TIDMCHRY
RNS Number : 3308O
Chrysalis Investments Limited
31 January 2023
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is not for publication, release or distribution in the United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.
31 January 2023
Chrysalis Investments Limited ("Chrysalis" or the "Company")
Annual Results
The Company today announces its results for the year ended 30
September 2022. 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 2022 30 September 2021 % change
NAV per share 147.79p 251.96p (41%)
------------------ ------------------ ---------
Share price 62p 267p (76%)
------------------ ------------------ ---------
Total net assets GBP880m GBP1,379 million (36%)
------------------ ------------------ ---------
Performance Headlines
A NAV decline of 104.17p (to 147.79p) was largely driven by
Klarna (57.66p) and the listed portfolio (31.90p) with the
remaining assets performing strongly against a challenging
backdrop
GBP108.0m of investments were realised over the period.
Chrysalis fully divested two assets, Embark Group and THG. Embark
realised net proceeds of GBP57m for a cash-on-cash return of
2.1x
GBP80.3m of capital was deployed during the period following a
GBP60.0m capital raise in December 2021 and realisations in the
period
Available liquidity of GBP82.8m as at 30 September 2022 leaves
the Company well placed to support the existing portfolio in the
drive towards profitability
The portfolio ended the year well-funded, with 67% of portfolio
now either profitable or expected to be funded to profitability and
a further 14% with a cash runway of approximately two years
Andrew Haining, Chair, commented:
"After what was a tough year in the markets in 2022, Chrysalis
begins the new financial year with confidence in its portfolio of
high potential, market leading businesses. We have a robust cash
position that will enable us to further support these companies; a
reinforced valuation process overseen by a group of highly
experienced independent experts; and an agreement in principle,
subject, inter alia to shareholder approval, with Jupiter for the
ongoing management of the Company's assets which we believe is well
aligned with the interests of our shareholders."
Richard Watts and Nick Williamson, co-portfolio managers,
commented:
"Despite the challenging market for growth companies in 2022, we
saw some exceptionally strong performances from within the
portfolio, over two thirds of which is now profitable or funded
through to profitability. This gives us confidence in the
significant growth potential of these businesses and their ability
to generate or exceed the returns expected from our
shareholders."
-S-
For further information, please
contact
Media
Montfort Communications +44 (0) 7976 098139
Charlotte McMullen / Toto Reissland chrysalis@montfort.london
/ Lesley Kezhu Wang
Jupiter Asset Management:
James Simpson +44 (0) 20 3817 1696
Liberum:
Chris Clarke / Darren Vickers
/ Owen Matthews +44 (0) 20 3100 2000
Numis:
Nathan Brown / Matt Goss +44 (0) 20 7260 1000
Maitland Administration (Guernsey)
Limited:
Elaine Smeja / Aimee Gontier +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 Capturing Growth
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.
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 Delivering Value
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.
Performance Headlines
147.79p - NAV decline of 104.17p or 41%
------------------------------------------------------------------------
* Falls in the valuations of Klarna (57.66p) and the
listed portfolio (31.90p) contributed to much of the
decline. The share price closed at 61.70p, a 58%
discount to NAV.
GBP108.0m - Cash from realisations
------------------------------------------------------------------------
* Fully divested two assets, Embark Group and THG, and
realised a portion of other listed assets. Embark
realised net proceeds of GBP57million for a
cash-on-cash return of 2.1x.
GBP60.0m - New capital raised
------------------------------------------------------------------------
* Raised in December 2021 with the objective of funding
follow-on investments.
GBP80.3m - Follow-on investment
------------------------------------------------------------------------
* Deployed proceeds from realisations and capital
raised to support the existing portfolio in the drive
towards profitability.
GBP82.8m - Available liquidity at 30 September 2022
------------------------------------------------------------------------
* Ended the year well placed to continue to support the
current portfolio.
67% of portfolio profitable or expected to be funded
to profitability
------------------------------------------------------------------------
* The portfolio ended the year well-funded, with 35% of
the portfolio now profitable; 32% expected to be
funded through to expected profitability and a
further 14% with a cash runway of approximately two
years.
Chairman's Statement
Introduction
Chrysalis Investments Limited (the "Company" or "Chrysalis") saw
a decline in its NAV per share over the course of the year of 41%
to 147.79 pence per share, reflecting an abrupt turnaround in
market sentiment when compared to the preceding three years of
growth. Despite this volte-face, our portfolio of best in class,
innovative businesses continue to generate significant revenue
growth, as a result of the transformations they are driving within
their sectors and the strong demand for their solutions. The vast
majority of our portfolio companies are either profitable, funded
to profitability, or have a two-year cash runway.
In addition to the reduction in NAV per share, the premium to
NAV, we had enjoyed for most of the three preceding years, has been
replaced by a substantial discount. This discount has begun to
narrow in recent months but still, as at 31 December 2022, the
discount to the 31 September 2022 NAV stood at 48%.
We recognise that the reversal in our share price, reflecting
similar moves in the wider market, will have been disappointing to
our shareholders but what we hope that these accounts convey is the
market leading potential of the businesses in our portfolio and
their ability to generate considerable value.
We have already had some great successes, with the realisation
of Embark at over twice our original cost, and the partial
realisation of Wise at approximately three times our original cost.
Some of our investments, as in any private capital portfolio, have
not met original expectations. THG and Revolution Beauty fall into
that category; our realised gains, however, remain well ahead of
our realised losses.
We believe the portfolio has considerable opportunity for
further growth as the investment team highlights in the Investment
Adviser's Report.
As technology continues to advance, there will be new exciting
opportunities in which to invest when the time is right. Given the
potential in the portfolio and the change in markets, the
investment team is for now focusing on ensuring that its existing
investments are positioned correctly. There have been new lessons
for both growth orientated companies and investment teams over the
last twelve months. As and when we start to add to the portfolio,
we will be drawing on those lessons, which will inform our due
diligence and investing process.
Nearer term, there will be opportunities to reinforce our
positions in some of our key investments on attractive terms.
Ensuring we have the capacity to do that is a key objective for the
Board and the Investment Adviser, coupled with taking steps to
reduce the current discount to NAV.
Realisations, even partial, will underpin confidence in the
value of our portfolio. Our largest four or five holdings have the
capacity to take advantage of public capital markets, as and when
they open again for IPOs. Given their value and profile, there is
also a limited private market for some holdings. We need to balance
the short-term benefit of a partial disposal against the long-term
cost of reducing potential returns from asset value accretion in
successful investments. Chrysalis was established as a permanent
capital vehicle to ensure it did not have to sell assets within
prescribed timeframes and we believe that shareholders will benefit
over the medium term from the lack of pressure to sell.
I will go on to expand on other initiatives within the Board's
control, which we believe should influence, and hopefully reduce,
the discount to NAV at which the shares currently trade.
Valuation and valuation process
Valuation is fundamental to our delivery of information to
shareholders. Our underlying investments are developing at pace and
values of comparable businesses are moving with markets. The net
result is a very dynamic environment for "point in time" valuations
of investments on a quarterly basis.
Chrysalis benefits from the skill set we have assembled on the
new independent Valuation Committee, which has become operational
during this year.
Chrysalis has clearly reinforced and improved its valuation
process by drawing on the experience this committee has on valuing
direct investing in private growth capital, multiple PE and venture
portfolios, listed fund management covering both listed and
unlisted investments, and fund of fund investing in private
capital.
The committee, led by Lord Rockley, seeks to shorten the
delivery time for quarterly valuations, as well as selectively
testing individual investments with additional third-party
valuation work. Transparency on process and efficiency in delivery
will enable shareholders to derive greater confidence in our
valuations, particularly in challenging markets.
Environmental, Social and Corporate Governance
The Board and the Investment Adviser have made good progress on
ESG, and I would draw your attention to the dedicated section in
our Report and Accounts.
Private capital markets (and private equity/venture managers)
have lagged their listed peers with their approach to ESG and the
adoption of such principles as part of the mainstream investing
process. At Chrysalis, review of ESG credentials forms part of our
initial investment decisions and ongoing review of businesses. Our
approach is intrinsic to the investment decision making process and
we will be building on this going forward.
However, managing to a set of ESG principles is only valuable if
one can learn from mistakes and act on circumstances that clearly
fall short of our objectives.
In the instance of Revolution Beauty, notwithstanding the
disposal of the Company's holding post period end, we are
considering the summary findings of the independent investigation
report (conducted by law firm Macfarlanes LLP and forensic
accountant Forensic Risk Alliance). This report examined the
Company's historic corporate governance amongst other factors that
may have contributed to the decline in its share price since IPO in
July 2021 and the ultimate suspension of its shares from being
traded in the public market in August 2022. The announcement made
by Revolution Beauty clearly identified a number of issues which we
intend to pursue further. We have instructed our lawyers and we
intend to undertake the steps that are available to us in order
that we can begin to assess the full extent of these issues and
their legal implications. Whilst we are mindful of the potential
costs of a drawn-out legal process, we are also determined to
ensure that where significant governance shortcomings occur and may
be responsible for shareholder losses, individuals and corporate
bodies are held to account.
Share Buybacks
The Board and the Investment Adviser have discussed the issue of
share buybacks regularly, given the discount to NAV at which the
shares have been trading recently.
In this regard, I would make the following observations:
-- We gained approval originally from shareholders for share
buybacks primarily as a way of returning surplus capital from
realisations of underlying investments;
-- The cash applied to a buyback programme would need to be
measured against the likely future investment needs of, and
opportunities in, the portfolio;
-- We also believe that to "move the dial" any buyback programme
would need to be substantial and not token.
As the economic cycle plays out, and in particular as the likely
shape of the current downturn becomes clearer, the Company's
investment needs should also become clearer. At this stage in the
cycle we believe there is still a degree of uncertainty as to the
final path interest rates will take and the depth and ramifications
on business models the current economic slowdown will cause. While
we are very confident in the value of the portfolio, we need to
maintain sufficient liquidity to ensure that we can continue to
support and preserve our investments.
While we specified recently a likely further follow-on
commitment of approximately GBP20 million, the Board and Investment
Adviser are in agreement that currently not all the necessary
criteria to commence a share buyback for discount control purposes
exist.
We will continue to keep this option under review. While the
passage of time should reduce uncertainty on the economic cycle
side, other factors, such as the reopening of the IPO market, which
could lead to increased portfolio liquidity, could also materially
alter our deliberations.
Management agreement
As highlighted in last year's accounts, the Board has been
reviewing the performance fee agreement with the Investment
Adviser. The Company announced on 30 November 2022 that it had
reached an agreement in principle with Jupiter in this regard. The
terms of the new agreement, which will be put to shareholders and
on which a detailed circular will be distributed, can be summarised
as follows:
-- The 20% performance fee is reduced to 12.5%;
-- Settlement of the fee will be in shares and will be deferred over a 3-to-5-year period;
-- Share releases will be subject to share price gates and an annual cap; and
-- The High-Water mark of 253p NAV per share will remain in
place for the new fee agreement, with no performance fee accruing
until that level is exceeded.
In reaching this agreement, the Board has tried to balance a
variety of issues, namely:
-- The need for a competitive remuneration structure to ensure
the highest quality of staff can be attracted and retained by the
Investment Adviser;
-- As close a proxy for reward on realisation as possible in an open-ended structure; and
-- An overall reduction in both the absolute and the annual payment under such a scheme.
Both Jupiter and the Board recognise the overriding need to make
these changes work for Chrysalis over the long term.
In summary, I believe the combination of these fee agreement
proposals should provide shareholders with greater clarity on the
approach your Board is taking in managing your Company, and
hopefully result in greater support for the Company and its
future.
Finally, I would like to thank the management teams of our
investee companies, the investment team, and my colleagues on the
Board for their efforts during the 2022 financial year. It has been
more challenging than we had perhaps anticipated, but I firmly
believe we have a portfolio of companies with significant growth
prospects which can generate the returns our shareholders envisaged
and expected from this exciting investment strategy.
Portfolio Statement
As at 30 September 2022
Company Location Opening Net invested/ Fair value Closing
Cost value (returned) movements Value
% of
net
(GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) assets
wefox Holding AG Germany 65,625 108,657 - 46,286 154,943 17.6
Starling Bank Limited UK 98,248 210,767 10,000 (107,373) 113,394 12.9
The Brandtech Group USA 46,440 94,837 - 8,553 103,390 11.8
Smart Pension Limited UK 90,000 88,600 15,000 (8,413) 95,187 10.8
Deep Instinct Limited USA 62,226 48,430 14,937 18,462 81,829 9.3
Klarna Holding AB Sweden 71,486 386,999 7,106 (337,970) 56,135 6.4
Featurespace Limited UK 29,546 34,729 5,097 13,313 53,139 6.0
Graphcore Limited UK 57,589 61,545 - (16,480) 45,065 5.1
Tactus Holdings
Limited UK 40,130 40,079 - (3,284) 36,795 4.2
Cognitive Logic Inc. USA 47,126 48,435 - (18,136) 30,299 3.5
Wise PLC UK 6,716 108,700 (37,571) (50,812) 20,317 2.3
Sorted Holdings
Limited UK 27,941 17,705 12,940 (12,216) 18,429 2.1
Secret Escapes
Limited UK 21,509 24,427 - (11,195) 13,232 1.5
Growth Street
Holdings
Limited UK 11,372 1,332 (1,240) 117 209 0.0
Revolution Beauty
Group PLC UK 41,778 41,373 (514) (40,859) - 0.0
THG PLC UK - 86,683 3,828 (90,511) - 0.0
Embark Group Limited UK - 56,900 (70,601) 13,701 - 0.0
Rowanmoor Group Ltd UK 13,363 - 13,363 (13,363) - 0.0
Total investments 731,095 1,460,198 (27,655) (610,180) 822,363 93.5
Cash and cash equivalents 58,712 6.7
Other net current
liabilities (1,493) (0.2)
Total net assets 879,582 100.0
Investment Adviser's Report
Overview
Having benefited from the tailwinds generated by the growing
interest in, and scale of, late-stage private markets over the
first three years of Chrysalis' existence, the last twelve months
have seen an abrupt change in sentiment towards growth companies.
This volte- face is attributable predominantly to rising inflation
rates, which have led to interest rates rising across the world,
with the former being exacerbated by the outbreak of war in
Ukraine.
Rising interest rates have in turn provoked a marked shift in
investor sentiment from growth to profitability and have had a
negative impact on many companies' ability to access capital in the
private market. The Investment Adviser's investment process has
always considered IPO as a likely exit route, and thus has focused
on those businesses with strong financial models and the potential
to earn substantial profits.
As of September 2022, companies accounting for approximately 35%
of NAV were profitable. The Investment Adviser has worked hard with
other portfolio assets to ensure they have sufficient cash, and,
where necessary, has worked with them to reduce cash burn, to
elongate their cash runways.
As a result of this work, another 32% of NAV is accounted for by
companies that the Investment Adviser believes are funded to
profitability, and another 14% have cash runways for at least two
years of trading.
While some companies, such as THG (disposed of in the year)
struggled with the inflationary environment, others, such as
Starling Bank and Wise, have seen a benefit from rising interest
rates. The majority have continued to execute on their growth plans
and expand, albeit some, such as Klarna, chose to moderate their
pace of growth given the expected squeeze on consumers' income.
While the Company's share price decreased over the year and
market conditions have weighed on sentiment, many of our companies
have continued to develop strongly. With much of the heavy lifting
in terms of funding now completed, this gives the Investment
Adviser confidence in the ability of the portfolio to continue to
deliver substantially better growth rates than those available in
the listed sphere.
NAV
Valuations of comparable listed peers to the Company's portfolio
assets are used by the independent valuer to assess fair value,
which is considered by the Valuation Committee, before being
ratified by the Board.
The global decrease in valuations of growth stocks, stemming
from higher interest rates, transmitted through the above mechanism
to the Company's NAV per ordinary share, leading to an approximate
41% decline in NAV over the year.
During the course of the year, no new investments were made.
Follow-on investments of approximately GBP80.3 million were made,
with the main recipients being Smart Pension, Deep Instinct and
THG, which each accounted for approximately GBP15 million. More
than offsetting this were realisations of approximately GBP108
million. The main components here were the proceeds from the sale
of Embark Group to Lloyds Bank plc (approximately GBP57 million
net), and sales of listed holdings to raise liquidity, particularly
Wise (approximately GBP38 million).
This led to a net realisation across the year of approximately
GBP28 million.
In December 2021, Chrysalis raised gross proceeds of GBP60
million, which allowed the Company to continue to support its
investee companies as they dealt with the difficult market
conditions described below.
Market
The market backdrop changed materially from the prior year as
investors grappled with the first major interest rate tightening
cycle in over 30 years, lifting rates from the negligible levels
extant since the Great Financial Crisis. This tightening was driven
by rising inflation, attributable to many sources, but likely
reflecting the fallout on global supply capacity in numerous
sectors following COVID-19 related shutdowns, and further
exacerbated by the Russian initiated war in Ukraine.
