TIDMSSIT
RNS Number : 3021Q
Seraphim Space Investment Trust PLC
17 October 2023
SERAPHIM SPACE INVESTMENT TRUST PLC
("SSIT" or "the Company")
Full Year Results
Seraphim Space Investment Trust plc (LSE: SSIT), the world's
first S paceTech investment company, announces its audited results
for the financial year ended 30 June 2023.
The annual report can be found at: here , and the summary is
below:
Financial Summary
30 June 2023 30 June 2022 Change
--------------------------- ------------- ------------- -------
NAV GBP222.4m GBP239.3m -7.1%
NAV per share(1) 92.90p 99.97p -7.1%
Portfolio valuation GBP187.4m GBP186.1m 0.7%
Fair value vs. cost(1) 98.5% 104.3%
Market capitalisation GBP64.6m GBP126.9m -49.1%
Share price(1) 27.0p 53.0p -49.1%
-Discount/+premium(1) -70.9% -47.0%
Ongoing charges(1) 1.89% 1.72%
Number of shares in issue 239.4m 239.4m 0.0%
Liquid resources GBP35.3m GBP57.7m -38.8%
---------------------------- ------------- ------------- -------
(1) Alternative performance measure - see Alternative
Performance Measures on pages 160 to 161 of the annual report
Full Year Highlights
-- During the year, GBP4.9m was invested in six new portfolio
companies. GBP4.2m into two new additions to the Company's main
portfolio, with GBP0.7m into early-stage companies.
-- The Company completed GBP12.2m of additional follow-on
investments in eight companies (five in the main portfolio
totalling GBP10.7m and three early-stage, non-material companies
totalling GBP1.5m).
-- The top 10 portfolio companies saw their bookings increase by
199% on average over the year, with the average revenue growth
increase 34% (both on a fair value weighted basis).
-- Seven of SSIT's portfolio companies closed funding rounds at
higher valuations relative to previous rounds, versus only one at a
lower valuation (the remaining rounds were unpriced convertible
loan note issues).
-- Investment activity was robust, with a total of 11 companies
successfully closing funding rounds.
-- The majority of rounds were led by new external investors,
with SSIT participating in two-thirds of the rounds with the other
rounds being able to access the required funding from other
investors due to the strength of their syndicates.
Transactions Completed during the Full Year
Segment Type Cost
Company Sub-sector HQ (GBPm)
-------------------------------------------- ------------- --------------------- ------- --------------- -------
Voyager Beyond Earth Space Infrastructure US New Investment 2.1
Taranis Analyse Data Analytics Israel New Investment 2.1
PlanetWatchers Analyse Data Analytics UK Follow-on 2.5
D-Orbit Launch In-orbit Services Italy Follow-on 4.4
SatVu Platform Earth Observation UK Follow-on 2.1
New
4 early-stage(1) investments Investment 0.7
2 early-stage(1) , material investments Follow-on 1.7
3 early-stage(1) , non-material investments Follow-on 1.5
Total 17.1m
(1) These are very early-stage companies in which small
(typically less than GBP1m) initial investments are made and
provide early access to companies which could become candidates for
substantial growth investment in subsequent rounds should they
progress strongly.
Post Period Highlights
-- Since 30 June 2023, the Company has invested a total of
GBP4.1m, with GBP3.3m in follow-on funding into three existing
portfolio companies and GBP0.9m into two new early-stage
investments.
-- On 13 July 2023, the Company announced a share repurchase
programme. In the period to 8 September 2023, the Company bought
back a total of 2,186,344 shares (0.9% of the shares in issue at 12
July 2023) at an aggregate cost of GBP1.0m or 45p per share.
Will Whitehorn, Chair of Seraphim Space Investment Trust plc,
commented : "The SSIT portfolio is well-positioned given the strong
global tailwinds of increased defence spending and the continued
investment into solutions to address the climate and sustainability
agenda. The top 10 portfolio companies saw their bookings increase
by 199% on a fair value weighted average basis over the year.
Therefore, these companies have solid contracted orders for the
years ahead, providing great confidence to investors.
Encouragingly, we have seen some well-known private equity
investors, such as KKR, Advent and BlackRock, entering the sector
to build their SpaceTech exposure and indicating interest from new
investor groups. Given their broad mandate to invest across
sectors, their focus on space gives us confidence of increasing
growth aspirations for the domain. Furthermore, with significant
amounts of dry powder (capital which has been committed to but not
yet invested by investment vehicles) sat in impact and climate
funds from across the globe, we remain confident that there is a
large and growing pool of motivated capital to support the needs of
companies in the SSIT portfolio in the years ahead.
We have reserved cash to support portfolio fundraisings as
required in the year ahead, leaving a modest sum for new investment
until the market improves and more capital can be raised. Some of
the best investments are undertaken at the bottom of the economic
cycle. The SSIT deal flow pipeline is healthy and, given cash
constraints, we are focused on participating in only the most
exceptional opportunities, carefully selecting those with a strong
growth premise that offer the highest returns for
shareholders."
James Bruegger, Chief Investment Officer, Seraphim Space Manager
LLP, said : "We are delighted with the progress the portfolio has
made during the period. The portfolio has proven itself adept at
successfully accessing capital at a time when the wider funding
raising environment has been challenging. It is particularly
gratifying that many of these companies have closed funding rounds
led by new investors and on improved terms relative to their
previous funding rounds. The success in capital raising across the
portfolio is in no small part due to the impressive commercial
traction achieved allied to the scale of the opportunities these
companies are addressing. With the majority of the portfolio now
well-funded through the next 12--18 months, we are excited to see
what will be achieved over the year ahead."
Mark Boggett, Chief Executive Officer, Seraphim Space Manager
LLP, said: "We remain confident with the outlook for the space
domain globally as well as the SSIT portfolio, consisting of
best-of-breed SpaceTech companies. We continue to enjoy the
privileged position of seeing the majority of the sector's global
deal flow. This provides an information asymmetry over the sector
that informs our every move.
With the secular trends relating to global security, food
security, climate change and sustainability expected to accelerate,
we believe the Company is well-positioned to take advantage of the
resultant opportunities. We anticipate that demand for the products
and services of the Company's portfolio companies, particularly
from governments, should result in the portfolio delivering strong
growth metrics.
As of 13 October 2023, cash was GBP29.4m, with a potential
further GBP3.0m of liquidity available in the holdings of listed
companies. We believe this liquidity should be sufficient to
provide the necessary levels of support to the portfolio over the
course of the next 12 months. Whilst we expect to continue to
diversify the portfolio with selective new investments, uncertainty
around the timing of market recovery (and, therefore, our ability
to raise new equity capital) means that the size of new investments
will likely be small, with investment activity expected to be more
weighted in favour of supporting the existing portfolio until a
time when the market provides the appropriate conditions to
fundraise."
A copy of the Annual Report has been submitted to the National
Storage Mechanism and will shortly be available for inspection here
.
Results Presentations
The Company will also be hosting a virtual presentation for
analysts at 9.00am today and an online presentation for retail
investors at 11.00am. To register for either event, please contact
SEC Newgate at seraphim@secnewgate.co.uk .
Capital Markets Day
The Company is hosting a Capital Markets Day in London for
institutional investors and equity analysts at 15:00pm on
Wednesday, 18 October 2023.
Institutional investors and equity analysts can register for the
in-person event by contacting Deutsche Bank/J.P. Morgan Cazenove or
by emailing SEC Newgate at seraphim@secnewgate.co.uk
Following the announcement of the results, no new material
information will be disclosed at the event.
- Ends -
Media Enquiries
Seraphim Space Manager LLP (via SEC Newgate)
Mark Boggett, CEO / James Bruegger, CIO / Rob Desborough
SEC Newgate (Communications advisers)
seraphim@secnewgate.co.uk
Emma Kane / Clotilde Gros / George Esmond
+44 (0) 20 3757 6767
Deutsche Numis
Mark Hankinson / Gavin Deane / Neil Coleman
+44 (0) 20 7545 8000
J.P. Morgan Cazenove
William Simmonds / Jérémie Birnbaum / Rupert Budge
+44 (0) 20 7742 4000
Ocorian Administration (UK) Limited
seraphimteam@ocorian.com
Lorna Zimny
+44 7387 971915
Notes to Editors:
About Seraphim Space Investment Trust plc
Seraphim Space Investment Trust plc (the "Company") is the
world's first listed fund focused on SpaceTech. The Company seeks
exposure predominantly to early and growth stage private financed
SpaceTech businesses that have the potential to dominate globally
and that are sector leaders with first mover advantages in areas
such as climate, communications, mobility and cyber security.
The Company is listed on the Premium Segment of the London Stock
Exchange.
Further information is available at:
https://investors.seraphim.vc
Please note that the Glossary below provides definitions for
defined terms used through the Annual Report.
Investment Manager
The Company is managed by Seraphim Space Manager LLP (the
'Investment Manager' or 'Seraphim Space'), the world's leading
SpaceTech investment group. The Investment Manager's team consists
of seasoned venture capitalists and some of the space sector's most
successful entrepreneurs who scaled their businesses to
multi-billion Dollar outcomes.
The Investment Manager has supported more than 100 SpaceTech
companies across its fund management and accelerator activities
since 2016 and has a proven track record of delivering value.
Positioned at the heart of the global SpaceTech ecosystem, the
Investment Manager has a unique model, using information asymmetry
generated from its global deal flow, partnerships with leading
industry players and primary research to back the most notable
emerging SpaceTech companies shaping a new industrial
revolution.
The Investment Manager is a signatory to the UN Principles for
Responsible Investment ('UN PRI'). Its first UN PRI report is due
in 2024.
Key Highlights
For the year ended 30 June 2023
Average portfolio company revenue growth (1) Average portfolio company bookings growth (1)
34% 199%
Investment into new portfolio companies Follow on investments
GBP4.9m GBP12.2m
Key Performance Indicators
For the year ended 30 June 2023
NAV per share movement (2) Share price movement (2)
-7.1% -49.1%
Discount (as at 30 June 2023) (2) Ongoing charges (2)
70.9% 1.89%
Fair value vs. initial cost (as at 30 June 2023) (2)
98.5%
1) Fair value weighted average (as defined in the Glossary)
year-on-year growth for the 12 months ended 30 June 2023 of the top
10holdings, representing 86% of fair value (72% of NAV) at the year
end. Source: Portfolio company data.
(2) Alternative performance measure - see Alternative
Performance Measures below.
Sector Highlights
The year ended 30 June 2023 was another year of breakthroughs
for the space sector. It was marked by new scientific boundaries
being pushed, SpaceTech's central role in geopolitics being
reinforced, Big Tech (the most dominant and largest technology
companies) further embracing satellite communications,
multi-billion Dollar mergers and acquisitions and concerted efforts
to protect the sustainability of space.
-- Jul-22: First images from James Webb Space Telescope
-- Sep22: NASA DART mission alters trajectory of asteroid
-- Oct-22: Construction of the Chinese Space Station completes
-- Nov-22: Apple/Globalstar deal establishes direct to smartphone satcoms
-- Nov-22: Successful first launch of NASA's Space Launch System
(SLS), marking the first step in the next era of lunar
exploration
-- Nov-22: Satcoms operator Eutelsat announces plans to merge
with 'mega constellation' OneWeb for $3.4bn
-- Dec-22: New US Federal Communication Commission rules on
de-orbiting all space craft within five years of end of life
-- Dec-22: Private Equity group, Advent International, acquires Maxar for $6.4bn
-- Apr-23: SpaceX attempts first launch of its next generation
Starship launch vehicle that is projected to decrease launch costs
by a further 10x
-- Apr-23: Virgin Orbit files for bankruptcy following its failed launch in Jan-23
-- May-23: Satellite operators Viasat and Inmarsat complete $7.3bn merger
Sizeable Markets Addressed by Space
Size of the Opportunity
The space industry has evolved beyond the confines of
traditionally being classified within 'aerospace and defence', with
the utilisation of space data in large, well-established
terrestrial markets. Telecommunications, navigation and
transportation represent the most significant opportunities, after
defence, in the near term, and have become increasingly reliant on
space-based assets to drive business.
With climate change taking centre stage among global priorities,
earth observation data has played a crucial role in monitoring the
planet. With meteorology heavily reliant on space technology for
weather forecasting, space data has also helped us better monitor
deforestation and the health of oceans and ecosystems. Satellites
equipped with multispectral and hyperspectral imaging sensors can
detect and map mineral deposits, oil reserves and vegetation
health.
As the applications of space data remain diverse, a common
factor among all of them is that SpaceTech has brought a welcome
move of modernisation to traditionally large markets slow to
innovate. From a venture perspective, large markets such as
telecommunications and navigation remain ripe for disruption by new
technologies.
The global space economy is valued at $386bn, with 72% of this
attributed to the satellite industry and its downstream
applications. This sub-sector is well-represented across SSIT's
portfolio with 57% of companies operating within satellite
services.
Investment Activity
Seraphim Space tracks global venture capital activity within the
SpaceTech market. Collating information drawn from both public and
private sources on individual transactions, Seraphim Space
publishes a quarterly SpaceTech venture capital index (the
'Seraphim Space Index') that provides insights into the latest
trends in the SpaceTech investment market. The charts in the annual
report are drawn from this index .
-- SpaceTech venture capital investment for the 12 months ending
June 2023 totalled $4.5bn, down from $9.2bn the previous year.
However, this decline is primarily attributable to unusually large
funding rounds in CY21 and CY22 such as those by SpaceX1 and Sierra
Space(2) . Excluding these, investment activity was down less than
one third compared to the previous period.
-- The sector has shown strong signs of recovery in the first
half of CY23, where there was a 57% increase in investment compared
to the second half of CY22.
-- The overall number of deals in the sector has increased this
year, underlining a robust early stage investment environment.
Early stage investments reached an all-time high, with 257 deals in
Q2 CY23, showing that investor interest remains strong at Seed and
Series A.
-- The number of late stage investments also saw a notable
uptick in H1 CY23, particularly in Series C deals in Q2 CY23,
reinforcing growing investor confidence in established SpaceTech
companies.
(1) SpaceX raised $1.16bn in Q2 CY21, $1.72bn in Q2 CY22 and
$750m in Q1 CY23.
(2) Sierra Space raised $1.4bn in Q4 CY21.
Trailing 12 Months Spacetech Investment Activity Index
-- The Seraphim Space Index serves as an investment activity
barometer, indexing global SpaceTech VC deals against Q1 CY18.
-- Investment activity peaked at an index value of 417 in Q2
CY21 and remained strong through Q3 CY22, declining to 178 in Q2
CY23 due to less growth investing.
-- Despite general market declines affecting SpaceTech,
underlying startup activity continues to reach new heights with 301
deals in Q2 CY23, indicating robust sector health.
Spacetech Annual Cumulative Investment Tracker ($bn
invested)
-- H1 CY23 showed a SpaceTech investment rebound, marked by a
resurgence in growth deals absent in H2 CY22.
-- Notable funding rounds included SpaceX's $750m, Astranis'
$200m, and Isar Aerospace's $165m, signaling renewed investor
interest.
-- Despite being down due to weak H2 CY22, trailing 12 months'
data shows early signs of recovery.
-- Even though H1 CY23 investment lagged behind CY21 and CY22,
it still outpaced all previous years, confirming enduring market
strength.
Trailing 12 Months Spacetech Investment by Sub-Sector ($bn)
-- From CY17 to CY22, the Platform segment led in venture
capital investment, primarily funding next-gen communications and
earth-sensing networks.
-- Investment is now more diversified across the SpaceTech
ecosystem, with rising interest in newly emerging sectors like
Beyond Earth.
Number of Spacetech Deals by Region (12 Months Ended Q2 CY)
-- Europe surpassed the US in Q1 CY23 investment, marking an early recovery in the region.
-- The US regained its lead in Q2 CY23, but Europe still saw a
60% surge in deal numbers year-over-year.
-- Asian investment also showed robust growth, increasing by 79% over the prior year.
SpaceTech VC activity compared to general technology VC
activity
-- Compared to the broader technology venture capital landscape,
SpaceTech has shown superior performance when indexed against Q1
CY18.
-- Despite a 50% drop in investment from CY22 peaks, SpaceTech
investment is still over twice its Q1 CY18 levels, whereas general
technology VC investment is at 1.25x.
-- SpaceTech has demonstrated greater resilience amid
macroeconomic uncertainty, contrasting with broader technology VC
trends.
-- The sector's resilience is evident in its growing deal
activity, in stark contrast to five quarters of decline in general
technology.
Chair's Statement
'SSIT addresses two of the biggest threats we collectively face
over this decade: firstly, geopolitical tensions and the
ever-present potential for escalation of war and, secondly, the
growing symptoms of climate change, including increasing instances
and severity of wildfires, flooding and hurricanes. Our portfolio
companies are delivering innovative ways to gather unique datasets
about our planet in high resolution from space and then applying AI
to create insightful solutions. The portfolio is largely
well-capitalised following robust fundraising activity, with a
total of 11 companies successfully closing funding rounds, the
majority led by external investors and priced higher than previous
rounds. This positive activity demonstrates the continued strength
of the SSIT portfolio and the increasing market recognition of its
potential.
In July 2023, the Board commenced a share repurchase programme
which has resulted in a share price recovery to a discount level
comparable to our broader peer group. We have confidence that
underlying portfolio performance will instil confidence in investor
sentiment going forward.'
Will Whitehorn
Chair
I am pleased to present the Annual Report of Seraphim Space
Investment Trust PLC for the year ended 30 June 2023.
I would like to thank all shareholders for their continued
support during the challenging macroeconomic climate of
2022/23.
Progress in the Year
GBP4.9m was invested in six new portfolio companies during the
year, two of which were sourced through accelerator programmes
managed by an affiliate of the Investment Manager. In addition, a
further GBP12.2m was deployed as follow-on investments in eight
existing portfolio companies during the year.
Highlights include the following:
-- World firsts : Several portfolio companies achieved major
milestones showcasing new capabilities that set the path for the
space sector's future:
o AST SpaceMobile (NASDAQ: ASTS) successfully demonstrated its
ability to deliver space-based cellular communications at 4G speeds
direct to unmodified smartphones, marking a major development in
the convergence of space-based and terrestrial connectivity.
o SatVu (formerly Satellite Vu) successfully launched 'HOTSAT
1', its first smallsat capable of measuring the thermal footprint
of any building on the planet. This marked an important step in
space's critical role in helping the world achieve Net Zero.
o Tomorrow.io successfully launched its first two miniaturised
radar satellites for collecting real time precipitation data to
turbo charge global weather forecasting capabilities.
o Xona was the first private company ever to launch a GPS
satellite which demonstrated its ability to provide
centimetre-level user positioning with its proprietary satellite
hardware and software stack.
-- Traction : Buoyed by a spike in demand by governments for
commercial space capabilities to enhance global security and combat
climate change, several portfolio companies witnessed record
contract wins:
o ICEYE's deal with Bayanat to provide five of its SAR
satellites to the United Arab Emirates.
o D-Orbit closing multi-million Euro contracts with the European
and Italian Space Agencies.
-- New additions, new horizons : The six new companies invested
in during the year have reinforced the Company's focus on the
intersection of space technology and climate change, alongside
first forays into the opportunities presented by space to the life
sciences sector.
At the year-end, the Company's portfolio consisted of 30 active
SpaceTech companies with an aggregate fair value of GBP187.4m and
its cash reserves were GBP35.3m.
The war on Ukraine and the global macroenvironment have had a
significant impact on global capital markets. As a consequence, the
Company continued to implement its decision to reserve cash by
deliberately slowing the pace of deployment in order to follow its
rights in key existing portfolio companies whilst also continuing
to actively seek to invest smaller ticket sizes in new target
companies. As outlined in the Investment Manager's Report, overall,
the portfolio continues to be well-capitalised, with a significant
number of portfolio companies completing funding rounds during the
year.
NAV
A reduction in the fair value of the portfolio caused the NAV
per share to decrease by 7.1% over the year, from 99.97p to 92.90p
at 30 June 2023.
The private companies in the portfolio, which accounted for
86.7% by number and 97.4% by fair value of the portfolio (2022:
87.1% by number, 90.0% by fair value), represented GBP182.6 million
of NAV (2022: GBP167.5 million) and continued to be relatively
stable in aggregate over the year, despite the challenging
macroeconomic environment. 11 completed funding rounds during the
year, only one of which was priced at a lower price than the
previous round. The fair value of the private companies in the
portfolio was 119.2% of cost (2022: 122.5%) or 122.9% excluding FX
impact (2022: 117.1%). A combination of underperformance against
expectations, limited cash runways and lower priced funding rounds
led to write downs of PlanetWatchers, ALL.SPACE, Altitude Angel,
Edgybees, Xona Space Systems and LeoLabs, which was more than
offset by mark-ups of SatVu, D-Orbit, ICEYE, Astroscale and HawkEye
360 in the main portfolio and also two early stage companies. The
Investment Manager's Report includes a more detailed review of the
performance of portfolio companies.
The listed element of the portfolio (13.0% in fair value vs.
cost (2022: 44.7%)) continued to experience reducing share prices.
We continue to believe that this is distinct from the performance
of the private portfolio, and continues to be in line with other
companies which went public via mergers with special purpose
acquisition companies ('SPACs'), precipitated by rising interest
rates, global energy prices, high inflation and the war on Ukraine,
as well as being driven by fundraises at two of the companies which
put pressure on their share prices.
Continued strengthening of Sterling against the US Dollar over
the year resulting in GBP6.8m in FX loss in the year (2022:
GBP16.8m gain).
Share Price
The Company's share price continued to fall over the year driven
by significant volatility experienced by global stock markets in
2022/23. In particular, the heavy falls suffered by growth and
smaller technology stocks and alternative investment vehicles,
which continue to be depressed, has also impacted the broader peer
group. The NAV per share has remained more resilient, in line with
performance of the underlying private portfolio companies which
continue to develop their products and services. At 30 June 2023,
the share price was 27.0p, a decrease of 49.1% from 53.0p at 30
June 2022.
SSIT underperformed the peer group, particularly in relation to
its share price, over the period, although the share price recovery
since the year-end has led to significant improvement, with SSIT
outperforming its peer group since early August 2023, as shown in
the chart in the annual report.
The share price as at 30 June 2023 represented a 70.9% discount
to NAV, a further decline from the 47.0% discount as at 30 June
2022, and an implied 84.2% discount to the fair value of the
portfolio (once cash on balance sheet is discounted) (2022: 62.8%).
The Board continues to believe this does not reflect the
performance of the portfolio or how downside protections in
well-capitalised companies are effectively protecting shareholder
value (see the Investment Manager's Report for more detail). Post
the year-end, the share price decline continued, reaching a low of
26.1p on 12 July 2023. The Company announced a share repurchase
programme on 13 July 2023 and the share price has improved to 39.5p
on 13 October 2023.
Earnings and Dividend
The Company made a revenue loss after tax of GBP4.5m for the
year, equal to -1.88p per share.
The Company is focused on achieving capital growth over the long
term. Given the nature of the Company's investments, we do not
anticipate recommending to pay a dividend in the foreseeable
future.
Responsible Investment
The Board is keen to demonstrate the Company's commitment to
responsible investing through objective reporting metrics for ESG
factors. The Investment Manager continues to use its proprietary
due diligence tool in order to assess sustainability opportunities
and ESG risks associated with each potential investment, and has
been able to identify risks that have led it to turn down
opportunities in the year, as well as to identify opportunities
that portfolio companies can take advantage of in order to deliver
positive ESG and sustainability impacts.
Board
From the Annual General Meeting which took place on 13 November
2022, Angela Lane succeeded Christina McComb as Chair of the Audit
Committee and Christina succeeded me as Chair of the Management
Engagement Committee.
Availability of Annual Reports
In the interests of the environment and for ease of access,
Annual Reports are available on the Company's website and can be
viewed and downloaded at https://investors.seraphim.vc/ . Copies of
Annual Reports will only be available on request.
Annual General Meeting
The AGM of the Company will be held at 12.00 p.m. on 20 November
2023 at Seraphim Space's offices, 1 Fleet Place, London, EC4M 7WS
(GPS postcode EC4M 7RA). The AGM will include a presentation from
the Investment Manager (a video of the presentation will be added
to the website as soon as practicable after the AGM). Details of
the resolutions to be proposed at the AGM, together with
explanations, will be included in the notice of meeting to be
distributed to shareholders on 19 October 2023. As a matter of good
practice, all resolutions will be conducted on a poll and the
results will be announced to the market as soon as possible after
the AGM.
The Directors and representatives of the Investment Manager will
be available at the AGM (either in person or via video conference)
to answer shareholder questions. We do recognise that some
shareholders may be unable to come to the AGM and, if you have any
questions about the Annual Report, the investment portfolio or any
other matter relevant to the Company, please write to us via email
at seraphimteam@ocorian.com or by post to The Company Secretary,
Seraphim Space Investment Trust PLC, 5(th) Floor, 20 Fenchurch
Street, London, EC3M 3BY. If you are unable to attend the AGM, I
urge you to submit your proxy votes in good time for the meeting,
following the instructions on the proxy form. If you vote against
any of the resolutions, we would be interested to hear from you so
that we can understand the reasons behind any objections.
Events After the Year End
As mentioned under 'Share Price' above, the Company announced a
share repurchase programme on 13 July 2023. The weighted average
share price at which the shares were brought back represents a
discount of 51% to the NAV per share at 30 June 2023. In the period
to 13 October 2023, the Company bought back a total of 2,186,344
shares (0.9% of the shares in issue on 12 July 2023) at an
aggregate cost of GBP1.0m. The shares bought back are being held in
treasury. The closing share price on 13 October 2023 was 39.5p, an
increase of 51% from the closing share price of 26.1p on 12 July
2023.
Since 30 June 2023, five further investments (two new
investments and three follow-on investments) have been concluded
for an aggregate cost of GBP4.1m, and terms have been agreed on
another potential addition to the portfolio. A further additional
potential investment is in due diligence.
On 7 October 2023, conflict broke out between Israel and
Palestine. We are working with the Israeli companies in the
portfolio to support them as necessary, but there has been limited
impact to date.
Outlook
The Board continues to believe that the SSIT portfolio is
well-positioned given the strong global tailwinds of increased
defence spending and an openness to adopt solutions to address the
climate and sustainability agenda. The top 10 companies saw their
bookings increase by 199% on average1 over the year. Therefore,
these companies have solid contracted orders for the years ahead,
providing great confidence to investors.
Encouragingly, we have seen some well-known private equity
investors, such as KKR, Advent and BlackRock, entering the sector
to build their SpaceTech exposure and indicating interest from new
investor groups. Given their broad mandate to invest across
sectors, their focus on space gives us confidence of increasing
growth aspirations for the domain. Furthermore, with significant
amounts of dry powder (capital which has been committed to but not
yet invested by investment vehicles) sat in impact and climate
funds from across the globe, we remain confident that there is a
large and growing pool of motivated capital to support the needs of
companies in the SSIT portfolio in the years ahead.
We have reserved cash to support portfolio fundraisings as
required in the year ahead, leaving a modest sum for new investment
until the market improves and more capital can be raised.
Experience demonstrates that some of the best investments are
undertaken at the bottom of the economic cycle. The SSIT deal flow
pipeline is healthy and, given cash constraints, we are focused on
participating in only the most exceptional opportunities, carefully
selecting those with a strong growth premise that offer the highest
returns for shareholders.
Will Whitehorn
Chair
16 October 2023
(1) Fair value weighted average (as defined in the Glossary)
year-on-year growth for the 12 months ended 30 June 2023 of the top
10 holdings, representing 86% of fair value (72% of NAV) as at 30
June 2023. Source: Portfolio company data.
Investment Manager's Report
'In a challenging and volatile macroeconomic environment, our
portfolio companies have demonstrated resilience and leadership,
resulting in strong revenue (+34%) and bookings growth (+199%).
We've been heartened by the support from both existing
co-shareholders and new investors, reflecting a flight to quality
during uncertain times. This year, 11 portfolio companies
successfully raised funding, with the majority led by new external
investors, and we actively participated in two-thirds of these
rounds. Our portfolio's valuations have remained robust, with a
fair value of GBP187.4m, experiencing a marginal 0.7% year-on-year
increase. The structuring of investments using a combination of
preference shares and anti-dilution protection has made us less
susceptible to short-term fluctuations in enterprise value.
During the year, the Company invested GBP4.2m into two additions
to the Company's main portfolio, Taranis and Voyager. We also
continued to support the portfolio companies in which we have the
highest conviction, investing GBP12.2m in eight companies, split
between our main portfolio (GBP10.7m) and early stage, non-material
positions (GBP1.5m). The cash position within the portfolio is
robust with 20 months of cash runway on average in the private
portfolio. Looking ahead we remain focused on essential follow-on
investments and smaller transactions, as we prioritise cash
preservation in the current economic climate. Overall, we remain
committed to our strategy and are confident in the performance
outlook of our portfolio.'
Mark Boggett
CEO , Seraphim Space
Overview
We moved to a slower rate of deployment in Q1 CY22 and
established a framework to preserve cash, support the portfolio and
continue to make limited new investments. This strategy has played
out in line with expectations, and we have been encouraged by both
the performance of the underlying portfolio companies and the
continued appetite of co-shareholders and new investors to support
the capital needs of the portfolio companies. In challenging times
there is always a flight to quality, and we can confidently assert
that many portfolio companies have extended their leadership
positions during this more challenging and volatile macroeconomic
period and are delivering strong revenue and bookings growth, as
they address strong demand for their products and services. The
value of the Company's investments has been robust, with the
portfolio fair value at GBP187.4m, up 0.7% year-on-year. As
explained below, 11 portfolio companies raised funding, with the
majority of rounds led by new external investors. SSIT participated
in two-thirds of the rounds. Seven of the rounds were made at
higher valuations relative to previous rounds, one was flat and one
was lower, with the remainder being unpriced convertible loan
notes. This positive investment activity demonstrates the continued
strength of the portfolio companies and the increasing market
recognition of their potential.
This also brings into sharp focus the underlying investment
structuring employed across the portfolio, including liquidation
preference and anti-dilution clauses, which is an important part of
our investment toolset. This approach to structuring makes SSIT
less vulnerable to short-term negative fluctuations in the
enterprise value of a portfolio company. In the case of liquidation
preference, the last monies invested stand first in line to get
back the original subscription price paid before any other prior
round shareholders are paid. Anti-dilution provides for additional
shares to be issued to rebalance the stake in a company in the
event that future rounds are undertaken at a lower share price.
Portfolio valuation methodologies
92.6% of the portfolio by fair value is valued using either
available market price or an enterprise value that has been
recalibrated in the last three months.
Downside protection
An important consideration in relation to valuation is the
structuring of individual investments. We routinely seek to obtain
downside protection measures across the private companies within
the portfolio via preference shares, rather than common equity. All
the top 10 private companies in the portfolio are structured via
preference shares with weighted average anti-dilution protection
and/or liquidation preference.
Preference shares sit above common equity in the capital
structure in the event of a liquidity event, but below creditors
such as banks. Preference shares offer more defensive exposure to
an asset with their 'liquidation preference'. Liquidation
preference provides a prioritised return ahead of other previously
issued share classes, which means value can be preserved even in
scenarios where a business is sold at a far lower valuation than
that used to make the investment.
Anti-dilution rights retrospectively amend the price paid or the
number of shares owned where a subsequent funding round is done at
a lower valuation (a down round). These measures can help mitigate
dilution in the event of a down round, but it rarely results in no
dilution. Additional shares are often issued at par to ensure that
the shareholdings of existing investors are at least partially
protected in a down round. We typically apply weighted average
dilution, which provides a proportion of adjustment and less
protection, but still a better outcome than if no anti-dilution
measures were applied in the event of a down round.
Downside protection afforded by liquidation preferences means
that, relative to the most recent valuation event used to calculate
fair value, valuations within the top 10 holdings would on average
need to fall by more than 30.0% before fair value would fall below
cost (on a fair value weighted basis). The chart in the annual
report shows how much the enterprise value of each company in the
top 10 private companies (on an anonymised basis) would need to
fall in order to return cost. In order to deliver cost, companies 9
and 10 need to see an increase in enterprise value, as their
enterprise values are currently below cost.
Applying sensitivities of a 10-50% reduction in the enterprise
values of the top 10 holdings results in an implied NAV per share
of 70p to 93p.
Preference shares
What are they?
-- Class of shares that rank senior to ordinary shares/common stock.
-- 'Liquidation preference' provides for priority return ahead
of other previously issued classes of shares.
How do they work?
-- Ranks junior to debt and, typically, future issues of
preference shares, but senior to ordinary shares/other classes of
existing shares.
-- At exit, holder receives amount - normally equivalent to 1x
return - ahead of any other proceeds being distributed to junior
ranking shares.
What is their purpose?
-- Protect value of investment.
-- Provide downside protection by potentially delivering 1x return in low exit scenarios.
Enterprise value recalibrations
Proportion of fair value where EV was recalibrated in Top 10 private companies' EV change 1 in the year
the 3 months to 30 June 2023 4.8%
92.6%
Number of portfolio companies that were existing Number of portfolio companies that were existing
portfolio companies at the start of the year portfolio companies at the start of the year
and raised a priced round in the year and raised a priced round post the year end
9 4
(1) Fair value weighted average (as defined in the Glossary)
year-on-year change for the 12 months ended 30 June 2023 of the top
10 holdings, representing 86% of fair value (72% of NAV) as at 30
June 2023
The chart in the annual report shows, on an anonymised basis,
the percentage change in the underlying EV of each of these
companies for the year ended 30 June 2023. Changes in EV relate to
either new funding rounds or adjustments from quarterly valuation
recalibration exercises. It is worth noting that, as a result of
the downside protections in place, most particularly liquidation
preferences, where there were reductions in underlying EV, these
have not necessarily translated directly into commensurate
reductions in fair value. Therefore, while the underlying EV of the
private companies within the top 10 holdings has increased by 4.8%,
the aggregate fair value has increased more, 8.5% (both on a fair
value weighted average basis).
The chart in the annual report shows the fair value changes for
the top 10 holdings from 1 July 2022 to 30 June 2023. Amounts below
the axis are reductions in fair value.
As explained above, more recently we have seen an uptick in the
number of new funding rounds being raised. Portfolio companies
representing more than 60% of the fair value of the portfolio were
existing companies at the start of the year and managed to raise a
priced round during the year or post the year end. Of the nine
priced funding rounds completed during the year, seven were priced
higher than the previous round, one was priced lower and one was
flat. We believe this indicates improvement in the market.
