TIDMCHRY
RNS Number : 6422Z
Chrysalis Investments Limited
26 January 2022
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/6422Z_1-2022-1-26.pdf
Chrysalis Investments Limited
26 January 2022
Chrysalis Investments Limited (the "Company")
Annual Results
The Company today announces its results for the year ended 30
September 2021. 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 2021 30 September 2020 % increase
NAV per share 251.96p 160.97p 57%
------------------ ------------------ -----------
Share price 267p 145p 84%
------------------ ------------------ -----------
Total net assets GBP1,379 million GBP542 million 154%
------------------ ------------------ -----------
Highlights
- NAV per share of 251.96p, representing 57% growth year-on-year and a CAGR of 38% since IPO
- Further diversification achieved: five new investments added
in the period, outperforming expectations, taking the portfolio to
15 holdings (excluding Growth Street and Embark)
- Partial realisation of Wise at the point of Initial Public
Offering (GBP83m) and announcement of the sale of Embark to Lloyds
Bank, where completion is expected imminently
- GBP95m of capital recycled, driven by realisations, to fund
new investments (an increase from c.GBP20m in FY20)
- Cash position of GBP55m, pre expected Embark proceeds, and a
strong total liquidity position of over GBP160m, both as of close
on 24 January 2022
Andrew Haining, Chair, commented:
" Chrysalis produced another strong NAV performance, driven by
the successes of several of our major holdings. The ambition set
out early in the year to scale the Company has been achieved,
assisted by both material revaluations (many supported by
significant funding rounds), and our shareholders via capital
raises, for which I thank them. The Board is delighted with the
performance of the investment team, to which further resource was
added post year end to bolster the Finance and ESG functions. In
the space of three years, the team has built a unique platform by
which ordinary investors can access the opportunities available in
the late-stage private market. With interest in private investing
growing, I believe Chrysalis is extremely well placed to continue
its development."
Nick Williamson and Richard Watts, co-portfolio managers,
commented:
"Our investments performed strongly in aggregate over 2021,
driven by market leading business propositions that have continued
to drive material revenue growth. We estimate the aggregate Total
Addressable Market our companies face is over $1 trillion, of which
they have less than 1% combined market share. Typically, these
markets are growing, and we expect our companies to increase their
market shares over time. So, as we look forward, we believe the
portfolio has significant revenue growth potential embedded within
it, likely to be at a speed that is materially faster than those
typically available in listed markets over the medium-term.
Despite recent market weakness in growth stocks, including
technology names, we believe Chrysalis is well positioned; we think
a number of our major holdings are attractively valued versus their
listed peers, are growing very quickly and, in many cases, are
digital market leaders. In the current febrile market environment,
our focus remains on supporting our companies to continue to build
and grow. We firmly believe that we are still at the start of
digital disruption and our purpose of identifying and enabling the
most innovative technology enabled companies to disrupt huge
addressable markets will provide exceptional long-term returns to
shareholders."
The Report and Accounts will be available on the Company's
website at http://chrysalisinvestments.co.uk under Investor
Relations, then Financial Reporting.
Issue of Equity
Further to the Company's announcement on 29 November 2021 in
respect of the issue of Ordinary Shares in the capital of the
Company in order to settle 54 per cent. of the performance fee
amount payable to the investment manager in respect of the period
to 30 September 2021, an application has been made for up to
22,667,255 million New Ordinary Shares to be admitted to the
premium segment of the Official List of the FCA and to trading on
the Main Market of the London Stock Exchange. It is expected that
admission in respect of the New Ordinary Shares will become
effective, and that dealings in the New Ordinary Shares will
commence, at 8.00 a.m. on 28 January 2022.
Total Voting Rights
Following the issue and admission, Chrysalis' issued share
capital will consist of 595,150,415 Ordinary Shares with voting
rights in the Company. This figure may be used by Shareholders in
determining the denominator for the calculation by which they will
establish if they are required to notify their interest in, or a
change to their interest in, the Company under the FCA's Disclosure
Guidance and Transparency Rules.
-S-
For further information, please
contact:
Jupiter Asset Management:
Magnus Spence +44 (0) 20 3817 1325
Liberum:
Chris Clarke / Owen Matthews
/ Darren Vickers +44 (0) 20 3100 2000
Numis Securities Limited:
Nathan Brown / Matt Goss +44 (0) 20 7260 1000
Maitland Administration (Guernsey)
Limited:
Elaine Smeja / Aimee Gontier +44 (0) 1481 749364
Media Enquiries:
Montfort Communications +44 (0) 20 3514 0897
Charlotte McMullen Chrysalis@montfort.london
LEI: 213800F9SQ753JQHSW24
A copy of this announcement will be available on the Company's
website at http://chrysalisinvestments.co.uk . 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.
This announcement may include "forward-looking statements". All
statements other than statements of historical facts included in
this announcement, including, without limitation, those regarding
the Company's financial position, business strategy, plans and
objectives of management for future operations (including
development plans and objectives relating to the Company's products
and services) are forward-looking statements.
Forward-looking statements are subject to risks and
uncertainties and accordingly the Company's actual future financial
results and operational performance may differ materially from the
results and performance expressed in, or implied by, the
statements. These factors include but are not limited to those
described in the formal Prospectus. These forward-looking
statements speak only as at the date of this announcement. The
Company expressly disclaims any obligation or undertaking to update
or revise any forward-looking statements contained herein to
reflect actual results or any change in the assumptions, conditions
or circumstances on which any such statements are based unless
required to do so by the Financial Services and Markets Act 2000,
the Listing Rules or Prospectus Rules of the Financial Conduct
Authority or other applicable laws, regulations or rules.
A different kind of capital
Chrysalis Investments Limited's ("Chrysalis") proposition to
high growth private companies remains distinct: one of long-term
crossover capital.
Our attractiveness to companies is our ability to fund them up
to and through Initial Public Offering ("IPO"), helping them
de-risk this process and align with a natural buyer of listed
equity.
Our attractiveness to investors is that our crossover
proposition allows us access to some of the most exciting private
growth names, which are unavailable to most investors.
Our proposition is based on our ability to offer material
crossover funding. As Chrysalis has grown, our ability to offer a
meaningful crossover proposition internally has increased, but is
further underpinned by over GBP6.4 billion of capital managed by
Jupiter Fund Management PLC and its subsidiaries ("Jupiter")
focused on the UK small and mid-cap listed market. This pool of
funds makes Jupiter one of the biggest IPO investors in the UK.
The Company was set up to seek out attractive, typically
unlisted companies. We define some of the characteristics we are
targeting as:
-- The ability to deliver growth rates substantially higher than the average UK plc;
-- The ability to protect the duration of these growth rates via
competitive advantage, e.g. via scale or technology; and
-- The ability to generate significant margins, and thus profits, at scale.
This has led us towards a group of businesses we label
"tech-enabled disrupters".
We believe:
-- Technology is at the heart of modern life, and thus at the heart of most modern businesses;
-- Technology offers society ways to operate more efficiently
than under older business models;
-- Technology serves society best when the benefits of this
efficiency are shared with its users; and
-- Technology is increasingly a catalyst for environmental change and sustainable development.
Performance Highlights
251.96p - NAV growth of 57%
-----------------------------------------------------------------------
* Asset revaluations drove material Net Asset Value
("NAV") per ordinary share growth over the year
(prior year: 160.97p).
267p - Share price growth of 84%
-----------------------------------------------------------------------
* The Company's Share Price performed well year-on-year
(prior year: 145p), peaking at 277p at the beginning
of September 2021 and ending the year at a 6.0%
premium to NAV (prior year: 9.9% discount).
GBP448.3m - Gain
-----------------------------------------------------------------------
* The Company achieved a significant pre-tax gain for
the year, driven by GBP568.4m net investment gains.
GBP380.2m - Substantial deployment
-----------------------------------------------------------------------
* Material capital investments were made in the year,
as most of the proceeds from funds raised during the
year were utilised for new and follow-on investments.
17 investments - Increased diversification
-----------------------------------------------------------------------
* Five investments were added during the year, further
increasing diversification in the portfolio.
GBP1,460.2m - Total portfolio value
-----------------------------------------------------------------------
* The total portfolio grew to over GBP1 billion during
the year, increasing by GBP853.9m (140.8%) through a
combination of investment gains and new investments,
predominantly funded by capital raises.
Chairman's Statement
Chrysalis Investments Limited (the "Company" or "Chrysalis") saw
strong NAV per share growth over the year of 57% (from 160.97p to
251.96p), which builds on the 42% growth in the prior year. This
continued robust performance means that NAV per share has risen by
156% from the date of the IPO, representing a Compound Annual
Growth Rate of approximately 38% per annum.
Over the year, a number of the Company's biggest investments
undertook material funding rounds supported by new investors, which
provides strong external validation of the valuation progression of
these individual investments, and thus the Company's NAV per
share.
In particular, Klarna added approximately GBP294 million to the
gross portfolio value over the year, following its two successful
funding rounds. The most recent was in June 2021, valuing the
business at $45.6 billion. Chrysalis initially invested at a post
new-money valuation of $5.5 billion in August 2019, demonstrating
the Investment Adviser's origination capability and ability to
access funding rounds prior to widespread acceptance of the power
of the Klarna investment case.
Wise, which listed on the London Stock Exchange in the year, and
Starling Bank, which continued its rapid expansion, enabled by
follow-on capital committed by Chrysalis over 2020, both saw gross
portfolio valuation gains of over GBP100 million, again underpinned
by the provision of capital from new shareholders.
While our aim is to invest predominantly in private growth
companies, our investment philosophy is agnostic to whether a
company is public or private: we want to invest in the best
companies we can find, and Chrysalis was structured in a way that
allows this freedom.
As an example of this approach, we continue to hold some of our
Wise holding after listing, where we believe the investment case
still has not been fully valued by the stock market, despite the
shares showing a substantial gain on our original investment.
Similarly, we retained our THG holding, and increased it at
listing. THG's share price has fallen materially since IPO and was
the largest detractor to performance over the year and has
continued to fall after year end. However, the Investment Adviser
remains committed to the business strategy which the team at THG
has followed over the duration of our ownership, and which
fundamentally remains unchanged.
Our structure enables us to take a long-term view to value
creation; public markets are often shorter term in outlook and
sometimes growth businesses, particularly those where growth has
been prioritised over margin maximisation, struggle to make the
case for investment to those public shareholders, who are more used
to slower-growing, profit-maximising companies. We believe that all
our listed investments have significant upside from their current
market prices. However, if public markets continue to undervalue
assets, Chrysalis does have the flexibility to maintain its
shareholding if companies choose a return to the private
marketplace to continue their growth development.
The Company raised GBP395 million of new capital in the year, as
well as realising approximately GBP83 million from a partial
disposal of our holding in Wise shortly after its IPO. The sale of
Embark to Lloyds Bank Plc for a total consideration of GBP395
million, is scheduled to complete in the coming weeks. These
realisations and fresh capital enabled a fast pace of new
investment and five new investments were added over the summer, at
a rate that exceeded the Investment Adviser's expectations. This
investment activity has continued to diversify the range of
investee companies and should also aid in the creation of a
self-sustaining portfolio of investments in time.
Investment Adviser
The Investment Adviser has continued to deliver strong
performance for the Company and has striven to build Chrysalis into
an increasingly compelling partner for late-stage private growth
companies.
The Investment Adviser has invested in resourcing, and I would
like to welcome Rebecca Whiting, who will act as a Director of
Finance, and Andrew Mortimer, who joins the wider UK small and
midcap team at Jupiter as an ESG Investment Director. With this
further investment, I believe the platform that is now in place
opens up the possibility of extending Chrysalis' position in its
target marketplace.
As a result of the significantly increased NAV over the year, a
performance fee of GBP112.1m is due and payable under the terms of
the investment agreement.
Following the end of the financial year, the Board and the
portfolio management team reviewed payment arrangements for the
performance fee to ensure ongoing alignment between the Investment
Adviser and the Company's shareholders. The Board was pleased that
the portfolio management team requested that the deferred element
of its performance fee be taken in new Chrysalis shares to be
issued by the Company, a stance that the Board believes was
extremely constructive.
These shares will be issued at the closing share price of 267p
at 30 September 2021, an approximate 6% premium to NAV, which
reflects the team's confidence in the prospects for the portfolio.
To ensure continued alignment with stakeholders, the Board will
review fee arrangements, including the performance fee payment
structure, in 2022 after consultation with relevant parties. The
Board will set out its thoughts to shareholders on this subject
later in 2022.
ESG
The latest financial year has demonstrated the growing
prominence of environmental, social and governance ("ESG")
considerations for investors, intermediaries and asset owners. The
Board and the Investment Adviser have established and are currently
implementing an ESG policy which ensures that we are aligning
ourselves with best practice in this area. The ESG policy can be
found on:
https://www.jupiteram.com/about-jupiter/esg-and-stewardship/
Following the year-end, in November 2021 the UK Government
announced that the UK will be the world's first Net Zero-aligned
Financial Centre. This will require asset managers and listed
companies to publish transition plans setting out how an
organisation will adapt as the world transitions towards a low
carbon economy.
The Board believes that the type of tech-enabled, disruptive
businesses in which Chrysalis invests are well-positioned to
navigate the transition to a low carbon economy. They are also
likely to be significant job creators, with positive spill-over
effects elsewhere in the economy. The Investment Adviser integrates
ESG analysis within the investment process and encourages all
portfolio companies to set out a net zero target consistent with
less than 1.5 degrees Celsius in line with the Paris Agreement
across their own operations and value chain. Jupiter has also made
its initial disclosures as part of the Net Zero Asset Managers
initiative, through which it has committed to achieving net zero
emissions by 2050 across its full range of investments and
operations, including the holdings within Chrysalis.
To grow successfully, companies and their founders must not only
execute strategically; they must also lay the foundations for
future growth by creating appropriate corporate governance
structures. Though they are in growth mode, they must also consider
long-term themes relating to the sustainability of their business
model.
This includes a broad range of considerations, but fundamentally
the purpose of the business must remain focused on creating value
for all of these stakeholders and reduce negative impacts if it is
to succeed over the long term. The Investment Adviser continues to
emphasise these points and encourage founders and management teams
considering listing to prepare themselves for the additional
scrutiny which comes with going public.
I am pleased to note that the Investment Adviser has also
aligned its strategy, purpose and principles with the UN Global
Compact ("UNGC") such that all investment decision-making and
engagement is guided by the principles of the UNGC. This means
investee companies are expected to abide by the Compact's Ten
Principles, committing to meeting fundamental responsibilities in
the areas of human rights, labour, environment, and
anti-corruption. These commitments apply to the investment
management of Chrysalis and are welcomed by the Board.
Alternative Investment Fund Management Arrangements
The Board of the Company has determined that it has now reached
a stage in its evolution at which it would be more efficient to
become a self-managed investment company in 2022, with Jupiter
Investment Management Limited continuing to provide portfolio
management services. This would entail the Company assuming direct
responsibility for the Alternative Investment Fund Manager (AIFM)
role, including the valuation and risk management aspects,
replacing Jupiter Unit Trust Managers Limited as the current AIFM.
This transition is expected to be implemented by 30 June 2022,
subject to regulatory approval. The Board is grateful to Jupiter
Unit Trust Managers Limited for its AIFM services to date and the
transitional support going forward.
Outlook
Last year's objective was to continue to grow the size of the
Company, based on the hypothesis that adding scale to Chrysalis'
crossover proposition would enhance access to deal flow and further
boost origination capabilities. The pace of new investments, to
which the Company committed over GBP380 million, would suggest this
capital has achieved its aim.
Total investible assets grew by approximately GBP853 million,
meaning nearly 54% of growth was driven by gains on the revaluation
of investments. Since inception to September 2021, gains on the
revaluation of investments accounted for roughly 35% of total asset
growth, indicating less dependence on capital raises in the year to
scale the Company.
Despite the excellent revenue growth performance achieved by the
portfolio in aggregate, the Investment Adviser's Report details why
it thinks prospects continue to be positive, based on the
substantial aggregate Total Addressable Market ("TAM") the
portfolio accesses, combined with low current revenue penetration
rates.
The Investment Adviser typically sees a strong correlation
between its supply of follow-on capital and the subsequent
performance of the investee asset. The ability and willingness of
Chrysalis to back its assets is one of its attractions to potential
investee companies and demonstrates the Investment Adviser's belief
in the "Power of Primary Capital". Both Starling and wefox are
examples of this investment process and have seen considerable
valuation gains in the year from the accelerated growth that our
follow-on capital helped to fund.
Fundamentally, this is what Chrysalis was set up to do: identify
excellent businesses and then back them to succeed, regardless of
whether they choose to stay private or go public. This flexibility
provides a highly differentiated offering in Europe, and is a key
underpin of the strength in the Company's deal origination
function, backed up by its increased scale.
The Company's share price rose 84% over the year to 267p, and,
notwithstanding the post year end correction in technology stocks,
it is still showing a substantial gain over the period from its
opening level of 145p. While at the time of writing growth stocks
appear to be out-of-favour with investors, experience shows how
quickly market sentiment can swing. Fundamentally, the aim of
Chrysalis is to invest in companies which can generate
significantly faster growth rates in the medium-term than those
typically available in listed markets. This should ultimately
provide the Company the ability to outperform stock markets in
share price terms.
Finally, I would like to thank the investment team at the
Investment Adviser, which the Board believes has developed an
impressive origination function. The majority of our deals have
come from non-advised channels, and so are typically outside of
formal funding rounds. This has allowed the team access to deals
outside of competitive funding processes, at hopefully more
attractive prices and better terms.
Having established a strong brand and origination channel, and
with what I believe to be substantial embedded revenue growth
within the portfolio, I believe the outlook for your Company
remains very exciting.
Andrew Haining
Chairman
25 January 2022
Portfolio Statement
As at 30 September 2021
Company Location Opening Net invested/ Valuation Closing
Cost value recycled change Value % of
Total Total Total Total Total net
(GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) assets
Klarna Holding AB Sweden 64,381 93,453 - 293,546 386,999 28.1
Starling Bank Limited UK 88,248 69,641 35,000 106,126 210,767 15.3
Wise PLC UK 21,838 79,658 (82,677) 111,719 108,700 7.9
wefox Holding AG Germany 65,624 - 109,319 (662) 108,657 7.9
You & Mr Jones LLC USA 46,440 46,440 - 48,397 94,837 6.9
Smart Pension Limited UK 75,000 - 75,000 13,600 88,600 6.4
THG PLC UK 58,799 94,213 7,191 (14,721) 86,683 6.3
Graphcore Limited UK 57,589 67,394 7,194 (13,043) 61,545 4.5
Embark Group Limited UK 27,100 60,069 - (3,169) 56,900 4.1
Cognitive Logic Inc. USA 47,126 - 47,126 1,309 48,435 3.5
Deep Instinct Limited USA 47,289 - 47,289 1,141 48,430 3.5
Revolution Beauty
Group PLC UK 44,879 - 44,879 (3,506) 41,373 3.0
Tactus Holdings Limited UK 40,130 - 40,130 (51) 40,079 2.9
Featurespace Limited UK 24,449 36,391 4,449 (6,111) 34,729 2.5
Secret Escapes Limited UK 21,509 11,064 5,842 7,521 24,427 1.8
Sorted Holdings Limited UK 15,000 11,690 5,000 1,015 17,705 1.3
Growth Street Holdings
Limited UK 12,612 1,256 - 76 1,332 0.1
wefox Holding AG
Loan Note Germany - 35,018 (60,250) 25,232 - 0.0
----------- ----------- -------------- ----------- ----------- --------
Total investments 758,013 606,287 285,492 568,419 1,460,198 106.0
Cash and cash equivalents 49,794 3.5
Other net current
liabilities (131,058) (9.5)
----------- --------
Total net assets 1,378,934 100.0
=========== ========
Investment Adviser's Report
Overview
The year has seen considerable progress for the Company on a
number of fronts. NAV has continued to grow strongly; our investee
companies have delivered strong growth, in many cases culminating
in funding rounds at valuations substantially above the Company's
carrying value; portfolio diversification has continued; further
realisations have been made; and the Company has grown
significantly in scale.
The late-stage private market has continued to grow materially.
Within that, crossover investing has become more prominent.
Chrysalis established itself relatively early in this market shift,
which has enabled it to take advantage of this trend.
We are extremely grateful to our investors who have supported
the development of Chrysalis, with the March 2021 raise of GBP300
million in particular enabling significant further investment to be
undertaken, supplemented by proceeds "recycled" from realisations
in the year.
NAV
NAV per share grew approximately 57% over the year, continuing
the strong progress since March 2020. As previously articulated,
NAV growth in the "Investment Phase" was restricted by significant
levels of new investment activity: new investments can take time to
see their underlying financial performance fully reflected in their
valuations.
The Company entered the financial year with approximately GBP16
million of cash and, over the course of the year, gross proceeds of
GBP395 million were raised via two funding rounds. Gross
investments of GBP380 million were deployed, with GBP255 million
used to fund new investments and GBP125 million for follow-ons.
Cash proceeds from realisations of GBP95 million were received,
of which GBP83 million related to selling part of the Company's
position in Wise at point of IPO, and the rest from a top-slicing
of the Company's investment in THG in the early part of the
financial year.
Hitherto, realisations have been a relatively modest source of
funds for reinvestment which was expected, given the investment
phase the Company undertook in its initial years. Our expectation
was that realisations would increase in scale as the portfolio
matured, and the progress over the year demonstrates this.
Market
The late-stage private market saw ongoing investor confidence
over the year. This was mirrored by listed markets, such as the
NASDAQ, which rose 29%; the S&P 500, which rose 28%; and the
FTSE All Share, which rose 24%. The NASDAQ in particular saw its
overall performance driven by a few of its biggest companies
(FANMAGs). In this regard we believe that Chrysalis' performance,
where the valuer is not typically using the FANMAGs, but smaller
and more relevant companies, as comparatives, demonstrates the
attractiveness of a number of our investee companies' end markets
to investors and their growth profiles.
