TIDMMERI
RNS Number : 9117D
Merian Chrysalis Investment Co. Ltd
28 June 2019
MERIAN CHRYSALIS INVESTMENT COMPANY LIMITED
(the "Company")
RELEASE OF INTERIM FINANCIAL STATEMENTS ("Interim Report")
LEI: 213800F9SQ753JQHSW24
(Classified Regulated Information, under DTR 6 Annex 1 section
1.2)
The Directors of the Company announces the interim results for
the period 03 September 2018 (inception) to 31 March 2019. A copy
of this report is attached below and will shortly be available on
the Company's website at www.merian.com/Chrysalis
http://www.rns-pdf.londonstockexchange.com/rns/9117D_1-2019-6-28.pdf
-Ends-
For further information, please
contact:
Merian Global Investors:
Amelie Shepherd +44 (0) 20 7332 7500
Liberum:
Gillian Martin / Owen Matthews +44 (0) 20 3100 2222
Maitland Administration (Guernsey)
Limited:
Aimee Gontier / Elaine Smeja +44 (0) 1481 749364
Chairman's Statement
Introduction
I am pleased to present the first Interim Report of Merian
Chrysalis Investment Company Limited ("the Company" or "Merian
Chrysalis") since the Company commenced trading on the London Stock
Exchange's Main Market for listed securities on 6 November
2018.
This report covers the period from incorporation on 3 September
2018 to 31 March 2019. Investment Objective
The Company's Investment Objective is to generate long-term
capital growth through investing in a portfolio consisting
primarily of equity or equity-related investments in unquoted
investments.
Share capital
The Company raised gross proceeds of GBP100m at its launch. As
at 31 March 2019 there were a total of 100 million Ordinary Shares
in issue. Post period end, on 16 April 2019, GBP100m was raised and
a further 90,909,091 Ordinary Shares were issued.
Performance
The Net Asset Value ("NAV") at launch was 98.85p. As at 31 March
2019 the NAV was 108.41p. NAV total return for the period was
9.66%.
Portfolio
I am pleased to report that our rate of capital deployment was
faster than anticipated, the net proceeds of the IPO was 70%
invested as at 31 March 2019. As at 31 March 2019, in addition to
the initial portfolio comprising investments in TransferWise
Limited and Secret Escapes Limited, further investments had been
made into The Hut Group Limited, Graphcore Limited and Growth
Street Limited. A further investment in Starling Bank was announced
during the period, on 13 February 2019. This transaction completed
post the period end on 10 April 2019, bringing the company to 85%
fully invested.
Following the raising of additional capital on 16 April 2019, we
expect to notify the market on further investments in due course as
Merian Global Investors (UK) Limited, our Investment Advisor,
continues to evaluate opportunities currently in companies across
various market sectors; there are several exciting opportunities
going through the due diligence process.
The Investment Advisor's report reviews the market and provides
more detail on the portfolio.
Share price
The share price remained relatively stable from IPO to
mid-February despite some volatility in the UK market. From
mid-February 2019 to 31 March 2019 the share price steadily
increased. As at 26 June 2019, the latest practicable date before
the publication of these financial statements, the Company's share
price was 122.50 pence per share, representing a 13% premium to the
last published NAV per share. No shares have been bought back in
the period under review.
Dividends
The Directors have resolved not to pay a dividend. The Company
is focused on providing capital growth, and given the investment
opportunities in the sector, we do not anticipate recommending to
pay a dividend in the near future.
Interim Report
In the interests of cost control, Interim Reports to
shareholders will only be available on the Company's website. These
can be viewed and downloaded at www.merian.com/Chrysalis. Annual
Reports, the first being for the period ending 30 September 2019,
will be available on the website.
Outlook
In a short period of time, Merian Chrysalis has built real
momentum. The investment proposition is resonating strongly with
late-stage private companies that are seeking to evolve their
shareholder base. The opportunity for a crossover investment
strategy, investing in private companies and helping them
transition on to the public markets, in the UK and across Europe is
very compelling. Investors are recognising the strength of this
offering, as evidenced by their support for the recent placing. I
am confident that Merian Chrysalis can build upon its strong start
and become a very meaningful player in European private capital
markets.
Andrew Haining
Chairman
28 June 2019
Board Members
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 may delegate certain functions to other parties
such as the Alternative Investment Fund Manager ("AIFM"), the
Investment Advisor, the Administrator, the Company Secretary, the
Depositary and the Registrar. In particular, the Directors have
delegated responsibility for day-to-day management of the
investments comprising the Company's portfolio to the Investment
Advisor. The Directors have responsibility for exercising
supervision of the Investment Advisor.
Andrew Haining (Chairperson) (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, including
Chairman of Praxis IFM Group Limited and Chairman of Aurigny, the
state-owned Channel Islands airline.
Stephen Coe (independent)
Stephen is currently a director and Chairman of the Audit
Committee of Leaf Clean Energy Company Limited and Weiss Korean
Opportunities Fund 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 operation roles at Candover
Investments then Terra Firma Capital Partners. Since 2015, Simon
has become an active independent director to listed alternative
investment companies (HICL Infrastructure Company Limited,
Hipgnosis Songs Fund Limited, Trian Investors 1 Limited and Merian
Chrysalis Investment Company Limited), private equity funds and
trading company Boards, including a trading asset owned by the
States of Guernsey.
Simon holds the DipIoD in Company Direction from the Institute
of Directors, graduated from the University of Cambridge with an
MEng and MA in Manufacturing Engineering and is an active member of
Guernsey's GIFA, NED Forum and IP Commercial Group.
