REG - Chrysalis Investment - Annual Report and Audited Financial Statements
10/01/2025 07:15
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RNS Number : 8289S Chrysalis Investments Limited 10 January 2025
The information contained in this announcement is restricted and is not for
publication, release or distribution in the United States of America, any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.
10 January 2025
Chrysalis Investments Limited ("Chrysalis" or the "Company")
Annual Results
The Company today announces its results for the year ended 30 September 2024.
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 2024 30 September 2023 % change
NAV per share 141.26p 134.65p + 4.9%
Share price 93.30p 62.20p + 50.0%
Total net assets £840m £801m + 4.9%
Performance Headlines
The NAV at 30 September 2024 was 141.26 pence per share, an increase of 4.9%.
Some of the largest holdings within the portfolio performed well over the
period, which was reflected in the increased carrying value of Starling,
Klarna and Smart Pension. The performance of these assets was largely offset
by a write down in wefox and the impact of foreign exchange. The share price
closed at 93.30p, a 34% discount to NAV per share, compared with a 54%
discount as of September 2024.
With the Company's shares still trading at a material discount to NAV per
share, the Investment Adviser has continued to focus on supporting existing
investments. Over the year, approximately £23 million was invested, with
circa £6 million invested into Smart Pension and circa £17 million into
wefox. Realisations totaled approximately £54 million over the period with
circa £45 million coming from the sale of Graphcore to SoftBank Group Corp
via trade sale and circa £9 million realised from Wise. These transactions
led to a net capital inflow into Chrysalis of almost £31 million and £47
million of liquidity was available at the period end.
There has been a continued focus on driving the portfolio towards
profitability over the period and this is reflected in a 45% improvement in
the weighted average PBT of the portfolio, which improved from c£91m to
£132m over the last twelve months. The portfolio continues to grow strongly
and the weighted average rate of sales growth over the last twelve months was
22%.
At period end, Chrysalis signed a loan agreement with Barclays Bank plc; post
period end, the full £70 million available under the facility was drawn down.
In addition, and also post period end, the deal to sell Featurespace to Visa
completed, which yielded initial proceeds of approximately £79 million.
The Company has used this liquidity position to fund follow-on investments in
certain investee companies as well as return capital to shareholders, both as
set out in the documentation sent to shareholders as part of the Continuation
Vote, which was approved in March 2024. As of 7 January 2025, approximately
£31 million had been used to buy back the Company's shares.
As a result of the activity highlighted above, the Company currently has a
strong liquidity position of approximately £151 million, which it intends to
use to continue its capital return programme of up to £100 million, as
previously articulated.
Andrew Haining, Chair, commented:
"The year to 2024 has seen significant change for your Company, both in the
way that it is run, and also in market sentiment surrounding its portfolio
holdings.
In April 2024, the existing investment advisory team left Jupiter Asset
Management in an agreed transition, to their own investment advisory business;
I am delighted to say that this process has been seamless.
Of probably greater consequence has been the return of some positivity in the
stock market for "growth assets" and thus an improving outlook for similar
investments in private markets. Evidence of this can be seen from the recent
realisations from the portfolio, and we hope will continue to be underpinned
by a successful IPO of Klarna this year.
These realisations, along with the loan facility from Barclays, have enabled
us to return capital to shareholders, as we committed to do at the time of the
Company's continuation vote in March 2024. We view the initial impact of this
buyback programme as positive, with the shares rising by approximately 24%
from when the share buyback programme was announced to the end December 2024.
The Board continues to work with the Investment Adviser to consider how to
best generate value for shareholders. We see two main levers to deliver this.
First, is to minimise the discount at which the shares trade to NAV on a
sustainable basis, and second, maximise the valuations of the portfolio
companies, and thus the Company's NAV. I look forward to discussing this topic
with shareholders this year.
Richard Watts and Nick Williamson (Managing Partners of the Investment
Adviser), commented:
"Our focus has remained on supporting the Company's investments to maximise
their potential. Significant examples of this have been in helping Smart to
streamline its operations, which we believe has placed the company on a robust
path to profitability, and also participating in the restructuring of wefox.
The exits achieved over the year have enabled an excellent start to be made on
the capital return process discussed with investors around the start of 2024.
As we look ahead, we are optimistic Klarna will successfully IPO in the
current financial year, which would further add to the Company's liquidity
position. Further out, we believe we have strong contenders for future IPOs."
- ENDS-
For further information, please contact
Media
Montfort Communications: +44 (0) 7921 881 800
Charlotte McMullen / Imogen Saunders chrysalis@montfort.london
Chrysalis Investment Partners LLP: +44 (0) 20 7871 5343
James Simpson
G10 Capital Limited (AIFM): +44 (0) 20 7397 5450
Maria Baldwin
Panmure Liberum: +44 (0) 20 3100 2000
Chris Clarke / Darren Vickers
Deutsche Numis: +44 (0) 20 7260 1000
Nathan Brown / Matt Goss
IQEQ Fund Services (Guernsey) Limited: +44 (0) 1481 231852
Aimee Gontier/Elaine Smeja
LEI: 213800F9SQ753JQHSW24
A copy of this announcement will be available on the Company's website at
https://www.chrysalisinvestments.co.uk
(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.
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.
The Company is an alternative investment fund ("AIF") for the purposes of the
AIFM Directive and as such is required to have an investment manager who is
duly authorised to undertake the role of an alternative investment fund
manager ("AIFM"). G10 Capital Limited is the AIFM to the Company. Chrysalis
Investment Partners LLP is the investment adviser to G10 Capital Limited.
Chrysalis Investment Partners LLP is an appointed representative of G10
Capital Limited which is authorised and regulated by the Financial Conduct
Authority.
Strategy
At Chrysalis we aim to deliver value for our shareholders and partners by
investing in and supporting innovative businesses with the potential to
transform their sectors.
Backing Winning Ideas We seek high growth innovative businesses which are leading transformation
within their sectors.
Technology has the power to transform the world in which we live. We look to
invest in those businesses that have the ability to achieve meaningful change.
We identify opportunities for significant growth and help companies carve out Capturing Growth
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 approach. Delivering Value
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
141.26p
- NAV per share increase of 6.61p or 5%
The increase in the fair value of the portfolio was 13.29p, offset by an
adverse movement in foreign exchange of 5.59p. Increases in the value of
Starling Bank, Klarna, Smart Pension and Featurespace were partially offset by
a material decline in the value of wefox and the write-off of Tactus.
93.30p
- Share price increase of 31.10p or 50%
The share price closed at a 34% discount to NAV, narrowing from 46% in the
prior year.
£54 million
- Proceeds from realisations
The Company realised positions in Graphcore (£45 million) and Wise (£9
million) and post period end received £79 million from the sale of
Featurespace.
£23 million
- Capital deployed
Capital was deployed in ongoing support of two existing portfolio companies,
wefox (£17 million) and Smart Pension (£6 million).
£47 million
- Available liquidity at 30 September 2024
The portfolio remains well funded, with the majority either profitable or
funded to profitability. The Company ended the year with an improved level of
liquidity available to support both the existing portfolio, and the
commencement of the share buyback, which forms part of the Company's Capital
Allocation Policy.
£132 million
- Portfolio profitability
Portfolio profitability improved by 45% in the period and revenue growth
remained robust. All portfolio companies saw profits rise or losses narrow.
Chairman's Statement
The year, which saw a welcome return to growth in NAV per share - up 5% over
the year to 141.26 pence, driven by Starling Bank and Klarna revaluations
which offset the write downs on wefox and Tactus - was one of significant
change for Chrysalis Investments Limited ("Chrysalis" or "the Company"). Not
only has it seen the market for exits reopen, which I will cover in more
detail below, but it has also witnessed a shift in the way the Company has
been managed.
Following lengthy discussions, the Board, Investment Adviser and Jupiter
agreed to move the advisory team out of the employment of Jupiter and into a
separate structure. The Board has overseen this process, and I am pleased to
report this transition has passed off seamlessly. I believe this new structure
provides a better foundation for the management of your Company in the future.
The majority of the portfolio continues to perform strongly. As detailed in
the Investment Adviser's report, aggregate revenue growth remained robust, at
approximately 22% over the year; however, the reversal in value at Wefox is
frustrating. The Investment Adviser has been working hard to refocus the
business under new management with a revised business plan which is covered in
more detail in the Investment Adviser report. Despite this situation, I am
pleased to say that the year has been notable for the return of liquidity to
the Company, which I had highlighted as a possibility in my statement last
year.
The first liquidity event came in the form of an exit from Graphcore, which
generated initial cash proceeds of approximately £45 million. This allowed a
valuable recycling of capital, used to fund the initial tranche of the share
buyback and was, I believe, the best possible result for shareholders in the
circumstances, generating a significant uplift to the carrying value and
recouping the bulk of the cost of the original investment.
The sale of Featurespace to Visa, which closed post period end, has generated
strong returns for shareholders and is likely to yield a 3.0x money-on-money
multiple once full proceeds have been received (initial proceeds of
approximately £79 million were received post period end). The completion of
this transaction unlocks the ability of the Company to meet the second pillar
of its Capital Allocation Policy ("CAP"), endorsed by shareholders, namely the
return of up to £100 million of capital.
I am optimistic that further liquidity will be generated in 2025 with the
expected IPO of Klarna, which has been long mooted, where the company recently
announcing it had filed its F-1 with the SEC as a prelude to a listing. The
Investment Adviser believes the first half of 2025 offers an obvious window
for its IPO, and notes that news flow regarding product announcements has been
building in recent months.
Capital Allocation
The Capital Allocation Policy ("CAP") is the cornerstone of the Company's
three-year extension strategy, balancing shareholder returns with long-term
growth, and the Board was delighted that shareholders so comprehensively
supported all the proposals put to them at the Company's AGM in March 2024.
During this extension period, we anticipated the Company would dispose of
investments in an orderly way, to fund both buybacks and, potentially in time,
new investments. Within the first year of the extension, the Company has
generated substantial liquidity, demonstrating significant progress towards
its commitments, thus placing itself in a good position from which to refine
its approach to reinvestment and long-term value creation.
As a recap, four core potential uses of capital were set out in the CAP:
i. to support existing portfolio companies
ii. to fund the Company's working capital (for operating costs and fees)
iii. to invest in late-stage growth opportunities in accordance with the
Company's investment policy
iv. to return available capital to shareholders through share buybacks (or
equivalent programmes) where it is economically attractive to do so.
Further, the uses of capital in the future would consider:
i. the prevailing discount to NAV per share at which the Company's
shares are trading
ii. the likely timeline of realisations
iii. the likely uses of capital to fund existing investee companies
iv. the strength of any new investment opportunities
We remain committed to enacting the second pillar of the CAP - the return of
up to £100 million of capital, as well as supporting the existing portfolio -
to ensure the best possible returns for our shareholders. We also expect to
return at least 25% of net realised gains on further asset sales, thus
ensuring further capital returns to shareholders are possible.
Shortly before the end of the year the Company agreed a two-year, £70 million
debt facility with Barclays Bank plc, the full £70 million being drawn down
shortly after period end. The facility was designed to cover the "buffer"
element of the CAP, to support existing portfolio companies and fund working
capital.
We were then able to commence the buyback programme at the end of September
2024; the Board, its advisers, and the Investment Adviser continue to monitor
its progress. As of the end of December, the Company had bought back
approximately 28 million shares at a cost of £26.5 million, representing 66%
of the initial buyback size of £40 million, and 27% of the maximum second
pillar of the CAP, namely the return of up to £100 million.
Hitherto, we have chosen to return capital to shareholders via share buybacks,
which we believe maximise the NAV per share accretion available to
shareholders, but the appropriate mechanism of capital return will be kept
under review. While only just over one quarter of the total capital return
available under the full programme has been enacted, our initial assessment of
its "success" is positive. From a share price of 87 pence prior to the
announcement of the commencement of the share buyback, the shares closed the
calendar year at 108 pence. In comparison, the FTSE250 was broadly unchanged,
meaning our shares outperformed their market segment by approximately 25% over
the three months to December 2024.
Way Forward
I am grateful for the time and input provided by several of our shareholders
since we gave our trading update in October, and I am sorry I have not been
able to discuss our views with more, but those that I have spoken to account
for approximately 40% of the shareholder base.
Most shareholders with whom I have spoken recognise that private growth
capital investing still has a place in institutional and private portfolios
and that there are very few vehicles through which to access that market. We
agree that there remains a need for late-stage venture capital provision in
Europe and firmly believe that the platform that Chrysalis has established
since IPO provides just such a vehicle, with a collection of growth capital
assets that we expect will, over time, grow in value and generate capital
returns for our shareholders.
However, as acknowledged by shareholders, the need to achieve and maintain
"scale" for such a vehicle is paramount to its future success. The CAP
therefore looked to balance the demand to return capital to shareholders,
where it is economically attractive to do so - which, by its nature, will
reduce scale - with the recycling of some of that capital to cement the
long-term viability of the product. If capital is simply returned, then
portfolio concentration increases, and firepower and scale decrease. If this
continued, it would effectively imply a winding-down of the vehicle. Not only
is this contrary to the continuation vote of March 2024, but, as recognised by
many shareholders, it is likely to limit the Company's ability to realise
assets at fair value and is, consequently, a far from optimal outcome. To
minimise these risks, such a process is likely to take considerable time, and
cost, to execute.
We believe there are further ramifications of a de facto wind-down, with
decreased scale and increased concentration in the portfolio potentially
resulting in an increase in the perception of "risk" around the Company. This
could lead to the discount the shares trade at versus NAV beginning to widen
again, thus undoing the impact of the capital return undertaken to date.
With the prospect of liquidity improving in 2025 and the Company's prevailing
discount to NAV having materially tightened, the Board and Investment Adviser
continue to evaluate how to ensure that the Company can maximise the value
delivered to shareholders. Our overarching aims are twofold: first, to
minimise the discount to NAV the shares trade at and second, to maximise NAV
growth potential in the portfolio. Further announcements will be made in the
first half of 2025, and I look forward to discussing this topic directly with
as many shareholders as possible.
I would like to thank all those who have contributed to the Company's
development over the year - the management teams and employees of all our
investee companies, the team at the Investment Adviser, our legal and
financial advisers and all of my colleagues on the Board. It has been a very
busy and productive year.
It only remains for me to thank our shareholders for their engagement and
support over the year. I believe there are grounds for optimism for the fiscal
year ahead, with the prospects of further liquidity, and thus capital returns,
that hopefully will make 2025 another year of development.
Portfolio Statement
As at 30 September 2024
Net invested/ (returned)
(£'000)
Principal place of business Opening value Fair value movements Closing value % of
Cost (£'000) (£'000) (£'000) net assets
(£'000)
Company
Starling Bank Limited UK 118,349 141,696 - 112,745 254,441 30.3
Smart Pension Limited UK 108,570 79,683 6,070 37,681 123,434 14.7
Klarna Group PLC UK 71,486 56,913 - 63,649 120,562 14.3
Featurespace Limited UK 29,546 49,588 - 31,803 81,391 9.7
The Brandtech Group LLC USA 46,440 103,881 - (23,651) 80,230 9.5
Deep Instinct Limited Israel 62,226 51,514 - (9,705) 41,809 5.0
wefox Holding AG Switzerland 86,538 188,633 17,351 (169,767) 36,217 4.3
Cognitive Logic Inc. USA 48,453 27,231 - 2,697 29,928 3.6
Secret Escapes Holding Limited UK 28,009 25,030 - 298 25,328 3.0
Wise PLC UK 655 10,284 (9,025) 756 2,015 0.2
Sorted Holdings Limited UK 316 316 - - 316 0.1
Graphcore Limited UK - 16,506 (44,866) 28,360 - 0.0
Growth Street Holdings Limited UK - 63 (67) 4 - 0.0
Rowanmoor Group Limited UK 13,363 - - - - 0.0
Tactus Holdings Limited UK 42,129 29,038 - (29,038) - 0.0
Total investments 656,080 780,376 (30,537) 45,832 795,671 94.7
Cash and cash equivalents 44,612 5.3
Other net current assets 48 0.0
Total net assets 840,331 100.0
Investment Adviser's Report
Market Context
As discussed at the Interim results, the Investment Adviser ("Chrysalis
Investment Partners LLP" or "CIP LLP") continues to believe that the market
backdrop for growth assets is improving.
Despite some volatility, the NASDAQ 100 rose approximately 35.2% over the year
to 30 September 2024, with the FTSE All Share following suit, rising by 10.8%.
US ten-year yields trended down from a recent peak of nearly 5% in October
2023 to approximately 3.8% by year end, which likely supported valuations to
some extent, despite concerns in certain quarters over the health of the US
economy.
Post period end, yields have risen again, likely due to a combination of
certain economic indicators proving more optimistic than feared and then
further fuelled by the expectation, and then reality, of the ramifications of
a Trump presidency. Despite the negative connotations of rising yield for
growth stocks, the NASDAQ has performed well post period end, helped by the
expectation of benign conditions for certain sectors, including fintech, that
the new political backdrop will bring.
This environment has led to a more favourable backdrop for risk assets, as
seen by the continued improvement in IPO markets over the period. While the
Investment Adviser has consistently pointed out that IPO is only one possible
exit route for the Company's investments, it is of the view that it does
provide a good indicator of investor risk appetite.
While the five-year picture of IPO activity in both Europe and the Americas
(which is predominantly the US), remains muted, volumes have picked up
materially recently.
Evidence of this improvement in market dynamics has been seen in the portfolio
over the year, namely both the sale of Graphcore to SoftBank Group Corp
("SoftBank") and Featurespace to Visa, the latter of which completed in
December 2024. While both of these deals were trade sales, it demonstrates
that there is activity occurring in parts of the market that the Company has
invested in.
Klarna has also indicated that it is looking to IPO and announced it had made
a draft filing to the SEC in November 2024 in relation to a public offering.
While no precise timetable has been publicly released, the Investment Adviser
believes that the first half of 2025 could be realistic. An exit of Klarna - a
position valued at £121 million as of September 2024 - would not only provide
the Company with significant further liquidity, but could result in an uplift
to the current valuation. This would be consistent with other investments
which have exited above their carrying value.
It is likely that pressure for exits is growing. As of July 2024, Forge
Private Markets estimated that the total IPO pipeline value for technology
stocks stood at approximately $102 billion, which equates to roughly three
years of the volume of the annualised 1H24 issuance in the US.
Activity
With the Company's shares still trading at a material discount to NAV per
share, the Investment Adviser has continued to focus on follow-ons to support
existing investments, rather than looking to source new ideas.
Over the year, approximately £23 million was invested, of which:
· circa £6 million was injected into Smart Pension in two tranches
to support the company's growth ambitions and enable it to drive towards
profitability. The terms of this transaction led to a write up of the
Company's carrying value of this asset; and,
· circa £17 million was invested in wefox to enable the company to
continue to pursue profitability and to allow it to consider its strategic
direction.
On the other side of the coin, approximately £54 million was realised, of
which:
· circa £45 million came from the sale of Graphcore to SoftBank
via trade sale. While the original investment thesis on Graphcore did not play
out as envisaged - despite the strong growth experienced in the AI market -
the Company's positioning in the capital structure enabled it to recover 74%
of its initial investment in US dollar terms; and,
· circa £9 million was realised from the holding in Wise, which
has been used to fund other corporate activities
The upshot of these transactions has been a net capital inflow into Chrysalis
of almost £31 million. This has rebuilt the Company's liquidity position
substantially, to the extent that once the "cash buffer" element of the CAP
was advanced by the debt facility from Barclays Bank PLC ("Barclays"), net
realised proceeds were used to commence the buyback of the Company's shares,
starting on 30 September 2024.
During the period, the Company entered into a debt facility agreement with
Barclays, with the following characteristics:
· A two-year tenor, which the Investment Adviser believes should
provide sufficient time for further realisations to occur in the portfolio,
while falling within the three-year continuation period;
· A committed facility of £70 million;
· An uncommitted accordion of £15 million;
· A margin over SONIA that the Investment Adviser believes is
market standard; and
· The ability to repay after one year with no cost
As of period end, the Company had a liquidity position of approximately £46.6
million (representing a position in Wise of £2 million and cash of £44.6
million). Post period end, the Company called down the full £70 million
committed facility, which has substantially increased liquidity. In addition,
the sale of Featurespace to Visa post-period end has yielded a further £79
million of capital initially, eventually rising to £89 million once proceeds
deferred in escrow are received. If both of these events had occurred at year
end, the Company would have had a liquidity position of approximately £195
million (net of facility fees), representing 35% of the Company's market
capitalisation as of September 2024.