The prior year saw a substantial outperformance by the
tech-heavy NASDAQ, versus the S&P 500, which we believe
reflected investor confidence in the likely performance of
tech-based business models in the teeth of the COVID-19 crisis.
Last year marked more of a "normalisation" as the rollout of
vaccine programmes gave confidence that more traditional business
models would recover. The fact that the NASDAQ performed in line
with the wider US market and consolidated its gains of the prior
year suggests the COVID-19 driven boost to tech businesses is seen
to be permanent by the market, a hypothesis we would agree
with.
The late-stage private market saw approximately GBP38 billion of
capital invested in the first nine months of 2021, more than twice
that seen over the whole of 2020. We see this as clear evidence
that other investors are now latching onto the trend we identified
some years ago: that of companies staying private for longer. It
also likely reflects the growing scale of a number of these private
companies, and thus their growing capital requirements.
There has also been an increase in crossover activity. When we
analyse the number of deals that have occurred in the key
late-stage European private market in the first nine months of
2021, at least one major crossover investor participated in 15% of
deals, more than double the activity levels of two years' ago.
This activity suggests investors are beginning to adapt their
investing behaviour to access innovative and disruptive companies
that are choosing to stay private for longer.
The year marked another period of significant progress in the
portfolio. We saw material funding rounds from a number of our
investee companies; ongoing strong revenue growth from the
portfolio; five new investments adding to overall diversification;
and two realisation events.
The major drivers of gross asset performance, and thus NAV, came
from some of our major investments. While Klarna was a stand out
performer, eight of our eleven investments (excluding Growth Street
- in liquidation) as of the beginning of the year saw uplifts; the
only asset marked down to a significant degree was THG.
These revaluations were typically endorsed by funding rounds,
often at materially higher valuations than our carrying values.
Klarna saw two major funding rounds over the year. The first, in
March 2021, saw the company raise $1 billion at a post-new money
valuation of $31 billion. The second, in June 2021, saw the company
raise $639 million at a post-new money valuation of $45.6 billion.
Our initial investment in 2019, at a $5.5 billion valuation, was
used by Klarna to fund expansion into the US and UK markets.
Klarna's successful penetration of the US market, in particular,
was the key driver of valuation in these funding rounds.
Over the first nine months of 2021, Klarna reported 63% Gross
Merchandise Volume ("GMV") growth to $57.3 billion, with the US
growing at more than 300%. The US has low penetration of Buy Now
Pay Later ("BNPL") and represents a huge consumer spending
market.
The fact that the US represents less than 10% of Klarna's total
GMV suggests a substantial opportunity for growth rates to remain
strong in future years .
Wise also saw a strong valuation performance as it debuted on
the London Stock Exchange by way of a direct listing IPO. The
Investment Adviser's initial investment in Wise in late 2017, at a
valuation of approximately GBP1.2 billion, predates the formation
of Chrysalis, but Wise formed part of the initial seed portfolio
for the Company. The investment case for Wise was well received by
listed market investors and the shares opened at 800p -
approximating to a market capitalisation of GBP8 billion - and rose
to 1087p by year end.
Following the IPO of THG in September 2020, Wise represents the
second public market listing from the portfolio. We sold
approximately half of the Company's position in Wise around the IPO
point, to control position size and enable capital to be recycled
into the new investment opportunities undertaken over the summer of
2021.
Elsewhere, both Starling Bank and wefox continued their strong
growth and subsequently successfully raised capital at levels
substantially above their valuations on prior rounds.
THG was the only meaningful negative contributor to performance
in the period, with its share price falling from 598p as of
September 2020 to 507p as of September 2021. The share price fell
further post year end, and this is addressed more fully in the
relevant company section.
Portfolio activity
The two capital raises undertaken in the period were mainly
deployed into growing the Company's number of holdings. At the time
of our major raise in March 2021, we articulated an ambition to add
between one and three new holdings per annum; in the event, over
the summer of 2021, we added five. This was significantly higher
than expectations and reflects the growing strength of our
origination channel and ability to source deals.
We think of the origination channel as having three legs:
-- Network: Opportunities generated by our activities and
contacts in both listed and private markets;
-- Direct: Representing both inbound and outbound contact with
potential investee companies; and
-- Adviser: Captures broker and other introducer channels.
Of our 17 investments made to date, 12 have come via the network
or direct channels. This is crucial, as this allows us to invest
outside of a formal, often adviser-led, round and is thus typically
less competitive.
In the year to 30 September 2021, we assessed approximately 150
deals, a number which has been growing steadily over time. These
150 deals put into context the five new investments we have
undertaken: we are highly selective and our investment rate (3%) is
modest versus the opportunity set we see.
Following these new investments, the portfolio now comprises of
15 companies - excluding Growth Street, which is in liquidation,
and Embark, which has been sold to Lloyds Banking Group plc,
subject to completion.
This investment activity continued to diversify the company
positions which the Investment Adviser indicated will achieve a
well-diversified, and crucially, self-sustaining portfolio of
investments.
We not only consider diversification by number of units, but
also by "wave" - the stage or maturity of a company. Our aim is to
produce a portfolio that has companies at different stages of
development within it. Often relatively less mature and likely
smaller companies can have substantially faster growth prospects,
albeit with a probable increase in investment risk. We can moderate
that risk via careful stock selection, deal structuring and
position sizing.
Wave 1, and those assets moving towards it, represent the
largest and most mature of our investee companies accounts for
approximately 68% of the invested portfolio.
This dynamic is also reflected in the market capitalisation
groupings of investee companies, with 73% of the portfolio invested
in companies with valuations of over GBP1 billion.
Market dynamics
We continue to believe revenue growth is the key to driving
long-term NAV growth for shareholders. While listed valuations are
prone to volatility, which can have an effect on the valuations of
our unlisted positions, ultimately the only two valuations that
really count are those at entry and exit. We believe our experience
in listed markets gives us considerable insight into pricing, but
we accept this is not ultimately within our control. Where we can
make a difference is supporting our companies in their growth
aspirations. We call this "driving success" and it is fundamental
to our investment approach.
We aim to partner with companies for the long-term and assist
them on their respective journeys to become the best businesses
that they can be. The structure of Chrysalis suits this approach:
the long-term nature of its capital, compared with fixed life
funds, is very attractive to potential investee companies. It also
gives us the ability to continue to fund growth post initial
investment, and we have been very active in this regard.
Over 2021, we committed approximately GBP125 million to drive
success for our companies. Major primary follow-on examples are
Starling and wefox.
In the case of Starling, alongside the other major shareholder,
we made a significant investment in early 2020 in order to give the
bank the capital to support UK SMEs in the UK government's Bounce
Back Loan Scheme, as well as the Coronavirus Business Interruption
Loan Scheme. This government underwritten lending allowed Starling
to rapidly expand its loan book in a low-risk way, drove
exceptional revenue growth - in the quarter to June 2021, revenue
was up 285% year-on-year - and led the bank to profitability in
October 2020. This performance allowed Starling to raise over
GBP300 million in early 2021 and is testament to the power of
primary capital.
For wefox, we continued to support the company over 2020 when
many other private market participants were reluctant to invest due
to COVID-19 induced uncertainty. This enabled management to
continue to pursue an acquisition agenda to supplement the high
levels of organic growth being delivered.
We believe the successful demonstration of strong growth over
the year was a crucial consideration for those investors in the
funding round in mid-2021, which valued wefox at approximately $3
billion. The impact of this type of support feeds through to the
aggregate portfolio revenue growth rate, which continues to be
exceptional.
Looking over the last two years, the compounded revenue growth
rate of the portfolio is approximately three times that of the
NASDAQ, nine times that of the S&P 500, while the FTSE
All-Share has seen revenues fall 11% over the period.
We believe the portfolio still has a substantial runway for
growth. An assessment of the aggregate revenue opportunity of the
portfolio reveals a Total Addressable Market ("TAM") of over $1
trillion, with the largest six positions in the portfolio
accounting for approximately 80%.
The aggregate market share of our companies is less than 1% of
their TAM, implying substantial revenue opportunity remains.
If the market share of the portfolio doubles over the next three
years this implies a compound annual growth rate in revenues of
approximately 26%. Given Starling estimates it currently has a 7%
market share in SME banking in the UK, after only launching its SME
proposition in 2018, this sort of performance does not seem
unrealistic. On top of this we also see reasons why the TAM should
grow:
-- many of these markets are growing substantially already, such as e-commerce; and
-- many of our companies have offerings and technology that will
allow them to expand into adjacent verticals and open up new market
opportunities.
In combination, these factors give us comfort that the portfolio
has many years of substantial future revenue growth within it.
Outlook
We are optimistic about the opportunity for Chrysalis in the
year ahead. This stems from our belief in the strength of the
portfolio we have constructed, and in the structure of the platform
we have developed.
While our focus remains on sourcing ideas from the private
market, Chrysalis was purposely set up to allow it the flexibility
to adapt to companies' needs, irrespective of whether they choose
to raise capital in the public or private markets: the source of a
company's funds is of less importance to us than the nature of its
business model and end markets. Our long association with public
markets tells us that most public market investors have a much
shorter-term investment horizon than that needed for successful
growth investing, where maximisation of value creation can often
take some years to achieve. A vehicle like Chrysalis gives us the
confidence to back our investee companies for long-term success,
and allows us to follow them on their journeys, regardless of how
they choose to finance themselves.
This leads us to the Chrysalis blueprint, which is to seek out
tech-enabled, disruptive businesses, operating in large-end markets
with compelling unit economics and proven business models.
As we look at how the late-stage private market is developing,
it could be argued that Chrysalis itself shares many of these
characteristics. The late-stage private market is growing very
quickly; the crossover model is proving disruptive, as evidenced by
its growing market share; and Chrysalis has proven itself capable
of accessing many of the best-of-breed investee companies, mainly
via its proprietary origination channels.
Much of the work over the last three years since IPO has been
spent on developing the Chrysalis platform and scaling it. While
this is a process of continual refinement and evolution, much of
the heavy lifting in this regard has been achieved. In particular,
our "platform" is well established and we are continuing to invest
in it.
Post year-end we welcomed two new colleagues on to the team.
Rebecca Whiting joins to assist us in a financial capacity to help
oversee modelling, liquidity management and reporting processes.
Andrew Mortimer has joined the Jupiter UK Small & Midcap Team
as ESG Investment Director and will help develop our ESG process to
give more insight to investors regarding the work we are already
doing in this space.
Last year the portfolio saw a significant benefit from
accelerated channel shift due to COVID-19 pushing consumers towards
digital channels and our expectation was that much of this channel
shift would prove to be permanent. While there have been some
disruptions and tough growth comparatives for certain portfolio
companies to navigate, particularly in e-commerce, to date it
appears our hypothesis was fundamentally correct: many of our
companies are still growing strongly on top of last year's
exceptional growth.
Our focus last year was on increasing the scale of Chrysalis. A
combination of two fund raises and strong NAV growth has delivered
a material increase in gross investible assets, which rose by 140%
from approximately GBP606 million to approximately GBP1.5 billion.
This has enabled Chrysalis to be much more relevant to larger
potential investee companies as well as those with likely ongoing
funding requirements. This growth meant we made our largest single
investment this year, a GBP75 million primary commitment to Smart
Pension.
Having made a number of new investments over the year, our focus
for the year ahead is likely to be more balanced between new
investment and follow-on. As previously discussed, we see follow-on
as key to accelerating the potential growth of our investee
companies, driving future NAV performance. While we undertake
secondary transactions, to gain access to an investment case - such
as our initial investment in Wise - or to increase a position size,
providing primary capital is at the heart of the Chrysalis
model.
We believe primary capital can drive a flywheel effect in our
investments, allowing them to unlock opportunities and drive
revenues. Having done substantial work on diversifying the
portfolio over 2021, our aim for 2022 is to do our upmost to ensure
the flywheel spins as fast as possible.
Company section
Klarna Holding AB
Online shopping has many points of friction, for both customers
and retailers, which Klarna's services are designed to smooth out.
At a consumer level, Klarna offers easy tracking of orders; an
enhanced returns offering; and merchant funded credit. The latter
is of considerable interest as it spreads the cost of credit over
the retailer's entire customer base, rather than credit card
models, which rely on those least able to pay to generate revenues
for card providers, via typically high APRs.
For retailers, reduction in these points of friction result in
better conversion metrics, and thus revenues. Klarna has seen
considerable progress over the year, culminating in substantial
increases in valuation. The building blocks for this performance
were laid in previous years, driven by the investment rounds in
2019 and 2020, in which we participated, designed to fund expansion
in the US and UK.
The US is particularly interesting, given its size and low
penetration of Buy Now, Pay Later ("BNPL"). In 2020, the US was
estimated to have 2% BNPL penetration, double that of 2019, but
still well below the UK at 5%, and other markets. Given the size of
the US market, there would appear to be significant room for
growth, which is what attracted us to the investment case in Klarna
initially.
Over the first nine months of 2021, Klarna saw material growth
in the US with GMV rising by over 300% in US dollar terms, leading
to overall GMV growth for Klarna of 63% in USD (approximately 48%
in SEK). This is well above the circa 30% growth rate level Klarna
was running at before entry into the US and UK gathered pace.
Despite strong growth, the US still only accounts for less than
10% of Klarna's total GMV, implying substantial future upside if
penetration continues to grow.
Credit card debt was aggressively paid down by US consumers over
the pandemic. It remains to be seen whether this is a pure function
of lock-down, or whether the ease and attractiveness of other forms
of credit have also played a part. Anecdotal evidence suggests the
latter is a strong driver, with BNPL resonating with customers on a
number of levels.
We believe it is trends like these that have triggered
significant interest in the sector from investors and by industry.
As a result, there has been considerable corporate activity,
namely:
-- Block's (formerly Square) acquisition of Afterpay for $29 billion;
-- Amazon's partnership with Affirm; and
-- PayPal's acquisition of Paidy in Japan for $2.7 billion.
Klarna has also been active on the M&A front as it looks to
build an offering that benefits both retailers and consumers. Over
the last year, Klarna has completed over 10 deals, most recently
including PriceRunner - to bring reviews to its customers,
Inspirock - an online trip planner, and APPRL - a SaaS ("Software
as a Service") platform linking creators and retailers to develop
content for shoppers.
Adding other services around its core financing product should
increase the attractiveness of Klarna to consumers and boost
conversion for retailers, thus making its app more valuable to both
parties.
Post year end, Klarna announced a strategic partnership with
Stripe, which will allow retailers using Stripe to activate Klarna
in their checkouts within minutes. Initial results from Stripe
retailers using Klarna indicate an average 27% increase in sales,
with some retailers experiencing up to 40% of Klarna shoppers being
new to their brand. It is estimated Stripe processed approximately
$350 billon of GMV in 2020 versus Klarna's GMV of $53 billion in
the same year.
On the ESG front, Klarna has committed to cut carbon emissions
by 50% by 2030 and to operate at net zero by 2040. It will use 100%
renewable energy by 2025.
Klarna has set an internal price on carbon - 100 USD for Scope
1, 2, and travel emissions - and invests the funds from the
internal carbon tax into projects selected from a climate
transformation portfolio and enables consumers to do the same.
Date of Initial Investment: 5th August 2019
Total Investment: GBP64.4m
Carrying Value: GBP386.9m
Last Reported Financials: Y/E December 2020: SEK10.0bn Net
Revenue (+40% YoY); SEK1.4bn Loss after taxation
Starling Bank Limited
Banking has traditionally been dominated by the branch model,
leaving it out-of-sync with society's shift towards technology.
Where technology has been adopted by banks, typically it has been
an expensive and frustrating process to integrate into a model that
was designed in an analogue world.
Starling was founded as a digital, mobile-first, scalable
platform from the start, meaning it is relatively easy to implement
new products and services. This was used to great effect during the
pandemic and those effects continued to be felt over the year.
Following on from a transformational 2020, which saw rapid
growth fuelled by the difficulties faced by branch-based
competitors and the roll out of government backed lending schemes,
which Starling actively participated in, 2021 saw continued strong
growth.
Notable events in the year were:
-- October 2020 - the bank moved into profitability (profit before tax);
-- March 2021 - a GBP322 million funding round was undertaken at
a post new money valuation of over GBP1.4 billion, providing
additional firepower and broadening the investor base;
-- July 2021 - Starling acquired buy-to-let specialist, Fleet
Mortgages, to provide in-house origination capability;
-- July 2021 - Starling named "Best British Bank" for the fourth
year in a row at the British Bank Awards;
-- September 2021 - Starling announced its intention to make its tech stack available as a "Banking-as-a-Service" ("BaaS") offering in the EU.
We first invested in Starling in early 2019, when the bank was
beginning to see meaningful revenue traction. However, over the
course of the last two years it has been transformed and now
generates well over GBP200m of revenue on an annualised basis and
has reported a phenomenal CAGR of over 500% over the last three
years. Deposits and lending have also grown significantly, with the
latter being a major driver of revenue growth.
More and more customers are flocking to Starling. As of early
2022, the bank had over 2.7 million accounts open, of which 475,000
were for SMEs. Starling's share of the UK market for small business
banking is now over 7%, up from 3% in 2020.
The trading statement released covering the quarter to June 2021
is also illuminating in terms of what it reveals about the business
model.
In that quarter, the bank reported profit before tax of GBP7.3
million, corresponding to a return on equity ("RoE") of 16.7%,
despite only operating a loan-to-deposit ratio ("LDR") of
approximately 35%. What does this imply for the future?
LDR can be seen as a crude "efficiency" metric for a bank: how
much of the deposit book is supporting lending. Many banks operate
at an LDR of roughly 100% but struggle to make significant returns
on equity. The fact that Starling can deliver meaningful
profitability off lower LDR speaks to its efficiency as a platform.
This manifests in two key ways:
-- Its market-beating cost of funds, currently around 4 basis points; and
-- Its very low "cost-to-serve", which is driven by its tech
platform and absence of an expensive branch network to
maintain.
The question we work with management on is: "how much profit can
this bank earn running an LDR more in line with the market?"; our
suspicion is probably quite a lot.
In order to achieve this, Anne Boden (CEO) has publicly
articulated a strategy to continue to sustainably grow the core
bank, while branching into other related areas. In terms of the
bank, she expects to continue to expand the balance sheet, to
utilise the 4 basis point, market-beating cost of funds, via
strategic forward flow agreements, organic lending across various
asset classes and a targeted M&A ("Mergers and acquisitions")
strategy, to supplement the recent Fleet deal.
In terms of adjacencies, the ramp-up of BaaS will allow Starling
to move outside the UK in an efficient way and allow brands access
to a platform on which they can build their own financial
capability. In our view, this should open up new revenue streams
for Starling of a type that are recurring and sticky and thus
typically highly valued by investors. Progress is being made in
this regard, for example the recent tie-up with Standard Chartered
to launch Shoal - a green savings platform.
In terms of ESG, in November 2021 Starling committed to a one
third reduction target in its carbon emissions by 2030 and to
offset carbon emissions from its own operations and supply chain
annually from 2021.
Date of Initial Investment: 12th February 2019
Total Investment: GBP88.2m
Carrying Value: GBP210.8m
Last Reported Financials: March 2021 (16 months): GBP119.5m
Total income (+400% versus prior period of 12 months); GBP9.2m Loss
after taxation
Wise PLC
Transferring money around the globe has historically been an
expensive undertaking, with many financial institutions charging
several percent of the principal in fees at different stages of the
money transfer. Wise was set up to use technology to create a more
efficient network to move money cross border, and it shares those
benefits with its customers, resulting in market-leading rates.
The major event in the year for Wise was its successful listing
via direct IPO on the London Stock Exchange. Wise marks the second
of our companies, following THG in 2020, to IPO since Chrysalis'
formation.
At the Investment Adviser's point of first investment in Wise,
which predates the establishment of Chrysalis by about a year, the
company's valuation was approximately GBP1.2 billion. The IPO
clearing price implied a market capitalisation of approximately
GBP8 billion at 800p per share, which climbed in the aftermarket to
1087p at year end.
The Wise proposition is heavily consumer oriented: trying to
provide the cheapest method to move money in the most convenient
way. Much of the company's investment focuses around opening up new
currency pairs, driving down the cost of transactions, and
improving speed.
Over the first half of its financial year to September 2021,
trading volumes rose 44% year-on-year to GBP34.3 billion and
instant transfers now account for 40% of volumes, up from 32% in
the prior year. The prices customers pay, or the "take rate", fell
from 74bps to 65bps as Wise continued to offer customers the best
possible prices and share its efficiencies. This meant revenue
growth of 33% was achieved in the half, and prompted management to
upgrade annual revenue growth from "low to mid 20s on a percentage
basis" to "mid-to-high 20s on a percentage basis" over its fiscal
year to March 2022.
In addition, efficiencies in the platform drove increased
guidance to full year gross margins, resulting in EBITDA
upgrades.
Although there was some short-term nervousness by investors over
the decline in the take-rate, in our view this fundamentally
misunderstands the Wise proposition, where efficiencies can be
partly invested in price to drive more volume, while shareholders
still benefit from improving profits. Looking ahead, the fact that
gross margins are rising is very positive for further strong
progress over the coming periods, and they could be enhanced
further by Wise's moves to offer new services to customers, such as
its recent launch of "Assets", which allows customers to hold cash
in a stock market fund, instead of on account.
Date of Initial Investment: 7th November 2018
Total Investment: GBP21.8m
Carrying Value: GBP 108.7m
Last Reported Financials: Y/E March 2021: GBP421.0m Revenue (+
39% YoY); GBP109m adjusted EBITDA
wefox Holding AG
The insurance industry is ripe for disruption, with the vast
majority of insurance policies across Europe still sold via high
street brokers. wefox has developed a digital platform which
enables insurance brokers to automate administrative tasks, consult
with customers and accelerate lead generation. wefox benefits from
increased scale as it negotiates better commission terms with
insurance provides, compared to smaller insurance brokers. The
company has also launched a fully digital insurance product - ONE -
that integrates with the wefox marketplace. wefox can analyse data
sets and distribute ONE insurance products to the most profitable
customer cohorts which leads to best-in-class Customer Acquisition
Cost ("CAC") and loss ratios. This is a highly disruptive and
profitable business model to operate.