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 a
fiduciary licensee. Anne is self-employed and has a number of
non-executive directorships and chairman roles in investment
companies, banks and trust companies in the Channel Islands and in
London. Anne is currently a Senior Independent Director on the LSE
listed Alcentra Floating Rate Income Fund Limited.
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.
Portfolio Statement
As at 31 March 2019 Value % of net
Company Holding (no. of shares) (GBP'000) assets
Transferwise Limited 391,170 26,416 24.37
Graphcore Limited 5,823,289 19,093 17.61
Secret Escapes Limited 106,279 14,985 13.82
The Hut Group Limited 23,284 10,478 9.67
Growth Street Limited 790,513,834 5,000 4.61
---------- ------------
Total Investments 75,972 70.08
Cash and other net assets 32,438 29.92
---------- ------------
Total net assets 108,410 100.00
---------- ------------
Investment Advisor's Report
Overview
The period in question saw a substantial level of corporate
activity. Despite weak stock markets, the Company successfully
raised GBP100m of gross proceeds from a range of investors and held
its IPO on 6 November 2018.
The Company was seeded with the initial portfolio, comprising
shares in TransferWise Limited and Secret Escapes Limited. The
Company announced a second purchase of shares in The Hut Group
Limited in 2018. As a result, the Company had deployed
approximately 48% of the gross proceeds of the IPO.
Having lined up a strong pipeline of opportunities pre-IPO, the
Company made an investment in Graphcore Limited in late December,
and has since invested in Growth Street Limited and Starling Bank.
As of March 2019, the Company had invested 70% of gross proceeds of
the IPO, meeting its target of being substantially deployed earlier
than planned.
In April 2019, the Company raised a further GBP100m of gross
proceeds in a subsequent placing to continue to pursue
opportunities. Pleasingly, this raise saw follow-on commitments
from existing investors, as well as new investors coming in.
Market
The market backdrop over the period since incorporation
represented a tale of two halves. Global equities reported sharp
declines through Q4 2018, with investors concerned about slower
economic growth, rising interest rates, global trade and a hard
Brexit. A series of profit warnings from high profile stocks such
as Apple and NVIDIA led to increased uncertainty in the technology
sector and also prompted a sell-off in growth stocks. Equities
recovered tentatively through Q1 2019, despite ongoing political
uncertainty, as central banks stepped away from tighter monetary
policy and China-US trade disputes eased.
Market conditions in the private arena continue to feel buoyant.
In the UK unlisted market, 19 comparative deals closed in Q4 2018,
similar to Q3 2018 with 21 deals; 87 deals were completed in 2018.
These deals have the characteristics of >$20m in deal size in
late-stage or expansion rounds and being UK based only. In early
2019, anecdotally we noted some talk of private companies trying to
access funding with more urgency, in anticipation of further
volatility; this now appears to have abated with public markets
settling down. Generally, the types of business the Company is
targeting are typically more immune to the economic cycle than the
wider stock market, given the high levels of structural growth they
display.
Investment objective and rationale
The objective of the Company is to provide investors with access
to the returns available from investing in later-stage, private
companies with long-term growth potential, an investment class that
has traditionally been difficult to access for individual
investors. The Company does not consider venture capital-type (VC)
start-ups.
MGI (UK) Ltd, the Investment Advisor, has realised substantial
capital returns through investments in listed securities over
recent years. However, it has become clear that not all companies
are choosing a public listing to fund their growth. Instead, they
are staying private for longer. Between 2011 and 2018, the average
age of a private company investment at exit almost doubled to
approximately 10 years. This trend is also visible in the falling
number of UK IPOs. Between 1997 and 2007, there was an average of
217 IPOs per annum. During the period from 2011 to 2018 this figure
fell to 94.
MGI (UK) Ltd believes there are a number of possible reasons for
this trend, including:
-- capital-light business models;
-- the "value curve" trade-off - where companies look to
maximise valuation for a given level of growth;
-- greater flexibility offered by private markets;
-- a growing private securities market with increased liquidity
As companies have stayed private for longer, there has been a
growing focus on cultivating the optimum shareholder structure as
they mature and consider a future IPO. This has driven an interest
in "crossover" investors. Most late-stage private companies are
backed by VC, which are natural sellers of equity at a future IPO.A
crossover investor that can operate in both the public and private
market is extremely attractive to investee companies at this stage
of their development as it can enable a company to de-risk a future
IPO process, by aligning itself with a natural buyer of listed
equity. The Investment Advisor believes that the Company, due to
MGI's presence in the public market, is one of only a few credible
entities that has relevance as a crossover investor in the UK
market and the ability to provide permanent capital.
Portfolio
The strategy of the Company is to invest only in what it
believes to be high quality businesses, with high growth potential.
At IPO, the stated intention was to invest the initial proceeds in
a portfolio of 6-8 holdings - to ensure a relevant ticket size and
timely deployment of proceeds - and then to return to the market to
raise money to further build out the number of holdings.
Given that full sector diversification is difficult based on 6-8
holdings, there was an expectation of a relatively concentrated
portfolio initially, that would subsequently become more
diversified over time.
We look for investments that display some or all of the
following:
-- investee companies to typically have demonstrated proof of
concept - usually implying revenue generation credentials;
-- ability to generate growth rates substantially better than an average UK plc;
-- ability to protect these growth rates for a substantial period of time;
-- where valuation appears attractive, particularly against a
listed market backdrop, giving an ability to earn a multiple of the
entry valuation; and
-- ability to earn superior returns at scale
Typically these businesses are at an advanced stage of private
ownership and are beginning to consider an IPO in two to five
years' time. In addition, the maturity of these opportunities, as
compared to VC/start-ups, should substantially decrease stock
specific risk.
As at the end of March 2019, the portfolio consisted of five
holdings. The weighted average revenue growth rate in 2018 of the
five companies within the portfolio was in excess of 50% over
2017.
