STRATEGIC REPORT # RESPONSIBLE INVESTMENT (continued) ![img-0.jpeg](img-0.jpeg) ![img-1.jpeg](img-1.jpeg) ## Potential Sustainability Impact SpaceTech is a powerful new industry which can contribute significantly to achieving the United Nations Sustainable Development Goals (the 'SDGs') and their underlying targets. The extent to which our portfolio companies contribute to the SDGs is seen as a key factor in the success of our investment strategy and, as such, considerations of this are also an integral part of Seraphim Space's decision-making process. Each portfolio company contributes to at least two, and up to 11, SDGs. In addition, every SDG is addressed by at least one portfolio company. SDG 8 (economic growth) and SDG 9 (innovation/ infrastructure) are, unsurprisingly, the most common SDGs, with at least 20 portfolio companies contributing to each of these. The scorecard below shows the SDGs being addressed by the companies in SSIT's main portfolio. | Portfolio company name | SDG 1 | SDG 2 | SDG 3 | SDG 4 | SDG 5 | SDG 6 | SDG 7 | SDG 8 | SDG 9 | SDG 10 | SDG 11 | SDG 12 | SDG 13 | SDG 14 | SDG 15 | SDG 16 | SDG 17 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | ALL.SPACE | | | | | | | | ✓ | ✓ | ✓ | | | | | | | ✓ | | Altitude Angel | | | | | | | | ✓ | ✓ | | ✓ | | ✓ | | | ✓ | | | Arqit | | | | | | | | | ✓ | | | | | | | ✓ | ✓ | | AST SpaceMobile | ✓ | | ✓ | ✓ | ✓ | | | ✓ | ✓ | ✓ | ✓ | | | | | ✓ | | | Astroscale | | | | | | | | ✓ | ✓ | | | ✓ | | | | | | | D-Orbit | | | | | | | | ✓ | ✓ | | | ✓ | | | | | | | Edgybees | | | | | | | | ✓ | ✓ | | | | | | | ✓ | ✓ | | HawkEye 360 | | | | | | | | ✓ | ✓ | | | | | | | ✓ | | | ICEYE | | ✓ | | | | ✓ | | | ✓ | | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | LeoLabs | | | | | | | | | ✓ | | | ✓ | | | | | ✓ | | Nightingale | | | | | | | | ✓ | ✓ | | ✓ | | | | | ✓ | | | Pixxel | | ✓ | | | | ✓ | ✓ | | ✓ | | ✓ | ✓ | ✓ | ✓ | ✓ | | | | PlanetWatchers | | ✓ | | | | | | ✓ | ✓ | | | ✓ | | | | | | | QuadSAT | | | | | | | | ✓ | ✓ | | | | | | | | | | SatVu | | | | | | ✓ | ✓ | | ✓ | | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Spire Global | ✓ | ✓ | | | | ✓ | | ✓ | ✓ | | | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Taranis | | | | | | | | ✓ | ✓ | | | ✓ | ✓ | ✓ | ✓ | | | | Tomorrow.io | ✓ | ✓ | | | | | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | ✓ | | | | Voyager | | ✓ | ✓ | ✓ | | | | | ✓ | | | | | | | | ✓ | | Xona Space Systems | ✓ | | | | | | | | ✓ | | ✓ | ✓ | | | | | | Source: Portfolio company information; Seraphim Space analysis Annual Report and Financial Statements 63 --- STRATEGIC REPORT # RESPONSIBLE INVESTMENT (continued) Seraphim Space recently accepted an invite to participate in the United Nations' Data Expert Group convened to support the UN's efforts for designing and implementing a global environmental data strategy by 2025. The symposium was focused on how 'Big Data' can be used more effectively to support the achievement of the SDGs. Space data will be integral to achieving this, and through Seraphim Space's continued participation in the UN's Data Expert Group, we will continue advocating for the critical role we expect many of our portfolio companies to play in ensuring our planet has a sustainable future. # Ownership and ESG reporting Each portfolio company is actively encouraged to integrate ESG considerations in their business strategies and value creation plans. Seraphim Space works with the boards and management teams of portfolio companies to identify and address sustainability risks, capitalise on opportunities and meet established ESG objectives in their own operations and throughout their value chains and with co-investors to increase collective influence in these areas. In situations where a portfolio company fails to address adequately any significant risks identified at investment, Seraphim Space will take this into consideration when assessing follow-on investment opportunities into the company. In September/October 2022, Seraphim Space organised training sessions delivered by sustainability consultancy Sancroft International for the management teams of the portfolio companies. Intended as an introduction to ESG and the general topics of focus for funders and society as a whole, it also covered the key opportunities and risks specific to the SpaceTech sector, including materiality, climate change and human rights, as well as the SDGs and examples of impact in the portfolio. Following the first collection of ESG data from the portfolio, as explained below, Seraphim Space is engaging with the portfolio companies to encourage them to implement further measures to mitigate risk and drive impact and opportunities. # OBJECTIVE REPORTING METRICS FOR ESG FACTORS PERCENTAGE OF DESIRED MEASURES(1) IN PLACE ACROSS THE PORTFOLIO(2) TO MANAGE ESG RISK 67% SENIOR MANAGEMENT IDENTIFYING AS FEMALE OR FROM AN ETHNIC MINORITY WITHIN THE PORTFOLIO(2) 21% AVERAGE PORTFOLIO COMPANY HEADCOUNT GROWTH(4) 22.1% PROPORTION OF THE ACTIVE PORTFOLIO WITH A FOUNDER WHO IDENTIFIES AS FEMALE OR FROM AN ETHNIC MINORITY 20% SERAPHIM SPACE STAFF(3) IDENTIFYING AS FEMALE/ FROM AN ETHNIC MINORITY 50%/20% PERCENTAGE OF ENERGY CONSUMPTION THAT IS RENEWABLE(2) 30% (1) Desired measures as explained in the 'ESG governance and risk management section' on page 65. Source: Portfolio company data. (2) Fair value weighted average (as defined in the Glossary on page 162) of the portfolio companies providing information (which represents 95% of the fair value as of 30 June 2023). Source: Portfolio company data. (3) Includes Seraphim Space's affiliates. (4) Fair value weighted average (as defined in the Glossary on page 162) year-on-year growth for the 12 months ended 30 June 2023 of the top 10 holdings, representing 86% of fair value (72% of NAV) as at 30 June 2023. Source: Portfolio company data. 64 Seraphim Space Investment Trust PLC --- STRATEGIC REPORT ## RESPONSIBLE INVESTMENT (continued) The Company began collecting ESG metrics, such as carbon emissions, job creation and diversity, from CY22 (hence there are no comparable metrics for the prior year in this report) and plans to increasingly report on such metrics for the aggregate portfolio in the future. In addition, the Company also collects qualitative information around the following topics: - effective board and risk management; - business ethics, legal and compliance; - data security and customer privacy; - health and safety; - employee engagement, diversity and inclusion; - product quality and safety; - community relations; - energy management; - GHG emissions; and - materials management. 95% of the portfolio (by fair value as at 30 June 2023) provided the above data, with the remaining 5% comprised predominantly of listed portfolio companies or private companies where SSIT has no information rights. ### ESG governance and risk management The Investment Manager allocated points (up to a maximum of 15) to private portfolio companies based on the number of measures that it would like to see and which they have in place to manage ESG risk, including frequency of discussion of such topics by the board and the policies and processes to assess and mitigate such risks. On a fair value weighted basis, 67% of the desired measures are in place across the portfolio (71% for portfolio companies that are post Series A). ### Diversity A growing body of evidence suggests that diverse teams are more innovative and achieve higher returns than those with just one gender and/or one race or ethnicity represented(1). The World Economic Forum cites that teams that include a female founder outperform all-male led teams by 63%(2). Forbes also outlines the outperformance of diverse teams, explaining that companies with at least one female or ethnically diverse founder generate over 60%+ in business value(3). Despite this, 2019 data from Pitchbook and the National Venture Capital Association suggests that venture investors continued to be white (80%) and male (84%), predominantly backing white, male founders (85% or $136.5bn in 2019)(4). The SSIT active portfolio includes six companies (20%) with a founder that identifies as female or from an ethnic minority. ![img-2.jpeg](img-2.jpeg) Satellite imagery is used to track the development of a flood by measuring the depth of water on the ground. (1) https://www.forbes.com/sites/committeeof200/2020/09/22/diversity-as-uperpower-the-well-known-data-against-homogeneous-teams-in-venture-capital/?sh=228846b52019 (2) https://www.weforum.org/agenda/2021/05/close-gender-gap-venture-capital/ (3) https://www.forbes.com/sites/forbesbusinesscouncil/2022/05/26/diversity-the-holy-grail-of-venture-capital/?sh=9eb823a41787 (4) https://www.forbes.com/sites/committeeof200/2020/09/22/diversity-as-uperpower-the-well-known-data-against-homogeneous-teams-in-venture-capital/?sh=228846b52019 Annual Report and Financial Statements 65 --- STRATEGIC REPORT # RESPONSIBLE INVESTMENT (continued) # SSIT PORTFOLIO DIVERSITY STATISTICS | | SSIT portfolio^{(1)} | | Industry comparisons | | --- | --- | --- | --- | | | Average | Fair value weighted average^{(2)} | | | Board members identifying as female | 9% | 4% | High tech companies 2020 – 8%^{(3)} | | Board members identifying as from an ethnic minority | 7% | 9% | | | Senior management identifying as female or from an ethnic minority | 19% | 21% | | | Staff identifying as female or from an ethnic minority | 27% | 23% | Venture capital-backed startups 2020 – men (89.3%) and white (71.6%)^{(4)} | Sources: Portfolio company information; Seraphim Space analysis $^{(1)}$ Data provided by portfolio companies representing 95% of the fair value as of 30 June 2023. $^{(2)}$ Fair value weighted average (as defined in the Glossary on page 162). $^{(3)}$ https://techcrunch.com/2021/08/29/diversifying-startups-and-vc-power-corridors/ $^{(4)}$ https://venturebeat.com/games/diversity-vc-reports-1-87-of-venture-capital-allocated-to-women-and-minority-owned-startups/ Compared to the diversity information outlined in the BVCA and Level 20 Diversity and Inclusion Report (2023), as at 30 June 2023, Seraphim Space outperformed the market in most categories as outlined in the chart below. With 17% females in all senior roles, it is slightly below the industry at 20%, although the team is supported by the SSIT Board which is 75% female. While Seraphim Space had no women in senior investment roles versus the industry at 12% as outlined on page 44, Maureen Haverty was promoted post the year end to Investment Principal (which would take the percentage to 20%), and the Investment Committee is 33% female. Together with its affiliates, Seraphim Space has roughly the same proportion of people from ethnic minorities represented as the industry at 20%. ![img-3.jpeg](img-3.jpeg) 66 Seraphim Space Investment Trust PLC --- STRATEGIC REPORT # **RESPONSIBLE INVESTMENT** (continued) ![img-4.jpeg](img-4.jpeg) # **Job creation** Continued strong revenue growth and the ability for portfolio companies to access the funding they require is driving headcount increases, despite the difficult macroeconomic environment over the last 12 to 18 months. On a fair value weighted basis, the top 10 holdings grew headcount by 22.1% in the 12 months to 30 June 2023. # **Carbon emissions/ energy reduction** Given the fact that the private portfolio companies are relatively early in their life, a number are not yet measuring energy consumption, and scope 1/2 and 3 carbon emissions are only measured by four and two private portfolio companies, respectively. On a fair value weighted basis, 30% of energy consumption is renewable. We are engaging with the portfolio companies to drive further work in this key area. Annual Report and Financial Statements 67 --- # BUSINESS REVIEW --- --- STRATEGIC REPORT # BUSINESS REVIEW ## BUSINESS MODEL SSIT is the world's first and only listed SpaceTech fund providing public access to private SpaceTech businesses. The Company carries on business as an investment trust, which is a form of a collective investment vehicle constituted as a closed-ended public limited company. The Company's shares are traded on the premium segment of the London Stock Exchange's main market. The Company has no employees. It is managed by the Board, comprising four independent non-executive Directors. The management of the Company's investments in accordance with its investment objective and policy is delegated to the Investment Manager and the Company's day-to-day functions, including administrative, financial and share registration services, are carried out by duly appointed service providers. The Board oversees the activities and performance of the Investment Manager and other key service providers. As an investment company with no employees, we believe that the best way to achieve SSIT's strategic objectives is to have effective and strong working relationships with the Investment Manager and other key service providers. The Company complies, where relevant, with the FCA's Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Regulation Rules. In addition to publishing its Annual and Interim Reports, the Company announces regulatory, financial and portfolio information on a periodic basis via the London Stock Exchange, thereby helping current and potential investors to make informed investment decisions. Additional information is available on the Company's website (https://investors.seraphim.vc/). ## INVESTMENT STRATEGY The Company provides investors with exposure to nascent SpaceTech companies, being businesses which rely on space-based connectivity or precision, navigation and timing signals, or whose technology or services are already addressing, originally derived from or of potential benefit to the space sector. These businesses comprise companies providing the SpaceTech infrastructure for collecting and communicating data, principally via satellites, as well as companies with the technology that facilitates the exploitation of this data for terrestrial applications in areas such as climate, communications, mobility and security (including cyber security). ## INVESTMENT OBJECTIVE The Company's objective is to generate capital growth over the long term through investment in a diversified, international portfolio of predominantly early and growth stage unquoted SpaceTech businesses with the potential to dominate globally. ## INVESTMENT POLICY The Company seeks exposure to early and growth stage privately financed SpaceTech businesses, acquiring primarily minority holdings. The Company intends to realise long-term value through exiting its investments over time. The Company invests internationally with a view to maintaining a diversified portfolio primarily located in the US, UK and Europe. The Company's portfolio is expected to comprise 20 to 50 holdings. The Company will at all times invest and manage the portfolio in a manner consistent with spreading investment risk. Investments are mainly in the form of equity and equity-related instruments although the Company may invest in a range of financial instruments including, without limit, securities, derivatives, warrants, options, futures, convertible bonds, convertible loan notes, convertible loan stocks or convertible preferred equity. The Company may also on occasion invest in other debt-based investments not referred to above, including, without limit, loan stock, payment-in kind instruments and shareholder loans. In addition to participating in new issues, the Company may also undertake secondary transactions that involve the acquisition of existing stakes. The Company may invest in companies, as well as other forms of legal entity, including partnerships and limited liability partnerships. The Company may acquire investments directly or by way of holdings in special purpose vehicles, intermediate holding entities or other structures. The Company will not invest in other listed closed-ended investment funds. 70 Seraphim Space Investment Trust PLC --- STRATEGIC REPORT # BUSINESS REVIEW (continued) # Investment restrictions The Company will invest and manage its assets with the objective of spreading risk through the following investment restrictions: - other than the ability for the aggregate value of the Company's holding in one single portfolio company or other entity to represent up to 20% of Gross Asset Value, the aggregate value of the Company's holding in any other single portfolio company or other entity will represent no more than 15% of Gross Asset Value; and - the Company's aggregate investment in publicly quoted companies will represent no more than 30% of Gross Asset Value. The Company will generally only invest in publicly quoted companies that constituted part of the Initial Portfolio or the Retained Assets or in circumstances where it has already made an initial investment prior to the portfolio company's initial public offering. However, the Company may invest up to 5% of Gross Asset Value in aggregate in publicly quoted companies that do not constitute part of the Initial Portfolio or the Retained Assets or in which it has not already made an initial investment prior to an initial public offering. For the avoidance of doubt, any process by which an unlisted investment of the Company becomes listed shall be deemed not to be a new investment by the Company. Each of the restrictions referred to above will be calculated at the time of investment. The Company will not be required to dispose of any investment or to rebalance the portfolio as a result of a change in the respective valuations of its assets. # Hedging and derivatives Save for investments made using equity-related instruments as described above, the Company will not employ derivatives of any kind for investment purposes other than to potentially hedge downside risk on a quoted portfolio company for specific reasons, such as where the Company is subject to lock-up provisions. Derivatives may be used for currency hedging purposes. # Borrowings Although the Company does not intend to use structural gearing with a view to enhancing returns on investments, the Company may, from time to time, use borrowings for the purpose of bridging investments, managing its working capital requirements and efficient portfolio management purposes. Borrowings will not exceed 10% of NAV, calculated at the time of drawdown of the relevant borrowings. # Cash management The Company may hold cash on deposit and may invest in cash equivalent investments, which may include short-term investments in money market-type funds and tradeable debt securities ('Cash and Cash Equivalents'). There is no restriction on the amount of Cash and Cash Equivalents that the Company may hold or where it is held. Cash and Cash Equivalents will be held with approved counterparties and in line with prudent cash management guidelines agreed between the Board and the Investment Manager. The Company will hold sufficient Cash and Cash Equivalents for the purpose of making follow-on investments in accordance with the Company's investment policy and to manage the working capital requirements of the Company. # TARGET RETURNS AND DIVIDEND POLICY The Directors intend to manage the Company's affairs to achieve shareholder returns through capital growth rather than income. The Company has no formal benchmark. However, the Company targets an annualised total return on the Company's portfolio of at least 20% over the long term (adjusted for any dividends paid or share buy-backs by the Company). This is a target only and reflects the Investment Manager's expectations of the potential returns that can be generated by investing in a portfolio of early and growth stage private companies which have the potential to generate substantial returns for their shareholders over the long term whilst recognising that not all portfolio companies will achieve their potential and that some may fail in their entirety. This should not be taken as an indication of the Company's expected future performance, return or results over any period and does not constitute a profit forecast. The actual return generated by the Company over any period will depend on a wide range of factors, including, but not limited to, the terms of the investments made, the performance of its portfolio companies, general macroeconomic conditions and fluctuations in currency exchange rates. Annual Report and Financial Statements 71 --- STRATEGIC REPORT # BUSINESS REVIEW (continued) As the Company's priority is to produce capital growth over the long term, it has no dividend target and will not seek to provide shareholders with a particular level of distribution. However, the Company intends to comply with the requirements for maintaining investment trust status for the purposes of section 1158 of the Corporation Tax Act 2010 regarding distributable income. Therefore, in accordance with regulation 19 of the Investment Trust (Approved Company) (Tax) Regulations 2011, the Company will not (except to the extent permitted by those regulations) retain more than 15% of its income (as calculated for UK tax purposes) in respect of each accounting period and any excess will be distributed in the form of a final dividend. # SHARE RATING MANAGEMENT The Board recognises the need to address any sustained and significant imbalance of buyers and sellers which might otherwise lead to the ordinary shares trading at a material discount or premium to their NAV. The Board has not adopted any formal discount or premium targets which would dictate the point at which the Company would seek to buy back or issue ordinary shares. However, the Board is committed to utilising its share buy-back and issuance authorities where appropriate in such a way as to mitigate the effects of any such imbalance. In considering whether buy-back or issuance might be appropriate in any particular set of circumstances, the Board will take into account, amongst other things, prevailing market conditions, (in the case of buy-backs) the level of the Company's discount relative to those of comparable listed investment companies, the cash resources readily available to the Company, the Company's immediate pipeline of investment opportunities, the level of the Company's borrowings (if any), the Company's working capital requirements and the degree of NAV accretion that will result from the buy-back or issuance, and, in the case of buy-backs, whether higher returns would be made from investing capital than buying back ordinary shares. On 13 July 2023, the Board announced a share repurchase programme to mitigate the effect of the substantial discount experienced by the Company. In the period to 13 October 2023, the Company bought back 2,186,344 shares pursuant to the share repurchase programme. The shares bought back are being held in treasury and may be resold in due course at a premium to NAV. The Board will keep shareholders informed, on a regular and ongoing basis, of the approach which it has adopted to share rating management, principally through commentary in the Company's Annual and Interim Reports. # KEY PERFORMANCE INDICATORS At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives. The key performance indicators ('KPIs') used to measure the performance and progress of the Company over time are as follows: - the movement in NAV per share (as the Company does not pay dividends, this is the same as the NAV total return per share); - the movement in the share price (as the Company does not pay dividends, this is the same as the share price total return per share); - the premium/discount of the share price to the NAV per share; - ongoing charges; and - portfolio fair value vs. cost. The first four KPIs are established industry measures. Having regard to the Company's target return, we believe that, at this stage in the Company's life, the portfolio fair value vs. cost is an appropriate KPI to measure the portfolio's performance. An explanation of the KPIs can be found in Alternative Performance Measures on pages 160 and 161. The KPIs for the year ended 30 June 2023 are shown on page 1. 