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Chrysalis VCT Plc  -  CYS   

Chrysalis VCT PLC : Annual Financial Report

Released 16:15 22-Dec-2016

Chrysalis VCT PLC : Annual Financial Report

Chrysalis VCT plc
Reports & Accounts for the year ended 31 October 2016

  31 Oct
  31 Oct
Net asset value per share ("NAV") 80.80   81.30
Cumulative dividends paid per share since launch * 67.45   60.45
Total Return 148.25   141.75
(Net asset value per share plus cumulative dividends)      
Dividends in respect of financial year      
Interim dividend per share (paid) 1.75   1.75
Special dividend per share (paid) 2.00   2.25
Final proposed dividend per share 3.25   3.25
  7.00   7.25
* Excludes final proposed dividend      

*Total return of 8.0% for the year
*Total return on original 80p investment now at 148.25p
*Total dividends of 7.0p for the year

I am pleased to present the Annual Report for Chrysalis VCT plc for the year ended 31 October 2016. The year has been an eventful one with significant changes to the VCT regulations starting to take effect. The Company has, however, continued to perform well and maintained its dividends at a high level, with a total of 7p per share being paid during the year.

At the year end, the Company held a portfolio of 29 venture capital investments, valued at £17.8 million. During the year, two new companies joined the portfolio and two follow-on investments were also completed at a total of cost of £0.8 million.

There were a number of loan stock redemptions, which generated proceeds of £1.3 million, as well as the more deferred consideration from WASP, from which we exited in 2014, which added a further £440,000 to the total proceeds.

As usual, the Board has reviewed the investment valuations at the year end and made a number of adjustments. 11 investments increased in value, seven investments fell in value and 11 were unchanged. The largest movers have been MyTime Media Holdings Limited, the publisher of niche hobby magazines, Internet Fusion Limited, the online retailer, Precision Dental Laboratories Group Limited, the dental laboratory group, and Driver Require Group Limited, the driver recruitment agency, which have increased by £599,000, £484,000, £440,000 and £429,000 respectively.

On the negative side, we have had to make a full provision of £1 million against Electrobase RP (Holdings) Limited, a precision engineering business, which has failed to recover after a number of changes at management level.

Total unrealised movements for the year on the venture capital portfolio resulted in a net gain of £1.5 million, equivalent to approximately 5.0p per share.

The Investment Management Report gives a detailed overview of the portfolio activity during the year and of the main valuation movements.

Cash and fixed income securities
The Company held £6.3 million in cash and fixed income securities at the year-end; split between cash of £4.2 million and fixed income securities of £2.1 million.

Net asset value, results and dividends
The Company's NAV fell by a small margin from 81.3p to 80.8p over the year as dividends slightly exceeded net earnings for the period. After adding back the dividends of 7.0p paid, the total return for the year was equivalent to 8.0% based on the opening NAV.

The return on activities after taxation for the year was £1.9 million (2014: £2.0 million), comprising a revenue return of £154,000 and a capital return of £1.8 million.

The Company paid a final 2015 dividend of 3.25p per share on 26 February 2016. An interim 2015 dividend of 1.75p per share was combined with a special dividend of 2.00p per share making a total of 3.75p per share paid on 29 July 2016.

Subject to Shareholder approval at the forthcoming AGM, your Board is proposing to pay a final 2016 dividend of 3.25p per share on 28 February 2017 to Shareholders on the register at 3 February 2017.

Share buybacks
The Board regularly reviews the Company's share buyback policy to ensure that it remains appropriate and, in the opinion of the Directors, in the best interests of Shareholders as a whole.

In the Directors' opinion, the Company's liquid resources are generally best utilised in paying tax free dividends to all Shareholders and therefore the Company does not have a fixed policy to buy in its own shares, but may do so, on an ad hoc basis, from time to time, and a resolution will be proposed accordingly.

There were no share buybacks undertaken during the year.

We recommend that any Shareholders wishing to either acquire more shares, or to sell existing holdings, contact the Company's broker, Nplus1 Singer Capital Markets, who are often aware of other parties looking to buy or sell.

Management and Board
The Board believes that the untypical management structure of the Company as a self-managed VCT continues to serve Shareholders well.  Chris Kay heads a team at the wholly-owned management subsidiary, Chrysalis Management VCT Limited, who continue to do a good job in what is, on occasion, a challenging environment. Chris and his team have adapted well to the new conditions and I thank them on your behalf for their continued contribution in managing the Company's portfolio and believe that this structure will continue to serve Shareholders well in the future.