Investment Activity
Year ended 30 June 2023
In light of global markets and the continued share price
discount restricting the ability to raise additional capital, we
slowed down the pace of investment significantly from the beginning
of 2022. The chart in the annual report shows the number of deals
done in the year ended 30 June 2023 vs. the previous year. The
number of follow-on investments remained relatively constant. New
investments and late stage (Series B+) deals were both lower than
in the year ended 30 June 2022 as we focused on required follow-on
investments and favoured smaller transactions due to the need to
preserve cash in the current environment.
New investments
During the year, the Company invested GBP4.2m into two additions
to the Company's main portfolio (Taranis and Voyager) and funded
the investment in Tomorrow.io which had closed at the end of the
previous financial year. In addition, there were four new
investments into early stage portfolio companies for a total of
GBP0.7m.
Taranis is an agriculture-focused AI company that uses earth
observation data to optimise crop yields and increase global food
supply. Taranis is improving agricultural efficiency by providing
insights to growers on field health. Taranis uses satellite and
drone imagery, in combination with its extensive library of crop
health indicators, for early detection of disease or nutrient
deficiencies. These accurate and local assessments improve crop
yields by better tailoring the use of fertilisers and pesticides.
In August 2022, the Company completed a $2.5m (GBP2.1m) investment
in Taranis' Series B investment round. Taranis received investment
from numerous top Israeli venture and growth investors. With this
round, Taranis will build out its US sales capability, and gain
early traction with its new carbon monitoring product.
Voyager is a next generation Space Prime that is developing
Starlab, a free flying space station. Starlab will provide the
facilities to host public and private astronauts, as well as
forming the critical infrastructure required to support research,
development and manufacturing in space. The Company completed a
$2.5m (GBP2.1m) investment into Voyager's Series B investment round
in July 2022. Voyager intends to use the funds raised to continue
to finance the development of Starlab and expand its capabilities
through strategic M&A.
New investment case study: Tomorrow.io
Investment Tomorrow.io is revolutionising weather forecasting
thesis by enabling companies across industries to easily
build, standardise and automate weather-related
operating protocols. This is possible through high-accuracy,
hyperlocal short-term forecasts that are unrivalled
within the industry.
Round New investment: Convertible Loan Note Pre-Series
E round.
------------------------------------------------------------------
SSIT investment
/ round
size $5m / $87m.
------------------------------------------------------------------
Co-investors Activate Capital, Canaan Partners, Clearvision Ventures,
Pitango, Square Peg, Stonecourt Capital.
------------------------------------------------------------------
Problem Billon Dollar industries, including aviation, logistics
and utilities, are adversely impacted by weather
events. Traditional weather forecasts are not sufficient
to translate into operational decisions.
------------------------------------------------------------------
Solution Tomorrow.io provides industry-specific actionable
weather insights via APIs/platforms that are embedded
into the operational processes of its customers.
Insights are based on both proprietary weather models
and satellite data.
------------------------------------------------------------------
Market Global spend on weather was estimated to be $56bn
in 2015 1 . Assuming growth has continued at the
historic 8% CAGR, the market would have been valued
at roughly $104bn in 2022.
------------------------------------------------------------------
Latest news
* Successfully closed $87m Series E in June 2023.
* Launched its first two weather radar satellites in Q2
CY23 to provide proprietary global precipitation
data.
* Released new Unified Precipitation (UP) solution to
provide real-time and nowcast (0-6 hours) global
precipitation with unparalleled accuracy.
------------------------------------------------------------------
(1) Global disparity in the supply of commercial weather and
climate information services by Lucien Georgeson, Mark Maslin and
Martyn Poessinouw, 24 May 2017
New investment case study: Voyager
Investment The commercial and government ecosystem in low earth
thesis orbit is experiencing sustained growth that will
create sufficient demand for a new Space Prime akin
to incumbent defence prime contractors such as Lockheed
Martin. The most agile and adaptable companies are
expected to be competitive given existing primes
are hampered by engrained procedures and operations,
making them ill-suited for the prime contracts of
tomorrow.
Round New investment: Series B.
------------------------------------------------------------------
SSIT investment $2.5m / $92m.
/ round
size
------------------------------------------------------------------
Co-investors Walleye Capital, Senvest, Juniper, Scout.
------------------------------------------------------------------
Problem Today, the only organisations capable of delivering
cutting edge space infrastructure, like space stations
and CisLunar missions are the existing base of large
defence primes. These organisations are notoriously
slow moving, costly and regularly subject to delays
and cost overruns due to outdated working practices.
They are unsuited to the evolving and dynamic needs
of the in-space economy.
------------------------------------------------------------------
Solution Voyager's lean, fast-moving organisation, with a
strong commercial mindset, will provide the next
generation hardware demanded by the evolving userbase
of space. Voyager will be best positioned to capitalise
on the demand from a customer base increasingly
prioritising commercial considerations for the businesses
which they operate in space.
------------------------------------------------------------------
Market With Voyager's Starlab space station, the business
is well-placed to address the approximately $4bn
annual spend on the International Space Station.
Furthermore, new markets of in-space manufacturing
and R&D at maturity are expected to be worth $5bn
annually.
------------------------------------------------------------------
Latest news
* Acquired its (7t) h subsidiary, ZIN Technologies. ZIN
Technologies brings decades of experience in
engineering, design and integration of human-rated
spaceflight systems.
* Announced its $80m Series B raise.
* Announced a joint venture with Airbus to build and
operate the Starlab space station.
------------------------------------------------------------------
Follow-on investments
The Company continues to invest in line with the strategy
articulated at the time of its IPO, seeking to increase the level
of support for those portfolio companies which we have the greatest
conviction in. During the year, the Company invested GBP12.2m of
additional funding in eight companies (five in the main portfolio
totalling GBP10.7m and three early stage, non-material positions
totalling GBP1.5m). The main follow-ons are outlined below.
In August 2022, the Company completed a $3m (GBP2.5m) follow-on
investment in PlanetWatchers, acting as co-lead alongside Creative
Ventures as part of Planet Watchers' Series A investment round.
With this round, PlanetWatchers is looking to invest in automation
and fuel its commercial growth through expanded sales efforts.
PlanetWatchers uses synthetic aperture radar data to tell the story
of every field, helping crop insurers and farmers to automate data
capture and claims validation.
In December 2022, the Company invested a further EUR5m (GBP4.4m)
alongside other shareholders in D-Orbit to help consolidate its
position as the market leader within the in-space transportation
market. D-Orbit is the market leader in space logistics, providing
last-mile satellite delivery, space cloud computing and hosted
payload operations.
In March 2023, the Company completed a EUR1.0m (GBP0.9m)
follow-on investment in QuadSAT as part of the company's EUR6.3m
Series A investment round led by IQ Capital. QuadSAT will utilise
this funding to execute on its increasingly strong commercial
pipeline. QuadSAT provides satellite operators, antenna
manufacturers and service providers with a flexible and
cost-efficient solution to test and validate the performance of
antennas. Its drones, equipped with specialised instruments,
collect data efficiently and accurately without the need for manual
labour.
In May 2023, the Company completed a GBP2.1m follow-on
investment in SatVu as part of the company's GBP13m Series A2
round. Shortly after the closing of this round, SatVu launched its
first satellite (HOTSAT1). This funding round will allow the
business the runway to start executing on over GBP100m of
commercial interest and provide meaningful headway to the launch of
the second satellite in its constellation. SatVu is deploying a
constellation of infrared sensing satellites. Using this
constellation, the business will be able to monitor the temperature
of any building on the planet in near real time to determine
valuable insights about economic activity, energy efficiency and
carbon footprint.
Follow-on study: SatVu
Investment Finding a way to pinpoint the worst energy-wasting
thesis buildings on a global scale is a pressing issue
if the world is to achieve Net Zero.
By measuring the thermal footprint of any building
on the planet, SatVu's high resolution, high revisit
infrared satellite constellation holds the key to
resolving this issue.
Round GBP13m Series A2.
-----------------------------------------------------------------
SSIT investment Total: GBP6.7m (Seed, Series A and Series A2).
Series A2: GBP2.1m.
-----------------------------------------------------------------
Co-investors Molten Ventures, AO Proptech, Lockheed Martin, In-Q-Tel.
-----------------------------------------------------------------
Problem Infrared (IR) has a unique capability to 'see' inside
buildings/objects. This holds vast potential for
gathering intelligence for defence, economic activity
and energy efficiency applications. Existing IR
satellites are government-operated, cost hundreds
of millions of Dollars and lack the resolution or
revisit required for these applications.
-----------------------------------------------------------------
Solution SatVu is developing the world's first constellation
of mid-wave IR small satellites that represent a
10-100x reduction in cost and weight versus existing
government satellites.
-----------------------------------------------------------------
Market Defence, intelligence, industrial monitoring, climate.
-----------------------------------------------------------------
Latest news
* First satellite launched by SpaceX on 12 June 2023.
* Closed GBP13m Series A2 round, extending cash runway
until at least September 2024.
* Gathered pipeline of 50+ pre-contracts with options
to purchase GBP100m+ in imagery.
-----------------------------------------------------------------
Follow-on study: D-Orbit
Investment D-Orbit is the leader in the nascent 'space taxi'
thesis market offering last mile delivery services for
customers' satellites. Beyond its pioneering space
taxi services, the company innovates with high-margin
ancillary offerings, including using its ION spacecraft
for on-orbit cloud computing and in-space logistics,
carving a path to become a cornerstone in the new
space economy. Leveraging its unique capabilities
and vision, D-Orbit is on track not only to dominate
the space taxi sector but also to explore lucrative
avenues in space servicing and cloud infrastructure,
promising substantial growth and value.
Round Convertible loan bridge round.
-----------------------------------------------------------------
SSIT investment Total: GBP10.7m.
Bridge round: EUR5m.
-----------------------------------------------------------------
Co-investors Large Ventures, Indaco, Neva.
-----------------------------------------------------------------
Problem Rideshare models, like SpaceX, are limited in the
orbits they can achieve. The rapidly growing smallsat
market lacks reliable, efficient means to deliver
satellites to specific orbits.
-----------------------------------------------------------------
Solution D-Orbit's breakthrough IONs combine low-cost rideshare
with targeted, quick satellite delivery. After launch,
IONs form a 'pseudo constellation', adaptable for
varied high-margin applications and potential in-orbit
services.
-----------------------------------------------------------------
Market Space logistics (EUR1bn+), in-space computing (EUR3bn+).
-----------------------------------------------------------------
Latest news
* Launched 11(th) successful mission.
* Delivered over a hundred payloads in total to orbit.
* Won EUR26m contract from ESA for IRIDE, an earth
observation programme. D-Orbit will design and build
a synthetic aperture radar satellite with an
additional EUR24m option.
* Won another 3 multi-million Euro contracts with ESA
and ASI.
* Completed 10-month in-orbit cloud computing
demonstration with AWS.
-----------------------------------------------------------------
Disposals
In the year, the Company received GBP3.3m in proceeds from
disposals. During a rally in November 2022, we took the opportunity
to sell down some of the Arqit holding at an average price of $8.48
per share in order to provide some additional liquidity to support
private portfolio companies. In addition, we sold one of the early
stage portfolio companies which had been fully written down back to
its founder for a diminimis sum.
Portfolio Performance
Year ended 30 June 2023
Portfolio cash runway
During the year, a number of the Company's investments completed
funding rounds supported by new investors, which provides strong
external validation of the valuation progression of individual
investments. 11 portfolio companies that were in the portfolio at
the start of the period raised 12 rounds. SSIT participated in the
rounds of seven of these portfolio companies.
The companies in the portfolio at the start of the year which
raised rounds during the year largely experienced positive
valuations in those rounds as outlined in the annual report.
The average cash runway of the private portfolio from 30 June
20231 is 20 months. 87% of the fair value of the private holdings
has a cash runway to 30 June 2024 or beyond. The chart in the
annual report shows the material holdings' cash runways and their
syndicates' strength and ability to support future capital needs of
the businesses. Syndicate strength is an area we assess prior to
investment. We note that some of the larger holdings with 12
months' or less cash runway are in the advanced stages of closing
significant additional capital before the end of 2023 which will
materially extend their cash runways. In addition, some of the
larger holdings are now forecasting that they will become cashflow
positive without requiring additional funding.
(1) Fair value weighted average (as defined in the Glossary)
number of months of cash runway from 30 June 2023 for the private
holdings representing 97% of fair value, taking into account cash
as at 30 June 2023 and any funding raised post period end. Source:
Portfolio company data.
Listed portfolio
Continued share price reductions of three of the listed
portfolio companies (Arqit, Spire Global and AST SpaceMobile) led
to an aggregate fair value decrease of GBP9.1m for the listed
portfolio (GBP8.0m excluding FX losses) over the year. In
aggregate, the listed portfolio represented just 2% of NAV and 3%
of portfolio fair value at the end of the year (fair value vs.
cost: 13.0%, down from 44.7% at 30 June 2022). These listed
companies continue to experience depressed share prices, similar to
that experienced by other companies which went public via mergers
with special purpose acquisition companies ('SPACs'), as shown on
the chart in the annual report by the DeSPAC Index. We believe that
the greater reductions seen by the listed portfolio companies'
share prices than that experienced by the DeSPAC Index is likely
driven by the fact that both Arqit and AST SpaceMobile were able to
raise additional funding in the year (albeit at a discount to their
share prices which would have caused further downward pressure).
Positively, there appear to be some signs of improvement in the IPO
market, with the venture capital-backed and private equity-backed
IPO indices both up at the year end and since.
On 18 November 2022, Nightingale listed on the Australian Stock
Exchange raising AUD5m (ASX: NGL; fair value vs. cost: n/m). The
Company had previously fully provided against this portfolio
company, which had been acquired for zero consideration from
Seraphim Space LP as part of the Initial Portfolio, and the fair
value was GBP0.1m as at 30 June 2023. Nightingale offers an
autonomous drone perimeter security service designed to enhance
physical security at large, sensitive facilities, including
critical infrastructure such as ports and nuclear power facilities
through to Fortune 500 companies.
Private portfolio
The private portfolio, which comprises the main part of the
Company's investments representing 97% of fair value and 82% of
NAV, continued to deliver robust performance, with its fair value
closing the year at 119% vs. cost (123% excluding FX losses), down
from 122% on 30 June 2022 (117% excluding FX). These businesses
continue to deliver solid revenue and bookings growth driven by
solid fundamentals in their core focus areas (especially global
security and climate change/ sustainability).
As explained above, a number of portfolio companies raised
funding at flat or higher prices than their previous rounds. This
led to increasing underlying fair value for a number of the main
portfolio companies, SatVu (fair value vs. cost: 218%), D-Orbit
(fair value vs. cost: 183%), Astroscale (fair value vs. cost:
105%), QuadSAT (fair value vs. cost: 150%) and Pixxel (fair value
vs. cost: 153%). In addition, the recalibration exercise and
sustained strong performance led us to mark up the value of ICEYE
(fair value vs. cost: 115%). This was more than offset by the
combined impact of FX losses and portfolio companies which saw
reducing fair value driven by reductions in enterprise values due
to a combination of underperformance against expectations, limited
cash runways and lower priced rounds, including PlanetWatchers
(fair value vs. cost: 86%), ALL.SPACE (fair value vs. cost: 109%),
Altitude Angel (fair value vs. cost: 167%), Edgybees (fair value
vs. cost: 0%), Xona Space Systems (fair value vs. cost: 84%) and
LeoLabs (fair value vs. cost: 106%).
Valuation policy
In respect of private company valuations, fair value is
established by using recognised valuation methodologies, in
accordance with the International Private Equity and Venture
Capital Valuation ('IPEV') Guidelines. The Company has a valuation
policy for unquoted securities to provide an objective, consistent
and transparent basis for estimating their fair value in accordance
with IFRS as well as the IPEV Guidelines. The unquoted securities
valuation policy and the associated valuation procedures are
subject to review on a regular basis, and updated as appropriate,
in line with industry best practice.
In summary, the Company determines fair value in accordance with
the IPEV Guidelines by focusing on updating the enterprise value
(either through there being a new funding round or through a
valuation calibration exercise or adjustment for milestones) and
then applying the implied equity value (based on adjustments for
new debt, etc) to the company's capital structure (i.e. preference
stack). In the event of commercial (or technical) underperformance
of a portfolio company, a write down can then also be applied,
typically in increments of 25% to reduce fair value.
All valuations are considered on a quarterly basis and
calibrated against the price of the last funding round. However,
given valuation volatility during 2022/23, to ensure appropriate
NAV reporting, the Board initiated a process to recalibrate, across
an increased number of datapoints, the material portfolio companies
(i) whose last funding rounds took place more than 12 months
earlier or (ii) which had experienced a significant milestone event
or material under- or over-performance (each a 'recalibration
event'). This process entails assessing the enterprise value
following the most recent round against a composite of four
elements: observable market data (where possible), recent relevant
private investment transactions, public market valuations of
comparable companies and the company's internal metrics and
performance. This exercise further strengthens the valuation
process with the goal of preserving shareholder confidence in the
NAV during volatile market conditions and will be conducted when a
recalibration event occurs and every quarter thereafter until a new
priced funding round is completed.
Performance of the Company
Year ended 30 June 2023
Portfolio Attribution
-- GBP4.9m in new investments (2022: GBP117.5m) and GBP12.2m of
follow-ons in the year (2022: GBP32.5m).
-- GBP3.3m in proceeds from disposals in the year (2022: GBP0.0m).
-- GBP2.0m realised loss from partial sale of Arqit and the exit
of one of the early stage portfolio companies.
-- Reduction in unrealised fair value of GBP3.7m during the year
(2022: GBP9.2m) and a GBP6.8m unrealised FX loss (2022: GBP16.8m
gain).
-- GBP187.4m fair value of portfolio at the end of the year (2022: GBP186.1m).
-- 576bps decrease in closing portfolio fair value vs. portfolio
cost, including FX movements (2022: 429bps increase).
NAV
-- GBP16.9m decrease in NAV (7.1% decrease) over the year to
GBP222.4m (30 June 2022: GBP239.3m).
-- GBP35.3m liquid resources (15.9% of NAV) at 30 June 2023 (30 June 2022: GBP57.7m).
NAV Per Share: 99.97p 92.90p
NAV decreased from GBP239.3m to GBP222.4m during the year. This
decrease of GBP16.9m was primarily a result of a portfolio fair
value decrease (including FX movements), with a GBP6.8m FX loss
across the portfolio and a GBP8.0m reduction in the underlying fair
value of listed companies in aggregate more than offsetting a
GBP4.3m increase in the underlying fair value of private
companies.
The other movements consist of a realised loss for the year
(GBP2.0m) from the sale of some of the Arqit holding and one of the
early stage companies, management fees (GBP2.9m) and operating
expenses (GBP1.9m), partially offset by interest received
(GBP0.3m).
The NAV per share decreased from 99.97p to 92.90p over the
year.
The Company is targeting an annualised total return on the
Company's portfolio of at least 20% over the long term. The Company
has no formal benchmark index but has tracked its NAV per share and
share price movements against the following indices for
reference.
-- MSCI World Aero and Defence Index (GBP) - a significant
proportion of portfolio companies' revenues are derived from the
broader aerospace and defence industry and/or have governments as
significant customers.
-- MSCI World Climate Change Index (GBP) - a significant
proportion of portfolio companies' revenues are derived from
climate change products and services.
-- FTSE All-Share Index (GBP) - the Company is listed on the London Stock Exchange.
-- NASDAQ (GBP) - the Company invests in SpaceTech, a subset of
the broader technology market, and two of its listed holdings are
listed on NASDAQ.
-- Dow Jones Global Technology Index (GBP) - the Company invests
globally in SpaceTech, a subset of the broader technology
market.
-- S&P Kensho Space Index (GBP)- the Company invests
globally in SpaceTech, a subset of the broader space sector.
-- Goldman Sachs Future Tech Leaders Equity ETF (GBP) - the
Company invests globally in SpaceTech, a subset of the broader
technology market.
On 30 June 2023, all indices were up year-on-year other than
NASDAQ.
As explained in the Share Price section, the Company's share
price has been significantly more volatile than its NAV per
share.
Quarterly valuation changes
In the three months ended 30 June 2023
During the quarter ended 30 June 2023, the fair value (adjusted
for acquisitions and disposals over the quarter) rose by GBP3.9m,
increasing fair value to 98.5% vs. cost (101% excluding FX
losses).
An FX loss of GBP4.2m and fair value reductions at Altitude
Angel (GBP3.6m), Xona Space Systems (GBP1.1m) and PlanetWatchers
(GBP0.9m), driven by underperformance, were more than offset by
fair value increases driven by new funding rounds at D-Orbit
(GBP3.8m), LeoLabs (GBP3.5m), Pixxel (GBP1.2m) and SatVu (GBP0.7m),
as well as a premium being applied to ICEYE's enterprise value due
to strong performance leading to a GBP4.1m increase in fair
value.
Post Year End Developments
Investment activity has continued since the end of the year,
with a further GBP4.1m invested. One follow-on investment of
GBP2.8m was made into ALL.SPACE, an existing portfolio company in
the main portfolio. In addition, there were two follow-on
investments, totalling GBP0.5m, and two new investments, totalling
GBP0.9m, into early stage companies.
Team Update
Investment team members Andre Ronsoehr, Maureen Haverty and
Lewis Jones were all promoted recently to Investment Partner,
Investment Principal and Investment Vice President, respectively.
In addition, Zainab Qasim joined the investment team as an
Investment Analyst on 1 April 2023 having previously worked at the
affiliated Seraphim Space Accelerator.
Outlook
We remain confident with the outlook for the space domain
globally and SSIT's portfolio of best-of-breed SpaceTech companies.
We continue to enjoy the privileged position of seeing the majority
of the sector's global dealflow. This provides an information
asymmetry over the sector that informs our every move.
With the secular trends relating to global security, food
security, climate change and sustainability expected to accelerate,
we believe the Company is well-positioned to take advantage of the
resultant opportunities. We anticipate that demand for the products
and services of the portfolio companies, particularly from
governments, should result in the portfolio delivering strong
growth metrics.
As at 13 October 2023, cash was GBP29.4m, with a potential
further GBP3.0m of liquidity available in the holdings of listed
companies. We believe this liquidity should be sufficient to
provide the necessary levels of support to the portfolio over the
course of the next 12 months. Whilst we expect to continue to
diversify the portfolio with selective new investments, uncertainty
around the timing of market recovery (and, therefore, our ability
to raise new equity capital) means that the size of new investments
will likely be small, with investment activity expected to be more
weighted in favour of supporting the existing portfolio until a
time when the market provides the appropriate conditions to
fundraise .
Mark Boggett
CEO
Seraphim Space Manager LLP
Investment Manager
16 October 2023
Portfolio at 30 June 2023
Portfolio Snapshot
Fair value Top 10 investments
GBP187.4m as % of fair value
(2022: GBP186.1m) 85.7%
(2022: 87.0%)
Private portfolio Listed portfolio
fair value vs. initial fair value vs. initial cost
cost 13.0%
119.2% (2022: 44.7%)
(2022: 122.5%)
Average portfolio company Average portfolio company
revenue growth(1) bookings growth(1)
34% 199%
Average cash runway of the
Total money raised by private portfolio from 30
private portfolio companies(2) June 2023(3)
$>360m 20 months
(1) Fair value weighted average (as defined in the Glossary)
year-on-year growth for the 12 months ended 30 June 2023 of the top
10 holdings, representing 86% of fair value (72% of NAV) at the
year end. Source: Portfolio company data.
(2) Between 1 July 2022 and 30 June 2023. Source: Portfolio
company data.
(3) Fair value weighted average (as defined in the Glossary)
number of months of cash runway from 30 June 2023 for the private
holdings representing 97% of fair value, taking into account cash
as at the year end and any funding raised post period end. Source:
Portfolio company data.
Portfolio Highlights
'We are delighted with the progress the portfolio has made
during the year. The portfolio has proven itself adept at
successfully accessing capital at a time when the wider fundraising
environment has been challenging. It is particularly gratifying
that many of these companies have closed funding rounds led by new
investors and on improved terms relative to their previous funding
rounds. The success in capital raising across the portfolio is in
no small part due to the impressive commercial traction achieved,
allied to the scale of the opportunities these companies are
addressing. With the majority of the portfolio now well-funded
through the next 12-18 months, we are excited to see what will be
achieved over the year ahead.'
James Bruegger
CIO , Seraphim Space
ICEYE signed contract to service the government of Astroscale successfully closed $76m Series E funding in
Ukraine by providing access to constellation; early 2023. Awarded $25.5m contract
the only company to make such a deal. Signed five by US Space Systems Command and $80m SBIR from Japanese
satellite deals with Bayanat in UAE. Announced Government after the end of the year.
partnership to provide radar imaging satellite for BAE
Systems' new multi-sensor satellite
constellation. Awarded multi-year purchase agreement by
NASA.
ALL.SPACE started deliveries of its game-changing Altitude Angel announced the development of 265km of
antennas and announced a strategic partnership drone super highways in the UK and received
with Kratos Defense & Security Solutions, Inc. (NASDAQ: GBP5m in backing from BT.
KTOS).
HawkEye 360's cluster 7 of satellites launched to orbit LeoLabs accelerated coverage in Europe with the
in April, bringing its constellation commissioning of its Azores Space Radar and
to 21 satellites. In July 2023, it announced a new $58m now has global radar coverage , with 7 operational radars
funding round led by BlackRock (NYSE: achieving c75% market share in LEO.
BLK).
D-Orbit secured four multi-million Euro contracts with PlanetWatchers won new customers and grew its footprint
the European and Italian Space Agencies across the North American crop insurance
to test intersatellite optical links, for satellite market. It also launched its CropCycle webapp, a second
servicing and to establish an in-orbit product line.
space lab.
SatVu launched its first satellite on a SpaceX launch in Tomorrow.io launched its first two precipitation radar
June 2023, and signed GBP100m in satellites, beginning to build the
pre-contracts as part of its early-adopters programme. In world's most comprehensive precipitation dataset, with a
May 2023, the company announced 10x improvement in revisit rate.
an additional GBP12.7m in funding. Announced $87m Series E funding round in June 2023.
Voyager and Airbus announced a joint venture to build and
operate the Starlab space station.
It also completed its seventh acquisition, of ZIN
Technologies, in March 2023.
Portfolio Lowlights
One of ICEYE's satellites failed to deploy on a SpaceX
launch.
A number of portfolio companies were affected by the Silicon
Valley Bank failure
Holdings
30 June 2023 30 June 2022
Cost(1) Fair value(1) % of Fair value
Company Sub-sector HQ GBPm GBPm NAV GBPm
Earth
ICEYE Observation Finland 39.6 45.5 20.4% 43.3
In-orbit
D-Orbit Services Italy 11.7 21.4 9.6% 12.7
Ground
ALL.SPACE Terminals UK 19.5 21.2 9.5% 24.9
Earth
HawkEye 360 Observation US 18.6 20.6 9.3% 20.6
Earth
SatVu Observation UK 6.7 14.7 6.6% 7.8
Data
LeoLabs Platforms US 11.7 12.4 5.6% 13.7
In-orbit
Astroscale Services Japan 9.4 9.8 4.4% 7.7
Data
Altitude Angel Platforms UK 3.7 6.2 2.8% 9.0
Data
PlanetWatchers Analytics UK 5.6 4.8 2.2% 8.1
Data
Tomorrow.io Platforms US 4.2 3.9 1.8% 4.1
Top 10 investments 130.7 160.6 72.2% 151.9
Other investments 53.5 19.9 8.9% 29.7
Non-material
investments
6.0 7.0 3.1% 4.5
Total
investments 190.2 187.4 84.3% 186.1
Net current assets 35.0 15.7% 53.2
Total assets 222.4 100.0% 239.3
--------------------------------------- ------------------ ---------------------------------------------------- ------ ----------------
(1) Includes new and follow-on investments and disposals, where
relevant, made since 30 June 2022 of GBP11.8m in aggregate.
Portfolio Breakdown (by fair value)(1)
At 30 June 2023
Top 10 Investments
ICEYE ALL.SPACE HawkEye 360 D-Orbit SatVu
--------------- ---------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------ ---------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------
Web iceye.com all.space he360.com dorbit.space atellitevu u.com
HQ Finland UK US Italy UK
Taxonomy Platform / Earth Observation Downlink / Ground Terminals Platform / Earth Observation Launch / In-orbit Services Platform / Earth Observation
Status Private / Soonicorn Private / Minicorn Private / Soonicorn Private / Soonicorn Private / Minicorn
Stake category >5-10% >10-15% 0-5% >5-10% >15-25%
Fair value vs.
cost 115% 109% 111% 183% 218%
Valuation Premium to price of recent investment Calibrated price of recent investment (post period) Calibrated price of recent investment (post period) Calibrated price of recent investment Calibrated price of recent investment
method
Description ICEYE operates the world's first and largest constellation of miniaturised satellites that ALL.SPACE is aiming to create a mesh network of satellite connectivity by developing an HawkEye 360 operates the world's largest satellite constellation collecting radio D-Orbit is the market leader in the space logistics and orbital transportation services industry. SatVu is aiming to monitor the temperature of any building on the planet in near real time
use radar to image the earth both during the day and night, even through cloud. ICEYE's radar antenna frequency to determine valuable insights into economic activity, energy efficiency and carbon footprint.
technology has the ability to monitor change in near real-time. capable of connecting to any satellite in any constellation in any orbit. signals to identify and geolocate previously invisible activities.
Seraphim Space https://seraphim.vc/generation-space/podcast/portfolio-spotlight-rafal-modrzewski-ceo-and-co- https://seraphim.vc/generation-space/podcast/portfolio-spotlight-john-finney-ceo-and-foun https://seraphim.vc/generation-space/podcast/portfolio-spotlight-ceo-of-hawkeye-3 https://seraphim.vc/generation-space/podcast/portfolio-spotlight-luca-rossettini-ceo-founder-d-orbitpor https://seraphim.vc/generation-space/podcast/portfolio-spotlight-founder-ceo-of-satellite-vu-a
podcast link founder-of-iceye/ der-of-all-space/ 60-john-serafini/ tfolio-spotlight/ nthony-baker/
Total $10bn+ $10bn+ $10bn+ $1-5bn $1-5bn
estimated
long-term
addressable
market
Key sectors Insurance, defence, climate Communications, defence, transport Maritime, defence Space logistics, datacentres Energy, property
addressed
Recent key
developments: * ICEYE US awarded 5-year blanket purchase agreement by * Rebranded from Isotropic Systems to ALL.SPACE. * Cluster 7 of satellites launched to orbit in April, * Successfully launched its eleventh ION mission. * Launched its first satellite (HOTSAT 1) on Falcon 9
NASA for use in Earth Science and Research. bringing constellation to 21 satellites, with transporter 8 on 12 June 2023.
meaningful drop in overall latency.
* Making strong progress in delivering its first * Secured four multi-million Euro contracts with
* Announced beta release of Wildfire Insights product, products during 2023. European Space Agency and Italian Space Agency, * Closed additional GBP13m of funding as part of Series
a first of its kind with building-level data in near * Established new customers in India, Australia, Europe including one of EUR26m and one of EUR6m. A2 round.
real-time. and Nigeria, with customers now over 6 continents.
* Announced a strategic partnership with Kratos Defense
& Security Solutions, Inc. (NASDAQ: KTOS). * Featured in Sifted as one of Europe's leading * Gathered pipeline of 50+ pre-contracts with options
* Entered data agreement with Global Parametrics to * Working with Pacific Islands Forum Fisheries Agency SpaceTech companies. to purchase GBP100m+ in imagery.
drive disaster risk management. for greater maritime visibility in the Pacific
* Delivered first terminal to SES for testing and Islands.
verification. * Completed 10-month edge computing in space
* Announced partnership with Bayanat and Yahsat to demonstration with Amazon Web Services.
build national satellite and remote sensing * Further $58m funding closed in July 2023.
capabilities within the UAE.
* Signed contract with Government of Ukraine to provide
access to constellation.
* Announced partnership to provide radar imaging
satellite for BAE Systems' new multi-sensor satellite
constellation.
Principal UN
SDG alignment: 13, 11, 2 9, 8, 10 9, 16, 8 9, 8, 12 7, 11, 13
LeoLabs Astroscale Altitude Angel Tomorrow.io PlanetWatchers
--------------- ------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------ --------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------
Web leolabs.space astroscale.com altitudeangel.com tomorrow.io planetwatchers.com
HQ US Japan UK US UK
Taxonomy Product / Data Platforms Beyond Earth / In-orbit Services Product / Data Platforms Platform / Data Platforms Analyse / Data Analytics
Status Private / Minicorn Private / Soonicorn Private / Minicorn Private / Soonicorn Private / Seedcorn
Stake category 0-5% 0-5% >15-25% 0-5% >25-50%
Fair value vs.
cost 106% 105% 167% 93% 86%
Valuation Calibrated price of recent investment (post period) Calibrated price of recent investment Milestones, market comparables Calibrated price of recent investment Partial write down to price of recent investment
method
Description LeoLabs is providing the mapping service for space by deploying a network of ground-based Astroscale is a global leader of space sustainability solutions. It is Altitude Angel operates a cloud-based automated air traffic control platform for drones and Tomorrow.io is powering actionable weather insights around the PlanetWatchers has developed an AI-enabled analytics platform using satellite radar imagery
antennas capable of detecting objects as small as 2cm as far as 1,000km away. currently developing flying taxis. Its software powers the world's first sky corridor for drones. world. The company's mission for crop monitoring, insurance and automated insurance claims assessments.
a set of capabilities around satellite monitoring, refuelling, upgrading, is to help countries, businesses and individuals better manage their
repairing and disposal weather-related challenges
to enable a vibrant in-orbit economy. with the best information and insights.
Seraphim Space https://seraphim.vc/generation-space/podcast/ensuring-space-remains-sustainable-the-truth- https://seraphim.vc/generation-space/podcast/portfolio-spotlight-ceo-of-astro https://seraphim.vc/generation-space/podcast/portfolio-spotlight-richard-park-founder-and-ceo-o https://seraphim.vc/generation-space/podcast/how-to-build-a-successf https://seraphim.vc/generation-space/podcast/portfolio-spotlight-planetwatchers-dominic-edmunds-ceo-of-
podcast link about-space-junk/ scale-nobo-okada/ f-altitude-angel/ ul-space-company/ planetwatchers/
Total $1-5bn $1-5bn $10bn+ $30bn+ $5-10bn
estimated
long-term
addressable
market
Key sectors Space, insurance, defence Space, defence Logistics, aviation Logistics, aviation, maritime, government civil, government defence Agriculture, insurance, climate
addressed
Recent key
developments: * Expanded its radar network to 6 sites with another * Following successful $76m Series E funding round in * 256km drone super highway announcement made in UK. * Successfully launched first two satellites of its * Successfully expanded customer footprint within North
under construction for greater coverage. Q1 CY23, Astroscale added Gayle Sheppard, former planned weather radar constellation to provide global American crop insurance market during CY23 growing
Corporate VP and CTO at Microsoft, and Erica Newland, coverage. season.
former Finance Director at Intel, to its board. * Received backing from BT Group's Incubation Hub.
