Notes to the financial statements (unaudited)

1.   General information

Cordiant Digital Infrastructure Limited (the Company; LSE ticker: CORD) was incorporated and registered in Guernsey on 4 January 2021 with registered number 68630 as a non-cellular company limited by shares and is governed in accordance with the provisions of the Companies (Guernsey) Law 2008 (as amended). The registered office address is 2^nd Floor Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 4LY. The Company's ordinary shares were admitted to trading on the Specialist Fund Segment of the London Stock Exchange on 16 February 2021 and its C Shares on 10 June 2021. On 20 January 2022, all C Shares were converted to ordinary shares. A second issuance of ordinary shares took place on 25 January 2022. Note 9 gives more information on share capital.

2.   Significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied, unless otherwise stated.

Basis of preparation

The summary financial information set out above does not constitute the Company's statutory financial statements for the financial period ended 31 March 2022. The Company has not yet fully completed the finalisation of the 2022 Annual Report. The Company expects the 2022 full financial statements to be signed by the Directors no later than 25 May 2022. Accordingly, the financial information for the period ended 31 March 2022 set out above is unaudited.

The financial statements have been prepared in accordance with IFRS as issued by the IASB and with the Companies (Guernsey) Law 2008 (as amended).

The annual financial statements have been prepared on an historical cost basis as modified for the measurement of certain financial instruments at fair value through profit or loss. They are presented in pounds sterling, which is the currency of the primary economic environment in which the Company operates and are rounded to the nearest thousand, unless otherwise stated. The principal accounting policies are set out below.

Going concern

The Company's cash balance at 31 March 2022 was £353.73 million, which is sufficient to cover its existing liabilities of £1.02 million, dividend of £11.6 million with respect to the six-month period ended 31 March 2022, and any foreseeable expenses for at least, but not limited to, 12 months from the issuance of the financial statements. The Company also has future acquisition commitments of £366 million. As at 31 March 2022, Royal Bank of Scotland International held £42 million as collateral in respect of foreign currency forward contracts held for financing the acquisition. The £42 million cash collateral will be released when the forward contracts mature and will be available to help meet the Emitel purchase consideration.

The most significant cash requirements arise when the Company successfully bids for investments, and the amount and timing of these are impossible to predict. Where further cash is needed to make fully funded bids, it is anticipated that the Company will be able to access the capital markets for equity, debt or a combination of both, and will therefore be able to continue to make investments.

The Company's cash balance is comprised of cash held on deposit with substantial global financial institutions with strong credit ratings, and the risk of default by the counterparties is considered extremely low. Due to this the Directors believe there is no material going concern risk. The major

Notes to the financial statements

2.   Significant accounting policies (continued)

Going concern (continued)

cash outflows of the Company are expected to be the payment of dividends and expenses and the acquisition of new assets. The Company is closed-ended and there is no requirement for the Company to redeem shares.

The COVID-19 pandemic has caused severe disruptions in global economies and capital markets. The pandemic is not yet over and may also continue to materially and adversely impact the performance of the global economy, the Company's operations, and investments in the future. The war in Ukraine has also had, and is expected to continue for some time to have, substantial additional impacts on the global economy, in particular in respect of inflation rates. Given the ongoing nature

of the COVID-19 pandemic and the war in Ukraine, it is currently not possible to determine the potential scale and scope of the ultimate effects on the global economy, capital markets, and the Company's operations and investments. As the situation continues to evolve, this will remain a risk to the Company.

The Directors and Investment Manager are actively monitoring this and its potential effect on the Company and its underlying investments. In particular, they have considered the following specific key potential impacts:

·      unavailability of key personnel at the Investment Manager or Administrator due to illness

·      increased volatility in the fair value of investments

·      disruptions to business activities of the underlying investments; and

·      recoverability of income and principal and allowance for expected credit losses.

In considering the above key potential impacts of COVID-19 and the war in Ukraine on the Company and its underlying investments, the Investment Manager has assessed these with reference to the mitigation measures in place.

As further detailed in note 5 to the financial statements, the Investment Manager uses a third-party valuation provider to perform a reasonableness assessment of the Investment Manager's valuation of the underlying investments. Additionally, the Investment Manager and Directors have considered the cash flow forecast to determine the term over which the Company can remain viable given its current resources.

Based on the assessment outlined above, including the various risk mitigation measures in place, the Directors do not consider that the effects of COVID-19 and the war in Ukraine have created a material uncertainty over the assessment of the Company as a going concern.

On the basis of this review, and after making due enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for at least 12 months from 24 May 2022 to 30 June 2023, being the period of assessment considered by the Directors. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

Accounting for subsidiaries

The Directors have concluded that the Company has all the elements of control as prescribed by IFRS 10 'Consolidated Financial Statements' in relation to all its subsidiaries and that the Company satisfies the three essential criteria to be regarded as an Investment Entity as defined in IFRS 10, IFRS 12 'Disclosure of Interests in Other Entities' and IAS 27 'Consolidated and Separate Financial

Notes to the financial statements

2.   Significant accounting policies (continued)

Accounting for subsidiaries (continued)

Statements'. The three essential criteria are that the entity must:

·    Obtain funds from one or more investors for the purpose of providing these investors with professional investment management services;

·    Commit to its investors that its business purpose is to invest its funds solely for returns from capital appreciation, investment income or both; and

·    Measure and evaluate the performance of substantially all of its investments on a fair value basis.

