Silence Therapeutics plc
Annual Report 2022

Plain-text annual report

Silence Therapeutics Annual Report 2022 SILENCE THERAPEUTICS PLC Contents 1 Strategic report 2 Governance Board of Directors Corporate Governance Report Audit and Risk Committee Report Remuneration Committee Report 3 Financial Statements Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Company Balance Sheet Company Statement of Changes in Equity Notes to the Company Financial Statements Company Information and Advisers 2 22 29 35 37 55 58 1 SILENCE THERAPEUTICS PLC Strategic Report Business Overview Silence Therapeutics plc is a biotechnology company focussed on discovering and developing novel molecules incorporating short interfering ribonucleic acid, or siRNA, to inhibit the expression of specific updated genes thought to play a role in the pathology of diseases with significant unmet medical specifically binding to and degrading messenger RNA, or mRNA, molecules that encode specific targeted disease- associated proteins in a cell. By degrading the message that encodes the disease-associated protein, the production of that protein is reduced and its level of activity is lowered. In the field of RNAi therapeutics, this reduction of disease- Our proprietary mRNAi GOLD (GalNAc Oligonucleotide Discovery) platform consists of precision-engineered medicines designed to accurately target and disease-associated genes in the liver. Using our mRNAi GOLD platform, we have generated siRNA product candidates both for our internal development pipeline as well as for out-licensed programmes with third-party collaborators. Our wholly owned pipeline is currently focused in three therapeutic areas of high unmet need: cardiovascular disease, haematology and rare diseases. SLN360, an siRNA targeting the LPA gene, is our wholly owned product candidate currently in phase 2 clinical development (ALPACAR-360 trial), to reduce high levels of lipoprotein(a), or Lp(a), a genetically determined from the single-ascending dose portion of the APOLLO phase 1 programme evaluating SLN360 in 32 healthy adults with high 600 mg) had up to 96% and 98% median reduction in Lp(a) levels, respectively, and median reductions of up to 71% and 81% from baseline persisted at 150 days. Those receiving a placebo saw no change in Lp(a) levels. Further analysis showed median time-averaged Lp(a) reductions over 150 days exceeded 80% in the SLN360 300 mg and 600 mg dose groups. At day 365, some participants still exhibited substantial knockdown of Lp(a) to approximately 50% of baseline. SLN360 was well tolerated with no serious safety concerns reported. The multiple-ascending dose portion of the APOLLO programme in subjects with high Lp(a) and stable ASCVD is ongoing and expected to readout in the fourth quarter of 2023. In January 2023, we started dosing in the ALPACAR-360 phase 2 trial evaluating subjects with high tic cardiovascular disease, or ASCVD, events and we expect to complete enrolment by the end of 2023. We are engaged in global partnership discussions for this programme to ensure we are well positioned to scale up SLN360 development and future commercialization. SLN124, an siRNA targeting the TMPRSS6 gene, is our wholly owned product candidate that has shown the potential to address a range of haematological conditions by modulating endogenous hepcidin, a peptide hormone that is the master regulator of systemic iron balance. SLN124 is being evaluated in the SANRECO phase 1/2 trial in patients with polcythaemia vera, or PV, and the GEMINI II phase 1 trial in patients with non-transfusion dependent, or NTD, thalassemia. SLN124 demonstrated proof of mechanism in the GEMINI phase 1 trial in healthy volunteers completed in May 2021, representing the first clinical data from our mRNAi GOLD platform. SLN124 has FDA Fast Track and orphan drug designations for PV as well as orphan drug and rare paediatric disease designations for beta-thalassaemia. The European Medical Agency has also granted SLN124 orphan drug designation and rare paediatric disease designation for beta-thalassaemia. The potential of our mRNAi GOLD platform has been validated through ongoing research and development collaborations with leading pharmaceutical companies, such as AstraZeneca, Mallinckrodt and Hansoh. These collaborations collectively represent up to 16 pipeline programmes and approximately $7.5 billion in potential milestones plus royalties. We believe the potential for our mRNAi GOLD platform to address disease-associated genes in the liver is substantial. Only around one percent of the approximately 14,000 liver expressed genes have been targeted by publicly known siRNAs. Once in the clinic, early-stage GalNAC-conjugated RNAi programmes have shown a greater likelihood of advancement from the current phase of development compared to the pharma industry average, according to a 2020 industry analysis based on phase transition success rates. We aim to maximize our mRNAi GOLD platform by advancing both our proprietary and partnered pipelines. 2 SILENCE THERAPEUTICS PLC Background on siRNA Molecules and RNA Interference Messenger RNA (mRNA) plays an essential role in the process used by cells to translate genetic information from DNA to create proteins. Transcription from DNA in the cell nucleus generates different types of RNA, including mRNA, which carries in the sequence of its nucleotides the genetic information which serves as molecular blueprints required for translation, or protein synthesis, outside of the nucleus where proteins are made. In some cases, cells produce mRNA erroneously, resulting in synthesis of too much of a particular protein or a mutated protein variant, which can lead to disease. Our siRNAs are designed to bind to undesirable mRNA, whereupon a natural process known as RNA interference, or RNAi, is triggered, resulting in catalytic degradation of the mRNA and reduced production and activity of the disease-associated protein. RNAi is a naturally occurring biological pathway within cells for sequence-specific silencing and regulation of gene expression. RNAi was discovered by Andrew Fire and Craig Mello, and they were awarded the 2006 Nobel Prize in Physiology or Medicine for the discovery. RNAi therapeutics represent a novel advance in drug development that has the potential to transform the care of patients with genetic and other diseases. Historically, the pharmaceutical industry had developed only small molecules or recombinant proteins to inhibit the activity of disease-associated proteins. While this approach is effective for many diseases, a number of proteins cannot be inhibited by either small molecules or recombinant proteins. Some proteins lack the binding pockets small molecules require for interaction. Other proteins are solely intracellular and are therefore inaccessible to recombinant protein-based therapeutics, which are limited to cell surface and extracellular proteins. The unique advantage of RNAi is that, instead of targeting proteins, RNAi silences the expression of genes themselves via the targeted destruction of the mRNAs made from the gene. Rather than seeking to inhibit a protein directly, the RNAi approach works upstream to prevent its creation in the first place. Once inside a cell, siRNA molecules are recognised by the endogenous RNAi cellular machinery, which removes one of the strands, referred to as a passenger strand, of the siRNA construct thereby allowing the other strand, referred to as a guide strand, to find its target mRNA and bind to it through Watson-Crick base pairing. This site-specific binding triggers the biological process of RNAi interference, by which natural cellular machinery degrades target mRNA bound by the guide strand and thereby prevents it from being translated into functional proteins. Our medicines are designed to harness this natural pathway to develop a new generation of therapeutics by designing tailored siRNA sequences that are able to bind through Watson-Crick base pairing to mRNAs that code for specific disease-associated genes, or genes that regulate them. Our siRNA molecules are administered by subcutaneous injection. Once administered, our siRNA molecules are taken up specifically by target liver cells or cleared from the body within hours. A single siRNA molecule, once in the liver and incorporated into the RNAi cellular machinery, can degrade large numbers catalytic activity of the RNAi pathway eventually fades with gradual degradation of the guide strands, RNAi-mediated protein reduction is not permanent. In our preclinical studies, we have observed a durable, dose-dependent silencing effect with our product candidates, with the highest dose resulting in reductions of between 50% and 85% or more of the target protein level over the course of several weeks to months following subcutaneous injection. As a result of the phase 1 clinical data we have generated in both our SLN360 and SLN124 programmes, we believe that these observed results suggest that our product candidates could lead to similar results in humans. The graphic below shows the steps involved in the pairing of our siRNA molecules with the bases contained in the mRNA sequence for a particular target gene. 3 SILENCE THERAPEUTICS PLC We believe that siRNA molecules can, in theory, be engineered to bind specifically to and silence almost any gene in the human genome to which siRNA can be delivered. This potentially broad application of siRNA therapeutics could allow them to become a new major class of drugs. We are currently able to deliver siRNA molecules to liver cells using N-acetylgalactosamine, or GalNAc, for receptor-mediated targeting. GalNAc is an amino-modified monosaccharide that binds to asialoglycoprotein receptors, or ASGPRs, with high affinity and specificity. When GalNAc-conjugated siRNA molecules reach the surface of liver cells, they are internalised in those cells, with those not internalised being excreted. Once internalised pathway. This GalNAc-siRNA drug modality is intended to enable precision medicine through the accuracy of Watson- Crick base pairing of the siRNA to its target gene mRNA, coupled with the specificity of GalNAc-mediated delivery to the target gene-containing liver cell. Our mRNAi GOLD platform uses a novel structure of double-stranded RNA with chemical modifications designed to improve the stability and efficacy of our siRNA molecules as well as to enhance delivery to targeted liver cells. We incorporate proprietary chemical modifications to enhance drug properties of our siRNA molecules, such as potency, stability and tissue distribution. We believe this approach results in a powerful modular technology that will be well- suited to tackle life-changing diseases. Particular siRNA molecules are designed to reduce the levels of a disease- associated protein directly, such as in the case of SLN360. In preclinical studies and our phase 1 single-ascending dose study, SLN360 was shown to directly reduce Lp(a) expression. Alternatively, in cases in which a disease-associated protein is normally subject to inhibition by a regulatory protein, siRNA molecules are designed to increase the levels of the disease-associated protein by silencing the inhibitory protein, thereby relieving inhibition and indirectly increasing levels of the protein normally subject to inhibition. In preclinical studies and in a phase 1 study in healthy volunteers, SLN124 was shown to indirectly up-regulate hepcidin levels by reducing the expression of a specific gene, TMPRSS6, which normally anaemia conditions in which hepcidin expression is typically low. Using these techniques, we believe we can design siRNA molecules to decrease high protein levels, and in some cases, to increase low protein levels, depending on the particular disease genes being targeted. 4 SILENCE THERAPEUTICS PLC Our mRNAi GOLD Platform Our mRNAi GOLD platform comprises elements of our GalNAc-siRNA toolbox, our liver cell targeting technology and our target selection and screening process. GalNAc-siRNA Toolbox. Our mRNAi GOLD platform is a toolbox comprising several different elements that can be incorporated into our double-stranded siRNA structure, known as blunt-ended 19-mers, either singly or in different combinations depending on individual siRNA sequences. The toolbox elements include: sugar modifications of one or more select individual nucleotides; stabilizing modifications of one or more internucleoside linkages in the sense and antisense strands; stabilizing modifications at one or more of the ends of the siRNA molecules; a five- silencing complex, or RISC; and -induced a versatile linker chemistry for GalNAc ligand conjugation in various numbers and configurations. When applying these elements of our toolbox, we also aim to reduce the overall content of the sugar modifications and the number of undefined stereogenic centres in the siRNA molecule. Liver Cell Targeting Technology. Blood flow and fenestra, or small openings in the endothelium, result in a large amount of the injected dose of a conjugated siRNA passing through the liver and reaching the main cell type of the liver known as a hepatocyte. Hepatocytes are cuboidal epithelial cells that line the liver sinusoids. Individual hepatocytes have approximately 0.5 to 1.0 million cell surface ASGPRs. GalNAc binds to ASGPRs with high affinity so that when GalNAc-conjugated siRNA reach the hepatocytes, they are internalised into the cells where siRNA can bind and, as a thereby silencing the respective gene. Only a small fraction of the initial dose reaches the hepatocyte and the right compartment of the cell, but once the siRNA is there, it can stay active and intact for several months, allowing a small number of internalized siRNA molecules to exert a potent effect on the target mRNA. We apply the toolbox elements in the lead optimization phase to identify candidates that we believe will be potent with a long duration of action and have a favourable safety profile. Target Selection and Screening Process. We are able to source potential product candidates through a proprietary target selection process. The selection of new targets involves a careful analysis of the biology underlying an indication, disease epidemiology and addressable population, the current standard of care and resulting medical need, the commercial landscape and the envisaged clinical path. Our screening process relies on a proprietary in silico algorithm that seeks to predict the most efficacious and specific siRNAs for any given target. This bioinformatics function is designed to continuously improve in silico predictions for finding potentially potent and safe siRNA sequences. The highest scoring drug candidates subsequently undergo a multi-step evaluation process involving several rounds of in vitro screening in cell lines and primary hepatocytes to identify the most potent molecules. Top candidates identified in vitro are then tested for safety and potential efficacy in animal models. At this point in the process, additional modification patterns and new chemistries are introduced for improvement of activity and duration of action while maintaining the desired safety profile. To be selected as a drug candidate for clinical trials, it further needs to be shown that a molecule is well tolerated, elicits no serious adverse effects, and achieves strong and long-lasting knockdown of the targeted gene in a study with non-human primates. Translational Genomics. Our translational genomics team comprises machine learning experts, statistical geneticists, bioinformaticians and software engineers. The team uses state-of-the-art methods to analyse human genetic data to identify, characterise and prioritise new disease-causing gene targets, and develops machine learning models to enable us to continuously fine tune the siRNA design algorithm. By powering the analysis with the flexibility of cloud computing we are able to scale up our computational work as we grow. 5 SILENCE THERAPEUTICS PLC Our Pipeline Our pipeline is centred around our liver-targeting mRNAi GOLD platform and consists of a diversified set of therapeutic areas, including haematology, cardiovascular disease and rare diseases. *Silence retains exclusive rights to this programme outside of the China region, which includes Hong Kong, Macau and Taiwan. Our siRNA Product Candidates SLN360 Overview SLN360 is an siRNA molecule designed for the treatment of cardiovascular disease associated with elevated Lp(a), a lipoprotein in the blood. Available human data validate Lp(a) as an independent risk factor increasing the chances of developing premature cardiovascular diseases, including coronary heart disease and unstable angina, as well as myocardial infarction and ischaemic stroke. SLN360 has the potential to reduce these diseases by specifically binding to and inducing RNAi-mediated degradation of the mRNAs made from LPA, the gene that encodes apolipoprotein(a), a product candidate for several indications for which Lp(a) has been shown to be a causal, independent risk factor. We believe SLN360 could be beneficial in addressing increased cardiovascular risk associated with raised levels of Lp(a) greater than 50mg/ Lp(a) is thought to be higher in people with established cardiovascular disease and calcific aortic valvular stenosis. Additionally, elevated Lp(a) concentrations are associated with an increased risk of myocardial infarction and ischaemic stroke, particularly in stroke patients 55 years of age and younger. There is a genetic link between plasma Lp(a) level and cardiovascular risk. Mutations that genetically cause elevated Lp(a) levels have been linked with increases in myocardial infarction, ischaemic stroke, carotid stenosis, peripheral arterial disease (including femoral artery stenosis), abdominal aortic aneurysm, obstructed coronary vessels (i.e. coronary atherosclerotic burden), earlier onset of coronary artery disease, cardiovascular and all-cause mortality, increased risk of heart failure and reduced longevity. Importantly, these causal relationships are independent of concentrations of other lipids and lipoproteins, including low-density lipoprotein, or LDL, and conventional cardiovascular disease risk factors. Conversely, a genetically determined decrease in Lp(a) has been associated with a 29% lower risk of coronary artery disease, 31% lower risk of peripheral vascular disease, 17% lower risk of heart failure, 13% lower risk of stroke and a 37% lower risk of aortic stenosis. 6 SILENCE THERAPEUTICS PLC SLN360 is administered by subcutaneous injection and was observed to have a long duration of action in the APOLLO trial, potentially allowing for infrequent dosing, such as every three months or less frequently. In April 2022, results from the single-ascending dose portion of the APOLLO programme nmol/L were simultaneously presented in a late-breaking presentation at the American College of Cardiology (ACC) Annual Meeting and published in The Journal of the American Medical Association, or JAMA. In January 2023, we started dosing in the ALPACAR- ASCVD events and we expect to complete enrolment in the fourth quarter of 2023. Disadvantages of existing treatment options Lp(a) is not susceptible to lifestyle changes and there are no currently available pharmacological treatments that cause an appreciable reduction in Lp(a). The only existing treatment to reduce Lp(a) is apheresis, which involves the removal of blood plasma from the body by the withdrawal of blood, its separation into plasma and cells, and the reintroduction of the cells, used especially to remove antibodies in treating autoimmune diseases. This process can take between two and four hours and is performed every one to two weeks. Consequently, it is invasive and burdensome for patients, and it is only available at limited centres at a high cost. Apheresis is primarily used in Europe and it is not incorporated in the treatment guidelines in the United States. There are currently no approved lipid-lowering agents specific to Lp(a). Several non-specific agents, largely targeting LDL cholesterol, have been observed to have only marginal or modest Lp(a) reductions, including ezetimibe (7%), niacin therapy (23%), cholesteryl ester transfer protein, or CETP, inhibitors (25-60%), and antisense oligonucleotide-mediated inhibition of apo(b) by mipomersen (26%). Additionally, two monoclonal antibodies that inhibit proprotein convertase subtilisin/kexin type 9, or PCSK9, have been observed to reduce Lp(a) levels by 20%-30%. However, randomisation studies have suggested that to produce a clinically significant reduction in cardiovascular risk, a larger reduction in Lp(a) may be required, something that we believe may be achieved by targeted RNA-based approaches such as ours. Preclinical Data In a proof of mechanism study in cynomolgus monkeys, non-human primates also known as long-tailed macaques, administration of SLN360 lowered blood serum Lp(a) levels in a sustained manner. The chart below shows changes from baseline, or BL, levels with each data plot shown as an arithmetic mean plus or minus one standard deviation, or SD. As shown in the chart below, over nine weeks following administration of either a single dose of SLN360 (3 mg/kg or 9 mg/kg) on day 0 or three doses (of 3 mg/kg each) on days 0, 7 and 14, the largest dose resulted in a 95% reduction in Lp(a) levels. Individual animals observed in the study had their serum Lp(a) normalised to their own baseline levels, which are expressed as a nominal value of 100 in the chart below. SLN360-Induced Reduction in Serum Lp(a) in Cynomolgus Monkeys SLN360 has undergone an extensive nonclinical safety and pharmacokinetic evaluation, including rat biodistribution, repeat dose toxicity in two animal species (rat and the pharmacologically relevant cynomolgus monkey), including safety pharmacology investigations, and in vitro and in vivo genetic toxicity studies. SLN360 has displayed a typically short pharmacokinetic profile, where the compound is almost completely cleared from circulation in the blood after 24 hours. 7 SILENCE THERAPEUTICS PLC SLN360 distribution was largely restricted to the liver and kidney, with levels in other organs (including reproductive organs) at less than 1% of peak liver levels. SLN360 was shown to be non-genotoxic in the standard battery of genotoxic tests. In good laboratory practice (GLP) toxicology studies, SLN360 was well tolerated up to the maximum dose administered. All findings in both species were considered to be non-adverse. In the cynomolgus monkey, the most relevant species, the No Observed Adverse Effect Level, or NOAEL, was 60 times the pharmacologically active dose, and no dose-related changes in clinical chemistry, haematology, circulatory and electrocardiography, or ECG, parameters, respiratory rate, neurobehaviour, plasma cytokines, complement activation or c-reactive protein levels were noted. Phase 1 Clinical Programme (APOLLO) The APOLLO phase 1 clinical programme is a global randomised, double-blind, placebo controlled, single- ascending dose and multiple-ascending dose study to investigate the safety, tolerability, pharmacodynamic and pharmacokinetic response of SLN360 administered subcutaneously in up to 88 people total with high Lp(a) levels of In February 2022, we reported positive results from the single-ascending dose portion of the APOLLO phase 1 programme APOLLO trial were simultaneously presented in a late-breaking presentation at the ACC Annual Meeting and published in JAMA. In the APOLLO trial, participants in the top two SLN360 single dose groups (300 mg and 600 mg) had up to 96% and 98% median reduction in Lp(a) levels, respectively, and median reductions of up to 71% and 81% from baseline persisted at 150 days. Those receiving a placebo saw no change in Lp(a) levels. Other efficacy measures included the effects of SLN360 on low-density lipoprotein cholesterol (LDL cholesterol) and apolipoprotein B (ApoB), both of which are associated with an increased risk of cardiovascular events. The highest doses of SLN360 reduced LDL cholesterol and ApoB by about 25%. SLN360 was well tolerated with no serious safety concerns reported. In November 2022, we presented a further analysis from the APOLLO trial up to 365 days in a moderated - esults from the averaged Lp(a) reductions over 150 days exceeded 80% in the SLN360 300 mg and 600 mg dose groups. At day 365, some participants still exhibited substantial knockdown of Lp(a) to approximately 50% of baseline. Additionally, extension data to day 365 showed no new drug related safety findings. The multiple-ascending dose portion of the APOLLO study in subjects with high Lp(a) and stable ASCVD is ongoing and expected to readout in the fourth quarter of 2023. Phase 2 Clinical Programme (ALPACAR-360) The ALPACAR-360 phase 2 clinical trial is a randomised, double-blind, placebo-controlled trial enrolling randomly assigned to receive either two or three doses of SLN360 or placebo administered subcutaneously. The primary endpoint is time averaged change in Lp(a) from baseline. In January 2023, we announced that we started dosing patients in the ALPACAR-360 trial and we expect to complete enrolment in the fourth quarter of 2023. SLN124 Overview SLN124 is an siRNA molecule designed to treat ineffective erythropoiesis, or the production of red blood cells, associated with iron overload disorders and with primary or secondary dysregulation of hepcidin synthesis. These constitute diseases associated with pathologically low hepcidin and diseases in which there is inadequate hepcidin response for the degree of iron loading, such as beta-thalassaemia and polycythaemia vera (PV). Left untreated, iron overload disorders cause damage to the heart, liver, pituitary gland, adrenal gland, testes, pancreas, ovaries and kidney and endocrine organs. Beta-thalassaemia is often accompanied by the destruction of a large number of red blood cells, which causes the spleen to enlarge and work harder than normal, potentially worsening the anaemia. Beta-thalassaemia is a rare disease, with an overall prevalence of 1 per 100,000 persons, rising in certain regions (such as Mediterranean Europe, the Middle East and South East Asia) to 1 per 10,000 persons. Globally, there are over 60,000 new cases of beta-thalassaemia each year, of which there are approximately 15,000 cases in the United States and the five major markets in Europe. PV is a chronic myeloproliferative neoplasm, where the body makes too many blood cells. This increases the thickness of the blood and can lead to an increased risk of thrombosis (blood clots). The disease often presents later in life (60-65 years) and affects approximately 44 per 100,000 persons in Europe and the United States. 8 SILENCE THERAPEUTICS PLC SLN124 has the potential to reduce systemic iron, prevent organ iron overload and normalize erythropoiesis. It does so by specifically binding to and inducing RNAi-mediated degradation of mRNAs made from the gene TMPRSS6, a negative regulator of hepcidin, which is the main hormone controlling iron homeostasis. SLN124 is administered by subcutaneous injection and has demonstrated a long duration of action in the GEMINI healthy volunteer trial completed in May 2021. Data from the trial showed that SLN124 was effective in reducing plasma iron levels and had a long duration of action. In September 2022, we reported preliminary safety data from the single dose component of the GEMINI II phase 1 trial of SLN124 in patients with NTD thalassaemia. Data showed SLN124 was well tolerated with no serious safety issues identified. The multiple dose component of the GEMINI II trial is ongoing and expected to readout in the fourth quarter of 2023. SLN124 is also being evaluated in the SANRECO phase 1/2 trial in polycythaemia vera (PV) patients. In 2019, the EMA granted SLN124 orphan drug designation for the treatment of beta-thalassaemia. In 2020, the FDA granted rare paediatric disease designation for the treatment of beta-thalassemia and orphan drug designations for the treatment of myelodysplastic syndrome (MDS) and adult beta-thalassaemia. In 2022, the FDA granted Fast Track and orphan drug designations for SLN124 in PV. Disadvantages of existing treatment options The cornerstone of treatment for iron loading anaemias, like beta-thalassaemia, is the regular transfusion of packed red blood cell, or RBC, units. Despite providing immediate symptomatic relief by boosting haemoglobin levels (therefore reducing anaemia), RBC transfusions are burdensome, require frequent hospital visits (every two to five weeks) and carry the risk of further iron overload. Iron chelators are the standard of care for the prevention of iron overload and can be administered by intravenous or subcutaneous twice daily injections (deferoxamine) or taken orally once (deferasirox) to three times daily (deferiprone). While orally available chelators, particularly Deferasirox (Exjade) are currently prescribed due to their ease of administration, some patients still need to receive deferoxamine infusions. Regardless of administration profile, chelator use carries a known risk of severe side effects with several restrictions of use and black box warnings regarding potential renal, ophthalmic, hepatic and gastrointestinal, or GI, toxicity/failure, with common acute GI side effects including abdominal pain, diarrhoea, nausea and vomiting. The side effect profile as well as frequency of administration and perceived bad taste are reported as drivers of poor patient compliance with this existing treatment option. Luspatercept (Reblozyl) is approved for the treatment of adults with transfusion-dependent beta-thalassaemia, and adults with erythropoiesis-stimulating agent (ESA) refractory MDS with ringed sideroblasts. We believe that the limited response rates observed in the MEDALIST and BELIEVE pivotal studies suggest that there remains a substantial unmet need among these patients. Lentiglobin (Zynteglo) is a gene therapy approved in the U.S. and Europe for the treatment of a subset of patients with transfusion-dependent beta-thalassaemia. We believe that outstanding questions surrounding the cost, safety and durability of gene therapies and their associated pre-conditioning regimens will limit their uptake, leaving a substantial unmet need for the treatment of beta-thalassaemia. The primary treatment goal in PV is to reduce the risk of thrombotic events by reducing haematocrit (the number of blood cells in a given volume) to within target levels. The mainstay of treatment is therapeutic phlebotomy to reduce the number of blood cells by regularly removing blood from the patient. Phlebotomy results in erratic, suboptimal control of haematocrit, and regular phlebotomies can be burdensome to the patient. Patients over 60, or those with prior thrombotic events or additional cardiovascular risk factors are also treated with chemotherapy drugs (cytoreductive agents) to suppress blood cell production. The majority of these patients are treated with hydroxyurea, which is poorly tolerated and carries the risk of potential long term side effects. Patients who are resistant or intolerant to hydroxyurea may be treated with the JAK2 inhibitor ruxolitinib (Jakafi), which carries the risk of thrombocytopenia (low platelet count). Finally, some patients are treated with synthetic hepcidin mimetic dosed weekly by subcutaneous injection in clinical trials. In contrast to synthetic hepcidin mimetics, SLN124 elevates endogenous hepcidin produced and secreted by the liver, avoiding high local concentrations of hepcidin at the injection site. We believe the sustained duration of action will allow SLN124 to be dosed monthly, or less frequently, bringing additional value to patients. 