Biopharma Cred. Regulatory News (BPCR)

22 MARCH 2022

BIOPHARMA CREDIT PLC

(THE "COMPANY")

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2021

STRONG PORTFOLIO PERFORMANCE, TRANSFER TO PREMIUM SEGEMENT OF MAIN MARKET AND SIGNIFICANT NEW INVESTMENT MOMENTUM

BioPharma Credit PLC (LSE: BPCR), the specialist life sciences debt investor, today announces publication of the Annual Report of the Company for the period ended 31 December 2021.

The full Annual Report and Financial Statements can be accessed via the Company's website at www.bpcruk.com or by contacting the Company Secretary by telephone on 01392 477500.

SHAREHOLDER RETURNS

· 7.29 cents per share in total dividends during period referencing net income for the four quarters ended 30 September 2021, once again ahead of the target to distribute at least 7 cents per share

· The Company has therefore maintained its record of paying a dividend of at least 1.75 cents per share every quarter since the quarter ended 30 June 2018

· Company NAV was highly stable during the period decreasing by 1.11 cents from 100.37 cents to 99.26 cents

· On 30th September 2021 shareholders approved the proposed admission to trade on the premium segment of the Main Market and transfer became effective on 5th October 2021

· In addition, the Company introduced a new additional market quote on 5th October 2021 for the ordinary shares to be denominated in GBP with the ticker BPCP

· The Company reported total net income for 2021 of $85m, this compares with $89m reported during 2020 which included $20.5m relating to the change in fair value of its subsidiary BPCR Limited Partnership

· There remains no material impact on the credit quality of any loan as a result of the global disruption caused by the Covid-19 pandemic

INVESTMENT HIGHLIGHTS

In the twelve month-period, the Company's portfolio performed robustly supplemented by further new investment activity and an attractive repayment:

· The Company and its subsidiaries invested $238m in new commitments during the period including:

o $150m with LumiraDx through a senior secured loan announced on 24th March 2021

o $50m additional expansion of the existing senior secured loan agreement with Global Blood Therapeutics announced on 15th December 2021

o $38m with Evolus through a senior secured loan announced on 15th December 2021

· The Company received an attractive repayment from Sebela totalling $194.2m on 30th June 2021 realising a Gross IRR of 11.2%

· Post period end the Company invested significant further capital in three investments:

o $325m senior secured loan with Collegium announced on 14th February 2022, as part of this transaction the existing loan commitments with Collegium and BDSI were repaid ($93m and $60m respectively)

o Up to $150m senior secured loan with Coherus ($50m deployed immediately, $50m by 1 April 2022 and $50m by 17 March 2023) announced on 10th January 2022

o Up to $50m senior secured loan with UroGen ($37.5m deployed on 16th March 2022 and up to an additional $12.5m by 31 December 2022) announced on 8th March 2022

· The Company's investment manager, Pharmakon Advisors is currently progressing a pipeline of further near term opportunities

PERFORMANCE HIGHLIGHTS

*Net income in 2020 included $20,484,000 relating to the change in fair value of the Company's subsidiary, BPCR Limited Partnership ("BPCR LP"). This change in fair value of $20,484,000 is equal to the undistributed net income earned by BPCR LP in the year, reflecting changes in the fair value of and income earned on the investment it holds and gave rise to an unrealised gain in the Company in 2020.

In 2021, the undistributed net income earned by BPCR LP in 2020 was received by the Company and was recognised in Investment income in the Statement of Comprehensive Income and as a corresponding unrealised loss in the fair value of the investment. If this had been included in the year in which the income was received, 2021 Investment income would have been $107,148,000 (2020: $121,029,000).

In 2021, undistributed investment income earned by BPCR LP was booked as a receivable of the Company ($9,593,000) and did not result in a change in fair value. The Company will continue with this treatment prospectively. Details of this investment are set out in the Company's annual report for the year ended 31 December 2021 in accounting policy for income (Note 2F) and Note 7, investment at fair value through profit or loss.

PORTFOLIO COMPOSITION

* Includes cash at the Company and its subsidiaries

Pedro Gonzalez de Cosio, CEO and co-founder of Pharmakon Advisors L. P., the Investment Manager of BioPharma Credit PLC, said:

"We are pleased to report these full year results, once again delivering on our target of distributing at least 7 cents per share to investors in quarterly payments over the year while managing a highly stable net asset value, the key ingredients for an excellent income product. Despite turbulent market conditions our highly resilient business model continued to deliver revenue as expected being uncorrelated from equity market movements and, uniquely for a London listed investment company, derived principally from cash flows from approved life science products.

"In the current inflationary environment with the potential for multiple bank interest rate increases this year, we note the high percentage (60%) of the Company's portfolio with floating rate loan exposure. This level of exposure brings further defensive qualities to the Company and potentially provide investors with a source of inflation protection.

"In Q4 and post period end in Q1 2022, the Company experienced a strong level of converted investment activity with a large amount of capital deployed in four high quality transactions. The Company continues to see many investment opportunities, driven in part by the sector's challenging equity markets. We look forward to updating shareholders further in due course."

Results presentation

As announced on 10th March 2022, a management presentation for analysts will be delivered at the offices of Buchanan, and remotely via a webcast facility, at 9:30am GMT today. For further details, analysts should contact biopharmacredit@buchanan.uk.com.

A recording of the webcast will be made available following the meeting on the Company website.

Enquiries

Buchanan

David Rydell / Mark Court / Jamie Hooper / Henry Wilson

+44 (0) 20 7466 5000

biopharmacredit@buchanan.uk.com

Notes to Editors

BioPharma Credit PLC is London's only specialist debt investor to the life sciences industry and joined the LSE in March 2017. The Company seeks to provide long-term shareholder returns, principally in the form of sustainable income distributions from exposure to the life sciences industry. The Company seeks to achieve this objective primarily through investments in debt assets secured by royalties or other cash flows derived from the sales of approved life sciences products.

Investment %

The $2,500 million invested by the Company and its subsidiaries since IPO, on 27 March 2017, has been primarily deployed in senior secured loans.

Assets %

The $1,377 million in assets as of 31 December 2021 continues to be dominated by senior secured loans and cash.

2021 Investments

Repayments made in 2021

INVESTMENT

*includes cash at the Company and its subsidiaries

CHAIRMAN'S STATEMENT

During 2021, the Company announced three investments totalling $263 million of which $238 million was funded through its financing subsidiary, BPCR Limited Partnership.

INTRODUCTION

The Company's portfolio and pipeline have proved resilient in unprecedented times. 2021 was the Company's fourth full year of operations and the Company reached its fifth anniversary in March 2022, reporting consistent returns.

INVESTMENTS

Over the course of 2021, the Company and its subsidiaries invested $238 million, comprised of $150 million and $38 million for the new LumiraDx and Evolus loans, respectively, and $50 million as part of the amendment and upsizing of the Global Blood Therapeutics loan. The portfolio diversification increased during 2021 and into 2022.

The Company, including assets and liabilities from its financing subsidiary, BPCR Limited Partnership, ended the year with total net assets of $1,364 million, comprising $1,203 million of investments, $174 million of cash less $13 million of other net liabilities. The post balance sheet deployment of $463 million has further reduced the negative impact of cash drag.

The Company and its subsidiaries saw $156 million increased liquidity due to the early repayment of the remaining principal balance of the Sebela loan and the scheduled amortisation payments from the Collegium loan and the BMS purchased payments.

DEBT FACILITY

On 10 September 2021, the Company was able to negotiate and amend the revolving credit facility that was originated with JPMorgan Chase Bank in 2020. The key terms to the amendment include a reduction in the committed Revolving Credit Facility ("RCF") from $200 million to $50 million together with changes in the accordion feature allowing for an increase in the RCF to $100 million and up to $200 million in term loans, extension of the maturity date, and more favorable terms to the interest rates.

ADMISSION TO PREMIUM SEGMENT OF MAIN MARKET

On 10 September 2021, the Company convened a General Meeting in which shareholders approved its proposed admission to trade on the premium segment of the main market of the London Stock Exchange (the "Admission"). The Company believes that the benefits associated with the Admission include potential index inclusion, greater access to capital, potential increased liquidity and expanded analyst coverage. In connection to the Admission, new Articles of Association suitable for a company whose shares are admitted to trading on the Premium Segment were approved by shareholders at that General Meeting.

SHAREHOLDER RETURNS

The Company reported net income of return on ordinary activities after finance costs and before taxation for 2021 of $85 million, down from the $89 million reported during 2020, which included $20.5 million relating to the change in fair value of its subsidiary, BPCR Limited Partnership.

On 31 December 2021, the Company's Ordinary Shares closed at 96.8 cents, below the closing price on 31 December 2020 of 99.6 cents. Net Asset Value ("NAV") per Ordinary Share decreased over the same timeframe by 1.11 cents from 100.37 cents to 99.26 cents. The Company made four dividend payments over the year totaling 7.29 cents per share, referencing net income for the four quarters ending 30 September 2021. The Company was therefore able to maintain its record of paying a dividend of at least 1.75 cents per share in every quarter since that ending 30 June 2018. Total dividends from 2021 results reached 7.0 cents per share. Management expects the 2022 dividends to be covered from profits.

COVID-19

The COVID-19 pandemic is continuing to affect the movement of people and disrupt business operations. The Board continues to hold its meetings online and Pharmakon and the Company's third-party service providers have well established virtual working arrangements that have not impacted operations. Our investment manager believes that, while the COVID-19 pandemic has temporarily affected the sales of some of the Company's borrowers, it has not had a material impact on the credit quality of the Company's loans. We will continue to monitor the situation and will inform shareholders of any material changes to this assessment.

