Chrysalis Inves Regulatory News (CHRY)

The information contained in this announcement is restricted and is not for publication, release or distribution in the United States of America, any member state of the European Economic Area (other than to professional investors in Belgium, Denmark, the Republic of Ireland, Luxembourg, the Netherlands, Norway and Sweden), Canada, Australia, Japan or the Republic of South Africa.

29 January 2024

Chrysalis Investments Limited ("Chrysalis" or the "Company")

Annual Results

The Company today announces its results for the year ended 30 September 2023. The Company's audited annual results are copied below. The results will be available on the Company's website in due course.

Financial summary

Performance Headlines

NAV at 30 September 2023 was 134.65 pence per share, a decline of 8.9% in the period. Nearly 40% of the decline relates to foreign exchange differences and non-asset related costs. Declines in the valuations of Smart Pension, Graphcore, Deep Instinct and Sorted also contributed. The share price closed at 62.20p, a 54% discount to NAV.

The Company's position in Revolution Beauty was fully divested during the year (£5.2 million). The Company also divested shares in Wise PLC (£10.3 million).

Capital was deployed across six existing portfolio companies to drive growth and the move towards profitability (£26.2 million). The Company increased its position in Starling Bank (£20.1 million) at an attractive valuation, reflecting optimism for the prospects of Starling and its ability to generate future value for shareholders.

The portfolio is well funded, with the majority either profitable or funded to profitability, and generated strong revenue growth of approximately 48% in the period. Chrysalis will have sufficient available liquidity to continue to support the portfolio and fund the Company for the foreseeable future.

Andrew Haining, Chair, commented:

"During a period of significant economic and political change, the NAV for the period to 30 September 2023 fell relatively modestly from 147.79p to 134.65p per share. In that period our exciting portfolio of high growth, tech enabled companies experienced a range of positive activity which we believe positions them strongly to benefit from a recovery in markets, which we would expect to see in 2024."

Richard Watts and Nick Williamson, co-portfolio managers, commented:

"The last two years have seen a significant change in market sentiment, the ramifications of which have triggered a widespread reconsideration of strategic priorities across both the Company's investee companies, and in the Investment Adviser's approach to running the Company. The Investment Adviser has worked hard with the portfolio companies over this time to extend cash funding runways and assist the quicker transition to more sustainable operating models. As a result, the Company's portfolio contains a number of companies that are both mature in scale and, conceivably, moving into a window where an exit is a possibility. The recent strength in markets - triggered by yields falling in response to better inflation data - should be seen as encouraging. A backdrop of more optimistic markets should increase the possibility of exits for the Company's investments."

-ENDS-

LEI: 213800F9SQ753JQHSW24

A copy of this announcement will be available on the Company's website at https://www.chrysalisinvestments.co.uk

The information contained in this announcement regarding the Company's investments has been provided by the relevant underlying portfolio company and has not been independently verified by the Company. The information contained herein is unaudited.

This announcement is for information purposes only and is not an offer to invest. All investments are subject to risk. Past performance is no guarantee of future returns. Prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decision. The value of investments may fluctuate. Results achieved in the past are no guarantee of future results.

Neither the content of the Company's website, nor the content on any website accessible from hyperlinks on its website for any other website, is incorporated into, or forms part of, this announcement nor, unless previously published by means of a recognised information service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.

Strategy

At Chrysalis we deliver value for our shareholders and partners by investing in and supporting innovative businesses with the potential to transform their sectors.

Performance Headlines

Chairman's Statement

During a period of significant economic and political change, the independently derived valuation of Chrysalis' (the "Company") investments and net assets for the period to 30 September 2023 fell relatively modestly, from 147.79p to 134.65p per share. The first quarter of the 2024 financial year has seen virtually all the reduction erased with net assets at 31 December 2023 being 143.37p per share. Our exciting portfolio of high growth, tech enabled companies experienced a range of positive activity during the period which we believe positions them strongly to benefit from a recovery in markets, which we would expect to see in 2024.

The management team at Jupiter Investment Management Limited (the "Investment Adviser"), cover the developments in the portfolio in detail in their section of the report. Suffice to say that we believe that the level of our share price, at discounts of approximately 50% to the Company's net asset value ("NAV") during the year, significantly undervalues the Company. The Board of Directors (the "Board"), together with Nick Williamson and Richard Watts as the principals (the "Principals") of the Company's new investment adviser (the "New Investment Adviser"), are acutely aware of the need to address the discount and are working to mitigate this position in several ways.

Significant macro issues, which we are unable to influence, have moved sentiment in our asset class so substantially that it has gone from trading at a premium for three years to a discount over the last two. However, there are other issues which we can manage, particularly as it relates to the application of capital from realisations in the future.

I would like to highlight a number of areas where we have continued to refine the Company's operations and removed the perceived conflicts arising from the Company's relationship with Jupiter.

1. The Company decided to participate in a syndicate of Starling shareholders which purchased a block of Starling shares held by other Jupiter-managed funds in February 2023. This removed a seller of Starling shares which no longer had the capacity to hold its position longer term. Starling has subsequently increased its profitability, signed new licences with international banks for its banking technology platform and has reinforced its position as one of the most successful digital banks.

2. The Board has successfully ensured that the management of your Company's assets remain under the control of the existing portfolio team, which we believe is in the best interests of the Company. This separation from Jupiter was amicably executed shortly after the financial year-end and will enable the team to devote its sole focus on the existing Company portfolio and over time build a team for the longer term.

3. The Board has, subject to approval by the Company's shareholders ("Shareholders"), agreed revised performance fee payment arrangements that are better aligned with Shareholder interests whilst retaining the existing "high water mark" of 251.96p.

4. The independent valuation committee has worked hard with the Principals and the Board to continue to improve the valuation process, resulting in quicker and more transparent information flowing to Shareholders and will continue to perform this function going forward.

5. Post year end, Jupiter managed funds reduced their holdings below 5%. The resultant share register is now more balanced, and we have welcomed a number of new Shareholders to the register.

Additionally, in December 2023 the Company announced a likely disposal at a valuation which, if applied to the Company's NAV as of 30 September 2023, would imply an increase in NAV per share of up to approximately 5.5 pence. The transaction is still expected to complete on the terms reflected in that announcement.

As we look forward, we have good reason to be hopeful that realisations will occur in one or two of our investments during the course of the 2024 financial year, albeit this will depend on wider market conditions.

We hope that these actions, together with the Capital Allocation process outlined below, will over time be reflected in a return to more normal market levels of discount/premium for the Company's share price.

The Company was formed to take advantage of the trend for growth companies to source expansion capital from the private markets rather than the public markets. That trend five years later has accelerated, with fewer companies coming to the public market and growth companies continuing their high growth development as private companies. Some of the world's largest private growth companies have been in existence for more than ten years, have accessed private capital repeatedly, and have avoided public capital markets until becoming very mature and substantial businesses. Given its structure, the Company is ideally placed to provide institutional and retail investors access to those types of growth companies, matching their aspiration for growth with our capacity to be a long-term holder and supporter.

It is however inevitable that building successful companies over those periods of time involves straddling macro-economic and political shocks such as our main economies have suffered in the last two years. We have spent much of our time this year ensuring that the companies we have invested in have a plan fit for the constraints of the near-term economic environments, without losing sight of their long-term disruptive strategies which made them attractive to us for investment originally and which, we are confident, will deliver value for Shareholders.

We also need to reflect on this when thinking of the way forward for the Company and its proposed capital allocation policy (the "CAP").

The longer-term strategy remains valid - to provide Shareholders with access to an attractive portfolio of approximately 15 later stage companies capable of above average growth.

The shorter-term consideration is that the market discount to the net asset value of the Company's shares (the "Shares") makes purchasing the Shares a potentially higher returning investment than new portfolio investments. 

The proposed CAP is therefore designed to recognise these shorter-term cyclical considerations could be a factor. Consequently we are proposing to shareholders that a three year extension to the life of the Company be agreed at the forthcoming AGM.

 In that period, we aim to demonstrate that the Company can return to its long-term purpose of making investments on the basis that the share price in that period will have returned more closely to our NAV from the exceptional discount levels we currently have.

The AGM circular containing details of the continuation vote (the "Continuation Vote") is being sent to all Shareholders. In summary, I believe that the Company has demonstrated an ability to invest in a number of fast growing businesses. There is no question that a long-term funding structure for these types of investment is the right structure. We expect to be able to demonstrate the ability to realise such investments to Shareholders and the market within the three-year extension period.

Capital Allocation Policy ("CAP")

One of the key components of obtaining Shareholder support for the proposed three-year extension is to provide Shareholders with a framework for how capital will be allocated during that period. The Board indicated to Shareholders its preferred approach to capital allocation at the time of the investor consultation in October 2023. This consultation process then informed the Principals and the Board of Directors' views on this issue. Derived from that consultation and further discussions that the Principals and I have had directly with Shareholders, the Board and the Principals have agreed an adjusted proposal, the details of which are contained in the AGM circular which proposes the Continuation Vote.

A capital allocation policy for the Company must consider four core potential uses of capital to:

1) support existing portfolio companies;

2) fund working capital (operating costs, fees etc);

3) invest in late-stage growth opportunities in accordance with the Company's investment policy; and

4) return available capital to Shareholders through share buybacks (or equivalent programmes) where it is economically attractive to do so.

During the next three years, the Board and the Principals have already committed to return the first £100 million of realisations to Shareholders, likely in the form of a share buyback programme and subject to the prevailing discount, after satisfying the "buffer" of up to £50 million being held back for working capital and follow-on investments.

Additionally, the Board and the Principals have agreed that, after the first £100 million has been returned, we will continue to return at least 25% of net realised gains on the Company's investments, and I can confirm this will be measured as net realised gains against historical cost price (and not NAV).

Overarching all of the CAP considerations is an acknowledgement that the Company's capital needs to be managed in a dynamic way. As we consider the uses of the Company's available capital going forward we will, when determining the appropriate implementation of the commitments described above, take into account, inter alia, the:

· prevailing discount to NAV per share at which the Shares are trading;

· likely timeline of realisations;

· likely uses of capital to fund existing investee companies; and

· strength of any new investment opportunities.

The Board and Principals also consider scale to be important to maintain the relevance of the Company's offering and to help gain access to the best investment opportunities. Subject also to scale, abnormally wide Share price discounts to NAV are likely to favour capital returns to Shareholders over new investments.

Full details of the proposed CAP are set out in the AGM circular.

New Management Arrangements

After year end, the Board announced a significant change in the structural arrangements for managing the Company's portfolio. The detail relating to those management arrangements are covered in full in a circular convening a Extraordinary General Meeting to be held immediately following the AGM in order to approve the performance fee payable to the New Investment Adviser as a 'related party transaction'.

The new arrangements will see the Principals remain your portfolio managers as part of a new and independent management entity. The Board believes that this independent manager will have the capacity to manage the Company's assets under whatever scenario Shareholders choose to follow post the Continuation Vote.

The commercial terms of the new investment management and advisory agreement remain the same as those proposed to Shareholders previously, namely:

· an AUM advisory services fee based on NAV equal to 50 basis points per annum, and

· a performance fee of 12.5%, with revised deferred payment terms, payable over the existing high-water mark of 251.96p.

I have had a number of discussions directly with individual Shareholders and we have had the benefit of the feedback from the Shareholder consultation commissioned with Rothschilds & Co. There was a consistent view expressed in support of Richard and Nick and we believe the new arrangements, under which their entity will be working with IQEQ/G10 to provide not only management services, but also AIFM oversight, will be to the benefit of the Company going forward.

Revolution Beauty Group plc ("Revolution")

The Company has potential claims against Revolution under s.90A FSMA 2000 and the common law causes of action of deceit, negligent misstatement and/or misrepresentation, in relation to Revolution shares purchased in July 2021 for approximately £45million and finally sold in late 2022 for approximately £5.7million in total.

The original share purchase was made on the basis that information provided to the Company by Revolution prior to the Company's purchase of the shares in Revolution, and during the period in which the shares were held prior to their sale, contained misstatements and material omissions. The Company wrote a formal letter of claim to Revolution Beauty on 22 November 2023, which requested a response within 28 days. A response has recently been received asking for a further 28 days to provide a response. The Company is now considering next steps with its retained lawyers, Travers Smith.

Board Composition

The fifth anniversary of the Company has also focussed the Board's thinking on the way the Board develops going forward. Our approach to governance is laid out in some detail in the Governance section of this report.

Five out of six directors have now been in place for five years, having simultaneously been appointed to the Board at the time of listing. It is important that your Company reviews our contribution as directors. To that end, an independent board review has been carried out this year and is reported on in the Governance section.

It is also important that the Company can attract and retain the appropriate talent at director level to ensure continued delivery of the governance targets we have set ourselves. The Company has undergone a substantial change over the last five years which has seen, inter alia, improvements in management arrangements, revision of fee arrangements and a new valuation process. It is therefore crucial that the skills of the Board continue to match the operational and risk management requirements of the Company going forward.

To do this we believe a sensible rotation of directors will invigorate the Board and meet our governance goals. It has been the intention of your Board for some time that a rotation approach would start in 2024.

It is envisaged that three directors will stand down on a phased basis before December 2025. However, if Shareholders did not support the Continuation Vote at our March 2024 AGM, the Board would need to review the implications of that decision before initiating a rotation policy. However, in the circumstance the Company has a mandate to continue to grow and develop, this rotation strategy will see 50% of the Board being replaced by the end of 2025.

The chair of the remuneration and nomination committee is already in discussions regarding a formal, third party managed process for the selection of these posts.

It remains for me to thank all the staff of the management team, our corporate administrator, our colleagues on the independent valuation committee together with all legal and financial advisers and third-party contractors for their hard work this year. My colleagues on the Board are grateful for all their contributions in what has been a busy and productive year.

Signed on behalf of the Board by:

Andrew Haining

Chairman

Portfolio Statement

Investment Adviser's Report

Introduction

The last two years have seen a significant change in market sentiment, the ramifications of which have triggered a widespread reconsideration of strategic priorities across both the Company's investee companies, and in the Investment Adviser's approach to running the Company. More detail on this is provided below, but underpinning the Investment Adviser's thinking is that the trend of companies staying private for longer has continued. This is a particularly pertinent consideration with the Company's continuation vote due in the early part of 2024.

Following the Company's inception, the Investment Adviser proposed a likely holding period of investments made by Chrysalis of between two to five years. The retrenchment of market risk appetite, observable from the beginning of 2022 and initially driven by rising inflation and yield expectations, closed off likely exit routes for investee companies over the last two years, including IPO markets.

As a result, the Company's portfolio contains a number of companies that are both mature in scale and, conceivably, moving into a window where an exit is a possibility. With an average hold period as of January 2024 of approximately three and a half years, and with a number of large-scale companies at between four and five years - such as Starling, Klarna and wefox - there is reason to believe that the portfolio is able to move towards realisations, once market conditions allow.

In that regard, the recent strength in markets - triggered by yields falling in response to better inflation data - should be seen as encouraging. A backdrop of more optimistic markets should increase the possibility that the two main exit routes for the Company's investments - trade sale and IPO - will open. In terms of the latter, the successful flotation of companies such as Arm in the US should be taken as an encouraging sign.

The Investment Adviser believes that the continuation vote should be considered through the lens of these two factors:

· A maturing portfolio, with a number of companies that Chrysalis has held for some time and are themselves "later-stage" in nature; and

· Apparently, a market more amenable to exits.