Outlook
At the interim stage, the Investment Adviser described an emphasis on two
areas, which remain its key focus. These are:
i. Maximising investee company potential to boost valuations; and
ii. Closing the discount to NAV at which the Company's shares trade
Maximising investee company potential to boost valuations
The process of driving towards profitability has been a constant trend of the
last few years in the market and this has been replicated in the portfolio.
Over the course of the year, material progress has been made at an individual
investee company level, which has driven increased profitability at a
portfolio level. This has meant that portfolio profitability, as measured by
cumulative weighted average profits/losses, has improved by approximately 45%.
Revenue growth remained robust at 22%.
Across the active portfolio, all companies either saw profits rise, or losses
narrow, which the Investment Adviser believes demonstrates the dedication of
the portfolio company management teams to drive towards profitability.
Examples of this include Featurespace and Smart Pension ("Smart").
At Featurespace, the company continued to invest in its offering as well as
developing new products, such as TallierLTM, which the company believes is the
first application of a large AI model to the fraud market. As a result of this
investment, growth over calendar year 2023 was 47% year-on-year, up from 28%
in 2022. Due to strong operational gearing, losses fell from £20.9 million in
2022 to £8.1 million in 2023.
As previously mentioned, the Company invested approximately £6 million into
Smart in early 2024, in a Series E extension round, to enable it to continue
to pursue its growth agenda, including providing firepower for M&A; the
main Series E round having taken place in early 2023. In July 2024 Smart
signed a deal with STM Group PLC to take on members of the Options Workplace
Pension Trust through a bulk transfer to the Smart Pension Master Trust; in
the Investment Adviser's experience, these types of replatforming deals can
generate high unit economics for the acquirer.
As part of the extension round, Smart made the difficult decision to
rationalise its cost base, including headcount, which was reduced by 150 to
427 as of June 2024. The Investment Adviser has witnessed this decision being
played out across the technology sector in recent years, as unprofitable firms
aim to narrow losses.
Published accounts show underlying EBITDA for Smart as significantly negative
in calendar year 2023 - in fact losses widened - but this does not include the
full benefit of the above mentioned cost savings. As a result, the Investment
Adviser believes that the financial performance of Smart will be much improved
in 2024, and this is reflected in the aggregated numbers depicted in the
portfolio profitability chart.
Closing the discount to NAV
There are levers the Investment Adviser believes it can pull in order to begin
to swing the balance of opinion on the Company's shares. These include:
i. Generating liquidity; and
ii. Enacting the Capital Allocation Policy
All other things being equal, converting unlisted asset positions into cash
should be seen by investors as a reduction in risk, and should imply a high
"cash adjusted" discount, as demonstrated in the table below.
Deducting the cash from the market value ("MV") gives the amount of market cap
attributable to just the portfolio. In the below example, shifting £20 from
portfolio value to cash - i.e. leaving NAV unchanged - increases the implied
discount of the portfolio from 45% to 56%.
Impact of cash on implied discount (£)
Low cash High cash
Portfolio 100 80
Cash 0 20
NAV 100 100
MV 55 55
MV cash adjusted 55 35
MV/NAV -45% -45%
MV cash adjusted/NAV -45% -56%
Source: Chrysalis Investment Partners LLP
Across the portfolio, the Investment Adviser is discussing exit plans with
investee companies, including timing and potential method of exit. While
sentiment has an important impact on whether or not an exit is possible, early
preparation allows a wider range of timing options.
Looking at Featurespace again, the work done in upskilling members of the
senior management team were undoubtedly crucial in putting the company in a
place where an exit could be effected. As an example, the Investment Adviser
would call out the appointment of John Shipsey as CFO as critical in
instilling improvements in the finance function, which led to a significantly
better cash flow performance. This type of enhancement ultimately places
businesses in a better state to either float or sell themselves privately.
In terms of the CAP, the Investment Adviser worked closely with the Board to
generate a policy that it believes will have the maximum impact on the
discount. Following the achievement of the £50 million "cash buffer" element,
the next two phases were designed to:
i. Return a significant quantum of capital immediately, aiming to
take advantage of the current discount (this was expressed in the CAP as a
return of up to £100 million to shareholders; at the time of proposal, this
represented approximately 40% of the Company's market capitalisation); and
ii. Offer a way for part of future realisations to continue to address
the discount, if it proves difficult to close (at the time of proposal, this
was expressed as at least 25% of net realised gains on future disposals)
Both liquidity and the CAP are interlinked, as delivery of the former should
allow the latter to be able to take effect.
To this end, the Investment Adviser has worked on a number of processes over
the period, of which it can comment on three, namely:
i. The sale of Graphcore to SoftBank;
ii. Setting up a debt facility with Barclays; and
iii. The sale of Featurespace to Visa
The sale of Graphcore to SoftBank on 12 July 2024 significantly rebuilt the
Company's liquidity position, with the injection of approximately £43.8
million of initial proceeds. This took total liquidity at the time to
approximately £50 million, net of further expected investment into wefox,
which subsequently occurred.
The signing of the Barclays debt facility allowed the Buffer element of the
CAP to be covered, thus freeing up the Graphcore proceeds for distribution. As
a result of this, a share buyback programme of up to £40 million was
commenced on 30 September 2024.
It is hoped that the facility will also serve as a "bridge" in certain
circumstances. Often there is a time delay between signing a realisation and
receipt of funds. For Graphcore, the Company first announced a "likely
disposal" on 5 December 2023, but the process took until mid-July 2024 before
initial proceeds were received. The debt facility could be used to accelerate
the ability of the Company to return capital to shareholders in these
situations, with due consideration taken regarding the risk mitigation over
the completion of any transaction.
Finally, the agreement with Visa to acquire Featurespace, which was announced
before year end, completed on 19 December 2024. Receipt of approximately £79
million of initial proceeds now means there is sufficient capital to continue
the buyback up to £100 million.
Conclusion
The year has provided good news in terms of realisations. While the Graphcore
investment thesis did not play out as originally planned, the intellectual
property ("IP") that the company had generated, combined with the Company's
positioning in the capital structure, meant that a meaningful recovery was
made against cost.
The Investment Adviser believes the sale of Featurespace further underlines
the reopening of the markets for disposals.
With both listed and private markets appearing to have regained a degree of
momentum, the Investment Adviser believes the outlook for future realisations
remains promising. Most eagerly awaited is probably Klarna, where its recent
announcement suggests an IPO could occur in the first half of 2025. Elsewhere,
the Investment Adviser continues to work with portfolio companies to seek the
best outcome for them, and by inference, the Company's shareholders.
Starling Bank Limited ("Starling")
The key developments over the year for Starling were:
i. The appointment of Raman Bhatia as CEO;
ii. The initial contracts signed by Engine; and
iii. Post period-end, a fine for failings in its financial crime systems
and controls
Raman took over from John Mountain, the interim CEO, in the summer of 2024.
Prior to joining Starling, Raman was CEO of OVO, a leading energy retailer in
the UK, and before that was the Head of Digital Bank for HSBC's Retail Banking
and Wealth Management business in the UK and Europe.
The Investment Adviser believes having a permanent CEO for Starling is
important to allow proper consideration of a medium to long-term strategy for
the bank. This is especially critical following the £29 million fine recently
imposed by the FCA. The fine was paid in full and final settlement of concerns
over its AML and sanctions framework, during a period spanning December 2019
to November 2023. Since these issues have been raised by the regulator, a
significant strengthening in the management team has occurred, including the
appointment of Cyrille Salle de Chou as Chief Risk Officer, who joined from
HSBC.
Engine by Starling ("Engine") is a Platform as a Service ("PaaS") offering
which delivers a cloud native, modular, API based banking platform.
Effectively, this is the software that runs Starling Bank, but which has been
evolved for rapid deployment by other entities. Engine offers third party
access to Starling's highly efficient software.
At the backend of 2023, Engine got off to a flying start, announcing two
contracts in quick succession. The first was with Salt Bank in Romania, which
was to power a new retail customer offering. This project went live in April
2024 and saw 100,000 customers onboarded in just two weeks. The second was
with AMP, a listed Australian financial services firm, which intends to launch
an offering targeting SMEs; it is expected to go-live in 1Q 2025. AMP expects
to invest approximately A$60 million over its fiscal 2024 and 2025.
Overall, the bank has continued to perform well. While Starling has put in
place significant structural hedges, with a shift down in the yield curve over
the course of the last 12 months, the Investment Adviser continues to work
with the company to consider new products and offerings to drive top line
growth.
Smart Pension Limited ("Smart")
Smart saw continued progress over calendar 2023 - the last period with
publicly available data - but this was masked somewhat by the mix of revenue.
Over its fiscal year, Smart saw headline revenue fall, but this was due to a
significant amount of implementation work undertaken in the prior period.
Recurring revenue, which includes "pension service revenue" (mainly from the
Smart Pension Master Trust) and "Keystone service revenue", rose 51% in the
year from £29 million to £44 million.
The December 2023 exit run rate - effectively the annualised revenue in
December 2023 - shows further embedded growth into 2024 at over £55 million.
On the profit front, the company remained significantly loss making in the
year ended December 2023, with losses after tax of approximately £74 million.
However, in the first quarter of 2024, the company undertook a substantial
restructuring, which included a rationalisation of the workforce with
headcount reduced by 150 to 427, as of June 2024.
The Investment Adviser believes this cost action will significantly reduce the
company's loss profile and put it on the road to profitability in 2025.
Smart has continued to expand both organically, as well as by acquisition. In
June 2024, Smart announced that it had taken on the assets of the Options
Master Trust ("Options"), which it believed had the potential to add up to
£545 million of AuM and would boost total AuM to £6 billion. This
acquisition comes on the heels of the July 2023 purchase of Evolve, which
added £750 million in AuM, and Ensign in October 2022, which added £158
million.
Prospects for further growth led Jamie Fiveash - the CEO of the Smart Pension
Master Trust ("SPMT") - to give an interview in March 2024 in which he stated
that Smart anticipates reaching £10 billion of AuM within three years.
The Keystone division, which is the software platform that is sold to third
parties as well as powering SPMT, completed a complex migration onto its
platform of an existing €2 billion book of pension assets and customers,
from a legacy technology solution within a leading insurer in the Irish
market. The solution is expected to deliver a significant reduction in ongoing
cost to serve and a market leading customer experience.
The company believes the addressable market for Keystone is substantial and it
is hopeful of adoption, given its superior unit economics, ability to
transform existing business models and the ease at which it can be deployed.
In the near term, the focus will be on opportunities in the UK and Middle
East.
Klarna Group PLC ("Klarna")
Klarna has demonstrated solid growth over the first six months of 2024, which
has, importantly, also driven a progression in profits.
The Investment Adviser estimates that Klarna, based on its new metric of
"Adjusted Operating Income", lost approximately $500 million in the first half
of 2022, but became profitable in 1H24. This turnaround was partly driven by
uninterrupted growth in revenues, but also a result of a significant cost
reduction programme. The latter was originally forecast to remove
approximately 10% of heads from the business, but it is clear from recent data
that this trajectory has continued. This ties in with the significant focus
Klarna has placed on generative AI ("GenAI"), and its ability to replace more
mundane roles with technology.
In terms of announcements, Klarna has continued to sign new collaborations
with other platforms. Recent news includes:
i. Klarna being made an official Apple reseller, allowing customers
to buy Apple products using Klarna's payment options;
ii. A deal with Xero, to allow SMEs to accept payments from customers
wanting a Buy Now Pay Later ("BNPL") solution;
iii. The launch of Klarna's payment options on Adyen's physical payment
terminals across Europe, North America and Australia;
iv. Probably most importantly, Klarna went live as an option on Apple
Pay online and in apps in the UK and US, and has stated it will soon be
available as an option on Google Pay.
In addition, there have been other corporate developments, including:
i. The establishment of a UK holding company;
ii. The sale of Klarna Checkout, purportedly for $520 million, which
served mainly the Nordic markets;
iii. The establishment of a forward flow arrangement with the US hedge
fund, Elliott, which could see $30 billion of loans transferred over the
coming years.
The Investment Adviser sees all these developments as either being beneficial
to growth, or driving capital efficiency, but in aggregate all supportive of
an equity story leading up to IPO.
Post period end, Klarna announced that it had submitted a draft Registration
Statement to the Securities and Exchange Commission in the US, regarding a
possible IPO of its shares. Such an event is likely to be transformational for
the Company, adding significant liquidity to its already strong capital
position.
Featurespace Limited ("Featurespace")
Featurespace has continued to experience good growth over the year, building
on the 47% revenue growth it showed over its year to December 2023.
Over the last four years, Featurespace's revenue growth has accelerated,
implying significant increases in the absolute quantum of new business won in
those years; the Investment Adviser believes this shows the potency of the
company's offering.
Over the last five years, Featurespace has operated at a loss, but losses
narrowed substantially in 2023, and it is expected that the company will
continue its journey towards profitability over the course of 2024.
The company continued to win awards for its products over the year, including
the "Best Innovation by a Financial Institution" award at the 2023 Fraud and
AML Impact Awards for the deployment of the ARIC Risk Hub, alongside NatWest.
The implementation led to 57% and 135% increases in the value of fraud and
scams detected respectively. The company has also been shortlisted in five
categories for The Card and Payments Awards 2025. In addition, Featurespace
launched TallierLTM, which it believed was the first adoption of GenAI in the
fraud space, which it claimed could improve fraud detection rates by 71%.
The key news in the period was Visa signing a definitive agreement to acquire
Featurepsace on 26 September 2024. Visa is a world leader in digital payments
and the Investment Adviser considers it a natural home for Featurespace.
The sale completed post period end and the Company received approximately £79
million in late December. A further £11 million is expected if the amount
held in escrow is paid in full. At point of announcement of the deal, if the
gross proceeds were applied for valuation purposes, this represented a 20%
premium (equating to an uplift in NAV per share of circa 2.5 pence) to the
Company's previous carrying value of Featurespace (£74.2 million) as of 30
June 2024.
Chrysalis first invested in Featurespace in May 2020, with a capital injection
of £20 million; it increased its position with secondary share purchases over
2021 (aggregating to approximately £4.5 million) and a follow-on capital
injection of £5 million was provided in July 2022, summing to a total
investment of £29.5 million. As such, the gross proceeds represent a money
multiple return of 3.0 times and an IRR of c32% (assuming gross proceeds were
received at time of announcement).
The Investment Adviser views Featurespace as an exemplar of the type of
investment it is looking for: having the ability to operate in significant end
markets and providing scalable, efficient technology that can bring benefit to
its clients.
The Brandtech Group LLC ("Brandtech")
Brandtech acquired Jellyfish, a leading global digital media and marketing
group, in June 2023 and the key focus for management since that time has been
successfully integrating the acquisition into the Group. Jellyfish represented
the ninth and largest acquisition made since inception, so the transaction
naturally presented some level of risk.
Since that time, a significant amount of work has been done to streamline the
cost base, build the sales pipeline and reaccelerate organic growth and the
Investment Adviser is particularly pleased with the progress that has been
made over recent months. The acquisition of Jellyfish has allowed Brandtech to
accelerate in all areas, given the agency's skills in data, creation and
especially media. Jellyfish also enables the group to accelerate its AI
strategy due to the relationships the company has established with the major
platforms, and due to its team's ability to train on new technologies at
scale. This allows these innovations to be deployed faster than competitors,
who do not have the same resources in-house.
Despite a tough backdrop, the rest of the group has continued to generate
positive organic growth year to date and in more recent months has seen
improved momentum. The Investment Adviser is particularly excited about the
potential of Pencil, Brandtech's GenAI marketing platform.
Within weeks of acquiring the company, Pencil was used to target global brands
with the release of Pencil Pro, an AI-driven ad generation engine with
predictive models of those advertisements' success. Pencil Pro, which debuted
with Unilever and Bayer as launch partners, has already shown to produce an
average 48% drop in an advertisement's cost per action (where advertisers pay
only when a specific action is completed by a user) and a 78% boost in return
on ad spend, compared to a brand's baseline. Pencil was also named by Fast
Company as one of the world's Most Innovative Companies in the advertising and
marketing category, the only GenAI marketing company to be recognized.
Finally of note, Matthieu Bucaille joined the company as Global CFO in March
2024. Matthieu was previously the ex-CEO of Lazard International and held
several senior roles there including Global CFO of publicly listed Lazard Ltd.
from 2011 to 2017. This is an encouraging appointment and should stand
Brandtech in good stead ahead of a future IPO.
Deep Instinct Limited ("Deep Instinct")
Deep Instinct, the prevention-first cybersecurity company with a
purpose-built, AI-based deep learning framework, announced the launch of Deep
Instinct Prevention for Applications (DPA) v3.0 in January. The new solution
is an agentless, on-demand, anti-malware solution that is device and system
agnostic, seamlessly connecting to an organisation's existing infrastructure
to quickly scan files and provide a malicious-vs-benign verdict before a file
is allowed into an application or storage repository.
File transfers are often not scanned, or are scanned with inadequate solutions
that cannot scale to meet the volume and velocity of cyber threats brought on
by adversarial AI. Additionally, these technologies have not evolved to stop
unknown malware and are largely reliant on signature-based and
machine-learning models that require constant human intervention. Powered by
deep learning, the company believes that DPA v3.0 is the only solution on the
market that can truly mitigate risks posed by file transfer, while requiring
only one to two updates per year.
In May, the company also announced the launch of the Deep Instinct Artificial
Neural Network Assistant (DIANNA), one of the industry's first AI-based
cybersecurity companions that provides explainability into unknown threats.
Powered by a large language model (LLM), DIANNA serves as a virtual AI team of
malware analysts and incident response specialists, providing deep analysis
into all attacks, including never-before-seen threats, revealing the
techniques employed and the behaviours of files.
In the period, Deep Instinct also won the CRN 2024 Tech Innovator Award for
its Prevention for Storage (DPS) solution. DPS provides data storage threat
prevention across network attached storage (NAS) and cloud storage
environments, demonstrating its innovative approach to data security.
Continued innovation should ultimately widen the company's addressable market
and lead to a growing sales pipeline, with sales conversion ultimately driving
ARR progression and the strategic value of the asset.
wefox Holding AG ("wefox")
There has been significant change at wefox over the past twelve months. In
March, wefox appointed Mark Hartigan as its Executive Chairman and CEO, with
Julian Teicke transitioning into the role of Non-executive President. A
permanent CEO was later identified, with Joachim Muller appointed in September
2024.
Joachim Muller is a highly experienced leader in the retail and commercial
insurance industry, with expertise in business transformation and
digitalization in multinational markets. He was previously CEO of Allianz
Global Corporate & Specialty SE, and CEO of Allianz Commercial, where he
was responsible for bringing together Allianz's Commercial insurance
businesses under one global umbrella.
The focus of the management team during the period has been to streamline the
company's operations, disposing of non-core assets and enhancing its core
strengths. This period of restructuring has included a reduction in the cost
base, optimisation of processes and investment in keys areas, to build a more
resilient and efficient organisation. Going forward, wefox will only focus on
markets where it has profitable operations of critical size or is on track to
achieving this within the next 12 months.
In this context, the company is likely to look to further build out its market
positions in the Netherlands, Austria and Switzerland, and will withdraw from
the German market.
The new strategy also means that the insurance carrier, wefox Insurance AG,
will no longer be part of the group's core business. The sale of the insurance
carrier was completed post period end.
A €25 million funding round was completed in June 2024 to support the
ongoing restructuring plan and further capital was raised through the sale of
certain assets of the business. In July, wefox Germany Holding GmbH reached an
agreement with Ecclesia Group on the sale of Assona GmbH. In addition, the
company reached an agreement with IWV Versicherungsservice AG to transfer its
insurance brokerage activities in the German market through the sale of a
subsidiary. These two transactions largely complete the exit of wefox from the
German market.