OUTLOOK

The Company started 2022 strongly having announced 3 transactions that represent $525 million in commitments to be funded this year. On 5 January 2022, the Company entered into a definitive senior secured term loan with Coherus Inc. investing up to $150 million and funded the first tranche of $50 million on 5 January 2022. On 14 February 2022, the Company committed to invest $325 million in a new senior secured term loan with Collegium Pharmaceutical, Inc. On 8 March 2022, the Company entered into a definitive senior secured term loan with UroGen Pharma Inc. investing up to $50 million and funded the first tranche of $37.5 million on 16 March 2022. The Investment Manager continues to develop a pipeline of additional potential investments and, as a consequence, we expect to be evaluating a number of potential alternatives to fund future growth and further diversify our portfolio. On behalf of the Board, I should like to express our thanks to Pharmakon for their continued achievements on behalf of the Company in 2021 and to our shareholders for their continued support.

Harry Hyman

Chairman

21 March 2021

INVESTMENT MANAGER'S REPORT

Strong investment portfolio leading us into 2022

INTRODUCTION TO THE INVESTMENT MANAGER

Pharmakon is pleased to present an update on the Company's portfolio and investment outlook. The Company's existing portfolio investments continue to perform well.

Pharmakon's engagement during 2021 with potential counterparties resulted in the execution of new and follow on investments totaling $238 million. During the year, the Company announced the repayment of the outstanding portion of the Sebela loan, with payments during 2021 totaling $97 million, including a prepayment premium totaling $1.5 million.

Below is an update on the Company and its subsidiaries portfolio.

EVOLUS

On 14 December 2021, the Company and BioPharma Credit Investments-V, a private fund also investing in life sciences debt managed by Pharmakon Advisors, entered into a definitive senior secured loan agreement for up to $125 million with Evolus Inc (Nasdaq: EOLS), a biopharmaceutical company that develops, produces, and markets clinical neurotoxins for the treatment of aesthetics ("Evolus").

The Company funded $38 million of the first tranche of $75 million on 29 December 2021. The remaining $50 million may be drawn by 31 December 2022.

The loan will mature in December 2027 and will bear interest at 3-month LIBOR plus 8.50 per cent. per annum subject to a 1.00 per cent. floor along with a one-time additional consideration of 2.25 per cent. of the total loan amount payable upon funding of the first tranche.

Evolus currently markets Jeuveau® (prabotulinumtoxinA-xvfs), the first and only neurotoxin dedicated exclusively to aesthetics.

LUMIRADX

On 24 March 2021, the Company and BioPharma-V entered into a definitive senior secured loan agreement for $300 million with LumiraDx Investment Limited and LumiraDx Group Limited (collectively "LumiraDx").

The Company and its subsidiaries funded $150 million of the $300 million loan on 29 March 2021.

The loan will mature in March 2024 and will bear interest at 8.00 per cent. per annum along with an additional consideration of 2.50 per cent. of the loan amount paid upon funding and an additional 1.50 per cent. of the loan payable at maturity. On 28 September 2021, LumiraDx became public via a SPAC transaction with CA Healthcare Acquisition Corp. and began trading on NASDAQ under the ticker LMDX. The Company and BioPharma-V each received 742,924 warrants exercisable into common stock of LumiraDx under the terms of the transaction.

The warrants were valued at $2,068,225 as at 31 December 2021 with a LumiraDx closing stock price of $8.91 and a strike price of $10.00.

LumiraDx is a UK based, next-generation Point of Care, or POC, diagnostic company addressing the current limitations of legacy POC systems by bringing performance comparable to a central lab to the POC in minutes, on a single instrument for a broad menu of tests with a low cost of ownership. To date, LumiraDx has developed and launched four diagnostic tests for use with its platform: a SARS-CoV-2 ("COVID-19") antigen test commercially available under an Emergency Use Authorization in the United States, and a Conformité Européenne (CE) Mark in the European Economic Area, as well as a SARS-CoV-2 antibody test, an International Normalized Ratio, or INR, test, and a D-Dimer test, all of which are CE Marked.

LumiraDx has also used its technology to develop two rapid COVID-19 reagent testing kits for use on open molecular systems, LumiraDx SARS-CoV-2 RNA STAR and SARS- CoV-2 RNA STAR Complete, both of which obtained Emergency Use Authorization by the FDA.

COLLEGIUM

On 7 February 2020, the Company and BioPharma-V entered into a definitive senior secured term loan agreement for $200 million with Collegium Pharmaceutical, Inc. (Nasdaq: COLL), a biopharmaceutical company focused on developing and commercialising new medicines for responsible pain management ("Collegium").

The Company and its subsidiaries funded $165 million of the $200 million loan on 13 February 2020.

The loan will mature in February 2024 and bears interest at three-month LIBOR plus 7.50 per cent. per annum subject to a 2.00 per cent. LIBOR floor with a one-time additional consideration of 2.50 per cent. of the loan amount paid upon funding. The loan amortises quarterly and had a remaining balance of $93 million as of 31 December 2021.

On 14 February 2022, the Company along with BioPharma‐V, provided Collegium with a commitment to enter into a new senior secured term loan agreement for $650 million. Proceeds from the new loan will be used to fund Collegium's proposed acquisition of BDSI as well as repay the outstanding debt of Collegium and BDSI. Under the terms of the new loan, the Company will invest $325 million in a single drawing. The four‐year loan will have $100 million in amortization payments during the first year and the remaining $550 million balance will amortize in equal quarterly installments. The loan will bear interest at 3‐month LIBOR plus 7.50 per cent. per annum subject to a 1.20 per cent. floor along with a onetime additional consideration of 2.00 per cent. of the loan amount payable at signing and 1.00 per cent. of the loan amount payable at funding. Refer to note 19 subsequent events.

Collegium currently markets Xtampza® ER, an abuse-deterrent, extended-release, oral formulation of oxycodone and Nucynta® (tapentadol), a centrally acting synthetic analgesic.

GLOBAL BLOOD THERAPEUTICS ("GBT")

On 18 December 2019, the Company and BioPharma-V entered into a definitive senior secured term loan agreement for up to $150 million with Global Blood Therapeutics (Nasdaq: GBT), a biopharmaceutical company focused on innovative treatments that provide hope to underserved patient communities.

GBT drew down $75 million at closing and an additional $75 million on 20 November 2020. On 14 December 2021 the loan agreement was amended and restated. The amendment increased the aggregate principal amount of the loan to $250 million through a $100 million third tranche, which was drawn on 22 December 2021.

The Company and its subsidiaries funded $133 million across all three tranches. The loan will mature in December 2027 and bears interest at three-month LIBOR plus 7.00 per cent. per annum subject to a 2.00 per cent. floor along with a one-time additional consideration of 1.50 per cent. of the total loan amount paid upon funding and an additional 2.00 per cent. payable upon the repayment of the loan. The third tranche also incurred additional consideration of 1.50 per cent. at the time of funding. As a part of the amendment in 2021, the Company and its subsidiaries received a one-time fee equal to 1.25 per cent. of the first two tranches and the three-year make-whole period was reset to December 2021, expiring in December 2024 instead of December 2022 under the original terms.

GBT manufactures and sells OxbrytaTM (voxelotor) for the treatment of sickle cell disease in adults and paediatric patients 12 years of age and older.

SAREPTAOn 13 December 2019, the Company and BioPharma-V entered into a definitive senior secured term loan agreement for up to $500 million with Sarepta Therapeutics (Nasdaq: SRPT), a fully integrated biopharmaceutical company focused on precision genetic medicine ("Sarepta").

On 24 September 2020 the Sarepta loan agreement was amended and the loan amount was increased to $550 million. Sarepta drew down the first $250 million tranche at closing and an additional $300 million on 2 November 2020.

The Company and its subsidiaries funded $175 million of each tranche for a total investment of $350 million. The first tranche will mature in December 2023 and the second tranche in December 2024. The loan bears interest at 8.5 per cent. per annum along with a one-time additional consideration of 1.75 per cent. of the first tranche and 2.95 per cent. of the second tranche paid upon funding and an additional 2 per cent. payable upon the repayment of the loan.

Sarepta currently markets Exondys 51 (eteplirsen), Vyondys 53 (golodirsen) and Amondys (casimersen) in the US for the treatment of Duchenne muscular dystrophy (DMD).

AKEBIA

On 11 November 2019, the Company and BioPharma-V entered into a definitive senior secured term loan agreement for up to $100 million with Akebia (Nasdaq: AKBA), a fully integrated biopharmaceutical company focused on the development and commercialisation of therapeutics for people living with kidney disease ("Akebia").

Akebia drew down $80 million at closing and an additional $20 million on 10 December 2020.

The Company and its subsidiaries funded $40 million of the $80 million first tranche and $10 million of the second tranche.

The loan will mature in November 2024 and bears interest at LIBOR plus 7.5 per cent. per annum along with a one-time additional consideration of 2 per cent. of the total loan amount paid upon funding.

Akebia currently markets Auryxia® (ferric citrate) which is approved in the US for hyperphosphatemia (elevated phosphorus levels in blood serum) in adult patients with chronic kidney disease (CKD) on dialysis and iron deficiency anaemia in adult patients with CKD not on dialysis.

EPIZYME

On 4 November 2019, the Company and BioPharma-V entered into a definitive senior secured term loan agreement for up to $70 million with Epizyme (Nasdaq: EPZM), a late-stage biopharmaceutical company developing novel epigenetic therapies for cancer.

On 3 November 2020 the Epizyme loan agreement was amended and the loan amount was increased to $220 million. Epizyme drew down $25 million at closing and an additional $195 million during 2020.

The Company and its subsidiaries funded a total of $110 million of the Epizyme loan. The loan will mature in November 2024 and bears interest at LIBOR plus 7.75 per cent. per annum along with a one-time additional consideration of 2 per cent. of the total loan amount paid upon funding. Epizyme's lead product, TAZVERIK (tazemetostat), is a first-in-class, oral inhibitor that received FDA approval for epithelioid sarcoma on 23 January 2020 and follicular lymphoma on 18 June 2020.