9 SILENCE THERAPEUTICS PLC Preclinical Data Preclinical data in a PV transgenic mouse model A proof-of-concept study was conducted with an inducible PV mouse model to determine if TMPRSS6 siRNA can raise endogenous hepcidin levels in this condition, restrict iron from erythropoiesis and thereby attenuate disease progression and severity. The majority of PV patients have a JAK2 gene gain of function mutation, JAK2V617F. Since JAK-STAT signalling is involved in the regulation of hepcidin in the liver, it was imperative to create a PV model that restricted the expression of mutant JAK2 allele to the bone marrow (BM). A pharmacodynamic study was conducted using a tamoxifen inducible (CreERT2) BM transplant mice model of PV with the human JAK2V617Fallele. Control mice lack the inducible CreERT2. The model recapitulates human disease with increased red blood cells, haematocrit and haemoglobin compared to control animals. Importantly, our model has hepcidin levels in line with control animals, recapitulating what has been previously reported in PV patients. Inducible bone marrow transplant model of polycythaemia vera A) Red blood cells (RBC), (B) haematocrit, (C) haemoglobin and (D) serum hepcidin in control (n=13) and PV mice (n=20). Data are presented as mean +/- Treatment of the PV mice with TMPRSS6 siRNA resulted in an approximately 95% reduction in TMPRSS6 mRNA levels which also resulted in a 3.1-fold increase in hepcidin levels in comparison to siCTR. The increased hepcidin levels caused a 25% and 32% reduction in haematocrit and haemoglobin, respectively, in comparison to siCTR TMPRSS6 siRNA increases hepcidin and decreases the erythron A) Liver Tmprss6 mRNA, (B) serum hepcidin, (C) haemoglobin and (D) haematocrit of PV mice treated by subcutaneous injections of PBS (n=12), non-targeting control siRNA, siCTR (n=11) or Tmprss6 siRNA, siTMP (n=13). Data are presented as mean +/- 10 SILENCE THERAPEUTICS PLC Mice treated with TMPRSS6 siRNA had decreased mean cell volume compared to siCTR siRNA treated mice, which is indicative of iron restricted erythropoiesis. TMPRSS6 siRNA significantly decreased serum iron levels, however it did not have an effect on liver iron levels, in comparison to siCTR treated mice. Figure15 TMPRSS6 siRNA treatment decreases serum iron (A) Serum iron, (B) Mean cell volume and (C) liver iron in PV mice treated with subcutaneous injections of PBS (n=12), non-targeting control (siCTR) siRNA (n=11) and Tmprss6 siRNA, siTMP (n=13). Data are presented as mean +/- Preclinical data in a beta thalassaemia rodent disease model In a beta-thalassaemia rodent disease model, SLN124 reduced expression of its target gene, TMPRSS6, in the liver after 35 days, while also increasing serum hepcidin levels and lowering transferrin saturation. On days 1 and 15 of the -globin genes, also known as Hbbth3/+, were treated with either 3 mg/kg of SLN124 subcutaneously as monotherapy or with the same dose of SLN124 in combination with 1.25 ng/mL of deferiprone supplied in drinking water. One cohort of mice was treated with deferiprone alone. The control group consisted of mice having TMPRSS6 siRNA without a ligand. TMPRSS6 mRNA levels were assessed by quantitative Reverse Transcription Polymerase Chain Reaction, or qRT- PCR, a common laboratory technique, and were normalised to the endogenous reference actin relative to their expression levels in control treated animals. These TMPRSS6 mRNA levels are shown in the left panel of the figure below. Serum hepcidin levels were determined using an ELISA assay and are shown in the middle panel of the figure below. Transferrin saturation, a clinical biomarker for serum iron levels, was calculated based on total serum iron and total iron binding capacity, and the observations from the study are shown in the right panel of the figure below. 11 SILENCE THERAPEUTICS PLC In the figure below, we show the results from administration on individual animals as well as the mean for each group plus or minus one standard deviation. The figures show that administration of SLN124, either as monotherapy or in combination with deferiprone, reduced TMPRSS6 mRNA levels as compared to the control group or treatment with deferiprone alone. The two mouse groups receiving SLN124 also experienced comparatively higher hepcidin levels and lower transferrin saturation levels than the control group or the deferiprone only group (the deferiprone only control data being non-statistically significant be confirmed in human clinical trials. SLN124 reduced live -thalassaemic mice compared to deferiprone -thalassaemic mice compared to deferiprone 12 SILENCE THERAPEUTICS PLC -thalassaemic mice compared to deferiprone In our preclinical studies of beta-thalassaemic mice, we also observed that administration of SLN124 improved anaemia, which led to reduced extramedullary erythropoiesis, evident by the reduction in spleen weight shown in the left panel of the figure below. In these studies, mice were dosed twice over two weeks, following which their spleen weight and haemoglobin levels were measured over five weeks. As shown in the right panel of the figure below, we observed a median increase of 2.5 g/dL in haemoglobin levels, or 30% more than the control group, in the mice receiving SLN124 in this study. Increases of at least 1.5 g/dL are generally considered to be clinically relevant responses, based on 2018 International Working Group standardized response criteria for showing haematologic improvement in patients with MDS. SLN124 reduced spleen weight and improved ana -thalassaemic mice Data based on collaboration with Dr. J. Vadolas, Australia, Monash Medical Centre/Melbourne. SLN124 has undergone an extensive nonclinical safety and pharmacokinetic evaluation including mouse biodistribution, single and repeat dose toxicity in two relevant animal species (mouse and cynomolgus monkey) including safety pharmacology investigations, and in vitro genetic toxicity studies. Drug-drug interaction studies have also been carried out as the initial clinical trial will also be performed in a patient population that may be using concomitant medications. The toxicological data obtained so far are regarded as adequate to support single and repeated intermittent monthly treatment in humans. 13 SILENCE THERAPEUTICS PLC In these nonclinical evaluations, SLN124 was highly absorbed within hours, while its pharmacodynamic effects were sustained over weeks. SLN124 was distributed to the liver and kidney with little or no detectable tissue concentrations in other tissues, including brain and reproductive organs. The nonclinical safety has been assessed in a series of GLP pharmacology studies. In these studies, ECG, blood pressure and respiration were assessed in cynomolgus monkeys without any test-article related observations. Evaluation of SLN124 in weekly repeat dose GLP studies in mouse and non-human primates has not revealed any unexpected findings. The NOAEL was more than 25 times the predicted efficacious pharmacological dose in both the mouse and monkey species. In vitro experiments in mammalian assay systems confirmed the lack of genotoxicity. In drug-drug interaction studies, SLN124 was not a direct or time-dependent inhibitor of analysed cytochrome enzymes and was neither an inhibitor nor a substrate of analysed transporters under the conditions examined. Healthy Volunteer Trial (GEMINI) The GEMINI phase 1 trial was a randomised, double-blind, placebo controlled, single-ascending dose study to investigate the safety, tolerability, PK and PD response of SLN124 (1.0, 3.0 and 4.5 mg/kg doses) administered subcutaneously in 24 healthy volunteers. In May 2021, we reported positive data from the GEMINI Trial, which was the first clinical data from our mRNAi GOLD platform. In December 2021, we presented further clinical data from the study at the American Society of Haematology (ASH) Annual Meeting. Key outcomes included: All 3 dose levels were well tolerated with no serious or severe treatment emergent adverse events, or TEAEs, leading to withdrawal. Average hepcidin, a key endogenous regulator of iron balance and distribution, increased up to ~4-fold after a single dose with effect sustained for at least 2 months. Serum iron reduced by ~50% after a single dose with effect sustained for at least 2 months. SLN124 was rapidly distributed (median tmax was 4.0 or 5.0 hours) and largely eliminated from plasma within 24 hours post-dose in all dosing groups. SLN124 plasma concentrations increased in a greater than dose-linear fashion between dosing groups. All SLN124 doses induced marked reductions in transferrin saturation, or TSAT; absolute levels of TSAT achieved (10 16%) are below the level (< 20%) where iron availability to tissue is restricted and at or below that (< 16%) required to support normal erythropoiesis in health. Thalassaemia Phase 1 Programme (GEMINI II) The GEMINI II phase 1 programme is a global, randomized, single-blind, placebo controlled, single-ascending and multiple-ascending dose studies to investigate the safety, tolerability, PK and PD response of SLN124 in approximately 24 adults with NTD thalassaemia. In September 2022, we reported preliminary safety results from the single-ascending dose portion of the trial showing SLN124 was well tolerated with no serious adverse events, or AEs, no severe TEAEs that were SLN124 related and no TEAEs leading to withdrawal identified. Effects on hepcidin, serum iron, transferrin saturation and haemoglobin are being evaluated in the ongoing multiple-dose arm expected to readout in the fourth quarter of 2023. Polycythaemia Vera Phase 1/2 Programme (SANRECO) The SANRECO phase 1/2 PV programme is a two-part clinical trial which includes a phase 1 open-label, dose finding trial followed by a phase 2 randomised, double-blind, placebo-controlled parallel arm study of SLN124 in PV patients. The study is expected to enrol approximately 65 participants total. The primary endpoint for the phase 1 portion of the trial is safety/tolerability and the assessment of the number of phlebotomies at different intervals. The phase 2 portion of the trial will evaluate the number of patients who are phlebotomy free after treatment. In January 2023, we announced that sites are open for enrolment. Collaborations In July 2019, we announced a strategic collaboration with Mallinckrodt to develop and commercialize RNAi drug targets designed to silence the complement cascade in complement-mediated disorders. Under the agreement, we granted Mallinckrodt an exclusive worldwide license to our C3 targeting programme, SLN501, with options to license additional complement-mediated disease targets from us, with Mallinckrodt exercising the option for two additional targets in July 2020. We are responsible for preclinical activities, and for conducting each development programme until 14 SILENCE THERAPEUTICS PLC the end of phase 1 clinical trials, after which Mallinckrodt will assume clinical development and responsibility for global commercialisation. In connection with the execution of the agreement, Mallinckrodt made an upfront cash payment to us of $20 million (£16.4 million) and purchased $5 million of our ordinary shares. We are eligible to receive up to $10 million in potential research milestone payments, in addition to funding for the phase 1 clinical development of SLN501 including GMP manufacturing. We will fund all other preclinical activities. We received a $2 million (equivalent to £1.6 million based on the exchange rate at the payment date) research milestone payment in October 2019 upon the initiation of work on the first C3 target. In September 2020, we received another $2 million (£1.4 million) research milestone payment following the initiation of work on a second complement target. In February 2021, we initiated work on the third complement target which triggered another $2 million (£1.5 million) research milestone payment. In April 2021, we also received $2 million (£1.5 million) for the second research milestone related to the SLN501 C3 targeting programme and triggered another $3 million milestone payment following the submission of the SLN501 clinical trial application in March 2022. The collaboration provides for potential additional development and regulatory milestone payments in aggregate of up to $100 million for the initial C3 target and up to $140 million for each of the two optioned complement-mediated disease targets, with such milestones relating to the initiation of specified clinical trials in specified jurisdictions, and upon the receipt of regulatory approvals by specified authorities, in each case for multiple indications. We are also eligible to receive potential commercial milestone payments of up to $562.5 million upon the achievement of specified levels of annual net sales of licensed products for each programme. We are also eligible to receive tiered, low double- digit to high-teen percentage royalties on net sales for licensed products for each programme. In March 2020, we announced a strategic collaboration with AstraZeneca to discover, develop and commercialise siRNA therapeutics for the treatment of cardiovascular, renal, metabolic and respiratory diseases. AstraZeneca made an upfront cash payment to us of $20 million (equivalent to £17.1 million based on the exchange rate at the payment date) in May 2020 and an additional cash payment of $40 million (equivalent to £30.8 million based on the exchange rate at the payment date) in May 2021. AstraZeneca also made an equity investment of $20 million in our company in March 2020. We anticipate initiating work on five targets within the first three years of the collaboration, with AstraZeneca having the option to extend the collaboration to a further five targets. AstraZeneca has agreed to pay us $10 million for each selected target at the point of candidate nomination. For each target selected under the collaboration, we will be eligible to receive up to $140 million in milestone payments upon the achievement of milestones relating to the initiation of specified clinical trials, the acceptance of specified regulatory filings and the first commercial sale in specified jurisdictions. For each target selected, we will also be eligible to receive up to $250 million in milestone payments as well as tiered royalties as a percentage of net sales ranging from the high single digits to the low double digits. On October 15, 2021, we announced a collaboration agreement with Hansoh, one of the leading biopharmaceutical companies in China, to develop siRNAs for three undisclosed targets leveraging Silence's proprietary mRNAi GOLD platform. Under the terms of the agreement, we retain exclusive rights to the first two targets in all territories except the China Region (Greater China, Hong Kong, Macau and Taiwan). Hansoh has the exclusive option to license rights to those two targets in the China Region following the completion of phase 1 studies. Silence will be responsible for all activities up to option exercise and will retain responsibility for development outside the China region post phase 1 studies. Hansoh will also have the exclusive option to license global rights to a third target at the point of IND filing. Hansoh will be responsible for all development activities post option exercise for the third target. Hansoh made a $16 million upfront payment to us in December 2021. We achieved our first $2 million research milestone payment in the Hansoh collaboration in April 2022. We are eligible to receive up to $1.3 billion in additional development, regulatory and commercial milestones. We will also receive royalties tiered from low double-digit to mid-teens on Hansoh net product sales. In December 2022, we initiated work on the second target which we retain global rights to outside the China Region. 15 SILENCE THERAPEUTICS PLC SLN501: Complement Factor C3 Programme SLN501 is our siRNA partnered with Mallinckrodt that targets C3 and is in development for complement-mediated diseases. In June 2022, we initiated a phase 1 trial in healthy volunteers. Overview of the complement system The complement system plays a pivotal role in both innate and adaptive immune systems. Complement proteins are produced primar complement system may be activated through three principal pathways, known as the classical, lectin and alternative pathways, each of which requires the C3 protein to enable three principal immune responses: opsonization, inflammation and formation of the membrane attack complex, or MAC. When C3 is activated, C3 fragments, such as C3b, tag cell surfaces in a process called opsonization, which marks the cells for removal from tissues or the bloodstream. Two other fragments, C3a and C5a, are released, contributing to inflammation in the surrounding tissues. Further complement activation causes MAC formation on cell surfaces, piercing holes and causing cells to lyse, or rupture. Under conditions of excessive or uncontrolled activation, the complement system is believed to play a key role in the incidence and progression of several autoimmune and inflammatory diseases. In these diseases, the complement system acts directly through tissue destruction by the MAC and indirectly by signalling other elements of the immune system to inappropriately target otherwise healthy tissues. Because the contribution of complement activation to the development and progression of these diseases is not fully understood, it has been difficult to develop therapeutics that ameliorate the conditions contributing to these diseases by targeting only one of the complement activation pathways. Competition The life sciences industry is characterised by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions, governmental agencies and public and private research institutions. Many of our competitors may have greater experience in research and development, manufacturing, managing clinical trials and/or regulatory compliance than we do, and may be better resourced financially. Any product candidates that we successfully develop and commercialise will compete with existing products and new products that may become available in the future. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical study sites and patient registration for clinical studies, as well as in acquiring technologies complementary to, or necessary for, our programmes. Companies that complete clinical trials, obtain required regulatory authority approvals and commence commercial sale of their drugs before their competitors may achieve a significant competitive advantage, and our commercial opportunity could be reduced or eliminated if competitors develop and commercialise products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop and commercialize. Because our products and many potential competing products are in various stages of preclinical and clinical development, and given the inherent unpredictability of drug development, it is difficult to predict which third parties may provide the most competition, and on what specific basis. In addition to the competition we face from competing drugs in general, we also face competition from other companies working to develop novel drugs using technology that competes more directly with our own. We are aware of several other companies that are working to develop RNAi therapeutic products and other companies may develop alternative treatments for the diseases we have identified as being potentially treated with our siRNA molecules. To the extent those alternative treatments are more efficacious, less expensive, more convenient or produce fewer side effects, our market opportunity would be reduced. We anticipate that we will face intense and increasing competition as new products and therapies enter the market and advanced technologies become available. We expect any treatments that we develop and commercialise to compete on the basis of, among other things, efficacy, safety, delivery, patient friendliness, price and the availability of reimbursement from government and other third-party payors. 16 SILENCE THERAPEUTICS PLC Financial Review Revenue Revenue for the year ended 31 December 2022 was £17.5 million (2021: £12.4 million). The increase was primarily due to the advancement of targets in our Mallinckrodt and AstraZeneca collaborations which delivered £16.7 million in 2022 (2021: £11.4 million). Research and Development Expenses Research and development expenses for the year ended 31 December 2022 were £35.6 million as compared to £30.8 million for the year ended 31 December 2021. Contract development costs increased by £3.2 million from 2021 as a result of additional clinical studies and an increase in contract manufacturing activities for our proprietary programmes. Personnel costs also increased by £1.2 million from 2021 as we increased our capabilities and expertise to further advance our siRNA platform. Cost of sales consists of research and development expenditure that is directly related to work carried out on revenue generating contracts, which increased to £10.9 million for the year ended 31 December 2022 (2021: £7.5 million). The increase was largely due to the further advancement of our collaboration programmes. General and Administrative Expenses General and administrative expenses were £19.6 million for the year ended 31 December 2022 as compared to £20.0 million for the year ended 31 December 2021. While there was an increase in payroll costs of £1.6 million, this was offset by a reduction in consulting and recruiting costs of £0.6 million as we continue to reduce reliance on consultants. The remainder of the decrease is due to finance, insurance, internal control, travel and legal costs as we continue to benefit from efficiencies gained and the monitoring of administrative costs. Finance and Other Income (Expense) Finance income represents bank interest and accretion from U.S. Treasury Bills. For December 31, 2022, this was £0.2 million (2021: £10 thousand). The increase of finance income in 2022 can mainly be attributed to purchases of U.S. Treasury Bills in 2022. Also included in the Finance and other Income total is foreign exchange gains of £1.0 million and £nil for the years ended December 31, 2022, and 2021, respectively. Net foreign exchange gains and losses result primarily from foreign currency (Euro and USD) denominated bank accounts. Finance expense for the year ended December 31, 2022, was £47 thousand, resulting from interest expense incurred in connection with lease liabilities, compared to £8 thousand for the prior year. Also included in the Finance and other expense total is foreign exchange losses of £nil and £44 thousand for the years ended December 31, 2022, and 2021, respectively. Net foreign exchange gains and losses result primarily from foreign currency (Euro and USD) denominated bank accounts. Taxation During 2022 and 2021, we have recognized U.K. research and development tax credits of £7.8 million and £6.9 million, respectively in respect of R&D expenditures incurred; the higher tax credit in current year due to an increase in R&D expenditure compared to previous year. This amount was offset by tax charges in our foreign tax expense. Liquidity, cash and cash equivalents As of December 31, 2022, we had cash, cash equivalents and U.S. Treasury Bills of £71.1 million ($86.0 million), which reflects the registered direct offering, or the Offering, of 5,950,000 ADSs, at a public offering price of $9.50 per ADS, in August 2022. Our aggregate gross proceeds from this offering were $56.5 million (approximately £46.4 million) before deducting $4.1 million (approximately £3.3 million) in underwriting discounts, commissions and estimated offering expenses. 17 SILENCE THERAPEUTICS PLC The Company is a development stage business and does not yet generate revenues or other operating cash inflows from commercial sales. The Company therefore has primary KPI of cash and short-term investments. Strategic objective: Availability of financial resources to progress the development of research and development activities of the Company and its subsidiaries. Key Performance Indicator: Year-end cash and short-term investments: £71.1 million (2021: £73.5 million) Principal Risks We constantly monitor and assess the overall risk of doing business in the biopharmaceutical industry and the particular risks associated with our current activities and corporate profile. Having carried out a review of the level of risks the Company and its subsidiaries is taking in pursuit of its strategy, the board of directors is satisfied that the level of retained risk is appropriate and commensurate with the financial rewards that should result from the achievement of its strategy. The main risks have been identified as followed: The approach we are taking to discover and develop drugs is novel and we may not be successful in our efforts to identify or discover potential drug product candidates to bring into clinical trials. If clinical trials of our product candidates fail to commence or, once commenced, fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities, or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialisation of our product candidates. We have a history of net losses and we anticipate that we will continue to incur significant losses for the foreseeable future. We will need to raise additional capital, which may not be available on acceptable terms, or at all. We face competition from other companies that are working to develop novel drugs and technology platforms using technologies similar to ours. If these companies compete with us for limited manufacturing supplies, or for animals critical for preclinical testing, or otherwise develop drugs more rapidly than we do or their technologies, including delivery technologies, are more effective, our ability to successfully commercialise drugs may be adversely affected. We rely on third parties to conduct some aspects of our manufacturing, research and development activities, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of research or clinical testing. If we are unable to obtain or protect intellectual property rights related to our current or future product candidates, we may not be able to compete effectively in our markets. We qualify as a foreign private issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company. If equity research analysts do not publish research or reports, or publish unfavourable research or reports, about us, our business or our market, the price and trading volume of our ADSs could decline. adversely impact our ability to obtain regulatory approvals of our product candidates in the European Union, result in restrictions or imposition of taxes and duties for importing our product candidates into the European 18 SILENCE THERAPEUTICS PLC Union, and may require us to incur additional expenses in order to develop, manufacture and commercialize our product candidates in the European Union. The Ukraine/Russia War could adversely affect our operations, including increases in the prices of the supplies used in our business, supply chain interruptions and increased cybersecurity risks. Inflation may adversely affect our operations, including increases in the prices of goods and services required for our operations. Corporate Social Responsibility medicines whilst driving positive change for the communities around us. As part of this we are committed to corporate social responsibility. Social, Community & Human Rights Our aim is to improve global health by bringing transformative treatments to adults and children in need, including for rare diseases continued to progress: SLN360: Announced positive results from the APOLLO phase 1 single-ascending dose study in healthy volunteers with high Lp(a). SLN124: Announced preliminary safety results from the single ascending dose portion of the GEMINI II phase 1 study in thalassaemia patients. We are committed to creating inclusive policies and equal opportunities for our current generation, while encouraging Throughout 2022, we continued our UK policy initiatives with a successful podcast hosted by the Foundation for Science and Technology and a white paper stating the case for regulatory and clinical trial reform. The white paper has been distributed to relevant MPs, policy makers as well as industry fora such as the UK Biotechnology Association. Face to face meetings were planned but disrupted by changes in government leadership. Silence has participated in initiatives aiming to enhance the environment for commercial clinical trials in the UK led by Lord O'Shaughnessy as well as contributing to the agenda and content of an oligonucleotide workshop to be organised by the European Medicines Agency, due to be held in early 2023. The aim of the workshop will be to issue development guidance for oligonucleotides which currently fall between guidance for small molecules and biologics. Employees W .K. and Berlin and in 2022 we achieved certification in the U.S. We foster a culture in which upward communication and feedback is valued and encouraged. Silence recognises that flexibility positively impacts employee productivity, commitment and loyalty, so we have focused on building a diverse and inclusive culture and believe in trying to assist staff to achieve a good balance between their work and home life. We provide private medical insurance to all employees for acute medical conditions to cover full out-patient treatment, therapies, mental health support, dentist and optician cashback and extra cancer cover as a taxable benefit. We have also introduced several new health and wellbeing programmes to our employees in 2022. For example, we now pay for all employees to have a subscription to the app-based wellbeing programme called Headspace. We also introduced a new Employee Assistant program with the aim to give people access to 24/7 advice and help in personal and work-related matters. Throughout 2022, Silence provided support for patient advocacy partners, including walk in June where Silence employees collectively walked 10,349 kilometres and raised £10,349 for our partner charities. 19 SILENCE THERAPEUTICS PLC Environment We are monitoring our production processes and investigating new ways to increase the efficiency and reduce the mass and better work-from-home practices. Gender of Directors and Employees As of 31 December 2022, we had 122 employees. Of these employees, 93 employees are engaged in research and development activities and 29 employees are engaged in general and administrative activities. We have no collective bargaining agreements with our employees and we have not experienced any work stoppages. Diversity Appointments within the Group are made on merit accounting to the balance of skills and experiences offered by prospective candidates. Whilst acknowledging the benefits of diversity, individual appointments are made irrespective of personal characteristics such as race, disability, gender, sexual orientation, religion or age. A breakdown of the employment statistics on the basis of employees as at 31 December 2022 is as follows: Gender Identity Directors* Senior Leadership** Other employees Female Male Non-Binary - 5 61 6 9 47 - - - Did Not Disclose Gender - - - *Of the Directors, there are two executive directors, that are considered both a director and an employee. **Senior Leadership includes Department Heads and Vice Presidents. Human Rights The Group supports the UN Universal Declaration of Human Rights and recognises the obligation to promote universal respect for and observance of human rights and fundamental freedoms for all, without distinction. The Group complies with all applicable human rights laws. Companies Act 2006, s.172 Compliance The Company is required to provide information on how the directors have performed their duty under section 172 of the Companies Act 2006 to promote its success, including how the interests of its stakeholders have been taken into account in Board discussions and decision-making; stakeholders include: Investors The interests of its shareholders have been taken into account on a fair basis. This is described in more detail in "Relations with shareholders" in the Corporate Governance Report on page 29. The Company has a frequent and transparent dialogue with its investors throughout the year. Meetings take the form of roadshows, investor conferences and one-on-one dialogue as required. Regulators Good dialogue is maintained with regulatory agencies and the Board ensures our clinical trials are designed appropriately to allow the maximum potential for our products in development. 