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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Rtw Biotech Opportunities Ltd | LSE:RTWG | London | Ordinary Share | GG00BKTRRM22 | ORD NPV (GBP) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 104.50 | 103.00 | 106.00 | 985 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Trust,ex Ed,religious,charty | 2.17M | -5.29M | -0.0251 | -41.63 | 220.11M |
From Apr 2022 to Apr 2024
TIDMRTW
RNS Number : 8473U
RTW Venture Fund Limited
31 March 2023
LEI: 549300Q7EXQQH6KF7Z84
31 March 2023
RTW Venture Fund Limited
Annual Report and Audited Financial Statements for the Year Ended 31 December 2022
Benchmark outperformance, realising significant value through successful portfolio company IPOs and disposals
RTW Venture Fund Limited (the "Group" or the "Company"), a London Stock Exchange-listed investment company focused on identifying transformative assets with high growth potential across the life sciences sector, is pleased to announce its Annual Results for the year ended 31 December 2022.
Financial Highlights -
Hot Features
Premium
RTW Venture Fund Limited Year-end reporting period Previous Year-end reporting Admission (30/10/2019)
(01/01/2022-31/12/2022) period (01/01/2021-31/12/2021) to 31/12/2022
Ordinary NAV US$326.1 million US$363.0 million US$326.1 million
-------------------------- ------------------------------- -----------------------
NAV per Ordinary Share US$1.54 US$1.71 US$1.54
-------------------------- ------------------------------- -----------------------
NAV movement per Ordinary Share -10.2% -9.9% 47.6%
-------------------------- ------------------------------- -----------------------
Price per Ordinary Share US$1.21 US$1.78 US$1.21
-------------------------- ------------------------------- -----------------------
Share price return (i) -32.0% -5.3% 16.4%
-------------------------- ------------------------------- -----------------------
Benchmark returns (ii)
----------------------------------------------------------------------------------------------------------------------
Russell 2000 Biotech -31.3% -26.9% -5.3%
-------------------------- ------------------------------- -----------------------
Nasdaq Biotech -10.9% -0.6% 24.7%
-------------------------- ------------------------------- -----------------------
(i) Total shareholder return is an alternative performance measure.
(ii) Source: Capital IQ.
Portfolio Highlights
-- As of 31 December 2022, the Group held 39 core portfolio companies (2021: 42)
o 14 of which are publicly-listed (2021: 17)
o 25 of which are privately-held (2021: 25)
-- 68% (2021: 67%) of the core portfolio companies' pipeline products are in clinical stage programs
-- As of 31 December 2022, 70.9% of NAV was invested in core portfolio companies (2021: 66.4%)
-- During the year to 31 December 2022, 2 portfolio companies (Cincor and Third Harmonic Bio), completed an initial public offering (IPO)
-- The Group added 3 new companies to its portfolio in 2022 ( Lenz Therapeutics, Mineralys and Apogee Therapeutics), while disposing of 6 core public portfolio companies (Athira, Biomea, iTeos, Pyxis, Pulmonx, and Landos), and 1 core private position, RTW Royalty Holdings 1 (Mavacamtem)
Roderick Wong, MD, Managing Partner and Chief Investment Officer of RTW Investments, LP (the "Investment Manager") commented:
"We are pleased to report another robust set of results for the RTW Venture Fund in 2022. We find ourselves in unprecedented market conditions, having witnessed the second consecutive year of a bear market in the biotech sector.
"Given these challenging times, we are happy to report that the Group has once again significantly outperformed the Russell 200 Biotech Index (the most appropriate performance comparator), with a -10.2% NAV return for the period, against a -31.3% return for the Index.
"The Group's successful strategy of selecting high-quality transformative assets with significant growth potential could be seen in our core portfolio, which held up well, contributing +0.2% to NAV during 2022. Whilst only a modest return, it compares favourably to the weak performance of the Group's sector indices.
"Due to the adverse market conditions, 2022 saw just two of our portfolio companies IPO. RTW added three new companies to the portfolio and disposed of seven. Disposals crystalised a +1.6% contribution to NAV for the year with the proceeds being redeployed into other public opportunities.
"Most importantly, we continue to see public market valuations at significant discounts to historic levels, providing extremely compelling investment opportunities, with many of potential best-in-class therapeutics trading at notable lows compared to their long-term benchmarks. Our resources and expertise place us in an excellent position to capitalise on these trends and achieve significant value for shareholders over the medium- to long-term."
For Further Information
RTW Investments, LP +44 (0)20 7959 6361
Woody Stileman, Managing Director
---------------------
Elysium Fund Management Limited +44 (0)14 8181 0100
---------------------
Joanna Duquemin Nicolle, Chief Executive
Officer
Sadie Morrison, Managing Director
---------------------
J.P. Morgan Cazenove +44 (0)20 7742 4000
---------------------
William Simmonds
Jérémie Birnbaum
James Bouverat (Sales)
---------------------
BofA Securities +44 (0) 20 7628 1000
---------------------
Edward Peel
Kieran Millar
---------------------
Buchanan +44 (0)20 7466 5107
---------------------
Charles Ryland
Henry Wilson
George Beale
---------------------
Morgan Stanley Fund Services USA
LLC +1 (914) 225 8885
---------------------
About RTW Venture Fund Limited:
RTW Venture Fund Limited (LSE: RTW & RTWG) is an investment fund focused on identifying transformative assets with high growth potential across the biopharmaceutical and medical technology sectors. Driven by a long-term approach to support innovative businesses, RTW Venture Fund invests in companies developing next-generation therapies and technologies that can significantly improve patients' lives.
RTW Venture Fund Limited is managed by RTW Investments, LP, a leading healthcare-focused entrepreneurial investment firm with deep scientific expertise and a strong track record of supporting companies developing life-changing therapies.
Visit the RTW website at www.rtwfunds.com for more information.
Chairman's Statement
Building disruptive companies through innovative investing
RTW Venture Fund Limited (the "Company"), passed its third anniversary since admission to the London Stock Exchange ("LSE") on 30 October 2022. Since admission, the Company's NAV per ordinary share has grown by +48% and it has outperformed its relevant benchmarks through good times for the sector and, recently, through bad. Despite a -10% decline in NAV this year, I am pleased to say that the Group (including the Company's new wholly-owned subsidiary) outperformed the smaller capitalisation Russell 2000 Biotech Index by approximately 20% as we begin to witness the early stages of a recovery for the sector, which I am confident that we are very well positioned to capture.
2022 Overview
After the flood comes the drought. 2021 was a record-breaking year for private and public biotech financing activity. Then 2022 saw IPOs fall to the lowest levels in ten years and follow-on financings return to 2016 levels, which is when the sector experienced a significant drug pricing panic. This year saw actual drug pricing reform as part of the Inflation Reduction Act, which was signed into US federal law in August. At a sector level there is no impact on revenue growth potential through 2026, which limits its impact on equities today, and in fact resolves significant policy uncertainty. However, there are likely to be some unintended consequences that will need careful navigation.
As a result, of the decline in IPOs, the Group's cadence of new investments and IPOs also slowed, albeit not as dramatically as the sector as a whole. During 2022, the Group added three portfolio companies, Lenz Therapeutics, Mineralys and Apogee Therapeutics, and exited six core public portfolio companies, Athira, Biomea, iTeos, Pyxis, Pulmonx, and Landos and one core private position, RTW Royalty Holdings 1 (Mavacamtem). In total, the exits crystalised a c.+1.8% contribution to NAV. Two private portfolio companies, Cincor and Third Harmonic Bio successfully went public and one, Orchestra BioMed, announced its intention to combine with RTW's Health Sciences Acquisitions Corporation 2, a deal which subsequently completed in January 2023.
At the end of the period, the Group had thirty-eight core portfolio companies, of which twenty-five were privately held and thirteen were publicly listed. All core portfolio companies were initiated as private investments by the Investment Manager including three company creations. The core portfolio represented c. 71% of NAV at the end of the reporting period, up from 66% at the end of 2021. For the balance of the portfolio, to mitigate any drag on performance due to excess cash awaiting deployment into new private assets, the Group invests in a portfolio of listed companies selected by the Investment Manager to be representative of positions that are also held in its other investment funds. At the end of the reporting period, this represented c. 29% of NAV, down from 37% at the end of 2021.
In the year ended 31 December 2022, the NAV declined by -10.2% % from US$363.0 million or US$1.71 per Ordinary Share to US$326.1 million or US$1.54 per Ordinary Share. The main detractor to the NAV was the markdown in Ji Xing (c. -2.2% contribution), after the IPO was delayed due to market conditions, despite a positive operating performance. The mark to market share price performance of Prometheus Biosciences (c. +9.1% contribution) and the realised gain in RTW Royalty Holdings 1 (c. +4.9% contribution), following the successful sale to Bristol Myers Squibb, were two outstanding results in a year that saw the Russell 2000 Biotechnology Index decline by 32.0%. Since admission, the Company's NAV per Ordinary Share has appreciated by 47.6% against a -5.3% decline for the Russell 2000 Biotechnology Index. By any standard, this is a commendable and consistent degree of outperformance and testament to the Investment Manager's robust business model and expertise.
The Company's share price fell to a discount to NAV this year as did those of many of our investment company peers, especially those that provide growth financing to private companies. This was, perhaps, exacerbated by a change in U.S. tax regulation affecting publicly traded partnerships (PTPs), which the Company was formerly classified as for U.S. tax purposes. A number of custodians effecting transactions in the Company's Ordinary Shares informed the Company's shareholders that, as a result of the imposition of a new U.S. withholding tax obligation, they would no longer hold or deal with the Ordinary Shares if the Company continued to be classified as a PTP. This likely led to some selling pressure on the shares as the 1 January 2023 deadline approached until the Company changed its tax status on 1 December, which was subsequently ratified by an EGM held on 19 December 2022. We thank our shareholders for their support through this and are pleased that the share price has recovered significantly since. We are optimistic that it will continue to do so with further NAV accretion in an improving market environment.
Outlook
Public market valuations are still near historic lows, while innovation remains at an all-time high. The valuation metrics of the sector and our portfolio are truly compelling by historic standards, with many companies developing great potential therapies trading at a fraction of long-term valuation norms. The private portfolio is well funded and fairly valued and a sector bear market from February 2021 to June 2022 has created significant opportunities for a skilled investor, such as RTW, that has both scale of scientific resources and understanding, together with extensive capital markets experience and solutions to outpace their less experienced and less-resourced rivals.
The Investment Manager believes that there remains significant demand for reliable capital to support the discovery and development of scientific innovation, and that there is an opportunity to grow their footprint in the UK and EU as an active local participant in the biotech ecosystem. The Investment Manager therefore intends to seek additional ways of growing demand for the Company's shares with the ambition of restoring a premium valuation that can lead to the growth of the Group and its portfolio. This growth would assist in the financing of an exciting pipeline of new ideas, based upon the Group's strategy of founding, investing, and supporting companies developing next-generation therapies and technologies that can significantly improve patients' lives. Accordingly, the Board expects the Group to continue to achieve a strong performance over the long term and create value for shareholders.
2023 AGM
The Company will hold its Annual General Meeting on 21 June 2023 to review the annual results and provide portfolio updates.
We would like to dedicate a part of the meeting to address questions from our shareholders. At the present time, we anticipate holding it at Royal Chambers, St Julian's Avenue, St Peter Port, Guernsey. We encourage our shareholders to share their questions here and we will endeavour to answer as many as we can: RTWVentureFund@rtwfunds.com .
On behalf of the Board, I would like to express my gratitude for your continued support and wish you all the best for 2023.
William Simpson
Chairman of the Board of Directors
RTW Venture Fund Limited
30 March 2023
Report of the Investment Manager
Together we are harnessing the potential to accelerate the revolution in medicine
Executive summary
Since its listing on the London Stock Exchange in October 2019, the Group has grown the NAV attributable to Ordinary Shareholders from US$168.0 million to US$326.1 million by a combination of investment returns and the issue of additional Ordinary Shares. The NAV per Ordinary Share has grown 47.6% from $1.04 to $1.54 as of 31 December 2022. Since admission to the year-end, the share price has lagged NAV growth, returning +16.4%, as the shares fell, albeit by much less than the wider market as represented by the Russell 2000 Biotechnology Index this year.
Table 1. Financial Highlights
RTW Venture Fund Limited Year-end reporting period Previous Year-end reporting Admission (30/10/2019)
(01/01/2022-31/12/2022) period (01/01/2021-31/12/2021) to 31/12/2022
Ordinary NAV - start of period US$363.0 million US$375.3 million US$168.0 million
-------------------------- ------------------------------- -----------------------
Ordinary NAV - end of period US$326.1million US$363.0 million US$326.1million
-------------------------- ------------------------------- -----------------------
NAV per Ordinary Share - start US$1.71 US$1.96 US$1.04
of period
-------------------------- ------------------------------- -----------------------
NAV per Ordinary Share - end of US$1.54 US$1.71 US$1.54
period
-------------------------- ------------------------------- -----------------------
NAV movement per Ordinary Share -10.2% -12.8% 47.6%
-------------------------- ------------------------------- -----------------------
Price per Ordinary Share - US$1.78 US$1.88 US$1.04
start of period
-------------------------- ------------------------------- -----------------------
Price per Ordinary Share - end US$1.21 US$1.78 US$1.21
of period
-------------------------- ------------------------------- -----------------------
Share price return (i) -32.0% -5.3% 16.4%
-------------------------- ------------------------------- -----------------------
Benchmark returns (ii)
----------------------------------------------------------------------------------------------------------------------
Russell 2000 Biotech -31.3% -26.9% -5.3%
-------------------------- ------------------------------- -----------------------
Nasdaq Biotech -10.9% -0.6% 24.7%
-------------------------- ------------------------------- -----------------------
(i) Total shareholder return is an alternative performance measure.
(ii) Source: Capital IQ.
RTW Investments, LP (the "Investment Manager", "us", "we"), a leading global healthcare-focused investment firm with a strong track record of supporting companies developing life-changing therapies, created the Company as an investment fund focused on identifying transformative assets with high growth potential across the biopharmaceutical and medical technology sectors. Driven by our deep scientific expertise and a long-term approach to building and supporting innovative businesses, we invest in companies developing transformative next-generation therapies and technologies that can significantly improve patients' lives.
As of 31 December 2022, approximately 71% of the portfolio was invested in the core portfolio (private and public), a 5% increase versus 31 December 2021. Within that, the mix changed slightly. Core private exposure stands at 25% of NAV, a 3% reduction on last year, while core public exposure increased by 10% to 46%. We define core public companies as companies that were initially added to our portfolio as private investments, reflecting the key focus of the Company's strategy. Our investment approach is defined as full life cycle and, therefore, involves retaining our private investments well beyond their IPO, hence our core portfolio consists of both privately-held and publicly-listed companies.
Approximately 29% of the Company's NAV is currently invested in other publicly listed companies in lieu of holding cash for future private investments. This portfolio of assets has been carefully selected by us, matching, on a pro-rated basis, the long investments held in our other funds. The investments represented in this portfolio are similarly categorised as innovative biotechnology and medical technology companies developing and commercialising potentially disruptive and transformational products.
The -10.2% reduction in NAV during 2022 was largely driven by the "other public" portfolio's (-9.3% contribution), which declined roughly in line with the Russell 2000 Biotech Index. The core portfolio made a small positive contribution to NAV with the core public portfolio contributing +0.2% and the core private portfolio detracting -0.1%. Within our core private portfolio we crystallised gains of +4.9% of NAV when RTW Royalty Holdings sold Mavacamten to Bristol Myers Squibb. These gains were offset by write-downs across the majority of our private portfolio based on declining public market comparables. The positive return of the core portfolio, in a year when small cap biotech companies, particularly newly public ones, performed very poorly, highlights the selectivity of our process, quality of our investments and value of our full life cycle approach. Income and Expense (offset by both the mark to market on the Performance Allocation Share for the period from 1 January 2022 through 30 November 2022 and Non-Controlling Interest for the period from 1 December 2022 through 31 December 2022) make up the balance of returns (-0.7% contribution).
Figure 1. Performance drivers as of 31 December 2022
[chart]
On listing, the Company's core portfolio included six companies, four of which were developing clinical-stage therapeutics and two medtech companies developing transformative devices. The Group now has thirty-eight core portfolio companies having added three new companies in 2022 alongside seven disposals. Core portfolio companies added in 2022 are listed below.
Our 2022 new investments include:
Company name Description % NAV
(1)
Clinical stage biopharma company developing
Lenz Therapeutics treatments for presbyopia 0.4%
------------------------------------------------------ ------
Clinical stage biopharma company developing
Mineralys Therapeutics treatments for hypertension 0.3%
------------------------------------------------------ ------
Pre-clinical biopharma company developing treatments
Apogee Therapeutics for inflammation 0.6%
------------------------------------------------------ ------
(1) On 31 December 2022
As of 31 December 2022, the portfolio was diversified across treatment modalities, therapeutic focus, and the clinical stage of programs (Figure 2A-C). While the portfolio remains dominated by US-based companies (Figure 2D), we are committed to adding UK and EU-based scientists and companies in an effort to support the best assets across the globe and foster local biotech ecosystems. By constructing the portfolio in such a way, investors can gain exposure to the most innovative parts of a highly specialised sector with the explosive potential of companies such as Prometheus Biosciences (which we expand on below).
Figure 2. Core portfolio breakdown, by (A) modality, (B) therapeutic focus, (C) clinical stage and (D) geography as of 31 December 2022
(A) [chart] (B) [chart] (C) [chart] (D) [chart]
Key updates for Core Portfolio Companies during 2022:
Clinical milestones
-- In January 2022, Immunocore received an FDA approval for Kimmtrak (tebentafusp), its first-in-class T-cell therapy for the treatment of uveal melanoma.
-- In April, C4 Therapeutics shared Phase 1 first-in-human clinical data for its targeted protein degradation program in multiple myeloma that unfortunately had limited efficacy and needed to refine its treatment regimen.
-- In May, Rocket Pharmaceuticals shared positive top line data for its registrational gene therapy program for Leukocyte Adhesion Deficiency-I (LAD-I), a rare genetic disorder of immunodeficiency in young children.
-- In May, Tarsus Pharmaceuticals shared positive data in the second Phase 3 trial for their blepharitis demodex treatment. The company filed a New Drug Application ("NDA") with the FDA in September.
-- In June, Beta Bionics shared results of the multi-center randomised Insulin-Only Bionic Pancreas Pivotal Trial for Type 1 diabetes patients at the American Diabetes Association ("ADA") conference. The trial met key endpoints and showed consistent mean HbA1c reductions across various patient subgroups.
-- In August, Cincor Pharma shared positive Phase 2 data for its hypertension program.
-- In August, Ventyx Biosciences shared positive Phase 1 data for its TYK2 program for autoimmune and inflammatory conditions.
-- In October, Avidity Biosciences announced an FDA partial clinical hold on new participant enrolment in its lead program for myotonic dystrophy.
-- In September, Immunocore shared first in human data on its PRAME program.
-- In November, Rocket Pharmaceuticals presented a positive data update on its LADI clinical trial. Then, in December, it provided an update on its Danon program, stating that the company anticipates starting a pivotal clinical trial in H1'23.
-- In November, Mineralys Therapeutics shared positive Phase 2 data for its hypertension program.
-- In December, Prometheus Biosciences reported positive Phase 2 data for its antibody therapy for inflammatory diseases, suggesting a best-in-class profile.
-- In December, Avidity Biosciences announced a positive clinical update on its proof-of-concept Phase 1 trial for is antibody-siRNA therapy.
-- In December, Third Harmonic Bio announced the discontinuation of its Phase 1b study for the treatment of chronic inducible urticaria.
-- In December, Cincor Pharma announced the failure of its Phase 2 trial of baxdrostat for uncontrolled hypertension by missing a statistically significant difference between its treatment and placebo arms.
Financing and commercial developments
-- In January 2022, Cincor Pharma announced pricing of its IPO at US$16.00 per share, raising US$193.6 million and beginning to trade on Nasdaq Global Market under ticker "CINC".
-- In January 2022, Magnolia Medical Technologies raised US$46 million in a follow-on cross-over round where RTW served as a co-lead investor. Ovid Amadi, PhD, Senior Analyst at RTW joins Magnolia's Board of Directors.
-- In February 2022, the Company and other affiliated funds of the Investment Manager participated in a follow-on Series C financing round in Beta Bionics.
-- In April, Ji Xing announced an exclusive licensing agreement with Lenz Therapeutics to develop and commercialise LNZ100 and LNZ101 for the treatment of presbyopia in Greater China. As a part of the transaction, Lenz Therapeutics has also become the latest addition to the Company's portfolio.
-- In April, Mavacamten, the underlying asset of RTW Royalty Holdings 1 received FDA approval. Soon after, the Company sold its stake in the royalty to Bristol Myers Squibb for a significant gain.
-- In June, the Company and other affiliated funds of the Investment Manager participated in a Series B financing round in Mineralys Therapeutics, a clinical-stage biopharma working on hypertension.
-- In September, Third Harmonic Bio announced the pricing of its IPO at US$17.00 per share, raising US$185.3 million and beginning to trade on Nasdaq Global Market under ticker "THRD".
-- In July, Orchestra BioMed announced a strategic collaboration with Medtronic, the closing of US$110 million private equity financing round, and plans to list on Nasdaq through a merger with RTW sponsored Health Sciences Acquisitions Corporation 2.
-- In July, Immunocore announced a PIPE financing round that RTW participated in and then announced continued success in the commercial launch of Kimmtrak for uveal melanoma.
-- In December, the Group announced a US$2 million investment in Apogee Therapeutics, which is working on developing best-in-class medicines for immunological and inflammatory diseases. RTW co-lead the Series B round.
-- In December, Takeda announced the acquisition of Nimbus' TYK2-targeting drug, providing a positive read-through for RTW Venture Fund Ltd.'s holding in Ventyx Biosciences, which is also advancing a TYK2-targeting therapy.
Portfolio performance and updates
The Company's NAV has significantly outperformed biotech benchmarks since admission on 30 October 2019, returning +47.6% versus -5.3% and +24.7% for the Russell 2000 Biotechnology Index and the Nasdaq Biotechnology Index, respectively. This marks the third consecutive full year of outperformance against the more comparable Russell 2000 Biotechnology Index. However, the Company's share price has lagged NAV, returning +16.4% since admission after a -32.0% return in 2022 compared with a -31.1% return for the Russell 2000 Biotechnology Index in 2022 and -10.9% for the Nasdaq Biotechnology Index in 2022. Having traded at a premium for most of the time from admission to 31 December 2021, the shares fell to a discount in 2022 alongside most investment companies that have exposure to growth stage private companies.