OPTINOSE

On 12 September 2019, the Company and BioPharma-V entered into a definitive senior secured note purchase agreement for the issuance and sale of senior secured notes in an aggregate original principal amount of up to US$150 million by OptiNose US, a wholly-owned subsidiary of OptiNose (Nasdaq: OPTN), a commercial-stage specialty pharmaceutical company ("OptiNose").

Optinose drew a total of US$130 million in three tranches: $80 million on 12 September 2019, $30 million on 13 February 2020 and $20 million on 1 December 2020. There are no additional funding commitments.

On 2 March 2021, the sales covenants in the notes were reduced by 16 per cent. for 2021 and 3 per cent. thereafter to allow for slower growth due to the temporary impact of COVID 19 from reduced patient visits. The revised covenant for 2021 of $80 million still represents growth of 65 per cent. from 2020.

The Company and its subsidiaries funded a total $72 million across all tranches and were allocated 445,696 warrants. The notes mature in September 2024 and bear interest at 10.75 per cent. per annum along with a one-time additional consideration of 0.75 per cent. of the aggregate original principal amount of senior secured notes which the Company was committed to purchase under the facility and 810,357 warrants exercisable into common stock of OptiNose.

On 18 November 2021, OptiNose raised $46 million in a follow-on offering at a price of $1.60. As part of the financing, Pharmakon re-tiered its sales covenants, amended the amortisation and make-whole provisions, and received 1,375,000 new three-year warrants, with the original warrants being canceled. The new warrants were valued at $894,066 as at 31 December 2021 with an OptiNose closing stock price of $1.62 and a strike price of $1.60.

OptiNose's leading product, XHANCE® (fluticasone propionate), is a nasal spray approved by the U.S. Food and Drug Administration (FDA) in September 2017 for the treatment of nasal polyps in patients 18 years or older. XHANCE® utilises a novel and proprietary exhalation delivery system to deliver the drug high and deep into the sinuses, targeting areas traditional intranasal sprays are not able to reach.

BIODELIVERY SCIENCES

On 23 May 2019, the Company entered into a senior secured loan agreement for up to $80 million with BioDelivery Sciences International (Nasdaq: BDSI), a commercial-stage specialty pharmaceutical company ("BDSI"). BDSI utilises its novel and proprietary BioErodible MucoAdhesive (BEMA®) technology to develop and commercialize new applications of proven therapies aimed at addressing important unmet medical needs. In addition, the Company acquired 5,000,000 BDSI shares at $5.00 each for a total cost of $25 million in a public offering that took place on 11 April 2019.

The first tranche of the loan for $60 million was funded on 28 May 2019 and the second $20 million tranche was funded on 22 May 2020. The loan will mature in May 2025 and bears interest at LIBOR plus 7.5 per cent., along with 2 per cent. additional consideration paid at closing. On 23 September 2021, BDSI made an early prepayment of $20 million, making the outstanding loan balance $60 million as of 31 December 2021. The Company sold 46 per cent of its BDSI shares during 2019 at an average price of $6.5. BDSI shares closed at $3.10 on 31 December 2021.

On 14 February 2022, the Company along with BioPharma‐V, provided Collegium with a commitment to enter into a new senior secured term loan agreement for $650 million. Proceeds from the new loan will be used to fund Collegium's proposed acquisition of BDSI as well as repay the outstanding debt of Collegium and BDSI. Upon the closing of the acquisition, BDSI will be required to repay the $60 million balance together with accrued interest and a 2.0% prepayment fee and the Company will receive cash consideration of $5.60 per share of BDSI.

BDSI's leading products include BELBUCA® (buprenorphine buccal film) and Symproic® (naldemedine).

BRISTOL-MYERS SQUIBB, INC.

On 8 December 2017, the Company's wholly-owned subsidiary entered into a purchase, sale and assignment agreement with a wholly-owned subsidiary of Royalty Pharma Investments ("RPI"), an affiliate of the Investment Manager, for the purchase of a 50 per cent. interest in a stream of payments (the "Purchased Payments") acquired by RPI's subsidiary from Bristol-Myers Squibb (NYSE: BMY) through a purchase agreement dated 14 November 2017.

As a result of the arrangements, RPI's subsidiary and the Company's subsidiary are each entitled to the benefit of 50 per cent. of the Purchased Payments under identical economic terms. The Purchased Payments are linked to tiered worldwide sales of Onglyza and Farxiga, diabetes agents marketed by AstraZeneca, and related products. The Company was expected to fund $140 million to $165 million during 2018 and 2019, determined by product sales over that period, and will receive payments from 2020 through 2025. The Purchased Payments are expected to generate attractive risk-adjusted returns in the high single digits per annum.

The Company funded all of the Purchased Payments based on sales from 1 January 2018 to 31 December 2019 for a total of $162 million.

The Company received $25 million in 2020, $2 million in principal and $23 million in income. The Company received $36 million in 2021, $23 million in principal and $13 million in income.

REALISED INVESTMENTS

Sebela Pharmaceuticals

On 1 May 2018, the Company was lead arranger of a $316 million senior secured term loan for Sebela BT Holdings Inc. ("Sebela"), a subsidiary of Sebela Pharmaceuticals. The Company committed to a $194 million investment, with the remaining $122 million balance coming from co- investors. Sebela is a private specialty pharmaceutical company focused on gastrointestinal medicines, dermatology, and women's health.

The five-year senior secured loan began amortising in the third quarter of 2018 and was due to fully mature in December 2022. The loan bore interest at LIBOR (un-capped) plus a single digit spread and included additional consideration. The Company received its final loan payment on 30 June 2021 with payments during 2021 totaling $97 million, including a prepayment premium totaling $1.5 million. The Company earned a 11.2 per cent. internal rate of return on its Sebela investment.

MARKET ANALYSIS

The life sciences industry is expected to continue to have substantial capital needs during the coming years as the number of products undergoing clinical trials continues to grow. All else being equal, companies seeking to raise capital are generally more receptive to straight debt financing alternatives at times when equity markets are soft, increasing the number and size of fixed-income investment opportunities for the Company, and will be more inclined to issue equity or convertible bonds at times when equity markets are strong. A good indicator of the life sciences equity market is the New York Stock Exchange Biotechnology Index ("BTK Index"). While there was substantial volatility during the period, the BTK index decreased 4 per cent. during 2021, compared to a 13 per cent. increase during 2020. Global equity issuance by life sciences companies in 2021 was $106 billion, a 26 per cent. decrease from the $144 billion issued in 2020. We anticipate a slowdown in equity issuance coupled with greater appetite for fixed income as a source of capital in 2022.

Acquisition financing is an important driver of capital needs in the life sciences industry in general and a source of investment opportunities. An active M&A market helps drive opportunities for investors such as the Company, as acquiring companies need capital to fund acquisitions. Global life sciences M&A volume during 2021 was $146 billion, a 24 per cent. decrease from the $192 billion witnessed during 2020, driven mainly by an increase in M&A activity globally as a result of COVID-19 pandemic restrictions easing. We are encouraged by the number of M&A opportunities that are starting to build up which should lead to a more active market in the near term.

USD LIBOR

On 5 March 2021, the Financial Conduct Authority ("FCA"), the regulatory supervisor of USD LIBOR's administrator ("IBA") announced in a public statement the future cessation of the 3-month USD LIBOR tenor setting. As of that date, 30 June 2023, that all available Tenor of USD LIBOR have either permanently or indefinitely ceased to be provided by IBA or have been announced by or on behalf of the FCA pursuant to public statement or publication of information to be no longer representative, a replacement benchmark will be used in the absence of USD LIBOR. If the benchmark replacement is daily simple Secured Overnight Financing Rate ("SOFR"), all interest payments will be calculated with SOFR beginning on the effective date on a quarterly basis. The Company has six loans with coupons that reference 3-month USD LIBOR and four have a 2.00 per cent. floor and two have a 1.00 per cent. floor. As of 31 December 2021, the 3-month LIBOR rate was 0.21 per cent., significantly below the floors in the six loans. The Investment Manager will continue to monitor the news on the replacement benchmark and will take steps to update its interest payments as of the effective date.

COVID-19

Despite the gradual easing of COVID-19 restrictions in 2021 following the deployment of vaccination campaigns, we continue to carefully track and monitor the Company's operations and its service providers, which have not experienced any technical or operational difficulties during the pandemic. COVID-19 continues to cause major disruptions across the globe and has temporarily affected the sales of some of the Company's borrowers. However, we have confidence in the performance of our loans and there has not been a material impact on the credit quality of the Company's investments. We will continue to monitor the pandemic and will inform investors of any material changes to this assessment.

INVESTMENT OUTLOOK

We expect our investment pipeline to grow as new products and companies enter the market in 2022. In the first quarter of 2022, the Company invested $375 million and committed to invest an additional $100 million. On 5 January 2022, the Company entered into a senior secured term loan agreement for up to $150 million with Coherus Inc. The loan will mature in January 2027 and will bear interest at 3-month LIBOR plus 8.25 per cent. per annum subject to a 1.00 per cent. floor along with a one-time additional consideration of 2.00 per cent. of the total loan amount payable upon funding of the first tranche. On 14 February 2022, the Company provided Collegium Pharmaceutical, Inc. a commitment to enter into a new senior secured term loan agreement for $325 million. Proceeds from the new loan were used to fund Collegium's proposed acquisition of BioDelivery Sciences International, Inc. as well as repay the outstanding debt of Collegium and BDSI. Under the terms of the new loan, the Company invested $325 million in a single drawing. The four-year loan will have $50 million in amortization payments during the first year and the remaining $275 million balance will amortize in equal quarterly installments. The loan will bear interest at 3-month LIBOR plus 7.50 per cent. per annum subject to a 1.20 per cent. floor along with a one-time additional consideration of 2.00 per cent. of the loan amount payable at signing and 1.00 per cent. of the loan amount payable at funding. Pharmakon's extensive network and thorough approach will continue to identify strong investment opportunities. We remain focused on our mission of creating the premier dedicated provider of debt capital to the life sciences industry while generating attractive returns and sustainable income to investors. Further, Pharmakon remains confident of our ability to deliver its target dividend yield to its investors.