With this in mind, the Investment Adviser strongly believes that the best outcome for shareholders is that they vote for continuation, such that the timing of exits can be finessed for valuation maximisation.

Both the Investment Adviser and the Board are acutely aware of the current discount to NAV per share that the Company's shares currently trade at. If realisations are achieved, the proposed CAP, if enacted at prevailing shares prices, should yield material accretion to the NAV per share.

Despite the widespread focus on discounts and realisations, the portfolio continues to grow strongly, with many of the investee companies looking to accelerate growth via AI, a topic that is discussed further below. While a number of the Company's investments have been exploring AI growth angles for a while, others are latching onto this theme more recently. In the Investment Adviser's view, AI has the potential to not only accelerate growth, but also to elongate the period of that growth, or protect existing competitive advantages.

Market Environment

The market backdrop changed materially in late-2021 and into 2022, as investors were faced with a fundamental shift in the interest rate environment, which began its first major tightening cycle in over 30 years. This was in response to rising inflation, likely due in part to supply chain constraints stemming from COVID-19 related shutdowns, but further exacerbated by the war in Ukraine.

In the Investment Adviser's view, the medium-term outlook for interest rates is likely to remain at levels higher than experienced since the global financial crisis ("GFC"). Higher discount rates typically have a greater impact on growth company valuations, where more of their value is based on future cash flows, compared with more mature companies. While a "higher-for-longer" thesis may not appear conducive to risk asset performance, often it is uncertainty over the direction of rates that investors most fear. This implies, as volatility of expectations around the exact course of interest rates abates, growth assets will be in a better position to deliver valuation performance from here.

Over the year, the FTSE All-share saw a 9% increase, but the S&P500 rose 20% and the NASDAQ100 by 34%. Given interest rates have risen over the period, particularly short-term rates, it is perhaps surprising that the most "growth exposed" index - the NASDAQ - has performed the best.

However, an analysis of the leading NASDAQ contributors in calendar 2023 suggests excitement about generative AI is assisting certain stocks, and Nvidia in particular, which was a leading index contributor.

This shows how certain growth trends, at least in some cases, can be more important than the overall market backdrop. The Investment Adviser believes the Chrysalis portfolio is well placed to benefit from AI growth trends:

· Klarna - as an early adopter of ChatGPT, became the first fintech globally to launch the ChatGPT plug-in. It also launched an AI-powered image search tool in October 2023, which allows customers to search for products via an image;

· Deep Instinct - uses deep learning based models to deliver its services;

· Featurespace - also uses deep learning, as well as machine learning, in its products and recently won the PETs ("Privacy-Enhancing Technologies") challenge, sponsored by Innovate UK and the US National Science Foundations, which allows AI models to make better predictions from multiple data sources without exposing any sensitive data between parties. In October 2023 it launched TallierLTM - the world's first Large Transaction Model;

· Brandtech - recently bought Pencil AI, a leading AI creative and distribution SaaS platform, generating channel-ready adverts; and

· wefox - is developing AI capabilities to enhance the productivity of insurance brokers.

The scale of the overall decrease in activity in the private market has been significant over the last year and a half. The market contracted for four consecutive quarters from its peak in 1Q 2022 (despite the stock market rolling over in the previous quarter, this associated decrease in investment appetite can take time to filter through into activity).

However, as the wider market has become more used to higher levels of interest rates, so there have been tentative signs of risk appetite returning. From the low point in 1Q 2023, each of the subsequent two quarters showed a sequential increase in funding activity. Albeit, 4Q 2023 saw the typical seasonal slowdown, the outturn for 2023 was an improvement over 2020, the year before the market saw supernormal activity. The Investment Adviser believes that the focus in the private market has remained on companies driving towards profitability and discusses this in more detail below.

Portfolio

Over the year, Chrysalis' NAV per share fell from 147.79 pence to 134.65 pence, a fall of 13.14 pence or approximately 8.9%. Of this move, approximately five pence, or nearly 40% of the decrease, was due to foreign exchange differences arising on the translation of investment valuations into GBP and non-asset related costs.

Despite this diminution in NAV, the underlying companies continued to generate strong growth in the period. On a weighted average basis, the portfolio generated approximately 48% revenue growth over the year.

Material progress towards profitability

Last year the Investment Adviser discussed the market's shift of focus away from pure growth, to one that balanced growth with a drive towards profitability; as a result, many companies reassessed growth plans and funding requirements. The Investment Adviser has worked hard with the portfolio companies since the beginning of 2022 to extend cash funding runways and assist the quicker transition to more sustainable operating models.

A good example of this is Klarna, which announced job losses expected to equate to 10% of its workforce in 2Q22, alongside an equity raise of $800 million at a valuation of $6.7 billion post new money, compared with its round in the prior year that was struck at $45.6 billion.

Despite the negative press associated with an 85% down round, the Investment Adviser was optimistic about the prospects for Klarna heading towards profitability, and the fact it was funded to get there.

As a demonstration of the power of operational gearing, in 2Q22, Klarna was annualising an operating loss of approximately $1.1 billion; by 2Q23 Klarna had hit breakeven and in 3Q23 the operating profit was annualising at approximately $180 million, implying a nearly $1.3 billion swing in profitability over the course of 15 months.

The move to breakeven in 2Q23 was driven by year-on-year decreases in both impairment and operating costs of over 40% and approximately 25% respectively; meanwhile, GMV grew approximately 14% in SEK terms year-on-year. While this GMV growth is slower than previous years, the scaling power of the platform has enabled Klarna to close a material loss in the space of four quarters. GMV growth reaccelerated to 22% in 3Q23, which translated into revenue growth of 30%.

While this may be a more extreme example of what is possible, the Investment Adviser believes this is the direction of travel seen across the portfolio in aggregate: the weighted average improvement in EBITDA across the portfolio was over 80% over the year. While a number of portfolio companies still remain loss-making, generally those losses have been diminishing, with only three portfolio companies seeing losses worsen, of which one was only modestly worse.

This pattern is highly encouraging to the Investment Adviser as it helps to demonstrate the progress being made by the portfolio companies. If this trend continues and more companies become profitable, then not only does this help to lower funding risk in the portfolio, but it raises the likelihood that, in time, it will be possible to generate theoretical valuation metrics for the Company, such as a price-to-earnings ratio ("PE").

Portfolio activity

Given the significant risk aversion prevalent in markets over the year, and thus the material discount that the Company's shares traded at relative to NAV per share, there was no ability for the Company to consider raising primary capital from shareholders. The last capital raise was £60 million in December 2021.

This, along with approximately £118 million from realisations - largely from the exit of Embark (£57 million) and sale of Wise shares (£42 million) - permitted the rotation of capital into value accretive follow-on investments, and certain secondary purchases, totaling £98 million over this 21-month period.

Over the course of the year, Chrysalis supported six of its existing portfolio companies with primary follow-on capital and made one secondary investment in Starling; the latter accounted for £20 million of the total £46 million spent on follow-ons and secondary investments.

In terms of follow-ons, the most significant was into Smart (£12.5 million), to enable it to accelerate its M&A strategy and drive growth in core markets. Other, smaller rounds were also completed in Secret Escapes - £6.5 million invested, to enable it to invest further in marketing to drive growth - and wefox - £3.6 million invested to assist the company drive towards profitability. All of these rounds were in participation with other investors.

Offsetting this to a degree were £15.5 million of realisations in 2023, mainly comprising the sale of shares in Wise and Revolution Beauty, which accounted for approximately £10.3 million and £5.2 million respectively. This meant that the Company spent approximately £31 million on net investment over the year.

The Company was formed five years ago to offer individuals and other market participants an easy way to access late-stage private companies.

The Investment Adviser believed this was an opportunity due to the increasing tendency of companies to stay private for longer, a period which typically coincided with materially higher growth rates than those observed in the stock market.

The issues driving this desire to delay listing were considered by the Investment Adviser to be multi-faceted, and indeed likely remain so. Recent media articles citing respected industry observers highlight a variety of reasons still remain extant, particularly for the UK market.

The Investment Adviser believes some of the reasons include:

· regulation applicable to listed businesses which, particularly post global financial crisis ("GFC"), is considered by the Investment Adviser to be stringent and places significant additional costs on listed businesses;

· in the UK, a significant "income mindset" which seeks high dividend payouts from stocks, thus decreasing the capital available for reinvestment to drive growth;

· a fixation on short-term returns in the listed market - which the Investment Adviser has had first-hand experience of; and

· a sense that expansion capital is not readily available to grow businesses, leading to a lack of appetite to absorb losses as companies look to build share aggressively; and

· losses of control for founders in connection with listings.

These types of impediment mean that new issuance activity via IPO has been on the wane, a point that the Investment Adviser has repeatedly highlighted.

At the point of the Company's IPO, the Investment Adviser calculated that the average number of IPOs in the UK had fallen from 217 per annum prior to the GFC, to 94 per annum in the period from 2011 to 2017. In the five years since the Company's IPO, the average has fallen further to 69.

Looking in more detail at just the London Stock Exchange's Main Market and AIM, the lack of IPOs since the start of 2022 is now the longest run of low issuance in the last 30 years, spanning eight consecutive quarters. This is despite UK stock markets proving resilient in economic terms.

Late 2023 was particularly anaemic, with only one Main Market listing in CAB Payments in the third quarter and with no IPOs recorded in either the Main Market or AIM in the last quarter of 2023. In fact, the last two years have been some of the weakest in the last 30 years for the IPO market in the UK, with the US also recording below average volumes.

Rising global yields, in reaction to increasing inflationary pressures, over the last couple of years have likely hampered risk appetite and thus deflated IPO markets.

While some IPOs were able to get away successfully in 2023 despite rising yields, such as Arm Holdings Inc in the US, the recent retrenchment of yields from approximately five per cent. down to approximately four per cent. potentially augurs well for a better IPO market in 2024, particularly in combination with more moderate central bank language around the prospect for rates.

As such, the Investment Adviser believes there are reasons to be moderately optimistic about the outlook for general risk appetite in 2024, which, in normal circumstances, would lead to stronger exit markets, including IPO and trade sale.

An increasing chance of realisations could have a significant impact on the Company's liquidity position, opening up the possibility of capital returns via the CAP.

Following its IPO, the Company indicated a likely hold time for investments of two to five years; the current average holding period in the portfolio is approximately three and a half years. Sitting above this average are key later-stage assets, such as Starling, Klarna and wefox.

Holding period of the portfolio by asset

Source: Chrysalis

The Investment Adviser believes that the high yield environment since early 2022 has likely delayed certain of the Company's investments from seeking an exit over this period.

As such, the Company now holds a number of assets that could conceivably be considered as exit candidates. If IPO is the chosen route, then conducive stock market conditions are required, as well as all the necessary internal preparations to become a listed entity.

In this regard, Klarna's recent comments that the company is preparing for an IPO and that one could come "quite soon", should demonstrate that the view that conditions are improving is not solely held by the Investment Adviser.

In this context, the Investment Adviser believes that a decision to wind up the Company would not benefit Shareholders, as it could restrict the its ability to time realisations and thus its ability to maximise value.

Outlook

Last year the Investment Adviser was hopeful that wider market risk appetite would support realisations from the portfolio in 2023, including the reopening of the IPO market. This was partly predicated on the apparent emergence of some price stability in the market.

While the IPO market has arguably shown signs of life - particularly in the US with the flotation of companies such as Arm - the more widespread confidence that is necessary to deliver a meaningful reopening has not been forthcoming. This situation is arguably more acute in the UK, which in 3Q 2023 only saw one Main Market flotation - CAB Payments - which promptly warned on profits and saw its share price fall over 80%.

The Investment Adviser has continued to focus on helping the portfolio companies get in the best possible shape for an eventual exit; Klarna moving into profitability is a significant, positive step in the right direction. This work centres around both maximising potential exit valuation, as well as installation of systems and governance processes required for an exit.

While speculation has swirled around Klarna's IPO over the last few years, this is the first time the Investment Adviser has seen the company publicly state conditions are now "in place" for it to consider such a move. The ramifications for Chrysalis of an exit that at least underpins the asset's valuation are hard to understate. Such a move could potentially deliver substantial liquidity into the Company and allow the new CAP to come into effect.

A commitment to return up to £100 million of capital to shareholders - representing approximately 25% of the Company's market capitalisation at the time of writing - should be viewed as a powerful indicator of the Board and Investment Adviser's ambition to manage the prevailing share price discount.

Company Sections

wefox Holding AG ("wefox")

Over the last twelve months, wefox has been focussing on demonstrating a clear roadmap to profitability and good progress has been made on this front. The Investment Adviser believes that wefox will have approached run rate profitability towards the end of 2023, a target the company set itself at the beginning of the period and which then positions it strongly moving into 2024. Very few 'insurtech' assets that the Investment Adviser has analysed globally have been able to demonstrate profitability, with many business models negatively impacted by high loss ratios (due to negative selection) and high customer acquisition costs (due to high competition).

What sets wefox apart from listed peers such as Lemonade or Hippo is its focus on digitising indirect distribution channels (such as insurance brokers) rather than selling own-brand insurance products direct-to-consumer ("D2C"). wefox can drive productivity for its partners through lead generation, process automation, and the provision of customer self-service technology and AI-driven cross-selling. wefox provides these technologies for a share of any commission generated through the sale of insurance products; historically, these partners have also sold a variety of wefox insurance products to their clients too across a range of insurance categories, such as motor or home insurance.

wefox has been one of the Company's fastest growing assets since initial investment in December 2019, and the company's growth rate remains robust and materially higher than its listed peers. In 2022, wefox grew its gross revenues by 89% to ?587 million, with the outturn for 2023 looking substantially better, while doubling the number of monthly active distribution partners on the platform. The company also managed to cross the ?1.5 billion milestone in terms of Gross Platform Value (total annual insurance premium volume transacted by wefox) in September 2023. It took a total of 66 months to achieve the first ?500 million in Gross Production Value ("GPV") and just 11 months to add the most recent ?500 million in GPV.

In April 2023, wefox announced that it has launched its global affinity business, which will connect insurance companies with partners to distribute insurance products; this increases the existing distribution channel for wefox and extends the company's ability to deliver insurance products through partners. wefox has since announced a number of affinity insurance partners. Particularly encouraging was the announcement that WINDTRE, Italy's leading telecommunications business, has signed a 10-year deal to launch the sale of home and travel insurance products in-store. Partnerships have also been announced with Green & Advanced Transport Ecosystem ("GATE") and PROPUP.

wefox has developed a technology platform to deliver these affinity partnerships and the Investment Adviser believes this will be a key value driver in the future. wefox has the potential to become an infrastructure-as-a-service ("IaaS") play over time, which could drive a recurring and highly profitable revenue stream for the group. This increased focus towards an infrastructure play has occurred before in the portfolio, for example with Wise offering its foreign exchange network to banks, and Starling with its Engine proposition.

Starling Bank Limited ("Starling")

Starling has delivered exceptional revenue and profit growth since Chrysalis first invested in the company in 2019.

Starling - Financial Performance (£ millions, year to indicated date)

Source: Starling and Jupiter

The growth in total income has been driven by two factors: an increase in lending, and an increase in base rates. Starling accelerated its lending capabilities through the acquisition of Fleet Mortgages in 2021, which originates 'Buy to Let' mortgages, and has generated increased interest income through an increase in yields on cash and on debt securities as a result of increases in the Bank of England's base rate.