The Company invests and manages its assets with the objective of
spreading risk. No single investment will represent more than 20%
of gross assets, calculated at the time of investment. Transferwise
Limited and Graphcore Limited are the Company's two largest
investments; collectively they represent 42% of the portfolio.
TransferWise Limited
TransferWise Limited was founded with the aim of reducing fees
associated with sending money across borders. With a simple money
transfer platform and borderless accounts, TransferWise Limited
makes it quick and easy for individuals who travel, live and work
internationally to manage their money. Businesses can use
TransferWise Limited to pay suppliers or employees overseas,
request payments from customers and transfer funds between their
own accounts in different countries. Over four million people use
TransferWise Limited to transfer over GBP3bn every month, saving
themselves over GBP3m every day.
The Company invested approximately US$22m in TransferWise
Limited on admission.
Secret Escapes Limited
Secret Escapes Limited 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.
The Company invested approximately GBP13m in Secret Escapes
Limited on admission.
The Hut Group Limited
The Hut Group Limited is an ecommerce business that operates a
highly scalable, end-to-end proprietary technology platform
powering sales of its own brands and third-party brands online. The
firm has invested significantly in its infrastructure, technology
platform and brands and is one of the world's largest online beauty
and wellbeing businesses.
In December 2018, the Company announced an investment of
approximately GBP9.5m in The Hut Group Limited.
Graphcore Limited
Graphcore Limited is a leading artificial intelligence processor
business, which has developed the Intelligence Processing Unit
('IPU') and the related Poplar(R) graph software toolchain. The IPU
is a processor that has been designed from the ground up for
machine intelligence applications and supports the training and
inference of deep learning models, as well as other machine
learning approaches. Based in Bristol, Graphcore Limited's products
can improve the efficiency and performance of artificial
intelligence applications by between 10 to 100 times, compared to
existing hardware solutions.
The Company invested approximately US$25m in a US$200m series D
funding round conducted in December 2018.
Growth Street Holdings Limited
Growth Street Holdings Limited has developed an innovative
peer-to-peer ("P2P") product specifically targeted at UK SMEs. The
firm's proprietary technology platform integrates with a number of
data sources to provide unmatched speed, flexibility and credit
monitoring for SMEs. Growth Street Holdings Limited Holdings
reconciles accounting, bank and credit data on a daily basis which
enables it to streamline the credit decision process and provide
ongoing credit monitoring and credit line adjustment. Its flagship
business finance facility, GrowthLine, is a highly flexible
revolving line of credit designed to replace and extend bank
overdrafts and invoice financing. Growth Street Holdings Limited
has facilitated more than GBP80m of borrowing since launching in
2014.
The Company invested approximately GBP5m in a funding round
conducted in January 2019.
Pipeline and outlook
Starling Bank
In April 2019 The Company committed to invest approximately
GBP19m in a GBP60m series C funding round. The Company later noted
that Starling Bank was awarded a GBP100m grant from the RBS
capability and Innovation Fund.
Starling Bank is a digital challenger bank which has built a
scalable platform that delivers a range of financial services. 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.
Growth Street Holdings Limited
On 11 June 2019, a further investment was made in Growth Street
Holdings Limited with the purchase of GBP7.5m worth of convertible
loan notes which can be converted into Preference Shares at a later
date, conditional upon FCA approval.
Companies are typically staying private for longer. The
survivorship bias this generates means the late-stage private
growth companies the Company targets are getting bigger, in turn
implying they require larger capital investment to continue to
fulfil their growth aspirations. In addition, these businesses are
beginning to think harder about what type of capital they wish to
take. Many are now looking for peripheral benefits afforded by
strategic and value-add investors.
In addition, the proposition of crossover permanent capital also
offers potential investee companies a different type of money - one
that is not a forced seller at a possible future IPO. This is a
very attractive proposition, and one that has allowed the Company
access to a range of deals that are out of reach of the majority of
investors in this area of the market.
The encouraging result of this is that the traction the
crossover concept has gained has been increasing, with a
commensurate improvement in our early engagement with investment
prospects; possible co-investors; and the intermediary banking and
broking channels. As a result, the Company's Investment pipeline as
at 31 March 2019 included eight qualified leads at various stages
of due diligence, substantially better than that pre-IPO. Based on
success to date, the Company raised a further GBP100m in gross
proceeds in April to allow it to continue to execute, selectively,
on the pipeline.
Our job over the coming months is to select and identify the
deals that offer the best risk-adjusted returns for investors, with
quality of the investment thesis paramount. With funding available,
and a strong pipeline of opportunities, we are excited for
prospects of the Company.
Cautionary Statement
This interim management report has been prepared solely to
provide additional information to shareholders to assess the
strategies of the Company. The interim management report should not
be relied upon by any other party or for any other purpose.
The interim management report contains forward looking
statements. These statements are made by the Directors in good
faith based on the information available to them up to the time of
their approval of this report but such statements should be treated
with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying any such
forward-looking information.
Risks and Uncertainties
There are a number of 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
conformance with the Association of Investment Companies Corporate
Governance Code's requirements.
The principal risks to which the Company will be exposed in the
remaining six months of the financial year are given in note 16 to
the Unaudited Interim Financial Statements and below:
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; and
(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.
Other risks
(i) Brexit - The United Kingdom held a referendum on 23 June
2016 in which a majority of voters voted to exit the European Union
("Brexit"). On 29 March 2017, the UK triggered the formal process
to leave the European Union. The effects of Brexit will depend,
amongst other things, on any agreements the United Kingdom makes to
retain access to European Union markets either during a
transitional period or more permanently. Brexit could adversely
affect UK, European and worldwide economic and market conditions
and could contribute to instability in global financial and foreign
exchange markets.