72 Seraphim Space Investment Trust PLC --- STRATEGIC REPORT # BUSINESS REVIEW (continued) # ENVIRONMENTAL, SOCIAL AND GOVERNANCE MATTERS # Socially responsible investment The Board has endorsed the Investment Manager's Responsible Investment Policy, which seeks to ensure that the Investment Manager's management of SSIT's investments takes account of environmental, social, governance and ethical factors, where appropriate. The Investment Manager actively engages with portfolio companies on ESG factors and often has a participation role at board level with such companies, helping to guide their governance policies. Details of the Responsible Investment Policy are included on pages 62 to 67. # Environment As an investment company with all its activities outsourced to third parties, the Company does not have any physical assets, property, employees or operations of its own and, therefore, the Company's own direct environmental impact is minimal. The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Reporting) Regulations 2018. For the same reasons, the Company considers itself to be a low energy user under the Streamlined Energy & Carbon Reporting Regulation and, therefore, is not required to disclose energy and carbon information. The Company notes the Taskforce for Climate-related Financial Disclosures ('TCFD') recommendations on climate-related financial disclosures. The Company is an investment company and, as such, it is exempt from the FCA's Listing Rules requirement to report against the TCFD framework. A key focus of the Investment Manager's Responsible Investment Policy, and its engagement with portfolio companies, is on their management of environmental risks, particularly those associated with the climate change, and their ability to develop products and services that help address climate change impacts. # Employees, human rights and community issues The Board recognises the requirement under section 414C of the Companies Act 2006 to provide information about employees, human rights and community issues, including information in respect of any of its policies in relation to these matters and their effectiveness. These requirements do not apply to SSIT as it has no employees, all of the Directors are non-executive and it has outsourced all of its functions to third-party service providers. Consequently, SSIT has not reported further in respect of these provisions. # Modern slavery The Company does not provide goods or services in the normal course of business and, as an investment company, does not have customers. Consequently, the Directors do not consider that the Company is required to make a statement under the Modern Slavery Act 2015 in relation to slavery or human trafficking. # Diversity The Board and Investment Manager strongly believe that having diversity in skills, experience, identity and cognitive thought has significant benefits when making decisions. The Board currently comprises four independent Directors appointed on merit-based qualifications. The skills and experience which the current members of the Board bring to SSIT's leadership are described on pages 90 and 91. Currently, the Board has 75% female representation (greater than the FCA's target for listed companies of 40%) and the Senior Independent Director (Sue Inglis) is also female (in line with the FCA's target for listed companies of one senior position being held by a woman). Given the size of the Board and that fact the Company is in an early stage, it does not currently have at least one member of the Board from a minority ethnic background (contrary to the FCA's target for listed companies) but this will be a key consideration for future appointments. The Investment Manager (together with its affiliates) has a diverse employee base (currently, 50% female and 23% from non-white British or other white backgrounds) and continues to dedicate recruiting resources to increasing its diversity across all positions and levels. # Bribery Act 2010 The Board has a zero-tolerance policy in relation to bribery and corruption and has received assurance through internal controls reporting from the Company's key service party providers, including the Investment Manager, that adequate safeguards are in place to protect against any such potentially illegal behaviour by employees or agents. # Criminal Finances Act 2017 The Company has a zero-tolerance policy towards the criminal facilitation of tax evasion. Annual Report and Financial Statements 73 --- STRATEGIC REPORT # **BUSINESS REVIEW** (continued) # **PRINCIPAL AND EMERGING RISKS AND UNCERTAINTIES** Under the FCA's Disclosure Guidance and Transparency Rules, the Directors are required to identify those material risks to which the Company is exposed and take appropriate steps to mitigate those risks. The Board thoroughly considers the process for identifying, evaluating and managing any significant risks faced by the Company, including emerging risks, on an ongoing basis, and these risks are reported and discussed at Board meetings. The Board ensures that effective controls are in place to mitigate these risks and that a satisfactory compliance regime exists to ensure all applicable local and international laws and regulations are upheld (see 'Risk management and internal control systems' on page 108 for further information). For each material risk identified in the risk matrix, the likelihood and consequences are identified, management controls and frequency of monitoring are confirmed and results are reported and discussed at each scheduled Audit Committee meeting and more often if required. The key areas of risk faced by the Company and mitigating factors are summarised below: | RISK | POTENTIAL IMPACT | MITIGATION | | --- | --- | --- | | **1. INVESTMENT RETURN** Risk that SSIT fails to achieve its investment objective and provide a satisfactory investment return | - Reduced demand for SSIT's shares - Reduced liquidity in SSIT's share trading - Increase in share price discount | - Seraphim Space has deep sector knowledge and experience and a rigorous investment process designed to identify and manage risks - The portfolio is managed in accordance with the investment policy to spread investment risk - The investment environment, portfolio performance, specific factors affecting portfolio companies (individually or collectively), transactions, investment pipeline opportunities and cash flow forecasts are reviewed regularly by the Board - The Board conducts a rigorous strategy review annually | | **2. DISCOUNT** Risk that SSIT's shares trade at a material discount to NAV as a result of an imbalance between buyers and sellers which may occur for a wide variety of reasons | - Reduced liquidity in SSIT's share trading - Reduced shareholder return - Discount may attract short-term investors with return aspirations materially different to SSIT's investors supportive of its long-term strategy - SSIT's access to additional capital constrained | - The Board, Seraphim Space and SSIT's corporate brokers monitor the SSIT share price discount (and premium) on an ongoing basis and movements in the share register on a regular basis, taking into account broader market conditions - Proactive investor communication and engagement by the Board, Seraphim Space and SSIT's corporate brokers to enhance investors' understanding of SSIT, its strategy and associated risks - Shareholders are encouraged to engage freely with the Board on matters that are of concern to them so that the Board can understand their views and concerns and consider them in its discussions and decision-making - SSIT has authorities in place to buy back shares, which the Board may use when deemed to be in the best interests of shareholders as a whole (in July 2023, the Board announced a share repurchase programme to support the Company's share price in light of the substantial discount it was experiencing) | 74 Seraphim Space Investment Trust PLC --- STRATEGIC REPORT # **BUSINESS REVIEW** (continued) | RISK | POTENTIAL IMPACT | MITIGATION | | --- | --- | --- | | **3. LIQUIDITY** Risk that SSIT has insufficient liquid resources to participate in subsequent funding rounds by portfolio companies or make new investments | - Dilution of SSIT's holdings in existing portfolio companies - Reputational damage - Reduced NAV growth - Reduced shareholder return | - Seraphim Space monitors the cash runways of portfolio companies and maintains cash flow projections based on its assessment of return potential, timing and scale of potential funding rounds, the ability of others in portfolio company syndicates to support funding rounds, the availability of new investment opportunities and SSIT's projected operating costs in order to manage SSIT's ability to participate in forthcoming funding rounds - Cash flow forecasts are reviewed regularly by the Board | | **4. PORTFOLIO COMPANY PERFORMANCE** Risk that portfolio companies, being early and growth stage companies which may lack breadth and depth of management team and capital and have a higher risk profile than larger, more established companies, are unable to commercialise their technology, products, business concepts or services and/or otherwise fail to achieve their business objectives | - Reduction in relevant portfolio company valuations, potentially resulting in 100% write-off - Reduced NAV and shareholder returns | - Seraphim Space has extensive experience of investing into and supporting early and growth stage businesses - Seraphim Space has a rigorous investment process designed to identify and manage risks - A third party technical due diligence provider is engaged prior to every material deal to assess the technological and market opportunity - Seraphim Space monitors progress against critical milestones, with the aim of supporting portfolio companies in changes in strategy where progress is not as anticipated - SSIT's investment strategy is to ensure sufficient diversification within its portfolio and to syndicate investments with other investors to ensure portfolio companies are well capitalised - Portfolio company performance is regularly reviewed by the Board | | **5. PUBLIC COMPANY SHARE PRICE VOLATILITY** Risk of extreme volatility in the share prices of SSIT's listed portfolio companies materially adversely impacting the concentration risk associated with the portfolio | - Increased share price volatility - Reduced demand for SSIT's shares - Reduced liquidity in SSIT's share trading - Reduced NAV and shareholder returns - Increase in share price discount | - The investment policy includes restrictions on investment in listed companies - Seraphim Space monitors share price fluctuations and portfolio concentration levels | Annual Report and Financial Statements 75 --- STRATEGIC REPORT # **BUSINESS REVIEW** (continued) | RISK | POTENTIAL IMPACT | MITIGATION | | --- | --- | --- | | **6. MACROECONOMIC** Risk that the performance of portfolio companies may be materially adversely affected by geopolitical risks, a pandemic/epidemic, climate change and/or other macroeconomic conditions, including interest rate rises and inflation | - Significant widescale disruption impacting businesses generally - Adverse impact on global markets and investor sentiment - Reduced portfolio valuations - Reduced demand for SSIT's shares - Reduced liquidity in SSIT's share trading - Reduced NAV and shareholder return - Increase in share price discount - SSIT's access to additional capital constrained | - Seraphim Space completes extensive due diligence procedures prior to investment and, on an ongoing basis, monitors and works closely with portfolio companies to provide advice and experience in dealing with adverse macroeconomic conditions and disruptive events - Portfolio companies have business continuity plans, which, in many cases, have been fully tested during the COVID-19 pandemic and/or since the war in Ukraine began and demonstrating that they are adept at adjusting in response to major widescale disruption - The investment environment and specific factors affecting portfolio companies (individually or collectively) are assessed regularly by the Board | | **7. VALUATION** Risk that estimates, assumptions and judgements used in valuing SSIT's investments in private companies lead to a material misstatement of the valuation and, consequently, in SSIT's NAV | - False market in SSIT's shares - Reputational damage - Reduced NAV and shareholder returns - Increase in share price discount | - Valuations are prepared in accordance with the IPEV Valuation Guidelines and Seraphim Space's valuation policy, which has been formally reviewed by the Board and commented upon by the Company's Auditor and is consistently applied - In advance of quarterly Audit Committee meetings, the Audit Committee meets with Seraphim Space solely for the purpose of reviewing the quarterly valuations, giving the Audit Committee an opportunity to challenge the valuations and to request further information before the valuations are approved - SSIT's Auditor reviews the valuations and methodology and attends ad hoc Audit Committee meetings when interim and year end valuations are presented and discussed by the Investment Manager as part of their annual audit review procedures | | **8. REALISATION** Risk that, as SSIT's private company investments are illiquid and its investments may have restrictions on sale or transfer of shares, SSIT may be unable to realise investments at short notice or at all and/or the price achieved on any realisation may be at a material discount to the prevailing valuation | - Reduced NAV and shareholder returns | - SSIT's investment strategy is to hold investments for the long term in order to deliver capital growth, SSIT has no debt, dividend or buy-back obligations, it does not have a fixed life and it manages its liquidity to pay its operating costs as they fall due, so there is no pressure to realise investments - As set out opposite 'Valuation' above, SSIT has a robust and consistent valuation process | | **9. FOREIGN EXCHANGE** Risk that FX movements materially adversely affect the value of investments made in currencies other than Sterling | - Reduced NAV and shareholder returns | - SSIT invests globally and has exposure to several non-Sterling currencies, providing some FX risk diversification - Whilst it is not currently SSIT's policy to actively manage FX risk, Seraphim Space monitors FX rates and may, in consultation with the Board and SSIT's corporate brokers, explore mitigating options - The Company has engaged a provider who has demonstrated a track record of favourable rates for FX spot trades | 76 Seraphim Space Investment Trust PLC --- STRATEGIC REPORT # **BUSINESS REVIEW** (continued) | RISK | POTENTIAL IMPACT | MITIGATION | | --- | --- | --- | | **10. KEY PERSONS** Risk that one or more of Mark Boggett, James Bruegger and Rob Desborough (key members of Seraphim Space's team) cease to be actively engaged in the management of SSIT's portfolio | - Adverse impact on SSIT's ability to implement its investment strategy - Reduced NAV and shareholder returns | - Seraphim Space has controls and incentives in regard to key persons retention, including annual bonus, share of any performance fee payable by SSIT and succession planning - Seraphim Space's recruitment and appointments since SSIT's IPO have added further depth to its team - The Investment Management Agreement may be terminated by SSIT if a key person leaves Seraphim Space and is not replaced by (a) person(s) of equal or satisfactory standing within specified timeframes | | **11. ESG** Risk that Seraphim Space fails to identify ESG issues in portfolio companies or receive adequate ESG information from portfolio companies or that portfolio companies fail to adequately address any material climate change impacts they might have | - Reputational damage - SSIT's shares may be less attractive to investors - Issues regarding valuations of portfolio companies concerned | - With the assistance of an international sustainability consultancy firm, Seraphim Space has developed a robust Responsible Investment Policy and associated tools - Seraphim Space works with the boards and management teams of portfolio companies to identify and address ESG issues, including ESG reporting, and with co-investors to increase collective influence on such matters | Each of the above principal risks has been identified in the Company's risk matrix, which is reported and discussed at Audit Committee and Board meetings. The Directors ensure that effective controls are in place to mitigate each risk and the graphics below show the Board's assessment of the likelihood and impact of each, both pre-control and post-control. # **PRINCIPAL RISKS - PRE-CONTROL** ![img-5.jpeg](img-5.jpeg) 1. Investment return 2. Discount 3. Liquidity 4. Portfolio company performance 5. Public company share price volatility 6. Macroeconomic # **PRINCIPAL RISKS - POST-CONTROL** ![img-6.jpeg](img-6.jpeg) 7. Valuation 8. Realisation 9. Foreign exchange 10. Key persons 11. ESG * The Directors have amended their assessment of the likelihood of the liquidity risk from the prior year, when it was deemed to be Low, to the current Medium. Annual Report and Financial Statements 77 --- STRATEGIC REPORT # BUSINESS REVIEW (continued) # GOING CONCERN In light of the conclusions drawn in the longer-term viability statement below and as set out in note 2 to the financial statements on page 136, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for at least 12 months from the date of this annual report. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements. # LONGER-TERM VIABILITY As required by the AIC Code, the Directors have assessed the prospects of the Company over a period longer than the 12 months required for the going concern statement. The Board has assessed the Company's prospects over the period of three years ending 30 September 2026. The Board has chosen this period because it is consistent with the three-year basis that the Directors evaluate the Company's financial position as a whole on a quarterly basis and projecting financial and economic scenarios over a longer period would be imprecise given the lack of long-term economic visibility. Soon after the period of three years ending 30 September 2026, an ordinary resolution will be proposed at the AGM in 2026 pertaining to the Company continuing as an investment company. In assessing the Company's prospects and longer-term viability, the Board has taken into account: - the principal and emerging risks and their mitigation identified in the 'Principal and Emerging Risks and Uncertainties' section above; - the nature of the Company's business; - the Company's cash and other liquid reserves, as well as the value of its listed holdings; - the ability of the Investment Manager and Directors to minimise the level of cash outflows, if necessary, as the Investment Manager considers the Company's future cash requirements before making investments and the Board receives regular updates from the Investment Manager on the Company's cash position and forecast cash flows, which allows the Board to limit funding for existing and/or new investments as required; - the Investment Manager monitors the Company's cash requirements to meet ongoing fees and expenses and expects to maintain sufficient assets in cash reserves to meet these obligations; - the circumstances in which a performance fee is payable to the Investment Manager as outlined in note 4 to the financial statements; and - the Company does not have any gearing or any obligation to pay dividends. The process for identifying, evaluating and managing significant and any emerging risks faced by the Company and periodic reports from the Investment Manager and Administrator regarding risks faced by the Company are reviewed routinely at Audit Committee and Board meetings. The Board ensures that effective controls are in place to mitigate these risks and that a satisfactory compliance regime exists to ensure all applicable local and international laws and regulations are upheld. When required, the Company seeks expert advice regarding tax, legal and other factors. Based on a robust assessment of the principal and emerging risks facing the Company, the Board believes that the most significant risks to the Company's longer-term viability are: - the risk of a significant and prolonged economic downturn which could impact the Company through poor ratings with consequent discounts, high interest rates adversely impacting growth company valuations and a tough fundraising environment; - a significant majority of the Company's investments are in private companies that are not liquid and may be subject to restrictions on sale or transfer, which may limit the Company's ability to realise investments at short notice and/or at a reasonable price or at all; and - the inability to raise funds, should the need arise. The Board has considered the Company's viability over the three-year period, based on a working capital model prepared by the Investment Manager. The working capital model forecasts key cash flow drivers, such as capital deployment rate and operating expenses, and includes robust downside scenarios with continued high interest rates and a considered amount of additional investment activity in the near term. Capital raises, realisations and/or share buy-backs are assumed to not occur during the three-year period, unless already predetermined. 