REG - Chrysalis Invs Ltd - Annual Results
29/01/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240129:nRSc1322Ba&default-theme=true
RNS Number : 1322B Chrysalis Investments Limited 29 January 2024
The information contained in this announcement is restricted and is not for
publication, release or distribution in the United States of America, any
member state of the European Economic Area (other than to professional
investors in Belgium, Denmark, the Republic of Ireland, Luxembourg, the
Netherlands, Norway and Sweden), Canada, Australia, Japan or the Republic of
South Africa.
29 January 2024
Chrysalis Investments Limited ("Chrysalis" or the "Company")
Annual Results
The Company today announces its results for the year ended 30 September 2023.
The Company's audited annual results are copied below. The results will be
available on the Company's website in due course.
Financial summary
30 September 2023 30 September 2022 % change
NAV per share 134.65p 147.79p (8.9%)
Share price 62.2p 61.7p 0.1%
Total net assets £801m £880m (9.0%)
Performance Headlines
NAV at 30 September 2023 was 134.65 pence per share, a decline of 8.9% in the
period. Nearly 40% of the decline relates to foreign exchange differences and
non-asset related costs. Declines in the valuations of Smart Pension,
Graphcore, Deep Instinct and Sorted also contributed. The share price closed
at 62.20p, a 54% discount to NAV.
The Company's position in Revolution Beauty was fully divested during the year
(£5.2 million). The Company also divested shares in Wise PLC (£10.3
million).
Capital was deployed across six existing portfolio companies to drive growth
and the move towards profitability (£26.2 million). The Company increased its
position in Starling Bank (£20.1 million) at an attractive valuation,
reflecting optimism for the prospects of Starling and its ability to generate
future value for shareholders.
The portfolio is well funded, with the majority either profitable or funded to
profitability, and generated strong revenue growth of approximately 48% in the
period. Chrysalis will have sufficient available liquidity to continue to
support the portfolio and fund the Company for the foreseeable future.
Andrew Haining, Chair, commented:
"During a period of significant economic and political change, the NAV for the
period to 30 September 2023 fell relatively modestly from 147.79p to 134.65p
per share. In that period our exciting portfolio of high growth, tech enabled
companies experienced a range of positive activity which we believe positions
them strongly to benefit from a recovery in markets, which we would expect to
see in 2024."
Richard Watts and Nick Williamson, co-portfolio managers, commented:
"The last two years have seen a significant change in market sentiment, the
ramifications of which have triggered a widespread reconsideration of
strategic priorities across both the Company's investee companies, and in the
Investment Adviser's approach to running the Company. The Investment Adviser
has worked hard with the portfolio companies over this time to extend cash
funding runways and assist the quicker transition to more sustainable
operating models. As a result, the Company's portfolio contains a number of
companies that are both mature in scale and, conceivably, moving into a window
where an exit is a possibility. The recent strength in markets - triggered by
yields falling in response to better inflation data - should be seen as
encouraging. A backdrop of more optimistic markets should increase the
possibility of exits for the Company's investments."
-ENDS-
For further information, please contact
Media
Montfort Communications +44 (0) 7542 846 844
Charlotte McMullen / Toto Reissland / Lesley Kezhu Wang chrysalis@montfort.london
Jupiter Asset Management: +44 (0) 20 3817 1696
James Simpson
Liberum: +44 (0) 20 3100 2000
Chris Clarke / Owen Matthews
Deutsche Numis: +44 (0) 20 7260 1000
Nathan Brown / Matt Goss
Apex Administration (Guernsey) Limited: +44 (0) 1481 749364
Chris Bougourd / Harry Rouillard
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. The information contained
herein is unaudited.
This announcement is for information purposes only and is not an offer to
invest. All investments are subject to risk. Past performance is no guarantee
of future returns. Prospective investors are advised to seek expert legal,
financial, tax and other professional advice before making any investment
decision. The value of investments may fluctuate. Results achieved in the past
are no guarantee of future results.
Neither the content of the Company's website, nor the content on any website
accessible from hyperlinks on its website for any other website, is
incorporated into, or forms part of, this announcement nor, unless previously
published by means of a recognised information service, should any such
content be relied upon in reaching a decision as to whether or not to acquire,
continue to hold, or dispose of, securities in the Company.
Strategy
At Chrysalis we deliver value for our shareholders and partners by investing
in and supporting innovative businesses with the potential to transform their
sectors.
Backing Winning Ideas We seek high growth innovative businesses which are leading transformation
within their sectors.
Technology has the power to transform the world in which we live. We look to
invest in those businesses that have the ability to achieve meaningful change.
We identify opportunities for significant growth and help companies carve out 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
Proven by our successful track record, we de-risk and enhance the competitive
edge of our partners, whilst offering shareholders the opportunity to access
and gain returns from these exciting private and public companies.
Performance Headlines
13.14p - NAV decline, equivalent to 8.9%
· NAV at 30 September 2023 was 134.65 pence per share. Nearly 40%
of the decline in the period relates to foreign exchange differences and
non-asset related costs. Declines in the valuations of Smart Pension,
Graphcore, Deep Instinct and Sorted also contributed. The share price closed
at 62.20p, a 54% discount to NAV.
£15.5 million - Cash from realisations
· The Company's position in Revolution Beauty was fully divested
during the year
(£5.2 million). The Company also divested shares in Wise PLC (£10.3
million).
£46.3 million - Capital deployed
· Deployed capital across six existing portfolio companies to drive
growth and the move towards profitability (£26.2 million). Increased the
position size in Starling Bank (£20.1 million) at an attractive valuation,
reflecting optimism for the prospects of Starling and its ability to generate
future value for shareholders.
£32.9 million - Available liquidity at 30 September 2023
· The portfolio is well funded, with the majority either profitable
or funded to profitability. The Company ended the year with an appropriate
level of liquidity available to continue to support the portfolio and fund the
Company for the foreseeable future.
48% - Weighted average revenue growth
· The portfolio generated strong revenue growth of approximately
48%.
Chairman's Statement
During a period of significant economic and political change, the
independently derived valuation of Chrysalis' (the "Company") investments and
net assets for the period to 30 September 2023 fell relatively modestly, from
147.79p to 134.65p per share. The first quarter of the 2024 financial year has
seen virtually all the reduction erased with net assets at 31 December 2023
being 143.37p per share. Our exciting portfolio of high growth, tech enabled
companies experienced a range of positive activity during the period which we
believe positions them strongly to benefit from a recovery in markets, which
we would expect to see in 2024.
The management team at Jupiter Investment Management Limited (the "Investment
Adviser"), cover the developments in the portfolio in detail in their section
of the report. Suffice to say that we believe that the level of our share
price, at discounts of approximately 50% to the Company's net asset value
("NAV") during the year, significantly undervalues the Company. The Board of
Directors (the "Board"), together with Nick Williamson and Richard Watts as
the principals (the "Principals") of the Company's new investment adviser (the
"New Investment Adviser"), are acutely aware of the need to address the
discount and are working to mitigate this position in several ways.
Significant macro issues, which we are unable to influence, have moved
sentiment in our asset class so substantially that it has gone from trading at
a premium for three years to a discount over the last two. However, there are
other issues which we can manage, particularly as it relates to the
application of capital from realisations in the future.
I would like to highlight a number of areas where we have continued to refine
the Company's operations and removed the perceived conflicts arising from the
Company's relationship with Jupiter.
1. The Company decided to participate in a syndicate of
Starling shareholders which purchased a block of Starling shares held by other
Jupiter-managed funds in February 2023. This removed a seller of Starling
shares which no longer had the capacity to hold its position longer term.
Starling has subsequently increased its profitability, signed new licences
with international banks for its banking technology platform and has
reinforced its position as one of the most successful digital banks.
2. The Board has successfully ensured that the management of
your Company's assets remain under the control of the existing portfolio team,
which we believe is in the best interests of the Company. This separation from
Jupiter was amicably executed shortly after the financial year-end and will
enable the team to devote its sole focus on the existing Company portfolio and
over time build a team for the longer term.
3. The Board has, subject to approval by the Company's
shareholders ("Shareholders"), agreed revised performance fee payment
arrangements that are better aligned with Shareholder interests whilst
retaining the existing "high water mark" of 251.96p.
4. The independent valuation committee has worked hard with
the Principals and the Board to continue to improve the valuation process,
resulting in quicker and more transparent information flowing to Shareholders
and will continue to perform this function going forward.
5. Post year end, Jupiter managed funds reduced their holdings
below 5%. The resultant share register is now more balanced, and we have
welcomed a number of new Shareholders to the register.
Additionally, in December 2023 the Company announced a likely disposal at a
valuation which, if applied to the Company's NAV as of 30 September 2023,
would imply an increase in NAV per share of up to approximately 5.5 pence. The
transaction is still expected to complete on the terms reflected in that
announcement.
As we look forward, we have good reason to be hopeful that realisations will
occur in one or two of our investments during the course of the 2024 financial
year, albeit this will depend on wider market conditions.
We hope that these actions, together with the Capital Allocation process
outlined below, will over time be reflected in a return to more normal market
levels of discount/premium for the Company's share price.
The Company was formed to take advantage of the trend for growth companies to
source expansion capital from the private markets rather than the public
markets. That trend five years later has accelerated, with fewer companies
coming to the public market and growth companies continuing their high growth
development as private companies. Some of the world's largest private growth
companies have been in existence for more than ten years, have accessed
private capital repeatedly, and have avoided public capital markets until
becoming very mature and substantial businesses. Given its structure, the
Company is ideally placed to provide institutional and retail investors access
to those types of growth companies, matching their aspiration for growth with
our capacity to be a long-term holder and supporter.
It is however inevitable that building successful companies over those periods
of time involves straddling macro-economic and political shocks such as our
main economies have suffered in the last two years. We have spent much of our
time this year ensuring that the companies we have invested in have a plan fit
for the constraints of the near-term economic environments, without losing
sight of their long-term disruptive strategies which made them attractive to
us for investment originally and which, we are confident, will deliver value
for Shareholders.
We also need to reflect on this when thinking of the way forward for the
Company and its proposed capital allocation policy (the "CAP").
The longer-term strategy remains valid - to provide Shareholders with access
to an attractive portfolio of approximately 15 later stage companies capable
of above average growth.
The shorter-term consideration is that the market discount to the net asset
value of the Company's shares (the "Shares") makes purchasing the Shares a
potentially higher returning investment than new portfolio investments.
The proposed CAP is therefore designed to recognise these shorter-term
cyclical considerations could be a factor. Consequently we are proposing to
shareholders that a three year extension to the life of the Company be agreed
at the forthcoming AGM.
In that period, we aim to demonstrate that the Company can return to its
long-term purpose of making investments on the basis that the share price in
that period will have returned more closely to our NAV from the exceptional
discount levels we currently have.
The AGM circular containing details of the continuation vote (the
"Continuation Vote") is being sent to all Shareholders. In summary, I believe
that the Company has demonstrated an ability to invest in a number of fast
growing businesses. There is no question that a long-term funding structure
for these types of investment is the right structure. We expect to be able to
demonstrate the ability to realise such investments to Shareholders and the
market within the three-year extension period.
Capital Allocation Policy ("CAP")
One of the key components of obtaining Shareholder support for the proposed
three-year extension is to provide Shareholders with a framework for how
capital will be allocated during that period. The Board indicated to
Shareholders its preferred approach to capital allocation at the time of the
investor consultation in October 2023. This consultation process then informed
the Principals and the Board of Directors' views on this issue. Derived from
that consultation and further discussions that the Principals and I have had
directly with Shareholders, the Board and the Principals have agreed an
adjusted proposal, the details of which are contained in the AGM circular
which proposes the Continuation Vote.
A capital allocation policy for the Company must consider four core potential
uses of capital to:
1) support existing portfolio companies;
2) fund working capital (operating costs, fees etc);
3) invest in late-stage growth opportunities in accordance with the
Company's investment policy; and
4) return available capital to Shareholders through share buybacks (or
equivalent programmes) where it is economically attractive to do so.
During the next three years, the Board and the Principals have already
committed to return the first £100 million of realisations to Shareholders,
likely in the form of a share buyback programme and subject to the prevailing
discount, after satisfying the "buffer" of up to £50 million being held back
for working capital and follow-on investments.
Additionally, the Board and the Principals have agreed that, after the first
£100 million has been returned, we will continue to return at least 25% of
net realised gains on the Company's investments, and I can confirm this will
be measured as net realised gains against historical cost price (and not NAV).
Overarching all of the CAP considerations is an acknowledgement that the
Company's capital needs to be managed in a dynamic way. As we consider the
uses of the Company's available capital going forward we will, when
determining the appropriate implementation of the commitments described above,
take into account, inter alia, the:
· prevailing discount to NAV per share at which the Shares are
trading;
· likely timeline of realisations;
· likely uses of capital to fund existing investee companies; and
· strength of any new investment opportunities.
The Board and Principals also consider scale to be important to maintain the
relevance of the Company's offering and to help gain access to the best
investment opportunities. Subject also to scale, abnormally wide Share price
discounts to NAV are likely to favour capital returns to Shareholders over new
investments.
Full details of the proposed CAP are set out in the AGM circular.
New Management Arrangements
After year end, the Board announced a significant change in the structural
arrangements for managing the Company's portfolio. The detail relating to
those management arrangements are covered in full in a circular convening a
Extraordinary General Meeting to be held immediately following the AGM in
order to approve the performance fee payable to the New Investment Adviser as
a 'related party transaction'.
The new arrangements will see the Principals remain your portfolio managers as
part of a new and independent management entity. The Board believes that this
independent manager will have the capacity to manage the Company's assets
under whatever scenario Shareholders choose to follow post the Continuation
Vote.
The commercial terms of the new investment management and advisory agreement
remain the same as those proposed to Shareholders previously, namely:
· an AUM advisory services fee based on NAV equal to 50 basis
points per annum, and
· a performance fee of 12.5%, with revised deferred payment terms,
payable over the existing high-water mark of 251.96p.
I have had a number of discussions directly with individual Shareholders and
we have had the benefit of the feedback from the Shareholder consultation
commissioned with Rothschilds & Co. There was a consistent view expressed
in support of Richard and Nick and we believe the new arrangements, under
which their entity will be working with IQEQ/G10 to provide not only
management services, but also AIFM oversight, will be to the benefit of the
Company going forward.
Revolution Beauty Group plc ("Revolution")
The Company has potential claims against Revolution under s.90A FSMA 2000 and
the common law causes of action of deceit, negligent misstatement and/or
misrepresentation, in relation to Revolution shares purchased in July 2021 for
approximately £45million and finally sold in late 2022 for approximately
£5.7million in total.
The original share purchase was made on the basis that information provided to
the Company by Revolution prior to the Company's purchase of the shares in
Revolution, and during the period in which the shares were held prior to their
sale, contained misstatements and material omissions. The Company wrote a
formal letter of claim to Revolution Beauty on 22 November 2023, which
requested a response within 28 days. A response has recently been received
asking for a further 28 days to provide a response. The Company is now
considering next steps with its retained lawyers, Travers Smith.
Board Composition
The fifth anniversary of the Company has also focussed the Board's thinking on
the way the Board develops going forward. Our approach to governance is laid
out in some detail in the Governance section of this report.
Five out of six directors have now been in place for five years, having
simultaneously been appointed to the Board at the time of listing. It is
important that your Company reviews our contribution as directors. To that
end, an independent board review has been carried out this year and is
reported on in the Governance section.
It is also important that the Company can attract and retain the appropriate
talent at director level to ensure continued delivery of the governance
targets we have set ourselves. The Company has undergone a substantial change
over the last five years which has seen, inter alia, improvements in
management arrangements, revision of fee arrangements and a new valuation
process. It is therefore crucial that the skills of the Board continue to
match the operational and risk management requirements of the Company going
forward.
To do this we believe a sensible rotation of directors will invigorate the
Board and meet our governance goals. It has been the intention of your Board
for some time that a rotation approach would start in 2024.
It is envisaged that three directors will stand down on a phased basis before
December 2025. However, if Shareholders did not support the Continuation Vote
at our March 2024 AGM, the Board would need to review the implications of that
decision before initiating a rotation policy. However, in the circumstance the
Company has a mandate to continue to grow and develop, this rotation strategy
will see 50% of the Board being replaced by the end of 2025.
The chair of the remuneration and nomination committee is already in
discussions regarding a formal, third party managed process for the selection
of these posts.
It remains for me to thank all the staff of the management team, our corporate
administrator, our colleagues on the independent valuation committee together
with all legal and financial advisers and third-party contractors for their
hard work this year. My colleagues on the Board are grateful for all their
contributions in what has been a busy and productive year.
Signed on behalf of the Board by:
( )
Andrew Haining
Chairman
Portfolio Statement
As at 30 September 2023
Net invested/ (returned)
(£'000)
Opening value Fair value movements Closing Value % of net assets
Cost (£'000) (£'000) (£'000)
(£'000)
Company Location
wefox Holding AG Germany 69,187 154,943 3,562 30,128 188,633 23.5
Starling Bank Limited UK 118,349 113,394 20,101 8,201 141,696 17.7
The Brandtech Group LLC USA 46,440 103,390 - 491 103,881 13.0
Smart Pension Limited UK 105,625 95,187 12,500 (28,004) 79,683 9.9
Klarna Holding AB Sweden 71,486 56,135 - 778 56,913 7.1
Deep Instinct Limited USA 62,226 81,829 - (30,315) 51,514 6.4
Featurespace Limited UK 29,546 53,139 - (3,551) 49,588 6.2
Tactus Holdings Limited UK 42,129 36,795 1,999 (9,756) 29,038 3.6
Cognitive Logic Inc. USA 48,453 30,299 1,327 (4,395) 27,231 3.4
Secret Escapes Holding Limited UK 28,009 13,232 6,500 5,298 25,030 3.1
Graphcore Limited UK 57,589 45,065 - (28,559) 16,506 2.1
Wise PLC UK 3,276 20,317 (10,263) 230 10,284 1.3
Sorted Holdings Limited UK 28,257 18,429 316 (18,429) 316 0.1
Growth Street Holdings Limited UK 11,223 209 (149) 3 63 0.0
Revolution Beauty Group PLC UK - - (5,220) 5,220 - 0.0
Rowanmoor Group Limited UK 13,363 - - - - 0.0
Total investments 735,158 822,363 30,673 (72,660) 780,376 97.4
Cash and cash equivalents 22,626 2.8
Other net current liabilities (1,653) (0.2)
Total net assets 801,349 100.0
Investment Adviser's Report
Introduction
The last two years have seen a significant change in market sentiment, the
ramifications of which have triggered a widespread reconsideration of
strategic priorities across both the Company's investee companies, and in the
Investment Adviser's approach to running the Company. More detail on this is
provided below, but underpinning the Investment Adviser's thinking is that the
trend of companies staying private for longer has continued. This is a
particularly pertinent consideration with the Company's continuation vote due
in the early part of 2024.
Following the Company's inception, the Investment Adviser proposed a likely
holding period of investments made by Chrysalis of between two to five years.
The retrenchment of market risk appetite, observable from the beginning of
2022 and initially driven by rising inflation and yield expectations, closed
off likely exit routes for investee companies over the last two years,
including IPO markets.
As a result, the Company's portfolio contains a number of companies that are
both mature in scale and, conceivably, moving into a window where an exit is a
possibility. With an average hold period as of January 2024 of approximately
three and a half years, and with a number of large-scale companies at between
four and five years - such as Starling, Klarna and wefox - there is reason to
believe that the portfolio is able to move towards realisations, once market
conditions allow.
In that regard, the recent strength in markets - triggered by yields falling
in response to better inflation data - should be seen as encouraging. A
backdrop of more optimistic markets should increase the possibility that the
two main exit routes for the Company's investments - trade sale and IPO - will
open. In terms of the latter, the successful flotation of companies such as
Arm in the US should be taken as an encouraging sign.
The Investment Adviser believes that the continuation vote should be
considered through the lens of these two factors:
· A maturing portfolio, with a number of companies that Chrysalis
has held for some time and are themselves "later-stage" in nature; and
· Apparently, a market more amenable to exits.
With this in mind, the Investment Adviser strongly believes that the best
outcome for shareholders is that they vote for continuation, such that the
timing of exits can be finessed for valuation maximisation.
Both the Investment Adviser and the Board are acutely aware of the current
discount to NAV per share that the Company's shares currently trade at. If
realisations are achieved, the proposed CAP, if enacted at prevailing shares
prices, should yield material accretion to the NAV per share.
Despite the widespread focus on discounts and realisations, the portfolio
continues to grow strongly, with many of the investee companies looking to
accelerate growth via AI, a topic that is discussed further below. While a
number of the Company's investments have been exploring AI growth angles for a
while, others are latching onto this theme more recently. In the Investment
Adviser's view, AI has the potential to not only accelerate growth, but also
to elongate the period of that growth, or protect existing competitive
advantages.
Market Environment
The market backdrop changed materially in late-2021 and into 2022, as
investors were faced with a fundamental shift in the interest rate
environment, which began its first major tightening cycle in over 30 years.
This was in response to rising inflation, likely due in part to supply chain
constraints stemming from COVID-19 related shutdowns, but further exacerbated
by the war in Ukraine.
In the Investment Adviser's view, the medium-term outlook for interest rates
is likely to remain at levels higher than experienced since the global
financial crisis ("GFC"). Higher discount rates typically have a greater
impact on growth company valuations, where more of their value is based on
future cash flows, compared with more mature companies. While a
"higher-for-longer" thesis may not appear conducive to risk asset performance,
often it is uncertainty over the direction of rates that investors most fear.
This implies, as volatility of expectations around the exact course of
interest rates abates, growth assets will be in a better position to deliver
valuation performance from here.
Over the year, the FTSE All-share saw a 9% increase, but the S&P500 rose
20% and the NASDAQ100 by 34%. Given interest rates have risen over the period,
particularly short-term rates, it is perhaps surprising that the most "growth
exposed" index - the NASDAQ - has performed the best.
However, an analysis of the leading NASDAQ contributors in calendar 2023
suggests excitement about generative AI is assisting certain stocks, and
Nvidia in particular, which was a leading index contributor.
This shows how certain growth trends, at least in some cases, can be more
important than the overall market backdrop. The Investment Adviser believes
the Chrysalis portfolio is well placed to benefit from AI growth trends:
· Klarna - as an early adopter of ChatGPT, became the first fintech
globally to launch the ChatGPT plug-in. It also launched an AI-powered image
search tool in October 2023, which allows customers to search for products via
an image;
· Deep Instinct - uses deep learning based models to deliver its
services;
· Featurespace - also uses deep learning, as well as machine
learning, in its products and recently won the PETs ("Privacy-Enhancing
Technologies") challenge, sponsored by Innovate UK and the US National Science
Foundations, which allows AI models to make better predictions from multiple
data sources without exposing any sensitive data between parties. In October
2023 it launched TallierLTM - the world's first Large Transaction Model;
· Brandtech - recently bought Pencil AI, a leading AI creative and
distribution SaaS platform, generating channel-ready adverts; and
· wefox - is developing AI capabilities to enhance the productivity
of insurance brokers.
The scale of the overall decrease in activity in the private market has been
significant over the last year and a half. The market contracted for four
consecutive quarters from its peak in 1Q 2022 (despite the stock market
rolling over in the previous quarter, this associated decrease in investment
appetite can take time to filter through into activity).
However, as the wider market has become more used to higher levels of interest
rates, so there have been tentative signs of risk appetite returning. From the
low point in 1Q 2023, each of the subsequent two quarters showed a sequential
increase in funding activity. Albeit, 4Q 2023 saw the typical seasonal
slowdown, the outturn for 2023 was an improvement over 2020, the year before
the market saw supernormal activity. The Investment Adviser believes that the
focus in the private market has remained on companies driving towards
profitability and discusses this in more detail below.
Portfolio
Over the year, Chrysalis' NAV per share fell from 147.79 pence to 134.65
pence, a fall of 13.14 pence or approximately 8.9%. Of this move,
approximately five pence, or nearly 40% of the decrease, was due to foreign
exchange differences arising on the translation of investment valuations into
GBP and non-asset related costs.
Despite this diminution in NAV, the underlying companies continued to generate
strong growth in the period. On a weighted average basis, the portfolio
generated approximately 48% revenue growth over the year.