Chrysalis VCT plc has for some years had a stable Board comprising just three non-executives; Julie Baddeley, Martin Knight and myself. We remain satisfied that this format works well for your company has continued to operate efficiently and, I believe, once again, has added value for Shareholders. I would like thank both Julie and Martin for another year of support and the significant part they have played in the ongoing success of Chrysalis VCT.

Annual General Meeting
The forthcoming AGM will be held at Ergon House, Horseferry Road, London SW1P 2AL at 2:30pm on 23 February 2017.

The challenges presented by the new VCT regulations are expected to be an ongoing theme over the next year as both the VCT industry and HMRC develop a clearer understanding of their implications and how VCTs can operate in this new era. Perhaps it is a vain hope, but as Britain will inevitably begin to take more control of its economic and Governmental affairs than was possible before the Brexit vote, it would seem to me that a further review of the VCT system would be a worthwhile project. There is indisputable evidence that the VCT movement has been a positive influence within "UK plc" providing capital to sectors which were previously all but ignored by banks and large private equity players. The current regulations represent, in my personal view, a retrograde step and they have certainly impacted on Chrysalis to the extent that we have had to decline opportunities which we would otherwise have been keen to support.

Of course, Chrysalis VCT is already heavily invested and we are therefore under little pressure to make new investments. Any negative impact on the portfolio is therefore expected to be relatively limited. Generally existing portfolio companies are continuing to perform well and we believe the portfolio contains several candidates that may be able to deliver profitable exits in due course.

As always I look forward to meeting some Shareholders at the AGM on 23 February 2017 and providing an update on developments in my statement with the Half Yearly Report to 30 April 2017 which is expected to be published in July.

Peter Harkness

This has been a relatively quiet year for Chrysalis VCT plc, although with one exception, the portfolio has continued to make good progress and produced another profitable year for Shareholders.  A total return of over £1.9 million for the year takes total profits in the last 12 and a half years, since the Company was reorganised and merged, to over £25.9 million.

After a number of sizeable exits in 2014, it is no surprise that there have been very few exits recently, especially as a lot of decisions appear to have been put on hold following the Brexit vote on 23 June 2016. However, with the portfolio becoming more mature, it is likely that there will be some realisations in the next few years.

Even though no investments have been sold, Chrysalis VCT plc has benefited from an inflow of cash as investee companies redeem loan stock.  This year £1.3 million has been repaid with a couple of the portfolio companies, MyTime Media Holdings Limited and Precision Dental Laboratories Group Limited, now becoming completely debt free.

In addition, we again received nearly £600,000 in deferred payments from previous sales, principally another £440,000 from the sale of Wessex Advanced Switching Productions Limited ("WASP").  We are hopeful that the payment condition will continue to be met and that we will receive the final payment of a further £440,000 in the next year.

This cash inflow helped fund the £2.1 million paid out to Shareholders in dividends during the year.

The one major disappointment of the year was the collapse of Electrobase RP (Holdings) Limited necessitating a full provision against our £1 million investment.  The major factor that caused the extremely poor outcome was too much managerial change.  For various reasons the company went through a whole series of changes at the top, none of which arrested its decline.  Whereas large companies have their own momentum and are more equipped to survive management changes, the smaller companies that VCTs invest in are typically highly dependent on the people at their head and too much change can often, as has happened in this case, prove disastrous.

We are pleased to report, however, that the overwhelming majority of the portfolio has continued to trade well and generate cash (hence the loan stock redemptions).  Therefore, there have been a number of upward valuation movements.

In particular, our investment in Driver Require Group Limited has seen its valuation nearly double to £949,000.  This was an MBO we backed in January 2015 and it appears that the buy-out price was a pretty favourable one.  Unfortunately, under the new VCT rules this is not a type of investment that we can make in the future.

Probably the most significant economic event of the year was the vote to leave the EU but so far the most tangible actual of "Brexit" has been the devaluation of the pound.  This has, however, mainly had a positive impact on our portfolio.

For instance, a good proportion of Coolabi Group Limited's revenue is priced in dollars and euros but virtually all its costs are priced in pounds.  So, our largest investment has seen a boost in its margins.

Equally our second largest investment, Locale Enterprises Limited, has benefitted from the increased number of tourists using its restaurants who now regard the offering as extremely good value.

The portfolio has also enjoyed some non-trading achievements.

Coolabi Group Limited was nominated for two more BAFTA's for its Clangers production and K10 (London) Limited won an award for "The world's most innovative small restaurant chain" from an American organisation.