* Awarded contract with the Japanese MoD to provide
space situational awareness. * Completed $87m Series E fundraising, led by US growth * Launched CropCycle webapp as second product line to
* Opened subsidiary and office in France and announced * Began rolling out purpose-built low-altitude aviation investor, Activate Capital. provide easier access to crop intelligence.
partnership with CNES (the French Space Agency) that surveillance network.
* Won sole source contract with US Department of includes funded study for active debris removal of
Commerce, validating that LeoLabs is only real viable French space debris. * Launched 'Gale' generative AI platform to * Satellite-based acreage reporting product now
alternative data source to US Space Surveillance effortlessly convert climate and weather data into reaching precision higher than 90% in many cases.
Network. predictive and actionable insights.
* Announced partnership with Astro Digital US
Inc.,which will incorporate Astroscale's Generation 2
* Continued success in growing commercial/ recurring Docking Plate into its satellite bus.
revenue base, including several large satellite
constellations.
* Showcased its new manoeuvre-detection dashboard,
demonstrating suspicious movements from adversary
spacecraft.
Principal UN
SDG alignment: 9, 12, 17 9, 8, 12 9, 11, 8 8, 12, 9 12, 2, 8
Case study 1: Wildfire
Background 1 Role of space in solving the problem Role of SSIT portfolio in solving the
problem
Climate change has increased the Solutions from space provide the
frequency, severity and behaviour of unique ability to provide cost ICEYE operates the world's first and
wildfires, making them effective sensing solutions largest constellation of
far more difficult to predict and on a global scale, which is necessary miniaturised satellites that
prevent. According to the US's for monitoring vast areas of use radar to image the earth both
National Oceanic and Atmospheric wildfire-prone land. Historically, during the day and night, even
Administration and NASA, the earth's this monitoring was limited to small through cloud. ICEYE's radar
average surface temperature has risen areas with terrestrial sensors or by technology has the ability to
by about 1degC plane. monitor change in near real-time.
since 1880, which has made extreme With reliable (night/day and
heatwaves five times more likely than Pre-event risk modelling: Earth through clouds) and rapid imaging,
150 years ago. This observation satellites collect the business provides situational
is a major contributing factor in imagery across many sensor awareness solutions for
drying vegetation and soil, making types that help better qualify the disaster relief following a
land more combustible risk of a wildfire event by significant wildfire event whereas
and wildfires more likely. This has understanding vegetation health, optical imagery would be obscured
led to unprecedented economic losses the vulnerability of structures, by smoke. The business also offers
from some of the topology and a variety of different solutions to the insurance industry
most devastating fires in recorded contributing factors. to estimate loss exposure
history. It was estimated that, in This has applications in insurance following a wildfire.
2021, California's wildfires and is used as a tool by government
resulted in over $45bn in economic agencies to identify Using proprietary algorithms to
losses. The Dixie fire in July 2021 areas for controlled burns and reduce analyse satellite imagery and
burned over 960 thousand acres and risk. high-resolution weather forecasts,
destroyed 1,300 buildings. Delos Insurance can more accurately
Identifying emerging fires: Imagery price wildfire risk to offer
Local fire departments need to can also be used to identify fires wildfire cover as part of
monitor large areas of wildfire-prone early to prevent widescale homeowner insurance policies. In
land. Under certain conditions, disaster. New sensors in addition, the business also delivers
fires can grow extremely quickly, multispectral and infrared are insights to consumers
making them difficult to contain. capable of detecting small heat wishing to purchase insurance on how
Wildfires and other natural signatures they can better harden their homes
catastrophe events often damage which can be used to alert fire to reduce their insurance
critical infrastructure leaving first departments. premiums and the risk of loss in the
responders without the case of a wildfire.
necessary tools to carry out disaster Post-event situational awareness:
response and save lives. Insurers do Imagery is also being used following SatVu's constellation of infrared
not have the necessary insured events to imaging satellites will be able to
tools to understand wildfire risk and better estimate potential losses to detect fires as soon
exposure. Two of the largest insurers insurers' portfolios, and by first as they have begun. Using its
in the US, AllState responders to better imagery, the business can inform
and StateFarm, have halted property coordinate disaster responses. first responders and local
insurance policy sales in California, fire departments to act quickly
citing rapidly growing before they become uncontrollable.
wildfire exposure as making it
difficult for them to build Spire Global is one of the leading
profitable portfolios. This has satellite manufacturers globally.
left millions struggling to find Through its satellite-as-a-service
homeowner's insurance. products, the business designs,
builds and operates satellites on
Following a catastrophe, insurers behalf of customers. OroraTech,
must ensure they have the necessary a Spire Global
capital to cover insured satellite-as-a-service customer, is
losses. Damage assessment has focused on persistent monitoring of
historically involved on the ground wildfire-prone
claims assessment, making areas to inform first responders.
it time consuming and costly.
-------------------------------------- --------------------------------------
(1)
https://www.climate.gov/news-features/climate-qa/what-evidence-exists-earth-warming-and-humans-are-main-cause
(https://www.npr.org/2021/11/08/1052198840/1-5-degrees-warming-climate-change)
(https://www.imperial.ac.uk/news/241572/wildfires-becoming-more-dangerous-
heres/#::text=A%20big%20contributing%20factor%20
is,climate%20change% 20discussions%20and%20science)
(https://www.cnbc.com/2023/08/22/moodys-hawaii-wildfires-caused-up-to-6-billion-in-economic-losses.html)
(https://www.swissre.com/risk-knowledge/mitigating-climate-risk/remote-sensing-technology-in-claims-assessment.html)
Case study 2 - Ukraine
Background 2 Role of space in supporting Ukraine Role of SSIT portfolio in solving the
problem
Overview and death toll: Russia's Commercial satellite imaging:
invasion of Ukraine in February 2022 Satellite imagery provided by
has resulted in a commercial providers and that
devastating human toll and widespread is shareable with allies has been ICEYE, a Finnish SAR (Synthetic
displacement. As of July 2023, over integral to Ukraine's defence. Aperture Radar) satellite company,
9,000 civilians Satellite imagery has provided has significantly impacted
have been recorded dead and more than invaluable intelligence on Russian the conflict between Ukraine and
16,000 injured, though the UN troop locations and movements. Russia. Its technology, capable of
believes the actual numbers Satellite images post-attacks imaging through cloud
are higher. The war has also left have assessed damage, such as after cover and darkness, provides an
nearly 500,000 troops either dead or the Kakhovka hydroelectric dam unparalleled view of ground
injured, with estimates incident. SAR imaging can activities 8 .
of up to 120,000 Russian and 70,000 monitor troop movements under diverse ICEYE delivered the capacity of one
Ukrainian soldiers killed. conditions (cloud and night). of its satellites to the Ukrainian
Displacement: The conflict has forced Infrared can detect artillery government through
millions of Ukrainians to flee their fire and locations of intense a partnership with the Serhiy
homes. With a fighting 3 . Prytula Charity Foundation. This
national population exceeding 41 Communication and coordination: 'people's satellite', purchased
million, about 17.6 million people Commercial satellite constellations with donations from Ukrainians, has
now require urgent humanitarian like Starlink and Viasat since played a pivotal role. Within
support. Over 5 million people have have ensured that military units and five months of its
been internally displaced, and Europe civilian groups remain connected, deployment, the satellite enabled
is hosting nearly especially during communication Ukrainian Defence Intelligence to
6 million Ukrainian refugees. blackouts in certain regions. It has detect and target 7,321
Territorial losses and economic even been used to stream live feed pieces of Russian military equipment
impact: Russia now controls imagery back from 9 .
approximately 17.5% of Ukraine's drones to command centres 4 .
territory, including the annexed Open-source intelligence (OSINT) in
Crimea. As a result of the war and Ukraine: Activists and independent
loss of significant territories, analysts have used HawkEye 360 is significantly aiding
Ukraine's economy shrank by 30% in satellite images to track troop efforts in the Ukraine conflict
2022. Predictions for 2023 estimate build-ups along the Ukraine-Russia through its unique satellite
modest growth of 1-3%. border. This has allowed technology. Established with the
The exact financial toll of the war for real-time assessments of the mission of offering commercial
on Ukraine remains unclear. situation on the ground 5 . space-based RF data and analytics,
Global ramifications: Russia's GPS denial and its impact: Russian HawkEye 360's satellite
invasion and the subsequent Western forces have deployed jamming constellation can detect radio waves
sanctions have disrupted equipment to interfere with emitted by communication equipment
global markets. Key commodities like Ukrainian military GPS systems, and other electronic devices 10 .
oil, wheat and metals have witnessed required for weapons targeting. This capability allows for the
price surges, triggering Ukrainian forces are losing identification of enemy troop
a global food crisis and contributing up to 2,000 drones per week as a concentrations, which is crucial
to recent increases in inflation. result. Ukrainian forces have for understanding troop movements
Western support for resorted to alternatives like and potential threats on the
Ukraine has also been substantial, terrain matching and supplementing battlefield. In Ukraine, HawkEye
with the US alone committing over $43 GPS with communication satellite 360's capabilities provide
billion in security signals 6 from commercial invaluable insights that help in
assistance, supplying advanced providers. strategic decision-making on the
weaponry and protective equipment. Radio frequency (RF) signal detection ground. The company's satellite
in Ukraine: The detection of RF data, combined with advanced
signals from Russian analytics, offers a comprehensive
communication hubs or moving view of activities, strengthening
battalions could indicate Ukraine's situational awareness
preparations for major offensives. amidst the conflict 11 .
Ukrainian forces can use this
intelligence to anticipate enemy
movements 7 .
-------------------------------------- --------------------------------------
(2)
https://www.reuters.com/world/europe/blood-billions-cost-russias-war-ukraine-2023-08-23
(3)
https://www.economist.com/interactive/briefing/2023/02/23/data-from-satellites-reveal-the-vast-extent-of-fighting-in-ukraine
(4)
https://www.defenseone.com/technology/2023/03/black-swan-starlinks-unexpected-boon-ukraines-defenders/383514/
(5)
https://www.economist.com/interactive/international/2023/01/13/open-source-intelligence-is-piercing-the-fog-of-war-in-ukraine
(6)
https://www.economist.com/special-report/2023/07/03/the-latest-in-the-battle-of-jamming-with-electronic-beams
(7)
https://www.economist.com/special-report/2023/07/03/the-war-in-ukraine-shows-how-technology-is-changing-the-battlefield
(8)
https://interactive.satellitetoday.com/via/november-2022/how-satellite-imagery-magnified-ukraine-to-the-world/
(9)
https://news.yahoo.com/defence-intelligence-reports-quantity-russian-110700367.html?guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAEnf9fTV0GF1Z-HuKF3hFM49Di78yhJ3R8NaBaQZkI_uE4MvgafFLc-E9nkhyBwaQ5rLDP4cR3VsxkUuR_ci8ZOLD28eHjQT6Oj5bnfL0ZLWLAn_352aupTWENB71sEhwpOLJ5xsu9XjmbZvzrrgvP4
(NM2RjUCWw5-ewgQdC76iR&guccounter=2)
(10)
https://interactive.satellitetoday.com/via/august-2023/unleashing-the-power-of-rf-data/
(11)
https://www.nytimes.com/2023/05/21/us/politics/start-ups-weapons-pentagon-procurement.html
Responsible Investment
'Many of the technologies being developed by the portfolio
companies are delivering ESG impact in key areas such as climate
change, sustainability and security. In addition, as the portfolio
companies continue to grow and develop, their ESG resourcing and
risk management is maturing. The Investment Manager is focused on
helping portfolio companies on this ESG journey and engaging in
industry forums to ensure the potential impact that space can make
is understood and leveraged.'
Sarah Shackleton
COO, Seraphim Space
Being a responsible investor and taking into consideration
environmental, social and governance ('ESG') factors are paramount
to the way the Company and Investment Manager operate.
The Investment Manager is a signatory to Principles of
Responsible Investment, the UN-supported network of investors
dedicated to promoting sustainable investment through incorporating
ESG factors into their investment and ownership decisions (the
'UNPRI').
During the year, Seraphim Space was involved in the consultation
process to develop the Space Sustainability Principles by the Earth
& Space Sustainability Initiative ('ESSI')1.
Responsible Investment Policy
The Investment Manager's Responsible Investment Policy, which
has been adopted by the Company, may be found at
https://seraphim.vc/esg/ . The Investment Manager will update its
Responsible Investment Policy as necessary to reflect emerging
regulations and best practices.
The Directors and Investment Manager believe that ensuring
robust assessment of ESG-related risks and opportunities as part of
the investment analysis and decision-making processes leads to
investment in more robust businesses, ultimately creating
long-term, sustainable value.
(1)
https://www.essi.org/news/essis-memorandum-of-principles-for-space-sustainability-full-signatory-list-published
Potential Sustainability Impact
SpaceTech is a powerful new industry which can contribute
significantly to achieving the United Nations Sustainable
Development Goals (the 'SDGs') and their underlying targets. The
extent to which our portfolio companies contribute to the SDGs is
seen as a key factor in the success of our investment strategy and,
as such, considerations of this are also an integral part of
Seraphim Space's decision-making process. Each portfolio company
contributes to at least two, and up to 11, SDGs. In addition, every
SDG is addressed by at least one portfolio company. SDG 8 (economic
growth) and SDG 9 (innovation/infrastructure) are, unsurprisingly,
the most common SDGs, with at least 20 portfolio companies
contributing to each of these.
The scorecard in the annual report shows the SDGs being
addressed by the companies in SSIT's main portfolio.
Seraphim Space recently accepted an invite to participate in the
United Nations' Data Expert Group convened to support the UN's
efforts for designing and implementing a global environmental data
strategy by 2025. The symposium was focused on how 'Big Data' can
be used more effectively to support the achievement of the SDGs.
Space data will be integral to achieving this, and through Seraphim
Space's continued participation in the UN's Data Expert Group, we
will continue advocating for the critical role we expect many of
our portfolio companies to play in ensuring our planet has a
sustainable future.
Ownership and ESG reporting
Each portfolio company is actively encouraged to integrate ESG
considerations in their business strategies and value creation
plans. Seraphim Space works with the boards and management teams of
portfolio companies to identify and address sustainability risks,
capitalise on opportunities and meet established ESG objectives in
their own operations and throughout their value chains and with
co-investors to increase collective influence in these areas.
In situations where a portfolio company fails to address
adequately any significant risks identified at investment, Seraphim
Space will take this into consideration when assessing follow-on
investment opportunities into the company.
In September/October 2022, Seraphim Space organised training
sessions delivered by sustainability consultancy Sancroft
International for the management teams of the portfolio companies.
Intended as an introduction to ESG and the general topics of focus
for funders and society as a whole, it also covered the key
opportunities and risks specific to the SpaceTech sector, including
materiality, climate change and human rights, as well as the SDGs
and examples of impact in the portfolio.
Following the first collection of ESG data from the portfolio,
as explained below, Seraphim Space is engaging with the portfolio
companies to encourage them to implement further measures to
mitigate risk and drive impact and opportunities.
Objective Reporting Metrics for ESG Factors
Percentage of desired measures(1) in place across Proportion of the active portfolio with a founder
the portfolio(2) to manage ESG risk who identifies as female or from an ethnic
67% minority
20%
Senior management identifying as female or from an Seraphim Space staff(3) identifying as female / from an
ethnic minority within the portfolio(2) ethnic minority
21% 50% / 20%
Percentage of energy consumption that is renewable(2)
Average portfolio company headcount growth(4) 30%
22.1%
(1) Desired measures as explained in the 'ESG governance and
risk management section'. Source: Portfolio company data.
(2) Fair value weighted average (as defined in the Glossary) of
the portfolio companies providing information (which represents 95%
of the fair value as of 30 June 2023). Source: Portfolio company
data.
( (3) () (Includes Seraphim Space's affiliates.)
(4) Fair value weighted average (as defined in the Glossary)
year-on-year growth for the 12 months ended 30 June 2023 of the top
10 holdings, representing 86% of fair value (72% of NAV) as at 30
June 2023. Source: Portfolio company data.
The Company began collecting ESG metrics, such as carbon
emissions, job creation and diversity, from CY22 (hence there are
no comparable metrics for the prior year in this report) and plans
to increasingly report on such metrics for the aggregate portfolio
in the future. In addition, the Company also collects qualitative
information around the following topics:
-- effective board and risk management;
-- business ethics, legal and compliance;
-- data security and customer privacy;
-- health and safety;
-- employee engagement, diversity and inclusion;
-- product quality and safety;
-- community relations;
-- energy management;
-- GHG emissions; and
-- materials management.
95% of the portfolio (by fair value as at 30 June 2023) provided
the above data, with the remaining 5% comprised predominantly of
listed portfolio companies or private companies where SSIT has no
information rights.
ESG governance and risk management
The Investment Manager allocated points (up to a maximum of 15)
to private portfolio companies based on the number of measures that
it would like to see and which they have in place to manage ESG
risk, including frequency of discussion of such topics by the board
and the policies and processes to assess and mitigate such risks.
On a fair value weighted basis, 67% of the desired measures are in
place across the portfolio (71% for portfolio companies that are
post Series A).
Diversity
A growing body of evidence suggests that diverse teams are more
innovative and achieve higher returns than those with just one
gender and/ or one race or ethnicity represented(1) . The World
Economic Forum cites that teams that include a female founder
outperform all -- male led teams by 63%(2) . Forbes also outlines
the outperformance of diverse teams, explaining that companies with
at least one female or ethnically diverse founder generate over
60%+ in business value(3) . Despite this, 2019 data from Pitchbook
and the National Venture Capital Association suggests that venture
investors continued to be white (80%) and male (84%), predominantly
backing white, male founders (85% or $136.5bn in 2019)(4) . The
SSIT active portfolio includes six companies (20%) with a founder
that identifies as female or from an ethnic minority.
(1)
https://www.forbes.com/sites/committeeof200/2020/09/22/diversity-as-uperpower-the-well-known-data-against-homogeneous-teams-in-venture-capital/?sh=228846b52019
(2)
https://www.weforum.org/agenda/2021/05/close-gender-gap-venture-capital/
(3)
https://www.forbes.com/sites/forbesbusinesscouncil/2022/05/26/diversity-the-holy-grail-of-venture-capital/?sh=9eb823a41787
(4)
https://www.forbes.com/sites/committeeof200/2020/09/22/diversity-as-uperpower-the-well-known-data-against-homogeneous-teams-in-venture-capital/?sh=228846b52019
SSIT portfolio diversity statistics
SSIT portfolio(1) Industry comparisons
Average Fair value weighted
average(2)
------------------------------- -------- -------------------- -----------------------
Board members identifying High tech companies
as female 9% 4% 2020-- 8%(3)
Board members identifying
as from an ethnic minority 7% 9%
Senior management identifying
as female or from an
ethnic minority 19% 21%
Venture capital-backed
Staff identifying as startups 2020-- men
female or from an ethnic (89.3%) and white
minority 27% 23% (71.6%)(4)
------------------------------- -------- -------------------- -----------------------
Sources: Portfolio company information; Seraphim Space
analysis
Notes: (1) Data provided by portfolio companies representing 95%
of the fair value as of 30 June 2023
(2) Fair value weighted average (as defined in the Glossary)
(3)
https://techcrunch.com/2021/08/29/diversifying-startups-and-vc-power-corridors
/
(4)
https://venturebeat.com/games/diversity-vc-reports-1-87-of-venture-capital-allocated-to-women-and-minority-owned-startups
/
Compared to the diversity information outlined in the BVCA and
Level 20 Diversity and Inclusion Report (2023), as at 30 June 2023,
Seraphim Space outperformed the market in most categories as
outlined in the chart in the annual report. With 17% females in all
senior roles, it is slightly below the industry at 20%, although
the team is supported by the SSIT Board which is 75% female. While
Seraphim Space had no women in senior investment roles versus the
industry at 12%, Maureen Haverty was promoted post the year end to
Investment Principal (which would take the percentage to 20%), and
the Investment Committee is 33% female. Together with its
affiliates, Seraphim Space has roughly the same proportion of
people from ethnic minorities represented as the industry at
20%.
Job creation
Continued strong revenue growth and the ability for portfolio
companies to access the funding they require is driving headcount
increases, despite the difficult macroeconomic environment over the
last 12 to 18 months. On a fair value weighted basis, the top 10
holdings grew headcount by 22.1% in the 12 months to 30 June
2023.
Carbon emissions/energy reduction
Given the fact that the private portfolio companies are
relatively early in their life, a number are not yet measuring
energy consumption, and scope 1/2 and 3 carbon emissions are only
measured by four and two private portfolio companies, respectively.
On a fair value weighted basis, 30% of energy consumption is
renewable. We are engaging with the portfolio companies to drive
further work in this key area.
Business Review
Business Model
SSIT is the world's first and only listed SpaceTech fund
providing public access to private SpaceTech businesses.
The Company carries on business as an investment trust, which is
a form of a collective investment vehicle constituted as a
closed-ended public limited company. The Company's shares are
traded on the premium segment of the London Stock Exchange's main
market.
The Company has no employees. It is managed by the Board,
comprising four independent non-executive Directors. The management
of the Company's investments in accordance with its investment
objective and policy is delegated to the Investment Manager and the
Company's day-to-day functions, including administrative, financial
and share registration services, are carried out by duly appointed
service providers. The Board oversees the activities and
performance of the Investment Manager and other key service
providers. As an investment company with no employees, we believe
that the best way to achieve SSIT's strategic objectives is to have
effective and strong working relationships with the Investment
Manager and other key service providers.
The Company complies, where relevant, with the FCA's Listing
Rules, Disclosure Guidance and Transparency Rules and Prospectus
Regulation Rules. In addition to publishing its Annual and Interim
Reports, the Company announces regulatory, financial and portfolio
information on a periodic basis via the London Stock Exchange,
thereby helping current and potential investors to make informed
investment decisions.
Additional information is available on the Company's website (
https://investors.seraphim.vc/ ).
Investment Strategy
The Company provides investors with exposure to nascent
SpaceTech companies, being businesses which rely on Space-based
connectivity or precision, navigation and timing signals, or whose
technology or services are already addressing, originally derived
from or of potential benefit to the Space sector. These businesses
comprise companies providing the SpaceTech infrastructure for
collecting and communicating data, principally via satellites, as
well as companies with the technology that facilitates the
exploitation of this data for terrestrial applications in areas
such as climate, communications, mobility and security (including
cyber security).
Investment Objective
The Company's objective is to generate capital growth over the
long term through investment in a diversified, international
portfolio of predominantly early and growth stage unquoted
SpaceTech businesses with the potential to dominate globally.
Investment Policy
The Company seeks exposure to early and growth stage privately
financed SpaceTech businesses, acquiring primarily minority
holdings. The Company intends to realise long-term value through
exiting its investments over time.
The Company invests internationally with a view to maintaining a
diversified portfolio primarily located in the US, UK and Europe.
The Company's portfolio is expected to comprise 20 to 50 holdings.
The Company will at all times invest and manage the portfolio in a
manner consistent with spreading investment risk.
Investments are mainly in the form of equity and equity-related
instruments although the Company may invest in a range of financial
instruments including, without limit, securities, derivatives,
warrants, options, futures, convertible bonds, convertible loan
notes, convertible loan stocks or convertible preferred equity. The
Company may also on occasion invest in other debt-based investments
not referred to above, including, without limit, loan stock,
payment-in kind instruments and shareholder loans. In addition to
participating in new issues, the Company may also undertake
secondary transactions that involve the acquisition of existing
stakes.
The Company may invest in companies, as well as other forms of
legal entity, including partnerships and limited liability
partnerships. The Company may acquire investments directly or by
way of holdings in special purpose vehicles, intermediate holding
entities or other structures. The Company will not invest in other
listed closed-ended investment funds.
Investment restrictions
The Company will invest and manage its assets with the objective
of spreading risk through the following investment
restrictions:
-- other than the ability for the aggregate value of the
Company's holding in one single portfolio company or other entity
to represent up to 20% of Gross Asset Value, the aggregate value of
the Company ' s holding in any other single portfolio company or
other entity will represent no more than 15% of Gross Asset Value;
and
-- the Company ' s aggregate investment in publicly quoted
companies will represent no more than 30% of Gross Asset Value.
The Company will generally only invest in publicly quoted
companies that constituted part of the Initial Portfolio or the
Retained Assets or in circumstances where it has already made an
initial investment prior to the portfolio company's initial public
offering. However, the Company may invest up to 5% of Gross Asset
Value in aggregate in publicly quoted companies that do not
constitute part of the Initial Portfolio or the Retained Assets or
in which it has not already made an initial investment prior to an
initial public offering. For the avoidance of doubt, any process by
which an unlisted investment of the Company becomes listed shall be
deemed not to be a new investment by the Company.
Each of the restrictions referred to above will be calculated at
the time of investment. The Company will not be required to dispose
of any investment or to rebalance the portfolio as a result of a
change in the respective valuations of its assets.
Hedging and derivatives
Save for investments made using equity-related instruments as
described above, the Company will not employ derivatives of any
kind for investment purposes other than to potentially hedge
downside risk on a quoted portfolio company for specific reasons,
such as where the Company is subject to lock-up provisions.
Derivatives may be used for currency hedging purposes.
Borrowings
Although the Company does not intend to use structural gearing
with a view to enhancing returns on investments, the Company may,
from time to time, use borrowings for the purpose of bridging
investments, managing its working capital requirements and
efficient portfolio management purposes. Borrowings will not exceed
10% of NAV, calculated at the time of drawdown of the relevant
borrowings.
Cash management
The Company may hold cash on deposit and may invest in cash
equivalent investments, which may include short-term investments in
money market-type funds and tradeable debt securities ('Cash and
Cash Equivalents'). There is no restriction on the amount of Cash
or Cash Equivalents that the Company may hold or where it is
held.
Cash and Cash Equivalents will be held with approved
counterparties and in line with prudent cash management guidelines
agreed between the Board and the Investment Manager.
The Company will hold sufficient Cash or Cash Equivalents for
the purpose of making follow-on investments in accordance with the
Company's investment policy and to manage the working capital
requirements of the Company.
Target Returns and Dividend Policy
The Directors intend to manage the Company's affairs to achieve
shareholder returns through capital growth rather than income.
The Company has no formal benchmark. However, the Company
targets an annualised total return on the Company's portfolio of at
least 20% over the long term (adjusted for any dividends paid or
share buy-backs by the Company). This is a target only and reflects
the Investment Manager's expectations of the potential returns that
can be generated by investing in a portfolio of early and growth
stage private companies which have the potential to generate
substantial returns for their shareholders over the long term
whilst recognising that not all portfolio companies will achieve
their potential and that some may fail in their entirety. This
should not be taken as an indication of the Company's expected
future performance, return or results over any period and does not
constitute a profit forecast. The actual return generated by the
Company over any period will depend on a wide range of factors,
including, but not limited to, the terms of the investments made,
the performance of its portfolio companies, general macroeconomic
conditions and fluctuations in currency exchange rates.
As the Company's priority is to produce capital growth over the
long term, it has no dividend target and will not seek to provide
shareholders with a particular level of distribution. However, the
Company intends to comply with the requirements for maintaining
investment trust status for the purposes of section 1158 of the
Corporation Tax Act 2010 regarding distributable income. Therefore,
in accordance with regulation 19 of the Investment Trust (Approved
Company) (Tax) Regulations 2011, the Company will not (except to
the extent permitted by those regulations) retain more than 15% of
its income (as calculated for UK tax purposes) in respect of each
accounting period and any excess will be distributed in the form of
a final dividend.
Share Rating Management
The Board recognises the need to address any sustained and
significant imbalance of buyers and sellers which might otherwise
lead to the ordinary shares trading at a material discount or
premium to their NAV.
The Board has not adopted any formal discount or premium targets
which would dictate the point at which the Company would seek to
buy back or issue ordinary shares. However, the Board is committed
to utilising its share buy-back and issuance authorities where
appropriate in such a way as to mitigate the effects of any such
imbalance. In considering whether buy-back or issuance might be
appropriate in any particular set of circumstances, the Board will
take into account, amongst other things, prevailing market
conditions, (in the case of buy-backs) the level of the Company's
discount relative to those of comparable listed investment
companies, the cash resources readily available to the Company, the
Company's immediate pipeline of investment opportunities, the level
of the Company's borrowings (if any), the Company's working capital
requirements and the degree of NAV accretion that will result from
the buy-back or issuance, and, in the case of buy-backs, whether
higher returns would be made from investing capital than buying
back ordinary shares.
On 13 July 2023, the Board announced a share repurchase
programme to mitigate the effect of the substantial discount
experienced by the Company. In the period to 13 October 2023, the
Company bought back 2,186,344 shares pursuant to the share
repurchase programme. The shares bought back are being held in
treasury and may be resold in due course at a premium to NAV. The
Board will keep shareholders informed, on a regular and ongoing
basis, of the approach which it has adopted to share rating
management, principally through commentary in the Company's Annual
and Interim Reports.
Key Performance Indicators
At each Board meeting, the Directors consider a number of
performance measures to assess the Company's success in achieving
its objectives. The key performance indicators ('KPIs') used to
measure the performance and progress of the Company over time are
as follows:
-- the movement in NAV per share (as the Company does not pay
dividends, this is the same as the NAV total return per share);
-- the movement in the share price (as the Company does not pay
dividends, this is the same as the share price total return per
share);
-- the premium/discount of the share price to the NAV per share;
-- ongoing charges; and
-- portfolio fair value vs. cost.
The first four KPIs are established industry measures. Having
regard to the Company's target return, we believe that, at this
stage in the Company's life, the portfolio fair value vs. cost is
an appropriate KPI to measure the portfolio's performance.
An explanation of the KPIs can be found in Alternative
Performance Measures. The KPIs for the year ended 30 June 2023 are
shown in the Key Highlights within the Strategic Report.
Environmental, Social and Governance Matters
Socially responsible investment
The Board has endorsed the Investment Manager's Responsible
Investment Policy, which seeks to ensure that the Investment
Manager's management of SSIT's investments takes account of
environmental, social, governance and ethical factors, where
appropriate. The Investment Manager actively engages with portfolio
companies on ESG factors and often has a participation role at
board level with such companies, helping to guide their governance
policies. Details of the Responsible Investment Policy are included
in the Strategic Report above.
Environment
As an investment company with all its activities outsourced to
third parties, the Company does not have any physical assets,
property, employees or operations of its own and, therefore, the
Company's own direct environmental impact is minimal. The Company
has no greenhouse gas emissions to report from its operations, nor
does it have responsibility for any other emissions producing
sources under the Companies (Directors' Report) and Limited
Liability Partnerships (Energy and Carbon Reporting) Regulations
2018. For the same reasons, the Company considers itself to be a
low energy user under the Streamlined Energy & Carbon Reporting
Regulation and, therefore, is not required to disclose energy and
carbon information.
The Company notes the Taskforce for Climate-related Financial
Disclosures ('TCFD') recommendations on climate-related financial
disclosures. The Company is an investment company and, as such, it
is exempt from the FCA's Listing Rules requirement to report
against the TCFD framework.
A key focus of the Investment Manager's Responsible Investment
Policy, and its engagement with portfolio companies, is on their
management of environmental risks, particularly those associated
with the climate change, and their ability to develop products and
services that help address climate change impacts.
Employees, human rights and community issues
The Board recognises the requirement under section 414C of the
Companies Act 2006 to provide information about employees, human
rights and community issues, including information in respect of
any of its policies in relation to these matters and their
effectiveness. These requirements do not apply to SSIT as it has no
employees, all of the Directors are non -- executive and it has
outsourced all of its functions to third-party service providers.
Consequently, SSIT has not reported further in respect of these
provisions.
Modern slavery
The Company does not provide goods or services in the normal
course of business and, as an investment company, does not have
customers. Consequently, the Directors do not consider that the
Company is required to make a statement under the Modern Slavery
Act 2015 in relation to slavery or human trafficking.
Diversity
The Board and Investment Manager strongly believe that having
diversity in skills, experience, identity and cognitive thought has
significant benefits when making decisions.
The Board currently comprises four independent Directors
appointed on merit-based qualifications. The skills and experience
which the current members of the Board bring to SSIT's leadership
are described in the Corporate Governance section below. Currently,
the Board has 75% female representation (greater than the FCA's
target for listed companies of 40%) and the Senior Independent
Director (Sue Inglis) is also female (in line with the FCA's target
for listed companies of one senior position being held by a woman).
Given the size of the Board and that fact the Company is in an
early stage, it does not currently have at least one member of the
Board from a minority ethnic background (contrary to the FCA's
target for listed companies) but this will be a key consideration
for future appointments.
The Investment Manager (together with its affiliates) has a
diverse employee base (currently, 50% female and 23% from non-white
British or other white backgrounds) and continues to dedicate
recruiting resources to increasing its diversity across all
positions and levels.
Bribery Act 2010
The Board has a zero-tolerance policy in relation to bribery and
corruption and has received assurance through internal controls
reporting from the Company's key service party providers, including
the Investment Manager, that adequate safeguards are in place to
protect against any such potentially illegal behaviour by employees
or agents.
Criminal Finances Act 2017
The Company has a zero-tolerance policy towards the criminal
facilitation of tax evasion.
Principal and Emerging Risks and Uncertainties
Under the FCA's Disclosure Guidance and Transparency Rules, the
Directors are required to identify those material risks to which
the Company is exposed and take appropriate steps to mitigate those
risks.
The Board thoroughly considers the process for identifying,
evaluating and managing any significant risks faced by the Company,
including emerging risks, on an ongoing basis, and these risks are
reported and discussed at Board meetings. The Board ensures that
effective controls are in place to mitigate these risks and that a
satisfactory compliance regime exists to ensure all applicable
local and international laws and regulations are upheld. For each
material risk identified in the risk matrix, the likelihood and
consequences are identified, management controls and frequency of
monitoring are confirmed and results are reported and discussed at
each scheduled Audit Committee meeting and more often if
required.