Starling's cost base has grown much slower than its revenues which has led to a very attractive margin profile. In more recent months, Starling has been generating profit before tax of roughly £350 million on an annualised basis, leading to a circa 45% pre-tax return on tangible equity, making it, the Investment Adviser believes, one of the most profitable digital banks globally.

What makes Starling truly disruptive, and what drew the Investment Adviser to the company initially, is its proprietary technology stack enables the bank to operate with a much lower fixed cost base than a typical bank (leading to higher returns and margins) while allowing it to offer customers a much better user experience. Over time, Starling has been able to pass on these benefits of technology to its customers, which ultimately can lead to an enhanced customer experience and potentially lower costs and fees. Engine, the technology platform that powers Starling, also offers the potential to license Starling's award-winning technology to financial organisations around the world, and now has two contracts signed and in implementation.

Starling grew deposits particularly quickly during the COVID-19 period and continues to evolve its deposit strategy. Most notably, Starling announced in September 2023 that it would pay 3.25% AER interest on account balances of up to £5,000 from 1 October 2023. The Investment Adviser views this offering as consistent with Starling's brand: unlike many banks that tempt savers with "teaser" rates that surreptitiously revert to much lower rates and almost never on their current account, Starling is trying to offer savers a reasonable rate with durability. For those with more capital and who wish to save, Starling also offers a One Year Fixed Saver paying 4.48% interest on deposits between £2,000 and £1,000,000.

Despite investment in these products, the direction of interest rates has meant the bank has continued to operate at very profitable levels over the course of 2023.

The Brandtech Group LLC ("Brandtech")

The highlight of the year for Brandtech was the acquisition of Jellyfish, a leading global digital media and marketing group. Jellyfish represents the group's ninth, and largest ever, acquisition and solidifies Brandtech's position as the leading digital-only marketing group globally. The combined group now generates in excess of $1 billion of revenue, servicing eight out of the ten largest advertisers, and has over 7,000 employees.

Brandtech already had scale across its Digital Strategy & Content and Data division, but management had an ambition to grow its Digital Media unit following the appointment of Nick Emery as CEO of Brandtech Media. Media represents a huge and highly profitable addressable market for the group, but also a material revenue opportunity across its existing customer base. Nick Emery should be able to capitalise on this opportunity now that he has the necessary scale and resource within the Brandtech media division.

Although much smaller, the recent acquisition of Pencil AI is also exciting. Pencil AI was founded in 2018 and is currently a leading AI creative and distribution SaaS platform. The technology is built on Open AI's GPT family of large language models ("LLMs") and generates multiple channel-ready adverts by looking at a brand's objective, existing assets, and preferences. Within minutes Pencil AI can create content that is up to tenfold lower in cost to produce but with a twofold uplift in performance. Pencil AI was one of the first generative AI companies globally that enables brands to generate finished, ready-to-run ads, launch them and measure an uplift in performance.

Since 2018, Pencil AI has managed over $1 billion of media spend across 4,000 brands and is generating significant interest from prospective clients. Post acquisition, Brandtech has launched Pencil Pro, an enterprise-level generative AI product, specifically created to meet the needs of global brands; Unilever and Bayer are launch partners.

With the marketing landscape becoming increasingly complex to navigate, the Investment Adviser believes Brandtech is well positioned to continue disrupting legacy advertising holding companies. While there has been a well-publicised slowdown in media spend over 2023 - and Brandtech is not immune to this - organic growth over the preceding four years has averaged at more than 30%.

Smart Pension Limited ("Smart")

Smart continued to grow in 2023, with platform revenues forming a much larger proportion of the revenue mix.

Following the announcement of its $95 million Series E funding round in May, led by Aquiline Capital Partners, Smart has continued to execute its M&A strategy and has since completed two further acquisitions.

In May 2023, Smart USA announced that it had acquired ProManage LLC. ProManage is an independent financial wellness service provider that offers managed accounts and other personalised retirement solutions to plan sponsors and plan participants. The acquisition made Smart the fifth largest managed account provider in the US, one of the largest retirement and savings markets globally.

The company then acquired Evolve Pensions in July, a leading provider of workplace pension services through its master trust the Crystal Trust. Evolve has over 128,000 members and £750 million in assets. This acquisition represents one of the largest master trust transactions of the year and makes the Smart Pension Master Trust ("SPMT") the country's third biggest master trust operator. SPMT now has 1.3 million members and nearly £5 billion of assets under management ("AUM") while the group now has a total of approximately £12.5 billion AUM.

Smart's global business is powered by Keystone, the group's proprietary technology platform. Keystone is the only cloud-based retirement and savings platform that can serve multiple jurisdictions globally. Keystone is ideally suited to consolidation, as high levels of automation (including self-service) drives efficiencies and helps to deliver scale, ultimately leading to better value for members.

Klarna Holding AB ("Klarna")

Klarna is one of the Company's later-stage assets and has scaled aggressively over the last few years. Having seen losses rise dramatically as it entered the US market, in the middle of 2022 it announced a cost cutting exercise, a focus on existing and profitable customers, and an $800 million fundraise to steer it to profitability. Since that time, losses have rapidly come down, such that the company announced it was profitable through Q3 2023, somewhat earlier than previously expected.

Klarna achieved an adjusted operating profit in 3Q 2023 of SEK 478 million which compares against an adjusted operating loss of SEK 1.6 billion in 3Q 2022. This improvement was driven by a 7% decrease in total operating expenses before credit losses year-on-year and a material decrease in credit losses. Credit losses for 3Q 2023 declined by 46% year-on-year and the credit loss rate fell by 56% year-on-year to 0.33%; the lowest credit loss rate since Chrysalis became a shareholder. Klarna's growth profile has also been encouraging.

A period of exceptional growth was experienced over 2020 and much of 2021, driven by the move into the US market and assisted by COVID-19. This growth slowed into 2022, with the company throttling credit growth in response to its desire to drive towards profitability. More recently, however, growth has begun to reaccelerate, with 22% GMV growth recorded in 3Q23 - with the US growing at 46% - which translated into 30% revenue growth.

We believe that product innovation is a key factor in sustaining levels of growth, as it attracts new customers and merchant partners. In recent months, Klarna has unveiled several new AI-powered features, which enhance the user experience. Klarna's retail network continues to grow across multiple verticals including travel, events and entertainment, luxury clothing and accessories. In the US, Stubhub joined Klarna's network of over half a million retailers globally, while in Canada shoppers can now take advantage of flexible payments at Walmart. The Investment Adviser is also excited by the global roll out of Klarna's partnership with AirBnB, with consumers in seven countries now able to spread the cost of their trips worldwide. By early 2024, AirBnB will roll out Klarna in countries across three continents.

Klarna is an asset that the Investment Adviser classifies as 'IPO ready', a view supported by recent comments from Klarna's founder, Sebastien Siemiatkowski, that his three key conditions for an IPO had been met; they were:

· Becoming established in the US

· Having a sustainable business model

· Demonstrating significant growth potential.

A flotation could prove highly significant for Chrysalis.

Deep Instinct Limited ("Deep Instinct")

The adoption of new technologies such as generative AI is leading to an increased number of cyber-attacks globally and organisations remain vulnerable to cyber threats. A recent study by Sapio Research highlighted the impact of generative AI on the cybersecurity industry, analysing the technology's positive and negative effect on organisations' security postures and preparedness. Unsurprisingly, 75% of security professionals witnessed an increase in attacks over the past 12 months, with 85% attributing the rise to the application of generative AI.

In this new era of generative AI, the only way to combat emerging threats is by using advanced AI. Deep Instinct has developed a prevention-first approach to stopping malware, using the world's first and only purpose-built deep learning cybersecurity framework. Deep Instinct has developed technologies that can predict and prevent known and unknown threats in under 20 milliseconds, 750 times faster than the fastest ransomware can encrypt.

Organisations are beginning to realise that Endpoint Detection and Response ("EDR") and Next-Generation Antivirus ("NGAV") solutions do not have sufficient efficacy and the company has witnessed increased interest and engagement in its solution over the year to date. If the company can convert these leads into sales, then it will enter 2024 with very strong deal momentum.

Featurespace Limited ("Featurespace")

Earlier in the year Featurespace developed a bespoke fraud transaction monitoring framework for NatWest that led to a 135% improvement in Natwest's financial scam detection rate and a 75% reduction in false positives. Subsequently, NatWest and Featurespace won 'Best Innovation by a Financial Institution' at the Datos Insights 2023 Fraud & AML Impact Awards for that specific initiative. This follows a number of other awards over the period, including being named one of the winners in the PETs Challenge.

Industry recognition is translating into customer transaction and Featurespace currently has 70 direct customers and 200,000 institutions using its technology including HSBC, NatWest, TSYS, Worldpay, Marqeta, Contis, Danske Bank, Akbank, Edenred and Permanent TSB.

The company's results for 2022 demonstrated continued momentum in the business. Revenues increased 28% year-on-year to £34 million but new order intake was extremely strong towards the end of 2022 enabling Featurespace to enter 2023 with a strong tailwind. Annual Recurring Revenue ("ARR") grew by more than 40% through 2022 and has increased by almost 50% for September 2023 versus September 2022.

A number of positive steps have been made in terms of stewardship and governance over the year. In April 2023, Featurespace announced the appointment of John Shipsey as CFO. John was previously CFO at Smiths Group from 2017-2022 and prior to that was CFO of Dyson. In addition, the company appointed Len Laufer to the board as Non-Executive Director in October 2023. Len is a leader in Data Science and Technology across the Financial Services Industry and, after founding and successfully exiting Argus Information and Advisory Services, he went on to lead JP Morgan's machine learning and data science efforts as Head of Intelligent Solutions.

With market-leading technology and a proven go-to-market strategy, Featurespace appears well placed to continue disrupting its end market.

Tactus Holdings Limited ("Tactus")

The market backdrop has been challenging over the past twelve to eighteen months, with both Microsoft and Apple reporting a material decline in hardware sales. These recent trends have made it more difficult for Tactus to drive organic growth.

Notwithstanding this challenging backdrop, Tactus has continued to invest in a stable of brands over the course of the year and CCL, Box and Chillblast have now been integrated, rebranded, and repositioned post-acquisition. Chillblast in particular has performed well and is one of the most highly respected and decorated desktop PC builders in the world, evidenced by the fact that Chillblast was awarded the 'PC Pro Excellence Award for "Best PC Manufacturer 2022" over the period.

Tactus also has a business-to-business ("B2B") division which it has been investing in and scaling over the period. The company has made strong progress with this offering year to date, and we believe that B2B could represent a material revenue opportunity for the group going forwards. There are very few IT providers able to provide fully bespoke IT solutions to their clients, yet this is something Tactus is able to offer through its own-branded products and ability to innovate.

The global gaming sector is in structural growth and this inevitably will fuel demand for gaming devices and accessories. While near-term trading has been soft, Tactus should be a beneficiary of this trend as one the UKs leading providers of own and third-party branded gaming PCs, component parts and accessories.

Cognitive Logic Inc, trading as InfoSum ("InfoSum")

InfoSum has been looking to expand its routes to the market and has been focussed on delivering strategic partnerships that can accelerate its go to market strategy. Good progress has been made on this front and several partnerships have been announced in recent months, including partnerships with Google, Samsung Ads, Experian and Acxiom.

The group's partnership with Google was announced in May and will see InfoSum integrate with Google Display & Video 360's Publisher Advertiser Identity Reconciliation ("PAIR"). Display & Video 360's PAIR is a new solution that is integrated into Google's Display & Video 360 ("DV360") demand-side platforms ("DSP") and enables advertisers and publishers to reconcile their first-party data without tracking people across the web. This offering will be particularly relevant to the US market when Google begins to phase out support for third party cookies from midway through 2024. This development is relevant to InfoSum as approximately 80% of advertisers depend on third-party cookies and, without them, those advertisers will need to find a new way to reach end customers and prospects online.

Similarly, InfoSum's agreement with Samsung Ads in April, a leading provider of advanced TV advertising, will enable Samsung Ad's advertising partners to match against Samsung's industry-leading Smart TV footprint, as well as through Samsung DSP, all while continuing to maintain full control over their data.

It is evident from partnerships such as these that organisations will further prioritise and expand their first-party data programs and the Investment Adviser believes that data clean rooms will be an emerging and integral solution for publishers. InfoSum continues to be one of the pioneers in this space and applies innovative privacy controls, differential privacy techniques and utilises its 'non-movement of data' approach to prioritise consumer privacy at every stage, allowing stakeholders to keep their own first-party data separate and under their complete control. As a result, InfoSum should be well positioned thematically to take advantage of global regulatory tailwinds.

Secret Escapes Holding Limited ("Secret Escapes")

The backdrop for travel has been much more favourable over the course of the year and trading at Secret Escapes has been considerably better than in previous years, where booking cycles were impacted by COVID-19 and travel restrictions. The company's financial performance year to date has been encouraging and the outlook for the business into 2024 is positive.

The company announced a funding round in July and secured £31.7 million of equity funding alongside a debt refinancing. These funding initiatives should enable the company to accelerate marketing spend to drive customer acquisition and, ultimately, growth. This should result in a faster growing and more profitable business in the near to medium term.

Graphcore Limited ("Graphcore")

Graphcore has continued to develop its hardware and software solutions, against a fast-moving industry backdrop.

While the market for AI applications has seen considerable growth, this has meant that model sizes have grown significantly: in 2017, AI models had around 1 million parameters, but currently have over 1 trillion. This explosion in size has led to a requirement for AI compute capabilities to expand very aggressively. The Investment Adviser believes this has favoured the incumbent, Nvidia, which commands a dominant position in terms of sales of AI hardware. So, despite a strong market backdrop and considerable customer interest, Graphcore has found it hard to generate significant revenues from its products.

Wise PLC ("Wise")

Post-period end, Wise released a trading update that demonstrated sustained momentum over the period. Active customer growth remained strong at 30% (to 7.5 million) while revenues increased by 23% year-on-year, and "Income" - which includes interest income - grew 40%.

Part of the reason for the strong operating performance of Wise over the last twelve months has been its exposure to UK base rates. Like Starling, Wise has deposits on its platform that it can lodge with the Bank of England and other central banks, which have achieved negligible yields for several years. Following the global shift upwards in yields, these excess deposits are now earning a return.

As a result of this performance, management increased FY24 income growth guidance from 28-33% to 33-38% at the interim stage and further increased guidance to 42-44% at its fiscal third quarter and noted that FY24 profitability will be supported by higher gross profit margins (due to higher net yields on customer balances) and remain elevated above its 20% medium-term guidance.

Sorted Holdings Limited ("Sorted")

It was announced in June 2023 that Location Sciences Group PLC was looking to acquire the entire share capital of Sorted. Significant progress has been made by the Company and its advisers in relation to the proposed acquisition and it is anticipated that this transaction will close soon.

Alongside pushing forward with this transaction, Sorted has streamlined its operations, while expanding the customer base and shipping volumes with existing customers. This should result in a more efficient and profitable business going forwards.

Environmental, Social and Corporate Governance Report

The role of ESG in our investment process

Chrysalis provides primary capital to predominantly unlisted businesses that offer the technology to transform the way people live and work. The Company's ESG Policy sets out how the Investment Team fulfils its responsibilities on behalf of clients at each stage of the investment process, in line with the Company's investment policy and asset class specific considerations.