Figure 3. RTW NAV per Ordinary Share vs. RTW.L Share Price and Benchmarks as of 31 December 2022
[chart]
Table 2. Performance of all private and core public portfolio investments since inception as of 31 December 2022
Portfolio Holding Initial Investment Valuation/Exit Date MOC (1) XIRR (1) Holding Period (yrs)
Inivata (2) 24/12/2020 18/06/2021 2.62 635.5% 0.5
-------------------- --------------------- -------- --------- ---------------------
Prometheus Biosciences 30/10/2020 31/12/2022 14.05 268.6% 2.2
-------------------- --------------------- -------- --------- ---------------------
RTW Royalty Holdings 1 (2) 13/11/2020 30/12/2022 3.38 129.6% 2.1
-------------------- --------------------- -------- --------- ---------------------
Ventyx Biosciences 26/02/2021 31/12/2022 3.36 110.8% 1.8
-------------------- --------------------- -------- --------- ---------------------
Iteos Therapeutics (2) 24/03/2020 17/03/2022 3.63 108.2% 2.0
-------------------- --------------------- -------- --------- ---------------------
Frequency Therapeutics (2) 17/07/2019 23/03/2021 2.79 85.3% 1.7
-------------------- --------------------- -------- --------- ---------------------
HSAC 2 17/07/2020 31/12/2022 4.31 83.0% 2.5
-------------------- --------------------- -------- --------- ---------------------
Athira Pharma (2) 29/05/2020 30/06/2022 1.65 56.8% 2.1
-------------------- --------------------- -------- --------- ---------------------
Immunocore 13/08/2019 31/12/2022 2.83 39.5% 3.4
-------------------- --------------------- -------- --------- ---------------------
Avidity Biosciences 08/11/2019 31/12/2022 2.42 32.5% 3.1
-------------------- --------------------- -------- --------- ---------------------
Prometheus Laboratories 31/12/2020 31/12/2022 1.41 18.9% 2.0
-------------------- --------------------- -------- --------- ---------------------
RTW Royalty Holdings (2) 05/05/2021 31/12/2022 1.32 18.8% 1.7
-------------------- --------------------- -------- --------- ---------------------
Mineralys 01/06/2022 31/12/2022 1.08 14.6% 0.6
-------------------- --------------------- -------- --------- ---------------------
Pulmonx Corporation (2) 17/04/2020 04/11/2022 1.31 13.1% 2.6
-------------------- --------------------- -------- --------- ---------------------
Acelyrin 20/10/2021 31/12/2022 1.12 11.6% 1.2
-------------------- --------------------- -------- --------- ---------------------
Ji Xing Pharmaceuticals 10/02/2020 31/12/2022 1.11 7.4% 2.9
-------------------- --------------------- -------- --------- ---------------------
Encoded Therapeutics 12/06/2020 31/12/2022 1.18 6.8% 2.6
-------------------- --------------------- -------- --------- ---------------------
Magnolia Medical 02/07/2021 31/12/2022 1.05 4.8% 1.5
-------------------- --------------------- -------- --------- ---------------------
Tarsus Pharma 24/09/2020 31/12/2022 1.05 2.1% 2.3
-------------------- --------------------- -------- --------- ---------------------
Nikang Therapeutics 09/09/2020 31/12/2022 1.03 1.6% 2.3
-------------------- --------------------- -------- --------- ---------------------
Numab Therapeutics 07/05/2021 31/12/2022 1.02 1.4% 1.7
-------------------- --------------------- -------- --------- ---------------------
Ancora Heart 20/01/2021 31/12/2022 1.01 1.0% 1.9
-------------------- --------------------- -------- --------- ---------------------
Apogee Therapeutics 15/11/2022 31/12/2022 1.00 0.0% 0.1
-------------------- --------------------- -------- --------- ---------------------
Neurogastrx 25/06/2021 31/12/2022 0.99 -0.3% 1.5
-------------------- --------------------- -------- --------- ---------------------
Milestone Pharma 23/07/2020 31/12/2022 0.96 -1.9% 2.4
-------------------- --------------------- -------- --------- ---------------------
Lenz Therapeutics, Inc. 13/04/2022 31/12/2022 0.99 -2.0% 0.7
-------------------- --------------------- -------- --------- ---------------------
Artiva Biotherapeutics 23/02/2021 31/12/2022 0.94 -3.4% 1.9
-------------------- --------------------- -------- --------- ---------------------
Nuance Biotech 07/12/2020 31/12/2022 0.92 -4.1% 2.1
-------------------- --------------------- -------- --------- ---------------------
Kyverna 09/11/2021 31/12/2022 0.95 -4.3% 1.1
-------------------- --------------------- -------- --------- ---------------------
Beta Bionics 28/06/2019 31/12/2022 0.86 -5.0% 3.5
-------------------- --------------------- -------- --------- ---------------------
C4 Therapeutics 02/06/2020 31/12/2022 0.88 -5.8% 2.6
-------------------- --------------------- -------- --------- ---------------------
Orchestra Biomed 28/06/2019 31/12/2022 0.86 -7.5% 3.5
-------------------- --------------------- -------- --------- ---------------------
Cincor Pharma 22/09/2021 31/12/2022 0.90 -7.6% 1.3
-------------------- --------------------- -------- --------- ---------------------
Lycia Therapeutics 02/09/2021 31/12/2022 0.89 -8.3% 1.3
-------------------- --------------------- -------- --------- ---------------------
Artios Pharma 27/07/2021 31/12/2022 0.87 -9.1% 1.4
-------------------- --------------------- -------- --------- ---------------------
Biomea Fusion (2) 23/12/2020 24/01/2022 0.89 -10.2% 1.1
-------------------- --------------------- -------- --------- ---------------------
GH Research Ireland 09/04/2021 31/12/2022 0.79 -12.9% 1.7
-------------------- --------------------- -------- --------- ---------------------
Umoja Biopharma 09/06/2021 31/12/2022 0.78 -14.5% 1.6
-------------------- --------------------- -------- --------- ---------------------
RTW Holdings LLC (Yarrow) 14/05/2021 31/12/2022 0.88 -16.2% 1.6
-------------------- --------------------- -------- --------- ---------------------
Monte Rosa Therapeutics 12/03/2021 31/12/2022 0.73 -16.2% 1.8
-------------------- --------------------- -------- --------- ---------------------
Swift Health Systems 27/08/2021 31/12/2022 0.74 -20.1% 1.3
-------------------- --------------------- -------- --------- ---------------------
Landos Biopharma (2) 09/08/2019 02/11/2022 0.08 -55.0% 3.2
-------------------- --------------------- -------- --------- ---------------------
Tenaya Therapeutics 17/12/2020 31/12/2022 0.16 -59.1% 2.0
-------------------- --------------------- -------- --------- ---------------------
Alcyone Therapeutics 08/06/2021 31/12/2022 0.25 -66.2% 1.6
-------------------- --------------------- -------- --------- ---------------------
Pyxis Oncology (2) 08/03/2021 08/07/2022 0.22 -70.5% 1.3
-------------------- --------------------- -------- --------- ---------------------
Third Harmonic Bio, Inc. 17/12/2021 31/12/2022 0.26 -73.1% 1.0
-------------------- --------------------- -------- --------- ---------------------
Visus Therapeutics 26/01/2021 31/12/2022 0.00 -99.4% 1.9
-------------------- --------------------- -------- --------- ---------------------
AVERAGE 1.54 23.0% 1.88
----------------------------------------------------------------------- -------- --------- ---------------------
1 Alternative Performance Measure
2 Exited the position
Table 3. Performance of Rocket Pharmaceuticals from admission to 31 December 2022
Share price at admission Share price at 31 December 2022 Share price return %
Rocket Pharmaceuticals US$14.00 US$19.57 +39.8%
-------------------------- --------------------------------- ---------------------
Table 4. NAV capital breakdown as of 31 December 2022
Portfolio grouping % of NAV
Core private 24.6%
---------
Core public 46.3%
---------
"Other" public 29.8%
---------
Cash, due to/from brokers, other (including liabilities
such as other payables and accrued expenses) -0.7%
---------
Total 100.0%
---------
As of 31 December 2022, our top five holdings in the "other public" portfolio were:
- 4.2% of NAV in Argenx (ticker: "ARGX"), a commercial stage multi-pipeline immunology company;
- 1.8% of NAV in Axsome Therapeutics (ticker: "AXSM") a commercial staged biotech focused on CNS treatments;
- 1.7% of NAV in Masimo Corporation (ticker: "MASI") a global medtech company focused on patient monitoring;
- 1.5% of NAV in PTC Therapeutics ("PTCT"), a biotech company developing therapies for rare genetic diseases;
- 1.4% of NAV in Ultragenyx Pharmaceuticals (ticker: "RARE") a biopharma company addressing rare diseases.
We expect to deploy the capital invested in "other public" assets into private companies as the opportunities arise.
Table 5. Overview of core portfolio companies' valuations and Company shareholding on 31 December 2022
Portfolio Company % of Company's Private (1) / Company's % shareholding Valuation of YTD P&L US$
net assets Public (2) Company's
investment in
US$
Prometheus Bio 15.2% Public <1% $52,760,400 $33,198,288
------------------ ------------------ ------------------------- ----------------- ------------
Rocket 13.5% Public <5% $46,982,775 -$6,604,656
------------------ ------------------ ------------------------- ----------------- ------------
Immunocore 7.4% Public <1% $25,908,924 $9,935,999
------------------ ------------------ ------------------------- ----------------- ------------
Ji Xing (4) 7.3% Private <15% $25,225,606 -$8,036,798
------------------ ------------------ ------------------------- ----------------- ------------
Avidity 4.2% Public <5% $14,502,829 -$1,268,910
------------------ ------------------ ------------------------- ----------------- ------------
RTW Royalty
Holdings
(Urogen) 4.0% Private <20% $14,074,846 $1,510,287
------------------ ------------------ ------------------------- ----------------- ------------
Ventyx 2.3% Public <1% $8,025,353 $3,454,534
------------------ ------------------ ------------------------- ----------------- ------------
Beta Bionics 1.6% Private <5% $5,633,890 -$766,537
------------------ ------------------ ------------------------- ----------------- ------------
Orchestra 1.3% Private <5% $4,490,264 -$500,961
------------------ ------------------ ------------------------- ----------------- ------------
NiKang 1.3% Private <5% $4,416,891 -$227,399
------------------ ------------------ ------------------------- ----------------- ------------
Ancora 1.2% Private <5% $4,163,943 $9,122
------------------ ------------------ ------------------------- ----------------- ------------
Tarsus 0.9% Public <1% $3,169,037 -$2,050,561
------------------ ------------------ ------------------------- ----------------- ------------
GH Research 0.9% Public <1% $2,981,309 -$4,174,446
------------------ ------------------ ------------------------- ----------------- ------------
Milestone (5) 0.8% Public <5% $2,871,141 -$2,125,030
------------------ ------------------ ------------------------- ----------------- ------------
Umoja 0.7% Private <1% $2,540,152 -$852,790
------------------ ------------------ ------------------------- ----------------- ------------
Magnolia 0.7% Private <5% $2,403,543 $95,829
------------------ ------------------ ------------------------- ----------------- ------------
Encoded 0.7% Private <1% $2,364,636 -$1,872,579
------------------ ------------------ ------------------------- ----------------- ------------
Cincor 0.6% Public <1% $2,175,674 -$683,084
------------------ ------------------ ------------------------- ----------------- ------------
Apogee
Therapeutics 0.6% Private <1% $2,102,903 $0
------------------ ------------------ ------------------------- ----------------- ------------
Numab
Therapeutics AG 0.5% Private <1% $1,768,384 $49,888
------------------ ------------------ ------------------------- ----------------- ------------
Acelyrin 0.5% Private <1% $1,650,669 $179,485
------------------ ------------------ ------------------------- ----------------- ------------
Nuance 0.5% Private <1% $1,622,898 -$148,311
------------------ ------------------ ------------------------- ----------------- ------------
Neurogastrx 0.5% Private <1% $1,612,974 -$8,329
------------------ ------------------ ------------------------- ----------------- ------------
Kyverna 0.4% Private <1% $1,455,105 -$74,908
------------------ ------------------ ------------------------- ----------------- ------------
Lenz Therapeutics 0.4% Private <5% $1,449,836 -$21,412
------------------ ------------------ ------------------------- ----------------- ------------
Monte Rosa 0.4% Public <1% $1,402,744 -$2,361,254
------------------ ------------------ ------------------------- ----------------- ------------
Alcyone (4) 0.4% Private <5% $1,280,484 -$3,820,806
------------------ ------------------ ------------------------- ----------------- ------------
Mineralys 0.3% Private <1% $1,119,555 $85,324
------------------ ------------------ ------------------------- ----------------- ------------
Lycia 0.3% Private <1% $1,008,626 -$122,674
------------------ ------------------ ------------------------- ----------------- ------------
RTW Holdings, LLC
(Yarrow) (4) 0.3% Private <5% $1,001,854 -$133,869
------------------ ------------------ ------------------------- ----------------- ------------
C4 Therapeutics 0.3% Public <1% $926,459 -$7,565,568
------------------ ------------------ ------------------------- ----------------- ------------
Tenaya 0.3% Public <1% $881,791 -$7,331,469
------------------ ------------------ ------------------------- ----------------- ------------
Artiva 0.3% Private <1% $880,074 -$298,454
------------------ ------------------ ------------------------- ----------------- ------------
Artios 0.2% Private <1% $675,895 -$98,421
------------------ ------------------ ------------------------- ----------------- ------------
Swift Health 0.2% Private <1% $649,150 -$228,531
------------------ ------------------ ------------------------- ----------------- ------------
Third Harmonic 0.1% Public (3) <1% $347,952 -$1,088,132
------------------ ------------------ ------------------------- ----------------- ------------
Prometheus Labs 0.1% Private <1% $186,504 $54,524
------------------ ------------------ ------------------------- ----------------- ------------
Visus 0.0% Private <1% $149 -$2,352,170
------------------ ------------------ ------------------------- ----------------- ------------
Pulmonx 0.0% Public <1% $27 -$896,517
------------------ ------------------ ------------------------- ----------------- ------------
1 Valuations for private portfolio companies on a fair value basis as of 31 December 2022.
2 The valuations of public positions have been calculated using their market capitalisation as at 31 December 2022.
3 In accordance with its valuation policy, the Group applies a discount to its investments in private portfolio companies which become public portfolio companies that are subject to customary post-IPO lock-up provisions. The valuation policy also includes Level 1 securities purchased at or after portfolio company IPO.
4 Excludes convertible note.
5 Includes pre-funded warrants.
Table 6. RTW representation on portfolio companies' boards
Portfolio company (1) RTW representative on the board
Alcyone Piratip Pratumsuwan
-------------------------------------------
Ji Xing Rod Wong, Peter Fong
-------------------------------------------
Magnolia Ovid Amadi
-------------------------------------------
Nikang Rod Wong
-------------------------------------------
Rocket Rod Wong, Gotham Makker, Naveen Yalamanchi
-------------------------------------------
Yarrow Rod Wong, Peter Fong
-------------------------------------------
1 In aggregate these represented 23% of the NAV of the Group at 31 December 2022
Summary of top fifteen core portfolio companies as of 31 December 2022:
As of 31 December 2022, the Group's core portfolio included thirty-eight companies comprised of pre-clinical to commercial stage biotechnology companies, companies developing traditional small molecule pharmaceuticals, and med-tech companies developing or commercializing transformative devices. We selected the Group's portfolio companies based upon our rigorous assessment of scientific and commercial potential, opportunities to positively impact value, and with regard to the valuation of the assets at the time of investment. The table below includes the top fifteen portfolio companies at the end of the reporting period.
Table 7. RTW Venture Fund core portfolio - Top fifteen positions as of 31 December 2022
Portfolio Company Therapeutic Area Clinical Stage Description Expected Catalyst % NAV
Precision medicine
company focused on
IBD, a chronic
inflammatory
disease of GI tract
with
the lead antibody
program against Data updates in Q2
Prometheus Bio Inflammation Phase 2 TL1A. 2023 15.2%
--------------------- ---------------- --------------------- ---------------------- ------
Gene therapy
platform company
for rare paediatric
diseases. Four
clinical programs
for Fanconi
anaemia, Danon, Data updates in H1
Rocket Rare Disease Phase 2 LAD, and PKD. 2023 13.5%
--------------------- ---------------- --------------------- ---------------------- ------
T-cell receptor
therapy company
focused on oncology
and infectious
disease. Lead
program for Launch updates in H1
Immunocore Oncology Commercial uveal melanoma. 2023 7.4%
--------------------- ---------------- --------------------- ---------------------- ------
NewCo focused on
acquiring rights
for innovative
therapies for
development and
Cardiovascular, commercialisation
Ji Xing Ophthalmology Phase 3 in China. Series D in H2 2023 7.3%
--------------------- ---------------- --------------------- ---------------------- ------
Antibody conjugated
RNA medicines
company. Lead
program for
myotonic dystrophy,
a degenerative
disease with no Data updates in Q2
Avidity Myotonic Dystrophy Phase 1 therapy. 2023 4.2%
--------------------- ---------------- --------------------- ---------------------- ------
Royalty as a part of
RTW-Urogen deal
based on revenues
RTW Royalty Holdings of both Jelmyto and
(Urogen) Oncology Commercial UGN--102. - 4.0%
--------------------- ---------------- --------------------- ---------------------- ------
Clinical stage
biotech advancing a
promising
immunology pipeline
for autoimmune and
inflammatory Data updates in Q2
Ventyx Autoimmune Phase 2 diseases. 2023 2.3%
--------------------- ---------------- --------------------- ---------------------- ------
Closed-loop
pancreatic system
for automated and
autonomous delivery
Beta Bionics Type 1 Diabetes Pivotal of insulin. - 1.6%
--------------------- ---------------- --------------------- ---------------------- ------
Medical device
company focused on
developing products
for the treatment
of coronary artery
disease and Data updates in H1
Orchestra Cardiovascular Pivotal hypertension. 2023 1.3%
--------------------- ---------------- --------------------- ---------------------- ------
Biotech using a
structure-based
design to develop
innovative small
molecules against
promising
molecular targets Data updates in H1
NiKang Oncology Phase 1 in oncology. 2023 1.3%
--------------------- ---------------- --------------------- ---------------------- ------
Medical device
company dedicated
to developing
products which
target dysfunction
of the left
ventricle, the
underlying cause of
Ancora Cardiovascular Pivotal heart failure. - 1.2%
--------------------- ---------------- --------------------- ---------------------- ------
Clinical stage
biotech developing
first-in-class
therapeutics for
ophthalmic
Tarsus Ophthalmology Phase 3 conditions. PDUFA Aug 25, 2023 0.9%
--------------------- ---------------- --------------------- ---------------------- ------
Clinical stage
biotech developing
therapies to manage
GH Research CNS Phase 2 mental disease. - 0.9%
--------------------- ---------------- --------------------- ---------------------- ------
Clinical stage
company developing
interventions for
Milestone Cardiovascular Phase 3 tachycardias. FDA filing H2 2023 0.8%
--------------------- ---------------- --------------------- ---------------------- ------
Preclinical stage
biotech company
developing cell
therapies in
cancer. The lead
program is
focused on B cell
Umoja Oncology Preclinical malignancies. - 0.7%
--------------------- ---------------- --------------------- ---------------------- ------
Sector review and outlook
[chart]
We already knew that 2021 was an historic year for small cap biotech. The Russell 2000 Biotech Index finished -27%, behind only 2008's -31% and 2002's -54%. Then 2022 tied 2008 for second from the bottom, with a drop of -31%, a rare two down years in a row. As a result, the absolute number and percentage of companies trading at less than 1x market capitalisation to cash remains near historic highs (37%). This is despite some meaningful advances in biotech innovation, most importantly Biogen/Eisai's lecanemab for Alzheimer's.
[charts]
Funding for smaller public companies is scarce. The IPO market is at its lowest level in a decade and follow-on offerings declined for the second year in a row, back to the lowest level since 2016's drug pricing panic. In sharp contrast, big was beautiful this year. The NYSE Arca Pharmaceutical Index (DRG) finished +5% on the year. In fact, the 36% performance gap between large and small cap therapeutics adds to last year's 50% gap, totaling the largest outperformance for pharma since 1997-98. Investors are setting aside long-term risks (most notably Medicare price negotiation and patent cliffs beginning in 2026) and are placing high value on recession-resistant near-term growth, which pharma is delivering with its own innovation breakthrough, the Glp1s. The Glp1s are the first class of medicines to deliver meaningful weight loss with an attractive safety profile, and early sales momentum suggests the potential to create one of, if not the largest drug class in history. Eli Lilly and Novo Nordisk have surpassed Pfizer and Merck as the second and third largest biopharma companies, thanks to the success of Mounjaro and Rybelsus.
The large-cap-weighted Nasdaq Biotech Index lost -11% in 2022. Companies with consistent growth, or those who can plug pharma patent holes with de-risked blockbuster potential have been first to recover. Overall, we believe this is consistent with a biotech recovery that is in its earliest innings.
A year ago, our optimism for 2022 stemmed from expectations for a return to normalcy at the FDA, clarity on drug pricing, increased M&A, and the historically large performance gap between biotech and the broader markets. The 2022 volume (of deals worth over US$500 million) totaled US$58 billion, a nice pick-up from 2021's US$52 billion, the lowest in the past eight years. Pharma (DRG +5%) and large cap biotech (NBI -11%) significantly outperformed the broader market and (S&P500 -19%), narrowing the performance gap. In sum, we have seen significant progress against each of these items. Unfortunately, small caps have so far been left behind (Russell 2000 Biotechnology Index -31% and XBI -26%), and our concentration here has correspondingly affected 2022 NAV performance.
Volume of deals worth over US$500 million totaled
$58b
2021: $52 billion
After the last two years, we think investors have priced in failure for much of the wave of companies that experienced setbacks after going public too early. Of the IPO classes of 2020-2021, the average performance is -37% and -50%, with 74% trading below cash. Notable breakthroughs in the past year have only minimally improved sentiment. This includes several potential first-in-class therapies for blockbuster markets. In addition to Biogen and Eisai's Alzheimer's breakthrough, Axsome is launching the first new class of oral antidepressants in over half a century, Karuna reported positive Phase 3 schizophrenia data for a first-in-class muscarinic receptor directed therapy, and Madrigal reported the first successful Phase 3 study ever conducted for fatty liver disease.
[chart]
FDA approved novel new drugs
37
2021: 50
Drugs from new modalities
13
2021: 9
In total, the FDA approved 37 novel new drugs (two of which came from RTW portfolio companies: Kimmtrak from Immunocore and Camzyos (mavacamten) from RTW Royalty Holdings 1). This is down from last year's 50 and likely reflects an FDA that has struggled post-COVID. Importantly, however, drugs from new modalities continue to increase: 13 vs 9 last year. It includes an impressive four gene therapies (vs zero last year), two bispecifics, an RNAi, mRNA, cell therapy, ADC, radiotherapy, and the first ever TCR and microbiome therapies. With innovation from new modalities continuing to mature and accelerate, we think the swing of the sentiment pendulum from optimism to pessimism for small companies creates asymmetric opportunity in front of future potential breakthroughs. Importantly, several of our core early-stage therapeutic companies that have suffered either alongside other small caps or due to their own setbacks remain key positions in the portfolio. Those that have cleared our re-underwriting efforts have made operational progress this past year and many are nearing their next value inflection points. We like the asymmetric risk reward in front of these more mature data readouts in 2023.
Recent cases suggest that the market environment may be increasingly more likely to reward strong data. In December, positive data translated to significant moves for Madrigal Pharmaceuticals (+320%), and our own Prometheus Biosciences (+167%) and Avidity (+91%).
We continue to expect M&A to accelerate given patent expiries and headwinds from the Inflation Reduction Act of 2022 in the second half of the decade, growing pharma cash balances, small company cost of capital, and lower valuations. This should help drive better performance for the sector, which has never been down three years in a row.
Executing on our strategy
We are scientists and entrepreneurs who aspire to change the lives of patients through innovation, and our mission is at the heart of everything we do. We power breakthrough therapies that transform the lives of millions. True value realisation from transformative products takes time, and in order to capture that value, it is critical to be involved in and invested in such companies throughout the various stages of their development. As a full life cycle investor, we recognise the importance of providing growth capital along with the support of an experienced team, if and when it is needed, at any critical inflection point in an asset's life cycle. Scientific development rarely follows a linear path, which is why we are always thinking about the optimal way to support a company. This can be achieved through providing growth capital, creative financing solutions, capital markets expertise, or guidance through investing our time and sharing our collective experience as directors and stewards of tomorrow's most exciting and disruptive companies.
Our full life cycle approach and broad offering of financial solutions for investee companies allows us to capture a diverse opportunity set. In the first half, this was most clearly demonstrated when we sold our royalty stake in Mavacamten, the underlying asset of RTW Royalty Holdings 1, to Bristol Myers Squibb soon after the drug had achieved the primary endpoint of its Phase 3 trials, achieving a greater than 3x return on our initial investment in November 2020. We originally acquired the royalty asset as part of a multi-solution transaction with Cytokinetics, a promising mid-stage cardiovascular company, which also included an equity investment, a regional partnering deal with Ji Xing, and future clinical trial funding. It was a ground-breaking transaction because, as a single counterparty, we were able to move quickly to simplify and de-risk the execution of a process that would otherwise have taken much longer with the involvement of multiple partners. We believe that we are the only investment manager who could have accomplished what we did.
In the second half of the year, our second SPAC, Health Sciences Acquisitions Corporation 2, announced a proposed combination with Orchestra BioMed, one of the Group's core private holdings. The combination subsequently closed after year-end and, on 27 January 2023, Orchestra started trading on Nasdaq Global Market under the ticker "OBIO". Simultaneously, the company cemented a strategic collaboration with Medtronic, a global leader in medical technology, services and solutions, to develop its "BackBeat Cardiac Neuromodulation Therapy" as a potential integrated treatment for cardiac pacemaker patients. We always believed that Orchestra had promising data and a leadership team with an exceptional track record of bringing novel medical technologies to market; now they have that, a new partnership with a global leader and the financial resources to help accelerate their clinical development and position them for commercial success. In our opinion, this deal validates our view on and approach to SPACs, which is that they can be an especially useful tool to bring public-ready companies to the next stage of their life cycle when the capital markets are temporarily closed for business.