Pedro Gonzalez de Cosio

Co-founded and CEO, Pharmakon

21 March 2022

ESG PROGRAMME AND SUSTAINABILITY

Environmental, social and governance report

As an investment trust, the Company does not have any employees and most of its activities are performed by its service providers. The Company utilises the services of Pharmakon Advisors as the Investment Manager to take appropriate Environment, Social and Governance ("ESG") principles into account in its investment decisions and in the ongoing management of the portfolio. In order to ensure the robustness of these policies, the Board engages with the Investment Manager on ESG matters and monitors compliance of BioPharma Credit's portfolio companies with this policy. The Board takes its fiduciary responsibility to Shareholders seriously and engages with the Investment Manager on corporate governance matters.

Further details on Investment Manager's ESG and sustainability polices are set out in the sections below.

Statement from the Investment Manager

ESG has become an increasingly important topic in both the assessment of impact of investments in the future and investor assessment of opportunities. We maintain the highest standards of integrity and trust in our role as investors and partners to the Biopharma industry. We conduct thorough diligence and monitoring with all of our investment positions. The biopharmaceutical companies and academic and non-profit institutions with which we work typically have well-developed and transparent ESG policies, which seek to benefit wider society through sustainable and ethical business practices.

Investment Process

The Investment Manager is focused on providing capital to life sciences companies that develop and manufacture products responsibly and seeks to oversee this by incorporating a thorough review of applicable environmental issues in our underwriting process. As lenders, we commonly require that our borrowers represent and commit to continued compliance with environmental regulations and good practices such as; (a) conducting clinical trials in accordance with current good clinical practices and good laboratory practices, as well as (b) manufacturing their products in accordance with current good manufacturing practices.

Monitoring and engagement

The Investment Manager is focused on providing capital to life sciences companies that develop and market products that provide value to patients and society. As lenders, we commonly require that our borrowers represent and commit to continued compliance with various health care laws meant to protect patients and payors. These laws regulate matters such as (a) compliance with public payor programs, including fraud and abuse laws, (b) billings to insurance companies, health maintenance organizations and other managed care plans or otherwise relating to insurance fraud, (c) accreditation standards, (d) marketing of drugs and payments to physicians, etc.

In addition, the Investment Manager is a signatory to the New Commitment to Patients signed in January 2020 by 215 biopharmaceutical CEOs and industry leaders who recognize that (a) "we have a moral obligation to develop the best medicines and ensure that every person who may benefit has access to them" and (b) "that we need to ensure that we act with the highest integrity and corporate responsibility - always putting the interests of patients first".

Responsible investment

The Investment Manager believes that strong governance, ethical business practices and prudent risk management are critical to achieving its goals. The Investment Manager's Code of Ethics, an integral part of its Compliance Manual, applies to all employees, officers and principals, serves as the foundation for high standards of integrity and ethics, the deterrence of wrongdoing and the promotion of compliance with applicable regulations. Risk management at the Investment Manager is ultimately the responsibility of senior management who are responsible of ensuring investments are properly diligence and meet investment guidelines. The Investment Manager is conscious that the ultimate success of our ESG initiative will depend on periodic reviews to ensure adherence and seek ways to continuously make improvements. We believe that all employees are stakeholders in the success of the Investment Manager's ESG initiative and should be actively engaged in its design and compliance.

Sustainable investing

The Technical Screening Criteria (TSC) of the EU Taxonomy Regulation (Taxonomy) were finalised only on 9 December 2021 (i.e., in respect of the first two Taxonomy environmental objectives of climate change mitigation and climate change adaptation) or have not yet been developed (i.e. for the other four Taxonomy environmental objectives). These detailed criteria will require the availability of multiple, specific data points regarding each investment. During the reporting period, there was insufficient reliable, timely and verifiable data available for the Investment Manager to be able to assess investments using the TSC.

While there may be investments held by the Company that are in economic activities that contribute to an environmental objective and may be eligible to be assessed against the TSC, the Investment Manager was not currently in a position to describe: a) the extent to which the investments of the Company are in economic activities that qualify as environmentally sustainable and are aligned with the Taxonomy Regulation; b) the proportion, as a percentage of the Company's portfolio, of investments in environmentally sustainable economic activities which are aligned with the Taxonomy Regulation; or c) the proportion, as a percentage of the Company's portfolio, of enabling and transitional activities (as described in the Taxonomy Regulation). The Investment Manager is keeping this situation under active review and where, in its discretion, it has assessed that it has sufficient reliable, timely and verifiable data on the Company's investments, the Investment Manager will make the descriptions referred to above available to shareholders.

Climate change

The Investment Manager believes that climate change is now a defining factor in companies' long-term prospects, and that it will have a significant and lasting impact on economic growth and prosperity. The Investment Manager believes that climate risk may be an investment risk, and that this may drive a profound reassessment of risk and asset values as investors seek to react to the impact of climate policy changes. This in turn is likely to drive a significant reallocation of capital away from traditional carbon intensive industries over the coming years. The Investment Manager recognizes that reporting to these standards requires significant time, analysis and effort. The Investment Manager is monitoring regulations as they develop and will inform shareholder of any changes to its assessment.

Diversity and inclusion

We believe that we will only succeed in our goals if we are able to attract and retain individuals of diverse backgrounds. Our success relies on creating an inclusive environment where all of our employees can do their best work, and where each can play a vital role in achieving our collective goals. Pharmakon is committed to working to continuously develop an organization that is diverse, equitable and inclusive. Our goal is to provide every team member with the ability to achieve success within an equitable work environment and to encourage our teams to leverage diversity to drive innovation and performance. The current makeup of our employee base is representative of our commitment to diversity:

Pharmakon is conscious that the ultimate success of our ESG initiative will depend on periodic reviews to ensure adherence and seek ways to continuously make improvements. We believe that all employees are stakeholders in the success of Pharmakon's ESG initiative and should be actively engaged in its design and compliance.

STRATEGIC OVERVIEW

INVESTMENT OBJECTIVE

The Company aims to generate long-term Shareholder returns, predominantly in the form of sustainable income distributions from exposure to the life sciences industry.

INVESTMENT POLICY

The Company will seek to achieve its investment objective predominantly through direct or indirect exposure to Debt Assets, which include Royalty Investments, Senior Secured Debt, Unsecured Debt and Credit Linked Notes.

The Company may acquire Debt Assets:

· Directly from the entity issuing the Debt Asset (a "Borrower"), which may be: (i) a company operating in the life sciences industry (a "LifeSci Company"); or (ii) an entity other than a LifeSci Company which directly or indirectly holds an interest in royalty rights to certain products, including any investment vehicle or special purpose vehicle ("Royalty Owner"); or

· Or in the secondary market.

The Company may also invest in equity issued by a LifeSci Company, acquired directly from the LifeSci Company or in the secondary market.

"Debt Assets" will typically comprise:

· Royalty debt instruments

Debt issued by a Royalty Owner where the Royalty Owner's obligations in relation to the Debt are secured as to repayment of principal and payment of interest by Royalty Collateral.

· Priority royalty tranches

Contract with a Borrower that provides the Company with the right to receive payment of all or a fixed percentage of the future royalty payments receivable in respect of a Product (or Products) that would otherwise belong to the Borrower up to a fixed monetary amount or a pre-set rate of return, with such royalty payment being secured by Royalty Collateral in respect of that Product (or Products).

· Senior secured debt

Debt issued by a LifeSci Company, and which is secured as to repayment of principal and payment of interest by a first priority charge over some or all of such LifeSci Company's assets, which may include: (i) Royalty Collateral; or (ii) other intellectual property and marketing rights to the Products of that LifeSci Company.

· Unsecured debt

Debt issued by a LifeSci Company which is not secured or is secured by a second lien on assets of the Borrower.

· Credit linked notes

Derivative instruments referencing Debt Assets, being a synthetic obligation between the Company and another party where the repayment of principal and/or the payment of interest is based on the performance of the obligations under the underlying Debt Assets.

"Royalty Collateral" means, with respect to a Debt Asset, (i) future payments receivable by the Borrower on a Product (or Products) in the form of royalty payments or other revenue sharing arrangements; or (ii) future distributions receivable by the Borrower based on royalty payments generated from a Product (or Products); or (iii) both limb (i) and limb (ii) "Debt" includes loans, notes, bonds and other debt instruments and securities, including convertible debt, and Priority Royalty Tranches.

Borrowers will predominantly be domiciled in the US, Europe and Japan, though the Company may also acquire Debt Assets issued by Borrowers in other jurisdictions.

Investment restrictions and portfolio diversification

The Company will seek to create a diversified portfolio of investments by investing across a range of different forms of Debt Assets issued by a variety of Borrowers. In particular, the Company will observe the following restrictions when making investments in accordance with its investment policy:

· no more than 25 per cent. of the Company's gross assets will be exposed to any single Borrower or investment;

· no more than 35 per cent. of the Company's gross assets will be invested in Unsecured Debt;

· no more than 15 per cent. of the Company's gross assets will be invested in equity securities issued by LifeSci Companies; and 

· the Company will invest no more than 10 per cent., in aggregate, of gross asset value at the time of acquisition in other listed closed-ended investment funds.