Material progress towards profitability
Last year the Investment Adviser discussed the market's shift of focus away
from pure growth, to one that balanced growth with a drive towards
profitability; as a result, many companies reassessed growth plans and funding
requirements. The Investment Adviser has worked hard with the portfolio
companies since the beginning of 2022 to extend cash funding runways and
assist the quicker transition to more sustainable operating models.
A good example of this is Klarna, which announced job losses expected to
equate to 10% of its workforce in 2Q22, alongside an equity raise of $800
million at a valuation of $6.7 billion post new money, compared with its round
in the prior year that was struck at $45.6 billion.
Despite the negative press associated with an 85% down round, the Investment
Adviser was optimistic about the prospects for Klarna heading towards
profitability, and the fact it was funded to get there.
As a demonstration of the power of operational gearing, in 2Q22, Klarna was
annualising an operating loss of approximately $1.1 billion; by 2Q23 Klarna
had hit breakeven and in 3Q23 the operating profit was annualising at
approximately $180 million, implying a nearly $1.3 billion swing in
profitability over the course of 15 months.
The move to breakeven in 2Q23 was driven by year-on-year decreases in both
impairment and operating costs of over 40% and approximately 25% respectively;
meanwhile, GMV grew approximately 14% in SEK terms year-on-year. While this
GMV growth is slower than previous years, the scaling power of the platform
has enabled Klarna to close a material loss in the space of four quarters. GMV
growth reaccelerated to 22% in 3Q23, which translated into revenue growth of
30%.
While this may be a more extreme example of what is possible, the Investment
Adviser believes this is the direction of travel seen across the portfolio in
aggregate: the weighted average improvement in EBITDA across the portfolio was
over 80% over the year. While a number of portfolio companies still remain
loss-making, generally those losses have been diminishing, with only three
portfolio companies seeing losses worsen, of which one was only modestly
worse.
This pattern is highly encouraging to the Investment Adviser as it helps to
demonstrate the progress being made by the portfolio companies. If this trend
continues and more companies become profitable, then not only does this help
to lower funding risk in the portfolio, but it raises the likelihood that, in
time, it will be possible to generate theoretical valuation metrics for the
Company, such as a price-to-earnings ratio ("PE").
Portfolio activity
Given the significant risk aversion prevalent in markets over the year, and
thus the material discount that the Company's shares traded at relative to NAV
per share, there was no ability for the Company to consider raising primary
capital from shareholders. The last capital raise was £60 million in December
2021.
This, along with approximately £118 million from realisations - largely from
the exit of Embark (£57 million) and sale of Wise shares (£42 million) -
permitted the rotation of capital into value accretive follow-on investments,
and certain secondary purchases, totaling £98 million over this 21-month
period.
Over the course of the year, Chrysalis supported six of its existing portfolio
companies with primary follow-on capital and made one secondary investment in
Starling; the latter accounted for £20 million of the total £46 million
spent on follow-ons and secondary investments.
In terms of follow-ons, the most significant was into Smart (£12.5 million),
to enable it to accelerate its M&A strategy and drive growth in core
markets. Other, smaller rounds were also completed in Secret Escapes - £6.5
million invested, to enable it to invest further in marketing to drive growth
- and wefox - £3.6 million invested to assist the company drive towards
profitability. All of these rounds were in participation with other investors.
Offsetting this to a degree were £15.5 million of realisations in 2023,
mainly comprising the sale of shares in Wise and Revolution Beauty, which
accounted for approximately £10.3 million and £5.2 million respectively.
This meant that the Company spent approximately £31 million on net investment
over the year.
The Company was formed five years ago to offer individuals and other market
participants an easy way to access late-stage private companies.
The Investment Adviser believed this was an opportunity due to the increasing
tendency of companies to stay private for longer, a period which typically
coincided with materially higher growth rates than those observed in the stock
market.
The issues driving this desire to delay listing were considered by the
Investment Adviser to be multi-faceted, and indeed likely remain so. Recent
media articles citing respected industry observers highlight a variety of
reasons still remain extant, particularly for the UK market.
The Investment Adviser believes some of the reasons include:
· regulation applicable to listed businesses which, particularly
post global financial crisis ("GFC"), is considered by the Investment Adviser
to be stringent and places significant additional costs on listed businesses;
· in the UK, a significant "income mindset" which seeks high
dividend payouts from stocks, thus decreasing the capital available for
reinvestment to drive growth;
· a fixation on short-term returns in the listed market - which the
Investment Adviser has had first-hand experience of; and
· a sense that expansion capital is not readily available to grow
businesses, leading to a lack of appetite to absorb losses as companies look
to build share aggressively; and
· losses of control for founders in connection with listings.
These types of impediment mean that new issuance activity via IPO has been on
the wane, a point that the Investment Adviser has repeatedly highlighted.
At the point of the Company's IPO, the Investment Adviser calculated that the
average number of IPOs in the UK had fallen from 217 per annum prior to the
GFC, to 94 per annum in the period from 2011 to 2017. In the five years since
the Company's IPO, the average has fallen further to 69.
Looking in more detail at just the London Stock Exchange's Main Market and
AIM, the lack of IPOs since the start of 2022 is now the longest run of low
issuance in the last 30 years, spanning eight consecutive quarters. This is
despite UK stock markets proving resilient in economic terms.
Late 2023 was particularly anaemic, with only one Main Market listing in CAB
Payments in the third quarter and with no IPOs recorded in either the Main
Market or AIM in the last quarter of 2023. In fact, the last two years have
been some of the weakest in the last 30 years for the IPO market in the UK,
with the US also recording below average volumes.
Rising global yields, in reaction to increasing inflationary pressures, over
the last couple of years have likely hampered risk appetite and thus deflated
IPO markets.
While some IPOs were able to get away successfully in 2023 despite rising
yields, such as Arm Holdings Inc in the US, the recent retrenchment of yields
from approximately five per cent. down to approximately four per cent.
potentially augurs well for a better IPO market in 2024, particularly in
combination with more moderate central bank language around the prospect for
rates.
As such, the Investment Adviser believes there are reasons to be moderately
optimistic about the outlook for general risk appetite in 2024, which, in
normal circumstances, would lead to stronger exit markets, including IPO and
trade sale.
An increasing chance of realisations could have a significant impact on the
Company's liquidity position, opening up the possibility of capital returns
via the CAP.
Following its IPO, the Company indicated a likely hold time for investments of
two to five years; the current average holding period in the portfolio is
approximately three and a half years. Sitting above this average are key
later-stage assets, such as Starling, Klarna and wefox.
Holding period of the portfolio by asset
Investment date Hold period (years)
Secret Escapes Nov-18 5.2
Starling Feb-19 4.9
Klarna Aug-19 4.5
Sorted Aug-19 4.4
wefox Dec-19 4.1
Featurespace May-20 3.7
Brandtech Sep-20 3.3
Smart Pension Jun-21 2.6
Deep Instinct Jul-21 2.6
Revolution Beauty Jul-21 2.5
InfoSum Aug-21 2.4
Average 3.6
Source: Chrysalis
The Investment Adviser believes that the high yield environment since early
2022 has likely delayed certain of the Company's investments from seeking an
exit over this period.
As such, the Company now holds a number of assets that could conceivably be
considered as exit candidates. If IPO is the chosen route, then conducive
stock market conditions are required, as well as all the necessary internal
preparations to become a listed entity.
In this regard, Klarna's recent comments that the company is preparing for an
IPO and that one could come "quite soon", should demonstrate that the view
that conditions are improving is not solely held by the Investment Adviser.
In this context, the Investment Adviser believes that a decision to wind up
the Company would not benefit Shareholders, as it could restrict the its
ability to time realisations and thus its ability to maximise value.
Outlook
Last year the Investment Adviser was hopeful that wider market risk appetite
would support realisations from the portfolio in 2023, including the reopening
of the IPO market. This was partly predicated on the apparent emergence of
some price stability in the market.
While the IPO market has arguably shown signs of life - particularly in the US
with the flotation of companies such as Arm - the more widespread confidence
that is necessary to deliver a meaningful reopening has not been forthcoming.
This situation is arguably more acute in the UK, which in 3Q 2023 only saw one
Main Market flotation - CAB Payments - which promptly warned on profits and
saw its share price fall over 80%.
The Investment Adviser has continued to focus on helping the portfolio
companies get in the best possible shape for an eventual exit; Klarna moving
into profitability is a significant, positive step in the right direction.
This work centres around both maximising potential exit valuation, as well as
installation of systems and governance processes required for an exit.
While speculation has swirled around Klarna's IPO over the last few years,
this is the first time the Investment Adviser has seen the company publicly
state conditions are now "in place" for it to consider such a move. The
ramifications for Chrysalis of an exit that at least underpins the asset's
valuation are hard to understate. Such a move could potentially deliver
substantial liquidity into the Company and allow the new CAP to come into
effect.
A commitment to return up to £100 million of capital to shareholders -
representing approximately 25% of the Company's market capitalisation at the
time of writing - should be viewed as a powerful indicator of the Board and
Investment Adviser's ambition to manage the prevailing share price discount.
Company Sections
wefox Holding AG ("wefox")
Over the last twelve months, wefox has been focussing on demonstrating a clear
roadmap to profitability and good progress has been made on this front. The
Investment Adviser believes that wefox will have approached run rate
profitability towards the end of 2023, a target the company set itself at the
beginning of the period and which then positions it strongly moving into 2024.
Very few 'insurtech' assets that the Investment Adviser has analysed globally
have been able to demonstrate profitability, with many business models
negatively impacted by high loss ratios (due to negative selection) and high
customer acquisition costs (due to high competition).
What sets wefox apart from listed peers such as Lemonade or Hippo is its focus
on digitising indirect distribution channels (such as insurance brokers)
rather than selling own-brand insurance products direct-to-consumer ("D2C").
wefox can drive productivity for its partners through lead generation, process
automation, and the provision of customer self-service technology and
AI-driven cross-selling. wefox provides these technologies for a share of any
commission generated through the sale of insurance products; historically,
these partners have also sold a variety of wefox insurance products to their
clients too across a range of insurance categories, such as motor or home
insurance.
wefox has been one of the Company's fastest growing assets since initial
investment in December 2019, and the company's growth rate remains robust and
materially higher than its listed peers. In 2022, wefox grew its gross
revenues by 89% to €587 million, with the outturn for 2023 looking
substantially better, while doubling the number of monthly active distribution
partners on the platform. The company also managed to cross the €1.5 billion
milestone in terms of Gross Platform Value (total annual insurance premium
volume transacted by wefox) in September 2023. It took a total of 66 months to
achieve the first €500 million in Gross Production Value ("GPV") and just 11
months to add the most recent €500 million in GPV.
In April 2023, wefox announced that it has launched its global affinity
business, which will connect insurance companies with partners to distribute
insurance products; this increases the existing distribution channel for wefox
and extends the company's ability to deliver insurance products through
partners. wefox has since announced a number of affinity insurance partners.
Particularly encouraging was the announcement that WINDTRE, Italy's leading
telecommunications business, has signed a 10-year deal to launch the sale of
home and travel insurance products in-store. Partnerships have also been
announced with Green & Advanced Transport Ecosystem ("GATE") and PROPUP.
wefox has developed a technology platform to deliver these affinity
partnerships and the Investment Adviser believes this will be a key value
driver in the future. wefox has the potential to become an
infrastructure-as-a-service ("IaaS") play over time, which could drive a
recurring and highly profitable revenue stream for the group. This increased
focus towards an infrastructure play has occurred before in the portfolio, for
example with Wise offering its foreign exchange network to banks, and Starling
with its Engine proposition.
Starling Bank Limited ("Starling")
Starling has delivered exceptional revenue and profit growth since Chrysalis
first invested in the company in 2019.
Starling - Financial Performance (£ millions, year to indicated date)
Nov-19 Mar-21 Mar-22 Mar-23 % chg
(Mar21 -23)
Total income 14.2 87.8 188.1 414.8 372%
Implied costs (67.8) (101.5) (156.0) (220.2) 117%
Profit before tax (53.6) (13.7) 32.1 194.6
Return on Tangible Equity 18.3% 29.0%
Source: Starling and Jupiter
The growth in total income has been driven by two factors: an increase in
lending, and an increase in base rates. Starling accelerated its lending
capabilities through the acquisition of Fleet Mortgages in 2021, which
originates 'Buy to Let' mortgages, and has generated increased interest income
through an increase in yields on cash and on debt securities as a result of
increases in the Bank of England's base rate.
Starling's cost base has grown much slower than its revenues which has led to
a very attractive margin profile. In more recent months, Starling has been
generating profit before tax of roughly £350 million on an annualised basis,
leading to a circa 45% pre-tax return on tangible equity, making it, the
Investment Adviser believes, one of the most profitable digital banks
globally.
What makes Starling truly disruptive, and what drew the Investment Adviser to
the company initially, is its proprietary technology stack enables the bank to
operate with a much lower fixed cost base than a typical bank (leading to
higher returns and margins) while allowing it to offer customers a much better
user experience. Over time, Starling has been able to pass on these benefits
of technology to its customers, which ultimately can lead to an enhanced
customer experience and potentially lower costs and fees. Engine, the
technology platform that powers Starling, also offers the potential to license
Starling's award-winning technology to financial organisations around the
world, and now has two contracts signed and in implementation.
Starling grew deposits particularly quickly during the COVID-19 period and
continues to evolve its deposit strategy. Most notably, Starling announced in
September 2023 that it would pay 3.25% AER interest on account balances of up
to £5,000 from 1 October 2023. The Investment Adviser views this offering as
consistent with Starling's brand: unlike many banks that tempt savers with
"teaser" rates that surreptitiously revert to much lower rates and almost
never on their current account, Starling is trying to offer savers a
reasonable rate with durability. For those with more capital and who wish to
save, Starling also offers a One Year Fixed Saver paying 4.48% interest on
deposits between £2,000 and £1,000,000.
Despite investment in these products, the direction of interest rates has
meant the bank has continued to operate at very profitable levels over the
course of 2023.
The Brandtech Group LLC ("Brandtech")
The highlight of the year for Brandtech was the acquisition of Jellyfish, a
leading global digital media and marketing group. Jellyfish represents the
group's ninth, and largest ever, acquisition and solidifies Brandtech's
position as the leading digital-only marketing group globally. The combined
group now generates in excess of $1 billion of revenue, servicing eight out of
the ten largest advertisers, and has over 7,000 employees.
Brandtech already had scale across its Digital Strategy & Content and Data
division, but management had an ambition to grow its Digital Media unit
following the appointment of Nick Emery as CEO of Brandtech Media. Media
represents a huge and highly profitable addressable market for the group, but
also a material revenue opportunity across its existing customer base. Nick
Emery should be able to capitalise on this opportunity now that he has the
necessary scale and resource within the Brandtech media division.
Although much smaller, the recent acquisition of Pencil AI is also exciting.
Pencil AI was founded in 2018 and is currently a leading AI creative and
distribution SaaS platform. The technology is built on Open AI's GPT family of
large language models ("LLMs") and generates multiple channel-ready adverts by
looking at a brand's objective, existing assets, and preferences. Within
minutes Pencil AI can create content that is up to tenfold lower in cost to
produce but with a twofold uplift in performance. Pencil AI was one of the
first generative AI companies globally that enables brands to generate
finished, ready-to-run ads, launch them and measure an uplift in performance.
Since 2018, Pencil AI has managed over $1 billion of media spend across 4,000
brands and is generating significant interest from prospective clients. Post
acquisition, Brandtech has launched Pencil Pro, an enterprise-level generative
AI product, specifically created to meet the needs of global brands; Unilever
and Bayer are launch partners.
With the marketing landscape becoming increasingly complex to navigate, the
Investment Adviser believes Brandtech is well positioned to continue
disrupting legacy advertising holding companies. While there has been a
well-publicised slowdown in media spend over 2023 - and Brandtech is not
immune to this - organic growth over the preceding four years has averaged at
more than 30%.
Smart Pension Limited ("Smart")
Smart continued to grow in 2023, with platform revenues forming a much larger
proportion of the revenue mix.
Following the announcement of its $95 million Series E funding round in May,
led by Aquiline Capital Partners, Smart has continued to execute its M&A
strategy and has since completed two further acquisitions.
In May 2023, Smart USA announced that it had acquired ProManage LLC. ProManage
is an independent financial wellness service provider that offers managed
accounts and other personalised retirement solutions to plan sponsors and plan
participants. The acquisition made Smart the fifth largest managed account
provider in the US, one of the largest retirement and savings markets
globally.
The company then acquired Evolve Pensions in July, a leading provider of
workplace pension services through its master trust the Crystal Trust. Evolve
has over 128,000 members and £750 million in assets. This acquisition
represents one of the largest master trust transactions of the year and makes
the Smart Pension Master Trust ("SPMT") the country's third biggest master
trust operator. SPMT now has 1.3 million members and nearly £5 billion of
assets under management ("AUM") while the group now has a total of
approximately £12.5 billion AUM.
Smart's global business is powered by Keystone, the group's proprietary
technology platform. Keystone is the only cloud-based retirement and savings
platform that can serve multiple jurisdictions globally. Keystone is ideally
suited to consolidation, as high levels of automation (including self-service)
drives efficiencies and helps to deliver scale, ultimately leading to better
value for members.
Klarna Holding AB ("Klarna")
Klarna is one of the Company's later-stage assets and has scaled aggressively
over the last few years. Having seen losses rise dramatically as it entered
the US market, in the middle of 2022 it announced a cost cutting exercise, a
focus on existing and profitable customers, and an $800 million fundraise to
steer it to profitability. Since that time, losses have rapidly come down,
such that the company announced it was profitable through Q3 2023, somewhat
earlier than previously expected.
Klarna achieved an adjusted operating profit in 3Q 2023 of SEK 478 million
which compares against an adjusted operating loss of SEK 1.6 billion in 3Q
2022. This improvement was driven by a 7% decrease in total operating expenses
before credit losses year-on-year and a material decrease in credit losses.
Credit losses for 3Q 2023 declined by 46% year-on-year and the credit loss
rate fell by 56% year-on-year to 0.33%; the lowest credit loss rate since
Chrysalis became a shareholder. Klarna's growth profile has also been
encouraging.
A period of exceptional growth was experienced over 2020 and much of 2021,
driven by the move into the US market and assisted by COVID-19. This growth
slowed into 2022, with the company throttling credit growth in response to its
desire to drive towards profitability. More recently, however, growth has
begun to reaccelerate, with 22% GMV growth recorded in 3Q23 - with the US
growing at 46% - which translated into 30% revenue growth.
We believe that product innovation is a key factor in sustaining levels of
growth, as it attracts new customers and merchant partners. In recent months,
Klarna has unveiled several new AI-powered features, which enhance the user
experience. Klarna's retail network continues to grow across multiple
verticals including travel, events and entertainment, luxury clothing and
accessories. In the US, Stubhub joined Klarna's network of over half a million
retailers globally, while in Canada shoppers can now take advantage of
flexible payments at Walmart. The Investment Adviser is also excited by the
global roll out of Klarna's partnership with AirBnB, with consumers in seven
countries now able to spread the cost of their trips worldwide. By early 2024,
AirBnB will roll out Klarna in countries across three continents.
Klarna is an asset that the Investment Adviser classifies as 'IPO ready', a
view supported by recent comments from Klarna's founder, Sebastien
Siemiatkowski, that his three key conditions for an IPO had been met; they
were:
· Becoming established in the US
· Having a sustainable business model
· Demonstrating significant growth potential.
A flotation could prove highly significant for Chrysalis.
Deep Instinct Limited ("Deep Instinct")
The adoption of new technologies such as generative AI is leading to an
increased number of cyber-attacks globally and organisations remain vulnerable
to cyber threats. A recent study by Sapio Research highlighted the impact of
generative AI on the cybersecurity industry, analysing the technology's
positive and negative effect on organisations' security postures and
preparedness. Unsurprisingly, 75% of security professionals witnessed an
increase in attacks over the past 12 months, with 85% attributing the rise to
the application of generative AI.
In this new era of generative AI, the only way to combat emerging threats is
by using advanced AI. Deep Instinct has developed a prevention-first approach
to stopping malware, using the world's first and only purpose-built deep
learning cybersecurity framework. Deep Instinct has developed technologies
that can predict and prevent known and unknown threats in under 20
milliseconds, 750 times faster than the fastest ransomware can encrypt.
Organisations are beginning to realise that Endpoint Detection and Response
("EDR") and Next-Generation Antivirus ("NGAV") solutions do not have
sufficient efficacy and the company has witnessed increased interest and
engagement in its solution over the year to date. If the company can convert
these leads into sales, then it will enter 2024 with very strong deal
momentum.
Featurespace Limited ("Featurespace")
Earlier in the year Featurespace developed a bespoke fraud transaction
monitoring framework for NatWest that led to a 135% improvement in Natwest's
financial scam detection rate and a 75% reduction in false positives.
Subsequently, NatWest and Featurespace won 'Best Innovation by a Financial
Institution' at the Datos Insights 2023 Fraud & AML Impact Awards for that
specific initiative. This follows a number of other awards over the period,
including being named one of the winners in the PETs Challenge.
Industry recognition is translating into customer transaction and Featurespace
currently has 70 direct customers and 200,000 institutions using its
technology including HSBC, NatWest, TSYS, Worldpay, Marqeta, Contis, Danske
Bank, Akbank, Edenred and Permanent TSB.
The company's results for 2022 demonstrated continued momentum in the
business. Revenues increased 28% year-on-year to £34 million but new order
intake was extremely strong towards the end of 2022 enabling Featurespace to
enter 2023 with a strong tailwind. Annual Recurring Revenue ("ARR") grew by
more than 40% through 2022 and has increased by almost 50% for September 2023
versus September 2022.
A number of positive steps have been made in terms of stewardship and
governance over the year. In April 2023, Featurespace announced the
appointment of John Shipsey as CFO. John was previously CFO at Smiths Group
from 2017-2022 and prior to that was CFO of Dyson. In addition, the company
appointed Len Laufer to the board as Non-Executive Director in October 2023.
Len is a leader in Data Science and Technology across the Financial Services
Industry and, after founding and successfully exiting Argus Information and
Advisory Services, he went on to lead JP Morgan's machine learning and data
science efforts as Head of Intelligent Solutions.
With market-leading technology and a proven go-to-market strategy,
Featurespace appears well placed to continue disrupting its end market.
Tactus Holdings Limited ("Tactus")
The market backdrop has been challenging over the past twelve to eighteen
months, with both Microsoft and Apple reporting a material decline in hardware
sales. These recent trends have made it more difficult for Tactus to drive
organic growth.
Notwithstanding this challenging backdrop, Tactus has continued to invest in a
stable of brands over the course of the year and CCL, Box and Chillblast have
now been integrated, rebranded, and repositioned post-acquisition. Chillblast
in particular has performed well and is one of the most highly respected and
decorated desktop PC builders in the world, evidenced by the fact that
Chillblast was awarded the 'PC Pro Excellence Award for "Best PC Manufacturer
2022" over the period.
Tactus also has a business-to-business ("B2B") division which it has been
investing in and scaling over the period. The company has made strong progress
with this offering year to date, and we believe that B2B could represent a
material revenue opportunity for the group going forwards. There are very few
IT providers able to provide fully bespoke IT solutions to their clients, yet
this is something Tactus is able to offer through its own-branded products and
ability to innovate.
The global gaming sector is in structural growth and this inevitably will fuel
demand for gaming devices and accessories. While near-term trading has been
soft, Tactus should be a beneficiary of this trend as one the UKs leading
providers of own and third-party branded gaming PCs, component parts and
accessories.
Cognitive Logic Inc, trading as InfoSum ("InfoSum")
InfoSum has been looking to expand its routes to the market and has been
focussed on delivering strategic partnerships that can accelerate its go to
market strategy. Good progress has been made on this front and several
partnerships have been announced in recent months, including partnerships with
Google, Samsung Ads, Experian and Acxiom.
The group's partnership with Google was announced in May and will see InfoSum
integrate with Google Display & Video 360's Publisher Advertiser Identity
Reconciliation ("PAIR"). Display & Video 360's PAIR is a new solution that
is integrated into Google's Display & Video 360 ("DV360") demand-side
platforms ("DSP") and enables advertisers and publishers to reconcile their
first-party data without tracking people across the web. This offering will be
particularly relevant to the US market when Google begins to phase out support
for third party cookies from midway through 2024. This development is relevant
to InfoSum as approximately 80% of advertisers depend on third-party cookies
and, without them, those advertisers will need to find a new way to reach end
customers and prospects online.