Our global reach continues to expand with new offices opened in London and Shanghai. In China, our NewCo Ji Xing, continues to build out its clinical pipelines with the addition of an exclusive licensing agreement with Lenz Therapeutics for their LNZ100 and LNZ101 treatments for presbyopia. As part of the transaction, Lenz Therapeutics also became the latest addition to the Group's portfolio, underlining the value of our multi-asset approach. In London, we have continued to support the development of Immunocore with our participation in a US$140 million PIPE (Private Investment in Public Equity) alongside a small handful of other investors in July. As a firm, we have been supporting Immunocore since their Series A in 2015 and we are proud to be part of a significant UK success story as the company received FDA approval in January for Kimmtrak (tebentafusp), its first-in-class T-cell therapy for the treatment of uveal melanoma, which subsequently surpassed most people's expectations on its commercial launch. We expect to receive clinical updates from their highly promising PRAME (Preferentially Expressed Antigen of Melanoma) program, which could be a blockbuster drug, in 2023.
From a science perspective, our primary areas of focus remain in genetic medicines, rare diseases, small molecules, targeted oncology, medical technologies, antibodies, and next generation antibody therapies. Our science-led, full life cycle approach was clearly demonstrated this year by Prometheus Biosciences' transformational data from their Phase 2 studies in ulcerative colitis and Crohn's disease. The company's Anti-TL1A antibody is a new mechanism of action in inflammatory bowel disease ("IBD") which also leverages companion diagnostics that may enable a more personalised and effective treatment for patients suffering from the condition. With best-in-disease efficacy against existing, commercially validated, mechanisms of action, we believe Prometheus is set up to capture a significant portion of the multibillion-dollar IBD market. On the heels of the Phase 2 data, Prometheus successfully raised US$500 million in a follow-on financing to advance into Phase 3 development. We have been following the company for several years, starting in February 2020 when we observed proof-of-concept data from Pfizer, which alerted us to the possibilities of the TL1A mechanism of action. After further scrutinizing the science and gaining a better understanding of its companion diagnostic platform (something which Pfizer was not considering at the time), we co-led the crossover financing in November 2020 when they raised US$130 million ahead of anchoring their IPO and US$220 million raise in March 2021 at a US$660 million valuation. Prometheus' market cap now stands at US$5.5 billion.
None of this is possible without a sound foundation. Our foundation, or core, is built on our rigorous assessment of the best private market investment opportunities, which then go on to realise their ultimate value in the public markets. We have always been highly selective in this area, focusing only on companies with well-founded science and attractive commercial opportunities. We are now benefiting from this discipline in a challenging capital markets environment as our private portfolio is a reasonable size and is well funded. Figure 4 shows a breakdown of the approximate cash runway of our core private companies that have negative cash flow. Of the twenty-four companies that do so, the average cash runway (at current burn rates) is around three years, which gives them the time to focus on their clinical development until the funding markets normalise . Of the six companies with less than one year of runway, two are RTW NewCos, so that is by design. Of the remaining four, only two are in a challenging financial position.
Figure 4. Core private portfolio - approximate cash runway as of 31 December 2022
[chart]
Reflecting their challenged positions, these two companies, Alcyone and Visus, were written down by RTW's Valuation Committee to the tune of -75% and -99%, respectively, through 2022. Figure 5 shows the 2022 valuation changes for all the core private holdings in the portfolio on 31 December 2022. It is important to note that this does not include the value realisations from RTW Royalty Holdings 1 or the changes arising from Cincor's or Third Harmonic's IPOs. Last year, we marked down seventeen of the privates we now hold by an average of 23% and marked up seven by an average of 12%. Apogee Therapeutics' valuation remained unchanged as we only invested in December 2022. 70% of the markdowns were primarily driven by changes to relative comparables or market-based inputs. On the other hand, 71% of the markups were primarily driven by idiosyncratic company performance or a financing or transaction. Our Valuation Committee, which includes an expert internal team, takes a fair value approach to marking our private portfolio, doing so on a monthly basis, with the involvement of multiple third-party valuation companies, with the goal of ensuring there are no surprises for our investors. The Board reviews and challenges these valuations in two semi-annual meetings.
Figure 5. Core private portfolio on 31 December 2022 - year to date valuation changes
[chart]
In summary, the private portfolio is in good shape and we have been active and fair in our valuation of the individual holdings. This foundation provides us with the capacity and the confidence to continue to back our existing holdings should they need it and make new investments as the opportunities arise
We believe there is a significant demand for reliable capital providers such as ourselves, to continue to support scientific innovation and the development of transformative therapies for patients. We expect the portfolio's sector split to remain close to 80% biopharmaceutical assets and 20% medical technology assets. In line with prior prospectus guidance, we anticipate two-thirds of the new investments will be made in mid- to later-stage venture companies and one-third focused on active company building around the discovery and development or licensing and distribution of promising assets.
Key portfolio company events post period end
-- In January 2023, Cincor Pharma entered into an agreement to be acquired by AstraZeneca for a total deal value of US$1.8 billion, a 206% premium to the prior closing market value.
-- In January 2023, Orchestra BioMed combined with RTW's HSAC 2 and started trading on Nasdaq Global Markets under the ticker symbol "OBIO".
-- On 9 February 2023, Mineralys Therapeutics announced pricing of its IPO by offering 12 million shares at US$16.00 per share. The shares began trading on Nasdaq Global Market on 10 February 2023 under ticker "MLYS". Since IPO, Mineralys Therapeutics shares have traded down 7.2% as of 29 March 2023.
-- On 28 March 2023, Milestone Therapeutics announced a $125m strategic financing from the Investment Manager to support Milestone's operations into mid-2025, including etripamil NDA submission and launch in PSVT.
-- Privately-held portfolio companies
-- 25
-- 2021: 25
RTW Investments, LP
30 March 2023
Our Long-Term Strategy
Transforming the lives of millions
Our long-term strategy is anchored in identifying sources of transformational innovations by engaging in deep scientific research and a rigorous idea generation process, which is complemented with years of investment, company building, transactional, and legal expertise.
Identify
Identify transformational innovations
We have developed expertise through our comprehensive study of industry and academic efforts in targeted areas of significant innovation. Thanks to the genome, there is more clarity around the causes of disease. Coupled with exciting new modalities that can address genetic diseases in a targeted way, drug innovation is accelerating.
Engage
Engage in deep research to unlock value
We developed repeatable internal processes combining technology and manpower to comprehensively cover critical drivers of innovation globally. We seek to identify biopharmaceutical and medical technology assets, ascertained through rigorous scientific analysis that have a high probability of becoming commercially viable products and can dramatically change the course of treatment and in some cases bring effective and/or full curative outcomes to patients.
Build
Build new companies around promising academic licences
We have the capabilities to partner with universities and in-license academic programs, by providing capital and infrastructure to entrepreneurs to advance scientific programs. Particularly working in rare diseases, often areas with little existing research and treatment options, means that forming a rare disease-focused company is a way of shining a light on this space and creating a roadmap to eventually developing a curative treatment.
Support
Support full life cycle investment
A key part of our competitive advantage is the ability to determine at what point in a company's life cycle we should support the target asset or pipeline. As a full life cycle investor, we can provide growth capital, creative financing solutions, capital markets expertise, or guidance through investing our time and sharing our collective experience as directors and stewards of tomorrow's most exciting and innovative companies. Taking a long-term full life cycle approach and having a true evergreen structure enables us to avoid the pitfalls and structural constraints of venture-only or public-only vehicles. Our focus is on becoming the best investors and company builders we can be, delivering exceptional results to shareholders and making a positive impact on patients' lives.
Our Strategy in Action
Identify transformational innovations
Avidity Biosciences
RTW focuses on identifying transformational innovations across the life sciences space, specifically backing scientific programs that have the potential to disrupt the prevailing standard of care in their respective disease areas.
Learn more about Avidity Biosciences,
www.aviditybiosciences.com
NAV
4.2%
2021: 4.3%
Portfolio company ownership
<5%
2021:<5%
The need
It is estimated that about 40,000 Americans suffer from myotonic dystrophy, a rare genetic muscular dystrophy with no approved treatment options for patients and their families.
Mission
Avidity is developing antibody oligonucleotide conjugate (AOC(TM)) therapeutics, which combines the tissue selectivity of monoclonal antibodies and the precision of oligonucleotide-based therapeutics to overcome barriers to the delivery of oligonucleotides and target genetic drivers of disease.
Status
In December, Avidity Biosciences announced a positive clinical update on its proof-of-concept Phase 1 trial for AOC 1001, its antibody-siRNA therapy, for myotonic dystrophy. The company is also expanding its pipeline in other rare muscle disorders such as Facioscapulohumeral Muscular Dystrophy, Duchenne Muscular Dystrophy and others.
Next milestone
Avidity is expected to share AOC 1001 Phase 1 clinical progress in H1 2023.
Engage in deep research to unlock value
Prometheus
Our team is comprised of individuals with medical and advanced scientific training and legal and banking experience, enabling a deeply differentiated approach to research, idea generation and strategic investment.
Learn more about Prometheus Biosciences
www.prometheusbiosciences.com
NAV
15.2%
2021: 5.6%
Portfolio company ownership
<5%
2021: <5%
The need
Inflammatory Bowel Disease (IBD) is a chronic inflammatory condition of the GI tract. The pathology of the disease is mixed and without a definitive cause, therefore it represents an area of a high unmet need for a large proportion of patients. Prometheus Biosciences is developing an antibody targeting TL1A, a novel target in IBD. RTW has been an investor in Prometheus since the firm co-led the company's crossover financing US$130 million raise in 2020.
Mission
Prometheus is a biotechnology company developing novel therapeutic and companion diagnostic product candidates for the treatment of immune-mediated diseases, starting with IBD. Its transformational approach brings the power of big data to immune biology, changing lives through patient-centric drug design.
Status
In December 2022, Prometheus shared positive Phase 2 clinical data for ulcerative colitis and Crohn's disease clinical trials with a successful use of companion diagnostic in IBD. The data suggests a best-in-class profile for an IBD therapy.
Next milestone
Prometheus is expected to present further clinical data updates from its Phase 2 trials in IBD in H1 2023.
Building new companies
We engage in new company formation around promising academic licences and beyond. We have the capabilities to partner with universities and in-license academic programs, by providing capital and infrastructure to entrepreneurs to advance scientific programs. We are well-placed to offer support to early-stage life sciences companies and NewCos.
Company creation
Rocket
Danon Disease (AAV) - Halfway between Phase 1 and 2
Fanconi Anaemia (LVV) - Phase 2
Leukocyte Adhesion Deficiency (LVV) - End of Phase 1
Pyruvate Kinase Deficiency (LVV) - Phase 1
BAG3-Associated Dilated Cardiomyopathy - Lighter tint - End of Preclinical
PKP2-Associated Dilated Cardiomyopathy - Lighter tint - Mid of Preclinical
JiXing
OMECAMTIV MECABRIL: HfrEF - End of Phase 3
AFICAMTEN: oHCM - Phase 3
AFICAMTEN: nHCM - Phase 2
AFICAMTEN: HfpEF - Phase 2
ETRIPAMIL: PSVT - Phase 3
ETRIPAMIL: Atrial fibrillation (Afib) - Phase 3
OC-01: Dry eye disease - Phase 3
OC-02: Dry eye disease - Phase 3
LNZ100/101: Presbyopia - Phase 3
JX08: Demodex blepharitis - Lighter tint - Halfway between Preclinical and Phase 1
Yarrow
ASO TECHNOLOGY - Preclinical
Support full life cycle investment
Orchestra (OBIO)
Drug development is not a linear process. There are advancements and setbacks and we are structured to maximise value creation at any point beginning with company creation to late-stage venture and into publicly traded markets. We let the fundamentals and not market movements dictate our investment.
Learn more about Orchestra Biomed
www.orchestrabiomed.com
NAV
1.3%
2021: 0.6%
Portfolio company ownership
<1%
2021: <1%
The need
Orchestra BioMed is a biomedical innovation company accelerating high-impact technologies to patients. Its flagship product candidates include BackBeat Cardiac Neuromodulation Therapy(TM) (CNT(TM)) for the treatment of hypertension, a significant risk factor for death worldwide, and Virtue(R) Sirolimus AngioInfusion(TM) Balloon (SAB) for the treatment of atherosclerotic artery disease, the leading cause of mortality worldwide. The Company has been invested in Orchestra Biomed since the time of its listing on LSE in 2019.
Mission
Orchestra Biomed's partnership-enabled business model focuses on forging strategic collaborations with and licensing patented technologies to leading medical device companies to drive successful global commercialisation of product candidates we develop. The company focuses on advancing promising therapeutic solutions, such as BackBeat CNT and Virtue SAB, through late-stage clinical research and regulatory approvals, while our partners focus on leveraging their commercial expertise and existing infrastructure to bring our product candidates to global markets quickly and efficiently.
Status
In July 2022, Orchestra Biomed announced its plans to list on Nasdaq through a merger with Health Sciences Acquisitions Corporation 2 (HSAQ), an RTW-sponsored SPAC. The RTW team has been delighted to support Orchestra in a turbulent public markets environment and provide an alternative path to becoming a public company.
Next milestone
The business merger occurred in January 2023 with Orchestra Biomed trading on Nasdaq under ticker "OBIO". The transaction had negligible P&L impact as we had anticipated a successful completion in our 31 December 2022 NAV.
Our Business Model
Shaping tomorrow's most disruptive companies
We are full life cycle investors creating value and offering support at any stage, from academic programs all the way to mature publicly traded companies.
What we need to create value
EXPERIENCED TEAM
A collaborative team of doctors, academics, and drug developers coupled with seasoned venture capitalists, investment bankers, lawyers and company operators with a strong culture of compliance.
SCIENTIFIC RIGOUR
Our research process combines wide data-gathering with deep analysis to identify the most compelling assets, technologies, and modalities with the best chance of reaching patients.
FULL LIFE CYCLE INVESTING
Taking a long-term, full life cycle approach and having a true evergreen structure helps us avoid the structural constraints of venture-only or public-only vehicles.
GLOBAL REACH
Great science takes place everywhere in the world. Our priority is to unlock value by advancing early-stage scientific development and delivering innovative therapies to patients in need.
How we create value
We power breakthrough therapies that transform the lives of millions.
Identify transformative assets with high growth potential across the biopharmaceutical and medical technology sectors. Driven by our deep scientific understanding and long-term approach to supporting innovative businesses, we invest in companies developing next-generation therapies and technologies that can significantly improve patients' lives.
IDENTIFY TRANSFORMATIONAL INNOVATIONS AND UNMET NEEDS
We focus on identifying transformational innovations and unmet needs across the life sciences space, specifically backing scientific programs that have the potential to disrupt the prevailing standard of care in their respective disease areas.
INVEST IN DEEP RESEARCH AND LONG-TERM RELATIONSHIPS
We believe in developing long-term relationships with great entrepreneurs and scientists who are as passionate about medicine as we are and working closely with our peers to support companies at any stage of their life cycle.
SUPPORT THROUGH FULL LIFE CYCLE INVESTMENT
A key part of our competitive advantage is the ability to determine at what point in a company's life cycle we should support the target asset or pipeline. As a full life cycle investor, we can provide growth capital, creative financing solution, capital markets expertise, or guidance through investing our time and sharing our collective experience as leaders of tomorrow's most exciting and disruptive companies.
Value created
PATIENT BENEFITS
Innovation is the best medicine. We believe solving unmet patients' needs is the best way to create value.
Number of drugs commercialised by our 10 most successful investments since inception
11 (2021: 10)
Core portfolio companies with clinical stage programs
25 / 39 (2021: 28 / 42)
SHAREHOLDERS
Privileged access to private markets and bespoke negotiated opportunities
Total shareholder return since admission
+16.3% (2021: 71%)
NAV per ordinary share growth since inception
+47.6% (2021: 38.1%)
PORTFOLIO COMPANIES
We support teams through the inevitable setbacks that occur when introducing a first-in-class or disruptive therapy.
NAV deployed into core portfolio companies
70.9% (2021: 66%)
RTW CHARITABLE FOUNDATION
Founded as the Charitable Foundation arm of RTW, RTWCF partners with organisations conducting disease research and championing humanitarian causes.
Number of humanitarian grants
10 (2021: 9)
- 8 COVID Recovery grants in NYC, 1 STEM education grant in NYC (BioEYES), and 1 emergency response grant for Ukraine (Razom).
Operational and Financial Review for the Year
Leading with innovative asset creation
MARKET CAPITALISATION
The Company's market capitalisation declined from US$378 million at 31 December 2021 to US$257 million at 31 December 2022. The Company issued no shares during the year and did not repurchase any shares so the decline in the market capitalisation of its shares is solely attributable to the decline in the Company's share price.
ORDINARY NAV
The Ordinary NAV of the Company declined from US$363 million to US$326 million during the year. The main driver of the decline was the share price performance of publicly-listed portfolio companies within the Group's portfolio as realised gains from the sale of private investments were offset by fair value write downs of the remaining private investments. The majority of the private portfolio's fair value (excluding royalty investments) is made up of convertible preferred stock and convertible notes, which offers a degree of downside protection given their senior positioning in the capital structure. Additionally, in the last three months before year end, the majority of the private investment valuations were updated by independent third-party valuers.
An approximate attribution of the Group's performance is provided below
Private Core Realised
Gain +4.9%
Private Core Mark to
Market -5.2%
Public Core Mark to
Market +0.1%
Other Public Mark to
Market -9.3%
Income, Expense and
Other Offsets (1) -0.7%
-------
Net Performance -10.2%
-------
(1) Other Offsets are both the mark to market on the Performance Allocation Share for the period from 1 January 2022 through 30 November 2022 and Non-Controlling Interest for the period from 1 December 2022 through 31 December 2022.
NAV PER ORDINARY SHARE
The -10.2 % decline in NAV per Ordinary Share was driven by the decline in the Company's ordinary NAV as the number of shares in issue did not change during the year.
PREMIUM / DISCOUNT
The Company's shares traded on average at a c. 12% discount due to reduced market demand for growth and venture capital assets during the reporting period. At the year-end, the Company's Ordinary Shares were trading at a 21.2% discount to NAV (2021: 4.1% premium to NAV; 2020: 4.1% discount to NAV).
TOTAL RETURN TO SHAREHOLDERS BASED ON ORDINARY NAV
As the Company has not paid dividends, the negative total return for the year of -10.2 % (2021: -12.8%) equates to the decline in NAV per Ordinary Share. There was no performance allocation triggered during the reporting period as the total shareholder return based on ordinary NAV movements was negative.
TOTAL RETURN TO SHAREHOLDERS BASED ON SHARE PRICE
The negative share price return of -32.0% in the year compared to the NAV movement of -10.2% was the result of a decline in demand for growth companies that are not currently profitable as interest rates increased in the US and UK. Investors also assumed that private companies within venture capital portfolios would be subject to substantial market-based valuation adjustments leading to a cyclical widening of share price discounts. Companies with the highest proportion of private growth assets experienced the most significant widening.
ONGOING CHARGES
The Group's ongoing charges ratio is 1.92%, calculated in accordance with the AIC recommended methodology, which excludes non-recurring costs and interest payable and uses the average NAV in its calculation.
Highlights
Market Capitalisation as of 31 Dec 2022
2022: US$257m
2021: US$378m
2020: US$360m
Ordinary NAV as of 31 Dec 2022
2022: US$326m
2021: US$363m
2020: US$375m
Premium to NAV discount as of 31 Dec 2022
2022: -21.2%
2021: +4.1%
2020: -4.1%
Ongoing charges as of 31 Dec 2022
2022: 1.92%
2021: 1.73%
2020: 1.96%
Our Key Performance Indicators
Measuring our performance
The Board has identified the following indicators for assessing the Group's annual performance in meeting its objectives:
Financial KPIs
NAV Growth
PERFORMANCE
Performance of the portfolio companies and cash management strategy net of all fees and costs
KEY FACTORS
-- Portfolio performance and progression through clinical trials -- Cash management -- Capital pool and deployment -- Scientific and financial risks
PROGRESS
Ordinary NAV
2022: -10.2%
2021: -12.8%
During the reporting period this was largely driven by public companies' share price performance.
FUTURE INTENT
Achieve superior long-term capital appreciation; target an annualised total return of 20% over the medium term
LINK TO STRATEGY
Identify
Engage
Build
Support
LINK TO PRINCIPAL RISKS
Failure to achieve investment objective
Exposure to global political and economic risks
Clinical Development & Regulatory Risks
Total shareholder return
PERFORMANCE
Delivering value to the shareholders
KEY FACTORS
-- Portfolio performance -- Liquidity of RTW.L shares -- General market sentiment
PROGRESS
Return
2022: -32.0%
2021: -5.3%
FUTURE INTENT
Achieve superior long-term capital appreciation; target an annualised total return of 20% over the medium term
LINK TO STRATEGY
Identify
Engage
Build
Support
LINK TO PRINCIPAL RISKS
Failure to achieve investment objective
Exposure to global political and economic risks
Clinical Development & Regulatory Risks
Premium/discount to NAV
PERFORMANCE
The level of supply and demand for the Company's shares
KEY FACTORS (in order of impact at year end)
-- The percentage of private growth assets within the Group's portfolio -- Portfolio performance -- Liquidity of the Company's shares -- Governance
PROGRESS
Premium/discount to NAV (average during the year)
2022: -12%
2021: 10%
FUTURE INTENT
Return to par or a premium to NAV such that total shareholder returns more closely match NAV performance
LINK TO STRATEGY
Identify
Engage
Build
Support
LINK TO PRINCIPAL RISKS
Failure to achieve investment objective
Exposure to global political and economic risks
Percent of NAV invested in core portfolio companies
PERFORMANCE
Level of capital deployment into core portfolio companies
KEY FACTORS
-- Level of capital deployment and investment pace, as well as availability of funds to be deployed into new portfolio companies or for follow-on investments into existing portfolio companies
PROGRESS
NAV invested in core portfolio
2022: 71%
2021: 66%
Deployed into core portfolio companies
FUTURE INTENT
Identify transformative assets with high growth potential across the biopharmaceutical and medical technology sectors
LINK TO STRATEGY
Identify
Engage
Build
Support
LINK TO PRINCIPAL RISKS
Clinical Development & Regulatory Risks
The Investment Manager relies on key personnel
Exposure to global political and economic risks
Non-financial KPIs
Geographic & therapeutically diversified portfolio
PERFORMANCE
Measures the Group's commitment to invest in best-in-class science and innovative assets worldwide
KEY FACTORS
-- Continue to diversify within life sciences sector, looking for opportunities globally and also support local biotech ecosystems
PROGRESS
Therapeutic areas addressed
2022: 10
2021: 10
Core portfolio companies' focus spans multiple therapeutic areas, treatment modalities and geographies.
FUTURE INTENT
Continue investing in and supporting companies developing next generation therapies and technologies that can significantly improve patients' lives
LINK TO STRATEGY
Identify
Engage
Build
Support
LINK TO PRINCIPAL RISKS
Clinical Development & Regulatory Risks
Exposure to global political and economic risks
Active and robust pipeline
PERFORMANCE
Delivers transformational new treatments and medical devices to patients in need.
KEY FACTORS
-- Balance and breadth of the pipeline across all clinical stages -- Data readouts and progress through multiple clinical stages -- Commercial opportunity and competitive landscape
PROGRESS
Portfolio companies have leading programs in a clinical stage
2022: 68%
2021: 67%
Capturing a spectrum of early-stage Phase 1 to late stage Pivotal
FUTURE INTENT
Progress towards delivering transformational treatments to patients in areas of high unmet need.
LINK TO STRATEGY
Identify
Engage
Build
Support
LINK TO PRINCIPAL RISKS
Clinical Development & Regulatory Risks
Exposure to global political and economic risks
Imposition of pricing controls
Risk Management
Applying deep scientific expertise with a long-term investment horizon
Our long-term strategy is anchored in identifying transformative assets with high growth potential across the biopharmaceutical and medical technology sectors. Driven by our deep scientific understanding and a long-term approach to supporting innovative businesses, we invest in companies developing next-generation therapies and technologies that can significantly improve patients' lives. With this significant opportunity also comes risk.
Our risk framework is overseen by the Audit Committee under delegation from the Board. Multiple parties contribute to managing risk, including the Board, the RTW team, and the Group's other advisers.