As a result of the restructuring activities outlined above, the valuation of
wefox was written down materially over the period, reflecting a more cautious
assessment of the company's valuation, insertion of a variety of downside
scenarios in the blended valuation put through the share capital waterfall,
and the treatment of certain CLA instruments as debt.
The Company has invested €20 million in wefox since period end.
It is also noted that Richard Watts was appointed to the company board in
June.
Cognitive Logic Inc ("InfoSum")
In January 2020, Google formally announced its intention to deprecate
third-party cookies in Chrome, stating that it aimed to complete the phase-out
within two years. After a series of delays to this timeline, Google announced
in July 2024 that it was abandoning its longstanding plans to deprecate
third-party cookies in Chrome. While this is disappointing news, the
initiative has highlighted the need for publishers and advertisers to invest
in privacy compliant technologies and accelerated the trajectory towards
enhanced privacy and user consent.
InfoSum has designed a platform that enables secure and privacy-first data
collaboration. The platform uses patented technology to connect customer
records between companies without exposing or transferring the data; this
ensures that organisations can collaborate and analyse first-party data in a
completely secure and compliant environment, and without a reliance on
third-party cookies. In recent months, the company achieved the Amazon Web
Services (AWS) Advertising and Marketing Technology Competency in the category
of Privacy-Enhanced Data Collaboration. This designation reinforces InfoSum's
position as an industry contender in data collaboration.
In the period, InfoSum announced a number of strategic partnerships that
extends its data collaboration network. In March, the company announced a
solution with Experian that enables automotive brands to securely access
insights about vehicle owners, extend match rates and improve targeting. In
August, a partnership with Netflix, the world's biggest streaming platform,
was announced that will enable advertisers to securely match their first-party
data against Netflix's audience to create powerful advertising experiences,
without having to share or centralise data. A further partnership was
announced that month with WPP's global data and technology company,
Choreograph, to streamline and futureproof campaign planning and audience
profiling capabilities for GroupM clients.
In a planned management transition, Lauren Wetzel was announced as InfoSum's
new Chief Executive Officer in July. Lauren Wetzel was previously the Group's
Chief Commercial Officer and replaces Brian Lesser, who has led InfoSum as
Chairman and CEO since 2020. Two further hires have been made. Aline Zenses
was appointed as Managing Director of the DACH region. Aline has nearly 20
years in the marketing and adtech industry and was previously MD for Northern
Europe at SilverBullet, a leading consultancy that helps clients derive value
from their first-party data. Adele Burke has also been appointed as Sales
Director to help the group expand in Australia and New Zealand.
Secret Escapes Holding Limited ("Secret Escapes")
Secret Escapes released its results for the year ended 31 December 2023 during
the period. The group delivered a strong financial and operational performance
over the course of the year with gross bookings increasing +19% year-on-year
to £523.8 million and revenues growing +14% to £104.1 million. Growth in
early 2023 was driven by increased demand post-COVID. Across the year, 2023
saw robust consumer demand, despite ongoing cost-of-living pressures, as
consumers continued to prioritise experiences, albeit with a greater emphasis
on value.
Actions were taken towards the end of 2022 to streamline the cost base and
operate more efficiently, and this led to improved profitability through 2023.
Underlying EBITDA grew to £11.4 million in 2023 (2022: £4.0 million) while
operating profit increased to £1.6 million (2022: £14.8 million loss). It is
also exploring further initiatives to enhance its operational efficiency,
including additional consolidation of its central support teams.
Secret Escapes has had an encouraging start to 2024 and continues to grow
profitability. It continues to execute its strategy to consolidate and grow
market share in Europe, while driving operational efficiency goals. Supported
by a strengthened balance sheet and differentiated customer offering, the
long-term outlook for the business remains positive.
Wise PLC ("Wise")
In the half year to 30 September 2024 (1H 2025), Wise moved £68.4 billion
around the world for 11.4 million customers, a 19% increase on the same period
in the prior year (1H 2024). The company also reported revenue of £807.8
million for the half (up 23% from 1H 2024) and net income of £217.3 million
(up 55% from 1H 2024), beating expectations.
In its results announcement, Wise also confirmed the launch of its sixth live
direct connection to a domestic payment system, with the Philippines. Wise has
also received regulatory approvals to integrate directly with the domestic
payment systems in Brazil and Japan, taking the number of direct connections
to eight once these two territories are launched. Enhancing its infrastructure
is making Wise increasingly efficient: 63% of transfers are now completed
instantly and reducing unit costs allowed the company to lower prices, with
the average cross border take rate at 62bps, 5bps lower than a year ago.
The Company maintains a modest position in Wise.
Tactus Holding Limited ("Tactus")
In the Investment Adviser's last update in the Annual Report and Accounts for
2023, it was highlighted that Tactus had faced significant structural
headwinds, as hardware sales had declined materially across the industry.
Trading post period end did not improve, and the Investment Adviser made the
decision not to invest further capital in Tactus. The company was placed into
administration in May 2024 and the investment in Tactus was subsequently
written off.
Environmental, Social and Corporate Governance Report
The role of ESG in the investment process
The Board and the Investment Adviser recognise their responsibility to
investors to provide clear and transparent information in respect of the
Company's approach to ESG.
ESG Objective
The Company does not have a specific sustainability objective and, for the
purposes of the Sustainable Finance Disclosure Regulation ("SFDR"), has
declared itself an Article 6 firm. The Company does not intend to adopt a
label under the Sustainable Disclosure Requirements ("SDR").
ESG Strategy
The Investment Adviser does not seek out investments that have a
sustainability focus. However, as part of its investment process, it
recognises the necessity to assess the ESG risks and practices of an
investment as a contributing factor to its overall success. The Investment
Adviser contributes to positive ESG outcomes through active stewardship.
The following ESG factors are considered as part of the investment process:
- Governance practices
- Human Capital management
- Social matters
- Greenhouse gas emissions, carbon reduction and net zero targets
In this report, the Investment Adviser, provides an update on the progress of
ESG practices within the portfolio over the last twelve months. All data
provided is on a like-for-like basis and looks at companies in the current,
active portfolio (ten portfolio companies), allowing for a direct assessment
of progress over the period. As such, data for the prior period may differ to
that previously reported, as exited or inactive portfolio companies have been
removed.
The case studies that the Investment Adviser has selected are designed to
demonstrate good ESG practices in those companies and are not necessarily
indicative of practices across the portfolio.
Stewardship
Stewardship is a core aspect of the Investment Adviser's approach. There is
regular dialogue between the Investment Adviser and the leadership teams of
portfolio companies. Where the Investment Adviser has a board seat or board
observer status, members of the Investment Team attend board meetings and
provide input where they believe they can help companies achieve their
strategic objectives. This includes regular dialogue on ESG related topics,
and the Investment Adviser seeks to influence companies where they believe the
management of material ESG factors can be improved.
One of the principal challenges of ESG integration in a private company
context is data availability. Unlike listed companies, many private companies
do not disclose ESG related data, either publicly or to third party data
providers. This reality can hinder the identification of material ESG risks
and potential issues which may require engagement.
On behalf of the Company, the Investment Adviser developed an internal
dashboard of metrics to assess the ESG performance of portfolio companies to
address these challenges. This data is collected directly from portfolio
companies or from publicly available information. The Investment Adviser uses
the resulting metrics to assess each company's ESG performance relative to its
level of corporate development and maturity, and incorporates insights gained
into its dialogue with company leadership teams, to assist with their
continued development.
Where potential material ESG risks, or areas of group governance which require
development, are identified, the Investment Adviser communicates these
conclusions to management and seeks to work collaboratively with them to make
improvements. Company action plans and any material ESG incidents are reported
to the Risk Committee and monitored over time to assess progress.
Corporate Governance
· 50% (2023: 50%) of portfolio companies have an independent
chairperson
· 80% (2023: 80%) of portfolio companies have at least one
independent director
· 50% (2023: 20%) of portfolio companies are ISO 27001 certified
To grow successfully, companies and their founders must not only execute
strategically, but they must also lay the foundations for future growth by
creating appropriate corporate governance structures. It is critical that
private companies considering listing prepare themselves for the additional
scrutiny which comes with going public. It is also vital that founders, who
may not have previously run listed businesses, are prepared to bring in
experienced independent non-executive directors who can help their companies
develop. Building capacity at board and executive level - reducing key man
risk and reliance on individual founders over time - is crucial to a company's
future development.
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. Following the changes to
investment management arrangements during the period, the Investment Adviser
has now also been able to appoint representatives to the board of several
portfolio companies. We consider this to be an important step in the effective
oversight of these investments.
Metrics
A total of 8 portfolio companies have at least one independent director on
their board, consistent with the prior period on a like-for-like basis. During
the period, two portfolio companies appointed new independent chairs, Gordon
Wilson at Smart and Mark Hartigan at wefox.
There is an increasing focus on cyber security governance and the approach
portfolio companies are taking to ensure they have a comprehensive framework
in place to prevent the interruption of activities due to cyber threats or
attacks. Five portfolio companies now have an ISO 27001 certification, which
is an international standard for information security management. This
compares to just two portfolio companies in the prior period.
Case Study
Following the two successful terms of Ruston Smith as Independent
Non-Executive Director and Chair of Smart, the Investment Adviser, following
consultation with other major investors, recognised the need to identify a new
Chairperson who could help steer Smart through its next phase of growth.
In June 2024, Smart announced the appointment of Gordon Wilson as the
company's new Chair of the Board, succeeding Ruston Smith. Gordon brings a
wealth of experience and a proven track record in the technology and pensions
sectors, further strengthening Smart's leadership team as the company
continues its global expansion.
Gordon's distinguished career spans three decades, during which he has held
key leadership positions and driven significant growth in various
organisations, including both technology and pensions businesses. Gordon was
the CEO of Advanced for over eight years and recently stepped down to start
his non-executive career.
Gordon is also a member of the board of TechUK, and chairs three other tech
businesses: Zenitech, Imagesound and The Polaris Group. During his executive
career, he notably led the management team at Aquila Heywood, a leading
pension software provider, achieving substantial growth.
Human Capital
· 20% (2023: 20%) of portfolio companies have female CEOs
· 30% (2023: 30%) average proportion of women in senior leadership
roles
Good human capital management supports both value creation and business
resilience, and the Investment Adviser believes that investing in human
capital correlates with longer-term business success. Human capital management
can both upskill and educate a workforce, increase abilities, and retain and
motivate employees.
The Investment Adviser recognises that approaches to human capital management,
including DE&I will differ from company to company, and seeks to
understand a portfolio company's operating model and engage to advise on best
practice and potential improvements.
Metrics
While Anne Boden was replaced by Raman Bhatia as the CEO of Starling Bank, the
period closed with 2 female CEOs across the portfolio. Lauren Wetzel was
appointed as the CEO of InfoSum in July 2024, taking over from Brian Lesser in
a planned management transition.
The average proportion of women in senior leadership roles in the portfolio
also remained stable over the period.
Case Study
During the period, Smart Pension joined the Diversity Project, a cross-company
initiative, which champions shared learning and promotion of best practice in
order to achieve a truly diverse, equitable and inclusive UK investment and
savings industry.
In signing up to the initiative, Smart Pension joins other notable industry
members such as Fidelity International, Franklin Templeton, AXA Investment
Managers, Legal & General Investment Management, Mercer, Natixis
Investment Managers and Octopus Investments.
With its membership, Smart Pension commits to striving for progress in
diversity, equity and inclusion (DE&I) and to take action to drive wider
change in the industry. The Diversity Project's aims include reductions in
gender pay gap levels, a 90% ethnicity disclosure rate amongst participating
businesses, and support of graduate and school leaver recruitment programmes
focused on socioeconomic diversity.
The membership signifies a commitment to supporting and promoting diversity,
equity and inclusion at Smart Pension, through peer discussions, shared
learning and events, all working towards a more inclusive culture within the
investments and savings industry. This covers many areas including
socio-economic background, disability, age, gender, sexuality, neurodiversity,
mental health, race and ethnicity.
Social Impact
The current portfolio includes companies which provide solutions to urgent
business problems and in some instances, the development and application of
technology is accelerating the ability of those companies to enact change,
which in turn provides an opportunity to have a positive impact on society.
Case Study
The Brandtech Group recently announced that it is launching several
initiatives to promote and regulate the ethical use of GenAI. Among these, is
the introduction of a blueprint for creating ethical generating AI policies
and the unveiling of Bias Breaker, a proprietary technology aimed at combating
bias in AI foundation models.
Brandtech's own research revealed significant biases in existing AI models.
When prompted for an image of a CEO, several major models generated 98% to
100% pictures of males, a stark contrast to reality, with the McKinsey's Women
in the Workplace study showing that 28% of C-Suite roles and 10.4% of Fortune
500 chief executive positions were held by women. Bias Breaker addresses this
issue by adding a probability-based layer of inclusivity to prompts, covering
aspects such as age, race, gender identity and religion.
Environmental Impact
· 60% (2023: 30%) of portfolio companies have calculated their
Scope 1 and 2 emissions
· 40% (2023: 30%) of portfolio companies have made a net zero
commitment
· 40% (2023: 30%) of portfolio companies have set at least one
short or medium-term carbon reduction target
· 0% (2023: 0%) portfolio exposure to companies engaged in
extraction or production of fossil fuels
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 to encourage companies to
identify, manage and mitigate climate change risks or opportunities.
The Investment Adviser believes that the Company's portfolio of tech-enabled,
predominately digital businesses is not exposed to material climate risks and
has limited direct environmental impacts, mainly due to the comparatively low
levels of their carbon emissions. However, its view is that the scale of
climate change will impact all sectors, industries, and asset classes and so
acknowledges the positive role that it can play in tackling it through
investment decisions and capital allocation.
Metrics
Progress was made by some companies in the portfolio over the course of the
year, with three additional portfolio companies now calculating and disclosing
their Scope 1 and 2 emissions, namely Klarna, Featurespace and Secret Escapes.
Klarna has also now made a net zero commitment and set at least one short or
medium-term carbon reduction target, with an increase in the number of
portfolio companies doing so from 30% to 40%.
Case Study
During the period, Klarna announced its sustainability achievements for the
past year. In 2023, it saw a significant uptick in the use of its features
that provide consumers with information about the sustainability efforts of
merchants and promote conscious shopping, contributing to 4.75 million
purchases from more conscious brands. A standout achievement from their report
was the 150% year-over-year increase in the usage of Klarna's CO2e Emissions
Tracker, highlighting a shift towards more conscious consumer behaviour. In
addition, the company saw a 25% reduction in its greenhouse gas (GHG)
emissions and had, to date of the report, committed $24.5 million to planet
health initiatives. These environmental and social contributions underscore
the company's continued commitment to addressing environmental sustainability,
focusing on reducing its carbon footprint and promoting conscious consumption
among its vast network of 150 million consumers and 550,000 retail partners
worldwide.
Klarna's 2023 sustainability highlights include:
· Driving 4.75 million conscious purchases through tech innovation:
In 2023, Klarna introduced a number of advancements to its products and
services that furthered its mission of empowering its 150 million consumers
with information to make more conscious purchasing decisions. Klarna's CO2e
Emissions Tracker, which was updated to include expanded insights for over 170
million products, drew in 460,000 monthly users-a 150% jump from the previous
year. Additionally, new features including sustainability search filters in
Klarna's intelligent search & compare feature, a resell feature in the
Klarna app, conscious brands ratings displaying brands' sustainability
achievements, as well as an online sustainability hub, contributed to Klarna
customers making 4.75 million purchases from brands recognized for their
sustainability efforts .
· Enabling thousands of consumers to contribute to planet health:
In 2023, Klarna introduced a donations feature for US shoppers as part of its
commitment to planet health with a focus on climate, people, and biodiversity.
This feature allows shoppers to add a $1 donation to their purchases using the
interest-free Pay in 4 service at participating retailers, with donations
supporting the WRLD Foundation's work towards achieving UN Sustainable
Development goals. In just 7 months since its June 2023 launch, the initiative
has received a powerful response with over 193,000 consumers contributing to
date, raising over USD $200K total.
· Achieving 25% GHG reduction: Klarna has made significant progress
in cutting its greenhouse gas (GHG) emissions, achieving a 25% reduction in
its overall absolute carbon footprint in 2023 compared to the previous year,
with a 66% decrease in scope 1 and 2 emissions and a 39% reduction in carbon
intensity. These figures represent significant strides towards Klarna's 2030
goal of halving carbon intensity from a 2019 baseline.
· Committing $24.5M to planet health initiatives: Since its pledge
in April 2021, Klarna has dedicated 1% from each of its funding rounds to
planet health initiatives via its Give One initiative. This commitment
resulted in a total contribution of USD $24.5 million by the end of 2023,
supporting over 50 organizations worldwide in regions including North America,
South America, Africa, Europe, and Asia. Notable achievements from this
support included the planting of 3.4 million trees to restore and reforest
important ecosystems and 900,000 hectares (approx. 2.2 million acres) of
habitat across the globe seeing positive impact through organizations backed
by Klarna.
In recognition of its efforts, Klarna was named the Most Sustainable Bank in
Sweden 2023 by the Sustainable Brand Index and received several other
accolades throughout the year including being awarded the Most Disruptive
Global Climate Action Initiative in the CSR Excellence Awards, and receiving a
finalist position in the Reuters Responsible Business Awards within the Net
Zero Transition Award category.
ESG Roadmap
Following the changes to the Company's investment management arrangements in
the period, the Company and Investment Adviser have been engaging with
advisors to assess the current ESG strategy. Those advisers have reviewed the
ESG Policies in place as well as the relevance of the data and ESG metrics
collected and used to make assessments on portfolio companies, to drive ESG
outcomes and to report to its investors. This process has identified
opportunities for the Company to close gaps in its approach to ESG,
particularly considering increased regulatory scrutiny of ESG reporting.
ESG Data
There is recognition that more can be done to improve the transparency and
depth of data that the Company collects. As a result, the Company is aiming to
implement the ESG Data Convergence Initiative ("EDCI") framework, to
supplement the current metrics collected from the portfolio.
The EDCI framework is a collaborative effort aimed at standardising the
collection and reporting of ESG data within the private equity industry. The
initiative seeks to create a unified approach to ESG metrics, making it easier
to benchmark and compare ESG performance across different portfolio companies
and investment vehicles.
Key Features of the EDCI Framework:
Standardised Metrics: The EDCI framework includes a core set of ESG metrics
such as greenhouse gas emissions, net zero commitments, renewable energy
usage, board and C-suite diversity, work-related accidents, net new hires, and
employee engagement. Some of which the Company is already collecting today.
Benchmarking: By using these standardised metrics, the Company can compare its
portfolio companies' ESG performance against industry benchmarks, providing
valuable insights and driving improvements.
Transparency: The initiative promotes greater transparency in ESG reporting,
enabling more consistent and comparable data for investors.
Collaboration: The EDCI is supported by a wide range of stakeholders,
including over 450 investors, representing approximately $38 trillion in
assets under management.
In summary, the initiative helps streamline ESG reporting processes and
enhances the quality and comparability of ESG data in the private equity
sector. The EDCI framework has been established by some of the largest private
market investors and managers for collecting information from their private
portfolio companies.
The Investment Adviser will integrate the EDCI metrics into the investment
process, the Company's risk management framework and reporting over the course
of 2025. A further update will be provided on progress here in the Interim
Report and Financial Statement to 31 March 2025.
ESG Regulation
The Company is exposed to ESG regulation in the form of:
1. The Sustainable Finance Disclosure Regulation ("SFDR")
The SFDR exists to increase transparency on how financial market participants
integrate sustainability risks and opportunities into their investment
decisions and processes.
2. The Sustainable Disclosure Requirements ("SDR")
The SDR is designed to provide clear and comparable information about the
sustainability characteristics of financial products, helping consumers make
clear and informed decisions and to reduce the risk of greenwashing.
The Company has considered the requirements of both the SFDR and SDR
regulation, including the anti-greenwashing rules applicable from 31 May 2024,
and has made changes to its practices and the disclosures in this document to
ensure compliance with that regulation.
3. The Task Force on Climate-related Financial Disclosures ("TCFD")
The TCFD is a global initiative established to develop voluntary
climate-related financial disclosures that companies and financial
institutions can use to provide clear, comprehensive and high-quality
information on the impacts of climate change.