Rising rates are deemed to have a greater impact on
long-duration assets, such as growth stocks, where more of their
value (cash generation) resides in the future, compared with more
mature companies that are typically already generating greater
levels of cash. This impact is felt to a greater extent by those
companies which are currently not profitable, and so the long-term
"terminal" value of the business forms over 100% of the company's
enterprise value.
As a result, the impact on stock markets was varied, although
most saw declines. The NASDAQ 100 - with a greater proportion of
growth companies - fell approximately 25%, whereas the S&P 500
- with the typical constituent being profitable - fell by a more
modest 17%. In the UK, the FTSE All-Share fell by approximately 7%,
with its outperformance likely aided by high index weightings to
energy companies (which benefited from rising commodity prices) and
banks (which benefited from expectations of widening net interest
margins).
The Impact on the private late-stage market was significant,
particularly as many companies had been operating business models
which focused on aggressive expansion, often at the cost of
profits.
While 1Q22 saw continued growth in the late-stage private
market, the Investment Adviser believes this reflects the
completion of deals that were likely agreed towards the end of
2021. During 2Q and 3Q 2022, the market slowed markedly and fell
approximately 30% year-on-year in each quarter. The Investment
Adviser believes it is likely that this contraction will continue
for at least two more quarters.
Despite this slowdown, 2022 will still be the second most
prolific year of late-stage private equity raising on record. The
Investment Adviser believes this growth reflects a growing
understanding by other market participants of the exciting growth
opportunities available in this segment, and while the near-term
market outlook is weak, the market has fundamentally altered over
the last few years.
Despite near-term uncertainty, there is evidence of some green
shoots emerging. Numis, one of our brokers, has published the
results of a survey of 30 top global growth investors.
Interestingly, investors' expectations for valuations appear to be
beginning to stabilise.
Compared with 2Q22, 3Q22 has seen the average response improve
from prices likely to fall meaningfully, to the majority of
investors expecting prices to be roughly stable. If this comes to
pass, the Investment Adviser believes this will have important
ramifications for the future performance of the Company. Stable
pricing is indicative of improved market conditions, which suggests
less downward pressure on listed peers, and thus on the Company's
NAV.
The other big shift seen over the year is a change of investor
mindset, from growth - which the Investment Adviser has observed
some market participants chasing at all costs - towards
profitability.
From 2Q22 to 3Q22, the proportion of investors believing this
shift to profitability will last for more than 18 months has risen
from 32% to 58%, despite another three months having passed.
The ability of technology to disrupt huge, established markets
has meant many companies have focused on how to drive their market
shares from very low levels. As an example, the Investment Adviser
estimates the Total Addressable Market ("TAM") of its six largest
holdings is over $800 billion, but these companies only command a
0.4% share at present.
As such, the wider investment universe has seen a significant
focus on driving growth, often at the expense of profitability,
over preceding years.
Given the Investment Adviser has always considered IPO as the
most likely exit route for its unlisted holdings, it has assessed
its investments through the lens of a listed market investor, which
is typically more sensitive to profits and cashflow. As a result,
the Investment Adviser looks for certain characteristics at point
of investment that suggest a company can achieve material profits
at scale, even if it is currently loss making, including, where
sensible, analysis of unit economics and cohorts.
As such, the Investment Adviser believes its companies are well
equipped to deal with this change in direction, and it has been
working with them across the year, where necessary, to ensure they
are adequately capitalised and have efficient cost bases.
As of September 2022, over 80% of the portfolio is either
profitable, or likely funded to profitability, or has a two year
cash runway.
The funding options surrounding the remaining 19% of the
portfolio include:
-- A follow-on with funding from Chrysalis;
-- A follow-on where Chrysalis does not participate; and
-- A strategic exit/ merger.
The Investment Adviser assesses that it will not utilise the
Company's capital to follow-on in all of the cases in this segment,
limiting the likely future requirement of funding to approximately
GBP20 million.
Portfolio
Most of our portfolio companies, particularly those which are
relatively more mature, made considerable progress over the year,
albeit this was masked in the NAV calculation by weakening listed
market comparables.
This led to six of our companies successfully raising capital,
despite the difficult market backdrop, netting a total of
approximately $1.5 billion.
Although Klarna undertook its funding round at a post-money
valuation of $6.7 billion - well down on the peak it achieved in
June 2021 of $45.6 billion - the Investment Adviser believes the
fact that it managed to raise $800 million at the height of the
growth sell off is testament to its strong investment case.
Subsequent to this raise, Klarna has confirmed that it expects to
achieve profitability in the second half of 2023, which the
Investment Adviser views as extremely positive news.
This is likely to be in part achieved via last year's announced
cost savings, where Klarna indicated expected job losses equating
to 10% of its workforce, but also due to its on-going strong credit
performance. Although the market had been worrying about the impact
of rising rates on Klarna's business model - both in terms of
funding costs and the potential for customers to default - Klarna
actually saw impairment charges fall over 3Q22 to 0.7%, from 0.8%,
with a faster improvement in the US than the wider group, despite
its growing at 92% over the nine months to September 2022.
wefox also managed to close a substantial round of $400 million
at a similar time to Klarna.
While the Investment Adviser believes securing funding for its
continued expansion was the right move for Klarna to deliver
long-term value for shareholders, the ramifications of the down
round were felt on the Company's NAV per share.
Over the year, Chrysalis' NAV per share fell from 251.96p to
147.79p, or approximately 104p. Of this move, Klarna alone
accounted for 58p - given the scale of the decrease in its
valuation and its starting position size in the portfolio - more
than all the other movements combined. Ex-Klarna, the listed part
of the portfolio (THG, Wise and REVB) contributed 32p of downside -
of which THG was the main contributor - with unlisted positions
causing the smallest impact at 14p.
In terms of the latter, some of the Company's positions contain
downside protection mechanisms, which help to minimise the decrease
in certain share classes, at the expense of others. Due to its
share structure, this benefit is not embedded in Klarna, hence the
decrease in its valuation fed straight through to the Company's
shareholding.
Across the unlisted portfolio as a whole, the weighted average
write down in the investee companies' market capitalisations has
been approximately 50% from their respective peaks.
Portfolio activity
Given the changing market conditions, and the fact that the
Company's share price traded on a discount to its NAV per share for
much of the year, there was limited ability to raise significant
quantities of new capital, bar the GBP60 million raised in December
2021.
As a result, the Investment Adviser focused on raising liquidity
where available, notably from its listed holdings, as well as
receiving approximately GBP57 million net proceeds from the sale of
Embark to Lloyds Bank plc in January 2022.
The Investment Adviser spent considerable time over the year
working with investee companies to prepare them for tighter funding
markets, by encouraging operational efficiencies where able, as
well as pre-emptive capital raises, to put them in the best
possible shape for the likely more restrictive capital raising
environment to come. As a result, the Company's capital was
exclusively targeted at follow-on investments; no investments into
new holdings were made over the year.
As a result of this activity, the position in THG was entirely
disposed of in the period. THG's share price suffered from
inflation-induced downgrades to profit expectations and Ingenuity
performing less well than expected. The Investment Adviser felt it
more value enhancing to redeploy capital elsewhere.
Wise was also used as a source of capital. Although Wise has
been a strong performer for the Company, and the Investment Adviser
believes it is still only scratching the surface of its potential,
given its current market share, a balance needs to be made between
running positions, and ensuring adequate liquidity is available to
support other holdings.
Given the progress achieved over the course of the year, the
Investment Adviser believes that much of this support work has now
been completed.
The situation that unfolded at Revolution Beauty was extremely
disappointing. Over the course of August it became apparent that
the group's auditors had issues in relation to the company's audit,
which culminated in the launch of an independent investigation and
the suspension of the company's shares. The Investment Adviser, in
consultation with the Board, is considering the initial findings of
the investigation, before deciding on the appropriate steps to
take.
Post period end, the Company was able to sell its entire holding
of Revolution Beauty in an off-market transaction. This netted
proceeds of over GBP5 million, compared with the carrying value of
nil as of September 2022.
In terms of the rationale to hold listed positions in the
portfolio, the Investment Adviser still considers that there is an
argument for doing so, in order to capture expected gains post
flotation, as well as managing liquidity. While the experience of
the last year is contradictory to the above, and the Investment
Adviser recognises the points of learning to be taken from this, it
is also of the view that each investment case is unique and needs
to be judged accordingly.
A recap on purpose
Chrysalis was set up to deliver value for shareholders by
investing in innovative businesses with proven business models and
the potential to transform their sectors. It was founded based on
two key principles:
1) That companies were staying private for longer; and
2) That by moving into the private market, the Investment
Adviser believed it could tap into substantially faster rates of
revenue growth, compared with public markets.
Over the course of the year, the Investment Adviser believes the
trends behind Principle 1 remain fully in force, and that it has
succeeded in delivering on Principle 2.
Staying private for longer
One of the side effects of companies staying private for longer
is that fewer of them come to market via IPO. Following over 20
years of public market investing, the Investment Adviser believes
that IPOs are essential to rejuvenate public markets, by offering
investors new investment cases to consider, as well as updating the
listed investable universe with business models that are more
contemporary.
With this in mind, it is clear that the IPO market is still
depressed relative to its previous strength pre the Great Financial
Crisis ("GFC") of 2008.
Even 2021, which was seen as a "good" year for IPOs relative to
the recent past, is still nearly 40% below the pre-GFC average.
Superior growth rates versus public markets
Many of the Company's holdings have seen material revenue growth
since point of investment, with several seeing exceptional growth.
The standout performer has been Starling, which in the year before
Chrysalis' investment generated GBP1 million in revenue, whereas as
of June 2022 was capitalised approximately GBP331 million.
As a result of revenue growth by its investee companies - partly
funded by capital invested by the Company - the aggregate revenue
of the portfolio has expanded by GBP2.5 billion since investment,
representing three times the initial level.
Portfolio dynamics
The Investment Adviser believes the portfolio continues to look
good value, when compared with its expected future growth. The
NASDAQ is currently trading back near its long-term average
one-year forward EV/sales ratio of approximately 4.6x, at
approximately 5.4x.
Interestingly, many other growth oriented indices are also
trading on around 5x EV/sales.
The Investment Adviser believes the similar multiples for the
listed indices, despite their differing growth profiles, reflects
the differing levels of profitability of their constituent members,
to which market participants are currently particularly
sensitive.
Against this, the aggregate revenue performance of Chrysalis'
portfolio is expected to be over 50%, which the Investment Adviser
believes more than compensates for the modest premium the portfolio
is trading on.
Given the discount to NAV that the shares in Chrysalis are
currently trading on, although the valuation at a portfolio level
is a touch over 6x, the implied valuation at a Company level is
almost halved by this discount to approximately 3x.
The majority of the portfolio is comprised of highly scalable
platform businesses that are leading transformation within their
sectors. The Investment Adviser believes these companies have the
ability to generate significant margins at scale, and it notes that
typically, high margin, high growth businesses attract high
valuations from investors. In the Investment Adviser's view, it is
unusual to find the ability to access such investments on levels
commensurate with the discount adjusted figures generated
above.
Outlook
With most of 2022 having been dominated by difficult market
conditions, it is easy to become pessimistic over the future:
investor sentiment typically reflects the recent past. In the
Investment Adviser's opinion, it is important to look forward and
consider what might change.
Although one swallow might not make a summer, the indications
from other leading growth investors suggest pricing has begun to
stabilise in the market.
Anecdotally, and post period end, the Investment Adviser has
also seen bids for certain of the Company's assets at levels above
recent funding rounds, which supports the above assertion. The
Investment Adviser would expect market sentiment to be sensitive to
this second derivative.
So the backdrop to valuations may be slightly more optimistic
than it has been. Time will tell.
Despite this, the Investment Adviser believes many of the
Company's holdings are continuing to deliver excellent financial
performance, and that the majority of them are sufficiently well
capitalised to weather further difficult conditions, if these do
indeed persist.
While the higher interest rate environment has been detrimental
to certain holdings, for a number of them, particularly Starling
and Wise, it has actually been a tailwind. A key focus of the
Investment Adviser in previous years has been to increase
diversification within the portfolio, and the effect of this is to
reduce stock specific risk. This has also helped ameliorate, at a
portfolio level, the impact of those holdings where the investment
case did not play out as planned, particularly in regard to THG and
Revolution Beauty last year.
With generally strong balance sheets, the Investment Adviser
believes the portfolio holdings are well placed to continue to
build on their impressive growth trajectories. In the fullness of
time, this should feed through into valuations.
If market sentiment does improve, one area this is likely to be
felt is in the IPO market, which has consistently been seen by the
Investment Adviser as an important method of exit available to the
Company. Currently, the IPO market has endured four consecutive
quarters of low issuance.
Ignoring the negative impact of COVID-19 on the market, previous
significant market downturns, post the dotcom bubble and during the
Global Financial Crisis led to five and seven quarters of low
issuance respectively. Thus, history suggests that the market is
over halfway through this issuance correction.
The reopening of the IPO market, possibly in 2023, might enable
some of the Company's relatively more mature assets to consider a
flotation. Such a move would substantially improve the Company's
liquidity position.
Company Section
wefox Holding AG ("wefox")
wefox successfully closed a EUR400 million Series D funding
round in July 2022 which valued it at EUR4.5 billion. This
represented a material increase from the EUR3.0 billion valuation
the company achieved in June 2021 when it completed a EUR300
million Series C funding round.
Private companies across a variety of sectors have struggled to
raise large amounts of capital from new investors against a
challenging backdrop but wefox has continued to deliver on this
front; this has enabled the business to continue expanding
internationally and to grow rapidly.
wefox's growth trajectory has been remarkable, with the company
more than doubling its annual turnover every year since its
inception in 2015. When Chrysalis first invested in 2019, the
company generated less than EUR50 million of revenue. Last year, it
generated over EUR300 million in revenue, and is targeting EUR600
million of revenue for 2022. This makes wefox the leading
'Insurtech' asset globally by both revenue and valuation.
wefox has historically generated best-in-class rates of organic
growth, but the company also has a very focused M&A strategy
that it is executing. This is one of the reasons the business has
continued to raise significant amounts of capital. wefox acquired
Mansutti, an Italian insurance broker, in 2021 and more recently
TAF, a large Managing General Agent ("MGA") and a market leader in
the Netherlands.
wefox operates a very different business model to its peers,
which gives a clear roadmap to profitability, and this is the
reason why Chrysalis initially invested in the business.
The company focuses on digitising indirect distribution channels
(advisers, brokers and affinity partners) which in total represent
90% of its target markets, by providing them with customer leads,
Customer Relationship Management ("CRM") functionality and workflow
management software. This results in improved broker productivity
and a better customer experience. wefox is then able to selectively
target profitable customer cohorts with its own digital insurance
products, displaying much lower customer acquisition costs and loss
ratios than its digital peers.
wefox is now present in six territories: Germany, Poland, Italy,
Switzerland, Austria and Netherlands and its market share in all
these markets is under 2%. On this basis, the Investment Adviser
believes that the runway for growth is still substantial, and that
the company can sustain high rates of organic growth in the future,
which are likely to be supplemented with further acquisitions.
Starling Bank Limited ("Starling")
Starling has been one of the strongest assets in the portfolio,
in terms of its outperformance of the Investment Adviser's
expectations at the point of investment. When the Investment
Adviser first engaged with Starling, the company was sub-scale and
loss making, but had developed the basis for a potentially highly
lucrative platform. Almost four years later, Starling has grown
into one of Europe's largest, fastest growing, and most profitable
digital banks.
Starling progression since the point of investment
Nov-18 Jun-22 Factor
Customers ('000s) 356 3,000 8x
------- ------- -------
Lending (GBPm) 9 4,033 464x
------- ------- -------
Deposits (GBPm) 202 9,628 48x
------- ------- -------
Revenue (GBPm) 1 331 292x
------- ------- -------
Profit before tax (GBPm) -27 92
------- ------- -------
Personal current account
share 0.4% 2.5%
------- ------- -------
Business current account
share 0.3% 8.4%
------- ------- -------
Source: Starling and Jupiter
As at June 2022, the bank had opened 3.0 million accounts,
including approximately 460,000 small and medium enterprise ("SME")
accounts. The growth in SME accounts is particularly impressive,
given the business bank only opened in 2018. Starling has managed
to grow to approximately half the market share of Barclays (by
number of accounts), which was founded over 300 years ago, in just
over three years. There has been significant growth in other KPIs
too, with customer deposits increasing from GBP202 million in
November 2018 to almost GBP10 billion in June 2022, a
forty-eight-fold increase.
The Investment Adviser always intended to build a diversified
portfolio of assets by sector, theme and geography that could be
resilient throughout the economic cycle. The current economic
backdrop of rising interest rates highlights this, with some assets
being clear beneficiaries of this trend.
For Starling, the impact of rising interest rates is highly
significant: the implied GBP5.6 billion sitting in treasury, which
last year would have earned minimal yield, will begin to generate
meaningful amounts of income, which crucially, is not subject to
impairment risk.