Risk framework
Our risk framework begins with the Investment Policy, and the Board, which oversees the Company's operation in accordance with the Investment Policy and the process to ensure a robust assessment of principal and emerging risks and potential future risks, and receives an update at each Board meeting. A risk register is maintained that sets out our principal and emerging risks and how we mitigate them. The RTW team is responsible for day-to-day operation and oversight of the risk framework. The RTW team has a culture of transparency, ensuring that any developments are shared and addressed effectively with the benefit of input from the whole team, and reported to the Board where appropriate. We rely on having highly experienced personnel to support and manage issues as they arise.
The Audit Committee oversees and monitors the risk framework, including reviewing the risk register to ensure it properly captures the principal and emerging risks, overseeing the framework for identifying risks (including potential future risks), reviewing the ongoing operation and effectiveness of our control environment to manage the principal and emerging risks we face, and ensuring that any actions identified are taken forward by the RTW and Elysium teams as appropriate. This review process provides a focus to drive continuous improvement in our risk processes.
Identifying principal and emerging risks
We evaluate our principal and emerging risks on an ongoing basis using both top-down and bottom-up inputs. We also continuously assess future risks that could have a potential impact. During the year the Board and the Investment Manager had ongoing discussions to consider current and potential risks of the Group. The discussions also generated insights into a range of potential emerging risks and have helped to focus attention on additional areas for monitoring by the Board and the Investment Manager.
The RTW team carries out a bottom-up review, considering each of our life science companies and our internal operations, both as a specific exercise and on an ongoing basis through regular monitoring of our portfolio companies. In doing this we draw on the underlying assessments by the management teams of each of our life science companies. These inputs are brought together in our risk register, which is reviewed by the Audit Committee in detail each year. The principal and emerging risks identified by the Board are set out on below. These have not substantially changed in the last year, although COVID-19 is no longer considered to be a principal risk of the Group. The Board also monitors future risks that may arise, including the longer-term risks of changes to US pharmaceutical drug pricing and US FDA productivity.
Risk management structure
Board of Directors
Risk management leadership
Audit Committee
Reviews and monitors the risk framework
RTW Team
Risk management is integral to the investment process and financial management Implementing and monitoring risk controls; risk reporting
Other advisers
Risk identification; risk reporting
Portfolio companies' management teams
Risk identification and mitigation
Risk appetite
The Board is willing to accept a level of risk in managing our business to achieve our strategic goals. As part of the risk framework, the Board sets the risk appetite in relation to each of the principal and emerging risks and monitors the actual risk against that. Where a risk is approaching or moves to the higher end of what the Board deems to be acceptable, the Board will consider the actions being taken to manage it. This year the Audit Committee carried out a detailed review of the defined risk types, to ensure they continue to reflect the understanding of the Board and accurately reflect the risks we take. Following that review the Audit Committee recommended to the Board that the risk appetite remained appropriate, and the Board has accepted that recommendation.
Principal and Emerging Risks and Uncertainties
Principal risks and how we mitigate them
Under the FCA's Disclosure Guidance and Transparency Rules the Directors are required to identify the material risks to which the Group is exposed, and the steps taken to mitigate those risks.
The Group has five categories of risks in its risk register namely:
-- Investment Risks -- Operational Risks -- Governance/Reputational Risks -- External Risks -- Emerging Risks
Investment Risks
1. FAILURE TO ACHIEVE INVESTMENT OBJECTIVE
RISK DESCRIPTION
The Group's target return on net assets is not guaranteed and may not be achieved.
RISK CONTROL MEASURES
The Board will monitor and supervise the Group's performance, compared to the target return, similar investment funds and broader market conditions. Where performance is unsatisfactory, the Board will discuss the appropriate response with the Investment Manager.
DECREASING
STRATEGIC LINK
Build
Support
Operational Risks
2. COUNTERPARTY RISK
RISK DESCRIPTION
The Group has the potential to be exposed to the creditworthiness of trading counterparties in OTC derivatives contracts, its prime broker in the event of re-hypothecation of its investments and any counterparty where collateral or cash margin is provided or where cash is deposited in the normal course of business.
RISK CONTROL MEASURES
The Group uses Goldman Sachs, Morgan Stanley and Bank of America Merrill Lynch, JP Morgan and Jefferies as prime brokers and Cowen, UBS, Bank of America Merrill Lynch, Goldman Sachs, Jefferies, and Morgan Stanley as ISDA counterparties. To monitor counter party risk, the Investment Manager monitors fluctuations in share prices, percentage changes in daily, monthly, and annual 5-year CDS spreads and S&P credit ratings. If a counterparty group share price moves up or down in excess of 20%, the trader at the Investment Manager is alerted immediately. In case of an alert, the trader notifies RTW's Chief Compliance Officer. There has been no disruption in operations with the Group's counterparties to date. The Group's bankers are an offshore branch of Barclays Bank PLC and are also included in the Investment Manager's CDS monitoring program.
STABLE
STRATEGIC LINK
Identify
Engage
Build
Support
Governance/Reputational Risks
3. THE INVESTMENT MANAGER RELIES ON KEY PERSONNEL
RISK DESCRIPTION
The Investment Manager relies on the founder of RTW, Roderick Wong M.D. Roderick Wong is a key figure at the Investment Manager and is extensively involved in investment decisions.
RISK CONTROL MEASURES
In the event that Roderick Wong was to no longer work for the Investment Manager or was incapacitated, the Board is able to terminate the Investment Management Agreement within 180 days if a suitable replacement has not been found and would consider whether it was appropriate to wind up the Group and return capital to shareholders, or to appoint a new Investment Manager.
STABLE
STRATEGIC LINK
Identify
Engage
Build
Support
4. PORTFOLIO COMPANIES MAY BE SUBJECT TO LITIGATION
RISK DESCRIPTION
Portfolio Companies may be subject to product liability claims. Such liability claims would have a direct financial impact and may impact market acceptance even if ultimately rebutted.
RISK CONTROL MEASURES
The Investment Manager's due diligence process includes considering the risk that innovative therapies may have unforeseen side effects, based on the Investment Manager's extensive sector knowledge and experience, published research, and publicly available information.
STABLE
STRATEGIC LINK
Identify
Engage
Build
Support
External Risks
5. EXPOSURE TO GLOBAL POLITICAL AND ECONOMIC RISKS
RISK DESCRIPTION
It is anticipated that approximately 75% of investments will be in US companies or licensing agreements with US institutions and 25% of investments will be made outside of the US. The Group's investments will be exposed to foreign exchange, and global political, economic, and regulatory risks.
RISK CONTROL MEASURES
The Investment Manager has extensive experience transacting across the global healthcare marketplace and will be responsible for identifying relevant events and updating the investment plans appropriately.
STABLE
STRATEGIC LINK
Engage
Build
Support
6. CLINICAL DEVELOPMENT & REGULATORY RISKS
RISK DESCRIPTION
New drugs, medical devices and procedures are subject to extensive regulatory scrutiny before approval, and approvals can be revoked.
RISK CONTROL MEASURES
The Investment Manager's due diligence process includes a rigorous process of assessing preclinical and clinical assets and their probabilities of success to become an approved product utilizing scientific, clinical, commercial and regulatory benchmarks. Additionally, the Investment Manager's process of evaluation includes assessing the likely attitude of regulators towards a potential new therapy. The due diligence will also consider the unmet need of the disease and whether the therapy offers advantages over the current standard of care.
STABLE
STRATEGIC LINK
Identify
Engage
Build
Support
7. IMPOSITION OF PRICING CONTROLS FOR CLINICAL PRODUCTS AND SERVICES
RISK DESCRIPTION
Portfolio Company products may be subject to price controls, price gouging claims and other pricing regulation in the US and other major markets; or government healthcare systems may be the major purchasers of the products.
RISK CONTROL MEASURES
While future political developments cannot be reliably forecast, the Investment Manager's due diligence process includes an assessment of political risk, and the likely acceptability of the investee's pricing intentions.
STABLE
STRATEGIC LINK
Build
Support
8. INFLATION
RISK DESCRIPTION
The unprecedented level of fiscal and monetary stimulus that has been applied to the global economy has caused US inflation to surge to a 40-year high and resulted in sharp falls in the share prices of technology firms without current earnings.
RISK CONTROL MEASURES
The creation of value through innovation in the biotechnology sector outweighs the singular and/or short-term adjustment to valuation levels arising from changes in discount rates as a result of rising inflation. The Investment Manager holds investments that have current earnings and cash-flows and has significant exposure to Phase 3 products which have a high probability of achieving cash-flows in the near-term. Whilst the pace of interest rate rises has moderated in reaction to reductions in US inflation it is not possible to say that this risk is reducing yet as inflationary pressures remain.
STABLE
STRATEGIC LINK
Identify
Engage
Build
Support
9. UKRAINE WAR
RISK DESCRIPTION
The ongoing war in Ukraine has led to the imposition of harsh sanctions on Russia and substantial restrictions on the ability to transact in Russian securities and trade with Russian companies. These sanctions and the corresponding impact on commodity and transport costs have weighed on the global economy.
RISK CONTROL MEASURES
The Investment Manager has confirmed that the Group has no direct or indirect exposure to Russian securities or assets.
STABLE
STRATEGIC LINK
Identify
Engage
Build
Support
Emerging Risks
10. AVAILABILITY OF CAPITAL
RISK DESCRIPTION
Funding for early stage venture companies through smaller public companies is much reduced in comparison to recent years. The IPO market is at its lowest level in a decade and follow-on offerings declined for the second year in a row, back to the lowest level since 2016's drug pricing panic. The Russell 2000 Biotech Index of listed LifeSci companies has declined for a second year in a row to give a cumulative drawdown of 49.8%, with the 69.9 % fall from 8 February 2021 to 11 May 2022 approaching the worst in recent decades, being the 84.7% decline from 6 March 2000 to 11 March 2003. With a record number of companies trading at less than 1x their cash balances, the market appears to believe that not all companies will survive. With reduced availability of capital allocation to the sector, in particular through the absence of generalist investors, there may be the risk that not all sponsors have enough capital to support the continued financing of all investees.
RISK CONTROL MEASURES
The Investment Manager is a long-standing full life-cycle investor in the sector, in many instances supplying commercial expertise and advice to investees in addition to supporting successive financing rounds. The Investment Manager is experienced in identifying potential in companies that have strong fundamentals at attractive valuations that create an asymmetric and attractive risk/reward profile. The Board formally reviews the financing status of the Group's private portfolio with the Investment Manager at least twice each year at Board meetings. 25% of the Group's NAV is exposed to private companies of which only one quarter will need refinancing within the next 12 months and most of these companies have re-financing plans in place. Out of these six private companies (amounting to 6.25% of NAV) two are RTW NewCos, so that is by design. Approximately 29% of the Group's NAV is currently invested in other publicly listed companies in lieu of holding cash for future private investments with a further 46% of NAV invested in core publicly listed holdings that could also be sold. The Group has no net borrowings. The Group therefore retains significant access to sources of liquid capital to enable it to support investees for the foreseeable future.
INCREASING
11. LIQUIDITY RISK
RISK DESCRIPTION
Many investees are not yet at a stage of their life cycle where they are inherently cash-generative and enjoy stable, predictable free cash-flow. They have typically raised significant amounts of cash which are then held in bank deposits and liquid securities to meet operational requirements until their next planned capital raising round or IPO. In recent weeks there have been several high-profile bank failures, some of which, but not all, are to some extent attributable directly or indirectly to rising policy interest rates and rising long-term yields in response to sustained inflationary pressures. To the extent that investees keep their cash on deposit at such banks, there is a risk that they may suffer a partial or total loss of their capital and suffer a consequent liquidity crisis threatening their ability to continue their planned development.
RISK CONTROL MEASURES
The Investment Manager closely monitors counterparty exposures in its portfolio companies. Exposures to recent bank failures have been minimal in that four portfolio companies totalling 1.68% of Group NAV had some exposure to Silicon Valley Bank. Portfolio companies will typically manage their treasury functions on a prudent basis, spreading exposure over several counterparties thereby avoiding catastrophic losses from any single failure. Where the Investment Manager becomes aware of significant risk concentration it will engage with investees to encourage more prudent diversification. The Board also notes that, to date, regulators have ensured that no depositors have lost funds in such banking failures although it recognises that this may not necessarily be achieved in the future.
STABLE
Longer Term Viability Statement
Realising a robust and resilient company
ASSESSING THE PROSPECTS OF THE GROUP
The corporate planning process is underpinned by scenarios that encompass a wide spectrum of potential outcomes. These scenarios are designed to explore the resilience of the Group to the potential impact of significant risks set out below.
The scenarios are designed to be severe but plausible and take full account of the availability and likely effectiveness of the mitigating actions that could be taken to avoid or reduce the impact or occurrence of the underlying risks and which would realistically be open to management in the circumstances. In considering the likely effectiveness of such actions, the conclusions of the Board's regular monitoring and review of risk and the Investment Manager's internal control systems is taken into account.
The Board reviewed the impact of stress testing the quantifiable risks to the Group's cash flows as detailed in risk factors 1-5 and concluded that the Group, would have sufficient working capital to fund its operations in the following extreme scenario:
(1) The Group incurred NAV losses of 39% of NAV over a three-year period ending 28 February 2026.
(2) No new capital was raised.
(3) US$45 million of private investments were funded from cash and by selling public portfolio investments.
To provide some context for this scenario, the NASDAQ Biotech Index was in a 26% drawdown at the end of February and the additional 39% drawdown that we have modelled simulates a total drawdown of approximately 55% which has only been exceeded on a rolling 3-year basis once in the life of the index in Q1 2003 at the end of the technology bubble .
The Board considers that this stress testing-based assessment of the Group's prospects is reasonable in the circumstances of the inherent uncertainty involved.
THE PERIOD OVER WHICH WE CONFIRM LONGER TERM VIABILITY
Within the context of the corporate planning framework discussed above, the Board has assessed the prospects of the Group over a three-year period ending 28 February 2026. Whilst the Board has no reason to believe the Group will not be viable over a longer period, given the inherent uncertainty involved, the period over which the Board considers it possible to form a reasonable expectation as to the Group's longer-term viability, based on the stress testing scenario planning discussed above, is the three-year period to February 2026. This period is used for the Investment Manager's business plans and has been selected because it presents the Board and therefore readers of the Annual Report with a reasonable degree of confidence whilst still providing an appropriate longer-term outlook.
CONFIRMATION OF LONGER-TERM VIABILITY
The Board confirms that it has carried out a robust assessment of the emerging and principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. Based upon the robust assessment of the principal and emerging risks facing the Group and its stress testing-based assessment of the Group's prospects, the Board confirms that it has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period to February 2026.
On behalf of the Board
William Simpson
Chairman
30 March 2023
Section 172
Close collaborators and committed partners
Section 172 of the Companies Act 2006 applies directly to UK domiciled companies. Nonetheless the AIC Code requires that the matters set out in section 172 are reported on by all companies, irrespective of domicile, provided this does not conflict with local company law.
Section 172 recognises that directors are responsible for acting in a way that they consider, in good faith, is the most likely to promote the success of the Group for the benefit of its shareholders as a whole. In doing so, they are also required to consider the broader implications of their decisions and operations on other key stakeholders and their impact on the wider community and the environment. Key decisions are those that are either material to the Group or are significant to any of the Group's key stakeholders. The Group's engagement with key stakeholders and the key decisions that were made or approved by the Directors during the year are described below.
Stakeholder group Methods of Benefits of engagements
engagement
Shareholders
Continued access to capital The Group In the financial year
is vital to the Group's engages with the Group issued:
longer term growth objectives, its * 10 portfolio updates by way of RNS
and therefore, in line shareholders
with its objectives, through
the Group seeks to maintain the issuance * 12 monthly NAV announcements by way of RNS
shareholder satisfaction of regular
through: portfolio
* Positive risk-adjusted returns updates in * Fact sheets on a quarterly basis
the form of
RNS
* Continuous communication of portfolio updates announcements * Annual and Interim Reports
and quarterly
factsheets.
The Group Through its roadshows
provides and broker outreach,
in-depth the Group has met with
commentary on 75+ investors / prospective
the investment investors.
portfolio,
corporate
governance and
corporate
outlook in its
Annual
and Interim
Reports and
financial
statements.
In addition,
the Group,
through its
brokers and
Investment
Manager,
undertakes
regular
roadshows to
meet with
existing and
prospective
investors
to solicit
their
feedback,
understand any
areas
of concern,
and share
forward
looking
investment
commentary.
The Board
receives
quarterly
feedback from
its brokers
in respect of
investor
engagement and
investor
sentiment.
---------------- --------------------------------------------------
Service providers
The Group does not have The Group has The feedback given by
any direct employees; identified the service providers
however, it works closely its key is used to review the
with a number of service service Group's policies and
providers (the Investment providers procedures to ensure
Manager, Administrator, and on an open lines of communication,
Sub-Administrator, Corporate annual basis and operational efficiency.
Secretary, auditor, third undertakes a
party valuation agent, review of
brokers and other professional performance
advisers). based on
a
The independence, quality questionnaire
and timeliness of their through
service provision is which it also
critical to the success seeks
of the Group. feedback.
Furthermore,
the Board
and its
sub-committees
engage
regularly with
its service
providers
on a formal
and informal
basis.
The Group will
also regularly
review all
material
contracts
for service
quality and
value.
---------------- --------------------------------------------------
Portfolio Companies
The Group is currently The Investment Honesty, fairness and
invested in 39 Core Portfolio Manager integrity of the management
Companies. engages on a teams of the portfolio
regular companies are vital to
basis with its the long-term success
portfolio of the Group's investments.
companies in
order to
conduct
regular
on-going
due diligence
and to
meet
obligations if
the
Investment
Manager holds
a board seat.
---------------- --------------------------------------------------
Community & Environment
The Group does not have The Group aims The Group and the Directors
direct employees. to minimise minimise air travel by
its making maximum use of
environmental video conferencing for
footprint. Company related matters.
Climate change impact
The Group does
RTW Charitable Foundation not anticipate
was created by the Investment any material To research grant recipients,
Manager with the vision impact to RTW Charitable Foundation
to work towards a world its business offers not only financial
free of ultra-rare disease. model from support, but also guidance
The Foundation funds climate gleaned from the experience
research of rare conditions change. of the Investment Manager
that do not attract significant in drug development and
outside investment due RTW Charitable company building.
to limited commercial Foundation Beyond research, RTW
opportunity represents an Charitable Foundation
extension offers support to humanitarian
of the causes, initiatives that
Investment raise disease awareness
Manager's and programs with direct
mission. Its patient impact.
research
process helps
RTW identify
important
causes of
human
suffering and
introduces
the firm to
individuals
and
organisations
trying
to make a
difference.
---------------- --------------------------------------------------
ESG: Environmental, Social and Governance Topics
Responsible investing
The Board has directed the Group to initiate an ESG assessment in 2023, to plan for forecasted regulatory measures, including the United Kingdom's proposed Sustainability Disclosure Requirements, and pave the way for reporting of the Group's ESG considerations to shareholders. The Group does not have direct employees or physical office space, and most of its activities are performed by other organisations. Therefore, the Group's carbon footprint should be relatively small because it does not directly contribute to fuel combustion or any other greenhouse gas emissions. Three of the four Directors, as well as the Administrator, Company Secretary are all based in Guernsey where Board meetings are held, thus reducing the environmental impact of long commutes and flights. The Group's ESG assessment will also address indirect impacts on ESG factors.
The Investment Manager's operations are highly concentrated in its primary office space located in a building that is LEED Gold Certified based on, among other things, the sustainability of its location, water efficiency, energy and atmosphere characteristics, use of materials and resources, indoor environmental quality, and innovation. The Investment Manager espouses a strong culture of compliance, risk management and ethical behaviour. It aims to always act in the best interests of shareholders, employees and stakeholders. Its corporate code of ethics addresses the largest areas of risk pertaining to the alternative asset management industry, including but not limited to conflicts of interest, anti-bribery, employee investing, insider trading and political contributions. Furthermore, it seeks to ensure that investments do not lead to negative impacts on public health or well-being or contribute to human or labour rights violations, corruption, serious environmental harm or other actions which may be perceived to be unethical. It seeks long-term investment partners that evidence equivalent professional and ethical rigour. The Investment Manager is wholly-owned by minority and/or female shareholders.
RESPONSIBLE INVESTING
The Board believes that acting and investing responsibly is a necessary foundation for the long-term sustainability of investment success. The Investment Manager's stated mission, to power breakthrough therapies that transform the lives of million s, is an approach to investing that is inherently socially conscious. Its team of scientists and researchers work tirelessly to find treatments and potentially cures for diseases and conditions in order to improve quality of life across the globe. As a guiding principle, it prioritises overall positive impact on patients and long-term meaningful outcomes to society and believes this is the foundation of the Group's success.
RTW CHARITABLE FOUNDATION
The Investment Manager created the RTW Charitable Foundation ("RTWCF") with its vision to work towards a world free of ultra-rare disease. It was founded at the intersection of scientific progress and humanitarian effort. While working to improve human health on a global scale is an inspiring undertaking, the RTWCF brings hope to those with conditions so rare that they do not attract significant outside investment due to the limited potential for commercial opportunity. RTWCF's mission is to power rare disease research, medical innovation and humanitarian collaborations to improve the health of underserved communities.
It is able to provide capital, manpower, and logistical support to help scientists push projects forward. In addition, it aims to contribute to advocacy, disease awareness and direct support of organisations and communities in New York City.
RTWCF provides research grant recipients financial support as well as guidance gleaned from the Investment Manager's experience in drug development and company building.
CASE STUDY
Improving vaccine access
In August 2021, some NYC neighbourhoods had less than 35% of residents fully vaccinated, when the city average was roughly 55%. The New York City Department of Health and Mental Hygiene found that distrust in government and drug companies created hesitancy in vaccine uptake. We say this often - RTWCF was one of the first to support our recovery efforts and helped pave the way to our impact and reimagined programs. We're excited to reach new heights together. New Immigrant Community Empowerment (NICE) supports immigrant workers and their families by advocating for workplace safety and rights, providing skills training, and connecting families with resources. During the pandemic, NICE expanded their services to include food access, vaccine support, and financial assistance. RTWCF partnered with NICE to distribute 10,000 meal and grocery packages, conduct comprehensive community outreach around COVID-19 vaccination safety, and throw a Vaccine Access Block Party. In 2021, NICE helped over 5,000 people access COVID vaccines by translating appointment registration documents, educating people on the vaccine, and accompanying people to appointments.
CASE STUDY
Building education access
Areté Education designs interactive afterschool and summer programs to teach students in the South Bronx about leadership skills, wellness, diverse career paths, and arts & culture. During the pandemic, children living in temporary housing had limited access to education when schools moved to remote learning. With RTWCF's support, Areté Education created the Areté Hope Network Program to provide direct assistance to families struggling during the pandemic. Eighteen students and families with unstable housing received stipends, groceries, hotspots, laptops, and mentoring to improve children's attendance rates and academic performance. Students' engagement and attendance improved dramatically: all students in warning groups labeled "chronically absent" or "severely chronically absent" moved out of those warning groups during the intervention. Ninety-three percent of participants had attendance rates of 80% or higher including 50% with perfect attendance through the course of the program.
Each of our days of action have been really inspirational and powerful, it is a way to feel connected. We are really hands on, doing the work physically not just mentally or through spirit. We combine all of these elements on our journey at work to make a difference.