While no new private investments were made during the period, the Investment Adviser updated the ESG policy established by the Board and continued to integrate ESG analysis systematically across the portfolio.

The current portfolio includes many companies which provide solutions to urgent business problems with broader societal costs - such as fraud, cyber risks, data privacy and affordable pension provision - or which disrupt highly profitable financial services incumbents and share cost savings with consumers. The demand to reduce these broader societal costs is a crucial driver which underpins the long-term growth story of these investments.

As well as positive sustainability outcomes, the Investment Adviser expects all companies to minimise any direct and indirect negative impact on the environment and broader society.

This report provides a review of the steps the Investment Adviser is taking to evolve the Company's ESG strategy, and the progress being made against the ESG objectives. Also included are a number of case studies to bring to life good practice by portfolio companies during the financial year, and stewardship activity conducted by the Investment Team.

Stewardship

Stewardship is an important responsibility and a core aspect of the investor approach. There is a continuous process of dialogue with the leadership teams of investee companies. Where the Investment Adviser has a board seat or board observer status, members of the Investment Team attend board meetings and provide input where they believe they can advise companies on how to meet their strategic objectives. This includes regular dialogue on ESG related topics, and the Investment Adviser seeks to influence companies where they believe the management of material ESG factors can be improved.

One of the principal challenges of ESG integration in a private company context is data availability. Unlike listed companies, many private companies do not disclose ESG related data, either publicly or to third party data providers. This reality can hinder the identification of material ESG risks and potential issues which may require engagement.

The Investment Adviser has developed an internal dashboard of metrics to assess the ESG performance of portfolio companies. This data is collected directly from private investee companies or sourced from the sustainability disclosures of listed holdings. The Investment Adviser uses the resulting metrics to assess each company's ESG performance relative to its level of corporate development and maturity, and incorporates insights gained into its dialogue with company leadership teams, to assist their continued development.

Where potential material ESG risks, or areas of group governance which require further development, are identified, the Investment Adviser communicates these conclusions to management and seeks to work collaboratively with them to make improvements. Company action plans and any material ESG incidents are reported to the Risk Committee and monitored over time to assess progress.

Cast study: Starling

Starling has been a long-held position in the portfolio; with the initial investment made in early 2019.

During the due diligence process, the Investment Adviser identified that the board of directors would benefit from additional independence and as part of its original investment, negotiated the right to appoint a new independent non-executive director. Following investment, the Investment Adviser then worked with the other major investor to bring in suitable new directors to replace those leaving the board. This included a new Chairman and senior independent director ("SID"), as well as other directors with specific skill sets, with a view to helping the company develop.

This work paid dividends when Anne Boden, former CEO and founder, decided to step back from Starling, as the board was able to provide effective support to the interim CEO as he took over, being comprised of a number of individuals with relevant experience, including holding roles at major, global banks.

Corporate Governance

To grow successfully, companies and their founders must not only execute strategically, but they must also lay the foundations for future growth by creating appropriate corporate governance structures. It is critical that private companies considering listing prepare themselves for the additional scrutiny which comes with going public. It is also vital that founders, who may not have previously run listed businesses, are prepared to bring in experienced independent non-executive directors who can help their companies develop. Building capacity at board and executive level - reducing key man risk and reliance on individual founders over time - is crucial to a company's future development.

During the financial year, the portfolio companies have continued to strengthen group governance. As active owners, the Investment Adviser assesses company governance on a range of issues, recognising that good practice will differ depending on a company's jurisdiction, size, and ownership structure.

Case study: wefox

wefox continued to strengthen its board and management team during the period, recruiting Nicholas Walker as Chief HR Officer. Nicholas is a seasoned HR professional with more than 25 years' global experience spanning technology, fintech and payment industries, most recently at Paysafe.

Post period end, wefox appointed Jonathan Wismer as its new Group Chief Financial Officer. Jonathan brings more than 25 years of experience in the insurance industry, having held senior finance roles at Zurich, AIG and Resolution Life. The appointment represents the company's continued strengthening of its C-suite as it steps up its plans for profitable growth and global expansion.

Subsequently, wefox also appointed Mark Hartigan as Chairman. Mark was previously Chief Executive at LV and Head of Operations for Europe, Middle East and Africa at Zurich Insurance Group. He was Chief Executive Officer for Zurich Global Life in the Asia Pacific and Middle East region and led its regional business in Europe.

Human Capital

Good human capital management supports both value creation and business resilience, and the Investment Adviser believes that investing in human capital correlates with longer-term business success. Human capital management can both upskill and educate a workforce, increase abilities, and retain and motivate employees.

The Investment Adviser recognises that approaches to human capital management, including DE&I will differ, and as an active owner seeks to understand an investee company's operating model and engage to advise on best practice and potential improvements.

Case study: Starling

Starling Bank continues to build on its position as a leader on gender diversity, both organisationally and as a catalyst for a broader change in retail banking.

Effective integration of DE&I principles within a business is widely considered to help companies attract talent from a wider talent pool. It also contributes to better decision-making, performance, innovation, and employee satisfaction and retention.

The cumulative Impact of these initiatives has been significant. Starling's latest gender pay gap figures (2022), show that the median gender pay gap has decreased from 10% to 9%, while the mean has narrowed from 16% to 12%. Its gender pay gap remains substantially lower than those of competitors (see table).

Source: Company disclosures

Starling launched its #MakeMoneyEqual campaign in 2018, with the aim of removing negative gender stereotypes from public conversation around money and personal finances. Since then, the bank has conducted studies showing significant discrepancies in the way that men and women are spoken to about money and portrayed in banking advertising campaigns, factors which could discourage women's engagement with financial affairs. It created a free image library that better represented women and money, helping to ensure that women are better represented in images used by media and advertisers. Since 2019, the bank has commissioned a regular independent audit of its algorithms and technological processes to make sure Starling is fair and free from gender or race bias.

Social Impact

The current portfolio includes many companies which provide solutions to urgent business problems with broader societal costs.

Case study: The use of AI to prevent financial crime

Both Featurespace and Deep Instinct, representing approximately 13% of net assets at period end, drive innovation through generative AI and deep learning.

Featurespace estimates that global losses from card fraud will total $397.4 billion over the next 10 years, and the problem will only continue to grow as criminals utilise generative AI for their own gain.

In response, in October 2023 the company launched TallierLTM, the world's first Large Transaction Model ("LTM"). TallierLTM, a foundation AI technology for the payment and financial services industry, is a large-scale, self-supervised, pre-trained model designed to power the next generation of AI applications. The model has shown improvements of up to 71% in fraud value detection when compared to industry standard models. It identifies hidden transactional patterns undiscoverable using current industry methods, enabling it to predict likely future consumer transactions.

Deep Instinct's 2023 Mid-Year Cyber Threat Report calculates that the number of ransomware victims in the first half of 2023 exceeded the total number of victims for the whole of 2022. The proliferation of Ransomware-as-a-Service ("RaaS") - which sees criminal actors exploiting vulnerabilities to launch large-scale cyber-attacks - has continued in 2023 alongside a rise in the use of Large Language Models ('LLMs"), e.g. ChatGPT, with criminal actors taking advantage of its capabilities to develop malicious code.

Deep Instinct predicts that in 2024 threats will become even more customised, making it critical to develop deep learning methods, the most advanced form of AI, to tackle these threats.

Case study: Financial wellbeing

Wise is the longest held asset in the portfolio.

Its mission is to lower the cost to customers of transferring money around the world. Historically, there have been many links in the chain to send money cross boarder; local bank branches - sometimes at each end - as well as transmitting banks, if the former are not using payment rails such as SWIFT. As well as each bank requiring a cut of the principle, foreign exchange fees will also be levied.

Wise set out to circumvent this layering of fees and built its own infrastructure to move money globally. This meant that not only did it cut out many of the (costly) links in the chain, but it could also offer economies of scale in terms of foreign exchange pricing. As a result, Wise allows individuals to move money around the world up to approximately five-times cheaper than many high street UK banks.

Environmental Impact

Limiting global temperature rises to 1.5 degrees above pre-industrial levels, in line with the Paris Agreement, is an urgent challenge facing the global economy. The Investment Adviser uses its influence as an investor through stewardship and active ownership to encourage companies to identify, manage and mitigate climate change risks or opportunities. While the Investment Adviser believes that the Company's portfolio of tech-enabled, predominately digital businesses is not exposed to material climate risks and have limited direct environmental impacts, its view is that the scale of climate change will impact all sectors, industries, and asset classes and so acknowledges the positive role that investors can play in tackling it through investment decisions and capital allocation.

Disclosed below is the weighted average carbon intensity of the portfolio and other related metrics. The companies representing 42% of NAV at year end have calculated their operational (Scope 1 and 2) emissions. Where companies have not yet calculated their own emissions, the Investment Adviser has used estimated data based on the peer groups used in the Company's valuation process. The analysis suggests that the portfolio's total emissions increased during the year, which may be expected given the continued growth of many portfolio companies. However, on a relative basis the weighted average carbon intensity of the portfolio decreased as a proportion of revenues, suggesting increased carbon efficiency of the portfolio in aggregate.

Case study: Smart Pension

In January 2023, Smart Pension announced the launch of three new fully sustainable lifestyle strategies with different growth fund options. All three growth funds fully invest in funds that positively contribute to the planet and society, including investing in areas such as renewable energy projects, clean water, and healthcare. Smart Pension is the first UK pension provider to offer customers a range of lifestyle strategies that are all fully sustainable, including the Smart Pension default fund. The Smart Pension Master Trust was also approved as a signatory to the UK Stewardship Code in March 2023.

In February 2023, Smart Pension announced that it has halved the emissions of its default growth fund. This is over two years ahead of the 50% reduction target it announced in June 2022 and represents considerable progress towards the company's pledge to make its default growth fund net zero by 2040. This is also well ahead of the goals of the Paris Agreement, which called for emissions to be reduced by 45% by 2030 and to reach net zero by 2050.

Case study: Klarna

During the financial year, Klarna provided an update on the progress of its Give One initiative, launched in April 2021, which pledges 1% of all future funding rounds to support change-makers on the frontlines of environmental challenges. Klarna has contributed $11 million to the initiative since launch in April 2021, funds which have enabled the planting of 3.4 million trees worldwide. Give One supports 56 environmental initiatives which include over 70 organisations throughout North America, South America, Africa, Europe, and Asia.

Figures disclosed in this section have not been independently verified by the Company or the Investment Adviser.

Investment Objective and Policy

Investment objective

The investment objective of the Company is to generate long term capital growth through investing in a portfolio consisting primarily of equity or equity-related investments in unquoted and listed companies.

Investment policy

Investments will be primarily in equity and equity-related instruments (which shall include, without limitation, preference shares, convertible debt instruments, equity-related and equity-linked notes and warrants) issued by portfolio companies. The Company will also be permitted to invest in partnerships, limited liability partnerships and other legal forms of entity where the investment has equity like return characteristics.

For the purposes of this investment policy, unquoted companies shall include companies with a technical listing on a stock exchange but where there is no liquid trading market in the relevant securities on that market (for example, companies with listings on The International Stock Exchange or the Cayman Islands Stock Exchange). Furthermore, the Company shall be permitted to invest in unquoted subsidiaries of companies whose parent or group entities have listed equity or debt securities.

The Company may invest in publicly traded companies (including participating in the IPO of an existing unquoted company investment), subject to the investment restrictions below. In particular, unquoted portfolio companies may seek IPOs from time to time following an investment by the Company, in which case the Company may continue to hold its investment without restriction.

The Company is not expected to take majority shareholder positions in portfolio companies but shall not be restricted from doing so. Furthermore, there may be circumstances where the ownership of a portfolio company exceeds 50% of voting and/or economic interests in that portfolio company notwithstanding an initial investment in a minority position. While the Company does not intend to focus its investments on a particular sector, there is no limit on the Company's ability to make investments in portfolio companies within the same sector if it chooses to do so.

The Company will seek to ensure that it has suitable investor protection rights through its investment in portfolio companies where appropriate. The Company may acquire investments directly or by way of holdings in special purpose vehicles, intermediate holding vehicles or other funds or similar structures.

Investment restrictions

The Company will invest and manage its assets with the objective of spreading risk, as far as reasonably practicable. No single investment (including related investments in group entities) will represent more than 20% of Gross Assets, calculated as at the time of that investment. The market value of individual investments may exceed 20% of gross assets following investment.

The Company's aggregate equity investments in publicly traded companies that it has not previously held an investment in prior to that Company's IPO will represent no more than 20% of the Gross Assets, calculated at the time of investment.

Subject in all cases to the Company's cash management policy, the Company's aggregate investment in notes, bonds, debentures and other debt instruments (which shall exclude for the avoidance of doubt convertible debt, equity-related and equity-linked notes, warrants or equivalent instruments) will represent no more than 20% of the Gross Assets, calculated as at the time of investment.

The Company will not be required to dispose of any investment or rebalance its portfolio as a result of a change in the respective value of any of its investments.

Corporate Governance Statement

Chrysalis has a Premium Listing on the London Stock Exchange Main Market and became a member of the Association of Investment Companies (AIC) on 21 January 2019. The Board has considered the Principles and Provisions of the 2019 AIC Code of Corporate Governance (AIC Code), and a full scope review of the Company's corporate governance processes and procedures has been conducted with reference to the AIC Code by the Board and the Company Secretary. The AIC Code addresses the relevant Principles and Provisions set out in the UK Corporate Governance Code (the UK Code), as well as setting out additional Provisions on issues that are of specific relevance to the Company.

The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the Financial Reporting Council and the Guernsey Financial Services Commission, provides more relevant information to shareholders. The Company has complied with the Principles and Provisions of the AIC Code and in doing so has met its associated disclosure requirements under paragraph 9.8.6 of the Listing Rules.

The AIC Code is available on the AIC website (www.theaic.co.uk). It includes an explanation of how the AIC Code adapts the Principles and Provisions set out in the UK Code to make them relevant for investment companies.

Key Governance Disclosures

Section 172(1) Statement

Through adopting the AIC Code, the Board acknowledges its duty to apply and demonstrate compliance with section 172 of the UK Companies Act 2006 and to act in a way that promotes the success of the Company for the benefit of its Shareholders as a whole, having regard to (amongst other things):

a) consequences of any decision in the long-term;

b) the need to foster business relationships with suppliers, customers and others;

c) impact on community and environment;

d) maintaining reputation; and

e) acting fairly as between members of the Company.

The Board considers its duties under S.172 to be integrated within the Company's culture and values. The Company's culture is one of respect for the opinions of stakeholders, with an aim of carrying out its operations in a fair and sustainable manner that is both instrumental to the Company's long term success and upholds the Company's ethical values. The Board encourages diversity of thought and opinion in accordance with its Diversity Policy and would like to encourage stakeholders to engage freely with the Board of Directors on matters that are of concern to them.

Stakeholders may contact the Company via the Company's dedicated e-mail address (chrysalis@maitlandgroup.com), the Company's LinkedIn page (https://www.linkedin.com/company/chrysalis-investments-investment-trust/) or by post via the Company Secretary on any matters that they wish to discuss with the Board of Directors.

The Company is an externally administered investment company, has no employees, and as such is operationally quite simple. The Board does not believe that the Company has any material stakeholders other than those set out in the following table.