In satisfying the second essential criterion, the notion of an investment time frame is critical and an Investment Entity should have an exit strategy for the realisation of its investments. The Board has approved a divestment strategy under which the Investment Manager will, within two years from acquisition of an investment and at least annually thereafter, undertake a review of the current condition and future prospects of the investment. If the Investment Manager concludes that:

·      the future prospects for an investment are insufficiently strong to meet the Company's rate of return targets; or

·      the value that could be realised by an immediate disposal would outweigh the value of retaining the investment; or

·      it would be more advantageous to realise capital for investment elsewhere than to continue to hold the investment,

then the Investment Manager will take appropriate steps to dispose of the investment.

Also as set out in IFRS 10, further consideration should be given to the typical characteristics of an Investment Entity, which are that:

·      it should have more than one investment, to diversify the risk portfolio and maximise returns;

·      it should have multiple investors, who pool their funds to maximise investment opportunities;

·      it should have investors that are not related parties of the entity; and

·      it should have ownership interests in the form of equity or similar interests.

The Directors are of the opinion that the Company meets the essential criteria and typical characteristics of an Investment Entity. Therefore, subsidiaries are measured at fair value through profit or loss, in accordance with IFRS 9 'Financial Instruments'. Fair value is measured in accordance with IFRS 13 'Fair Value Measurement'.

Financial instruments

In accordance with IFRS 9, financial assets and financial liabilities are recognised in the Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are only offset, and the net amount reported in the Statement of Financial Position and Statement of Comprehensive Income, when there is a currently enforceable legal right to offset the recognised amounts and the Company intends to settle on a net basis or realise the asset and liability simultaneously.

Financial assets

The classification of financial assets at initial recognition depends on the purpose for which the financial asset was acquired and its characteristics. All purchases of financial assets are recorded at the date on which the Company became party to the contractual requirements of the financial asset.

Notes to the financial statements

2.   Significant accounting policies (continued)

Financial assets (continued)

The Company's financial assets principally comprise of investments held at fair value through profit or loss, derivative financial instruments, cash and cash equivalents, and trade receivables.

Financial assets are recognised at the date of the purchase or the date on which the Company became party to the contractual requirements of the asset. Investments are initially recognised at cost, being the fair value of consideration given. Transaction costs are recognised in the Statement of Comprehensive Income as incurred.

A financial asset is derecognised (in whole or in part) either:

·    when the Company has transferred substantially all the risks and rewards of ownership; or

·    when it has neither transferred nor retained substantially all the risks and rewards and when it no longer has control over the assets or a portion of the asset; or

·    when the contractual right to receive cash flow has expired.

Investments held at fair value through profit or loss

Investments are measured at fair value through profit or loss. Gains or losses resulting from the movement in fair value are recognised in the Statement of Comprehensive Income at each valuation point.

The loans provided to subsidiaries are held at fair value through profit or loss as they form part of a managed portfolio of assets whose performance is evaluated on a fair value basis. These loans are recognised at the loan principal value plus outstanding interest. Any gains and losses to investments are allocated to equity.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is calculated on an unlevered, discounted cash flow basis in accordance with IFRS 13 and IFRS 9.

When available, the Company measures fair value using the quoted price in an active market. A market is regarded as 'active' if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no quoted price in an active market, then the Company uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account when pricing a transaction.

Valuation process

The Investment Manager is responsible for proposing the valuation of the assets held by the Company, and the Directors are responsible for reviewing the Company's valuation policy and approving the valuations.

Derivatives held for trading

When considered appropriate the Company will enter into derivative contracts to manage its foreign-exchange risk and provide protection against the volatility of the market.

Quoted derivatives are valued at bid price on the reporting date. If the price is not available as at the accounting date, the last available price is used. Gains and losses arising from changes in fair value are presented in the Statement of Comprehensive Income in the period in which they arise.

Notes to the financial statements

2.   Significant accounting policies (continued)

Financial assets (continued)

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments with an original maturity of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Trade receivables

Trade receivables are classified as financial assets at amortised cost. They are measured at amortised cost less impairment assessed using the simplified approach of the expected credit loss (ECL) model based on experience of previous losses and expectations of future losses. Trade and other receivables are recorded based on agreements entered into with entities with no notable history of default causing the expected ECL of these receivables to be immaterial and therefore no ECL has been recorded.

Financial liabilities

Financial liabilities are classified according to the substance of the contractual agreements entered into and are recorded on the date on which the Company becomes party to the contractual requirements of the financial liability.

The Company's financial liabilities measured at amortised cost include trade and other payables, and other short-term monetary liabilities which are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method.

A financial liability (in whole or in part) is derecognised when the Company has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on derecognition is taken to the Statement of Comprehensive Income.

Equity

Financial instruments issued by the Company are treated as equity if the holder has only a residual interest in the assets of the Company after the deduction of all liabilities. The Company's ordinary shares and Subscription Shares are classified as equity.