78 Seraphim Space Investment Trust PLC --- STRATEGIC REPORT ## BUSINESS REVIEW (continued) Based on its assessment, the Board has concluded there is a reasonable expectation that the Company will continue to meet its liabilities as they fall due and remain viable, even in a scenario where global macroeconomic uncertainty persists for an extended period and including severe but plausible downside scenarios over the three-year period of the assessment. ### LIFE OF THE COMPANY The Company has no fixed life but, in accordance with its Articles of Association, an ordinary resolution proposing that it continues in existence as an investment company will be proposed at its AGM in 2026 and, if passed, every five years thereafter. If any such resolution is not passed, proposals will be put forward by the Directors within three months from the date of the resolution to the effect that the Company be wound up, liquidated, reconstructed or unitised. ### FUTURE DEVELOPMENT OF THE COMPANY While the future development of the Company is dependent on the success of its investment strategy, which is subject to various factors including external ones (such as the macroeconomic environment and market developments) which are outside the control of the Board and Investment Manager, and the future attractiveness of the Company as an investment vehicle, the Board's intention is that the Company will continue to pursue its investment objective and policy. The Chair's Statement and the Investment Manager's Report include, on pages 20 and 44 to 45 respectively, commentary on the outlook for the Company. ### APPROVAL OF STRATEGIC REPORT The Strategic Report set out on pages 1 to 87 is provided in accordance with The Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 and is intended to provide information about the Company's strategy and business needs, its performance and results for the year and the information and measures which the Directors use to assess, direct and oversee the Investment Manager in the management of the Company's activities. The Strategic Report has been approved by the Board and is signed on its behalf by: **WILL WHITEHORN** Chair 16 October 2023 Annual Report and Financial Statements 79 --- # SECTION 172: ENGAGING WITH KEY STAKEHOLDERS --- 1 --- STRATEGIC REPORT # ENGAGING WITH KEY STAKEHOLDERS “ Our responsibilities to stakeholders, together with consideration of the long-term consequences of our decisions and maintaining high standards of business conduct, are integral to the way the Board operates ” ## S.172 RESPONSIBILITIES Under section 172 of the Companies Act 2006 (‘s.172’), the Directors have a duty to act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole. In doing so, the Directors are required to take into account (amongst other matters) the likely long-term consequences of their decisions, the need to foster relationships with the Company’s wider stakeholders, the desirability of the Company maintaining a reputation for high standards of business conduct and the impact of the Company’s operations on the community and environment. As an externally managed investment company, SSIT has no premises, employees or customers and conducts its core activities through third-party service providers. Currently, SSIT has no debt finance. We consider, therefore, shareholders to be the Company’s principal stakeholders but also regard potential shareholders, the Investment Manager, the Administrator, other key service providers (corporate brokers, Auditor, legal advisers, public relations and communications adviser, depositary and registrar) and portfolio companies as key stakeholders. The Investment Manager’s Responsible Investment Policy is integrated into its investment process, ensuring that it has regard to the impact of SSIT’s investments on the wider community and environment. Our responsibilities to stakeholders, together with consideration of the long-term consequences of our decisions and maintaining high standards of business conduct, are integral to the way we operate as a Board and are foremost in our minds in our discussions, decision-making and reporting. We welcome, therefore, shareholders’ and other stakeholders’ views and concerns and place great importance on our engagement with them so that we can better understand and consider them in our discussions and decision-making. 82 Seraphim Space Investment Trust PLC --- STRATEGIC REPORT # ENGAGING WITH KEY STAKEHOLDERS (continued) ## STAKEHOLDER ENGAGEMENT The table below sets out the principal ways in which we engage with the Company's key stakeholder groups. ### STAKEHOLDER GROUP #### SHAREHOLDERS AND POTENTIAL INVESTORS ##### Why they are important Continued shareholder support and engagement and attracting new investors are critical to the continuing existence of the Company and the delivery of its long-term strategy. ##### How we engage The Company has a broad range of shareholders, comprising both professional and retail investors, and has developed various ways of engaging with them, including: - **Regulatory announcements and publications:** The Company issues regulatory announcements via the London Stock Exchange in respect of routine reporting obligations, periodic financial and portfolio information updates and in response to other events. The Company's Annual and Interim Reports and associated presentations, as well as quarterly reports and shareholder circulars, are made available on the Company's website. Their availability is announced via the London Stock Exchange and are available via the 'RNS Announcements' section under 'Investor Relations' on the Company's website. - **RNS Reach Newsletter:** The Company issues a monthly SpaceTech Sector Newsletter via RNS Reach to provide timely updates, based on publicly available information, on the Company's investments, its Investment Manager and the wider SpaceTech market. The first publication was issued on 9 January 2023. Their availability is also announced via the London Stock Exchange. - **Website (https://investors.seraphim.vcf):** This includes videos, research notes available to retail investors and other relevant information to enhance investors' understanding of the Company and its strategy. Shareholders and other interested parties can subscribe to email news updates by registering online on the website. - **Investor meetings and events:** The Investment Manager, on behalf of the Board and with the assistance of SSIT's corporate brokers and public relations and communications advisor, undertakes a programme of investor engagement throughout the year. During the year to 30 June 2023, the Investment Manager held four group meetings for research analysts for each quarterly results and four professional and/or retail investor webinars through the Company's public relations and communications advisor. Each analyst presentation had 25 attendees. Through the Company's corporate brokers, there were 120 interactions with 57 unique investors. Directors attend some investor meetings to gauge sentiment first hand. All investors are offered the opportunity to meet the Chair, Senior Independent Director or other Board members. - **Capital markets day:** This is an event, attended by research analysts and professional investors, held periodically consisting of presentations from the Chair and senior members of the Investment Manager's team. The capital markets day held on 12 May 2022 also included presentations from a selection of SSIT's portfolio companies. Videos of the event are available on SSIT's website. The next capital markets day is scheduled for 18 October 2023. - **Investor relations updates:** At quarterly Board meetings, the Directors receive updates on the share trading activity, share price performance and investor feedback. The Directors also receive investor feedback following investor roadshows arranged by the Company's corporate brokers. - **Annual General Meetings:** The Annual General Meeting of the Company provides a forum for shareholders to meet, ask questions and discuss issues with the Directors and Investment Manager. The next Annual General Meeting will take place on 20 November 2023. - **Working with external partners:** The Board also engages some external providers, such as a public relations and communications adviser, to assist in investor communication and obtain input on specific aspects of shareholder communications, such as developing more effective ways to communicate with investors. Annual Report and Financial Statements 83 --- STRATEGIC REPORT # ENGAGING WITH KEY STAKEHOLDERS (continued) | STAKEHOLDER GROUP | | | --- | --- | | **SHAREHOLDERS AND POTENTIAL INVESTORS** (continued) | We welcome diversity of thought and opinions. Shareholders may contact the Company via seraphimteam@ocorian.com or by post via the Company Secretary on any matters that they wish to discuss with the Board and the Company Secretary will arrange for the relevant Board member to contact them. **Target outcomes** Shareholders and potential investors receive relevant information to enable them to evaluate whether their investment interests are aligned with the Company's strategy. We receive feedback and views on investor concerns and priorities which inform our discussions and decisions. | | **INVESTMENT MANAGER** (Seraphim Space Manager LLP) | **Why it is important** The Investment Manager's specialist knowledge and experience is vital to implementing SSIT's investment strategy successfully and achieving its investment objective, so maintaining a strong, collaborative relationship with the Investment Manager is critical to SSIT's long-term success. **How we engage** Important components in the collaboration with the Investment Manager are: - drawing on Board members' individual experience to support the Investment Manager in the performance of its responsibilities to the Company, including implementing SSIT's investment strategy; - willingness to make the Board members' experience available to support the Investment Manager in the sound, long-term development of its business and resources, recognising that SSIT is currently the principal client of the Investment Manager and so the long-term success of the Investment Manager is closely aligned to that of the Company; and - having in place appropriate remuneration arrangements to incentivise the Investment Manager whilst aligning with shareholders' interests. We engage with the Investment Manager in numerous ways, including: - **Regular reporting:** We receive at least quarterly reports from the Investment Manager on performance, investment activity and pipeline, portfolio company developments, cash flow projections, and investor relations activities, as well as on a wide range of other topics. - **Meetings:** The Board and Investment Manager meet face-to-face at least quarterly for scheduled Board and Committee meetings. In addition, the Board and Investment Manager frequently meet, either in person or virtually, between scheduled Board and Committee meetings to consider ad hoc matters. - **Continuous dialogue:** The Board maintains an open dialogue with the Investment Manager, engaging on key matters affecting SSIT or the Investment Manager. **Target outcomes** We maintain a strong, collaborative relationship with the Investment Manager. The Company's portfolio is well-managed, enabling it to meet its strategic objectives and achieve long-term sustainable success. | 84 Seraphim Space Investment Trust PLC --- STRATEGIC REPORT # ENGAGING WITH KEY STAKEHOLDERS (continued) | STAKEHOLDER GROUP | | | --- | --- | | **ADMINISTRATOR/ COMPANY SECRETARY** (Ocorian Administration (UK) Limited) | **Why it is important** The Administrator provides accounting, company secretarial and other administrative services, so maintaining a strong, collaborative relationship with the Administrator is critical to the effective running of SSIT's day-to-day operations. **How we engage** We engage with the Administrator in several ways, including: - **Regular reporting:** We receive at least quarterly reports from the Administrator on a range of matters, including financial, corporate governance, legal, regulatory and compliance matters. - **Meetings:** The Administrator attends both scheduled and ad hoc Board and Committee meetings. - **Continuous dialogue:** The Board maintains open and constructive dialogue with the Administrator, engaging on key matters affecting SSIT. In addition, the Investment Manager, on our behalf, engages with the Administrator on at least a weekly basis and ensures service levels are satisfactory and appropriate controls are in place. **Target outcomes** We maintain a strong, collaborative relationship with the Administrator. The Company's day-to-day operations are well-managed, supporting its ability to meet its strategic objectives and achieve long-term sustainable success. | | **OTHER KEY SERVICE PROVIDERS** (corporate brokers, Auditor, legal advisers, public relations and communications adviser, depositary, registrar – see page 164 for details) | **Why they are important** For the Company to operate as a listed investment company, the Board relies on the other key service providers for essential services and for advice and support in meeting relevant obligations and complying with best practice. Constructive working relationships with the other key service providers helps ensure the Company continues to operate effectively. **How we engage** We engage with the other key service providers in a collaborative and collegiate manner, with open and respectful discussion and debate being encouraged, whilst also ensuring that appropriate and regular challenge is brought. We engage with the other key service providers in several ways, including receiving regular and, as needed, ad hoc reports, face-to-face meetings (at the request of the Board or the relevant service provider) and other dialogue as and when appropriate. In addition, the Investment Manager and/or Administrator, on our behalf, engages with the other key service providers on a regular basis and ensures service levels are satisfactory. **Target outcomes** We, directly and indirectly, maintain constructive working relationships with our other key service providers. Other key service providers provide the required level of service, enabling the Company to meet its obligations and follow best practice. | | **PORTFOLIO COMPANIES** | **Why they are important** For the Company to deliver capital appreciation, it needs to invest in portfolio companies that ultimately develop their products and services and successfully grow. **How we engage** We look to engage with the portfolio companies in a collaborative and collegiate manner. We engage with portfolio companies during investor events. In addition, the Investment Manager, on our behalf, engages with portfolio companies on a regular basis through participation on their boards, interaction with their shareholders, introductions to partners, customers and potential funding providers, and value-add support and advice. **Target outcomes** We, directly and indirectly, maintain constructive working relationships with our portfolio companies. Portfolio companies benefit from the engagement, leading to their growth and, ultimately, higher value for the Company. | Annual Report and Financial Statements 85 --- CORPORATE GOVERNANCE # DIRECTORS AND INVESTMENT MANAGER (continued) ![img-7.jpeg](img-7.jpeg) SARAH SHACKLETON COO Sarah is the COO at Seraphim Space and has more than 25 years of finance experience. Prior to Seraphim Space, Sarah was a partner at Development Partners International since its inception in 2007. She was responsible for administration of the firm and its funds, including legal, compliance, HR, IT, operations, facilities and ESG and also sat on the investment committee. Sarah has experience as an active board director on private equity fund general partners and investment holding companies. Before joining Development Partners International, Sarah was an Associate Director on the Technology Equity Research team at UBS in London, specialising in the telecommunications equipment sector and covering large-cap European companies, including Nokia, Ericsson and Alcatel-Lucent. Sarah holds a BSc (Hons) in Economics and Accounting from University of Bristol. ![img-8.jpeg](img-8.jpeg) ANDRE RONSOEHR Investment Partner Andre is an Investment Partner at Seraphim Space, following a career focussed on the Space sector. He worked for almost a decade at Virgin Management, the family office of Sir Richard Branson. Andre co-led the seed investment in OneWeb in 2015 and was instrumental in investments into Virgin Galactic and Virgin Orbit. During this time, Andre worked hand-in-hand with the boards and C-level teams of each of these three pioneering space businesses, helping shape them into $billion businesses. Andre has been a fund representative on the boards of a range of SpaceTech companies, including Astroscale and PlanetWatchers. ![img-9.jpeg](img-9.jpeg) MAUREEN HAVERTY Investment Principal Maureen joined Seraphim Space in 2022 following a successful career in the space industry. She was COO at Apollo Fusion, a space start up that was sold for $145m, where she was responsible for business development, manufacturing and complex programmes. She was also Senior Director of Corporate Development at Astra, a rocket launch company listed on NASDAQ. She has a first-class Batchelor Civil and Environmental Engineering (BE) degree from University College Cork and a PhD in Nuclear Engineering from University of Manchester. Maureen is focussed on deal origination, deal execution, portfolio management and fund operations in addition to actively supporting the Seraphim Space Camp Accelerator. Annual Report and Financial Statements 93 --- CORPORATE GOVERNANCE # DIRECTORS AND INVESTMENT MANAGER (continued) ![img-10.jpeg](img-10.jpeg) # CANDACE JOHNSON Independent Advisory Committee Member Candace has a long and distinguished career as founder/ co-founder of Space ventures such as SES ASTRA, SES Global, Loral-Teleport Europe and Europe Online, as well as having played critical roles in developing Space sector leaders, including Iridium and ILS. An experienced venture capitalist and investor, she has been a member of the Strategic Committee of Iris Capital for the past decade and served as President of the European Business Angel Network, and is now President Emeritus. Candace serves and has served on the boards of a number of emerging Space leaders, including NorthStar Earth and Space and Kacific. Candace serves on Seraphim Space's Investment Committee as an independent member to advise on and address any conflicts of interest. ![img-11.jpeg](img-11.jpeg) # MATT O'CONNELL Independent Advisory Committee Member Matt is a recognised thought leader in the geospatial intelligence industry. Currently an Operating Partner at DCVC, supporting its investments, including Space companies Capella and Planet. Matt has been working with Seraphim Space since 2018. Before that, he was CEO of OneWeb until July 2016. In 2006, he founded GeoEye (NASDAQ: GEOY), a leading global provider of satellite and aerial imagery and digital mapping information, which was acquired by Digital Globe in 2013 for $1.3bn. He has served on several private company boards and government and industry advisory commissions. Matt serves on Seraphim Space's Investment Committee as an independent member to advise on and address any conflicts of interest. ![img-12.jpeg](img-12.jpeg) # ANN WINBLAD Independent Advisory Committee Member Ann is a Managing Director of Hummer Winblad Venture Partners, a venture capital firm she co-founded in 1989. She is a well-known and respected software industry entrepreneur and technology leader. Ann's firm has launched over 160 enterprise software companies and led investments that pioneered successful companies across the enterprise software sector. She served as a director of numerous private and public companies including MuleSoft, Hyperion, Sonatype, The Knot, Liquid Audio, Net Perceptions and Ace Metrix. She also currently serves as a Director of OptiMine. Ann serves on Seraphim Space's Investment Committee as an independent member to advise on and address any conflicts of interest. 