Eagle-eyed shareholders may also have noticed the latest Vodafone post, internet and newspaper advert campaign which features "Nick & Dave" the co-founders of Life's Kitchen Limited.

As mentioned last year, new draconian rules regarding what investments a VCT can make have now come into force and, to make matters worse, there is some confusion as to the interpretation of those rules.  Since breaking a rule can lead to the removal of VCT status, the whole industry has been proceeding with extreme caution and the total volume of investments is significantly down on previous years.

Chrysalis VCT plc is no exception and we have only made one small investment since the new rules came into force in April 2016. That was a £150,000 investment into an early-stage software company, Inaspect Technology Limited, whose product is specifically aimed at the Care Home industry.

Prior to the rule change we did make further investments in Coolabi Group Limited (£500,000) and Cambridge Mechatronics Limited (£30,000) and one other new investment, £75,000 into Fusion Catering Solutions Limited.  Although currently small, this dessert manufacturer does have an impressive list of clients including Wembley Stadium and The British Open.

As well as making new investments more difficult, the new rules have dramatically reduced the pool of potential investee companies, however, there remains substantial cash in VCTs looking for a home.  Consequently, competition for deals is fiercer and investment terms are inevitably less attractive.  Although the new rules emulated from Brussels, it is unlikely that they will be substantially changed in the medium term despite Brexit.
Chrysalis VCT plc remains fortunate that we are fairly fully invested and is therefore not under pressure to make new investments.  We do, of course, continue to look for new opportunities and to work with the portfolio in order to finance their growth where it is allowed.

At the time of writing, the majority of the portfolio continues to trade well and we are hopeful of another profitable year for Chrysalis VCT plc with maybe a couple of realisations.

Chrysalis VCT Management Limited


Portfolio of investments
The following investments, all of which are incorporated in England and Wales, were held at 31 October 2016:





in year
% of portfolio
by value
  £'000 £'000 £'000  
Top ten venture capital investments        
Coolabi Group Limited 3,456 4,044 60 17.1%
Locale Enterprises Limited 2,513 2,769 392 11.7%
Internet Fusion Limited 800 1,802 484 7.6%
Precision Dental Laboratories Group Limited 1,110 1,730 440 7.3%
MyTime Media Holdings Limited 76 1,217 599 3.4%
K10 (London) Limited 950 1,122 41 4.7%
Driver Require Group Limited 520 949 429 4.0%
Cambridge Mechatronics Limited 366 843 343 3.6%
Zappar (Holding) Limited 25 775 - 3.3%
Green Star Media Limited 650 719 66 3.0%
  10,466 15,970 2,854 65.7%
Other venture capital investments        
IX Group Limited 250 388 59 1.6%
Life's Kitchen Limited 200 336 (50) 1.4%
Triaster Limited 71 241 (79) 1.0%
Ensign Communication (Holdings) Limited 292 165 (269) 0.7%
Livvakt Limited 380 160 - 0.7%
Hoop Holdings Limited 150 150 - 0.6%
Inaspect Technology Limited 150 150 - 0.6%
Cashfac plc - 120 32 0.5%
Fusion Catering Solutions Limited 75 75 - 0.3%
The Mission Marketing Group plc * 150 51 (6) 0.2%
The Kellan Group plc * 320 4 (2) -
Progility plc * 100 1 (1) -
Electrobase RP (Holdings) Limited 1,001 - (1,000) -
VEEMEE Limited 500 - - -
Art VPS Limited 358 - - -
G-Crypt Limited 305 - - -
Newquay Helicopters (2013) Limited 64 - - -
Planet Sport (Holdings) Limited 322 - - -
Rhino Sport & Leisure Limited 304 - - -
  4,992 1,841 (1,316) 7.6%
Fixed income securities        
Lloyds Banking Group 7% 724 721 (20) 3.0%
Intermediate Capital Group plc 7% 745 725 (3) 3.1%
Provident Financial 7% 741 711 (7) 3.0%
  2,210 2,157 (30) 9.1%
17,668 19,968 1,508 82.4%
Cash at bank and in hand
  4,161   17.6%
Total investments
  24,129   100.0%

All investments are unquoted unless otherwise stated.
*Quoted on AIM

Investment movements for the year ended 31 October 2016


New venture capital investments  
Inaspect Technology Limited 150
Fusion Catering Solutions Limited 75
Follow-on venture capital investments  
Coolabi Group Limited 500
Cambridge Mechatronics Limited 30
Total investments 755