Share issue costs directly attributable to the issue of ordinary shares are shown in equity as a deduction from share capital.

Dividends

Dividends payable are recognised as distributions in the financial statements when the Company's obligation to make payment has been established.

Revenue recognition

Dividend income is recognised when the Company's entitlement to receive payment is established. Interest income is accounted for in accordance with the loan documentation.

Expenses

Expenses include legal, accounting, auditing and other operating expenses. They are recognised on an accruals basis in the Statement of Comprehensive Income in the period in which they are incurred.

Notes to the financial statements

2.   Significant accounting policies (continued)

Taxation

It is the intention of the Directors to conduct the affairs of the Company so that it satisfies the conditions in section 1158 Corporation Tax Act 2010 and the Investment Trust (Approved Company) (Tax) Regulations 2011 for it to be approved by HMRC as an investment trust.

In respect of each accounting period for which the Company is, and continues to be, approved by HMRC as an investment trust, the Company will be exempt from UK corporation tax on its chargeable gains and its capital profits from creditor loan relationships. The Company will, however, be subject to UK corporation tax on its income (currently at a rate of 19%).

In principle, the Company will be liable to UK corporation tax on its dividend income. However, there are broad-ranging exemptions from this charge which would be expected to be applicable in respect of most of the dividends the Company may receive.

A company that is an approved investment trust in respect of an accounting period is able to take advantage of modified UK tax treatment in respect of its 'qualifying interest income' for an accounting period. It is expected that the Company will have material amounts of qualifying interest income and that it may, therefore, decide to designate some or all of the dividends paid in respect of a given accounting period as interest distributions.

To the extent that the Company receives income from, or realises amounts on the disposal of, investments in foreign countries it may be subject to foreign withholding or other taxation in those jurisdictions. To the extent it relates to income, this foreign tax may, to the extent not relievable under a double tax treaty, be able to be treated as an expense for UK corporation tax purposes, or it may be treated as a credit against UK corporation tax up to certain limits and subject to certain conditions.

Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments, except where the Company is able to control the timing of the reversal of the difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the

Statement of Comprehensive Income except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with directly in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off tax assets against tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. Deferred tax assets and liabilities are not discounted.

Notes to the financial statements

2.   Significant accounting policies (continued)

Foreign currencies

The functional currency of the Company is sterling, reflecting the primary economic environment in which it operates. The Company has chosen pounds sterling as its presentation currency for financial reporting purposes.

Transactions during the period, including purchases and sales of investments, income and expenses are translated into pounds sterling at the rate of exchange prevailing on the date of the transaction.

Monetary assets and liabilities denominated in currencies other than pounds sterling are retranslated at the rate of exchange ruling at the reporting date. Non-monetary items that are measured in terms of historical cost in a currency other than pounds sterling are translated using the exchange rates at the dates of the initial transactions.

Non-monetary items measured at fair value in a currency other than pounds sterling are translated using the exchange rates at the date when the fair value was determined. Foreign currency transaction gains and losses on financial instruments classified as at fair value through profit or loss are included in profit or loss in the Statement of Comprehensive Income as part of the change in fair value of investments.

Foreign currency transaction gains and losses on financial instruments are included in profit or loss in the Statement of Comprehensive Income as finance income or expense.

Segmental reporting

The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors, as a whole. The key measure of performance used by the Board to assess the Company's performance and to allocate resources is the Company's NAV, as calculated under IFRS as issued by the IASB, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in the Annual Report.

For management purposes, the Company is organised into one main operating segment, which invests in Digital Infrastructure Assets.

100 % of the Company's income is generated within the Czech Republic.

86% of the Company's non-current assets are located in the Czech Republic and 14% within the US.

Due to the Company's nature, it has no customers.

New and amended standards and interpretations not applied

Accounting standards and interpretations have been published and will be mandatory for the Company's accounting periods beginning on or after 1 April 2022 or later periods. The following are the new or amended accounting standards or interpretations applicable to the Company:

·      amendments to IAS 1 'Presentation of financial statements' on classification of liabilities, effective for annual periods beginning on or after 1 January 2023;

·      amendments to IAS 1 'Presentation of financial statements' and IFRS Practice Statement 2 on disclosure of accounting policies, effective for annual periods beginning on or after 1 January 2023;

Notes to the financial statements

2.   Significant accounting policies (continued)

New and amended standards and interpretations not applied (continued)

·      amendments to IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors', effective for annual periods beginning on or after 1 January 2023; and

·      amendments to IAS 12 (issued on 7 May 2021 and effective for annual periods beginning on or after 1 January 2023) - Deferred tax related to assets and liabilities arising from a single transaction.

·     

The impact of these amendments is not expected to be material to the reported results and financial position of the Company.

3.   Significant accounting judgements, estimates and assumptions

The preparation of the financial statements 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.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Judgements

In the process of applying the Company's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:

Assessment as an Investment Entity

The Directors have concluded that the Company has all the elements of control as prescribed by IFRS 10 'Consolidated Financial Statements' in relation to all its subsidiaries and that the Company satisfies the three essential criteria to be regarded as an Investment Entity as defined in IFRS 10, IFRS 12 'Disclosure of Interests in Other Entities' and IAS 27 'Consolidated and Separate Financial Statements'. Refer to note 2 for more information.

Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the period ended 31 March 2022 is included in note 15 and relates to the determination of fair value of investments with significant unobservable inputs.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The resulting accounting estimates will, by definition, seldom equal the related actual results. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Notes to the financial statements

3.   Significant accounting judgements, estimates and assumptions (continued)

Judgements (continued)

Climate change

In preparing the financial statements, the Directors have considered the impact of climate change, particularly in the context of the climate change risks identified in the ESG Report section of the Strategic Report.

In preparing the financial statements, the Directors have considered the medium-and longer-term cash flow impacts of climate change on a number of key estimates within the financial statements, including:

·      the estimates of future cash flows used in assessments of the fair value of investments; and

·      the estimates of future profitability used in the assessment of distributable income.

These considerations did not have a material impact on the financial reporting judgements and estimates in the current year. This reflects the conclusion that climate change is not expected to have a significant impact on the Company's short- or medium-term cash flows including those considered in the going concern and viability assessments.

4.   Other expenses

Other expenses in the Condensed Statement of Comprehensive Income comprise:

5.   Investments at fair value through profit or loss

Notes to the financial statements

5.   Investments at fair value through profit or loss (continued)

During the period the Company made two investments, one in the Czech Republic and one in the US. These additions are described in more detail below.

The Company's investments in the Czech Republic comprise a loan investment and an equity investment in Communications Investments Holdings s.r.o., an entity incorporated in the Czech Republic and the parent company of České Radiokomunikace a.s. (CRA), the principal operating company. To fund the acquisition, a loan of €333 million was drawn down on 29 April, and was fully repaid within 15 days out of the proceeds of a maturing deposit. The investment is held at fair value.

The loan to Communications Investments Holdings s.r.o. is repayable on a monthly basis, and bears interest at a rate of 9.90% per annum. Interest receivable on the loan investment in the period was £2,932,000, of which £nil was outstanding at 31 March 2022. During the period £2,797,000 of interest receivable was capitalised as interest income. Under the terms of the loan, interest is payable monthly and capitalised if not received.

During the period the Company purchased, through its subsidiary, CDIL Data Centre USA LLC, the full operational platform of Hudson Interxchange (previously operating under the name DataGryd Datacenters LLC). The investment is held at fair value.

The investment comprises a $1 equity investment and various equity contributions made in the period. As at 31 March 2022 the equity investment is valued at £55,837,000. The fair value of the investment is considered to be equal to cost  due to the proximity of its acquisition to the financial period end.

The below table details all gains on investments through profit or loss.

Fair value measurements

IFRS 13 requires disclosure of fair value measurement by level. The level of fair value hierarchy within the financial assets or financial liabilities is determined on the basis of the lowest level input that is significant to the fair value measurement. Financial assets and financial liabilities are classified in their entirety into only one of the following three levels:

•    Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

•    Level 2 - inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

·      Level 3 - inputs for assets or liabilities that are not based on observable market data (unobservable inputs).

The determination of what constitutes 'observable' requires significant judgement by the Company. The Directors consider observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

Notes to the financial statements

5.   Investments at fair value through profit or loss (continued)

The Company's investments have been classified within Level 3 as the investments are not traded and contain unobservable inputs. The valuations have been carried out by the Investment Manager. In order to obtain assurance in respect of the valuations calculated by the Investment Manager, the Company has engaged a third-party valuations expert to carry out an independent assessment of the unobservable inputs and of the forecast cash flows of the Company's investments.

The fair value of the Company's investment in Hudson Interxchange has been assessed as being equal to invested capital. In reaching this conclusion, the Investment Manager and the Board have considered the short time since the acquisition, and the absence of factors which might suggest the acquisition price might no longer be an accurate assessment of fair value. In particular, there have been no significant changes in the results of Hudson Interxchange from the forecast at the time of acquisition and no significant changes in the market for data centre space. The independent valuation expert concurs with this assessment. This valuation has also been calibrated using a discounted cash flow (DCF) valuation model.

The Company's investment in CRA has been valued using a DCF methodology. This involves forecasting the entity's future cash flows, taking into account the terms of existing contracts, expected rates of contract renewal and targeted new contracts, and the economic and geopolitical environment. These cash flows are discounted at the entity's weighted average cost of capital (WACC). This method also requires estimating a terminal value, being the value of the investment at the end of the period for which cash flows can be forecast with reasonable accuracy. The terminal value is calculated using an assumed terminal growth rate (TGR) into perpetuity based on anticipated industry trends and long-term inflation rates.

The DCF valuation methodology requires estimation of unobservable inputs. The following table  summarises the effect on the valuation of the Company's portfolio of reasonably possible alternative investment assumptions with regards to those estimates.