94 Seraphim Space Investment Trust PLC --- CORPORATE GOVERNANCE # DIRECTORS' REPORT The Directors present their Annual Report and audited financial statements for the Company for the year ended 30 June 2023. The Corporate Governance Report on pages 90 to 121 forms part of this Report. ## COMPANY STATUS The Company is incorporated and domiciled in the United Kingdom and registered in England and Wales. The Company is an investment company as defined in section 833 of the Companies Act 2006 and is as an approved investment trust in accordance with section 1158 of the Corporation Tax Act 2010 ('s.1158'). The Directors intend at all times to conduct the affairs of the Company to enable it to continue to qualify as an investment trust for the purposes of s.1158. The Company manages its affairs so as to be a qualifying investment for inclusion in an Individual Savings Account and it is the Directors' intention that the Company should continue to do so. ## BUSINESS REVIEW The Company's principal activity is investment in a diversified, international portfolio of predominantly early and growth stage privately financed SpaceTech businesses that have the potential to dominate globally and are category leaders with first mover advantages in areas such as climate change, sustainability, communications, mobility and global security (including cyber security) with the objective of generating capital growth over the long term. A detailed review of the Company's business and performance during the year, the principal risks and uncertainties facing the Company, any future likely developments in the Company and any important events since 30 June 2023 are contained in the Strategic Report on pages 74 to 77 and should be read as part of this Report. ## RESULTS AND DIVIDENDS The loss for the year was £16.9 million. A loss of £4.5 million was attributable to the revenue reserve. As the Company is focused on generating capital growth over the long term and given the nature of the Company's investments, the Board does not anticipate recommending paying any dividends in the foreseeable future. ## SHARE CAPITAL As at 30 June 2023, the Company's issued share capital comprised 239,384,928 ordinary shares and no shares were held in treasury. The total number of voting rights of the Company at 30 June 2023 was, therefore, 239,384,928. Shareholders are entitled to all dividends paid by the Company (as stated above, the Company does not expect to pay dividends in the foreseeable future). On a winding up, provided the Company has satisfied all its liabilities, shareholders are entitled to the surplus assets of the Company. Shareholders are entitled to attend and vote at all general meetings of the Company and, on a poll, to one vote for each ordinary share held. There are: - no restrictions on the transfer of securities in the Company save where the Company is legally entitled to impose such restrictions, such as restrictions on transfers by Directors and persons closely associated with them during closed periods, or the Company's Articles of Association allow the Board to decline to register a transfer of shares or otherwise impose a restriction on shares to prevent the Company breaching any law or regulation; - no agreements between holders of securities regarding their transfer which are known to the Company; - no restrictions on exercising voting rights save where the Company is legally entitled to impose such restrictions, such as if, having been served with a notice under section 793 of the Companies Act 2006, a shareholder fails to disclose details of any past or present beneficial interest; - no special rights with regard to control attached to securities in the Company; and - no agreements to which the Company is party that might affect its control following a successful takeover bid. Annual Report and Financial Statements 95 --- CORPORATE GOVERNANCE # DIRECTORS' REPORT (continued) ## SHARE ISSUES AND BUY-BACKS The Board has not adopted any formal premium or discount targets which would dictate the point at which the Company would seek to issue or buy back ordinary shares. Information on the Board's approach to share issues and buy-backs can be found under 'Examples of Stakeholder Considerations' on page 87 and 'Share Rating Management' on page 72. The Company's current general authority to allot for cash on a non-pre-emptive basis up to 23,938,492 ordinary shares, representing c.10% of the ordinary shares in issue on the date the authority was granted expires at the conclusion of the 2023 AGM. Special resolution 10 will be proposed at the forthcoming AGM seeking renewal of such authority until the 2024 AGM or 31 December 2024, whichever is the earlier. Unless specifically authorised by shareholders, no issue of ordinary shares on a non-pre-emptive basis will be made at a price less than the prevailing NAV per ordinary share at the time of issue. The Company's current authority to make market purchases up to 35,883,800 ordinary shares, representing 14.99% of the ordinary shares in issue on the date the authority was granted, expires at the conclusion of the 2023 AGM. No shares were bought back under this authority during the year ended 30 June 2023. In the period since the year end to 13 October 2023, the Company bought back 2,186,344 shares under this authority following a share repurchase programme announced on 13 July 2023. The shares bought back are being held in treasury. Special resolution 11 will be proposed at the forthcoming AGM seeking renewal of this authority until the 2024 AGM or 31 December 2024, whichever is the earlier. The Company may hold bought-back shares in treasury and then re-sell such shares (or any of them) for cash or cancel bought-back shares (or any of them). Shares will only be re-sold from treasury at a premium to the NAV per share. ## MAJOR INTERESTS IN SHARES At 30 June 2023 and 30 September 2023, the Company had been notified under the FCA's Disclosure Guidance and Transparency Rules or was otherwise aware of the following shareholders who were directly or indirectly interested in 3% or more of the voting rights in the Company's issued share capital: | Holder | % of voting rights 30 June 2023 | % of voting rights 29 September 2023 | | --- | --- | --- | | British Business Bank Finance Ltd | 13.94 | 14.07 | | Schroders Plc | 12.25 | 12.19 | | RBC Brewin Dolphin | 6.78 | 6.65 | | RBC Dominion Securities%Inc | 5.22 | 5.27 | | Hargreaves Lansdown Asset Mgmt | 4.71 | 5.00 | | Airbus Defence & Space Limited | 3.66 | 3.69 | ## DIRECTORS The names and biographical details of the Directors at the date of this Report are shown on pages 90 and 91. Details of the interests of the Directors and their connected persons in the Company's ordinary shares, the Directors' remuneration policy and their remuneration can be found in the Directors' Remuneration Report on pages 118 to 120. No Director has a service contract with the Company and there are no agreements between the Company and its Directors providing for compensation for loss of office. The rules concerning the appointment and replacement of Directors are contained in SSIT's Articles of Association and the Companies Act 2006. Further details are provided in the Corporate Governance Report on page 107. In line with the AIC Code and the Company's Articles of Association all of the Directors are retiring at the forthcoming AGM and each offers themself for re-election. The Chair confirms that, following formal performance evaluation, all the Directors continue to be effective and their contribution is valuable and they demonstrate full commitment to and independence in their roles. The Board considers each Director to be independent of the Investment Manager and each has the full support of the Board in standing for re-election. 96 Seraphim Space Investment Trust PLC --- CORPORATE GOVERNANCE # DIRECTORS' REPORT (continued) ## DIRECTORS' INSURANCE AND INDEMNIFICATION Directors' and officers' liability insurance cover is in place in respect of the Directors and was in place throughout the year. The Company's Articles of Association provide that the Company may, subject to the Companies Act 2006 and other applicable UK legislation for the time being in force affecting the Company, indemnify any person who is a Director of the Company against (a) any liability whether in connection with any negligence, default, breach of duty or breach of trust by that person in relation to the Company or any associated company or (b) any other liability incurred by or attaching to that person in the actual or purported execution and/or discharge of that person's duties and/or the exercise or purported exercise of that person's powers and/or otherwise in relation to or in connection with that person's duties, powers or office. ## RELATED PARTY AND INVESTMENT MANAGER TRANSACTIONS The Company's transactions with related parties during the year were with its Directors. There were no material transactions between the Company and its Directors during the year other than the amounts paid to them in respect of Directors' remuneration for which there were no outstanding amounts payable at the year end. In relation to the provision of services by the Investment Manager, other than fees payable by the Company in the ordinary course of business, there were no transactions with the Investment Manager affecting the financial position of the Company during the year. Details of amounts paid to the Investment Manager during the year may be found in note 4 to the financial statements on page 143. There were no amounts outstanding to the Investment Manager at 30 June 2023. ## RISKS AND RISK MANAGEMENT The principal risks and uncertainties facing the Company are set out on pages 74 to 77. Further details of the Company's key financial risks are set out in note 14 to the financial statements on page 150 to 156. ## ARTICLES OF ASSOCIATION The Company's Articles of Association may only be amended by special resolution at a general meeting of shareholders. ## LISTING RULE 9.8.4 The FCA's Listing Rule 9.8.4 requires the Company to include certain information in a single identifiable section of the Annual Report or a cross reference table indicating where the information is set out. ## WHISTLEBLOWING The Board has considered arrangements by which staff of the Investment Manager or Administrator may, in confidence, raise concerns within their respective organisations about possible improprieties in matters of financial reporting or other matters. It has concluded that adequate arrangements are in place for the proportionate and independent investigation of such matters and, where necessary, for appropriate follow-up action to be taken within their organisations. ## DISCLOSURE OF INFORMATION TO THE COMPANY'S AUDITOR Having made enquiries of the Investment Manager and Administrator, each of the Directors confirms that, at the date of approval of this Report: - as far as they are aware, there is no relevant audit information of which the Auditor is unaware; and - they have taken all the steps a Director might reasonably be expected to have taken to be aware of any relevant audit information and to establish that the Auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the companies Act 2006. Annual Report and Financial Statements 97 --- CORPORATE GOVERNANCE # DIRECTORS' REPORT (continued) ## INDEPENDENT AUDITOR The Directors will propose the re-appointment of BDO LLP as the Company's Auditor and resolutions concerning this and to authorise the Audit Committee to determine the Auditor's remuneration will be proposed at the forthcoming AGM. ## ANNUAL REPORT As disclosed in the Audit Committee Report on pages 110 to 113, after due consideration the Audit Committee concluded that the Annual Report, taken as a whole, is fair, balanced and understandable. Therefore, the Board is of the opinion that the Annual Report provides the information necessary for shareholders to assess the position and performance, strategy and business model of the Company. ## EVENTS AFTER THE BALANCE SHEET DATE On 13 July 2023, the Board announced a share repurchase programme to mitigate the effect of the substantial discount experienced by the Company. In the period to 13 October 2023, the Company bought back 2,186,344 shares pursuant to the share repurchase programme announced. There have been no other significant events since 30 June 2023. ## 2023 AGM A separate notice convening the Company's 2023 AGM will be sent to shareholders in due course. The notice will include an explanation of the resolutions to be considered at the AGM. A copy of the notice will also be published on the Company's website (https://investors.seraphim.vc). We believe that all the resolutions to be proposed at the AGM are in the best interests of shareholders as a whole and therefore recommend shareholders to vote in favour of them as we will be doing with our own holdings. ## APPROVAL This Directors' Report was approved by the Board on 16 October 2023. On behalf of the Board: **WILL WHITEHORN** Chair 16 October 2023 98 Seraphim Space Investment Trust PLC --- CORPORATE GOVERNANCE # CORPORATE GOVERNANCE REPORT The Board aims to promote SSIT’s long term sustainable success and ensure that SSIT is run in a manner that is consistent with our beliefs in integrity, fairness, transparency and diligence. This is achieved through the application and maintenance of the highest standards of corporate governance. ## CORPORATE GOVERNANCE FRAMEWORK AND COMPLIANCE The FCA’s Disclosure Guidance and Transparency Rules (the ‘Disclosure Rules’) require listed companies to disclose how they have applied the principles and complied with the provisions of the UK Corporate Governance Code issued by the Financial Reporting Council (the ‘FRC’) in July 2018 (the ‘UK Code’). The UK Code can be viewed at www.frc.org.uk. The related Code of Corporate Governance issued by the Association of Investment Companies (the ‘AIC’) in February 2019 (the ‘AIC Code’) addresses the principles and provisions set out in the UK Code, as well as setting out additional provisions on issues that are of specific relevance to listed closed-ended investment companies, such as the Company. The AIC Code is available on the AIC website (www.theaic.co.uk). It includes an explanation of how the AIC Code adapts the principles and provisions set out in the UK Code to make them relevant for listed closed-ended investment companies. The FRC has endorsed the AIC Code and confirmed that AIC member companies who report against the AIC Code will be meeting their obligations in relation to the UK Code and the associated disclosure requirements of the Disclosure Rules. The Company is a member of the AIC and the Board considers that reporting against the principles and provisions of the AIC Code provides more relevant information on the Company’s governance arrangements to shareholders than reporting against the principles and provisions of the UK Code. The Board operates under a governance framework which is consistent with the principles and provisions of the AIC Code. This Report describes how the Company applies those principles and provisions. The Audit, Management Engagement and Remuneration and Nomination Committee Reports on pages 110 to 117 form part of this Report. The Board confirms that the Company complied with the relevant principles and provisions of the AIC Code during the year. As an externally managed investment company, the Company has no employees and all its substantive operations are conducted on its behalf by its third-party service providers. Consequently, the Company has not complied with the provisions in the UK Code relating to the role of the chief executive, executive directors’ remuneration and the need for an internal audit function. However, the Audit Committee considers the need for an internal audit function at least annually (see page 112 for further information). ## BOARD LEADERSHIP AND PURPOSE ### Role of the Board The Board is collectively responsible for promoting the long-term sustainable success of the Company, generating value for shareholders whilst having regard to the interests of wider society. The Board’s role is to provide leadership and direction within a robust framework of risk management and internal controls. It sets the Company’s strategic objectives (subject to the Company’s Articles of Association and such approval of the shareholders in general meeting as may be required from time to time) and ensures that the necessary resources are in place to enable the Company’s objectives to be met. In managing the Company, the aim of both the Board and the Investment Manager is always to ensure SSIT’s long-term sustainable success and, therefore, the likely long-term consequences of any decision are a key consideration. The Investment Manager’s Responsible Investment Policy is integrated into its investment process, ensuring that it has regard to the interests of wider society in managing SSIT’s portfolio. ### Company purpose and strategy The Company’s purpose is to provide a vehicle through which a broad range of investors can gain exposure to a diversified, international portfolio of predominantly early and growth stage privately financed SpaceTech businesses that have the potential to dominate globally and are category leaders with first mover advantages Annual Report and Financial Statements 99 --- CORPORATE GOVERNANCE # CORPORATE GOVERNANCE REPORT (continued) in areas such as climate change, sustainability, communications, mobility and security (including cyber security). The Company seeks to generate capital growth over the long term for shareholders. Operating as an externally managed investment company, SSIT seeks to fulfil its purpose by delegating operational matters to specialist third-party service providers, subject to oversight by the Board. In particular, the Investment Manager and Administrator are responsible for implementing the Company's strategy and managing the Company's day-to-day operations, respectively. The Company's success is based on such implementation and management being effective. The Board's strategy is, therefore, to work closely with the Investment Manager and Administrator in a long-term relationship designed to foster an environment that is consistent with SSIT's culture and values and contributes to achieving SSIT's strategic objectives. ## Culture and values As an externally managed investment company, SSIT's culture and values are the product of the behaviours of both the Board and the Investment Manager and the way in which they interact with each other and with the Company's other stakeholders. The Board operates in an open, respectful and inclusive manner, where differences of perspective are welcomed and constructive challenge is encouraged. Advice and input are sought from external advisers and others, as required, to ensure a broad range of views are available and to guard against groupthink. As noted in more detail under 'Section 172: Engaging with Stakeholders' on pages 82 to 87, the Board seeks to engage with its Investment Manager, Administrator and other key stakeholders in a constructive and collaborative manner. The Investment Manager has established an organisation driven by purpose where its employees are united by a passion to work with the most impactful companies in the SpaceTech sector. The Investment Manager strives to develop a culture of candour and openness, with employees empowered to innovate and work autonomously. Value is placed on output (the quality of work produced) rather than input (the number of hours logged). Team cohesion and collaboration are core tenets of the Investment Manager's people strategy. Both the Board and Investment Manager aim to ensure that SSIT is run in a manner that is consistent with their beliefs in integrity, fairness, transparency and diligence and responsive to the views of the Company's shareholders and other stakeholders. Both seek to maintain high standards of business conduct at all times. We believe that the culture and values of the Board and Investment Manager encourage constructive and robust challenge and debate, generate strong collective wisdom and ultimately lead to good decision making, all of which are important to the successful implementation of the Company's strategy. Recognising the importance of culture and values, the Board monitors them on an ongoing basis. They are also formally reviewed as part of the annual Board and Investment Manager evaluation process. ## Conflicts of interest Directors have a duty to avoid situations where they have, or could have, a direct or indirect interest that conflicts, or possibly could conflict, with the Company's interests ('conflict situations'). As permitted by the Companies Act 2006, the Company's Articles of Association allow the Directors to authorise conflict situations, where appropriate. The Board has a procedure in place to deal with conflict situations. As part of this process, Directors must submit any actual or potential conflict situations they may have to the Board for approval as soon as possible. In deciding whether to approve a conflict situation, the Board will act in a way it considers, in good faith, will be most likely to promote the Company's success, taking into consideration whether the Director's ability to act in accordance with their wider duties is affected. The Company Secretary maintains the register of approved conflict situations (which also includes a list of other external positions held). Directors have a duty to keep the Board updated about any changes to their approved conflict situations. In certain circumstances the conflicted Director may be required to absent themself from discussions or decisions on the matter on which they are conflicted (in which event, the Director will not be counted when determining whether the meeting is quorate). No such circumstances arose in the year. None of the Directors have, or have had, any potential conflicts of interest of the nature listed in provisions 6 and 12 of the AIC Code. 100 Seraphim Space Investment Trust PLC --- CORPORATE GOVERNANCE # CORPORATE GOVERNANCE REPORT (continued) The Board also has a procedure in place to manage potential conflicts of interest of the Investment Manager. These can arise, for example, where share options and/or warrants have been granted to an affiliate of the Investment Manager by a participant in an accelerator programme run by that affiliate and the Company subsequently has the opportunity to invest in the participant. In such instances, only the independent advisory committee members of the Investment Manager's Investment Committee (listed on page 94) consider the investment at the Investment Committee meeting, and the final stage of the Board's conflict management process requires any such investment to be approved by the Board before it is made. During the year, the Board approved investments in 2 companies (£2.3m of investments