In June, wefox announced a record $650 million Series C funding
round at a post-money valuation of $3 billion. This funding round
had strong participation from both new and existing investors and
represents the largest financing round in the InsurTech sector
worldwide. Following this funding round, the company has penetrated
new geographies such as Poland, Italy and Spain and has expanded
its product portfolio in existing markets.
In the coming years, wefox has indicated that it will continue
to increase its presence in Europe and move to both the US and
Asian market.
These growth initiatives, coupled with selective M&A, are
leading to rapid growth. wefox has doubled its annual turnover
every year since its inception in 2015 and reported sales of $143
million for the 2020 financial year and an initial profit for wefox
Insurance (formerly ONE). Year to date, growth has accelerated and
Julian Tiecke (CEO) recently commented that revenues are expected
to reach $336 million in 2021, implying a rate of growth of
+135%.
The executive team at wefox has been strengthened following the
funding round and the business is attracting some top industry
talent. The company recently appointed Peter Huber as CIO
(previously CEO of Zurich International), David Stachon as COO
(previously CEO of Generali's direct insurer CosmosDirekt) and
Young Sohn as Chairman (previously President of Samsung Electronics
and Non-Executive Director at ARM).
Date of Initial Investment: 18th December 2019
Total Investment: GBP65.6m
Carrying Value: GBP108.7m
Last Reported Financials: Not publicly disclosed
You & Mr Jones LLC
Few categories are as ripe for technology-driven change as
marketing and communications. The future of marketing will rely on
expert curation of multiple service providers and the continued
fragmentation of media, and the broadening diversity of audiences
will lead to an unprecedented level of complexity for the brand
owner. You & Mr Jones has designed the operating model for the
future where multiple service providers can be invoked at ease
through a core technology platform, creating a marketplace of
expertise through a single point of contact.
You & Mr Jones (which was renamed The Brandtech Group on 12
January 2022) is the world's first Brandtech group and its mission
is to help businesses do their marketing better, faster and cheaper
using technology. In just 6 years, the company has grown into the
global market leader in content in-housing and is now delivering
enterprise-level marketing technology solutions for some of the
world's biggest brands, including: Unilever, Google, Adidas,
Microsoft, LVMH, Danone, Uber and Reckitt Benckiser.
2020 was an exceptional year for You & Mr Jones, reporting
+27% organic net revenue growth for the year, and 2021 started with
even greater momentum, with organic net revenue growth of +34%
through Q1. The company is significantly outperforming the
traditional legacy holding companies, which all experienced a
significant decline in revenues and is performing slightly better
than its closest peer, S4 Capital.
Future growth will be underpinned by M&A and organic growth
initiatives. The group recently launched You & Mr Jones Media
which we view as a particularly exciting development. The division
will be led by former Mindshare Global CEO Nick Emery and is
looking to deploy a $300m war chest to build a totally new media
model for brands that puts them back in control of their media, and
empowering them through transparency, technology, and
in-housing.
You & Mr Jones acquired DP6 shortly after the year end which
is Latin America's leading marketing technology and data company.
DP6 is based in Brazil and delivers technology and data solutions
for many of the region's largest businesses as well as numerous
global brands operating there, including Carrefour, CNN, BASF,
Nubank and Whirlpool. The company provides technology and data
expertise, from data measurement to media attribution, martech
integration, data science, AI-powered analytics and content
optimisation.
Finally, we note the company's continued ability to attract
great talent. You & Mr Jones hired Virginie Douin, Amazon's
head of global agency partnerships, to lead the expansion and
acceleration of the group's ecommerce offering, including
enterprise-level partnerships. The company also announced the
appointment of Will Luttrell, founder and CTO of Integral Ad
Science and, more recently, founder and CEO of Amino as its Chief
Technology Officer.
Date of Initial Investment: 30th September 2020
Total Investment: GBP46.4m
Carrying Value: GBP94.8m
Last Reported Financials: Not publicly disclosed
Smart Pension Limited
Governments around the world recognise a need for their citizens
to save more for retirement and a number have begun to mandate
saving via employer schemes. Smart is a global savings and
investments platform provider, founded in 2014, which has used
technology to create an efficient offering to make it easier for
both employers and employees to save. Its mission is to transform
retirement, savings and financial well-being around the world.
Smart partners with governments and financial institutions
(including insurers, asset managers, banks and financial advisers)
to deliver retirement savings and income solutions that are
digital, bespoke and cost efficient. Smart's focus is on the
workplace pension market, and it helps employers to offer,
typically government mandated, pensions schemes in an efficient
manner to their employees.
In the UK, it operates one of the biggest master trusts. Smart's
technology also helps employees effectively and easily manage their
pension pot via an app.
In addition to the UK, Smart is operating in the USA, Europe,
Australia and the Middle East with close to a million savers
entrusting over GBP1.7 billion in assets on the platform. Smart
supports its clients with a 550 strong global team and saw 160%
growth in assets on its technology platform in 2020.
Over the course of the year, Smart saw very strong growth driven
by growing customer traction from both domestic and international
markets.
Date of Initial Investment: 25th June 2021
Total Investment: GBP75.0m
Carrying Value: GBP88.6m
Last Reported Financials: Y/E June 2020: GBP7.9m Revenue (+161%
YoY); GBP21.4m Loss after taxation
THG plc
The bulk of THG revenue is associated with its beauty and
nutrition divisions, which sell own and third party brands around
the world. However, we believe much of the future growth story at
THG centres around its ecommerce and logistics platform - Ingenuity
- which powers both THG's own operations, as well as offering its
service to external parties. For many companies, building their own
ecommerce offering can be a significant investment, with no
certainty of adequate returns. Ingenuity solves this problem, by
offering a one-stop shop for companies looking for a cost-effective
solution to get online or open new global markets.
Considerable activity has occurred at THG since its IPO in
September 2020.
Over the course of the year, it has made several acquisitions
mainly to bolt onto its existing beauty operations, including:
-- Perricone (September 2020), a US prestige skincare brand for
$60 million, effectively a 1x continuing sales multiple;
-- Dermstore.com (December 2020), the US number one online
retailer of prestige skincare and speciality beauty brands for
$350m, implying a forward 12 months' revenue multiple of c1.8x;
-- Brighter Foods (April 2021), a developer and manufacturer of
snack bars, which was already working with THG's nutrition arm.
Consideration was GBP43 million with expected GBP20 million revenue
and GBP6.5 million EBITDA contributions in 2022;
-- Bentley Laboratories (May 2021), a developer and manufacturer
of prestige skin and haircare products. The total consideration was
$255 million with an expected impact of $77 million of revenues and
$15 million of EBITDA in 2022; and
-- Cult Beauty (August 2021), a UK based online beauty retailer
to broaden customer choice compared to THG's existing beauty sites.
The total consideration was GBP275 million and Cult Beauty is
expected to add approximately GBP140 million of sales and GBP10
million EBITDA in 2022.
M&A was one of the main drivers for THG's listing, and
execution of this part of its strategy has been rapid.
Elsewhere, Ingenuity - THG's ecommerce solutions platform -
announced a partnership with SoftBank, which saw the Japanese
conglomerate inject approximately $730 million into a fund raise of
over $1 billion. In addition, an option was granted to SoftBank to
enable it to inject a further $1.6 billion into Ingenuity at an
implied pre new-money valuation of $6.3 billion for the division,
which is due to be separated from the group.
Ingenuity - THG's proprietary ecommerce and logistics platform -
provides services to both THG's beauty and nutrition divisions, but
has also begun to offer them to third parties. The growth available
in this market is substantial, we believe, and the division is
growing from a small base of revenues. This has made it hard for
the stock market to value accurately, and we saw the SoftBank
investment as endorsement of the growth potential and valuation of
Ingenuity.
However, into period end and post period, the share price
suffered heavy selling pressure reaching c121p in January 2022.
While well documented, the reasons appear to centre around:
-- concerns over corporate governance;
-- uncertainty surrounding the possible exercise of the SoftBank
option to buy 19.9% of Ingenuity and the implicit GBP4.5 billion
valuation of the division, as well as prospects for its future
growth; and
-- a modest, downgrade to EBITDA mainly FX driven.
In response, THG has:
-- made several moves designed to improve corporate governance,
including: a commitment to rescind the founder's Golden Share,
which effectively prevents an unwanted takeover in the next two
years, and splitting the role of CEO and Chairman, with a process
underway to identify an independent candidate to fill the
latter;
-- appointed a SoftBank representative to its board; and
-- upgraded expectations for Ingenuity growth.
As the representative of major shareholders, we engaged with the
company to understand and support its plans, particularly in
respect of corporate governance, and we are encouraged by the
company's optimism surrounding Ingenuity. As part of our normal
process, we have revisited our investment case and believe there
has been no substantive change to the investment thesis since IPO.
Given the current valuation, we believe there is significant upside
potential in THG shares, and as a result, have topped up the
Company's position in THG following the year end.
Date of Initial Investment: 17th December 2018
Total Investment: GBP58.8m
Carrying Value: GBP86.7m
Last Reported Financials: Y/E December 2020: GBP1.6bn Revenue
(+42%); GBP0.5bn Loss after taxation
Graphcore Limited
The use of Artificial Intelligence ("AI") models in society
continues to grow. Currently the hardware used to accelerate the
associated heavy computational workloads is dominated by graphics
processors from Nvidia ("GPUs"). These chips have been repurposed
from their intended original focus to run AI models.
In 2018 Graphcore launched its first chip, the IPU ("Intelligent
Processing Unit"), which was designed from first principals to
address the AI market's likely future requirements. In July 2020,
it revealed its second generation IPU with an 8x step up in
performance.
Following its raise of $222 million in December 2020, Graphcore
has continued to invest heavily in its technology, most visibly in
its software development kit, where it has released several
updates, giving customers further functionality and ease-of-use,
and resulting in improved performance.
This culminated in its first submission to MLPerf for
comparative benchmarking tests. Results from this showed a
significant advantage (between 1.3x-1.6x) for Graphcore over
incumbent Nvidia in terms of performance per dollar - which is a
critical consideration for many hyper-scaler buyers. Importantly,
these results were based on existing model architectures, which are
typically ubiquitous due to their suitability to run GPU based
workloads. On next generation architectures, the IPU's advantage
improved to 3.8x.
Graphcore hopes to turn its technological developments into
commercial sales during 2022.
Date of Initial Investment: 17th December 2018
Total Investment: GBP57.6m
Carrying Value: GBP61.5m
Last Reported Financials: Y/E December 2020: $3.3m Revenue (-67% YoY); $127m Loss after taxation
Embark Group Limited
Embark was formed in 2013 with a strategic vision to build a
leading independent digital retirement platform in the UK that
combined the technology strengths of the wrap platform (where users
can access and manage their entire portfolio of investments
online), with the deep pension expertise of the traditional SIPP
('Self-Invested Personal Pension") and SSAS ('Small
Self-Administered Scheme") players. The company completed its
technology build with FNZ and has since sold its proposition on
STP/API quality, an unrivalled service performance and highly
disruptive pricing.
The business has grown significantly since we first invested in
2019, driven by two material M&A transactions, and over the
last twelve months management has been focused on migrating
acquired client assets onto the Embark platform. In February, the
company completed the successful migration of over GBP7 billion of
advised assets onto the platform from the client books of Alliance
Trust Savings ("ATS"), including those from trading service
provider Stocktrade, which it acquired in October 2019.
In July 2021, Embark announced its sales to Lloyds Banking Group
(Lloyds), subject to regulatory approval. Lloyds will acquire
Embark Group Limited ("EGL") and its subsidiary brands for a
consideration of GBP395m, but the sale excludes the Rowanmoor SIPP
and SSAS administration business, which is being retained by
existing shareholders.
This transaction demonstrates the value of our proposition. The
funds we committed to this business enabled the management team to
complete value accretive M&A and grow AuA from cGBP16 billion
to over GBP40 billion.
This transformed Embark into one of the UK's fastest growing
digital retirement and savings businesses with huge strategic
value.
Date of Initial Investment: 14(th) August 2019
Total Investment: GBP27.1m
Carrying Value: GBP56.9m
Last Reported Financials: Y/E December 2019: GBP34m Revenue (+5%
YoY); GBP1m Profit After Tax
Cognitive Logic Inc. ("InfoSum")
Regulatory changes and individuals' growing awareness of privacy
issues means that many of the ways companies have looked to enhance
their understanding of customers' online behaviour and preferences
- so called "data enrichment" - have become either unavailable, or
unpalatable. Regulatory changes have included GDPR in the UK and
CCPA in the US. Apple's launch of App Tracking Transparency in
April 2021, which allowed users to stop apps tracking their data
for use in advertising, caused significant disruption in the
market, with Forbes reporting only 4% of US users permitting
tracking. Google is also considering a move to phase out third
party cookies, although this has been postponed to 2023.
This lack of data enrichment has already seen disruption in the
advertising revenues of many online platforms over 2021. Regulatory
rule changes plus commercial considerations also make it difficult
for companies to share data as they have commitments surrounding
their customer information if they are seen as data controllers,
and do not wish other organisations to benefit from access to their
data.
InfoSum is the world's leading data collaboration platform
empowering companies to deliver better customer experiences while
prioritizing customer privacy. Using patented, privacy-first
technology, InfoSum connects customer records between and amongst
companies, without moving or sharing data.
Since launching the platform in 2019, global customer-oriented
companies across financial services, CTV, retail, healthcare,
gaming, and entertainment trust InfoSum to seamlessly and
compliantly deliver better customer experiences.
InfoSum was founded in 2016 with a vision to connect the world's
data without ever sharing it. The company has multiple patents,
protecting its invention of the "non-movement of data". InfoSum is
based in the US, UK and Germany, with offices across Europe and
North America.
Date of Initial Investment: 16th August 2021
Total Investment: GBP47.1m
Carrying Value: GBP48.4m
Last Reported Financials: Not publicly disclosed
Deep Instinct Limited
Cyber security is a growing issue. For corporate endpoints
alone, IDC estimates the market will be worth $9.7 billion in 2021,
as companies look to protect themselves from hacking with a growing
emphasis on ransomware. The current market can be broadly
categorised into legacy providers, such as the original anti-virus
companies, and the next generation, which are typically using
machine learning solutions.
Deep Instinct is the first company applying end-to-end deep
learning to cybersecurity. Deep learning is inspired by the brain's
ability to learn. Once a brain learns to identify an object, its
identification becomes second nature. Similarly, as Deep Instinct's
artificial deep neural network brain learns to prevent any type of
cyber threat, its prediction capabilities become instinctive.
Its zero-time cybersecurity solution stands on top of the only
deep learning framework purpose-built for cybersecurity, allowing
Deep Instinct to process file-based threats faster than other
endpoint solutions.
More specifically, its unmatched deep learning approach
offers:
-- Accuracy - Deep Instinct reduces false positives to 0.1% or
less, compared to an industry average of 26%. A June 2021 survey
revealed that 62% of SecOps professionals feel that threats in
their company could get missed due to the overwhelming volume of
false positives, while 86% believe the tools driven by data science
(AI/Machine Learning/Deep Learning) will make a significant impact
in preventing unknown threats and reducing false positives. In
addition, as the model is trained to look and detect like a human,
it prevents >99% unknown threats, such as first-seen malware,
zero-days, ransomware, and APT (advanced persistent threat), as
well as known threats. To the best of the company's knowledge, no
Deep Instinct customer has suffered a successful ransomware attack
since the start of the pandemic.
-- Speed - the low (<1% CPU) computational impact of the
technology makes it the most efficient and effective cybersecurity
solution in the market, with a sub 20 millisecond response time.
Platform-agnostic, Deep Instinct can be quickly deployed across an
organisation to deliver multi-layered protection with negligible
latency.
-- Model longevity - unlike many other providers that need to
update their platform monthly, Deep Instinct's "brain" requires
only 1-2 updates per year, and remains highly effective after many
months, ensuring offline scanning remains effective.
-- Impact - a study by leading analyst, Forrester Consulting,
showed an ROI ("Return on investment") of 446% over a 3 year
period, with payback to the business visible in less than 3
months.
Deep Instinct prides itself on being able to predict and prevent
threats, rather than an EDR ("Endpoint Detection and Response")
solution that is more focused on response, which in many cases is
too little too late. Deep Instinct prevents malicious files from
ever entering an enterprise, thus substantially reducing the time
and cost required to track, trace, and rectify any infections.
The Company's confidence in its technology is reflected in its
provision of both the industry's first false positive warranty, and
the industry's largest ransomware warranty, backed by Munich Re
Group.
The company continued to build out its go-to-market strategy
over the year and post year end signed a major partnership with
Tanium that we believe could be very significant. Tanium manages
endpoints for nearly half of the Fortune 100, and this relationship
will see Deep Instinct integrated into its Threat Response
solution, thereby offering a new, major route to market.
Date of Initial Investment: 6th July 2021
Total Investment: GBP47.3m
Carrying Value: GBP48.4m
Last Reported Financials: Not publicly disclosed
Revolution Beauty Group PLC
Revolution Beauty is a UK based beauty company that operates a
digital first strategy but has multiple channels to market for its
various brands, which cover a number of different categories
including makeup, skincare and hair products.
The company differentiates itself with its speed to market: it
looks to identify beauty trends quickly and bring them to the
market within 16 weeks, making it significantly more agile and
responsive than its global competitors, which typically take 6 to
12 months.
In addition to this, Revolution Beauty prices its products
extremely competitively, and its offer is predicated on providing
high-quality, affordable cosmetic products for everyone.
Chrysalis met Revolution Beauty as part of a "pilot fishing" (a
pre-IPO exploratory meeting) exercise at the request of the CEO,
Adam Minto, due to the Company's ability to invest both privately
and publicly. Having analysed the investment case for Revolution
Beauty and undertaken channel checks on the brand, we believed that
the brand has a significant runway for growth.
Revolution Beauty decided to IPO and was admitted to AIM with a
market capitalisation of GBP495 million. Chrysalis, along with
other funds managed by the Investment Adviser, entered into a
cornerstone agreement with Revolution Beauty as part of its IPO,
and invested GBP45 million as part of this process. While the
Company's primary goal is to secure access to exciting companies
prior to their IPOs and capture the subsequent growth in private
markets, one of its other aims is to position itself favourably at
the point of IPO.
Recent trading has been strong, and Revolution Beauty recently
reported GBP78 million of revenues in the six months to 31 August
2021, representing a 35% increase from the same period in 2020. In
spite of this, the share price has fallen since IPO, down
approximately 8% to year end, and has suffered further losses
since, in line with many other e-commerce retailers.
US sales increased by 90% over the period and the US is on
course to become the group's biggest country by revenue globally in
2021. In Q1 2021, Revolution Beauty launched in 1,800 Target stores
through the US and its Makeup Revolution brand is already a top
performing brand in the Target makeup category. A local site was
also launched in the US in January 2021 and in Australia/New
Zealand in March 2021 and both sites are generating triple digit
percentage increases in sales.
More recently, the company announced the acquisition of Medichem
Manufacturing for a total consideration of GBP23 million. Medichem
is a long-standing supplier of haircare and skincare products to
Revolution Beauty, manufacturing all products from its UK facility.
This represents Revolution Beauty's first acquisition and provides
the Group with its own, fully-owned and vertically integrated
manufacturing business. This should enable the group to enhance
margins, increase control of its supply chain and enhance
productivity. This is a value accretive deal and the company stated
that it will be significantly earnings enhancing for the financial
year ending 28 February 2023.
Date of Initial Investment: 19th July 2021
Total Investment: GBP44.9m
Carrying Value: GBP41.4m
Last Reported Financials: Y/E February 2021: GBP157.6m Revenue
(+15% YoY); GBP18.0m Loss after taxation
Tactus Holdings Limited
The global gaming sector continues to grow rapidly, and this is
fueling demand for gaming devices and accessories. There are now
more than 2.5 billion gamers worldwide and the global gaming
industry is forecast to grow at a rate of 9.2% per annum through
2025 to $257 billion (Source: Mordor Intelligence). Tactus is a
beneficiary of this trend and is building a global technology group
with unrivalled expertise in the gaming sector. The company
focusses on the supply of own and third-party branded custom gaming
PCs, component parts, and accessories to consumers, enterprise, and
the education sector.
The market which Tactus operates in is hugely fragmented and
sector consolidation formed a key part of our investment thesis.
Year to date, Tactus has completed the acquisition of PC gaming
specialist CCL Computers, coding and robotics firm pi-top and our
investment enabled the company to more recently complete the
acquisition of B2B ("Business to Business") IT hardware provider
BIST Group, and the award winning PC gaming brand Chillblast. The
company is looking to continue to execute on its M&A pipeline
which should enable it to realise revenue and cost synergies, enjoy
the benefits of scale and have increased control of its supply
chain.
We were extremely pleased to see Tactus' efforts recognised by
its partners and in April, Tactus was named the Microsoft Device
Partner of the Year. This represents a landmark accomplishment for
the group, and demonstrates its ability to produce and source
innovative technology. The award was granted following a 600 per
cent rise in revenues for Geo, which makes premium-finish Windows
10 laptops and GeoBook Minecraft Edition devices.
Date of Initial Investment: 18th August 2021
Total Investment: GBP40.1m
Carrying Value: GBP40.0m
Last Reported Financials: Y/E March 2021: GBP42m Revenue (+422%
YoY); GBP2.3m Profit after taxation
Featurespace Limited
Financial fraud continues to be a major, worldwide problem. The
Federal Trade Commission reported US consumers lost GBP3.3 billion
to fraud in 2020, with over a third being via imposter scams. In
the UK, over GBP750 million was lost to fraud over 1H21, up 30% on
the prior year.