The key areas of risk faced by the Company and mitigating
factors are summarised below:
Risk Potential impacts Mitigation
------------------ ----------------------------------------------------------------- ------------------------------------------------------------
Investment return
Risk that SSIT * Reduced demand for SSIT's shares * Seraphim Space has deep sector knowledge and
fails to achieve experience and a rigorous investment process designed
its investment to identify and manage risks
objective and * Reduced liquidity in SSIT's share trading
provide
a satisfactory * The portfolio is managed in accordance with the
investment return * Increase in share price discount investment policy to spread investment risk
* The investment environment, portfolio performance,
specific factors affecting portfolio companies
(individually or collectively), transactions,
investment pipeline opportunities and cash flow
forecasts are reviewed regularly by the Board
* The Board conducts a rigorous strategy review
annually
------------------ ----------------------------------------------------------------- ------------------------------------------------------------
Discount
Risk that SSIT's * Reduced liquidity in SSIT's share trading * The Board, Seraphim Space and SSIT's corporate
shares trade at a brokers monitor the SSIT share price discount (and
material discount premium) on an ongoing basis and movements in the
to NAV as a result * Reduced shareholder return share register on a regular basis, taking into
of an imbalance account broader market conditions
between buyers and
sellers * Discount may attract short-term investors with return
which may occur aspirations materially different to SSIT's investors * Proactive investor communication and engagement by
for a wide variety supportive of its long-term strategy the Board, Seraphim Space and SSIT's corporate
of brokers to enhance investors' understanding of SSIT,
reasons its strategy and associated risks
* SSIT's access to additional capital constrained
* Shareholders are encouraged to engage freely with the
Board on matters that are of concern to them so that
the Board can understand their views and concerns and
consider them in its discussions and decision-making
* SSIT has authorities in place to buy back shares,
which the Board may use when deemed to be in the best
interests of shareholders as a whole (in July 2023,
the Board announced a share repurchase programme to
support the Company's share price in light of the
substantial discount it was experiencing)
------------------ ----------------------------------------------------------------- ------------------------------------------------------------
Liquidity
Risk that SSIT has * Dilution of SSIT's holdings in existing portfolio * Seraphim Space monitors the cash runways of portfolio
insufficient companies companies and maintains cash flow projections based
liquid on its assessment of return potential, timing and
resources to scale of potential funding rounds, the ability of
particate in * Reputational damage others in portfolio company syndicates to support
subsequent funding rounds, the availability of new investment
funding rounds by opportunities and SSIT's projected operating costs in
portfolio * Reduced NAV growth order to manage SSIT's ability to participate in
companies forthcoming funding rounds
or make new
investments * Reduced shareholder return
* Cash flow forecasts are reviewed regularly by the
Board
------------------ ----------------------------------------------------------------- ------------------------------------------------------------
Portfolio company
performance * Reduction in relevant portfolio company valuations, * Seraphim Space has extensive experience of investing
Risk that potentially resulting in 100% write-off into and supporting early and growth stage businesses
portfolio
companies, being
early and growth * Reduced NAV and shareholder returns * Seraphim Space has a rigorous investment process
stage companies designed to identify and manage risks
which
may lack breadth
and depth of * A third party technical due diligence provider is
management engaged prior to every material deal to assess the
team and capital technological and market opportunity
and have a higher
risk
profile than * Seraphim Space monitors progress against critical
larger, more milestones, with the aim of supporting portfolio
established companies in changes in strategy where progress is
companies, are not as anticipated
unable to
commercialise
their technology, * SSIT's investment strategy is to ensure sufficient
products, business diversification within its portfolio and to syndicate
concepts or investments with other investors to ensure portfolio
services and/or companies are well capitalised
otherwise
fail to achieve
their business * Portfolio company performance is regularly reviewed
objectives by the Board
------------------ ----------------------------------------------------------------- ------------------------------------------------------------
Public company
share price * Increased share price volatility * The investment policy includes restrictions on
volatility investment in listed companies
Risk of extreme
volatility in the * Reduced demand for SSIT's shares
share * Seraphim Space monitors share price fluctuations and
prices of SSIT's portfolio concentration levels
listed portfolio * Reduced liquidity in SSIT's share trading
companies
materially
adversely * Reduced NAV and shareholder returns
impacting the
concentration
risk associated * Increase in share price discount
with the portfolio
------------------ ----------------------------------------------------------------- ------------------------------------------------------------
Macroeconomic
Risk that the * Significant widescale disruption impacting businesses * Seraphim Space completes extensive due diligence
performance of generally procedures prior to investment and, on an ongoing
portfolio basis, monitors and works closely with portfolio
companies may be companies to provide advice and experience in dealing
materially * Adverse impact on global markets and investor with adverse macroeconomic conditions and disruptive
adversely sentiment events
affected by
geopolitical
risks, a * Reduced portfolio valuations * Portfolio companies have business continuity plans,
pandemic/epidemic, which, in many cases, have been fully tested during
climate change the COVID-19 pandemic and/or since the war in Ukraine
and/or other * Reduced demand for SSIT's shares began and demonstrating that they are adept at
macroeconomic adjusting in response to major widescale disruption
conditions,
including interest * Reduced liquidity in SSIT's share trading
rate * The investment environment and specific factors
rises and affecting portfolio companies (individually or
inflation * Reduced NAV and shareholder return collectively) are assessed regularly by the Board
* Increase in share price discount
* SSIT's access to additional capital constrained
------------------ ----------------------------------------------------------------- ------------------------------------------------------------
Valuation
Risk that * False market in SSIT's shares * Valuations are prepared in accordance with the IPEV
estimates, Valuation Guidelines and Seraphim Space's valuation
assumptions and policy, which has been formally reviewed by the Board
judgements used in * Reputational damage and commented upon by the Company's Auditor and is
valuing SSIT's consistently applied
investments
in private * Reduced NAV and shareholder returns
companies lead to * In advance of quarterly Audit Committee meetings, the
a material Audit Committee meets with Seraphim Space solely for
misstatement of * Increase in share price discount the purpose of reviewing the quarterly valuations,
the valuation and, giving the Audit Committee an opportunity to
consequently, challenge the valuations and to request further
in SSIT's NAV information before the valuations are approved
* SSIT's Auditor reviews the valuations and methodology
and attends ad hoc Audit Committee meetings when
interim and year end valuations are presented and
discussed by the Investment Manager as part of their
annual audit review procedures
------------------ ----------------------------------------------------------------- ------------------------------------------------------------
Realisation
Risk that, as * Reduced NAV and shareholder returns * SSIT's investment strategy is to hold investments for
SSIT's private the long term in order to deliver capital growth,
company SSIT has no debt, dividend or buy-back obligations,
investments are it does not have a fixed life and it manages its
illiquid and its liquidity to pay its operating costs as they fall due,
investments so there is no pressure to realise investments
may have
restrictions on
sale or transfer * As set out opposite 'Valuation' above, SSIT has a
of shares, SSIT robust and consistent valuation process
may be unable to
realise
investments at
short notice or at
all
and/or the price
achieved on any
realisation
may be at a
material discount
to the
prevailing
valuation
------------------ ----------------------------------------------------------------- ------------------------------------------------------------
Foreign exchange
Risk that FX * Reduced NAV and shareholder returns * SSIT invests globally and has exposure to several
movements non-Sterling currencies, providing some FX risk
materially diversification
adversely
affect the value
of investments * Whilst it is not currently SSIT's policy to actively
made manage FX risk, Seraphim Space monitors FX rates and
in currencies may, in consultation with the Board and SSIT's
other than corporate brokers, explore mitigating options
Sterling
* The Company has engaged a provider who has
demonstrated a track record of favourable rates for
FX spot trades
------------------ ----------------------------------------------------------------- ------------------------------------------------------------
Key persons
Risk that one or * Adverse impact on SSIT's ability to implement its * Seraphim Space has controls and incentives in regard
more of Mark investment strategy to key persons retention, including annual bonus,
Boggett, share of any performance fee payable by SSIT and
James Bruegger and succession planning
Rob Desborough * Reduced NAV and shareholder returns
(key
members of * Seraphim Space's recruitment and appointments since
Seraphim Space's SSIT's IPO have added further depth to its team
team)
cease to be
actively engaged * The Investment Management Agreement may be terminated
in the by SSIT if a key person leaves Seraphim Space and is
management of not replaced by (a) person(s) of equal or
SSIT's portfolio satisfactory standing within specified timeframes
------------------ ----------------------------------------------------------------- ------------------------------------------------------------
ESG
Risk that * Reputational damage * With the assistance of an international
Seraphim Space sustainability consultancy firm, Seraphim Space has
fails to developed a robust Responsible Investment Policy and
identify ESG * SSIT's shares may be less attractive to investors associated tools
issues in
portfolio
companies * Issues regarding valuations of portfolio companies * Seraphim Space works with the boards and management
or receive concerned teams of portfolio companies to identify and address
adequate ESG ESG issues, including ESG reporting, and with
information co-investors to increase collective influence on such
from portfolio matters.
companies or that
portfolio
companies fail to
adequately
address
any material
climate change
impacts
they might have
------------------ ----------------------------------------------------------------- ------------------------------------------------------------
Each of the above principal risks has been identified in the
Company's risk matrix, which is reported and discussed at Audit
Committee and Board meetings. The Directors ensure that effective
controls are in place to mitigate each risk and the graphics in the
Annual Report show the Board's assessment of the likelihood and
impact of each, both pre -- control and post-control.
Going Concern
In light of the conclusions drawn in the longer-term viability
statement below and as set out in note 2 to the financial
statements, the Directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence
for at least 12 months from the date of this annual report.
Accordingly, the Directors believe that it is appropriate to
continue to adopt the going concern basis in preparing the
financial statements.
Longer-term Viability
As required by the AIC Code, the Directors have assessed the
prospects of the Company over a period longer than the 12 months
required for the going concern statement. The Board has assessed
the Company's prospects over the period of three years ending 30
September 2026. The Board has chosen this period because it is
consistent with the three-year basis that the Directors evaluate
the Company's financial position as a whole on a quarterly basis
and projecting financial and economic scenarios over a longer
period would be imprecise given the lack of long-term economic
visibility. Soon after the period of three years ending 30
September 2026, an ordinary resolution will be proposed at the AGM
in 2026 pertaining to the Company continuing as an investment
company.
In assessing the Company's prospects and longer-term viability,
the Board has taken into account:
-- the principal and emerging risks and their mitigation
identified in the 'Principal and Emerging Risks and Uncertainties'
section above;
-- the nature of the Company's business;
-- the Company's cash and other liquid reserves, as well as the value of its listed holdings;
-- the ability of the Investment Manager and Directors to
minimise the level of cash outflows, if necessary, as the
Investment Manager considers the Company's future cash requirements
before making investments and the Board receives regular updates
from the Investment Manager on the Company's cash position and
forecast cash flows, which allows the Board to limit funding for
existing and/or new investments as required;
-- the Investment Manager monitors the Company's cash
requirements to meet ongoing fees and expenses and expects to
maintain sufficient assets in cash reserves to meet these
obligations;
-- the circumstances in which a performance fee is payable to
the Investment Manager as outlined in note 4 to the financial
statements; and
-- the Company does not have any gearing or any obligation to pay dividends.
The process for identifying, evaluating and managing significant
and any emerging risks faced by the Company and periodic reports
from the Investment Manager and Administrator regarding risks faced
by the Company are reviewed routinely at Audit Committee and Board
meetings. The Board ensures that effective controls are in place to
mitigate these risks and that a satisfactory compliance regime
exists to ensure all applicable local and international laws and
regulations are upheld. When required, the Company seeks expert
advice regarding tax, legal and other factors.
Based on a robust assessment of the principal and emerging risks
facing the Company, the Board believes that the most significant
risks to the Company's longer-term viability are:
-- the risk of a significant and prolonged economic downturn
which could impact the Company through poor ratings of growth with
consequent discounts, high interest rates adversely impacting
growth company valuations and a tough fundraising environment;
-- a significant majority of the Company's investments are in
private companies that are not liquid and may be subject to
restrictions on sale or transfer, which may limit the Company's
ability to realise investments at short notice and/or at a
reasonable price or at all; and
-- the inability to raise funds, should the need arise.
The Board has considered the Company's viability over the
three-year period, based on a working capital model prepared by the
Investment Manager. The working capital model forecasts key cash
flow drivers, such as capital deployment rate and operating
expenses, and includes robust downside scenarios with continued
high interest rates and a considered amount of additional
investment activity in the near term. Capital raises, realisations
and/or share buy-backs are assumed to not occur during the
three-year period, unless already predetermined.
Based on its assessment, the Board has concluded there is a
reasonable expectation that the Company will continue to meet its
liabilities as they fall due and remain viable, even in a scenario
where global macroeconomic uncertainty persists for an extended
period and including severe but plausible downside scenarios over
the three-year period of the assessment.
Life of the Company
The Company has no fixed life but, in accordance with its
Articles of Association, an ordinary resolution proposing that it
continues in existence as an investment company will be proposed at
its AGM in 2026 and, if passed, every five years thereafter. If any
such resolution is not passed, proposals will be put forward by the
Directors within three months from the date of the resolution to
the effect that the Company be wound up, liquidated, reconstructed
or unitised.
Future Development of the Company
While the future development of the Company is dependent on the
success of its investment strategy, which is subject to various
factors including external ones (such as the macroeconomic
environment and market developments) which are outside the control
of the Board and Investment Manager, and the future attractiveness
of the Company as an investment vehicle, the Board's intention is
that the Company will continue to pursue its investment objective
and policy. The Chair's Statement and the Investment Manager's
Report include commentary on the outlook for the Company.
Approval of Strategic Report
The Strategic Report is provided in accordance with The
Companies Act 2006 (Strategic Report and Directors' Report)
Regulations 2013 and is intended to provide information about the
Company's strategy and business needs, its performance and results
for the year and the information and measures which the Directors
use to assess, direct and oversee the Investment Manager in the
management of the Company's activities. The Strategic Report has
been approved by the Board and is signed on its behalf by:
Will Whitehorn
Chair
16 October 2023
Section 172: Engaging with Key Stakeholders
'Our responsibilities to stakeholders, together with
consideration of the long-term consequences of our decisions and
maintaining high standards of business conduct, are integral to the
way the Board operates'.
S.172 Responsibilities
Under section 172 of the Companies Act 2006 ('s.172'), the
Directors have a duty to act in the way they consider, in good
faith, would be most likely to promote the success of the Company
for the benefit of its members as a whole. In doing so, the
Directors are required to take into account (amongst other matters)
the likely long-term consequences of their decisions, the need to
foster relationships with the Company's wider stakeholders, the
desirability of the Company maintaining a reputation for high
standards of business conduct and the impact of the Company's
operations on the community and environment.
As an externally managed investment company, SSIT has no
premises, employees or customers and conducts its core activities
through third-party service providers. Currently, SSIT has no debt
finance. We consider, therefore, shareholders to be the Company's
principal stakeholders but also regard potential shareholders, the
Investment Manager, the Administrator, other key service providers
(corporate brokers, Auditor, legal advisers, public relations and
communications adviser, depositary and registrar) and portfolio
companies as key stakeholders. The Investment Manager's Responsible
Investment Policy is integrated into its investment process,
ensuring that it has regard to the impact of SSIT's investments on
the wider community and environment.
Our responsibilities to stakeholders, together with
consideration of the long-term consequences of our decisions and
maintaining high standards of business conduct, are integral to the
way we operate as a Board and are foremost in our minds in our
discussions, decision-making and reporting. We welcome, therefore,
shareholders' and other stakeholders' views and concerns and place
great importance on our engagement with them so that we can better
understand and consider them in our discussions and
decision-making.
Stakeholder Engagement
The table below sets out the principal ways in which we engage
with the Company's key stakeholder groups.
Stakeholder group
Shareholders and potential investors Why they are important
Continued shareholder support and engagement and attracting
new investors are critical to
the continuing existence of the Company and the delivery of
its long-term strategy.
How we engage
The Company has a broad range of shareholders, comprising
both professional and retail investors,
and has developed various ways of engaging with them,
including:
* Regulatory announcements and publications: The
Company issues regulatory announcements via the
London Stock Exchange in respect of routine reporting
obligations, periodic financial and portfolio
information updates and in response to other events.
The Company's Annual and Interim Reports and
associated presentations, as well as quarterly
reports and shareholder circulars, are made available
on the Company's website. Their availability is
announced via the London Stock Exchange.
* RNS Reach Newsletter: The Company issues a monthly
SpaceTech Sector Newsletter via RNS Reach to provide
timely updates, based on publicly available
information, on the Company's investments, its
Investment Manager and the wider SpaceTech market.
The first publication was issued on 9 January 2023.
Their availability is also announced via the London
Stock Exchange and are available via the 'RNS
Announcements' section under 'Investor Relations' on
the Company's website.
* Website ( https://investors.seraphim.vc/ ): This
includes videos, research notes available to retail
investors and other relevant information to enhance
investors' understanding of the Company and its
strategy. Shareholders and other interested parties
can subscribe to email news updates by registering
online on the website.
* Investor meetings and events: The Investment Manager,
on behalf of the Board and with the assistance of
SSIT's corporate brokers and public relations and
communications advisor, undertakes a programme of
investor engagement throughout the year. During the
year to 30 June 2023, the Investment Manager held
four group meetings for research analysts for each
quarterly results and four professional and/or retail
investor webinars through the Company's public
relations and communications advisor. Each analyst
presentation had 25 attendees. Through the Company's
corporate brokers, there were 120 interactions with
57 unique investors. Directors attend some investor
meetings to gauge sentiment first hand. All investors
are offered the opportunity to meet the Chair, Senior
Independent Director or other Board members.
* Capital markets day: This is an event, attended by
research analysts and professional investors, held
periodically consisting of presentations from the
Chair and senior members of the Investment Manager's
team. The capital markets day held on 12 May 2022
also included presentations from a selection of
SSIT's portfolio companies. Videos of the event are
available on SSIT's website. The next capital markets
day is scheduled for 18 October 2023.
* Investor relations updates: At quarterly Board
meetings, the Directors receive updates on the share
trading activity, share price performance and
investor feedback. The Directors also receive
investor feedback following investor roadshows
arranged by the Company's corporate brokers.
* Annual General Meetings: The Annual General Meeting
of the Company provides a forum for shareholders to
meet, ask questions and discuss issues with the
Directors and Investment Manager. The next Annual
General Meeting will take place on 20 November 2023.
* Working with external partners: The Board also
engages some external providers, such as a public
relations and communications adviser, to assist in
investor communication and obtain input on specific
aspects of shareholder communications, such as
developing more effective ways to communicate with
investors.
We welcome diversity of thought and opinions. Shareholders
may contact the Company via seraphimteam@ocorian.com
or by post via the Company Secretary on any matters that
they wish to discuss with the Board
and the Company Secretary will arrange for the relevant
Board member to contact them.
Target outcomes
Shareholders and potential investors receive relevant
information to enable them to evaluate
whether their investment interests are aligned with the
Company's strategy.
We receive feedback and views on investor concerns and
priorities which inform our discussions
and decisions.
-----------------------------------------------------------
Investment Manager Why it is important
(Seraphim Space Manager LLP) The Investment Manager's specialist knowledge and
experience is vital to implementing SSIT's
investment strategy successfully and achieving its
investment objective, so maintaining a
strong, collaborative relationship with the Investment
Manager is critical to SSIT's long-term
success.
How we engage
Important components in the collaboration with the
Investment Manager are:
* drawing on Board members' individual experience to
support the Investment Manager in the performance of
its responsibilities to the Company, including
implementing SSIT's investment strategy;
* willingness to make the Board members' experience
available to support the Investment Manager in the
sound, long-term development of its business and
resources, recognising that SSIT is currently the
principal client of the Investment Manager and so the
long-term success of the Investment Manager is
closely aligned to that of the Company; and
* having in place appropriate remuneration arrangements
to incentivise the Investment Manager whilst aligning
with shareholders' interests.
We engage with the Investment Manager in numerous ways,
including:
* Regular reporting: We receive at least quarterly
reports from the Investment Manager on performance,
investment activity and pipeline, portfolio company
developments, cash flow projections, and investor
relations activities, as well as on a wide range of
other topics.
* Meetings: The Board and Investment Manager meet
face-to-face at least quarterly for scheduled Board
and Committee meetings. In addition, the Board and
Investment Manager frequently meet, either in person
or virtually, between scheduled Board and Committee
meetings to consider ad hoc matters.
* Continuous dialogue: The Board maintains an open
dialogue with the Investment Manager, engaging on key
matters affecting SSIT or the Investment Manager.
Target outcomes
We maintain a strong, collaborative relationship with the
Investment Manager.
The Company's portfolio is well-managed, enabling it to
meet its strategic objectives and
achieve long-term sustainable success.
-----------------------------------------------------------
Administrator / Company Secretary Why it is important
(Ocorian Administration (UK) Limited) The Administrator provides accounting, company secretarial
and other administrative services,
so maintaining a strong, collaborative relationship with
the Administrator is critical to
the effective running of SSIT's day-to-day operations.
How we engage
We engage with the Administrator in several ways,
including:
* Regular reporting: We receive at least quarterly
reports from the Administrator on a range of matters,
including financial, corporate governance, legal,
regulatory and compliance matters.
* Meetings: The Administrator attends both scheduled
and ad hoc Board and Committee meetings.
* Continuous dialogue: The Board maintains open and
constructive dialogue with the Administrator,
engaging on key matters affecting SSIT.
In addition, the Investment Manager, on our behalf, engages
with the Administrator on at least
a weekly basis and ensures service levels are satisfactory
and appropriate controls are in
place.
Target outcomes
We maintain a strong, collaborative relationship with the
Administrator.
The Company's day-to-day operations are well-managed,
supporting its ability to meet its strategic
objectives and achieve long-term sustainable success.
-----------------------------------------------------------
Other key service providers Why they are important
(corporate brokers, Auditor, legal advisers, public For the Company to operate as a listed investment company,
relations and communications adviser, the Board relies on the other key
depositary, registrar) service providers for essential services and for advice and
support in meeting relevant obligations
and complying with best practice. Constructive working
relationships with the other key service
providers helps ensure the Company continues to operate
effectively.
How we engage
We engage with the other key service providers in a
collaborative and collegiate manner, with
open and respectful discussion and debate being encouraged,
whilst also ensuring that appropriate
and regular challenge is brought. We engage with the other
key service providers in several
ways, including receiving regular and, as needed, ad hoc
reports, face-to-face meetings (at
the request of the Board or the relevant service provider)
and other dialogue as and when
appropriate.
In addition, the Investment Manager and/or Administrator,
on our behalf, engages with the
other key service providers on a regular basis and ensures
service levels are satisfactory.
Target outcomes
We, directly and indirectly, maintain constructive working
relationships with our other key
service providers.
Other key service providers provide the required level of
service, enabling the Company to
meet its obligations and follow best practice.
-----------------------------------------------------------
Portfolio companies Why they are important
For the Company to deliver capital appreciation, it needs
to invest in portfolio companies
that ultimately develop their products and services and
successfully grow.
How we engage
We look to engage with the portfolio companies in a
collaborative and collegiate manner. We
engage with portfolio companies during investor events.
In addition, the Investment Manager, on our behalf, engages
with portfolio companies on a
regular basis through participation on their boards,
interaction with their shareholders,
introductions to partners, customers and potential funding
providers and value-add support
and advice.
Target outcomes
We, directly and indirectly, maintain constructive working
relationships with our portfolio
companies.
Portfolio companies benefit from the engagement, leading to
their growth and, ultimately,
higher value for the Company.
-----------------------------------------------------------
Examples of Stakeholder Considerations
Set out below are examples of decisions and actions during the
year which have required the Directors to have regard to applicable
s.172 factors.
Topic Stakeholder considerations and outcome
Responsible investment S.172 consideration: the impact of the Company's operations on the community and
the environment
Whilst the Company's operations are limited (with all substantive operations being
conducted
by its third-party service providers), the Board is aware of the need to consider
the impact
of the Company's investment strategy on society and the environment. The Board is
also aware,
based on feedback from investor meetings, that investors would like a better
understanding
of how ESG matters are factored into the Company's investment strategy.
Stakeholders influencing and/or impacted considerations and outcome: Portfolio
companies,
shareholders and potential investors.
----------------------------------------------------------------------------------
Investment approvals S.172 consideration: the desirability of the Company maintaining a reputation for
high standards
of business conduct
The Company has appointed the Investment Manager to manage its investments on a
discretionary
basis, save where the Investment Manager may have a potential conflict of
interest. A company
affiliated with the Investment Manager runs accelerator programmes for very early
stage SpaceTech
companies and receives share options and/or warrants from participants in those
programmes.
During the financial year, the Investment Manager proposed that SSIT invest, in
aggregate,
up to GBP2.3m, in two former accelerator programme participants (one new
investment which
did not close prior to the year end and one follow-on) where the affiliate had a
potential
conflict of interest. In each case, the Board considered the proposed investment
and the conflict
and noted that only the independent members of the Investment Manager's
Independent Advisory
Committee had considered the investment at the Investment Manager's Investment
Committee meeting
and were recommending the investment. The Board was satisfied that the conflict
had been managed
appropriately and the investments were consistent with SSIT's strategy and
objectives and
had the benefit of having been monitored by the Investment Manager for some time.
The Board
also noted that the terms of each proposed investment were in line with those for
other comparable
transactions, and there was participation from arm's length investors, including
significant
investment from a new investor or more than pro-rata participation from an
existing investor.
Accordingly, the Board concluded that it was in the interests of SSIT's
shareholders to approve
the investments.
Stakeholders influencing and/or impacted considerations and outcome: Shareholders
and potential
investors, Investment Manager.
----------------------------------------------------------------------------------
Capital allocation S.172 consideration: the likely consequences of the decisions in the long term
Having regard to the challenging environment for raising additional capital (debt
and/or equity)
and in expectation that such environment would continue for some time, the Board
and Investment
Manager regularly reviewed the Company's cash resources and other sources of
liquidity, identified
anticipated shorter-term funding requirements of SSIT's portfolio companies and
agreed capital
allocations for supporting portfolio companies and new investment opportunities
until such
time as the fundraising environment improves or a significant liquidity event
occurs. These
allocations were consistent with SSIT's long-term strategy, should enable the
Company to continue
to foster good relationships with portfolio company management teams and maintain
it's standing
as a key investor in the SpaceTech sector and are aimed at supporting the
long-term growth
of the NAV per share.
Stakeholders influencing and/or impacted considerations and outcome: Shareholders
and potential
investors, portfolio companies, Investment Manager.
----------------------------------------------------------------------------------
Share buy backs S.172 consideration: the likely consequences of the decisions in the long term,
the need
to act fairly as between members of the Company
The Board considers that it is not in Shareholders' interests for the Ordinary
Shares of the
Company to trade at a significant discount to the prevailing NAV in normal market
conditions.
SSIT's shares have traded at a material discount to NAV during the year (and
continue to do
so). The Board has authority to buy-back shares when they are trading at a
discount to NAV.
The Board kept under review whether buying back shares would be in the interests
of shareholders
having regard to market conditions generally, the ratings of other similar listed
investment
companies, the anticipated shorter-term funding requirements of SSIT's portfolio
companies,
the investment opportunities available to the Company, feedback from shareholder
meetings
and advice from SSIT's corporate brokers. The Board believes that the most
effective means
of minimising any discount at which the Ordinary Shares may trade is for the
Company to deliver
strong, consistent, long-term performance from the investment portfolio. However,
wider market
conditions and other considerations inevitably affect the rating of the Ordinary
Shares from
time to time.
Towards the end of the year, the Ordinary Share price discount widened to a level
that the
Board concluded, having regard to the matters referred to in the previous
paragraph, that
it would be in the interests of shareholders to commence a share repurchase
programme. On
13 July 2023, the Board announced a share repurchase programme funded out of
SSIT's existing
cash resources. Since then, and up to 13 October 2023, the Company bought back a
total of
2,186,344 shares (0.9% of the shares in issue at 12 July 2023) at an aggregate
cost of GBP1m.
The shares bought back are being held in treasury. The closing price as at 13
October 2023
was [x]p, an increase of [x]% from the closing share price of 26.1p on 12 July
2023. The shares
were bought at a discount to net asset value in order to ensure that the company's
shareholders
found liquidity for their shares when market demand was insufficient and on terms
that enhanced
net asset value for remaining shareholders.
Stakeholders influencing and/or impacted considerations and outcome: Shareholders
and potential
investors.
----------------------------------------------------------------------------------
Annual review of service providers S.172 consideration: the need for the Company's to foster business relationships
with suppliers,
customers and others
The Management Engagement Committee met during the year to review the Company's
external service
providers and, in particular, the quality and costs of the services provided
(details of the
review are included in the Management Engagement Report). For the reasons noted in
its Report,
the Management Engagement Committee concluded that the interests of the Company's
shareholders
would be best served by the ongoing appointments of the Investment Manager, the
Administrator
and SSIT's other key service providers on the existing terms.
Stakeholders influencing and/or impacted considerations and outcome: Investment
Manager,
Administrator, other key service providers.
----------------------------------------------------------------------------------
Strategy session S.172 consideration: the likely consequences of the decisions in the long term
In June 2023, the Board held a strategy session with the Investment Manager,
outside of the
scheduled quarterly Board meetings, to consider the Company's strategic
objectives. Topics
discussed included liquidity projections, scenario planning and allocation of
existing cash
resources. The Board believes that the strategy session helped to strengthen a
clear and collaborative
vision for the strategic direction of the Company, while taking into account the
views and
needs of stakeholders. The Board will continue to conduct a strategy session
annually.
Stakeholders influencing and/or impacted considerations and outcome: Shareholders
and potential
investors, portfolio companies, Investment Manager.
----------------------------------------------------------------------------------
Directors and Investment Manager
Board of Directors
The Board of the Company, which combines considerable knowledge
of the SpaceTech industry, venture capital investment, the
investment company sector and corporate governance, is responsible
for ensuring conformance to the investment strategy, monitoring the
performance of the Investment Manager and ensuring good governance,
including in relation to ESG matters.
The Directors are all non-executive and independent.
Photo Photo Photo Photo
William (Will) Susan (Sue) Inglis Christina McComb Angela Lane
Whitehorn Senior Independent Director Director
Chair Director
Date of appointment 14 June 2021 14 June 2021 14 June 2021 1 January 2022
---------------------- ---------------------- ---------------------- ----------------------
Committee membership AC, RNC, MEC AC, RNC(c), MEC AC, RNC, MEC(c) AC(c), RNC, MEC
---------------------- ---------------------- ---------------------- ----------------------
Skills and experience Will was formerly a Sue has a wealth of Christina has over 25 Angela has decades of
director of Virgin experience from more years' experience of experience working
Group and President of than 30 years advising venture capital and with private
Virgin Galactic until listed investment growth investment as a equity-owned companies
2010. companies former and investment
He has since pursued a and financial director of 3i PLC and companies and as the
private equity and institutions. Her other venture funds. chair of audit and
non-executive career. executive roles She has been a remuneration
He is the President of included Managing director of other committees. She is a
UKSpace, Director, Corporate investment companies, Fellow of the
the trade body that Finance including as Chair of Institute
represents the Space in the investment Standard Life European of Chartered
industry in the UK. companies team at Private Equity Trust Accountants in England
Will chairs the Cantor Fitzgerald PLC, from which role and Wales and began
Scottish Event Europe and investment she her career at the
Campus, which hosted companies and retired in April 2022. venture capital
COP26. In addition to financial institutions She has also held a firm 3i PLC and became
these corporate roles, teams at Canaccord number of senior a partner of 3i's
he has been a Fellow Genuity. Sue is a public sector roles Growth Capital
of qualified lawyer and involved in business, overseeing
the Royal Aeronautical was a partner SME and growth the UK Growth
Society since 2014 and and head of the funds business finance, Capital portfolio.
is a member of the UK and financial services including as Senior Subsequently, she has
Government's Space group at Shepherd & Independent Director held a number of
Exploration Wedderburn, a leading at the British positions as chair of
Advisory Committee, Scottish Business private equity-backed
which reports to the law firm. In 1999 she Bank. She was awarded businesses. She is
UK Space Agency. was a founding partner an OBE in the Queen's currently on the Board
of Intelli Corporate Birthday Honours 2018 of and acts as chair
Finance, an advisory for services to the of the audit committee
boutique economy. for
firm focusing on the three investment
asset management and trusts investing in
investment company quoted and unquoted
sectors, which was companies.
acquired by
Canaccord Genuity in
2009.
---------------------- ---------------------- ---------------------- ----------------------
External appointments Chair of Good Energy Chair of ThomasLloyd Non-executive Non-executive
Group PLC and Energy Impact Trust director of Big director and chair of
Craneware PLC and PLC and the senior Society Capital Ltd the Audit Committee
non-executive independent director and trustee and chair of BlackRock
director of AAC Clyde of Baillie of Investment Throgmorton Trust
Space Gifford Growth US Committee PLC,
AB. Growth Trust PLC and of Nesta, the UK's Pacific Horizon
CT Global Managed Innovation Agency for Investment Trust PLC
Portfolio Trust PLC. Social Good . and Dunedin
Enterprise Investment
Trust PLC.
---------------------- ---------------------- ---------------------- ----------------------
Committee membership key
AC Audit Committee
--------------------------------------
MEC Management Engagement Committee
--------------------------------------
RNC Remuneration and Nomination Committee
--------------------------------------
(c) Chair
--------------------------------------
Investment Manager
The Company has appointed Seraphim Space Manager LLP as its
alternative investment fund manager. The Seraphim Space team is
comprised of seasoned venture capitalists and some of the sector's
most successful entrepreneurs who scaled their SpaceTech businesses
to multi-billion Dollar exits.
The senior individuals responsible for executing and overseeing
the Company's investment strategy are shown below.
Mark Boggett, CEO
Mark is a pioneer in SpaceTech investment having co-founded
Seraphim Space and launched the Seraphim Space LP fund, Seraphim
Space Camp Accelerator, UK Space Tech Angels and SSIT. Previously,
Mark was a director at YFM Equity Partners, the firm behind the
high profile British Smaller Companies VCTs 1 & 2. He also
worked at Brewin Dolphin and Williams de Broe. He completed his
undergraduate degree in Accounting & Finance and Master's in
Economics and Finance from University of Leeds. Mark has been a
fund representative on the boards of a range of leading global
SpaceTech companies, including LeoLabs, Spire Global (listed on
NYSE), Arqit (listed on NASDAQ) and HawkEye 360.