in aggregate) in former accelerator programme participants (for further information, see 'Examples of Stakeholder Considerations' on page 86). ## DIVISION OF RESPONSIBILITIES The Board has overall responsibility for the Company's activities. However, the Company has delegated or outsourced various matters to its standing Committees and key service providers, most notably the Investment Manager and the Administrator, all of which operate within clearly defined terms of reference or agreements that set out their roles, responsibilities and authorities. ### Board The Board's principal responsibilities include: - determining the Company's strategic objectives; - overseeing the execution of the Company's strategy, business conduct and implementation of its key investment, financial, operational and compliance policies, ensuring they are aligned with SSIT's purpose and strategy and the Board's culture and values and that any necessary corrective action is taken; - ensuring that appropriate internal controls and risk management frameworks are in place to enable risk to be managed and continually assessed; - scrutinising the performance of the Investment Manager, Administrator and other key service providers and holding them to account; - ensuring effective engagement with, and encouraging participation from, shareholders and other key stakeholders; and - providing constructive challenge and strategic guidance and offering specialist advice. The Board's responsibilities for this Annual Report are set out in the Directors' Responsibility Statement on page 121. Matters not delegated or outsourced to Committees and key service providers are reserved for consideration and approval by the Board (including those matters listed in a formal schedule of reserved matters approved by the Board), thus enabling the Board to maintain full and effective control over appropriate strategic, financial, operational and compliance issues. The reserved matters include: - approving SSIT's long-term objectives and any matters of a strategic nature, including any change in investment objective, policy and restrictions, including those which may need to be submitted to shareholders for approval; - the appointment and removal of key service providers and any material amendments to the Company's agreements with them; - approval of any other material contracts and agreements entered into, varied or terminated; - approving any transactions with related parties; - approval of quarterly and any ad hoc NAV and other financial announcements; - approval of the Company's operating and marketing budgets; - the Company's corporate governance arrangements; and - approving any actual or potential conflicts of interest, including any potential investments in respect of which the Investment Manager may have a potential conflict of interest. The full schedule of matters reserved for the Board is available on the Company's website (https://investors.seraphim.vc/). Annual Report and Financial Statements 101 --- CORPORATE GOVERNANCE # CORPORATE GOVERNANCE REPORT (continued) The primary focus at Board meetings is a review of investment performance and associated matters (such as new investments, progress of portfolio companies, investment pipeline, projected cash flow and market environment), share price discount/premium, investor relations, industry issues, legal and regulatory (including corporate governance) developments and principal and emerging risks and uncertainties, in particular those identified in the Strategic Report on pages 1 to 87. ## Chair The Chair is Will Whitehorn. His primary role as Chair is to provide leadership to the Board. The principal responsibilities of the Chair include: - ensuring the overall effectiveness of the Board in directing the Company; - taking a leading role in setting the Company's strategic objectives; - facilitating open, honest and constructive debate among Directors and the effective contribution of all Directors; - ensuring the Company is meeting its responsibilities to shareholders and wider stakeholders; and - engaging with shareholders to ensure that the Board has a clear understanding of their views. Full details of the role and responsibilities of the Chair are available on the Company's website (https://investors.seraphim.vc/). ## Senior Independent Director The Senior Independent Director is Sue Inglis. Her primary responsibilities as such are to serve as a sounding board for the Chair, act as an intermediary for other Directors and be available to respond to shareholders' concerns if they cannot be resolved through the normal channels of communication (i.e. through the Chair). The Senior Independent Director leads the annual evaluation of the Chair. Full details of the role and responsibilities of the Senior Independent Director are available on the Company's website (https://investors.seraphim.vc/). ## Board Committees The Board has three standing Committees, being the Audit Committee, Management Engagement Committee and Remuneration and Nomination Committee: The roles and responsibilities of the Committees are included in their respective Reports on pages 110 to 117 and the terms of reference of each Committee are available on the Company's website (https://investors.seraphim.vc/). The Committees review their terms of reference at least annually, with any proposed changes recommended to the Board for approval. Committee Chairs will attend AGMs to answer any questions on each of their Committees' activities. In addition, Committee Chairs will seek engagement with shareholders on significant matters related to their areas of responsibility. The Board may also establish additional Committees from time to time to take operational responsibility on specific matters. These Committees ensure that key matters are dealt with efficiently. ## Investment Manager The Investment Manager is the Company's alternative investment fund manager ('AIFM') for the purpose of the EU AIFM Directive as incorporated into UK legislation. The Investment Management Agreement dated 22 June 2021 between the Company and the Investment Manager (the 'IMA') sets out the matters in respect of which the Investment Manager has authority and responsibility, subject to the overall control and supervision of the Board. These include the Investment Manager having full discretion in relation to SSIT's portfolio management activities in accordance with SSIT's investment policy and any other restrictions imposed by the IMA or the Board from time to time. The Investment Manager is also responsible for promoting the Company's investment proposition to professional and retail investors. In advance of Board meetings, the Investment Manager provides regular reports, which include operating updates on the Company's investments, information on potential new investment opportunities, cash flow forecasts and other financial information and other relevant information. Senior representatives of the Investment Manager attend Board meetings. The Investment Manager is responsible for keeping the Board informed, in a timely manner, of any material developments arising from its portfolio management activities or other relevant matters, including interactions with shareholders and other key stakeholders. Under the IMA, the Investment Manager is entitled to management and performance fees, details of which are included in note 4 to the financial statements on page 143. The Investment Manager's appointment is terminable by the Company or Investment Manager on 102 Seraphim Space Investment Trust PLC --- CORPORATE GOVERNANCE # CORPORATE GOVERNANCE REPORT (continued) not less than 12 months' notice, such notice to expire on or at any time after the third anniversary of SSIT's launch (14 July 2021). The IMA may be terminated with immediate effect on the occurrence of certain events. ## Administrator/Company Secretary The Company has appointed the Administrator to provide fund accounting, company secretarial and other administrative services. The Administrator's responsibilities include: - undertaking the day-to-day financial and administration functions of the Company, including calculation of the NAV and maintenance of the Company's accounting and statutory records; - providing the company secretarial functions required by the Companies Act 2006; - ensuring that the Company complies with applicable laws, rules and regulations, including laws and regulations applicable to investment trusts and the rules of the FCA and London Stock Exchange; - advising on governance matters; - supporting the Board to ensure that it has the policies, processes and information it needs to function effectively and efficiently; - ensuring that Board procedures are followed; and - facilitating the flow of information between the Board, Committees, Investment Manager and other service providers. In advance of Board meetings, the Administrator provides regular reports, which include financial and other operational information, details of any breaches or complaints and relevant legal and regulatory, corporate governance and other technical updates. The Administrator is responsible for keeping the Board informed, in a timely manner, of any material developments regarding matters within the scope of its role and responsibilities. ## BOARD AND COMMITTEE MEETINGS Regular Board and Committee meetings are scheduled throughout the year (Board: four; Audit Committee: four; Management Engagement Committee: one; Remuneration and Nomination Committee: one). In addition, the Board and Committees meet between scheduled meetings in preparation for or follow-up after scheduled meetings and any other matters that may arise between scheduled meetings. The Company also holds an annual strategy meeting to enable the Directors to consider strategic matters outside of scheduled quarterly Board meetings. The Company Secretary assists the Board and Committee Chairs in agreeing the agenda in sufficient time before the meeting to allow input from key stakeholders. Care is taken to ensure that papers are presented clearly and with the appropriate level of detail to assist the Board and Committees in discharging their duties. The Board uses a web-based system which provides ready access to Board and Committee papers and materials. Prior to each Board and Committee meeting the Directors receive the agenda and supporting papers through this system to ensure that they have all the latest and relevant information in advance of the meeting to enable them sufficient time to prepare properly for the meeting and to make further enquiries about any matter prior to the meeting, should they so wish. This also allows any Director who is unable to attend to submit views in advance of the meeting. The Investment Manager, the Administrator and, as required, the Company's other key service providers are expected to be present at formal Board and Committee meetings unless identified conflicts require otherwise. Due to its size the Board has deemed it appropriate for all Directors to be members of all Committees. When running meetings, the Chair or Committee Chair maintains a collaborative atmosphere and ensures that all Directors have the opportunity to contribute to the debate. The Directors are able to voice their opinions in a calm and respectful environment, allowing coherent discussion. The proceedings at all Board and Committee meetings are fully recorded, including any Director's concerns, in the minutes. After each Board and Committee meeting, the Company Secretary operates a follow-up procedure to ensure that actions are completed as agreed by the Board or Committee. Annual Report and Financial Statements 103 --- CORPORATE GOVERNANCE # CORPORATE GOVERNANCE REPORT (continued) The number of scheduled meetings during the year, and the attendance of the individual Directors at those meetings, is shown in the table below. | | Board | Audit Committee | Remuneration and Nomination Committee | Management Engagement Committee | | --- | --- | --- | --- | --- | | **Number of meetings** | **4** | **2** | **1** | **1** | | Will Whitehorn | 4 | 2 | 1 | 0^{(1)} | | Sue Inglis | 4 | 2 | 1 | 1 | | Christina McComb | 4 | 2 | 1 | 1 | | Angela Lane | 4 | 2 | 1 | 1 | $^{(1)}$ Mr Whitehorn was unable to be present at the Management Engagement Committee meeting held on 15 May 2023 but was briefed on the outcomes of the meeting by the Chair of this Committee shortly after the meeting. In addition to the scheduled meetings and the annual strategy meeting, there were nine ad hoc Board and Committee meetings during the year. These meetings were convened to conclude a number of matters previously discussed at scheduled meetings and deal with matters arising between scheduled meetings, as well as, to consider the Investment Manager's preliminary reports on proposed portfolio valuations. Prior to ad hoc meetings, the Directors receive the agenda and supporting papers. Typically, all Directors attend ad hoc meetings, although this is not always feasible or necessary and Directors who are unable to attend a meeting can communicate their views ahead of the meeting. ## BOARD COMPOSITION AND SUCCESSION ### Board composition and independence At the date of this Report, the Board consists of four non-executive Directors, all of whom are (and were on appointment) independent of the Investment Manager. Each of the Directors is (and was on appointment) independent when assessed against the circumstances set out in provision 13 of the AIC Code. The current Board was selected to bring a breadth of skills, experience and knowledge relevant to the Company's structure and strategy. Three of the Directors were appointed prior to the IPO and the fourth joined the Board on 1 January 2022. Details of the Directors, including their skills and experience, are set out on pages 90 and 91. The composition of the Board is a fundamental driver of its success as the Board must provide strong and effective leadership of the Company without any one individual or small group dominating the decision-making. The strong and diverse mix of experienced individuals on the current Board enables high calibre debate and constructive challenge. The Board is able to use the skills, experience and knowledge of the individual Directors to their maximum potential and make decisions that are in the best long-term interests of the Company. The Board's tenure, succession and diversity policies seek to ensure that the Board continues to be well-balanced and refreshed by the appointment of new Directors with the necessary skills, experience, knowledge and personal qualities and who can bring fresh perspectives. ### Board diversity The Board acknowledges the importance of diversity as a key driver of effectiveness and strongly believes that having diversity in skills, experience, identity and cognitive thought has significant benefits when making decisions. The Board currently comprises four independent Directors appointed on merit-based qualifications. The skills and experience which the current members of the Board bring to SSIT's leadership are described on pages 90 and 91. The Board supports the progress being made under the direction of the FCA's guidance to improve the governance of listed companies by increasing both gender and racial diversity amongst the directors who serve these businesses. 104 Seraphim Space Investment Trust PLC --- CORPORATE GOVERNANCE # CORPORATE GOVERNANCE REPORT (continued) As at 30 June 2023, our Board composition exceeded the revised gender targets which require at least 40% of the Board to be women and met the target that at least one of the senior Board positions be filled by a woman. Currently, the Board has 75% female representation and the Senior Independent Director (Sue Inglis) is also female. REPORTING TABLE ON GENDER REPRESENTATION AT 30 JUNE 2023 | | Number of Board members | Percentage of the Board | Number of senior positions on the Board (Chair and Senior Independent Director) | | --- | --- | --- | --- | | Men | 1 | 25% | 1 | | Women | 3 | 75% | 1 | | Other categories | - | - | - | | Not specified/prefer not to say | - | - | - | Given the current tenure, knowledge and experience of our relatively small Board and the fact that the Company is in an early stage, it does not currently have at least one member of the Board from a minority ethnic background (contrary to the FCA's target for listed companies). Further consideration will be given to these targets when implementing future succession plans. REPORTING TABLE ON ETHNICITY REPRESENTATION AT 30 JUNE 2023 | | Number of Board members | Percentage of the Board | Number of senior positions on the Board (Chair and Senior Independent Director) | | --- | --- | --- | --- | | White British or other White (including minority-white groups) | 4 | 100% | 2 | | Mixed/Multiple Ethnic groups | - | - | - | | Asian/Asian British | - | - | - | | Black/African/Caribbean/Black British | - | - | - | | Other ethnic group, including Arab | - | - | - | | Not specified/prefer not to say | - | - | - | The Board will keep under review and evaluate its balance and composition to ensure that both it and its Committees have the appropriate mix of skills, experience, independence and knowledge to ensure their continued effectiveness. In doing so, the Board will consider diversity, including age, gender, ethnicity, educational and professional backgrounds and cognitive and personal strengths amongst other relevant factors. ## Appointments to the Board The Remuneration and Nomination Committee reviews at least annually the composition of the Board and its Committees, including the balance of skills, experience, knowledge, diversity (including age, gender, social and ethnic backgrounds and cognitive and personal strengths) and length of service, and makes recommendations to the Board when it considers that a new Director should be recruited. Annual Report and Financial Statements 105 --- CORPORATE GOVERNANCE # CORPORATE GOVERNANCE REPORT (continued) Once a decision has been taken by the Board to recruit a new Director, the Remuneration and Nomination Committee oversees the recruitment process. At the outset, the Committee reviews the current balance and diversity of the Board, identifies any specific skills, experience, knowledge and personal qualities that are required to ensure the continued effective operation of the Board and then sets objective selection criteria to ensure a formal and transparent appointment process. The Remuneration and Nomination Committee intends to use non-executive director recruitment consultants and/or open advertising when recruiting new Directors. Following the creation of a shortlist of candidates, the decision-making process will be based on merit, with due consideration of the objective selection criteria identified. When considering new appointments, the Committee also takes into account other demands on the candidates' time. In advance of joining the Board, successful candidates will be asked to disclose any existing significant commitments with an indication of the time involved and to confirm that they are able to allocate sufficient time to the business of the Company and that there are no situations where they have, or could have, a direct or indirect interest that conflicts, or possibly could conflict, with the Company's interests. Directors are not appointed for any specific term and are subject to election at the first AGM following their appointment and, thereafter, annual re-election at AGMs. Directors' appointments are reviewed by the Remuneration and Nomination Committee ahead of their submission for re-election, with submission being contingent on satisfactory performance evaluation. Directors may resign by notice in writing to the Board at any time. At the time of appointment, a new Director receives a letter of appointment that sets out their duties and obligations. Copies of the letters of appointment of the current Directors are available for inspection at the Company's registered office and at each AGM. ## Board induction and training New Directors will receive an induction on joining the Board covering the Company's strategy, policies, operational structure and governance, which will be coordinated by the Company Secretary. In addition, new Directors will be briefed fully about the Company's strategy and portfolio by the Investment Manager. The Company Secretary is charged with assisting in the ongoing training and development of all Directors, including providing the Directors with details of the Company's regulatory and statutory obligations (and changes thereto). Directors are able to receive training or additional information on any specific subject pertinent to their role as a Director that they request or require. The Directors are encouraged to participate generally in industry events and to attend any other relevant seminars and conferences, if necessary at the Company's expense. ## Information and support To enable the Board to function effectively and the Directors to discharge their responsibilities, the Directors are regularly updated, in a timely manner, on investment, financial, investor and other stakeholder engagement and other matters. In addition to periodic reporting at scheduled Board and Committee meetings, the Directors receive, and may request, ad hoc additional information from the Investment Manager, Administrator and other key service providers. The Directors also maintain regular engagement, through formal meetings and calls as well as informal communications, with the Investment Manager, Administrator and other key service providers. This active engagement creates an open and collaborative culture that ensures that we have a thorough understanding of the Company's business and facilitates our robust scrutiny and constructive challenge of the activities and performance of, in particular, the Investment Manager and Administrator. The Directors have access to the advice and services of the Company Secretary. The Company Secretary is responsible for facilitating good and timely information flows within the Board and its Committees and between Directors and the Investment Manager. There is a procedure in place for Directors to take independent professional advice at the Company's expense should this be required to aid them in their duties. ## Time commitment All Directors are aware of the need to allocate sufficient time to the Company in order to discharge their responsibilities effectively. Directors must obtain prior approval from the Board when they take on any additional external appointments and it is their responsibility to ensure that such appointments will not prevent them meeting their time commitments to the Company. 