Starling: illustrative impact of rising yields on revenues
June-22
GBP billion
Deposits 9.6
Loans 4.0
Implied treasury 5.6
Dec-21 Dec-22 Nov-23
Base rates 0.10% 3.50% 4.60%
Implied treasury revenue (GBP
million) 6 196 258
Source: Jupiter and Bloomberg
Looking at the June 2022 balance sheet and market derived base
rate expectations - the latter are predicted to rise to over 4.5%
by December 2023, compared to the 10bps experienced since the onset
of COVID-19 - the Investment Adviser believes there is the
potential for Starling to generate over GBP250 million of revenue
on an incremental basis, if it kept these balances with the Bank of
England.
In reality, the Investment Adviser believes it is likely that
Starling will look, at least partially, to deploy this excess
funding into interest-bearing loans. This may lead to a greater
revenue accretion, demonstrating the growth options available to
Starling.
The Brandtech Group LLC ("Brandtech", formerly You & Mr
Jones LLC)
You & Mr Jones was renamed The Brandtech Group LLC earlier
this year and aims to help businesses do their marketing better,
faster and cheaper using technology. Brandtech is now a global
market leader in content in-housing and is delivering
enterprise-level marketing solutions for some of the world's
biggest brands, including Unilever, Google, Adidas, Microsoft,
LVMH, Danone, Uber and Reckitt Benckiser.
Brandtech has been a consistent performer since Chrysalis
completed its first investment in September 2020. The company
generated +27% organic growth in 2020 and growth accelerated
materially through 2021 to more than +50%, with the company
demonstrating continuing strong growth of approximately 37% in to
the first quarter of 2022. The Investment Adviser considers these
rates of growth to be compelling in an industry context,
particularly given the most recent figures are coming off the back
of extremely strong prior years.
Brandtech generated more than $500 million in revenues in 2021
and the Investment Adviser now considers the company to be a global
platform. In 2019, David Jones - CEO - described the business as
"strongly profitable" and the Investment Adviser believes EBITDA
margins in this sector typically range from 15% to 25%.
Total growth has been boosted by selective M&A with
Brandtech recently acquiring DP6 - Latin America's leading
marketing technology and data company - and Acorn-I - an ecommerce
Software as a Service ("SaaS") platform.
DP6 is based in Brazil and delivers technology and data
solutions for many of the region's largest businesses as well as
numerous global brands, including Carrefour, CNN, BASF, Nubank and
Whirlpool. The company provides technology and data expertise, from
data measurement to media attribution, data science, AI-powered
analytics, and content optimisation. Acorn-i helps brands to market
on ecommerce platforms, particularly Amazon where it improves
advertising effectiveness and search engine optimisation.
Brandtech operates in a TAM of $640 billion, which implies a
current market share of just 0.1%. Digital media and content
continue to disrupt the traditional media conglomerates and
analogue channels, and the probability of someone building a very
significant digitally focused player in the market is high. While
the clear market winner is yet to emerge, the Investment Adviser
believes that Brandtech has made a very good start on this
journey.
Smart Pension Limited ("Smart")
Smart is now operating at scale and continues to grow rapidly.
Smart had GBP2.2 billion of assets under management ("AuM") in 2021
which is expected to rise to just over GBP6 billion of AuM by the
end of 2022. Further, Smart forecasts it will achieve a 150% CAGR
in revenues this year, versus 2019, and the company now serves over
one million members and 90,000 employers who are contributing over
GBP50 million per month to their workplace pensions.
Smart operates in a $62 trillion global retirement market and
there is an abundance of tailwind that the company should continue
to benefit from. There is an on-going regulatory convergence on a
global scale towards mandatory direct contribution retirement
savings, due to retirement savings gaps in most advanced countries.
Continued reform should lead to more opportunity for Smart.
The United Kingdom introduced the Pension Act in 2008, but more
recently the Investment Adviser notes regulators forcing change in
Hong Kong (Mandatory Prov. Fund Schemes, 2019), UAE (End of Service
Gratuity Reform, 2020), Australia (Retirement Income Covenant,
2022) and in the US (SECURE Act 2.0, 2022).
Almost half of private sector workers in the US are not covered
by workplace retirement plans and consequently the retirement
savings gap is expected to be $400 trillion by 2050.
The Investment Adviser believes Smart has built the only
cloud-based platform that can serve the global retirement and
savings market and is delighted that the company is demonstrating
its ability to internationalise.
In the first half of 2022, Smart acquired US-based Stadion Money
Management, which offers personalised digital retirement solutions
to advisers, employers and members. Smart has also announced a
partnership with US-based Finhabits and launched a new 401k
offering. Outside the US, international expansion includes a
programme in Ireland to deliver a bespoke Platform as a Service
(PaaS) to New Ireland Assurance; an employee workplace savings
scheme in Dubai for 22,000 members in partnership with Zurich; and
an agreement to tackle the Australian market with Link Group.
Deep Instinct Limited ("Deep Instinct")
Deep Instinct takes a prevention-first approach to stopping
ransomware and other malware using the world's first and only
purpose-built, deep learning cybersecurity framework. Using this
proprietary technology, Deep Instinct can predict and prevent
known, unknown, and zero-day threats in less than 20 milliseconds,
750x faster than the fastest ransomware can encrypt. Deep Instinct
has a better than 99% zero-day accuracy as well as a sub 0.1% false
positive rate.
The Investment Adviser knows of no other cyber security solution
which guarantees the same levels of efficacy as Deep Instinct and
is pleased to see the company announce the results of is first
participation in MITRE Engenuity's ATT&CK Evaluations. This
round of evaluations emulated the malicious activities of various
threat groups, highlighting the results across 30 vendors. Deep
Instinct provided visibility and detection to adverse activities in
all 15 attack steps tested, with its prevention and suspicious
activity detection engines achieving excellent detection coverage
on techniques related to execution, persistence, command and
control, and impact tactics, as well as additional visibility and
insight into all other tactics included in the test.
The Investment Adviser is also encouraged by the appointment of
two very credible senior figures to its executive leadership team.
In July, Deep Instinct announced the addition of Carl Froggett as
Chief Information Officer; formerly Head of Global Infrastructure
Defense, CISO Cybersecurity Services at Citi. In September, the
company announced that Lane Bess, former Palo Alto Networks CEO and
Zscaler COO, was taking over as CEO. Lane Bess has 35 years of
experience in cybersecurity and technology, with a proven track
record of leading rapidly growing cybersecurity companies.
Deep Instinct closed a $62.5 million funding round in September.
The round was led by Blackrock, with Chrysalis participation. The
Investment Adviser believes this round will provide Deep Instinct
with over two years of cash runway and enable it to continue to
grow rapidly. While the economic backdrop is tough, Deep Instinct
is confident that enterprises will not be looking to reduce their
cyber spend, given the record number of attacks witnessed in recent
years.
Klarna Holding AB ("Klarna")
In July 2022, Klarna announced the closing of a new $800 million
funding round at a $6.7 billion post-money valuation.
The round was well supported by existing investors, but also
attracted new investors including Mubadala Investment Company and
Canada Pension Plan (CPP Investments).
Much was made of Klarna raising capital at a significantly lower
valuation to its previous funding round, but the Investment Adviser
would highlight that the funding round occurred during possibly the
worst set of circumstances to afflict stock markets in recent
years. Considering this, the Investment Adviser views an $800
million funding round, with strong participation from new
investors, as a success, and believes it is the second biggest
undertaken in Europe in 2022.
Klarna stated that the proceeds of its recent round would be
primarily used to expand its market leading position in the US. The
Investment Adviser also believes that the round will fund the
business through to profitability in 2023. The Investment Adviser
highlights that Klarna is the only fintech in the world that has
been profitable for its first 14 years of existence and in 2017
Klarna recorded a 12% EBT margin.
As evidence of Klarna's potential, recent trading has remained
strong and the Investment Adviser was encouraged by the progress
made through 3Q 2022. Year to date revenues increased by +22%
year-on-year to $1.4 billion and gross merchandise volume ("GMV")
also increased by +22% year-on-year to $60.2 billion. While this
growth represents a slowdown from the levels seen in recent years,
the Investment Adviser notes the company's decision to focus on
tighter underwriting, which it believes will have had a modest
impact on achieved growth. Despite this, the US continues to be a
standout performer with GMV +92% year-on-year to $8.6 billion.
Considering this level of growth, there was a remarkable
improvement in profitability. Operating losses fell by $169 million
quarter-on-quarter (42%), and the company stated it expects to be
run rate profitable in the second half of 2023. While this is
likely to be driven in part by the cost savings announced earlier
in 2022 - partly achieved through headcount reduction - there has
also been a decrease in impairments. Global credit losses declined
by 12% - improving from 0.8% of GMV to 0.7% - with substantial
gains made in the high-growth US market, which saw a 30% decrease
in credit losses year-on-year.
The Investment Adviser remains confident of the long-term
potential of Klarna and is extremely pleased with the progress the
company has made since Chrysalis first invested back in August
2019. Since this date, Klarna has grown revenues from $753 million
in 2019 to likely well over $2.0 billion in 2023. In achieving
this, between 1H18 and 1H22 globally it has added 94 million users
and 360,000 merchants, entered 35 new markets (with presence in 45
countries globally) and has acquired a number of companies to
supplement its offering.
Over the past three years, Klarna has grown into a truly global
payments business with a dominant market position in several
territories. Innovative products and services have been rolled out
across new and growing verticals such as travel, event ticketing,
beauty, and high-frequency verticals such as pharmacy and grocery.
A global partnership with Stripe has also been announced giving
access to millions more SMBs (small-to-medium sized
businesses).
Featurespace Limited ("Featurespace")
Featurespace continued to demonstrate strong growth over the
financial period, with considerable sales traction, driven by its
award-winning product.
As evidence of the quality of its offering it:
-- won the Next Generation Payments award in the 2021 FinTech Rankings;
-- was recognised as Best-in-Class among fraud and Anti Money
Laundering ("AML") machine learning platforms by Aite-Novarica
Group in December 2021;
-- won "Best Technology Initiative" via Worldpay's Fraudsight
(powered by Featurespace) at the 2022 Cards & Payments Awards;
and
-- was a finalist in the 2021-22 Cambridge Independent Science
and Technology Awards for AI Company of the Year and Technology
Company of the Year.
The Investment Adviser has seen estimates that put the TAM
opportunity for Fraud Analytics at $6 billion in 2020, but given
the rate of increase in the market, it is not inconceivable that
this might double by 2025, providing significant runway for
Featurespace to grow into.
In terms of market dynamics, alongside PYMTS, Featurespace
published "The State of Fraud and Financial Crime in the US" - a
survey of 200 executives working in Financial Institutions ("FIs")
with assets of at least $5 billion - in September 2022. This makes
for sobering reading.
Over the previous year, 59 FIs saw an increase in overall fraud
rates, with an average loss of 1.29 bps per transaction. Fraud
rates only fell for 19% of respondents. Credit cards were
particularly targeted, with 64% of FIs reporting an increase in
attacks.
These types of market changes play into Featurespace's product
offering, which utilises machine learning, and increasingly deep
learning, to provide enhanced protection against fraudsters -
crucially, at lower false positive rates - versus the typically
rules-based systems traditionally in use.
This has enabled the company to continue its growth, such that
it now has 65 direct customers and over 100,000 indirect. This
means the company now protects over half a billion customers
globally, checking over 50 billion transactions per annum, blocking
75% of fraud attacks as they occur, at significantly reduced false
positive rates.
Graphcore continues to roll out new technology. Following on
from its strong showing in the MLPerf industry measure of
comparative benchmark testing, which showed a significant advantage
(between 1.3x-1.6x) for Graphcore over incumbent Nvidia on a
performance per dollar basis, the company has recently released new
hardware.
Earlier in the year, Graphcore's third-generation system, called
Bow, was launched. Bow is the first chip ever to feature
wafer-on-wafer technology, which allows a significant improvement
in performance, at greater efficiency. Bow contains 1,472
independent cores that can allow 9,000 separate programmes to be
run at the same time, for true parallel computing. Performance
gains in the industry are key, as model sizes have been rising
aggressively. When Chrysalis first invested in late 2018, models
contained about 330 million parameters. Fast forward to today, and
models of up to one trillion parameters are on the cards.
Bow pods deliver up to 40% more performance compared with the
previous generation of IPU pods. Bow also increases the performance
advantage over Nvidia's comparable machines, with a fivefold
decrease in time to train and a tenfold lower total cost of
ownership.
Later in the period, the company announced a new PCIe card, the
C600, in response to demand from datacentre customers looking for
an easy configuration with existing architecture. In addition,
software development has continued to ensure support of the new
hardware launched.
In response to the challenging funding market, and in-line with
many other unprofitable companies, Graphcore took the difficult
decision to extend cash runway, which unfortunately meant a
reduction in workforce.
While both the hardware and software have come on significantly
since our initial investment, the company needs to demonstrate that
it can successfully commercialise its products. Graphcore ended
2021 with cash and liquidity of $327 million, having reported a
loss before tax of $185 million.
Tactus Holdings Limited ("Tactus")
The gaming industry is now the largest and fastest growing form
of entertainment globally, with the gaming PC market rapidly
expanding as more gamers, from casual players to e-sports
professionals, immerse themselves in their own virtual communities.
As a leading provider of own and third-party branded custom gaming
PCs, component parts, equipment, and accessories, Tactus is ideally
positioned to benefit from these structural dynamics.
Tactus has completed a number of acquisitions since our initial
investment, including coding and robotics firm pi-top, B2B IT
hardware provider BIST Group and award winning PC gaming brand
Chillblast. More recently, Tactus announced the acquisition of
online gaming and technology retailer Box.
Box is an online retailer of consumer technology and specialist
devices, with a customer base across the UK and Europe. Founded in
1996, the company had grown to over GBP100 million of revenues in
2021. Box takes the group's headcount to over 350 individuals and
its purpose built 120,000 sq ft logistics centre significantly
expands the scale of Tactus' supply chain and operations across the
UK and beyond, while providing enhanced capacity to accommodate
future growth.
Progress has also been made internationalising the business, and
a European partnership was recently announced with NBB in Germany.
NBB is one of the largest German online retailers for consumer
electronics and will distribute Geo devices into the DACH market.
While ecommerce businesses generally have faced headwinds from
retailers destocking and high levels of promotional activity over
the course of the year, Tactus has continued to scale through
strategic M&A .
Despite Google's decision to delay its self-imposed deadline to
deprecate third-party cookies in its Chrome browser, InfoSum is
benefitting from many structural tailwinds that are also driving
the purchasing decisions of prospective clients. The launch of App
Tracking Transparency by Apple in April 2021 and regulatory
changes, such as GDPR in the UK and CCPA in the US, are making it
increasingly difficult for brands and publishers alike to gather
information on consumers, and thus to target specific cohorts.
These tailwinds have led to the emergence and increased momentum
of data clean rooms - secure environments where personally
identifiable information can be anonymised and processed to gain
insights into customer cohort behaviours, in a privacy-compliant
way. Disney publicly announced a data clean room solution in
October 2021 for advertisers, harnessing more than one thousand
first-party data segments to boost measurement and campaign
insights, using InfoSum as a partner. InfoSum also announced a
partnership with The Trade Desk, in an effort to scale its clean
room network.
InfoSum continued to expand internationally and over the course
of the year the company announced that it has entered Germany,
Italy, Australia and New Zealand. The Investment Adviser recognised
the scale of the opportunity globally for InfoSum at the point of
investment and is encouraged by the company's progress in these
jurisdictions.
Wise plc ("Wise")
Wise is a fantastic example of the Chrysalis blueprint. The
Investment Adviser identified this asset when it was generating
under GBP70 million of revenues and had only just demonstrated
profitability. Wise had very strong unit economics, however, and an
attractive customer proposition that was clearly disrupting a huge
addressable market. This gave the Investment Adviser confidence
that the company could grow rapidly and sustain high rates of
growth over a prolonged period of time, while continuing to be
profitable and cash generative.
Over a five year period, Wise has increased its global active
user base from 1.7 million to 7.4 million and has improved volume
per active user from GBP5.6k to GBP10.3k; this has driven an
eightfold increase in revenues from GBP66 million to GBP560
million. Profitability, which has, and will continue to be, a key
focus of the Investment Adviser, has been excellent and the
adjusted EBTIDA margin has improved from 6% to 22%, with Wise
recording GBP121 million EBITDA in its most recent full-year
results.
As at September 2022, Wise's share of the remittance market
remains relatively low globally, at approximately 4% in personal
and less than 1% in business transactions. It is interesting to
note that its share of personal transactions in the UK is
approximately 20%, and this, combined with its continued focus on
innovation and investment in its proposition, means the Investment
Adviser believes there are strong reasons to support continued
progression.
As evidence of this, Wise is currently growing as strongly as it
was five years ago, which the Investment Adviser believes is
unusual, given the increase in the revenue base. The top end of
consensus is currently projecting Wise to generate GBP1.8 billion
of revenue in FY26 and GBP425 million EBITDA, which would imply a
threefold increase in the size of the business over the next four
years, highlighting the power of compound growth over the
medium-to-long term and the value that this can create for
investors.
