SBSI Schroder Bsc Social Impact Trust Plc

Schroder BSC Social Impact Trust plc (the "Company")

Annual Results

Continuing to tackle poverty and inequality while delivering resilient NAV total returns

The Company's Annual Financial Report for the year ended 30 June 2024 is being published in hard copy format and an electronic copy will shortly be available to download from the Company's website: www.schroders.com/sbsi. Please click on the following link to view the document: http://www.rns-pdf.londonstockexchange.com/rns/3857J_1-2024-10-23.pdf

Financial highlights

·      NAV per share of 104.13 pence (FY 2023: 104.90 pence)

·      NAV total return per share of +1.5% (FY 2023: +0.8%), delivered against a challenging macro-economic backdrop  

·      NAV total return per share of 10.2% since inception (2.8% annualised)

·      Dividend made up wholly of a 2.94 pence interest distribution per share for the year, up 28% from the prior year, in line with our 2-3% dividend guidance

·      £8.6 million of capital (10% of NAV as of 30 Jun 2024) was re-committed into two new investments, increasing portfolio diversification:

o  £3.6 million into Community Energy Together; and

o  £5.0 million into Simply Affordable Homes

Impact highlights

·      £86 million of capital committed to date to support 194 frontline organisations, positively impacting 400,000 people since inception, at least 95% of whom are disadvantaged or vulnerable

·      100% of investments align with the UN Sustainable Development Goals, with the majority of the portfolio aimed at reducing poverty and inequality (SDGs 1 & 10)

Results Presentation

The Portfolio Managers will present a webinar on the results at 9.00 am today, Thursday 24 October 2024. This is open to all existing and potential shareholders, who can sign up for the webinar at: https://www.schroders.events/SBSI24

Susannah Nicklin, Chair of Schroder BSC Social Impact Trust plc, said:

"I am proud that the Company has again delivered impact in line with its stated mission in the period, significantly improving the lives of thousands of people at a time when issues such as deprivation and homelessness are intensifying. The services of the organisations the Company finances has never been more crucial, and addressing social issues is high on the government's agenda.

The year to 30 June 2024 was one of macro-economic and political turbulence, and the Board and I are therefore pleased to have seen strong investment income generated from our holdings, allowing us to announce a dividend in line with our range of guidance. Capital returned to the fund has also been quickly redeployed into two new investments. With a growing pipeline of opportunities available, it is an exciting time to be investing in the social impact sector."

About Schroder BSC Social Impact Trust plc 

The Company was launched in December 2020, to enable access to high social impact investment opportunities in private markets - tackling social challenges across the UK. The Company manages a diversified portfolio across asset classes, targeting sustainable returns, demonstrable social impact, and low correlation to traditional public markets. 

About Better Society Capital

Better Society Capital is the UK's leading social impact investor. Our mission is to grow the amount of money invested in tackling social issues and inequalities in the UK. We do this by investing our own capital and helping others invest for impact too.  

Since 2012, we have helped build a market that has directed more than £10 billion into social purpose organisations tackling issues from homelessness and mental health, to childhood obesity and fuel poverty, a more than ten-fold increase. 

Further information about Better Society Capital can be found at www.bettersocietycapital.com 

About Schroders plc 

Schroders is a global investment manager which provides active asset management, wealth management and investment solutions, with £773.7 billion (€912.6 billion; $978.1 billion) of assets under management at 30 June 2024. As a UK listed FTSE100 company, Schroders has a market capitalisation of circa £6 billion and over 6,000 employees across 38 locations.

Established in 1804, Schroders remains true to its roots as a family-founded business. The Schroder family continues to be a significant shareholder, holding approximately 44% of the issued share capital.

Schroders' success can be attributed to its diversified business model, spanning different asset classes, client types and geographies. The company offers innovative products and solutions through four core business divisions: Public Markets, Solutions, Wealth Management, and Schroders Capital, which focuses on private markets, including private equity, renewable infrastructure investing, private debt & credit alternatives, and real estate.

Schroders aims to provide excellent investment performance to clients through active management. This means directing capital towards resilient businesses with sustainable business models, consistently with the investment goals of its clients. Schroders serves a diverse client base that includes pension schemes, insurance companies, sovereign wealth funds, endowments, foundations, high net worth individuals, family offices, as well as end clients through partnerships with distributors, financial advisers, and online platforms.

For further information, please contact:

Chair's Statement

"It is clear that demand for the services the Company helps to finance is significant, urgent and unmet. Finding opportunities to spend more wisely on these issues is at the top of the Government's agenda."

The Schroder BSC Social Impact Trust (the "Company" or "Social Impact Trust") delivered a robust performance in the year, against a challenging macro-economic and political backdrop. Capital returned from the portfolio was quickly re-deployed, the dividend increase reflected maturing investments, and, vitally, the Company continued to invest in life-changing projects across the UK, significantly improving the circumstances of thousands of vulnerable people.

Private investment in delivering impact continues to grow at pace, although opportunities for investors to direct their capital to organisations supporting people in the greatest need remain more limited. The Company offers a unique proposition, allowing investors of all sizes to access high quality, high impact social investments.

Over its four years of operation, the Company has demonstrated how impact investing can address social needs while providing resilient financial returns. As we move forward, the Board hopes to see the Company grow, enabling increased investment to reach much-needed social solutions.

Navigating a period of economic and political turbulence

After a technical recession in late 2023, the UK economy rebounded in the first half of 2024 with 0.7% GDP growth January to March followed by a 0.6% increase April to June. The Consumer Price Index rose by 2% in the period under review. The Bank of England maintained a 5.25% base rate from August 2023 until it was reduced to 5% after the period end. With inflation appearing to be stabilising from the peaks of late 2022 further cuts are anticipated in the coming months.

This was a difficult macro backdrop for the Company, mitigated to some extent by the portfolio's high proportion of inflation-linked or correlated assets. Some of the benefits of this are expected to be reflected in the portfolio performance in the future after a lagged effect.

The snap election in July also led to a lack of clarity on policy and general uncertainty, generating further macro challenges.

The Labour Party came into power in July 2024, after the period end, and has recently noted the level of fiscal constraint it faces. However, the Government's policy priorities, as announced in the King's Speech, align with several of the Company's areas of focus.

Continuing to tackle poverty, inequality and homelessness

The constraints on public spending are particularly worrying in the face of worsening problems for UK society. The proportion of people experiencing food insecurity and material deprivation in 2022-23 has increased significantly versus a few years ago. Homelessness rose by 16% year-on-year at the end of 2023. The proportion of working-age people reporting long-term health conditions in the UK has risen to 36%.

It is clear that demand for the services the Company helps to finance is significant, urgent and unmet. Finding opportunities to invest more wisely on these issues is at the top of the Government's agenda.

The Company has again demonstrated the results its portfolio can achieve in these areas this year. The portfolio has positively impacted 400,000 people since inception, provided affordable, decent homes for 35,000 disadvantaged, vulnerable and lower-income groups and delivered £217 million (cumulative) savings through improved and more accessible services. The Company 2024 Impact Report is available at: https://publications.schroders.com/view/683320694/.

New investments this year saw the Company committing to delivering more affordable homes to deprived areas, via the Simply Affordable Homes fund ("SAH") (managed by Savills Investment Management), and supporting UK communities to help deliver a just transition to net zero, via an investment in a community renewable energy project.

Better Society Capital's role as portfolio manager

The Schroder BSC Social Impact Trust has a portfolio managed by Better Society Capital ("BSC" or the "Portfolio Manager"), the UK's leading financial institution dedicated to social impact investing in its home country and an experienced market-builder.

As part of its wider remit, BSC supports the growth of the social impact investment market, building relationships and exploring new ways to work alongside the investment community. For the Company, this means an extensive pipeline of investible opportunities, as well as deepening the capital pool engaged in impact investing.

This year, pre-election, BSC was highly engaged with policymakers, and the team are optimistic that these conversations have been fruitful in building awareness of the value of social impact investing amongst key decision makers. The Board hopes to see this greater awareness translating into wider investor interest and opportunities for private capital to play a helpful role in tackling difficult social challenges and strengthening communities across the UK.

Resilient financial performance

For the year ended 30 June 2024, the Company's NAV total return was 1.5%, leading to a cumulative return of 10.2% since inception. The largest positive contribution to the return came from investment income (4.0p per share), partially offset by valuation losses (1.5p per share) principally due to the write-down in the Bridges Evergreen Holdings ("BEH") disclosed in the Interim Report along with a provision made for refinancing a Charity Bond. Liquidity Assets had a positive contribution to NAV per share of 0.6p. While financial returns did not meet our longer-term ambition, largely due to market conditions affecting the operating and exit environment, we are pleased to have seen the Portfolio Manager acting quickly and diligently to proactively safeguard the long-term financial value of the portfolio, while supporting fund managers and social enterprises to continue delivering their services.

We are pleased that the Company will pay out substantially all of its income as a dividend, resulting in a dividend made up wholly of an interest distribution of 2.94p per share (2023: 2.30p), another significant year-on-year increase in line with our guidance range, which was raised last year.

A more detailed analysis of performance and additional information on the portfolio is included in the Portfolio Manager's Report.

Demonstrating and promoting our unique investor proposition

From inception, we have stated that the Company offers portfolio diversification, with a differentiated risk/return profile. The Company has delivered resilient NAV total returns since its inception on 22 December 2020, in a highly volatile market, with an annualised NAV total return per share of 2.8%.