106 Seraphim Space Investment Trust PLC --- CORPORATE GOVERNANCE # CORPORATE GOVERNANCE REPORT (continued) Where a significant additional external appointment is approved by the Board, the reasons for permitting the appointment will be explained in the Annual Report. ## Election and re-election by shareholders Directors are required to stand for election at the first AGM following their appointment and annual re-election at each subsequent AGM. A Director who retires at an AGM may, if willing to continue to act, be elected or re-elected at that meeting. If, at a general meeting at which a Director retires, the Company neither re-elects that Director nor appoints another person to the Board in the place of that Director, the retiring Director shall, if willing to act, be deemed to have been re-elected unless at the general meeting it is resolved not to fill the vacancy or unless a resolution for the re-election of the Director is put to the meeting and not passed. All of the Directors will retire at the forthcoming AGM and are willing to continue to act. Having considered their effectiveness, demonstration of commitment to the role, attendance at meetings and contribution to the Board's and Committees' deliberations, the Board has approved the nomination for re-election of all of the Directors. ## Board tenure The Board's policy on Director, including Chair, tenure is that a Director should normally serve no longer than nine years but, where it is in the best interests of the Company, its shareholders and other stakeholders, a Director may serve for a limited time beyond that. The Board believes that the continuity of experience and knowledge of its Directors is important and that a suitable balance requires to be struck with the need for refreshing of the skills and experience of the Board. The Board believes that some limited flexibility in its approach to Director, including Chair, tenure will enable it to manage succession planning more effectively. The Board also believes that Directors with more than nine years' service can still form part of an independent majority. In the event that any Director, including the Chair, shall have been (or on re-election would be) in office for nine years or more the Company will consider whether there is a risk that such a Director might reasonably be deemed to have lost independence through such long service. In the event of a Director being in office for nine years or more at the AGM at which their re-election is to be proposed, the Board will include an explanation in the relevant Annual Report or notice convening the next AGM as to its reasoning for recommending re-election notwithstanding the length of tenure. As the Company was incorporated on 14 May 2021, no issues regarding long tenure have arisen to be considered by the Board. ## Succession planning The aim of the Company's succession plan is: - to preserve continuity by phasing the retirement of the original Directors so that they do not all retire at once after serving nine years; and - to ensure the Board's skills and experience are regularly refreshed and the benefits of a truly diverse Board are further enhanced, in terms of age, gender and diversity of background and thought. Succession planning is explained in more detail in the Remuneration and Nomination Committee report on page 117. ## ANNUAL PERFORMANCE EVALUATIONS ### Board, Committees, Chair and individual Directors Details on the annual evaluations of the Board, its standing Committees, the Chair and individual Directors, conducted by the Remuneration and Nomination Committee, are included in that Committee's Report on pages 116 and 117. Having considered the Committee's report and recommendations, the Board accepted all of the Committee's recommendations. ### Investment Manager Details on the annual evaluation of the Investment Manager, conducted by the Management Engagement Committee, are included in that Committee's Report on pages 114 and 115. Having considered the report and recommendation from the Management Engagement Committee, the Board believes that the continued appointment of the Investment Manager on the terms agreed is in the interests of the shareholders as a whole. Annual Report and Financial Statements 107 --- CORPORATE GOVERNANCE # CORPORATE GOVERNANCE REPORT (continued) ### **Administrator and other key service providers** Information on the annual evaluations of the Administrator and other key service providers is included in the Management Engagement Committee Report on page 115. Having considered the Committee's report and recommendations, the Board accepted all of the Committee's recommendations. ### **DIRECTORS' REMUNERATION** The Directors' Remuneration Report on pages 118 to 120 includes the Directors' remuneration policy and details of the remuneration of each Director. ### **RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS** A critical factor in achieving the long-term sustainable success of the Company is understanding the risks that the Company faces and ensuring that controls are in place to manage and mitigate them. The Company's principal and emerging risks, together with details of how we seek to manage and mitigate them, are set out in the Strategic Report on pages 1 to 87. The Company's financial risks are discussed in note 14 to the financial statements on pages 150 to 156. ### **Responsibility for, and effectiveness of, risk management and internal controls** The Board is responsible for determining the nature and extent of the principal and emerging risks the Company is willing to take in order to achieve its long-term strategic objectives. The Board is also responsible for maintaining the Company's systems of risk management and internal controls (such as financial, operational and compliance controls). The AIC Code requires the Board to review the effectiveness of the Company's systems of risk management and internal controls at least annually. The Board has established an ongoing process for identifying, evaluating and managing the principal and emerging risks faced by the Company. The Board, through the Audit Committee, has established, in conjunction with the Investment Manager and Administrator, an ongoing process designed to meet the particular needs of the Company in identifying, evaluating and managing the risks to which it is exposed. The process accords with the Financial Reporting Council's 'Guidance on Risk Management, Internal Control and Related Financial and Business Reporting'. The process was in operation throughout the year and up to the date of this Report. The system is designed to meet the specific risks faced by the Company and takes account of the nature of the Company's reliance on the Investment Manager, Administrator and other key service providers and their internal controls. The process therefore manages rather than eliminates the risk of failure to achieve the Company's business objectives and provides reasonable, but not absolute, assurance against material misstatement or loss. At its October 2023 meeting, the Audit Committee carried out an annual assessment of the Company's risk management and internal controls for the year and taking account of events since 30 June 2023. The Committee determined that the risk management and internal controls were operating effectively and as expected, and the results of the assessment were then reported to the Board at the following Board meeting. Based on the ongoing work of the Audit Committee in monitoring the risk management and internal control systems on behalf of the Board and the Audit Committee's report to the Board on its findings and conclusions regarding those systems, the Board: - is satisfied that it has carried out a robust assessment of the principal and emerging risks facing the Company, including those that could threaten its business model, future performance, solvency, liquidity or reputation; and - has reviewed the adequacy and effectiveness of the risk management and internal control systems and no significant failings or weaknesses were identified. ### **Risk management and internal control systems** The Company's risk management and internal control systems are designed to identify, manage and mitigate on a timely basis both the principal and emerging risks inherent to the Company's business and activities and safeguarding the Company's assets. The Company has a risk-based approach to risk management and internal controls through a detailed matrix that identifies each of the key risk areas associated with the Company's business and activities and the controls employed to minimise and mitigate those risks. The Audit Committee is responsible for monitoring and regularly reviewing the Company's risk management and internal control systems, including the risk matrix, and reports its findings and conclusions to the Board. Where changes in risk are identified during the year, the risk matrix is 108 Seraphim Space Investment Trust PLC --- CORPORATE GOVERNANCE # CORPORATE GOVERNANCE REPORT (continued) updated as appropriate and an assessment made as to whether further action is required to manage the changes identified. The risk matrix was reviewed and updated by the Audit Committee, and approved by the Board, during the year. The Company has delegated its day-to-day activities to the Investment Manager and Administrator and has clearly defined their roles, responsibilities and authorities. The Investment Manager and Administrator have their own risk management and internal control systems. The Investment Manager, which is regulated by the FCA, and Administrator both operate risk-controlled frameworks on an ongoing basis. The Administrator has an annual type 2 report produced under the International Standard on Assurance Engagements (ISAE) 3402. This entails an independent rigorous examination and testing of its controls and processes. The Board oversees the ongoing performance and actions of the Investment Manager and Administrator at its scheduled quarterly meetings and, as required, at ad hoc meetings. At each quarterly Board meeting, the Investment Manager reports on the performance and valuation of the Company's investments, activities since the last Board meeting, any specific new risks identified relating to the Company's portfolio and cash projections and the Administrator reports on the Company's corporate activity and financial, compliance, governance, legal and regulatory matters. The Board also receives updates from the Investment Manager and Administrator on material developments affecting the Company's business, activities or investments between quarterly Board meetings. The Board, Investment Manager and Administrator, together, review all financial performance and results notifications. The Investment Manager reports to the Board twice a year regarding the Company's longer-term viability, which includes financial sensitivities and stress testing of the business to ensure that the adoption of the going concern basis is appropriate. The Company is ultimately dependent upon the quality and integrity of the management and staff of the Investment Manager and Administrator. In each case, qualified and able individuals have been selected at all levels. The Investment Manager and Administrator are aware of the risk management and internal controls relevant to their activities and are collectively accountable for the operation of those controls. Each year a detailed review of the quality of services and performance of the Investment Manager, Administrator and other key service providers pursuant to their terms of engagement is undertaken by the Management Engagement Committee. ## INTERNAL AUDIT FUNCTION For the reasons stated in the Audit Committee Report on page 112, the Board does not currently consider that an internal audit function is required. ## RELATIONS WITH SHAREHOLDERS AND OTHER STAKEHOLDERS We place great importance on communication with shareholders, as well as with the Investment Manager, Administrator and other key stakeholders. Details of our engagement with all of the Company's key stakeholders and examples of how we had regard to those stakeholders in our decision-making processes during the year are set out in the Strategic Report on pages 82 to 87. In addition, the Chairs of the Board's standing Committees will seek to engage with shareholders on significant matters related to their areas of responsibility. The Board recognises that relationships with suppliers are enhanced by prompt payment and the Administrator, in conjunction with the Investment Manager, ensures all payments are processed within the contractual terms agreed with the individual suppliers. ## APPROVAL This Corporate Governance Report was approved by the Board on 16 October 2023. On behalf of the Board: **WILL WHITEHORN** Chair 16 October 2023 Annual Report and Financial Statements 109 --- CORPORATE GOVERNANCE # AUDIT COMMITTEE REPORT The Audit Committee consists of all Board members and is currently chaired by Ms Lane, who succeeded Ms McComb as Chair of the Audit Committee following the conclusion of the Company's AGM on 17 November 2022. The AIC Code permits the Chair of the Board to be a member of the Audit Committee. The Board believes that Mr Whitehorn's experience and knowledge is a significant benefit to the Committee. The Committee members have considerable business and financial experience and the Board considers that the membership as a whole has sufficient recent and relevant sector and financial experience to discharge the responsibilities of the Committee. Ms Lane is a Fellow of the Institute of Chartered Accountants in England and Wales. All members of the Committee are independent of the Company's Auditor, Investment Manager and Administrator. The Committee's authority and duties are clearly defined in its written terms of reference which are available on the Company's website (https://investors.seraphim.vc/). The terms of reference include all matters indicated by the FCA's Disclosure Guidance and Transparency Rule 7.1, the AIC Code and the UK Code. The terms of reference are reviewed at least annually. The Committee meets no less than two times a year and at such other times as the Committee Chair shall require. At least once a year the Committee meets with the Auditor without any representative of the Investment Manager or Administrator being present. The Committee's effectiveness is reviewed on an annual basis as part of the Board's performance evaluation process. ## Key Responsibilities - Scrutinising and, where appropriate, challenging the Investment Manager's proposed valuations of SSIT's private company investments. - Monitoring the integrity of SSIT's financial reporting and, where appropriate, challenging the financial reporting judgements of the Investment Manager and Administrator. - Keeping under review the adequacy and effectiveness of SSIT's internal controls, including financial controls and risk management systems. - Considering the ongoing assessment of SSIT as a going concern and assessment of its longer-term viability. - Appointing the Auditor, approving its remuneration, monitoring the extent of any proposed non-audit services and generally overseeing the relationship. - Monitoring the Auditor's independence, objectivity and effectiveness. - Reviewing the performance and quality of the Auditor's audit work. - Reporting to the Board on how the Committee has discharged its responsibilities and making recommendations as appropriate. ## MAIN ACTIVITIES During the year, the Committee held four scheduled meetings and several ad hoc meetings and there was ongoing liaison and discussion between the Auditor, BDO LLP, and the Audit Committee Chair with regard to the audit approach, identified risks and other matters pertinent to the Committee. 110 Seraphim Space Investment Trust PLC --- CORPORATE GOVERNANCE # AUDIT COMMITTEE REPORT (continued) The matters considered, monitored, reviewed and, where appropriate challenged by the Committee during the year included the following: - the terms of reference of the Committee; - the Company's accounting policies and practices; - the Investment Manager's valuation approach and the quarterly valuations of the Company's investments prepared by the Investment Manager; - the Company's key risks, including emerging risks, the risk management systems in place and the Company's risk matrix; - the adequacy and effectiveness of the Company's internal control environment; - whether there is a need for an internal audit function; - the format of the Annual and Interim Reports and financial statements, associated results announcements and related matters; - regulatory changes impacting the Company; - the Financial Reporting Council's latest Annual Audit Quality Inspection Report on BDO LLP; - the independence of the Auditor; - the remuneration and terms of engagement of the Auditor; and - the audit plan of the Auditor for the year. After the year end, the Committee met on 12 October 2023 and 16 October 2023 to consider and review the Annual Report and financial statements and related matters and recommend the Annual Report and financial statements to the Board for approval. The Auditor was invited to attend the Committee meeting on 12 October 2023 and 16 October 2023 and a member of the Committee met with the Auditor without representatives of the Investment Manager or Administrator being present. # FINANCIAL REPORTING The primary role of the Committee in relation to financial reporting is to review, with the Administrator, Investment Manager and Auditor, and report to the Board on the appropriateness of the Annual Report and financial statements and Interim Report, concentrating on, amongst other matters: - the quality and acceptability of accounting policies and practices; - the clarity of the disclosures and compliance with financial reporting standards and relevant financial and governance reporting requirements; - material areas in which significant judgements had been applied or where there had been discussion with the Auditor, including the valuation of unlisted investments and going concern and viability statements; - whether the strategic report included in the Annual Report included a fair review of the development and performance of the business and financial position of the Company, together with a description of the principal and emerging risks and uncertainties that it faces; and - whether the Annual Report and financial statements, taken as a whole, were fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy. To aid its review, the Committee considered reports from the Administrator and Investment Manager and the report from the Auditor on the outcome of its annual audit. # SIGNIFICANT AREAS OF JUDGEMENT CONSIDERED BY THE COMMITTEE The Committee has determined that a key risk of misstatement of the Company's financial statements relates to the valuations of its private company investments held at fair value through profit or loss as they represent a significant proportion of the Company's net assets (82.1% as at 30 June 2023) and since the valuations of these investments require the use of estimates, assumptions and judgements. There is also an inherent risk of management override as the Investment Manager's performance fee is calculated based on NAV (see note 4 to the financial statements on page 143 for details of the performance fee). Whilst the Administrator is responsible for calculating the NAV, the most significant input to calculating the NAV is the valuation of the Company's investments, which are prepared by the Investment Manager and reviewed by the Committee before approval by the Board. Annual Report and Financial Statements 111 --- CORPORATE GOVERNANCE # AUDIT COMMITTEE REPORT (continued) The Company's private company investments are early or growth stage companies. Valuations are prepared in accordance with the IPEV Valuation Guidelines and the Investment Manager's valuation policy, which has been formally reviewed and approved by the Board. The Investment Manager's approach to valuation of investments is outlined in the Investment Manager's Report on page 40 and in notes 2 and 8 to the financial statements on pages 140 and 145 to 147 respectively. The valuation methodology used for each private company investment is reassessed at each valuation date. On a quarterly basis, the Investment Manager provides a detailed analysis of the proposed valuations of the Company's investments with supporting materials. The Committee considers in detail and, as necessary, challenges the analysis and supporting materials, including the methodology and integrity of the valuations, and may request additional information. Once the Committee has satisfied itself that the key estimates, assumptions and judgements used in the valuations are appropriate and that the investments have been fairly valued, it recommends the valuations for approval by the Board. The Auditor has explained the results of its audit work on valuations in the Independent Auditor's Report on pages 124 to 131. There were no adjustments proposed that were material in the context of the Annual Report and financial statements as a whole. ## RISK MANAGEMENT The Board is accountable for carrying out a robust assessment of the principal risks facing the Company, including those threatening its business model, future performance, solvency and liquidity. On behalf of the Board, the Committee reviews the effectiveness of the Company's risk management processes. The Company's risk assessment process and the way in which significant business risks are managed are key areas of focus for the Committee. The work of the Committee during the year was driven primarily by the Company's assessment of its principal and emerging risks as set out in the Strategic Report on pages 74 to 77. The Committee also receives reports from the Investment Manager and Administrator on the Company's risk evaluation process and reviews changes to significant risks identified. No significant weaknesses were identified in the year. ## INTERNAL AUDIT The Committee considers at least once a year whether there is a need for an internal audit function. Currently, the Committee does not consider there to be a need for an internal audit function, on the basis that there are no employees in the Company and all outsourced functions are with parties who have their own internal controls and procedures. The Management Engagement Committee regularly reviews the performance of the key service providers and their risk and control processes. ## AUDITOR BDO LLP was appointed as the Company's Auditor following its incorporation. The reappointment of the Auditor is subject to annual shareholder approval at the AGM. There are no contractual obligations restricting the choice of Auditor and the Company will put the audit services contract out to tender at least every 10 years. In accordance with professional guidelines, the statutory auditor will be rotated at least every five years. The current statutory auditor, Mr Wieder, has completed his second year in the role. To form a view on audit quality and the effectiveness of the external audit process, the Committee reviewed and considered: - the Auditor's fulfilment of the agreed audit plan and variations from it; - discussions or reports highlighting the major issues that arose during the course of the audit; - feedback from the Administrator and Investment Manager evaluating the performance of the audit team, including the robustness of the audit, the level of challenge offered by the audit team, the skills, experience and overall quality of the audit team, the timeliness of delivering the tasks required for the audit and reporting to the Committee and the overall quality of the service; and - the Committee's own observations and interactions with the Auditor. 