Schroders Capital
Global Innovation Trust plc
Annual Report and Accounts
for the year ended 31 December 2023
Schroders Capital Global Innovation Trust plc
Performance Summary
NAV per share total return*
–11.2%
2022: –40.7%
Share price total return*
–5.3%
2022: –53.3%
NAV per share
25.32p
2022: 28.52p
Some of the financial measures are classified as Alternative Performance Measures, as defined by the European Securities and
Markets Authority and are indicated with an asterisk (*). Definitions of these performance measures, and other terms used in this
report, are given on pages 88 and 89 together with supporting calculations and sources where appropriate.
Investment objective
The Company’s investment objective is to achieve long-term capital growth through investing in a diversified global portfolio of private and
public equity companies.
Why invest in the Company?
•
A compelling long-term growth opportunity
Schroders Capital Global Innovation Trust plc provides access to the leading growth businesses of the future.
•
Invest with an experienced venture specialist with proven expertise
Schroders Capital’s private equity team has a strong track record and has been investing in global innovation for over 25 years.
•
Benefit from a global innovation remit
Exposure to some of the world’s most promising innovators, with a focus on eight themes across technology and healthcare.
Award winning
Schroders Capital Global Innovation Trust plc
1
Financial
Other Information (Unaudited)
Governance
Introduction
Strategic Report
Ongoing charges ratio*
1.08%
2022: 0.98%
Share price discount
to NAV per share*
42.1%
2022: 45.8%
Share price
14.65p
2022: 15.47p
Revenue return per share
–0.20p
2022: –0.34p
Strategic Report
Chair’s Statement
4
Investment Manager’s Review
7
Top 10 Investments
16
Investment Portfolio
20
Long Term Financial Record
23
Investment Approach and Process
24
Valuation Approach and Process
30
Business Review
32
Governance
Board of Directors
44
Directors’ Report
46
Audit, Risk and Valuation
Committee Report
49
Management Engagement
Committee Report
52
Nomination and Remuneration
Committee Report
53
Directors’ Remuneration Report
55
Statement of Directors’
Responsibilities
58
Financial
Independent Auditor’s Report
60
Income Statement
65
Statement of Changes in Equity
66
Statement of Financial Position
67
Cash Flow Statement
68
Notes to the Accounts
69
Other Information
(Unaudited)
Annual General Meeting –
Recommendations
84
Notice of Annual General Meeting
85
Explanatory Notes to the
Notice of Meeting
86
Definitions of Terms and Alternative
Performance Measures
88
Shareholder Information
90
Information about the Company
92
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Schroders Capital Global
Innovation Trust plc
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Capital Global Innovation Trust plc
3
Strategic Report
Strategic Report
Chair’s Statement
4
Investment Manager’s Review
7
Top 10 Investments
16
Investment Portfolio
20
Long Term Financial Record
23
Investment Approach and Process
24
Valuation Approach and Process
30
Business Review
32
4
Schroders Capital Global Innovation Trust plc
Performance
For most of 2023, the macroeconomic backdrop of rising inflation and
tightening central bank policy proved challenging for the Company
and investor sentiment towards the areas of the market your
Company invests in was significantly depressed.
The Company’s net asset value (“NAV”) per share for the year to
31 December 2023 fell by 11.2% and the share price by 5.3% but
importantly the NAV per share at 31 December 2023 had recovered
by 7.9% relative to the 30 September valuation.
Performance during the first three quarters of the year was primarily
driven by a fall in value of the holdings in AMO Pharma, BenevolentAI,
Atom Bank, and our largest public holding, Oxford Nanopore. In
contrast, stronger performance in the last quarter of the year was
driven by our holding in Autolus Therapeutics, whose share price
increased by 239.5% over the year reflecting encouraging results
from clinical trials and pipeline developments.
Against the difficult macroeconomic background, the Company
continued to make progress with the strategy agreed with the
Investment Manager:
–
Work closely with the management of portfolio companies to
support growth and map a path to profitability;
–
Optimise liquidity to facilitate the execution of the buyback
programme and the continued investment in private assets;
–
Maximise the sale proceeds from holdings; and
–
Complete new investments in line with the investment strategy
already announced.
During the year, the Company made realisations of equities totalling
£32.8 million, acquired 46.9 million of its shares, equivalent to 5.2% of
our outstanding share capital, and made six new investments in
innovative private companies across the three strategies of venture,
growth, and life sciences which align with the Investment Manager’s
successful 25-year track record.
As at 31 December 2023, the Company had £12.6 million in cash and
liquid money market funds and £54.6 million in liquid public equity
investments to meet the funding requirements of the existing
portfolio, to continue to execute the buyback programme and to
target a select number of new investments.
The Company has announced positive news at the start of 2024; we
have received a further milestone payment of £4.5 million from the
sale of Kymab and proceeds of £4.5 million, an uplift of 219.2% on the
30 September valuation from the sale of Carmot Therapeutics which
was only announced earlier in 2024.
The Board expects that future returns will likely continue to be driven
by the performance of new investments.
Capital Discipline policy
The cancellation of the share premium account and rectification
measures in respect of share repurchases undertaken in 2022 and up
to the end of February 2023 were approved by shareholders at the
Annual General Meeting (“AGM”) on 21 June 2023 and the court on
18 July 2023.
This allowed the Company to begin a share repurchase programme in
September 2023 as part of its Capital Discipline policy and we
restated the intention “to repurchase shares equal to at least 5% of the
Company’s issued share capital in each of the calendar years 2023 and
2024, and in addition such number of shares in order to ensure that over
the period to the 2025 AGM, the Company has undertaken share
repurchases in an amount equating to 25% of all net cash realisations
from the portfolio inherited from the previous portfolio manager.”
The Board believes this programme demonstrates the Investment
Manager’s discipline around capital allocation; underlines the Board’s
confidence in the long-term prospects of the Company, its cash flows
and NAV; will enhance the NAV per Share; and over time may reduce
the volatility of the Company’s discount and increase its trading
liquidity.
The Board successfully repurchased 45,124,212 shares equal to 5% of
the Company’s issued share capital in the four-month period
September to December 2023, at an estimated weighted average
discount to the last reported NAV on 30 September 2023 of 36.3%.
The Company has already begun its programme for 2024 in order to
meet its commitment for the year, and as at 27 March 2024, the
Chair’s Statement
The increase in net asset
value in the last quarter of the
year and the positive news
flow from the portfolio since
the end of the year, both
indicate that momentum is
beginning to turn in favour
of growth in the new
investments in the portfolio.
Company has repurchased 17,500,000 shares for cancellation. No
shares are held in treasury. Accordingly, the total number of voting
rights in the Company as at 27 March 2024 was 839,860,026. In
aggregate the buybacks from September 2023 to date represent a
capital return of £9.1 million to date.
The discount to net asset value which was trading at 47.9%
immediately before the start of the share repurchase programme
finished the year at 42.1% and as at 25 March 2024, stood at 43.9%.
The Directors continue to examine options available to it to address
the discount level.
The Board has continued to monitor realisations since 17 April 2023
to ensure its commitment to return 25% of net cash realisation is
being fulfilled.
Valuation process for private investments
The valuation of private investments continues to be an area of
considerable focus by the market.
The private investments are valued by a Schroders in-house valuation
team which resides in Schroders Capital Fund Operations and
Services team and is separate from the investment function.
The Company’s AIFM maintains and applies effective organisational
and administrative arrangements with a view to taking all reasonable
steps designed to identify, prevent, manage and monitor conflicts of
interests in relation to the unquoted valuation process. The Schroders
Capital valuation process and governance structure is intended to
ensure independence, accountability and segregation of duties in the
oversight functions.
Valuations are calculated using established methodologies and public
market comparators in accordance with International Private Equity
and Venture Capital guidelines.
Valuations of the entire portfolio are reviewed on a quarterly basis by
the Board and annually by the Auditor and clearly communicated to
the market.
Comprehensive details of the valuation methodology and process can
be found in the Strategic Report on pages 30 and 31.
Valuation frequency
In the past, the Board has published an indicative NAV each day in
addition to the complete NAV calculations contained in the annual
results, the interim results and as part of two quarterly NAV updates.
In view of the current composition of the portfolio and the future
investment strategy centred around investment in private companies,
the Company will cease to publish an indicative NAV every business
day from 2 April 2024 and the Company will focus on its quarterly
NAV reporting schedule. The private portfolio now accounts for
approximately 81% of the equity portfolio and this level will likely
increase during 2024. Full quarterly valuation of all holdings and
quarterly updates on the whole portfolio will provide a more definitive
valuation basis for investors. The current daily indicative NAV does not
include revaluation of the private holdings other than to account for
foreign exchange movements and the relevance of the daily update is
questionable when the quarterly valuation process for the private
investments is taken into account.
The first NAV to be published under the new reporting regime will be
the 31 March 2024 NAV which is expected to be published before the
end of June 2024. In addition, the Company will continue to make
announcements arising from developments within portfolio
companies that have a material impact on the NAV, as well as new
private investments and realisations of any nature in private
investments (including partial realisations). The Board believes this
quarterly NAV reporting cycle will provide shareholders with a clear
framework for the release of information on the portfolio.
Change of Company Name, Auditor and
Registrar
On 20 April 2023, the Company rebranded as Schroders Capital
Global Innovation Trust plc and at the Company’s AGM held on
21 June 2023, Ernst & Young LLP, was appointed as the Company’s
new Auditor. Additionally, the change of registrar to Equiniti Limited
“Equiniti” was finalised on 30 June 2023.
Board composition
The Board noted the departure of Raymond Abbott, who retired from
the Board at the AGM in June 2023 and, again, thank Raymond for his
valuable contribution to the Company.
Lamia Baker joined the Board as an independent non-executive
Director with effect from 22 June 2023. With more than 20 years of
experience in business and technology, Lamia brings expertise in
areas such as intellectual property, sales, innovation,
entrepreneurship, venture capital investment, and board
representation. Currently, Lamia holds the position of managing
director (UK) at Dennemeyer & Co Limited and serves as the Head of
Commercial (EMEA) for Dennemeyer Group.
A resolution to appoint Lamia as a Director of the Company will be
proposed at the forthcoming AGM.
Scott Brown, who has served on the Board since 2015, will retire
following the conclusion of the forthcoming AGM in May 2024. On
behalf of the Board, I would like to thank Scott for his considerable
contribution to the Company and wish him well for his future plans.
AGM
The AGM will be held at 12.30pm on Wednesday, 22 May 2024 at
1 London Wall Place, London EC2Y 5AU. The Board looks forward to
welcoming shareholders to attend and participate in the meeting.
Shareholders will also have the opportunity to hear a presentation
from the portfolio managers, Tim Creed and Harry Raikes and light
refreshments will be served. Please note that all voting will be on a
poll and we encourage all shareholders to exercise their votes by
means of registering them with the Company’s registrar ahead of the
meeting, online or by completing paper proxy forms, and to appoint
the Chair of the meeting as their proxy. Information on voting can be
found in the Notice of Annual General Meeting on pages 85 to 87. In
the event that shareholders have a question for the Board, please
email amcompanysecretary@schroders.com in advance of the AGM.
Continuation vote in 2025
Shareholders will have the opportunity to vote on the continuation of
the Company at its AGM in 2025 and every five years thereafter.
Packaged Retail Insurance and
Investment Products (“PRIIPs”) legislation
There is a view that the UK’s Listed Investment Companies have been
shunned by investors and investment platforms because of the UK’s
unique interpretation of the PRIIPs regulations in the Markets in
Financial Instruments Directive (“MiFID”) which remain on the UK
statute book.
In the House of Lords on Friday, 1 March 2024, Peers from all sides of
the House agreed that a simple change to the interpretation in line
with Baroness Altmann’s Alternative Investment Fund Designation Bill
Schroders Capital Global Innovation Trust plc
5
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
6
Schroders Capital Global Innovation Trust plc
Chair’s Statement
continued
would bring the UK into line with the rest of the world and was
urgently needed in the interest of the country. We support this Bill
and believe it would be a helpful legislative change.
Results webinar
Please join the Investment Manager for a webinar in which they will
report on the year ended 31 December 2023 and outline their
thoughts on the future direction of the portfolio. The presentation
will be followed by a live Q&A session. The webinar will take place on
28 March 2024 at 2pm. Register for the event at
https://www.schroders.events/INOV24 or via the QR code below:
Outlook
The increase in net asset value in the last quarter of the year and the
positive news flow from the portfolio since the end of the year, both
indicate that momentum is beginning to turn in favour of growth in
the new investments in the portfolio.
This progress is not currently reflected in the Company’s share price
and sentiment towards the private equity sector remains muted. The
Investment Manager is finding exciting new investments and
rebalancing the portfolio and the Board is encouraged by the
portfolio taking shape under their direction. Shareholders can see this
potential in the Investment Managers' Review. The Board’s continued
implementation of its Capital Discipline policy will underpin the
Investment Manager’s efforts and, in time, the share price and
discount should begin to respond positively.
Tim Edwards
Chair
27 March 2024
Summary
–
The Company reported a net asset value (“NAV”) of 25.32p per
share as of 31 December 2023, a decrease of 11.2% relative to
the NAV share per share as of 31 December 2022 (28.52p) but
an increase of 7.9% relative to the NAV per share of 23.46p as of
30 September 2023.
–
The main detractors from performance over the 12-month
period, which have been previously discussed, included holdings
in AMO Pharma, BenevolentAI, Oxford Nanopore and Atom
Bank. On the positive side, positions in Autolus Therapeutics,
Carmot Therapeutics and Ada Health provided bright spots,
while the Company also notably benefited from the first
milestone payment following the sale of Kymab to Sanofi, and an
additional deferred cash consideration received following the
sale of assets to Rosetta Capital.
–
It has been a busy year with six new investments completed
(AgroStar, Carmot Therapeutics, Securiti, Bizongo, AI software
company (MMC SPV 3 LP), Memo Therapeutics) across our three
strategies: venture, growth and life sciences.
–
During the 12 months to 31 December 2023 the Company made
realisations totalling £32.8 million, with positions in Oxford
Nanopore and Immunocore reduced, while Johnson Matthey,
Spirent Communications, Petershill Partners and IDEX Biometrics
were exited.
–
During the year, the Company purchased 46.9 million shares,
equivalent to 5.2% of the outstanding share capital as of
31 December 2022.
–
As of 31 December 2023, the Company had £2.9 million in cash
(2022: £16.1 million), along with an investment of £9.7 million in
the Schroder Special Situations – Sterling Liquidity Plus Fund
(2022: nil), a daily liquidity money-market fund and £54.6 million
in liquid public equity investments
1
(2022: £83.7 million) to meet
the funding requirements of the existing portfolio, continue to
execute the buyback programme and target a select number of
new investments.
Source: Schroders.
Introduction
Progress made in 2023
In the half year report and accounts, we discussed our four key
strategic areas as Investment Manager. Here, we discuss the progress
made this year towards our long-term investment strategy of
pursuing opportunities in innovative, private companies globally
across three key strategies: venture, growth and life sciences.
1.
Work closely with portfolio management teams,
co-investors, and other stakeholders to support
business growth and a path to profitability
As Investment Manager, we take an active approach to engagement
with the management teams of portfolio companies, with some
examples provided in the engagement section later in this report.
During 2023, the portfolio made significant progress in terms of both
growth and profitability. The below figures offer a snapshot of
progress by strategy as of 31 December 2023.
Source: Schroders Capital, 2024.
*As at 31 December 2023, the weighted average sales growth over the last
12 months for all growth investments valued using a market-based approach,
and excluded HP Environmental Technologies Fund.
80%
average sales
growth for growth
portfolio companies*
2
new venture portfolio
companies added in
the past 12 months
11
of
12
life sciences portfolio
companies have
reached clinical stage
Schroders Capital Global Innovation Trust plc
7
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
Investment Manager’s Review
Tim Creed
Harry Raikes
The progress achieved in
2023 has been against
a difficult macroeconomic
backdrop with investor
focus primarily on rising
inflation and the policy
response from major central
banks.
1
Excluding BenevolentAI.
8
Schroders Capital Global Innovation Trust plc
Meanwhile, we are encouraged by the aggregate health of the
portfolio in terms of estimated cash runway 67% of equity
investments (by value) as at 31 December 2023 are profitable, fully
funded or have more than 24 months of expected cash runway, as
described in the below table.
Expected cash runways for portfolio companies
<12 months
£24.1m
12.0%
12-24 months
£43.0m
21.5%
>24 months
£63.6m
31.7%
Unprofitable (fully funded)
£11.8m
5.9%
Profitable (incl. milestones)
£57.9m
28.9%
Total equities
£200.4m
100.0%
Source: Schroders Capital, 2024. These figures represent forecasts and may not
be realised. % of total investments as at 31 December 2023.
2.
Rebalance the portfolio ensuring the appropriate
liquidity (cash and liquid public equities) to execute
efficiently the buyback programme and support the
portfolio
We made notable progress in altering the liquidity mix to ensure the
Company is appropriately positioned to execute efficiently the
buyback programme and support the portfolio. During the year, we
reduced the exposure to certain public holdings with the goal of
reducing concentration risk, and to position the portfolio to better
align with the renewed focus on private equity. To this end, the
Company realised £23.8 million over the 12 months to 31 December
2023, exiting public equity holdings in Johnson Matthey, Spirent
Communications, Petershill Partners and IDEX Biometrics, as well as
reducing the holdings in Oxford Nanopore and Immunocore. As of
31 December 2023, the Company had £2.9 million in cash (2022:
£16.1 million), along with an investment of £9.7 million in the
Schroder Special Situations – Sterling Liquidity Plus Fund (2022: nil), a
daily liquidity money-market fund and £54.6 million in liquid public
equity investments, which we believe to be sufficient to successfully
continue the buyback programme in 2024, meet the funding
requirements of the existing portfolio and selectively target new
investments.
3.
Maximise the sale proceeds from holdings, both
public and private, as part of the rebalancing
exercise
The economic environment in 2023 of inflation and interest rate
headwinds, recession fears, weaker business confidence, subdued
equity capital markets and slow fundraising and M&A activity, made it
difficult to achieve sales for private holdings in the portfolio. We will
continue to explore sales options in 2024, which we expect to provide
an increasingly favourable environment for exits in private markets.
That said, through the sale of public equity holdings discussed in the
investment activity section and new investments (see below), we have
made considerable progress in rebalancing the portfolio, increasing
the portfolio’s weightings to venture, growth and life science
investments while reducing the public equity exposure, which is
illustrated in the below figure. In addition, and more recently, we have
seen exits in Tessian (acquired by Proofpoint) and Carmot (acquired
by Roche), as well as receiving an additional £2.9 million deferred cash
consideration received following the sale of assets to Rosetta Capital
and an additional £4.6 million distribution related to the first
milestone of the Kymab sale to Sanofi.
% of total investments by strategy:
inner ring = 31 December 2022, outer = 31 December 2023
Fair value
% of equities
Expected cash runway
£54.6m
invested in liquid public
equity investments
£12.6m
in cash and money
market funds
Venture
Growth
Life sciences
Public equity
12%
30%
18%
40%
28%
20%
37%
16%
Investment Manager’s Review
continued
4.
Complete new investments that align with our new strategy
While ensuring the Company was in a position to successfully execute the buyback programme, we simultaneously made good progress with
our long-term investment strategy, making six new investments in innovative, private companies globally (from the US to India) across venture,
growth and life sciences. These are illustrated below.
Two new investments per strategy made in 2023
While we have made progress completing new investments, only 30% of total equities as of 31 December 2023 represent investments made
since Schroders was appointed Investment Manager.
Economic and market backdrop
The progress achieved in 2023 has been against a difficult macroeconomic backdrop with investor focus primarily on rising inflation and the
policy response from major central banks. There were fears that rising interest rates could lead to recession, although economic growth
generally remained resilient.
In Europe, the ongoing war in Ukraine contributed to higher inflation as the region had to import liquified natural gas from more distant
producers. However, warmer winter weather helped limit the impact of high gas prices. China’s decision to abandon its strict lockdown
measures at the end of 2022 enabled economic activity to pick up, however the recovery was weaker than many had hoped, with the property
sector coming under pressure. Volatility heightened in March 2023 as several regional US banks – including Silicon Valley Bank – collapsed due
to lack of liquidity. In Europe, this was followed by the takeover of Credit Suisse by UBS. Further uncertainty emerged amid concerns that the US
would breach its debt ceiling. However, a deal to extend the debt ceiling was reached in early June 2023.
Towards the end of the period, inflation readings in major economies began to soften. The debate over the outlook for interest rates continued
though, as resilient growth and strong US labour markets raised expectations that rates could remain elevated.
However, a definitive change appeared to come in November with the release of softer-than-expected US and eurozone inflation data. This was
followed in December by comments from the US Federal Reserve suggesting that rates may not only have peaked, but that cuts could be
coming in 2024.
Global shares posted strong gains over the 12-month period in aggregate, shrugging off concerns about higher interest rates and risks to
growth. US shares were among the strongest performers. Gains were led by some of the mega cap technology and consumer stocks.
Companies thought to be winners from the AI revolution saw particularly strong share price gains around mid-year as markets embraced the
potential of AI with enthusiasm.
Against the backdrop of inflation, rate rises and macroeconomic headwinds, global venture capital deal activity fell in 2023, with a year-on-year
decline of 42% by value (from $426 billion in 2022 to $248 billion in 2023) and 30% by volume (from 42,069 deals in 2022 to 29,303 deals in
2023). This sees a return to the levels of deal activity seen prior to the COVID-19 pandemic.
Meanwhile, investors have demonstrated greater selectivity of deals and have been reluctant to participate in large, late-stage rounds. The
number of mega-rounds, which represent deals worth $100 million+, has fallen 58% year-on-year (from 933 in 2022 to 394 in 2023), while the
aggregate value of these deals has fallen nearly 50% over the same period (from $192 billion in 2022 to $100 billion in 2023). Furthermore,
while median deal sizes have come down across all stages over the past three years, it has been most pronounced in late-stage deals, which
have fallen 58% since 2021 ($50 million in 2021 vs. $21 million in 2023).
The market cooling was also evident with only 71 new unicorns created in 2023, a reduction of 73% from 2022 (263 unicorns) – representing
a seven-year low. The environment for exits also saw continued weakness. The number of M&A transactions, the predominant exit route for
venture-backed businesses, declined 18% year-on-year (from 10,234 in 2022 to 8,351 in 2023). Initial public offerings were even further in
decline, falling 48% year-on year (from 90 in 2022 to 47 in 2023).
Source for venture data: CB Insights, State of Venture 2023 Report.
LIFE
E SCIENCES
VENTURE
GROWTH
Description
n of
f
strategy
Focused on biotech
h and
d life
e science
e
opportunities.
.
Either clinical
l stage
e or with visibility on IND
(max 6 months). Clinical endpoint clearly
defined and financed.
Focused on venture-stage
e companies
s with
h early
y
revenues.
Will typically have initial
l customers,
unproven
n
unit
t economics
s and
raising
g capital
l to
o invest
t in
n
their
r product/technology
y and
d go-to-market
t
strategy.
Focused on more mature,
, growth-stage
e
companies
s that
t have
e achieved
d scaled
d revenues.
Will typically have established
d customers,
proven
n unit
t economics
s and
raising
g capital
l to
o
invest
t for
r growth.
New
w portfolio
o
companies
s in
n
2023
AI software
company
Schroders Capital Global Innovation Trust plc
9
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
10
Schroders Capital Global Innovation Trust plc
Financial performance
2023 performance
The NAV as of 31 December 2023 was £217.1 million, a decrease of 15.8% compared with the NAV (£257.9 million) as of 31 December 2022. The
NAV per share as of 31 December 2023 was 25.32p, a decrease of 11.2% compared with the NAV per share (28.52p) as of 31 December 2022.
This 11.2% decrease in NAV per share comprised:
–
Public equity holdings: –5.8%
–
Private equity venture holdings: –4.2%
–
Private equity life science holdings: –1.9%
–
Private equity growth holdings: –0.5%
–
Repurchase and cancellation of the Company’s own shares: 1.9%
–
Costs and other movements: –0.7%
Attribution analysis (£m)
Private equity
Money
Life sciences*
Venture
Growth
Public equity
market funds
Cash
Other
NAV
Fair value as at
31 December 2022
34.9
49.7
62.3
95.6
0.0
16.1
(0.7)
257.9
+ Investments
4.3
5.6
12.9
–
13.2
(36.0)
–
–
– Realisations at value
(3.1)
(5.2)
(0.7)
(23.8)
(3.6)
36.4
–
–
+/– Fair value gains/(losses)
(5.1)
(10.8)
(1.2)
(15.0)
0.1
–
–
(32.0)
+/– Reclassified holdings
–
–
–
–
–
–
–
–
– Repurchase & cancellation of
the Company’s own shares
–
–
–
–
–
(7.0)
–
(7.0)
+/– Costs & other movements
–
–
–
–
–
(6.6)
4.8
(1.8)
Fair value as at
31 December 2023
31.0
39.3
73.3
56.8
9.7
2.9
4.1
217.1
*Included £2.9 million of proceeds from Rosetta sale (sale of basket of life science assets to Rosetta Capital).
Public equity holdings
The Company’s public equity holdings saw a fair value loss of –15.7% of the opening fair value, contributing –5.8% to the decrease in NAV per
share over the 12-month period.
The listed share price of AI-enabled drug discovery and development company BenevolentAI declined 74.9% over the year. In April, the company
announced the results of its Phase Ila study of BEN-2293, a treatment for Atopic Dermatitis, a common skin condition that causes patches of skin
that are itchy, cracked and sore. The treatment was safe and well tolerated, however failed to demonstrate efficacy – the key requirement for further
progression of the drug. In May, the company announced a new strategic plan to position itself going forward. This included streamlining its
portfolio to focus on a narrower set of drug programmes, and changing its cost base and organisational structure, resulting in an extended cash
runway to 2025. The company is reported as a public equity holding although fair value priced by the Company’s AIFM, (“Schroder Unit Trusts
Limited” or the “Manager”), due to a lack of liquidity in the listed shares. As of 31 December 2023, the holding in BenevolentAI is held at a discount
of 33% to the listed share price (FY22: 19%).
Meanwhile, the share price of Oxford Nanopore Technologies (“ONT”), the Company’s largest holding, fell 15.6% over the year, reflecting a mixed
year in which underlying financial growth was insufficient to offset pessimistic market sentiment and continued valuation weakness. The share
price declined 13.5% in the first half and 2.4% in the second half of the year. In September, ONT released its interim results for the six months
ended 30 June 2023 detailing Life Science Research Tools (“LSRT”) revenue growth of 22% year-on-year to £86 million – towards the mid-point of
previous guidance, an adjusted EBITDA loss aligned with market consensus, whilst reiterating medium term guidance. During its capital markets
day in October, ONT announced that bioMérieux, a leading company in the field of vitro diagnostics, planned to make a strategic investment of
£70 million in ONT at 238p per share, while expecting to make further market share purchases, up to a further 3.5% of Oxford Nanopore’s
shares. Additionally, ONT announced a multi-year joint development collaboration with the Mayo Clinic, the renowned academic medical centre,
to develop new clinical tests for diseases and improve patient care. After the period end, in January 2024, ONT released its FY23 trading update
outlining LSRT revenue increased 15% year-on-year to £169 million, towards the lower end of previous guidance. Performance in the fourth
quarter was impacted by slower than expected ramp-up of certain new customers, which management expect to fall into FY24, and a slowdown
of growth in China and the Middle East following the issuance of the recent US trade rules further regulating sales of advanced AI
semiconductors. The company also agreed to replace and supersede its existing purchase agreement with G42 Laboratories in support of the
Emirati Genome Programme to remove the outstanding purchase commitment.
On the positive side, the share price of Autolus Therapeutics, the CAR T-cell therapy company, increased by 239.5% over the year. This increase
reflects encouraging results from clinical trials and pipeline developments. The company presented positive results from a pivotal Phase 2
clinical trial for OBE-CELL, aimed at patients with relapsed/refractory adult B-cell Acute Lymphoblastic Leukaemia. These results were presented
at the American Society of Hematology in May and December. In November, the company filed a Biologics License Application with the FDA,
seeking US regulatory market approval. Elsewhere in the pipeline, in April, the company reported that AUTO1/22 showed complete responses
Investment Manager’s Review
continued
and no antigen negative relapse in responding patients with Acute Lymphoblastic Leukaemia in a Phase I study. In June, the company reported
that AUTO4 demonstrated responses in all four treated patients with relapsed/refractory TRBC1-positive Peripheral T-cell Lymphoma. AUTO4
was well tolerated with no dose-limiting toxicities. Two of these patients showed a complete metabolic response at the highest doses.
Private equity venture holdings
The Company’s venture holdings saw a decrease in value of 21.7% contributing –4.2% to the decrease in NAV per share over the 12-month period.
The valuation of the Company’s holding in Federated Wireless decreased as a result of slower sales growth than anticipated. The market that
Federated Wireless is penetrating is large but relatively cautious in adopting new technologies. As such the company has taken a more cautious
view on growth in these early years which is reflected in the valuation change. Additionally, the valuation of the Company’s holding in Genomics
was decreased over the period to reflect the terms of its £35 million fundraise which completed in early January 2024.
A key contributor over the period was innovative email cybersecurity company Tessian, which in November was announced to have entered into
a definitive agreement to be acquired by Proofpoint - a people-centric cybersecurity and compliance company. The agreement closed in
December 2023, with the Company receiving $6.7 million (£5.2 million), representing an increase of 32% compared to the valuation as of
31 December 2022 (£3.9 million).
Private equity life science holdings
The Company’s life science holdings saw a decrease in value of 14.6% contributing –1.9% to the decrease in NAV per share over the 12-month
period.
AMO Pharma, an emerging biopharmaceutical business developing new treatments for serious and debilitating diseases, including rare genetic
disorders, was one of the main detractors over the year. In September, the company reported that its Phase 3 REACH-COM clinical trial for
AMO-02, a clinical stage investigational medicine for the treatment of Congenital Myotonic Dystrophy, did not meet its primary efficacy
endpoint.
On the positive side, we are delighted with the progress of two of the portfolio’s more recent life science investments: clinical-stage
biopharmaceutical companies Carmot Therapeutics and Anthos Therapeutics. In December 2023, it was announced that Carmot had entered
into a definitive agreement to be acquired by Roche, a global pharmaceutical company, at a purchase price of $2.7 billion upfront and the
potential for $400 million in milestone payments. The transaction closed on 29 January 2024. This news has been reflected in the latest valuation
(£4.3 million), which represents an uplift of 216% from the value as at 30 June 2023 (£1.3 million). Post year end, the Company received
a $5.6 million (£4.5 million) distribution from the completed sale.
Meanwhile, the valuation in Anthos has increased, driven by the positive result of its Phase 2 ANT-006 (“AZALEA”) study designed to compare
Abelacimab’s safety to leading DOAC standard-of care (Rivaroxaban) in a high bleeding-risk cohort of atrial fibrillation patients. In September
2023, Anthos announced that the AZALEA study of 1,287 patients with atrial fibrillation at moderate-to-high risk of stroke met its primary efficacy
endpoint. The study was stopped early by recommendation from the Data Monitoring Committee due to an overwhelming reduction in the
composite of major and clinically non-major bleeding in patients taking Abelacimab compared with patients taking Rivaroxaban. Abelacimab is
the first and only Factor XI inhibitor to demonstrate an unprecedented reduction in major bleeding compared to a direct oral anticoagulants
which are the current standard of care.
Overall, we are strongly encouraged by the progress made by this area of the portfolio, out of the 12 life science portfolio investments (shown
below), 11 have reached clinical stage, of which two have been acquired, five have shown clinical proof of concept and one has been approved.
Development of life science investments
Source: Schroders Capital, 2024. Companies shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell. Logos shown are
the property of their own entities.
H
Holding
Lead
d candidate/
product
Indication
Discovery
Pre-clinical
Clinical
l -
pre
e proof
f of
f
concept
Clinical
l -
post
t proof
f of
f
concept
Application
n for
r
market
t
approval
Approval
CT-388
Obesity
Abelacimab
Thrombosis
prevention
IOA-244
Uveal melanoma
Anti-BKV
BKV infection
MOv18 IgE
Ovarian cancer
A2B530
Colorectal cancer
Anti-CD79b
Lymphoma
OTT166
diabetic retinopathy
NM002-IV
Pneumonia
AMO-02
Myotonic dystrophy
KY1005
Atopic dermatitis
Simplicity insulin
patch
Diabetes
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Strategic Report
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Other Information (Unaudited)
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The portfolio also notably benefitted from:
(1)
An additional £2.9 million deferred cash consideration that was
received as part of the sale of a basket of seven assets to Rosetta
Capital which originally completed in March 2021.
(2)
A revaluation of the holding in Kymab to reflect the first
milestone payment following the sale of Kymab to Sanofi which
originally completed in April 2021.
Private equity growth holdings
The Company’s growth holdings saw a decrease in value of 1.9%
contributing –0.5% to the decrease in NAV per share over the
12-month period.
In November 2023, it was announced that UK app-based bank, Atom
Bank, had raised £100 million in new equity capital from existing
shareholders BBVA, Toscafund and Infinity Investment Partners, to
accelerate lending and balance sheet growth as the bank continues
to scale. Following this news, the Company’s AIFM revalued the
holding in Atom Bank to £23.1 million. This revaluation, which
represented a discount to the valuation of the fundraise, resulted in
a negative fair value impact of £8.6 million relative to the holding
value as of 30 June 2023 and 31 December 2022 (£31.7 million).
