Schroder British Opportunities

Schroder British Opportunities Trust plc

Annual Report & Accounts for the year ended 31 March 2023

Schroder British Opportunities Trust plc ("SBO" or the "Company") hereby submits its final results for the year ended 31 March 2023.

Financial highlights

·      Net asset value ("NAV") per share increased 3.1% to 107.32 pence (31 March 2022: 104.14 pence)

·      Strong aggregate performance of private equity allocation, which now represents 65% of total investments (31 March 2022: 42%), and resilient NAV performance since inception against challenging market backdrop

·      Available cash for future investments as at 31 March 2023 of £7.8 million

Portfolio highlights

·      Portfolio focus remains on high growth small and mid-sized companies

·      Profitable* companies make up 74% of total investments as at 31 March 2023

·      Private equity allocation focused on the 'growth capital' and 'buyout' areas of the market

o  Portfolio seeing significant EBITDA development, driven by strong organic and inorganic growth

o  65% of total investments are now in private companies

o  Eight of nine unquoted investments performing well with uplifts to their original valuations and are already profitable or have a clear pathway to profitability, that have in aggregate grown sales 40% over the past 12 months   

o  New investments into Mintec, CFC and Pirum

o  First cash distribution (£2.4 million) from private equity holdings received, following combination of Culligan and Waterlogic

·      Public holdings decreased in value slightly as UK small and mid-cap stocks were affected by the macro factors impacting the market, but with substantial re-rating potential when markets recover

o  Added Bytes Technology and exited holdings in Euromoney, EMIS and Ideagen - sold after they received takeover bids, illustrating the Portfolio Manager's ability to identifying undervalued businesses

*Based on EBITDA profitability

Investor Presentation

The Company's Portfolio Managers are hosting an annual results presentation for investors on Tuesday, 11 July 2023 at 10.00 a.m. Investors can register for the event at: https://registration.duuzra.com/form/SBOAnnualResults23.

Neil England, Chairman of Schroder British Opportunities Trust plc commented:

"In certain areas of the private equity market there has been significant downwards revaluation, although this has generally not been the case in the part of the market that we focus on.

Our differentiated public-private equity strategy enables us to continue to invest without boundaries, thus providing access to a broader investable universe. Our current portfolio of growing and innovative British companies are expected to perform well. The patient investor that can look beyond the recent and current environment should be well rewarded."

The Company's Report and Accounts for the period ended 31 March 2023 are also being published in hard copy format and an electronic copy will shortly be available to download from the Company's website www.schroders.com/sbo. Please click on the following link to view the document:

http://www.rns-pdf.londonstockexchange.com/rns/1168F_1-2023-7-5.pdf

Enquiries:

Schroder Investment Management Limited

Augustine Chipungu (Press)                                          020 7658 6000

Paula Lockwood (Company Secretary)                          020 7658 6000

John Spedding                                                              020 7658 6000

Schroder British Opportunities Trust plc

Chairman's Statement

I am pleased to present your Company's third report and accounts since the launch of the Company in 2020. This report covers the year ended 31 March 2023.

Investment policy

Your Company invests in a diversified mix of public and private companies, either based in the UK or generating a significant proportion of their revenue in the UK. We seek to invest in companies with potential for high growth and with strong ESG credentials, particularly where we believe these to be undervalued by the market. Our objective is to deliver long term and sustainable capital growth for shareholders.

Performance

Shareholders will be fully aware of the significant market volatility throughout the year under review. The war in Ukraine, inflation, rising interest rates after a prolonged period of close to free money, highly priced US technology stocks falling in value and the contagion from that, have all been contributing factors. Fast growing companies that need cash to fuel their growth have generally been out of favour, but this sentiment has also hit other growth companies that are profitable already or have cash reserves that will fund them through to that point.

In certain areas of the private equity market there has been significant downwards revaluation, although this has generally not been the case in the part of the market that we focus on.  We are not venture investors. We focus on the growth and the buyout sector. Of the Company's portfolio of nine private businesses, diversified across sectors, eight are either profitable or on a clear path to profitability. These companies have an average of c.40% revenue growth and good margins. Our decision to focus on this area of the private equity market has proved to be the right one in this environment. Our private portfolio contributed 10% to the Company's NAV during the period under review.

The Company's public holdings fell slightly in value as UK small and mid-cap stocks were badly affected by the macro factors affecting the market.

Despite this difficult environment, it is pleasing to report that your Company's NAV increased by 3.1% during the period (from 104.14p to 107.32p). This positive overall result highlights the benefit of blending public and private companies together in one portfolio.

Unfortunately, this robust NAV performance did not produce a commensurate improvement in our share price, which suffered a decline of -18.5%. The discount to NAV widened during the period under review from ‑19.3% to -36.2% as at 31 March 2023. The share price falling to this higher discount correlates with market sentiment towards growth stocks and private equity investment companies in particular. It is frustrating when our share price does not reflect the performance or the potential of the Company's portfolio.

Further comment on performance and portfolio activity can be found in the Portfolio Managers' review.

Valuations

The portfolio has a mix of public and private equities. Public investments are obviously valued at the prevailing market price. Shareholders in investment companies with a private portfolio are often sceptical of valuations when they don't see them change as much or as rapidly as they do in many public companies. Your Board considers its governance role in the private equities valuations process to be of utmost importance. We are fortunate to have a specialist valuations team within Schroders, who are independent of the Portfolio Managers, and who report their findings directly to the Board. The results we are reporting reflect their in-depth analysis and a discursive and challenging valuations process. In all cases, we use public market comparables.

In December 2022, revised international private equity and venture valuations (IPEV) guidelines were issued, built on industry best practice. Shareholders will be comforted to learn that the Company's valuation process was already fully compliant with these guidelines.

Discount management

The Board monitors the Company's discount levels and regularly reviews its share buyback policy. The Board instigated a highly accretive buyback, seeking to convey to the market our confidence in the value of the portfolio. 1,100,000 shares were purchased by the Company and are being held in treasury. These shares can be reissued when the share price recovers to a premium to NAV.

Dividend

No dividend has been declared or recommended for the year. Your Company is focused on providing capital growth and has a policy to only pay dividends to the extent that it is necessary to maintain the Company's investment trust status.

Portfolio Managers

The Company's portfolio has been co-managed by Rory Bateman (Schroders' Co-Head of Investment and Head of Equities), and Tim Creed (Schroders Capital's Head of Private Equity Investments). In view of recognising talent within the team, Uzo Ekwue and Peraveenan ('Pav') Sriharan will additionally join them as Co-Managers of the portfolio. Uzo is a Fund Manager within Schroders' UK Equity team, where she manages assets across the market cap spectrum. She joined Schroders in November 2020 and has been working closely alongside Rory since the Company's inception. Pav covers Schroders Capital's private equity investment activities in Europe and forms part of the technology and consumer sector groups. He started at Schroders in September 2012 and joined the private equity team in January 2022, and has been working closely with Tim on the Company's private investments since then.

