The Directors con?rm that they have carried out a robust annual assessment of the principal risks facing the Company, including those that would threaten its objectives, business model, future performance, solvency or liquidity. The Board regularly monitors the principal risks facing the Company, the likelihood of any risk crystallisation, the potential implications for the Company and its performance, and any additional mitigation that might be introduced. Mitigation of these risks is primarily sought and achieved in a number of ways as set out below:

Market risk

The Company is exposed to UK market risk due to ?uctuations in the market prices of its investments.

The Investment Manager actively monitors economic performance of investee companies and reports regularly to the Board on a formal and informal basis. The Board formally meets with the Investment Manager on a quarterly basis when the portfolio transactions and performance are discussed and reviewed.

The Company is substantially dependent on the services of the Investment Manager's investment team for the implementation of its investment policy.

The Company may hold a proportion of the portfolio in cash or cash equivalent investments from time to time. Whilst during positive stock market movements the portfolio may forego potential gains, during negative market movements this may provide protection.

Discount volatility

The Board recognises that, as a closed ended company, it is in the long-term interests of shareholders to reduce discount volatility and believes that the prime driver of discounts over the longer term is performance. The Board are pleased to report that discount volatility improved with Company's stronger Net Asset Value position and share price during the year. However, the Board, with its advisers, continues to monitor the Company's discount levels and shares may be bought back in future should it be thought appropriate to do so by the Board.

Regulatory risks

A breach of Companies Act provisions and Financial Conduct Authority ('FCA') rules may result in the Group's companies being liable to ?nes or the suspension of either of the Group companies from listing and from trading on the London Stock Exchange. The Board, with its advisers, monitors the Group and SDVP's regulatory obligations both on an ongoing basis and at quarterly Board meetings.

Financial risk

The ?nancial position of the Group is reviewed via detailed management accounts at each Board meeting and both ?nancial position and controls are monitored by the Audit Committee.

Political risk

The Board recognises that changes in the political landscape may substantially affect the Company's prospects and the value of its portfolio companies. There is continuing uncertainty as to the nature of and prospects for future global trading relationships following the end of the 'Brexit' transition period and the UK's departure from the European Union ('EU'). Potential future changes to the UK's policies and regulatory landscape following the UK's departure from the EU could also impact the Company and its portfolio companies. Potential consequences for the Company are regularly monitored and assessed by the Board.

Climate change risk

The Board and Investment Manager consider and discuss how climate change could affect the Company's portfolio companies and shareholder returns. Environmental, social and governance factors increasingly form a part of the dialogue between the Investment Manager and the management teams of portfolio companies and may also contribute to portfolio investment decisions.

The coronavirus pandemic

The Board recognises that despite an improving outlook as a result of successful vaccine rollouts, in the UK in particular, the pandemic continues to negatively impact economies and ?nancial markets worldwide. Certain sectors of economies, globally and in the UK, have been severely affected by the restrictions imposed by governments to reduce the spread of the virus and may in turn take considerable time to recover. The Board and Investment Manager continue to monitor the effects of the pandemic on the market and the future prospects of all portfolio companies.

Accounting policies

New developments in accounting standards and industry-related issues are actively reported to and monitored by the Audit Committee, the Board where applicable and the Company's advisers, ensuring that all appropriate accounting policies are adhered to.

A more detailed explanation of the ?nancial risks facing the Group is given in note 22 to the ?nancial statements on pages 65 to 69.

Gearing

The Company's shares are geared by the Zero Dividend Preference shares and should be regarded as carrying above average risk, since a positive NAV for the Company's shareholders will be dependent upon the Company's assets being suf?cient to meet those prior ?nal entitlements of the holders of Zero Dividend Preference shares. As a consequence of the gearing, a decline in the value of the Company's investment portfolio will result in a greater percentage decline in the NAV of the Ordinary shares and vice versa. Section 172 Statement

The Directors are conscious of their duties to promote the success of the Company under Section 172 of the Companies Act 2006, for the bene?t of the shareholders, giving careful consideration to wider stakeholders' interests and the environment in which the Company operates. The Board recognises that its decisions are material to the Company and its future performance but also the Company's key stakeholders as identi?ed below. In making decisions, the Board considered the outcome from its stakeholder engagement exercises as well as the need to act fairly between the members of the Company.

Key stakeholders

Investors - The Company's shareholders have a signi?cant role in monitoring and safeguarding the governance of the Company and exercise voting rights to do so at general meetings of the Company. Shareholders also bene?t from improving performance and returns.

All shareholders have access to the Board via the Company Secretary and the Investment Manager at key company events such as the annual general meeting and throughout the year if appropriate. These regular communications help the Board make informed decisions when considering how to promote the success of the Company for the bene?t of shareholders. This year, the Annual General Meeting to be held on 9 September 2021 is currently anticipated to be open to shareholders to attend in person. However, the Board reserves the right to change the arrangements for the meeting, if necessary at short notice, in order to ensure adherence to prevailing Government guidance in light of the ongoing Covid-19 pandemic. In any event, and to ensure all travel is minimised, shareholders are strongly encouraged to vote by proxy and to appoint the Chairman as their proxy. Shareholders are also encouraged to put forward any questions to the Company Secretary in advance of the Annual General Meeting, as was the case in 2020.

The Board received enhanced Investor Relations themed reporting from its broker Shore Capital during the year to ensure continuing awareness of key shareholder matters.

Investment Manager - The Board recognises the critical role of the Investment Manager in delivering the Company's future success. The Investment Manager attends Board and Audit Committee meetings, to participate in transparent discussions, where constructive and collegiate challenge is encouraged. The Board and Investment Manager communicate regularly outside of these meetings with the aim of maintaining an open relationship and momentum in the Company's performance and prospects. The Investment Manager's performance is evaluated informally on a regular basis, with a formal review carried out on an annual basis by the Board when performing the functions of a management engagement committee. The Investment Management Agreement is reviewed as part of this process as further discussed on page 21.

Key suppliers - The Company employs a collaborative approach and looks to build long term partnerships with its key suppliers. Key suppliers are required to report to the Board on a regular basis and their performance and the terms on which they are engaged, are evaluated and considered annually, as detailed from page 30.

Portfolio companies - The Investment Manager regularly liaises with the management teams of companies within the Investment Portfolio and reports on ?ndings and the performance of investee companies to the Board on at least a quarterly basis.

Regulators - The Board regularly reviews the regulatory landscape and ensures compliance with rules and regulations relevant to the Company via reporting at quarterly Board meeting from the Company Secretary. Compliance with relevant rules and regulations is formally assessed on at least an annual basis. Viability Statement

The Board and Investment Manager continuously consider the performance, progress and future prospects of the Company over a variety of future timescales. These assessments, including regular investment performance updates from the Investment Manager, and a continuing programme of risk monitoring and analysis, form the foundations of the Board's assessment of the future viability of the Company. The Directors are mindful of the Company's commitments to shareholders of the subsidiary SDVP in 2025 in forming their viability opinion for the Company each year.

The Directors consider that a period of three years is currently the most appropriate time horizon to consider the Company's future viability. After careful analysis, taking into account the potential impact of the current risks and uncertainties the Company is exposed to including the continuing implications of the Covid-19 pandemic and government responses globally, the Directors con?rm that in their opinion: ? it is appropriate to adopt the going concern basis for this Annual Report & Accounts ? the Company continues to be viable for a period of at least three years from the date of signing of this Annual

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June 24, 2021 02:04 ET (06:04 GMT)