Whilst the valuation impact of this fundraise is disappointing in the
short term, this significant investment should be viewed as a good
signal of confidence in Atom Bank. The company now has the capital
to scale up and demonstrate the operating efficiency of its platform.
Although much work remains, Atom Bank is one step closer to
a planned future liquidity event.
On the positive side, the Company’s holdings in Ada Health, Revolut
and Back Market were revalued upwards. As detailed in the Top 10
holdings, all three companies reported solid progress over the year.
Revolut continued its rapid international expansion, growing the
number of retail customers to over 35 million across 38 countries,
with the expectation to achieve $2 billion (£1.7 billion) in revenue
in 2023, an increase of over 80% year-on-year (FY22 revenue
£923 million). Ada Health had a successful year achieving record
revenue and becoming profitable. The company announced
collaborations with Pfizer, the global pharmaceutical company, and
Jefferson Health, Greater Philadelphia’s largest health system.
Meanwhile, Back Market has achieved and maintained profitability in
mature markets such as France and Spain, while it continues its global
expansion journey, focusing on US, UK, Germany and Japan.
Foreign exchange
Over the period, the fair value of investments denominated in United
States Dollar, Euro and Norwegian Krone were negatively impacted by
appreciation in the value of the British Pound Sterling. Meanwhile, the
fair value of investments denominated in Swiss Franc were positively
impacted by depreciation in the value of the British Pound Sterling
relative to Swiss Francs.
Investment activity
Realisations
During the 12 months to 31 December 2023, the Company made
realisations totalling £32.8 million. Public equity holdings in
Johnson Matthey, Spirent Communications, Petershill Partners and
IDEX Biometrics were exited, while positions in Oxford Nanopore and
Immunocore were reduced.
Additionally, £5.2 million was received from the sale of Tessian,
discussed above.
Furthermore, the Company received an additional deferred
consideration of £2.9 million as part of the sale of a basket of seven
assets to Rosetta Capital which completed in March 2021. The
Company received total distributions of £0.7 million from the
HP Environmental Technologies Fund following the successful sales
of several portfolio companies in 2021 and 2022. The Company also
sold its holding in healthcare company, Origin Inc, generating
proceeds of less than £0.2 million. The holding was valued at zero
as of 31 December 2022 resulting in a modest positive impact on
performance.
After the period end, Roche’s acquisition of Carmot completed
(discussed below), while the Company also received a £4.6 million
distribution related to the first milestone of the Kymab sale to Sanofi.
Investments
During the 12 months to 31 December 2023, the Company made
investments totalling £22.8 million. These included six new holdings:
two venture investments (Securiti and an AI software company (MMC
SPV 3 LP)), two growth investments (AgroStar and Bizongo) and two
life science investments (Carmot Therapeutics and Memo
Therapeutics), as well as small follow-on investments or capital calls
(£2.3 million) in iOnctura, Anthos Therapeutics and Epsilogen.
Investment Manager’s Review
continued
LIFE SCIENCES
Carmot Therapeutics
The Company completed a $1.7 million (£1.4 million) investment in US-based, clinical stage biopharmaceutical company, Carmot
Therapeutics, Inc (“Carmot”), as part of its Series E financing round.
Carmot discovers and develops disease modifying therapies for people living with metabolic diseases. Utilising a pioneering drug
discovery platform called Chemotype Evolution, Carmot identifies novel drug targets and develops a broad pipeline of experimental
therapeutics with the aim of treating patients suffering from metabolic diseases, including obesity and diabetes.
The proceeds from the Series E round should support development of Carmot’s broad clinical-stage metabolic pipeline including
two Phase 2 trials of CT-388, a once weekly, injectable experimental therapeutic to treat patients with obesity and/or type 2 diabetes.
In a phase I/II clinical trial, Carmot’s lead therapeutic was found to be safe, well-tolerated, and produced more than 8% weight loss in
four weeks in overweight and obese adults.
Deep Track Capital led a Series E financing round, which was also supported by a syndicate of new and existing healthcare investors
including SAM Ventures, Franklin Templeton, Frazier Life Sciences, Janus Henderson Investors, RA Capital Management, Millennium
Management, TCGX, The Column Group, Venrock Healthcare Capital Partners and Willett Advisors.
Carmot’s pipeline of experimental therapeutics has the potential to significantly improve the quality of life for patients suffering from
metabolic diseases, including obesity and diabetes. Schroders Capital’s ability to access this restricted and oversubscribed funding
round is testament to the network that our healthcare team has developed across the industry.
On 3 December 2023, it was announced that Carmot had entered into a definitive agreement to be acquired by Roche, a global
pharmaceutical company, at a purchase price of $2.7 billion upfront and the potential for $400 million in milestone payments. Roche
completed the acquisition of Carmot on 29 January 2024.
We chose to invest in Carmot based on its compelling assets, backed by robust clinical data and were delighted by the news of this sale,
which has occurred earlier than expected, but which reflected the unique nature of Carmot’s pipeline.
Memo Therapeutics
The Company made a commitment of CHF 0.9 million (£0.8 million) to Memo Therapeutics, a Switzerland-based clinical-stage
biopharmaceutical company. The Company participated in Memo’s Series C financing round, which raised CHF 25 million and was led by
Pureos Bioventures. Existing investors Swisscanto, Vesalius Biocapital, Adjuvant Capital, Verve Ventures, GF Group, Fresenius Medical
Care Ventures, and Red Alpine also joined the round. As of 31 December 2023, the Company had invested £0.5 million of its total
commitment.
Memo develops novel therapeutic antibodies for patients with viral infections and cancer. Memo’s unique antibody discovery and
functional screening platform enables the identification, isolation, and selection of antibodies from patient samples or vaccinated
animals. This technology helps Memo to discover antibodies with the potential to treat diseases using rare antibodies that other
methods might miss.
The Series C funding should support Memo in completing the U.S. Phase II clinical development of their leading antibody, AntiBKV. This
antibody is designed to neutralise BK virus (BKV) infection in kidney transplant recipients. BKV infection can have serious adverse effects
on graft function and patient survival following a transplantation procedure. Currently there are no regulatory approved therapeutics to
treat BVK infection in kidney transplant recipients. With Phase II clinical data expected in 2024, the funding should also enable Memo to
prepare for large-scale manufacturing of AntiBKV for a Phase III study and potential market entry. Additionally, the investment should
help Memo advance its pipeline of other experimental antibody therapeutics.
We believe Memo is a highly complementary addition to the company’s portfolio. AntiBKV has solid pre-clinical efficacy and clinical safety
data with near term Phase II clinical efficacy data expected in 2024. A positive phase II readout has the potential to drive a significant
value inflection for Memo and may enable a material improvement in the quality of life for kidney transplant recipients with BKV
infection.
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VENTURE
GROWTH
Securiti
The Company made an $5.0 million (£3.9 million) investment in US-based cybersecurity company, Securiti. The company is the pioneer of
the Data Command Center, a centralised platform that enables the safe use of data and GenAI. Its solution unifies controls for data
security, privacy, governance and compliance in one place. This unification of data intelligence is revolutionising important but arduous
processes, allowing organisations to retire disparate, legacy solutions which add cost and complexity.
Schroders Capital has known Securiti for a number of years, having been an investor since 2019 through our fund investments. We believe
Securiti is playing a key role in transforming how organisations can innovate with vast quantities of data while meeting their data
obligations.
AI software company (MMC SPV 3 LP)
The Company made an investment of $2.0 million (£1.7 million) into an early leader in an emerging segment of artificial intelligence (AI)
software. The Company invested through its co-investment partner, MMC Ventures, via a single asset fund, MMC SPV 3 LP.
Schroders Capital has been investing in venture capital for over 25 years. Over that time, our team has seen various waves of technological
innovation and witnessed first-hand the ripple effect through different sectors and regions. Our belief is that AI, most recently focused on
the field of generative AI that has been enabled by the advent of large language models, has the potential for innovation and disruption on a
scale comparable to the introduction of email, the internet and the smartphone. We see significant opportunity in the AI sector, justifying its
position as one of our eight key global innovation themes. This investment, which forms part of our strategy of backing innovative venture-
stage business, is in an access-restricted software company that is an early leader in an emerging application of AI. We are not currently able
to name the company due to confidentiality, however, we believe it represents a highly complementary addition to the portfolio.
AgroStar
Over the period, the Company completed its first transaction in Asia with an $8.0 million (£6.6 million) investment in AgroStar (Ulink
Agritech Pvt. Ltd.), one of India’s foremost agricultural technology start-ups.
The investment formed part of the $25 million (~£20.6 million) total investment by Schroders Capital that led the $40 million (~£33.0 million)
financing round. The round also saw participation from other existing investors including Accel, Chiratae Ventures, Evolvence, Aavishkaar
Capital, Bertelsmann India Investments, Hero Enterprise, Rabo Frontier Ventures, British International Investments and IFC.
Founded in 2013, AgroStar uses technology, data, and agronomy knowledge to help Indian farmers. It provides an end-to-end solution
that is solving three major problems for Indian farmers: limited access to good quality agricultural inputs, a knowledge gap (even among
the most experienced farmers), and a lack of access to global markets to sell their produce. The company serves millions of farmers across
multiple Indian states via an omnichannel approach, having built a highly engaged digital farmer network on the AgroStar app, with over
7.5 million users, and a rapidly expanding retail network of over 5,000 stores. Through the recent acquisition of INI Farms, India’s largest
exporter of fruits and vegetables, AgroStar is quickly scaling its business into the domestic and international food supply chains.
Schroders Capital has known AgroStar for several years, having been an investor since 2021, and we believe the company has
demonstrated exceptional growth by combining technology with strong agronomy capabilities to play an important role in the Indian
agricultural sector.
Bizongo
The Company also made an investment of $8.0 million (£6.3 million) in India-based vendor digitisation company, Bizongo. This investment
formed part of the $50.0 million Series E funding round that was led by Schroders Capital with participation from other investors including
IFC, BCap, Chiratae Ventures, and British International Investment.
Bizongo, which was founded in 2015, is transforming supply chain operations for large enterprises, as well as for micro, small and medium
enterprises (“MSME’s”) in India, through its foundational vendor digitisation platform. Bizongo enables vendors to source raw materials across
a broad range of categories, including steel, aluminium and textiles, and to optimise their procurement processes. Customers leverage the
Bizongo vendor digitisation platform to source suppliers, optimise for cost, seamlessly place orders, all whilst managing invoicing and order
tracking in real-time. Bizongo has a capital efficient, inventory-free operating model, that connects vendors directly with suppliers. The vendor
digitisation platform has seen a three-fold rise in its gross merchandise value, the total value of sales through the platform, from ~$215 million
in FY22 to ~$750 million in FY23.
With its platform, the company has also opened doors to embedded financing through its network of more than 40 partner banks and
non-banking financial corporations, who can evaluate MSMEs based on deep transactional and behavioural insights, allowing them to take
better financing calls, and enabling MSMEs to scale their growth through efficient working capital.
Schroders Capital has been an investor in Bizongo since 2019, over which time we have seen the company grow exponentially, achieve
scale, and expand into more sectors. We believe the company is playing a transformational role in enabling vendors in India to digitalise
their supply chain, which has accelerated since the COVID-19 pandemic. We are excited that the Company is now participating in Bizongo’s
future growth.
Investment Manager’s Review
continued
Outlook
The core tenets of the strategy pursued in 2023 remain unchanged in
2024. We continue to work closely with portfolio company
management teams, co-investors, and other stakeholders to support
business growth and a path to profitability. Below we look at the
outlook across the four different strategies:
Growth
With an increasing percentage of the private equity portfolio, particularly
within the growth strategy, now valued on a multiples-based approach
as detailed in the Valuation Approach and Process section, we are
hopeful that during the year the portfolio will benefit from underlying
financial growth being more readily reflected in quarterly valuations. We
are also cautiously optimistic that this effect will be compounded by
improving market conditions giving rise to a more favourable valuation
and exit environment.
Of the seven growth holdings in the portfolio: all generate scalable
commercial revenues, four are profitable, five are fully funded based
on their latest business plan, and none need to raise capital during
2024. We expect exits from this segment of the portfolio to start
materialising from 2026 onwards, so the near-term focus is on capital
efficient growth.
Atom Bank, the second largest holding, aims to focus on productively
deploying the capital from its recent fundraise, accelerating mortgage
and business lending, and expanding its deposit base. Atom operates
in highly competitive markets dominated by large established banks,
however this fresh capital is expected to allow the bank sufficient
scale to demonstrate the operational efficiency of its digital-first
model, a key requirement for any future potential liquidity event.
Key factors for success in 2024 will include Revolut and Back Market
delivering against their ambitious international expansion plans,
AgroStar and Bizongo, our latest growth-stage investments in India,
leveraging recent funding rounds to expand domestically, investing in
new product innovation and continuing to expand their services to
customers, and Ada Health replicating the success of partnerships
signed with Pfizer and Jefferson Health in 2023.
Venture
The venture segment of the portfolio by design is where we expect to
see the highest level of risk and therefore widest dispersion of returns
(excluding life sciences) and 2024 is likely to be no different. These
holdings are the hardest to value, often requiring a milestone-based
approach which, at times, can result in large swings in valuation.
Of the nine venture holdings in the portfolio: four generate scalable
commercial revenues, all are unprofitable, two are fully funded based
on their latest business plan and only one needs to raise further
capital during 2024.
Key factors for success in 2024 are expected to include Reaction
Engines commercialising spin-off technologies from its core heat
exchanger programme, Nexeon making progress with building its first
commercial scale production plant and Federated Wireless driving
further commercial and federal traction enabling it to continue to scale.
Life sciences
We expect several portfolio biotech companies to experience value
inflections based on their ongoing clinical trials and potential market
approvals. Autolus, which is classified as a public company, is awaiting
market approval in the US, EU, and UK for Obe-cel, a treatment for
relapsed/refractory Acute Lymphocytic Leukaemia expected in Q2.
Additionally, results from the Phase 1 clinical trial for Obe-cel in B-cell
Non-Hodgkin Lymphoma and Chronic Lymphocytic Leukaemia are
expected in Q4. Phase 1 clinical trials results are also expected in Q4
for Obe-cel in the treatment of primary CNS Lymphoma, allogenic
Obe-cell for B-cell malignancies, and AUTO8 for multiple myeloma.
OcuTerra is conducting a Phase 2 clinical trial for OTT166 in adults with
Diabetic retinopathy, and results from this trial are anticipated by Q2.
Immunocore are seeking to release additional Phase 1 clinical data for
IMC-F106C, a treatment for multiple solid tumour types between Q2
and Q4. Anthos, which received positive results in Q4 2023 from
a Phase 2 clinical trial for its thrombosis prophylaxis Abelacimab we
believe may lead to potential mergers and acquisitions during the
year.
iOnctura‘s Phase 1 clinical trial for IOA-244 is expected to be
completed by Q4. This trial aims to evaluate the efficacy of IOA-244 in
treating patients with Uveal Melanoma, Cutaneous Melanoma,
Mesothelioma, Myelofibrosis, Non-Hodgkin Lymphoma, and
Non-Small Cell Lung Cancer (“NSCLC”). Memo Therapeutics may
release data from its ongoing pivotal Phase 2/3 clinical trial for its
therapeutic antibody AntiBVK for the treatment BK virus infection in
kidney transplant recipients in Q4. Epsilogen is expected to initiate
Phase 2 clinical trials for its lead therapeutic Mov18 in patients with
advanced solid tumours. Lastly, A2 Bio may release Phase 1 data for
A2B530, a treatment for CEA positive solid tumours by year end.
Public equities
We expect the public equity portfolio, principally Oxford Nanopore, to
remain volatile as the valuation environment for loss-making, growth
focused listed companies remains unforgiving. During 2024, Oxford
Nanopore will focus on increasing LSRT sales, developing new clinical
and applied applications of its technology, and winning new large
scale genetic sequencing projects. The company aims to achieve
greater than 30% growth in underlying LSRT revenue, expand gross
margins through operating efficiency gains, demonstrate progress on
its path to profitability and ease concerns of any further future capital
needs that would be dilutive to shareholders.
Rebalancing & diversification
With only 30% of equities as of 31 December 2023 representing
investments made by Schroders, we continue to seek to maximise the
sale proceeds from holdings, both public and private, as part of the
rebalancing exercise to ensure sufficient liquidity (cash and liquid
public equities) to efficiently execute the buyback programme,
support the portfolio and make new investments.
We expect diversification to be a key topic for 2024. As capital
availability allows, we seek to target new investments that align with
our three strategies (venture, growth and life sciences) with the aim of
building a diversified portfolio which more appropriately balances the
risk of each strategy. This goal remains a moving target with the
requirements of the buyback programme and uncertain timing of
potential future exits, however our direction of travel is clear. However,
with private markets lagging those of public equities, we see a
compelling opportunity to continue making new investments at
attractive entry prices.
Schroders Capital remains committed to the Company and delivering
long-term value for shareholders.
Tim Creed and Harry Raikes
Portfolio Managers
27 March 2024
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Strategic Report
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Financial
Other Information (Unaudited)
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Schroders Capital Global Innovation Trust plc
The Company’s top ten investments as of 31 December 2023 compared with the respective holdings as of 31 December 2022.
31 December 2022
31 December 2023
Value
% of total
Value
% of total
Portfolio company
Strategy
(£’000)
equities
(£’000)
equities
Oxford Nanopore
Public
56,529
23.3
41,669
20.8
Atom Bank
Growth
31,686
13.1
23,105
11.5
HP Environmental Technologies
Growth
10,700
4.4
10,918
5.4
Reaction Engines
Venture
12,500
5.2
10,625
5.3
Ada Health
Growth
7,122
2.9
9,638
4.8
Back Market
Growth
7,329
3.0
8,839
4.4
Autolus Therapeutics
Public
2,642
1.1
8,463
4.2
Revolut
Growth
5,436
2.3
7,888
3.9
AgroStar
Growth
-
-
7,279
3.6
Nexeon
Venture
6,505
2.7
7,039
3.5
Oxford Nanopore
Technology company at the forefront of next generation DNA sequencing instrumentation
Oxford Nanopore Technologies (“ONT“) has developed a new generation of nanopore-based electronic systems for the analysis of single molecules,
including DNA, RNA and proteins. The handheld MinION™ device, the high-throughput PromethION™ and the GridION™ system are used in scientific
research, personalised medicine, crop science, security and defence and environmental applications.
ONT had a mixed 2023 with key highlights including:
–
In September, ONT released its interim results for the six months ended 30 June 2023:
o
LSRT revenue increased 22% year-on-year to £86 million.
o
Underlying LSRT revenue growth, excluding revenue from the Emirati Genome Program (“EGP”) and COVID-19 sequencing, expected
to be ~46% on constant currency basis.
o
Adjusted EBITDA loss of £39 million which aligned with market consensus.
–
In October, ONT announced various updates as part of its Capital Markets Day including:
o
Signing a multi-year joint development collaboration with Mayo Clinic, the renowned academic medical centre.
o
Securing a strategic investment from bioMerieux, a leading company in the field of in vitro diagnostics.
o
Progress advancing the technology from research into clinical and applied industrial markets targeted at 10-20% of revenue by FY26.
–
After the period end, in January 2024, ONT released its FY23 trading update outlining:
o
LSRT revenue increased 15% year-on-year to £169 million towards the lower end of previous guidance.
o
Performance in the fourth quarter was impacted by slower than expected ramp-up of certain new customers, which management
expect to fall into FY24, and a slowdown of growth in China and the Middle East following the issuance of the recent US semiconductor
trade rule further regulating sales of advanced AI semiconductors.
o
An agreement to replace and supersede its existing purchase agreement with G42 Laboratories in support of the EGP - the new
agreement will remove the outstanding purchase commitment and extends the expiration date until 31 December 2026.
o
Reiterated medium-term guidance including underlying revenue growth of more than 30% per annum (on a constant currency basis),
gross margin of greater than 65% and the target for adjusted EBITDA breakeven by the end of 2026.
Top 10 investments
Atom Bank
Leading UK app-only challenger bank
Atom Bank is the UK’s first bank built exclusively for mobile. It aims to
redefine what a bank should be, making things easier, more transparent,
and better value. Atom currently offers savings accounts, mortgages and
business loans.
In July 2023, Atom Bank published its FY23 annual report for the
12-month period to 31 March 2023 reporting its first annual
operating profit of £4.2 million. Key highlights included:
–
Customer numbers increased 82% from 123,000 to 224,000
whilst maintaining industry leading customer reviews.
–
Customer deposits increased 105% from £3.2 billion to
£6.6 billion with rising interest rates incentivising UK consumers
to switch into the company’s competitively priced products.
–
Loans under management increased 4% from £3.3 billion to
£3.4 billion with new lending slowing through the middle of the
year due to volatility in market rates.
–
Net interest income increased 62% from £47 million to
£76 million due to balance sheet growth and improving spreads
against a backdrop of rapidly rising base rates.
–
Net interest margin, calculated as net interest income divided by
average total loans for the period over which it was generated,
declined from 2.93% to 2.84%. Despite an improving yield on
lending assets, the result was lower than the prior year due to
the comparatively lower yield on cash.
In November 2023, Atom Bank announced it had raised £100 million
in new equity capital from existing shareholders BBVA, Toscafund and
Infinity Investment Partners. The funds are expected to be used to
accelerate lending and balance sheet growth as the bank continues
to scale. Whilst the valuation impact of this fundraise is disappointing
in the short term, this significant investment is a good signal of
confidence in Atom Bank. The company now has the capital to scale
up and demonstrate the operating efficiency of its platform. Although
much work remains, Atom Bank is one step closer to a planned future
liquidity event.
HP Environmental Technologies
Fund that invests in emerging environmental
technologies
The HP Environmental Technologies Fund invests in emerging
environmental technologies working to solve some of the most
important environmental challenges faced by the world today. The Fund
was seeded through the secondary purchase of a portfolio of seven
leading environmental technology companies and seeks primary
investment opportunities that arise from efforts to reduce our impact on
the planet and move towards solving important environmental
challenges.
Key portfolio updates in 2023:
–
Bluewater Bio
o
Throughout 2023, Bluewater Bio continued to roll out its
FilterClear technology across the UK as a core part of water
companies’ phosphorous removal programmes which are
essential to maintaining the health of our streams, rivers
and lakes.
o
In addition, Bluewater’s HYBACS (HYBrid ACtivated Sludge)
technology continued to perform in the UK, Middle East and
South Africa, providing millions of tonnes of water for reuse,
saving energy and reducing pollution.
–
P2i
o
P2i protected over 100 million electronic devices with its
nano-coating in 2023, enhancing the quality of these
devices and at the same time reducing waste and the
amount of rare earth metals used, and generating
significant carbon savings.
o
In March 2023, P2i was proud to be part of the official
launch of the United Electronics Coating Association
(“UECA”), whose formation P2i had spearheaded. The UECA
was established to support, develop and deliver to markets
sustainable electronic coating solutions in line with the
principles of the Circular Economy, recyclable electronics,
and re-usability.
–
Iceotope
o
In February 2023, Iceotope announced the availability of
KUL Extreme, a fully integrated and standardised open radio
access network architecture solution to support far edge
computing across the entire telecommunications data
centre estate. The product is a result of a close collaboration
between Iceotope, Hewlett Packard Enterprise, Intel, and
nVent to significantly reduce energy consumption and
deliver a sustainable solution across distributed workloads,
for both telco service providers and enterprises.
o
In September 2023, BT Group announced that it aims to
trial ‘precision liquid cooled’ networks switches using a
solution provided by Iceotope and Juniper Networks QFX
Series Switches, which are widely used in existing network
cloud architectures.
Schroders Capital Global Innovation Trust plc
17
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
18
Schroders Capital Global Innovation Trust plc
Reaction Engines
Developer of engine technologies to enable space and
hypersonic travel
Reaction Engines is pioneering space access and sustainable
technologies. For over 30 years the company has been at the forefront of
engineering innovation – including developing SABRE, a revolutionary
new class of aerospace propulsion. SABRE enables Reaction Engines to
go beyond the limits of flight both within and outside the atmosphere.
–
In January 2023, Reaction Engines announced a further
£40 million funding round led by Strategic Development Fund,
the investment arm of UAE’s Tawazun Council.
–
In February 2023, the company announced that it had joined the
Thermal Management for Hybrid Electric Regional Aircraft
consortium, a pan-European consortium led by Honeywell, which
is researching and developing thermal management
components and architectures for next-generation narrow body
and regional, hybrid-electric aircraft.
–
In June 2023, the company announced its participation in
projects RACHEL and LH2GT, two cutting-edge projects
developing technologies for the use of liquid hydrogen fuel in
aviation, led by Rolls-Royce and funded by the UK government’s
Aerospace Technology Institute.
–
In August 2023, it was announced that the company had been
awarded funding to further a UK/US collaboration under the
UK Space Agency’s International Bilateral Fund.
Ada Health
Global digital health company focused on improving
human health at scale
Ada has developed a powerful AI-based health assessment and care
navigation platform that helps users to understand their symptoms,
identify and differentiate conditions with a high degree of medical
accuracy, and navigate safely to the right care at the right time.
2023 was a very successful year for Ada Health, with the company
achieving record revenues and becoming profitable at an EBITDA
level. The year was marked by many highlights, including:
–
In January 2023, it was announced that Ada Health and Pfizer
were collaborating to launch a nationwide online COVID-19 Care
Journey, operated by Ada, to help connect patients with timely
treatment.
–
In April 2023, Ada announced a new collaboration with Jefferson
Health, Greater Philadelphia’s largest health system comprised of
18 hospitals and more than 50 outpatient facilities across
Pennsylvania and New Jersey.
–
In June 2023, the company announced that it had secured
€30 million to advance global growth. The agreement between
Ada Health and IPF Partners represented up to €30 million of
debt borrowing and reinforced Ada Health’s financial runway
through 2024 and beyond as the company steers toward
profitability. The funding enabled continued investment in
product enhancement and development, user growth, and
commercial traction with leading health systems, governments,
and life sciences organisations. Initially, Ada Health intend to only
draw part of the committed funding.
–
In September 2023, Ada Health launched a new collaboration to
provide medical advice and care guidance for mothers across
South Africa.
–
In October 2023, the company launched a COVID-19 risk and
therapy screener to help people across Germany understand
their risks.
Back Market
Global marketplace for refurbished devices
Back Market is a leading online marketplace dedicated to refurbished
devices. The company’s mission is to make restored devices mainstream.
Back Market works with professional refurbishers to guarantee that every
device has been tested and restored to perfect working condition
according to industry standards.
–
In April 2023, Back Market announced that it had received
B Corp status. This means that from their environmental impact
to their hiring practice, they are working toward a more inclusive
and sustainable economy. B Corp is a third-party certification for
“businesses meeting high standards of verified performance,
accountability, and transparency on factors from employee
benefits and charitable giving to supply chain practices and input
materials.”
–
Back Market now has over 1,500 professional sellers on the
platform backed by a solid ranking system.
–
Profitability has been achieved and maintained in mature
markets such as France and Spain, with the company continuing
on its global expansion journey, with focus on US, UK, Germany
and Japan.
–
Looking forward, Back Market aims to focus on diversifying into
new categories, increasing buyback and recycling activity and
furthering partnerships with telcos.
Autolus
Clinical-stage biopharmaceutical company developing
next-generation, programmed T-cell therapies for the
treatment of cancer
Autolus is a CAR T-cell therapy company. The company applies its
extensive programming capabilities to develop advanced autologous
T-cell therapies that have the potential to deliver life-changing benefits to
cancer patients.
–
The company presented positive results from a pivotal Phase 2
clinical trial for OBE-CELL, aimed at patients with
relapsed/refractory adult B-cell Acute Lymphoblastic Leukaemia.
These results were presented at the American Society of
Hematology in May and December 2023.
–
In November 2023, the company filed a Biologics License
Application with the FDA, seeking US regulatory market approval.
–
Elsewhere in their pipeline, the company reported in April 2023
that AUTO1/22 showed complete responses and no antigen
negative relapse in responding patients with Acute
Lymphoblastic Leukaemia in a Phase I study.
–
In June 2023, the company reported that AUTO4 demonstrated
responses in all four treated patients with relapsed/refractory
TRBC1-positive Peripheral T-cell Lymphoma. AUTO4 was well
tolerated with no dose-limiting toxicities. Two of these patients
showed a complete metabolic response at the highest doses.
Top 10 Investments
continued
Schroders Capital Global Innovation Trust plc
19
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
Revolut
Global neobank and financial technology company
Revolut is a fintech firm that provides banking and payment services.
The company offers multi-currency cards and a mobile app that includes
currency exchange, peer-to-peer payment and bank transfer solutions.
It also offers personal and business banking solutions.
In December 2023, Revolut released its annual report for 2022
providing greater detail on progress in the prior year:
–
Number of retail customers increased 60% year-on-year to
26.2 million, including a 55% increase in customers on paid
plans, and during the course of 2023, the number of retail
customers later surpassed 35 million customers across
38 countries.
–
Number of monthly transactions increased 71% to 341 million.
–
Deposits increased 71% to £12.6 billion.
–
Revenue increased 45% to £923 million.
–
Number of employees increased 112% to 5,913.
–
During the year, Revolut continued to pursue its global
expansion across a number of markets:
o
North America: United States.
o
Asia-Pacific: Australia, Singapore, Japan and New Zealand
(launched in July 2023).
o
Latin America: Brazil (launched in May 2023) and Mexico.
–
The company reiterated its commitment to its ongoing UK
banking licence application.
–
Expects to hit $2 billion (£1.7 billion) in revenue and double-digit
net profit margin for 2023.
AgroStar
One of India’s foremost agricultural technology
(AgTech) start-ups
AgroStar uses technology, data, and agronomy knowledge to help Indian
farmers. It provides an end-to-end solution that is solving three major
problems for Indian farmers: limited access to good quality agricultural
inputs, a knowledge gap (even among the most experienced farmers),
and a lack of access to global markets to sell their produce.
AgroStar made good progress in 2023. The private label business
grew by 60% year-on-year and expanded into five new Indian states.
The company added multiple new crops to the produce portfolio and
forayed into new geographies with partnerships with marquee global
brands. Key highlights included:
–
Served more than 1.4 million farmers in 2023 across channels.
–
Farmer App continues to be well rated on the app store and had
>1.5 million new downloads in 2023.
–
Expansion of footprint to five new Indian states including Bihar,
Haryana, Karnataka, Andhra Pradesh and Telangana.
–
Added over 3,000 new stores in CY23 and now have 7,000+
Saathi stores distributing AgroStar products across 10 Indian
states.
–
Export of over 80,000 metric tonnes of fresh produce from
Indian farmers to global markets in 2023.
–
Added new crops (guava and melons) to the offering in 2023.
Nexeon
Leader in engineered silicon materials for battery
applications
Nexeon is a global leader in the development and manufacturing of
ground-breaking, silicon-based anode materials, dramatically enhancing
the performance of Lithium-Ion batteries.
–
In July 2023, Nexeon announced that it had entered into a
long-term partnership with Panasonic to supply its advanced
silicon-based anode material, which has the potential to catapult
the energy density of lithium-ion cells. This technology redefines
the limits of energy density and enables a new era of enhanced
battery performance.
–
In August 2023, the company announced that it had signed an
agreement for its first commercial volume production site and
secured a raw material supply chain for silicon anodes. This
represented a significant step towards delivery of cost-efficient
silicon anode materials for energy dense batteries.
20
Schroders Capital Global Innovation Trust plc
Investment Portfolio
as at 31 December 2023
Portfolio composition
Portfolio by geography*
Portfolio by public equity and private equity
% of total equities
1
% of total equities
1
Portfolio by sector
Portfolio by strategy/stage
% of total equities
1
% of total equities
1
Source: Schroders. Figures have been rounded to nearest %.
* Based on country of risk.
1
Excluding money market funds
UK
U.S.
Switzerland
France
Germany
India
4.2%
4.8%
4.4%
11.5%
68.7%
6.4%
Private equity
Public equity
71.7%
28.3%
Health Care
Financials
Industrials
Technology
Consumer
Business services
4.2%
15.5%
51.2%
15.0%
6.1%
8.0%
Public equity
Growth
Venture
Life sciences
36.6%
28.3%
19.6%
15.5%
Schroders Capital Global Innovation Trust plc
21
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
The 20 largest investments account for 91.1% of total investments by value (31 December 2022: 93.4%).