Board

Chris Keljik, a non-executive Director since our IPO, resigned in February for personal reasons. We thank him and wish him well. The Board decided not to replace Chris immediately, conscious of our relatively small size and expense ratio. Chris's role as Chair of the Management Engagement Committee has been taken by current non-executive Director, Professor Tim Jenkinson. We believe the Board has adequate resources to manage workloads at this time but expects to recruit a replacement in due course. We will seek to add diversity to the Board when doing so.

The Board completed an evaluation of its performance during the year, taking input from Directors and related parties. It was concluded that Board performance was either at or above the standard in all areas measured.

Presentation from the Portfolio Managers

Our Portfolio Managers will be presenting at a webinar on Tuesday, 11 July 2023 from 10-11 am to provide some insight into their decision making and the current portfolio. Shareholders are encouraged to register for the event at: https://registration.duuzra.com/form/SBOAnnualResults23.

Regular news about the Company can be found on the Company's website: https://www.schroders.com/en/uk/private-investor/fundcentre/funds-in-fo…

AGM

Our AGM will be held on Wednesday, 27 September 2023 at 1.00 pm at 1 London Wall Place, London EC2Y 5AU.

Your Board welcomes shareholders' comments and questions for them or for the Portfolio Managers. A short presentation will be given by the investment management team at the meeting. Please contact us via our Company Secretary's email: [email protected] or, if you prefer to write in, to: The Company Secretary, Schroder British Opportunities Trust plc, at the above address. We will endeavour to get your questions answered at or prior to the AGM and will be providing answers to commonly asked questions on our webpage.

Shareholders are encouraged to cast their votes by proxy to ensure that they are counted. The Directors consider that all of the resolutions listed are in the best interests of the Company and its shareholders and therefore recommend a vote in favour of each, as the Directors intend to do in respect of their own holdings.

Why invest in SBO today?

I am often asked by private investors and wealth managers why they should invest in SBO at this time. If asked that question today, my response would be:

·      65% of our investments are in private companies.

·      Eight of these nine investments are already profitable or have a clear pathway to profitability, that have in aggregate grown sales 40% over the past 12 months.  

·      We have had nine successive quarters of an increase in the valuation of the private portfolio.

·      We also have some interesting positions in UK small to mid-cap public companies, which we expect to benefit from a re-rating when markets recover.

Outlook

The current economic environment is challenging and many company valuations are trading close to historic lows. In a number of cases there is disconnect between an investment company's share price and the value of its portfolio holdings, and that is certainly the case here. Your Board and the Portfolio Managers view our current discount as unjustly high and expect to see this start to close in the coming months.

Having avoided a recession, the UK's economy is showing some positive signs with inflation seemingly peaked, which in turn should limit further interest rate rises. Small and mid-cap stocks are expected to be early beneficiaries from any recovery.

The Company had £7.8 million in cash as at 31 March 2023, and therefore is well positioned to take advantage of new attractive investment opportunities.

Our differentiated public-private equity strategy enables us to continue to invest without boundaries, thus providing access to a broader investable universe. Our current portfolio of growing and innovative British companies are expected to perform well. The patient investor that can look beyond the recent and current environment should be well rewarded.

Neil England

Chairman

5 July 2023

Portfolio Managers' Review

Introduction

Summary

The investment case

At present, there are many instances where there is a disconnect between an investment company's share price and the value of its portfolio holdings, and we believe this is certainly the case with the Company. We believe the investment case is currently enhanced by two forms of discount.

Firstly, the UK is among the lowest valued of any regional stock markets at present, with a notable valuation discount to global peers. This provides investors with the opportunity to invest in UK assets at a discount to what they would be worth if they were listed, in say, the US.

Furthermore, listed UK small and mid- cap companies (the focus of the portfolio's public equity allocation) have notably underperformed UK large caps over the past year, as fast-growing small and mid-cap businesses in new and emerging industries were shunned for most of the period in preference for large companies able to return cash today. We are confident that UK small and mid-caps are poised to do well from here, which we discuss in the outlook section.

Secondly, the Company's shares are priced at a discount to NAV, which we believe is driven by exogenous factors. To demonstrate this, in early 2022 the shares reached a modest premium to NAV until unexpected geopolitical factors and negative sentiment around the private equity asset class drove the Company's shares to trade at a discount. While the discount grew throughout the course of the year, it has recently stabilised for several months at the low-to-mid 30% region. While other private equity-exposed investment trusts have also slipped to a discount, the operational performance of the Company's unlisted holdings has, in aggregate, been very positive since inception and momentum remains generally strong.

EBITDA = earnings before interest, taxes, depreciation and amortization. EBITDA margin is a measure of a company's operating profit as a percentage of its revenue. Weighted averages using latest last 12 month figures available.

We believe this operational performance reflects the resilient characteristics we are seeking to invest in and the maturity of our portfolio companies, which are already at profitability (74% as at 31 March 2023¹) or approaching it, while growing revenues quickly. In short, we believe the combination of these two discounts provides a window of opportunity for investors to buy a quality, fast-growing portfolio of predominantly UK businesses at a wide discount.

Additionally, the winding-up resolution, a feature of the Company since its inception, should act as a catalyst to the closing of the discount². While only an illustration, assuming a recent discount of 33% to net asset value remains, this may imply that investors could see an approximate 8.5% annualised return on their investment from now until 31 May 2028 (assuming a hypothetical crystallisation of all investments on 31 May 2028). While only illustrative, we believe this is a notable return profile. If the discount exacerbates, the return increases further. While it may be argued that this annualised return is only achievable if we realise par, we are confident this is achievable as cash is tradeable at cash, the public equity portfolio is valued at market and the private equity portfolio is valued above cost despite turbulent markets.

Market

Over the 12 months to end March 2023, UK small and mid-cap stocks performed poorly as their valuations were negatively impacted by rising interest rates, as Russia's invasion of Ukraine looked set to prolong the inflation problem facing developed economies. UK mid-caps and UK small caps (represented by the FTSE 250 and FTSE Small Cap indices) saw total returns of -7.9% and -9.0% respectively, while UK large caps (represented by the FTSE 100) returned +5.4%.³ The UK small and mid-cap area of the market has a larger contingent of fast-growing businesses in new and emerging industries, which were shunned for most of 2022 in preference for large companies able to return cash today. At the same time, higher interest rates threatened to further squeeze consumers also struggling to cope with soaring energy and food costs, weighing heavily on quoted retailers, as well as the travel and leisure and home construction sectors. These and other domestically focused companies are well represented in UK small and mid-cap indices. Valuations reached very depressed levels in the autumn when some ill-advised policies from the Liz Truss government spooked markets. A collapse in sterling and soaring market interest rates threatened to heap further pressure on consumers and businesses, although a new government was able to restore confidence and stability to asset prices relatively quickly. More broadly, hopes built towards the back end of 2022 that central banks might 'pivot' to cutting interest rates in late 2023 also contributed to a recovery in UK small and mid-caps. Domestically focused companies recovered particularly well during this phase as the UK economy performed much more resiliently than feared as European wholesale energy prices fell back very sharply.