Consolidated Statement of Assets and Liabilities
as at 31 December 2022 and 31 December 2021
(Expressed in United States Dollars)
2022 2021
ASSETS:
Investments in securities, at fair value (cost at 31 December 2022:
$259,472,596; 31 December
2021: $271,421,062) 350,125,577 409,179,507
Derivative contracts, at fair value
(cost at 31 December 2022: $2,614,659 ;
31 December 2021: $ 2,348,062) 21,467,649 10,983,574
Cash and cash equivalents 6,966,168 6,484,057
Due from brokers 22,195,456 12,323,965
Receivable from unsettled trades 439,798 200,695
Other assets 345,750 191,565
TOTAL ASSETS 401,540,398 439,363,363
------------- ------------
LIABILITIES:
Securities sold short, at fair value
(proceeds at 31 December 2022: $15,407,927 ;
31 December 2021: $ 9,620,981) 12,438,334 9,318,393
Derivative contracts, at fair value
(proceeds at 31 December 2022: nil ;
31 December 2021: $nil) 8,926,743 3,310,833
Due to brokers 25,823,016 38,019,859
Payable for unsettled trades 5,561,560 492,007
Accrued expenses 866,756 861,545
TOTAL LIABILITIES 53,616,409 52,002,637
------------- ------------
TOTAL NET ASSETS 347,923,989 387,360,726
============= ============
NET ASSETS attributable to Ordinary Shares
(shares at 31 December 2022: 212,389,138;
31 December 2021: 212,389,138) 326,079,521 363,040,222
============= ============
NET ASSETS attributable to Non-Controlling Interest 21,844,468 -
============= ============
NET ASSETS attributable to Performance Allocation Shares (shares at 31 December
2022: 0;
31 December 2021: 1) - 24,320,504
============= ============
NAV per Ordinary Share 1.5353 1.7093
============= ============
The audited consolidated financial statements of the Group were approved and authorised for issue by the Board of Directors on 30 March 2023 and signed on its behalf by:
William Simpson Paul Le Page Chairman Director
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments
as at 31 December 2022
(Expressed in United States Dollars)
Number Percentage
Descriptions of Shares Cost Fair Value of Net Assets
--------------------------------- ----------- ------------- ------------- ---------------
Investments in securities,
at fair value
Common stocks
United States
Healthcare
Prometheus Biosciences,
Inc. 670,916 6,802,058 52,946,904 15.22
Rocket Pharmaceuticals,
Inc. 2,400,755 8,188,796 46,982,775 13.50
Others* 124,096,539 118,157,365 33.96
Total United States 139,087,393 218,087,044 62.68
Netherlands
Healthcare 4,368,486 5,345,551 1.54
Ireland
Healthcare 4,099,988 2,981,309 0.86
Canada
Healthcare 3,275,323 1,012,216 0.29
British Virgin Islands
Healthcare 547,564 997,552 0.29
China
Healthcare
Ji Xing Pharmaceuticals
Ltd. 541,205 216,482 600,738 0.17
Cayman Islands
Financials 254,581 257,459 0.07
Healthcare 188,880 194,370 0.06
------------- ------------- ---------------
Total Cayman Islands 443,461 451,829 0.13
Bermuda
Healthcare 260,330 208,004 0.06
Belgium
Healthcare 165,629 32,919 0.01
Total common stocks 152,464,656 229,717,162 66.03
* No individual investment security or contract constitutes greater
than 5 percent of net assets.
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2022
(Expressed in United States Dollars)
Number Percentage
Descriptions of Shares Cost Fair Value of Net Assets
------------------------------------ ----------- ------------ ------------ ---------------
Investments in securities, at
fair value (continued)
Convertible preferred stocks
United States
Healthcare* 44,011,844 38,108,351 10.95
China
Healthcare
Ji Xing Pharmaceuticals
Ltd. 10,599,945 14,824,185 16,433,316 4.73
Others 1,771,209 1,622,898 0.47
------------ ------------ ---------------
Total China 16,595,394 18,056,214 5.20
Switzerland
Healthcare 1,729,518 1,768,384 0.51
Ireland
Healthcare 116,545 117,696 0.03
Total convertible preferred
stocks 62,453,301 58,050,645 16.69
American depository receipts
United Kingdom
Healthcare
Immunocore Holdings plc 453,985 11,440,789 25,908,924 7.45
Others 1,064,820 813,170 0.23
------------ ------------ ---------------
Total United Kingdom 12,505,609 26,722,094 7.68
Netherlands
Healthcare 8,996,563 9,918,906 2.85
Ireland
Healthcare 893,338 961,567 0.28
Sweden
Healthcare 339,248 528,539 0.15
Israel
Healthcare 372,743 98,985 0.03
Total American depository
receipts 23,107,501 38,230,091 10.99
* No individual investment security or contract constitutes greater
than 5 percent of net assets.
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2022
(Expressed in United States Dollars)
Number Percentage
Descriptions of Shares Cost Fair Value of Net Assets
----------------------------------- ----------- ------------ ------------ ---------------
Investments in securities, at fair
value (continued)
Investment in private investment
companies
Ireland
Healthcare 11,814,933 14,074,846 4.04
Total investment in private
investment companies 11,814,933 14,074,846 4.04
Convertible notes
China
Healthcare
Ji Xing Pharmaceuticals
Ltd. 762,474 7,624,737 8,191,552 2.35
United States
Healthcare 2,007,468 1,861,281 0.53
Total convertible notes 9,632,205 10,052,833 2.88
Total investments in securities,
at fair value 259,472,596 350,125,577 100.63
============ ============ ===============
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2022
(Expressed in United States Dollars)
Percentage
Descriptions Cost Fair Value of Net Assets
----------------------------------------- ---------- ----------- ---------------
Derivative contracts - assets,
at fair value
Equity swaps
United States
Healthcare 16,781,963 4.83
British Virgin Islands
Healthcare 2,097,803 0.60
Ireland
Healthcare 206,563 0.06
Total equity swaps 19,086,329 5.49
Warrants
Canada
Healthcare 1,939,543 1,858,925 0.53
United States
Healthcare 674,517 522,337 0.15
Cayman Islands
Financials 599 58 0.00
Total warrants 2,614,659 2,381,320 0.68
Total derivative contracts - assets,
at fair value 2,614,659 21,467,649 6.17
========== =========== ===============
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2022
(Expressed in United States Dollars)
Percentage
Descriptions Proceeds Fair Value of Net Assets
-------------------------------------- ----------- ----------- ---------------
Securities sold short,
at fair value
Common stocks
United States
Healthcare 14,521,155 11,500,094 3.31
Netherlands
Healthcare 293,711 221,800 0.06
Cayman Islands
Financials 96,480 98,829 0.03
Healthcare 46,260 89,072 0.03
----------- ----------- ---------------
Total Cayman Islands 142,740 187,901 0.06
Total common stocks 14,957,606 11,909,795 3.43
American depository receipts
Sweden
Healthcare 450,321 528,539 0.15
Total American depository receipts 450,321 528,539 0.15
Total securities sold short,
at fair value 15,407,927 12,438,334 3.58
=========== =========== ===============
Percentage
Descriptions Fair Value of Net Assets
--------------------------------------------- ----------- ---------------
Derivative contracts - liabilities,
at fair value
Equity swaps
United States
Healthcare 7,041,281 2.02
Index 1,860,052 0.54
----------- ---------------
Total United States 8,901,333 2.56
Israel
Healthcare 25,410 0.01
Total derivative contracts - liabilities,
at fair value 8,926,743 2.57
=========== ===============
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments
as at 31 December 2021
(Expressed in United States Dollars)
Number Percentage
Descriptions of Shares Cost Fair Value of Net Assets
--------------------------------- ----------- ------------- ------------ ---------------
Investments in securities,
at fair value
Common stocks
United States
Financials 108,150 106,527 0.03
Healthcare
Prometheus Biosciences,
Inc. 740,564 5,396,652 21,850,828 5.64
Rocket Pharmaceuticals,
Inc. 2,364,728 6,223,376 51,622,012 13.33
Others* 131,292,813 177,272,154 45.76
Materials 45,415 9,801 0.00
Total United States 143,066,406 250,861,322 64.76
Ireland
Healthcare 4,099,989 7,155,755 1.85
Netherlands
Healthcare 3,339,207 4,302,049 1.11
Canada
Healthcare 4,400,407 2,573,859 0.66
China
Healthcare
Ji Xing Pharmaceuticals
Ltd. 541,205 216,482 844,280 0.22
British Virgin Islands
Healthcare 226,450 689,080 0.18
Cayman Islands
Financials 422,961 414,583 0.11
Healthcare 104,050 103,530 0.03
------------- ------------ ---------------
Total Cayman Islands 527,011 518,113 0.14
Bermuda
Healthcare 260,330 262,413 0.07
Belgium
Healthcare 207,840 146,096 0.04
Switzerland
Healthcare 106,002 83,035 0.02
Total common stocks 156,450,124 267,436,002 69.05
* No individual investment security or contract constitutes greater
than 5 percent of net assets.
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2021
(Expressed in United States Dollars)
Number Percentage
Descriptions of Shares Cost Fair Value of Net Assets
-------------------------------- ----------- ------------ ------------ ---------------
Investments in securities, at
fair value (continued)
Convertible preferred
stocks
United States
Healthcare* 35,924,442 39,402,135 10.17
China
Healthcare
Ji Xing Pharmaceuticals
Ltd. 10,599,945 14,824,184 24,793,386 6.40
Others 1,771,209 1,771,209 0.46
------------ ------------ ---------------
Total China 16,595,393 26,564,595 6.86
Switzerland
Healthcare 1,704,186 1,693,165 0.44
Ireland
Healthcare 116,545 132,819 0.03
Total convertible preferred
stocks 54,340,566 67,792,714 17.50
Exchange traded funds
United States
Index
SPDR S&P 500 ETF TRUST 67,579 26,216,888 32,097,322 8.28
Total exchange traded
funds 26,216,888 32,097,322 8.28
Investment in private
investment companies
Ireland
Healthcare 11,814,933 13,068,663 3.37
United States
Healthcare 8,234,839 10,013,859 2.59
Total investment in private
investment companies 20,049,772 23,082,522 5.96
------------ ------------ ---------------
* No individual investment security or contract constitutes greater
than 5 percent of net assets.
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2021
(Expressed in United States Dollars)
Percentage
Descriptions Cost Fair Value of Net Assets
------------------------------------- ------------ ------------ ---------------
Investments in securities, at fair
value (continued)
American depository receipts
United Kingdom
Healthcare 7,368,293 12,033,889 3.11
Netherlands
Healthcare 3,786,165 3,962,050 1.02
Ireland
Healthcare 893,338 1,085,120 0.28
Sweden
Healthcare 438,397 388,133 0.10
Israel
Healthcare 372,855 308,578 0.08
China
Healthcare 549,132 202,418 0.05
Singapore
Healthcare 231,809 67,036 0.02
Total American depository
receipts 13,639,989 18,047,224 4.66
Convertible bonds
United States
Healthcare 723,723 723,723 0.18
Total convertible bonds 723,723 723,723 0.18
Total investments in securities,
at fair value 271,421,062 409,179,507 105.63
============ ============ ===============
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2021
(Expressed in United States Dollars)
Percentage
Descriptions Cost Fair Value of Net Assets
----------------------------------------- ----------- ----------- ---------------
Derivative contracts - assets,
at fair value
Equity swaps
United States
Healthcare 5,442,939 1.41
British Virgin Islands
Healthcare 2,128,260 0.55
Netherlands
Healthcare 4,225 0.00
Total equity swaps 7,575,424 1.96
Warrants
Canada
Healthcare 1,939,543 3,077,816 0.79
United States
Healthcare 407,920 329,865 0.09
Cayman Islands
Financials 599 469 0.00
Total warrants 2,348,062 3,408,150 0.88
Total derivative contracts - assets,
at fair value 2,348,062 10,983,574 2.84
=========== =========== ===============
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2021
(Expressed in United States Dollars)
Percentage
Descriptions Proceeds Fair Value of Net Assets
-------------------------------------- ---------- ----------- ---------------
Securities sold short,
at fair value
Common stocks
United States
Healthcare 8,526,920 8,330,314 2.15
Materials 56,309 9,801 0.00
---------- ----------- ---------------
Total United States 8,583,229 8,340,115 2.15
Netherlands
Healthcare 278,805 324,576 0.09
Cayman Islands
Financials 96,480 97,018 0.03
Switzerland
Healthcare 106,146 83,035 0.02
Total common stocks 9,064,660 8,844,744 2.29
American depository receipts
Sweden
Healthcare 462,836 388,133 0.10
China
Healthcare 93,485 85,516 0.02
Total American depository receipts 556,321 473,649 0.12
Total securities sold short,
at fair value 9,620,981 9,318,393 2.41
========== =========== ===============
Percentage
Descriptions Fair Value of Net Assets
--------------------------------------------- ----------- ---------------
Derivative contracts - liabilities,
at fair value
Equity swaps
United States
Healthcare 3,223,278 0.83
Ireland
Healthcare 52,601 0.01
Israel
Healthcare 34,954 0.01
Total derivative contracts - liabilities,
at fair value 3,310,833 0.85
=========== ===============
See accompanying notes to the consolidated financial statements.
Consolidated Statement of Operations
For the year ended 31 December 2022 and 31 December 2021
(Expressed in United States Dollars)
2022 2021
-------------- ---------------------
Investment income
Interest (net of withholding taxes of $nil; 31 December 2021: $nil) 635,860 363,673
Dividends (net of withholding tax rebate of $123,149; 31 December 2021:
tax expense $123,894) 332,103 294,027
Other 1,199,296 -
Total investment income 2,167,259 657,700
-------------- ---------------------
Expenses
Management fees 3,751,464 4,813,854
Professional fees 1,008,629 1,070, 317
Interest 779,988 215, 606
Research costs 742,738 237,984
Audit fees 329,557 288, 254
Administrative fees 312,003 330, 834
Directors' fees 176,722 214, 353
Listing fees - 936,615
Other expenses 357,429 346, 867
-------------- ---------------------
Total expenses 7,458,530 8,454,684
-------------- ---------------------
Net investment income/(loss) (5,291,271) (7,796,984)
============== =====================
Realised and change in unrealised gain/(loss) on investments, derivatives
and foreign currency
transactions
Net realised gain/(loss) on securities and foreign currency transactions 8,357,014 41,280,297
Net change in unrealised gain/(loss) on securities and foreign currency
translation (44,355,779) (99,115,160)
Net realised gain/(loss) on derivative contracts (2,748,269) (1,648,961)
Net change in unrealised gain/(loss) on derivative contracts 4,601,568 2,936,018
Net realised and unrealised gain/(loss) on investments, derivatives and
foreign currency
transactions (34,145,466) (56,547,806)
-------------- ---------------------
Net increase/(decrease) in net assets resulting from operations (39,436,737) (64,344,790)
============== =====================
See accompanying notes to the consolidated financial statements.
Consolidated Statement of Changes in Net Assets
For the year ended 31 December 2022
(Expressed in United States Dollars)
Performance
Ordinary Allocation Total Shareholders' Non-Controlling
Share Class Share Class Funds Interest
------------------------------------- -------------------------------------- ------------------------------------- ----------------
Net assets,
beginning of
year 363,040,222 24,320,504 387,360,726 -
Operations
Net investment
income/( loss) (5,291,271) - (5,291,271) -
Net realised
gain/(loss) on
securities and
foreign
currency
transactions 8,357,014 - 8,357,014 -
Net change in
unrealised
gain/(loss)
on securities
and foreign
currency
translation (44,355,779) - (44,355,779) -
Net realised
gain/(loss) on
derivative
contracts (2,748,269) - (2,748,269) -
Net change in
unrealised
gain/(loss)
on derivative
contracts 4,601,568 - 4,601,568 -
Performance
Allocation 4,359,551 (4,359,551) - -
Income/(loss)
attributable to
Non-Controlling
Interest (1,883,515) - (1,883,515) 1,883,515
Net change in
net assets
resulting
from operations (36,960,701) (4,359,551) (41,320,252) 1,883,515
------------------------------------- -------------------------------------- ------------------------------------- ----------------
Capital
transactions
In-kind transfer - (19,960,953) (19,960,953) 19,960,953
Net change in
net assets
resulting
from capital
transactions - (19,960,953) (19,960,953) 19,960,953
Net change in
net assets (36,960,701) (24,320,504) (61,281,205) 21,844,468
Net assets, end
of year 326,079,521 - 326,079,521 21,844,468
===================================== ====================================== ===================================== ================
See accompanying notes to the consolidated financial statements.
Consolidated Statement of Changes in Net Assets
For the year ended 31 December 2021
(Expressed in United States Dollars)
Performance
Ordinary Allocation Total Shareholders'
Share Class Share Class Funds
------------- ------------- --------------------
Net assets, beginning of year 375,281,126 37,330,803 412,611,929
Operations
Net investment income/( loss) (7,796,984) - (7,796,984)
Net realised gain/(loss) on securities
and foreign currency transactions 41,280,297 - 41,280,297
Net change in unrealised gain/(loss)
on securities and foreign currency
translation (99,115,160) - (99,115,160)
Net realised gain/(loss) on derivative
contracts (1,648,961) - (1,648,961)
Net change in unrealised gain/(loss)
on derivative contracts 2,936,018 - 2,936,018
Performance Allocation 8,035,379 (8,035,379) -
Net change in net assets resulting
from operations (56,309,411) (8,035,379) (64,344,790)
------------- ------------- --------------------
Capital transactions
Issuance of Ordinary Shares (net
of issuance costs of $222,883) 44,068,507 - 44,068,507
Performance Allocation distribution - (4,974,920) (4,974,920)
------------- ------------- --------------------
Net change in net assets resulting
from capital transactions 44,068,507 (4,974,920) 39,093,587
------------- ------------- --------------------
Net change in net assets (12,240,904) (13,010,299) (25,251,203)
Net assets, end of year 363,040,222 24,320,504 387,360,726
============= ============= ====================
See accompanying notes to the consolidated financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2022 and 31 December 2021
(Expressed in United States Dollars)
2022 2021
-------------- ---------------------
Cash flows from operating activities
Net increase/(decrease) in net assets
resulting from operations (39,436,737) (64,344,790)
Adjustments to reconcile net change in
net assets resulting from operations to
net cash provided by/(used in) operating
activities:
Net realised (gain)/loss on securities
and foreign currency transactions (8,357,014) (41,280,297)
Net change in unrealised (gain)/loss on
securities and foreign currency translation 44,355,779 99,115,160
Net realised (gain)/loss on derivative
contracts 2,748,269 1,648,961
Net change in unrealised (gain)/loss on
derivative contracts (4,601,568) (2,936,018)
Effect of exchange rate changes on cash
and cash equivalents 149,875 -
Purchases of investments in securities (116,361,329) (202,925,739)
Proceeds from sales of investments in
securities 127,814,762 119,715,056
Proceeds from securities sold short 27,488,465 15,049,848
Payments for securities sold short (12,916,667) (5,416,866)
Proceeds from derivative contracts 1,971,402 (784,778)
Payments for derivative contracts (4,986,268) (1,466,746)
Changes in operating assets and liabilities:
Other assets (154,185) (66,990)
(Receivable from)/payable for unsettled
trades 4,830,450 830,880
Due to brokers (12,196,843) 37,658,827
Accrued expenses 5,211 331,475
Net cash provided by/(used in) operating
activities 10,353,602 (44,872,017)
-------------- ---------------------
Cash flows from financing activities
Net proceeds from issuance of shares - 44,068,507
Performance Allocation distribution - (4,974,920)
Net cash provided by/(used in) financing
activities - 39,093, 587
-------------- ---------------------
Net change in cash and cash equivalents 10,353,602 (5,778,430)
Cash, cash equivalents, and restricted
cash, beginning of the year 18,808,022 24,586,452
-------------- ---------------------
Cash, cash equivalents, and restricted
cash, end of the year 29,161,624 18,808,022
============== =====================
At 31 December 2022, the amounts categorised in cash, cash equivalents,
and restricted cash include the following:
Cash and cash equivalents 6,966,168 6,484,057
Due from brokers 22,195,456 12,323,965
Total 29,161,624 18,808,022
============== =====================
Supplemental disclosure of cash flow
information
Cash paid during the year for interest 724,317 250,980
See accompanying notes to the consolidated financial statements.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(Expressed in United States Dollars)
1. Nature of operations and summary of significant accounting policies
RTW Venture Fund Limited (the "Company") is a publicly listed Guernsey non-cellular company limited by shares. The Company was originally incorporated in the State of Delaware, United States of America, and re-domiciled into Guernsey under the Companies Law on 2 October 2019 with registration number 66847 on the Guernsey Register of Companies. On 30 October 2019, all of the issued Ordinary Shares of the Company were listed and admitted to trading on the Specialist Fund Segment of the London Stock Exchange under the ticker symbol: RTW. Subsequently, on 6 August 2021, the Company's Ordinary Shares were admitted to trading on the Premium Segment of the London Stock Exchange with the additional ticker symbol: RTWG denoting the Sterling price. The original ticker, RTW, continues to denote the US Dollar price.
On 1 December 2022 the Company changed its status for U.S. federal tax purposes from a publicly traded partnership to a corporation. The Group believes that the change in status will cause it to be treated as a passive foreign investment company. This change has been necessitated by recent changes to U.S. tax legislation due to come into effect from 1 January 2023. The Company established a new wholly owned subsidiary, RTW Venture Fund Operating Limited (the "Subsidiary" or "OpCo"), to which it has transferred its right to the profits and losses attributable to the Group's portfolio of assets. This reorganisation will have no economic impact on shareholders. All the income and expenses of the Subsidiary are consolidated with the income and expenses of the Group.
The Group seeks to use equity capital (from the net proceeds of any share issuance or, where appropriate, from the net proceeds of investment divestments or other related profits) to provide seed and additional growth capital to the private investments. To mitigate cash-drag, the uninvested portion is invested across public stocks largely replicating the public stock portfolios of RTW's existing US-based funds. The Group focuses on creating, building, and supporting world-class life sciences, biopharmaceutical and medical technology companies. The Group's investment objective is to generate attractive risk-adjusted returns through investments in securities, both equity and debt, long and short, of companies with a focus on the pharmaceutical sector.
Pursuant to an investment management agreement, the Group is managed by RTW Investments, LP, a Delaware limited partnership, to provide the Group with discretionary portfolio management, risk management services and certain other services. The Investment Manager is an investment adviser registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940.
Basis of presentation
The consolidated financial statements are expressed in United States Dollars. The consolidated financial statements which give a true and fair view and have been prepared in accordance with US generally accepted accounting principles ("US GAAP") and are in compliance with the Companies (Guernsey) Law, 2008. The entities comprised within the Group are investment companies and follow the accounting and reporting guidance in Financial Accounting Standards Board's ("FASB") Accounting Standards Codification Topic 946, Financial Services - Investment Companies.
The Directors considered that it is appropriate to adopt a going concern basis of accounting in preparing the consolidated financial statements. In reaching this assessment, the Directors have considered a wide range of information relating to present and future conditions including the balance sheets, future projections, cash flows and the longer-term strategy of the business.
Principles of consolidation
The consolidated financial statements include accounts of the Company consolidated with the accounts of the Subsidiary. All inter-group balances have been eliminated upon consolidation. The Subsidiary is incorporated in Guernsey.
Non-Controlling Interest
An affiliate of the Investment Manager, RTW Venture Performance LP, holds an interest in the Subsidiary. At 31 December 2022, the Non-Controlling Interest of $21,844,468 represents the in-kind transfer on 1 December 2022 of $19,960,953 and mark to market of $1,883,515 for the period from 1 December 2022 through 31 December 2022. The Non-Controlling Interest will capture both Performance Allocation and mark to market movements on the New Performance Allocation Share held by RTW Venture Performance LP in the Subsidiary. For the year ended 31 December 2022, the entirety of the income/(loss) attributable to Non-Controlling Interest was comprised of mark to market movements.
Cash, cash equivalents, and restricted cash
Cash represents cash deposits held at financial institutions. Cash equivalents include short-term highly liquid investments of sufficient credit quality that are readily convertible to known amounts of cash and have original maturities of three months or less. Cash equivalents are carried at cost plus accrued interest, which approximates fair value. Cash equivalents are held for the purpose of meeting short-term liquidity requirements, rather than for investment purposes. As at 31 December 2022 and 31 December 2021, the Group had no cash equivalents.
Restricted cash is subject to a legal or contractual restriction by third parties as well as a restriction as to withdrawal or use, including restrictions that require the funds to be used for a specified purpose and restrictions that limit the purpose for which the funds can be used. The Group considers cash pledged as collateral for securities sold short, cash collateral posted with counterparties for derivative contracts and further amounts due from brokers to be restricted cash, as outlined in Note 3.
Fair value - definition and hierarchy
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the 'exit price') in an orderly transaction between market participants at the measurement date.
In determining fair value, the Group uses various valuation techniques. A fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs are to be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Group.
Unobservable inputs reflect the Group's assumptions about the inputs market participants would use in pricing the asset or liability based on the best information available in the circumstances. The fair value hierarchy is categorised into three levels based on the inputs as follows:
Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Group has the ability to access. Valuation adjustments are not applied to Level 1 investments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these investments does not entail a significant degree of judgement.
Level 2 - Valuations based on inputs, other than quoted prices included in Level 1, that are observable, either directly or indirectly.
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
Investments in private investment companies measured using net asset value as a practical expedient are not categorized in the fair value hierarchy.
The availability of valuation techniques and observable inputs can vary from investment to investment and is affected by a wide variety of factors, including the type of investment, whether the investment is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgement. Those estimated values do not necessarily represent the amounts that may be ultimately realised due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the investments existed. Accordingly, the degree of judgement exercised by the Group in determining fair value is greatest for investments categorised in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement.
Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Group's own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Group uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified to a lower level within the fair value hierarchy.
