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Schroder UK Public Private Tst plc Announcement of NAV

27/05/2021 7:00am

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Schroder UK Public Private Tst plc

27 May 2021

Schroder UK Public Private Trust plc

Announcement of Net Asset Value as of 31 March 2021

Schroder UK Public Private Trust plc (the "Company") today announces its net asset value ("NAV") as of 31 March 2021.

Summary

-- NAV of 40.00p per share as of 31 March 2021, an increase of 14.3% relative to the NAV as of 31 December 2020 (35.00p per share).

-- As disclosed in earlier announcements, there have been several positive developments within the portfolio including Oxford Nanopore's funding round at an uplifted valuation, Immunocore's initial public offering ("IPO"), the sale of Kuur Therapeutics and prospective sale of Inivata. These previously announced developments comprise the majority of the change in NAV stated above.

-- Completion of the sale of a basket of assets to Rosetta Capital generating initial proceeds of GBP52.9 million and allowing a meaningful portion of the Company's outstanding debt to be paid down.

-- Since the period end, the Company has fully repaid its debt facility with the $87.4 million (GBP63.6 million) proceeds from the Kymab exit resulting in a cash position of GBP9.9 million as of 14 May 2021. The cash balance may be further bolstered by $38.6 million expected from the sale of Inivata which remains subject to regulatory approvals.

-- The Company is now in a strong financial position to execute its strategy and enable new and follow-on investments. On 25 May 2021, the Company announced its first new investment into UK cybersecurity company, Tessian, as part of its Series C funding round.

Introduction

Economic backdrop

Investors' hopes for a global economic recovery continued to grow over the first quarter against the backdrop of a rollout of COVID-19 vaccines. Equities globally gained ground while bond yields and inflation expectations rose, led by the US where President Joe Biden confirmed a fiscal stimulus package of $1.9 trillion. This was followed up with an additional promise of $2 trillion in infrastructure spending.

Lowly-valued and economically sensitive equities extended the recovery they enjoyed at the end of 2020, with energy and financial stocks leading many markets higher. UK equities kept pace with the recovery, while some domestically focused areas responded particularly well to good progress with the country's vaccination programme and an improving economic outlook. This progress was reflected in the strength of sterling, which also gained against a strong US dollar.

Objectives and progress

Within the Company's portfolio, the first quarter was a period during which much of the hard work undertaken by the Portfolio Manager during 2020 has started to bear fruit more visibly with positive developments including:

   --      Agreement to extend the term of the credit facility for 24 months to 30 January 2023. 
   --      Immunocore completed its IPO on Nasdaq. 

-- The Company completed the sale of a basket of assets to Rosetta Capital allowing a meaningful portion of the outstanding debt to be repaid.

-- Oxford Nanopore announced its intention to IPO on the London Stock Exchange in the second half of 2021.

A trend which continued after the period end with further announcements including:

   --      Sanofi completed the acquisition of Kymab. 
   --      The Company fully repaid its outstanding debt. 
   --      The announcement of the acquisition of Inivata by NeoGenomics. 
   --      The announcement of the acquisition of Kuur Therapeutics by Athenex. 
   --      Oxford Nanopore completed a fundraise resulting in a material revaluation. 

Overall, these events represent a considerable leap forward in the repositioning of the portfolio. The Company has significantly bolstered its financial position, fully repaying the outstanding debt which stood at GBP113 million as of 31 December 2019 and is now able to make its first new investments since the appointment of Schroders as Portfolio Manager.

Portfolio composition and valuation reviews

The Company entered the first quarter with 38 portfolio holdings(1) including 8 quoted holdings and 30 unquoted holdings.

During the period, the number and composition of holdings was impacted by the following events:

   --      Immunocore completed an IPO and transitioned to being a quoted holding. 

-- The sale of a basket of assets to Rosetta Capital resulted in the realisation of the entire holdings in four companies and partial holdings in three companies.

   --      Lignia Wood entered administration resulting in its fair value being reduced to zero. 

As of 31 March 2021, all the Company's quoted holdings were valued using unadjusted quoted prices except Rutherford Health which continues to be fair value priced by Link Fund Solutions Limited ("LFS"), the Company's AIFM. For the unquoted holdings, the AIFM considered any material 'triggering' events since the last valuation assessment as of 31 December 2020 and as such conducted nine valuation reviews to determine the fair value of the portfolio as of 31 March 2021.