The real driver of this was authorised push payment ("APP")
fraud, where a customer is tricked into sending money to a
fraudster, which saw a 71% increase to GBP355 million. APP fraud
has risen partly due to the increase in "card not present"
transactions, where the customer is physically not present at point
of transaction, which rose substantially during COVID-19 induced
lockdowns. Payment card scams actually fell 9% over first half of
2021.
Featurespace's technology uses machine learning to detect frauds
more accurately, resulting in a reduction of 75% in false
positives, with the majority of fraud attacks blocked as they
occur, allowing real time decision making.
So far this year, over 70 new companies have directly and
indirectly selected Featurespace's technology to deliver an
enhanced level of fraud and risk management. These include eftpos,
the Australian debit card payment system; a large Irish financial
services company; a major Nigerian payments and switch services
provider; and multiple banks across the U.S. and Europe. This
global expansion was recognised in April when the company received
the Queen's Award for Enterprise: International Trade, which
follows its Queen's Award for Innovation in 2018.
Featurespace has also continued to drive innovation, introducing
Automated Deep Behavioral Networks for the card and payments
industry to provide a deeper layer of defence to protect consumers
from scams, account takeover, card and payments fraud, which cost
an estimated $42 billion in 2020.
A breakthrough in deep learning technology, this invention
required an entirely new way to architect and engineer machine
learning platforms based on Recurrent Neural Networks.
Date of Initial Investment: 13th May 2020
Total Investment: GBP24.4m
Carrying Value: GBP34.7m
Last Reported Financials: Y/E December 2020: GBP21.0m Revenue
(+19% YoY); GBP11.8m Loss after taxation
Secret Escapes Limited
Every year hotels struggle to manage their capacity and are
often left with unoccupied rooms that impact yield. They are often
unwilling to market these rooms at discounted prices in case this
affects their brand and ability to price in the future.
Secret Escapes Limited ("Secret Escapes") is a members-only
online travel company. Its digital marketplace uses innovative
technology to connect travelers with discounts on luxury hotels and
travel experiences. It helps hotels minimise unsold inventory by
allowing them to discreetly market to its members who are seeking
luxury travel at affordable prices. The firm operates in many
countries around the world and is the market-leading
membership-based travel company in Germany, UK, Czech Republic,
Poland, Slovakia and the Nordics.
The pandemic and a series of lockdowns over the last 18 months
has created a tough backdrop for online travel businesses, and we
supported the company with additional capital in 2020 to allow it
to continue to invest in its offering and have sufficient cash
runway assuming booking patterns normalise over the course of the
next 12-18 months.
Secret Escapes made good progress on this front over the last
twelve months and successfully re-platformed Travelist onto the
Travelbird technology stack that it acquired in 2018, while
continued progress is being made on its consumer app and Always On
Hotel Only offering. In the periods where COVID-19 travel
restrictions have been eased we have seen a positive correlation
with bookings and revenues. This gives us increased confidence that
Secret Escapes can grow rapidly once we come out of the
pandemic.
In addition, operational efficiencies have been realised through
the financial period, and we believe when revenues scale on this
new cost base, it will drive a more attractive margin profile.
Date of Initial Investment: 7th November 2018
Total Investment: GBP21.5m
Carrying Value: GBP24.4m
Last Reported Financials: Y/E December 19: GBP169m Revenue (+40%
YoY); GBP12.7m Loss after taxation
Sorted Holdings Limited
COVID-19 accelerated channel shift and highlighted the
importance of investing in a comprehensive online
direct-to-consumer ("D2C") solution. Sorted has developed a
delivery management platform ("DMP") which enables retailers to
easily and effectively manage their delivery and returns
proposition. This enables retailers to increase conversion rates,
reduce abandoned baskets and boost customer satisfaction.
Enterprise retailers became increasingly focused on their
delivery and returns capability throughout the pandemic, and this
has led to an acceleration in the sales pipeline and customer
acquisition. During the period, Sorted landed a number of
enterprise accounts, including JD Sports, Dunelm, boohoo.com,
M&S, ASDA, Hobbycraft, Music Magpie and Lovehoney.
Encouragingly, many of these retailers have also opted to use
Sorted REACT, an automated tracking and post-purchase
communications solution.
More recently, the executive team was strengthened to lead the
company into the next stage of its growth. Carmen Carey, who has
been a Non-Executive Director on Sorted's board of directors for
the past two years, took over as CEO. Carmen joined Sorted from
trading and risk management software solutions provider Brady
Technologies (where she held the position of CEO). Previously,
Carmen was CEO at Big Data Partnership, Apica and Control Circle
and was COO at Unbabel, MetaPack and MessageLabs. Other senior
hires include Iain Greig as Non-Executive Director and interim COO,
Steve Langley as Vice President of Product, and Axel Lagerborg as
Vice President of Sales.
Post year-end, Sorted announced the acquisition of Clicksit.
Clicksit is an enterprise grade returns management solution that
operates in both the US and UK. This acquisition enables Sorted to
extend its commercial model by providing enterprise clients with an
end-to-end service. It also enables the company to penetrate the US
and the SMB (small and midsize business) markets which will
materially enhance the serviceable addressable market.
Date of Initial Investment: 15th August 2019
Total Investment: GBP15.0m
Carrying Value: GBP17.7m
Last Reported Financials: September 2020 (16 months): GBP5.2m
Revenue (+94% versus prior period of 12 months); GBP6.9m Loss after
taxation
Growth Street Holding Limited
Growth Street was set up to provide innovative and flexible
revolving credit lines to SMEs, supported by a peer-to-peer funding
model. As detailed in last year's Report & Accounts, due to two
large loan losses in 2020, the major shareholders decided to wind
up the business. The company is currently going through the final
stages of liquidation, having paid out full recoveries to investors
that funded the Growth Street platform.
Date of Initial Investment: 22nd January 2019
Total Investment: GBP12.6m
Carrying Value: GBP1.3m
Last Reported Financials: Not publicly disclosed
Stewardship and Environmental, Social and Governance Policy
Overview
As Investment Adviser we integrate stewardship and analysis of
material ESG factors, including climate change, systematically
across all of our investment strategies. Further details on the
approach can be found in Jupiter's Stewardship Policy and Annual
Stewardship Report, available on the Investment Adviser's
website.
As long-term investors, our fund managers create sustained and
effective relationships with the executive of its investee
companies, and this enables more meaningful and relevant
engagement. The Chrysalis ESG policy, available on the Company's
website, outlines principles and commitments during the four stages
of investment: i) deal origination; ii) investment decision; iii)
ownership; and iv) exit.
Philosophy
The Company's investments will typically constitute a minority
holding unlike many private market participants that operate as
control or majority investors. Although in certain instances we may
hold a board seat, our investments will typically constitute a
minority holding, and our ESG framework reflects that.
There is no single type of business in which Chrysalis invests,
however our aim is to find companies which display a number of
characteristics which we call the "Chrysalis blueprint". Typically,
they will be founder-led businesses with huge addressable markets
and structural tailwinds. Their core assets are intellectual
property and the people who create it. They use technology to solve
customer problems in novel ways, putting the customer at the
centre.
Often, in disrupting incumbent business models they will unlock
more value for customers than they capture for themselves. Lastly,
companies should also have a clear roadmap to profitability, and
the ability to achieve and sustain exceptional rates of growth.
From an ESG perspective, we believe that such businesses are,
almost by definition, well-positioned to navigate the transition to
a low carbon economy.
They are also likely to be significant job creators, with
positive spillover effects elsewhere in the economy. To grow
successfully, companies and their founders must not only execute
strategically; they must also lay the foundations for future growth
by creating appropriate corporate governance structures.
Though they are in growth mode, they must also consider
long-term themes relating to the sustainability of their business
model. This includes a broad range of considerations, but
fundamentally the purpose of the business must remain focused on
creating value for all of these stakeholders and reduce negative
impacts if it is to succeed over the long term.
ESG Integration
The integration of material environmental, social and governance
factors is applied throughout the investment process and is
assessed in terms of both risks and opportunities that drive
long-term value. The process is described in detail in the
company's ESG Policy, which can be found on our website. The fund
manager conducts detailed due diligence on every potential
investment opportunity.
The analysis incorporates material ESG factors including the
following where applicable:
-- Corporate Governance
-- Strategy and performance
-- Environment
o Sustainability
o Climate
-- Trust and reputation
-- Corporate reporting
-- Human Capital
o Remuneration
o Culture and values
o Development, diversity and engagement
-- Social Impact
o Human rights
o Supply chain
o Financial inclusion
Stewardship
Stewardship is an important responsibility and a core aspect of
our investor approach. We aim to partner with companies for the
long-term and assist them on their respective journeys to become
the best businesses that they can be. The structure of Chrysalis
suits this approach: the long-term nature of its capital, compared
with fixed life funds, gives us the ability to continue to fund
growth post initial investment, and as such we remain actively
engaged and well-positioned to influence companies on ESG and other
topics.
There is a continuous process of dialogue with the leadership
teams of our investee companies. We typically attend board meetings
of investee companies as observers to monitor strategic and
governance matters.
We regularly provide our input where we believe we can advise
companies on how to meet their strategic objectives. This includes
regular dialogue to understand how ESG goals are being met and
whether new challenges have arisen.
Our investment focus on late-stage growth companies is an
important feature of our proposition. It provides a level of
comfort that the business models and strategies employed by the
investee companies are sound; it provides assurance that the
management teams are proven; and it gives confidence that the
businesses are financially robust.
It also makes it important that founders and management teams
prepare themselves to go public as there is a relentless focus on
ESG matters in the public markets. Companies face multiple demands
in response to shifting regulation, consumer preferences,
stakeholder concerns and shareholder expectations. It is important
that private companies considering listing prepare themselves for
the additional scrutiny which comes with going public.
We recognise the importance of these issues, and we believe that
our decades of experience investing in public markets means we are
well placed to act as a sounding board for companies as they
prepare for the scrutiny that comes with going public. We hold
regular dialogue with the Boards of portfolio companies on these
topics.
Sustainability
We expect all our investments to minimise their operational
impacts and conduct their business in a sustainable manner. We look
for evidence that appropriate policies and governance mechanisms
are in place to enable companies to achieve this. Where we identify
a deficiency in a portfolio company's ESG practices we will develop
a roadmap and work with the company to address any issues. Selected
examples of leading practice by our portfolio companies can be
found in the relevant sections of the Investment Adviser's
Report.
A number of our portfolio companies provide solutions for
pressing societal problems, such as financial crime prevention,
cyber crime, data security and privacy. Others exhibit a positive
impact by disrupting sectors in which incumbents had captured high
costs, such as consumer credit or cross-border transactions, and
passing these savings back to customers. Looking ahead, we are
seeing opportunities to invest in innovative companies which seek
to address other systemic challenges, such as climate change.
Given our investment process, it will not surprise investors
that the Company has no direct exposure to fossil fuel producers or
other extractive industries. Additionally, we will not invest in
companies that manufacture weapons or utilise forced or child
labour.
Jupiter Investment Management Limited
Investment Adviser
25 January 2022
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 and the Cayman Stock
Exchange). Furthermore, the Company shall be permitted to invest in
unquoted subsidiaries of companies whose parent or group entities
have listed equity or debt securities.
The Company may invest in publicly traded companies (including
participating in the IPO of an existing unquoted company
investment), subject to the investment restrictions below. In
particular, unquoted portfolio companies may seek IPOs from time to
time following an investment by the Company, in which case the
Company may continue to hold its investment without
restriction.
The Company is not expected to take majority shareholder
positions in portfolio companies but shall not be restricted from
doing so. Furthermore, there may be circumstances where the
ownership of a portfolio company exceeds 50% of voting and/or
economic interests in that portfolio company notwithstanding an
initial investment in a minority position. While the Company does
not intend to focus its investments on a particular sector, there
is no limit on the Company's ability to make investments in
portfolio companies within the same sector if it chooses to do
so.
The Company will seek to ensure that it has suitable investor
protection rights through its investment in portfolio companies
where appropriate.
The Company may acquire investments directly or by way of
holdings in special purpose vehicles, intermediate holding vehicles
or other funds or similar structures.
Investment restrictions
The Company will invest and manage its assets with the objective
of spreading risk, as far as reasonably practicable. No single
investment (including related investments in group entities) will
represent more than 20% of Gross Assets, calculated as at the time
of that investment. The market value of individual investments may
exceed 20% of gross assets following investment.
The Company's aggregate equity investments in publicly traded
companies that it has not previously held an investment in prior to
that Company's IPO will represent no more than 20% of the Gross
Assets, calculated as at the time of investment.
Subject in all cases to the Company's cash management policy,
the Company's aggregate investment in notes, bonds, debentures and
other debt instruments (which shall exclude for the avoidance of
doubt convertible debt, equity-related and equity-linked notes,
warrants or equivalent instruments) will represent no more than 20%
of the Gross Assets, calculated as at the time of investment.
The Company will not be required to dispose of any investment or
rebalance its portfolio as a result of a change in the respective
value of any of its investments.
Corporate Governance Statement
Chrysalis has a Premium Listing on the London Stock Exchange
Main Market and became a member of the Association of Investment
Companies (AIC) on 21 January 2019. The Board has considered the
Principles and Provisions of the 2019 AIC Code of Corporate
Governance (AIC Code ), and a full scope review of the Company's
corporate governance processes and procedures has been conducted
with reference to the AIC Code by the Board and the Company
Secretary. The AIC Code addresses the relevant Principles and
Provisions set out in the UK Corporate Governance Code (the UK
Code), as well as setting out additional Provisions on issues that
are of specific relevance to the Company.
The Board considers that reporting against the Principles and
Provisions of the AIC Code, which has been endorsed by the
Financial Reporting Council and the Guernsey Financial Services
Commission, provides more relevant information to shareholders. The
Company has complied with the Principles and Provisions of the AIC
Code and in doing so has met its associated disclosure requirements
under paragraph 9.8.6 of the Listing Rules.
The AIC Code is available on the AIC website (www.theaic.co.uk).
It includes an explanation of how the AIC Code adapts the
Principles and Provisions set out in the UK Code to make them
relevant for investment companies.
Key Governance Disclosures
Section 172(1) Statement
Through adopting the AIC Code, the Board acknowledges its duty
to apply and demonstrate compliance with section 172 of the UK
Companies Act 2006 and to act in a way that promotes the success of
the Company for the benefit of its Shareholders as a whole, having
regard to (amongst other things):
a) consequences of any decision in the long-term;
b) the need to foster business relationships with suppliers, customers and others;
c) impact on community and environment;
d) maintaining reputation; and
e) acting fairly as between members of the Company.
The Board considers its duties under S.172 to be integrated
within the Company's culture and values. The Company's culture is
one of respect for the opinions of stakeholders, with an aim of
carrying out its operations in a fair and sustainable manner that
is both instrumental to the Company's long term success and upholds
the Company's ethical values. The Board encourages diversity of
thought and opinion in accordance with its Diversity Policy and
would like to encourage stakeholders to engage freely with the
Board of Directors on matters that are of concern to them.
Stakeholders may contact the Company via the Company's dedicated
e-mail address chrysalis@maitlandgroup.com or by post via the
Company Secretary on any matters that they wish to discuss with the
Board of Directors.
The Company, as an externally managed investment company, has no
employees and is operationally quite simple. The Board do not
believe the Company has any material stakeholders other than those
set out in the following table.
The Company is an externally managed investment company, has no
employees, and as such is operationally quite simple. The Board
does not believe that the Company has any material stakeholders
other than those set out in the following table.
Investors Service providers Community and environment
Issues that matter to them
Performance of the shares Reputation of the Compliance with Law
Company and Regulation Impact
Growth of the Company of the Company and its
Compliance with Law activities on third
Liquidity of the shares and Regulation parties
Corporate Governance Remuneration
------------------------------ -----------------------------
Engagement process
Annual General Meeting The main service Adherence to principles
providers engage of appropriate ESG policies
Frequent meetings with with the Board in exists at both Company
investors by brokers formal quarterly and investment level.
and the Investment Adviser meetings, giving Principles of socially
and subsequent reports them direct input responsible investing
to the Board to Board discussions. form a key part of the
Company's investment
Quarterly factsheets Communication between strategy.
Board and service
Key Information Document providers also occurs
informally on an
ongoing basis during
the year.
Rationale and example outcomes
The Board have engaged The Company relies The Investment Adviser
with shareholders in on service providers works to ensure that
relation to the Company as it has no systems sustainability and ESG
business over the course or employees of its factors are carefully
of the year. own. considered and reflected
in the Company's investment
The Board seeks to decisions.
act fairly and transparently
with all service The Board of Directors
providers, and this travel as infrequently
includes such aspects as possible and instead
as prompt payment communicate, where they
of invoices. are able to, by video
and conference call.
------------------------------ -----------------------------
Going Concern Statement
The Going Concern Statement is made on page 51.
Viability Statement
The Viability Statement is made on page 51 & 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.
Continuing Appointment of the Investment Adviser
Further details relating to the continuing appointment of the
Investment Adviser and how this is in the interests of members as a
whole can be found within the Report of the Management Engagement
Committee.
Assessment of Principal and Emerging Risks
The Board has undertaken a robust assessment of the Company's
principal and emerging risks, together with the procedures that are
in place to identify emerging risks. Further information on this
assessment and an explanation on how these risks are being
mitigated and managed can be found on page 54.
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 2021, 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 78 and 86
and note 20 of the annual report and audited financial
statements.
Chrysalis ESG
Chrysalis focuses its ESG policy on ensuring asset-appropriate
practices and disclosure throughout the fundraising,
pre-investment, post-investment, reporting, and realisation phases.
We believe ESG represents another opportunity to demonstrate our
market leadership capabilities as well as our effective risk
mitigation skills.
Chrysalis puts ESG policy into practice in our own organisation
as well in our work with portfolio companies. Highlights of ESG
progress at the Company during 2021 include:
-- Compliance with Hampton-Alexander Review recommendations on
diversity and inclusion on boards. The appointment of its second
female independent director, Margaret O'Connor, brought the gender
balance on the Chrysalis Board to 33% voluntary target for female
representation on FTSE 350 boards.
-- Initial board input of how Chrysalis can comply with The
Parker Review recommendation to support diverse talent pipeline
development and for FTSE 250 boards to appoint at least one
director from an ethnic minority background by 2024.
-- Investment in a dedicated ESG specialist at Jupiter. Andrew
Mortimer's appointment enables Chrysalis to benefit from expert
stewardship guidance for the investment trust as well as consistent
stewardship support for portfolio companies.
-- The Investment Adviser made important contributions to the
Hill Listing Review report which was published in March 2021.
-- A review of cyber risk management policy and training
protocols to ensure the organisation remains vigilant in preventing
threats using relevant technology and human ingenuity.
-- Workflow to reduce the potential for conflict of interest in
our NAV (net asset valuation) reporting. The Board initiated a
process to acquire further independent valuation advice on one of
its most complex technology assets with a view to ensuring
appropriate NAV reporting and to update our realisation
expectations for this asset. During the coming year, we plan to
further strengthen the independence of the valuation process with
the goal of preserving shareholder confidence in our ability to
manage volatile disruptive technology investments.
Trust is one of the most important non-financial assets we seek
to develop and grow with the companies in which we're invested and
with the companies that invest with us. During the past year, the
Board turned down a commercially attractive deep technology
investment because of governance concerns.
For those companies that make it through our rigorous due
diligence process, Chrysalis undertakes a long-term commitment to
executive leadership as they navigate uncertainty about demand for
their technology solutions, extreme pressure on their human
resources, and potential vulnerability to emerging competitors.
Objective Setting for ESG in our portfolio companies is
influenced by four key factors:
-- The size of our position
-- Board or investor requests
-- Collaborative activity with management and/or shareholders
-- Realisation planning
The growth capital asset class includes high-growth private
companies and recently listed public companies. During 2021, when
the listing process in the US, Europe, and the UK became
increasingly focused on ESG compliance, Chrysalis heightened its
focus on monitoring potential sustainability and governance risks
that could become material factors in the realisation of optimal
commercial returns in those companies transitioning from private to
public market status.
The Board of Directors
The Board comprises six independent non-executive Directors, 33%
of whom are female, who meet on a at least quarterly basis, in
addition to ad hoc meetings convened in accordance with the needs
of the business, to consider the Company's affairs in a prescribed
and structured manner. Further details concerning the meetings
attended during the year by the Board and its Committees can be
found on page 45. All Directors are considered independent of the
Investment Adviser for the purposes of the AIC Code and Listing
Rule 15.2.12A.
The Board is responsible for the Company's long term sustainable
success and the generation of value for shareholders and in doing
so manages the business affairs of the Company in accordance with
the Articles of Incorporation, the investment policy and with due
regard to the wider interests of stakeholders as a whole. For
further information on how the Board considers the interests of
stakeholders in its decision making please see the S.172(1)
statement on page 39. 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 & 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 bring 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 River and Mercantile UK Micro
Cap Investment Company Limited. 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, a Guernsey resident, brings board experience from both
private equity and portfolio company operations roles at Candover
Investments and then Terra Firma Capital Partners. Since 2015,
Simon has been an independent director to listed alternative
investment companies, private equity funds and trading company
boards including pro-bono roles to the States of Guernsey
overseeing infrastructure critical to the Island including the
airport, harbours and two maritime fuel supply vessels.
Simon is a Chartered Director (CDir) accredited by the UK
Institute of Directors, graduated from the University of Cambridge
with an MEng and MA in Manufacturing Engineering and is an active
member of UK and Guernsey fund management interest groups.
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 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 and chairman roles
in investment companies and a banking and trust company group in
the Channel Islands and in London.
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 was appointed an Independent Director of Chrysalis in
September 2021. She brings global experience of guiding boards
through investments in disruptive technologies, including AI, big
data, AR, and blockchain to this role.
Margaret has had a 30-year career building value in global
technology companies across the US, Asia, Africa, and Europe. She
has been instrumental in starting up two Mauritius domiciled,
pan-African technology investment funds. During 2020, she moved to
London and was appointed to Chair the Launch Africa Venture Fund 1
and Pay Today and to serve on the Investment Committee of Five35
Ventures.
