TIDMCHRY
RNS Number : 3966N
Chrysalis Investments Limited
29 January 2021
Chrysalis Investments Limited
29 January 2021
Chrysalis Investments Limited (the "Company")
Annual Results
The Company today announces its results for the year ended 30
September 2020. 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 2020 30 September 2019 % increase
NAV per share 160.97p 113.33p 42.0%
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Share price 145p 124p 16.9%
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Total net assets GBP542 million GBP382 million 42.0%
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Highlights
- NAV per share of 160.97p, representing 42.0% growth year-on-year
- GBP160.4m pre-tax gain, driven by GBP196.4m of net investment gains
- The Initial Public Offering of THG was a key milestone,
demonstrating the crossover proposition in action and delivering an
approximate 120% IRR to IPO for investors
- Further diversification achieved: three new investments added
in the period, taking the portfolio to twelve holdings
- Cash position of GBP38m and strong total liquidity position of
over GBP150m, both as of 31 December 2020
- Strong performances from the majority of portfolio companies,
delivering approximately 60% blended revenue growth
year-on-year
- Exciting pipeline of new investment and follow-on opportunities
- Company well positioned to deliver further growth in the year ahead
Andrew Haining, Chair, commented:
"The year was one of strong growth for Chrysalis with
significant progress made on a number of fronts. Despite the
turbulence of COVID-19, the portfolio delivered robust NAV growth
as well as our first realisations, and I believe is well positioned
to continue to perform. High quality investment idea sourcing
remains the life blood of the Company. The growth of the Company is
enabling us to bring in more resource to support areas such as
portfolio management and the development of our ESG strategy whilst
ensuring investment sourcing and development remains the central
focus for the Investment Advisor"".
Nick Williamson and Richard Watts, co-portfolio managers,
commented:
"The portfolio performed well last year, as the impact of
COVID-19 accelerated society's shift online, a dynamic which our
investee companies are typically exposed to. Net investment gains
were widely spread, with three major assets delivering externally
validated, material valuation growth, being Klarna, TransferWise,
and culminating in the successful IPO of THG. Having begun our
expansion outside the UK with our initial investment in Klarna in
2019, we ended 2020 with our first US investment - You & Mr
Jones - which took the number of portfolio holdings to 12. Looking
ahead, we believe the portfolio in aggregate is well positioned to
continue to generate robust sales growth, based on the strong
adoption of our investee companies' services by new users over
2020. In combination with exciting possible follow-ons and new
investment opportunities, we are optimistic over prospects for the
Company in 2021".
The hard copy Report and Accounts will be posted to Shareholders
in due course.
-S-
For further information, please
contact:
Jupiter Asset Management:
Magnus Spence +44 (0) 20 3817 1325
Liberum:
Gillian Martin / Owen Matthews +44 (0) 20 3100 2000
Maitland Administration (Guernsey)
Limited:
Elaine Smeja / Aimee Gontier +44 (0) 1481 749364
Media Enquiries:
Montfort Communications +44 (0) 20 3770 7920
Charlotte McMullen / Toto Reissland-Burghart Chrysalis@montfort.london
/ Miles McKechnie
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 Investments" or the
"Company") proposition to high growth private companies remains
distinct: one of permanent crossover capital.
Our attractiveness to companies is our ability to fund them up
to and through 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, underpinned by over GBP6 billion ([1]) of
capital managed by Merian Global Investors ("MGI") focused on the
UK small and mid-cap listed market. This pool of funds is the
largest of its kind and makes MGI one of the biggest IPO investors
in the UK.
The Company was set up to seek out attractive, 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; and
-- Technology serves society best when the benefits of this
efficiency are shared with its users.
Performance Highlights
160.97p - NAV growth of 42.0%
------------------------------------------------------------------
* Asset revaluations drove material Net Asset Value
("NAV") per ordinary share growth over the prior year
(113.33p).
145p - Share price growth of 16.9%
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* The Company's Share Price performed well year-on-year
(124p) and more than doubled versus the COVID-19
induced trough in March (70p).
GBP160.4m - Pre-tax gain
------------------------------------------------------------------
* The Company achieved a significant pre-tax gain for
the year, driven by GBP196.4m net investment gains.
GBP258.4m - New investments
------------------------------------------------------------------
* Material capital investments were made in the year,
as proceeds from the prior period's fund raise were
utilised in new investments and follow- on
investments.
12 investments - Increased diversification
------------------------------------------------------------------
* Following three new investments over the year,
further portfolio diversification was achieved.
Chairman's Statement
I am delighted to report on a successful year, which has seen
significant progress in terms of NAV growth, portfolio development,
realisations, and underlying investee company performance, as well
as a change in ownership of our Investment Advisor and the
Company's name from Merian Chrysalis Investment Company Limited to
"Chrysalis Investments Limited".
The Company saw strong NAV per share growth of 42.0% during the
twelve months to 30 September 2020, driven by robust performances
from several of our major assets. Shares in the Company rose 16.9%
over the year, closing at 145p, and we have seen a strong start to
2021, with the shares trading at a good premium to the September
NAV as of late January 2021.
I have previously discussed the Company moving out of its
initial stage of development - the "Investment phase" - into the
second stage of its development - the "Growth Phase" - with an eye
on a third stage - "Realisations". At the time of the Interim
Report, I articulated a belief that Chrysalis Investments was
entering the Growth Phase, and I note the 48.2% growth in NAV over
the second half. In addition, progress has been made on the
realisation front, with a $25 million sell down in TransferWise in
July, and the IPO of The Hut Group ("THG") just before year
end.
The THG IPO warrants special mention, as it demonstrates the
concept of crossover investing that Chrysalis Investments is trying
to capture. The Investment Advisor first invested in this asset -
via some of its other funds - three years ago, a year before
Chrysalis Investments was established, and THG formed part of the
early asset purchases by the Company shortly after its own IPO. The
Company's existing shareholding in THG enabled it to commit further
capital to the IPO - effectively providing a full-capability
crossover offering - and shareholders have subsequently benefited
from share price performance in the aftermarket: the shares closed
the year up approximately 20% on the IPO price. This has resulted
in an IRR on this investment of nearly 120% for the Company, as of
the year end.
The Company added three new holdings to its portfolio in the
year, wefox in December 2019, Featurespace in May 2020, and You
& Mr Jones on the last day of the financial year, taking the
number of investee companies to 12 at year end.
These investments continue to diversify the portfolio, which I
know has been a focus for the Investment Advisor. In addition, the
Investment Advisor has made several follow-on investments into
existing positions where it sees considerable potential for future
growth.
As a result of these investments, approximately GBP258 million
has been committed over the year, building out a portfolio that I
believe offers investors the potential for strong valuation growth
over the coming years. The Investment Advisor discusses portfolio
dynamics and individual company performances in its report, but
well over half the portfolio is invested in unicorns (companies
with a valuation of more than $1 billion), demonstrating the scale
of the companies with which we are partnering.
Despite their size, and the impact of COVID-19, average revenue
growth for the portfolio was nearly 60% on a trailing 12-month
basis to the end of September 2020.
Investment Advisor
The Investment Advisor has performed strongly for the Company.
Despite the distractions of a change in its own parent company, as
described below, and the disruption caused by COVID-19, the team
has worked tirelessly to build a high-quality portfolio of assets.
I believe its expertise has given the Company a great opportunity
to build on its early successes and become a major global player in
late-stage, private growth investing.
On 1 July 2020, the acquisition of MGI by Jupiter Asset
Management ("Jupiter", "JAM") was completed which triggered a
change of control provision in the Company's investment advisory
agreement. We held discussions with the senior management of
Jupiter on the implications of the change in control. During these
discussions, the Chrysalis Board was able to gain the necessary
comfort on how the investment advisory contract would be managed
under Jupiter's ownership of MGI. We are pleased that all the
Company's investment team, led by Richard Watts and Nick
Williamson, has moved to Jupiter and will continue to provide the
same services to the Company going forward. The terms of the
investment advisory agreement have not altered as a result of the
change of control and accordingly, and as a result of the strong
performance of the Company, a performance fee of GBP32.6 million is
due and payable to the Investment Advisor.
Environmental, Social and Governance ("ESG")
As Chrysalis Investments has grown, so our approach to ESG has
been evolving and I am pleased to say that work on developing our
ESG strategy has been progressing well.
Following the acquisition of MGI by Jupiter, we are
incorporating Jupiter's ESG policies into our own procedures and
will report more fully on our ESG review and monitoring during
2021.
The Board believes that the adherence to principles of
appropriate ESG policies exists at both the Company and Investment
Advisor level. We are pleased that Jupiter is a signatory to the UN
PRI. Additionally, the Investment Advisor has formalised its ESG
framework covering origination and monitoring of, and engagement
with, investments.
The Board is determined to set itself the challenge of ensuring
that, both as a Company, and as a portfolio of investments, the
principles of socially responsible investing form a key part of our
strategy for investing in, what we hope will be, leading companies
of the future.
Outlook
The Company's successful fundraising in October, together with
the position in THG, provides significant liquidity. The Company is
also looking to put in place a revolving credit facility in order
to provide funding flexibility around further investments; any
leverage taken on is not expected to be structural. As a result,
the Company is in a strong position from which to continue to
pursue its pipeline of new investments and follow-on
opportunities.
Based on the experience of the last two years since Chrysalis
Investments' IPO, which has seen substantial progress in terms of
raising capital and deploying it into highly attractive assets, I
believe the prospects for your Company are very strong.
The portfolio is well positioned to continue to benefit from the
structural shift in activity from the "offline" world to the
"online", and this trend was significantly accelerated over the
period in many cases due to the impact of COVID-19, which has
typically led to material growth in new user adoption by many of
our portfolio companies.
The Board actively supports the Investment Advisor in its desire
to continue to grow the size of the Company. To date, the strength
of the Investment Advisor's crossover proposition and strong
contacts has enabled access to several investments in the "global
leader" category - typically the reserve of the largest global
investors. It is clear to both the Board and the Investment Advisor
that combining greater scale with Chrysalis Investments' offering
should cement its access to the best deal flow, by allowing the
Company to write more substantial investment tickets - approaching
those of the large global funds.
The Board and the Investment Advisor are focused on achieving
this greater scale with an eye on both the speed of scaling, and on
its efficiency for shareholders. Fund raises have allowed the
Company to scale at speed. Converting revaluation investment gains
- reflecting roughly 35% of total asset growth to date - into
realisations is the most capital efficient way for growing
shareholder value. However, this route can take time to provide
sufficient capital to recycle into new investments which the
Investment Advisor is sourcing.
I am pleased to say that both routes for asset growth remain
possible for the Company, with the choice of path likely to be
dependent on the future size and pace of investment opportunities
in front of the Company at any point in time. A revolving credit
facility will assist in managing this growth.
With an established proposition and strong portfolio, I am
optimistic of further progress in the year ahead. The established
base which the Investment Advisor has been able to develop for the
Company has been derived from the on-going support of investors,
for which the Board is most grateful.
Portfolio Statement
As at 30 September 2020
Company Location Date of Cost Value % of
acquisition (GBP'000) (GBP'000) net assets
THG Holdings PLC UK 16/09/2020 44,089 94,213 17.4
Klarna Holding AB Sweden 09/08/2019 64,381 93,453 17.2
TransferWise Limited USA 07/11/2018 43,992 79,658 14.7
Starling Bank Limited UK 10/04/2019 53,248 69,641 12.8
Graphcore Limited USA 17/12/2018 50,395 67,394 12.4
Embark Group Limited UK 14/08/2019 27,100 60,069 11.1
You & Mr Jones LLC USA 30/09/2020 46,440 46,440 8.6
Featurespace UK 13/05/2020 20,000 36,391 6.7
FinanceApp (wefox) Loan Note Germany 18/12/2019 16,556 35,018 6.5
Sorted Holdings Limited UK 15/08/2019 10,000 11,690 2.2
Secret Escapes Limited UK 07/11/2018 15,667 11,064 2.0
Growth Street Holdings UK 22/01/2019 12,612 1,256 0.2
Total investments 404,480 606,287 111.8
Cash and cash equivalents 15,559 2.9
Other net current liabilities (79,803) (14.7)
-----------
Total net assets 542,043 100
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Andrew Haining
Chairman
29 January 2021
Investment Advisor's Report
Overview
The last twelve months have proved to be successful for the
Company, although COVID-19 introduced significant volatility into
equity markets in the middle of the financial year.
As we have previously described, it can take time for the
underlying performance of portfolio companies to be fully reflected
in their valuations. This meant NAV growth over the first quarter
was slight, with the second quarter seeing a modest decrease due to
the decline in valuations of comparable listed peers resulting from
the impact of COVID-19. This decline was partly offset by our
insertion, where possible, of downside protection mechanisms, such
as convertible loan notes and preference structures. This meant NAV
growth over the first half of the year was slightly negative.
However, performance was much improved in the second half of the
year, driven primarily by:
-- A significant rebound in the valuations of listed peers, as
stock markets began to identify those companies - typically
tech-enabled, like much of our portfolio - that could adapt more
readily to a post-COVID-19 world; and
-- Strong underlying trading from several of our key assets.
In addition, valuation rounds, with significant participation
from new investors, occurred at substantially higher levels than
the prevailing carrying valuations by the Company for Klarna,
TransferWise and THG, the latter via IPO.
No capital was raised during the Company's financial year.
Instead, the Company deployed the proceeds of its significant
fundraising in September 2019, which had raised GBP175 million.
Post-year end, a further GBP95 million was raised, taking total
capital raised by Chrysalis Investments to date to GBP470
million.
Of the GBP258 million invested during the year, approximately
GBP179 million of this was via follow-ons, which we discuss in more
detail later, with approximately GBP79 million via opening new
positions, noting that the You & Mr Jones deal settled post
year end. Against this, approximately GBP20 million was sold from
TransferWise - to control position size after further revaluations
during the year.
Valuation gains, both realised and unrealised, and foreign
currency movements added GBP189 million to total investments.