Going Concern Statement

The Going Concern Statement is made on page 50.

Viability Statement

The Viability Statement is made on page 50 and 52.

Fair, Balanced and Understandable Statement

The annual report and accounts taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy. Further information on how this conclusion was reached can be found within the Audit Committee Report.

Appointment of the New Investment Adviser

Further details relating to the appointment of the New Investment Adviser and how this is in the interests of members as a whole can be found within the Report of the Management Engagement Committee.

Assessment of Principal and Emerging Risks

The Board has undertaken a robust assessment of the Company's principal and emerging risks, together with the procedures that are in place to identify emerging risks. Further information on this assessment and an explanation on how these risks are being mitigated and managed can be found on page 53.

Review of Risk Management and Internal Control

The Board confirms that it has reviewed the Company's system of risk management and internal controls for the year ended 30 September 2023, and to the date of the approval of this annual report and audited financial statements. For further details of the key risks and uncertainties the Directors believe the Company is exposed to together with the policies and procedures in place to monitor and mitigate these risks, please refer to pages 77 to 79 and 88 to 89 and note 19 of the annual report and audited financial statements.

The Board of Directors

The Board comprises six independent non-executive Directors, two of whom are female, who meet at least quarterly, in addition to ad hoc meetings convened in accordance with the needs of the business, to consider the Company's affairs in a prescribed and structured manner. Further details concerning the meetings attended during the year by the Board and its Committees can be found on page 39. All Directors are considered independent of the Investment Adviser for the purposes of the AIC Code and Listing Rule 15.2.12A.

The Board is responsible for the Company's long term sustainable success and the generation of value for shareholders and in doing so manages the business affairs of the Company in accordance with the Articles of Incorporation, the investment policy and with due regard to the wider interests of stakeholders as a whole. For further information on how the Board considers the interests of stakeholders in its decision making please see the S.172(1) statement on pages 33 and 34. Additionally, the Board have overall responsibility for the Company's activities including its investment activities and reviewing the performance of the Company's portfolio. The Board are confident that the combination of its members is appropriate and is such that no one individual or small group of individuals dominates the Board's decision making.

The Directors, in the furtherance of their duties, may take independent professional advice at the Company's expense, which is in accordance with provision 19 of the AIC Code. The Directors also have access to the advice and services of the Company Secretary through its appointed representatives who are responsible to the Board for ensuring that the Board's procedures are followed, and that applicable rules and regulations are complied with.

To enable the Board to function effectively and allow the Directors to discharge their responsibilities, full and timely access is given to all relevant information.

Comprehensive board papers are circulated to the Board in advance of meetings by the Company Secretary, allowing time for full review and comment by the attending parties. In the event that Directors are unable to attend a particular meeting, they are invited to express their views on the matters being discussed to the Chairman in advance of the meeting for these to be raised accordingly on their behalf. Full and thorough minutes of all meetings are kept by the Company Secretary.

The Directors are requested to confirm their continuing professional development is up to date and any necessary training is identified during the annual performance reviews carried out and recorded by the Remuneration and Nomination Committee.

The current Board have served since the Company's inception in October 2018, with the exception of Margaret O'Connor who was appointed on 6 September 2021, and have been carefully selected against a set of objective criteria. The Board considers that the combination of its members brings a wealth of skills, experience and knowledge to the Company as illustrated in their biographies below:

Director Biographies

Andrew Haining (Chairman) (independent)

Andrew has had a 30-year career in banking and private equity with Bank of America, CDC (now Bridgepoint) and Botts & Company. During his career, Andrew has been responsible for over 20 private equity investments with transactional values in excess of $1 billion.

Andrew holds several Guernsey and UK board positions.

Stephen Coe (senior independent)

Stephen serves as Chairman of the Audit Committee. He is currently a Non-Executive Director of a number of private companies. Stephen has been involved with offshore investment funds and managers since 1990, with significant exposure to property, debt, emerging markets and private equity investments. Stephen qualified as a Chartered Accountant with Price Waterhouse Bristol in 1990 and remained in audit practice, specialising in financial services, until 1997. From 1997 to 2003 Stephen was a director of the Bachmann Group of fiduciary companies and Managing Director of Bachmann Fund Administration Limited, a specialist third party fund administration company.

From 2003 to 2006 Stephen was a director with Investec in Guernsey and Managing Director of Investec Trust (Guernsey) Limited and Investec Administration Services Limited. Stephen became self-employed in August 2006, providing services to financial services clients.

Simon Holden (independent)

Simon is a Chartered Director ("Cdir") accredited by the Institute of Directors. Previously an investment director at Terra Firma Capital Partners and Candover Investment prior to that, Simon has been an active independent director to listed investment company, private equity fund and trading company boards since 2015. In addition, Simon acts as the pro-bono Business Adviser to Guernsey Ports; a State of Guernsey enterprise that operates all the Bailiwick's critical airports and harbour infrastructure.

A graduate of the University of Cambridge with an Meng and MA in Manufacturing Engineering, Simon is an active member of UK and Guernsey fund management interest groups including a director member of the Association of Investment Companies ("AIC").

Anne Ewing (independent)

Anne has over 35 years of financial services experience in banking, asset and fund management, corporate treasury, life insurance and the fiduciary sector. Anne has an MSc in Corporate Governance, is a Chartered Fellow of the Securities Institute and has held senior roles in Citibank, Rothschilds, Old Mutual International and KPMG, and latterly has been instrumental in the start-ups of a Guernsey fund manager and two fiduciary licensees.

Anne has several non-executive directorships roles in investment companies and a London based private wealth banking group and related subsidiaries in Jersey and Guernsey.

Tim Cruttenden (independent)

Tim is Chief Executive Officer of VenCap International PLC, a UK-based asset management firm focused on investing in venture capital funds. He joined VenCap in 1994 and is responsible for leading the strategy and development of the firm. Prior to joining VenCap, Tim was an economist and statistician at the Association of British Insurers in London. He received his Bachelor of Science degree (with honours) in Combined Science (Economics and Statistics) from Coventry University and is an Associate of the CFA Society of the UK. Tim is a non-executive director of Polar Capital Technology Trust.

Margaret O'Connor (independent)

Margaret has had a 30-year career commercialising technology in the US, Asia, Europe, and Africa. She brings insights from having worked as a MarTech operator, MasterCard senior executive, and investor to her current roles as an independent director of a Guernsey investment trust and Chair of a Mauritius Venture Capital Fund. She's a member of the Private Equity Women Investor Network.

She earned her BA from Rutgers University and studied International Relations at Princeton University before moving to Seoul, Korea to work for the Korean Ministry of Finance.

Public Company Directorships

The following details are of all other public Company Directorships and employment held by each Director and shared Directorships of any commercial company held by two or more Directors:

Anne Ewing

None to be disclosed

Andrew Haining

None to be disclosed

Simon Holden

HICL Infrastructure PLC

Hipgnosis Songs Fund Limited

JPMorgan Global Core Real Assets Limited

Stephen Coe

None to be disclosed

Tim Cruttenden

Polar Capital Technology Trust PLC

Margaret O' Connor

None to be disclosed

Valuation Committee

The Board are of the view that the valuation process needs to be as efficient as possible while also providing for comprehensive and independent oversight. Consequently, the Board established an independent Valuation Committee which comprises of the following members:

Lord Rockley (Committee Chairman)

Anthony Rockley was an audit partner at KPMG until 2015 with a sector focus on private equity and venture capital. Over a 34 year career with KPMG, Anthony was responsible for auditing private equity and venture capital companies and structures. Amongst other sector specific work, Anthony was a member of the International Private Equity and Venture Capital Guidelines Board for 9 years.

Diane Seymour Williams

Diane Seymour Williams has a career spanning over 30 years in asset and wealth management. She was a listed portfolio manager with Deutsche Morgan Grenfell, ultimately running DMG's asset management business in Asia. After returning to the UK, Diane subsequently held a number of board positions in the financial services sector. Currently she sits, inter alia, on the boards of ABRDN Private Equity Opportunities Trust PLC, Mercia Asset Management PLC and SEI's European business. Diane brings extensive fund management and portfolio oversight experience. In addition to her public company roles Diane sits on the investment committees of Newnham College, Cambridge and the Canal & River Trust.

Jonathan Biggs

Jonathan Biggs worked at Accel, a leading global venture and growth capital investor, for 20 years up until 2021. One of the first hires in Europe, he was the COO of Accel's European business. During his time at Accel, he raised over $2.5 billion in five early-stage venture funds focused on Europe. Jon has subsequently joined Top Tier Capital Partners as a Partner where he leads the European funds business. Prior to that he was a Managing Partner at SVB Capital.

The fourth member of the committee is Tim Cruttenden who has been a director of the Company since its formation.

Director Attendance

During the year ended 30 September 2023, the Board and Committee meetings held and attended by the Directors were as follows:

Division of Responsibilities

A schedule of matters reserved for the Board is maintained by the Company and can be summarised as follows:

· Strategic Issues

· Financial Items such as approval of the annual and half-yearly reports, any quarterly financial statements and any preliminary announcement of the final results and the annual report and accounts including the corporate governance statement

· Treasury Items

· Legal, Administration and Other Benefits

· Communications with Shareholders

· Board Appointments and Arrangements

· Miscellaneous such as to approve the appointments of professional advisers for any Group company in addition to the Company's Auditors

· Monetary Limits

The Directors have also delegated certain functions to other parties such as the Valuation Committee, the Investment Adviser, the Administrator, the Company Secretary, the Depositary and the Registrar. In particular, the Investment Adviser has been granted discretion over the management of the investments comprising the Company's portfolio.

The Investment Adviser reports to the Board on a regular basis both outside of and during quarterly board and Committee meetings, where the operating and financial performance of the portfolio, together with valuations, are discussed at length between the Board and the Investment Adviser. The Directors have responsibility for exercising supervision of the Valuation Committee and the Investment Adviser.

Board Committees

The Company has an Audit Committee, Remuneration and Nomination Committee, Management Engagement Committee, Risk Committee and an Independent Valuation Committee (together the "Committees"). The Terms of Reference for each committee is available on the Company's website.

The Board believes that its established Committees are adequately composed, and that each member has the necessary skills and experience to discharge their duties effectively. All new Committee members will be provided with an induction on joining the relevant Committee. The actions carried out by each Committee since the previous quarterly board meeting are reported at each meeting to the Board of Directors by the respective Committee chair. Each Committee meeting is attended by the Company Secretary and comprehensive minutes are kept, as well as a schedule of the action points arising from each meeting.

Stephen Coe is the Chairman of the Audit Committee with Anne Ewing and Simon Holden as members with Margaret O'Connor as an observer. A full report regarding the Audit Committee's activities during the year can be found in the Audit Committee Report on page 60.

Anne Ewing is Chairman of the Remuneration and Nomination Committee, with Margaret O'Connor and Tim Cruttenden as members. The Remuneration and Nomination Committee meets at least once a year in accordance with the terms of reference and reviews, inter alia, the structure, size and composition of the Board. A full report regarding the Remuneration and Nomination Committee's activities during the year can be found on page 41.

Margaret O'Connor is Chairman of the Management Engagement Committee, with Simon Holden and Tim Cruttenden as members. The Management Engagement Committee will meet formally at least once a year for the purpose, amongst other things, of reviewing the actions and judgments of the Investment Adviser and the terms of the Portfolio Management Agreement. A full report regarding the Management Engagement Committee's activities during the year can be found on page 44.

Simon Holden is Chairman of the Risk Committee, with Anne Ewing, Margaret O'Connor, Stephen Coe and Tim Cruttenden as members. The Risk Committee will meet formally, at a minimum once a year, though it has been agreed, that the Risk Committee is convened quarterly in the first year of assuming its responsibilities, aligned with the Company's financial reporting cycle and at such other times as the Chairman of the Committee deems appropriate, for the purpose of, amongst other things, to ensure that there is proper consideration and assessment risks and stresses ensuring that the Investment Adviser develops appropriate strategies to protect the Group's portfolio of investments. A full report regarding the Risk Committee's activities during the year can be found on page 46.

Report of the Remuneration and Nomination Committee

Statement: Chairman of Committee

I am pleased to present the Remuneration and Nomination Committee report for the year ended 30 September 2023. The composition of the Remuneration and Nomination Committee meets with the requirements of the AIC Code and, in line with good practice, membership is reviewed annually.

During the year, there have been no changes to the Directors' Remuneration Policy or the Terms of Reference of the Remuneration and Nomination Committee. No new Directors were appointed to the Board during the year.

In 2024, and subject to the outcome of the Continuation Vote at the AGM, the Remuneration and Nomination Committee will revive its recruitment process to help the Company further achieve its targets.

I am satisfied that the Remuneration and Nomination Committee is discharging its responsibilities proficiently and recommend this report to the Board.

Purpose and Aim of the Remuneration and Nomination Committee

The terms of reference of the Remuneration and Nomination Committee are set out on the Company's website at https://chrysalisinvestments.co.uk/investor-relations/. The primary responsibility of the Remuneration and Nomination Committee is, in relation to remuneration, to determine and agree with the Company's Board of Directors (together the "Board" and individually a "Director") the framework or broad policy for the remuneration of the Company's Chairman and non-executive Directors in accordance with the Company's articles of incorporation (the "Articles") and applicable law and, in relation to nominations, to review the structure, size and composition (including the skills, knowledge and experience) required of the Board compared to its current position and make recommendations to the Board with regard to any changes as necessary.

Membership and Meetings of the Remuneration and Nomination Committee

The Remuneration and Nomination Committee met formally once during 2023, on 27 October 2023. Due to illness the meeting was chaired by Margaret O'Connor and attended by Tim Cruttenden with papers prepared by the Chair of the Committee.

The members of the Remuneration and Nomination Committee are as follows:

· Anne Ewing (Chairman)

· Tim Cruttenden

· Margaret O'Connor

Composition, Succession and Evaluation of the Board

At its meeting, the Remuneration and Nomination Committee reviewed and reaffirmed the Company's policy whereby no Director will serve for more than nine years (such policy being aligned to the AIC Code). The Remuneration and Nomination Committee confirms that no Director has served for longer than nine years, due to the Company being incorporated in October 2018.

No new directors were appointed to the Board during the year.

On 27 October 2023, at a general board meeting, the Company reviewed and refreshed its policy on Diversity and Inclusion as follows:

The Board is committed to longer term succession planning in the context of meeting the objective of the Parker Review will follow ahead of the 2024 deadline. This will require the Company to increase the ethnic diversity of its board by having at least one director from an ethnic minority. The Company's Board currently comprises two female directors which meets the targets set by the Hampton-Alexander Review to increase the number of women in senior leadership positions in all FTSE 350 companies to 30% by end 2022. Although not a constituent of the FTSE 350, the Company is committed to maintaining the highest standards of corporate governance and hence will seek to meet the further recommendations of the review within the 2025 deadline.

Appointments to the Board will be based on merit and on any skills gap identified to ensure the Board can continue to act effectively.

The Company follows a set of principles when looking to recruit a new candidate. This will include the use of an external well regarded recruitment agency who will be instructed to conduct a wide search for diverse candidates and, where applicable potentially, encourage candidates who may have appropriate transferable skills which, if appointed, would add to the diversity of the Board.

Where the Company is unable to meet any diversity or inclusion targets it will look to fully explain its position to its shareholders and stakeholders.