Total
Fair value
investments
Holding
Quoted/unquoted
Strategy
Industry sector
£’000
%
Equities
Oxford Nanopore
1
Quoted
Public
Health Care
41,669
19.8
Atom Bank
1
Unquoted
Growth
Financials
23,105
11.0
HP Environmental Technologies Fund
1
Unquoted
Growth
Industrials
10,918
5.2
Reaction Engines
1
Unquoted
Venture
Industrials
10,625
5.1
Ada Health
Unquoted
Growth
Health Care
9,638
4.6
Back Market
2
Unquoted
Growth
Consumer
8,839
4.2
Autolus Therapeutics
1
Quoted
Public
Health Care
8,463
4.0
Revolut LLP
3
Unquoted
Growth
Financials
7,888
3.8
AgroStar
4
Unquoted
Growth
Technology
7,279
3.5
Nexeon
1
Unquoted
Venture
Industrials
7,039
3.4
Federated Wireless
1
Unquoted
Venture
Technology
6,392
3.0
Kymab
1
Unquoted
Life sciences
Health Care
6,370
3.0
Bizongo
5
Unquoted
Growth
Technology
5,585
2.7
Genomics
1
Unquoted
Venture
Health Care
5,139
2.4
Cequr
1
Unquoted
Life sciences
Health Care
4,956
2.4
OcuTerra
1
Unquoted
Life sciences
Health Care
4,804
2.3
Immunocore
1
Quoted
Public
Health Care
4,437
2.1
Carmot Therapeutics
Unquoted
Life sciences
Health Care
4,262
2.0
Securiti
Unquoted
Venture
Technology
4,210
2.0
Attest Technologies
Unquoted
Venture
Business Services
2,870
1.4
Anthos Therapeutics
Unquoted
Life sciences
Health Care
2,440
1.2
BenevolentAl
1,6
Quoted
Public
Health Care
2,176
1.0
Epsilogen
Unquoted
Life sciences
Health Care
2,047
1.0
MMC SPV 3 LP
7
Unquoted
Venture
Technology
1,651
0.8
Araris Biotech
Unquoted
Life sciences
Health Care
1,482
0.7
iOnctura
Unquoted
Life sciences
Health Care
1,399
0.7
AMO Pharma
1
Unquoted
Life sciences
Health Care
1,350
0.6
Industrial Heat
1
Unquoted
Venture
Industrials
1,306
0.6
A2 Biotherapeutics
Unquoted
Life sciences
Health Care
914
0.4
Memo Therapeutics
Unquoted
Life sciences
Health Care
558
0.3
Novabiotics
1
Unquoted
Life sciences
Health Care
457
0.2
Econic
1
Unquoted
Venture
Industrials
58
–
ARC Group
1
Quoted
Public
Business Services
34
–
Freevolt (formerly Drayson)
1
Unquoted
Venture
Technology
–
–
Just Benchmarks
1
Unquoted
Venture
Financials
–
–
Mafic
1
Unquoted
Venture
Industrials
–
–
Metaboards
1
Unquoted
Venture
Technology
–
–
Mereo BioPharma Group
1
Quoted
Life sciences
Health Care
–
–
EVOFEM Biosciences
1
Unquoted
Life sciences
Health Care
–
–
Halosource
1
Unquoted
Venture
Industrials
–
–
Bodle Technologies
1
Unquoted
Venture
Technology
–
–
22
Schroders Capital Global Innovation Trust plc
Investment Portfolio
as at 31 December 2023
continued
Total
Fair value
investments
Holding
Quoted/unquoted
Strategy
Industry sector
£’000
%
Rutherford Health
1
Unquoted
Venture
Health Care
–
–
Lignia Wood
1
Unquoted
Venture
Industrials
–
–
Oxsybio
1
Unquoted
Life sciences
Health Care
–
–
Spin Memory
1
Unquoted
Venture
Technology
–
–
Kind Consumer
1
Unquoted
Venture
Consumer Staples
–
–
Total equities
200,360
95.4
Money market funds
Schroder Special Situations – Sterling
Liquidity Plus Fund
Quoted
Cash
Collectives
9,733
4.6
Total money market funds
9,733
4.6
Total investments
8
210,093
100.0
1
Assets inherited from the previous portfolio manager.
2
Back Market is held via the Company’s holding in Sprints Capital Ellison LP, a single asset fund.
3
Revolut is held via the Company’s holding in Target Global Selected Opportunities, LLC – Series Space, a single asset fund.
4
AgroStar is held via the Company’s holding in Schroders Capital Private Equity Asia Mauri VIII Ltd, a single asset fund.
5
Bizongo is held via the Company’s holding in Schroders Capital Private Equity Asia Maurit V Ltd, a single asset fund.
6
BenevolentAI is quoted, but the market is inactive. Thus its valuation has been determined in accordance with the process followed for unquoted assets.
7
MMC SPV 3 LP is a single asset fund that holds an AI software company.
8
Total investments comprise:
£’000
%
Unquoted
143,581
68.5
Listed on the London Stock Exchange
41,669
19.8
Listed on a recognised stock exchange overseas
15,110
7.1
Collective investment scheme
9,733
4.6
Total
210,093
100.0
Additional details of unquoted, including investments quoted in inactive markets, in the top 10 holdings
Pre-tax
Net assets/
Turnover for
profit/losses
(liabilities)
the latest
for the
at the latest
audited
latest audited
audited
financial
financial
balance
Description
Cost
Fair value
year
year
sheet date
Holding
of business
£’000
£’000
£’000
£’000
£’000
Atom Bank
Leading UK app-only challenger
bank
75,165
23,105
209,107
10,097
283,134
HP Environmental Technologies
Portfolio of venture and
Fund
growth-stage industrial
companies
3,369
10,918
N/P
1
N/P
1
N/P
1
Reaction Engines
Developer of engine technologies
to enable space and hypersonic
travel
10,000
10,625
4,743
(28,744)
32,144
Ada Health
Develops an artificial intelligence
powered personal health guide
10,028
9,638
N/P
1
N/P
1
N/P
1
Back Market
Online marketplace for
refurbished devices
10,032
8,839
N/P
1
N/P
1
N/P
1
Revolut LLP
Provides a digital banking solution
9,849
7,888
922,547
25,418
1,171,333
AgroStar
Manufactures and distributes
organic fertilisers
6,581
7,279
N/P
1
N/P
1
N/P
1
Nexeon
Develops silicon materials for
4,944
7,039
4,359
(7073)
99,282
battery applications
1
Information not publicly available.
Long Term Financial Record
Schroders Capital Global Innovation Trust plc
23
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
21 April 2015
At 31 December
(launch date)
2015
2016
2017
2018
2019
2020
2021
2022
2023
Shareholders’ funds (£’000)
790,640
805,264
771,093
755,295
807,200
449,429
318,069
436,871
257,922
217,064
NAV per share (pence)
98.83
97.37
93.24
91.33
97.61
49.46
35.00
48.08
28.52
25.32
Share price (pence)
102.00
101.00
91.00
84.45
82.10
38.35
31.00
33.10
15.47
14.65
Share price (premium)/discount
to NAV per share (%)
1
(3.2)
(3.7)
2.4
7.5
15.9
22.5
11.4
31.2
45.8
42.1
(Net cash)/gearing (%)
1
–
(1.5)
9.7
19.8
18.6
24.6
31.6
0.7
(6.3)
(1.3)
For the year ended 31 December
2015
2
2016
2017
2018
2019
2020
2021
2022
2023
Net revenue return/(loss) after
taxation (£'000)
1,538
(711)
(3,441)
(3,847)
(5,956)
(5,072)
(5,315)
(3,051)
(1,825)
Revenue return/(loss) per share (pence)
0.25
(0.09)
(0.42)
(0.47)
(0.67)
(0.56)
(0.58)
(0.34)
(0.20)
Dividend per share (pence)
0.16
–
–
–
–
–
–
–
–
Ongoing charges (%)
1
0.10
0.20
0.18
0.17
0.43
0.74
1.21
0.98
1.08
1
Alternative Performance Measures. Further details can be found on pages 88 and 89.
2
Represents the period from 21 April 2015 (the date on which the Company began investing) to 31 December 2015.
NAV per share, share price total return versus FTSE All-Share Index total return for the
period from 21 April 2015 (launch date) to 31 December 2023
Schroder Investment Management Limited took over investment management responsibilities in December 2019.
Source: Morningstar/Thomson Reuters. Rebased to 100 at 21 April 2015.
NAV
FTSE All-Share Index
Share price
0
25
50
75
100
125
150
175
31-Dec-23
31-Dec-22
31-Dec-21
31-Dec-20
31-Dec-19
31-Dec-18
31-Dec-17
31-Dec-16
31-Dec-15
21-Apr-15
24
Schroders Capital Global Innovation Trust plc
Investment Approach and Process
Investment team
Schroders Capital’s private equity business comprises over 180 professionals and has been managing private equity on behalf of investors
globally since 1997. It is responsible for managing c.$17 billion of assets (as at 31 December 2023), providing investors with access to a broad
range of private equity, including venture capital, growth and buyout investment opportunities, across a number of investment programmes,
including a successful, long-standing Global Innovation programme.
The Company’s core investment team consists of six investment professionals, outlined below. This core team draws on the extensive
capabilities of the Schroders organisation more broadly.
Tim Creed
Harry Raikes
Lead Portfolio Manager
Co-Portfolio Manager
Erwin Boos
Paul Lamacraft
Vahit Alili
Chad Brokopp
Senior Investment Director
Senior Investment Director
Senior Investment Director
Investment Manager
The Investment Manager aims to identify private equity investments globally in innovative companies that represent an optimal combination of
best-in-class products/services/technology, significant growth potential, high-calibre management teams and value-add co-investors. In short,
the Investment Manager is seeking out ground-breaking companies with significant long-term growth prospects, wherever they are in the
world. They believe that a combination of pioneering technology and strong management teams that are aligned with a stable, well-respected
institutional shareholder base, provides the most innovative companies with the best opportunity to fulfil their potential and grow into the
leading businesses of the future.
What your Investment Manager is looking for when making investment for the Company
B
Best-in-class
s
products/services/
technology
Significant
t growth
h
potential,
,
underpinned
d by
y
secular
r trends
Managed
d by
y
a
a world-class
s
management
t team
Investing
g alongside,
,
high
h quality,
, value-
add
d co-investors
Schroders Capital Global Innovation Trust plc
25
The Investment Manager’s long-term investment strategy is focused on pursuing opportunities in private companies across three strategies: life
sciences, venture and growth, which is illustrated in the below figure.
Long-term investment strategy comprised of three strategies
Source: Schroders Capital, 2024. Companies shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell. Forecasts and
estimates may not be realised. Logos shown are the property of their own entities.
1
Series: denotes stage of funding round. It is common for a company to begin with a seed round and continue with A, B, and then C fund rounds, etc.
2
Enterprise value: a measure of a company’s total value. It looks at the entire market value rather than just the equity value, so all ownership interests and asset
claims from both debt and equity are included.
3
Revenue growth: annual increase (or decrease) in a company’s revenues.
4
Unit economics: a measure of the profitability of selling one unit of product/service.
5
Key risk factors: those risk factors we believe are most relevant to business success or failure.
Deals have been and are expected to be sourced both directly and as co-investments alongside some of the world’s leading venture capital (VC)
firms, thanks to Schroders Capital’s more than 25-year history of investing in VC funds globally. By investing during some of the fastest growth
phases of a company’s development, the Investment Manager believes it can access higher potential returns. It further believes that by
investing at early stages of development and having the flexibility to hold public entities, the Company can capture the full spectrum of growth,
regardless of a company’s ownership structure.
The world around us is continually facing challenges, from global climate change to evolving regulations, from social, cultural and workplace
shifts to emerging online threats. The Investment Manager believes that innovation will be crucial to solving some of these challenges, and
investors in innovative companies should benefit. Furthermore, innovation is accelerating globally and driving change across all sectors. The
Investment Manager applies a thematic lens based on long-term secular trends, focusing on eight key areas where the team is uncovering,
attractive, innovative business in which to invest (see below), from artificial intelligence to biotechnology discovery platforms. The Investment
Manager believes that investing in these areas, as well as other tech-enabled businesses, should provide investors with access to fast growing,
high quality, innovative companies of the decades ahead that are not available solely through public markets.
Eight innovation themes
LIFE
E SCIENCES
VENTURE
GROWTH
Focused on biotech
h and
d life
e science
e
opportunities.
Either clinical
l stage
e or with visibility on IND (max
6 months). Clinical endpoint clearly defined and
financed.
Prudent
t reserving
g (1:3 if preclinical, 1:2 if early
clinical and no crossover, 1:1 if IPO visibility).
Focused on venture-stage
e companies
s with
h early
y
revenues.
Will typically have initial
l customers,
unproven
n
unit
t economics
s and
raising
g capital
l to
o invest
t in
n
their
r product/technology
y and
d go-to-market
t
strategy.
Prudent
t reserving
g with typical initial investments
of ~£4m with 1:1 reserve ratio.
Focused on more mature
e growth-stage
e
companies
s that
t have
e achieved
d scaled
d revenues.
Will typically have established
d customers,
proven
n unit
t economics
s and
raising
g capital
l to
o
invest
t for
r growth.
Prudent
t reserving
g with typical initial investments
of ~£10m with 1:0.5 reserve ratio.
Typical
l investment
t profiles
Series
1
D
/
C
s
e
i
r
e
S
B
/
A
s
e
i
r
e
S
B
s
e
i
r
e
S
Enterprise
e value
2
m
0
0
5
£
>
m
0
0
5
£
<
m
0
5
2
£
<
Annual
l revenue
e growth
3
%
0
3
>
%
0
5
>
A
/
N
Unit
t economics
4
n
e
v
o
r
P
n
e
v
o
r
p
n
U
A
/
N
Key
y risk
k factors
5
n
o
i
t
a
u
l
a
v
,
n
o
i
t
i
t
e
p
m
o
C
t
i
f
t
e
k
r
a
m
,
t
c
u
d
o
r
p
/
y
g
o
l
o
n
h
c
e
T
k
s
i
r
m
r
o
f
t
a
l
p
/
e
n
i
l
e
p
i
P
Example
e portfolio
o
companies
Artificial
l
Intelligence
Fintech/Payments
Consumer
Infra
a software
Oncology
Biotech
h discovery
y
platforms
Software using large language
models
Machine learning algorithms
Processing & APIs
Multi-channel and Point of Sale
Marketplaces
On-demand and mobile-first
Data analytics
Cloud computing
Open source
Immuno-oncology
Undruggable targets
Cell/gene therapies
Small molecules
Cybersecurity
Vertical
l SaaS
Prevention, remediation, and
monitoring software
Sector specialists
Enterprise software platforms
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
26
Schroders Capital Global Innovation Trust plc
Investment Approach and Process
continued
Process
Schroders Capital applies a thorough and disciplined due diligence process to seek to select the most attractive private equity investment
opportunities. This process is based on extensive sector knowledge and specialisation, ability to benchmark operational metrics with
comparable businesses within existing portfolios and ability to extensively reference opportunities with a significant network within the private
equity world.
Potential investment opportunities are vetted through a rigorous due diligence process, which is characterised by three main principles:
1.
Broad, outbound sourcing efforts;
2.
Openness and interaction among deal teams, region/sector teams, and the Investment Committee; and
3.
Unanimous decision-making Schroders Capital’s private equity investment process is illustrated below.
Sourcing
Private equity investments are made either directly into the share capital of the target company, or as co-investments through a special purpose
vehicle (“SPV”) created by another fund manager/general partner. Identifying attractive private equity investments through proactive deal
sourcing is key to successful private equity investing. Therefore, the investment team spends considerable time on this activity by mining the
firm’s substantial network of investment professionals and industry experts.
Schroders Capital sources opportunities from well-established and emerging managers globally with whom it usually has a strong, existing
relationship. Schroders Capital’s sourcing strategy has four mainstays:
1.
Preferred co-investment partner of a significant number of high-quality General Partners (“GP”) to whom Schroders Capital is an important
limited partner;
2.
Generation of additional co-investment opportunities through an active dialogue with promising GPs with whom Schroders Capital doesn’t
have a primary investment relationship and capable deal-by-deal groups;
3.
Rigorous assessment of the fit of each deal to the GP’s strategy and whether it is being offered for the ‘right reason’; and
4.
No fee/no carry (performance fee) or significantly discounted co-investments.
Schroders Capital is well positioned to access a high-quality deal flow as one of the largest limited partners in the majority of funds it invests in,
and being on the advisory board of most of the funds where it is invested. Schroders Capital also maintains relationships with hundreds of fund
managers and independent sponsors that view Schroders Capital as a potential future fund partner. These managers provide additional and
sizeable deal flow. The investment team meets weekly to discuss new opportunities that may be appropriate for inclusion in the Company’s
pipeline and whether they should progress to pre-qualification stage.
Pre-qualification
Investment opportunities that enter the pre-qualification stage are assessed and vetted through a rigorous due diligence process. The due
diligence process includes an assessment of the company’s positioning, technology differentiation, market opportunity, competitive landscape,
management execution and depth, strength of the existing financing syndicate and prospective financing needs. Due diligence is conducted on
the basis of company financial and management reports, audited accounts, third party commercial, financial, legal and tax due diligence
reports, GP Investment Committee papers and financial models. Schroders Capital also endeavours to speak directly to the management team
as part of the process.
The due diligence process is led by a Deal Team of two or more investment professionals. If the Deal Team wishes to pursue a transaction, they
must also discuss it and seek approval from the wider region/segment team. Once the team agrees to pursue the opportunity, the deal is
shared with the Schroders Capital Global Investment Committee (the “IC”) for preliminary discussion (pre-qualification). The IC provides input
and can progress or veto the opportunity. This committee, consisting of Head of Private Equity Investments, Head of Investment Risk and
Monitoring, Head of Private Equity, Chief Investment Officer and Head of Global Private Equity Portfolios, is required to approve new company
investment proposals.
Dealflow
Prequalification
Qualification
Execution
Monitoring
Core relationship
Management/
access top deals
Outbound sourcing
Assessment
Review investment
oppordunity
Due diligence of
target company
GP fit assessment
Prequalification
Team visits/calls
with management
ESG due diligence
One-on-one
meetings with IC
Investment
recommendation
Manager and
portfolio
monitoring
Company visits
and AGM
Follow-on
financing needs
Finalisation of legal
documentation
Program
Team
Discussion
Investment
Committee
discussion
Investment
Committee
discussion
Legal and tax
due dilligence
Structuring
Closing
Schroders Capital Global Innovation Trust plc
27
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
Qualification
Between the pre-qualification and the final IC recommendation, the
Deal Team completes additional due diligence to address concerns
and outstanding topics.
Additional ESG, legal and tax due diligence is also conducted.
The Deal Team discusses outstanding questions with the
region/segment team, the Company’s core investment team and two
of the four IC members separately. Following agreement of both
teams and the IC, the investment recommendation is brought to the
IC for final approval. The vote must be unanimous. In addition, each
new investment needs to be approved by the portfolio managers.
who will have been involved in the assessment of the opportunity
through each stage of the process via the weekly team meetings.
Key criteria for investment approval includes valuation, market
positioning, competitive advantages, historical and future growth
prospects, client or supplier concentration, quality of earnings, cash
conversion, transaction structure and alignment of interests (with
both the lead GP and management team). Additionally, assessing the
fit of the GP as co-investor and ESG considerations also plays a role in
investment decisions.
Schroders Capital employs a proprietary risk/return assessment
framework to score each opportunity across seven dimensions and
identify the ones which offer the most attractive risk/return profiles.
Execution
Execution of transactions involves the finalisation of all transaction
documentation, a process which is generally initiated earlier in the
due diligence process. The legal review and negotiation process is led
by the Deal Team and supported by external legal and tax counsel.
Transaction funding is executed by Schroders Capital’s Fund
Operations team and requires fully agreed and executed legal
documentation.
Monitoring
The Investment Manager has established account management
responsibilities for all private equity direct/co-investments.
Account managers are responsible for monitoring performance
development and further equity requirements. Post investment
monitoring is underpinned by strong information and monitoring
rights. The Investment Manager secures access to management and
management reports (typically receiving the same information as
a lead investor would), and observer board seats whenever possible.
Progress is reviewed on a quarterly basis and discussed with the lead
GP or management team during one-to-one meetings, calls, AGMs
and advisory board meetings. Key metrics tracked include revenue,
gross margin, earnings, net cash flow, enterprise value, valuation
multiple, net debt, equity value as well as qualitative information and
overall investment development. The results are used to forecast exit
valuations and aggregated to produce up-to-date portfolio
performance expectations.
Post investment management also involves active value creation. The
Investment Manager uses its global network to add value to
direct/co- investments. This includes introductions to potential new
customers, new suppliers, GPs in other geographies with similar
portfolio companies, and potential buyers for the companies.
The investment team take a fundamental approach at all times,
seeking businesses that they believe are set to deliver strong returns
for the long term. Furthermore, the investment team have a keen
focus on risk management, which forms an integral part of the
investment process. The managers have a particular focus on the
financing needs of the privately held companies, the liquidity profile of
the publicly listed holdings, as well as stock and sector
concentrations. The size of each holding will be determined on the
basis of the portfolio managers’ investment conviction alongside an
assessment of the risks associated with it. Meanwhile, portfolio
construction is supported by a robust system of risk controls, while
proprietary risk tools help the Investment Manager and the Board to
understand the factors contributing to risk as well as to avoid
unintended risk. In order to add an extra layer of rigour to the
investment management process, the investment managers are
overseen by the Private Equity Risk and Performance Committee,
which meets quarterly to discuss portfolio monitoring and key risks.
This committee comprises Schroders Capital’s Head of Investment
Risk and Monitoring, Schroders’ Head of Financial Risk Management,
Schroders’ Head of Investment Risk for Private Equity and Insurance
Linked Securities, Schroders’ Head of Product Governance and
Schroders Capital’s Head of Product Management. The portfolio
management team is expected to provide the committee with
explanations for current risk exposures, describe any future intended
state and the pathway to transition, outline current and future
liquidity status, as well as discuss portfolio holding rationales.
Responsible investment
The Company delegates to its Investment Manager the responsibility
for taking environmental, social and governance (“ESG”) issues into
account when assessing the selection, retention and realisation of
investments. The Board expects the Investment Manager to engage
with investee companies on social, environmental and business ethics
issues and to promote best practice. The Board expects the
Investment Manager to exercise the Company’s voting rights in
consideration of these issues.
In addition to the description of the Investment Manager’s integration
of ESG into the investment process on pages 28 and 29, a description
of the Manager’s policy, and its engagement with investee companies
on these matters, can be found on the Schroders’ website at
https://www.schroders.com/en/sustainability/active-ownership/.
The Board notes that Schroders believes that companies with good
ESG management often perform better and deliver superior returns
over time. Engaging with companies to understand how they
approach ESG management is an integral part of the investment
process. Schroders is compliant with the UK Stewardship Code and its
compliance with the principles therein is reported on its website. The
Board has received reporting from the Manager on the application of
its policy.
28
Schroders Capital Global Innovation Trust plc
Investment Approach and Process
continued
Engagement
The team engages with each of the Company’s underlying portfolio companies, and/or with Schroders Capital’s investment partners for
co-investments, on a regular basis. However, the frequency and depth of this engagement typically depends on a range of factors including
shareholder rights, size of the position, risk profile, value creation potential and strength of the shareholder syndicate. As an example, for most
private companies in the top 20 holdings, where the Company’s rights allow, the team will attend company board meetings as an observer.
These meetings serve as an essential source of information about the progress of the business, but also present an opportune moment to
support strategic planning and engage with the management team, board members and co-investors on sustainability-related topics. The
below table offers an overview of the board rights/source of primary engagement across the Company’s top holdings.
Portfolio company
Engagement
Atom Bank
Board observer
HP Environmental Technologies
Limited Partner Advisory (LPAC) member
Reaction Engines
Board observer
Ada Health
Board observer
Back Market
Co-investment – primary engagement through Sprints Capital
Revolut
Co-investment – primary engagement through several managers where
Schroders Capital has look-through exposure
AgroStar
Board observer
ESG integration
Schroders Capital’s private equity investment team adopts sustainable investing practices as an integral part of identifying, assessing and
monitoring portfolio companies. It believes that these practices enhance the long-term value of private equity investments and benefits all
stakeholders including shareholders, employees, clients, and the communities in which it operates. Its commitment to sustainability applies to
all private equity investments, including direct and indirect holdings, and the firms it partners with. Furthermore, it believes private equity
investors are well positioned to adhere to responsible investing principles and drive positive change due to private equity’s long-term
orientation, ability to conduct extensive due diligence and the opportunity for private equity investors to make a strategic impact on their
portfolio companies.
As Investment Manager of the Company, the investment team pursues investments in leading, innovative businesses of the decades ahead,
seeking out those companies that possess best-in-class products or services, with high disruption potential, poised for significant growth, and
managed by world class management teams. Investments are made either directly into the share capital of the target company, or as co-
investments through a SPV created by another fund manager/GP. Many of the companies that Schroders Capital focuses on for this Company
are commercialising research and innovation. It follows from this that the team is looking for companies with valuable intellectual property that
are able to drive significant revenue growth as their products are commercialised. Many of the companies that meet these criteria are engaged
in the development of new technologies that can have positive and negative societal and environmental outcomes (e.g. life sciences and the
treatment of disease). Through its ESG risk assessment and monitoring, Schroders Capital aims to minimise those negative outcomes, and
encourage increasing positive outcomes.
For all investments, Schroders Capital assesses ESG factors at the pre-investment selection stage, at investment due diligence and during post-
investment monitoring of investments. The process is based on three pillars: (1) identifying investment opportunities that will meet return
expectations through the active search for sustainability leaders (positive selection), (2) managing downside ESG related risks and exclusion of
certain business activities and industries, and (3) actively seeking increased adoption of sustainable investment practices and standards among
portfolio companies through assessment, engagement, monitoring and reporting.
Schroders Capital Global Innovation Trust plc
29
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
Engagement examples from 2023
Over 2023, we continued to actively engage with investee companies and our investment partners. We provide some of the key
engagements we undertook over the year below.
Company background
Ada Health, a digital health company, has
been a portfolio company since 2021.
The company has developed a powerful
AI-based health assessment and care
navigation platform that helps users to
understand their symptoms, to identify and
differentiate conditions with a high degree of
medical accuracy, and to navigate safely to
the right care, at the right time.
Initial observations
Actions taken
Outcome
– Ada Health targets partnerships with a wide
range of potential clients, including healthcare
systems, providers, payors and pharmaceutical
companies
– Meanwhile, Schroders Capital has a large
investment portfolio of >6,000 companies on
a direct and indirect basis
– The investment team screened their portfolio for
companies that could benefit from a partnership
with Ada Health and identified more than
10 potential introductions
– Ada Health has several ongoing partnership
discussions which the investment team are
working to support
Company background
Nexeon, a battery materials and
manufacturing company with a unique
silicon anode technology, has been a
portfolio company since 2016.
The company’s technology unlocks the
potential of silicon to deliver increased
capacity without compromising lithium-ion
battery cycle life, providing lighter batteries
with more power and longer lifetime
between charges.
Initial observations
Actions taken
Outcome
– The investment team engaged with Nexeon to
help with the development of their ESG
framework
– In 2022 Nexeon’s management team was
presented with a blueprint report on how formally
to set up a corporate sustainability strategy
– In 2023, Nexeon formally appointed a senior
management member with responsibility for
setting up a programme and reporting.
Schroders Capital further encouraged the specific
foundation pillars, including the importance of
environmental product life cycle assessments
– The investment team continues to engage with
the management team to ensure execution of
initiatives recommended in the sustainability
blueprint report
30
Schroders Capital Global Innovation Trust plc
Valuation Approach and Process
The Company’s AIFM conducts valuations for the portfolio holdings on
a quarterly basis. Investments that are quoted on an exchange are
typically valued using closing bid prices. If there has been no material
trading in an investment, it will be valued using the process for
unquoted investments, described below. Each quarter, the Audit, Risk
and Valuation Committee reviews a report on the revaluations
undertaken on the unquoted holdings during the period and
challenges the considerations and key assumptions made, where
appropriate, to ensure that the valuations are reliable.
Investments in shares that are not quoted on any stock exchange
(unquoted investments) represent a significant part of the Company’s
portfolio and may include common stock, preferred stock, warrants
and other option-like instruments. Those investments are carried at
their estimated fair values, consistent with the UK accounting
convention FRS 102 and the recommendations on best practices of
the International Private Equity and Venture Capital (“IPEV”) guidelines
issued in December 2022. The following factors will be considered in
determining the fair value of an unquoted asset:
(i)
Investments which are not traded in an active market are valued
using the price of a recent investment, where there are no factors
observed to suggest a material change in fair value.
(ii)
Where (i) is no longer considered appropriate, investments are
valued at the price used in a material arm’s length transaction by
an independent third party, and where there is no impact on the
rights of existing shareholders.
(iii)
In the absence of (ii), one of the following methods may be used:
a.
Revenue, Gross Profit or EBITDA multiples, based on listed
investments and private market transactions in the relevant
sector, adjusted for differences such as lack of marketability,
size and growth profile.
b.
Recent transaction prices adjusted for the company’s
performance against key milestones and the complexity of
the capital structure.
c.
Probability-weighted expected return scenarios, discounted
at a risk-adjusted rate of return.
d.
Discounted cash flows analyses based on estimate future
cash flows with an appropriate discount rate.
e.
Option price modelling.
(iv)
Investments in funds (which are invariably comprised of
unquoted investments) are valued using the NAV per unit with an
appropriate discount or premium applied to arrive at a unit price.
Private equity valuation governance framework
The Company’s AIFM maintains and applies effective organisational
and administrative arrangements with a view to taking all reasonable
steps designed to identify, prevent, manage and monitor conflicts of
interests in relation to the unquoted valuation process. The Schroders
Capital valuation process and governance structure is intended to
ensure independence, accountability and segregation of duties in the
oversight functions. The Private Equity in-house valuation team
resides in the Fund Operations and Services Department and is
separate from the Investment function. It performs valuations
using widely-accepted valuation methodologies and may be
supported by an external valuation agent. Currently, S&P Global is
engaged to support the valuation team and provides inputs and
recommendations to assist in conducting valuations, where required.
The Private Equity Valuation Working Group (“VWG”) is responsible for
the identification and valuation of all private asset investments within
its scope and consists of the Private Equity COO as the chairman and
other senior personnel including representation from risk and
compliance.
Key valuation observations are summarised in a valuation
memorandum that includes:
‒
Appropriateness of valuation technique and key assumptions
used;
‒
Results of alternative valuation techniques (if available);
‒
Reasonableness of significant valuation movements since the last
valuation; and
‒
Impact of timing differences due to the availability of information.
Schroders Private Assets Pricing Committee (“PAPC”) is responsible for
oversight and challenge for investment valuations across Schroders
Capital’s Private Assets. The PAPC must approve valuation
methodologies for each VWG on at least an annual basis and the
PAPC must approve fair valuation decisions that are escalated by
the VWG.
Fair value application
The determination of fair value involves key assumptions dependent
upon the valuation techniques used. The AIFM applies the following
valuation methodologies on a consistent basis, which are all aligned to
the best practices set out in the IPEV guidelines. Valuation estimates
rely on the information and assumptions as those were known or
knowable at the measurement date and require a varying degree of
judgment taking into consideration internal and external factors.
The selection of valuation techniques is affected by the availability of
relevant inputs and the relative reliability of these inputs. Due to the
nature of the investments and the inherent uncertainty in the fair
value estimation, the AIFM will at times consider that one valuation
approach may be appropriate for an investment and in other cases
evaluate and weigh the results of multiple valuation techniques to
develop a range of possible values, with the fair value based on the
AIFM’s assessment of the most appropriate point within this range.
The AIFM has set out a framework that prioritises the use of
observable inputs wherever possible. Inputs to the valuation generally
refer to the assumptions that market participants would use to make
valuation decisions, including assumptions about risk. The AIFM may
further use an external valuer to support in forming an appropriate
valuation range for certain investments and has currently engaged
S&P Global to assist with such independent valuation advice.
In the quarter immediately following the purchase transaction of an
investment, where the price of the investment is deemed to be the
best reflection of fair value, a calibration analysis will be created to
arrive at an appropriate starting basis for future valuation cycles. The
difference between the initial valuation and the transaction price is
assessed as the calibrated difference, and the factors driving the
difference are analysed. This analysis is then revisited during
subsequent valuations, which may drive fair value changes.
Schroders Capital Global Innovation Trust plc
31
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
The following presents an overview of the most frequently applied
valuation techniques:
The primary technique for investments with no expected short-term
earnings or where the investment outcome is based on a discrete set
of (often binary) scenarios and for which investments are funded for,
is the milestone approach. This is typically the case for pre-revenue
and clinical life science investments. The milestone approach is based
on a set of agreed milestones at the time of the initial investment.
These include various measurements depending on the type of
investment, the industry as well as the key drivers of the investment
company. Progress against these milestones is measured at each
valuation date and drives fair value changes. If a milestone event was
achieved or if it was failed to achieve, a variety of valuation techniques
may be used to quantify the resulting fair value impact.
The primary technique for investments that are producing either
maintainable revenues or earnings is the market approach. This
approach determines the fair value of a company based on the
market price of selected comparable companies or recent
transactions (or a combination of both) and its relationship to relevant
performance measures with the assumption that the relationship
between the market price and the financial performance of the
comparable company is similar. The relevant multiples can be subject
to adjustments for general qualitative differences between the
underlying portfolio company and the comparable companies. These
adjustments may include, but are not limited to, differences due to
size, marketability, growth profile or the market size of end-markets.
The primary technique for investments that have not yet or have just
commenced to produce revenues and that possess material future
earnings potential is the Probability-Weighted-Expected-Return-
Method (“PWERM”). It involves estimating the expected cash flows of
the company under different scenarios, such as best-case, base-case,
and worst-case scenarios. Each scenario is assigned a probability
based on the likelihood of its occurrence. The expected cash flows are
then discounted back to their present value using an appropriate
discount rate, which reflects the risk and uncertainty associated with
each scenario. The PWERM approach also considers other factors
such as changes in market conditions, industry trends, competitive
landscape, regulatory changes, and other macroeconomic factors.
Adjustments are made to the cash flow projections and discount rates
to reflect these factors and their potential impact on the company’s
value.
Once a company’s value is established, it is allocated to the company’s
various share classes. Early-stage, venture and growth investments
typically possess complex capital structures with varying rights and
economic preferences attached to each share class. To assess the
relative value of these individual share classes, either a qualitative
scenario-analysis of the expected ultimate pay-off profile of each
share class, or an option pricing model is utilised. The relative value of
each share class is dependent on the expected time to exit, volatility,
and other relevant quantitative or qualitative parameters.