As of 30 September Opening Additions Sales Net valuation Closing %
2020 balance (GBP'000) (at cost gains (GBP'000) balance
(GBP'000) GBP'000) (GBP'000)
Company
THG Holdings PLC 10,478 34,542 - 49,193 94,213 15.5%
Klarna Holding AB 39,574 23,145 - 30,734 93,453 15.4%
TransferWise Limited 27,934 38,472 (11,565) 24,817 79,658 13.1%
Starling Bank Limited 27,124 33,718 - 8,799 69,641 11.5%
Graphcore Limited 20,190 30,666 - 16,538 67,394 11.1%
Embark Group Limited 14,900 12,200 - 32,969 60,069 9.9%
You & Mr Jones LLC - 46,440 - - 46,440 7.7%
Featurespace - 20,000 - 16,391 36,391 6.0%
wefox - 16,556 - 18,462 35,018 5.8%
Sorted Holdings Limited 10,000 - - 1,690 11,690 1.9%
Secret Escapes Limited 13,796 2,602 - (5,334) 11,064 1.8%
Growth Street Holdings 6,044 112 - (4,900) 1,256 0.2%
Total investments 170,040 258,453 (11,565) 189,359 606,287 100%
=========== =========== ========== ================= =========== ======
Market
The primary focus of global stock markets during the year was
the impact of COVID-19 on society.
The NASDAQ performed strongly from September 2019 until the
pandemic's effects began to be felt in February and into March,
when it experienced a drawdown of approximately 30%. From that
trough it rallied approximately 63%, to end the year to September
2020 up approximately 40%.
In the UK, the FTSE 250 suffered a drawdown of approximately 42%
during the pandemic and rallied only about 32%, to end the year to
September 2020 still down approximately 17%.
We believe the much stronger performance of the NASDAQ towards
the end of the financial year illustrates the shift that occurred
in investors' minds over this period. The initial COVID-19 response
saw indiscriminate selling of stocks, with little differentiation
in terms of likely impact on investment cases from the pandemic. As
investors began to analyse its likely effects, it became clear that
COVID-19 was likely to accelerate the pre-existing structural shift
of consumers and businesses towards online and digitally enabled
models.
This dynamic underpinned investor confidence in tech names, and
saw the NASDAQ recover strongly. As a result, the FTSE 250, with
its much lower exposure to structural growth names, underperformed
relatively.
This dynamic played out to a lesser degree in the private
markets too, where there was initially a period of hiatus in terms
of activity, as many investors drew back from fresh investment.
However, given the regular flow of information from private
companies, it became clear to most private market participants that
generally most tech-enabled names were coping with the seismic
structural shifts in demand far better than slower-to-react, more
traditional business models.
As a result, activity in private markets picked up again over
the summer, with Klarna's $650 million primary raise at a valuation
more than 80% higher than a year before a prime example.
Over the year, we have continued to see strong deal flow, driven
by the attractiveness of our crossover proposition.
"Our engagement with Merian Global Investors dates back to 2017,
when we recognised the potential of its crossover proposition.
During that time, we have developed a great relationship with the
team and we were truly delighted when they became one of our
cornerstone investors at IPO and helped ensure a smooth transition
onto the public markets." Matt Moulding - CEO and Chairman THG
Opportunities are originated both organically - either via
companies contacting us directly, or vice versa - and via our
introducer channel. The latter consists of banks, consultants and
advisors who work with the underlying companies. As our activities
in the private markets have grown, and our crossover credentials
become better understood, so too have our origination channels and
we now have an extensive network of contacts.
Over the course of the year, we had approximately 90 active
leads shown to us, taking our total leads since inception to about
180. From this, we have constructed a portfolio of 12, as of year
end. This low conversion ratio reflects an active choice to only
invest in the best ideas that we can find. Given our increasing
scale, we have great focus on identifying global leaders, or
companies that can potentially attain that title. In our
experience, market leaders typically have superior unit economics
and command premium valuations versus peers. We believe uncovering
these types of investments gives us the best opportunity of
delivering optimal returns for shareholders.
Portfolio
Considerable progress was made over the course of the year in
terms of the structure of the portfolio.
In December 2019, wefox became our tenth asset, followed by
Featurespace in May 2020. The latter was completed during the early
stages of the pandemic when most market participants decided to
withdraw from actively deploying funds. At the time, Chrysalis
Investments had available excess capital, post a conservative
assessment of any likely funding requirements that might reasonably
arise from the uncertainty thrown up by the virus. As a result, we
believed it was a sensible time to be investing in an asset and
sector that benefitted from structural tailwinds and had high
levels of recurring revenue and enterprise level customers.
At year end, we made our twelfth investment into You & Mr
Jones, a digital marketing company.
This activity has increased the diversification of the
portfolio, an aim that we have had since IPO, when we set a
near-term target of a 7-15 stock portfolio. Given the strength of
the portfolio we believe we have constructed, there is a balance
between increasing diversification and not diluting the potency of
the investment theses. We have chosen to focus on the latter, as we
believe this is the route to superior returns for shareholders.
As a result of this decision, we have deployed significant
amounts of capital into follow-on opportunities over the year. We
see several benefits to follow-ons, including:
-- An ability to gain experience of how an investment is
performing, before increasing the position size; and
-- Using follow-ons to grow our investments and thus contribute
towards their success, which in turn drives NAV growth for
shareholders. An example would be Embark, where our follow-on
enabled it to buy the Zurich platform and considerably expand its
assets under administration ("AuA").
"2020 was a transformative year for Embark, driven by the high
impact follow-on capital investment from Chrysalis Investments,
which allowed us to continue to pursue our M&A goals. Since
investing in 2019, Chrysalis's capital has contributed to Embark
more than doubling AuA and the team has proved an excellent
sounding board for our growth strategy." Phil Smith - CEO Embark
Group
In many cases our ability to follow-on and support investee
companies with their growth plans all the way through to IPO is a
key attraction for entrepreneurs.
Portfolio dynamics
Following the raise of GBP175 million in September 2019, the
year to September 2020 saw no further money raised from investors
and instead focused on investing. Deployment of this capital has
substantially altered the balance of the portfolio, as cash has
fallen from over 50% of investible assets in September 2019 to
about 9% at year end.
At the start of the year, we had four major positions: Klarna,
TransferWise, Starling Bank and Graphcore. Over the course of the
year, THG has joined this group, due to follow-on investment and
strong valuation performance. As of year end, these top five
positions accounted for approximately 61% of gross investible
assets(6) .
The types of business we invest in are typically late-stage and
well-established.
Once the portfolio is split into groupings by the investee
companies' underlying valuations, nearly 70% of the portfolio is
invested in unicorns (expressed here as valuations of more than $1
billion). Klarna, recently valued at $10.65 billion post its $650
million primary raise, would currently qualify for inclusion in the
FTSE 100 if it were listed in the UK.
This can also be demonstrated in the maturity of portfolio
companies, both in terms of funding round and in terms of age since
formation.
The portfolio is roughly equally split between EBITDA-profitable
companies and those that are currently loss-making. While typically
it is the younger businesses that are loss-making, some of the more
established companies, such as Klarna with its proven unit
economics, are choosing to delay delivering profitability so as to
invest aggressively to continue their rapid expansion.
As we have discussed before, this is entirely economically
rational to us, and one of the reasons that these late-stage
private companies look to raise further funding.
Investment like this supports on-going rapid sales growth in the
portfolio. Over the year to September 2020, year-on-year sales
growth was 64% on an asset-weighted basis. This is substantially
faster than that available in the UK market, where the comparable
figure for the UK All Share index was -13.7%, having seen a
significant impact from COVID-19.
In a nutshell, this is what Chrysalis Investments was designed
to do for investors: give them access to previously unobtainable
investments that are growing substantially faster than those in
public markets.
Working with our investee companies
Chrysalis Investments typically operates as a minority investor
in a world where most people's idea of "private equity" is of a
control or majority investor.
There are advantages and disadvantages of being a minority
investor, but importantly for us, it is a situation that we are
entirely comfortable with. The Investment Advisor has a 20-year
track record of activity in public markets, which by its nature, is
a minority investment activity. We do, however, have to ensure that
appropriate levels of governance are in place, that the board
composition is correct and that we are working with a management
team that we explicitly trust and have a strong relationship
with.
We actively engage with management teams and other investors in
helping to grow our investments. The degree of influence and
engagement we have depends on the type of company we have invested
in and our shareholding. For example, we are unlikely to be able to
help the team at Graphcore with IPU chip design, but on the other
hand, we do have strong views on banking - an area in which we have
invested heavily in public markets over the years - so we can
assist Starling Bank, for instance.
"Chrysalis Investments has been more than just a source of funds
to Starling. Richard and Nick recognised the potential of Starling
from the outset and have been passionate about helping us to
deliver the business we have today. Their contributions have been
crucial in helping to shape our growth strategy, particularly their
recent recognition that accelerated investment during the pandemic
was the right response to allow us to extend critical support to as
many new customers as possible. They are collaborative and
insightful partners and an integral part of the Starling story. It
is a pleasure to work with them." Anne Boden - CEO Starling
Bank
In addition, we have been working hard to try and find
synergistic opportunities for growth between our portfolio
companies, and we have been active introducers.
Company commentary
THG
E-commerce has been a feature of modern life for many years now,
albeit it is still capturing a growing proportion of customers'
wallets versus the offline equivalent. However, the complexities of
integrating a full e-commerce proposition can be daunting, even for
multinationals. Considerations include warehouse management; parcel
sortation optimisation; global logistics capability; website
creation, translation and near-customer hosting; returns
capability; and data capture.
The Hut Group is an e-commerce business that operates a highly
scalable, end-to-end proprietary technology platform (Ingenuity)
powering the sale of both its own brands and third-party brands.
Accessing Ingenuity provides a cost-effective solution for
companies to begin distributing their products online. The firm has
invested significantly in its infrastructure, technology platform
and brands and is one of the world's largest online beauty and
well-being businesses.
In March 2020, THG reported a surge in demand for its health,
beauty, and nutrition products across its world-leading brands,
including MyProtein.com and Lookfantastic.com. This led the group
to bring forward its recruitment plans from later this year, with
the creation of 500 permanent positions across manufacturing,
fulfilment, and logistics. Most roles (c350) will be created at
THG's 1m sq. ft. manufacturing and fulfilment centre in Warrington,
Cheshire.
Ingenuity is also gaining significant traction. In April 2020,
the company announced the signing of a GBP100 million, 10-year
contract with Nestle Health Science under which THG will deliver a
fully serviced, global e-commerce platform, to internationally
scale several of Nestle's brands. THG has now partnered with
several international retailers, including Procter & Gamble,
Walgreens Boots Alliance, Johnson & Johnson, Groupe L'Occitane
and Nintendo, and this enables the group to dispatch over 68m items
to customers globally.
The most notable achievement during the year was THG's
successful IPO. THG listed on the main market of the London Stock
Exchange in September, raising gross new money of GBP920 million
and achieving a market capitalisation of approximately GBP5.4
billion. THG's flotation is a significant and exciting moment in
the development of the Company. It represents the portfolio's first
IPO and clearly demonstrates the strength of our crossover
proposition, with Merian Global Investors named as one of only five
global cornerstone investors.
The financial performance of the business has been impressive
over 2020. Group revenue increased to GBP559 million in 4Q 2020,
which represented a +51% rate of growth year-on-year and
acceleration versus the reported first half 2020 revenue growth
rate of +36%. Direct-to-Consumer (D2C) online revenues increased to
GBP469 million (+54% year-on-year) and high margin Ingenuity
revenues grew +144% year-on-year, albeit from a small base.
Following the IPO, the company had a positive net cash position of
approximately GBP420 million with over GBP900 million of
liquidity.
Date of Initial Investment: 17th December 2018
Total Investment: GBP44.1m
Carrying Value: GBP94.2m
Last Reported Financials: Y/E December 2019: GBP1.1bn Revenue
(+24% YoY); GBP111m EBITDA
Klarna
Online shopping is not always frictionless for consumers.
Examples range from having to fill in multiple personal detail
fields, particularly when using a new website, and also around
returns. Having paid immediately, consumers can often wait several
weeks for returned goods to be checked and the cost credited back
to their account, leaving them out of pocket. This friction results
in abandoned baskets and slower purchase velocity, which lowers
retailers' revenues.
Founded in Stockholm in 2005, Klarna is a leading global
payments provider that is revolutionising the online payment
experience by removing friction from customers' website journeys
and allowing them to control how they pay for goods. To that end,
Klarna offers direct payment, payment after delivery options and
instalment plans in a smooth one-click purchase experience that
allows users across Europe and North America to phase their
spending. Its technology also allows returned goods to be credited
back to customers' accounts as soon as it is accepted by the
logistics company.
The company announced in March 2020 that Ant Financial Services
Group, owner and operator of the world's leading payments and
lifestyle platform Alipay, has taken a minority stake. This
investment supports the further developments of its strategic
cooperation, bringing more of Klarna's innovative solutions to
consumers and merchants within the broader Alibaba ecosystem. The
Alipay investment highlights the company's desire to enter new
territories, and immediate traction was made in Australia, Belgium,
Canada and Spain during the year.
Klarna has typically generated a 30%+ rate of sales growth per
annum in recent years but this accelerated over the nine months to
September 2020 with gross merchandise volume and total net
operating income (sales) increasing by +43% and +37% respectively.
More than 57,000 retailers were added to the already strong global
retailer base of more than 200,000 and 21 million consumers were
acquired. Achieving market leadership in the US and UK is a key
part of our investment thesis and we were particularly encouraged
by growth in those territories as evidenced by customer number
growth of 230% over the year in the US. In September, Klarna had
1.7 million monthly active users in the US and was the most
downloaded shopping app in the month, ahead of giants such as
Amazon and Walmart.
The business is currently loss making but has demonstrated in
the past that it can operate a profitable model through the cycle.
The company has currently chosen to run at a loss in order to
maximise customer and merchant growth in new territories overseas;
this ultimately leads to higher customer acquisition and impairment
charges in the near term but increases long-term potential. We are
confident this is the correct decision and strategy for the
business, given the value that could be created if market
leadership is established in geographies such as the US, Canada and
Asia.
Klarna continues to innovate and develop new payment solutions
and the Klarna card, app and in-store solution in combination with
the core offering enables consumers to shop and pay with Klarna
where, when and how they prefer; in many markets the consumer can
now use the app at any online retailer. The Klarna app powers the
whole shopping and post purchase experience with features such as
overview of all purchases with pictures, price drop notifications,
delivery tracking, connecting to other bank accounts, upcoming
payment alerts and 24/7 chat functions recently launched. New
features get instant traction with consumers, create a smoother end
to end shopping experience, improve brand loyalty and drive repeat
usage.