The Company ended the period with 33 holdings(2) including 8 quoted holdings and 25 unquoted holdings.

(1) Excluding 7 holdings with no value. (2) Excluding 8 holdings with no value.

Financial Performance

 
 Attribution Analysis             Quoted*   Unquoted   Net Debt   Other     NAV 
  (GBP'm) 
 Value at 31.12.20                   66.6      354.6    (100.7)   (2.4)   318.1 
                                 --------  ---------  ---------  ------  ------ 
 + Investments                          -        3.5      (3.5)       -       - 
                                 --------  ---------  ---------  ------  ------ 
 - Realisations                     (7.7)     (45.2)       52.9       -       - 
                                 --------  ---------  ---------  ------  ------ 
 +/- Fair value gains/(losses)      (3.3)       51.1          -       -    47.8 
                                 --------  ---------  ---------  ------  ------ 
 +/- FX gains/(losses)              (0.2)      (2.3)          -       -   (2.5) 
                                 --------  ---------  ---------  ------  ------ 
 +/- Reclassified holdings           25.5     (25.5)          -       -       - 
                                 --------  ---------  ---------  ------  ------ 
 +/- Costs and other 
  movements                             -          -      (1.1)     1.2     0.1 
                                 --------  ---------  ---------  ------  ------ 
 Value at 31.03.21                   80.9      336.2     (52.4)   (1.2)   363.5 
                                 --------  ---------  ---------  ------  ------ 
 

Source: AIFM, Link Fund Solutions Limited, as of 31 March 2021. * Rutherford Health is reported as a quoted holding despite being fair value priced by the AIFM.

The NAV as of 31 March 2021 was GBP363.5 million or 40.00p per share reflecting an increase of 14.3% compared with the NAV as of 31 December 2020.

The quarterly NAV return of 14.3% comprised:

   --      Quoted holdings: -1.0% 
   --      Unquoted holdings: +16.1% 
   --      Foreign exchange: -0.8% 
   --      Costs and other movements: 0.0% 

Portfolio

The Company's quoted holdings saw a decline in value of 5.0% contributing -1.0% to the quarterly change in NAV. The largest single negative contributors to performance were Autolus Therapeutics ("Autolus") and Idex Biometrics ASA ("Idex") which declined 35% and 13% respectively. In February 2021, Autolus undertook a capital raise of $115m (gross), which was larger than expected, but secures the balance sheet for the coming years. The raise had a temporary negative impact on the stock price, which in the absence of new data from clinical trials continued into the quarter end. Idex also raised equity in the quarter and has continued to make progress with key partners with the planned roll out of payment cards featuring its biometric sensors.

It should be noted that the quoted performance excludes Immunocore which, despite completing an IPO, started the period as an unquoted company. Within the unquoted holdings, Immunocore was the third largest contributor with an increase in fair value of GBP12.8m or 98% relative to the 31 December 2020 holding value after adjusting for the partial sale to Rosetta Capital. Following the listing of Immunocore's shares on Nasdaq in February 2021 at a price of $26 per share, the shares subsequently increased 62% to $42 per share as of 31 March 2021.

The Company's unquoted holdings saw an increase in value of 14.4% contributing 16.1% to the quarterly change in NAV. In Q1 2021, the largest positive contributor to performance was Oxford Nanopore. The holding's fair value was uplifted by GBP22.0 million or 32.1% to reflect the pricing of the external funding round completed in May 2021 (see further details in the Company Updates section of this report). As of 31 March 2021, Oxford Nanopore was the largest holding within the portfolio representing 21.8% of total investments and has further increased to more than 25% post-period end following the sale of Kymab.

The second largest positive contributor to performance was Inivata. The fair value of the holding was increased by GBP15.5 million or 121%, after adjusting for the partial sale to Rosetta Capital, to reflect the terms of the prospective acquisition by NeoGenomics, Inc. ("NeoGenomics") with the Company expecting to receive total proceeds of $38.6m on completion of the transaction.

