CoinShares International Ltd.

Annual Report • Apr 8, 2024

Untitled c o i n s h a r e s . c o m 2022 ANNUAL REPORT Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 Jean-Marie Mognetti CEO / Board Member Meltem Demirors Head of Strategy Frank Spiteri Head of Asset Management Daniel Masters Non-Executive Chairman Carsten Køppen Independent Non-Executive Director Johan Lundberg Independent Non-Executive Director Richard Nash Chief Financial Officer Graeme Dickson Group General Counsel Board of Directors Pierre Porthaux Head of Capital Markets Benoît Pellevoizin Head of Marketing & Communications Viktor Fritzén Independent Non-Executive Director Christine Rankin Independent Non-Executive Director BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT Management Team Jean-Marie Mognetti CEO / Board Member Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 TA B L E O F C O N T E N T S 01 - Message from the CEO 02 - Strategy 03 - Summary of Financial Performance 04 - CoinShares Asset Management 05 - CoinShares Capital Markets 06 - Other Activities 07 - Industry & Market 08 - Corporate Governance Report 09 - Sustainability report 10 - Audited Financial Statements 4 7 9 13 17 21 22 29 48 57 Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 4 | 138 COINSHARES 2022 ANNUAL REPORT 0 1 02 03 04 05 06 07 08 09 10 MESSAGE FROM THE CEO 2022 was a violently turbulent and difficult one for the entire digital asset industry. We witnessed steep falls in the value of the main digital assets and the failure of several operators in the sector. At the same time, it was the perfect testing ground for CoinShares and our strategy. Thanks to our approach to risk, our transparency, and above all the professionalism and skill of our colleagues, we weathered the storm better than almost any other firm in our space. This report lays out our performance and strategy in more detail, which we have revised over the course of the past tumultuous year, reaffirms our dedication to providing clients with the very best investment solutions and focuses on the exciting opportunities that we see ahead of us. Although we fared better than most of our peers in these conditions, we could not escape the year unscathed; the losses incurred in Q2 and Q4 effectively wiped out the positive performance of the underlying business, resulting in Total Comprehensive Income of £2.9 million, compared with the £113.4 million in 2021. 2022 will be remembered as a watershed for the industry. We believe that companies that are capable of being publicly listed and fully regulated will emerge as the winners in our industry. This is a position we have maintained for years and believe that the events of the past 12 months have fully vindicated that position. Having graduated to Nasdaq Stockholm’s main market regulated segment, we are one of them. Our Strategic Pillars Over the course of the year we took the opportunity to refine our corporate strategy, based on five key pillars: • Execution • Talent • Risk Management and Performance • Shareholder Value • Asset Management Focus Taking each of these in turn: 1. Execution Long ago, when CoinShares was still called Global Advisors, it was an important participant in the old NYMEX market. Trading demands discipline, patience, a capacity for continuous learning and the ability to seize opportunities when they arise. As Marty Greenberg, former COMEX Chairman and our first clearer at Sterling Commodities once told us, it is not about being right or wrong, it is about changing your mind quickly enough. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 5 | 138 COINSHARES 2022 ANNUAL REPORT 0 1 02 03 04 05 06 07 08 09 10 As we grow CoinShares, I realise the same is valid for a company. We need to change our style and move from an opportunistic mindset to one based on long term conviction and vision. Whilst remaining agile, we cannot grab every single opportunity. A company needs a clear long-term vision that aligns its strengths and conveys a succinct message to employees, the market, shareholders, investors, opinion leaders, and analysts. This vision infuses everything we do, and our actions should all contribute towards this common goal. In the past we have benefited significantly from strategic acquisitions, and market conditions today are throwing up several interesting opportunities. Thanks to our conservative approach and strong financial position we can consider each of these. But we will only act and acquire businesses that fit within our long-term vision for the group and only acquire on terms that are attractive and enable us to build long term shareholder value. That work of careful evaluation and analysis is continuing and we are confident that it will bear fruit in time. But we will not make any opportunistic move that puts at risk what we have achieved so far. As we move forward, we must find new ways to build on the success of the Group. We must focus on our strengths and preserve them while integrating them into a long-term strategy that will deliver value to our shareholders and position us favourably in the market and secure our position as the leading alternative asset manager in the ever-evolving digital asset industry. 2. Talent While it is obvious that our employees are the bedrock of any strategic direction we choose, it would be remiss of me not to acknowledge here their resilience throughout 2022. Their hard work and unwavering commitment have made CoinShares a company that can weather market turbulence and proactively anticipate future challenges. We have always been judicious in our management of resources, which has allowed us to avoid (what has become an industry trend) large scale layoffs. Instead, we have always sought to recruit intelligently and invest in training and developing our staff. I am pleased to report that our Executive Committee has never been stronger or more cohesive. By delegating more authority to our managers, we are fostering a culture of collaboration and cross- functional teamwork attempting to remove silos and improve the efficiency of our operations across all four of our global offices. The ability to place reliance on the wider team, which is ever-evolving, allows me to concentrate less on the day-to-day operation and dedicate more time to the long-term strategy. Consequently, I am determined to further elevate our profile with industry players, seek profitable partnerships, and define plans for potential acquisitions. This shift also involves being the official spokesperson for CoinShares and conveying our vision to opinion leaders, the market, and the media. 3. Risk Management and Performance Financial performance is the primary measure of our achievements. In 2022, the core activities of the Group performed well despite being overshadowed by the failures of Terra/Luna and FTX and the provisions we had to set aside for each. The resultant losses eradicated the positive financial performance we would have otherwise achieved. We can never eradicate risk from our business, but the events of 2022 have undoubtedly highlighted the importance of robust and measured performance in conjunction with the ongoing strengthening of our risk framework. In 2023, we are continuing to experience a great deal of turbulence, namely within the banking sector and its liquidity crisis that continues to generate significant fallout. Fortunately, we have not been materially impacted by this, due to the range of banking relationships we have established over the Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 6 | 138 COINSHARES 2022 ANNUAL REPORT 0 1 02 03 04 05 06 07 08 09 10 years, including our investment in FlowBank which plays its part in the robust design of CoinShares. These events are yet another reminder of the importance of working with solid counterparties throughout our business and conducting exhaustive due diligence on all of them. Robust and measured performance also includes ensuring steps are taken to maintain the fine- tuned nature of our cost control whilst not being shy to invest to maximise shareholder value. This approach led us to make some tough decisions, such as winding down our consumer business acquired through Napoleon in France. We recognised that this venture was heavily influenced by market fluctuations, and required further material investment we deemed suboptimal in the current climate. However, our French office remains a strong constituent of our expansion strategy. Despite the challenges of the sector, we have reasons for optimism. We plan to bolster our licences and authorisations in Europe in anticipation of Markets in Crypto-Asset Regulation (“MiCA”) which was approved on 20 April 2023. These developments enable us to maintain excellence in serving our European clients. Our strong underlying performance, overlaid with our risk management and mitigation processes have put us in a very strong position today to take maximum advantage of the opportunities presented to us. 4. Shareholder Value Given the strength of CoinShares, our financial track record and our risk management, we do not believe our current share price accurately reflects the value of our business. Since our first listing day, we have experienced issues of low trading volumes. Over time, this has resulted in the removal of our shares from thematic Blockchain ETFs such as the BLOCK Index and VanEck (DAPP) ETFs. We keep assessing our options to address this lack of liquidity. Our graduation to Nasdaq Stockholm’s main market in December, achieved amid challenging market conditions, is a crucial milestone for improving investor access to our shares and increasing trading activity. Being one of the few crypto companies listed on a regulated market, alongside the likes of Coinbase, highlights our commitment to growth and success. However, our stock still faces restrictions on most investment platforms in Europe due to the banking sector’s attitude towards crypto in general. We will continue to take steps to increase the profile and improve the understanding of the Group, which we hope will in turn lead to increased interest and ultimately additional trading volumes. Our revised strategy will enhance our ability to communicate about CoinShares to a wider audience and secure a better appreciation of our true value. 5. Asset Management Focus As 2022 concluded, as part of a wider review of our strategy, we recognized that our company was neither an investment group nor a consumer or technology company. In fact, our undeniable DNA is asset management, overlaid with a 10-year expertise in the digital asset industry. This acknowledgement prompted us to reassess our business model, embracing a long-term vision focused on our strengths in regulated asset management, financial product engineering and distribution with a specialisation on digital assets. Our 2023 strategy is designed to focus on this critical activity, clarify our objectives, and chart a new path to consolidate our position as Europe’s leading alternative asset manager specialised in digital assets. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 7 | 138 COINSHARES 2022 ANNUAL REPORT 01 0 2 03 04 05 06 07 08 09 10 With these five pillars in place our goal is now clearer than ever: to build CoinShares into the global leader in digital asset management. Today’s investors seek more than passive exposure to digital assets and are demanding increasingly sophisticated investment alternatives. To meet these needs, we aspire to become a comprehensive solution provider, allowing investors to build portfolio allocation models around digital assets. As the leading European alternative asset manager specialising in digital assets, CoinShares aims to expand its product offerings. In 2023, we plan to establish an active asset management business, creating several active investment strategies open to external allocators. This approach offers numerous benefits, including the enrichment of our product offerings, streamlining our messaging, and defining our strategic goals both internally and externally. For our passive asset management franchise, our focus is on increasing our European market share of gross inflows. Our goal is to capture a market share of more than 30% of gross inflows this year, following our 16% share in 2022 and 8% in 2021. For our newly established active asset management franchise, we will prioritise risk-adjusted returns and robustness of our target operating model. External allocation will follow if our model is right. Ultimately, this strategy simplifies our income statement by distinguishing between the revenues produced by management fees from our passive asset management products and those derived from our active asset management funds, which will encompass a blend of management and performance fees. This clarity should allow us to present a clearer narrative but also a cleaner income statement and balance sheet. STRATEGY Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 8 | 138 COINSHARES 2022 ANNUAL REPORT 01 0 2 03 04 05 06 07 08 09 10 Our vision extends beyond the immediate future, anticipating the entrance of financial institutions into the market in 2024. We understand that regulation will play a significant role in shaping the market, and we are prepared to navigate these uncharted waters. Our strategy and positioning in the digital asset industry align with this vision, and we are committed to being at the forefront of the market’s evolution. Conclusion We believe the strategy outlined above, if executed correctly, will allow us to achieve our objective: to become the leading global digital asset manager, the rewards will be measurable in terms of the resultant financial performance we expect to see. Rest assured, we remain steadfast in our commitment to enhancing shareholder value as we embark on this exciting journey together. As ever, I’m grateful for your continued confidence in CoinShares, and I look forward to our mutual success in the years to come. Jean-Marie Mognetti, CEO of CoinShares Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 9 | 138 01 02 0 3 04 05 06 07 08 09 10 SUMMARY OF FINANCIAL PERFORMANCE Selected financial information derived from the audited consolidated financial statements of the Group is disclosed below. The full-form audited financial statements, including notes and as prepared under IFRS are included within section 10 of the annual report. Please note that the Adjusted EBITDA calculation of the Group (which is disclosed below) is designed to reflect the performance of the Group if gains on digital assets were taken through profit and loss at fair value, rather than through Other Comprehensive Income, as required by accounting standards, which can result in a profit after tax figure that does not provide an accurate view of the Group’s performance. The Directors believe this presentation is a useful tool for investors when evaluating the performance of the Group, and should be viewed in conjunction with the financial prepared in accordance with IFRS (a summary of which is also included below). Adjusted EBITDA Calculation Year ended 31 December 2022 £ Year ended 31 December 2021 £ Asset management revenue 50,090,889 80,395,418 Capital markets gains/income 26,293,650 61,234,942 Principal investment (losses)/gains (4,916,495) 9,920,338 Consumer platform revenue 936,684 297,312 Total revenue gains and other income 72,404,728 151,848,010 Direct costs (8,667,090) (8,615,868) Goodwill impairment (5,473,525) - Exceptional items (43,852,096) - Administrative expenses (21,177,642) (22,173,363) Adjusted EBITDA (6,765,625) 121,058,779 Adjusted EBITDA (%) n/a 80% Depreciation/Amortisation (2,882,841) (1,270,029) Adjusted EBIT (9,648,466) 119,788,750 Finance costs (6,330,425) (7,045,382) Currency translation differences 19,281,832 1,756,423 Taxation (368,674) (1,056,353) Total comprehensive income 2,934,267 113,443,438 Historical Quarterly Performance - 2020 - 2022 £(25m) £(15m) £(5m) £5m £15m £25m £35m £45m Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Asset Management Platform Capital Markets Infrastructure Principal Investments Consumer Platform EBITDA Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 10 | 138 01 02 0 3 04 05 06 07 08 09 10 The Adjusted EBITDA of the Group for the year ended 31 December 2022 was negative £6.8 million (2021: positive £121.1 million). The Group experienced two loss making quarters, arising from major events that impacted the wider industry; the de-pegging of UST 1 significantly impacted us during Q2, and Q4 brought with it the collapse of FTX 2 which resulted in a material provision to be recognised. These events combined to overshadow the Group’s financial performance during a turbulent year for digital assets. Without these losses, the Adjusted EBITDA of the Group would have arrived at approximately positive £37.1 million for the year, representing an Adjusted EBITDA margin of 51%. Despite these events, the Group’s Total Comprehensive Income for the year has finished positive at a figure of £2.9 million (FY 2021: £113.4 million), assisted significantly by the strengthening of USD, which is the operational and presentational currency of our core wholly-owned subsidiary CoinShares Capital Markets (Jersey) Limited. Despite extremely turbulent market conditions, Asset Management fees generated across the various products within the Group’s Asset Management platform totalled £50.1 million (FY 2021: £80.4 million). This figure continues to be comprised of an ever-diversifying mix of products; XBT as our legacy product, CoinShares Physical leading the market in terms of inflows, and the BLOCK index providing exposure to a range of digital asset equities. It is noted that 2022 management fees alone are in excess of the administrative expenses of the Group. The Group’s Capital Markets activities were impacted heavily by the events of Q2 and Q4 mentioned above. That being said, income and gains generated exclusive of these events stands at £26.3 million. The Group’s Principal Investment portfolio has shown a loss of £4.9 million, largely reflecting the wider market conditions that were experienced over the year, as these investments predominantly comprise equities of companies operating within the digital asset space. The difficult decision was taken at the end of the year to cease the Group’s Consumer Platform. While positive steps were being taken throughout the year, it has become clear following the collapse of FTX that the landscape had changed significantly. The level of ongoing investment required to support Consumer Platform initiatives would be better directed into supporting the core business units of the Group. Moving forward into 2023, we will therefore no longer be reporting on this as a business unit, as any remaining resources will be serving other parts of the Group. As a result of this cessation, we have also incurred a sizeable impairment charge against the goodwill held in respect of the Napoleon acquisition which marked the start of the Group’s Consumer Platform activities. Direct costs of the Group comprise custody fees, trading fees and issuer expenses incurred by the issuing entities of the Group’s ETPs. These have shown a quarter-on-quarter decrease in 2022, in line with a reduction in Capital Markets activities, and reduced custody fees arising from decreased AUM following digital asset price declines over the year. Admin expenses of the Group have been relatively consistent throughout the year at an average of approximately £1.8 million per month, and £21.2 million for full year (excluding goodwill impairment charge of £5.5 million), with the key expenses for the year being salaries, marketing, professional fees, IT related expenditure & legal fees. 1. As included within the Group’s Q2 2022 earnings report, released on 2 August 2022, a loss of £17.9 million was incurred on disposal of the Group’s UST holdings following the Terra Luna collapse. 2. As announced on 10 November 2022, the Group provided in full against balances held on FTX, totalling £26.0 million due to its collapse and doubts around the recovery of any assets held with the exchange. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 11 | 138 01 02 0 3 04 05 06 07 08 09 10 As at 31 December 2022 £ As at 31 December 2021 £ Assets Investments 45,011,850 23,689,517 Other non-current assets 16,814,023 22,799,714 Total non-current assets 61,825,873 46,489,231 Digital assets 868,922,517 2,761,629,509 Trade receivables and other assets 422,610,194 1,182,391,016 Cash at bank 26,567,599 10,775,650 Total current assets 1,318,100,310 3,954,796,175 Total assets 1,379,926,183 4,001,285,406 Liabilities Trade payables and other liabilities (1,019,101,526) (3,505,885,786) Amounts due to brokers (135,384,786) (292,706,977) Current tax liabilities (235,814) (2,578,333) Total current liabilities (1,154,722,126) (3,801,171,096) Lease liabilities (28,980) (101,157) Borrowings (21,433,967) - Total non-current liabilities (21,462,947) (101,157) Net assets 203,741,110 200,013,153 Summary Balance Sheet Year ended 31 December 2022 £ Year ended 31 December 2021 £ Revenue 51,336,682 80,754,813 Administrative expenses (38,201,098) (32,059,260) Net gain/(loss) on financial instruments/digital assets 489,185,745 (2,483,773,256) Other operating income 16,626,978 14,665,375 Operating profit/(loss) 518,948,307 (2,420,412,328) (Loss)/gain on investments/JVs (4,950,035) 5,287,123 Net finance income 6,586,466 3,859,852 Taxation (368,674) (1,056,353) Profit/(loss) after taxation 520,216,064 (2,412,321,706) Other comprehensive (loss)/income (517,281,797) 2,525,765,144 Total comprehensive income for the year 2,934,267 113,443,438 Summary Statement of Comprehensive Income Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 12 | 138 01 02 0 3 04 05 06 07 08 09 10 The net asset position of the Group has remained largely static when compared to the previous year, with the gains made and currency translation uplift being offset by the events of Q2 and Q4. Total AUM of the Group as at 31 December 2022 held on the balance sheet stands at £1.00 billion. These assets are held in relation to the Group’s ETPs issued by XBT Provider and CoinShares Digital Securities Limited. This has seen a significant reduction when compared to 2021 due to declining digital asset prices. The composition of the balance sheet has remained largely consistent throughout 2022, with the majority of assets represented by digital asset holdings and exposure, and liabilities represented by amounts owing to holders of the Group’s ETPs. The key difference when compared to 2021 is the decrease in amounts due to brokers as we have significantly reduced trading activities due to market conditions and have returned the vast majority of our digital asset holdings to regulated digital asset custodians. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 13 | 138 01 02 03 0 4 05 06 07 08 09 10 COINSHARES ASSET MANAGEMENT 2022 OVERVIEW 2022 has been an eventful, if not entirely positive, year for crypto investors. In price terms, coming off the highs achieved in autumn 2021, 2022 has often been referred to as starting another ‘crypto winter’. In market events, the collapse of Luna in May provided a new round of headlines, trader losses and general apprehensiveness towards developing ecosystems as a whole. As the year matured and industry participants came to terms with the oversights and mistakes in the Luna ecosystem, the fraud and mismanagement of FTX brought a primary player in crypto markets tumbling down. Both have been sobering reminders of how systems, and people, can be flawed in a variety of unexpected ways and emphasised the importance of understanding both opportunities and risks with a growing and developing industry & ecosystem. With that background, European net investment into crypto ETPs was mildly negative. But the market did continue to develop with certain trends continuing in 2022 that have been underway for a while. Flows into the European Crypto ETP Segment $1,344.0M $405.4M $81.0M -$90.3M $252.5M $12.0M $4.9M $109.7M -$76.7M Notional Flow 20192015 2023 (Q1) 2020 2021 20222016 2017 2018 2022 ETP PERFORMANCE XBT Provider One trend that we continue to see is a regular turnover in the client base of all issuers, leading to net redemptions for more established issuers in both bull and bear markets. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 14 | 138 01 02 03 0 4 05 06 07 08 09 10 XBT Provider, the most established of all crypto asset issuers, led in this regard with continued disposal from all client segments, while new assets and customers come primarily from continued strength in core retail markets where the ratio of buyers/sellers has remained steady from 2021 through 2022. While 2021 saw net buying from retail investors in core markets and European intermediaries represented over 75% of disposals, in 2022, outflows were broadly equivalent for both professionals and retail investors, with new retail investment substantially offsetting outflows. We credit both the loss of professional investors and the relative strength of private client investors to three factors: 1. preference for fund size amongst private client investors; 2. strength of XBT Provider/CoinShares brand in our core markets; and 3. more immediate consideration to competitors given by professional clients. Gross revenue generated from XBT Provider totalled £78.3 million 2021 and dropped to £46.0 million in 2022. 15% of this drop is attributed to outflows, while price drove 85% of the decrease. Flows into the European Crypto ETP Segment - 2022 -$800.0M -$600.0M -$400.0M -$200.0M $0.0M $200.0M $400.0M $600.0M i i 21Shares AG CoinShares Digital Securities VanEck WisdomTree Europe Hashdex AG Iconic Global X Digital Assets Issuer Limited SEBA A1 Issuer Bitpanda Invesco Digital Assets Fidelity Eqonex Helveteq AG Valour Structured Products ETC Issuance GmbH XBT Provider -$399.8M $583.7M $241.8M $211.9M $90.2M $522.3M -$644.0M -$512.5M -$96.5M Notional FlowIssuer Outflow Inflow -$100.7M -$58.6M $65.1M Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 15 | 138 01 02 03 0 4 05 06 07 08 09 10 CoinShares Physical While issuers with a more established client base faced the headwinds of redemptions, 2022 was a key period of growth for our physically-backed platform CoinShares Physical. Overall gross revenue for the platform rose to £2.3 million with inflows roughly offsetting the negative revenue impact of price over the year. We remain committed to CoinShares Physical and providing both professional and retail investors across Europe with: • the best in investor protection; • high liquidity; • competitive pricing; and • innovative product features. Our line of ETPs offering staking rewards to investors reached a total of 7 products in 2022 and has quickly become competitive in the overall landscape, with CSDS being second overall in flows for products tracking these 7 protocols. Meanwhile, our strategy of positioning CoinShares Physical Bitcoin and CoinShares Physical Ethereum as the best compromise between investor protection, liquidity and price gave us particular success in 2022 as we led net flows into these exposures. BTC & ETH Net Flows - 2022 -$447.4M -$127.1M -$3.8M $0.0M $0.3M $0.8M $0.9M $1.6M $2.0M $2.8M $3.1M $22.2M $29.1M $61.2M $104.7M CoinShares Digital Securities 21Shares AG WisdomTree Europe VanEck Iconic Global X Digital Assets Issuer Limited SEBA A1 Issuer Bitpanda Invesco Digital Assets Fidelity Eqonex Helveteq AG Valour Structured Products ETC Issuance GmbH XBT Provider Notional FlowIssuer Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 16 | 138 01 02 03 0 4 05 06 07 08 09 10 2023 OUTLOOK 2022 saw how market events can overtake any expectations that we may have for the year ahead. In our 2021 annual report, we saw the potential for overall flows into the European crypto ETP segment to double from circa $2 billion to over $4 billion. Instead, net flows were mildly negative. Regardless, 2022 has been a year of maturing markets and maturing offerings. A majority of new entrants into the market in 2021 saw negligible client interest in 2022 and we see the ongoing importance of expertise, compelling features and appropriate positioning to overall success. Throughout 2022 and despite adverse events, we believe the investment case for crypto has only improved as technology and adoption have moved forward and continues to be more global in scope. We believe that large amounts of latent demand remain across investor segments and that crypto ETPs in Europe will continue to grow from their current $4bn mark. Private clients continue to be the primary beneficiaries of securities like our crypto ETPs, however we believe that European regulatory clarity around both ETPs and underlying crypto assets, will help a larger proportion of professional investors to participate in the opportunity which strengthening fundamentals and lower prices present investors in the months and years ahead. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 17 | 138 01 02 03 04 0 5 06 07 08 09 10 COINSHARES CAPITAL MARKETS 2022 OVERVIEW After a record year in 2021, the cryptocurrency market cooled significantly in line with what we have typically observed as a 4-year cycle, despite being cognisant of the infancy of digital assets vis a vis legacy financial markets. Bitcoin’s price started around $48,000 and closed the year down more than 66% at approximately $16,000. Ethereum, the second largest cryptocurrency, suffered a similar trajectory, declining from $3,700 to $1,200 amidst what arguably represents crypto’s most severe annus horribilis. Whilst the mainstays of BTC and ETH were suffering, the crypto winter has been especially harsh for the rising stars of the previous year like Solana and Avalanche that shed 95% and 90% of their respective market values. It would be remiss to view cryptocurrencies in isolation: US Stock markets fell more than 15% over the course of the year, with bond markets taking a 20% decline following a steep rise in interest rates. The tightening of monetary policies to fight inflation slowed down the risk appetite of investors leading to a readjustment away from growth stocks, particularly in the tech sector, as well as cryptocurrencies. Amidst a bleak macroeconomic backdrop and a flight for safety, the sell-off was steepened by the collapse of Luna/Terra in May and the implosion in June of CeFi apps such as BlockFi, Babel Finance, Celsius, Genesis and Voyager Digital. Losses were further exacerbated by the bankruptcy of Three Arrows Capital, who had significant loans drawn down from several counterparties and concerns shifted towards the impact this will have from a contagion perspective. Whilst CoinShares Capital Markets successfully managed the risk of our loan book, suffering no credit events from a carefully curated book of counterparties, we were not immune from incurring losses on our UST position (the value of which fell drastically in conjunction with the Terra Luna incident in Q2), which risk management determined that we cut to prevent further detriment to our shareholders. The immediate days and weeks post the events surrounding UST presented significant market dislocations which we were able to capitalise upon as we sought to recover losses under an appropriately controlled risk framework. Naturally, such a seismic event saw a number of our competitors withdraw from the market, either partially or entirely. As such, we saw significant market opportunity, however, we re-entered the market cautiously in line with our approach of revising our risk framework from the bottom up after such a market event occurs. - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 - 10,000 20,000 30,000 4 0,000 50,000 60,000 January February March April May June July August September October November December Bitcoin (left axis) Ethereum (right axis) Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 18 | 138 01 02 03 04 0 5 06 07 08 09 10 As the summer neared an end, and the market seemed to be healing, the implosion of both Alameda and FTX placed significant pressure on prices. Prima Facie, both companies appeared as the great winners of the aftermath of the Terra/Luna meltdown but recent news would instead suggest that both parties were complicit in a systematic defrauding of investors and trading counterparties, exhibiting zero risk management principles and a wilful disregard for investors, both institutional and retail alike. The massive failures and scandals of 2022 have unsurprisingly led to increasing scrutiny from regulators and lawmakers across the world who will help to shape and guide the direction of digital assets for the forthcoming years and the traditional finance and digital asset markets becoming increasingly interlinked. To paint cryptocurrencies as solely an asset adopted by those with a libertarian philosophy of finance seems no longer appropriate. As testament to this, the vast majority of Ethereum transactions are now Office of Foreign Assets (“OFAC”) compliant, which demonstrates both the willingness of market participants to engage with appropriate regulation, whilst simultaneously raising the question of the network’s true degree of ‘decentralisation’ . These failures have, unfortunately, overshadowed some of the major successes exhibited by cryptocurrencies, such as Ethereum’s finalisation of the transition from Proof of Work to Proof of Stake or the exponential growth of the Bitcoin Lightning network. Volume The total notional traded by CoinShares Capital Markets in 2022 reduced to $15.0 billion as market participants withdrew from the market and black swan events quelled investor appetites, amidst the backdrop of a rising rate and risk-off environment. (2021: $32.0 billion, 2020: $7.8 billion and 2019: $2.3 Billion). Trading activity was continuously high except for the summer months and December due to uncertainties concerning the viability of a number of trading counterparties and the outright evaporation of a number of market makers following unbearable losses sustained by them. $0 $1 $1 $2 $2 $3 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Billions ETN Ph ys ical Derivatives CSCM Trading Volumes - 2022 Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 19 | 138 01 02 03 04 0 5 06 07 08 09 10 2022 PERFORMANCE The market conditions of 2022, coupled with the turbulence of Q2 and Q4, have resulted in a landscape which is vastly different from that seen in 2021. Q2 and Q4 Capital Markets performance was overshadowed by the significant exceptional items incurred on disposal of the Group’s US Terra holding and collateral posted on FTX for our arbitrage activity, which stood at £17.9 million and £26.0 million respectively. Year ended 31 December 2022 £ Year ended 31 December 2021 £ Liquidity provisioning 4,451,317 13,819,969 Delta neutral trading strategies 2,587,091 27,166,837 Fixed income activities 4,955,180 10,904,601 DeFi 13,857,006 3,587,052 Other 443,056 5,756,483 Total 26,293,650 61,234,942 Exceptional items (43,852,096) - Total (17,558,446) 61,234,942 Capital Markets Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 20 | 138 01 02 03 04 0 5 06 07 08 09 10 2023 OUTLOOK The Capital Market team started this new year with a focus on risk management and preparation for future regulatory change, which has likely been accelerated by market events. We are scrutinising each existing counterparty through enhanced risk review and due diligence, including deeper compliance, legal, regulatory, financial and cyber-security scrutiny. This new risk framework seeks to further ascertain and map out the risks faced by contagion events which came to bear significantly upon 2022. We are experiencing a flight to quality and continue to harvest the fruits of our efforts towards greater transparency and adherence to regulatory frameworks. Our trading efforts have largely been concentrated onshore, with our trading on the Chicago Mercantile Exchange being a significant driver of our revenue since August 2022. Concomitant to this trend, an increasing number of crypto exchanges are moving to a model whereby tokens are held with an independent custodian, extending a credit line to trade on exchange with an end of day or batch settlement process, akin to a swap reset model. This model closely mimics the architecture of traditional capital markets and shows the growing maturity of the crypto sector. This evolution will be extremely beneficial for us as it reduces our overall risk, with assets being housed at our trusted custodians, Komainu and Zodia, which ought to give our investors further comfort. We continue to support the asset management arm of CoinShares by providing liquidity on our growing suite of Exchange Traded Products. CoinShares is the first crypto company being accepted as a member on the Euronext stock exchange. We also continue to invest in our technological infrastructure in order to keep our competitive advantage. An important new release of our platform Galata is scheduled in 2023 that will improve speed, safety and regulatory compliance, whilst we continue to grow our prospective service lines. In accordance with our strong asset management background we will be looking to launch a number of structured products which we look forward to sharing with the market in due course. Whilst 2022 was certainly a year to forget for market participants, we continue to honour our commitments to trading partners with a trading uptime of over 99% and remain confident that the hard work we continue to put in each day will bear fruit in 2023. Whilst drawdowns are never easy, we are a very tight team of seasoned finance professionals who have seen many permutations of markets and their cycles. Our commitment to our fundamental belief in the inevitable success of digital assets remains unwavering. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 21 | 138 01 02 03 04 05 0 6 07 08 09 10 OTHER ACTIVITIES CONSUMER PLATFORM FTX’s bankruptcy was a setback and had a significant impact on our capacity to deploy HAL.trading in Europe. Consequently, in consultation with CoinShares France’s senior management, it was decided to terminate CoinShares’ consumer activity. It is time to refocus and build upon the skills we already possess. The team of quants who developed HAL’s strategies will join the Capital Markets team. The team of engineers who developed the platform will be redeployed to our Galata trading platform, and the design and marketing team will refocus their expertise on our corporate and ETP marketing strategies. PRINCIPAL INVESTMENTS Given the nature of the investments we hold, our Principal Investments portfolio has also experienced the turbulence of 2022. We have experienced several write-downs and unfortunately seen certain invested companies cease trading altogether, including Viridi Funds, which liquidated the Viridi Bitcoin Miners ETF during December 2022. The decreases seen in other holdings largely mirror the market decline we saw over the year. We believe that, following the events of 2022, institutional focused, regulated players will potentially be those who will benefit the most moving into 2023. This view aligns with what we have seen with Komainu, the regulated custodian in which we have a stake. Komainu completed part of a funding round which commenced in the latter stages of 2022 closing a significant tranche in early 2023. We believe this is a very positive step in Komainu’s journey, who have been a valuable partner to the Group since their inception, and this stride forward has been reflected accordingly in our year end valuation. FlowBank, in which we hold a material stake (valued using the equity method due to the quantum of our shareholding) has made a number of positive steps. They have experienced a consistent 30-40% growth rate in new clients per quarter since Q1 2021. Additionally, results from trading activities, prior to costs, reached CHF 27.7 million for 2022, an increase of 73% on 2021. We hope to see FlowBank continue to progress moving into 2023 and start to see consecutive months of profitability to bring it to a rolling breakeven position as it continues to evidence growth. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 22 | 138 01 02 03 04 05 06 0 7 08 09 10 INDUSTRY & MARKET 2023 Crypto Market Outlook 2022 was a year of tightening monetary policy which initiated the unwinding of valuations in the crypto world after a period of exuberance. Like in most bear markets, this then led to the unravelling of crypto malinvestment and the exposure of bad actors. These events have distracted investors from the key reasons why digital assets were created: to mitigate monetary debasement, decentralise computation and to protect from censorship. 