Klarna completed a $650 million primary funding round over the
summer, with significant interest from several new investors. The
round valued Klarna at $10 billion pre new money, which represents
a material increase compared with the valuation of $5.5 billion
achieved in 2019 when we first invested. Given the very strong
on-going performance of the business, we participated in this
funding round, and the proceeds will enable the company to continue
investing in product development and accelerate growth
internationally.
Klarna is a major position for the Company. As we look forward,
we see considerable potential for its recent strong growth to
continue, and believe its current valuation looks favourable versus
a range of listed peers.
Date of Initial Investment: 5th August 2019
Total Investment: GBP64.4m
Carrying Value: GBP93.5m
Last Reported Financials: Y/E December 2019: SEK7bn Net Revenue
(+31% YoY); (SEK1bn) Net Income
TransferWise Limited
Every year, more than $10 trillion is transferred
internationally. However, traditional bank networks are local,
making international money transfers slow, expensive and
inconvenient. The cost of transfers to both individuals and
businesses continues to be far too high across the industry and
transactions are typically advertised with zero or low fees despite
hidden charges in the exchange rate mark-up. As of March 2020, the
World Bank estimated the global average total cost of remittance to
be 6.8% of the transfer value.
TransferWise is a global technology company that was founded
with the aim of reducing the fees associated with sending money
across borders. With a simple money transfer platform and
borderless accounts, TransferWise makes it quick and easy for
individuals who travel, live and work internationally to manage
their money. Businesses can also use TransferWise to pay suppliers
or employees overseas, request payments from customers and transfer
funds between their own accounts in different countries.
TransferWise's pricing is always transparent, with the full cost
of the transaction shown upfront. On average it costs 0.68% of the
transfer value to move money across borders and for some
established currency routes like GBP-EUR, the fee is less than
0.4%.
In the year ended March 2020, GBP67 billion in customer payments
were processed by TransferWise - an uplift of c86% from the
previous year - and it was the fourth consecutive year that the
company has been profitable whilst continuing to scale rapidly.
Revenues during the year increased approximately 70% to GBP302.6
million and EBITDA increased from approximately GBP18 million to
approximately GBP42 million with the implied EBITDA margin
increasing by about 3.7 percentage points to 14.0%. Over 100,000
new business customers were acquired in the financial year and
total customer numbers increased from five million to seven
million.
In the year, TransferWise continued to expand globally and
services were launched in the UAE, Malaysia and Japan. TransferWise
is now live in over 85 countries and customers can hold money in
more than 50 different currencies, with local account numbers in
five currencies - for the UK, Eurozone, Australia, New Zealand and
US. Customers are increasingly using their accounts for a growing
range of needs, rather than simply sending money and receiving
funds from abroad.
New products include direct debits, Send Money to Friends, and
Apple Pay. TransferWise for Business continues to gain traction
with SMEs and larger companies. Several API partnerships were
signed during the year which expands the use of the company's
payment rails to solve a range of problems.
Partnerships with accounting software provider Xero and payment
collection company GoCardless have been formed which will enable
business customers to pay suppliers and other providers via the
platform and collect overseas payments at the real exchange
rate.
There has also been increased demand for TransferWise for Banks.
In Q1 2020, TransferWise announced a partnership with ActivoBank,
its first Portuguese banking customer. TransferWise now works with
partners across three continents, including Monzo in the UK, Bunq
in the Netherlands, N26 in Germany, LVH in Estonia, Novo and
Stanford Federal Credit Union in the US and EQ in Canada.
Partnerships with BPCE, France's second largest bank, and Up! in
Australia have also been announced.
During the year, TransferWise did not raise any primary capital
but it did complete a $319 million secondary share sale in July
that valued the business at $5 billion, which resulted in a
material mark-up to our carrying value. We participated in this
round and sold approximately GBP20 million of stock, which
represented our first realisation, and was undertaken for position
size control purposes.
TransferWise has been a consistent performer for the Company
over our period of ownership. Despite its strong valuation
progression over recent years, we continue to be optimistic
regarding the outlook for this position. With a small share in a
massive market and a compelling offering, the outlook for ongoing
growth looks favourable, as does its valuation against listed
peers.
Date of Initial Investment: 7th November 2018
Total Investment: GBP44.0m
Carrying Value: GBP 79.7m
Last Reported Financials: Y/E March 2020: GBP303m Revenue (+70%
YoY); GBP42m EBITDA
Starling Bank
Banking has traditionally been dominated by the branch model,
with technology added on an ad- hoc basis. Branches add cost,
particularly as consumers' demands shift more towards online
access, which is an issue for banks facing ever growing regulatory
and shareholder pressure. In addition, the application of
technology piecemeal typically results in lower functionality, a
poor customer experience, and an inability to scale the bank's
architecture.
Founded by banking expert Anne Boden in 2014, Starling has built
a cloud-native, mobile first, scalable platform that delivers a
wide range of financial services to customers. Core products
include bank accounts for both retail and SME customers, which
allow users to bank via a mobile app, offering digital sign-up;
instant notification of transactions; insights into spending
habits; and 24/7 support. Starling has also been successful in
providing its technology to other financial services businesses and
users via its "Banking-as-a-Service" offering, which allows
customers to access its state-of-the-art payments systems and
infrastructure.
2020 has been a transformational year for the company with
COVID-19 driving an accelerating take up by new customers, as many
branch-based models stumbled. Starling ended its financial year to
November 2019 with 926,000 retail accounts, 82,000 business
accounts and just over GBP1 billion held on deposit.
As at July 2020, Starling had 1.25 million retail accounts,
200,000 business accounts and more than GBP3 billion on deposit.
Starling is now the fastest growing SME bank in Europe and holds a
more than 3% share of the UK's SME banking market. The employee
base has increased by 352 over this year, with a net increase of
147 people since the start of lockdown, bringing the total number
of employees to 958.
Starling is beginning to demonstrate that it has built a
sustainable, and likely highly profitable, business model.
Annualised revenue run rate has increased to GBP80 million(11) and
the business remains on track to hit break even by the end of the
year; few Neobanks have been able to achieve this milestone. The
biggest development over the course of the year has been the
extraordinary growth of the loan book from less than GBP100 million
to more than GBP1 billion. Starling participated in both the
Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce
Back Loan Scheme (BBLS) through the pandemic and supported over
25,000 SMEs.
During the year Starling continued to innovate and launch new
functionality, such as:
-- A business toolkit aimed at Small and Medium Enterprises
("SMEs") was released that assists with invoice and cash flow
tracking and helps submit VAT returns to Her Majesty's Revenue and
Customs ("HMRC");
-- A new 'Connected Card'- a second, secure debit card attached
to the customer's account for use by trusted friends, family or
carers;
-- Cheque imaging, so that customers can pay in cheques from home; and
-- An online eligibility checker so businesses and individuals
can find out what support and services they are entitled to.
High levels of customer service and account functionality led to
Starling winning Best British Bank for a third year in a row at the
British Bank Awards.
The company raised a further GBP100 million of primary capital
from existing investors, including the Company, in February and May
2020 to continue its rapid growth, with European expansion expected
to commence in 2021.
Starling's performance in 2020 to date has been phenomenal.
Growth has materially exceeded our expectations and we believe
there is an excellent opportunity for the bank to substantially
disrupt the established banking market in the UK and beyond.
Date of Initial Investment: 12th February 2019
Total Investment: GBP53.2m
Carrying Value: GBP69.6m
Last Reported Financials: Y/E November 2019: GBP24m Total Income
(+69% YoY); (GBP49m) Loss after Taxation
Graphcore
The application of machine learning ('"ML") and artificial
intelligence ("AI") continues to gain traction across society, from
seemingly mundane tasks like directing call centre chat bots, to
understanding voice commands and autonomous driving. Work we
commissioned about a year ago predicted the ML/AI chip market would
grow to nearly $9 billion by 2023, from approximately $2.6 billion
in 2019, illustrating the market's substantial growth
potential.
ML/AI programmes have traditionally been run on graphics
processing units ("GPUs") being the best architecture available to
accelerate the huge workloads these models require. However, GPUs
require algorithms to be optimised to suit their modus operandi to
gain maximum efficiency.
This means data scientists can be restricted in their model
choice: the model is chosen to fit the hardware, rather than the
problem it is trying to address.
Graphcore is a leading machine intelligence semiconductor
business, which has developed the Intelligence Processing Unit
("IPU"). The IPU is completely different from today's Central
Processing Unit ("CPU") and GPU processors. It is a highly
flexible, easy to use, parallel processor that has been designed
from the ground up to deliver state of the art performance on
today's machine intelligence models for both training and
inference. The IPU has been designed to allow new and emerging
machine intelligence workloads to be realised. As well as designing
one of the world's most sophisticated silicon processor, Graphcore
has also built the world's very first graph tool chain specifically
designed for machine intelligence - the Poplar software stack.
Graphcore achieved a significant milestone during the year when
it introduced its second-generation IPU platform ("MK2") in July
2020. This has greater processing power, more memory and built-in
scalability for handling extremely large MI workloads. The initial
performance benchmarks that Graphcore has publicly released are
impressive and demonstrate state of the art performance and
accuracy across several complex AI models such as BERT and
ResNeXt.
Graphcore secured an additional $222 million of primary capital
in December 2020 as part of a Series E funding round. This funding
round was completed at a pre-money valuation of $2.5 billion and
saw participation from new and existing investors. The business is
now extremely well capitalised, with cash of $440 million, which
will support its continuing, major R&D investment and global
expansion.
Customer engagement is growing rapidly across a range of
corporations, organisations and research institutions, with users
of Graphcore systems including Microsoft, Oxford Nanopore, Citadel
and Qwant. The past twelve months have been transformational for
Graphcore as the business has transitioned from development to
prepare for volume production. Demand for IPU products is
increasing among new and existing customers, and we believe the
outlook for the business is extremely positive
Date of Initial Investment: 17th December 2018
Total Investment: GBP50.4m
Carrying Value: GBP67.4m
Last Reported Financials: December 2019: $10m Revenue (+767% YoY); ($82m) Loss after Taxation
Embark Group
In recent years, the Wrap Platform Market has continued to
invest in Technology while the traditional Self-Invested Personal
Pension ("SIPP") and Small Self Administrated Schemes ("SSAS")
players have relied on product knowledge. Embark was formed to
combine the technology strengths of the Wrap Platforms with the
extensive pensions expertise of the typical SIPP and SSAS providers
in order to deliver specialist and tech-enabled solutions to both
retail and corporate customers.
Embark is a full-scale retirement solutions provider, with
platform, investment wrap, e-SIPP, SIPP, SSAS, fund research and
employee benefits consulting capabilities. The Group trades under
the subsidiary brands Embark, Vested, Rowanmoor, EBS, The Adviser
Centre, DISCUS and Hornbuckle. It also operates a wide portfolio of
white-label technology solutions for businesses such as RBS Coutts,
Standard Life, Nutmeg, BestInvest, Charles Stanley, Moneyfarm and
Wealthsimple.
Embark is one of the fastest growing digital retirement and
savings businesses in the UK market. The Group is experiencing
strong demand for its digital services and the capital it has
raised recently will enable it to take full advantage of its
disruptive position in the UK savings sector, through continued
technological innovation and selective expansion opportunities.
Embark completed its acquisition of Zurich's Investment and
Retail Platform during the year. This transferred circa GBP11
billion of assets under administration, and circa GBP0.6 billion of
multi-asset assets under management to Embark, along with an
advised client book of more than 130,000, largely dominated by SIPP
clients.
This takes Embark's AuA to over GBP34 billion, serving more than
365,000 consumer clients across all its channels and brands, up
from approximately GBP16 billion at the time of the Company's
initial investment. These transactions position Embark as the
seventh largest player in the advised platform market in the
UK.
Embark has been recognised in the WealthTech 100 as one of the
most innovative Wealth Tech companies in 2019 and 2020.
The company raised primary capital during the year (November
2019) to fund the acquisition of the Zurich's Investment and Retail
Platform, with Chrysalis Investments contributing GBP12.2 million
of this funding.
Date of Initial Investment: 3rd July 2019
Total Investment: GBP27.1m
Carrying Value: GBP60.1m
Last Reported Financials: Y/E December 2019: GBP34m Revenue (+5%
YoY); GBP1m Profit After Tax
You & Mr Jones
Along with other industries, the world of marketing is adjusting
to the impact of technology on its consumers. In particular, the
rise of the mobile phone has meant digital marketing now accounts
for nearly half of the $640 billion total annual media spend.
While marketers have perfected the television marketing
playbook, the ones for digital marketing are immature. Consumers
create their own content and discuss brands online, requiring
companies to have a much more responsive marketing product. In
addition to this speed, they need to create, curate and disseminate
product across multiple platforms and deal with the resulting huge
quantities of data. All of this causes efficiency problems.
You & Mr Jones is at the forefront of digital marketing or
"Brandtech". Its offering is based around the OMG technology
platform, which allows marketers to plan, create and distribute
digital campaigns seamlessly. This operating system offers a
significant productivity boost to clients and has enabled some to
make material cost savings.
The company is headquartered in New York (US), employs
approximately 3,000 people across 40 countries and has made seven
acquisitions and 20 strategic investments to date to build out its
product offering. Clients include Unilever, Adidas, Microsoft,
Danone, Diageo, Reebok, Reckitt Benckiser, PayPal and Google.
Despite the pandemic, 3Q 2020 was another strong quarter for the
group with net revenue organic growth for the nine months to
September 2020 of 27%.
Date of Initial Investment: 6th October 2020
Total Investment: GBP46.4m
Carrying Value: GBP46.4m
Last Reported Financials: Not publicly disclosed
Featurespace
Fraud is an occupational hazard for banks and other financial
institutions. In areas such as card fraud, models are deployed that
look for suspicious activity and block it before illegal
transactions can occur.
Fraudulent behaviour can change very quickly, particularly in an
online world, and rules-based models are non-adaptive. This means
that the rulebook goes out of date rapidly, resulting in rising
fraud unless more rules are written. If the rules are too tight,
then the financial institution receives too many false positives,
resulting in lost revenue through lower lending or transaction
volumes. Typically, this also increases the number of in-bound
calls to customer service agents in the form of complaints,
requiring higher levels of staffing. If too many rules are written,
the rulebook becomes unwieldy and time consuming to manage.