Fair value - valuation techniques and inputs
Investments in securities and securities sold short
Listed investments
The Group values investments in securities including exchange traded funds and securities sold short that are freely tradable and are listed on a national securities exchange or reported on the NASDAQ national market at their closing sales price as of the valuation date. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorised in Level 1 of the fair value hierarchy. Securities traded on inactive markets or valued by reference to similar instruments or where a discount may be applied are categorised in Level 2 or 3 of the fair value hierarchy. A discount for lack of marketability based on the 180-day restriction period under SEC Rule 144 is applied for investments that the Group purchases prior to an IPO and that subsequently begin trading on the NASDAQ national market.
Unlisted investments
Unlisted investments are valued at fair value by the Directors following a detailed review and appropriate challenge of the valuations proposed by the Investment Manager. As part of their valuation process, the Investment Manager engages an Independent Valuer to challenge their assessed fair value on certain unlisted investments. The Investment Manager's unlisted investment valuation policy applies to techniques consistent with the IPEV Guidelines.
The valuation techniques applied are either a market-based approach, an income approach such as discounted cash flows, or where available, a net asset value practical expedient approach. The IPEV Guidelines recognise that the price of a recent transaction, if resulting from an orderly transaction, generally represents fair value as at the transaction date and may be an appropriate starting point for estimating fair value at subsequent measurement dates. Consideration is given to the facts and circumstances as at the subsequent measurement date including changes in the market and/or performance of the investee company. Milestone analysis is used where appropriate to incorporate operational progress at the investee company level. In addition, a trigger event such as a subsequent round of financing by the investee company would influence the market technique used to calibrate fair value at the measurement date.
The market approach utilizes guideline public companies relying on projected revenues to derive an indicative enterprise value. Due to the nature of the investments, being in the early stages of development, the projected revenues are used as a proxy for stable state revenue. A selected multiple is then applied based on the observed market multiples of the guideline public companies. To reflect the risk associated with the achievement of the projected revenues and the early development stage of each of the investments, the indicative enterprise value is discounted at an appropriate rate.
The income approach utilizes the discounted cash flow method. Projected cash flows for each investment are discounted to determine an assumed enterprise value.
Where applicable, the indicative enterprise value has been determined using a back-solve model based on the pricing of the most recent round of financing. The internal rate of return for each investment is compared to the selected venture capital rate applied in the market approach to assess the reasonableness of the indicated value implied by each financing round. The derived enterprise value is allocated to the equity class on either a fully diluted basis or using an option pricing model. The resulting indicative value on a per share basis is then multiplied by the number of shares to derive the fair market value.
American depository receipts
The Group values investments in American depositary receipts that are freely tradable and are listed on a national securities exchange or reported on the NASDAQ national market at their last reported sales price as of the valuation date. These investments are categorised in Level 1 of the fair value hierarchy.
Convertible bonds
Convertible bonds are recorded at fair value using valuation techniques based on observable inputs. These instruments are generally categorised in Level 2 of the fair value hierarchy. In instances where significant inputs are unobservable, convertible bonds are categorised in Level 3 of the fair value hierarchy.
Convertible notes
The Group values investments in convertible notes in accordance with the unlisted investments section above. As of 31 December 2022, these investments are all categorised in Level 3 of the fair value hierarchy.
Convertible preferred stock
The Group values Level 1 investments in convertible preferred stock that are listed on a national securities exchange at their closing sales price as of the valuation date. Level 3 investments in convertible preferred stock are valued in accordance with the unlisted investments section above. As of 31 December 2022, these investments are categorised in Level 1 and Level 3 of the fair value hierarchy.
Investment in private investment companies
The Group values investment in private investment companies using the net asset values provided by the underlying private investment companies as a practical expedient. The Group applies the practical expedient to its private investment companies on an investment-by-investment basis and consistently with the Group's entire position in a particular investment, unless it is probable that the Group will sell a portion of an investment at an amount different from the net asset value of the investment.
Private investment in public equity
Private investment in public equity ("PIPE") cannot be offered for sale to the public until the issuer complies with certain statutory or contractual requirements. The Group generally values PIPE at a discount to similar publicly traded companies to the extent the restriction is specific to the security. The Group considers the type and duration of the restriction, but in no event does the valuation exceed the listed price on any major securities exchange. PIPE is generally categorized in Level 2 of the fair value hierarchy. However, to the extent that significant inputs used to determine liquidity discounts are unobservable, PIPE may be categorized in Level 3 of the fair value hierarchy. As of 31 December 2022 and 31 December 2021, there were no open PIPE positions.
Derivative contracts
Equity swaps
Equity swaps may be centrally cleared or traded on the over-the-counter market. The fair value of equity swaps is calculated based on the terms of the contract and current market data, such as changes in fair value of the reference asset. The fair value of equity swaps is generally categorised in Level 2 of the fair value hierarchy.
Warrants
Warrants that are listed on major securities exchanges are valued at their last reported sales price as of the valuation date. The fair value of over-the-counter ("OTC") warrants is determined using the Black-Scholes option pricing model, a valuation technique that follows the income approach. This pricing model takes into account the contract terms (including maturity) as well as multiple inputs, including time value, implied volatility, equity prices, interest rates and currency rates. Warrants are categorised in all levels of the fair value hierarchy.
Fair value - valuation processes
The Group establishes valuation processes and procedures to ensure that the valuation techniques are fair and consistent, and valuation inputs are supportable. The Group designates the Investment Manager's Valuation Committee to oversee the entire valuation process of the Group's investments. The Valuation Committee comprises various members of the Investment Manager, including those separate from the Group's portfolio management and trading functions, and reports to the Board.
The Valuation Committee is responsible for developing the Group's written valuation processes and procedures, conducting periodic reviews of the valuation policies, and evaluating the overall fairness and consistent application of the valuation policies.
The Investment Manager's Valuation Committee meets on a monthly basis or more frequently, as needed, to determine the valuations of the Group's Level 3 investments. Valuations determined by the Valuation Committee are required to be supported by market data, third-party pricing sources, industry-accepted pricing models, counterparty prices or other methods they deem to be appropriate, including the use of internal proprietary pricing models.
The Group periodically tests its valuations of Level 3 investments by performing back-testing. Back-testing involves the comparison of sales proceeds of those investments to the most recent fair values reported and, if necessary, uses the findings to recalibrate its valuation procedures.
On a regular basis, the Group engages the services of a third-party valuation firm, the Independent Valuer, to perform an independent review of the valuation of the Group's Level 3 investments and the Group may adjust its valuations based on the recommendations from the Investment Manager's Valuation Committee.
Translation of foreign currency
Assets and liabilities denominated in foreign currencies are translated into United States Dollar amounts at the year-end exchange rates. Transactions denominated in foreign currencies, including purchases and sales of investments, and income and expenses, are translated into United States Dollar amounts on the transaction date. Adjustments arising from foreign currency transactions are reflected in the consolidated statement of operations.
The Group does not isolate that portion of the results of operations arising from the effect of changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of investments held. Such fluctuations are included in net realised and change in unrealised gain/(loss) on securities, derivatives and foreign currency transactions in the consolidated statement of operations.
Reported net realised gain/(loss) from foreign currency transactions arise from sales of foreign currencies; currency gains or losses realised between the trade and settlement dates on securities transactions; and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Group's books and the United States Dollar equivalent of the amounts actually received or paid.
Net change in unrealised gain/(loss) from foreign currency translation of assets and liabilities arises from changes in the fair values of assets and liabilities, other than investments in securities at the end of the period, resulting from changes in exchange rates.
Investment transactions and related investment income
Investment transactions are accounted for on a trade date basis. Realised gains and losses on investment transactions have been calculated on a specific identification method .
Dividends are recorded on the ex-dividend date and interest is recognised on the accrual basis.
Withholding taxes on foreign dividends have been provided for in accordance with the Group's understanding of the applicable country's rules and rates.
Offsetting of amounts related to certain contracts
Amounts due from and to brokers are presented on a net basis, by counterparty, to the extent the Group has the legal right to offset the recognised amounts and intends to settle on a net basis.
The Group has elected not to offset fair value amounts recognised for cash collateral receivables and payables against fair value amounts recognised for derivative positions executed with the same counterparty under the same master netting arrangement. At 31 December 2022, the Group had cash collateral receivables of $16,384,706 (31 December 2021: $12,228,870) (see Note 3) with derivative counterparties under the same master netting arrangement.
Income taxes
On 1 December 2022, the Company changed its status for US federal tax purposes from a publicly traded partnership ("PTP") to a corporation. This change by the Board was necessitated due to recent changes to US tax legislation that came into effect on 1 January 2023. Pursuant to this, the Company established OpCo, a partnership for US federal tax purposes, to which the Company transferred its portfolio of assets and the attributable profits and losses. The Company, as a corporation, is expected to be treated as a Passive Foreign Investment Company ("PFIC") for US federal tax purposes.
The Company and Subsidiary are exempt from taxation in Guernsey and are each charged an annual exemption fee of GBP1,200. The Group will only be liable to tax in Guernsey in respect of income arising or accruing from a Guernsey source, other than from a relevant bank deposit. It is not anticipated that such Guernsey source taxable income will arise. The Group is managed so as not to be resident in the UK for UK tax purposes.
The Group recognises tax benefits of uncertain tax positions only where the position is more likely than not to be sustained assuming examination by a tax authority based on the technical merits of the position. In evaluating whether a tax position has met the recognition threshold, the Group must presume the position will be examined by the appropriate taxing authority and that taxing authority has full knowledge of all relevant information. A tax position meeting the more likely than not recognition threshold is measured to determine the amount of benefit to recognise in the Group's consolidated financial statements. Income tax and related interest and penalties would be recognised as a tax expense in the consolidated statement of operations if the tax position was deemed to meet the more likely than not threshold.
The Investment Manager has analysed the Group's tax positions and has concluded no liability for unrecognised tax benefits should be recorded related to uncertain tax positions. Further, management is not aware of any tax positions for which it is reasonably possible the total amounts of unrecognised tax benefits will significantly change in the next twelve months.
The Company and OpCo each file income tax returns in the US federal jurisdiction and, as applicable, in US state or local jurisdictions, or non-US jurisdictions. Generally, the Group was subject to income tax examinations by major taxing authorities for each tax period since inception. Based on its analysis, the Group determined that it had not incurred any liability for unrecognised tax benefits as of 31 December 2022 or 31 December 2021.
Use of estimates
Preparing consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities, including the fair value of investments, and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
New accounting pronouncements
In June 2022, the FASB issued ASU 2022-03, ASC Topic 820, "Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions". The amendment clarifies that contractual sale restrictions should not be considered when measuring the equity security's fair value and prohibits an entity from recognizing a contractual sale restriction as a separate unit of account. The amendments in this ASU are effective for the Group beginning after December 15, 2024. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Group does not expect this guidance to have a material impact on its consolidated financial statements and related disclosures.
2 . F air value measurements
The Group's assets and liabilities recorded at fair value have been categorised based upon a fair value hierarchy as described in the Group's significant accounting policies in Note 1.
The following table presents information about the Group's assets and liabilities measured at fair value as of 31 December 2022:
Investments
measured
at net asset
Level 1 Level 2 Level 3 value* Total
-------------- ------------- ------------- -------------- --------------
Assets (at fair value)
Investments in
securities
Common stocks 225,817,734 534,871 3,364,557 - 229,717,162
Convertible preferred
stocks 117,696 - 57,932,949 - 58,050,645
American depository
receipts 38,230,091 - - - 38,230,091
Investment in private
investment companies - - - 14,074,846 14,074,846
Convertible notes - - 10,052,833 - 10,052,833
Total investments
in securities 264,165,521 534,871 71,350,339 14,074,846 350,125,577
-------------- ------------- ------------- -------------- --------------
Derivative contracts
Equity swaps - 19,086,329 - - 19,086,329
Warrants - 1,904,409 476,911 - 2,381,320
-------------- ------------- ------------- -------------- --------------
Total derivative
contracts - 20,990,738 476,911 21,467,649
-------------- ------------- ------------- -------------- --------------
264,165,521 21,525,609 71,827,250 14,074,846 371,593,226
============== ============= ============= ============== ==============
Liabilities (at fair
value)
Securities sold
short
Common stocks 11,810,966 98,829 - - 11,909,795
American depository
receipts 528,539 - - - 528,539
-------------- ------------- ------------- -------------- --------------
Total securities
sold short 12,339,505 98,829 - 12,438,334
-------------- ------------- ------------- -------------- --------------
Derivative contracts
Equity swaps - 8,926,743 - - 8,926,743
-------------- ------------- ------------- -------------- --------------
Total derivative
contracts - 8,926,743 - - 8,926,743
-------------- ------------- ------------- -------------- --------------
12,339,505 9,025,572 - - 21,365,077
-------------- ------------- ------------- -------------- --------------
* The Group's investment in private investment companies that are valued at their net asset value are not categorized within the fair value hierarchy.
The following table presents information about the Group's assets and liabilities measured at fair value as of 31 December 2021:
Investments
measured
at net asset
Level 1 Level Level value* Total
2 3
------------ ----------- ----------- ---------------- ---------------------------
Assets (at fair value)
Investments in securities
Common stocks 249,490,511 16,001,524 1,943,967 - 267,436,002
Convertible preferred
stocks 615,444 - 67,177,270 - 67,792,714
Exchange traded funds 32,097,322 - - - 32,097,322
Investment in private
investment companies - - - 23,082,522 23,082,522
American depository
receipts 18,047,224 - - - 18,047,224
Convertible bonds - - 723,723 - 723,723
------------ ----------- ----------- ---------------- ---------------------------
Total investments
in securities 300,250,501 16,001,524 69,844,960 23,082,522 409,179,507
------------ ----------- ----------- ---------------- ---------------------------
Derivative contracts
Equity swaps - 7,575,424 - - 7,575,424
Warrants 6,576 3,267,566 134,008 - 3,408,150
------------ ----------- ----------- ---------------- ---------------------------
Total derivative contracts 6,576 10,842,990 134,008 - 10,983,574
------------ ----------- ----------- ---------------- ---------------------------
300,257,077 26,844,514 69,978,968 23,082,522 420,163,081
============ =========== =========== ================ ===========================
Liabilities (at fair
value)
Securities sold short
Common stocks 8,844,744 - - - 8,844,744
American depository
receipts 473,649 - - - 473,649
------------ ----------- ----------- ---------------- ---------------------------
Total securities sold
short 9,318,393 - - - 9,318,393
------------ ----------- ----------- ---------------- ---------------------------
Derivative contracts
Equity swaps - 3,310,833 - - 3,310,833
------------ ----------- ----------- ---------------- ---------------------------
Total derivative contracts - 3,310,833 - - 3,310,833
------------ ----------- ----------- ---------------- ---------------------------
9,318,393 3,310,833 - - 12,629,226
------------ ----------- ----------- ---------------- ---------------------------
* The Group's investment in private investment companies that are valued at their net asset value are not categorized within the fair value hierarchy.
Transfers between Levels 2 and 3 generally relate to whether significant relevant observable inputs are available for the fair value measurements in their entirety. See Note 1 for additional information related to the fair value hierarchy and valuation techniques and inputs. For the year ended 31 December 2022, the Group had net transfers into Level 2 of $4,555,194 from Level 3 due to conversion into publicly traded common stocks subject to an unexpired 180-day lock-up as at 31 December 2022 (2021: $9,064,760) and transfers into Level 1 of $nil from Level 3 due to conversion into publicly traded common stocks (2021: $20,330,984). Transfers between levels are deemed to occur at year end.
The following tables summarise the valuation techniques and significant unobservable inputs used for the Group's investments that are categorised within Level 3 of the fair value hierarchy as of 31 December 2022 and 31 December 2021:
Fair value Significant
at 31 December unobservable Range
2022 Valuation techniques inputs of inputs
---------------- ---------------------- --------------------- -------------
Assets (at fair value)
Investments in securities
Convertible preferred Discounted cash
stocks 50,023,996 flow; WACC 13% - 33%
and/or market Revenue multiples 2.8x -
approach; 4.0x
Market
step-up 0.7x - 1.5x
multiple
Market rate of -30% -
returns 20%
7,908,953 Price of most recent
funding round n/a n/a
Discounted cash
Convertible notes 8,772,349 flow; WACC 13%
and/or market
approach; Revenue multiples 4.0x
Market step-up 0.7x -
multiple 1.1x
Market rate of
returns 0%
Probability weighted
expected return Market rate of
1,280,484 method ("PWERM") returns -30%
Recovery rate 0% - 50%
Discounted cash
Common stocks 1,208,299 flow; WACC 13%
and/or market Revenue multiples 0.2x -
approach; Market step-up 4x
multiple 0.7x -
1.1x
Market rate of
returns -10%
Probability of
2,156,109 PWERM business 95%
combination
149 Price of most recent
funding round n/a n/a
Total investments
in securities 71,350,339
================
Derivative contracts
Discounted cash
Warrants 315,589 flow; WACC 33%
Market approach; Revenue multiple 4.0x
Market rate of
returns Expected
and/or option pricing volatility 10%
model 53%
161,322 PWERM Expected volatility 25%
Total derivative contracts 476,911
================
Fair value Significant
at 31 December unobservable Range
2021 Valuation techniques inputs of inputs
---------------- --------------------- -------------------- -----------
Assets (at fair value)
Investments in securities
Convertible preferred
stocks 60,740,530 Discounted cash
flow; WACC 16% - 38%
Market approach; Exit revenue 3.0x -
multiple 4.0x
and/or option
pricing model Expected volatility 40% - 135%
Market step-up
multiple 1.0x -
1.8x
6,436,740 Price of most
recent
funding round n/a n/a
Common stocks 844,280 Market approach; Expected volatility 60%
and/or option Market step-up 1.1x -
1.7x
pricing model multiple
1,099,687 Price of most n/a n/a
recent
funding round
Convertible bonds 723,723 Price of most n/a n/a
recent
funding round
Total investments
in securities 69,844,960
================
Derivative contracts
Warrants 133,983 Price of most n/a n/a
recent
funding round
25 Discounted cash
flow; WACC 38%
Exit revenue
Market approach; multiple 3.0x
and/or option Expected volatility 45%
pricing model
Total derivative contracts 134,008
================
The significant unobservable inputs used in the fair value measurements of Level 3 common stock, convertible preferred stocks, convertible notes, and warrants include, but are not limited to, WACC, revenue and/or earnings multiple, market rate of return, and expected volatility. Increases in the WACC in isolation would result in a lower fair value for the security, and vice versa. Increases in multiples and/or market rate of returns in isolation would result in a higher fair value of the security, and vice versa. A change in volatility in isolation could result in a higher or lower fair value for the security.
The table below presents additional information about Level 3 assets and liabilities measured at fair value. Both observable and unobservable inputs may be used to determine the fair value of positions that the Group has classified within the Level 3 category. As a result, the unrealised gains and losses for assets and liabilities within the Level 3 category may include changes in fair value that were attributable to both observable and unobservable inputs.
Changes in Level 3 assets and liabilities measured at fair value for the year ended 31 December 2022 were as follows:
Balance Change Ending
beginning Realised in Unrealised Transfers balance
1 January gains/ gains/ into/(from) 31 December
2022 (losses)(a) (losses)(a) Purchases Sales Level 3* 2022
Assets (at
fair value)
Investments
in securities
Convertible
preferred
stocks 67,177,270 - (17,555,053) 12,142,203 - (3,831,471) 57,932,949
Common stocks 1,943,967 - (664,647) 2,085,237 - - 3,364,557
Convertible
notes - - 420628 8,195,772 - 1,436,433 10,052,833
Convertible
bonds 723,723 - - 1,436,433 - (2,160,156) -
Total
investments
in securities 69,844,960 - (17,799,072) 23,859,645 - (4,555,194) 71,350,339
=========== =============== =============== =========== ====== ============= =============
Derivative
contracts
Warrants 134,008 - 76,306 266,597 - - 476,911
----------- --------------- --------------- ----------- ------ ------------- -------------
Total derivative
contracts 134,008 - 76,306 266,597 - - 476,911
=========== =============== =============== =========== ====== ============= =============
* Includes conversion of convertible bonds into convertible preferred stock and convertible notes.
(a) Realised and unrealised gains and losses are included in net realised and change in unrealised gain/(loss) on investments, derivatives and foreign currency transactions in the consolidated statement of operations.
Changes in Level 3 assets and liabilities measured at fair value for the year ended 31 December 2021 were as follows:
Change Ending
Balance in balance
beginning Realised Unrealised Transfers 31
1 January gains/ gains/ into/(from) December
2021 (losses) (losses) Purchases Sales Level 3* 2021
Assets (at
fair value)
Investments
in
securities
Convertible
preferred
stocks 38,161,752 1,440,394 13,226,721 46,075,180 (2,331,033) (29,395,744) 67,177,270
Common
stocks 9,087,381 - 502,587 564,688 - (8,210,689) 1,943,967
Convertible
bonds - - - 723,723 - - 723,723
-------------------- ---------- ----------- ----------- ------------ ------------- -----------
Total
investments
in
securities 47,249,133 1,440,394 13,729,308 47,363,591 (2,331,033) (37,606,433) 69,844,960
==================== ========== =========== =========== ============ ============= ===========
Derivative
contracts
Warrants 133,983 - 1 24 - - 134,008
-------------------- ---------- ----------- ----------- ------------ ------------- -----------
Total
derivative
contracts 133,983 - 1 24 - - 134,008
==================== ========== =========== =========== ============ ============= ===========
* Conversions of preferred stock into common stock.
Changes in Level 3 unrealised gains and losses during the year for assets still held at year end were as follows:
2022 2021
Common stocks (664,647) 497,966
Convertible notes 420,628 -
Convertible preferred stocks (13,404,700) 12,873,757
Warrants 76,306 1
Change in unrealised gains and
losses during the year for assets
still held at year end (13,572,413) 13,371,724
============= ===========
Total realised gains and losses and unrealised gains and losses in the Group's investment in securities, derivative contracts and securities sold short are made up of the following gain and loss elements:
2022 2021
Realised gains 47,604,728 54,163,408
Realised losses (41,995,983) (14,532,072)
Net realised gain on securities,
derivative contracts and securities
sold short 5,608,745 39,631,336
============= =============
2022 2021
Change in unrealised
gains 112,585,347 106,379,343
Change in unrealised
losses (152,339,558) (202,558,485)
-------------- --------------
Net change in unrealised gain/(loss)
on securities, derivative contracts
and securities sold short (39,754,211) (96,179,142)
============== ==============
As at 31 December 2022 the Group had commitments (subject to completion of certain parameters) to certain investments totalling $2,544,486 (2021: $2,358,325).
3. Due to/from brokers
Due to/from brokers includes cash balances held with brokers and collateral on derivative transactions. Amounts due from brokers may be restricted to the extent that they serve as deposits for securities sold short or cash posted as collateral for derivative contracts.
As at 31 December 2022, restricted cash with due from brokers totalled $22,195,456 (2021: $12,323,965). Included within due from brokers of $5,810,750 (31 December 2021: $95,095) can be used for investment. The Group pledged cash collateral to counterparties to over-the-counter derivative contracts of $16,384,706 (31 December 2021: $12,228,870) which is included in due from brokers.
In the normal course of business, substantially all of the Group's securities transactions, money balances, and security positions are transacted with the Group's prime brokers and counterparties, Goldman Sachs & Co. LLC, Cowen Financial Products, LLC, UBS AG, Bank of America Merrill Lynch, Morgan Stanley & Co. LLC, Jeffries & Co. and J.P. Morgan Securities, LLC. The Group is subject to credit risk to the extent any broker with which it conducts business is unable to fulfil contractual obligations on its behalf. The Group's management monitors the financial condition of such brokers and does not anticipate any losses from these counterparties.
4. Derivative contracts
In the normal course of business, the Group utilizes derivative contracts in connection with its proprietary trading activities. Investments in derivative contracts are subject to additional risks that can result in a loss of all or part of an investment. The Group's derivative activities and exposure to derivative contracts are classified by the primary underlying risk, equity price risk and foreign currency exchange rate risk. In addition to its primary underlying risk, the Group is also subject to additional counterparty risk due to the inability of its counterparties to meet the terms of their contracts.
Warrants
The Group may receive warrants from its portfolio companies upon an investment in the debt or equity of a portfolio company. The warrants provide the Group with exposure and potential gains upon equity appreciation of the portfolio company's share price.