Prior to this, she was a Silicon Valley VC-funded MarketingTech
entrepreneur and a founding member of the MasterCard Asia Pacific
management team in Singapore and the MasterCard Global New
Technology Communications group in New York. She is a member of the
Institute of Directors and a nominee for the Private Equity Women
Investor Network (PEWIN.org). She earned her BA from Rutgers
University and an Eagleton Institute of Politics fellowship. She
studied International Relations at Princeton University before
moving to Seoul, Korea in 1987.
Public Company Directorships
The following details are of all other public Company
Directorships and employment held by each Director and shared
Directorships of any commercial company held by two or more
Directors:
Anne Ewing
None to be disclosed
Andrew Haining
None to be disclosed
Simon Holden
HICL Infrastructure Plc.
Hipgnosis Songs Fund Limited
JPMorgan Global Core Real Assets Limited
Trian Investors 1 Limited
Stephen Coe
River and Mercantile UK Micro Cap Investment Company Limited
Tim Cruttenden
Polar Capital Technology Trust plc
Margaret O' Connor
None to be disclosed
Director Attendance
During the year ended 30 September 2021, the Board and Committee
meetings held and attended by the Directors were as follows:
Remuneration Management
Quarterly Audit Committee & nomination Engagement Ad-hoc Meetings
Board Meeting Meeting Meetings Meetings
Director Attended/Eligible Attended/Eligible Attended/Eligible Attended/Eligible Attended/Eligible
------------------ ------------------ ------------------ ------------------ ------------------
Anne Ewing 3/3 3/3 4/4 n/a 9/10
------------------ ------------------ ------------------ ------------------ ------------------
Andrew Haining 3/3 n/a n/a n/a 8/10
------------------ ------------------ ------------------ ------------------ ------------------
Simon Holden 3/3 3/3 n/a n/a 8/10
------------------ ------------------ ------------------ ------------------ ------------------
Stephen Coe 3/3 3/3 n/a n/a 10/10
------------------ ------------------ ------------------ ------------------ ------------------
Tim Cruttenden 3/3 n/a 4/4 n/a 6/10
------------------ ------------------ ------------------ ------------------ ------------------
Margaret O'Connor n/a n/a n/a n/a n/a
------------------ ------------------ ------------------ ------------------ ------------------
Division of Responsibilities
A schedule of matters reserved for the Board is maintained by
the Company and can be summarized as follows:
-- Strategic Issues
-- Financial Items such as approval of the annual and
half-yearly reports, any quarterly financial statements and any
preliminary announcement of the final results and the annual report
and accounts including the corporate governance statement
-- Treasury Items
-- Legal, Administration and Other Benefits
-- Communications with Shareholders
-- Board Appointments and Arrangements
-- Miscellaneous such as to approve the appointments of
professional advisers for any Group company in addition to the
Company's Auditors.
-- Monetary Limits
The Directors have also delegated certain functions to other
parties such as the Alternative Investment Fund Manager ("AIFM"),
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 AIFM and the Investment Adviser.
Board Committees
The Company has established an Audit Committee, Remuneration
& Nomination Committee, and Management Engagement Committee
(together the "Committees"). The Terms of Reference for each
committee is available on the Company's website.
The Board believes that its established Committees are
adequately composed, and that each member has the necessary skills
and experience to discharge their duties effectively. All new
Committee members will be provided with an induction on joining the
relevant Committee and the actions carried out by each Committee
since the previous quarterly board meeting are reported at each
meeting to the Board of Directors by the respective Committee
chair. Each Committee meeting is attended by the Company Secretary
and comprehensive minutes are kept, as well as a schedule of the
action points arising from each meeting.
Stephen Coe is the Chairman of the Audit Committee with Anne
Ewing and Simon Holden as members. A full report regarding the
Audit Committee's activities during the year can be found in the
Audit Committee Report on page 61.
In accordance with the AIC Code, a Remuneration & Nomination
Committee has been established. Anne Ewing has been appointed as
Chairman, with Margaret O'Connor and Tim Cruttenden as members. The
appointment date for Margaret is 6 September 2021. The Remuneration
& 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 & Nomination Committee's activities during the
year can be found on page 47.
Simon Holden has been appointed Chairman of the Management
Engagement Committee, with Margaret O'Connor 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 AIFM, the Investment
Adviser and the terms of the Investment Management Agreement. A
full report regarding the Management Engagement Committee's
activities during the year can be found on page 49.
Report of the Remuneration & Nomination Committee
Composition, Succession & Evaluation
On 27 November 2019 the Board adopted a policy on tenure which
is aligned to the AIC Code where no director will serve for more
than nine years. The Board confirms that no member has served for
longer than nine years, due to the Company being incorporated in
October 2018. The Board has reviewed this policy and agreed it
remains appropriate.
During 2021 the Committee considered succession planning and
undertook a review of the attributes and skills of the then current
board and made recommendations to the Board. The Board came to the
view that an additional director should be appointed with an
entrepreneurial background in tech or tech enabled services and
experience in private and public capital markets.
As a result the Board engaged an independent search firm, Nurole
Limited, who have a strong track record of being able to recommend
a diverse and relevant range of candidates. A good number of
candidates were considered and all Board members were involved at
every stage of the recruitment process. As a result, the Company
appointed Margaret O'Connor on 6 September 2021 who was warmly
welcomed by her fellow directors.
On appointment Margaret undertook a comprehensive induction
programme including with the Company's advisers and third party
service providers. Margaret engaged immediately on the Board,
accepting roles on both the Management Engagement Committee and the
Remuneration & Nomination Committee. In addition, Margaret
undertakes the informal role as the ESG Champion of the
Company.
2021 Review of Board Performance & Remuneration
The Remuneration & Nomination Committee undertook an
internal review of board performance and remuneration in the second
half of 2021. This internal review followed an external "triennial
review" undertaken in 2020 by an independent professional
remuneration and performance consultant.
The output from the internal review has been considered by the
Board and a number of actions are in progress to address various
matters including, for example, training on diversity and enhancing
the visibility of the benefits of ESG and CSR to the Company's
portfolio assets.
Remuneration levels were considered alongside the contributions
of each of the directors in terms of time and commitment. Despite
the continued and increased time commitments of the directors, the
Remuneration & Nomination Committee recommended only modest
increases to basic remuneration for the year ended 30 September
2021. The Board accepted that any increase in remuneration should
reflect the market conditions and the current stage of the
Company's development. This contrasts with the prior year when
additional discretionary fees were paid to the directors during the
integration of Jupiter as Investment Adviser and fund raising
activities.
Performance and board composition will remain under active
review during 2022 alongside the future development and strategy of
the Company.
The table below is shown to enable shareholders to assess the
relative importance of spend on remuneration and given the
increased size of the Board. The figures provide a comparison
against management fees payable to the AIFM relative to the
Company's Net Asset Value.
Total Director Renumeration* GBP353,557
Investment Adviser Fees GBP5,153,194
-----------------
Investment Adviser Performance GBP112,076,983
Fees
-----------------
NAV at year end GBP1,378,934,354
-----------------
*GBP500,000 limit per Articles of Association
The Remuneration & Nomination Committee recommended and the
Board resolved that with effect from 1 October 2021 the annual
remuneration for each Director should be increased as per the table
below.
**Total Fees
Fees Proposed Director paid
Y/E 2022 Fees Y/E 2021 including
Y/E 2021 Discretionary
Fees
Chairman GBP75,000 GBP70,000 GBP120,500
-------------- --------- -------------------
Audit Committee Chair/SID GBP57,500 GBP55,000 GBP72,500
-------------- --------- -------------------
Management Engagement Committee GBP52,500 GBP50,000 GBP82,500
Chair
-------------- --------- -------------------
Remuneration & Nomination GBP47,500 GBP45,000 GBP62,500
Committee Chair
-------------- --------- -------------------
Director (1) GBP47,500 GBP45,000 GBP62,500
-------------- --------- -------------------
Director (2) GBP47,500 *GBP3,057 GBP3,057
-------------- --------- -------------------
* part year fee - appointed September 2021
** includes GBP10,000 p.a. for a new Prospectus/Fund Raise
Anne Ewing
Chairman of the Remuneration & Nomination Committee
Members: Tim Cruttenden, Margaret O'Connor
Report of the Management Engagement Committee
The Management Engagement Committee (hereafter referred to in
this report as the "Committee" or the "MEC") is chaired by Mr Simon
Holden and at this time, comprises a sub-committee of the Board
including Miss Margaret O'Connor and Mr Tim Cruttenden, whilst
other Board members are invited to attend. Only non-executive
Directors who are independent of the Investment Advisor may serve
on the Committee, which meets at least once per year. The MEC's
terms of reference are available to view on the Company's website,
with the Committee's primary purpose being to review, annually, the
compliance of the Investment Adviser with the Company's investment
policy and Portfolio Management Agreement as well as to keep under
review the performance of all other key service providers involved
in supporting the Company and its operations.
The MEC convened once during the year ended 30 September
2021.
Since the acquisition of Merian Global Investors Limited by
Jupiter Fund Management plc, the MEC's priority has been to ensure
a smooth transition of the Investment Advisory and Alternative
Investment Fund Manager (AIFM) functions as well as stronger
investor engagement as a result of the Company's new brand and
communication materials.
I am pleased to report that this transition has been relatively
smooth and the performance of all service providers continues to
meet the required standards of the Company. An on-going dialogue is
maintained with the AIFM in respect of the valuation process. The
Board has exercised its right (both in respect of 2020 and 2021
year-end valuations) to obtain independent valuations of specific
assets where the Board believes additional judgments are merited
and where the marginal valuation of the total portfolio determines
the performance fee earned.
It is worth noting the specific achievements of the Investment
Adviser, as detailed earlier in the Annual Report, in proving out
the thesis of the cross-over capital investment proposition. This
has been marked with three partial exits in the year into the
public markets, well supported capital raises allowing the Company
to materially increase the size of its portfolio to 17 holdings at
the year end and to achieve 57% NAV growth, all of which
contributed to the crystallisation of the performance fee within
the year.
In accordance with Listing Rule 15.6.2(2)R and following the
review of the Portfolio Management Agreement as previously
outlined, t he Board of the Company has determined that it has now
reached a stage in its evolution where it should move to becoming a
self-managed investment company in 2022, with Jupiter Investment
Management Limited continuing to provide investment management
services. This will entail the Company replacing Jupiter Unit Trust
Managers Limited as the current Alternative Investment Fund Manager
(AIFM) and assuming direct responsibility for the role an AIFM
conducts including the valuation and risk management aspects. This
transition is expected to be implemented by 30 June 2022, subject
to regulatory approval. The Board is grateful to Jupiter Unit Trust
Managers Limited for its AIFM services to date and the transitional
support going forward.
Simon Holden
Chairman of the Management Engagement Committee
Directors' Report
The Directors present their Annual Report and the Audited
Financial Statements of the Company for the year ended 30 September
2021.
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 an 'Alternative Investment Fund' ("AIF"), as
defined by the Alternative Investment Fund Managers Directive
("AIFMD"), and on 1 May 2021 the Company appointed Jupiter Unit
Trust Managers Limited ("JUTM") as its new Alternative Investment
Fund Manager ("AIFM"), replacing Maitland Institutional Services
Limited whose appointment was terminated at the same time. JUTM
subsequently sub delegated portfolio management to Jupiter
Investment Management Limited ("JIML", formerly Merian Global
Investors (UK) Limited or "MGI"), which is a member of the same
group. JIML continues to act as Investment Adviser and the change
does not impact the provision of services to the Company by the
existing management team at the Investment Adviser. The management
and performance fees previously payable to JIML are now payable to
JUTM. JUTM is also entitled to an AIFM fee.
The Company operates as an externally managed non-EEA domiciled
AIF with a non-EEA domiciled AIFM for the purposes of AIFMD.
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. This information and these
disclosures may be found on pages 105 and 106 of this annual report
and on the Company's website http://chrysalisinvestments.co.uk
.
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 recent market volatility and the
impact of COVID-19 on the Company's investments. After making
enquiries and bearing in mind the nature of the Company's business
and assets, the Directors consider that the Company has adequate
resources to continue in operational existence for at least twelve
months from the date of approval of the Annual Report and Audited
Financial Statements.
At year end, the Company has a current cash position of
GBP49,794,000, net current liabilities amounting to GBP81,264,000
and liquid listed investments amounting to GBP236,756,000.
On 29 November, the Company announced that it had entered into
an agreement with the AIFM, Jupiter Unit Trust Managers Limited
("JUTM") to settle 54% (GBP60,522,000) of the performance fee due
in respect of the year to 30 September 2021 in ordinary shares
issued by the Company. The remaining 46% (GBP51,555,000) of the
performance fee amount will be settled in cash. The issue price of
the shares will be 267p per share (being the closing share price on
30 September 2021). The shares will be issued after approval of the
annual report with the cash settled shortly afterwards. The
accounting for the settlement of this transaction will be reflected
within the Company's financial statements for the year ending 30
September 2022.
On 13 December 2021, the Company announced that it has raised
gross proceeds of GBP60 million pursuant to the Placing and the
PrimaryBid Offer (the "Issue"). Accordingly, under the Issue an
aggregate of 25,210,084 new Ordinary Shares have been issued and
allotted conditionally upon admission at a price of 238 pence per
Ordinary Share.
Having considered the circumstances above it is the Board's view
that the Company has sufficient liquidity to meet its obligations.
For these reasons, the Directors continue to adopt the going
concern basis in preparing the Annual Report and Audited Financial
Statements.
Viability Statement
The Directors have assessed the prospects of the Company over
the three-year period to 30 September 2024. The Directors consider
that three years is an appropriate period to assess viability given
the Company's style of investment.
In determining the appropriate period of assessment, the
Directors consider that three years is a sufficient investment time
horizon to be relevant to shareholders and that choosing a longer
time period can present difficulties given the lack of longer-term
economic visibility and the need for adaptation that will
inevitably create for its Portfolio Companies.
In their assessment of the viability of the Company, the
Directors have considered each of the Company's principal and
emerging risks and uncertainties detailed on page 54 (and in note
20) and, in particular, the impact on the Company and its
activities of COVID-19, and the impact of a significant fall in
equity markets on the value of the Company's investment
portfolio.
The continuation of the Company in its present form is dependent
on a portfolio management agreement remaining in place between the
AIFM and the Investment Adviser. The AIFM has delegated portfolio
management services to the Investment Adviser. The current
portfolio management agreement is terminable on six months' notice
by either party. The Directors currently know of no reason why
either the AIFM or the Investment Adviser might serve notice of the
portfolio management agreement over the period of the viability
statement. The Company has now announced its intention to become
self-managed and will work with the AIFM to ensure a smooth
transition and to keep the existing Investment Adviser in
place.
The Directors have carried out a robust assessment of the
principal and emerging risks facing the Company and based on the
Company's processes for monitoring operating costs, share price
discount, the Investment Adviser's compliance with the investment
objective and policy, asset allocation, the portfolio risk profile,
counterparty exposure, liquidity risk and financial controls, the
Directors 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 30
September 2024.
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 (2020:
GBPnil)
Directors
The Directors of the Company who served during the year and to
date are set out on pages 42 and 43.
Directors' Interests
The Directors held the following interests in the share capital
of the Company either directly or beneficially as at 30 September
2021, and as at the date of signing these Audited Financial
Statements:
Shares % Held
A Haining 64,000 0.0117
S Coe 50,909 0.0093
S Holden 72,500 0.0132
A Ewing 32,500 0.0059
T Cruttenden 14,968 0.0027
Margaret O'Connor - -
The Directors' fees are as disclosed below:
GBP
A Haining 110,500
S Coe 62,500
S Holden 72,500
A Ewing 52,500
T Cruttenden 52,500
Margaret O'Connor 3,057
Under their terms of appointment, the Directors total
remuneration (including one-off fees) are as disclosed below:
Each Director is paid a basic fee of GBP45,000 per annum by the
Company. In addition to this, the Chairman receives an extra
GBP25,000 per annum, the Management Engagement Committee Chairman
receives an extra GBP5,000 per annum and the Audit Committee
Chairman receives an extra GBP10,000 per annum. Refer to page 48
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 AIFM 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 AIFM monitors the risk profile of
the Company. The AIFM also maintains a risk management process to
identify, monitor and control risk concentration.
The Board's responsibility for conducting a robust assessment of
the principal and emerging risks is embedded in the Company's risk
map and stress testing, which helps position the Company to ensure
compliance with the Association of Investment Companies Code of
Corporate Governance (the "AIC Code").
The principal risks to which the Company will be exposed are
given in note 20 to the Annual Report and Audited Financial
Statements.
The main risks that the Company faces arising from its financial
instruments are: (i) market risk, including: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.
Ongoing Charges
The ongoing charges figure for the year was 0.77%. The ongoing
charges represent ongoing annual expenses of GBP8,561,445 divided
by total average Net Asset Value for the year of GBP1,127,604,307.
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 GBP353,733 and
performance fees of GBP112,076,983 have been excluded and
represents the percentage reduction in shareholder returns as a
result of recurring operational expenses.
Emerging Risks
Whilst vaccination programmes are being rolled out and, the
outlook for the economy is improving, COVID-19 remains an ongoing
risk and remains a source of uncertainty.
In considering this risk, the Board's thought process has been
as follows:
The Directors have carried out a robust assessment of the
Company's processes for monitoring operating costs, share price
discount, the Investment Adviser's compliance with the investment
objective and policy, asset allocation, the portfolio risk profile,
counterparty exposure, liquidity risk and financial controls. At
the year end, the Company had cash and cash equivalents of
GBP49,794,000 and net current liabilities of GBP81,264,000.
Among the aims of the Company, as set out at IPO, are to invest
in companies that have both the ability to deliver growth rates
substantially higher than the average UK plc and that can protect
the duration of those rates via competitive advantage, e.g. via
scale or technology. This led the Investment Adviser towards a
group of businesses it labelled "tech-enabled disrupters".
Given the shutdown of many "traditional" areas of the economy,
businesses and consumers have had to rely much more heavily on
technology and online channels. These were sectors already growing
faster than the wider economy but have now been given added
impetus. Not only can this lead to higher growth rates in the short
term, but it can also drive new user adoption at significantly
lower cost than previously experienced.
The Directors monitor the performance of our assets on a
quarterly basis and receive monthly data in some instances which
enables them to track the development of the Investment Adviser's
investment theses.
The Board have considered the operations of the services
providers as they relate to the Company. With this in mind, the
Board believe the Company is well-positioned at this particular
time from a thematic perspective and the strategy of the Company
therefore remains unchanged.
The Board will of course continue to assess the position as more
information about the impact of the virus becomes available.
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.
The Board of directors avoid travel where good governance
allows. The Covid-19 pandemic has prevented the Board from carrying
out scheduled due diligence visits due to travel restrictions,
however video conferencing has been used for the majority of
meetings which has reduced the need for travel.
The Board are also supported against disruption to the Company's
activities through (for example) adverse weather events, by the
business continuity policy of the Administrator which has been
recently tested as a result of the Covid-19 pandemic, with no
issues to report.
Further information on how the Board and Jupiter manage the
Company's ESG and climate change related risks at the investment
portfolio level can be found within the Chairman's Statement on
page 3 and the Investment Adviser's Report on pages 35-37. 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.
Investment Management and Administration
Investment 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 AIFM to perform
portfolio and risk management functions.
The AIFM has delegated responsibility for day-to-day management
of the investments comprising the Company's portfolio to the
Investment Adviser.
The AIFM is entitled to a management fee together with
reimbursement of all reasonable costs and expenses incurred by it
in the performance of its duties. The AIFM is also entitled to a
performance fee in certain circumstances. Details of the management
fee and performance fee are set out in note 6. The Investment
Management Agreement may be terminated by either party on six
months' notice and may be immediately terminated by either party in
certain circumstances such as a material breach which is not
remedied.
Administrator
Maitland Administration (Guernsey) Limited has been appointed as
Administrator to the Company pursuant to a master services
agreement. The Administrator is responsible for the maintenance of
the books and financial accounts of the Company and the
calculation, in conjunction with the Investment Adviser, of the Net
Asset Value of the Company and the shares.
Depositary
The Depositary of the Company was Citibank Europe plc, UK
Branch. On 9 October 2021 the depositary changed to 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 2021 appear on pages 42 and 43 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 & 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 & Nomination 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 & Nomination Committee
In accordance with the AIC Code, a Remuneration & Nomination
Committee has been established. Anne Ewing has been appointed as
Chairman. The Remuneration & Nomination Committee meets at
least once a year in accordance with the terms of reference and
reviews, inter alia, the structure, size and composition of the
Board.
Details of the Directors' remuneration can be found in note 21
and page 48.
Management Engagement Committee
Simon Holden 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 AIFM, the
Investment Adviser and the terms of the Investment Management
Agreement. Details of the management and performance fees can be
found in note 6.
Substantial Shareholdings
On 14 January 2022, the latest practicable date for disclosure
in this Annual Report, the Company's only shareholder with a
holding greater than 10% was Jupiter UK Mid-Cap Fund (14.9%).
Shareholder Communication
The Company's main method of communication with Shareholders is
through its published Half Yearly and Annual Reports which aim to
provide Shareholders with a fair, balanced and understandable view
of the Company's results and objectives. This is supplemented by
the publication of the Company's quarterly net asset values on its
ordinary shares on the London Stock Exchange.
In line with principle 16 of the AIC Code, the Investment
Adviser communicates with both the Chairman and shareholders and is
available to communicate and meet with major shareholders. The
Company has also appointed Liberum Capital Limited to liaise with
all major shareholders together with the Investment Adviser, all of
whom report back to the Board at quarterly board meetings ensuring
that the Board is fully aware of shareholder sentiment,
expectations and analyst views. The Company's website, which is
maintained by the Investment Adviser, is regularly updated with
news and announcements. Information published online is accessible
in many countries each with differing legal requirements relating
to the preparation and dissemination of financial information.
Users of the Company's website are responsible for informing
themselves of how the requirements in their own countries may
differ from those of Guernsey.