Featurespace has invented Adaptive Behavioural Analytics and
created the ARIC Risk Hub, which utilises real-time machine
learning software to risk score events in more than 180 countries
to prevent fraud and financial crime. By analysing anomalies in
individuals' transactions, ARIC Risk Hub can automatically identify
emerging fraud attacks and suspicious activity in real-time,
without requiring constant retraining.
Over 30 major global financial institutions use ARIC Risk Hub to
protect their businesses and customers, including four of the five
largest banks in the UK. Included in the 30 are white labelled
payment sector partnerships where Featurespace's technology is
distributed to an extensive additional customer base.
Given its partial exposure to transactional revenues, the
initial impact of lockdown did see a reduction in revenue versus
forecast; as our investment occurred in May 2020, we had already
factored in this likely effect. As economies have normalised, so
this element of revenues has begun to recover and is an increasing
contributor to Featurespace's recurring revenues.
Pleasingly, Featurespace's risk models adapted automatically to
the pandemic related shift in spending patterns - most notably a
move from "card present" transactions to "card not present" - as
publicly endorsed by their largest customer. We believe COVID-19
has clearly demonstrated the power of the company's adaptive
technology.
Customer traction continues to be strong. The major news since
investment is the record-breaking volume of new business, including
the consummation of a partnership with global payments giant,
Fiserv, and continued recurring revenue growth.
Date of Initial Investment: 13th May 2019
Total Investment: GBP20.0m
Carrying Value: GBP36.4m
Last Reported Financials: Y/E December 2019: GBP17.7m revenue
(+78% YoY); (GBP10.2m) loss after tax
FinanceAPP AG ("wefox")
The vast majority of insurance policies across Europe are still
sold via brokers. These brokers typically operate from a
high-street store and do not enjoy the benefits of scale or
technology. Customers are also often dissatisfied with their
current insurance experience as customer service is poor and
insurance products are not tailored to fit their particularly needs
or behaviour.
wefox is looking to solve these problems by aggregating
insurance brokers onto a digital platform and then enabling them to
distribute fully digital and customised insurance products to their
customers, resulting in market leading prices and service.
wefox was founded in Berlin in 2015 and has already established
itself as one of Europe's largest and fastest growing InsureTech
assets. The wefox Group consists of two subsidiaries: wefox and
ONE.
wefox is Europe's largest digital insurance platform with
significant existing scale in Germany, Austria and Switzerland. The
wefox platform enables over 350,000 customers, 1,500 insurance
broker agents and 300 insurance providers to transact and manage
insurance products digitally. The wefox app and website acts as a
digital wallet, where consumers can store details of their
insurance policies, and allows third-party insurance companies and
brokers to achieve efficiencies through a high degree of
automation.
ONE was launched in February 2018 and is a fully digital
insurance company distributing private liability and household
policies in Germany. ONE is fully integrated with wefox and
leverages the platform's distribution capability and data sets to
deliver best-in-class loss ratios and customer acquisition cost.
The company has performed well over the year and now generates more
than EUR100 million in sales.
The company raised over EUR200 million in 2019 and additional
primary capital in 2020, more than any other European InsureTech
asset, and the proceeds will be used to expand across Europe and
into Asia.
Date of Initial Investment: 5th December 2019
Total Investment: GBP16.6m
Carrying Value: GBP35m
Last Reported Financials: Not publicly disclosed
Sorted Holdings Limited ("Sorted")
Integration with a logistics carrier and its services is one of
the most complex and difficult connections for an e-commerce site
to develop, especially on a global basis. Providing an easy-to-use
API connection requires specialist knowledge to build and continual
maintenance. This can be time consuming and expensive. Retail is
also becoming increasingly global and building APIs to carriers
worldwide and managing different commercial terms and pricing
models is an increasingly complex problem.
Sorted is a Manchester-based, global Software as a Service
(SaaS) company that has developed a delivery management platform
that allows retailers (both digital and physical) to effectively
manage their delivery and returns proposition. This enables
retailers to increase conversion rates, reduce abandoned baskets
and maintain customer loyalty. Sorted has developed three highly
innovative products:
-- SortedHERO, an application programming interface solution,
allowing retailers to display real-time delivery options at
checkout;
-- SortedPRO, a ground-breaking delivery management platform for
carrier and shipping management; and
-- SortedREACT, a powerful AI driven tracking platform that
aggregates carrier and delivery communications post purchase.
Sorted is one of the UK's fastest growing and most disruptive
SaaS companies. It has invested over GBP30 million to date in its
technology and provides global retailers with a best-in-class
solution. Sorted now operates in 14 countries across Europe and the
US and works with several leading companies, including: ASOS,
Farfetch, JD Sports, N Brown, Wincanton and Clipper Logistics.
Sorted had a very strong start to the year, winning several
material new clients. During the year, Sorted signed JD Sports with
two distinct projects covering UK and Europe; Insight, a Fortune
500 business IT reseller with US$7 billion turnover; George at
ASDA; and a global contract with a British multi-brand enterprise
retailer. The company also went live in Australia, Japan and South
Korea.
Sorted's carrier library, which represents a material barrier to
entry for new entrants to the market, continues to expand with new
carriers in Europe, US and Australia recently added.
Generally, the impact of COVID-19 has seen retailers
increasingly relying on their digital capabilities and this has led
to increased focus and spending on their online propositions,
including with Sorted.
Date of Initial Investment: 15th August 2019
Total Investment: GBP10.0m
Carrying Value: GBP11.7m
Last Reported Financials: Not publicly disclosed
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 that
effects 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 travellers 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.
As an online travel business, the company has seen a significant
impact from the pandemic and related restrictions to travel. As
previously announced, the Company made a GBP2.6 million follow-on
investment, as part of a wider funding round in May 2020, in order
to support Secret Escapes navigate through a variety of COVID-19
stressed trading scenarios, as well as allowing it to benefit from
expectations of accelerated channel shift and less competition
post-lockdown.
Recent trading has been correlated with local lockdown laws, and
typically has seen a rebound when restrictions have been lifted.
The business continues to trade better than its COVID-19 downside
scenario budget.
Date of Initial Investment: 7th November 2018
Total Investment: GBP15.7m
Carrying Value: GBP11.1m
Last Reported Financials: Y/E December 18: GBP121m Revenue (+66%
YoY); GBP2m EBITDA
Growth Street
Growth Street was set up to provide innovative and flexible
revolving credit lines to SMEs. As previously reported, two large
loans defaulted early in the financial year. In combination with
changes to the peer-to-peer funding market and accentuated by the
pandemic, a decision was taken to wind down the company during the
year. The Investment Advisor worked with other shareholders to
support the business through this difficult time and, post period
end, a decision was taken to accelerate returns to investors that
funded the Growth Street platform, such that they received full
recoveries. While this decision modestly increases the risk of a
lower wind-down value for Chrysalis Investments, the Investment
Advisor believes ensuring no losses for retail customers was the
responsible course of action.
Given it was relatively early stage at the time of investment,
compared with other portfolio companies, Growth Street was a small
position in the portfolio. It is currently held at a nominal
amount, reflecting a reasonable estimation of its wind-down
value.
Date of Initial Investment: 24th January 2019
Total Investment: GBP12.6m
Carrying Value: GBP1.3m
Last Reported Financials: Not publicly disclosed
Outlook
Following our post year end fund raising, and subsequent use of
funds - mainly into the You & Mr Jones investment - the Company
has cash of approximately GBP38 million.
In addition, the position in THG provides significant liquidity,
given its listed nature, giving total liquidity of over GBP150
million. The Company is also looking to put in place an RCF in
order to provide funding flexibility around further investments;
any leverage taken on is not expected to be structural.
As a result, the Company is in a strong position from which to
continue to pursue its pipeline of new investments and follow-on
opportunities.
At the time of writing, while the UK is under a third national
lockdown, there is optimism surrounding the rollout of approved
vaccines to COVID-19 and stock markets are reacting positively to
this news, helped by a consensual view that interest rates are
likely to remain suppressed for the foreseeable period. While in
aggregate the portfolio saw a benefit from accelerating channel
shift as a result of COVID-19, we believe a significant number of
the new users gained by our businesses over this time will prove to
be permanent, as COVID-19 has just amplified already
well-established trends. So, while growth comparators for certain
portfolio companies might be more challenging over the coming year,
our expectation is that our key units will still demonstrate robust
growth.
Thematically, therefore, we are comfortable with the positioning
of the portfolio and are optimistic over prospects for further NAV
growth in the year ahead.
We recognise the benefits of increased scale, and believe it is
right to continue to try and grow the Company such that it can
compete in terms of ticket size with many of the global growth
investors. Our target investments are often large, late-stage
private businesses, with commensurately significant funding
requirements. The ability to credibly provide that funding, over a
sometimes prolonged period, is an important consideration when
these targets look to select which investors to partner with.
While our crossover proposition has opened many doors for us, as
indeed have our contacts from over 20 years of public market
investing, we believe combining these attributes with true scale
will really cement our offering in the market.
As our Chairman has highlighted, we have a number of ways in
which we can look to achieve this increased scale. Our focus
remains on trying to affect this in the most efficient way for
shareholders, while considering the investment opportunities in
front of us.
With on-going robust trading performance from our key assets,
significant liquidity, a strong origination capability, and a
growing recognition of our offering, we look forward to the coming
year with optimism.
ESG
Following the acquisition of MGI by Jupiter we are implementing
Jupiter's ESG framework to tie in with the Company's ESG Policy set
out on page 26. The integration of material environmental, social
and governance factors under this framework will be applied
throughout the investment process, with assistance provided by
Jupiter's Governance and Sustainability team. We will report in
detail against the Company's ESG policy in due course
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). Further, 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. Further, 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 fund 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 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.
Responsible Investment and Environmental Social and Governance
Policy
Overview
Chrysalis Investments provides shareholders with exposure to
some of the most innovative, entrepreneurial, and creative private
companies in its target markets. The Investment Advisor already
operates under an ESG framework in its capacity as a manager of
listed equities, but recognises that a framework for Chrysalis
Investments needs to reflect not only the different characteristics
of the private market, but also the Company's positioning within
that market.
While Chrysalis Investments is active in private markets, unlike
many private market participants that operate as control or
majority investors, the Company's investments will typically
constitute a minority holding, and its ESG framework needs to
reflect that. Minority positions are normal in public markets where
the Investment Advisor works with management teams to achieve
desired outcomes.
The approach to exiting positions, which the Investment Advisor
typically expects to be via IPO, also distinguishes the Company
from private equity peers and needs to be considered. A key feature
of the Company is its dual capability as a 'crossover investor'
which means it can provide funding in both private and public
arenas. Therefore, on occasions, it may continue to hold companies
once they are listed and this shapes the manner in which the
Investment Advisor considers ESG risks and imparts expectations to
businesses at this stage of their development. The Investment
Advisor's long track record of activity in public markets is
extremely useful in this regard, and means it can help companies
establish best practice.
Prospective portfolio holdings are identified based on their
customer offering and growth and financial potential. Typically,
the Investment Advisor is not focused on achievement of short-term
financial metrics, rather companies are partnered because of the
strength and sustainability of their business model. Therefore,
understanding corporate culture and the factors that uphold
long-term success has always been a core part of the Investment
Advisor's analysis.
The adoption of the new framework will help to formalise this
approach, and tie in other material environmental, social and
governance factors into the investment process to assess both the
risks and the opportunities that drive long-term value. The
Investment Advisor believes this will contribute to astute
investment decision making, by partnering companies that are
aligned to shareholder and stakeholder interests, and enable it to
continue to actively engage with portfolio holdings, providing
challenge and support to management.
In constructing its ESG framework for Chrysalis Investments, the
Investment Advisor is being assisted by Jupiter's Governance &
Sustainability team and anticipates continued support from it with
respect to research and monitoring of companies. The overall
approach is also underpinned by the internal governance and
oversight provided by Jupiter's Chief Investment Officer ("CIO")
Office. We will report more fully on our ESG policies and
procedures in 2021.
Corporate Governance Statement
Chrysalis Investments Limited 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 table below outlines decisions made by the Board during the
year under review that have contributed to the Company's long term
sustainable success and are considered to be of importance both to
the Company and its stakeholder groups. In making these decisions
and as is the case for all future decisions of this nature, the
Board consider the factors outlined within S.172 together with the
wider interests of its stakeholders as a whole, acting with honesty
and integrity at all times.
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 Advisor 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 Advisor
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 40.
Viability Statement
The viability statement is made on page 40.
Fair, Balanced and Understandable Statement
The financial 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 on page
50.
Continuing Appointment of the Investment Advisor
Further details relating to the continuing appointment of the
Investment Advisor and how this is in the interests of members as a
whole can be found within the Report of the Management Engagement
Committee on page 37.
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 42.
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 2020, and to the date of the approval of this financial
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 64 and 72
and note 17 of the financial report and audited financial
statements.
The Board of Directors
The Board comprises five independent non-executive Directors who
meet on an 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 32. All Directors
are considered independent of the Investment Advisor for the
purposes of the AIC Code and Listing Rule 15.2.12A.
The Boards are responsible for the Company's long term
sustainable success and the generation of value for shareholders
and in doing so manage 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 27. Additionally, the Board have overall
responsibility for the Company's activities including its
investment activities and reviewing the performance of the
Company's portfolio. The Board are confident that the combination
of its members is appropriate and is such that no one individual or
small group of individuals dominates the Board's decision
making.
The Directors, in the furtherance of their duties, may take
independent professional advice at the Company's expense, which is
in accordance with provision 19 of the AIC Code. The Directors also
have access to the advice and services of the Company Secretary
through its appointed representatives who are responsible to the
Board for ensuring that the Board's procedures are followed, and
that applicable rules and regulations are complied with.
To enable the Board to function effectively and allow the
Directors to discharge their responsibilities, full and timely
access is given to all relevant information.
Comprehensive board papers are circulated to the Board in
advance of meetings by the Company Secretary, allowing time for
full review and comment by the attending parties. In the event that
Directors are unable to attend a particular meeting, they are
invited to express their views on the matters being discussed to
the Chairman in advance of the meeting for these to be raised
accordingly on their behalf. Full and thorough minutes of all
meetings are kept by the Company Secretary.