James Bruegger, CIO
James, co-founder and CIO of Seraphim Space, is a prolific
venture capital investor in the global SpaceTech domain. James was
an early venture capital investor in Arqit, ICEYE, LeoLabs and
D-Orbit and led investments in several companies that went public,
including Spire Global and AST SpaceMobile. Previously, he worked
at YFM Equity Partners and Burlington Consultants, a boutique
strategy consultancy that was acquired by Deloitte & Touche.
James holds a first-class degree in History from University College
London. James has been a fund representative on the boards of a
range of leading global SpaceTech companies, including ICEYE,
D-Orbit, Ultrasoc, ALL.SPACE (formerly Isotropic Systems) and
SatVu.
Rob Desborough, Managing Partner
Rob is a partner at Seraphim Space, heading up the early stage
investments. He is a co-founder of Seraphim Space Camp Accelerator,
which was launched in 2018 and is now one of the world's leading
accelerator programmes for SpaceTech start-ups. Prior to Seraphim
Space, Rob was with YFM Equity Partners as an Investment Director.
Rob holds a BSc (Hons) in Biomedical Sciences from University of
Glasgow and a Postgraduate Diploma (PGDip) in Information
Technology Systems from University of Strathclyde. Under Rob's
guidance the Seraphim Space Camp Accelerator has graduated 63
SpaceTech start-ups, which have collectively raised $200m in
co-investment syndicated from 73 venture capital investors. He is a
fund representative on the boards of Xona Space Systems, Altitude
Angel and other early stage investments.
Patrick McCall, Venture Partner
Patrick is the former chair of Virgin Galactic and Virgin Orbit.
He was a Director at Virgin from 2001 and developed businesses
including Virgin Active and Virgin Trains. His most recent role was
senior partner at Virgin Group.
Sarah Shackleton, COO
Sarah is the COO at Seraphim Space and has more than 25 years of
finance experience. Prior to Seraphim Space, Sarah was a partner at
Development Partners International since its inception in 2007. She
was responsible for administration of the firm and its funds,
including legal, compliance, HR, IT, operations, facilities and ESG
and also sat on the investment committee. Sarah has experience as
an active board director on private equity fund general partners
and investment holding companies. Before joining Development
Partners International, Sarah was an Associate Director on the
Technology Equity Research team at UBS in London, specialising in
the telecommunications equipment sector and covering large-cap
European companies, including Nokia, Ericsson and Alcatel-Lucent.
Sarah holds a BSc (Hons) in Economics and Accounting from
University of Bristol.
Andre Ronsoehr, Investment Partner
Andre is an Investment Partner at Seraphim Space, following a
career focussed on the Space sector. He worked for almost a decade
at Virgin Management, the family office of Sir Richard Branson.
Andre co-led the seed investment in OneWeb in 2015 and was
instrumental in investments into Virgin Galactic and Virgin Orbit.
During this time, Andre worked hand-in-hand with the boards and
C-level teams of each of these three pioneering space businesses,
helping shape them into $billion businesses Andre has been a fund
representative on the boards of a range of SpaceTech companies,
including Astroscale and PlanetWatchers.
Maureen Haverty, Investment Principal
Maureen joined Seraphim Space in 2022 following a successful
career in the space industry. She was COO at Apollo Fusion, a space
start up that was sold for $145m, where she was responsible for
business development, manufacturing and complex programmes. She was
also Senior Director of Corporate Development at Astra, a rocket
launch company listed on NASDAQ. She has a first-class Batchelor
Civil and Environmental Engineering (BE) degree from University
College Cork and a PhD in Nuclear Engineering from University of
Manchester. Maureen is focussed on deal origination, deal
execution, portfolio management and fund operations in addition to
actively supporting the Seraphim Space Camp Accelerator.
Candace Johnson, Independent Advisory Committee Member
Candace has a long and distinguished career as
founder/co-founder of Space ventures such as SES ASTRA, SES Global,
Loral-Teleport Europe and Europe Online, as well as having played
critical roles in developing Space sector leaders, including
Iridium and ILS. An experienced venture capitalist and investor,
she has been a member of the Strategic Committee of Iris Capital
for the past decade and served as President of the European
Business Angel Network, and is now President Emeritus. Candace
serves and has served on the boards of a number of emerging Space
leaders, including NorthStar Earth and Space and Kacific. Candace
serves on Seraphim Space's Investment Committee as an independent
member to advise on and address any conflicts of interest.
Matt O'Connell, Independent Advisory Committee Member
Matt is a recognised thought leader in the geospatial
intelligence industry. Currently an Operating Partner at DCVC,
supporting its investments, including Space companies Capella and
Planet. Matt has been working with Seraphim Space since 2018.
Before that, he was CEO of OneWeb until July 2016. In 2006, he
founded GeoEye (NASDAQ: GEOY), a leading global provider of
satellite and aerial imagery and digital mapping information, which
was acquired by Digital Globe in 2013 for $1.3bn. He has served on
several private company boards and government and industry advisory
commissions. Matt serves on Seraphim Space's Investment Committee
as an independent member to advise on and address any conflicts of
interest.
Ann Winblad, Independent Advisory Committee Member
Ann is a Managing Director of Hummer Winblad Venture Partners, a
venture capital firm she co-founded in 1989. She is a well-known
and respected software industry entrepreneur and technology leader.
Ann's firm has launched over 160 enterprise software companies and
led investments that pioneered successful companies across the
enterprise software sector. She served as a director of numerous
private and public companies including MuleSoft, Hyperion,
Sonatype, The Knot, Liquid Audio, Net Perceptions and Ace Metrix.
She also currently serves as a Director of OptiMine. Ann serves on
Seraphim Space's Investment Committee as an independent member to
advise on and address any conflicts of interest.
Directors' Report
The Directors present their Annual Report and audited financial
statements for the Company for the year ended 30 June 2023. The
Corporate Governance Report forms part of this Report.
Company Status
The Company is incorporated and domiciled in the United Kingdom
and registered in England and Wales.
The Company is an investment company as defined in section 833
of the Companies Act 2006 and is as an approved investment trust in
accordance with section 1158 of the Corporation Tax Act 2010
('s.1158'). The Directors intend at all times to conduct the
affairs of the Company to enable it to continue to qualify as an
investment trust for the purposes of s.1158 .
The Company manages its affairs so as to be a qualifying
investment for inclusion in an Individual Savings Account and it is
the Directors' intention that the Company should continue to do
so.
Business Review
The Company's principal activity is investment in a diversified,
international portfolio of predominantly early and growth stage
privately financed SpaceTech businesses that have the potential to
dominate globally and are category leaders with first mover
advantages in areas such as climate change, sustainability,
communications, mobility and global security (including cyber
security) with the objective of generating capital growth over the
long term.
A detailed review of the Company's business and performance
during the year, the principal risks and uncertainties facing the
Company, any future likely developments in the Company and any
important events since 30 June 2023 are contained in the Strategic
Report and should be read as part of this Report.
Results and Dividends
The loss for the year was GBP16.9 million. A loss of GBP4.5
million was attributable to the revenue reserve. As the Company is
focused on generating capital growth over the long term and given
the nature of the Company's investments, the Board does not
anticipate recommending paying any dividends in the foreseeable
future.
Share Capital
As at 30 June 2023, the Company's issued share capital comprised
239,384,928 ordinary shares and no shares were held in treasury.
The total number of voting rights of the Company at 30 June 2023
was, therefore, 239,384,928.
Shareholders are entitled to all dividends paid by the Company
(as stated above, the Company does not expect to pay dividends in
the foreseeable future). On a winding up, provided the Company has
satisfied all its liabilities, shareholders are entitled to the
surplus assets of the Company. Shareholders are entitled to attend
and vote at all general meetings of the Company and, on a poll, to
one vote for each ordinary share held.
There are:
-- no restrictions on the transfer of securities in the Company
save where the Company is legally entitled to impose such
restrictions, such as restrictions on transfers by Directors and
persons closely associated with them during closed periods, or the
Company's Articles of Association allow the Board to decline to
register a transfer of shares or otherwise impose a restriction on
shares to prevent the Company breaching any law or regulation;
-- no agreements between holders of securities regarding their
transfer which are known to the Company;
-- no restrictions on exercising voting rights save where the
Company is legally entitled to impose such restrictions, such as
if, having been served with a notice under section 793 of the
Companies Act 2006, a shareholder fails to disclose details of any
past or present beneficial interest;
-- no special rights with regard to control attached to securities in the Company; and
-- no agreements to which the Company is party that might affect
its control following a successful takeover bid.
Share Issues and Buy-backs
The Board has not adopted any formal premium or discount targets
which would dictate the point at which the Company would seek to
issue or buy back ordinary shares. Information on the Board's
approach to share issues and buy-backs can be found under 'Examples
of Stakeholder Considerations' and 'Share Rating Management'.
The Company's current general authority to allot for cash on a
non-pre-emptive basis up to 23,938,492 ordinary shares,
representing c.10% of the ordinary shares in issue on the date the
authority was granted, expires at the conclusion of the 2023 AGM.
Special resolution 10 will be proposed at the forthcoming AGM
seeking renewal of such authority until the 2024 AGM or 31 December
2024, whichever is the earlier. Unless specifically authorised by
shareholders, no issue of ordinary shares on a non-pre-emptive
basis will be made at a price less than the prevailing NAV per
ordinary share at the time of issue.
The Company's current authority to make market purchases up to
35,883,800 ordinary shares, representing 14.99% of the ordinary
shares in issue on the date the authority was granted, expires at
the conclusion of the 2023 AGM. No shares were bought back under
this authority during the year ended 30 June 2023. In the period
since the year end to 13 October 2023, the Company bought back
2,186,344 shares under this authority following a share repurchase
programme announced on 13 July 2023. The shares bought back are
being held in treasury. Special resolution 11 will be proposed at
the forthcoming AGM seeking renewal of this authority until the
2024 AGM or 31 December 2024, whichever is the earlier. The Company
may hold bought-back shares in treasury and then re-sell such
shares (or any of them) for cash or cancel bought-back shares (or
any of them). Shares will only be re-sold from treasury at a
premium to the NAV per share.
Major Interests in Shares
At 30 June 2023 and 30 September 2023, the Company had been
notified under the FCA's Disclosure Guidance and Transparency Rules
or was otherwise aware of the following shareholders who were
directly or indirectly interested in 3% or more of the voting
rights in the Company's issued share capital:
% of voting rights % of voting rights
Holder 30 June 2023 29 September 2023
---------------------------------- ------------------ ------------------
British Business Bank Finance Ltd 13.94 14.07
Schroders Plc 12.25 12.19
RBC Brewin Dolphin 6.78 6.65
RBC Dominion Securities Inc 5.22 5.27
Hargreaves Lansdown Asset Mgmt 4.71 5.00
Airbus Defence & Space Limited 3.66 3.69
---------------------------------- ------------------ ------------------
Directors
The names and biographical details of the Directors at the date
of this Report are shown in the Corporate Governance section.
Details of the interests of the Directors and their connected
persons in the Company's ordinary shares, the Directors'
remuneration policy and their remuneration can be found in the
Directors' Remuneration Report. No Director has a service contract
with the Company and there are no agreements between the Company
and its Directors providing for compensation for loss of
office.
The rules concerning the appointment and replacement of
Directors are contained in SSIT's Articles of Association and the
Companies Act 2006. Further details are provided in the Corporate
Governance Report.
In line with the AIC Code and the Company's Articles of
Association all of the Directors are retiring at the forthcoming
AGM and each offers themself for re-election. The Chair confirms
that, following formal performance evaluation, all the Directors
continue to be effective and their contribution is valuable and
they demonstrate full commitment to and independence in their
roles. The Board considers each Director to be independent of the
Investment Manager and each has the full support of the Board in
standing for re-election.
Directors' Insurance and Indemnification
Directors' and officers' liability insurance cover is in place
in respect of the Directors and was in place throughout the
year.
The Company's Articles of Association provide that the Company
may, subject to the Companies Act 2006 and other applicable UK
legislation for the time being in force affecting the Company,
indemnify any person who is a Director of the Company against (a)
any liability whether in connection with any negligence, default,
breach of duty or breach of trust by that person in relation to the
Company or any associated company or (b) any other liability
incurred by or attaching to that person in the actual or purported
execution and/or discharge of that person's duties and/or the
exercise or purported exercise of that person's powers and/or
otherwise in relation to or in connection with that person's
duties, powers or office.
Related Party and Investment Manager Transactions
The Company's transactions with related parties during the year
were with its Directors.
There were no material transactions between the Company and its
Directors during the year other than the amounts paid to them in
respect of Directors' remuneration for which there were no
outstanding amounts payable at the year end.
In relation to the provision of services by the Investment
Manager, other than fees payable by the Company in the ordinary
course of business, there were no transactions with the Investment
Manager affecting the financial position of the Company during the
year. Details of amounts paid to the Investment Manager during the
year may be found in note 4 to the financial statements. There were
no amounts outstanding to the Investment Manager at 30 June
2023.
Risks and Risk Management
The principal risks and uncertainties facing the Company are set
out in the Strategic Report. Further details of the Company's key
financial risks are set out in note 14 to the financial
statements.
Articles of Association
The Company's Articles of Association may only be amended by
special resolution at a general meeting of shareholders.
Listing Rule 9.8.4
The FCA's Listing Rule 9.8.4 requires the Company to include
certain information in a single identifiable section of the Annual
Report or a cross reference table indicating where the information
is set out.
Whistleblowing
The Board has considered arrangements by which staff of the
Investment Manager or Administrator may, in confidence, raise
concerns within their respective organisations about possible
improprieties in matters of financial reporting or other matters.
It has concluded that adequate arrangements are in place for the
proportionate and independent investigation of such matters and,
where necessary, for appropriate follow-up action to be taken
within their organisations.
Disclosure of Information to the Company's Auditor
Having made enquiries of the Investment Manager and
Administrator, each of the Directors confirms that, at the date of
approval of this Report:
-- as far as they are aware, there is no relevant audit
information of which the Auditor is unaware; and
-- they have taken all the steps a Director might reasonably be
expected to have taken to be aware of any relevant audit
information and to establish that the Auditor is aware of that
information.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the companies Act
2006.
Independent Auditor
The Directors will propose the re-appointment of BDO LLP as the
Company's Auditor and resolutions concerning this and to authorise
the Audit Committee to determine the Auditor's remuneration will be
proposed at the forthcoming AGM.
Annual Report
As disclosed in the Audit Committee Report, after due
consideration the Audit Committee concluded that the Annual Report,
taken as a whole, is fair, balanced and understandable. Therefore,
the Board is of the opinion that the Annual Report provides the
information necessary for shareholders to assess the position and
performance, strategy and business model of the Company.
Events After the Balance Sheet Date
On 13 July 2023, the Board announced a share repurchase
programme to mitigate the effect of the substantial discount
experienced by the Company. In the period to 13 October 2023, the
Company bought back 2,186,344 shares pursuant to the share
repurchase programme announced.
There have been no other significant events since 30 June
2023.
2023 AGM
A separate notice convening the Company's 2023 AGM will be sent
to shareholders in due course. The notice will include an
explanation of the resolutions to be considered at the AGM. A copy
of the notice will also be published on the Company's website (
https://investors.seraphim.vc ).
We believe that all the resolutions to be proposed at the AGM
are in the best interests of shareholders as a whole and therefore
recommend shareholders to vote in favour of them as we will be
doing with our own holdings.
Approval
This Directors' Report was approved by the Board on 16 October
2023.
On behalf of the Board:
Will Whitehorn
Chair
16 October 2023
Corporate Governance Report
The Board aims to promote SSIT's long term sustainable success
and ensure that SSIT is run in a manner that is consistent with our
beliefs in integrity, fairness, transparency and diligence. This is
achieved through the application and maintenance of the highest
standards of corporate governance.
Corporate Governance Framework and Compliance
The FCA's Disclosure Guidance and Transparency Rules (the
'Disclosure Rules') require listed companies to disclose how they
have applied the principles and complied with the provisions of the
UK Corporate Governance Code issued by the Financial Reporting
Council (the 'FRC') in July 2018 (the 'UK Code'). The UK Code can
be viewed at www.frc.org.uk .
The related Code of Corporate Governance issued by the
Association of Investment Companies (the 'AIC') in February 2019
(the 'AIC Code') addresses the principles and provisions set out in
the UK Code, as well as setting out additional provisions on issues
that are of specific relevance to listed closed-ended investment
companies, such as the Company. The AIC Code is available on the
AIC website ( www.theaic.co.uk ). It includes an explanation of how
the AIC Code adapts the principles and provisions set out in the UK
Code to make them relevant for listed closed-ended investment
companies. The FRC has endorsed the AIC Code and confirmed that AIC
member companies who report against the AIC Code will be meeting
their obligations in relation to the UK Code and the associated
disclosure requirements of the Disclosure Rules.
The Company is a member of the AIC and the Board considers that
reporting against the principles and provisions of the AIC Code
provides more relevant information on the Company's governance
arrangements to shareholders than reporting against the principles
and provisions of the UK Code.
The Board operates under a governance framework which is
consistent with the principles and provisions of the AIC Code. This
Report describes how the Company applies those principles and
provisions. The Audit, Management Engagement and Remuneration and
Nomination Committee Reports form part of this Report. The Board
confirms that the Company complied with the relevant principles and
provisions of the AIC Code during the year.
As an externally managed investment company, the Company has no
employees and all its substantive operations are conducted on its
behalf by its third-party service providers. Consequently, the
Company has not complied with the provisions in the UK Code
relating to the role of the chief executive, executive directors'
remuneration and the need for an internal audit function. However,
the Audit Committee considers the need for an internal audit
function at least annually.
Board Leadership and Purpose
Role of the Board
The Board is collectively responsible for promoting the
long-term sustainable success of the Company, generating value for
shareholders whilst having regard to the interests of wider
society.
The Board's role is to provide leadership and direction within a
robust framework of risk management and internal controls. It sets
the Company's strategic objectives (subject to the Company's
Articles of Association and such approval of the shareholders in
general meeting as may be required from time to time) and ensures
that the necessary resources are in place to enable the Company's
objectives to be met.
In managing the Company, the aim of both the Board and the
Investment Manager is always to ensure SSIT's long-term sustainable
success and, therefore, the likely long-term consequences of any
decision are a key consideration. The Investment Manager's
Responsible Investment Policy is integrated into its investment
process, ensuring that it has regard to the interests of wider
society in managing SSIT's portfolio.
Company purpose and strategy
The Company's purpose is to provide a vehicle through which a
broad range of investors can gain exposure to a diversified,
international portfolio of predominantly early and growth stage
privately financed SpaceTech businesses that have the potential to
dominate globally and are category leaders with first mover
advantages in areas such as climate change, sustainability,
communications, mobility and security (including cyber security).
The Company seeks to generate capital growth over the long term for
shareholders.
Operating as an externally managed investment company, SSIT
seeks to fulfil its purpose by delegating operational matters to
specialist third-party service providers, subject to oversight by
the Board. In particular, the Investment Manager and Administrator
are responsible for implementing the Company's strategy and
managing the Company's day-to-day operations, respectively. The
Company's success is based on such implementation and management
being effective. The Board's strategy is, therefore, to work
closely with the Investment Manager and Administrator in a
long-term relationship designed to foster an environment that is
consistent with SSIT's culture and values and contributes to
achieving SSIT's strategic objectives.
Culture and values
As an externally managed investment company, SSIT's culture and
values are the product of the behaviours of both the Board and the
Investment Manager and the way in which they interact with each
other and with the Company's other stakeholders.
The Board operates in an open, respectful and inclusive manner,
where differences of perspective are welcomed and constructive
challenge is encouraged. Advice and input are sought from external
advisers and others, as required, to ensure a broad range of views
are available and to guard against groupthink. As noted in more
detail under 'Section 172: Engaging with Stakeholders', the Board
seeks to engage with its Investment Manager, Administrator and
other key stakeholders in a constructive and collaborative
manner.
The Investment Manager has established an organisation driven by
purpose where its employees are united by a passion to work with
the most impactful companies in the SpaceTech sector. The
Investment Manager strives to develop a culture of candour and
openness, with employees empowered to innovate and work
autonomously. Value is placed on output (the quality of work
produced) rather than input (the number of hours logged). Team
cohesion and collaboration are core tenets of the Investment
Manager's people strategy.
Both the Board and Investment Manager aim to ensure that SSIT is
run in a manner that is consistent with their beliefs in integrity,
fairness, transparency and diligence and responsive to the views of
the Company's shareholders and other stakeholders. Both seek to
maintain high standards of business conduct at all times.
We believe that the culture and values of the Board and
Investment Manager encourage constructive and robust challenge and
debate, generate strong collective wisdom and ultimately lead to
good decision making, all of which are important to the successful
implementation of the Company's strategy.
Recognising the importance of culture and values, the Board
monitors them on an ongoing basis. They are also formally reviewed
as part of the annual Board and Investment Manager evaluation
process.
Conflicts of interest
Directors have a duty to avoid situations where they have, or
could have, a direct or indirect interest that conflicts, or
possibly could conflict, with the Company's interests ('conflict
situations'). As permitted by the Companies Act 2006, the Company's
Articles of Association allow the Directors to authorise conflict
situations, where appropriate.
The Board has a procedure in place to deal with conflict
situations. As part of this process, Directors must submit any
actual or potential conflict situations they may have to the Board
for approval as soon as possible. In deciding whether to approve a
conflict situation, the Board will act in a way it considers, in
good faith, will be most likely to promote the Company's success,
taking into consideration whether the Director's ability to act in
accordance with their wider duties is affected. The Company
Secretary maintains the register of approved conflict situations
(which also includes a list of other external positions held).
Directors have a duty to keep the Board updated about any changes
to their approved conflict situations. In certain circumstances the
conflicted Director may be required to absent themself from
discussions or decisions on the matter on which they are conflicted
(in which event, the Director will not be counted when determining
whether the meeting is quorate). No such circumstances arose in the
year. None of the Directors have, or have had, any potential
conflicts of interest of the nature listed in provisions 6 and 12
of the AIC Code.
The Board also has a procedure in place to manage potential
conflicts of interest of the Investment Manager. These can arise,
for example, where share options and/or warrants have been granted
to an affiliate of the Investment Manager by a participant in an
accelerator programme run by that affiliate and the Company
subsequently has the opportunity to invest in the participant. In
such instances, only the independent advisory committee members of
the Investment Manager's Investment Committee consider the
investment at the Investment Committee meeting, and the final stage
of the Board's conflict management process requires any such
investment to be approved by the Board before it is made. During
the year, the Board approved investments in 2 companies (GBP2.3m of
investments in aggregate) in former accelerator programme
participants (for further information, see 'Examples of Stakeholder
Considerations').
Division of Responsibilities
The Board has overall responsibility for the Company's
activities. However, the Company has delegated or outsourced
various matters to its standing Committees and key service
providers, most notably the Investment Manager and the
Administrator, all of which operate within clearly defined terms of
reference or agreements that set out their roles, responsibilities
and authorities.
Board
The Board's principal responsibilities include:
-- determining the Company's strategic objectives;
-- overseeing the execution of the Company's strategy, business
conduct and implementation of its key investment, financial,
operational and compliance policies, ensuring they are aligned with
SSIT's purpose and strategy and the Board's culture and values and
that any necessary corrective action is taken;
-- ensuring that appropriate internal controls and risk
management frameworks are in place to enable risk to be managed and
continually assessed;
-- scrutinising the performance of the Investment Manager,
Administrator and other key service providers and holding them to
account;
-- ensuring effective engagement with, and encouraging
participation from, shareholders and other key stakeholders;
and
-- providing constructive challenge and strategic guidance and offering specialist advice.
The Board's responsibilities for this Annual Report are set out
in the Directors' Responsibility Statement.
Matters not delegated or outsourced to Committees and key
service providers are reserved for consideration and approval by
the Board (including those matters listed in a formal schedule of
reserved matters approved by the Board), thus enabling the Board to
maintain full and effective control over appropriate strategic,
financial, operational and compliance issues. The reserved matters
include:
-- approving SSIT's long-term objectives and any matters of a
strategic nature, including any change in investment objective,
policy and restrictions, including those which may need to be
submitted to shareholders for approval;
-- the appointment and removal of key service providers and any
material amendments to the Company's agreements with them;
-- approval of any other material contracts and agreements entered into, varied or terminated;
-- approving any transactions with related parties;
-- approval of quarterly and any ad hoc NAV and other financial announcements;
-- approval of the Company's operating and marketing budgets;
-- the Company's corporate governance arrangements; and
-- approving any actual or potential conflicts of interest,
including any potential investments in respect of which the
Investment Manager may have a potential conflict of interest.
The full schedule of matters reserved for the Board is available
on the Company's website ( https://investors.seraphim.vc/ ).
The primary focus at Board meetings is a review of investment
performance and associated matters (such as new investments,
progress of portfolio companies, investment pipeline, projected
cash flow and market environment), share price discount/premium,
investor relations, industry issues, legal and regulatory
(including corporate governance) developments and principal and
emerging risks and uncertainties, in particular those identified in
the Strategic Report.
Chair
The Chair is Will Whitehorn. His primary role as Chair is to
provide leadership to the Board. The principal responsibilities of
the Chair include:
-- ensuring the overall effectiveness of the Board in directing the Company;
-- taking a leading role in setting the Company's strategic objectives;
-- facilitating open, honest and constructive debate among
Directors and the effective contribution of all Directors;
-- ensuring the Company is meeting its responsibilities to
shareholders and wider stakeholders; and
-- engaging with shareholders to ensure that the Board has a clear understanding of their views.
Full details of the role and responsibilities of the Chair are
available on the Company's website ( https://investors.seraphim.vc/
).
Senior Independent Director
The Senior Independent Director is Sue Inglis. Her primary
responsibilities as such are to serve as a sounding board for the
Chair, act as an intermediary for other Directors and be available
to respond to shareholders' concerns if they cannot be resolved
through the normal channels of communication (i.e. through the
Chair). The Senior Independent Director leads the annual evaluation
of the Chair. Full details of the role and responsibilities of the
Senior Independent Director are available on the Company's website
( https://investors.seraphim.vc/ ).
Board Committees
The Board has three standing Committees, being the Audit
Committee, Management Engagement Committee and Remuneration and
Nomination Committee: The roles and responsibilities of the
Committees are included in their respective Reports and the terms
of reference of each Committee are available on the Company's
website ( https://investors.seraphim.vc/ ). The Committees review
their terms of reference at least annually, with any proposed
changes recommended to the Board for approval. Committee Chairs
will attend AGMs to answer any questions on each of their
Committees' activities. In addition, Committee Chairs will seek
engagement with shareholders on significant matters related to
their areas of responsibility.
The Board may also establish additional Committees from time to
time to take operational responsibility on specific matters. These
Committees ensure that key matters are dealt with efficiently.
Investment Manager
The Investment Manager is the Company's alternative investment
fund manager ('AIFM') for the purpose of the EU AIFM Directive as
incorporated into UK legislation. The Investment Management
Agreement dated 22 June 2021 between the Company and the Investment
Manager (the 'IMA') sets out the matters in respect of which the
Investment Manager has authority and responsibility, subject to the
overall control and supervision of the Board. These include the
Investment Manager having full discretion in relation to SSIT's
portfolio management activities in accordance with SSIT's
investment policy and any other restrictions imposed by the IMA or
the Board from time to time. The Investment Manager is also
responsible for promoting the Company's investment proposition to
professional and retail investors.
In advance of Board meetings, the Investment Manager provides
regular reports, which include operating updates on the Company's
investments, information on potential new investment opportunities,
cash flow forecasts and other financial information and other
relevant information. Senior representatives of the Investment
Manager attend Board meetings. The Investment Manager is
responsible for keeping the Board informed, in a timely manner, of
any material developments arising from its portfolio management
activities or other relevant matters, including interactions with
shareholders and other key stakeholders.
Under the IMA, the Investment Manager is entitled to management
and performance fees, details of which are included in note 4 to
the financial statements. The Investment Manager's appointment is
terminable by the Company or Investment Manager on not less than 12
months' notice, such notice to expire on or at any time after the
third anniversary of SSIT's launch (14 July 2021). The IMA may be
terminated with immediate effect on the occurrence of certain
events.
Administrator/Company Secretary
The Company has appointed the Administrator to provide fund
accounting, company secretarial and other administrative services.
The Administrator's responsibilities include:
-- undertaking the day-to-day financial and administration
functions of the Company, including calculation of the NAV and
maintenance of the Company's accounting and statutory records;
-- providing the company secretarial functions required by the Companies Act 2006;
-- ensuring that the Company complies with applicable laws,
rules and regulations, including laws and regulations applicable to
investment trusts and the rules of the FCA and London Stock
Exchange;
-- advising on governance matters;
-- supporting the Board to ensure that it has the policies,
processes and information it needs to function effectively and
efficiently;
-- ensuring that Board procedures are followed; and
-- facilitating the flow of information between the Board,
Committees, Investment Manager and other service providers.
In advance of Board meetings, the Administrator provides regular
reports, which include financial and other operational information,
details of any breaches or complaints and relevant legal and
regulatory, corporate governance and other technical updates. The
Administrator is responsible for keeping the Board informed, in a
timely manner, of any material developments regarding matters
within the scope of its role and responsibilities.
Board and Committee Meetings
Regular Board and Committee meetings are scheduled throughout
the year (Board: four; Audit Committee: four; Management Engagement
Committee: one; Remuneration and Nomination Committee: one). In
addition, the Board and Committees meet between scheduled meetings
in preparation for or follow-up after scheduled meetings and any
other matters that may arise between scheduled meetings. The
Company also holds an annual strategy meeting to enable the
Directors to consider strategic matters outside of scheduled
quarterly Board meetings.
The Company Secretary assists the Board and Committee Chairs in
agreeing the agenda in sufficient time before the meeting to allow
input from key stakeholders. Care is taken to ensure that papers
are presented clearly and with the appropriate level of detail to
assist the Board and Committees in discharging their duties. The
Board uses a web-based system which provides ready access to Board
and Committee papers and materials. Prior to each Board and
Committee meeting the Directors receive the agenda and supporting
papers through this system to ensure that they have all the latest
and relevant information in advance of the meeting to enable them
sufficient time to prepare properly for the meeting and to make
further enquiries about any matter prior to the meeting, should
they so wish. This also allows any Director who is unable to attend
to submit views in advance of the meeting.
The Investment Manager, the Administrator and, as required, the
Company's other key service providers are expected to be present at
formal Board and Committee meetings unless identified conflicts
require otherwise.
Due to its size the Board has deemed it appropriate for all
Directors to be members of all Committees. When running meetings,
the Chair or Committee Chair maintains a collaborative atmosphere
and ensures that all Directors have the opportunity to contribute
to the debate. The Directors are able to voice their opinions in a
calm and respectful environment, allowing coherent discussion.
The proceedings at all Board and Committee meetings are fully
recorded, including any Director's concerns, in the minutes. After
each Board and Committee meeting, the Company Secretary operates a
follow-up procedure to ensure that actions are completed as agreed
by the Board or Committee.
The number of scheduled meetings during the year, and the
attendance of the individual Directors at those meetings, is shown
in the table below.
Remuneration Management
and Nomination Engagement
Board Audit Committee Committee Committee
------------------- ----- --------------- --------------- -----------
Number of meetings 4 4 1 1
Will Whitehorn 4 4 1 0(1)
Sue Inglis 4 4 1 1
Christina McComb 4 4 1 1
Angela Lane 4 4 1 1
------------------- ----- --------------- --------------- -----------
(1)Mr Whitehorn was unable to be present at the Management
Engagement Committee meeting held on 15 May 2023 but was briefed on
the outcomes of the meeting by the Chair of this Committee shortly
after the meeting.
In addition to the scheduled meetings and the annual strategy
meeting, there were nine ad hoc Board and Committee meetings during
the year. These meetings were convened to conclude a number of
matters previously discussed at scheduled meetings and deal with
matters arising between scheduled meetings, as well as, to consider
the Investment Manager's preliminary reports on proposed portfolio
valuations. Prior to ad hoc meetings, the Directors receive the
agenda and supporting papers. Typically, all Directors attend ad
hoc meetings, although this is not always feasible or necessary and
Directors who are unable to attend a meeting can communicate their
views ahead of the meeting.
Board Composition and Succession
Board composition and independence
At the date of this Report, the Board consists of four
non-executive Directors, all of whom are (and were on appointment)
independent of the Investment Manager. Each of the Directors is
(and was on appointment) independent when assessed against the
circumstances set out in provision 13 of the AIC Code.
The current Board was selected to bring a breadth of skills,
experience and knowledge relevant to the Company's structure and
strategy. Three of the Directors were appointed prior to the IPO
and the fourth joined the Board on 1 January 2022. Details of the
Directors, including their skills and experience, are set out in
the Corporate Governance section.
The composition of the Board is a fundamental driver of its
success as the Board must provide strong and effective leadership
of the Company without any one individual or small group dominating
the decision-making. The strong and diverse mix of experienced
individuals on the current Board enables high calibre debate and
constructive challenge. The Board is able to use the skills,
experience and knowledge of the individual Directors to their
maximum potential and make decisions that are in the best long-term
interests of the Company.
The Board's tenure, succession and diversity policies seek to
ensure that the Board continues to be well-balanced and refreshed
by the appointment of new Directors with the necessary skills,
experience, knowledge and personal qualities and who can bring
fresh perspectives.
Board diversity
The Board acknowledges the importance of diversity as a key
driver of effectiveness and strongly believes that having diversity
in skills, experience, identity and cognitive thought has
significant benefits when making decisions. T he Board currently
comprises four independent Directors appointed on merit-based
qualifications. The skills and experience which the current members
of the Board bring to SSIT's leadership are described in the
Corporate Governance section.
The Board supports the progress being made under the direction
of the FCA's guidance to improve the governance of listed companies
by increasing both gender and racial diversity amongst the
directors who serve these businesses.
As at 30 June 2023, our Board composition exceeded the revised
gender targets which require at least 40% of the Board to be women
and met the target that at least one of the senior Board positions
be filled by a woman. Currently, the Board has 75% female
representation and the Senior Independent Director (Sue Inglis) is
also female.
Reporting table on gender representation at 30 June 2023
Number of Board members Percentage of the Board Number of senior positions on
the Board (Chair and Senior
Independent Director)
Men 1 25% 1
------------------------ ------------------------ -------------------------------
Women 3 75% 1
------------------------ ------------------------ -------------------------------
Other categories - - -
------------------------ ------------------------ -------------------------------
Not specified/prefer not to say - - -
------------------------ ------------------------ -------------------------------
Given the current tenure, knowledge and experience of our
relatively small Board and the fact that the Company is in an early
stage, it does not currently have at least one member of the Board
from a minority ethnic background (contrary to the FCA's target for
listed companies). Further consideration will be given to these
targets whe n implementing future succession plans.