Both the Investment Manager and the third-party valuation expert use a combination of other valuation techniques to verify the reasonableness of the DCF valuations, as recommended in the International Private Equity and Venture Capital (IPEV) Valuation Guidelines:

·      earnings multiple: applying a multiple, derived largely from comparable listed entities in the market, to the forecast EBITDA of the entity to calculate an enterprise value, and then deducting the fair value of any debt in the entity;

·      DCF with multiple: calculating a DCF valuation of the cash flows of the entity to the end of the period for which cash flows can be forecast with reasonable accuracy, and then applying a multiple to EBITDA at the end of that period to estimate a terminal value; and

·      dividend yield: forecasting the entity's capacity to pay dividends in the future and applying an equity yield to that forecast dividend, based on comparable listed entities in the market.

The DCF valuations derived by the Investment Manager and those derived by the third-party valuation expert were not materially different from each other, and the other valuation techniques used provided assurance that the DCF valuations are reasonable.

6.   Unconsolidated subsidiaries

The following table shows subsidiaries of the Company. As the Company qualifies as an Investment Entity as referred to in note [5], these subsidiaries have not been consolidated in the preparation of the financial statements:

¹ Entity previously named Cordiant Digital Holdings (Czechia) Limited.

The registered office of the subsidiaries located in the Czech Republic is Skokanska 2117/1, 169 00, Prague 6. The registered office of the subsidiaries located in the UK is 63, St James's Street, London SW1A 1LY. The registered office of the subsidiaries located in the USA 60 Hudson Street suite, New York, NY 10013.

The amounts invested in the Company's unconsolidated subsidiaries during the period and their carrying value at 31 March 2022 are as outlined in note 5. [his comprised £305,643,000 invested in Communications Investments Holdings s.r.o. on acquisition of the entity in April 2021 £2,797,000 of the shareholder loan interest receivable capitalised in the period, and £55,837,000 invested in CDIL Data Centre USA LLC in January 2022.

During the period, the Company has invested £1 into each of Cordiant Digital Holdings UK Limited, Cordiant Digital Holdings One Limited and Cordiant Digital Holdings Two Limited, relating to the subscription for ordinary share capital on incorporation. Each of these entities has been dormant since incorporation. The Company intends to fund underlying investments through its unconsolidated subsidiaries.

There are certain restrictions on the ability of the Company's unconsolidated subsidiaries in the Czech Republic to transfer funds to the Company in the form of cash dividends or repayment of loans. In accordance with the documentation relating to loans made by various banks to CRA, such cash movements are subject to limitations on amounts and timing, and satisfaction of certain conditions relating to leverage and interest cover ratio. The Directors do not consider that these restrictions are likely to have a significant effect on the ability of the Company's subsidiaries to transfer funds to the Company.

Subsidiaries held in the Czech Republic are profitable and cash generative, and do not need the financial support of the Company. The subsidiary based in the US will receive the financial support of the Company for a period of at least 12 months from the publication of this report.

Notes to the financial statements

7.   Trade and other receivables

 Cash collateral relates to two security deposits held in money market accounts. £42,000,000 is held as collateral in respect of three foreign exchange forward contracts the Company has entered into, and will be released when the forward contracts are settled. The collateral generates interest at 1.05% per annum. The remaining amount relates to collateral for a letter of credit relating to the lease of the building occupied by Hudson Interxchange, totalling US$11.3 million (£8.6 million) and generates interest at 0.59% per annum.

8.   Derivatives

Forward contracts

The Company has entered into three foreign exchange forwards of £50 million each in Polish zloty, and one in Czech koruna of CZK260 million. The maturity dates of the three Polish zloty foreign exchange forwards are 9 June 2022, and the Czech koruna contract is 23 May 2022. The fair value of the foreign exchange forward contracts receivable is determined using forward rates at reporting date. There have been no realised gains in the period and the total unrealised gains are £8,072 million.

Notes to the financial statements

9.   Share capital

Ordinary shares

C Shares

In January 2022, the Company announced the conversion of C Shares into new ordinary shares, in accordance with the terms of the C Shares. The total number of new shares arising on conversion was 174,640,000. The new ordinary shares rank equally with the existing ordinary shares for any dividends or distributions declared after the conversion date.

Notes to the financial statements

9.   Share capital (continued)

At 31 March 2022, the Company's issued share capital comprised 773,288,394 ordinary shares and 6,435,071 Subscription Shares. Holders of ordinary shares are entitled to all dividends paid by the Company on the ordinary shares and, on a winding up, provided the Company has satisfied all of its liabilities, ordinary shareholders are entitled to all of the surplus assets of the Company attributable to the ordinary shares.

Subscription shareholders carry no right to any dividends paid by the Company and have no voting rights.

No Subscription Shares have been exercised between 31 March 2022 and the date of this report.

10. Audit fees

Other operating expenses include fees payable to the Company's auditor, which can be analysed as follows:

Non-audit services paid to the Company's auditor relate to, a review of the Interim Report (£8,000) and services relating to the C Share conversion to ordinary shares (£7,500).

11. Tax

a)  Analysis of the tax charge for the period ended 31 March 2022

b)  Factors affecting tax charge for the period ended 31 March 2022

The tax assessed for the period ended 31 March 2022 is lower than the Company's applicable rate of corporation tax for that period of 19%. The factors affecting the tax charge for the period are as follows:

Notes to the financial statements

11. Tax (continued)

c)   Deferred taxation

The Company has an unrecognised deferred tax asset of £712,000 based on a main rate of corporation tax of 25%.

