The information contained in this announcement is restricted
and is not for publication, release or distribution in the United
States of America, any member state of the European Economic Area
(other than to professional investors in Belgium, Denmark, the
Republic of Ireland, Luxembourg, the Netherlands, Norway and
Sweden), Canada, Australia, Japan or the Republic of South
Africa.
29 January 2024
Chrysalis Investments
Limited ("Chrysalis" or the "Company")
Annual
Results
The Company today announces its
results for the year ended 30 September 2023. The Company's audited
annual results are copied below. The results will be available on
the Company's website in due course.
Financial summary
|
30 September 2023
|
30 September 2022
|
%
change
|
NAV per share
|
134.65p
|
147.79p
|
(8.9%)
|
Share price
|
62.2p
|
61.7p
|
0.1%
|
Total net assets
|
£801m
|
£880m
|
(9.0%)
|
Performance Headlines
NAV at 30 September 2023 was
134.65 pence per share, a decline of 8.9% in the period. Nearly 40%
of the decline relates to foreign exchange differences and
non-asset related costs. Declines in the valuations of Smart
Pension, Graphcore, Deep Instinct and Sorted also contributed. The
share price closed at 62.20p, a 54% discount to NAV.
The Company's position in
Revolution Beauty was fully divested during the year (£5.2
million). The Company also divested shares in Wise PLC (£10.3
million).
Capital was deployed across six
existing portfolio companies to drive growth and the move towards
profitability (£26.2 million). The Company increased its position
in Starling Bank (£20.1 million) at an attractive valuation,
reflecting optimism for the prospects of Starling and its ability
to generate future value for shareholders.
The portfolio is well funded, with
the majority either profitable or funded to profitability,
and generated strong revenue growth of
approximately 48% in the period. Chrysalis
will have sufficient available liquidity to continue to support the
portfolio and fund the Company for the foreseeable
future.
Andrew Haining, Chair,
commented:
"During a period of significant
economic and political change, the NAV for the period to 30
September 2023 fell relatively modestly from 147.79p to 134.65p per
share. In that period our exciting portfolio of high growth, tech
enabled companies experienced a range of positive activity which we
believe positions them strongly to benefit from a recovery in
markets, which we would expect to see in 2024."
Richard Watts and Nick Williamson,
co-portfolio managers, commented:
"The last two years have seen a
significant change in market sentiment, the ramifications of which
have triggered a widespread reconsideration of strategic priorities
across both the Company's investee companies, and in the Investment
Adviser's approach to running the Company. The Investment Adviser
has worked hard with the portfolio companies over this time to
extend cash funding runways and assist the quicker transition to
more sustainable operating models. As a result, the Company's
portfolio contains a number of companies that are both mature in
scale and, conceivably, moving into a window where an exit is a
possibility. The recent strength in markets - triggered by yields
falling in response to better inflation data - should be seen as
encouraging. A backdrop of more optimistic markets should increase
the possibility of exits for the Company's investments."
-ENDS-
For further information, please contact
Media
Montfort Communications
Charlotte McMullen / Toto
Reissland / Lesley Kezhu Wang
|
+44 (0) 7542 846 844
chrysalis@montfort.london
|
Jupiter Asset Management:
James Simpson
|
+44 (0) 20 3817 1696
|
Liberum:
Chris Clarke / Owen
Matthews
|
+44 (0) 20 3100 2000
|
Deutsche Numis:
Nathan Brown / Matt
Goss
|
+44 (0) 20 7260 1000
|
Apex Administration (Guernsey) Limited:
Chris Bougourd / Harry
Rouillard
|
+44 (0) 1481 749364
|
LEI:
213800F9SQ753JQHSW24
A copy of this announcement will
be available on the Company's website at https://www.chrysalisinvestments.co.uk
The information contained in this
announcement regarding the Company's investments has been provided
by the relevant underlying portfolio company and has not been
independently verified by the Company. The information contained
herein is unaudited.
This announcement is for
information purposes only and is not an offer to invest. All
investments are subject to risk. Past performance is no guarantee
of future returns. Prospective investors are advised to seek expert
legal, financial, tax and other professional advice before making
any investment decision. The value of investments may fluctuate.
Results achieved in the past are no guarantee of future
results.
Neither the content of the
Company's website, nor the content on any website accessible from
hyperlinks on its website for any other website, is incorporated
into, or forms part of, this announcement nor, unless previously
published by means of a recognised information service, should any
such content be relied upon in reaching a decision as to whether or
not to acquire, continue to hold, or dispose of, securities in the
Company.
Strategy
At Chrysalis we deliver value for
our shareholders and partners by investing in and supporting
innovative businesses with the potential to transform their
sectors.
Backing
Winning Ideas
|
We seek high growth innovative
businesses which are leading transformation within their
sectors.
Technology has the power to
transform the world in which we live. We look to invest in those
businesses that have the ability to achieve meaningful
change.
|
We identify opportunities for
significant growth and help companies carve out clear pathways to
profit.
Operating in huge addressable
markets, the companies we choose to support offer best-in-class
scalable technologies, enabling them to drive and capitalise on
societal change.
|
Capturing Growth
|
Empowering Our Partners
|
We actively engage in building
long-term relationships with our partner businesses.
Collaborating with businesses, we
provide them with the support, knowledge, experience, and flexible
capital necessary to empower the delivery of transformational
technology.
|
We create value by taking a high
conviction approach.
Proven by our successful track
record, we de-risk and enhance the competitive edge of our
partners, whilst offering shareholders the opportunity to access
and gain returns from these exciting private and public
companies.
|
Delivering Value
|
Performance Headlines
|
13.14p - NAV decline, equivalent to 8.9%
|
· NAV
at 30 September 2023 was 134.65 pence per share. Nearly 40% of the
decline in the period relates to foreign exchange differences and
non-asset related costs. Declines in the valuations of Smart
Pension, Graphcore, Deep Instinct and Sorted also contributed. The
share price closed at 62.20p, a 54% discount to NAV.
|
|
£15.5 million - Cash from realisations
|
· The
Company's position in Revolution Beauty was fully divested during
the year
(£5.2 million). The Company also
divested shares in Wise PLC (£10.3 million).
|
|
£46.3 million - Capital deployed
|
· Deployed capital across six existing portfolio companies to
drive growth and the move towards profitability (£26.2 million).
Increased the position size in Starling Bank (£20.1 million) at an
attractive valuation, reflecting optimism for the prospects of
Starling and its ability to generate future value for
shareholders.
|
|
£32.9 million - Available liquidity at 30 September
2023
|
· The
portfolio is well funded, with the majority either profitable or
funded to profitability. The Company ended the year with an
appropriate level of liquidity available to continue to support the
portfolio and fund the Company for the foreseeable
future.
|
|
48% - Weighted average revenue growth
|
· The
portfolio generated strong revenue growth of approximately
48%.
|
Chairman's Statement
During a period of significant
economic and political change, the independently derived valuation
of Chrysalis' (the "Company") investments and net assets for the
period to 30 September 2023 fell relatively modestly, from 147.79p
to 134.65p per share. The first quarter of the 2024 financial year
has seen virtually all the reduction erased with net assets at 31
December 2023 being 143.37p per share. Our exciting portfolio of
high growth, tech enabled companies experienced a range of positive
activity during the period which we believe positions them strongly
to benefit from a recovery in markets, which we would expect to see
in 2024.
The management team at Jupiter
Investment Management Limited (the "Investment Adviser"), cover the
developments in the portfolio in detail in their section of the
report. Suffice to say that we believe that the level of our share
price, at discounts of approximately 50% to the Company's net asset
value ("NAV") during the year, significantly undervalues the
Company. The Board of Directors (the "Board"), together with Nick
Williamson and Richard Watts as the principals (the "Principals")
of the Company's new investment adviser (the "New Investment
Adviser"), are acutely aware of the need to address the discount
and are working to mitigate this position in several
ways.
Significant macro issues, which we
are unable to influence, have moved sentiment in our asset class so
substantially that it has gone from trading at a premium for three
years to a discount over the last two. However, there are other
issues which we can manage, particularly as it relates to the
application of capital from realisations in the future.
I would like to highlight a number
of areas where we have continued to refine the Company's operations
and removed the perceived conflicts arising from the Company's
relationship with Jupiter.
1. The
Company decided to participate in a syndicate of Starling
shareholders which purchased a block of Starling shares held by
other Jupiter-managed funds in February 2023. This removed a seller
of Starling shares which no longer had the capacity to hold its
position longer term. Starling has subsequently increased its
profitability, signed new licences with international banks for its
banking technology platform and has reinforced its position as one
of the most successful digital banks.
2. The Board
has successfully ensured that the management of your Company's
assets remain under the control of the existing portfolio team,
which we believe is in the best interests of the Company. This
separation from Jupiter was amicably executed shortly after the
financial year-end and will enable the team to devote its sole
focus on the existing Company portfolio and over time build a team
for the longer term.
3. The Board
has, subject to approval by the Company's shareholders
("Shareholders"), agreed revised performance fee payment
arrangements that are better aligned with Shareholder interests
whilst retaining the existing "high water mark" of
251.96p.
4. The
independent valuation committee has worked hard with the Principals
and the Board to continue to improve the valuation process,
resulting in quicker and more transparent information flowing to
Shareholders and will continue to perform this function going
forward.
5. Post year
end, Jupiter managed funds reduced their holdings below 5%. The
resultant share register is now more balanced, and we have welcomed
a number of new Shareholders to the register.
Additionally, in December 2023 the
Company announced a likely disposal at a valuation which, if
applied to the Company's NAV as of 30 September 2023, would imply
an increase in NAV per share of up to approximately 5.5 pence. The
transaction is still expected to complete on the terms reflected in
that announcement.
As we look forward, we have good
reason to be hopeful that realisations will occur in one or two of
our investments during the course of the 2024 financial year,
albeit this will depend on wider market conditions.
We hope that these actions,
together with the Capital Allocation process outlined below, will
over time be reflected in a return to more normal market levels of
discount/premium for the Company's share price.
The Company was formed to take
advantage of the trend for growth companies to source expansion
capital from the private markets rather than the public markets.
That trend five years later has accelerated, with fewer companies
coming to the public market and growth companies continuing their
high growth development as private companies. Some of the world's
largest private growth companies have been in existence for more
than ten years, have accessed private capital repeatedly, and have
avoided public capital markets until becoming very mature and
substantial businesses. Given its structure, the Company is ideally
placed to provide institutional and retail investors access to
those types of growth companies, matching their aspiration for
growth with our capacity to be a long-term holder and
supporter.
It is however inevitable that
building successful companies over those periods of time involves
straddling macro-economic and political shocks such as our main
economies have suffered in the last two years. We have spent much
of our time this year ensuring that the companies we have invested
in have a plan fit for the constraints of the near-term economic
environments, without losing sight of their long-term disruptive
strategies which made them attractive to us for investment
originally and which, we are confident, will deliver value for
Shareholders.
We also need to reflect on this
when thinking of the way forward for the Company and its proposed
capital allocation policy (the "CAP").
The longer-term strategy remains
valid - to provide Shareholders with access to an attractive
portfolio of approximately 15 later stage companies capable of
above average growth.
The shorter-term consideration is
that the market discount to the net asset value of the Company's
shares (the "Shares") makes purchasing the Shares a potentially
higher returning investment than new portfolio
investments.
The proposed CAP is therefore
designed to recognise these shorter-term cyclical considerations
could be a factor. Consequently we are proposing to shareholders
that a three year extension to the life of the Company be agreed at
the forthcoming AGM.
In that period, we aim to
demonstrate that the Company can return to its long-term purpose of
making investments on the basis that the share price in that period
will have returned more closely to our NAV from the exceptional
discount levels we currently have.
The AGM circular containing
details of the continuation vote (the "Continuation Vote") is being
sent to all Shareholders. In summary, I believe that the Company
has demonstrated an ability to invest in a number of fast growing
businesses. There is no question that a long-term funding structure
for these types of investment is the right structure. We expect to
be able to demonstrate the ability to realise such investments to
Shareholders and the market within the three-year extension
period.
Capital Allocation Policy ("CAP")
One of the key components of
obtaining Shareholder support for the proposed three-year extension
is to provide Shareholders with a framework for how capital will be
allocated during that period. The Board indicated to Shareholders
its preferred approach to capital allocation at the time of the
investor consultation in October 2023. This consultation process
then informed the Principals and the Board of Directors' views on
this issue. Derived from that consultation and further discussions
that the Principals and I have had directly with Shareholders, the
Board and the Principals have agreed an adjusted proposal, the
details of which are contained in the AGM circular which proposes
the Continuation Vote.
A capital allocation policy for the
Company must consider four core potential uses of capital
to:
1) support
existing portfolio companies;
2) fund working
capital (operating costs, fees etc);
3) invest in
late-stage growth opportunities in accordance with the Company's
investment policy; and
4) return
available capital to Shareholders through share buybacks (or
equivalent programmes) where it is economically attractive to do
so.
During the next three years, the
Board and the Principals have already committed to return the first
£100 million of realisations to Shareholders, likely in the form of
a share buyback programme and subject to the prevailing discount,
after satisfying the "buffer" of up to £50 million being held back
for working capital and follow-on investments.
Additionally, the Board and the
Principals have agreed that, after the first £100 million has been
returned, we will continue to return at least 25% of net realised
gains on the Company's investments, and I can confirm this will be
measured as net realised gains against historical cost price (and
not NAV).
Overarching all of the CAP
considerations is an acknowledgement that the Company's capital
needs to be managed in a dynamic way. As we consider the uses of
the Company's available capital going forward we will, when
determining the appropriate implementation of the commitments
described above, take into account, inter alia, the:
· prevailing discount to NAV per share at which the Shares are
trading;
· likely timeline of realisations;
· likely uses of capital to fund existing investee companies;
and
· strength of any new investment opportunities.
The Board and Principals also
consider scale to be important to maintain the relevance of the
Company's offering and to help gain access to the best investment
opportunities. Subject also to scale, abnormally wide Share price
discounts to NAV are likely to favour capital returns to
Shareholders over new investments.
Full details of the proposed CAP
are set out in the AGM circular.
New Management Arrangements
After year end, the Board
announced a significant change in the structural arrangements for
managing the Company's portfolio. The detail relating to those
management arrangements are covered in full in a circular convening
a Extraordinary General Meeting to be held immediately following
the AGM in order to approve the performance fee payable to the New
Investment Adviser as a 'related party transaction'.
The new arrangements will see the
Principals remain your portfolio managers as part of a new and
independent management entity. The Board believes that this
independent manager will have the capacity to manage the Company's
assets under whatever scenario Shareholders choose to follow post
the Continuation Vote.
The commercial terms of the new
investment management and advisory agreement remain the same as
those proposed to Shareholders previously, namely:
· an
AUM advisory services fee based on NAV equal to 50 basis points per
annum, and
· a
performance fee of 12.5%, with revised deferred payment terms,
payable over the existing high-water mark of 251.96p.
I have had a number of discussions
directly with individual Shareholders and we have had the benefit
of the feedback from the Shareholder consultation commissioned with
Rothschilds & Co. There was a consistent view expressed in
support of Richard and Nick and we believe the new arrangements,
under which their entity will be working with IQEQ/G10 to provide
not only management services, but also AIFM oversight, will be to
the benefit of the Company going forward.
Revolution Beauty Group plc ("Revolution")
The Company has potential claims
against Revolution under s.90A FSMA 2000 and the common law causes
of action of deceit, negligent misstatement and/or
misrepresentation, in relation to Revolution shares purchased in
July 2021 for approximately £45million and finally sold in late
2022 for approximately £5.7million in total.
The original share purchase was
made on the basis that information provided to the Company by
Revolution prior to the Company's purchase of the shares in
Revolution, and during the period in which the shares were held
prior to their sale, contained misstatements and material
omissions. The Company wrote a formal letter of claim to Revolution
Beauty on 22 November 2023, which requested a response within 28
days. A response has recently been received asking for a further 28
days to provide a response. The Company is now considering next
steps with its retained lawyers, Travers Smith.
Board Composition
The fifth anniversary of the
Company has also focussed the Board's thinking on the way the Board
develops going forward. Our approach to governance is laid out in
some detail in the Governance section of this report.
Five out of six directors have now
been in place for five years, having simultaneously been appointed
to the Board at the time of listing. It is important that your
Company reviews our contribution as directors. To that end, an
independent board review has been carried out this year and is
reported on in the Governance section.
It is also important that the
Company can attract and retain the appropriate talent at director
level to ensure continued delivery of the governance targets we
have set ourselves. The Company has undergone a substantial change
over the last five years which has seen, inter alia, improvements
in management arrangements, revision of fee arrangements and a new
valuation process. It is therefore crucial that the skills of the
Board continue to match the operational and risk management
requirements of the Company going forward.
To do this we believe a sensible
rotation of directors will invigorate the Board and meet our
governance goals. It has been the intention of your Board for some
time that a rotation approach would start in 2024.
It is envisaged that three
directors will stand down on a phased basis before December 2025.
However, if Shareholders did not support the Continuation Vote at
our March 2024 AGM, the Board would need to review the implications
of that decision before initiating a rotation policy. However, in
the circumstance the Company has a mandate to continue to grow and
develop, this rotation strategy will see 50% of the Board being
replaced by the end of 2025.
The chair of the remuneration and
nomination committee is already in discussions regarding a formal,
third party managed process for the selection of these
posts.
It remains for me to thank all the
staff of the management team, our corporate administrator, our
colleagues on the independent valuation committee together with all
legal and financial advisers and third-party contractors for their
hard work this year. My colleagues on the Board are grateful for
all their contributions in what has been a busy and productive
year.
Signed on behalf of the Board
by:
Andrew Haining
Chairman
Portfolio Statement
As at 30 September 2023
|
Cost
(£'000)
|
Opening
value
(£'000)
|
Net invested/ (returned)
(£'000)
|
Fair value
movements
(£'000)
|
Closing
Value
(£'000)
|
% of net
assets
|
Company
|
Location
|
wefox Holding AG
|
Germany
|
69,187
|
154,943
|
3,562
|
30,128
|
188,633
|
23.5
|
Starling Bank Limited
|
UK
|
118,349
|
113,394
|
20,101
|
8,201
|
141,696
|
17.7
|
The Brandtech Group LLC
|
USA
|
46,440
|
103,390
|
-
|
491
|
103,881
|
13.0
|
Smart Pension Limited
|
UK
|
105,625
|
95,187
|
12,500
|
(28,004)
|
79,683
|
9.9
|
Klarna Holding AB
|
Sweden
|
71,486
|
56,135
|
-
|
778
|
56,913
|
7.1
|
Deep Instinct Limited
|
USA
|
62,226
|
81,829
|
-
|
(30,315)
|
51,514
|
6.4
|
Featurespace Limited
|
UK
|
29,546
|
53,139
|
-
|
(3,551)
|
49,588
|
6.2
|
Tactus Holdings Limited
|
UK
|
42,129
|
36,795
|
1,999
|
(9,756)
|
29,038
|
3.6
|
Cognitive Logic Inc.
|
USA
|
48,453
|
30,299
|
1,327
|
(4,395)
|
27,231
|
3.4
|
Secret Escapes Holding
Limited
|
UK
|
28,009
|
13,232
|
6,500
|
5,298
|
25,030
|
3.1
|
Graphcore Limited
|
UK
|
57,589
|
45,065
|
-
|
(28,559)
|
16,506
|
2.1
|
Wise PLC
|
UK
|
3,276
|
20,317
|
(10,263)
|
230
|
10,284
|
1.3
|
Sorted Holdings Limited
|
UK
|
28,257
|
18,429
|
316
|
(18,429)
|
316
|
0.1
|
Growth Street Holdings
Limited
|
UK
|
11,223
|
209
|
(149)
|
3
|
63
|
0.0
|
Revolution Beauty Group
PLC
|
UK
|
-
|
-
|
(5,220)
|
5,220
|
-
|
0.0
|
Rowanmoor Group Limited
|
UK
|
13,363
|
-
|
-
|
-
|
-
|
0.0
|
Total investments
|
|
735,158
|
822,363
|
30,673
|
(72,660)
|
780,376
|
97.4
|
Cash and cash equivalents
|
|
|
|
22,626
|
2.8
|
Other net current
liabilities
|
|
|
|
|
|
(1,653)
|
(0.2)
|
Total net assets
|
|
|
|
|
|
801,349
|
100.0
|
|
|
|
|
|
|
|
|
Investment Adviser's
Report
Introduction
The last two years have seen a
significant change in market sentiment, the ramifications of which
have triggered a widespread reconsideration of strategic priorities
across both the Company's investee companies, and in the Investment
Adviser's approach to running the Company. More detail on this is
provided below, but underpinning the Investment Adviser's thinking
is that the trend of companies staying private for longer has
continued. This is a particularly pertinent consideration with the
Company's continuation vote due in the early part of
2024.
Following the Company's inception,
the Investment Adviser proposed a likely holding period of
investments made by Chrysalis of between two to five years. The
retrenchment of market risk appetite, observable from the beginning
of 2022 and initially driven by rising inflation and yield
expectations, closed off likely exit routes for investee companies
over the last two years, including IPO markets.
As a result, the Company's
portfolio contains a number of companies that are both mature in
scale and, conceivably, moving into a window where an exit is a
possibility. With an average hold period as of January 2024 of
approximately three and a half years, and with a number of
large-scale companies at between four and five years - such as
Starling, Klarna and wefox - there is reason to believe that the
portfolio is able to move towards realisations, once market
conditions allow.
In that regard, the recent
strength in markets - triggered by yields falling in response to
better inflation data - should be seen as encouraging. A backdrop
of more optimistic markets should increase the possibility that the
two main exit routes for the Company's investments - trade sale and
IPO - will open. In terms of the latter, the successful flotation
of companies such as Arm in the US should be taken as an
encouraging sign.
The Investment Adviser believes
that the continuation vote should be considered through the lens of
these two factors:
· A
maturing portfolio, with a number of companies that Chrysalis has
held for some time and are themselves "later-stage" in nature;
and
· Apparently, a market more amenable to exits.
With this in mind, the Investment
Adviser strongly believes that the best outcome for shareholders is
that they vote for continuation, such that the timing of exits can
be finessed for valuation maximisation.
Both the Investment Adviser and
the Board are acutely aware of the current discount to NAV per
share that the Company's shares currently trade at. If realisations
are achieved, the proposed CAP, if enacted at prevailing shares
prices, should yield material accretion to the NAV per
share.
Despite the widespread focus on
discounts and realisations, the portfolio continues to grow
strongly, with many of the investee companies looking to accelerate
growth via AI, a topic that is discussed further below. While a
number of the Company's investments have been exploring AI growth
angles for a while, others are latching onto this theme more
recently. In the Investment Adviser's view, AI has the potential to
not only accelerate growth, but also to elongate the period of that
growth, or protect existing competitive advantages.
Market Environment
The market backdrop changed
materially in late-2021 and into 2022, as investors were faced with
a fundamental shift in the interest rate environment, which began
its first major tightening cycle in over 30 years. This was in
response to rising inflation, likely due in part to supply chain
constraints stemming from COVID-19 related shutdowns, but further
exacerbated by the war in Ukraine.
In the Investment Adviser's view,
the medium-term outlook for interest rates is likely to remain at
levels higher than experienced since the global financial crisis
("GFC"). Higher discount rates typically have a greater impact on
growth company valuations, where more of their value is based on
future cash flows, compared with more mature companies. While a
"higher-for-longer" thesis may not appear conducive to risk asset
performance, often it is uncertainty over the direction of rates
that investors most fear. This implies, as volatility of
expectations around the exact course of interest rates abates,
growth assets will be in a better position to deliver valuation
performance from here.
Over the year, the FTSE All-share
saw a 9% increase, but the S&P500 rose 20% and the NASDAQ100 by
34%. Given interest rates have risen over the period, particularly
short-term rates, it is perhaps surprising that the most "growth
exposed" index - the NASDAQ - has performed the best.
However, an analysis of the
leading NASDAQ contributors in calendar 2023 suggests excitement
about generative AI is assisting certain stocks, and Nvidia in
particular, which was a leading index contributor.
This shows how certain growth
trends, at least in some cases, can be more important than the
overall market backdrop. The Investment Adviser believes the
Chrysalis portfolio is well placed to benefit from AI growth
trends:
· Klarna - as an early adopter of ChatGPT, became the first
fintech globally to launch the ChatGPT plug-in. It also launched an
AI-powered image search tool in October 2023, which allows
customers to search for products via an image;
· Deep
Instinct - uses deep learning based models to deliver its
services;
· Featurespace - also uses deep learning, as well as machine
learning, in its products and recently won the PETs
("Privacy-Enhancing Technologies") challenge, sponsored by Innovate
UK and the US National Science Foundations, which allows AI models
to make better predictions from multiple data sources without
exposing any sensitive data between parties. In October 2023 it
launched TallierLTM - the world's first Large Transaction
Model;
· Brandtech - recently bought Pencil AI, a leading AI creative
and distribution SaaS platform, generating channel-ready adverts;
and
· wefox - is developing AI capabilities to enhance the
productivity of insurance brokers.
The scale of the overall decrease
in activity in the private market has been significant over the
last year and a half. The market contracted for four consecutive
quarters from its peak in 1Q 2022 (despite the stock market rolling
over in the previous quarter, this associated decrease in
investment appetite can take time to filter through into
activity).
However, as the wider market has
become more used to higher levels of interest rates, so there have
been tentative signs of risk appetite returning. From the low point
in 1Q 2023, each of the subsequent two quarters showed a sequential
increase in funding activity. Albeit, 4Q 2023 saw the typical
seasonal slowdown, the outturn for 2023 was an improvement over
2020, the year before the market saw supernormal activity. The
Investment Adviser believes that the focus in the private market
has remained on companies driving towards profitability and
discusses this in more detail below.
Portfolio
Over the year, Chrysalis' NAV per
share fell from 147.79 pence to 134.65 pence, a fall of 13.14 pence
or approximately 8.9%. Of this move, approximately five pence, or
nearly 40% of the decrease, was due to foreign exchange differences
arising on the translation of investment valuations into GBP and
non-asset related costs.
Despite this diminution in NAV,
the underlying companies continued to generate strong growth in the
period. On a weighted average basis, the portfolio generated
approximately 48% revenue growth over the year.
Material progress towards profitability
Last year the Investment Adviser
discussed the market's shift of focus away from pure growth, to one
that balanced growth with a drive towards profitability; as a
result, many companies reassessed growth plans and funding
requirements. The Investment Adviser has worked hard with the
portfolio companies since the beginning of 2022 to extend cash
funding runways and assist the quicker transition to more
sustainable operating models.
A good example of this is Klarna,
which announced job losses expected to equate to 10% of its
workforce in 2Q22, alongside an equity raise of $800 million at a
valuation of $6.7 billion post new money, compared with its round
in the prior year that was struck at $45.6 billion.
Despite the negative press
associated with an 85% down round, the Investment Adviser was
optimistic about the prospects for Klarna heading towards
profitability, and the fact it was funded to get there.
As a demonstration of the power of
operational gearing, in 2Q22, Klarna was annualising an operating
loss of approximately $1.1 billion; by 2Q23 Klarna had hit
breakeven and in 3Q23 the operating profit was annualising at
approximately $180 million, implying a nearly $1.3 billion swing in
profitability over the course of 15 months.