Progression in Wise's KPIs since the Investment Adviser first
engaged with the company (FY17-22)
Mar-17 Mar-22 Factor Mar-26e Factor
Active users
(m) 1.7 7.4 4.4x
------- ------- ------- -------- -------
Volume per active
(GBPk) 5.6 10.3 1.8x
------- ------- ------- -------- -------
Revenue (GBPm) 66 560 8.4x 1,847 3.3x
------- ------- ------- -------- -------
EBITDA adj (GBPm) 4 121 32.8x 425 3.5x
------- ------- ------- -------- -------
Margin (%) 6% 22% 23%
------- ------- ------- -------- -------
Source: Wise and Jupiter (data as of November 2022)
Post period end, Wise released a strong set of interim results.
Total income for the first six months increased +63% year-on-year
to GBP416 million, reflecting strong growth in active customers and
an increase in total volumes. Adjusted EBITDA increased +52%
year-on-year to GBP92 million which implies a margin of 22%. Total
income is now guided to increase by between +55% and +60% for FY23
with an adjusted EBITDA margin at or above 20% over the medium
term.
Sorted Holdings Limited ("Sorted")
There has been significant change at Sorted over the past twelve
months, which commenced in October 2021, when a decision was made
to recruit a new CEO and senior leadership team.
As a result, Carmen Carey, who had been a Non-Executive Director
on Sorted's Board of Directors for two years, was appointed as CEO.
Carmen has a strong SaaS background and was previously CEO at Brady
Technologies, Big Data Partnership and ControlCircle, and COO at
Metapack (a major carrier platform competitor to Sorted). Other key
appointments included a CTO, an interim COO, a Vice President of
Product, and a Vice President of Sales.
As part of this overhaul, Sorted raised a Series C funding round
of $40 million in December 2021, which enabled it to acquire
Clicksit, an automated returns company. This acquisition marks
Sorted's continued expansion into the US market and will also
enable the group to target the Small and Mid-sized Business ("SMB")
market. Returns are a crucial step in the customer journey and
Clicksit will enable Sorted to provide a complete delivery
experience platform to both enterprise and SMB clients.
Following this acquisition, and increased investment in REACT,
the company's tracking engine, Sorted has transformed itself over
the past twelve months from a SaaS business operating with a single
product in a single market, to a SaaS platform with multiple
products across multiple-territories.
Secret Escapes Limited ("Secret Escapes")
Secret Escapes has continued to develop its customer proposition
over the past twelve months with an increased focus on the
"Always-on Hotel-Only" offering, which has resonated well with
customers. The company has also developed its website and
smartphone application further and these initiatives appear to be
driving key performance indicators and unit economics.
The trading environment for Secret Escapes has been tough over
the past couple of years, given the lingering effects of COVID-19,
but more recently the Investment Adviser has been encouraged by the
sales performance of the company versus 2019, and notes that some
territories are now exhibiting strong rates of growth.
Secret Escapes has taken proactive measures to embed operational
efficiencies, and this has proven effective at driving
profitability with the business profitable on a year-to-date
basis.
The Investment Adviser does believe that there is now an
opportunity to accelerate customer acquisition and drive organic
growth and profitability over the next twelve months, and this is
the current focus of the management team.
Revolution Beauty Group plc ("Revolution Beauty" or "REVB")
Having updated the market positively on 26(th) May 2022,
Revolution Beauty released a disappointing trading update on 2(nd)
August 2022 which downgraded revenue and EBITDA guidance.
Following this trading update, Revolution Beauty then released
another statement which said that BDO, the company's auditor, had
written to the Board and identified 'a number of serious concerns
that had arisen during the course of its work on the FY22 audit.
This included the Group's ability to provide sufficient and
accurate evidence in respect of a number of keys audit areas and
the validity of certain commercial arrangements entered into by the
Company'.
The board of Revolution Beauty has subsequently appointed
Macfarlanes LLP and Forensic Risk Alliance to undertake an
independent investigation into the matters raised by BDO and any
other matters that may become relevant during their review. The
initial findings of this investigation were announced on 13 January
2023 and the Board and Investment Adviser are considering how best
to proceed.
Chrysalis disposed of its entire holding in Revolution Beauty
Group post period end in of off-market transaction for GBP5
million, which compares to the period end carrying value of
nil.
Growth Street Holdings Limited
The company is in the final stages of liquidation, following its
wind up as a result of poor underwriting controls in 2019.
Chrysalis had already received most of the expected liquidation
proceeds, but post period end, it was notified of a further
expected distribution at a level higher than the previous carrying
value. As a result, the carrying value of the stake was written
up.
Embark Group Limited ("Embark") / Rowanmoor Group
("Rowanmoor")
During the period Embark was sold to Scottish Widows Group
Limited, a subsidiary of Lloyds Banking Group plc for GBP390
million. Chrysalis received net cash proceeds of GBP57 million as
part of the transaction which implies a cash-on-cash return of 2.1x
from the date of Chrysalis' initial investment in July 2019.
Following the sale, Chrysalis maintains an interest in the
Rowanmoor SIPP and SSAS administration business. Due to ongoing
issues in the business, the investment was attributed a zero
carrying value. At the end of August 2022, the operating subsidiary
of Rowanmoor was placed into liquidation, with Evelyn Partners
appointed as administrators.
Environmental, Social and Corporate Governance Report
Overview
The Investment Adviser is a specialist, high-conviction, active
asset manager committed to helping its clients achieve their
long-term investment objectives.
As active owners and long-term stewards of the assets in which
it invests on behalf of its shareholders, the Investment Adviser's
investment teams are at the core of its responsible investment
approach. The investment team analyse holdings on a range of
material ESG issues to ensure the Company protects and enhances the
value of its investments to deliver returns in line with its
objectives. Where opportunities are identified to improve the ESG
performance or reduce the ESG risk of an investment, the Investment
Adviser actively engages and makes use of its shareholder vote with
the objective of improving stewardship outcomes.
The Investment Adviser's Responsible Investment Policy describes
how it approaches these issues as an active investor, setting out
its sustainability, governance, and oversight; its approach to ESG
integration and materiality; and core material ESG issues. The
Investment Adviser's Sustainability Policy identifies material
sustainability issues relevant to Jupiter's corporate and
investment footprints. The Company's ESG Policy sets out how the
investment team fulfil their 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.
The Investment Adviser supports the Company's integration of
environmental, social and governance (ESG) responsibilities in the
following ways:
-- The presence of a dedicated ESG Investment Director within the investment team
-- The support provided by Jupiter's Stewardship and Data Science Teams
-- The oversight provided by the Adviser's Sustainability and
Responsible Investment Oversight Structures.
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.
In addition, a range of portfolio metrics are presented
throughout this Report to provide transparency to investors,
including those that have their own climate reporting
responsibilities aligned to the recommendations of the Task Force
on Climate related Financial Disclosures ("TCFD"). The Investment
Adviser intends to continue to develop its ESG-related disclosures
in the next financial year.
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.
There is no single type of business in which Chrysalis invests,
however the Investment Adviser's aim is to find companies which
display a number of characteristics.
Typically, they will be high growth, innovative businesses which
are leading transformation within their sectors and operate in huge
addressable markets with structural tailwinds. Their core assets
are intellectual property and the people who create it. They use
best in class scalable technologies to capitalise on societal
change and to solve customer problems in novel ways. Lastly,
companies should also have a clear roadmap to profitability, and
the ability to achieve and sustain exceptional rates of growth.
Chrysalis' investment policy informs its opportunity set, which
in turn influences the type of ESG risks the Company will and will
not be exposed to. Its investments are typically tech-enabled
digital businesses whose direct environmental impacts will be
limited.
Although no new private investments were made during the period,
the Investment Adviser has continued to implement the ESG policy
established by the Board and enhance the systematic integration of
ESG analysis across the portfolio. As potential opportunities for
new investments arise, the investment team will conduct detailed
due diligence on every potential investment opportunity.
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.
The Investment Adviser expects all companies to minimise any
direct and indirect negative impact on the environment and broader
society. For example, the Company is invested in consumer-facing
companies which are taking tangible steps to enhance the
sustainability profile of their operations, using techniques such
as ethical sourcing of raw materials, reduced freight emissions and
building circular economy principles into their manufacturing
capabilities. The Investment Adviser supports these strategies and
believes they will translate into a stronger brand proposition and
a closer relationship with customers over time, while mitigating a
range of risks posed by changing customer preferences and future
regulatory costs.
The Investment Adviser believes that in order to grow
successfully, companies must not only execute strategically; they
must also lay the foundations for future growth by fostering a
healthy corporate culture, a talented and diverse workforce and
creating appropriate corporate governance structures.
They must also seek to minimise any direct and indirect negative
impact on the environment and broader society. As investors with
decades of experience in investing in public markets, the
Investment Adviser believes it is well-placed to advise companies
not only on their growth strategy, but on their ESG development
also as they prepare to IPO.
Data
One of the principle 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 development
scorecard to assess its portfolio companies' ESG performance.
This data is collected directly from private investee companies
or from public disclosures where available. The scorecard covers a
broad range of environmental, social and governance factors drawing
on recognised public sustainability frameworks and the stewardship
experience of the Investment Adviser.
The Investment Adviser uses the scorecard to assess each
company's ESG performance relative to its level of corporate
development and maturity and incorporates insights gained into our
dialogue with company leadership teams in order to assist their
continued development.
The data also provides a baseline for the sustainability
characteristics of the portfolio. The Investment Adviser will
continue to develop the internal development scorecard, and will
use the data to provide shareholders with increased transparency on
the sustainable characteristics of the portfolio. The metrics will
also be used to assess potential new investments as part of any new
investment due diligence process.
Stewardship
Stewardship is an important responsibility and a core aspect of
the Company's investment approach.
The Investment Adviser aims to partner with companies for the
long-term and assist them on their respective journeys to become
the best businesses that they can be. The structure of Chrysalis
suits this approach: the permanence of its capital, compared with
fixed life funds, gives it the ability to continue to fund growth
post initial investment, and as such remain actively engaged and
well-positioned to influence companies on ESG and other topics.
The Company's stewardship approach and ability to influence
companies is determined by its investment policy. Unlike many
private market participants that operate as control or majority
investors, the Company's investments will typically constitute a
minority holding, although it may hold a board seat or be entitled
to board observer status. Although the Company does not exercise
control, the Investment Adviser will seek to use its influence to
encourage companies to build sustainability principles into their
strategy, operations and corporate culture.
The investment team operates a continuous programme of
engagement with the leadership teams of the investee companies. The
Investment Adviser's ability to influence companies varies
depending on the size of the Company's shareholding and whether it
has board observer status and access to management information.
Where the Company has a board seat or board observer status, the
Investment Adviser can attend Board meetings of investee companies
and provide input where it believes it can advise companies on how
to meet their strategic objectives. This includes regular dialogue
on ESG related topics. Dialogue with companies where the Investment
Adviser does not have direct access to management information will
typically take place via regular meetings with management.
Many material ESG issues are complex and interconnected, and
outcomes take time. The Investment Adviser is committed to
long-term engagement goals; however, to protect client interests it
reserves the right to exit an investment if it concludes that
progress is insufficient or does not meet our strategic
objectives.
Case study: THG
The Investment Adviser engaged with the company's Senior
Independent Director in October 2021 after THG suffered heavy
selling pressure following a capital markets day. The declines
reflected a number of factors, including investor concerns about
the group's governance arrangements.
The Investment Adviser highlighted the need for enhanced
financial disclosures at the divisional level and called for the
search process for a new independent Board Chair to begin
immediately. The Investment Adviser expressed its view that
potential candidates should have a proven track record of leading
large, listed businesses.
The company subsequently announced several moves designed to
improve corporate governance and disclosed that the search process
for a new Independent Chair had begun. The Investment Adviser was
pleased when the company appointed its first independent Board
Chair in March 2022 and continued to engage with THG, both directly
and also via a collective engagement with other shareholders,
coordinated by the Investor Forum.
While further positive governance changes have subsequently
taken place, including the appointment of new independent
directors, the Company has since exited its position in THG.
Corporate Governance
To grow successfully, companies and their founders must not only
execute strategically, 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. Four companies held in
the portfolio during the year (Starling, Wefox, THG, Wise)
appointed independent board chairs. Several other companies
increased board independence during the period.
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. These issues may include but are not limited
to:
-- Boards and executive leadership: the Investment Adviser
builds understanding of the quality of leadership teams and boards
through assessment of i) Board and committee composition and
independence, ii) Board and executive tenure and succession
planning, iii) DE&I ("Diversity, Equity, and Inclusion")
oversight and actions at Board level and throughout an enterprise,
iv) oversight and management of corporate culture.
-- Remuneration: management incentivisation structures should be
aligned with shareholder interests. The Investment Adviser seeks to
understand how remuneration structures encourage correct behaviours
and do not create perverse incentives, short-term actions, or
rewards for failure.
-- Protection of minority rights and related party transactions:
the Investment Adviser will escalate engagement where it believes
that minority rights have been compromised.
-- Systemic risks: the environment in which companies operate
continues to change rapidly and consideration is given where
businesses are exposed to wider systemic risks, including through
the assessment of global standards, such as the UN Global
Compact.
-- Conduct, litigation and relations with policy makers and
regulators: poor relations with regulators can severely hamper
corporate success and result in value destruction for investors.
The Investment Adviser seeks to understand how management teams
engage with regulators and Board oversight of regulatory matters.
It also looks to understand how a company guards against
malpractice.
-- Corporate culture: Board engagement is also used to
understand how corporate culture is being led, developed, and
monitored and to highlight strengths and areas for development.
-- Audit and control environment: the Investment Adviser
considers the quality and independence of auditors, and may
escalate engagement with Audit Committee chairs where it believes
that audit standards are not in line with its expectations.
Case study: wefox
In July, Chrysalis participated in wefox's successful $400
million Series D funding round, which increased its post-money
valuation to $4.5 billion. Following its $650 million Series C
funding round in June 2021, wefox has continued to scale rapidly.
wefox is now present in five territories across Europe and has
indicated that it will look to expand into both Asia and the US in
the medium term.
wefox has made notable additions to its board and management
team in 2022.
The new Chairman, Young Sohn, was previously Global President
and Chief Strategy Officer at Samsung Electronics. In June, Hanna
Jacobsson, former Chief Risk Officer of Klarna, joined as Chair of
the Risk Committee. Helen Heslop, an experienced former finance
director and non-executive director, was recently appointed as
Chair of the Audit Committee.
The management team around the founders has also been
strengthened in 2021 by the addition of a Chief Insurance Officer
and Chief Operating Officer, both with significant insurance,
financial services and general management experience. The
Investment Adviser believes the addition of independent directors
with relevant experience has enhanced group governance, in line
with the group's IPO ambitions. The positive direction of travel on
governance supported the Investment Adviser's decision to
participate in the Series D funding round.
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
which has a direct impact both on an individual company and on
wider society.
DE&I enables companies to attract talent from a wider talent
pool. It also contributes to better decision-making, performance,
innovation, and employee satisfaction and retention.
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.
The leadership teams of portfolio companies recognise the
importance of human capital to the long-term success of their
businesses. A particular focus of recent dialogue has been the
importance of embedding ESG principles and creating an open and
inclusive culture in order to attract and retain a highly skilled
and diverse workforce, in an environment where the competition for
talent is fierce.
The Investment Adviser is encouraged by this alignment with its
own perspective and will continue to report on its activities in
this area in future.
Case study: Starling
Led by founder Anne Boden, Starling Bank is a leader within its
sector on gender diversity, both organisationally and as a catalyst
for a broader change in retail banking.
As a group, Starling's gender representation and pay gap equity
is market leading. This is no accident. As a starting point, in
2017 Starling signed the Women in Finance Charter. This is a
voluntary commitment by HM Treasury and signatory firms to make
financial services a more gender balanced industry. Starling
launched a range of initiatives to promote DE&I throughout the
organisation. These have included publishing tips on how to write
inclusively; partnering with a specialist recruitment platform;
launching manager training programmes; and creating a 'Returners'
programme, via which the company provided paid placements to
individuals who had been out of work for 18 months due to caring
responsibilities.
The cumulative impact of these initiatives has been significant.
When Starling signed up to the Charter in 2017, 27% of senior roles
were held by women. In 2022, that figure increased to 42%, ahead of
the group's original target and closely aligned to the overall
proportion of women in its workforce (44%). Starling's latest
gender pay gap figures (2021), show that the median gap between men
and women has decreased from 16% to 10%, while the mean has
narrowed from 21% to 16%. Its mean gender pay gap is substantially
lower than those of its competitors (see table).
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.
Starling NatWest Lloyds Virgin Money
2021 mean gender
pay gap 16% 30% 30% 30%
--------- -------- ------- -------------
Source: Company disclosure
Social impact
The current portfolio includes many companies which provide
solutions to urgent business problems with broader societal costs.
For example, there are two companies in the portfolio, Featurespace
and Deep Instinct, which target crime prevention. These positions
represented approximately 14% of net assets at period end.
In the UK, a total of GBP1.3 billion was stolen through fraud
and scams in 2021, according to UK Finance, an 8% increase over the
previous year. The threat of fraud is growing, but efforts to
combat it are having a material impact. The banking and finance
industry prevented a further GBP1.4 billion of unauthorised fraud,
equivalent to 65.3p in every GBP1 of attempted unauthorised fraud
being stopped without a loss occurring.