Each of these investment restrictions will be calculated at the time of each proposed investment. In the event that any of the above limits are breached at any point after the relevant investment has been made (for instance, as a result of any movements in the value of the Company's total assets), there will be no requirement to sell any investment (in whole or in part).

Cash management

The Company's uninvested capital may be invested in cash instruments or bank deposits for cash management purposes.

Hedging

The Company does not propose to enter into any hedging or other derivative arrangements other than as may from time to time be considered appropriate for the purposes of efficient portfolio management. The Company will not enter into such arrangements for investment purposes.

Business and status of the Company

The Company is registered in England as a public limited company and is an investment company in accordance with the provisions of Section 833 of the Companies Act 2006.

The principal activity of the Company is to carry on business as an investment trust. The Company intends at all times to conduct its affairs so as to enable it to qualify as an investment trust for the purposes of Sections 1158/1159 of the Corporation Tax Act 2010 ("S1158/1159"). The Directors do not envisage any change in this activity in the foreseeable future.

The Company has been granted approval from HM Revenue & Customs ("HMRC") as an investment trust under S1158/1159 and will continue to be treated as an investment trust company, subject to there being no serious breaches of the conditions for approval. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 December 2021 so as to be able to continue to qualify as an investment trust.

The Company has two wholly-owned subsidiaries, BPCR Limited Partnership and BPCR GP Limited, details of which can be found in Note 14 to the financial statements.

STAKEHOLDER ENGAGEMENT - SECTION 172(1) STATEMENT

Overview

The Directors' overarching duty is to promote the success of the Company for the benefit of its shareholders, having regard to the interests of its stakeholders, as set out in section 172(1) of the Companies Act 2006. The Directors have considered each aspect of this section of the Act and consider that the information set out below is particularly relevant in the context of the Company's business as an externally managed investment company which does not have any employees or suppliers.

The importance of stakeholders is taken into account at every Board meeting. All discussions involve careful consideration of the longer-term consequences of any decisions and their implications for stakeholders.

Stakeholders

The Board seeks to understand the needs and priorities of the Company's stakeholders and these are taken into account during all its discussions and as part of its decision-making. The Board believes that the Company's key stakeholders comprise its shareholders, clients and service providers. The section below discusses why these stakeholders are considered of importance to the Company and the actions taken to ensure that their interests are taken into account. The Company recognises the importance of maintaining high standards of business conduct and seeks to ensure that these are applied in all of its business dealings and in its engagement with stakeholders. Further information on the impact of the Company's operations on the community and the environment is set out below.

The Company's mechanisms for engaging with its stakeholders are set out below. These are kept under review by the Directors and are discussed on a regular basis at Board meetings to ensure that they remain effective.

For more information on the purpose, culture and values of the Company, and the processes which the Board has put in place to ensure these, see the Corporate Governance Statement in the full annual report.

Shareholders

Importance

Continued shareholder support and engagement are critical to the existence of the Company and the delivery of its long-term strategy and engagement with shareholders is given a high priority by both the Board and the Investment Manager.

How the Company engages

The Chairman ensures that the Board as a whole has a clear understanding of the views of shareholders by receiving regular updates from the Brokers and Investment Manager. The Investment Manager and the Company's Brokers are in regular contact with major shareholders and report the results of all meetings and the views of those shareholders to the Board on a regular basis. The Investment Manager provides regular investor updates and presentation to shareholders. The Chairman and the other Directors are available to attend these meetings with shareholders if required. Relations with shareholders are also considered as part of the annual Board evaluation process. For further details regarding this process see the full annual report.

All shareholders are encouraged to attend and vote at annual general meetings, during which the Board and the Investment Manager will be available to discuss issues affecting the Company and answer any questions. Further information regarding the AGM is detailed in the full annual report. Shareholders wishing to raise questions or concerns directly with the Chairman, Senior Independent Director or Company Secretary, outside of the AGM, should do so using the contact details provided below.

While the ongoing COVID-19 pandemic meant that shareholders were encouraged not to attend the AGM in June 2021, Shareholders were able to provide questions to the Company Secretary in advance of the AGM and a separate shareholder call was scheduled for any such questions to be answered by the Board and Investment Manager.

Although the Company has been established with an indefinite life, the Articles provide that a continuation vote be put to shareholders at the first AGM of the Company to be held following the fifth anniversary of Initial Admission i.e. in 2022 and, if passed, at the annual general meeting of the Company held every third year thereafter. However, the Directors believed that it was beneficial to the Company for the first continuation resolution to be held earlier, at the General Meeting on 30 September 2021, so as to give investors greater certainty as to the Company's longer term existence in the context of the then proposed migration to the Premium Segment. 635,130,451 shares were voted, all of which were in favour of the approval of the continuation resolution. The next continuation vote will take place in 2024.

Clients

Importance

The investments made by the Company support the large capital needs of its portfolio companies, supporting their research and development budgets for life sciences products and enable it to achieve its investment objective.

How the Company engages

The Company's clients are pharmaceutical and biotechnology companies within the life sciences industry to which it provides debt capital. The Investment Manager is highly experienced in this area with a strong track record of meeting the capital needs of its clients. The Investment Manager meets regularly with the management teams of current and prospective investee companies to enhance relationships and to understand their views and capital requirements.

The Directors receive updates from the Investment Manager on the companies within its investment portfolio at all Board meetings, and outside of meetings as appropriate.

Further information on the Company's engagement with investee companies during the year, including case studies regarding their products, is set out above.

Service Providers 

Importance In order to function as an investment trust on the Premium Segment of the London Stock Exchange, the Company relies on a number of reputable advisers for support in complying with all relevant legal and regulatory obligations.

How the Company engages

The Company's day-to-day operational functions are delegated to a number of third-party service providers, each engaged under separate contracts. The Company's principal service providers include the Investment Manager, Company Secretary, Joint Brokers, Administrator, Legal Adviser, Auditor and the Registrar.

The Board keeps the ongoing performance of the Investment Manager under continual review and conducts an annual appraisal of the Investment Manager, along with the performance of all other third-party service providers in December each year. The Investment Manager has executed the investment strategy according to the Board's expectations and it is the opinion of the Directors that the continuing appointment of Pharmakon is in the interests of shareholders as a whole.

The Audit and Risk Committee reviews and evaluates the control environments in place at each service provider. Further details regarding the role of the Audit and Risk Committee are set out in the full annual report. Further information about the review of service providers and the culture of the Investment Manager is set out in the Corporate Governance Statement in the full annual report.

KEY PERFORMANCE INDICATORS

The Company assesses its performance in meeting its investment objectives using the following Key Performance Indicators ("KPIs"):

NAV performance

The NAV at 31 December 2021 was $0.9926 per Share, compared to $1.0037 per Share at 31 December 2020.

A full description of the Company's performance for the year ended 31 December 2021 is included in the Investment Manager's Report above.

Share price return

The Company's Share price at 31 December 2021 was $0.9680, giving a return since 31 December 2020 of -2.8 per cent. The Company's Share price at 31 December 2020 was $0.996, giving a return since 31 December 2019 of -2.4 per cent.

Share price discount / premium to NAV per Share

The Company's Share price was at a discount to the NAV per Share at 31 December 2021 and 31 December 2020 of 2.5 per cent. and 0.77 per cent. respectively.

The daily closing price of the Company's Shares ranged from $0.9460 - $1.0050 throughout the year.

In accordance with the Company's Prospectus issued on 14 March 2018, if the Share price declines to a point where the Shares trade on average at a discount to NAV per Share in excess of 5 per cent. in any three-month rolling period, the Company has certain discount control mechanisms in place, one of which requires the Company to repurchase Shares until such time as the Share price discount to NAV per Share moves below 1 per cent.

In accordance with the Investment Management Agreement, the Investment Manager is required to apply 50 per cent. of any Performance Fee paid by the Company to the Investment Manager in shares subject to certain price metrics, if the Company's shares have, on average, traded at a discount of 1 per cent. or more to the Net Asset Value per Share.

Ongoing charges

The Company's ongoing charges ratio is shown in the table below.

* Ongoing charges are the Company's expenses (excluding performance fees) expressed as a percentage of its average monthly net assets and follow the AIC recommended methodology.

Dividends

Dividends totaling 7.29 cents per Ordinary Share, including one special dividend of 0.29 cents, have been paid during the year ended 31 December 2021. Dividends totaling 8.29 cents per Ordinary Share, including two special dividends of 1.28 cents and 0.01 cents, were paid during the year ended 31 December 2020.

RISK MANAGEMENT AND THE INTERNAL CONTROL ENVIRONMENT

The role of the Board

A formal risk identification and assessment process has been adopted by the Company resulting in a risk framework document which summarises the key risks and their mitigation.

The Board undertakes a formal risk review with the assistance of the Audit and Risk Committee at least twice a year in order to robustly assess the effectiveness of the Company's risk management and internal control systems. During the course of its review in respect of the year ended 31 December 2021, the Board has not identified, nor been advised of any failings or weaknesses which it has determined to be of a material nature. The principal risks and uncertainties which the Company faces are set out below.

Principal risks and uncertainties

The Board of Directors has overall responsibility for risk management and internal control of the Company. The Board recognises that risk is inherent in the operation of the Company and that effective risk management is key to the success of the organisation. The Board has delegated responsibility for the assurance of the risk management process and the review of mitigating controls to the Audit and Risk Committee.

The principal risks and the Company's policies for managing these risks are set out below and the policy and practice with regard to financial instruments are summarised in Note 16 to the financial statements.

There were no changes to these risks in the current year or at the date of this report.

GOING CONCERN

The Directors consider that it is appropriate to adopt the going concern basis in preparing the financial statements. After making enquiries, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. In arriving at this conclusion, the Directors have considered the liquidity of the portfolio and the Company's ability to meet obligations as they fall due for a period of at least 12 months from the date that these financial statements were approved.