20 SILENCE THERAPEUTICS PLC Suppliers identify suppliers with the right profile and capabilities. Good relationships are kept with suppliers; high standards are expected in product and service, and the Company reciprocates by paying on a prompt basis, within agreed terms. We meet with our significant suppliers regularly, monitoring the quality of products and services on a constant basis to ensure that there is no negative impact or delays on our research programmes. Employees The Boa with employees. Appropriate remuneration and incentive schemes are maintained to align employees' objectives with those of the Company. As a result, the Company has a high staff retention rate. More detail on how the board takes into account the interests of employees can be found in the Remuneration Committee report on page 37. Community & Environment Policies are being formulated with emphasis on matters like carbon footprint, for example holding virtual meetings where possible rather than travelling between our sites in the U.K., Germany and U.S. Diversity in the workplace is actively encouraged. The Company has policies on anti-slavery and anti-bribery which are actively promoted. The Board focuses on maintaining high standards of business conduct. The Company operates a Code of Business Conduct and Ethics and provides mechanisms for whistle blowing and complaints. The directors The strategic report has been approved by the Board and is signed on its behalf by: Craig Tooman Chief Executive Officer 21 SILENCE THERAPEUTICS PLC Board of Directors Our Board is comprised of eight accomplished members, two Executive and six Non-Executive Directors. Together, they bring highly valuable experience across a variety of relevant disciplines to effectively execute our business plan. Iain Ross Chairman Appointed April 2019 Iain Ross has over 40 technology sectors and has held significant roles in multi-national companies including Sandoz, Hoffman La Roche, Reed Business Publishing and Celltech Group plc. He has completed multiple financing transactions, and has over 30 years experience in cross-border management as a chairman and CEO. He has led and participated in eight Initial Public Offerings (IPOs) and has direct experience of M&A transactions in Europe, the United States and the Pacific Rim. Currently he is Executive Chairman of ReNeuron Group plc (LSE) and Non-Executive Chairman of Kazia Therapeutics Limited (ASX & Nasdaq). In addition, he is a non- executive director of BiVictriX Therapeutics plc (LSE) and advises a number of private companies in the biotechnology sector. He is a qualified Chartered Director and Fellow of Royal Holloway, London University. Areas of Expertise Corporate Strategy, M&A, Business Development and Governance Current External Roles ReNeuron Group plc, Kazia Therapeutics Limited and BiVictriX Therapeutics plc Craig Tooman Executive Director Appointed February 2022 Craig Tooman has served as our President, Chief Executive Officer and as a member of our Board since February 2022 and previously served as our Chief Financial Officer from January 2021 until February 2022. Mr. Tooman has experience in the biopharmaceutical industry spanning more than 30 years, including 15 years of experience as a public company CEO and CFO. Prior to joining us, from September 2019 to January 2021, he served as CFO and COO at Vyome Therapeutics, Inc. and prior to his tenure at Vyome, from November 2013 to July 2019, Mr. Tooman served as CFO, and then subsequently as CEO and Board Director of Aratana Therapeutics, Inc., where he successfully negotiated a merger with Elanco. Before Aratana, from 2005 to 2010, Mr. Tooman served as the CFO of Enzon Pharmaceuticals, Inc. until its acquisition by Sigma Tau, and prior to that led the $1.1 billion M&A initiative and integration of ILEX Oncology, Inc. and Genzyme Corporation. Mr. Tooman has also held key positions at Pharmacia, and Upjohn. Mr. Tooman currently serves on the Supervisory Board, and the Audit and Remuneration Committees of CureVac. He also serves on the Board of Directors of Ondine Biomedical Inc. and Verté Therapeutics. Mr. Tooman received a BA degree in Economics from Kalamazoo College and studied at Waseda University in Tokyo as part of that programme. He earned his MBA in finance from the University of Chicago. Areas of Expertise Leadership, Global Commercialisation, Strategy, Business Development, Biotech build Current External Roles CureVac and Ondine Biomedical Inc. Giles Campion Executive Director Appointed May 2020 Giles Campion, M.D. is our Head of R&D and Chief Medical Officer, having joined Silence in June 2019. 22 SILENCE THERAPEUTICS PLC He is an expert in translational medicine and a highly experienced biotech and pharmaceutical professional across many therapeutic areas, most recently in orphan neuromuscular disorders. He has held senior global research and development roles in several large pharmaceutical, diagnostics and biotech companies, including responsibilities at the board level. Dr. Campion served as Chief Medical Officer for Albumedix Ltd from January 2017 to July 2018. He previously served as Group Vice President, Neuromuscular Franchise at BioMarin Pharmaceutical Inc., or BioMarin, Prosensa Holding N.V., or Prosensa. Dr. Campion served as Chief Medical Officer and Senior Vice President of Research and Development at Prosensa from 2009 until its acquisition by BioMarin. Dr. Campion has also served as medical advisor to MyoTherix Inc and is a co- founder of PepGen Ltd. Dr. Campion hold bachelors and doctorate degrees in medicine from the University of Bristol and is listed on the General Medical Council (UK) Specialist Register (Rheumatology). Areas of Expertise Pharmaceutical Research and Development, Rare Disease Development, Translational medicine Current External Roles Co-Founder of PepGen Ltd. Dave Lemus Non-Executive Director Appointed June 2018 Dave Lemus currently serves as non-executive director of Sorrento Therapeutics Inc. (NASDAQ: SRNE), Scilex Holding Company (NASDAQ: SCLX) and BioHealthInnovation, Inc. Mr. Lemus was previously the Chief Executive Officer of Ironshore Pharmaceuticals Inc. and prior to this, Mr. Lemus served as Chief Operating Officer and Chief Financial Officer of Medigene AG. From 2011 to 2015, he served as Chief Executive Officer of Sigma Tau Pharmaceuticals, Inc. Mr. Lemus was also Chief Financial Officer and Executive Vice President of MorphoSys AG from 1998 to 2011, during which t Mr. Lemus received an M.S. from the Massachusetts Institute of Technology and received a B.S. in accounting from the University of Maryland College Park. Mr. Lemus is also a Certified Public Accountant in the United States. Areas of Expertise Drug Commercialisation, Strategic Partnerships, Corporate Financing Current External Roles Lemax LLC (CEO), Sorrento Therapeutics Inc., Scilex Holding company, and BioHealth Innovation Inc. James Ede-Golightly Non-Executive Director Appointed April 2019 James Ede-Golightly is currently chairman of Oxehealth Ltd, East Balkan Properties Plc and Oxford Advanced Surfaces Ltd. Among other directorships, Mr. Ede-Golightly is non-executive director of Sarossa plc, Serendipity Capital Ltd and Plant Health Care plc, and has extensive experience as a non-executive director of AIM-quoted companies with international business interests. Mr. Ede-Golightly was a founder of ORA Capital Partners in 2006, having previously worked as an analyst at Merrill Lynch Investment Managers and Commerzbank. Mr. Ede-Golightly is a CFA Charterholder and holds an M.A. degree in economics from Cambridge University. In 2012, he was awarded New Chartered Director of the Year by the Institute of Directors. Areas of Expertise Investment and Corporate Finance Current External Roles Dunheved Limited, East Balkan Properties plc, Oxehealth Limited, Oxford Advanced Surfaces Limited, Sarossa plc, and Serendipity Capital Limited 23 SILENCE THERAPEUTICS PLC Alistair Gray Senior Independent Non-Executive Director Appointed November 2015 Alistair Gray currently serves as non- -executive director of Scottish Golf Ltd. Mr. Gray is also a founder and director of Renaissance & Company, a strategic management consultancy firm. Mr. Gray previously held senior management positions with Unilever and John Wood Group PLC, and he also chaired the Audit and Remuneration committees of AorTech International PLC and Highland Distillers PLC. Mr. Gray entered strategic management consulting at Arthur Young (now EY) Management Consultants and PA Consulting Group, where he served as a director for over ten years. Mr. Gray also served as a Fellow of the Institute of Directors and Institute of Consultants. He graduated from the University of Edinburgh in Mathematics and Economics, following this with a management accounting qualification. He is a member of the faculty of Strathclyde Business School and Manufacturing and Engineering Management department. He is also a Visiting Professor at Loughborough University London and the University of Stirling. Areas of Expertise Strategic management, Organisation Performance and Governance Current External Roles Non- Board and Scottish Golf Ltd. Founder/Director of Renaissance & Company. He is a member of the faculty of Strathclyde department. He is also a Visiting Professor at Loughborough University London and the University of Stirling. Dr. Steven Romano Non-Executive Director Appointed July 2019 Dr. Romano is a pharmaceutical executive and board-certified psychiatrist with over 28 years of drug development experience across a wide range of therapeutic and disease areas. Dr. Romano most recently served as executive vice president and chief scientific officer at Mallinckrodt plc, where he had responsibility for research and development, regulatory, safety sciences and medical affairs. Prior to joining Mallinckrodt, Dr. Romano spent 16 years at Pfizer, Inc. where he held a series of senior research and development and medical roles of increasing responsibility, culminating in his most recent position as SVP, Head, Global Medicines Development, Global Innovative Pharmaceuticals Business. He has recently served as Chairman of the National Pharmaceuticals Council, a health policy research organization, and is a past president of the International Society for CNS Clinical Trials and Methodology, an independent organization focused on enhancing therapeutic development of central nervous system therapeutics. Dr. Romano graduated from University of Missouri-Columbia School of Medicine and completed his psychiatry and fellowship at Weill Cornell Medical Center, where he held academic and clinical positions prior to entering the industry. Areas of Expertise Research and Development, Regulatory, and Medical Affairs Current External Roles Non-executive director of Evolution Research Group. 24 SILENCE THERAPEUTICS PLC Michael Davidson, MD Non-Executive Director Appointed January 2021 Michael H. Davidson, MD, FACC, FNLA, is Professor of Medicine and Director of the Lipid Clinic at the University of Chicago. He also serves as Chief Executive Officer of New Amsterdam Pharma. Dr. Davidson is a leading expert in the field of Lipidology. He has conducted over 1000 clinical trials, published more than 350 medical journal articles and written three books on Lipidology. His research background encompasses both pharmaceutical and nutritional clinical trials including extensive research on statins, novel lipid-lowering drugs, and omega-3 fatty acids. Dr. Davidson is a serial biotech entrepreneur, founding three companies, the Chicago Center for Clinical Research, which became the largest investigator site in the United States and was acquired by Pharmaceutical Product Development in 1996, Omthera Pharmaceuticals in 2008, which was acquired by AstraZeneca in 2013 for $440 million, and most recently, he was the founding CEO/CSO of Corvidia Therapeutics, which was acquired by Novo Nordisk for up to $2.1 billion in 2020. In August 2020, he became the founding CEO of New Amsterdam Pharma based in Amsterdam and Adventura, Florida. New Amsterdam was listed on Nasdaq (NAMS) in November 2022. He is also in independent director of Nasdaq-listed Tenax Therapeutics and serves on the board of two private biotech companies, Sonothera and NanoPhoria Biocience. Dr. Davidson is board-certified in internal medicine, cardiology, and clinical lipidology. He was President (2010-2011) of the National Lipid Association, named as one The Best Doctors in America for the past 20 Diabetes Association, 2010. Areas of Expertise Lipidology and Clinical Development Current External Roles NewAmsterdam Pharma B.V., SonoThera, Inc., Tenax Therapeutics and NanoPhoria srl 25 SILENCE THERAPEUTICS PLC Introduction continues to be to maximize the potential of our proprietary mRNAi GOLD platform by building a pipeline of both wholly owned and partnered programmes. Our wholly owned programmes focus and leverage our internal expertise in specific areas with the most opportunity while our partnered programmes provide collaboration for a broader reach and potential source for non-dilutive capital. We believe this hybrid business model balances risk and creates more opportunities. During the year, we continued to expand our institutional shareholder base, a key priority for us following the November 2021 AIM delisting. In December 2022, institutional ownership accounted for 44% of our total ADSs outstanding vs. only 27% in December 2021. This growing institutional interest was highlighted during our August 2022 $56.5 million registered direct offering - an oversubscribed deal led by new U.S. healthcare investment funds. During the year, we also made steady progress towards improving our liquidity profile - average ADS trading volume more than doubled in 2022 vs. 2021. We expect this positive momentum to continue into 2023 as we advance in the clinic. mRNAi GOLD Proprietary Programmes SLN360 for cardiovascular disease SLN360 is our lead wholly owned siRNA in phase 2 development for high lipoprotein(a), a genetic cardiovascular risk In December 2022, SLN360's INN (international non-proprietary name) was approved zerlasiran. Phase 1 programme (APOLLO) In February 2022, we reported positive results from the single-ascending dose portion of the APOLLO phase 1 programme the top two SLN360 single dose groups (300 mg and 600 mg) had up to 96% and 98% median reduction in Lp(a) levels, respectively, and median reductions of up to 71% and 81% from baseline persisted at 150 days. Those receiving a placebo saw no change in Lp(a) levels. In April 2022, results from the APOLLO single dose study were simultaneously presented at the American College of Cardiology (ACC) Annual Meeting and published in The Journal of the American Medical Association (JAMA). In November 2022, we presented a further analysis up to 365 days from the APOLLO single dose study in a moderated poster session at the American Heart Association (AHA) Annual Meeting. The assessment showed participants who received a single dose of SLN360 maintained median Lp(a) reductions over 80% over a five-month period. Additionally, extension data to day 365 showed no new drug related safety findings. We expect data from the multiple dose portion of the APOLLO programme in the fourth quarter of 2023. Phase 2 programme (ALPACAR-360) After the end of the year, on January 12, 2023, we announced that the first subjects have been dosed in the ALPACAR-360 phase 2 study of expect to complete enrolment in the study in the fourth quarter of 2023. -risk of ASCVD events. We We plan to partner SLN360 prior to initiation of a phase 3 cardiovascular outcomes study and potential commercialization. These partnering discussions are ongoing and remain a top priority. SLN124 for hematological diseases SLN124 is our second wholly owned siRNA that has shown potential in several hematological diseases. SLN124 is currently in clinical development for polycythemia TMPRSS6 In March 2022, SLN124 was granted FDA orphan drug designation in PV. In September 2022, the FDA granted SLN124 Fast Track Designation for PV. SLN124 has FDA orphan drug designation and rare pediatric disease designation for beta-thalassemia. The European Medical Agency also granted SLN124 orphan drug designation and rare pediatric disease designation for beta-thalassemia. Polycythemia Vera SANRECO phase 1/2 programme 26 SILENCE THERAPEUTICS PLC GEMINI II phase 1 programme After the end of the year, on January 12, 2023, we announced that sites were open for enrolment in the SLN124 phase 1/2 PV study. The SLN124 PV study is a two-part study which includes a phase 1 open-label, dose finding study followed by a phase 2 randomized, double-blind, placebo-controlled parallel arm study. Thalassemia In September 2022, we announced positive preliminary safety results from the single-ascending dose portion of the GEMINI II study in non-transfusion dependent thalassemia patients. SLN124 was well tolerated with no serious AEs, no severe TEAEs that were SLN124 related and no TEAEs leading to withdrawal. No dose limiting toxicity or drug related liver injury was observed. Effects on hepcidin, serum iron, transferrin saturation and hemoglobin are being evaluated in the ongoing multiple-dose arm expected to readout in the fourth quarter of 2023. mRNAi GOLD Partnered Programmes AstraZeneca During the year, we continued work with AstraZeneca on two undisclosed targets. We started our collaboration in March 2020 and received an upfront cash payment of $60 million. We have the potential to receive up to $4 billion in potential milestones plus royalties for a total of 10 targets. Mallinckrodt In March 2022, we achieved a $3.0 million milestone payment from Mallinckrodt following the submission of the clinical trial application for SLN501, our siRNA targeting C3 for complement-mediated diseases. In June 2022, we started dosing in the SLN501 phase 1 study in healthy volunteers. We are working with Mallinckrodt on two other undisclosed complement targets which are progressing on-track. We started our collaboration in July 2019 and received an upfront cash payment of $20 million. We have the potential to receive up to $2 billion in potential milestones plus royalties for the 3 targets. Hansoh In April 2022, we achieved our first $2 million research milestone in our Hansoh Pharma collaboration. In this partnership, we have exclusive rights to two targets in all territories except the China Region (Greater China, Hong Kong, Macau and Taiwan) and Hansoh has global rights to a third target. We started our collaboration in October 2021 and received an upfront payment of $16 million. We have the potential to receive up to $1.3 billion in potential milestones plus royalties. In December 2022, we initiated work on the second target which we retain global rights to outside the China Region. Great Place to Work certified certified in the United States. We foster a culture in which upward communication and feedback is valued and encouraged. Silence recognizes that flexibility positively impacts employee productivity, commitment, and loyalty, so we have focused on building a diverse and inclusive culture and believe in trying to assist staff to achieve a good balance between their work and home life. Organizational change In February 2022, we were pleased to appoint Craig Tooman who previously served as our Chief Financial Officer as President, Chief Executive Officer and Board member. We were also pleased to appoint Rhonda Hellums, previously our VP, Finance, as Chief Financial Officer. Commitment to sustainability and high standards of governance RNAi continues to be an exciting space with huge potential to disrupt the treatment of multiple genetic diseases and I believe Silence will play a key role in the future of this important therapeutic area. To maximise this opportunity, we recognise the critical importance of promoting a culture of inclusion and diversity. Currently at the Board level, we have one self-identified member of the LGBTQ+ community and another Silence director identified as a member of the Latinx community. Good science depends upon recruiting a mix of patients into our clinical trials reflective of the overall population and good business depends upon diverse representation across our organisation, especially in leadership positions. The Board is also committed to Corporate Social Responsibility, ensuring that we continue to make a positive impact on the world. We have made great strides in three areas in which we will aim to pursue our ambition to drive positive change for the communities around us: Social, Community & Human Rights, Employees and Environment. More 27 SILENCE THERAPEUTICS PLC details on our Corporate Social Responsibility initiatives can be found in the Corporate Social Responsibility section of this Annual Report Iain Ross Chairman 28 SILENCE THERAPEUTICS PLC Corporate Governance Report The Directors remain committed to maintaining high standards of transparency, ethics and corporate governance. What corporate governance standards does the Company follow? In July 2018, the Board approved the application of The Quoted Companies Alliance (QCA) Corporate Governance Code (2018 edition) (the QCA Code). While the Company is no longer required to comply with the QCA code as the Company is no longer listed on AIM, the Company has voluntarily continued to comply, where applicable, through the reporting period. The QCA Code is a practical, outcome-oriented approach to corporate governance that is tailored for small and mid-size quoted companies in the UK. The Board views this as an appropriate corporate governance framework for Silence Therapeutics plc and consideration has been given below to each of the ten principles set out in the QCA Code. How frequently does the Board meet? The Board holds four scheduled meetings per year, aligned with quarterly management reporting; regular monthly Board update calls and additional meetings and Board calls when circumstances and urgent business dictate. In the 12-month period under review, there were 12 meetings. The high number of Board meetings was driven by the introduction of regular monthly Board update calls to keep Board members fully updated on business developments. Type of meeting Board Audit and Risk Committee Remuneration Committee Nomination Committee* Number of meetings 12 8 4 0 Craig Tooman appointment as CFO were both discussed and agreed upon at Meetings of the full Board All Board and Audit and Risk Committee meetings were fully attended by the relevant Directors throughout the year either in person or virtually; two Remuneration Committee meetings were not attended by Dr. Michael Davidson. All Directors receive the agenda and Board papers in advance of Board meetings to enable them to make an effective contribution. Between Board meetings, the Chairman maintains regular informal contact with Non-Executive Directors. The Board continues to meet on a regular basis in order to review progress and agree strategy. The Board reviews the strategy and at each meeting evaluates the progress of the Company towards achieving its annual objectives. It also analyses the risk of potential activities and monitors financial progress against budget. -Executive Director and How does the Board apply the ten principles set out in the QCA Code? 1. Establish a strategy and business model which promote long-term value for shareholders To support the execution of this strategy, the Board performs the following key tasks: statement on page 26. approval of long-term objectives and strategy; approval of revenue, expense and capital budgets and plans; approval for therapeutic candidate progression through key development and clinical stages; 29 SILENCE THERAPEUTICS PLC oversight of operations ensuring that adequate systems of internal controls and risk management are in place, ensuring maintenance of accounting and other records, and compliance with statutory and regulatory obligations; review of performance in light of strategy and budgets ensuring that any necessary corrective actions are taken; review progress towards and consider options and terms of business development and corporate collaboration and development deals; approval of the annual report and financial statements, half year results, material contracts and major projects; changes to structure, size and composition of the Board; determining remuneration policy for the Directors and approval of the remuneration of the Non-Executive Directors; and approval of communications with shareholders and the market. 2. Seek to understand and meet shareholder needs and expectations Contact with major shareholders has been principally maintained by the CEO and the Chairman during the reporting period, and they have ensured that their views are communicated to the Board as a whole. The Board believes that appropriate steps have been taken during the reporting period to ensure that the members of the Board, and in particular the Non-Executive Directors, develop an understanding of the views of major shareholders about the Company. Whilst we are aiming to hold our Annual General Meeting in April, a Notice of Annual General Meeting will be issued in due course and will be available on our website. Separate resolutions will be provided on each issue so that they can be given proper consideration. Proxy votes are counted and the level of proxies lodged on each resolution reported after it has been dealt with by a show of hands. 3. Take into account wider stakeholder and social responsibilities and their implications for long-term success ability to help patients and their caregivers to be highly important and critical to the The Board considers the long-term success of Silence. For more information on how the lead drug candidates, SLN124, SLN360 and SLN501, can help patients, refer to pages 6 to 16. Our Sustainable Development Goals including goals related to community, health and environment, are set out on page 19. 4. Embed effective risk management, considering both opportunities and threats, throughout the organisation A Risk Register is maintained for regular review by the Audit and Risk Committee and the Board. Principal risks are set out on page 18 where mitigating activities are also explained. Additionally, the Audit and Risk Committee report on page 35 sets out how risks are reviewed. 5. Maintain the Board as a well-functioning, balanced team led by the Chairman Currently the Board has a majority of Non-Executive Directors, consisting of two Executive and six Non-Executive Directors The skillsets of the Board include extensive knowledge of the pharmaceutical and biotechnology industries, strategic consultancy and corporate finance. The Nomination Committee is chaired by the Chairman of the Board, Iain Ross. Craig Tooman was appointed as CEO on February 21, 2022 background are given in their biographies on pages 22 to 25. The Chairman is responsible for leading the Board and ensuring its effectiveness and is responsible for the operational management of the Company and implementation of Board strategy and policy. The Board delegates certain activities to the Committees, with terms of reference which are available on the Company website (www.silence-therapeutics.com). Membership of all three Board Committees comprises a Non-Executive Chair and at least two other Non- expense, professional advice on any matter within their terms of reference and to have access to sufficient resources in order to carry out their duties. 30 SILENCE THERAPEUTICS PLC Board Structure Following the appointment of Craig Tooman as CEO in February 2022, the Board Committee memberships are as follows: Audit and Risk Committee Dave Lemus (Chair) Alistair Gray James Ede-Golightly Dr. Michael Davidson Remuneration Committee James Ede-Golightly (Chair) Dr. Michael Davidson Dave Lemus Dr. Steven Romano Nomination Committee Iain Ross (Chair) Alistair Gray Dr. Steven Romano Craig Tooman 6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities The Board has delegated the tasks of reviewing Board composition, searching for appropriate candidates and making recommendations to the Board on candidates to be appointed as Directors, to the Nomination Committee. The Nomination Committee chair is held by the Chairman of the Company. The main duties of the Nomination Committee are set out in its terms of reference and include: regularly reviewing the structure, size and composition (including the skills, knowledge, experience and diversity) required of the Board compared to its current position and making recommendations to the Board with regard to any changes; determining the qualities and experience required of the and identifying suitable candidates, assisted where appropriate by recruitment consultants; Executive and Non-Executive Directors formulating plans for succession for both Executive and Non-Executive Directors and in particular for the key roles of Chair and Chief Executive Officer; assessing the re-appointment of any Non-Executive Director at the conclusion of their specified term of office, having given due regard to their performance and ability to continue to contribute to the Board in the light of the knowledge, skills and experience required; and assessing the re-election by shareholders of any Director, having due regard to their performance and ability to continue to contribute to the Board in the light of the knowledge, skills and experience required and the need for progressive refreshing of the Board. Craig Tooman was appointed as CEO and Executive Director in February 2022. With regard to the re-election of Directors, the Company is governed by its Articles of Association (the Articles). Under the Articles, the Board has the power to appoint a Director during the year, but any person so appointed must stand for election at the next Annual General Meeting. Any Director who has been a Director at each preceding two Annual General Meetings and has not been appointed or re-appointed since, must retire from office at the next Annual General Meeting. 31 SILENCE THERAPEUTICS PLC The Director is then eligible to stand for re-appointment by the shareholders. Steven Romano will stand for re-election at the 2023 Annual General Meeting. The annual performance evaluation for 2021, resulted in recommendations, which are being implemented by the Board, to allocate more time at Board meetings to consider business development and opportunities to grow the business. Silence is committed to diversity in all aspects of its mission and activities and at all levels of the organisation, including its Board of Directors. The Board understands the value in having directors of diverse gender, race, and ethnicity, along with varied skills, perspectives and experiences. We are constantly looking for opportunities to improve our diversity and inclusion practices. 7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement The Silence Therapeutics plc Board remains mindful that it needs to continually monitor and identify ways in which it might improve i effectiveness. A review of the CEO was initiated and concluded in January 2023. The CEO reviewed the performance of the CFO for 2022. Any performance-related remuneration is determined by the Remuneration Committee and recommended to the Board. The Directors, led by the Senior Independent Non-Executive Director, performance. In conducting the formal annual evaluation, the Board undertakes a rigorous assessment of its own performance, balance of skills, experience, independence, diversity (including gender diversity) and other factors relevant to its effectiveness (and also that of its Committees) and the performance of its individual Directors. In late 2022 the Board commenced a formal evaluation of its performance which was concluded in Q1 2023. In conducting this review, the Chairman and the Senior Independent Director undertook discussions with each of the other Directors regarding the In preparation, the Chairman and the Senior Independent Non-Executive Director, solicited the views of the other Directors, including the completion by each Director of a confidential questionnaire in respect of the Board, the Audit and Remuneration Committee and one specifically relating to the performance of the Chairman. The Senior Independent Non Executive Director had individual discussions with the Directors about the performance of the Chairman. In the case of the Directors, all questionnaires were returned to the Senior Independent Non-Executive Director, who summarised the overall assessment of each director. Following the reviews, the Chairman and the Senior Independent Non-Executive Director, shared their observations with the other Directors at a Board Meeting in Q1 2023 during which an open feedback session was held in an executive session of the Non-Executive Directors. The individual director evaluations were aimed to confirm that each Director continues both to contribute effectively and to demonstrate commitment to the role (including the allocation of necessary time for preparation and attendance at Board and Committee meetings and any other duties). The results of the review were satisfactory overall, actions emerged which can be summarised as follows: Strategy and Contingency Planning - As in-house capabilities and corresponding operational infrastructure globally, it was agreed that there should be more emphasis at Board meetings on strategic discussions and risk analysis and in addition that the annual strategy session for the Board of Directors should be expanded to include external and professional input. External environment we are likely to face should also be considered, both metric based and qualitative. Also, the Board and its Committees should pro-actively consider, review and assess contingency scenarios on a regular basis. the Company expands its development pipeline, Succession Planning - as the Company expands it was agreed that the Board needs to formalise its approach to Board & Management succession planning in terms of skills, geography and diversity. The Chairman is committed to lead this initiative in liaison with the CEO. In addition, be open and transparent around any concern about conflict of interest if, and when, that exists. Non-Executive Directors ongoing training and development and interaction with senior management - Following a concerted effort led by the Chairman and the Senior Independent Non-Executive Director, this will be implemented to introduce a more structured approach to the induction and broader development of Directors and interaction with the Senior Management on a more frequent basis to enhance their knowledge and understanding of the business as it evolves. Further, each Committee should be given the challenge to modernize, in light of changes in regulation and capital markets and other external issues which many include potential changes in scope of the committee. 32 SILENCE THERAPEUTICS PLC The Nomination Committee is responsible for succession planning and making recommendations to the Board in this respect, as set out above. 8. Promote a corporate culture that is based on ethical values and behaviours Ethical values and behaviours are important to the Company and the Company is dedicated to driving positive change for communities around the world. The policies to implement this are explained on page 19. 