Another key differentiator of the Company is our deep impact focus. We therefore see the introduction of the Sustainability Disclosure Requirements ("SDR") as a helpful opportunity to evidence the quality of the Portfolio Manager's impact-driven investment process. It is the Board's intention that the Company adopts the "Sustainability Impact" label, given it is in line with the Company's existing central aims and objectives*.

Significant work has taken place with Schroders (the "Manager" or "AIFM"), the Portfolio Manager, and professional advisers to date to ensure adoption of this label. We are currently in dialogue with the FCA in relation to amending the Company's investment policy, adding additional disclosure to align with SDR guidance. On FCA approval of the proposed new investment policy, the change will be put to shareholders at an EGM. Further details are expected to be included in a Circular containing the Notice of EGM and proposed new investment policy and objective to be voted on by shareholders.

Investor engagement remains very important to the Company, which is proactively pursuing opportunities to reach a broader audience and connect more deeply with its existing shareholders. The management team has been focusing on developing our marketing materials and articulating better what we can offer to investors. The Company has a unique ability to share its experience in impact investing, provide reporting support, thematic case studies and much more to its investors. We would encourage shareholders to take advantage of these opportunities, and I would be delighted to hear from investors about what they most value.

Managing the discount

Despite the Company's resilient NAV and impact performance, and similarly to the majority of UK investment trusts, its shares continue to trade at a discount to NAV. The share price total return during the period was -4.8% in line with broader negative investor sentiment towards UK alternative equities and during the financial year, the Company traded at an average discount to NAV of 13.9% and the average discount across the UK investment trust market was 14.7% and the Company's share price traded at a 16.7% discount to NAV at the period end, and as of 22 October 2024, the discount had widened to 19.67%.

The discount to NAV over the financial year was indicative of negative investor sentiment across the sector, particularly towards alternative asset classes. In tackling this, throughout the year, the Board has remained focused on articulating the Company's unique proposition through promotional activities combined with the judicious use of share buybacks.

During the year ended 30 June 2024 the Company bought back 1,575,205 ordinary shares for a total consideration of £1.4 million. All shares were bought at a discount to the prevailing NAV and were placed into Treasury for future re-issue. This has been accretive to the NAV total return per share in the period by 0.27p per share. While the Board is reluctant to shrink the size of the Company, we believe the careful use of buybacks has not only been accretive, but also helped liquidity and demonstrates our confidence in the portfolio.

In the Prospectus, published at the time of the IPO, the Company undertook to provide shareholders with the opportunity to vote on the Company's continuation should the Company's shares trade, on average, at a discount in excess of 10% to NAV for the two-year period ending 31 December 2023 and in any subsequent two-year period. The average discount for the two-year period to 31 December 2023 was 6.7%. The current period under assessment is the two-year period to 31 December 2025. In the event that a vote was triggered, shareholders would be provided with the opportunity to vote on whether the Company should continue in its present form at the AGM in 2026.

Since 30 June 2024 and up to 22 October 2024, a further 496,486 shares have been bought back and placed in Treasury. At the forthcoming Annual General Meeting ("AGM") the Board will seek to renew the authorities previously granted by shareholders to issue or buy back shares. We encourage shareholders to vote in favour of these resolutions which are described in more detail in the Notice of AGM in the full set of annual financial statements.

In the longer term, we remain committed to plans to raise funds through share issuance. This approach will allow us to capitalise on the attractive pipeline of high impact investments identified by our Portfolio Manager. By deploying additional capital, we would also be able to positively change the lives of more people in the UK.

Online presentation

Our Portfolio Manager will be giving a presentation at an investor webinar on Thursday 24 October 2024 at 9.00 am (which can be signed up to via the following link: https://www.schroders.events/SBSI24).

AGM

The AGM will be held on 18 December 2024 at 12.00 pm at the offices of Schroders at 1 London Wall Place, London, EC2Y 5AU. The Portfolio Manager will give a presentation following the formal business of the AGM, and attendees will be able to ask questions in person. The presentation will be made available on the Company's website following the meeting. Details of the AGM are set out on in this Annual Report.

Board changes

Mike Balfour has served on the Board since the Company's IPO, and having completed four years in post, will step down from the Board at the conclusion of this year's AGM. I would like to thank him on behalf of the Board and all of the Company's stakeholders for his unfailing dedication and meticulousness as Chairman of the Audit and Risk Committee and for his wisdom as a Board member. He will be missed.

We are delighted to have appointed Ranjan Ramparia to the Board on 16 October 2024. This followed a thorough search process undertaken by Sapphire Partners Limited, a specialist recruitment firm. Ms Ramparia is a qualified Chartered Accountant and experienced business professional with a background in corporate finance and investment management. On behalf of all the directors, I welcome Ranjan to the Board. She will succeed Mike Balfour as Chair of the Audit and Risk Committee.

Outlook - a pivotal moment for social impact investment in the UK

Several factors give me confidence in the outlook for the UK social impact investment market over the next year, and for the Company. Firstly, the UK continues to grapple with structural challenges, such as homelessness, an ageing population and pressures on the health system, as well as a restricted government budget. We believe that the Company's investments are therefore extremely valuable, allowing capital to be deployed to organisations delivering essential, government-mandated services while at the same time delivering significant financial and social savings.

Secondly, the General Election in July 2024 represented the most significant political shift for the UK since Brexit. While it is early days, we believe this represents a significant opportunity to bring communities together and build partnerships between public sector bodies, private organisations and the people of the UK. The Schroder BSC Social Impact Trust can play an important role in this mission, evidencing how innovative solutions implemented and financed well can benefit everyone involved.

And finally, at the same time the operating environment for social enterprises shows early signs of improvement. While we remain cautious, inflation looks to be easing, and the latest Social Enterprise Barometer report, published August 2024, shows a growing number of social enterprises increasing their reserves compared to a year ago.

While uncertainty continues, the Company remains committed to its goals of delivering high quality impact and stable financial returns to shareholders with low correlation to traditional quoted markets. We have an attractive pipeline of investment opportunities available to us and look forward to the year ahead as we continue to provide significant social impact for vulnerable and disadvantaged people across the UK. Our biggest opportunity lies in effectively engaging with a wider pool of investors and I hope this report will encourage you to be in touch and learn more.

* For more information on the labelling regime please see FCA policy statement via this link here: https://www.fca.org.uk/publication/policy/ps23-16.pdf.

Susannah Nicklin

Chair

23 October 2024

Portfolio Manager's Report

Market developments

In the twelve months to 30 June 2024, we have seen a return to stability in interest rates, with the Bank of England base rate remaining constant at 5.25% during the period, inflation decreasing to the 2% target and emerging signs of an economic rebound.

However, lagged and long-term effects of the market disruptions of the previous 18 months continue to impact the operating environment of companies in the UK, while we see a continued increase in the number of people affected by issues like poverty, deprivation¹ and homelessness², with negative repercussions on long term health³.

The year was also marked by political uncertainty, with the impending election in the UK leading to lack of clarity on the outlook for the policy environment.

While a new Labour government came into power in July 2024, after the period end, the backdrop of a constrained fiscal environment and pressures on public spending remains, at a time when the need to address social issues continues to be as urgent as ever.

In this market environment, we have continued to manage the Company's portfolio to address and mitigate the emerging risks, as well as act on areas of opportunity.

Looking first at risk management, while our portfolio includes seasoned companies with decades of experience in delivering UK social impact solutions, these organisations are not immune to broader market disruptions. We have been working across our portfolio to help organisations and funds adapt to the operating environment and new opportunity set.

On financial returns, we have aimed to build a portfolio with a degree of inflation correlation. While we have previously caveated that some of these correlations would be partial and/or lagged, we have seen the benefit of higher interest rates reflected in the increased income from the floating rate loans; this will be passed on to investors as increased dividend income. From the last quarter of the financial year ending 30 June 24, we have also started to see increased income in the High Impact Housing portfolio, reflecting increases in the Local Housing Allowance effective as of April 2024.

Looking at opportunities, against a challenging exit environment, we have seen several successful exits and refinancings within the portfolio, which we detail further in the report. At the portfolio level, we have re-committed £8.6m of capital during the year (representing 10% of NAV) into new investments, increasing the diversification of our portfolio with a new renewable energy investment contributing to the theme we call 'Just Transition to Net Zero' and growing our High Impact Housing portfolio. We have also seen capital recycling within the underlying funds. Where capital is returned from successful exits and refinancings, we often work with our fund managers to have the proceeds returned to the Company, pending re-deployment into High Impact Investments, mitigating fee and cash drag for the Company's investors.

We continue to see high and growing demand for social impact investments, as evidenced by the growing need in the UK alongside constrained public spending. The Impact Investing Institute's market sizing report⁴ published on 16 September 2024 estimated that the UK impact investing market had grown at a compound annual growth rate of 10.1% between the beginning of 2021 and end of 2023, to £76.8bn assets under management, significantly outpacing the broader UK asset management sector, which had an annual growth rate between -2% and 0% over the same period. Using a narrower definition of the market, Better Society Capital's market sizing exercise estimated that the UK social impact investing market grew by a compound annual rate of 15% between the end of 2020 to the end of 2023, to £10bn.

We are also seeing an expanding and maturing pipeline of investment opportunities, primarily in private markets that are difficult for many investors to access. We believe the Company remains well positioned to offer investors access to a mature portfolio of high-quality impact investments within this expanding opportunity set, as evidenced by our ability to efficiently recycle capital repaid in the last year.