The Company falls under the TCFD regulation by virtue of having a UK-based
AIFM, which has AUM of greater than £5 billion on a 3 year rolling average.
Given the new investment management arrangements have only been in place since
1 April 2024 the Company will provide an update regarding compliance with TCFD
in the Interim Report and Financial Statement to 31 March 2025.
4. The Modern Slavery Act 2015
Several of the Company's portfolio companies are required to make a Modern
Slavery Prevention Statement ("MSS"). The statement is voluntary for those who
are not. The Investment Adviser plans on engaging with portfolio companies who
have not yet made an MSS.
Investment Objective and Policy
Investment objective
The investment objective of the Company is to generate long term capital
growth through investing in a portfolio consisting primarily of equity or
equity-related investments in unquoted and listed companies.
Investment policy
Investments will be primarily in equity and equity-related instruments (which
shall include, without limitation, preference shares, convertible debt
instruments, equity-related and equity-linked notes and warrants) issued by
portfolio companies. The Company will also be permitted to invest in
partnerships, limited liability partnerships and other legal forms of entity
where the investment has equity like return characteristics.
For the purposes of this investment policy, unquoted companies shall include
companies with a technical listing on a stock exchange but where there is no
liquid trading market in the relevant securities on that market (for example,
companies with listings on The International Stock Exchange or the Cayman
Islands Stock Exchange). Furthermore, the Company shall be permitted to invest
in unquoted subsidiaries of companies whose parent or group entities have
listed equity or debt securities.
The Company may invest in publicly traded companies (including participating
in the IPO of an existing unquoted company investment), subject to the
investment restrictions below. In particular, unquoted portfolio companies may
seek IPOs from time to time following an investment by the Company, in which
case the Company may continue to hold its investment without restriction.
The Company is not expected to take majority shareholder positions in
portfolio companies but shall not be restricted from doing so. Furthermore,
there may be circumstances where the ownership of a portfolio company exceeds
50% of voting and/or economic interests in that portfolio company
notwithstanding an initial investment in a minority position. While the
Company does not intend to focus its investments on a particular sector, there
is no limit on the Company's ability to make investments in portfolio
companies within the same sector if it chooses to do so.
The Company will seek to ensure that it has suitable investor protection
rights through its investment in portfolio companies where appropriate. The
Company may acquire investments directly or by way of holdings in special
purpose vehicles, intermediate holding vehicles or other funds or similar
structures.
Investment restrictions
The Company will invest and manage its assets with the objective of spreading
risk, as far as reasonably practicable. No single investment (including
related investments in group entities) will represent more than 20% of Gross
Assets, calculated as at the time of that investment. The market value of
individual investments may exceed 20% of gross assets following investment.
The Company's aggregate equity investments in publicly traded companies that
it has not previously held an investment in prior to that Company's IPO will
represent no more than 20% of the Gross Assets, calculated at the time of
investment.
Subject in all cases to the Company's cash management policy, the Company's
aggregate investment in notes, bonds, debentures and other debt instruments
(which shall exclude for the avoidance of doubt convertible debt,
equity-related and equity-linked notes, warrants or equivalent instruments)
will represent no more than 20% of the Gross Assets, calculated as at the time
of investment.
The Company will not be required to dispose of any investment or rebalance its
portfolio as a result of a change in the respective value of any of its
investments.
Corporate Governance Statement
Chrysalis has a listing on the Closed Ended Investment Fund segment of the
London Stock Exchange Main Market and is a member of the Association of
Investment Companies (AIC). 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 (ChrysalisGSYTeam@iqeq.com (mailto:ChrysalisGSYTeam@iqeq.com) ), the
Company's LinkedIn page
(https://www.linkedin.com/company/chrysalis-investments-investment-trust/) or
by post via the Company Secretary on any matters that they wish to discuss
with the Board of Directors.
The Company is an externally administered investment company, has no
employees, and as such is operationally quite simple. The Board does not
believe that the Company has any material stakeholders other than those set
out in the following table.
Investors Service providers Community and environment
Issues that matter to them
Performance of the shares Reputation of the Company Compliance with Law and Regulation
Growth of the Company Compliance with Law and Regulation Impact of the Company and its activities on third parties
Liquidity of the shares Remuneration
Corporate Governance
Engagement process
Annual General Meeting The main service providers engage with the Board in formal quarterly meetings, Adherence to principles of appropriate ESG policies exists at both Company and
giving them direct input to Board discussions. investment level.
Frequent meetings with investors by brokers and the Investment Adviser and
subsequent reports to the Board Communication between Board and service providers also occurs informally on an Principles of socially responsible investing form a key part of the Company's
ongoing basis during the year. investment strategy.
Quarterly factsheets
Key Information Document
Rationale and example outcomes
The Board have engaged with investors in relation to the Company business over The Company relies on service providers as it has no systems or employees of The Investment Adviser works to ensure that sustainability and ESG factors are
the course of the year. its own. carefully considered and reflected in the Company's investment decisions.
The Board seeks to act fairly and transparently with all service providers, The Board of Directors travel as infrequently as possible and instead
and this includes such aspects as prompt payment of invoices. communicate, where they are able to, by video and conference call.
Going Concern Statement
The Going Concern Statement is made on page 49.
Viability Statement
The Viability Statement is made on page 49 and 50.
Fair, Balanced and Understandable Statement
The annual report and accounts taken as a whole are fair, balanced and
understandable and provide the information necessary for shareholders to
assess the Company's performance, business model and strategy. Further
information on how this conclusion was reached can be found within the Audit
Committee Report.
Appointment of the New Investment Adviser
Further details relating to the appointment of the New Investment Adviser and
how this is in the interests of members as a whole can be found within the
Report of the Management Engagement Committee.
Appointment of the New Administrator and Company Secretary
On 1 August 2024, IQ-EQ Fund Services (Guernsey) Limited ("IQ-EQ") was
appointed as Administrator and Company Secretary. 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.
Assessment of Principal and Emerging Risks
The Board has undertaken a robust assessment of the Company's principal and
emerging risks, together with the procedures that are in place to identify
emerging risks. Further information on this assessment and an explanation on
how these risks are being mitigated and managed can be found on page 53.
Review of Risk Management and Internal Control
The Board confirms that it has reviewed the Company's system of risk
management and internal controls for the year ended 30 September 2024, 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
88 to 98 and note 18 of the annual report and audited financial statements.
The Board of Directors
The Board comprises six independent non-executive Directors, two of whom are
female, who meet at least quarterly, in addition to ad hoc meetings convened
in accordance with the needs of the business, to consider the Company's
affairs in a prescribed and structured manner. Further details concerning the
meetings attended during the year by the Board and its Committees can be found
on page 36. 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 30. Additionally, the Board have overall responsibility for the Company's
activities including its investment activities and reviewing the performance
of the Company's portfolio. The Board are confident that the combination of
its members is appropriate and is such that no one individual or small group
of individuals dominates the Board's decision making.
The Directors, in the furtherance of their duties, may take independent
professional advice at the Company's expense, which is in accordance with
provision 19 of the AIC Code. The Directors also have access to the advice and
services of the Company Secretary through its appointed representatives who
are responsible to the Board for ensuring that the Board's procedures are
followed, and that applicable rules and regulations are complied with.
To enable the Board to function effectively and allow the Directors to
discharge their responsibilities, full and timely access is given to all
relevant information.
Comprehensive board papers are circulated to the Board in advance of meetings
by the Company Secretary, allowing time for full review and comment by the
attending parties. In the event that Directors are unable to attend a
particular meeting, they are invited to express their views on the matters
being discussed to the Chairman in advance of the meeting for these to be
raised accordingly on their behalf. Full and thorough minutes of all meetings
are kept by the Company Secretary.
The Directors are requested to confirm their continuing professional
development is up to date and any necessary training is identified during the
annual performance reviews carried out and recorded by the Remuneration and
Nomination Committee.
The current Board have served since the Company's inception in October 2018,
with the exception of Margaret O'Connor who was appointed on 6 September 2021,
and have been carefully selected against a set of objective criteria. The
Board considers that the combination of its members brings a wealth of skills,
experience and knowledge to the Company as illustrated in their biographies
below:
Director Biographies
Andrew Haining (Chairman) (independent)
Andrew has had a 30-year career in banking and private equity with Bank of
America, CDC (now Bridgepoint) and Botts & Company. During his career,
Andrew has been responsible for over 20 private equity investments with
transactional values in excess of $1 billion.
Andrew holds several Guernsey and UK board positions.
Stephen Coe (senior independent)
Stephen serves as Chairman of the Audit Committee. He is currently a
Non-Executive Director of a number of private companies. Stephen has been
involved with offshore investment funds and managers since 1990, with
significant exposure to property, debt, emerging markets and private equity
investments. Stephen qualified as a Chartered Accountant with Price Waterhouse
in 1990.
Simon Holden (independent)
Simon is a Chartered Director ("CDir") accredited by the Institute of
Directors. Previously an investment director with portfolio company
responsibilities at Terra Firma Capital Partners and Candover Investment prior
to that, since 2015 Simon has been an active independent director to complex
listed alternative investment company, private equity fund and private
operating company boards. In addition, Simon is the pro-bono Business Adviser
to Guernsey Ports; a States of Guernsey enterprise responsible for the safe,
secure and available airports and harbours critical infrastructure.
Simon received an MEng and MA graduate in Manufacturing Engineering from the
University of Cambridge, he is an active member of UK and Guernsey fund
management interest groups including a director member of the Association of
Investment Companies ("AIC").
Anne Ewing (independent)
Anne has over 40 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, an ACCA Diploma in Accounting &
Finance, 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. Tim is also a NED of Polar Capital Technology Trust, where he is
Senior Independent Director. 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.
Margaret O'Connor (independent)
Margaret brings 30 years of international experience commercialising
technology and evolving the governance structure and growth strategy of
companies from the early- stage to realizations. Her plural career includes
serving on the board of a Guernsey investment trust and as Chairman of a
Mauritius Venture Capital fund. Her past roles as a US AdTech operator, that
led EU and Asia market expansions before a successful trade sale, and as a
MasterCard International executive, inform her board mindset and skill set.
She is active in the Institute of Directors and 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
JPMorgan Global Core Real Assets Limited
Stephen Coe
None to be disclosed
Tim Cruttenden
Polar Capital Technology Trust PLC
Margaret O' Connor
None to be disclosed
Valuation Committee
The Board is of the view that the valuation process needs to be as efficient
as possible while also providing for comprehensive and independent oversight.
Consequently, the Board uses an independent Valuation Committee which
comprises of the following members:
Lord Anthony Rockley (Committee Chairman)
Anthony Rockley was an audit partner at KPMG until 2015, with a sector focus
on private equity and venture capital. Over a 34 year career with KPMG,
Anthony was responsible for auditing private equity and venture capital
companies and structures. Amongst other sector specific work, Anthony was a
member of the International Private Equity and Venture Capital Guidelines
Board for 9 years.
Diane Seymour Williams
Diane Seymour Williams has a career spanning over 30 years in asset and wealth
management. She was a listed portfolio manager with Deutsche Morgan Grenfell
("DMG"), and became CIO and CEO of the 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 Patria Private Equity Trust PLC, Mercia Asset Management PLC and
SEI's European business. Diane brings extensive fund management and portfolio
oversight experience. In addition to her public company roles Diane sits on
the investment committees of Newnham College, Cambridge and the Canal &
River Trust.
Jonathan Biggs
Jonathan Biggs worked at Accel, a leading global venture and growth capital
investor, for 20 years up until 2021. One of the first hires in Europe, he was
the COO of Accel's European business. During his time at Accel, he raised over
$2.5 billion in five early-stage venture funds focused on Europe. Jon has
subsequently joined Top Tier Capital Partners as a Partner where he leads the
European funds business. Prior to that he was a Managing Partner at SVB
Capital.
The fourth member of the committee is Tim Cruttenden who has been a director
of the Company since its formation.
Director Attendance
During the year ended 30 September 2024, the Board and Committee meetings held
and attended by the Directors were as follows:
Quarterly Board Meeting Audit Committee Meeting
Remuneration and nomination Meetings Risk Committee Meetings Management
Engagement Ad-hoc Meetings
Meetings
Director Attended/Eligible Attended/ Attended/ Attended/ Attended/ Attended/
Eligible Eligible Eligible Eligible Eligible
Anne Ewing 3/3 3/3 1/2 0/1 n/a 4/4
Andrew Haining 3/3 n/a n/a n/a n/a 4/4
Simon Holden 3/3 3/3 n/a 1/1 1/1 4/4
Stephen Coe 3/3 3/3 n/a 1/1 n/a 4/4
Tim Cruttenden 2/3 3/3 2/2 1/1 1/1 4/4
Margaret O'Connor 3/3 3/3 2/2 1/1 1/1 4/4
Valuation Committee Meetings
Member Attended/ Eligible
Lord Rockley 14/14
Diane Seymour-Williams 14/14
Jonathan Biggs 13/14
Tim Cruttenden 12/14
Division of Responsibilities
A schedule of matters reserved for the Board is maintained by the Company and
can be summarised as follows:
· Strategic Issues
· Financial Items such as approval of the half-yearly reports, any
quarterly announcements, any preliminary announcement of the final results and
the annual report and accounts including the corporate governance statement
· Treasury Items
· Legal and Administration
· 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 Alternative Investment Fund Manager ("AIFM"), the
Investment Adviser, the Administrator, the Company Secretary, the Depositary
and the Registrar.
The Investment Adviser reports to the Board on a regular basis both outside of
and during quarterly board and Committee meetings, where the operating and
financial performance of the portfolio, together with valuations, are
discussed at length between the Board and the Investment Adviser. The
Directors have responsibility for exercising supervision of the Valuation
Committee and the Investment Adviser.
Board Committees
The Company has an Audit Committee, Remuneration and Nomination Committee,
Management Engagement Committee, Risk Committee and an Independent Valuation
Committee (together the "Committees"). The Terms of Reference for each
committee is available on the Company's website.
The Board believes that its established Committees are adequately composed,
and that each member has the necessary skills and experience to discharge
their duties effectively. All new Committee members will be provided with an
induction on joining the relevant Committee. The actions carried out by each
Committee since the previous quarterly board meeting are reported at each
meeting to the Board of Directors by the respective Committee chair. Each
Committee meeting is attended by the Company Secretary and comprehensive
minutes are kept, as well as a schedule of the action points arising from each
meeting.
Stephen Coe is the Chairman of the Audit Committee with Anne Ewing and Simon
Holden as members, with Margaret O'Connor as an observer. A full report
regarding the Audit Committee's activities during the year can be found in the
Audit Committee Report on page 59.
Anne Ewing is Chairman of the Remuneration and Nomination Committee, with
Margaret O'Connor and Tim Cruttenden as members. The Remuneration and
Nomination Committee meets at least once a year in accordance with the terms
of reference and reviews, inter alia, the structure, size and composition of
the Board. A full report regarding the Remuneration and Nomination Committee's
activities during the year can be found on page 39.
Margaret O'Connor is Chairman of the Management Engagement Committee, with
Simon Holden, Stephen Coe 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 AIFM, and the terms of the AIFM and Investment Advisory
Agreement. A full report regarding the Management Engagement Committee's
activities during the year can be found on page 43.
Simon Holden is Chairman of the Risk Committee, with Anne Ewing, Margaret
O'Connor, Stephen Coe and Tim Cruttenden as members. The Risk Committee will
meet formally, at a minimum once a year, though it has been agreed, that the
Risk Committee is convened twice a year, 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 45.
Report of the Remuneration and Nomination Committee
Statement: Chairman of Committee
I am pleased to present the Remuneration and Nomination Committee report for
the year ended 30 September 2024. 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 2025 the Remuneration & Nomination Committee will revive its
recruitment process to help the Company further achieve its targets.
I am satisfied that the Remuneration and Nomination Committee is discharging
its responsibilities proficiently and recommend this report to the Board.
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/
(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 twice during the
reporting period.
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 its meetings, 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 financial year as the
Board focused on, amongst other things, the Continuation Vote which was
successfully passed at the Company's 2024 Annual General Meeting.
The Board continues to work towards meeting the targets set by the
Hampton-Alexander Review on gender balance and the Parker Review into ethnic
diversity in FTSE leadership.
The Company provides information as set out in the table below, on the
progress made on board diversity targets:
· At least 40% of the Board is female
· At least one senior position on the Board is held by a woman
· At least one individual on the Board is from a minority ethnic
background
Gender Identity/Ethnic background Number of Board members % of the Board Number of Senior Positions Held
Female 2 33% 2
Male 4 67% 3
White British or other White group 6 100% 5
Black/African/Caribbean/Black British/Asian/Other 0 0 0
The data detailed above has been obtained from and confirmed by each Board
Director.
The Board notes that as an externally managed investment company, with a Board
comprised entirely of non executive directors, the senior positions of the
Board include the roles of the Chair, SID and Chair of any permanent committee
of the Board.
The Company has yet to achieve the appointment of a candidate from a minority
ethnic background. In its recruitment processes the Board seeks to ensure
that it is presented with a diverse set of candidates from which it appoints
the candidate best suited to the role. A major factor in the Board's
current succession planning process is to maintain and demonstrate management
and control of the Company in the jurisdiction of its incorporation in
relation to the size of the Board. This can significantly impact the size of
the candidate pool from which the company can recruit.
The updated report from the Parker Review in 2022 also recognised such
constraints where the size of typical Investment Trusts such as Chrysalis can
reduce the opportunity to make further diverse appointments.
During 2024, and after the successful Continuation Vote, the Committee
refreshed its succession planning and undertook a review of the attributes and
skills of the current board and made recommendations to the Board.
Accordingly, and post financial year end, a search for a new director was made
using external consultants. The Board wishes to ensure the best possible fit
for the Company and will, therefore, continue its deliberations on Board
composition in 2025.
During any future search, due regard will be given to equal opportunity,
diversity and inclusion for this appointment.
Committee Memberships
Audit Committee Risk Committee Valuations Committee Management Engagement Committee Remuneration 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* S Coe T Cruttenden
S Holden A Ewing J Biggs* T Cruttenden M O'Connor
T Cruttenden T Cruttenden (Board Representative) S Holden
M O'Connor
*Independent
Review of Board Performance
The board has established a three year cycle for the evaluation of its own
performance which is initiated by the Committee and led by the Chair. The
Chair's performance is evaluated by the Senior Independent Director. An
external review was conducted in October 2023 by Board Alpha, followed by an
internal review post financial year end 2023.
The output from the 2023 review was positively received by the Board and a
number of actions are in progress to address various matters, together with
focused externally led training, such as Cyber Risk and Listing Rule changes
and continuing obligations. The results of the internal 2024 review have yet
to be assessed at the time of this report.
The next externally led board effectiveness review will be carried out in
relation to the financial year ending September 2026.
Review of Remuneration
The Company's policy is that the fees payable to the Directors should reflect
the time spent by the Board on the Company's affairs and the responsibilities
borne by the Directors, and should be sufficient to retain high calibre
directors.
The policy is for the Chairman of the Board, the chairs of the Audit Committee
and Risk Committee to be paid a higher fee than the other Directors in
recognition of their more onerous roles and more time spent. The Board may
only amend the level of remuneration paid within the limits of the Articles
(i.e. £500,000 per annum maximum).
The table below is provided to enable Shareholders to assess the relative
importance of spend on Director remuneration and the size of the Board. The
figures below provide a comparison against advisory fees payable to the
Investment Adviser and Director Remuneration relative to the Company's Net
Asset Value ("NAV").
Total Director Remuneration (Note 19) £397,500
Investment Adviser Fees (Note 19) £2,368,766
NAV at year end -£840,331,149
A comparison of the Company's Director remuneration against its competitors
was undertaken by the Committee and a view taken on current market conditions,
noting the trajectory of inflation rates and the time commitment and
activities of the Board.
The Remuneration and Nomination Committee recommended, and the Board resolved,
that there should be no increase in remuneration for male directors for the
financial year commencing 1 October 2024. However modest increases for the
two female directors were agreed. These increases serve to equalise
directors' remuneration levels and to fairly reflect the work undertaken by
each director on their respective committees.