Similarly, InfoSum's agreement with Samsung Ads in April, a leading provider
of advanced TV advertising, will enable Samsung Ad's advertising partners to
match against Samsung's industry-leading Smart TV footprint, as well as
through Samsung DSP, all while continuing to maintain full control over their
data.
It is evident from partnerships such as these that organisations will further
prioritise and expand their first-party data programs and the Investment
Adviser believes that data clean rooms will be an emerging and integral
solution for publishers. InfoSum continues to be one of the pioneers in this
space and applies innovative privacy controls, differential privacy techniques
and utilises its 'non-movement of data' approach to prioritise consumer
privacy at every stage, allowing stakeholders to keep their own first-party
data separate and under their complete control. As a result, InfoSum should be
well positioned thematically to take advantage of global regulatory tailwinds.
Secret Escapes Holding Limited ("Secret Escapes")
The backdrop for travel has been much more favourable over the course of the
year and trading at Secret Escapes has been considerably better than in
previous years, where booking cycles were impacted by COVID-19 and travel
restrictions. The company's financial performance year to date has been
encouraging and the outlook for the business into 2024 is positive.
The company announced a funding round in July and secured £31.7 million of
equity funding alongside a debt refinancing. These funding initiatives should
enable the company to accelerate marketing spend to drive customer acquisition
and, ultimately, growth. This should result in a faster growing and more
profitable business in the near to medium term.
Graphcore Limited ("Graphcore")
Graphcore has continued to develop its hardware and software solutions,
against a fast-moving industry backdrop.
While the market for AI applications has seen considerable growth, this has
meant that model sizes have grown significantly: in 2017, AI models had around
1 million parameters, but currently have over 1 trillion. This explosion in
size has led to a requirement for AI compute capabilities to expand very
aggressively. The Investment Adviser believes this has favoured the incumbent,
Nvidia, which commands a dominant position in terms of sales of AI hardware.
So, despite a strong market backdrop and considerable customer interest,
Graphcore has found it hard to generate significant revenues from its
products.
Wise PLC ("Wise")
Post-period end, Wise released a trading update that demonstrated sustained
momentum over the period. Active customer growth remained strong at 30% (to
7.5 million) while revenues increased by 23% year-on-year, and "Income" -
which includes interest income - grew 40%.
Part of the reason for the strong operating performance of Wise over the last
twelve months has been its exposure to UK base rates. Like Starling, Wise has
deposits on its platform that it can lodge with the Bank of England and other
central banks, which have achieved negligible yields for several years.
Following the global shift upwards in yields, these excess deposits are now
earning a return.
As a result of this performance, management increased FY24 income growth
guidance from 28-33% to 33-38% at the interim stage and further increased
guidance to 42-44% at its fiscal third quarter and noted that FY24
profitability will be supported by higher gross profit margins (due to higher
net yields on customer balances) and remain elevated above its 20% medium-term
guidance.
Sorted Holdings Limited ("Sorted")
It was announced in June 2023 that Location Sciences Group PLC was looking to
acquire the entire share capital of Sorted. Significant progress has been made
by the Company and its advisers in relation to the proposed acquisition and it
is anticipated that this transaction will close soon.
Alongside pushing forward with this transaction, Sorted has streamlined its
operations, while expanding the customer base and shipping volumes with
existing customers. This should result in a more efficient and profitable
business going forwards.
Environmental, Social and Corporate Governance Report
The role of ESG in our investment process
Chrysalis provides primary capital to predominantly unlisted businesses that
offer the technology to transform the way people live and work. The Company's
ESG Policy sets out how the Investment Team fulfils its responsibilities on
behalf of clients at each stage of the investment process, in line with the
Company's investment policy and asset class specific considerations.
While no new private investments were made during the period, the Investment
Adviser updated the ESG policy established by the Board and continued to
integrate ESG analysis systematically across the portfolio.
The current portfolio includes many companies which provide solutions to
urgent business problems with broader societal costs - such as fraud, cyber
risks, data privacy and affordable pension provision - or which disrupt highly
profitable financial services incumbents and share cost savings with
consumers. The demand to reduce these broader societal costs is a crucial
driver which underpins the long-term growth story of these investments.
As well as positive sustainability outcomes, the Investment Adviser expects
all companies to minimise any direct and indirect negative impact on the
environment and broader society.
This report provides a review of the steps the Investment Adviser is taking to
evolve the Company's ESG strategy, and the progress being made against the ESG
objectives. Also included are a number of case studies to bring to life good
practice by portfolio companies during the financial year, and stewardship
activity conducted by the Investment Team.
Stewardship
Stewardship is an important responsibility and a core aspect of the investor
approach. There is a continuous process of dialogue with the leadership teams
of investee companies. Where the Investment Adviser has a board seat or board
observer status, members of the Investment Team attend board meetings and
provide input where they believe they can advise companies on how to meet
their strategic objectives. This includes regular dialogue on ESG related
topics, and the Investment Adviser seeks to influence companies where they
believe the management of material ESG factors can be improved.
One of the principal challenges of ESG integration in a private company
context is data availability. Unlike listed companies, many private companies
do not disclose ESG related data, either publicly or to third party data
providers. This reality can hinder the identification of material ESG risks
and potential issues which may require engagement.
The Investment Adviser has developed an internal dashboard of metrics to
assess the ESG performance of portfolio companies. This data is collected
directly from private investee companies or sourced from the sustainability
disclosures of listed holdings. The Investment Adviser uses the resulting
metrics to assess each company's ESG performance relative to its level of
corporate development and maturity, and incorporates insights gained into its
dialogue with company leadership teams, to assist their continued development.
Where potential material ESG risks, or areas of group governance which require
further development, are identified, the Investment Adviser communicates these
conclusions to management and seeks to work collaboratively with them to make
improvements. Company action plans and any material ESG incidents are reported
to the Risk Committee and monitored over time to assess progress.
Cast study: Starling
Starling has been a long-held position in the portfolio; with the initial
investment made in early 2019.
During the due diligence process, the Investment Adviser identified that the
board of directors would benefit from additional independence and as part of
its original investment, negotiated the right to appoint a new independent
non-executive director. Following investment, the Investment Adviser then
worked with the other major investor to bring in suitable new directors to
replace those leaving the board. This included a new Chairman and senior
independent director ("SID"), as well as other directors with specific skill
sets, with a view to helping the company develop.
This work paid dividends when Anne Boden, former CEO and founder, decided to
step back from Starling, as the board was able to provide effective support to
the interim CEO as he took over, being comprised of a number of individuals
with relevant experience, including holding roles at major, global banks.
Corporate Governance
To grow successfully, companies and their founders must not only execute
strategically, but they must also lay the foundations for future growth by
creating appropriate corporate governance structures. It is critical that
private companies considering listing prepare themselves for the additional
scrutiny which comes with going public. It is also vital that founders, who
may not have previously run listed businesses, are prepared to bring in
experienced independent non-executive directors who can help their companies
develop. Building capacity at board and executive level - reducing key man
risk and reliance on individual founders over time - is crucial to a company's
future development.
During the financial year, the portfolio companies have continued to
strengthen group governance. As active owners, the Investment Adviser assesses
company governance on a range of issues, recognising that good practice will
differ depending on a company's jurisdiction, size, and ownership structure.
Case study: wefox
wefox continued to strengthen its board and management team during the period,
recruiting Nicholas Walker as Chief HR Officer. Nicholas is a seasoned HR
professional with more than 25 years' global experience spanning technology,
fintech and payment industries, most recently at Paysafe.
Post period end, wefox appointed Jonathan Wismer as its new Group Chief
Financial Officer. Jonathan brings more than 25 years of experience in the
insurance industry, having held senior finance roles at Zurich, AIG and
Resolution Life. The appointment represents the company's continued
strengthening of its C-suite as it steps up its plans for profitable growth
and global expansion.
Subsequently, wefox also appointed Mark Hartigan as Chairman. Mark was
previously Chief Executive at LV and Head of Operations for Europe, Middle
East and Africa at Zurich Insurance Group. He was Chief Executive Officer for
Zurich Global Life in the Asia Pacific and Middle East region and led its
regional business in Europe.
Human Capital
Good human capital management supports both value creation and business
resilience, and the Investment Adviser believes that investing in human
capital correlates with longer-term business success. Human capital management
can both upskill and educate a workforce, increase abilities, and retain and
motivate employees.
The Investment Adviser recognises that approaches to human capital management,
including DE&I will differ, and as an active owner seeks to understand an
investee company's operating model and engage to advise on best practice and
potential improvements.
Case study: Starling
Starling Bank continues to build on its position as a leader on gender
diversity, both organisationally and as a catalyst for a broader change in
retail banking.
Effective integration of DE&I principles within a business is widely
considered to help companies attract talent from a wider talent pool. It also
contributes to better decision-making, performance, innovation, and employee
satisfaction and retention.
The cumulative Impact of these initiatives has been significant. Starling's
latest gender pay gap figures (2022), show that the median gender pay gap has
decreased from 10% to 9%, while the mean has narrowed from 16% to 12%. Its
gender pay gap remains substantially lower than those of competitors (see
table).
Starling NatWest Lloyds Virgin Money
2022 mean gender pay gap 12% 32% 29% 28%
Source: Company disclosures
Starling launched its #MakeMoneyEqual campaign in 2018, with the aim of
removing negative gender stereotypes from public conversation around money and
personal finances. Since then, the bank has conducted studies showing
significant discrepancies in the way that men and women are spoken to about
money and portrayed in banking advertising campaigns, factors which could
discourage women's engagement with financial affairs. It created a free image
library that better represented women and money, helping to ensure that women
are better represented in images used by media and advertisers. Since 2019,
the bank has commissioned a regular independent audit of its algorithms and
technological processes to make sure Starling is fair and free from gender or
race bias.
Social Impact
The current portfolio includes many companies which provide solutions to
urgent business problems with broader societal costs.
Case study: The use of AI to prevent financial crime
Both Featurespace and Deep Instinct, representing approximately 13% of net
assets at period end, drive innovation through generative AI and deep
learning.
Featurespace estimates that global losses from card fraud will total $397.4
billion over the next 10 years, and the problem will only continue to grow as
criminals utilise generative AI for their own gain.
In response, in October 2023 the company launched TallierLTM, the world's
first Large Transaction Model ("LTM"). TallierLTM, a foundation AI technology
for the payment and financial services industry, is a large-scale,
self-supervised, pre-trained model designed to power the next generation of AI
applications. The model has shown improvements of up to 71% in fraud value
detection when compared to industry standard models. It identifies hidden
transactional patterns undiscoverable using current industry methods, enabling
it to predict likely future consumer transactions.
Deep Instinct's 2023 Mid-Year Cyber Threat Report calculates that the number
of ransomware victims in the first half of 2023 exceeded the total number of
victims for the whole of 2022. The proliferation of Ransomware-as-a-Service
("RaaS") - which sees criminal actors exploiting vulnerabilities to launch
large-scale cyber-attacks - has continued in 2023 alongside a rise in the use
of Large Language Models ('LLMs"), e.g. ChatGPT, with criminal actors taking
advantage of its capabilities to develop malicious code.
Deep Instinct predicts that in 2024 threats will become even more customised,
making it critical to develop deep learning methods, the most advanced form of
AI, to tackle these threats.
Case study: Financial wellbeing
Wise is the longest held asset in the portfolio.
Its mission is to lower the cost to customers of transferring money around the
world. Historically, there have been many links in the chain to send money
cross boarder; local bank branches - sometimes at each end - as well as
transmitting banks, if the former are not using payment rails such as SWIFT.
As well as each bank requiring a cut of the principle, foreign exchange fees
will also be levied.
Wise set out to circumvent this layering of fees and built its own
infrastructure to move money globally. This meant that not only did it cut out
many of the (costly) links in the chain, but it could also offer economies of
scale in terms of foreign exchange pricing. As a result, Wise allows
individuals to move money around the world up to approximately five-times
cheaper than many high street UK banks.
Environmental Impact
Limiting global temperature rises to 1.5 degrees above pre-industrial levels,
in line with the Paris Agreement, is an urgent challenge facing the global
economy. The Investment Adviser uses its influence as an investor through
stewardship and active ownership to encourage companies to identify, manage
and mitigate climate change risks or opportunities. While the Investment
Adviser believes that the Company's portfolio of tech-enabled, predominately
digital businesses is not exposed to material climate risks and have limited
direct environmental impacts, its view is that the scale of climate change
will impact all sectors, industries, and asset classes and so acknowledges the
positive role that investors can play in tackling it through investment
decisions and capital allocation.
Disclosed below is the weighted average carbon intensity of the portfolio and
other related metrics. The companies representing 42% of NAV at year end have
calculated their operational (Scope 1 and 2) emissions. Where companies have
not yet calculated their own emissions, the Investment Adviser has used
estimated data based on the peer groups used in the Company's valuation
process. The analysis suggests that the portfolio's total emissions increased
during the year, which may be expected given the continued growth of many
portfolio companies. However, on a relative basis the weighted average carbon
intensity of the portfolio decreased as a proportion of revenues, suggesting
increased carbon efficiency of the portfolio in aggregate.
Chrysalis Portfolio Carbon Metrics (Scope 1 and 2 emissions)
FY 2023 FY 2022
Carbon Emissions (tons CO2e/$M invested) 0.9 0.5
Total Carbon Emissions (tons CO2e) 880 450
Weighted Average Carbon Intensity (tons CO2e/$M Sales) 14.7 22.7
Source: Data collected during Chrysalis ESG Data Collection Exercise, based on
public disclosures by portfolio companies, or estimates. Latest year of
reported emissions.
Case study: Smart Pension
In January 2023, Smart Pension announced the launch of three new fully
sustainable lifestyle strategies with different growth fund options. All three
growth funds fully invest in funds that positively contribute to the planet
and society, including investing in areas such as renewable energy projects,
clean water, and healthcare. Smart Pension is the first UK pension provider to
offer customers a range of lifestyle strategies that are all fully
sustainable, including the Smart Pension default fund. The Smart Pension
Master Trust was also approved as a signatory to the UK Stewardship Code in
March 2023.
In February 2023, Smart Pension announced that it has halved the emissions of
its default growth fund. This is over two years ahead of the 50% reduction
target it announced in June 2022 and represents considerable progress towards
the company's pledge to make its default growth fund net zero by 2040. This is
also well ahead of the goals of the Paris Agreement, which called for
emissions to be reduced by 45% by 2030 and to reach net zero by 2050.
Case study: Klarna
During the financial year, Klarna provided an update on the progress of its
Give One initiative, launched in April 2021, which pledges 1% of all future
funding rounds to support change-makers on the frontlines of environmental
challenges. Klarna has contributed $11 million to the initiative since launch
in April 2021, funds which have enabled the planting of 3.4 million trees
worldwide. Give One supports 56 environmental initiatives which include over
70 organisations throughout North America, South America, Africa, Europe, and
Asia.
Figures disclosed in this section have not been independently verified by the
Company or the Investment Adviser.
Investment Objective and Policy
Investment objective
The investment objective of the Company is to generate long term capital
growth through investing in a portfolio consisting primarily of equity or
equity-related investments in unquoted and listed companies.
Investment policy
Investments will be primarily in equity and equity-related instruments (which
shall include, without limitation, preference shares, convertible debt
instruments, equity-related and equity-linked notes and warrants) issued by
portfolio companies. The Company will also be permitted to invest in
partnerships, limited liability partnerships and other legal forms of entity
where the investment has equity like return characteristics.
For the purposes of this investment policy, unquoted companies shall include
companies with a technical listing on a stock exchange but where there is no
liquid trading market in the relevant securities on that market (for example,
companies with listings on The International Stock Exchange or the Cayman
Islands Stock Exchange). Furthermore, the Company shall be permitted to invest
in unquoted subsidiaries of companies whose parent or group entities have
listed equity or debt securities.
The Company may invest in publicly traded companies (including participating
in the IPO of an existing unquoted company investment), subject to the
investment restrictions below. In particular, unquoted portfolio companies may
seek IPOs from time to time following an investment by the Company, in which
case the Company may continue to hold its investment without restriction.
The Company is not expected to take majority shareholder positions in
portfolio companies but shall not be restricted from doing so. Furthermore,
there may be circumstances where the ownership of a portfolio company exceeds
50% of voting and/or economic interests in that portfolio company
notwithstanding an initial investment in a minority position. While the
Company does not intend to focus its investments on a particular sector, there
is no limit on the Company's ability to make investments in portfolio
companies within the same sector if it chooses to do so.
The Company will seek to ensure that it has suitable investor protection
rights through its investment in portfolio companies where appropriate. The
Company may acquire investments directly or by way of holdings in special
purpose vehicles, intermediate holding vehicles or other funds or similar
structures.
Investment restrictions
The Company will invest and manage its assets with the objective of spreading
risk, as far as reasonably practicable. No single investment (including
related investments in group entities) will represent more than 20% of Gross
Assets, calculated as at the time of that investment. The market value of
individual investments may exceed 20% of gross assets following investment.
The Company's aggregate equity investments in publicly traded companies that
it has not previously held an investment in prior to that Company's IPO will
represent no more than 20% of the Gross Assets, calculated at the time of
investment.
Subject in all cases to the Company's cash management policy, the Company's
aggregate investment in notes, bonds, debentures and other debt instruments
(which shall exclude for the avoidance of doubt convertible debt,
equity-related and equity-linked notes, warrants or equivalent instruments)
will represent no more than 20% of the Gross Assets, calculated as at the time
of investment.
The Company will not be required to dispose of any investment or rebalance its
portfolio as a result of a change in the respective value of any of its
investments.
Corporate Governance Statement
Chrysalis has a Premium Listing on the London Stock Exchange Main Market and
became a member of the Association of Investment Companies (AIC) on 21 January
2019. The Board has considered the Principles and Provisions of the 2019 AIC
Code of Corporate Governance (AIC Code), and a full scope review of the
Company's corporate governance processes and procedures has been conducted
with reference to the AIC Code by the Board and the Company Secretary. The AIC
Code addresses the relevant Principles and Provisions set out in the UK
Corporate Governance Code (the UK Code), as well as setting out additional
Provisions on issues that are of specific relevance to the Company.
The Board considers that reporting against the Principles and Provisions of
the AIC Code, which has been endorsed by the Financial Reporting Council and
the Guernsey Financial Services Commission, provides more relevant information
to shareholders. The Company has complied with the Principles and Provisions
of the AIC Code and in doing so has met its associated disclosure requirements
under paragraph 9.8.6 of the Listing Rules.
The AIC Code is available on the AIC website (www.theaic.co.uk). It includes
an explanation of how the AIC Code adapts the Principles and Provisions set
out in the UK Code to make them relevant for investment companies.
Key Governance Disclosures
Section 172(1) Statement
Through adopting the AIC Code, the Board acknowledges its duty to apply and
demonstrate compliance with section 172 of the UK Companies Act 2006 and to
act in a way that promotes the success of the Company for the benefit of its
Shareholders as a whole, having regard to (amongst other things):
a) consequences of any decision in the long-term;
b) the need to foster business relationships with suppliers, customers
and others;
c) impact on community and environment;
d) maintaining reputation; and
e) acting fairly as between members of the Company.
The Board considers its duties under S.172 to be integrated within the
Company's culture and values. The Company's culture is one of respect for the
opinions of stakeholders, with an aim of carrying out its operations in a fair
and sustainable manner that is both instrumental to the Company's long term
success and upholds the Company's ethical values. The Board encourages
diversity of thought and opinion in accordance with its Diversity Policy and
would like to encourage stakeholders to engage freely with the Board of
Directors on matters that are of concern to them.
Stakeholders may contact the Company via the Company's dedicated e-mail
address (chrysalis@maitlandgroup.com (mailto:chrysalis@maitlandgroup.com) ),
the Company's LinkedIn page
(https://www.linkedin.com/company/chrysalis-investments-investment-trust/) or
by post via the Company Secretary on any matters that they wish to discuss
with the Board of Directors.
The Company is an externally administered investment company, has no
employees, and as such is operationally quite simple. The Board does not
believe that the Company has any material stakeholders other than those set
out in the following table.
Investors Service providers Community and environment
Issues that matter to them
Performance of the shares 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 shareholders in relation to the Company business 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
over 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 50.
Viability Statement
The Viability Statement is made on page 50 and 52.
Fair, Balanced and Understandable Statement
The annual report and accounts taken as a whole are fair, balanced and
understandable and provide the information necessary for shareholders to
assess the Company's performance, business model and strategy. Further
information on how this conclusion was reached can be found within the Audit
Committee Report.
Appointment of the New Investment Adviser
Further details relating to the appointment of the New Investment Adviser and
how this is in the interests of members as a whole can be found within the
Report of the Management Engagement Committee.
Assessment of Principal and Emerging Risks
The Board has undertaken a robust assessment of the Company's principal and
emerging risks, together with the procedures that are in place to identify
emerging risks. Further information on this assessment and an explanation on
how these risks are being mitigated and managed can be found on page 53.
Review of Risk Management and Internal Control
The Board confirms that it has reviewed the Company's system of risk
management and internal controls for the year ended 30 September 2023, and to
the date of the approval of this annual report and audited financial
statements. For further details of the key risks and uncertainties the
Directors believe the Company is exposed to together with the policies and
procedures in place to monitor and mitigate these risks, please refer to pages
77 to 79 and 88 to 89 and note 19 of the annual report and audited financial
statements.
The Board of Directors
The Board comprises six independent non-executive Directors, two of whom are
female, who meet at least quarterly, in addition to ad hoc meetings convened
in accordance with the needs of the business, to consider the Company's
affairs in a prescribed and structured manner. Further details concerning the
meetings attended during the year by the Board and its Committees can be found
on page 39. All Directors are considered independent of the Investment Adviser
for the purposes of the AIC Code and Listing Rule 15.2.12A.
The Board is responsible for the Company's long term sustainable success and
the generation of value for shareholders and in doing so manages the business
affairs of the Company in accordance with the Articles of Incorporation, the
investment policy and with due regard to the wider interests of stakeholders
as a whole. For further information on how the Board considers the interests
of stakeholders in its decision making please see the S.172(1) statement on
pages 33 and 34. Additionally, the Board have overall responsibility for the
Company's activities including its investment activities and reviewing the
performance of the Company's portfolio. The Board are confident that the
combination of its members is appropriate and is such that no one individual
or small group of individuals dominates the Board's decision making.
The Directors, in the furtherance of their duties, may take independent
professional advice at the Company's expense, which is in accordance with
provision 19 of the AIC Code. The Directors also have access to the advice and
services of the Company Secretary through its appointed representatives who
are responsible to the Board for ensuring that the Board's procedures are
followed, and that applicable rules and regulations are complied with.
To enable the Board to function effectively and allow the Directors to
discharge their responsibilities, full and timely access is given to all
relevant information.
Comprehensive board papers are circulated to the Board in advance of meetings
by the Company Secretary, allowing time for full review and comment by the
attending parties. In the event that Directors are unable to attend a
particular meeting, they are invited to express their views on the matters
being discussed to the Chairman in advance of the meeting for these to be
raised accordingly on their behalf. Full and thorough minutes of all meetings
are kept by the Company Secretary.
The Directors are requested to confirm their continuing professional
development is up to date and any necessary training is identified during the
annual performance reviews carried out and recorded by the Remuneration and
Nomination Committee.
The current Board have served since the Company's inception in October 2018,
with the exception of Margaret O'Connor who was appointed on 6 September 2021,
and have been carefully selected against a set of objective criteria. The
Board considers that the combination of its members brings a wealth of skills,
experience and knowledge to the Company as illustrated in their biographies
below:
Director Biographies
Andrew Haining (Chairman) (independent)
Andrew has had a 30-year career in banking and private equity with Bank of
America, CDC (now Bridgepoint) and Botts & Company. During his career,
Andrew has been responsible for over 20 private equity investments with
transactional values in excess of $1 billion.
Andrew holds several Guernsey and UK board positions.
Stephen Coe (senior independent)
Stephen serves as Chairman of the Audit Committee. He is currently a
Non-Executive Director of a number of private companies. Stephen has been
involved with offshore investment funds and managers since 1990, with
significant exposure to property, debt, emerging markets and private equity
investments. Stephen qualified as a Chartered Accountant with Price Waterhouse
Bristol in 1990 and remained in audit practice, specialising in financial
services, until 1997. From 1997 to 2003 Stephen was a director of the Bachmann
Group of fiduciary companies and Managing Director of Bachmann Fund
Administration Limited, a specialist third party fund administration company.