Finally, the fourth largest positive contributor was Kuur Therapeutics ("Kuur"). The holding's fair value was increased GBP4.3m to reflect the terms of the sale to Athenex, Inc ("Athenex"), a U.S. incorporated company listed on Nasdaq. As announced on 5 May 2021, the Company has received total proceeds of $8.3 million in Athenex common stock on completion of the sale. Furthermore, there is the potential for additional contingent payments of up to $14.6 million over several years which may be paid in either cash or additional Athenex common stock, at the sole discretion of Athenex. The Company's AIFM had originally expected to revalue the holding for reflection in the NAV as of 30 June 2021, however decided to revalue the holding as of 31 March 2021. The holding was valued based on the Athenex quoted share price as of 31 March 2021 with a 20% discount applied to reflect the execution uncertainty between the valuation and transaction closing dates.

Elsewhere across the portfolio, there was no unquoted holding that detracted from performance by more than GBP2.0 million, although there were several smaller adjustments amongst which include:

-- CeQur was revalued to reflect the terms of a recent funding round ( see further details in the Company Updates section below).

   --      Mafic was revalued to reflect increased funding uncertainty. 

-- Seedrs was revalued due to a valuation review conducted following termination of the merger with Crowdcube.

   --      Spin Memory was revalued to reflect its deteriorating financial position. 

Cash and net debt

As of 31 March 2021, the Company had a net debt balance of GBP52.4 million, a decrease of GBP48.3 million relative to 31 December 2020. This balance is reflective of the partial debt repayment following the sale of assets to Rosetta Capital, but before the exit of Kymab resulting in additional proceeds of GBP63.6m after the period end. Hence, as at 14 May 2021 the Company had a net cash position of GBP9.9 million, which may be further bolstered with news of the prospective sale of Inivata for $38.6 million.

Investment Activity

During Q1, the most notable investment activity impacting the portfolio composition was the sale of a basket of assets to Rosetta Capital. As disclosed in the Annual Report and Accounts for the year ended 31 December 2020, on 27 January 2021, the Company agreed the sale of a basket of seven assets (the "Sale Portfolio") to Rosetta Capital VI, LP (the "Buyer"), an investment fund managed by the UK-based life science venture capital firm Rosetta Capital Limited, for a total acquisition price of GBP49.0 million. The Sale Portfolio consisted of the entire holdings in Carrick Therapeutics, Mission Therapeutics, PsiOxus Therapeutics and Mereo BioPharma and partial holdings in Inivata, Immunocore and ReNeuron. The Buyer also agreed to pay GBP2.9 million representing the value of certain follow-on investments made by the Company with respect to holdings contained in the Sale Portfolio during January 2021. On 15 March 2021, the transaction successfully closed with the Company receiving initial proceeds of GBP52.9 million, out of which GBP1.0 million resulted from a positive adjustment to the acquisition price due to changes in the values of the listed portfolio companies Mereo BioPharma and ReNeuron on an aggregated basis.

Elsewhere in the portfolio, the Company completed two small follow-on investments in unquoted holdings with a combined value of just under GBP0.6 million. The first investment was in Mafic as part of an internal funding round structured to resolve legacy governance issues and marginally extend the cash runway, albeit that further funding uncertainty remains. The second investment was in CeQur, where due to the existing holding, the Company had the opportunity to acquire additional shares at a discount to the valuation implied by the significant $115m funding round (see further details in the Company Updates section).

There was no investment activity within the public equity holdings during the period.

Since the end of Q1 2021, the Company has announced three further updates in relation to its private equity portfolio:

(1) Sanofi completed the acquisition of Kymab

On 9 April 2021, Sanofi successfully completed the acquisition of the Company's holding in Kymab Group Ltd. ("Kymab") resulting in the receipt of initial proceeds of $87 million (GBP63 million) with the potential for additional contingent payments of up to $33 million subject to a deferred purchase price release and Kymab achieving certain development and regulatory milestones.

As reported in the Annual Report and Accounts for the year ended 31 December 2020, during Q4 2020, the holding in Kymab was revalued to GBP70 million generating a fair value gain of GBP54m to reflect the terms of the agreed sale. This is after accounting for the purchase of $1.3m additional shares, which generated a return of over 700% on sale, and when compared with the holding value of GBP14 million as of 31 December 2019. Hence, it should be noted that the closing of the transaction has not notably impacted the portfolio valuation during the first quarter.