In November 2023, the Committee considered succession planning and undertook a review of the attributes and skills of the current Board and made recommendations to the Board.

In light of the forthcoming Continuation Vote it was considered inappropriate to make changes to the Board and indeed it would have proved difficult to recruit appropriate candidates with the different scenarios that might follow the vote. The Board therefore agreed to defer any recruitment until the results of the Continuation Vote are known.

A succession plan has been drawn up in the event of the continuation of the Company when it is expected at least three directors would rotate off the Board over a period of 24 months. Due regard will be given to equal opportunity, diversity and inclusion for these appointments.

Committee Memberships

2023 Review of Board Performance

The Remuneration and Nomination Committee engaged BoardAlpha Limited to undertake a review of Board performance. This externally facilitated review was undertaken during the summer months of 2023. Interviews were held with each of the six non-executive directors, including the Chairman. Discussions were also held with the Investment Adviser, Director of Finance - Chrysalis and with Lord Rockley as Chairman of the Valuation Committee. Further discussions were held with the Company's administrator, legal counsel and brokers. BoardAlpha attended a Valuation Committee Meeting, a Risk Committee Meeting and a full Board Meeting and reviewed all information packs from meetings for the full year.

The output from the review was positively received by the Board and a number of actions are in progress to address various procedural matters, some of which are already underway as part of this year's reporting.

2023 Review of Remuneration

The Company's policy is that the fees payable to the Directors should reflect the time spent by the Board on the Company's affairs and the responsibilities borne by the Directors, and should be sufficient to retain high calibre directors. The policy is for the Chairman of the Board, the Chairs of the Audit Committee and Risk Committee and the Valuation Committee Board Representative to be paid a higher fee than the other Directors in recognition of their more onerous roles and more time spent. The Board may only amend the level of remuneration paid within the limits of the Articles (£500,000 per annum maximum).

The table below is provided to enable Shareholders to assess the relative spend on Director remuneration and the size of the Board. The figures provide a comparison against management fees payable to the Investment Adviser relative to the Company's Net Asset Value ("NAV").

A comparison of the Company's remuneration against its competitors was undertaken by the Committee and a view taken on current market conditions, noting the trajectory of inflation rates and the time commitment and activities of the Board. The forthcoming Continuation Vote was also considered.

The Remuneration and Nomination Committee recommended, and the Board resolved, that there should be no increase in base remuneration for the financial year commencing 1 October 2023.

_____________________

Anne Ewing

Chairman of the Remuneration and Nomination Committee, Chrysalis Investments Limited

Report of the Management Engagement Committee

The Management Engagement Committee (hereafter referred to in this report as the "MEC") is chaired by Ms Margaret O'Connor and at this time, comprises a sub-committee of the Board including Mr Simon Holden and Mr Tim Cruttenden, whilst other Board members are invited to attend. Only non-executive Directors who are independent of the Investment Adviser may serve on the MEC, which meets at least once per year. The MEC's terms of reference are available to view on the Company's website, with the MEC's primary purpose being to review, annually, the compliance of the Investment Adviser with the Company's investment policy and Portfolio Management Agreement as well as to keep under review the performance of all other key service providers involved in supporting the Company and its operations.

Please see the MEC's terms of reference on the Company's website, the link is https://chrysalisinvestments.co.uk/wp-content/uploads/2022/11/mec-terms-of-reference-1.pdf

The MEC convened twice during the year ended 30 September 2023. Optimising the cost-effectiveness and operational efficiency of service provision is essential to the Company, especially in the current difficult trading environment. With one exception, the service provision was satisfactory to Company standards.

The MEC's priorities during the past year have been:

1. To ensure appropriate resourcing at and reporting from the Investment Adviser,

2. To ensure appropriate resourcing for the Valuation process,

3. To strengthen the self-managed Alternative Investment Fund Manager ("AIFM") function,

4. To ensure appropriate investor engagement in advance of the Continuation Vote.

During the past year, the Investment Adviser's dedicated finance and ESG resources made excellent progress developing appropriate reporting for the Company and the Risk Committee. During the MEC meeting on 23 September 2023, we noted the need for more strategic analysis about the commercial, technology, and regulatory challenges and opportunities confronting each disruptive technology asset as well as comprehensive reporting about the investment management process going forward.

The Board Chairman continues to serve as the primary point of contact with the Investment Adviser. In consultation with the Board, the MEC, and key advisers, Mr. Haining led a process to negotiate a separation agreement with Jupiter Fund Management PLC ("Jupiter") to enable the Investment Advisory team responsible for managing the Company's assets to form a New Investment Adviser within a new regulated structure. The MEC provided a comprehensive commercial and regulatory framework for the new AdviserCo that anticipates the strategic and operational challenges this experienced team may confront in the new proposed structure.

Following the end of the Company's financial year, a Heads of Terms announcement was made on 27 November 2023, explaining the redrawn structure through which the investment advisory services will be provided and the timing of the proposed Jupiter contract termination on 31 March 2024. Jupiter has agreed to a reduction in the management fee, effective from 1 October 2023, from 50bps to 15bps, leading to an expected saving of approximately £1.4 million for Chrysalis shareholders over the six-month period to 31 March 2024.

Under the Heads of Terms, Jupiter has released the Principals and four other executives from their employment contracts and employment restrictions, effective 31 March 2024. The Board has agreed, in principle, to enter into a tripartite contract with an LLP formed by the Principals to take over investment advisory services from Jupiter, and with G10 - the AIFM platform of the IQEQ fund administration group - to take over AIFM services for the Company, each with effect from 1 April 2024.

The Board exercised its right to obtain independent third-party expert recommendations on Valuations for those assets where the Board or the Valuation Committee believed additional judgments were required.

The Company commissioned Rothschild & Co. to conduct a second annual perception study with shareholders and the Company commissioned Montfort Communications to conduct a media benchmarking analysis. This market analysis will help to inform investor and media relations going forward.

___________________

Margaret O'Connor

Chairman of Management Engagement Committee, Chrysalis Investments Limited

Report of the Risk Committee

I am pleased to present the Report of the Risk Committee (the "Committee") of Chrysalis Investments Limited ("Chrysalis", or the "Company") for the year ended 30 September 2023.

Overview

The terms of reference of the Risk Committee are set out on the Company's website at https://chrysalisinvestments.co.uk/investor-relations/.

The role of the Risk Committee is to ensure that the Board gives proper consideration and assessment of the opportunities, risks and stress scenarios within which the Company operates and to ensure that the recommendations and strategy of the Investment Adviser protect its portfolio of investments.

Specifically, it will:

· Recommend to the Board a Group risk appetite, the principal risks to which the Company is exposed and assess the strength of risk mitigation controls;

· To review the policies and process for identifying and assessing business risks and the management of those risks by the Company;

· Monitor key risk exposures ensuring that the Investment Adviser is exercising appropriate control to reduce the likelihood of risk crystallisation resulting in financial loss, reputational damage or regulatory concern;

· Review, challenge, approve and monitor stress and scenario tests;

· Monitor investments so that they are aligned within the agreed risk appetite;

· Review major initiatives such as related party acquisitions or initiatives in new geographies or sectors and be assured that appropriate due diligence has been carried out and that any associated movement in risk profile remains within risk appetite; and Provide oversight and advice to the Board in relation to current and emerging risk exposures of the Company.

The members of the Risk Committee are as follows:

· Simon Holden (Chairman)

· Stephen Coe

· Tim Cruttenden

· Anne Ewing

· Margaret O'Connor

· Andrew Haining (Company Chairman) - invited as an Observer

Status of the Risk Committee

The Company has been a self-managed Alternative Investment Fund ("AIF") since 1 July 2022 and the Committee was constituted on that date. In my last report I commented on the work that the Committee had been doing since its constitution to implement an effective risk governance structure and control framework, along with the development of a reporting process that was fit for purpose.

In January 2023, the Risk Committee presented its first full risk report to the Board and has met quarterly since. During its quarterly meetings the Committee has engaged with the Investment Adviser to refine the risk reporting approach. I am delighted with the step change in both the usability and quality of the reporting since becoming a self-managed AIF and I thank the Investment Adviser and my Committee members for their contribution and engagement throughout the year to get to this point.

The reporting process has developed to a point that the Committee has concluded that it will move to a more typical semi-annual review process for the year ended 30 September 2024. The Investment Adviser will continue to produce a quarterly report and will continue to alert the Committee to material risk indicators on an 'as-arising' basis.

Risk Classes

The Committee reviews the risk profile of the Company under a series of pre-defined risk classes. Eash risk class is composed of separately identified and scored risks.

Priority risk classes with highest overall residual risk ratings:

1. Liquidity Management - risks to the funding runway and allocation of resources that the Company has available to deploy to support and optimise the value of its investments.

2. Relative Performance - the Company's longer terms sustainability will depend on risk-adjusted returns outperforming adjacent asset classes.

3. Financial/ Capital Markets - risks related to shareholder understanding, confidence in the Company's growth capital mandate and implications of shares trading at a discount to NAV.

4. Portfolio Performance - risks to tracking each portfolio company's progress towards measurable milestones along the 'equity roadmap' and evidence of the strategy and influence over profitable realisations. Movements in the fair values of our holdings have led to an overall increase in the concentration risk within the portfolio during the year.

5. Portfolio Construction - ensuring that the portfolio remains sufficiently diversified and that the Investment Adviser's span of control and management of the Company's holdings remains effective. Movements in the fair value of the Company's investments have led to an overall increase in the concentration risk within the portfolio during the year.

6. Conflict and Compliance Management - verification of robust governance in all stakeholder relationships between the Board, the Investment Adviser, Jupiter-managed funds with shared holdings and Jupiter-managed funds with interests in the Company. During the year, the scale of Jupiter's wider fund-management interests in both Chrysalis's shareholders register, and underlying holdings, has reduced considerably. Conflict management procedures are in place and followed but with reduced market liquidity in the growth equity sector, together with wide discounts, marginal buying and selling has an outsize impact on share prices. Consequently, whilst the underlying risk factors have reduced, this risk class remains at a more elevated level of interest to the Committee than last year.

Risk class assessed to be well controlled but with the potential for high impact if crystallised:

7. Regulatory and political - risk monitoring over routine regulatory compliance (e.g., FCA in the UK) and/or politically exposed sectors within which certain portfolio companies must operate.

Risk classes currently judged to have a lower overall residual risk rating:

8. The Environment, Social Impact and Good Governance ("ESG") - the Company's policy is addressed in Environmental, Social and Corporate Governance report of the Annual Report.

9. Investment Decisions - evidence that the Investment Adviser has undertaken appropriate due diligence, risk assessments and origination processes at the point of committing the Company to new investments.

10. Central Management - governance, depositary, foreign exchange and treasury risk management controls; some under delegation to specialist third party service providers.

11. Valuation - the Independent Valuation Committee's oversight of the quarterly portfolio valuation and the basis of the Investment Adviser's recommendations when pricing new investments.

Finally, as a standing item, the Risk Committee considers:

12. Horizon Risks - themes emerging that could have an outsize impact or influence on the prospects of clusters of our target sectors and/or portfolio companies.

In October 2023, the Committee reviewed the risk register, approved amended residual risk scoring for each individual risk and risk class and concluded the risk appetite of the Fund remained appropriate with the investment policy.

In the past year, the enhancements to risk management and reporting have helped reduce the Committee's assessment of residual risk across five risk classes. However, greater concentration of value within the portfolio and weaker relative shareholder returns compared with adjacent asset classes has resulted in a higher on-going assessment of residual risk in these areas. Liquidity management remains the Company's priority risk.

As previously announced, the Board's proposed capital allocation policy aims to be able to support our current portfolio, fund a sustainable level of reinvestment in our portfolio, share returns on investment with investors and manage the discount in the market value of the Company's shares to their intrinsic NAV.

Recommendation

I am satisfied that the Risk Committee is discharging its responsibilities proficiently and recommend this report to the Board.

_____________________

Simon Holden

Chairman of the Risk Committee, Chrysalis Investments Limited

Directors' Report

The Directors present their Annual Report and the Audited Financial Statements of the Company for the year ended 30 September 2023.

Principal Activities and Business Review

The investment objective of the Company is to generate long term capital growth through investing in a portfolio consisting primarily of equity or equity-related investments in unquoted companies.

The Directors do not envisage any change in these activities for the foreseeable future. A description of the activities of the Company in the year under review is given in the Chairman's Statement and the Investment Adviser's Report.

Business and Tax Status

The Company has been registered with the GFSC as a closed-ended investment company under RCIS Rule and Protection of Investors ("POI") Law and was incorporated in Guernsey on 3 September 2018. The Company operates under The Companies (Guernsey) Law, 2008 (the "Law").

The Company's shares have a premium listing and are admitted to trading on the London Stock Exchange's Main Market for listed securities.

The Company's management and administration takes place in Guernsey and the Company has been granted exemption from income tax within Guernsey by the Administrator of Income Tax. It is the intention of the Directors to continue to operate the Company so that each year this tax-exempt status is maintained.

In respect of the Criminal Finances Act 2017, which has introduced a new corporate criminal offence of 'failing to take reasonable steps to prevent the facilitation of tax evasion', the Board confirms that they are committed to zero tolerance towards the criminal facilitation of tax evasion.

Alternative Investment Fund Managers Directive

The Company is a non-EEA-domiciled 'Alternative Investment Fund' ("AIF"), as defined by the Alternative Investment Fund Managers Directive ("AIFMD"). The Company is a self-managed AIF and JIML acts as Investment Adviser.

The AIFMD, as transposed into the FCA Handbook in the UK, requires that certain pre-investment information be made available to investors in AIFs (such as the Company) and that certain regular and periodic disclosures are made.

Foreign Account Tax Compliance Act ("FATCA")

FATCA requires certain financial institutions outside the United States ("US") to pass information about their US customers to the US tax authorities, the Internal Revenue Service (the "IRS"). A 30% withholding tax is imposed on the US source income and disposal of assets of any financial institution within the scope of the legislation that fails to comply with this requirement.

The Board of the Company has taken all necessary steps to ensure that the Company is FATCA compliant and confirms that the Company is registered and has been issued a Global Intermediary Identification Number ("GIIN") by the IRS. The Company will use its GIIN to identify that it is FATCA compliant to all financial counterparties.

Common Reporting Standard

The Common Reporting Standard is a global standard for the automatic exchange of financial account information developed by the Organisation for Economic Co-operation and Development ("OECD"), which has been adopted in Guernsey and which came into effect in January 2016.

The Company is subject to Guernsey regulations and guidance on the automatic exchange of tax information and the Board will therefore take the necessary actions to ensure that the Company is compliant in this regard.

Going Concern

In assessing the going concern basis of accounting, the Directors have assessed the guidance issued by the Financial Reporting Council and considered the Company's own financial position, the status of global financial markets, various geopolitical events and conflicts, the current macroeconomic climate and other uncertainties impacting on the Company's investments, their financial position and liquidity requirements.

At year end, the Company has liquidity including a current cash position of £22,626,000, a net current asset position of £20,973,000 and liquid listed investments amounting to £10,284,000.

The Company generates liquidity by raising capital and exiting investments. It uses liquidity by making new and follow-on investments, paying company expenses and making returns to Shareholders. The Directors ensure it has adequate liquidity by regularly reviewing its financial position and forward-looking liquidity requirements. The Directors Going Concern assessment includes consideration of a range of likely downside scenarios which measure the impact on the Company's liquidity of differing assumptions for portfolio valuation, exits, new and follow-on investment requirements, capital raising and company expenses.