A change to the UK tax rate from 19% to 25% was enacted on 24 May 2021 and the deferred tax asset not recognised has been calculated at the expected applicable future rate.

It is unlikely that the Company will generate sufficient taxable profits in the future to utilise these expenses and therefore no deferred tax asset has been recognised.

Due to the Company's status as an investment trust and the intention to continue to meet the conditions required to retain that status, the Company has not provided tax on any capital gains arising on capital gains or losses arising on the revaluation of investments.

12. Management and performance fees

Under the Investment Management Agreement, the Investment Manager is entitled to receive an annual management fee and a performance fee, plus any applicable VAT, in addition to the reimbursement of reasonable expenses incurred by it in the performance of its duties.

Management fee

The Investment Manager receives from the Company an annual management fee, based on the average market capitalisation of the Company, calculated and paid monthly in arrears using the average market capitalisation for each LSE trading day for the relevant month. The management fee has been payable since 30 April 2021, being the date on which more than 75% of the IPO proceeds were deployed in investment activities.

The annual management fee is calculated on the following basis:

·      1.00% of the average market capitalisation up to £500 million;

·      0.90% of the average market capitalisation between £500 million and £1 billion; and

·      0.80% of the average market capitalisation in excess of £1 billion.

Following the publication of each Interim Report and Annual Report, the Investment Manager is required to apply an amount, in aggregate, equal to 10% of the annual management fee for the preceding six-month period in the following manner:

a)   if the average trading price, calculated over the 20 trading days immediately preceding the announcement date, is equal to, or higher than, the last reported NAV per ordinary share (as adjusted to reflect any dividends reflected in the average trading price) the Investment Manager shall use the relevant amount to subscribe for new ordinary shares (rounded down to the nearest whole number of ordinary shares), issued at the average trading price; or

Notes to the financial statements

12. Management and performance Fees (continued)

b)   if the average trading price is lower than the last reported NAV per ordinary share (as adjusted to reflect any dividends reflected in the average trading price) the Investment Manager shall, as soon as reasonably practicable, use the relevant amount to make market purchases of ordinary shares (rounded down to the nearest whole number of ordinary shares) within two months of the relevant NAV announcement date.

Even though the annual management fee is payable on a monthly basis, ordinary shares will only be acquired by the Investment Manager on a half-yearly basis.

During the period from 4 January 2021 to 30 September 2021 the Investment Manager has been allotted and issued 154,238 new ordinary shares for aggregate consideration of £175,000. During the period from 1 October 2021 to 31 March 2022 the Investment Manager is required to subscribe for new ordinary shares for aggregate consideration of £294,000.

During the period from 4 January 2021 to 31 March 2022 the Investment Manager has charged management fees of £4,690,000 to the Company, with £661,000 accrued at period end.

Any ordinary shares subscribed or purchased by the Investment Manager pursuant to the above arrangements will, subject to usual exceptions, be subject to a lock-up of 12 months from the date of subscription or purchase.

Performance fee

The Investment Manager may receive a performance fee on each performance fee calculation date, dependent on the performance of the Company's NAV and share price. The first performance fee calculation date is 31 March 2024 and subsequent calculation dates are on 31 March each year thereafter. The fee will be equal to 12.5% of the excess return over the target of 9% for the NAV return or share price return, whichever is the lower, multiplied by the time-weighted average number of ordinary shares in issue (excluding any ordinary shares held in treasury) during the relevant period.

Any performance fee is to be satisfied as follows:

·      as to 50% in cash; and

·      as to the remaining 50% of the performance fee, subject to certain exceptions and the relevant regulatory and tax requirements:

a)   if the average trading price, calculated over the 20 trading days immediately preceding the performance fee calculation date, is equal to or higher than the last reported NAV per ordinary share (as adjusted to reflect any dividends reflected in the average trading price) the Company will issue to the Investment Manager such number of new ordinary shares (credited as fully paid) as is equal to the performance fee investment amount divided by the average trading price (rounded down to the nearest whole number of ordinary shares); or

b)   if the average trading price is lower than the last reported NAV per ordinary share (as adjusted to reflect any dividends reflected in the average trading price) then the Company shall (on behalf of, and as agent for, the Investment Manager) apply the performance fee investment amount in making market purchases of ordinary shares, provided any such ordinary shares are purchased at prices below the last reported NAV per ordinary share.

Any ordinary shares subscribed or purchased by the Investment Manager pursuant to the above arrangements will, subject to usual exceptions, be subject to a lock-up of 36 months from the date of subscription or purchase.

For the period from 4 January 2021 to 31 March 2022 no performance fee is due to the Investment Manager.

Notes to the financial statements

13. Earnings per share and net asset value per share

Earnings per share

On IPO 46,249,982 Subscription Shares were issued. During the period 39,814,911 Subscription Shares were exercised, as detailed in note 9. At 31 March 2022, there were 6,435,071 dilutive Subscription Shares in issue. No earnings are attributable to the Subscription Shares.