VIABILITY STATEMENT

The Board has assessed the principal risks facing the Company over a five-year period, including those that would threaten its business model, future performance, solvency or liquidity. The five-year period was selected to align with the average duration of the Company's existing investments. The next continuation vote of the Company will also take place within this five-year time frame, in 2024. The Board has developed a matrix of risks facing the Company and has put in place certain investment restrictions which are in line with the Company's investment objective and policy in order to mitigate these risks as far as practicable. The principal risks which have been identified, and the steps taken by the Board to mitigate these risks, are presented above.

The Company believes its borrowing capabilities provide further flexibility and help ensure it is in a position to finance its funding obligations in the event that internally generated cash flow in the period is insufficient to finance the unfunded portion of a lending commitment. The Board reviews the Company's financing arrangements quarterly to ensure that the Company is in a strong position to fund all outstanding commitments on existing investments as well as being able to finance new investments. In addition, the Board regularly reviews the prospects for the Company's portfolio and the pipeline of potential investment opportunities which provide comfort that the Company is able to continue to finance its activities for the medium-term future.

Based on this assessment, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five-year period.

ENVIRONMENTAL, HUMAN RIGHTS, EMPLOYEE, SOCIAL AND COMMUNITY ISSUES

The Board recognises the requirement under the Companies Act 2006 to detail information about employees, human rights, environmental and community issues, including information about any policies it has in relation to these matters and the effectiveness of these policies. These requirements do not apply directly to the Company as it has no employees, all the Directors are non-executive and it has outsourced all its functions to third-party service providers. The Company has therefore not reported further in respect of these provisions.

While the Company is not within the scope of the Modern Slavery Act 2015 and it is not, therefore, obliged to make a slavery and human trafficking statement, the Company considers its supply chains to be of low risk as its principal service providers are the professional advisers set out in the Corporate Information section below. Further information on the Company's anti-bribery and corruption policy is set out in the full Annual Report.

There are five Directors, four male and one female. Further information on the composition and operation of the Board is detailed in the Corporate Governance Statement in the full Annual Report.

The Strategic Report has been approved by the Board and signed on its behalf by

Harry Hyman

Chairman

21 March 2022

EXTRACTS FROM THE DIRECTORS' REPORT

The Directors are pleased to present the Annual Report and audited financial statements for the year ended 31 December 2021.

Directors

The Directors of the Company who were in office during the year and up to the date of signing the financial statements are listed below:

Harry Hyman - Chairman

Duncan Budge - Senior Independent Director

Colin Bond - Chairman of the Audit and Risk Committee

Stephanie Léouzon - Director

Rolf Soderstrom - Director

Share capital

At the general meeting held on 28 February 2017, the Company was granted authority to allot Ordinary Shares or C Shares up to an aggregate nominal amount of $20 million on a non-pre-emptive basis for a period of five years from the date of the resolution. No Ordinary Shares or C Shares were allotted under this authority during the year. This authority has now expired. A new allotment authority will be sought at the Annual General Meeting to be held in May 2022.

At the annual general meeting held on 17 June 2021, the Company was granted authority to purchase up to 14.99 per cent. of the Company's Ordinary Share capital in issue at that date, amounting to 205,952,416 Ordinary Shares. This authority will expire at the conclusion of, and renewal will be sought at, the annual general meeting to be held in May 2022. No shares were purchased during the year for cancellation or held in treasury.

At 31 December 2021, and as at the date of this report, there are 1,373,932,067 Ordinary Shares in issue, of which 59,694 Ordinary Shares are held in treasury. At general meetings of the Company, shareholders are entitled to one vote on a show of hands and on a poll, to one vote for every Share held. Shares held in treasury do not carry voting rights. The total voting rights of the Company at 31 December 2021, and as at the date of this report, were 1,373,872,373.

Further information on the Company's share capital is set out in Note 13 to the financial statements.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

In respect of the financial statements

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB).

Under company law, 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 of the company for that period. In preparing the financial statements, the directors are required to:

· select suitable accounting policies and then apply them consistently; 

· state whether applicable IFRSs as issued by the International Accounting Standards Board (IASB) have been followed, subject to any material departures disclosed and explained in the financial statements; 

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

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

The directors are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006.

The directors are responsible for the maintenance and integrity of the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' confirmations

Each of the directors, whose names and functions are listed in the Board of Directors section above confirm that, to the best of their knowledge:

· the company financial statements, which have been prepared in accordance with IFRSs as issued by the International Accounting Standards Board (IASB), give a true and fair view of the assets, liabilities, financial position and profit of the company; and 

· the Strategic Report includes a fair review of the development and performance of the business and the position of the company, together with a description of the principal risks and uncertainties that it faces.

On behalf of the Board

Harry Hyman

Chairman

21 March 2022

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2020 and 31 December 2021 but is derived from those accounts. Statutory accounts for the year ended 31 December 2020 have been delivered to the Registrar of Companies, and those for the year ended 31 December 2021 will be delivered in due course. The Auditor has reviewed those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full Annual Report and Financial Statements.

.

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2021

(In $000s except per share amounts)

* 2021 Investment income includes $20,484,000 from prior year income from its financing subsidiary, BPCR Limited Partnership. Please see note 3 below for full details.

The total column of this statement is the Company's Statement of Comprehensive Income prepared in accordance with IFRS. The supplementary revenue and capital columns are presented for information purposes as recommended by the Statement of Recommended Practice ("SORP") issued by the Association of Investment Companies ("AIC").

All items in the above Statement derive from continuing operations.

There is no other comprehensive income, and therefore the return on ordinary activities after finance costs and taxation is also the total comprehensive income.

The notes below form part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2021

(in $000s)

* The special distributable and revenue reserves can be distributed in the form of a dividend.

The notes below form part of these financial statements.

STATEMENT OF FINANCIAL POSITION

As at 31 December 2021 (In $000s except per share amounts)

The financial statements of BioPharma Credit PLC registered number 10443190 were approved and authorised for issue by the Board of Directors on 21 March 2022 and signed on its behalf by:

Harry Hyman

Chairman

21 March 2022

The notes below form part of these financial statements.

CASH FLOW STATEMENT

For the year ended 31 December 2021 (In $000s)

* 2021 purchases of investments includes $186,250,000 transferred to BPCR Limited Partnership for the purchase of investments in LumiraDx and Evolus. 2020 includes Collegium, Optinose Tranche B, Epizyme Tranche B and BDSI Tranche B fundings before assets were transferred in kind to the financing subsidiary, BPCR Limited Partnership, on 22 May 2020. These payments do not include investments made by BPCR Limited Partnership.

** BPCR LP investments not included.

The notes below form part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2021

1. GENERAL INFORMATION

BioPharma Credit PLC is a closed-ended investment company limited by shares incorporated and registered in England and Wales on 24 October 2016 with registered number 10443190. The registered office of the Company is 51 New North Road, Exeter, EX4 4EP. On 6 February 2017 the Company changed its name from PRECIS (2772) PLC.

The Company carries on the business as an investment trust company within the meaning of Sections 1158/1159 of the Corporation Tax Act 2010.

The Company's Investment Manager is Pharmakon Advisors L.P. ("Pharmakon") . Pharmakon is a limited partnership established under the laws of the State of Delaware. It is registered as an investment adviser with the Securities and Exchange Commission ("SEC") under the United States Investment Advisers Act of 1940, as amended.

Pharmakon is authorised as an Alternative Investment Fund Manager ("AIFM") under the Alternative Investment Fund Managers Directive ("AIFMD") . Pharmakon has, with the consent of the Directors, delegated certain administrative duties to Link Alternative Fund Administrators Limited ("Link").

2. ACCOUNTING POLICIES

a) Basis of preparation

On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. The Company transitioned to UK-adopted International Accounting Standards in its financial statements on 1 January 2021. This change constitutes a change in accounting framework. However, there is no impact on recognition, measurement or disclosure in the period reported as a result of the change in framework. The Company's annual financial statements covers the year from 1 January 2021 to 31 December 2021 and have been prepared in accordance with UK-adopted International Accounting Standards and as applied in accordance with the Disclosure Guidance Transparency Rules sourcebook of the Financial Conduct Authority (FCA) and the AIC SORP (issued in April 2021) for the financial statements of investment trust companies and venture capital trusts, except to any extent where it is not consistent with the requirements of IFRS. The financial statements have been prepared in accordance with the Companies Act 2006, as applicable to companies reporting under those standards.

The financial statements are presented in US dollars, being the functional currency of the Company. The financial statements have been prepared on a going concern basis under historical cost convention, except for the measurement at fair value of investments measured at fair value through profit or loss.

The information for the year ended 31 December 2021 has been extracted from the latest published financial statements, which have been delivered to the Registrar of Companies. The Auditor's Report on those financial statements contained no qualification or statement under Section 498 of the Companies Act 2006.

Assessment as an investment entity

Entities that meet the definition of an investment entity within IFRS 10 'Consolidated Financial Statements' are required to measure their subsidiaries at fair value through profit or loss rather than consolidate the entities. The criteria which define an investment entity are as follows:

• an entity that obtains funds from one or more investors for the purpose of providing those investors with investment services;

• an entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and

• an entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.

The Directors have concluded that the Company meets the characteristics of an investment entity, in that it has more than one investor and its investors are not related parties; holds a portfolio of investments, predominantly in the form of loans which generates returns through interest income. All investments, including its subsidiary BPCR Limited Partnership, are reported at fair value to the extent allowed by IFRS.

b) Presentation of Statement of Comprehensive Income

In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been prepared alongside the Income Statement.

c) Segmental reporting

The Directors are of the opinion that the Company has one operating and reportable segment being the investment in debt assets secured by royalties or other cash flows derived from the sales of approved life sciences products.

d) Investments at fair value through profit or loss

The principal activity of the Company is to invest in interest-bearing debt assets with a contractual right to future cash flows derived from royalties or sales of approved life sciences products. In accordance with IFRS, the financial assets are measured at fair value through profit or loss. They are accounted for on their trade date at fair value, which is equivalent to the cost of the investment. The fair value of the asset reflects any contractual amortising balance and accrued interest.