(2) Inivata announced its acquisition by NeoGenomics

On 5 May 2021, Inivata announced its acquisition by NeoGenomics, a provider of cancer-focused genetic testing services and global oncology contract research services. An acquisition which followed a $25 million minority equity investment by NeoGenomics in Inivata in May 2020, at which time NeoGenomics was granted a fixed price option to purchase the remainder of Inivata for $390 million.

The closing of the transaction is subject to the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions. Based on the terms of the transaction, the Company expects to receive total proceeds of $38.6 million on completion of the transaction which is currently expected in June 2021.

(3) Athenex announced its acquisition of Kuur Therapeutics

On 4 May 2021, Athenex announced that it had acquired Kuur Therapeutics for an upfront payment of $70 million, comprised of equity in Athenex common stock listed on Nasdaq and subject to a 90-day lockup period. Additionally, Kuur shareholders are eligible to receive up to $115 million of milestone payments over several years, which may be paid in either cash or additional Athenex common stock, at the sole discretion of Athenex.

Based on the terms of the transaction, the Company has received total initial proceeds of $8.3 million in Athenex common stock. Furthermore, the Company has the potential for additional contingent payments of up to $14.6 million over several years which may be paid in either cash or additional Athenex common stock, at the sole discretion of Athenex.

Top 10

The Company's top 10 holdings as of 31 March 2021 compared with the respective holding as of 31 December 2020.

 
Holding                Fair value as     % of total       Fair value       % of total 
                      of 31 March 2021   investments   as of 31 December   investments 
                         (GBP'000)                      2020 (GBP'000) 
 Oxford Nanopore           90,745           21.8%           68,707            16.3% 
                     -----------------  ------------  ------------------  ------------ 
 Kymab Group               68,937           16.5%           69,580            16.5% 
                     -----------------  ------------  ------------------  ------------ 
 Atom Bank                 37,760           9.1%            37,760            9.0% 
                     -----------------  ------------  ------------------  ------------ 
 Rutherford Health         33,889           8.1%            33,889            8.0% 
                     -----------------  ------------  ------------------  ------------ 
 Inivata                   28,393           6.8%            26,137            6.2% 
                     -----------------  ------------  ------------------  ------------ 
 Immunocore                25,451           6.1%            25,570            6.1% 
                     -----------------  ------------  ------------------  ------------ 
 BenevolentAI              21,339           5.1%            21,339            5.1% 
                     -----------------  ------------  ------------------  ------------ 
 Reaction Engines          12,500           3.0%            12,500            3.0% 
                     -----------------  ------------  ------------------  ------------ 
 AMO Pharma                11,305           2.7%            11,411            2.7% 
                     -----------------  ------------  ------------------  ------------ 
 IDEX ASA                  9,864            2.4%            11,466            2.7% 
                     -----------------  ------------  ------------------  ------------ 
 

Source: AIFM, Link Fund Solutions Limited.

Company Updates

Oxford Nanopore: Started preparing for an IPO and completed a funding round

In March 2021, Oxford Nanopore ("ONT") notified shareholders that is has started the process of preparing for a potential IPO. Whilst the timing of a potential IPO is dependent on market conditions and other matters not fully within its control, Oxford Nanopore currently expects the IPO to occur in the second half of the year on the London Stock Exchange.

In May 2021, ONT also announced that it had raised GBP195 million in new capital including GBP125 million from new investors Temasek, Wellington Management, M&G Investments and Nikon.

Atom Bank: Completed a funding round

In April 2021, Atom Bank ("Atom") announced that it had raised a further GBP40 million from existing shareholders and guided towards profitability from its mortgage and business lending within a year, and to IPO the year after. Atom disclosed that it is on course to achieve 100bps of Net Interest Margin by the end March 2021 with lending to SMEs on its balance sheet having grown to over GBP700 million, a tripling of business loans in the last 12 months. This growth has been achieved both within the Coronavirus Business Interruption Loan Scheme and independent of government schemes.

The latest funding round took place at a price of 60p per share, which is significantly below the 2019 funding round price. This is due to particularly weak sentiment around this sector in the public markets throughout 2020. This funding round price impacted the holding fair value as of 31 December 2020 which has remained unchanged as of 31 March 2021.