Performance update

The Net Asset Value (NAV) total return per share for the twelve-month period to 30 June 2024 was 1.5%. Overall, the Company's total NAV reduced slightly from £88.75m to £86.46m over the period due to distributions to shareholders via a dividend payment (£1.93m) and share buy-backs (£1.41m) reducing the number of shares in issue from 84.60m to 83.02m, offset by the net return of £1.05m during the year under review.

The Company's NAV per share declined from 104.90p to 104.13p - including the 2.30p dividend payment - with a full performance bridge in the chart in the full set of annual financial statements.

In the twelve months to 30 June 2024 the Company recorded gross revenue of £3.49m (2023: £2.77m) and net revenue after fees, costs and expenses of £2.65m (2023: £1.97m), providing a net revenue return per share of 3.16 pence (2023: 2.32 pence). The Company recorded losses on the fair value of investments of £0.83m, recognised an impairment provision of £0.41m and recorded capitalised expenses of £0.36m, resulting in a total gross return of £2.24m, and a total net return of £1.05m, or 1.25 pence per share.

The Company will pay a dividend made up wholly of an interest distribution of 2.94p per share (2023: 2.30p) on 20 December 2024, which represents a dividend yield of 2.82% based on the net asset value at 30 June 2024. This is in line with our guided dividend range of 2-3% yield on net asset value p.a.

The key drivers of financial performance in the twelve-month period to 30 June 2024 were:

•      A mix of income and capital gains in the Social Outcomes Contracts portfolio driven by strong performance of the underlying projects, with Bridges Social Outcomes Fund II contributing 0.56p to NAV per share;

•      A ramp-up of returns in the High Impact Housing portfolio, in particular valuation gains in the Real Lettings Property Fund, contributing 0.55p to NAV per share, driven by the increases in the Local Housing Allowance (LHA) effective from 1 April 2024 (with an expected 13% uplift in annual rental income) and uplifts in the value of its property portfolio;

•      BEH had a negative 1.00p contribution to NAV per share, due to a capital loss on the disposal of AgilityEco, relative to the previously recorded book value of the investment, as disclosed in the Interim Report. The full year loss was slightly lower than the (1.10)p per share disclosed in the Interim Report, thanks to dividend income and continued performance of the remaining investments.

The Social Impact performance of the portfolio was reported in the Company's third Impact Report published in July 2024. The report highlighted that since launch, the Company's investments have reached 400,000 people, 95% of whom are from disadvantaged, vulnerable or underserved backgrounds; generated £217m in social outcomes and savings; and funded 35,000 affordable, decent homes.

Portfolio exits and new investments

The Company's capital is fully committed to High Impact Investments (drawn or pending drawdowns). The Portfolio Manager continuously monitors a pipeline of additional High Impact Investments to allow efficient recycling of capital that is returned to the Company via distributions, scheduled maturities or early exits, and in anticipation of new capital raises should the share price discount be closed.

During the period under review, £5.9m (7% of NAV) of capital was returned largely through the Charity Bank Co-investment portfolio, as scheduled maturities alongside the early repayment of the remaining £2.4m balance of the Sue Ryder loan, as well as capital returned by the Bridges Social Outcomes Fund II (£1.9m).

We have made two new commitments:

•      £3.6m to Community Energy Together Limited ("CETL") (fully drawn at commitment in December 2023): a community renewable energy project company, contributing to a 'Just Transition to Net Zero'; and

•      £5.0m to SAH (managed by Savills Investment Management) (first drawdown after period end): SAH aims to deliver affordable homes across the UK, with a focus on areas with high local authority waiting lists and areas ranked within the lowest 40% in the Index of Multiple Deprivation. SAH will invest in and manage a diversified portfolio of affordable housing, comprising both affordable and social-rent homes as well as shared-ownership homes, generating government-backed and inflation-linked income streams.

Portfolio cash flows and balance sheet

During the period, net drawdowns for High Impact Investments were £0.62m, comprising new deployment of capital of £6.47m, and capital repayments of £5.85m (£3.12m of which are recallable distributions):

•      In Debt and Equity for Social Enterprises:

-     BEH exited AgilityEco via a sale to M Group Service, delivering a 3.4 times money multiple return on the original BEH investment (2.7 times since investment by the Company); the proceeds from the exit will be reinvested in other high impact opportunities; post period end, the fund made a recallable distribution to investors, pending re-investment by BEH;

-     £3.6m was deployed into the Company's new investment in CETL;

-     In the Charity Bank Co-investment portfolio, we have received an early repayment of the Sue Ryder £2.64m loan, and a £1.02m drawdown for the Abbeyfield York loan;

-     The Community Investment Fund made a recallable distribution of £1.22m following the refinancing of the Resilient Energy Forest of Dean loan, and a drawdown of £0.64m for new investments, including a new loan to Social adVentures for the purchase of a detached family home in Salford Greater Manchester, which has opened a new children's home for three children aged 8 to 18 years;

•      In High Impact Housing, £0.86m was drawn by Social and Sustainable Housing LP and £0.08m by Man GPM RI Community Housing Fund, deployed towards delivering more affordable and social housing in the UK.

•      Within Social Outcomes Contracts, further investment was made into new and existing projects for the delivery of public services in areas such as homelessness and healthcare.

¹ Institute for Fiscal Studies, March 2024

² The Guardian, Apr 2024

³ Office for National Statistics, July 2023

⁴ https://www.impactinvest.org.uk/resources/publications/the-uk-impact-investing-market-size-scope-and-potential/

Portfolio allocation

A diversified asset allocation delivering local UK social impact

The Company delivers its investment objective through allocating to best-in-class social impact managers in private markets - with proven track records delivering high quality financial returns alongside measurable social impact for more disadvantaged groups in the UK. Investments that are committed but not yet drawn by private market funds are held in listed Liquidity Assets investments to mitigate cash drag during longer drawdown periods.

As of 30 June 2024, total commitments (drawn and undrawn) to High Impact Investments amounted to 104% of NAV, while the drawn portion of the commitments was at 90% of NAV ("invested as % of NAV"). Capital awaiting deployment into High Impact Investments is currently held in Liquidity Assets (including investment funds and money market funds earning interest in line with base rates) (11% of NAV).

While current undrawn commitments exceed the amounts held in Liquidity Assets, this is mainly a reflection of the long drawdown periods of some of our commitments (in particular in housing), and when matched against expected capital repayments, we are maintaining appropriate cover for expected drawdowns.

Providing access to a seasoned high impact portfolio

The Company has built a seasoned high impact portfolio that would be difficult for shareholders to access directly - through a combination of a seed portfolio and secondary investments from Better Society Capital, the Portfolio Manager, as well as its relationships and knowledge of the sector. This provides a greater allocation to more mature assets that will help drive future financial and impact performance. The Portfolio Manager's broader portfolio relationships offer additional fee benefits to Company shareholders - with 43% of the Company's portfolio with no or discounted management fees - from co-investments or fee discounts that the Portfolio Manager has negotiated, often through their role as initial cornerstone investor in funds.

Targeting inflation resilient returns

The Company aims to deliver an asset allocation that is resilient through periods of rising prices through targeting two-thirds of its asset allocation to assets that will benefit from inflation. These assets are:

•      Property and renewables - with a mix of long dated inflation linked leases, shorter property leases where value is more driven by property prices, and smaller investments in community renewables in our Debt and Equity for Social Enterprises asset class; we also hold renewables investments in our Liquidity Assets portfolio.

•      Mezzanine and equity investments - where the value is driven by government contracts that have historically moved with inflation.

•      Floating rate instruments which benefit from increases in the base rate (currently base rates are higher than inflation, and are expected to decrease).

As of 30 June 2024, the Company had committed 66% of its capital to inflation sensitive assets. The remaining capital committed to high impact investments was allocated to fixed income securities such as charity bonds and social outcomes contracts; the Company aims to minimise the duration of these fixed income assets, to allow reinvestment over time into the prevailing interest rate environment. Including the investments in Liquidity Assets, the Company's invested amount in assets that are linked or correlated with inflation is 67% of its capital.

To date the Company has underperformed its CPI+2% aim, with double digit inflation levels not being reflected in portfolio returns given lease caps, increases in discount rates, falls in real value of house prices and lags in inflation feeding through into new contracts.  We expect to see future returns now benefiting as the lagged impact of higher inflation and interest rate reductions feed across the portfolio.

Targeting low correlation to mainstream markets

The Company's asset allocation aims to achieve low correlation to mainstream markets by backing business models that are underpinned by government expenditure and have been historically resilient through economic cycles. As of 30 June 2024, 71% of the committed portfolio (55% invested) is underpinned by government backed revenue streams. These revenue streams are themselves diversified across policy areas, such as housing, clean energy and fuel poverty, education, and addressing inequalities/levelling up. This diversification reduces exposure to individual policy risk, such as the risk that government or budgetary changes would significantly reduce or withdraw payments. The Company targets areas with a track record of delivering impact for more disadvantaged groups and generating savings for the public purse which provides additional revenue resilience. In the twelve months to 30 June 2024, the Company's share price had a negative correlation with the FTSE All Share Index of (0.76) (compared to (0.61) in the previous year), and since Company IPO, the share price had a negative correlation of (0.78) with the market index.

In a challenging period for financial markets since the IPO in December 2020 the Company's portfolio performance has shown resilience, delivering a NAV Total Return per share of 10.2% (2.8% annualised).