From 2003 to 2006 Stephen was a director with Investec in Guernsey and
Managing Director of Investec Trust (Guernsey) Limited and Investec
Administration Services Limited. Stephen became self-employed in August 2006,
providing services to financial services clients.
Simon Holden (independent)
Simon is a Chartered Director ("Cdir") accredited by the Institute of
Directors. Previously an investment director at Terra Firma Capital Partners
and Candover Investment prior to that, Simon has been an active independent
director to listed investment company, private equity fund and trading company
boards since 2015. In addition, Simon acts as the pro-bono Business Adviser to
Guernsey Ports; a State of Guernsey enterprise that operates all the
Bailiwick's critical airports and harbour infrastructure.
A graduate of the University of Cambridge with an Meng and MA in Manufacturing
Engineering, Simon is an active member of UK and Guernsey fund management
interest groups including a director member of the Association of Investment
Companies ("AIC").
Anne Ewing (independent)
Anne has over 35 years of financial services experience in banking, asset and
fund management, corporate treasury, life insurance and the fiduciary sector.
Anne has an MSc in Corporate Governance, is a Chartered Fellow of the
Securities Institute and has held senior roles in Citibank, Rothschilds, Old
Mutual International and KPMG, and latterly has been instrumental in the
start-ups of a Guernsey fund manager and two fiduciary licensees.
Anne has several non-executive directorships roles in investment companies and
a London based private wealth banking group and related subsidiaries in Jersey
and Guernsey.
Tim Cruttenden (independent)
Tim is Chief Executive Officer of VenCap International PLC, a UK-based asset
management firm focused on investing in venture capital funds. He joined
VenCap in 1994 and is responsible for leading the strategy and development of
the firm. Prior to joining VenCap, Tim was an economist and statistician at
the Association of British Insurers in London. He received his Bachelor of
Science degree (with honours) in Combined Science (Economics and Statistics)
from Coventry University and is an Associate of the CFA Society of the UK. Tim
is a non-executive director of Polar Capital Technology Trust.
Margaret O'Connor (independent)
Margaret has had a 30-year career commercialising technology in the US, Asia,
Europe, and Africa. She brings insights from having worked as a MarTech
operator, MasterCard senior executive, and investor to her current roles as an
independent director of a Guernsey investment trust and Chair of a Mauritius
Venture Capital Fund. She's a member of the Private Equity Women Investor
Network.
She earned her BA from Rutgers University and studied International Relations
at Princeton University before moving to Seoul, Korea to work for the Korean
Ministry of Finance.
Public Company Directorships
The following details are of all other public Company Directorships and
employment held by each Director and shared Directorships of any commercial
company held by two or more Directors:
Anne Ewing
None to be disclosed
Andrew Haining
None to be disclosed
Simon Holden
HICL Infrastructure PLC
Hipgnosis Songs Fund Limited
JPMorgan Global Core Real Assets Limited
Stephen Coe
None to be disclosed
Tim Cruttenden
Polar Capital Technology Trust PLC
Margaret O' Connor
None to be disclosed
Valuation Committee
The Board are of the view that the valuation process needs to be as efficient
as possible while also providing for comprehensive and independent oversight.
Consequently, the Board established an independent Valuation Committee which
comprises of the following members:
Lord Rockley (Committee Chairman)
Anthony Rockley was an audit partner at KPMG until 2015 with a sector focus on
private equity and venture capital. Over a 34 year career with KPMG, Anthony
was responsible for auditing private equity and venture capital companies and
structures. Amongst other sector specific work, Anthony was a member of the
International Private Equity and Venture Capital Guidelines Board for 9 years.
Diane Seymour Williams
Diane Seymour Williams has a career spanning over 30 years in asset and wealth
management. She was a listed portfolio manager with Deutsche Morgan Grenfell,
ultimately running DMG's asset management business in Asia. After returning to
the UK, Diane subsequently held a number of board positions in the financial
services sector. Currently she sits, inter alia, on the boards of ABRDN
Private Equity Opportunities Trust PLC, Mercia Asset Management PLC and SEI's
European business. Diane brings extensive fund management and portfolio
oversight experience. In addition to her public company roles Diane sits on
the investment committees of Newnham College, Cambridge and the Canal &
River Trust.
Jonathan Biggs
Jonathan Biggs worked at Accel, a leading global venture and growth capital
investor, for 20 years up until 2021. One of the first hires in Europe, he was
the COO of Accel's European business. During his time at Accel, he raised over
$2.5 billion in five early-stage venture funds focused on Europe. Jon has
subsequently joined Top Tier Capital Partners as a Partner where he leads the
European funds business. Prior to that he was a Managing Partner at SVB
Capital.
The fourth member of the committee is Tim Cruttenden who has been a director
of the Company since its formation.
Director Attendance
During the year ended 30 September 2023, the Board and Committee meetings held
and attended by the Directors were as follows:
Quarterly Board Meeting Audit Committee Meeting
Remuneration and nomination Meetings Risk Committee Meetings Management
Engagement Ad-hoc Meetings
Meetings
Director Attended/Eligible Attended/ Attended/ Attended/ Attended/ Attended/
Eligible Eligible Eligible Eligible Eligible
Anne Ewing 6/6 3/3 1/1 4/4 n/a 2/2
Andrew Haining 5/6 n/a 1/1 n/a n/a 2/2
Simon Holden 6/6 3/3 1/1 4/4 1/1 2/2
Stephen Coe 6/6 3/3 1/1 3/4 n/a 2/2
Tim Cruttenden 6/6 1/3 1/1 4/4 1/1 2/2
Margaret O'Connor 6/6 1/3 1/1 4/4 1/1 2/2
Valuation Committee Meetings
Member Attended/ Eligible
Lord Rockley 8/8
Diane Seymour-Williams 8/8
Jonathan Biggs 7/8
Tim Cruttenden 7/8
Division of Responsibilities
A schedule of matters reserved for the Board is maintained by the Company and
can be summarised as follows:
· Strategic Issues
· Financial Items such as approval of the annual and half-yearly
reports, any quarterly financial statements and any preliminary announcement
of the final results and the annual report and accounts including the
corporate governance statement
· Treasury Items
· Legal, Administration and Other Benefits
· Communications with Shareholders
· Board Appointments and Arrangements
· Miscellaneous such as to approve the appointments of professional
advisers for any Group company in addition to the Company's Auditors
· Monetary Limits
The Directors have also delegated certain functions to other parties such as
the Valuation Committee, the Investment Adviser, the Administrator, the
Company Secretary, the Depositary and the Registrar. In particular, the
Investment Adviser has been granted discretion over the management of the
investments comprising the Company's portfolio.
The Investment Adviser reports to the Board on a regular basis both outside of
and during quarterly board and Committee meetings, where the operating and
financial performance of the portfolio, together with valuations, are
discussed at length between the Board and the Investment Adviser. The
Directors have responsibility for exercising supervision of the Valuation
Committee and the Investment Adviser.
Board Committees
The Company has an Audit Committee, Remuneration and Nomination Committee,
Management Engagement Committee, Risk Committee and an Independent Valuation
Committee (together the "Committees"). The Terms of Reference for each
committee is available on the Company's website.
The Board believes that its established Committees are adequately composed,
and that each member has the necessary skills and experience to discharge
their duties effectively. All new Committee members will be provided with an
induction on joining the relevant Committee. The actions carried out by each
Committee since the previous quarterly board meeting are reported at each
meeting to the Board of Directors by the respective Committee chair. Each
Committee meeting is attended by the Company Secretary and comprehensive
minutes are kept, as well as a schedule of the action points arising from each
meeting.
Stephen Coe is the Chairman of the Audit Committee with Anne Ewing and Simon
Holden as members with Margaret O'Connor as an observer. A full report
regarding the Audit Committee's activities during the year can be found in the
Audit Committee Report on page 60.
Anne Ewing is Chairman of the Remuneration and Nomination Committee, with
Margaret O'Connor and Tim Cruttenden as members. The Remuneration and
Nomination Committee meets at least once a year in accordance with the terms
of reference and reviews, inter alia, the structure, size and composition of
the Board. A full report regarding the Remuneration and Nomination Committee's
activities during the year can be found on page 41.
Margaret O'Connor is Chairman of the Management Engagement Committee, with
Simon Holden and Tim Cruttenden as members. The Management Engagement
Committee will meet formally at least once a year for the purpose, amongst
other things, of reviewing the actions and judgments of the Investment Adviser
and the terms of the Portfolio Management Agreement. A full report regarding
the Management Engagement Committee's activities during the year can be found
on page 44.
Simon Holden is Chairman of the Risk Committee, with Anne Ewing, Margaret
O'Connor, Stephen Coe and Tim Cruttenden as members. The Risk Committee will
meet formally, at a minimum once a year, though it has been agreed, that the
Risk Committee is convened quarterly in the first year of assuming its
responsibilities, aligned with the Company's financial reporting cycle and at
such other times as the Chairman of the Committee deems appropriate, for the
purpose of, amongst other things, to ensure that there is proper consideration
and assessment risks and stresses ensuring that the Investment Adviser
develops appropriate strategies to protect the Group's portfolio of
investments. A full report regarding the Risk Committee's activities during
the year can be found on page 46.
Report of the Remuneration and Nomination Committee
Statement: Chairman of Committee
I am pleased to present the Remuneration and Nomination Committee report for
the year ended 30 September 2023. The composition of the Remuneration and
Nomination Committee meets with the requirements of the AIC Code and, in line
with good practice, membership is reviewed annually.
During the year, there have been no changes to the Directors' Remuneration
Policy or the Terms of Reference of the Remuneration and Nomination Committee.
No new Directors were appointed to the Board during the year.
In 2024, and subject to the outcome of the Continuation Vote at the AGM, the
Remuneration and Nomination Committee will revive its recruitment process to
help the Company further achieve its targets.
I am satisfied that the Remuneration and Nomination Committee is discharging
its responsibilities proficiently and recommend this report to the Board.
Purpose and Aim of the Remuneration and Nomination Committee
The terms of reference of the Remuneration and Nomination Committee are set
out on the Company's website at
https://chrysalisinvestments.co.uk/investor-relations/. The primary
responsibility of the Remuneration and Nomination Committee is, in relation to
remuneration, to determine and agree with the Company's Board of Directors
(together the "Board" and individually a "Director") the framework or broad
policy for the remuneration of the Company's Chairman and non-executive
Directors in accordance with the Company's articles of incorporation (the
"Articles") and applicable law and, in relation to nominations, to review the
structure, size and composition (including the skills, knowledge and
experience) required of the Board compared to its current position and make
recommendations to the Board with regard to any changes as necessary.
Membership and Meetings of the Remuneration and Nomination Committee
The Remuneration and Nomination Committee met formally once during 2023, on 27
October 2023. Due to illness the meeting was chaired by Margaret O'Connor and
attended by Tim Cruttenden with papers prepared by the Chair of the Committee.
The members of the Remuneration and Nomination Committee are as follows:
· Anne Ewing (Chairman)
· Tim Cruttenden
· Margaret O'Connor
Composition, Succession and Evaluation of the Board
At its meeting, the Remuneration and Nomination Committee reviewed and
reaffirmed the Company's policy whereby no Director will serve for more than
nine years (such policy being aligned to the AIC Code). The Remuneration and
Nomination Committee confirms that no Director has served for longer than nine
years, due to the Company being incorporated in October 2018.
No new directors were appointed to the Board during the year.
On 27 October 2023, at a general board meeting, the Company reviewed and
refreshed its policy on Diversity and Inclusion as follows:
The Board is committed to longer term succession planning in the context of
meeting the objective of the Parker Review will follow ahead of the 2024
deadline. This will require the Company to increase the ethnic diversity of
its board by having at least one director from an ethnic minority. The
Company's Board currently comprises two female directors which meets the
targets set by the Hampton-Alexander Review to increase the number of women in
senior leadership positions in all FTSE 350 companies to 30% by end 2022.
Although not a constituent of the FTSE 350, the Company is committed to
maintaining the highest standards of corporate governance and hence will seek
to meet the further recommendations of the review within the 2025 deadline.
Appointments to the Board will be based on merit and on any skills gap
identified to ensure the Board can continue to act effectively.
The Company follows a set of principles when looking to recruit a new
candidate. This will include the use of an external well regarded recruitment
agency who will be instructed to conduct a wide search for diverse candidates
and, where applicable potentially, encourage candidates who may have
appropriate transferable skills which, if appointed, would add to the
diversity of the Board.
Where the Company is unable to meet any diversity or inclusion targets it will
look to fully explain its position to its shareholders and stakeholders.
In November 2023, the Committee considered succession planning and undertook a
review of the attributes and skills of the current Board and made
recommendations to the Board.
In light of the forthcoming Continuation Vote it was considered inappropriate
to make changes to the Board and indeed it would have proved difficult to
recruit appropriate candidates with the different scenarios that might follow
the vote. The Board therefore agreed to defer any recruitment until the
results of the Continuation Vote are known.
A succession plan has been drawn up in the event of the continuation of the
Company when it is expected at least three directors would rotate off the
Board over a period of 24 months. Due regard will be given to equal
opportunity, diversity and inclusion for these appointments.
Committee Memberships
Audit Committee Risk Committee Valuation Committee Management Engagement Committee Remuneration and Nomination Committee
Chaired by: 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
Margaret O'Connor (Observer) T Cruttenden T Cruttenden (Board Representative) S Holden
M O'Connor
*Independent
2023 Review of Board Performance
The Remuneration and Nomination Committee engaged BoardAlpha Limited to
undertake a review of Board performance. This externally facilitated review
was undertaken during the summer months of 2023. Interviews were held with
each of the six non-executive directors, including the Chairman. Discussions
were also held with the Investment Adviser, Director of Finance - Chrysalis
and with Lord Rockley as Chairman of the Valuation Committee. Further
discussions were held with the Company's administrator, legal counsel and
brokers. BoardAlpha attended a Valuation Committee Meeting, a Risk Committee
Meeting and a full Board Meeting and reviewed all information packs from
meetings for the full year.
The output from the review was positively received by the Board and a number
of actions are in progress to address various procedural matters, some of
which are already underway as part of this year's reporting.
2023 Review of Remuneration
The Company's policy is that the fees payable to the Directors should reflect
the time spent by the Board on the Company's affairs and the responsibilities
borne by the Directors, and should be sufficient to retain high calibre
directors. The policy is for the Chairman of the Board, the Chairs of the
Audit Committee and Risk Committee and the Valuation Committee Board
Representative to be paid a higher fee than the other Directors in recognition
of their more onerous roles and more time spent. The Board may only amend the
level of remuneration paid within the limits of the Articles (£500,000 per
annum maximum).
The table below is provided to enable Shareholders to assess the relative
spend on Director remuneration and the size of the Board. The figures provide
a comparison against management fees payable to the Investment Adviser
relative to the Company's Net Asset Value ("NAV").
Total Director Remuneration £432,500
Investment Adviser Fees £4,008,937
Investment Adviser Performance Fees -
NAV at year end £801,348,784
A comparison of the Company's remuneration against its competitors was
undertaken by the Committee and a view taken on current market conditions,
noting the trajectory of inflation rates and the time commitment and
activities of the Board. The forthcoming Continuation Vote was also
considered.
The Remuneration and Nomination Committee recommended, and the Board resolved,
that there should be no increase in base remuneration for the financial year
commencing 1 October 2023.
Director base fees p.a. Director base fees proposed FY/E 2024
FY/E 2023 £
£
Chairman - A Haining 120,000 85,000
Audit Committee Chairman/SID - S Coe 67,500 67,500
Risk Committee Chairman - S Holden 67,500 67,500
Valuations Committee Board Representative - T Cruttenden 62,500 62,500
Directors - M O'Connor/A Ewing 57,500 57,500
_____________________
Anne Ewing
Chairman of the Remuneration and Nomination Committee, Chrysalis Investments
Limited
Report of the Management Engagement Committee
The Management Engagement Committee (hereafter referred to in this report as
the "MEC") is chaired by Ms Margaret O'Connor and at this time, comprises a
sub-committee of the Board including Mr Simon Holden and Mr Tim Cruttenden,
whilst other Board members are invited to attend. Only non-executive Directors
who are independent of the Investment Adviser may serve on the MEC, which
meets at least once per year. The MEC's terms of reference are available to
view on the Company's website, with the MEC's primary purpose being to review,
annually, the compliance of the Investment Adviser with the Company's
investment policy and Portfolio Management Agreement as well as to keep under
review the performance of all other key service providers involved in
supporting the Company and its operations.
Please see the MEC's terms of reference on the Company's website, the link is
https://chrysalisinvestments.co.uk/wp-content/uploads/2022/11/mec-terms-of-reference-1.pdf
The MEC convened twice during the year ended 30 September 2023. Optimising the
cost-effectiveness and operational efficiency of service provision is
essential to the Company, especially in the current difficult trading
environment. With one exception, the service provision was satisfactory to
Company standards.
The MEC's priorities during the past year have been:
1. To ensure appropriate resourcing at and reporting from the
Investment Adviser,
2. To ensure appropriate resourcing for the Valuation process,
3. To strengthen the self-managed Alternative Investment Fund Manager
("AIFM") function,
4. To ensure appropriate investor engagement in advance of the
Continuation Vote.
During the past year, the Investment Adviser's dedicated finance and ESG
resources made excellent progress developing appropriate reporting for the
Company and the Risk Committee. During the MEC meeting on 23 September 2023,
we noted the need for more strategic analysis about the commercial,
technology, and regulatory challenges and opportunities confronting each
disruptive technology asset as well as comprehensive reporting about the
investment management process going forward.
The Board Chairman continues to serve as the primary point of contact with the
Investment Adviser. In consultation with the Board, the MEC, and key advisers,
Mr. Haining led a process to negotiate a separation agreement with Jupiter
Fund Management PLC ("Jupiter") to enable the Investment Advisory team
responsible for managing the Company's assets to form a New Investment Adviser
within a new regulated structure. The MEC provided a comprehensive commercial
and regulatory framework for the new AdviserCo that anticipates the strategic
and operational challenges this experienced team may confront in the new
proposed structure.
Following the end of the Company's financial year, a Heads of Terms
announcement was made on 27 November 2023, explaining the redrawn structure
through which the investment advisory services will be provided and the timing
of the proposed Jupiter contract termination on 31 March 2024. Jupiter has
agreed to a reduction in the management fee, effective from 1 October 2023,
from 50bps to 15bps, leading to an expected saving of approximately £1.4
million for Chrysalis shareholders over the six-month period to 31 March 2024.
Under the Heads of Terms, Jupiter has released the Principals and four other
executives from their employment contracts and employment restrictions,
effective 31 March 2024. The Board has agreed, in principle, to enter into a
tripartite contract with an LLP formed by the Principals to take over
investment advisory services from Jupiter, and with G10 - the AIFM platform of
the IQEQ fund administration group - to take over AIFM services for the
Company, each with effect from 1 April 2024.
The Board exercised its right to obtain independent third-party expert
recommendations on Valuations for those assets where the Board or the
Valuation Committee believed additional judgments were required.
The Company commissioned Rothschild & Co. to conduct a second annual
perception study with shareholders and the Company commissioned Montfort
Communications to conduct a media benchmarking analysis. This market analysis
will help to inform investor and media relations going forward.
___________________
Margaret O'Connor
Chairman of Management Engagement Committee, Chrysalis Investments Limited
Report of the Risk Committee
I am pleased to present the Report of the Risk Committee (the "Committee") of
Chrysalis Investments Limited ("Chrysalis", or the "Company") for the year
ended 30 September 2023.
Overview
The terms of reference of the Risk Committee are set out on the Company's
website at https://chrysalisinvestments.co.uk/investor-relations/.
The role of the Risk Committee is to ensure that the Board gives proper
consideration and assessment of the opportunities, risks and stress scenarios
within which the Company operates and to ensure that the recommendations and
strategy of the Investment Adviser protect its portfolio of investments.
Specifically, it will:
· Recommend to the Board a Group risk appetite, the principal risks
to which the Company is exposed and assess the strength of risk mitigation
controls;
· To review the policies and process for identifying and assessing
business risks and the management of those risks by the Company;
· Monitor key risk exposures ensuring that the Investment Adviser
is exercising appropriate control to reduce the likelihood of risk
crystallisation resulting in financial loss, reputational damage or regulatory
concern;
· Review, challenge, approve and monitor stress and scenario tests;
· Monitor investments so that they are aligned within the agreed
risk appetite;
· Review major initiatives such as related party acquisitions or
initiatives in new geographies or sectors and be assured that appropriate due
diligence has been carried out and that any associated movement in risk
profile remains within risk appetite; and Provide oversight and advice to the
Board in relation to current and emerging risk exposures of the Company.
The members of the Risk Committee are as follows:
· Simon Holden (Chairman)
· Stephen Coe
· Tim Cruttenden
· Anne Ewing
· Margaret O'Connor
· Andrew Haining (Company Chairman) - invited as an Observer
Status of the Risk Committee
The Company has been a self-managed Alternative Investment Fund ("AIF") since
1 July 2022 and the Committee was constituted on that date. In my last report
I commented on the work that the Committee had been doing since its
constitution to implement an effective risk governance structure and control
framework, along with the development of a reporting process that was fit for
purpose.
In January 2023, the Risk Committee presented its first full risk report to
the Board and has met quarterly since. During its quarterly meetings the
Committee has engaged with the Investment Adviser to refine the risk reporting
approach. I am delighted with the step change in both the usability and
quality of the reporting since becoming a self-managed AIF and I thank the
Investment Adviser and my Committee members for their contribution and
engagement throughout the year to get to this point.
The reporting process has developed to a point that the Committee has
concluded that it will move to a more typical semi-annual review process for
the year ended 30 September 2024. The Investment Adviser will continue to
produce a quarterly report and will continue to alert the Committee to
material risk indicators on an 'as-arising' basis.
Risk Classes
The Committee reviews the risk profile of the Company under a series of
pre-defined risk classes. Eash risk class is composed of separately identified
and scored risks.
Priority risk classes with highest overall residual risk ratings:
1. Liquidity Management - risks to the funding runway and allocation
of resources that the Company has available to deploy to support and optimise
the value of its investments.
2. Relative Performance - the Company's longer terms sustainability
will depend on risk-adjusted returns outperforming adjacent asset classes.
3. Financial/ Capital Markets - risks related to shareholder
understanding, confidence in the Company's growth capital mandate and
implications of shares trading at a discount to NAV.
4. Portfolio Performance - risks to tracking each portfolio company's
progress towards measurable milestones along the 'equity roadmap' and evidence
of the strategy and influence over profitable realisations. Movements in the
fair values of our holdings have led to an overall increase in the
concentration risk within the portfolio during the year.
5. Portfolio Construction - ensuring that the portfolio remains
sufficiently diversified and that the Investment Adviser's span of control and
management of the Company's holdings remains effective. Movements in the fair
value of the Company's investments have led to an overall increase in the
concentration risk within the portfolio during the year.
6. Conflict and Compliance Management - verification of robust
governance in all stakeholder relationships between the Board, the Investment
Adviser, Jupiter-managed funds with shared holdings and Jupiter-managed funds
with interests in the Company. During the year, the scale of Jupiter's wider
fund-management interests in both Chrysalis's shareholders register, and
underlying holdings, has reduced considerably. Conflict management procedures
are in place and followed but with reduced market liquidity in the growth
equity sector, together with wide discounts, marginal buying and selling has
an outsize impact on share prices. Consequently, whilst the underlying risk
factors have reduced, this risk class remains at a more elevated level of
interest to the Committee than last year.
Risk class assessed to be well controlled but with the potential for high
impact if crystallised:
7. Regulatory and political - risk monitoring over routine regulatory
compliance (e.g., FCA in the UK) and/or politically exposed sectors within
which certain portfolio companies must operate.
Risk classes currently judged to have a lower overall residual risk rating:
8. The Environment, Social Impact and Good Governance ("ESG") - the
Company's policy is addressed in Environmental, Social and Corporate
Governance report of the Annual Report.
9. Investment Decisions - evidence that the Investment Adviser has
undertaken appropriate due diligence, risk assessments and origination
processes at the point of committing the Company to new investments.
10. Central Management - governance, depositary, foreign exchange and
treasury risk management controls; some under delegation to specialist third
party service providers.