The Directors are requested to confirm their continuing
professional development is up to date and any necessary training
is identified during the annual performance reviews carried out and
recorded by the Remuneration and Nomination Committee.
The current Board have served since the Company's inception in
October 2018 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
$1bn.
Andrew holds several Guernsey and UK board positions.
Stephen Coe (senior independent)
Stephen serves as Chairman of the Audit Committee. He is
currently a Director and Chairman of the Audit Committee of Weiss
Korean Opportunities Fund Limited, and 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 become an independent director to listed alternative
investment companies (the Company, HICL Infrastructure plc., Trian
Investors 1 Limited and Chrysalis Investments Limited), 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 is a Chartered Fellow of the Securities Institute
and a Fellow of ICSA. Anne 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 is self-employed and 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.
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
Trian Investors 1 Limited
JPMorgan Global Core Real Assets Limited
Stephen Coe
River and Mercantile UK Micro Cap Investment Company Limited
Weiss Korea Opportunities Fund Limited
Tim Cruttenden
Polar Capital Technology Trust plc
Director Attendance
During the year ended 30 September 2020, the Board and Audit
Committee meetings held and attended by the Directors were as
follows:
Remuneration
and nomination Management
Quarterly Audit Committee Meetings Engagement Ad-hoc Meetings
Board Meeting Meeting Meetings
Director Attended Attended Attended Attended Attended
/ Eligible / Eligible / Eligible / Eligible / Eligible
--------------- ---------------- ---------------- ------------- ------------------
Anne Ewing 4/ 4 2 / 2 1/1 3/3 10/10
--------------- ---------------- ---------------- ------------- ------------------
Andrew Haining 4 / 4 1 / 2 1/1 3/3 9/10
--------------- ---------------- ---------------- ------------- ------------------
Simon Holden 4 / 4 2 / 2 1/1 3/3 9/10
--------------- ---------------- ---------------- ------------- ------------------
Stephen Coe 4 / 4 2 / 2 1/1 3/3 9/10
--------------- ---------------- ---------------- ------------- ------------------
Tim Cruttenden 4 / 4 2 / 2 1/1 3/3 8/10
--------------- ---------------- ---------------- ------------- ------------------
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 statement and any
preliminary announcement of the final results and the financial
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 Manager, the Administrator, the Company Secretary,
the Depositary and the Registrar. In particular, the Investment
Manager has been granted discretion over the management of the
investments comprising the Company's portfolio. The Investment
Manager 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 Manager. The Directors have responsibility for
exercising supervision of the AIFM and the Investment Manager
Board Committees
The Company has established an Audit Committee, Remuneration and
Nomination Committee, and Management Engagement Committee (together
the "Committees"). The Committees comprise the whole Board with the
exception of the Audit Committee, which excludes the Chairman. 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. A full
report regarding the Audit Committee's activities during the year
can be found in the Audit Committee Report on page 50.
In accordance with the AIC Code, a Remuneration and Nomination
Committee has been established. Anne Ewing has been appointed as
Chairman. The Remuneration and Nomination Committee meets at least
once a year in accordance with the terms of reference and reviews,
inter alia, the structure, size and composition of the Board. A
full report regarding the Remuneration and Nomination Committee's
activities during the year can be found on page 34.
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 Investment
Manager and the terms of the Portfolio Management Agreement. A full
report regarding the Management Engagement Committee's activities
during the year can be found on page 37.
Report of the Remuneration & Nomination Committee
Composition, Succession & Evaluation
The Board of Directors and its Committees is currently
considered to be adequately composed in order to discharge their
duties effectively, however when considering new appointments in
the future, the Board will ensure that a diverse group of
candidates is considered in accordance with its Diversity Policy
and that appointments are made against a set objective criteria.
The Board have been briefed by their legal advisers about their
on-going responsibilities as Directors and newly appointed
Directors will be invited to participate in a formal induction
process.
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 therefore there are currently no issues to consider
with regards to long tenure. Composition and succession planning is
considered on an ongoing basis by the Remuneration and Nomination
Committee.
2020 Independent Review of Board Performance and
Remuneration
The Remuneration & Nomination Committee (the Committee)
brought forward its triennial independent review of Board
remuneration in the second half of 2020 which was one year earlier
than had been envisaged at inception of the Company. At the same
time an independent external evaluation of board performance was
brought forward to provide some insight and assurance that the
Directors were being sufficiently remunerated and were performing
to the requisite standard as the Company's growth and results
accelerated at a pace.
To assist both reviews the Committee commissioned Board Alpha,
an independent professional remuneration and performance consultant
with deep experience of investment companies and their fee
structures. Fees of GBP24,500 were paid to Board Alpha for their
work. The Board confirms that Board Alpha do not have any
connection with either the Board itself, the Company or individual
Directors.
The report from Board Alpha which contained remuneration
recommendations as at the financial year end 30 September 2020 was
considered by the Committee in December 2020.
An increase in remuneration for all Board roles was supported by
Board Alpha recognising the size and relative performance of the
Company and benchmarking current remuneration against similar
investment companies based on asset class and size. The
recommendations recognises a premium over the Directors' base fee
for the additional responsibility of the Chairman, and the Audit
and Management Engagement Committee Chair roles.
Board Alpha's independent review also recognised the time
commitments of the Directors during the reporting year over and
above that normally contemplated of an independent non-executive
director. Under their Letters of Appointment, Directors are
entitled to additional ad-hoc remuneration for additional work
outside of the scope of their ordinary duties.
Review of Remuneration
During the second half of 2020, the Board commissioned Board
Alpha, an independent remuneration and performance consultant with
deep experience of investment companies and their fee structures,
to provide some insight and assurance that the Board were both
performing to the requisite standard and being sufficiently
remunerated. This was considered especially pertinent given the
Company's rapid growth and strong results.
The report from Board Alpha containing remuneration
recommendations as at the financial year end 30 September 2020 was
considered by the Committee in December 2020.
An increase in remuneration for all Board roles was recommended
by Board Alpha in line with the market rates recognising the size
and relative performance of the Company and benchmarking current
remuneration against similar investment companies based on asset
class, size and the hard-to-value, illiquid nature of the private
equity holdings. The recommendation recognises a premium over the
Directors' base fee for the additional responsibility of the
Chairman, and the Audit and Management Engagement Committee Chair
roles.
Board Alpha's independent review also recognised the time
commitments of the Directors during the reporting year over and
above that normally contemplated of an independent non-executive
director. Under their Letters of Appointment, Directors are
entitled to additional ad-hoc remuneration for additional work
outside of the scope of their ordinary duties. The Remuneration
& Nomination Committee resolved that payment of the ad-hoc fee
should be made, and the fees were paid, following the year end.
Y/E 2020 Specific work General work Total ad-hoc fee
Chairman GBP33,000 GBP7,500 GBP40,500
------------- ------------ ----------------
Audit Committee
Chair GBP7,500 GBP7,500
------------- ------------ ----------------
Management Engagement
Committee Chair GBP15,000 GBP7,500 GBP22,500
------------- ------------ ----------------
Director GBP7,500 GBP7,500
------------- ------------ ----------------
These additional time commitments arose from the increased size,
breadth and complexity of the Company and the pace of development
of its operating environment since launch. In particular, much time
has been devoted to the integration of Jupiter as Investment
Advisor and the rebranding of the Company and the launch of its new
website. This work continues.
The table below is shown to enable shareholders to assess the
relative importance of spend on remuneration. It compares Board
remuneration against management and performance fees payable to the
Investment Advisor relative to the Company's NAV.
Total Director Renumeration GBP208,000
Investment Management Fees GBP2,084,030
---------------
Investment Advisor Performance GBP32,607,513
Fees
---------------
NAV at year end GBP542,043,335
---------------
The Remuneration & Nomination Committee resolved that, with
effect from 1 October 2020 and as a result of the Board Alpha
review and recommendation, the annual remuneration for each
Director would be increased as per the table below.
Fees proposed Y/E 2021 Fees paid Y/E 2020
Chairman GBP70,000 GBP45,000
---------------------- ------------------
Audit Committee Chair GBP55,000 GBP43,000
---------------------- ------------------
Management Engagement
Committee Chair GBP50,000 GBP40,000
---------------------- ------------------
Director GBP45,000 GBP40,000
---------------------- ------------------
In order to further enhance and diversify the Board, and as a
matter of good governance and succession planning, the Board has
commissioned the Nomination Committee to initiate a search for an
additional independent non-executive director during 2021.
Anne Ewing
Chairman of the Remuneration & Nomination Committee
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 comprises the whole Board. 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 Advisor 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.
During the year ended 30 September 2020, the MEC convened three
times, marking three distinct phases to the evolution of your
Company which happened during the year.
Firstly, during its inaugural meeting in January 2020 the MEC
undertook its annual review of the performance of all critical
service providers appointed to support the ongoing operation of the
Company during the year ended 30 September 2019. This focused on
the Investment Advisor and included the Company's administrator and
company secretary, Alternative Investment Fund Manager, lawyers,
broker, auditor, depository, and other services.
A combination of self-assessments, the oversight experience of
the Board during the year and constructive feedback from members of
the MEC are used to identify positive capabilities and performance
improvements which are then shared with service providers as
required.
Secondly, following the announcement of the proposed acquisition
of MGI by JAM on 15 February 2020, the Company had the right to
give notice under the Portfolio Management Agreement as the
acquisition constituted a "change of control" event as defined in
the agreement. Together with the Company Chairman, the Chairman of
the MEC led the Company's interaction with the key executives of
JAM to examine if and how the change of control would ultimately
benefit the interests of our shareholders. This proved to be an
opportune moment to reflect upon:
-- the successes and achievements of the Company in its initial growth phase post-IPO;
-- those areas where the Board believed further support and
resource should be brought to bear and to seek a commitment from
JAM to achieve this; and finally,
-- the Board's desire to see the Company rebranded independently
of either MGI or JAM. This was deemed appropriate and consistent
with the Company's growing profile as a direct channel for
investors seeking private equity exposure to some of the most
exciting high growth, high potential technology-enabled enterprises
shaping the economy of tomorrow.
The MEC Chairman led these negotiations with JAM over the course
of several weeks during the Summer of 2020, updating the Company
Chairman and Committee members regularly on progress. This
workstream involved extensive interaction with members of JAM's
executive committee, key personnel of the Company's Investment
Advisor, Travers Smith and the Board.
Thirdly, and subsequent to the year-end, the MEC Chairman led
the strategy and rationale for workstream three above, culminating
in a proposed new graphic identity and promotional collateral to
enhance the Company's brand and industry profile. Best&Co Ltd.,
a communications agency specialised in brand development, were duly
engaged to deliver this project supported by key personnel of the
Investment Advisor.
To achieve this outcome, shareholders were recommended to vote
in support of the Company's change of name to Chrysalis Investments
Company Ltd, (ticker: CHRY) which was duly carried at the EGM of 18
December 2020.
I would like to thank shareholders for supporting that
resolution as well as all those who contributed to the new brand
strategy which marks the beginning of the second chapter in the
Company's evolution. The Company starts 2021 with a fresh new
corporate identity befitting its specialised private equity
proposition for investors and its role as source of valuable
cross-over capital for investee companies alike.
In summary, it has been an especially busy year for the Company;
its investment proposition has started to mature, whilst the MEC
had a significant role to play adapting to the proposed change in
Investment Advisor. The performance of all service providers
remains under the Committee's continuing scrutiny, with the aim of
identifying areas for performance improvement and ensuring
continued value for money for shareholders. The Committee's
inaugural review of JAM as Investment Advisor is intended to be
scheduled for later in 2021, by which time a period of one year's
service will have elapsed.
In accordance with Listing Rule 15.6.2(2)R and following the
review of the Portfolio Management Agreement as previously
outlined, it is the opinion of both the MEC and the Board of
Directors that the continuing appointment of MGI as Investment
Advisor on the terms agreed is in the best interests of the Company
and its shareholders as a whole.
Simon Holden
Chairman of the Management Engagement Committee
Directors' Report
The Directors present their Financial Report and the Audited
Financial Statements of the Company for the year ended 30 September
2020.
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 Advisor'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 has appointed Maitland Institutional Services Limited
as its Alternative Investment Fund Manager ("AIFM"). The Company
operates as an externally managed non-EEA domiciled AIF with an 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 page 91 of this financial 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 Financial Report and
Audited Financial Statements.
At year end, the Company has a current cash position of
GBP15,559,000 and net current liability amounting to GBP64,244,000.
Taking into account the October 2020 fund raising, together with
its listed investments, the Company has sufficient liquidity to
meet its obligations. For this reason, the Directors continue to
adopt the going concern basis in preparing the Financial Report and
Audited Financial Statements.
Viability Statement
The Directors have assessed the prospects of the Company over
the three-year period to 30 September 2023. 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 risks and
uncertainties detailed on page 42 (and in note 17) 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 with the
Investment Advisor. The AIFM has delegated portfolio management
services to the Investment Advisor. 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 Advisor might serve notice of the portfolio
management agreement over the period of the viability
statement.
The Directors have carried out a robust assessment of the risks
and based on the Company's processes for monitoring operating
costs, share price discount, the Investment Advisor'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 2023.
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 (2019:
GBPnil)
Directors
The Directors of the Company who served during the year and to
date are set out on pages 30 and 31.
Directors' interests
The Directors held the following interests in the share capital
of the Company either directly or beneficially as at 30 September
2020, and as at the date of signing these Audited Financial
Statements:
Shares % Held
A Haining 45,000 0.0134
S Coe 45,909 0.0136
S Holden 67,500 0.0200
A Ewing 7,500 0.0022
T Cruttenden 9,090 0.0027
Subsequent to the year end, A Ewing purchased an additional
20,000 shares.
The Directors' fees are as disclosed below:
GBP
A Haining 45,000
S Coe 43,000
S Holden 40,000
A Ewing 40,000
T Cruttenden 40,000
Under their terms of appointment, each Director is paid a basic
fee of GBP40,000 per annum by the Company. In addition to this, the
Chairman receives an extra GBP5,000 per annum and the Audit
Committee Chairman receives an extra GBP3,000 per annum. Refer to
page 35 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 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 17 to the Financial 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 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; 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 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.