While private equity valuations have held up better than those of public markets, the asset class has not been immune to global economic headwinds, inflation and increased interest rates. Our focus is on the small to mid-market area of the UK private equity landscape, but we believe the following provides useful insight into recent activity to contextualise the period under review. Following a stellar year in 2021, deal volumes in the UK mid-market private equity segment fell by 19% year-on-year in 2022 (from 843 deals to 680 deals), while the total deal value fell 6% (from £49.1bn to £46.0bn). Despite these year-on-year decreases, this was still a relatively strong year for private equity deals in the context of the last five years. Additionally, exit volumes fell by nearly 23% year-on-year in 2022 (from 189 exits to 146 exits), while the total exit value fell 55% (from £19.1bn to £8.6bn).⁴ Conspicuously there were no IPO exits over the year, which is most likely explained by uncertainty in markets.

Portfolio performance

Since the Company's IPO in December 2020, the net asset value has been resilient despite a volatile market backdrop. The portfolio's combined exposure to both public and private equity markets has provided NAV stability since inception, with the portfolio's listed holdings driving returns in the Company's first reporting period to 30 June 2021, while strong performance of the unquoted portfolio allocation provided a substantial cushion to falls in asset prices over the 9 month reporting period to the end of March 2022, before also driving the Company's positive NAV development over the past 12 months to the end of March 2023. Indeed, eight out of the nine unquoted holdings are performing well with uplifts to their original valuations.

Below, we focus on the past 12 months and discuss what has driven the increase in the Company's net asset value.

Attribution analysis (£m) for 12 months to 31 March 2023

Key positive and negative performers over the 12 months to 31 March 2023

Source: HSBC, as at 31 March 2023. Numbers have been rounded

The net asset value increased 1.5% over the period,⁵ which comprised:

•          Quoted holdings: -5.9%

•          Unquoted holdings: +10.0%

•          Buybacks: -1.0%

•          Costs and other movements: -1.6%

In a challenging environment, the portfolio's private equity (unquoted) holdings have continued to perform well in aggregate and the overall resilience of the private equity holdings has been particularly pleasing. We believe that the Company's private equity focus on the 'growth capital' and 'buyout' areas of the private equity landscape, in contrast to venture capital and pre-IPO areas, which have been more negatively impacted by rising inflation and interest rates, has contributed to the resilience of the NAV. Looking closer at the past 12 months, transactional activity (e.g. add-on transactions and financing rounds) and trading gains of the unquoted holdings in aggregate have driven strong performance, despite multiple contraction which demonstrates the prudent valuation approach applied.

The Company's private equity allocation has seen significant EBITDA⁶ development, driven by strong organic and inorganic growth. Transformational add-on acquisitions executed by Waterlogic (combination with Culligan) and Mintec (with its acquisition of Agribriefing for example) have enhanced total EBITDA.

We like companies that employ market consolidation strategies (often referred to as "Buy and Build") as these often allow companies to consolidate fragmented markets and smaller competitors, and complementary business can be bought, typically at lower multiples, leading to immediate multiple accretion. Our companies have been very active in employing this strategy.

Furthermore, organic growth delivered through market expansion, new product development, cross and upselling and curating strategic partnerships were some of the levers employed to deliver strong EBITDA accretion.

The growth seen by our profitable⁷ private equity portfolio companies, in both revenue and profit-based KPIs, is almost double that of publicly listed comparables. Nonetheless, we are marking these profitable companies at a c.25% discount⁸ to public comparables. This reiterates our valuation prudence.

Turning to individual private equity portfolio companies, a key contributor over the year was Mintec, the world's leading independent provider of global commodity price data & market intelligence, which was added to the portfolio in the first half of 2022 and has seen its fair value almost double since. Over the period, the company acquired French business CommoPrices, an independent provider of commodity price data and analysis, and more recently Agribriefing, which comprises multiple global brands specialising in agri-food supply chains through its products and proprietary data. These acquisitions complemented the company's investment in Kairos, a provider of commodity market intelligence and commodity risk management, bought in 2021. These acquisitions have established Mintec as the largest agri-food-focused price reporting agency and global information provider with a unique portfolio of feed-to-food commodity prices, forecasts, cost-modelling tools and fundamental market data, serving over 5,000 customers in 50 countries.

Cera Care, Europe's largest provider of digital-first home healthcare, was a strong contributor over the year following a further funding round to accelerate its growth in August 2022, in which the Company made an additional investment. We were pleased to have been able to participate in Cera's latest financing and help them empower those in the care sector. Ageing populations, post-pandemic recovery and major staff shortages have created a series of issues facing healthcare providers and governments. Cera's proposition is positioned to address these challenges. More recently, the company has taken further steps to strengthen its offering through the use of artificial intelligence, launching "Cera Brain", a platform that helps to automate and power Cera's care delivery operations. This is discussed in further detail in the top 10 holdings section below.

The Company's holding in EasyPark, the parking tech company that helps drivers to find, manage and pay for both parking and electric vehicle charging, saw its valuation increase over the period. The company continues to grow and strengthen its position as the parking tech company with the widest coverage in the world. In 2022, EasyPark grew both in new and existing markets, adding new cities such as Paris and Boston, as well as new countries, such as Slovakia. From an operational perspective, the company continues to deliver very strong transaction and monthly active user volumes.

A further contributor was global designer, manufacturer, distributor and service provider of purified drinking water dispensers, Waterlogic, which completed its merger with Culligan International - the innovative brand in consumer-focused, sustainable water solutions and services. The merger led to the Company receiving £2.4m in sales proceeds, which is a key milestone considering the Company only launched in December 2020. As at 31 March 2022, the Company's holding in Waterlogic was valued at £6.0m. As at 31 March 2023, and following the £2.4m distribution, the holding was valued at £5.1m.

The Company's holding in CFC, one of the world's most successful technology-led insurance platforms and a global leader in the cyber market, was another strong contributor over the year. CFC operates a unique model in the insurance industry, and benefits from a 20-year track record of innovative insurance products. Cyber risk is a fast-growing market and CFC are well positioned from an insurance perspective in this space to increase market share.

On the more challenging side, Graphcore, which was added to the portfolio towards the end of 2020 as part of a $222m Series E funding round alongside Ontario Teachers' Pension Plan, Fidelity International and existing Graphcore investors, has been revalued downwards over the year. Graphcore, which has developed a next generation processor for machine learning and AI applications, is currently facing a challenging market environment given the long sales cycles that surround such revolutionary technologies. Additionally, the company has not been immune to the US Department of Commerce's sweeping set of export controls to restrict China from certain semi-conductor chips and chip-making equipment announced in early October 2022. The scale of the artificial intelligence and machine learning opportunity longer term remains immense and Graphcore's technology continues to set new benchmarks in performance. The situation is developing, and we continue to monitor it closely.