The move to breakeven in 2Q23 was
driven by year-on-year decreases in both impairment and operating
costs of over 40% and approximately 25% respectively; meanwhile,
GMV grew approximately 14% in SEK terms year-on-year. While this
GMV growth is slower than previous years, the scaling power of the
platform has enabled Klarna to close a material loss in the space
of four quarters. GMV growth reaccelerated to 22% in 3Q23, which
translated into revenue growth of 30%.
While this may be a more extreme
example of what is possible, the Investment Adviser believes this
is the direction of travel seen across the portfolio in aggregate:
the weighted average improvement in EBITDA across the portfolio was
over 80% over the year. While a number of portfolio companies still
remain loss-making, generally those losses have been diminishing,
with only three portfolio companies seeing losses worsen, of which
one was only modestly worse.
This pattern is highly encouraging
to the Investment Adviser as it helps to demonstrate the progress
being made by the portfolio companies. If this trend continues and
more companies become profitable, then not only does this help to
lower funding risk in the portfolio, but it raises the likelihood
that, in time, it will be possible to generate theoretical
valuation metrics for the Company, such as a price-to-earnings
ratio ("PE").
Portfolio activity
Given the significant risk
aversion prevalent in markets over the year, and thus the material
discount that the Company's shares traded at relative to NAV per
share, there was no ability for the Company to consider raising
primary capital from shareholders. The last capital raise was £60
million in December 2021.
This, along with approximately
£118 million from realisations - largely from the exit of Embark
(£57 million) and sale of Wise shares (£42 million) - permitted the
rotation of capital into value accretive follow-on investments, and
certain secondary purchases, totaling £98 million over this
21-month period.
Over the course of the year,
Chrysalis supported six of its existing portfolio companies with
primary follow-on capital and made one secondary investment in
Starling; the latter accounted for £20 million of the total £46
million spent on follow-ons and secondary investments.
In terms of follow-ons, the most
significant was into Smart (£12.5 million), to enable it to
accelerate its M&A strategy and drive growth in core markets.
Other, smaller rounds were also completed in Secret Escapes - £6.5
million invested, to enable it to invest further in marketing to
drive growth - and wefox - £3.6 million invested to assist the
company drive towards profitability. All of these rounds were in
participation with other investors.
Offsetting this to a degree were
£15.5 million of realisations in 2023, mainly comprising the sale
of shares in Wise and Revolution Beauty, which accounted for
approximately £10.3 million and £5.2 million respectively. This
meant that the Company spent approximately £31 million on net
investment over the year.
The Company was formed five years
ago to offer individuals and other market participants an easy way
to access late-stage private companies.
The Investment Adviser believed
this was an opportunity due to the increasing tendency of companies
to stay private for longer, a period which typically coincided with
materially higher growth rates than those observed in the stock
market.
The issues driving this desire to
delay listing were considered by the Investment Adviser to be
multi-faceted, and indeed likely remain so. Recent media articles
citing respected industry observers highlight a variety of reasons
still remain extant, particularly for the UK market.
The Investment Adviser believes
some of the reasons include:
· regulation applicable to listed businesses which,
particularly post global financial crisis ("GFC"), is considered by
the Investment Adviser to be stringent and places significant
additional costs on listed businesses;
· in
the UK, a significant "income mindset" which seeks high dividend
payouts from stocks, thus decreasing the capital available for
reinvestment to drive growth;
· a
fixation on short-term returns in the listed market - which the
Investment Adviser has had first-hand experience of; and
· a
sense that expansion capital is not readily available to grow
businesses, leading to a lack of appetite to absorb losses as
companies look to build share aggressively; and
· losses of control for founders in connection with
listings.
These types of impediment mean
that new issuance activity via IPO has been on the wane, a point
that the Investment Adviser has repeatedly highlighted.
At the point of the Company's IPO,
the Investment Adviser calculated that the average number of IPOs
in the UK had fallen from 217 per annum prior to the GFC, to 94 per
annum in the period from 2011 to 2017. In the five years since the
Company's IPO, the average has fallen further to 69.
Looking in more detail at just the
London Stock Exchange's Main Market and AIM, the lack of IPOs since
the start of 2022 is now the longest run of low issuance in the
last 30 years, spanning eight consecutive quarters. This is despite
UK stock markets proving resilient in economic terms.
Late 2023 was particularly
anaemic, with only one Main Market listing in CAB Payments in the
third quarter and with no IPOs recorded in either the Main Market
or AIM in the last quarter of 2023. In fact, the last two years
have been some of the weakest in the last 30 years for the IPO
market in the UK, with the US also recording below average
volumes.
Rising global yields, in reaction
to increasing inflationary pressures, over the last couple of years
have likely hampered risk appetite and thus deflated IPO
markets.
While some IPOs were able to get
away successfully in 2023 despite rising yields, such as Arm
Holdings Inc in the US, the recent retrenchment of yields from
approximately five per cent. down to approximately four per cent.
potentially augurs well for a better IPO market in 2024,
particularly in combination with more moderate central bank
language around the prospect for rates.
As such, the Investment Adviser
believes there are reasons to be moderately optimistic about the
outlook for general risk appetite in 2024, which, in normal
circumstances, would lead to stronger exit markets, including IPO
and trade sale.
An increasing chance of
realisations could have a significant impact on the Company's
liquidity position, opening up the possibility of capital returns
via the CAP.
Following its IPO, the Company
indicated a likely hold time for investments of two to five years;
the current average holding period in the portfolio is
approximately three and a half years. Sitting above this average
are key later-stage assets, such as Starling, Klarna and
wefox.
Holding period of the portfolio by asset
|
Investment date
|
Hold
period (years)
|
Secret Escapes
|
Nov-18
|
5.2
|
Starling
|
Feb-19
|
4.9
|
Klarna
|
Aug-19
|
4.5
|
Sorted
|
Aug-19
|
4.4
|
wefox
|
Dec-19
|
4.1
|
Featurespace
|
May-20
|
3.7
|
Brandtech
|
Sep-20
|
3.3
|
Smart Pension
|
Jun-21
|
2.6
|
Deep Instinct
|
Jul-21
|
2.6
|
Revolution Beauty
|
Jul-21
|
2.5
|
InfoSum
|
Aug-21
|
2.4
|
Average
|
|
3.6
|
Source: Chrysalis
The Investment Adviser believes
that the high yield environment since early 2022 has likely delayed
certain of the Company's investments from seeking an exit over this
period.
As such, the Company now holds a
number of assets that could conceivably be considered as exit
candidates. If IPO is the chosen route, then conducive stock market
conditions are required, as well as all the necessary internal
preparations to become a listed entity.
In this regard, Klarna's recent
comments that the company is preparing for an IPO and that one
could come "quite soon", should demonstrate that the view that
conditions are improving is not solely held by the Investment
Adviser.
In this context, the Investment
Adviser believes that a decision to wind up the Company would not
benefit Shareholders, as it could restrict the its ability to time
realisations and thus its ability to maximise value.
Outlook
Last year the Investment Adviser
was hopeful that wider market risk appetite would support
realisations from the portfolio in 2023, including the reopening of
the IPO market. This was partly predicated on the apparent
emergence of some price stability in the market.
While the IPO market has arguably
shown signs of life - particularly in the US with the flotation of
companies such as Arm - the more widespread confidence that is
necessary to deliver a meaningful reopening has not been
forthcoming. This situation is arguably more acute in the UK, which
in 3Q 2023 only saw one Main Market flotation - CAB Payments -
which promptly warned on profits and saw its share price fall over
80%.
The Investment Adviser has
continued to focus on helping the portfolio companies get in the
best possible shape for an eventual exit; Klarna moving into
profitability is a significant, positive step in the right
direction. This work centres around both maximising potential exit
valuation, as well as installation of systems and governance
processes required for an exit.
While speculation has swirled
around Klarna's IPO over the last few years, this is the first time
the Investment Adviser has seen the company publicly state
conditions are now "in place" for it to consider such a move. The
ramifications for Chrysalis of an exit that at least underpins the
asset's valuation are hard to understate. Such a move could
potentially deliver substantial liquidity into the Company and
allow the new CAP to come into effect.
A commitment to return up to £100
million of capital to shareholders - representing approximately 25%
of the Company's market capitalisation at the time of writing -
should be viewed as a powerful indicator of the Board and
Investment Adviser's ambition to manage the prevailing share price
discount.
Company Sections
wefox Holding AG ("wefox")
Over the last twelve months, wefox
has been focussing on demonstrating a clear roadmap to
profitability and good progress has been made on this front. The
Investment Adviser believes that wefox will have approached run
rate profitability towards the end of 2023, a target the company
set itself at the beginning of the period and which then positions
it strongly moving into 2024. Very few 'insurtech' assets that the
Investment Adviser has analysed globally have been able to
demonstrate profitability, with many business models negatively
impacted by high loss ratios (due to negative selection) and high
customer acquisition costs (due to high competition).
What sets wefox apart from listed
peers such as Lemonade or Hippo is its focus on digitising indirect
distribution channels (such as insurance brokers) rather than
selling own-brand insurance products direct-to-consumer ("D2C").
wefox can drive productivity for its partners through lead
generation, process automation, and the provision of customer
self-service technology and AI-driven cross-selling. wefox provides
these technologies for a share of any commission generated through
the sale of insurance products; historically, these partners have
also sold a variety of wefox insurance products to their clients
too across a range of insurance categories, such as motor or home
insurance.
wefox has been one of the
Company's fastest growing assets since initial investment in
December 2019, and the company's growth rate remains robust and
materially higher than its listed peers. In 2022, wefox grew its
gross revenues by 89% to €587 million, with the outturn for 2023
looking substantially better, while doubling the number of monthly
active distribution partners on the platform. The company also
managed to cross the €1.5 billion milestone in terms of Gross
Platform Value (total annual insurance premium volume transacted by
wefox) in September 2023. It took a total of 66 months to achieve
the first €500 million in Gross Production Value ("GPV") and just
11 months to add the most recent €500 million in GPV.
In April 2023, wefox announced
that it has launched its global affinity business, which will
connect insurance companies with partners to distribute insurance
products; this increases the existing distribution channel for
wefox and extends the company's ability to deliver insurance
products through partners. wefox has since announced a number of
affinity insurance partners. Particularly encouraging was the
announcement that WINDTRE, Italy's leading telecommunications
business, has signed a 10-year deal to launch the sale of home and
travel insurance products in-store. Partnerships have also been
announced with Green & Advanced Transport Ecosystem ("GATE")
and PROPUP.
wefox has developed a technology
platform to deliver these affinity partnerships and the Investment
Adviser believes this will be a key value driver in the future.
wefox has the potential to become an infrastructure-as-a-service
("IaaS") play over time, which could drive a recurring and highly
profitable revenue stream for the group. This increased focus
towards an infrastructure play has occurred before in the
portfolio, for example with Wise offering its foreign exchange
network to banks, and Starling with its Engine
proposition.
Starling Bank Limited ("Starling")
Starling has delivered exceptional
revenue and profit growth since Chrysalis first invested in the
company in 2019.
Starling - Financial Performance (£ millions, year to
indicated date)
|
Nov-19
|
Mar-21
|
Mar-22
|
Mar-23
|
% chg
(Mar21
-23)
|
Total income
|
14.2
|
87.8
|
188.1
|
414.8
|
372%
|
Implied costs
|
(67.8)
|
(101.5)
|
(156.0)
|
(220.2)
|
117%
|
Profit before tax
|
(53.6)
|
(13.7)
|
32.1
|
194.6
|
|
Return on Tangible
Equity
|
|
|
18.3%
|
29.0%
|
|
Source: Starling and
Jupiter
The growth in total income has
been driven by two factors: an increase in lending, and an increase
in base rates. Starling accelerated its lending capabilities
through the acquisition of Fleet Mortgages in 2021, which
originates 'Buy to Let' mortgages, and has generated increased
interest income through an increase in yields on cash and on debt
securities as a result of increases in the Bank of England's base
rate.
Starling's cost base has grown
much slower than its revenues which has led to a very attractive
margin profile. In more recent months, Starling has been generating
profit before tax of roughly £350 million on an annualised basis,
leading to a circa 45% pre-tax return on tangible equity, making
it, the Investment Adviser believes, one of the most profitable
digital banks globally.
What makes Starling truly
disruptive, and what drew the Investment Adviser to the company
initially, is its proprietary technology stack enables the bank to
operate with a much lower fixed cost base than a typical bank
(leading to higher returns and margins) while allowing it to offer
customers a much better user experience. Over time, Starling has
been able to pass on these benefits of technology to its customers,
which ultimately can lead to an enhanced customer experience and
potentially lower costs and fees. Engine, the technology platform
that powers Starling, also offers the potential to license
Starling's award-winning technology to financial organisations
around the world, and now has two contracts signed and in
implementation.
Starling grew deposits
particularly quickly during the COVID-19 period and continues to
evolve its deposit strategy. Most notably, Starling announced in
September 2023 that it would pay 3.25% AER interest on account
balances of up to £5,000 from 1 October 2023. The Investment
Adviser views this offering as consistent with Starling's brand:
unlike many banks that tempt savers with "teaser" rates that
surreptitiously revert to much lower rates and almost never on
their current account, Starling is trying to offer savers a
reasonable rate with durability. For those with more capital and
who wish to save, Starling also offers a One Year Fixed Saver
paying 4.48% interest on deposits between £2,000 and
£1,000,000.
Despite investment in these
products, the direction of interest rates has meant the bank has
continued to operate at very profitable levels over the course of
2023.
The Brandtech Group LLC ("Brandtech")
The highlight of the year for
Brandtech was the acquisition of Jellyfish, a leading global
digital media and marketing group. Jellyfish represents the group's
ninth, and largest ever, acquisition and solidifies Brandtech's
position as the leading digital-only marketing group globally. The
combined group now generates in excess of $1 billion of revenue,
servicing eight out of the ten largest advertisers, and has over
7,000 employees.
Brandtech already had scale across
its Digital Strategy & Content and Data division, but
management had an ambition to grow its Digital Media unit following
the appointment of Nick Emery as CEO of Brandtech Media. Media
represents a huge and highly profitable addressable market for the
group, but also a material revenue opportunity across its existing
customer base. Nick Emery should be able to capitalise on this
opportunity now that he has the necessary scale and resource within
the Brandtech media division.
Although much smaller, the recent
acquisition of Pencil AI is also exciting. Pencil AI was founded in
2018 and is currently a leading AI creative and distribution SaaS
platform. The technology is built on Open AI's GPT family of large
language models ("LLMs") and generates multiple channel-ready
adverts by looking at a brand's objective, existing assets, and
preferences. Within minutes Pencil AI can create content that is up
to tenfold lower in cost to produce but with a twofold uplift in
performance. Pencil AI was one of the first generative AI companies
globally that enables brands to generate finished, ready-to-run
ads, launch them and measure an uplift in performance.
Since 2018, Pencil AI has managed
over $1 billion of media spend across 4,000 brands and is
generating significant interest from prospective clients. Post
acquisition, Brandtech has launched Pencil Pro, an enterprise-level
generative AI product, specifically created to meet the needs of
global brands; Unilever and Bayer are launch partners.
With the marketing landscape
becoming increasingly complex to navigate, the Investment Adviser
believes Brandtech is well positioned to continue disrupting legacy
advertising holding companies. While there has been a
well-publicised slowdown in media spend over 2023 - and Brandtech
is not immune to this - organic growth over the preceding four
years has averaged at more than 30%.
Smart Pension Limited ("Smart")
Smart continued to grow in 2023,
with platform revenues forming a much larger proportion of the
revenue mix.
Following the announcement of its
$95 million Series E funding round in May, led by Aquiline Capital
Partners, Smart has continued to execute its M&A strategy and
has since completed two further acquisitions.
In May 2023, Smart USA announced
that it had acquired ProManage LLC. ProManage is an independent
financial wellness service provider that offers managed accounts
and other personalised retirement solutions to plan sponsors and
plan participants. The acquisition made Smart the fifth largest
managed account provider in the US, one of the largest retirement
and savings markets globally.
The company then acquired Evolve
Pensions in July, a leading provider of workplace pension services
through its master trust the Crystal Trust. Evolve has over 128,000
members and £750 million in assets. This acquisition represents one
of the largest master trust transactions of the year and makes the
Smart Pension Master Trust ("SPMT") the country's third biggest
master trust operator. SPMT now has 1.3 million members and nearly
£5 billion of assets under management ("AUM") while the group now
has a total of approximately £12.5 billion AUM.
Smart's global business is powered
by Keystone, the group's proprietary technology platform. Keystone
is the only cloud-based retirement and savings platform that can
serve multiple jurisdictions globally. Keystone is ideally suited
to consolidation, as high levels of automation (including
self-service) drives efficiencies and helps to deliver scale,
ultimately leading to better value for members.
Klarna Holding AB ("Klarna")
Klarna is one of the Company's
later-stage assets and has scaled aggressively over the last few
years. Having seen losses rise dramatically as it entered the US
market, in the middle of 2022 it announced a cost cutting exercise,
a focus on existing and profitable customers, and an $800 million
fundraise to steer it to profitability. Since that time, losses
have rapidly come down, such that the company announced it was
profitable through Q3 2023, somewhat earlier than previously
expected.
Klarna achieved an adjusted
operating profit in 3Q 2023 of SEK 478 million which compares
against an adjusted operating loss of SEK 1.6 billion in 3Q 2022.
This improvement was driven by a 7% decrease in total operating
expenses before credit losses year-on-year and a material decrease
in credit losses. Credit losses for 3Q 2023 declined by 46%
year-on-year and the credit loss rate fell by 56% year-on-year to
0.33%; the lowest credit loss rate since Chrysalis became a
shareholder. Klarna's growth profile has also been
encouraging.
A period of exceptional growth was
experienced over 2020 and much of 2021, driven by the move into the
US market and assisted by COVID-19. This growth slowed into 2022,
with the company throttling credit growth in response to its desire
to drive towards profitability. More recently, however, growth has
begun to reaccelerate, with 22% GMV growth recorded in 3Q23 - with
the US growing at 46% - which translated into 30% revenue
growth.
We believe that product innovation
is a key factor in sustaining levels of growth, as it attracts new
customers and merchant partners. In recent months, Klarna has
unveiled several new AI-powered features, which enhance the user
experience. Klarna's retail network continues to grow across
multiple verticals including travel, events and entertainment,
luxury clothing and accessories. In the US, Stubhub joined Klarna's
network of over half a million retailers globally, while in Canada
shoppers can now take advantage of flexible payments at Walmart.
The Investment Adviser is also excited by the global roll out of
Klarna's partnership with AirBnB, with consumers in seven countries
now able to spread the cost of their trips worldwide. By early
2024, AirBnB will roll out Klarna in countries across three
continents.
Klarna is an asset that the
Investment Adviser classifies as 'IPO ready', a view supported by
recent comments from Klarna's founder, Sebastien Siemiatkowski,
that his three key conditions for an IPO had been met; they
were:
· Becoming established in the US
· Having a sustainable business model
· Demonstrating significant growth potential.
A flotation could prove highly
significant for Chrysalis.
Deep Instinct Limited ("Deep Instinct")
The adoption of new technologies
such as generative AI is leading to an increased number of
cyber-attacks globally and organisations remain vulnerable to cyber
threats. A recent study by Sapio Research highlighted the impact of
generative AI on the cybersecurity industry, analysing the
technology's positive and negative effect on organisations'
security postures and preparedness. Unsurprisingly, 75% of security
professionals witnessed an increase in attacks over the past 12
months, with 85% attributing the rise to the application of
generative AI.
In this new era of generative AI,
the only way to combat emerging threats is by using advanced AI.
Deep Instinct has developed a prevention-first approach to stopping
malware, using the world's first and only purpose-built deep
learning cybersecurity framework. Deep Instinct has developed
technologies that can predict and prevent known and unknown threats
in under 20 milliseconds, 750 times faster than the fastest
ransomware can encrypt.
Organisations are beginning to
realise that Endpoint Detection and Response ("EDR") and
Next-Generation Antivirus ("NGAV") solutions do not have sufficient
efficacy and the company has witnessed increased interest and
engagement in its solution over the year to date. If the company
can convert these leads into sales, then it will enter 2024 with
very strong deal momentum.
Featurespace Limited ("Featurespace")
Earlier in the year Featurespace
developed a bespoke fraud transaction monitoring framework for
NatWest that led to a 135% improvement in Natwest's financial scam
detection rate and a 75% reduction in false positives.
Subsequently, NatWest and Featurespace won 'Best Innovation by a Financial
Institution' at the Datos Insights 2023 Fraud & AML
Impact Awards for that specific initiative. This follows a number
of other awards over the period, including being named one of the
winners in the PETs Challenge.
Industry recognition is
translating into customer transaction and Featurespace currently
has 70 direct customers and 200,000 institutions using its
technology including HSBC, NatWest, TSYS, Worldpay, Marqeta,
Contis, Danske Bank, Akbank, Edenred and Permanent TSB.
The company's results for 2022
demonstrated continued momentum in the business. Revenues increased
28% year-on-year to £34 million but new order intake was extremely
strong towards the end of 2022 enabling Featurespace to enter 2023
with a strong tailwind. Annual Recurring Revenue ("ARR") grew by
more than 40% through 2022 and has increased by almost 50% for
September 2023 versus September 2022.
A number of positive steps have
been made in terms of stewardship and governance over the year. In
April 2023, Featurespace announced the appointment of John Shipsey
as CFO. John was previously CFO at Smiths Group from 2017-2022 and
prior to that was CFO of Dyson. In addition, the company appointed
Len Laufer to the board as Non-Executive Director in October 2023.
Len is a leader in Data Science and Technology across the Financial
Services Industry and, after founding and successfully exiting
Argus Information and Advisory Services, he went on to lead JP
Morgan's machine learning and data science efforts as Head of
Intelligent Solutions.
With market-leading technology and
a proven go-to-market strategy, Featurespace appears well placed to
continue disrupting its end market.
Tactus Holdings Limited ("Tactus")
The market backdrop has been
challenging over the past twelve to eighteen months, with both
Microsoft and Apple reporting a material decline in hardware sales.
These recent trends have made it more difficult for Tactus to drive
organic growth.
Notwithstanding this challenging
backdrop, Tactus has continued to invest in a stable of brands over
the course of the year and CCL, Box and Chillblast have now been
integrated, rebranded, and repositioned post-acquisition.
Chillblast in particular has performed well and is one of the most
highly respected and decorated desktop PC builders in the world,
evidenced by the fact that Chillblast was awarded the 'PC Pro
Excellence Award for "Best PC Manufacturer 2022" over the
period.
Tactus also has a
business-to-business ("B2B") division which it has been investing
in and scaling over the period. The company has made strong
progress with this offering year to date, and we believe that B2B
could represent a material revenue opportunity for the group going
forwards. There are very few IT providers able to provide fully
bespoke IT solutions to their clients, yet this is something Tactus
is able to offer through its own-branded products and ability to
innovate.
The global gaming sector is in
structural growth and this inevitably will fuel demand for gaming
devices and accessories. While near-term trading has been soft,
Tactus should be a beneficiary of this trend as one the UKs leading
providers of own and third-party branded gaming PCs, component
parts and accessories.
Cognitive Logic Inc, trading as InfoSum
("InfoSum")
InfoSum has been looking to expand
its routes to the market and has been focussed on delivering
strategic partnerships that can accelerate its go to market
strategy. Good progress has been made on this front and several
partnerships have been announced in recent months, including
partnerships with Google, Samsung Ads, Experian and
Acxiom.
The group's partnership with
Google was announced in May and will see InfoSum integrate with
Google Display & Video 360's Publisher Advertiser Identity
Reconciliation ("PAIR"). Display & Video 360's PAIR is a new
solution that is integrated into Google's Display & Video 360
("DV360") demand-side platforms ("DSP") and enables advertisers and
publishers to reconcile their first-party data without tracking
people across the web. This offering will be particularly relevant
to the US market when Google begins to phase out support for third
party cookies from midway through 2024. This development is
relevant to InfoSum as approximately 80% of advertisers depend on
third-party cookies and, without them, those advertisers will need
to find a new way to reach end customers and prospects
online.
Similarly, InfoSum's agreement
with Samsung Ads in April, a leading provider of advanced TV
advertising, will enable Samsung Ad's advertising partners to match
against Samsung's industry-leading Smart TV footprint, as well as
through Samsung DSP, all while continuing to maintain full control
over their data.
It is evident from partnerships
such as these that organisations will further prioritise and expand
their first-party data programs and the Investment Adviser believes
that data clean rooms will be an emerging and integral solution for
publishers. InfoSum continues to be one of the pioneers in this
space and applies innovative privacy controls, differential privacy
techniques and utilises its 'non-movement of data' approach to
prioritise consumer privacy at every stage, allowing stakeholders
to keep their own first-party data separate and under their
complete control. As a result, InfoSum should be well positioned
thematically to take advantage of global regulatory
tailwinds.
Secret Escapes Holding Limited ("Secret
Escapes")
The backdrop for travel has been
much more favourable over the course of the year and trading at
Secret Escapes has been considerably better than in previous years,
where booking cycles were impacted by COVID-19 and travel
restrictions. The company's financial performance year to date has
been encouraging and the outlook for the business into 2024 is
positive.
The company announced a funding
round in July and secured £31.7 million of equity funding alongside
a debt refinancing. These funding initiatives should enable the
company to accelerate marketing spend to drive customer acquisition
and, ultimately, growth. This should result in a faster growing and
more profitable business in the near to medium term.
Graphcore Limited ("Graphcore")
Graphcore has continued to develop
its hardware and software solutions, against a fast-moving industry
backdrop.
While the market for AI
applications has seen considerable growth, this has meant that
model sizes have grown significantly: in 2017, AI models had around
1 million parameters, but currently have over 1 trillion. This
explosion in size has led to a requirement for AI compute
capabilities to expand very aggressively. The Investment Adviser
believes this has favoured the incumbent, Nvidia, which commands a
dominant position in terms of sales of AI hardware. So, despite a
strong market backdrop and considerable customer interest,
Graphcore has found it hard to generate significant revenues from
its products.
Wise PLC ("Wise")
Post-period end, Wise released a
trading update that demonstrated sustained momentum over the
period. Active customer growth remained strong at 30% (to 7.5
million) while revenues increased by 23% year-on-year, and "Income"
- which includes interest income - grew 40%.
Part of the reason for the strong
operating performance of Wise over the last twelve months has been
its exposure to UK base rates. Like Starling, Wise has deposits on
its platform that it can lodge with the Bank of England and other
central banks, which have achieved negligible yields for several
years. Following the global shift upwards in yields, these excess
deposits are now earning a return.
As a result of this performance,
management increased FY24 income growth guidance from 28-33% to
33-38% at the interim stage and further increased guidance to
42-44% at its fiscal third quarter and noted that FY24
profitability will be supported by higher gross profit margins (due
to higher net yields on customer balances) and remain elevated
above its 20% medium-term guidance.
Sorted Holdings Limited ("Sorted")
It was announced in June 2023 that
Location Sciences Group PLC was looking to acquire the entire share
capital of Sorted. Significant progress has been made by the
Company and its advisers in relation to the proposed acquisition
and it is anticipated that this transaction will close
soon.
Alongside pushing forward with
this transaction, Sorted has streamlined its operations, while
expanding the customer base and shipping volumes with existing
customers. This should result in a more efficient and profitable
business going forwards.