Rutherford Health: Agreed a secured infrastructure investment

In February 2021, Rutherford Health ("Rutherford") provided an update on its funding situation which highlighted the approaching need for financing during the first quarter of 2021.

In March 2021, Rutherford announced that it has agreed an infrastructure investment of GBP40 million with Equitix Investment Management Ltd. The proceeds from the investment are being used to repay the company's current debt of GBP18.6 million, for further investment in its infrastructure and for mid-term working capital purposes. The investment is backed by the freehold transfer of the Rutherford Cancer Centre South Wales and supported by other security to be put in place over the company's other centres. The agreement is for 25 years, and the company will have the option to repurchase the freehold of the South Wales centre for an agreed nominal sum at expiry.

Immunocore: Completed its IPO on Nasdaq

In January 2021, Immunocore announced the completion of its $75 million Series C financing round. A precursor to its ultimate IPO on Nasdaq in February 2021 raising gross proceeds of $312 million.

Finally, in March 2021, Immunocore provided a business update and reported full year 2020 financial results. The announcement highlighted the continued progression of the ImmTAC (Immune mobilizing monoclonal T-cell receptors Against Cancer) clinical portfolio for multiple tumour types and the grant of Breakthrough Therapy Designation by the FDA for Tebentafusp in unresectable or metastatic uveal melanoma, with the company anticipating completion of the submission of a Biologics License Application in the third quarter of 2021.

BenevolentAI: Completed first dosing for its trial in Atopic Dermatitis

In February 2021, BenevolentAI announced dosing of the first patient in its randomised first-in-human clinical trial for BEN-2293, a molecule designed and developed to treat Atopic Dermatitis. A development which sees a novel multi-target drug developed using BenevolentAI's scientific and technical expertise entering human clinical trials. BEN-2293 is a potent and selective small-molecule Pan-Trk antagonist formulated for topical delivery, with a pharmacokinetic profile designed for low systemic exposure to deliver the optimal safety and efficacy profile in the treatment of itch and inflammation associated with Atopic Dermatitis. In this initial trial, BEN-2293 will be studied in adult patients with mild to moderate disease.

In April 2021, BenevolentAI reported that AstraZeneca had selected a novel chronic kidney disease ("CKD") target to advance to its drug development portfolio, a major milestone since formation of the strategic collaboration in 2019 to discover new drugs for CKD and idiopathic pulmonary fibrosis. A collaboration which combines AstraZeneca's scientific expertise and rich datasets with BenevolentAI's target identification platform and biomedical knowledge graph to understand these two complex diseases' underlying mechanisms and identify new and more efficacious drug targets.

Reaction Engines: Completed further validation of SABRE technology

In February 2021, Reaction Engines announced that it had completed the testing of two vital sub-systems of SABRE; the HX3 heat exchanger and the advanced hydrogen preburner. These sub-systems supply heat energy and air to the air-breathing core of the engine. These experiments have yielded high levels of insight and are the latest in a wider series designed to validate SABRE technology.

The objectives of both campaigns were to manufacture full size test rigs to validate performance modelling and de-risk high temperature operation in advance of further integration. The preburner test campaign further aimed to show that Reaction Engines' novel fuel injection system would function at full scale, with the ability to control the heat output precisely and provide even temperature to the HX3.

During testing, the HX3 achieved a top temperature 1126 , making it the hottest test to date, even higher than the precooler's validation at speeds representative of Mach 5 in 2019. Performance exceeded model predictions with slightly more heat exchange and less pressure loss than expected. Similarly, the preburner exceeded expectations and actually provided a larger performance envelope. The preburner campaign involved testing a lot of new technology at the same time and significant redesigns were expected, however only relatively minor issues ensued.

IDEX Biometrics: Completed a placing

In February 2021, Idex completed a placing of NOK 229m which is expected to fund the business through to breakeven in H2 2022. The company has continued to secure certifications from major international card schemes and saw its sensors integrated into the first biometric payment card ready for mass launch by a leading card manufacturer. Several leading card issuers have announced their intention to integrate biometric sensors into upcoming card replacement cycles, and the business looks set for a production ramp up over the coming quarters. The company also announced that its sensors are being used in trials for digital RMB being run by the People's Bank of China. This follows the trend of central banks launching digital currency initiatives and represents a new potential route to market for Idex.