As mentioned in the market section above, UK small and mid-caps in the public equity market fared relatively poorly over the period and, given the focus of the portfolio's public allocation of investing in small and medium-sized businesses listed in the UK, performance was challenging for this part of the portfolio in absolute terms. In particular, the share price performance of holdings in National Express, GB Group, Ascential and Genuit weighed on returns. However, there were bright spots, with the Company benefitting from M&A activity in the market, as holdings in Euromoney, Ideagen and EMIS Group were all subject to takeover bids over the period, with all three positions subsequently exited. Meanwhile, shares in Volution Group, a leading supplier of ventilation products, performed well. In March 2023, the company reported a strong set of interim results, with half year revenues and adjusted operating profits up 8.5% and 7.1% respectively year-on-year, following on from strong annual results published in October 2022.

Revenue growth and analysis

The public equity element of the portfolio has an aggregate weighted average revenue growth of 71.5% over the last financial year.⁹

We believe it is useful to contextualise the performance of the portfolio's public equity allocation in the wider context of other UK smaller-company investors. For illustrative purposes, when comparing the Company's public equity allocation performance to the IA UK Smaller Companies peer group, it ranks in the first quartile over the 12 months to 31 March 2023.¹⁰

Portfolio positioning & activity

The portfolio is diversified across a number of industry sectors. We believe that diversification is key to the protection of capital. Whilst some areas of the market may be in favour in certain periods, we believe that a diversified portfolio should better protect investors in the long run, with more stable investment returns.

The portfolio has been constructed from the bottom up, with a focus on high growth businesses. The result is a portfolio that is well-exposed to companies with a technology offering (notably in software & IT services areas of the market), which reflects the digitalisation age of today as well as our belief that this is likely to continue. However, the portfolio is well diversified to include other sectors, such as consumer services, media, hotels, restaurants & leisure and financial services.

We invest in growing companies that have a number of attractive characteristics that we believe should allow them to withstand challenging economic environments and prosper. Whilst the macroeconomic backdrop is expected to ebb and flow, our core focus is to invest in quality, growth companies that have strong balance sheets and that can sustainably compound their earnings over the long run. These are typically companies that have considerable pricing power, market leadership (or an opportunity to gain scale via consolidation), attractive unit economics and strong management teams. While there is exposure to the wider consumer discretionary sector, which continues to face significant inflationary risk, we believe the characteristics of our investments mean they are well-positioned to navigate the current landscape and beyond. Furthermore, our investments are typically profitable, with profitable companies¹¹ making up 74% of total investments as at 31 March 2023.

Where we have invested in companies that have not yet reached profitability, they are well-funded at point of investment and possess a clear route towards profitability, and we expect them to deliver substantial value over the long term.

The portfolio's private equity allocation is not focused on the pre IPO or 'crossover' area and earlier-stage venture capital companies that had witnessed notable negative impacts to valuations during the downturn of late, putting some of them at funding risk. In contrast, it is focused on growth capital and small/mid market buyout-stage companies, where valuations have contracted in some cases but declines have been moderate in comparison and notably have been offset by robust growth in financial performance. The businesses the Company is investing in have already cleared the higher risk hurdles, and are now generating revenues, building scale and either already profitable or close to it. That does not mean they are risk free but the portfolio has already been substantially de-risked and the individual businesses within it are now focused on fulfilling their significant growth potential.

Following the resolutions of the Company's 2022 AGM in September 2022, the 50:50 public/private allocation guidance and the private equity limit of 60% of the Company's gross asset value were removed, providing us with greater flexibility to take advantage of further private equity opportunities. Since then we have explored a number of further investments for the portfolio but have rejected a number, largely as a result of maintaining price discipline. However, we have a healthy pipeline of potential private equity investments across a breadth of opportunities. As at 31 March 2023, private equity investments represented 65% of total investments, compared to 42% as at 31 March 2022.

Over the year, the Company continued to take advantage of its broad investment universe, scouring both private and public markets for the brightest growth prospects in the UK, focusing on small and mid-sized companies. We added a number of exciting companies to the portfolio while also increasing portfolio concentration, demonstrating our conviction in the portfolio's investments.

Private equity activity

We announced three new private equity investments over the 12-month period. In May 2022, we announced investments into Mintec (through Synova), a leading provider of food-related commodity pricing, and CFC (through Vitruvian Partners), a technology-driven global insurance business. These were followed in June by the announced investment into Pirum (through Bowmark Capital), a leading provider of post-trade automation and collateral management technology for the global securities industry. We had been tracking these businesses for an extended period prior to investment through our long-term relationships with private equity firms Synova, Vitruvian Partners and Bowmark Capital, and were delighted to complete investments in these strong, UK-based, market leaders.

Additionally, the Company made a follow-on investment in August 2022 into Cera Care, Europe's largest provider of digital-first home healthcare, as part of a new funding round to accelerate the company's growth and expand from servicing 15,000 to 100,000 at-home patients each day.

Furthermore, we were pleased to report the first cash generation from our private equity holdings. Following the completion of the merger in November 2022 between Waterlogic (a global designer, manufacturer, distributor and service provider of purified drinking water dispensers) and Culligan International (the innovative brand in consumer-focused, sustainable water solutions and services), the Company received £2.4m in sales proceeds. The Company remains invested as we believe the combined business has considerable potential for future growth.

Public equity activity

Three of our public equity holdings received takeover approaches during the 12-month period to 31 March 2023. Shareholders approved a bid by Becketts Bidco, a consortium of PE firms that comprised Astorg and Epiris, for Euromoney Institutional Investor. In addition, shareholders approved a £1.24bn all-cash takeover by Optum Health Solutions UK Ltd, a subsidiary of UnitedHealth Group Inc, for Emis Group. Furthermore, Ideagen was acquired by Rainforest Bidco Limited, a wholly owned subsidiary of funds managed by Hg. We are pleased that these bids and the resultant exits of these positions benefited portfolio performance.

We added Bytes Technology Group, one of the UK's leading resellers of software, security and cloud-based products, to the portfolio in 2023. This is a high quality, cash-generative company, and we expect it to be resilient across economic cycles due to its sticky customer base and high renewal rates.

Elsewhere, we used periods of market weakness to increase existing positions in stocks where we continue to have a high conviction. These included online women's clothing retailer, Sosandar, and business review platform, Trustpilot.