Featurespace's anti-fraud product offering, which has won
multiple awards, utilises machine learning, and increasingly deep
learning, to provide enhanced protection against fraudsters. The
company now protects over half a billion customers globally,
checking over 50 billion transactions per annum, blocking 75% of
fraud attacks as they occur, at significantly reduced false
positive rates. The Investment Adviser believes the efficacy of its
products in combatting the growing global threat posed by fraud
creates a highly attractive opportunity set for future growth.
Cybercrime arguably represents an even greater threat to
businesses and consumers than fraud. In the UK, 39% businesses
identified a cyber-attack last year, according to the UK
Government's Cyber Security Breaches Survey, with 31% of businesses
estimating they were attacked at least once a week. Globally, 88%
of midsize enterprise boards of directors identified cybersecurity
as a business risk for their organisations, according to
Gartner.
The Company's investment in groundbreaking cybersecurity
solutions contributes to business continuity and confidence in
technology systems as described in the Company Section of the
Report, Deep Instinct's market leading approach to stopping
ransomware and other malware using proprietary deep learning
technology is being adopted by a growing list of clients. Deep
learning dramatically improves efficacy and enables near real-time
performance, helping companies navigate an environment where the
speed, volume and sophistication of attacks continues to
escalate.
Social impact: financial inclusion
The portfolio contains a number of fintech businesses which have
products that display positive social externalities, such as
broadening financial inclusion or disrupting high-cost financial
services incumbents, while often sharing resulting cost savings and
efficiencies with consumers.
Smart Pension's product addresses the need for affordable
pension provision in an environment where a rapidly increasing
old-age dependency ratio, and a widening retirement savings gap,
mean that almost half of private sector workers in the USA are not
covered by workplace retirement plans. This pressure, which
compounds every year, is forecast to create an expected $400
trillion retirement savings gap by 2050. Smart's workplace saving
technology, Keystone, aims to transform retirement, savings and
financial well-being across all generations around the world. The
Investment Adviser believes Smart has built the only cloud-based
platform that can serve the global retirement and savings market
and will play an enabling role in helping to close the savings
gap.
Wise is another Chrysalis holding that exists to solve a
pressing global challenge, in this case the high costs and opacity
of foreign currency transfer. Globally, sending remittances costs
an average of 6.3% of the amount sent, according to the World
Bank.
Wise was founded in 2011 to make it cheaper and easier for
people to transfer money between countries, relative to traditional
financial institutions. Wise estimates that consumers pay around
GBP180 billion in hidden fees every year.
It has continued to reduce costs for consumers, with the average
price paid by its customers reducing by 12% in its last financial
year, saving customers an estimated GBP1 billion.
In the Investment Adviser's view, Wise's circa 4% share of
personal international transfers indicates the growth potential of
the business, as well as producing powerful positive externalities
by reducing costs for consumers.
Climate
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, 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.
The Investment Adviser supports the Task Force on Climate
Related Financial Disclosures ("TCFD") and encourages companies to
provide (as the Investment Adviser does) accurate and timely
disclosure in line with the four thematic pillars of the TCFD
framework The Investment Adviser first became a supporter of the
TCFD recommendations in June 2017. The Investment Adviser's TCFD
Report can be found within its Annual Report on its website. The
investment team considers climate risk through the analysis of a
company's TCFD disclosure or climate risk reporting, via direct
engagement, or via an assessment of a company's climate risk based
on its sector.
Disclosed below is the weighted average carbon intensity of
portfolio and other related metrics. The companies representing 41%
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. Few
portfolio companies have calculated a complete baseline of Scope 3
emissions. Given the challenge of estimating Scope 3 emissions,
this data is not disclosed for portfolio holdings. The Investment
Adviser will encourage portfolio companies to measure Scope 3
emissions in future and incorporate this metric in disclosures,
once sufficient data is available.
Chrysalis Portfolio Carbon Metrics (Scope 1 and 2 emissions)
Portfolio
------------
Carbon Emissions (tons CO2e/$M invested) 0.5
------------
Total Carbon Emissions (tons CO2e) 450
------------
Weighted Average Carbon Intensity (tons CO2e/$M
Sales) 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: Klarna
Klarna has introduced an internal carbon tax (set at $100 per
metric ton) for emissions under the group's control to incentivise
an internal shift to low-carbon products and services. Proceeds are
invested into projects selected from the Climate Transformation
Fund, through which consumers can also donate to projects.
Klarna has committed that by 2025 all of its locations will use
100% green electricity. By 2030, the group will reduce its
carbon-intensity-based emissions by 50%, in line with the Paris
Agreement. By 2040, the group will operate at net-zero. In
addition, Klarna has upgraded its in-app CO2e tracker, to allow
consumers better insights into the emissions of over 50 million
items, across all stages of their lifecycle.
Figures disclosed in this section have not been subject to
assurance 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 as 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 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 managed 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 Reputation of the Compliance with Law
Company and Regulation Impact
Growth of the Company of the Company and its
Compliance with Law activities on third
Liquidity of the shares and Regulation parties
Corporate Governance Remuneration
------------------------------ -----------------------------
Engagement process
Annual General Meeting The main service Adherence to principles
providers engage of appropriate ESG policies
Frequent meetings with with the Board in exists at both Company
investors by brokers formal quarterly and investment level.
and the Investment Adviser meetings, giving Principles of socially
and subsequent reports them direct input responsible investing
to the Board to Board discussions. form a key part of the
Company's investment
Quarterly factsheets Communication between strategy.
Board and service
Key Information Document providers also occurs
informally on an
ongoing basis during
the year.
Rationale and example outcomes
The Board have engaged The Company relies The Investment Adviser
with shareholders in on service providers works to ensure that
relation to the Company as it has no systems sustainability and ESG
business over the course or employees of its factors are carefully
of the year. own. considered and reflected
in the Company's investment
The Board seeks to decisions.
act fairly and transparently
with all service The Board of Directors
providers, and this travel as infrequently
includes such aspects as possible and instead
as prompt payment communicate, where they
of invoices. are able to, by video
and conference call.
------------------------------ -----------------------------
Going Concern Statement
The Going Concern Statement is made on page 58.
Viability Statement
The Viability Statement is made on page 58 and 59.
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.
Continuing Appointment of the Investment Adviser
Further details relating to the continuing appointment of the
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 60 and 61.
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 2022, 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 84-85 and
93 and note 20 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 on at least quarterly basis, 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 46. 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 page 41. 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 31-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 investment funds, trust and
managers. 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 Charted 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.
Simon is a member of several industry interest groups in both
financial services and intellectual property and graduated from the
University of Cambridge with an MEng and MA (Cantab) in
Manufacturing Engineering.
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 MarketingTech 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
Trian Investors 1 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, upon moving to a self-managed
structure from 1 July 2022, the Board established a new independent
Valuation Committee comprising 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 International Private
Equity and Venture Capital Guidelines Board for 9 years. The Board
is delighted that Anthony has agreed to become chairman of the new
Valuation Committee.
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
SVB Capital as a managing partner where he is a senior leader in
its funds management business. Jonathan's venture investing
experience in the Company's sector over many years will be
extremely helpful to the committee in its assessment of the
portfolio.
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 2022, the Board and Committee
meetings held and attended by the Directors were as follows:
Quarterly Audit Remuneration Risk Committee Management
Board Committee and nomination Meetings Engagement Ad-hoc
Meeting Meeting Meetings Meetings Meetings
Director Attended/Eligible Attended/ Attended/ Attended/ Attended/ Attended/
Eligible Eligible Eligible Eligible Eligible
------------------ ----------- ----------------- ----------------- ------------- -----------
Anne Ewing 4/4 3/3 2/2 2/2 n/a 15/16
------------------ ----------- ----------------- ----------------- ------------- -----------
Andrew Haining 4/4 n/a n/a n/a n/a 13/16
------------------ ----------- ----------------- ----------------- ------------- -----------
Simon Holden 2/4 2/3 n/a 2/2 2/2 13/16
------------------ ----------- ----------------- ----------------- ------------- -----------
Stephen Coe 4/4 3/3 n/a 2/2 n/a 12/16
------------------ ----------- ----------------- ----------------- ------------- -----------
Tim Cruttenden 4/4 2/3 2/2 2/2 2/2 11/16
------------------ ----------- ----------------- ----------------- ------------- -----------
Margaret
O'Connor 4/4 2/3 1/2 2/2 1/2 13/16
------------------ ----------- ----------------- ----------------- ------------- -----------
Valuation Committee
Meetings
Member Attended/ Eligible
--------------------
Lord Rockley 3/3
--------------------
Diane Seymour-Williams 3/3
--------------------
Jonathan Biggs 3/3
--------------------
Tim Cruttenden 3/3
--------------------
Division of Responsibilities
A schedule of matters reserved for the Board is maintained by
the Company and can be summarized 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 established 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 and 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. A full report regarding the
Audit Committee's activities during the year can be found in the
Audit Committee Report on page 68.
In accordance with the AIC Code, a Remuneration and Nomination
Committee has been established. Anne Ewing has been appointed as
Chairman, 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 48.
Margaret O'Connor has been appointed 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 52.
Simon Holden has been appointed 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, 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 53.
Report of the Remuneration and Nomination Committee
Statement: Chair of Committee
I am pleased to present the Remuneration and Nomination
Committee ("the Committee") report for the year ended 30 September
2022. 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 2023, amongst other things, the Remuneration and Nomination
Committee will review its recruitment process to help the Company
further achieve its diversity and inclusion targets.
I am satisfied that the Remuneration and Nomination Committee is
discharging its responsibilities proficiently and recommend this
report to the Board.
Anne Ewing, Chair of the Remuneration and Nomination
Committee
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 the year, on 28 September 2022. Each of the members of the
Remuneration and Nomination Committee, being those persons listed
below, was in attendance at that meeting.
The members of the Remuneration and Nomination Committee are as
follows:
-- Anne Ewing (Chairperson)
-- Tim Cruttenden
-- Margaret O'Connor
Composition, Succession and Evaluation of the Board
At the meeting held on 28 September 2022, 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 28 September 2022, 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.
The Company 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 May 2022, the Committee considered succession planning and
undertook a review of the attributes and skills of the current
board and made recommendations to the Board. The Board came to the
view that an additional Director should be appointed; such person
to have an accountancy background and experience in private and
public capital markets.
Consequently, the Company engaged an independent search firm,
Nurole Limited, who have a strong track record of being able to
recommend a diverse and relevant range of candidates. A good number
of candidates were considered, and the Board believed such
candidates may have helped the Company further achieve its
diversity and inclusion targets. However, during this time it
became apparent that the Board would need to focus on becoming a
self-managed Alternative Investment Fund ("AIF") and, as a result,
would not be able to devote sufficient time to onboard a new
Director. The Board agreed to defer this recruitment to 2023 when a
further review of succession planning will be undertaken alongside
a review of the strategic direction of the Company.
The Company will seek to meet the further recommendations of the
Parker Review within the 2024 deadline. However, the Company also
notes the 2022 updated report from the Parker Review recognises the
constraints of the size of typical Investment Trust Boards such as
Chrysalis' which may reduce the opportunity to make further diverse
appointments.
As a result of becoming a self-managed AIF on 1 July 2022, the
Board created new committees to oversee Risk and Valuations: the
Risk Committee and Valuations Committee, respectively. It was
decided, at that time, that additional scrutiny on the valuations
of the Chrysalis portfolio would be of benefit to the Company and
accordingly independent committee members were appointed, joined by
a Chrysalis Board member. The Risk Committee was created, and the
members appointed, and a risk reporting framework was agreed
between the Company and Jupiter Investment Management Limited as
Investment Adviser.
The members of the Risk Committee and Valuations Committee,
including each chairperson, are now fulfilling additional roles and
responsibilities which take up a considerable amount of time over
and above what was contemplated when Jupiter Unit Trust Managers
Limited was remunerated to fulfil the role of AIFM.
Considerable cost savings have been made as result of becoming a
self-managed AIF which the Board anticipates to be welcomed by
investors.
Committee Memberships
Audit Committee Risk Committee Valuations Management Remuneration
Committee Engagement Committee and Nomination
Committee
Chaired by: Chaired by: Chaired by: Chaired by: Chaired by:
S Coe S Holden Lord Rockley* M O'Connor A Ewing
A Ewing S Coe D Seymour- Willliams* T Cruttenden T Cruttenden
S Holden A Ewing J Biggs* S Holden M O'Connor
T Cruttenden T Cruttenden
M O'Connor (Board Representative)
*Independent
--------------- -------------- ----------------------- ---------------------
2022 Review of Board Performance
The Remuneration and Nomination Committee undertook an internal
review of board performance and remuneration in the second half of
2022. This is the second internal review following an external
"triennial review" undertaken in 2020 by an independent
professional remuneration and performance consultant.
The output from the internal performance review has been
considered by the Board and a number of actions are in progress to
address various matters including, for example, training on
diversity, ESG and general continuing professional development for
listed companies.
An external assurance review is planned for 2023 to assess the
effectiveness of the Company in executing its self-managed AIF
responsibilities.
2022 Review of Remuneration
A comparison of the Company against its competitors was
undertaken and a view taken on current market conditions, noting
the trajectory of inflation rates and the time commitment and
activities of the Board.
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 Valuations 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 amend the level of remuneration paid within
the limits of the Articles (i.e., being a maximum of GBP500,000 per
annum).
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 GBP345,000
Investment Adviser Fees GBP6,092,744
---------------
Investment Adviser Performance -
Fees
---------------
NAV at year end GBP879,582,064
---------------
The Remuneration and Nomination Committee recommended, and the
Board resolved, that with effect from 1 July 2022 the annual
remuneration for each Director should be increased per the table
below. The effective date ("w.e.f.") reflects the date of the
Company becoming a self-managed AIF and recognition of the
additional duties of the Directors. In addition, one-off payments
were made to Directors S Holden and T Cruttenden of GBP6,375 each
to fairly remunerate them for Committee preparation work undertaken
leading up to the Company becoming self-managed.
Director fees (per Director fees (per
annum) annum)
w.e.f. 1 July 2022 w.e.f. 1 October 2021
GBP GBP
Chairman - A Haining 77,500 75,000
-------------------------- -------------------
Audit Committee Chair/SID
- S Coe 60,000 57,500
-------------------------- -------------------
Risk Committee Chair
- S Holden 56,250 52,500
-------------------------- -------------------
Valuations Committee
Board Representative
- T Cruttenden 51,250 47,500
-------------------------- -------------------
Directors - M O'Connor/
A Ewing 50,000 47,500
-------------------------- -------------------
It should be noted that the 1 July 2022 uplift for the Chairman
was nominal and did not fully recognise the increased amount of
time expended by the Chairman during the year. The Senior
Independent Director (presently S Coe, as shown) has been asked to
lead a review of the Chairman's remuneration in Q1 2023 with an
anticipated one-off fee to be recommended to the Board, becoming
effective from 1 January 2023.
_____________________
Anne Ewing
Chair of the Remuneration and Nomination Committee, Chrysalis
Investments Ltd.
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.
The MEC convened twice during the year ended 30 September 2022.
I am pleased to report that the performance of all service
providers continues to meet the required standards of the
Company
The MEC's priorities during the past year have been
three-fold:
1. ensure appropriate resourcing at and reporting from the
Investment Adviser
2. to oversee the transition to a self-managed Alternative
Investment Fund Manager (AIFM) function
3. to further strengthen investor engagement
It is worth noting the specific challenges and achievements of
the Investment Adviser, as detailed earlier in the Annual Report.
During the past year, JIML has added a dedicated finance and ESG
resource who have worked closely with the Board and the Risk
Committee to measure, manage, and mitigate risk. The Board and the
MEC have been consistent in their recommendation that additional
analyst resource is required to support the Company and its
underlying assets. The Investment Adviser's performance fee last
year of GBP112.1 million, after achieving 57% NAV growth, generated
significant market, media, and shareholder interest. The subsequent
global technology market downturn and the Company's share price
decline amplified the need for board action.
The Board Chairman serves as the primary point of contact with
the Investment Adviser. In consultation with the Board, the MEC,
and key external advisers, Mr Haining led a review of the
performance fee and a renegotiation of the Portfolio Management
agreement with Jupiter Investment Management Limited ("JIML"). An
update on Performance Fee Arrangements was made to shareholders on
30 November 2022. For more information, see page 4 of Chairman's
Report.
In accordance with Listing Rule 15.6.2(2)R and following the
review of the Portfolio Management Agreement as previously
outlined, the Board determined that it had reached a stage in its
evolution where it should move to becoming a self-managed
investment company, with the Investment Adviser continuing to
provide portfolio management services. The Company replaced Jupiter
Unit Trust Managers Limited as the Alternative Investment Fund
Manager (AIFM) on 30 June 2022 and assumed direct responsibility
for the role an AIFM conducts including the valuation and risk
management aspects. This Company received regulatory approval for
this change. The Board is grateful to Jupiter Unit Trust Managers
Limited for its AIFM services.