The value of a warrant has two components: time value and intrinsic value. A warrant has a limited life and expires on a certain date. As time to the expiration date of a warrant approaches, the time value of a warrant will decline. In addition, if the stock underlying the warrant declines in price, the intrinsic value of an "in the money" warrant will decline. Further, if the price of the stock underlying the warrant does not exceed the strike price of the warrant on the expiration date, the warrant will expire worthless. As a result, there is the potential for the Group to lose its entire investment in a warrant.
The Group is exposed to counterparty risk from the potential failure of an issuer of warrants to settle its exercised warrants. The maximum risk of loss from counterparty risk to the Group is the fair value of the contracts and the purchase price of the warrants. The Group considers the effects of counterparty risk when determining the fair value of its investments in warrants.
Equity swap contracts
The Group is subject to equity price risk in the normal course of pursuing its investment objectives. The Group may enter into equity swap contracts either to manage its exposure to the market or certain sectors of the market, or to create exposure to certain equities to which it is otherwise not exposed.
Equity swap contracts involve the exchange by the Group and a counterparty of their respective commitments to pay or receive a net amount based on the change in the fair value of a particular security or index and a specified notional amount.
Volume of derivative activities
The Group considers the average month-end notional amounts during the year, categorised by primary underlying risk, to be representative of the volume of its derivative activities during the year ended 31 December 2022:
2022 2021
--------------------------- ------------------------
Short Long Short
Long exposure exposure exposure exposure
-------------- ----------- ----------- -----------
Primary underlying Notional Notional Notional Notional
risk amounts amounts amounts amounts
--------------------- -------------- ----------- ----------- -----------
Equity price
Equity swaps 48,774,292 56,273,944 2,347,607 66,149,127
Warrants(a) 4,024,470 - 9,031,998 -
52,798,762 56,273,944 11,379,605 66,149,127
============== =========== =========== ===========
(a) Notional amounts presented for warrants are based on the fair value of the underlying shares as if the warrants were exercised at each respective month end date.
Impact of derivatives on the consolidated statement of assets and liabilities and consolidated statement of operations
The following tables identify the fair value amounts of derivative instruments included in the consolidated statement of assets and liabilities as derivative contracts, categorised by primary underlying risk, at 31 December 2022 and 31 December 2021. The following table also identifies the gain and loss amounts included in the consolidated statement of operations as net realised gain/(loss) on derivative contracts and net change in unrealised gain/(loss) on derivative contracts, categorised by primary underlying risk, for the year ended 31 December 2022 and 31 December 2021.
2022
-------------------------------------------------------------
Change in
Primary underlying Derivative Derivative Realised unrealised
risk assets liabilities gain/(loss) gain/(loss)
--------------------- ----------- ------------- ------------- ------------------
Equity price
Equity swaps 19,086,329 8,926,743 (2,748,269) 5,894,995
Warrants 2,381,320 - - (1,293,427)
21,467,649 8,926,743 (2,748,269) 4,601,568
=========== ============= ============= ==================
2021
--------------------------------------------------------
Change in
Primary underlying Derivative Derivative Realised unrealised
risk assets liabilities gain/(loss) gain/(loss)
--------------------- ----------- ------------- ------------- -------------
Equity price
Equity swaps 7,575,424 3,310,833 (1,651,404) 3,061,415
Warrants 3,408,150 - 2,443 (125,397)
----------- ------------- ------------- -------------
10,983,574 3,310,833 (1,648,961) 2,936,018
=========== ============= ============= =============
5. Securities lending agreements
The Group has entered into securities lending agreements with its prime brokers. From time to time, the prime brokers lend securities on the Group's behalf. As of 31 December 2022 and 31 December 2021, no securities were loaned and no collateral was received.
6. Offsetting assets and liabilities
The Group is required to disclose the impact of offsetting assets and liabilities represented in the consolidated statement of assets and liabilities to enable users of the consolidated financial statements to evaluate the effect or potential effect of netting arrangements on its financial position for recognised assets and liabilities. These recognised assets and liabilities are financial instruments and derivative instruments that are either subject to an enforceable master netting arrangement or similar agreement or meet the following right of setoff criteria: the amounts owed by the Group to another party are determinable, the Group has the right to offset the amounts owed with the amounts owed by the other party, the Group intends to offset and the Group's right of setoff is enforceable by law.
As of 31 December 2022 and 31 December 2021, the Group held financial instruments and derivative instruments that were eligible for offset in the consolidated statement of assets and liabilities and are subject to a master netting arrangement. The master netting arrangement allows the counterparty to net applicable collateral held on behalf of the Group against applicable liabilities or payment obligations of the Group to the counterparty. These arrangements also allow the counterparty to net any of its applicable liabilities or payment obligations they have to the Group against any collateral sent to the Group.
As discussed in Note 1, the Group has elected not to offset assets and liabilities in the consolidated statement of assets and liabilities. The following table presents the potential effect of netting arrangements for asset derivative contracts presented in the consolidated statement of assets and liabilities:
31 December 2022
Gross amounts not offset
in the consolidated statement
of
assets and liabilities
------------- ------------- ------------- ------------------------------
Gross
amounts
offset in
the Gross
Gross consolidated amounts
amounts statement of
of of assets recognised Cash
recognised and assets and Financial collateral Net
Description assets liabilities liabilities instruments(a) received(b) amount
--------------- ------------- ------------- ------------- --------------- -------------
Equity swaps
Bank of
America
Merrill Lynch 12,929,367 - 12,929,367 (3,983,939) - 8,945,428
Cowen
Financial
Products, LLC 3,239,591 - 3,239,591 (1,224,200) - 2,015,391
Morgan Stanley
& Co. LLC 2,797,503 - 2,797,503 (2,797,503) - -
Jeffries & Co. 119,868 - 119,868 (119,868) - -
19,086,329 - 19,086,329 (8,125,510) - 10,960,819
============= ============= ============= =============== ============= ==========
31 December 2021
Gross amounts not offset
in the statement of assets
and liabilities
-------------- -------------- ------------- ------------- -------------------------------
Gross
amounts Gross
offset in amounts
the of
statement recognised
Gross amounts of assets assets Cash
of recognised and and Financial collateral
Description assets liabilities liabilities instruments(a) received(b) Net amount
--------------- -------------- ------------- ------------- --------------- --------------
Equity
swaps
Cowen
Financial
Products, LLC 5,777,357 - 5,777,357 (1,532,754) - 4,244,603
Bank of
America
Merrill Lynch 1,396,737 - 1,396,737 (1,190,091) - 206,646
Morgan Stanley
& Co. LLC 306,560 - 306,560 (77,393) - 229,167
Jeffries & Co. 78,710 - 78,710 (78,710) - -
UBS AG 16,060 - 16,060 (16,060) - -
-------------- ------------- ------------- --------------- -------------- ------------
7,575,424 - 7,575,424 (2,895,008) - 4,680,416
============== ============= ============= =============== ============== ============
(a) Amounts related to master netting agreements (e.g. ISDA), determined by the Group to be legally enforceable in the event of default and if certain other criteria are met in accordance with applicable offsetting accounting guidance but were not offset due to management's accounting policy election.
(b) Amounts related to master netting agreements and collateral agreements determined by the Group to be legally enforceable in the event of default, but certain other criteria are not met in accordance with applicable offsetting accounting guidance. The collateral amounts may exceed the related net amounts of financial assets and liabilities presented in the consolidated statement of assets and liabilities. If this is the case, the total amount reported is limited to the net amounts of financial assets and liabilities with that counterparty.
The following tables present the potential effect of netting arrangements for liability derivative contracts presented in the consolidated statement of assets and liabilities as of 31 December 2022 and 31 December 2021:
31 December 2022
Gross amounts not offset
in the consolidated statement
of
assets and liabilities
--------------- -------------- -------------- -------------- ------------------------------- -----------
Gross amounts
offset in
the
consolidated
Gross statement
amounts of assets Gross amounts Cash
of recognised and of recognised Financial collateral
Description liabilities liabilities liabilities instruments(a) pledged(b) Net amount
---------------- -------------- -------------- -------------- -----------
Equity swaps
Bank of America
Merrill Lynch 3,983,939 - 3,983,939 (3,983,939) - -
Morgan Stanley
& Co. LLC 3,372,143 - 3,372,143 (2,797,503) (574,640) -
Cowen Financial
Products, LLC 1,224,200 - 1,224,200 (1,224,200) - -
Jeffries & Co. 336,931 - 336,931 (119,868) (217,063) -
UBS AG 9,530 - 9,530 - (9,530) -
8,926,743 - 8,926,743 (8,125,510) (801,233) -
============== ============== ============== =============== ============== ===========
31 December 2021
Gross amounts not offset
in the statement of assets
and liabilities
--------------- -------------- -------------- -------------- ------------------------------- -----------
Gross amounts
offset in
Gross the statement
amounts of assets Gross amounts Cash
of recognised and of recognised Financial collateral
Description liabilities liabilities liabilities instruments(a) pledged(b) Net amount
---------------- -------------- -------------- -------------- -----------
Equity swaps
Cowen Financial
Products, LLC 1,532,754 - 1,532,754 (1,532,754) - -
Bank of America
Merrill Lynch 1,190,091 - 1,190,091 (1,190,091) - -
Jeffries & Co. 406,977 - 406,977 (78,710) (328,267) -
UBS AG 103,618 - 103,618 (16,060) (87,558) -
Morgan Stanley
& Co. LLC 77,393 - 77,393 (77,393) - -
-------------- -------------- -------------- --------------- -------------- -----------
3,310,833 - 3,310,833 (2,895,008) (415,825) -
============== ============== ============== =============== ============== ===========
(a) Amounts related to master netting agreements (e.g. ISDA), determined by the Group to be legally enforceable in the event of default and if certain other criteria are met in accordance with applicable offsetting accounting guidance but were not offset due to management's accounting policy election.
(b) Amounts related to master netting agreements and collateral agreements determined by the Group to be legally enforceable in the event of default, but certain other criteria are not met in accordance with applicable offsetting accounting guidance. The collateral amounts may exceed the related net amounts of financial assets and liabilities presented in the consolidated statement of assets and liabilities. If this is the case, the total amount reported is limited to the net amounts of financial assets and liabilities with that counterparty.
7. Securities sold short
The Group is subject to certain inherent risks arising from its investing activities of selling securities short. The ultimate cost to the Group to acquire these securities may exceed the liability reflected in these consolidated financial statements.
8. Risk factors
Some underlying investments may be deemed to be highly speculative investments and are not intended as a complete investment program. The Group is designed only for sophisticated persons who are able to bear the economic risk of the loss of their entire investment in the Group and who have a limited need for liquidity in their investment. The following risks are applicable to the Group:
Market risk
Certain events particular to each market in which Portfolio Companies conduct operations, as well as general economic and political conditions, may have a significant negative impact on the operations and profitability of the Group's investments and/or on the fair value of the Group's investments. Such events are beyond the Group's control, and the likelihood they may occur and the effect on the Group cannot be predicted. The Group intends to mitigate market risk generally by investing in LifeSci Companies in various geographies.
Portfolio Company products are subject to regulatory approvals and actions with new drugs, medical devices and procedures being subject to extensive regulatory scrutiny before approval, and approvals can be revoked.
The market value of the Group's holdings in public Portfolio Companies could be affected by a number of factors, including, but not limited to: a change in sentiment in the market regarding the public Portfolio Companies, the market's appetite for specific asset classes; and the financial or operational performance of the public Portfolio Companies.
The size of investments in public Portfolio Companies or involvement in management may trigger restrictions on buying or selling securities. Laws and regulations relating to takeovers and inside information may restrict the ability of the Group to carry out transactions, or there may be delays or disclosure requirements before transactions can be completed.
Equity prices and returns from investing in equity markets are sensitive to various factors, including but not limited to: expectations of future dividends and profits; economic growth; exchange rates; interest rates; and inflation.
Biotech/healthcare companies
The Portfolio Companies are biotechnology companies. Biotech companies are generally subject to greater governmental regulation than other industries at both the state and federal levels. Changes in governmental policies may have a material effect on the demand for or costs of certain products and services.
Any failure by a Portfolio Company to develop new technologies or to accurately evaluate the technical or commercial prospects of new technologies could result in it failing to achieve a growth in value and this could have a material adverse effect on the Group's financial condition.
Portfolio Companies may not successfully translate promising scientific theory into a commercially viable business opportunity. Further, the Portfolio Companies' therapies in development may fail clinical trials and therefore no longer be viable.
Portfolio Company products are subject to intense competition and there are many factors that will affect whether the new therapies released by the Portfolio Companies gain market share against competitors and existing therapies.
Portfolio Companies may be newer small and mid-size LifeSci Companies. These companies may be more volatile and have less experience and fewer resources than more established companies.
Concentration risk
The Group may not make an investment or a series of investments in a Portfolio Company that result in the Group's aggregate investment in such Portfolio Company exceeding 15 per cent. of the Group's gross assets, save for Rocket for which the limit is 25 per cent. as stated in the Group's prospectus. Each of these investment restrictions will be calculated as at the time of investment. As such, it is possible that the Group's portfolio may be concentrated at any given point in time, potentially with more than 15 per cent. of gross assets held in one Portfolio Company as Portfolio Companies increase or decrease in value following such initial investment. The Group's portfolio of investments may also lack diversification among LifeSci Companies and related investments.
Concentration of credit risk
In the normal course of business, the Group maintains its cash balances in financial institutions, which at times may exceed US federal or UK insured limits, as applicable. The Group is subject to credit risk to the extent any financial institution with which it conducts business is unable to fulfil contractual obligations on its behalf. Management monitors the financial condition of such financial institutions and does not anticipate any losses from these counterparties.
Counterparty risk
The Group invests in equity swaps and takes the risk of non-performance by the other party to the contract. This risk may include credit risk of the counterparty, the risk of settlement default, and generally, the risk of the inability of counterparties to perform with respect to transactions, whether due to insolvency, bankruptcy or other causes.
In an effort to mitigate such risks, the Group will attempt to limit its transactions to counterparties which are established, well capitalised and creditworthy.
Liquidity risk
Liquidity risk is the risk that the Group cannot meet its financial commitments as they fall due. The Group's unquoted investments may have limited or no secondary market liquidity so the Investment Manager maintains a sufficient balance of cash and market quoted securities which can be sold if needed to meet its commitments.
The Group's investments in quoted securities may also be subject to sale restrictions on listing and when the Investment Manager is subject to close periods or privy to confidential information by virtue of their active involvement in the management of portfolio companies.
Derivative transactions may not be liquid in all circumstances, such that in volatile markets it may not be possible to close out a position without incurring a loss. The illiquidity of the derivatives markets may be due to various factors, including congestion, disorderly markets, limitations on deliverable supplies, the participation of speculators, government regulation and intervention, and technical and operational or system failures.
Foreign exchange risk
The Group will make investments in various jurisdictions in a number of currencies and will be exposed to the risk of currency fluctuations that may materially adversely affect, amongst other things, the value of the Portfolio Company or the Group's investment in such Portfolio Company, or any distributions received from the Portfolio Company. Under its investment policy, the Group does not intend to enter into any securities or financially engineered products designed to hedge portfolio exposure or mitigate portfolio risk as a core part of its investment strategy.
9. Share capital
During the year ended 31 December 2022 the Company did not issue any Ordinary Shares:
2022 2021
----------------- ------------
Number of
Number of Ordinary
Ordinary Shares Shares
As at 1 January 212,389,138 191,515,735
Issuance of Ordinary Shares - 20,873,403
----------------- ------------
As at 31 December 212,389,138 212,389,138
Ordinary Shares carry the right to receive all income of the Company attributable to the Ordinary Shares and to participate in any distribution of such income made by the Company. Such income shall be divided pari passu among the holders of Ordinary Shares in proportion to the number of Ordinary Shares held by them.
Ordinary Shares shall carry the right to receive notice of and attend and vote at any general meeting of the Company, and at any such meeting on a show of hands, every holder of Ordinary Shares present in person (includes present by attorney or by proxy or, in the case of a corporate member, by duly authorised corporate representative) and entitled to vote shall have one vote, and on a poll, subject to any special voting powers or restrictions, every holder of Ordinary Shares present in person or by proxy shall be entitled to one vote for each Ordinary Share, or fraction of an Ordinary Share, held.
On 1 December 2022, the Performance Allocation Share held by RTW Venture Performance LP was surrendered in exchange for a New Performance Allocation Share issued by the Subsidiary. The New Performance Allocation Share issued by the Subsidiary has identical terms to the original Performance Allocation Share issued by the Company. From 1 December 2022, the Performance Allocation Amount will now be allocated at the Subsidiary level, and is presented in the Group's financial statements as part of the Non-Controlling Interest. The sole New Performance Allocation Share is held by RTW Venture Performance LP. As at 31 December 2022, there were no Performance Allocation Shares of the Company in issue (31 December 2021: one) and one New Performance Allocation Share of the Subsidiary in issue (31 December 2021: nil).
New Performance Allocation Shares of the Subsidiary carry the right to receive, and participate in, any dividends or other distributions of the Subsidiary available for dividend or distribution. New Performance Allocation Shares are not entitled to receive notice of, to attend or to vote at general meetings of the Company or the Subsidiary.
For all share classes, subject to compliance with the solvency test set out in the Companies Law, the Board may declare and pay such annual or interim dividends and distributions as appear to be justified by the position of the Group. The Board may, in relation to any dividend or distribution, direct that the dividend or distribution shall be satisfied wholly or partly by the distribution of assets, and in particular of paid-up shares or reserves of any nature as approved by the Group.
10. Related party transactions
Management Fee
The Investment Manager receives a monthly management fee, in advance, as of the beginning of each month in an amount equal to 0.104% (1.25% per annum) of the net assets of the Group (the "Management Fee"). For purposes of determining the Management Fee, private investments will be valued at the fair value. The Management Fee will be prorated for any period that is less than a full month. The Management Fees charged for the year ended 31 December 2022 amounted to $3,751,464 (31 December 2021: $4,813,854) of which $nil (31 December 2021: $nil) was outstanding at the year end.
Performance Allocation
The Performance Allocation Share held by RTW Venture Performance LP was surrendered in exchange for a New Performance Allocation Share issued by the Subsidiary. The New Performance Allocation Share issued by the Subsidiary has identical terms to the original Performance Allocation Share issued by the Company.
In respect of each Performance Allocation Period, the Performance Allocation Amount shall be allocated at the Subsidiary level and disclosed on the Group's financial statements within the Non-Controlling Interest, subject to the satisfaction of a hurdle condition.
The Performance Allocation Amount relating to the Performance Allocation Period, which is calculated solely at the Subsidiary, is an amount equal to:
((A-B) x C) x 20 per cent.
where:
A is the Adjusted Net Asset Value per Ordinary Share on the Calculation Date, adjusted by:
adding back (i) the total net Distributions (if any) per Ordinary Share (whether paid, or declared but not yet paid) during the Performance Allocation Period; and (ii) any accrual for the Performance Allocation for the current Performance Allocation Period reflected in the Net Asset Value per Ordinary Share; and deducting any accretion in the Net Asset Value per Ordinary Share resulting from either the issuance of Ordinary Shares at a premium or the repurchase or redemption of Ordinary Shares at a discount during the Performance Allocation Period;
B is the Adjusted Net Asset Value per Ordinary Share at the start of the Performance Allocation Period; and
C is the time weighted average number of Ordinary Shares in issue during the Performance Allocation Period.
The Hurdle Amount represents an 8 per cent. annualised compounded rate of return in respect of the Adjusted Net Asset Value per Ordinary Share from the start of the initial Performance Allocation Period through the then current Performance Allocation Period.
The Performance Allocation Share Class can elect to receive the Performance Allocation Amount in Ordinary Shares; cash; or a mixture of the two, subject to a minimum 50% as Ordinary Shares. The Performance Allocation Share Class entered into a letter agreement dated 21 April 2020, pursuant to which the Performance Allocation Share Class agreed to defer distributions of Ordinary Shares that would otherwise be distributed to the Performance Allocation Share Class no later than 30 business days after the publication of the Group's audited annual consolidated financial statements. Under that letter agreement, such Ordinary Shares shall be distributed to the Performance Allocation Share Class at such time or times as determined by the Boards of Directors of the Group.
The Group will increase or decrease the amount owed to the Performance Allocation Share Class based on its investment exposure to the Group's performance had such Performance Ordinary Shares been so issued. The Performance Allocation Amount for the year ended 31 December 2022 includes the residual, undistributed Performance Allocation Amounts from prior years that were previously converted into a total of 14,228,208 Notional Ordinary Shares. These Notional Ordinary Shares are subject to market risk alongside the Ordinary Shares and incurred a mark to market loss of $2,476,036 in 2022 (2021: notional loss of $3,559,670), which is included in Performance Allocation within the Consolidated Statement of Changes in Net Assets. There was no reallocation of uncrystallized performance allocation back to Ordinary Shareholders related to the Group's performance in the period.
Until the Group makes a distribution of Ordinary Shares to the Performance Allocation Share Class, the Group will have an unsecured discretionary obligation to make such distribution at such time or times as the Board of Directors of the Group determines. RTW Venture Performance LP has agreed to the deferral of the distributions of the Subsidiary's Ordinary Shares in connection with its own tax planning. The Group does not believe that the deferral of such distributions to the Performance Allocation Share Class will have any negative effects on holders of the Company's Ordinary Shares.
The Investment Manager is a member of the Performance Allocation Share Class and will therefore receive a proportion of the Performance Allocation Amount. For the year ended 31 December 2022, the Board did not approve a cash distribution to the Performance Allocation Share Class (31 December 2021: $4,974,920). At the year end the Performance Allocation Share Class of the Subsidiary is reflected within the Non-Controlling Interest balance of $21,844,468 and was captured within the Performance Allocation Share Class of the Company at 31 December 2021 with a balance of $24,320,504.
The Investment Manager is also refunded any research costs incurred on behalf of the Group.
One of the Directors of the Group, Stephanie Sirota, is also a partner and the Chief Business Officer of the Investment Manager. The following table represents the number of related parties served on the boards of directors of investments held by the Group during the year ended 31 December 2022 and 31 December 2021:
Investments Partners Employees Rocket Two(a) One HSAC2 Holdings II Two(a) One Ji Xing Two(a) One Yarrow Biotechnology Two(b) One
(a) Roderick Wong, Naveen Yalamanchi
(b) Roderick Wong, Peter Fong
As at 31 December 2022, the number of Ordinary Shares held by each Director was as follows:
2022 2021
-----------------
Number of Ordinary Number of
Shares Ordinary Shares
William Simpson 200,000 150,000
Paul Le Page 128,000 103,000
William Scott 305,003 150,000
Stephanie Sirota 1,010,000 1,000,000
All Directors added to their holdings during the year by purchasing Ordinary Shares in the secondary market.
Roderick Wong is a major shareholder and also a member of the Investment Manager. As at 31 December 2022, he held 29,593,872 Ordinary Shares in the Group (13.93% of the Ordinary Shares in issue) (31 December 2021: 29,218,773, 13.76% of the Ordinary Shares in issue).
The total Directors' fees expense for the year amounted to $176,722 (31 December 2021: $214,353) of which $48,281 was outstanding at 31 December 2022 (31 December 2021: $52,761) and is included within accrued expenses.
All of the Directors of the Company were also appointed as directors of the Subsidiary on its incorporation on 23 November 2022.
11. Administrative services
Elysium Fund Management Limited ("EFML") serves as Administrator to the Group, providing administration, corporate secretarial, corporate governance and compliance services. Morgan Stanley Fund Services USA LLC ("MSFS") serves as the Group's Sub-Administrator.
During the year ended 31 December 2022, EFML and MSFS charged administration fees of $93,469 and $218,534 respectively (31 December 2021: EFML charged $107,767 and MSFS charged $223,067) of which $6,484 and $91,099 (31 December 2021: EFML $8,396, MSFS $76,053) was outstanding at 31 December 2022, and is included within accrued expenses.
12. Financial highlights
Financial highlights for the year ended 31 December 2022 and 31 December 2021 are as follows:
2022 2021
Per Ordinary Share operating performance
Net Asset Value, beginning of year $ 1.71 $ 1.96
Issuance of Ordinary Shares - 0.02
Income from investments
Net investment income/(loss) (0.02) (0.04)
Net realised and unrealised gain/(loss)
on investments, derivatives and foreign
currency transactions (0.15) (0.23)
Total from investment operations (0.17) (0.27)
Net Asset Value, end of year $ 1.54 $ 1.71
Total return
Total return before Performance Allocation (10.18)% (15.35)%
Performance Allocation (excluding mark
to market) - % 2.58 %
Total return after Performance Allocation (10.18)% (12.77)%
Ratios to average net assets*
Expenses 2.47% 2.22 %
Performance Allocation (1.44)% (2.11)%
Expenses and Performance Allocation 1.03% 0.11 %
Net investment income/(loss) (1.75)% (2.04)%
NAV total return for the year (10.18)% (15.35)%
* Ratios are not annualised.