Outlook

The sell-off in UK small and mid-caps in 2022 was indiscriminate, and not discerning between the "good" and "less good" companies. We believe that when clearer signs of a sustained economic recovery materialise and market sentiment substantially improves, small and mid-caps should be the first to re-rate in response. Our analysis shows that such market underperformance in the past by UK small and mid-caps has usually been followed by outperformance over three- to five-year periods relative to large cap companies in the FTSE 100.

Aside from the relative valuation opportunity with UK equities remaining unloved relative to world markets in an historical context (as noted in the investment case section), in aggregate, they are also attractive as a result of their strong balance sheets, which has increased considerably since 2000.

The valuation opportunity can also be looked at through the lens of free cash flow yields, with the UK having one of the highest yields in the world, making the market a compelling investment opportunity in our view. Free cash flow is the money a firm has left over after paying its operating and capital expenses. The yield is calculated as free cash flow divided by market value.

In private equity markets, with financial engineering unlikely to propel returns in the near term due to increased rates, inflation and macroeconomic uncertainty, we believe strategies focused on identifying companies that exhibit strong underlying financial performance are poised to do well. This may be achieved by the expansion of product lines, geographic footprint, and professionalising management to improve profit margins, for example. This is all easier to do among small and medium-sized companies, and typically harder to achieve at larger companies, which have often been through several rounds of private equity or institutional ownership. Portfolio company EasyPark, for example, has evolved as a company in terms of product offering, maturity in the marketplace and thorough geographical expansion. We believe buy and build strategies are also positioned to do well, with opportunities to buy smaller companies with the intention to improve profitability and sell at higher multiples in the future. Furthermore, despite the economic backdrop, we are seeing strong significant deal flow across a breadth of opportunities. Given our private equity team's established and formidable network in the UK (as well as globally) with hard-to-access investment partners, we are well positioned to seek out the best opportunities for the Company going forward.

Our differentiated public-private equity strategy enables us to continue to invest without boundaries, whilst providing access to a broader investable universe to the benefit of shareholders. We believe this differentiates the Company from other investment trusts and provides us with an advantage when selecting attractive investment opportunities. While we are pleased with the investments in the portfolio at present, we continue to seek out high quality, growth opportunities with the aim of delivering long-term total returns. The investment team harnesses Schroders Capital's strong network of co-investment partners developed over 25 years, giving them access to unique investment opportunities. Meanwhile, our extensive resources in both public and private equities work together to the benefit of the Company, providing a more comprehensive view of the landscape in which companies operate, making us more informed investors that we believe contributes to better investment decision-making.

We believe that the current cash position (£7.8m as at 31 March 2023) and prudent liquidity profile of the public equity allocation of the portfolio provide us with an excellent opportunity to make further investments in high growth companies and/or initiate positions in mispriced growth companies. Furthermore, following the approval from shareholders to remove the 50:50 public/private allocation guidance and the 60% private equity limit provides us with greater flexibility to take advantage of further private equity opportunities, and utilise our healthy pipeline of potential private equity investments.

Schroder Investment Management Limited

5 July 2023

¹On an EBITDA profitability view

²The Articles require the Directors to put forward, at a general meeting of the Company to be held in the year 2028 but in any event no later than 31 May 2028, a winding-up resolution to place the Company into voluntary liquidation.

³Source: FTSE Russell, 12 months to 31 March 2023, in GBP.

⁴Source for data: KPMG UK Mid-market PE review, February 2023.

⁵The net asset value increase of 1.5% differs to the 3.1% increase in NAV per share over the period due to share buybacks conducted over the period.

⁶EBITDA = earnings before interest, taxes, depreciation and amortisation. It is used as a measure of a company's profitability, specifically representing cash profit generated by a company's operations.

⁷EBITDA-positive.

⁸Discount between the average of the respective portfolio Company's EBITDA valuation multiple against the respective peer group sector comparable averages, which has been elected by the independent valuation team.

⁹Past performance is not a guide to future performance and may not be repeated. Revenue growth calculated using the last two financial year revenue figures for each public portfolio company. Weighted averages calculated using each position as a proportion of total public equity holdings in the portfolio.

¹⁰Source: Schroders, Morningstar, Aladdin. Rankings are based on the performance of the public equity portion of the Company (excluding cash). The IA UK Smaller Companies peer group median average ongoing charge (0.90%) was applied to the Company's public equity gross performance and compared against the IA UK Smaller Companies peer group (net of fees).

¹¹On an EBITDA profitability view.

The Company's top ten holdings as of 31 March 2023 are set out below, with overviews of each company and recent updates regarding their businesses.

Source: Schroders.

1.       The fair value disclosed for the following investments represents the Company's investment in an intermediary vehicle:

-        Mintec (held via Synova Merlin LP).

-        Rapyd Financial Network (held via Target Global Fund).

-        Pirum (held via Bowmark Investment Partnership LP).

-        Culligan (held via EPIC-1b Fund).

-        EasyPark (held via Purple Garden Invest (D) AB).

-        CFC (held via Vitruvian Investment Partnership).

-        Learning Curve (held via Agilitas Boyd 2020 Co-Invest Fund).

Mintec

(unquoted holding)

The world's leading independent provider of global commodity price data, price forecasts & market intelligence for the food, CPG and capital goods supply chains

Mintec enables the world's largest food and manufacturing brands to implement more efficient and sustainable procurement strategies. They do this through their cutting-edge Software as a Service platform, Mintec Analytics, which delivers market prices and analysis for thousands of commodities, food ingredients and associated materials. Their data and tools empower their customers to understand prices better, analyse their spend and negotiate with confidence.

Latest updates:

•        In May 2022, Mintec launched the latest version of its multi-award-winning procurement and commodity price intelligence platform (Mintec Analytics 4.1), including new features that increase price visibility and improve efficiency for commodity buying teams.

•        In December 2022, the company acquired French business, CommoPrices, an independent provider of commodity price data and analysis operating across similar sectors, to extend its coverage of commodity price data and intelligence.

•        In January 2023, Mintec announced the acquisition of AgriBriefing, which includes the brands Urner Barry, Strategie Grains, FeedInfo and Tropical Research Services. Building on previous acquisitions by Mintec (including Kairos Commodities in 2021 and the aforementioned CommoPrices), this established the combined company as the largest agri-food-focused PRA and global information provider with a unique portfolio of feed-to-food commodity prices, forecasts, cost-modelling tools and fundamental market data, serving over 5,000 customers in 50 countries.

Rapyd

(unquoted holding)

Integrates the world's many payment networks and technologies into a single platform

Rapyd is the fastest way to power local payments anywhere in the world, enabling companies across the globe to access markets quicker than ever before. By utilizing Rapyd's payments network and Fintech-as-a-Service platform, businesses and consumers can engage in local and cross-border transactions in any market. The Rapyd platform is unifying fragmented payment systems worldwide by bringing together 900-plus payment methods in over 100 countries.