The Company's ability to raise new capital could be hindered by
any heightened market volatility caused by Brexit in the shorter
term. Brexit could also adversely affect the operational,
regulatory, insurance and tax regime to which the Company is
currently subject and negatively impact the value of the Company
and its underlying investments and make accurate valuations of the
Company's shares and the investment interests comprising the assets
of the Company more difficult. ln the longer term, if any changes
to the national private placement regimes on which the Company
currently relies to raise capital from certain investors based in
the EEA arise as a result of Brexit or otherwise, this could
restrict the Company's ability to market its shares in the EEA,
which in turn may have a negative effect on marketing and liquidity
of the shares generally. Any of these effects of Brexit, and others
that the Directors cannot anticipate at this stage given the
political and economic uncertainty surrounding the nature of the
United Kingdom's future relationship with the European Union, could
adversely affect the Company's business, financial condition and
cash flows, including the ability of the Company to invest in
equity and equity-related securities issued by companies in the
European Union.
(ii) There can be no guarantee that the basis of calculation of
the value of the Company's investments will reflect the actual
value achievable on realisation of those investments. - A
significant proportion of the Company's portfolio will comprises
unquoted securities. Such investments can be more difficult to
value than quoted securities. The Company's investments in unquoted
securities will be valued in accordance with the valuation policy
adopted by the Board from time to time.
(iii) Investments may be difficult to realise - The Company
invests a significant proportion of its assets in securities that
are not readily tradable, are highly illiquid and have no public
market. These features may make it difficult for the Company to
sell its investments. Further, even where there are potential
purchasers, sales of investments made by the Company in unquoted
interests in portfolio companies may require the consent or
cooperation of other interested parties. A failure or delay to
obtain consent or cooperation of other interested parties may
restrict the ability of the Company to realise unquoted interests
in portfolio companies prior to an IPO by the relevant portfolio
company or other corporate transactions policy adopted by the Board
from time to time.
(iv) Investments outside the UK may be exposed to local legal,
economic, political, social and other risks - The Company is
expected to mainly invest in companies with a substantial presence
in the UK. Over time, the Company's investment portfolio may expand
to become exposed to companies established, or undertaking a
substantial part of their operations, in other geographical
locations. The laws and regulations of various jurisdictions in
which the Company may invest may impose restrictions that would not
exist in the UK. Such jurisdictions may have their own legal,
economic, political, social, cultural, business, industrial and
labour and environmental risks and investments made in such
jurisdictions may require significant government approvals under
corporate, securities, exchange control, foreign investment and
other similar laws and may require financing and structuring
alternatives that differ significantly from those customarily used
in the UK.
(v) The Company is reliant on the performance and retention of
key personnel - The Company will rely on key individuals at the
Investment Adviser to identify and select investment opportunities
and to manage the day-to-day affairs of the Company. There can be
no assurance as to the continued service of these key individuals
at the Investment Adviser. The death or departure of any of these
from the Investment Adviser without adequate replacement may have a
material adverse effect on the Company's business prospects and
results of operations. Accordingly, the ability of the Company to
achieve its investment objective depends heavily on the experience
of the Investment Adviser's team, and more generally on the ability
of the Investment Adviser to attract and retain suitable staff. The
Board will have broad discretion to monitor the performance of the
Investment Adviser or to appoint a replacement but the performance
of the Investment Adviser or that of any replacement cannot be
guaranteed.
Important events and financial performance
The important events that have occurred since incorporation
are:
Highlights 31 March 2019
Net Asset Value per share 108.41p
Share Price 112.00p
% of capital deployed 70%
The table below provides monthly performance information:
% change in
Price price since
Date p launch
03.11.18 98.85 0.0%
31.12.18 98.54 -0.3%
31.03.19 108.41 9.7%
The net profit for the period amounted to GBP9,554,000.
Further details of the Company's performance for the period are
included in the Investment Advisor's Report, which includes a
review of investment activity and adherence to investment
restrictions.
Premium
As per the diclosure in the Chairman's Statement, the share
price has been trading at a premium.
Related party transactions
Details of related party transactions are given in note 17 to
the Unaudited Interim Financial Statements.
Statement of Directors' Responsibilities
The Directors confirm that to the best of their knowledge:
-- the Unaudited Interim Financial Statements ("Financial
Statements") have been prepared in accordance with IAS 34 Interim
Financial Reporting and the Directors have elected to prepare
financial statements that comply with International Financial
Reporting Standards as adopted by the EU;
-- the interim management report (which includes the Chairman's
Statement, Interim Management Report and the Investment Advisor's
Report) includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the period from 3 September 2018 (date of incorporation) to
31 March 2019 and their impact on the Financial Statements, and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the period from 3 September 2018 (date of incorporation) to 31
March 2019 and that have materially affected the financial position
or the performance of the entity during that period.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website, and for the preparation and dissemination of
financial statements. Legislation in Guernsey governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Stephen Coe
Director
28 June 2019
Independent Review Report to Merian Chrysalis Investment Company
Limited
Conclusion
We have been engaged by Merian Chysalis Investment Company
Limited ("the Company") to review the Unaudited Interim Financial
Statements ("the Financial Statements") in the interim financial
report for the period from 3 September 2018 (date of incorporation)
to 31 March 2019 of the Company which comprises the Unaudited
Statement of Comprehensive Income, the Unaudited Statement of
Financial Position, the Unaudited Statement of Changes in Equity,
the Unaudited Statement of Cash Flows and the related explanatory
notes.