Environmental, Social and Corporate Governance
Report
The role of ESG in our investment process
Chrysalis provides primary capital
to predominantly unlisted businesses that offer the technology to
transform the way people live and work. The Company's ESG Policy
sets out how the Investment Team fulfils its responsibilities on
behalf of clients at each stage of the investment process, in line
with the Company's investment policy and asset class specific
considerations.
While no new private investments
were made during the period, the Investment Adviser updated the ESG
policy established by the Board and continued to integrate ESG
analysis systematically across the portfolio.
The current portfolio includes
many companies which provide solutions to urgent business problems
with broader societal costs - such as fraud, cyber risks, data
privacy and affordable pension provision - or which disrupt highly
profitable financial services incumbents and share cost savings
with consumers. The demand to reduce these broader societal costs
is a crucial driver which underpins the long-term growth story of
these investments.
As well as positive sustainability
outcomes, the Investment Adviser expects all companies to minimise
any direct and indirect negative impact on the environment and
broader society.
This report provides a review of
the steps the Investment Adviser is taking to evolve the Company's
ESG strategy, and the progress being made against the ESG
objectives. Also included are a number of case studies to bring to
life good practice by portfolio companies during the financial
year, and stewardship activity conducted by the Investment
Team.
Stewardship
Stewardship is an important
responsibility and a core aspect of the investor approach. There is
a continuous process of dialogue with the leadership teams of
investee companies. Where the Investment Adviser has a board seat
or board observer status, members of the Investment Team attend
board meetings and provide input where they believe they can advise
companies on how to meet their strategic objectives. This includes
regular dialogue on ESG related topics, and the Investment Adviser
seeks to influence companies where they believe the management of
material ESG factors can be improved.
One of the principal challenges of
ESG integration in a private company context is data availability.
Unlike listed companies, many private companies do not disclose ESG
related data, either publicly or to third party data providers.
This reality can hinder the identification of material ESG risks
and potential issues which may require engagement.
The Investment Adviser has
developed an internal dashboard of metrics to assess the ESG
performance of portfolio companies. This data is collected directly
from private investee companies or sourced from the sustainability
disclosures of listed holdings. The Investment Adviser uses the
resulting metrics to assess each company's ESG performance relative
to its level of corporate development and maturity, and
incorporates insights gained into its dialogue with company
leadership teams, to assist their continued development.
Where potential material ESG
risks, or areas of group governance which require further
development, are identified, the Investment Adviser communicates
these conclusions to management and seeks to work collaboratively
with them to make improvements. Company action plans and any
material ESG incidents are reported to the Risk Committee and
monitored over time to assess progress.
Cast study: Starling
Starling has been a long-held
position in the portfolio; with the initial investment made in
early 2019.
During the due diligence process,
the Investment Adviser identified that the board of directors would
benefit from additional independence and as part of its original
investment, negotiated the right to appoint a new independent
non-executive director. Following investment, the Investment
Adviser then worked with the other major investor to bring in
suitable new directors to replace those leaving the board. This
included a new Chairman and senior independent director ("SID"), as
well as other directors with specific skill sets, with a view to
helping the company develop.
This work paid dividends when Anne
Boden, former CEO and founder, decided to step back from Starling,
as the board was able to provide effective support to the interim
CEO as he took over, being comprised of a number of individuals
with relevant experience, including holding roles at major, global
banks.
Corporate Governance
To grow successfully, companies
and their founders must not only execute strategically, but they
must also lay the foundations for future growth by creating
appropriate corporate governance structures. It is critical that
private companies considering listing prepare themselves for the
additional scrutiny which comes with going public. It is also vital
that founders, who may not have previously run listed businesses,
are prepared to bring in experienced independent non-executive
directors who can help their companies develop. Building capacity
at board and executive level - reducing key man risk and reliance
on individual founders over time - is crucial to a company's future
development.
During the financial year, the
portfolio companies have continued to strengthen group
governance. As active owners, the
Investment Adviser assesses company governance on a range of
issues, recognising that good practice will differ depending on a
company's jurisdiction, size, and ownership structure.
Case study: wefox
wefox continued to strengthen its
board and management team during the period, recruiting Nicholas
Walker as Chief HR Officer. Nicholas is a seasoned HR professional
with more than 25 years' global experience spanning technology,
fintech and payment industries, most recently at
Paysafe.
Post period end, wefox appointed
Jonathan Wismer as its new Group Chief Financial Officer. Jonathan
brings more than 25 years of experience in the insurance industry,
having held senior finance roles at Zurich, AIG and Resolution
Life. The appointment represents the company's continued
strengthening of its C-suite as it steps up its plans for
profitable growth and global expansion.
Subsequently, wefox also appointed
Mark Hartigan as Chairman. Mark was previously Chief Executive at
LV and Head of Operations for Europe, Middle East and Africa at
Zurich Insurance Group. He was Chief Executive Officer for Zurich
Global Life in the Asia Pacific and Middle East region and led its
regional business in Europe.
Human Capital
Good human capital management
supports both value creation and business resilience, and the
Investment Adviser believes that investing in human capital
correlates with longer-term business success. Human capital
management can both upskill and educate a workforce, increase
abilities, and retain and motivate employees.
The Investment Adviser recognises
that approaches to human capital management, including DE&I
will differ, and as an active owner seeks to understand an investee
company's operating model and engage to advise on best practice and
potential improvements.
Case study: Starling
Starling Bank continues to build
on its position as a leader on gender diversity, both
organisationally and as a catalyst for a broader change in retail
banking.
Effective integration of DE&I
principles within a business is widely considered to help companies
attract talent from a wider talent pool. It also contributes to
better decision-making, performance, innovation, and employee
satisfaction and retention.
The cumulative Impact of these
initiatives has been significant. Starling's latest gender pay gap
figures (2022), show that the median gender pay gap has decreased
from 10% to 9%, while the mean has narrowed from 16% to 12%. Its
gender pay gap remains substantially lower than those of
competitors (see table).
|
Starling
|
NatWest
|
Lloyds
|
Virgin
Money
|
2022 mean gender pay
gap
|
12%
|
32%
|
29%
|
28%
|
Source: Company
disclosures
Starling launched its
#MakeMoneyEqual campaign in 2018, with the aim of removing negative
gender stereotypes from public conversation around money and
personal finances. Since then, the bank has conducted studies
showing significant discrepancies in the way that men and women are
spoken to about money and portrayed in banking advertising
campaigns, factors which could discourage women's engagement with
financial affairs. It created a free image library that better
represented women and money, helping to ensure that women are
better represented in images used by media and advertisers. Since
2019, the bank has commissioned a regular independent audit of its
algorithms and technological processes to make sure Starling is
fair and free from gender or race bias.
Social Impact
The current portfolio includes
many companies which provide solutions to urgent business problems
with broader societal costs.
Case study: The use of AI to prevent financial
crime
Both Featurespace and Deep
Instinct, representing approximately 13%
of net assets at period end, drive
innovation through generative AI and deep learning.
Featurespace estimates that global
losses from card fraud will total $397.4 billion over the next 10
years, and the problem will only continue to grow as criminals
utilise generative AI for their own gain.
In response, in October 2023 the
company launched TallierLTM, the world's first Large Transaction
Model ("LTM"). TallierLTM, a foundation AI technology for the
payment and financial services industry, is a large-scale,
self-supervised, pre-trained model designed to power the next
generation of AI applications. The model has shown improvements of
up to 71% in fraud value detection when compared to industry
standard models. It identifies hidden transactional patterns
undiscoverable using current industry methods, enabling it to
predict likely future consumer transactions.
Deep Instinct's 2023 Mid-Year
Cyber Threat Report calculates that the number of ransomware
victims in the first half of 2023 exceeded the total number of
victims for the whole of 2022. The proliferation of
Ransomware-as-a-Service ("RaaS") - which sees criminal actors
exploiting vulnerabilities to launch large-scale cyber-attacks -
has continued in 2023 alongside a rise in the use of Large Language
Models ('LLMs"), e.g. ChatGPT, with criminal actors taking
advantage of its capabilities to develop malicious code.
Deep Instinct predicts that in
2024 threats will become even more customised, making it critical
to develop deep learning methods, the most advanced form of AI, to
tackle these threats.
Case study: Financial wellbeing
Wise is the longest held asset in
the portfolio.
Its mission is to lower the cost
to customers of transferring money around the world. Historically,
there have been many links in the chain to send money cross
boarder; local bank branches - sometimes at each end - as well as
transmitting banks, if the former are not using payment rails such
as SWIFT. As well as each bank requiring a cut of the principle,
foreign exchange fees will also be levied.
Wise set out to circumvent this
layering of fees and built its own infrastructure to move money
globally. This meant that not only did it cut out many of the
(costly) links in the chain, but it could also offer economies of
scale in terms of foreign exchange pricing. As a result, Wise
allows individuals to move money around the world up to
approximately five-times cheaper than many high street UK
banks.
Environmental Impact
Limiting global temperature rises
to 1.5 degrees above pre-industrial levels, in line with the Paris
Agreement, is an urgent challenge facing the global economy. The
Investment Adviser uses its influence as an investor through
stewardship and active ownership to encourage companies to
identify, manage and mitigate climate change risks or
opportunities. While the Investment
Adviser believes that the Company's portfolio of tech-enabled,
predominately digital businesses is not exposed to material climate
risks and have limited direct environmental impacts, its view is
that the scale of climate change will impact all sectors,
industries, and asset classes and so acknowledges the positive role
that investors can play in tackling it through investment decisions
and capital allocation.
Disclosed below is the weighted
average carbon intensity of the portfolio and other related
metrics. The companies representing 42% of NAV at year end have
calculated their operational (Scope 1 and 2) emissions. Where
companies have not yet calculated their own emissions, the
Investment Adviser has used estimated data based on the peer groups
used in the Company's valuation process. The analysis suggests that
the portfolio's total emissions increased during the year, which
may be expected given the continued growth of many portfolio
companies. However, on a relative basis the weighted average carbon
intensity of the portfolio decreased as a proportion of revenues,
suggesting increased carbon efficiency of the portfolio in
aggregate.
Chrysalis Portfolio Carbon Metrics (Scope 1 and 2
emissions)
|
|
FY 2023
|
FY 2022
|
Carbon Emissions (tons CO2e/$M
invested)
|
0.9
|
0.5
|
Total Carbon Emissions (tons
CO2e)
|
880
|
450
|
Weighted Average Carbon Intensity
(tons CO2e/$M Sales)
|
14.7
|
22.7
|
Source: Data collected during
Chrysalis ESG Data Collection Exercise, based on public disclosures
by portfolio companies, or estimates. Latest year of reported
emissions.
|
Case study: Smart Pension
In January 2023, Smart Pension
announced the launch of three new fully sustainable lifestyle
strategies with different growth fund options. All three growth
funds fully invest in funds that positively contribute to the
planet and society, including investing in areas such as renewable
energy projects, clean water, and healthcare. Smart Pension is the
first UK pension provider to offer customers a range of lifestyle
strategies that are all fully sustainable, including the Smart
Pension default fund. The Smart Pension Master Trust was also
approved as a signatory to the UK Stewardship Code in March
2023.
In February 2023, Smart Pension
announced that it has halved the emissions of its default growth
fund. This is over two years ahead of the 50% reduction target it
announced in June 2022 and represents considerable progress towards
the company's pledge to make its default growth fund net zero by
2040. This is also well ahead of the goals of the Paris Agreement,
which called for emissions to be reduced by 45% by 2030 and to
reach net zero by 2050.
Case study: Klarna
During the financial year, Klarna
provided an update on the progress of its Give One initiative,
launched in April 2021, which pledges 1% of all future funding
rounds to support change-makers on the frontlines of environmental
challenges. Klarna has contributed $11 million to the initiative
since launch in April 2021, funds which have enabled the planting
of 3.4 million trees worldwide. Give One supports 56 environmental
initiatives which include over 70 organisations throughout North
America, South America, Africa, Europe, and Asia.
Figures disclosed in this
section have not been independently verified by the Company or the
Investment Adviser.
Investment Objective and
Policy
Investment objective
The investment objective of the
Company is to generate long term capital growth through investing
in a portfolio consisting primarily of equity or equity-related
investments in unquoted and listed companies.
Investment policy
Investments will be primarily in
equity and equity-related instruments (which shall include, without
limitation, preference shares, convertible debt instruments,
equity-related and equity-linked notes and warrants) issued by
portfolio companies. The Company will also be permitted to invest
in partnerships, limited liability partnerships and other legal
forms of entity where the investment has equity like return
characteristics.
For the purposes of this
investment policy, unquoted companies shall include companies with
a technical listing on a stock exchange but where there is no
liquid trading market in the relevant securities on that market
(for example, companies with listings on The International Stock
Exchange or the Cayman Islands Stock Exchange). Furthermore, the
Company shall be permitted to invest in unquoted subsidiaries of
companies whose parent or group entities have listed equity or debt
securities.
The Company may invest in publicly
traded companies (including participating in the IPO of an existing
unquoted company investment), subject to the investment
restrictions below. In particular, unquoted portfolio companies may
seek IPOs from time to time following an investment by the Company,
in which case the Company may continue to hold its investment
without restriction.
The Company is not expected to
take majority shareholder positions in portfolio companies but
shall not be restricted from doing so. Furthermore, there may be
circumstances where the ownership of a portfolio company exceeds
50% of voting and/or economic interests in that portfolio company
notwithstanding an initial investment in a minority position. While
the Company does not intend to focus its investments on a
particular sector, there is no limit on the Company's ability to
make investments in portfolio companies within the same sector if
it chooses to do so.
The Company will seek to ensure
that it has suitable investor protection rights through its
investment in portfolio companies where appropriate. The Company
may acquire investments directly or by way of holdings in special
purpose vehicles, intermediate holding vehicles or other funds or
similar structures.
Investment restrictions
The Company will invest and manage
its assets with the objective of spreading risk, as far as
reasonably practicable. No single investment (including related
investments in group entities) will represent more than 20% of
Gross Assets, calculated as at the time of that investment. The
market value of individual investments may exceed 20% of gross
assets following investment.
The Company's aggregate equity
investments in publicly traded companies that it has not previously
held an investment in prior to that Company's IPO will represent no
more than 20% of the Gross Assets, calculated at the time of
investment.
Subject in all cases to the
Company's cash management policy, the Company's aggregate
investment in notes, bonds, debentures and other debt instruments
(which shall exclude for the avoidance of doubt convertible debt,
equity-related and equity-linked notes, warrants or equivalent
instruments) will represent no more than 20% of the Gross Assets,
calculated as at the time of investment.
The Company will not be required
to dispose of any investment or rebalance its portfolio as a
result of a change in the respective value
of any of its investments.
Corporate Governance
Statement
Chrysalis has a Premium Listing on
the London Stock Exchange Main Market and became a member of the
Association of Investment Companies (AIC) on 21 January
2019. The Board has considered the
Principles and Provisions of the 2019 AIC Code of Corporate
Governance (AIC Code), and a full scope
review of the Company's corporate governance processes and
procedures has been conducted with reference to the AIC Code by the
Board and the Company Secretary. The AIC
Code addresses the relevant Principles and Provisions set out in
the UK Corporate Governance Code (the UK Code), as well as setting
out additional Provisions on issues that are of specific relevance
to the Company.
The Board considers that reporting
against the Principles and Provisions of the AIC Code, which has
been endorsed by the Financial Reporting Council and the Guernsey
Financial Services Commission, provides more relevant information
to shareholders. The Company has complied with the Principles and
Provisions of the AIC Code and in doing so has met its associated
disclosure requirements under paragraph 9.8.6 of the Listing
Rules.
The AIC Code is available on the
AIC website (www.theaic.co.uk). It includes an explanation of how
the AIC Code adapts the Principles and Provisions set out in the UK
Code to make them relevant for investment companies.
Key Governance Disclosures
Section 172(1) Statement
Through adopting the AIC Code, the
Board acknowledges its duty to apply and demonstrate compliance
with section 172 of the UK Companies Act 2006 and to act in a way
that promotes the success of the Company for the benefit of its
Shareholders as a whole, having regard to (amongst other
things):
a) consequences
of any decision in the long-term;
b) the need to
foster business relationships with suppliers, customers and
others;
c) impact on
community and environment;
d) maintaining
reputation; and
e) acting fairly
as between members of the Company.
The Board considers its duties
under S.172 to be integrated within the Company's culture and
values. The Company's culture is one of respect for the opinions of
stakeholders, with an aim of carrying out its operations in a fair
and sustainable manner that is both instrumental to the Company's
long term success and upholds the Company's ethical values. The
Board encourages diversity of thought and opinion in accordance
with its Diversity Policy and would like to encourage stakeholders
to engage freely with the Board of Directors on matters that are of
concern to them.
Stakeholders may contact the
Company via the Company's dedicated e-mail address
(chrysalis@maitlandgroup.com),
the Company's LinkedIn page
(https://www.linkedin.com/company/chrysalis-investments-investment-trust/)
or by post via the Company Secretary on any matters that they wish
to discuss with the Board of Directors.
The Company is an externally
administered investment company, has no employees, and as such is
operationally quite simple. The Board does not believe that the
Company has any material stakeholders other than those set out in
the following table.
Investors
|
Service providers
|
Community and environment
|
Issues that matter to
them
|
Performance of the shares
Growth of the Company
Liquidity of the shares
Corporate Governance
|
Reputation of the Company
Compliance with Law and
Regulation
Remuneration
|
Compliance with Law and
Regulation
Impact of the Company and its
activities on third parties
|
Engagement
process
|
Annual General Meeting
Frequent meetings with investors by
brokers and the Investment Adviser and subsequent reports to the
Board
Quarterly factsheets
Key Information Document
|
The main service providers engage
with the Board in formal quarterly meetings, giving them direct
input to Board discussions.
Communication between Board and
service providers also occurs informally on an ongoing basis during
the year.
|
Adherence to principles of
appropriate ESG policies exists at both Company and investment
level.
Principles of socially responsible
investing form a key part of the Company's investment
strategy.
|
Rationale and example
outcomes
|
The Board have engaged with
shareholders in relation to the Company business over the course of
the year.
|
The Company relies on service
providers as it has no systems or employees of its own.
The Board seeks to act fairly and
transparently with all service providers, and this includes such
aspects as prompt payment of invoices.
|
The Investment Adviser works to
ensure that sustainability and ESG factors are carefully considered
and reflected in the Company's investment decisions.
The Board of Directors travel
as infrequently as possible and instead communicate, where they are
able to, by video and conference call.
|
Going Concern Statement
The Going Concern Statement is
made on page 50.
Viability Statement
The Viability Statement is made on
page 50 and 52.
Fair, Balanced and Understandable Statement
The annual report and accounts
taken as a whole are fair, balanced and understandable and provide
the information necessary for shareholders to assess the Company's
performance, business model and strategy. Further information on
how this conclusion was reached can be found within the Audit
Committee Report.
Appointment of the New Investment Adviser
Further details relating to the
appointment of the New Investment Adviser and how this is in the
interests of members as a whole can be found within the Report of
the Management Engagement Committee.
Assessment of Principal and Emerging Risks
The Board has undertaken a robust
assessment of the Company's principal and emerging risks, together
with the procedures that are in place to identify emerging risks.
Further information on this assessment and an explanation on how
these risks are being mitigated and managed can be found on page
53.
Review of Risk Management and Internal
Control
The Board confirms that it has
reviewed the Company's system of risk management and internal
controls for the year ended 30 September 2023, and to the date of
the approval of this annual report and audited financial
statements. For further details of the key risks and uncertainties
the Directors believe the Company is exposed to together with the
policies and procedures in place to monitor and mitigate these
risks, please refer to pages 77 to 79 and 88 to 89 and note 19 of
the annual report and audited financial statements.
The Board of Directors
The Board comprises six
independent non-executive Directors, two of whom are female, who
meet at least quarterly, in addition to ad hoc meetings convened in
accordance with the needs of the business, to consider the
Company's affairs in a prescribed and structured manner. Further
details concerning the meetings attended during the year by the
Board and its Committees can be found on page 39. All Directors are
considered independent of the Investment Adviser for the purposes
of the AIC Code and Listing Rule 15.2.12A.
The Board is responsible for the
Company's long term sustainable success and the generation of value
for shareholders and in doing so manages the business affairs of
the Company in accordance with the Articles of Incorporation, the
investment policy and with due regard to the wider interests of
stakeholders as a whole. For further information on how the Board
considers the interests of stakeholders in its decision making
please see the S.172(1) statement on pages 33 and 34. Additionally,
the Board have overall responsibility for the Company's activities
including its investment activities and reviewing the performance
of the Company's portfolio. The Board are confident that the
combination of its members is appropriate and is such that no one
individual or small group of individuals dominates the Board's
decision making.
The Directors, in the furtherance
of their duties, may take independent professional advice at the
Company's expense, which is in accordance with provision 19 of the
AIC Code. The Directors also have access to the advice and services
of the Company Secretary through its appointed representatives who
are responsible to the Board for ensuring that the Board's
procedures are followed, and that applicable rules and regulations
are complied with.
To enable the Board to function
effectively and allow the Directors to discharge their
responsibilities, full and timely access is given to all relevant
information.
Comprehensive board papers are
circulated to the Board in advance of meetings by the Company
Secretary, allowing time for full review and comment by the
attending parties. In the event that Directors are unable to attend
a particular meeting, they are invited to express their views on
the matters being discussed to the Chairman in advance of the
meeting for these to be raised accordingly on their behalf. Full
and thorough minutes of all meetings are kept by the Company
Secretary.
The Directors are requested to
confirm their continuing professional development is up to date and
any necessary training is identified during the annual performance
reviews carried out and recorded by the Remuneration and Nomination
Committee.
The current Board have served
since the Company's inception in October 2018, with the exception
of Margaret O'Connor who was appointed on 6 September 2021, and
have been carefully selected against a set of objective criteria.
The Board considers that the combination of its members brings a
wealth of skills, experience and knowledge to the Company as
illustrated in their biographies below:
Director Biographies
Andrew Haining (Chairman) (independent)
Andrew has had a 30-year career in
banking and private equity with Bank of America, CDC (now
Bridgepoint) and Botts & Company. During his career, Andrew has
been responsible for over 20 private equity investments with
transactional values in excess of $1 billion.
Andrew holds several Guernsey and
UK board positions.
Stephen Coe (senior independent)
Stephen serves as Chairman of the
Audit Committee. He is currently a Non-Executive Director of a
number of private companies. Stephen has been involved with
offshore investment funds and managers since 1990, with significant
exposure to property, debt, emerging markets and private equity
investments. Stephen qualified as a Chartered Accountant with Price
Waterhouse Bristol in 1990 and remained in audit practice,
specialising in financial services, until 1997. From 1997 to 2003
Stephen was a director of the Bachmann Group of fiduciary companies
and Managing Director of Bachmann Fund Administration Limited, a
specialist third party fund administration company.
From 2003 to 2006 Stephen was a
director with Investec in Guernsey and Managing Director of
Investec Trust (Guernsey) Limited and Investec Administration
Services Limited. Stephen became self-employed in August 2006,
providing services to financial services clients.
Simon Holden (independent)
Simon is a Chartered Director
("Cdir") accredited by the Institute of Directors. Previously an
investment director at Terra Firma Capital Partners and Candover
Investment prior to that, Simon has been an active independent
director to listed investment company, private equity fund and
trading company boards since 2015. In addition, Simon acts as the
pro-bono Business Adviser to Guernsey Ports; a State of Guernsey
enterprise that operates all the Bailiwick's critical airports and
harbour infrastructure.
A graduate of the University of
Cambridge with an Meng and MA in Manufacturing Engineering, Simon
is an active member of UK and Guernsey fund management interest
groups including a director member of the Association of Investment
Companies ("AIC").
Anne Ewing (independent)
Anne has over 35 years of
financial services experience in banking, asset and fund
management, corporate treasury, life insurance and the fiduciary
sector. Anne has an MSc in Corporate Governance, is a Chartered
Fellow of the Securities Institute and has held senior roles in
Citibank, Rothschilds, Old Mutual International and KPMG, and
latterly has been instrumental in the start-ups of a Guernsey fund
manager and two fiduciary licensees.
Anne has several non-executive
directorships roles in investment companies and a London based
private wealth banking group and related subsidiaries in Jersey and
Guernsey.
Tim Cruttenden (independent)
Tim is Chief Executive Officer of
VenCap International PLC, a UK-based asset management firm focused
on investing in venture capital funds. He joined VenCap in 1994 and
is responsible for leading the strategy and development of the
firm. Prior to joining VenCap, Tim was an economist and
statistician at the Association of British Insurers in London. He
received his Bachelor of Science degree (with honours) in Combined
Science (Economics and Statistics) from Coventry University and is
an Associate of the CFA Society of the UK. Tim is a non-executive
director of Polar Capital Technology Trust.
Margaret O'Connor (independent)
Margaret has had a 30-year career
commercialising technology in the US, Asia, Europe, and Africa. She
brings insights from having worked as a MarTech operator,
MasterCard senior executive, and investor to her current roles as
an independent director of a Guernsey investment trust and Chair of
a Mauritius Venture Capital Fund. She's a member of the Private
Equity Women Investor Network.
She earned her BA from Rutgers
University and studied International Relations at Princeton
University before moving to Seoul, Korea to work for the Korean
Ministry of Finance.
Public Company Directorships
The following details are of all
other public Company Directorships and employment held by each
Director and shared Directorships of any commercial company held by
two or more Directors:
Anne Ewing
None to be disclosed
Andrew Haining
None to be disclosed
Simon Holden
HICL Infrastructure PLC
Hipgnosis Songs Fund
Limited
JPMorgan Global Core Real Assets
Limited
Stephen Coe
None to be disclosed
Tim Cruttenden
Polar Capital Technology Trust
PLC
Margaret O' Connor
None to be disclosed
Valuation Committee
The Board are of the view that the
valuation process needs to be as efficient as possible while also
providing for comprehensive and independent oversight.
Consequently, the Board established an independent Valuation
Committee which comprises of the following members:
Lord Rockley (Committee Chairman)
Anthony Rockley was an audit
partner at KPMG until 2015 with a sector focus on private equity
and venture capital. Over a 34 year career with KPMG, Anthony was
responsible for auditing private equity and venture capital
companies and structures. Amongst other sector specific work,
Anthony was a member of the International Private Equity and
Venture Capital Guidelines Board for 9 years.
Diane Seymour Williams
Diane Seymour Williams has a
career spanning over 30 years in asset and wealth management. She
was a listed portfolio manager with Deutsche Morgan Grenfell,
ultimately running DMG's asset management business in Asia. After
returning to the UK, Diane subsequently held a number of board
positions in the financial services sector. Currently she sits,
inter alia, on the boards of ABRDN Private Equity Opportunities
Trust PLC, Mercia Asset Management PLC and SEI's European business.
Diane brings extensive fund management and portfolio oversight
experience. In addition to her public company roles Diane sits on
the investment committees of Newnham College, Cambridge and the
Canal & River Trust.
Jonathan Biggs
Jonathan Biggs worked at Accel, a
leading global venture and growth capital investor, for 20 years up
until 2021. One of the first hires in Europe, he was the COO of
Accel's European business. During his time at Accel, he raised over
$2.5 billion in five early-stage venture funds focused on Europe.
Jon has subsequently joined Top Tier Capital Partners as a Partner
where he leads the European funds business. Prior to that he was a
Managing Partner at SVB Capital.