Latest updates:

•        In May 2022, the company announced the launch of "Virtual Accounts", a product that empowers businesses to expand globally while supporting local payments. This new offering allows organizations anywhere in the world to securely and reliably accept local bank transfers in 40 countries in more than 25 currencies, including the US, UK, EU, and APAC regions.

•        Also in May 2022, Rapyd opened its first office in the Dubai International Financial Centre. The UAE emerged as an attractive fintech hub during the pandemic with increased digital adoption, a booming eCommerce economy, and transformative digital marketing initiatives.

•        In July 2022, it was announced that Rakuten Viber had partnered with Rapyd to unlock instant cross-border peer-to-peer payments.

•        In 2022, Rapyd was named an EMEA 60 Leader by PYMNTS, the global leader in payments industry news and data analytics, as well as being named on Forbes' Cloud 100 list - the list of the world's top private cloud companies.

Cera

(unquoted holding)

Europe's largest provider of digital-first home healthcare

Cera is Europe's largest provider of digital-first home healthcare. They are transforming healthcare by moving services such as care, nursing, telehealth and repeat medications out of hospitals and into people's own homes through technology. In combining pioneering technology with their community of professional carers and nurses, Cera are empowering people to live longer, better, healthier lives in their own homes.

Latest updates:

•        In August 2022, the company raised c.£260m in an equity and debt funding round, with the goal of increasing the number of patients its serves from 15,000 to 100,000. We were pleased to have been able to participate in this financing to accelerate the company's growth and help Cera empower those in the care sector.

•        Subsequently, Cera announced its expansion into nursing services across its UK network, marking the company's first move into additional healthcare services, as part of its overall ambition to move more aspects of healthcare out of hospitals and into people's own homes.

•        More recently, Cera launched its latest AI-powered technology, Cera Brain, a platform that helps to automate and power the company's care delivery operations. Using AI across key features, Cera Brain should enhance the company's impact in the sector, utilising technology to automate administrative tasks, more efficiently match carers to patients, enable better regulatory compliance checks, onboard patients faster and drive healthcare workflow automation. This new technology should enable Cera to care for more people, allowing carers to see an estimated 20% more patients per day. It should also power a more efficient model of care delivery, making the sector more sustainable by reducing overhead costs, allowing carers and frontline staff to be paid better.

•        Lastly, Cera has recently been ranked the Number 1 UK HealthTech company in the HealthTech50 list for 2023, which is testament to the company's continued technology-enabled growth.

Pirum

(unquoted holding)

A leading provider of post-trade automation and collateral management technology for the global securities industry

Pirum has created a set of award-winning, highly innovative and flexible services which are tailored to fully support the complexities of financial institutions around the world. Pirum provides a secure processing hub which seamlessly links market participants, allowing them to electronically process and verify key transaction details. Through easy integration with their services, Pirum's clients have increased processing efficiency, reduced operational risk and improved profitability by reducing manual processing.

Latest updates:

•        In October 2022, Pirum expanded its Trade Risk Manager service to provide visibility of the collateral status at a transaction level.

•        Knowing the status of collateral prior to releasing an instruction to market is a key step in reducing counterparty risk and preventing fails and CSDR fines.

•        This expansion leverages Pirum's Loan Release service which provides valuable automation for lenders to release their market instructions on the back of the borrower collateralising the lender and provides extensive prioritisation tools and controls to ensure loans are released within market cut offs to increase settlement rates and market efficiency.

Culligan

(formerly Waterlogic) (unquoted holding)

The leading provider of drinking water dispensers for businesses across the globe

Culligan is an innovative brand in consumer-focused, sustainable water solutions and services. It was established in 1936 as a provider of water softening solutions for residences in Northbrook, Illinois, and has since grown to become a worldwide leader in water treatment needs, from the simplest filtration system to complex industrial water solutions.

Latest updates:

•        In November 2022, Culligan International - the innovative brand in consumer-focused, sustainable water solutions and services - and Waterlogic Group Holdings - a global designer, manufacturer, distributor and service provider of purified drinking water dispensers - announced the completion of their merger, creating a global leader in clean and sustainable drinking water solutions and services.

•        As result of the merger agreement, the Company received £2.4 million, representing the first cash generation from the Company's private equity portfolio.

•        The Company remains a shareholder as the combined business has considerable potential for future growth.

EasyPark

(unquoted holding)

Parking tech company that helps drivers to find, manage and pay for both parking and electric vehicle charging

EasyPark's technology supports its users, cities and parking operators with parking administration, planning and management. The company has a unique market coverage with presence in over 20 countries and more than 3,200 cities.

Latest updates:

•        In 2022, EasyPark grew both in new and existing markets, launching in new cities such as Paris in France and Boston in the US, as well as in new countries, such as Slovakia.

•        The company launched support for the EasyPark app for Android Auto.

•        In a collaboration with French automobile manufacturer, Renault, EasyPark launched direct in-car integration of the EasyPark app in the New Renault Megane E-Tech infotainment system.

•        Additionally, the company continued to expand collaborations with both local and nationwide operators for electric car charging in Sweden, Denmark, Finland, Norway and Slovenia.

CFC

(unquoted holding)

Technology-driven global insurance business

For over 20 years, CFC has built market-leading solutions to some of the insurance industry's biggest challenges. The company uses technology and data science to stay one step ahead. From developing cutting-edge insurance products, pioneering autonomous underwriting, deploying advanced threat intelligence, to offering unparalleled service to its partners and customers, CFC is re-imagining the world of specialist insurance.

Latest updates:

•        In July 2022, CFC enhanced its UK proposition, partnering with legal services company, Farillio, to launch a digital platform for its professional liability and management liability policyholders. Designed for small business owners, the platform delivers practical tools and expert resources to help customers grow and scale their businesses.

•        Also in July 2022, the company announced the expansion of its market-leading cyber threat analysis capability into North America and Australia. CFC's cyber threat analysis, a critical component of its proactive cyber insurance offering, focuses solely on identifying new cyber threats and working with cyber customers to prevent attacks before they happen.

•        In January 2023, CFC established a dedicated team to meet increasing demand from fintechs, as part of its financial institutions practice. Since launching its solution, built specifically to cover the risks faced by organisations operating in the fintech space in 2020, CFC has seen the volume of submissions increase by more than 100% year-on-year over the past two years and has grown its fintech book by 100% over the past year.

•        In March 2023, the company announced the expansion of its "admitted product" suite with the addition of professional liability and technology Errors & Omissions (E&O), having traded its admitted solution for cyber since 2020.

Learning Curve

(unquoted holding)

UK training and education specialist

Learning Curve works with further education providers, employers and learners to help them achieve success. Since 2004, the company has grown both organically and through acquisition to become one of the largest and most diverse providers in the country.

Latest updates:

•        In September 2022, Learning Curve announced the acquisition of Yorkshire-based White Rose Beauty Colleges, one of the largest beauty therapy training providers in the UK, in a move which will complement its existing academy provision. The acquisition is expected to see the addition of a further 3,500 learners each year in nine new locations and 170 employees, confirming Learning Curve's position as one of the largest providers of high-quality beauty training in the country.

