Half Year Report

Schroders Capital Global Innovation Trust plc hereby submits its Half Year Report for the six months ended 30 June 2023 as required by the Financial Conduct Authority's Disclosure Guidance and Transparency Rule 4.2.

Tim Edwards, Chair of the Company, commented:

"On 8 September 2023 the Board started a large programme to repurchase shares for cancellation and alongside this, Schroders Capital will continue to invest in private opportunities in line with the Company's global mandate and in keeping with the path followed by them for over 25 years."

Key highlights -

·      The Board has commenced large programme to repurchase shares.

·      During the six month period to 30 June 2023, the net asset value ("NAV") per share decreased by 13.3% from 28.52p per share to 24.73p per share.

·      Notwithstanding the disappointments of BenevolentAI and AMO Pharma, our Manager remains focused on key priorities, rebalancing the portfolio and, in doing so, extracting maximum value from the Company's holdings.

·      Our Manager has made notable progress, particularly during the second quarter of 2023, in altering the liquidity mix to ensure the Company is appropriately positioned to execute the buyback programme efficiently and to support the existing portfolio.

·      With the portfolio in a strong liquidity position, our Manager has been confident in continuing to pursue new investments in innovative global venture, growth, and life science companies. During the period, we announced two such investments, AgroStar, one of India's foremost agricultural technology start-ups, and US-based, clinical-stage biopharmaceutical company, Carmot Therapeutics.

·      On 20 April 2023, it was announced that the Company changed its name to Schroders Capital Global Innovation Trust plc to better reflect the emphasis on global private equity opportunities and to align with other funds within the Schroders Capital Global Innovation programme which Schroders Capital has been investing in for over 25 years.

·      The Board welcomed Dr Lamia Baker as an independent non-executive Director with effect from 22 June 2023. Dr Baker has over 20 years of experience in business and technology with skill in intellectual property, sales, innovation, entrepreneurship, venture capital investment and representation on companies' boards.

The Half Year Report is also available to download from the Company's webpage. Please click on the following link to view the document:

http://www.rns-pdf.londonstockexchange.com/rns/5956N_1-2023-9-25.pdf

The Company has submitted a copy of its Half Year Report to the National Storage Mechanism and it will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism 

Enquiries:

Schroder Investment Management Limited

Augustine Chipungu                                                        020 7658 2106

Shilla Pindoria                                                                 020 7658 6000

John Spedding                                                               020 7658 3206

Half Year Report and Accounts for the six months ended 30 June 2023

Chair's Statement

Performance and Valuation

During the six month period to 30 June 2023, the net asset value ("NAV") per share decreased by 13.3% from 28.52p per share to 24.73p per share. The share price decreased by 18.9% from 15.47p to 12.55p in the same period. The share price discount to NAV per share widened from 45.8% to 51.3% during the period.

The main detractors to performance over the first half of the year included AI-enabled drug discovery and development company, BenevolentAI, which was further discounted because of a lack of liquidity in its listed shares; and clinical-stage private biopharmaceutical company, AMO Pharma, who 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.

More details on performance, valuation and portfolio activity can be found in the Manager's Report.

Cancellation of Share Premium Account

The cancellation of the share premium account and rectification measures in respect of share repurchases undertaken in 2022 and 2023 was approved by shareholders at the AGM on 21 June 2023 and by the court on 18 July 2023. A set of interim accounts was filed with Companies House showing that the Company now has sufficient distributable reserves, as at the period ended 24 July 2023, to commence the share repurchase programme detailed below.

Capital Discipline and Share Repurchases

The Company has appointed Winterflood Investment Trusts to manage an irrevocable share repurchase programme to buy back shares, subject to certain parameters in accordance with the Company's share buyback policy set out in the Company's annual report and accounts for the year ended 31 December 2022.

The Board intends 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.

As at 22 September 2023, the Company has repurchased 5,762,288 shares for cancellation. No shares are held in treasury. Accordingly, the total number of voting rights in the Company as at 22 September 2023 was 896,721,950.