The fair value hierarchy consists of the following three levels:

• Level 1 - Quoted market price for identical instruments in active markets

• Level 2 - Valuation techniques using observable Inputs

• Level 3 - Valuation techniques using significant unobservable inputs

Listed level 1 investments where a financial instrument is active are priced by quoted market prices.

Level 2 investments may be valued using market data obtained from external, independent sources. The data used could include quoted prices for similar assets and liabilities in active markets, prices for identical or similar assets and liabilities in inactive markets, or models with observable inputs.

For unlisted level 3 investments where the market for a financial instrument is not active, fair value is established using valuation techniques in accordance with the International Private Equity and Venture Capital Valuation ("IPEV") Guidelines (issued in December 2018), which may include recent arm's length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. Where there is a valuation technique commonly used by market participants to price the instrument and that technique has proved reliable from estimates of prices obtained in actual market transactions, that technique is utilised. More information can be found in Note 2(n) below.

Unlisted investments often require the manager to make estimates and judgements and apply assumptions or subjective judgement to future events and other matters that may affect fair value. For unlisted investments valued using a discounted cash flow analysis, the key judgements are the size of the market, pricing, projected sales of the product at trade date and future growth and other factors that will support the repayment of a senior secured or royalty debt instrument.

Changes in the fair value of investments held at fair value through profit or loss, and gains or losses on disposal, are recognised in the Statement of Comprehensive Income as gains or losses from investments held at fair value through profit or loss. Transaction costs incurred on the purchase and disposal of investments are included within the cost or deducted from the proceeds of the investments. All purchases and sales are accounted for on trade date.

e) Foreign currency

Transactions denominated in currencies other than US dollars are recorded at the rates of exchange prevailing on the date of the transaction. Items which are denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Any gain or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the Statement of Comprehensive Income.

f) Income

There are five main sources of revenue for the Company: interest income, income from subsidiaries, royalty revenue, make-whole and prepayment income, dividends and paydown fees.

Interest income is recognised when it is probable that the economic benefits will flow to the Company. Interest is accrued on a time basis, by reference to the principal outstanding and the effective interest rate that is applicable. Accrued interest is included within trade and other receivables on the Statement of Financial Position.

The Company recognises accrued income for investments that it holds directly. The Company also holds an investment in BPCR Limited Partnership, its wholly owned subsidiary which it measures at fair value through profit or loss rather than consolidate. BPCR Limited Partnership also recognises accrued income for investments it holds directly. When the accrued income is recorded at the Partnership, the Company recognises the income in capital within the Statement of Comprehensive Income. When the Company's right to receive the income is established, funds are transferred from the Partnership to the Company and income is transferred to revenue within the Statement of Comprehensive Income.

Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement (provided that it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured reliably) . Royalty arrangements that are based on production, sales and other measures are recognised by reference to the underlying arrangement.

Make-whole and prepayment income is recognised when payments are received by the Company and is recorded to revenue within the Statement of Comprehensive Income.

Dividends are receivable on equity shares and recognised on the ex-dividend date. Where no ex-dividend date is quoted, dividends are recognised when the Company's right to receive payment is established. Dividends from investments in unquoted shares and securities are recognised when they become receivable.

Some investments include additional consideration in the form of structuring fees, which are paid on completion of the transaction. As the investments are classified as level 3 in the fair value hierarchy, there is no observable evidence of the fair value of the investments excluding the fees, therefore the fees should be included in the day one fair value of the investments. Such fees are included in the fair value of the investment and released to the Statement of Comprehensive Income over the life of the investment. We consider incorporating the fees in the fair value gains and losses over the life of the loans to be more reflective of the period over which the benefit is received. These fees are allocated to revenue within the Statement of Comprehensive Income.

Bank interest and other interest receivable are accounted for on an accruals basis.

g) Dividends paid to shareholders

The Company intends to pay dividends in US Dollars on a quarterly basis, however, shareholders can elect to have dividends paid in sterling. The Company may, where the Directors consider it appropriate, use the reserve created by the cancellation of its share premium account to pay dividends.

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 (as amended) regarding distributable income. As such, the Company will distribute amounts such that it does not retain in respect of an accounting period an amount greater than 15 per cent. of its income (as calculated for UK tax purposes) for that period.

h) Expenses

All expenses are accounted for on an accruals basis, with the exception of director's expenses which are accounted for on a cash basis. Expenses, including investment management fees, performance fees and finance costs, are charged through the revenue account except as follows:

• expenses which are incidental to the acquisition or disposal of an investment are treated as capital costs and separately identified and disclosed in Note 4; and

• expenses of a capital nature are accounted for through the capital account.

The performance fee is considered to be an annual fee and is only recognised at the end of each performance period. It is calculated in accordance with the details in Note 4(b) below. Any performance fee triggered, whether payable or deferred, is recognised in the Statement of Comprehensive Income. Where a performance fee is payable it is treated as a current liability in the Statement of Financial Position. Where a performance fee is deferred, it is treated as a non-current liability in the Statement of Financial Position. It becomes payable to the Investment Manager at the end of the first performance period in respect to which the compounding condition is satisfied.

i) Trade and other receivables

Trade and other receivables are recognised and carried at amortised cost as the Company collects contractual interest payments from its borrowers. An allowance for estimated unrecoverable amounts are measured and recognised where necessary. The Company assesses, on a forward-looking basis, the expected losses associated with its trade and other receivables.

j) Cash and cash equivalents

Cash and cash equivalents are defined as cash in hand, demand deposits, and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

Cash and cash equivalents includes interest and income from money market funds.

k) Trade and other payables

Trade and other payables are recognised and carried at amortised cost, do not carry any interest and are short-term in nature.

l) Taxation

The Company may, if it so chooses, designate as an 'interest distribution' all or part of the amount it distributes to shareholders as dividends, to the extent that it has 'qualifying interest income' for the accounting period. Were the Company to designate any dividend it pays in this manner, it should be able to deduct such interest distributions from its income in calculating its taxable profit for the relevant accounting period. The Company intends to elect for the 'streaming' regime to apply to the dividend payments it makes to the extent that it has such 'qualifying interest income'. shareholders in receipt of such a dividend will be treated, for UK tax purposes, as though they had received a payment of interest, which results in a reduction of the corporation tax payable by the Company.

Tax on the profit or loss for the year comprises current and deferred tax. Corporation tax is recognised in the Statement of Comprehensive Income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in respect of previous periods. The tax effect of different items of expenditure is allocated between revenue and capital on the same basis as the particular item to which it relates, using the Company's marginal method of tax, as applied to those items allocated to revenue, for the accounting period.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax basis of assets and liabilities and their carrying amount for financial reporting purposes. Deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

m) Share capital and reserves

The share capital represents the nominal value of the Company's ordinary shares.

The share premium account represents the excess over nominal value of the fair value of consideration received for the Company's ordinary shares, net of expenses of the share issue. This reserve cannot be distributed.

The special distributable reserve was created on 29 June 2017 to enable the Company to buy back its own shares and pay dividends out of such distributable reserve, in each case when the Directors consider it appropriate to do so, and for other corporate purposes.

The capital reserve represents realised and unrealised capital and exchange gains and losses on the disposal and revaluation of investments and of foreign currency items. The realised capital reserve can be used for the repurchase of shares. This reserve cannot be distributed.

The revenue reserve represents retained profits from the income derived from holding investment assets less the costs and interest on cash balances associated with running the Company. This reserve can be distributed.

n) Critical accounting estimates and assumptions

The preparation of these financial statements in conformity with IFRS requires the Directors to make accounting estimates which will not always equal the actual results. There are no material judgements required in applying the Company's accounting policies.

This note provides an overview of the areas that involve a higher degree of judgement or complexity and of items which are more likely to be materially adjusted due to estimates included in other notes, together with information about the basis of calculation for each line in the financial statements.

In particular, estimates are made in determining the fair valuation of unquoted investments for which there is no observable market and may cause material adjustments to the carrying value of those investments. Determining fair value of investments with unobservable market inputs is an area involving management judgement, requiring assessment as to whether the value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain assumptions are required to be made including management's expectations of short and long term growth rates in product sales and the selection of discount rates to reflect the risks involved. These are valued in accordance with Note 2(d) above and using the valuation techniques described in Note 7 below.

Also, estimates including cash flow projections, discount rates and growth rates in product sales are made when determining any deferred performance fee; this may be affected by future changes in the Company's portfolio and other assets and liabilities. Any deferred performance fee is calculated in accordance with Note 4(b) below and is recognised in accordance with Note 2(h) above.

These estimates are reviewed on an ongoing basis. Revisions to these judgements and estimates are also reviewed on an ongoing basis. Revisions are recognised prospectively.

o) New accounting standards effective since 1 January 2020

There are no new standards impacting the Company that have had a significant effect in the annual financial statements for the year ended 31 December 2021.

New standards that have been adopted in the annual financial statements for the year ending 31 December 2021, but have not had a significant effect on the Company are:

IFRS 9 'Financial Instruments', interest benchmark reform. The Phase 2 amendments address issues that arise from the implementation of the reforms, including the replacement of one benchmark with an alternative one.

The Directors have considered the implications of the amendments to IFRS 9 and are of the opinion that there is no significant impact to the Company, as all investments which reference USD LIBOR will transition in June 2023. Therefore, there has been no impact on the current and comparative financial statements for this accounting standard.

p) Accounting standards not yet effective

There are no standards or amendments not yet effective which are relevant or have a material impact on the Company.