The MEC approved an amendment to the Terms of Reference (9.4.1)
to reflect the formation of the Risk Committee. That together with
the formation of an independent valuation committee were important
developments in the transition to a self-managed AIFM. The Board
exercised its right to obtain independent third-party valuations of
specific assets where the Board or the Valuation Committee believed
additional judgments were merited.
To strengthen shareholder engagement, the Board approved
investments in additional market research, communications, and
public relations resource. The Company undertook a shareholder
perceptions study and a communications audit to provide qualitative
and quantitative data about the Company's performance relative to
its peers.
The Board Chairman and several board members together with the
Investment Adviser and our strategic partners have invested
significant time and attention to ensuring the successful
development and implementation of the shareholder engagement
program this year.
Since the year end two key deliverables include a Capital
Markets Day and a new iteration of the Company's website in
November 2022. The Company will continue to monitor how best to
evolve its shareholder engagement program during the year
ahead.
Margaret O'Connor
Chairman of the Management Engagement Committee
Report of the Risk Committee
It is my pleasure to write to you in this inaugural Risk Report
as Chair of the Risk Committee of Chrysalis Investments Limited
("Chrysalis", or the "Company").
The following pages set out the Risk Committee's report on its
activities in respect of the year ended 30 September 2022.
Overview
The Alternative Investment Fund Management Directive ("AIFMD")
places specific governance rules over both portfolio management and
risk management within closed-ended funds. At the time of the
Company's IPO in October 2018, Maitland Institutional Services
Limited was appointed as the Alternative Investment Fund Manager
("AIFM") of the Company. Under the Board's oversight, the AIFM
performed risk management for the Fund whilst portfolio management
was, and remains, outsourced under a discretionary mandate to the
Investment Adviser, Jupiter Investment Management Limited.
From early in the Company's life, whilst the Board of Directors
of the Company (the "Board") were satisfied that the AIFM
discharged its responsibilities under the directive, they believed
that the AIFM's analysis and procedures could be better tailored to
identifying, analysing and reporting risks that are more specific
to the Company's investment mandate; growth capital.
In 2019, Merian Global Investors was acquired by Jupiter Fund
Management (together with its affiliates, as the case may be,
"Jupiter"). This gave the Board the opportunity to set out its
requirements and tender for the AIFM role. Amongst several possible
AIFM solutions, Jupiter Unit Trust Managers Limited, a Jupiter
group company, had a well-established, independently operated AIFM
business and proposed a service framework, resource capability and
fee base which proved competitive. Jupiter Unit Trust Managers
Limited was awarded the AIFM mandate.
The Board noted several improvements as a result of the change
in AIFM; quarterly reporting provided more practical insight and
assessment of the effectiveness of risk management controls. The
AIFM's primary risk reporting responsibilities relate to regulatory
and compliance risks, but the Company achieved stronger links with
portfolio management risks that are intrinsic to investing in high
growth, high potential, often loss-making disruptive
enterprises.
Supportive market sentiment towards growth-style investment
mandates, particularly growth capital, reversed markedly in late
2021 to early 2022. The Board recognised this early. It was felt
more appropriate to internalise responsibility for managing the
escalating risk environment in order to have full and timely
oversight over the Investment Adviser as the market rotated.
The Board considered the pros and cons of assuming this
increased responsibility. It concluded that Shareholders should
benefit from internalising the risk management function;
principally from a direct line of reporting from the Investment
Adviser to the Risk Committee of the Board, as well as net cost
savings having terminated a third-party AIFM.
The Company released an announcement on 7 June 2022 that
notified the Shareholders of the intention for the Company to
become a self-managed AIF and provided the Board's reasoning behind
the decision.
The Company has been a self-managed Alternative Investment Fund
("AIF") since 1 July 2022 and, notwithstanding certain contractual
changes with third parties and the introduction of a Risk and
Valuation Committees to achieve this, there is no change to either
the investment mandate, the original investment restrictions
contained in the Prospectus, or the function and discretion of the
Investment Adviser.
Risk Assessment
The opportunities for challenger businesses disrupting and
transforming cyber security, digital banking, insurance, financial
services and e-commerce remain highly attractive. However,
contracting economic activity, inflation (stimulated from COVID-19
support measures and cemented by energy and food impacts from
Russia's invasion of Ukraine) and cyclical tightening in monetary
policy are each influencing the risk profile, target maturity, or
timing of achieving that full potential.
Closed-ended funds, particularly listed investment companies,
remain ideal vehicles in which to invest in and nurture growth
capital investments. They offer investors and investee companies
the certainty of diversification, defined capital limits and
exposures and transparent reporting and disclosure. Listed
investment companies like Chrysalis, allow a wide cross section of
investors a means to access what is typically an institutional
niche, whilst offering listed secondary market liquidity.
Nonetheless, the Company recognises that investing in high
potential, high growth, private companies requires a healthy
appetite for risk. The businesses Chrysalis invests in are borne
out of proprietary technologies, operate in and are disrupting
complex supply chains and in their early stages are prioritising
the long-term market opportunity over near-term bottom line.
The Board believe the Investment Adviser is suitably skilled to
perform this investment mandate having demonstrated these
credentials prior to Chrysalis being created and honing these
skills since. Additional skill sets have been added in the past 18
months and the Board are expecting to see headcount increase
marginally in 2023 to add specialist skill and free the fund
managers to engage more intensively with all portfolio
companies.
Status of the Risk Committee
The Risk Committee was only constituted for the short period
from 1 July 2022 to the financial year end on 30 September 2022 but
convened three times in that period.
The Risk Committee's immediate priorities have been:
-- Constitution and publishing of its Terms of Reference (which
are available to Shareholders on the Company's website at
https://chrysalisinvestments.co.uk/investor-relations/ , as adopted
on 27 July 2022 and a summary of which is provided below).
-- Developing its Risk Policy Framework, finalising this on 27 July 2022.
-- Producing its risk register from scratch, organising
identifiable risks within one of twelve distinct risk classes.
These have been populated and scored to help the Risk Committee
evaluate what it believes to be the likelihood and impact of risks
manifesting and the relative effectiveness of mitigating
controls.
Post year-end, a risk report workshop took place at Jupiter's
offices on 11 November 2022 to plan the structure of the Investment
Adviser's risk reporting documentation. On 18 November 2022, the
Risk Committee was briefed on this in full by the Investment
Adviser's Director of Finance.
Looking ahead to the February 2023 Q1 Board Meeting, the Risk
Committee expects to deliver to the Board its inaugural full risk
report. Notwithstanding this intervening period, there is clear
understanding between the Board and Investment Adviser about the
priority risk exposures for the Company and the Investment
Adviser's accountability for alerting the Risk Committee to
material risk indicators on an 'as-arising' basis between now and
February.
Summary governance features of the Terms of Reference
adopted:
-- The Risk Committee currently comprises all members of the
Board other than the Chairman in order that he can report
independently to the Committee on matters germane to the Company's
risk profile, such as stakeholder relations.
-- The Risk Committee will continue to convene quarterly until
such time as the reporting process has matured and the Committee is
comfortable that the pace at which the Company's risk profile is
changing merits a typical semi-annual review process.
Risk Classes
Each risk class is composed of a number of separately identified
and scored risks, but looking at this in composite, top-down, the
priority risk classes for the Company are considered to be:
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. Financial/ Capital Market - risks related to shareholder
understanding, confidence and sentiment in the Company's growth
capital mandate and implications of shares trading at a discount to
NAV.
3. 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.
4. Relative Performance - the Company's longer terms
sustainability will depend on risk adjusted returns outperforming
adjacent asset classes.
5. Conflict and Compliance Management - verification of robust
governance in all stakeholder relationships between the Board, the
Investment Adviser, Jupiter-managed funds with shared holdings
(e.g. Starling) and Jupiter-managed funds with interests in the
Company.
Looking at the individual risks in reverse order, the following
risk class has a lower overall risk assessment but a significant
number of underlying risk factors which the Committee assess could
be high impact and so it is critical to review and maintain the
identified control environment:
6. 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.
The remaining six risk classes each have specific key risk
indicators but lower overall combined risk scores at this time:
7. 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.
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 - oversight of the risks to both the pricing of
new investments as well the independent valuation committee .
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.
Recommendation
I'm glad to report that the Investment Adviser has given its
full co-operation to the Risk Committee in its work to internalise
responsibility for risk management within the Board.
Notwithstanding a challenging market backdrop for the Company, I
welcome their active contribution.
I am satisfied that the Risk Committee is discharging its new
responsibilities proficiently and recommend this report to the
Board.
_____________________
Simon Holden
Chair of the Risk Committee, Chrysalis Investments Ltd.
Directors' Report
The Directors present their Annual Report and the Audited
Financial Statements of the Company for the year ended 30 September
2022.
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"). Jupiter Unit Trust Managers Limited ("JUTM")
was its Alternative Investment Fund Manager ("AIFM") and had
sub-delegated portfolio management to Jupiter Investment Management
Limited ("JIML"), which is a member of the same group. With effect
from 1 July 2022, the Company is a self-managed AIF. JIML continues
to act as Investment Adviser and the change does not impact the
provision of services to the Company by the existing management
team at the 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, recent market volatility, the on-going impact of the
Russian war on Ukraine, energy shortages, inflation and increases
in interest rates 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 GBP58,712,000, a net current asset position of
GBP57,219,000 and liquid listed investments amounting to
GBP20,317,000.
The Company generates liquidity by raising capital and exiting
investments. It uses liquidity by making new and follow-on
investments and paying company expenses. 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.
After making enquiries, 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 2025. 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, which are now organised into Risk Classes
by the newly established Risk Committee (page 55 and 56).
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 (Risk Class 11: Valuation) of the existing portfolio
- 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 beyond September 2025 to meet its financial
obligations.
The continuation of the Company in its present form is dependent
on a portfolio management agreement remaining in place between the
Company and the Investment Adviser. The current portfolio
management agreement is terminable on two months' notice by either
party. In the event notice was served the Board is confident that
it could put in place alternative arrangements. The Directors
currently know of no reason why the Investment Adviser might serve
notice of the portfolio management agreement over the period of the
viability statement.
The Company has no fixed life but, pursuant to the Articles of
Association, an ordinary resolution for the continuation of the
Company will be proposed at the first annual general meeting of the
Company following the fifth anniversary of first admission and, if
passed, at the annual general meeting every three years thereafter.
The fifth anniversary of first admission falls in November 2023 and
the continuation vote would therefore take place within the
viability period. In the best interests of the Company, the
Directors operate under the assumption that a resolution for
continuation would be passed. If a resolution for continuation is
not passed, proposals would be put forward to Shareholders for the
reconstruction, reorganisation or winding-up of the Company within
six months.
At year end, the Company has liquidity including a current cash
position of GBP58,712,000, a net current asset position of
GBP57,219,000 and liquid listed investments amounting to
GBP20,317,000. This available liquidity would sustain the business
for at least 9 years.
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 2025.
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 (2021:
GBPnil).
Directors
The Directors of the Company who served during the year and to
date are set out on pages 43 and 44.
Directors' Interests
The Directors held the following interests in the share capital
of the Company either directly or beneficially as at 30 September
2022, and as at the date of signing these Audited Financial
Statements:
Shares % Held
A Haining 79,000 0.0133
S Coe 60,909 0.0102
S Holden 89,500 0.0150
A Ewing 55,000 0.0092
T Cruttenden 21,298 0.0036
Margaret O'Connor - -
S Cruttenden (son of T Cruttenden) 11,170 0.0019
The Directors' fees are as disclosed below:
GBP
A Haining 77,500
S Coe 60,000
S Holden 56,250
A Ewing 50,000
T Cruttenden 51,250
M O'Connor 50,000
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
GBP40,000 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 2022, each Director is paid a basic fee of GBP52,500 (2021:
GBP47,500) per annum by the Company. In addition to this, the
Chairman receives an extra GBP27,500 (2021: GBP27,500) per annum,
the Risk Committee Chairman receives an extra GBP10,000 per annum
and the Audit Committee Chairman receives an extra GBP10,000 (2021:
GBP10,000) per annum, Mr Cruttenden also receives an additional
GBP15,000 per annum to reflect his position on the Valuation
Committee. Refer to page 51 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 20 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:
(ii) 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.
(iii) (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.
(iv) (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.
(v) (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.
Ongoing Charges
The ongoing charges figure for the year was 0.81%. The ongoing
charges represent ongoing annual expenses of GBP9,292,678 divided
by total average Net Asset Value for the year of GBP1,118,258,532.
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 GBP274,912 and
performance fees of GBPnil have been excluded and represents the
percentage reduction in shareholder returns as a result of
recurring operational expenses.
Emerging Risks
On 24 February 2022, Russia launched a military invasion of
Ukraine. In response, sanctions have been imposed on key Russian
institutions, businesses and individuals by major world powers
including the US, UK and the EU. Russia is a major exporter of oil,
gas, and coal while both Russia and Ukraine are major exporters of
grain.
The Company's portfolio has very limited direct exposure to the
Russian and Ukrainian markets and so the sanctions imposed, as a
result of the Russian invasion, are not expected to have a material
impact. Certain portfolio companies have withdrawn services from
the Russian market, a move which the Investment Adviser supports.
Notwithstanding this, certain investee companies are exposed to the
wider economic headwinds (such as increases in energy costs and
interest rates) resulting from the invasion, but the Investment
Adviser remains confident about the resilience of the portfolio in
aggregate to continue to grow and has sufficient liquidity to
support these companies to deliver their business plans.
In considering this risk, the Board's thought process has been
as follows:
The Directors have carried out a robust assessment of the
Company's processes for monitoring operating costs, share price
discount, the Investment Adviser's compliance with the investment
objective and policy, asset allocation, the portfolio risk profile,
counterparty exposure, liquidity risk and financial controls. At
the year end, the Company had cash and cash equivalents of
GBP58,712,000 and net current assets of GBP57,219,000.
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
page 2-3 and the Environmental, Social and Corporate Governance
Report on pages 30-38. 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.
The Investment Adviser is entitled to a management fee together
with reimbursement of all reasonable costs and expenses incurred by
it in the performance of its duties. The Investment Adviser is also
entitled to a performance fee in certain circumstances. Details of
the management fee and performance fee are set out in note 6. The
Portfolio Management Agreement may be terminated by either party on
two months' notice and may be immediately terminated by either
party in certain circumstances such as a material breach which is
not remedied.
Details of the proposed changes can be found in the Chairman's
Report on page 4.
Administrator
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 2022 appear on pages 43 and 44 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 21
and page 51.
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 26 January 2022, the latest practicable date for disclosure
in this Annual Report, the Company's only shareholder with a
holding greater than 10% was Jupiter UK Mid-Cap Fund (13.4%).
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. 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 are responsible for informing
themselves of how the requirements in their own countries may
differ from those of Guernsey.
The Board hosted a Capital Markets Day for shareholders at 30
November 2022. The presentation provided an overview of Chrysalis'
strategy and outlook, pointing to its robust balance sheet, the
potential of its well-funded portfolio, valuations relative to
growth, the drive towards profitability, and the possible
opportunities that may arise as and when the market re-opens. In
addition, lessons learned from the less successful assets were also
discussed, as well as the risks around ensuring adequate funding in
the portfolio, particularly the trade-off between ability to
follow-on and share buybacks.
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 Advisers' 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
30 January 2023
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 2022. 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 paid by the Company to KPMG Channel
Islands Limited ("KPMG") for audit and non-audit services during
the year ended 30 September 2022.
30 September 30 September
2022 2021
Annual audit fee 135,000 120,000
Interim review 40,000 33,000
___________ ___________
175,000 153,000
___________ ___________
Internal Control
Following the Company becoming self-managed AIF on 1 July 2022,
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 Maitland 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. On 1 July 2022, the company become a s
elf-managed Alternative Investment Fund, assuming direct
responsibility for risk management and investment valuation. A new
Risk Committee and an Independent Valuation Committee were
subsequently 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 Fair
Value Pricing Committee engages independent valuers for specific
assets where it considers it appropriate.
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. 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 times with all
members present (refer to Director Attendance on page 46).
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
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 2022, 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 2022, 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.
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.
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 key audit matter was as
follows (unchanged from 2021):
The risk Our response
------------------------------------ ------------------------------------- --------------------------------------------------------------
Valuation of investments held at Basis: Our audit procedures included but were not limited to:
fair value through profit or loss The Company's investments are
carried at fair value in Internal Controls:
GBP822,363,000 (2021: accordance with IFRS. The We assessed the design and implementation of the control in
GBP1,460,198,000) investments place over the valuation of investments.
comprise of equity and
Refer to page 69 of the Audit equity-related instruments in Challenging managements' assumptions and inputs:
Committee Report, notes 2(i), 3, 11 quoted and unquoted companies and For the Unlisted Investments, with the support of our
and 20 represent valuation specialist, we:
93% (2021: 106%) of the Company's * assessed the objectivity, capabilities and competence
net assets as at 30 September of the Valuation Agents;
2022.