2023 will be a year of coming back down to earth, with many tokens likely being shunned for larger, more viable ones. As monetary policy may reverse in the second half of the year, it is likely that we see much greater support for digital assets by investors. It will also be the point at which the momentary higher correlation between risk assets such as equities and digital assets will degrade. We expect much tougher regulation, more in-line with existing banking regulations, to begin to be formulated and in-part implemented this year, particularly for the on- and off-ramps for crypto. This is particularly relevant following the events of March 2023 which saw the downfall of several crypto friendly banks and the fallout that followed. Although this is likely to be a long-term consultation process for the industry, MiCA from Europe is the most advanced piece of crypto regulation globally and is likely to be used as the blueprint by other regulators. The Bitcoin mining market in 2023 is likely to be a more steady and sustainable year for industry participants. After rapid growth in 2021 and a devastating downturn in 2022, the mining market seems poised for a less dramatic 2023. We note the particular importance of the 2024 supply halving, given that it will have a direct impact on mining revenues across the industry and is only roughly 14 months away. 2023 is shaping up to be the year of Layer-2s, for years Ethereum has been struggling to scale effectively while preserving decentralisation and security and Layer-2s have seemingly solved this trilemma. With cheap and fast transactions, and improved economics, the differentiators of competing Layer-1s arguably diminish. We see further integration between real-world assets and crypto exchanges. This is evidenced by JP Morgan forking AAVE to trade Singapore Dollars, the sale of real estate through NFTs and the lending of stablecoins to SMEs in emerging markets. Smaller, less proven DeFi protocols will have to build both their products and reputation in a more orderly manner as risky behaviours aren’t being rewarded to the same extent anymore. So, for now, while we do expect innovation among newer protocols, we see a clear deviation between the two groups and expect them to further diverge as the year progresses. While the noise may quieten, especially amongst the lower market cap tokens, developer communities are likely to stay thin while adoption struggles, a lingering buzz may continue amongst the larger Layer-1s as innovation will not cease to occur. The signal shows, however, that consolidation and convergence towards the Ethereum ecosystem are the lines of direction for the rest of 2023. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 23 | 138 01 02 03 04 05 06 0 7 08 09 10 The Bitcoin Mining Market Will Rebalance in 2023 The growth of the Bitcoin mining industry is expected to continue over the next several years as entrepreneurs take increasing advantage of the abundance of opportunities to monetise stranded and waste energy sources. However, there are several factors that will likely lead to a rebalancing of the mining market in 2023. This rebalance will likely be driven by the exit of unprofitable companies, a potential decrease in Bitcoin price volatility, and the delivery of new, more efficient mining machines. Overall, we find that the Bitcoin mining market in 2023 is likely to be a more steady and sustainable year for industry participants. After rapid growth in 2021 and a devastating downturn in 2022, the mining market seems poised for a less dramatic 2023. This would be positive news for both miners and investors alike, as it will create a more predictable market for all involved. We note the particular importance of the 2024 supply halving, given that it will have a direct impact on mining revenues across the industry and is only roughly 14 months away. In anticipation, a potential strategy by mining companies may be to focus on reducing operating expenses above their cash-costs (including overhead, debt, hosting, etc.). This would strengthen miner balance sheets and in turn extend their cash runway. Bitcoin Mining Revenue Weakened Throughout 2022 Source: Coinmetrics, Hashrate Index, CoinShares, data available as of close 11 January 2023 Revenue ($/TH/s/day, RHS) Difficulty (∆%, LHS) Price USD (∆%, LHS) $0.00 $0.05 $0.10 $0.15 $0.20 $0.25 $0.30 -8 0% - 60% - 40% -20% 0% 20% 40% 60% Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Revenue ($/TH/s/day, RHS) Difficulty ( ∆ %, LHS) Price USD ( ∆ %, LHS) Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 24 | 138 01 02 03 04 05 06 0 7 08 09 10 The Shift from Layer-1s to Layer-2s 2022 marked the 5th year in a row that blockchains dubbed “Ethereum Killers” failed to kill Ethereum. Yet, despite its innovation and reliability, during periods of high demand, Ethereum is slow and expensive and as a result, has seen its market share eaten away by its competitors. However, in response to its deficiencies, the Ethereum vision has shifted from being the blockchain that does it all to one that lets the free markets handle the load for it. This is where Layer-2s enter the picture, which can essentially be thought of as data compression solutions. Users interact with a Layer-2 blockchain, and their transactions are bundled into one transaction, then posted on the Ethereum Layer-1 for verification. The advantages of Layer-2s are why we see an upcoming shift towards them in 2023. The design space for Layer-2s is large and growing with some offering fast transactions, some that offer free transactions, and others that use the entire chain just for one app. Currently, Layer-2s have caught up to Ethereum and handle around 1 million transactions per day, however, we expect Layer-2s to continue their climb and handle more than double Ethereum’s transactions by the end of the year. 2023 is shaping up to be the year of Layer-2s, for years Ethereum has been struggling to scale effectively while preserving decentralisation and security and Layer-2s have seemingly solved this trilemma. With cheap and fast transactions, and improved economics, the differentiators of competing Layer-1s arguably diminish. There are still innovations in Layer-1s such as app- chains and zero-knowledge Layer-1s but keep an eye out for the releases of StarkNet, zkSync, Fuel labs, and Aztec as these Layer-2s have been in the works for years and are nearing their mainnet launches. Expect leaders like Optimism and Arbitrum also to continue their growth and for competition among these Layer-2s to really heat up. Unsurprisingly, there are “Layer- 2s” being built on other networks as well, such as Bitcoin’s Lightning network, Nitro on Solana, as well as other efforts on the Tezos, Cardano and Near blockchains. However, with a first- mover advantage and the most social capital, these advancements in scaling should help the Ethereum ecosystem prepare for the next wave of adoption and regain some of its lost market share. Blockchain equities: Soft landing vs hard landing We see 2023 as a year of digesting the record interest rate hikes from 2022 and whether the global economy, in particular the US, can remain resilient in the face of deteriorating leading economic indicators. As the rate of US inflation is appearing to decelerate based on the past six months, the question remains: Will we have a soft or hard landing in 2023? In our view, a soft landing scenario in the US would constitute moderately lower inflation and tepid rises in unemployment, possibly in the ranges of 3-4% and 4-5% respectively. Fed fund rates are likely to remain higher for longer in a soft landing, near the terminal rate of 5%, with the economy extending GDP growth for longer. This is likely to have a diverging impact on blockchain equities with the more value-oriented and growth-at-a-reasonable price companies outperforming the higher beta growth sector. In this environment, we would expect cryptocurrency prices to remain stable (assuming no exogenous risk) and therefore, pure-play companies might be better positioned to predict the path of their revenue generation going forward. In retrospect, companies with weaker balance sheets are unlikely to be able to access debt markets for financing or capex spending and may underperform businesses that are capital light, have earnings predictability and benefit from higher interest rates. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 25 | 138 01 02 03 04 05 06 0 7 08 09 10 We believe that it is increasingly likely that a delayed deterioration in lagging indicators, such as the unemployment rate, may disguise a hard landing scenario that is postponed to 2024. Therefore, we consider that 2023 could spell more absorption of restrictive monetary policy in the US, with corporate profitability starting to decline in the latter half of the year. Value-oriented equities may outperform growth, with cyclical industries such as semiconductors and high growth technology not faring as well due to persistently high interest rates and declining consumer and business fundamentals. Dramatic Changes in the Exchange World Spot and futures volumes are notoriously difficult to get right in the cryptocurrency world for several reasons. The data is very fragmented, with few providers providing a full picture of what’s being traded, and there is often an element of wash trading, which we estimate could be up to 60% of total volumes. Quantifying volume is essential though, as it highlights to some extent how much a cryptocurrency is being used on exchange, being relatively agnostic as to what its use is. Cryptocurrencies can also be traded OTC, but this is difficult to reconcile accurately, and it can also be traded in marketplaces that are hosted directly within a cryptocurrency platform itself, often called decentralised exchanges. Our analysis is focussed on the spot markets using a select group of trusted exchanges on both the centralised and decentralised markets. We are also focussing on just Bitcoin and Ethereum, which we estimate to comprise ~65% of total spot volumes on trusted exchanges, excluding stablecoins. We have followed similar criteria to Coinmetrics in selecting trusted exchanges which are based on a combination of volume correlation, web traffic analytics and qualitative factors. The list comprises ~45% of total market spot volumes while it adopts a conservative approach, so it is probable that we are understating volumes to some extent. Trading Volumes on trusted exchanges (7d DMA US$bn) Source: Compass, Bloomberg, CoinShares, data available as of close 05 March 2023 Nasdaq 100 Bitcoin Ethereum FTSE 100 0 10 20 30 40 50 60 70 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 2022 2022 2023 Bitcoin Ethereum Nasdaq 100 FTSE 100 Q1Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 $ Billion Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 26 | 138 01 02 03 04 05 06 0 7 08 09 10 The results highlight that spot Bitcoin averaged a daily US$11 billion and spot Ethereum US$6 billion in 2022, having fallen 23% and 34% respectively relative to 2021. Regardless, these trading volumes are substantial when compared to the FTSE 100 and the Nasdaq 100, which both traded a daily US$4.4 billion and US$38 billion respectively in 2022. 2022 was a year of seismic shifts in trading patterns, with stablecoins usage growing by 3.5% relative to 2021, averaging US$7.8 billion per day. Meanwhile, fiat and Cryptocurrency Bitcoin trading pairs fell 40% and 73% respectively over the same period, leading to a dramatic rise in stablecoin market share to 70% of all Bitcoin trades. The same phenomenon was not seen in Ethereum, with market share remaining relatively stable over the course of 2022. Despite the recent crisis, crypto trading volumes remain deeply liquid, and continue to trade in greater volumes than most equity exchanges around the world. Measuring trading volumes, while use-agnostic, is a good measure of the use of crypto assets, particularly when we have seen much of the speculative froth leave the market. As the exchange market continues to mature in 2023, we are likely to see a continued move away from centralised exchanges due to their inherent vulnerability to human error. Decentralised exchanges and sophisticated OTC solutions are likely to be the main beneficiaries of this change in user behaviour. 2023 Banking Collapses We have seen over Q1 2023, hard evidence of accounting principles for US banks being problematic in their treatment of unrealised fair value losses. They do not need to be reported in the income statement, partially obscuring their vulnerabilities to investors. This is fine until there is a liquidity crisis, where the bank is forced to sell those assets on the open market, such as when deposit withdrawals force their hand. This wasn’t an issue in 2008 when the dissemination of news was far slower, today banks have to meet the immediate and substantial demands of depositors that are looking to liquidate positions. The challenges in the banking sector are also exacerbated by unprecedented 12 years of quantitative easing, followed by one of the fastest rate hike periods increase in history. It was inevitable that things in the economy could start to break. The early signs of this have been a liquidity crisis in the banking system, with bond losses not covering depositor withdrawals, and signs of a cascade of bankruptcies have since emerged. Silvergate, Silicon Valley Bank (SVB) and Signature Bank are beginning the liquidation process and there is potential for more to follow despite the US Federal Reserve creating a bailout programme to assuage depositors. Consequently, there has been a sharp divergence between the US bank equities and Bitcoin prices, this, we believe is highlighting investors’ concerns over custody in the traditional banking system and preference for a more transparent and liquid monetary system. Regulatory Outlook 2022 was the veritable annus horribilis for the digital asset industry: a single-point failure in an ill-conceived “stablecoin” led to a contagion that put numerous digital asset intermediaries into bankruptcy, causing client losses in the tens of billions of dollars. In addition, in the United States, both the SEC and the CFTC took fairly aggressive action against some of the digital asset industry levying some fairly serious fines. And finally, (although one might see this as the silver lining), the EU has now approved the Markets in Crypto Assets Directive (MiCA), which promises to introduce a comprehensive digital asset regulatory regime across one of the largest trading blocs in the world. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 27 | 138 01 02 03 04 05 06 0 7 08 09 10 2023 will very likely bring the backlash, at least from a regulatory perspective. We expect heightened scrutiny for the entire industry, driven by increasingly emboldened regulators keen to ensure governance over an industry that has largely escaped regulatory scrutiny for over a decade. At CoinShares we continuously track the regulatory and political landscape, both in the countries where we have a business presence, where our clients are based and other countries which are developing a legislative framework for digital assets. What we are seeing is that different countries are moving at different speeds. EU The EU is expected to formally adopt MiCA sometime in Q2 2023 with an eye towards establishing a comprehensive and transparent regulatory regime for digital assets throughout the European Union. Once finalised expect steady implementation from both Member States as they pass MiCA into their domestic law and for firms that will find themselves subject to a wide range of regulatory obligations. We also expect the EU to monitor market developments with an eye to ensuring that MiCA addresses any possible eventualities (i.e., loopholes). We think Member States will focus on retail intermediaries, especially those who may try to access the market from unregulated third countries via reverse solicitation. Retail marketing efforts are likely to be heavily scrutinised and held to a standard similar to the marketing of financial instruments. As the implementation period progresses, it is very likely that innovation will overtake some of the regulations, so we would expect continued engagement from the EU and Member State regulators on the market. Furthermore, the EU has promised to look more closely at decentralised finance (DeFi), which was initially excluded from MiCA, which in turn is likely to lead to further amendments to MiCA. In anticipation of the introduction of MiCA’s comprehensive legal framework harmonizing regulatory requirements for crypto-asset related services across Europe, CoinShares is already familiarising itself with MiCA’s provisions and assessing the impact on its current and future products, services and business models. A significant aspect of MiCA is the harmonized regulatory regime for crypto-asset service providers (CASPs), which encompasses a total of ten services defined as “crypto-asset services”, similar to the list of investment services under the Markets in Financial Instruments Directive. Moreover, in cases where an EU member state has already established a bespoke registration/licensing regime for virtual asset service providers (VASPs), regulators will apply a simplified authorization process to facilitate the transition from a national registration/license to a MiCA CASP license that is valid throughout the EU. This is an important consideration for CoinShares, especially in relation to its French entities. US In March 2022, President Biden issued an executive order titled “Ensuring Responsible Development of Digital Assets” requesting various reports be provided addressing “policy recommendations, including potential regulatory and legislative actions, as appropriate, to protect United States consumers, investors, and businesses, and support expanding access to safe and affordable financial services”. The executive order specified a number of dates for government departments to deliver reports on various topics. Departments such as the Treasury Department, the Department of Commerce, the Justice Department and the White House Office of Science and Technology Policy, dutifully filed their reports. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 28 | 138 01 02 03 04 05 06 0 7 08 09 10 The executive order can be seen as a meaningful step in the long and winding road towards regulatory transparency in the United States. However, to keep up the momentum, 2023 will need to be the year that a coherent roadmap for digital assets in the United States develops. Also, the question of who, between the Securities and Exchange Commission and the Commodities Futures Trading Commission, has jurisdiction over cryptocurrency needs to be resolved. UK While in the UK, on 4 April 2022, the UK Treasury released proposals to make the UK a global cryptoasset technology hub. These proposals included: 1. stablecoins being regulated; 2. the introduction of a financial market infrastructure “sandbox”; 3. establishing a Cryptoasset Engagement Group to work more closely with the industry; and 4. exploring ways of enhancing the competitiveness of the UK tax system to encourage further development of the cryptoasset market. While some of these proposals have been advanced, the consultation on the Future Financial Services Regulatory Regime for Cryptoassets was released in February 2023. CoinShares is looking forward to responding to this consultation using its knowledge and experience from operating in the global digital asset ecosystem to help form UK regulations. Jersey Finally in Jersey, where the headquarters of the Group are based, where there is a focus on compliance with the Financial Action Taskforce (“FATF”) guidance on a Risk Based Approach to Virtual Assets and Virtual Asset Service Providers (October 2021). To ensure that Jersey is able to demonstrate compliance with FATF’s Recommendation 15 and the 2021 guidance, the Proceeds of Crime (Amendment No. 6) (Jersey) Order 2022 (Amendment No. 6) came into force on 30 January 2023. The Amendment No. 6 has introduced the following definitions: “Virtual Asset” means a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes. “Virtual Asset Service Provider” includes a natural or legal person or arrangement that carries on the business of conducting one or more of the following activities or operations to, for or on behalf of another natural or legal person or arrangement: 1. Exchange between virtual assets and fiat currencies, 2. Exchange between one or more forms of virtual assets, 3. Transfer of virtual assets, 4. Safekeeping or administration of virtual assets or instruments enabling control over virtual assets, 5. Participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset. This revised legislation will impact any CoinShares entity that is administered/or managed in Jersey and will require the appointment of a Money Laundering Compliance Officer and a Money Laundering Reporting Officer for each entity, the maintenance of an Anti-Money Laundering Business Risk Assessment and a detailed Compliance Monitoring Programme. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 29 | 138 01 02 03 04 05 06 07 0 8 09 10 CORPORATE GOVERNANCE This Corporate Governance Report has been prepared in accordance with the Swedish Corporate Governance Code (the “Code”). The Board of Directors is responsible for the Corporate Governance report. The Corporate Governance report for the financial year has been reviewed by the company’s auditor, as described in the “Auditor’s report on the corporate governance statement”. CoinShares International Limited is a Jersey, public limited liability company whose shares are listed for trading on Nasdaq Stockholm. The Corporate Governance framework for CoinShares International Limited is grounded in the Company’s Articles of Association, Companies (Jersey) Law 1991, as amended, the Code, Nasdaq’s Nordic Main Market Rulebook for Issuers of Shares (the “Main Market Rulebook”), and the Company’s internal rules and guidelines. The internal rules and guidelines include primarily the Board’s rules of procedure, the CEO’s instructions, the instructions for financial reporting and internal control, and the finance manual. In addition, CoinShares International Limited has a number of policy documents and manuals, including the Code of Conduct, the Corporate Governance Policy, the Insider Policy, and the Information and Communication Policy, as well as other internal rules and recommendations that include principals and provide guidance in the company’s operations and for its employees. The above-mentioned governance documents are evaluated and adopted annually by the Board of Directors. The requirements arising from CoinShares International Limited’s shares being listed for trading on Nasdaq Stockholm include the compulsory adoption of a corporate governance code and the company has chosen to adhere to the Code. The guidelines of the Code are available on the Swedish Corporate Governance Board’s website (www.bolagsstyrning.se). The Code is based on the “comply or explain” principle, entailing that companies that apply the Code may depart from individual rules as long as they provide an explanation for the departure. As at the date of this Corporate Governance Report, the Company has complied with the Code. The Group’s statutory auditor is elected by the AGM to audit the Group’s annual report and accounting practices. The Nomination Committee proposes resolutions ahead of the AGM regarding issues concerning election of directors and fees and drafts a proposal for resolution that is presented to the AGM. The AGM resolves on principles for the appointment of the Nomination Committee. The Board establishes its committees and determines which of its members are to serve on the respective committees. The Audit Committee and the Remuneration Committee report to the Board of Directors. NOMINATION COMMITTEE REMUNERATION COMMITTEE EXTERNAL AUDITOR AUDIT & RISK COMMITTEE ANNUAL GENERAL MEETING BOARD OF DIRECTORS GROUP MANAGEMENT EXECUTIVE COMMITTEE OPERATING SEGMENTS Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 30 | 138 01 02 03 04 05 06 07 0 8 09 10 Shareholders Shares Ownership Daniel Masters 15,289,388 22.41% Mognetti Partners Limited 11,881,609 17.42% Russell Paul Newton 8,314,452 12.19% Alan Howard 7,933,540 11.63% Adam Levinson 3,896,618 5.71% Paul Davidson 3,240,000 4.75% Meltem Ebru Bahar Demirors 2,778,020 4.07% Vitruvius Limited 2,566,213 3.76% Dwight Anderson 2,543,502 3.73% Horseferry Trading Pte Limited 1,700,506 2.49% Sum 10 largest owners 60,143,848 88.17% Sum other 8,069,973 11.83% Total number of shares 68,213,821 100% Number of share options in issue 3,996,457 5.53% Total diluted share capital 72,210,278 100% CORPORATE GOVERNANCE The figure above describes how corporate governance is organised. CoinShares International Limited is a Jersey limited liability company whose shareholders ultimately decide on the company’s governance by electing the company’s board of directors at the Annual General Meeting. The Board, in turn, has continuing responsibility for ensuring that corporate governance of the company is in compliance with laws and other external and internal rules and regulations. INTERNAL GUIDELINES Mission and goals, Articles of Association, the Board’s Rules of Procedure, the CEO’s instructions, the Financial Manual, Group Policies, and general processes for internal control and governance. EXTERNAL GOVERNANCE INSTRUMENTS Companies (Jersey) Law 1991, the Swedish Annual Accounts Act, the Main Market Rulebook, the Code and other relevant laws. SHAREHOLDERS As of 31 December 2022, CoinShares International Limited had 2,755 shareholders. The ten largest shareholders as of 31 December 2022 had ownership corresponding to 88.17% of the votes and share capital. The number of unique shareholders with a holding of 5% or more in the company was five (5). SHARE CAPITAL AND VOTING RIGHTS According to the Articles of Association in effect at the end of the financial year, the share capital of the company shall be no more than GBP 99,000 divided into 200,000,000 Ordinary Shares in a single share class. The company’s registered share capital as of 31 December 2022 was GBP 33,765.84, divided among 68,213,821 Ordinary Shares. The shares, which are denominated in British pounds (GBP), had a share price of GBP 0.000495. Each share carries entitlement to 1 vote. Every person entitled to vote at general meetings of the shareholders may vote for the full number of shares owned and represented by him or her without restriction in voting rights. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 31 | 138 01 02 03 04 05 06 07 0 8 09 10 GENERAL MEETINGS The general meeting is the ultimate decision-making body of the company. At the general meeting, the shareholders exercise their voting rights on key issues, such as the adoption of income statements and statements of financial position, appropriation of the company’s results, election of members of the Board of Directors and auditors and remuneration to the Board of Directors and the auditors. The annual general meeting (“AGM”) must be held within six months from the end of the financial year. In addition to the AGM, extraordinary general meetings may be convened. As permitted under article 38. Notices of the Articles of Association, general meetings are convened by publication of the notice convening the meeting on the company’s website and via a press release. Notice of general meetings According to the current Articles of Association, notice of general meetings shall be made: • through a relevant system, where the notice or document relates to uncertificated shares; • by giving it by electronic communication to an address for the time being notified to the Company by the Shareholder concerned for that purpose; and • by making it available on the Company’s website and publishing a press release. Notice of the annual general meeting and extraordinary general meeting where an amendment of the articles of association will be considered shall be given no earlier than six weeks and no later than four weeks prior to the general meeting. Notice of other extraordinary general meetings shall be issued no earlier than six weeks and no later than three weeks before the general meeting. Right to participate in a general meeting Those shareholders who wish to participate in a general meeting must: 1. be recorded in the share register kept by Euroclear Sweden AB on the record date, being ten clear days prior to the general meeting; and 2. notify the Company of their intention to participate no later than on the date set out in the notice of the general meeting. In addition to notifying the company, shareholders whose shares are registered under a nominee through a bank or other nominee must request that their shares be temporarily registered in their own names in the share register ten clear days prior to the general meeting in order to be entitled to participate in the general meeting. Shareholders should inform their nominees well in advance of the record date. Shareholders may attend general meetings in person or by proxy. Shareholder initiatives Every shareholder has the right to have a matter taken up for consideration at a general meeting. A shareholder who wishes to have a matter taken up for consideration at a general meeting must submit a written request about such to the Board of Directors. Such a request must normally be received by the Board not later than seven weeks prior to the general meeting in question. Annual General Meeting – 2021 Financial Year The Annual General Meeting (AGM) for the 2021 financial year was held on 20 June 2022 in the form of a virtual event without the physical presence of the shareholders or their proxies. The AGM resolved the following: • that the consolidated income statement and consolidated balance sheet be adopted by the company; • to re-elect Daniel Masters, Jean-Marie Mognetti, Carsten Køppen, Johan Lundberg, Christine Rankin and Viktor Fritzén as members of the Board; • to re-elect Daniel Masters as the Board Chairman; • to re-elect Baker Tilly Channel Islands Limited as the company’s auditors; • that the remuneration of the auditor shall be set at the discretion of the Board; Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 32 | 138 01 02 03 04 05 06 07 0 8 09 10 • that the guidelines for remuneration to senior executives be adopted; • that the principals for the nomination committee be adopted; • that the board be authorised to repurchase and transfer the Company’s own shares in accordance with the proposal presented to the AGM; and • that the Company’s articles of association be altered by the deletion of the existing articles of association in their entirety and the adoption and substitution in their place of the amended articles of association in the form presented to the AGM. GENERAL MEETING – 2022 FINANCIAL YEAR CoinShares International Limited’s Annual General Meeting for the 2022 financial year will be held virtually on 31 May 2023. Further information is provided at www.coinshares.com under the section for Investor Relations. NOMINATION COMMITTEE According to the Code, companies that adhere to the Code shall appoint a nomination committee. CoinShares International Limited’s Nomination Committee, which is made up of representatives of the largest shareholders, has been formed in accordance with the guidelines approved by the 2021 AGM. The Nomination Committee is tasked with submitting recommendations for the Chairman of the Board and other board members, directors’ fees and other fees for directors’ work on the Board, the election of the auditor and the auditor’s fees, and with evaluating the Board’s work. In the course of its work, the Nomination Committee applied Rule 4.1 of the Code as the Board’s diversity policy. Diversity is an important factor in the Nomination Committee’s nomination work and the Nomination Committee shall continuously strive for an even gender balance and diversity regarding the competence, experience and background of the Board’s members. The Nomination Committee’s recommendations are reported in the AGM notice. CoinShares International Limited’s Nomination Committee shall be composed of four members, of whom three shall represent the Company’s largest shareholders, and the fourth shall be a representative of the Board. Regardless of how the Nomination Committee members are appointed, they shall safeguard the shareholders’ interests. The members of the Nomination Committee are appointed in a procedure whereby the Chairman of the Board – as soon as possible after the end of the third quarter – contacts the three largest shareholders as at the end of August. The Chairman of the Board shall never serve as the chair of the Nomination Committee. The composition of the Nomination Committee is publicly announced through a press release as soon as the members have been appointed, but not later than six months prior to the AGM. Based on the above, the Nomination Committee ahead of the 2022 AGM was appointed and consists of the following persons, who together represent approximately 52.02% of the number of votes and shares in the Company as per 31 August 2022: • Michael Carlton, appointed by Daniel Masters • Gunther Thumann, appointed by Mognetti Partners Limited • Paul Davidson, appointed by Russell Newton • Johan Lundberg, representative of the Board BOARD COMPOSITION AND DIRECTORS’ INDEPENDENCE According to the Articles of Association, the Board shall be composed of three to ten members. The Articles of Association state that the shareholders may, by Ordinary Resolution, appoint any person or remove any Director from office. The Board is comprised of six directors, each of whom were elected at the AGM on 20 June 2022 for the terms until the end of the 2022 AGM. Jean-Marie Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 33 | 138 01 02 03 04 05 06 07 0 8 09 10 Mognetti, CEO, is a member of the Board. Other CoinShares executives participate at board meetings in a reporting role on specific matters. According to the Code, a majority of the directors shall be independent in relation to the Group and its management, which the company meets. RESPONSIBILITIES AND WORK OF THE BOARD The Board’s duties are regulated by Companies (Jersey) Law 1991, CoinShares International Limited’s Articles of Association, other laws and statutes, and the Code. In addition, the Board’s work is regulated by the Rules of Procedure adopted by the Board. The Rules of Procedure regulate, among other things, the division of duties and responsibilities between the board members, the Chairman of the Board and the CEO, and lay out routines for financial reporting by the CEO. The Board also adopts instructions for the Board’s committees. The Board’s duties include adoption of strategies, business plans, budgets and forecasts, interim reports, the year-end book-closing, and policies and guidelines. The Board is also responsible for monitoring the company’s financial performance, ensuring the quality of financial reporting and internal controls, and evaluating the business against the objectives and guidelines established by the Board. Finally the Board decides on substantial investments and changes in the Group’s organisation and operations. The Chairman of the Board and CEO shall monitor the company’s performance, and conduct preparatory work for and lead board meetings. The Chairman of the Board is also responsible for ensuring that the board members evaluate their work every year and that they continuously receive the information required for them to perform their work effectively. The Chairman of the Board represents CoinShares vis-à- vis its shareholders. During the year, the Board held 8 meetings. The Board’s work during the year was focused particularly on the company’s strategy, including the integration of acquired operations, positioning, financing, culture, and the company’s development and expansion. Committees The Board of CoinShares International Limited has established two committees – an audit & risk committee and a remuneration committee. Audit & Risk Committee (“ARC”) The ARC was formally established on 29 November 2021. On its establishment it was solely an Audit Committee. On 31 October 2022 it was amended to encompass risk matters pertaining to the Group and renamed the Audit and Risk Committee. The ARC is tasked with providing a special forum for the work with financial reporting, internal control, risk management and auditing, and advises the Board of Directors in these areas. The members of the ARC are Carsten Køppen, Viktor Fritzén and Christine Rankin, who is also the committee chair. The main duties of the ARC are to monitor the Group’s financial reporting and to oversee the effectiveness of the company’s internal controls and risk management. In addition, the ARC is tasked with staying informed about the audit of the annual report and consolidated accounts, reviewing and overseeing the auditor’s impartiality and independence, and in this context paying particular attention to whether the auditor provides other services to the Group than auditing services. The ARC maintains contact with the Group’s auditor in order to establish an ongoing exchange of information and understanding between the Board and the auditor on auditing issues. The ARC held 8 meetings in 2022. Remuneration Committee The Remuneration Committee was formally established on 29 November 2021. The members of the Remuneration Committee are Carsten Køppen, Christine Rankin and Daniel Masters, who is also the committee chair. The Remuneration Committee has an advisory and a drafting function. Its main duties are to conduct preparatory work for the Board’s decisions on matters concerning remuneration principles, remuneration and other terms of employment for members Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 34 | 138 01 02 03 04 05 06 07 0 8 09 10 of the Executive Management Committee, monitoring and evaluating application of the guidelines for remuneration of senior executives approved by the AGM as well as applicable remuneration structures and remuneration levels in CoinShares. The Remuneration Committee held 3 meetings in 2022. Evaluation of the Board’s work The Board’s work is evaluated yearly through a systematic, structured process that aims among other things to produce constructive documentation for improvements in the Board’s own work. The evaluation is conducted both individually and through discussions at board meetings. The evaluation aims to give the Chairman of the Board information on how the board members perceive the Board’s effectiveness and collective competence as well as on whether there are any needs for changes on the Board. Chairman of the Board informs the Nomination Committee about the results of the evaluations. Directors’ fees Total remuneration paid to the directors for 2022 was £557,931, including remuneration for committee work. This figure excludes amounts paid to the CEO as an employee of the Group. Such remuneration is disclosed separately in the Group’s remuneration report. INTERNAL CONTROL AND RISK MANAGEMENT Due to the nature of the industry within which the Group operates, coupled with the nature of the services and products provided, a robust control environment is paramount in order to protect the Group’s stakeholders, ensure compliance with regulatory requirements of the Group, and allow for accurate and timely dissemination of information throughout the Group. The control environment is focused on the areas described below: Risk Management The risk management of the Group is split into four key areas, each of which are discussed at the risk & compliance committee meetings, and formally presented to the ARC on an ongoing basis throughout the year. (i) Trading Risk The trading activities of the Group which, amongst other things, support the products issued by XBT Provider and CoinShares Physical are a key risk area given the potential impact of trading issues on the overall performance and financial health of the Group. The Group has a variety of systems and controls in place that allow for the ongoing monitoring of all of its digital asset holdings and positions with each of its counterparties. Internal reports are generated automatically every 10 minutes (increased to every minute during periods of significant volatility) and provided to the relevant members of CoinShares Asset Management and CoinShares Capital Markets responsible for hedging and trading activities of the Group. This is further enhanced by a daily reconciliation and examination of the composition of digital assets to ensure the activities of the Group remain in accordance with the terms of the Collateral Management Agreement between CoinShares Capital Markets (Jersey) Limited and XBT Provider AB (publ). All counterparties with which the Group interacts for the purpose of either digital assets storage or trading are subject to robust due diligence procedures and are integrated fully with the Group’s internal systems prior to engaging in any kind of active relationship. The counterparty risk of the Group is further mitigated by the fact that the majority of the Group’s physical asset holdings are in custody with Komainu and Zodia Custody, regulated custodians and depositaries specialising in digital assets. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 35 | 138 01 02 03 04 05 06 07 0 8 09 10 (ii) Cyber-Security Risk Cyber-security remains a critical focus for the Group. Significant investment in and ongoing improvement of the Group’s security posture is essential to align the infrastructure of the Group with its growth. From a completely new physical networking layer to the optimised, secure cloud environment, these improvements have been validated by the Group’s external information security audits and accreditations. Maintaining the integrity of its technical architecture is an ongoing priority and focus of the Group’s executive leadership tests, and, in this regard, the Group ensures the undertaking of regular external reviews and penetration tests whilst also ensuring that its infrastructure is monitored in real-time by state-of-the-art security monitoring systems. Furthermore, the Group’s cloud-based network is segregated and tied back to physical premises and remote workstations using best-in-class encryption technology. All data stored on the Group servers and file stores are fully encrypted at rest and in transit. The Group’s latest annual independent cyber-security review described the Group’s security profile as “very strong” and “highly secure”. At the same time, the Group has maintained ISO/IEC 27001 certification since 2019 (the auditable, international standard for Cyber Security), evidencing adherence to a “best-practice” approach to managing information security by addressing people and processes as well as technology. Ad-hoc security tests and attack simulations are regularly undertaken to allow the Group to ensure buy-in and understanding from all employees. The Group’s endpoint, mobile and perimeter protections are monitored continuously to adapt to emerging threats and ensure that the Group remains protected in the ever-changing cyber-security landscape. Furthermore, the Group’s cybersecurity controls are routinely tested as part of the Group’s Compliance Monitoring Plan. (iii) Financial Statement Risk The accuracy and timeliness of the dissemination of financial information is integral to the Group. This is both internal (to inform decision making at the Executive Committee level), and external (to provide stakeholders with a clear view of performance on a regular basis). Internal financial statement risk – Internal reliance is placed upon the regular management accounts prepared monthly for each of the Group’s subsidiaries and at a consolidated, Group level. Such information is subject to a number of sign-offs within the finance department prior to dissemination to ensure accuracy. The procedures in place for preparation of such information are designed to evolve alongside the complexity of the business and its activities. Key areas of potential misstatement include digital asset holdings and valuations. The same infrastructure that is in place to help monitor trading risk (as mentioned above) also allows for mitigation against such risks. External financial statement risk - In addition to the consolidated financial statements being subject to annual audit (in accordance with both legal and listing requirements) a number of the Group’s subsidiaries are also subject to such procedures. Furthermore, the Group releases earnings reports on a quarterly basis. Each financial report is subject to review by the CFO, CEO, ARC, and the Board itself. Key areas of potential misstatement are identified, and these areas are discussed regularly at the appropriate levels throughout the Group. As with the internal financial reporting on which the Group is reliant, the risk areas for potential misstatement in the external reporting comprise digital asset holdings and valuations. Additionally, more judgemental areas such as principal investment valuations and goodwill carry with them a higher risk of misstatement. As such these areas are standing items within the agenda of the ARC. (iv) Regulatory and Compliance Risk The Group operates the Three Lines of Defence model, which is considered to be industry best practice and comprises the following: Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 36 | 138 01 02 03 04 05 06 07 0 8 09 10 The First Line of Defence – the client facing operations teams in each of the Group’s jurisdictions; The client-facing operations teams are responsible for maintaining a strict control environment over day-to-day operational matters. The first line has a comprehensive control framework, managed and maintained by them; the framework spans both organisation wide controls and department specific controls. The Second Line of Defence – the Group’s Compliance and Risk team; The Group’s Compliance Team and the recently recruited Group Risk Consultant have a number of key responsibilities, including but not limited to: • the anti-money laundering, countering of terrorism financing and proliferation financing control framework and associated staff training; • regular testing of the Group’s control framework; • liaising with the Group’s various external regulatory bodies; • undertaking the role of Money Laundering Reporting Officer, Money Laundering Compliance Officer and Compliance Officer as required; and • regular reporting/communication of Compliance and risk matters to the monthly Risk & Compliance Committee and to the relevant Boards. The Group also benefits from a network of external advisors relied upon as required for guidance on a range of specialised topics. The Third Line of Defence – external financial audit and other specialist audit work; The Group relies upon both the annual financial audit process in addition to more focused specialised external work, undertaken on particular parts of the business, for example, the work undertaken by The Network Firm, providing attestation reports on the assets held in support of the Group’s ETPs. Information Dissemination and Transparency Due to various jurisdictions within which the Group operates, and the variety of activities undertaken across the Group it is essential that information is disseminated in a timely and consistent manner. To facilitate this, various committees are in place with meetings held on a regular basis to encourage the information generated by the Group’s control environment to be disseminated accordingly. The dissemination of information is not only a focus for the Group internally, but also externally to the Group’s stakeholders, such as regulators, auditors, existing clients or prospective clients. CEO AND SENIOR EXECUTIVES The CEO is responsible for the day-to-day administration of the Group in accordance with applicable laws and regulations, and the instructions and strategies established by the Board of Directors. The CEO ensures that the Board receives the information required for the Board to be able to make well-grounded decisions, and monitors compliance with the goals, policies and strategy plans for CoinShares that are set by the Board of Directors. The CEO is also responsible for ensuring that the Board is provided with satisfactory information about the Group’s development between regular board meetings. The CEO leads the work of the Executive Management Committee, which is responsible for the overarching business development. In addition to the CEO, the Executive Management Committee included six senior executives as of 31 December 2022: the Chief Financial Officer, the Group General Counsel, Head of Strategy, Head of Asset Management, Head of Capital Markets and Head of Marketing and Communications. Remuneration of the CEO and senior executives Remuneration of the CEO and other senior executives may consist of a fixed cash salary, discretionary bonus, other customary benefits and pension. The combined yearly cash remuneration shall be in line with the going rate in the market and geographic area in which the executive is stationed, and shall be commensurate with the individual’s qualifications and experience. By other senior executives is meant the six persons who together with the CEO make up the Executive Management Committee. The Company has drawn up recommendations for guidelines for remuneration of the senior executives Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 37 | 138 01 02 03 04 05 06 07 0 8 09 10 to be put to the 2022 AGM for approval (the “Remuneration Procedure”). The Remuneration Procedure includes, among other things, principles for the relationship between fixed salary, pension benefits, and limitations regarding severance pay and fixed salary during notice periods. Individual remuneration of the CEO and the individual remuneration of other senior executives are approved by the Board of Directors after approval by the Remuneration Committee. Remuneration paid to the CEO and Executive Management is disclosed within the Group’s remuneration report. AUDITOR The Annual General Meeting on 20 June 2022 resolved to elect the chartered accounting firm Baker Tilly Channel Islands Limited as auditor of the company for a term until the end of the 2022 AGM. Authorised Public Accountant Ewan Spraggon was appointed auditor-in-charge. Ewan Spraggon is a member of the Institute of Chartered Accountants of Scotland and Fellow of the Institute of Chartered Accountants of England and Wales. EXTERNAL AUDIT The external audit of the accounts of CoinShares International Limited and certain subsidiaries, including the Board of Directors’ and Group Management’s administration, is performed in accordance with International Standards on Auditing. The external auditor will attend all meetings of the Audit Committee and at least one board meeting each year, at which the auditors report on their observations from the audit. BOARD OF DIRECTORS Daniel Masters Assignments and year elected Born 1963, Chairman of the Board since 2008. Chair of the Remuneration Committee. Education, professional experience and previous assignments Daniel holds a Bachelor of Science (Honours) in Physics from Exeter University and a Master’s degree in Management Science and Operational Research from Imperial College, London. Daniel has more than 30 years of experience in energy trading. He was, among other things, the Head of Global Energy Trading for Morgan Guaranty Trust Company (MGT), oversaw several of the trading and risk management functions at the Energy Division of Salomon, Inc., was involved in the establishment of the natural gas and electricity markets in the UK, completed some of the first forward contracts for electricity and was one of the first and most active participants in the market for Contracts for Difference in Europe. Other current assignments Director and Shareholder of GABI Ventures Limited; Director of CB Limited; Director of CommerceBlock Limited; Director of CommerceBlock Holding Limited; Director of CommerceBlock Limited; Director and Shareholder of Crypto Composite Limited; Director and Shareholder of Satoshipay Limited; Council Member of Tezos Foundation; Consultant to Pendulum; indirect Director of Globacap Limited (GABI Ventures Limited is a Corporate Director); indirect Director of Aventures Holdings Limited (GABI Ventures Limited is a Corporate Director) Non-Executive Director’s fee (yearly) Salary - £125,000 Bonus - £Nil Buy-out payment - £225,000 Benefits in kind - £7,931 Fee for committee work Included within Director’s fee. Independent in relation to the company and Group management No. Daniel Masters was employed by the Company until 29 November 2021. Independent in relation to major shareholders No. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 38 | 138 01 02 03 04 05 06 07 0 8 09 10 Own and related parties’ shareholdings as per 31 December 2022 15,289,388 ordinary shares. Attendance at board meetings 8 of 8 possible. Attendance at Remuneration Committee meetings 3 of 3 possible. ----- Jean-Marie Mognetti Assignments and year elected Born in 1984, Board member since 2014. Member of the Executive Management Committee. Education, professional experience and previous assignments Jean-Marie holds a Master’s degree in Mathematical Trading and Finance from Sir John Cass Business School. Jean-Marie is an experienced commodities trader with a background and expertise in quantitative analysis, risk management and alpha-generation through macro commodity-oriented programs, including cryptocurrencies. Prior to joining CoinShares, Jean-Marie was a quantitative strategist with Hermès Commodities Fund Managers. Other current assignments Council Member of the Aventus Protocol Foundation; Director of FlowB Holding Switzerland SA; Director of FlowBank SA; Director of JFM & FK Management Services; Director and Shareholder of Mognetti Partners Limited; Director of Komainu Holdings Limited; Director of Tactiques D’avant- Garde (Jersey) Limited. Director’s fee (yearly) Nil, paid as an employee for role on Executive Committee, as disclosed in the remuneration report. Fee for committee work Not applicable. Independent in relation to the company and Group management No. Independent in relation to major shareholders No. Own and related parties’ shareholdings as per 31 December 2022 11,881,609 ordinary shares and 618,356 share options. Attendance at board meetings 8 of 8 possible. ----- Carsten Køppen Assignments and year elected Born in 1964, non-executive Board member since 2020. Member of the ARC and Remuneration Committee. Education, professional experience and previous assignments Carsten holds a Diploma in Banking from the Danish School of Banking. Carsten has 40 years of experience in financial services, including stock exchange equity trading, investment advisory, capital market debt and fixed income, alternative asset management and asset servicing. He is a specialist in corporate governance and best practices within the alternative investment fund industry, and is also, among other things, independent, regulated non-executive director and Member of the Board to various alternative investment structures and managers. Other current assignments Director of Triton Managers Limited; Director of Triton Managers II Limited; Director of Triton Managers III Limited; Director of Triton Managers IV Limited; Director of Triton Managers V limited; Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 39 | 138 01 02 03 04 05 06 07 0 8 09 10 Director of Triton Smaller Mid Cap General Partner Limited; Director of Triton Debt Opportunities Managers Limited; Director of Triton Debt Opportunities Managers II Limited; Director of Triton Managed Account General Partner Limited; Director of Alpenhof Limited; Director of Octopus Aternative Investment Fund Management Limited; Director of GSG Ethereum Enhanced Master Fund Limited; Director of GSG Digital Frontier Master Fund Limited; Council Member of the Aventus Protocol Foundation. Director’s fee (yearly) £50,000 Fee for committee work Included within Director’s fee. Independent in relation to the company and Group management Carsten held a non-executive directorship position on the Board of CoinShares (Jersey) Limited, a Group Company, until the end of November 2021. Independent in relation to major shareholders Yes. Own and related parties’ shareholdings as per 31 December 2022 9,750 ordinary shares. Attendance at board meetings 8 of 8 possible. Attendance at Audit Committee meetings 4 of 4 possible. Attendance at Remuneration Committee meetings 3 of 3 possible. ----- Johan Lundberg Assignments and year elected Born in 1977, non-executive Board member since 2020. Member of the Nomination Committee. Education, professional experience and previous assignments Johan holds an MBA in Finance from Stockholm School of Economics; MBA in International Strategy from Stockholm University. Johan is a founding partner of NFT Ventures, an early- and growth-stage fund founded in 2014 to capture the opportunity in transformation of banking and financial services. Other current assignments Director of MR Cake AB; Director of MR Cake Göteborg AB; Director of MR Cake Retail AB; Director of MR Cake Holding AB; Director of Swiftcourt AB; Director of Fastighets AB Stentulpanen Stockholm; Director of Nordic Collection AB; Director of Svolder AB; Director of NFT Ventures AB; Director of NFT Ventures 1 AB; Director of NFT Ventures 2 AB; Director of NFT Ventures CV 1 AB; Director of NFT Ventures Invest AB; Director of Ölands Bank AB; Director of Roy Fares AB; Director of Betsson AB; Director of Loomis AB; Director of Stentulpanen Fastigheter i Kalmar & Öland AB; Director of Stentulpanen Fastigheter Smedby AB; Director of Fastighets AB Stentulpanen; Director of Kapitalförvaltnings AB Stentulpanen; Director of Barcelona Development Corporation AB; Director of Barcelona Opportunity AB (publ); Director of SoliFast Holding AB; Director of SoliFast Sagacity AB; Director of Nft Growth 1 AB; Chairman and Director of Investment AB Stentulpanen; Director of AB Stentulpanen Försäkringar; Director of SoliFast Sverige AB; Director of Global Fintech Industries AB; Director of Investment AB Vildtulpanen. Director’s fee (yearly) £50,000 Fee for committee work Included within Director’s fee. Independent in relation to the company and Group management Yes. Independent in relation to major shareholders Yes. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 40 | 138 01 02 03 04 05 06 07 0 8 09 10 Own and related parties’ shareholdings as per 31 December 2022 2,500 ordinary shares. Attendance at board meetings 7 of 8 possible. ----- Christine Rankin Assignments and year elected Born in 1964, non-executive Board member since 2021. Member of the Remuneration Committee; member of the ARC. Education, professional experience and previous assignments Christine holds a Bachelor in Business Administration and Economics from Stockholm University. Christine is a former Partner at PWC and has held positions of trust at several organisations including Spotify, Veoneer Inc., NASDAQ and Cherry AB. Other current assignments Director and audit committee chair of 4C Group AB; Director and audit committee member of Orexo AB; Director and audit committee chair of Bonesupport AB. Director’s fee (yearly) £50,000 Fee for committee work Included within Director’s fee. Independent in relation to the company and Group management Yes. Independent in relation to major shareholders Yes. Own and related parties’ shareholdings as per 31 December 2022 N/A. Attendance at board meetings 6 of 8 possible. Attendance at Audit Committee meetings 8 of 8 possible. Attendance at Remuneration Committee meetings 3 of 3 possible. ----- Viktor Fritzén Assignments and year elected Born in 1985, non-executive Board member since 2021. Member of the ARC. Education, professional experience and previous assignments Viktor holds a Master’s in finance from the Stockholm School of Economics. Viktor previously held the positions of Global Investment Research Analyst and Corporate Finance Analyst at Goldman Sachs and GP Bullhound respectively. He was CFO of the online gaming group LeoVegas which he was part of building from a start-up to a Stockholm Nasdaq listed company. Other current assignments Director of StickerApp Holding AB; Director of Appjobs Sweden AB; Director of Beyond Zebra; non- executive Director of Cithara BidCo; non-executive Director of Cithara HoldCo. Director’s fee (yearly) £50,000 Fee for committee work Included within Director’s fee. Independent in relation to the company and Group management Yes. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 41 | 138 01 02 03 04 05 06 07 0 8 09 10 Independent in relation to major shareholders Yes. Own and related parties’ shareholdings as per 31 December 2022 40,100 ordinary shares. Attendance at board meetings 8 of 8 possible. Attendance at Audit Committee meetings 8 of 8 possible. ----- GROUP MANAGEMENT Jean-Marie Mognetti Group Chief Executive Officer Education, professional experience and previous assignments As disclosed above Other current assignments As disclosed above Own and related parties’ shareholdings as per 31 December 2022 As disclosed above Attendance at Executive Management Committee meetings 16 of 16 possible. ----- Richard Nash Chief Financial Officer Education, professional experience and previous assignments Richard holds a Master’s degree in Sinology from School of Oriental and African Studies, University of London. Richard has 12 years of experience in chartered accounting. Richard joined CoinShares from Cairn Financial Advisers where he acted as Nominated Adviser to a number of listed companies, holding the status of Qualified Executive (as granted by the London Stock Exchange). Richard was formerly part of the RSM UK Capital Markets Team, where he acted as reporting accountant to a number of listings. Other current assignments N/A. Own and related parties’ shareholdings as per 31 December 2022 900 ordinary shares and 174,423 share options. Attendance at Executive Management Committee meetings 16 of 16 possible. ----- Graeme Dickson Group General Counsel Education, professional experience and previous assignments Graeme holds a Master’s degree (Honours) in International Relations from University of St. Andrews and Post Graduate Diploma in Law from the University of Law. Graeme has 14 years of experience as an English qualified solicitor. He joined CoinShares from Aviva Plc. where he held the position of Senior Legal Counsel. Prior to that he held positions at Linklaters, White & Case, Bank of America and Standard Bank. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 42 | 138 01 02 03 04 05 06 07 0 8 09 10 Other current assignments N/A. Own and related parties’ shareholdings as per 31 December 2022 12,427 ordinary shares and 149,114 share options. Attendance at Executive Management Committee meetings 16 of 16 possible. ----- Meltem Demirors Head of Strategy Education, professional experience and previous assignments Meltem holds a Bachelor’s degree in Mathematical Economics from Rice University and an MBA with a focus on Finance and Innovation from Sloan School of Management, Massachussetts Institute of Technology (MIT). Meltem has prior experience in the oil and gas industry in trading, corporate treasury and M&A roles. She helped build and grow the Digital Currency Group, managing a portfolio of 120 companies and 4 subsidiaries, is a founding member of the World Economic Forum Blockchain Council, and teaches at MIT as well as Oxford. Other current assignments Advisor to Shyft Network; Advisor to Metaplex Foundation; Director of Stacks Foundation; Director of Compass Mining Inc (Representing CoinShares Group); Director of Mintgreen Blockchain Innovation Corporation (Representing CoinShares Group); Director of Choice FinTech Holdings (previously Kingdom Trust)(Representing CoinShares Group); Director of Ejara (Representing CoinShares Group); Director of 3iQ Corp (Representing CoinShares Group); Director of The Topps Company, Inc.; Advisor to Blockdaemon; Advisor to Casa; Managing Member of Shiny Pony LLC; Programme Director at Oxford Saïd Business School. Own and related parties’ shareholdings as per 31 December 2022 2,778,020 ordinary shares and 422,125 share options. Attendance at Executive Management Committee meetings 7 of 16 possible. ----- Frank Spiteri Head of Asset Management Education, professional experience and previous assignments Frank has over 10 years of experience as an ETP specialist, joining CoinShares after previously working as the former Head of Distribution and Capital Markets at WisdomTree. Prior to specializing in ETPs, he spent 11 years working as a trader with KBC Financial Products. Other current assignments 30% shareholder of Clapham Incubators; 30% shareholder of Rever Kitchens; minority shareholder of Mayahuel Limited; minority shareholder of Garton Jones Real Estate. Own and related parties’ shareholdings as per 31 December 2022 592,763 ordinary shares and 1,773,600 share options. Attendance at Executive Management Committee meetings 16 of 16 possible. ----- Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 43 | 138 01 02 03 04 05 06 07 0 8 09 10 Pierre Porthaux Head of Capital Markets Education, professional experience and previous assignments Pierre has close to 20 years’ experience in finance in both traditional markets and cryptocurrencies. Prior to CoinShares, Pierre co-founded Blockchain Solutions, a technology and strategy consulting company, and Emergence Labs, specialized in Bitcoin trading technology, both located in Paris. Previously, Pierre was a trader undertaking statistical and index arbitrage strategies for banks and hedge funds such as Nomura, Millennium Partners, Dresdner Kleinwort and Natixis. Other current assignments 50% shareholder of SCI Repo; 27% shareholder of Cranmer Court Ltd. Own and related parties’ shareholdings as per 31 December 2022 0 ordinary shares and 170,030 share options. Attendance at Executive Management Committee meetings 15 of 16 possible. ----- Benoît Pellevoizin Head of Marketing & Communications Education, professional experience and previous assignments Benoît graduated from the Celsa Sorbonne Université (Grande Ecole of Communications & Journalism) and the Hasso Plattner Institute School of Design Thinking. Benoît has over 15 years of experience in developing marketing, communications, advertising and branding. He joined CoinShares from the leading crypto hardware firm Ledger. Prior to that he has held positions involving strategy, branding and innovation with Ogilvy Consulting, SID LEE, M&C Saatchi, Fred & Farid and Digitas. Other current assignments Owner of 560 BPSCE of Ledger; Advisor to Source Ineractie. Own and related parties’ shareholdings as per 31 December 2022 N/A Attendance at Executive Management Committee meetings 16 of 16 possible. ----- SHARES, SHAREHOLDERS AND SHARE CAPITAL GENERAL INFORMATION CoinShares International Limited was listed on Nasdaq Stockholm in December 2022. According to the company’s Articles of Association, the share capital of the company shall be no more than £99,000 divided into 200,000,000 Ordinary Shares in a single share class. The company’s registered share capital as of 31 December 2022 was £33,765.84, divided among 68,213,821 Ordinary Shares. The shares, which are denominated in British pounds (GBP), had a share price of £0.000495. The company’s shares have been issued in accordance with Jersey law. All issued shares are fully paid for and freely transferable. The company’s shares are listed on the regulated multilateral trading facility, Nasdaq Stockholm, and the ISIN code for CoinShares International Limited’s shares is JE00BLD8Y945. The company’s shares are not the subject of any offer that has been made as a result of a mandatory bid, redemption right or redemption obligation. Nor has any public takeover offer been made for the shares during the current or preceding financial years. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 44 | 138 01 02 03 04 05 06 07 0 8 09 10 Certain rights associate with the shares The company’s shares are of the same class. The rights associated with shares issued by the company, including those pursuant to the Articles of Association, may only be amended in accordance with the procedures set out in Companies (Jersey) Law 1991. Voting rights Each share entitles the holder to vote at general meetings, and each shareholder is entitled to a number of votes corresponding to the shareholder’s total holding of shares in the company. Preferential rights to new shares In accordance with Article 3 of the Articles of Association (the “Articles”), the company shall not allot and issue ordinary shares, or rights to subscribe for, or to convert securities into, ordinary shares (“Equity Securities”), to any person on any terms unless it has made an offer to each Shareholder on the same or more favourable terms (the “Preferential Rights”). These Preferential Rights shall not apply to: 1. any ordinary shares issued pursuant to the exercise of warrants; 2. in one or more tranches of ordinary shares as does not in the aggregate exceed ten percent (10%) of the total number of ordinary shares in issue at 9am on 1 January of such year; and 3. any Equity Securities allotted and issued by the Directors in the three years following adoption of the Articles pursuant to any employee incentive or bonus plan or scheme. Such Equity Securities not to exceed fifteen percent (15%) of the total number of ordinary shares in issue at the date of the adoption of the Articles. DIVIDEND AND DIVIDEND POLICY General All shares carry equal entitlement to a share in the company’s profits and to the company’s assets and any surpluses in the event of liquidation. Resolutions regarding dividends in limited liability companies are made by a general meeting of shareholders. Entitlement to dividends accrues to those who, on the record date resolved by a general meeting of shareholders, are registered in the shareholder register maintained by Euroclear Sweden as holders of shares. Dividends are normally paid to the shareholders as a cash amount per share through Euroclear Sweden, although they may also be paid in a form other than cash (in-kind dividend). If a shareholder cannot be reached through Euroclear Sweden, the shareholder will continue to have a claim against the company for the dividend amount for a period that is limited by rules concerning a ten-year statute of limitation. After expiration of this limitation period, the dividend amount accrues to the company. There are no restrictions on dividend rights in respect of shareholders who reside outside Sweden. Shareholders who are not tax resident in Sweden are usually required to pay Swedish withholding tax. Dividend policy The dividend policy of the company, in line with its ambitions as a growth company, is not to distribute to its shareholders any surplus funds from its distributable profits and/or general reserves. The approach to paying a dividend whether special or regular will be reviewed by the Board on an annual basis and any changes will be communicated to the market in the disclosure section in the annual report and company website. CENTRAL SECURITIES DEPOSITORY CoinShares International Limited’s shares are registered in an electronic VPC register in accordance with the Central Securities Depositories and Swedish Financial Instruments Accounts Act (Lagen (1998:1479) om värdepapperscentraler och kontoföring av finansiella instrument). No share certificates have been issued for the company’s shares registered in the VPC register. The account operator is Euroclear Sweden. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 45 | 138 01 02 03 04 05 06 07 0 8 09 10 CONVERTIBLES, WARRANTS, AUTHORISATIONS TO ISSUE SECURITIES, ETC. Incentive programs In accordance with the Articles of Association, the Board of Directors is authorised, in three years from the date of adoption of the Articles of Association (20 June 2020), to issue share options that do not, in aggregate, exceed 15% of the total number of outstanding ordinary shares. The employee incentive program (“EIP”) is governed by general terms and conditions and individual share option agreements with the holders of share options. The aim of the EIP is to create conditions to retain and increase motivation of senior executives, other employees and other key persons in the company and Group. The Board of Directors believes that it is in the interests of all shareholders that senior executives, other employees and key persons have a long-term interest in good growth in the value of the company’s shares. A long-term owner engagement is expected to stimulate greater interest in the business and its earnings performance overall and enhance motivation among the participants and aims to achieve a greater foundation for shared interests between the program’s participants and the company’s shareholders. Share Options issued under the EIP - November 2020 On 25 October 2019 the Board of CoinShares (Holdings) Limited, a Group Company, resolved on an incentive program that was approved by its shareholders on 29 October 2019. During March 2020, warrants were issued based on the terms for the incentive program for employees. The Share Options issued under the incentive program for employees in CoinShares (Holdings) Limited were transferred to CoinShares International Limited on 24 November 2020 on the same terms as Share Options granted at CoinShares (Holdings) Limited level. The number of share options issued were adjusted in connection with the transfer in order to ensure the recipient received share options corresponding to the number which were initially issued. The strike price was adjusted accordingly. Following the transfer of the share options from CoinShares (Holdings) Limited to CoinShares International Limited, no options exist in CoinShares (Holdings) Limited. A total of 2,955,920 share options were issued and held by key employees in Jersey, the UK and the US. Of these share options, 1,011,320 were issued with 13 March 2023 as the vesting date. The remaining 1,944,600 share options, held by the Group’s Head of Asset Management Frank Spiteri, are subject to certain vesting criteria that need to be fulfilled; (i) double the Group’s AUM, (ii) double the customer count and (iii) drive team performance (determined by the Board). The vesting terms are outlined in a separate share option agreement between the company and Frank Spiteri. The following terms apply to all 2,995,920 share options: • each share option gives the share option holder the right to subscribe for one ordinary share in the company; • the share options were issued free of charge; and • the subscription price (strike price) for each ordinary share amounts to £1.43, equivalent to the fair market value of one ordinary share at issuance (adjusted accordingly following the transfer to the company) and as determined by a third party valuation specialist. Share Options issued under the EIP – March 2021 On 22 February 2021, the Board resolved to grant key employees a total of 183,489 share options. The following terms apply to all 183,489 share options: • the share options would vest in eight equal tranches over the 24 months from the date of issue, being 11 March 2021; • each share option gives the share option holder the right to subscribe for one ordinary share in the company; • the share options were issued free of charge; and • the subscription price (strike price) for each ordinary share amounts to SEK 44.9, equivalent to the subscription price in Prospectus dated 22 February 2021. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 46 | 138 01 02 03 04 05 06 07 0 8 09 10 Share Options issued under the EIP – April 2021 On 26 March 2021, the Board resolved to grant key employees a total of 373,944 share options. The following terms apply to all 373,944 share options: • vesting date of 19 April 2024; • each share option gives the share option holder the right to subscribe for one ordinary share in the company; • the share options were issued free of charge; and • the subscription price (strike price) for each ordinary share amounts to SEK 94.4. Share Options issued under the EIP – March 2022 On 21 January 2022, the Board resolved to grant key employees a total of 670,002 share options. The following terms apply to all 670,002 share options: • vesting date of 18 March 2025; • each share option gives the share option holder the right to subscribe for one ordinary share in the company; • the share options were issued free of charge; and • the subscription price (strike price) for each ordinary share amounts to SEK 82.3. Share Options issued under the EIP – March 2023 On 20 February 2023, the Board resolved to grant key employees a total of 448,000 share options. The following terms apply to all 448,000 share options: • vesting date of 20 March 2026; • each share option gives the share option holder the right to subscribe for one ordinary share in the company; • the share options were issued free of charge; and • the subscription price (strike price) for each ordinary share amounts to SEK 31.0. As of 31 March 2023, 870,695 share options had either lapsed or been cancelled. If all 3,769,268 outstanding share options in the company were to be exercised for subscription of ordinary shares, the maximum dilution amounts to approximately 5.24 percent of the number of outstanding ordinary shares as at 31 March 2023. GROWTH IN SHARE CAPITAL Since the company’s shares were listed for trading on Nasdaq First North Growth Market on 11 March 2021, the company has decided on new share issues on two occasions. The below is a table of the number of shares and registered share capital shows registrations related to the historical development of these new share issues and other events pertaining to the company’s share capital. Number of Shares Registration date Event Change Total 11 March 2021 IPO - 66,551,863 6 July 2021 Consideration for acquisition 1,298,322 67,850,185 16 December 2021 Consideration for acquisition 363,636 68,213,821 31 December 2022 - 68,213,821 Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 47 | 138 01 02 03 04 05 06 07 0 8 09 10 Shareholder agreements To the best of the knowledge of CoinShares International Limited’s board of directors, there are no shareholder agreements or other agreements between the company’s shareholders that are intended to influence the company. Nor is the company’s board aware of any agreements or similar undertakings that could lead to a change in control over the company. SHARE PRICE DEVELOPMENT The table below shows movements in the company’s share price during the year. CoinShares International Limited’s shares are traded under the ticker code “CS”. The initial listing was on Nasdaq First North Growth Market in March 2021 and the Company’s shares were listed for trading on Nasdaq Stockholm on 19 December 2022. The initial listing price was SEK 44.9. The lowest price paid for the shares in 2022 was SEK 19.0 and the highest price paid during the year was SEK 87.0. The price of the shares was SEK 19.8 at year-end. Shareholders No. Shares Share of Ownership (%) Daniel Masters 15,289,388 22.41% Mognetti Partners Limited 11,881,609 17.42% Russell Newton 8,314,452 12.19% Alan Howard 7,933,540 11.63% Adam Levinson 3,896,618 5.71% Paul Davidson 3,240,000 4.75% Meltem Demirors 2,778,020 4.07% Vitruvius Limited 2,566,213 3.76% Dwight Anderson 2,543,502 3.73% Horseferry Trading Ptd Limited 1,700,506 2.49% Total, 10 largest shareholders 60,143,848 88.17% Other existing shareholders 8,069,973 11.83% Total 68,213,821 100% OWNERSHIP STRUCTURE The table below shows CoinShares International Limited’s largest shareholders as per 31 December 2022. The company had 2,755 shareholders on 31 December 2022. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 48 | 138 01 02 03 04 05 06 07 08 0 9 10 SUSTAINABILITY REPORT INTRODUCTION CoinShares’ Sustainability Report aims to be transparent and relevant, to ensure that stakeholders can easily learn about our sustainability efforts and gain an understanding of our performance and progress over time in relation to Environmental, Social and Governance (“ESG”) initiatives. This report presents the events and outcomes for 2022. The disclosures are structured according to our key sustainability topics. The report has been written with reference to the Swedish Annual Accounts Act (1995:1554), and is presented in four sections, as follows: 1. Strategy & Current Position 2. Sustainability 3. Environmental Initiatives 4. Social Initiatives The governance of the Group, which forms a key part of the ESG initiatives is presented separately within section 8 of the Annual Report. 