Reporting table on ethnicity representation at 30 June 2023
Number of Board Percentage Number of senior
members of the Board positions on the
Board (Chair and
Senior Independent
Director)
White British or
other White (including
minority-white
groups) 4 100% 2
---------------- -------------- --------------------
Mixed/Multiple - - -
Ethnic groups
---------------- -------------- --------------------
Asian/Asian British - - -
---------------- -------------- --------------------
Black/African/ - - -
Caribbean/Black
British
---------------- -------------- --------------------
Other ethnic group, - - -
including Arab
---------------- -------------- --------------------
Not specified/ - - -
prefer not to say
---------------- -------------- --------------------
The Board will keep under review and evaluate its balance and
composition to ensure that both it and its Committees have the
appropriate mix of skills, experience, independence and knowledge
to ensure their continued effectiveness. In doing so, the Board
will consider diversity, including age, gender, ethnicity,
educational and professional backgrounds and cognitive and personal
strengths amongst other relevant factors.
Appointments to the Board
The Remuneration and Nomination Committee reviews at least
annually the composition of the Board and its Committees, including
the balance of skills, experience, knowledge, diversity (including
age, gender, social and ethnic backgrounds and cognitive and
personal strengths) and length of service, and makes
recommendations to the Board when it considers that a new Director
should be recruited.
Once a decision has been taken by the Board to recruit a new
Director, the Remuneration and Nomination Committee oversees the
recruitment process. At the outset, the Committee reviews the
current balance and diversity of the Board, identifies any specific
skills, experience, knowledge and personal qualities that are
required to ensure the continued effective operation of the Board
and then sets objective selection criteria to ensure a formal and
transparent appointment process. The Remuneration and Nomination
Committee intends to use non-executive director recruitment
consultants and/or open advertising when recruiting new Directors.
Following the creation of a shortlist of candidates, the
decision-making process will be based on merit, with due
consideration of the objective selection criteria identified.
When considering new appointments, the Committee also takes into
account other demands on the candidates' time. In advance of
joining the Board, successful candidates will be asked to disclose
any existing significant commitments with an indication of the time
involved and to confirm that they are able to allocate sufficient
time to the business of the Company and that there are no
situations where they have, or could have, a direct or indirect
interest that conflicts, or possibly could conflict, with the
Company's interests.
Directors are not appointed for any specific term and are
subject to election at the first AGM following their appointment
and, thereafter, annual re-election at AGMs. Directors'
appointments are reviewed by the Remuneration and Nomination
Committee ahead of their submission for re-election, with
submission being contingent on satisfactory performance evaluation.
Directors may resign by notice in writing to the Board at any
time.
At the time of appointment, a new Director receives a letter of
appointment that sets out their duties and obligations. Copies of
the letters of appointment of the current Directors are available
for inspection at the Company's registered office and at each
AGM.
Board induction and training
New Directors will receive an induction on joining the Board
covering the Company's strategy, policies, operational structure
and governance, which will be coordinated by the Company Secretary.
In addition, new Directors will be briefed fully about the
Company's strategy and portfolio by the Investment Manager.
The Company Secretary is charged with assisting in the ongoing
training and development of all Directors, including providing the
Directors with details of the Company's regulatory and statutory
obligations (and changes thereto). Directors are able to receive
training or additional information on any specific subject
pertinent to their role as a Director that they request or require.
The Directors are encouraged to participate generally in industry
events and to attend any other relevant seminars and conferences,
if necessary at the Company's expense.
Information and support
To enable the Board to function effectively and the Directors to
discharge their responsibilities, the Directors are regularly
updated, in a timely manner, on investment, financial, investor and
other stakeholder engagement and other matters. In addition to
periodic reporting at scheduled Board and Committee meetings, the
Directors receive, and may request, ad hoc additional information
from the Investment Manager, Administrator and other key service
providers. The Directors also maintain regular engagement, through
formal meetings and calls as well as informal communications, with
the Investment Manager, Administrator and other key service
providers. This active engagement creates an open and collaborative
culture that ensures that we have a thorough understanding of the
Company's business and facilitates our robust scrutiny and
constructive challenge of the activities and performance of, in
particular, the Investment Manager and Administrator.
The Directors have access to the advice and services of the
Company Secretary. The Company Secretary is responsible for
facilitating good and timely information flows within the Board and
its Committees and between Directors and the Investment
Manager.
There is a procedure in place for Directors to take independent
professional advice at the Company's expense should this be
required to aid them in their duties.
Time commitment
All Directors are aware of the need to allocate sufficient time
to the Company in order to discharge their responsibilities
effectively. Directors must obtain prior approval from the Board
when they take on any additional external appointments and it is
their responsibility to ensure that such appointments will not
prevent them meeting their time commitments to the Company.
Where a significant additional external appointment is approved
by the Board, the reasons for permitting the appointment will be
explained in the Annual Report.
Election and re-election by shareholders
Directors are required to stand for election at the first AGM
following their appointment and annual re-election at each
subsequent AGM. A Director who retires at an AGM may, if willing to
continue to act, be elected or re-elected at that meeting. If, at a
general meeting at which a Director retires, the Company neither
re-elects that Director nor appoints another person to the Board in
the place of that Director, the retiring Director shall, if willing
to act, be deemed to have been re-elected unless at the general
meeting it is resolved not to fill the vacancy or unless a
resolution for the re-election of the Director is put to the
meeting and not passed.
All of the Directors will retire at the forthcoming AGM and are
willing to continue to act. Having considered their effectiveness,
demonstration of commitment to the role, attendance at meetings and
contribution to the Board's and Committees' deliberations, the
Board has approved the nomination for re-election of all of the
Directors.
Board tenure
The Board's policy on Director, including Chair, tenure is that
a Director should normally serve no longer than nine years but,
where it is in the best interests of the Company, its shareholders
and other stakeholders, a Director may serve for a limited time
beyond that.
The Board believes that the continuity of experience and
knowledge of its Directors is important and that a suitable balance
requires to be struck with the need for refreshing of the skills
and experience of the Board. The Board believes that some limited
flexibility in its approach to Director, including Chair, tenure
will enable it to manage succession planning more effectively.
The Board also believes that Directors with more than nine
years' service can still form part of an independent majority. In
the event that any Director, including the Chair, shall have been
(or on re-election would be) in office for nine years or more the
Company will consider whether there is a risk that such a Director
might reasonably be deemed to have lost independence through such
long service.
In the event of a Director being in office for nine years or
more at the AGM at which their re-election is to be proposed, the
Board will include an explanation in the relevant Annual Report or
notice convening the next AGM as to its reasoning for recommending
re-election notwithstanding the length of tenure.
As the Company was incorporated on 14 May 2021, no issues
regarding long tenure have arisen to be considered by the
Board.
Succession planning
The aim of the Company's succession plan is:
-- to preserve continuity by phasing the retirement of the
original Directors so that they do not all retire at once after
serving nine years; and
-- to ensure the Board's skills and experience are regularly
refreshed and the benefits of a truly diverse Board are further
enhanced, in terms of age, gender and diversity of background and
thought.
Succession planning is explained in more detail in the
Remuneration and Nomination Committee report.
Annual Performance Evaluations
Board, Committees, Chair and individual Directors
Details on the annual evaluations of the Board, its standing
Committees, the Chair and individual Directors, conducted by the
Remuneration and Nomination Committee, are included in that
Committee's Report. Having considered the Committee's report and
recommendations, the Board accepted all of the Committee's
recommendations.
Investment Manager
Details on the annual evaluation of the Investment Manager,
conducted by the Management Engagement Committee, are included in
that Committee's Report. Having considered the report and
recommendation from the Management Engagement Committee, the Board
believes that the continued appointment of the Investment Manager
on the terms agreed is in the interests of the shareholders as a
whole.
Administrator and other key service providers
Information on the annual evaluations of the Administrator and
other key service providers is included in the Management
Engagement Committee Report. Having considered the Committee's
report and recommendations, the Board accepted all of the
Committee's recommendations.
Directors' Remuneration
The Directors' Remuneration Report includes the Directors'
remuneration policy and details of the remuneration of each
Director.
Risk Management and Internal Control Systems
A critical factor in achieving the long-term sustainable success
of the Company is understanding the risks that the Company faces
and ensuring that controls are in place to manage and mitigate
them. The Company's principal and emerging risks, together with
details of how we seek to manage and mitigate them, are set out in
the Strategic Report. The Company's financial risks are discussed
in note 14 to the financial statements.
Responsibility for, and effectiveness of, risk management and
internal controls
The Board is responsible for determining the nature and extent
of the principal and emerging risks the Company is willing to take
in order to achieve its long-term strategic objectives. The Board
is also responsible for maintaining the Company's systems of risk
management and internal controls (such as financial, operational
and compliance controls). The AIC Code requires the Board to review
the effectiveness of the Company's systems of risk management and
internal controls at least annually.
The Board has established an ongoing process for identifying,
evaluating and managing the principal and emerging risks faced by
the Company.
The Board, through the Audit Committee, has established, in
conjunction with the Investment Manager and Administrator, an
ongoing process designed to meet the particular needs of the
Company in identifying, evaluating and managing the risks to which
it is exposed. The process accords with the Financial Reporting
Council's 'Guidance on Risk Management, Internal Control and
Related Financial and Business Reporting'. The process was in
operation throughout the year and up to the date of this Report.
The system is designed to meet the specific risks faced by the
Company and takes account of the nature of the Company's reliance
on the Investment Manager, Administrator and other key service
providers and their internal controls. The process therefore
manages rather than eliminates the risk of failure to achieve the
Company's business objectives and provides reasonable, but not
absolute, assurance against material misstatement or loss.
At its October 2023 meeting, the Audit Committee carried out an
annual assessment of the Company's risk management and internal
controls for the year and taking account of events since 30 June
2023. The Committee determined that the risk management and
internal controls were operating effectively and as expected, and
the results of the assessment were then reported to the Board at
the following Board meeting.
Based on the ongoing work of the Audit Committee in monitoring
the risk management and internal control systems on behalf of the
Board and the Audit Committee's report to the Board on its findings
and conclusions regarding those systems, the Board:
-- is satisfied that it has carried out a robust assessment of
the principal and emerging risks facing the Company, including
those that could threaten its business model, future performance,
solvency, liquidity or reputation; and
-- has reviewed the adequacy and effectiveness of the risk
management and internal control systems and no significant failings
or weaknesses were identified.
Risk management and internal control systems
The Company's risk management and internal control systems are
designed to identify, manage and mitigate on a timely basis both
the principal and emerging risks inherent to the Company's business
and activities and safeguarding the Company's assets. The Company
has a risk-based approach to risk management and internal controls
through a detailed matrix that identifies each of the key risk
areas associated with the Company's business and activities and the
controls employed to minimise and mitigate those risks. The Audit
Committee is responsible for monitoring and regularly reviewing the
Company's risk management and internal control systems, including
the risk matrix, and reports its findings and conclusions to the
Board. Where changes in risk are identified during the year, the
risk matrix is updated as appropriate and an assessment made as to
whether further action is required to manage the changes
identified. The risk matrix was reviewed and updated by the Audit
Committee, and approved by the Board, during the year.
The Company has delegated its day-to-day activities to the
Investment Manager and Administrator and has clearly defined their
roles, responsibilities and authorities. The Investment Manager and
Administrator have their own risk management and internal control
systems. The Investment Manager, which is regulated by the FCA, and
Administrator both operate risk-controlled frameworks on an ongoing
basis. The Administrator has an annual type 2 report produced under
the International Standard on Assurance Engagements (ISAE) 3402.
This entails an independent rigorous examination and testing of its
controls and processes.
The Board oversees the ongoing performance and actions of the
Investment Manager and Administrator at its scheduled quarterly
meetings and, as required, at ad hoc meetings. At each quarterly
Board meeting, the Investment Manager reports on the performance
and valuation of the Company's investments, activities since the
last Board meeting, any specific new risks identified relating to
the Company's portfolio and cash projections and the Administrator
reports on the Company's corporate activity and financial,
compliance, governance, legal and regulatory matters. The Board
also receives updates from the Investment Manager and Administrator
on material developments affecting the Company's business,
activities or investments between quarterly Board meetings.
The Board, Investment Manager and Administrator, together,
review all financial performance and results notifications. The
Investment Manager reports to the Board twice a year regarding the
Company's longer-term viability, which includes financial
sensitivities and stress testing of the business to ensure that the
adoption of the going concern basis is appropriate.
The Company is ultimately dependent upon the quality and
integrity of the management and staff of the Investment Manager and
Administrator. In each case, qualified and able individuals have
been selected at all levels. The Investment Manager and
Administrator are aware of the risk management and internal
controls relevant to their activities and are collectively
accountable for the operation of those controls.
Each year a detailed review of the quality of services and
performance of the Investment Manager, Administrator and other key
service providers pursuant to their terms of engagement is
undertaken by the Management Engagement Committee.
Internal Audit Function
For the reasons stated in the Audit Committee Report, the Board
does not currently consider that an internal audit function is
required.
Relations with Shareholders and Other Stakeholders
We place great importance on communication with shareholders, as
well as with the Investment Manager, Administrator and other key
stakeholders. Details of our engagement with all of the Company's
key stakeholders and examples of how we had regard to those
stakeholders in our decision-making processes during the year are
set out in the Strategic Report. In addition, the Chairs of the
Board's standing Committees will seek to engage with shareholders
on significant matters related to their areas of
responsibility.
The Board recognises that relationships with suppliers are
enhanced by prompt payment and the Administrator, in conjunction
with the Investment Manager, ensures all payments are processed
within the contractual terms agreed with the individual
suppliers.
Approval
This Corporate Governance Report was approved by the Board on 16
October 2023.
On behalf of the Board:
Will Whitehorn
Chair
16 October 2023
Audit Committee Report
The Audit Committee consists of all Board members and is
currently chaired by Ms Lane, who succeeded Ms McComb as Chair of
the Audit Committee following the conclusion of the Company's AGM
on 17 November 2022.
The AIC Code permits the Chair of the Board to be a member of
the Audit Committee. The Board believes that Mr Whitehorn's
experience and knowledge is a significant benefit to the
Committee.
The Committee members have considerable business and financial
experience and the Board considers that the membership as a whole
has sufficient recent and relevant sector and financial experience
to discharge the responsibilities of the Committee. Ms Lane is a
Fellow of the Institute of Chartered Accountants in England and
Wales. All members of the Committee are independent of the
Company's Auditor, Investment Manager and Administrator.
The Committee's authority and duties are clearly defined in its
written terms of reference which are available on the Company's
website ( https://investors.seraphim.vc/ ). The terms of reference
include all matters indicated by the FCA's Disclosure Guidance and
Transparency Rule 7.1, the AIC Code and the UK Code. The terms of
reference are reviewed at least annually.
The Committee meets no less than two times a year and at such
other times as the Committee Chair shall require. At least once a
year the Committee meets with the Auditor without any
representative of the Investment Manager or Administrator being
present.
The Committee's effectiveness is reviewed on an annual basis as
part of the Board's performance evaluation process.
Key Responsibilities
-- Scrutinising and, where appropriate, challenging the
Investment Manager's proposed valuations of SSIT's private company
investments.
-- Monitoring the integrity of SSIT's financial reporting and,
where appropriate, challenging the financial reporting judgements
of the Investment Manager and Administrator.
-- Keeping under review the adequacy and effectiveness of SSIT's
internal controls, including financial controls and risk management
systems.
-- Considering the ongoing assessment of SSIT as a going concern
and assessment of its longer-term viability.
-- Appointing the Auditor, approving its remuneration,
monitoring the extent of any proposed non -- audit services and
generally overseeing the relationship.
-- Monitoring the Auditor's independence, objectivity and effectiveness.
-- Reviewing the performance and quality of the Auditor's audit work.
Reporting to the Board on how the Committee has discharged its
responsibilities and making recommendations as appropriate.
Main Activities
During the year, the Committee held four scheduled meetings and
several ad hoc meetings and there was ongoing liaison and
discussion between the Auditor, BDO LLP, and the Audit Committee
Chair with regard to the audit approach, identified risks and other
matters pertinent to the Committee.
The matters considered, monitored, reviewed and, where
appropriate challenged by the Committee during the year included
the following:
-- the terms of reference of the Committee;
-- the Company's accounting policies and practices;
-- the Investment Manager's valuation approach and the quarterly
valuations of the Company's investments prepared by the Investment
Manager;
-- the Company's key risks, including emerging risks, the risk
management systems in place and the Company's risk matrix;
-- the adequacy and effectiveness of the Company's internal control environment;
-- whether there is a need for an internal audit function;
-- the format of the Annual and Interim Reports and financial
statements, associated results announcements and related
matters;
-- regulatory changes impacting the Company;
-- the Financial Reporting Council's latest Annual Audit Quality Inspection Report on BDO LLP;
-- the independence of the Auditor;
-- the remuneration and terms of engagement of the Auditor; and
-- the audit plan of the Auditor for the year.
After the year end, the Committee met on 12 October 2023 and 16
October 2023 to consider and review the Annual Report and financial
statements and related matters and recommend the Annual Report and
financial statements to the Board for approval. The Auditor was
invited to attend the Committee meeting on 12 October 2023 and 16
October 2023 and a member of the Committee met with the Auditor
without representatives of the Investment Manager or Administrator
being present.
Financial Reporting
The primary role of the Committee in relation to financial
reporting is to review, with the Administrator, Investment Manager
and Auditor, and report to the Board on the appropriateness of the
Annual Report and financial statements and Interim Report,
concentrating on, amongst other matters:
-- the quality and acceptability of accounting policies and practices;
-- the clarity of the disclosures and compliance with financial
reporting standards and relevant financial and governance reporting
requirements;
-- material areas in which significant judgements had been
applied or where there had been discussion with the Auditor,
including the valuation of unlisted investments and going concern
and viability statements;
-- whether the strategic report included in the Annual Report
included a fair review of the development and performance of the
business and financial position of the Company, together with a
description of the principal and emerging risks and uncertainties
that it faces; and
-- whether the Annual Report and financial statements, taken as
a whole, were fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company's
position and performance, business model and strategy.
To aid its review, the Committee considered reports from the
Administrator and Investment Manager and the report from the
Auditor on the outcome of its annual audit.
Significant Areas of Judgement Considered by the Committee
The Committee has determined that a key risk of misstatement of
the Company's financial statements relates to the valuations of its
private company investments held at fair value through profit or
loss as they represent a significant proportion of the Company's
net assets (82.1% as at 30 June 2023) and since the valuations of
these investments require the use of estimates, assumptions and
judgements. There is also an inherent risk of management override
as the Investment Manager's performance fee is calculated based on
NAV (see note 4 to the financial statements for details of the
performance fee). Whilst the Administrator is responsible for
calculating the NAV, the most significant input to calculating the
NAV is the valuation of the Company's investments, which are
prepared by the Investment Manager and reviewed by the Committee
before approval by the Board.
The Company's private company investments are early or growth
stage companies. Valuations are prepared in accordance with the
IPEV Valuation Guidelines and the Investment Manager's valuation
policy, which has been formally reviewed and approved by the Board.
The Investment Manager's approach to valuation of investments is
outlined in the Investment Manager's Report and in notes 2 and 8 to
the financial statements. The valuation methodology used for each
private company investment is reassessed at each valuation
date.
On a quarterly basis, the Investment Manager provides a detailed
analysis of the proposed valuations of the Company's investments
with supporting materials. The Committee considers in detail and,
as necessary, challenges the analysis and supporting materials,
including the methodology and integrity of the valuations, and may
request additional information. Once the Committee has satisfied
itself that the key estimates, assumptions and judgements used in
the valuations are appropriate and that the investments have been
fairly valued, it recommends the valuations for approval by the
Board.
The Auditor has explained the results of its audit work on
valuations in the Independent Auditor's Report. There were no
adjustments proposed that were material in the context of the
Annual Report and financial statements as a whole.
Risk Management
The Board is accountable for carrying out a robust assessment of
the principal risks facing the Company, including those threatening
its business model, future performance, solvency and liquidity.
On behalf of the Board, the Committee reviews the effectiveness
of the Company's risk management processes. The Company's risk
assessment process and the way in which significant business risks
are managed are key areas of focus for the Committee. The work of
the Committee during the year was driven primarily by the Company's
assessment of its principal and emerging risks as set out in the
Strategic Report. The Committee also receives reports from the
Investment Manager and Administrator on the Company's risk
evaluation process and reviews changes to significant risks
identified.
No significant weaknesses were identified in the year.
Internal Audit
The Committee considers at least once a year whether there is a
need for an internal audit function. Currently, the Committee does
not consider there to be a need for an internal audit function, on
the basis that there are no employees in the Company and all
outsourced functions are with parties who have their own internal
controls and procedures. The Management Engagement Committee
regularly reviews the performance of the key service providers and
their risk and control processes.
Auditor
BDO LLP was appointed as the Company's Auditor following its
incorporation.
The reappointment of the Auditor is subject to annual
shareholder approval at the AGM. There are no contractual
obligations restricting the choice of Auditor and the Company will
put the audit services contract out to tender at least every 10
years. In accordance with professional guidelines, the statutory
auditor will be rotated at least every five years. The current
statutory auditor, Mr Wieder, has completed his second year in the
role.
To form a view on audit quality and the effectiveness of the
external audit process, the Committee reviewed and considered:
-- the Auditor's fulfilment of the agreed audit plan and variations from it;
-- discussions or reports highlighting the major issues that
arose during the course of the audit;
-- feedback from the Administrator and Investment Manager
evaluating the performance of the audit team, including the
robustness of the audit, the level of challenge offered by the
audit team, the skills, experience and overall quality of the audit
team, the timeliness of delivering the tasks required for the audit
and reporting to the Committee and the overall quality of the
service; and
-- the Committee's own observations and interactions with the Auditor.
The Committee also considered the Auditor's technical
competence, understanding of the Company's business and whether it
demonstrated an appropriate level of diligence, professional
scepticism and challenge. Following this review, the Audit
Committee was satisfied that BDO LLP had carried out its duties in
a diligent and professional manner and provided a high level of
service.
The Committee monitors the Auditor's independence through three
aspects of its work:
-- the approval of a policy regulating the non-audit services
that may be provided by the Auditor to the Company;
-- assessing the appropriateness of the fees paid to the Auditor
for all work undertaken by it; and
-- reviewing the information and assurances provided by the
Auditor on its compliance with the relevant ethical standards.
Details of the audit and non-audit fees paid to BDO LLP in
respect of the year and prior period are set out in note 5 to the
financial statements. Notwithstanding such non-audit services, the
Committee considered BDO LLP to be independent of the Company and
that the provision of such services was not a threat to BDO LLP's
objectivity and independence.
BDO LLP confirmed that all its partners and staff involved with
the audit were independent of any links to the Company and that
these individuals had complied with BDO LLP's ethics and
independence policies and procedures which are fully consistent
with the Financial Reporting Council's Ethical Standards.
Having satisfied itself as to the effectiveness and independence
of BDO LLP as the Company's Auditor, the Committee recommended to
the Board that BDO LLP be reappointed as Auditor for the year
ending 30 June 2024. Accordingly, a resolution proposing the
reappointment of BDO LLP as the Auditor will be put to shareholders
at the 2023 AGM.
The Committee will continue to monitor the performance of the
Auditor on an annual basis and will consider its independence and
objectivity, taking account of appropriate guidelines. In addition,
the Committee Chair will continue to maintain regular contact with
the lead audit partner outside the formal Committee meeting
schedule, not only to discuss formal agenda items for upcoming
meetings, but also to review any other significant matters.
Financial Statements
The Board has requested the Committee to confirm that, in its
opinion, the Board can make the required statement that the Annual
Report and financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary
for shareholders to assess the Company's position and performance,
business model and strategy. The Committee has given this
confirmation based on its review of the whole document, underpinned
by involvement in the planning for its preparation and review of
the processes to assure the accuracy of factual content.
Committee Evaluation
The activities of the Committee were considered as part of the
Board evaluation process completed in May 2023 in accordance with
standard governance arrangements as summarised in the Remuneration
and Nomination Committee Report. The conclusion from the process
was that the Committee was operating effectively with the right
balance of membership and skills.
Approval
This Audit Committee Report was approved by the Committee on 16
October 2023.
On behalf of the Committee:
Angela Lane
Audit Committee Chair
16 October 2023
Management Engagement Committee Report
The Management Engagement Committee consists of all the
Directors and is currently chaired by Ms McComb, who succeeded Mr
Whitehorn as chair following the conclusion of the Company's AGM on
17 November 2022 .
The Committee's authority and duties are clearly defined in its
written terms of reference which are available on the Company's
website ( https://investors.seraphim.vc/ ). The terms of reference
are reviewed at least annually.
The Committee meets once a year and at such other times as the
Committee Chair shall require. It met once during the year.
The Committee's effectiveness is reviewed on an annual basis as
part of the Board's performance evaluation process.
Key Responsibilities
-- Evaluating the performance of the Investment Manager.
-- Reviewing the terms of the Investment Management Agreement.
-- Reviewing the Investment Manager's remuneration, including
the methodology and level of the annual management and performance
fees.
-- Considering the merit of obtaining an independent appraisal
of the Investment Manager's services.
-- Evaluating the performance of SSIT's other key service
providers (except for the Auditor) and whether those service
providers deliver value for money services.
-- Assessing whether the culture, policies and practices of the
Investment Manager and other key service providers are consistent
with good risk management, compliance and regulatory
frameworks.
-- Reporting to the Board on how the Committee has discharged its responsibilities and making recommendations as appropriate.
Evaluation of the Investment Manager
The performance of the Investment Manager is considered at every
Board meeting, with a formal evaluation by the Committee at least
once each year. For the purpose of its ongoing monitoring, the
Board receives detailed reports and views from the Investment
Manager on the Company's investment strategy, investment portfolio
and pipeline (including associated risks) and investment
performance.
The Committee met in May 2023 for the purpose of the formal
annual evaluation of the Investment Manager's performance and to
review the terms of the Investment Management Agreement (details of
which are included under 'Investment Manager' and in note 4 to the
financial statements), including the fee provisions. The Committee
reviewed detailed questionnaires completed by the Investment
Manager, which included sections on the Investment Manager's
systems, controls and policies. The results of the detailed
questionnaire completed by the Directors and the Investment Manager
in connection with the Board evaluation, to the extent that they
were relevant to the Investment Manager evaluation, were also
reviewed. Other factors reviewed included:
-- quality and continuity of the Investment Manager's team;
-- investment results achieved to date;
-- the Investment Manager's engagement with the Board and other key stakeholders;
-- the Investment Manager's ongoing commitment to promoting the Company;
-- the Investment Manager's compliance with contractual
arrangements and duties, including compliance with SSIT's
investment policy;
-- the methodology and level of the annual management and
performance fees (see note 4 to the financial statements for
details) and the other terms of the Investment Management
Agreement, having regard to those of comparable listed investment
companies; and
-- the Investment Manager's culture and its strategy and goals for developing its business.
Following its review, the Committee concluded that the
Investment Manager was performing well against the requirements set
by the Board and that it was satisfied, in all material respects,
with the services provided by, performance of and support from the
Investment Manager and also with the interaction between the Board
and the Investment Manager.
The Committee concluded that, in its opinion, the continuing
appointment of the Investment Manager on the terms agreed was in
the best interests of shareholders as a whole and recommended this
to the Board. The Board agreed with the Committee's recommendation
and approved the continuing appointment of the Investment Manager
on the terms agreed.
Evaluation of Other Key Service Providers
The performance of the Company's other key service providers is
monitored by the Board on an ongoing basis and formally evaluated
by the Committee at least once a year, with a key focus on the
Administrator and Company Secretary.
At its meeting in May 2023, the Committee also undertook the
formal annual evaluation of the other key service providers'
performance and reviewed their respective remuneration. The
Committee reviewed a detailed questionnaire completed by the other
key service providers, which included sections on their systems,
controls and policies. In most instances, relationships with the
other key service providers are managed by the Investment Manager
and/or Administrator and Company Secretary on behalf of the Board
and the Committee considered feedback received from the Investment
Manager and the Administrator regarding the levels of service
provided by, and relationships with, the other key service
providers.
The Committee was satisfied, in all material respects, with the
levels of service provided by the other key service providers . The
Committee concluded that, in its opinion, the continuing
appointments of the other key service providers on the terms agreed
remained appropriate and in the best interests of the Company and
recommended this to the Board. The Board agreed with the
Committee's recommendations and approved the continuing
appointments of the other key service provider on the terms
agreed.
Committee Evaluation
The activities of the Management Engagement Committee were
considered as part of the Board evaluation process completed in May
2023 in accordance with standard governance arrangements as
summarised in the Remuneration and Nomination Committee Report. It
was concluded that the Committee has the right balance of
membership and skills and is operating effectively.
Approval
This Management Engagement Committee Report was approved on 16
October 2023.
On behalf of the Committee:
Christina McComb
Management Engagement Committee Chair
16 October 2023
Remuneration and Nomination Committee Report
The Remuneration and Nomination Committee consists of all the
Directors and is chaired by Ms Inglis. Individual Directors are not
involved in decisions connected with their own appointments.
The Committee's authority and duties are clearly defined in its
written terms of reference which are available on the Company's
website ( https://investors.seraphim.vc/ ). The terms of reference
are reviewed at least annually.
The Committee meets once a year, and at such other times as the
Committee Chair shall require.
The Committee's effectiveness is reviewed on an annual basis as
part of the Board's performance evaluation process.
Key Responsibilities
-- Developing and reviewing the Directors' remuneration policy
and policies on Board tenure and diversity.
-- In conjunction with the Chair, reviewing the Directors'
remuneration levels and considering the need to appoint external
remuneration consultants.
-- Reviewing outside commitments of the Directors.
-- Evaluating the Board, its Committees and the Directors and
considering whether the Directors should be recommended for
election or re-election.
-- Reviewing the composition of the Board and its Committees,
including the balance of skills, experience, knowledge and
diversity (including gender, social and ethnic backgrounds and
cognitive and personal strengths).
-- Formulating succession plans for the Directors consistent
with SSIT's policies on Board tenure and diversity.
-- Identifying, evaluating and recommending candidates for new Board appointments.
-- Reporting to the Board on how the Committee has discharged its responsibilities and making recommendations as appropriate.
Principal Activities During the Year
Annual evaluation of Board, Committees and Directors
The Committee ensures that there is a formal and rigorous annual
evaluation of the performance of the Board, its Committees, the
Chair and individual Directors.
The evaluations, which were facilitated by the Company Secretary
and undertaken during May 2023, consisted of performance
appraisals, questionnaires, and discussions to determine
effectiveness and performance in various areas. The areas
considered included (a) the Board's composition, knowledge, skills
and independence, (b) its governance and processes, (c) the
contributions of individual Directors to the Board's work, (d) the
relationships and communication between the Directors, as well as
between the Board and the Investment Manager, the Administrator and
other key service providers, (e) investment matters, (f) delivering
shareholder value and (g) key priorities for the financial year
ending 30 June 2024. The Committee also sought the views of the
Investment Manager as part of the evaluation process. The
performance evaluation of the Chair was led by Ms Inglis as the
Company's Senior Independent Director and Chair of the Remuneration
and Nomination Committee.
Following review and discussion of the evaluation results, the
Committee concluded, at its scheduled meeting in May 2023,
that:
-- the Board and each of its standing Committees had a good
balance of relevant skills, experience and knowledge and their
structures, sizes and compositions were appropriate at this stage
in the Company's life and, accordingly, no changes were expected to
be required for at least the next 12 months;
-- each Director continued to be independent in character and
judgement, their skills and experience were a significant benefit
to the Board and they had demonstrated their ability to commit the
time required to fulfil their responsibilities;
-- the Directors (individually and collectively as the Board) had been operating effectively;
-- there were no specific additional training requirements for any of the Directors; and
-- the proposed re-election of each Director at the 2023 AGM should be recommended.
The Committee made recommendations to the Board based on the
outcome of its deliberations.
Other routine activities
At its schedule meeting in May 2023, the Committee also:
-- reviewed the Board's policies on diversity and Board tenure
and its succession plan and recommended them to the Board for
approval (see 'Board diversity', 'Board tenure' and 'Succession
Planning' for details of these policies, as approved by the Board);
and
-- reviewed the Directors' remuneration policy and the annual
remuneration of the Directors and concluded that no changes were
required in respect of the year ending 30 June 2024.
Succession Planning
The Board is at an early stage of its life, with all Directors
having a number of years of their tenure left. The tenure of all
Directors, including the Chair, is expected not to exceed nine
years unless exceptional circumstances warrant, such as to allow
for phased retirements of the current Directors. The Committee
considers succession planning annually and has developed a
succession plan that seeks to achieve an appropriate balance
between preservation of experience and knowledge and bringing in
fresh ideas and perspectives and is consistent with the Company's
policies on Board tenure and diversity. The Committee is cognisant
that it does not currently have ethnic representation, contrary to
the new FCA diversity targets, and this will be an important
consideration in future Board appointments.
The process for recruiting additional Directors is described
under 'Appointments to the Board'. The Committee intends to use
non-executive director recruitment consultants and/or open
advertising when recruiting new Directors in the future.
Committee Evaluation
The activities of the Committee were considered as part of the
Board evaluation process completed in May 2023 in accordance with
standard governance arrangements as summarised under 'Annual
evaluation of Board, Committees and Directors' earlier in this
Report. The conclusion from the process was that the Committee was
operating effectively with the right balance of membership and
skills.
Approval
This Remuneration and Nomination Committee Report was approved
on 16 October 2023.
On behalf of the Committee:
Sue Inglis
Remuneration and Nomination Committee Chair
16 October 2023
Directors' Remuneration Report
This Report has been prepared by the Directors in accordance
with the requirements of the Companies Act 2006 and the Large and
Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008. By law, the Company's Auditor is required to
audit certain of the disclosures provided in this Report. Where
disclosures have been audited, they are indicated as such. An
ordinary resolution for the approval of this Report (excluding the
section 'Remuneration Policy') will be put to shareholders at the
Company's AGM on 20 November 2023.
Annual Statement from the Chair of the Board
The Company's remuneration policy, which is set out below, is
subject to shareholder approval every three years or sooner if an
alteration to the policy is proposed. The remuneration policy was
approved at the AGM of the Company on 17 November 2022 and no
changes to the policy are proposed. It is intended that the
remuneration policy will continue in force until the AGM in
2025.