The following table provides an overview of the select (primary)
valuation techniques:
Valuation
% of unquoted
techniques
portfolio
Market approach
70.8
Arm’s length transaction
9.3
Adjusted transaction price
28.2
Multiples-based
33.3
Milestone approach
8.3
Probability-weighted-expected return
13.5
Third-party fund NAV
7.5
Gross Profit/
EBITDA
(if profitable)
Revenue
(run-rate, forward)
Revenue
(run-rate, forward)
KPIs (e.g. monthly
user growth)
Business
performance
against key
milestones
Key inputs
Growth
Venture
Life sciences
Market
approach
Market
approach
Milestone analysis
Primary
valuation
technique
Discounted
cash flows
Probability-
weighted
expected return
methods
Probability-
weighted
expected return
methods
Secondary
valuation
technique
Purpose, values and culture
The Company’s purpose is to achieve its investment objective through successful application of the investment policy.
The Company’s culture is driven by its values: transparency, engagement and rigour, with collegial behaviour and constructive, robust challenge.
The values are all centred on achieving returns for shareholders in line with the Company’s investment objective. The Board also promotes the
effective management or mitigation of the risks faced by the Company and, to the extent it does not conflict with the investment objective, aims
to structure the Company’s operations with regard to all its stakeholders and take account of the impact of the Company’s operations on the
environment and community.
As the Company has no employees and acts through its service providers, its culture is represented by the values and behaviour of the Board
and third parties to which it delegates. The Board aims to fulfil the Company’s investment objective by encouraging a culture of constructive
challenge with all key suppliers and openness with all stakeholders. The Board is responsible for embedding the Company’s culture in its
operations.
Business model
The Board appointed Schroder Unit Trusts Limited (the “Manager”) in October 2022 to implement the investment strategy and to manage the
Company’s assets in line with the appropriate restrictions placed on it by the Board, including limits on the type and relative size of holdings
which may be held in the portfolio and on the use of gearing, cash, derivatives and other financial instruments as appropriate.
The terms of the appointment are described more completely in the Directors’ Report including delegation to the Investment Manager. The
Manager also promotes the Company using its sales and marketing teams. The Board and the Manager work together to deliver the Company’s
investment objective, as demonstrated in the diagram below. The investment processes are described in the Investment Approach and Process
section and the promotion is described in more detail on the next page.
Investment trust status
The Company carries on business as an investment trust. Its shares are listed and admitted to trading on the premium segment of the main
market of the London Stock Exchange. It has been approved by HM Revenue & Customs as an investment trust in accordance with section 1158
of the Corporation Tax Act 2010, by way of a one-off application and it is intended that the Company will continue to conduct its affairs in a
manner which will enable it to retain this status.
The Company is domiciled in the UK and is an investment company within the meaning of section 833 of the Companies Act 2006. The
Company is not a “close” company for taxation purposes.
Continuation vote
It is not intended that the Company should have a limited life but the Directors consider it desirable that the shareholders should have the
opportunity to review the future of the Company at appropriate intervals. Accordingly, the articles of association contain provisions requiring the
Directors to put a proposal for the continuation of the Company to shareholders at its AGM in May 2025, and at every five yearly intervals
thereafter.
Investor
value
Strategy
Board
Appoints Manager and
other service providers
to achieve objectives
Responsible for
overall strategy and
oversight including
risk management
Activities centred
on the creation of
shareholder value
–
–
–
Sets objectives, strategy and key
performance indicators (“KPIs”)
–
Oversight
Oversees portfolio
management
Monitors achievement
of KPIs
Oversees the use of gearing
Oversees discount/premium
management and the
provision of liquidity
through share issuance
and repurchase
–
–
–
–
Investment
Investment Manager
implements the investment
strategy by following an
investment process
Supported by strong
research and
risk environment
Regular reporting and
interaction with the Board
–
–
–
Promotion
Marketing and sales
capability of the Manager
Support from the corporate
broker with secondary
market intervention to
support discount/
premium management
–
–
Competitiveness
Board is focused on ensuring that:
– the Company remains
attractive to investors
– the fees and ongoing
charges remain competitive
32
Schroders Capital Global Innovation Trust plc
Business Review
Schroders Capital Global Innovation Trust plc
33
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
Investment model
Investment objective
The Company’s investment objective is to achieve long-term capital
growth through investing in a diversified global portfolio of private
and public equity companies.
Investment policy
The Investment Manager employs a collaborative, team-based
approach combining skills, experience and research resources across
its public and private equity teams. It aims to identify private equity
investments which demonstrate an optimal combination of
fast-growing, high-quality companies with strong management teams
and co-investors, and public companies with innovative business
models, a focus on organic growth and high-quality management.
The portfolio composition at any one time will reflect the opportunities
available to the Investment Manager, the performance of the
underlying investee companies and the maturity of the portfolio.
The Company’s portfolio will typically consist of 30-80 holdings.
The Company may become a significant shareholder in any of the
underlying portfolio companies.
While the intention is for public companies to represent not less than
20% of gross assets over the long-term, the actual exposure may vary
from time to time reflecting the maturity of the portfolio and market
environment at that time.
The Company’s portfolio is constructed on the basis of an assessment
of the fundamental value of individual securities and is not structured
on the basis of country or sector weightings. The Company’s portfolio
will be diversified across a number of sectors and, while there are no
specific limits placed on exposure to any one country or sector, the
Company will at all times invest and manage the portfolio in a manner
consistent with spreading investment risk.
Investment restrictions and spread of investment risk
The Company is subject to the following investment restrictions:
–
the Company’s portfolio shall be invested in a minimum of
30 holdings;
–
the Company shall not invest more than 10% of its NAV at the
time of initial investment in an investee company save that the
Investment Manager may make further investments into an
investee company subject to an aggregate investment limit in
any investee company of 20% of NAV at the time of investment;
–
the Company may invest in other investment funds, including
listed closed-ended investment funds, to gain investment
exposure, but such investment will be unleveraged and (other
than in relation to investment in money market funds for the
purposes of cash management) limited, in aggregate, to 10%
of NAV at the time of investment; and
–
with respect to cash deposits, the Company shall not have
exposure of more than 10% of NAV, at the time of investment,
to any one issuer.
Borrowing and cash management
The Company may employ gearing of up to 20% of NAV, calculated at
the time of borrowing, for the purpose of capital flexibility, including
for investment purposes. The Company’s £40 million loan facility with
The Northern Trust Company terminated on 30 January 2023 and was
not renewed. The facility was undrawn at that date. The Company’s
assets include readily realisable securities which can be sold to meet
ongoing funding requirements.
Further details of the Company’s management of liquidity can be
found in the principal and emerging risks and uncertainties section of
this report on pages 38 to 41 and in note 18(b) to the accounts.
Hedging
It is currently not the Company’s policy to hedge against currency risk,
but the Manager may, with the Board’s consent and oversight, hedge
against specific currencies, depending on their longer term view.
Cash
management
While it is intended that the Company will be fully invested in normal
market conditions, the Company may hold cash on deposit or invest
on a temporary basis in a range of debt securities and cash
equivalent instruments. There is no restriction on the amount of cash
or cash equivalent instruments that the Company may hold and there
may be times when it is appropriate for the Company to have
a significant cash position instead of being fully or near fully invested.
Key performance indicators (“KPIs”)
The Board measures the development and success of the Company’s
business through achievement of the Company’s investment
objective which is considered to be the most significant KPI for the
Company. Comment on performance against the investment
objective can be found in the Chair’s Statement and Investment
Manager’s Review.
The Board continues to review the Company’s ongoing charges to
ensure that the total costs incurred by shareholders in the running of
the Company remain competitive when measured against peer group
funds. An analysis of the Company’s costs, including management
fees, Directors’ fees and general expenses, is reviewed every quarter.
Management and performance fees are reviewed at least annually by
the Management Engagement Committee.
Promotion
The Company promotes its shares to a broad range of investors
including discretionary wealth managers, private investors, financial
advisers and institutions which have the potential to be long-term
supporters of the investment strategy. The Company seeks to achieve
this through its Manager and corporate broker, which promote the
shares of the Company through regular contact with both current
and potential shareholders.
These activities consist of investor lunches, one-on-one meetings,
regional road shows and attendance at conferences for professional
investors. In addition, the Company’s shares are supported by the
Manager’s wider marketing of investment companies targeted at all
types of investors. This includes maintaining close relationships with
adviser and execution-only platforms, advertising in the trade press,
maintaining relationships with financial journalists and the provision
of digital information on Schroders’ website. The Board also seeks
active engagement with investors, and meetings with the Chair are
offered to investors when appropriate.
Shareholders are encouraged to sign up to the Manager’s Investment
Trusts update, to receive information on the Company directly
https://www.schroders.com/en-gb/uk/individual/never-miss-an-update/.
34
Schroders Capital Global Innovation Trust plc
Business Review
continued
Stakeholder engagement
Section 172 of the Companies Act 2006
During the year the Board discharged its duty under section 172 of the Companies Act 2006 to promote the success of the Company for the
benefit of its members as a whole, having regard to the interests of all stakeholders. As an externally managed investment trust, the Company
has no employees, operations or premises. The Board has identified its key stakeholders as the Company’s shareholders, the Investment
Manager, other service providers, the Investee companies and wider society and the environment. The table below explains how the Directors
have engaged with, and maintained high standards of business conduct and fair treatment of, all stakeholders and outlines key activities
undertaken and decisions made by the Board during the year.
Stakeholder
Significance
Engagement
2023 highlights
The AGM was held in person in 2023 and
questions and feedback from
shareholders were welcomed. The Board,
along with the Investment Manager, look
forward to meeting and interacting with
more shareholders at the forthcoming
AGM in May 2024.
The Company’s web pages continued to
be refreshed and enhanced during the
year to optimise the user experience for
shareholders and investors.
Shareholders can, via the Company’s web
pages, subscribe to the Schroders
investment trusts newsletter to receive
regular updates on the Company.
The Chair of the Board and the Senior
Independent Director met with its major
shareholders during the year and since
the year end. Their views were taken into
consideration as part of the Board’s duty
to ensure their interests were taken into
account.
The Investment Manager engaged with
a number of its shareholders and
investors during the year and regular
feedback was provided to the Board.
A number of promotional activities were
undertaken during the year including
Investment Manager interviews, a capital
markets event, webinars and coverage in
key publications.
The Board continues to work with Kepler
on promoting the Company through its
research notes which are published once
a year following the publication of the
Company’s annual results.
–
AGM: The Company welcomes
attendance and participation from
shareholders at the AGM.
Shareholders have the opportunity to
meet the Directors and the
Investment Manager and ask
questions at the AGM. The Board
values the feedback it receives from
shareholders which is incorporated
into Board discussions.
–
Publications: The annual and half
year results presentations are
available on the Company’s web
pages with their availability
announced via the London Stock
Exchange. Daily and quarterly NAV
updates are issued to provide
shareholders with transparent
information on the Company’s
portfolio. Feedback and/or questions
received from shareholders enable
the Company to evolve its reporting
which, in turn, helps to deliver
transparent and understandable
updates.
–
Shareholder communication: The
Manager communicates with
shareholders periodically. All investors
are offered the opportunity to meet
the Chair, Senior Independent
Director, or other Board members
without using the Manager or
Company Secretary as a conduit, by
writing to the Company’s registered
office. The Board also corresponds
with shareholders by letter and email.
The Board receives regular feedback
from its broker on investor
engagement and sentiment.
–
Investor Relations updates: At
every board meeting, the Directors
receive updates on share trading
activity, share price performance and
any shareholders’ feedback, as well as
any publications or comments in the
press. To gain a deeper
understanding of the views of its
shareholders and potential investors,
the Investment Manager also
undertakes Investor Roadshows
throughout the year.
–
Working with external partners:
The Board also engages some
external providers, such as investor
communications advisors to obtain a
more detailed view on specific aspects
of shareholder communications, such
as developing more effective ways to
communicate with investors.
Continued shareholder
support and engagement
are critical to the continuing
existence of the Company
and the delivery of the long-
term strategy.
Shareholders
Schroders Capital Global Innovation Trust plc
35
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
Stakeholder
Significance
Engagement
2023 highlights
In accordance with the Company’s
strategy, the Investment Manager has
remained focused on key priorities:
support business growth and
profitability; rebalance the portfolio;
maximise sale proceeds; and new
investments as part of the investment
strategy. There were six new investments
made in 2023, across the Investment
Manager’s three private equity strategies:
venture, growth and life sciences.
In addition, strategic public equity sales
have been made over the course of the
year to facilitate the successful execution
of the Company’s share repurchase
programme.
Maintaining a close and constructive
working relationship with the Investment
Manager is crucial as the Board and the
Investment Manager both aim to
continue to achieve consistent, long-term
returns in line with the investment
objective. The Board invites the
Investment Manager to attend all Board
and certain Committee meetings in order
to update the Directors on the
performance of the investments and the
implementation of the investment
strategy and objective.
Important components in the Board’s
collaboration with the Investment
Manager are:
–
Encouraging open discussion with the
Investment Manager;
–
Recognising that the interests of
shareholders and the Investment
Manager (as well as of its other
clients) are, for the most part, well
aligned, adopting a tone of
constructive challenge, balanced
when those interests are not fully
congruent by robust negotiation of
the Investment Manager’s terms of
engagement; and
–
Drawing on Directors’ individual
experience to support the Investment
Manager in its monitoring and
change management of portfolio
companies, for the benefit of all of the
Investment Manager’s clients.
The Management Engagement
Committee reviews the performance of
the Manager, its remuneration and the
discharge of its contractual obligations at
least annually.
Holding the Company’s
shares offers investors a
liquid investment vehicle
through which they can
obtain exposure to the
Company’s diversified
portfolio of public and
private equity investments.
The Investment Manager’s
performance is critical for
the Company to deliver its
investment strategy
successfully and meet its
objective to achieve
long-term capital growth
through investing in a
diversified global portfolio of
private and public equity
companies.
The Investment
Manager
Investee
companies
The Board is committed to
responsible investing and
actively monitors the
activities of investee
companies through its
delegation to the
Investment Manager.
In order to achieve its commitment to
responsible investing, the Investment
Manager adopts sustainability and
impact (“S&I”) investing practices as an
integral part of identifying, assessing and
monitoring portfolio companies. The
commitment to sustainability applies to
all private equity investments, including
direct and indirect holdings, and the
firms the Investment Manager partners
with.
Furthermore, the Investment Manager
believes private equity investors are well
positioned to adhere to responsible
investing principles and drive positive
change due to private equity’s long term
orientation, ability to conduct extensive
due diligence and the opportunity for
private equity investors to make a
strategic impact on their portfolio
companies.
The Board received regular updates on
engagement with investee companies at
its board meetings. For most private
companies in the top 20 holdings where
the Company’s share rights allow, the
Investment Manager will attend investee
company board meetings as an observer.
These meetings serve as an essential
source of information about the progress
of the business, but also present an
opportune moment to support strategic
planning and engage with the
management team, board members and
co-investors on sustainability-related
topics.
36
Schroders Capital Global Innovation Trust plc
Business Review
continued
Stakeholder
Significance
Engagement
2023 highlights
The Board’s desire for greater
engagement reporting has resulted in
the inclusion of case studies showcasing
how the Investment Manager supports
and integrates responsible investing in its
investment approach set out in the
annual report. Further details of the ESG
practices and case studies can be found
in the Investment Approach and Process
section of this report.
The Board engages with the Investment
Manager at each board meeting in
respect of its ESG considerations on
existing and new investments. The
Manager also spends time explaining its
approach to ESG to the Board once a
year.
Whilst strong long-term
investment performance is
essential for an investment
trust, the Board recognises
that to provide an
investment vehicle that is
sustainable over the
long-term, both it and the
Investment Manager must
have regard to ethical and
environmental issues that
impact society. Hence ESG
considerations are
integrated into the
Investment Manager’s
investment process and will
continue to evolve.
Wider society and
the environment
Other service
providers
In order to operate as an
investment trust with a
premium listing on the
London Stock Exchange, the
Company relies on a diverse
range of advisers to support
meeting all relevant
obligations.
The Board maintains regular contact with
its key external providers, both through
the Board and Committee meetings, as
well as outside of the regular meeting
cycle. Their advice, as well as their needs
and views, are routinely taken into
account.
As previously announced, the Company
changed its Auditor and registrar during
the year. Under delegated authority from
the Board, the Management
Engagement Committee reviewed all
material third-party service providers.
The Board considers the ongoing
appointments of its service providers to
be in the best interests of the Company
and its shareholders as a whole and will
monitor their progress in the year ahead.
The Directors were invited to attend
a two day annual internal controls
briefing session which assessed the
internal controls of certain key service
providers including the Company’s
depositary and custodian, HSBC, the
Company’s registrar, Equiniti, and
Schroders Group Internal Audit.
Schroders Capital Global Innovation Trust plc
37
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
Corporate and social responsibility
The Board recognises the Company’s responsibilities with respect to
corporate and social responsibility and engages with its outsourced
service providers and other stakeholders to safeguard the Company’s
interests. As part of this ongoing monitoring, the Board receives
reports from its service providers with respect to their diversity
policies; anti-bribery and corruption policies; Modern Slavery Act 2015
statements; financial crime policies; and greenhouse gas and energy
usage reporting.
Diversity policy
The Board has adopted a diversity and inclusion policy which seeks to
promote diversity of gender, social and ethnic backgrounds, cognitive
and personal strengths. The Board recognises that its debates and
decision-making are greatly enriched by a wider range of perspectives
and thinking. The Board will encourage any recruitment agencies it
engages to find a range of candidates that meet the objective criteria
agreed for each appointment. Appointments will always be based on
merit alone. Candidates for board vacancies are selected based on
their skills and experience, which are matched against the balance of
skills and experience of the overall board taking into account the
criteria for the role being offered.
Statement on Board diversity – gender and ethnic
background
The Board has made a commitment to consider diversity when
reviewing the composition of the Board and notes the new Listing
Rules requirements (LR 9.8.6R(9) and (11)) regarding the targets on
board diversity:
•
at least 40% of individuals on the board are women;
•
at least one senior board position is held by a woman; and
•
at least one individual on the board is from a minority ethnic
background.
The FCA defines senior board positions as Chairman, Chief Executive
Officer (“CEO”), Chief Financial Officer (“CFO”) or Senior Independent
Director (“SID”). As an investment trust with no executive officers, the
Company has no CEO or CFO. The Board has reflected the senior
positions of the Chair of the Board and the SID in its diversity tables
below.
The Board has chosen to align its diversity reporting reference date
with the Company’s financial year end and proposes to maintain this
alignment for future reporting periods. The following information has
been provided by each Director through the completion of a
questionnaire.
As at 31 December 2023, the Company met all three criteria and
there have been no changes since 31 December 2023 to the date of
publication of the annual report and accounts.
Gender identity
Number of
Number of
% of
senior positions
Board members
the Board
on the Board
Men
3
60
1
Women
2
40
1
Other
–
–
–
Not specified/prefer
not to say
–
–
–
Ethnic background
Number of
Number of
% of
senior positions
Board members
the Board
on the Board
White British or other
White (including
minority-white groups)
4
80
2
Mixed Multiple
Ethnic Groups
–
–
–
Asian/Asian British
–
–
–
Black/African/
Caribbean/Black British
–
–
–
Other ethnic group,
including Arab
1
20
–
Not specified/prefer
not to say
–
–
–
Financial crime policy
The Company continues to be committed to carrying out its business
fairly, honestly and openly operates a financial crime policy covering
bribery and corruption, tax evasion, money laundering, terrorist
financing and sanctions, as well as seeking confirmations that the
Company’s service providers’ policies are operating soundly.
Modern Slavery Act 2015
As an investment trust, the Company does not provide goods or
services in the normal course of business and does not have
customers. Accordingly, the Directors consider that the Company is
not required to make any slavery or human trafficking statement
under the Modern Slavery Act 2015.
Climate
Greenhouse gas emissions and energy usage
As the Company outsources its operations to third parties, it
consumed less than 40,000 kWh during the year and so has no
greenhouse gas emissions, energy consumption or energy efficiency
action to report.
Taskforce for Climate-Related Financial Disclosures
(“TCFD”)
The Company, as an investment trust, is exempt from the
requirement to report against TCFD regulation. However, the
Company’s Manager produces an annual product level disclosure
consistent with the TCFD. This can be found here: TCFD data product
report.
38
Schroders Capital Global Innovation Trust plc
Business Review
continued
Principal and emerging risks and uncertainties
The Board, through its delegation to the Audit, Risk and Valuation 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, Risk and Valuation 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.
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, Risk and Valuation Committee, including the
incidence of significant control failings or weaknesses that have been identified at any time and the extent to which they have resulted in
unforeseen outcomes or contingencies that may have a material impact on the Company’s performance or condition. The internal control
environment of the Manager, the depositary and the registrar are tested annually by independent external auditors. The reports are reviewed by
the Audit, Risk and Valuation Committee.
Although the Board believes that it has a robust framework of internal control in place this can provide only reasonable, and not absolute,
assurance against material financial misstatement or loss and is designed to manage, not eliminate, risk. Actions taken by the Board and, where
appropriate, its Committees, to manage and mitigate the Company’s principal and emerging risks and uncertainties are set out in the table
below.
Both the principal and emerging risks and uncertainties and the monitoring system are subject to robust assessment at least annually. The last
assessment took place in March 2024.
During the year, the Board discussed and monitored a number of risks that could potentially impact the Company’s ability to meet its strategic
objectives. The Board receives updates from the Investment Manager, Company Secretary and other service providers on emerging risks that
could affect the Company. The Board was mindful of the following emerging risks during the year; risks posed by the failure of the capital
discipline mechanisms and/or the continuation vote at the AGM in 2025. These risks have been incorporated in the strategy risk section in the
table below.
A significant control failing or weakness relating to share repurchases was identified during the year. Although the Company had a share
premium account of £891 million, as this had not been cancelled, the Company did not have sufficient distributable profits to comply with the
requirements of the Companies Act 2006. The Board worked with its service providers to rectify the matter which was approved by
shareholders, filed section 838 interim accounts in July 2023 and has been given assurances that additional controls are now in place to tighten
processes and avoid a recurrence. No other significant control failings or weaknesses were identified from the Audit, Risk and Valuation
Committee’s ongoing risk assessment throughout the financial year and up to the date of this report. The Board is therefore satisfied that it has
undertaken a detailed review of the risks facing the Company and that the internal control environment continues to operate effectively.
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. The “Change” column on the right highlights at a glance the Board’s assessment of any increases or
decreases in risk during the year after mitigation and management. The arrows show the risks as increased, decreased or unchanged.
A full analysis of the financial risks facing the Company is set out in note 18 to the accounts on pages 80 and 81.
Risk
Mitigation and management
Change
Strategy
The 5% target for share
repurchases was achieved in
2023 and work continues on
meeting the 2024 commitment.
Despite these positive efforts,
the discount to NAV remains
wide and the continued
increased risk relates to market
sentiment in line with the
decline of popularity of the
private equity sector.
The Board holds a strategy day each year to
consider the investment objective and policy and
the Company’s longer term investment strategy.
The Board receives regular reports on the
Company’s investment performance against its
stated objectives and peer group along with
reports from discussions with its major
shareholders. The Board also receives regular
reports on marketing and promotional activity.
Following the cancellation of the share premium
account, the Company appointed Winterflood
Securities Limited in September 2023 to manage
an irrevocable share repurchase programme:
(i) to buy back up to 5% of the Company’s shares
in 2023 and 2024; (ii) to purchase such number of
shares to ensure that to the period to the 2025
AGM, the Company has undertaken share
repurchases in an amount equating to 25% of all
net cash realisations from the portfolio inherited
from the previous portfolio manager
1
. The Board
continues to monitor these positions on an
ongoing basis.
A continuation vote will be held at the 2025
AGM which will only be extended for a further
five years if the Company continues to meet
investor requirements.
Investment objective and longer term growth
Investment objective is out of line with the
requirements of investors or investors lose interest
in listed closed end private equity as an asset class.
Discount widens to unacceptable levels.
Failure of capital discipline mechanisms and/or the
continuation vote in May 2025.
1
These assets are shown in the Investment Portfolio section on pages 20 to 22.
Schroders Capital Global Innovation Trust plc
39
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
Risk
Mitigation and management
Change
Investment
The Investment Manager is experienced and has
a long track record in successfully investing in
private equity and venture.
The Investment Manager spreads investment risk
by investing in high quality companies at various
stages of their development. Having the flexibility
to continue to hold these investments as they
transition to public entities taps into the growth
potential of businesses throughout their life cycle.
The global mandate allows the Investment
Manager to diversify the portfolio geographically
and thus mitigate against challenging economic
conditions of a single market or sector.
The Investment Manager will not normally hedge
against foreign currency movements, but does
take into account the risk when making
investment decisions. Further details on financial
risks and risk mitigation are detailed in note 18 to
the accounts.
Economic and market
The portfolio will normally be fully invested and as
such will therefore inevitably be exposed to
economic and market risk. Changes in general
economic and market conditions, such as currency
exchange rates, interest rates, inflation rates,
industry conditions, tax laws, political events and
trends can substantially and adversely affect the
value of investments. Market risk includes the
potential impact of events which are outside the
Company’s control, such as pandemics, civil unrest
and wars.
During periods of higher
interest rates and market
volatility, inherent risks in
valuations risk can rise.
In the year under review, the
Investment Manager reduced
the exposure to certain public
holdings with the goal of
reducing concentration risk.
Further details can be found in
the Investment Manager’s
Review.
The AIFM, under delegated authority from the
Board, has responsibility for the valuation of the
assets in the portfolio. The AIFM, in turn, uses
extensive research and input from S&P Global,
the external valuation specialist provider. S&P
Global conducts a regular rolling review of the
valuation of all portfolio assets and also reviews
their valuations in the event of any significant
triggers at individual investee companies. They
follow the widely respected and widely followed
IPEVCV guidelines in executing these valuations;
these processes are explained in the Valuation
Approach and Process Report.
Valuations are considered and challenged by
the Audit, Risk and Valuations Committee on
a quarterly basis as well as on an ad hoc basis
where required together with scrutiny by the
Auditor on an annual basis.
The Board and the Investment Manager feel that
undue concentration is not desirable in the
longer term and continuously explore options to
reduce this over time.
The Investment Manager conducts regular
reviews of investee companies through regular
engagement to monitor progress and ensure
milestones are adequately met. Short term
liquidity issues are mitigated over time when such
companies deliver on their milestones and value
is recognised.
Portfolio
Portfolio risk encompasses valuation, and
concentration risks.
Private equity companies generally have greater
valuation uncertainties and liquidity risks than
public equity holdings.
The valuation of private equity early stage
companies is inherently difficult. Valuation at a fixed
point in time may not be representative of the
medium or longer term. Particular events at a
company or particular funding rounds may have
a significant impact. Information may not be as
widely available as with public companies and these
companies may not yet have meaningful revenues
or profits.
Investments quoted in inactive markets may also be
subject to significant and abrupt volatility and
liquidity discount.
The risk linked to any portfolio concentration might
be compounded due to the nature of some of the
businesses and the risks associated with both
commercial and technical milestones.
Short term liquidity issues can become
compounded by market events.
Investment performance
There is always, for any investment portfolio, the
generic risk of poor performance arising as a result
of poor decisions in stock selection made by the
Investment Manager. In addition, given the
long-term nature of this investment strategy (up to
10 years) and the absence of a clear benchmark, it
is not necessarily easy to make an evaluation of the
Investment Manager based simply on returns over
shorter periods.
This risk is mitigated by the Board monitoring the
performance of the portfolio and the decisions
made by the Investment Manager through
detailed reporting at each board meeting.
The Audit, Risk and Valuation Committee reviews
all private equity investments on a quarterly basis
and challenges proposed revaluations and
methodologies used by the Investment Manager
at each meeting.
40
Schroders Capital Global Innovation Trust plc
Business Review
continued
Risk
Mitigation and management
Change
Liquidity
Insufficient liquid resources to meet its ongoing
financial demands.
The Company has no loan facility in place and its
assets include readily realisable securities which
can be sold to meet ongoing funding
requirements. The Investment Manager manages
its liquid investments to ensure that sufficient
cash is available to meet contractual
commitments. A cash buffer is also held to meet
other short-term needs. The Company had cash
of £2.9 million (2022: £16.1 million) as at
31 December 2023. In addition, the Company has
a £9.7 million holding in the Schroder Special
Situations – Sterling Liquidity Plus Fund, which is
a money market fund with daily redemption
terms. The Board reviews the Company’s cash
flow forecasts under various stressed scenarios
on an ongoing basis.
Key person dependency
The Manager operates a team approach to
portfolio management and decision-making so the
risk arising from the departure of one or more of
the Manager’s key investment professionals should
not necessarily prevent the Company from
achieving its investment objective.
The Manager’s resources could become stretched
through the launch of new products or team
departures leading to a lack of focus on the
Company’s portfolio.
The Manager could terminate its contract with the
Company. This event would have an impact on the
management of the portfolio requiring
renegotiation or substitution, likely on less
favourable terms.
The Investment Manager has a compensation
and incentive scheme to recruit and retain key
staff including the portfolio managers, and has
developed a suitable succession planning
programme, which seeks to ease the impact
that additional workload and/or the loss of a
key investment professional may have on the
Company’s performance. The Investment
Manager will notify any change in its key
professionals to the Board at the earliest possible
opportunity and the Board will be made aware of
all efforts made to fill a vacancy.
Furthermore, investment decisions are made by
a team of professionals, mitigating the impact of
the loss of any key professional within the
Investment Manager’s organisation on the
Company’s performance.
The AIFM agreement includes clauses which set
out the notice periods for termination from either
party as detailed in the Directors’ Report on
page 47.
ESG and climate change
Failure by the Investment Manager to identify
potential ESG matters in an investee company,
given their private nature, could lead to the
Company’s shares being less attractive to investors
as well as potential valuation issues in the
underlying investee company.
The Investment Manager integrates ESG
considerations, including climate change, into the
investment process. Case studies of engagement
with a sample of the Company’s portfolio
companies are incorporated in the Investment
Approach and Process section of the Strategic
Report. The approach to conducting ESG-related
analysis of private companies is complemented
with a standard exclusions list, more bespoke
assessments, dedicated ESG reference calls, and
by integrating several external tools and data
sources, including RepRisk, World- Check, the ESG
Data Convergence Project and eFront’s ESG
Outreach module to further assess ESG risks and
opportunities in private assets.
Schroders Capital Global Innovation Trust plc
41
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
Risk
Mitigation and management
Change
Operational
A significant control failing or
weakness relating to share
repurchases was identified
during the year under review.
Although the Company had
a share premium account of
£891 million, as this had not
been cancelled, the Company
did not have sufficient
distributable profits to comply
with the requirements of the
Companies Act 2006. The
Board worked with its service
providers to rectify the matter
which was approved by
shareholders, filed section 838
interim accounts in July 2023
and has been given assurances
that additional controls are
now in place to tighten
processes and avoid a
recurrence.
Experienced third party service providers are
employed by the Company under appropriate
terms and conditions and with agreed service
level specifications. Service level agreements
include clauses which set out the notice periods
for terminations.
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.
Directors are invited to a Manager hosted
two-day annual internal controls briefing sessions
which covers the internal controls of its key
service providers including the Company’s
depositary and custodian, HSBC, the Company’s
registrar, Equiniti, and Schroders Group Internal
Audit team. In addition, the Audit, Risk and
Valuation Committee reviews reports on the
external audits of the internal controls operated
by certain key service providers.
Operational
The Company has no employees and the Directors
have been appointed on a non-executive basis. The
Company is therefore reliant upon the performance
of third-party service providers.
Failure of any of the Company’s service providers to
perform in accordance with the terms of its
appointment, to protect against breaches of the
Company’s legal and regulatory obligations such as
data protection, or to perform its obligations at all
as a result of insolvency, fraud, breaches of cyber
security, failures in business continuity plans or
other causes, could have a material detrimental
impact on the operation of the Company.
The Board receives controls reports from its key
service providers which describe the protective
measures they take as well as their business
recovery plans. In addition, the Board receives an
annual presentation from the Manager on cyber
risk.
Information technology and information
security
Each of the Company’s service providers is at risk of
cyber attack, data theft and service disruption.
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.
42
Schroders Capital Global Innovation Trust plc
Business Review
continued
Viability statement
The Board has assessed the prospects of the Company over the
five-year period ending 31 December 2028. The Board considers
a five-year period to be appropriate because it is the minimum
holding period that it would recommend to a prospective investor
considering purchasing shares in the Company.
The Board has considered the principal and emerging risks and
uncertainties set out on pages 38 to 41, including climate-related
risks, and detailed revenue and cashflow forecasts prepared by the
Manager and stress case scenarios.
The Board believes that the portfolio will provide shareholders with
satisfactory returns from the investment portfolio over a five-year
period and, notwithstanding the Strategy risks mentioned in the
principal risks and uncertainties section, there should be continued
demand for the Company’s shares.
The continuation of the Company will be subject to the approval of
shareholders at the 2025 AGM. The Board has successfully
repurchased shares equal to at least 5% of the Company’s issued
share capital in 2023. Work has commenced on the 2024
commitment of 5%. In addition, the Company continues to monitor
share repurchases equating to 25% of all net cash realisations from
the portfolio inherited from the previous portfolio manager. The
Board believes the Manager is well placed to deliver on these
proposals, generate long-term capital growth and has no reason to
believe that the continuation vote will not be approved in 2025.