11. Valuation - the Independent Valuation Committee's oversight of the
quarterly portfolio valuation and the basis of the Investment Adviser's
recommendations when pricing new investments.
Finally, as a standing item, the Risk Committee considers:
12. Horizon Risks - themes emerging that could have an outsize impact or
influence on the prospects of clusters of our target sectors and/or portfolio
companies.
In October 2023, the Committee reviewed the risk register, approved amended
residual risk scoring for each individual risk and risk class and concluded
the risk appetite of the Fund remained appropriate with the investment policy.
In the past year, the enhancements to risk management and reporting have
helped reduce the Committee's assessment of residual risk across five risk
classes. However, greater concentration of value within the portfolio and
weaker relative shareholder returns compared with adjacent asset classes has
resulted in a higher on-going assessment of residual risk in these areas.
Liquidity management remains the Company's priority risk.
As previously announced, the Board's proposed capital allocation policy aims
to be able to support our current portfolio, fund a sustainable level of
reinvestment in our portfolio, share returns on investment with investors and
manage the discount in the market value of the Company's shares to their
intrinsic NAV.
Recommendation
I am satisfied that the Risk Committee is discharging its responsibilities
proficiently and recommend this report to the Board.
_____________________
Simon Holden
Chairman of the Risk Committee, Chrysalis Investments Limited
Directors' Report
The Directors present their Annual Report and the Audited Financial Statements
of the Company for the year ended 30 September 2023.
Principal Activities and Business Review
The investment objective of the Company is to generate long term capital
growth through investing in a portfolio consisting primarily of equity or
equity-related investments in unquoted companies.
The Directors do not envisage any change in these activities for the
foreseeable future. A description of the activities of the Company in the year
under review is given in the Chairman's Statement and the Investment Adviser's
Report.
Business and Tax Status
The Company has been registered with the GFSC as a closed-ended investment
company under RCIS Rule and Protection of Investors ("POI") Law and was
incorporated in Guernsey on 3 September 2018. The Company operates under The
Companies (Guernsey) Law, 2008 (the "Law").
The Company's shares have a premium listing and are admitted to trading on the
London Stock Exchange's Main Market for listed securities.
The Company's management and administration takes place in Guernsey and the
Company has been granted exemption from income tax within Guernsey by the
Administrator of Income Tax. It is the intention of the Directors to continue
to operate the Company so that each year this tax-exempt status is maintained.
In respect of the Criminal Finances Act 2017, which has introduced a new
corporate criminal offence of 'failing to take reasonable steps to prevent the
facilitation of tax evasion', the Board confirms that they are committed to
zero tolerance towards the criminal facilitation of tax evasion.
Alternative Investment Fund Managers Directive
The Company is a non-EEA-domiciled 'Alternative Investment Fund' ("AIF"), as
defined by the Alternative Investment Fund Managers Directive ("AIFMD"). The
Company is a self-managed AIF and JIML acts as Investment Adviser.
The AIFMD, as transposed into the FCA Handbook in the UK, requires that
certain pre-investment information be made available to investors in AIFs
(such as the Company) and that certain regular and periodic disclosures are
made.
Foreign Account Tax Compliance Act ("FATCA")
FATCA requires certain financial institutions outside the United States ("US")
to pass information about their US customers to the US tax authorities, the
Internal Revenue Service (the "IRS"). A 30% withholding tax is imposed on the
US source income and disposal of assets of any financial institution within
the scope of the legislation that fails to comply with this requirement.
The Board of the Company has taken all necessary steps to ensure that the
Company is FATCA compliant and confirms that the Company is registered and has
been issued a Global Intermediary Identification Number ("GIIN") by the IRS.
The Company will use its GIIN to identify that it is FATCA compliant to all
financial counterparties.
Common Reporting Standard
The Common Reporting Standard is a global standard for the automatic exchange
of financial account information developed by the Organisation for Economic
Co-operation and Development ("OECD"), which has been adopted in Guernsey and
which came into effect in January 2016.
The Company is subject to Guernsey regulations and guidance on the automatic
exchange of tax information and the Board will therefore take the necessary
actions to ensure that the Company is compliant in this regard.
Going Concern
In assessing the going concern basis of accounting, the Directors have
assessed the guidance issued by the Financial Reporting Council and considered
the Company's own financial position, the status of global financial markets,
various geopolitical events and conflicts, the current macroeconomic climate
and other uncertainties impacting on the Company's investments, their
financial position and liquidity requirements.
At year end, the Company has liquidity including a current cash position of
£22,626,000, a net current asset position of £20,973,000 and liquid listed
investments amounting to £10,284,000.
The Company generates liquidity by raising capital and exiting investments. It
uses liquidity by making new and follow-on investments, paying company
expenses and making returns to Shareholders. The Directors ensure it has
adequate liquidity by regularly reviewing its financial position and
forward-looking liquidity requirements. The Directors Going Concern assessment
includes consideration of a range of likely downside scenarios which measure
the impact on the Company's liquidity of differing assumptions for portfolio
valuation, exits, new and follow-on investment requirements, capital raising
and company expenses.
Under the Articles, at the first annual general meeting of the Company
following the fifth anniversary of IPO (such anniversary being 6 November
2023), the Directors must propose an ordinary resolution that the Company
continues its business as a closed-ended investment company. At the Company's
annual general meeting, scheduled for 15 March 2024, Shareholders will be
invited to vote on the continuation of the Company. The Board will recommend
that Shareholders vote in favour of continuation. If the resolution is not
passed, the Directors will be required to put forward proposals for the
reconstruction, reorganisation or winding-up of the Company for Shareholders'
consideration within six months following the date on which the resolution is
not passed. These proposals may or may not involve winding-up the Company or
liquidating all or part of the Company's then existing portfolio of
investments and, accordingly, failure to pass a continuation vote will not
necessarily result in the winding-up of the Company or liquidation of all or
some of its investments.
At the time of preparation of this report the outcome of the continuation vote
is not known. Should the resolution not be passed, and depending on the nature
of the recommendation of the Board for the reconstruction, reorganisation or
winding-up of the Company, there is a material uncertainty related to events
or conditions that may cast significant doubt on the Company's continuation as
a going concern. The Board operates under the assumption that the resolution
will be passed.
Taking all matters into account, the Directors have a reasonable expectation
that the Company will continue in operational existence for at least twelve
months from the date of approval of the of the Annual Report and Audited
Financial Statements and continue to adopt the going concern basis in
preparing them.
Viability Statement
The Directors have assessed the viability of the Company over the three-year
period to September 2026. The Directors consider that three years is an
appropriate period to assess viability given the Company's style of investment
and is a sufficient investment time horizon to be relevant to shareholders.
Choosing a longer time period can present difficulties, given the lack of
longer-term economic visibility and the need for adaptation that this will
inevitably create for the Company and its portfolio.
In their assessment of the viability of the Company, the Directors have
considered the Company's principal and emerging risks and uncertainties,
organised into Risk Classes by the Risk Committee (page 53).
The Directors have reviewed financial projections which consider:
- Available liquidity (Risk Class 1: Liquidity Management)
- The ability of the Company to raise capital (Risk Class 2:
Financial/Capital Market)
- The performance (Risk Class 3: Portfolio Performance) and value of
the existing portfolio (Risk Class 11: Valuation)
- The ongoing expenses of the Company
The Directors' considered a severe downside scenario which models:
- A significant economic event, which results in a deterioration
of portfolio company performance and a recalibration of public and private
markets leading to a compound 25% per annum decrease in the aggregate
portfolio value over a three-year economic cycle.
- A sustained discount to NAV which results in the inability of
the company to raise new capital.
- Dislocation of public and private markets, including the
prolonged closure of the IPO market, resulting in the inability to make
portfolio exits.
- A sustained period of inflation of approximately 10% per annum.
Even in this severe downside scenario the company has sufficient liquidity for
the next three years to meet its financial obligations.
As previously announced, the Company expects to enter into new arrangements
relating to the management of the Company. In summary, with effect from 1
April 2024:
- the appointment of Jupiter Investment Management Limited as
portfolio manager and investment adviser to the Company will be terminated;
and
- pursuant to a new investment management and advisory agreement
becoming effective 1 April 2024:
· the Company will appoint Chrysalis Investment Partners
LLP to act as the Company's investment adviser; and
· G10 Capital Limited - part of IQ-EQ group's UK Regulatory
and AIFM platform - will be appointed as the Company's alternative investment
fund manager.
The continuation of the Company is dependent on an investment management and
advisory agreement being in place. The appointment of either party under the
new agreement may be terminated by giving not less than six months' notice.
The Directors do not know of any reason why notice would be served by either
party over the period of the viability statement.
As noted above, at the Company's annual general meeting, Shareholders will be
invited to vote on the continuation of the Company. The vote therefore takes
place during the viability period. The Board will recommend that Shareholders
vote in favour of continuation and the Directors operate under the assumption
that the resolution will be passed. If the resolution is not passed, the
Directors will be required to put forward proposals for the reconstruction,
reorganisation or winding-up of the Company for Shareholders' consideration
within six months following the date on which the resolution is not passed.
These proposals may or may not involve winding-up the Company or liquidating
all or part of the Company's then existing portfolio of investments and,
accordingly, failure to pass a continuation vote will not necessarily result
in the winding-up of the Company or liquidation of all or some of its
investments.
At year end, the Company has liquidity including a current cash position of
£22,626,000, a net current asset position of £20,973,000 and liquid listed
investments amounting to £10,284,000. This available liquidity would sustain
the business over the course of the viability period.
The Directors, having considered the above and having carried out a robust
assessment of the principal and emerging risks facing the Company, have
concluded that there is a reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they fall due over the
three-year period to September 2026.
Results and Dividends
The results attributable to shareholders for the year are shown in the
Statement of Comprehensive Income.
The Directors have not declared a dividend for the year (2022: £nil).
Directors
The Directors of the Company who served during the year and to date are set
out on pages 36 and 37.
Directors' Interests
The Directors held the following interests in the share capital of the Company
either directly or beneficially as at 30 September 2023, and as at the date of
signing these Audited Financial Statements:
Number of % Ordinary Shares in
Ordinary Shares issue as at 30 September 2023
Andrew Haining 79,000 0.0133
Stephen Coe 60,909 0.0102
Simon Holden 89,500 0.0150
Anne Ewing 55,000 0.0092
Tim Cruttenden 21,298 0.0036
Margaret O'Connor - -
S Cruttenden (son of Tim Cruttenden) 11,530 0.0019
As at 30 September 2022 the following Directors had holdings in the Company:
Number of % Ordinary Shares in
Ordinary Shares issue as at 30 September 2022
Andrew Haining 79,000 0.0133
Stephen Coe 60,909 0.0102
Simon Holden 89,500 0.0150
Anne Ewing 55,000 0.0092
Tim Cruttenden 21,298 0.0036
Margaret O'Connor - -
S Cruttenden (son of Tim Cruttenden) 11,170 0.0019
Under their terms of appointment, the Directors' total remuneration (including
one-off fees) are as disclosed below:
Lord Rockley, Diane Seymour-Williams and Jonathan Biggs receive £40,000 each
per annum as members of the Valuation Committee. Lord Rockley, Diane
Seymour-Williams and Jonathan Biggs are not Directors of the Company.
The Directors' compensation is reviewed annually and effective 1 October 2023,
each Director is paid a basic fee of £57,500 (2022: £52,500) per annum by
the Company. In addition to this, the Chairman receives an extra £27,500
(2022: £27,500) per annum. A one-off fee was awarded to the Chairman of
£35,000 to acknowledge and reflect his considerable time commitment to the
Company The Risk Committee Chairman receives an extra £10,000 per annum and
the Audit Committee Chairman receives an extra £10,000 (2022: £10,000) per
annum, Mr Cruttenden also receives an additional £5,000 per annum to reflect
his position on the Valuation Committee. Refer to page 44 for more information
regarding Directors' remuneration.
Risks and Uncertainties
There are several potential risks and uncertainties which could have a
material impact on the Company's performance and could cause actual results to
differ materially from expected and historical results.
The Risk Committee has overall responsibility for risk management and control
within the context of achieving the Company's objectives. The Board agrees the
strategy for the Company, approves the Company's risk appetite and the Risk
Committee monitors the risk profile of the Company. The Risk Committee also
maintains a risk management process to identify, monitor and control risk
concentration.
The Board's responsibility for conducting a robust assessment of the principal
and emerging risks is embedded in the Company's risk map and stress testing,
which helps position the Company to ensure compliance with the Association of
Investment Companies Code of Corporate Governance (the "AIC Code").
The principal risks to which the Company will be exposed are given in note 19
to the Annual Report and Audited Financial Statements.
The main risks that the Company faces arising from its financial instruments
are:
(i) market risk, including:
- price risk, being the risk that the value of investments will
fluctuate because of changes in more investee-company specific performance as
well as market pricing of comparable businesses;
- interest rate risk, being the risk that the future cash flows of a
financial instrument will fluctuate because of changes in interest rates; and
- foreign currency risk, being the risk that the value of financial
assets and liabilities will fluctuate because of movements in currency rates.
(ii) credit risk, being the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that it has
entered into with the Company.
(iii) liquidity risk, being the risk that the Company will not be able to meet
its liabilities when they fall due. This may arise should the Company not be
able to liquidate its investments.
(iv) company failure, being the risk that companies invested in may fail and
result in loss of capital invested.
To manage such risks the Company shall comply with the investment restrictions
and diversification limits provided for in the Prospectus. The Company will
invest and manage its assets with the objective of spreading risk. Further to
the investment restrictions discussed, the Company also seeks to manage risk
by:
· not incurring debt over 20% of its NAV, calculated at time of drawdown. The
Company will target repayment of such debt within twelve months of drawdown;
and
· entering from time to time into hedging or other derivative arrangements
for the purposes of efficient portfolio management, managing where
appropriate, any exposure through its investments to currencies other than
Sterling.
For further details with respect to the processes for identifying, monitoring
and controlling risks to which the Company is exposed, kindly referred to
Report of the Risk Committee on pages 46 to 48.
Ongoing Charges
The ongoing charges figure for the year was 0.78%. The ongoing charges
represent ongoing annual expenses of £6,669,787 divided by total average Net
Asset Value for the year of £788,273,640. The ongoing charges has also been
prepared in accordance with the recommended methodology provided by the
Association of Investment Companies where investment purchase costs of
£515,724 and performance fees of £nil have been excluded and represents the
percentage reduction in shareholder returns as a result of recurring
operational expenses.
Emerging Risks
Since 7 October 2023 an armed conflict has been ongoing between Israel and
Hamas-led Palestinian militant groups, largely in and around the Gaza Strip,
the West Bank and on the Israel-Lebanon border. One of the Company's portfolio
companies, Deep Instinct, has an operational presence in Tel Aviv, Israel.
Notwithstanding the impact the conflict has had in the region to date, Deep
Instinct has not experienced material disruption to its operations.
The Board will of course continue to assess the position as the nature of the
conflict evolves.
ESG and Climate Change Risks and Considerations
The Board of Directors have carefully considered the impact of climate change
and ESG related risks on the Company's business strategy and the impact of the
Company's operations on the local community and environment. This analysis has
taken place at both the level of the Company and at the investment portfolio
level.
As an investment company with no employees, the Company itself has only a
minimal footprint on the local community and environment, but recognises that
everyone has a part to play in the reduction of adverse environmental impacts
and ensuring the company's operations have a positive impact on society and
the generation of long term sustainable value.
Further information on how the Board and Jupiter manage the Company's ESG and
climate change related risks at the investment portfolio level can be found
within the Chairman's Statement on pages 2 to 6 and the Environmental, Social
and Corporate Governance Report on pages 26 to 31. This includes the
integration of ESG analysis into the investment process and the alignment of
Jupiter's strategy, purpose and principles to the UN Global Compact.
Portfolio Management and Administration
Portfolio Management Agreement and Fees
The Directors are responsible for managing the business affairs of the Company
in accordance with the Articles of Incorporation and the investment policy and
have overall responsibility for the Company's activities including its
investment activities and reviewing the performance of the Company's
portfolio.
The Directors have, however, appointed the Investment Adviser to perform
portfolio management functions.
Following the end of the Company's financial year, a Heads of Terms
announcement was made on 27 November 2023, explaining a redrawn structure
through which investment advisory services will be provided, including the
timing of the proposed Jupiter contract termination on 1 April 2024. Jupiter
has agreed to a reduction in the management fee, effective from 1 October
2023, from 50bps to 15bps, leading to an expected saving of approximately
£1.75 million for Chrysalis shareholders over the six-month period to 31
March 2024.
Under the Heads of Term announcement, Jupiter has released the Principals and
other executives from their employment contracts and employment restrictions,
effective 31 March 2024. The Board has agreed, in principle, to enter into a
tripartite contract with an LLP formed by the Principals to take over
investment advisory services from Jupiter, and with G10 - the AIFM platform of
the IQEQ fund administration group - to take over AIFM services for the
Company, each with effect from 1 April 2024.
Administrator
Apex Administration (Guernsey) Limited (formerly known as Maitland
Administration (Guernsey) Limited) has been appointed as Administrator to the
Company pursuant to a master services agreement. The Administrator is
responsible for the maintenance of the books and financial accounts of the
Company and the calculation, in conjunction with the Investment Adviser, of
the Net Asset Value of the Company and the shares.
Depositary
The Depositary of the Company is Citibank UK Limited.
Corporate Governance Statement
The Corporate Governance Statement forms part of the Directors' Report.
Board Responsibilities
The Board comprises six non-executive Directors, who meet at least quarterly
to consider the affairs of the Company in a prescribed and structured manner.
All Directors are considered independent of the Investment Adviser for the
purposes of the AIC Code and Listing Rule 15.2.12A. Biographies of the
Directors for the year ended 30 September 2023 appear on pages 36 and 37 which
demonstrate the wide range of skills and experience they bring to the Board.
The Directors, in the furtherance of their duties, may take independent
professional advice at the Company's expense, which is in accordance with
principle 13 of the AIC Code. The Directors also have access to the advice and
services of the Company Secretary through its appointed representatives who
are responsible to the Board for ensuring that the Board's procedures are
followed, and that applicable rules and regulations are complied with.
To enable the Board to function effectively and allow the Directors to
discharge their responsibilities, full and timely access is given to all
relevant information.
The Directors are requested to confirm their continuing professional
development is up to date and any necessary training is identified during the
annual performance reviews carried out and recorded by the Remuneration and
Nomination Committee.
At each annual general meeting of the Company, each director shall retire from
office and each director may offer themselves for election or re-election by
the shareholders.
Conflicts of Interest
None of the Directors nor any persons connected with them had a material
interest in any of the Company's transactions, arrangements or agreements at
the date of this report and none of the Directors has or had any interest in
any transaction which is or was unusual in its nature or conditions or
significant to the business of the Company, and which was affected by the
Company during the reporting year.
At the date of this Annual Report, there are no outstanding loans or
guarantees between the Company and any Director.
Committees
The Company has established: the Audit Committee, the Remuneration and
Nomination Committee, the Risk Committee, Valuation Committee and the
Management Engagement Committee (together the "Committees"). Terms of
Reference for each committee is available on request from the Administrator.
The Audit Committee
Stephen Coe is the Chairman of the Audit Committee. A full report regarding
the Audit Committee can be found in the Audit Committee Report.
Remuneration and Nomination Committee
In accordance with the AIC Code, a Remuneration and Nomination Committee has
been established. Anne Ewing has been appointed as Chairman. The Remuneration
and Nomination Committee meets at least once a year in accordance with the
terms of reference and reviews, inter alia, the structure, size and
composition of the Board.
Details of the Directors' remuneration can be found in note 20 and page 44.
Management Engagement Committee
Margaret O'Connor has been appointed Chairman of the Management Engagement
Committee. The Management Engagement Committee will meet formally at least
once a year for the purpose, amongst other things, of reviewing the actions
and judgments of the Investment Adviser and the terms of the Portfolio
Management Agreement. Details of the management and performance fees can be
found in note 6.
Risk Committee
Simon Holden is the Chairman of the Risk Committee. A full report regarding
the Risk Committee can be found in the Risk Committee Report.
Valuation Committee
Lord Rockley is the Chairman of the Valuation Committee with Tim Cruttenden,
Diane Seymour-Williams and Jonathan Biggs as members.
Substantial Shareholdings
On 31 December 2023, the latest practicable date for disclosure in this Annual
Report, the Company did not have any shareholders with a holding greater than
10%.
Shareholder Communication
The Company's main method of communication with Shareholders is through its
published Half Yearly and Annual Reports which aim to provide Shareholders
with a fair, balanced and understandable view of the Company's results and
objectives. This is supplemented by the publication of the Company's quarterly
net asset values on its ordinary shares on the London Stock Exchange.
In line with principle 16 of the AIC Code, the Investment Adviser communicates
with both the Chairman and shareholders and is available to communicate and
meet with major shareholders. The Company has also appointed Liberum Capital
Limited to liaise with all major shareholders together with the Investment
Adviser, all of whom report back to the Board at quarterly board meetings
ensuring that the Board is fully aware of shareholder sentiment, expectations
and analyst views.
Shareholder Communication
The Company's website, which is maintained by the Investment Adviser, is
regularly updated with news and announcements. Information published online is
accessible in many countries each with differing legal requirements relating
to the preparation and dissemination of financial information. Users of the
Company's website is responsible for informing themselves of how the
requirements in their own countries may differ from those of Guernsey.
Relations with Shareholders
All holders of Ordinary Shares in the Company have the right to receive notice
of, attend and vote at the general meetings of the Company.
At each general meeting of the Company, the Board and the Investment Adviser
are available to discuss issues affecting the Company.
Shareholders are additionally able to contact the Board directly outside of
meetings via the Company's dedicated e-mail address
(chrysalis@maitlandgroup.com) or by post via the Company Secretary.
Alternatively, Shareholders are able to contact the Investment Adviser
directly (chrysalis@maitlandgroup.com) or the Senior Independent Director
(chrysalis@maitlandgroup.com) for issues they feel they may be unable to raise
directly with the Company itself.
The Company has adopted a zero-tolerance policy towards bribery and is
committed to carrying out business fairly, honestly and openly.
Voting and Stewardship code
The Investment Adviser is committed to the principles of the Financial
Reporting Council's UK Stewardship Code and this also constitutes the
disclosure of that commitment required under the rules of the FCA (Conduct of
Business Rule 2.2.3).
Signed on behalf of the Board by:
Andrew Haining
Chairman
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and Audited
Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Audited Financial Statements for
each financial year. Under that law they are required to prepare the Audited
Financial Statements in accordance with International Financial Reporting
Standards as adopted by the EU and applicable law.
Under company law the Directors must not approve the Audited Financial
Statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Company and of its profit or loss for that year.
In preparing these Audited Financial Statements, the Directors are required
to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and estimates that are reasonable, relevant and
reliable;
· state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the Audited
Financial Statements;
· assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
· use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations or have no realistic
alternative but to do so.
The Directors are responsible for keeping proper accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that its Audited Financial Statements comply with the
Companies (Guernsey) Law, 2008. They are responsible for such internal control
as they determine is necessary to enable the preparation of Financial
Statements that are free from material misstatement, whether due to fraud or
error, and have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Company and to prevent and detect
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in Guernsey governing the preparation and dissemination of
Financial Statements may differ from legislation in other jurisdictions.
Disclosure of information to auditors
The Directors who held office at the date of approval of this Directors'
Report confirm that, so far as they are aware, there is no relevant audit
information of which the Company's Auditor is unaware; and that each Director
has taken all the steps that they ought to have taken as a director to make
themselves aware of any relevant audit information and to establish that the
Company's Auditor is aware of that information.
Responsibility statement of the Directors in respect of the Annual Report
We confirm that to the best of our knowledge:
· the Financial Statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company; and
· the management report (comprising the Chairman's Statement, the
Investment Adviser's Report, and Directors' Report) includes a fair review of
the development and performance of the business and the position of the
Company, together with a description of the principal risks and uncertainties
that it faces.
We consider the Annual Report and Audited Financial Statements, taken as a
whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's position and performance,
business model and strategy.
Signed on behalf of the Board by:
Andrew Haining
Chairman
28 January 2024
Audit Committee Report
In accordance with the AIC Code, an Audit Committee has been established
consisting of Anne Ewing, Simon Holden, Margaret O'Connor and Stephen Coe, who
is the Chairman of the Audit Committee.