The fourth member of the committee
is Tim Cruttenden who has been a director of the Company since its
formation.
Director Attendance
During the year ended 30 September
2023, the Board and Committee meetings held and attended by the
Directors were as follows:
|
Quarterly Board
Meeting
|
Audit Committee
Meeting
|
Remuneration and nomination
Meetings
|
Risk Committee
Meetings
|
Management
Engagement
Meetings
|
Ad-hoc
Meetings
|
Director
|
Attended/Eligible
|
Attended/
Eligible
|
Attended/
Eligible
|
Attended/
Eligible
|
Attended/
Eligible
|
Attended/
Eligible
|
Anne Ewing
|
6/6
|
3/3
|
1/1
|
4/4
|
n/a
|
2/2
|
Andrew Haining
|
5/6
|
n/a
|
1/1
|
n/a
|
n/a
|
2/2
|
Simon Holden
|
6/6
|
3/3
|
1/1
|
4/4
|
1/1
|
2/2
|
Stephen Coe
|
6/6
|
3/3
|
1/1
|
3/4
|
n/a
|
2/2
|
Tim Cruttenden
|
6/6
|
1/3
|
1/1
|
4/4
|
1/1
|
2/2
|
Margaret O'Connor
|
6/6
|
1/3
|
1/1
|
4/4
|
1/1
|
2/2
|
|
Valuation Committee
Meetings
|
Member
|
Attended/ Eligible
|
Lord Rockley
|
8/8
|
Diane Seymour-Williams
|
8/8
|
Jonathan Biggs
|
7/8
|
Tim Cruttenden
|
7/8
|
Division of Responsibilities
A schedule of matters reserved for
the Board is maintained by the Company and can be summarised as
follows:
· Strategic Issues
· Financial Items such as approval of the annual and
half-yearly reports, any quarterly financial statements and any
preliminary announcement of the final results and the annual report
and accounts including the corporate governance
statement
· Treasury Items
· Legal, Administration and Other Benefits
· Communications with Shareholders
· Board Appointments and Arrangements
· Miscellaneous such as to approve the appointments of
professional advisers for any Group company in addition to the
Company's Auditors
· Monetary Limits
The Directors have also delegated
certain functions to other parties such as the Valuation Committee,
the Investment Adviser, the Administrator, the Company Secretary,
the Depositary and the Registrar. In particular, the Investment
Adviser has been granted discretion over the management of the
investments comprising the Company's portfolio.
The Investment Adviser reports to
the Board on a regular basis both outside of and during quarterly
board and Committee meetings, where the operating and financial
performance of the portfolio, together with valuations, are
discussed at length between the Board and the Investment Adviser.
The Directors have responsibility for exercising supervision of the
Valuation Committee and the Investment Adviser.
Board Committees
The Company has an Audit
Committee, Remuneration and Nomination Committee, Management
Engagement Committee, Risk Committee and an Independent Valuation
Committee (together the "Committees"). The Terms of Reference for
each committee is available on the Company's website.
The Board believes that its
established Committees are adequately composed, and that each
member has the necessary skills and experience to discharge their
duties effectively. All new Committee members will be provided with
an induction on joining the relevant Committee. The actions carried
out by each Committee since the previous quarterly board meeting
are reported at each meeting to the Board of Directors by the
respective Committee chair. Each Committee meeting is attended by
the Company Secretary and comprehensive minutes are kept, as well
as a schedule of the action points arising from each
meeting.
Stephen Coe is the Chairman of the
Audit Committee with Anne Ewing and Simon Holden as members with
Margaret O'Connor as an observer. A full report regarding the Audit
Committee's activities during the year can be found in the Audit
Committee Report on page 60.
Anne Ewing is Chairman of the
Remuneration and Nomination Committee, with Margaret O'Connor and
Tim Cruttenden as members. The Remuneration and Nomination
Committee meets at least once a year in accordance with the terms
of reference and reviews, inter alia, the structure, size and
composition of the Board. A full report regarding the Remuneration
and Nomination Committee's activities during the year can be found
on page 41.
Margaret O'Connor is Chairman of
the Management Engagement Committee, with Simon Holden and Tim
Cruttenden as members. The Management Engagement Committee will
meet formally at least once a year for the purpose, amongst other
things, of reviewing the actions and judgments of the Investment
Adviser and the terms of the Portfolio
Management Agreement. A full report regarding the Management
Engagement Committee's activities during the year can be found on
page 44.
Simon Holden is Chairman of the
Risk Committee, with Anne Ewing, Margaret O'Connor, Stephen Coe and
Tim Cruttenden as members. The Risk Committee will meet formally,
at a minimum once a year, though it has been agreed, that the Risk
Committee is convened quarterly in the first year of assuming its
responsibilities, aligned with the Company's financial reporting
cycle and at such other times as the Chairman of the Committee
deems appropriate, for the purpose of, amongst other things,
to ensure that there is proper consideration and
assessment risks and stresses ensuring that the Investment Adviser
develops appropriate strategies to protect the Group's portfolio of
investments. A full report regarding the
Risk Committee's activities during the year can be found on page
46.
Report of the Remuneration and Nomination
Committee
Statement: Chairman of Committee
I am pleased to present the
Remuneration and Nomination Committee report for the year ended 30
September 2023. The composition of the Remuneration and Nomination
Committee meets with the requirements of the AIC Code and, in line
with good practice, membership is reviewed annually.
During the year, there have been
no changes to the Directors' Remuneration Policy or the Terms of
Reference of the Remuneration and Nomination Committee.
No new Directors were appointed to the Board
during the year.
In 2024, and subject to the
outcome of the Continuation Vote at the AGM, the Remuneration and
Nomination Committee will revive its recruitment process to help
the Company further achieve its targets.
I am satisfied that the
Remuneration and Nomination Committee is discharging its
responsibilities proficiently and recommend this report to the
Board.
Purpose and Aim of the Remuneration and Nomination
Committee
The terms of reference of the
Remuneration and Nomination Committee are set out on the Company's
website at https://chrysalisinvestments.co.uk/investor-relations/.
The primary responsibility of the Remuneration
and Nomination Committee is, in relation to remuneration, to
determine and agree with the Company's Board of Directors (together
the "Board" and individually a "Director") the framework or broad
policy for the remuneration of the Company's Chairman and
non-executive Directors in accordance with the Company's articles
of incorporation (the "Articles") and applicable law and, in
relation to nominations, to review the structure, size and
composition (including the skills, knowledge and experience)
required of the Board compared to its current position and make
recommendations to the Board with regard to any changes as
necessary.
Membership and Meetings of the Remuneration and Nomination
Committee
The Remuneration and Nomination
Committee met formally once during 2023, on 27 October 2023. Due to
illness the meeting was chaired by Margaret O'Connor and attended
by Tim Cruttenden with papers prepared by the Chair of the
Committee.
The members of the Remuneration
and Nomination Committee are as follows:
· Anne
Ewing (Chairman)
· Tim
Cruttenden
· Margaret O'Connor
Composition, Succession and Evaluation of the
Board
At its meeting, the Remuneration
and Nomination Committee reviewed and reaffirmed the Company's
policy whereby no Director will serve for more than nine years
(such policy being aligned to the AIC Code). The Remuneration and
Nomination Committee confirms that no Director has served for
longer than nine years, due to the Company being incorporated in
October 2018.
No new directors were appointed to
the Board during the year.
On 27 October 2023, at a general
board meeting, the Company reviewed and refreshed its policy on
Diversity and Inclusion as follows:
The Board is committed to longer term succession planning in
the context of meeting the objective of the Parker Review will
follow ahead of the 2024 deadline. This will require the Company to
increase the ethnic diversity of its board by having at least one
director from an ethnic minority. The Company's Board currently
comprises two female directors which meets the targets set by the
Hampton-Alexander Review to increase the number of women in senior
leadership positions in all FTSE 350 companies to 30% by end 2022.
Although not a constituent of the FTSE 350, the Company is
committed to maintaining the highest standards of corporate
governance and hence will seek to meet the further recommendations
of the review within the 2025 deadline.
Appointments to the Board will be based on merit and on any
skills gap identified to ensure the Board can continue to act
effectively.
The Company follows a set of principles when looking to
recruit a new candidate. This will include the use of an external
well regarded recruitment agency who will be instructed to conduct
a wide search for diverse candidates and, where applicable
potentially, encourage candidates who may have appropriate
transferable skills which, if appointed, would add to the diversity
of the Board.
Where the Company is unable to meet any diversity or
inclusion targets it will look to fully explain its position to its
shareholders and stakeholders.
In November 2023, the Committee
considered succession planning and undertook a review of the
attributes and skills of the current Board and made recommendations
to the Board.
In light of the forthcoming
Continuation Vote it was considered inappropriate to make changes
to the Board and indeed it would have proved difficult to recruit
appropriate candidates with the different scenarios that might
follow the vote. The Board therefore agreed to defer any
recruitment until the results of the Continuation Vote are
known.
A succession plan has been drawn
up in the event of the continuation of the Company when it is
expected at least three directors would rotate off the Board over a
period of 24 months. Due regard will be given to equal opportunity,
diversity and inclusion for these appointments.
Committee Memberships
Audit Committee
|
Risk Committee
|
Valuation Committee
|
Management Engagement Committee
|
Remuneration and Nomination Committee
|
Chaired by:
S Coe
A Ewing
S Holden
Margaret O'Connor
(Observer)
|
Chaired by:
S Holden
S Coe
A Ewing
T Cruttenden
M O'Connor
|
Chaired by:
Lord Rockley*
D Seymour- Willliams*
J Biggs*
T Cruttenden (Board
Representative)
*Independent
|
Chaired by:
M O'Connor
S Coe
T Cruttenden
S Holden
|
Chaired by:
A Ewing
T Cruttenden
M O'Connor
|
2023 Review of Board Performance
The Remuneration and Nomination
Committee engaged BoardAlpha Limited to undertake a review of Board
performance. This externally facilitated review was undertaken
during the summer months of 2023. Interviews were held with each of
the six non-executive directors, including the Chairman.
Discussions were also held with the Investment Adviser, Director of
Finance - Chrysalis and with Lord Rockley as Chairman of the
Valuation Committee. Further discussions were held with the
Company's administrator, legal counsel and brokers. BoardAlpha
attended a Valuation Committee Meeting, a Risk Committee Meeting
and a full Board Meeting and reviewed all information packs from
meetings for the full year.
The output from the review was
positively received by the Board and a number of actions are in
progress to address various procedural matters, some of which are
already underway as part of this year's reporting.
2023 Review of Remuneration
The Company's policy is that the
fees payable to the Directors should reflect the time spent by the
Board on the Company's affairs and the responsibilities borne by
the Directors, and should be sufficient to retain high calibre
directors. The policy is for the Chairman of the Board, the Chairs
of the Audit Committee and Risk Committee and the Valuation
Committee Board Representative to be paid a higher fee than the
other Directors in recognition of their more onerous roles and more
time spent. The Board may only amend the level of remuneration paid
within the limits of the Articles (£500,000 per annum
maximum).
The table below is provided to
enable Shareholders to assess the relative spend on Director
remuneration and the size of the Board. The figures provide a
comparison against management fees payable to the Investment
Adviser relative to the Company's Net Asset Value ("NAV").
Total Director
Remuneration
|
£432,500
|
Investment Adviser Fees
|
£4,008,937
|
Investment Adviser Performance
Fees
|
-
|
NAV at year end
|
£801,348,784
|
A comparison of the Company's
remuneration against its competitors was undertaken by the
Committee and a view taken on current market conditions, noting the
trajectory of inflation rates and the time commitment and
activities of the Board. The forthcoming Continuation Vote was also
considered.
The Remuneration and Nomination
Committee recommended, and the Board resolved, that there should be
no increase in base remuneration for the financial year commencing
1 October 2023.
|
Director base fees
p.a.
FY/E 2023
£
|
Director base fees proposed
FY/E 2024
£
|
Chairman - A Haining
|
120,000
|
85,000
|
Audit Committee Chairman/SID - S
Coe
|
67,500
|
67,500
|
Risk Committee Chairman - S
Holden
|
67,500
|
67,500
|
Valuations Committee Board
Representative - T Cruttenden
|
62,500
|
62,500
|
Directors - M O'Connor/A
Ewing
|
57,500
|
57,500
|
_____________________
Anne Ewing
Chairman of the Remuneration and
Nomination Committee, Chrysalis Investments Limited
Report of the Management Engagement
Committee
The Management Engagement
Committee (hereafter referred to in this report as the "MEC") is
chaired by Ms Margaret O'Connor and at this time, comprises a
sub-committee of the Board including Mr Simon Holden and Mr Tim
Cruttenden, whilst other Board members are invited to attend. Only
non-executive Directors who are independent of the Investment
Adviser may serve on the MEC, which meets at least once per year.
The MEC's terms of reference are available to view on the Company's
website, with the MEC's primary purpose being to review, annually,
the compliance of the Investment Adviser with the Company's
investment policy and Portfolio Management Agreement as well as to
keep under review the performance of all other key service
providers involved in supporting the Company and its
operations.
Please see the MEC's terms of
reference on the Company's website, the link is
https://chrysalisinvestments.co.uk/wp-content/uploads/2022/11/mec-terms-of-reference-1.pdf
The MEC convened twice during the
year ended 30 September 2023. Optimising the cost-effectiveness and
operational efficiency of service provision is essential to the
Company, especially in the current difficult trading environment.
With one exception, the service provision was satisfactory to
Company standards.
The MEC's priorities during the
past year have been:
1. To
ensure appropriate resourcing at and reporting from the Investment
Adviser,
2. To
ensure appropriate resourcing for the Valuation process,
3. To
strengthen the self-managed Alternative Investment Fund Manager
("AIFM") function,
4. To
ensure appropriate investor engagement in advance of the
Continuation Vote.
During the past year, the
Investment Adviser's dedicated finance and ESG resources made
excellent progress developing appropriate reporting for the Company
and the Risk Committee. During the MEC meeting on 23 September
2023, we noted the need for more strategic
analysis about the commercial, technology, and regulatory
challenges and opportunities confronting each disruptive technology
asset as well as comprehensive reporting about the investment
management process going forward.
The Board Chairman continues to
serve as the primary point of contact with the Investment Adviser.
In consultation with the Board, the MEC, and key advisers, Mr.
Haining led a process to negotiate a separation agreement with
Jupiter Fund Management PLC ("Jupiter") to enable the Investment
Advisory team responsible for managing the Company's assets to form
a New Investment Adviser within a new regulated structure. The MEC
provided a comprehensive commercial and regulatory framework for
the new AdviserCo that anticipates the strategic and operational
challenges this experienced team may confront in the new proposed
structure.
Following the end of the Company's
financial year, a Heads of Terms announcement was made on 27
November 2023, explaining the redrawn structure through which the
investment advisory services will be provided and the timing of the
proposed Jupiter contract termination on 31 March 2024. Jupiter has
agreed to a reduction in the management fee, effective from 1
October 2023, from 50bps to 15bps, leading to an expected saving of
approximately £1.4 million for Chrysalis shareholders over the
six-month period to 31 March 2024.
Under the Heads of Terms, Jupiter
has released the Principals and four other executives from their
employment contracts and employment restrictions, effective 31
March 2024. The Board has agreed, in principle, to enter into a
tripartite contract with an LLP formed by the Principals to take
over investment advisory services from Jupiter, and with G10 - the
AIFM platform of the IQEQ fund administration group - to take over
AIFM services for the Company, each with effect from 1 April
2024.
The Board exercised its right to
obtain independent third-party expert recommendations on Valuations
for those assets where the Board or the Valuation Committee
believed additional judgments were required.
The Company commissioned
Rothschild & Co. to conduct a second annual perception study
with shareholders and the Company commissioned Montfort
Communications to conduct a media benchmarking analysis. This
market analysis will help to inform investor and media relations
going forward.
___________________
Margaret O'Connor
Chairman of Management Engagement
Committee, Chrysalis Investments Limited
Report of the Risk Committee
I am pleased to present the Report
of the Risk Committee (the "Committee") of Chrysalis Investments
Limited ("Chrysalis", or the "Company") for the year ended 30
September 2023.
Overview
The terms of reference of the Risk
Committee are set out on the Company's website at
https://chrysalisinvestments.co.uk/investor-relations/.
The role of the Risk Committee is
to ensure that the Board gives proper consideration and assessment
of the opportunities, risks and stress scenarios within which the
Company operates and to ensure that the recommendations and
strategy of the Investment Adviser protect its portfolio of
investments.
Specifically, it will:
· Recommend to the Board a Group risk appetite, the principal
risks to which the Company is exposed and assess the strength of
risk mitigation controls;
· To
review the policies and process for identifying and assessing
business risks and the management of those risks by the
Company;
· Monitor key risk exposures ensuring that the Investment
Adviser is exercising appropriate control to reduce the likelihood
of risk crystallisation resulting in financial loss, reputational
damage or regulatory concern;
· Review, challenge, approve and monitor stress and scenario
tests;
· Monitor investments so that they are aligned within the
agreed risk appetite;
· Review major initiatives such as related party acquisitions
or initiatives in new geographies or sectors and be assured that
appropriate due diligence has been carried out and that any
associated movement in risk profile remains within risk appetite;
and Provide oversight and advice to the Board in relation to
current and emerging risk exposures of the Company.
The members of the Risk Committee
are as follows:
· Simon Holden (Chairman)
· Stephen Coe
· Tim
Cruttenden
· Anne
Ewing
· Margaret O'Connor
· Andrew Haining (Company Chairman) - invited as an
Observer
Status of the Risk Committee
The Company has been a
self-managed Alternative Investment Fund ("AIF") since 1 July 2022
and the Committee was constituted on that date. In my last report I
commented on the work that the Committee had been doing since its
constitution to implement an effective risk governance structure
and control framework, along with the development of a reporting
process that was fit for purpose.
In January 2023, the Risk
Committee presented its first full risk report to the Board and has
met quarterly since. During its quarterly meetings the Committee
has engaged with the Investment Adviser to refine the risk
reporting approach. I am delighted with the step change in both the
usability and quality of the reporting since becoming a
self-managed AIF and I thank the Investment Adviser and my
Committee members for their contribution and engagement throughout
the year to get to this point.
The reporting process has
developed to a point that the Committee has concluded that it will
move to a more typical semi-annual review process for the year
ended 30 September 2024. The Investment Adviser will continue to
produce a quarterly report and will continue to alert the Committee
to material risk indicators on an 'as-arising' basis.
Risk Classes
The Committee reviews the risk
profile of the Company under a series of pre-defined risk classes.
Eash risk class is composed of separately identified and scored
risks.
Priority risk classes with highest
overall residual risk ratings:
1.
Liquidity Management -
risks to the funding runway and allocation of resources that the
Company has available to deploy to support and optimise the value
of its investments.
2.
Relative Performance - the
Company's longer terms sustainability will depend on risk-adjusted
returns outperforming adjacent asset classes.
3.
Financial/ Capital Markets
- risks related to shareholder understanding, confidence in the
Company's growth capital mandate and implications of shares trading
at a discount to NAV.
4.
Portfolio Performance -
risks to tracking each portfolio company's progress towards
measurable milestones along the 'equity roadmap' and evidence of
the strategy and influence over profitable realisations. Movements
in the fair values of our holdings have led to an overall increase
in the concentration risk within the portfolio during the
year.
5.
Portfolio Construction -
ensuring that the portfolio remains sufficiently diversified and
that the Investment Adviser's span of control and management of the
Company's holdings remains effective. Movements in the fair value
of the Company's investments have led to an overall increase in the
concentration risk within the portfolio during the year.
6.
Conflict and Compliance
Management - verification of robust governance in all
stakeholder relationships between the Board, the Investment
Adviser, Jupiter-managed funds with shared holdings and
Jupiter-managed funds with interests in the Company. During the
year, the scale of Jupiter's wider fund-management interests in
both Chrysalis's shareholders register, and underlying holdings,
has reduced considerably. Conflict management procedures are in
place and followed but with reduced market liquidity in the growth
equity sector, together with wide discounts, marginal buying and
selling has an outsize impact on share prices. Consequently, whilst
the underlying risk factors have reduced, this risk class remains
at a more elevated level of interest to the Committee than last
year.
Risk class assessed to be well
controlled but with the potential for high impact if
crystallised:
7.
Regulatory and political -
risk monitoring over routine regulatory compliance (e.g., FCA in
the UK) and/or politically exposed sectors within which certain
portfolio companies must operate.
Risk classes currently judged to
have a lower overall residual risk rating:
8.
The Environment, Social Impact and
Good Governance ("ESG") - the Company's policy is addressed
in Environmental, Social and Corporate Governance report of the
Annual Report.
9.
Investment Decisions -
evidence that the Investment Adviser has undertaken appropriate due
diligence, risk assessments and origination processes at the point
of committing the Company to new investments.
10. Central Management - governance,
depositary, foreign exchange and treasury risk management controls;
some under delegation to specialist third party service
providers.
11. Valuation - the Independent Valuation
Committee's oversight of the quarterly portfolio valuation and the
basis of the Investment Adviser's recommendations when pricing new
investments.
Finally, as a standing item, the
Risk Committee considers:
12. Horizon Risks - themes emerging that
could have an outsize impact or influence on the prospects of
clusters of our target sectors and/or portfolio
companies.
In October 2023, the Committee
reviewed the risk register, approved amended residual risk scoring
for each individual risk and risk class and concluded the risk
appetite of the Fund remained appropriate with the investment
policy.
In the past year, the enhancements
to risk management and reporting have helped reduce the Committee's
assessment of residual risk across five risk classes. However,
greater concentration of value within the portfolio and weaker
relative shareholder returns compared with adjacent asset classes
has resulted in a higher on-going assessment of residual risk in
these areas. Liquidity management remains the Company's priority
risk.
As previously announced, the
Board's proposed capital allocation policy aims to be able to
support our current portfolio, fund a sustainable level of
reinvestment in our portfolio, share returns on investment with
investors and manage the discount in the market value of the
Company's shares to their intrinsic NAV.
Recommendation
I am satisfied that the Risk
Committee is discharging its responsibilities proficiently and
recommend this report to the Board.
_____________________
Simon Holden
Chairman of the Risk Committee,
Chrysalis Investments Limited
Directors' Report
The Directors present their Annual
Report and the Audited Financial Statements of the Company for the
year ended 30 September 2023.
Principal Activities and Business Review
The investment objective of the
Company is to generate long term capital growth through investing
in a portfolio consisting primarily of equity or equity-related
investments in unquoted companies.
The Directors do not envisage any
change in these activities for the foreseeable future. A
description of the activities of the Company in the year under
review is given in the Chairman's Statement and the Investment
Adviser's Report.
Business and Tax Status
The Company has been registered
with the GFSC as a closed-ended investment company under RCIS Rule
and Protection of Investors ("POI") Law and was incorporated in
Guernsey on 3 September 2018. The Company operates under The
Companies (Guernsey) Law, 2008 (the "Law").
The Company's shares have a
premium listing and are admitted to trading on the London Stock
Exchange's Main Market for listed securities.
The Company's management and
administration takes place in Guernsey and the Company has been
granted exemption from income tax within Guernsey by the
Administrator of Income Tax. It is the intention of the Directors
to continue to operate the Company so that each year this
tax-exempt status is maintained.
In respect of the Criminal
Finances Act 2017, which has introduced a new corporate criminal
offence of 'failing to take reasonable steps to prevent the
facilitation of tax evasion', the Board confirms that they are
committed to zero tolerance towards the criminal facilitation of
tax evasion.
Alternative Investment Fund Managers
Directive
The Company is a non-EEA-domiciled
'Alternative Investment Fund' ("AIF"), as defined by the
Alternative Investment Fund Managers Directive ("AIFMD"). The
Company is a self-managed AIF and JIML acts as Investment
Adviser.
The AIFMD, as transposed into the
FCA Handbook in the UK, requires that certain pre-investment
information be made available to investors in AIFs (such as the
Company) and that certain regular and periodic disclosures are
made.
Foreign Account Tax Compliance Act
("FATCA")
FATCA requires certain financial
institutions outside the United States ("US") to pass information
about their US customers to the US tax authorities, the Internal
Revenue Service (the "IRS"). A 30% withholding tax is imposed on
the US source income and disposal of assets of any financial
institution within the scope of the legislation that fails to
comply with this requirement.
The Board of the Company has taken
all necessary steps to ensure that the Company is FATCA compliant
and confirms that the Company is registered and has been issued a
Global Intermediary Identification Number ("GIIN") by the IRS. The
Company will use its GIIN to identify that it is FATCA compliant to
all financial counterparties.
Common Reporting Standard
The Common Reporting Standard is a
global standard for the automatic exchange of financial account
information developed by the Organisation for Economic Co-operation
and Development ("OECD"), which has been adopted in Guernsey and
which came into effect in January 2016.
The Company is subject to Guernsey
regulations and guidance on the automatic exchange of tax
information and the Board will therefore take the necessary actions
to ensure that the Company is compliant in
this regard.
Going Concern
In assessing the going concern
basis of accounting, the Directors have assessed the guidance
issued by the Financial Reporting Council and considered the
Company's own financial position, the status of global financial
markets, various geopolitical events and conflicts, the current
macroeconomic climate and other uncertainties impacting on the
Company's investments, their financial position and liquidity
requirements.
At year end, the Company has
liquidity including a current cash position of £22,626,000, a net
current asset position of £20,973,000 and liquid listed investments
amounting to £10,284,000.
The Company generates liquidity by
raising capital and exiting investments. It uses liquidity by
making new and follow-on investments, paying company expenses and
making returns to Shareholders. The Directors ensure it has
adequate liquidity by regularly reviewing its financial position
and forward-looking liquidity requirements. The Directors Going
Concern assessment includes consideration of a range of likely
downside scenarios which measure the impact on the Company's
liquidity of differing assumptions for portfolio valuation, exits,
new and follow-on investment requirements, capital raising and
company expenses.
Under the Articles, at the first
annual general meeting of the Company following the fifth
anniversary of IPO (such anniversary being 6 November 2023), the
Directors must propose an ordinary resolution that the Company
continues its business as a closed-ended investment company. At the
Company's annual general meeting, scheduled for 15 March 2024,
Shareholders will be invited to vote on the continuation of the
Company. The Board will recommend that Shareholders vote in favour
of continuation. If the resolution is not passed, the Directors
will be required to put forward proposals for the reconstruction,
reorganisation or winding-up of the Company for Shareholders'
consideration within six months following the date on which the
resolution is not passed. These proposals may or may not involve
winding-up the Company or liquidating all or part of the Company's
then existing portfolio of investments and, accordingly, failure to
pass a continuation vote will not necessarily result in the
winding-up of the Company or liquidation of all or some of its
investments.
At the time of preparation of this
report the outcome of the continuation vote is not known. Should
the resolution not be passed, and depending on the nature of the
recommendation of the Board for the reconstruction, reorganisation
or winding-up of the Company, there is a material uncertainty
related to events or conditions that may cast significant doubt on
the Company's continuation as a going concern. The Board operates
under the assumption that the resolution will be passed.
Taking all matters into account,
the Directors have a reasonable expectation that the Company will
continue in operational existence for at least twelve months from
the date of approval of the of the Annual Report and Audited
Financial Statements and continue to adopt the going concern basis
in preparing them.