•        In February 2023, the company announced it is expanding its successful Hair and Beauty training academies in the London region with two brand-new, state-of-the-art salons.

Volution

(quoted holding)

A leading supplier of ventilation products

Volution is a market leader in residential and commercial ventilation solutions, covering the UK, Continental Europe and Australasia. They aim for their products to enhance customers' experience of ventilation by reducing energy consumption, improving indoor air quality and design and making them easier to use. The company has primary markets in the UK, Continental Europe and Australasia.

Latest updates:

•        Volution published a strong set of interim results (6 months to 31 January 2023) in March 2023, driven in particular by strong UK residential RMI (repair, maintenance and improvement) demand, with the company successfully managing inflationary headwinds and supply chain challenges through pricing discipline and inventory optimisation.

•        The interim results showed that revenue was up 8.5% (7.3% organic growth and 1.2% inorganic growth), while adjusted operating margin stood at 21.1% above the company's long-term operating margin target.

•        Volution has continued to execute on its acquisition strategy (acquiring Bera in Germany in July 2022 and the remaining shares of ERI Corporation UK Limited more recently). The company is optimistic of being able to add further earnings-accretive acquisitions in the future, given its strong pipeline of potential candidates and strong balance sheet.

Watches of Switzerland

(quoted holding)

The UK's largest luxury watch retailer

Watches of Switzerland is the leading luxury watch specialist in the UK, with a significant presence in the US with a complementary jewellery offering. There are 15 Watches of Switzerland showrooms across the UK, including dedicated Rolex and Jaeger-LeCoultre boutiques. The company's success is based on strong, long-standing partnerships with the most prestigious luxury watch brands, supported by impactful marketing and powered by leading edge technology to provide clients with a modern, distinctive luxury experience.

Latest updates:

•        In December 2022, Watches of Switzerland released its H1 (26 weeks to 30 October 2022) results, revealing that group revenue had increased 23% on a constant currency basis and 31% at reported rates.

•        The luxury watches division's revenue grew 31% year-on-year on a reported rates basis to £667m, representing 87% of total group sales (unchanged from H1 FY 2022), with growth driven by increases in average selling price and volume.

•        In terms of geography, its US revenues grew year-on-year 60% and 80% on constant currency and reported rates bases respectively, with revenue growth excluding acquisitions at +44% constant currency.

•        Meanwhile, UK performance was driven by domestic clientele, with revenue of £454m up 8% year-on-year.

•        The company has continued to expand its retail network, opening 20 showrooms across the UK, US and Europe in the first half of FY23.

Business Review

Principal risks and uncertainties

The Board 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. The Board has also adopted a risk appetite statement. 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 the principal risks and the monitoring system are also subject to regular, robust review. The last review took place in March 2023.

Although the Board believes that it has a robust framework of internal controls 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 risks and uncertainties are set out below.

Emerging risks and uncertainties

During the year, the Board continued to discuss and monitor a number of risks which could affect the Company or the valuations of investee companies. Two emerging risks were considered, geopolitical risks and ESG risks. The Board receives updates from the Portfolio Managers, Company Secretary and other service providers on other potential risks that could affect the Company.

Geopolitical risk includes the impact of regional tensions, trade wars and sanctions against companies. During the year, the Board noted that the Russian invasion of Ukraine impacted supply chains, inflation and interest rates both in the UK and globally. Increases in interest rates lead to increases in the discount rates used to value growth companies. This has led to the Board determining that the market risks faced by the Company have increased in the last year.

ESG risks are increasing generally owing to greater awareness of the long term cost of the environmental impact of corporate activities as well as changes in investor requirements. This has led to the Board considering the market risks affecting the pricing of the Company's investments as having increased during the last year.

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.

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 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.

An analysis of the financial risks facing the Company is set out in note 22 to the accounts on pages 77 to 80 of the annual report and accounts.

Going concern

The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence until 31 July 2024 which is more than twelve months from the date when this Report and accounts was signed and the Directors have accordingly adopted the going concern basis in preparing this Report and accounts.

In reaching this assessment the Directors have considered the principal risks, the impact of the emerging risks and uncertainties and the matters referred to in the viability statement. They have additionally considered the liquidity of the Company's portfolio of listed investments, the Company's cash balances and the forecast income and expenditure flows as well as commitments to provide further funding to the Company's private equity investee companies; the Company currently has no borrowings. A substantial proportion of the Company's expenditure varies with the value of the investment portfolio. In the event that there is insufficient cash to meet the Company's liabilities, the listed investments in the portfolio may be realised and the Directors have reviewed the average days to liquidate the listed investments. The Company is a closed-end investment trust and there is no requirement to redeem or buy back shares. 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.

Viability statement

In accordance with the AIC Code the Board has considered the longer term prospects for the Company beyond the twelve months required to assess the Company's ability to continue as a going concern. The Board believes that a period of five years reflects a suitable time horizon for strategic planning, the investment cycle of private equity and the longer term view taken by the Portfolio Managers and investors; this period is in line with the Company's Key Information Document. The Company has a fixed life. In the event that no alternative proposals are put forward to shareholders, or such proposals are not approved by shareholders, the Company will commence winding up in 2028.

As an investment trust, the Company is entitled to beneficial treatment with regard to chargeable gains. Any change to such taxation arrangements could affect the Company's viability as an effective investment vehicle.

In their assessment of the prospects for the Company over the next five years, the Directors have assumed that the Company will continue to adopt the same investment objective, that the Company's performance will continue to be attractive to shareholders and that the Company will continue to meet the requirements so as to retain its status as an investment trust.

The Directors have considered each of the Company's principal and emerging risks and uncertainties detailed on pages 34 to 36 of the annual report and accounts. In particular, the Directors concluded that the emerging geopolitical and ESG risks do not materially impact the viability of the Company. The Directors have also considered a significant fall in equity markets on the value of the Company's investment portfolio. The Directors have, furthermore, considered the Company's projections of income and expenditure as well as any commitments to provide funding to investee companies. They have noted that the Company's investment portfolio will continue to comprise a significant proportion of highly liquid listed equities which can be readily realised and that a substantial proportion of the Company's operating expenses vary with the value of the investment portfolio. As stated in Going Concern above, the Company is a closed-end investment trust and there is no requirement to redeem or buy back shares. A stress test to evaluate the consequences of a 50% reduction in the market value of the Company's investments over the five year period has also been evaluated.

The conclusion of this review is that the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five years.