Membership and Role of the Committee
The Audit Committee meets at least twice a year and, when requested, provides
advice to the Board on whether the Annual Report and Audited Financial
Statements, taken as a whole, is fair, balanced and understandable and
provides information necessary for the shareholders to assess the Company's
performance, business model and strategy. The Audit Committee also reviews,
inter alia, the financial reporting process and the system of internal control
and management of financial risks, including understanding the current areas
of greatest financial risk and how these are managed by the Investment
Adviser, reviewing the Annual Report and Audited Financial Statements,
assessing the fairness of Audited Financial Statements and disclosures and
reviewing the external audit process. The Audit Committee is responsible for
overseeing the Company's relationship with the external auditor (the
"Auditor"), including making recommendations to the Board on the appointment
of the Auditor and their remuneration.
The Audit Committee considers the nature, scope and results of the Auditor's
work and reviews, and develops and implements a policy on the supply of any
non-audit services that are to be provided by the Auditor. The Audit Committee
annually reviews the independence and objectivity of the Auditor and considers
the appointment of an appropriate Auditor.
The continuation of the Auditor was considered and the Board subsequently
decided that the Auditor was sufficiently independent and was appropriately
appointed in order to carry out the audit of the Company for the year ended 30
September 2023. Appointment of the Auditor will be reviewed each year before
the AGM. The level of non-audit versus audit services is monitored. The table
below summarises the remuneration for services provided to the Company to KPMG
Channel Islands Limited ("KPMG") for audit and non-audit services during the
year ended 30 September 2023.
30 September 30 September
2023 2022
Annual audit fee 135,000 135,000
Reporting accountant services 15,000 -
Interim review 45,000 40,000
195,000 175,000
Non-audit services provided in the year arose in connection with the review of
the Company's interim financial statements and the provision of reporting
accountant services in respect of the preparation by the Company of a related
party circular regarding proposed amendments to the Company's performance fee
payable under the terms of a portfolio management agreement to Jupiter Asset
Management Limited. Notwithstanding such services, the Audit Committee
considers KPMG to be independent of the Company and that the provision of such
non-audit services is not a threat to the objectivity and independence of the
conduct of the auditor as appropriate safeguards are in place.
Internal Control
The Company is responsible for the process surrounding the valuation of its
investment portfolio. The Company has delegated these processes to its
independent Valuation Committee which reviews third party valuations of
unlisted investments. The Audit Committee liaises with the Valuation Committee
regularly and reviews minutes of Valuation Committee meetings. For all other
processes of the Company responsibility for internal control lies within the
services provided by JIML and other service providers. These controls are
monitored by the Board reviewing and challenging reports from these service
providers and through segregation of duties between them.
The Audit Committee monitors the financial reporting process and tasks
undertaken in the production of the Annual Report and Audited Financial
Statements. The administration and company secretarial duties of the Company
are performed by Apex Administration (Guernsey) Limited.
Registrar duties are performed by Computershare Investor Services (Guernsey)
Limited.
The custody of financial assets is undertaken by Citibank UK Limited.
The Company does not have an internal audit department. All the Company's
management and administration functions are delegated to independent third
parties and it is therefore felt there is no need for the Company to have an
internal function. The Audit Committee have assessed the Company's internal
controls and found them to be satisfactory.
Fair Value Estimation
The valuation of the Company's investments is considered to be a significant
area of focus given that they represent the majority of the net assets of the
Company and in view of the significance of the estimates and judgments that
may be involved in the determination of their fair value. In discharging its
responsibilities, the Audit Committee has specifically considered the
valuation of investments as follows:
· Independent third-party valuation firms are engaged to provide
assistance, advice, assurance, and documentation in relation to the portfolio
valuations. Valuations are then submitted to the portfolio managers and the
Company's Valuation Committee for review. The Board reviews these portfolio
valuations on a regular basis throughout the year. The Company is a
self-managed Alternative Investment Fund. The Risk Committee and an
Independent Valuation Committee were appointed. The Audit Committee's ultimate
responsibility is to review the portfolio valuations.
· The Audit Committee receives and reviews reports from the
Investment Adviser and the Auditor relating to the Company's Annual Report.
The Audit Committee focuses particularly on compliance with legal
requirements, accounting standards and the Listing Rules and ensures that an
effective system of internal financial and non-financial controls is
maintained. The ultimate responsibility for reviewing and approving the Annual
Report remains with the Board.
· Reporting to the Board on the significant judgment made in the
preparation of the Company's Annual Report and Audited Financial Statements
and recommending valuations of the Company's investments to the Board.
· The Audit Committee will recommend the Board and or Independent
Valuation Committee engages independent valuers for specific assets where it
considers it appropriate.
Continuation vote
In addition to the above the Audit Committee paid particular attention during
the year to the continuation vote that is to be presented at the 2024 AGM. In
reaching its conclusion the Audit Committee reviewed the AIC SORP which states
that it is more appropriate to prepare financial statements on a going concern
basis unless a vote has already been triggered and shareholders have voted
against continuation. The SORP guidance goes on to state that it is
appropriate for the financial statements to be prepared on a going concern
basis whilst making a material uncertainty disclosure as set out in accounting
standards.
External Audit
The Audit Committee will hold an annual meeting to approve the Company's
Annual Report and Audited Financial Statements before its publication. During
the current year the Audit Committee met with the Auditor to discuss the audit
plan and approach.
During this meeting it was agreed with the Auditor that the area of
significant audit focus related to the valuation of investments given that
they represent the majority of net assets of the Company and their valuation
involves significant judgement. The scope of the audit work in relation to
this asset class was discussed. The Auditor has also identified the Company's
going concern status as an area of focus.
The Audit Committee reviews cash flow and working capital reports as part of
the review of annual and semi-annual financial statements, together with
taking into consideration significant events such as the continuation vote. At
the conclusion of the audit, the Audit Committee met with the Auditor and
discussed the scope of their annual audit work and their audit findings.
The Audit Committee reviews the scope and results of the audit, its cost
effectiveness, and the independence and objectivity of the Auditor. The Audit
Committee has particular regard to any non-audit work that the Auditor may
undertake and the terms under which the Auditor may be appointed to perform
non-audit services. In order to safeguard the Auditor's independence and
objectivity, the Audit Committee ensures that any other advisery and/or
consulting services provided by the Auditor does not conflict with their
statutory audit responsibilities.
To fulfil its responsibilities regarding the independence of the Auditor, the
Audit Committee considered:
· a report from the Auditor describing their arrangements to
identify, report and manage any conflicts of interest; and
· the extent of the non-audit services provided by the Auditor.
To assess the effectiveness of the Auditor, the committee reviewed:
· the Auditor's fulfilment of the agreed audit plan and variations
from it;
· the audit findings report highlighting any major issues that
arose during the course of the audit; and
· the effectiveness and independence of the Auditor having
considered the degree of diligence and professional scepticism demonstrated by
them.
The Audit Committee is satisfied with KPMG's effectiveness and independence as
Auditor.
During the year the Audit Committee met three time with all members present
(refer to Director Attendance on page 39).
Reappointment of auditor
The Auditor, KPMG Channel Islands Limited, has expressed its willingness to
continue in office as Auditor. A resolution proposing their reappointment will
be submitted at the forthcoming general meeting to be held pursuant to section
199 of the Law.
Stephen Coe
Chairman of the Audit Committee, Chrysalis Investments Limited
Our opinion is unmodified
We have audited the financial statements of Chrysalis Investments Limited (the
"Company"), which comprise the statement of financial position as at 30
September 2023, the statements of comprehensive income, changes in equity and
cash flows for the year then ended, and notes, comprising significant
accounting policies and other explanatory information.
In our opinion, the accompanying financial statements:
· give a true and fair view of the financial position of the
Company as at 30 September 2023, and of the Company's financial performance
and cash flows for the year then ended;
· are prepared in accordance with International Financial Reporting
Standards as adopted by the EU ("IFRS"); and
· comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) ("ISAs (UK)") and applicable law. Our responsibilities are described
below. We have fulfilled our ethical responsibilities under, and are
independent of the Company in accordance with, UK ethical requirements
including the FRC Ethical Standard as required by the Crown Dependencies'
Audit Rules and Guidance. We believe that the audit evidence we have obtained
is a sufficient and appropriate basis for our opinion.
Material uncertainty relating to going concern
The risk Our response
Going concern Disclosure quality Our procedures included, but were not limited to:
Refer to Director's Report on page 50 and Audit Committee report on page 61. The financial statements explain how the Board has formed a judgment that it · We obtained and inspected a Board approved written assessment of going
is appropriate to adopt the going concern basis of preparation for the concern on the Company and corroborated the assessment with our knowledge of
We draw attention to note 2 (b) to the financial statements which indicates Company. the business.
that the Company is obliged to hold a continuation vote at the 2024 Annual
General Meeting of Shareholders. That judgement is based on an evaluation of the inherent risks to the · We considered the risk that the outcome of the continuation vote could
Company's business model and how those risks might affect the Company's affect the Company for at least a year from the date of approval of the
This condition constitutes a material uncertainty that may cast doubt about financial resources or ability to continue operations over a period of at financial statements (the "going concern period") by inspecting minutes of
the Company's ability to continue as a going concern. least a year from the date of approval of the financial statements, in meetings held by the directors, inquiring with management as to their
particular in relation to the continuation vote. assessment of the likelihood of uptake of the continuation vote, and
Our opinion is not modified in respect of this matter.
considering key financial metrics including the discount of the Company's
The risk for our audit is whether or not those risks are such that they share price against its net asset value.
amounted to a material uncertainty that may cast significant doubt about the
ability to continue as a going concern. Assessing disclosures:
We considered whether the going concern disclosure in note 2(b) to the
If so, that fact is required to be disclosed (as has been done) and, along financial statements gives a full and accurate description of the directors'
with a description of the circumstances, is a key financial statement assessment of going concern, including the identified risks and dependencies.
disclosure.
Other key audit matters: our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were
of most significance in the audit of the financial statements and include the
most significant assessed risks of material misstatement (whether or not due
to fraud) identified by us, including those which had the greatest effect on:
the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. Going concern is a significant
key audit matter and is described in the 'Material uncertainty relating to
going concern' section of our report.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. In arriving at our audit opinion
above, the other key audit matter was as follows (unchanged from 2022):
The risk Our response
Valuation of investments held at fair value through profit or loss Basis: Our audit procedures included but were not limited to:
£780,376,000 (2022: £822,363,000) The Company's investments are classified, recognised and measured at fair Internal Controls:
value through profit or loss in accordance with IFRS 9. The investments
Refer to page 61 of the Audit Committee Report, notes 2(i), 3, 11 and 19 comprise of equity and equity-related instruments in quoted and unquoted We assessed the design and implementation of the control in place over the
companies and represent 97% (2022: 93%) of the Company's net assets as at 30 valuation of the Company's Unlisted Investments.
September 2023.
Challenging managements' assumptions and inputs including use of our KPMG
The Company's unlisted investments, with a value of £770,092,000 (the valuation specialist:
"Unlisted Investments"), are valued by using recognised valuation
methodologies and models, in accordance with the International Private Equity For the Unlisted Investments, with the support of our KPMG valuation
and Venture Capital Valuation Guidelines. specialist, we:
The Company utilises independent third party valuation firms (the "Valuation · assessed the scope of the services provided by the Valuation Agents
Agents") to assist and advise on their valuation process. in relation to the Unlisted Investments as well as the objectivity,
capabilities and competence of the Valuation Agents;
The Company's listed investment, with a value of £10,284,000 (the "Listed
Investment"), is valued by the Company based on the quoted market bid price in · held discussions with the Investment Adviser and the Valuation Agents
an active market for that instrument. and attended, in an observation capacity, a meeting of the Board of Directors
of the Company, to understand the valuation approach;
Risk:
· read the valuation reports and memoranda produced by the Valuation
The valuation of the Company's investments is a significant area of our audit, Agents and by the Investment Adviser;
given that it represents a significant portion of the net assets of the
Company. · read the minutes of meetings of the Company's Valuation Committee and
Board of Directors where the Unlisted Valuations were discussed;
The valuation risk of the Unlisted Investments incorporates both a risk of
fraud and error given the significance of estimates and judgements that may be · assessed the appropriateness of the valuation approach and
involved in the determination of fair value. methodology applied to each Unlisted Investment;
On the basis of the above we determined that the valuation of Unlisted · benchmarked the assumptions used in the valuation models employed to
Investments have a high degree of estimation uncertainty giving rise to a observable market data (where possible);
potential range of reasonable outcomes greater than our materiality for the
financial statements as a whole. The financial statements disclose in note 19 · obtained an understanding of how the impact of global economic
the sensitivities estimated by the Company. factors and the resultant increase in uncertainty have been reflected in the
valuation of the Unlisted Investments; and
· corroborated material investee company inputs and recent investment
transactions used in the valuation models to supporting documentations.
Our KPMG valuation specialist independently priced the Listed Investment to a
third party pricing source.
Assessing disclosures:
We also considered the Company's disclosures (see notes 3 and 19) in relation
to the use of estimates and judgements regarding the valuation of investments
and the Company's investment valuation policies adopted in note 2(i) and fair
value disclosures in note 19 for compliance with IFRS.
Our application of materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at £16,000,000,
determined with reference to a benchmark of net assets of £801,349,000, of
which it represents approximately 2.0% (2022: 2.0%).
In line with our audit methodology, our procedures on individual account
balances and disclosures were performed to a lower threshold, performance
materiality, so as to reduce to an acceptable level the risk that individually
immaterial misstatements in individual account balances add up to a material
amount across the financial statements as a whole. Performance materiality for
the Company was set at 75% (2022: 75%) of materiality for the financial
statements as a whole, which equates to £12,000,000. We applied this
percentage in our determination of performance materiality because we did not
identify any factors indicating an elevated level of risk.
We reported to the Audit Committee any corrected or uncorrected identified
misstatements exceeding £800,000, in addition to other identified
misstatements that warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level specified
above, which has informed our identification of significant risks of material
misstatement and the associated audit procedures performed in those areas as
detailed above.
Going concern
The Directors have prepared the financial statements on the going concern
basis as they do not intend to liquidate the Company or to cease its
operations, and as they have concluded that the Company's financial position
means that this is realistic. As stated in the 'material uncertainty relating
to going concern' section of our report, they have also concluded that there
is a material uncertainty relating to going concern.
An explanation of how we evaluated the directors' assessment is set out in the
'material uncertainty relating to going concern' section of our report.
Our conclusions based on this work:
· we consider that the directors' use of the going concern basis of
accounting in the preparation of the financial statements is appropriate; and
· we have nothing material to add or draw attention to in relation
to the directors' statement in the notes to the financial statements on the
use of the going concern basis of accounting, and their identification therein
of a material uncertainty over the Company's use of that basis for the going
concern period
Fraud and breaches of laws and regulations - ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud ("fraud risks") we
assessed events or conditions that could indicate an incentive or pressure to
commit fraud or provide an opportunity to commit fraud.
Our risk assessment procedures included:
· enquiring of management as to the Company's policies and
procedures to prevent and detect fraud as well as enquiring whether management
have knowledge of any actual, suspected or alleged fraud;
· reading minutes of meetings of those charged with governance; and
· using analytical procedures to identify any unusual or unexpected
relationships.
As required by auditing standards, and taking into account possible incentives
or pressures to misstate performance and our overall knowledge of the control
environment, we perform procedures to address the risk of management override
of controls, in particular the risk that management may be in a position to
make inappropriate accounting entries, and the risk of bias in accounting
estimates such as valuation of unquoted investments.
On this audit we do not believe there is a fraud risk related to revenue
recognition because the Company's revenue streams are simple in nature with
respect to accounting policy choice, and are easily verifiable to external
data sources or agreements with little or no requirement for estimation from
management. We did not identify any additional fraud risks.
We performed procedures including:
· identifying journal entries and other adjustments to test based
on risk criteria and comparing any identified entries to supporting
documentation;
· incorporating an element of unpredictability in our audit
procedures; and
· assessing significant accounting estimates for bias
Further detail in respect of valuation of unquoted investments is set out in
the key audit matter section of this report.
Identifying and responding to risks of material misstatement due to
non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected
to have a material effect on the financial statements from our sector
experience and through discussion with management (as required by auditing
standards), and from inspection of the Company's regulatory and legal
correspondence, if any, and discussed with management the policies and
procedures regarding compliance with laws and regulations. As the Company is
regulated, our assessment of risks involved gaining an understanding of the
control environment including the entity's procedures for complying with
regulatory requirements.
The Company is subject to laws and regulations that directly affect the
financial statements including financial reporting legislation and taxation
legislation and we assessed the extent of compliance with these laws and
regulations as part of our procedures on the related financial statement
items.
The Company is subject to other laws and regulations where the consequences of
non-compliance could have a material effect on amounts or disclosures in the
financial statements, for instance through the imposition of fines or
litigation or impacts on the Company's ability to operate. We identified
financial services regulation as being the area most likely to have such an
effect, recognising the regulated nature of the Company's activities and its
legal form. Auditing standards limit the required audit procedures to identify
non-compliance with these laws and regulations to enquiry of management and
inspection of regulatory and legal correspondence, if any. Therefore if a
breach of operational regulations is not disclosed to us or evident from
relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or
regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk
that we may not have detected some material misstatements in the financial
statements, even though we have properly planned and performed our audit in
accordance with auditing standards. For example, the further removed
non-compliance with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely the inherently limited
procedures required by auditing standards would identify it.
In addition, as with any audit, there remains a higher risk of non-detection
of fraud, as this may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. Our audit procedures
are designed to detect material misstatement. We are not responsible for
preventing non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
Other information
The directors are responsible for the other information. The other
information comprises the information included in the annual report but does
not include the financial statements and our auditor's report thereon. Our
opinion on the financial statements does not cover the other information and
we do not express an audit opinion or any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Disclosures of emerging and principal risks and longer term viability
We are required to perform procedures to identify whether there is a material
inconsistency between the directors' disclosures in respect of emerging and
principal risks and the viability statement, and the financial statements
and our audit knowledge. We have nothing material to add or draw attention to
in relation to:
· the directors' confirmation within the Viability Statement (pages
50 to 52) that they have carried out a robust assessment of the emerging and
principal risks facing the Company, including those that would threaten its
business model, future performance, solvency or liquidity;
· the emerging and principal risks disclosures describing these
risks and explaining how they are being managed or mitigated;
· the directors' explanation in the Viability Statement (pages 50
to 52) as to how they have assessed the prospects of the Company, over what
period they have done so and why they consider that period to be appropriate,
and their statement as to whether they have a reasonable expectation that the
Company will be able to continue in operation and meet its liabilities as they
fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or assumptions.
We are also required to review the Viability Statement, set out on pages 50 to
52 under the Listing Rules. Based on the above procedures, we have concluded
that the above disclosures are materially consistent with the financial
statements and our audit knowledge.
Corporate governance disclosures
We are required to perform procedures to identify whether there is a material
inconsistency between the directors' corporate governance disclosures and the
financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is
materially consistent with the financial statements and our audit knowledge:
· the directors' statement that they consider that the annual report
and financial statements taken as a whole is fair, balanced and
understandable, and provides the information necessary for shareholders to
assess the Company's position and performance, business model and strategy;
· the section of the annual report describing the work of the Audit
Committee, including the significant issues that the audit committee
considered in relation to the financial statements, and how these issues were
addressed; and
· the section of the annual report that describes the review of the
effectiveness of the Company's risk management and internal control systems.
We are required to review the part of Corporate Governance Statement relating
to the Company's compliance with the provisions of the UK Corporate Governance
Code specified by the Listing Rules for our review. We have nothing to report
in this respect.
We have nothing to report on other matters on which we are required to report
by exception
We have nothing to report in respect of the following matters where the
Companies (Guernsey) Law, 2008 requires us to report to you if, in our
opinion:
· the Company has not kept proper accounting records; or
· the financial statements are not in agreement with the
accounting records; or
· we have not received all the information and explanations, which
to the best of our knowledge and belief are necessary for the purpose of our
audit.
Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on pages 58 and 59,
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair view; such
internal control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due
to fraud or error; assessing the Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern; and
using the going concern basis of accounting unless they either intend to
liquidate the Company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue our opinion in an auditor's report. Reasonable
assurance is a high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC's website
at www.frc.org.uk/auditorsresponsibilities
(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.
Barry Ryan
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
28 January 2024
Statement of Comprehensive Income
For the year ended 30 September 2023
Year ended Year ended
30 September 2023 30 September 2022
Notes Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investments
Net losses on investments
held at fair value
11 - (72,660) (72,660) - (610,180) (610,180)
Net (losses)/gains on currency movements - (33) (33) - 215 215
Net investment losses - (72,693) (72,693) - (609,965) (609,965)
Interest income 5 1,127 3 1,130 71 - 71
Gain on settlement of 6 - - - - 17,907 17,907
financial liability
Total income 1,127 3 1,130 71 17,907 17,978
Investment management and performance fees 6 (4,009) - (4,009) (6,093) - (6,093)
Other expenses 7 (2,661) - (2,661) (3,199) - (3,199)
Losses before finance costs and taxation (5,543) (72,690) (78,233) (9,221) (592,058) (601,279)
Finance costs 8 - - - (13) - (13)
Losses before taxation (5,543) (72,690) (78,233) (9,234) (592,058) (601,292)
Tax expense - - - - - -
Total losses and comprehensive loss (5,543) (72,690) (78,233) (9,234) (592,058) (601,292)
for the year
Basic and diluted Loss per Ordinary Share (pence) 9 (0.94) (12.21) (13.15) (1.59) (101.65) (103.24)
The total column of this statement represents the Statement of Comprehensive
Income of the Company prepared in accordance with International Financial
Reporting Standards as adopted by the European Union ("IFRS").
The supplementary revenue and capital return columns are prepared under
guidance published by the Association of Investment Companies ("AIC").
All items in the above statement derive from continuing operations.
The notes on pages 71 to 102 form an integral part of these Audited Financial
Statements.
Statement of Financial Position
As at 30 September 2023
2023 2022
Notes £'000 £'000
Non-current assets
Investments held at fair value through profit or loss 11 780,376 822,363
Current assets
Cash and cash equivalents 12 22,626 58,712
Other receivables 13 50 69
Unsettled trades 14 - 3,791
22,676 62,572
Total 803,052 884,935
assets
Current liabilities
Performance fee payable 6 - -
Management fee payable 6 (1,022) (4,306)
Other payables 15 (681) (1,047)
Total liabilities (1,703) (5,353)
Net assets 801,349 879,582
Equity
Share Capital 16 860,890 860,890
Capital reserve (31,328) 41,362
Revenue reserve (28,213) (22,670)
Total equity 801,349 879,582
Net Asset Value per Ordinary Share (pence) 17 134.65 147.79
Number of Ordinary Shares in issue 16 595,150,414 595,150,414
Approved by the Board of Directors and authorised for issue on 28 January 2024
and signed on their behalf:
Stephen Coe
Director
The notes on pages 71 to 102 form an integral part of these Audited Financial
Statements.
Statement of Changes in Equity
For the year ended 30 September 2023
Share Capital Revenue
capital reserve reserve Total
£'000 £'000 £'000 £'000
At 30 September 2021 758,950 633,420 (13,436) 1,378,934
Total losses and comprehensive loss for the year - (592,058) (9,234) (601,292)
Share issue 102,614 - - 102,614
Share issue costs (674) - - (674)
At 30 September 2022 860,890 41,362 (22,670) 879,582
Total losses and comprehensive loss for the year - (72,690) (5,543) (78,233)
At 30 September 2023 860,890 (31,328) (28,213) 801,349
The notes on pages 71 to 102 form an integral part of these Audited Financial
Statements.
Statement of Cash Flows
For the year ended 30 September 2023
2023 2022
Notes £'000 £'000
Cash used in operating activities 18 (10,330) (59,330)
Interest paid 8 - (13)
Interest income 5 1,130 71
Purchase of investments 11 (46,305) (93,663)
Sale of investments 11, 14 19,423 117,527
Net (gains)/losses on currency movements (33) 215
Net cash outflow from operating activities (36,115) (35,193)
Cash flows from financing activities
Issue of ordinary shares 16 - 59,999
Share issue costs 16 - (674)
Repayment of loan payable - (15,000)
Net cash inflow from financing activities - 44,325
Net (decrease)/increase in cash and cash equivalents (36,115) 9,132
Cash and cash equivalents at beginning of year 58,712 49,794
Net gains/(losses) on cash currency movements 29 (214)
Cash and cash equivalents at end of year 12 22,626 58,712
Cash and cash equivalents comprise of the following:
Cash at bank 4,382 58,712
Treasury bills 18,244 -
22,626 58,712
The notes on pages 71 to 102 form an integral part of these Audited Financial
Statements.