Viability Statement
The Directors have assessed the
viability of the Company over the three-year period to September
2026. The Directors consider that three years is an appropriate
period to assess viability given the Company's style of investment
and is a sufficient investment time horizon to be relevant to
shareholders.
Choosing a longer time period can
present difficulties, given the lack of longer-term economic
visibility and the need for adaptation that this will inevitably
create for the Company and its portfolio.
In their assessment of the
viability of the Company, the Directors have considered the
Company's principal and emerging risks and uncertainties, organised
into Risk Classes by the Risk Committee (page 53).
The Directors have reviewed
financial projections which consider:
- Available liquidity (Risk Class 1: Liquidity
Management)
- The
ability of the Company to raise capital (Risk Class 2:
Financial/Capital Market)
- The
performance (Risk Class 3: Portfolio Performance) and value of the
existing portfolio (Risk Class 11: Valuation)
- The
ongoing expenses of the Company
The Directors' considered a severe
downside scenario which models:
- A significant economic event, which results in a
deterioration of portfolio company performance and a recalibration
of public and private markets leading to a compound 25% per annum
decrease in the aggregate portfolio value over a three-year
economic cycle.
- A sustained discount to NAV which results in the inability of
the company to raise new capital.
- Dislocation of public and private markets, including the
prolonged closure of the IPO market, resulting in the inability to
make portfolio exits.
- A sustained period of inflation of approximately 10% per
annum.
Even in this severe downside
scenario the company has sufficient liquidity for the next three
years to meet its financial obligations.
As previously announced, the
Company expects to enter into new arrangements relating to the
management of the Company. In summary, with effect from 1 April
2024:
- the appointment of Jupiter Investment Management Limited as
portfolio manager and investment adviser to the Company will be
terminated; and
- pursuant to a new investment management and advisory
agreement becoming effective 1 April 2024:
·
the Company will appoint Chrysalis Investment
Partners LLP to act as the Company's investment adviser;
and
·
G10 Capital Limited - part of IQ-EQ group's UK
Regulatory and AIFM platform - will be appointed as the Company's
alternative investment fund manager.
The continuation of the Company is
dependent on an investment management and advisory agreement being
in place. The appointment of either party under the new agreement
may be terminated by giving not less than six months' notice. The
Directors do not know of any reason why notice would be served by
either party over the period of the viability statement.
As noted above, at the Company's
annual general meeting, Shareholders will be invited to vote on the
continuation of the Company. The vote therefore takes place during
the viability period. The Board will recommend that Shareholders
vote in favour of continuation and the Directors operate under the
assumption that the resolution will be passed. If the resolution is
not passed, the Directors will be required to put forward proposals
for the reconstruction, reorganisation or winding-up of the Company
for Shareholders' consideration within six months following the
date on which the resolution is not passed. These proposals may or
may not involve winding-up the Company or liquidating all or part
of the Company's then existing portfolio of investments and,
accordingly, failure to pass a continuation vote will not
necessarily result in the winding-up of the Company or liquidation
of all or some of its investments.
At year end, the Company has
liquidity including a current cash position of £22,626,000, a net
current asset position of £20,973,000 and liquid listed investments
amounting to £10,284,000. This available liquidity would sustain
the business over the course of the viability period.
The Directors, having considered
the above and having carried out a robust assessment of the
principal and emerging risks facing the Company, have concluded
that there is a reasonable expectation that the Company will be
able to continue in operation and meet its liabilities as they fall
due over the three-year period to September 2026.
Results and Dividends
The results attributable to
shareholders for the year are shown in the Statement of
Comprehensive Income.
The Directors have not declared a
dividend for the year (2022: £nil).
Directors
The Directors of the Company who
served during the year and to date are set out on pages 36 and
37.
Directors' Interests
The Directors held the following
interests in the share capital of the Company either directly or
beneficially as at 30 September 2023, and as at the date of signing
these Audited Financial Statements:
|
|
Number of
|
|
% Ordinary Shares
in
|
|
|
Ordinary
Shares
|
|
issue as at 30 September 2023
|
|
|
|
|
|
Andrew Haining
|
|
79,000
|
|
0.0133
|
Stephen Coe
|
|
60,909
|
|
0.0102
|
Simon Holden
|
|
89,500
|
|
0.0150
|
Anne Ewing
|
|
55,000
|
|
0.0092
|
Tim Cruttenden
|
|
21,298
|
|
0.0036
|
Margaret O'Connor
|
|
-
|
|
-
|
S Cruttenden (son of Tim
Cruttenden)
|
|
11,530
|
|
0.0019
|
As at 30 September 2022 the
following Directors had holdings in the Company:
|
|
Number of
|
|
% Ordinary Shares
in
|
|
|
Ordinary
Shares
|
|
issue as at 30 September 2022
|
|
|
|
|
|
Andrew Haining
|
|
79,000
|
|
0.0133
|
Stephen Coe
|
|
60,909
|
|
0.0102
|
Simon Holden
|
|
89,500
|
|
0.0150
|
Anne Ewing
|
|
55,000
|
|
0.0092
|
Tim Cruttenden
|
|
21,298
|
|
0.0036
|
Margaret O'Connor
|
|
-
|
|
-
|
S Cruttenden (son of Tim
Cruttenden)
|
|
11,170
|
|
0.0019
|
Under their terms of appointment,
the Directors' total remuneration (including one-off fees) are as
disclosed below:
Lord Rockley, Diane
Seymour-Williams and Jonathan Biggs receive £40,000 each per annum
as members of the Valuation Committee. Lord Rockley, Diane
Seymour-Williams and Jonathan Biggs are not Directors of the
Company.
The Directors' compensation is
reviewed annually and effective 1 October 2023, each Director is
paid a basic fee of £57,500 (2022: £52,500) per annum by the
Company. In addition to this, the Chairman receives an extra
£27,500 (2022: £27,500) per annum. A
one-off fee was awarded to the Chairman of £35,000 to acknowledge
and reflect his considerable time commitment to the Company
The Risk Committee Chairman receives an extra
£10,000 per annum and the Audit Committee Chairman receives an
extra £10,000 (2022: £10,000) per annum, Mr Cruttenden also
receives an additional £5,000 per annum to reflect his position on
the Valuation Committee. Refer to page 44 for more information
regarding Directors' remuneration.
Risks and Uncertainties
There are several potential risks
and uncertainties which could have a material impact on the
Company's performance and could cause actual results to differ
materially from expected and historical results.
The Risk Committee has overall
responsibility for risk management and control within the context
of achieving the Company's objectives. The Board agrees the
strategy for the Company, approves the Company's risk appetite and
the Risk Committee monitors the risk profile of the Company. The
Risk Committee also maintains a risk management process to
identify, monitor and control risk concentration.
The Board's responsibility for
conducting a robust assessment of the principal and emerging risks
is embedded in the Company's risk map and stress testing, which
helps position the Company to ensure compliance with the
Association of Investment Companies Code of Corporate Governance
(the "AIC Code").
The principal risks to which the
Company will be exposed are given in note 19 to the Annual Report
and Audited Financial Statements.
The main risks that the Company
faces arising from its financial instruments are:
(i) market risk,
including:
- price risk, being the risk that the value of investments will
fluctuate because of changes in more investee-company specific
performance as well as market pricing of comparable
businesses;
- interest rate risk, being the risk that the future cash flows
of a financial instrument will fluctuate because of changes in
interest rates; and
- foreign currency risk, being the risk that the value of
financial assets and liabilities will fluctuate because of
movements in currency rates.
(ii) credit risk, being the
risk that a counterparty to a financial instrument will fail to
discharge an obligation or commitment that it has entered into with
the Company.
(iii) liquidity risk, being the
risk that the Company will not be able to meet its liabilities when
they fall due. This may arise should the Company not be able to
liquidate its investments.
(iv) company failure, being the
risk that companies invested in may fail and result in loss of
capital invested.
To manage such risks the Company
shall comply with the investment restrictions and diversification
limits provided for in the Prospectus. The Company will invest and
manage its assets with the objective of spreading risk. Further to
the investment restrictions discussed, the Company also seeks to
manage risk by:
· not
incurring debt over 20% of its NAV, calculated at time of drawdown.
The Company will target repayment of such debt within twelve months
of drawdown; and
· entering from time to time into hedging or other derivative
arrangements for the purposes of efficient portfolio management,
managing where appropriate, any exposure through its investments to
currencies other than Sterling.
For further details with respect
to the processes for identifying, monitoring and controlling risks
to which the Company is exposed, kindly referred to Report of the
Risk Committee on pages 46 to 48.
Ongoing Charges
The ongoing charges figure for the
year was 0.78%. The ongoing charges represent ongoing annual
expenses of £6,669,787 divided by total average Net Asset Value for
the year of £788,273,640. The ongoing charges has also been
prepared in accordance with the recommended methodology provided by
the Association of Investment Companies where investment purchase
costs of £515,724 and performance fees of £nil have been excluded
and represents the percentage reduction in shareholder returns as a
result of recurring operational expenses.
Emerging Risks
Since 7 October 2023 an armed
conflict has been ongoing between Israel and Hamas-led Palestinian
militant groups, largely in and around the Gaza Strip, the West
Bank and on the Israel-Lebanon border. One of the Company's
portfolio companies, Deep Instinct, has an operational presence in
Tel Aviv, Israel. Notwithstanding the impact the conflict has had
in the region to date, Deep Instinct has not experienced material
disruption to its operations.
The Board will of course continue
to assess the position as the nature of the conflict
evolves.
ESG and Climate Change Risks and
Considerations
The Board of Directors have
carefully considered the impact of climate change and ESG related
risks on the Company's business strategy and the impact of the
Company's operations on the local community and environment. This
analysis has taken place at both the level of the Company and at
the investment portfolio level.
As an investment company with no
employees, the Company itself has only a minimal footprint on the
local community and environment, but recognises that everyone has a
part to play in the reduction of adverse environmental impacts and
ensuring the company's operations have a positive impact on society
and the generation of long term sustainable value.
Further information on how the
Board and Jupiter manage the Company's ESG and climate change
related risks at the investment portfolio level can be found within
the Chairman's Statement on pages 2 to 6 and the Environmental,
Social and Corporate Governance Report on pages 26 to 31. This
includes the integration of ESG analysis into the investment
process and the alignment of Jupiter's strategy, purpose and
principles to the UN Global Compact.
Portfolio Management and Administration
Portfolio Management Agreement and Fees
The Directors are responsible for
managing the business affairs of the Company in accordance with the
Articles of Incorporation and the investment policy and have
overall responsibility for the Company's activities including its
investment activities and reviewing the performance of the
Company's portfolio.
The Directors have, however,
appointed the Investment Adviser to perform portfolio management
functions.
Following the end of the Company's
financial year, a Heads of Terms announcement was made on 27
November 2023, explaining a redrawn structure through which
investment advisory services will be provided, including the timing
of the proposed Jupiter contract termination on 1 April 2024.
Jupiter has agreed to a reduction in the management fee, effective
from 1 October 2023, from 50bps to 15bps, leading to an expected
saving of approximately £1.75 million for Chrysalis shareholders
over the six-month period to 31 March 2024.
Under the Heads of Term
announcement, Jupiter has released the Principals and other
executives from their employment contracts and employment
restrictions, effective 31 March 2024. The Board has agreed, in
principle, to enter into a tripartite contract with an LLP formed
by the Principals to take over investment advisory services from
Jupiter, and with G10 - the AIFM platform of the IQEQ fund
administration group - to take over AIFM services for the Company,
each with effect from 1 April 2024.
Administrator
Apex Administration (Guernsey)
Limited (formerly known as Maitland Administration (Guernsey)
Limited) has been appointed as Administrator to the Company
pursuant to a master services agreement. The Administrator is
responsible for the maintenance of the books and financial accounts
of the Company and the calculation, in conjunction with the
Investment Adviser, of the Net Asset Value of the Company and the
shares.
Depositary
The Depositary of the Company is
Citibank UK Limited.
Corporate Governance Statement
The Corporate Governance Statement
forms part of the Directors' Report.
Board Responsibilities
The Board comprises six
non-executive Directors, who meet at least quarterly to consider
the affairs of the Company in a prescribed and structured manner.
All Directors are considered independent of the Investment Adviser
for the purposes of the AIC Code and Listing Rule 15.2.12A.
Biographies of the Directors for the year ended 30 September 2023
appear on pages 36 and 37 which demonstrate the wide range of
skills and experience they bring to the Board.
The Directors, in the furtherance
of their duties, may take independent professional advice at the
Company's expense, which is in accordance with principle 13 of the
AIC Code. The Directors also have access to the advice and services
of the Company Secretary through its appointed representatives who
are responsible to the Board for ensuring that the Board's
procedures are followed, and that applicable rules and regulations
are complied with.
To enable the Board to function
effectively and allow the Directors to discharge their
responsibilities, full and timely access is given to all relevant
information.
The Directors are requested to
confirm their continuing professional development is up to date and
any necessary training is identified during the annual performance
reviews carried out and recorded by the Remuneration and Nomination
Committee.
At each annual general meeting of
the Company, each director shall retire from office and each
director may offer themselves for election or re-election by the
shareholders.
Conflicts of Interest
None of the Directors nor any
persons connected with them had a material interest in any of the
Company's transactions, arrangements or agreements at the date of
this report and none of the Directors has or had any interest in
any transaction which is or was unusual in its nature or conditions
or significant to the business of the Company, and which was
affected by the Company during the reporting year.
At the date of this Annual Report,
there are no outstanding loans or guarantees between the Company
and any Director.
Committees
The Company has established: the
Audit Committee, the Remuneration and Nomination Committee, the
Risk Committee, Valuation Committee and the Management Engagement
Committee (together the "Committees"). Terms of Reference for each
committee is available on request from the
Administrator.
The Audit Committee
Stephen Coe is the Chairman of the
Audit Committee. A full report regarding the Audit Committee can be
found in the Audit Committee Report.
Remuneration and Nomination Committee
In accordance with the AIC Code, a
Remuneration and Nomination Committee has been established. Anne
Ewing has been appointed as Chairman. The Remuneration and
Nomination Committee meets at least once a year in accordance with
the terms of reference and reviews, inter alia, the structure, size
and composition of the Board.
Details of the Directors'
remuneration can be found in note 20 and page 44.
Management Engagement Committee
Margaret O'Connor has been
appointed Chairman of the Management Engagement Committee. The
Management Engagement Committee will meet formally at least once a
year for the purpose, amongst other things, of reviewing the
actions and judgments of the Investment Adviser and the terms of
the Portfolio Management Agreement. Details of the management and
performance fees can be found in note 6.
Risk Committee
Simon Holden is the Chairman of
the Risk Committee. A full report regarding the Risk Committee can
be found in the Risk Committee Report.
Valuation Committee
Lord Rockley is the Chairman of the Valuation Committee with
Tim Cruttenden, Diane
Seymour-Williams and Jonathan Biggs as members.
Substantial Shareholdings
On 31 December 2023, the latest
practicable date for disclosure in this Annual Report, the Company
did not have any shareholders with a holding greater than
10%.
Shareholder Communication
The Company's main method of
communication with Shareholders is through its published Half
Yearly and Annual Reports which aim to provide Shareholders with a
fair, balanced and understandable view of the Company's results and
objectives. This is supplemented by the publication of the
Company's quarterly net asset values on its ordinary shares on the
London Stock Exchange.
In line with principle 16 of the
AIC Code, the Investment Adviser communicates with both the
Chairman and shareholders and is available to communicate and meet
with major shareholders. The Company has also appointed Liberum
Capital Limited to liaise with all major shareholders together with
the Investment Adviser, all of whom report back to the Board at
quarterly board meetings ensuring that the Board is fully aware of
shareholder sentiment, expectations and analyst
views.
Shareholder Communication
The Company's website, which is
maintained by the Investment Adviser, is regularly updated with
news and announcements. Information published online is accessible
in many countries each with differing legal requirements relating
to the preparation and dissemination of financial information.
Users of the Company's website is responsible for informing
themselves of how the requirements in their own countries may
differ from those of Guernsey.
Relations with Shareholders
All holders of Ordinary Shares in
the Company have the right to receive notice of, attend and vote at
the general meetings of the Company.
At each general meeting of the
Company, the Board and the Investment Adviser are available to
discuss issues affecting the Company.
Shareholders are additionally able
to contact the Board directly outside of meetings via the Company's
dedicated e-mail address (chrysalis@maitlandgroup.com) or by post
via the Company Secretary. Alternatively, Shareholders are able to
contact the Investment Adviser directly
(chrysalis@maitlandgroup.com) or the Senior Independent Director
(chrysalis@maitlandgroup.com) for issues they feel they may be
unable to raise directly with the Company itself.
The Company has adopted a
zero-tolerance policy towards bribery and is committed to carrying
out business fairly, honestly and openly.
Voting and Stewardship code
The Investment Adviser is
committed to the principles of the Financial Reporting Council's UK
Stewardship Code and this also constitutes the disclosure of that
commitment required under the rules of the FCA (Conduct of Business
Rule 2.2.3).
Signed on behalf of the Board
by:
Andrew Haining
Chairman
Statement of Directors'
Responsibilities
The Directors are responsible for
preparing the Annual Report and Audited Financial Statements in
accordance with applicable law and regulations.
Company law requires the Directors
to prepare Audited Financial Statements for each financial
year. Under that law they are required to
prepare the Audited Financial Statements in accordance with
International Financial Reporting Standards as
adopted by the EU and applicable law.
Under company law the Directors
must not approve the Audited Financial Statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Company and of its profit or loss for that year. In
preparing these Audited Financial Statements, the Directors are
required to:
· select suitable accounting policies and then apply them
consistently;
· make
judgements and estimates that are reasonable, relevant and
reliable;
· state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the Audited Financial Statements;
· assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
· use
the going concern basis of accounting unless they either intend to
liquidate the Company or to cease operations or have no realistic
alternative but to do so.
The Directors are responsible for
keeping proper accounting records that are sufficient to show and
explain the Company's transactions and disclose with reasonable
accuracy at any time the financial position of the Company and
enable them to ensure that its Audited Financial Statements comply
with the Companies (Guernsey) Law, 2008. They are 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, and have general
responsibility for taking such steps as are reasonably open to them
to safeguard the assets of the Company and to prevent and detect
fraud and other irregularities.
The Directors are responsible for
the maintenance and integrity of the corporate and financial
information included on the Company's website. Legislation in
Guernsey governing the preparation and dissemination of Financial
Statements may differ from legislation in other
jurisdictions.
Disclosure of information to auditors
The Directors who held office at
the date of approval of this Directors' Report confirm that, so far
as they are aware, there is no relevant audit information of which
the Company's Auditor is unaware; and that each Director has taken
all the steps that they ought to have taken as a director to
make themselves aware of any relevant
audit information and to establish that the Company's Auditor is
aware of that information.
Responsibility statement of the Directors in respect of the
Annual Report
We confirm that to the best of our
knowledge:
· the
Financial Statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company; and
· the
management report (comprising the Chairman's Statement, the
Investment Adviser's Report, and Directors' Report) includes a fair
review of the development and performance of the business and the
position of the Company, together with a description of the
principal risks and uncertainties that it faces.
We consider the Annual Report and
Audited Financial Statements, taken as a whole, are fair, balanced
and understandable and provide the information necessary for
shareholders to assess the Company's position and performance,
business model and strategy.
Signed on behalf of the Board
by:
Andrew Haining
Chairman
28 January 2024
Audit Committee Report
In accordance with the AIC Code,
an Audit Committee has been established consisting of Anne Ewing,
Simon Holden, Margaret O'Connor and Stephen Coe, who is the
Chairman of the Audit
Committee.
Membership and Role of the Committee
The Audit Committee meets at least
twice a year and, when requested, provides advice to the Board on
whether the Annual Report and Audited Financial Statements, taken
as a whole, is fair, balanced and understandable and provides
information necessary for the shareholders to assess the Company's
performance, business model and strategy. The Audit Committee also
reviews, inter alia, the financial reporting process and the system
of internal control and management of financial risks, including
understanding the current areas of greatest financial risk and how
these are managed by the Investment Adviser, reviewing the Annual
Report and Audited Financial Statements, assessing the fairness of
Audited Financial Statements and disclosures and reviewing the
external audit process. The Audit Committee is responsible for
overseeing the Company's relationship with the external auditor
(the "Auditor"), including making recommendations to the Board on
the appointment of the Auditor and their remuneration.
The Audit Committee considers the
nature, scope and results of the Auditor's work and reviews, and
develops and implements a policy on the supply of any non-audit
services that are to be provided by the Auditor. The Audit
Committee annually reviews the independence and objectivity of the
Auditor and considers the appointment of an appropriate
Auditor.
The continuation of the Auditor
was considered and the Board subsequently decided that the Auditor
was sufficiently independent and was appropriately appointed in
order to carry out the audit of the Company for the year ended 30
September 2023. Appointment of the Auditor will be reviewed each
year before the AGM. The level of non-audit versus audit services
is monitored. The table below summarises the remuneration for
services provided to the Company to KPMG Channel Islands Limited
("KPMG") for audit and non-audit services during the year ended 30
September 2023.
|
30
September
|
|
30
September
|
|
2023
|
|
2022
|
Annual audit fee
|
135,000
|
|
135,000
|
Reporting accountant
services
|
15,000
|
|
-
|
Interim review
|
45,000
|
|
40,000
|
|
|
|
|
|
195,000
|
|
175,000
|
Non-audit services provided in the
year arose in connection with the review of the Company's interim
financial statements and the provision of reporting accountant
services in respect of the preparation by the Company of a related
party circular regarding proposed amendments to the Company's
performance fee payable under the terms of a portfolio management
agreement to Jupiter Asset Management Limited. Notwithstanding such
services, the Audit Committee considers KPMG to be independent of
the Company and that the provision of such non-audit services is
not a threat to the objectivity and independence of the conduct of
the auditor as appropriate safeguards are in place.
Internal Control
The Company is responsible for the
process surrounding the valuation of its investment portfolio. The
Company has delegated these processes to its independent Valuation
Committee which reviews third party valuations of unlisted
investments. The Audit Committee liaises with the Valuation
Committee regularly and reviews minutes of Valuation Committee
meetings. For all other processes of the Company responsibility for
internal control lies within the services provided by JIML and
other service providers. These controls are monitored by the Board
reviewing and challenging reports from these service providers and
through segregation of duties between them.
The Audit Committee monitors the
financial reporting process and tasks undertaken in the production
of the Annual Report and Audited Financial Statements. The
administration and company secretarial duties of the Company are
performed by Apex Administration
(Guernsey) Limited.
Registrar duties are performed by
Computershare Investor Services (Guernsey) Limited.
The custody of financial assets is
undertaken by Citibank UK Limited.
The Company does not have an
internal audit department. All the Company's management and
administration functions are delegated to independent third parties
and it is therefore felt there is no need for the Company to have
an internal function. The Audit Committee have assessed the
Company's internal controls and found them to be
satisfactory.
Fair Value Estimation
The valuation of the Company's
investments is considered to be a significant area of focus given
that they represent the majority of the net assets of the Company
and in view of the significance of the estimates and judgments that
may be involved in the determination of their fair value. In
discharging its responsibilities, the Audit Committee has
specifically considered the valuation of investments as
follows:
· Independent third-party valuation firms are engaged to
provide assistance, advice, assurance, and documentation in
relation to the portfolio valuations. Valuations are then submitted
to the portfolio managers and the Company's Valuation Committee for
review. The Board reviews these portfolio valuations on a regular
basis throughout the year. The Company is a self-managed Alternative Investment Fund. The Risk Committee
and an Independent Valuation Committee were appointed. The Audit
Committee's ultimate responsibility is to
review the portfolio valuations.
· The
Audit Committee receives and reviews reports from the Investment
Adviser and the Auditor relating to the Company's Annual Report.
The Audit Committee focuses particularly on compliance with legal
requirements, accounting standards and the Listing Rules and
ensures that an effective system of internal financial and
non-financial controls is maintained. The ultimate responsibility
for reviewing and approving the Annual Report remains with the
Board.
· Reporting to the Board on the significant judgment made in
the preparation of the Company's Annual Report and Audited
Financial Statements and recommending valuations of the Company's
investments to the Board.
· The
Audit Committee will recommend the Board and or Independent
Valuation Committee engages independent valuers for specific assets
where it considers it appropriate.
Continuation vote
In addition to the above the Audit
Committee paid particular attention during the year to the
continuation vote that is to be presented at the 2024 AGM. In
reaching its conclusion the Audit Committee reviewed the AIC SORP
which states that it is more appropriate to prepare financial
statements on a going concern basis unless a vote has already been
triggered and shareholders have voted against continuation. The
SORP guidance goes on to state that it is appropriate for the
financial statements to be prepared on a going concern basis whilst
making a material uncertainty disclosure as set out in accounting
standards.
External Audit
The Audit Committee will hold an
annual meeting to approve the Company's Annual Report and Audited
Financial Statements before its publication. During the current
year the Audit Committee met with the Auditor to discuss the audit
plan and approach.
During this meeting it was agreed
with the Auditor that the area of significant audit focus related
to the valuation of investments given that they represent the
majority of net assets of the Company and their valuation involves
significant judgement. The scope of the audit work in relation to
this asset class was discussed. The Auditor has also identified the
Company's going concern status as an area of focus.
The Audit Committee reviews cash
flow and working capital reports as part of the review of annual
and semi-annual financial statements, together with taking into
consideration significant events such as the continuation vote. At
the conclusion of the audit, the Audit Committee met with the
Auditor and discussed the scope of their annual audit work and
their audit findings.
The Audit Committee reviews the
scope and results of the audit, its cost effectiveness, and the
independence and objectivity of the Auditor. The Audit Committee
has particular regard to any non-audit work that the Auditor may
undertake and the terms under which the Auditor may be appointed to
perform non-audit services. In order to safeguard the Auditor's
independence and objectivity, the Audit Committee ensures that any
other advisery and/or consulting services provided by the Auditor
does not conflict with their statutory audit
responsibilities.
To fulfil its responsibilities
regarding the independence of the Auditor, the Audit Committee
considered:
· a
report from the Auditor describing their arrangements to identify,
report and manage any conflicts of interest; and
· the
extent of the non-audit services provided by the
Auditor.
To assess the effectiveness of the
Auditor, the committee reviewed:
· the
Auditor's fulfilment of the agreed audit plan and variations from
it;
· the
audit findings report highlighting any major issues that arose
during the course of the audit; and
· the
effectiveness and independence of the Auditor having considered the
degree of diligence and professional scepticism demonstrated by
them.
The Audit Committee is satisfied
with KPMG's effectiveness and independence as Auditor.
During the year the Audit
Committee met three time with all members present (refer to
Director Attendance on page 39).
Reappointment of auditor
The Auditor, KPMG Channel Islands
Limited, has expressed its willingness to continue in office as
Auditor. A resolution proposing their reappointment will be
submitted at the forthcoming general meeting to be held pursuant to
section 199 of the Law.
Stephen Coe
Chairman of the Audit Committee,
Chrysalis Investments Limited
Our opinion is
unmodified
We have audited the financial
statements of Chrysalis Investments Limited (the "Company"), which
comprise the statement of financial position as at 30 September
2023, the statements of comprehensive income, changes in equity and
cash flows for the year then ended, and notes, comprising
significant accounting policies and other explanatory
information.