Under the Articles, at the first annual general meeting of the Company following the fifth anniversary of IPO (such anniversary being 6 November 2023), the Directors must propose an ordinary resolution that the Company continues its business as a closed-ended investment company. At the Company's annual general meeting, scheduled for 15 March 2024, Shareholders will be invited to vote on the continuation of the Company. The Board will recommend that Shareholders vote in favour of continuation. If the resolution is not passed, the Directors will be required to put forward proposals for the reconstruction, reorganisation or winding-up of the Company for Shareholders' consideration within six months following the date on which the resolution is not passed. These proposals may or may not involve winding-up the Company or liquidating all or part of the Company's then existing portfolio of investments and, accordingly, failure to pass a continuation vote will not necessarily result in the winding-up of the Company or liquidation of all or some of its investments.

At the time of preparation of this report the outcome of the continuation vote is not known. Should the resolution not be passed, and depending on the nature of the recommendation of the Board for the reconstruction, reorganisation or winding-up of the Company, there is a material uncertainty related to events or conditions that may cast significant doubt on the Company's continuation as a going concern. The Board operates under the assumption that the resolution will be passed.

Taking all matters into account, the Directors have a reasonable expectation that the Company will continue in operational existence for at least twelve months from the date of approval of the of the Annual Report and Audited Financial Statements and continue to adopt the going concern basis in preparing them.

Viability Statement

The Directors have assessed the viability of the Company over the three-year period to September 2026. The Directors consider that three years is an appropriate period to assess viability given the Company's style of investment and is a sufficient investment time horizon to be relevant to shareholders.

Choosing a longer time period can present difficulties, given the lack of longer-term economic visibility and the need for adaptation that this will inevitably create for the Company and its portfolio.

In their assessment of the viability of the Company, the Directors have considered the Company's principal and emerging risks and uncertainties, organised into Risk Classes by the Risk Committee (page 53).

The Directors have reviewed financial projections which consider:

- Available liquidity (Risk Class 1: Liquidity Management)

- The ability of the Company to raise capital (Risk Class 2: Financial/Capital Market)

- The performance (Risk Class 3: Portfolio Performance) and value of the existing portfolio (Risk Class 11: Valuation)

- The ongoing expenses of the Company

The Directors' considered a severe downside scenario which models:

- A significant economic event, which results in a deterioration of portfolio company performance and a recalibration of public and private markets leading to a compound 25% per annum decrease in the aggregate portfolio value over a three-year economic cycle.

- A sustained discount to NAV which results in the inability of the company to raise new capital.

- Dislocation of public and private markets, including the prolonged closure of the IPO market, resulting in the inability to make portfolio exits.

- A sustained period of inflation of approximately 10% per annum.

Even in this severe downside scenario the company has sufficient liquidity for the next three years to meet its financial obligations.

As previously announced, the Company expects to enter into new arrangements relating to the management of the Company. In summary, with effect from 1 April 2024:

- the appointment of Jupiter Investment Management Limited as portfolio manager and investment adviser to the Company will be terminated; and

- pursuant to a new investment management and advisory agreement becoming effective 1 April 2024:

· the Company will appoint Chrysalis Investment Partners LLP to act as the Company's investment adviser; and

· G10 Capital Limited - part of IQ-EQ group's UK Regulatory and AIFM platform - will be appointed as the Company's alternative investment fund manager.

The continuation of the Company is dependent on an investment management and advisory agreement being in place. The appointment of either party under the new agreement may be terminated by giving not less than six months' notice. The Directors do not know of any reason why notice would be served by either party over the period of the viability statement.

As noted above, at the Company's annual general meeting, Shareholders will be invited to vote on the continuation of the Company. The vote therefore takes place during the viability period. The Board will recommend that Shareholders vote in favour of continuation and the Directors operate under the assumption that the resolution will be passed. If the resolution is not passed, the Directors will be required to put forward proposals for the reconstruction, reorganisation or winding-up of the Company for Shareholders' consideration within six months following the date on which the resolution is not passed. These proposals may or may not involve winding-up the Company or liquidating all or part of the Company's then existing portfolio of investments and, accordingly, failure to pass a continuation vote will not necessarily result in the winding-up of the Company or liquidation of all or some of its investments.

At year end, the Company has liquidity including a current cash position of £22,626,000, a net current asset position of £20,973,000 and liquid listed investments amounting to £10,284,000. This available liquidity would sustain the business over the course of the viability period.

The Directors, having considered the above and having carried out a robust assessment of the principal and emerging risks facing the Company, have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three-year period to September 2026.

Results and Dividends

The results attributable to shareholders for the year are shown in the Statement of Comprehensive Income.

The Directors have not declared a dividend for the year (2022: £nil).

Directors

The Directors of the Company who served during the year and to date are set out on pages 36 and 37.

Directors' Interests

The Directors held the following interests in the share capital of the Company either directly or beneficially as at 30 September 2023, and as at the date of signing these Audited Financial Statements:

As at 30 September 2022 the following Directors had holdings in the Company:

Under their terms of appointment, the Directors' total remuneration (including one-off fees) are as disclosed below:

Lord Rockley, Diane Seymour-Williams and Jonathan Biggs receive £40,000 each per annum as members of the Valuation Committee. Lord Rockley, Diane Seymour-Williams and Jonathan Biggs are not Directors of the Company.

The Directors' compensation is reviewed annually and effective 1 October 2023, each Director is paid a basic fee of £57,500 (2022: £52,500) per annum by the Company. In addition to this, the Chairman receives an extra £27,500 (2022: £27,500) per annum. A one-off fee was awarded to the Chairman of £35,000 to acknowledge and reflect his considerable time commitment to the Company The Risk Committee Chairman receives an extra £10,000 per annum and the Audit Committee Chairman receives an extra £10,000 (2022: £10,000) per annum, Mr Cruttenden also receives an additional £5,000 per annum to reflect his position on the Valuation Committee. Refer to page 44 for more information regarding Directors' remuneration.

Risks and Uncertainties

There are several potential risks and uncertainties which could have a material impact on the Company's performance and could cause actual results to differ materially from expected and historical results.

The Risk Committee has overall responsibility for risk management and control within the context of achieving the Company's objectives. The Board agrees the strategy for the Company, approves the Company's risk appetite and the Risk Committee monitors the risk profile of the Company. The Risk Committee also maintains a risk management process to identify, monitor and control risk concentration.

The Board's responsibility for conducting a robust assessment of the principal and emerging risks is embedded in the Company's risk map and stress testing, which helps position the Company to ensure compliance with the Association of Investment Companies Code of Corporate Governance (the "AIC Code").

The principal risks to which the Company will be exposed are given in note 19 to the Annual Report and Audited Financial Statements.

The main risks that the Company faces arising from its financial instruments are:

(i) market risk, including:

- price risk, being the risk that the value of investments will fluctuate because of changes in more investee-company specific performance as well as market pricing of comparable businesses;

- interest rate risk, being the risk that the future cash flows of a financial instrument will fluctuate because of changes in interest rates; and

- foreign currency risk, being the risk that the value of financial assets and liabilities will fluctuate because of movements in currency rates.

(ii) credit risk, being the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company.

(iii) liquidity risk, being the risk that the Company will not be able to meet its liabilities when they fall due. This may arise should the Company not be able to liquidate its investments.

(iv) company failure, being the risk that companies invested in may fail and result in loss of capital invested.

To manage such risks the Company shall comply with the investment restrictions and diversification limits provided for in the Prospectus. The Company will invest and manage its assets with the objective of spreading risk. Further to the investment restrictions discussed, the Company also seeks to manage risk by:

· not incurring debt over 20% of its NAV, calculated at time of drawdown. The Company will target repayment of such debt within twelve months of drawdown; and

· entering from time to time into hedging or other derivative arrangements for the purposes of efficient portfolio management, managing where appropriate, any exposure through its investments to currencies other than Sterling.

For further details with respect to the processes for identifying, monitoring and controlling risks to which the Company is exposed, kindly referred to Report of the Risk Committee on pages 46 to 48.

Ongoing Charges

The ongoing charges figure for the year was 0.78%. The ongoing charges represent ongoing annual expenses of £6,669,787 divided by total average Net Asset Value for the year of £788,273,640. The ongoing charges has also been prepared in accordance with the recommended methodology provided by the Association of Investment Companies where investment purchase costs of £515,724 and performance fees of £nil have been excluded and represents the percentage reduction in shareholder returns as a result of recurring operational expenses.

Emerging Risks

Since 7 October 2023 an armed conflict has been ongoing between Israel and Hamas-led Palestinian militant groups, largely in and around the Gaza Strip, the West Bank and on the Israel-Lebanon border. One of the Company's portfolio companies, Deep Instinct, has an operational presence in Tel Aviv, Israel. Notwithstanding the impact the conflict has had in the region to date, Deep Instinct has not experienced material disruption to its operations.

The Board will of course continue to assess the position as the nature of the conflict evolves.

ESG and Climate Change Risks and Considerations

The Board of Directors have carefully considered the impact of climate change and ESG related risks on the Company's business strategy and the impact of the Company's operations on the local community and environment. This analysis has taken place at both the level of the Company and at the investment portfolio level.

As an investment company with no employees, the Company itself has only a minimal footprint on the local community and environment, but recognises that everyone has a part to play in the reduction of adverse environmental impacts and ensuring the company's operations have a positive impact on society and the generation of long term sustainable value.

Further information on how the Board and Jupiter manage the Company's ESG and climate change related risks at the investment portfolio level can be found within the Chairman's Statement on pages 2 to 6 and the Environmental, Social and Corporate Governance Report on pages 26 to 31. This includes the integration of ESG analysis into the investment process and the alignment of Jupiter's strategy, purpose and principles to the UN Global Compact.

Portfolio Management and Administration

Portfolio Management Agreement and Fees

The Directors are responsible for managing the business affairs of the Company in accordance with the Articles of Incorporation and the investment policy and have overall responsibility for the Company's activities including its investment activities and reviewing the performance of the Company's portfolio.

The Directors have, however, appointed the Investment Adviser to perform portfolio management functions.

Following the end of the Company's financial year, a Heads of Terms announcement was made on 27 November 2023, explaining a redrawn structure through which investment advisory services will be provided, including the timing of the proposed Jupiter contract termination on 1 April 2024. Jupiter has agreed to a reduction in the management fee, effective from 1 October 2023, from 50bps to 15bps, leading to an expected saving of approximately £1.75 million for Chrysalis shareholders over the six-month period to 31 March 2024.

Under the Heads of Term announcement, Jupiter has released the Principals and other executives from their employment contracts and employment restrictions, effective 31 March 2024. The Board has agreed, in principle, to enter into a tripartite contract with an LLP formed by the Principals to take over investment advisory services from Jupiter, and with G10 - the AIFM platform of the IQEQ fund administration group - to take over AIFM services for the Company, each with effect from 1 April 2024.

Administrator

Apex Administration (Guernsey) Limited (formerly known as Maitland Administration (Guernsey) Limited) has been appointed as Administrator to the Company pursuant to a master services agreement. The Administrator is responsible for the maintenance of the books and financial accounts of the Company and the calculation, in conjunction with the Investment Adviser, of the Net Asset Value of the Company and the shares.

Depositary

The Depositary of the Company is Citibank UK Limited.

Corporate Governance Statement

The Corporate Governance Statement forms part of the Directors' Report.

Board Responsibilities

The Board comprises six non-executive Directors, who meet at least quarterly to consider the affairs of the Company in a prescribed and structured manner. All Directors are considered independent of the Investment Adviser for the purposes of the AIC Code and Listing Rule 15.2.12A. Biographies of the Directors for the year ended 30 September 2023 appear on pages 36 and 37 which demonstrate the wide range of skills and experience they bring to the Board.

The Directors, in the furtherance of their duties, may take independent professional advice at the Company's expense, which is in accordance with principle 13 of the AIC Code. The Directors also have access to the advice and services of the Company Secretary through its appointed representatives who are responsible to the Board for ensuring that the Board's procedures are followed, and that applicable rules and regulations are complied with.

To enable the Board to function effectively and allow the Directors to discharge their responsibilities, full and timely access is given to all relevant information.

The Directors are requested to confirm their continuing professional development is up to date and any necessary training is identified during the annual performance reviews carried out and recorded by the Remuneration and Nomination Committee.

At each annual general meeting of the Company, each director shall retire from office and each director may offer themselves for election or re-election by the shareholders.

Conflicts of Interest

None of the Directors nor any persons connected with them had a material interest in any of the Company's transactions, arrangements or agreements at the date of this report and none of the Directors has or had any interest in any transaction which is or was unusual in its nature or conditions or significant to the business of the Company, and which was affected by the Company during the reporting year.

At the date of this Annual Report, there are no outstanding loans or guarantees between the Company and any Director.

Committees

The Company has established: the Audit Committee, the Remuneration and Nomination Committee, the Risk Committee, Valuation Committee and the Management Engagement Committee (together the "Committees"). Terms of Reference for each committee is available on request from the Administrator.

The Audit Committee

Stephen Coe is the Chairman of the Audit Committee. A full report regarding the Audit Committee can be found in the Audit Committee Report.

Remuneration and Nomination Committee

In accordance with the AIC Code, a Remuneration and Nomination Committee has been established. Anne Ewing has been appointed as Chairman. The Remuneration and Nomination Committee meets at least once a year in accordance with the terms of reference and reviews, inter alia, the structure, size and composition of the Board.

Details of the Directors' remuneration can be found in note 20 and page 44.

Management Engagement Committee

Margaret O'Connor has been appointed Chairman of the Management Engagement Committee. The Management Engagement Committee will meet formally at least once a year for the purpose, amongst other things, of reviewing the actions and judgments of the Investment Adviser and the terms of the Portfolio Management Agreement. Details of the management and performance fees can be found in note 6.

Risk Committee

Simon Holden is the Chairman of the Risk Committee. A full report regarding the Risk Committee can be found in the Risk Committee Report.

Valuation Committee

Lord Rockley is the Chairman of the Valuation Committee with Tim Cruttenden, Diane Seymour-Williams and Jonathan Biggs as members.

Substantial Shareholdings

On 31 December 2023, the latest practicable date for disclosure in this Annual Report, the Company did not have any shareholders with a holding greater than 10%.

Shareholder Communication

The Company's main method of communication with Shareholders is through its published Half Yearly and Annual Reports which aim to provide Shareholders with a fair, balanced and understandable view of the Company's results and objectives. This is supplemented by the publication of the Company's quarterly net asset values on its ordinary shares on the London Stock Exchange.

In line with principle 16 of the AIC Code, the Investment Adviser communicates with both the Chairman and shareholders and is available to communicate and meet with major shareholders. The Company has also appointed Liberum Capital Limited to liaise with all major shareholders together with the Investment Adviser, all of whom report back to the Board at quarterly board meetings ensuring that the Board is fully aware of shareholder sentiment, expectations and analyst views.

Shareholder Communication

The Company's website, which is maintained by the Investment Adviser, is regularly updated with news and announcements. Information published online is accessible in many countries each with differing legal requirements relating to the preparation and dissemination of financial information. Users of the Company's website is responsible for informing themselves of how the requirements in their own countries may differ from those of Guernsey.