Recent events

The Company recently won its category at the Best ESG Investment Fund: Impact (private markets) at the ESG Investing Awards 2024. The Judges commented that "their clear report card approach following IMP principles was impressive. Easy to digest a huge amount of information in their impact report. We particularly liked their reporting of impact metrics including the financials. This was backed by clear intentionality and approach." The Company was also shortlisted for the Best Impact Fund at the Sustainable Investment Awards in September 2024. The Company has won four awards since its launch. Judges have cited its unique offering of a diversified portfolio delivering deep social impact for more disadvantaged groups across the UK. We are pleased that the Company's contribution is being recognised as playing a key role in the evolution of sustainable investing.

In October 2024 Better Society Capital completed an equity investment into Resonance Limited ("Resonance"), the parent company of the manager of the Real Lettings Property Fund in the Company's portfolio, to accelerate Resonance's growth. The Portfolio Manager now holds 5.2% of the capital of Resonance by way of non-voting shares. This does not form a part of the Company's investment portfolio.

Outlook

The start of the Company's new financial year was marked by the UK election, bringing the Labour Party into power. A common thread remains that social issues requiring intervention are growing, while public spending remains under pressure.

We welcome the new government's indications of their intention to work in partnership with private capital to address the UK's most urgent issues:

•      Several public sector investment partnership opportunities are emerging with opportunities to create social impact. For example, the Government is launching a National Wealth Fund⁵ capitalised with £7.3bn and a remit to invest in new and growing industries, targeting £3 of private investment for every £1 of public investment. Great British Energy⁶, a publicly owned national energy company, is also being created, capitalised with £8.3bn to catalyse up to £60bn of private investment, including funding to ensure communities own and benefit from clean power projects.

⁵Gov.uk: Chancellor Rachel Reeves is taking immediate action to fix the foundations of our economy

⁶Gov.uk: Great British Energy founding statement

•      Secondly, broader changes to the public sector landscape are anticipated. For example, the commitment to deliver 1.5 million homes⁷ with incentives for social and affordable housebuilding alongside the promise of social rent stability. Other favourable changes to the landscape may follow the pensions review⁸ and "Local Growth Plans"⁹ which all regional governments with devolution deals will develop.

Finally, during the pre-election period the new Government was actively considering how to harness the power of the "impact economy" - social impact private markets, purpose-driven businesses and philanthropists - to help them deliver their ambitions once in government¹⁰. Across all areas, the Portfolio Manager, Better Society Capital, is following developments closely and engaging where suitable to explore social impact opportunities.

Another important policy development was the launch of the FCA's SDR labelling regime in July 2024. The framework signals the regulator's commitment to supporting the integrity and growth of the impact and wider sustainability investment markets in the UK. We believe transparent labelling and disclosure of impact products are essential for the impact investment market to grow healthily. We believe that our deep impact focus is strongly aligned with the principles of the Sustainability Impact label and, as mentioned in the Chair's statement, will be seeking shareholder approval for changes to our investment policy to ensure alignment with the principles and guidance of the labelling regime*.

As markets stabilise and we gain further clarity on policy, we think the Company is in a unique position to offer shareholders access to a diversified portfolio of private investments into organisations delivering high impact solutions for the most disadvantaged and vulnerable groups in the UK, while achieving high quality returns with low correlation to traditional quoted markets.

⁷Gov.uk: Housing targets increased to get Britain building again

⁸Gov.uk: Chancellor vows 'big bang on growth' to boost investment and savings

⁹Gov.uk: Deputy Prime Minister kickstarts new devolution revolution to boost local power

¹⁰https://www.cityam.com/labour-must-partner-with-businesses-in-the-impact-economy/

*For more information on the labelling regime please see FCA policy statement via this link here: https://www.fca.org.uk/publication/policy/ps23-16.pdf

Portfolio developments

The Company invests primarily in three asset classes that were selected to give a diversified set of opportunities with low correlation, both with one another and with mainstream financial developments across all three in the year under review.

Debt and Equity for Social Enterprises

Lending and some preference shares to typically large and well-established charities and social enterprises to help fund expansion projects to scale operations and impact including: 

-              Health and Social Care

-              Community Facilities and Services

-              Fuel Poverty

High Impact Housing

Investment to increase the number of safe, secure and genuinely affordable homes for more disadvantaged groups, diversified across:

-              Transitional Supported Housing

-              General Needs Social and Affordable Housing

-              Specialist Supported Housing

Social Outcome Contracts

Outcomes Contracts, where private capital enables a consortium of expert charities and social enterprises to deliver outcomes for Government commissioned contracts across:

-              Family Therapy and Children's Services

-              Homelessness

-              Adult Health and Social Care

High Impact Portfolio*

Asset class: Debt and Equity for Social Enterprises

Many impact-led social enterprises need capital to grow and increase their impact, as well as to satisfy their existing working capital requirements. The Company's portfolio is designed to include a diversified set of investments, including charity bonds, asset-backed lending and portfolios of secured loans, and funds that invest in established social enterprises via mezzanine debt and/or equity. The underlying charities and social enterprises deliver interventions to support the most disadvantaged or vulnerable members of society, in areas such as health and social care, and often benefit from government backed revenue streams.

As of 30 June 2024, the value of investments in this asset class was £40.9 million (47% of 30 June 2024 NAV). The Company has committed £41.5 million (48% of NAV) to investments in this asset class, £0.58 million (1% of NAV) of which remains undrawn at the year end.

BEH run by Bridges Fund Management, is a long-term capital vehicle that makes equity investments into highly impactful businesses. Post period end, the fund was converted from an evergreen to a closed ended structure, to be re-named as the Bridges Inclusive Growth Fund. The fund will continue its strategy of providing patient, flexible capital to impact-led businesses that deliver measurable social outcomes for vulnerable groups in the UK.

As of 30 June 2024, the Company's investment was valued at £11.5m (13% of NAV) and was 100% drawn, funding investments into the Ethical Housing Company & New Reflexions (following the AgilityEco exit earlier in the year). BEH's financial performance was below target driven by valuation losses following the AgilityEco exit, resulting in a 1p decline in the Company's NAV per share in the period. While the write-down was disappointing, the sale of the AgilityEco investment delivered a 3.4x money multiple and 40% gross IRR over the holding period by Bridges, and proceeds from the disposal have been distributed to investors post period end, to be recallable for re-investment into new impactful investments.

BEH's impact performance remains strong: the portfolio provides a range of essential services including 98 affordable homes provided to 222 people moving from poor-quality accommodation or insecure tenancy agreements, of whom 59% were homeless or at risk of homelessness when applying, and 19,439 days of quality care, education and therapy in the year for young people with complex needs.

The Charity Bond Portfolio managed by Rathbones supports larger UK charities seeking to raise capital via the public and private bond markets, providing an alternative source of funding to bank finance. As of 30 June 2024, the Company's investment was valued at £14.5 million (17% of NAV). The portfolio is invested in nine bonds (both listed and unlisted) issued by charities and social enterprises through the Allia C&C and Triodos Crowdfunding platforms, predominantly delivering care and housing services with government revenue. The portfolio delivered a 4.38% yield for the period delivering a 0.34p contribution to Company NAV per share. One bond in the portfolio, for Thera Trust, agreed a new repayment schedule due to cash flow challenges, and as a result we have taken a partial provision against the holding which adjusted it to 0.5p per share, and reduced the Company's NAV by 0.4 pence per share - the charity has continued to pay the coupon on its bonds as due. Other bonds in the portfolio continue to perform to plan. Impact performance across the Charity Bond Portfolio companies in the year included over 10,000 affordable homes provided, intensive support including care, education, training, employability and housing provision to more than 3,200 people with health conditions or special educational needs, as well as 10,000 rural properties connected with broadband.

The Community Investment Fund (CIF) managed by Social and Sustainable Capital provides secured loans to charities and social enterprises focused on community renewable energy, social housing, and family support in the community. A high proportion of revenue comes from government mandated sources. As of 30 June 2024, the Company's investment was valued at £4.9 million (6% of NAV). During the period the Fund contributed 0.21p to Company NAV per share from income and capital gains. Impact performance in the period included 1,004 people reached by 11 social organisations providing essential services, including housing, care and training.

The Charity Bank Co-investment Portfolio comprises three secured loans with a total value as of 30 June 2024 of £3.8 million (4% of NAV), following the loan repayment from Sue Ryder in the period. Working with Charity Bank, the portfolio invests in low loan to value ratio (average 39%) loans to housing and care providers Abbeyfield South Downs, Uxbridge United Welfare Trust and Abbeyfield York. All loans are priced at a margin over the Bank of England base rate and delivered a 0.45p contribution to Company NAV per share over the period under review. Impact performance in the year includes the provision of 89 units of accommodation for the elderly at social rents.

CETL is a community renewable energy project company, contributing to a 'Just Transition to Net Zero'. The investment is in the form of a junior loan of £3.6 million, alongside Better Society Capital and Power to Change. The Loan has a five-year term and targets an internal rate of return of 8.2% (fixed coupon of 7% p.a. and additional rolled up interest paid at exit). The investment is strongly aligned with the Company's investment thesis, delivering positive social outcomes for communities alongside a good risk adjusted financial return. CETL is a partnership of five community organisations that have acquired seven cross-collateralised solar farm assets across the UK. These solar farms benefit from government backed subsidies (Feed-in-Tariffs and Renewables Obligation Certificate schemes) and the assets are funded on a cross-collateralised basis for scale and risk-sharing. As of 30 June 2024, the Company's investment was valued at £3.7 million (4% of NAV) and was 100% drawn. During the period, the investment contributed 0.20p to Company NAV per share. On impact, CETL is forecast to generate total community benefit funds in the region of £20m over the assets' lifetime of 20-25 years.