Having considered all of the Company’s resources, strategy, risks and
probabilities, the Board has a reasonable expectation that the
Company will continue to operate and meet its liabilities as they fall
due, during the five year period to 31 December 2028.
Going concern
The Board has considered the Company’s principal risks and
uncertainties (including whether there are any emerging risks); has
scrutinised the detailed revenue and cashflow forecast prepared by
the Manager; and considered their assessment of the likelihood and
quantum of funds which could be raised from sales of investments.
The Manager has also performed a range of stress tests, and
demonstrated to the Board that even in an adverse scenario of
depressed markets and restrictions on sales in the private equity
market, the Company could still generate sufficient funds from sales
of investments to meet its liabilities over the next 12 months. As a
result, the Board is comfortable that the Company will have sufficient
liquid funds to pay operating expenses.
On this basis, the Board considers it appropriate to adopt the going
concern basis of accounting in the Company’s accounts, and has not
identified any material uncertainties to the Company’s ability to
continue as a going concern over a period of at least 12 months from
the date of approval of these annual report and accounts.
By order of the Board
Schroder Investment Management Limited
Company Secretary
27 March 2024
Governance
43
Governance
Board of Directors
44
Directors’ Report
46
Audit, Risk and Valuation Committee Report
49
Management Engagement Committee Report
52
Nomination and Remuneration Committee Report
53
Directors’ Remuneration Report
55
Statement of Directors’ Responsibilities
58
44
Schroders Capital Global Innovation Trust plc
Board of Directors
1
Shareholdings are as at 27 March 2024, full details of Directors’ shareholdings are set out in the Directors’ Remuneration Report on page 57.
2
Ms Baker was appointed to the Board on 22 June 2023.
Lamia Baker
Status: Independent non-executive
Director
Length of service: nine months –
appointed as a Director in June 2023.
Experience: Lamia is currently managing
director UK of Dennemeyer & Co Limited,
a position she has held since 2019, as well as
Head of Commercial EMEA for Dennemeyer
Group a position held since 2022, a global
intellectual property service provider
(“Dennemeyer”). Before joining Dennemeyer,
Lamia was at Imperial Innovations Ltd,
focusing on commercialising Intellectual
Property through licensing activities and
startup formation. This position was
preceded by employment as a venture
capital seed investor in high-technology
startups in the UK and by various positions in
several technology startups in Boston, USA.
Lamia has over 25 years of experience in
business and technology. She is skilled in
intellectual property, sales, innovation,
entrepreneurship, venture capital investment
and fund representation on companies’
boards.
Contribution to the Board and its
Committees: Lamia’s background in
technology and venture capital seed
investment in addition to extensive
experience in business development enables
her to contribute to the portfolio analysis
and decision making of the Board.
Committee membership: Audit, Risk and
Valuation, Management Engagement,
Nomination and Remuneration Committees.
Remuneration for the year ended
31 December 2023: £16,159 per annum
2
Number of shares held: Nil
1
Tim Edwards
Status: Independent non-executive
Chair
Length of service: three years – appointed
as a Director in February 2021 and Chair in
June 2021.
Experience: Tim is a Chartered Accountant
with a background in corporate finance and
venture investing. Previously, Tim was a
member of the governing Board of
InnovateUK, the UK’s innovation agency,
a director of the UK Cell and Gene Therapy
Catapult and chair of the UK BioIndustry
Association. Tim is currently chair of Storm
Therapeutics Limited, EndLyz Therapeutics
Inc. and AstronauTX Limited, and Senior
Independent Director of Record plc. Tim has
expertise in evaluating, fund-raising,
managing and exiting private life science
companies, with years working as a chair.
Contribution to the Board and its
Committees: Tim’s extensive operational
and strategic experience enables him to
facilitate Board discussions and prioritise
strategic decisions.
Committee membership: Audit, Risk and
Valuation, Management Engagement and
Nomination and Remuneration Committees.
Remuneration for the year ended
31 December 2023: £49,752 per annum
Number of shares held:
210,230
1
Scott Brown
Status: Independent non-executive
Director
Length of service: nine years – appointed
as a Director in February 2015.
Experience: Scott is chief executive of
Nexeon Limited, an Imperial College spin-out
focused on developing silicon anode
technology for next generation Li-ion battery
technology. During his tenure, he has led the
change in the company’s strategy to
successfully move from an IP licensing
business model to one of material
production and supply. Previously, Scott was
executive vice president at Cambridge
Display Technology (“CDT”), responsible for
commercial and IP activities of the company.
Prior to CDT, Scott was global R&D director
for the electronic materials business at Dow
Corning (now a wholly-owned subsidiary of
Dow Chemical), a US-headquartered
multinational corporation with over
US$6 billion in annual revenues. Scott holds
a PhD in Chemistry, an MBA and is a Fellow
of the Royal Society of Chemistry.
Contribution to the Board and its
Committees: Scott’s background in
materials science and chemistry and his
experience as CEO of an advanced
technology business enables him to
contribute to key investment decisions as
well as bring operational and strategic
knowledge to the Board.
Committee membership: Audit, Risk and
Valuation, Management Engagement and
Nomination and Remuneration Committees.
Remuneration for the year ended
31 December 2023: £32,137 per annum
Number of shares held:
78,269
1
Schroders Capital Global Innovation Trust plc
45
Other Information (Unaudited)
Introduction
Strategic Report
Governance
Financial
1
Shareholdings are as at 27 March 2024, full details of Directors’ shareholdings are set out in the Directors’ Remuneration Report on page 57.
Stephen Cohen
Status: Independent non-executive
Director and Audit, Risk and
Valuation Committee Chair
Length of service: four years – appointed
as a Director in June 2019.
Experience: Stephen spent the bulk of his
career at Mercury Asset Management where
he led both investment teams and business
units. He has been actively involved with
open-end and closed-end funds, in multiple
jurisdictions, for over 30 years. He is
currently the chair of JPMorgan Japanese
Investment Trust plc. Stephen is also a
Commissioner at the Gambling Commission
and at the Civil Service Commission and
a director of the Advanced Research
Invention Agency. Stephen is a graduate of
the University of Oxford.
Contribution to the Board and its
Committees: Stephen is an experienced
Board member with a strong history in
business development and fund
management as well as personal VC and
tech investing. His experience in sales and
marketing and close interest in ESG issues
contributes to the Company’s long-term
sustainable success.
Committee membership: Audit, Risk and
Valuation, Management Engagement and
Nomination and Remuneration Committees.
Remuneration for the year ended
31 December 2023: £42,849 per annum
Number of shares held:
309,737
1
Jane Tufnell
Status: Senior Independent
non-executive Director
Length of service: four years – appointed
as a Director in September 2019.
Experience: Jane spent the majority of her
career at Ruffer Investment Management,
which she co-founded in 1994 and where
she worked until 2015. She is currently chair
of Odyssean Investment Trust PLC and ICG
Enterprise Trust PLC. Jane is a graduate of
the University of Cambridge.
Contribution to the Board and its
Committees: Jane‘s long standing
experience in the wealth management
sector is extremely valuable to the Board.
Her experience as a non-executive director
on other boards means she is well placed to
bring good business insight and market
experience to the Board in order to drive the
business forward.
Committee membership: Audit, Risk and
Valuation, Management Engagement and
Nomination and Remuneration Committees
(Chair of Management Engagement and
Nomination and Remuneration Committees).
Remuneration for the year ended
31 December 2023: £37,493 per annum
Number of shares held:
500,000
1
46
Schroders Capital Global Innovation Trust plc
The Directors submit their annual report and accounts of the
Company for the year ended 31 December 2023.
Directors and officers
Chair
The Chair is an independent non-executive Director who is
responsible for leadership of the Board and ensuring its
effectiveness in all aspects of its role. The Chair’s other significant
commitments are detailed on page 44. He has no conflicting
relationships.
Senior Independent Director (“SID”)
The SID acts as a sounding board for the Chair, meets with major
shareholders as appropriate, provides a channel for any shareholder
concerns regarding the Chair and takes the lead in the annual
evaluation of the Chair by the independent Directors.
Company Secretary
Schroder Investment Management Limited (“SIM”) provides
company secretarial support to the Board and is responsible for
assisting the Chair with board meetings and advising the Board with
respect to governance. The Company Secretary also manages the
relationship with the Company’s service providers. Shareholders
wishing to lodge questions in advance of the AGM are invited to do
so by writing to the Company Secretary at the address given in the
section on Information about the Company on page 92 or by email
to: amcompanysecretary@schroders.com.
Corporate governance statement
The Company is committed to high standards of corporate
governance and has implemented a framework for corporate
governance which it considers to be appropriate for an investment
trust.
The Financial Conduct Authority (“FCA”) requires all UK listed
companies to disclose how they have applied the principles and
complied with the provisions of the UK Corporate Governance Code
2018 (the “UK Code”) issued by the Financial Reporting Council
(“FRC”).
The Board has considered the principles and provisions of the
Association of Investment Companies (“AIC”) Code of Corporate
Governance 2019 (the “AIC Code”) which addresses those set out in
the UK Code, as well as setting out additional provisions on issues
that are of specific relevance to the Company.
The Board considers that reporting against the principles and
provisions of the AIC Code, which has been endorsed by the FRC,
provides more relevant information to shareholders.
The AIC Code is available on the AIC website (www.theaic.co.uk). It
includes an explanation of how the AIC Code adopts the principles
and provisions set out in the UK Code to make them relevant for
investment companies.
The Board confirms that the Company has complied with the AIC
Code, in so far as they apply to the Company’s business, throughout
the year under review with the exception of establishing a separate
remuneration committee, which is undertaken by the Nomination
and Remuneration Committee as detailed on pages 53 and 54. As all
of the Company’s day-to-day management and administrative
functions are outsourced to third parties, it has no executive
directors, employees or internal operations and therefore has not
reported in respect of the following UK Code Provisions:
–
the role of the executive directors and senior management;
–
the need for an internal audit function; and
–
executive directors’ remuneration.
Role and operation of the Board
The Board is the Company’s governing body; it sets the Company’s
strategy and is collectively responsible to Shareholders for its
long-term success. The Board is responsible for appointing and
subsequently monitoring the activities of the Manager and other
service providers to seek to ensure that the investment objective of
the Company continues to be met. The Board also ensures that the
Manager adheres to the investment restrictions set by the Board
and, where applicable, acts within the parameters set by it in respect
of any gearing. The Business Review on pages 32 to 42 sets out
further details of how the Board reviews the Company’s strategy, risk
management and internal controls and also includes other
information required for the Directors’ Report and is incorporated
by reference.
A formal schedule of matters specifically reserved for decision by
the Board has been defined and a procedure adopted for directors,
in the furtherance of their duties, to take independent professional
advice at the expense of the Company.
The Chair ensures that all Directors receive relevant management,
regulatory and financial information in a timely manner and that
they are provided, on a regular basis, with key information on the
Company’s policies, regulatory requirements and internal controls.
The Board receives and considers reports regularly from the
Manager and other key advisers and ad hoc reports and information
are supplied to the Board as required.
Four Board meetings are usually scheduled each year to deal with
matters including: the setting and monitoring of investment
strategy, approval of any borrowings and/or cash positions, review
of investment performance, the level of discount of the Company’s
shares to NAV, promotion of the Company, and services provided by
third parties. Additional meetings of the Board are arranged as
required.
The Board has approved a policy on Directors’ conflicts of interest.
Under this policy, Directors are required to disclose all actual and
potential conflicts of interest to the board as they arise for
consideration and approval. The Board may impose restrictions or
refuse to authorise such conflicts if deemed appropriate. No
directors have any connections with the Manager, shared
directorships with other directors or material interests in any
contract which is significant to the Company’s business.
Committees
In order to assist the Board in fulfilling its governance
responsibilities, it has delegated certain functions to committees.
The roles and responsibilities of these committees, together with
details of work undertaken during the year under review, is outlined
over the next few pages. The reports of the Audit, Risk and Valuation
Committee, Management Engagement Committee and Nomination
and Remuneration Committee are incorporated into and form part
of the Directors’ Report. Each committee’s effectiveness was
assessed, and judged to be satisfactory, as part of the Board’s
annual review of the Board and its committees.
Directors’ Report
Directors’ attendance at meetings
The number of scheduled meetings of the Board and its
Committees held during the reporting period and the attendance of
individual Directors is shown below.
Audit,
Nomination
Risk and
Management
and
Valuation
Engagement Remuneration
Board
Committee
Committee
Committee
Tim Edwards
4/4
4/4
1/1
2/2
Raymond Abbott
1
2/4
2/4
0/1
1/2
Lamia Baker
2
2/4
2/4
1/1
1/2
Scott Brown
4/4
4/4
1/1
2/2
Stephen Cohen
4/4
4/4
1/1
2/2
Jane Tufnell
4/4
4/4
1/1
2/2
1
Mr Abbott retired from the Board on 21 June 2023.
2
Ms Baker was appointed to the Board on 22 June 2023.
In addition to the scheduled quarterly Board meetings, the Board met once
during the year to review and focus on the Company’s strategy and on
additional occasions for ad-hoc business. The Nomination and Remuneration
Committee held additional meetings during the year to consider recruitment
matters. A quorum of Directors was present for all additional meetings held.
Key service providers
The Board has adopted an outsourced business model and has
appointed the following key service providers:
Manager
The Company is an Alternative Investment Fund as defined by the
AIFM Directive and, with effect from 1 October 2022, has appointed
Schroders Unit Trusts Limited (“SUTL”) as the Alternative Investment
Fund Manager (“AIFM” or “Manager”). In accordance with the terms
of the AIFM agreement, which is governed by the laws of England
and Wales, the appointment can be terminated by either party on
six months’ notice or on immediate notice in the event of certain
breaches or the insolvency of either party. As at the date of this
report no such notice had been given by either party. Details of the
amounts paid to SUTL are detailed in note 15 on page 76.
SUTL is authorised and regulated by the FCA and provides portfolio
management, risk management, accounting and company
secretarial services to the Company under the AIFM agreement. The
AIFM also provides general marketing support for the Company and
manages relationships with key investors, in conjunction with the
Chair, other Board members or the corporate broker as appropriate.
The Manager has delegated investment management services to
two wholly owned subsidiaries of Schroders plc, SIM and Schroders
Capital Management (Switzerland) AG (“Schroders Capital”). In
addition, accounting, administration and company secretarial
services have also been delegated to SIM, who has in turn
delegated certain accounting and administrative services to HSBC
Securities Services (UK) Limited. The AIFM has appropriate
professional indemnity cover in place.
The Schroders Group manages £750.6 billion (as at 31 December
2023) on behalf of institutional and retail investors, financial
institutions and high net worth clients from around the world,
invested in a broad range of asset classes across equities, fixed
income, multi-asset and alternatives.
Fees payable to the Manager
Under the terms of the AIFM Agreement, a quarterly management
fee is payable to the Investment Manager. The fee is calculated and
accrued daily based on the Company’s market capitalisation. The fee
is payable at a rate of the aggregate of 1.0% per annum of the
market capitalisation up to £600 million, and 0.8% per annum of
market capitalisation over £600 million.
The Manager is entitled to receive from the Company an annual fee
equal to £165,000 in respect of AIFM Services, paid quarterly in
arrears.
The Investment Manager is entitled to be reimbursed by the
Company for the fees of HSBC Securities Services (UK) Limited, who
have been appointed to provide certain accounting and
administrative services.
The Manager is entitled to receive a performance fee, calculated at
15% of any excess of the “Adjusted NAV per Share” above “Target
NAV per share”.
For the purpose of the above the following expressions shall have
the following meanings:
“Target NAV per Share” means (i) in respect of the Initial
Performance Period, 77p; or (ii) in respect of each subsequent
Performance Period, the Adjusted Closing NAV per Share plus 10%;
“Initial Performance Period” means the period which began on
13 December 2019 and ends on the final day of the first accounting
period after 31 December 2022 when the Adjusted NAV Per Share
on the final day of such accounting period exceeds the Target NAV
per Share.
“Performance Period” means the Initial Performance Period and
each subsequent period commencing on the day following the final
day of the previous Performance Period and ending on the final day
of an accounting period where Adjusted NAV per Share exceeds
Target NAV per Share.
Details of all amounts payable to the Manager are set out in note 15
to the accounts on page 76.
The Board has reviewed the performance of the Manager for the
year under review. The Board is satisfied that the Manager has the
appropriate depth and quality of resource to deliver good returns
over the longer term and that the continued appointment of the
Manager on the terms agreed is in the best interest of the Company
and its shareholders.
Depositary
HSBC Bank plc, which is authorised by the Prudential Regulation
Authority and regulated by the FCA and the Prudential Regulation
Authority, carries out certain duties of a depositary specified in the
AIFM Directive including, in relation to the Company:
–
safekeeping of the assets of the Company which are entrusted
to it;
–
cash monitoring and verifying the Company’s cash flows; and
–
oversight of the Company and the Manager.
The Company, the Manager and the depositary may terminate the
depositary agreement at any time by giving 90 days’ notice in
writing. The depositary may only be removed from office when a
new depositary is appointed by the Company.
Registrar
Equiniti was appointed as the Company’s registrar replacing Link
Group on 30 June 2023. Equiniti’s services to the Company include
share register maintenance (including the issuance, transfer and
cancellation of shares as necessary), acting as agent for the
payment of any dividends, management of company meetings
(including the registering of proxy votes and scrutineer services as
necessary), handling shareholder queries and correspondence and
processing corporate actions.
Schroders Capital Global Innovation Trust plc
47
Other Information (Unaudited)
Introduction
Strategic Report
Governance
Financial
48
Schroders Capital Global Innovation Trust plc
Share capital and substantial share interests
During the year under review the Company repurchased a total of
46,859,212 shares for cancellation. As detailed in the Chair’s
Statement on page 4, the Company cancelled its share premium
account in July 2023 and completed the rectification measures in
respect of share repurchases undertaken in 2022 and 2023. As at
31 December 2023, the Company had 857,360,026 ordinary shares
of 1p in issue.
Since the year end, a further 17,500,000 shares have been
repurchased for cancellation and as at 27 March 2024, the Company
had 839,860,026 ordinary shares of 1p in issue. No shares are held
in treasury. Accordingly, the total number of voting rights in the
Company as at 27 March 2024 was 839,860,026. Details of changes
to the Company’s share capital during the year under review are
given in note 11 to the accounts. All shares in issue rank equally with
respect to voting, dividends and any distribution on winding up.
As at 31 December 2023, the Company has received notifications in
accordance with the FCA Disclosure Guidance and Transparency
Rule 5.1.2R of the below interests in 3% or more of the voting rights
attaching to the Company’s issued share capital. The Company is
reliant on investors to comply with these regulations, and certain
investors may be exempted from providing these. As such, this
should not be relied on as an exhaustive list of shareholders holding
above 3% of the Company’s voting rights.
% of total
Number of
voting
shares held
1
rights
1
City of London Investment Management
Company Ltd
146,155,664
16.18
Momentum Global Investment
Management Ltd
74,075,854
8.21
First Equity Limited
29,300,000
3.24
1
As at date of notification.
Following the year end and at the date of this report, First Equity
Limited has advised that its holding has increased to 34,136,000
shares representing 4.04% of the Company’s total voting rights.
Dividends
The Directors do not propose the payment of a dividend in respect
of the year ended 31 December 2023 (2022: nil).
Provision of information to the Auditor
The Directors at the date of approval of this report confirm that, so
far as each of them is aware, there is no relevant audit information
of which the Company’s Auditor is unaware; and each Director has
taken all the steps that he or she ought to have taken as a Director
in order to make himself or herself aware of any relevant audit
information and to establish that the Company’s Auditor is aware of
that information.
Directors’ and Officers’ liability insurance
and indemnities
Directors’ and officers’ liability insurance cover was in place for the
Directors throughout the period. The Company’s articles of
association provide, subject to the provisions of UK legislation, an
indemnity for Directors in respect of costs which they may incur
relating to the defence of any proceedings brought against them
arising out of their positions as Directors, in which they are
acquitted or judgment is given in their favour by the court. This
indemnity is a qualifying third party indemnity policy and was in
place throughout the year under review for each Director and to the
date of this report.
By order of the Board
Schroder Investment Management Limited
Company Secretary
27 March 2024
Directors’ Report
continued
Schroders Capital Global Innovation Trust plc
49
Other Information (Unaudited)
Introduction
Strategic Report
Governance
Financial
The responsibilities and work carried out by the Audit, Risk and Valuation Committee during the year under review are set out in the following
report. The duties and responsibilities of the Committee, which include monitoring the integrity of the Company’s financial reporting and
internal controls, are set out in further detail below, and may be found in the terms of reference which are set out on the Company’s web pages,
www.schroders.com/inov.
All Directors are members of the Committee. Stephen Cohen is the Chair of the Committee. The Board has satisfied itself that at least one of the
Committee’s members has recent and relevant financial experience and that the Committee as a whole has competence relevant to the sector
in which the Company operates. The AIC Code permits the Chair of the Board to be a member of the audit committee of an investment trust.
Therefore, it is considered appropriate for the Chair of the Board, who was independent on appointment, to be a member of the Committee.
Approach
Risk management and
Financial reports and valuation
Audit
internal controls
Principal and emerging risks and
uncertainties
To establish a process for identifying,
assessing, managing and monitoring
principal and emerging risks and
uncertainties of the Company, and an
explanation of how these are being
managed or mitigated.
The Committee is responsible for reviewing
the adequacy and effectiveness of the
Company’s internal controls and the
whistleblowing procedures operated by the
AIFM and other services providers.
Financial statements
To monitor the integrity of the financial
statements of the Company and any formal
announcements relating to the Company’s
financial performance and valuation.
Audit results
To discuss any matters arising from the
audit and recommendations made by the
Auditor.
Risk
management
Internal
controls
Review of
external
auditors and
their work
Half year
and annual
report
Accounting
policies and
judgements
Going concern and viability
To review the position and make
recommendations to the Board in relation to
whether it considers it appropriate to adopt
the going concern basis of accounting in
preparing its annual and half-year report and
accounts.
The Committee is also responsible for
reviewing the disclosures made by the
Company in the viability statement.
Auditor appointment, independence
and performance
To make recommendations to the Board,
in relation to the appointment,
re-appointment, effectiveness, and any
non-audit services by the Auditor and
removal of the external Auditor. To review
their independence, and to approve their
remuneration and terms of engagement.
To review the audit plan and engagement
letter.
Audit, Risk and Valuation Committee Report
50
Schroders Capital Global Innovation Trust plc
Audit, Risk and Valuation Committee Report
continued
The Committee met four times during the year under review and the table below sets out how the Committee discharged its duties during the
year under review and up until the approval of this report. Further details on attendance can be found on page 47. Significant issues identified
during the year under review and key matters communicated by the Auditor during its reporting are included below.
Application during the year
Risk management and
Financial reports and valuation
Audit
internal controls
Meetings with the Auditor
The Auditor attended meetings to present
their audit plan and the findings of the
audit.
The Committee met the Auditor without
representatives of the Manager present.
Effectiveness of the independent audit
process and Auditor performance
Evaluated the effectiveness of the
independent audit firm and process.
Evaluated the Auditor’s performance
against agreed criteria including:
qualification; knowledge, expertise and
resources; independence policies;
effectiveness of audit planning; adherence
to auditing standards; and overall
competence was considered, alongside
feedback from the Manager on the audit
process. Professional scepticism of the
Auditor was questioned and the Committee
was satisfied with the Auditor’s replies.
Valuation and existence of holdings
The Company’s assets are principally invested
in quoted and unquoted equities. The
Committee reviewed internal control reports
from the AIFM in the year, reporting on the
systems and controls around the pricing and
valuation of securities. The Committee notes
that quoted investments are valued using
stock exchange prices provided by third-
party financial data vendors, unless trading
volume would indicate that price is not a
reliable valuation. In such cases, the asset will
be subject to fair value as if it were an
unquoted holding.
In respect of the unquoted holdings, at
quarterly meetings the Committee reviews a
report on the revaluations undertaken on the
unquoted holdings during the period and
challenges the considerations and key
assumptions made where appropriate, to
ensure that the valuations are reliable.
During the year under review, the Committee
has also reviewed the process in place to
ensure the accurate valuation of unquoted
holdings on an ongoing basis.
The Committee has also considered the work
of the AIFM’s Fair Value Pricing Committee,
which takes inputs from the Investment
Manager and S&P Global (previously known
as IHSMarkit) who acts as independent
valuation adviser, which considers the pricing
of the unquoted holdings.
Principal and emerging risks and
uncertainties
Reviewed the principal and emerging and
uncertainties risks faced by the Company
together with the systems, processes and
oversight in place to manage and mitigate
them.
Service provider controls
Consideration of the operational controls
reports issued on the Manager, depositary
and registrar. Following a detailed review,
the Board decided to change its Auditor
and registrar and Ernst & Young LLP and
Equiniti were appointed from 21 June and
30 June 2023 respectively.
Auditor independence
Ernst & Young LLP has provided audit
services to the Company since it was
appointed on 21 June 2023. This is the first
year that Ernst & Young LLP will be
undertaking the Company’s audit.
The Auditor is required to rotate the senior
statutory auditor every five years. This is the
first year that the senior statutory auditor,
Denise Davidson, has conducted the audit
of the Company’s financial statements.
There are no contractual obligations
restricting the choice of external auditor.
Calculation of the investment
management fee and performance fee
Consideration of methodology used to
calculate the fees, matched against the
criteria set out in the AIFM agreement.
Internal controls and risk management
Consideration of several key aspects of
internal control and risk management
operating within the Manager, depositary
and registrar, including assurance reports
and presentations on these controls.
Schroders Capital Global Innovation Trust plc
51
Other Information (Unaudited)
Introduction
Strategic Report
Governance
Financial
Risk management and
Financial reports and valuation
Audit
internal controls
Stephen Cohen
Audit, Risk and Valuation Committee Chair
27 March 2024
Compliance with the investment trust
qualifying rules in S1158 of the
Corporation Tax Act 2010
Consideration of the Manager’s report
confirming compliance.
Overall accuracy of the report and
accounts
Consideration of the annual report and
accounts and the letter from the Manager in
support of the letter of representation to the
Auditor.
Audit tender
An audit tender was undertaken in January
2023 and it was agreed to appoint Ernst &
Young LLP as the Company’s Auditor for
the year ended 31 December 2023.
Audit results
Met with and reviewed a comprehensive
report from the Auditor which detailed the
results of the Audit, compliance with
regulatory requirements, safeguards that
have been established, and on their own
internal quality control procedures.
Fair, balanced and understandable
Reviewed the annual report and accounts to
advise the Board whether it was fair,
balanced and understandable. Reviewed
whether performance measures were
reflective of the business, whether there was
adequate commentary on the Company’s
strengths and weaknesses and that the
annual report and accounts, taken as a whole
was consistent with the Board’s view of the
operation of the Company.
Provision of non-audit services by the
Auditor
Reviewed the FRC’s Guidance on Audit
Committees and has formulated a policy on
the provision of non-audit services by the
Company’s Auditor. The Committee has
determined that the Company’s appointed
Auditor will not be considered for the
provision of certain non-audit services, such
as accounting and preparation of the
financial statements, internal audit and
custody. The Auditor may, if required,
provide other non-audit services which will
be judged on a case-by-case basis. The
Auditor did not provide any non-audit
services to the Company during the year
under review.
The Committee was satisfied that there
were no circumstances that affected the
independence or objectivity of the Auditor.
Going concern and viability
Reviewed the impact of risks on going
concern and longer-term viability, as
described further on page 42.
Consent to continue as Auditor
Ernst & Young LLP indicated to the
Committee its willingness to continue
to act as Auditor.
Recommendations made to, and approved by, the Board:
•
The Committee recommended that the Board approve the quarterly valuations, the half year report and the annual report and
accounts.
•
The Committee recommended that the going concern presumption be adopted in the annual report and accounts and the
explanations set out in the viability statement.
•
The Committee recommended the appointment of Ernst & Young LLP, as the Company’s Auditor, following a competitive tender
process.
•
As a result of the work performed, the Committee has concluded that the annual report and accounts for the year ended
31 December 2023, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders
to assess the Company’s position, performance, business model and strategy, and has reported on these findings to the Board. The
Board’s conclusions in this respect are set out in the Statement of Directors’ Responsibilities on page 58.
•
Having reviewed the performance of the Auditor as described above, the Committee considered it appropriate to recommend the
Auditor’s re-appointment. Resolutions to re-appoint Ernst & Young LLP as Auditor to the Company, and to authorise the Directors to
determine their remuneration will be proposed at the forthcoming AGM.
52
Schroders Capital Global Innovation Trust plc
Management Engagement Committee Report
The Management Engagement Committee is responsible for (1) the monitoring and oversight of the Manager’s performance and fees, and
confirming the Manager’s ongoing suitability, and (2) reviewing and assessing the Company’s other service providers, including reviewing their
fees. All Directors are members of the Committee. Jane Tufnell is the Chair of the Committee. Its terms of reference are available on the
Company’s web pages, www.schroders.com/inov.
Approach
Oversight of the Manager
Oversight of other service providers
Application during the year
The Committee:
•
reviews the Manager’s performance, over the short and long
term, against a peer group and the market;
•
considers the reporting it has received from the Manager
throughout the reporting period, and the reporting from the
Manager to the shareholders;
•
assesses management fees including the performance fee on
an absolute and relative basis, receiving input from the
Company’s broker, including peer group and industry figures,
as well as the structure of the fees;
•
reviews the appropriateness of the Manager’s contract,
including terms such as notice period; and
•
assesses whether the Company receives appropriate
administrative, accounting, company secretarial and marketing
support from the Manager.
The Committee reviews the performance and competitiveness of
the following service providers on at least an annual basis:
•
Depositary and custodian;
•
Corporate broker; and
•
Registrar.
The Committee receives a report from the Company Secretary on
ancillary service providers, and considers any recommendations.
The Committee notes the Audit, Risk and Valuation Committee’s
review of the Auditor.
The Committee undertook a review of the Investment Manager’s
performance and agreed that it has the appropriate depth and
quality of resource to deliver superior returns over the longer
term.
The Committee also reviewed the terms of the AIFM agreement,
including the fee structure and agreed they remain fit for
purpose.
The Committee reviewed the other services provided by the
Manager and agreed they were satisfactory.
As noted earlier in this report, Ernst & Young LLP was appointed
as the Company’s Auditor effective from the AGM on 21 June
2023. In addition, Equiniti was appointed as registrar on 30 June
2023.
The annual review of each of the service providers was
satisfactory.
The Committee noted that the Audit, Risk and Valuation
Committee had undertaken an evaluation of the internal controls
of the Manager, registrar, depositary and custodian.
Recommendations made to, and approved by, the Board:
•
That the ongoing appointment of the Manager on the terms of the AIFM agreement, including the fee, was in the best interests of
shareholders as a whole.
•
That Equiniti be approved as the Company’s registrar with effect from 30 June 2023.
•
That the Company’s service providers’ performance remained satisfactory.
Schroders Capital Global Innovation Trust plc
53
Other Information (Unaudited)
Introduction
Strategic Report
Governance
Financial
The Nomination and Remuneration Committee is responsible for: (1) the recruitment, selection and induction of Directors; (2) their assessment
during their tenure; (3) Directors’ fees; and (4) the Board’s succession. All Directors are members of the Committee. Jane Tufnell is the Chair of
the Committee. Its terms of reference are available on the Company’s web pages, www.schroders.com/inov.
Oversight of Directors
Approach
Selection and induction
Board evaluation and Directors’ fees
Succession
Application during the year (see overleaf)
Selection
Induction
Application
of succession
policy
Annual
review of
succession
policy
Annual
evaluation
Review of
Directors’
fees
•
Committee prepares a job specification
for each role, and considers the use of an
independent recruitment firm. For the
Chair and the Chairs of the Committees,
the Committee considers current Board
members too.
•
Job specification outlines the knowledge,
professional skills, personal qualities and
experience requirements.
•
Potential candidates assessed against
the Company’s diversity policy.
•
Committee discusses the long list, invites
a number of candidates for interview and
makes a recommendation to the Board.
•
Committee reviews the induction and
training of new Directors.
•
Committee assesses each Director
annually, and considers if an external
evaluation is appropriate.
•
Evaluation focuses on whether each
Director continues to demonstrate
commitment to their role and provides a
valuable contribution to the Board during
the reporting period, taking into account
time commitment, independence, conflicts
and training needs.
•
Following the evaluation, the Committee
provides a recommendation to
shareholders with respect to the annual
re-election of Directors at the AGM.
•
All Directors retire at the AGM and their
re-election is subject to shareholder
approval.
•
Committee reviews Directors’ fees, taking
into account comparative data and reports
to shareholders.
•
Any proposed changes to the
remuneration policy for Directors
discussed and reported to shareholders.
•
Taking into consideration diversity and
the need for regular refreshment, the
Board’s policy is that Directors’ tenure,
including the Chair of the Board, will be
for no longer than nine years, except in
exceptional circumstances, and that each
Director will be subject to annual re-
election at the AGM.
•
Committee reviews the Board’s current
and future needs at least annually.
Should any need be identified the
Committee will initiate the selection
process.
•
Committee oversees the handover
process for retiring Directors.
Nomination and Remuneration Committee Report
54
Schroders Capital Global Innovation Trust plc
Nomination and Remuneration Committee Report
continued
Selection and induction
Board evaluation and Directors’ fees
Succession
•
Following a rigorous selection process
using an independent external
recruitment agency, Odgers Berndtson,
Lamia Baker was appointed to the Board
with effect from 22 June 2023. Odgers
Berndtson has no connection with the
Company or any of the Directors.