Relations with Shareholders

All holders of Ordinary Shares in the Company have the right to receive notice of, attend and vote at the general meetings of the Company.

At each general meeting of the Company, the Board and the Investment Adviser are available to discuss issues affecting the Company.

Shareholders are additionally able to contact the Board directly outside of meetings via the Company's dedicated e-mail address (chrysalis@maitlandgroup.com) or by post via the Company Secretary. Alternatively, Shareholders are able to contact the Investment Adviser directly (chrysalis@maitlandgroup.com) or the Senior Independent Director (chrysalis@maitlandgroup.com) for issues they feel they may be unable to raise directly with the Company itself.

The Company has adopted a zero-tolerance policy towards bribery and is committed to carrying out business fairly, honestly and openly.

Voting and Stewardship code

The Investment Adviser is committed to the principles of the Financial Reporting Council's UK Stewardship Code and this also constitutes the disclosure of that commitment required under the rules of the FCA (Conduct of Business Rule 2.2.3).

Signed on behalf of the Board by:

Andrew Haining

Chairman

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and Audited Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Audited Financial Statements for each financial year. Under that law they are required to prepare the Audited Financial Statements in accordance with International Financial Reporting Standards as adopted by the EU and applicable law.

Under company law the Directors must not approve the Audited Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that year. In preparing these Audited Financial Statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable, relevant and reliable;

· state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the Audited Financial Statements;

· assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

· use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations or have no realistic alternative but to do so.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its Audited Financial Statements comply with the Companies (Guernsey) Law, 2008. They are responsible for such internal control as they determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Guernsey governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

Disclosure of information to auditors

The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are aware, there is no relevant audit information of which the Company's Auditor is unaware; and that each Director has taken all the steps that they ought to have taken as a director to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

Responsibility statement of the Directors in respect of the Annual Report

We confirm that to the best of our knowledge:

· the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

· the management report (comprising the Chairman's Statement, the Investment Adviser's Report, and Directors' Report) includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

We consider the Annual Report and Audited Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

Signed on behalf of the Board by:

Andrew Haining

Chairman

28 January 2024

Audit Committee Report

In accordance with the AIC Code, an Audit Committee has been established consisting of Anne Ewing, Simon Holden, Margaret O'Connor and Stephen Coe, who is the Chairman of the Audit Committee.

Membership and Role of the Committee

The Audit Committee meets at least twice a year and, when requested, provides advice to the Board on whether the Annual Report and Audited Financial Statements, taken as a whole, is fair, balanced and understandable and provides information necessary for the shareholders to assess the Company's performance, business model and strategy. The Audit Committee also reviews, inter alia, the financial reporting process and the system of internal control and management of financial risks, including understanding the current areas of greatest financial risk and how these are managed by the Investment Adviser, reviewing the Annual Report and Audited Financial Statements, assessing the fairness of Audited Financial Statements and disclosures and reviewing the external audit process. The Audit Committee is responsible for overseeing the Company's relationship with the external auditor (the "Auditor"), including making recommendations to the Board on the appointment of the Auditor and their remuneration.

The Audit Committee considers the nature, scope and results of the Auditor's work and reviews, and develops and implements a policy on the supply of any non-audit services that are to be provided by the Auditor. The Audit Committee annually reviews the independence and objectivity of the Auditor and considers the appointment of an appropriate Auditor.

The continuation of the Auditor was considered and the Board subsequently decided that the Auditor was sufficiently independent and was appropriately appointed in order to carry out the audit of the Company for the year ended 30 September 2023. Appointment of the Auditor will be reviewed each year before the AGM. The level of non-audit versus audit services is monitored. The table below summarises the remuneration for services provided to the Company to KPMG Channel Islands Limited ("KPMG") for audit and non-audit services during the year ended 30 September 2023.

Non-audit services provided in the year arose in connection with the review of the Company's interim financial statements and the provision of reporting accountant services in respect of the preparation by the Company of a related party circular regarding proposed amendments to the Company's performance fee payable under the terms of a portfolio management agreement to Jupiter Asset Management Limited. Notwithstanding such services, the Audit Committee considers KPMG to be independent of the Company and that the provision of such non-audit services is not a threat to the objectivity and independence of the conduct of the auditor as appropriate safeguards are in place.

Internal Control

The Company is responsible for the process surrounding the valuation of its investment portfolio. The Company has delegated these processes to its independent Valuation Committee which reviews third party valuations of unlisted investments. The Audit Committee liaises with the Valuation Committee regularly and reviews minutes of Valuation Committee meetings. For all other processes of the Company responsibility for internal control lies within the services provided by JIML and other service providers. These controls are monitored by the Board reviewing and challenging reports from these service providers and through segregation of duties between them.

The Audit Committee monitors the financial reporting process and tasks undertaken in the production of the Annual Report and Audited Financial Statements. The administration and company secretarial duties of the Company are performed by Apex Administration (Guernsey) Limited.

Registrar duties are performed by Computershare Investor Services (Guernsey) Limited.

The custody of financial assets is undertaken by Citibank UK Limited.

The Company does not have an internal audit department. All the Company's management and administration functions are delegated to independent third parties and it is therefore felt there is no need for the Company to have an internal function. The Audit Committee have assessed the Company's internal controls and found them to be satisfactory.

Fair Value Estimation

The valuation of the Company's investments is considered to be a significant area of focus given that they represent the majority of the net assets of the Company and in view of the significance of the estimates and judgments that may be involved in the determination of their fair value. In discharging its responsibilities, the Audit Committee has specifically considered the valuation of investments as follows:

· Independent third-party valuation firms are engaged to provide assistance, advice, assurance, and documentation in relation to the portfolio valuations. Valuations are then submitted to the portfolio managers and the Company's Valuation Committee for review. The Board reviews these portfolio valuations on a regular basis throughout the year. The Company is a self-managed Alternative Investment Fund. The Risk Committee and an Independent Valuation Committee were appointed. The Audit Committee's ultimate responsibility is to review the portfolio valuations.

· The Audit Committee receives and reviews reports from the Investment Adviser and the Auditor relating to the Company's Annual Report. The Audit Committee focuses particularly on compliance with legal requirements, accounting standards and the Listing Rules and ensures that an effective system of internal financial and non-financial controls is maintained. The ultimate responsibility for reviewing and approving the Annual Report remains with the Board.

· Reporting to the Board on the significant judgment made in the preparation of the Company's Annual Report and Audited Financial Statements and recommending valuations of the Company's investments to the Board.

· The Audit Committee will recommend the Board and or Independent Valuation Committee engages independent valuers for specific assets where it considers it appropriate.

Continuation vote

In addition to the above the Audit Committee paid particular attention during the year to the continuation vote that is to be presented at the 2024 AGM. In reaching its conclusion the Audit Committee reviewed the AIC SORP which states that it is more appropriate to prepare financial statements on a going concern basis unless a vote has already been triggered and shareholders have voted against continuation. The SORP guidance goes on to state that it is appropriate for the financial statements to be prepared on a going concern basis whilst making a material uncertainty disclosure as set out in accounting standards.

External Audit

The Audit Committee will hold an annual meeting to approve the Company's Annual Report and Audited Financial Statements before its publication. During the current year the Audit Committee met with the Auditor to discuss the audit plan and approach.

During this meeting it was agreed with the Auditor that the area of significant audit focus related to the valuation of investments given that they represent the majority of net assets of the Company and their valuation involves significant judgement. The scope of the audit work in relation to this asset class was discussed. The Auditor has also identified the Company's going concern status as an area of focus.

The Audit Committee reviews cash flow and working capital reports as part of the review of annual and semi-annual financial statements, together with taking into consideration significant events such as the continuation vote. At the conclusion of the audit, the Audit Committee met with the Auditor and discussed the scope of their annual audit work and their audit findings.

The Audit Committee reviews the scope and results of the audit, its cost effectiveness, and the independence and objectivity of the Auditor. The Audit Committee has particular regard to any non-audit work that the Auditor may undertake and the terms under which the Auditor may be appointed to perform non-audit services. In order to safeguard the Auditor's independence and objectivity, the Audit Committee ensures that any other advisery and/or consulting services provided by the Auditor does not conflict with their statutory audit responsibilities.

To fulfil its responsibilities regarding the independence of the Auditor, the Audit Committee considered:

· a report from the Auditor describing their arrangements to identify, report and manage any conflicts of interest; and

· the extent of the non-audit services provided by the Auditor.

To assess the effectiveness of the Auditor, the committee reviewed:

· the Auditor's fulfilment of the agreed audit plan and variations from it;

· the audit findings report highlighting any major issues that arose during the course of the audit; and

· the effectiveness and independence of the Auditor having considered the degree of diligence and professional scepticism demonstrated by them.

The Audit Committee is satisfied with KPMG's effectiveness and independence as Auditor.

During the year the Audit Committee met three time with all members present (refer to Director Attendance on page 39).

Reappointment of auditor

The Auditor, KPMG Channel Islands Limited, has expressed its willingness to continue in office as Auditor. A resolution proposing their reappointment will be submitted at the forthcoming general meeting to be held pursuant to section 199 of the Law.

Stephen Coe

Chairman of the Audit Committee, Chrysalis Investments Limited

Our opinion is unmodified

We have audited the financial statements of Chrysalis Investments Limited (the "Company"), which comprise the statement of financial position as at 30 September 2023, the statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying financial statements:

· give a true and fair view of the financial position of the Company as at 30 September 2023, and of the Company's financial performance and cash flows for the year then ended;

· are prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS"); and

· comply with the Companies (Guernsey) Law, 2008.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard as required by the Crown Dependencies' Audit Rules and Guidance. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

Material uncertainty relating to going concern

Other key audit matters: our assessment of the risks of material misstatement

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. Going concern is a significant key audit matter and is described in the 'Material uncertainty relating to going concern' section of our report.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the other key audit matter was as follows (unchanged from 2022):

Our application of materiality and an overview of the scope of our audit

Materiality for the financial statements as a whole was set at £16,000,000, determined with reference to a benchmark of net assets of £801,349,000, of which it represents approximately 2.0% (2022: 2.0%).

In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality for the Company was set at 75% (2022: 75%) of materiality for the financial statements as a whole, which equates to £12,000,000. We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk.

We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding £800,000, in addition to other identified misstatements that warranted reporting on qualitative grounds. 

Our audit of the Company was undertaken to the materiality level specified above, which has informed our identification of significant risks of material misstatement and the associated audit procedures performed in those areas as detailed above. 

Going concern

The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease its operations, and as they have concluded that the Company's financial position means that this is realistic. As stated in the 'material uncertainty relating to going concern' section of our report, they have also concluded that there is a material uncertainty relating to going concern.

An explanation of how we evaluated the directors' assessment is set out in the 'material uncertainty relating to going concern' section of our report.

Our conclusions based on this work:

· we consider that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate; and

· we have nothing material to add or draw attention to in relation to the directors' statement in the notes to the financial statements on the use of the going concern basis of accounting, and their identification therein of a material uncertainty over the Company's use of that basis for the going concern period

Fraud and breaches of laws and regulations - ability to detect

Identifying and responding to risks of material misstatement due to fraud

To identify risks of material misstatement due to fraud ("fraud risks") we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud.

Our risk assessment procedures included:

· enquiring of management as to the Company's policies and procedures to prevent and detect fraud as well as enquiring whether management have knowledge of any actual, suspected or alleged fraud;

· reading minutes of meetings of those charged with governance; and

· using analytical procedures to identify any unusual or unexpected relationships.

As required by auditing standards, and taking into account possible incentives or pressures to misstate performance and our overall knowledge of the control environment, we perform procedures to address the risk of management override of controls, in particular the risk that management may be in a position to make inappropriate accounting entries, and the risk of bias in accounting estimates such as valuation of unquoted investments.

On this audit we do not believe there is a fraud risk related to revenue recognition because the Company's revenue streams are simple in nature with respect to accounting policy choice, and are easily verifiable to external data sources or agreements with little or no requirement for estimation from management. We did not identify any additional fraud risks.

We performed procedures including:

· identifying journal entries and other adjustments to test based on risk criteria and comparing any identified entries to supporting documentation;

· incorporating an element of unpredictability in our audit procedures; and

· assessing significant accounting estimates for bias

Further detail in respect of valuation of unquoted investments is set out in the key audit matter section of this report.

Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our sector experience and through discussion with management (as required by auditing standards), and from inspection of the Company's regulatory and legal correspondence, if any, and discussed with management the policies and procedures regarding compliance with laws and regulations. As the Company is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity's procedures for complying with regulatory requirements.

The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.

The Company is subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or impacts on the Company's ability to operate. We identified financial services regulation as being the area most likely to have such an effect, recognising the regulated nature of the Company's activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.

Context of the ability of the audit to detect fraud or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. 

In addition, as with any audit, there remains a higher risk of non-detection of fraud, as this may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Disclosures of emerging and principal risks and longer term viability

We are required to perform procedures to identify whether there is a material inconsistency between the directors' disclosures in respect of emerging and principal risks and the viability statement, and the financial statements and our audit knowledge. We have nothing material to add or draw attention to in relation to:

· the directors' confirmation within the Viability Statement (pages 50 to 52) that they have carried out a robust assessment of the emerging and principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity;

· the emerging and principal risks disclosures describing these risks and explaining how they are being managed or mitigated;

· the directors' explanation in the Viability Statement (pages 50 to 52) as to how they have assessed the prospects of the Company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

We are also required to review the Viability Statement, set out on pages 50 to 52 under the Listing Rules. Based on the above procedures, we have concluded that the above disclosures are materially consistent with the financial statements and our audit knowledge.

Corporate governance disclosures

We are required to perform procedures to identify whether there is a material inconsistency between the directors' corporate governance disclosures and the financial statements and our audit knowledge.

Based on those procedures, we have concluded that each of the following is materially consistent with the financial statements and our audit knowledge:

· the directors' statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy;

· the section of the annual report describing the work of the Audit Committee, including the significant issues that the audit committee considered in relation to the financial statements, and how these issues were addressed; and

· the section of the annual report that describes the review of the effectiveness of the Company's risk management and internal control systems.

We are required to review the part of Corporate Governance Statement relating to the Company's compliance with the provisions of the UK Corporate Governance Code specified by the Listing Rules for our review. We have nothing to report in this respect. 

We have nothing to report on other matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:

· the Company has not kept proper accounting records; or

· the financial statements are not in agreement with the accounting records; or

· we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit.

Respective responsibilities

Directors' responsibilities

As explained more fully in their statement set out on pages 58 and 59, the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. 

Auditor's responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. 

A fuller description of our responsibilities is provided on the FRC's website at www.frc.org.uk/auditorsresponsibilities.

The purpose of this report and restrictions on its use by persons other than the Company's members as a body

This report is made solely to the Company's members, as a body, in accordance with section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

Barry Ryan

For and on behalf of KPMG Channel Islands Limited

Chartered Accountants and Recognised Auditors

Guernsey

28 January 2024

Statement of Comprehensive Income

For the year ended 30 September 2023

The total column of this statement represents the Statement of Comprehensive Income of the Company prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").

The supplementary revenue and capital return columns are prepared under guidance published by the Association of Investment Companies ("AIC").

All items in the above statement derive from continuing operations.

The notes on pages 71 to 102 form an integral part of these Audited Financial Statements.

Statement of Financial Position

As at 30 September 2023