The standards or amendments not yet effective that will be adopted on their effective date are:

• Amendment to IAS1, presentation of financial statements on classification of liabilities, effective from 1 January 2024, clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period.

• Amendment to IAS12, Income taxes effective from 1 January 2023. These amendments require companies to recognise deferred tax on transactions that, on initial recognition give rise to equal amounts of taxable and deductible temporary differences.

3. INCOME

* In 2020 $136,000 of fixed investment income was incorrectly deducted as tax at source. This was corrected in 2021.

** In 2020 the Company's senior secured term loan to Lexicon included make whole interest investment income of $3,082,000, which was paid upon the loan repayment and recognised as income in the year.

*** In 2021 the Company's senior secured term loan to Sebela included a prepayment premium of $1,474,000, which was paid upon the loan repayment and recognised as income in the year. In 2020 the Company's senior secured term loans to Lexicon and Sebela included a prepayment premium of $2,675,000, which was paid upon the loan repayment and recognised as income in the year.

**** In 2021 $36,000 was recorded as additional income from the Company's investment in Optinose Warrants. In 2020 the Company's senior secured term loan to Collegium included additional consideration in the form of structuring fees of $4,125,000 which was paid upon the completion of the transaction and $467,000 of this amount was recognised as income in the year.

***** Net income in 2020 included $20,484,000 relating to the change in fair value of the Company's subsidiary, BPCR Limited Partnership ("BPCR LP"). This change in fair value of $20,484,000 is equal to the undistributed net income earned by BPCR LP in the year, reflecting changes in the fair value of and income earned on the investment it holds and gave rise to an unrealised gain in the Company in 2020.

In 2021, the undistributed net income earned by BPCR LP in 2020 was received by the Company and was recognised in Investment income in the Statement of Comprehensive Income and as a corresponding unrealised loss in the fair value of the investment. If this had been included in the year in which the income was received, 2021 Investment income would have been $107,148,000 (2020: $121,029,000).

In 2021, undistributed investment income earned by BPCR LP was booked as a receivable of the Company ($9,593,000) and did not result in a change in fair value. The Company will continue with this treatment prospectively. Details of this investment are set out in the accounting policy for income (Note 2F) and Note 7, investment at fair value through profit or loss.  

4. FEES AND EXPENSES

EXPENSES

* Negative VAT expense is due to an over accrual of VAT in 2020.

**In 2021 the company incurred costs of $981,000 to be admitted to trade on the premium segment of the main market of the London Stock Exchange. Includes $127,000 auditor's remuneration - LSE listing.

A) INVESTMENT MANAGEMENT FEE

With effect from the Initial Admission, the Investment Manager is entitled to a management fee (''Management Fee'') calculated on the following basis: (1/12 of 1 per cent. of the NAV on the last business day of the month in respect of which the Management Fee is to be paid (calculated before deducting any accrued Management Fee in respect of such month) ) minus (1/12 of $100,000).

The Management Fee payable in respect of any quarter will be reduced by an amount equal to the Company's pro rata share of any transaction fees, topping fees, break-up fees, investment banking fees, closing fees, consulting fees or other similar fees which the Investment Manager (or an affiliate) receives in connection with transactions involving investments of the Company (''Transaction Fees'') . The Company's pro rata share of any Transaction Fees will be in proportion to the Company's economic interest in the investment(s) to which such Transaction Fees relate.

B) PERFORMANCE FEE

Subject to: (i) the NAV attributable to the Ordinary Shares as at the end of a performance period representing a minimum of 6 per cent. annualised rate of return on the Company's IPO gross proceeds (adjusted for dividends, share issues and buybacks as appropriate) , (ii) the total return on the NAV attributable to the Ordinary Shares (adjusted for dividends, share issues and buybacks as appropriate) exceeding 6 per cent. over such performance period, and (iii) a high watermark, the Investment Manager will be entitled to receive a performance fee equal to the lesser of: (a) 50 per cent. of the total return above 6 per cent.; and (b) 10 per cent. of the total return over such performance period provided always that the amount of any performance fee payable to the Investment Manager will be reduced to the extent necessary to ensure that after account is taken of such fee, condition (iii) above remains satisfied.

Where the Investment Manager is not entitled to a performance fee solely because condition (i) has not been satisfied, such fee will be deferred and paid in a subsequent performance period in which such condition is satisfied. Where condition (i) is satisfied in a performance period but the payment of a performance fee (or any deferred performance fee from previous performance periods) in full would result in that condition failing, the Investment Manager shall be entitled to such a portion of such fee that does not result in the failure of the condition (i) above and the balance would be deferred to a future performance period.

Any performance fee (whether deferred or otherwise) shall be paid as soon as practicable after the end of the relevant performance period and, in any event, within 15 business days of the publication of the Company's audited annual financial statements relating to such period.

Where the payment of performance fee (or any deferred performance fee from previous performance periods) in full would result in the failure of condition (i) above, the Investment Manager shall only be entitled to 50 per cent. of such fee that does not result in the failure of condition (i) with the balance being deferred to a future performance period.

If, during the last month of a performance period, the Shares have, on average, traded at a discount of 1 per cent. or more to the NAV per Share (calculated by comparing the middle market quotation of the Shares at the end of each business day in the month to the prevailing published NAV per Share (exclusive of any dividend declared) as at the end of such business day and averaging this comparative figure over the month), the Investment Manager shall (or shall procure that its Associate does) apply 50 per cent. of any Performance Fee paid by the Company to the Investment Manager (or its Associate) in respect of that performance period (net of all taxes and charges applicable to such portion of the Performance Fee) to make market acquisitions of Shares (the "Performance Shares") as soon as practicable following the payment of the Performance Fee by the Company to the Investment Manager (or its Associate) and at least until such time as the Shares have, on average, traded at a discount of less than 1 per cent. to the NAV per Share over a period of five business days (calculated by comparing the middle market quotation of the Shares at the end of each such business day to the prevailing published NAV per Share (exclusive of any dividend declared) and averaging this comparative figure over the period of five business days) . The Investment Manager's obligation:

1) shall not apply to the extent that the acquisition of the Performance Shares would require the Investment Manager to make a mandatory bid under Rule 9 of the Takeover Code; and

2) shall expire at the end of the performance period which immediately follows the performance period to which the obligation relates.

The Performance Fee for a performance period shall be paid as soon as practicable after the end of the relevant performance period and, in any event, within three calendar months of the end of such performance period.

C) DIRECTORS

Each of the Directors is entitled to receive a fee from the Company at such rate as may be determined in accordance with the Articles. The Directors' remuneration is $70,000 per annum for each Director other than:

• the Chairman, who will receive an additional $30,000 per annum; and

• the Chairman of the Audit and Risk Committee, who will receive an additional $15,000 per annum.

5. TAXATION ON ORDINARY ACTIVITIES

It is the intention of the Directors to conduct the affairs of the Company so as to satisfy the conditions for approval of the Company by HMRC as an investment trust under Section 1158 of the Corporation Tax Act 2010 (as amended) and pursuant to regulations made under Section 1159 of the Corporation Tax Act 2010 and pursuant to regulations made under Section 1159 of the Corporation Tax Act 2010. As an investment trust, the Company is exempt from corporation tax on capital gains.

The current taxation charge for the year is different from the standard rate of corporation tax in the UK of 19.00 per cent. (2022: 19.00 per cent.), the effective tax rate was 0.00 per cent. (2020: 0.00 per cent.). The differences are explained below.

There will be in increase in the UK corporation tax rate from 19% to 25%, effective from April 2023, which was substantively enacted on 3 March 2021. This is expected to have no effect on the tax charge for the Company as the exemptions above will still apply.

* The theoretical tax rate is calculated using a blended tax rate over the year.

At 31 December 2021, the Company had no unprovided deferred tax liabilities (2020: $nil).

At that date, based on current estimates and including the accumulation of net allowable losses, the Company had no unrelieved losses.

Deferred tax is not provided on capital gains and losses arising on the revaluation or disposal of investments because the Company meets (and

intends to continue for the foreseeable future to meet) the conditions for approval as an Investment Trust company.

Income received from BPCR LP is qualifying interest income and is streamed by the Company, therefore no tax charge has been incurred.

6. DIVIDENDS

The below table represents the dividends paid in the financial year.

Set out below are the interim dividends paid or proposed on Ordinary Shares in respect of the financial year, which is the basis on which the requirements of Section 1159 of the Corporation Tax Act 2010 are considered.

On 24 February 2022, the Board approved a fourth interim dividend, for the year ended 31 December 2021, of $0.0175 per Ordinary Share payable on 31 March 2022. In accordance with IFRS, these dividends have not been included as a liability in these financial statements.

7. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS

* On 22 May 2020, the Company transferred the full carrying amount of several investments to its newly incorporated, wholly-owned subsidiary BPCR Limited Partnership in return for an investment in BPCR Limited Partnership of the same amount $1,048 million. The balance on the transfer line of $21.358 million relates to accrued income which is subsequently reflected in the fair value of BPCR Limited Partnership, previously disclosed as part of trade and other receivables in the Company and expenses paid on the behalf of BPCR Limited Partnership.

Transaction costs, (incurred at the point of the transaction) incidental to the acquisition of investments totalled $nil (2020: $nil) and to the disposals of investments totalled $nil (2020: $nil) for the year. In addition, legal fees incidental to the acquisition of investments totalled $nil (2020: $nil) as disclosed in Note 4, have been taken to the capital column in the Statement of Comprehensive Income since they are capital in nature.

The Company is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following three levels:

· Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

· Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

· Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level of the fair value hierarchy, within which the fair value measurement is categorised, is determined on the basis of the lowest level input that is significant to the fair value of the investment.