In our opinion, the accompanying
financial statements:
· give
a true and fair view of the financial position of the Company as at
30 September 2023, and of the Company's financial performance and
cash flows for the year then ended;
· are
prepared in accordance with International Financial Reporting
Standards as adopted by the EU ("IFRS"); and
· comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in
accordance with International Standards on Auditing (UK) ("ISAs
(UK)") and applicable law. Our responsibilities are described
below. We have fulfilled our ethical responsibilities under, and
are independent of the Company in accordance with, UK ethical
requirements including the FRC Ethical Standard as required by the
Crown Dependencies' Audit Rules and Guidance. We believe that the
audit evidence we have obtained is a sufficient and appropriate
basis for our opinion.
Material uncertainty relating to
going concern
|
The risk
|
Our response
|
|
|
|
Going concern
Refer to Director's Report on page
50 and Audit Committee report on page 61.
We draw attention to note 2 (b) to
the financial statements which indicates that the Company is
obliged to hold a continuation vote at the 2024 Annual General
Meeting of Shareholders.
This condition constitutes a
material uncertainty that may cast doubt about the Company's
ability to continue as a going concern.
Our opinion is not modified in
respect of this matter.
|
Disclosure quality
The financial statements explain
how the Board has formed a judgment that it is appropriate to adopt
the going concern basis of preparation for the Company.
That judgement is based on an
evaluation of the inherent risks to the Company's business model
and how those risks might affect the Company's financial resources
or ability to continue operations over a period of at least a year
from the date of approval of the financial statements, in
particular in relation to the continuation vote.
The risk for our audit is whether
or not those risks are such that they amounted to a material
uncertainty that may cast significant doubt about the ability to
continue as a going concern.
If so, that fact is required to be
disclosed (as has been done) and, along with a description of the
circumstances, is a key financial statement disclosure.
|
Our procedures included, but were
not limited to:
· We obtained and inspected a Board approved written assessment
of going concern on the Company and corroborated the assessment
with our knowledge of the business.
· We considered the risk that the outcome of the continuation
vote could affect the Company for at least a year from the date of
approval of the financial statements (the "going concern period")
by inspecting minutes of meetings held by the directors, inquiring
with management as to their assessment of the likelihood of uptake
of the continuation vote, and considering key financial metrics
including the discount of the Company's share price against its net
asset value.
Assessing
disclosures:
We considered whether the going concern disclosure in
note 2(b) to the financial statements gives a full and
accurate description of the directors' assessment of going concern,
including the identified risks and dependencies.
|
Other key audit matters: our assessment of the risks of
material misstatement
Key audit matters are those matters
that, in our professional judgment, were of most significance in
the audit of the financial statements and include the most
significant assessed risks of material misstatement (whether or not
due to fraud) identified by us, 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. Going concern is a significant key audit matter and is
described in the 'Material uncertainty relating to going concern'
section of our report.
These matters 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. In arriving at our audit
opinion above, the other key audit matter was as follows
(unchanged from 2022):
|
The risk
|
Our response
|
|
|
|
Valuation of investments held at
fair value through profit or loss
£780,376,000 (2022:
£822,363,000)
Refer to page 61 of the Audit
Committee Report, notes 2(i), 3, 11 and 19
|
Basis:
The Company's investments are
classified, recognised and measured at fair value through profit or
loss in accordance with IFRS 9. The investments comprise of equity
and equity-related instruments in quoted and unquoted companies and
represent 97% (2022: 93%) of the Company's net assets as at 30
September 2023.
The Company's unlisted investments,
with a value of £770,092,000 (the "Unlisted Investments"), are
valued by using recognised valuation methodologies and models, in
accordance with the International Private Equity and Venture
Capital Valuation Guidelines.
The Company utilises independent
third party valuation firms (the "Valuation Agents") to assist and
advise on their valuation process.
The Company's listed investment,
with a value of £10,284,000 (the "Listed Investment"), is valued by
the Company based on the quoted market bid price in an active
market for that instrument.
Risk:
The valuation of the Company's
investments is a significant area of our audit, given that it
represents a significant portion of the net assets of the
Company.
The valuation risk of the Unlisted
Investments incorporates both a risk of fraud and error given the
significance of estimates and judgements that may be involved in
the determination of fair value.
On the basis of the above we
determined that the valuation of Unlisted Investments have a high
degree of estimation uncertainty giving rise to a potential range
of reasonable outcomes greater than our materiality for the
financial statements as a whole. The financial statements disclose
in note 19 the sensitivities estimated by the Company.
|
Our audit
procedures included but were not limited to:
Internal
Controls:
We assessed the design and
implementation of the control in place over the valuation of the
Company's Unlisted Investments.
Challenging managements' assumptions and inputs including use
of our KPMG valuation specialist:
For the Unlisted Investments, with
the support of our KPMG valuation specialist, we:
·
assessed the scope of the services provided by
the Valuation Agents in relation to the Unlisted Investments as
well as the objectivity, capabilities and competence of the
Valuation Agents;
·
held discussions with the Investment Adviser and
the Valuation Agents and attended, in an observation capacity, a
meeting of the Board of Directors of the Company, to understand the
valuation approach;
·
read the valuation reports and memoranda produced
by the Valuation Agents and by the Investment Adviser;
·
read the minutes of meetings of the Company's
Valuation Committee and Board of Directors where the Unlisted
Valuations were discussed;
·
assessed the appropriateness of the valuation
approach and methodology applied to each Unlisted
Investment;
·
benchmarked the assumptions used in the valuation
models employed to observable market data (where
possible);
·
obtained an understanding of how the impact of
global economic factors and the resultant increase in uncertainty
have been reflected in the valuation of the Unlisted Investments;
and
·
corroborated material investee company inputs and
recent investment transactions used in the valuation models to
supporting documentations.
Our KPMG valuation specialist
independently priced the Listed Investment to a third party pricing
source.
Assessing
disclosures:
We also considered the Company's disclosures (see notes 3 and 19)
in relation to the use of estimates and judgements regarding the
valuation of investments and the Company's investment valuation
policies adopted in note 2(i) and fair value disclosures in note 19
for compliance with IFRS.
|
Our application of materiality and
an overview of the scope of our audit
Materiality for the financial
statements as a whole was set at £16,000,000, determined with
reference to a benchmark of net assets of £801,349,000, of which it
represents approximately 2.0% (2022: 2.0%).
In line with our audit
methodology, our procedures on individual account balances and
disclosures were performed to a lower threshold, performance
materiality, so as to reduce to an acceptable level the risk that
individually immaterial misstatements in individual account
balances add up to a material amount across the financial
statements as a whole. Performance materiality for the Company was
set at 75% (2022: 75%) of materiality for the financial statements
as a whole, which equates to £12,000,000. We applied this
percentage in our determination of performance materiality because
we did not identify any factors indicating an elevated level of
risk.
We reported to the Audit Committee
any corrected or uncorrected identified misstatements exceeding
£800,000, in addition to other identified misstatements that
warranted reporting on qualitative grounds.
Our audit of the Company was
undertaken to the materiality level specified above, which has
informed our identification of significant risks of material
misstatement and the associated audit procedures performed in those
areas as detailed above.
Going concern
The Directors have prepared the
financial statements on the going concern basis as they do not
intend to liquidate the Company or to cease its operations, and as
they have concluded that the Company's financial position means
that this is realistic. As stated in the 'material uncertainty
relating to going concern' section of our report, they have also
concluded that there is a material uncertainty relating to going
concern.
An explanation of how we evaluated
the directors' assessment is set out in the 'material uncertainty
relating to going concern' section of our report.
Our conclusions based on this
work:
· we
consider that the directors' use of the going concern basis of
accounting in the preparation of the financial statements is
appropriate; and
· we
have nothing material to add or draw attention to in relation to
the directors' statement in the notes to the financial statements
on the use of the going concern basis of accounting, and their
identification therein of a material uncertainty over the Company's
use of that basis for the going concern period
Fraud and breaches of laws and
regulations - ability to detect
Identifying and responding to risks
of material misstatement due to fraud
To identify risks of material
misstatement due to fraud ("fraud risks") we assessed events or
conditions that could indicate an incentive or pressure to commit
fraud or provide an opportunity to commit fraud.
Our risk assessment procedures
included:
· enquiring of management as to the Company's policies and
procedures to prevent and detect fraud as well as enquiring whether
management have knowledge of any actual, suspected or alleged
fraud;
· reading minutes of meetings of those charged with governance;
and
· using analytical procedures to identify any unusual or
unexpected relationships.
As required by auditing standards,
and taking into account possible incentives or pressures to
misstate performance and our overall knowledge of the control
environment, we perform procedures to address the risk of
management override of controls, in particular the risk that
management may be in a position to make inappropriate accounting
entries, and the risk of bias in accounting estimates such as
valuation of unquoted investments.
On this audit we do not believe
there is a fraud risk related to revenue recognition because the
Company's revenue streams are simple in nature with respect to
accounting policy choice, and are easily verifiable to external
data sources or agreements with little or no requirement for
estimation from management. We did not identify any additional
fraud risks.
We performed procedures
including:
· identifying journal entries and other adjustments to test
based on risk criteria and comparing any identified entries to
supporting documentation;
· incorporating an element of unpredictability in our audit
procedures; and
· assessing significant accounting estimates for
bias
Further detail in respect of
valuation of unquoted investments is set out in the key audit
matter section of this report.
Identifying and responding to
risks of material misstatement due to non-compliance with laws and
regulations
We identified areas of laws and
regulations that could reasonably be expected to have a material
effect on the financial statements from our sector experience and
through discussion with management (as required by auditing
standards), and from inspection of the Company's regulatory and
legal correspondence, if any, and discussed with management the
policies and procedures regarding compliance with laws and
regulations. As the Company is regulated, our assessment of risks
involved gaining an understanding of the control environment
including the entity's procedures for complying with regulatory
requirements.
The Company is subject to laws and
regulations that directly affect the financial statements including
financial reporting legislation and taxation legislation and we
assessed the extent of compliance with these laws and regulations
as part of our procedures on the related financial statement
items.
The Company is subject to other
laws and regulations where the consequences of non-compliance could
have a material effect on amounts or disclosures in the financial
statements, for instance through the imposition of fines or
litigation or impacts on the Company's ability to operate. We
identified financial services regulation as being the area most
likely to have such an effect, recognising the regulated nature of
the Company's activities and its legal form. Auditing standards
limit the required audit procedures to identify non-compliance with
these laws and regulations to enquiry of management and inspection
of regulatory and legal correspondence, if any. Therefore if a
breach of operational regulations is not disclosed to us or evident
from relevant correspondence, an audit will not detect that
breach.
Context of the ability of the
audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations
of an audit, there is an unavoidable risk that we may not have
detected some material misstatements in the financial statements,
even though we have properly planned and performed our audit in
accordance with auditing standards. For example, the further
removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less
likely the inherently limited procedures required by auditing
standards would identify it.
In addition, as with any audit,
there remains a higher risk of non-detection of fraud, as this may
involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. Our audit
procedures are designed to detect material misstatement. We are not
responsible for preventing non-compliance or fraud and cannot be
expected to detect non-compliance with all laws and
regulations.
Other information
The directors are responsible
for the other information. The other information comprises the
information included in the annual report but does not
include the financial statements and our auditor's report
thereon. Our opinion on the financial statements does not cover the
other information and we do not express an audit opinion or any
form of assurance conclusion 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, 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 in this regard.
Disclosures of emerging and
principal risks and longer term viability
We are required to perform
procedures to identify whether there is a material inconsistency
between the directors' disclosures in respect of emerging and
principal risks and the viability statement, and the financial
statements and our audit knowledge. We have nothing material
to add or draw attention to in relation to:
· the
directors' confirmation within the Viability Statement (pages 50 to
52) that they have carried out a robust assessment of the emerging
and principal risks facing the Company, including those that would
threaten its business model, future performance, solvency or
liquidity;
· the
emerging and principal risks disclosures describing these risks and
explaining how they are being managed or mitigated;
· the
directors' explanation in the Viability Statement (pages 50 to
52) as to how they have assessed the prospects of the Company, over
what period they have done so and why they consider that period to
be appropriate, and their statement as to whether they have a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing
attention to any necessary qualifications or
assumptions.
We are also required to review the
Viability Statement, set out on pages 50 to 52 under the Listing
Rules. Based on the above procedures, we have concluded that
the above disclosures are materially consistent with the financial
statements and our audit knowledge.
Corporate governance
disclosures
We are required to perform
procedures to identify whether there is a material inconsistency
between the directors' corporate governance disclosures and the
financial statements and our audit knowledge.
Based on those procedures, we have
concluded that each of the following is materially consistent with
the financial statements and our audit knowledge:
·
the directors' statement that they consider that
the annual report and financial statements taken as a whole is
fair, balanced and understandable, and provides the information
necessary for shareholders to assess the Company's position and
performance, business model and strategy;
·
the section of the annual report describing the
work of the Audit Committee, including the significant issues that
the audit committee considered in relation to the financial
statements, and how these issues were addressed; and
·
the section of the annual report that describes
the review of the effectiveness of the Company's risk management
and internal control systems.
We are required to review the part
of Corporate Governance Statement relating to the Company's
compliance with the provisions of the UK Corporate Governance Code
specified by the Listing Rules for our review. We have nothing to
report in this respect.
We have nothing to report on other
matters on which we are required to report by exception
We have nothing to report in
respect of the following matters where the Companies (Guernsey)
Law, 2008 requires us to report to you if, in our
opinion:
· the
Company has not kept proper accounting records; or
· the financial statements are not in agreement with the
accounting records; or
· we
have not received all the information and explanations, which to
the best of our knowledge and belief are necessary for the purpose
of our audit.
Respective
responsibilities
Directors'
responsibilities
As explained more fully in their
statement set out on pages 58 and 59, the directors are
responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; 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; assessing the
Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's
responsibilities
Our objectives are to obtain
reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud
or error, and to issue our opinion in an auditor's report.
Reasonable assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of the
financial statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities.
The purpose of this report and
restrictions on its use by persons other than the Company's members
as a body
This report is made solely to the
Company's members, as a body, in accordance with section 262 of the
Companies (Guernsey) Law, 2008. Our audit work has been
undertaken so that we might state to the Company's members
those matters we are required to state to them in an auditor's
report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than
the Company and the Company's members, as a body, for our
audit work, for this report, or for the opinions we have
formed.
Barry Ryan
For and on behalf of KPMG Channel
Islands Limited
Chartered Accountants and
Recognised Auditors
Guernsey
28 January 2024
Statement of Comprehensive Income
For the year ended 30 September
2023
|
|
Year ended
|
Year ended
|
|
|
30 September
2023
|
30 September
2022
|
|
Notes
|
Revenue
|
|
Capital
|
|
Total
|
|
Revenue
|
|
Capital
|
|
Total
|
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses on
investments
held at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
-
|
|
(72,660)
|
|
(72,660)
|
|
-
|
|
(610,180)
|
|
(610,180)
|
Net (losses)/gains on currency
movements
|
|
-
|
|
(33)
|
|
(33)
|
|
-
|
|
215
|
|
215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment losses
|
|
-
|
|
(72,693)
|
|
(72,693)
|
|
-
|
|
(609,965)
|
|
(609,965)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
5
|
1,127
|
|
3
|
|
1,130
|
|
71
|
|
-
|
|
71
|
Gain on settlement of
financial liability
|
6
|
-
|
|
-
|
|
-
|
|
-
|
|
17,907
|
|
17,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income
|
|
1,127
|
|
3
|
|
1,130
|
|
71
|
|
17,907
|
|
17,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management and
performance fees
|
6
|
(4,009)
|
|
-
|
|
(4,009)
|
|
(6,093)
|
|
-
|
|
(6,093)
|
Other expenses
|
7
|
(2,661)
|
|
-
|
|
(2,661)
|
|
(3,199)
|
|
-
|
|
(3,199)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses before finance costs and taxation
|
(5,543)
|
|
(72,690)
|
|
(78,233)
|
|
(9,221)
|
|
(592,058)
|
|
(601,279)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs
|
8
|
-
|
|
-
|
|
-
|
|
(13)
|
|
-
|
|
(13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses before taxation
|
|
(5,543)
|
|
(72,690)
|
|
(78,233)
|
|
(9,234)
|
|
(592,058)
|
|
(601,292)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total losses and comprehensive loss
for the year
|
(5,543)
|
|
(72,690)
|
|
(78,233)
|
|
(9,234)
|
|
(592,058)
|
|
(601,292)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted Loss per Ordinary Share
(pence)
|
9
|
(0.94)
|
|
(12.21)
|
|
(13.15)
|
|
(1.59)
|
|
(101.65)
|
|
(103.24)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total column of this statement
represents the Statement of Comprehensive Income of the Company
prepared in accordance with International Financial Reporting
Standards as adopted by the European Union ("IFRS").
The supplementary revenue and
capital return columns are prepared under guidance published by the
Association of Investment Companies ("AIC").
All items in the above statement
derive from continuing operations.
The notes on pages 71 to 102 form
an integral part of these Audited Financial Statements.
Statement of Financial Position
As at 30 September 2023
|
|
2023
|
|
2022
|
|
Notes
|
£'000
|
|
£'000
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
Investments held at fair value
through profit or loss
|
11
|
780,376
|
|
822,363
|
|
|
|
|
|
Current assets
|
|
|
|
|
Cash and cash equivalents
|
12
|
22,626
|
|
58,712
|
Other receivables
|
13
|
50
|
|
69
|
Unsettled trades
|
14
|
-
|
|
3,791
|
|
|
|
|
|
|
|
22,676
|
|
62,572
|
|
|
|
|
|
Total
assets
|
|
803,052
|
|
884,935
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Performance fee payable
|
6
|
-
|
|
-
|
Management fee payable
|
6
|
(1,022)
|
|
(4,306)
|
Other payables
|
15
|
(681)
|
|
(1,047)
|
|
|
|
|
|
Total liabilities
|
|
(1,703)
|
|
(5,353)
|
|
|
|
|
|
Net
assets
|
|
801,349
|
|
879,582
|
|
|
|
|
|
Equity
|
|
|
|
|
Share Capital
|
16
|
860,890
|
|
860,890
|
Capital reserve
|
|
(31,328)
|
|
41,362
|
Revenue reserve
|
|
(28,213)
|
|
(22,670)
|
|
|
|
|
|
Total equity
|
|
801,349
|
|
879,582
|
|
|
|
|
|
Net
Asset Value per Ordinary Share (pence)
|
17
|
134.65
|
|
147.79
|
|
|
|
|
|
Number of Ordinary Shares in issue
|
16
|
595,150,414
|
|
595,150,414
|
Approved by the Board of Directors
and authorised for issue on 28 January 2024 and signed on their
behalf:
Stephen Coe
Director
The notes on pages 71 to 102 form
an integral part of these Audited Financial Statements.
Statement of Changes in Equity
For the year ended 30 September
2023
|
|
Share
|
|
Capital
|
|
Revenue
|
|
|
|
|
capital
|
|
reserve
|
|
reserve
|
|
Total
|
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
|
|
|
|
|
|
|
|
|
At 30 September 2021
|
|
758,950
|
|
633,420
|
|
(13,436)
|
|
1,378,934
|
Total losses and comprehensive
loss for the year
|
|
-
|
|
(592,058)
|
|
(9,234)
|
|
(601,292)
|
Share issue
|
|
102,614
|
|
-
|
|
-
|
|
102,614
|
Share issue costs
|
|
(674)
|
|
-
|
|
-
|
|
(674)
|
|
|
|
|
|
|
|
|
|
At 30 September 2022
|
|
860,890
|
|
41,362
|
|
(22,670)
|
|
879,582
|
|
|
|
|
|
|
|
|
|
Total losses and comprehensive
loss for the year
|
|
-
|
|
(72,690)
|
|
(5,543)
|
|
(78,233)
|
|
|
|
|
|
|
|
|
|
At 30 September 2023
|
|
860,890
|
|
(31,328)
|
|
(28,213)
|
|
801,349
|
The notes on pages 71 to 102 form
an integral part of these Audited Financial Statements.
Statement of Cash Flows
For the year ended 30 September
2023
|
|
2023
|
|
2022
|
|
Notes
|
£'000
|
|
£'000
|
|
|
|
|
|
Cash used in operating
activities
|
18
|
(10,330)
|
|
(59,330)
|
Interest paid
|
8
|
-
|
|
(13)
|
Interest income
|
5
|
1,130
|
|
71
|
Purchase of investments
|
11
|
(46,305)
|
|
(93,663)
|
Sale of investments
|
11,
14
|
19,423
|
|
117,527
|
Net (gains)/losses on currency
movements
|
|
(33)
|
|
215
|
|
|
|
|
|
Net
cash outflow from operating activities
|
|
(36,115)
|
|
(35,193)
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
Issue of ordinary shares
|
16
|
-
|
|
59,999
|
Share issue costs
|
16
|
-
|
|
(674)
|
Repayment of loan payable
|
|
-
|
|
(15,000)
|
|
|
|
|
|
Net
cash inflow from financing activities
|
|
-
|
|
44,325
|
|
|
|
|
|
Net
(decrease)/increase in cash and cash equivalents
|
|
(36,115)
|
|
9,132
|
Cash and cash equivalents at
beginning of year
|
|
58,712
|
|
49,794
|
Net gains/(losses) on cash currency
movements
|
|
29
|
|
(214)
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
12
|
22,626
|
|
58,712
|
|
|
|
|
|
Cash and cash equivalents comprise
of the following:
|
|
|
|
|
Cash at bank
|
|
4,382
|
|
58,712
|
Treasury bills
|
|
18,244
|
|
-
|
|
|
|
|
|
|
|
22,626
|
|
58,712
|
The notes on pages 71 to 102 form an
integral part of these Audited Financial Statements.
Notes to the Audited Financial Statements
For the year ended 30 September
2023
1. Reporting Entity
Chrysalis Investments Limited (the
"Company") is a closed-ended investment company, registered in
Guernsey on 3 September 2018, with registered number 65432. The
Company's registered office is 1 Royal Plaza, Royal Avenue, St
Peter Port, Guernsey, GY1 2HL.
The Company is a Registered
Closed-ended Collective Investment Scheme regulated by the Guernsey
Financial Services Commission ("GFSC"), with reference number
2404263, pursuant to the Protection of Investors (Bailiwick of
Guernsey) Law 2020, as amended and the Registered Closed-ended
Investment Scheme Rules 2021.
The Company's 595,150,414 shares
in issue (per note 16) under ticker CHRY, SEDOL BGJYPP4 and ISIN
GG00BGJYPP46 have a premium listing and are admitted to trading on
the London Stock Exchange's Main Market for listed securities. The
Company invests in a diversified portfolio consisting primarily of
equity and equity-related securities issued by unquoted
companies.
The Company is a self-managed
Alternative Investment Fund ("AIF") and received discretionary
portfolio management services directly from Jupiter Investment
Management Limited ("JIML") during the year ended 30 September
2023. The administration of the Company is delegated to Apex
Administration (Guernsey) Limited (formerly Maitland Administration
(Guernsey) Limited), an Apex Group company ("Apex") (the
"Administrator").
2. Significant accounting
policies
(a) Basis of accounting
The Audited Financial Statements
have been prepared in compliance with International Financial
Reporting Standards as adopted by the European Union ("IFRS"). The
Audited Financial Statements give a true and fair view and comply
with the Companies (Guernsey) Law, 2008.
Where presentational guidance set
out in the Statement of Recommended Practice ("SORP") for
investment companies issued by the Association of Investment
Companies ("AIC") updated in February 2019 is consistent with the
requirements of IFRS, the Directors have sought to prepare the
Audited Financial Statements on a basis compliant with the
recommendations of the SORP.
(b) Going concern
In assessing the going concern
basis of accounting, the Directors have assessed the guidance
issued by the Financial Reporting Council and considered the
Company's own financial position, the status of global financial
markets, various geopolitical events and
conflicts, the current macroeconomic
climate and other uncertainties impacting on the Company's
investments, their financial position and liquidity
requirements.
At year end, the Company has
liquidity including a current cash position of £22,626,000, a net
current asset position of £20,973,000 and liquid listed investments
amounting to £10,284,000.
The Company generates liquidity by
raising capital and exiting investments. It uses liquidity by
making new and follow-on investments, paying company expenses and
making returns the Shareholders. The Directors ensure it has
adequate liquidity by regularly reviewing its financial position
and forward-looking liquidity requirements. The Directors Going
Concern assessment includes consideration of a range of likely
downside scenarios which measure the impact on the Company's
liquidity of differing assumptions for portfolio valuation, exits,
new and follow-on investment requirements, capital raising and
company expenses.
Under the Articles, at the first
annual general meeting of the Company following the fifth
anniversary of IPO (such anniversary being 6 November 2023), the
Directors must propose an ordinary resolution that the Company
continues its business as a closed-ended investment
company. At the Company's annual general meeting, scheduled
for 15 March 2024, Shareholders will be invited to vote on the
continuation of the Company.
The Board will recommend that
Shareholders vote in favour of
continuation and operate under the assumption that the resolution
will be passed. If the resolution is not passed, the Directors will
be required to put forward proposals for the reconstruction,
reorganisation or winding-up of the Company for Shareholders'
consideration within six months following the date on which the
resolution is not passed. These proposals may or may not involve
winding-up the Company or liquidating all or part of the Company's
then existing portfolio of investments and, accordingly, failure to
pass a continuation vote will not necessarily result in the
winding-up of the Company or liquidation of all or some of its
investments.
At the time of preparation of this
report the outcome of the continuation vote is not known. Should
the resolution not be passed, and depending on the nature of the
recommendation of the Board for the reconstruction, reorganisation
or winding-up of the Company, there is a material uncertainty
related to events or conditions that may cast significant doubt on
the Company's continuation as a going concern. The Board operates
under the assumption that the resolution will be passed.
Taking all matters into account,
the Directors have a reasonable expectation that the Company will
continue in operational existence for at least twelve months from
the date of approval of the of the Annual Report and Audited
Financial Statements and continue to adopt the going concern basis
in preparing them.
(c) Functional and presentational
currency
The Audited Financial Statements
of the Company are presented in the currency of the primary
economic environment in which it operates (its functional
currency). For the purpose of the Audited Financial Statements, the
results and financial position of the Company are expressed in
pound sterling ("£").
(d) Segmental reporting
The chief operating decision maker
is the Board of Directors. The Directors are of the opinion that
the Company is engaged in a single segment of business with the
primary objective of investing in securities to generate capital
growth for shareholders. Consequently, no business segmental
analysis is provided.
The key measure of performance
used by the Board is the Net Asset Value of the Company (which is
calculated under IFRS). Therefore, no reconciliation is required
between the measure of profit or loss used by the Board and that
contained in these Audited Financial Statements.
(e) Income
Interest income is accounted for
on an accruals basis and recognised in profit or loss in the
Statement of Comprehensive Income. Interest income includes
interest earned on convertible loan notes, cash held at bank on
call or on deposit and cash assets held as cash equivalents,
including UK treasury bills.
(f) Expenses
Expenses are accounted for on an
accruals basis. The Company's portfolio management and
administration fees, finance costs and all other expenses are
charged through the Statement of Comprehensive Income and are
charged to revenue. Performance fees are charged to the capital in
the Statement of Comprehensive Income.
(g) Dividends to
shareholders
Dividends are recognised in the
year in which they are paid.