Continuation Vote

As detailed in the Company's annual report and accounts for the year ended 31 December 2022, shareholders will have the opportunity to vote on the continuation of the Company at its AGM in 2025 and every five years thereafter. This will allow the Board and shareholders the opportunity to review the performance of the Manager over the five years since their appointment which the Directors consider to be an appropriate timeframe for the investment team to have repositioned the portfolio, including having made a number of new investments against which its performance can be assessed.

Change of Company Name, Auditor and Registrar

The Company changed its name to Schroders Capital Global Innovation Trust plc on 20 April 2023. The Company's new auditor, Ernst & Young LLP, was appointed at the AGM on 21 June 2023 and the change of registrar to Equiniti Limited was completed on 30 June 2023.

Board Composition

The Board welcomed Dr Lamia Baker as an independent non-executive Director with effect from 22 June 2023. Dr Baker has over 20 years of experience in business and technology with skill in intellectual property, sales, innovation, entrepreneurship, venture capital investment and representation on companies' boards. She is currently the managing director (UK) of Dennemeyer & Co Limited and Head of Commercial (EMEA) for Dennemeyer Group.

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 contribution to the Company.

Outlook

As of 30 June 2023, the Company had £31.0 million in cash and a further £52.1 million¹ invested in public equity investments, which will be utilised to meet the funding requirements of the existing portfolio, execute the buyback program, and selectively target new investments in innovative venture, growth and life science companies.

Notwithstanding the disappointments of BenevolentAI and AMO Pharma, our Manager remains focused on key priorities, rebalancing the portfolio and, in doing so, extracting maximum value from the Company's holdings. On 8 September 2023 the Board started a large programme to repurchase shares for cancellation and alongside this, Schroders Capital will continue to invest in private opportunities in line with the Company's global mandate and in keeping with the path followed by them for over 25 years.

¹ Excluding BenevolentAI which is fair value priced by the AIFM.

Tim Edwards

Chair

25 September 2023

Manager's Report

Summary

·    The Company reported a net asset value ("NAV") of 24.73p per share as of 30 June 2023, a decrease of 13.3% relative to the NAV share per share as of 31 December 2022 (28.52p) and a decrease of 6.1% relative to the NAV per share as of 31 March 2023 (26.35p).

·    There were three main detractors to performance over the half year period.

·    The listed share price of AI-enabled drug discovery and development company, BenevolentAI, declined by 61.4% and was further discounted because of a lack of liquidity in its listed shares. The Company's AIFM opted to increase the appropriate level of discount applied to the listed share price in its fair value assessment from 19.1% to 34.1%.

·    The clinical-stage private biopharmaceutical company, AMO Pharma 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.

·    The share price of Oxford Nanopore ("ONT"), the Company's largest holding, declined by 13.5% over the period. The company reported its FY22 results in March, detailing good underlying progress, however the share price remained weak throughout the remainder of the period.

·    Additional deferred cash consideration of £2.9 million was received as part of the sale of a basket of seven assets to Rosetta Capital which originally completed in March 2021.

·    Two new investments completed including AgroStar - an agricultural solutions platform for Indian farmers, and Carmot Therapeutics - a clinical stage biopharmaceutical company developing disease-modifying therapies for people living with metabolic diseases.

·    As of 30 June 2023, the Company had £31.0 million in cash and £52.1 million in public equity investments¹ to meet the funding requirements of the existing portfolio and execute the buyback programme.

·    On 20 April 2023, it was announced that the Company changed its name to Schroders Capital Global Innovation Trust plc to better reflect the emphasis on global private equity opportunities and to align with other funds within the Schroders Capital Global Innovation programme which Schroders Capital has been investing in for over 25 years.

¹ Excluding BenevolentAI which is fair value priced by the AIFM.

Introduction

Strategic update

The first half of 2023 has been challenging for the Company.

Day-to-day, our focus as Portfolio Manager continues to be on four key strategic areas:

1.     Work closely with portfolio company management teams, co-investors, and other stakeholders to support business growth and a path to profitability.

2.     Rebalance the portfolio ensuring the appropriate liquidity mix (cash and liquid public equities) to efficiently execute the buyback programme and support the portfolio.