On-going Charges
The on-going charges figure for the year was 0.71%. The on-going
charges represent on-going annual expenses of GBP3,111,095 divided
by total average Net Asset Value for the year of GBP438,172,787.
The on-going charges has also been prepared in accordance with the
recommended methodology provided by the Association of Investment
Companies where investment purchase costs of GBP866,968 and
performance fees of GBP32,608,000 have been excluded and represents
the percentage reduction in shareholder returns as a result of
recurring operational expenses.
Emerging risks
COVID-19
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 Advisor'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
GBP15,559,000 and net current liabilities of (GBP64,244,000). Based
on the funding raised post year end (note 19), the Company is able
to settle its debts and continue its business with no
interruptions.
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 Advisor 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 Advisor'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.
Investment Management and Administration
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 Advisor.
The Investment Advisor is entitled to a management fee together
with reimbursement of all reasonable costs and expenses incurred by
it in the performance of its duties. The Investment Advisor is also
entitled to a performance fee in certain circumstances. Details of
the management fee and performance fee are set out in note 6. The
portfolio management agreement may be terminated by either party on
six months' notice and may be immediately terminated by either
party in certain circumstances such as a material breach which is
not remedied.
For the Company's full holdings information please refer to the
Portfolio Statement on page 5.
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 Advisor, of the Net
Asset Value of the Company and the shares.
Depositary
The Depositary of the Company is Citibank Europe plc, UK
Branch.
Corporate Governance Statement
This Corporate Governance Statement forms part of the Directors'
Report.
Statement of Compliance
The Listing Rules require that the Company must "comply or
explain" in terms of the UK Corporate Governance Code. In addition,
the Disclosure Guidance and Transparency Rules require the Company
to: (i) make a corporate governance statement in its annual report
based on the code to which it is subject, or with which it
voluntarily complies; and (ii) describe its internal control and
risk management arrangements.
In applying the main principles set out in the UK Corporate
Governance Code (the "UK Code"), the Directors have considered the
principles and recommendations of the AIC Code published in
February 2019 by reference to the AIC Guide (which is available at
www.theaic.co.uk ). The AIC Code, as explained by the AIC Guide,
addresses all the principles set out in the UK Code, as well as
setting out additional principles and recommendations on issues
that are of specific relevance to the Company.
The Board considers that reporting against the principles and
recommendations of the AIC Code, and by reference to the AIC Guide
(which incorporates the UK Code), will provide better information
to shareholders.
Other areas of non-compliance with the AIC Code by the Company,
and the reasons, therefore, are as follows:
-- The Company does not comply with principle 9 of the AIC Code
as it does not have a formal policy on diversity, however the
Company has established a Remuneration and Nomination Committee
that adheres to a formal term of reference and which is responsible
for identifying any gaps on the Company's board that need to be
filled. When considering candidates, the Board has due regard to
the benefits of diversity on the Board and amongst other
considerations which includes gender and ethnicity.
The Board, with the assistance of the Company Secretary, will be
undertaking a full review of its governance against the 2020
version of the AIC Code, published in February 2019, to reflect
revision to the UK Corporate Governance Code made in July 2018,
which applies to the Company's financial year commencing 1 October
2020, and the Board will report further in due course.
Board Responsibilities
The Board comprises five 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 Advisor for the purposes of the AIC
Code and Listing Rule 15.2.12A. Biographies of the Directors for
the year ended 30 September 2020 appear on pages 30 and 31 which
demonstrate the wide range of skills and experience they bring to
the Board.
The Directors, in the furtherance of their duties, may take
independent professional advice at the Company's expense, which is
in accordance with principle 13 of the AIC Code.
The Directors also have access to the advice and services of the
Company Secretary through its appointed representatives who are
responsible to the Board for ensuring that the Board's procedures
are followed, and that applicable rules and regulations are
complied with.
To enable the Board to function effectively and allow the
Directors to discharge their responsibilities, full and timely
access is given to all relevant information.
The Directors are requested to confirm their continuing
professional development is up to date and any necessary training
is identified during the annual performance reviews carried out and
recorded by the Remuneration and Nomination Committee.
At each annual general meeting of the Company, each director
shall retire from office and each director may offer themselves for
election or re-election by the shareholders.
Conflicts of Interest
None of the Directors nor any persons connected with them had a
material interest in any of the Company's transactions,
arrangements or agreements at the date of this report and none of
the Directors has or had any interest in any transaction which is
or was unusual in its nature or conditions or significant to the
business of the Company, and which was affected by the Company
during the reporting year.
At the date of this Financial Report, there are no outstanding
loans or guarantees between the Company and any Director.
Committees
The Company has established: the Audit Committee, the
Remuneration and Nomination Committee, and the Management
Engagement Committee (together the "Committees"). The Committees
comprise the whole Board. The Terms of Reference for each committee
is available on request from the Administrator.
The Audit Committee
Stephen Coe is the Chairman of the Audit Committee. A full
report regarding the Audit Committee can be found in the Audit
Committee Report.
Remuneration and Nomination Committee
In accordance with the AIC Code, a Remuneration and Nomination
Committee has been established. Anne Ewing has been appointed as
Chairman. The Remuneration and Nomination Committee meets at least
once a year in accordance with the terms of reference and reviews,
inter alia, the structure, size and composition of the Board.
Details of the Directors' remuneration can be found in note 18
and page 35 and 36.
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 Investment
Advisor and the terms of the Portfolio Management Agreement.
Details of the Investment Advisor and performance fees can be found
in note 6.
Substantial Shareholdings
As at 13 January 2021, the latest practicable date for
disclosure in this Financial Report, the Company's only shareholder
with a holding greater than 10% was Merian UK Mid-Cap Fund
(15.8%).
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
Advisor 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 Advisor, 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 Advisor, 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 Advisor 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
Advisor Directly on chrysalis@maitlandgroup.com or the Senior
Independent Director on (chrysalis@maitlandgroup.com) for issues
they feel may feel 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 Advisor 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
29 January 2021
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Financial 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
Audited 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 Audited 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
Financial Report
We confirm that to the best of our knowledge:
-- the Audited 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 Advisors' 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 Financial 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
29 January 2021
Audit Committee Report
For the year ended 30 September 2020
In accordance with the AIC Code, an Audit Committee has been
established consisting of Andrew Haining, Anne Ewing, Simon Holden,
Tim Cruttenden 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 Financial
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 Advisor, reviewing the Financial 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 2020. 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 2020.
Year ended Period ended
30 September 30 September
2020 2019
Annual audit fee 69,000 66,000
Interim review 33,000 36,382
Specified procedures relating to the Performance
fee - 7,000
-------------- --------------
102,000 109,382
-------------- --------------
Internal Control
The Company itself has no internal systems to control. Internal
control lies within the services provided by MGI 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 Financial Report and Audited Financial
Statements.
Investment advice is provided by MGI under a portfolio
management agreement dated 11 October 2018 (revised 28 August
2019). The Investment Advisor provides the Board with updates at
each quarterly board meeting and at any other time that the Board
requests.
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 Advisor'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 Advisor and the Auditor relating to the Company's
Financial 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 Financial Report
remains with the Board.
-- Representatives of The Audit Committee meet with the
Investment Advisor 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 Financial Report and
Audited Financial Statements and recommending valuations of the
Company's investments to the Board.
External Audit
The Audit Committee will hold an annual meeting to approve the
Company's Financial Report and Audited Financial Statements before
its publication. At a meeting held on 12 October 2020 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 twice where one meeting
had 80% attendance (refer to Director Attendance on page 32).
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
29 January 2021
Independent Auditor's Report to the Members of Chrysalis
Investments Limited (formerly Merian Chrysalis Investment Company
Limited)
Our opinion is unmodified
We have audited the financial statements of Chrysalis
Investments Limited (formerly Merian Chrysalis Investment Company
Limited) (the "Company"), which comprise the Statement of Financial
Position as at 30 September 2020, 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 2020, 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 FRC Ethical
Standards, as applied to listed entities. 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 2019):
The risk Our response
-------------------------------------- -------------------------------------- --------------------------------------
Valuation of investments held at fair Basis: Our audit procedures included but
value through profit or loss The Company's investments are carried were not limited to:
GBP606,287,000 (2019: GBP170,040,000) at fair value in accordance with Internal Control:
Refer to Audit Committee Report on IFRS. The investments We assessed the design and
page 51, notes 2(i), 3, 11 and 17 comprise of equity and equity-related implementation of the control in
instruments in quoted and unquoted place over the valuation of
companies and represent investments.
112% (2019: 45%) of the Company's net Challenging managements' assumptions
assets as at 30 September 2020. and inputs including use of KPMG
The Company's unlisted investments, valuation specialists:
with a value of GBP512,074,000, are Our valuation specialist
valued by using recognised independently priced the listed
valuation methodologies and models, investment to a third party pricing
in accordance with the International source.
Private Equity and For the unlisted investments, with
Venture Capital Valuation Guidelines. the support of our valuation
The Company utilises independent specialists, we:
third party valuation firms (the assessed the objectivity,
"Valuation Agents") to assist capabilities and competence of the
and advise on their valuation Valuation Agents
process. assessed the scope of the Valuation
The Company's listed investment, with Agents' review of the investments and
a value of GBP94,213,000, is valued read the valuation
by the Company based reports and memoranda produced by
on the quoted market bid price in an them and the Investment Advisor
active market for that instrument. assessed the appropriateness of the
Risk: valuation approach and methodology
The valuation of the Company's applied to each investment
investments is a significant area of compared the assumptions used in the
our audit, given that valuation models employed to
it represents a significant portion observable market data
of the net assets of the Company. (where possible)
The valuation risk of the unlisted corroborated significant investee
investments incorporates both a risk company inputs used in the valuation
of fraud and error models, and recent
given the significance of estimates investment transactions to supporting
and judgments that may be involved in documentation
the determination considered market transactions in
of their fair value. close proximity to the year end and
assessed their appropriateness
as being representative of fair value
considered the impact of COVID-19 on
their valuation.
Assessing disclosures:
We also considered the Company's
disclosures (see notes 3 and 17) in
relation to the use of
estimates and judgments regarding the
valuation of investments and the
Company's investment
valuation policies adopted in note
2(i) and fair value disclosures in
note 17 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
GBP10,840,000, determined with reference to a benchmark of net
assets of GBP542,043,000, of which it represents approximately
2%.
We reported to the Audit Committee any corrected or uncorrected
identified misstatements exceeding GBP542,000, 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.
We have nothing to report on 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 activities including where
relevant the impact of the COVID-19 pandemic and the requirements
of the applicable financial reporting framework. We analysed how
those risks might affect the Company's financial resources or
ability to continue operations over the going concern period,
including challenging the underlying data and key assumptions used
to make the assessment, and evaluated the directors' plans for
future actions in relation to their going concern assessment.
Based on this work, we are required to report to you if we have
anything material to add or draw attention to in relation to the
directors' statement in 2(b) 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 a period of at least twelve months from the
date of approval of the financial statements. We have nothing to
report in these respects.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the
financial 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
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw attention
to in relation to:
-- the Directors' confirmation within the viability statement
(page 40) 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 Principal Risks and uncertainties disclosures describing
these risks and explaining how they are being managed or
mitigated;
-- the Directors' explanation in the viability statement (page
40) 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 report to you if:
-- we have identified material inconsistencies between the
knowledge we acquired during our financial statements audit and the
Directors' statement that they consider that the financial 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; or
-- the section of the financial report describing the work of
the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
We are required to report to you if the Corporate Governance
Statement does not properly disclose a departure from the
provisions of the UK Corporate Governance Code specified by the
Listing Rules for our review.
We have nothing to report to you in these respects.
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 48
and 49, 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
29 January 2021
Statement of Comprehensive Income
For the year ended 30 September 2020
Year ended 30 September Period from 3 Sept 2018
2020 to 30 Sept 2019
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 - 197,426 197,426 - 12,449 12,449
Losses on currency
movements - (985) (985) - (15) (15)
-------- --------- --------- -------- -------- --------
Net investment
gains - 196,441 196,441 - 12,434 12,434
-------- --------- --------- -------- -------- --------
Interest income 5 287 273 560 57 373 430
-------- --------- --------- -------- -------- --------
Total income 287 273 560 57 373 430
-------- --------- --------- -------- -------- --------
Investment management
fees 6 (2,084) (32,608) (34,692) (414) (103) (517)
Other expenses 7 (1,897) - (1,897) (1,082) - (1,082)
-------- --------- --------- -------- -------- --------
(Loss) / gain
before finance
costs and taxation (3,694) 164,106 160,412 (1,439) 12,704 11,265
Finance costs 8 - - - (1) - (1)
-------- --------- --------- -------- -------- --------
(Loss) / gain
before taxation (3,694) 164,106 160,412 (1,440) 12,704 11,26
Withholding - - - - - -
tax expense
-------- --------- --------- -------- -------- --------
Total gains
and comprehensive
Income for the
year/period (3,694) 164,106 160,412 (1,440) 12,704 11,26
-------- --------- --------- -------- -------- --------
(Loss)/gain
per Ordinary
Share (pence) 9 (1.10) 48.73 47.64 (0.97) 8.56 7.59
The total column of this statement represents the Statement of
Comprehensive Income of the Company prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union.
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 62 to 87 form an integral part of these
Audited Financial Statements.
Statement of Financial Position
As at 30 September 2020
2019 2019
Note GBP'000 GBP'000
Non-current assets
Investments held at fair value through
profit or loss 11 606,287 170,040
------------ --------------
Current assets
Cash and cash equivalents 12 15,559 212,665
Other receivables 13 267 82
------------ --------------
15,826 212,747
------------ --------------
Total assets 622,113 382,787
------------ --------------
Current liabilities
Performance fee payable 14 (32,710) (103)
Management fee payable (631) (182)
Unsettled trades (46,440) -
Other payables (289) (872)
------------ --------------
Total liabilities (80,070) (1,157)
Net assets 542,043 381,630
------------ --------------
Equity
Share Capital 15 370,366 370,366
Capital reserve 176,810 12,704
Revenue reserve (5,134) (1,440)
Total equity 542,043 381,630
------------ --------------
Net Asset Value per Ordinary Share (pence) 16 160.97 113.33
Number of Ordinary Shares in issue 336,742,424 336,742,424
Approved by the Board of Directors and authorised for issue on
29 January 2021 and signed on their behalf:
Stephen Coe
Director
The notes on pages 62 to 87 form an integral part of these
Audited Financial Statements.