1. STRATEGY & CURRENT POSITION Strategy In 2022 we put forward an ESG Strategy as a core pillar of our business initiatives and company culture for a sustainable future. We monitored our ESG framework that sets clear objectives and can be transparently measured to demonstrate our commitment to ESG. Our ESG Strategy was formalised through a company-wide ESG Policy which was adopted in conjunction with our admission to trading on Nasdaq Stockholm. The three pillars of our strategy are: • Sustainability: adopting climate change friendly standards and working towards reducing our CO 2 footprint. • Education: market leading information provider in the crypto ecosystem from novices to industry experts. • Investing in the future: promoting and developing next generation talent from universities and nurturing existing personnel within the CoinShares Group. We aim to consider each of these in all our ESG initiatives, and also to promote them within the company wide culture of the CoinShares Group. These core pillars are critical to our ability to be responsible and effective stewards of the digital ecosystem as cryptocurrencies are inherently political, social, and economic in nature. As a company we have always therefore been interested and invested in the development of initiatives in relation to digital assets and digital asset investing, particularly through the output our research arm. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 49 | 138 01 02 03 04 05 06 07 08 0 9 10 Current Position For the nascent cryptocurrency industry, CoinShares is considered in its early stages of its ESG journey. We have therefore taken steps in 2022 (and in 2021) to peer assess our ESG credentials against other leading financial institutions. It is important to quantify where we are in our ESG journey, allowing us to quantify the progress made as we move forward and the industry around us evolves. CoinShares completed the S&P Global Corporate Sustainability Assessment (“CSA”) that tested a wide range of ESG criteria, benchmarked scoring against other financial institutions such as banks and financial technology (FinTech) participants. The submission process provided useful insights into specific improvement areas for CoinShares in the future. Our new score, which is comparable to industry peers, was an improvement on our 2021 assessment. However, there are further efforts and investments required to support our ongoing ESG efforts. A ring-fenced portion of the 2022 Budget was therefore allocated to ESG initiatives as part of the Change Management budget. Such an allocation is to be made on an annual basis moving forward as we continue to grow. 2. SUSTAINABILITY Sustainability & Output of Research Team The digital asset industry is at the forefront of the technology to ensure a more efficient energy usage environment for financial services in the future, and we see an active role for ourselves in ensuring the potential of these advancements are widely known. Following on from 2021 when published a number of articles on the environmental impact of Bitcoin mining (https://coinshares.com/research/closer-look-environmental-impact-of-bitcoin- mining) and hosted an industry first ESG webinar with hundreds of participants, we continued our research efforts into 2022, publishing a detailed report on the Bitcoin mining network and the energy and carbon impact (https://coinshares.com/research/bitcoin-mining-network-2022). The industry continues to make a number of material strides in respect of sustainability, with changes in the Ethereum protocol from proof of work to proof of stake (reducing energy usage by 99%). Cyber Security Risks and Hacking Risks The further development of digital asset networks could lead to increased security risks. Many digital assets and their underlying networks have historically experienced security issues, hacks, and software errors. Such risks must be efficiently and successfully addressed so that bugs and security risks are mitigated to the greatest extent possible. Even if a high level of security is achieved, malicious actors could still successfully target digital asset networks and/or exchanges which may lead to financial losses to holders, as seen historically. Malicious actors have in the past targeted platforms and exchanges to exploit them and are now also targeting the infrastructure for decentralised finance (“DeFI”) and various smart contracts. To address this risk we are continuing to invest in our state of the art cyber-security processes and controls. These include but are not limited to a dedicated incident response team, 24/7/365 altering, estate monitoring and threat intelligence. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 50 | 138 01 02 03 04 05 06 07 08 0 9 10 The Group’s ability to attract and retain customers and grow the business depends on the provision of products and services in a reliable, secure and transparent manner. This in turn improves upon the Group’s reputation as Europe’s largest digital assets investment firm. As an industry leader in our sector, it is important for us to protect ourselves and our clients against financial crime. We have strong financial crime processes and procedures that provide protection, but also identify bad actors and organisations. Due to the nature of the industry within which the Group operates, coupled with the nature of the services and products provided, a robust control environment is paramount to protect the Group’s stakeholders, ensure compliance with regulatory requirements of the Group, and allow for accurate and timely dissemination of information throughout the Group. Cyber-security remains a critical focus for the Group. Significant investment in and ongoing improvement of the Group’s security posture is essential to align the infrastructure of the Group with its growth. From a completely new physical networking layer to the optimised secure cloud environment, these improvements have been validated by the Group’s external information security audits and accreditations. Since 2021 the Group has maintained its ISO27001 certification (international standard for information security management), evidencing adherence to a “best-practice” approach to the management of information security by addressing people and processes as well as technology. In 2022, there was a mandatory rollout to Company Personnel of Cyber Security training so that they are well equipped to identify and take appropriate action for high-risk Cyber Security scenarios. 100% of Company Personnel completed the Cyber Security training and this will be monitored on a going forward basis. Ad-hoc security tests and attack simulations are regularly undertaken allowing the Group to ensure buy-in and understanding from all employees. The Group’s endpoint, mobile and perimeter protections are monitored on an ongoing basis to adapt to emerging threats and to ensure the Group remains protected in the ever-changing landscape of cybersecurity. Furthermore, the Group’s cyber- security controls are routinely tested as part of the Group’s Compliance Monitoring Plan. Growth & Development of Personnel & Company Culture The Group’s growth journey has and will continue to take place in a sector which places further demands on the Group and its management, further accentuated by the prevalence of new technically advanced products and services offered by market participants in a macro environment where laws and regulations frequently change and emerge at a rapid pace. In this context an inability to handle growth effectively can create a variety of risks for the Group. We aim to invest in a sensible manner to scale and preserve the company culture without adversely impacting future prospects adversely, including the Group’s ability to retain and recruit personnel and to effectively focus on and pursue the Group’s short term and long-term objectives. Anti-Money Laundering and Terrorist Financing The Group has a variety of systems and controls in place that allow for the ongoing monitoring of all its digital asset holdings and positions with each of the exchanges and custodians it uses. All exchanges and custodians with which the Group interacts for the purpose of either digital asset storage or trading are subject to client onboarding and due diligence checks. These are integrated fully with the Group’s internal systems prior to engaging in any kind of active relationship. This risk of the Group is further mitigated by the fact that most of the Group’s physical asset holdings are in custody with regulated custodians specialising in digital assets. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 51 | 138 01 02 03 04 05 06 07 08 0 9 10 3. ENVIRONMENT The environment within which CoinShares operates is wide-ranging and there are both direct and indirect impacts from company activities. CoinShares aims to minimise its carbon footprint as much as possible and employs effective company stewardship to enable positive climate change action. CoinShares’ activities have limited direct environmental impact; however, we prioritise the issue because we know it is important to run the business in a way that minimises our ecological footprint. There has been significant negative press coverage in regard to the environmental impact of Bitcoin mining due to its high energy usage. It is important to highlight that CoinShares is not directly engaged in Bitcoin mining and the vast majority of our transactions in Bitcoin are off- chain. MintGreen Investment In 2021 CoinShares invested in the company MintGreen, which is a clean tech company that uses Bitcoin mining to monetise heat generation. MintGreen is focused on addressing two of the primary concerns related to cryptocurrency mining - sustainability and power costs. MintGreen builds, manages, and maintains industrial Bitcoin mining systems co-located with utilities and industrial plants to produce guaranteed income from two revenue streams - cryptocurrency and the sale of heat. MintGreen has built a proprietary solution to capture heat emitted from Bitcoin mining and sell it to buyers of heat. Our Head of Strategy Meltem Demirors holds a Director role in MintGreen and CoinShares is determined to back more innovative solutions in the Bitcoin mining space. Crypto Climate Accord In April 2021, CoinShares joined the Crypto Climate Accord, a private sector-led initiative committed to making the cryptocurrency industry 100% renewable. One of the objectives includes achieving net-zero emissions from electricity consumption by 2030. Inspired by the Paris Climate Agreement, the Accord brings together the crypto and FinTech industry to build a sustainable future for global finance with support from the United Nations Framework Convention on Climate Change (“UNFCCC”) Climate Champions. Global Blockchain Business Council Digital Finance ESG Working Group In 2022, CoinShares joined the Global Blockchain Business Council (“GBBC”) Digital Finance ESG Working Group with other prominent participants across the cryptocurrency industry to educate the White House on the decarbonization considerations for the cryptocurrency industry. This helped frame the conversation with regulators as to how the digital assets industry is preparing itself to reduce its environmental impact considering the negative press news around Bitcoin and its Proof of Work energy consumption. CoinShares provided commentary and input on the “GBBC Digital Finance: Guidance on ESG Reporting for Digital Assets”. This was led by the GBBC team with valued inputs from the upstream and downstream stakeholders of the cryptocurrency value chain. Existing Science Based Target initiative (“SBTi”) guidance was used from both the Financial Services and ICT sectors. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 52 | 138 01 02 03 04 05 06 07 08 0 9 10 Jersey Trees For Life In 2022, we supported the Jersey Trees for Life organisation by allowing CoinShares employees time away from work to clear paths and plant trees with the local Jersey community. This initiative assisted our local community in reducing our carbon footprint as well as preserving wildlife living in their habitats. CoinShares also donated £26,500 to this local organisation. CoinShares partnered with Jersey- based environmental charity and agreed to fund the charity’s newest restoration project, the Alder Collection Restoration. The Alder Collection Restoration Project, an extension of the Alder Collection, which has been planted and maintained by Jersey Trees for Life since the early 1990s, is designed to protect and restore the trees, habitats of endangered species, and improve the livelihoods of thousands of people who will be able to enjoy the site in the near future. Office Environment CoinShares does not generate any hazardous waste with only non-hazardous waste being produced, e.g. paper waste. CoinShares has recycling areas in local office kitchens and there are several local initiatives to reduce our environmental footprint such as using recycled paper for printers, using recycled or reused packages for deliveries, and reducing the number of plastic bottles used by installing water dispensers. As a technology driven company a crucial part of our success is providing our people with an optimal set of IT equipment. Having the right tools is a necessity to keep developing and maintaining the innovative products and services we offer customers and partners. That said, CoinShares endeavours as much as possible to maintain a sustainable consumption of physical electronic goods. CoinShares reuses as much of the IT equipment necessary for business operations as possible and ensures that every device gets used for its full product life before it is recycled. When recycling we work with different partners around the globe to refurbish and recycle used equipment most of which is repaired and resold. CoinShares aims to ensure that printers are only used when necessary. Several IT tools ensure that the need for printouts is kept to a minimum and to make sure no printouts are made unintentionally as all personnel must physically confirm printouts with their ID badge. All staff use portable laptops, and each meeting room is equipped with a screen that all participants can use and view to reduce the need to share information on paper. Post the COVID-19 pandemic way of working, printing and its environmental impact was much reduced compared to previous years as digital solutions took precedence as employees use a hybrid model of returning to the office and working from home. As staff have returned to the office our goal remains to keep our impact from printouts to the bare minimum. We intend to retain the most efficient ways of working which have been beneficial to the environment that resulted from the shift to home-based working. As a global organisation we aim to minimise air travel where possible and host meetings virtually to minimise the carbon footprint of Company Personnel. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 53 | 138 01 02 03 04 05 06 07 08 0 9 10 4. SOCIAL Confidence and the highest reputational standards for CoinShares are crucial parts of our business and critical to our success. Trust and confidence are earned by acting responsibly and by meeting or exceeding expectations. Our Social impacts relate to the relationships held with our impacted stakeholders, including employees, clients, and the local community. Our focus is on ensuring that we have the right people working in the most effective organisation structure to support the strategy of the Group - committed employees are the foundation of CoinShares’ success. Creating a stimulating, rewarding work environment where employees want to stay, and nurturing the next generation’s talents is critical to longevity and retaining the role of digital asset management market leader. CoinShares strives to be an attractive and responsible employer. Being responsible requires a long-term perspective. Skills development, diversity, compensation, and health are high-priority issues. Our work is governed by the applicable laws and regulations in the markets where CoinShares operates, as well as several policies such as guidelines for health and safety management, conduct, ethics, and human resources policies. Wider Cryptocurrency Adoption In lieu of the current traditional finance model, cryptocurrencies and digital assets are designed and developed for the entire mass market to adopt. The current traditional finance model caters for the developed nations who have stable economies that can manage low inflation risk (until recently) whereas developing nations have high inflation risk leading to the devaluation of their citizens’ savings and incomes. Over half of the world lives in an economy of authoritarianism and/or recurring double-digit inflation. CoinShares is a staunch supporter of including billions of people in the global economy and giving them sovereignty over their money. Hence, we are proud to offer CoinShares developed ETPs to clients to cater for this type of financial inclusion. According to World Bank data, 24% of the adult world population do not have a bank account and this percentage is of course higher among the adult population in developing nations. This unbanked population do not have access to banking and bank fees for remittances to send money cross-border are exorbitant (i.e. range between 5-30% per transaction). The cross border remittance of money is a real use case for developing nations due to people working in developed nations to send money home to families in developing nations. Cryptocurrencies such as Bitcoin remove the intermediary such as banks and other financial institutions to allow the unbanked population to keep more of their hard-earned income and gives them more financial freedom over their money. In 2022, CoinShares continued its contribution to the Massachusetts Institute of Technology (MIT) Digital Currency Initiative (DCI). CoinShares committed to gift $500,000 over the course of 4 years from 2021 to support Bitcoin open-source software development and advance the security of the Bitcoin protocol. This contribution to the initiative supports a growing team of senior, specialised open-source developers focused on systemic threat mitigation and rigorous improvements to Bitcoin’s underlying infrastructure, including code audits, increasing automation, and novel research into Bitcoin’s long-term economic security. CoinShares joined other industry leaders as part of a new DCI Guardian’s Circle committed to long-term foundational funding of open-source development and systemic security improvements to the Bitcoin protocol. The CEO stated, “As a beneficiary of the work of hundreds of developers who secure, upgrade, and maintain the open-source protocols that underlie the Bitcoin network and the applications built on top of it, we believe for-profit firms in the digital asset industry have an obligation to fund independent, neutral development efforts and research that advances the mutual interest of all ecosystem participants.” Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 54 | 138 01 02 03 04 05 06 07 08 0 9 10 Employee Benefits CoinShares strives to provide a competitive salary and benefits package to all eligible employees according to job requirements, jurisdiction and individual performance. Our employees have the opportunity to participate in CoinShares’ success through our incentive programs such as the Employee Incentive Program (“EIP”), of which all levels of employees are qualified to receive EIP. Employees are also eligible for consideration for a discretionary bonus annually, the sum of which is determined by overall company performance. CoinShares actively monitors the attrition rate of staff (15% voluntary resignations in 2022) to identify any functional areas of improvement. Exit interviews are conducted to gain further insights and to improve retention rates. We have in place paid leave and flexibility schedules where our employees are eligible for paid leave and are able to benefit from flexible working given the 24/7 nature of the digital assets industry. The benefits package that CoinShares offers our employees varies from one operating jurisdiction to another to reflect local market conditions and legislation. Typically this includes benefits such as a defined contribution pension plan, medical insurance, income protection/ disability insurance and life insurance provided either via private insurance schemes or social security contributions. In some locations, there are fitness and wellbeing benefits offered with regular health assessments made available. Health and Safety For our global footprint, the safety and wellbeing of our staff is of paramount importance. During the COVID-19 pandemic, we put forward and enacted work from home protocols so that our staff could minimise the risk of infection for themselves and their families. Effective COVID-19 testing measures were put in place for key staff who had to attend the offices in person. The offices followed the relevant government guidance at the time by instilling social distancing requirements. Employees were continuously kept up to date with changes to work arrangements via internal communications platforms on a regular basis. Ensuring the health and safety of employees is also one of CoinShares’ prime responsibilities and it endeavours to provide a safe and healthy working environment for employees and protects them from work-related accidents or injuries. The Group also maintained a healthy and safe working environment record with no occurrences of work-related deaths. As the Group is principally engaged in digital assets’ investments, the Group believes that the potential occupational hazards are considered low. Wellbeing Employees who utilise a good work-life balance are better equipped for high performance in the work environment. CoinShares regularly reviews employee benefits against market benchmarks to ensure they are fit and proper to support staff wellbeing. The Group embraces workforce diversity and promotes productivity, irrespective of physical and geographical locations. The Group allows colleagues to work from home and provides other forms of flexible working arrangements designed to protect health and safety. To consider and accommodate employee requests in an equitable, consistent, and sustainable manner, the Group also rolled out a flexible working application (“FWA”) to allow employees to work from home depending on the nature of their job, the requirements of the business, and their own circumstances. Diversity and Inclusion CoinShares is committed to promoting a diverse, equal, and inclusive working environment, where all employees feel valued and respected for who they are and for the work they contribute. The Group’s Employee handbook outlines the responsibilities of staff in relation to equal Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 55 | 138 01 02 03 04 05 06 07 08 0 9 10 opportunities, diversity and inclusion. We instil the principle of an inclusive workplace culture with zero tolerance for discrimination or harassment. All harassment is strictly prohibited, and a reporting channel is provided to employees as a forum where the Group can handle and investigate any potential reports of harassment. The Group’s HR policies strictly comply with all applicable employee local laws and regulations. As an equal opportunity employer, the Group is committed to providing equal opportunities to all employees and applicants. We create a safe working environment of mutual respect for employees that values individual contribution and recognises diversity. CoinShares upholds local laws on protecting staff from discrimination. We pride ourselves on being a meritocracy where each person is evaluated based on personal skill and merit. Moreover, the Group prohibits the use of child labour and forced or compulsory labour at all its units and suppliers. The Group has zero tolerance to employment of child labour and forced labour by the suppliers. The Group is not aware of any non-compliance with relevant rules and regulations on preventing child or forced labour. Learning and Development CoinShares seeks to establish a workplace that provides continuous learning to employees to equip them with effective skills, knowledge, and training to meet their full potential. The Group provides new joiners with a comprehensive induction training to ensure new employees clearly understand the Group’s values and culture and efficiently integrate into the working culture. The induction program provides information on the Group’s structure, an introduction to the different departments of the Group, an overview of company policies and procedures and other important HR-related activities. CoinShares also provides annual training as part of the Continuing Professional Development (“CPD”) scheme to employees on financial industry ethics, compliance, anti-money laundering, insider trading, conflicts of interest, information security and cyber risk awareness. The courses are administered and tracked by the Compliance and Human Resources teams. Additional courses are also provided by an online learning tool to Company Personnel and professional development courses are also provided to staff looking to further develop their skills. CoinShares supported our Company Personnel when external courses were held. For instance, one of our CoinShares colleagues enrolled in the Harvard Business School MBA course in 2022 and was given time off to attend the course in person in the USA. Also, CoinShares supported a number of employees to obtain their Chartered Financial Analyst (CFA) qualifications across Levels 1, 2 and 3, Investment Management Certificates, ACCA and CGI IFA qualifications. All personnel were given time off to attend the examinations, additional study days and financial support to access extra study materials. Our most recent successes were individual employees completing their CFA Level 2 and their Level 5 CGI International Finance and Administration respectively. In addition to the professional qualification support, CoinShares is currently running a trial with Coursera which is an online learning platform offering access to courses, certificates, guided projects and clips. Industry Leadership We provide deep and thought-provoking research into the digital assets industry utilising our subject matter experts in the Research department. Our research is aimed at a wide spectrum of cryptocurrency amateurs, enthusiasts, and institutional investors. We have published research on the impact of crypto mining, promoting the usage of efficient and renewable energy in crypto mining technology. CoinShares have explored opportunities to invest in renewable power generation in underutilised globally distributed locations for optimisation of energy usage in the crypto ecosystem. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 56 | 138 01 02 03 04 05 06 07 08 0 9 10 External Community We look for opportunities where CoinShares can have a meaningful impact, with a focus on preserving local culture. We collaborate with community non-profit organisations, neighbourhood groups, and other special initiatives for local residents. In view of the Ukraine war that commenced in 2022, CoinShares donated €19,200 worth of Bitcoin assets to the Ukrainian relief effort. The funds helped to transport hundreds of pallets of items donated by Jersey residents from St. Malo (France) to Poland. The donation was seen as a demonstration of the potency of cryptocurrency as a fast, secure way of funding relief efforts, which can be harnessed without the need for centralised banks’ involvement. The CEO commented the following: “It’s only right that individuals and companies do what they can to alleviate the impact of the events in Ukraine. The team at CoinShares was very keen to play a part.” We are proud to fund a three-year title sponsorship of the Jersey Race Club, the club which dates back to 1832, and where horse racing has continued in one form or another with the exception of the two world wars and the 2020 season. Since 2008, CoinShares founders and employees have been part of island life in Jersey, and fantastic memories have been created at Les Landes by generations of locals and visitors alike. The sponsorship provides the financial support required for the Club to continue to host local horse racing events, affecting both local and off-Island jobs amongst jockeys, trainers, stable personnel and catering. The Jersey Race Club caters for both corporate events as well as for families for the racing events, providing a welcome outlet for these visitors. As horse racing is a regulated sport, the welfare of its human and equine participants is considered integral to the Club. The Club meticulously treats and cares for its horses by employing its team of expert stablemen, the provision of vets and other welfare professionals. In the London office, office desk usage was given at no cost to charity workers from the Horseferry Foundation. The foundation’s activities include the advancement of education, and the protection and conservation of the environment for the benefit of children and young people. We intend to continue contributing to the global crypto community via research, events, and advocacy throughout 2023 and beyond and look forward to reporting on these efforts. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 57 | 138 01 02 03 04 05 06 07 08 09 1 0 AUDITED FINANCIAL STATEMENTS CONTENTS Company Information Directors’ Report Independent Auditor’s Report Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Alternative Consolidated Statement of Comprehensive Income Notes to the Consolidated Financial Statements The following pages do not form part of the audited financial statements: Supplementary Statement (unaudited) 58 60 62 69 70 71 72 74 75 137 Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 58 | 138 01 02 03 04 05 06 07 08 09 1 0 COMPANY INFORMATION CoinShares International Limited Jersey 102185 2nd Floor 2 Hill Street St Helier Jersey JE2 4UA Daniel Masters Jean-Marie Mognetti Carsten Køppen Johan Lundburg Viktor Fritzén Christine Rankin CoinShares Corporate Services (Jersey) Limited Baker Tilly Channel Islands Limited PO Box 437 1st Floor, Kensington Chambers 46/50 Kensington Place St Helier Jersey JE4 OZE Silvergate Bank (closed March 2023) 4250 Executive Square Suite 300 La Jolla CA 92037 Deltec Deltec House Lyford Cay PO Box N-3229 Nassau The Bahamas Signature Bank 565 Fifth Avenue New York NY 10017 DBS Bank Ltd 12 Marina Boulevard Singapore 018982 Barclays Bank 13 Library Place Jersey JE4 8NE The Company Jurisdiction Registered Number Registered Office Directors Company Secretary Independent Auditor Bankers Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 59 | 138 01 02 03 04 05 06 07 08 09 1 0 Handelsbanken Kungsträdgårdsgatan 2 106 70 Stockholm Silicon Valley Bank 3003 Tasman Dr Santa Clara CA 95054 Banque Populaire 76 Avenue France 75013 Paris France Flowbank (from January 2022) Esplanade de Pont-Rouge 6, 1211 Geneva 26 Switzerland Komainu Digital 3rd Floor 2 Hill Street St Helier Jersey JE2 4UA Zodia Custody Limited (from January 2022) Thomas House 84 Eccleston Squares London SW1V 1PX Carey Olsen Jersey LLP 47 Esplanade St Helier Jersey JE1 0BD Cowen International Limited 11th Floor 1 Snowden Street London EC2A 2DQ Interactive Brokers LLC 110 Bishopsgate London LEC2N 4AY Mangold Fondkommission AB Engelbrektsplan 2 114 34 Stockholm Marex Capital Markets Inc. (from June 2022) 425 S Financial Place, Suite 1850 Chicago IL 60605 Custodians Legal Advisor Brokers Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 60 | 138 01 02 03 04 05 06 07 08 09 1 0 DIRECTORS’ REPORT The directors present their annual report and the consolidated financial statements (the ‘financial statements’) of CoinShares International Limited (the ‘Company’), together with its subsidiaries listed in note 15(ii) of the financial statements (collectively the ‘Group’), for the year ended 31 December 2022. Incorporation The Company is incorporated and domiciled in Jersey. The Company is registered as a public company with the Jersey Financial Services Commission and listed on Nasdaq Stockholm. Principal activity The principal activity of the Group is to engage in creating financial products associated with digital assets and blockchain technology. Results and dividends The total comprehensive income for the year amounted to £2,934,267 (2021: £113,443,438). The profit for the year, after taxation and excluding movements on digital assets recognised through other comprehensive income, amounted to £520,216,064 (2021: loss of £2,412,321,706) as per page 69. Dividends of £nil (2021: £nil) were declared or payable in the year. A share buy-back program undertaken during the year resulted in the buy-back of 78,396 shares (2021: nil) for consideration of £228,383 (2021: £nil). Statement of directors’ responsibilities The directors are responsible for preparing the Directors’ Report and financial statements in accordance with applicable laws and regulations. The Companies (Jersey) Law 1991 requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the Group financial statements in accordance with UK-adopted International Financial Reporting Standards. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period. In preparing the financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • state whether applicable UK-adopted International Financial Reporting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; • make judgements and accounting estimates that are reasonable and prudent; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company, and which enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 61 | 138 01 02 03 04 05 06 07 08 09 1 0 The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Directors The directors who held office during the year and subsequently are set out on page 58. Company Secretary The Company Secretary who held office during the year and subsequently is set out on page 58. Going concern The Group had net assets of £203,741,110 (2021: £200,013,153), an operating profit of £518,948,307 (2021: loss of £2,420,412,328), and total comprehensive income of £2,934,267 (2021: £113,443,438). The directors have prepared these financial statements on a going concern basis on the understanding that they have satisfied themselves that sufficient working capital will be available for 12 months from the date of issue of these financial statements. The Group has an obligation to settle amounts due to investors for Exchange Traded Products (‘ETP’) that reference the performance of specific digital assets issued. As the Group holds hedging assets in excess of this liability, the directors consider that they will be able to convert digital assets to fiat currency so as to settle the obligations in the event that certificates are redeemed and so deem the going concern risk associated with these certificates to not be material. In addition, delays in the settlement of the certificates may be imposed or certain modifications be made in the occurrence of market illiquidity or other disruptions. Furthermore, the directors deem the cyber-security of the Group to be sufficient to mitigate cyber risk and the risk of theft of digital assets that could potentially leave the Group unhedged and exposed in its obligation to certificate holders. Accordingly, the directors have prepared the financial statements on a going concern basis. Post balance sheet events Events subsequent to the year end have been disclosed in note 30. Independent auditor In accordance with the Company’s articles, a resolution proposing that Baker Tilly Channel Islands Limited be reappointed as auditor of the Group will be put at the Annual General Meeting on 31 May 2023. The report was approved by the board on 28 April 2023 and signed on its behalf. ........................................................... Jean-Marie Mognetti Director Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 62 | 138 01 02 03 04 05 06 07 08 09 1 0 INDEPENDENT AUDITOR’S REPORT To the Members of CoinShares International Limited Opinion We have audited the consolidated financial statements of CoinShares International Limited (the “Company” and, together with its subsidiaries, the “Group”), which comprise the consolidated statement of financial position as at 31 December 2022, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements: • give a true and fair view of the consolidated financial position of the Group as at 31 December 2022, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the United Kingdom (IFRSs); and • have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991, as amended. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs) and applicable law. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group and Company in accordance with the ethical requirements that are relevant to our audit of the Consolidated Financial Statements in Jersey, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 63 | 138 01 02 03 04 05 06 07 08 09 1 0 Key audit maer How our audit addressed the maer Key observaons communicated to those charged with governance Valuaon of investments There is a risk that investments could be materially misstated and incorrectly disclosed in the consolidated financial statements. • Total value: £45,011,850 (2021: £23,689,517) • As disclosed in note 15. We understood and evaluated the valuaon methodology applied with reference to the Internaonal Private Equity and Venture Capital Valuaon guidelines (IPEV), and tested the techniques used by the Directors in determining the fair value of material unquoted investments. To test the value we undertook the following: • Assessed the appropriateness of the valuaon methodology used and tested the inputs either through validaon to appropriate third party sources, or where relevant, assessed the reasonableness of significant esmates and judgements used; • Compared valuaons of investments in funds to the most recent audited financial statements, where available; • Compared valuaons to recent transacons, where relevant; and • Compared valuaons to recent investments made in investee companies where there was a significant new investor. No issues were idenfied that were required to be communicated to those charged with governance. Existence and rights and obligaons in respect of investments There is a risk that investments do not exist or the group does not hold tle to the investment. • Total value: £45,011,850 (2021: £23,689,517) • As disclosed in note 15. For each material investment held by the Group we have obtained third party confirmaon of ownership. No issues were idenfied that were required to be communicated to those charged with governance. Digital asset: Existence, Rights and Obligaons There is a risk that the Group does not own or control the assets which would result in a material misstatement in the consolidated financial statements. • Total value: £869,034,495 (2021: £2,764,318,368) • As disclosed in note 13. Our substanve procedures included performing the following: • Obtained confirmaons from the custodian and centralised exchanges, where available; • Performed a stocktake of digital assets held on decentralised wallets; and • We have also understood and evaluated the procedures relang to the process to assess the reliability of the custodian both at take on and throughout the relaonship. No issues were idenfied that were required to be communicated to those charged with governance. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 64 | 138 01 02 03 04 05 06 07 08 09 1 0 Key audit maer How our audit addressed the maer Key observaons communicated to those charged with governance Digital assets – Valuaon There is a risk that the value aached to the digital assets is materially misstated. • Total value: £869,034,495 (2021: £2,764,318,368) • As disclosed in note 13. We have obtained prices used in the valuaon and compared to a third-party source to determine the reasonableness of the price and the level which has been applied. No issues were idenfied that were required to be communicated to those charged with governance. ETP liabilies: Completeness, Rights and Obligaons There is a risk that the ETP liability is not fully recognised which would materially misstate the consolidated financial statements. • Total value: £986,707,490 (2021: £3,308,728,916) • As disclosed in note 18. We have obtained confirmaons from the relevant third pares who issue the ETP liability cerficates and compared this to the financial records to ensure the liabilies exist. No issues were idenfied that were required to be communicated to those charged with governance. ETP liability – Valuaon There is a risk that the value aached to the ETP liability is materially misstated. • Total value: £986,707,490 (2021: £3,308,728,916) • As disclosed in note 18. The valuaon of the cerficates has been tested by: • Recompung the underlying digital asset allocaon as per the prospectus; and • Comparing prices used in the valuaon of underlying digital assets to third party sources to determine reasonableness. No issues were idenfied that were required to be communicated to those charged with governance. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 65 | 138 01 02 03 04 05 06 07 08 09 1 0 Our Application of Materiality Materiality for the consolidated financial statements as a whole was set at £6,112,000 (2021: £6,015,000), determined with reference to a benchmark of net assets, of which it represents 3% (2021: 3%). 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 consolidated financial statements as a whole. Performance materiality was set at 60% (2021: 60%) of materiality for the consolidated financial statements as a whole, which equates to £3,667,200 (2021: £3,609,000). We applied this percentage in our determination of performance materiality because we deem the cryptocurrency activities undertaken by the Group to be high risk. We reported to the Audit Committee any uncorrected omissions or misstatements exceeding £305,600 (2021: £300,000), in addition to those that warranted reporting on qualitative grounds. Of the Group’s 19 (2021: 18) reporting components, including the Company, we subjected 4 (2021: 4) to full scope audits. The work on all the components was performed by the Group audit team. The components within the scope of our audit accounted for 94% (2021: 96%) of the Group’s net assets. Conclusions relating to Going Concern In auditing the consolidated financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the consolidated financial statements is appropriate. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and Company’s ability to continue as a going concern for a period of at least twelve months from when the consolidated financial statements are authorised for issue. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. Other Information The other information comprises the information included in the annual report other than the consolidated financial statements and our auditor’s report thereon. The Directors are responsible for the other information contained within the annual report. Our opinion on the consolidated financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the consolidated financial statements themselves. If, based on the work 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. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 66 | 138 01 02 03 04 05 06 07 08 09 1 0 Matters on which we are required to Report by Exception In the light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we have not identified material misstatements in the Directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies (Jersey) Law 1991, as amended, requires us to report to you if, in our opinion: • proper accounting records have not been kept; • proper returns adequate for the audit have not been received from branches not visited by us; • the consolidated financial statements are not in agreement with the accounting records and returns; or • we have not obtained all information and explanation that, to the best of our knowledge and belief, was necessary for the audit. Responsibilities of the Directors As explained more fully in the Directors’ responsibilities statement set out on page 60, the Directors are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with IFRSs, and for such internal control as the Directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Directors are responsible for assessing the Group and 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 management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Directors are responsible for overseeing the Group’s financial reporting process. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below: • Enquiry of management to identify any instances of non-compliance with laws and regulations, including actual, suspected or alleged fraud; • Reading minutes of meetings of the Board of Directors; • Review of legal invoices; • Review of management’s significant estimates and judgements for evidence of bias; • Review for undisclosed related party transactions; • Obtained the revenue calculation and recalculated revenue for the year based on underlying support; • Using analytical procedures to identify any unusual or unexpected relationships; and • Undertaking journal testing, including an analysis of manual journal entries to assess whether there were large and/or unusual entries pointing to irregularities, including fraud. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 67 | 138 01 02 03 04 05 06 07 08 09 1 0 A further description of the auditor’s responsibilities for the audit of the financial statements is located at the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Report on the examination of the ESEF report Opinion In addition to our audit of the annual report, we have also examined that the Board of Directors have prepared the annual report in a format that enables uniform electronic reporting (the ESEF report) pursuant to Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528) for CoinShares International Limited for the year ended 31 December 2022. Our examination and our opinion relate only to the statutory requirements. In our opinion, the ESEF report has been prepared in a format that, in all material respects, enables uniform electronic reporting. Basis for opinion We conducted our examination in accordance with International Standard on Assurance Engagements (UK) 3000 Assurance Engagements Other Than Audits Or Reviews of Historical Financial Information. Our responsibilities under those standards are further described in the Auditor’s responsibilities section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant in Jersey, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the Board of Directors The Board of Directors is responsible for the preparation and fair representation of the ESEF report in accordance with Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528), and for such internal control as the Board of Directors determines is necessary to enable the preparation of the ESEF report that is free from material misstatement, whether due to fraud or error. Auditor’s responsibilities Our objectives are to obtain reasonable assurance about whether the ESEF report is in all material respects prepared in a format that meets the requirements of Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528), based on the procedures performed. Reasonable assurance is a high level of assurance, but it is not a guarantee that an engagement carried out in accordance with ISAE (UK) 3000 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 ESEF report. We apply ISQM (UK) 1 Quality Management for Firms that Perform Audits or Reviews of Financial Statements, Or Other Assurance Or Related Services Engagements and accordingly we maintain a comprehensive system of quality management, including documented policies and procedures regarding compliance with professional ethical requirements, professional standards and legal and regulatory requirements. The examination involves obtaining evidence, through various procedures selected using our judgement, that the ESEF report has been prepared in a format that enables uniform electronic reporting of the annual report. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 68 | 138 01 02 03 04 05 06 07 08 09 1 0 The examination included: • Consideration of those elements of internal control that are relevant to the preparation of the ESEF report by the Board of Directors; • Evaluating that the ESEF report has been prepared in a valid format; and • Reconciling the ESEF report with the audited annual report. Auditor’s report on the Board of Directors Report, Corporate Governance Report and Sustainability Report Based on our audit of the consolidated financial statements as described above, it is our opinion that the information presented in the Board of Directors Report, Corporate Governance Report and Sustainability Report concerning the financial statements and the going concern assumption is consistent with the consolidated financial statements and complies with the applicable laws and regulations. Other Matters which we are Required to Address We were appointed by the Board of Directors on 22 November 2021 to audit the consolidated financial statements. Our total uninterrupted period of engagement is 4 years. The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group and we remain independent of the Group in conducting our audit. Our audit opinion is consistent with the additional report to the audit committee in accordance with ISAs. Use of this Report This report is made solely to the Members of the Company, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991, as amended. Our audit work has been undertaken so that we might state to the 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 its Members, as a body, for our audit work, for this report, or for the opinions we have formed. Ewan John Spraggon For and on behalf of Baker Tilly Channel Islands Limited Chartered Accountants St Helier, Jersey Date: 28 April 2023 Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 69 | 138 COINSHARES 2022 ANNUAL REPORT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2022 Note 2022 £ 2021 £ Revenue 4 51,336,682 80,754,813 Gross profit 51,336,682 80,754,813 Administrative expenses 6 (38,201,098) (32,059,260) Fair value loss on digital assets 5 (1,226,595,255) - Impairment loss on amounts held at exchange 5, 14 (25,492,017) - Gain/(loss) on financial instruments 5, 14 1,741,273,017 (2,483,773,256) Other operating income 4 16,626,978 14,665,375 Operating profit/(loss) 518,948,307 (2,420,412,328) (Loss)/gain on investments 15(i) (2,800,424) 5,577,984 Share of associate and joint ventures losses 15(i) (2,149,611) (290,861) Profit/(loss) before interest and income tax expense 513,998,272 (2,415,125,205) Finance income 9 12,916,891 10,905,234 Finance costs 10 (6,330,425) (7,045,382) Profit/(loss) before income tax expense 520,584,738 (2,411,265,353) Income tax expense 11 (368,674) (1,056,353) Profit/(loss) after income tax expense 520,216,064 (2,412,321,706) Other comprehensive income Items that may be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations 22 19,281,832 1,756,423 19,281,832 1,756,423 Items that will not be reclassified subsequently to profit or loss Fair value (loss)/gain on digital assets 5 (539,108,506) 2,521,823,193 Fair value (loss)/gain on financial instruments 5 (609,445) 106,288 Fair value gain on investments 15(i) 3,154,322 2,079,240 (536,563,629) 2,524,008,721 Total other comprehensive (loss)/income (517,281,797) 2,525,765,144 Total comprehensive income 2,934,267 113,443,438 Earnings per share Basic 23 7.63 (36.24) Diluted 23 7.21 (36.24) The notes on pages 75 to 136 are an integral part of these financial statements. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 70 | 138 COINSHARES 2022 ANNUAL REPORT CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022 Note 2022 £ 2021 £ ASSETS Non-current assets Property, plant and equipment 12 1,935,862 836,299 Digital assets 13(i) 111,978 2,688,859 Goodwill 13(ii) 943,484 6,412,800 Other intangible assets 13(iii) 11,048,448 11,685,861 Investments 15(i) 45,011,850 23,689,517 Trade receivables and other assets 17 2,774,251 1,175,895 61,825,873 46,489,231 Current assets Trade receivables and other assets 17 260,643,117 1,063,415,358 Digital assets 13(i) 868,922,517 2,761,629,509 Amounts due from brokers 16 161,967,077 118,975,658 Cash at bank 16 26,567,599 10,775,650 1,318,100,310 3,954,796,175 Total assets 1,379,926,183 4,001,285,406 LIABILITIES Current liabilities Trade payables and other liabilities 18, 19 (1,017,794,019) (3,505,675,430) Amounts due to brokers 16 (135,384,786) (292,706,977) Lease liabilities 20 (1,307,507) (210,356) Current tax liabilities 11 (235,814) (2,578,333) (1,154,722,126) (3,801,171,096) Net current assets 163,378,184 153,625,079 Non-current liabilities Lease liabilities 20 (28,980) (101,157) Trade payables and other liabilities 18, 19 (21,433,967) - (21,462,947) (101,157) Total liabilities (1,176,185,073) (3,801,272,253) Net assets 203,741,110 200,013,153 EQUITY Share capital 21 33,766 33,766 Share premium 21 30,781,210 30,781,210 Other reserves 22 22,136,272 (2,797,090,363) Retained earnings 150,789,862 2,966,288,540 Total equity 203,741,110 200,013,153 The notes on pages 75 to 136 are an integral part of these financial statements. ............................................. Jean-Marie Mognetti Director Date: 28 April 2023 The financial statements on pages 69 to 136 were approved and authorised for issue by the board of directors and signed on its behalf by: Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 71 | 138 COINSHARES 2022 ANNUAL REPORT CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2022 Note Share capital £ Share premium £ Other reserves £ Retained earnings £ Total equity £ At 31 December 2020 31,278 2,387,070 1,209,832,600 (1,155,726,994) 56,523,954 Loss for the year - - - (2,412,321,706) (2,412,321,706) Other comprehensive income for the year - - 2,523,579,616 2,185,528 2,525,765,144 Total comprehensive income - - 2,523,579,616 (2,410,136,178) 113,443,438 Share based payments 7, 8, 24 - - 1,649,133 - 1,649,133 Shares issued 21 2,488 28,394,140 - - 28,396,628 Total transactions with owners recognised in equity 2,488 28,394,140 1,649,133 - 30,045,761 Transfer of revaluation reserve upon disposal of digital assets - - (6,532,151,712) 6,532,151,712 - Total other changes in equity - - (6,532,151,712) 6,532,151,712 - At 31 December 2021 33,766 30,781,210 (2,797,090,363) 2,966,288,540 200,013,153 Profit for the year - - - 520,216,064 520,216,064 Other comprehensive loss for the year - - (519,826,674) 2,544,877 (517,281,797) Total comprehensive income - - (519,826,674) 522,760,941 2,934,267 Share based payments 7, 8, 24 - - 1,229,617 - 1,229,617 Share buybacks 21, 22 - - (228,383) - (228,383) Share option liquidations 22 - - (153,900) (53,644) (207,544) Total transactions with owners recognised in equity - - 847,334 (53,644) 793,690 Transfer of revaluation reserve upon disposal of digital assets 22 - - 3,338,205,975 (3,338,205,975) - Total other changes in equity - - 3,338,205,975 (3,338,205,975) - At 31 December 2022 33,766 30,781,210 22,136,272 150,789,862 203,741,110 The notes on pages 75 to 136 are an integral part of these financial statements. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 72 | 138 COINSHARES 2022 ANNUAL REPORT CONSOLIDATED STATEMENT OF CASH FLOWS (1/2) FOR THE YEAR ENDED 31 DECEMBER 2022 Note 2022 £ 2021 £ Cash flows from operating activities Profit/(loss) after income tax expense 520,216,064 (2,412,321,706) Adjustments for: - Depreciation of property, plant and equipment 12 240,683 176,560 - Depreciation of right-of-use assets 12 872,526 219,289 - Impairment of goodwill 13(ii) 5,473,525 - - Amortisation of other intangible assets 13(iii) 1,769,632 874,180 - Share-based payment expense 7, 8 1,229,617 1,649,133 - Finance income 9 (12,916,891) (10,905,234) - Finance costs 10 6,330,425 7,045,382 - Income tax expense 11 368,674 1,056,353 - Gain on financial instruments settled through digital assets 5 (20,619,173) (22,061,763) - (Gain)/loss on ETP liabilities 5 (2,349,122,865) 2,527,462,402 - Fair value loss on digital assets 5 1,230,310,948 - - Loss/(gain) on investments 15(i) 2,800,424 (5,577,984) - Share of joint venture losses 15(i) 230,910 290,861 - Share of associate losses 15(i) 1,918,701 - (610,896,800) 87,907,473 Changes in working capital: - Trade receivables and other assets 1,257,429,319 (979,727,142) - Trade payables and other liabilities (502,361,951) 156,962,245 Cash generated from/(used in) operations 144,170,568 (734,857,424) Finance costs paid (6,329,290) (7,042,292) Income taxes paid (3,457,543) (387,978) Net cash flow generated from/(used in) operating activities 134,383,735 (742,287,694) Cash flows from investing activities Net sales of digital assets 13(i) 381,400,078 1,632,502,984 Net purchases of ETP liabilities (295,834,379) (1,015,848,687) Purchases of other intangible assets 13(iii) (703,461) (182,364) Disposals of other intangible assets 13(iii) 6,828 - Purchases of property, plant and equipment 12 (327,508) (216,544) Disposals of property, plant and equipment 12 196,187 7,796 Acquisition of subsidiaries 15(ii) - (2,064,753) Acquisition of investments in joint ventures 15(i) - (755,902) Acquisition of investments in associates 15(i) (20,266,689) - Acquisition of other investments 15(i) (28,520) (11,760,563) Net disposals/(purchases) of listed equities 15(i) 98,578 (212,846) Finance income 9 12,957,913 10,905,233 Net cash generated from investing activities 77,499,027 612,374,354 Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 73 | 138 COINSHARES 2022 ANNUAL REPORT CONSOLIDATED STATEMENT OF CASH FLOWS (2/2) FOR THE YEAR ENDED 31 DECEMBER 2022 Note 2022 £ 2021 £ Cash flows from financing activities Issue of shares 21 - 12,766,244 Issue of long term loan 21,573,387 - Repayment of lease liabilities (1,079,297) (211,876) Share option liquidations 24 (207,544) - Share buybacks 21, 22 (228,383) - Net cash generated from financing activities 20,058,163 12,554,368 Net increase/(decrease) in cash and cash equivalents 231,940,925 (117,358,972) Cash and cash equivalents At the beginning of the year (162,955,669) (43,337,185) Effects of currency translation on cash and cash equivalents (15,835,366) (2,259,512) At the end of the year 16 53,149,890 (162,955,669) Cash and cash equivalents comprise Cash at bank 26,567,599 10,775,650 Amounts due from brokers 161,967,077 118,975,658 Amounts due to brokers (135,384,786) (292,706,977) At the end of the year 16 53,149,890 (162,955,669) Non-cash analysis Cash flows from investing activities Acquisition of subsidiaries 15(ii) - (15,630,384) Cash flows from financing activities Issue of shares 21 - 15,630,384 - - The notes on pages 75 to 136 are an integral part of these financial statements. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 74 | 138 COINSHARES 2022 ANNUAL REPORT ALTERNATIVE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2022 Note 2022 £ 2021 £ Revenue 4 51,336,682 80,754,813 Gross profit 51,336,682 80,754,813 Administrative expenses 6 (38,201,098) (32,059,260) Fair value (loss)/gain on digital assets 5 (1,765,703,761) 2,521,823,193 Impairment loss on amounts held at exchange 5, 14 (25,492,017) - Gain/(loss) on financial instruments 5 1,741,273,017 (2,483,773,256) Other operating income 4 16,626,978 14,665,375 Operating (loss)/profit (20,160,199) 101,410,865 (Loss)/gain on investments 15(i) (2,800,424) 5,577,984 Share of joint ventures losses 15(i) (2,149,611) (290,861) (Loss)/profit before interest and income tax expense (25,110,234) 106,697,988 Finance income 9 12,916,891 10,905,234 Finance costs 10 (6,330,425) (7,045,382) (Loss)/profit before income tax expense (18,523,768) 110,557,840 Income tax expense 11 (368,674) (1,056,353) (Loss)/profit after income tax expense (18,892,442) 109,501,487 Other comprehensive income Items that may be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations 22 19,281,832 1,756,423 19,281,832 1,756,423 Items that will not be reclassified subsequently to profit or loss Fair value (loss)/gain on financial instruments 5 (609,445) 106,288 Fair value gain on investments 15(i) 3,154,322 2,079,240 2,544,877 2,185,528 Total other comprehensive income 21,826,709 3,941,951 Total comprehensive income 2,934,267 113,443,438 Adjusted earnings per share Basic 23 0.04 1.70 Diluted 23 0.04 1.62 The alternative presentation of the SOCI is designed to reflect the performance of the Group if gains and losses on digital assets were taken through profit and loss, rather than through other comprehensive income as required by accounting standards. Due to the treatment of digital assets as intangible assets under the revaluation model, and the gains and losses recognised as a result, it is the opinion of management that the total comprehensive income figure, inclusive of digital asset gains and losses, is the most representative measure of the Group’s overall performance. No other adjustments have been made. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 75 | 138 01 02 03 04 05 06 07 08 09 1 0 These notes form an integral part of and should be read in conjunction with the accompanying consolidated financial statements (the ‘financial statements’). 1. General information CoinShares International Limited (the ‘Company’) and its subsidiaries (together the ‘Group’) primarily operates in Jersey, Channel Islands (see note 15(ii) for other jurisdictions in which the Group operates). The principal activity of the Group is providing exposure to the digital asset ecosystem via a range of financial products and services, supported by its technology stack and team. The Company is a public company limited by shares and is incorporated and domiciled in Jersey. The address of its registered office is 2nd Floor, 2 Hill Street, St Helier, Jersey JE2 4UA. 2. Significant accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1 Basis of preparation These financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with UK-adopted International Financial Reporting Standards (‘IFRS’) and the Companies (Jersey) Law 1991. The financial statements are presented in Pound Sterling, which is also the functional currency. Monetary amounts in these financial statements are rounded to the nearest pound, except when otherwise indicated. The preparation of financial statements in compliance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Group accounting policies, see note 2.25 for further details. The following principal accounting policies have been applied: 2.2 Separate financial statements Under Article 105(11) of the Companies (Jersey) Law 1991, the directors of a holding company need not prepare separate financial statements. Accordingly, these financial statements present the results of the Group headed by the Company. 2.3 Going concern basis The Group had net assets of £203,741,110 (2021: £200,013,153), an operating profit of £518,948,307 (2021: loss of £2,420,412,328), and total comprehensive income of £2,934,267 (2021: £113,443,438). The directors have prepared these financial statements on a going concern basis on the understanding that they have satisfied themselves that sufficient working capital will be available for 12 months from the date of issue of these financial statements. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2022 Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 76 | 138 01 02 03 04 05 06 07 08 09 1 0 The Group has an obligation to settle amounts due to investors for ETPs that reference the performance of specific digital assets issued. As the Group holds hedging assets in excess of this liability, the directors consider that they will be able to convert digital assets to fiat currency so as to settle the obligations in the event that certificates are redeemed and so deem a going concern risk to not be material. In addition, delays in the settlement of the certificates may be imposed or certain modifications be made in the occurrence of market illiquidity or other disruptions. Furthermore, the directors deem the cyber-security of the Group to be sufficient to mitigate cyber risk and the risk of theft of digital assets that could potentially leave the Group unhedged and exposed in its obligation to certificate holders. Accordingly, the directors have prepared the financial statements on a going concern basis. 2.4 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved when the Group: • has power over the investee; • is exposed, or has rights, to variable returns from its involvement with the investee; and • has the ability to use its power to affects its returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Group has less than a majority of the voting rights of an investee, it considers that it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group’s voting rights in an investee are sufficient to give it power, including: • the size of the Group’s holding of voting rights relative to the size and dispersion of holdings of the other vote rights; • potential voting rights held by the Group, other vote holders or other parties; • rights arising from other contractual arrangements; and • any additional facts and circumstances that indicate that the Group has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the year are included in profit or loss from the date the Group gains control until the date when the Group ceases to control the subsidiary. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the Group are eliminated on consolidation. Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amount of the Group’s interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 77 | 138 01 02 03 04 05 06 07 08 09 1 0 When the Group loses control of a subsidiary, the gain or loss on disposal recognised in profit or loss is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), less liabilities of the subsidiary. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as required/permitted by applicable IFRS Standards). 2.5 Business combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interest issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that: • deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 and IAS 19 respectively; • liabilities or equity instruments related to share-based payment arrangements of the acquiree, or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 at the acquisition date; and • assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 are measured in accordance with that Standard. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. 2.6 Goodwill Goodwill is initially recognised and measured as set out in note 2.5. Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash- generating unit is less than the carrying amount of the unit, the impairment loss is allocated first Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 78 | 138 01 02 03 04 05 06 07 08 09 1 0 to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. 2.7 Investments in associates and joint ventures A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. In the Group consolidated financial statements the results and assets and liabilities of associates or joint ventures are incorporated using the equity method of accounting, unless the investee is held indirectly through a venture capitalist organisation in which case the investment is measured at fair value through profit or loss. Under the equity method, an investment in an associate or a joint venture is recognised initially in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associate or joint venture. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate or joint venture, the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. The requirements of IAS 36 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate or a joint venture accounted for under the equity method. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised is not allocated to any asset, including goodwill that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases. 2.8 Other investments In the financial statements of the Group, investments in listed equities and other investments are held at fair value through profit or loss except where the directors have made an irrevocable claim to designate fair value movements through other comprehensive income. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 79 | 138 01 02 03 04 05 06 07 08 09 1 0 2.9 Fair value measurement The Group measures financial instruments such as ETPs, and non-financial assets such as digital assets, at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market for the asset or liability accessible by the Group. The fair value hierarchy under IFRS is set out as follows: • Level 1 – The unadjusted quoted price in an active market for identical assets or liabilities that the Group can access at the measurement date. • Level 2 – Inputs other than quoted prices included in Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly. • Level 3 – Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability. For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. On a quarterly basis, the board of directors analyses the movements in the values of assets and liabilities which are required to be remeasured or re-assessed as per the Group’s accounting policies. Investment valuations are subject to several key judgements and reflect both local and external economic factors. In selecting the investment valuation criteria, the directors evaluate the key drivers relevant to each investment in conjunction with local partners, supported, wherever practicable, by local market data. As such, fair value measurements for investment valuations have been classified as Level 2 or Level 3 depending on the information available. More information is given in notes 2.19, 2.21 and 15. Refer to accounting policies 2.19 and 2.21 for the fair value policies as they apply respectively to the Group’s digital assets and to certain of the Group’s financial instruments, including ETPs. For all other assets and liabilities measured at fair value, the directors perform an internal valuation exercise to determine fair value using methodologies disclosed in the Group Investment Valuation Policy. Fair value disclosures are summarised in the following notes: Digital assets Note 13 Investments Note 15 Financial instruments Note 26 2.10 Revenue recognition The Group earns revenue by issuing ETPs which synthetically track the performance of digital assets under various note programmes. The Group earns fee income, which may vary depending on the note programme, based on the market value of the ETP. The Group recognises the fee income as revenue because it arises on a daily basis over the period that the ETP is outstanding. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 80 | 138 01 02 03 04 05 06 07 08 09 1 0 The XBT Provider AB (publ) (‘XBTP’) note program fee revenue is recognised on a daily basis, denominated in fiat, by means of a reduction in the liability owing to the ETP holder. Due to the structure of the XBTP ETPs, and the way in which the Group elects to hedge the liability arising from the issuance of these ETPs, the revenue remains held as part of the overall hedging asset balance until such a time that notes are redeemed, at which point the cash is realised. There is no digital asset exposure risk attached to the revenue that remains held within the hedging assets between recognition and redemption. The CoinShares Digital Securities Limited (‘CSDSL’) management fee note program fee revenue is recognised on a daily basis, denominated in digital assets, by means of a reduction in the coin entitlement owing to the ETP holder. For the staking products with no fee, revenue arising from staking is also denominated in digital assets, with a portion of such proceeds owing to noteholders through increasing the coin entitlement. These revenues are converted on a regular basis into fiat in order to ensure the Group’s revenues arising from CSDSL are not exposed to digital asset price fluctuations. There is no digital asset exposure risk attached to the revenue that remains held within the hedging assets between recognition and redemption. Digital assets received as a result of staking activities and airdrops are initially recognised within other operating income. Following initial recognition, such digital assets are valued in accordance with the Group’s policy on digital assets, with unrealised gains being recognised in other comprehensive income, and losses recognised through profit and loss, unless such a loss is reversing a gain previously recognised through other comprehensive income. The Group also earns revenue from the provision of investment management and advisory services. Revenue is recognised when the performance obligation has been satisfied by transferring the promised services to the customer on a straight line basis over the period during which the service is provided. 2.11 Leases The Group as lessee On commencement of a contract (or part of a contract) which gives the right to use an asset for a period of time in exchange for consideration, the group recognises a right-of-use asset and a lease liability unless the lease qualifies as a ‘short-term’ lease or a ‘low-value’ lease. Short-term leases Where the lease term is twelve months or less and the lease does not contain an option to purchase the leased asset, lease payments are recognised as an expense on a straight-line basis over the lease term. Leases of low-value assets Where the underlying asset in a lease is ‘low-value’, lease payments are recognised as an expense on a straight-line basis over the lease term. Low-value leases are deemed to be leases under £50,000. Initial measurement of the lease liability The lease liability is initially measured at the present value of the lease payments during the lease term discounted using the incremental borrowing rate because the interest rate implicit in the lease cannot be readily determined. The lease term is the non-cancellable period of the lease plus extension periods that are reasonably certain to exercise and termination periods that are reasonably certain not to exercise. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 81 | 138 01 02 03 04 05 06 07 08 09 1 0 Lease payments include fixed payments, less any lease incentives receivable, variable lease payments dependent on an index or a rate and any residual value guarantees. Variable lease payments are initially measured using the index or rate when the leased asset is available for use. Subsequent measurement of the lease liability The lease liability is subsequently increased for a constant periodic rate of interest on the remaining balance of the lease liability and reduced for lease payments. Interest on the lease liability is recognised in profit or loss. Re-measurement of the lease liability The lease liability is adjusted for changes arising from the original terms and conditions of the lease that change the lease term, the assessment of options to purchase the leased asset, the amount expected to be payable under a residual value guarantee and/or changes in lease payments due to a change in an index or rate. The adjustment to the lease liability is recognised when the change takes effect and is adjusted against the right-of-use asset, unless the carrying amount of the right-of-use asset is reduced to nil, when any further adjustment is recognised in profit or loss. Adjustments to the lease payments arising from a change in the lease term or the assessment of its option to purchase the leased asset are discounted using a revised discount rate. The revised discount rate is calculated as the incremental borrowing rate at the date of the reassessment because the interest rate implicit in the lease cannot be readily determined. Lease modifications A lease modification is a change that was not part of the original terms and conditions of the lease and is accounted for as a separate lease if it increases the scope of the lease by adding the right to use one or more additional assets with a commensurate adjustment to the payments under the lease. For a lease modification not accounted for as a separate lease, the lease liability is adjusted for the revised lease payments, discounted using a revised discount rate. Where the lease modification decreases the scope of the lease, the carrying amount of the right-of-use asset is reduced to reflect the partial or full termination of the lease. Any difference between the adjustment to the lease liability and the adjustment to the right-of-use asset is recognised in profit or loss. For all other lease modifications, the adjustment to the lease liability is recognised as an adjustment to the right-of-use asset. The Group as lessor Leases are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases. When the Group is an intermediate lessor, it accounts for the head lease and the sub-lease as two separate contracts. The sub-lease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 82 | 138 01 02 03 04 05 06 07 08 09 1 0 2.12 Foreign currency translation Transactions and balances Foreign currency transactions are translated into the functional currency of the relevant Group entity using the exchange rates prevailing at the dates of the transactions. At each reporting date, monetary assets and liabilities denominated in a foreign currency are translated into the functional currency of the relevant Group entity at the closing exchange rate. Non-monetary assets and liabilities denominated in a foreign currency, and measured at historical cost, are initially translated into the functional currency of the relevant Group entity at the date of the transaction, and are not subsequently re-translated. Non-monetary assets and liabilities denominated in a foreign currency, and measured at fair value, are measured using the exchange rate at each date the fair value is determined. Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit and loss. Foreign exchange gains and losses from the translation of assets and liabilities measured at fair value are recognised as part of the fair value gain or loss. Translation For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s overseas subsidiaries are translated at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in a foreign currency translation reserve (attributed to non-controlling interests as appropriate). On the disposal of an overseas subsidiary all of the exchange differences accumulated in a foreign currency translation reserve in respect of that subsidiary attributable to the owners of the Group are reclassified to profit or loss. 2.13 Retirement benefits The Group operates a defined contribution scheme for the benefit of its employees. Contributions payable are charged to profit or loss in the year they are payable. The assets of the scheme are held separately from those of the Group in an independently administered fund. 2.14 Employee benefits Employee benefits are recognised as an expense, unless the cost qualifies to be capitalised as an asset. Short term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 83 | 138 01 02 03 04 05 06 07 08 09 1 0 The Group may compensate employees for absence for various reasons including vacation, sickness and parental leave. There is non-accumulating compensation of absence and this does not carry forward; it will lapse if the current period’s entitlement is not used in full, therefore the Group does not recognise a liability or expense until the time of absence. Annual bonus plan The Group operates a bonus plan for employees. An expense is recognised in profit and loss when the Group has a legal or constructive obligation to make payments under the plan as a result of past events and a reliable estimate of the obligation can be made. 2.15 Share based payments Employee incentive share plan Equity-settled arrangements are measured at fair value at the date of the grant. The fair value determined at grant date is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the number of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to reserves. Where equity-settled arrangements are modified, and are of some benefit to the employee, the incremental fair value is recognised over the period from the date of modification to date of vesting. Where a modification is not beneficial to the employee there is no change to the charge for share-based payments. Settlements and cancellations are treated as an acceleration of vesting and the unvested amount is recognised immediately in profit and loss. The Group has no cash-settled share-based payment arrangements. 2.16 Taxation The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in profit and loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, a deferred tax liability is not recognised if the temporary difference arises from the initial recognition of goodwill. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the reporting date. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 84 | 138 01 02 03 04 05 06 07 08 09 1 0 The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Current and deferred tax are recognised in profit and loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. The taxation charge is based on the profit for the year as adjusted for tax purposes. The Company pays tax at 0%, the standard Jersey tax rate. Entities within the Group pay tax at various rates throughout the jurisdictions, as described in note 11. 