b'Annual Report & Accounts 2022 Mercia Asset Management PLC 51Strategic reportRisk Possible consequences MitigationThe value of the GroupsA large proportion of the overallThe Group seeks to balance the total portfolio by direct investmentvalue of the direct investmentsector quantum and value, as the total number of portfolio may beportfolio may at any time bedirect investments and their values grow over time. dominated by a singleaccounted for by one or very fewNotwithstanding the successful sale of OXGENE in or limited number ofcompanies. There is a risk that one2021 and Faradion in early 2022, the current portfolio companies. or more of the portfolio businessescontinues to be well balanced. will experience financial difficulties,Concentration risk is further mitigated by the increased become insolvent or suffer fromresources available to assess and monitor direct poor market conditions (includinginvestments and by the fact that the overall portfolio is as a result of the pandemic) and if,maturing, with failures less likely to occur. The balance as a result, their values were to besheet is an evergreen investment vehicle and can support adversely affected, this could havefirms for longer, where appropriate. As well as the Groups a materially detrimental effect onincreasing investment team talent, Mercia has focused the overall value of the Groupsits attention on strengthening investee company boards investment portfolio, and greaterthrough its non-executive director network and venture skew fair value concentration intopartners, further mitigating against investee failure risk.a smaller number of companies. Currently, the top five direct investments represent 58.6% of the total portfolio by value.Events after the balance sheet dateOther than the continuing completion of approved direct investments, there have been no other material events since the balance sheet date.ApprovalThe Strategic Report was approved by the Board of Directors and signed on its behalf by:Dr Mark PaytonChief Executive Officer4 July 2022'