Seedrs: Terminated its merger with Crowdcube

In March 2021, the Competition and Markets Authority published its provisional findings which concluded that, in their opinion, the merger with Crowdcube may be expected to result in a substantial lessening of competition within the supply of equity crowdfunding platforms to small and medium enterprises and investors in the UK.

Hence, following further evaluation, both companies decided to walk away from the transaction with Seedrs subsequently announcing a new funding round.

Genomics: Completed a $30m funding round

In March 2021, Genomics plc ("Genomics") announced that it had successfully completed a $30m funding round with participation from new investors including Foresite Capital and F-Prime Capital, plus existing shareholders Oxford Sciences Innovation and Lansdowne Partners. Genomics intends to use the funding to expand its work, building a patient-centric, population health platform that unlocks a more proactive, precise, and personalised form of healthcare.

Genomics is a leader in the new area of genomic prevention: a paradigm-changing approach to sustainable healthcare. For the first time, it allows reliable and personalised estimates of risk for common diseases, well ahead of disease manifestation. This allows targeted interventions and tailored screening to either prevent disease entirely, or to catch it early when outcomes remain favourable. Genomics' population health management services and clinical decision support tools are designed to bring greater, earlier, and more accurate understanding about an individual's risk for all the common chronic diseases and cancers to doctors and their patients. The company also uses insights from genomic variation to accelerate the discovery and development of new medicines.

Federated Wireless : Began deployment of a private 5G wireless network for the U.S. Department of Defense

In February 2021, Federated Wireless announced that it had begun deployment of a Citizens Broadband Radio Service ("CBRS")-enabled private 5G wireless network for the U.S. Department of Defense, along with a team of partners including AWS, Cisco, JMA, Vectrus, Perspecta Labs and Capstone Partners. The trial is designed to modernize the Marine Corps Logistics Command warehouse operations in Albany, Georgia. The new private enterprise 5G network supports a broad set of smart warehouse use cases, including warehouse robotics, barcode scanning and holographic, augmented and virtual reality applications.

The multi-year initiative will create a 5G Smart Warehouse reference design to increase the efficiency and dependability of Marine Corps Logistics Command warehouse operations, including improvements to receipt, storage, issuance, inventory control and auditability of material and supplies that directly support Marine Corps global operations.

CeQur: Completed a $115m funding round

In April 2021, CeQur announced the close of a $115 million equity financing to advance commercial plans for CeQur Simplicity(TM), including market development activities, a phased commercial launch strategy that includes a limited market release in 2021, and the scale-up of high-volume manufacturing. Credit Suisse Entrepreneur Capital Ltd. and Endeavour Vision led the financing with participation from new investors, including Tandem Diabetes Care, Inc. (NASDAQ: TNDM), Ypsomed Group (SWX: YPSN), Federated Hermes Kaufmann Funds, Kingdon Capital, and GMS Capital, as well as existing investors.

CeQur Simplicity is a simple, three-day, wearable insulin device for discreet, convenient, and injection-free bolus dosing. One Simplicity patch holds up to 200 units of rapid-acting insulin administered in two-unit increments and replaces, on average, nine mealtime injections over three days. Clinical research has shown that nearly 90% of patients using CeQur Simplicity reported following their insulin regimen better as compared to MDI. The device is clinically proven to improve glycaemic control, with patients achieving significantly improved HbA1C and time-in-range ("TIR") goals. CeQur Simplicity is both FDA cleared and CE-marked.

Source: Portfolio companies, including information disclosed publicly on their websites.

Outlook

As recently highlighted in the Annual Report and Accounts, 2020 was a year of transition for the Company. The Portfolio Manager focused on building relationships with the portfolio companies, contributing to strategic thinking, honouring the Company's existing financial commitments, selectively investing in new follow-on opportunities within the financial constraints and working to pay down the outstanding debt to enable longer-term repositioning.

At the timing of writing, the Company now sits in a net cash position having fully repaid the debt that stood at GBP113m as of 31 December 2019. This represents a tremendous leap forward in the repositioning of the Company and now enables the Portfolio Manager to not only support the strongest companies in the existing portfolio but also to invest into new high quality, high conviction opportunities, both public and private.