* assessed the scope of the Valuation Agents' review of
the investments and read the valuation reports and
memoranda produced by them and the Investment
Adviser;
The Company's unlisted
investments, with a value of
GBP802,046,000 (the "Unlisted * held discussions with the Investment Adviser and the
Investments"), Valuation Agent and attended, in an observation
are valued by using recognised capacity, a meeting of the Board of Directors of the
valuation methodologies and Company, to understand the key judgments made and
models, in accordance with the valuation approaches applied;
International Private Equity and
Venture Capital Valuation
Guidelines. * assessed the appropriateness of the valuation
approach and methodology applied to each investment;
The Company utilises independent
third party valuation firms (the
"Valuation Agents") to assist * compared the assumptions used in the valuation models
and advise on their valuation employed to observable market data (where possible);
process.
The Company's listed investment, * corroborated significant investee company inputs used
with a value of GBP20,317,000 (the in the valuation models, and recent investment
"Listed Investment"), transactions to supporting documentations; and
is valued by the Company based on
the quoted market bid price in an
active market for that * considered market transactions in close proximity to
instrument. the year end and assessed their appropriateness as
being representative of fair value.
Risk:
The valuation of the Company's
investments is a significant area Our valuation specialist independently priced the Listed
of our audit, given that Investment to a third party pricing
it represents a significant source.
portion of the net assets of the
Company. Assessing disclosures:
We also considered the Company's disclosures (see notes 3 and
The valuation risk of the Unlisted 20) in relation to the use
Investments incorporates both a of estimates and judgements regarding the valuation of
risk of fraud and error investments and the Company's investment
given the significance of valuation policies adopted in note 2(i) and fair value
estimates and judgements that may disclosures in note 20 for compliance
be involved in the determination with IFRS.
of fair value.
------------------------------------ ----------------------------------- --------------------------------------------------------------
Our application of materiality and an overview of the scope of
our audit
Materiality for the financial statements as a whole was set at
GBP17,591,000, determined with reference to a benchmark of net
assets of GBP879,582,000, of which it represents approximately 2.0%
(2021: 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% (2021: 75%) of
materiality for the financial statements as a whole, which equates
to GBP13,193,000. 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 GBP879,000, 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. They
have also concluded that there are no material uncertainties that
could have cast significant doubt over its ability to continue as a
going concern for at least a year from the date of approval of the
financial statements (the "going concern period").
In our evaluation of the directors' conclusions, we considered
the inherent risks to the Company's business model and analysed how
those risks might affect the Company's financial resources or
ability to continue operations over the going concern period. The
risks that we considered most likely to affect the Company's
financial resources or ability to continue operations over this
period was the availability of capital to meet operating costs and
other financial commitments.
We considered whether this risk could plausibly affect the
liquidity in the going concern period by comparing severe, but
plausible downside scenarios that could arise from this risk
against the level of available financial resources indicated by the
Company's financial forecasts.
We considered whether the going concern disclose in note 2(b) to
the financial statements gives a full and accurate description of
the directors' assessment of going concern.
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;
-- we have not identified, and concur with the directors'
assessment that there is not, a material uncertainty related to
events or conditions that, individually or collectively, may cast
significant doubt on the Company's ability to continue as a going
concern for the going concern period; and
-- we have nothing material to add or draw attention to in
relation to the directors' statement in notes to the financial
statements on the use of the going concern basis of accounting with
no material uncertainties that may cast significant doubt over the
Company's use of that basis for the going concern period, and that
statement is materially consistent with the financial statements
and our audit knowledge.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the above conclusions are not a guarantee that the
Company will continue in operation.
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 58 and 59) 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
58 and 59) 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 58 and 59 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 66
and 67, 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
30 January 2023
Statement of Comprehensive Income
For the year ended 30 September 2022
Year ended Year ended
30 September 2022 30 September 2021
Notes Revenue Capital Total Revenue Capital Total
GBP,000 GBP,000 GBP,000 GBP,000 GBP,000 GBP,000
Investments
Net (losses)/gains
on investments
held at fair
value through
profit or loss 11 - (610,180) (610,180) 568,419 568,419
Net gains on
currency
movements - 215 215 268 268
Net investment (losses)/gains - (609,965) (609,965) - 568,687 568,687
Interest income 5 71 - 71 851 - 851
Gain on settlement
of
financial liability 6 - 17,907 17,907 - - -
Total income 71 17,907 17,978 851 - 851
Investment management
and performance
fees 6 (6,093) - (6,093) (5,153) (112,077) (117,230)
Other expenses 7 (3,199) - (3,199) (3,762) - (3,762)
(Losses)/gains
before finance
costs and taxation (9,221) (592,058) (601,279) (8,064) 456,610 448,546
Finance costs 8 (13) - (13) (238) - (238)
(Losses)/gains
before taxation (9,234) (592,058) (601,292) (8,302) 456,610 448,308
Tax expense - - - - - -
Total (losses)/gains
and
comprehensive
income for the
year (9,234) (592,058) (601,292) (8,302) 456,610 448,308
Loss)/gain
per
Ordinary Share
(pence) 9 (1.59) (101.65) (103.24) (1.75) 96.54 94.76
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 82 to 110 form an integral part of these
Audited Financial Statements.
Statement of Financial Position
As at 30 September 2022
2022 2021
Notes GBP,000
GBP,000
Non-current assets
Investments held at fair value
through profit or loss 11 822,363 1,460,198
------------ ------------
Current Assets
Cash and cash equivalents 12 58,712 49,794
Other receivables 13 69 427
Unsettled trades 14 3,791 -
62,572 50,221
------------ ------------
Total assets 884,935 1,510,419
------------ ------------
Current liabilities
Performance fee payable 6 - (112,077)
Management fee payable 6 (4,306) (3,333)
Loan payable 15 - (15,000)
Other payables 16 (1,047) (1,075)
Total liabilities (5,353) (131,485)
------------ ------------
Net assets 879,582 1,378,934
------------ ------------
Equity
Share Capital 17 860,890 758,950
Capital reserve 41,362 633,420
Revenue reserve (22,670) (13,436)
Total Equity 879,582 1,378,934
------------ ------------
Net Asset Value per Ordinary
Share (pence) 18 147.79 251.96
Number of Ordinary Shares in
issue 17 595,150,414 547,273,076
___________ ___________
Approved by the Board of Directors and authorised for issue on
30 January 2023 and signed on their behalf:
Stephen Coe
Director
The notes on pages 82 to 110 form an integral part of these
Audited Financial Statements.
Statement of Changes in Equity
For the year ended 30 September 2022
Share Capital Revenue Total
capital reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000
At 30 September 2020
Total gains/(losses) and
comprehensive
income for the year 370,367 176,810 (5,134) 542,043
Share issue - 456,610 (8,302) 448,308
Share issue costs 395,000 - - 395,000
(6,417) - - (6,417)
At 30 September 2021 758,950 633,420 (13,436) 1,378,934
--------- ---------- --------- ----------
Total gains/(losses) and
comprehensive
income 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
--------- ---------- --------- ----------
The notes on pages 82 to 110 form an integral part of these
Audited Financial Statements.
Statement of Cash Flows
For the year ended 30 September 2022
2022 2021
Notes GBP'000 GBP'000
Cash flows from operating activities
Cash used in operating activities 19 (59,330) (37,987)
Interest paid 8 (13) ( 238)
Interest income 5 71 851
Purchase of investments 11 (93,663) (426,639)
11,
Sale of investments 14 117,527 94,707
Net gains on currency movements 215 268
Net cash outflow from operating
activities (35,193) (369,038)
--------- ----------
Cash flows from financing activities
Issue of ordinary shares 17 59,999 395,000
Share issue costs 17 (674) (6,417)
( Repayment)/Proceeds of loan payable 15 (15,000) 15,000
Net cash inflow from financing activities 44,325 403,583
--------- ----------
Net increase in cash and cash equivalents 9,132 34,545
Cash and cash equivalents at beginning
of year 49,794 15,559
Net loss on cash currency movements (214) (310)
Cash and cash equivalents at end
of year 12 58,712 49,794
--------- ----------
Cash and cash equivalents comprise
of the following:
Cash at bank 58,712 49,794
58,712 49,794
--------- ----------
The notes on pages 82 to 110 form an integral part of these
Audited Financial Statements.
Notes to the Audited Financial Statements
For the year ended 30 September 2022
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
3rd Floor, 1 Le Truchot, St Peter Port, Guernsey GY1 1WD.
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 17) 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. During the year, the Company had
share issues of 25,210,084 and 22,667,254 for a net consideration
of GBP59,403,549 and GBP42,536,651 respectively. The shares were
issued on 15 December 2021 and 28 January 2022. The Audited
Financial Statements of the Company are presented for the year
ended 30 September 2022. The Company invests in a diversified
portfolio consisting primarily of equity and equity-related
securities issued by unquoted companies.
The Company and its Alternative Investment Fund Manager ("AIFM")
received investment advice from Jupiter Investment Management
Limited ("JIML") up to 30 June 2022. From 1 July 2022, the Company
became a self-managed Alternative Investment Fund ("AIF"), assuming
direct responsibility for risk management and investment valuation.
A new Risk Committee and an Independent Valuation Committee were
subsequently appointed. Discretionary portfolio management services
are now procured directly from JIML. The administration of the
Company is delegated to Maitland Administration (Guernsey) Limited
("MAGL") (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, recent market volatility, the on-going impact of the
Russian war on Ukraine, energy shortages, inflation and increases
in interest rates 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 GBP58,712,000, a net current asset position of
GBP57,219,000 and liquid listed investments amounting to
GBP20,317,000.
The Company generates liquidity by raising capital and exiting
investments. It uses liquidity by making new and follow-on
investments and paying company expenses. 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.
After making enquiries, 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 ("GBP").
(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, on deposit and cash 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 fee is charged to
the capital column 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 GBP1,200 (2021:
GBP1,200).
(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").
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 JIML 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 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 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 GBP58,712,000.
Refer to note 12 for further details of the cash balance held at 30
September 2022.
(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 (GBP) 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 profit or loss in the capital
column of 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 column of 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 20.
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
2022. The Directors have considered their impact and have concluded
that they will not have a material impact on the Company's
financial statements.
-- 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 8 - Accounting Policies, Changes in Accounting Estimates and Errors
Definition of Accounting Estimates: The amendments replace the
definition of a change in accounting estimates with a definition of
accounting estimates. Under the new definition, accounting
estimates are "monetary amounts in financial statements that are
subject to measurement uncertainty". Entities develop accounting
estimates if accounting policies require items in financial
statements to be measured in a way that involves measurement
uncertainty. The amendments clarify that a change in accounting
estimate that results from new information or new developments is
not the correction of an error.
Effective date - 1 January 2023
-- IAS 12 - Income Taxes
Deferred Tax related to Assets and Liabilities arising from a
Single Transaction: The amendments clarify that the initial
recognition exemption does not apply to transactions in which equal
amounts of deductible and taxable temporary differences arise on
initial recognition.
Effective date - 1 January 2023
-- IAS 37 - Provisions, Contingent Liabilities and Assets
Onerous Contracts-Cost of Fulfilling a Contract: The amendments
specify that the 'cost of fulfilling' a contract comprises the
'costs that relate directly to the contract'. Costs that relate
directly to a contract can either be incremental costs of
fulfilling that contract (examples would be direct labour,
materials) or an allocation of other costs that relate directly to
fulfilling contracts (an example would be the allocation of the
depreciation charge for an item of property, plant and equipment
used in fulfilling the contract).
Effective date - 1 January 2022
-- IFRS 9 - Financial Instruments
Annual Improvements to IFRS Standards 2018-2020: The amendment
clarifies which fees an entity includes when it applies the '10 per
cent' test in paragraph B3.3.6 of IFRS 9 in assessing whether to
derecognise a financial liability. An entity includes only fees
paid or received between the entity (the borrower) and the lender,
including fees paid or received by either the entity or the lender
on the other's behalf.
Effective date - 1 January 2022
5. Interest income
Interest is accounted for using the effective interest method.
Interest income totaling GBP60,000 (2021: GBP380,000) was earned
from the Sorted Holdings Limited Convertible Loan which is held at
fair value through profit or loss (FVTPL). GBP11,000 (2021: GBPnil)
was earned from Citibank accounts. During the prior year,
GBP471,000 was earned from the wefox Loan note which converted to
equity in that period. It was also held at fair value through
profit or loss (FVTPL).
6. Investment management fees
2022 2021
GBP'000 GBP'000
Investment management fee
Jupiter Unit Trust Managers Limited ("JUTM") 4,915 2,840
Jupiter Investment Management Limited ("JIML") 1,178 2,313
Investment performance fee - charged to capital - 112,077
Total investment management fees 6,093 117,230
-------- ----------
Jupiter Unit Trust Managers Limited ("JUTM") was the Alternative
Investment Fund Manager ("AIFM") until 30 June 2022. JUTM had sub
delegated portfolio management to Jupiter Investment Management
Limited ("JIML") which is a member of the same group. From 1 July
2022 the Company became a self-managed AIF and procures portfolio
management services directly from JIML, under the Portfolio
Management Agreement entered into on the same date.
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 2022, an amount of GBP3,128,000 (2021:
GBP3,333,000) to JUTM and GBP1,178,000 (2021: GBPnil) 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%
(GBP60,522,000) of the performance fee due to JUTM for the year
ended 30 September 2021 in ordinary shares issued by the Company.
The remaining 46% (GBP51,555,000) 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 GBP42,615,000. 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 GBP17,907,000, is recognised within gains on settlement
of financial liability within the Statement of Comprehensive
Income.
For the year ended 30 September 2022, 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 2021 and ending on 30 September 2022 (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:
(x) 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
(y) 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 2022, the Company had not exceeded the High
Water Mark and Performance Hurdle and no accrual (2021:
GBP112,077,000 due to JUTM) for performance fees has been reflected
within these Audited Financial Statements.
An amount of GBP nil (2021: GBP112,077,000 due to JUTM) was
outstanding and due to JIML in respect of performance fee payable
as at 30 September 2022.
7. Other expenses
2022 2021
GBP'000 GBP'000
Administration fee 267 237
AIFM fee 433 400
Auditor's remuneration for:
- audit fees (current year) 135 120
- audit fees (under accrual in prior
year) 4 42
- non-audit fees 40 114
Committee fees 79 -
Depositary fees 87 91
Directors' expenses 6 -
Directors' fees 345 404
Directors' liability insurance 68 49
FCA fees 31 18
Legal fee and professional fees:
- ongoing operations 826 946
- valuation fees 152 221
- due diligence fees 160 165
- purchases 275 354
Listing fees 53 140
Loan agreement fee - 160
Loan commitment fee 9 88
Printing fees 32 47
Registrars' fees 42 72
Secretarial fees 41 35
Sundry 114 89
3,199 3,762
-------- --------
8. Finance costs
2022 2021
GBP'000 GBP'000
Bank interest 1 21
Loan interest 12 217
13 238
-------- --------
9. (Losses)/gains per ordinary share
30 September 2022 30 September 2021
Net return Per share Net return Per share
GBP,000 pence GBP,000 pence
Revenue return (9,234) (1.59) (8,302) (1.75)
Capital return (592,058) (101.65) 456,610 96.51
(601,292) (103.24) 448,308 94.76
--------------- ------------ ----------- ------------
Weighted average number of Ordinary
Shares 582,448,943 473,121,001
------------ ------------
The return per share is calculated using the weighted average
number of ordinary shares.
10. Dividends
The Board has not declared a dividend (2021: GBPnil).
11. Investments held at fair value through profit or loss
2022 2021
GBP'000 GBP'000
Opening book cost 758,013 404,480
Opening investment holding unrealised gains 702,185 201,807
Opening valuation 1,460,198 606,287
Movements in the year:
Purchases at cost 93,663 380,199
Sales - proceeds (121,318) (94,707)
Net (losses)/gains on investments held at
fair value through profit or loss (610,180) 568,419
Closing valuation 822,363 1,460,198
---------- ----------
2022 2021
GBP'000 GBP'000
Closing book cost 731,095 758,013
Closing investment holding unrealised gains 91,268 702,185
Closing valuation 822,363 1,460,198
---------- ----------
2022 2021
GBP'000 GBP'000
Movement in unrealised gains during the year 130,434 501,083
Movement in unrealised losses during the
year (741,351) (705)
Realised loss on sale of investments (55,742) -
Realised gain on sale of investments 56,479 68,041
Net (losses)/gains on investments held at
fair value through profit or loss (610,180) 568,419
The Company holds all its investments at fair value through
profit and loss. Investments held by the Company on 30 September
2022 where the ownership interest exceeded 20% were as follows:
Principal
place Principal Ownership interest
Name of business activity %
Cognitive Logic Inc. United States Trading company 20-30%
Smart Pension Limited United Kingdom Trading company 20-30%
Sorted Holdings Limited United Kingdom Trading company 20-30%
Tactus Holdings Limited United Kingdom Trading company 20-30%
12. Cash and cash equivalents
2022 2021
GBP'000 GBP'000
Cash and cash equivalents comprise of the
following:
Cash at bank 58,712 49,794
58,712 49,794
--------- ---------
13. Other receivables
2022 2021
GBP'000 GBP'000
Prepayments and accrued income 69 427
69 427
-------- --------
14. Unsettled trades
On 30 September 2022, the Company sold 566,927 shares in Wise
plc for a consideration of GBP3,791,154. The transaction was
settled on 4 October 2022.