Notes to the Audited Financial Statements
For the year ended 30 September 2023
1. Reporting Entity
Chrysalis Investments Limited (the "Company") is a closed-ended investment
company, registered in Guernsey on 3 September 2018, with registered number
65432. The Company's registered office is 1 Royal Plaza, Royal Avenue, St
Peter Port, Guernsey, GY1 2HL.
The Company is a Registered Closed-ended Collective Investment Scheme
regulated by the Guernsey Financial Services Commission ("GFSC"), with
reference number 2404263, pursuant to the Protection of Investors (Bailiwick
of Guernsey) Law 2020, as amended and the Registered Closed-ended Investment
Scheme Rules 2021.
The Company's 595,150,414 shares in issue (per note 16) under ticker CHRY,
SEDOL BGJYPP4 and ISIN GG00BGJYPP46 have a premium listing and are admitted to
trading on the London Stock Exchange's Main Market for listed securities. The
Company invests in a diversified portfolio consisting primarily of equity and
equity-related securities issued by unquoted companies.
The Company is a self-managed Alternative Investment Fund ("AIF") and received
discretionary portfolio management services directly from Jupiter Investment
Management Limited ("JIML") during the year ended 30 September 2023. The
administration of the Company is delegated to Apex Administration (Guernsey)
Limited (formerly Maitland Administration (Guernsey) Limited), an Apex Group
company ("Apex") (the "Administrator").
2. Significant accounting policies
(a) Basis of accounting
The Audited Financial Statements have been prepared in compliance with
International Financial Reporting Standards as adopted by the European Union
("IFRS"). The Audited Financial Statements give a true and fair view and
comply with the Companies (Guernsey) Law, 2008.
Where presentational guidance set out in the Statement of Recommended Practice
("SORP") for investment companies issued by the Association of Investment
Companies ("AIC") updated in February 2019 is consistent with the requirements
of IFRS, the Directors have sought to prepare the Audited Financial Statements
on a basis compliant with the recommendations of the SORP.
(b) Going concern
In assessing the going concern basis of accounting, the Directors have
assessed the guidance issued by the Financial Reporting Council and considered
the Company's own financial position, the status of global financial markets,
various geopolitical events and conflicts, the current macroeconomic climate
and other uncertainties impacting on the Company's investments, their
financial position and liquidity requirements.
At year end, the Company has liquidity including a current cash position of
£22,626,000, a net current asset position of £20,973,000 and liquid listed
investments amounting to £10,284,000.
The Company generates liquidity by raising capital and exiting investments. It
uses liquidity by making new and follow-on investments, paying company
expenses and making returns the Shareholders. The Directors ensure it has
adequate liquidity by regularly reviewing its financial position and
forward-looking liquidity requirements. The Directors Going Concern assessment
includes consideration of a range of likely downside scenarios which measure
the impact on the Company's liquidity of differing assumptions for portfolio
valuation, exits, new and follow-on investment requirements, capital raising
and company expenses.
Under the Articles, at the first annual general meeting of the Company
following the fifth anniversary of IPO (such anniversary being 6 November
2023), the Directors must propose an ordinary resolution that the Company
continues its business as a closed-ended investment company. At the Company's
annual general meeting, scheduled for 15 March 2024, Shareholders will be
invited to vote on the continuation of the Company.
The Board will recommend that Shareholders vote in favour of continuation and
operate under the assumption that the resolution will be passed. If the
resolution is not passed, the Directors will be required to put forward
proposals for the reconstruction, reorganisation or winding-up of the Company
for Shareholders' consideration within six months following the date on which
the resolution is not passed. These proposals may or may not involve
winding-up the Company or liquidating all or part of the Company's then
existing portfolio of investments and, accordingly, failure to pass a
continuation vote will not necessarily result in the winding-up of the Company
or liquidation of all or some of its investments.
At the time of preparation of this report the outcome of the continuation vote
is not known. Should the resolution not be passed, and depending on the nature
of the recommendation of the Board for the reconstruction, reorganisation or
winding-up of the Company, there is a material uncertainty related to events
or conditions that may cast significant doubt on the Company's continuation as
a going concern. The Board operates under the assumption that the resolution
will be passed.
Taking all matters into account, the Directors have a reasonable expectation
that the Company will continue in operational existence for at least twelve
months from the date of approval of the of the Annual Report and Audited
Financial Statements and continue to adopt the going concern basis in
preparing them.
(c) Functional and presentational currency
The Audited Financial Statements of the Company are presented in the currency
of the primary economic environment in which it operates (its functional
currency). For the purpose of the Audited Financial Statements, the results
and financial position of the Company are expressed in pound sterling ("£").
(d) Segmental reporting
The chief operating decision maker is the Board of Directors. The Directors
are of the opinion that the Company is engaged in a single segment of business
with the primary objective of investing in securities to generate capital
growth for shareholders. Consequently, no business segmental analysis is
provided.
The key measure of performance used by the Board is the Net Asset Value of the
Company (which is calculated under IFRS). Therefore, no reconciliation is
required between the measure of profit or loss used by the Board and that
contained in these Audited Financial Statements.
(e) Income
Interest income is accounted for on an accruals basis and recognised in profit
or loss in the Statement of Comprehensive Income. Interest income includes
interest earned on convertible loan notes, cash held at bank on call or on
deposit and cash assets held as cash equivalents, including UK treasury bills.
(f) Expenses
Expenses are accounted for on an accruals basis. The Company's portfolio
management and administration fees, finance costs and all other expenses are
charged through the Statement of Comprehensive Income and are charged to
revenue. Performance fees are charged to the capital in the Statement of
Comprehensive Income.
(g) Dividends to shareholders
Dividends are recognised in the year in which they are paid.
(h) Taxation
The Company has been granted exemption from liability to income tax in
Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989
amended by the Director of Income Tax in Guernsey for the current year.
Exemption is applied and granted annually and subject to the payment of a fee,
currently £1,200 (2022: £1,200).
(i) Financial instruments
Classification
The Company's financial assets are classified in the following measurement
categories:
· those to be measured subsequently at fair value through profit or loss;
and
· those to be measured at amortised cost.
The classification depends on the entity's business model for managing the
financial assets and the contractual terms of the cash flows.
At initial recognition, the Company measures a financial asset at its fair
value, plus, in the case of a financial asset not at fair value through profit
or loss, transaction costs that are directly attributable to the acquisition
of the financial asset. Transaction costs of financial assets carried at fair
value through profit or loss are expensed in profit or loss.
Financial assets held at amortised cost
Assets that are held in order to collect contractual cash flows give rise to
cash flows that are solely payments of principal and interest are measured at
amortised cost. These assets are subsequently measured at amortised cost using
the effective interest method.
The Company has elected to apply the simplified approach permitted by IFRS 9
in respect of trade and other receivables. This approach requires expected
lifetime losses to be recognised from initial recognition of the receivables.
The Company's financial assets held at amortised cost include trade and other
receivables and cash and cash equivalents.
Financial assets at fair value through profit or loss
For investments actively traded in organised financial markets, fair value
will generally be determined by reference to Stock Exchange quoted market bid
prices at the close of business on the valuation date, without adjustment for
transaction costs necessary to realise the asset.
In respect of unquoted instruments, including associates, or where the market
for a financial instrument is not active, fair value is established by using
recognised valuation methodologies, in accordance with International Private
Equity and Venture Capital Valuation Guidelines ("IPEVC"), revised December
2022.
The Company has adopted a valuation policy for unquoted securities to provide
an objective, consistent and transparent basis for estimating the fair value
of unquoted equity securities in accordance with IFRS as well as IPEVC.
The unquoted securities valuation policy and the associated valuation
procedures are subject to review on a regular basis, and updated as
appropriate, in line with industry best practice. In addition, the Company
works with independent third-party valuation firms, to obtain assistance,
advice, assurance, and documentation in relation to the ongoing valuation
process.
The Company considers it impractical to perform an in-depth valuation analysis
for every unquoted investment on a daily basis (whether internally or with the
assistance of an independent third party). Therefore, it is expected that an
in-depth valuation of each investment will be performed independently by an
independent third-party valuation firm: (i) on a quarterly basis; and (ii)
where the Company, in conjunction with its advisors, determines that a
Triggering Event has occurred.
A "Triggering Event" may include any of the following:
· a subsequent round of financing (whether pro rata or otherwise) by the
relevant investee company;
· a significant or material milestone achieved by the relevant investee
company;
· a secondary transaction involving the relevant investee company on
which sufficient information is available;
· a change in the makeup of the management of the relevant investee
company;
· a material change in the recent financial performance or expected
future financial performance of the relevant investee company;
· a material change in the market environment in which the relevant
investee company operates; or
· a significant movement in market indices or economic indicators.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The change in fair value is recognised in profit or loss
and is presented within the "net gains/(losses) on investments held at fair
value through profit or loss" in the Statement of Comprehensive Income.
IFRS requires the Company to measure fair value using the following fair value
hierarchy that reflects the significance of the inputs used in making the
measurements. IFRS establishes a fair value hierarchy that prioritises the
inputs to valuation techniques used to measure fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1 measurements) and the lowest priority
to unobservable inputs (Level 3 measurements).
The three levels of fair value hierarchy under IFRS are as follows:
· Level 1 reflects financial instruments quoted in an active market.
· Level 2 reflects financial instruments whose fair value is evidenced by
comparison with other observable current market transactions in the same
instrument or based on a valuation technique whose variables include only data
from observable markets.
· Level 3 reflects financial instruments whose fair value is determined
in whole or in part using a valuation technique based on assumptions that are
not supported by prices from observable market transactions in the same
instrument and not based on available observable market data. For investments
that are recognised in the Audited Financial Statements on a recurring basis,
the Company determines whether transfers have occurred between levels in the
hierarchy by re-assessing the categorisation (based on the lowest significant
input) at the date of the event that caused the transfer.
Recognition and derecognition of financial assets
The Company recognises a financial asset at its fair value, plus, in the case
of a financial asset not at fair value through profit or loss, transaction
costs that are directly attributable to the acquisition of the financial
asset. Transaction costs of financial assets carried at fair value through
profit or loss are expensed in profit or loss.
A financial asset (in whole or in part) is derecognised either (i) when the
Company has transferred substantially all the risks and rewards of ownership;
or (ii) when it has neither transferred nor retained substantially all the
risks and rewards and when it no longer has control over the assets or a
portion of the asset; or (iii) when the contractual right to receive cash flow
has expired. The derecognised investments are measured at the weighted average
method. Any gain or loss on derecognition is recognised in the Net
gains/(losses) on investments held at fair value through profit or loss in the
Statement of Comprehensive Income.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities. Equity instruments
issued by the Company are recognised at the proceeds received, net of direct
issue costs.
Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or
as equity in accordance with the substance of the contractual arrangement.
Financial liabilities, including borrowings, are initially measured at fair
value, net of transaction costs.
Financial liabilities are subsequently measured at amortised cost using the
effective interest method, with interest expense recognised on an effective
yield basis.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the
Company's obligations are discharged, cancelled or they expire.
(j) Cash and cash equivalents
Cash comprises cash and demand deposits. Cash equivalents, which may include
UK treasury bills, are short-term, highly liquid investments that are readily
convertible to known amounts of cash, are subject to insignificant risks of
changes in value, and are held for the purpose of meeting short-term cash
commitments rather than for investment or other purposes. Included in cash and
cash equivalents at the year end was cash at bank of £4,382,000 and treasury
bills of £18,244,000. Refer to note 12 for further details of the cash
balance held at 30 September 2023.
(k) Other receivables
Other receivables do not carry interest and are short-term in nature and are
accordingly recognised at amortised cost.
(l) Foreign currency
Transactions and balances
At each Statement of Financial Position date, monetary assets and liabilities
that are denominated in foreign currencies are translated at the rates
prevailing at that date.
Non-monetary items carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date fair value is
measured. Non-monetary items that are measured in terms of historical cost in
a foreign currency are not retranslated. Exchange differences are recognised
in profit or loss in the year in which they arise. Transactions denominated in
foreign currencies are translated into pound sterling (£) at the rate of
exchange ruling at the date of the transaction. Foreign exchange gains and
losses arising from translation are included in the Statement of Comprehensive
Income.
Where foreign currency items are held at fair value, the foreign currency
movements are presented as part of the fair value change.
(m) Capital reserve
Profits achieved by selling investments and changes in fair value arising upon
the revaluation of investments that remain in the portfolio are all charged to
capital the Statement of Comprehensive Income and allocated to the capital
reserve. The capital reserve is also used to fund dividend distributions.
(n) Revenue reserve
The balance of all items allocated to the revenue in the Statement of
Comprehensive Income for the year is transferred to the Company's revenue
reserve.
(o) Investment entities
In accordance with IFRS 10 an investment entity is an entity that:
· obtains funds from one or more investors for the purpose of
providing those investor(s) with investment management services;
· commits to its investor(s) that its business purpose is to
invest funds solely for returns from capital application, investment income,
or both; and
· measures and evaluates the performance of substantially all
of its investments on a fair value basis.
The Directors are satisfied that the Company meets each of these criteria and
hence is an investment entity in accordance with IFRS 10.
3. Use of estimates and critical judgements
The preparation of Audited Financial Statements in accordance with IFRS
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the Audited Financial Statements and the reported
amounts of income and expenses during the year. Actual results could differ
from those estimates and assumptions.
The estimates and underlying assumptions are reviewed on an ongoing basis.
There were no significant accounting estimates or significant judgements in
the current year, except for the use of estimates in the valuation of the
unquoted investments detailed in note 19.
4. New and revised standards
The following standards have been released but are not yet effective and hence
have not been applied in preparing the Company's financial statements for the
year ended 30 September 2023. The Directors have considered their impact and
have concluded that they will not have a material impact on the Company's
financial statements.
· IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors
The amendments aim to improve accounting policy disclosures and to help users
of the financial statements to distinguish between changes in accounting
estimates and changes in accounting policies.
Effective date - 1 January 2023
· IAS 1 - Presentation of Financial Statements
Classification of Liabilities as Current or Non-current: The amendments aim to
promote consistency in applying the requirements by helping companies
determine whether, in the statement of financial position, debt and other
liabilities with an uncertain settlement date should be classified as current
(due or potentially due to be settled within one year) or non-current.
Effective date - 1 January 2024
· IAS 21 - The Effects of Changes in Foreign Exchange Rates
On 15 August 2023, the IASB issued 'Lack of Exchangeability (Amendments to
IAS 21)' to provide guidance to specify when a currency is exchangeable and
how to determine the exchange rate when it is not.
Effective date - 1 January 2025
5. Interest income
2023 2022
£'000 £'000
Interest accounted for using the effective interest rate method on assets held 3 60
at fair value through profit or loss (FVTPL):
Interest on assets held at amortised cost:
Cash at bank 255 11
UK treasury bills 872 -
1,130 71
6. Investment management fees
2023 2022
£'000 £'000
Jupiter Unit Trust Managers Limited ("JUTM") 11 4,915
Jupiter Investment Management Limited ("JIML") 3,998 1,178
4,009 6,093
On 1 July 2022, the Company became a self-managed AIF. Since that date the
company has procured portfolio management services directly from Jupiter
Investment Management Limited.
Management fee
The monthly management fee is equal to 1/12 of 0.5% of the Net Asset Value
(the "management fee"). The management fee is calculated and paid monthly in
arrears.
If at any time the Company invests in or through any other investment fund or
special purpose vehicle and a management fee or advisery fee is charged to
such investment fund or special purpose vehicle by JIML or any of its
Associates and is not waived, the value of such investment will be excluded
from the calculation of NAV for the purposes of determining the management
fee.
As at 30 September 2023, an amount of £nil (2022: £3,128,000) to JUTM and
£1,022,000 (2022: £1,178,000) to JIML were outstanding and due in respect of
management fees.
Performance fee
In accordance with an agreement between the Company and JUTM dated 29 November
2021 (the "Agreement"), the Company settled 54% (£60,522,000) of the
performance fee due to JUTM for the year ended 30 September 2021 in ordinary
shares issued by the Company. The remaining 46% (£51,555,000) of the
performance fee amount was settled in cash.
The value of the 22,667,415 ordinary shares issued under the Agreement on 28
January 2022 was £42,615,000. The difference between the value of the
liability settled through the issuance of ordinary shares and the value of the
shares issued on 28 January 2022, being £17,907,000, was recognised within
gains on settlement of financial liability within the Statement of
Comprehensive Income during the year ended 30 September 2022.
For the year ended 30 September 2023, JIML was entitled to receive a
performance fee, the sum of which is equal to 20% of the amount by which the
Adjusted Net Asset Value at the end of a Calculation Period exceeds the higher
of: (i) the Performance Hurdle; and (ii) the High Water Mark (the "Performance
Fee"). The calculation period for the current period will be the period
commencing on 1 October 2022 and ending on 30 September 2023 (the "Calculation
Period").
Adjusted Net Asset Value at the end of a Calculation Period shall be the
audited NAV in Sterling at the end of the relevant Calculation Period:
(i) plus an amount equal to any accrued or paid performance fee in respect
of that Calculation Period or any prior Calculation Period;
(ii) plus an amount equal to all dividend or other income distributions paid
to shareholders that have been declared and paid on or prior to the end of the
relevant Calculation Period;
(iii) minus the amount of any distribution declared in respect of the
Calculation Period but which has not already reduced the audited NAV;
(iv) minus the Net Capital Change where the Net Capital Change is positive or,
correspondingly, plus the Net Capital Change where such net Capital Change is
negative (which for this purpose includes the Net Capital Change in the
relevant Calculation Period and each preceding Calculation Period); and
(v) minus any increase in the NAV during the Calculation Period attributable
to investments attributable to C shares prior to the conversion of those C
shares.
"Performance Hurdle" means, in relation to the Calculation Period, ("A"
multiplied by "B") + C where:
"A" is 8% (expressed for the purposes of this calculation as 1.08) (calculated
as an annual rate and adjusted to the extent the Calculation Period is greater
or shorter than one year).
"B" is:
(i) in respect of the first Calculation Period, the Net Issue Proceeds; or
(ii) in respect of each subsequent Calculation Period, the sum of this
calculation as at the end of the immediately preceding Calculation Period:
plus (where sum is positive) or minus (where such sum is negative) the Net
Capital Change attributable to shares issues and repurchases in all preceding
Calculation Period (the amount in this paragraph (b) being the "Aggregate
NCC"), in each case, plus (where such sum is positive) or minus (where such
sum is negative) the sum of:
(a) in respect of each share issue undertaken in the relevant Calculation
Period being assessed, an amount equal to the Net Capital Change attributable
to that share issue multiplied by the sum of the number of days between
admission to trading of the relevant shares and the end of the relevant
Calculation Period divided by 365 (such amount being the "issue adjustment"),
minus
(b) in respect of each repurchase or redemption of shares undertaken in the
relevant Calculation Period being assessed, an amount equal to Net Capital
Charge attributable to that share purchase or redemption multiplied by the
number of days between the relevant disbursement of monies to fund such
repurchase or redemption and the end of the relevant Calculation Period
divided by 365 (such amount being the "reduction adjustment").
"C" is the sum of:
the issue adjustment for the Calculation Period;
the reduction adjustment for the Calculation Period; and
the Aggregate NCC multiplied by -1.
"Net Capital Change" equals I minus R where:
"I" is the aggregate of the net proceeds of any share issue over the relevant
year (other than the first issue of ordinary shares);
"R" is the aggregate of amounts disbursed by the Company in respect of the
share redemption or repurchases over the relevant period.
"High Water Mark" means the Adjusted Net Asset Value as at the end of the
Calculation Period in respect of which a performance fee was last earned or if
no performance fee has yet been earned, an amount equal to the Net Issue
Proceeds (as such term is defined in the prospectus); and
"Calculation period" means each twelve-month period ending on 30 September,
except that the first Calculation Period shall be the period commencing on
Admission and ending on 30 September 2019.
Under the terms of the Portfolio Management Agreement, any accrued and unpaid
performance fees will crystallise and become payable to JIML upon certain
termination events.
The accrued performance fee shall only be payable by the Company to the extent
that the Payment Amount is greater than the sum of the performance fee (which
shall both be calculated as at the end of each Calculation Period) and, to the
extent that the Payment Amount is less than the sum of the performance fee for
that Calculation Period, an amount equal to the difference shall be carried
forward and included in the performance fee calculated as at the end of the
next Calculation Period (and such amount shall be paid before any
performance fee accrued at a later date).
"Payment amount" is the sum of:
(i) aggregate net realised profits on investments since the start of the
relevant Calculation Period; plus
(ii) an amount equal to each IPO investment unrealised gain where the
initial public offering of the relevant investment takes place during the
relevant Calculation Period; plus or minus (as applicable)
(iii) an amount equal to the listed investment value change attributable to
that calculation period; plus
(iv) the aggregate amount of all dividends or other income received from
investments of the Company in that Calculation Period (other than investments
made pursuant to the cash management policy of the Company as stated in the
Investment Policy).
No performance fee is payable out of the assets attributable to any C Shares
in issue from time to time.
As at 30 September 2023, the Company had not exceeded the High Water Mark and
Performance Hurdle and no accrual (2022: £nil) for performance fees has been
reflected within these Audited Financial Statements. The amount of £nil
(2022: £nil) was outstanding and due to JIML in respect of performance fee
payable as at 30 September 2023.
7. Other expenses
2023 2022
£'000 £'000
Administration fee 210 267
AIFM fee - 433
Auditor's remuneration for:
- audit fees (current year) 135 135
- audit fees (under accrual in prior year) 10 4
- non-audit fees 60 40
Committee fees 151 79
Depositary fees 63 87
Directors' expenses 15 6
Directors' fees 433 345
Directors' liability insurance 68 68
FCA fees 31 31
Legal fee and professional fees:
- ongoing operations 313 826
- valuation fees 281 152
- due diligence fees 77 160
- fees relating to purchases of investments 516 275
Listing fees 31 53
Loan commitment fee - 9
Printing fees 44 32
Registrars' fees 33 42
Secretarial fees 45 41
Sundry 145 114
2,661 3,199
8. Finance costs
2023 2022
£'000 £'000
Bank interest - 1
Loan interest - 12
- 13
9. Losses per ordinary share
30 September 2023 30 September 2022
Net return Per share Net return Per share
£'000 pence £'000 pence
Revenue return (5,543) (0.94) (9,234) (1.59)
Capital return (72,690) (12.21) (592,058) (101.65)
(78,233) (13.15) (601,292) (103.24)
Weighted average number of ordinary shares 595,150,414 582,448,943
The return per share is calculated using the weighted
average number of ordinary shares.
10. Dividends
The Board has not declared a dividend (2022: £nil).
11. Investments held at fair value through profit or loss
2023 2022
£'000 £'000
Opening book cost 731,095 758,013
Opening investment holding unrealised gains 91,268 702,185
Opening valuation 822,363 1,460,198
Movements in the year:
Purchases at cost 46,305 93,663
Sales proceeds (15,632) (121,318)
Net losses on investments held at fair value (72,660) (610,180)
Closing valuation 780,376 822,363
2023 2022
£'000 £'000
Closing book cost 761,768 731,095
Closing investment holding unrealised gains 18,608 91,268
Closing valuation 780,376 822,363
Movement in unrealised gains during the year 249,567 130,434
Movement in unrealised losses during the year (292,492) (741,351)
Realised loss on sale of investments (36,558) (55,742)
Realised gain on sale of investments 6,823 56,479
Net losses on investments held at fair value through profit or loss (72,660) (610,180)
The Company holds all its investments at fair value through profit or loss.
Investments held by the Company on 30 September 2023 where the ownership
interest exceeded 20% were as follows:
Name Principal place Principal activity Ownership interest %
of business
Cognitive Logic Inc. United States Trading company 20-30%
Sorted Holdings Limited United Kingdom Trading company 20-30%
Growth Street Holdings Limited United Kingdom In liquidation 30-40%
Rowanmoor Group Limited United Kingdom In wind down 20-30%
12. Cash and cash equivalents
2023 2022
£'000 £'000
Cash and cash equivalents comprise of the following:
Cash at bank 4,382 58,712
Treasury bills 18,244 -
22,626 58,712
13. Other receivables
2023 2022
£'000 £'000
Prepayments and accrued income 50 69
50 69
14. Unsettled trades
No trades remained unsettled at 30 September 2023. On 30 September 2022, the
Company sold 566,927 shares in Wise PLC for a consideration of £3,791,154.