112 Seraphim Space Investment Trust PLC --- CORPORATE GOVERNANCE # AUDIT COMMITTEE REPORT (continued) The Committee also considered the Auditor's technical competence, understanding of the Company's business and whether it demonstrated an appropriate level of diligence, professional scepticism and challenge. Following this review, the Audit Committee was satisfied that BDO LLP had carried out its duties in a diligent and professional manner and provided a high level of service. The Committee monitors the Auditor's independence through three aspects of its work: - the approval of a policy regulating the non-audit services that may be provided by the Auditor to the Company; - assessing the appropriateness of the fees paid to the Auditor for all work undertaken by it; and - reviewing the information and assurances provided by the Auditor on its compliance with the relevant ethical standards. Details of the audit and non-audit fees paid to BDO LLP in respect of the year and prior period are set out in note 5 to the financial statements on page 143. Notwithstanding such non-audit services, the Committee considered BDO LLP to be independent of the Company and that the provision of such services was not a threat to BDO LLP's objectivity and independence. BDO LLP confirmed that all its partners and staff involved with the audit were independent of any links to the Company and that these individuals had complied with BDO LLP's ethics and independence policies and procedures which are fully consistent with the Financial Reporting Council's Ethical Standards. Having satisfied itself as to the effectiveness and independence of BDO LLP as the Company's Auditor, the Committee recommended to the Board that BDO LLP be reappointed as Auditor for the year ending 30 June 2024. Accordingly, a resolution proposing the reappointment of BDO LLP as the Auditor will be put to shareholders at the 2023 AGM. The Committee will continue to monitor the performance of the Auditor on an annual basis and will consider its independence and objectivity, taking account of appropriate guidelines. In addition, the Committee Chair will continue to maintain regular contact with the lead audit partner outside the formal Committee meeting schedule, not only to discuss formal agenda items for upcoming meetings, but also to review any other significant matters. ## FINANCIAL STATEMENTS The Board has requested the Committee to confirm that, in its opinion, the Board can make the required statement that the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy. The Committee has given this confirmation based on its review of the whole document, underpinned by involvement in the planning for its preparation and review of the processes to assure the accuracy of factual content. ## COMMITTEE EVALUATION The activities of the Committee were considered as part of the Board evaluation process completed in May 2023 in accordance with standard governance arrangements as summarised in the Remuneration and Nomination Committee Report on pages 116 and 117. The conclusion from the process was that the Committee was operating effectively with the right balance of membership and skills. ## APPROVAL This Audit Committee Report was approved by the Committee on 16 October 2023. On behalf of the Committee: **ANGELA LANE** Audit Committee Chair 16 October 2023 Annual Report and Financial Statements 113 --- CORPORATE GOVERNANCE # MANAGEMENT ENGAGEMENT COMMITTEE REPORT The Management Engagement Committee consists of all the Directors and is currently chaired by Ms McComb, who succeeded Mr Whitehorn as chair following the conclusion of the Company's AGM on 17 November 2022. The Committee's authority and duties are clearly defined in its written terms of reference which are available on the Company's website (https://investors.seraphim.vc/). The terms of reference are reviewed at least annually. ## Key Responsibilities - Evaluating the performance of the Investment Manager. - Reviewing the terms of the Investment Management Agreement. - Reviewing the Investment Manager's remuneration, including the methodology and level of the annual management and performance fees. - Considering the merit of obtaining an independent appraisal of the Investment Manager's services. - Evaluating the performance of SSIT's other key service providers (except for the Auditor) and whether those service providers deliver value for money services. - Assessing whether the culture, policies and practices of the Investment Manager and other key service providers are consistent with good risk management, compliance and regulatory frameworks. - Reporting to the Board on how the Committee has discharged its responsibilities and making recommendations as appropriate. The Committee meets once a year and at such other times as the Committee Chair shall require. It met once during the year. The Committee's effectiveness is reviewed on an annual basis as part of the Board's performance evaluation process. ## EVALUATION OF THE INVESTMENT MANAGER The performance of the Investment Manager is considered at every Board meeting, with a formal evaluation by the Committee at least once each year. For the purpose of its ongoing monitoring, the Board receives detailed reports and views from the Investment Manager on the Company's investment strategy, investment portfolio and pipeline (including associated risks) and investment performance. The Committee met in May 2023 for the purpose of the formal annual evaluation of the Investment Manager's performance and to review the terms of the Investment Management Agreement (details of which are included under 'Investment Manager' on page 107 and in note 4 to the financial statements on page 143), including the fee provisions. The Committee reviewed detailed questionnaires completed by the Investment Manager, which included sections on the Investment Manager's systems, controls and policies. The results of the detailed questionnaire completed by the Directors and the Investment Manager in connection with the Board evaluation, to the extent that they were relevant to the Investment Manager evaluation, were also reviewed. Other factors reviewed included: - quality and continuity of the Investment Manager's team; - investment results achieved to date; - the Investment Manager's engagement with the Board and other key stakeholders; - the Investment Manager's ongoing commitment to promoting the Company; - the Investment Manager's compliance with contractual arrangements and duties, including compliance with SSIT's investment policy; 114 Seraphim Space Investment Trust PLC --- CORPORATE GOVERNANCE # MANAGEMENT ENGAGEMENT COMMITTEE REPORT (continued) - the methodology and level of the annual management and performance fees (see note 4 to the financial statements on page 143 for details) and the other terms of the Investment Management Agreement, having regard to those of comparable listed investment companies; and - the Investment Manager's culture and its strategy and goals for developing its business. Following its review, the Committee concluded that the Investment Manager was performing well against the requirements set by the Board and that it was satisfied, in all material respects, with the services provided by, performance of and support from the Investment Manager and also with the interaction between the Board and the Investment Manager. The Committee concluded that, in its opinion, the continuing appointment of the Investment Manager on the terms agreed was in the best interests of shareholders as a whole and recommended this to the Board. The Board agreed with the Committee's recommendation and approved the continuing appointment of the Investment Manager on the terms agreed. # EVALUATION OF OTHER KEY SERVICE PROVIDERS The performance of the Company's other key service providers is monitored by the Board on an ongoing basis and formally evaluated by the Committee at least once a year, with a key focus on the Administrator and Company Secretary. At its meeting in May 2023, the Committee also undertook the formal annual evaluation of the other key service providers' performance and reviewed their respective remuneration. The Committee reviewed a detailed questionnaire completed by the other key service providers, which included sections on their systems, controls and policies. In most instances, relationships with the other key service providers are managed by the Investment Manager and/or Administrator and Company Secretary on behalf of the Board and the Committee considered feedback received from the Investment Manager and the Administrator regarding the levels of service provided by, and relationships with, the other key service providers. The Committee was satisfied, in all material respects, with the levels of service provided by the other key service providers. The Committee concluded that, in its opinion, the continuing appointments of the other key service providers on the terms agreed remained appropriate and in the best interests of the Company and recommended this to the Board. The Board agreed with the Committee's recommendations and approved the continuing appointments of the other key service provider on the terms agreed. # COMMITTEE EVALUATION The activities of the Management Engagement Committee were considered as part of the Board evaluation process completed in May 2023 in accordance with standard governance arrangements as summarised in the Remuneration and Nomination Committee Report on pages 114 and 115. It was concluded that the Committee has the right balance of membership and skills and is operating effectively. # APPROVAL This Management Engagement Committee Report was approved on 16 October 2023. On behalf of the Committee: CHRISTINA MCCOMB Management Engagement Committee Chair 16 October 2023 Annual Report and Financial Statements 115 --- CORPORATE GOVERNANCE # REMUNERATION AND NOMINATION COMMITTEE REPORT The Remuneration and Nomination Committee consists of all the Directors and is chaired by Ms Inglis. Individual Directors are not involved in decisions connected with their own appointments. The Committee's authority and duties are clearly defined in its written terms of reference which are available on the Company's website (https://investors.seraphim.vc/). The terms of reference are reviewed at least annually. ## Key Responsibilities - Developing and reviewing the Directors' remuneration policy and policies on Board tenure and diversity. - In conjunction with the Chair, reviewing the Directors' remuneration levels and considering the need to appoint external remuneration consultants. - Reviewing outside commitments of the Directors. - Evaluating the Board, its Committees and the Directors and considering whether the Directors should be recommended for election or re-election. - Reviewing the composition of the Board and its Committees, including the balance of skills, experience, knowledge and diversity (including gender, social and ethnic backgrounds and cognitive and personal strengths). - Formulating succession plans for the Directors consistent with SSIT's policies on Board tenure and diversity. - Identifying, evaluating and recommending candidates for new Board appointments. - Reporting to the Board on how the Committee has discharged its responsibilities and making recommendations as appropriate. The Committee meets once a year, and at such other times as the Committee Chair shall require. The Committee's effectiveness is reviewed on an annual basis as part of the Board's performance evaluation process. ## PRINCIPAL ACTIVITIES DURING THE YEAR ### Annual evaluation of Board, Committees and Directors The Committee ensures that there is a formal and rigorous annual evaluation of the performance of the Board, its Committees, the Chair and individual Directors. The evaluations, which were facilitated by the Company Secretary and undertaken during May 2023, consisted of performance appraisals, questionnaires, and discussions to determine effectiveness and performance in various areas. The areas considered included (a) the Board's composition, knowledge, skills and independence, (b) its governance and processes, (c) the contributions of individual Directors to the Board's work, (d) the relationships and communication between the Directors, as well as between the Board and the Investment Manager, the Administrator and other key service providers, (e) investment matters, (f) delivering shareholder value and (g) key priorities for the financial year ending 30 June 2024. The Committee also sought the views of the Investment Manager as part of the evaluation process. The performance evaluation of the Chair was led by Ms Inglis as the Company's Senior Independent Director and Chair of the Remuneration and Nomination Committee. 116 Seraphim Space Investment Trust PLC --- CORPORATE GOVERNANCE # REMUNERATION AND NOMINATION COMMITTEE REPORT (continued) Following review and discussion of the evaluation results, the Committee concluded, at its scheduled meeting in May 2023, that: - the Board and each of its standing Committees had a good balance of relevant skills, experience and knowledge and their structures, sizes and compositions were appropriate at this stage in the Company's life and, accordingly, no changes were expected to be required for at least the next 12 months; - each Director continued to be independent in character and judgement, their skills and experience were a significant benefit to the Board and they had demonstrated their ability to commit the time required to fulfil their responsibilities; - the Directors (individually and collectively as the Board) had been operating effectively; - there were no specific additional training requirements for any of the Directors; and - the proposed re-election of each Director at the 2023 AGM should be recommended. The Committee made recommendations to the Board based on the outcome of its deliberations. ### Other routine activities At its schedule meeting in May 2023, the Committee also: - reviewed the Board's policies on diversity and Board tenure and its succession plan and recommended them to the Board for approval (see 'Board diversity', 'Board tenure' and 'Succession Planning' on pages 104 to 107 and page 117 for details of these policies, as approved by the Board); and - reviewed the Directors' remuneration policy and the annual remuneration of the Directors and concluded that no changes were required in respect of the year ending 30 June 2024. ## SUCCESSION PLANNING The Board is at an early stage of its life, with all Directors having a number of years of their tenure left. The tenure of all Directors, including the Chair, is expected not to exceed nine years unless exceptional circumstances warrant, such as to allow for phased retirements of the current Directors. The Committee considers succession planning annually and has developed a succession plan that seeks to achieve an appropriate balance between preservation of experience and knowledge and bringing in fresh ideas and perspectives and is consistent with the Company's policies on Board tenure and diversity. The Committee is cognisant that it does not currently have ethnic representation, contrary to the new FCA diversity targets, and this will be an important consideration in future Board appointments. The process for recruiting additional Directors is described under 'Appointments to the Board' on page 105 to 106. The Committee intends to use non-executive director recruitment consultants and/or open advertising when recruiting new Directors in the future. ## COMMITTEE EVALUATION The activities of the Committee were considered as part of the Board evaluation process completed in May 2023 in accordance with standard governance arrangements as summarised under 'Annual evaluation of Board, Committees and Directors' earlier in this Report. The conclusion from the process was that the Committee was operating effectively with the right balance of membership and skills. ## APPROVAL This Remuneration and Nomination Committee Report was approved on 16 October 2023. On behalf of the Committee: **SUE INGLIS** Remuneration and Nomination Committee Chair 16 October 2023 Annual Report and Financial Statements 117 --- CORPORATE GOVERNANCE # DIRECTORS' REMUNERATION REPORT This Report has been prepared by the Directors in accordance with the requirements of the Companies Act 2006 and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008. By law, the Company's Auditor is required to audit certain of the disclosures provided in this Report. Where disclosures have been audited, they are indicated as such. An ordinary resolution for the approval of this Report (excluding the section 'Remuneration Policy') will be put to shareholders at the Company's AGM on 20 November 2023. ## ANNUAL STATEMENT FROM THE CHAIR OF THE BOARD The Company's remuneration policy, which is set out below, is subject to shareholder approval every three years or sooner if an alteration to the policy is proposed. The remuneration policy was approved at the AGM of the Company on 17 November 2022 and no changes to the policy are proposed. It is intended that the remuneration policy will continue in force until the AGM in 2025. The remuneration of the Directors has been set in order to attract individuals of a calibre appropriate to the future development of the Company. For the year ended 30 June 2023, the Directors' remuneration was set at £50,000 per annum for each Director. The Remuneration and Nomination Committee reviewed the level of fees during the year and the Board approved the Committee's recommendation that there should be no increase in the level of fees for the year ending 30 June 2024. The Remuneration and Nomination Committee did not receive independent advice or services in respect of its review of the Directors' remuneration; however, the Company Secretary provided it with details of comparable fees and other market information. ## REMUNERATION POLICY It is the Company's policy to determine the level of Directors' fees which should be sufficient to attract and retain Directors with appropriate skills and experience necessary for the effective stewardship of the Company and the expected contribution of the Board as a whole in achieving the Company's objectives. The time committed to the Company's business and the specific responsibilities of individual Directors are taken into account. The policy aims to be fair and reasonable in relation to the level of fees payable to non-executive directors of comparable investment companies and other investment companies of similar size and complexity as the Company. The Company's Articles of Association limit the aggregate fees payable to the Directors to £500,000 per annum (any change to that limit requires shareholder approval). Within that limit, it is the responsibility of the Board as a whole to determine and approve the Directors' fees, following a recommendation from the Remuneration and Nomination Committee. The fees are fixed and payable in cash, quarterly in arrears. Annual fees are pro-rated where a change takes place during a financial year. Directors have no entitlement to pensions or pension-related benefits, medical or life insurance schemes, share options or long-term incentive schemes. The Directors' fee rates are reviewed by the Remuneration and Nomination Committee at least annually, but reviews will not necessarily result in a change to the rates. Any feedback received from shareholders will be taken into account when setting fee rates. Directors abstain from voting on their own fees. The Directors are entitled to the reimbursement of reasonable fees and expenses incurred by them in the performance of their duties. Where expenses are recognised as a taxable benefit, a Director may receive the grossed-up costs of that expense as a benefit. The Directors do not have a service contract. Each Director has signed a letter of appointment with the Company. The letters of appointment do not include any minimum period of notice of termination by either party or any provision for compensation for loss of office. 