15. Loan payable
2022 2021
GBP'000 GBP'000
Barclays Bank plc - 15,000
During the prior year the Company entered into a revolving loan
facility with Barclays Bank plc. The facility had an interest rate
of LIBOR +2.5%. An amount of GBP15,000,000 was drawn on the
facility in the prior period. The Company incurred agreement fees
of GBP160,000 and a commitment fee of GBP88,000 during the prior
period in respect of the facility. The loan was subsequently repaid
in full on 15 October 2021 and the facility terminated.
16. Other payables
2022 2021
GBP'000 GBP'000
Administration fees 60 142
AIFM fees 287 280
Audit fees 135 142
Loan interest - 86
Pricing review fees 367 276
Custodian fees 18 30
Other creditors 280 119
1,047 1,075
-------- --------
17. Share capital
No of GBP'000
shares
Ordinary Shares at no par value
At 30 September 2020 336,742,424 370,367
Issue of shares 210,530,652 3 95,000
Issue costs - (6,417)
At 30 September 2021 547,273,076 758,950
Issue of shares 47,877,338 102,614
Issue costs - (674)
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.
Included within the value of the issue of shares is
GBP42,615,000 relating to shares issued to JUTM in settlement of
the performance fee payable at 30 September 2021 (see Note 6).
18. 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 2022 30 September 2021
NAV NAV NAV NAV
per share attributable per share attributable
pence GBP,000 pence GBP,000
Ordinary Shares: basic
and diluted 147.79 879,582 251.96 1,378,934
The Net Asset Value per Ordinary Share is based on 595,150,414
(2021: 547,273,076) Ordinary Shares, being the number of Ordinary
Shares in issue at the year end.
19. Cash used in operating activities
2022 2021
GBP'000 GBP'000
Total (losses)/gains for the year (601,292) 448,308
Net losses/(gains) on investments held at
fair value through profit or loss 610,810 (568,419)
Gain on settlement of financial liability (17,907) -
Interest income (71) (851)
Finance costs 13 238
Net (gains)/losses on currency movements (1) 42
Movement in working capital
Decrease / (Increase) in other receivables 358 (160)
Decrease)/Increase in payables (excluding
loan payable and settlement of performance
fees through the issuance of shares - see
note 6) (50,610) 82,855
(59,330) (37,987)
---------- ------------
20. 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 other 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 2022 Level Level Level Total
1 2 3
GBP,000 GBP,000 GBP,000 GBP,000
Quoted equity 20,317 - - 20,317
Unquoted equity - - 802,046 802,046
20,317 - 802,046 822,363
--------- -------- ---------- ----------
At 30 September 2021 Level Level Level Total
1 2 3
GBP,000 GBP,000 GBP,000 GBP,000
Quoted equity 236,756 - - 236,756
Unquoted equity/Convertible
debt - - 1,223,442 1,223,442
236,756 1,223,442 1,460,198
--------- ---------- ----------
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 Valuation Significant Range Sensitivity Sensitivity to changes
as at 30 Technique Unobservable % in significant
September Inputs unobservable
2022 (GBP000s) inputs
------------------ ------------------- ---------------- -------------- --------------------------
EV/2022E revenue
multiples
If multiples changed by
EV/LTM revenue +/- 25%, the value of the
multiples companies in this group
Market approach would change by +
using comparable EV/2023E revenue GBP42,745,628
447,933 traded multiples multiples 0.13 - 25.79x 25% / - GBP41,842,136
--------------
If multiples changed by
+/- 25%, the value of the
companies in this group
Market approach would change by +
using price Price/2022E GBP39,701,835
113,394 to book ratios Book multiple 0.35 - 4.41x 25% / - GBP34,903,560
--------------
177,016 Recent transaction N/A N/A N/A N/A
price
------------------ ------------------- ---------------- -------------- --------------------------
If probability changed
by +/- 25%, the value of
the companies in this
group
would change by +
GBP21,124,669
45,065 Scenario Analysis Probability 17-100% 25% / - GBP21,124,669
------------------ ------------------- ---------------- -------------- --------------------------
If the underlying asset
values changed by +/-
25%,
the value of the
companies
in this group would
change
Underlying by + GBP3,816,379 / -
18,429 Option Pricing Asset Value N/A 25% GBP3,893,347
------------------ ------------------- ---------------- -------------- --------------------------
209 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 item:
Unlisted Investments 2021
Fair Value as at 30 Valuation Technique Significant Range Sensitivity % Sensitivity to
September 2021 Unobservable Inputs changes in
(GBP000s) significant
unobservable
inputs
-------------------- -------------------- ---------------- ------------- -------------------
840,358 Market approach 10% If revenue
using comparable EV/2022E revenue multiples changed
traded multiples multiples by +/- 10%, the
5.47 - 18.50x value of the
EV/LTM revenue companies in this
multiples group would change
by +/-GBP76,875,162
EV/2021E revenue
multiples
-------------------- -------------------- ---------------- ------------- -------------------
1,332 Wind Down N/A N/A N/A N/A
-------------------- -------------------- ---------------- ------------- -------------------
307,147 Recent transaction N/A N/A N/A N/A
price
-------------------- -------------------- ---------------- ------------- -------------------
74,605 Indicative Offer N/A N/A N/A N/A
-------------------- -------------------- ---------------- ------------- -------------------
The Company has an established control framework with respect to
the measurement of fair values. The Unlisted Asset Valuation
Committee ("UAVC") of the AIFM was responsible for valuation of the
Company's investments until 30 June 2022. The Company has appointed
a new independent Valuation Committee upon its move to a
self-managed structure from 1 July 2022. Under the new structure,
the Company's Investment Adviser continues to provide discretionary
portfolio management services, while the Company assumes direct
responsibility for the valuation process.
The 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:
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Level Level Level Level
1 1 3 3
Opening balance 236,756 94,213 1,223,442 512,074
Transferred to/(from) Level
1 (4,961) 161,161 4,961 (161,161)
Purchases 15,219 64,101 78,444 316,098
Sales (49,478) (94,707) (71,840) -
Total gains/(losses) included
in net gains on investments
in the statement of comprehensive
income:
- on assets sold (42,763) 68,041 43,500 -
- on assets held at year
end (134,456) (56,053) (476,461) 556,431
20,317 236,756 802,046 1,223,442
---------- --------- ---------- ----------
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. 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
amount to GBP427,998,000 (2021: net gain of GBP474,928,000).
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 2022 (10% at 30 September 2021), the impact on the net
asset value would have been GBP205,590,626 (2021: GBP146,019,845).
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 2022 the financial assets and financial
liabilities exposed to interest rate risk are as shown below:
In one Greater
year than 2022
or less one year Total
GBP,000 GBP,000 GBP,000
Cash and cash equivalents (daily
interest rate) 58,712 - 58,712
Total 58,712 - 58,712
-------- --------- --------
As at 30 September 2021 the financial assets and financial
liabilities exposed to interest rate risk are as shown below:
In one Greater
year than 2021
or less one year Total
GBP,000 GBP,000 GBP,000
Cash and cash equivalents (daily
interest rate) 49,794 - 49,794
Loan payable (LIBOR +2.5%) (15,000) (15,000)
Total 34,794 - 34,794
--------- --------- ---------
Liquidity and interest risk tables
The following tables detail the Company's remaining contractual
maturity for its financial assets and liabilities.
2022 Over
Interest Year Year 2 years
rate % 1 1 - 2 GBP,000 Total
GBP,000 GBP,000
Assets
Daily bank
Cash rate 58,712 - - 58,712
Other receivables
and unsettled Interest
trades free 3,860 - - 3,860
62,572 - - 62,572
---------- ---------- --------- --------
2021 Over
Interest Year Year 2 years
rate % 1 1 - 2 GBP,000 Total
GBP,000 GBP,000
Assets
Convertible 8% fixed
loan note (notional) rate 5,205 - - 5,205
Daily bank
Cash rate 49,794 - - 49,794
Interest
Other receivables free 727 - - 727
55,426 - - 55,426
---------- ---------- --------- --------
2022 Over
Interest Year Year 2 years
rate % 1 1 - 2 GBP,000 Total
GBP,000 GBP,000
Liabilities
Other current Interest
liabilities free 5,353 - - 5,353
5,353 - - 5,353
---------- ---------- --------- --------
2021 Over
Interest Year Year 2 years
rate % 1 1 - 2 GBP,000 Total
GBP,000 GBP,000
Liabilities
Loan payable Libor +2.5% 15,000 - - 15,000
Other current Interest
liabilities free 116,485 - - 116,485
131,485 - - 131,485
---------- ---------- --------- --------
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:
2022
Investments Cash Debtors Creditors
GBP,000 GBP,000 GBP,000 GBP,000
US dollar 260,583 58 - 2
Euro 154,943 10 - -
Swedish krona 56,135 290 - -
Total 471,661 358 - 2
------------ -------- -------- ----------
2021
Investments Cash Debtors Creditors
GBP,000 GBP,000 GBP,000 GBP,000
US dollar 253,247 216 - 2
Euro 108,657 10 - -
Swedish krona 386,999 - - -
Total 748,903 226 - 2
------------ -------- -------- ----------
During the year pound sterling weakened by an average of 4.75%
against all of the currencies in the investment portfolio (weighted
for exposure at 30 September 2022). In a similar scenario, where
the value of pound sterling had strengthened against each of the
currencies in the portfolio by 5% (2021: 10%), the impact on the
Net Asset Value would have been negative GBP22,460,066 (2021:
negative GBP68,082,169). If the value of pound sterling had
weakened against each of the currencies in the investment portfolio
by 5% (2021: 10%), the impact on the Net Asset Value would have
been positive GBP24,824,284 (2021: GBP83,211,540). 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:
2022 2021
GBP'000 GBP'000
Convertible loan note (fair value) 58,712 5,205
Cash and cash equivalents 69 49,794
Other receivables 3,791 427
Unsettled trades -
62,572 55,426
-------- --------
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 GBP58,354,558, $64,552, CHF72, SEK3,586,427 and
EUR10,961 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 91% (2021: 89%)
of the net assets as at 30 September 2022.
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 1 and
3 months 12 months 5 years Total
GBP GBP GBP GBP
2022
Assets
Cash 58,712 - - 58,712
Other receivables 69 - - 69
Unsettled trades 3,791 - - 3,791
Liabilities
Current liabilities (5,353) - - (5,353)
Total 57,219 - - 57,219
----------- ----------- --------- --------
Between Between
Up to 3 and 1 and
3 months 12 months 5 years Total
GBP GBP GBP GBP
2021
Assets
Convertible loan note
(notional) - 5,205 - 5,205
Cash 49,794 - 49,794
Other receivables 427 - 427
Liabilities
Current liabilities (116,485) - (116,485)
Loan payable - (15,000)
(15,000)
----------- ----------- --------- ----------
Total (66,264) (9,795) - (76,059)
----------- ----------- --------- ----------
Capital management objectives, policies and procedures
The structure of the Company's capital is described in note 17
and details of the Company's reserves are shown in the Statement of
Changes in Equity on page 80.
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.
21. Related parties
On 1 May 2021 the Company appointed Jupiter Unit Trust Managers
Limited ("JUTM") as its Alternative Investment Fund Manager
("AIFM"), replacing Maitland Institutional Services Limited whose
appointment was terminated at the same time. JUTM subsequently sub
delegated portfolio management services to Jupiter Investment
Management Limited ("JIML") which is a member of the same
group.
On 30 June 2022 JUTM's appointment as AIFM was terminated, and
on 1 July 2022 the Company became a self-managed AIF. JIML
continues to provide portfolio management services by virtue of a
Portfolio Management Agreement entered into the same date.
2022 2021
GBP'000 GBP'000
Management fee charged by JUTM:
Total management fee charged 4,915 2,840
Management fee outstanding 3,128 2,840
Management fee charged by JIML:
Total management fee charged 1,178 2,313
Management fee outstanding 1,178 493
Performance fee charged by JUTM:
Total performance fee charged - 112,077
Performance fee outstanding - 112,077
AIFM fee charged by JUTM:
Total AIFM fee charged 433 147
AIFM fee outstanding 287 147
AIFM fee charged by Maitland Institutional
Services Ltd:
Total AIFM fee charged - 248
AIFM fee outstanding - 129
Directors' fees:
Total Directors' fees charged 345 404
Directors' fees outstanding 18 -
As detailed in note 6, on 28 January 2022 JUTM received
22,667,415 shares in satisfaction of the performance fee payable at
30 September 2021.
As at 30 September 2022 the following Directors have holdings in
the Company:
Director Number of % Ordinary shares
Ordinary shares in 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
As at 30 September 2021 the following Directors have holdings in
the Company:
Director Number of % Ordinary shares
Ordinary shares in issue
as at 30 September
2022
Andrew Haining 64,000 0.0117
Stephen Coe 50,909 0.0093
Simon Holden 72,500 0.0132
Anne Ewing 32,500 0.0059
Tim Cruttenden 14,968 0.0027
Margaret O'Connor - -
The following funds, which are also managed by Jupiter, hold an
investment in the Company.
Total holdings Total holdings Value of
at Shares purchased Shares sold at holdings at
30 September during during 30 September 30 September
2021 the year the year 2022 2022
GBP'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
The following funds, which are also managed by Jupiter, hold an
investment in the Company.
Value of holdings
Total holdings at Shares purchased Shares sold Total holdings at at
30 September during during 30 September 30 September
2020 the year the year 2021 2021
GBP'000
Fund name
Jupiter UK Smaller
Companies Focus
Fund 5,520,882 2,637,000 (1,590,596) 6,567,286 17,535
Jupiter UK
Specialist Equity
Fund 8,112,820 - (1,103,652) 7,009,168 18,714
Jupiter UK Mid-Cap
Fund 51,451,305 26,141,070 - 77,592,375 207,172
Jupiter UK Smaller
Companies Fund 14,601,552 3,219,000 - 17,820,552 47,581
Jupiter Investment
Fund - Jupiter
Managed European
Portfolio - - - 742,325 1,982
Jupiter Investment
Fund -Jupiter
Merlin
International
Balanced - 668,092 - 668,092 1,784
Jupiter Investment
Fund - Jupiter
Merlin
International
Equities - 946,275 - 946,275 2,527
Jupiter Investment
Fund - Jupiter
Merlin Real
Return Portfolio - 1,559,644 - 1,559,644 4,164
Jupiter Fund of
Investment Trusts - 2,000,000 - 2,000,000 5,340
Jupiter Merlin
Real Return
Portfolio - 103,926 - 103,926 277
Jupiter Merlin
Worldwide
Portfolio - 8,532,956 - 8,532,956 22,783
Jupiter UK Smaller
Companies Equity
Fund - 1,750,000 - 1,750,000 4,673
------------------ ------------ ------------------- ------------------
Total 79,686,559 47,557,963 (2,694,248) 125,292,599 334,532
22. Post balance sheet events
During October 2022, the Company purchased two UK treasury bills
maturing on 14 November 2022 and 21 November 2022 respectively for
a consideration of GBP28,944,225. The Company also purchased three
UK treasury bills in December 2022 maturing on 16 January 2023, 23
January 2023 and 30 January 2023 respectively for a consideration
of GBP54,800,418. The Company purchased three further treasury
bills in January 2022 maturing on 30 January 2023, 6 February 2023
and 20 February 2023 for a consideration of GBP21,368,497.
The Company completed a GBP1,499,999 follow-on investment in
Cognitive Logic Inc. (InfoSum) in October 2022.
During October 2022, the Company sold 874,411 shares in Wise plc
for a net consideration of GBP5,894,843 and a realised gain of
GBP3,873,061.
During November 2022, the Company sold all of its stake in
Revolution Beauty Group plc for approximately GBP5 million via an
off-market transaction. The asset was held at nil value at 30
September 2022.
On 30 November 2022, an announcement was made about the
intention to revise current performance fee arrangements. Details
of the proposed changes can be found in the Chairman's Report on
page 4. Further details will be provided to shareholders through a
circular where shareholder consent will be sought by virtue of
these changes being a related party transaction for the purposes of
the Listing Rules. If approved by shareholders, it is expected that
the revised arrangements will apply with effect from the start of
the financial year ended 30 September 2023.
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
3rd Floor
1 Le Truchot
St Peter Port
Guernsey, GY1 1WD
Investment Adviser
Jupiter Investment Management Limited ("JIML")
The Zig Zag Building
70 Victoria Street
London, SE1E 6SQW
Alternative Investment Fund Manager ("AIFM")
Jupiter Unit Trust Managers Limited ("JUTM") (To 30 June
2022)
The Zig Zag Building
70 Victoria Street
London, SE1E 6SQW
On 1 July 2022 the Company moved to a self-managed structure
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
Maitland Administration (Guernsey) Limited
3rd Floor
1 Le Truchot
St Peter Port
Guernsey, GY1 1WD
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
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