•
The Committee noted that following her
appointment, Lamia Baker engaged in an
induction programme with the Manager
and its various operating functions.
•
Lamia Baker will stand for election as
a Director at the forthcoming AGM, as set
out in resolution 3 of the Notice of
Annual General Meeting.
•
In anticipation of Scott Brown’s
retirement at the conclusion of the
forthcoming AGM, the Committee
discussed appointing a suitable
replacement having regard to the current
Board’s composition, diversity and
efficacy. A skills matrix was also reviewed
to assist the Committee in identifying any
skill gaps. Following consideration, the
Board agreed to continue with the
composition of four Directors following
the forthcoming AGM for the time being.
•
Independent external recruitment
agencies were approached to provide
suitable proposals.
•
The annual Board evaluation, including
evaluation of its Committees, was
undertaken in November 2023. For the
year under review, the evaluation was
undertaken internally by the completion of
questionnaires.
•
The Committee also reviewed each
Director’s time commitment and
independence by reviewing a complete list
of appointments, including pro bono
not
for profit roles, to ensure that each
Director remained free from conflict and
had sufficient time available to discharge
each of their duties effectively. The
Committee was also mindful of the
concept of ‘overboarding’ and considered
the time, nature and complexity of each
Directors’ other roles and concluded that it
does not believe that any of the Directors
are currently overboarded. All Directors
were considered to be independent in
character and judgement. The Committee
reviews this information annually.
•
The Committee considered each Director’s
contributions, and noted that in addition to
extensive experience as professionals and
non-executive Directors, each Director had
valuable skills and experience, as detailed
in their biographies on pages 44 and 45.
•
Based on its assessment, the Committee
provided individual recommendations for
each Director’s election and re-election,
with the exception of Scott Brown, who
having served as a non-executive director
for nine years will not seek re-election.
•
The Committee reviewed Directors’ fees,
using external benchmarking, and
recommended that Directors’ fees be
increased by 5% with effect from 1 January
2024. Further details are provided in the
Directors’ Remuneration Report.
•
Lamia Baker succeeded Raymond Abbott
who retired from the Board at the
Company’s AGM on 21 June 2023.
•
The Committee believes it is important
for the Board to have the appropriate
skills and diversity and has reviewed
composition and succession plans with
these in mind.
•
The Committee reviewed the succession
policy and agreed it was still fit for
purpose.
•
As noted in the Company’s annual report
and accounts for the year ended
31 December 2022, Scott Brown will be
retiring as a Director of the Company at
the forthcoming AGM.
Recommendations made to, and approved by, the Board:
•
That all Directors continue to demonstrate commitment to their roles, provide a valuable contribution to the deliberations of the
Board, remuneration of the Directors remains appropriate and Directors remain free from conflicts with the Company and its
Directors contribute to the long-term sustainable success of the Company, and should all be recommended for election or
re-election by shareholders at the AGM. Scott Brown will retire at the forthcoming AGM and will not be standing for re-election.
•
That Directors’ fees be increased by an additional 5% per annum with effect from 1 January 2024.
•
That the Directors’ Remuneration Report be put to shareholders for approval as an advisory vote at the forthcoming AGM.
•
That Odgers Berndtson be engaged to assist in the search for a successor for Raymond Abbott who retired as a Director at the
Company's AGM on 21 June 2023.
•
That Lamia Baker be appointed as a non-executive Director with effect from 22 June 2023 and that her election as a Director be
proposed, and recommended to shareholders for approval at the forthcoming AGM.
Schroders Capital Global Innovation Trust plc
55
Other Information (Unaudited)
Introduction
Strategic Report
Governance
Financial
Introduction
The following remuneration policy is currently in force and is subject
to a binding vote every three years. The next vote will take place at the
2025 AGM and the current policy provisions will apply until that date.
The Directors’ report on remuneration, set out below, is subject to an
annual advisory vote. An ordinary resolution to approve this report
will be put to shareholders at the forthcoming AGM.
At the AGM held on 18 May 2022, 99.74% of the votes cast in respect
of approval of the Directors’ Remuneration Policy were in favour, while
0.26% were against and 258,195 votes were withheld.
At the AGM held on 21 June 2023, 99.57% of the votes cast in respect
of approval of the Directors’ Remuneration Report for the year ended
31 December 2022 were in favour, while 0.43% were against and
417,782 votes were withheld.
Directors’ remuneration policy
The determination of the Directors’ fees is a matter dealt with by the
Board and the Nomination and Remuneration Committee.
It is the Board’s policy to determine the level of Directors’
remuneration having regard to amounts payable to non-executive
Directors in the industry generally, the role that individual Directors
fulfil in respect of Board and Committee responsibilities, and time
committed to the Company’s affairs, taking into account the
aggregate limit of fees set out in the Company’s articles of
association. This aggregate level of Directors’ fees is currently set at
£500,000 per financial year and any increase in this level requires
approval by the Board and the Company’s shareholders.
The Chair of the Board, the Chair of the Audit, Risk and Valuation
Committee and the Senior Independent Director each receive fees at
a higher rate than the other Directors to reflect their additional
responsibilities. Directors’ fees are set at a level to recruit and retain
individuals of sufficient calibre, with the level of knowledge,
experience and expertise necessary, and to promote the success of
the Company in reaching its short and long-term strategic objectives.
The Board and its Committees exclusively comprise of non- executive
Directors. No Director past or present has an entitlement to a
pension from the Company and the Company has not, and does not
intend, to operate a share scheme for Directors or to award any share
options or long- term performance incentives to any Director. No
Director has a service contract with the Company; however Directors
have a letter of appointment. Directors do not receive exit payments
and are not provided with any compensation for loss of office.
Any Director who performs services which in the opinion of the
Directors are outside the scope of the ordinary duties of a Director,
may be paid additional remuneration to be determined by the
Directors, subject to the previously mentioned fee cap and in
accordance with the Company’s articles of association. No other
payments are made to Directors other than the reimbursement of
reasonable out- of-pocket expenses incurred in attending to the
Company’s business.
Implementation of policy
The terms of the Directors’ letters of appointment are available for
inspection at the Company’s registered office address during normal
business hours and during the AGM at the location of such meeting.
The Board did not seek the views of shareholders in setting this
remuneration policy. Any comments on the policy received from
shareholders would be considered on a case by case basis.
As the Company does not have any employees, no employee pay and
employment conditions were taken into account when setting this
remuneration policy and no employees were consulted in its
construction.
Directors’ fees are reviewed annually and take into account research
from third parties on the fee levels of directors of peer group
companies, inflation, as well as industry norms and factors affecting
the time commitment expected of the Directors. New Directors are
subject to the provisions set out in this remuneration policy.
Directors’ Remuneration Report
56
Schroders Capital Global Innovation Trust plc
Directors’ Remuneration Report
continued
Directors’ report on remuneration
This report sets out how the remuneration policy was implemented during the year ended 31 December 2023.
Fees paid to Directors
The following amounts were paid by the Company to Directors for their services in respect of the year ended 31 December 2023 and the
preceding financial year. Directors’ remuneration is all fixed; Directors do not receive any variable remuneration. The performance of the
Company over the financial year is presented on the inside front cover and page 1, under the heading “Performance Summary”.
Change in annual fee over years
Fees
ended 31 December
2023
2022
2023
2022
2021
2020
Director
£
£
%
%
%
%
Tim Edwards (Chair)
49,752
47,553
4.6
38.8
1
N/A
N/A
Raymond Abbott
2
17,956
30,787
(41.7)
2.6
–
N/A
Lamia Baker
3
16,159
N/A
N/A
N/A
N/A
N/A
Scott Brown
32,137
30,787
4.4
2.6
–
–
Stephen Cohen
42,849
41,050
4.4
2.6
(20.0)
4
24.0
4
Jane Tufnell
37,493
35,919
4.4
2.6
–
N/A
196,346
186,096
1
Appointed as a Director on 26 February 2021. Appointed Chair on 4 June 2021.
2
Retired as a Director on 21 June 2023.
3
Appointed as a Director on 22 June 2023.
4
The scope of the Audit, Risk and Valuation Committee Chair role had been enlarged to provide additional cover during a crisis period and an enhanced fee had been agreed
from the date of his appointment on 28 June 2019 to 31 March 2020.
N/A
Directors were not appointed during these periods.
The Directors’ fees in the above table have been audited.
Consideration of matters relating to Directors’ remuneration
Directors’ remuneration was last reviewed by the Nomination and Remuneration Committee and the Board in November 2023. The members of
the Board at the time that remuneration levels were considered are as set out on pages 44 and 45.
Although no external advice was sought in considering the levels of Directors’ fees, information on fees paid to Directors of other investment
companies managed by Schroders, peer group companies and the latest inflation rates was taken into consideration together with independent
third party research.
Following this review, the Board agreed the Nomination and Remuneration Committee’s recommendation that Directors’ fees should be
increased by 5% per annum, effective from 1 January 2024. The new fees are as follows; Chair: £52,240; Audit, Risk and Valuation Committee
Chair: £44,991; Senior Independent Director: £39,368; Director: £33,744.
The table below compares the remuneration payable to directors, to distributions made to shareholders during the year under review and the
prior year. In considering these figures, shareholders should take into account the Company’s investment objective.
Distributions to shareholders vs Directors’ remuneration
Year ended
Year ended
31 December 31 December
2023
2022
%
£’000
£’000
Change
Remuneration payable to Directors
196
186
5.4
Distributions paid to shareholders
– Dividends paid during the year
–
–
–
– Share buybacks
7,060
812
769.5
Total distributions paid to shareholders
7,060
812
769.5
Schroders Capital Global Innovation Trust plc
57
Other Information (Unaudited)
Introduction
Strategic Report
Governance
Financial
Performance graph
Share price total return versus FTSE All-Share Index total return for the period from 21 April 2015 to 31 December 2023.
Schroder Investment Management Limited took over investment management responsibilities in December 2019.
Source: Morningstar/Thomson Reuters. Rebased to 100 at 21 April 2015.
Directors’ share interests
The Company’s articles of association do not require Directors to own shares in the Company. The interests of Directors, including those of
connected persons, at the beginning and end of the financial year under review, are set out below.
At 31 December
At 1 January
2023
1
2023
1
Tim Edwards
210,230
210,230
Raymond Abbott
N/A
2
100,000
Lamia Baker
Nil
N/A
3
Scott Brown
78,269
78,269
Stephen Cohen
309,737
309,737
Jane Tufnell
500,000
500,000
1
Ordinary shares of 1p each.
2
Mr Abbott retired from the Board on 21 June 2023.
3
Ms Baker was appointed to the Board on 22 June 2023.
Since the year ended 31 December 2023, there have been no notified changes to Directors’ interests in the shares of the Company.
The information in the above table has been audited.
On behalf of the Board
Jane Tufnell
Senior Independent Director
27 March 2024
FTSE All-Share Index
Share price
0
25
50
75
100
125
150
175
31-Dec-23
31-Dec-22
31-Dec-21
31-Dec-20
31-Dec-19
31-Dec-18
31-Dec-17
31-Dec-16
31-Dec-15
21-Apr-15
58
Schroders Capital Global Innovation Trust plc
Statement of Directors’ Responsibilities
Directors’ responsibilities
The Directors are responsible for preparing the annual report and the
financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have elected to
prepare the financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting
Standards, comprising Financial Reporting Standard (FRS) 102 “The
Financial Reporting Standard applicable in the UK and Republic of
Ireland” and applicable law). Under company law the Directors must
not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Company
and of the return or loss of the Company for that period. In preparing
these financial statements, the Directors are required to:
–
select suitable accounting policies and then apply them
consistently;
–
make judgements and accounting estimates that are reasonable
and prudent;
–
state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
–
prepare the financial statements on a going concern basis unless
it is inappropriate to presume that the Company will continue in
business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that the
financial statements and the Directors’ Remuneration Report comply
with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
The Manager is responsible for the maintenance and integrity of the
web pages dedicated to the Company. Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors’ statement
Each of the Directors, whose names and functions are listed on
pages 44 and 45, 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 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
Tim Edwards
Chair
27 March 2024
Financial
Financial
Independent Auditor’s Report
60
Income Statement
65
Statement of Changes in Equity
66
Statement of Financial Position
67
Cash Flow Statement
68
Notes to the Accounts
69
59
60
Schroders Capital Global Innovation Trust plc
Independent Auditor’s Report
to the Members of Schroders Capital Global Innovation Trust plc
Opinion
We have audited the financial statements of Schroders Capital Global
Innovation Trust plc (the “Company”) for the year ended 31 December
2023 which comprise the Income Statement, the Statement of
Changes in Equity, the Statement of Financial Position, the Cash Flow
Statement and the related notes 1 to 21, including a summary of
significant accounting policies. The financial reporting framework that
has been applied in their preparation is applicable law and United
Kingdom Accounting Standards including FRS 102 “The Financial
Reporting Standard applicable in the UK and Republic of Ireland”
(United Kingdom Generally Accepted Accounting Practice).
In our opinion, the financial statements:
–
give a true and fair view of the Company’s affairs as at
31 December 2023 and of its loss for the year then ended;
–
have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
–
have been prepared in accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our
report. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as applied to public
interest entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were
not provided to the Company and we remain independent of
Company in conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation
of the directors’ assessment of the Company’s ability to continue to
adopt the going concern basis of accounting included:
–
Confirming our understanding of the Company’s going concern
assessment process by engaging with the directors and the
Company Secretary to determine if all key factors were
considered in their assessment.
–
Inspecting the directors’ assessment of going concern, including
the revenue forecast, for the period to 31 March 2025 which is at
least 12 months from the date these financial statements are
authorised for issue. In preparing the revenue forecast, the
Company has concluded that it is able to continue to meet its
ongoing costs as they fall due.
–
Reviewing the factors and assumptions, including the impact of
the current economic environment and other significant events
that could give rise to market volatility, as applied to the revenue
forecast and the liquidity assessment of the investments. We
considered the appropriateness of the methods used to calculate
the revenue forecast and the liquidity assessment and
determined, through testing of the methodology and calculations,
that the methods, inputs and assumptions utilised were
appropriate to be able to make an assessment for the Company.
–
Considering the mitigating factors included in the revenue
forecast that are within the control of the Company. We reviewed
the Company’s assessment of the liquidity of investments held
and evaluated the Company’s ability to sell those investments to
cover the working capital requirements.
–
Considering the commitments that have been made with respect
to the purchase of unquoted investments, ensuring these have
been appropriately taken account of when preparing the forecast.
–
Reviewing the Company’s going concern disclosures included in
the annual report in order to assess that the disclosures were
appropriate and in conformity with the reporting standards.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Company’s ability to
continue as a going concern for a period assessed by the directors,
being the period to 31 March 2025, which is at least 12 months from
the date these financial statements are authorised for issue.
In relation to the Company’s reporting on how they have applied the
UK Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the directors’ statement in the financial
statements about whether the directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections of this
report. However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the company’s
ability to continue as a going concern.
Overview of our audit approach
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our
allocation of performance materiality determine our audit scope for
the Company. This enables us to form an opinion on the financial
statements. We take into account size, risk profile, the organisation of
the Company and effectiveness of controls, the potential impact of
climate change and changes in the business environment when
assessing the level of work to be performed. All audit work was
performed directly by the audit engagement team.
Climate change
There has been increasing interest from stakeholders as to how climate
change will impact companies. The Company has determined that the
impact from climate change could affect the Company’s investments
and overall investment process. This is explained in the principal and
emerging risks and uncertainties section on page 40, which forms part
of the “Other information,” rather than the audited financial statements.
Our procedures on these disclosures therefore consisted solely of
considering whether they are materially inconsistent with the financial
statements, or our knowledge obtained in the course of the audit or
otherwise appear to be materially misstated.
Our audit effort in considering climate change was focused on the
adequacy of the Company’s disclosures in the financial statements as
set out in note 1(a) and conclusion that there was no further impact
of climate change to be taken into account. The quoted investments
are valued based on market pricing as required by FRS 102 and the
unquoted investments are valued using a variety of techniques
consistent with the recommendations set out in the International
Private Equity and Venture Capital (IPEV) guidelines which also reflect
each investment’s exposure to climate change risk. We also
challenged the Directors’ considerations of climate change in their
assessment of viability and associated disclosures.
Key audit
matters
–
Risk of incorrect valuation or ownership of the
investment portfolio.
–
Overall materiality of £2.17 million which
represents 1% of shareholder’s funds.
Materiality
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our
opinion thereon, and we do not provide a separate opinion on these matters.
Key observations communicated to
the Audit, Risk and Valuation
Risk
Our response to the risk
Committee
The results of our procedures identified no
material misstatements in relation to the risk
of incorrect valuation or ownership of the
investment portfolio.
We performed the following procedures:
We obtained an understanding of the
processes surrounding the valuation of
investments and legal title by performing
walkthrough procedures.
For all Level 1 and Level 2 investments, we
verified the market prices and exchange
rates applied to an independent pricing
vendor and recalculated the investment
valuations as at the year end.
We confirmed that there were no Level 1 and
Level 2 investments with stale prices as at
the year end and therefore no stale pricing
report was produced by the administrator.
We obtained the market prices, from an
independent pricing vendor, for five business
days pre and post the year end date, and
calculated the day-on-day movement and
confirmed there are no stale prices.
For a sample of Level 3 investments, we
engaged our team of valuation specialists to
review the valuations which included
completing the following procedures:
–
Reviewing the valuation papers for the
year ended 31 December 2023 to gain
an understanding of and to review the
valuation methodologies and
assumptions used;
–
Assessing whether the valuations have
been performed in line with general
valuation approaches as set out in
UK GAAP and the IPEV guidelines;
–
Assessing the appropriateness of data
inputs and challenging the assumptions
used to support the valuations;
–
Assessing other facts and
circumstances, such as market
movements and comparative company
information, that have an impact on the
fair market value of the investments; and
–
Performing comparative calculations,
where appropriate, to assess whether
the valuation conclusions are
reasonable and within an
independently calculated acceptable
valuation range.
We recalculated the unrealised gains/losses
on Level 3 investments as at the year-end
using the book-cost reconciliation and
reviewed the fair value hierarchy disclosure
for consistency with our understanding of
the investments held.
Incorrect valuation or ownership of the
investment portfolio (as described on
page 50 in the Audit, Risk and Valuation
Committee Report and as per the accounting
policy set out on page 69).
The valuation of the investment portfolio at
31 December 2023 was £210.09 million
(2022: £242.50 million) consisting of Level 1
and Level 2 investments with an aggregate
value of £64.33 million (2022: £83.71 million)
and Level 3 investments with an aggregate
value of £145.76 million (2022:
£158.79 million).
The valuation of the investments held by the
Company is the key driver of the Company’s
net asset value and total return. Incorrect
investment pricing, or a failure to maintain
proper legal title to the investments held by
the Company could have a significant impact
on the net asset value and the return
generated for shareholders.
The fair value of Level 1 and Level 2
investments is determined by reference to
bid prices which are at close of business on
the reporting date.
The fair value of Level 3 investments is
determined by reference to principles
consistent with the International Private
Equity and Venture Capital Valuation
guidelines (“IPEV”). The valuation of the
Level 3 investments, and the resultant
impact on the unrealised gains/(losses), is
the area requiring the most significant
judgement and estimation in the
preparation of the financial statements.
Schroders Capital Global Innovation Trust plc
61
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
62
Schroders Capital Global Innovation Trust plc
Independent Auditor’s Report
to the Members of Schroders Capital Global Innovation Trust plc
continued
Key observations communicated to
the Audit, Risk and Valuation
Risk
Our response to the risk
Committee
Our application of materiality
We apply the concept of materiality in planning and performing the
audit, in evaluating the effect of identified misstatements on the audit
and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in
the aggregate, could reasonably be expected to influence the economic
decisions of the users of the financial statements. Materiality provides
a basis for determining the nature and extent of our audit procedures.
We determined materiality for the Company to be £2.17 million which
is 1% (2022: 1%) of shareholders’ funds. We believe that shareholders’
funds provides us with materiality aligned to the key measurement of
the Company’s performance.
In the prior year, the predecessor auditor determined materiality for
the Company to be £2.75 million, which was approximately 1% of
shareholder’s funds.
Performance materiality
The application of materiality at the individual account or balance level.
It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment
of the Company’s overall control environment, our judgement was
that performance materiality was 50% of our planning materiality,
namely £1.09 million. We have set performance materiality at this
percentage due to this being our first year of auditing the Company.
In the prior year, the predecessor auditor determined performance
materiality for the Company to be £1.92 million, which was 70% of
planning materiality.
Reporting threshold
An amount below which identified misstatements are considered as
being clearly trivial.
We agreed with the Audit, Risk and Valuation Committee that we
would report to them all uncorrected audit differences in excess of
£0.11 million, which is set at 5% of planning materiality, as well as
differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
In the prior year, the predecessor auditor determined reporting
threshold for the Company to be £0.14 million, which was 5% of
planning materiality.
We evaluate any uncorrected misstatements against both the
quantitative measures of materiality discussed above and in light of
other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the
annual report other than the financial statements and our auditor’s
report thereon. The directors are responsible for the other
information contained within the annual report.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in
this report, we do not express any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the course of
the audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise
to a material misstatement in the financial statements themselves.
If, based on the work we have performed, we conclude that there is
a material misstatement of the other information, we are required to
report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion the part of the directors’ remuneration report to be
audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the
audit:
–
the information given in the strategic report and the directors’
report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
–
the strategic report and directors’ reports have been prepared in
accordance with applicable legal requirements;
Matters on which we are required to report
by exception
In the light of the knowledge and understanding of the Company and
its environment obtained in the course of the audit, we have not
For all new purchases of unquoted
investments made during the year, we
obtained supporting documents and agreed
these to the purchase cost per the
accounting records and to bank statements.
We corroborated a sample of inputs used in
the valuation to underlying supporting
information.
We compared the Company’s quoted and
unquoted investment holdings at
31 December 2023 to an independent
confirmation received directly from the
Company’s Custodian and Depositary. All
investments were confirmed by the
Company’s Custodian and Depositary.
identified material misstatements in the strategic report or directors’
report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to you
if, in our opinion:
–
adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches
not visited by us; or
–
the financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
–
certain disclosures of directors’ remuneration specified by law
are not made; or
–
we have not received all the information and explanations we
require for our audit.
Corporate Governance Statement
We have reviewed the directors’ statement in relation to going
concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Company’s compliance with the
provisions of the UK Corporate Governance Code specified for our
review by the Listing Rules.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial
statements or our knowledge obtained during the audit:
–
Directors’ statement with regards to the appropriateness of
adopting the going concern basis of accounting and any
material uncertainties identified set out on page 42.
–
Directors’ explanation as to its assessment of the Company’s
prospects, the period this assessment covers and why the period
is appropriate set out on page 42.
–
Director’s statement on whether it has a reasonable expectation
that the Company will be able to continue in operation and
meets its liabilities set out on page 42.
–
Directors’ statement on fair, balanced and understandable set
out on page 58.
–
Board’s confirmation that it has carried out a robust assessment
of the principal and emerging risks and uncertainties set out on
pages 38 to 41.
–
The section of the annual report that describes the review of
effectiveness of risk management and internal control systems
set out on pages 49 to 51; and
–
The section describing the work of the Audit, Risk and Valuation
Committee set out on pages 49 to 51.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set
out on page 58, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the Directors determine
is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible
for assessing the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the Directors either
intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
Explanation as to what extent the audit was
considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with
laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including
fraud. The risk of not detecting a material misstatement due to fraud
is higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion. The extent to
which our procedures are capable of detecting irregularities,
including fraud is detailed below.
However, the primary responsibility for the prevention and detection
of fraud rests with both those charged with governance of the
Company and management.
–
We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Company and determined
that the most significant are UK GAAP, the Companies Act 2006,
the Listing Rules, the UK Corporate Governance Code, the
Statement of Recommended Practice for the Financial
Statements of Investment Trust Companies as issued by the
Association of Investment Companies, Section 1158 of the
Corporation Tax Act 2010 and The Companies (Miscellaneous
Reporting) Regulations 2018.
–
We understood how the Company is complying with those
frameworks through discussions with the Audit, Risk and
Valuation Committee and Company Secretary, review of Board
and committee minutes and review of papers provided to the
Audit, Risk and Valuation Committee.
–
We assessed the susceptibility of the Company’s financial
statements to material misstatement, including how fraud might
occur by considering the key risks impacting the financial
statements. We identified a fraud risk with respect to the
incorrect valuation of the unquoted investments and the
resulting impact on unrealised gains/(losses). Further discussion
of our approach is set out in the section on key audit matters
above which include our response to the fraud risks and other
areas of audit focus.
–
Based on this understanding we designed our audit procedures
to identify non-compliance with such laws and regulations. Our
procedures involved review of the reporting to the Directors with
respect to the application of the documented policies and
procedures and review of the financial statements to ensure
compliance with the reporting requirements of the Company.
As disclosed in director’s report, the Company undertook a series
of share buybacks in the year to 31 December 2022 and
31 December 2023 without the availability of sufficient
distributable reserves and was therefore not compliant with the
requirements of the Companies Act 2006. This was rectified
during the year to 31 December 2023 through the cancellation
and conversion of the Company’s share premium account to
Schroders Capital Global Innovation Trust plc
63
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
64
Schroders Capital Global Innovation Trust plc
Independent Auditor’s Report
to the Members of Schroders Capital Global Innovation Trust plc
continued
a distributable reserve. We reviewed the legal advice sought by
the Directors, the accounting treatment to rectify the
non-compliance and the disclosures made within the annual
report and financial statements to conclude on the matter.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Other matters we are required to address
–
Following the recommendation from the Audit, Risk and
Valuation Committee, we were appointed by the Company on
21 June 2023 to audit the financial statements for the year ended
31 December 2023 and subsequent financial periods.
The period of total uninterrupted engagement including
previous renewals and reappointments is one year, covering the
year ended 31 December 2023.
–
The audit opinion is consistent with the additional report to the
Audit, Risk and Valuation Committee.
Use of our report
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as
a body, for our audit work, for this report, or for the opinions we
have formed.
Denise Davidson
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Edinburgh
27 March 2024
Schroders Capital Global Innovation Trust plc
65
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
Income Statement
for the year ended 31 December 2023
2023
2022
Revenue
Capital
Total
Revenue
Capital
Total
Note
£’000
£’000
£’000
£’000
£’000
£’000
Losses on investments held at fair value through profit or loss
–
(32,015)
(32,015)
–
(175,669)
(175,669)
Net foreign currency gains
–
42
42
–
583
583
Income from investments
2
784
–
784
479
–
479
Gross return/(loss)
784
(31,973)
(31,189)
479
(175,086)
(174,607)
Management fee
3
(1,252)
–
(1,252)
(1,989)
–
(1,989)
Administrative expenses
4
(1,341)
–
(1,341)
(1,237)
–
(1,237)
Net loss before finance costs and taxation
(1,809)
(31,973)
(33,782)
(2,747)
(175,086)
(177,833)
Finance costs
5
(16)
–
(16)
(304)
–
(304)
Net loss before taxation
(1,825)
(31,973)
(33,798)
(3,051)
(175,086)
(178,137)
Taxation
6
–
–
–
–
–
–
Net loss after taxation
(1,825)
(31,973)
(33,798)
(3,051)
(175,086)
(178,137)
Loss per share (pence)
7
(0.20)
(3.57)
(3.77)
(0.34)
(19.30)
(19.64)
The “Total” column of this statement is the profit and loss account of the Company. The “Revenue” and “Capital” columns represent
supplementary information prepared under guidance issued by The Association of Investment Companies. The Company has no other items of
other comprehensive income, and therefore the net loss on ordinary activities after taxation is also the total comprehensive income for the year,
therefore no separate Statement of Comprehensive Income has been prepared.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the
year.
The notes on pages 69 to 81 form an integral part of these accounts.
Called-up
Capital
share
Share
redemption
Special
Capital
Revenue
Note
capital
premium
reserve
reserve
reserves
reserve
Total
At 31 December 2021
9,086
891,017
–
–
(439,105)
(24,127)
436,871
Repurchase and cancellation of the Company’s
own shares
(44)
–
44
–
(812)
–
(812)
Net loss after taxation
–
–
-
–
(175,086)
(3,051)
(178,137)
At 31 December 2022
9,042
891,017
44
–
(615,003)
(27,178)
257,922
Cancellation of share premium
1
–
(891,017)
–
891,017
–
–
–
Repurchase and cancellation of the Company’s
own shares
(469)
–
469
(7,872)
812
–
(7,060)
Net loss after taxation
–
–
–
–
(31,973)
(1,825)
(33,798)
At 31 December 2023
11,12
8,573
–
513
883,145
(646,164)
(29,003)
217,064
1
Following an application to the Court on 18 July 2023, the Company has cancelled its share premium and converted it to a distributable reserve.
The notes on pages 69 to 81 form an integral part of these accounts.
Statement of Changes in Equity
for the year ended 31 December 2023
66
Schroders Capital Global Innovation Trust plc
Schroders Capital Global Innovation Trust plc
67
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
Statement of Financial Position
at 31 December 2023
2023
2022
Note
£’000
£’000
Fixed assets
Investments held at fair value through profit or loss
8
210,093
242,504
Current assets
Debtors
9
5,511
160
Cash and cash equivalents
9
2,913
16,122
8,424
16,282
Current liabilities
Creditors: amounts falling due within one year
10
(1,453)
(864)
Net current assets
6,971
15,418
Total assets less current liabilities
217,064
257,922
Net assets
217,064
257,922
Capital and reserves
Called-up share capital
11
8,573
9,042
Share premium
12
–
891,017
Capital redemption reserve
12
513
44
Special reserve
12
883,145
–
Capital reserves
12
(646,164)
(615,003)
Revenue reserve
12
(29,003)
(27,178)
Total equity shareholders’ funds
217,064
257,922
Net asset value per share (pence)
13
25.32
28.52
These accounts were approved and authorised for issue by the Board of Directors on 27 March 2024 and signed on its behalf by:
Tim Edwards
Chair
The notes on pages 69 to 81 form an integral part of these accounts.
Registered in England and Wales as a public company limited by shares
Company registration number: 09405653
68
Schroders Capital Global Innovation Trust plc
2023
2022
£’000
£’000
Operating activities
Net loss before finance costs and taxation
(33,782)
(177,833)
Adjustments for
Capital loss before taxation
31,973
175,669
(Increase)/decrease in debtors
(134)
11
Increase/(decrease) in creditors
514
(316)
Net cash outflow from operating activities
(1,429)
(2,469)
Investing activities
Purchases of investments
(35,999)
(17,422)
Sales of investments
31,178
40,148
Net cash (outflow)/inflow from investing activities
(4,821)
22,726
Financing activities
Repurchase and cancellation of the Company’s own shares
(6,985)
(812)
Finance costs
(16)
(400)
Bank loan repaid
–
(22,000)
Net cash outflow from financing activities
(7,001)
(23,212)
Change in cash and cash equivalents
(13,251)
(2,955)
Cash and cash equivalents at the beginning of the year
16,122
19,077
Exchange movements
42
–
Cash and cash equivalents at the end of the year
2,913
16,122
Dividends received during the year amounted to £311,000 (2022: £425,000) and deposit interest receipts amounted to £376,000 (2022:
£15,000).
The notes on pages 69 to 81 form an integral part of these accounts.
Cash Flow Statement
for the year ended 31 December 2023
Schroders Capital Global Innovation Trust plc
69
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
1.
Accounting Policies
(a)
Basis of accounting
Schroders Capital Global Innovation 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, except for certain financial information required by
paragraph 82(c) regarding unquoted holdings with a value greater than 5% of the portfolio or included in the top 10, where information is
not publicly available. All of the Company’s operations are of a continuing nature.
The accounts have been prepared on a going concern basis with investments at fair value through profit or loss. The Directors believe that the
Company has adequate resources to continue operating for the period to 31 March 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 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 revenue and cashflow forecasts and the liquidity of the Company’s investments. The Directors
have also considered any potential impact of climate change on the viability of the Company. Further details of directors’ considerations
regarding this are given in the Chair’s Statement, Investment Managers’ Review, Going Concern Statement, Viability Statement and under the
principal and emerging risks and uncertainties.
In preparing these accounts the Directors have considered the impact of climate change on the value of the Company’s investments. The Board
has concluded that, for investments which are valued using quoted bid prices in active markets, the fair value reflects market participants’ view
of climate change risk. Unquoted investments are valued in accordance with the policy detailed below, using techniques which also reflect each
investment’s exposure to climate change risk.
The Company has adopted the provisions of Sections 11 and 12 of FRS 102 for measuring and disclosing its financial instruments.
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 31 December 2022.
Significant judgements, estimates and assumptions have been required in valuing the Company’s investments and these are detailed below.
(b)
Use of judgements, estimates and assumptions
The preparation of the accounts requires management to make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The
resulting accounting judgements, estimates and assumptions will, by definition, seldom equal the related actual results.
Judgements, estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods affected. The key estimates in the accounts are the determination of the fair
values of the unquoted investments by the Investment Manager for consideration by the Directors.
These estimates are key, as they significantly impact the valuation of the unquoted investments at the year end. The fair valuation process
involves estimation using subjective inputs that are unobservable (for which market data is unavailable). The key judgements, estimates and
assumptions are described in note 17 on pages 76 and 77.
Fair value estimates are cross-checked to alternative estimation methods where possible to improve the robustness of the estimates. The risk of
an over or under estimation of fair values is greater when methodologies are applied using more subjective inputs.