The remuneration of the Directors has been set in order to
attract individuals of a calibre appropriate to the future
development of the Company. For the year ended 30 June 2023, the
Directors' remuneration was set at GBP50,000 per annum for each
Director. The Remuneration and Nomination Committee reviewed the
level of fees during the year and the Board approved the
Committee's recommendation that there should be no increase in the
level of fees for the year ending 30 June 2024. The Remuneration
and Nomination Committee did not receive independent advice or
services in respect of its review of the Directors' remuneration;
however, the Company Secretary provided it with details of
comparable fees and other market information.
Remuneration Policy
It is the Company's policy to determine the level of Directors'
fees which should be sufficient to attract and retain Directors
with appropriate skills and experience necessary for the effective
stewardship of the Company and the expected contribution of the
Board as a whole in achieving the Company's objectives. The time
committed to the Company's business and the specific
responsibilities of individual Directors are taken into account.
The policy aims to be fair and reasonable in relation to the level
of fees payable to non-executive directors of comparable investment
companies and other investment companies of similar size and
complexity as the Company.
The Company's Articles of Association limit the aggregate fees
payable to the Directors to GBP500,000 per annum ( any change to
that limit requires shareholder approval) . Within that limit, it
is the responsibility of the Board as a whole to determine and
approve the Directors' fees, following a recommendation from the
Remuneration and Nomination Committee. The fees are fixed and
payable in cash, quarterly in arrears. Annual fees are pro-rated
where a change takes place during a financial year. Directors have
no entitlement to pensions or pension-related benefits, medical or
life insurance schemes, share options or long-term incentive
schemes.
The Directors' fee rates are reviewed by the Remuneration and
Nomination Committee at least annually, but reviews will not
necessarily result in a change to the rates. Any feedback received
from shareholders will be taken into account when setting fee
rates. Directors abstain from voting on their own fees .
The Directors are entitled to the reimbursement of reasonable
fees and expenses incurred by them in the performance of their
duties. Where expenses are recognised as a taxable benefit, a
Director may receive the grossed-up costs of that expense as a
benefit.
The Directors do not have a service contract. Each Director has
signed a letter of appointment with the Company. The letters of
appointment do not include any minimum period of notice of
termination by either party or any provision for compensation for
loss of office.
Annual Report on Directors' Remuneration (Audited
Information)
The table below shows all remuneration earned by each individual
Director during the year. No Director received taxable benefits
during the year.
% change from prior period(2)
30 June 2023 30 June 2022
GBP GBP
----------------------------------------- --------------- ------------- -----------------------------
Will Whitehorn (Chair) GBP50,000 GBP48,322 3%
Sue Inglis (Senior Independent Director) GBP50,000 GBP48,322 3%
Christina McComb GBP50,000 GBP48,322 3%
Angela Lane(1) GBP50,000 GBP25,000 100%
Total GBP200,000 GBP169,966
----------------------------------------- --------------- ------------- -----------------------------
(1) Appointed with effect from 1 January 2022.
(2) Movement in individual Director's salary based on annualised
total figures. Prior year remuneration was prorated based on
duration of service.
Remuneration for each Director is set at GBP50,000 per annum.
None of the Directors received any other remuneration or additional
discretionary payments during the year from the Company (2022:
GBPNIL).
Relative Importance of Spend on Pay
The remuneration of the Directors with respect to the year
totalled GBP200,000. The Directors intend to manage the Company's
affairs to achieve shareholder returns through capital growth
rather than income. Therefore, no dividends have been declared or
paid during the year and a comparison of amounts paid to Directors
against distributions to shareholders would not be relevant.
Directors' Interests (Audited Information)
The Directors who held office during the year and their
interests in the ordinary shares of the Company at 30 June 2023 are
shown in the table below. There have been no changes to the
Directors' interests between 30 June 2023 and the date of this
Report.
30 June 2023 Ordinary shares 30 June 2022 Ordinary shares
----------------- ---------------------------- ----------------------------
Will Whitehorn 100,000 100,000
Sue Inglis 50,000 50,000
Christina McComb 41,706 25,000
Angela Lane 47,000 27,284
----------------- ---------------------------- ----------------------------
There are no requirements for the Directors to own shares in the
Company.
Statement of Voting at Annual General Meeting
The Company seeks shareholder approval of the Directors'
remuneration policy at every third AGM. At the 2022 AGM, of the
proxy votes received in respect of the Directors' Remuneration
Policy, 99.58% were in favour and 0.42% were against (votes
representing approximately 0.03% of the issued share capital were
withheld).
An advisory ordinary resolution to approve the Directors'
Remuneration Report (excluding the Directors' remuneration policy)
is put to members at each AGM. At the 2022 AGM, of the proxy votes
received in respect of the Directors' Remuneration Report, 99.60%
were in favour and 0.40% were against (votes representing 0.03% of
the issued share capital were withheld).
Approval
This Directors' Remuneration Report was approved by the Board on
16 2023.
On behalf of the Board:
Will Whitehorn
Chair
17 2023
Directors' Responsibilities Statement
Responsibilities
The Directors are responsible for preparing the Annual Report
and financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the Company's financial statements, in
accordance with UK-adopted International Accounting Standards and
the requirements of the Companies Act 2006. Under company law the
Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss for the Company
for that financial year.
In preparing the financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with
UK-adopted International Accounting Standards, subject to any
material departures disclosed and explained in the financial
statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
-- prepare a Directors' Report, strategic report and Directors'
remuneration report which comply with the requirements of the
Companies Act 2006.
The Directors are responsible for:
-- keeping adequate accounting records that are sufficient to
show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements
comply with the Companies Act 2006;
-- for safeguarding the assets of the Company and, hence, for
taking reasonable steps for the prevention and detection of fraud
and other irregularities; and
-- ensuring that the Annual Report, taken as a whole, is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Company's performance, business
model and strategy.
Website Publication
The Directors are responsible for ensuring the Annual Report and
financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the UK governing the preparation and
dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Directors,
which they have delegated to the Investment Manager. The Directors'
responsibilities also extend to the ongoing integrity of the
financial statements contained on the website.
Responsibility Statement
The Directors confirm to the best of their knowledge that:
-- the Company's financial statements have been prepared in
accordance with UK-adopted International Accounting Standards and
give a true and fair view of the assets, liabilities, financial
position and profit and loss of the Company;
-- the Strategic Report includes a fair review of the
development and performance of the business and financial position
of the Company, together with a description of the principal and
emerging risks and uncertainties that it faces; and
-- the Annual Report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's position and
performance, business model and strategy.
This responsibility statement was approved by the Board on 16
October 2023.
On behalf of the Board
Will Whitehorn
Chair
16 October 2023
Statement of Comprehensive Income
For the year ended 30 June 2023
For the year ended 30 June 2023 For the period ended 30 June 2022
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ----- ---------- ----------- ----------- ------------ ----------- -----------
Investment (loss)/gain
Net (loss)/gain on investments
held at fair value through
profit or loss 8 - (12,416) (12,416) - 7,655 7,655
--------------------------------- ----- ---------- ----------- ----------- ------------ ----------- -----------
- (12,416) (12,416) - 7,655 7,655
Expenses
Management fee 4 (2,912) - (2,912) (2,744) - (2,744)
Other operating expenses 5 (1,851) - (1,851) (1,626) - (1,626)
------------ ----------- -----------
Total expenses (4,763) - (4,763) (4,370) - (4,370)
Operating (loss)/profit for the
year/period (4,763) (12,416) (17,179) (4,370) 7,655 3,285
Finance income
Interest income 260 - 260 84 - 84
--------------------------------- ----- ---------- ----------- ----------- ------------ ----------- -----------
Total finance income 260 - 260 84 - 84
(Loss)/profit for the
year/period before tax (4,503) (12,416) (16,919) (4,286) 7,655 3,369
Tax 6 - - - - - -
--------------------------------- ----- ---------- ----------- ----------- ------------ ----------- -----------
(Loss)/profit and total
comprehensive income for the
year/period attributable to:
Equity holders of the Company (4,503) (12,416) (16,919) (4,286) 7,655 3,369
Earnings per share
--------------------------------- ----- ---------- ----------- -----------
Basic and diluted
(losses)/earnings per share
(pence) 7 (1.88) (5.19) (7.07) (1.94) 3.47 1.53
--------------------------------- ----- ---------- ----------- ----------- ------------ ----------- -----------
All Revenue and Capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
in the year or prior period.
The Total column of this statement is the profit and loss
account of the Company, and the Revenue and Capital columns
represent supplementary information prepared under guidance issued
by the Association of Investment Companies.
The accompanying notes below form an integral part of these
financial statements.
Statement of Financial Position
As at 30 June 2023
Year ended Period ended
30 June 2023 30 June 2022
GBP'000 GBP'000
Note
-------------------------------------------------- ----- ------------- -------------
Non-current assets
Investments at fair value through profit or loss 8 187,428 186,083
-------------------------------------------------- ----- ------------- -------------
187,428 186,083
Current assets
Trade and other receivables 9 88 121
Cash and cash equivalents 10 35,309 57,650
-------------------------------------------------- ----- ------------- -------------
35,397 57,771
Current liabilities
Trade and other payables 11 (428) (4,538)
-------------------------------------------------- ----- ------------- -------------
(428) (4,538)
Net current assets 34,969 53,233
Net assets 222,397 239,316
-------------------------------------------------- ----- ------------- -------------
Equity
Share capital 12 2,394 2,394
Share premium 12 60,377 60,377
Other reserves 12 173,176 173,176
Retained (losses)/earnings (13,550) 3,369
Total shareholders' funds 222,397 239,316
-------------------------------------------------- ----- ------------- -------------
Number of shares in issue at period end 239,384,928 239,384,928
Net assets per share (pence) 13 92.90 99.97
-------------------------------------------------- ----- ------------- -------------
The financial statements were approved and authorised for issue
by the Board of Directors on 16 October 2023 and signed on its
behalf by:
Will Whitehorn Sue Inglis
Chair Director
Registered Company Number 13395698
The accompanying notes below form an integral part of these
financial statements.
Statement of Changes in Equity
For the year ended 30 June 2023
Special
distributable
Share capital Share premium reserve Retained (losses)/earnings Total
Revenue Capital
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------------- -------------- --------------------- ------------- -------------- ---------
Total shareholders'
funds at 1 July
2022 2,394 60,377 173,176 (4,286) 7,655 239,316
Total comprehensive
expense for the
year - - - (4,503) (12,416) (16,919)
Total shareholders'
funds at 30 June
2023 2,394 60,377 173,176 (8,789) (4,761) 222,397
--------------------- -------------- -------------- --------------------- ------------- -------------- ---------
For the period from inception to 30 June 2022
Special
distributable
Share capital Share premium reserve Retained (losses)/earnings Total
Revenue Capital
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------------- -------------- --------------------- -------------- ------------- --------
Total shareholders'
funds at 14 May 2021 - - - - - -
Issue of redeemable
preference shares 50 - - - - 50
Issues of ordinary
shares 2,394 236,991 - - - 239,385
Redemption of
redeemable
preference shares (50) - - - - (50)
Share issue costs - (3,438) - - (3,438)
Cancellation of share
premium - (173,176) 173,176 - - -
Total comprehensive
(expense) / income
for the period - - - (4,286) 7,655 3,369
Total shareholders'
funds at 30 June
2022 2,394 60,377 173,176 (4,286) 7,655 239,316
---------------------- -------------- -------------- --------------------- -------------- ------------- --------
The accompanying notes below form an integral part of these
financial statements.
Statement of Cash Flows
For the year ended 30 June 2023
For the year For the period
ended ended
30 June 2023 30 June 2022
Note GBP'000 GBP'000
-------------------------------- ----- ------------- ---------------
Cash flows from operating
activities
(Loss)/profit for the
year/period before tax (16,919) 3,369
Adjustments for:
Foreign currency cash
movement 237 -
Purchase of investments (21,330) (84,815)
Disposal of investments 8 3,341 -
Unrealised movement
in fair value of investments 8 10,456 (7,655)
Realised loss on disposal
of investments 8 1,960 -
Movement in payables 118 310
Movement in receivables 33 (121)
-------------------------------- -----
Net cash used in operating
activities (22,104) (88,912)
Cash flows from financing
activities
Proceeds of share capital
issuance - 147,639
Payment of issue costs - (1,077)
Net cash generated
from financing activities - 146,562
Net movement in cash
and cash equivalents
during the year/period (22,104) 57,650
Cash and cash equivalents
at the beginning of
the year/period 57,650 -
Exchange translation
movement (237) -
-------------------------------- ----- ------------- ---------------
Cash and cash equivalents
at the end of the year/period 35,309 57,650
-------------------------------- ----- ------------- ---------------
The accompanying notes below form an integral part of these
financial statements.
NOTES TO THE FINACIAL STATEMENTS
For the year ended 30 June 2023
1. General Information
The Company is an externally managed closed-ended investment
company, incorporated in England and Wales on 14 May 2021 with
registered number 13395698. The Company's ordinary shares were
admitted to trading on the London Stock Exchange's main market on
14 July 2021.
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
These financial statements have been prepared on the historic
cost basis, as modified for the measurement of certain financial
instruments held at fair value through profit or loss and in
accordance with UK-adopted International Accounting Standards and
those parts of the Companies Act 2006 applicable to companies under
International Financial Reporting Standards.
Where presentational guidance set out in the Association of
Investment Companies Statement of Recommended Practice for the
Financial Statements of Investment Trust Companies and Venture
Capital Trusts (AIC SORP) is consistent with the requirements of
UK-adopted International Accounting Standards, the Directors have
sought to prepare the financial statements on a basis compliant
with the recommendations of the AIC SORP. In particular,
supplementary information which analyses the Statement of
Comprehensive Income between items of revenue and capital nature
has been presented alongside the total Statement of Comprehensive
Income. The determination of whether an item should be recognised
as revenue or capital is carried out in accordance with the
principles and recommendations set out in the AIC SORP. The
Directors have chosen to apply the non-allocation approach, so all
indirect costs are charged to the revenue column of the Statement
of Comprehensive Income.
The Company was formed on 14 May 2021, so comparative
information in the financial statements covers the period from 14
May 2021 to 30 June 2022, but during that period the meaningful
activities of the Company took place from the Company's listing on
the London Stock Exchange on 14 July 2021 to 30 June 2022.
In these financial statements, values are rounded to the nearest
thousand (GBP'000), unless otherwise indicated.
Going concern
The Company's cash balance at 30 June 2023 was GBP35.3m (2022:
GBP57.7m), which was sufficient to cover its liabilities of GBP0.4m
(2022: GBP4.5m including GBP4.2m investment settled post
period-end) at that date and any foreseeable expenses for a period
of at least 12 months from the date of approval of these financial
statements, including in severe but plausible downside scenarios.
The Company's cash balance at the date of approval of these
financial statements was GBP29.4m.
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. The major cash outflows of the Company are expected
to be for the acquisition of new investments, which are
discretionary. The Company is closed-ended and there is no
requirement for the Company to buy back or redeem shares.
The war in Ukraine has had substantial impacts on the global
economy, in particular in respect of heightened inflation rates.
Heightened inflation rates and interest rates have caused a weak
macroeconomic environment which has impacted global markets.
Continued strengthening of Sterling against the US Dollar has
more than reversed the Sterling weakness experienced in the first
quarter of this year. Given the ongoing weak macroeconomic
environment, 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 key risk to the Company. In the meantime, the Directors and
Investment Manager are actively monitoring the situation. In
addition, they have considered the following specific key potential
impacts:
-- increased volatility in the fair value of investments;
-- uncertainty regarding the ability to raise additional capital
and support the existing portfolio; and
-- disruptions to business activities of the underlying investments.
In considering these key potential impacts, the Directors and
Investment Manager have assessed them with reference to the
Company's risk framework and mitigation measures in place.
Based on the assessment outlined above, including the various
risk mitigation measures in place, the Directors do not consider
that the effects of the weak macroeconomic environment or the
impact of the continuing war on 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 the date of approval of these financial
statements. Accordingly, they continue to adopt the going concern
basis in preparing the financial statements.
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 in accordance with UK-adopted International
Accounting Standards, 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 predominantly in early and growth
stage privately financed SpaceTech businesses globally.
All of the Company's current bank interest income is derived
from within the UK.
The Company's non-current assets are located in the US, the UK,
the EU, Israel and Japan. Due to the Company's nature, it has no
customers.
Functional currency and foreign currency transactions
These financial statements are presented in Sterling. As the
majority of the Company's transactions are in Sterling, it is
appropriate for the Company's functional currency to be Sterling.
However, the Company holds investments denominated in currencies
other than Sterling, including US Dollars. In addition, an element
of any income from the Company's investments may be generated in
currencies other than Sterling.
Transactions in foreign currencies are translated at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
reporting date are translated at the foreign exchange rate ruling
at that date. Foreign exchange differences arising on translation
are recognised in the Statement of Comprehensive Income. The
Company may employ derivatives for currency hedging purposes, but
the Board did not do so in the year.
New and amended standards and interpretations not applied
At the date of authorisation of these financial statements, the
following amendments had been published and will be mandatory for
future accounting periods.
Effective for accounting periods beginning on or after 1 January
2023:
-- Narrow-scope amendments to IAS 1 'Presentation of financial
statements', Practice statement 2 and IAS 8 'Accounting policies,
changes in accounting estimates and errors'.
-- Amendments to IAS 12 'Income taxes' - deferred tax related to
assets and liabilities arising from a single transaction.
-- Amendments to IFRS 17 'Insurance contracts' - this standard
replaces IFRS 4 'Insurance contracts', which currently permits a
wide variety of practices in accounting for insurance
contracts.
Effective for accounting periods beginning on or after 1 January
2024:
-- Amendments to IAS 1 on classification of liabilities clarify
that liabilities are classified as either current or non-current,
depending on the rights that exist at the end of the reporting
period.
The Company has considered the IFRS accounting standards and
interpretations that have been issued but are not yet effective.
None of these standards or interpretations are likely to have a
material effect on the Company, as it is the belief of the Board
that the activities of the Company are unlikely to be affected by
the changes to these standards, although any disclosures
recommended by these standards, where applicable, will be provided
as required.
Assessment as an investment entity
IFRS 10 'Consolidated financial statements' sets out the
following three essential criteria that must be met if a company is
to be considered as an investment entity:
-- it must obtain funds from multiple investors for the purpose
of providing those investors with investment management
services;
-- it must commit to its investors that its business purpose is
to invest funds solely for returns from capital appreciation,
investment income or both; and
-- it must measure and evaluate the performance of substantially
all of its investments on a fair value basis.
In satisfying the second essential criteria, the notion of an
investment time frame is critical, and an investment entity should
have an exit strategy for the realisation of its investments. 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
portfolio risk 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 as it obtains funds from investors to invest for returns
from capital appreciation and substantially all of its investments
are held 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'.
Income recognition
Investment income and interest income is accounted for on an
accruals basis using the effective interest rate method.
Fair value movement
Gains or losses resulting from the movement in fair value of the
Company's investments held at fair value through profit or loss are
recognised in the Capital column of the Statement of Comprehensive
Income at each valuation point.
Expenses
Expenses are accounted for on an accruals basis. The Company's
management, administration and all other expenses are charged
through the Revenue column and any performance fee is charged to
the Capital column of the Statement of Comprehensive Income.
Share issue expenses of the Company directly attributable to the
issue and listing of shares are charged to the share premium
account.
Taxation
The Company has received confirmation from HMRC that it has been
accepted as an approved investment trust with effect from 14 July
2021, provided it continues to meet the eligibility conditions of
section 1158 of the Corporation Tax Act 2010 ('s.1158') and the
ongoing requirements for approved companies in the Investment Trust
(Approved Company) (Tax) Regulations 2011. The Directors believe
that the Company has conducted its affairs in compliance with
s.1158 since approval was granted and intends to continue to do
so.
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. The Company will, however, be subject to UK corporation tax
on its income (currently at a rate of 25%).
In principle, the Company is liable to UK corporation tax on any
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.
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 taxable 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 if the Company has a tax liability 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 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 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.
Financial instruments
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.
At 30 June 2023 and 2022, the carrying amounts of cash and cash
equivalents, receivables, payables and accrued expenses reflected
in the financial statements are reasonable estimates of fair value
in view of the nature of these instruments or the relatively short
period of time between the original instruments and their expected
realisation.
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 financial assets are initially recognised at fair value. All
purchases of financial assets are recorded at the date on which the
Company became party to the contractual requirements of the
financial asset.
The Company's financial assets principally comprise of cash and
cash equivalents and investments held at fair value through profit
or loss.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, short term
deposits held on call with banks and other short-term highly liquid
deposits with original maturities of three months or less and that
are readily convertible to a known amount of cash and are subject
to an insignificant risk of changes in value.
Investments held at fair value through profit or loss
Investments are designated upon initial recognition as held 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.
Financial assets are recognised/derecognised at the date of the
purchase/disposal. 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.
Fair value is defined as the amount for which an asset could be
exchanged between knowledgeable willing parties in an arm's length
transaction. The value of the Company's investments is calculated
on the following bases:
-- the value of investments that are not publicly traded are valued using recognised valuation methodologies in accordance with the IPEV Valuation Guidelines. These methods include primary valuation techniques such as revenue or earnings multiples, milestones or recent transactions;
-- where an investment in an unlisted business has been made
recently, the Company may use the calibrated price of recent
investment as the best indicator of fair value. In such a case,
changes or events subsequent to the relevant transaction date are
assessed to ascertain if they imply a change in the investment's
fair value;
-- publicly traded securities are valued by reference to their
bid price or last traded price, if applicable, on the relevant
exchange in accordance with the AIC's valuation guidelines and
applicable accounting standards. Where trading in the securities of
a portfolio company is suspended, the investment in those
securities would be valued at the estimate of its net realisable
value. In preparing these valuations, account is taken, where
appropriate, of latest dealing prices, valuations from reliable
sources, comparable asset values and other relevant factors;
and
-- any value otherwise than in Sterling is converted into Sterling at the prevailing rate.
Derecognition of financial assets
A financial asset (in whole or in part) is derecognised:
-- 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 asset or a portion of the asset; or
-- when the contractual right to receive cashflow has expired.
Purchases of investments for cash are classified as operating
activities in the Statement of Cash Flows as the Company's
objective is to generate capital growth through investment in a
portfolio of predominantly early and growth stage privately
financed SpaceTech businesses.
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 are measured at amortised
cost and 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, or it
expires or is cancelled. Any gain or loss on derecognition is taken
to the Statement of Comprehensive Income.
Provisions
A provision is recognised when there is an expected future
economic outflow as a result of a past event and for which the
timing or amount is uncertain.
Share capital
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 are classified as equity instruments.
For the issue of each ordinary share, GBP0.01 has been
recognised in share capital and the remaining amount received has
been recognised in share premium. Incremental costs directly
attributable to the issue of new shares are shown in share premium
as a deduction from proceeds. Amounts in the share capital and
share premium accounts are not distributable.
As disclosed in note 11, the amount standing to the credit of
the share premium account of the Company on completion of the IPO,
less issue expenses set off against the share premium account, was
cancelled by a court order dated 14 December 2021 and credited to
the special distributable reserve. Retained earnings include
cumulative unrealised movements in investments which are classified
as capital in the Statement of Comprehensive Income, which are not
distributable; and cumulative revenue items, which are classified
as distributable to shareholders.
3. Significant Accounting Judgements, Estimates and Assumptions
The preparation of the financial statements requires the
application of estimates which may affect the results reported in
the financial statements. Estimates, by their nature, are based on
judgement and available information.
Investment entity
As disclosed in note 2, the Directors have concluded that the
Company meets the definition of an investment entity as defined in
IFRS 10, IFRS 12 and IAS 27. This conclusion involved a degree of
judgement and assessment as to whether the Company met the criteria
outlined in the accounting standards.
Valuation
The key area involving a high degree of estimation or complexity
that is significant to the financial statements has been identified
as the risk of misstatement of the valuation of the Company's
unlisted investments (see note 8). In addition, as disclosed in
note 4, amounts payable as management fee or performance fee to the
Investment Manager are dependent on NAV and, therefore, valuation
of investments.
The Company's unlisted investments are early or growth stage
companies. Given the nature of these investments, there are often
no current or short-term future earnings or positive cash flows.
Consequently, the Company abides by the IPEV Valuation Guidelines
in determining fair value. Although not considered to be the
default valuation technique, the appropriate approach to determine
fair value may be based on a methodology with reference to a
calibrated price of recent investment, or, in the case of terms for
a future round being agreed, fair value may be based with reference
to a calibrated price of such future round, discounted for
execution risk. This is of greater reliability than other methods
based on estimates and assumptions and, accordingly, where there
have been recent investments by third parties, the price of that
investment generally provides a basis of the valuation. Recent
transactions may include post year-end (if terms agreed pre
year-end) as well as pre year-end transactions depending on their
nature and timing. Where a significant milestone is achieved by a
portfolio company and there has not yet been a subsequent funding
round, the fair value is determined using comparable metrics. Where
relevant, such as in cases where portfolio companies are profitable
or have stable and predictable revenues, fair value may be
determined using a multiples approach (earnings or revenue,
respectively). It may be necessary to apply discounts to some or
all of the comparables due to differences between the portfolio
company and the comparables (such as size, margin, liquidity,
marketability etc). In addition, in the case of underperformance,
fair value write-downs are taken. Publicly traded securities are
valued by reference to their bid price or last traded price.
The Company considers whether the basis for the last valuation
remains appropriate each time valuations are reviewed. In addition,
inputs to the fair value calculation are recalibrated to assess the
appropriateness of the methodology used in relation to the market
performance since the last funding round, such as the portfolio
company's trading performance relative to the expectations of the
round and macroeconomic conditions and general market
performance.
In all cases, valuations of unlisted investments are based on
the judgement of the Directors after consideration of the above and
upon available information believed to be reliable, which may be
affected by conditions in the financial markets. Due to the
inherent uncertainty of the investment valuations, the estimated
values may differ significantly from the values that would have
been used had a ready market for the investments existed and the
differences could be material. Due to this uncertainty, the Company
may not be able to sell its investments at the carrying value in
these financial statements when it desires to do so or to realise
what it perceives to be fair value in the event of a sale.
4. Management and Performance Fees
Management fee
Under the Investment Management Agreement, the Investment
Manager is entitled to a management fee of 1.25% per annum of NAV
up to GBP300m and 1.00% per annum of NAV above GBP300m, payable
quarterly in advance.
Management fees incurred in the year were GBP2.9m (2022:
GBP2.7m), of which GBPNIL was payable to the Investment Manager as
at 30 June 2023 (2022: GBPNIL).
Performance fee
Under the Investment Management Agreement, the Investment
Manager is also entitled to a performance fee of 15% over an 8%
hurdle with full catch-up, calculated on NAV annually. The
performance fee is only payable where the adjusted NAV at the end
of a performance period exceeds the higher of the performance
hurdle and a high-water mark. Any accrued performance fee will only
be paid to the extent that the aggregate of the net realised
profits on unlisted investments, net unrealised gains on listed
investments and income received from investments during the
relevant performance period is greater than the performance fee
payable and, to the extent that such aggregate is less than the
performance fee payable, an amount equal to the difference shall be
carried forward and included in the performance fee payable as at
the end of the next performance period. Subject to the Takeover
Code, the Investment Manager is required to reinvest 15% of any
performance fee paid in shares of the Company. Full details of the
performance fee are set out in the Company's IPO prospectus, which
is available on the Company's website (
https://investors.seraphim.vc/ ).
No performance fee was accrued for or paid to the Investment
Manager for the year (2022: GBPNIL).
5. Operating Expenses
2023 2022
GBP'000 GBP'000
----------------------------------------- -------- --------
Legal & professional fees 394 298
Administration & depository fees 219 215
Directors' fees 224 170
Insurance expense 23 168
Irrecoverable VAT 95 98
Audit of statutory financial statements 96 80
Other operating expenses 800 597
Total operating expenses 1,851 1,626
------------------------------------------ -------- --------
During the prior period, the Company's external Auditor, BDO
LLP, was also paid GBP210k (including VAT) in relation to share
issue and valuation work, completed before the IPO, which was
recognised in share premium.
6. Tax
As an investment trust, the Company is exempt from UK
corporation tax on capital gains arising on the disposal of
shares.
Capital profits from its creditor loan relationships or
derivative contracts are exempt from UK tax where the profits are
accounted for through the Capital column of the Statement of
Comprehensive Income, in accordance with the AIC SORP.
No tax liability has been recognised in the financial
statements.
30 June 2023 30 June 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------------- -------- --------- --------- -------- -------- --------
UK corporation tax charge on profits for the year / - - - - - -
period at 20.5% *(2022: 19%)
-------------------------------------------------------- -------- --------- --------- -------- -------- --------
* The tax rate changed from 19% to 25% on 31 March 2023 such that the average rate for the
year was 20.5% and this is the percentage used for the tax reconciliation.
30 June 2023 30 June 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------------- -------- --------- --------- -------- -------- --------
Return on ordinary activities before tax (4,503) (12,416) (16,919) (4,286) 7,655 3,369
-------------------------------------------------------- -------- --------- --------- -------- -------- --------
Tax at UK corporation tax rate of 20.5% (2022 19%) (923) (2,545) (3,468) (814) 1,454 640
Effects of:
Non-taxable (losses)/gains on investments - 2,545 2,545 - (1,454) (1,454)
Disallowable Expenses 32 - 32 39 - 39
Excess management expenses not utilised in the period 891 - 891 775 - 775
-------------------------------------------------------- -------- --------- --------- -------- -------- --------
Total tax charge - - - - - -
-------------------------------------------------------- -------- --------- --------- -------- -------- --------
As at 30 June 2023, the Company has not recognised a deferred
tax asset of GBP2,105,902 (2022: GBP1,019,196) arising as a result
of having unutilised management expenses carried forward at the
year-end of GBP8,423,609 (2022: GBP4,076,786) based on a
prospective corporation tax rate of 25% (2022: 19%). These expenses
will only be utilised if the tax treatment of the Company's income
and chargeable gains changes or if the Company's investment profile
changes.
Deferred tax is not provided on capital gains and losses arising
on the revaluation or disposal of investments because the Company
meets (and intends to continue to meet for the foreseeable future)
the conditions for approval as an Investment Trust company.
7. Earnings Per Share
2023 2022
Revenue Capital Total Revenue Capital Total
---------------------------------------------- --------- ---------- ------------ --------- -------- ------------
(Loss)/profit attributable to equity -
GBP'000 (4,503) (12,416) (16,919) (4,286) 7,655 3,369
Weighted average number of ordinary shares in
issue 239,384,928 220,621,858
---------------------------------------------- --------- ---------- ------------ --------- -------- ------------
Basic and diluted earnings per share in the
year/period (pence) (1.88) (5.19) (7.07) 1.94 3.47 1.53
---------------------------------------------- --------- ---------- ------------ --------- -------- ------------
8. Investments Held at Fair Value Through Profit or Loss
For the Year ending 30 June 2023 Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------------- --------- -------- -------- ---------
Opening balance * 16,236 2,373 167,474 186,083
Investment additions - - 17,102 17,102
Investment disposals (3,341) - - (3,341)
Transfers from Level 3 to Level 1 103 - (103) -
------------------------------------------------------------------- --------- -------- -------- ---------
Loss on disposals (1,358) - (602) (1,960)
Change in fair value (7,569) (525) 4,427 (3,667)
Change in fair value - Foreign Exchange Movement (900) (211) (5,678) (6,789)
------------------------------------------------------------------- --------- -------- -------- ---------
Net loss on investments held at fair value through profit or loss (9,827) (736) (1,853) (12,416)
Closing balance 3,171 1,637 182,620 187,428
------------------------------------------------------------------- --------- -------- -------- ---------
For the Year ending 30 June 2022
------------------------------------------------------------------- --------- -------- -------- ---------
Opening balance - - - -
vestment additions 2,478 - 86,565 89,043
Investment additions - shares issued (note 11) 39,189 - 50,196 89,385
Change in fair value (23,058) - 30,713 7,655
--------- -------- -------- ---------
Closing balance 18,609 - 167,474 186,083
------------------------------------------------------------------- --------- -------- -------- ---------
* Investment in AST SpaceMobile has been reclassified to a Level
2 investment
During the year ended 30 June 2023 investments with a fair value
at 30 June 2023 of GBP0.1m were transferred from Level 3 to Level 1
due to the Nightingale IPO and listing in November 2022 (2022: no
transfers).
Fair value measurements
The Company measures fair value using the following fair value
hierarchy that prioritises the inputs to valuation techniques used
to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to
valuations with unobservable inputs (Level 3 measurements). The
three levels of the fair value hierarchy under IFRS 13 are as
follows:
Level 1: Quoted price (unadjusted) in an active market for an identical instrument.
Level 2: Valuation techniques based on observable inputs, either
directly (i.e., as prices) or indirectly (i.e., derived from
prices). This category includes instruments valued using quoted
prices in active markets for similar instruments, quoted prices for
identical or similar instruments in markets that are considered
less than active, or other valuation techniques for which all
significant inputs are directly or indirectly observable from
market data.
Level 3: Valuation techniques using significant unobservable
inputs. This category includes all instruments for which the
valuation technique includes inputs that are not based on
observable data and the unobservable inputs have a significant
effect on the instrument's valuation. This category includes
instruments that are valued based on quoted prices for similar
instruments for which significant unobservable adjustments or
assumptions are required to reflect differences between the
instruments.
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement. For this purpose, the significance of an input
is assessed against the fair value measurement in its entirety. If
a fair value measurement uses observable inputs that require
significant adjustment based on unobservable inputs, that
measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair
value measurement in its entirety requires judgement, considering
factors specific to the asset or liability.
The determination of what constitutes 'observable' requires
significant judgement by the Company. The Company considers
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.
The objective of the valuation techniques used is to arrive at a
fair value measurement that reflects the price that would be
received if an asset was sold or a liability transferred in an
orderly transaction between market participants at the measurement
date.
The following table analyses, within the fair value hierarchy,
the Company's investments measured at fair value at 30 June
2023.
As at June 2023
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- -------- -------- --------
Listed investments 3,171 1,637 - 4,808
Unlisted investments - - 182,620 182,620
---------------------- -------- -------- -------- --------
3,171 1,637 182,620 187,428
---------------------- -------- -------- -------- --------
As at June 2022
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- -------- -------- --------
Listed investments 18,609 - - 18,609
Unlisted investments - - 167,474 167,474
---------------------- -------- -------- -------- --------
18,609 - 167,474 186,083
---------------------- -------- -------- -------- --------
The Level 1 investments were valued by reference to the closing
bid prices of each portfolio company on the reporting date.