Relations with Shareholders
All holders of Ordinary Shares in the Company have the right to
receive notice of, attend and vote at the general meetings of the
Company.
At each general meeting of the Company, the Board and the
Investment Adviser are available to discuss issues affecting the
Company.
Shareholders are additionally able to contact the Board directly
outside of meetings via the Company's dedicated e-mail address
(chrysalis@maitlandgroup.com) or by post via the Company Secretary.
Alternatively, Shareholders are able to contact the Investment
Adviser directly (chrysalis@maitlandgroup.com) or the Senior
Independent Director (chrysalis@maitlandgroup.com) for issues they
feel they may be unable to raise directly with the Company
itself.
The Company has adopted a zero-tolerance policy towards bribery
and is committed to carrying out business fairly, honestly and
openly.
Voting and Stewardship code
The Investment Adviser is committed to the principles of the
Financial Reporting Council's UK Stewardship Code and this also
constitutes the disclosure of that commitment required under the
rules of the FCA (Conduct of Business Rule 2.2.3).
Signed on behalf of the Board by:
Andrew Haining
Chairman
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and Audited Financial Statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare Audited Financial
Statements for each financial year. Under that law they are
required to prepare the Audited Financial Statements in accordance
with International Financial Reporting Standards as adopted by the
EU and applicable law.
Under company law the Directors must not approve the Audited
Financial Statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of
its profit or loss for that year. In preparing these Audited
Financial Statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable, relevant and reliable;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the Audited Financial Statements;
-- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations or have no
realistic alternative but to do so.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
its Audited Financial Statements comply with the Companies
(Guernsey) Law, 2008. They are responsible for such internal
control as they determine is necessary to enable the preparation of
Financial Statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility for
taking such steps as are reasonably open to them to safeguard the
assets of the Company and to prevent and detect fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in Guernsey governing the
preparation and dissemination of Financial Statements may differ
from legislation in other jurisdictions.
Disclosure of information to auditors
The Directors who held office at the date of approval of this
Directors' Report confirm that, so far as they are aware, there is
no relevant audit information of which the Company's Auditor is
unaware; and that each Director has taken all the steps that they
ought to have taken as a director to make themselves aware of any
relevant audit information and to establish that the Company's
Auditor is aware of that information.
Responsibility statement of the Directors in respect of the
Annual Report
We confirm that to the best of our knowledge:
-- the Financial Statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company; and
-- the management report (comprising the Chairman's Statement,
the Investment Advisers' Report, and Directors' Report) includes a
fair review of the development and performance of the business and
the position of the Company, together with a description of the
principal risks and uncertainties that it faces.
We consider the Annual Report and Audited Financial Statements,
taken as a whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the Company's
position and performance, business model and strategy.
Signed on behalf of the Board by:
Andrew Haining
Chairman
25 January 2022
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 2021. Appointment of
the Auditor will be reviewed each year before the AGM. The level of
non-audit versus audit services is monitored. The table below
summarises the remuneration paid by the Company to KPMG ChanneI
Islands Limited ("KPMG") for audit and non-audit services during
the year ended 30 September 2021.
30 September 30 September
2021 2020
Annual audit
fee 120,000 69,000
Interim review 33,000 33,000
------------- -------------
153,000 102,000
============= =============
Internal Control
The Company itself has no internal systems to control. Internal
control lies within the services provided by JUTM, JIML and other
service providers. These controls are monitored by the Board
reviewing and challenging reports from these service providers and
through segregation of duties between them. The Audit Committee
monitors the financial reporting process and tasks undertaken in
the production of the Annual Report and Audited Financial
Statements.
The administration and company secretarial duties of the Company
are performed by Maitland Administration (Guernsey) Limited.
Registrar duties are performed by Computershare Investor
Services (Guernsey) Limited.
The custody of financial assets is undertaken by Citibank Europe
plc, UK Branch.
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 Investment Adviser's Fair Value
Pricing Committee for review. The Board reviews these portfolio
valuations on a regular basis throughout the year.
-- 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.
-- Representatives of The Audit Committee meet with the
Investment Adviser at least quarterly and are involved with the
review of the quarterly valuations. It also seeks assurance that
the pricing basis is appropriate and in line with relevant
accounting standards as adopted by the Company and that the
carrying values are correct.
-- 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 engages
independent valuers for specific assets where it considers it
appropriate.
External Audit
The Audit Committee will hold an annual meeting to approve the
Company's Annual Report and Audited Financial Statements before its
publication. At a meeting held on 26 June 2021 the Audit Committee
met with the Auditor to discuss the audit plan and approach. During
this meeting it was agreed with the Auditor that the area of
significant audit focus related to the valuation of investments
given that they represent the majority of net assets of the Company
and their valuation involves significant judgement. The scope of
the audit work in relation to this asset class was discussed. At
the conclusion of the audit, the Audit Committee met with the
Auditor and discussed the scope of their annual audit work and
their audit findings.
The Audit Committee reviews the scope and results of the audit,
its cost effectiveness, and the independence and objectivity of the
Auditor. The Audit Committee has particular regard to any non-audit
work that the Auditor may undertake and the terms under which the
Auditor may be appointed to perform non-audit services. In order to
safeguard the Auditor's independence and objectivity, the Audit
Committee ensures that any other advisory and/or consulting
services provided by the Auditor does not conflict with their
statutory audit responsibilities.
To fulfil its responsibilities regarding the independence of the
Auditor, the Audit Committee considered:
-- a report from the Auditor describing their arrangements to
identify, report and manage any conflicts of interest; and
-- the extent of the non-audit services provided by the Auditor.
To assess the effectiveness of the Auditor, the committee
reviewed:
-- the Auditor's fulfilment of the agreed audit plan and variations from it;
-- the audit findings report highlighting any major issues that
arose during the course of the audit; and
-- the effectiveness and independence of the Auditor having
considered the degree of diligence and professional scepticism
demonstrated by them.
The Audit Committee is satisfied with KPMG's effectiveness and
independence as Auditor.
During the year the Audit Committee met three times with all
members present (refer to Director Attendance on page 45).
Reappointment of auditor
The Auditor, KPMG Channel Islands Limited, has expressed its
willingness to continue in office as Auditor. A resolution
proposing their reappointment will be submitted at the forthcoming
general meeting to be held pursuant to section 199 of the Law.
Stephen Coe
Chairman of the Audit Committee
Our opinion is unmodified
We have audited the financial statements of Chrysalis
Investments Limited (the "Company"), which comprise the statement
of financial position as at 30 September 2021, 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 2021, and of the
Company's financial performance and cash flows for the year then ended;
-- are prepared in accordance with International Financial
Reporting Standards as adopted by the EU ("IFRS"); and
-- comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of the Company in
accordance with, UK ethical requirements including the FRC Ethical
Standard as required by the Crown Dependencies' Audit Rules and
Guidance. We believe that the audit evidence we have obtained is a
sufficient and appropriate basis for our opinion.
Key audit matters: our assessment of the risks of material
misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
In arriving at our audit opinion above, the key audit matter was as
follows (unchanged from 2020):
Our response
Valuation Basis: Our audit procedures included but were not
of The Company's investments are carried at fair limited to:
investments value in accordance with IFRS. The investments Internal Controls:
held comprise of equity and equity-related We assessed the design and implementation of
at instruments in quoted and unquoted companies the control in place over the valuation of
fair and represent investments.
value 106% (2020: 112%) of the Company's net assets Challenging managements' assumptions and
through as at 30 September 2021. inputs:
profit The Company's unlisted investments, with a For the Unlisted Investments, with the support
or value of GBP1,223,442,000 (the "Unlisted of our valuation specialist, we:
loss Investments"), assessed the objectivity, capabilities and
GBP1,460,198,000 are valued by using recognised valuation competence of the Valuation Agents;
(2020: methodologies and models, in accordance with assessed the scope of the Valuation Agents'
GBP606,287,000) the review of the investments and read the
Refer International Private Equity and Venture valuation
to Capital Valuation Guidelines. reports and memoranda produced by them and the
page The Company utilises independent third party Investment Advisor;
62 valuation firms (the "Valuation Agents") to assessed the appropriateness of the valuation
of assist approach and methodology applied to each
the and advise on their valuation process. investment;
Audit The Company's listed investments, with a value compared the assumptions used in the valuation
Committee of GBP236,756,000 (the "Listed Investments"), models employed to observable market data
Report, are valued by the Company based on the quoted (where possible);
notes market bid price in an active market for that corroborated significant investee company
2(i), instrument. inputs used in the valuation models, and recent
3, Risk: investment transactions to supporting
11 The valuation of the Company's investments is a documentation; and
and significant area of our audit, given that considered market transactions in close
20 it represents a significant portion of the net proximity to the year end and assessed their
assets of the Company. appropriateness
The valuation risk of the Unlisted Investments as being representative of fair value.
incorporates both a risk of fraud and error Our valuation specialist independently priced
given the significance of estimates and the Listed Investments to a third party pricing
judgements that may be involved in the source.
determination Assessing disclosures:
of their fair value. We also considered the Company's disclosures
(see notes 3 and 20) 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 20 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
GBP27,578,000, determined with reference to a benchmark of net
assets of GBP1,378,934,000, of which it represents approximately
2.0% (2020: 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% (2020: 75%) of
materiality for the financial statements as a whole, which equates
to GBP20,683,000. 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 GBP1,378,000, in addition to
other identified misstatements that warranted reporting on
qualitative grounds.
Our audit of the Company was undertaken to the materiality level
specified above, which has informed our identification of
significant risks of material misstatement and the associated audit
procedures performed in those areas as detailed above.
Going concern
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Company
or to cease its operations, and as they have concluded that the
Company's financial position means that this is realistic. They
have also concluded that there are no material uncertainties that
could have cast significant doubt over its ability to continue as a
going concern for at least a year from the date of approval of the
financial statements (the "going concern period").
In our evaluation of the directors' conclusions, we considered
the inherent risks to the Company's business model and analysed how
those risks might affect the Company's financial resources or
ability to continue operations over the going concern period. The
risk that we considered most likely to affect the Company's
financial resources or ability to continue operations over this
period was the availability of capital to meet operating costs and
other financial commitments.
We considered whether this risk could plausibly affect the
liquidity in the going concern period by comparing severe, but
plausible downside scenarios that could arise from this risk
against the level of available financial resources indicated by the
Company's financial forecasts.
We considered whether the going concern disclosure in note 2(b)
to the financial statements gives a full and accurate description
of the directors' assessment of going concern.
Our conclusions based on this work:
-- we consider that the directors' use of the going concern
basis of accounting in the preparation of the financial statements
is appropriate;
-- we have not identified, and concur with the directors'
assessment that there is not, a material uncertainty related to
events or conditions that, individually or collectively, may cast
significant doubt on the Company's ability to continue as a going
concern for the going concern period; and
-- we have nothing material to add or draw attention to in
relation to the directors' statement in the notes to the financial
statements on the use of the going concern basis of accounting with
no material uncertainties that may cast significant doubt over the
Company's use of that basis for the going concern period, and that
statement is materially consistent with the financial statements
and our audit knowledge.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the above conclusions are not a guarantee that the
Company will continue in operation.
Fraud and breaches of laws and regulations - ability to
detect
Identifying and responding to risks of material misstatement due
to fraud
To identify risks of material misstatement due to fraud ("fraud
risks") we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to
commit fraud. Our risk assessment procedures included:
-- enquiring of management as to the Company's policies and
procedures to prevent and detect fraud as well as
enquiring whether management have knowledge of any actual,
suspected or alleged fraud;
-- reading minutes of meetings of those charged with governance;
and
-- using analytical procedures to identify any unusual or
unexpected relationships.
As required by auditing standards, and taking into account
possible incentives or pressures to misstate performance and our
overall knowledge of the control environment, we perform procedures
to address the risk of management override of controls, in
particular the risk that management may be in a position to make
inappropriate accounting entries, and the risk of bias in
accounting estimates such as valuation of unquoted investments. On
this audit we do not believe there is a fraud risk related to
revenue recognition because the Company's revenue streams are
simple in nature with respect to accounting policy choice, and are
easily verifiable to external data sources or agreements with
little or no requirement for estimation from management. We did not
identify any additional fraud risks.
We performed procedures including:
-- identifying journal entries and other adjustments to test
based on risk criteria and comparing any identified entries
to supporting documentation;
-- incorporating an element of unpredictability in our audit
procedures; and
-- assessing significant accounting estimates for bias
Further detail in respect of the valuation of unquoted
investments is set out in the 'Key Audit Matters' section of in
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 51 and 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
51 and 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.
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 59
and 60, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give a
true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error;
assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
using the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor's report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities .
The purpose of this report and restrictions on its use by
persons other than the Company's members as a body
This report is made solely to the Company's members, as a body,
in accordance with section 262 of the Companies (Guernsey) Law,
2008 and, in respect of any further matters on which we have agreed
to report, on terms we have agreed with the Company. 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
25 January 2022
Statement of Comprehensive Income
For the year ended 30 September 2021
Year ended Year ended
30 September
2021 30 September 2020
Notes Revenue Capital Total
Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments
Net gains on investments
held at fair value
through profit or loss 11 - 568,419 568,419 - 197,426
197,426
Net gains/(losses) on currency
movements - 268 268 - (985) (985)
_____ ___
________ ________ ________ ________ ________
Net investment gains - 568,687
568,687 - 196,441 196,441
________
________ ________ ________ ________ ________
Interest income 5 851 - 851 287 273 560
________
________ ________ ________ ________ ________
Total income 851
- 851 287 273 560
________
________ ________ ________ ________ ________
Investment management 6 (5,153) (112,077) (117,230)
(2,084) (32,608) (34,692)
and performance fees
Other expenses 7 (3,762) - (3,762) (1,897) - (1,897)
________
________ ________ ________ ________ ________
(Losses)/gains before finance
costs and taxation (8,064) 456,610 448,546
(3,694) 164,106 160,412
Finance costs 8 (238) - (238) - - -
________
________ ________ ________ ________ ________
(Losses)/gains before taxation (8,302) 456,610 448,308
(3,694) 164,106 160,412
Withholding tax expense - - - - - -
________
________ ________ ________ ________ ________
Total (losses)/gains and
comprehensive income for the year (8,302) 456,610 448,308
(3,694) 164,106 160,412
________
________ ________ ________ ________ ________
(Loss)/gain per
Ordinary Share (pence) 9 (1.75) 96.51
94.76 (1.10) 48.73 47.63
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 75 to 101 form an integral part of these
Audited Financial Statements
Statement of Financial Position
As at 30 September 2021
2021 2020
Notes GBP'000 GBP'000
Non-current assets
Investments held at fair value through profit or loss 11 1,460,198
606,287
___________ ___________
Current assets
Cash and cash equivalents 12
49,794 15,559
Other receivables 13 427 267
___________ ___________
50,221 15,826
___________ ___________
Total assets 1,510,419 622,113
___________ ___________
Current liabilities
Performance fee payable 6 (112,077) (32,710)
Management fee payable 6 (3,333) (631)
Unsettled trades 14 - (46,440)
Loan payable 15 (15,000) -
Other payables 16 (1,075) (289)
___________ ___________
Total liabilities (131,485) (80,070)
___________ ___________
Net assets 1,378,934 542,043
___________ ___________
Equity
Share Capital 17 758,950 370,367
Capital reserve 633,420 176,810
Revenue reserve (13,436) (5,134)
___________ ___________
Total equity
1,378,934 542,043
___________ ___________
Net Asset Value per Ordinary Share (pence) 18 251.96
160.97
Number of Ordinary Shares in issue 17
547,273,076 336,742,424
Approved by the Board of Directors and authorised for issue on
25 January 2022 and signed on their behalf:
Stephen Coe
Director
The notes on pages 75 to 101 form an integral part of these
Audited Financial Statements
Statement of Changes in Equity
For the year ended 30 September 2021
Share Capital Revenue
capital reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000
At 30 September 2019 370,366 12,704 (1,440) 381,630
Total gains/(losses) and comprehensive
income for the year - 164,106 (3,694) 160,412
Share issue costs 1 - - 1
___________ ___________ ___________ ___________
At 30 September 2020 370,367
176,810 (5,134) 542,043
Total gains/(losses) and comprehensive
income for the year -
456,610 (8,302) 448,308
Share issue 395,000 - - 395,000
Share issue costs (6,417) - - (6,417)
___________ ___________ ___________ ___________
At 30 September 2021 758,950
633,420 (13,436) 1,378,934
___________ ___________ ___________ ___________
The notes on pages 75 to 101 form an integral part of these
Audited Financial Statements
Statement of Cash Flows
For the year ended 30 September 2021
2021 2020
Notes GBP'000 GBP'000
Cash flows from operating activities
Interest paid 8 (238) -
Other expense payments 19
(37,987) (5,286)
Interest income 5 851 560
Purchase of investments
(426,639) (212,013)
Sale of investments 11 94,707 19,632
Net gains/(losses) on currency movements
268 (985)
___________ ________
Net cash outflow from operating activities
(369,038) (198,092)
___________ ___________
Cash flows from financing activities
Issue of ordinary shares 17 395,000 -
Share issue costs 17 (6,417) -
Proceeds of loan payable 15 15,000 -
___________ ___________
Net cash inflow from financing activities
403,583 -
___________ ___________
Net increase/(decrease) in cash and cash equivalents
34,545 (198,092)
Net (loss)/gains on cash currency movements
(310) 986
Cash and cash equivalents at beginning of year
15,559 212,665
___________ ___________
Cash and cash equivalents at end of year 12
49,794 15,559
___________ ___________
Cash and cash equivalents comprise of the following:
Cash at bank
49,794 15,559
___________ ___________
49,794 15,559
___________ ___________
The notes on pages 75 to 101 form an integral part of these
Audited Financial Statements
Notes to the Audited Financial Statements
For the year ended 30 September 2021
1. Reporting Entity
Chrysalis Investments Limited (the "Company") is a closed-ended
investment company, registered in Guernsey on 3 September 2018,
with registered number 65432. The Company's registered office is
3rd Floor, 1 Le Truchot, St Peter Port, Guernsey GY1 1WD.
The Company is a Registered Closed-ended Collective Investment
Scheme regulated by the Guernsey Financial Services Commission
("GFSC"), with reference number 2404263, pursuant to the Protection
of Investors (Bailiwick of Guernsey) Law 1987, as amended and the
Registered Closed-ended Investment Scheme Rules 2015.
The Company's 547,273,076 shares in issue (per note 17) under
ticker CHRY, SEDOL BGJYPP4 and ISIN GG00BGJYPP46 have a premium
listing and are admitted to trading on the London Stock Exchange's
Main Market for listed securities. During the year, the Company had
share issues of 64,189,189 and 146,341,463 for a net consideration
of GBP93,346,659 and GBP295,236,429 respectively. The shares were
issued on 9 October 2020 and 30 March 2021. The Audited Financial
Statements of the Company are presented for the year ended 30
September 2021.
The Company invests in a diversified portfolio consisting
primarily of equity and equity-related securities issued by
unquoted companies. The Company became a FTSE 250 company on 23
March 2021.
The Company received investment advice from Jupiter Investment
Management Limited ("JIML") (formerly known as Merian Global
Investors (UK) Limited or "MGI") during the year ended 30 September
2021. The administration of the Company is delegated to Maitland
Administration (Guernsey) Limited ("MAGL") (the
"Administrator").
2. Significant accounting policies
(a) Basis of accounting
The Audited Financial Statements have been prepared in
compliance with International Financial Reporting Standards as
adopted by the European Union ("IFRS"). The Audited Financial
Statements give a true and fair view and comply with the Companies
(Guernsey) Law, 2008.
Where presentational guidance set out in the Statement of
Recommended Practice ("SORP") for investment companies issued by
the Association of Investment Companies ("AIC") updated in February
2019 is consistent with the requirements of IFRS, the Directors
have sought to prepare the Audited Financial Statements on a basis
compliant with the recommendations of the SORP.
(b) Going concern
The Directors have adopted the going concern basis in preparing
the annual Audited Financial Statements.
In assessing the going concern basis of accounting, the
Directors have assessed the guidance issued by the Financial
Reporting Council and considered recent market volatility and the
impact of COVID-19 on the Company's investments. After making
enquiries and bearing in mind the nature of the Company's business
and assets, the Directors consider that the Company has adequate
resources to continue in operational existence for at least twelve
months from the date of approval of the Annual Report and Audited
Financial Statements.
At year end, the Company has a current cash position of
GBP49,794,000, net current liabilities amounting to GBP81,264,000
and liquid listed investments amounting to GBP236,756,000.
On 29 November, the Company announced that it had entered into
an agreement with the AIFM, Jupiter Unit Trust Managers Limited
("JUTM") to settle 54% (GBP60,522,000) of the performance fee due
in respect of the year to 30 September 2021 in ordinary shares
issued by the Company. The remaining 46% (GBP51,555,000) of the
performance fee amount will be settled in cash. The issue price of
the shares will be 267p per share (being the closing share price on
30 September 2021). The shares will be issued after approval of the
annual report with the cash settled shortly afterwards. The
accounting for the settlement of this transaction will be reflected
within the Company's financial statements for the year ending 30
September 2022.
On 13 December 2021, the Company announces that it has raised
gross proceeds of GBP60 million pursuant to the Placing and the
PrimaryBid Offer (the "Issue"). Accordingly, under the Issue an
aggregate of 25,210,084 new Ordinary Shares have been issued and
allotted conditionally upon admission at a price of 238 pence per
Ordinary Share.
Therefore, the Company has sufficient liquidity to meet its
obligations. For these reasons, the Directors continue to adopt the
going concern basis in preparing the Annual Report and Audited
Financial Statements.
(c) Functional and presentational currency
The Audited Financial Statements of the Company are presented in
the currency of the primary economic environment in which it
operates (its functional currency). For the purpose of the Audited
Financial Statements, the results and financial position of the
Company are expressed in pound sterling ("GBP").
(d) Segmental reporting
The chief operating decision maker is the Board of Directors.