(c)
Valuation of investments
Investments that are quoted on an exchange are valued using closing bid prices. If there has been no material trading in an investment, it will
be valued using the process for unquoted investments, described below.
Investments in shares that are not quoted on any Stock Exchange (unquoted investments) represent a significant part of the Company’s
portfolio. Such investments are held at fair value, which requires significant estimation in concluding on their fair value. The Company’s AIFM
conducts valuations for the portfolio holdings on a quarterly basis. Each quarter, the Audit, Risk and Valuation Committee reviews a report on
the revaluations undertaken on the unquoted holdings during the period and challenges the considerations and key assumptions made, where
appropriate, to ensure that the valuations are reliable. Investments in shares that are not quoted on any stock exchange (unquoted
investments) represent a significant part of the Company’s portfolio and may include common stock, preferred stock, warrants and other
option-like instruments. Those investments are carried at their estimated fair values, consistent with the UK accounting convention FRS 102 and
the recommendations on best practices of the International Private Equity and Venture Capital (“IPEV”) guidelines issued in December 2022. The
following factors will be considered in determining the fair value of an unquoted asset:
(i)
Investments which are not traded in an active market are valued using the price of a recent investment, where there are no factors
observed to suggest a material change in fair value.
(ii)
Where (i) is no longer considered appropriate, investments are valued at the price used in a material arm’s length transaction by an
independent third party, and where there is no impact on the rights of existing shareholders.
(iii)
In the absence of (ii), one of the following methods may be used:
a.
Revenue, Gross Profit or EBITDA multiples, based on listed investments and private market transactions in the relevant sector,
adjusted for differences such as lack of marketability, size and growth profile.
b.
Recent transaction prices adjusted for the company’s performance against key milestones and the complexity of the capital structure.
Notes to the Accounts
1.
Accounting Policies continued
(c)
Valuation of investments continued
c.
Probability-weighted expected return scenarios, discounted at a risk-adjusted rate of return.
d.
Discounted cash flows analyses based on estimate future cash flows with an appropriate discount rate.
e.
Option price modelling.
(iv)
Investments in funds (which are invariably comprised of unquoted investments) are valued using the NAV per unit with an appropriate
discount or premium applied to arrive at a unit price.
Where models are used in valuing an investment, significant judgements are made in estimating the various inputs into the models and
recognising the sensitivity of such estimates, especially in early-stage pre-revenue enterprises. Examples of the factors where significant
judgement is made include, but are not limited to – the probability assigned to the relative success or failure of an enterprise; the probable
future outcome paths; discount rates; growth rates; terminal value; selection of appropriate market comparable companies, the reliability of
future revenue and growth forecasts and the likely exit scenarios for the investor company, for example, IPO or trade sale. In making
judgements in regard to the probability of an investee outcome, it must be noted that due to the nature of the investee company’s activity, its
future outcome may, to a greater or lesser extent, be binary, for example, if an investee company is developing one particular drug and that fails
its required trials then the outcome may be terminal for that enterprise. It should be noted that the most significant event that will drive
valuation change in investee companies are company-specific events that would give rise to a valuation inflexion point (known also as a
‘triggering event’). An example of a material inflexion point in a bio-pharma company would be the successful completion of a drug trial or its
approval by a regulatory authority.
These valuation methods may lead to a company being valued on a suitable price-earnings ratio to that company’s historic, current or forecast
post-tax earnings before interest and amortisation. The ratio used will be based on a comparable sector but the resulting value will be adjusted
to reflect points of difference identified when compared to the market sector (in which the investment would reside if it were it listed) including,
inter alia, a lack of marketability.
(d)
Accounting for reserves
Gains and losses on sales of investments are included in the Income Statement and in capital reserves within “Gains and losses on sales of
investments”. Increases and decreases in the valuation of investments held at the year end are included in the Income Statement and in capital
reserves within “Net movement in investment holding gains and losses”.
Foreign exchange gains and losses on cash and deposit balances are included in the Income Statement and in capital reserves.
Revenue reserve
The revenue reserve reflects all income and expenditure recognised in the revenue column of the Income Statement and any surplus is
distributable by way of dividend.
(e)
Income
Dividends receivable are included in revenue on an ex-dividend basis except where, in the opinion of the board, the dividend is capital in nature,
in which case it is included in capital.
Overseas dividends are included gross of any withholding tax.
Deposit interest outstanding at the year end is calculated and accrued on a time apportionment basis using market rates of interest.
(f)
Expenses
All expenses are accounted for on an accruals basis. Expenses are allocated wholly to revenue, except that:
–
Any performance fee is charged wholly to capital.
–
Expenses incidental to the purchase or sale of an investment are charged to capital. These expenses are commonly referred to as
transaction costs and mainly comprise brokerage commission. Details of transaction costs are given in note 8 on page 74.
(g)
Finance costs
Finance costs, comprising loan and overdraft interest, are charged wholly to revenue.
(h)
Financial instruments
Cash and cash equivalents may comprise cash and demand deposits which are readily convertible to a known amount of cash and are subject
to insignificant risk of changes in value.
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 the transaction price and subsequently at amortised cost. They are recorded at the proceeds
received net of direct issue costs.
(i)
Taxation
The tax charge for the year includes a provision for all amounts expected to be received or paid. Deferred tax is provided on all timing
differences that have originated but not reversed by the accounting date. Deferred tax liabilities are recognised for all taxable timing differences
but deferred tax assets are only recognised to the extent that it is probable that taxable profits will be available against which those timing
differences can be utilised. Deferred tax is measured at the tax rate which is expected to apply in the periods in which the timing differences are
expected to reverse, based on tax rates that have been enacted or substantively enacted at the balance sheet date and is measured on an
undiscounted basis.
70
Schroders Capital Global Innovation Trust plc
Notes to the Accounts
continued
Schroders Capital Global Innovation Trust plc
71
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
(j)
Value added tax (“VAT”)
Expenses are disclosed inclusive of any related irrecoverable VAT.
(k)
Foreign currency
In accordance with FRS 102, the Company is required to determine a functional currency, being the currency in which the Company
predominantly operates. The board, having regard to the currency of the Company’s share capital and the predominant currency in which its
shareholders operate, has determined that sterling is the functional currency and the currency in which the accounts are presented.
Transactions denominated in foreign currencies are converted at actual exchange rates as at the date of the transaction. Monetary assets,
liabilities and equity investments held at fair value, denominated in foreign currencies at the year end are translated at the rates of exchange
prevailing at close of business on the accounting date.
(l)
Share issues
Shares issued are recognised based on the proceeds or fair value received, with the excess of the amount received over their nominal value
being credited to the share premium account. Direct issue costs are deducted from share premium.
(m)
Repurchases of shares for cancellation
The cost of repurchasing the Company’s own shares including the related stamp duty and transactions costs is charged to the “Special reserve”
in the current year, and dealt with in the Statement of Changes in Equity. These costs were charged to the “Capital Reserve” in the prior year.
Share repurchase transactions are accounted for on a trade date basis. The nominal value of share capital repurchased and cancelled is
transferred out of “Called-up share capital” and into “Capital redemption reserve”.
2.
Income
2023
2022
£’000
£’000
Income from investments
UK dividends
256
425
Interest from debt securities
166
20
Bank interest
362
34
784
479
3.
Management fee
2023
2022
£’000
£’000
Management fee
1,252
1,989
1,252
1,989
Under the terms of the AIFM agreement, the Manager is entitled to a management fee and a performance fee, subject to achieving
performance targets. Details of these calculations are set out in the Directors’ Report on page 47. No performance fee is payable for the current
or prior year and no provision is required at 31 December 2023.
Details of all transactions with the Manager are given in note 15 on page 76.
4.
Administrative expenses
2023
2022
£’000
£’000
Other administration expenses
1
632
529
Legal and professional fees
2
304
97
Valuation fees
3
21
275
Directors’ fees
4
196
186
Auditor’s remuneration
5
188
150
1,341
1,237
1
Prior year fee adjusted to split out legal and professional fee and include irrecoverable VAT on Auditors renumeration.
2
Legal and professional fees are disclosed on a separate line due to the size of the current years fee. The increase in fee is due to one off costs in relation to the
revolving credit facility and the cancellation of the share premium reserve.
3
The valuation fees have reduced significantly in the current year due to an over accrual at the prior year end.
4
Details payable to the Directors are given in the Directors’ Remuneration Report on pages 55 to 57.
5
No amounts are payable to the Auditor for non-audit services. In the prior year the audit fee was disclosed including VAT amounting to £30,000. For consistency
with industry practice, the audit fee in the table above is shown excluding VAT with any irrecoverable VAT included as part of other administrative expenses and the
comparative figure reflects this change.
5.
Finance costs
2023
2022
£’000
£’000
Interest on bank loans and overdrafts
16
304
16
304
6.
Taxation
(a)
Analysis of tax charge for the year
2023
2022
Revenue
Capital
Total
Revenue
Capital
Total
£’000
£’000
£’000
£’000
£’000
£’000
Taxation on ordinary activities
–
–
–
–
–
–
The Company has no corporation tax liability for the year ended 31 December 2023 (2022: nil).
(b)
Factors affecting tax charge for the year
2023
2022
Revenue
Capital
Total
Revenue
Capital
Total
£’000
£’000
£’000
£’000
£’000
£’000
Net loss on ordinary activities before taxation
(1,825)
(31,973)
(33,798)
(3,051)
(175,086)
(178,137)
Net loss on ordinary activities before taxation multiplied by the
Company’s applicable rate of corporation tax for the year
of 23.5% (2022: 19.0%)
(429)
(7,514)
(7,943)
(580)
(33,266)
(33,846)
Effects of:
Capital loss on investments
–
7,514
7,514
–
33,266
33,266
UK dividends which are not taxable
(60)
–
(60)
(81)
–
(81)
Disallowed expenses
7
–
7
24
–
24
Unrelieved loan relationship deficit
–
–
–
48
–
48
Unrelieved management expenses
482
–
482
589
–
589
Taxation on ordinary activities
–
–
–
–
–
–
(c)
Deferred taxation
The Company has an unrecognised deferred tax asset £8,042,000 (2022: £7,529,000) arising from unutilised tax losses of £32,169,000 (2022:
£30,117,000) based on a prospective corporation tax rate of 25.0% (2022: 25%). In its 2021 budget, the government announced that the main
rate of corporation tax would increase to 25% for the fiscal year beginning on 1 April 2023.
The deferred tax asset has arisen due to the cumulative excess of deductible expenses over taxable income. Given the composition of the
Company’s portfolio, it is not likely that this asset will be utilised in the foreseeable future and therefore no asset has been recognised in the
accounts.
Given the Company’s intention to meet the conditions required to retain its status as an Investment Trust Company, no provision has been
made for deferred tax on any capital gains or losses arising on the revaluation or disposal of investments.
7.
Return/(loss) per share
2023
2022
£’000
£’000
Revenue loss
(1,825)
(3,051)
Capital loss
(31,973)
(175,086)
Total loss
(33,798)
(178,137)
Weighted average number of shares in issue during the year
895,075,078
907,291,950
Revenue loss per share
(0.20)
(0.34)
Capital loss per share
(3.57)
(19.30)
Loss per share (pence)
(3.77)
(19.64)
The basic and diluted loss per share is the same because there are no dilutive instruments in issue.
72
Schroders Capital Global Innovation Trust plc
Notes to the Accounts
continued
Schroders Capital Global Innovation Trust plc
73
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
8.
Investments held at fair value through profit or loss
(a)
Movement in investments
2023
2022
£’000
£’000
Opening book cost
581,253
622,857
Opening investment holding losses
(338,749)
(181,958)
Opening fair value
242,504
440,899
Purchases at cost
35,999
17,422
Sales proceeds
(36,395)
(40,148)
Losses on investments held at fair value through profit or loss
(32,015)
(175,669)
Closing fair value
210,093
242,504
Closing book cost
553,693
581,253
Closing investment holding losses
(343,600)
(338,749)
Closing fair value
210,093
242,504
The Company received £36,395,000 (2022: £40,148,000) from investments sold in the year. The book cost of the investments when they were
purchased was £63,560,000 (2022: £59,026,000). These investments have been revalued over time and, until they were sold, any unrealised
gains/losses were included in the fair value of the investments.
(b)
Unquoted investments, including investments quoted in inactive markets
Material revaluations of unquoted investments during the year 2023
Opening
Closing
valuation at
valuation at
31 December
Valuation
Purchases/
31 December
2022
adjustment
(disposals)
2023
£’000
£’000
£’000
£’000
Atom Bank
31,686
(8,581)
–
23,105
Ada Health
7,122
2,516
–
9,638
Revolut LLP
5,436
2,452
–
7,888
Federated Wireless
11,227
(4,835)
–
6,392
Kymab
1,831
4,539
–
6,370
Genomics
8,854
(3,715)
–
5,139
BenevolentAI
11,935
(9,679)
(80)
2,176
AMO Pharma
16,408
(15,058)
–
1,350
Material revaluations of unquoted investments during the year 2022
Opening
Closing
valuation at
valuation at
31 December
Valuation
Purchases/
31 December
2021
adjustment
(disposals)
2022
£’000
£’000
£’000
£’000
Atom Bank
46,209
(14,523)
–
31,686
AMO Pharma
11,668
4,740
–
16,408
BenevolentAI
28,484
(16,549)
–
11,935
Revolut LLP
10,115
(4,679)
–
5,436
Material disposals of unquoted investments during the year 2023
Gain based
Carrying
on carrying
value at
value at
31 December
Sales 31 December
Book cost
2022
Proceeds
2023
£’000
£’000
£’000
£’000
Tessian
4,806
3,928
5,217
1,289
8.
Investments held at fair value through profit or loss continued
(b)
Unquoted investments, including investments quoted in inactive markets continued
Material disposals of unquoted investments during the year 2022
Gain based
Carrying
on carrying
value at
value at
31 December
Sales 31 December
Book cost
2021
Proceeds
2022
£’000
£’000
£’000
£’000
Seedrs
10,470
11,272
12,000
728
Nexeon
1,059
7,788
1,552
(6,236)
(c)
Transaction costs
The following transaction costs, comprising stamp duty and brokerage commission, were incurred in the year:
2023
2022
£’000
£’000
On acquisitions
–
–
On disposals
10
8
10
8
9.
Current assets
\
2023
2022
Debtors
£’000
£’000
Securities sold awaiting settlement
5,217
–
Dividends and interest receivable
191
94
Other debtors
103
66
5,511
160
The Directors consider that the carrying amount of accrued income and debtors approximate to their fair value.
Cash and cash equivalents
The carrying amount of cash, amounting to £2,913,000 (2022: £16,122,000) represents its fair value.
10.
Creditors: amounts falling due within one year
2023
2022
Creditors: amounts falling due within one year
£’000
£’000
Repurchase and cancellation of the Company’s own shares awaiting settlement
75
–
Management fee payable
633
373
Other creditors and accruals
745
491
1,453
864
The Directors consider that the carrying amount of creditors falling due within one year approximates to their fair value.
11.
Called-up share capital
2023
2022
£’000
£’000
Ordinary shares of 1p each allotted, called up and fully paid:
Opening balance of 904,219,238 (2022: 908,639,238) shares
9,042
9,086
Repurchase and cancellation of 46,859,212 (2022: 4,420,000) shares
(469)
(44)
Closing balance of 857,360,026 (2022: 904,219,238) shares
8,573
9,042
During the year, the Company made market purchases of 46,859,212 of its own shares, nominal value £469,000, for cancellation, representing
5.2% of the shares outstanding at the beginning of the year. The total consideration paid for these shares amounted to £7,060,000. The reason
for these purchases was to seek to manage the volatility of the share price discount to NAV per share.
74
Schroders Capital Global Innovation Trust plc
Notes to the Accounts
continued
Schroders Capital Global Innovation Trust plc
75
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
12.
Reserves
Capital reserves
Losses on
Investment
Share
Capital
Special
sales of
holding
Revenue
premium
1
redemption
2
reserve
3
investments
4
losses
5
reserve
6
£’000
£’000
£’000
£’000
£’000
£’000
At 31 December 2022
891,017
44
–
(275,594)
(339,409)
(27,178)
Losses on sales of investments based on historic cost
–
–
–
(27,164)
–
–
Net movement in investment holding gains and losses
–
–
–
–
(4,851)
–
Repurchase and cancellation of the Company’s own shares
–
469
(7,872)
812
–
–
Exchange gains
–
–
–
42
–
–
Cancellation of share premium
(891,017)
–
891,017
–
–
–
Retained revenue loss for the year
–
–
–
–
–
(1,825)
At 31 December 2023
–
513
883,145
(301,904)
(344,260)
(29,003)
Capital reserves
Losses on
Investment
Share
Capital
Special
sales of
holding
Revenue
premium
1
redemption
2
reserve
3
investments
4
losses
5
reserve
6
£’000
£’000
£’000
£’000
£’000
£’000
At 31 December 2021
891,017
–
–
(256,487)
(182,618)
(24,127)
Losses on sales of investments based on historic cost
–
–
–
(18,878)
–
–
Net movement in investment holding gains and losses
–
–
–
–
(156,791)
–
Repurchase and cancellation of the Company’s own shares
–
44
–
(812)
–
–
Exchange gains
–
–
–
583
–
–
Retained revenue loss for the year
–
–
–
–
–
(3,051)
At 31 December 2022
891,017
44
–
(275,594)
(339,409)
(27,178)
The Company’s articles of association permit dividend distributions out of realised capital profits.
1
The share premium reserve 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. Following an application to the Court on 18 July 2023, the Company has cancelled its share premium and converted it
to a distributable reserve.
2
The capital redemption reserve represents the accumulated nominal value of shares repurchased for cancellation. This reserve is not distributable.
3
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.
4
This is a realised (distributable) capital reserve and a positive balance may be used to repurchase the Company’s own shares or distributed as dividends. However,
the Company is not currently in a position to make such a distribution as the balance is negative.
5
This reserve may include some holding gains on liquid investments (which may be deemed to be realised) and other amounts which are unrealised. An analysis has
not been made between those amounts that are realised (and may be distributed as dividends or used to repurchase the Company’s own shares) and those that
are unrealised. The Company is not currently in a position to make any distributions due to total net negative balances on its distributable reserves.
6
A positive balance on the revenue reserve may be distributed as dividends or used to repurchase the Company’s own shares.
13.
Net asset value per share
2023
2022
Net assets (£’000)
217,064
257,922
Shares in issue at the year end
857,360,026
904,219,238
Net asset value per share (pence)
25.32
28.52
14.
Uncalled capital commitments
At 31 December 2023, the Company had uncalled capital commitments amounting to £3,275,000 (2022: £5,121,000) in respect of follow-on
investments, which may be called by investee companies, subject to their achievement of certain milestones and objectives.
15.
Transactions with the Manager and Alternative Investment Fund Manager (AIFM)
Under the terms of the AIFM Agreement, the Manager is entitled to receive a management fee and a company secretarial fee. Details of the
basis of the management fee calculation are given in the Directors’ Report on page 47. A management fee amounting to £1,252,000 (2022:
£1,989,000) is payable to Schroder Investment Management Limited for the year ended 31 December 2023, of which £633,000 (2022:
£373,000) was outstanding at the year end.
Fees amounting to £165,000 (2022: £41,000) were payable to Schroder Unit Trusts Limited for services as AIFM, following its appointment as
AIFM with effect from 1 October 2022, of which £206,000 (2022: £41,000) was outstanding at the year end.
There were no further fees paid to Link Fund Solutions Limited for services as AIFM (2022: £65,000).
Under the terms of the Alternative Investment Management Agreement dated 29 September 2022, Schroder Unit Trusts Limited may reclaim
from the Company certain expenses which it has paid on behalf of the Company to HSBC in connection with accounting and administrative
services provided to the Company. These charges amounted to £128,000 (2022: £17,000 for the three months ended 31 December 2022), of
which £60,000 (2022: £17,000) was outstanding at the year end.
No Director of the Company served as a Director of any member of the Schroder Group or its affiliates at any time during the year.
16.
Related party transactions
Details of the remuneration payable to Directors are given in the Directors’ Remuneration Report on page 56 and details of Directors’
shareholdings are given in the Directors’ Remuneration Report on page 57. Details of transactions with the Manager, the AIFM and its
associated companies are given in note 15 above. There have been no other transactions with related parties during the year (2022: nil).
17.
Disclosures regarding financial instruments measured at fair value
The Company’s financial instruments within the scope of FRS 102 that are held at fair value comprise its investment portfolio and derivative
financial instruments.
FRS 102 requires that financial instruments held at fair value are categorised into a hierarchy consisting of the three levels below. A fair value
measurement is categorised in its entirety on the basis of the lowest level input that is significant to the fair value measurement.
Level 1 – valued using unadjusted quoted prices in active markets for identical assets.
Level 2 – valued using observable inputs other than quoted prices included within Level 1.
Level 3 – valued using inputs that are unobservable.
Details of the Company’s policy for valuing investments and derivative instruments are given in note 1(c) on page 70 and 1(g) on page 70.
Level 3 investments have been valued in accordance with note 1(c)(i) - (iv).
The primary technique for investments with no expected short-term earnings or where the investment outcome is based on a discrete set of
(often binary) scenarios and for which investments are funded for, is the milestone approach. This is typically the case for pre-revenue and
clinical life science investments. The milestone approach is based on a set of agreed milestones at the time of the initial investment. These
include various measurements depending on the type of investment, the industry as well as the key drivers of the investment company.
Progress against these milestones is measured at each valuation date and drives fair value changes. If a milestone event was achieved or if it
was failed to achieve, a variety of valuation techniques may be used to quantify the resulting fair value impact.
The primary technique for investments that are producing either maintainable revenues or earnings is the market approach. This approach
determines the fair value of a company based on the market price of selected comparable companies or recent transactions (or a combination
of both) and its relationship to relevant performance measures with the assumption that the relationship between the market price and the
financial performance of the comparable company is similar. The relevant multiples can be subject to adjustments for general qualitative
differences between the underlying portfolio company and the comparable companies. These adjustments may include, but are not limited to,
differences due to size, marketability, growth profile or the market size of end-markets.
The primary technique for investments that have not yet or have just commenced to produce revenues and that possess material future
earnings potential is the Probability-Weighted-Expected-Return-Method (“PWERM”). It involves estimating the expected cash flows of the
company under different scenarios, such as best-case, base-case, and worst-case scenarios. Each scenario is assigned a probability based on
the likelihood of its occurrence. The expected cash flows are then discounted back to their present value using an appropriate discount rate,
which reflects the risk and uncertainty associated with each scenario. The PWERM approach also considers other factors such as changes in
market conditions, industry trends, competitive landscape, regulatory changes, and other macroeconomic factors. Adjustments are made to the
cash flow projections and discount rates to reflect these factors and their potential impact on the company’s value.
Once a company’s value is established, it is allocated to the company’s various share classes. Early-stage, venture and growth investments
typically possess complex capital structures with varying rights and economic preferences attached to each share class. To assess the relative
value of these individual share classes, either a qualitative scenario-analysis of the expected ultimate pay-off profile of each share class, or an
option pricing model is utilised. The relative value of each share class is dependent on the expected time to exit, volatility, and other relevant
quantitative or qualitative parameters.
76
Schroders Capital Global Innovation Trust plc
Notes to the Accounts
continued
Schroders Capital Global Innovation Trust plc
77
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
The following table provides an overview of the select (primary) valuation techniques:
% of
Range of
unquoted
Valuation techniques
Key input
metric utilised
portfolio
Market approach
Arm’s length transaction
Premium/(discount) to last negotiated price
(33.9)% to 7.3%
9.7
Adjusted transaction price
28.2
Multiples-based
Multiple of Sales
7.0x to 9.5x
33.3
Multiple of Gross Profit
9.0x to 13.6x
Milestone approach
Discount rate
17.5% to 35.0%
8.3
Probability-weighted-expected return
13.5
Third-party fund NAV
N/A
N/A
7.5
N/A
No range utilised.
At 31 December, the Company’s investment portfolio and any derivative financial instruments were categorised as follows:
2023
Level 1
Level 2
Level 3
Total
£’000
£’000
£’000
£’000
Investments in equities – quoted
54,603
9,733
2,176
66,512
– unquoted
–
–
143,581
143,581
Total
54,603
9,733
145,757
210,093
The Level 2 asset relates to the holding in Schroders Special Situations - Sterling Liquidity Plus Fund. BenevolentAI is quoted, but the market is
inactive. Thus its valuation has been determined in accordance with the process followed for unquoted assets and included in Level 3 above.
2022
Level 1
Level 2
Level 3
Total
£’000
£’000
£’000
£’000
Investments in equities – quoted
83,711
–
11,935
95,646
– unquoted
–
–
146,858
146,858
Total
83,711
–
158,793
242,504
Movements in fair value measurements included in Level 3 during the year are as follows:
2023
2022
£’000
£’000
Opening book cost
458,690
482,416
Opening investment holding losses
(299,897)
(263,548)
Opening valuation
158,793
218,868
Purchases at cost
22,759
17,422
Sales proceeds
(6,056)
(19,289)
Transfer between Level 3 and Level 1
–
(19,152)
Net movement in investment holding gains and losses
(29,739)
(39,056)
Closing valuation
145,757
158,793
Closing book cost
473,660
458,690
Closing investment holding losses
(327,903)
(299,897)
Total level 3 investments held at fair value through profit or loss
145,757
158,793
The Company received £6,056,000 (2022: £19,289,000) from Level 3 investments sold in the year. The book cost of the investments when they
were purchased was £7,789,000 (2022: £20,384,000). These investments have been revalued over time and, until they were sold, any unrealised
gains/losses were included in the fair value of the investments.
18.
Financial instruments’ exposure to risk and risk management policies
The investment objective is set out on the inside front cover of this report. In pursuing this objective, 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 currency risk, interest rate risk and market 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 objectives, policies and processes for managing the risks and the methods used to measure the risks that are set out below, have not
changed from those applying in the comparative year.
The Company’s classes of financial instruments may comprise the following:
–
investments in shares of quoted and unquoted companies which are held in accordance with the Company’s investment objective;
–
short-term debtors, creditors and cash arising directly from its operations; and
–
forward foreign currency contracts, the purpose of which is to manage the currency risk arising from the Company’s investment
activities.
(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 three elements: currency risk, interest rate risk and other price risk. Information to enable an evaluation of the nature and
extent of these three elements of market risk is given in parts (i) to (iii) of this note, together with sensitivity analyses where appropriate. The
board reviews and agrees policies for managing these risks and these policies have remained unchanged from those applying in the
comparative year. 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)
Currency risk
Certain of the Company’s assets, liabilities and income are denominated in currencies other than sterling, which is the Company’s functional
currency and the presentational currency of the accounts. As a result, movements in exchange rates will affect the sterling value of those items.
Management of currency risk
The AIFM monitors the Company’s exposure to foreign currencies on a daily basis and reports to the Board, which meets on at least four
occasions each year. The Manager measures the risk to the Company of the foreign currency exposure by considering the effect on the
Company’s net asset value and income of a movement in the rates of exchange to which the Company’s assets, liabilities, income and expenses
are exposed.
Income denominated in foreign currencies is converted into sterling on receipt
It is currently not the Company’s policy to hedge against currency risk, but the Manager may, with the board’s consent and oversight, hedge
against specific currencies, depending on their longer term view.
Foreign currency exposure
The fair value of the Company’s monetary items that have foreign currency exposure at 31 December are shown below.
2023
Norwegian
Swiss
US
Euro
Krone
Francs
Dollars
Total
£’000
£’000
£’000
£’000
£’000
Cash and cash equivalents
11
–
3
583
597
Investments held at fair value through profit or loss
22,051
–
6,997
70,255
99,303
Total net foreign currency exposure
22,062
–
7,000
70,838
99,900
2022
Norwegian
Swiss
US
Euro
Krone
Francs
Dollars
Total
£’000
£’000
£’000
£’000
£’000
Cash and cash equivalents
6
–
–
3,618
3,624
Investments held at fair value through profit or loss
27,083
3,781
7,460
62,542
100,866
Total net foreign currency exposure
27,089
3,781
7,460
66,160
104,490
The above year end amounts are broadly representative of the exposure to foreign currency risk during the current and comparative year.
Foreign currency sensitivity
The following tables illustrate the sensitivity of net profit for the year and net assets with regard to the Company’s monetary financial assets and
financial liabilities and exchange rates. The sensitivity analysis is based on the Company’s foreign and non-monetary currency financial
instruments held at each accounting date and assumes a 10% (2022: 10%) appreciation or depreciation in sterling against all the currencies to
which the Company is exposed, which is considered to be a reasonable illustration based on the volatility of exchange rates during the year.
78
Schroders Capital Global Innovation Trust plc
Notes to the Accounts
continued
Schroders Capital Global Innovation Trust plc
79
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
If sterling had weakened by 10% this would have had the following effect:
2023
2022
£’000
£’000
Income Statement – return after taxation
Revenue return
17
–
Capital return
9,990
10,449
Total return after taxation
10,007
10,449
Net assets
10,007
10,449
Conversely if sterling had strengthened by 10% this would have had the following effect:
2023
2022
£’000
£’000
Income Statement – return after taxation
Revenue return
(17)
–
Capital return
(9,990)
(10,449)
Total return after taxation
(10,007)
(10,449)
Net assets
(10,007)
(10,449)
In the opinion of the directors, the above sensitivity analysis is broadly representative of the whole of the current and comparative year.
(ii)
Interest rate risk
Interest rate movements may affect the level of income receivable on cash balances and the interest payable on the bank overdraft 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 board would not normally expect gearing to
exceed 20% where gearing is defined as borrowings used for investment purposes, less cash, expressed as a percentage of net assets.
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:
2023
2022
£’000
£’000
Exposure to floating interest rates:
Cash and cash equivalents
2,913
16,122
The floating rate assets comprise cash deposits on call. Sterling cash deposits at call earn interest at floating rates based on Sterling Overnight
Index Average rates (“SONIA”).
The above year end amount may not be representative of the exposure to interest rates during the year, due to fluctuating cash balances.
Interest rate sensitivity
The following table illustrates the sensitivity of the return after taxation for the year and net assets to a 1.5% (2022: 1.5%) 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 which are exposed to interest rate changes held at the accounting date, with all other variables held constant.
2023
2022
1.5% increase
1.5% decrease
1.5% increase
1.5% decrease
in rate
in rate
in rate
in rate
£’000
£’000
£’000
£’000
Income statement – return after taxation
Revenue return
44
(44)
242
(242)
Capital return
–
–
–
–
Total return after taxation
44
(44)
242
(242)
Net assets
44
(44)
242
(242)
Given the increase in UK interest rates, the interest rate sensitivity has been updated to 1.5%. The prior year disclosure has been updated to
1.5% to show a direct comparison in the sensitivity. In the prior year report, the sensitivity was calculated using 1.0%, which was representative
of the market at 31 December 2022. As disclosed in the prior year annual report, an increase of 1.0% increased total return after taxation by
£161,000 (a decrease of 1.0% had an equal and opposite effect).
18.
Financial instruments’ exposure to risk and risk management policies continued
(a) Market risk
continued
(iii)
Market price risk
Market price risk includes changes in market prices, other than those arising from interest rate risk, which may affect the value of investments.
Management of market 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
countries and industry sectors. The investment management team has responsibility for monitoring the portfolio, which is selected in
accordance with the Company’s investment objective and seeks to ensure that individual stocks meet an acceptable risk/reward profile. The
Board may authorise the Manager to enter derivative transactions for the purpose of protecting the portfolio against falls in market prices.
Market price risk exposure
The Company’s total exposure to changes in market prices at 31 December comprises the following:
2023
2022
£’000
£’000
Investments held at fair value through profit or loss
210,093
242,504
The above data is broadly representative of the exposure to market price risk during the year.
Concentration of exposure to market price risk
A sector and geographical analysis of the Company’s investments is given on page 20. This shows a concentration of exposure to economic
conditions in the United Kingdom and to the Health Care sector. In addition, it is noted that as the Company’s holds six (2022: five) investments
amounting to approximately £28.6 million (2022: £61.5 million), representing 13.2% (2022: 23.8%) of NAV, whose valuation is deemed to be
potentially volatile, as it is dependent on a number of factors including future funding and meeting of anticipated milestones.
Market price risk sensitivity
The following table illustrates the sensitivity of the return after taxation for the year and net assets to an increase or decrease of 20% (2022:
20%) in the fair values of the Company’s investments. This level of change is considered to be a reasonable illustration based on observation of
current market conditions.
2023
2022
20% increase
20% decrease
20% increase
20% decrease
in fair value
in fair value
in fair value
in fair value
£’000
£’000
£’000
£’000
Income statement – return after taxation
Revenue return
–
–
–
–
Capital return
42,019
(42,019)
48,501
(48,501)
Total return after taxation and net assets
42,019
(42,019)
48,501
(48,501)
Percentage change in net asset value
19.4
(19.4)
18.8
(18.8)
(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 Company’s assets include readily realisable securities amounting to £64,336,000 (2022: £83,711,000), which can be sold to meet ongoing
funding requirements. Additionally, the Company has level 3 investments valued at £145,757,000 (2022: £158,793,000) which are illiquid, but
could be sold if required.