3.     Maximise the sale proceeds from legacy holdings, both public and private, as part of the rebalancing exercise.

4.     Complete new investments that align with our new strategy to improve the maturity profile of the portfolio, build portfolio diversification, and place the fund closer to the path followed by Schroders Capital for over 25 years.

The current environment of inflation and interest rate headwinds, recession fears, weaker business confidence, subdued equity capital markets and slow fundraising and M&A activity, has made it particularly difficult for us to sell legacy private holdings. However, given the absence of a liquid secondary market for private companies, we continue to seek opportunities when possible as they arise.

We have made notable progress, particularly during the second quarter of 2023, in altering the liquidity mix to ensure the Company is appropriately positioned to execute the buyback programme efficiently and to support the existing portfolio. We have reduced the exposure to certain public holdings with the goal of reducing concentration risk, and positioning the portfolio to better align with the renewed focus on private equity. To this end, the Company realised £24.5 million over the 6 months to 30 June 2023, exiting public equity holdings in Johnson Matthey, Spirent Communications, Petershill Partners, as well as reducing the holdings in Oxford Nanopore, Immunocore and IDEX Biometrics. As of 30 June 2023, the Company had £31.0 million in cash and £52.1 million in public equity investments¹ that we believe should be sufficient to fund the buybacks for the balance of FY23 and meet the funding requirements of the existing portfolio.

With the portfolio in a strong liquidity position, we have been confident in continuing to pursue new investments in innovative global venture, growth, and life science companies. During the period, we announced two such investments, AgroStar, one of India's foremost agricultural technology start-ups, and US-based, clinical-stage biopharmaceutical company, Carmot Therapeutics. Further details of these companies are provided in the investment activity section of this report.

¹ Excluding BenevolentAI which is fair value priced by the AIFM.

Economic and market backdrop

Across developed economies, the six months continued to be dominated by the prospects for inflation and interest rates. The US Federal Reserve (Fed) raised interest rates three times in the period, taking the Fed Funds rate to 5.00-5.75%. The hikes came despite turmoil in the US banking sector in March, when three regional lenders collapsed. One of these - Silicon Valley Bank - was a key lender to the technology sector and start-ups in particular. The Company and its underlying investee companies had minimal exposure (as outlined in the Company's release on 15 March) and ultimately did not directly suffer from this collapse. The Fed paused its rate rises in June as data for May showed that US inflation was cooling. However, core inflation remained above the Fed's target rate and the labour market was still strong with unemployment at only 3.6% in May, suggesting further rate hikes may be required. In the UK, inflation remained elevated so that in June, the Bank of England accelerated the pace of its interest rate rises with a 50 basis point increase to 5.0%.

Global equity markets made gains over the period despite fears that rising inflation and interest rates could lead to recession in many developed markets. However, the resilient economic backdrop and some robust corporate earnings helped markets move higher. The MSCI World index returned 15.1% (in US dollar terms). The information technology sector led the gains with semiconductor stocks in particular performing well. This came in the wake of the release of Chat GPT and a wave of investor enthusiasm about the potential uses of generative artificial intelligence (Al). Other sectors that registered a strong advance included consumer discretionary and communication services. Laggards were energy and utilities.

Against this backdrop, global venture capital deal activity continued to fall in Q1 and Q2 2023, representing the fifth and sixth consecutive down quarters, with a year-on-year decline of 52% by value (from $270 billion in H1 2022 to $130 billion in H1 2023) and 36% by volume (from 21,855 deals in H1 2022 to 13,982 deals in H1 2023). This sees a return to the levels of deal activity seen prior to the COVID-19 pandemic. The number of mega-rounds - funding rounds of more than $100 million - which declined sharply in 2022, saw some stabilisation in the first quarter although weakened again in the second quarter resulting in a year-on-year decline of 59% by value (from $133.4 billion in H1 2022 to $55.3 billion in H1 2023) and 69% by volume (from 649 deals in H1 2022 to 200 deals in H1 2023). The market cooling was also evident as only 33 new unicorns were created in the first half year, moderately down on the 45 created in H2 2022, and a fraction of the 217 created twelve months earlier.