Based on our review, nothing has come to our attention that
causes us to believe that the Financial Statements for the period
from 3 September 2018 (date of incorporation) to 31 March 2019 do
not give a true and fair view of the financial position of the
Company as at 31 March 2019 and of its financial performance and
its cash flows for the period from 3 September 2018 (date of
incorporation) to 31 March 2019 in accordance with International
Financial Reporting Standards as adopted by the EU and the
Disclosure Guidance and Transparency Rules ("the DTR") of the UK's
Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the interim
financial report and consider whether it contains any apparent
misstatements or material inconsistencies with the information in
the Financial Statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The interim financial report is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for
preparing the interim financial report in accordance with IAS 34:
Interim Financial Reporting and the DTR of the UK FCA.
The Financial Statements included in this interim report have
been prepared in accordance with International Financial Reporting
Standards as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the Financial Statements in the interim financial report based on
our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement letter to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this 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 for our
review work, for this report, or for the conclusions we have
reached.
Barry Ryan
for and on behalf of KPMG Channel Islands Limited
Chartered Accountants, Guernsey
28 June 2019
Unaudited Statement of Comprehensive Income
For the period from 3 September 2018 (date of incorporation) to
31 March 2019
Revenue 2019 Capital Total
Notes GBP'000 GBP'000 GBP'000
Investments
Net gains on investments held at
fair value through profit or loss 11 - 11,463 11,463
Losses on currency movements (15) (15)
-------- -------------- --------
Net investment gains - 11,448 11,448
-------- -------------- --------
Interest income 5 114 114
-------- -------------- --------
Total income - 114 114
-------- -------------- --------
Investment management fees 6 (110) (1,617) (1,727)
Other expenses 7 (280) (280)
-------- -------------- --------
(Losses)/gains before finance costs
and taxation (390) 9,945 9,555
Finance costs 8 (1) (1)
-------- -------------- --------
(Losses)/gains before taxation (391) 9,945 9,554
Withholding tax expense - - -
-------- -------------- --------
Total (losses)/gains and comprehensive
income for the period (391) 9,945 9,554
-------- -------------- --------
(Losses)/gains per Ordinary Share
(pence) 9 (0.39) 9.95 9.56
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 form an integral part of these Financial
Statements.
There are no comparative figures for the period, as the Company
was incorporated on 3 September 2018 and commenced business,
following the admission of the Company's shares to trading on the
London Stock Exchange, on 6 November 2018. These are therefore the
first Interim Financial Statements produced by the Company.
Unaudited Statement of Financial Position
As at 31 March 2019
2019
Notes GBP'000
Non-current assets
Investments held at fair value through profit or loss 11
75,972
Current assets
Cash and cash equivalents 34,298
Other receivables 12 6
34,304
Total assets 110,276
Current liabilities
Other payables 13 (1,866)
Total liabilities (1,866)
Net assets 108,410
Equity
Share capital 14 98,856
Capital reserve 9,945
Revenue reserve (391)
Total equity 108,410
Net Asset Value per Ordinary Share (pence) 15 108.41
Number of Ordinary Shares in issue 100,000,000
Approved by the Board of Directors and authorised for issue on
28 June 2019 and signed on their behalf:
Stephen Coe
Director
The notes form an integral part of these Financial
Statements.
Unaudited Statement of Changes in Equity
For the period from 3 September 2018 (date of incorporation) to
31 March 2019
Share capital Capital Revenue
2019 reserve reserve Total
GBP'000 2019 2019 2019
GBP'000 GBP'000 GBP'000
For the period 3 September 2018
to 31 March 2019
At 3 September 2018 - - - -
Total gains/(losses) and comprehensive
income for the period - 9,945 (391) 9,554
Issue of Management Shares 1 - - 1
Redemption of Management Shares (1) - - (1)
Issue of Ordinary Shares 100,000 - - 100,000
Expenses of share issue (1,144) - - (1,144)
--------------------------- -------------- ---------- --------
At 31 March 2019 98,856 9,945 (391) 108,410
--------------------------- -------------- ---------- --------
The notes form an integral part of these Interim Financial
statements.
Unaudited Statement of Cash Flows
For the period from 3 September 2018 (date of incorporation) to
31 March 2019
2019
Notes GBP'000
Cash flows from operating activities
Bank interest paid (1)
Other expense payments (147)
Interest income 114
Purchases of investments 11 (64,509)
Sales of investments 11 -
--------
Net cash outflow from operating activities (64,543)
--------
Cash flows from financing activities
Issue of Ordinary Shares 100,000
Expenses of Ordinary Share issuance (1,144)
--------
Net cash inflow from financing activities 98,856
--------
Net increase in cash and cash equivalents 34,313
Cash and cash equivalents at beginning -
of period
Effect of foreign exchange (15)
--------
Cash and cash equivalents at end of
period 34,298
--------
Cash and cash equivalents comprise
of the following:
Cash at bank 1,315
Cash equivalents - UK Treasury Bills 32,983
--------
34,298
--------
The notes form an integral part of these Interim Financial
Statements.
Notes to the Unaudited Financial Statements
For the period from 3 September 2018 (date of incorporation) to
31 March 2019
1. Reporting Entity
Merian Chrysalis Investment Company Limited ("the Company") is a
closed-ended investment company, registered in Guernsey on 3
September 2018. The Company's registered office is 3rd Floor, 1 Le
Truchot, St Peter Port, Guernsey GY1 1WD. The Company's shares have
a premium listing on the London Stock Exchange's Main Market for
listed securities and commenced trading on 6 November 2018. The
Interim Financial Statements of the Company are presented for the
period from 3 September 2018 (date of incorporation) to 31 March
2019.
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 MGI (UK) Ltd during the period from 3
September 2018 to 31 March 2019. The administration of the Company
is delegated to Maitland Administration (Guernsey) Limited ("MAGL")
(the administrator).