The Company's investment in a private bond issued by Triodos Bank UK Ltd was valued as of 30 June 2024 at £2.5 million (3% of NAV). Triodos Bank is a leading lender to sustainability and social impact focused organisations. This includes social housing, healthcare, education, renewable energy, arts and culture, and community projects. The bond issue enables Triodos Bank to continue to grow its loan book and contribute to the resilience and growth of charities and social enterprises. Triodos Bank UK remains well capitalised and with good liquidity (Equity Ratio of 22.4% and a total capital ratio of 23.0% as of 31 December 2023). The bond contributed 0.12p to Company NAV per share. The impact performance included 135 housing projects financed in year.

Asset class: High Impact Housing

The portfolio is invested in affordable and social housing, which is intended to address the housing needs of a wide spectrum of people, who are often those on the lowest incomes and the most vulnerable. We invest across a range of asset types, from long-term inflation-linked lease contracts with high-quality counterparties to shorter leases to address specific issues, such as homelessness or the housing needs of survivors of domestic abuse. Counterparties include Registered Providers of social housing (such as housing associations) and charities with long-standing track records, deep expertise in addressing specific issues, and strong local relationships with authorities and beneficiaries.

In addressing these needs, we seek to deliver returns that are often supported by the government-backed housing benefit system. This has led to a lower historical correlation to mainstream markets and insulation from the sharper price movements in the private housing market. The portfolio has a diversified exposure to rental streams and is experiencing a mix of increases in the current environment.

The UK Affordable Housing and the Man GPM RI Community Housing funds have mainly seen rents increase driven by index-linked leases (capped at 7% for social rent for the fiscal year from April 2023 to April 2024). This cap was removed in April 2024, and the funds will benefit from rent increases of 7.7% until April 2025. The Social and Sustainable Housing (SASH) portfolio is primarily "Exempt Accommodation" for high need groups which has seen rents increasing in line with inflation. The Real Lettings Portfolio is primarily Local Housing Allowance income, which has been increased by an average of 13% across the fund's portfolio, following several years of being frozen. Furthermore, we note some of the challenges being experienced by listed Social Property REITs - often linked to the short operating history and limited delivery experience of property counterparties. We are not seeing any comparable issues in our High Impact Housing investments - with 100% of rent due by June 2024 collected.

As of 30 June 2024, the value of investments in this asset class is £33.8 million (39% of 30 June 2024 NAV). The Company has committed £41.3 million (48% of NAV) to investments in this asset class, £7.5 million (9% of NAV) of which remains undrawn at the year end, including £5 million committed to Simply Affordable Homes.

The UK Affordable Housing Fund, managed by CBRE Investment Management, aims to increase the supply of sustainable and affordable homes in the UK for people unable to purchase or rent in the open market. The fund targets a total return greater than 6% (with an annual target income distribution yield of 4% from income producing assets) net of all costs over the long term. The Company's investment is fully deployed and valued at £10.4 million (12% of NAV). The fund contributed 0.34p to Company NAV per share growth due to a greater proportion of assets becoming income producing, as well as property valuations increasing through rent review uplifts. In terms of impact performance as of Q2 2024, the Fund has so far delivered over 2,500 homes, potentially housing over 8,500 people.

The Real Lettings Property Fund, managed by Resonance Impact Investments Limited, provides high quality accommodation and support for people previously homeless or at risk of homelessness, in its 259 homes across London. The fund leases the properties to experienced housing partners (Notting Hill Genesis, Capital Letter and St. Mungo's) who manage the tenancies and support tenants, helping them access support services and become part of local communities. The fund has an overall target return of 6% and a 3.5% annual cash yield. Following the uplift of LHA rates to match the lowest 30% of private rents as of 1 April 2024, the fund's annual rental income is expected to increase by 13%. As of 30 June, the Company's investment was valued at £5.8 million (7% of NAV). During the period the fund contributed 0.55p to Company NAV per share from rental income and capital gains. On impact performance, as of the end of June 2024, 630 people (358 adults and 272 children) were being housed by the fund. Furthermore, research by Alma Economics commissioned by BSC estimated that the fund generated £12.1m of public value in 202312, through reduced costs of public services, temporary accommodation and through improved tenant well-being.

The Man GPM RI Community Housing Fund aims to help address the UK's housing crisis through the provision of new affordable rental and shared ownership homes. The fund has a target of 70% of homes to be affordable and delivered in mixed-tenure communities, and is currently on track to achieve 90% of its homes being affordable. These homes will be predominantly leased to local housing associations to deliver customer and asset management services. The fund seeks to achieve returns driven by long-term inflation-linked income streams, with a stabilised yield of 5% from income producing assets. During the period, the fund drew down £0.72 million and as of 30 June 2024 the Company's investment was valued at £8.2 million (9% of NAV). The fund had a net breakeven contribution to Company NAV per share performance in the period, mainly due to income and capital gains from stabilised assets in the portfolio being offset by higher costs due to developer insolvencies. The fund is now substantially committed, which is ahead of schedule - 3 years since the fund's first close in April 2021 versus the forecast investment period of five years. On impact performance, 318 homes have been completed as of December 2023, with an estimated 1,242 people housed to date.

The Social and Sustainable Housing LP (SASH), managed by Social and Sustainable Capital, provides investment to high-performing social sector organisations with local knowledge and networks, and a strong track record of managing transitional supported housing for vulnerable individuals. They may include survivors of domestic violence, children leaving the care system, ex-offenders, asylum seekers, people with complex mental health issues and people with addiction issues. SASH makes flexible secured loans which participate in changes in property prices and rental incomes - generated from government-backed rental payments with a target net return of 6%. During the period, the fund drew down £0.86 million and as of 30 June 2024, the Company's investment was valued at £9.5 million (11% of NAV). The fund contributed 0.38p to Company NAV per share growth during the period with the fund still in its investment period and deployment on track. On impact performance the fund has supported 888 adults and 236 children in the year into housing while contributing more consistent and higher quality service provision.

Simply Affordable Homes (SAH), managed by Savills Investment Management, seeks to deliver affordable homes across the UK, by using its established strategic partnerships with high quality housing associations, developers, and housebuilders, through a mix of acquiring existing stock and delivering new build homes. The fund will invest in and manage a diversified portfolio of affordable housing, comprising both affordable and social-rent homes as well as shared-ownership homes, generating government-backed and inflation-linked income streams. The fund aims to deliver strong impact in line with the Company's Impact Thesis and Theory of Change: properties will be affordable rented (20% or higher discount to market rates), social-rent or shared ownership homes, with a focus on areas with high local authority waiting lists and delivering high quality well-built sustainable homes. Furthermore, the fund operates under enhanced governance frameworks and a sustainable investment strategy, targeting high environmental standards and progressing towards Net Zero Carbon by 2040. As a new commitment in the period, the fund had its first drawdown post period end, with the fund still in its investment period.

Asset class: Social Outcomes Contracts

Social outcomes contracts (SOCs) aim to help the government achieve better life outcomes for vulnerable people and better value for public funds. They are public sector contracts designed to overcome challenges in the way that public services have traditionally been managed. The providers of these services are being paid for achieving specified and measurable outcomes rather than prescribed inputs. Investment is used to cover the upfront costs incurred to deliver the service, which ultimately produces the desired social outcomes. We look to invest in a pool of outcomes contracts that is diversified across central and local government commissioners and different policy areas. As of 30 June 2024, the value of investments in this asset class was £2.7 million (3% of NAV). The Company received distributions of £1.9 million during the year. Following these distributions, the Company's remaining exposure to assets in this asset class is £6.8 million (8% of NAV), of which £4.1 million (5% of NAV) is undrawn at year end. Bridges Social Outcomes Fund II, managed by Bridges Fund Management and Bridges Outcomes Partnerships, invests in social outcomes contracts, receiving payments when outcomes are delivered and thereby ensuring that payment is aligned with measurable improvements in the lives of participants. The fund has a mid-single digit return target. During the period, the fund drew down a further £0.22 million. The fund contributed 0.56p to Company NAV per share performance during the period with overall achievement of outcomes and outcomes payments running in line with plan. So far, the fund has supported 30,233 people across homelessness prevention, education, employment and family care services, achieving £87 million outcomes payments to date.

Liquidity Assets

The Company manages its committed but uncalled capital through Liquidity Assets, which aim to provide sufficient liquidity to meet impact investment commitments while earning commensurate returns. This allocation can be held as cash or invested in money market funds, bond funds, real assets investment trusts and other liquidity investments that align with the Company's liquidity requirements, meet high sustainability standards and comply with the Company's investment policy. As of 30 June 2024, the Company held £9.5 million in Liquidity Assets, with one redemption in the period (highlighted in grey), as detailed in the table below.

*Totals may not sum due to rounding.

Our Liquidity Assets portfolio, representing 11% of NAV, contributed 0.55p per share to the Company's total NAV during the period. The positive performance was achieved by robust dividend and interest income from underlying investments, as the portfolio benefited from overweighting floating rate credit. During the financial year, partial withdrawals from the portfolio were made to fund High Impact portfolio drawdowns.

The existing portfolio at year end continues to reflect a focus on generating positive real returns by capturing spreads over cash returns through dividends from investments with strong sustainability credentials. As interest rate cuts approach and the economic cycle matures, the existing portfolio continues to maintain flexibility through diversified duration exposures while managing immediate liquidity needs through money market funds and cash.