The Directors are of the opinion that the Company is engaged in a
single segment of business with the primary objective of investing
in securities to generate capital growth for shareholders.
Consequently, no business segmental analysis is provided.
The key measure of performance used by the Board is the Net
Asset Value of the Company (which is calculated under IFRS).
Therefore, no reconciliation is required between the measure of
profit or loss used by the Board and that contained in these
Audited Financial Statements.
(e) Income
Interest income is accounted for on an accruals basis and
recognised in profit or loss in the Statement of Comprehensive
Income. Interest income includes interest earned on convertible
loan notes, cash held at bank on call, on deposit and cash held as
cash equivalents including UK treasury bills.
(f) Expenses
Expenses are accounted for on an accruals basis. The Company's
investment management and administration fees, finance costs and
all other expenses are charged through the Statement of
Comprehensive Income and are charged to Revenue. Performance fee is
charged to the capital column in the Statement of Comprehensive
Income.
(g) Dividends to shareholders
Dividends are recognised in the year in which they are paid.
(h) Taxation
The Company has been granted exemption from liability to income
tax in Guernsey under the Income Tax (Exempt Bodies) (Guernsey)
Ordinance, 1989 amended by the Director of Income Tax in Guernsey
for the current year. Exemption is applied and granted annually and
subject to the payment of a fee, currently GBP1,200 (2020:
GBP1,200).
(i) Financial instruments
Classification
The Company's financial assets are classified in the following
measurement categories:
-- those to be measured subsequently at fair value through profit or loss; and
-- those to be measured at amortised cost.
The classification depends on the entity's business model for
managing the financial assets and the contractual terms of the cash
flows.
At initial recognition, the Company measures a financial asset
at its fair value, plus, in the case of a financial asset not at
fair value through profit or loss, transaction costs that are
directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at fair value through
profit or loss are expensed in profit or loss.
Financial assets held at amortised cost
Assets that are held in order to collect contractual cash flows
give rise to cash flows that are solely payments of principal and
interest are measured at amortised cost. These assets are
subsequently measured at amortised cost using the effective
interest method.
The Company has elected to apply the simplified approach
permitted by IFRS 9 in respect of trade and other receivables. This
approach requires expected lifetime losses to be recognised from
initial recognition of the receivables.
The Company's financial assets held at amortised cost include
trade and other receivables and cash and cash equivalents.
Financial assets at fair value through profit or loss
For investments actively traded in organised financial markets,
fair value will generally be determined by reference to Stock
Exchange quoted market bid prices at the close of business on the
valuation date, without adjustment for transaction costs necessary
to realise the asset.
In respect of unquoted instruments, including associates, or
where the market for a financial instrument is not active, fair
value is established by using recognised valuation methodologies,
in accordance with International Private Equity and Venture Capital
Valuation Guidelines ("IPEVC").
The Company has adopted a valuation policy for unquoted
securities to provide an objective, consistent and transparent
basis for estimating the fair value of unquoted equity securities
in accordance with IFRS as well as IPEVC.
The unquoted securities valuation policy and the associated
valuation procedures are subject to review on a regular basis, and
updated as appropriate, in line with industry best practice. In
addition, the Company works with independent third-party valuation
firms, to obtain assistance, advice, assurance, and documentation
in relation to the ongoing valuation process.
The Company considers it impractical to perform an in-depth
valuation analysis for every unquoted investment on a daily basis
(whether internally or with the assistance of an independent third
party).
Financial assets at fair value through profit or loss
(continued)
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 JUTM 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 amount for which an asset could be exchanged
between knowledgeable, willing parties in an arm's-length
transaction.
The change in fair value is recognised in profit or loss and is
presented within the "net gains on investments held at fair value
through profit or loss" in the Statement of Comprehensive
Income.
IFRS requires the Company to measure fair value using the
following fair value hierarchy that reflects the significance of
the inputs used in making the measurements. IFRS establishes a fair
value hierarchy that prioritises the inputs to valuation techniques
used to measure fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements).
The three levels of fair value hierarchy under IFRS are as
follows:
-- Level 1 reflects financial instruments quoted in an active market.
-- Level 2 reflects financial instruments whose fair value is
evidenced by comparison with other observable current market
transactions in the same instrument or based on a valuation
technique whose variables include only data from observable
markets.
-- Level 3 reflects financial instruments whose fair value is
determined in whole or in part using a valuation technique based on
assumptions that are not supported by prices from observable market
transactions in the same instrument and not based on available
observable market data. For investments that are recognised in the
Audited Financial Statements on a recurring basis, the Company
determines whether transfers have occurred between levels in the
hierarchy by re-assessing the categorisation (based on the lowest
significant input) at the date of the event that caused the
transfer.
Recognition and derecognition of financial assets
The Company recognises a financial asset at its fair value,
plus, in the case of a financial asset not at fair value through
profit or loss, transaction costs that are directly attributable to
the acquisition of the financial asset. Transaction costs of
financial assets carried at fair value through profit or loss are
expensed in profit or loss.
A financial asset (in whole or in part) is derecognised either
(i) when the Company has transferred substantially all the risks
and rewards of ownership; or (ii) when it has neither transferred
nor retained substantially all the risks and rewards and when it no
longer has control over the assets or a portion of the asset; or
(iii) when the contractual right to receive cash flow has expired.
The derecognised investments are measured at the weighted average
method. Any gain or loss on derecognition is recognised in the Net
gains on investments held at fair value through profit or loss in
the Statement of Comprehensive Income.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs.
Financial liabilities and equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
Financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs.
Financial liabilities are subsequently measured at amortised
cost using the effective interest method, with interest expense
recognised on an effective yield basis.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only
when, the Company's obligations are discharged, cancelled or they
expire.
(j) Cash and cash equivalents
Cash comprises cash and demand deposits. Cash equivalents, which
may include UK treasury bills, are short-term, highly liquid
investments that are readily convertible to known amounts of cash,
are subject to insignificant risks of changes in value, and are
held for the purpose of meeting short-term cash commitments rather
than for investment or other purposes. Included in cash and cash
equivalents at the year end was cash at bank of GBP49,794,000.
Refer to note 12 for further details of the cash balance held at 30
September 2021.
(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
year end. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the year
in which they arise. Transactions denominated in foreign currencies
are translated into pound sterling (GBP) at the rate of exchange
ruling at the date of the transaction.
Foreign exchange gains and losses arising from translation are
included in the Statement of Comprehensive Income.
Where foreign currency items are held at fair value, the foreign
currency movements are presented as part of the fair value
change.
(m) Capital reserve
Profits achieved by selling investments and changes in fair
value arising upon the revaluation of investments that remain in
the portfolio are all charged to profit or loss in the capital
column of the Statement of Comprehensive Income and allocated to
the capital reserve. The capital reserve is also used to fund
dividend distributions.
(n) Revenue reserve
The balance of all items allocated to the revenue column of the
Statement of Comprehensive Income for the year is transferred to
the Company's revenue reserve.
3. Use of estimates and critical judgements
The preparation of Audited Financial Statements in accordance
with IFRS requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the
Audited Financial Statements and the reported amounts of income and
expenses during the year. Actual results could differ from those
estimates and assumptions.
The estimates and underlying assumptions are reviewed on an
ongoing basis. There were no significant accounting estimates or
significant judgements in the current year, except for the use of
estimates in the valuation of the unquoted investments detailed in
note 20.
4. New and revised standards
The following accounting standards and their amendments were in
issue at the year end but will not be in effect until after this
financial year end and have not been early-adopted by the Company.
The Directors have considered their impact and have concluded that
they will not have a significant impact on the Audited Financial
Statements.
-- Amendments to IFRS 9, IAS 1 and IAS 37 - effective 1 January 2022
-- Amendments to IAS 1, IAS 8 and IAS 12 - effective 1 January 2023
5. Interest income
Interest income totaling GBP380,000 was earned from the Sorted
Holdings Limited Convertible Loan which is held at fair value
through profit or loss (FVTPL). GBP471,000 was earned from the
wefox Loan note which converted during the current year. It was
also held at fair value through profit or loss (FVTPL). Interest is
accounted for using the effective interest method.
6. Investment management fees
2021 2020
GBP'000 GBP'000
Investment management fee
5,153 2,084
Investment performance fee - charged to capital 112,077
32,608
___________ ___________
Total investment management fees
117,230 34,692
___________ ___________
On 1 May 2021 the Company appointed Jupiter Unit Trust Managers
Limited ("JUTM") as its new Alternative Investment Fund Manager
("AIFM"), replacing Maitland Institutional Services Limited whose
appointment was terminated at the same time. JUTM subsequently sub
delegated portfolio management to Jupiter Investment Management
Limited ("JIML", formerly Merian Global Investors (UK) Limited or
"MGI") which is a member of the same group.
JIML continues to act as Investment Adviser and the change does
not impact the provision of services to the Company by the existing
management team at the Investment Adviser. The management and
performance fees previously payable to JIML are now payable to
JUTM.
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
advisory fee is charged to such investment fund or special purpose
vehicle by JUTM 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 2021, an amount of GBP3,333,000 (2020:
GBP631,000 to JIML) was outstanding and due to JUTM in respect of
management fees.
Performance fee
JUTM will be 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 2020 and ending on 30
September 2021 (the "Calculation Period").
Performance fee (continued)
Adjusted Net Asset Value at the end of a Calculation Period
shall be the audited NAV in Sterling at the end of the relevant
Calculation Period:
(i) plus an amount equal to any accrued or paid performance fee
in respect of that Calculation Period or any prior Calculation
Period;
(ii) plus an amount equal to all dividend or other income
distributions paid to shareholders that have been declared and paid
on or prior to the end of the relevant Calculation Period;
(iii) minus the amount of any distribution declared in respect
of the Calculation Period but which has not already reduced the
audited NAV;
(iv) minus the Net Capital Change where the Net Capital Change
is positive or, correspondingly, plus the Net Capital Change where
such net Capital Change is negative (which for this purpose
includes the Net Capital Change in the relevant Calculation Period
and each preceding Calculation Period); and
(v) minus any increase in the NAV during the Calculation Period
attributable to investments attributable to C shares prior to the
conversion of those C shares.
"Performance Hurdle" means, in relation to the Calculation
Period, ("A" multiplied by "B") + C where:
"A" is 8% (expressed for the purposes of this calculation as
1.08) (calculated as an annual rate and adjusted to the extent the
Calculation Period is greater or shorter than one year).
"B" is:
(i) in respect of the first Calculation Period, the Net Issue
Proceeds; or
(ii) in respect of each subsequent Calculation Period, the sum
of this calculation as at the end of the immediately preceding
Calculation Period: plus (where sum is positive) or minus (where
such sum is negative) the Net Capital Change attributable to shares
issues and repurchases in all preceding Calculation Period (the
amount in this paragraph (b) being the "Aggregate NCC"), in each
case, plus (where such sum is positive) or minus (where such sum is
negative) the sum of:
(x) in respect of each share issue undertaken in the relevant
Calculation Period being assessed, an amount equal to the Net
Capital Change attributable to that share issue multiplied by the
sum of the number of days between admission to trading of the
relevant shares and the end of the relevant Calculation Period
divided by 365 (such amount being the "issue adjustment"),
minus
(y) in respect of each repurchase or redemption of shares
undertaken in the relevant Calculation Period being assessed, an
amount equal to Net Capital Charge attributable to that share
purchase or redemption multiplied by the number of days between the
relevant disbursement of monies to fund such repurchase or
redemption and the end of the relevant Calculation Period divided
by 365 (such amount being the "reduction adjustment").
"C" is the sum of:
the issue adjustment for the Calculation Period;
the reduction adjustment for the Calculation Period; and
the Aggregate NCC multiplied by -1.
"Net Capital Change" equals I minus R where:
"I" is the aggregate of the net proceeds of any share issue over
the relevant year (other than the first issue of ordinary
shares);
"R" is the aggregate of amounts disbursed by the Company in
respect of the share redemption or repurchases over the relevant
period.
"High Water Mark" means the Adjusted Net Asset Value as at the
end of the Calculation Period in respect of which a performance fee
was last earned or if no performance fee has yet been earned, an
amount equal to the Net Issue Proceeds (as such term is defined in
the prospectus); and
"Calculation period" means each twelve-month period ending on 30
September, except that the first Calculation Period shall be the
period commencing on Admission and ending on 30 September 2019.
Under the terms of the Investment Management Agreement, any
accrued and unpaid performance fees will crystallise and become
payable to JUTM 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 2021, the Company had exceeded the High Water
Mark and Performance Hurdle and an accrual of GBP112,077,000 (2020:
GBP32,608,000) for performance fees has been reflected within these
Audited Financial Statements.
An amount of GBP 112,077,000 (2020: GBP32,710,000) was
outstanding and due to JUTM in respect of performance fee due as at
30 September 2021.
On 29 November, the Company announced that it had entered into
an agreement with JUTM to settle 54% (GBP60,522,000) of the
performance fee due in respect of the year to 30 September 2021 in
ordinary shares issued by the Company. The remaining 46%
(GBP51,555,000) of the performance fee amount will be settled in
cash. The issue price of the shares will be 267p per share (being
the closing share price on 30 September 2021). The shares will be
issued after approval of the annual report with the cash settled
shortly afterwards. The accounting for the settlement of this
transaction will be reflected within the Company's financial
statements for the year ending 30 September 2022.
7. Other expenses
2021 2020
GBP'000 GBP'000
Administration fee 237 125
AIFM fee
400 147
Auditor's remuneration for:
- audit fees (current year) 120 74
- audit fees (prior year) 42 -
- non-audit fees 114 53
Depositary fees 91 36
Directors' expenses - 1
Directors' fees 404 208
Directors' liability insurance 49 33
FCA fees
18 11
Legal fee and professional fees:
- ongoing operations 946 76
- valuation fees 221 31
- due diligence fees 165 40
- purchases 354 869
Listing fees 140 18
Loan agreement fee
160 -
Loan commitment fee
88 -
Printing fees 47 36
Registrars' fees 42 20
Secretarial fees 35 36
Sundry
89 83
___________ ___________
3,762 1,897
___________ ___________
8. Finance costs
2021 2020
GBP'000 GBP'000
Bank interest 21 -
Loan interest 217 -
___________ ___________
238 -
___________ ___________
9. (Losses)/gains per ordinary share
30 September 2021 30 September 2020
Net
return Per share Net return Per share
GBP'000 pence GBP'000 pence
Revenue return (8,302) (1.75) (3,694) (1.10)
Capital return 456,610 96.51 164,106 48.73
___________ ___________ ___________ ___________
448,308 94.76 160,412 47.63
___________ ___________ ___________ ___________
Weighted average number of Ordinary Shares 473,121,001
336,742,424
___________ ___________
The return per share is calculated using the weighted average
number of ordinary shares.
10. Dividends
The Board has not declared a dividend (2020: GBPnil).
11. Investments held at fair value through profit or loss
2021 2020
GBP'000 GBP'000
Opening book cost
404,480 157,591
Opening investment holding unrealised gains 201,807 12,449
___________ ___________
Opening valuation
606,287 170,040
Movements in the year:
Purchases at cost
380,199 258,453
Sales - proceeds
(94,707) (19,632)
Net gains on investments held at fair value
through profit or loss
568,419 197,426
___________ ___________
Closing valuation
1,460,198 606,287
___________ ___________
2021 2020
GBP'000 GBP'000
Closing book cost
758,013 404,480
Closing investment holding unrealised gains
702,185 201,807
___________ ___________
Closing valuation
1,460,198 606,287
___________ ___________
2021 2020
GBP'000 GBP'000
Movement in unrealised gains during the year 501,083 197,199
Movement in unrealised losses during the year
(705) (7,841)
Realised gain on sale of investments
68,041 8,068
___________ ___________
Net gains on investments held at fair value
through profit or loss
568,419 197,426
___________ ___________
12. Cash and cash equivalents
2021 2020
GBP'000 GBP'000
Cash and cash equivalents comprise of the following:
Cash at bank
49,794 15,559
___________ ___________
49,794 15,559
___________ ___________
13. Other receivables
2021 2020
GBP'000 GBP'000
Prepayments and accrued income
427 267
___________ ___________
427 267
___________ ___________
14. Unsettled trades
The prior year payable in respect of unsettled trades of
GBP46,440,000 relates to the amount due for the purchase of You
& Mr Jones on 30 September 2020. This amount was settled on 15
October 2020. No amounts remained outstanding in relation to
unsettled trades at 30 September 2021.
15. Loan payable
2021 2020
GBP'000 GBP'000
Barclays Bank PLC
15,000 -
___________ ___________
During the period the Company entered into a revolving loan
facility with Barclays Bank PLC. The facility has an interest rate
of LIBOR +2.5%. An amount of GBP15,000,000 was drawn on the
facility at the year end. The Company incurred agreement fees of
GBP160,000 and a commitment fee of GBP88,000 during the period in
respect of the facility. The loan was subsequently repaid in full
on 15 October 2021 and was not available to be redrawn.
16. Other payables
2021 2020
GBP'000 GBP'000
Administration fees
142 37
AIFM fees
280 45
Audit fees
142 88
Loan interest
86 -
Pricing review fees
276 40
Custodian fees
30 22
Other creditors
119 57
___________ ___________
1,075 289
___________ ___________
17. Share capital
No of
shares GBP'000
Ordinary Shares at no par value
At 30 September 2019
336,742,424 370,366
Issue costs
- 1
___________ ___________
At 30 September 2020 336,742,424 370,367
Issue of shares 210,530,652 3 95,000
Issue costs
- (6,417)
___________ ___________
At 30 September 2021
547,273,076 758,950
___________ ___________
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.
18. Net asset value per ordinary share
The Net Asset Value per Ordinary Share and the Net Asset Value
at the year end calculated in accordance with the Articles of
Incorporation were as follows:
30 September 2021 30 September 2020
NAV NAV NAV NAV
per share
attributable per share attributable
pence GBP'000 pence GBP'000
Ordinary Shares: basic and diluted 251.96 1,378,934 160.97
542,043
___________
___________ ___________ ___________
The Net Asset Value per Ordinary Share is based on 547,273,076
(2020: 336,742,424) Ordinary Shares, being the number of Ordinary
Shares in issue at the year end.
19. Other expenses payments
2021 2020
GBP'000 GBP'000
Total gains and comprehensive income for the year
448,308 160,412
Net gains on investments held at fair value
through profit or loss
(568,419) (197,426)
Interest income
(851) (560)
Finance costs
238 -
Net losses/(gains) on currency movements
42 (1)
Movement in working capital
Increase in other receivables
(160) (185)
Increase in payables (excluding unsettled trades and loan
payable)
82,855 32,474
___________ ___________
(37,987) (5,286)
___________ ___________
20. Financial instruments and capital disclosures
The Company's activities expose it to a variety of financial
risks; market risk (including other price risk, foreign currency
risk and interest rate risk), credit risk and liquidity risk.
Certain financial assets and financial liabilities of the
Company are carried in the Statement of Financial Position at their
fair value. The fair value is the amount at which the asset could
be sold, or the liability transferred in a current transaction
between market participants, other than a forced or liquidation
sale. For investments actively traded in organised financial
markets, fair value is generally determined by reference to Stock
Exchange quoted market mid prices and Stock Exchange Electronic
Trading Services ("SETS") at last trade price at the year end date,
without adjustment for transaction costs necessary to realise the
asset. Other financial instruments not carried at fair value are
typically short-term in nature and reprice to the current market
rates frequently. Accordingly, their carrying amount is a
reasonable approximation of fair value. This includes cash and cash
equivalents, other receivables and other payables.
The Company measures fair values using the following hierarchy
that reflects the significance of the inputs used in making the
measurements. Categorisation within the hierarchy has been
determined on the basis of the lowest level input that is
significant to the fair value measurement of the relevant assets as
follows:
Level 1 - Quoted prices (unadjusted) in active markets for
identical assets or liabilities.
An active market is a market in which transactions for the asset
or liability occur with sufficient frequency and volume on an
ongoing basis such that quoted prices reflect prices at which an
orderly transaction would take place between market participants at
the measurement date. Quoted prices provided by external pricing
services, brokers and vendors are included in Level 1, if they
reflect actual and regularly occurring market transactions on an
arm's-length basis.
Level 2 - Inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from
prices).
Level 2 inputs include the following:
-- quoted prices for similar (i.e. not identical) assets in
active markets;
-- quoted prices for identical or similar assets or liabilities
in markets that are not active. Characteristics of an inactive
market include a significant decline in the volume and level of
trading activity, the available prices vary significantly over time
or among market participants or the prices are not current;
-- inputs other than quoted prices that are observable for the
asset (for example, interest rates and yield curves observable at
commonly quoted intervals); and
-- inputs that are derived principally from, or corroborated by,
observable market data by correlation or other means
(market-corroborated inputs).
Level 3 - Inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety. If a fair value measurement uses
observable inputs that require significant adjustment based on
unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgement, considering factors
specific to the asset or liability.