Director base fees p.a. Director base fees proposed FY/E 2025
FY/E 2024 £
£
Chairman - A Haining 85,000 85,000
Audit Committee Chairman/SID - S Coe 67,500 67,500
Risk Committee Chairman - S Holden 67,500 67,500
Valuation Committee Board Representative - T Cruttenden 62,500 62,500
Directors - M O'Connor/A Ewing 57,500 62,500
Anne Ewing
Chairman of the Remuneration and Nomination Committee, Chrysalis Investments
Limited
Report of the Management Engagement Committee
I am pleased to present the Management Engagement Committee ("MEC") report for
the year ended 30 September 2024. The composition of the MEC meets with the
requirements of the AIC Code and, in line with good practice, membership is
reviewed annually.
During the year, the Terms of Reference of the Committee were updated to
enable an annual review of board appointments to the committee and to remove
committee term limits.
I am satisfied that the Committee is discharging its responsibilities
proficiently and recommend this report to the Board.
Margaret O'Connor, Chair of the MEC
Purpose and Aim of the Management Engagement Committee
The terms of reference of the MEC are set out on the Company's website. The
primary responsibility of the MEC is to review, annually, the compliance of
the AIFM and Investment Adviser with the Company's investment policy and AIFM
and Investment Advisory Agreement, as well as to keep under review the
performance of all other key service providers involved in supporting the
Company and its operations, to agree with the Company's Board of Directors the
framework for annual evaluations of these professional services, and to make
recommendations to the Board with regards to any changes as necessary.
Membership and Meetings of the Management Engagement Committee
The MEC met formally on September 20, 2024.
The members of the MEC are as follows:
· Margaret O'Connor (Chairperson)
· Tim Cruttenden
· Simon Holden
· Steve Coe
Priorities This Past Year
1. To ensure appropriate resourcing at and reporting from the
Investment Adviser.
2. To ensure an orderly transition to the new investment management
arrangements.
3. To ensure appropriate investor engagement.
Review of Service Providers
· The MEC was pleased to receive comprehensive feedback from all
service providers during its annual review.
· The MEC commended the Investment Adviser on moving quickly and
thoughtfully to establish itself in the new investment management structure,
whilst acknowledging the opportunity to evolve operational effectiveness as it
becomes better established, with a focus on forward looking investment
strategy.
· As part of a wider cybersecurity review, the MEC interrogated the
cybersecurity policies and practices of select third-party service providers.
Recommendations for strengthening cybersecurity infrastructure were noted and
the MEC will monitor progress against addressing those recommendations during
2025. One key recommendation was the development of a co-ordinated
cybersecurity response plan, to ensure a clear strategy for all service
providers, and the Board, in the event of a cyber security event impacting the
Company.
· Finally, the MEC recommended to the Board that they request
assurance from IQ-EQ Fund Services (Guernsey) Limited ("IQ-EQ") regarding the
Company's compliance with the Financial Conduct Authority 2024 listing rules.
Margaret O'Connor
Chair of the Management Engagement Committee, Chrysalis Investments Limited
Report of the Risk Committee
I am pleased to present the Report of the Risk Committee (the "Committee") of
the Company for the year ended 30 September 2024.
Overview
The terms of reference of the Risk Committee are set out on the Company's
website at https://chrysalisinvestments.co.uk/investor-relations/.
The role of the Risk Committee is to ensure that the Board receives due
consideration and assessment of the opportunities, risks and stress scenarios
within which the Company operates and to ensure that the recommended actions
of the Investment Adviser protect its portfolio of investments.
Specifically, the Risk Committee:
· Recommends an overall risk appetite to the Board, monitors the
principal risks to which the Company is exposed and evaluates the strength of
the mitigating controls;
· Reviews the policies and process for identifying and assessing
business risks and the management of those risks by the Company;
· Monitors key risk exposures ensuring that the Investment Adviser
is exercising appropriate control to reduce the likelihood of risk
crystallisation resulting in financial loss, reputational damage or regulatory
concern;
· Reviews, challenge, approve and monitor stress and scenario
tests;
· Monitors investments so that they are aligned within the agreed
risk appetite;
· Reviews major initiatives such as related party acquisitions or
initiatives in new geographies or sectors and be assured that appropriate due
diligence has been carried out and that any associated movement in risk
profile remains within risk appetite; and
· Provides oversight and advice to the Board in relation to current
and emerging risk exposures of the Company.
The members of the Risk Committee are as follows:
· Simon Holden (Chairman)
· Stephen Coe
· Tim Cruttenden
· Anne Ewing
· Margaret O'Connor
· Andrew Haining (Company Chairman) - invited as an Observer
Status of the Risk Committee
I mentioned in last year's Risk Committee Report that the Company became a
self-managed Alternative Investment Fund ("AIF") from 1 July 2022. The Board's
original decision to insource our risk management was to instigate a more
tailored risk management function than was available under third-party AIFM
management. The goal was to deliver more insightful risk disclosure
appropriate to holding minority positions in higher risk, higher growth
potential, illiquid private company holdings; consistent with the risk profile
and investment policy of the Company.
The Risk Committee established, from first principles, a much improved risk
management oversight and control function. More than two years on, I am
pleased to reflect on this step change and conclude that it has proved to be a
successful decision. Risk management now follows a robust and repeatable
process with a framework that guides the recommendations of the Investment
Adviser under the Board's oversight.
Effective 1 April 2024, the Company shifted back to a managed risk structure
with G10 Capital Limited ("G10") appointed as Alternative Investment Fund
Manager ("AIFM"). G10 was selected as part of a review and tender process for
a suite of corporate services, following the migration of portfolio management
and investment advisory services from Jupiter Investment Management Limited to
G10 and Chrysalis Investment Partners LLP ("CIP LLP"). With time and effort
invested in improving risk frameworks since 2022, I'm pleased to say this has
been a smooth transition during the year.
As of September 2024, the Risk Committee convenes semi-annually (within its
Terms of Reference), reflecting the scrutiny deemed necessary to changes in
the Company's risk factors. In the other quarters, the Board receives a more
streamlined risk report from the AIFM that includes operational risk reporting
from the Investment Adviser. Beyond this, the Chair of the Risk Committee is
the primary point of alert for material risk indicators as Reportable Risk
Events on an 'as-arising' basis.
Risk Classes
The Committee reviews the risk profile of the Company under a series of
pre-defined risk classes. Eash risk class is composed of separately identified
and scored risks and mitigating controls.
Risk classes are then prioritised in order of their highest overall residual
risk ratings and this process is refreshed (at least) annually:
1. Relative Performance - the Company's longer terms sustainability
will depend on risk-adjusted returns outperforming adjacent asset classes.
2. Portfolio Performance - risks to tracking each portfolio company's
progress towards measurable milestones along the 'equity roadmap' and evidence
of the strategy and influence over profitable realisations. Movements in the
fair values of our holdings have led to an overall increase in the
concentration risk within the portfolio during the year.
3. Financial/ Capital Markets - risks related to shareholder
understanding, confidence in the Company's growth capital mandate and
implications of shares trading at a discount to NAV.
4. Conflict and Compliance Management - verification of robust
governance in all stakeholder relationships including but not limited to the
fiduciary responsibilities the Investment Adviser assumes where it exercises
the Company's right to board representation within our portfolio companies.
5. 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.
6. Portfolio Construction - ensuring that the portfolio remains
sufficiently diversified and that the Investment Adviser's span of control and
management of the Company's holdings remains effective. Movements in the fair
value of the Company's investments have led to an overall increase in the
concentration risk within the portfolio during the year.
Risk class assessed to be well controlled but with the potential for high
impact if crystallised:
7. Regulatory and political - risk monitoring over routine regulatory
compliance (e.g., FCA in the UK) and/or politically exposed sectors within
which certain portfolio companies must operate.
Risk classes currently judged to have a lower overall residual risk rating:
8. The Environment, Social Impact and Good Governance ("ESG") - the
Company's policy is addressed in Environmental, Social and Corporate
Governance report of the Annual Report.
9. Investment Decisions - evidence that the Investment Adviser has
undertaken appropriate due diligence, risk assessments and origination
processes at the point of committing the Company to new investments; cognisant
of the announced capital allocation policy.
10. Central Management - governance, depositary, foreign exchange and
treasury risk management controls; some under delegation to specialist third
party service providers.
11. Valuation - the Independent Valuation Committee's role in provide
insightful and consistent oversight of the quarterly portfolio valuation
process.
Finally, as a standing item, the Risk Committee considers:
12. Horizon Risks - themes emerging that could have an outsize impact or
influence on the prospects of clusters of our target sectors and/or portfolio
companies.
In September 2024, the Committee Chair conducted the annual refresh of the
risk register with the Investment Adviser before presenting the findings to
the Risk Committee in October 2024. Each existing and new risk was considered
individually, combining in the prioritised risk classes above.
In relative terms, it was pleasing to see a year of improvement with
consistent and clear risk reporting by the Investment Adviser throughout a
year of significant change, including the Continuation Vote, migration of the
Investment Advisory relationship, migration of corporate administration to
IQ-EQ, liquidity events from realisations, follow-on investments against a
challenging backdrop for growth equity, several operational risk matters that
required careful consideration, and finally, the introduction and execution of
the capital allocation policy which made use of borrowed funds against a
Barclays debt facility, drawn down after the end of the period.
In absolute terms, the risk profile of the Company improved with increased
visibility over both valuations and liquidity with realisation events in the
year and further positive developments in several of the Company's largest
holdings. Notwithstanding this, a persistent discount in the Company's shares
is undermining the value of the long-term shareholder proposition and to
manage this, the Board introduced a package of measures, set within a near
term capital allocation policy.
As a special measure in 2024, the Risk Committee commissioned a 3-part study
with a specialist cyber security consultancy to scrutinise the quality and
preparedness of cyber risk frameworks and governance of both the Company and
its three key suppliers; CIP LLP, IQ-EQ and G10. The Board noted compliance
with leading standards, adopted its Cyber Security Strategy and now has
several initiatives underway as part of ongoing monitoring and management of
cyber risk.
Recommendation
Growth equity as an asset class accepts a higher appetite for risk to find
investment opportunities in companies that have the potential for outsize
returns. Whilst there have been some notable failures in our portfolio, this
year has crystalised profitable returns and the portfolio, whilst smaller,
contains several high conviction holdings. 2025 holds great promise for this
portfolio and my report highlights the approach we take to ensuring the risks
accepted continue to be overseen and managed. I am satisfied that the Risk
Committee is discharging its responsibilities proficiently and so recommend
this report to the Board.
Simon Holden
Chairman of the Risk Committee, Chrysalis Investments Limited
Directors' Report
The Directors present their Annual Report and the Audited Financial Statements
of the Company for the year ended 30 September 2024.
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 listing and are admitted to trading on the Closed
Ended Investment Fund segment of 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"). From
1 October2023 to 31 March 2024, the Company was a self-managed AIF and
procured portfolio management services from Jupiter Investment Management
Limited ("JIML"), under a Portfolio Management Agreement dated 1 July 2022. On
29 January 2024, the Company entered into an AIFM and Advisory Agreement with
G1O and CIP LLP respectively. Under this agreement, with effect from 1 April
2024, G10 was appointed as the AIFM to the Company. CIP LLP became Investment
Adviser to G10. CIP LLP is an appointed representative of G10 which is
authorised and regulated by the Financial Conduct Authority.
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
The Directors have adopted the going concern basis in preparing the Audited
Financial Statements.
In assessing the going concern basis of accounting, the Directors have
assessed the guidance issued by the Financial Reporting Council and considered
the Company's own financial position, the status of global financial markets,
various geopolitical events and conflicts, the current macroeconomic climate
and other uncertainties impacting on the Company's investments, their
financial position and liquidity requirements.
At year end, the Company has liquidity including a current cash position of
£44,612,000 (2023: £22,626,000), a net current asset position of
£44,660,000 (2023: £20,973,000) and liquid listed investments amounting to
£2,015,000 (2023: £10,284,000).
The Company generates liquidity by raising capital and from exiting
investments. It uses liquidity by making new and follow-on investments, paying
company expenses and making returns to Shareholders. The Directors ensure it
has adequate liquidity by regularly reviewing its financial position and
forward-looking liquidity requirements. The Directors' going concern
assessment includes consideration of a range of likely downside scenarios
which measure the impact on the Company's liquidity of differing assumptions
for portfolio valuation, exits, new and follow-on investment requirements,
capital raising and company expenses.
In accordance with the Company's Articles of Incorporation, at the first
annual general meeting of the Company following the fifth anniversary of IPO
(such anniversary being 6 November 2023), the Directors proposed an ordinary
resolution that the Company continues its business as a closed-ended
investment company. At the Company's Annual General Meeting, on 15 March 2024,
Shareholders were invited to vote on the continuation of the Company. The
Board recommended that Shareholders vote in favour of continuation and such
resolution was duly passed. The Directors will now put a further Continuation
Resolution to Shareholders at the Annual General Meeting of the Company every
three years thereafter.
On 24 September 2024, the Company agreed a £70,000,000 debt facility with
Barclays Bank PLC which was fully drawn on 1 October 2024. Interest accrues at
a market-rate margin plus the daily SONIA rate. The facility matures on 30
September 2026. The purpose of the facility is to cover the Company's working
capital requirements and potential follow-on investments. As at the date of
this report, the facility continues to be fully drawn.
Taking all matters into account, the Directors have a reasonable expectation
that the Company will continue in operational existence for at least twelve
months from the date of approval of the of the Annual Report and Audited
Financial Statements, and continue to adopt the going concern basis in
preparing them.
Viability Statement
The Directors have assessed the viability of the Company over the three-year
period to September 2027. The Directors consider that three years is an
appropriate period to assess viability given the Company's style of investment
and is a sufficient investment time horizon to be relevant to shareholders.
Choosing a longer time period can present difficulties, given the lack of
longer-term economic visibility and the need for adaptation that this will
inevitably create for the Company and its portfolio.
In their assessment of the viability of the Company, the Directors have
considered the Company's principal and emerging risks and uncertainties,
organised into Risk Classes by the Risk Committee (page 47).
The Directors have reviewed financial projections which consider:
- Available liquidity (Risk Class 1: Liquidity Management)
- The ability of the Company to raise capital (Risk Class 2:
Financial/Capital Market)
- The performance (Risk Class 3: Portfolio Performance) and value of
the existing portfolio (Risk Class 11: Valuation)
- The ongoing expenses of the Company
The Directors' considered a severe downside scenario which models:
- A significant economic event, which results in a deterioration
of portfolio company performance and a recalibration of public and private
markets leading to a compound 25% per annum decrease in the aggregate
portfolio value over a three-year economic cycle.
- The Company honours the committed capital return under the CAP
and does not raise further 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.
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 2027.
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 (2023: £nil).
Directors
The Directors of the Company who served during the year and to date are set
out on pages 33 to 38
Directors' Interests
The Directors held the following interests in the share capital of the Company
either directly or beneficially as at 30 September 2024, and as at the date of
signing these Audited Financial Statements:
Number of % Ordinary Shares in
Ordinary Shares issue as at 30 September 2024
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 2023 the following Directors had holdings in the Company:
Number of % Ordinary Shares in
Ordinary Shares issue as at 30 September 2023
Andrew Haining 79,000 0.0133
Stephen Coe 60,909 0.0102
Simon Holden 89,500 0.0150
Anne Ewing 55,000 0.0092
Tim Cruttenden 21,298 0.0036
Margaret O'Connor - -
S Cruttenden (son of Tim Cruttenden) 11,170 0.0019
Under their terms of appointment, the Directors' total remuneration (including
one-off fees) are as disclosed below:
The Directors' compensation is reviewed annually and effective 1 October 2024,
each Director is paid a basic fee of £62,500 (2023: £57,500) per annum by
the Company. In addition to this, the Chairman will receive an extra £22,500
(2023: £27,500) per annum.
Lord Rockley, Diane Seymour-Williams and Jonathan Biggs receive £40,000 each
per annum as members of the Valuation Committee. Lord Rockley, Diane
Seymour-Williams and Jonathan Biggs are not Directors of the Company.
Effective 1 October 2024, each Valuation Committee member is paid £42,000 per
annum.
At year end, the Company has liquidity including a current cash position of
£44,612,000, a net current asset position of £44,660,000 and liquid listed
investments amounting to £2,015,000. This available liquidity would sustain
the business over the course of the viability period.
A one-off fee was awarded to the Chairman of £nil (2023: £35,000). The Risk
Committee Chairman will receive an extra £5,000 (2023: £10,000) per annum
and the Audit Committee Chairman will receive an extra £5,000 (2023:
£10,000) per annum. Refer to pages 41 and 42 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 18
to the Annual Report and Audited Financial Statements.
The main risks that the Company faces arising from its financial instruments
are:
i. market risk, including:
- price risk, being the risk that the value of investments will
fluctuate because of changes in more investee-company specific performance as
well as market pricing of comparable businesses;
- interest rate risk, being the risk that the future cash flows of a
financial instrument will fluctuate because of changes in interest rates; and
- foreign currency risk, being the risk that the value of financial
assets and liabilities will fluctuate because of movements in currency rates.
ii. credit risk, being the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that it has
entered into with the Company.
iii. liquidity risk, being the risk that the Company will not be able to
meet its liabilities when they fall due. This may arise should the Company not
be able to liquidate its investments.
iv. company failure, being the risk that companies invested in may fail
and result in loss of capital invested.
To manage such risks the Company shall comply with the investment restrictions
and diversification limits provided for in the Prospectus. The Company will
invest and manage its assets with the objective of spreading risk.
Further to the investment restrictions discussed, the Company also seeks to
manage risk by:
· not incurring debt over 20% of its NAV, calculated at time of
drawdown. The Company will target repayment of such debt within twelve months
of drawdown; and
· entering from time to time into hedging or other derivative
arrangements for the purposes of efficient portfolio management, managing
where appropriate, any exposure through its investments to currencies other
than Sterling.
For further details with respect to the processes for identifying, monitoring
and controlling risks to which the Company is exposed, see the Report of the
Risk Committee on pages 45 to 47.
Ongoing Charges
The ongoing charges figure for the year was 0.72% (2023: 0.78%). The ongoing
charges represent ongoing annual expenses of £6,217,319 (2023: £6,669,787)
divided by total average Net Asset Value for the year of £858,854,011 (2023:
£788,273,640). The ongoing charges have also been prepared in accordance with
the recommended methodology provided by the Association of Investment
Companies where investment purchase costs of £33,564 (2023: £515,724) and
performance fees of £nil have been excluded and represent the percentage
reduction in shareholder returns as a result of recurring operational
expenses.
Emerging Risks
The Middle East region is currently experiencing multiple conflicts.
Despite ongoing diplomatic efforts, tensions remain high between Israel and
Gaza, and the situation continues to be volatile, with ongoing violence and
humanitarian concerns.
The Syrian conflict has evolved with the recent toppling of President Bashar
al-Assad. Rebel forces have entered Damascus, leading to a shift in power
dynamics. This change has increased humanitarian needs, with millions of
people requiring aid.
Iran's nuclear program is a point of international concern. The International
Atomic Energy Agency (IAEA) having reported significant advancements in Iran's
uranium enrichment capabilities. The US has levied sanctions on Iran's oil
tankers, aiming to disrupt Iran's use of oil revenue to finance its nuclear
program.
The Board will continue to monitor developments in the region. Deep Instinct
maintains a presence in Israel but has not suffered material disruption to its
operations.
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 CIP LLP manage the Company's ESG and
climate change related risks at the investment portfolio level can be found
within the Environmental, Social and Corporate Governance Report on pages 21
to 27. This includes the integration of ESG analysis into the investment
process.
Investment Management and Administration
AIFM and Investment Advisory 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 G10 to perform delegated investment
management functions.
The Company entered into a tripartite agreement with G10 and CIP LLP, with
effect from 1 April 2024. G10 is the AIFM to the Company. CIP LLP is the
investment adviser to G10. CIP LLP is an appointed representative of G10,
which is authorised and regulated by the Financial Conduct Authority.
Administrator
IQ-EQ has been appointed as Administrator and Company Secretary 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 2024 appear on pages 33 to 36 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
and on the Company's website
https://chrysalisinvestments.co.uk/investor-relations/
(https://chrysalisinvestments.co.uk/investor-relations/) .
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 19 and pages 41
and 42.