The transaction was settled on 4 October 2022.
15. Other payables
2023 2022
£'000 £'000
Administration fees 53 60
AIFM fees - 287
Audit fees 150 135
Pricing review fees 290 267
Custodian fees 16 18
Other creditors 172 280
681 1,047
16. Share capital
No of
shares £'000
Ordinary Shares at no par
value
At 30 September 2021 547,273,076 758,950
Issue of shares 47,877,338 102,614
Issue costs - (674)
At 30 September 2022 595,150,414 860,890
Issue of shares - -
Issue costs - -
At 30 September 2023 595,150,414 860,890
The holders of Ordinary Shares have the right to receive notice of and attend,
speak and vote in general meetings of the Company. They are also entitled to
participate in any dividends and other distributions of the Company. There
were no changes for the year in the share capital of the Company.
Included within the value of shares issued during the year ended 30 September
2022 is £42,615,000 relating to shares issued to JUTM in settlement of the
performance fee payable at 30 September 2021.
17. Net asset value per ordinary share
The Net Asset Value per Ordinary Share and the Net Asset Value at the year end
calculated in accordance with the Articles of Incorporation were as follows:
30 September 2023 30 September 2022
NAV NAV NAV NAV
per share attributable per share attributable
pence £'000 pence £'000
Ordinary Shares: basic and diluted 134.65 801,349 147.79 879,582
The Net Asset Value per Ordinary Share is based on 595,150,414 (2022:
595,150,414) Ordinary Shares, being the number of Ordinary Shares in issue at
the year end.
18. Cash used in operating activities
2023 2022
£'000 £'000
Total losses for the year (78,233) (601,292)
Net losses on investments held at fair value through profit or loss 72,660 610,180
Gain on settlement of financial liability - (17,907)
Interest income (1,130) (71)
Finance costs - 13
Net losses/gains on currency movements 4 (1)
Movement in working capital
Decrease in other receivables 19 358
Decrease in payables (excluding loan payable and settlement of performance (3,650) (50,610)
fees through the issuance of shares - see note 6)
(10,330) (59,330)
19. Financial instruments and capital disclosures
The Company's activities expose it to a variety of financial risks; market
risk (including other price risk, foreign currency risk and interest rate
risk), credit risk and liquidity risk.
Certain financial assets and financial liabilities of the Company are carried
in the Statement of Financial Position at their fair value. The fair value is
the amount at which the asset could be sold, or the liability transferred in a
current transaction between market participants, other than a forced or
liquidation sale. For investments actively traded in organised financial
markets, fair value is generally determined by reference to Stock Exchange
quoted market mid prices and Stock Exchange Electronic Trading Services
("SETS") at last trade price at the year end date, without adjustment for
transaction costs necessary to realise the asset. Other financial instruments
not carried at fair value are typically short-term in nature and reprice to
the current market rates frequently. Accordingly, their carrying amount is a
reasonable approximation of fair value. This includes cash and cash
equivalents, other receivables and payables.
The Company measures fair values using the following hierarchy that reflects
the significance of the inputs used in making the measurements. Categorisation
within the hierarchy has been determined on the basis of the lowest level
input that is significant to the fair value measurement of the relevant assets
as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or
liabilities.
An active market is a market in which transactions for the asset or liability
occur with sufficient frequency and volume on an ongoing basis such that
quoted prices reflect prices at which an orderly transaction would take place
between market participants at the measurement date. Quoted prices provided by
external pricing services, brokers and vendors are included in Level 1, if
they reflect actual and regularly occurring market transactions on an
arm's-length basis.
Level 2 - Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices).
Level 2 inputs include the following:
· quoted prices for similar (i.e. not identical) assets in active markets;
· quoted prices for identical or similar assets or liabilities in markets
that are not active. Characteristics of an inactive market include a
significant decline in the volume and level of trading activity, the available
prices vary significantly over time or among market participants or the prices
are not current;
· inputs other than quoted prices that are observable for the asset (for
example, interest rates and yield curves observable at commonly quoted
intervals); and
· inputs that are derived principally from, or corroborated by, observable
market data by correlation or other means (market-corroborated inputs).
Level 3 - Inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
The level in the fair value hierarchy within which the fair value measurement
is categorised in its entirety is determined on the basis of the lowest level
input that is significant to the fair value measurement in its entirety. If a
fair value measurement uses observable inputs that require significant
adjustment based on unobservable inputs, that measurement is a Level 3
measurement. Assessing the significance of a particular input to the fair
value measurement in its entirety requires judgement, considering factors
specific to the asset or liability.
At 30 September 2023 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Quoted equity 10,284 - - 10,284
Unquoted equity - - 770,092 770,092
10,284 - 770,092 780,376
At 30 September 2022 Level 1 Level 2 Level 3 Total
Quoted equity 20,317 - - 20,317
Unquoted equity - - 802,046 802,046
20,317 - 802,046 822,363
The following table shows the valuation techniques used for Level 3 fair
values, as well as the significant unobservable inputs used for Level 3 items:
Unlisted Investments 2023
Fair Value as at 30 September 2023 (£000s) Valuation Technique Significant Unobservable Inputs Range Sensitivity % Sensitivity to changes in significant unobservable inputs
728,177 Market approach using comparable traded multiples 25% If multiples changed by +/- 25%, the value of the companies in this group
would change by + £112,340,325 / - £127,156,208
EV/LTM Revenue multiples
EV/2023E Revenue multiples
0.23 - 19.09x
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 following table shows the valuation techniques used for Level 3 fair
values, as well as the significant unobservable inputs used for Level 3 items:
Unlisted Investments 2022
Fair Value as at 30 September 2022 (£000s) Valuation Technique Significant Unobservable Inputs Range Sensitivity % Sensitivity to changes in significant unobservable inputs
447,933 Market approach using comparable traded multiples 25% If multiples changed by +/- 25%, the value of the companies in this group
would change by + £42,745,628 / - £41,842,136
EV/2022E revenue multiples
EV/LTM revenue multiples
0.13 - 25.79x
EV/2023E revenue multiples
113,394 Market approach using price to book ratios Price/2022E Book multiple 25% If multiples changed by +/- 25%, the value of the companies in this group
would change by + £39,701,835 / - £34,903,560
0.35 - 4.41x
177,016 Recent transaction price N/A N/A N/A N/A
45,065 Scenario Analysis Probability 17-100% 25% If probability changed by +/- 25%, the value of the companies in this group
would change by + £21,124,669 / - £21,124,669
18,429 Option Pricing Underlying Asset Value N/A 25% If the underlying asset values changed by +/- 25%, the value of the companies
in this group would change by + £3,816,379 / - £3,893,347
209 Wind Down N/A N/A N/A N/A
The Company has an established control framework with respect to the
measurement of fair values. The Company's Investment Adviser provides
discretionary portfolio management services, while the Company assumes direct
responsibility for the valuation process.
The Company's Valuation Committee regularly reviews significant unobservable
inputs and valuation adjustments. Valuations are prepared by an independent
third party valuer and the Valuation Committee assesses the evidence prepared
to support the conclusion that these valuations meet the requirements of the
standards, including the level in the fair value hierarchy in which the
valuation should be classified.
The following table shows a reconciliation of the opening balance to the
closing balance for Level 1 and 3 fair values:
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Level 1 Level 1 Level 3 Level 3
Opening balance 20,317 236,756 802,046 1,223,442
Transferred to/(from) Level 1/(Level 3) - (4,961) - 4,961
Purchases - 15,219 46,305 78,444
Sales (10,263) (49,478) (5,369) (71,840)
Total gains/(losses) included in net gains on investments in the statement of
comprehensive income
- on assets sold 6,826 (42,763) (36,556) 43,500
- on assets held at year end (6,596) (134,456) (36,334) (476,461)
10,284 20,317 770,092 802,046
During the period ended 30 September 2022,Revolution Beauty was moved to Level
3 from Level 1 due to being suspended on the London Stock Exchange and no
longer valued using a quoted share price in the prior year. There have been no
transfers between levels in the current year. The change in unrealised gains
or losses (net loss) for the period included in the Statement of Comprehensive
Income relating to those Level 3 assets held at the reporting date amounts to
a net loss of £36,334,000 (2022: net loss of £427,998,000).
Investments are moved between levels at the point of the trigger event.
The main risks that the Company faces arising from its financial instruments
are:
(i) market risk, including:
- other price risk, being the risk that the value of investments will
fluctuate as a result of changes in market prices;
- interest rate risk, being the risk that the future cash flows of a financial
instrument will fluctuate because of changes in interest rates;
- foreign currency risk, being the risk that the value of financial assets and
liabilities will fluctuate because of movements in currency rates;
(ii) credit risk, being the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that it has
entered into with the Company; and
(iii) liquidity risk, being the risk that the Company will not be able to meet
its liabilities when they fall due. This may arise should the Company not be
able to liquidate its investments.
Other price risk
The management of price risk is part of the portfolio management process and
is characteristic of investing in equity securities. The investment portfolio
is managed with an awareness of the effects of adverse price movements through
detailed and continuing analysis with an objective of maximising overall
returns to shareholders. Although it is the Company's current policy not to
use derivatives, they may be used from time to time for the purpose of
efficient portfolio management and managing any exposure to assets denominated
in currencies other than pound sterling.
If the investment portfolio valuation rose or fell by 25% at 30 September 2023
(25% at 30 September 2022), the impact on the net asset value would have been
£195,093,937 (2022: £205,590,626). The calculations are based on the
investment portfolio valuation as at the Statement of Financial Position date
and are not necessarily representative of the year as a whole.
Interest rate risk
As at 30 September 2023 the financial assets and financial liabilities exposed
to interest rate risk are as shown below:
In one year Greater than 2023
or less one year Total
£'000 £'000 £'000
Cash and cash equivalents 22,626 - 22,626
22,626 - 22,626
In one year Greater than 2022
or less one year Total
£'000 £'000 £'000
Cash and cash equivalents 58,712 - 58,712
58,712 - 58,712
Liquidity and interest risk tables
The following tables detail the Company's remaining contractual maturity for
its financial assets and liabilities.
Over
Interest Year 1 Year 1 - 2 2 years Total
2023 rate % £'000 £'000 £'000 £'000
Assets
Cash Daily bank rate 4,382 - - 4,382
UK treasury bills Yield to maturity 18,244 - - 18,244
Sorted Holdings Convertible Loan Note Default interest free 316 - - 316
Other receivables Interest free 50 - - 50
22,992 22,992
Over
Interest Year 1 Year 1 - 2 2 years Total
2022 rate % £'000 £'000 £'000 £'000
Assets
Cash Daily bank rate 58,712 - - 58,712
Other receivables and unsettled trades Interest free 3,860 - - 3,860
62,572 62,572
Over
Interest Year 1 Year 1 - 2 2 years Total
2023 rate % £'000 £'000 £'000 £'000
Liabilities
Other current liabilities Interest free 1,703 - - 1,703
1,703 - - 1,703
Over
Interest Year 1 Year 1 - 2 2 years Total
2022 rate % £'000 £'000 £'000 £'000
Assets
Other current liabilities Interest free 5,353 - - 5,353
5,353 - - 5,353
Foreign currency risk
The Investment Adviser does not normally hedge against foreign currency
movements affecting the value of the investment portfolio but takes account of
this risk when making investment decisions. The Company invests in securities
denominated in foreign currencies which give rise to currency risks.
Foreign currency exposure:
2023
Investments Cash Debtors Creditors
2023 £'000 £'000 £'000 £'000
Assets
US dollar 199,132 10 - 3
Euro 185,785 16 - -
Swedish krona 56,913 3,581 - -
Swiss Franc 2,848 - - -
444,678 3,607 - 3
2022
Investments Cash Debtors Creditors
2022 £'000 £'000 £'000 £'000
Assets
US dollar 260,583 58 - 2
Euro 154,943 10 - -
Swedish krona 56,135 290 - -
471,661 358 - 2
During the year pound sterling weakened by an average of 4.85% against all of
the currencies in the investment portfolio (weighted for exposure at 30
September 2023). In a similar scenario, where the value of pound sterling had
strengthened against each of the currencies in the portfolio by 5% (2022: 5%),
the impact on the Net Asset Value would have been negative £21,175,126 (2022:
negative £22,460,066). If the value of pound sterling had weakened against
each of the currencies in the investment portfolio by 5% (2022: 5%), the
impact on the Net Asset Value would have been positive £23,404,082 (2022:
positive £24,824,284). The calculations are based on the investment portfolio
valuation and cash balances as at the year end and are not necessarily
representative of the year as a whole.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into with
the Company. The Risk Committee has in place a monitoring procedure in respect
of counterparty risk which is reviewed on an ongoing basis.
The carrying amounts of financial assets best represent the maximum credit
risk exposure at the Statement of Financial Position date, and the main
exposure to credit risk is via the Company's Depositary who is responsible for
the safeguarding of the Company's cash balances.
At the reporting date, the Company's financial assets exposed to credit risk
amounted to the following:
2023 2022
£'000 £'000
Cash and cash equivalents 22,626 58,712
Sorted Holdings Convertible Loan Note 316 -
Other receivables 50 69
Unsettled trades - 3,791
22,992 62,572
All the assets of the Company which are traded on a recognised exchange are
held on its behalf by Citibank UK Limited, the Company's Depositary.
Bankruptcy or insolvency of the Depositary may cause the Company's rights with
respect to securities held by the Depositary to be delayed or limited.
The credit risk on cash is controlled through the use of counterparties or
banks with high credit ratings, rated AA or higher, assigned by international
credit rating agencies. Bankruptcy or insolvency of such financial
institutions may cause the Company's ability to access cash placed on deposit
to be delayed, limited or lost.
Cash of £4,091,027, $10,373, CHF70, SEK3,580,960 and €15,720 was held with
Citibank UK Limited at year end.
The credit rating of Citibank UK Limited was A-1 at the year end.
Liquidity risk
Liquidity risk is defined as the risk that the Company does not have
sufficient liquid resources to meet its obligations as they fall due. In
managing the Company's assets, the Company will seek to ensure that it holds
at all times a portfolio of assets (including cash) to enable the Company to
discharge its payment obligations as they fall due. The Company may also
maintain a short-term overdraft facility that it may utilise from time to time
to manage short-term liquidity.
The Company invests in a number of unquoted securities which are not readily
realisable. These investments make up 97% (2022: 91%) of the net assets as at
30 September 2023.
The Company's liquidity risk is maintained by the Risk Committee in accordance
with established policies, procedures and governance structures in place. Cash
flow forecasting is reviewed by the Risk Committee to ensure that it has
sufficient cash to meet obligations as they fall due.
The maturity profile of the Company's current assets and liabilities is
presented in the following table.
Between Between
Up to 3 and 12 1 and 5
3 months months years Total
£ £ £ £
2023
Assets
Cash and cash equivalents 26,626 - - 26,626
Sorted Holdings Convertible Loan Note 316 - - 316
Other receivables 50 - - 50
Liabilities
Other current liabilities (1,703) - - (1,703)
25,289 - - 25,289
Between Between
Up to 3 and 12 1 and 5
3 months months years Total
£ £ £ £
2022
Assets
Cash and cash equivalents 58,712 - - 58,712
Other receivables 69 - - 69
Unsettled trades 3,791 - - 3,791
Liabilities
Other current liabilities (5,353) - - (5,353)
57,219 - - 57,219
Capital management objectives, policies and procedures
The structure of the Company's capital is described in note 16 and details of
the Company's reserves are shown in the Statement of Changes in Equity on page
73.
The Company's capital management objectives are:
· to ensure that it is able to continue as a going concern; and
· to generate long-term capital growth through investing in a
portfolio consisting primarily of equity or equity related investments in
unquoted companies.
The Board, with the assistance of the Investment Adviser, regularly monitors
and reviews the broad structure of the Company's capital. These reviews
include:
· the level of gearing, set at limits in normal market conditions,
between 5% and 25% of net assets, which takes account of the Company's
position and the views of the Board and the Investment Adviser on the market;
· the extent to which revenue reserves should be retained or
utilised; and
· ensuring the Company's ability to continue as a going concern.
20. Related parties
Prior to the Company's move to being a self-managed AIF, Jupiter Unit Trust
Managers Limited ("JUTM") acted as the Company's Alternative Investment Fund
Manager ("AIFM") and sub-delegated portfolio management services to Jupiter
Investment Management Limited ("JIML"). On 30 June 2022 JUTM's appointment as
AIFM was terminated and on 1 July 2022 and the Company became a self-managed
AIF. JIML continues to provide portfolio management services by virtue of a
Portfolio Management Agreement dated 1 July 2022.
2023 2022
£'000 £'000
Management fee charged by JUTM: 11 4,915
Total management fee charged - 3,128
Management fee outstanding
Management fee charged by JIML:
Total management fee charged 3,998 1,178
Management fee outstanding 1,022 1,178
AIFM fee charged by JUTM
Total AIFM fee charged - 433
AIFM fee outstanding - 287
Directors' fees
Total Directors' fees charged 433 345
Directors' fees outstanding - 18
As at 30 September 2023 the following Directors have
holdings in the Company:
Number of % Ordinary Shares in
Ordinary Shares issue as at 30 September 2023
Andrew Haining 79,000 0.0133
Stephen Coe 60,909 0.0102
Simon Holden 89,500 0.0150
Anne Ewing 55,000 0.0092
Tim Cruttenden 21,298 0.0036
Margaret O'Connor - -
S Cruttenden (son of Tim Cruttenden) 11,530 0.0019
As at 30 September 2022 the following Directors have
holdings in the Company:
Number of % Ordinary Shares in
Ordinary Shares issue as at 30 September 2022
Andrew Haining 79,000 0.0133
Stephen Coe 60,909 0.0102
Simon Holden 89,500 0.0150
Anne Ewing 55,000 0.0092
Tim Cruttenden 21,298 0.0036
Margaret O'Connor - -
S Cruttenden (son of Tim Cruttenden) 11,170 0.0019
The following funds, which are also managed by Jupiter, hold an investment in
the Company.
Total holdings at Shares purchased Shares sold Total holdings at Value of holdings at
30 September during during 30 September 30 September
2022 the year the year 2023 2023
£'000
Fund name
Jupiter UK Smaller Companies Focus Fund 4,390,111 - (2,370,872) 2,019,239 1,256
Jupiter UK Specialist Equity Fund 4,166,225 - (3,072,435) 1,093,790 680
Jupiter UK Mid-Cap Fund 84,063,528 - (29,715,277) 54,348,251 33,805
Jupiter UK Smaller Companies Fund 15,958,557 - (5,968,606) 9,989,951 6,214
Jupiter Investment Fund - Jupiter Merlin Real Return Portfolio 1,259,639 - (1,259,639) - -
Jupiter Fund of Investment Trusts 2,000,000 - - 2,000,000 1,244
Jupiter UK Smaller Companies Equity Fund 2,250,000 - - 2,250,000 1,400
Total 114,088,060 - (42,386,829) 71,701,231 44,599
The following funds, which are also managed by Jupiter, hold an investment in
the Company.
Total holdings at Shares purchased Shares sold Total holdings at Value of holdings at
30 September during during 30 September 30 September
2021 the year the year 2022 2022
£'000
Fund name
Jupiter UK Smaller Companies Focus Fund 6,567,286 - (2,177,175) 4,390,111 2,709
Jupiter UK Specialist Equity Fund 7,009,168 - (2,842,943) 4,166,225 2,571
Jupiter UK Mid-Cap Fund 77,592,375 7,600,007 (1,128,854) 84,063,528 51,867
Jupiter UK Smaller Companies Fund 17,820,552 - (1,861,995) 15,958,557 9,846
Jupiter Investment Fund - Jupiter Managed European Portfolio 742,325 3,633 (745,958) - -
Jupiter Investment Fund -Jupiter Merlin International Balanced 668,092 3,270 (671,362) - -
Jupiter Investment Fund - Jupiter Merlin International Equities 946,275 4,724 (950,999) - -
Jupiter Investment Fund - Jupiter Merlin Real Return Portfolio 1,559,644 7,268 (307,273) 1,259,639 777
Jupiter Fund of Investment Trusts 2,000,000 - - 2,000,000 1,234
Jupiter Merlin Real Return Portfolio 103,926 509 (104,435) - -
Jupiter Merlin Worldwide Portfolio 8,532,956 43,605 (8,576,561) - -
Jupiter UK Smaller Companies Equity Fund 1,750,000 500,000 - 2,250,000 1,388
Total 125,292,599 8,163,016 (19,367,555) 114,088,060 70,392
21. Post balance sheet events
Since 7 October 2023 an armed conflict has been ongoing between Israel and
Hamas-led Palestinian militant groups, largely in and around the Gaza Strip,
the West Bank and on the Israel-Lebanon border. One of the Company's portfolio
companies, Deep Instinct, has an operational presence in Tel Aviv, Israel.
Notwithstanding the impact the conflict has had in the region to date, Deep
Instinct has not experienced material disruption to its operations.
On 27 November 2023 the Company announced that that it has reached agreement
with Jupiter Investment Management Limited and agreed Heads of Terms with the
Company's managers (Richard Watts and Nick Williamson) to redraw the structure
under which investment advisory services will be provided. This foresees the
Company's managers leaving Jupiter to provide advisory services to the Company
from a new entity, effective 1 April 2024. It was also announced that G10
Capital Limited - part of IQ-EQ group's UK Regulatory and AIFM platform - will
take over AIFM services for the Company.
On 16 January 2024 the Company paid £2 million to Smart Pension Limited as
part of an advance subscription, ahead of a wider funding round that is
expected to complete on or around 31 January 2024. On completion of the
funding round the advance subscription will convert to share capital in Smart
Pension Limited.
There has not been any other matter or circumstance occurring subsequent to
the end of the financial year that has significantly affected, or may
significantly affect, the operations of the Company, the results of those
operations, or the state of affairs of the Company in the future financial
year.
Corporate Information
Directors
Andrew Haining, Chairman
Anne Ewing
Simon Holden
Stephen Coe (Senior Independent Director)
Tim Cruttenden
Margaret O'Connor
Registered office
1 Royal Plaza
Royal Avenue
St Peter Port
Guernsey, GY1 2HL
Investment Adviser
Jupiter Investment Management Limited ("JIML")
The Zig Zag Building
70 Victoria Street
London, SE1E 6SQW
Financial Adviser and Corporate Broker
Liberum Capital Limited
Ropemaker Place Level 12
25 Ropemaker Street
London, EC2Y 9LY
Numis Securities Limited
45 Gresham Street
London, EC2V 7BF
Administrator and Company Secretary
Apex Administration (Guernsey) Limited (formerly known as Maitland
Administration (Guernsey) Limited)
1 Royal Plaza
Royal Avenue
St Peter Port
Guernsey, GY1 2HL
Registrar
Computershare Investor Services (Guernsey) Limited
1st Floor, Tudor House
Le Bordage
St Peter Port
Guernsey, GY1 1DB
Depositary
Citibank UK Limited
Citigroup Centre
Canada Square
Canary Wharf
London, E14 5LB
English Legal Adviser to the Company
Travers Smith LLP
10 Snow Hill
London, EC1A 2AL
Guernsey Legal Adviser to the Company
Ogier (Guernsey) LLP
Redwood House
St Julian's Avenue
St Peter Port, GY1 1AW
Independent Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey, GY1 1WR
Definitions
BENCHMARK PERFORMANCE
With reference to investment valuation, application of the performance of a
benchmark or pool of comparable companies to an unlisted company to determine
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 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
MULTIPLE ON INVESTED CAPITAL ("MOIC")
The ratio calculates the total cash earned on an investment as a ratio of the
total cash invested in that investment.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR QKFBNFBKDDDBRecent news on Chrysalis Investments
See all newsREG - Chrysalis Invs Ltd - Quarterly NAV Announcement and Trading Update
AnnouncementREG - Chrysalis Invs Ltd - Update on claim against Revolution Beauty GroupPLC
AnnouncementREG - Chrysalis Invs Ltd - Result of AGM & EGM
AnnouncementREG - Chrysalis Invs Ltd - Holding(s) in Company
AnnouncementREG - Chrysalis Invs Ltd - Holding(s) in Company
Announcement