The investment in AST SpaceMobile has been reclassified as a
Level 2 investment with regards to the Fair Value hierarchy as at
30 June 2023.
Due to their nature, the unlisted investments are always
expected to be classified as Level 3 as these are not traded and
their fair values will contain unobservable inputs.
Significant unobservable inputs for Level 3 valuations
The fair value of unlisted securities is established with
reference to the IPEV Valuation Guidelines and the Company may base
valuations on the calibrated price of recent investment in the
portfolio companies, comparable milestones or multiples of earnings
or revenues where applicable. An assessment is made at each
measurement date as to the most appropriate valuation
methodology.
The valuation methodologies applied involve subjectivity in
their significant unobservable inputs and the table below outlines
these inputs. Note 13 below illustrates the sensitivity that
flexing these inputs has on fair value ('FV').
Valuation methodology FV (GBP'000) Unobservable input
Level 1
Available market price 3,171 n/a
Level 2
Available market price 1,637 n/a
Level 3
Calibrated price of recent investment (<3 months) 44,428 Transaction price and company performance
Calibrated price of recent investment (3-6 months) 13,708 Transaction price and company performance
Calibrated price of recent investment (>6 months) 7,624 Transaction price and company performance
Calibrated price of future investment 21,237 Transaction price and company performance
Premium to price of recent investment 45,463 Premium percentage
Partial write down to price of recent investment 10,476 Write down percentage
Discount to price of recent investment 33,474 Uncertainty discount
(post-period)
Milestones and multiples 6,210 Weightings and discount to comparables/multiples
---------------------------------------------------- ------------- -------------------------------------------------
Total 187,428
Details of significant holdings as required by Schedule 4 of The
Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulation 2008 are set out below.
30 June 2023
Capital &
Nature of Country of Class of reserves Profit/(loss) Year-end
Name relationship incorporation shares held % shareholding (GBP) (GBP) of data Notes
---------------- -------------- --------------- ------------ --------------- ------------ -------------- ---------- ---------------
In
administration
Bamboo Systems A Not publicly as of
Group Limited Shareholder UK Preference 47% (1,355,598) available 31-Dec-20 21-Nov-21
---------------- -------------- --------------- ------------ ------------ -------------- ---------- ---------------
Series Seed
2
Preference
Pre-Series 78%
A
Preference 29%
PlanetWatchers Series A Not publicly
(UK) Limited Shareholder UK Preference 43% 12,106,431 available 31-Dec-22
---------------- -------------- --------------- ------------ --------------- ------------ -------------- ---------- ---------------
30 June 2022
Capital &
Nature of Country of Class of shares reserves Year-end
Name relationship incorporation held % shareholding (GBP) Profit/(loss) (GBP) of data Notes
-------------------- -------------- --------------- ---------------- --------------- ------------ ----------------------- ---------- ---------------
A1 Preference 52%
Altitude Angel Ltd Shareholder UK A2 Preference 80% 4,272,201 Not publicly available 31-Dec-21
-------------------- -------------- --------------- ---------------- ------------ ----------------------- ---------- ---------------
Not Not
Series A publicly publicly
TransRobotics, Inc. Shareholder US Preferred 67% available Not publicly available available
-------------------- -------------- --------------- ---------------- ------------ ----------------------- ---------- ---------------
In
administration
Bamboo Systems as of
Group Limited Shareholder UK A Preference 47% (1,355,598) Not publicly available 31-Dec-20 21-Nov-21
-------------------- -------------- --------------- ---------------- ------------ ----------------------- ---------- ---------------
Series Seed 2
Preference 78%
PlanetWatchers (UK) Pre-Series A
Limited Shareholder UK Preference 29% 6,082,609 Not publicly available 31-Dec-21
9. Trade and Other Receivables
2023 2022
GBP'000 GBP'000
---------------- -------- --------
Prepayments 78 80
VAT receivable 10 41
-----------------
88 121
---------------- -------- --------
10. Cash and Cash Equivalents
2023 2022
GBP'000 GBP'000
------------------------------------ -------- --------
Cash and cash equivalent on demand 35,309 57,650
------------------------------------ -------- --------
35,309 57,650
------------------------------------ -------- --------
11. Trade and Other Payables
2023 2022
GBP'000 GBP'000
--------------------------------- -------- --------
Accruals 313 228
Trade creditors 115 82
Amounts payable for investments - 4,228
428 4,538
--------------------------------- -------- --------
12. Share Capital
Issued and fully Number of shares
Date paid issued Share capital Share premium Other reserves Total
------------------- ------------------ ------------------ -------------- -------------- --------------- --------
GBP'000 GBP'000 GBP'000 GBP'000
Incorporation -
14-May-21 ordinary shares 1 - - - -
Redeemable
preference
10-Jun-21 shares 50,000 50 - - 50
IPO - redeemable
preference
14-Jul-21 shares (50,000) (50) - - (50)
------------------- ------------------ ------------------ -------------- -------------- --------------- --------
1 - - - -
14-Jul-21 IPO - Cash (1) 150,000,000 1,500 148,500 - 150,000
IPO - Initial
14-Jul-21 portfolio(2) 28,414,561 284 28,130 - 28,414
Share issue costs - (3,438) - (3,438)
-------------------------------------- ------------------ -------------- -------------- --------------- --------
178,414,561 1,784 173,192 - 174,976
Subsequent share
10-Sep-21 issue(3) 7,418,890 74 7,345 - 7,419
Subsequent share
22-Sep-21 issue(3) 26,296,402 263 26,033 - 26,296
Cancellation of
14-Dec-21 share premium (173,176) 173,176 -
Subsequent share
20-Dec-21 issue(3) 27,255,074 273 26,983 - 27,256
------------------- ------------------ ------------------ -------------- -------------- --------------- --------
60,970,366 610 (112,815) 173,176 60,971
30 June 2022
and 30 June 2023 239,384,928 2,394 60,377 173,176 235,947
--------------------------------------- ------------------ -------------- -------------- --------------- --------
(1) Cash received by the Company was GBP147,639k after the
direct deduction of certain share issuance costs of GBP2,361k.
Other share issuance costs of GBP1,077k were subsequently paid in
cash and total share issuance costs of GBP3,438k were deducted from
share premium.
(2) Shares issued by way of direct subscriptions in connection
with the Company's acquisition of the Initial Portfolio.
(3) Shares issued by way of direct subscriptions in connection
with the Company's acquisition of the Retained Assets.
On incorporation, the issued share capital of the Company was
GBP0.01 represented by one ordinary share, issued to the subscriber
to the Company's Memorandum of Association. The ordinary share was
fully paid up.
To enable the Company to obtain a certificate of entitlement to
conduct business and to borrow under section 761 of the Companies
Act 2006, on 10 June 2021, 50,000 redeemable preference shares were
allotted to the Investment Manager. The redeemable preference
shares were considered to be paid up as to one quarter of their
nominal value and redeemed immediately following the IPO out of the
IPO proceeds.
The amount standing to the credit of the share premium account
of the Company on completion of the IPO, less issue expenses set
off against the share premium account, was cancelled by a court
order dated 14 December 2021 and credited to the special
distributable reserve. This amount shall be capable of being
applied in any manner in which the Company's profits available for
distribution, as determined in accordance with the Companies Act
2006, are able to be applied.
13. Net Asset Value Per Share
The net asset value per ordinary share at the year / period end
were as follows:
30 June 2023 30 June 2022
---------------------------------------------------------- ------------- -------------
Net assets GBP'000 (per Statement of Financial Position) GBP222.4m GBP239.3m
Number of ordinary shares issued 239,384,928 239,384,928
-----------------------------------------------------------
Net asset value per share (pence) 92.90p 99.97p
----------------------------------------------------------- ------------- -------------
14. Financial Risk Management
Financial risk management objectives
The Company's investing activities intentionally expose it to a
variety of financial risks. The Company makes investments 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
has overall responsibility for the determination of the Company's
risk management and sets policies to manage financial risks at an
acceptable level to achieve the Company's 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 Board 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 instrument
For financial assets and liabilities carried at amortised cost,
the Directors are of the opinion that their carrying value
approximates to their fair value.
Financial assets/liabilities are as follows:
2023 2022
GBP'000 GBP'000
-------------------------- ---------------------
Financial assets
Investments held at fair value
through profit or loss: 187,428 186,083
--------------------------
Investments
-------------------------- ---------------------
Other Financial Assets:
Cash and cash equivalents 35,309 57,650
Trade and other receivables 88 121
-------------------------- ---------------------
Financial liabilities
Current liabilities
Trade and other payables 428 4,538
-------------------------- ---------------------
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, share premium, retained earnings and other
reserves, as stated in the Statement of Financial Position.
In order to maintain or adjust the capital structure, the
Company may buy back shares or issue new shares. There are no
external capital requirements imposed on the Company.
During the year ended 30 June 2023, the Company had no
borrowings (2022: GBPNIL).
The Company's investment policy is set out in the Strategic
Report.
Market risk
Market risk includes price risk (impact of the general market on
the price of any listed holdings or the uncertainty associated with
the price of unlisted holdings), foreign currency risk and interest
rate risk.
a) Price risk
The investments held by the Company present a potential risk of
loss of capital to the Company. Price risk arises from uncertainty
about future prices of the underlying financial investments held by
the Company. See note 8 for quantitative information about the fair
value measurement of the Company's Level 3 investments.
The table below outlines that the valuation methodologies
employed involve subjectivity in their significant unobservable
inputs and illustrates sensitivity of the valuations to these
inputs. The inputs have been flexed by the percentages
outlined.
As at June 2023
Valuation FV Key Other Range Reasonable possible shift in Change in
methodology (GBP'000) unobservable unobservable input FV
input inputs (GBP'000)
(+) (-) (+) (-)
Level 1
Available
market price 3,171 n/a n/a n/a 5% -5% 159 (159)
Level 2
Available
market price 1,637 n/a n/a n/a 5% -5% 82 (82)
Level 3
Calibrated 44,428 Transaction (2, 3, 4, 5, 9) n/a 5% -5% 2,221 (2,221)
price of price(1) and
recent company
investment (<3 performance
months)
Calibrated 13,708 Transaction (2, 3, 4, 5, 9) n/a 10% -10% 1,371 (1,371)
price of price(1) and
recent company
investment performance
(3-6 months)
Calibrated 7,624 Transaction (2, 3, 4, 5, 9) n/a 20% -20% 1,525 (1,525)
price of price(1) and
recent company
investment (>6 performance
months)
Calibrated 21,237 Transaction (2, 3, 4, 5, 9) n/a 5% -5% 1,062 (1,062)
price of price(1) and
future company
investment performance
Premium to
price of
recent Premium
investment 45,463 percentage (6) 5% -15% 2,273 (6,818)
Partial write
down to price
of recent Write down
investment 10,476 percentage (7) 25% - 50% 25% -25% 2,619 (2,619)
Discount to
price of
recent
investment Uncertainty
(post-period) 459 discount (8) 15% 20% -5% 92 (23)
Discount to
price of
recent
investment Uncertainty
(post-period) 33,015 discount (8) 5% 10% -5% 3,302 (1,651)
Milestones and 6,210 Weightings(9) (3, 4, 5) n/a 10% -10% 621 (621)
multiples and discount
to
comparables /
multiples
--------------- ---------- -------------- ---------------- ---------- ------- ----------------- ------- ----------
Total 187,428 15,327 (18,152)
Notes:
(1) While transaction price is observable, where it is deemed to
be the appropriate valuation methodology, it is also calibrated
against other methodologies as outlined in the table above.
(2) Benchmark performance against relevant indices - the
selection of appropriate benchmarks is assessed for each
investment, taking into account its industry, geography, products
and customers.
(3) EV/revenue multiple of comparable companies or M&A
transactions - the selection of comparable companies or
M&A/secondary transactions is assessed for each investment,
taking into account its industry, geography, level of revenue and
growth profile.
(4) Milestone comparison with private company comparables - the
selection of milestone to be compared to EV is assessed for each
investment based on its industry and includes milestones such as
number of satellites/missions/radars, headcount and funding
raised.
(5) Growth in company metrics - the selection of metric is
assessed for each investment based on its industry, level of
revenue and growth profile and includes metrics such as
satellites/missions/radars, headcount, revenue and bookings.
(6) The premium percentage applied for strong performance is
typically in 10% increments - the level of premium to be applied is
assessed for each investment based on its level of performance,
cash runway and ability to deliver revenue growth.
(7) The write down percentage applied for underperformance is
typically in 25% increments - the level of write down to be applied
is assessed for each investment based on its level of
underperformance, cash runway and ability to show improvement.
(8) The uncertainty discount applied where terms for a new
funding round have been agreed, but the round has not yet closed,
can vary from 0-100% - the level of discount applied is assessed
for each investment based on the level of certainty.
(9) Where multiple methods of calibration or valuation are used,
weightings of 5-40% are applied to these methods to total 100% -
the level of weighting applied to each method is assessed for each
investment based on the relevance of such method and to offset the
impact of any outliers.
As at June 2022
Valuation FV (GBP'000) Unobservable Reasonable possible shift in input Change in FV (GBP'000)
methodology input
(+) (-) (+) (-)
Level 1
Available market
price 18,609 n/a 5% -5% 930 (930)
Level 3
Calibrated price
of recent
investment (<3
months) 5,197 Transaction price 5% -5% 260 (260)
Calibrated price
of recent
investment (3-6
months) 56,102 Transaction price 10% -10% 5,610 (5,610)
Calibrated price
of recent
investment (>6
months) 65,452 Transaction price 20% -20% 13,090 (13,090)
Partial write
down to price of
recent Write down
investment 10,191 percentage 25% -25% 2,548 (2,548)
Discount to price
of recent
investment Uncertainty
(post-period) 8,830 discount 20% -5% 1,766 (441)
Weightings and
Milestone discount to
multiples 21,703 comparables 10% -10% 2,170 (2,170)
------------------ ------------- ------------------ ----------------
Total 186,084 25,185 (23,860)
Variable input shifts are explained as follows:
-- Investments valued using Level 1 methodologies or the
calibrated price of recent transactions which completed in the
three months to the period-end are flexed up and down by 5% as the
Board believe these do not involve significant subjectivity.
-- Investments valued using the calibrated price of recent
transactions which completed more than three months but less than
six months before the period-end are flexed up and down by 10% as
the subjectivity is thought to be greater than the above, but still
not very material.
-- Investments valued using the calibrated price of recent
transactions which completed more than six months before the
period-end are flexed up and down by 20% as there is a greater
chance that market movements would impact the price of private
transactions.
-- Partial write downs used in the period were 25% and
therefore, the inputs are flexed up and down by this amount to
account for a similar level of improvement or deterioration in the
portfolio companies' performance.
-- Premiums of 10% were applied where the recalibration exercise
suggested an increase to enterprise value was warranted due to
strong performance. In an upside scenario, this input is flexed up
by 5% and accounts for a 5% flex up in relation to the underlying
price which the Board does not believe involves significant
subjectivity. In the downside scenario, the input is flexed down by
15% to remove the applied premium and accounts for a 5% reduction
in relation to the underlying price.
-- Uncertainty discounts of 5% were applied where a funding
round was completed shortly after the end of the period. In an
upside scenario, this input is flexed up by 10% to remove the
applied uncertainty discount and accounts for a 5% flex up in
relation to the underlying price which the Board does not believe
involves significant subjectivity. In the downside scenario, the
input is flexed down by 5% in relation to the underlying price
(similar to the flex used for investments valued using the
calibrated price of recent investment which completed in the three
months prior to the period-end).
-- Uncertainty discounts of 15% were applied where a funding
round was completed after the end of the period. In an upside
scenario, this input is flexed up by 20% to remove the applied
uncertainty discount and accounts for a 5% flex up in relation to
the underlying price which the Board does not believe involves
significant subjectivity. In the downside scenario, the input is
flexed down by 5% in relation to the underlying price (similar to
the flex used for investments valued using the calibrated price of
recent investment which completed in the three months prior to the
period-end).
-- Investments valued using milestone multiples relative to
comparable companies or M&A transactions, with the discount
factor flexed up and down by 10%. A 10% flex is considered
reasonable as a result of judgement in relation to the comparable
multiples.
Market risk
The Company is exposed to a variety of risks which may have an
impact on the carrying value of the Company's investments.
i) Not actively traded
The majority of 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 Company's investments vary as to the industry
sub-sector, geographic distribution of operations and size, all of
which may impact the susceptibility of their valuation to
uncertainty.
Although the investments are in the same industry, the risk is
managed through careful selection of investments within the
specified limits of the investment policy. The investments are
monitored on an ongoing basis by the Investment Manager.
ii) Concentration
The Company invests principally in early and growth-stage
unquoted SpaceTech businesses. This means that the Company is
exposed to the concentration risk of only making investments in the
SpaceTech sector, of which concentration risk may further relate to
sub-sector, geography, relative size of an investment or other
factors.
The Board and the Investment Manager monitor the concentration
of the investment portfolio on a quarterly and ongoing basis
respectively to ensure compliance with the investment policy.
iii) Liquidity
The Company maintains flexibility in funding by keeping
sufficient liquidity in cash, short term deposits and other cash
equivalents, which may be invested on a temporary basis in line
with the cash management policy as agreed by the Board from time to
time.
As at 30 June 2023, GBP35.3m, or 15.9% of Company's financial
assets, were money market fixed deposits and cash balances held on
deposit with banks with high credit ratings (2022: GBP57.7m, or
24.1%).
b) Foreign currency risk
The Company has exposure to foreign currency risk due to the
acquisition of some investments and payment of some expenses in
currencies other than Sterling. Consequently, the Company is
exposed to risks that the exchange rate of its functional 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
Sterling.
The following table shows the FX rates as of 30 June 2023
compared to 30 June 2022.
30 June 2023 30 June 2022 % change
GBP/USD 1.271 1.215 4.7%
GBP/EUR 1.165 1.162 0.3%
GBP/DKK 8.675 8.641 0.4%
GBP/AUD 1.910 1.766 8.2%
The following table sets out, in 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 30 GBP USD $ EUR DKK AUD Total
June 2023 $
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Non-current
assets
Investment
at fair
value
through
profit
or loss 25,477 135,871 22,101 3,876 103 187,428
Total
non-current
assets 25,477 135,871 22,101 3,876 103 187,428
Current
assets
Trade and
other
receivables 88 - - - 88
Cash and
cash
equivalents 32,437 2,872 - - - 35,309
Total
current
assets 32,525 2,872 - - - 35,397
Current
liabilities
Trade and
other
payables (428) - - - - (428)
Total
current
liabilities (428) - - - - (428)
Total net
assets 57,574 138,743 22,101 3,876 103 222,397
If the US Dollar weakened/strengthened by 5% (2022: 5%) against
Sterling with all other variables held constant, the fair value of
net assets would increase/decrease by GBP6,794k (2022:
GBP7,603k).
If the Euro weakened/strengthened by 5% (2022: 5%) against
Sterling with all other variables held constant, the fair value of
net assets would increase/decrease by GBP1,105k (2022:
GBP647k).
If the Danish Krone weakened/strengthened by 5% (2022: 5%)
against Sterling with all other variables held constant, the fair
value of net assets would increase/decrease by GBP194k (2022:
GBP53k).
If the Australian Dollar weakened/strengthened by 5% (2022: 5%)
against Sterling with all other variables held constant, the fair
value of net assets would increase/decrease by GBP5k (2022:
GBPnil).
As at 30 June 2022 GBP $ EUR DKK Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Investments at fair value through profit or loss 20,018 152,067 12,942 1,056 186,083
Total non-current assets 20,018 152,067 12,942 1,056 186,083
Current assets
Trade and other receivables 121 - - - 121
Cash and cash equivalents 57,650 - - - 57,650
Total current assets 57,771 - - - 57,771
-
Current liabilities
Trade and other payables (4,538) - - - (4,538)
Total current liabilities (4,538) - - - (4,538)
Total net assets 73,251 152,067 12,942 1,056 239,316
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. Any excess cash and cash equivalents are invested at
short-term market interest rates. As at the date of the Statement
of Financial Position, the majority of the Company's cash and cash
equivalents were held in interest bearing fixed deposit
accounts.
The Company had no other Interest-bearing assets or liabilities
as at the reporting date. As a consequence, the Company was only
exposed to variable market interest rate risk. As at 30 June 2023,
the cash balance held by the Company was GBP35.3m (2022: GBP57.7m).
A 0.5% increase/(decrease) in interest rates with all other
variables held constant would result in a change to interest
received of +/- GBP176k per annum (2022: 0.5% increase/(decrease)
resulting in a change of +/- GBP288k).
Liquidity risk
Liquidity risk is the risk that the Company may not be able to
meet a demand for cash or fund an obligation when due. The
Investment Manager and the Board monitor forecast and actual cash
flows to consider future investing activities.
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.
Credit risk
Credit risk refers to the risk that a counterparty to a
financial instrument will default on a contractual obligation or
commitment that it has entered into with the Company, resulting in
financial loss to the Company. It arises principally from
investments in money market funds held and also from derivative
financial assets, cash and cash equivalents and other receivables
balances.
The Company's policy for credit risk is to minimise its exposure
to counterparties with perceived higher risk of default by only
dealing with counterparties that meet certain credit standards.
Credit risk is monitored on an ongoing basis by the Investment
Manager in accordance with the procedures and policies in
place.
The table below shows the material cash and short-term deposit
balances and credit rating for the counterparties used by the
Company at the year-end date.
Counterparty Location Rating 2023 2022
S&P GBP'000 GBP'000
Barclays UK A+ 25,038 47,640
JPMorgan Asset Management UK A- 10,271 10,010
The Company's maximum exposure to credit risk default at the
period-end is shown below:
2023 2022
GBP'000 GBP'000
Investments held at fair value through profit
or loss 184,788 186,084
Other financial assets
Cash and cash equivalents 35,309 58,650
Trade and other receivables (less prepayments) 10 41
15. Related Party and Investment Manager Transactions
Directors
As at 30 June 2023, the Company had four non-executive
Directors. Directors' fees for the year ended 30 June 2023 amounted
to GBP200k (2022: GBP170k), of which GBPNIL was outstanding at the
year-end (2022: GBPNIL).
Investment Manager
Seraphim Space Manager LLP has been appointed as the Company's
exclusive Investment Manager and AIFM and is responsible for the
day-to-day operation and management of the Company's investment
portfolio, subject at all times to the overall supervision of the
Board.
For the provision of services under the Investment Management
Agreement, the Investment Manager earns a management fee and
performance fee, as disclosed in note 4. Further details of the
Investment Management Agreement are included under 'Investment
Manager' in the Corporate Governance Report above.
16. Ultimate Controlling Party
In the opinion of the Board, on the basis of the shareholdings
advised to it, the Company has no ultimate controlling party.
17. Subsequent Events
Please refer to Post Year End Developments in the Investment
Manager's Report above for details of subsequent events in the
normal course of business. There are no other significant
subsequent events.
On 13 July 2023, the Company announced a share repurchase
programme to repurchase ordinary shares of GBP0.01 in the Company.
At the date of signing of these accounts, the Company holds
2,186,344 of its ordinary shares in treasury, all of which were
acquired pursuant to the share repurchase programme, and has
237,198,584 ordinary shares in issue (excluding treasury
shares).
Alternative Performance Measures
We assess the Company's performance using a variety of measures,
some of which are not specifically defined under UK-adopted
International Accounting Standards and are therefore termed 'APMs'.
Our APMs, which are shown below, are reconciled, where appropriate,
to the financial statements through the narrative below. The Board
believes that each of the APMs, which are typically used within the
listed investment company sector, (with the exception of portfolio
fair value vs. cost), provide additional useful information to
shareholders to help assess the Company's performance.
Share Price Movement
Share price movement in the year/period, expressed as a
percentage of the opening share price.
30 June 2023 vs. 30 June 2022
Share price on 30 June 2022 a 53.0p
Share price on 30 June 2023 b 27.0p
Movement (b-a)/a -49.1%
30 June 2022 vs. 14 July 2021
Share price on 14 July 2021 a 100.0p
Share price on 30 June 2022 b 53.0p
Movement (b-a)/a -47.0%
NAV per Share Movement
Net asset value per share movement in the year/period, expressed
as a percentage of the opening NAV per share.
30 June 2023 vs. 30 June 2022
NAV per share on 30 June 2022 a 99.97p
NAV per share on 30 June 2023 b 92.90p
Movement (b-a)/a -7.1%
30 June 2022 vs. 14 July 2021
NAV per share on 14 July 2021 a 98.15p
NAV per share on 30 June 2022 b 99.97p
Movement (b-a)/a 1.9%
-Discount/+Premium
The amount by which the market price per share of a listed
investment company is either lower (discount) or higher (premium)
than the NAV per share, expressed as a percentage of the NAV per
share.
30 June 2023 30 June 2022
NAV per share (note 12 to the financial statements) a 92.90p 99.97p
Share price b 27.0p 53.0p
-Discount/+premium (b-a)/a -70.9% -47.0%
Ongoing Charges
Operating costs incurred in the year/period, charged to Revenue
or Capital in the Statement of Comprehensive Income, calculated as
a percentage of the average published NAV in respect of the
year/period. Operating costs exclude, for this purpose, the costs
of acquiring and disposing of investments, any finance costs,
taxation and any costs not expected to recur in the foreseeable
future. The calculation is performed in accordance with the
guidelines issued by the AIC.
30 June 2023 30 June 2022
GBP'000 GBP'000
Investment management fee (note
4 to the financial statements) 2,912 2,744
Other operating expenses (note
5 to the financial statements) 1,851 1,626
Less non-recurring operating
expenses (442) (251)
Ongoing charges a 4,321 4,119
Average quarterly NAV b 228,604 240,014
Ongoing charges ratio a/b 1.89% 1.72%
The ongoing charges calculated above are different from the
ongoing costs provided in the Company's Key Information Document
('KID'), which are calculated in line with the Packaged Retail and
Insurance-based Investment Products Regulation. The ongoing costs
in the KID include investment transaction costs.
Portfolio Fair Value vs. Cost
The amount by which the fair value of the assets in the
portfolio at the end of the year/period has changed in relation to
the aggregate cost of the assets (adjusted for any disposals),
expressed as a percentage of the aggregate cost.
2023 2022
Portfolio fair value (note 8 to the financial statements) a 187.4 186.1
Aggregate cost of the assets (adjusted for any disposals) b 190.2 178.4
Portfolio fair value vs. cost a/b 98.5% 104.3%
Glossary
Administrator or Company Secretary: Ocorian Administration (UK)
Limited.
AGM: Annual general meeting.
AI: artificial intelligence.
AIC: The Association of Investment Companies, the trade body for
listed closed-ended investment companies.
AIC SORP: The Statement of Recommended Practice for the
Financial Statements of Investment Trust Companies and Venture
Capital Trusts, issued by the AIC as amended from time to time.
Amazon AWS Space Accelerator: the accelerator programme run by
an affiliate of the Investment Manager in 2021 on behalf of Amazon
Web Services.
API: Application Programming Interface.
Auditor: BDO LLP.
Average quarterly NAV : Calculated as the mean NAV at each of
the four quarter end periods throughout the year.
Board: the Board of Directors of the Company.
Bookings: contracted future revenues.
CAGR: Compound Annual Growth Rate, defined as the rate of return
that would be required for an investment to grow from its beginning
balance to its ending balance, assuming the profits were reinvested
at the end of each period of the investment's life span.
CisLunar: Lying between the earth and the moon or the moon's
orbit.
Company or SSIT: Seraphim Space Investment Trust PLC.
CY : Calendar year, a one-year period that begins on 1 January
and ends on 31 December.
Directors: the Directors of the Company.
Discount: the share price of a listed investment company is
rarely the same as its NAV. When the share price is lower than the
NAV per share it is said to be trading at a discount. The discount
is the difference between the share price and the NAV, expressed as
a percentage of the NAV.
ESG: environmental, social and governance.
EV: enterprise value.
Fair value-weighted average growth: average growth rates for
multiple portfolio companies, weighted by each portfolio company's
relative fair value.
FCA: Financial Conduct Authority.
FV: fair value.
FX : foreign exchange.
GEO: geosynchronous equatorial orbit (35,786km from earth) with
a 24-hour period.
GP: general partner.
GPS: global positioning system.
Gross Asset Value: the value of the gross assets of the Company,
determined in accordance with its accounting policies.
HEO : high earth orbit, being any orbit beyond 35,786km from
earth.
IAS: International Accounting Standard.
IFRS: the International Financial Reporting Standards, being the
principles-based accounting standards, interpretations and the
framework by that name issued by the International Accounting
Standards Board, to the extent they have been adopted by the
UK.
IoT: the interconnection via the internet of computing devices
embedded in everyday objects, enabling them to send and receive
data.
Initial Portfolio: the portfolio of investments acquired from
the LP Fund by the Company on completion of its IPO, details of
which are set out in the IPO prospectus, which is available on the
Company's website ( https://investors.seraphim.vc/ ).
Investment Management Agreement: the Investment Management
Agreement entered into between the Investment Manager and the
Company, details of which are included under 'Investment Manager'
in the Corporate Governance Report.
Investment Manager or Seraphim Space: Seraphim Space Manager
LLP.
IPEV : the International Private Equity and Venture Capital
Association
IPO : initial public offering, being an offering by a company of
its share capital to the public with a view to seeking an admission
of its shares to a recognised stock exchange.
LEO: low earth orbit, being an orbit that is relatively close to
the earth's surface, extending from 160km to 2,000km above
earth.
London Stock Exchange : London Stock Exchange PLC.
LP Fund : Seraphim Space LP.
M&A: mergers and acquisitions.
MEO: medium earth orbit, extending from 2,000km to below
35,786km. All orbits above LEO and below GEO are said to be in
medium earth orbit.
NASDAQ: National Association of Securities Dealers Automated
Quotations.
NAV or net asset value : the value of the assets of the Company
less its liabilities as calculated in accordance with its
accounting policies (or, in the context of an ordinary share, the
NAV of the Company divided by the number of ordinary shares in
issue (but excluding any treasury shares)).
New Space: the emerging commercial Space industry.
Period: the Company's accounting period to which this annual
report relates, being the period commencing on 1 July 2022 and
ending on 30 June 2023.
Premium: a premium occurs when the share price of a listed
investment company is higher than the NAV. The premium is the
difference between the share price and the NAV, expressed as a
percentage of the NAV.
Retained Assets : the investments acquired from the LP Fund by
the Company subsequent to its IPO, details of which are set out in
the IPO prospectus, which is available on the Company's website (
https://investors.seraphim.vc/ ).
RF: radio frequency, which involves using electromagnetic
radiation for transferring information between two circuits that
have no direct electrical connection.
Seraphim Space Accelerator : accelerator programme for early
stage SpaceTech companies run by an affiliate of the Investment
Manager.
Smallsat: small spacecraft with a mass less than 180kg and about
the size of a large kitchen fridge.
SPAC : special purpose acquisition company.
Space Prime: multi-capability space prime contractor offering a
wide range of services to government customers.
SpaceTech : in the context of a business, an organisation which
relies on space-based connectivity and/or precision, navigation and
timing signals or whose technology or services are already
addressing, originally derived from or of potential benefit to the
space sector.
Total return: The total return on an investment comprises both
changes in the NAV per share or share price and dividends paid to
shareholders and is calculated on the basis that all historic
dividends have been reinvested in the NAV or shares on the date the
shares become ex-dividend.
Treasury shares: the Company has the authority to make market
purchases of its ordinary shares for retention as treasury shares
for future reissue, resale, transfer or cancellation. Treasury
shares do not receive distributions and the Company is not entitled
to exercise the voting rights attaching to them.
TTM: Trailing 12 months, being the past 12 consecutive months of
the company's performance.
VC: Venture Capital.
VHF: very high frequency, denoting radio waves of a frequency of
c.30-300 MHz and a wavelength of c.1-10 metres.
Corporate Information
Registered Of fi ce
5th Floor
20 Fenchurch Street
London
EC3M 3BY
Board of Directors
Will Whitehorn (Chair)
Sue Inglis (Senior Independent Director)
Christina McComb
Angela Lane
Investment Manager
Seraphim Space Manager LLP
2nd Floor One Fleet Place
London
EC4M 7WS
Administrator and Company Secretary
Ocorian Administration (UK) Limited
5th Floor
20 Fenchurch Street
London
EC3M 3BY
Corporate Brokers
Deutsche Numis
45 Gresham Street
London
EC2V 7AF
J.P. Morgan Securities PLC
25 Bank Street
Canary Wharf
London
E14 5JP
Legal Adviser
Stephenson Harwood LLP
1 Finsbury Circus London
EC2M 7SH
Depositary
Ocorian Depositary (UK) Limited
5th Floor 20 Fenchurch Street
London
EC3M 3BY
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Independent Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
Custodian
Liberum Wealth
1st Floor Royal Chambers
St Julian's Avenue
St Peter Port
Guernsey
GY1 3JX
Public Relations and Communications Adviser
SEC Newgate
14 Greville Street
London
EC1N 8SB
Identifiers
Website: https://investors.seraphim.vc/
ISIN: GB00BKPG0138
Ticker: SSIT
SEDOL: BKPG013
GIIN: GXNBCF.99999.SL.826
Registered Company Number: 13395698
Legal Entity Identifier : 2138002THGUZBGZC2V85
Cautionary Statement
The Annual Report may include statements that are, or may be
deemed to be, 'forward-looking statements'. These forward-looking
statements are sometimes, but not always, identified by the use of
forward-looking terminology, including the terms 'believes',
'estimates', 'anticipates', 'expects', 'intends', 'may', 'will' or
'should' or, in each case, their negative or other variations or
comparable terminology.
These forward-looking statements include all matters that are
not historical facts. They appear in a number of places throughout
this Annual Report and include statements regarding the intentions,
beliefs or current expectations of the Directors or Investment
Manager concerning, amongst other things, the investment objective
and investment policy, investment performance, results of
operations, financial condition, liquidity, financing strategies
and prospects of the Company and the markets in which it
invests.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future.
Forward-looking statements are not guarantees of future
performance.
The Company's actual investment performance, results of
operations, financial condition, liquidity, financing strategies
and prospects may differ materially from the impression created by
the forward-looking statements contained in this Annual Report.
Subject to their legal and regulatory obligations, the Directors
and the Investment Manager expressly disclaim any obligations to
update or revise any forward-looking statement contained in this
Annual Report to reflect any change in expectations with regard
thereto or any change in events, conditions or circumstances on
which any statement is based.
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