2. Significant accounting policies
(a) Basis of accounting
The unaudited interim Financial Statements (the "Financial
Statements') have been prepared in accordance with IAS 34 Interim
Financial Reporting and the Directors have elected to prepare
Financial Statements that comply with International Reporting
Standards ("IFRS") as adopted by the European Union.
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
2018 is consistent with the requirements of IFRS, the directors
have sought to prepare the 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 Financial Statements.
The Directors believe that the Company has adequate resources to
continue in operational existence for at least 12 months from the
date of approval of these Financial Statements. In reaching this
conclusion, the Directors have considered the liquidity of the
Company's portfolio of investments as well as its cash position,
income and expense flows.
(c) Functional and presentation currency
The 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 Financial
Statements, the results and financial position of the Company are
expressed in pound sterling (GBP), and the presentation currency
for the Financial Statements.
(d) Segmental reporting
The chief operating decision maker is the Board of Directors.
The Directors are of the opinion that the Company is engaged in a
single segment of business with the primary objective of investing
in securities to generate capital growth for shareholders.
Consequently, no business segmental analysis is provided.
The key measure of performance used by the Board is the Net
Asset Value of the Company (which is calculated under IFRS).
Therefore no reconciliation is required between the measure of
profit or loss used by the board and that contained in these
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 cash held at
bank on call, on deposit and cash held as cash equivalents
including UK treasury bills.
Dividend income from investments is accounted for on an
ex-dividend basis, gross of applicable withholding taxes and is
recognised in the unaudited Statement of Comprehensive Income
within investment income when the Company's right to receive
payments is established.
(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.
(g) Dividends to shareholders
Dividends are recognised in the period 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 period. 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 or through profit or loss; and
-- those to be measured at amortised cost.
The classification depends on the entity's business model for
managing the financial assets and the contractual terms of the cash
flows.
At initial recognition, the Company measures a financial asset
at its fair value, plus, in the case of a financial asset not at
fair value, through profit or loss, transaction costs that are
directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at fair value through
profit or loss are expensed in profit or loss.
Financial assets held at amortised cost
Assets that are held in order to collect contractual cash flows
give rise to cash flows that are solely payments of principal and
interest are measured at amortised cost. These assets are
subsequently measured at amortised cost using the effective
interest method.
The Company has elected to apply the simplified approach
permitted by IFRS 9 in respect of trade and other receivables. This
approach requires expected lifetime losses to be recognised from
initial recognition of the receivables.
The Company's financial assets held at amortised cost include
trade and other receivables and cash and cash equivalents.
Financial assets at fair value through profit or loss
For investments actively traded in organised financial markets,
fair value will generally be determined by reference to Stock
Exchange quoted market bid prices at the close of business on the
valuation date, without adjustment for transaction costs necessary
to realise the asset.
In respect of unquoted instruments, 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 MGI (UK) Ltd's
valuation procedures are subject to review on a quarterly basis,
and updated as appropriate, in line with industry best practice. In
addition, MGI (UK) Ltd works with independent third-party valuation
firms, to obtain assistance, advice, assurance, and documentation
in relation to the ongoing valuation process.
MGI (UK) Ltd 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 (UK) Ltd 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 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 Unaudited 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
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
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.
Any gain or loss on derecognition is taken to the Unaudited
Statement of Comprehensive Income.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs.
Financial liabilities and equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
Financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs.
Financial liabilities are subsequently measured at amortised
cost using the effective interest method, with interest expense
recognised on an effective yield basis.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only
when, the Company's obligations are discharged, cancelled or they
expire.
(j) Cash and cash equivalents
Cash comprises cash and demand deposits. Cash equivalents, which
include bank overdrafts and 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.
(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 balance sheet 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 period or 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 period 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 Unaudited 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 in each year is transferred to
the Company's revenue reserve.
3. Use of estimates and critical judgements
The preparation of 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 Financial
Statements and the reported amounts of income and expenses during
the period. 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 period, except the valuation
of the unquoted investments detailed in note 16.
4. New and revised standards
The following accounting standards and their amendments were in
issue at the period end but will not be in effect until after this
financial year end. The Directors have considered the impact of
this accounting standard and it will have no impact on the
Financial Statements.
-- IFRS 16 Leases - effective 1 January 2019
5. Interest income
Interest income was earned from the UK treasury bills which are
held at amortised cost and interest accounted for using the
effective interest rate method.
6. Investment management fees
2019
GBP'000
Investment management fee 110
Investment Advisor's performance fee - charged to capital
1,617
Total management fee 1,727
Under the terms of the portfolio management agreement, MGI (UK)
Ltd is entitled to a management fee and a performance fee together
with reimbursement of reasonable expenses incurred by it in the
performance of its duties.
Management fee
The monthly management fee is equal to 1/12 of 0.5 percent of
the Net Asset Value ("the management fee"). The management fee is
calculated and paid monthly in arrears. For the period from first
admission until the date on which 90%. of the net proceeds has been
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) is excluded from the calculation
of Net Asset Value for the purposes of determining the management
fee.
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 (UK) Ltd or any of its Associates and is not waived,
the value of such investment will be excluded from the calculation
of Net Asset Value for the purposes of determining the management
fee.
MGI (UK) Ltd agreed to waive such portion of the management fee
as was required to ensure the Company's ongoing charge expense
ratio did not exceed 0.85% of its NAV until and including the
earlier of:
(i) 5 November 2019; and
(ii) the business day prior to which the invested NAV is first equal to or greater than GBP200m.
As at 31 March 2019, an amount of GBP110,000 was outstanding and
due to MGI (UK) Ltd in respect of management fees.