The reconciliation of the weighted average number of shares for the purposes of diluted earnings per share to the weighted average number of ordinary shares used in the calculation of basic earnings per share is as follows:

Net asset value per share

Notes to the financial statements

14. Dividends declared with respect to the period

On 23 May 2022, the Board approved an interim dividend of 1.5 per share in respect of the period from 1 October 2021 to 31 March 2022, bringing the total dividend for the period to 31 March 2022 to 3 pence per share. The record date for this dividend is 24 June 2022 and the payment date is 21 July 2022.

15. Financial risk management

Financial risk management objectives

The Company's investing activities intentionally expose it to various types of risks that are associated with the underlying investments. The Company makes the investment in order to generate returns in accordance with its investment policy and objectives.

The most important types of financial risks to which the Company is exposed are market risk (including price, interest rate and foreign currency risk), liquidity risk and credit risk. The Board of Directors has overall responsibility for the determination of the Company's risk management and sets policy to manage that risk at an acceptable level to achieve those objectives. The policy and process for measuring and mitigating each of the main risks are described below.

The Investment Manager and the Administrator provide advice to the Company which allows it to monitor and manage financial risks relating to its operations through internal risk reports which analyse exposures by degree and magnitude of risks. The Investment Manager and the Administrator report to the Board on a quarterly basis.

Categories of financial instruments

For those financial assets and liabilities carried at amortised cost, the Directors are of the opinion that their carrying value approximates to their fair value.

Notes to the financial statements

15. Financial risk management (continued)

Fair value hierarchy

The table below analyses financial instruments measure at fair value at the reporting date by the level in fair value hierarchy into which the fair value measurement is categorised. The amounts are based on the values recognised in the Statement of Financial Position. All fair value measurements below are recurring.

Capital risk management

The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the capital return to shareholders. The capital structure of the Company consists of issued share capital and retained earnings, as stated in the Statement of Financial Position.

In order to maintain or adjust the capital structure, the Company may issue new shares. There are no external capital requirements imposed on the Company.

During the period ended 31 March 2022, the Company entered into a €333 million loan on 29 April 2021, to fund the purchase of an investment. The loan was fully repaid within 15 days out of the proceeds of a maturing deposit. As at 31 March 2022 the Company had no borrowings.

The Company's investment policy will be set out in the Strategic report of the Annual Report 2022.

Notes to the financial statements

15. Financial risk management (continued)

Market risk

Market risk includes price risk, foreign currency risk and interest rate risk.

a)   Price risk

The underlying investments held present a potential risk of loss of capital to the Company. As outlined in note 5, investments are in the form of shareholder loans and equity. Price risk arises from uncertainty about future prices of underlying financial investments held by the Company. As at 31 March 2022, the fair value of investments, excluding cash and cash equivalents, was £409.9 million and a 3% increase / (decrease) in the price of investments with all other variables held constant would result in a change to the fair value of investments of +/- £12.3 million .

Please refer to note 5 for quantitative information about the fair value measurements of the Company's Level 3 investments.

The Company is exposed to a variety of risks which may have an impact on the carrying value of its investments. The risk factors are set out in (a)(i) to (a)(ii) below.

i.    Not actively traded

The Company's investments are not generally traded in an active market but are indirectly exposed to market price risk arising from uncertainties about future values of the investments held. The investments of the Company vary as to geographic distribution of operations and size, all of which may impact the susceptibility of their valuation to uncertainty.

ii.    Concentration

The Company invests in the Digital Infrastructure sector. While the Company is subject to the investment and diversification restrictions in its investment policy, within those limits, material concentrations of investments may arise.

Although the investments are in the same industry, each individual underlying data centre, mobile telecommunications tower or segment of a fibre-optic network held within the portfolio constitutes a separate Digital Infrastructure Asset. This risk is managed through careful selection of investments within the specified limits of the investment policy.

Each of these investment restrictions are calculated and applied as at the time of investment and noncompliance resulting from changes in the price or value of assets following investment is not considered a breach of the investment restrictions.

The Board and the Investment Manager monitor the concentration of the Company's investments to ensure compliance with the investment policy.

Notes to the financial statements

15. Financial risk management (continued)

Market risk (continued)

b)   Foreign currency risk

The Company invests in financial instruments and enters into transactions that are denominated in currencies other than its functional currency, primarily in US dollars, Polish zloty and Czech koruna.

The Company's currency risk is managed by the Investment Manager in accordance with the policies and procedures in place.

The Company also has exposure to foreign currency risk due to the payment of some expenses in euros, Canadian dollars, Czech koruna, Polish zloty and United States dollars. Consequently, the Company is exposed to risks that the exchange rate of its currency relative to other foreign currencies may change in a manner that has an adverse effect on the value of that portion of the Company's assets or liabilities denominated in currencies other than pounds sterling. Any exposure to foreign currency risk at the underlying investment level is captured within price risk.