Liquidity risk exposure
Contractual maturities of financial liabilities, based on the earliest date on which payment can be required are as follows:
2023
2022
More than
More than
three
three
months
months
Three
but not
More
Three
but not
More
months
more than
than
months
more than
than
or less
one year
one year
Total
or less
one year
one year
Total
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Creditors: amounts falling due within
one year
Other creditors and accruals
1,453
–
–
1,453
864
–
–
864
Uncalled capital commitments
549
1,328
1,398
3,275
–
1,700
3,421
5,121
2,002
1,328
1,398
4,728
864
1,700
3,421
5,985
80
Schroders Capital Global Innovation Trust plc
Notes to the Accounts
continued
Schroders Capital Global Innovation Trust plc
81
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
(c)
Credit risk
Credit risk is the risk that the failure of the counterparty to a transaction to discharge its obligations under that transaction could result in loss to
the Company.
Management of credit risk
This risk is not significant and is managed as follows:
Portfolio dealing
The credit ratings of broker counterparties is monitored by the AIFM and limits are set on exposure to any one broker.
Exposure to the custodian
The custodian of the Company’s assets is HSBC Bank plc which has Long-Term Credit Ratings of AA- with Fitch and A1 with Moody’s. The
Company’s investments are held in accounts which are segregated from the custodian’s own trading assets. If the custodian were to become
insolvent, the Company’s right of ownership of its investments is clear and they are therefore protected. However the Company’s cash balances
are all deposited with the custodian as banker and held on the custodian’s balance sheet. Accordingly, in accordance with usual banking
practice, the Company will rank as a general creditor to the custodian in respect of cash balances.
Credit risk exposure
The amounts shown in the balance sheet under debtors and cash at bank and in hand represent the maximum exposure to credit risk at the
current and comparative year ends. No debtors are past their due date and none have been provided for. There has been no stock lending
during the year, or prior year.
(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.
19.
Analysis of changes in net debt
At
At
31 December
31 December
2022
Cashflows
2023
£’000
£’000
£’000
Cash and cash equivalents
Cash and cash equivalents
16,122
(13,209)
2,913
20.
Capital management policies and procedures
The Company’s capital is represented by its net assets and borrowings, which are managed to achieve the Company’s investment objective, as
set out on page 33. The Board, with the assistance of the Manager, monitors and reviews the broad structure of the Company’s capital on an
ongoing basis. The Board intends to make an amount equating to 25% of all net cash realisations from the portfolio inherited from the previous
portfolio manager received between now and the 2025 AGM available to be redeployed to make share repurchases by the Company.
The Board acknowledges that it is not possible to accurately forecast such realisations between now and 2025. In order to ensure that the
Company remains active in buying back its stock, the Board intends in any event to purchase shares equal to at least 5% of the Company’s
issued share capital in each of the calendar years 2023 and 2024.
The Company’s debt and capital structure comprises the following:
2023
2022
£’000
£’000
Equity
Called-up share capital
8,573
9,042
Reserves
208,491
248,880
217,064
257,922
Total debt and equity
217,064
257,922
21.
Post balance sheet events
On 14 March 2024, OcuTerra Therapeutics, Inc., one of the Company’s life-science investments, published study results for its lead therapeutic
candidate in Phase 2 of clinical development. The results from its Phase 2 clinical trial (DR:EAM), which evaluated the safety and efficacy of its
single clinical stage experimental therapeutic OTT166 (nesvategrast) in patients with diabetic retinopathy, demonstrated OTT166 to be safe and
well tolerated but the study did not meet its primary efficacy endpoint. The review of the full dataset from the DR:EAM trial to evaluate the future
of OTT166 is ongoing.
The Company has assessed this development and considers this to be a non-adjusting event for these financial statements. It currently
estimates a negative valuation adjustment to £1.5 million, a decrease of 1.5% on the 31 December 2023 net asset value. It is anticipated that the
full magnitude of the valuation adjustment will be reflected in the quarterly net asset value as of 31 March 2024.
82
Schroders
Capital Global Innovation Trust plc
83
Other
Information
(Unaudited)
Other Information (Unaudited)
Annual General Meeting – Recommendations
84
Notice of Annual General Meeting
85
Explanatory Notes to the Notice of Meeting
86
Definitions of Terms and Alternative
Performance Measures
88
Shareholder Information
90
Information about the Company
92
84
Schroders Capital Global Innovation Trust plc
Annual General Meeting – Recommendations
The Annual General Meeting (“AGM”) of the Company will be
held on Wednesday, 22 May 2024 at 12.30 pm. The formal Notice
of Meeting is set out on page 85.
The following information is important and requires your
immediate attention. If you are in any doubt about the action
you should take, you should consult an independent financial
adviser, authorised under the Financial Services and Markets
Act 2000. If you have sold or transferred all of your ordinary
shares in the Company, please forward this document with its
accompanying form of proxy at once to the purchaser or
transferee, or to the stockbroker, bank or other agent through
whom the sale or transfer was effected, for onward transmission
to the purchaser or transferee.
Ordinary business
Resolutions 1 to 9 are all ordinary resolutions. Resolution 1 is
a required resolution. Resolution 2 concerns the Directors’
Remuneration Report, which is set out on pages 55 to 57.
Resolution 3 invites shareholders to elect Lamia Baker as a Director
and resolutions 4 to 6 invites shareholders to re-elect each of the
other Directors for another year following the recommendations of
the Nomination and Remuneration Committee, set out on pages 53
and 54 (the Directors’ biographies are set out on pages 44 and 45).
Resolutions 7 and 8 concern the re-appointment and remuneration of
the Company’s Auditor, discussed in the Audit, Risk and Valuation
Committee Report on pages 49 to 51.
Special business
Resolution 9: Directors’ authority to allot shares
(ordinary resolution) and resolution 10: power to
disapply pre-emption rights (special resolution)
The Directors are seeking authority to allot a limited number of
unissued ordinary shares for cash without first offering them to
existing shareholders in accordance with statutory pre-emption
procedures.
Appropriate resolutions will be proposed at the forthcoming AGM and
are set out in full in the Notice of AGM. An ordinary resolution will be
proposed to authorise the Directors to allot shares up to a maximum
aggregate nominal amount of £839,860.03 (being 10% of the issued
share capital (excluding any shares held in treasury) as at the date of
the Notice of AGM).
A special resolution will be proposed to authorise the Directors to
allot shares up to a maximum aggregate nominal amount of
£839,860.03 (being 10% of the issued share capital as at the date of
the Notice of AGM) on a non pre-emptive basis. This authority
includes shares that the Company sells or transfers that have been
held in treasury. The Directors do not intend to allot ordinary shares
or sell treasury shares, on a non-pre-emptive basis, pursuant to this
authority other than to take advantage of opportunities in the market
as they arise and only if they believe it to be advantageous to the
Company as a whole. Shares issued or treasury shares reissued,
under this authority, will be at a price that is equal to or greater than
the Company’s NAV per share, plus any applicable costs, as at the
latest practicable date before the allotment of such shares.
If approved, both of these authorities will expire at the conclusion of
the AGM in 2025 unless renewed, varied or revoked earlier.
Resolution 11: authority to make market purchases of
the Company’s own shares (special resolution)
At the AGM held on 21 June 2023, the Company was granted
authority to make market purchases of up to 135,282,387 ordinary
shares of 1p each for cancellation or holding in treasury. 62,624,212
shares have been bought back under this authority and the Company
therefore has remaining authority to purchase up to 72,658,175
ordinary shares. This authority will expire at the forthcoming AGM.
The Directors believe it is in the best interests of the Company and its
shareholders to have a general authority for the Company to buy
back its ordinary shares in the market as they keep under review the
share price discount to NAV. A special resolution will be proposed at
the forthcoming AGM to give the Company authority to make market
purchases of up to 14.99% of the ordinary shares in issue as at the
date of the Notice of AGM (excluding treasury shares). The Directors
will exercise this authority to buy back shares only when the share
price is at a discount to the Company’s NAV and only if the Directors
consider that any purchase would be for the benefit of the Company
and its shareholders, taking into account relevant factors and
circumstances at the time. Any shares so purchased would be
cancelled or held in treasury for potential reissue.
If renewed, this authority will lapse at the conclusion of the AGM in
2025 unless renewed, varied or revoked earlier.
Resolution 12: notice period for general meetings
(special resolution)
Resolution 12 set out in the Notice of AGM is a special resolution and
will, if passed, allow the Company to hold general meetings (other
than Annual General Meetings) on a minimum notice period of
14 clear days, rather than 21 clear days as required by the Companies
Act 2006. The approval, if granted, will be effective until the
Company’s next AGM to be held in 2025. The Directors will only call
general meetings on 14 clear days’ notice when they consider it to be
in the best interests of the Company's shareholders and will only do
so if the Company offers facilities for all shareholders to vote by
electronic means and when the matter needs to be dealt with
expediently.
Recommendations
The Board considers that the resolutions relating to the above items
of business are in the best interests of shareholders as a whole.
Accordingly, the Board unanimously recommends to shareholders
that they vote in favour of the resolutions to be proposed at the
forthcoming AGM, as they intend to do in respect of their own
beneficial holdings.
Notice is hereby given that the AGM of Schroders Capital Global
Innovation Trust plc (“the Company”) will be held at 12.30 pm on
Wednesday, 22 May 2024 at 1 London Wall Place, London EC2Y 5AU
to consider the following resolutions, of which resolutions 1 to 9 will
be proposed as ordinary resolutions, and resolutions 10 to 12 will be
proposed as special resolutions:
1.
To receive the Directors’ Report and the audited accounts for the
year ended 31 December 2023.
2.
To approve the Directors’ Remuneration Report for the year
ended 31 December 2023.
3.
To elect Lamia Baker as a Director of the Company.
4.
To re-elect Tim Edwards as a Director of the Company.
5.
To re-elect Stephen Cohen as a Director of the Company.
6.
To re-elect Jane Tufnell as a Director of the Company.
7.
To re-appoint Ernst & Young LLP as Auditor to the Company.
8.
To authorise the Directors to determine the remuneration of
Ernst & Young LLP as Auditor to the Company.
9.
To consider, and if thought fit, pass the following resolution as an
ordinary resolution:
“THAT in substitution for all existing authorities the Directors be
generally and unconditionally authorised pursuant to
section 551 of the Companies Act 2006 (the “Act”) to exercise all
the powers of the Company to allot relevant securities (within the
meaning of section 551 of the Act) up to an aggregate nominal
amount of £839,860.03 (being 10% of the issued ordinary share
capital at the date of this Notice) for a period expiring (unless
previously renewed, varied or revoked by the Company in
general meeting) at the conclusion of the Annual General
Meeting of the Company in 2025, but that the Company may
make an offer or agreement which would or might require
relevant securities to be allotted after expiry of this authority and
the Board may allot relevant securities in pursuance of that offer
or agreement.”
10.
To consider and, if thought fit, to pass the following resolution as
a special resolution:
“THAT, subject to the passing of Resolution 9 set out above,
the Directors be and are hereby empowered, pursuant to
Section 571 of the Act, to allot equity securities (including any
shares held in treasury) (as defined in section 560(1) of the Act)
pursuant to the authority given in accordance with section 551 of
the Act by the said Resolution 9 and/or where such allotment
constitutes an allotment of equity securities by virtue of section
560(2) of the Act as if Section 561(1) of the Act did not apply to
any such allotment, provided that this power shall be limited to
the allotment of equity securities up to an aggregate nominal
amount of £839,860.03 (representing 10% of the aggregate
nominal amount of the share capital in issue at the date of this
Notice); and where equity securities are issued pursuant to this
power they will only be issued at a price which is equal or greater
than the Company’s NAV per share as at the latest practicable
date before the allotment; and provided that this power shall
expire at the conclusion of the next Annual General Meeting of
the Company but so that this power shall enable the Company to
make offers or agreements before such expiry which would or
might require equity securities to be allotted after such expiry.”
11.
To consider and, if thought fit, to pass the following resolution as
a special resolution:
“THAT the Company be and is hereby generally and
unconditionally authorised in accordance with Section 701 of the
Companies Act 2006 (the “Act”) to make market purchases (within
the meaning of Section 693 of the Act) of ordinary shares of
1p each in the capital of the Company (“Share”) at whatever
discount the prevailing market price represents to the prevailing
net asset value per Share provided that:
(a)
the maximum number of Shares which may be purchased is
125,895,017 representing 14.99% of the Company’s issued
ordinary share capital as at the date of this Notice;
(b)
the maximum price (exclusive of expenses) which may be
paid for a Share shall not exceed the higher of;
i)
105% of the average of the middle market quotations
for the Shares as taken from the London Stock
Exchange Daily Official List for the five business days
preceding the date of purchase; and
ii)
the higher of the last independent bid and the highest
current independent bid on the London Stock
Exchange;
(c)
the minimum price (exclusive of expenses) which may be
paid for a Share shall be 1p, being the nominal value per
Share;
(d)
this authority hereby conferred shall expire at the
conclusion of the next Annual General Meeting of the
Company in 2025 (unless previously renewed, varied or
revoked by the Company prior to such date);
(e)
the Company may make a contract to purchase Shares
under the authority hereby conferred which will or may be
executed wholly or partly after the expiration of such
authority and may make a purchase of Shares pursuant to
any such contract; and
(f)
any Shares so purchased will be cancelled or held in
treasury.”
To consider, and if thought fit, to pass the following resolution as
a special resolution:
12.
“THAT a general meeting, other than an Annual General Meeting,
may be called on not less than 14 clear days’ notice.”
Schroders Capital Global Innovation Trust plc
85
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
Notice of Annual General Meeting
By order of the Board
Registered Office:
Schroder Investment Management Limited
1 London Wall Place,
Company Secretary
London EC2Y 5AU
27 March 2024
Registered Number: 09405653
86
Schroders Capital Global Innovation Trust plc
1.
Ordinary shareholders are entitled to attend, ask questions and
vote at the meeting and to appoint one or more proxies, who
need not be a shareholder, as their proxy to exercise all or any of
their rights to attend, speak and vote on their behalf at the
meeting.
In order to be valid an appointment of proxy must be returned
by one of the following methods:
–
online by following the instructions for the Equiniti’s website
Shareview, by either logging in or creating an online
portfolio at www.shareview.co.uk.
–
in the case of CREST members, by utilising the CREST
electronic proxy appointment service in accordance with
the procedures set out below,
–
Institutional investors may be able to use the Proxymity
platform, please visit www.proxymity.io for further details.
If you wish to receive a hard copy paper proxy form, please
contact Equiniti Limited via one of the following methods:
–
Shareholder helpline: +44 (0) 800 032 0641 calls to 0800 are
charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom are charged at
the applicable international rate. If calling from outside the
UK, please ensure the country code is used. Lines are open
between 8.30am – 5.30pm, Monday to Friday, excluding
public holidays in England and Wales; or
–
in writing to Equiniti Limited, Aspect House, Spencer Road,
Lancing, West Sussex BN99 6DA United Kingdom.
Completion of a form of proxy will not preclude a member from
attending the Annual General Meeting and voting in person.
On a vote by show of hands, every ordinary shareholder who is
present in person has one vote and every duly appointed proxy
who is present has one vote. On a poll vote, every ordinary
shareholder who is present in person or by way of a proxy has
one vote for every share of which he/she is a holder. Voting will
be by poll.
The “Vote Withheld” option on the proxy form is provided to
enable you to abstain on any particular resolution. However it
should be noted that a “Vote Withheld” is not a vote in law and
will not be counted in the calculation of the proportion of the
votes ‘For’ and ‘Against’ a resolution.
Shareholders are encouraged to register their appointment of
proxy electronically via the internet and can do so through
Equiniti’s website Shareview, by either logging in or creating an
online portfolio at www.shareview.co.uk and following the
on-screen instructions. A proxy appointment made electronically
will not be valid if sent to any other address other then those
provided or if received after 12.30 pm on 20 May 2024 (excluding
any parts of the day that is not a business day). If you have any
difficulties with online voting, you should contact the shareholder
helpline on +44 (0) 800 032 0641.
Alternatively, shareholders who have already registered with
Equiniti’s Shareview service can appoint a proxy by logging onto
their portfolio at www.shareview.co.uk using their user ID and
password. Once logged in simply click “View” on the “My
Investments” page, click on the link to vote then follow the
on-screen instructions. The on-screen instructions give details on
how to complete the appointment process. Please note that to
be valid, your proxy instructions must be received by Equiniti no
later than 12.30 pm. on 20 May 2024. If you have any difficulties
with online voting, you should contact the shareholder helpline
on +44 (0) 800 032 0641.
If an ordinary shareholder submits more than one valid proxy
appointment, the appointment received last before the latest
time for receipt of proxies will take precedence.
Shareholders may not use any electronic address provided either
in this Notice of Annual General Meeting or any related
documents to communicate with the Company for any purposes
other than expressly stated.
Representatives of shareholders that are corporations will have
to produce evidence of their proper appointment when
attending the Annual General Meeting.
2.
Any person to whom this notice is sent who is a person
nominated under section 146 of the Companies Act 2006 to
enjoy information rights (a “Nominated Person”) may, under an
agreement between him or her and the shareholder by whom
he or she was nominated, have a right to be appointed (or to
have someone else appointed) as a proxy for the Annual General
Meeting. If a Nominated Person has no such proxy appointment
right or does not wish to exercise it, he or she may, under any
such agreement, have a right to give instructions to the
shareholder as to the exercise of voting rights.
The statement of the rights of ordinary shareholders in relation
to the appointment of proxies in note 1 above does not apply to
Nominated Persons. The rights described in that note can only
be exercised by ordinary shareholders of the Company.
3.
Pursuant to Regulation 41 of the Uncertificated Securities
Regulations 2001, the Company has specified that only those
shareholders registered in the Register of members of the
Company at 6.30 p.m. on 20 May 2024, or 6.30 p.m. two days
prior to the date of an adjourned meeting, shall be entitled to
attend and vote at the meeting in respect of the number of
shares registered in their name at that time. Changes to the
Register of Members after 6.30 p.m. on 20 May 2024 shall be
disregarded in determining the right of any person to attend and
vote at the meeting.
4.
CREST members who wish to appoint a proxy or proxies through
the CREST electronic proxy appointment service may do so by
using the procedures described in the CREST manual. The CREST
manual can be viewed at www.euroclear.com. A CREST message
appointing a proxy (a “CREST proxy instruction”) regardless of
whether it constitutes the appointment of a proxy or an
amendment to the instruction previously given to a previously
appointed proxy must, in order to be valid, be transmitted so as
to be received by the issuer’s agent (ID RA19) by the latest time
for receipt of proxy appointments. If you are an institutional
investor you may be able to appoint a proxy electronically via the
Proxymity platform, a process which has been agreed by the
Company and approved by the Registrar. For further information
regarding Proxymity, please go to www.proxymity.io. Your proxy
must be lodged by 12.30pm on 20 May 2024 in order to be
considered valid. Before you can appoint a proxy via this process
you will need to have agreed to Proxymity’s associated terms and
conditions. It is important that you read these carefully as you
will be bound by them and they will govern the electronic
appointment of your proxy.
Explanatory Notes to the Notice of Meeting
Schroders Capital Global Innovation Trust plc
87
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
5.
Copies of the terms of appointment of the non-executive
Directors and a statement of all transactions of each Director
and of their family interests in the shares of the Company, will be
available for inspection by any member of the Company at the
registered office of the Company during normal business hours
on any weekday (English public holidays excepted) and at the
Annual General Meeting by any attendee, for at least 15 minutes
prior to, and during, the Annual General Meeting. None of the
Directors has a contract of service with the Company.
6.
The biographies of the Directors offering themselves for election
and re-election are set out on pages 44 and 45 of the Company’s
annual report and accounts for the year ended 31 December
2023.
7.
As at 27 March 2024, 839,860,026 ordinary shares of 1 pence
each were in issue, no ordinary shares were held in treasury.
Therefore the total number of voting rights of the Company as at
27 March 2024 was 839,860,026.
8.
A copy of this Notice of meeting, which includes details of
shareholder voting rights, together with any other information as
required under Section 311A of the Companies Act 2006, is
available from the Company’s web pages:
www.schroders.com/inov.
9.
Pursuant to Section 319A of the Companies Act 2006, the
Company must cause to be answered at the Annual General
Meeting any question relating to the business being dealt with at
the Annual General Meeting which is put by a member attending
the meeting, except in certain circumstances, including if it is
undesirable in the interests of the Company or the good order of
the meeting that the question be answered or if to do so would
involve the disclosure of confidential information.
10.
Members satisfying the thresholds in section 527 of the
Companies Act 2006 can require the Company to publish a
statement on its web pages setting out any matter relating to:
(a)
the audit of the Company’s Accounts (including the Auditor’s
report and the conduct of the audit) that are to be laid
before the Meeting; or
(b)
any circumstance connected with an auditor of the
Company ceasing to hold office since the last AGM, that the
members propose to raise at the Meeting. The Company
cannot require the members requesting the publication to
pay its expenses. Any statement placed on the website must
also be sent to the Company’s auditors no later than the
time it makes its statement available on the website. The
business which may be dealt with at the meeting includes
any statement that the Company has been required to
publish on its web pages.
11.
The Company’s privacy policy is available on its web pages:
www.schroders.com/inov. Shareholders can contact Equiniti for
details of how Equiniti processes their personal information as
part of the Annual General Meeting.
88
Schroders Capital Global Innovation Trust plc
The terms and performance measures below are those
commonly used by investment companies to assess values,
investment performance and operating costs. Numerical
calculations are given where relevant. Some of the financial
measures below are classified Alternative Performance
Measures (“APMs”) as defined by the European Securities and
Markets Authority. Under this definition, APMs include a
financial measure of historical financial performance or financial
position, other than a financial measure defined or specified in
the applicable financial reporting framework. APMs have been
marked with an asterisk.
Net asset value (“NAV”) per share
The NAV per share of 25.32p (2022: 28.52p) represents the net assets
attributable to equity shareholders of £217,064,000 (2022:
£257,922,000) divided by the number of shares in issue of
857,360,026 (2022: 904,219,238).
The change in the NAV amounted to –11.2% (2022: –40.7%) over the
year.
Total return*
The combined effect of any dividends paid, together with the rise or
fall in the share price or NAV per share. Total return statistics enable
the investor to make performance comparisons between investment
companies with different dividend policies. Any dividends received by
a shareholder are assumed to have been reinvested in either the
assets of the Company at its NAV per share at the time the shares
were quoted ex-dividend (to calculate the NAV per share total return)
or in additional shares of the Company (to calculate the share price
total return). The Company has not declared a dividend in either 2022
or 2023.
The NAV total return for the year ended 31 December 2023 is
calculated as follows:
Opening NAV at 31/12/22
28.52p
Closing NAV at 31/12/23
25.32p
NAV total return, being the closing NAV,
expressed as a percentage change in the
opening NAV:
(11.2%)
The NAV total return for the year ended 31 December 2022 is
calculated as follows:
Opening NAV at 31/12/21
48.08p
Closing NAV at 31/12/22
28.52p
NAV total return, being the closing NAV,
expressed as a percentage change in the
opening NAV:
(40.7%)
The share price total return for the year ended 31 December 2023 is
calculated as follows:
Opening share price at 31/12/22
15.47p
Closing share price at 31/12/23
14.65p
Share price total return, being the closing share
price, expressed as a percentage change in the
opening share price:
(5.3%)
Share price total return for the year ended 31 December 2022 is
calculated as follows:
Opening share price at
31/12/21
33.10p
Closing share price at
31/12/22
15.47p
Share price total return, being the closing share
price, expressed as a percentage change in the
opening share price:
(53.3%)
Discount/premium*
The amount by which the share price of an investment trust is lower
(discount) or higher (premium) than the NAV per share. If shares are
trading at a discount, investors would be paying less than the value
attributable to the shares by reference to the underlying assets.
A premium or discount is generally the consequence of supply and
demand for the shares on the stock market. The discount or premium
is expressed as a percentage of the NAV per share. The discount at
the year end amounted to 42.1% (2022: 45.8%), as the closing share
price of 14.65p (2022: 15.47p) was 42.1% (2022: 45.8%) lower than
the closing NAV of 25.32p (2022: 28.52p).
(Net cash)/gearing*
The gearing percentage reflects the amount of borrowings (i.e. bank
loans or overdrafts) which the Company has drawn down and
invested in the market. This figure is indicative of the extra amount by
which shareholders’ funds would move if the Company’s investments
were to rise or fall. This represents borrowings used for investment
purposes, less cash, expressed as a percentage of net assets. If the
figure so calculated is negative, this is shown as a “Net cash” position.
The gearing figure at the year end is calculated as follows:
2023
2022
£’000
£’000
Borrowings used for investment
purposes, less cash
2,913
(16,122)
Net assets
217,064
257,922
(Net cash)/gearing (%)
(1.3)
(6.3)
Ongoing charges*
The ongoing charges figure is a measure of the ongoing operating
cost of the Company. It is calculated in accordance with the AIC’s
recommended methodology and represents the management fee
and all other operating expenses excluding finance costs, transaction
costs and any performance fee payable, amounting to £2,593,000
(2022: £3,226,000), expressed as a percentage of the average daily
net asset values during the year of £239,109,000 (2022:
£330,194,000).
2023
2022
£’000
£’000
Management fee and all other
operating expenses excluding
finance costs, transaction costs
and any performance fee payable
2,593
3,226
Average daily net asset values
during the year
239,109
330,194
Ongoing charges ratio
1.08
0.98
Definitions of Terms and Alternative Performance Measures
*Alternative Performance Measure.
Schroders Capital Global Innovation Trust plc
89
Introduction
Strategic Report
Governance
Financial
Other Information (Unaudited)
Introduction
Strategic Report
Governance
Financial
Leverage*
For the purpose of the Alternative Investment Fund Managers (AIFM)
Directive, leverage is any method which increases the Company’s
exposure, including the borrowing of cash and the use of derivatives.
Higher Leverage numbers are thus indicative of higher market risk.
Leverage is expressed as the ratio of the Company’s exposure to its
net asset value and is required to be calculated both on a “Gross” and
a “Commitment” method. Under the Gross method, exposure
represents the sum of the absolute values of all positions, so as to
give an indication of overall exposure. Under the Commitment
method, exposure is calculated in a similar way, but after netting off
hedges which satisfy certain strict criteria.
The Company’s leverage policy and details of its leverage ratio
calculation and exposure limits as required by the AIFMD are
published on the Company’s webpages and within this report. The
Company is also required to periodically publish its actual leverage
exposures. As at 31 December 2023 these were:
% of net asset value
Leverage exposure
Maximum
Actual
Gross method
310
97.06
Commitment method
120
100
The AIF is permitted to be leveraged and the table below sets out the
current maximum permitted and actual leverage at 31 December
2023. An unleveraged position would be stated as 100%.
90
Schroders Capital Global Innovation Trust plc
Shareholder Information
Web pages and share price information
The Company has dedicated web pages, which may be found at
www.schroders.com/inov. The web pages are the Company’s primary
method of electronic communication with shareholders. They contain
details of the Company’s ordinary share price and copies of the
annual report and accounts and other documents published by the
Company as well as information on the Directors, terms of reference
of committees and other governance arrangements. In addition, the
web pages contain links to announcements made by the Company to
the market and Schroders’ website.
The Company releases its NAV per share on both a cum and
ex-income basis to the market on a daily basis.
Share price information may also be found in the Financial Times and
on the Company’s web pages.
Association of Investment Companies
The Company is a member of the Association of Investment
Companies. Further information on the Association can be found on
its website, www.theaic.co.uk.
Individual Savings Account (“ISA”) status
The Company’s shares are eligible for stocks and shares ISAs.
Non-Mainstream Pooled Investments status
The Company currently conducts its affairs so that its shares can be
recommended by IFAs to ordinary retail investors in accordance with
the FCA’s rules in relation to non-mainstream investment products
and intends to continue to do so for the foreseeable future. The
Company’s shares are excluded from the FCA’s restrictions which
apply to non- mainstream investment products because they are
shares in an investment trust.
Financial calendar
Annual General Meeting
May
Half year end
30 June
Half-year results announced
September
Financial-year end
31 December
Annual results announced
March
Alternative Investment Fund Managers
(“AIFM”) Directive
The AIFM Directive, as transposed into the FCA Handbook in the UK,
requires that certain pre-investment information be made available to
investors in Alternative Investment Funds (such as the Company) and
also that certain regular and periodic disclosures are made. This
information and these disclosures may be found either below,
elsewhere in this annual report and accounts, or in the Company’s
AIFM Directive information disclosure document published on the
Company’s web pages.
Remuneration disclosures
Quantitative remuneration disclosures to be made in this annual
report in accordance with FCA Handbook rule FUND3.3.5 may also be
found in the Company’s AIFMD information disclosure document
published on the Company’s web pages.
Publication of Key Information Document
(“KID”) by the AIFM
Pursuant to the Packaged Retail and Insurance-based Products
Regulation, the Manager, as the Company’s AIFM, is required to
publish a short KID on the Company. KIDs are designed to provide
certain prescribed information to retail investors, including details of
potential returns under different performance scenarios and a
risk/reward indicator. The Company’s KID is available on its web
pages.
How to invest
There are a number of ways to easily invest in the Company. The
Manager has set these out at www.schroders.com/invest-in-a-trust/.
Complaints
The Company has adopted a policy on complaints and other
shareholder communications which ensures that shareholder
complaints and communications addressed to the Company
Secretary, the Chair or the Board are, in each case, considered by the
Chair and the Board.
Schroders Capital Global Innovation Trust plc
91
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Strategic Report
Governance
Financial
Other Information (Unaudited)
Warning to shareholders
Companies are aware that their shareholders have received
unsolicited telephone calls or correspondence concerning investment
matters. These are typically from overseas-based ‘brokers’ who target
UK shareholders, offering to sell them what often turn out to be
worthless or high risk shares or investments.
These operations are commonly known as ‘boiler rooms’. These
‘brokers’ can be very persistent and extremely persuasive.
Shareholders are advised to be wary of any unsolicited advice, offers
to buy shares at a discount or offers of free company reports. If you
receive any unsolicited investment advice:
•
Make sure you get the correct name of the person and
organisation
•
Check that they are properly authorised by the FCA before getting
involved by visiting https://register.fca.org.uk
•
Report the matter to the FCA by calling 0800 111 6768 or visiting
https://fca.org.uk/consumers/report-scam-unauthorised-firm
•
Do not deal with any firm that you are unsure about
If you deal with an unauthorised firm, you will not be eligible to
receive payment under the Financial Services Compensation Scheme.
The FCA provides a list of unauthorised firms of which it is aware,
which can be accessed at
https://www.fca.org.uk/consumers/unauthorised-firms-
individuals#list.
More detailed information on this or similar activity can be found on
the FCA website at https://www.fca.org.uk/consumers/protect-
yourself-scams.
92
Schroders Capital Global Innovation Trust plc
www.schroders.com/inov
Directors
Tim Edwards (Chair)
Lamia Baker
Scott Brown
Stephen Cohen
Jane Tufnell
Registered office
1 London Wall Place
London EC2Y 5AU
Tel: +44 (0) 20 7658 6000
Advisers
Alternative Investment Fund Manager (the “AIFM” or
“Manager”)
Schroder Unit Trusts Limited
1 London Wall Place
London EC2Y 5AU
Investment Manager
Schroder Investment Management Limited
1 London Wall Place
London EC2Y 5AU
Schroders Capital Management (Switzerland) AG
Affolternstrausse 56, CH-8050
Zurich, Switzerland
Company Secretary
Schroder Investment Management Limited
1 London Wall Place
London EC2Y 5AU
Email: amcompanysecretary@schroders.com
Depositary and Custodian
HSBC Bank plc
8 Canada Square
London E14 5HQ
Corporate broker
Winterflood Securities Limited
Riverbank House
2 Swan Lane
London EC4R 3GA
Legal adviser
Stephenson Harwood LLP
1 Finsbury Circus
London EC2M 7SH
Independent Auditor
Ernst & Young LLP
25 Churchill Place
London E14 5EY
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Shareholder Helpline:
0800 032 0641
1
Website: www.shareview.co.uk
1
Calls to this number are free of charge from UK landlines.
Communications with shareholders are mailed to the address
held on the register. Any notifications and enquiries relating to
shareholdings, including a change of address or other
amendment should be directed to Equiniti Limited at the address
above.
Other information
Shareholder enquiries
General enquiries about the Company should be addressed to
the Company Secretary at the Company’s Registered Office.
Dealing codes
SEDOL:
BVG1CF2
ISIN:
GB00BVG1CF25
Ticker:
INOV
Global Intermediary Identification Number (GIIN)
U73RHA.99999.SL.826
Legal Entity Identifier (LEI)
2138008X94M7OVE73177
Privacy notice
The Company’s privacy notice is available on its web pages.
Information about the Company
Schroder Investment Management Limited
1 London Wall Place, London EC2Y 5AU, United Kingdom
T +44 (0) 20 7658 6000
Important information: This document is intended to be for information purposes
only and it is not intended as promotional material in any respect. The material is not
intended as an offer or solicitation for the purchase or sale of any financial
instrument. The material is not intended to provide, and should not be relied on for,
accounting, legal or tax advice, or investment recommendations. Information herein
is believed to be reliable but Schroders does not warrant its completeness or accuracy.
No responsibility can be accepted for errors of fact or opinion. Reliance should not be
placed on the views and information in the document when taking individual
investment and/or strategic decisions. Past performance is not a reliable indicator of
future results, prices of shares and the income from them may fall as well as rise and
investors may not get back the amount originally invested. Schroders has expressed
its own views in this document and these may change. Issued by Schroder Investment
Management Limited, 1 London Wall Place, London EC2Y 5AU, which is authorised
and regulated by the Financial Conduct Authority. For your security, communications
may be taped or monitored.
@schroders
schroders.com