Statement of Changes in Equity
For the year ended 30 September 2020
Share Capital Revenue
capital reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000
For the period 3 September
2018
to 30 September 2019
At 3 September 2018 - - - -
Total gains/(losses) and
comprehensive
income for the period - 12,704 (1,440) 11,264
Issue of Management Share - - - -
Redemption of Management - - - -
Share
Issue of Ordinary Shares 375,000 - - 375,000
Expenses of share issue (4,634) - - (4,634)
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
Expenses of share issue 1 - - 1
--------- --------- --------- --------
At 30 September 2020 370,367 176,810 (5,134) 542,043
--------- --------- --------- --------
The notes on pages 62 to 87 form an integral part of these
Audited Financial Statements.
Statement of Cash Flows
For the year ended 30 September 2020
Notes For the year Period from
ended 30 3 Sept 2018
September to 30 September
2020 2019
GBP'000 GBP'000
Cash flows from operating activities
Bank interest paid 8 - (1)
Other expense payments 7 (4,300) (524)
Interest income 560 430
Purchases of investments 11 (212,013) (157,591)
Sale of investments 11 19,632 -
Effect of foreign exchange (985) (15)
------------- -----------------
Net cash outflow from operating
activities (197,107) (157,686)
------------- -----------------
Cash flows from financing activities
Issue of Ordinary Shares 15 - 375,000
Expenses of Ordinary Share issuance 15 - (4,634)
------------- -----------------
Net cash inflow from financing
activities - 370,366
------------- -----------------
Net increase in cash and cash
equivalents (197,106) 212,680
Cash and cash equivalents at beginning 212,665 -
of year / period
-------------
Cash and cash equivalents at end
of year / period 15,559 212,665
------------- -----------------
Cash and cash equivalents comprise
of the following:
Cash at bank 15,559 189,670
Cash equivalents - UK treasury
bills - 22,995
15,559 212,665
------------- -----------------
Notes to the Audited Financial Statements
For the year ended 30 September 2020
1. Reporting Entity
Chrysalis Investments Limited (formerly Merian Chrysalis
Investment Company 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 336,742,424 shares in issue under ticker MERI,
SEDOL BGJYPP4 and ISIN GG00BGJYPP46 have a premium listing and are
admitted to trading on the London Stock Exchange's Main Market for
listed securities. The Audited Financial Statements of the Company
are presented for the year ended 30 September 2020.
The Company invests in a diversified portfolio consisting
primarily of equity and equity-related securities issued by
unquoted companies.
The Company and its Alternative Investment Fund Manager received
investment advice from Merian Global Investors (UK) Limited ("MGI")
during the year ended 30 September 2020. 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
("IFRS") as adopted by the European Union. 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 Financial Report and
Audited Financial Statements.
At year end, the Company has a current cash position of
GBP15,559,000 and net current liability amounting to GBP64,244,000.
Taking into account the October 2020 fund raising, together with
its listed investments, the Company has sufficient liquidity to
meet its obligations. For this reason, the Directors continue to
adopt the going concern basis in preparing the Financial Report and
Audited Financial Statements.
(c) Functional and presentation 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 as
adopted by the European Union). 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.
(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 rate 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, or where the market for a
financial instrument is not active, fair value is established by
using recognised valuation methodologies, in accordance with
International Private Equity and Venture Capital Valuation
Guidelines ("IPEVC").
The Company has adopted a valuation policy for unquoted
securities to provide an objective, consistent and transparent
basis for estimating the fair value of unquoted equity securities
in accordance with IFRS as well as IPEVC.
The unquoted securities valuation policy and the associated
valuation procedures are subject to review on a regular basis, and
updated as appropriate, in line with industry best practice. In
addition, the Company works with independent third-party valuation
firms, to obtain assistance, advice, assurance, and documentation
in relation to the ongoing valuation process.
The Company considers it impractical to perform an in-depth
valuation analysis for every unquoted investment on a daily basis
(whether internally or with the assistance of an independent third
party).
Therefore, it is expected that an in-depth valuation of each
investment will be performed independently by an independent
third-party valuation firm: (i) on a quarterly basis; and (ii)
where MGI 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 rate 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
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 GBP15,559,000.
Refer to note 12 for further details of the cash balance held at 30
September 2020.
(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 17.
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. 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 7, IFRS 9, IAS 1 and IAS 8 - effective 1 January 2020
-- Amendments to IFRS 9, IAS 1 and IAS 37 - effective 1 January 2022
5. Interest income
Interest income totaling GBP273,588 was earned from the UK
treasury bills which were held at amortised cost, GBP54,966 from
the Growth Street Convertible Loan Note which has been converted
and GBP232,188 from the FinanceApp (wefox) Loan note which is held
at fair value through profit or loss (FVTPL). Interest is accounted
for using the effective interest method.
6. Investment management fees
2020 2019
GBP'000 GBP'000
Investment management fee 2,084 414
Investment Advisor's performance fee - charged
to capital 32,608 103
Total investment management fees 34,692 517
-------- --------
Under the terms of the portfolio management agreement, Merian
Global Investors ("MGI") is entitled to a management fee and a
performance fee together with reimbursement of reasonable expenses
incurred in the performance of its duties.
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 MGI 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 2020, an amount of GBP631,000 (2019:
GBP182,000) was outstanding and due to MGI in respect of management
fees.
Performance fee
MGI 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 year will
be the year commencing on 1 October 2019 and ending on 30 September
2020 (the "Calculation Period").
Adjusted Net Asset Value at the end of a Calculation Period
shall be the audited NAV in Sterling at the end of the relevant
Calculation Period:
(i) plus an amount equal to any accrued or paid performance fee
in respect of that Calculation Period or any prior Calculation
Period;
(ii) plus an amount equal to all dividend or other income
distributions paid to shareholders that have been declared and paid
on or prior to the end of the relevant Calculation Period;
(iii) minus the amount of any distribution declared in respect
of the Calculation Period but which has not already reduced the
audited NAV;
(iv) minus the Net Capital Change where the Net Capital Change
is positive or, correspondingly, plus the Net Capital Change where
such net Capital Change is negative (which for this purpose
includes the Net Capital Change in the relevant Calculation Period
and each preceding Calculation Period; and
(v) minus any increase in the NAV during the Calculation Period
attributable to investments attributable to C shares prior to the
conversion of those C shares.
"Performance Hurdle" means, in relation to the Calculation
Period, ("A" multiplied by "B") + C where:
"A" is 8% (expressed for the purposes of this calculation as
1.08) (calculated as an annual rate and adjusted to the extent the
Calculation Period is greater or shorter than one year).
"B" is:
(i) in respect of the first Calculation Period, the Net Issue
Proceeds; or
(ii) in respect of each subsequent Calculation Period, the sum
of this calculation as at the end of the immediately preceding
Calculation Period: plus (where sum is positive) or minus (where
such sum is negative) the Net Capital Change attributable to shares
issues and repurchases in all preceding Calculation Period (the
amount in this paragraph (b) being the "Aggregate NCC"), in each
case, plus (where such sum is positive) or minus (where such sum is
negative) the sum of:
(x) in respect of each share issue undertaken in the relevant
Calculation Period being assessed, an amount equal to the Net
Capital Change attributable to that share issue multiplied by the
sum of the number of days between admission to trading of the
relevant shares and the end of the relevant Calculation Period
divided by 365 (such amount being the "issue adjustment"),
minus
(y) in respect of each repurchase or redemption of shares
undertaken in the relevant Calculation Period being assessed, an
amount equal to Net Capital Charge attributable to that share
purchase or redemption multiplied by the number of days between the
relevant disbursement of monies to fund such repurchase or
redemption and the end of the relevant Calculation Period divided
by 365 (such amount being the "reduction adjustment"),
"C" is the sum of:
the issue adjustment for the Calculation Period;
the reduction adjustment for the Calculation Period; and
the Aggregate NCC multiplied by -1.
"Net Capital Change" equals I minus R where:
"I" is the aggregate of the net proceeds of any share issue over
the relevant year (other than the first issue of ordinary
shares);
"R" is the aggregate of amounts disbursed by the Company in
respect of the share redemptions or repurchases over the relevant
period.
"High Water Mark" means the Adjusted Net Asset Value as at the
end of the Calculation Period in respect of which a performance fee
was last earned or if no performance fee has yet been earned, an
amount equal to the Net Issue Proceeds (as such term is defined in
the prospectus); and
"Calculation period" means each twelve-month period ending on 30
September, except that the first Calculation Period shall be the
period commencing on Admission and ending on
30 September 2019
Under the terms of the portfolio management agreement, any
accrued and unpaid performance fees will crystallise and become
payable to MGI 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 2020, the Company had exceeded the High Water
Mark and Performance Hurdle and an accrual of GBP32,608,000 (2019:
GBP103,000) for performance fees has been reflected within these
Audited Financial Statements.
An amount of GBP32,710,000 (2019: GBP103,000 ) was outstanding
and due to MGI in respect of performance fee due as at 30 September
2020.
7. Other expenses
2020 2019
GBP'000 GBP'000
Directors' fees 208 208
Directors expenses 1 2
Administration fee 125 67
AIFM fee 147 69
Auditor's remuneration for:
- audit fees 74 66
- non-audit fees 53 43
Secretarial fees 36 32
Printing fees 36 4
Registrars' fees 20 19
Listing fees 18 16
FCA fees 11 6
Legal fee and professional fees
- ongoing operations 147 42
- purchases 869 445
Depositary fees 36 16
Directors' liability insurance 33 9
Secretarial fees 83 38
--------
1,897 1,082
-------- --------
8. Finance costs
2020 2019
GBP'000 GBP'000
Bank interest payable - 1
- 1
---------- --------
9. (Losses) / gains per Ordinary Share
30 September 2020 30 September 2019
Net return Per share Net Per share
return
GBP'000 pence GBP'000 pence
Revenue return (3,694) (1.10) (1,440) (0.97)
Capital return 164,106 48.73 12,704 8.56
160,412 47.63 11,264 7.59
------------ -------------- ---------------------- ------------
Weighted average number
of Ordinary Shares 336,742,424 148,399,390
10. Dividends
The Board has not declared a dividend (2019: GBPnil).
11. Investments held at fair value through profit or loss
2020 2019
GBP'000 GBP'000
Opening book cost 157,591 -
Opening investment holding gains 12,449 -
Opening valuation 170,040 -
Movements in the year/period:
Purchases at cost 258,453 157,591
Sales - proceeds (cost of disposal GBP11,565) (19,632) -
Net gains on investments held at fair value
through profit or loss 197,426 12,449
Closing valuation 606,287 170,040
--------- --------
2020 2019
GBP'000 GBP'000
Closing book cost 404,480 157,591
Closing investment holding gains 201,807 12,449
Closing valuation 606,287 170,040
--------- --------
Movement in unrealised gains during the
year/period 197,199 20,566
Movement in unrealised losses during the
year/period (7,841) (8,117)
Profit on sale of investments 8,068 -
197,426 12,449
--------- --------
12. Cash and cash equivalents
2020 2019
GBP'000 GBP'000
Cash and cash equivalents comprise of the
following:
Cash at bank 15,559 189,670
Cash equivalents - UK treasury bills - 22,995
15,559 212,665
-------- --------
13. Other receivables
2020 2019
GBP'000 GBP'000
Prepayments and accrued income 267 82
267 82
-------- --------
14. Unsettled trades
The payable in respect of unsettled trades relates to the amount
due for the purchase of You & Mr Jones on 30 September
2020.
15. Share capital
No of
shares GBP'000
Ordinary Shares at no par value
Issue of Management Shares 1 -
Issue of shares on 6 November 2018 100,000,000 100,000
Issue costs - (1,144)
Issue of shares on 18 April 2019 90,909,091 100,000
Issue costs - (1,152)
Issue of shares on 24 September 2019 145,833,333 175,000
Issue costs - (2,338)
Redemption of Management Shares (1) -
Ordinary Shares at no par value 336,742,424 370,366
Issue costs - 1
At 30 September 2020 336,742,424 370,367
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.
The Company was incorporated on 3 September 2018 with an issued
share capital of GBP1 represented by 1 Management Share with a
nominal value of GBP1. The Management Share was redeemed
immediately following admission of the Ordinary Shares on 6
November 2018.
16. Net Asset Value per Ordinary Share
The Net Asset Value per Ordinary Share and the Net Asset Value
at the year end calculated in accordance with the Articles of
Incorporation were as follows:
NAV NAV NAV NAV
per attributable Per attributable
share share
pence GBP'000 pence GBP'000
Ordinary Shares:
basic and diluted 160.97 542,043 113.33 381,630
------- -------------- ----------- --------------
The Net Asset Value per Ordinary Share is based on 336,742,424
Ordinary Shares, being the number of Ordinary Shares in issue at
the year end.
17. 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 2020 Level Level Level Total
1 2 3
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
-------- -------- -------- --------
At 30 September 2019 Level Level Level Total
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
Unquoted equity / Convertible
debt - - 170,040 170,040
- - 170,040 170,040
-------- -------- -------- --------
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 2020
Fair Value Valuation Significant Range Sensitivity Sensitivity to
as at 30 September Technique Unobservable % changes in
2020 (GBP000s) Inputs significant
unobservable inputs
--------------------- --------------------- ------------ --------------- --------------------
115,474 Comparable Selection of 15-30% 10% If input comparable
Company performance comparable companies company performance
changed by +/- 10%,
the fair value
would
change by
+/-1,975,506
--------------------- --------------------- ------------ --------------- --------------------
185,809 Market approach EV/LTM revenue 1.8-13.5x 10% If EV/LTM multiples
using comparable multiple changed by +/- 10%,
traded multiples 13.8-15.4x 10% the fair value
EV/EBITDA Multiple would change by +/-
9,548,694
If EV/ EBITDA
multiples changed
by +/-
10%, the fair value
would change by
+/-5,069,250
--------------------- --------------------- ------------ --------------- --------------------
69,640 Discounted Discount Factor 12% 1% If discount factor
Cash Flow increased by 1%,
the
value of the
companies in this
group
would reduce by
8,190,000, if the
discount
factor decreased by
1%, the value of
the companies in
this group would
increase
by 14,691,000
--------------------- --------------------- ------------ --------------- --------------------
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 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 2019
Fair Value as at Valuation Technique Significant Unobservable Range Sensitivity to changes
September 2019 (GBP000s) Inputs in significant
unobservable inputs
------------------------- ------------------------- ---------- -------------------------
19,840 Market approach using EV/LTM revenue multiple 1.4-6.0x
comparable traded Percentage change in (12.85%) If the EV/LTM revenue
multiples share price of multiple were to
Weighted market based comparable listed 10% increase, the value
approach and asset based companies would increase.
approach Discount rate to account 75:25 If the share price of
for liquidity comparable listed
Weighting of EV/LTM companies were to
revenue multiple and increase, the value
liquid assets would increase.
