment objective resulting in the Company being subscale and shares trading at a discount. | The appropriateness of the Company's investment remit is regularly reviewed and the success of the Company in meeting its stated objectives is monitored. The share price relative to NAV per share is monitored and the Board has undertaken a capital reduction to facilitate a buy-back programme should this be required. |
| If in the two-year period ending on 31 December 2023, and in any two-year period following such date, the Ordinary Shares have traded, on average, at a discount in excess of 10 per cent. to Net Asset Value per Share, the Directors will propose an ordinary resolution at the Company's next annual general meeting that the Company continues its business as presently constituted (the "Continuation Resolution"). It could take several years until all of the Company's private equity investments are disposed of and any final distribution of proceeds made to shareholders. | The Portfolio Manager has extensive experience and a track record in accurately timing the exits of private equity investments. The Board will regularly monitor the position to ensure that any alternative proposals to be made to shareholders are put forward at an appropriate time. If the Continuation Resolution is not passed, the Directors will put forward proposals for the reconstruction or reorganisation of the Company, bearing in mind the liquidity of the Company's Investments, as soon as reasonably practicable following the date on which the Continuation Resolution is not passed. These proposals may or may not involve winding up the Company and, accordingly, failure to pass the Continuation Resolution will not necessarily result in the winding up of the Company. |
| Investment management risks | |
| Risks relating to the social impact of investee companies | The Portfolio Manager has extensive experience in selecting private social impact investments and has a robust investment process to ensure that the anticipated positive impact of investee companies is realistic and achievable. |
| Liquidity risk | |
| Liquidity risks include those risks resulting from holding private equity investments as well as not being able to participate in follow-on fundraises through lack of available capital which could result in dilution of an investment. Risks relating to investment commitments and capital calls. | Concentration limits are imposed on single investments to minimise the size of positions. The Portfolio Manager can sell Liquid ESG Investments 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 cashflow such that the Company will be able to participate in follow on fundraisings where appropriate. |
| Valuation risk | |
| Private equity investments are generally less liquid and more difficult to value than publicly traded companies. A lack of open market data and reliance on investee company projections may also make it more difficult to estimate fair value on a timely basis. | Contracts with investee companies are drafted to include obligations to provide information to the Portfolio Manager in a timely manner, where possible. The Portfolio Manager and AIFM have extensive track records of valuing privately held investments. 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. |
| Cyber security risks Each of the Company's service providers is at risk of cyber attack, data theft or disruption to their infrastructure which could have an effect on the services they provide to the Company. These risks could lead to reputational damage or the risk or loss control of sensitive information leading to a potential breach of data protection law. | Experienced third party service providers are employed by the Company under appropriate terms and conditions and with agreed service level specifications. The Board receives regular reports from its service providers and the Management Engagement Committee will review the performance of key service providers at least annually. The Audit and Risk Committee reviews reports on the external audits of the internal controls operated by certain of the key service providers. |
| Revenue | Capital | Total | ||
| £'000 | £'000 | £'000 | ||
| Gains on investments held at fair value through profit or loss | - | 4,200 | 4,200 | |
| Income from investments | 775 | - | 775 | |
| Other interest receivable and similar income | 5 | - | 5 | |
| Gross return | 780 | 4,200 | 4,980 | |
| Investment management fees | (121) | (121) | (242) | |
| Administrative expenses | (224) | - | (224) | |
| Transaction costs | - | (30) | (30) | |
| Net return before taxation | 435 | 4,049 | 4,484 | |
| Taxation | - | - | - | |
| Net return after taxation | 435 | 4,049 | 4,484 | |
| Return per share | 0.58p | 5.40p | 5.98p |
| Called-up | ||||||
| share | Share | Special | Capital | Revenue | ||
| capital | premium | reserve | reserves | reserve | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Issue of Management Shares | 50 | - | - | - | - | 50 |
| Redemption of Management Shares | (50) | - | - | - | - | (50) |
| Issue of Ordinary Shares | 750 | 74,250 | - | - | - | 75,000 |
| Share issue costs | - | (1,229) | (28) | - | - | (1,257) |
| Cancellation of share premium | - | (73,021) | 73,021 | - | - | - |
| Net return after taxation | - | - | - | 4,049 | 435 | 4,484 |
| At 30 June 2021 | 750 | - | 72,993 | 4,049 | 435 | 78,227 |
| 2021 | ||
| £'000 | ||
| Fixed assets | ||
| Investments held at fair value through profit or loss | 41,369 | |
| Investments held at amortised cost | 21,142 | |
| 62,511 | ||
| Current assets | ||
| Debtors | 221 | |
| Cash at bank and in hand | 17,086 | |
| 17,307 | ||
| Current liabilities | ||
| Creditors: amounts falling due within one year | (1,591) | |
| Net current assets | 15,716 | |
| Total assets less current liabilities | 78,227 | |
| Net assets | 78,227 | |
| Capital and reserves | ||
| Called-up share capital | 750 | |
| Special reserve | 72,993 | |
| Capital reserves | 4,049 | |
| Revenue reserve | 435 | |
| Total equity shareholders' funds | 78,227 | |
| Net asset value per share | 104.30p |
| £'000 | ||
| Net cash inflow from operating activities | 397 | |
| Investing activities | ||
| Purchases of investments | (57,245) | |
| Sales of investments | 191 | |
| Net cash outflow from investing activities | (57,054) | |
| Net cash outflow before financing | (56,657) | |
| Financing activities | ||
| Issue of Management Shares | 13 | |
| Redemption of Management Shares | (13) | |
| Issue of Ordinary Shares | 74,843 | |
| Share issue costs | (1,100) | |
| Net cash inflow from financing activities | 73,743 | |
| Net cash inflow in the period | 17,086 | |
| Cash at bank and in hand at the beginning of the period | - | |
| Net cash inflow in the period | 17,086 | |
| Cash at bank and in hand at the end of the period | 17,086 |
| Period to | |
| 30 June 2021 | |
| £'000 | |
| Income from investments: | |
| UK dividends | 285 |
| Interest income from debt securities and other financial assets | 490 |
| 775 | |
| Other interest receivable and similar income: | |
| Deposit interest | 1 |
| Other income | 4 |
| 5 | |
| Total income | 780 |
| Period to 30 June 2021 | |||
| Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | |
| Investment management fees | 121 | 121 | 242 |
| Period to | |
| 30 June 2021 | |
| £'000 | |
| Revenue return | 435 |
| Capital return | 4,049 |
| Total return | 4,484 |
| Weighted average number of shares in issue during the period | 75,000,000 |
| Revenue return per share | 0.58p |
| Capital return per share | 5.40p |
| Total return per share | 5.98p |
| 2021 | |
| £'000 | |
| Ordinary shares allotted, called-up and fully paid: | |
| 75,000,000 shares of 1p each: | 750 |
| 2021 | |
| Net assets attributable to shareholders (£'000) | 78,227 |
| Shares in issue at the period end | 75,000,000 |
| Net asset value per share | 104.30p |