9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board The Board is supported by the Committees, explained above, in the task of maintaining good practice governance processes and structures. Furthermore, the following governance matters support good decision-making by the Board. Internal Controls and Risk Management The Company has in place a system of internal financial controls commensurate with its current size and activities, which is designed to ensure that the possibility of misstatement or loss is kept to a minimum. These procedures include the preparation of management accounts, variance analysis, controls in place for one-off accounting items and other ad hoc reports. In 2022 the Group engaged EisnerAmper as consultants to test ICFR (Internal controls over financial reporting). As a result, the Group was able to build up of evidence from an internal control perspective and allow management to attest over the ICFR as required under the Sarbanes-Oxley Act 2002. Risks throughout the Company are considered and reviewed on a regular basis. Risks are identified and mitigating actions put into place as appropriate. Principal risks and uncertainties identified are set out in the strategic report on pages 18 and 19. Internal control and risk management procedures can only provide reasonable and not absolute assurance against material misstatement. Financial and Business Reporting position and prospects in The Board seeks to present a balanced and understandable assessment of the all half year, full year and price-sensitive reports and other information required to be presented by statute. The Board receives a number of reports to enable it to monitor and clearly understand the financial position. The Company maintains a Disclosure Policy to enhance the process for ensuring that price-sensitive information is identified effectively and all communications with the market are released in accordance with expected timescales. Conflicts of Interest Under the Articles of Association, the Directors may authorise any actual or potential conflict of interest a Director may have and may impose any conditions on the Director that are felt to be appropriate. Directors are not able to vote in respect of any contract, arrangement or transaction in which they have a material interest and they are not counted in This includes declaring any new conflicts at the start of each Board meeting. Board Advice All the Directors have access to the advice and services of the Company Secretary, who is responsible for ensuring that with. Each Director is Company 10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders Contact with major shareholders is principally maintained by the Chairman and CEO, and additionally as necessary the Senior Independent Non-Executive Director is available to discuss governance and other matters directly with major shareholders, both private and institutional. 33 SILENCE THERAPEUTICS PLC The Company uses its corporate website (www.silence-therapeutics.com) to communicate with institutional shareholders and private investors, and the website also contains the latest announcements, press releases, published financial information, current projects and other information about the Company. The annual report which includes the Iain Ross Chairman 34 SILENCE THERAPEUTICS PLC Audit and Risk Committee Report heightened focus on all aspects related to company financings, internal controls and additional financial reporting requirements. asdaq Dave Lemus Chair of the Audit and Risk Committee Who are the members and who do they interact with? Dave Lemus is Chair of the Audit and Risk Committee. Dave currently also serves as audit committee chair of Sorrento Therapeutics, Inc. (Nasdaq: SRNE) and Scilex Holding Company (Nasdaq: SCLX), and previously served on multiple public and private company boards as a non-executive board member in his more than 25 years of experience in the biopharmaceutical industry. Most recently he was CEO of Ironshore Pharmaceuticals, Inc., and has been previously a CEO, COO and CFO in several public and private companies in the U.S and in Europe. Dave is also a Certified Public Accountant in the USA In addition to Dave, the members of the committee comprise Alistair Gray, James Ede-Golightly and Dr. Michael Davidson. The Committee met eight times during 2022, including prior to results announcements. What does the Audit and Risk Committee do? Monitors enterprise and systemic risks Reviews accounting policies and key estimates and judgements Reviews the appropriateness and completeness of the internal controls Makes recommendations to the Board, to be put to shareholders for approval at the Annual General Meeting, in relation to the appointment, re- Meets with the external auditors, ensuring that they report to it on all relevant matters to enable the Committee to carry out its oversight responsibilities ? financial statements, preliminary announcements and any other In 2022, the Committee reviewed the 2021 annual report and the 2022 interim announcements. The Committee reviews and challenges where necessary any changes to, and the consistency of, accounting policies, advising whether the Company has followed appropriate accounting standards and made appropriate estimates and judgements (notably in respect to the adoption of any new accounting pronouncements, the accounting of the partnership agreements and financings, and the impairment of investments in subsidiaries), taking into account the views of the external auditors, the going concern assumption and all material information presented with the financial statements. What does the Committee do to review risks? To assess the appropriateness and completeness of internal controls, the Committee reviews changes to the detailed risk matrix which identifies high level control issues classifi are subject to, remedial action. The Committee considers whether the necessary actions are being taken to remedy any significant failings or weaknesses. Is there an internal audit function? 35 SILENCE THERAPEUTICS PLC At present the Company does not have an internal audit function. Given the Nasdaq listing, the Company will need to be compliant with additional Sarbanes-Oxley requirements over a period of time, this will initially be achieved by in- house initiatives supported by external specialists. However, the Committee will review the need for an internal audit function at least annually. With the Nasdaq listing, the Committee has a new responsibility to review the system of internal financial control and compliance with the US Sarbanes Oxley Act 2002. In 2022, EisnerAmper was appointed he ICFR (Internal controls over financial reporting). As a result, the Group was able to acquire sufficient evidence from an internal control perspective and allow management to attest over the ICFR as required under the Sarbanes Oxley Act 2002. Who are the external auditors and how long have they been appointed? PricewaterhouseCoopers LLP were appointed as the external auditors in 2014. The Committee reviews industry comparables for audit services and evaluates the overall service provided by the external auditors each year. Having LLP be re- How does the Audit and Risk Committee assess the effectiveness of the external audit process? The Committee oversees the relationship with the external auditors, including approval of their remuneration, approval of their terms of engagement, annual assessment of their independence and objectivity, taking into account relevant professional and regulatory requirements, and the relationship with the auditors, as a whole, including the provision of any non-audit services. The breakdown of fees between audit and non-audit services is provided in note 5 to the financial statements. The auditors prepare an Audit Plan for the audit of the full year financial statements, which was presented to the Committee and discussed in August 2022. The Audit Plan sets out the scope of the audit, areas to be targeted and the audit timetable. Following the audit, the auditors present their findings to the Committee for discussion. Review of Accounting and Financial Reporting Matters and Matters of Significance and Judgement The Committee received reports from management and the external auditor setting out the significant accounting and financial reporting matters and judgements applicable to the following key areas. Following discussion and challenge, the Committee reviewed management's conclusions on certain significant company accounting policies, which included but were not limited to: R&D costs related to CROs including associated accruals and prepayments In determining the R&D expense in relation to contract research organisations (CROs) management have estimated the total percentage of completion of each contract to date and included consideration of future costs to be incurred. These estimates have also been used in determining accruals and prepayments at the year end. Accounting for Revenue (collaboration agreements) In determining the revenue recognised for collaboration agreements, management have calculated the revenue recognised for the period based on the percentage of completion of each performance obligation, by determining the proportion of costs incurred to date in comparison to the total expected costs (both internal and external). Carrying value of the investment in Silence Therapeutics GmbH (to parent company) Different methodologies can be used to determine the carrying value of this investment. In determining the carrying erapeutics GmbH management assessed it as being based the Company has had to estimate the value and timing of future milestone cash inflows, which is however a standard industry practice. Committee aims to ensure appropriate corporate compliance with all accounting, internal controls, risk management and financial reporting requirements and in order to best ensure the Committee is carrying out its oversight responsibilities to the fullest extent possible. Dave Lemus Chair of the Audit and Risk Committee 36 SILENCE THERAPEUTICS PLC Remuneration Committee Report Having the right team to execute on an internationally competitive strategy in the fast-moving field of RNAi is a key priority for the Board and the Company. James Ede-Golightly Chair of the Remuneration Committee Dear Shareholder, for the year ended 31 December 2022. Having the right team to execute on an internationally competitive strategy in the fast-moving field of RNAi is a key issue for the Board and the Company. Craig Tooman has served as our President, Chief Executive Officer and as a member of our board of directors since February 2022 and previously served as our Chief Financial Officer from January 2021 until February 2022. Craig was instrumental in expanding the shareholder base with new US investors as well as leading the delisting of the Company from AIM in November 2021. Craig has experience in the biopharmaceutical industry spanning more than 30 years, including 15 years of experience as a public company CEO and CFO. In February 2022 we also appointed Rhonda Hellums as our Chief Financial Officer. She previously served as our Vice President, Finance since joining in April 2021. Rhonda has over 25 years of corporate finance, accounting, strategic planning, M&A, treasury management, investor and public relations experience, largely in the biopharmaceutical industry. Though she is not listed as a U.K director, she sits in on all board meetings. We continue to deliver a remuneration programme that rewards both achievement of short-term goals and fulfilment of our longer-term objectives, linked with the ultimate exploitation of our platform and its application in generating novel RNAi medicines. We recognise the need to retain and motivate Executive Directors and the senior management team and avoid making remuneration decisions solely based on shorter-term volatility. Accordingly, we include two performance-based elements in our remuneration programme: a shorter-term annual bonus programme, with payment -set goals for that year; and a longer-term equity-based programme of share options, vesting over four years and directed towards the achievement of substantial, longer-term strategic objectives. The short-term programme and the long-term incentive programme are providing a balance designed to incentivise Executive Directors and senior management to work toward achievement of the corporate strategy. During the year, share options were awarded to Craig Tooman, Rhonda Hellums and Giles Campion; vesting dates for these options are detailed later in this report. In light of our de-listing from AIM and the transition to a Nasdaq-focused company, in 2022 we have adopted a new compensation strategy for Non- in order to attract and retain top international talent. This remuneration policy has the intention of ensuring that Silence is in line with biotech industry best practices. James Ede-Golightly Chair of the Remuneration Committee 37 SILENCE THERAPEUTICS PLC Remuneration Policy This part of the remuneration report sets out the D The remuneration policy was approved by shareholders in a binding vote at the AGM on 15 June 2021. Thereby, as intended the remuneration policy will remain in effect from the date of approval and apply for a maximum period of three years (or until a revised policy is approved by shareholders). Remuneration report were approved at the AGM with 98% votes for / 2% votes against / 0% votes withheld. was Philosophy: Support value creation for shareholders over the longer term and create alignment with shareholders Fixed Remuneration Variable Remuneration Element Base Salary Benefits Pension Annual Bonus LTIP How it is influenced by the remuneration philosophy Assessed with reference to industry compensation benchmarks Assessed with reference to industry compensation benchmarks Assessed with reference to industry compensation benchmarks Set considering industry benchmarking data and consistent with positions held. The more significant element of the package linked to longer-term share performance. Determined by corporate and individual targets that goals and its overall strategy. Under the Silence Therapeutics plc 2018 employee LTIP, share options can be issued with performance criteria under this scheme. In developing its policy, the Committee has regard to the policy for remuneration of employees across the Company. The D does not engage in a wider consultation with employees on the policy. Remuneration across the Company is implemented in the following ways: All employees are rewarded with a remuneration package that includes certain key benefits such as life assurance, private medical insurance, 401(k) matching, access to pension benefits (or cash in lieu), and eligibility to receive a bonus. All employees are e to ensure that levels of remuneration for all key employees are up to date and competitive within the sector. The bonus scheme for our Executive Directors and employees are designed to reward performance, and all individuals work towards challenging corporate and individual goals. In setting the remuneration policy for Directors, the pay and conditions of other employees are taken into account, including any base salary increases awarded. The Committee is provided with data on the remuneration structure for management level tiers below the level of Executive Director and uses this information to ensure consistency of approach throughout the Company. The views of share shareholders in advance of making any material future changes to remuneration arrangements for Executive Directors. The remuneration of senior executives below Board level is reviewed by the Committee on an annual basis. The remuneration packages of these executives are broadly consistent with the policy outlined above, with the overall impact of the role and the individual being considered as well as relevant market comparative data, save that lower bonus percentages and lower share option opportunities are applicable. A copy of the can be found on the Com 38 SILENCE THERAPEUTICS PLC Remuneration Policy Table Executive Directors Purpose and Link to Strategy Operation Base Salary To attract and The Committee aims to set base salary at levels that are broadly aligned with the mid-points for equivalent roles in comparable global companies, adjusted to reflect Company size and complexity. Salaries are normally reviewed annually, and changes are generally effective from 1 January. The annual salary review of the Executive Directors takes into consideration a number of factors, including: business performance; salary increases awarded to the overall employee population; skills and experience of the individual over time; responsibilities; changes in the size and complexity of the Company; market competitiveness and UK, European and US market practice; and the underlying rate of inflation. retain executives of the highest calibre who are capable of delivering the Company strategic objectives, reflecting the experience and role within the Company. Base salary is designed to provide an appropriate level of fixed income to avoid an over- reliance on variable pay elements that could encourage excessive risk taking. Benefits Benefits in kind offered to Executive Directors are provided on a market- competitive basis, to assist with their recruitment and retention. Pensions Maximum Opportunity Performance Metrics No formal metrics, although any increases take account of Company performance and Executive Director appraisal against objectives. No clawback will be applied in relation to salaries. Executive Director level salaries are determined considering industry benchmarking data. Base salary increases are awarded at the discretion of the Committee; however, salary increases will normally be no greater than the inflationary pay rises awarded to the wider workforce. Executive Director level salaries are approved by the Committee in line with corporate performance and are consistent with the role currently being undertaken by the individual. The Company aims to offer benefits that are in line with market practice. The value of each benefit is not predetermined and is based upon the taxable value to the individual. Not performance related. No claw-back will be applied in relation to benefits. 39 SILENCE THERAPEUTICS PLC Executive Directors Purpose and Link to Strategy Operation Maximum Opportunity Performance Metrics The Company operates a defined contribution scheme and all employees, including Executive Directors, are invited to Employee contributions are matched two- fold by employer contributions up to a maximum employer contribution of 10%. Employees may contribute more than 5% participate. Cash payments in lieu of pension contributions may be made. themselves, but the Company will not provide any further employer contributions above this level. Not performance related. No claw-back will be applied in relation to pensions. The Company aims to provide market- competitive retirement benefits, as a retention tool and to reward sustained contribution. Annual cash bonuses are limited to a target of 50% or 60% of base salary for the Executive Directors. Executive Director level bonuses are approved by the Board in line with corporate performance and are consistent with the role currently being undertaken by the individual. The Board can exercise discretion in setting contractual bonus rates for new Executive Directors above 60%, with discretion exercised with respect to total compensation. Corporate goals typically include development of pipeline and platform, partnering successes, revenue generation, strengthening of intellectual property and control of cash expenditure, although the Committee has the discretion to set other targets. Individual goals set are specific, measurable and are linked to the -term strategy. Company Under the rules of the scheme, the Committee can claw-back up to 100% of the bonus awarded in the event of material results, an error in assessing the performance conditions to which an award is subject or for any other matter which it deems relevant. There is no claw-back time limit in the policy. Annual Performance Bonus An annual cash bonus rewards the achievement of objectives that support the Objectives are agreed with the Committee, and the Board, at the start of each financial year although the Committee retains the discretion to amend objectives Company corporate goals and delivery of the business strategy. during the year if it considers that objectives are no longer appropriate. Different performance measures and weightings may be used each year, as agreed with the Committee, to consider changes in the business strategy. Bonuses are paid at the discretion of the Committee. The Committee considers overall corporate performance and individual performance when determining the final bonus amount to be awarded and the Committee may adjust any formulaic outcomes accordingly. Bonuses are normally paid in cash (but may be paid in the form of an equity award) typically in January or February. Long Term Incentive Plan (LTIP) 40 SILENCE THERAPEUTICS PLC Executive Directors Purpose and Link to Strategy Operation LTIP awards granted to Executive Directors have typically taken the form of nominal cost options vesting according to performance conditions measured over at least three years, although different forms of awards may also be granted in accordance with the LTIP rules. The Remuneration Committee believes that a key component of the overall remuneration package is the provision of equity awards to senior executives through an LTIP, which is designed to develop a culture which encourages strong corporate performance on an absolute and relative basis to align with shareholder interests. Maximum Opportunity Performance Metrics Aggregate options outstanding will vest at up to a maximum of 300% of annual salary within a single financial year. Vesting of LTIP awards is generally subject to continued employment and may also be subject to the achievement of performance Executive Director level LTIP awards are approved by the Committee in line and are consistent with the role currently being undertaken by the individual. The Committee can exercise discretion in setting contractual LTIP awards for new Executive Directors above 250% of annual salary with discretion exercised with respect to total compensation. strategic plan. Measures, their weightings and the period over which performance is tested will be determined by the Committee. The Committee has the discretion to utilise differing types of performance criteria, measures and performance periods for future option grants, should it believe they are more relevant. The Committee may adjust the formulaic LTIP outcome to ensure it takes account of any major changes to the Company (e.g. as a result of M&A activity) and is a fair reflection of the underlying financial performance of the Company over the performance period. Further details, including the performance targets attached to the LTIP in respect of each year, will be disclosed in the relevant Annual Report on Remuneration. Awards will be subject to claw-back where there has been a misstatement of the property, an error in assessing the performance conditions to which an award is subject or for any other matter which the Committee deems relevant. There is a two- year claw back time limit in the policy. 41 SILENCE THERAPEUTICS PLC Chair and Non-Executive Directors Purpose and Link to Strategy Cash Fees Set at a level that is sufficient to attract and retain high-calibre non- executives who contribute to the business. Benefits Set at a level that is sufficient to attract and retain high-calibre non- executives who contribute to the business. Equity Based Awards Set a level that is sufficient to attract and retain high-calibre non- executives who contribute to the business. Operation Maximum opportunity Performance Metrics The Chair and the Non-Executive Directors receive fees paid in cash. Fees are paid monthly and reviewed annually. When reviewing fee levels, account is taken of market movements in the fees of Non- Executive Directors, Board Committee responsibilities and ongoing time commitments. Not performance related. No claw-back applies in relation to fees. Since 1 January 2018 Non-Executive Directors do not receive any benefits in connection with their roles other than Company life insurance and reimbursement of travel costs for attendance at Board meetings. This may be reviewed in the future. When reviewing benefits, account is taken of market movements in the fees of Non- Executive Directors, Board Committee responsibilities and ongoing time commitments. Not performance related. No claw-back applies in relation to benefits. The Non-Executive Directors may be offered the opportunity to participate in the Silence Therapeutics plc 2018 Non-Employee LTIP in the form of non- performance restricted stock units or other equity awards under the terms of such plan with careful consideration being made with respect to ensuring their independence. When reviewing equity-based awards, account is taken of market movements in the fees of Non-Executive Directors, Board Committee responsibilities and ongoing time commitments. Not performance related. Claw-back applies in relation to equity-based awards. 42 SILENCE THERAPEUTICS PLC Other Remuneration Policies Termination and Loss of Office Payments The policy on remuneration for Executive Directors who leave the Company is consistent with general market practice and is set out below. The Committee will exercise its discretion when determining amounts that should be paid to leavers, considering the facts and circumstances of each case. When calculating termination payments, the Committee will consider a variety of factors, including individual and Company performance, the length of service of the Executive Directors in question and, where appropriate, the obligation for the Executive Directors to mitigate loss. In the event of a change of control and ownership, the Committee may exercise its discretion to provide for additional remuneration and/or benefits for Executive Directors who leave the company in connection with such change of control and will take into account all relevant circumstances when making any such determination. notice period of six months unless contractually longer, and pension and contractual benefits, or payment in lieu of notice; statutory redundancy payments will be made, as appropriate; executives have no entitlement to a bonus payment in the event that they cease to be employed by the Company; however, they may be considered for a pro-rated award by the Committee in good leaver circumstances; any share- contracts or share option plans will be determined based upon the relevant individual share option contracts or plan rules; and performance conditions or hurdles; and the Committee may also provide for the leaver to be reimbursed for a reasonable level of legal fees in connection with a settlement agreement, to be paid ex gratia amounts in settlement of claims and in respect of other ancillary matters such as amounts in respect of outplacement services, relocation, and health benefits (continuation or cash in lieu). Service Contracts It is the Company The Executive Directors may accept outside appointments, with prior Board approval, provided that these opportunities do not negatively impact on their ability to fulfil their duties to the Company. Whether any related fees are retained by the individual or are remitted to the Company will be considered on a case-by-case basis. Non- Terms of Engagement All Non-Executive Directors notice by either party. either party. The remuneration of Non-Executive Directors is determined by the Board within the limits set by the Articles and based on a review of fees paid to Non-Executive Directors of similar companies. A Board evaluation has been performed and the results of this exercise confirmed that all Non-Executive Directors were independent. Remuneration for New Appointments Where it is necessary to recruit or replace an Executive Director, the Committee has determined that the new Executive Director will receive a compensation package in accordance with the provisions of the Policy. In setting base salaries for new Executive Directors, the Committee will consider the existing salary package of the new In setting the annual performance bonus, the Committee may wish to set different performance metrics (to those of other Executive Directors) in the first year of appointment. Where it is appropriate to offer a below-median salary on initial appointment, the Committee will have the discretion to allow phased salary increases over a period of time for a 43 SILENCE THERAPEUTICS PLC newly appointed Director, even though this may involve increases in excess of inflation and the increases awarded to the wider workforce. The Committee wishes to retain the ability to make buy out awards to a new Executive Director to facilitate the recruitment process. The amount of any such award would not exceed the expected value being forfeited and, to the extent possible, would mirror the form of payment, timing and degree of conditionality. Where awards are granted subject to performance conditions, these would be relevant to Silence Therapeutics plc. Any such award would only be made in exceptional circumstances and shareholders would be informed of any such payments at the time of appointment. Share-based awards would be made under the LTIP. In respect of internal appointments, any commitments entered in respect of a prior role, including variable pay elements, may be allowed to pay out according to their prior terms. For external and internal appointments, the Committee may consider it appropriate to pay reasonable relocation or incidental expenses, including reasonable legal expenses. Tax equalisation may be considered if a Director is adversely affected by taxation due to their employment or engagement with the Company. The terms of appointment for a Non-Executive Director would be in accordance with the remuneration policy for Non-Executive Directors as set out in the policy table. Remuneration Committee (the Committee) Governance In its decision-making process, the Committee takes account of information from both internal and independent sources and AON Solutions UK Ltd surveys. AON Solutions UK Ltd were appointed as remuneration consultants by the Committee based on their expertise in the field. AON Solutions UK Ltd advises the Committee on all aspects of senior executive remuneration and has kept the Committee up to date on remuneration trends and corporate governance best practice. AON Solutions UK Ltd does not have any other connection with the Company and is considered to be independent by the Committee. During the year ended 31 December 2022, fees charged by AON Solutions UK Ltd amounted to approximately £71k (2021: £79k). The current members of the Committee are Michael Davidson, James Ede-Golightly, Dave Lemus and Steven Romano. Michael Davidson, James Ede-Golightly and Dave Lemus are deemed to be independent. The Company the Committee, as required, to ensure that the Committee is fully informed about pay and performance issues throughout the Company. The Committee takes these factors into account when determining the remuneration of the Executive Directors and senior executives. No Executive Director or employee can participate in any discussion directly relating to their own personal conditions of service or remuneration. No conflicts of interest have arisen during the year and none of the members of the Committee has any personal financial interest in the matters discussed, other than as option holders. The fees of the Non-Executive Directors are approved by the Board on the joint recommendation of the Committee and the Chief Executive Officer. The Committee met 4 times in 2022. Director James Ede-Golightly Michael Davidson Dave Lemus Steven Romano Role Meetings attended 4/4 4/4 4/4 3/4 strategy by ensuring that those individuals responsible remuneration policy. for delivering the strategy are appropriately incentivised through the operation of the In determining the current policy, and in constructing the remuneration arrangements for Executive Directors and senior employees, the Board, advised by the Committee, aims to provide remuneration packages that are 44 SILENCE THERAPEUTICS PLC competitive and designed to attract, retain and motivate Executive Directors and senior employees of the highest calibre, and align incentives with shareholder interest. The Committee is responsible for: setting a remuneration policy that is designed to promote the long-term success of the Company; ensuring that the remuneration of the Executive Directors and other senior executives reflects both their individual performance and their contribution to the overall Company results; determining the terms of employment and remuneration of the Executive Directors and senior executives, including recruitment and retention terms; approving the design and performance targets of any annual incentive schemes that include the Executive Directors and senior executives; approving the design and performance targets, where applicable, of all share incentive plans requiring shareholder approval; rigorously assessing the appropriateness and subsequent achievement of the performance targets related to any share incentive plans; recommending to the Board the fees to be paid to the Chair. The Chair is excluded from this process; gathering and analysing appropriate data from comparator companies in the biotech sector; and the selection and appointment of the external advisers to the Committee to provide independent remuneration advice where necessary. Pay-for-Performance Scenario Analysis The charts below provide an estimate of the potential reward opportunities for the Executive Directors, and the potential split between different elements of remuneration under two Earned 45 SILENCE THERAPEUTICS PLC Craig Tooman Compensation 7000 6000 5000 4000 3000 2000 1000 0 £5,290 222 1 12 408 Earned 1 12 408 Minimum - Fixed Salary Benefits Pension Bonus LTIP Giles Campion Compensation 1800 1600 1400 1200 1000 800 600 400 200 0 £1,017 158 35 9 350 Earned 35 9 350 Minimum - Fixed Salary Benefits Pension Bonus LTIP Mark Rothera (Executive Director term ending February 21, 2022) 46 SILENCE THERAPEUTICS PLC Compensation 4500 4000 3500 3000 2500 2000 1500 1000 500 0 £3,254 167 15 47 554 Earned 15 47 554 Minimum - Fixed Salary Benefits Pension Bonus LTIP Amounts are shown in thousands (GBP). The LTIP award amounts shown represents the aggregate grant date fair value of option awards granted in 2022 measured using the Black Scholes model. 