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 Anthony Rockley is the Chairman of the Valuation Committee with Tim
Cruttenden, Diane Seymour-Williams and Jonathan Biggs as members.
Substantial Shareholdings
On 31 December 2024, the latest practicable date for disclosure in this Annual
Report, funds managed by Asset Value Investors held 14.5% of the share capital
of the Company. No other shareholder had a holding of greater than 10% of the
Company.
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 Panmure Liberum
Limited and Deutsche Numis 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.
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
(chrysalisgsyteam@iqeq.com) or by post via the Company Secretary.
Alternatively, Shareholders are able to contact the Investment Adviser
directly (enquiries@chrysalisllp.co.uk) or the Senior Independent Director
(chrysalisgsyteam@iqeq.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.
Stewardship code
The Company 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 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 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 Directors' Report (comprising the Chairman's Statement, the
Investment Adviser's Report, and Directors' Report) includes a fair review of
the development and performance of the business and the position of the
Company, together with a description of the principal risks and uncertainties
that it faces.
We consider the Annual Report and Audited Financial Statements, taken as a
whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's position and performance,
business model and strategy.
Signed on behalf of the Board by:
Andrew Haining
Chairman
9 January 2025
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 2024. Appointment of the Auditor will be reviewed each year before
the AGM. The level of non-audit versus audit services is monitored. The table
below summarises the remuneration for services provided to the Company to KPMG
Channel Islands Limited ("KPMG") for audit and non-audit services during the
year ended 30 September 2024.
30 September 30 September
2024 2023
Annual audit fee 160,000 135,000
Reporting accountant services - 15,000
Interim review 51,600 45,000
211,600 195,000
Non-audit services provided in the year arose in connection with the review of
the Company's interim financial statements. Notwithstanding such services, the
Audit Committee considers KPMG to be independent of the Company and that the
provision of such non-audit services is not a threat to the objectivity and
independence of the conduct of the auditor as appropriate safeguards are in
place.
Internal Control
The Company is responsible for the process surrounding the valuation of its
investment portfolio. The Company has delegated these processes to its
independent Valuation Committee which reviews third party valuations of
unlisted investments. The Audit Committee liaises with the Valuation Committee
regularly and reviews minutes of Valuation Committee meetings. For all other
processes of the Company responsibility for internal control lies within the
services provided by CIP LLP 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 IQ-EQ.
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 audit 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 the AIFM, Investment Adviser
and the Company's Valuation Committee for review. The Board reviews these
portfolio valuations on a regular basis throughout the year. The Audit
Committee's ultimate responsibility is to review the portfolio valuations.
· Reporting to the Board on the significant judgment made in the
preparation of the Company's Annual Report and Audited Financial Statements
and recommending valuations of the Company's investments to the Board.
· The Audit Committee will recommend the Board and or Independent
Valuation Committee engages independent valuers for specific assets where it
considers it appropriate.
External Audit
The Audit Committee will hold an annual meeting to approve the Company's
Annual Report and Audited Financial Statements before its publication. During
the current year the Audit Committee met with the Auditor to discuss the audit
plan and approach.
During this meeting it was agreed with the Auditor that the area of
significant audit focus related to the valuation of investments given that
they represent the majority of net assets of the Company and their valuation
involves significant judgement. The scope of the audit work in relation to
this asset class was discussed. The Auditor has also identified the Company's
going concern status as an area of focus.
The Audit Committee reviews cash flow and working capital reports as part of
the review of annual and semi-annual financial statements, together with
taking into consideration significant events such as the continuation vote. At
the conclusion of the audit, the Audit Committee met with the Auditor and
discussed the scope of their annual audit work and their audit findings.
The Audit Committee reviews the scope and results of the audit, its cost
effectiveness, and the independence and objectivity of the Auditor. The Audit
Committee has particular regard to any non-audit work that the Auditor may
undertake and the terms under which the Auditor may be appointed to perform
non-audit services. In order to safeguard the Auditor's independence and
objectivity, the Audit Committee ensures that any other advisory and/or
consulting services provided by the Auditor does not conflict with their
statutory audit responsibilities.
To fulfil its responsibilities regarding the independence of the Auditor, the
Audit Committee considered:
· a report from the Auditor describing their arrangements to
identify, report and manage any conflicts of interest; and
· the extent of the non-audit services provided by the Auditor.
To assess the effectiveness of the Auditor, the committee reviewed:
· the Auditor's fulfilment of the agreed audit plan and variations
from it;
· the audit findings report highlighting any major issues that
arose during the course of the audit; and
· the effectiveness and independence of the Auditor having
considered the degree of diligence and professional scepticism demonstrated by
them.
The Audit Committee is satisfied with KPMG's effectiveness and independence as
Auditor.
During the year the Audit Committee met three time with all members present
(refer to Director Attendance on page 36).
Reappointment of auditor
The Auditor, KPMG Channel Islands Limited, has expressed its willingness to
continue in office as Auditor. A resolution proposing their reappointment will
be submitted at the forthcoming general meeting to be held pursuant to section
199 of the Law.
Stephen Coe
Chairman of the Audit Committee, Chrysalis Investments Limited
Independent Auditor's Report to the Members of Chrysalis Investments Limited
Our opinion is unmodified
We have audited the financial statements of Chrysalis Investments Limited (the
"Company"), which comprise the statement of financial position as at 30
September 2024, the statements of comprehensive income, changes in equity and
cash flows for the year then ended, and notes, comprising material 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 2024, 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 2023):
The risk Our response
Valuation of unquoted investments held at fair value through profit or loss Basis: Our audit procedures included but were not limited to:
£793,656,000 (2023: £770,092,000) The Company's unquoted investments are classified, recognised and measured at Internal Controls:
fair value through profit or loss in accordance with IFRS 9. The investments
Refer to page 60 of the Audit Committee Report, notes 2(h), 3, 10 and 18 comprise of equity and equity-related instruments in unquoted companies (the We evaluated the design and implementation of the controls in place over the
"investments") and represent 94.5% (2023: 96.1%) valuation of the Company's investments.
The risk Our response
of the Company's net assets as at 30 September 2024. Challenging managements' assumptions and inputs including use of our KPMG
valuation specialist:
The Company's investments are valued by using recognised valuation
methodologies and models, in accordance with the International Private Equity For the investments, with the support of our KPMG valuation specialist, we:
and Venture Capital Valuation ("IPEV") Guidelines, 2022.
· assessed the objectivity, capabilities and competence of the
The Company utilises an independent third-party valuation firm (the "Valuation Valuation firm;
firm") to assist and advise on their valuation process.
· assessed the scope of the services provided by the Valuation firm
Risk: and read the valuation reports produced by them in order to understand the
specific methodologies and the valuation assumptions applied;
The valuation of the Company's investments is a significant area of audit
focus, given that it represents a significant portion of the net assets of the · assessed the scope of the services provided by the Investment
Company. Adviser and read the memoranda produced by them in order to understand the key
judgements affecting the investee company valuations;
The valuation risk of the investments incorporates both a risk of fraud and
error given the significance of estimates and judgements that may be involved · held discussions with the Investment Adviser and the Valuation
in the determination of fair value. firm to understand the key judgments made and the valuation approaches applied
to the valuation of the investments;
On the basis of the above we determined that the valuation of investments have
a high degree of estimation uncertainty giving rise to a potential range of · attended in an observation capacity the Board of Directors ("the
reasonable outcomes greater than our materiality for the financial statements Board") meeting where the valuation of the investments were tabled, to obtain
as a whole. The financial statements disclose in note 18 the sensitivities evidence of governance over the valuation process and observe challenge from
estimated by the Company. the members of the Board on the inputs in the valuation preparation;
The risk Our response
· read the minutes of meetings of the Company's Valuation Committee
and the Board held where the valuations of the investments were discussed to
obtain evidence of governance over the valuation process and observe challenge
from members of the Committee and Board on the inputs to the valuations;
· assessed the reasonableness and appropriateness of the valuation
approach and methodology applied to each investment;
· benchmarked the key assumptions used in the valuation models
employed to observable market data (where possible);
· corroborated key investee company inputs used in the valuation
models, and recent investment transactions to supporting documentation;
· considered market transactions in close proximity to the year-end
and assessed their appropriateness as being representative of fair value;
· obtained an understanding of how the impact of global economic
factors and the resultant increase in uncertainty have been reflected in the
valuation of the investments.
The risk Our response
Assessing disclosures:
We also considered the Company's disclosures (see notes 3 and 18) in relation
to the use of estimates and judgements regarding the valuation of investments
and the Company's investment valuation policies adopted in note 2(h) and fair
value disclosures in note 18 for compliance with the relevant accounting
standards.
Our application of materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at £17,500,000,
determined with reference to a benchmark of net assets of £877,637,000, of
which it represents approximately 1.99% (2023: 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% (2023: 75%) of materiality for the financial
statements as a whole, which equates to £13,100,000. 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 £875,000, 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 were availability of capital to meet operating costs and
other financial commitments.
We considered whether these risks could plausibly affect the liquidity in the
going concern period by comparing severe, but plausible downside scenarios
that could arise from these risks individually and collectively against the
level of available financial resources indicated by the Company's financial
forecasts.
We considered whether the going concern disclosure in note 2 (b) to the
financial statements gives a full and accurate description of the directors'
assessment of going concern.
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 the 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 49
and 50) 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 49 and 50) 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 49
and 50 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 theannual report and
financial statements taken as a whole is fair, balanced and understandable,
and provides the information necessary for shareholders to assess theCompany's
position and performance, business model and strategy;
the section of theannual 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 theannual report that describes the review of the effectiveness
of theCompany'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 57 and 58,
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
(http://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.
Sarah Margaret Hume
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
9 January 2025
Statement of Comprehensive Income
For the year ended 30 September 2024
Year ended Year ended
30 September 2024 30 September 2023
Note Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investments
Net gains / (losses) on investments
held at fair value 10 - 45,832 45,832 - (72,660) (72,660)
Net losses on currency movements - (1,230) (1,230) - (33) (33)
Net investment - 44,602 44,602 - (72,693) (72,693)
gains / (losses)
Interest income 5 834 - 834 1,127 3 1,130
Total income 834 - 834 1,127 3 1,130
Advisory and management fees 6 (2,987) - (2,987) (4,009) - (4,009)
Other expenses 7 (3,230) - (3,230) (2,661) - (2,661)
Gains / (losses) before finance costs and taxation (5,383) 44,602 39,219 (5,543) (72,690) (78,233)
Gains / (losses) before taxation (5,383) 44,602 39,219 (5,543) (72,690) (78,233)
Tax expense - - - - - -
Total gains / (losses) and (5,383) 44,602 39,219 (5,543) (72,690) (78,233)
comprehensive gain / (loss)
for the year
Basic and diluted gain/(loss) per Ordinary Share (pence) 8 (0.90) 7.49 6.59 (0.94) (12.21) (13.15)
Total income
834
-
834
1,127
3
1,130
Advisory and management fees
6
(2,987)
-
(2,987)
(4,009)
-
(4,009)
Other expenses
7
(3,230)
-
(3,230)
(2,661)
-
(2,661)
Gains / (losses) before finance costs and taxation
(5,383)
44,602
39,219
(5,543)
(72,690)
(78,233)
Gains / (losses) before taxation
(5,383)
44,602
39,219
(5,543)
(72,690)
(78,233)
Tax expense
-
-
-
-
-
-
Total gains / (losses) and
(5,383)
44,602
39,219
(5,543)
(72,690)
(78,233)
comprehensive gain / (loss)
for the year
Basic and diluted gain/(loss) per Ordinary Share (pence)
8
(0.90)
7.49
6.59
(0.94)
(12.21)
(13.15)
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 74 to 100 form an integral part of these Audited Financial
Statements.
Statement of Financial Position
As at 30 September 2024
2024 2023
Note £'000 £'000
Non-current assets
Investments held at fair value through profit or loss 10 795,671 780,376
Current assets
Cash and cash equivalents 11 44,612 22,626
Other receivables 12 1,376 50
45,988 22,676
Total assets 841,659 803,052
Current liabilities
Advisory and management fees payable 6 (385) (1,022)
Other payables 13 (943) (681)
Total liabilities (1,328) (1,703)
Net assets 840,331 801,349
Equity
Share capital 14 860,890 860,890
Treasury shares acquired 15 (237) -
Capital reserve 13,274 (31,328)
Revenue reserve (33,596) (28,213)
Total equity 840,331 801,349
Net asset value per ordinary share (pence) 16 141.26 134.65
Number of Ordinary Shares in issue 14 594,892,952 595,150,414
Approved by the Board of Directors and authorised for issue on 9 January 2025
and signed on its behalf:
Stephen Coe
Director
The notes on pages 74 to 100 form an integral part of these Audited Financial
Statements.
Statement of Changes in Equity
For the year ended 30 September 2024
Share Treasury Capital Revenue
capital shares reserve reserve Total
Note £'000 £'000 £'000 £'000 £'000
At 30 September 2022 860,890 - 41,362 (22,670) 879,582
Total losses and comprehensive loss for the year - - (72,690) (5,543) (78,233)
At 30 September 2023 860,890 - (31,328) (28,213) 801,349
Total gains/(losses) and comprehensive gain/(loss) for the year - - 44,602 (5,383) 39,219
Treasury shares acquired 15 - (237) - - (237)
At 30 September 2024 860,890 (237) 13,274 (33,596) 840,331
The notes on pages 74 to 100 form an integral part of these Audited Financial
Statements.
Statement of Cash Flows
For the year ended 30 September
2024
2024 2023
Notes £'000 £'000
Cash flows from operating activities
Cash used in operating activities 17 (8,384) (10,330)
Interest income 731 1,130
Purchase of investments 10 (23,421) (46,305)
Sale of investments 10,12 53,029 19,423
Net losses/(gains) on currency movements 1,230 (33)
Net cash inflow/(outflow) from operating activities 23,185 (36,115)
Net increase/(decrease) in cash and cash equivalents 23,185 (36,115)
Cash and cash equivalents at the beginning of the year 22,626 58,712
Net (losses)/gains on cash currency movements (1,199) 29
Cash and cash equivalents at the end of the year 11 44,612 22,626
Cash and cash equivalents comprise of the following:
- Cash at bank 44,612 4,382
- Treasury bills - 18,244
44,612 22,626
The notes on pages 74 to 100 form an integral part of these Audited Financial
Statements.
Notes to the Audited Financial Statements
For the year ended 30 September 2024
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 PO Box 60, Fourth Floor, Plaza
House, Admiral Park, St Peter Port, Guernsey, GY1 4BF (Royal Plaza, Royal
Avenue, St Peter Port, Guernsey, GY1 2HL from 1 October 2023 to 31 July 2024).
The Company is a Registered Closed-ended Collective Investment Scheme
regulated by the Guernsey Financial Services Commission ("GFSC"), with
reference number 2404263, pursuant to the Protection of Investors (Bailiwick
of Guernsey) Law 2020, as amended and the Registered Closed-ended Investment
Scheme Rules 2021.
The Company's 595,150,414 shares in issue (per note 16, of which 257,462 are
treasury shares) under ticker CHRY, SEDOL BGJYPP4 and ISIN GG00BGJYPP46 have a
listing on the Closed Ended Investment Fund segment and are admitted to
trading on the London Stock Exchange's Main Market for listed securities. The
Company invests in a diversified portfolio consisting primarily of equity and
equity-related securities issued by unquoted companies.
From 1 October 2023 to 31 March 2024 the Company was a self-managed
Alternative Investment Fund ("AIF") and received discretionary portfolio
management services from Jupiter Investment Management Limited ("JIML"). On 29
January 2024, the Company entered into an AIFM and Advisory Agreement with G10
Capital Limited ("G10") and Chrysalis Investment Partners LLP ("CIP LLP")
respectively. Under this agreement, with effect from 1 April 2024, G10 was
appointed as the Alternative Investment Fund Manager ("AIFM") to the Company
and CIP LLP became Investment Adviser to G10. CIP LLP is an appointed
representative of G10, which is authorised and regulated by the Financial
Conduct Authority.
From 1 August 2024 to the date of this report, the administration of the
Company has been delegated to IQ-EQ Fund Services (Guernsey) Limited, PO Box
60, Fourth Floor, Plaza House, Admiral Park, St Peter Port, Guernsey, GY1 4BF,
an IQ-EQ Group company ("IQ-EQ") (the "Administrator"). From 1 October 2023 to
31 July 2024, the administration of the Company was delegated to Apex
Administration (Guernsey) Limited, Royal Plaza, Royal Avenue, St Peter Port,
Guernsey, GY1 2HL, an Apex Group company.
2. Material 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
The Directors have adopted the going concern basis in preparing the Audited
Financial Statements.
In assessing the going concern basis of accounting, the Directors have
assessed the guidance issued by the Financial Reporting Council and considered
the Company's own financial position, the status of global financial markets,
various geopolitical events and conflicts, the current macroeconomic climate
and other uncertainties impacting on the Company's investments, their
financial position and liquidity requirements.
At year end, the Company has liquidity including a current cash position of
£44,612,000 (2023: £22,626,000), a net current asset position of
£44,660,000 (2023: £20,973,000) and liquid listed investments amounting to
£2,015,000 (2023: £10,284,000).
The Company generates liquidity by raising capital and from exiting
investments. It uses liquidity by making new and follow-on investments, paying
company expenses and making returns to the Shareholders. The Directors ensure
it has adequate liquidity by regularly reviewing its financial position and
forward-looking liquidity requirements. The Directors' going concern
assessment includes consideration of a range of likely downside scenarios
which measure the impact on the Company's liquidity of differing assumptions
for portfolio valuation, exits, new and follow-on investment requirements,
capital raising and company expenses.
In accordance with the Company's Articles of Incorporation, at the first
annual general meeting of the Company following the fifth anniversary of IPO
(such anniversary being 6 November 2023), the Directors proposed an ordinary
resolution that the Company continues its business as a closed-ended
investment company. At the Company's annual general meeting, on 15 March 2024,
Shareholders were invited to vote on the continuation of the Company. The
Board recommended that Shareholders vote in favour of continuation and such
resolution was duly passed. The Directors will now put a further Continuation
Resolution to Shareholders at the Annual General Meeting of the Company every
three years thereafter.
On 24 September 2024, the Company agreed a £70,000,000 debt facility with
Barclays Bank PLC which was fully drawn on 1 October 2024. Interest accrues at
a market-rate margin plus the daily SONIA rate. The facility matures on 30
September 2026. The purpose of the facility is to cover the Company's working
capital requirements and potential follow-on investments. As at the date of
this report, the facility continues to be fully drawn.
Taking all matters into account, the Directors have a reasonable expectation
that the Company will continue in operational existence for at least twelve
months from the date of approval of the of the Annual Report and Audited
Financial Statements, and continue to adopt the going concern basis in
preparing them.
(c) Functional and presentational currency
The Audited Financial Statements of the Company are presented in the currency
of the primary economic environment in which it operates (its functional
currency). For the purpose of the Audited Financial Statements, the results
and financial position of the Company are presented in pound sterling ("£").
(d) Segmental reporting
The chief operating decision maker is the Board of Directors. The Directors
are of the opinion that the Company is engaged in a single segment of business
with the primary objective of investing in securities to generate capital
growth for shareholders. Consequently, no business segmental analysis is
provided.
The key measure of performance used by the Board is the Net Asset
Value of the Company (which is calculated under IFRS). Therefore, no
reconciliation is required between the measure of profit or loss used by the
Board and that contained in these Audited Financial Statements.
(e) Income
Interest income is accounted for on an accruals basis and recognised in profit
or loss in the Statement of Comprehensive Income. Interest income includes
interest earned on convertible loan notes, cash held at bank on call or on
deposit and cash assets held as cash equivalents, including UK treasury bills.
(f) Expenses
Expenses are accounted for on an accruals basis. The Company's portfolio
management and administration fees, finance costs and all other expenses are
charged through the Statement of Comprehensive Income and are charged to
revenue. Performance fees are charged to capital in the Statement of
Comprehensive Income.
The Company has been granted exemption from liability to income tax in
Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989
amended by the Director of Income Tax in Guernsey for the current year.
Exemption is applied and granted annually and subject to the payment of a fee,
currently £1,600 (2023: £1,200).