The environment for exits also saw continued weakness. The number of M&A transactions, the predominant exit route for venture backed businesses, declined 25% year-on-year (from 5,654 in H1 2022 to 4,214 in H1 2023) with a modest 7% decline from H2 2022 (from 4,522). The number of initial public offerings ("IPOs") was also notably weak declining 44% year-on- year (from 339 in H1 2022 to 189 in H1 2023) and 51% from H2 2022 (from 388).

Source for data: CB Insights Q2 2023 State of Venture Report.

Financial Performance

The NAV as of 30 June 2023 was £223.2 million, a decrease of 13.5% compared with the NAV (£257.9 million) as of 31 December 2022.

This 13.5% decrease in NAV comprised:

·   Public equity holdings: -7.4%%

·   Private equity holdings: -5.7%

·   Costs and other movements: -0.4%

The Company's public equity holdings saw a decrease in value of 19.7% contributing -7.4% to the decrease in NAV over the six-month period.

The listed share price of BenevolentAI decreased by 61.4% during the period. The company is reported as a public equity holding although fair value priced due to a lack of liquidity in the listed shares. During the period, the AIFM increased the size of the discount applied to the listed share price from 19.1% to 34.1% resulting in a 68.6% decline in the share price applied to the valuation (€0.89 per share). In April, the company announced 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.

Meanwhile, the share price of Oxford Nanopore ("ONT"), the Company's largest holding, declined by 13.5% over the half year. In March, the company announced its FY22 results detailing good underlying progress, however the share price remained weak throughout the remainder of the period. The results reported that revenues from Life Science Research Tools ("LSRT"), the most sustainable long-term revenue line, were up 16% year-on-year, with 30% underlying growth in the core customer base. After the period end, in September, the company released its half year results reaffirming revenue guidance for the year with 2023 LSRT revenue growth expected to be in the range 18-25% on a constant currency basis.

The public equity portfolio was also negatively impacted by smaller declines in the value of holdings which were either reduced or fully exited during the period including Spirent Communications, IDEX Biometrics, Petershill Partners and Johnson Matthey. On the positive side, shares in Autolus appreciated 25.3% following the announcement of positive clinical trial results for experimental therapeutics. AUTO4 demonstrated efficacy in the treatment of a blood cancer known as Relapsed/Refractory TRBC1-Positive Peripheral T-Cell Lymphoma in a phase 1/11 clinical trial and Obe-cell demonstrated efficacy with potential best-in- class safety in a pivotal phase 2 trial.

The Company's private equity holdings saw a decrease in value of 10.1% contributing -5.7% to the decrease in NAV over the six-month period. The largest detractor to performance was legacy holding AMO Pharma, an emerging biopharmaceutical business developing new treatments for serious and debilitating diseases, including rare genetic disorders. 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 (further information can be found in AMO Pharma's announcement). On the positive side, the portfolio benefitted from 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.

Foreign exchange

Over the period, the fair value of investments denominated in United States Dollar (USD), Euro (EUR), Swiss Franc (CHF) and Norwegian Krone (NOK) were negatively impacted by appreciation in the value of the British Pound Sterling (GBP).

Cash and debt

As at 30 June 2023, the Company had cash and cash equivalents of £31.0 million.

Investment activity:

Realisations

During the 6 months to 30 June 2023, the Company made realisations totalling £24.5 million. During the second quarter, we fully exited the public equity holdings in Johnson Matthey, Spirent Communications, Petershill Partners, and reduced the holdings in Oxford Nanopore, Immunocore and IDEX Biometrics. As of the period end, the proceeds from the sale of these holdings were held as cash pending commencement of the share buyback programme.

In the private equity portfolio, as mentioned earlier, 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 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.

Investments

During the 6 months to 30 June 2023, the Company made investments totalling £8.4 million including two new investments, AgroStar and Carmot Therapeutics, and a small follow-on investment in iOnctura.

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.

The Company's investment in AgroStar is in line with the Company's private equity sub-strategy of backing innovative growth businesses while utilising the Company's broadened global investment remit. Schroders Capital has known AgroStar for several years, having been an investor since 2021, and the company has demonstrated exceptional growth by combining technology with strong agronomy capabilities to play an important role in the Indian agricultural sector.