Strategy

It is the Board and Portfolio Manager's combined intention that the Company's strategy will remain true to its origins, whilst leveraging the Portfolio Manager's extensive sourcing capabilities in the public and private markets, complemented by strict governance and control processes. In summary, the core tenets of the Company's strategy will continue to be:

(1) Focused on high quality UK innovation. The Company will look to invest in world class innovative businesses founded in the UK or with a strong innovation presence in the UK. These will be companies with disruptive innovations, significant growth potential, high quality management teams and supported by highly credible co-investors.

(2) Mindful of diversification by stage and sector. The Company will look to build out a balanced portfolio of venture, growth, and public companies across the Portfolio Manager's core sectors. New private investments will typically be targeted at the 'growth' stage where the companies are already generating revenue with proven unit economics and scaling towards profitability.

(3) Prudent debt utilisation. The Company will use its debt facility prudently to improve operational efficiency and minimise return dilution. The facility will only be used on a short-term basis to fund expenses and investments, but only when there is visibility of paying down the incremental amount within twelve months from future realisations. The intention being to keep the loan balance below 10% of gross asset value.

In addition, the Board and Portfolio Manager intend to consider in greater detail the specific investment opportunity at the pre-IPO, or cross-over stage between public and private markets, where the Company is uniquely positioned given its hybrid investment strategy. Furthermore, the Company intends to actively implement sustainability as a tool to enhance value creation and will consider alignment with the UN SDGs as an important part of the investment process.

New Investments

So, as the Company looks towards its first new investments in over 18 months, the Portfolio Manager has stated its intention to invest in two new private companies and two new public companies during 2021.

As such, the Company has just announced its first new investment since the appointment of Schroder Investment Management Ltd as Portfolio Manager on 13 December 2019. In May 2021, the Company made a $6.75m investment into cybersecurity company, Tessian Limited, as part of its $65m Series C funding round. The round was led by March Capital, a U.S.-based venture growth firm, with participation from existing shareholders including Sequoia Capital, Accel, Balderton Capital and Latitude. The deal values Tessian at $500m.

Tessian is pioneering a new approach to cybersecurity and is defining a new category of security software called Human Layer Security. To overcome the so-called "people problem" in security, Tessian uses machine learning to stop security threats and data breaches caused by people, without disrupting their workflow. It builds Behavioral Intelligence Models, tailored to every employee, by understanding each individual's communication patterns and behaviours online. Tessian uses the models to automatically detect security threats and prevent them from turning into breaches by notifying the employee in-the-moment. Over time, these alerts help employees improve their security behaviours. Today, Tessian secures people on email and automatically prevents threats such as phishing, business email compromise, data exfiltration and accidental data loss.

In the last year, Tessian has tripled its Fortune 500-level customer base and now has 350 customers around the world across the legal, financial services, healthcare and technology sectors including Affirm, Investec and Schroders.

With the new funding, Tessian will continue to expand its platform's capabilities and plans to secure other interfaces like messaging, web and collaboration platforms. Tessian will also use the funding to triple its rapidly growing employee base, with a particular focus on growing its sales team.

As highlighted above, this investment is in line with the Company's focus on backing innovative businesses founded in the UK with disruptive innovations, significant global growth potential, high quality management teams and supported by credible co-investors. The Company is committed to improving its sustainability profile hence, as communicated in the Annual Report and Accounts for the year ended 31 December 2020, the Portfolio Manager intends to disclose where appropriate the United Nations' Sustainable Development Goals ("SDGs") associated with new investments. The investment in Tessian is in line with SDG 16 "Peace, Justice and Strong Institutions" and Target 16.4 "By 2030, significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime".

Conclusion

In summary, the Board and Portfolio Manager are greatly encouraged with the progress seen in Q1 and since the period end. The Company is now on the front foot and in a strong position to be able to support the portfolio's most attractive companies and make new investments. With capital available to deploy, and further positive developments expected through 2021, we are optimistic about the portfolio's prospects and remain hopeful of rewarding the patience of shareholders.

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. The securities shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell.

Enquiries:

Schroder Investment Management Limited

 
 Gareth Faith (Company Secretary)    0207 658 5264 
 Estelle Bibby (Press)               0207 658 3431 
 

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