Notes to the Consolidated Financial Statements continued

For the year ended 31 March 2023

The main risks associated with the Group’s financial instruments relate to market (price and interest rate risk), liquidity and credit risk. The Group does not have any committed borrowing facilities and it is the Group’s policy not to trade in derivative instruments, or to enter into hedging transactions.

The Group’s main objective in using financial instruments is to manage investments in world-leading life sciences and technology companies with an affiliation to Cambridge, Europe’s leading capital for innovation, from funds raised specifically for this purpose. Within the context of this objective, the Group seeks to maximise returns from funds held on deposit, while maintaining liquidity and credit risk at acceptable levels.

Balance sheets at 31 March 2023 and 2022 are not necessarily representative of the positions throughout the year, as investments and cash and cash equivalents vary considerably depending on when investments, realisations and distributions have actually occurred.

Investments are held for strategic rather than trading purposes and, therefore, are not actively traded by the Group. The Group is exposed to price risk in respect of equity interests in, and loans to, investments held by the Group and classified on the balance sheet at fair value through profit or loss. The Group seeks to manage this risk by routinely monitoring and reporting to the Board the status, performance and valuation of these investments. Proposed investments are subject to a detailed analysis and approval process.

Post tax profit/(loss) for the year may increase or decrease as a result of fair value gains/losses on investments classified at fair value through profit or loss and are allocated to the capital reserve.

The Group does not have any liabilities that are exposed to interest rate risk.

The Group receives interest from cash and cash equivalents, which are primarily held in sterling, and the level of this interest is dependent upon the prevailing interest rates. The Group seeks to optimise the receipt of interest but has a primary focus on acceptable levels of credit and liquidity risk. All of the Group’s cash and cash equivalents were subject to floating rates in the range of 0.0% to 4.2% (2022: 0.0% to 0.7%).

The following table illustrates the sensitivity of the profit/(loss) for the year and total equity to a reasonably possible change in interest rates of +2% and 0% for both years with effect from the beginning of each year. The changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on the Group’s financial assets held during the year. All other variables are held constant.

Liquidity risk is the risk that the Group may not be able to meet its financial obligations. The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet forecast cash flows. Net cash requirements are compared to available cash and updated on a monthly basis.

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities:

In order to minimise the risk of loss, cash and cash equivalents are only held with European authorised financial institutions of good credit rating, being those at or above the credit rating of the main UK clearing banks. The credit rating profile, as per Standard & Poor’s rating services, for all of the Group’s financial assets was A+ (2022: A+).

The Group occasionally enters into transactions in currencies other than sterling. At 31 March 2023, the Group had committed, subject to certain milestone provisions contained in the relevant investment agreements, to make further investmens of $nil (2022: $1.3 million). The Group does not hedge its foreign currency commitments because of its policy not to enter into hedging transactions.

The capital structure of the Group is limited to its equity comprising share capital, reserves and retained losses. The Group manages its capital to ensure that entities within the Group will be able to continue as going concerns, while maximising the return to shareholders through the optimisation of any equity balance. The Group’s overall strategy remains unchanged for the years under review.

The fair values of the Group’s financial assets and liabilities are considered a reasonable approximation to the carrying values shown in the statement of financial position. The basis for determining fair values is described in Note 3.