Carmot

The Company also 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 will 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 4 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 Therapeutics is the sixth investment in the Company's growing portfolio of new life science investments, at the clinical or near- clinical stage, and underpinned by high quality science. The portfolio managers believe that 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.

Outlook

We remain frustrated by the lack of selling opportunities in the current market environment, although we continue to work hard to create opportunities when underlying company progress allows. We continue to focus on rebalancing the portfolio to ensure the appropriate liquidity mix to efficiently execute the buyback programme and support the portfolio. In this context, we are closely monitoring the capital available for new investments, which remains dependent on the execution of the Board's buyback strategy, which is the priority. We see the current environment of slower fundraising activity and lower valuation expectations as a favourable one in which to deploy capital.

Tim Creed and Harry Raikes

Portfolio Managers

25 September 2023

Top 10 portfolio holdings

The Company's top 10 holdings as of 30 June 2023 are shown below, compared with the respective holdings as of 31 December 2022.

Portfolio's 3 largest positions: recent developments

Oxford Nanopore Technologies

Technology company at the forefront of next generation DNA sequencing instrumentation

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.

·    In March 2023, ONT announced its full year results for the period to 31 December 2023 outlining good operational and financial progress:

o Revenues for Life Science Research Tools ("LSRT", the main business line) up 16% year-on-year to £147 million with -30% underlying growth in the core customer base (excl. strategic accounts).

o Gross margin for the LSRT business increased to 56%, a good outturn given supply chain strains and increased component costs.

o 2023 LSRT revenue guidance marginally reduced to £170-190 million (16-29% growth).

o Closing cash balance of greater than £558 million, which should be adequate to fund the business to profitability by 2026.

·    In September 2023, ONT announced its interim results for the period to 30 June 2023 with highlights including:

o LSRT revenue of £86m, +22% yoy, +16% constant currency (H1 2022: £70.6m)

o Gross margin lower than expected (57% vs. 60%) due to the write-off of excess COVID sequencing kit and investment in computer upgrades offsetting improvements in manufacturing efficiency

o Adjusted EBITDA loss aligned with consensus         (adjusted EBITDA -£39.4 million, -14% yoy (H1 2022: -£34.6 million))

o Cash and equivalents of £484.6 million (31 Dec 2022: £558 million)

o Reiterated full year guidance for 2023

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 March 2023 reporting its first annual operating profit of £4.2 million. Key highlights include:

o Customer numbers increased 82% from 123,000 to 224,000 whilst maintaining industry leading customer reviews.

o 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.

o 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.

o 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.

o 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% reflecting an improving yield on new assets offset by the comparatively low yield on cash.

·    Since reaching a run rate of operating profit, Atom has the ability to maintain stable regulatory capital ratios, however it remains dependent on further fundraising to scale its balance sheet towards a level where its technology-enabled efficiency and operating performance advantages can be proven in the eyes of prospective investors.

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, the company announced that it had joined the Thermal Management for Hybrid Electric Regional Aircraft ("TheMa4HERA") 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, 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 ("ATI").

Investment Portfolio

As at 30 June 2023

The 20 largest investments account for 94.8% of total investments by value (30 June 2022: 92.9% and 31 December 2022: 93.4%).

Interim Management Statement

Principal Risks and Uncertainties

The Board has determined that the key risks for the Company are economic and market risk, strategy risk, valuation risk, operational risk, portfolio concentration risk, performance risk, liquidity risk, investee company specific risk, information technology and information security risk, key person dependency risk and ESG risk. These risks are set out on pages 37 to 42 of the Annual Report and Accounts for the year ended 31 December 2022.

The Board regularly monitors the Company's liquid assets since the recommencement of share repurchases. There is continued geopolitical and economic uncertainty. The Company's principal risks and uncertainties, and their mitigation, have not materially changed during the six months to 30 June 2023 or since the Annual Report was published on 17 April 2023.