By order of the Board

Schroder Investment Management Limited

Company Secretary

5 July 2023

Statement of Directors' Responsibilities

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

Company law requires the Directors to prepare the Report and accounts for each financial year. Under that law, the Directors have prepared the Report and accounts in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising Financial Reporting Standard (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 Report and accounts 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 year. In preparing these Report and accounts, 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 Report and accounts;

-        notify the Company's shareholders in writing about the use of disclosure exemptions in FRS 102, used in the preparation of the Report and accounts; and

-        prepare the Report and accounts 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 Report and accounts 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 Manager is responsible for the maintenance and integrity of the webpage dedicated to the Company. Legislation in the United Kingdom governing the preparation and dissemination of Report and accounts may differ from legislation in other jurisdictions.

Each of the Directors, whose names and functions are listed on page 38 of the annual report and accounts, confirm that to the best of their knowledge:

-        the Report and accounts, 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 Strategic Report contained in the report and accounts includes a fair review of the development and performance of the business and the 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

Neil England

Chairman

5 July 2023

Income Statement

For the year ended 31 March 2023

¹The Company changed its accounting date to 31 March commencing 1 July 2021. The comparative figures cover the nine month period from 30 June 2021 to 31 March 2022.

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.

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

Statement of Changes in Equity

For the year ended 31 March 2023

For the nine months ended 31 March 2022¹

¹The Company changed its accounting date to 31 March commencing 1 July 2021. The comparative figures cover the nine month period from 30 June 2021 to 31 March 2022.

Statement of Financial Position

at 31 March 2023

¹Restated as detailed in note 13 on page 72 of the annual report and accounts.

Cash Flow Statement

Included under operating activities are dividends received during the year amounting to £362,000 (period ended 31 March 2022: £230,000) and interest receipts amounting to £62,000 (period ended 31 March 2022: nil).

¹The Company changed its accounting date to 31 March commencing 1 July 2021. The comparative figures cover the nine month period from 30 June 2021 to 31 March 2022.

Notes to the Accounts

1.         Accounting period

The Company changed its accounting date to 31 March commencing 1 July 2021. The comparative figures cover the nine month period from 30 June 2021 to 31 March 2022.

2.         Accounting policies

(a)       Basis of accounting

Schroder British Opportunities 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, United Kingdom.

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". The accounts are prepared in accordance with 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, except for certain financial information required by paragraph 82(c) regarding unquoted holdings with a value greater than 5% of the portfolio or included in the top 10, where information is not publicly available. All of the Company's operations are of a continuing nature.

The accounts have been prepared on a going concern basis with investments at fair value through profit or loss. The Directors believe that the Company has adequate resources to continue operating for the period to 31 July 2024, which is at least 12 months from the date of approval of this report and accounts. In forming this opinion, the Directors have taken into consideration: the controls and monitoring processes in place, the Company's other payables, the 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 the Company's principal risks, including climate change. Further details of Directors' considerations regarding this are given in the Chairman's Statement, Investment Managers' Review, Going Concern Statement, Viability Statement and under the Principal and Emerging Risks heading on page 34 of the annual report and accounts. The accounts have been prepared on the assumption that approval as an investment trust will continue to be granted.

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

(b)       Use of judgements, estimates and assumptions

The preparation of the accounts requires management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results.

Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

The key estimates in the accounts are the determination of the fair values of the unquoted investments by the Investment Manager for consideration by the Directors. These estimates are key, as they significantly impact the valuation of the unquoted investments at the year end. The fair valuation process involves estimation using subjective inputs that are unobservable (for which market data is unavailable). The key estimates and assumptions are described in note 21 on pages 75 and 76 of the annual report and accounts.

Fair value estimates are cross-checked to alternative estimation methods where possible to improve the robustness of the estimates. The risk of an over or under estimation of fair values is greater when methodologies are applied using more subjective inputs.

3.         Gains/(losses) on investments held at fair value through profit or loss

4.         Income from investments

5.         Investment management fee and performance fee

The bases for calculating the investment management and performance fees are set out in the Directors' Report on page 40 of the annual report and accounts and details of all amounts payable to the Manager are given in note 19 on page 75 of the annual report and accounts.

6.         Dividends

The Company has reported a revenue loss after taxation of £639,000 (period ended 31 March 2022: £577,000) for the year and accordingly there is no requirement to pay a dividend under Section 1158 of the Corporation Tax Act 2010.

7.         Return/(loss) per share

8.         Called-up share capital

The issued share capital at the accounting date was as follows:

¹Represents 75,000,000 (2022: 75,000,000) shares of 1p each, including 1,100,000 (2022: nil) held in treasury.

During the year, the Company repurchased 1,100,000 of its own shares, nominal value £11,000, to hold in treasury, representing 1.5% of the shares outstanding at the beginning of the year. The total consideration paid for these shares amounted to £808,000. The reason for these purchases was to seek to manage the volatility of the share price discount to NAV per share.

9.         Net asset value per share

10.       Transactions with the Manager

Under the terms of the Alternative Investment Fund Manager Agreement, the Manager is entitled to receive a management fee, a company secretarial and adminstrative fee, and a performance fee. Details of the bases of these calculations are given in the Directors' Report on page 40 of the annual report and accounts.

The management fee payable in respect of the year ended 31 March 2023 amounted to £458,000 (period ended 31 March 2022: £372,000), and £458,000 (31 March 2022: £650,000) was outstanding at the year/period 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. There have been no such investments during the year (period ended 31 March 2022: nil).

A performance fee provision amounting to £555,000 (period ended 31 March 2022: £714,000) has been included in these accounts. An amount of £487,000 is immediately payable and has been included in these accounts as a creditor falling due within one year. The remaining balance of £1,184,000 (31 March 2022: £1,116,000) is carried forward until such time as it may be paid under the terms of the AIFM Agreement.

The company secretarial and administrative fee payable for the year amounted to £180,000 (period ended 31 March 2022: £135,000). Company secretarial and administration fees amounting to £420,000 (31 March 2022: £240,000) were 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.

11.       Events after the accounting date which have not been reflected in the accounts

A performance fee amounting to £487,000 payable to the Manager, in relation to the partial disposal of Waterlogic, is included in the Statement of Financial Position within creditors falling due within one year. However since the year end, the Board has accepted Schroders' offer to disregard the Payment Amount, which would have triggered a performance fee pay-out in the year ending 31 March 2024. This agreement will have the effect of moving this performance fee into creditors falling due after more than one year in the Statement of Financial Position. Schroders considers this concession to be appropriate due to the disappointing performance of the share price versus the net asset value.

Status of announcement

2022 Financial Information

The figures and financial information for 2022 are extracted from the published Annual Report and Accounts for the period ended 31 March 2022 and do not constitute the statutory accounts for that year. The 2022 Annual Report and Accounts 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.

2023 Financial Information

The figures and financial information for 2023 are extracted from the Annual Report and Accounts for the year ended 31 March 2023 and do not constitute the statutory accounts for the year. The 2022 Annual Report and Accounts 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 2023 Annual Report and Accounts will be delivered to the Registrar of Companies in due course.

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