The following table sets out, in pounds sterling, the Company's total exposure to foreign currency risk and the net exposure to foreign currencies of the monetary assets and liabilities:

As at March 2022

The table below sets out the effect on the net assets against a reasonably possible weakening of the pound against the US dollar, Czech koruna, Canadian dollar and Polish zloty by 3%, at 31 March 2022. The analysis assumes that all other variables remain constant.

Notes to the financial statements

15. Financial risk management (continued)

Market risk (continued)

A strengthening of the pound against the above currencies would have resulted in an equal but opposite effect to the amounts shown above.

c)   Interest rate risk

The Company's exposure to interest rate risk relates to the Company's cash and cash equivalents.  The Company is subject to risk due to fluctuations in the prevailing levels of market interest rates.

The Company has no other interest-bearing assets or liabilities as at the reporting date. As a consequence, the Company is only exposed to variable market interest rate risk. As at 31 March 2022, the cash balance held by the Company was £353,734,000. A 1% increase/(decrease) in interest rates with all other variables held constant would result in a change to interest received of +/- £3,537,000 per annum.

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the Board of Directors.

Liquidity risk is defined as the risk that the Company may not be able to settle or meet its obligations on time or at a reasonable price. The Company's policy and the Investment Manager's approach to managing liquidity is to ensure, as far as possible, that it will always have liquidity to meet its liabilities when due, under both normal and stress conditions, without incurring unacceptable losses or risking damage to the Company's reputation. The Company's liabilities are made up of estimated accruals and trade creditors which are due to be settled within three months of the period end.

The Company adopts a prudent approach to liquidity management and through the preparation of budgets and cash flow forecasts maintains sufficient cash reserves to meet its obligations.

The Company's liquidity risk arises principally from the fact that there is no liquid market for its investments and it may not be able to realise their full value on a timely basis. The Company will maintain flexibility in funding by keeping liquidity in cash and cash equivalents, which may be invested on a temporary basis in line with the cash management policy as agreed by the Board of Directors from time to time.

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.

Notes to the financial statements

15. Financial risk management (continued)

Credit risk (continued)

Financial assets mainly consist of cash and cash equivalents and investments at fair value through profit or loss. The Company's risk on liquid funds is reduced because it can only deposit monies with institutions with a minimum credit rating of A-. The Company mitigates its credit risk exposure on its investments at fair value through profit or loss by the exercise of due diligence on the counterparties and the Investment Manager.

The table below shows the material cash balances and the credit rating for the counterparties used by the Company at the period-end date:

The Company's maximum exposure to loss of capital at the period end is shown below:

Carrying value and maximum exposure

Gearing

As at the date of these financial statements the Company has no gearing.

16. Related party transactions

Directors

The Company has four non-executive Directors, each of whom is considered to be independent. Directors' fees for the period ended 31 March 2022 amounted to £218,000, of which £nil was outstanding at the period end. During the period, £194 was paid to Directors as reimbursement of travel and other incidental expenses, and no such amounts were outstanding at period end. As part of the IPO Shonaid Jemmett-Page and Sian Hill purchased 20,000 shares each, and Marten Pieters and Simon Pitcher purchased 25,000 shares each. Each of the directors was also granted Subscription Shares at time of the IPO at a rate of one Subscription Share for every eight ordinary shares purchased, and each of them has subsequently exercised their rights to convert their Subscription Shares into additional ordinary shares.

Investment Manager

The Investment Manager provides advice to the Company on the origination and completion of new investments, the management of the portfolio and on realisations, as well as on funding requirements, subject to Board approval. For the provision of services under the Investment Management Agreement, the Investment Manager earns a management and performance fee, as disclosed in note 12.

Notes to the financial statements

16. Related party transactions (continued)

Investments

As part of the initial acquisition of Communications Investments Holdings s.r.o. (CIH) in April 2021, the Company acquired a loan due from CIH which accrues interest at 9.9% per annum. Total interest in relation to the period was £2,932,000, of which £[nil] remained outstanding at the period end. The balance on the loan investment at 31 March 2022, including accrued interest, was £27,671,000. Interest is payable monthly and capitalised if not received.

Under the terms of the Investment Management Agreement, on a semi-annual basis in respect of the six-month period ending 31 March and 30 September in each year, the Investment Manager is required to apply an amount in aggregate equal to 10%. of the management fee for the relevant six-month period to the acquisition of ordinary shares in the Company. On 21 December 2021 154,328 ordinary shares, with a consideration of £175,000, were allotted by the Company and issued to the Investment Manager relating to the period from 4 January 2021 to 30 September 2021.

In January 2022, the assets of Hudson Interxchange were acquired by the Company's subsidiary CDIL Data Centre USA LLC. The Company provided funding for this transaction in the form of equity contributions. The balance of the equity investment at 31 March 2022, was £58,231,000.

17. Ultimate controlling party

In the opinion of the Board, on the basis of the shareholdings advised to them, the Company has no ultimate controlling party.

18. Subsequent events

With the exception of dividends declared and disclosed in note 14, there are no other material subsequent events.

19. Commitments

On 4 January 2022, the Company entered into a binding agreement with Emitel S.A to acquire the business for a consideration of 1.97 billion Polish zloty. As at 31 March 2022, the Company has committed £366 million to the acquisition.