118 Seraphim Space Investment Trust PLC --- CORPORATE GOVERNANCE # DIRECTORS' REMUNERATION REPORT (continued) ## ANNUAL REPORT ON DIRECTORS' REMUNERATION [AUDITED INFORMATION] The table below shows all remuneration earned by each individual Director during the year. No Director received taxable benefits during the year. | | 30 June 2023 £ | 30 June 2022 £ | % change from prior period^{(2)} | | --- | --- | --- | --- | | Will Whitehorn (Chair) | £50,000 | £48,322 | 3% | | Sue Inglis (Senior Independent Director) | £50,000 | £48,322 | 3% | | Christina McComb | £50,000 | £48,322 | 3% | | Angela Lane^{(1)} | £50,000 | £25,000 | 100% | | **Total** | **£200,000** | **£169,966** | | $^{(1)}$ Appointed with effect from 1 January 2022. $^{(2)}$ Movement in individual Director's salary based on annualised total figures. Prior year remuneration was prorated based on duration of service. Remuneration for each Director is set at £50,000 per annum. None of the Directors received any other remuneration or additional discretionary payments during the year from the Company (2022: £NIL). ## RELATIVE IMPORTANCE OF SPEND ON PAY The remuneration of the Directors with respect to the year totalled £200,000. As outlined on page 19, the Directors intend to manage the Company's affairs to achieve shareholder returns through capital growth rather than income. Therefore, no dividends have been declared or paid during the year and a comparison of amounts paid to Directors against distributions to shareholders would not be relevant. ## DIRECTORS' INTERESTS [AUDITED INFORMATION] The Directors who held office during the year and their interests in the ordinary shares of the Company at 30 June 2023 are shown in the table below. There have been no changes to the Directors' interests between 30 June 2023 and the date of this Report. | | 30 June 2023 Ordinary shares | 30 June 2022 Ordinary shares | | --- | --- | --- | | Will Whitehorn | 100,000 | 100,000 | | Sue Inglis | 50,000 | 50,000 | | Christina McComb | 41,706 | 25,000 | | Angela Lane | 47,000 | 27,284 | There are no requirements for the Directors to own shares in the Company. Annual Report and Financial Statements 119 --- CORPORATE GOVERNANCE # DIRECTORS' REMUNERATION REPORT (continued) ## COMPANY PERFORMANCE The following chart shows the value of £100 invested in the Company on 14 July 2021 (the Company's launch date) compared with the value of £100 invested in the MSCI World Aero and Defence Index (in Sterling terms), as a significant proportion of portfolio companies' revenues are derived from the broader defence industry and/or many portfolio companies have government as a significant customer. ### SSIT SHARE PRICE VS. MSCI WORLD AERO AND DEFENCE INDEX (£, TOTAL RETURN REBASED TO 100) ![img-13.jpeg](img-13.jpeg) Source: Datastream ## STATEMENT OF VOTING AT ANNUAL GENERAL MEETING The Company seeks shareholder approval of the Directors' remuneration policy at every third AGM. At the 2022 AGM, of the proxy votes received in respect of the Directors' Remuneration Policy, 99.58% were in favour and 0.42% were against (votes representing approximately 0.03% of the issued share capital were withheld). An advisory ordinary resolution to approve the Directors' Remuneration Report (excluding the Directors' remuneration policy) is put to members at each AGM. At the 2022 AGM, of the proxy votes received in respect of the Directors' Remuneration Report, 99.60% were in favour and 0.40% were against (votes representing 0.03% of the issued share capital were withheld). ## APPROVAL This Directors' Remuneration Report was approved by the Board on 16 October 2023. On behalf of the Board: **WILL WHITEHORN** Chair 16 October 2023 120 Seraphim Space Investment Trust PLC --- CORPORATE GOVERNANCE # DIRECTORS' RESPONSIBILITIES STATEMENT ## RESPONSIBILITIES The Directors are responsible for preparing the Annual Report and financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Company's financial statements, in accordance with UK-adopted International Accounting Standards and the requirements of the Companies Act 2006. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for the Company for that financial year. In preparing the financial statements, the Directors are required to: - select suitable accounting policies and then apply them consistently; - make judgements and accounting estimates that are reasonable and prudent; - state whether they have been prepared in accordance with UK-adopted International Accounting Standards, subject to any material departures disclosed and explained in the financial statements; - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; and - prepare a Directors' Report, strategic report and Directors' remuneration report which comply with the requirements of the Companies Act 2006. The Directors are responsible for: - keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006; - for safeguarding the assets of the Company and, hence, for taking reasonable steps for the prevention and detection of fraud and other irregularities; and - ensuring that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy. ## WEBSITE PUBLICATION The Directors are responsible for ensuring the Annual Report and financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the UK governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors, which they have delegated to the Investment Manager. The Directors' responsibilities also extend to the ongoing integrity of the financial statements contained on the website. ## RESPONSIBILITY STATEMENT The Directors confirm to the best of their knowledge that: - the Company's financial statements have been prepared in accordance with UK-adopted International Accounting Standards and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company; - the Strategic Report includes a fair review of the development and performance of the business and financial position of the Company, together with a description of the principal and emerging risks and uncertainties that it faces; and - the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy. This responsibility statement was approved by the Board on 16 October 2023. On behalf of the Board **WILL WHITEHORN** Chair 16 October 2023 Annual Report and Financial Statements 121 --- ![img-14.jpeg](img-14.jpeg) # FINANCIAL STATEMENTS --- --- FINANCIAL STATEMENTS # INDEPENDENT AUDITOR'S REPORT to the members of Seraphim Space Investment Trust Plc ## OPINION ON THE FINANCIAL STATEMENTS In our opinion the financial statements: - give a true and fair view of the state of the Company's affairs as at 30 June 2023 and of its loss for the year then ended; - have been properly prepared in accordance with UK adopted international accounting standards; and - have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of Seraphim Space Investment Trust PLC (the 'Company') for the year ended 30 June 2023 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards. ## BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to the audit committee. ### Independence Following the recommendation of the audit committee, we were appointed by the Board in February 2022 to audit the financial statements for the period ended 30 June 2022 and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is 2 years, covering the period ended 30 June 2022 and year ended 30 June 2023. We remain independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Company. ### Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors' assessment of the Company's ability to continue to adopt the going concern basis of accounting included: - agreeing the inputs and assumptions (i.e., forecasted expenditure, investment additions and Investment Portfolio Value) within the board's assessment of the going concern status of the Company to supporting documentation and our own understanding of the Company; - assessing the appropriateness of assumptions made by the Directors in their scenario analysis by considering the nature of the entity and its operations and considered the likelihood of the extreme downside scenarios occurring as well as reverse stress testing the forecast and the resulting effects on the liquidity of the Company; and - calculating financial ratios to ascertain the financial health of the Company. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. In relation to the Company's reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors' statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. 124 Seraphim Space Investment Trust PLC --- FINANCIAL STATEMENTS # INDEPENDENT AUDITOR'S REPORT (continued) ## OVERVIEW | **Key audit matter** | Valuation of unquoted investments | | --- | --- | | **Materiality** | Company financial statements as a whole £4.281m (2022:£3.512m) based on 2% (2022: 1.5%) of Net assets | ## AN OVERVIEW OF THE SCOPE OF OUR AUDIT Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company's system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. ### Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Annual Report and Financial Statements 125 --- FINANCIAL STATEMENTS # INDEPENDENT AUDITOR'S REPORT (continued) # KEY AUDIT MATTER # Valuation of Unquoted Investments The Company's accounting policy for assessing the fair value of investments is disclosed on page 140 in note 2. The disclosure regarding significant accounting judgments, estimates and assumptions for assessing the fair value of investments is given on page 142 in note 3, and disclosures regarding the fair value estimates are given on pages 145 to 147 in note 8. Unquoted investments, which comprises equity and loan note investments, are valued using judgemental valuation techniques based on the International Private Equity and Venture Capital Valuation Guidelines and represent 97% of total investments at fair value through profit and loss, respectively. There is a high level of estimation uncertainty involved in determining the valuation of unquoted investments due to the judgements involved in selecting the appropriate valuation methodology as well as regarding the estimates involved in relation to the chosen inputs and valuation assumptions. Furthermore, the Investment Manager's fees are determined in reference to the net assets value, of which unquoted investments represent a significant percentage. As the Investment Manager is involved in valuing the investments, we have identified there to be a potential risk of material misstatement. Given the high level of estimation uncertainty, the risk of material misstatement, and the significance of the unquoted investments in the context of the financial statements, we have determined the valuation of the unquoted investments to be a key audit matter. # HOW THE SCOPE OF OUR AUDIT ADDRESSED THE KEY AUDIT MATTER We gained an understanding of the controls and processes in relation to the valuation of unquoted investments including how the respective methodology and inputs in the model are chosen. Our testing of unquoted investments was tested inter alia to an immaterial residual balance. For all investments in our sample: - We assessed whether the valuation methodology is the most appropriate in the circumstances under the International Private Equity and Venture Capital Valuation ("IPEV") Guidelines. - We considered whether the assumptions and inputs into the valuation are reasonable by obtaining an understanding of the portfolio companies and obtaining underlying evidence supporting the inputs in the year end valuations. - We recalculated the attributable value based on the rights of the relevant instruments, which were agreed to investment agreements. We received direct confirmation of the capital structure from all of the investee companies. For CPORI (Calibrated Price of Recent Investment) valuations in our sample: - We agreed the price of the recent investment to supporting documentation and management information. We considered whether or not the performance of the portfolio company has significantly varied from expectations at the transaction date by obtaining management's evaluation of post transaction performance considering both financial and non-financial KPI's against relevant milestones to determine the appropriateness of the level of adjustment, if any, made to the transaction value. We held extensive discussions with management around the portfolio companies performance, based on our understanding gained, we challenged management where a material difference was identified. Additionally, we have performed our own search of the macro-economic environment, and understood the performance of the investment portfolio companies, in order to assess whether management have appropriately considered the effect of rising inflation, the overall industry and the volatility of the public equity markets on their valuations. - Where a discount was noted, we assessed and challenged the judgments used in determining the discount percentage and whether this was appropriate. - For convertible loan notes and safe notes, we also agreed the inputs applied in the valuation to the loan agreements. Through discussions with management, and in reference to the terms of the loan agreements, we challenged the basis on how the loan conversion terms were reflected in the valuations of the equity and debt instruments, where applicable. - Where applicable, we assessed the impact of the preference share waterfall on the valuation by checking the accuracy of the preference share waterfall with reference to statutory documents and investment agreements. 126 Seraphim Space Investment Trust PLC --- FINANCIAL STATEMENTS # INDEPENDENT AUDITOR'S REPORT (continued) | KEY AUDIT MATTER | HOW THE SCOPE OF OUR AUDIT ADDRESSED THE KEY AUDIT MATTER | | --- | --- | | | - Assessed whether the investment was an arm's length transaction through reviewing the parties involved in the transaction and checking whether or not they were already investors of the investee company or otherwise connected. For milestone and market comparable valuations in our sample: - We gained an understanding around the investee in terms of the key strategic drivers and metrics which influences the overarching valuation. - We challenged estimates used in the valuation of the investments by holding discussions with management and reviewing management accounts or board packs to understand the performance of the portfolio company, including its cash runway. We challenged the appropriateness of the basket of comparable companies by considering the sectors in which those companies operate together with their nature of operations. We challenged the appropriateness of KPI's, milestones and metrics applied in the valuation by reviewing the portfolio companies underlying financial information with reference to investment agreements or board packs where applicable. - Where appropriate, we verified and benchmarked key inputs and estimates used in valuation models to independent information and assessed whether the benchmarks used were reasonable. - Where applicable, we assessed the impact of the preference share waterfall on the valuation by checking the accuracy of the preference share waterfall with reference to statutory documents and investment agreements.**Key observations:** Based on the procedures performed we consider the unquoted investment valuations to be within an appropriate range, and the estimates made by management in valuing the unquoted investments to be reasonable. | Annual Report and Financial Statements 127 --- FINANCIAL STATEMENTS ## INDEPENDENT AUDITOR'S REPORT (continued) ### OUR APPLICATION OF MATERIALITY We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: | | Company financial statements | | | --- | --- | --- | | | 2023 | 2022 | | **Materiality** | £4.281m | £3.512m | | **Basis for determining materiality** | 2% of Net assets | 1.5% of Net Assets | | **Rationale for the benchmark applied** | As an investment trust, the net asset value is considered to be the key measure of performance for users of the financial statements. | | | **Performance materiality** | £3.210m | £2.282m | | **Basis for determining performance materiality** | 75% of Materiality | 65% of Materiality | | **Rationale for the percentage applied for performance materiality** | The level of performance materiality applied was set after having considered a number of factors including our assessment of the Company's overall control environment and the expected total value of known and likely misstatements and the level of transactions in the year. | | ### Reporting threshold We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £222,000 (2022: £175,600). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. ### OTHER INFORMATION The directors are responsible for the other information. The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. ### CORPORATE GOVERNANCE STATEMENT The Listing Rules require us to review the Directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Company's compliance with the provisions of the UK Corporate Governance Code specified for our review. 128 Seraphim Space Investment Trust PLC --- FINANCIAL STATEMENTS # INDEPENDENT AUDITOR'S REPORT (continued) Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit. | **GOING CONCERN AND LONGER-TERM VIABILITY** | - The Directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 78; and - The Directors' explanation as to their assessment of the Company's prospects, the period this assessment covers and why the period is appropriate set out on pages 78 and 79. | | --- | --- | | **OTHER CODE PROVISIONS** | - Directors' statement on fair, balanced and understandable set out on page 121; - Board's confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 108 and 109; - The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 112; and - The section describing the work of the Audit Committee set out on pages 110 to 113. | # OTHER COMPANIES ACT 2006 REPORTING Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below. | **Strategic report and Directors' report** | In our opinion, based on the work undertaken in the course of the audit: - the information given in the Strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and - the Strategic report and the Directors' report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors' report. | | --- | --- | | **Directors' remuneration** | In our opinion, the part of the Directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. | | **Matters on which we are required to report by exception** | We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: - adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or - the financial statements and the part of the Directors' remuneration report to be audited are not in agreement with the accounting records and returns; or - certain disclosures of Directors' remuneration specified by law are not made; or - we have not received all the information and explanations we require for our audit. | Annual Report and Financial Statements 129 --- FINANCIAL STATEMENTS # INDEPENDENT AUDITOR'S REPORT (continued) ## RESPONSIBILITIES OF DIRECTORS As explained more fully in the Directors' responsibilities statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. ## AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. ### Extent to which the audit was capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: ### Non-compliance with laws and regulations We gained an understanding of the legal and regulatory framework applicable to the Company and the industry in which it operates, and considered the risk of acts by the company which were contrary to applicable laws and regulations, including fraud. We considered the significant laws and regulations to be compliance with Companies Act 2006, the FCA listing and DTR rules, the principles of the UK Corporate Governance Code, requirements of s.1158 of the Corporation Tax Act, and applicable accounting standards. We focused on laws and regulations that could give rise to a material misstatement in the Company financial statements. Our tests included, but were not limited to: - agreement of the financial statement disclosures to underlying supporting documentation; - enquiries of management and those charged with governance relating to the existence of any non-compliance with laws and regulations; - review of minutes of board meetings throughout the period; - obtaining an understanding of the control environment in monitoring compliance with laws and regulations; and - reviewing the calculation in relation to Investment Trust compliance to check that the Company was meeting its requirements to retain its Investment Trust status. ### Fraud We assessed the susceptibility of the financial statement to material misstatement including fraud and considered the fraud risk areas to be the valuation of unquoted investments and management override of controls. Our tests included, but were not limited to: - The procedures set out in the Key audit matter section above; - Obtaining independent evidence to support the ownership of a sample of investments; - Recalculating investment management fees in total; - Obtaining independent confirmation of bank balances; and 130 Seraphim Space Investment Trust PLC --- FINANCIAL STATEMENTS # INDEPENDENT AUDITOR'S REPORT (continued) - Testing journals period end financial reporting journals and evaluating whether there was evidence of bias by the Investment Manager and Directors that represented a risk of material misstatement due to fraud. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were deemed to have the appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. A further description of our responsibilities is available on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report. # USE OF OUR REPORT This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed. DocuSigned by: ERAN WIEDER B033F3EF4925438 ERAN WIEDER [SENIOR STATUTORY AUDITOR] For and on behalf of BDO LLP, Statutory Auditor London, United Kingdom 16 October 2023 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). Annual Report and Financial Statements 131