Performance fee
MGI (UK) Ltd will be entitled to receive a performance fee, the
sum of which is equal to 20%. of the amount by which the Adjusted
Net Asset Value at the end of a Calculation Period exceeds the
higher of: (i) the Performance Hurdle; and (ii) the High Water Mark
("the performance fee"). The calculation period for the current
period will be the period commencing date of first admission to 30
September 2019.
Adjusted Net Asset Value at the end of a calculation period
shall be the audited NAV in pound 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;
6. Investment management fees (continued)
(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.
"Performance Hurdle" means, in relation to each calculation
period, "A" multiplied by "B" 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); and
"B" is in respect of the first calculation period, the Net Issue
Proceeds.
"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.
Under the terms of the portfolio management agreement, any
accrued and unpaid performance fees will crystallise and become
payable to MGI (UK) Ltd 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
performance fee Amount (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 performance fee amount, an amount equal to
the difference shall be carried forward and included in the
"performance fee amount" 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:
(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)
As at 31 March 2019, the Company had exceeded the High Water
Mark and performance hurdle and an accrual of GBP1,617,000 for
performance fees has been reflected within these Financial
Statements.
7. Other expenses
2019
GBP'000
Directors fees 94
Administration fee 30
AIFM fee 16
Auditor's remuneration for:
- audit and interim review fees 33
Secretarial fees 14
Special pricing fees 23
Printing fees 6
Registrars' fees 7
Listing fees 7
FCA fees 3
Legal fees 9
Depositary fees 32
Directors' liability insurance 4
Sundry 2
-----------
280
-----------
8. Finance costs
2019
GBP'000
Interest payable 1
-----------
9. Earnings per Ordinary Share
For the period 3 September 2018 to 31
March 2019
Net return Per share
GBP'000 pence
Revenue return (391) (0.39)
Capital return 9,945 9.95
---------- -----------
Total return 9,554 9.56
---------- -----------
Weighted average number of Ordinary Shares 100,000,000
10. Dividends
The Board has not declared an interim
dividend.
11. Investments held at fair value through profit or loss
2019
GBP'000
Opening book cost -
Opening investment holding gains -
Opening valuation -
Movements in the period:
Purchases at cost 64,509
Sales - proceeds -
- gains on sales -
Movement in unrealised gains during the period 11,463
Closing valuation 75,972
Closing book cost 64,509
Closing investment holding gains 11,463
75,972
Realised gains on sales -
Movement in unrealised gains during the period 11,463
-------------
11,463
-------------
12. Other receivables
2019
GBP'000
Prepayments and accrued income 6
6
13. Other payables
2019
GBP'000
Accruals and deferred income 1,866
1,866
14. Share capital
No of 2019
shares GBP'000
Ordinary shares
Issue of Management Shares 1 -
Issue of shares 100,000,000 100,000
Issue costs - (1,144)
Redemption of Management Shares (1) -
Ordinary Shares at no par value 100,000,000 98,856
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 of GBP1
each. The Management Share was redeemed immediately following
admission of the Ordinary Shares on the 6 November 2018.
On 6 November 2018 the Company issued 100 million ordinary
shares at GBP1 per share in an initial placing offer for
subscription and intermediales offer raising GBP98.9m after
expenses.
15. Net Asset Value per share
The Net Asset Value per Ordinary Share and the Net Asset Value
at the period end calculated in accordance with the articles of
incorporation were as follows:
NAV NAV
per share attributable
pence GBP'000
Ordinary Shares: basic and diluted 108.41 108,410
The Net Asset Value per Ordinary Share is based on 100,000,000
Ordinary Shares, being the number of Ordinary Shares in issue at
the period end.
16. Financial instruments and capital disclosures
Financial assets and financial liabilities of the Company are
carried in the Unaudited 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 period end
date, without adjustment for transaction costs necessary to realise
the asset.
16. Financial instruments and capital disclosures
(continued)
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 31 March 2019 Level 1 Level 2 Level 3
GBP'000 GBP'000 GBP'000 GBP'000 - - 75,972 75,972
- - 75,972 75,972
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:
Fair value Significant Sensitivity to changes
as at 31 March Valuation unobservable in significant unobservable
2019 GBP'000 technique inputs Range inputs
--------------- ------------------- --------------- ------------ ---------------------------------------
14,985 Comparable -- EV/Revenue 1.8x-5.6x The estimated fair value
Company Multiples would increase/(decrease)
if the multiple were higher/(lower).
--------------- ------------------- --------------- ------------ ---------------------------------------
60,987 Other Most recent Not Not
financing Applicable Applicable
--------------- ------------------- --------------- ------------ ---------------------------------------
A reconciliation of fair value measurements in level 3 is set
out in the following table:
2019
GBP'000
Opening balance -
Purchases 64,509
Sales -
Total gains/(losses) included in gains on investments in the
statement of comprehensive income
- on assets sold -
- on assets held at period end 11,463
Closing balance 75,972
There have been no transfers between levels during the
period.
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;
16. Financial instruments and capital disclosures
(continued)
(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 through
its investment to currencies other than pound sterling.
If the investment portfolio valuation rose or fell by 10% at 31
March 2019, the impact on the net asset value would have been
GBP7,597,200. The calculations are based on the investment
portfolio valuation as at the respective Statement of Financial
Position dates and are not necessarily representative of the period
as a whole.
Interest rate risk
The Company is exposed to interest rate risks to the extent that
prevailing interest rates may fluctuate on the floating rate
instruments.