47 SILENCE THERAPEUTICS PLC Annual Report on Remuneration This section of the Remuneration report provides details of how our remuneration policy was implemented during the financial year ended 31 December 2022, and how it will be implemented during the year ending 31 December 2023. This report splits certain information into that for Executive Directors and that for Non-Executive Directors. Audited Information financial year ended 31 December 2022 The total remuneration of the individual Directors who served during the period is shown below. Total remuneration is the sum of emoluments for the period in service as a director plus Company pension contributions, and the value of long-term incentive awards vesting by reference to performance in the twelve months to 31 December 2022. Basic Salarya Benefits b Bonusc LTIPd Pension e Total remuneratio n Total fixed remuneratio n Year £000s £000s £000s £000s £000s £000s £000s Total variable remuneratio n £000s Executive Directors Craig Tooman (f) 2022 408 12 222 5,290 1 5,910 421 5,489 Mark Rothera (g) Giles Campion Non-Executive Directors Iain Ross Alistair Gray Dave Lemus James Ede- Golightly Dr Steven Romano Dr Michael Davidson 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 426 554 321 350 153 47 - 9 204 167 129 158 375 3,254 975 1017 54 15 32 35 1,212 4,037 1,457 1,569 120 90 55 54 55 46 55 44 55 37 54 40 - - - - - - - - - - - - - - - - - - - - - - - - 840 458 - 244 - 244 - 244 - 244 - 244 - - - - - - - - - - - - 960 548 55 298 55 290 55 288 55 281 54 284 633 616 353 394 120 90 55 54 55 46 55 44 55 37 54 40 579 3,421 1,104 1,175 840 458 - 244 - 244 - 244 - 244 - 244 Notes to the Remuneration Table (a) This is the amount earned in respect of the financial period. (b) This is the taxable value of benefits paid or payable in respect of the financial period. For Non-Executive Directors, the taxable benefits comprise travel costs (and the gross-up for associated income tax and National Insurance Contributions which will be settled on behalf of the Non-Executive Directors) for attendance at Board meetings. (c) For 2022, this is the total bonus earned under the annual bonus scheme in respect of the financial year (despite being paid in the following financial year, following determination of final outcomes). (d) For 2022, the amount shown represents the aggregate grant date fair value of option awards granted in 2022 measured using the Black Scholes model. For a description of the assumptions used in valuing these awards, see note 24 to our Annual Consolidated Financial Statements included elsewhere in this Annual Report. For 2021, the amount shown relates to the market value of the LTIP awards vesting during the year using the Co 48 SILENCE THERAPEUTICS PLC closing price at the end of the quarter in which the award vested less associated exercise price. Total option award compensation expense for the year ended December 31, 2022 for all key management personnel including the former CEO and non-executive directors was £3.5 million. (e) The amount shown relates to company contributions to the defined contribution scheme, plus any cash in lieu. (f) Mr. Tooman served as our Chief Financial Officer during 2021 and became our President and Chief Executive Officer on February 21, 2022. His compensation including, salary, bonus, pension and benefits, is prorated from the time of his appointment to Chief Executive Officer. (g) Mark Rothera, our former President and Chief Executive Officer, stepped down on February 21, 2022. His salary is inclusive of severance payments, paid in instalments from his separation date for an additional 12 months in line with his severance agreement and his bonus payment was prorated from the start of the year until six months after his separation date in line with his severance agreement. Annual Performance Bonus - 2022 In 2022, all employees were eligible for an annual discretionary cash bonus, whereby performance objectives are established at the beginning of the financial year by reference to suitably challenging corporate goals. In relation to the Directors, Craig To for 2022 was 50% of salary, with a maximum potential of 60%. 2022. -target bonus For all other staff (other than the Executive Directors and Non-Executive Directors) the maximum bonus opportunities ranged from 8% to 40% of salary, depending on grade. Bonus payments are not pensionable. For 2022 for all staff (other than the Executive Directors and Non-Executive Directors) the percentage attributable to individual goals for employees ranged from 30% to 70% depending on level (excluding the Executive Directors). In 2022, for Craig Tooman and Giles Campion 100% of their annual bonus was by reference to corporate goals. The achievement against the scorecard of corporate goals was as follows: Target Weighting SLN 124 milestone delivery SLN 360 milestone delivery Advance collaboration programmes Manufacturing processes New GalNAc target identification Achieve planned targets for the development of SLN 124 Achieve planned targets for the development of SLN 360 Advance collaboration targets into clinical development Increase capacity and build process optimisation capabilities for manufacturing Achieve planned activity and identification of new targets Achievement of financial targets Maintain a cash runway and adherence to budget New business development deal Secure high value business development deal Secure additional funding Bring in new US investors and non-dilutive funding Total 2022 achievement % 14.0 19.0 6.0 12.0 % 15.0 20.0 5.0 10.0 10.0 10.0 5.0 6.0 30.0 17.0 5.0 100.0 6.0 90.0 Achievement against objectives is given careful consideration by the Committee prior to finalisation. The Committee acknowledged the team's significant progress in advancing our clinical-stage programmes in 2022, further financing key programmes, securing additional manufacturing capacity, and expanding the US investor base. Therefore, the board determined an achievement score of 90% was fair and justifiable. The Committee reviewed the formulaic outcome of the scorecard and concluded that the scorecard outcome, as shown above, reflected the performance of the Executive Directors in the year. The resulting annual bonus awards under the Policy, i.e. bonus awards of up to 60% of salary payable in cash, are as follows: 49 SILENCE THERAPEUTICS PLC Bonus Scorecard Outcome Maximum opportunity % of salary Cash amount % of salary £000s 222 158 54 % 45 % £000s 245 210 60 % 60 % Craig Tooman Giles Campion Scheme Interests During the year ended 31 December 2022 Craig Tooman and Giles Campion were awarded share awards under the LTIP scheme, details of which are summarised in the table below. LTIP awards were granted under the Silence Therapeutics plc 2018 Employee Long Term Incentive Plan and were based on an industry peer analysis. Directors share awards Individual Date of Grant At 1 Jan, 2022 Awarded At 31 Dec 2022 Exercise price ($/share)) Gain on exercises during the year (£000s) Earliest date of exercise Last date of exercise Iain Ross 10/06/2019 10/06/2019 21/05/2020 21/05/2020 06/01/2022 250,000 250,000 150,000- 350,000- - - - - 90,000 250,000 250,000 150,000 350,000 90,000 $2.53 $0.80 $0.07 $5.87 $7.87 - - - - - 01/06/2020 01/06/2020 25/04/2022 21/08/2020 06/02/2022 10/06/2029 10/06/2029 20/05/2030 20/05/2030 06/01/2032 Alistair Gray 06/01/2022 Dave Lemus 06/01/2022 James Ede- GoLightly 06/01/2022 06/01/2022 06/01/2022 Dr Steven Romano Michael Davidson Craig Tooman Giles Campion 48,000 48,000 $7.87 06/02/2022 06/01/2032 48,000 48,000 $7.87 06/02/2022 06/01/2032 48,000 48,000 $7.87 06/02/2022 06/01/2032 48,000 48,000 $7.87 06/02/2022 06/01/2032 48,000 48,000 $7.87 06/02/2022 06/01/2032 06/01/2021 579,999 - 579,999 $7.02 - 06/01/2022 06/01/2031 06/01/2022 21/02/2022 16/09/2022 06/03/2019 10/06/2019 10/06/2019 10/06/2019 23/04/2021 06/01/2022 264,999 375,000 900,000 264,999 375,000 900,000 200,000 15,000 228,083 456,917 160,002 - - 200,000 - - - - 199,998 15,000 228,083 456,917 160,002 199,998 $7.87 $6.33 $3.86 $0.07 $2.44 $0.80 $2.53 $7.34 $7.87 06/02/2022 21/03/2022 16/10/2022 06/02/2032 21/03/2032 16/10/2032 - - - - - 06/02/2022 06/02/2029 10/06/2022 01/06/2020 01/06/2020 23/05/2021 06/02/2022 10/06/2029 10/06/2029 10/06/2029 23/04/2031 06/01/2032 50 SILENCE THERAPEUTICS PLC Scheme interests awarded in 2022 Date of grant Number awarded Exercise Price Iain Ross Alistair Gray Dave Lemus James Ede- GoLightly Dr Steven Romano Michael Davidson Craig Tooman Craig Tooman Craig Tooman Giles Campion 06/01/2022 06/01/2022 06/01/2022 90,000 48,000 48,000 06/01/2022 48,000 06/01/2022 06/01/2022 06/01/2022 21/02/2022 16/09/2022 06/01/2022 48,000 48,000 264,999 375,000 900,000 199,998 $7.87 $7.87 $7.87 $7.87 $7.87 $7.87 $7.87 $6.33 $3.86 $7.87 Face value (2) (£000s) - - - - - - - - £908 - Vesting Schedule Note 3 Note 3 Note 3 Note 3 Note 3 Note 1 Note 1 Note 1 Note 4 Note 1 1. Share options vest in 48 equal monthly vesting tranches starting from the month of grant. These awards are not subject to any performance conditions. 2. Face value is equal to the share price at December 31, 2022 less that exercise price. 3. Share options vest in 36 equal monthly vesting tranches starting from the month of grant. These awards are not subject to any performance conditions. 4. Share options vest in 60 equal monthly vesting tranches starting from the month of grant. These awards are not subject to any performance conditions. Directors' interests in shares at 31 December 2022 Options: Total shares owned outright plus vested options 606,267 1,056,807 1,070,766 28,569 26,193 28,569 31,659 31,659 Director Current directors Craig Tooman Giles Campion Iain Ross Alistair Gray Dave Lemus James Ede- Golightly Dr. Steven Romano Dr. Michael Davidson Former director Mark Rothera (2) Shares Owned outright Percentage of issued share capital Options: Vested but not exercised Options: Unvested but subject to performance 31,986 23,943 64,941 9,903 7,527 9,903 12,993 12,993 0.56% 0.98% 0.99% 0.03% 0.02% 0.03% 0.03% 0.03% 574,281 1,032,864 1,005,825 18,666 18,666 18,666 18,666 18,666 Options: Unvested and not subjected to performance1 3,645,717 484,791 174,168 77,334 77,334 77,334 77,334 77,334 - - - - - - - - - - 331,111 1. Options unvested and not subject to performance exclude those options that will only vest if a floor condition is met 2. The options expired in February 2023. Unaudited Information Performance Graph and Table to the Nasdaq Biotech Index. cumulative Total Shareholder Return (TSR) over the last five financial years relative ncludes dividends paid, the change in capital value of the shares and any other payment made to or by shareholders within the period. 51 SILENCE THERAPEUTICS PLC 160 140 120 100 80 60 40 Aligning Pay with Performance CEO remuneration compared with annual growth in TSR: SLN NBI The total 2022 remuneration figure for the CEO (Craig Tooman) is shown in the table below, along with the value of bonuses paid in respect of the year, and fair value of options granted, as a percentage of the total remuneration. 2022 Total remuneration Actual bonus as a % of the remuneration Actual share award as % of the remuneration 2021 Total remuneration Actual bonus as a % of the remuneration Actual share award vesting as % of the remuneration Craig Tooman £000s 5,910 4% 90% Mark Rothera £000s 1,212 17% 31% *As 2021 was the first year reported since listing on NASDAQ and therefore the first year for which this disclosure is required, it is not possible to provide meaningful comparative data. However, full disclosure of the year-on-year movement will be provided in future remuneration reports. Percentage Change in Remuneration of the Directors and Employees Set out below is the change over the prior period in base salary, benefits, pension and annual performance bonus for included below. The current CEO, Craig Tooman, is not included in the able above as he was appointed as a Director (Chief Executive Officer) on 21 February 2022 and therefore prior year data is not available. Former CEO, Mark Rothera 52 SILENCE THERAPEUTICS PLC Is not included in the table above as he served as a Director until 21 February 2022 and therefore the prior period is not comparable. Giles Campion Iain Ross Alistair Gray Dave Lemus James Ede-Golightly Dr. Steven Romano Dr. Michael Davidson All employees excl. directors Giles Campion Iain Ross Alistair Gray Dave Lemus James Ede-Golightly Dr. Steven Romano Michael Davidson All employees excl. directors Giles Campion Iain Ross Alistair Gray Dave Lemus James Ede-Golightly Dr. Steven Romano Michael Davidson All employees excl. directors Salary % Change 2021 vs 2022 Benefits % Change 2021 vs 2022 Bonus % Change 2021 vs 2022 9 % -25 % 2 % -16 % -20 % -26 % -33 % 3 % Salary % Change 2020 vs 2021 Note 1 Note 2 22 % 22 % 22 % 22 % N/A 4 % Salary % Change 2019 vs 2020 Note 1 Note 2 13 % 13 % 13 % 13 % N/A 4 % 100 % Note 2 Note 3 Note 3 Note 3 Note 3 Note 3 3 % Benefits % Change 2020 vs 2021 Note 1 -100 % Note 3 Note 3 Note 3 Note 3 N/A 3 % Benefits % Change 2019 vs 2020 Note 1 100 % -100 % -100 % Note 3 Note 3 N/A 3 % 22 % Note 2 Note 3 Note 3 Note 3 Note 3 Note 3 4 % Bonus % Change 2020 vs 2021 Note 1 Note 2 Note 3 Note 3 Note 3 Note 3 N/A 4 % Bonus % Change 2019 vs 2020 Note 1 Note 2 Note 3 Note 3 Note 3 Note 3 N/A 4 % 1. Giles Campion was appointed as a Director (Executive Vice President, Head of R&D and CMO) on 9 June 2020, therefore there is not a comparable change from 2020 or prior. 2. Iain Ross was appointed as Executive Chairman on 17 December 2019. Base salary included additional remuneration of £9 thousand (exclusive of VAT) relating to duties undertaken in December 2019 as Executive Chairman. This amount was billed by Iain 2020. Iain Ross was paid £15 thousand (exclusive of VAT) on a monthly basis until one month following the appointment of a new CEO. In 2020, in recognition of the additional Executive responsibilities and in addition to his monthly Chairman/Director fees of £10 thousand per month Mr Ross was paid an additional remuneration of £15k per month invoiced through his consultancy firm Gladstone Consultancy Partnership for the period 1 January to - 31 May 2020. In the absence of a permanent CEO appointment, on 1 June Mr Ross signed an employment contract immediately terminable 1 month following the appointment of a new CEO. For the period 1 June - 14 October 2020 Mr Ross was paid £30 thousand per month plus benefits including a contribution to pension and private healthcare insurance of £3 thousand. On 14 September 2020 Mr Ross reverted to his role as Non-executive Chairman and from 1 month after this date reverted to his monthly fees of £10 thousand per month. On signing the employment agreement effective 1 June 2020 Mr Ross was paid a one-off bonus of £75 thousand in respect of services rendered 17 December 2019 - 31 May 2020. Upon completion of his time as Interim Executive Chairman Mr Ross was paid a further one-off bonus of £80 thousand in respect of services rendered during the remainder of his time in this Executive role. Throughout 2021, Iain maintained a salary of £10 thousand per month. He was not paid a bonus or benefits in either 2021 or 2022. 3. Non-executive directors were not entitled to a bonus in any year. They were not entitled to benefits in any year, with the exception of Alistair Gray and Dave Lemus 53 SILENCE THERAPEUTICS PLC who were paid benefits of £13 thousand and £2 thousand, respectively in 2019. Relative Importance of Spend on Pay Total revenue and research and development expenditure have been selected as comparators for the employee costs as these two financial measures are strong indicators of the activity within the Company and of its performance. Total employee remuneration Average number of employees Revenue Research and development expenditure 2021 £000 21,279 92 12,415 30,765 2022 £000 26,875 116 17,501 35,605 Change £000 26 % 26 % 41 % 16 % No dividends distributions or share buyback transactions occurred in either 2021 or 2022. Statement of Implementation of Policy in 2022 Base Salary: The January 2023 target base salary increase was and average of 3% for all eligible employees. There base salary. Pension and Benefits: In 2023, Executive Directors are eligible for the same benefits as provided to all senior employees. The Executive Directors are each entitled to the maximum employer pension contribution of 10% of their respective base salary which is paid into a defined contribution pension scheme / paid in cash in lieu of pension contributions (where applicable). Annual Performance Bonus: For 2023 target pay-outs will be 60% and 50% per cent. of annual base salary for Craig Tooman (60%) and Giles Campion (50%) with maximum pay-outs of 90% and 60% respectively. The Committee considers overall corporate performance and individual performance when determining the final bonus amount to be awarded to an Executive Director. Performance will be tested against targets set by the Committee at the start of the year and will comprise 100% corporate goals for Craig Tooman and Giles Campion 3 corporate objectives are weighted as follows: objectives for 2023. Objective 1 SLN 360 milestone delivery 2 SLN 124 milestone delivery 3 SLN 501 milestone delivery 4 Manufacturing processes 5 New business development deals 6 Achievement of financial targets 7 Candidate selection 8 Execution/Operations TOTAL Weighting 12 % 20 % 8 % 8 % 25 % 17 % 5 % 5 % 100 % Specific targets are commercially sensitive and therefore are not disclosed in advance. However, full details of the targets and performance against them will be disclosed when they are no longer considered commercially sensitive. Payments for Loss of Office (audited information) There was no loss of office payments in 2022. James Ede-Golightly Chair of the Remuneration Committee 54 SILENCE THERAPEUTICS PLC Report The Directors present their report and the audited financial statements of the Group for the year ended 31 December 2022. Principal Activities The Company has full control and ownership of the following subsidiaries: Silence Therapeutics GmbH Silence Therapeutics (London) Ltd Innopeg Ltd Silence Therapeutics Inc. The Company, Silence Therapeutics GmbH, Silence Therapeutics (London) Ltd, Innopeg Ltd and Silence Therapeutics The principal activity of the Group is focused on the discovery, delivery and development of RNA therapeutics. Responsibilities 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 group financial statements in accordance with UK-adopted international accounting standards and the company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United 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 group and company and of the profit or loss of the group 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 UK-adopted international accounting standards have been followed for the group financial statements and United Kingdom Accounting Standards, comprising FRS 101 have been followed for the company financial statements, 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 Group and Company will continue in business. The Directors are also responsible for safeguarding the assets of the Group and 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 transactions and disclose with reasonable accuracy at any time the financial position of the and Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006. The Directors are responsible for the maintenance and integrity of the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 55 SILENCE THERAPEUTICS PLC confirmations In the case of each Director in office at the date the report is approved: so far as the Director is aware, there is no relevant audit information of which the Gro auditors are unaware; and and they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of auditors are aware of that any relevant audit information and to establish that the information. and Review of the Business and Future Developments The strategic report describes research and development activity during the year as well as outlining future planned developments. Details of the financial performance, including comments on the cash position and research and development expenditure, are given in the financial review. Principal risks and uncertainties are given in the strategic report. Health, Safety and Environment The Directors are committed to ensuring the highest standards of health and safety, both for their employees and for environment; see detailed statement in the Corporate Social Responsibility section of the Strategic Report. estimated electricity usage for the reporting period is 518,500 kWh (an estimated 224 metric tons of CO2 equivalent emissions), with 2.5% of that estimated usage occurring in the United Kingdom. premises are located in shared facilities so energy consumption is estimated based on space leased. Employees The Directors are committed to continuing involvement and communication with employees on matters affecting both employees and the Group. Management conducts regular meetings with all employees on site. Political and charitable contributions The Group did not make any political donations or incur any political expenditure during the year (2021: nil). The Group made total charitable donations of £75 thousand during the year (2021: £75 thousand). Research and Development In 2022, the Group spent £35.6 million on research and development (2021: £30.8 million). Subsequent Events The Group has no subsequent events. Financial Risk Management A description of financial risk management is set out in note 28 to the financial statements. Results and Dividends The Group recorded a loss for the year before taxation of £47.4 million (2021: £45.8 million). The loss after tax for the year was £40.5 million (2021: £39.4 million). Further details are given in the financial review. The Group is not yet in a position to pay a dividend and the loss for both periods has been added to accumulated losses. 56 SILENCE THERAPEUTICS PLC Indemnification of Directors Qualifying third party indemnity provisions (as defined in the Companies Act 2006) are in force for the benefit of Directors and former Directors who held office during 2022 and up to the signing of the annual report. Directors The Directors who served at any time during the year or since the year end were: Director Iain Ross Craig Tooman (appointed as a Director: 21 February 2022) Mark Rothera (resigned as Director: 21 February 2022) Giles Campion Alistair Gray Dave Lemus James Ede-Golightly Dr. Steven Romano Dr. Michael Davidson The interests of the Directors in the share Substantial Interests Job title Chairman Chief Executive Officer Former Chief Executive Officer Executive Director Non-Executive Non-Executive Non-Executive Non-Executive Non-Executive At 31 December 2022 the Company had been informed of the following substantial interests of over 3% in the issued share capital of the Company: Shareholder Richard Griffiths Robert Keith Compagnie Odier SCA Mallinckrodt plc and affiliated entities AstraZeneca UK Limited Deep Track Capital LP TCG Crossover Management, LLC. BVF Partners L.P. Aquilo Capital Management, LLC Percentage of issued share capital 23.9% 11.3% 19.7% 4.7% 4.1% 5.4% 5.9% 4.2% 3.6% Number of shares 25,799,271 12,199,473 21,281,802 5,062,167 4,418,022 5,854,740 6,314,625 4,525,248 3,852,399 Material Uncertainty Related to Going Concern The accompanying consolidated financial statements have been prepared assuming that the Group will continue as a going concern. As discussed in Note 2.3 to the consolidated financial statements, the Group has incurred recurring losses and cash outflows from operations and has stated that these events or conditions indicate that a material plans in regard to these matters are also described in Note 2.3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. This report was approved by the Board of Directors and signed on its behalf by: Craig Tooman Chief Executive Officer 23 March 2023 57 SILENCE THERAPEUTICS PLC 3 Financial statements of Silence Therapeutics plc Consolidated income statement Consolidated statement of comprehensive income Consolidated balance sheet Consolidated statement of changes in equity Company balance sheet Company statement of changes in equity Cash flow statements Notes to the financial statements Company information and advisers 58 SILENCE THERAPEUTICS PLC of Silence Therapeutics Plc Report on the audit of the financial statements Opinion In our opinion: for the year then ended; the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards as applied in accordance with the provisions of the Companies Act 2006; the company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting December ue and fair the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements, included within the Annual Report, which comprise: The consolidated and company balance sheets as at 31 December 2022; the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of cash flows, and the consolidated and company statements of changes in equity for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies. Basis for opinion under ISAs (UK) are further described in that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. onsibilities Independence We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements as applicable to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. Material uncertainty related to going concern In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 2 to the group financial statemen continue as a going concern. The Directors believe that, based on existing cash facilities and on their current forecasts and plans for raising additional financing from new and existing investors, the Group and Company will have sufficient funds to meet their cash requirements for at least the next 12 months. However, there is no guarantee that attempts to raise adequate additional financing on a timely basis will be successful. These conditions, along with the other matters explained in those notes to the financial statements, indicate the existence of a continue as a going concern. The financial statements do not include the adjustments that would result if the group and the company were unable to continue as a going concern. of the going concern basis of accounting in the preparation of the financial statements is appropriate. accounting included: asis of 59 SILENCE THERAPEUTICS PLC Testing the mathematical accuracy of the cash flow forecasts. Comparing the current year actual results to cash flow forecasts. Gaining and understanding from management on any notable year-on-year changes in the forecasts, including the assumptions used in the forecasts, and obtaining an update on the sources of funding options being sought, as set out in note 2 to the group financial statements and note C.2 in the company financial statements and we considered whether there were additional risks that ne eded to be reflected in the forecasts. Using our understanding of the group and the company and the industry in which they operate to assess the possibility of additional risk arising and their potential impact. Evaluating the disclosures within the financial statements. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Our audit approach Context Silence Therapeutics plc is a public limited company incorporated under the laws of England and Wales and is listed on the NASDAQ. Overview Audit scope There are 5 reporting units and we identified 2 units which, in our view, required a full scope audit based on their size and risk All of the work was performed by the Group audit engagement team including the Group finance consolidation, financial statement disclosures and a number of complex items, prepared by the head office finance function. These included goodwill, current and deferred taxes, derivatives, going concern and central adjustments recorded as part of the consolidation process. Taken together, the Group companies, as well as the consolidation adjustments, over which we performed our audit procedures accounted for 100% of the loss before tax and 100% of revenue. Our audit scope provided sufficient appropriate audit evidence as a basis for our opinion on the Group financial statements as a whole. Key audit matters Material uncertainty related to going concern (group and parent) parent) associated accruals and prepayments (group and parent) Carrying value of the investment in Silence Therapeutics GmbH (parent) Materiality Overall group materiality: £2,368,000 (2021: £2,089,000) based on 5% of Loss before tax. Overall company materiality: £2,132,000 (2021: £1,754,000) based on 5% of Loss before tax. Performance materiality: £1,776,000 (2021: £1,565,000) (group) and £1,599,000 (2021: £1,315,614) (company). The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. Key audit matters the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 60 SILENCE THERAPEUTICS PLC In addition to going concern, described in the Material uncertainty related to going concern section above, we determined the matters described below to be the key audit matters to be communicated in our report. This is not a complete list of all risks identified by our audit. The key audit matters below are consistent with last year. Key audit matter How our audit addressed the key audit matter assessment of revenue recognition under collaboration agreements (group and parent) The Group has entered into collaboration agreements with third parties, who obtain research services and patents and know- The Directors (management) have assessed the agreements include a mixture of fixed and variable consideration relating to the achievement of future milestones. They have previously been assessed to determine the separability of performance obligations, with the transaction price allocated to performance obligations based on their relative standalone selling price. The agreements overlap between different reporting periods and the timing of invoicing and cash receipts does not match with the progress of performance obligations. At each period end management calculate the revenue recognised for the period based on the percentage of completion of each performance obligation, by using the input method based on cost to cost, whereby management determines the proportion of programme and personnel costs incurred to date in comparison to the total expected costs (both internal and external). Total revenue recognised from collaborations during the year ended 31 December 2022 is £16.9m (2021: £12.0m). (Please see note 3 for further details) We performed the following audit procedures to address the risk: - Leveraged the previous assessment of the collaboration contracts and obtained an update from management to confirm no changes in this assessment which would impact the accounting treatment; - Obtained managemen of both internal costs and costs from third parties (external costs); - Where applicable, we confirmed that these costs are aligned to the collaboration plan and agreed by all parties; - confirmed these are consistent with approved budgets. We further performed a sensitivity analysis over the budgeted internal FTE rates ( i.e. Full time employee cost per head) to evaluate how changes to the 2023 budget would affect the average rates, and ultimately determined whether this would have a material impact on revenue. Additionally, on a sample basis we tested the underlying inputs ( i.e. salaries) of the budgeted payroll costs and recalculated budget; - programme Workplans, by splitting these future costs into elements that are already contracted or committed (i.e. Non-judgemental) and elements which are based on of contingent costs); - On a sample basis, we matched the committed costs with contracts or quotations from the third parties. For the estimated costs, we held discussions with relevant project managers to challenge and assess the reasonableness of these estimates. We also performed a retrospective review costs; and - Tested the mathematical accuracy of the calculations. All of the testing above has been performed to obtain a high level of assurance. Other elements of revenue non-third party related actual costs designated as having a normal risk of material misstatement and have been tested to obtain a normal related a assessment of costs related to third party research and accruals and prepayments. 