If the discount applied
were to increase, the
value would decrease.
If the weighting
attributable to the
market-based approach
were to increase, the
value would
increase; conversely if
the weighting
attributable to the
asset- based approach
were to increase,
the value would
decrease.
------------------------- ------------------------- ---------- -------------------------
150,200 Recent transaction price N/A N/A N/A
------------------------- ------------------------- ---------- -------------------------
The Company has an established control framework with respect to
the measurement of fair values. This includes a valuation team that
has overall responsibility for overseeing all significant fair
value measurement, including Level 3 fair values.
The valuation team regularly reviews significant unobservable
inputs and valuation adjustments If third party information, such
as pricing services, is used to measure fair vales, then the
valuation team 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:
2020 2019 Level Total
3
GBP'000 GBP'000 GBP'000 GBP'000
Level Level Level Level
1 1 3 3
Opening Balance - - 170,040 -
Transferred to Level
1 64,306 - (64,306) -
Purchases 14,442 - 244,011 157,591
Sales - - (19,632) -
Total gains included
in net gains on investments
in the statement of comprehensive
income
- on assets sold - - -
- on assets held at year
/ period end 15,465 - 173,893 12,449
-------- -------- --------- --------
94,213 - 512,074 170,040
-------- -------- --------- --------
The change in unrealized gains or losses (net gain) for the
period included in the Statement of Comprehensive Income relating
to those assets and liabilities held at the reporting date amount
to GBP140,163,879 (2019: GBP12,499,000).
The transfer 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
financial instrument will fail to discharge an obligation or
commitment that it has entered into with the Company; and
(iii) liquidity risk, being the risk that the Company will not
be able to meet its liabilities when they fall due. This may arise
should the Company not be able to liquidate its investments.
Other price risk
The management of price risk is part of the 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 2020, the impact on the net asset value would have been
GBP60,628,682 (2019: GBP17,004,041). 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 2020 the financial assets and financial
liabilities are exposed to interest rate risk as shown below:
Greater
In one year than 2020
or less one year Total
GBP'000 GBP'000 GBP'000
Convertible loan note (fixed
interest rates) 17,600 - 17,600
Cash and cash equivalents (daily
interest rate) 15,559 - 15,559
Total 33,159 - 33,159
------------ ---------- --------
As at 30 September 2019 the financial assets and financial
liabilities are not exposed to interest rate risk as shown
below:
Greater
In one year than 2019
or less one year Total
GBP'000 GBP'000 GBP'000
Convertible loan note (fixed
interest rates) 7,500 - 7,500
Cash and cash equivalents (fixed
interest rate) 212,665 - 212,665
Total 220,165 - 220,165
------------ ---------- --------
Liquidity and interest risk tables
The following tables detail the Company's remaining contractual
maturity for its financial assets and liabilities.
Interest Year 1 Over
rate % Year 1 - 2 2 years Total
GBP'000 GBP'000 GBP'000 GBP'000
2020
Assets
Convertible 2% fixed
loan note (notional) rate 17,600 - - 17,600
Daily bank
Cash rate 15,559 - - 15,559
Interest
Other receivables free 267 - - 267
33,426 - - 33,426
--------- -------- --------- --------
Interest Year 1 Over
rate % Year 1 - 2 2 years Total
GBP'000 GBP'000 GBP'000 GBP'000
2019
Assets
UK treasury 0% fixed
bills rate 22,995 - - 22,995
Convertible 2.5% fixed
loan note (notional) rate 7,500 - - 7,500
Daily bank
Cash rate 189,670 - - 189,670
Interest
Other receivables free 82 - - 82
220,247 - - 220,247
-------- -------- --------- --------
Interest
rate Year 1 Over
% Year 1 - 2 2 years Total
2020
Liabilities
Interest
Current liabilities free 80,070 - - 80,070
------- ------- --------- -------
80,070 - - 80,070
------- ------- --------- -------
Interest
rate Year 1 Over
% Year 1 - 2 2 years Total
2019
Liabilities
Interest
Current liabilities free 1,157 - - 1,157
------- ------- --------- ------
1,157 - - 1,157
------- ------- --------- ------
Foreign currency risk
The Investment Advisor 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:
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 - - -
321,964 13,664 232 -
------------ -------- -------- ----------
2019
Investments Cash Debtors Creditors
GBP'000 GBP'000 GBP'000 GBP'000
US dollar 48,124 6 - -
Swedish krona 39,574 - -
87,698 6 - -
------------ -------- -------- ----------
During the year the pound sterling weakened by an average of 2%
against all of the currencies in the investment portfolio (weighted
for exposure at 30 September 2020). 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
GBP29,269,000 (2019: GBP7,973,000). 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 GBP35,774,000 (2019: GBP9,745,000). 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. MGI 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
represents 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:
2020 2019
GBP'000 GBP'000
Convertible loan note 35,018 3,284
Cash and cash equivalents 15,559 212,665
Other receivables 232 57
33,391 216,006
-------- --------
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 GBP1,894,628, $60,986 and EUR15,010,011 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 80% (2019: 45%)of
the net assets as at 30 September 2020.
The Company's liquidity risk is overseen by MGI in accordance
with established policies, procedures and governance structures in
place. Cash flow forecasting is monitored by MGI 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
3 and Between
Up to 12 1 and
3 months months 5 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)
---------- --------- --------- ---------
The maturity profile of the Company's current assets and
liabilities is presented in the following table.
Between
3 and Between
Up to 12 1 and
3 months months 5 years Total
2019 GBP GBP GBP GBP
Assets
UK treasury bills 22,995 - - 22,995
Convertible loan note
(notional) - 7,500 - 7,500
Cash 189,670 - - 189,670
Other receivables 82 - - 82
Liabilities
Other payables (1,157) - - (1,157)
Total 211,590 7,500 - 219,090
---------- -------- --------- --------
Capital management objectives, policies and procedures
The structure of the Company's capital is described in note 15
and details of the Company's reserves are shown in the Statement of
Changes in Equity on page 60.
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
Advisor, 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 Advisor 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.
18. Related parties
MGI continues to be the Investment Advisor to the Company. The
relationship is governed by an agreement dated 11 October 2018.
30 September 30 September
2020 2019
GBP'000 GBP'000
Management fee charged by MGI:
Total management fee charged 2,084 414
Management fee outstanding 631 182
Performance fee charged by MGI:
Total performance fee charged 32,608 103
Performance fee outstanding 32,710 103
Directors' fees 208 208
Total d irectors' fees charged
Directors' fees outstanding - 52
As at 30 September 2020 the following Directors have holdings in
the Company:
Number of % Ordinary Shares
Ordinary Shares issue as at 30 September
Director 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 MGI's sub-funds hold an investment in the Company.
The Board is notified at the quarterly board meetings about any
transaction in relation to the sub-funds by MGI's risk and
compliance report.
Number
of Shares Value
holdings purchased Shares sold of holdings
during during during 30 September
the period the period the period 2020
GBP'000
Related party
Merian UK Smaller Companies
Focus Fund 5,520,882 - - 8,005
Merian UK Specialist
Equity Fund 8,112,820 - - 11,764
Merian UK Mid-Cap Fund 51,451,305 - - 74,604
Merian UK Smaller Companies
Fund 14,601,552 - - 21,172
Total 79,686,559 - - 115,545
------------ ------------ ------------ --------------
As announced at the time of the placing of 26 September 2019,
our intention was to use approximately 50% of the proceeds of the
capital raise to scale up exposure to a number of existing
portfolio holdings. This was achieved via the acquisition of
additional interests in those investments from the open-ended UK
small and mid-cap equity funds managed by Merian Global Investors,
as set out below:
(i) GBP38.3m of additional shares in TransferWise Limited
(GBP35m in October 2019 and GBP3.3m in November 2019);
(ii) GBP20.2m in additional shares in The Hut Group in October 2019; and
(iii) GBP11.6m in additional shares in Graphcore Limited in December 2019.
19. Post balance sheet events
The Company announced on 6 October 2020 that it has successfully
raised gross proceeds of GBP95,000,000 pursuant to the Placing and
the Primary Bid Offer.
On 19 October 2020, the Company completed a GBP5,000,000 follow
on investment in Sorted Holdings Limited.
On 4 November 2020, the Company acquired additional convertible
loan notes in FinanceApp AG (wefox) at a total cost of
EUR15,000,000.
On 13 November 2020 and 1 December 2020, the Company made
additional follow-on investments in Secret Escapes of GBP4,000,000
and GBP1,800,000 respectively.
On 25 November 2020, the Board of the Company announced a
proposed change of its registered name to Chrysalis Investments
Limited following the recent acquisition of Merian Global Investors
Limited by Jupiter Fund Management plc.
On 16 December 2020, the Company acquired additional convertible
loan notes in FinanceApp AG (wefox) at a total cost of
EUR10,000,000.
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 future financial year.
Corporate Information
Directors
Andrew Haining, Chairman
Anne Ewing
Simon Holden
Stephen Coe (Senior Independent Director) (*)
Tim Cruttenden
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
Investment Advisor
Merian Global Investors (UK) Limited
The zig Zag Building
70 Victoria Street
London, SW1E 6SQ
Financial Advisor and Corporate Broker
Liberum Capital Limited
Ropemaker Place Level 12
25 Ropemaker Street
London, EC2Y 9LY
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
* Appointed SID on 14 January 2020
Depositary
Citibank Europe plc, UK Branch
Citigroup Centre
Canada Square
Canary Wharf
London, E14 5LB
English Legal Advisor to the Company
Travers Smith LLP
10 Snow Hill
London, EC1A 2AL
Guernsey Legal Advisor 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, GY11WR
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)
Maitland Institutional Services Ltd (MISL) acts as AIFM of the
Company, providing risk management services to the Company.
The AIFM is required by the Alternative Investment Fund Managers
Directive and all applicable rules and regulations implementing the
AIFM Directive in the UK (the "AIFM" Rules):
-- to make the financial report available to investors and to
ensure that the financial report is prepared in accordance with
applicable accounting standards, the Company's articles of
incorporation and the AIFM Rules and that the financial 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 financial 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 AIFM Directive, the AIFM is required to stipulate how
much it pays to its staff, in relation to fixed and variable
remuneration and how much, in relation to the Company, is firstly
attributed to all staff and those that are deemed, under the
directive, to have an impact on the risk profile of the
Company.
The table provided below has been calculated in accordance with
the Maitland remuneration policy taking into account fees charged
during the year for the Company as Alternative Investment Manager.
Our most recent remuneration policy which contains further
information on the fees charged for all funds for which we act as
Alternative Investment Manager, are available from our website
www.maitlandgroup.com .
Year ending 30th September Number of Fixed Variable Total
2020 Beneficiaries
Total remuneration paid 85 GBP5,516,000 GBP42,920 GBP5,558,920
by the
AIFM during the year
--------------- ------------- ---------- -------------
Remuneration paid to 4 GBP909,000 GBP2,500 GBP911,500
employees who are material
risk takers
--------------- ------------- ---------- -------------
During the year ending 30 September 2020 there was zero leverage
used in the Portfolio. 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.
[1] As of 30 September 2020
2 21.8% premium as of 27 January 2020.
3 Based on last 12 months revenue growth to September 2020 and
holding percentages as of year end.
[4] At year end, investible assets stood at approximately GBP575
million (calculated as total investments of GBP606.3m less the You
& Mr Jones investment at period end (GBP46.4 million), which
was subsequently funded by the October 2020 share placing, add cash
of GBP15.6 million). Given the GBP375 million raised to that date,
this implies revaluation performance has contributed approximately
GBP200 million, or roughly 35%, to total asset growth.
[5] Other net current liabilities include GBP46,440,000
investment payable for the You & Mr Jones investment, which was
concluded on 30 September 2020, but funded post year end.
[6] As You & Mr Jones completed on 30 September 2020 and was
funded by the proceeds of the raise received in early October 2020,
this is calculated assuming the net raise proceeds were received on
30 September 2020.
[7] Defined in this instance as being over 10% of investible
assets, prior to the GBP175,000,000 equity raise.
[8] Portfolio blended revenue growth based on year end
weightings and trailing twelve months sales growth year-on-year to
September 2020.
[9] Source: Starling Bank CEO letter August 2020
[10] Source: Zenith Optimedia 2019
[11] As of 31 December 2020
[12] Defined as cash plus liquid assets GBP150m is as of 31
December 2020
[13] Section 172 of the UK's Companies Act 2006, imposes on a
director the duty to 'act in a way he considers, in good faith,
would be most likely to promote the success of the company for the
benefit of its members as a whole' and, in so doing, to have regard
to a series of factors listed in the section which refer to the
promotion of social, environmental and governance objectives.
[14] The first Management Engagement Committee meeting and
Remuneration and Nomination Committee meeting were held on 14
January 2020
[15] For the period from first admission until the date on which
90% of the net proceeds were invested, directly or indirectly, the
value attributable to any investments other than equity or
equity-related investments in quoted or unquoted portfolio
companies held for investment purposes (including cash, near cash
investments or highly liquid investments immediately convertible
into cash) was excluded from the calculation of Net Asset Value
("NAV") for the purposes of determining the management fee. This
period expired on 1 October 2020.
[16] Sale of shares in Transferwise
[17] Notional and accrued interest
[18] Credit rating obtained from Standard & Poor's
(S&P). S&P is a leading index provider and data source of
independent credit ratings.
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