(h) Taxation
The Company has been granted
exemption from liability to income tax in Guernsey under the Income
Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 amended by the
Director of Income Tax in Guernsey for the current year. Exemption
is applied and granted annually and subject to the payment of a
fee, currently £1,200 (2022: £1,200).
(i) Financial
instruments
Classification
The Company's financial assets are
classified in the following measurement categories:
· those to be measured subsequently at fair value through
profit or loss; and
· those to be measured at amortised cost.
The classification depends on the
entity's business model for managing the financial assets and the
contractual terms of the cash flows.
At initial recognition, the
Company measures a financial asset at its fair value, plus, in the
case of a financial asset not at fair value through profit or loss,
transaction costs that are directly attributable to the acquisition
of the financial asset. Transaction costs of financial assets
carried at fair value through profit or loss are expensed in profit
or loss.
Financial assets held at amortised cost
Assets that are held in order to
collect contractual cash flows give rise to cash flows that are
solely payments of principal and interest are measured at amortised
cost. These assets are subsequently measured at amortised cost
using the effective interest method.
The Company has elected to apply
the simplified approach permitted by IFRS 9 in respect of trade and
other receivables. This approach requires expected lifetime losses
to be recognised from initial recognition of the
receivables.
The Company's financial assets
held at amortised cost include trade and other receivables and cash
and cash equivalents.
Financial assets at fair value through profit or
loss
For investments actively traded in
organised financial markets, fair value will generally be
determined by reference to Stock Exchange quoted market bid prices
at the close of business on the valuation date, without adjustment
for transaction costs necessary to realise the asset.
In respect of unquoted
instruments, including associates, or where the market for a
financial instrument is not active, fair value is established by
using recognised valuation methodologies, in accordance with
International Private Equity and Venture Capital Valuation
Guidelines ("IPEVC"), revised December 2022.
The Company has adopted a
valuation policy for unquoted securities to provide an objective,
consistent and transparent basis for estimating the fair value of
unquoted equity securities in accordance with IFRS as well as
IPEVC.
The unquoted securities valuation
policy and the associated
valuation procedures are subject to review on a
regular basis, and updated as appropriate, in line with industry
best practice. In addition, the
Company works with independent third-party
valuation firms, to obtain assistance, advice, assurance, and
documentation in relation to the ongoing valuation
process.
The Company considers it
impractical to perform an in-depth valuation analysis for every
unquoted investment on a daily basis (whether internally or with
the assistance of an independent third party). Therefore, it is
expected that an in-depth valuation of each investment will be
performed independently by an independent third-party valuation
firm: (i) on a quarterly basis; and (ii) where the Company, in
conjunction with its advisors, determines that a Triggering Event
has occurred.
A "Triggering Event" may include
any of the following:
· a subsequent round of financing (whether pro rata or
otherwise) by the relevant investee company;
· a significant or material milestone achieved by the relevant
investee company;
· a secondary transaction involving the relevant investee
company on which sufficient information is available;
· a change in the makeup of the management of the relevant
investee company;
· a material change in the recent financial performance or
expected future financial performance of the relevant investee
company;
· a material change in the market environment in which the
relevant investee company operates; or
· a significant movement in market indices or economic
indicators.
Fair value is the price that would
be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date. The change in fair value is recognised in profit or loss and
is presented within the "net gains/(losses) on investments held at
fair value through profit or loss" in the Statement of
Comprehensive Income.
IFRS requires the Company to
measure fair value using the following fair value hierarchy that
reflects the significance of the inputs
used in making the measurements. IFRS establishes a fair value
hierarchy that prioritises the inputs to valuation techniques used
to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements).
The three levels of fair value
hierarchy under IFRS are as follows:
· Level 1 reflects financial instruments quoted in an active
market.
· Level 2 reflects financial instruments whose fair value is
evidenced by comparison with other observable current market
transactions in the same instrument or based on a valuation
technique whose variables include only data from observable
markets.
· Level 3 reflects financial instruments whose fair value is
determined in whole or in part using a valuation technique based on
assumptions that are not supported by prices from observable market
transactions in the same instrument and not based on available
observable market data. For investments that are recognised in the
Audited Financial Statements on a recurring basis, the Company
determines whether transfers have occurred between levels in the
hierarchy by re-assessing the categorisation (based on the lowest
significant input) at the date of the event that caused the
transfer.
Recognition and
derecognition of financial
assets
The Company recognises a financial
asset at its fair value, plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs that are
directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at fair value through
profit or loss are expensed in profit or loss.
A financial asset (in whole or in
part) is derecognised either (i) when the Company has transferred
substantially all the risks and rewards of ownership; or (ii) when
it has neither transferred nor retained substantially all the risks
and rewards and when it no longer has control over the assets or a
portion of the asset; or (iii) when the contractual right to
receive cash flow has expired. The derecognised investments are
measured at the weighted average method. Any gain or loss on
derecognition is recognised in the Net gains/(losses) on
investments held at fair value through profit or loss in the
Statement of Comprehensive Income.
Equity instruments
An equity instrument is any
contract that evidences a residual interest in the assets of an
entity after deducting all of its liabilities. Equity instruments
issued by the Company are recognised at the proceeds received, net
of direct issue costs.
Financial liabilities and
equity
Debt and equity instruments are
classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangement.
Financial liabilities, including borrowings, are initially measured
at fair value, net of transaction costs.
Financial liabilities are
subsequently measured at amortised cost using the effective
interest method, with interest expense recognised on an effective
yield basis.
Derecognition of financial
liabilities
The Company derecognises financial
liabilities when, and only when, the Company's obligations are discharged, cancelled or they
expire.
(j) Cash and cash
equivalents
Cash comprises cash and demand
deposits. Cash equivalents, which may include UK treasury bills,
are short-term, highly liquid investments that are readily
convertible to known amounts of cash, are subject to insignificant
risks of changes in value, and are held for the purpose of meeting
short-term cash commitments rather than for investment or other
purposes. Included in cash and cash equivalents at the year end was
cash at bank of £4,382,000 and treasury bills of £18,244,000. Refer
to note 12 for further details of the cash balance held at 30
September 2023.
(k) Other
receivables
Other receivables do not carry
interest and are short-term in nature and are accordingly
recognised at amortised cost.
(l) Foreign currency
Transactions and balances
At each Statement of Financial
Position date, monetary assets and liabilities that are denominated
in foreign currencies are translated at the rates prevailing at
that date.
Non-monetary items carried at fair
value that are denominated in foreign currencies are translated at
the rates prevailing at the date fair value is measured.
Non-monetary items that are measured in terms of historical cost in
a foreign currency are not retranslated. Exchange differences are
recognised in profit or loss in the year in which they arise.
Transactions denominated in foreign currencies are translated into
pound sterling (£) at the rate of exchange ruling at the date of
the transaction. Foreign exchange gains and losses arising from
translation are included in the Statement of Comprehensive
Income.
Where foreign currency items are
held at fair value, the foreign currency movements are presented as
part of the fair value change.
(m) Capital reserve
Profits achieved by selling
investments and changes in fair value arising upon the revaluation
of investments that remain in the portfolio are all charged to
capital the Statement of Comprehensive Income and allocated to the
capital reserve. The capital reserve is also used to fund dividend
distributions.
(n) Revenue
reserve
The balance of all items allocated
to the revenue in the Statement of Comprehensive Income for the
year is transferred to the Company's revenue reserve.
(o) Investment
entities
In accordance with IFRS 10 an
investment entity is an entity that:
·
obtains funds from one or more investors for the
purpose of providing those investor(s) with investment management
services;
·
commits to its investor(s) that its business
purpose is to invest funds solely for returns from capital
application, investment income, or both; and
·
measures and evaluates the performance of
substantially all of its investments on a fair value
basis.
The Directors are satisfied that
the Company meets each of these criteria and hence is an investment
entity in accordance with IFRS 10.
3. Use of estimates and critical
judgements
The preparation of Audited
Financial Statements in accordance with IFRS requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the Audited Financial Statements and the
reported amounts of income and expenses during the year. Actual
results could differ from those estimates and
assumptions.
The estimates and underlying
assumptions are reviewed on an ongoing basis. There were no
significant accounting estimates or significant judgements in the
current year, except for the use of estimates in the valuation of
the unquoted investments detailed in note 19.
4. New and revised
standards
The following standards have been
released but are not yet effective and hence have not been applied
in preparing the Company's financial statements for the year ended
30 September 2023. The Directors have considered their impact and
have concluded that they will not have a material impact on the
Company's financial statements.
· IAS 8 - Accounting Policies, Changes in Accounting Estimates
and Errors
The amendments aim to improve
accounting policy disclosures and to help users of the financial
statements to distinguish between changes in accounting estimates
and changes in accounting policies.
Effective date - 1 January
2023
· IAS 1 - Presentation of Financial Statements
Classification of Liabilities as
Current or Non-current: The amendments aim to promote consistency
in applying the requirements by helping companies determine
whether, in the statement of financial position, debt and other
liabilities with an uncertain settlement date should be classified
as current (due or potentially due to be settled within one year)
or non-current.
Effective date - 1 January
2024
· IAS 21 - The Effects of Changes in Foreign Exchange
Rates
On 15 August 2023, the IASB
issued 'Lack of Exchangeability (Amendments to IAS 21)' to provide
guidance to specify when a currency is exchangeable and how to
determine the exchange rate when it is not.
Effective date - 1 January
2025
5. Interest income
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Interest accounted for using the effective interest rate
method on assets held at fair value through profit or loss
(FVTPL):
|
3
|
|
60
|
|
|
|
|
Interest on assets held at amortised cost:
|
|
|
|
Cash at bank
|
255
|
|
11
|
UK treasury bills
|
872
|
|
-
|
|
|
|
|
|
1,130
|
|
71
|
6. Investment management
fees
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Jupiter Unit Trust Managers
Limited ("JUTM")
|
11
|
|
4,915
|
Jupiter Investment Management
Limited ("JIML")
|
3,998
|
|
1,178
|
|
|
|
|
|
4,009
|
|
6,093
|
On 1 July 2022, the Company became
a self-managed AIF. Since that date the company has procured
portfolio management services directly from Jupiter Investment
Management Limited.
Management fee
The monthly management fee is
equal to 1/12 of 0.5% of the Net Asset Value (the "management
fee"). The management fee is calculated and paid monthly in
arrears.
If at any time the Company invests
in or through any other investment fund or special purpose vehicle
and a management fee or advisery fee is charged to such investment
fund or special purpose vehicle by JIML or
any of its Associates and is not waived, the value of such
investment will be excluded from the calculation of NAV for the
purposes of determining the management fee.
As at 30 September 2023, an amount
of £nil (2022: £3,128,000) to JUTM and
£1,022,000 (2022: £1,178,000) to JIML were outstanding and due in
respect of management fees.
Performance fee
In accordance with an agreement
between the Company and JUTM dated 29 November 2021 (the
"Agreement"), the Company settled 54% (£60,522,000) of the
performance fee due to JUTM for the year ended 30 September 2021 in
ordinary shares issued by the Company. The remaining 46%
(£51,555,000) of the performance fee amount was settled in
cash.
The value of the 22,667,415
ordinary shares issued under the Agreement on 28 January 2022 was
£42,615,000. The difference between the value of the liability
settled through the issuance of ordinary shares and the value of
the shares issued on 28 January 2022, being £17,907,000, was
recognised within gains on settlement of financial liability within
the Statement of Comprehensive Income during the year ended 30
September 2022.
For the year ended 30 September
2023, JIML was entitled to receive a performance fee, the sum of
which is equal to 20% of the amount by which the Adjusted Net Asset
Value at the end of a Calculation Period exceeds the higher of: (i)
the Performance Hurdle; and (ii) the High Water Mark (the
"Performance Fee"). The calculation period for the current period
will be the period commencing on 1 October 2022 and ending on 30
September 2023 (the "Calculation Period").
Adjusted Net Asset Value at the
end of a Calculation Period shall be the audited NAV in Sterling at
the end of the relevant Calculation Period:
(i)
plus an amount equal to any accrued or paid
performance fee in respect of that Calculation Period or any prior
Calculation Period;
(ii) plus an amount equal to
all dividend or other income distributions paid to shareholders
that have been declared and paid on or prior to the end of the
relevant Calculation Period;
(iii) minus the amount of any
distribution declared in respect of the Calculation Period but
which has not already reduced the audited NAV;
(iv) minus the
Net Capital Change where the Net Capital Change is positive or,
correspondingly, plus the Net Capital Change where such net Capital
Change is negative (which for this purpose includes the Net Capital
Change in the relevant Calculation Period and each preceding
Calculation Period); and
(v) minus
any increase in the NAV during the Calculation Period attributable
to investments attributable to C shares prior to the conversion of
those C shares.
"Performance Hurdle" means, in
relation to the Calculation Period, ("A" multiplied by "B") + C
where:
"A" is 8% (expressed for the
purposes of this calculation as 1.08) (calculated as an annual rate
and adjusted to the extent the Calculation Period is greater or
shorter than one year).
"B" is:
(i) in respect of the first
Calculation Period, the Net Issue Proceeds; or
(ii) in respect of each subsequent
Calculation Period, the sum of this calculation as at the end of
the immediately preceding Calculation Period: plus (where sum is
positive) or minus (where such sum is negative) the Net Capital
Change attributable to shares issues and repurchases in all
preceding Calculation Period (the amount in this paragraph (b)
being the "Aggregate NCC"), in each case, plus (where such sum is
positive) or minus (where such sum is negative) the sum
of:
(a) in respect of each share issue undertaken in the
relevant Calculation Period being assessed, an amount equal to the
Net Capital Change attributable to that share issue multiplied by
the sum of the number of days between admission to trading of the
relevant shares and the end of the relevant Calculation Period
divided by 365 (such amount being the "issue adjustment"),
minus
(b) in respect of each repurchase or redemption of shares
undertaken in the relevant Calculation Period being assessed, an
amount equal to Net Capital Charge attributable to that share
purchase or redemption multiplied by the number of days between the
relevant disbursement of monies to fund such repurchase or
redemption and the end of the relevant Calculation Period divided
by 365 (such amount being the "reduction
adjustment").
"C" is the sum of:
the issue
adjustment for the Calculation Period;
the reduction
adjustment for the Calculation Period; and
the Aggregate NCC
multiplied by -1.
"Net Capital
Change" equals I minus R where:
"I" is the aggregate of the net
proceeds of any share issue over the relevant year (other than the
first issue of ordinary shares);
"R" is the aggregate of amounts
disbursed by the Company in respect of the share redemption
or repurchases over the relevant period.
"High Water Mark" means the
Adjusted Net Asset Value as at the end of the Calculation Period in
respect of which a performance fee was last earned or if no
performance fee has yet been earned, an amount equal to the Net
Issue Proceeds (as such term is defined in the prospectus);
and
"Calculation period" means each
twelve-month period ending on 30 September, except that the first
Calculation Period shall be the period commencing on Admission and
ending on 30 September 2019.
Under the terms of the Portfolio
Management Agreement, any accrued and unpaid performance fees will
crystallise and become payable to JIML
upon certain termination events.
The accrued performance fee shall
only be payable by the Company to the extent that the Payment
Amount is greater than the sum of the performance fee (which shall
both be calculated as at the end of each Calculation Period) and,
to the extent that the Payment Amount is less than the sum of the
performance fee for that Calculation Period, an amount equal to the
difference shall be carried forward and included in the performance
fee calculated as at the end of the next Calculation Period
(and such amount shall be paid before any performance fee accrued
at a later date).
"Payment amount" is the sum
of:
(i)
aggregate net realised profits on investments
since the start of the relevant Calculation Period; plus
(ii) an amount equal to each IPO investment unrealised gain where
the initial public offering of the relevant investment takes place
during the relevant Calculation Period; plus or minus (as
applicable)
(iii) an
amount equal to the listed investment value change attributable to
that calculation period; plus
(iv) the
aggregate amount of all dividends or other income received from
investments of the Company in that Calculation Period (other than
investments made pursuant to the cash management policy of the
Company as stated in the Investment Policy).
No performance fee is payable out
of the assets attributable to any C Shares in issue from time to
time.
As at 30 September 2023, the
Company had not exceeded the High Water Mark and Performance Hurdle
and no accrual (2022: £nil) for performance fees has been reflected
within these Audited Financial Statements. The
amount of £nil (2022: £nil)
was outstanding and due to JIML in respect of performance fee
payable as at 30 September 2023.
7. Other
expenses
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Administration fee
|
210
|
|
267
|
AIFM fee
|
-
|
|
433
|
Auditor's remuneration
for:
|
|
|
|
- audit fees (current
year)
|
135
|
|
135
|
- audit fees (under accrual in
prior year)
|
10
|
|
4
|
- non-audit fees
|
60
|
|
40
|
Committee fees
|
151
|
|
79
|
Depositary fees
|
63
|
|
87
|
Directors' expenses
|
15
|
|
6
|
Directors' fees
|
433
|
|
345
|
Directors' liability
insurance
|
68
|
|
68
|
FCA fees
|
31
|
|
31
|
Legal fee and professional
fees:
|
|
|
|
- ongoing operations
|
313
|
|
826
|
- valuation fees
|
281
|
|
152
|
- due diligence fees
|
77
|
|
160
|
- fees relating to purchases of
investments
|
516
|
|
275
|
Listing fees
|
31
|
|
53
|
Loan commitment fee
|
-
|
|
9
|
Printing fees
|
44
|
|
32
|
Registrars' fees
|
33
|
|
42
|
Secretarial fees
|
45
|
|
41
|
Sundry
|
145
|
|
114
|
|
|
|
|
|
2,661
|
|
3,199
|
|
|
|
|
8. Finance
costs
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Bank interest
|
-
|
|
1
|
Loan interest
|
-
|
|
12
|
|
|
|
|
|
-
|
|
13
|
|
|
|
|
9. Losses per ordinary
share
|
30 September
2023
|
|
30 September
2022
|
|
|
|
|
|
|
|
|
|
Net return
|
|
Per share
|
|
Net return
|
|
Per share
|
|
£'000
|
|
pence
|
|
£'000
|
|
pence
|
|
|
|
|
|
|
|
|
Revenue return
|
(5,543)
|
|
(0.94)
|
|
(9,234)
|
|
(1.59)
|
Capital return
|
(72,690)
|
|
(12.21)
|
|
(592,058)
|
|
(101.65)
|
|
|
|
|
|
|
|
|
|
(78,233)
|
|
(13.15)
|
|
(601,292)
|
|
(103.24)
|
|
|
|
|
|
|
|
|
Weighted average number of
ordinary shares
|
|
|
595,150,414
|
|
|
|
582,448,943
|
|
|
|
|
|
|
|
|
The return per share is calculated using the
weighted average number of ordinary shares.
10. Dividends
The Board has not declared a dividend (2022:
£nil).
11. Investments held at fair
value through profit or loss
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Opening book cost
|
731,095
|
|
758,013
|
Opening investment holding
unrealised gains
|
91,268
|
|
702,185
|
|
|
|
|
Opening valuation
|
822,363
|
|
1,460,198
|
|
|
|
|
Movements in the year:
|
|
|
|
Purchases at cost
|
46,305
|
|
93,663
|
Sales proceeds
|
(15,632)
|
|
(121,318)
|
Net losses on investments held at
fair value
|
(72,660)
|
|
(610,180)
|
|
|
|
|
Closing valuation
|
780,376
|
|
822,363
|
|
|
|
|
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Closing book cost
|
761,768
|
|
731,095
|
Closing investment holding
unrealised gains
|
18,608
|
|
91,268
|
|
|
|
|
Closing valuation
|
780,376
|
|
822,363
|
|
|
|
|
Movement in unrealised gains
during the year
|
249,567
|
|
130,434
|
Movement in unrealised losses
during the year
|
(292,492)
|
|
(741,351)
|
Realised loss on sale of
investments
|
(36,558)
|
|
(55,742)
|
Realised gain on sale of
investments
|
6,823
|
|
56,479
|
|
|
|
|
Net losses on investments held at fair value through profit
or loss
|
(72,660)
|
|
(610,180)
|
|
|
|
|
The Company holds all its
investments at fair value through profit or loss. Investments held
by the Company on 30 September 2023 where the ownership interest
exceeded 20% were as follows:
Name
|
Principal place
of
business
|
Principal activity
|
Ownership interest %
|
|
|
|
|
Cognitive Logic Inc.
|
United States
|
Trading company
|
20-30%
|
Sorted Holdings Limited
|
United Kingdom
|
Trading company
|
20-30%
|
Growth Street Holdings
Limited
|
United Kingdom
|
In liquidation
|
30-40%
|
Rowanmoor Group Limited
|
United Kingdom
|
In wind down
|
20-30%
|
12. Cash and cash
equivalents
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Cash and cash equivalents comprise of the
following:
|
|
|
|
Cash at bank
|
4,382
|
|
58,712
|
Treasury bills
|
18,244
|
|
-
|
|
|
|
|
|
22,626
|
|
58,712
|
|
|
|
|
13. Other
receivables
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Prepayments and accrued
income
|
50
|
|
69
|
|
|
|
|
|
50
|
|
69
|
|
|
|
|
14. Unsettled
trades
No trades remained unsettled at 30
September 2023. On 30 September 2022, the Company sold 566,927
shares in Wise PLC for a consideration of £3,791,154. The
transaction was settled on 4 October 2022.
15. Other payables
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Administration fees
|
53
|
|
60
|
AIFM fees
|
-
|
|
287
|
Audit fees
|
150
|
|
135
|
Pricing review fees
|
290
|
|
267
|
Custodian fees
|
16
|
|
18
|
Other creditors
|
172
|
|
280
|
|
|
|
|
|
681
|
|
1,047
|
|
|
|
|
16. Share
capital
|
No of
|
|
|
|
shares
|
|
£'000
|
|
|
|
|
Ordinary Shares at no par value
|
|
|
|
|
|
|
|
At 30 September 2021
|
547,273,076
|
|
758,950
|
Issue of shares
|
47,877,338
|
|
102,614
|
Issue costs
|
-
|
|
(674)
|
|
|
|
|
At 30 September 2022
|
595,150,414
|
|
860,890
|
Issue of shares
|
-
|
|
-
|
Issue costs
|
-
|
|
-
|
|
|
|
|
At 30 September 2023
|
595,150,414
|
|
860,890
|
|
|
|
|
The holders of Ordinary Shares
have the right to receive notice of and attend, speak and vote in
general meetings of the Company. They are also entitled to
participate in any dividends and other distributions of the
Company. There were no changes for the year in the share capital of
the Company.
Included within the value of
shares issued during the year ended 30 September 2022 is
£42,615,000 relating to shares issued to JUTM in settlement of the
performance fee payable at 30 September 2021.
17. Net asset value per ordinary
share
The Net Asset Value per Ordinary
Share and the Net Asset Value at the year end calculated in
accordance with the Articles of Incorporation were as
follows:
|
30 September
2023
|
|
30 September
2022
|
|
|
|
|
|
|
|
|
|
NAV
|
|
NAV
|
|
NAV
|
|
NAV
|
|
per share
|
|
attributable
|
|
per share
|
|
attributable
|
|
pence
|
|
£'000
|
|
pence
|
|
£'000
|
|
|
|
|
|
|
|
|
Ordinary Shares: basic and
diluted
|
134.65
|
|
801,349
|
|
147.79
|
|
879,582
|
|
|
|
|
|
|
|
|
The Net Asset Value per Ordinary
Share is based on 595,150,414 (2022: 595,150,414) Ordinary Shares,
being the number of Ordinary Shares in issue at the year
end.
18. Cash used in operating
activities
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Total losses for the
year
|
(78,233)
|
|
(601,292)
|
Net losses on investments held at
fair value through profit or loss
|
72,660
|
|
610,180
|
Gain on settlement of financial
liability
|
-
|
|
(17,907)
|
Interest income
|
(1,130)
|
|
(71)
|
Finance costs
|
-
|
|
13
|
Net losses/gains on currency
movements
|
4
|
|
(1)
|
Movement in working capital
|
|
|
|
Decrease in other
receivables
|
19
|
|
358
|
Decrease in payables (excluding loan
payable and settlement of performance fees through the issuance of
shares - see note 6)
|
(3,650)
|
|
(50,610)
|
|
|
|
|
|
(10,330)
|
|
(59,330)
|
|
|
|
|
19. Financial instruments and
capital disclosures
The Company's activities expose it
to a variety of financial risks; market risk (including other price
risk, foreign currency risk and interest rate risk), credit risk
and liquidity risk.
Certain financial assets and
financial liabilities of the Company are carried in the Statement
of Financial Position at their fair value. The fair value is the
amount at which the asset could be sold, or the liability
transferred in a current transaction between market participants,
other than a forced or liquidation sale. For investments actively
traded in organised financial markets, fair value is generally
determined by reference to Stock Exchange quoted market mid prices
and Stock Exchange Electronic Trading Services ("SETS") at last
trade price at the year end date, without adjustment for
transaction costs necessary to realise the asset. Other financial
instruments not carried at fair value are typically short-term in
nature and reprice to the current market rates frequently.
Accordingly, their carrying amount is a reasonable approximation of
fair value. This includes cash and cash equivalents, other
receivables and payables.
The Company measures fair values
using the following hierarchy that reflects the significance of the
inputs used in making the measurements. Categorisation within the
hierarchy has been determined on the basis of the lowest level
input that is significant to the fair value measurement of the
relevant assets as follows:
Level 1 - Quoted prices
(unadjusted) in active markets for identical assets or
liabilities.
An active market is a market in
which transactions for the asset or liability occur with sufficient
frequency and volume on an ongoing basis such that quoted prices
reflect prices at which an orderly transaction would take place
between market participants at the measurement date. Quoted prices
provided by external pricing services, brokers and vendors are
included in Level 1, if they reflect actual and regularly occurring
market transactions on an arm's-length basis.
Level 2 - Inputs other than quoted
prices included within Level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that
is, derived from prices).
Level 2 inputs include the
following:
· quoted
prices for similar (i.e. not identical) assets in active
markets;
· quoted
prices for identical or similar assets or liabilities in markets
that are not active. Characteristics of an inactive market include
a significant decline in the volume and level of trading activity,
the available prices vary significantly over time or among market
participants or the prices are not current;
· inputs
other than quoted prices that are observable for the asset (for
example, interest rates and yield curves observable at commonly
quoted intervals); and
· inputs
that are derived principally from, or corroborated by, observable
market data by correlation or other means (market-corroborated
inputs).
Level 3 - Inputs for the asset or
liability that are not based on observable market data
(unobservable inputs).
The level in the fair value
hierarchy within which the fair value measurement is categorised in
its entirety is determined on the basis of the lowest level input
that is significant to the fair value measurement in its entirety.
If a fair value measurement uses observable inputs that require
significant adjustment based on unobservable inputs, that
measurement is a Level 3 measurement. Assessing the significance of
a particular input to the fair value measurement in its entirety
requires judgement, considering factors specific to the asset or
liability.