61 SILENCE THERAPEUTICS PLC contracts including associated accruals and prepayments (group and parent) There is an inherent risk of error as a result of estimates that involve identifying the progress of research projects, which considers the progress of external costs and feeds into the risk around the estimation of completion for revenue over collaboration agreements. As the majority of research and development expenditure arises from the outsourcing of studies and clinical trials tothird-parties, management are required to calculate the expense and the associated accruals and prepayments based on the progress of the R&D contract versus the amounts billed to date at the end of each period. and ability to monitor the progression of a piece of research, or a trial's stage of completion. As a result, it can be difficult for management to measure what costs have been incurred in relation to a trial at a specific point in time and, as such, based on the billings received, whether the project accruals and prepayments recorded are appropriately estimated. Our audit risk focuses on whether the research projects are being appropriately recognised in expenses and whether associated accruals and prepayments are being correctly recorded. As at 31 December 2022, third party R&D contracts totalled £3.8m in accruals and £6.7m in prepayments. Please see notes 16 and 18 for further details. We concluded that m under collaboration agreements is appropriate. We performed the following audit procedures to address the risk: - Tested a sample of research projects over £100k performing the following procedures: - associated accruals and prepayments positions as at 31 December 2022, based on progress assessments from project managers; - Tested the mathematical accuracy of the calculations; - Obtained the underlying contracts and understood the basis on which the project managers assessed the progress, and that management had recognised the costs; - Verified the progress of projects by reviewing the support available, such as reading the minutes of meetings held between Silence and the third parties where the progress of the sampled projects was discussed. We confirmed that there was no contradictory evidence; - Verified that the assessment of progress confirmed by internal project managers was consistent with that provided by the third parties; and - Performed look-back procedures to assess the outcome of prior year accruals with no matters noted. The testing above has been performed to obtain a moderate level of assurance. Other elements of the calculations, such as the completeness of accruals and prepayments and the completeness of expenses were designated as having a normal risk of material misstatement and have been tested to obtain a lower level of assurance. For projects under £100k we tested a sample of invoices to a low level of assurance to ensure that the expense was accurately recorded and that the accruals or prepayments were reasonable. research costs through the year and the related accruals and prepayments are appropriate. Carrying value of the investment in Silence Therapeutics GmbH (parent) As at 31 December 2022 the parent company held an investment in its wholly owned subsidiary Silence We performed the following audit procedures to address the risk: long-term receivable from GmbH of £14.2m. A provision of £20.2m had been recorded against the investment balance in previous years, resulting in a net investment in GmbH of £3.1m, plus the loan balance. Management has performed an impairment assessment on the net investment in accordance with IAS 36 (Impairment of assets) and determined that no impairment was necessary in the current year. Judgement is required in the impairment assessment, specifically in forecasting the timing and probability of future contractual sensitivity on key assumptions within the model does not s impairment analysis and gained an understanding of the key assumptions and judgements underlying the assessment. We assessed the appropriateness of the methodology applied and tested the mathematical accuracy of the models, with no exceptions identified. We assessed and challenged the key assumptions, including the timing and probability of future milestones receipts by: - Discussing the status of projects with the project managers - Comparing the expected size and timing of milestone payments to the original collaboration agreements; and 62 SILENCE THERAPEUTICS PLC result in a different conclusion, thus no impairment is deemed necessary. - confirming that the timing of future receipts is consistent with our review of board minutes and project status meetings. Please see note C.6 for further details impairment is required in relation to the carrying value of the investment and no provision against the loan are appropriate. How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial sta tements as a whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in which they operate. ting entities. These functions maintain their own accounting records and controls (although transactional processing and certain controls for some reporting units are performed by the head office finance team) and report to the head office finance team through an integrated consolidation system. In establishing the overall Group audit strategy and plan, we determined all of the work that needed to be performed at the reporting units could be performed by the Group engagement team. For each reporting entity we determined whether we required an audit of their reported The two reporting entities where a full scope audit was required included Silence Therapeutics plc (incorporated in the UK) and Silence Therapeutics GmbH (incorporated in the UK) were determined as individually financially significant In addition to the work performed at the in-scope reporting entities, there is work performed at head office by the Group audit engagement team. The Group consolidation, financial statement disclosures and a number of complex items, prepared by the head office finance function, were audited by the Group engagement team. These included goodwill, current and deferred taxes, going concern and central adjustments recorded as part of the consolidation process. Reporting units where audit procedures were performed accounted for 100% of Group revenue and 100% of Group total losses before tax. As a result of its structure and size, the Group also has a number of small reporting entities that make up a trivial portion of the key coverage metrics. These small reporting units are covered by the work performed by the Group audit engagement team, where we perform analytical review procedures. Those not subject to analytical review procedures were individually, and in aggregate, immaterial. This ga ve us the evidence we needed for our opinion on the financial statements as a whole. The Company's accounting process is performed by the head office finance team, who maintain the Company's own accounting records and controls. All of the work is performed at the head office by the group engagement team. This includes the financial statement disclosures and complex items, prepared by the head office finance function such as investments and intercompany. The impact of climate risk on our audit As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk on the and f climate nancial statements. Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: 63 SILENCE THERAPEUTICS PLC Overall materiality How we determined it Rationale for benchmark applied Financial statements - group Financial statements - company £2,368,000 (2021: £2,089,000). £2,132,000 (2021: £1,754,000). 5% of Loss before tax 5% of Loss before tax The group is loss making, as expected given its status as an early stage biotech company which has not yet commercialised its products. As such, loss before tax is deemed to be the most appropriate benchmark on which to calculate materiality, as this is the metric on which the group's financial performance is assessed. The company is loss making, as expected given its status as an early stage biotech company which has not yet commercialised its products. As such, loss before tax is deemed to be the most appropriate benchmark on which to calculate materiality, as this is the metric on which the company's financial performance is assessed. For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality allocated across components was £1,205,000 to £2,132,000. Certain components were audited to a local statutory audit materiality that was also less than our overall group materiality. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (FY2021: 75%) of overall materiality, amounting to £1,776,000 (2021: £1,565,000) for the group financial statements and £1,599,000 (2021: £1,315,614) for the company financial statements. In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate. We agreed with those charged with governance that we would report to them misstatements identified during our audit above £118,000 (group audit) (2021: £10,000) and £107,000 (company audit) (2021: £87,700) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons. Reporting on other information The other in thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. With respect to the Strategic report and Directors' report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included. Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below. Strategic report and Directors' report In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors' report for the year ended 31 December 2022 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. 64 SILENCE THERAPEUTICS PLC In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic report and Directors' report. Responsibilities for the financial statements and the audit Responsibilities of the directors for the financial statements As explained more fully in the statement Responsibilities, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. ontinue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the company or to cease operations, or have no realistic alternative but to do so. Audito Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when i t exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related to patent protection, data privacy, product safety and regulatory compliance, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as the Companies Act 2006 of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to manipulate financial results, misappropriation of cash and potential management bias in accounting estimates. Audit procedures performed by the engagement team included: Discussions with management and internal legal counsel including consideration of known or suspected instances of non-compliance with laws, regulations and fraud Review of minutes of meeting with the Board of Directors Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations and journals posted by senior management Challenging assumptions made by management in their significant accounting estimates, in particular in relation to the recognition of revenue related to collaboration agreements There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of no n-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected. www.frc.org.uk/auditorsresponsibilities. This description 65 SILENCE THERAPEUTICS PLC Use of this report apter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Other required reporting Companies Act 2006 exception reporting Under the Companies Act 2006 we are required to report to you if, in our opinion: we have not obtained all the information and explanations we require for our audit; or adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or the company financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. Sam Taylor (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Reading 23 March 2023 66 SILENCE THERAPEUTICS PLC Consolidated income statement year ended 31 December 2022 Revenue Cost of sales Gross profit Research and development costs Administrative expenses Operating loss Finance and other expenses Finance and other income Loss for the year before taxation Taxation Loss for the year after taxation Note 3 5 7 8 9 2022 £000s 17,501 (10,880 ) 6,621 (35,605 ) (19,609 ) (48,593 ) (47 ) 1,272 (47,368 ) 6,879 (40,489 ) 2021 £000s 12,415 (7,456 ) 4,959 (30,765 ) (20,008 ) (45,814 ) (52 ) 10 (45,856 ) 6,446 (39,410 ) Loss per ordinary equity share (basic and diluted) 10 (41.9) pence (44.3) pence Consolidated statement of comprehensive income year ended 31 December 2022 Loss for the year after taxation Other comprehensive expense, net of tax: Items that may subsequently be reclassified to profit and loss: Foreign exchange differences arising on consolidation of foreign operations Total other comprehensive income/(expense) for the year Total comprehensive expense for the year 2022 £000s (40,489 ) 2021 £000s (39,410 ) 544 544 (39,945 ) (677 ) (677 ) (40,087 ) The accompanying accounting policies and notes form an integral part of these financial statements. 67 SILENCE THERAPEUTICS PLC Consolidated balance sheet at 31 December 2022 Non-current assets Property, plant and equipment Goodwill Other intangible assets Financial assets at amortised cost Current assets Cash and cash equivalents Financial assets at amortised cost R&D tax credit receivable Other current assets Trade receivables Non-current liabilities Lease liability Contract liabilities Current liabilities Contract liabilities Trade and other payables Lease liability Net assets Note 31 December 2022 £000s 11 12 13 17 14 15 10 16 17 19 20 20 18 19 2,201 8,009 320 284 10,814 54,816 16,328 14,882 9,745 915 96,686 (263) (63,485 ) (63,748 ) (8,864 ) (12,633 ) (183 ) (21,680 ) 22,072 2021 £000s 1,944 7,592 24 301 9,861 73,537 - 6,945 5,520 331 86,333 - (72,501 ) (72,501 ) (4,247 ) (10,783 ) (137 ) (15,167 ) 8,526 Capital and reserves attributable to the owners of the parent Share capital Capital reserves Translation reserve Accumulated losses Total shareholders equity 22 5,390 277,860 24 2,085 (263,263 ) 22,072 4,489 225,462 1,541 (222,966 ) 8,526 The financial statements on pages 67 to 100 were approved by the Board on 23 March 2023 and signed on its behalf. Craig Tooman Chief Executive Officer Company number: 02992058 The accompanying accounting policies and notes form an integral part of these financial statements. 68 SILENCE THERAPEUTICS PLC Consolidated statement of changes in equity year ended 31 December 2022 Note 22 22 24 / 22 24 24 24 / 22 At 31 December 2020 Recognition of share-based payments Options exercised in the year Proceeds from shares issued Transactions with owners recognised directly in equity Loss for year Other comprehensive income Foreign exchange differences arising on consolidation of foreign operations Total comprehensive expense for the year At 31 December 2021 Recognition of share-based payments Options exercised in the year Proceeds from shares issued Transactions with owners recognised directly in equity Loss for year Other comprehensive income Foreign exchange differences arising on consolidation of foreign operations Total comprehensive expense for the year At 31 December 2022 Capital reserves £000s Share capital £000s 4,165 186,891 8,632 (659 ) 30,598 - - 324 Translation reserve £000s 2,218 - - - Accumulated losses £000s (184,215 ) - 659 - 324 - 38,571 - - - 659 (39,410 ) - - - - 4,489 225,462 10,252 (192 ) 42,338 - - 901 (677) (677) 1,541 - - - - (39,410 ) (222,966 ) - 192 - 901 - 52,398 - - - 192 (40,489 ) Total equity £000s 9,059 8,632 - 30,922 39,554 (39,410 ) - (677) (40,087 ) 8,526 10,252 - 43,239 53,491 (40,489 ) - - - - - 5,390 277,860 544 544 2,085 - (40,489 ) (263,263 ) 544 (39,945 ) 22,072 The accompanying accounting policies and notes form an integral part of these financial statements. 69 SILENCE THERAPEUTICS PLC Consolidated statement of cash flows year ended 31 December 2022 Cash flow from operating activities Loss before tax Depreciation charges Amortisation charges Charge for the year in respect of share-based payments Net foreign exchange (gain)/loss Finance and other expenses Finance and other income (Increase)/decrease in trade and other receivables Increase in other current assets (Increase) in R&D Tax Credit Receivable Decrease in derivative financial instrument Increase in trade and other payables Increase in contract liabilities Cash generated/(spent) on operations R&D tax credits received Net cash (outflow)/inflow from operating activities Cash flow from investing activities Redemption of financial assets at amortised cost Purchase of financial assets at amortized cost Interest received Purchase of property, plant and equipment Purchase of intangible assets Net cash inflow/(outflow) from investing activities Cash flow from financing activities Repayment of lease liabilities Proceeds from issue of share capital Net cash inflow from financing activities Increase in cash and cash equivalents Cash and cash equivalents at start of year Effect of exchange rate fluctuations on cash and cash equivalents held Cash and cash equivalents at end of year term deposits Year ended 31 December 2022 £000s (47,368 ) 478 4 10,252 713 - (1,272 ) (584) (4,225 ) (502) - 1,447 (4,399) (45,456) - (45,456) - (16,125) 23 (140 ) (300 ) (16,542) (190 ) 43,239 43,049 (18,949) 73,537 228 54,816 The accompanying accounting policies and notes form an integral part of these financial statements. 2021 £000s (45,856 ) 411 16 8,632 305 52 (10 ) 27,483 (904 ) - 1,492 2,405 8,369 2,395 4,411 6,806 10,000 - 10 (1,311 ) (23 ) 8,676 (211 ) 30,922 30,711 46,193 27,449 (105 ) 73,537 70 SILENCE THERAPEUTICS PLC Notes to the consolidated financial statements year ended 31 December 2022 1. General information 1.1 Group development of RNA therapeutics. Silence Therapeutics plc, a public Company limited by shares registered in England and Wales, with company number 02992058 is 27 Eastcastle Street, London, W1W 8DH and the principal place of business is 72 Hammersmith Road, London, W14 8TH. 2. Principal accounting policies 2.1 Basis of preparation The consolidated financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, as applicable to companies using IFRS. The consolidated financial statements have been prepared under the historical cost convention as modified by revaluation to fair value of the derivative financial instrument. The accounting policies set out below have, unless otherwise stated, been prepared consistently for all periods presented in these consolidated financial statements. The financial statements are prepared in sterling and presented to the nearest thousand pounds. New standards and interpretations not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2022 reporting periods and have not been early adopted by the Group. These include amendments to IAS1 'Presentation of financial statements' on classification of liabilities. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. 2.2 Basis of consolidation The Consolidated financial statements consolidate those of the Company and its controlled subsidiary undertakings drawn up to 31 December 2022. The Group controls an entity when the Group is expected to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Where necessary, adjustments are made to the financial statements of subsidiaries to bring accounting policies into line with those used for reporting the operations of the Group. All intra Group transactions, balances, income and expenses are eliminated on consolidation. 71 SILENCE THERAPEUTICS PLC 2.3 Going concern The Group has incurred recurring losses since inception, including net losses of £40.5 million for the year ended December 31, 2022. As of December 31, 2022, the Group had accumulated losses of £263.3 million and cash outflows from operating activities for the year ended 31 December 2022 of £45.5 million. The Group expects to incur operating losses for the foreseeable future as it continues its research and development efforts, seeks to obtain regulatory approval of its product candidates and pursues any future product candidates the Group may develop. To-date, the Group has funded its operations through upfront payments and milestones from collaboration agreements, equity offerings and proceeds from private placements, as well as management of expenses and other financing options to support its continued operations. During 2021, the Group received $40.0 million (£30.8 million) of the upfront payments in respect of the AstraZeneca collaboration, $45 million from a private placement of ADSs (approximately $42.0 million / £30.8 million, net of expenses) and approximately $16.0 million (£10.7 million) of the upfront payment, (net of taxes withheld, based on the exchange rate at the payment date), related to the Hansoh Pharmaceutical Group Company Limited or Hansoh, collaboration executed on October 14, 2021. In August 2022 the Group raised additional funds through a registered direct offering with aggregate gross proceeds of $56.5 million (approximately £46.4 million) before deducting $4.1 million (approximately £3.3 million) in underwriting discounts, commissions and estimated offering expenses. As of December 31, 2022, the Group had cash and cash equivalents and U.S. Treasury Bills of £71.1 million ($86.0 million). The Group has the responsibility to evaluate whether conditions and/or events raise material uncertainty about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. The forecast for evaluating the going concern basis of the Group includes continued investment in our technology platform and product pipeline. The forecast does not include collaboration milestones which have not been fully achieved or other assumptions for potential future non-dilutive or dilutive funding sources. Based on this evaluation, the Group believes that its current cash and cash equivalents are only sufficient to fund its operating expenses through the first quarter of 2024. This indicates that a material uncertainty exists that may cast sign ability to continue as a going concern and therefore the Group may be unable to realize assets and discharge liabilities in the normal course of business. The Group will need to raise additional funding to fund its operation expenses and capital expenditure requirements in relation to its clinical development activities. The Group may seek additional funding through public or private financings, debt financing or collaboration agreements. Specifically, the Group may receive future milestone payments of up to $14 million from existing collaboration agreements in the next 12 months which will extend the ability to fund operations beyond the first quarter of 2024. However, these future milestone payments are dependent on achievement of certain development or regulatory objectives that may not occur. The Group has an authorized open market sale agreement and can potentially raise funds through the sale of ADSs. However, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us, or if at all. The inability to obtain future funding could impact; the eliminate some of its research and development programs, or being unable to continue operations or unable to continue as a going concern. These consolidated financial statements have been prepared assuming that the Group will continue as a going concern which contemplates the continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business and do not include adjustments that would result if the Group were unable to continue as a going concern. 2.4 Research and development The Group recognise expenditure incurred in carrying out its research and development activities in line with the calculation of research and development accruals at each period to account for expenditure that has been incurred. This requires estimations of the full costs to complete each study or activity and also estimation of the current stage of completion. In all cases, the full cost of each study or activity is expensed by the time the final report or, where applicable, product, has been received. Further details on research and development can be found in note 2.11. 72 SILENCE THERAPEUTICS PLC 2.5 Revenue recognition agreements. Royalty income December 2022 consists of royalty income and revenue from collaboration Alnylam is obliged to pay royalties to the Group on the net sales of ONPATTRO in the EU in a manner commensurate with the contractual terms. Invoices are raised in arrears on a quarterly basis based on sales information provided by Alnylam no later than 75 days after the quarter end. The royalty exemption under IFRS 15 requires sales-based data. Royalty revenue is recognised when sales data is received, based on the level of sales when the related sales occur. Revenue from collaboration agreements We have considered the Mallinckrodt, AstraZeneca, and Hansoh contracts and assessed whether the research and development services and license of the IP in respect of each target are distinct. For all contracts we have concluded the license of the intellectual property and the R&D services are not distinct, as Mallinckrodt, AstraZeneca, and Hansoh cannot benefit from the intellectual property absent the R&D services, as those R&D services are used to discover and develop a drug candidate and to enhance the value in the underlying intellectual property, and these services could not be performed by another party, indicating that the two are highly interrelated. On this basis, we have concluded that there is a single performance obligation covering both the R&D services and the license of the intellectual property in respect of each target. We recognise revenue over the duration of the contract based on an input method based on cost to cost. The contracts have multiple elements of consideration (some or all of the following), namely: Upfront payments (fixed); Subsequent milestone payments (variable); FTE costs rechargeable (variable); Recharges of direct costs for certain research activities (variable). The over the contract period based on costs to completion. continues throughout their entire duration. On this basis revenue is recognised Revenue has been calculated on the following ongoing basis for the year ended 31 December 2022: Total contract costs which includes actual FTE and direct costs incurred up to 31 December 2022 and forecast FTE and direct costs for the remainder of the contract Actual costs incurred up until 31 December 2022 are calculated as a percentage of total contract costs (actual and forecast) This percentage is then multiplied by the transaction price allocated to the performance obligation in question, thus calculating the cumulative revenue which is then used to calculate the revenue to be recognised in that period. In the case of the upfront and milestones, the consideration that is multiplied is in relation to the upfront and completed milestones only. Consideration in relation to milestones not yet achieved is excluded from the calculation. 73 SILENCE THERAPEUTICS PLC Forecast costs are monitored each period, with revenue recognised reflecting any changes in forecast or over/under spend in actuals. Further details of the revenue amounts recognised in the year ended 31 December 2022 can be found in note 3. 2.6 Foreign currency translation The consolidated financial statements are presented in sterling. The individual financial statements of each Group entity are prepared in the currency of the primary economic environment in which the entity operates (its functional currency). al currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the income statement for the year. operations (including comparatives) are translated into sterling using exchange rates prevailing on the balance sheet date. Income and expense items (including comparatives) are translated at the average exchange rates for the year unless individually significant to the Group at which point they are translated at spot rate. Exchange differences arising, if any, are recognised in equity. 2.7 Defined contribution pension funds The contributions payable to defined contribution retirement schemes are recognised as an expense in the period to which they relate. On the payment of the contribution the Group has no further liability. 2.8 Business combinations There were no new business combinations as defined by IFRS 3 during 2021 or 2022. All goodwill is attributed to an acquisition that occurred in 2005. Goodwill represents the excess of the cost of the recognised amount (generally fair value) of the identifiable assets, liabilities and contingent liabilities of the acquiree. 2.9 Property, plant and equipment The Group holds no property assets other than leased property assets classified as right-of-use assets. See note 2.14 for further details. All equipment and furniture is stated in the financial statements at its cost of acquisition less a provision for depreciation. Depreciation is charged to write off the cost less estimated residual values of furniture and equipment on a straight- line basis over their estimated useful lives. All equipment and furniture is estimated to have a useful economic life of between three and ten years. Estimated useful economic lives and residual values are reviewed each year and amended if necessary. 74 SILENCE THERAPEUTICS PLC 2.10 Goodwill Goodwill is stated at cost less any accumulated impairment losses; it is allocated to the cash generating unit or operating segment that is expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management controls the related cash flows. Goodwill is not amortised but is tested for impairment annually, or sooner when an indication of impairment has been identified. Goodwill arising on the acquisition identifiable assets, liabilities and contingent liabilities of the subsidiary at the date of acquisition. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. 2.11 Other intangible assets Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and less accumulated impairment losses. Amortisation Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows: Licences and software 10 15 years. Capitalisation of research and development costs Costs associated with research activities are treated as an expense in the period in which they are incurred. Costs that are directly attributable to the development phase of an internal project will only be recognised as intangible assets provided they meet the following requirements: an asset is created that can be separately identified; the technical feasibility exists to complete the intangible asset so that it will be available for sale or use and the Group has the intention and ability to do so; it is probable that the asset created will generate future economic benefits either through internal use or sale; sufficient technical, financial and other resources are available for completion of the asset; and the expenditure attributable to the intangible asset during its development can be reliably measured. Careful judgment by management is applied when deciding whether recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each balance sheet date. To date, no development costs have been capitalised in respect of the internal projects on the grounds that the costs to date are either for the research phase of the projects or, if relating to the development phase, then the work so far does not meet the recognition criteria set out above. In most cases recognition would not occur until regulatory approval. 2.12 Impairment testing of goodwill, other intangible assets and property, plant and equipment 75 SILENCE THERAPEUTICS PLC At each balance sheet date non-financial assets are assessed to determine whether there is an indication that the asset At least annually or if there is such an indication, the recoverable amount of the value in use. Impairment losses recognised for cash generating units to which goodwill has been allocated are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash generating unit. 2.13 Financial instruments Financial assets and financial liabilities are recognised on the balance sheet when the Group becomes a party to the contractual provisions of the instrument. For the periods presented in these financial statements, financial assets were classified in the following categories: derivative financial instruments, and financial assets at amortised cost. Currently other categories of financial asset are not used. Management determines the classification of its financial assets at initial recognition. The de-recognition of financial instruments occurs when the rights to receive cash flows from investments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred. Derivative financial instruments The Group uses forward contracts to manage exposure to risks from foreign exchange movements. Derivatives are initially recognised at fair value at the date that the contract is entered into and subsequently remeasured at each balance sheet date. The resulting gain or loss is recognised in the income statement. Financial assets at amortised cost Financial assets at amortised cost include trade receivables held in order to collect contractual cash flows, U.S. Treasury Bills, and a term deposit held to collect solely payment of the principal and interest, and deposits on property operating leases and for the procurement of materials. These are measured at initial recognition at fair value plus, if appropriate, directly attributable transaction costs and are subsequently measured at amortised cost using the effective interest method, less provision for impairment. Premiums and discounts, if any, are amortised or accreted as interest expense or income over the life of the related asset using the effective interest method. Any impairment is assessed using the Expected Credit Losses (ECL) model. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for trade receivables. Any impairment is recognised in the income statement. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits with original maturities of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value. Financial liabilities and equity 76 SILENCE THERAPEUTICS PLC Financial liabilities and equity instruments issued are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. A financial liability is a contractual obligation to either deliver cash or another financial asset to another entity or to exchange a financial asset or financial liability with another entity, including obligations which may be settled using its equity instruments. An equity instrument is any contract that evidences a residual interest in the assets after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below. Financial liabilities At initial recognition, financial liabilities are measured at their fair value minus, if appropriate, any transaction costs that are directly attributable to the issue of the financial liability. After initial recognition, all financial liabilities are measured at amortised cost using the effective interest method. Equity instruments Equity instruments issued by the Group are recorded as the proceeds received, net of direct issue costs. 2.14 Leased assets For any new contracts entered into on or after 1 January 2019, the Group considers whether a contract is, or contains asset) for a per contract meets two key evaluations, which are whether: the contract contains an identifiable asset; the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use Measurement and recognition At lease commencement date, the Group recognises a right-of-use asset (as part of the appropriate underlying class of assets in property, plant and equipment) and a lease liability on the balance sheet. The right-of-use asset is measured at cost comprising the following: the amount of the initial measurement of lease liability, any lease payments made at or before the commencement date less any lease incentives received, any initial direct costs, and restoration costs. The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted u of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. The Group has elected to account for short-term leases (leases with a duration of less than 12 months) and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term. The interest payments for leases are recognised in the statement of cashflows under finance and other expenses. 77 SILENCE THERAPEUTICS PLC Lease break clauses and extension options When the Group has the option to extend a lease, management uses its judgment to determine whether or not an option would be reasonably certain to be exercised. Management considers all facts and circumstances including past practice and any cost that will be incurred to change the asset if an option to extend is not taken, to help determine the lease term. Similarly, when a break clause exists in the lease agreement, management must consider the likelihood of this option to curtail the lease being exercised. 2.15 Share-based payments Historically the Group has issued equity settled share-based payments to certain employees (see note 25). Equity settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value so determined is expensed on a straight-line basis over the vesting period, based on the Group of the number of shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions. The value of the charge is adjusted to reflect expected and actual levels of award vesting, except where failure to vest is as a result of not meeting a market condition. Cancellations of equity instruments are treated as an acceleration of the vesting period and any outstanding charge is reversed in full immediately. Fair value is measured using a Black Scholes model, binomial pricing model or Monte Carlo model. The key assumptions estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Any payment made to a counterparty on the cancellation or settlement of a grant of equity instruments (even if this occurs after the vesting date) should be accounted for as a repurchase of an equity interest (that is, as a deduction from equity). But, if the payment exceeds the fair value of the equity instruments repurchased (measured at the repurchase date), any such excess should be recognised as an expense. 2.16 Equity Share capital is determined using the nominal value of shares that have been issued. The share premium account includes any premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from the share premium account, net of any related income tax benefits. The merger reserve represents the difference between the nominal value and the market value at the date of issue of shares issued in connection with the acquisition by the Group of an interest in over 90% of the share capital of another company. Equity settled share-based payments are credited to a share-based payment reserve as a component of equity until related options or warrants are exercised. Foreign currency translation differences are included in the translation reserve. Profit and loss account (deficit) includes all current and prior period results as disclosed in the income statement. 78 SILENCE THERAPEUTICS PLC 2.17 Taxation Current tax payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Current tax liabilities are calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Tax receivable arises from the U.K. legislation regarding the treatment of certain qualifying research and development costs, allowing for the surrender of tax losses attributable to such costs in return for a tax rebate. Research and development tax credits are recognised when the receipt is probable. Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Withholding tax is payable on gross income from dividends, interest, lease of property, royalties, and other China-source passive income since the Group does not have an establishment or place of business in China. 2.18 Critical accounting estimates and judgements and key sources of estimation uncertainty effect on the amounts recognised best knowledge of current events and actions, actual results may ultimately differ from those estimates. The critical judgments concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below: Application of IFRS 15 in determining revenue from contracts with customers specifically: 79 SILENCE THERAPEUTICS PLC o o The determination of the numbers of performance obligations. Judgement was previously required in determining whether the license and the R&D activities are distinct performance obligations or not at the time the collaboration agreements were executed. It is considered the license of the IP and the R&D activities are not distinct as the R&D services are essential to discover and develop a drug candidate and enhance the value in the underlying IP. In addition, the gene targets are highly specialised such that only the Group has the specialist knowledge to apply the IP to the specific target. On this basis, it was concluded that there is only one single performance obligation covering both the R&D services and licenses of the IP in respect of each target at the time the agreements were executed; The allocation of the upfront payments between performance obligations (judgement). Mallinckrodt paid the Group $20 million in 2019, AstraZeneca have paid the Group $60 million in 2020 and 2021, and Hansoh paid $16 million upfront under their respective contracts, which is in 2021. A judgment was required to determine how this should be allocated across the contracted targets. In 2019, due to the compounds being at similar stages of development at the time of contract execution, the $20 million paid by Mallinckrodt was allocated evenly, on the basis of a benchmarking exercise considering the standalone selling price per target of past deals announced to the market by comparable companies; similarly it was concluded that the $60 million amount to be paid by AstraZeneca was allocated evenly across target options for AstraZeneca. The Hansoh $16 million upfront payment was allocated $4 million for each of the two targets in Greater China, Hong Kong, Macau and Taiwan and $8 million for the global target based on the benchmarking exercise, as well as consideration for geography licensed and other contractual terms. These initial transaction amounts are recognized as revenue over the life of the performance obligations for each contract. The estimate of future costs to be incurred to determine percentage of completion of revenue contracts: o In determining the percentage of completion of the revenue projects, the Group estimated the total future costs expected to be incurred through the life of the performance obligations per the contract. An increase in future costs could arise as a result of a requested change in scope by the collaboration partner or through higher than anticipated internal costs incurred by Silence. The impact of a change in scope would be largely neutral on revenue recognition because there would be consequential increases in revenue to match the additional costs. There is no experience of internal costs being higher than anticipated to date, but if this were the case then a 10% increase in future estimated costs would lead to a 0.4% increase in revenue. 2.19 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the Board. The chief operating decision maker (CODM), who is responsible for allocating resources and assessing performance of the operating segments, has been i Chief Executive Officer. The Group has a single reportable segment (see note 4). 3. Revenue Revenue from collaboration agreements for the year ended 31 December 2022 relates to the Research collaboration agreements the Group entered into with Mallinckrodt plc in July 2019, AstraZeneca plc in March 2020, and Hansoh in October 2021. Revenue comprised £0.6 million of royalty income (2021: £0.4 million) and £16.9 million of Research collaboration income (2021: £12.0 million). Disaggregation of Revenue from Contracts with Customers is as follows: 80 SILENCE THERAPEUTICS PLC Revenue from Contracts with Customers Research collaboration - Mallinckrodt plc Research collaboration - AstraZeneca Research collaboration Research collaboration Royalties Other total Total revenue from contracts with customers 2022 £000s 11,658 5,081 184 16,923 578 17,501 2021 £000s 8,748 2,652 623 12,023 392 12,415 Under our collaboration agreement with Mallinckrodt, we received an upfront cash payment of £16.4 million ($20 million) in 2019 and are eligible to receive specified development, regulatory and commercial milestone payments. We received milestone payments totalling £2.2 million or $3 million (2021: £2.9 million) during the year ended 31 December 2022. In addition to these payments, Mallinckrodt has agreed to fund some of our research personnel and preclinical development costs. We recognise the upfront payment, milestone payments, payments for personnel costs and other research funding payments over time, in accordance with IFRS 15 para 35 c). During the year ended 31 December 2022, we recognised a total of £11.7 million in revenue under this agreement. (2021: £8.7 million) Under our collaboration agreement with AstraZeneca, we received an upfront cash payment of £17.1 million ($20 million) in 2020 with a further amount of £30.8 million ($40 million) received in May 2021. We are also eligible to receive specified development and commercial milestone payments as well as tiered royalties on net sales, if any. We recognise the upfront payment and milestone payments over time, in accordance with IFRS 15 para 35 c). During the year ended 31 December 2022, we recognised a total of £5.1 million in revenue under this agreement. (2021: £2.7 million) We entered into a collaboration agreement with Hansoh on 15 October 2021. We received a $16 million (equivalent to approximately £11.9 million based on the exchange rate at the payment date and $14.4 million or £10.7 million, net of taxes) upfront payment to us in December 2021. We are eligible to receive development, regulatory and commercial milestones as well as royalties on Hansoh net product sales. During the year ended December 31, 2022, the Company triggered milestone payments totaling $2.0 million (£1.5 million) (2021: £nil). We recognize the upfront payment and milestone payments over time, in accordance with IFRS 15 para 35 c). During the year ended December 31, 2022, we recognized a total of £0.2 million in revenue under this agreement to date. (2021: £32 thousand) In December 2018, we entered into a settlement and license agreement with Alnylam Pharmaceuticals Inc., or Alnylam, pursuant to which we settled outstanding patent litigation with Alnylam related to its RNAi product ONPATTRO. As part of the settlement, we license specified patents to Alnylam, and Alnylam pays us a tiered royalty of up to one percent of net sales of ONPATTRO in the European Union. We are eligible to receive these royalties through December 2023. We invoice Alnylam quarterly in arrears based on sales data for that quarter as reported to us by Alnylam. Royalty revenue is recognised based on the level of sales when the related sales occur. During the year ended 31 December 2022, we recognised a total of £0.6 million in royalty income from Alnylam. (2021: £0.4 million) 4. Segment reporting In 2022, the Group operated in the specific technology field of RNA therapeutics. Business segments The Group has identified the Chief Executive Officer as the CODM. For the 12 months ended 31 December 2021 and 2022, the CODM determined that the Group had one business segment, the development of RNAi-based medicines. This is in line with reporting to senior management. The information used internally by the CODM is the same as that disclosed in the financial statements. 81 SILENCE THERAPEUTICS PLC An analysis of the G assets and revenues by location is shown below: Non-current assets As at 31 December 2021 As at 31 December 2022 Revenue analysis for the year ended 31 December 2021 Research collaboration Royalties Revenue analysis for the year ended 31 December 2022 Research collaboration Royalties . 5. Operating loss This is stated after charging/(crediting): U.S.A. £000s U.K. £000s Germany £000s 17 - 516 1,166 9,328 9,648 Total £000s 9,861 10,814 - - - - - - 12,023 - 12,023 - 392 392 12,023 392 12,415 16,923 - 16,923 - 578 578 16,923 578 17,501 Depreciation of property, plant and equipment Amortisation of intangibles Share-based payments charge Short lease payments on premises Fees payable to the Company's auditors for the audit of the Company and the consolidation: - audit fees - other assurance services 6. Directors and staff costs Wages and salaries Social security costs Other pension costs Share-based payments charge Total aggregate remuneration 2022 £000s 478 4 10,252 410 463 150 2021 £000s 411 16 8,632 332 403 180 follows: 2022 £000s 14,760 1,434 429 10,252 26,875 2021 £000s 10,837 1,491 319 8,632 21,279 Remuneration and share based payments detail for all Directors is presented in the Remuneration Committee report. See page 37 for further details. 82 SILENCE THERAPEUTICS PLC Research and development and related support services Administration Total average number of employees 7. Finance and other expenses Lease liability interest expense Net foreign exchange losses Total Finance and other expenses 8. Finance and other income Bank interest receivable Accreditation on U.S. Treasury Bills Net foreign exchange gains Total Finance and other income 9. Taxation 2022 Number 88 28 116 2021 Number 66 26 92 2022 £000s 47 - 47 2022 £000s 23 203 1,046 1,272 2021 £000s 8 44 52 2021 £000s 10 - - 10 The entire tax credit of £6.9m relates to current tax as shown below. No deferred tax was recognised in the year. The deferred tax charge in 2022 was nil (2021: nil). Reconciliation of tax credit at standard rate of U.K. corporation tax to the current tax credit: Loss before tax Tax credit at the standard rate of U.K. corporation tax of 19% (2021: 19%; 2020: 19%) Effect of overseas tax rate Impact of unrelieved tax losses not recognised Adjustment in respect of prior year Research and development tax credit in respect of current year Effect of overseas taxes 2022 £000s (47,368 ) 9,000 544 (9,948 ) (401) 7,836 (152 ) 6,879 2021 £000s (45,856 ) 8,713 (264 ) (8,639 ) 875 6,945 (1,184) 6,446 Estimated tax losses of £167.8 million (2021: £154.1 million) are available for relief against future profits. 83 SILENCE THERAPEUTICS PLC The deferred tax asset not recognised in these financial statements on the estimated losses and the treatment of the equity settled share- based payments, net of any other temporary timing differences is detailed in note 23. During the year, the Group had not yet received a research and development tax credit of related to the prior year (2021: £4.4 million). The Group has accrued £7.8 million (2021: £6.95 million) recognising a current tax asset in respect of 2022 research and development tax credits. The company had a foreign tax expense of £0.4 million. (2021: £0.2 million). The corporation tax main rate during 2022 was 19% (2021: 19%). In the Spring Budget 2021, the U.K. Government announced that from 1 April 2023 the corporation tax rate will increase to 25%. As the company has not recognised and related deferred tax assets as at 31 December 2022, the tax rate increase has no impact. Since the Group does not have an establishment or place of business in China, the Group is subject to withholding tax on gross income from dividends, interest, lease of property, royalties, and other China-source passive income. The Group entered into a collaboration agreement with Hansoh, a biopharmaceutical company in China and received a $16 million upfront payment, which required withholding tax of $1.6 million. In 2022 the Group received a milestone payment of £1.5 million ($2.0 million), which required withholding tax of £0.2 million. 10. Loss per ordinary equity share (basic and diluted) The calculation of the loss per share is based on the loss for the financial year after taxation of £40.5 million (2021: loss of £39.4 million) and on the weighted average of 96,584,512 (2021: 88,950,441) ordinary shares in issue during the year. The options outstanding at 31 December 2021 and 31 December 2022 are considered to be anti-dilutive as the Group is loss-making. 84 SILENCE THERAPEUTICS PLC 11 Property, plant and equipment Cost At 1 January 2021 Additions Disposals Translation adjustment At 31 December 2021 At 1 January 2022 Additions Disposals Translation adjustment At 31 December 2022 Accumulated depreciation At 1 January 2021 Charge for the year Eliminated on disposal Translation adjustment At 31 December 2021 At 1 January 2022 Charge for the year Eliminated on disposal Translation adjustment At 31 December 2022 Net book value As at 31 December 2021 As at 31 December 2022 12. Goodwill Balance at start of year Translation adjustment Balance at end of year Equipment and furniture £000s Right-of-use asset £000s 4,066 1,311 (46) (219) 5,112 5,112 140 (506 ) 240 4,986 3,274 238 (46 ) (173) 3,293 3,293 306 (506 ) 144 3,237 1,819 1,749 456 - (111 ) - 345 345 499 (346 ) - 498 121 173 (74 ) - 220 220 172 (346 ) - 46 125 452 Total £000s 4,522 1,311 (157 ) (219 ) 5,457 5,457 639 (852 ) 240 5,484 3,395 411 (120 ) (173) 3,513 3,513 478 (852 ) 144 3,283 1,944 2,201 2022 £000s 7,592 417 8,009 2021 £000s 8,125 (533) 7,592 The recoverable amount is based on fair value less cost of disposal. The key assumptions used in the valuation models to determine the fair value less cost of disposal are as follows: Fair value has been determined as market capitalisation (share price x number of shares in issue) at 31 December 2022 Disposal costs have been estimated to be minimal Goodwill is assessed at a segment level. As there is only one operating segment, we have considered the fair value of the entire business as market capitalisation at 31 December 2022, which was £453.3 million (2021: £528.8 million), with share price not dropping significantly below its 31 December 2022 value at any point so far in 2023, and therefore a sensitivity analysis has not been presented. 85 SILENCE THERAPEUTICS PLC 13. Other intangible assets Cost At 1 January 2021 Additions Translation adjustment At 31 December 2021 At 1 January 2022 Additions Translation adjustment At 31 December 2022 Accumulated depreciation At 1 January 2021 Charge for the year Translation adjustment At 31 December 2021 At 1 January 2022 Charge for the year Translation adjustment At 31 December 2022 Net book value As at 31 December 2021 As at 31 December 2022 Licenses & software £000s 107 23 - 130 130 300 - 430 90 16 - 106 106 4 - 110 24 320 The intangible assets included above have finite useful lives estimated to be of 10 15 years from the date of acquisition, over which period they are amortised or written down if they are considered to be impaired. Internally generated patent costs are only recorded where they are expected to lead directly to near-term revenues, none have been capitalised to date. 14. Cash and cash equivalents Cash at bank and in hand U.S. Treasury Bills Short term bank deposits Total Cash and cash equivalents 2022 £000s 41,986 12,376 454 54,816 2021 £000s 73,537 - - 73,537 Cash at bank comprises balances held by the Group in current, U.S. Treasury Bills and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates to their fair value. 15. Financial assets at amortised cost Non-current financial assets at amortized cost primarily relate to deposits for properties. Current financial assets at amortized cost, other than trade receivables as disclosed in note 17, include U.S. Treasury Bills (with maturities from purchase date over three months) of £16.3 million (2021: nil). 86 SILENCE THERAPEUTICS PLC Financial assets at amortised cost U.S. Treasury Bills Total current financial assets at amortised cost Non-current financial assets at amortised cost Total financial assets at amortised cost 16. Other current assets Prepayments VAT receivable Total other current assets 2022 £000s 16,328 16,328 284 16,612 2022 £000s 8,200 1,545 9,745 2021 £000s - - 301 301 2021 £000s 4,309 1,211 5,520 87 SILENCE THERAPEUTICS PLC 17. Trade receivables Trade receivables 2022 £000s 915 2021 £000s 331 The Directors consider that the carrying amount of trade receivables approximates to their fair value. No interest is charged on outstanding receivables. There were no overdue trade receivables balances. The Group has applied an expected credit loss model to the balance and determined that £nil (2021: £nil) provision is required. 18. Trade and other payables Trade payables Social security and other taxes Accruals and other payables Corporate income tax payable Total trade and other payables 2022 £000s 3,186 467 8,391 589 12,633 2021 £000s 4,065 318 6,215 185 10,783 The Directors consider that the carrying amount of trade and other payables approximates to their fair value. 19. Lease liability Lease liability current Lease liability non-current Total lease liability 2022 £000s 183 263 446 2021 £000s 137 - 137 The lease liability recognis office, which was renegotiated upon completion of the original term, with the new term beginning in September 2022. The repayment of the principal portion of these lease liabilities for the year-ending December 31, 2022, was £0.2 million (2021: £0.2 million). There are 2 short-term leases in Berlin, Germany and three leases in Hoboken, U.S., not included in the lease liability above. Both leases in Berlin are on a rolling contract basis with either party being able to end the lease with a cancellation notice period of 11.5 months, while the leases in the U.S. are on a rolling contract basis with a notice period of three months, thus allowing exemption using the practical expedient, without significant cost. 88 SILENCE THERAPEUTICS PLC 20. Contract liabilities Contract liabilities comprise entirely deferred revenue in respect of the Mallinckrodt, AstraZeneca plc, and Hansoh research collaborations. The current contract liabilities represent the amount of estimated revenue to be reported in the next 12 months related to amounts invoiced to our partners. Current and non-current contract liabilities include future revenue from collaboration recharged expenses, upfront payments, and milestones achieved to December 31, 2022 Contract liabilities: Current Non-current Total contract liabilities Contract liabilities: At 1 January 2021 Additions during period Revenue unwound during period At 31 December 2021 At 1 January 2022 Additions during period Revenue unwound during period At 31 December 2022 21. Deferred tax 2021 £000s 4,247 72,501 76,748 31 December, 2022 £000s 8,864 63,485 72,349 Total £000s 68,379 20,392 (12,023 ) 76,748 76,748 12,519 (16,918 ) 72,349 The Group has the following unrecognised deferred tax assets as at 31 December 2022: Trading losses Share based payments Capital losses Total unrecognised deferred tax asset 2022 2021 Gross £000s 167,828 8,995 7,873 184,696 Net £000s 44,136 2,249 1,968 48,353 176,558 Gross £000s 152,060 16,625 7,873 Net £000s 33,909 3,159 1,496 38,564 To total unrecognised deferred tax assets are calculated based on the main corporate tax rate of 25% (19% for 2021) as this is the rate applicable to when we expect to utilise these deferred tax assets. Unrecognised deferred tax assets from foreign trading losses are calculated at the tax rate applicable to the related jurisdiction. Deferred tax assets are recognised where it is probable that future taxable profit will be available to utilise losses. Due to the uncertainty of future capital gains, a deferred tax asset in respect of capital losses was not recognised at 31 December 2022 (2021: nil). 89 SILENCE THERAPEUTICS PLC 22. Share capital Authorised, allotted, called up and fully paid ordinary shares, par value £0.05 Number of shares in issue 2022 £000s 5,390 2021 £000s 4,489 Number 107,808,472 Number 89,784,720 The Group has only one class of share. All ordinary shares have equal voting rights and rank pari passu for the distribution of dividends. Depositary $22.50 per ADS, with new and existing was US $45 million (approximately £33 million) before deducting approximately £2.4 million in placement agent fees and other expenses. The financing syndicate included Adage Capital Management LP, BVF Partners L.P., Consonance Capital, Great Point Partners, LLC, and other investors. On October 15, 2021, the Company filed a registration statement on Form F-3 with the SEC to cover the offering, issuance and sale of securities from time to time in one or more offerings of up to $300,000,000 in aggregate, which includes a sale of up to $100,000,000 of ADSs that may be issued and sold under an Open Market Sale Agreement, dated October, 15, 2021, with Jefferies LLC. On November 30, 2021, the Company completed delisting from AIM. As a result, the Company converted the existing employee share options to ADSs which represents three ordinary shares and the exercise price was also converted to represent an ADS price at an exchange rate equal to the average of the last five business trading days currency conversion of sterling pounds to US dollars, which was 1.334058 sterling pounds to 1 US dollar. This is not a modification of the existing share option grants, as the value or timing of the grants was unchanged. On August 11, 2022, the Group announced a registered direct offering (t ADSs, each representing three ordinary shares, at a price of $9.50 per ADS, with new and existing institutional and accredited investors. The aggregate gross proceeds of the Offering was $56.5 million (approximately £46.4 million) before deducting $4.1 million (approximately £3.3 million) in underwriting discounts, commissions and estimated offering expenses. Details of the shares issued during the current and previous year are as follows: 90 SILENCE THERAPEUTICS PLC Number of shares in issue at 1 January 2021 Shares issued during the year Options exercised at £0.05 Options exercised at £0.85 Options exercised at £1.00 Options exercised at £1.28 Options exercised at £1.90 Number of shares in issue at 31 December 2021 Shares issued during the year Options exercised at $0.20/ADS or $0.07/ordinary share Options exercised at $4.16/ADS or $1.39/ordinary share Options exercised at $5.12/ADS or $1.72/ordinary share Options exercised at $5.88/ADS or $1.96/ordinary share Options exercised at $7.32/ADS or $2.44/ordinary share Options exercised at $7.60/ADS or $2.53/ordinary share Number of shares in issue at 31 December 2022 Number of equivalent ADS in issue at 31 December 2022 83,306,259 6,066,654 66,114 121,854 25,000 720 198,119 89,784,720 17,850,000 84,835 16,968 12,951 24,000 15,000 19,998 107,808,472 35,936,157 At 31 December 2022, there were options outstanding over 11,571,487 (2021: 8,052,699) unissued ordinary shares. Details of the options outstanding are as follows: Year of issue Weighted average Exercise price (£) Weighted average Exercise price ($) At 1 January 2022 Options granted Options forfeited Options expired Options exercised At 31 December, 2022 Weighted average years to expiry date 2014 2015 2016 2017 2018 2019 3.50 3.50 4.25 6.00 0.18 4.31 2020 2021 18.38 17.33 2022 18.44 Total 4.23 4.23 5.14 7.25 0.21 5.21 22.22 20.95 22.30 4,000 3,333 19,832 46,240 70,233 763,260 1,040,023 737,312 - - - - - - - - - - (9,973) (8,000) (14,876) 4,000 3,333 9,859 38,240 55,357 (12,666 ) (25,068) 725,526 (316,573 ) (36,839 ) - - 723,450 700,473 1.67 2.52 3.35 4.83 5.22 6.73 7.58 8.27 - 1,940,377 (343,453 ) - 1,596,924 9.28 2,684,233 1,940,377 (709,531) (57,917) 3,857,162 Number of equivalent ADS 8,052,699 5,821,131 (2,128,593) (173,752) 11,571,487 91 SILENCE THERAPEUTICS PLC ADSs represent three ordinary shares and the exercise price was also converted to represent an ADS price at an exchange rate equal to the closing current year currency conversion of sterling pounds to US dollars, which was 1.208971 sterling pounds to 1 US Dollar. The market price of Company shares at the year-end was $15.25/ADS or ($5.08 or 420 pence/share). (2021: $23.89/ADS ($7.96 or 590 pence/share); 2020: 514 pence). During the year the minimum and maximum prices were $7.80 and $24.66 per ADS (215 pence and 680 pence per ordinary share), respectively (2021: 443 pence and 680 pence; 2020: 304 pence and 515 pence). 23. Equity-settled share-based payments The Group has issued share options under the 2018 Long Term Incentive Plan (LTIP), 2018 Non-Employee Long Term Inventive Plan (Non-Employee LTIP), and individual share option contracts, open to all employees of the Group, as well as EMI shares (none of which remain outstanding at 31 December 2022). Under the LTIP, Non-Employee LTIP, individual contracts and schemes available, the options typically vest after 3 years, with the exception of some options granted to certain members of key management personnel. The vesting period for these options ranges from 3 to 33 months. The options usually lapse after one year following the employee leaving the Group. 