At 30 September 2021 Level 1 Level 2
Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Quoted equity 236,756 - - 236,756
Unquoted equity/Convertible debt - -
1,223,442 1,223,442
___________ __________ ___________ ___________
236,756 - 1,223,442 1,460,198
___________ __________ ___________ ___________
At 30 September 2020 Level 1 Level 2
Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Quoted equity 94,213 - - 94,213
Unquoted equity/Convertible debt - - 512,074 512,074
___________ ________ ___________ ___________
94,213 - 512,074 606,287
___________ __________ ___________ ___________
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 2021
Fair Value Valuation Significant Range Sensitivity Sensitivity to changes
as at 30 Technique Unobservable % in significant
September Inputs unobservable
2021 (GBP000s) inputs
------------------ ------------------- ---------------- -------------- --------------------------
EV/2022E revenue
multiples
If revenue multiples
EV/LTM revenue changed by +/- 10%,
multiples the value of the
Market approach companies in this
using comparable EV/2021E revenue group would change
840,358 traded multiples multiples 5.47 - 18.50x 10% by +/-GBP76,875,162
------------------ ------------------- ---------------- -------------- --------------------------
1,332 Wind Down N/A N/A N/A N/A
------------------ ------------------- ---------------- -------------- --------------------------
307,147 Recent transaction N/A N/A N/A N/A
price
------------------ ------------------- ---------------- -------------- --------------------------
74,605 Indicative N/A N/A N/A N/A
Offer
------------------ ------------------- ---------------- -------------- --------------------------
The following table shows the valuation techniques used for
Level 3 fair values, as well as the significant unobservable inputs
used for Level 3 item:
Unlisted Investments 2020
Fair Value as at 30 Valuation Technique Significant Range Sensitivity % Sensitivity to
September 2020 Unobservable Inputs changes in
(GBP000s) significant
unobservable inputs
--------------------- --------------------- ------------ ------------- --------------------
115,474 Comparable Company Selection of 15-30% 10% If input comparable
performance comparable companies company performance
changed by +/- 10%,
the fair value would
change by
+/-GBP1,975,506
--------------------- --------------------- ------------ ------------- --------------------
185,809 Market approach using EV/LTM revenue 1.8-13.5x 10% If EV/LTM multiples
comparable traded multiple changed by +/- 10%,
multiples EV/EBITDA Multiple 13.8-15.4x 10% the fair value would
change by +/-
GBP9,548,694
If EV/EBITDA
multiples changed by
+/- 10%, the fair
value would change
by +/-GBP5,069,250
--------------------- --------------------- ------------ ------------- --------------------
69,640 Discounted Cash Flow Discount Factor 12% 1% If discount factor
increased by 1%, the
fair value would
reduce by
GBP8,190,000, if the
discount
factor decreased by
1%, the fair value
would increase by
GBP14,691,000
--------------------- --------------------- ------------ ------------- --------------------
139,892 Recent transaction N/A N/A N/A N/A
price
--------------------- --------------------- ------------ ------------- --------------------
1,256 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 Unlisted Asset Valuation
Committee ("UAVC") of the AIFM is responsible for valuation.
The UAVC regularly reviews significant unobservable inputs and
valuation adjustments. If third party information, such as pricing
services, is used to measure fair vales, then the UAVC assesses the
evidence obtained from the third parties to support the conclusion
that these valuations meet the requirements of the standards,
including to 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:
2021 2020 2021 2020
GBP'000
GBP'000 GBP'000 GBP'000
Level 1
Level 1 Level 3 Level 3
Opening balance 94,213 - 512,074 170,040
Transferred to Level 1 161,161 64,306 (161,161) (64,306)
Purchases 64,101
14,442 316,098 244,011
Sales (94,707) - - (19,632)
Total gains/(losses) included in net
gains on investments in the
statement of comprehensive income
- on assets sold 68,041
- - 8,068
- on assets held at year end (56,053) 15,465 556,431 173,893
___________ ___________ ___________ ___________
236,756 94,213 1,223,442 512,074
___________
___________ __________ ___________
The change in unrealised gains or losses (net gain) for the
period included in the Statement of Comprehensive Income relating
to those Level 3 assets held at the reporting date amount to
GBP474,928,000 (2020: GBP140,163,879).
The transfer of GBP108,657,367 relates to Wise PLC, which has
moved from being a Level 3 asset to a Level 1 asset as a result of
its listing in July 2021. The prior year movement of GBP64,306,000
relates to THG PLC, which has moved from being a Level 3 asset to a
Level 1 asset as a result of its listing in September 2020.
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
fincial 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 investment
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 10% at 30
September 2021, the impact on the net asset value would have been
GBP146,019,845 (2020: GBP60,628,682). 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 2021 the financial assets and financial
liabilities exposed to interest rate risk are as shown below:
In one year Greater than 2021
or less one year Total
GBP'000 GBP'000 GBP'000
Cash and cash equivalents (daily interest rate) 49,794
- 49,794
Loan payable (LIBOR +2.5%)
(15,000) - (15,000)
___________ ___________ ___________
Total 34,794 - 34,794
___________ ___________ ___________
As at 30 September 2020 the financial assets and financial
liabilities exposed to interest rate risk are as shown below:
In one year Greater than 2020
or less one year Total
GBP'000 GBP'000 GBP'000
Cash and cash equivalents (daily interest rate) 15,559 -
15,559
___________ ___________ ___________
Total 15,559 - 15,559
___________ ___________ ___________
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
2021 rate % GBP'000 GBP'000 GBP'000 GBP'000
Assets
Convertible loan note 8% fixed rate 5,205
- - 5,205
(notional)
Cash Daily bank rate 49,794 - - 49,794
Other receivables Interest free 427
- - 427
___________ ___________ ___________ ___________
55,426 - - 55,426
___________
___________ ___________ ___________
Over
Interest Year 1 Year 1 - 2 2 years Total
2020 rate % GBP'000 GBP'000 GBP'000 GBP'000
Assets
Convertible loan note 2% fixed rate 17,600 -
- 17,600
(notional)
Cash Daily bank rate 15,559 - - 15,559
Other receivables Interest free 267 - - 267
___________ ___________ ___________ ___________
33,426 - - 33,426
___________ ___________ ___________ ___________
Interest Over
rate % Year 1 Year 1 - 2 2 years Total
2021
Liabilities
Loan payable Libor +2.5% 15,000 - - 15,000
Other current liabilities Interest free 116,485 -
- 116,485
___________ ___________ ___________ ___________
131,485 - - 131,485
___________
___________ ___________ ___________
Interest Over
rate % Year 1 Year 1 - 2 2 years Total
2020
Liabilities
Current liabilities Interest free 80,070
- - 80,070
___________ ___________ ___________ ___________ 80,070 - - 80,070
___________
___________ ___________ ___________
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:
2021
Investments
Cash Debtors Creditors
GBP'000 GBP'000 GBP'000 GBP'000
US dollar 253,247 216 - 2
Euro 108,657 10 - -
Swedish krona 386,999 - - -
___________ ___________ ___________ ___________
Total 748,903 226 - 2
___________ ___________ ___________ ___________
2020
Investments
Cash Debtors Creditors
GBP'000 GBP'000 GBP'000 GBP'000
US dollar 193,493 47 - -
Euro 35,018 13,617 232 -
Swedish krona 93,453
- - -
___________ ___________ ___________ ___________
Total 321,964
13,664 232 -
___________ ___________ ___________ ___________
During the year pound sterling strengthened by an average of
4.43% against all of the currencies in the investment portfolio
(weighted for exposure at 30 September 2021). If the value of pound
sterling had strengthened against each of the currencies in the
portfolio by 10%, the impact on the Net Asset Value would have been
negative GBP68,082,169 (2020: negative GBP29,269,000). If the value
of pound sterling had weakened against each of the currencies in
the investment portfolio by 10%, the impact on the Net Asset Value
would have been positive GBP83,211,540 (2020: GBP35,774,000). 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. JUTM 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:
2021 2020
GBP'000 GBP'000
Convertible loan note (fair value)
5,205 35,018
Cash and cash equivalents
49,794 15,559
Other receivables
427 232
___________ ___________
55,426 50,809
___________ ___________
All the assets of the Company which are traded on a recognised
exchange are held on its behalf by the UK Branch of the Citibank
Europe plc, 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 GBP49,554,588, $290,491, CHF73 and EUR11,069 was held
with Citibank Europe plc at year end.
The credit rating of Citibank Europe plc, UK Branch 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 AIFM will seek to
ensure that the Company 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 89% (2020: 80%)
of the net assets as at 30 September 2021.
The Company's liquidity risk is overseen by JUTM in accordance
with established policies, procedures and governance structures in
place. Cash flow forecasting is monitored by JUTM 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
2021 GBP GBP GBP GBP
Assets
Convertible loan note (notional) - 5,205 - 5,205
Cash 49,794
- - 49,794
Other receivables 427 - - 427
Liabilities
Current liabilities (116,485)
- - (116,485)
Loan payable -
(15,000) - (15,000)
___________ ___________ ___________ __________
Total (66,264) (9,795) - (76,059)
___________ __________ __________ ___________
Between Between
Up to 3 and 12 1 and 5
3 months
months years Total
2020 GBP GBP GBP GBP
Assets
Convertible loan note (notional) - 17,600 - 17,600
Cash 15,559
- - 15,559
Other receivables 267 - - 267
Liabilities
Current liabilities (80,070)
- - (80,070)
___________ ___________ ___________ __________
Total (64,244) 17,600 - (46,644)
___________ ___________ ___________ ___________
Capital management objectives, policies and procedures
The structure of the Company's capital is described in note 17
and details of the Company's reserves are shown in the Statement of
Changes in Equity on page 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 AIFM and 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, the AIFM and
the Investment Adviser on the market;
-- the extent to which revenue reserves should be retained or utilised; and
-- ensuring the Company's ability to continue as a going concern.
21. Related parties
On 1 May 2021 the Company appointed Jupiter Unit Trust Managers
Limited ("JUTM") as its new Alternative Investment Fund Manager
("AIFM"), replacing Maitland Institutional Services Limited whose
appointment was terminated at the same time. JUTM subsequently sub
delegated portfolio management to Jupiter Investment Management
Limited ("JIML", formerly Merian Global Investors (UK) Limited or
"MGI") which is a member of the same group.
JIML continues to act as Investment Adviser and the change does
not impact the provision of services to the Company by the existing
management team at the Investment Adviser. The management and
performance fees previously payable to JIML are now payable to
JUTM. JUTM is also entitled to an AIFM fee.
2021 2020
GBP'000 GBP'000
Management fee charged by JUTM:
Total management fee charged 2,840 -
Management fee outstanding 2,840 -
Performance fee charged by JUTM:
Total performance fee charged 112,077 -
Performance fee outstanding 112,077 -
AIFM fee charged by JUTM:
Total AIFM fee charged 147 -
AIFM fee outstanding 147 -
Management fee charged by JIML (formerly MGI):
Total management fee charged 2,313 2,084
Management fee outstanding 493 631
Performance fee charged by JIML (formerly MGI):
Total performance fee charged - 32,608
Performance fee outstanding - 32,710
AIFM fee charged by Maitland Institutional Services Ltd
Total AIFM fee charged 248 147
AIFM fee outstanding 129 45
2021 2020
GBP'000 GBP'000
Directors' fees
Total Directors ' fees charged 354 208
Directors' fees outstanding
- -
As at 30 September 2021 the following Directors have holdings in
the Company:
Number of % Ordinary Shares in
Director Ordinary Shares
issue as at 30 September 2021
Andrew Haining 64,000 0.0117
Stephen Coe 50,909 0.0093
Simon Holden 72,500 0.0132
Anne Ewing 32,500 0.0059
Tim Cruttenden 14,968 0.0027
Margaret O'Connor - -
As at 30 September 2020 the following Directors have holdings in
the Company:
Number of % Ordinary Shares in
Director Ordinary Shares
issue as at 30 September 2020
Andrew Haining 45,000 0.0134
Stephen Coe 45,909 0.0136
Simon Holden 67,500 0.0200
Anne Ewing 7,500 0.0022
Tim Cruttenden 9,090 0.0027
Anne Ewing purchased 20,000 ordinary shares after the year
end.
The following funds, which are also managed by Jupiter, hold an
investment in the Company.
Total
Shares Shares Total Value
holdings at purchased
sold holdings of holdings
30 September during
during 30 September 30 September
2020 the period
the period 2021 2021
GBP'000
Fund name
Jupiter UK Smaller 5,520,882 2,637,000
(1,590,596) 6,567,286 17,535
Companies Focus Fund
Jupiter UK Specialist 8,112,820 -
(1,103,652) 7,009,168 18,714
Equity Fund
Jupiter UK Mid-Cap 51,451,305 26,141,070
- 77,592,375 207,172
Fund
Jupiter UK Smaller 14,601,552 3,219,000
- 17,820,552 47,581
Companies Fund
__________ __________
___________ ___________ ___________
Total 79,686,559 31,997,070 (2,694,248) 108,989,381 291,002
___________ ___________
___________ ___________ ___________
Total Shares Shares Total Value
holdings at purchased
sold holdings of holdings
30 September during
during 30 September 30 September
2019 the period
the period 2020 2020 GBP'000
Fund name
Jupiter UK Smaller 11,661,602 -
(6,140,720) 5,520,882 8,005 Companies Focus Fund
Jupiter UK Specialist 14,531,866 -
(6,419,046) 8,112,820 11,764
Equity Fund
Jupiter UK Mid-Cap 51,451,305 -
- 51,451,305 74,604
Fund
Jupiter UK Smaller 14,601,552 -
- 14,601,552 21,172
Companies Fund
__________
__________ ___________ ___________ ___________
Total 92,246,325 - (12,559,766) 79,686,559 115,545
___________ ___________
___________ ___________ ___________
22. Post balance sheet events
On 21 October 2021, the Company completed a GBP96,548 follow-on
investment in Featurespace Limited.
During November 2021, the Company also increased its investment
in Sorted Holdings Limited by GBP12,500,250. At the point in time
of this follow-on investment, the loan note associated with this
investment and the related accrued interest outstanding was
converted to share capital.
The Company has also completed a GBP14,924,897 follow-on
investment in Smart Pension Limited in December 2021.
The Company increased its holding in THG PLC in October and
November 2021, by GBP7,763,146 and GBP7,455,892 respectively into a
falling share price, which was c121p in January 2022.
On 13 December 2021 the Company received GBP744,042, which
represents the first tranche of liquidation proceeds in respect of
Growth Street Holdings Limited.
On 29 November 2021, the Company announced that it had entered
into an agreement with JUTM to settle 54% (GBP60,522,000) of the
performance fee due in respect of the year to 30 September 2021 in
ordinary shares issued by the Company. The remaining 46%
(GBP51,555,000) of the performance fee amount will be settled in
cash. The issue price of the shares will be 267p per share (being
the closing share price on 30 September 2021). The shares will be
issued after approval of the annual report with the cash settled
shortly afterwards. The accounting for the settlement of this
transaction will be reflected within the Company's financial
statements for the year ending 30 September 2022.
On 13 December 2021 the Company announced that it had raised
gross proceeds of GBP60 million pursuant to a Placing and the
PrimaryBid Offer. Subsequently, an aggregate of 25,210,084 new
Ordinary Shares have been issued and allotted at a price of 238
pence per Ordinary Share.
On 13 December 2021 the Company announced that it had raised
gross proceeds of GBP60 million pursuant to a Placing and the
PrimaryBid Offer. Subsequently, an aggregate of 25,210,084 new
Ordinary Shares have been issued and allotted at a price of 238
pence per Ordinary Share.
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
Appointed 6 September 2021
Registered office
3rd Floor
1 Le Truchot
St Peter Port
Guernsey, GY1 1WD
Alternative Investment Fund Manager
Maitland Institutional Services Ltd
Springfield Lodge
Colchester Road
Chelmsford
Essex, CM2 5PW
Notice served March 2021, inactive until end of notice period
being 2 September 2021
Jupiter Unit Trust Managers Limited (JUTM)
The Zig Zag Building
70 Victoria Street
London, SE1E 6SQW
Appointed 1 May 2021
Investment Adviser
Jupiter Investment Management Limited (JIML)
The Zig Zag Building
70 Victoria Street
London, SW1E 6SQ
Appointed 15 February 2021
Financial Adviser and Corporate Broker
Liberum Capital Limited
Ropemaker Place Level 12
25 Ropemaker Street
London, EC2Y 9LY
Numis Securities Limited
The London Stock Exchanges Building
10 Paternoster Square
London, EC4M 7LT
Appointed 17 February 2021
Administrator and Company Secretary
Maitland Administration (Guernsey) Limited
3rd Floor
1 Le Truchot
St Peter Port
Guernsey, GY1 1WD
Registrar
Computershare Investor Services (Guernsey) Limited
1st Floor, Tudor House
Le Bordage
St Peter Port
Guernsey, GY1 1DB
Depositary
Citibank Europe plc,
Citigroup Centre
Canada Square
Canary Wharf
London, E14 5LB
On 9 October 2021 the depositary changed to Citibank UK
Limited.
English Legal Adviser to the Company
Travers Smith LLP
10 Snow Hill
London, EC1A 2AL
Guernsey Legal Adviser to the Company
Ogier (Guernsey) LLP
Redwood House
St Julian's Avenue
St Peter Port, GY1 1AW
Independent Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey, GY1 1WR
Definitions
BENCHMARK PERFORMANCE
With reference to investment valuation,
application of the performance of
a benchmark or pool of comparable
companies to an unlisted company
to determine a valuation.
NAV PER SHARE
Net Asset Value expressed as an
amount per share.
NAV PER SHARE GROWTH
With reference to fund performance,
NAV at end of stated year/NAV at
beginning of stated year as a percentage.
IRR
Internal Rate of Return - with reference
to investment performance, calculated
using excel XIRR formula.
TRADING MULTIPLE
With reference to investment valuation,
enterprise value/annual revenue
of company.
DRAWDOWN
With reference to index performance,
the maximum percentage loss in value
over a given time period.
DISCOUNT/PREMIUM
The amount by which the market price
per share of an investment company
is lower or higher than its net
asset value per share. The discount
or premium is normally expressed
as a percentage of the net asset
value per share.
NET ASSET VALUE (NAV)
The Net Asset Value (NAV) is the
amount by which total assets exceed
total liabilities, i.e. the difference
between what the Company owns and
what it owes.
Alternative Investment Fund Managers Directive Disclosure
(Unaudited)
Jupiter Unit Trust Managers Ltd ("JUTM") acts as AIFM of the
Company, providing risk management services to the Company. JUTM
was appointed as AIFM on 1 May 2021 replacing Maitland
Institutional Services Limited, whose appointment was terminated at
the same time.
The AIFM is required by the Alternative Investment Fund Managers
Directive ("AIFMD") and all applicable rules and regulations
implementing the AIFM Directive in the UK:
-- to make the annual report available to investors and to
ensure that the annual report is prepared in accordance with
applicable accounting standards, the Company's articles of
incorporation and the AIFM Rules and that the annual report is
audited in accordance with International Standards on Auditing
(UK);
-- be responsible for the proper valuation of the Company's
assets, the calculation of the Company's net asset value and the
publication of the Company's net asset value; and
-- to make available to the Company's shareholders, a
description of all fees, charges and expenses and the amounts
thereof, which have been directly or indirectly borne by them.
The AIFM is required to ensure that the Annual Report contains a
report that shall include a fair and balanced review of the
activities and performance of the Company, containing also a
description of the principal risks and investment or economic
uncertainties that the Company might face.
Under the requirements of the Alternative Investment Fund
Managers Directive, JUTM (part of the Jupiter Group, which
comprises Jupiter Fund Management PLC and all of its subsidiaries
("Jupiter")) are required to comply with certain disclosure and
reporting obligations for funds that are considered to be
Alternative Investment Funds. This includes the Company.
Jupiter operates a Group-wide remuneration policy, which applies
to all employees across the Group. All employees are incentivised
in a similar way and are rewarded according to personal performance
and Jupiter's success. Details of the remuneration policy,
including the applicable financial and non-financial criteria, are
set out in the detailed remuneration policy disclosures available
via the following link:
https://www.jupiteram.com/corporate/Governance/Risk-management
Remuneration decisions are governed by Jupiter's Remuneration
Committee (the "Committee"), which meets on a regular basis to
consider remuneration matters across the Group. In order to avoid
conflicts of interest, the Committee comprises independent
non-executive directors, and no individual is involved in any
decisions regarding their own remuneration. Implementation of the
remuneration policy for the Group is subject to an annual
independent review by Jupiter's internal audit department. No
material outcomes or irregularities were identified as a result of
the most recent independent review, which took place in 2020.
JUTM's Board includes two independent non-executive directors
who are remunerated directly by JUTM. No other members of the Board
receive remuneration from JUTM and are instead remunerated directly
by their employing entity in the Jupiter Group. JUTM does not
employ any other staff. In the interests of transparency, Jupiter
has apportioned the total employee remuneration paid to all its 510
Jupiter staff (including Non-Executive Directors) in respect of
JUTM's AIFMD duties performed for the AIFs on a "number of funds'
funds" basis. It has estimated that the total amount of employee
remuneration paid in respect of duties for the Company is
GBP1,012,364 of which GBP259,938 is fixed remuneration and
GBP752,426 is variable remuneration.
The aggregate total remuneration paid by JUTM to its staff that
is attributable to duties for the Company is GBP439,301 of which
GBP133,533 is paid to Senior Management and GBP305,768 is paid to
other staff. It should be noted that the aforementioned staff also
provide services to other companies within Jupiter and its clients.
They are included because their professional activities are
considered to have a material impact on the risk profile of the
Company.
Leverage
In accordance with the AIFMD, the leverage employed by the
Company as at 30 September 2021 was 0.97 as determined using the
Gross method, and 1.00 as determined using the Commitment
method.
Average leverage on a gross exposure basis is calculated by
taking the sum of the notional values of the derivatives used by
the Company, without netting, and is expressed as a ratio of the
Company's net asset value. Average leverage on a commitment basis
is calculated by netting the sum of the notional values of the
derivatives and expressing it as a ratio of the Company's net asset
value.
Disclosed in the table below is the level of leverage employed
by the Company.
Gross Exposure Average Commitment exposure
leverage employed during Average leverage employed
Maximum the year to 30 September Maximum during the year to
limit 2021 limit 30 September 2021
2.0 0.97 2.0 0.97
-------------------------- -------- ---------------------------
The AIFM confirms there are no other material changes listed in
Articles 23 Disclosure Schedule, which are required to be disclosed
under AIFMD Article 22.
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 or visit 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.
END
FR BKABDBBKKDDB
(END) Dow Jones Newswires
January 26, 2022 02:00 ET (07:00 GMT)
Merian Chrysalis Investm... (LSE:MERI)
Graphique Historique de l'Action
De Mai 2024 à Juin 2024
Merian Chrysalis Investm... (LSE:MERI)
Graphique Historique de l'Action
De Juin 2023 à Juin 2024