2.17 Property, plant and equipment Assets are initially recognised at cost and subsequently measured at cost, net of depreciation and any impairment losses. Cost includes the original purchase price plus costs directly attributable to bringing the asset to its working condition for its intended use. Subsequent expenditure relating to an item of property, plant and equipment that has already been recognised is added to the carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance expenses are recognised in profit and loss as incurred. Depreciation is calculated using the straight-line method to allocate their depreciable amounts over their estimated useful lives as follows: Furniture and fittings 3 years Office equipment 3 years The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and adjusted as appropriate, at each year end. The effects of any revision are recognised in profit and loss when the changes arise. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit and loss in the period of disposal. 2.18 Right-of-use assets A right-of-use asset is recognised at commencement of the lease and initially measured at the amount of the lease liability, plus any incremental costs of obtaining the lease and any lease payments made at or before the leased asset is available for use by the Group. The right-of-use asset is subsequently measured at cost less accumulated depreciation and any accumulated impairment losses. Right-of-use assets are depreciated straight line over the following useful economic periods: Right-of-use property assets shorter period of the remaining lease term and the useful economic life The right-of-use asset is adjusted for any re-measurement of the lease liability and lease modifications, as set out in the lease accounting policy. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 85 | 138 01 02 03 04 05 06 07 08 09 1 0 2.19 Intangible assets Digital assets Digital assets are accounted for as intangible assets under the revaluation model. Under IFRS, most intangible assets other than goodwill are presumed to have a finite life. However, in the case of the majority of digital assets held by the Group, the residual value is equal to the carrying value, because (i) there is an active market, (ii) it is probable that the market will exist and (iii) the residual value can be determined by reference to the market. As such digital assets are not amortised. The overarching accounting policy that is adopted in respect of valuing the Group’s digital assets is as follows: • Digital assets which are freely tradeable and for which there is an active market are valued using unadjusted quoted prices, or an average of unadjusted quoted prices, taken from active markets. As such, these digital assets are classified as Level 1 in the fair value hierarchy; • Digital assets that are subject to lock-up and not freely tradeable are valued using quoted prices discounted for a lack of liquidity. As such these digital assets have been classified as Level 2 in the fair value hierarchy. At the point when such digital assets become freely tradeable, they are reclassified as Level 1 in the fair value hierarchy and accounted for in line with other digital assets; • In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The directors’ assessment of the significance of a particular input to the fair value measurement in its entirety requires judgement and it considers factors specific to the asset; • Increases in the fair value of digital assets are recognised in other comprehensive income, unless the increase reverses a revaluation loss previously recognised in profit and loss, in which case such an amount is recognised in profit and loss; • A decrease in the carrying value of a digital asset as a result of a revaluation loss is recognised in other comprehensive income to the extent that it reverses gains previously recognised in other comprehensive income. If a revaluation loss exceeds the accumulated gains recognised in equity in respect of digital assets, the excess is recognised in profit and loss; and • Digital assets are derecognised when the Group has transferred substantially all the risks and rewards of ownership on disposal. On disposal of digital assets, any cumulative gain previously recognised in other comprehensive income and accumulated in the revaluation reserve, is transferred to retained earnings. The Group holds digital assets for different purposes, namely (i) to collateralise the exchange traded products issued by its wholly owned subsidiary CSDSL, (ii) to hedge the liability arising from the issuance of exchange traded products by its wholly owned subsidiary XBTP, and (iii) as investments. Within CSDSL the digital assets are held in order to collateralise a number of exchange traded products. The exchange traded products are re-measured using reference indices as defined in the relevant prospectus for such products. The digital assets are valued using the same methodology, relying on an unadjusted index price. This prevents an accounting mismatch between the valuation of the digital assets and the certificates held. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 86 | 138 01 02 03 04 05 06 07 08 09 1 0 Within CoinShares Capital Markets (Jersey) Limited (‘CSCMJL’), Bitcoin and Ethereum are valued by the Company based on the average price of the three most liquid exchanges as defined in the XBTP prospectus at the date of valuation. Although these valuations are ultimately derived from a number of sources, the sources themselves are unadjusted and would each represent a Level 1 classification within the fair value hierarchy. As such, these holdings have been classified as Level 1. Should the average price of the three exchanges utilised show a material difference to any of the prices from an individual exchange, the classification of these assets as Level 1 would be reassessed. All other digital asset holdings within CSCMJL and held by other Group entities are valued by the Company based on an unadjusted price derived from a global cryptocurrency market data provider. On consolidation, no adjustments are made to these valuation approaches to create an alignment at the Group level. The directors consider that the assets held by each subsidiary are sufficiently different (and are therefore separate classes) insofar as they are being held for different purposes, and in the case of those held to hedge/collateralise exchange traded products, have a corresponding liability. This approach ensures the prevention of an accounting mismatch between the valuation of the digital assets and certificates held. This approach also reflects the prices that represent the most advantageous market available to sell each class of asset. The CSDSL digital assets are restricted to only being tradeable for a defined financial instrument (the ETP liability), the fair values of which are defined by the CSDSL prospectus. The XBTP assets are tradeable on any exchange, therefore the average price of three exchanges (as defined in the prospectus) represents management’s best estimate of the most advantageous market price. Separately acquired intangible assets Separately acquired intangible assets have finite useful lives and are measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation of the depreciable amount is allocated systematically on the basis of the consumption of economic benefits over their estimated useful lives. Amortisation is provided on the following basis: Website domains and trademarks 10 years The estimated useful life and amortisation method are reviewed at the end of each year, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets acquired in a business combination Intangible assets acquired in a business combination and recognised separately from goodwill are recognised initially at their fair value at the acquisition date. Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Amortisation is provided on the following basis: Fee generating contracts 10 years The estimated useful life and amortisation method are reviewed at the end of each year, with the effect of any changes in estimate being accounted for on a prospective basis. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 87 | 138 01 02 03 04 05 06 07 08 09 1 0 Internally developed software Expenditure on the research phase of projects to develop new customised software is recognised as an expense as incurred. Costs that are directly attributable to a project’s development phase are recognised as intangible assets, provided they meet all of the following recognition requirements: • the development costs can be measured reliably; • the project is technically and commercially feasible; • the Group intends to and has sufficient resources to complete the project; • the Group has the ability to use or sell the software; and • the software will generate probable future economic benefits. Development costs not meeting these criteria for capitalisation are expensed as incurred. Directly attributable costs include employee costs incurred on software development along with an appropriate portion of relevant overheads and borrowing costs. Subsequent measurement All finite-life intangible assets, including capitalised internally developed software, are accounted for using the cost model whereby the depreciable amount is amortised systematically on the basis of the consumption of economic benefits over their estimated useful lives. Residual values and useful lives are reviewed at each reporting date. In addition, they are subject to impairment testing. The following useful lives are applied: Software 3-5 years Any capitalised internally developed software that is not yet complete is not amortised but is subject to impairment testing. Amortisation has been included within administrative expenses. Subsequent expenditures on the maintenance of these assets are expensed as incurred. When an intangible asset is disposed of, the gain or loss on disposal is determined as the difference between the proceeds and the carrying amount of the asset, and is recognised in profit or loss within other gains or losses. Impairment of non-financial assets Goodwill impairment is covered in the goodwill accounting policy. All other non-financial assets are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired. If such an indicator exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. The recoverable amount is the higher of value in use and fair value less costs of disposal. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit and loss. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 88 | 138 01 02 03 04 05 06 07 08 09 1 0 When an impairment loss subsequently reverses, the carrying amount of the asset (or cash- generating unit) is increased to the revised estimate of the recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately as a credit to profit and loss. 2.20 Cash and cash equivalents Cash at bank Cash at bank consists of balances with banks and are classified as basic financial assets with a maturity of three months or less. Cash deposits with financial institutions are repayable without penalty on notice of not more than 24 hours. Amounts due from/to brokers Amounts due from/to brokers represent cash receivable from/payable to brokerage firms, arising due to the ongoing trading activities of the Group, and are classified as cash equivalents. Other cash equivalents Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. 2.21 Financial instruments Certain of the Group’s ETPs, and other derivative contracts, are settled in digital assets and therefore do not meet the definition of a financial instrument set out in IFRS 9. In all other respects they operate in the same way as an equivalent contract settled in cash. The Group has determined that the accounting policies for these contracts are the same as they would be for an equivalent contract settled in cash and meeting the definition of a financial instrument. These contracts are referred to as ‘financial instruments’ in the financial statements and are analysed as such in the financial instruments disclosure note (note 26). Financial assets The accounting policy for non-current asset investments where the Group does not have control or significant influence, which are financial assets accounted for under IFRS 9, is included in accounting policies 2.8 and 2.9. Initial recognition and measurement The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not measured at fair value through profit or loss, transaction costs. Trade receivables are initially measured at the transaction price. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 89 | 138 01 02 03 04 05 06 07 08 09 1 0 Subsequent measurement Subsequently the Group’s financial assets are classified into several categories: • Financial assets measured at amortised cost; • Financial assets measured at fair value through profit or loss; and • Financial assets measured at fair value through other comprehensive income. Financial assets at amortised cost and effective interest model The effective interest method is a method of calculating the amortised cost of a debt instrument and allocating interest income over the relevant period. For financial assets, the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding expected credit losses, through the expected life of the debt instrument, or, where appropriate, a shorter period, to the gross carrying amount of the debt instrument on initial recognition. The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance. Financial assets at amortised cost held by the Group include right-of-use lease assets. Financial assets at fair value through profit or loss Financial assets classified as current assets are measured at fair value through profit or loss. The fair value basis is measured using the fair value hierarchy. Financial assets at fair value through other comprehensive income Financial assets measured at fair value through other comprehensive income fall into three categories. Simple Agreements for Future Tokens (‘SAFTs’) Such agreements stipulate the delivery of digital assets to the Group on a specified date or following the occurrence of a defined event. SAFTs are classified as digital asset receivables. SAFTs which represent future ownership over tokens that do not have an active market, or have not yet been launched, are held at cost until such a time when the tokens over which rights exist are delivered, at which point they are classified as digital assets and valued in accordance with the Group’s policy for digital assets. SAFTs which represent future ownership over tokens that do have an active market are carried at fair value through other comprehensive income until such a time when the tokens over which rights exist are delivered, at which point they are classified as digital assets and valued in accordance with the Group’s policy for digital assets. SAFTs are monitored on an ongoing basis. In the event that the ultimate delivery of the tokens is called into question, or the likely value of the token holding is deemed to be lower than initial cost, the receivable will be impaired with such charge being taken through profit and loss. Simple Agreements for Future Equity (‘SAFEs’) Such agreements stipulate the delivery of equity to the Group on a specified date or following the occurrence of a defined event. SAFEs are classified as receivables and held at cost until such a time when the equity is delivered, at which point they are classified as investments and are valued in accordance with the Group’s investment valuation policy. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 90 | 138 01 02 03 04 05 06 07 08 09 1 0 SAFEs are monitored on an ongoing basis. In the event that the ultimate delivery of the equity is called into question, or the likely value of the equity holding is deemed to be lower than initial cost, the receivable will be impaired with such charge being taken through profit and loss. Simple Agreements for Future Tokens/Equity (‘SAFTEs’) Such agreements stipulate the delivery of digital assets and/or equity to the Group on a specified date or following the occurrence of a defined event. SAFTEs are classified as receivables and held at cost until such a time when the equity is delivered, at which point they are classified as investments and are valued in accordance with the Group’s investment valuation policy. SAFTEs are monitored on an ongoing basis. In the event that the ultimate delivery of the digital asset/ equity is called into question, or the likely value of the holding is deemed to be lower than initial cost, the receivable will be impaired with such charge being taken through profit and loss. Investments valued through Other Comprehensive Income Certain balances which are classified as investments held by the Group represent carried interest receivables on funds. Due to the lack of clarity around the timing of ultimate receipt of these amounts, these investments are revalued through other comprehensive income until such a time when the receivable is realised. Impairment of financial assets measured at amortised cost An impairment loss is recognised for the expected credit losses on financial assets when there is an increased probability that the counterparty will be unable to settle an instrument’s contractual cash flows on the contractual due dates, a reduction in the amounts expected to be recovered, or both. The probability of default and expected amounts recoverable are assessed using reasonable and supportable past and forward-looking information that is available without undue cost or effort. The expected credit loss is a probability-weighted amount determined from a range of outcomes and takes into account the time value of money. The measurement of impairment losses depends on whether the financial asset is ‘performing’, ‘underperforming’ or ‘non-performing’ based on the Group’s assessment of increases in the credit risk of the financial asset since its initial recognition and any events that have occurred before the year-end which have a detrimental impact on cash flows. The financial asset moves from ‘performing’ to ‘underperforming’ when the increase in credit risk since initial recognition becomes significant. In assessing whether credit risk has increased significantly, the Group compares the risk of default at the year-end with the risk of a default when the financial asset was originally recognised using reasonable and supportable past and forward-looking information that is available without undue cost. The risk of a default occurring takes into consideration default events that are possible within 12 months of the year-end (‘the 12-month expected credit losses’) for ‘performing’ financial assets, and all possible default events over the expected life of those debtors (‘the lifetime expected credit losses’) for ‘underperforming’ financial assets. Impairment losses and any subsequent reversals of impairment losses are adjusted against the carrying amount of the financial asset and are recognised in profit and loss. For trade receivables, expected credit losses are measured by applying an expected loss rate to the gross carrying amount. The expected loss rate comprises the risk of a default occurring and the expected cash flows on a default based on the ageing of the debtor. The risk of a default occurring always takes into consideration all possible default events over the expected life of those debtors. Different provision rates and periods are used based on groupings of historic credit loss experience by product type, customer type and location. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 91 | 138 01 02 03 04 05 06 07 08 09 1 0 Derecognition of financial assets Financial assets, or a part thereof, are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the Group transfers the financial asset and substantially all the risks and rewards of ownership to another entity. When there is no reasonable expectation of recovering a financial asset it is derecognised. The gain or loss on derecognition is recognised in profit and loss. Financial liabilities Initial recognition and measurement Financial liabilities are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deduction of all its liabilities. Financial liabilities are initially recognised at fair value, which is normally equivalent to transaction price, less transaction costs. Subsequent measurement Subsequently the Group’s financial liabilities are classified into two categories: • Financial liabilities measured at amortised cost; and • Financial liabilities measured at fair value through profit or loss (‘FVTPL’). Financial liabilities at amortised cost Financial liabilities that are not (i) held for trading, or (ii) designated as at FVTPL, are measured subsequently at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortised cost of a financial liability. Financial liabilities at amortised cost held by the Group include loans payable with contractual cashflows and lease liabilities. Financial liabilities at fair value through profit or loss Financial liabilities not held at amortised cost and whose business objectives are not achieved through trading or contractual cashflows are measured at fair value through profit or loss. Financial liabilities at fair value through profit or loss held by the Group include amounts due to the holders of Group issued ETPs. Liabilities arising in connection with ETPs issued by the Group referencing the performance of digital assets are measured at fair value through profit or loss. Their fair value is a function of the unadjusted quoted price of the digital asset underlying the ETP, less any accumulated management fees, measured as described in note 2.19. The fair value basis is consistent with the measurement of the underlying digital assets which are considered Level 1 under the fair value hierarchy. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 92 | 138 01 02 03 04 05 06 07 08 09 1 0 Derecognition of financial liabilities Financial liabilities (or part thereof) are derecognised when, and only when, the Group’s obligations are discharged, cancelled, or they expire. Any difference between the carrying amount of a financial liability (or part thereof) that is derecognised and the consideration paid is recognised in profit or loss. 2.22 Equity instruments Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds. During the year, the Company undertook a purchase of its own shares already in issue. The consideration paid, including any directly attributable incremental costs, is deducted from equity attributable to the owners as treasury shares until the shares are cancelled or reissued. 2.23 Related party transactions The Group discloses transactions with related parties which are not wholly owned within the same Group. Where appropriate, transactions of a similar nature are aggregated unless, in the opinion of the directors, separate disclosure is necessary to understand the effect of the transactions on the Group financial statements. 2.24 Adoption of new and revised Standards New and amended IFRS Standards that are effective for the current year From 1 January 2022, the Group has applied the below amendments to IFRS Standards and Interpretations issued by the IASB that are effective for annual periods beginning from 1 January 2022: • Annual Improvements to IFRSs 2018-2020 Cycle: Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 – effective 1 January 2022 • Reference to the Conceptual Framework (Amendments to IFRS 3) – effective 1 January 2022 • Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) – effective 1 January 2022 • Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37) – effective 1 January 2022 The adoption of these amendments has not had any material impact on the disclosures or on the amounts reported in these financial statements. New and revised IFRS Standards in issue but not yet effective At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRS Standards that have been issued and adopted by the UK Endorsement Board but are not yet effective: • Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) – effective 1 January 2023 • Definition of Accounting Estimates (Amendments to IAS 8) – effective 1 January 2023 • Disclosure of Accounting policies and Classification of Liabilities as Current or Non-current (Amendments to IAS 1) – effective 1 January 2023 • Amendments to IFRS 17 Insurance Contracts – effective 1 January 2023 Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 93 | 138 01 02 03 04 05 06 07 08 09 1 0 The directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods. 2.25 Judgements and sources of estimation uncertainty The preparation of the Group financial statements requires management to make judgements, estimates and assumptions in applying accounting policies to determine the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ significantly from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Critical Judgements Accounting treatment of digital assets In the absence of any specific accounting standard dealing with digital assets, the directors have exercised critical judgement in classifying the Group’s digital assets, comprising principally of cryptocurrency, as intangible assets. IFRS contains no explicit definition of the terms ‘cash’ or ‘currency’ but it is currently accepted practice under IFRS that cryptocurrency should not be considered as such, this is on the basis that it lacks some of the common properties of cash and currency. Digital assets do not meet the definition of a financial instrument because there is no right to receive cash (or another financial asset), and classification as inventory is not appropriate because the Group’s digital assets are not held for sale in the ordinary course of business. The Group holds digital assets for the purpose of hedging and the directors have determined that the assets meet the definition of an intangible asset under IAS 38 ‘Intangible Assets’. Refer to note 2.19 for further details on the Group’s accounting policy. Accounting treatment of ETPs Certain of the Group’s ETPs, and other derivative contracts, are settled in digital assets and therefore do not meet the definition of a financial instrument set out in IFRS 9. In all other respects they operate in the same way as an equivalent contract settled in cash. The Group has determined that the accounting policies for these contracts are the same as they would be for an equivalent contract settled in cash and meeting the definition of a financial instrument. Measurement of IFRS 16 lease liabilities and right-of-use assets The directors have exercised a number of judgements in order to measure lease liabilities and right- of-use assets under IFRS 16, including the determination of the lease term and discount rate. Note 20 provides further detail on these judgements. The carrying value of the lease liabilities and right- of-use assets at the reporting date are shown on the face of the Statement of Financial Position and note 12 respectively. Provision for assets held at FTX Due to the high degree of uncertainty around the recoverability of assets held on exchange at FTX, the directors have judged that such amounts are to be provided against in full. This situation is monitored regularly. Key accounting estimates and assumptions Valuation of investments The fair value of financial instruments, including investments, that are not traded in an active market is determined using valuation techniques. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. See note 15 for further information on how valuation has been applied. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 94 | 138 01 02 03 04 05 06 07 08 09 1 0 Share based payment costs The fair value of share options under the employee incentive plan are estimated using the fair value at the grant date. The fair value of share options is calculated using the Black-Scholes method and incorporates a number of key estimations and assumptions. The share based payment expense charged to profit or loss during the year and key inputs entered into the Black-Scholes model are disclosed in note 24. Useful life of intangible assets The Group has intangible assets that are amortised over their useful lives. The useful life has been estimated based on expected obsolescence of the assets that are amortised. 3. Operating segments The Group comprises four core operating segments from which it earns both revenues/gains and incurs expenses, being: • Asset Management • Capital Markets • Principal Investments • Consumer Solutions The identification of operating segments is performed by management, who have identified that such information needs to be reported separately on an ongoing basis to inform decision making and assessment of performance. Each operating segment has its own segment head and identifiable team/resources. The accounting policies of the operating segments differ from those adopted by the Group as per note 2, with fair value gains generated from digital assets classified as profit and loss movements rather than movements through other comprehensive income. This treatment is consistent with that of the Alternative Statement of Comprehensive Income. Additionally, administrative expenses as per the Statement of Comprehensive Income are split within the operating segments note between direct costs and other administrative expenses. The Group does not monitor its assets and liabilities split by operating segment, but rather on a consolidated basis. This is the measure reported to the Group’s Chief Executive, being the Group’s chief operating decision maker, for the assessment of segment performance. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 95 | 138 COINSHARES 2022 ANNUAL REPORT The following is an analysis of the Group’s revenue and results by reportable segment in the year ended 31 December 2022. Asset Management £ Capital Markets £ Principal Investments £ Consumer Platform £ Other £ Total £ Revenue 50,090,889 309,109 - 936,684 - 51,336,682 Gain/(loss) on financial instruments 2,349,122,865 (630,235,617) - - - 1,718,887,248 (Loss)/gain on digital assets (2,349,122,865) 582,986,520 (3,283,109) - - (1,769,419,454) Investment losses - - (1,795,713) - - (1,795,713) Finance income - 12,916,891 - - - 12,916,891 Other operating income - 16,464,651 162,327 - - 16,626,978 Total revenue, gains & other income 50,090,889 (17,558,446) (4,916,495) 936,684 - 28,552,632 Finance costs (16,807) (5,550,377) (718,517) (44,724) - (6,330,425) Direct costs (4,596,313) (2,975,042) (281,377) (814,358) - (8,667,090) Gross profit/(loss) 45,477,769 (26,083,865) (5,916,389) 77,602 - 13,555,117 Other admin expenses (4,029,522) (1,774,189) - (4,091,014) (19,639,283) (29,534,008) Operating profit/(loss) 41,448,247 (27,858,054) (5,916,389) (4,013,412) (19,639,283) (15,978,891) Income tax expense (368,674) Exchange differences on translation of foreign operations 19,281,832 Total comprehensive income 2,934,267 Asset Management £ Capital Markets £ Principal Investments £ Consumer Platform £ Other £ Total £ Revenue 80,395,418 62,083 - 297,312 - 80,754,813 (Loss)/gain on financial instruments (2,527,462,402) 43,795,434 - - - (2,483,666,968) Gain/(loss) on digital assets 2,527,462,402 (7,906,148) 2,266,939 - - 2,521,823,193 Investment gains - - 7,366,363 - - 7,366,363 Finance income - 10,905,234 - - - 10,905,234 Other operating income - 14,378,339 287,036 - - 14,665,375 Total revenue, gains & other income 80,395,418 61,234,942 9,920,338 297,312 - 151,848,010 Finance costs (16) (7,038,180) - (7,186) - (7,045,382) Direct costs (4,941,693) (3,459,103) (8,184) (206,888) - (8,615,868) Gross profit 75,453,709 50,737,659 9,912,154 83,238 - 136,186,760 Other admin expenses (7,524,946) (1,242,761) - (489,049) (14,186,636) (23,443,392) Operating profit/(loss) 67,928,763 49,494,898 9,912,154 (405,811) (14,186,636) 112,743,368 Income tax expense (1,056,353) Exchange differences on translation of foreign operations 1,756,423 Total comprehensive income 113,443,438 The following is an analysis of the Group’s revenue and results by reportable segment in the year ended 31 December 2021. There is no geographical split of revenues, gains or other income required in assessing the operating segments of the Group. All operations undertaken by the Group which generate such items are ultimately based in Jersey, with the exception of the Consumer Platform, which is based in France. This analysis is already presented by means of the existing split provided within this note. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 96 | 138 01 02 03 04 05 06 07 08 09 1 0 4. Revenue and other income The majority of the Group’s revenue is from management fees on ETPs issued by XBTP and CSDSL and on the Block index. The Group’s subsidiary, CoinShares France (‘CSF’), operates a range of consumer based programs offering cryptocurrency trading technology and resources. Revenue is also derived from the General Partner’s share for services provided to CoinShares Fund II LP (‘CSF2LP’) (for which CoinShares GP II Limited (‘CSGP2L’), a subsidiary in the Group, acts as General Partner), which in accordance with the Limited Partnership Agreement is one quarter of two percent of the capital deployed per quarter. Included within other operating income is a fee rebate on 1.75% management fee on the Group’s position in 3iQ ETFs of £5,459,170 (2021: £6,568,922), rewards received from staking of tokens on exchanges and DeFi activities of £8,041,736 (2021: £3,321,184) and airdrop income received in relation to Ethereum PoW and Ethereum Fair as a result of the Merge event on the Ethereum blockchain, plus Maple tokens and Luna 2.0 of £3,131,456 (2021: £3,886,068). 2022 £ 2021 £ Management fees 50,090,889 80,395,418 Consumer revenue 936,684 297,312 General Partner's Share 97,041 47,724 Other revenue 212,068 14,359 51,336,682 80,754,813 Other operating income 16,626,978 14,665,375 67,963,660 95,420,188 2022 £ 2021 £ Gain/(loss) on ETP liabilities 2,349,122,865 (2,527,462,402) Gain on financial instruments settled through digital assets 20,619,173 22,061,763 (Loss)/gain on other financial instruments through profit and loss (650,245,345) 21,627,383 1,719,496,693 (2,483,773,256) (Loss)/gain on other financial instruments through OCI (609,445) 106,288 1,718,887,248 (2,483,666,968) Fair value (loss)/gain on digital assets (1,769,419,454) 2,521,823,193 (50,532,206) 38,156,225 5. Net (loss)/gain on digital assets and related financial instruments 2022 £ 2021 £ Fair value loss on digital assets through profit and loss (1,226,595,255) - Impairment loss on digital assets (3,715,693) - Fair value (loss)/gain on digital assets through OCI (539,108,506) 2,521,823,193 (1,769,419,454) 2,521,823,193 Fair value (loss)/gain on digital assets comprises: Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 97 | 138 01 02 03 04 05 06 07 08 09 1 0 The gain/(loss) on ETP liabilities represents the fair value movement in the intercompany collateral obligation of the tracker certificates issued by XBTP and is recognised through profit and loss. Gain on financial instruments settled through digital assets represents the proceeds received from financial instruments that are settled in the underlying digital asset and is recognised through profit and loss. See note 26 for further details. (Loss)/gain on other financial instruments represents the proceeds received from financial instruments settled in cash and is recognised through profit and loss. Fair value (loss)/gain on digital assets represents the fair value movement in digital assets, held principally as collateral for the Group’s financial obligations and is recognised through other comprehensive income. Included within administrative expenses of £38,201,098 (2021: £32,059,260), (see page 137) are the following: 2022 £ 2021 £ Amortisation of intangible assets (see note 13) 1,769,632 874,180 Bad debt write off 99,009 523,833 Depreciation of property, plant and equipment - owned assets (see note 12) 240,683 176,560 - right-of-use assets (see note 12) 872,526 219,289 Loss/(gain) on foreign exchange 128,522 (329,692) Rent charged under operating leases 800,601 649,320 Low-value assets lease expense 6,674 4,145 Wages and salaries 12,565,471 14,927,892 Fees payable to the Company’s auditor for the audit of the Group’s current year financial statements 336,150 334,500 Additional fees payable to the Company’s auditor for the audit of the Group’s prior year financial statements 23,500 50,000 6. Administrative expenses 2022 £ 2021 £ Short-term employee benefits 8,851,504 8,226,056 Share-based payments 968,237 1,329,738 9,819,741 9,555,794 7. Staff costs 2022 £ 2021 £ Short-term employee benefits 2,484,350 5,052,703 Share-based payments 261,380 319,395 2,745,730 5,372,098 8. Directors’ remuneration This figure also includes fees of £65,000 in relation to an independent review performed during the year. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 98 | 138 01 02 03 04 05 06 07 08 09 1 0 The Group is subject to various corporation taxes as noted below. The parent company is subject to tax at the rate of 0%. 2022 £ 2021 £ Financial instruments measured at amortised cost: Interest on bank and broker deposits - 227,381 Interest on other borrowings 3,306,828 4,305,523 Interest on amounts owed to brokers 3,009,380 2,509,388 Interest on lease liabilities 14,217 3,090 6,330,425 7,045,382 2022 £ 2021 £ Corporation tax Current tax on results for the year 368,674 1,056,353 Taxation on ordinary activities 368,674 1,056,353 2022 £ 2021 £ Profit/(loss) on ordinary activities before income tax expense 520,584,738 (2,411,265,353) Tax calculated at Jersey tax rate of 0% (2021: 0%) - - Effects of: Tax calculated at Jersey tax rate for regulated financial service companies of 10% (incurred by CoinShares (Jersey) Limited (‘CSJL’)) (23,796) 800,279 Tax calculated at Swedish tax rate of 22% (incurred by XBTP) 3,417 2,813 Tax calculated at UK tax rate of 19% (incurred by CoinShares (UK) Limited (‘CSUK’), Elwood Asset Management Services Limited (‘EASML’) and CoinShares Capital Markets (UK) Limited (‘CSCMUKL’)) 484,609 428,353 Tax calculated at French tax rate of 26.5% (incurred by CSF) (95,556) (175,092) Total tax charge for the year 368,674 1,056,353 10. Finance costs 11. Taxation 2022 £ 2021 £ Financial instruments measured at amortised cost: Interest from bank and broker deposits 1,615,666 - Interest from other financial assets measured at amortised cost (see note 26) 11,301,225 10,905,234 12,916,891 10,905,234 The Group earns interest income on fixed income lending activities undertaken by CSCMJL, in addition to interest through bank deposits. 9. Finance income Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. There has been no change in applicable tax rates from the prior year. The current tax liability at the year end is £235,814 (2021: £2,578,333). Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 99 | 138 01 02 03 04 05 06 07 08 09 1 0 Right-of-use property assets £ Furniture and Fittings £ Office Equipment £ Total £ Cost At 31 December 2021 767,513 501,588 586,029 1,855,130 Additions - acquired separately 1,854,712 163,629 163,879 2,182,220 Additions - acquisition of subsidiary 274,584 - - 274,584 Disposals - (19,464) (208,007) (227,471) Exchange differences 23,027 - 9,288 32,315 At 31 December 2022 2,919,836 645,753 551,189 4,116,778 Accumulated depreciation At 31 December 2021 438,578 413,928 166,325 1,018,831 Charge for the year 872,526 97,532 143,151 1,113,209 Additions - acquisition of subsidiary 66,791 - - 66,791 Disposals - (14,598) (16,686) (31,284) Exchange differences 10,718 - 2,651 13,369 At 31 December 2022 1,388,613 496,862 295,441 2,180,916 Net book value At 31 December 2022 1,531,223 148,891 255,748 1,935,862 At 31 December 2021 328,935 87,660 419,704 836,299 12. Property, plant and equipment All right-of-use assets for the periods reported relate to property rights obtained as part of lease arrangements (see note 20). * Additions disclosed are in relation to the acquisition of CSF during the prior year, but not separately recognised until the current period. 