(g) Financial instruments
Recognition and initial measurement
The Company initially recognises transactions in financial instruments at Fair
Value through Profit and Loss ("FVTPL") on the trade date, which is the date
on which the Company becomes party to the contractual provisions of the
instrument.
Classification and measurement of financial assets
On initial recognition, the Company classifies financial assets as measured at
amortised cost or FVTPL.
A financial asset is measured at amortised cost if it meets both of the
following conditions and is not designated as at FVTPL:
• It is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
• Its contractual terms give rise on specified dates to cash flows
that are Solely Payments of Principal and Interest ("SPPI").
All other financial assets of the Company are measured at FVTPL.
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 the Statement of Comprehensive Income.
Business model assessment
In assessing the objective of the business model in which a financial asset is
held, the Company considers all the relevant information about how the
business is managed, including:
• the documented investment strategy and
the execution of this strategy in practice. This includes whether the
investment strategy focuses on earning contractual interest income,
maintaining a particular interest rate profile, matching the duration of the
financial assets to the duration of any related liabilities or expected cash
outflows or realising cash flows through the sale of the assets;
• how the performance of the portfolio is
evaluated and reported to the Company's management;
• the risks that affect the performance of
the business model (and the financial assets held within that business model)
and how those risks are managed;
• how the investment manager is compensated: e.g. whether
compensation is based on the fair value of the assets managed or the
contractual cash flows collected; and
• the frequency, volume and timing of sales
of financial assets in prior periods, the reasons for such sales and
expectations about future sales activity.
Transfers of financial assets to third parties in transactions that do not
qualify for derecognition are not considered sales for this purpose,
consistent with the Company's continuing recognition of the assets.
The Company has determined that it has two business models:
• Held-to-collect business model: this
includes cash and cash equivalents, balances due from brokers and receivables
from sale agreements. These financial assets are held to collect contractual
cash flows.
• Other business model: this includes debt
securities, equity investments, investments in unlisted open-ended investment
funds, unlisted private equities and derivatives. These financial assets are
managed, and their performance is evaluated, on a fair value basis.
Assessment whether contractual cash flows are SPPI
For the purposes of this assessment, 'principal' is defined as the fair value
of the financial asset on initial recognition. 'Interest' is defined as
consideration for the time value of money and for the credit risk associated
with the principal amount outstanding during a particular period and for other
basic lending risks and costs (e.g. liquidity risk and administrative costs),
as well as a profit margin.
In assessing whether the contractual cash flows are SPPI, the Company
considers the contractual terms of the instrument. This includes assessing
whether the financial asset contains a contractual term that could change the
timing or amount of contractual cash flows such that it would not meet this
condition. In making this assessment, the Company considers:
• contingent events that would change the
amount or timing of cash flows;
• leverage features;
• prepayment and extension features;
• terms that limit the Company's claim to
cash flows from specified assets (e.g. non-recourse features); and
• features that modify consideration of the
time value of money (e.g. periodical reset of interest rates).
Subsequent measurement of financial assets
Financial assets at FVTPL: These assets are subsequently measured at fair
value. Net gains and losses, any interest or dividend income and expense, and
foreign exchange gains and losses are recognised in 'Net gains/(losses) on
investments held at fair value' in the Statement of Comprehensive Income.
Debt securities, equity investments, investments in unlisted open-ended
investment funds, unlisted private equities and derivative financial
instruments are included in this category.
Financial assets at amortised cost: These assets are subsequently measured at
amortised cost using the effective interest method. Interest income is
recognised in 'Interest income', foreign exchange gains and losses are
recognised in 'Net gains/(losses) on currency movements' and impairment is
recognised in 'Impairment losses on financial instruments' in the Statement of
Comprehensive Income. Any gain or loss on derecognition is also recognised in
the Statement of Comprehensive Income.
Cash and cash equivalents, balances due on unsettled trades and receivables
from sale agreements are included in this category.
Fair value measurement
For investments actively traded in organised financial markets, fair value
will generally be determined by reference to Stock Exchange quoted market bid
prices at the close of business on the valuation date, without adjustment for
transaction costs necessary to realise the asset.
In respect of unquoted instruments, including associates, or where the market
for a financial instrument is not active, fair value is established by using
recognised valuation methodologies, in accordance with International Private
Equity and Venture Capital Valuation Guidelines ("IPEVC"), revised December
2022.
The Company has adopted a valuation policy for unquoted securities to provide
an objective, consistent and transparent basis for estimating the fair value
of unquoted equity securities in accordance with IFRS as well as IPEVC.
The unquoted securities valuation policy and the associated valuation
procedures are subject to review on a regular basis, and updated as
appropriate, in line with industry best practice. In addition, the Company
works with independent third-party valuation firms, to obtain assistance,
advice, assurance, and documentation in relation to the ongoing valuation
process.
The Company considers it impractical to perform an in-depth valuation analysis
for every unquoted investment on a daily basis (whether internally or with the
assistance of an independent third party). Therefore, it is expected that an
in- depth valuation of each investment will be performed independently by an
independent third-party valuation firm: (i) on a quarterly basis; and (ii)
where the Company, in conjunction with its advisors, determines that a
Triggering Event has occurred.
A "Triggering Event" may include any of the following:
• a subsequent round of financing (whether pro rata or otherwise) by
the relevant investee company;
• a significant or material milestone achieved by the relevant
investee company;
• a secondary transaction involving the relevant investee company on
which sufficient information is available;
• a change in the makeup of the management of the relevant investee
company;
• a material change in the recent financial performance or expected
future financial performance of the relevant investee company;
• a material change in the market environment in which the relevant
investee company operates; or
• a significant movement in market indices or economic indicators.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The change in fair value is recognised in profit or loss
and is presented within the "net gains/(losses) on investments held at fair
value through profit or loss" in the Statement of Comprehensive Income.
IFRS requires the Company to measure fair value using the following fair value
hierarchy that reflects the significance of the inputs used in making the
measurements. IFRS establishes a fair value hierarchy that prioritises the
inputs to valuation techniques used to measure fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1 measurements) and the lowest priority
to unobservable inputs (Level 3 measurements).
The three levels of fair value hierarchy under IFRS are as follows:
· Level 1 reflects financial instruments quoted in an active market.
· Level 2 reflects financial instruments whose fair value is evidenced
by comparison with other observable current market transactions in the same
instrument or based on a valuation technique whose variables include only data
from observable markets.
· Level 3 reflects financial instruments whose fair value is determined
in whole or in part using a valuation technique based on assumptions that are
not supported by prices from observable market transactions in the same
instrument and not based on available observable market data. For investments
that are recognised in the Audited Financial Statements on a recurring basis,
the Company determines whether transfers have occurred between levels in the
hierarchy by reassessing the categorisation (based on the lowest significant
input) at the date of the event that caused the transfer.
Derecognition of financial assets
A financial asset (in whole or in part) is derecognised either (i) when the
Company has transferred substantially all the risks and rewards of ownership;
or (ii) when it has neither transferred nor retained substantially all the
risks and rewards and when it no longer has control over the assets or a
portion of the asset; or (iii) when the contractual right to receive cash flow
has expired. The derecognised investments are measured at the weighted average
method. Any gain or loss on derecognition is recognised in the Net
gains/(losses) on investments held at fair value through profit or loss in the
Statement of Comprehensive Income.
Classification and subsequent measurement of financial liabilities
Financial liabilities are classified as measured at amortised cost or FVTPL.
A financial liability is classified as at FVTPL if it is classified as
held-for-trading, it is a derivative or it is designated as such on initial
recognition. Financial liabilities at FVTPL are measured at fair value and net
gains or losses, including any interest, are recognised in the Statement of
Comprehensive Income.
Other financial liabilities are subsequently measured at amortised cost using
the effective interest method. Interest expense and foreign exchange gains and
losses are recognised in the Statement of Comprehensive Income.
Any gain or loss on derecognition is also recognised in the Statement of
Comprehensive Income.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the
Company's obligations are discharged, cancelled or they expire.
(i) 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 £44,612,000 (2023:
£4,382,000) and treasury bills of £Nil (2023: £18,244,000). Refer to note
11 for further details of the cash balance held at 30 September 2024.
(j) Other receivables
Other receivables do not carry interest and are short-term in nature and are
accordingly recognised at amortised cost.
(k) Foreign currency
Transactions and balances
At each Statement of Financial Position date, monetary assets and liabilities
that are denominated in foreign currencies are translated at the rates
prevailing at that date.
Non-monetary items carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date fair value is
measured. Non-monetary items that are measured in terms of historical cost in
a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the year in which
they arise. Transactions denominated in foreign currencies are translated into
pound sterling (£) at the rate of exchange ruling at the date of the
transaction.
Foreign exchange gains and losses arising from translation are included in the
Statement of Comprehensive Income.
Where foreign currency items are held at fair value, the foreign currency
movements are presented as part of the fair value change.
(l) Treasury shares
When shares recognised as equity are repurchased, the amount of the
consideration paid, which includes directly attributable costs, is recognised
as a deduction from equity. Repurchased shares are classified as treasury
shares and are presented as treasury shares. When treasury shares are sold
or reissued subsequently, the amount received is recognised as an increase in
equity and the resulting surplus or deficit in the transaction is presented
within share premium.
(m) Capital reserve
Profits achieved by selling investments and changes in fair value arising upon
the revaluation of investments that remain in the portfolio are all charged to
capital the Statement of Comprehensive Income and allocated to the capital
reserve. The capital reserve is also used to fund dividend distributions.
(n) Revenue reserve
The balance of all items allocated to the revenue in the Statement of
Comprehensive Income for the year is transferred to the Company's revenue
reserve.
(o) Investment entities
In accordance with IFRS 10 an investment entity is an entity that:
· obtains funds from one or more investors for the purpose of
providing those investor(s) with investment management services;
· commits to its investor(s) that its business purpose is to
invest funds solely for returns from capital application, investment income,
or both; and
· measures and evaluates the performance of substantially all
of its investments on a fair value basis.
The Directors are satisfied that the Company meets each of these criteria and
hence is an investment entity in accordance with IFRS 10.
3. Use of estimates and critical judgements
The preparation of Audited Financial Statements in accordance with IFRS
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the Audited Financial Statements and the reported
amounts of income and expenses during the year. Actual results could differ
from those estimates and assumptions.
The estimates and underlying assumptions are reviewed on an ongoing
basis. There were no significant accounting estimates or significant
judgements in the current year, except for the use of estimates in the
valuation of the unquoted investments detailed in note 18.
4. Changes in material accounting policies
Effective from 1 January 2023
The Company adopted Disclosure of Accounting Policies (Amendments to IAS 1 and
IFRS Practice Statement 2) from 1 January 2023. Although the amendments did
not result in any changes to the accounting policies themselves, they impacted
the accounting policy information disclosed in the financial statements.
The amendments require the disclosure of "material" rather than "significant"
accounting policies. The amendments also provide guidance on the application
of materiality to disclosure of accounting policies, assisting entities to
provide useful, entity-specific accounting policy information that users need
to understand other information in the financial statements.
The Directors reviewed the accounting policies and made updates to the
information disclosed in Note 2 Material accounting policies (2023:
Significant accounting policies) in certain instances in line with the
amendments.
New and revised standards
The following accounting standards and their amendments were in issue at the
year end and will be adopted by the Company from 1 October 2024. The Directors
have considered their impact and have concluded that they will not have a
material impact on the Audited Financial Statements for the year ended 30
September 2025 onwards.
Non-current Liabilities with Covenants and Classification of Liabilities as
Current or Non-current (Amendments to IAS 1 Presentation of Financial
Statements)
(Effective for reporting periods beginning on or after 1 January 2024)
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.
Supplier Finance Arrangements (Amendments to IAS 7 Statement of Cash Flows and
IFRS 7 Financial Instruments: Disclosures)
(Effective for reporting periods beginning on or after 1 January 2024)
The amendment supplements existing disclosure requirements by requiring a
company to disclose specific information about its supplier finance
arrangements that enables users of financial statements to assess the effects
of those arrangements on the company's liabilities and cash flows and on the
company's exposure to liquidity risk.
Lack of Exchangeability (Amendments to IAS 21 The Effects of Changes in
Foreign Exchange Rates)
(Effective for reporting periods beginning on or after 1 January 2025)
The amendments require an entity to apply a consistent approach to assessing
whether a currency is exchangeable into another currency and, when it is not,
to determining the exchange rate to use and the disclosures to provide.
IFRS 18 Presentation and Disclosure in Financial Statements
(Effective for reporting periods beginning on or after 1 January 2027, subject
to adoption by the European Financial Reporting Advisory Group)
IFRS 18 Presentation and Disclosure in Financial Statements will replace IAS 1
Presentation of Financial Statements. The new standard introduces the
following key new requirements:
· Entities are required to classify all income and expenses into
five categories in the statement of profit or loss, namely the operating,
investing, financing, discontinued operations and income tax categories.
Entities are also required to present a newly-defined operating profit
subtotal. Entities' net profit will not change.
· Management-defined performance measures ("MPMs") are disclosed in
a single note in the financial statements.
· Enhanced guidance is provided on how to group information in the
financial statements.
· In addition, all entities are required to use the operating
profit subtotal as the starting point for the statement of cash flows when
presenting operating cash flows under the indirect method.
The Company is still in the process of assessing the impact of the new
standard, particularly with respect to the structure of the Company's
statement of profit or loss, the statement of cash flows and the additional
disclosures required for MPMs. The Company is also assessing the impact on how
information is grouped in the financial statements, including for items
currently labelled as 'other'.
There are no other standards, amendments to standards or interpretations that
are effective for annual periods beginning on 1 October 2023 that have a
material effect on the financial statements of the Company, apart from those
already disclosed.
5. Interest income
2024 2023
£'000 £'000
Interest accounted for using the effective interest rate method on
assets held at fair value through profit or loss (FVTPL):(4) - 3
Interest on assets held at amortised cost:
Cash at bank 474 255
UK treasury bills 360 872
834 1,130
6. Advisory and management fees
2024 2023
£'000 £'000
Jupiter Unit Trust Managers Limited ("JUTM") - 11
Jupiter Investment Management Limited ("JIML") 618 3,998
Chrysalis Investment Partners LLP ("CIP LLP") 2,369 -
Total advisory and management fees 2,987 4,009
From 1 October 2023 to 31 March 2024, the Company procured portfolio
management services from JIML, under a Portfolio Management Agreement dated 1
July 2022. On 29 January 2024, the Company entered into an AIFM and Investment
Advisory Agreement with G10 and CIP LLP respectively. Under this agreement,
with effect from 1 April 2024, G10 was appointed as the AIFM to the Company
and CIP LLP became Investment Adviser to G10. CIP LLP is an appointed
representative of G10 which is authorised and regulated by the Financial
Conduct Authority.
Advisory and management fees
The Company paid a monthly "Management Fee" to JIML, equal to 1/12 of 0.5% of
the Net Asset Value up to 30 September 2023. As part of the changes to
investment management arrangements, the Company agreed a reduction to the
Management Fee, effective from 1 October 2023 to 31 March 2024, from 0.5% to
0.15%, leading to a saving in the Management Fee over the period.
From 1 April 2024 the Company pays an "Advisory Fee" to CIP LLP, equal to the
sum of (a) 1/12 of 0.5% of the Net Asset Value per month; and (b) 1/12 of 5bps
of the Net Asset Value per annum on the first £1,000,000,000 of the Net Asset
Value and then 3bps of the Net Asset Value per annum thereafter, such amount
to be calculated and paid monthly in arrears.
Management Fees (for the period from 1 October 2023 to 31 March 2024) and
Advisory Fees (for the period from 1 April 2024 to 30 September 2024) are
charged to Revenue in the Statement of Comprehensive Income.
Performance fee
To 31 March 2024, the performance fee payable is 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").
At an Extraordinary General meeting that took place on 15 March 2024, new
Performance Fee terms were approved. The revised Performance Fee, effective
from 1 April 2024, is the sum of which shall be equal to 12.5 per cent 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 last Performance Fee was payable for the period ended 30
September 2021, at which time the NAV per share was 251.96 pence (2024: 141.26
pence). A full definition of the terms of the new Performance Fee can be found
in the Key Documents section of the Investor Relations page on the Company's
website.
Performance Fees are ordinarily charged to Capital in the Statement of
Comprehensive Income.
As at 30 September 2024, the Company had not exceeded the High Water Mark and
Performance Hurdle therefore no accrual (30 September 2023: £nil) for
performance fees has been charged within these Audited Financial Statements.
7. Other expenses
2024 2023
£'000 £'000
Administration fee Auditor's remuneration for: - audit fees (current year) 260 210
160 135
- audit fees ((over)/under accrual in prior year) (16) 10
- non-audit fees 52 60
Committee fees 158 151
Depositary fees 69 63
Directors' expenses 12 15
Directors' fees 398 433
Directors' liability insurance 59 68
FCA fees 23 31
Legal fee and professional fees:
- ongoing operations 1,363 313
- valuation fees 350 281
- due diligence fees - 77
- fees relating to purchases of investments 34 516
Listing fees 24 31
Design fees 38 44
Registrars' fees 35 33
Secretarial fees 51 45
Sundry 160 145
3,230 2,661
8. Losses per ordinary share
30 September
2023 30
September 2024
Net return Per share Net return Per share
£'000 pence £'000 pence
Revenue return (5,383) (0.90) (5,543) (0.94)
Capital return 44,602 7.49 (72,690) (12.21)
39,219 6.59 (78,233) (13.15)
Weighted average
number of ordinary 595,149,710 595,150,414
shares
The return per share is calculated using the weighted
average number of ordinary shares.
9. Dividends
The Board has not declared a dividend (2023: £nil).
10. Investments held at fair value through profit or loss
2024 2023
£'000 £'000
Opening book cost 732,033 731,095
Opening investment holding unrealised gains 48,343 91,268
Opening valuation 780,376 822,363
Movements during the year:
Purchases at cost 23,421 46,305
Sale of investments (53,958) (15,632)
Net gains/(losses) on investments held at fair value 45,832 (72,660)
Closing valuation 795,671 780,376
Closing book cost(5) 656,080 732,033
Closing investment holding unrealised gains(5) 139,591 48,343
Closing valuation 795,671 780,376
Movement in unrealised gains during the year 339,125 249,567
Movement in unrealised losses during the year (247,877) (292,492)
Realised loss on sale of investments (52,430) (36,558)
Realised gain on sale of investments 7,014 6,823
Net gains/(losses) on investments held at fair value through profit or loss 45,832 (72,660)
The Company holds all its investments at fair value through profit or loss.
Investments held by the Company on 30 September 2024 where the ownership
interest exceeded 20% were as follows:
Name Principal place of Principal activity Ownership interest %
business
Cognitive Logic Inc. United States Trading company 20-30%
Growth Street Holdings Limited United Kingdom In liquidation 30-40%
Rowanmoor Group Limited United Kingdom In wind down 20-30%
11. Cash and cash equivalents
2024 2023
£'000 £'000
Cash and cash equivalents comprise of the following:
Cash at bank 44,612 4,382
Treasury bills - 18,244
44,612 22,626
12. Other receivables
2024 2023
£'000 £'000
Other receivables 1,376 50
1,376 50
Included within "Other receivables" is an amount of $1,206,381 (equivalent to
£902,000). This relates to deferred consideration receivable on the disposal
of Graphcore.
Total expected proceeds on the sale of Graphcore are $57,385,584 (equivalent
to £44,866,000, on the date of disposal). This amount is included within
"Sale of investments" in Note 10: Investments held at fair value through
profit or loss.
On 12 July 2024, the Company received initial proceeds of $56,179,203
(equivalent to £43,937,000, on the date of disposal). This amount is included
within "Sale of investments" in the statement of cash flows.
At 30 September 2024, $1,206,381 of proceeds remained unpaid. On 30 September
2024 this amount was revalued to £902,000, generating an unrealised loss of
£27,000 within "Net (losses)/gains on currency movements" within the
statement of comprehensive income.