Hermina Popa, Jeremy Rogers

Better Society Capital

23 October 2024

Principal and emerging risks and uncertainties

The Board, through its delegation to the Audit and Risk Committee, is responsible for the Company's system of risk management and internal control and for reviewing its effectiveness. The Board has adopted a detailed matrix of principal risks affecting the Company's business as an investment trust and has established associated policies and processes designed to manage and, where possible, mitigate those risks, which are monitored by the Audit and Risk Committee on an ongoing basis. This system assists the Board in determining the nature and extent of the risks it is willing to take in achieving the Company's strategic objectives. Both principal and emerging risks and the monitoring system are subject to robust assessment at least annually.

Risk assessment and internal controls review by the Board

Risk assessment includes consideration of the scope and quality of the systems of internal control operating within key service providers, and ensures regular communication of the results of monitoring by such providers to the Audit and Risk Committee, including the incidence of significant control failings or weaknesses that have been identified at any time and the extent to which they have resulted in unforeseen outcomes or contingencies that may have a material impact on the Company's performance or condition. The internal control environment of the Manager, Portfolio Manager, depositary and the registrar are tested annually by independent external auditors. The reports are reviewed by the Audit and Risk Committee.

During the year, the Board discussed and monitored a number of risks which could potentially impact the Company's ability to meet its strategic objectives. The Board received updates from the Manager, Portfolio Manager, Company Secretary and other service providers on emerging risks that could affect the Company, where appropriate.

Although the Board believes that it has a robust framework of internal control in place this can provide only reasonable, and not absolute, assurance against material financial misstatement or loss and is designed to manage, not eliminate, risk. Actions taken by the Board and, where appropriate, its Committees, to manage and mitigate the Company's principal and emerging risks and uncertainties are set out in the table below. Both the principal and emerging risks and uncertainties and the monitoring system are subject to robust assessment at least annually. The most recent assessment took place in October 2024. The Committee concluded that the Company's risk management and internal control systems remain effective with no significant control failings or weaknesses identified.

The "Change" column on the right highlights the Audit and Risk Committee's assessment of any increases or decreases in risk during the year after mitigation and management. The arrows show the risks as increased or decreased, and sideway arrows show risks as stable.

Risk assessment and internal controls review by the Board

Risk assessment includes consideration of the scope and quality of the systems of internal control operating within key service providers and ensures regular communication of the results of monitoring by such providers to the Audit and Risk Committee. This includes the incidence of significant control failings or weaknesses that have been identified at any time and the extent to which they have resulted in unforeseen outcomes or contingencies that may have a material impact on the Company's performance or condition.

No significant control failings or weaknesses were identified from the Audit and Risk Committee's ongoing risk assessment which has been in place throughout the financial year and up to the date of this report. The Board is satisfied that it has undertaken a detailed review of the risks facing the Company.

A full analysis of the financial risks facing the Company is set out in note 20 to the accounts in the full set of annual financial statements.

Statement of Directors' Responsibilities

Directors' responsibilities

The directors are responsible for preparing the annual report and accounts in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial period. Under that law the directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (FRS: 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland) and applicable law. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the return or loss of the Company for that period. In preparing these financial statements, the directors are required to:

-     select suitable accounting policies and then apply them consistently;

-     make judgements and accounting estimates that are reasonable and prudent;

-     state whether applicable UK Accounting Standards, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements;

-     prepare a directors' report, a strategic report and directors' remuneration report which comply with the requirements of the Companies Act 2006; and

-     prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Manager. The directors' responsibilities also extend to the ongoing integrity of the financial statements contained therein.

Directors' statement

Each of the directors, whose names and functions are listed in the full set of annual financial statements, confirm that to the best of their knowledge:

-     the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and net return of the Company;

-     the annual report and accounts includes a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that it faces; and

-     the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

On behalf of the Board

Susannah Nicklin

Chair

23 October 2024

Income Statement

for the year ended 30 June 2024

The "Total" column of this statement is the profit and loss account of the Company. The "Revenue" and "Capital" columns represent supplementary information prepared under guidance issued by The Association of Investment Companies. The Company has no other items of other comprehensive income, and therefore the net return/(loss) after taxation is also the total comprehensive income for the year.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year (2023: none).

The notes in the full set of annual financial statements form an integral part of these accounts.

Statement of Changes in Equity

for the year ended 30 June 2024

The notes in the full set of annual financial statements form an integral part of these accounts.

Balance Sheet

at 30 June 2024

*Cash at bank and in hand in the Balance Sheet has been restated to exclude investments in money market funds of £1.7m for the year ended 30 June 2023 and disclose them separately as current asset investments, to conform with those required by the Companies Act - Statutory format of the Balance Sheet. There is no impact on other line items in the Balance Sheet nor on total current assets.

These accounts were approved and authorised for issue by the Board of Directors on 23 October 2024 and signed on its behalf by:

Susannah Nicklin
Chair

The notes in the full set of annual financial statements form an integral part of these accounts.

Registered in England and Wales as a public company limited by shares
Company registration number: 12902443

Cash Flow Statement

for the year ended 30 June 2024

Included in net cash inflow from operating activities are dividends received amounting to £1,013,000 (year ended 30 June 2023: £860,000), income from debt securities amounting to £1,955,000 (year ended 30 June 2023: £1,236,000) and other interest receivable and similar income amounting to £33,000 (year ended 30 June 2023: £70,000).

The notes in the full set of annual financial statements form an integral part of these accounts.

Notes to the Accounts

1.       Accounting policies

(a)        Basis of accounting

Schroder BSC Social Impact Trust plc ("the Company") is registered in England and Wales as a public company limited by shares. The Company's registered office is 1 London Wall Place, London EC2Y 5AU.

The accounts are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ("UK GAAP"), in particular in accordance with Financial Reporting Standard (FRS) 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland", and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (the "SORP") issued by the Association of Investment Companies in July 2022. All of the Company's operations are of a continuing nature.

The accounts have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of investments held at fair value. The Directors believe that the Company has adequate resources to continue operating until 31 October 2025, which is at least 12 months from the date of approval of these accounts. In forming this opinion, the Directors have taken into consideration: the controls and monitoring processes in place; the Company's level of debt, undrawn commitments and other payables; the low level of operating expenses, comprising largely variable costs which would reduce pro rata in the event of a market downturn; the Company's cash flow forecasts and the liquidity of the Company's investments. In forming this opinion, the Directors have also considered any potential impact of climate change, and the risk/impact of elevated and sustained inflation and interest rates on the viability of the Company. The Company has additionally performed stress tests which confirm that a 50% fall in the market prices of the portfolio would not affect the Board's conclusions in respect of going concern.

The accounts are presented in sterling and amounts have been rounded to the nearest thousand.

The accounting policies applied to these accounts are consistent with those applied in the accounts for the year ended 30 June 2023.

Certain judgements, estimates and assumptions have been required in valuing the Company's investments and these are detailed in note 19 in the full set of annual financial statements.

(b)        Valuation of investments

The Company's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. Investments with a fixed coupon and redemption amount are valued at amortised cost less any impairments in accordance with FRS 102. Other financial assets are managed and their performance evaluated on a fair value basis, in accordance with a documented investment objective and information is provided internally on that basis to the Company's Board of Directors. Upon initial recognition, these investments are designated by the Company as "held at fair value through profit or loss", included initially at cost and subsequently at fair value using the methodology below. This valuation process is consistent with International Private Equity and Venture Capital Guidelines issued in December 2022, which are intended to set out current best practice on the valuation of Private Capital investments.

(i)    Quoted bid prices for investments traded in active markets.

(ii)   The price of a recent investment, where there is considered to have been no material change in fair value.

(iii)  Where it is felt that a milestone has been reached or a target achieved, the Company may use the price of a recent investment adjusted to reflect that change.

(iv)  Investments in funds may be valued using the NAV per unit with an appropriate discount or premium applied to arrive at a unit price.

(v)   Price earning multiples, based on comparable businesses.

(vi)  Industry benchmarks, where available.

(vii) Discounted Cash Flow techniques, where reliable estimates of cash flows are available.

The above valuation methodologies are deemed to reflect the impact of climate change risk on the investments held.

Purchases and sales of quoted investments are accounted for on a trade date basis. Purchases and sales of unquoted investments are recognised when the related contract becomes unconditional.

(c)        Accounting for reserves

Gains and losses on sales of investments and the management fee or finance costs allocated to capital, are included in the Income Statement and dealt with in capital reserves. Increases and decreases in the valuation of investments held at the year end and impairment losses of investments, are included in the Income Statement and in capital reserves within "Investment holding gains and losses".

For shares that are repurchased and held in treasury, the full cost is charged to the Special reserve.

(d)        Income

Dividends receivable are included in revenue on an ex-dividend basis except where, in the opinion of the Board, the dividend is capital in nature, in which case it is included in capital.

Income from limited partnerships will be included in revenue on the income declaration date.

Income from fixed interest debt securities is recognised using the effective interest method.

Deposit interest outstanding at the year end is calculated and accrued on a time apportionment basis using market rates of interest.  

(e)        Expenses

All expenses are accounted for on an accruals basis. Expenses are allocated wholly to the revenue column of the Income Statement with the following exceptions:

-     The management fee is allocated 50% to revenue and 50% to capital in line with the Board's expected long-term split of revenue and capital return from the Company's investment portfolio.