Financial highlights are calculated for Ordinary Shares. An individual shareholder's financial highlights may vary based on participation in new issues, different Performance Allocation arrangements, and the timing of capital share transactions. Net investment income/loss does not reflect the effects of the Performance Allocation.
13. Subsequent events
These consolidated financial statements were approved by the Board of Directors on 30 March 2023. Subsequent events have been evaluated through this date.
General Company Information - Investment Objective and Investment Policy
The Company
RTW Venture Fund Limited is a company that was incorporated as a limited liability corporation in the State of Delaware, United States of America on 16 February 2017, with the name "RTW Special Purpose Fund I, LLC", and re-domiciled into Guernsey under the Companies Law on 2 October 2019 with registration number 66847 on the Guernsey Register of Companies.
The Company is registered with the GFSC as a Registered Closed-ended Collective Investment Scheme and is an investment company limited by shares. The registered office of the Company is 1(st) Floor, Royal Chambers, St Julian's Avenue, St Peter Port, Guernsey, GY1 3JX.
On 30 October 2019, the issued Ordinary Shares of the Company were listed and admitted to trading on the Specialist Fund Segment of the Main Market of the London Stock Exchange. The ISIN of the Company's Ordinary Shares is GG00BKTRRM22 and trades under the ticker symbol "RTW" and "RTWG".
The Company's Ordinary Shares were admitted to trading on the Premium Segment of the London Stock Exchange with effect from 6 August 2021.
The Subsidiary
On 1 December 2022 the Company changed its status for U.S. federal tax purposes from a "publicly traded partnership" or "PTP" to a corporation. The change in status caused it to be treated as a "passive foreign investment company" or a "PFIC." This change was necessitated by recent changes to U.S. tax legislation that came into effect on 1 January 2023.
Related to the making of the tax election, the Company carried out a reorganisation of the arrangements pursuant to which an affiliate of the Investment Manager is allocated its share of the investment performance generated by the Company. Pursuant to this, the Company established a new wholly-owned subsidiary incorporated in Guernsey, RTW Venture Fund Operating Limited, to which it has transferred its right to the profits and losses attributable to the Company's portfolio of assets. The Directors of the Subsidiary are the same as the Directors of the Company. This reorganisation had no economic impact on shareholders and was effected solely for the purpose of ensuring that the share of the investment performance generated by the Company which is allocable to an affiliate of the Investment Manager receives the same treatment for U.S. federal tax purposes as would have been the case if no tax election by the Company had been compelled by the change in U.S. tax law.
As part of the reorganisation, the Investment Management Agreement was amended to provide services to the Subsidiary. There was no change to the investment management fee, but the Performance Allocation Share held by RTW Venture Performance LP was surrendered in exchange for a New Performance Allocation Share issued by the Subsidiary. The New Performance Allocation Share issued by the Subsidiary has identical terms to the original Performance Allocation Share issued by the Company.
Investment Objective
The Group seeks to achieve positive absolute performance and superior long-term capital appreciation, with a focus on forming, building, and supporting world-class life sciences, biopharmaceutical and medical technology companies. It intends to create a diversi ed portfolio of investments across a range of businesses, each pursuing the development of superior pharmacological or medical therapeutic assets to enhance the quality of life and/or extend patient life.
Investment Policy
The Group seeks to achieve its investment objective by leveraging the Investment Manager's data-driven proprietary pipeline of innovative assets to invest in life sciences companies:
-- across various geographies (globally);
-- across various therapeutic categories and product types (including but not limited to genetic medicines, biologics, traditional modalities such as small molecule pharmaceuticals and antibodies, and medical devices);
-- in both a passive and active capacity and intends, from time to time, to take a controlling or majority position with active involvement in a Portfolio Company to assist and in uence its management. In those situations, it is expected that the Investment Manager's senior executives may serve in temporary executive capacities; and
-- by participation in opportunities created by the Investment Manager's formation of companies de novo when a significant unmet need has been identified and the Group is able to build a differentiated, sustainable business to address said unmet need.
The Group expects to invest approximately 80% of its gross in the biopharmaceutical sector and approximately 20% of its gross assets in the medical technology sector.
The Group's portfolio will reflect its view of the most compelling opportunities available to the Investment Manager, with an initial investment in each privately held Portfolio Company ("Private Portfolio Company") expected to start in a low single digit per cent. of the Group's gross assets and grow over time, as the Group may, if applicable, participate in follow-on investments and/or continue holding the Portfolio Company as it becomes publicly-traded. It is intended certain long-term holds will increase in size and may represent between five and ten per cent. or greater of the Group's gross assets.
The Group anticipates deploying one-third of its capital toward early-stage and de novo company formations (including newly formed entities around early-stage academic licenses and commercial stage corporate assets) and two-thirds of its capital in mid- to late-stage ventures.
The Group may choose to invest in Portfolio Companies listed on a public stock exchange ("Public Portfolio Companies") depending on market conditions and the availability of appropriate investment opportunities. Equally, as part of a full-life cycle investment approach, it is expected that Private Portfolio Companies may later become Public Portfolio Companies. Monetisation events such as IPOs and reverse mergers will not necessarily represent exit opportunities for the Group. Rather, the Group may decide to retain all or some of its investment in such Portfolio Companies or the acquiring Company where they meet the standard of diligence set by the Investment Manager. The Group is not required to allocate a specific percentage of its assets to Private Portfolio Companies or Public Portfolio Companies.
The Group also intends, where appropriate, to invest further in its Portfolio Companies, supporting existing investments throughout their life cycle. The Group may divest its interest in Portfolio Companies in part or in full when the risk-reward trade-off is deemed to be less favourable.
From time to time, the Group may seek opportunities to optimise investing conditions, and to allow for such circumstances, the Group will have the ability to hedge or enter into securities or derivative structures in order to enhance the risk-reward position of the portfolio and its underlying securities.
Investment restrictions
The Group will be subject to the following restrictions when making investments in accordance with its investment policy:
-- the Group may not make an investment or a series of investments in a Portfolio Company that result in the Group's aggregate investment in such Portfolio Company exceeding 15% (or, in the case of Rocket Pharmaceuticals, Inc., 25%) of the Group's gross assets at the time of each such investment;
-- the Group may not make any direct investment in any tobacco company and not knowingly make or continue to hold any Public Portfolio Company investments that would result in exposure to tobacco companies exceeding one per cent. of the aggregate value of the Public Portfolio Companies from time to time.
Each of these investment restrictions will be calculated as at the time of investment. In the event that any of the above limits are breached at any point after the relevant investment has been made (for instance, upon successful realisation of economic and/or scientific milestones or as a result of any movements in the value of the Group's gross assets), there will be no requirement to sell or otherwise dispose of any investment (in whole or in part).
Leverage and borrowing limits
The Group may use conservative leverage in the future in order to enhance returns and maximise the growth of its portfolio, as well as for working capital purposes, up to a maximum of 50% of the Group's net asset value at the time of incurrence. Any other decision to incur indebtedness may be taken by the Investment Manager for reasons and within such parameters as are approved by the Board. There are no limitations placed on indebtedness incurred in the Group's underlying investments.
Capital deployment
The Group anticipates that it will initially, upon Admission and upon any subsequent capital raises, invest up to 80% of available cash in Public Portfolio Companies that have been diligenced by the Investment Manager and represent holdings in other portfolios managed by the Investment Manager, subsequently rebalancing the portfolio between Public Portfolio Companies and Private Portfolio Companies as opportunities to invest in the latter become available.
Cash management
The Group's uninvested capital may be invested in cash instruments or bank deposits pending investment in Portfolio Companies or used for working capital purposes.
Hedging
As described above, the Group may seek opportunities to optimise investing conditions, and to allow for such circumstances, there will be no limitations placed on the Group's ability to hedge or enter into securities or derivative structures in order to enhance the risk-reward position of the portfolio and its underlying securities.
On an ongoing basis, the Group does not intend to enter into any securities or financially engineered products designed to hedge portfolio exposure or mitigate portfolio risk as a core part of its investment strategy, but may enter into hedging transactions to hedge individual positions or reduce volatility related to specific risks such as fluctuations in foreign exchange rates, interest rates, and other market forces.
Glossary (unaudited)
Defined Terms
"Adjusted Net Asset the NAV adjusted by deducting the unrealised
Value" gains and unrealised losses in respect of
private Portfolio Companies;
"Administrator" means Elysium Fund Management Limited;
"AIC" the Association of Investment Companies;
"AIC Code" the AIC Code of Corporate Governance dated
February 2019;
"AIFM" means Alternative Investment Fund Manager;
"AIFMD" the Alternative Investment Fund Managers Directive;
"Alcyone" Alcyone Therapeutics, Inc.;
"Ancora" Ancora Heart, Inc.;
"Annual General the annual general meeting of the shareholders
Meeting" or "AGM" of the Company;
"Annual Report" the Annual Report and audited consolidated
financial statements;
"Antibody" a large Y-shaped blood protein that can stick
to the surface of a virus, bacteria, or receptor
on a cell;
"Antibody-Oligonucleotide molecules that combine structures of an antibody
Conjugates" or "AOC" and an oligo;
"Artios" Artios Pharma, Inc.;
"Artiva" Artiva Biotherapeutics, Inc.;
"Athira" Athira Pharma, Inc.;
"Autoimmune diseases" conditions, where the immune system mistakenly
attacks a body tissue;
"Avidity" Avidity Biosciences, Inc.;
"Beta Bionics" Beta Bionics, Inc.;
"Biomea" Biomea Fusion, Inc.;
"C4 Therapeutics" C4 Therapeutics, Inc.;
or "C4T"
"Calculation Date" 31 December or, if such date is not a business
day, the previous business day;
"Cardiovascular conditions affecting heart and vascular system;
disease"
"CinCor" CinCor Pharma, Inc.;
"Clinical stage" a therapy in development goes through a number
or "clinical trial" of clinical trials to ensure its safety and
efficacy. The trials in human subjects range
from Phase 1 to Phase 3. All studies done
prior to clinical testing in human subjects
are considered preclinical;
"CNS" Central Nervous System
"Companies Law the Companies (Guernsey) Law, 2008 (as amended);
"
"Company " or "RTW RTW Venture Fund Limited is a company incorporated
Venture Fund Limited" in and controlled from Guernsey as a close-ended
Investment Company. The Company has an unlimited
life and is registered with the GFSC as a
Registered Closed-ended Collective Investment
Scheme. The registered office of the Company
is 1(st) Floor, Royal Chambers, St Julian's
Avenue, St Peter Port, Guernsey, GY1 3JX ;
"Company's Articles means the Company's Articles of Incorporation;
"
"Core portfolio Include private companies and public companies
companies" that were initially added to our portfolio
as private investments;
"Corporate Brokers" being J.P. Morgan Cazenove and Bank of America
;
"Crohn's Disease" a condition, in which a part(s) of digestive
tract is inflamed;
"CRS" Common Reporting Standard;
"Danon Disease" a rare genetic heart condition in children,
predominantly boys;
"Directors " or the directors of the Company as at the date
"Board" of this document, or who served during the
reporting period, and "Director" means any
one of them;
"DTR" Disclosure Guidance and Transparency Rules
of the UK's FCA;
"Encoded" Encoded Therapeutics, Inc.;
"EU " or "European the European Union first established by the
Union" treaty made at Maastricht on 7 February 1992;
"Fanconi Anemia" a rare genetic blood condition in young children;
"FATCA" the Foreign Account Tax Compliance Act;
"FCA " the Financial Conduct Authority;
"FCA Rules " the rules or regulations issued or promulgated
by the FCA from time to time and for the time
being in force (as varied by any waiver or
modification granted, or guidance given, by
the FCA);
"FDA" the US Food and Drug Administration;
"FRC" the Financial Reporting Council;
"Frequency" Frequency Therapeutics, Inc.;
"FTC" the Federal Trade Commission;
"Gene therapy" a biotechnology that uses gene delivery systems
to treat or prevent a disease;
"Genetic Medicine" an approach to treat or prevent a disease
using gene therapy or RNA medicines;
"GFSC " the Guernsey Financial Services Commission;
"GFSC Code" the GFSC Finance Sector Code of Corporate
Governance as amended in June 2021;
"GH Research" GH Research PLC;
"Group" the Company and the Subsidiary;
"HCM" or "Hypertrophic a cardiovascular disease characterised by
cardiomyopathy" an abnormally thick heart muscle;
"ImmTAC(R)" bi-specific biologic molecules designed to
fight cancer or viral infections;
"Immunocore" Immunocore Limited;
"InBrace" InBrace or Swift Health, Inc.;
"Independent Valuer" Alvarez & Marsal Valuation Services, LLC;
"Infantile Malignant a rare genetic bone disease in young children,
Osteopetrosis" or manifesting in an increased bone density;
"IMO"
"Interim Report" the Interim Financial Report;
"Investigational the FDA's investigational New Drug program
New Drug" or "IND" is the means by which a pharmaceutical company
obtains permission to start human clinical
trials;
"Investment Manager" RTW Investments, LP, also referred to as RTW;
"IPEV Guidelines" the International Private Equity and Venture
Capital Valuation Guidelines;
"IPO" an initial public offering;
"IRR" internal rate of return;
"ISDA" International Swaps and Derivatives Association;
"iTeos" iTeos Therapeutics, Inc.;
"Ji Xing" Ji Xing Pharmaceuticals, formerly China New
Co;
"Kyverna" Kyverna Therapeutics, Inc.;
"Landos" Landos Biopharma, Inc.;
"Lentiviral vector based gene therapy - a type of viral vector
or "LVV" used to deliver a gene;
"Leukocyte adhesion a rare genetic disorder of immunodeficiency
deficiency" or "LAD-I" in young children;
"LifeSci Companies" companies operating in the life sciences,
biopharmaceutical, or medical technology industries;
"Listing Rules the listing rules made under section 73A of
" the Financial Services and Markets Act 2000
(as set out in the FCA Handbook), as amended;
"London Stock Exchange London Stock Exchange plc;
" or "LSE"
"LSE" London Stock Exchange's main market for listed
securities;
"Lycia" Lycia Therapeutics, Inc.;
"MAGE-A4" a protein expressed on certain types of tumours;
"Magnolia Medical" Magnolia Medical Technologies, Inc.;
or "Magnolia"
"Medtech" medical technology sector within healthcare;
"Menin" a target for the treatment development in
oncology;
"Milestone" Milestone Pharmaceuticals, Inc.;
"MOC" Multiple on capital is the ratio of realised
and unrealised gains divided by the acquisition
cost of an investment;
"Monte Rosa" Monte Rosa Therapeutics, Inc.;
"Myotonic Dystrophy" a genetic condition that affects muscle function;
"NASDAQ Biotech" a stock market index made up of securities
of NASDAQ-listed companies classified according
to the Industry Classification Benchmark as
either the Biotechnology or the Pharmaceutical
industry;
"Net Asset Value the value of the assets of the Company less
" or "NAV" its liabilities, calculated in accordance
with the valuation guidelines laid down by
the Board;
"Neurogastrx" Neurogastrx, Inc.;
"New Performance performance allocation shares of no-par value
Allocation Shares" in the capital of the Subsidiary;
"NewCo" a new company;
"NiKang" Nikang Therapeutics, Inc;
"Non-core portfolio investments made in public companies as a
assets" part of cash management strategy;
"Notional Ordinary Performance Ordinary Shares, in which receipt
Shares" of such shares has been deferred;
"Nuance" Nuance Pharma;
"Numab" Numab Therapeutics, Inc.;
"Official List the official list of the UK Listing Authority;
"
"Oligonucleotides" short DNA or RNA molecules that have a wide
or "Oligos" range of applications in genetic testing and
research;
"Oncology" a therapeutic area focused on diagnosis, prevention
and treatment of cancer;
"OpCo" or "Subsidiary" RTW Venture Fund Operating Limited;
"Ophthalmic conditions" conditions affecting the eye;
"Orchestra BioMed" Orchestra BioMed, Inc.:
or "Orchestra"
"Ordinary Shares" the Ordinary Shares of the Company;
"Performance Allocation an allocation connected with the performance
Amount" of the Company to be allocated to the Performance
Allocation Share Class in such amounts and
as such times as shall be determined by the
Board;
"Performance Allocation each period ending on a Calculation Date and
Period" beginning on the business day immediately
following the last Performance Allocation
Period in respect of which a Performance Allocation
has been allocated ;
"Performance Allocation a class fund for the Performance Allocation
Share Class" Shares or New Performance Allocation Shares
to which the Performance Allocation will be
allocated;
"Performance Allocation performance allocation shares of no-par value
Shares" in the capital of the Company (prior to the
1 December 2022 reorganisation), or performance
allocation shares of no-par value in the capital
of the Subsidiary (with effect from the 1
December 2022 reorganisation);
"Performance Allocation the holder of Performance Allocation Shares
Shareholder" or New Performance Allocation Shares;
"PFIC" Passive Foreign Investment Company;
"Pilot study" a small-scale study;
"Private Investment is when an institutional or an accredited
in Public Equity" investor buys stock directly from a public
or "PIPE" company below market price;
"POI Law " The Protection of Investors (Bailiwick of
Guernsey) Law, 2020, as amended;
"Portfolio Companies" Private and public companies included into
the portfolio;
"PRAME" a cancer-testis antigen (CTA) that is highly
expressed in a broad range of solid and hematologic
malignancies;
"Premium Segment" Premium Segment of the Main Market of the
LSE;
"PRIority Medicines" to be accepted for PRIME, a medicine has to
or "PRIME" show its potential to benefit patients with
unmet medical needs based on early clinical
data;
"Prometheus" Prometheus Biosciences, Inc.;
"Prospectus" the prospectus of the Company, most recently
updated on 14 October 2019 and available on
the Company's website ( www.rtwfunds.com/venture-fund
);
"PTP" Publicly Traded Partnership;
"Pulmonary conditions" pathologic conditions that affect lungs;
"Pulmonx" Pulmonx Corporation;
"Pyruvate Kinase a rare genetic disorder affecting red blood
Deficiency" or "PKD" cells;
"Pyxis" Pyxis Oncology, Inc.;
"Rare disease" a disease that affects a small percentage
of the population;
"Registrar " Link Market Services (Guernsey) Limited;
"RNA medicines" a type of biotechnology that uses RNA to treat
a disease;
"Rocket Pharmaceuticals" Rocket Pharmaceuticals, Inc.;
or "Rocket"
"RTW" RTW Investments, LP, also referred to as the
Investment Manager;
"RTWCF" RTW Charitable Foundation;
"RTW Royalty" RTW Royalty Holding Company #1 and #2;
"Russell 2000 Biotech" a stock index of small cap biotechnology and
pharmaceutical companies;
"SEC Rule 144" selling restricted and control securities;
"Seed Assets" the initial portfolio of the Company, consisting
of: Beta Bionics, Frequency, Immunocore, Landos,
Orchestra BioMed and Rocket;
"SFS" Specialist Fund Segment of the London Stock
Exchange;
"Small molecule" a compound that can regulate a biologic activity;
"Sensorineural a type of hearing loss caused by damage to
hearing loss" the inner ear;
"SPAC" Special Purpose Acquisition Company;
"Sub-Administrator" Morg an S t an l ey Fun d Se r v ic e s USA
LLC;
"Subsidiary" or RTW Venture Fund Operating Limited;
"OpCo"
"Tachycardia" a heart rhythm disorder;
"Tarsus" Tarsus, Inc.;
"Tenaya" Tenaya Therapeutics. Inc.;
"TIGIT" a target for a checkpoint antibody development
in immune-oncology;
"TL1A" a target for the treatment of inflammation
associated with inflammatory bowel disease
(IBD);
"Type 1 Diabetes" a type of insulin resistance;
or "TD1"
"Total shareholder a measure of shareholders' investment in a
return" company with reference to movements in share
price and dividends paid over time;
"UK" United Kingdom;
"UK Code" the UK Corporate Governance Code 2018 published
by the Financial Reporting Council in July
2018;
"UK-Guernsey IGA" The UK-Guernsey Intergovernmental Agreement
for the Automatic Exchange of Information;
"Ulcerative Colitis" an inflammatory bowel disease that causes
sores in the digestive tract;
"Umoja" Umoja Biopharma. Inc.;
"US" the United States of America;
"US GAAP" US Generally Accepted Accounting Principles;
"Uveal melanoma" a type of eye cancer;
"Valuation Committee" Valuation Committee of the Investment Manager;
"Ventyx" Ventyx Biosciences, Inc.;
"Visus" Visus Therapeutics, Inc.;
"WACC" weighted average cost of capital;
"XIRR" an internal rate of return calculated using
irregular time intervals.
"Yarrow" Yarrow Biotechnology, Inc.
Alternative Performance Measures (unaudited)
APM Definition Purpose Calculation
Available Cash held by the A measure of Cash and cash equivalents,
Cash Group's Bankers, the Due from brokers less
Prime Broker and Group's Due to brokers on the
an ISDA liquidity, Statement of Assets
counterparty. working & Liabilities.
capital
and
investment
level.
NAV per The Company's NAV A measure of The net assets attributable
Ordinary divided by the the to ordinary shares
Share number value of one on the statement of
of Ordinary Ordinary financial position
Shares. Share. (US$326.1 million)
divided by the number
of Ordinary Shares
in issue (212,389,138)
as at the calculation
date.
Price per The Company's A measure of Extracted from the
share closing the official list of the
share price on the supply and London Stock Exchange.
London Stock demand
Exchange for the
for a specified Company's
date. shares.
NAV Growth The percentage A key measure The quotient of the
increase/decrease of NAV per share at the
in the NAV per the success end of the period (US$1.54)
Ordinary of and the NAV per share
share during the the at the beginning of
reporting period. Investment the period (US$1.71)
Manager's minus one expressed
investment as a percentage.
strategy.
Share price The percentage A measure of The quotient of the
growth/Total increase(decrease) the price per share at
Shareholder in the price per return that the end of the period
Return share during the could (US$1.21) and the price
reporting period. have been per share at the beginning
obtained of the period (US$1.78)
by holding a minus 1.00 expressed
share as a percentage. The
over the measure excludes transaction
reporting costs.
period.
Share Price The amount by A key measure The quotient of the
Premium which of price per share at
(Discount) the ordinary share supply and the end of the period
price is demand (US$1.21) and the NAV
higher/lower for the per share at the end
than the NAV per Company's of the period (US$1.54)
ordinary share, shares. A minus one expressed
expressed as a premium as a percentage.
percentage implies
of the NAV per excess
ordinary demand versus
share. supply
and vice
versa.
Multiple on The multiple that A measure to The ratio between initial
Invested measures value evaluate capital invested in
Capital that performance a portfolio company
(MOIC or MOC) an investment has of and current (as of
generated. the realised 31 December 2022) value
and of the investment.
unrealised It is a gross metric
investments. and calculation is
performed before fees
and incentive.
Extended The percentage or A measure of The rate also expressed
Internal single rate of return as a percentage that
Rate of return which is used calculates the returns
Return when applied to when on the total investment
(XIRR) all transactions multiple made with increments
in a portfolio investments through a given period
company. have been (from initial investment
made date to 31 December
over time 2022).
into
a portfolio
company.
Ongoing The recurring A measure of Calculated in accordance
charges costs the with the AIC methodology
ratio that the Group has minimum gross detailed on the web
incurred during profit link below:
the period that the https://www.theaic.co.uk/sites/default/files/documents/AICOngoingCharg
excluding Company esCalculationMay12.pdf
performance fees needs to
and one off legal produce
and professional to make a
fees expressed as positive
a percentage of return for
the Group's shareholders.
average
NAV for the
period.
Ongoing Charges 2022 2021
US$ US$
Fees to Investment Manager 3,751,464 4,813,854
Legal and professional fees 1,008,629 1,070,317
Audit fees 329,557 288,254
Administration fees 312,003 330,834
Directors' remuneration 176,722 214,353
Other expenses 1,100,167 584,851
Listing fees - 936,615
Total expenses 6,678,542 8,239,078
Non-recurring expenses (487,786) (1,176,627)
-----------
Total ongoing expenses 6,190,756 7,062,451
-----------
Average NAV 322,418,512 408,929,032
Annualised ongoing charges
(using AIC methodology) 1.92% 1.73 %
-----------
-- ENDS --
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