Going concern

The Board has considered the Company's principal risks and uncertainties (including whether there are any emerging risks); has scrutinised the detailed cash flow forecast prepared by the Manager; and considered their assessment of the likelihood and quantum of funds which could be raised from sales of investments. As a result, the Board is comfortable that the Company will have sufficient liquid funds to pay operating expenses and capital commitments.

On this basis, the Board considers it appropriate to adopt the going concern basis of accounting in preparing the Company's accounts.

Related party transactions

There have been no transactions with related parties that have materially affected the financial position or the performance of the Company during the six months ended 30 June 2023.

Directors' responsibility statement

The Directors confirm that, to the best of their knowledge, this set of condensed financial statements has been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, in particular with Financial Reporting Standard 104 "Interim Financial Reporting" and with the Statement of Recommended Practice, "Financial Statements of Investment Companies and Venture Capital Trusts" issued in July 2022 and that this Interim Management Report includes a fair review of the information required by 4.2.7R and 4.2.8R of the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.

Income Statement

for the six months ended 30 June 2023 (unaudited)

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 loss for the period.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.

Statement of Changes in Equity

for the six months ended 30 June 2023 (unaudited)

for the six months ended 30 June 2023 (unaudited)

for the six months ended 30 June 2022 (unaudited)

for the year ended 31 December 2022 (audited)

Statement of Financial Position

at 30 June 2023 (unaudited)

Cash Flow Statement

for the six months ended 30 June 2022 (unaudited)

Notes to the Accounts

1.       Financial Statements

The information contained within the accounts in this half year report has not been audited or reviewed by the Company's independent auditor.

The figures and financial information for the year ended 31 December 2022 are extracted from the latest published accounts of the Company and do not constitute statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditor which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2.       Accounting Policies

Basis of accounting

The accounts have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, in particular  with Financial Reporting Standard 104 "Interim Financial Reporting" and with the Statement of Recommend Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" issued by the Association of Investment Companies in July 2022.

All of the Company's operations are of a continuing nature.

The accounting policies applied to these accounts are consistent with those applied in the accounts for the year ended  31 December 2022. In particular, the policy on valuation of investments is consistent with that detailed in note 1(b) to the accounts for the year ended 31 December 2022, presented on pages 74 and 75 of the annual report.

3.       Loss per share

The basic and diluted loss per share is the same because there are no dilutive instruments in issue.

4.       Investments held at fair value through profit or loss

(a)     Movement in investments

The Company received £24,530,000 (period ended 30 June 2022: £25,703,000 and year ended 31 December 2022: £40,148,000) from investments  sold in the period. The book cost of the investments when they were purchased was £42,111,000 (period ended 30 June 2022: £32,309,000 and year ended 31 December 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 period (unaudited)

¹Based on the closing holding at opening prices.

There have been no material disposals of unquoted investments during the period.

5.       Creditors: amounts falling due within one year

The Directors consider that the carrying amount of creditors falling due within one year approximates to their fair value.

6.       Called-up share capital

7.       Net asset value per share

8.       Disclosures regarding financial instruments measured at fair value

The Company's financial instruments within the scope of FRS 102 that are held at fair value comprise its investment portfolio.

FRS 102 requires that financial instruments held at fair value are categorised into a hierarchy consisting of the three levels below. A fair value measurement is categorised in its entirety on the basis of the lowest level input that is significant to the fair value measurement.

Level 1 - valued using unadjusted quoted prices in active markets for identical assets.

Level 2 - valued using observable inputs other than quoted prices included within Level 1.

Level 3 - valued using inputs that are unobservable.

The Company's investment portfolio was categorised as follows:

There have been no transfers between levels during the period ended 30 June 2023.

During the period ended 30 June 2021, Immunocore £23,410,000 transferred from Level 3 to Level 1 following its IPO on the NASDAQ.

During the year ended 31 December 2022, RM2 International £104,000 transferred from Level 3 to Level 1, following the conversion of RM2 International shares into ARC Group Worldwide shares.

9.       Events after the interim date that have not been reflected in the financial statements for the interim period

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 Directors have evaluated the period since the interim date and have not noted any other events which have not been reflected in the financial statements.