-     Expenses incidental to the purchase of an investment are charged to capital. These expenses are commonly referred to as transaction costs and comprise brokerage commission and stamp duty. Details of transaction costs are given in note 9(c) in the full set of annual financial statements.

The underlying costs incurred by the Company's investments in collective funds are not included in the various expense disclosures.

(f)         Finance costs

Finance costs, including any premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis using the effective interest method and in accordance with FRS 102.

Finance costs are allocated 50% to revenue and 50% to capital in line with the Board's expected long-term split of revenue and capital return from the Company's investment portfolio.

(g)        Financial instruments

Cash at bank and in hand comprises cash held in the bank. Current asset investments comprise investments in money market funds and highly liquid investments which are readily convertible to a known amount of cash and are subject to insignificant risk of changes in value. Other debtors and creditors do not carry any interest, are short-term in nature and are accordingly stated at nominal value, with debtors reduced by appropriate allowances for estimated irrecoverable amounts.

Bank loans and overdrafts are initially measured at fair value and subsequently measured at amortised cost. They are recorded at the proceeds received net of direct issue costs. The Company had no bank loans or overdrafts at 30 June 2024 (2023: nil).

(h)        Taxation

Taxation on ordinary activities comprises amounts expected to be received or paid.

Tax relief is allocated to expenses charged to the capital column of the Income Statement on the "marginal basis". On this basis, if taxable income is capable of being entirely offset by revenue expenses, then no tax relief is transferred to the capital column.

Deferred tax is provided on all timing differences that have originated but not reversed by the accounting date.

Deferred tax liabilities are recognised for all taxable timing differences but deferred tax assets are only recognised to the extent that it is probable that taxable profits will be available against which those timing differences can be utilised.

Deferred tax is measured at the tax rate which is expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates that have been enacted or substantively enacted at the balance sheet date and is measured on an undiscounted basis.

As the Company continues to meet the conditions required to retain its status as an Investment Trust, any capital gains or losses arising on the revaluation or disposal of investments are exempt.

(i)         Value added tax ("VAT")

Expenses are disclosed inclusive of the related irrecoverable VAT.

(j)         Dividends payable

In accordance with FRS 102, dividends payable are included in the accounts in the year in which they are paid. Part, or all of any dividend declared may be designated as an "interest distribution", calculated in accordance with the investment trust income streaming rules and paid without deduction of any income tax.

2.       Losses on investments held at fair value through profit or loss

3.       Income from investments

4.       Investment management fees

The bases for calculating the investment management fees are set out in the Report of the Directors in the full set of annual financial statements and details of all amounts payable to the managers are given in note 17 in the full set of annual financial statements.

5.       Administrative expenses

¹Full details are given in the remuneration report in the full set of annual financial statements.

²Includes VAT amounting to £12,000 (2023: £12,000).

6.       Taxation

(a)        Analysis of tax charge for the year

The Company has no corporation tax liability for the year ended 30 June 2024 (2023: nil).

(b)        Factors affecting tax charge for the year

UK Corporation Tax rate has increased from 19% to 25% with effect from 1 April 2023.

(c)        Deferred taxation

The Company has an unrecognised deferred tax asset of £590,000 (2023:£330,000) based on a prospective corporation tax rate of 25% (2023:25%). The main rate of corporation tax increased to 25% for fiscal years beginning on or after 1 April 2023.

This deferred tax asset has arisen due to the cumulative excess of deductible expenses over taxable income. Given the composition of the Company's portfolio, it is not likely that this asset will be utilised in the foreseeable future and therefore no asset has been recognised in the accounts.

Given the Company's status as an investment trust company, no provision has been made for deferred tax on any capital gains or losses arising on the revaluation or disposal of investments.

7.       Return per share

There are no dilutive instruments, the return per share is actual return.

8.       Dividends

¹The 2023 interim dividend amounted to £1,946,000. However the amount actually paid was £1,934,000, as shares were repurchased into treasury after the accounting date but prior to the dividend record date.

The 2024 interim dividend is made up wholly of an interest distribution of 2.94p. The 2023 dividend of 2.30p was split between a 2.16p interest distribution and a 0.14p equity dividend.

The interim dividend amounting to £2,439,000 (2023: £1,946,000) is the amount used for the basis of determining whether the Company has satisfied the distribution requirements of Section 1158 of the Corporation Tax Act 2010. The revenue available for distribution by way of dividend for the year is £2,650,000 (2023: £1,974,000).

9.       Fixed assets

(a)        Movement in investments

The Company received £9,306,000 (2023: £9,279,000) from disposal of investments in the year. The book cost of these investments when they were purchased was £9,911,000 (2023: £9,921,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the value of the investments.

(b)        Unquoted investments, including investments quoted in inactive markets

Material revaluations of unquoted investments during the year ended 30 June 2024

Material revaluations of unquoted investments during the year ended 30 June 2023

Material disposals of unquoted investments during the year

(c)        Transaction costs

The following transaction costs, comprising stamp duty and legal fees, were incurred in the year:

10.     Current assets

Debtors

The Directors consider that the carrying amount of debtors approximates to their fair value.

11.     Current liabilities

Creditors: amounts falling due within one year

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

12.     Called-up share capital

^1�Represents 85,316,586 (2023: 85,316,586) shares of 1p each, including 2,286,925 (2023: 711,720) held in treasury.

During the year, the Company repurchased 1,575,205 of its own shares, nominal value £15,752 to hold in treasury, representing 1.86% of the shares outstanding at the beginning of the year. The total consideration paid for these shares amounted to £1,409,000. The reason for these purchases was to seek to manage the volatility of the share price discount to NAV per share.

13.     Reserves

Year ended 30 June 2024

^1�Share premium is a non distributable reserve and represents the amount by which the fair value of the consideration received from shares issued exceeds the nominal value of shares issued.

^2�This is a distributable capital reserve arising from the cancellation of the share premium, and may be distributed as dividends or used to repurchase the Company's own shares.

^3�This is a realised (distributable) capital reserve and may be distributed as dividends or used to repurchase the Company's own shares.

^4�This is an undistributable reserve which consists of unrealised gains and losses as a result of revaluations of investments held as at year end.

^5�The revenue reserve may be distributed as dividends or used to repurchase the Company's own shares.

Year ended 30 June 2023

The Company's Articles of Association permit dividend distributions out of realised capital profits. Total distributable reserves as at 30 June 2024 were £71,321,000 (30 June 2023: £72,974,000).

^1�Share premium is a non distributable reserve and represents the amount by which the fair value of the consideration received from shares issued exceeds the nominal value of shares issued.

^2�This is a distributable capital reserve arising from the cancellation of the share premium, and may be distributed as dividends or used to repurchase the Company's own shares.

^3�This is a realised (distributable) capital reserve and may be distributed as dividends or used to repurchase the Company's own shares.

^4�This is an undistributable reserve which consists of unrealised gains and losses as a result of revaluations of investments held as at year end.

^5�The revenue reserve may be distributed as dividends or used to repurchase the Company's own shares.

14.  Net asset value per share

15.  Reconciliation of total return on ordinary activities before finance costs and taxation to net cash inflow from operating activities

¹Accumulation dividends are capitalised to investments.

16.  Uncalled capital commitments

At 30 June 2024, the Company had uncalled capital commitments amounting to £12,174,000 (2023: £8,749,000) in respect of follow-on investments, which may be drawn down or called by investee entities, subject to agreed notice periods.

17.  Transactions with the Manager

Under the terms of the Alternative Investment Fund Manager Agreement, the Manager is entitled to receive a management fee. Details of the basis of the calculation are given in the Directors' Report in the full set of annual financial statements.

The fee payable to the Manager in respect of the year ended 30 June 2024 amounted to £624,000 (2023: £614,000), of which £307,000 (2023: £307,000) was outstanding at the year end. Any investments in funds managed or advised by the Manager or any of its associated companies, are excluded from the assets used for the purpose of the calculation and therefore incur no fee.

Under the terms of the Investment Management Agreement, the Manager may reclaim from the Company certain expenses paid by the Manager on behalf of the Company to HSBC in connection with accounting and administrative services provided to the Company. These charges amounted to £79,000 for the year ended 30 June 2024 (2023: £66,000), of which £66,000 (2023: same) was outstanding at the year end.              

No Director of the Company served as a Director of any company within the Schroder Group at any time during the year, or prior period.

In accordance with the terms of a discretionary mandate between the Company, Better Society Capital Limited, Rathbone Investment Management Limited and The Charity Bank Limited are entitled to receive a management fee for portfolio management services relating to certain of the Company's investments.

Details of the basis of the calculation are given in the Directors' Report in the full set of annual financial statements. The fee payable to Rathbone in respect of the year ended 30 June 2024 amounted to £54,000 (2023: £55,000), of which £13,000 (2023: £13,000) was outstanding at the year end. The fee payable to The Charity Bank Limited in respect of the year ended 30 June 2024 amounted to £2,000 (2023: £nil), of which £nil was outstanding at the year end (2023: same).

18.  Related party transactions

Details of the remuneration payable to Directors are given in the Directors' Remuneration Report in the full set of annual financial statements and details of Directors' shareholdings are given in the Directors' Remuneration Report in the full set of annual financial statements Details of transactions with the Managers are given in note 17 above.

During the year ended 30 June 2024, there has been a smaller related party transaction for the purposes of the Listing Rules as then in force in relation to the debt investment in CETL. The Company's debt investment in CETL, valued at £3.5 million and comprising 4.1% of the Company's investment portfolio as of 30 June 2024, was made by way of the sale of a £3.6 million direct junior loan to CETL previously owned by the Portfolio Manager. After the sale, the Portfolio Manager holds a £2.4 million investment in the same entity through a junior loan, compared to £6.0 million before the sale.