13. Other payables
2024 2023
£'000 £'000
Administration fees 28 53
Audit fees 160 150
Legal fees 382 -
Valuation fees 17 290
Custodian fees 23 16
Amounts due in respect of shares repurchased 237 -
Other creditors 96 172
943 681
14. Share capital
No. of
shares £'000
Ordinary Shares at no par value
At 30 September 2022 595,150,414 860,890
At 30 September 2023 595,150,414 860,890
Repurchase of shares (257,462) (236)
Share repurchase costs - (1)
At 30 September 2024 594,892,952 860,653
The holders of Ordinary Shares have the right to receive notice of and
attend, speak and vote in general meetings of the Company. They are also
entitled to participate in any dividends and other distributions of the
Company. There were no changes for the year in the share capital of the
Company.
15. Treasury shares acquired
No. of
shares £'000
Ordinary Shares at no par value
At 30 September 2023 - -
Repurchase of shares 257,462 236
Share repurchase costs - 1
At 30 September 2024 257,462 237
On 26 September 2024, the Company announced a Share Buyback Programme (the
"Programme") in accordance with its Capital Allocation Policy. The Programme
includes an initial buyback allocation of up to £40,000,000 and potential
additional buyback allocations of up to £60,000,000. As approved by
shareholders at the Company's annual general meeting on 15 March 2024, the
maximum number of shares which may be repurchased is currently 89,213,047. If
required, shareholders' approval for an additional buyback authority will be
sought at or before the 2025 annual general meeting.
The purpose of the Programme is to return capital to shareholders while also
accreting net asset value per share for the benefit of long-term shareholders.
The Company has engaged its Corporate Brokers to implement the Programme on
its behalf.
16. 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 2024 30 September 2023
NAV NAV NAV NAV
per share attributable per share attributable
pence £'000 pence £'000
Ordinary Shares: basic and diluted 141.26 840,331 134.65 801,349
The Net Asset Value per Ordinary Share is based on 594,892,952 (2023:
595,150,414) Ordinary Shares, being the number of Ordinary Shares in issue at
the year end.
17. Cash used in operating activities
2024 2023
£'000 £'000
Total gains/(losses) for the year 39,219 (78,233)
Net (gains)/losses on investments held at fair value through profit or loss (45,832) 72,660
Interest income (834) (1,130)
Net (gains)/losses on currency movements (4) 4
Movement in working capital
(Increase)/decrease in other receivables (2024: excluding interest (321) 19
receivable and deferred consideration receivable)
Decrease in payables (2024: excluding amounts due (612) (3,650)
in respect of shares repurchased)
(8,384) (10,330)
18. Financial instruments and capital disclosures
The Company's activities expose it to a variety of financial risks; market
risk (including other price risk, foreign currency risk and interest rate
risk), credit risk and liquidity risk.
Certain financial assets and financial liabilities of the Company are
carried in the Statement of Financial Position at their fair value. The fair
value is the amount at which the asset could be sold, or the liability
transferred in a current transaction between market participants, other than a
forced or liquidation sale. For investments actively traded in organised
financial markets, fair value is generally determined by reference to Stock
Exchange quoted market mid prices and Stock Exchange Electronic Trading
Services ("SETS") at last trade price at the year end date, without adjustment
for transaction costs necessary to realise the asset. Other financial
instruments not carried at fair value are typically short-term in nature and
reprice to the current market rates frequently. Accordingly, their carrying
amount is a reasonable approximation of fair value. This includes cash and
cash equivalents, other receivables and payables.
The Company measures fair values using the following hierarchy that reflects
the significance of the inputs used in making the measurements. Categorisation
within the hierarchy has been determined on the basis of the lowest level
input that is significant to the fair value measurement of the relevant assets
as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or
liabilities.
An active market is a market in which transactions for the asset or liability
occur with sufficient frequency and volume on an ongoing basis such that
quoted prices reflect prices at which an orderly transaction would take place
between market participants at the measurement date. Quoted prices provided by
external pricing services, brokers and vendors are included in Level 1, if
they reflect actual and regularly occurring market transactions on an
arm's-length basis.
Level 2 - Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices).
Level 2 inputs include the following:
· quoted prices for similar (i.e. not identical) assets in active markets;
· quoted prices for identical or similar assets or liabilities in markets
that are not active. Characteristics of an inactive market include a
significant decline in the volume and level of trading activity, the available
prices vary significantly over time or among market participants or the prices
are not current;
· inputs other than quoted prices that are observable for the asset (for
example, interest rates and yield curves observable at commonly quoted
intervals); and
· inputs that are derived principally from, or corroborated by, observable
market data by correlation or other means (market-corroborated inputs).
Level 3 - Inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
The level in the fair value hierarchy within which the fair value measurement
is categorised in its entirety is determined on the basis of the lowest level
input that is significant to the fair value measurement in its entirety. If a
fair value measurement uses observable inputs that require significant
adjustment based on unobservable inputs, that measurement is a Level 3
measurement. Assessing the significance of a particular input to the fair
value measurement in its entirety requires judgement, considering factors
specific to the asset or liability.
At 30 September 2024 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Quoted equity 2,015 - - 2,015
Unquoted equity - - 793,656 793,656
2,015 - 793,656 795,671
At 30 September 2023 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Quoted equity 10,284 - - 10,284
Unquoted equity - - 770,092 770,092
10,284 - 770,092 780,376
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 2024
Valuation Technique Fair Value as at 30 September 2024 (£000s) Significant Unobservable Inputs Weighted Average Range Unobservable Inputs Utilised (6) Sensitivity % Sensitivity to changes in significant unobservable input (£000s)
Market approach using comparable traded multiples 694,618 EV/LTM Revenue Multiple 5.84x 1.17x - 9.26x 1/2/3/4/5/6 +/- 25% + 77,257 / -82,054
EV/2024E Revenue Multiple 6.46x 1.94x - 10.26x 1/2/3/4/5/6 +/- 25% + 32,600 / -20,947
EV/LTM Earnings Multiple 10.11x No range 1/2/3/4/5/6 +/- 25% + 8,962 / -8,962
EV/2024E Earnings Multiple 11.15x No range 1/2/3/4/5/6 +/- 25% + 9,568 / -9,567
EV/Book Value Multiple 2.17x No range 1/2/3/4/5/6 +/- 25% + 9,233 / -9,233
EV/Book Value 2024E Multiple 2.11x No range 1/2/3/4/5/6 +/- 25% + 9,702 / -9,702
Illiquidity discount -10.0% - 5 +/- 25% + 162,027 / -148,637
Implied premium/(discount) -14.8% - 5 +/- 25% + 289 / -17,834
Expected Proceeds 99,038 Execution Discount -8.2% -10.0% - 0.0% 7 +/- 25% + 7,539 / -23,176
Insolvency - Likelihood of insolvency 75.0% No range 8 +/- 25% + 40,367 / -
Valuation Technique
The Company has adopted a valuation policy for unquoted securities that
provides an objective, consistent and transparent basis for estimating the
fair value of unquoted equity securities in accordance with IFRS and the
International Private Equity and Venture Capital Valuation Guidelines
("IPEVC"), revised December 2022.
IFRS requires the Company to measure fair value using a 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).
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. These are known as
unobservable inputs.
When valuing an asset the independent valuer is required to select the
valuation technique most appropriate for that asset, selecting the appropriate
unobservable inputs.
Unobservable Inputs
1. Trading Multiples
Trading multiples are financial ratios that allow an asset to be valued by
reference to various financial metrics, including revenue, earnings and book
value. The nature and stage of development of the asset will help to determine
the appropriate metric(s) to use. Revenue will generally be used until such a
time an asset is delivering sustainable earnings. Industry specific metrics
may also be used for specific assets. One or more trading multiples may be
used and an average taken when arriving at the final valuation.
2. Actual and Estimated Financial Metrics
When applying a trading multiple the independent valuer will generally utilise
the most recently available financial metrics, looking back over the last
twelve months for income statement metrics, or at the latest balance sheet
date for balance sheet metrics. Where estimated financial metrics are deemed
reliable these may also be used. Pro forma financial metrics may be used where
acquisitions and disposals have occurred. The impact of one-time revenue or
earnings events may also be removed from actual or estimated financial
metrics.
3. Comparable Companies
In order to calculate a trading multiple a set of comparable companies must be
identified. These companies will usually be listed companies with publicly
available financial information. When identifying comparable companies the
independent valuer will usually select those offering similar products or
services, to the same type of customers. The number of comparable companies
selected will vary depending on the number of similar companies in the
available universe. The set of comparable companies will change from time to
time depending on the evolution of the asset and the companies considered
comparable. Outliers which skew a trading multiple may be removed from the
set.
4. Net Cash/(Debt)
When arriving at the equity value of an asset any net cash/(debt) will be
added/(deducted) to/from the enterprise value to arrive at the equity value of
that asset.
5. Valuation Premiums/Discounts
Where a recent investment transaction has taken place for a specific asset
which allows for the calculation of an implied valuation, subsequent
valuations will be calibrated to the implied valuation resulting in an implied
premium or discount to that recent transaction. This premium or discount may
be reduced over time or as company performance evolves. If a calibrated
approach is no longer deemed appropriate, an illiquidity discount will be
applied. The independent valuer will use their knowledge of private markets to
determine the appropriate illiquidity discount.
6. Anticipated Exit Route
The nature of an exit for an unquoted asset, for example by way of IPO, trade
sale or liquidation, may often determine differing proceeds for the Company.
Where an exit route is known with virtual certainty then the expected proceeds
will be calculated based on the expected exit route. Where a valuation is
deeply discounted and there is a real risk the asset may fall into
administration the expected proceeds will be calculated based on a
liquidation. If an asset is valued below cost and the Company has a preferred
return, that preferred return will be applied. If an asset is valued above
cost and the Company's preferred return would deliver an enhanced return, the
preferred return will be applied. If an asset is valued significantly above
cost and an investor with a preferred return would benefit from a conversion
to ordinary shares, a conversion will be assumed.
7. Execution Discount
When the full or partial disposal of an asset has been negotiated and a price
set, but the transaction has not yet closed, the valuation of the asset may be
adjusted to take into account any uncertainty associated with the pending
transaction. The value of the execution discount will vary depending on the
conditions which need to be met before the transaction closes and the expected
timing of the close.
8. Likelihood of insolvency
When insolvency becomes a potential outcome for an investment then the valuer
may assume that it will not return any value. A probability is usually
assigned to a zero value scenario in the form of a percentage. The percentage
assigned to a zero value scenario may increase or decrease over time depending
on whether insolvency is deemed to be more or less likely at each valuation
point.
The following table shows the valuation techniques used for Level 3 fair
values, as well as the significant unobservable inputs used for Level 3 items:
Unlisted Investments 2023
Fair Value as at 30 September 2023 (£000s) Valuation Technique Significant Unobservable Inputs Range Sensitivity % Sensitivity to changes in significant unobservable inputs
728,177 Market approach using comparable traded multiples EV/LTM Revenue multiples 0.23 - 19.09x 25% If multiples changed by +/- 25%, the value of the companies in this group
EV/2023E Revenue multiples would change by + £112,340,325 / - £127,156,208
EV/2024E Revenue multiples
EV/2025E Revenue multiples
EV/2026E Revenue multiples
25,030 Recent Transaction Price N/A N/A N/A N/A
16,506 Scenario Analysis Probability 79% 25% If probability changed by +/- 25%, the value of the companies in this group
would change by - £16,505,837 / + £19,342,778
316 Expected Proceeds N/A N/A N/A N/A
63 Wind Down N/A N/A N/A N/A
The Company has an established control framework with respect to the
measurement of fair values.
The Company's Valuation Committee regularly reviews significant unobservable
inputs and valuation adjustments. Valuations are prepared by an independent
third party valuer and the Valuation Committee assesses the evidence prepared
to support the conclusion that these valuations meet the requirements of the
standards, including the level in the fair value hierarchy in which the
valuation should be classified.
2024 2023 2024 2023
Level 1 Level 1 Level 3 Level 3
£'000 £'000 £'000 £'000
Opening balance 10,284 20,317 770,092 802,046
Transferred to/(from) Level 1/(Level 3) - - -
Purchases - - 23,421 46,305
Sales (9,025) (10,263) (44,933) (5,369)
Total gains/(losses) included in net gains/(losses) on investments in the
statement of comprehensive income
- on assets sold 6,405 6,826 (51,821) (36,556)
- on assets held at year end (5,649) (6,596) 96,897 (36,334)
Closing balance 2,015 10,284 793,656 770,092
The following table shows a reconciliation of the opening balance to the
closing balance for Level 1 and 3 fair values:
There have been no transfers between levels in the current year or in the
prior year. The change in unrealised gains or losses (net loss) for the year
included in the Statement of Comprehensive Income relating to those Level 3
assets held at the reporting date amounts to a net gain of £96,897,000 (2023:
net loss of £36,334,000).
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 2024
(25% at 30 September 2023), the impact on net asset value and the
comprehensive gain for the year would have been £198,917,798 (2023:
£195,093,937). 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
The Company is exposed to interest rate risk on its cash and cash equivalent
balances. Interest rate risk arises when prevailing market interest rates
fluctuate. The Investment Adviser manages interest rate risk by ensuring that
it obtains market rates on the Company's cash and cash equivalent balances,
whilst simultaneously managing liquidity and credit risk.
In one year Greater than 2024
or less one year Total
£'000 £'000 £'000
Cash and cash equivalents 44,612 - 44,612
44,612 - 44,612
In one year Greater than 2023
or less one year Total
£'000 £'000 £'000
Cash and cash equivalents 22,626 - 22,626
22,626 - 22,626
If interest rates rose or fell by 1% compared to those available at 30
September 2024 (2023: 1%), the impact on net asset value and the comprehensive
gain for the year would be £446,000 (2023: £226,000). These calculations are
based on cash balances at the Statement of Financial Position date.
Foreign currency risk
The Company does not normally hedge against foreign currency movements 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:
2024
Investments Cash Debtors Creditors
£'000 £'000 £'000 £'000
2024
Assets
US Dollar 151,968 18,841 983 64
Euro 36,064 858 1 -
Swedish Krona 120,562 264 - -
Swiss Franc 153 107 - -
308,747 20,070 984 64
2023
Investments Cash Debtors Creditors
£'000 £'000 £'000 £'000
2023
Assets
US Dollar 199,132 10 - 3
Euro 185,785 16 - -
Swedish Krona 56,913 3,581 - -
Swiss Franc 2,848 - - -
444,678 3,607 - 3
During the year, pound sterling weakened by an average of 2.24% (2023: 4.85%)
against all of the currencies in the investment portfolio (weighted for
exposure at 30 September 2024). In a similar scenario, where the value of
pound sterling had strengthened against each of the currencies in the
portfolio by 2% (2023: 5%), the impact on Net Asset Value and the total
comprehensive gain for the year would have been negative £6,053,868 (2023:
negative £21,175,126). If the value of the pound sterling had weakened
against each of the currencies in the investment portfolio by 2% (2023: 5%),
the impact on the Net Asset Value and total gains and comprehensive gain would
have been positive £6,300,964 (2023: positive £23,404,082). 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:
2024 2023
£'000 £'000
Cash and cash equivalents 44,612 22,626
Sorted Holdings Convertible Loan Note(7) 316 316
wefox Holding AG Convertible Loan Notes(8) 17,351 -
Other receivables 1,376 50
63,655 22,992
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 managed by using counterparties or banks with high
credit ratings 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.
At the reporting date, total cash held with Citibank UK Limited and
Butterfield Bank (Guernsey) Limited amounted to the following:
2024 2023
'000 '000
GBP £24,542 £4,091
US Dollar $25,190 $10
Euro €1,031 €15
Swedish Krona SEK3,581 SEK3,581
Swiss Franc CHF121 -
The credit ratings of Citibank UK Limited and Butterfield Bank (Guernsey)
Limited were A-1 and A-2, respectively, at 30 September 2024 (2023: A-1 and
A-2, respecitvely) (9).
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 94% (2023: 97%) of the net assets as at
30 September 2024.
The Company's liquidity risk is maintained by the Risk Committee in accordance
with established policies, procedures and governance structures in place. Cash
flow forecasting is reviewed by the Risk Committee to ensure that it has
sufficient cash to meet obligations as they fall due.
The maturity profile of the Company's current assets and liabilities is
presented in the following table.
Between Between
Up to 3 and 12 1 and 5
3 months months years Total
£'000 £'000 £'000 £'000
2024
Assets
Cash and cash equivalents 44,612 - - 44,612
wefox Holding AG Convertible Loan Notes - - 17,351 17,351
Sorted Holdings Convertible Loan Note 316 - - 316
Other receivables 1,376 - - 1,376
Liabilities
Other current liabilities (1,328) - - (1,328)
44,976 - 17,351 62,327
Between Between
Up to 3 and 12 1 and 5
3 months months years Total
£'000 £'000 £'000 £'000
2023
Assets
Cash and cash equivalents 22,626 - - 22,626
Sorted Holdings Convertible Loan Note 316 - - 316
Other receivables 50 - - 50
Liabilities
Other current liabilities (1,703) - - (1,703)
21,289 - - 21,289
Capital management objectives, policies and procedures
The structure of the Company's capital is described in note 14 and details of
the Company's reserves are shown in the Statement of Changes in Equity on page
72.
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.
19. Related parties
2024 2023
£'000 £'000
Directors' fees
Total Directors' fees charged 398 433
Directors' fees outstanding - -
As at 30 September 2024 the following Directors have holdings in the Company:
Number of % Ordinary Shares in issue
Ordinary Shares as at 30 September 2024
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 2023 the following Directors had holdings in the Company:
Number of % Ordinary Shares in issue
Ordinary Shares as at 30 September 2023
Director
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
20. Post balance sheet events
On 1 October 2024, the Company fully drew a £70 million debt facility from
Barclays Bank PLC. The loan has a two-year tenor and accrues interest at a
market standard margin over SONIA.
Between 1 October 2024 and the date of signing of these audited financial
statements, the Company repurchased 32,325,799 ordinary shares for a total
consideration of £31,139,129.
On 6 November 2024, the Company purchased 27,264 warrants in Klarna Holding
AB. On 29 November 2024, the warrants converted into shares in Klarna Group
plc. The total investment amounted to SEK 113,549,543 plus transaction costs.
On 13 November 2024, Klarna Group plc announced that it had confidentially
submitted a draft Registration Statement on Form F-1 to the Securities and
Exchange Commission (the "SEC") relating to the proposed initial public
offering of its ordinary shares. The number of shares to be offered and the
price range for the proposed offering had not been determined. The initial
public offering is expected to take place after the SEC completes its review
process, subject to market and other conditions.
The Company entered into a convertible loan agreement with wefox Group Plus AG
on 13 November 2024, and has advanced a total of €20 million since the end
of the period.
On 19 December 2024, the Company completed the sale of Featurespace for a
gross consideration of £89 million, £79 million of which has been received
since the period end.
On 31 December 2024, the Company announced that it had agreed and entered into
a settlement agreement with Revolution Beauty in full and final satisfaction
of its claim. Under the terms of the settlement, Revolution Beauty has agreed
to pay the Company a non-material sum, being less than 1% of the Company's
market capitalisation (as at the date of the announcement).
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
IQ-EQ Fund Services (Guernsey) Limited
PO Box 60
Fourth Floor
Plaza House
Admiral Park
St Peter Port
Guernsey, GY1 4BF
(1 August 2024 to present)
Apex Group
Royal Plaza, Royal Avenue
St Peter Port
Guernsey, GY1 2HL
(1 October 2023 to 31 July 2024)
Investment Adviser
Chrysalis Investment Partners LLP
3 Orchard Place
London, SW1H 0BF
(1 April 2024 to present)
Jupiter Investment Management Limited
The Zig Zag Building
70 Victoria Street
London, SW1E 6SQ
(1 October 2023 to 31 March 2024)
AIFM
G10 Capital Limited
4th Floor
3 More London Riverside
London, SE1 2 AQ
(1 April 2024 to present)
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
IQ-EQ Fund Services (Guernsey) Limited
PO Box 60
Fourth Floor
Plaza House
Admiral Park
St Peter Port
Guernsey, GY1 4BF
(1 August 2024 to present)
Apex Group
Royal Plaza, Royal Avenue
St Peter Port
Guernsey, GY1 2HL
(1 October 2023 to 31 July 2024)
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
Guernsey, GY1 1WA
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
avaluation.
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 the 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
agiven 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
EV
Enterprise Value
LTM
Last Twelve Months
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