2022 Number of ADSs 000s Weighted Average Exercise price $ Weighted Average Exercise price Pence 2,684,233 1,940,377 (709,531 ) (57,917 ) 0 3,857,162 1,889,460 7.32 22.30 29.25 3.20 0 15.10 13.24 605.63 1,844.41 2,419.76 265.05 0 1,248.95 1,095.01 Options Outstanding at the beginning of the year Granted during the year Lapsed or forfeited during the year Exercised during the year Outstanding at the year-end (ordinary shares/pence) Outstanding at the year-end (ADS/$) Exercisable at the year-end 2021 Weighted Average Exercise price Pence Number of shares 000s 6,768,894 226.83 2,259,153 554.60 (563,541 ) 146.02 (411,807 ) 116.62 8,052,699 329.74 7.32 2,684,233 2,503,504 263.45 The table above shows the number of options in relation to ordinary shares and equivalent ADSs outstanding and exercisable at year end, on the conversion ratio of three ordinary share options to one ADS as disclosed in Note 24. The options outstanding at the year-end have a weighted average remaining contractual life of 8.2 years (2021: 8.3 years). The weighted average share price at the time of exercise during the year was 318.31 pence per ordinary share or $10.91 per ADS (2021: 575 pence). The Group granted 5,465,478 ADS options during the year (2021: 2,259,153). The fair value of options granted were calculated using Black Scholes model for 2022. Prior to January 1, 2022, the fair value of options granted were calculated using a Binomial or Monte Carlo model. Inputs into the model were as follows: 92 SILENCE THERAPEUTICS PLC Inputs and assumptions for options granted in the year Weighted average share price (pence) Weighted average ADS price ($) Weight average hurdle price (pence) Weighted average exercise price (pence) Weighted average ADS price ($) Option life (years) Expected volatility Risk free rate Expected dividend yield 2022 537.4 19.5 2021 586.0 n/a n/a 520.0 673.8 24.4 8.9 56%-74% 1.16%-3.57% nil 10.0 65%-70% 0.28%-1.04% nil The Group recognised total charges of £10.3 million (2021: £8,6 million) related to equity settled share-based payment transactions during the year. Fair value of the grants has been calculated using volatility assumptions between 56% and 74%, based on the three year historical volatility as at the respective date of grant. The Group does not bear any responsibility to settle any employee tax obligations that arise on the exercise of share options. The estimated employer tax obligation on outstanding options at the year-end was £0.4 million (2021: £0.6 million). 24. Capital reserves The capital redemption reserve was created in 2012 following the reduction of nominal share capital to 0.1p per share. It is required under Section 733 of the Companies Act 2006, held to maintain the capital of the Company when shares are bought back and subsequently cancelled without court approval. Due to the size of the deficit on the accumulated losses account, the Company has no distributable reserves. The share premium account reflects the premium to nominal value paid on issuing shares less costs related to the issue. The merger reserve was created on issuance of shares relating to the acquisition of Silence Therapeutics GmbH. The share-based payments reserve reflects the cost to issue share-based compensation, primarily employee share options. At 1 January 2021 Shares issued On options in issue during the year On options exercised during the year Costs capitalised in respect of issuance of shares during the period. Movement in the year At 31 December 2021 Shares issued On options in issue during the year On options exercised during the year Costs capitalised in respect of issuance of shares during the period. Movement in the year At 31 December 2022 Capital redemption Merger reserve £000s 22,248 - - - Share-based Payment reserve £000s 5,715 - 8,632 (659 ) Share Premium account £000s 153,734 32,585 - 460 (2,447) 30,598 184,332 45,533 - 153 - - 22,248 - - - - 7,973 13,688 - 10,252 (192 ) - 10,060 23,748 (3,348) 42,338 226,670 - - 22,248 reserve £000s 5,194 - - - - - 5,194 - - - Total £000s 186,891 32,585 8,632 (199 ) (2,447) 38,571 225,462 45,533 10,252 (39 ) - - 5,194 (3,348) 52,398 277,860 93 SILENCE THERAPEUTICS PLC 25. Capital commitments and contingent liabilities There were no capital commitments at 31 December 2022 (2021: nil). 94 SILENCE THERAPEUTICS PLC 26. Commitments under short leases At 31 December 2022, the Group had a gross commitment on its office rental and service charge in Berlin, Germany and the Hoboken, U.S. lease equal to £0.3 million (2021: £0.3 million) in the next year. No amounts are payable after more than one year. In addition, the Group enters into contracts in the normal course of business with contract research organisations to assist in the performance of research and development activities and other services and products for operating purposes. These contracts generally provide for termination on notice, and therefore are cancellable contracts and not reflected in the disclosure above. 27. Financial instruments and risk management receivables and trade payables which arise directly from its operations. The main purpose of these financial instruments approval is required for adoption of any new financial instrument or counterparty. The primary focus of the treasury function is preservation of capital. The Directors consider that the carrying amount of these financial instruments approximates to their fair value. Financial assets by category The categories of financial assets included in the balance sheet and the heading in which they are included are as follows. The measurement of financial assets is at amortised cost unless otherwise stated: Trade receivables Cash and cash equivalents Other current assets at amortised cost Non-current financial assets at amortised cost Financial liabilities by category Trade and other payables Lease liability All amounts are short-term. 2022 £000s 915 54,816 16,328 284 72,343 2021 £000s 331 73,537 - 301 74,169 2022 £000s 12,166 446 12,612 2021 £000s 10,464 137 10,601 95 SILENCE THERAPEUTICS PLC Credit quality of financial assets (loans and receivables) The maximum exposure to credit risk at the reporting date by class of financial asset was: Trade receivables Financial assets at amortised cost non-current Financial assets at amortised cost current 2022 £000s 915 284 16,328 17,527 2021 £000s 331 301 - 632 Cash and cash equivalents and U.S. Treasury Bills are not considered to be exposed to significant credit risk due to the the event of non-performance by a financial counterparty to be unlikely. The Group regularly monitors the creditworthiness of its customers and at the reporting date, no financial assets are credit impaired. Capital management The Group considers its capital to be equal to the sum of its total equity. The Group monitors its capital using a number of measures including cash flow projections, working capital ratios, the cost to achieve pre-clinical and clinical milestones and pote its capital is to ensure it obtains sufficient funding for continuing as a going concern. The Group funds its capital requirements through the issue of new shares to investors, milestone and research support payments received from existing licensing partners and potential new licenses. Interest rate risk ificant liquid resources. The Group uses these resources to meet the cost of future research and development activities. Consequently, it seeks to minimize risk in the holding of its bank deposits while maintaining a reasonable rate of interest. The Group is not financially dependent on the income earned on these resources and therefore the risk of interest rate fluctuations is not significant to the business. Nonetheless, the Directors take steps to secure rates of interest which generate a return for the Group. Credit and liquidity risk Credit risk is managed on a Group basis. Funds are deposited with financial institutions with a credit rating equivalent o the timing of (between zero and three months) and the Group maintains adequate bank balances in either instant access or short- term deposits to meet those liabilities as they fall due. The Group only enters into collaboration agreements with large, reputable companies and the creditworthiness of customers is monitored on an ongoing basis. 96 SILENCE THERAPEUTICS PLC The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. Expected loss rates are based on payment profiles of past receivables and the aging profiles of outstanding balances at the reporting period end date. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customer to settle the receivables. At the year-end there were no debts that were past due or are expected to be past due. It was therefore concluded on this basis that there were no expected credit losses for the trade receivable. Trade receivables are written off where there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery includes, but is not limited to, a failure to engage in a repayment plan with the Group. Currency risk The Group operates in a global market with revenue possibly arising in a number of different currencies, principally in US dollars, sterling or euros. The majority of the operating costs are incurred in euros with the rest predominantly in sterling. Additionally, to a lesser extent, a number of operating costs are incurred in US dollars. The Group makes use of forward contracts to reduce its exposure to foreign currency risk where the existence, timing and quantum of future cash inflows can be accurately predicted. Financial assets and liabilities denominated in euros and translated into sterling at the closing rate were: Financial assets Financial liabilities Net financial assets/(liabilities) 2022 £000s 2,302 (1,279 ) 1,023 Financial assets and liabilities denominated in US dollars and translated into sterling at the closing rate were: Financial assets Financial liabilities Net financial assets/(liabilities) 2022 £000s 53,086 (2,947 ) 50,139 2021 £000s 1,918 (3,278 ) (1,360 ) 2021 £000s 11,248 (876 ) 10,372 The following table illustrates the sensitivity of the net result for the year and the reported financial assets of the Group in regard to the exchange rate for sterling against the euro. During the year sterling rose by 1% (2021: 4%) against the euro. The table shows the impact of an additional weakening or strengthening of sterling against the euro by 20%. 2022 Group result for the year Euro denominated net financial liabilities Total equity at 31 December 2022 As reported £000s If sterling rose 20% £000s (40,489 ) 1,023 22,072 (37,572 ) 853 21,902 If sterling fell 20% £000s (44,865 ) 1,279 22,328 97 SILENCE THERAPEUTICS PLC 2021 Group result for the year Euro denominated net financial liabilities Total equity at 31 December 2021 (39,410 ) (1,360 ) 8,526 (35,618 ) (1,133 ) 8,753 (45,099 ) (1,700 ) 8,186 98 SILENCE THERAPEUTICS PLC The following table illustrates the sensitivity of the net result for the year and the reported financial assets of the Group in regard to the exchange rate for sterling against the U.S. dollar. During the year sterling rose by 10% (2021: 7%) against the US dollar. The table shows the impact of an additional weakening or strengthening of sterling against the US dollar by 20%. 2022 Group result for the year U.S. dollar denominated net financial assets Total equity at 31 December 2022 2021 Group result for the year U.S. dollar denominated net financial assets Total equity at 31 December 2021 28. Notes to the cash flow statement Changes in liabilities arising from financing activities Lease liabilities Total liabilities from financing activities 29. Related party transactions As reported £000s If sterling rose 20% £000s (40,489 ) 50,139 22,072 (37,013 ) 41,783 13,716 If sterling fell 20% £000s (45,703 ) 62,674 34,607 (39,410 ) 10,372 8,526 (36,308 ) 8,643 6,797 (44,063 ) 12,965 11,119 Cash flows from financing activities 1 January 2022 £000s 137 137 Repayments £000s (190 ) (190 ) Non-cash flows New lease liabilities £000s 499 499 31 December 2022 £000s 446 446 We have engaged in the following transactions with our directors, executive officers or holders of more than 10% of our outstanding share capital and their affiliates, which we refer to as our related parties. In 2022, we paid Gladstone Consultancy Partnership, a company controlled by our Non-Executive Chairman, £60 thousand for consulting and advisory services to be provided by Iain Ross (2021:nil). The amounts payable were settled before the relevant year ends. Key management are considered to be Directors of the Group. Remuneration Committee Report. compensation is discussed in the 30. Post Balance Sheet Events There were no post balance sheet events as of the filing date. 99 SILENCE THERAPEUTICS PLC 31. Group companies In accordance with Section 409 of the Companies Act 2006, a full list of subsidiaries, the address of the registered offices and effective percentages of equity owned as at 31 December 2022 are disclosed below. All subsidiaries are wholly owned. Name Silence Therapeutics GmbH Silence Therapeutics (London) Ltd Innopeg Ltd Silence Therapeutics Inc. Name Silence Therapeutics GmbH Silence Therapeutics (London) Ltd Innopeg Ltd Silence Therapeutics Inc. Registered office address Place of incorporation and operation Principal technology area Proportion of ownership interest Robert-Rössle-Strasse 10, 13125 Berlin, Germany 27 Eastcastle Street, London, W1W 8DH 27 Eastcastle Street, London, W1W 8DH 0c/o Harvard Business Services Inc., 16192 Coastal Hwy, Lewes, DE 19958 RNA Germany England England therapeutics Dormant Dormant RNA 100 % 100 % 100 % USA therapeutics 100 % Exempt from audit Exempt from filing financial statements Yes Yes Yes Yes No No No No 100 SILENCE THERAPEUTICS PLC Company balance sheet at 31 December 2022 Non-current assets Property, plant and equipment Other intangible assets Investment in subsidiaries Financial assets at amortised cost Current assets Cash and cash equivalents Derivative financial instrument Financial assets at amortised cost term deposit R&D tax credit receivable Other current assets Trade and other receivables Non-current liabilities Lease liability Contract liabilities Current liabilities Contract liabilities Trade and other payables Lease liability Total assets less liabilities Net assets Share capital Capital reserves Accumulated losses Total equity Note C.5 C.5 C.6 C.8 C.7 C.8 C.9 C.10 C.12 C.13 C.13 C.11 C.12 C.14 2022 £000s 563 320 17,519 284 18,686 54,067 - 16,328 14,882 9,505 934 95,716 (263) (63,485 ) (63,748 ) (8,864 ) (20,113 ) (183 ) (29,160 ) 21,494 21,494 2021 £000s 208 24 16,387 284 16,903 73,272 - - 6,945 5,214 843 86,274 - (72,501 ) (72,501 ) (4,247 ) (14,960 ) (112 ) (19,319 ) 11,357 11,357 5,390 277,676 (261,572 ) 21,494 4,489 225,278 (218,410 ) 11,357 The Company made a loss of £43.4 million in the year ended 31 December 2022 (2021: £42.3 million). The financial statements on pages 101 to 113 were approved by the Board on 23 March 2023 and signed on its behalf. Craig Tooman Chief Executive Officer Company number: 02992058 The accompanying accounting policies and notes form an integral part of these financial statements. 101 SILENCE THERAPEUTICS PLC Company statement of changes in equity year ended 31 December 2022 At 1 January 2021 Recognition of share-based payments Options exercised in the year Proceeds from shares issued Transactions with owners recognised directly in equity Loss for the year At 31 December 2021 Recognition of share-based payments Options exercised in the year Proceeds from shares issued Transactions with owners recognised directly in equity Loss for the financial year At 31 December 2022 Note C.14 C.14 C.14 Share capital £000s 4,165 - - 324 324 4,489 - - 901 901 - 5,390 Capital reserves £000s 186,707 8,632 (659 ) 30,598 38,571 225,278 10,252 (192 ) 42,338 52,398 - 277,676 Accumulated losses £000s (176,788 ) - 659 - 659 (42,281 ) (218,410 ) - 192 - 192 (43,354 ) (261,572 ) The accompanying accounting policies and notes form an integral part of these financial statements. Total equity £000s 14,084 8,632 - 30,922 39,554 (42,281 ) 11,357 10,252 - 43,239 53,491 (43,354 ) 21,494 102 SILENCE THERAPEUTICS PLC Notes to the Company Financial Statements Year ended 31 December 2022 C.1 General information 103 SILENCE THERAPEUTICS PLC C.2 Basis of preparation These financi the recognition, measurement and presentation requirements of international accounting standards in conformity with the requirements of the Companies Act 2006, but it makes amendments where necessary in order to comply with the Act and take advantage of the FRS 101 disclosure exemptions. As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions in relation to: Business combinations Share-based payment Financial Instruments Fair value measurement Presentation of a Cash Flow Statement Standards not yet effective Impairment of assets Related Party Transactions The financial statements have been prepared under the historical cost convention as modified by revaluation to fair value of the derivative financial instrument and on the going concern basis (see note 2 in the consolidated financial statements). The financial statements are prepared in sterling, which is also the functional currency of the Company, and presented to the nearest thousand pounds. The principal accounting policies, which have been applied consistently, are as set out in note 2 of the consolidated financial statements except those that are Company specific and noted below. Going Concern The Company has incurred recurring losses since inception, including net losses of £43.4 million for the year ended December 31, 2022. As of December 31, 2022, the Company had accumulated losses of £261.6 million. The Company expects to incur operating losses for the foreseeable future as it continues its research and development efforts, seeks to obtain regulatory approval of its product candidates and pursues any future product candidates the Company may develop. To-date, the Company has funded its operations through upfront payments and milestones from collaboration agreements, equity offerings and proceeds from private placements, as well as management of expenses and other financing options to support its continued operations. During 2021, the Company received $40.0 million (£30.8 million) of the upfront payments in respect of the AstraZeneca collaboration, $45 million from a private placement of ADSs (approximately $42.0 million / £30.8 million, net of expenses) and approximately $16.0 million (£10.7 million) of the upfront payment, (net of taxes withheld, based on the exchange rate at the payment date), related to the Hansoh Pharmaceutical Group Company Limited or Hansoh, collaboration executed on October 14, 2021. In August 2022 the Company raised additional funds through a registered direct offering with aggregate gross proceeds of $56.5 million (approximately £46.4 million) before deducting $4.1 million (approximately £3.3 million) in underwriting discounts, commissions and estimated offering expenses. As of December 31, 2022, the Company had cash and cash equivalents and U.S. Treasury Bills of £70.4 million. 104 SILENCE THERAPEUTICS PLC The Company has the responsibility to evaluate whether conditions and/or events raise material uncertainty about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. The forecast for evaluating the going concern basis of the Company includes continued investment in our technology platform and product pipeline. The forecast does not include collaboration milestones which have not been fully achieved or other assumptions for potential future non-dilutive or dilutive funding sources. Based on this evaluation, the Company believes that its current cash and cash equivalents are only sufficient to fund its operating expenses through the first quarter of 2024. This indicates that a material uncertainty exists that may cast significant doubt on the Company Company may be unable to realize assets and discharge liabilities in the normal course of business. The Company will need to raise additional funding to fund its operation expenses and capital expenditure requirements in relation to its clinical development activities. The Company may seek additional funding through public or private financings, debt financing or collaboration agreements. Specifically, the Company may receive future milestone payments of up to $14 million from existing collaboration agreements in the next 12 months which will extend the ability to fund operations beyond the first quarter of 2024. However, these future milestone payments are dependent on achievement of certain development or regulatory objectives that may not occur. The Company has an authorized open market sale agreement and can potentially raise funds through the sale of ADSs. However, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us, or if at all. The inability to obtain future funding could impact; required to delay, reduce or eliminate some of its research and development programs, or being unable to continue operations or unable to continue as a going concern. These consolidated financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business and do not include adjustments that would result if the Company were unable to continue as a going concern. Investments in subsidiaries Investments in subsidiaries comprise shares in the subsidiaries and quasi-equity loans from the Company. Investments in shares of the subsidiaries are stated at cost less provisions for impairment in line with IAS 27 (Separate Financial Statements). Quasi-equity loans are stated at amortised cost, net of expected credit losses in line with IFRS 9 (Classification and Measurement of Financial Instruments). Critical accounting judgements and key sources of estimation uncertainty best knowledge of current events and actions, actual results may ultimately differ from those estimates. The critical judgements concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are those relating to the following: the application of IFRS 15 in determining revenue from contracts with customers specifically: o o o the determination of the number of performance obligations (judgement); the allocation of the upfront payments between the performance obligations (judgement); the estimate of the future costs to be incurred; the carrying value of the investment in subsidiary undertakings as detailed in note C.6. 105 SILENCE THERAPEUTICS PLC C.3 Income statement The Company has taken advantage of Section 408 of the Companies Act 2006 and has not included its own income statement in these financial statements. C.4 Directors and staff costs remuneration, during the year for the Company were as follows: Wages and salaries Social security costs Share-based payments charge Other pension costs 2022 £000s 10,249 743 10,252 415 21,659 2021 £000s 7,414 947 8,632 319 17,312 Remuneration detail for all Directors is presented in the Remuneration Committee report. See page 37 for further details. The total remuneration of the highest paid director was £5.9 million (2021: £1.5 million) The monthly average number of employees of the Company was as follows: Research and development and associated support services Administration Total average number of employees 2022 Number 26 16 42 2021 Number 18 17 35 106 SILENCE THERAPEUTICS PLC C.5 Property, plant and equipment Cost At 1 January 2021 Additions Disposals At 31 December 2021 At 1 January 2022 Additions Disposals At 31 December 2022 Accumulated depreciation At 1 January 2021 Charge for the year Eliminated on disposal At 31 December 2021 At 1 January 2022 Charge for the year Eliminated on disposal At 31 December 2022 Net book value As at 31 December 2021 As at 31 December 2022 Intangible Assets Cost At 1 January 2021 Additions Disposals Translation adjustment At 31 December 2021 At 1 January 2022 Additions Disposals Translation adjustment At 31 December 2022 Accumulated depreciation At 1 January 2021 Charge for the year Eliminated on disposal Translation adjustment At 31 December 2021 At 1 January 2022 Charge for the year Eliminated on disposal Translation adjustment At 31 December 2022 Net book value As at 31 December 2021 As at 31 December 2022 Equipment and Right-of-use furniture £000s asset £000s 721 27 - 748 748 61 (70) 739 637 33 - 670 670 34 (70) 634 78 105 346 - - 346 346 499 (346) 499 43 173 - 216 216 171 (346) 41 130 458 Licenses and Software £000s Total £000s 107 23 - - 130 130 300 - - 430 90 16 - - 106 106 4 - - 110 24 320 107 23 - - 130 130 300 - - 430 90 16 - - 106 106 4 - - 110 24 320 Total £000s 1,067 27 - 1,094 1,094 560 (416) 1,238 680 206 - 886 886 205 (416) 675 208 563 107 SILENCE THERAPEUTICS PLC C.6 Investments in subsidiaries Company Investment in subsidiary undertakings 2022 £000s 17,519 2021 £000s 16,387 The investment in subsidiary undertakings is made up as follows: Shares and loans in subsidiary undertakings At 1 January 2021 Movement in the year At 31 December 2021 Movement in the year At 31 December 2022 Investment Quasi-equity at cost £000s loan £000s Impairment provision (Investment) £000s Impairment provision (Loan) £000s Net total £000s 23,713 - 23,713 - 23,713 36,058 (582) 35,476 1,132 36,608 (20,360 ) - (20,360 ) - (20,360 ) (22,442 ) - (22,442 ) - (22,442 ) 16,969 (582 ) 16,387 1,132 17,519 108 SILENCE THERAPEUTICS PLC Investments at cost total of £23.7 million (2021: £23.7 million) are analysed as follows: £23.3 million (2021: £23.3 million) relating to Silence Therapeutics GmbH. £0.2 million (2021: £0.2 million) relating to Silence Therapeutics Inc. The balance of the investments at cost of £0.2 million (2021: £0.2 million) relates to Innopeg Limited (2021: £0.1 million) and Silence Therapeutics (London) Limited (2021: £0.1 million). Quasi-equity loans total of £36.6 million (2021: £35.5 million) are analysed as follows: At 31 December 2022, an interest-bearing unsecured loan of £14.2 million (2021: £13.0 million) was outstanding from Silence Therapeutics plc to Silence Therapeutics GmbH. The movement in the year includes a foreign exchange gain of £0.7 million (2021: £0.6 million) and accrued interest of £0.4 million (2021: £0.3 million). At 31 December 2022, a non-interest-bearing unsecured loan of £22.4million (2021: £22.4 million) was outstanding from Silence Therapeutics plc to Silence Therapeutics (London) Ltd. This quasi-equity loan has been fully provided for. Impairment provision totalling £42.8 million (2021: 42.8 million) is analysed as follows: £20.2 million (2021: £20.2 million) relating to Silence Therapeutics GmbH. In accordance with IAS 36 Impairment of Assets, the carrying value of the net investment in Silence Therapeutics GmbH of £3.4 million (£3.4 million) has been assessed by comparing its carrying value to its recoverable amount. The recoverable amount is based on value in use. A discounted cash flow model has been used to make this assessment and management determined that there was no impairment. The model is prepared based on a 10 year forecast which management consider to be an accurate measure of further cash flows. The discount rate used was 10.72% and resulting headroom was £12.9 million. Management has assessed that, if no milestones were to be achieved in 2023 or 2024, this would result a reduction the headroom by of £2.4 million. £0.2 million (2021: £0.2 million) relating to the investments held in Silence Therapeutics (London) Ltd and Innopeg Ltd and they are not deemed to be recoverable. Silence Therapeutics plc has recorded an impairment provision against the quasi-equity loans in Silence Therapeutics (London) Ltd and Innopeg Ltd (2021: £22.4 million) as they are not deemed to be recoverable. In considering the recoverability of the loan with Silence Therapeutics GmbH, management have applied an expected credit loss methodology under IFRS 9 and calculated that a provision of £30 thousand is required (2021: £30 thousand). 109 SILENCE THERAPEUTICS PLC Subsidiary companies The principal activity of all subsidiaries is the research and development of pharmaceutical products. All subsidiary companies are consolidated in the Name Silence Therapeutics GmbH Silence Therapeutics (London) Ltd Innopeg Ltd Silence Therapeutics Inc. Name Silence Therapeutics GmbH Silence Therapeutics (London) Ltd Innopeg Ltd Silence Therapeutics Inc. Registered office address Place of incorporation and operation Principal technology area Proportion of ownership interest RNA Robert-Rössle-Strasse 10, 13125 Berlin, Germany 27 Eastcastle Street, London, W1W 8DH 27 Eastcastle Street, London, W1W 8DH Germany England England therapeutics Dormant Dormant 100 % 100 % 100 % 16192 Coastal Highway, Lewes, DE 19958, U.S.A. USA therapeutics 100 % RNA Exempt from audit Yes Yes Yes Yes Exempt from filing financial statements No No No No C.7 Cash and cash equivalents Cash at bank comprises balances held by the company in current and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates to their fair value. Cash at bank and in hand U.S. Treasury Bills Short term bank deposits Total Cash and cash equivalents 2022 £000s 41,237 12,376 454 54,067 2021 £000s 73,272 - - 73,272 C.8 Financial assets at amortised cost Non-current financial assets at amortized cost primarily relate to deposits for properties. Current financial assets at amortized cost, other than trade receivables as disclosed in C.12, include U.S. Treasury Bills (with maturities from purchase date over three months) of £16.3 million (2021: nil). Current financial assets at amortised cost Financial assets at amortised cost - non-current Total financial assets at amortised cost U.S.Treasury Bills 2022 £000s 16,328 284 16,612 2021 £000s - 284 284 110 SILENCE THERAPEUTICS PLC C.9 Other current assets Prepayments VAT receivable Total other current assets C.10 Trade and other receivables Trade receivables Amount receivable from subsidiary undertaking Total trade and other receivables 2022 £000s 8,064 1,441 9,505 2022 £000s 915 19 934 2021 £000s 4,206 1,008 5,214 2021 £000s 331 512 843 The Directors consider that the carrying amount of trade receivables approximates to their fair value. No interest is charged on outstanding receivables. There were no overdue trade receivables balances. The Group has applied an expected credit loss model to the balance and determined that £nil (2021: £nil) provision is required. 111 SILENCE THERAPEUTICS PLC C.11 Trade and other payables Trade payables Amount payable to subsidiary undertaking Social security and other taxes Accruals and other payables Total trade and other payables 2022 £000s 3,105 9,356 379 7,274 20,114 2021 £000s 3,535 5,978 254 5,193 14,960 The Directors consider that the carrying amount of trade and other payables approximates to their fair value. Amounts payable to subsidiary undertakings are interest free and unsecured. C.12 Lease liability Lease liability - current Lease liability non-current Total lease liability 2022 £000s 183 263 446 2021 £000s 112 - 112 In 2022 the lease liability recognised on the face of the balance sheet comprises of the repayment of the principal portion of these lease liabilities for the year-ending 31 December 2022 was £0.2 million (2021: £0.2 million). C.13 Contract liabilities Contract liabilities comprise entirely deferred revenue in respect of the Mallinckrodt, AstraZeneca plc, and Hansoh research collaborations. Contract liabilities Contract liabilities current non-current 2022 £000s 8,864 63,485 72,349 2021 £000s 4,247 72,501 76,748 112 SILENCE THERAPEUTICS PLC C.14 Capital reserves The capital redemption reserve was created in 2012 following the reduction of nominal share capital to 0.1p per share. It is required under Section 733 of the Companies Act 2006, held to maintain the capital of the Company when shares are bought back and subsequently cancelled without court approval. Due to the size of the deficit on the accumulated losses account, the Company has no distributable reserves. The share premium account reflects the premium to nominal value paid on issuing shares less costs related to the issue. The merger reserve was created on issuance of shares relating to the acquisition of Silence Therapeutics GmbH. Share premium account £000s 153,734 32,585 - 460 (2,447) 30,598 184,332 45,533 - 153 Merger reserve Share-based payment reserve Capital redemption reserve £000s 22,064 - - - - 22,064 - - - £000s 5,715 - 8,632 (659 ) £000s 5,194 - - - 7,973 13,688 - 10,252 (192 ) - 5,194 - - - (3,348) 42,338 226,670 - - 22,064 10,060 23,748 - 5,194 Total £000s 186,707 32,585 8,632 (199 ) (2,447) 38,571 225,278 45,533 10,252 (39 ) (3,348) 52,398 277,676 At 1 January 2021 Shares issued On options in issue during the year On options exercised during the year Costs capitalised in respect of issuance of shares during the period. Movement in the year At 31 December 2021 Shares issued On options in issue during the year On options exercised during the year Costs capitalised in respect of issuance of shares during the period. Movement in the year At 31 December 2022 C.15 Related party transactions We have engaged in the following transactions with our directors, executive officers or holders of more than 10% of our outstanding share capital and their affiliates, which we refer to as our related parties. In 2022, we paid Gladstone Consultancy Partnership, a company controlled by our Non-Executive Chairman, £60 thousand for consulting and advisory services to be provided by Iain Ross (2021: nil). The amounts payable were settled before the relevant year ends. C.16 Post balance sheet events There were no post balance sheet events as of the filing date. 113 SILENCE THERAPEUTICS PLC Company Information and Advisers Secretary Sarah Murphy Registered Office 27 Eastcastle Street London W1W 8DH, United Kingdom Registered Number 02992058 Registrar Link Asset Services 65 Gresham Street London EC2V 7NQ, United Kingdom Independent Auditors PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors The Maurice Wilkes Building Cambridge CB4 0DS United Kingdom Legal Adviser Cooley (UK) LLP 22 Bishopsgate London EC2N 4BQ United Kingdom Silence Trademarks Silence Silence Therapeutics The Silence Therapeutics logo AtuRNAi mRNAi GOLD 114 SILENCE THERAPEUTICS PLC Silence Therapeutics plc United Kingdom 72 Hammersmith Road London, W14 8TH +44(0)20 3457 6900 Germany Robert-Rossle-Str.10 D-13125 Berlin +49 30 9489 2800 United States 221 River Street 9th Floor Hoboken, NJ 07030 www.silence-therapeutics.com 

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