19.  Disclosures regarding financial instruments measured at fair value

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

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

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

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

Level 3 - valued using inputs that are unobservable.

Details of the Company's policy for valuing investments are given in note 1(b) in the full set of annual financial statements. Level 3 investments have been valued in accordance with note 1(b)(ii) to (vii).

The Company's unlisted investments held at fair value are valued using a variety of techniques consistent with the recommendations set out in the International Private Equity and Venture Capital guidelines. Investments in third-party managed funds were valued by reference to the most recent net asset value provided by the relevant manager. The valuation methods adopted by third-party managers include using comparable company multiples, net asset values, assessment of comparable company performance and assessment of milestone achievement at the investee. For certain investments, such as High Impact Housing, the third-party manager may appoint external valuers to periodically value the underlying portfolio of assets. The valuations of third-party managed funds will also be subject to an annual audit. The valuations of all investments are considered by the Portfolio Manager and recommended to the AIFM, who in turn recommends them to the Company. Where it is deemed appropriate, the Portfolio Manager may recommend an adjusted valuation to the extent that the adjusted valuation represents the Portfolio Manager's view of fair value.

At 30 June, the Company's investment held at fair value, were categorised as follows:

There have been no other transfers between Levels 1, 2 or 3 during the year (2023: nil).

Movements in fair value measurements included in Level 3 during the year are as follows:

20.  Financial instruments' exposure to risk and risk management policies

The Company's objectives are set out on the inside front cover of this report. In pursuing these objectives, the Company is exposed to a variety of financial risks that could result in a reduction in the Company's net assets or a reduction in the profits available for dividends.

These financial risks include market risk (comprising interest rate risk and other price risk), liquidity risk and credit risk. The Directors' policy for managing these risks is set out below. The Board coordinates the Company's risk management policy. The Company has no significant exposure to foreign exchange risk on monetary items.

The Company's classes of financial instruments may comprise the following:

-     investments in collective funds, listed and unlisted bonds, debts, shares of quoted and unquoted companies which are held in accordance with the Company's investment objective;

-     debtors, creditors, short-term deposit and cash arising directly from its operations;

-     bank loans used for investment purposes; and

-     derivatives used for efficient portfolio management or currency hedging.

(a)        Market risk

The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises two elements: interest rate risk and other price risk. Information to enable an evaluation of the nature and extent of these two elements of market risk is given in parts (i) and (ii) of this note, together with sensitivity analyses where appropriate. The Board reviews and agrees policies for managing these risks.

The Manager assesses the exposure to market risk when making each investment decision and monitors the overall level of market risk on the whole of the investment portfolio on an ongoing basis.

(i)         Interest rate risk

Interest rate movements may affect the level of income receivable on investments carrying a floating interest rate coupon, cash balances and interest payable on any loans or overdrafts when interest rates are re-set.

Management of interest rate risk

Liquidity and borrowings are managed with the aim of increasing returns to shareholders. The Company may borrow from time to time, but gearing will not exceed 20% of net asset value at the time of drawing. Gearing is defined as borrowings less cash, expressed as a percentage of net assets. The Company has arranged an overdraft facility subject to a limit of £5 million, which expires on 30 November 2024, with HSBC Bank plc but it has not been utilised during the year or prior year.

Interest rate exposure

The exposure of financial assets and financial liabilities to floating interest rates, giving cash flow interest rate risk when rates are re-set, is shown below:

Sterling cash balances at call earn interest at floating rates based on the Sterling Overnight Interest Average rates ("SONIA").

The above period end amounts are broadly representative of the exposure to interest rates during the year and prior year.

Interest rate sensitivity

The following table illustrates the sensitivity of the return after taxation for the year and net assets to a 0.75% (2023: 0.75%) increase or decrease in interest rates in regards to the Company's monetary financial assets and financial liabilities. This level of change is considered to be a reasonable illustration based on observation of current market conditions. The sensitivity analysis is based on the Company's monetary financial instruments held at the accounting date with all other variables held constant.

(ii)        Other price risk

Other price risk includes changes in market prices which may affect the value of investments.

Management of other price risk

The Board meets on at least four occasions each year to consider the asset allocation of the portfolio and the risk associated with particular industry sectors. The portfolio management team has responsibility for monitoring the portfolio, which is selected in accordance with the Company's investment objective and seeks to ensure that individual stocks meet an acceptable risk/reward profile. The Board may authorise the Manager to enter derivative transactions for the purpose of currency hedging, although non-sterling exposures are expected to be limited.

Market price risk exposure

The Company's total exposure to changes in market prices at 30 June comprises the following:

The above data is broadly representative of the exposure to market price risk during the year.

Concentration of exposure to market price risk

An analysis of the Company's investments is given in the full set of annual financial statements. This shows a concentration of exposure to the social housing sector in the United Kingdom.

Market price risk sensitivity

The following table illustrates the sensitivity of the return after taxation for the year and net assets to an increase or decrease of 10% in the fair values of the Company's investments. This level of change is considered to be a reasonable illustration based on observation of current market conditions. The sensitivity analysis is based on the Company's exposure to the underlying investments and includes the impact on the management fee but assumes that all other variables are held constant.

(b)        Liquidity risk

This is the risk that the Company will encounter difficulty in meeting its obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

Management of the risk

The Portfolio Manager monitors the cash position to ensure sufficient funds are available to meet the Company's financial obligations. For this purpose, the Portfolio Manager may retain up to 20% of net assets in Liquid Assets, other liquid investments and a reserve of cash. The Company has also arranged an overdraft facility with HSBC Bank plc.

Liquidity risk exposure

Contractual maturities of financial liabilities, based on the earliest date on which payment can be required are as follows:

(c)        Credit risk

Credit risk is the risk that the failure of the counterparty to a transaction to discharge its obligations under that transaction could result in loss to the Company.

Credit risk exposure

The Company is exposed to credit risk principally from debt securities held, off balance sheet commitments, loans and receivables and cash deposits.

Portfolio dealing

The credit ratings of broker counterparties are monitored by the AIFM and limits are set on exposure to any one broker.

Exposure to the Custodian

The custodian of the Company's assets is HSBC Bank plc which has long-term Credit Ratings of AA- with Fitch and Aa3 with Moody's.

Any assets held by the custodian will be held in accounts which are segregated from the custodian's own trading assets. If the custodian were to become insolvent, the Company's right of ownership of those investments is clear and they are therefore protected. However the Company's cash balances are all deposited with the custodian as banker and held on the custodian's balance sheet. Accordingly, in accordance with usual banking practice, the Company will rank as a general creditor to the custodian in respect of cash balances.

Exposure to debt securities

The Portfolio Manager's investment process ensures that potential investments are subject to robust analysis, appropriate due diligence and approval by an investment committee. Pre-investment checks are made to prevent breach of the Company's investment limits, which are designed to ensure a diversified portfolio to manage risk. Debt securities are subject to continuous monitoring and quarterly reports are presented to the Board.

Credit risk exposure

The following amounts shown in the Balance Sheet, represent the maximum exposure to credit risk at the year end:

At 30 June 2024, the Company had an off-balance sheet credit exposure consisting of uncalled capital commitments which amounted to £12,174,000 (2023: £8,749,000) in respect of follow-on investments.

(d)        Fair values of financial assets and financial liabilities

All financial assets and liabilities are either carried in the balance sheet at fair value, or the balance sheet amount is a reasonable approximation of fair value.

21.  Capital management policies and procedures

The Company's capital management objectives are to ensure that it will be able to continue as a going concern, and to maximise the income and capital return to its equity shareholders.

The Company's capital structure comprises the following:

The Board, with the assistance of the Manager, monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review will include:

-     the possible use of gearing, which will take into account the Manager's views on the market;

-     the potential benefit of repurchasing the Company's own shares for cancellation or holding in treasury, which will take into account the share price discount;

-     the opportunity for issue of new shares; and

-     the amount of dividend to be paid, in excess of that which is required to be distributed.

22.  Events after the accounting date that have not been reflected in the financial statements

There have been no events we are aware of since the balance sheet date which either require changes to be made to the figures included in the financial statements or to be disclosed by way of note.

23. Status of results announcement

2024 Financial Information

The figures and financial information for 2024 are extracted from the Annual Report and Financial Statements for the year ended 30th June 2024 and do not constitute the statutory accounts for that year. The Annual Report and Financial Statements include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts will be delivered to the Register of Companies in due course.

2023 Financial Information

The figures and financial information for 2023 are extracted from the published Annual Report and Financial Statements for the year ended 30th June 2023 and do not constitute the statutory accounts for the year. The Annual Report and Financial Statements have been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

23 October 2024

For further information:

Natalia de Sousa or Sunny Chou

Schroder Investment Management Limited

E-mail: AMCompanySecretary@Schroders.com

Issued by Schroder Investment Management Limited. Registration No 1893220 England.

Authorised and regulated by the Financial Conduct Authority.  For regular updates by e-mail please register online at www.schroders.com for our alerting service.

ENDS

A copy of the 2024 Annual Report will shortly be submitted to the FCA's National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The 2024Annual Report will shortly be available on the Company's website at www.schroders.com/SBSI where up-to-date information on the Company, including daily NAV and share prices, factsheets and portfolio in formation can also be found.