At 30 September 2023
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
|
|
|
|
|
|
|
|
Quoted equity
|
10,284
|
|
-
|
|
-
|
|
10,284
|
Unquoted equity
|
-
|
|
-
|
|
770,092
|
|
770,092
|
|
|
|
|
|
|
|
|
|
10,284
|
|
-
|
|
770,092
|
|
780,376
|
|
|
|
|
|
|
|
|
At 30 September 2022
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
|
|
|
|
|
Quoted equity
|
20,317
|
|
-
|
|
-
|
|
20,317
|
Unquoted equity
|
-
|
|
-
|
|
802,046
|
|
802,046
|
|
|
|
|
|
|
|
|
|
20,317
|
|
-
|
|
802,046
|
|
822,363
|
|
|
|
|
|
|
|
|
The following table shows the
valuation techniques used for Level 3 fair values, as well as the
significant unobservable inputs used for Level 3 items:
Unlisted Investments
2023
|
Fair Value as at 30
September 2023 (£000s)
|
Valuation
Technique
|
Significant Unobservable
Inputs
|
Range
|
Sensitivity
%
|
Sensitivity to changes in
significant unobservable inputs
|
728,177
|
Market
approach using comparable traded multiples
|
EV/LTM
Revenue multiples
EV/2023E
Revenue multiples
EV/2024E
Revenue multiples
EV/2025E
Revenue multiples
EV/2026E
Revenue multiples
|
0.23 -
19.09x
|
25%
|
If
multiples changed by +/- 25%, the value of the companies in this
group would change by + £112,340,325 / - £127,156,208
|
25,030
|
Recent
Transaction Price
|
N/A
|
N/A
|
N/A
|
N/A
|
16,506
|
Scenario
Analysis
|
Probability
|
79%
|
25%
|
If
probability changed by +/- 25%, the value of the companies in this
group would change by - £16,505,837 / + £19,342,778
|
316
|
Expected
Proceeds
|
N/A
|
N/A
|
N/A
|
N/A
|
63
|
Wind
Down
|
N/A
|
N/A
|
N/A
|
N/A
|
The following table shows the
valuation techniques used for Level 3 fair values, as well as the
significant unobservable inputs used for Level 3 items:
Unlisted Investments
2022
|
Fair Value as at 30
September 2022 (£000s)
|
Valuation
Technique
|
Significant Unobservable
Inputs
|
Range
|
Sensitivity
%
|
Sensitivity to changes in
significant unobservable inputs
|
447,933
|
Market
approach using comparable traded multiples
|
EV/2022E
revenue multiples
EV/LTM
revenue multiples
EV/2023E
revenue multiples
|
0.13 -
25.79x
|
25%
|
If
multiples changed by +/- 25%, the value of the companies in this
group would change by + £42,745,628 / - £41,842,136
|
113,394
|
Market
approach using price to book ratios
|
Price/2022E Book multiple
|
0.35 -
4.41x
|
25%
|
If
multiples changed by +/- 25%, the value of the companies in this
group would change by + £39,701,835 / - £34,903,560
|
177,016
|
Recent
transaction price
|
N/A
|
N/A
|
N/A
|
N/A
|
45,065
|
Scenario
Analysis
|
Probability
|
17-100%
|
25%
|
If
probability changed by +/- 25%, the value of the companies in this
group would change by + £21,124,669 / - £21,124,669
|
18,429
|
Option
Pricing
|
Underlying Asset Value
|
N/A
|
25%
|
If the
underlying asset values changed by +/- 25%, the value of the
companies in this group would change by + £3,816,379 / -
£3,893,347
|
209
|
Wind
Down
|
N/A
|
N/A
|
N/A
|
N/A
|
The Company has an established
control framework with respect to the measurement of fair values.
The Company's Investment Adviser provides discretionary portfolio
management services, while the Company assumes direct
responsibility for the valuation process.
The Company's Valuation Committee
regularly reviews significant unobservable inputs and valuation
adjustments. Valuations are prepared by an independent third party
valuer and the Valuation Committee assesses the evidence prepared
to support the conclusion that these valuations meet the
requirements of the standards, including the level in the fair
value hierarchy in which the valuation should be
classified.
The following table shows a
reconciliation of the opening balance to the closing balance for
Level 1 and 3 fair values:
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
|
|
Level 1
|
|
Level 1
|
|
Level 3
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
Opening balance
|
|
20,317
|
|
236,756
|
|
802,046
|
|
1,223,442
|
Transferred to/(from) Level
1/(Level 3)
|
|
-
|
|
(4,961)
|
|
-
|
|
4,961
|
Purchases
|
|
-
|
|
15,219
|
|
46,305
|
|
78,444
|
Sales
|
|
(10,263)
|
|
(49,478)
|
|
(5,369)
|
|
(71,840)
|
Total gains/(losses) included in
net gains on investments in the statement of comprehensive
income
|
|
|
|
|
|
|
- on assets sold
|
|
6,826
|
|
(42,763)
|
|
(36,556)
|
|
43,500
|
- on assets held at year
end
|
|
(6,596)
|
|
(134,456)
|
|
(36,334)
|
|
(476,461)
|
|
|
|
|
|
|
|
|
|
|
|
10,284
|
|
20,317
|
|
770,092
|
|
802,046
|
|
|
|
|
|
|
|
|
|
During the period ended 30
September 2022,Revolution Beauty was moved to Level 3 from Level 1
due to being suspended on the London Stock Exchange and no longer
valued using a quoted share price in the prior year. There have
been no transfers between levels in the current year. The change in
unrealised gains or losses (net loss) for the period included in
the Statement of Comprehensive Income relating to those Level 3
assets held at the reporting date amounts to a net loss of
£36,334,000 (2022: net loss of £427,998,000).
Investments are moved between
levels at the point of the trigger event.
The main risks that the Company
faces arising from its financial instruments are:
(i) market risk,
including:
- other price risk, being the risk
that the value of investments will fluctuate as a result of changes
in market prices;
- interest rate risk, being the
risk that the future cash flows of a financial instrument will
fluctuate because of changes in interest rates;
- foreign currency risk, being the
risk that the value of financial assets and liabilities will
fluctuate because of movements in currency rates;
(ii) credit risk, being the risk that a counterparty to a
financial instrument will fail to discharge an obligation or
commitment that it has entered into with the Company;
and
(iii) liquidity risk, being the risk that the Company will not be
able to meet its liabilities when they fall due. This may arise
should the Company not be able to liquidate its
investments.
Other price risk
The management of price risk is
part of the portfolio management process and is characteristic of
investing in equity securities. The investment portfolio is managed
with an awareness of the effects of adverse price movements through
detailed and continuing analysis with an objective of maximising
overall returns to shareholders. Although it is the Company's
current policy not to use derivatives, they may be used from time
to time for the purpose of efficient portfolio management and
managing any exposure to assets denominated in currencies other
than pound sterling.
If the investment portfolio
valuation rose or fell by 25% at 30 September 2023 (25% at 30
September 2022), the impact on the net asset value would have been
£195,093,937 (2022: £205,590,626). The calculations are based on
the investment portfolio valuation as at the Statement of Financial
Position date and are not necessarily representative of the year as
a whole.
Interest rate risk
As at 30 September 2023 the
financial assets and financial liabilities exposed to interest rate
risk are as shown below:
|
|
In one
year
|
|
Greater
than
|
|
2023
|
|
|
or less
|
|
one year
|
|
Total
|
|
|
£'000
|
|
£'000
|
|
£'000
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
22,626
|
|
-
|
|
22,626
|
|
|
|
|
|
|
|
|
|
22,626
|
|
-
|
|
22,626
|
|
|
In one
year
|
|
Greater
than
|
|
2022
|
|
|
or less
|
|
one year
|
|
Total
|
|
|
£'000
|
|
£'000
|
|
£'000
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
58,712
|
|
-
|
|
58,712
|
|
|
|
|
|
|
|
|
|
58,712
|
|
-
|
|
58,712
|
|
|
|
|
|
|
|
Liquidity and interest risk tables
The following tables detail the
Company's remaining contractual maturity for its financial assets
and liabilities.
|
|
|
|
|
|
|
Over
|
|
|
|
Interest
|
|
Year 1
|
|
Year 1
-
2
|
|
2 years
|
|
Total
|
2023
|
rate %
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
Daily bank rate
|
|
4,382
|
|
-
|
|
-
|
|
4,382
|
UK treasury bills
|
Yield to maturity
|
|
18,244
|
|
-
|
|
-
|
|
18,244
|
Sorted Holdings Convertible Loan
Note
|
Default interest free
|
|
316
|
|
-
|
|
-
|
|
316
|
Other receivables
|
Interest free
|
|
50
|
|
-
|
|
-
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,992
|
|
|
|
|
|
22,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over
|
|
|
|
Interest
|
|
Year 1
|
|
Year 1
-
2
|
|
2 years
|
|
Total
|
2022
|
rate %
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
Daily bank rate
|
|
58,712
|
|
-
|
|
-
|
|
58,712
|
Other receivables and unsettled
trades
|
Interest free
|
|
3,860
|
|
-
|
|
-
|
|
3,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,572
|
|
|
|
|
|
62,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over
|
|
|
|
Interest
|
|
Year 1
|
|
Year 1
-
2
|
|
2 years
|
|
Total
|
2023
|
rate %
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
Interest free
|
|
1,703
|
|
-
|
|
-
|
|
1,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,703
|
|
-
|
|
-
|
|
1,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over
|
|
|
|
Interest
|
|
Year 1
|
|
Year 1
-
2
|
|
2 years
|
|
Total
|
2022
|
rate %
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
Assets
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
Interest free
|
|
5,353
|
|
-
|
|
-
|
|
5,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,353
|
|
-
|
|
-
|
|
5,353
|
|
|
|
|
|
|
|
|
|
|
Foreign currency risk
The Investment Adviser does not
normally hedge against foreign currency movements affecting the
value of the investment portfolio but takes account of this risk
when making investment decisions. The Company invests in securities
denominated in foreign currencies which give rise to currency
risks.
Foreign currency exposure:
|
|
2023
|
|
|
|
|
|
|
|
|
Investments
|
|
Cash
|
|
Debtors
|
|
Creditors
|
2023
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
Assets
|
|
|
|
|
|
|
|
|
US dollar
|
|
199,132
|
|
10
|
|
-
|
|
3
|
Euro
|
|
185,785
|
|
16
|
|
-
|
|
-
|
Swedish krona
|
|
56,913
|
|
3,581
|
|
-
|
|
-
|
Swiss Franc
|
|
2,848
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
444,678
|
|
3,607
|
|
-
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
|
|
|
|
|
|
|
Investments
|
|
Cash
|
|
Debtors
|
|
Creditors
|
2022
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
Assets
|
|
|
|
|
|
|
|
|
US dollar
|
|
260,583
|
|
58
|
|
-
|
|
2
|
Euro
|
|
154,943
|
|
10
|
|
-
|
|
-
|
Swedish krona
|
|
56,135
|
|
290
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
471,661
|
|
358
|
|
-
|
|
2
|
|
|
|
|
|
|
|
|
|
During the year pound sterling
weakened by an average of 4.85% against all of the currencies in
the investment portfolio (weighted for exposure at 30 September
2023). In a similar scenario, where the value of pound sterling had
strengthened against each of the currencies in the portfolio by 5%
(2022: 5%), the impact on the Net Asset Value would have been
negative £21,175,126 (2022: negative £22,460,066). If the value of
pound sterling had weakened against each of the currencies in the
investment portfolio by 5% (2022: 5%), the impact on the Net Asset
Value would have been positive £23,404,082 (2022: positive
£24,824,284). The calculations are based on the investment
portfolio valuation and cash balances as at the year end and are
not necessarily representative of the year as a whole.
Credit risk
Credit risk is the risk that a
counterparty to a financial instrument will fail to discharge an
obligation or commitment that it has entered into with the Company.
The Risk Committee has in place a
monitoring procedure in respect of counterparty risk which is
reviewed on an ongoing basis.
The carrying amounts of financial
assets best represent the maximum credit risk exposure at the
Statement of Financial Position date, and the main exposure to
credit risk is via the Company's Depositary who is responsible for
the safeguarding of the Company's cash balances.
At the reporting date, the
Company's financial assets exposed to credit risk amounted to the
following:
|
|
2023
|
|
2022
|
|
|
£'000
|
|
£'000
|
|
|
|
|
|
Cash and cash
equivalents
|
|
22,626
|
|
58,712
|
Sorted Holdings Convertible Loan
Note
|
|
316
|
|
-
|
Other receivables
|
|
50
|
|
69
|
Unsettled trades
|
|
-
|
|
3,791
|
|
|
|
|
|
|
|
22,992
|
|
62,572
|
|
|
|
|
|
All the assets of the Company
which are traded on a recognised exchange are held on its behalf by
Citibank UK Limited, the Company's Depositary. Bankruptcy or
insolvency of the Depositary may cause the Company's rights with
respect to securities held by the Depositary to be delayed or
limited.
The credit risk on cash is
controlled through the use of counterparties or banks with high
credit ratings, rated AA or higher, assigned by international
credit rating agencies. Bankruptcy or insolvency of such financial
institutions may cause the Company's ability to access cash placed
on deposit to be delayed, limited or lost.
Cash of £4,091,027, $10,373,
CHF70, SEK3,580,960 and €15,720 was held with Citibank UK Limited
at year end.
The credit rating of Citibank UK
Limited was A-1 at the year end.
Liquidity risk
Liquidity risk is defined as the
risk that the Company does not have sufficient liquid resources to
meet its obligations as they fall due. In managing the Company's
assets, the Company will seek to ensure that it holds at all times
a portfolio of assets (including cash) to enable the Company to
discharge its payment obligations as they fall due. The Company may
also maintain a short-term overdraft facility that it may utilise
from time to time to manage short-term liquidity.
The Company invests in a number of
unquoted securities which are not readily realisable. These
investments make up 97% (2022: 91%) of the net assets as at 30
September 2023.
The Company's liquidity risk is
maintained by the Risk Committee in
accordance with established policies, procedures and governance
structures in place. Cash flow forecasting is reviewed by the Risk
Committee to ensure that it has sufficient cash to meet obligations
as they fall due.
The maturity profile of the
Company's current assets and liabilities is presented in the
following table.
|
|
|
|
Between
|
|
Between
|
|
|
|
|
Up to
|
|
3 and 12
|
|
1 and 5
|
|
|
|
|
3 months
|
|
months
|
|
years
|
|
Total
|
|
|
£
|
|
£
|
|
£
|
|
£
|
2023
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
26,626
|
|
-
|
|
-
|
|
26,626
|
Sorted Holdings Convertible Loan
Note
|
|
316
|
|
-
|
|
-
|
|
316
|
Other receivables
|
|
50
|
|
-
|
|
-
|
|
50
|
Liabilities
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
(1,703)
|
|
-
|
|
-
|
|
(1,703)
|
|
|
25,289
|
|
-
|
|
-
|
|
25,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Between
|
|
Between
|
|
|
|
|
Up to
|
|
3 and 12
|
|
1 and 5
|
|
|
|
|
3 months
|
|
months
|
|
years
|
|
Total
|
|
|
£
|
|
£
|
|
£
|
|
£
|
2022
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
58,712
|
|
-
|
|
-
|
|
58,712
|
Other receivables
|
|
69
|
|
-
|
|
-
|
|
69
|
Unsettled trades
|
|
3,791
|
|
-
|
|
-
|
|
3,791
|
Liabilities
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
(5,353)
|
|
-
|
|
-
|
|
(5,353)
|
|
|
57,219
|
|
-
|
|
-
|
|
57,219
|
|
|
|
|
|
|
|
|
|
Capital management objectives, policies and
procedures
The structure of the Company's
capital is described in note 16 and details of the Company's
reserves are shown in the Statement of Changes in Equity on page
73.
The Company's capital management
objectives are:
· to
ensure that it is able to continue as a going concern;
and
· to
generate long-term capital growth through investing in a portfolio
consisting primarily of equity or equity related investments in
unquoted companies.
The Board, with the assistance of
the Investment Adviser, regularly monitors and reviews the broad
structure of the Company's capital. These reviews
include:
· the
level of gearing, set at limits in normal market conditions,
between 5% and 25% of net assets, which takes account of the
Company's position and the views of the Board and the Investment
Adviser on the market;
· the
extent to which revenue reserves should be retained or utilised;
and
· ensuring the Company's ability to continue as a going
concern.
20. Related parties
Prior to the Company's move to
being a self-managed AIF, Jupiter Unit Trust Managers Limited
("JUTM") acted as the Company's Alternative Investment Fund Manager
("AIFM") and sub-delegated portfolio management services to Jupiter
Investment Management Limited ("JIML"). On 30 June 2022 JUTM's
appointment as AIFM was terminated and on 1 July 2022 and the
Company became a self-managed AIF. JIML continues to provide
portfolio management services by virtue of a Portfolio Management
Agreement dated 1 July 2022.
|
|
2023
|
|
2022
|
|
|
£'000
|
|
£'000
|
|
|
|
|
|
Management fee charged by JUTM:
|
|
11
|
|
4,915
|
Total management fee
charged
|
|
-
|
|
3,128
|
Management fee
outstanding
|
|
|
|
|
|
|
|
|
|
Management fee charged by JIML:
|
|
|
|
|
Total management fee
charged
|
|
3,998
|
|
1,178
|
Management fee
outstanding
|
|
1,022
|
|
1,178
|
|
|
|
|
|
AIFM fee charged by JUTM
|
|
|
|
|
Total AIFM fee charged
|
|
-
|
|
433
|
AIFM fee outstanding
|
|
-
|
|
287
|
|
|
|
|
|
Directors' fees
|
|
|
|
|
Total Directors' fees charged
|
|
433
|
|
345
|
Directors' fees
outstanding
|
|
-
|
|
18
|
As at 30 September 2023 the following Directors have holdings in
the Company:
|
|
Number of
|
|
% Ordinary Shares
in
|
|
|
Ordinary
Shares
|
|
issue as at 30 September 2023
|
|
|
|
|
|
Andrew Haining
|
|
79,000
|
|
0.0133
|
Stephen Coe
|
|
60,909
|
|
0.0102
|
Simon Holden
|
|
89,500
|
|
0.0150
|
Anne Ewing
|
|
55,000
|
|
0.0092
|
Tim Cruttenden
|
|
21,298
|
|
0.0036
|
Margaret O'Connor
|
|
-
|
|
-
|
S Cruttenden (son of Tim
Cruttenden)
|
|
11,530
|
|
0.0019
|
As at 30 September 2022 the following Directors have holdings in the
Company:
|
|
Number of
|
|
% Ordinary Shares
in
|
|
|
Ordinary
Shares
|
|
issue as at 30 September 2022
|
|
|
|
|
|
Andrew Haining
|
|
79,000
|
|
0.0133
|
Stephen Coe
|
|
60,909
|
|
0.0102
|
Simon Holden
|
|
89,500
|
|
0.0150
|
Anne Ewing
|
|
55,000
|
|
0.0092
|
Tim Cruttenden
|
|
21,298
|
|
0.0036
|
Margaret O'Connor
|
|
-
|
|
-
|
S Cruttenden (son of Tim
Cruttenden)
|
|
11,170
|
|
0.0019
|
The following funds, which are
also managed by Jupiter, hold an investment in the
Company.
|
|
|
|
|
|
|
|
|
|
|
Total holdings
at
|
|
Shares
purchased
|
|
Shares
sold
|
|
Total holdings
at
|
|
Value of holdings
at
|
|
30
September
|
|
during
|
|
during
|
|
30
September
|
|
30
September
|
|
2022
|
|
the year
|
|
the year
|
|
2023
|
|
2023
|
|
|
|
|
|
|
|
|
|
£'000
|
Fund name
|
|
|
|
|
|
|
|
|
Jupiter UK Smaller Companies Focus
Fund
|
4,390,111
|
|
-
|
|
(2,370,872)
|
|
2,019,239
|
|
1,256
|
Jupiter UK Specialist Equity
Fund
|
4,166,225
|
|
-
|
|
(3,072,435)
|
|
1,093,790
|
|
680
|
Jupiter UK Mid-Cap Fund
|
84,063,528
|
|
-
|
|
(29,715,277)
|
|
54,348,251
|
|
33,805
|
Jupiter UK Smaller Companies
Fund
|
15,958,557
|
|
-
|
|
(5,968,606)
|
|
9,989,951
|
|
6,214
|
Jupiter Investment Fund - Jupiter
Merlin Real Return Portfolio
|
1,259,639
|
|
-
|
|
(1,259,639)
|
|
-
|
|
-
|
Jupiter Fund of Investment
Trusts
|
2,000,000
|
|
-
|
|
-
|
|
2,000,000
|
|
1,244
|
Jupiter UK Smaller Companies
Equity Fund
|
2,250,000
|
|
-
|
|
-
|
|
2,250,000
|
|
1,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
114,088,060
|
|
-
|
|
(42,386,829)
|
|
71,701,231
|
|
44,599
|
|
|
|
|
|
|
|
|
|
|
The following funds, which are
also managed by Jupiter, hold an investment in the
Company.
|
|
|
|
|
|
|
|
|
|
|
Total holdings
at
|
|
Shares
purchased
|
|
Shares
sold
|
|
Total holdings
at
|
|
Value of holdings
at
|
|
30
September
|
|
during
|
|
during
|
|
30
September
|
|
30
September
|
|
2021
|
|
the year
|
|
the year
|
|
2022
|
|
2022
|
|
|
|
|
|
|
|
|
|
£'000
|
Fund name
|
|
|
|
|
|
|
|
|
Jupiter UK Smaller Companies Focus
Fund
|
6,567,286
|
|
-
|
|
(2,177,175)
|
|
4,390,111
|
|
2,709
|
Jupiter UK Specialist Equity
Fund
|
7,009,168
|
|
-
|
|
(2,842,943)
|
|
4,166,225
|
|
2,571
|
Jupiter UK Mid-Cap Fund
|
77,592,375
|
|
7,600,007
|
|
(1,128,854)
|
|
84,063,528
|
|
51,867
|
Jupiter UK Smaller Companies
Fund
|
17,820,552
|
|
-
|
|
(1,861,995)
|
|
15,958,557
|
|
9,846
|
Jupiter Investment Fund - Jupiter
Managed European Portfolio
|
742,325
|
|
3,633
|
|
(745,958)
|
|
-
|
|
-
|
Jupiter Investment Fund -Jupiter
Merlin International Balanced
|
668,092
|
|
3,270
|
|
(671,362)
|
|
-
|
|
-
|
Jupiter Investment Fund - Jupiter
Merlin International Equities
|
946,275
|
|
4,724
|
|
(950,999)
|
|
-
|
|
-
|
Jupiter Investment Fund - Jupiter
Merlin Real Return Portfolio
|
1,559,644
|
|
7,268
|
|
(307,273)
|
|
1,259,639
|
|
777
|
Jupiter Fund of Investment
Trusts
|
2,000,000
|
|
-
|
|
-
|
|
2,000,000
|
|
1,234
|
Jupiter Merlin Real Return
Portfolio
|
103,926
|
|
509
|
|
(104,435)
|
|
-
|
|
-
|
Jupiter Merlin Worldwide
Portfolio
|
8,532,956
|
|
43,605
|
|
(8,576,561)
|
|
-
|
|
-
|
Jupiter UK Smaller Companies
Equity Fund
|
1,750,000
|
|
500,000
|
|
-
|
|
2,250,000
|
|
1,388
|
|
|
|
|
|
|
|
|
|
|
Total
|
125,292,599
|
|
8,163,016
|
|
(19,367,555)
|
|
114,088,060
|
|
70,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21. Post balance sheet
events
Since 7 October 2023 an armed
conflict has been ongoing between Israel and Hamas-led Palestinian
militant groups, largely in and around the Gaza Strip, the West
Bank and on the Israel-Lebanon border. One of the Company's
portfolio companies, Deep Instinct, has an operational presence in
Tel Aviv, Israel. Notwithstanding the impact the conflict has had
in the region to date, Deep Instinct has not experienced material
disruption to its operations.
On 27 November 2023 the Company
announced that that it has reached agreement with Jupiter
Investment Management Limited and agreed Heads of Terms with the
Company's managers (Richard Watts and Nick Williamson) to redraw
the structure under which investment advisory services will be
provided. This foresees the Company's managers leaving Jupiter to
provide advisory services to the Company from a new entity,
effective 1 April 2024. It was also announced that G10 Capital
Limited - part of IQ-EQ group's UK Regulatory and AIFM platform -
will take over AIFM services for the Company.
On 16 January 2024 the Company
paid £2 million to Smart Pension Limited as part of an advance
subscription, ahead of a wider funding round that is expected to
complete on or around 31 January 2024. On completion of the funding
round the advance subscription will convert to share capital in
Smart Pension Limited.
There has not been any other
matter or circumstance occurring subsequent to the end of the
financial year that has significantly affected, or may
significantly affect, the operations of the Company, the results of
those operations, or the state of affairs of the Company in the
future financial year.
Corporate Information
Directors
Andrew Haining,
Chairman
Anne Ewing
Simon Holden
Stephen Coe (Senior Independent
Director)
Tim Cruttenden
Margaret O'Connor
Registered office
1 Royal
Plaza
Royal Avenue
St Peter Port
Guernsey, GY1 2HL
Investment Adviser
Jupiter Investment Management
Limited ("JIML")
The Zig Zag Building
70 Victoria Street
London, SE1E 6SQW
Financial Adviser and Corporate Broker
Liberum Capital Limited
Ropemaker Place Level
12
25 Ropemaker Street
London, EC2Y 9LY
Numis Securities
Limited
45 Gresham Street
London, EC2V 7BF
Administrator and Company Secretary
Apex Administration (Guernsey)
Limited (formerly known as Maitland Administration (Guernsey)
Limited)
1 Royal Plaza
Royal Avenue
St Peter Port
Guernsey, GY1 2HL
Registrar
Computershare Investor Services
(Guernsey) Limited
1st Floor, Tudor House
Le Bordage
St Peter Port
Guernsey, GY1 1DB
Depositary
Citibank UK Limited
Citigroup Centre
Canada Square
Canary Wharf
London, E14 5LB
English Legal Adviser to the Company
Travers Smith LLP
10 Snow Hill
London, EC1A 2AL
Guernsey Legal Adviser to the Company
Ogier (Guernsey) LLP
Redwood House
St Julian's Avenue
St Peter Port, GY1 1AW
Independent Auditor
KPMG Channel Islands
Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey,
GY1 1WR
Definitions
BENCHMARK PERFORMANCE
|
|
With reference to investment
valuation, application of the performance of a benchmark or pool of
comparable companies to an unlisted company to determine a
valuation.
NAV PER SHARE
Net Asset Value expressed as an
amount per share.
|
|
NAV PER SHARE GROWTH
|
|
With reference to fund
performance, NAV at end of stated year / NAV at beginning of stated
year as a percentage.
|
|
IRR
|
|
Internal Rate of Return - with
reference to investment performance, calculated using excel XIRR
formula.
|
|
TRADING MULTIPLE
|
|
With reference to investment
valuation, enterprise value / annual revenue of company.
|
|
DRAWDOWN
|
|
With reference to index
performance, the maximum percentage loss in value over a given time
period.
|
|
DISCOUNT / PREMIUM
|
|
The amount by which the market
price per share of an investment company is lower or higher than
its net asset value per share. The discount or premium is normally
expressed as a percentage of the net asset value per
share.
|
|
NET ASSET VALUE (NAV)
|
|
The Net Asset Value (NAV) is the
amount by which total assets exceed total liabilities, i.e., the
difference between what the Company owns and what it
owes.
|
|
EBITDA
|
|
Earnings before interest, tax,
depreciation and amortisation
|
|
|
|
MULTIPLE ON INVESTED CAPITAL ("MOIC")
|
|
The ratio calculates the total
cash earned on an investment as a ratio of the total cash invested
in that investment.
|
|
|
|
|
|