The exposure as at 31 March 2019 of financial assets and
financial liabilities to interest rate risk is shown below:
In one year Greater than
or less one year Total
GBP'000 GBP'000 GBP'000
Exposure to floating interest rates - - -
Cash and cash equivalents (fixed interest
rates) 32,983 32,983
Cash and cash equivalents (floating
interest rates) 1,315 1,315
----------- -------------- -------
Total 34,298 - 34,298
----------- -------------- -------
Given the majority of cash and cash equivalents is at fixed
interest rate, the Company is not exposed to significant interest
rate risk.
Foreign currency risk
The Company invests in securities denominated in foreign
currencies which give rise to currency risks.
Foreign currency exposure:
2019
Investments Cash Debtors Creditors
GBP'000 GBP'000 GBP'000 GBP'000
US dollar 45,509 - - -
Total 45,509 - - -
16. Financial instruments and capital disclosures
(continued)
During the period the pound sterling strengthened by an average
of 1.9% against all of the currencies in the investment portfolio
(weighted for exposure at 31 March 2019), 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 GBP4,137,000. 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
GBP5,056,000. The calculations are based on the investment
portfolio valuation and cash balances as at the period end and are
not necessarily representative of the period 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 (UK) Ltd 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 Investment and cash balances.
At the reporting date, the Company's financial assets exposed to
credit risk amounted to the following:
2019
GBP'000
Cash and cash equivalents 34,298
Other receivables 6
34,304
All the assets of the Company which are traded on a recognised
exchange are held on its behalf by Citi Bank Europe plc, UK Branch,
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.
The credit rating of Barclays Bank Plc was A at the period end.
The credit rating of Citibank Europe plc, UK Branch was A-1 at the
period end.
Liquidity risk
Liquidity risk is defined as the risk that the Company do 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's assets comprise of readily realisable UK Treasury
bills. Short-term flexibility is achieved through the ability to
liquidate these UK treasury bills. The Company also invests in a
number of unquoted securities which are not readily realisable.
These investments make up 70% of the net assets.
The Company's liquidity risk is overseen by MGI (UK) Ltd in
accordance with established policies, procedures and governance
structures in place. Cash flow forecasting is monitored by MGI (UK)
Ltd to ensure that it has sufficient cash to meet obligations as
they fall due.
The maturity profile of the Company's financial liabilities
GBP1,866,000 are all due in one year or less, and there is
sufficient liquid assets to fulfil these obligations.
Capital management objectives, policies and procedures
The structure of the Company's capital is described in note 14
on page 29 and details of the Company's reserves are shown in the
Unaudited Statement of Changes in Equity on page 18.
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 Portfolio
Manager, 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 Portfolio Manager 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.
17. Related parties
Merian Global Investors (UK) Limited have been appointed as the
Investment Advisor to the Company. The relationship is governed by
an agreement dated 11 October 2018.
The total management fee charged by Merian Global Investors (UK)
Limited for the period ended 31 March 2019 was GBP110,000. The
amounts outstanding at 31 March 2019 was GBP110,000.
The total performance fee charged by Merian Global Investors
(UK) Limited for the period ended
31 March 2019 was GBP1,617,000. The amounts outstanding at 31
March 2019 was GBP1,617,000.
Directors' fees paid for the period ended 31 March 2019 was
GBP94,000. As at 31 March 2019 there were no outstanding Director's
fees.
As at 31 March the following Directors have holdings in the
Company:
Number of % Ordinary Shares
Director Ordinary Shares issue as at 31 March 2019
Andrew Haining 30,000 0.030
Simon Holden 15,000 0.015
Stephen Coe 25,000 0.025
Anne Ewing 0 0
Tim Cruttenden 0 0
The following MGI UK Ltd's sub-funds hold an investment in the
Company. The board is notified about any transaction in relation to
the sub-funds by MGI UK Ltd's risk and compliance report.
Value of
Shares holdings
purchased Shares 31 March
Number of during sold during 2019
Related party holdings the period the period GBP'000
Merian UK Smaller Companies Focus Fund 2,205,360 2,205,360 -
2,470
Merian UK Specialist Equity Fund 2,616,023 2,616,023 - 2,910
Merian UK Mid Cap Fund 13,191,196 13,191,196 - 14,675
Merian UK Smaller Companies Fund 4,737,421 4,737,421 - 5,270
Total 22,750,000 22,750,000 - 25,325
During the period, the Company acquired shares in Secret Escapes
Limited and Transferwise Limited at a total value of GBP30,150,000
from funds managed by the Investment Advisor or its affiliates.
18. Post balance sheet events
Between the 31st March and 26 June 2019, the latest practicable
date before the publication of these Financial Statements, the
Company has issued Ordinary Shares for a consideration of
GBP100m.
Following such issue, the Company has 190,909,091 Ordinary
Shares in issue. Therefore, the total number of voting rights of
the Company is currently 190,909,091.
Starling Bank
In April 2019 the Company committed to invest approximately
GBP19m in a GBP60m series C funding round. Following the successful
investment, the Company is pleased to note that Starling Bank was
awarded a GBP100m grant from the RBS Capability and Innovation
Fund.
Growth Street Holdings Limited
On 11 June 2019, a further investment was made in Growth Street
Holdings Limited with the purchase of GBP7.5m worth of convertible
loan notes which can be converted into Preference Shares at a later
date, conditional upon FCA approval.
Corporate Information
Directors
Andrew Haining, Chairman (appointed 4 October 2018)
Anne Ewing (appointed 4 October 2018)
Simon Holden (appointed 4 October 2018)
Stephen Coe (appointed 4 October 2018)
Tim Cruttenden (appointed 4 October 2018)
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
Millennium Bridge House
2 Lambeth Hill
London, EC4P 4WR
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
Depositary
Citibank Europe plc, UK Branch
Citigroup Centre
Canada Square
Canary Wharf
London, E14 5LB
English and US 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, GY1 1WR
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BLGDLSGDBGCI
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