2022 £ 2021 £ Non-current digital assets 111,978 2,688,859 Current digital assets 868,922,517 2,761,629,509 (i) Total digital assets 869,034,495 2,764,318,368 (ii) Goodwill 943,484 6,412,800 (iii) Other intangible assets 11,048,448 11,685,861 881,026,427 2,782,417,029 13. Intangible assets Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 100 | 138 01 02 03 04 05 06 07 08 09 1 0 Revaluation Reserve £ Carrying Amount £ Reconciliation of Digital Assets At 31 December 2021 (2,799,097,469) 2,764,318,368 Net purchases/(sales) of digital assets 3,338,205,975 (401,409,806) Fair value loss on digital assets (See note 5) (539,108,506) (1,765,703,761) Gain on financial instruments settled through digital assets (See note 26) - 20,009,728 Exchange differences - 251,819,966 At 31 December 2022 - 869,034,495 (i) Digital assets 2022 Units 2021 Units 2022 £ 2021 £ By Currency Bitcoin 28,308 32,112 387,768,139 1,141,472,252 Ethereum 451,734 519,272 447,248,857 1,451,213,511 Litecoin 44,696 30,972 2,606,945 3,436,376 XRP 16,967,768 4,285,883 4,846,966 2,668,535 Other digital assets 26,563,588 165,527,694 869,034,495 2,764,318,368 2022 £ 2021 £ By Venue Custodian 772,807,015 1,736,849,348 Custody Platform 74,704,515 131,736,719 Exchange 20,368,749 711,679,760 Ledger 393,806 9,527,965 Other 760,410 31,713,718 Lending - 142,810,858 869,034,495 2,764,318,368 Amounts accumulated in the revaluation reserve have no restrictions on being distributed to shareholders. In practice however, this is unlikely because the majority of accumulated reserves relate to assets held in order to hedge the liability which arises from the issuance of the Group’s exchange traded products. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 101 | 138 01 02 03 04 05 06 07 08 09 1 0 (ii) Goodwill £ Cost At 31 December 2021 6,412,800 Exchange differences 4,209 At 31 December 2022 6,417,009 Accumulated impairment losses Impairment losses 5,473,525 At 31 December 2022 5,473,525 Net book value At 31 December 2022 943,484 At 31 December 2021 6,412,800 2022 £ 2021 £ Level 1 digital assets 868,777,452 2,752,692,494 Level 2 digital assets 257,043 11,625,874 869,034,495 2,764,318,368 There have been no transfers of digital assets between fair value hierarchy levels. The Group has classed digital assets under the fair value hierarchy as follows. Goodwill impairment charges and reversal of impairment charges are recognised in administrative expenses in the statement of comprehensive income. An impairment loss of £5,473,524 has been recognised in relation to the goodwill generated upon acquisition of CSF. Inclusive of its subsidiaries CSF is considered to be a single cash-generating unit (‘CGU’). Following the announcement on 10 December 2022 that HAL.trading (formerly Napbots) would cease activity on 11 January 2023, it became probable that projected inflows from the CGU could be affected. The impairment loss was determined by comparing the recoverable amount to the carrying amount of the CGU. Where the recoverable amount is deemed to be the higher of the value-in-use and fair value, less costs required to dispose of the assets. It is not possible to calculate a reliable estimate for fair value because the CGU is bespoke, and operating in volatile market conditions. The recoverable amount of CSF is therefore considered to be its value-in-use of £230,145, which was estimated using a discount rate of 7%. Impairment losses are included in administrative expenses in the statement of profit and loss, and relate to the consumer platform operating segment. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 102 | 138 01 02 03 04 05 06 07 08 09 1 0 (iii) Other intangible assets 2022 £ 2021 £ Business to Consumer 903,573 6,377,097 Broker Dealer 39,911 35,703 943,484 6,412,800 The carrying value of goodwill has been allocated to CGUs as follows: The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. Goodwill is impaired if the recoverable amount falls below the carrying amount of the CGU in question. The recoverable amount for a CGU is defined as the higher of fair value less costs of disposal or value in use. For the Business to Consumer CGU, the goodwill amount held as at 31 December 2021 was based upon the consideration paid. During 2022, following the decision to cease our Business to Consumer offering moving into 2023, an impairment review was undertaken and the carrying amount of goodwill reduced by £5,473,524. The residual value of £903,573 relates to the value of the regulatory licenses held by CoinShares France. For the Broker Dealer CGU, the recoverable amount is considered to be reasonable due to the value in use of relevant licenses being justifiable, and should the license be relinquished the costs involved in replacing this would be in excess of this amount. Fee Generating Contracts £ Software £ Website Domains and Trademarks £ Total £ Cost At 31 December 2021 12,180,776 307,485 74,153 12,562,414 Additions - acquired separately - 558,447 143,035 701,482 Disposals - - (7,419) (7,419) Exchange differences - 14,366 - 14,366 At 31 December 2022 12,180,776 880,298 209,769 13,270,843 Net book value At 31 December 2022 10,055,049 794,114 199,285 11,048,448 At 31 December 2021 11,310,129 306,364 69,368 11,685,861 At 31 December 2021 870,647 1,121 4,785 876,553 Charge for the year 1,680,593 80,770 8,269 1,769,632 Disposals - - (2,570) (2,570) Exchange differences (425,513) 4,293 - (421,220) At 31 December 2022 2,125,727 86,184 10,484 2,222,395 Accumulated amortisation Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 103 | 138 01 02 03 04 05 06 07 08 09 1 0 (i) Digital assets 2022 Units 2022 £ Bitcoin 190 2,573,557 Ethereum 1,000 1,012,776 Other digital assets 129,360 Total digital assets 3,715,693 14. Impairment loss on amounts held at exchanges On 11 November 2022, the world’s largest cryptocurrency exchange, FTX, filed for Chapter 11 bankruptcy protection in the United States. The Group held digital assets and US Dollars with FTX amounting to a total exposure of £25.5 million (US$31.4 million). As a result of significant uncertainty surrounding the recoverability of these assets, an impairment loss has been recognised in other comprehensive income in respect of the Group’s exposure. The following table shows the amount of assets held and their valuation. Amounts due from exchange USDC 23,000,118 18,654,997 USD 3,121,327 Total amounts due from exchange 21,776,324 Total impairment loss 25,492,017 The Bitcoin and Ethereum relate to pending withdrawals which were submitted prior to the halting of withdrawals by FTX. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 104 | 138 01 02 03 04 05 06 07 08 09 1 0 31 December 2021 £ Additions/ (Disposals) £ Investment Gain/(Loss) £ Transfers between levels £ 31 December 2022 £ Level 1 Investments 131,068 (98,578) (32,254) - 236 Level 2 Investments 2,125,563 - 3,154,322 - 5,279,885 Level 3 Investments 20,783,729 28,520 (2,758,964) (8,725,450) 9,327,835 Total investments held at fair value 23,040,360 (70,058) 363,104 (8,725,450) 14,607,956 Associates - 20,266,689 993,508 9,143,697 30,403,894 Joint ventures 649,157 - (230,910) (418,247) - Total investments valued using the equity method 649,157 20,266,689 762,598 8,725,450 30,403,894 Total investments 23,689,517 20,196,631 1,125,702 - 45,011,850 Investments in Joint Ventures & Associates £ Investments in Listed Equities £ Other Investments Through P&L £ Other Investments Through OCI £ Total £ At 31 December 2021 649,157 131,068 20,783,729 2,125,563 23,689,517 Additions 20,266,689 - 28,520 - 20,295,209 Disposals - (98,578) - - (98,578) Transfers 8,725,450 - (8,725,450) - - Fair value loss through profit and loss - (32,254) (2,768,170) - (2,800,424) Fair value gain through other comprehensive income - - - 3,154,322 3,154,322 Share of associate and joint venture losses (2,149,611) - - - (2,149,611) Exchange differences 2,912,209 - 9,206 - 2,921,415 At 31 December 2022 30,403,894 236 9,327,835 5,279,885 45,011,850 15. Investments (i) Third party investments Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 105 | 138 01 02 03 04 05 06 07 08 09 1 0 Name Investee Relationship Fair Value Hierarchy Level Ownership Jurisdiction Date of Initial Investment CoinShares Fund II LP - Carried Interest Investment 2 Carried interest Jersey 09/02/2018 Gold Token SA Associate N/A 22.54% Switzerland 08/08/2018 Komainu Holdings Limited Investment 3 14.24% Jersey 16/08/2019 SBG 1320, LLC (Kingdom Trust) Investment 3 16.00% USA 22/12/2020 3iQ Digital Asset Management Investment 3 9.85% Canada 31/12/2020 New Gen Minting LLC (Viridi) Investment 3 11.05% USA 09/05/2021 Choice Fintech Group LLC Investment 3 0.13% USA 07/06/2021 FlowB Holding Switzerland SA Associate N/A 28.31% Switzerland 02/10/2021 PlayDough Technologies Limited Investment 3 2.00% UK 22/10/2021 Syndica Inc. Investment 3 SAFE USA 26/10/2021 RSS3 Investment 3 SAFTE Grand Cayman 15/12/2021 The Group has investments in the following entities: All investments are held at fair value through profit or loss, with the exception of CoinShares Fund II LP which is, by election at recognition, valued through other comprehensive income due to the deferred and uncertain nature of the ultimate return. During the period, Kingdom Services Holdings, LLC changed its name to Choice Fintech Group LLC. There were no other investee name changes in the year. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 106 | 138 01 02 03 04 05 06 07 08 09 1 0 Associates The Group had its position in Gold Token SA (‘GTSA’) diluted from 50% to 23% during the year. As a result, the investment was reclassified from a joint venture to an associate and continues to be valued under the equity method. GTSA was reclassified at a valuation of £418,245. Following the Group’s recognition of GTSA’s performance for the year under the equity method, the carrying value as at 31 December 2022 stands at £274,997. During the year the Group contributed £20,268,153 to FlowB Holding Switzerland SA (‘FlowBank’) and increased its stake to 29.3% of the issued share capital. As such, the investment was reclassified as an associate and removed from level 1 in the fair value hierarchy, having previously been categorised as an other investment held at fair value through profit and loss, to being valued using the equity method. FlowBank was reclassified at a valuation of £8,725,450, following which the Group increased its stake to 29.30% due to a further investment of £20,257,103 on 9 March 2023. Following the recognition of FlowBank’s performance for the year under the equity method, the carrying value as at 31 December 2022 stands at £30,128,896. The equity method of accounting was applied consistently throughout the year. For the period from 1 January 2022 to 9 March 2022, the company held 9.52% of the issued share capital. For the period from 9 March 2022 to 30 September 2022, the company held 29.30% of the issued share capital. For the period from 30 September 2022 to 31 December 2022, the company held 28.31% of the issued share capital. The fair value of FlowBank’s identifiable assets and liabilities on 1 January 2022 were: 1 January 2022 £ Cash and cash equivalents 46,131,395 Intangible assets 237,617 Other assets 63,725,072 Property, plant and equipment 5,383,107 Total assets 115,477,191 Trade payables and other liabilities (90,693,888) Total liabilities (90,693,888) Total identifiable net assets 24,783,303 Our share of Flowbank's identifiable assets on 1 January 2022 2,360,315 Our additional share of net assets following increased stake 4,498,649 Our share of net assets 6,858,964 Fair value of investment on 1 January 2022 8,725,450 Cost of additional share purchases 20,277,646 Deemed consideration 29,003,096 Deemed goodwill 22,144,132 Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 107 | 138 01 02 03 04 05 06 07 08 09 1 0 The fair value of the investment as at 1 January 2022 is deemed to be the cost of initial investment. The additional acquisition made during March 2022 increased the Group’s share of net assets to £4,498,649, resulting in deemed goodwill of £22,144,132. There are no differences in asset valuation or items held off balance sheet that would require any amendment to the share of net asset calculation. Flowbank’s statement of comprehensive income for the year from 1 January 2022 to 31 December 2022. 31 December 2022 £ Cash and cash equivalents 60,047,441 Intangible assets 162,331 Other assets 79,600,867 Property, plant and equipment 7,146,958 Total assets 146,957,597 Trade payables and other liabilities (122,727,107) Total liabilities (122,727,107) Net assets 24,230,490 31 December 2022 £ Revenue 835,604 Loss after tax (10,455,626) Total comprehensive loss (10,455,626) Our share of total comprehensive loss (1,786,409) Flowbank’s statement of financial position as at 31 December 2022. 31 December 2022 £ Flowbank’s net assets 24,230,490 Our share of Flowbank’s net assets (28.31%) 6,858,964 Deemed goodwill 22,144,132 Our share of Flowbank's loss for the period (1,786,409) Foreign exchange differences 2,912,209 Interest in associate 30,128,896 Reconciliation of Flowbank’s carrying value: Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 108 | 138 01 02 03 04 05 06 07 08 09 1 0 Description Fair value £ Unobservable inputs Input amount Input range Unlisted equities not held at cost 9,312,422 Discount/premium to NAV 0% -20% to 20% AUM multiple 8% 5% to 10% Discount factor on price of recent investment -37% -50% to 0% Level 1 and 2 valuations and inputs The finance department performs monthly valuations of the Group’s investments that are classified as Level 1 and 2 within the fair value hierarchy, utilising market data (investments in listed equities) and observable inputs (CoinShares Fund II LP – carried interest and investments held at cost or price of recent investment that may subsequently be reclassified to Level 3). Discussions of valuation processes and results are held between the Chief Financial Officer, Audit and Risk Committee and the Board once every quarter, in line with the Group’s reporting periods. Level 3 valuations and inputs The finance department performs quarterly valuations of the Group’s investments that are classified as Level 3, within the fair value hierarchy, utilising a range of observable and unobservable inputs. Discussions of valuation processes and results are held between the Chief Financial Officer, Audit and Risk Committee and the Board once every quarter, in line with the Group’s reporting periods. The main Level 3 inputs used by the Group are derived and evaluated as follows: • price of recent investment; • earnings multiples, estimated based on market information for similar types of companies; • AUM multiples, estimated based on market information for similar types of companies; and • percentage ownership of net asset value of the investee company. For the balance of £9,327,835 the following table summarises the quantitative information about the significant unobservable inputs used in the Level 3 measurements. Relationship between unobservable inputs and fair value Decreasing all inputs to the lowest points of the given ranges would decrease fair value as at 31 December 2022 by £2,161,611. Increasing all inputs to the highest point of the given ranges would increase fair value as at 31 December 2022 by £4,933,817. Description Fair value £ Unlisted equities held at cost 15,413 Unlisted equities not held at cost 9,312,422 9,327,835 Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 109 | 138 01 02 03 04 05 06 07 08 09 1 0 The Company’s direct subsidiaries which make up the Group as at 31 December 2022 are as follows: Name Defined as Investee Relationship CSIL’s Ownership % Jurisdiction Date of Acquisition CoinShares (UK) Limited CSUKL Subsidiary 100% UK 19/04/2017 CoinShares (Holdings) Limited CSHL Subsidiary 100% Jersey 25/04/2017 XBT Provider AB (publ) XBTP Subsidiary 100% Sweden 25/09/2017 CoinShares GP II Limited CSGP2L Subsidiary 100% Jersey 09/02/2018 CoinShares Corporate Services (Jersey) Limited CSCSJL Subsidiary 100% Jersey 25/06/2018 CoinShares Co CSCo Subsidiary 100% USA 01/07/2018 CoinShares Employment Services (Jersey) Limited CSESJL Subsidiary 100% Jersey 09/08/2018 CoinShares (Jersey) Limited CSJL Subsidiary 100% Jersey 26/09/2018 GABI Trading Limited (Asia) GTLA Subsidiary 100% Hong Kong 12/02/2019 CoinShares Technologies Limited CSTL Subsidiary 100% Jersey 30/06/2019 CoinShares Capital Markets (Jersey) Limited CSCMJL Subsidiary 100% Jersey 30/06/2019 CoinShares Capital Markets (UK) Limited CSCMUKL Subsidiary 100% UK 30/06/2019 CoinShares Capital, LLC CS Cap Subsidiary 100% USA 18/09/2019 CoinShares GP I LLC CSGPI Subsidiary 100% USA 20/03/2020 CoinShares Digital Securities Limited CSDSL Subsidiary 100% Jersey 30/06/2020 Elwood Asset Management Services Limited EAMSL Subsidiary 100% UK 20/07/2021 Elwood Asset Management LLP EAMLLP Subsidiary 100% UK 20/07/2021 CoinShares France CSF Subsidiary 100% France 17/12/2021 CoinShares Asset Management CSAM Subsidiary 100% France 04/07/2022 (ii) Investments in subsidiaries Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 110 | 138 01 02 03 04 05 06 07 08 09 1 0 2022 £ 2021 £ Cash at bank 26,567,599 10,775,650 Amounts due from broker 161,967,077 118,975,658 188,534,676 129,751,308 Amounts due to broker (135,384,786) (292,706,977) Total cash and cash equivalents 53,149,890 (162,955,669) Lease liabilities £ Balance at 31 December 2021 311,513 Net cash used in financing activities (1,079,297) Additions 1,906,200 Effect of changes in foreign exchange rates 198,071 Balance at 31 December 2022 1,336,487 Changes in liabilities arising from financing activities 16. Cash and cash equivalents Following an internal restructuring, Napoleon Asset Management SAS was acquired on 4 July 2022 as a component of the CoinShares France acquisition that occurred at the end of 2021. It was subsequently renamed CoinShares Asset Management on 7 August 2022. CoinShares (Holdings) Limited (‘CSHL’) was dissolved on 10 January 2023. CoinShares Technologies Limited (‘CSTL’) (formerly GABI Capital Limited) was dissolved on 11 January 2023. Elwood Asset Management Services Limited and Elwood Asset Management LLP were dissolved on 28 March 2023. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 111 | 138 01 02 03 04 05 06 07 08 09 1 0 2022 £ 2021 £ Current Accounts receivable 390,349 1,416,181 Amounts due from exchanges 10,072,308 15,419,993 Amounts owed by related parties (i) 32,450 500,591 Deposits paid 124,667 199,589 Other assets (ii) 249,112,630 1,045,550,562 Prepayments 473,964 255,724 VAT receivable 436,749 72,718 Total current 260,643,117 1,063,415,358 Non-current Deposits paid 52,969 52,969 Deferred tax 753,083 - Loans receivable (iii) 1,968,199 1,122,926 Total non-current 2,774,251 1,175,895 Total trade receivables and other assets 263,417,368 1,064,591,253 17. Trade receivables and other assets (i) Amounts owed by related parties are unsecured, interest free, have no fixed date of repayment and are repayable on demand. See note 29 for related party transaction disclosures. (ii) Included in other assets are certificates in ETPs, valued at £168,334,836 (2021: £994,012,707), used to provide exposure to digital assets and are held as a part of the Group’s collateral management obligations. Also included is a receivable loan balance from Coinbase in the sum of 500 BTC plus accrued interest of 2.39 BTC. The loan bears interest at a rate of 5% and is repayable on demand with no specified repayment date. The Group also has accrued interest receivable from Virtu of 0.42 BTC in relation to a loan closed in November 2022. The prior year other asset balance also included an amount issued by CSCMJL, being a loan to Genesis Capital in the sum of US$50,000,000 (£36,963,384) plus accrued interest of US$297,260 (£219,755). The principal loan balance and accrued interest receivable from Genesis capital were repaid on 13 June 2022 and 1 July 2022 respectively. Also included were OTC trade receivables of £11,180,570 however these have been cleared to £nil at the year end. (iii) A convertible loan note was issued to Finrate AG on 14 October 2021 for a principal amount of CHF750,000 for a term of 24 months. Expected credit losses Credit risk is considered as part of the risk disclosures in note 27b). Management has undertaken a review of the credit loss and calculated that the risk of credit loss to be minimal. When calculating the value of this, the amount was below £100,000 and considered clearly trivial to the Group. Management regularly reviews this position to ensure that this is reasonable for the Group. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 112 | 138 01 02 03 04 05 06 07 08 09 1 0 2022 £ 2021 £ Current Amounts due to exchanges - 27,332,894 Amounts owed to related parties (i) - 224,724 Accounts payable 1,081,702 1,187,268 Accrued liabilities 2,888,081 6,820,150 Certificate liability (ii) 986,707,490 3,308,728,916 Borrowings (refer to note 19) 27,116,746 161,381,478 Total current 1,017,794,019 3,505,675,430 18. Trade payables and other liabilities Non-current Borrowings (refer to note 19) 21,433,967 - Total non-current 21,433,967 - Total trade payables and other liabilities 1,039,227,986 3,505,675,430 (i) Amounts owed to related parties are unsecured, interest free, have no fixed date of repayment and are repayable on demand. The Group holds 265,951 (2021: 952,407) certificates in the Grayscale Ethereum Trust on behalf of Aventus Protocol Foundation. The Group does not receive any economic benefit for holding these certificates and the risks associated with holding the certificates remain with Aventus Protocol Foundation. The directors of the Group have elected to offset these transactions as they judge the inclusion in the statement of financial position would misrepresent the position of the Group. Off-balance sheet arrangement 31 December 2022 £ 31 December 2021 £ Grayscale Ethereum Trust 1,046,208 22,784,149 Assets due to third parties (1,046,208) (22,784,149) - - Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 113 | 138 01 02 03 04 05 06 07 08 09 1 0 2022 Number 2021 Number 2022 £ 2021 £ Certificate type Bitcoin Tracker One 3,623,578 4,061,699 212,792,525 693,740,612 Bitcoin Tracker Euro 459,701 548,341 266,534,307 936,292,807 Ether Tracker One 16,649,235 20,606,836 146,946,227 561,828,061 Ether Tracker Euro 2,774,973 3,546,603 242,649,103 966,612,832 CoinShares Physical Bitcoin 4,948,800 2,778,800 66,880,637 97,567,239 CoinShares Physical Ethereum 1,212,286 586,600 35,727,952 48,592,824 CoinShares Physical Litecoin 212,500 96,500 2,416,053 2,117,670 CoinShares Physical XRP 434,800 80,300 4,840,826 1,976,871 CoinShares Physical Staked Polkadot 257,500 - 980,519 - CoinShares Physical Staked Tezos 453,000 - 1,402,567 - CoinShares FTX Physical Staked Solana 758,100 - 650,566 - CoinShares Physical Chainlink 715,000 - 329,077 - CoinShares Physical Uniswap 910,000 - 384,530 - CoinShares Physical Staked Cardano 8,265,000 - 1,764,189 - CoinShares Physical Staked Cosmos 193,000 - 774,317 - CoinShares Physical Staked Polygon 195,000 - 1,277,325 - CoinShares Physical Staked Algorand 245,000 - 356,770 - 986,707,490 3,308,728,916 During the year, the Group launched a CoinShares FTX Physical FTX Token (‘CFTT’) Digital Security offering investor exposure to FTX Token (‘FTT’), the native token to the FTX digital asset exchange. As a result of FTX entering Chapter 11 bankruptcy in November 2022 and resultant volatility surrounding FTT, the Group suspended creations in CFTT on 14 November 2022 and suspended all redemptions in CFTT on 18 November 2022. On 19 December 2022 all outstanding CFTT were compulsorily redeemed for approximately $0.10 each, and distributed to ETP holders. Additionally, the CFTT seed provided by Alameda Research was redeemed and the resulting FTT is being held by the Group. (ii) Certificate liability The certificates are held at fair value through profit or loss. The fair value of the certificates are calculated with reference to market prices as defined in the relevant prospectus. Reconciliation of certificates £ At 31 December 2021 3,308,728,916 Creations of certificates 186,324,904 Redemptions of certificates (482,178,379) Fair value movement on certificates through profit or loss (2,349,103,769) Exchange differences 322,935,818 At 31 December 2022 986,707,490 Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 114 | 138 01 02 03 04 05 06 07 08 09 1 0 2022 £ 2021 £ Reyl loan (i) 22,152,484 - Kingdom Trust (ii) 9,572,412 25,136,053 Alameda Research (iii) 9,588,974 - OTC Trades (iv) 4,307,428 20,819,392 Algorand Foundation (v) 2,039,791 - STX Loan (vi) 357,467 3,383,258 FlowBank SA (vii) 273,312 - Other borrowings 258,845 230,368 GAMA (viii) - 110,890,152 GABI Ventures Limited (ix) - 700,527 MKS (x) - 221,728 48,550,713 161,381,478 Payable within one year 27,116,746 161,381,478 Payable in more than one year 21,433,967 - 19. Borrowings (i) Following a loan arrangement made during the period by the Group for the further acquisition of equity in FlowB Holding Switzerland SA, the Group has a loan balance to Reyl & Cle Ltd (Reyl Bank) in the sum of CHF24,740,000 (£22,119,272) plus accrued interest of CHF41,914 (£33,212) (2021: £nil). The loan bears interest at a rate equal to the interest base rate SARON 1 to 3 months, that cannot fall below 0% per annum, plus a credit margin of 2.25% and internal costs of the Bank for making the liquidity available to the Company during the entire loan duration with a minimum of 0.20% per annum. The initial period of the loan is 12 months from the Disbursement Date, with the option to renew for further 12 month periods until the ultimate maturity date of 10 March 2027. The Group deposited collateral with Reyl Bank in the form of ETP certificates that amounted to a market value as at 31 December 2022 of £124,585,188 (2021: £nil). The collateral according to the terms and conditions of the loan will stay with Reyl Bank until the loan balance has been fully settled. Custodial fees of 0.08% on the average value of the portfolio during the period are charged by Reyl Bank on a quarterly basis on the ETP certificates provided. (ii) The Group manages digital assets loaned from Kingdom Trust. The balance represents the liability due to Kingdom Trust at the balance sheet date. This balance is hedged by digital assets held. (iii) The balance represents the value of 10,000,000 certificates in CoinShares FTX Physical Staked Solana which are held by the Group on behalf of Alameda Research, who contributed 1,000,000 SOL of seed capital to the product and 1,000,000 FTX Token which was seeded into the CoinShares FTX Physical FTX Token product. As described in note 18 all certificates were compulsorily redeemed, resulting in the seed amount being payable to Alameda Research. This balance is hedged by digital assets held. (iv) The balance represents the sterling equivalent value of OTC liabilities in the course of settlement at the balance sheet date. This balance is hedged by digital assets held. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 115 | 138 01 02 03 04 05 06 07 08 09 1 0 (v) The balance represents the value of 1,500,000 certificates in CoinShares Physical Staked Algorand which are held by the Group on behalf of the Algorand Foundation, who contributed 15,000,000 ALGO of seed capital to the product. This balance is hedged by digital assets held. (vi) The balance represents a loan with Stacks Open Internet Foundation of 2,000,000 STX tokens (‘STX’) plus accrued interest of 59,795 STX (2021: 16,333 STX). The loan accrues interest at 2.5% per annum. During 2022 the terms of the loan were automatically renewed for a further one year to 21 April 2023. This balance is hedged by digital assets held. (vii) The balance represents digital assets held on behalf of FlowBank SA. (viii) The loan balance with GAMA was repaid on 10 May 2022. (ix) The balance represented the amount held in Bare Trust for the benefit of GABI Ventures Limited, which was returned by 29 November 2022. (x) The loan balance with MKS was repaid on 15 December 2022. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 116 | 138 01 02 03 04 05 06 07 08 09 1 0 Less than 1 year £ 1 to 5 years £ Over 5 years £ Total at 31 December 2022 £ Jersey property leases 101,157 - - 101,157 London property leases 885,132 - - 885,132 Paris property leases 326,846 29,044 - 355,890 1,313,135 29,044 - 1,342,179 20. Leases Lease commitments for short-term leases at 31 December were as follows: 2022 £ 2021 £ Serviced office lease 41,320 - 41,320 - The group entered into a short-term lease contract for an office in New York on 1 May 2022 for six months. This lease was extended by a further six months until 30 April 2023. The total expense relating to short-term leases for the year was £81,108 (2021: £nil). The maturity of gross contractual undiscounted cash flows due on the Group’s lease liabilities is set out below based on the period between 31 December 2022 and the lease maturity date. The Group leased the second and third floors of a property for its operations in Jersey, a property for its operations in London and two properties for its operations in Paris during the period. The movements in right-of-use assets obtained as a result of lease arrangements and their associated depreciation charges are disclosed in note 12. The lease for the second floor of the property in Jersey commenced on 1 January 2019 and has a contractual end date of 23 June 2023. The lease for the third floor commenced on 1 December 2017 and has a contractual end date of 1 June 2023. The directors had the option to shorten the lease term for both floors to an end date of 1 January 2021 which was not exercised. The directors had no intention of exercising this break clause option on the transition date. The IFRS 16 lease accounting for both leases was therefore on the basis of future cash flows on rental payments up to the respective contractual lease end dates of 23 June 2023 and 1 June 2023. On 18 January 2022 the Group entered into an agreement with Brevan Howard Asset Management LLP for the underlease of 82 Baker Street, London, W1U 6TE. The lease term is two years, commencing on 1 January 2022 to 31 December 2023. Total rent per annum of £788,647 comprises rent of £705,525 and rentalised works of £83,122. CSF leased an office in Paris, 11 rue Paul Lelong, at the point of acquisition in 2021 and continued to do so throughout 2022. The lease was separately recognised in the current period and has a contractual end date of 4 April 2023. CSF also entered into a lease agreement for a property in Paris at 25 rue du 4 Septembre on 1 August 2022, with a contractual end date of 31 August 2023. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 117 | 138 01 02 03 04 05 06 07 08 09 1 0 Jersey property leases £ London property leases £ Paris property leases £ Total £ At 31 December 2021 311,513 - - 311,513 Additions - 1,508,262 569,183 2,077,445 Repayments (211,876) (633,013) (234,408) (1,079,297) Interest expense 1,425 7,521 5,271 14,217 Exchange differences - - 12,609 12,609 At 31 December 2022 101,062 882,770 352,655 1,336,487 Reconciliation of lease liabilities The Group has an operating lease arrangement in which it acts as a lessor in relation to office space sub-leased to a related party. The lease agreement includes a 2 month break clause option which is exercisable by either party. 2022 £ 2021 £ Within one year 22,000 22,000 22,000 22,000 Maturity analysis of operating lease payments: 2022 £ 2021 £ Operating lease rental income 132,000 132,000 132,000 132,000 During the year, the Group received lease income on operating leases amounting to: Allotted, called-up and fully paid 2022 Number 2021 Number 2022 £ 2021 £ Shares classified as equity Ordinary shares of £0.000495 each 68,213,821 68,213,821 33,766 33,766 68,213,821 68,213,821 33,766 33,766 21. Share capital 2022 £ 2021 £ Share premium 30,781,210 30,781,210 30,781,210 30,781,210 Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 118 | 138 01 02 03 04 05 06 07 08 09 1 0 All share premium balances relate to the issue of ordinary shares. There has been no movement in the share premium during the year. Ordinary shares issued and allotted are accounted for as equity. These shares confer on the holders the right to vote and receive dividends at the Company’s discretion. If, at the Company’s discretion, there is a return of assets, ordinary shares confer on the holders thereof the rights in respect of the assets of the Company available for distribution among the Shareholders. The Company is authorised to issue 200,000,000 shares. Movements in share capital during the year There has been no movement in the value of share capital in issue during the year. During the year the Group purchased 78,396 shares on the public market for a total consideration of £228,383. The shares are held in the Treasury Share Reserve, included within other reserves (See note 22), until they are cancelled or sold back to the market. There were no other movements in share capital during the year. Movements in share capital during the prior year On 11 March 2021 the Company issued 3,364,403 ordinary shares in an initial public offering for a consideration of £12,766,244, generating share premium of £12,764,579. On 5 July 2021 1,298,322 additional shares were issued as consideration for the purchase of Elwood Asset Management Services Limited. The value of these shares was deemed to be £12,278,979, generating additional share premium of £12,278,336. On 17 December 2021 363,636 additional shares were issued as consideration for the purchase of Napoleon. The value of these shares was deemed to be £3,351,405, generating additional share premium of £3,351,225. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 119 | 138 01 02 03 04 05 06 07 08 09 1 0 22. Reserves Included within other reserves in the Group are the following: Revaluation Reserve £ Foreign Exchange Translation Reserve £ Share Option Reserve £ Treasury Share Reserve £ Total £ At 31 December 2021 (2,799,097,469) 49,527 1,957,579 - (2,797,090,363) Exchange differences on translation of foreign operations - 19,281,832 - - 19,281,832 Fair value losses on digital assets (539,108,506) - - - (539,108,506) Share based payments - - 1,229,617 - 1,229,617 Share buybacks - - - (228,383) (228,383) Share option liquidations - - (153,900) - (153,900) Transfers to retained earnings 3,338,205,975 - - - 3,338,205,975 At 31 December 2022 - 19,331,359 3,033,296 (228,383) 22,136,272 The nature and purpose of each reserve in equity is described as follows: Share premium The share premium account represents the premium paid on the issue of ordinary shares in excess of their nominal value. Retained earnings The retained earnings reserve contains the Group’s cumulative profit or loss, net of distributions to owners. Net cumulative gains on financial instruments and investments held at fair value through other comprehensive income are shown in retained earnings. Revaluation reserve Net cumulative gains on digital assets held at fair value through other comprehensive income are shown in the revaluation reserve. When digital assets are disposed of, the gains associated with those assets in the revaluation reserve are transferred to retained earnings. Foreign exchange translation reserve Foreign exchange gains and losses on translation of the results and net assets of the Group’s foreign operations accumulate in the foreign exchange translation reserve. On disposal of foreign operations, the cumulative translation gains and losses in respect of those operations are recycled through profit or loss. Share option reserve The share option reserve represents the cost of the Group’s cumulative unexercised share options. Once options are exercised, the cumulative expense in relation to those options is transferred to retained earnings. Treasury share reserve The treasury share reserve represents the considerations paid by the Group to repurchase its own shares until such a time that the shares are cancelled or sold back to the market. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 120 | 138 01 02 03 04 05 06 07 08 09 1 0 23. Earnings per share As more fully disclosed in note 24, share options were issued during previous years, which had a dilutive effect. The Group made a loss in the prior year, therefore the share options are antidilutive and have not been included in the calculation of diluted earnings per share. The directors have also chosen to present the earnings per share calculated using total comprehensive income in the place of loss after income tax expense. It is the opinion of the directors that this is more representative of the Group’s financial performance due to the inclusion of the fair value gains on digital assets recognised through other comprehensive income. The calculation of the basic and diluted earnings per share is based on the following data: 2022 £ 2021 £ Basic earnings per share 7.63 (36.24) Diluted earnings per share 7.21 (36.24) 2022 Number 2021 Number Number of shares Weighted average number of ordinary shares for the purposes of basic earnings per share 68,184,833 66,557,294 Weighted effect of dilutive potential ordinary shares: Share options 3,955,200 3,365,468 Weighted average number of ordinary shares for the purposes of diluted earnings per share 72,140,033 69,922,762 2022 £ 2021 £ Adjusted earnings Earnings for the purposes of basic earnings per share being total comprehensive income attributable to owners of the Company 2,934,267 113,443,438 Earnings for the purposes of diluted earnings per share 2,934,267 113,443,438 2022 £ 2021 £ Adjusted basic earnings per share 0.04 1.70 Adjusted diluted earnings per share 0.04 1.62 2022 £ 2021 £ Earnings Earnings for the purposes of basic earnings per share being net profit/(loss) attributable to owners of the Company 520,216,064 (2,412,321,706) Earnings for the purposes of diluted earnings per share 520,216,064 (2,412,321,706) Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 121 | 138 01 02 03 04 05 06 07 08 09 1 0 24. Share-based payments Equity-settled share option plan The establishment of the employee incentive share plan was approved by the board on 16 October 2020. The employee incentive share plan is designed to provide long-term incentives for employees and managers to deliver long-term shareholder returns. Under the plan, participants are granted options which only vest if certain performance criteria are met. Participation in the plan is at the board’s discretion, and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits. Performance based options: The performance based options in issue by the Group vest when indicators of Group performance meet criteria defined in the options certificate. External indicators include growing firmwide AUM, increasing the number of ETP certificates in issue and the customer count. Internal metrics such as measures of team performance are also used to track if the vesting criteria are being met. The options have an exercisable period of 10 years from the vest date. Time based options: There are two separate options in issue. Some of the time based options in issue by the Group have a vesting period of between 2-3 years from the issue date and expire 10 years from the vesting date. Other options issued in March 2021 vest in 8 equal tranches, on a quarterly basis, over a two year period. Share option liquidation scheme Share options were repurchased from employees during the year under a scheme operated to allow the voluntary early liquidation of share options. 171,000 options were liquidated during the period for a total consideration of £207,544 (See note 29). Details of the share options outstanding during the year are as follows: Performance Based Options 2022 2021 Number of share options Weighted average exercise price £ Number of share options Weighted average exercise price £ Outstanding at beginning of year 1,944,600 1.43 1,944,600 1.43 Liquidated during the year (171,000) 1.43 - - Outstanding at the end of the year 1,773,600 1.43 1,944,600 1.43 Exercisable at the end of the year 1,773,600 1,156,198 Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 122 | 138 01 02 03 04 05 06 07 08 09 1 0 2022 2021 Number of share options Weighted average exercise price £ Number of share options Weighted average exercise price £ Outstanding at beginning of year 1,546,977 1.43 1,011,320 1.43 Granted during the year 690,402 6.73 557,433 8.33 Forfeited during the year (34,522) 6.35 (21,776) 1.43 Outstanding at the end of the year 2,202,857 4.33 1,546,977 3.88 Exercisable at the end of the year 160,552 68,808 Time Based Options No options were exercised during the current or prior year. In 2022, time based share options were granted on 18 March and 8 June. The aggregate of the estimated fair values of the options granted on those dates is £1,749,735. The options outstanding at 31 December 2022 had a weighted average exercise price of £4.33 and a weighted average remaining contractual life of 1.0 years. In 2021, share options were granted on 11 March and 20 April. The aggregate of the estimated fair values of the options granted on those dates is £1,767,589. Grant date Exercise price £ November 2020 1.43 March 2021 3.82 April 2021 8.02 March 2022 6.58 June 2022 9.12 The fair value of the options issued during the year at the grant date was calculated using the Black- Scholes methodology. The method takes into account the exercise price, the term of the option, the share price at the grant date, the expected volatility of the underlying share, the expected dividend yield, the risk-free interest rate for the term of the option and the correlations and volatilities of peer group companies. Expected volatility was estimated by taking the average value from comparable companies also operating around digital assets. The total share-based payment expenses for the year are £1,229,617 (2021: £1,649,133). All amounts are equity settled and there are no liabilities in relation to share-based payment transactions outstanding at the reporting date (2021: £nil). Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 123 | 138 01 02 03 04 05 06 07 08 09 1 0 Defined contribution plans The Group operates defined contribution retirement benefit plans for all qualifying employees. The assets of the plans are held separately from those of the Group in an independently administered fund. The total expense recognised in profit or loss of £39,231 (2021: £6,103) represents contributions payable to these plans by the Group at rates specified in the rules of the plans. As at 31 December 2022, contributions of £nil (2021: £nil) due in respect of the year were outstanding and included in accrued liabilities. 25. Retirement benefit plans The table below sets out the classifications of the carrying amounts of the Group’s financial assets and financial liabilities. Non-current asset investments classified and accounted for as financial instruments are disclosed separately in note 15. 26. Financial instruments 2022 £ 2021 £ Financial assets measured at amortised cost Accounts receivable 390,349 1,416,181 Amounts due from brokers 161,967,077 118,975,658 Amounts due from exchanges 10,072,308 15,419,993 Amounts owed by related parties 32,450 500,591 Cash at bank 26,567,599 10,775,650 Deposits paid 177,636 252,558 Other assets 26,243,371 26,613,331 Loans receivable 1,968,199 1,122,926 227,418,989 175,076,888 2022 £ 2021 £ Financial assets measured at fair value through profit or loss Exchange traded products 239,881,541 994,012,707 Loans receivable 7,614,923 11,181,336 247,496,464 1,005,194,043 2022 £ 2021 £ Financial assets measured at fair value through other comprehensive income Digital asset receivables 21,845 444,537 21,845 444,537 Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 124 | 138 01 02 03 04 05 06 07 08 09 1 0 2022 £ 2021 £ Financial liabilities measured at amortised cost Accounts payable 1,081,702 1,187,268 Amounts due to brokers 135,384,786 292,706,977 Amounts due to exchanges - 27,332,894 Amounts owed to related parties - 224,724 Loans payable 17,371,578 125,810,226 Lease liabilities 1,336,487 311,513 155,174,553 447,573,602 2022 £ 2021 £ Realised gain on financial instruments Loss on perpetual contracts settled through digital assets (i) (14,851,565) (15,292,128) Gain on other financial instruments settled through digital assets (i) 34,861,293 37,460,179 Total gain on financial instruments settled through digital assets 20,009,728 22,168,051 Gain/(loss) on other financial instruments (ii) 1,720,653,844 (2,505,835,019) Total gain/(loss) on financial instruments 1,740,663,572 (2,483,666,968) 2022 £ 2021 £ Financial liabilities measured at fair value through profit or loss Certificate liability 986,707,490 3,308,728,916 Loans payable 20,655,417 35,571,252 1,007,362,907 3,344,300,168 The carrying value of the Group’s financial assets and financial liabilities measured at amortised cost is not materially different to their fair value. The table below sets out the individual components of the Group’s realised gain on financial instruments. (i) Gain/(loss) on financial instruments through perpetual and other contracts are settled in the underlying digital asset in which the contract is denominated. (ii) Gain/(loss) on other financial instruments are cash settled and do not impact the Group’s digital asset balance. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 125 | 138 01 02 03 04 05 06 07 08 09 1 0 Financial instruments settled through digital assets The Group has entered into perpetual and futures contracts with digital asset exchanges. These contracts offer synthetic exposure to digital assets while reducing working capital requirements. A perpetual futures contract is a derivative product that is similar to a traditional futures contract, but has a few differing specifications: 1. There is no expiry or settlement; and 2. Perpetual contracts mimic a spot market and hence trade close to the underlying digital asset price. This is in contrast to a traditional futures contract which usually trades at a different price due to the time basis or time until maturity of the contract. The primary mechanism to tether the perpetual futures contract to the spot price is an interest funding mechanism. The following table shows the exposure at the year end for financial instruments settled through digital assets, taking into account the underlying digital asset price and number of contracts held at the year end. 2022 Number 2021 Number 2022 £ 2021 £ Perpetual Contracts BTC exposure - (2,722) - (96,798,762) ETH exposure - (29,513) - (82,493,333) Other digital asset exposure - (13,835,734) Futures Contracts BTC exposure - (211) - (7,478,012) ETH exposure - (39) - (108,367) - (200,714,208) * Refers to the exposure in relation to a mixed basket of other digital asset perpetual contracts. 27. Financial risk management objectives and policies and capital management The Group invests in a portfolio of digital assets and derivatives on a non-directional risk basis to generate a return, which matches its financial obligations to certificate holders. In pursuing its investment objective, the Group invests in digital assets and has a liability exposure towards certificate holders linked to digital assets, as well as the specific operational risks to trading and holding digital assets. The following sets out a description of the principal risks inherent in the activities of the Group along with the action taken to manage these risks. a) Market risk i) Currency risk The Group seeks to mitigate currency risk primarily experienced within its subsidiary CSCMJL. CSCMJL automatically converts amounts received in EUR and SEK from the sale of certificates by investors to US$. US$ is the functional currency of CSCMJL which automatically converts US$ to EUR and SEK as required to facilitate the redemption of notes. From time to time CSCMJL may Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 126 | 138 01 02 03 04 05 06 07 08 09 1 0 hold small currency balances in currencies other than US$ to facilitate operational expenses and occasionally holds EUR on a temporary basis for the purchase of digital assets. On the basis of the above information, the Group believes currency risk is not material. Currency risk in CSCMJL represents the most significant area of risk for the Group as a whole. However, given the functional and presentational currency of the Group is Pound Sterling, additional foreign currency movements arise on consolidation and with equity accounting of its foreign operations (as defined under IAS21) which result in movements through other comprehensive income. ii) Interest rate risk Interest rate risk is the risk that the value of the Group will be impacted by fluctuations in the prevailing levels of market interest rates. The Group has entered into a loan arrangement with a variable interest rate based on the base rate SARON 1 to 3 months. The directors have determined that as there is one loan, that this risk of the interest rate moving against the Group is acceptable. The loan renews for periods of 12 months at a time, so if the risk were determined to be too great, the Group could exit the arrangement, using other assets to pay the loan if necessary. The majority of the Group’s other financial assets and liabilities are either non-interest bearing, or at a fixed interest rate and as a result, the Group is not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates. The directors have considered the impact of an adverse movement in the SARON 1 to 3 months interest base rate. A 1% increase in the base rate would increase the Group’s annual interest cost in relation to the Reyl Loan to £913,780 (CHF 1,041,554) and does not create any going concern issues. iii) Digital asset price risk Digital assets are an extremely volatile asset class. Digital asset price risk arises from the uncertainty about future prices of the digital assets, impacting both the fair value of the digital assets held by the Group and the fair value of the liabilities of the Group towards certificate holders. To mitigate its exposure to changes in prices of digital assets, any exposure to changes in prices on the digital assets held is matched by the changes in value of the obligations to security holders. The Group does hold some strategic digital asset balances for its own account over and above the amounts required to hedge its obligations. Movement in digital asset prices is illustrated in the sensitivity analysis presented in note 27e. Reports are circulated every ten minutes showing the net digital asset exposure. In addition, the net exposure is constantly monitored, being the number of digital assets held versus the number of currencies required to cover the exposure towards certificate holders. iv) Risk of access to banking services The banking landscape and availability of banking partners for participants within the digital asset industry is ever evolving, as has been evidenced by events following the financial year end. The Group has a variety of banking partners and is continually seeking additional, suitable partners to further mitigate the risk of over-reliance on a single or limited number of counterparties. The operations of the Group are reliant on the availability of efficient payment rails, particularly in the requirement to perform the hedging activities associated with the Group’s XBTP ETPs. No issues have arisen to date arising from banking capabilities that have proven to have a significant operational impact on the Group, and the continued expansion of our banking relationships is designed to ensure that this remains the case as we continue to grow. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 127 | 138 01 02 03 04 05 06 07 08 09 1 0 b) Credit risk Credit risk is the risk that an issuer, counterparty or exchange will be unable or unwilling to meet a commitment, obligation under a financial instrument or contract that it has entered into with the Group, leading to a financial loss, or lack of liquidity and restriction of access to the Group’s assets. The Group is exposed to credit risk due to the range of counterparties with which it is required to interact. Certain transactions that the Group may enter into exposes it to the risk that the counterparty will not deliver the asset (purchase) or cash (sale) after the Group has fulfilled its responsibilities. The Group only transacts with brokers which have been approved by the Group as acceptable counterparties. Digital assets and exchanges Digital asset activity has an inherent credit risk due to the nature of the industry, which is non- regulated, extremely volatile, has low barriers to entry and is vulnerable to bad actors. Following the Terra de-pegging and FTX collapse the Group has actively reduced its level of exposure to all counterparties and is implementing a range of new controls, policies and procedures around the trading and holding of digital assets on exchange. The reduction of this exposure has led to a significant increase in the assets held in cold storage to 85% (2021: over 56%). Additional measures undertaken by the Group include enhanced on-boarding, compliance and risk reviews and/or utilising exchanges which are audited and report sufficient liquid positions (LMAX and Coinbase). This is designed to ensure only reputable, long-standing and mature exchanges are used. It is necessary for operational reasons to keep a balance with exchanges in order to purchase, transfer and swapdigital assets, as required to match the asset/liability exposure. The Group ensures that the only cash balances held on exchange are those required for the immediate trading associated with the XBTP products. For the CSDSL products, digital assets are held securely with a custodian until redemptions are requested. Exchanges are used only when a creation or redemption has been requested. The total credit risk exposure to the Group arising from balances held with exchanges is as follows: Financial instruments and cash deposits Credit risk from balances with banks, brokers and financial institutions is managed, monitored and controlled by the finance department in accordance with Group policy. Transactions that involve surplus cash inflows and outflows are only with approved counterparties and brokers within credit limits that have been agreed between the parties. The credit limits are reviewed by the compliance team and agreed upon by the Board of Directors on an annual basis. The limits are set to minimise the concentration of risks and therefore mitigate financial loss. Furthermore, regular risk reviews are performed over the use of the banks and brokers to manage credit risk. 2022 £ 2021 £ Digital assets 20,368,749 711,679,760 Cash and cash equivalents 10,072,308 15,419,993 30,441,057 727,099,753 Current asset exposure 2% 18% Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 128 | 138 01 02 03 04 05 06 07 08 09 1 0 Transactions that expose the Group to the risk that the counterparty will not deliver the asset (purchase) or cash (sale) after the Group has fulfilled its responsibilities, is managed through brokers which have been approved by the Group as acceptable counterparties. Low credit risk counterparties include Signature Bank and Interactive Brokers LLC. Interactive Brokers LLC’s credit rating is A- with a stable outlook and Signature Bank is Baa2 with a stable outlook. The Group also has receivables as a result of loans. Developments in the digital asset industry in 2022 have resulted in an elevated level of counterparty risk. The Company only enters into loans with reputable counterparties and in the case of digital asset loans these are all recallable on demand. The Company therefore does not expect to incur material losses with these loans. Certain transactions that the Group may enter into exposes it to the risk that the counterparty will not deliver the asset (purchase) or cash (sale) after the Group has fulfilled its responsibilities. The Group only transacts with brokers which have been approved by the Group as acceptable counterparties. The carrying amount of the financial assets best represents the maximum exposure to credit risk. The carrying amount is £227,418,989 (31 December 2021: £175,076,888). The Group also has receivables as a result of loans (see note 17). In the case of loans, the Group has been provided with collateral such as digital assets against the loans, meaning that should the counterparty be unable to meet its commitment, the Group has assets which it would then have available to use. The Group therefore does not expect to incur material losses with these loans. Included in other assets disclosed in note 17 are shares in ETPs, valued at £168,334,836 (2021: £994,012,707) used to provide exposure to digital assets and are held as a part of the Group’s collateral management obligations. These ETPs are fully collateralised and management maintains regular communications with their operators. The ETPs are regulated and audited. c) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulties in meeting obligations associated with financial liabilities, in particular towards certificate holders. The following maturity analysis shows that liquidity risks are dealt with through matching the maturity of the assets and liabilities. Carrying amount as at 31 December 2022 £ On demand £ Less than 3 months £ Current assets Accounts receivable 390,349 - 390,349 Amounts due from brokers 161,967,077 161,967,077 - Amounts due from exchanges 10,072,308 10,072,308 - Amounts owed by related parties 32,450 32,450 - Cash at bank 26,567,599 26,567,599 - Digital assets 868,922,517 868,922,517 - Other assets 250,148,010 127,751,961 121,556,502 Total current assets 1,318,100,310 1,195,313,912 121,946,851 Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 129 | 138 01 02 03 04 05 06 07 08 09 1 0 Carrying amount as at 31 December 2022 £ On demand £ Less than 3 months £ Current liabilities Accounts payable 1,081,702 1,081,702 - Accrued liabilities 2,888,081 - 2,888,081 Amounts due to brokers 135,384,786 135,384,786 - Amounts due to exchanges - - - Amounts owed to related parties - - - Certificate liability 986,707,490 986,707,490 - Current tax liability 235,814 - - Lease liabilities 1,307,507 - 373,835 Loans payable 27,116,746 27,116,746 - Total current liabilities 1,154,722,126 1,150,290,724 3,261,916 Net current assets 163,378,184 45,023,188 118,684,935 Carrying amount as at 31 December 2021 £ On demand £ Less than 3 months £ Current assets Accounts receivable 1,416,181 - 1,416,181 Amounts due from brokers 118,975,658 118,975,658 - Amounts due from exchanges 15,419,993 15,419,993 - Amounts owed by related parties 500,591 500,591 - Cash at bank 10,775,650 10,775,650 - Digital assets 2,761,629,509 2,761,629,509 - Other assets 1,046,078,593 846,193,614 198,148,410 Total current assets 3,954,796,175 3,753,495,015 199,564,591 Carrying amount as at 31 December 2021 £ On demand £ Less than 3 months £ Current liabilities Accounts payable 1,187,268 1,187,268 - Accrued liabilities 6,820,150 - 6,820,150 Amounts due to brokers 292,706,977 292,706,977 - Amounts due to exchanges 27,332,894 27,332,894 - Amounts owed to related parties 224,724 224,724 - Certificate liability 3,308,728,916 3,308,728,916 - Current tax liability 2,578,333 - - Lease liabilities 210,356 - 52,969 Loans payable 161,381,478 161,381,478 - Total current liabilities 3,801,171,096 3,791,562,257 6,873,119 Net current assets 153,625,079 (38,067,242) 192,691,472 *As disclosed in note 2 digital assets are not financial instruments however there is an active market and they are readily realisable on demand. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 130 | 138 01 02 03 04 05 06 07 08 09 1 0 Pursuant to contractual agreements between certificate holders and the Group, the Group is providing hedging services to certificate holders by buying digital assets to match the liabilities of the Group. Liquidity issues could arise as a result of the redemption of certificates. In this case, the Group would be required to have sufficient liquidity to finance the redemption of the certificates. The prospectus and final terms for each series of notes issued by XBTP define the formula at which the certificates can be redeemed based on an average of the price of the reference digital assets on three different exchanges to provide the contractual exposure defined in the final terms. The terms and conditions of the certificates include provisions under which, upon the occurrence of certain market disruptions, delays in the settlement of the certificates may be incurred or certain modifications be made. Each certificate holder may exercise the holder put option and have their certificates redeemed on the tenth business day following the end of the calendar month after the month of the exercise of the notice, in case the calculation agent determines that an asset disruption event has occurred, the certificates’ redemption will be postponed until the asset disruption event ceases. These contractual provisions would also act as liquidity risk mitigating factor for the Group. In the first instance, the cash held at brokers, and then the cash at bank would be used, while the proceeds from the sale of the digital assets would be transferred to pay the noteholders. Liquidity would thereafter be generated by trading the digital assets already held at the exchanges. The float of digital assets held at the exchanges is monitored in real time by the trading team to make sure that the float is sufficient to deal with possible redemption requests. When the trading team believes that more digital assets are required, digital assets held in cold storage with Komainu and Zodia (2021: Komainu) are transferred within 48 hours to the exchanges. Conversely, when the amount of digital assets held at exchange is in excess of the liquidity requirements, then digital assets are transferred to cold storage with Komainu and Zodia (2021: Komainu). The liquidity risk is further mitigated by only holding the most liquid digital assets, Bitcoin and Ethereum, for the purpose of hedging the notes. For the securities held by CSDSL, liquidity issues could arise as a result of the redemption of securities, however only if these were to be redeemed in cash rather than in digital asset. The prospectus defines when this could occur, but is the exception rather than the rule. In this case, the Group would be required to have sufficient liquidity to finance the redemption of the securities. The prospectus and final terms for each security define the formula at which the securities can be redeemed based on a coin entitlement. Securities holders can request redemption of their securities which will be settled two business days following a valid redemption notice. The Group ensures that it holds the relevant digital asset at all times to be able to meet these redemptions. d) Capital risk management The capital of the Group is represented by the net assets attributable to ordinary shareholders. The Group’s objective when managing capital is to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the Group. This is achieved through actively managing the Group’s Bitcoin, Ethereum and related products. For the purpose of the Group’s capital management, capital includes issued share capital, share premium and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Group’s capital management is to maximise the shareholder value. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 131 | 138 01 02 03 04 05 06 07 08 09 1 0 The Group manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group monitors capital using a gearing ratio, which is ‘net debt’ divided by total capital plus net debt. The Group has minimal debt and has a policy of keeping the gearing ratio as low as possible. No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2022 and 2021. e) Operational risk These are risks relating to losses as a result of operational matters such as having inappropriate or insufficient routines, human error, systems failures and legal risks. The main operational risk for the Group would be the inability to provide the contractual hedge through either systems failures or continuity planning issues. The risk is mitigated through the use of a highly secure algorithmic trading platform hosted in the cloudto mitigate the risk of human error. The business continuity plan was tested, and demonstrated that the traders can perform their work from anywhere. The Group has controls designed to monitor transactions, and flag any possible inconsistencies in trading, acting as further mitigating factors for human error. The risk of hacking, and losing Bitcoin/Ethereum and other digital assets in digital wallets due to fraud is reduced through the majority of the digital assets being kept in cold storage with Komainu and Zodia (2021: Komainu), providing a cold storage vault. Komainu has a SOC 1 Type 2 report, the latest covering the period from 1 January 2021 to 30 November 2021, which was independently reviewed by PricewaterhouseCoopers CI LLP and authorised for issue on 19 August 2022. A SOC 1 Type 2 Report covering Komainu’s control framework in 2022 is in progress. Zodia currently has a SOC 1 Type 1 report and a SOC 1 Type 2 report is in progress and expected to be completed in Q2 2023. Both Komainu and Zodia are also ISO27001 certified. In addition to limiting the exposure to fraud for the Group, cold storage of digital assets with Komainu and Zodia also reduces the exposure to hacking of the exchanges. The exchanges are constantly monitored and the Group has built a net asset buffer which reduces operational risk. The cyber risks are mitigated through the use of systems to prevent external attacks (firewalls, detection of possible phishing emails, encryption using secure keys and strong physical security for example). Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 132 | 138 01 02 03 04 05 06 07 08 09 1 0 Carrying amount as at 31 December 2022 £ Price change -50% £ Price change 100% £ Assets Bitcoin 387,768,139 160,237,716 842,828,986 Ethereum 447,248,857 208,786,198 924,174,176 Litecoin 2,606,945 1,303,473 5,213,890 XRP 4,846,966 2,423,483 9,693,932 Other digital assets 26,563,588 13,281,794 53,127,176 Other assets 510,891,688 386,335,373 760,004,318 Total assets 1,379,926,183 772,368,037 2,595,042,478 Liabilities Certificate liability 986,707,490 427,140,705 2,105,841,060 Other liabilities 189,477,583 178,740,339 210,952,072 Total liabilities 1,176,185,073 605,881,044 2,316,793,132 Net assets 203,741,110 166,486,993 278,249,346 Carrying amount as at 31 December 2021 £ Price change -50% £ Price change 100% £ Assets Bitcoin 1,141,472,252 622,366,174 2,179,684,408 Ethereum 1,451,213,511 766,946,866 2,819,746,802 Litecoin 3,436,376 2,389,231 5,530,664 XRP 2,668,535 1,674,317 4,656,971 Other digital assets 165,527,694 123,656,010 249,271,064 Other assets 1,236,967,038 739,960,684 2,230,979,744 Total assets 4,001,285,406 2,256,993,282 7,489,869,653 Liabilities Certificate liability 3,308,728,916 1,588,632,296 6,748,922,156 Other liabilities 492,543,337 489,105,173 499,419,666 Total liabilities 3,801,272,253 2,077,737,469 7,248,341,822 Net assets 200,013,153 179,255,813 241,527,831 The above analysis shows the impact of both a fifty percent decline and a one hundred percent increase in digital assets prices. A 50% decline in digital asset prices would reduce the Group’s net asset position to £166.5 million (2021: £179.3 million) and does not create any going concern issues. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 133 | 138 01 02 03 04 05 06 07 08 09 1 0 28. Guarantee The Group has issued a guarantee in respect of tracker certificates issued by XBTP. The obligations arising on XBTP from the certificates are managed by CSCMJL, which hedges the exposure of these liabilities. CSCMJL has procured a hedge to cover the obligations of XBTP to the certificate holders by having an identical exposure in digital assets under the terms of the collateral management agreement. At 31 December 2022, CSCMJL recorded a net equity position of £155.6 million (US$188.3 million) (2021: £139.3 million (US$188.4 million)). The guarantee could be called in the case of extreme events, such as an operational error, hacking or fraud impacting the hedging provided by CSCMJL which results in CSCMJL’s net equity being insufficient to settle XBTP’s obligations. In the opinion of the directors, there are sufficient controls and processes in place to mitigate such a risk by; (i) holding a float of digital assets at the exchanges which is monitored by the trading team to ensure there is a sufficient balance to deal with any redemption requests, (ii) using controls designed to monitor unusual transactions to mitigate factors for human error, (iii) CSCMJL’s automatic trading system is designed so that exposure to changes in prices of digital assets are matched by changes in value of the obligations towards XBTP, (iv) limiting exposure to currency risk by using US$ as the functional currency and hedging foreign currency exposures by regularly monitoring all foreign currency denominated assets and liabilities, (v) storing the majority of digital assets offline with an institutional custody service and (vi) using a secure algorithmic trading platform hosted on the cloud. As a result of the controls and processes in place, the directors consider that the risk of the guarantee being called on is very remote, and accordingly there is no provision or liability recorded within these financial statements. 29. Related party transactions The entities which make up the Group and investments held by the Group are listed in note 15(ii). On 10 January 2022, CoinShares entered into a service agreement with FlowBank, an associate of the Group. Under the terms of the service agreement, CoinShares shall provide to FlowBank support resource of one individual for a maximum of 6 days per calendar month to provide input into the recruitment of technical resources and guidance on the development of software projects and associated infrastructure, at a cost of £3,600 per calendar month. A total of £18,000 (2021: £nil) has been charged, of which £7,200 (2021: £nil) remains outstanding at year end. This agreement ceased during the course of Q2. As part of a commercial relationship under which CoinShares facilitates trading activities for FlowBank SA (‘Flowbank SA’) as a client, gains of £58,529 (2021: £nil) were generated in respect of trading related fees. Additionally, bank charges and FX trading commissions of £2,535 (2021: £nil) were paid to FlowBank SA in respect of banking services provided to CoinShares as a client of FlowBank SA. As at year end the Group held a cash receivable balance of £1,123,191 (2021: £nil) and was holding assets on behalf of FlowBank SA with a value of £273,312 (2021: £nil). CSGP2L is the General Partner to CoinShares Fund II LP (‘CS2LP’). The Group has recognised carried interest as at the year end of £5,279,885 (2021: £2,125,563 which is held as an investment. The Group also settled expenditure on behalf of CS2LP of £7,019 (2021: £nil) of which £1,477 (2021: £nil) is outstanding at the year end. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 134 | 138 01 02 03 04 05 06 07 08 09 1 0 The Group has an investment in GTSA. The Group had provided a fixed term loan of CHF100,000 that was repayable on 28 February 2021 and is interest free. The outstanding amount of CHF100,000 (£90,684) (2021: CHF100,000 (£81,048)) was written off during the year, as was an equivalent amount due from GTSA to the other former Joint Venture partner. Following completion of a dilutive fundraise, GTSA is now held as an associate. The Group has an investment in Komainu Holdings Limited (‘KHL’) of which Mr Jean-Marie Mognetti is a director and shareholder. The Group has settled expenditure on behalf of KHL in the year of £19,727 (2021: £57,978) of which £9,967 (2021: £2,360) remains outstanding at period end. The Group has a recharge agreement with KHL which allows for use of office facilities. £165,460 (2021: £212,760) has been charged for the year of which £11,000 (2021: £17,730) is outstanding at the year end. Komainu (Jersey) Limited (‘KJL’), a wholly owned subsidiary of KHL provides custodial services to the Group. During the year, the Group paid fees to KJL of £1,208,854 (2021: £3,352,248) of which £67,495 (2021: £219,867) was outstanding at the year end. The Group has settled expenditure on behalf of KJL of £68,251 (2021: £13,976) of which £nil (2021: £nil) is outstanding at the year end. KJL also settled expenditure on behalf of the Group of £5,369 (2021: £11,854) of which £nil (2021: £1,526) was outstanding at the year end. The Group has a service agreement with KJL which allows for support regarding staking and operations. £11,000 (2021: £nil) has been charged for the year of which £11,000 (2021: £nil) is outstanding at the year end. Mr Frank Spiteri is a person discharging managerial responsibility and a shareholder of the Group. During the year, the Group agreed to a buyback of share options over 171,000 ordinary shares granted to him through the employee incentive plan, at a price of SEK 15 per share on 12 August 2022. This buyback comprised 10% of Mr Spiteri’s total share options. Mr Spiteri received £207,544 (US$250,991) (2021: £nil) for the buyback of the options. 3iQ Corp (‘3iQ’) is an investee company of the Group where Ms Meltem Demirors, Head of Strategy of CoinShares holds a board seat. As at 31 December 2022 the Group held 56,623,841 (2021: 107,537,844) units of the 3iQ CoinShares Bitcoin ETF and nil (2021: 18,125,000) units of the 3iQ CoinShares Ethereum ETF which were valued at £127,751,962 (2021: £639,899,742) and £nil (2021: £206,293,873) respectively. During the year, the Group received a management fee rebate from 3iQ of £5,459,170 (2021: £6,568,922) of which £194,703 (2021: £945,175) is receivable at the year end. The Group has an investment in SBG 1320, LLC and Choice Fintech Group, LLC (formerly Kingdom Services Holdings LLC) (together, ‘Kingdom Trust’). The Group manages digital assets loan arrangements with the Kingdom Trust. As at 31 December 2022, fiat of £6,131,079 (US$7,418,974) (2021: £5,516,109 (US$7,502,166)) and digital assets worth £3,441,333 (2021: £19,589,944) are due to the Kingdom Trust by the Group. Digital assets worth £541,713 (2021: £nil) were also due to the Group from the Kingdom Trust. CSGP2L, a subsidiary of the Group, acts as General Partner of CSF2LP. In this capacity, it receives quarterly an amount of one quarter of two percent of the net asset value of CSF2LP. During the year £97,041 (2021: £47,724) has accrued for this fee, of which £30,604 (2021: £14,102) was outstanding at the year end. On 7 December 2022, the Group entered into an over the counter (‘OTC’) trade with Ms Meltem Demirors, Head of Strategy for the Group, whereby 150,000 USDC was provided to the Group. At the year end, £nil remained outstanding from the Group. Mr Richard Nash is a person discharging managerial responsibility and a shareholder of the Group. During the year, the Group undertook trades on his behalf of £nil (2021: 0.52 BTC and 0.84 ETH equating to £35,216). As at the year end, the Group held 0.3 BTC (£4,103) (2021: 0.3 BTC (£10,671) on his behalf. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 135 | 138 01 02 03 04 05 06 07 08 09 1 0 Mr Daniel Masters is the Group’s Chairman and a shareholder of the Group. During the year, the Group undertook trades on his behalf of 31.27 BTC, 29.91 ETH, 22,153.12 AVT, 508,864.31 USDT and 2,000,000.00 USDC, equating to £3,110,834 (2021: 2.00 BTC, 13.72 ETH, 9,489.83 FTT, 0.59 WBTC, 267.35 DGLD, 2,900,010 USDT and 2,809,000 USDC, equating to £4,454,403). As at the year end the Group held a balance of 206,486.33 AVT (US$237,459, £196,237) and US$69,606 (£57,523) (2021: £nil) owed to Mr Masters. The Group also holds a receivable from Mr Masters and one other person jointly of US$37,183 (£30,728) (2021: US$37,183 (£27,488)) in relation to an investment that was transferred using the Group as a broker. Mr Jean-Marie Mognetti is the Group’s Chief Executive Officer and a shareholder of the Group. During the year the Group undertook a trade of 30,000 AVT, which was not completed at year end (2021: 24.69 BTC and 827 ETH equating to £1,294,692). As at the year end the Group held a balance of 30,000 AVT (£28,511) (2021: £nil) owed to Mr Mognetti. The only other transactions with key management personnel are in relation to remuneration which has been disclosed in note 8. As at the year end no amounts remained payable. 30. Post balance sheet events On 11 January 2023, the Company cancelled 78,396 of its treasury shares which had been bought back as part of a share buy-back program which was undertaken during 2022. Since the year-end there has been a series of further share buy backs undertaken by the Company. As at the date of signing a total of 119,521 shares have bought back at an average purchase price of SEK 30.74 in the period since 31 December 2022 to the date of this report. This equates to total consideration of SEK 3,674,341 (£281,991). Following the announcement made on 10 December 2022, the HAL.trading platform closed on 11 January 2023. On 10 January 2023 the Group agreed to enter into block transactions with two shareholders to acquire 196,654 ordinary shares in the capital of the Company, at a price per share equal to SEK 24 resulting in total consideration of SEK 4,719,696 (£372,856). The transaction was completed on 13 January 2023. On 28 February 2023 the Group agreed to enter into a block transaction with a shareholder to acquire 50,000 ordinary shares in the capital of the Company, at a price per share equal to SEK 33 resulting in total consideration of SEK 1,650,000 (£130,984). The transaction was completed on 10 March 2023. On 24 March 2023 the Group agreed to enter into a block transaction with a shareholder to acquire 160,000 ordinary shares in the capital of the Company, at a price per share equal to SEK 29 resulting in total consideration of SEK 4,640,000 (£356,101). The transaction was completed on 31 March 2023. On 1 February 2023, CSDSL (a subsidiary in the Group) announced that a fee holiday had been agreed for the CoinShares Physical Ethereum product, reducing the management fees from 1.25% per annum to 0% per annum. In March 2023, there were several high-profile collapses of banks in the United States. At the time of the collapses, the Group only had exposure of $20,000 at Silicon Valley Bank, which has subsequently been recovered. The Group had no exposure to Silvergate, Signature or First Republic Bank. On 27 March 2023, CSDSL launched two new index ETPs CoinShares Physical Top 10 Crypto Market ETP & CoinShares Physical Smart Contract Platform ETP. These two products are listed on German’s main market Xetra. These products have both had their management fees reduced to 0.0% per annum. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 136 | 138 01 02 03 04 05 06 07 08 09 1 0 In the period since 31 December 2022, several wholly owned entities within the Group were dissolved as were no longer serving a purpose, commercial or otherwise, within the Group: • On 10 January 2023 CSHL was dissolved. • On 11 January 2023 CSTL was dissolved. • On 28 March 2023 Elwood Asset Management Services Limited and Elwood Asset Management LLP were dissolved. On 27 February 2023 the Group acquired 100% of the share capital of Larks Leaf Asset Management (Jersey) Limited, plus its associated entities of Larks Leaf Master Fund Limited, Larks Leaf Feeder Fund Limited and Larks Leaf Data Analytics (UK) Limited. On 30 March 2023 the Larks Leaf Master Fund Limited and Larks Leaf Feeder Fund Limited were renamed to CoinShares Bitcoin Call Overwrite Master Fund Limited and CoinShares Bitcoin Call Overwrite Feeder Fund Limited respectively. On 6 April 2023 four new entities were incorporated, being • CoinShares Ethereum Call Overwrite Master Fund Limited • CoinShares Ethereum Call Overwrite Feeder Fund Limited • CoinShares Relative Value Opportunities Master Fund Limited • CoinShares Relative Value Opportunities Feed Fund Limited On 20 March 2023, the Group issued new share options to employees as part of an employee incentive plan. A total of 448,000 options were issued at an exercise price of SEK 31 and a vesting date of 20 March 2026. On 15 March 2023 the 3iQ CoinShares Bitcoin certificates held were all redeemed by the Group. In period following the financial year end, digital asset prices have shown strong price recovery. As at 27 April 2023 Bitcoin stands at $29,246, and Ethereum at $1,905, having increased 76.7% and 59.2% respectively since 31 December 2022. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 COINSHARES 2022 ANNUAL REPORT 137 | 138 01 02 03 04 05 06 07 08 09 1 0 UNAUDITED 2022 £ UNAUDITED 2021 £ Administration expenses Amortisation of intangible assets 1,769,632 874,180 Auditor's remuneration 336,150 334,500 Audit and accountancy fees 131,626 159,739 Bad debt write off 99,009 523,833 Consultants and contractors - 10,253 Depreciation 1,113,209 395,849 Directors' salaries and national insurance 2,745,730 5,372,098 Entertainment 181,256 59,820 General expenses 1,432,341 1,128,187 HR related 239,028 173,055 Impairment of goodwill 5,473,525 - IT Expenses 1,198,150 662,695 Legal fees 560,228 799,788 Long term consultants 253,151 176,622 Marketing 2,437,449 1,897,349 Office expenses 146,806 93,610 Professional fees 3,484,387 2,172,880 Rent charged 800,601 649,320 Loss/(gain) on foreign exchange 128,522 (329,692) Staff salaries 9,819,741 9,555,794 Trading expenses 5,252,804 7,138,096 Travel and hotel accommodation 597,753 211,284 38,201,098 32,059,260 SUPPLEMENTARY STATEMENT (UNAUDITED) FOR THE YEAR ENDED 31 DECEMBER 2022 This page is unaudited and does not form part of the statutory financial statements. Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8 CONTACT CoinShares International Limited 2nd Floor 2 Hill Street St Helier Jersey, JE2 4UA Channel Islands Website: coinshares.com Email: enquiries@coinshares.com Doc ID: 594446835f44c3b7a656eab2ec5f57fc5b5578b8