Value at



vs cost

  £'000 £'000 £'000 £'000 £'000
Venture capital investments          
MyTime Media Holdings Limited 675 675 675 - -
Internet Fusion Limited 200 244 244 44 -
Precision Dental Laboratories Group Limited 200 200 200 - -
Livvakt Limited 169 169 169 - -
Locale Enterprises Limited 10 10 10 - -
Dissolution/liquidation and retention          
Wessex Advanced Switching Productions Limited - - 440 440 440
Autocue Limited - - 125 125 125
Newquay Helicopters (2013) Limited - - 27 27 27
Total 1,254 1,298 1,890 636 592

Directors' responsibilities statement
The Directors are responsible for preparing the Report of the Directors, the Strategic Report and the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations. They are also responsible for ensuring that the Annual Report includes information required by the Listing Rules of the Financial Conduct Authority.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 Company and of the profit or loss of the Company for that period.

In preparing these financial statements, the Directors are required to:

*select suitable accounting policies and then apply them consistently;
*make judgments and accounting estimates that are reasonable and prudent;
*state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
*prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions, to disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
In addition, each of the Directors considers that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's position, performance, business model and strategy.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements and other information included in annual reports may differ from legislation in other jurisdictions.

By order of the Board

Grant Whitehouse
Secretary of Chrysalis VCT plc

for the year ended 31 October 2016








Revenue   Capital   Total   Revenue   Capital   Total



£'000   £'000   £'000   £'000   £'000   £'000
Income   603   -   603   733   -   733



Gains on investments   -   2,100   2,100   -   1,971   1,971
    603   2,100   2,703   733   1,971   2,704
Investment management fees   (102)   (305)   (407)   (103)   (309)   (412)
Performance incentive fees   -   (41)   (41)   -   (35)   (35)
Other expenses   (310)   -   (310)   (261)   (2)   (263)
Return on ordinary activities before tax   191   1,754   1,945   369   1,625   1,994
Tax on ordinary activities   (37)   37   -   (73)   73   -
Return attributable to equity Shareholders   154   1,791   1,945   296   1,698   1,994
Basic and diluted return per share


0.5p   6.0p   6.5p   1.0p   5.7p   6.7p

All Revenue and Capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. The total column within the Income Statement represents the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS102"). There are no other items of comprehensive income. The supplementary revenue and capital return columns are prepared in accordance with the Statement of Recommended Practice issued in November 2014 by the Association of Investment Companies ("AIC SORP").

Other than revaluation movements arising on investments held at fair value through the profit or loss account, there were no differences between the return as stated above and historical cost.

at 31 October 2016

      2016 2015
    £'000 £'000 £'000 £'000
Fixed assets          
Investments     19,968   19,003
Current assets          
Debtors   88   153  
Cash at bank and in hand   4,161   5,223  
    4,249   5,376  
Creditors: amounts falling due within one year   (54)   (67)  
Net current assets     4,195   5,309
Net assets     24,163   24,312

Capital and reserves


Called up share capital     299   299
Capital redemption reserve     89   89
Share premium     1,478   1,478
Merger reserve     1,357   1,357
Special reserve     802   1,926
Capital reserve - realised     13,896   15,022
Capital reserve - unrealised     5,760   3,439
Revenue reserve     482   702
Total equity Shareholders' funds     24,163   24,312
Net asset value per share       80.8p   81.3p

for the year ended 31 October 2016



  £'000   £'000  
Cash flow from operating activities        
Profit on ordinary activities before taxation 1,945   1,994  
Gains on investments (2,100)   (1,971)  
Decrease in debtors 65   33  
Decrease in creditors (13)   (202)  
Net cash outflow from operating activities (103)   (146)  
Cash flow from investing activities      
Purchase of investments (755)   (2,483)
Proceeds from disposal of investments 1,890   5,083
Net cash inflow from investing activities 1,135   2,600
Cash flow for financing activities      
Equity dividends paid (2,094)   (2,169)
Net cash outflow from financing activities (2,094)   (2,169)
(Decrease)/increase in cash (1,062)   285
Net movement in cash      
Beginning of the year 5,223   4,938
Net cash (outflow)/inflow (1,062)   285
End of year 4,161   5,223

for the year ended 31 October 2016

1. Accounting policies

Basis of accounting
The Company has prepared its financial statements in accordance with the Companies Act 2006, Financial Reporting Standard 102 ("FRS102") and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" revised November 2014 ("SORP").

This is the first period in which the financial statements have been prepared under FRS102, however, it has not been necessary to restate comparatives as the treatment previously applied is consistent with the requirements of FRS102. As a result, there are no reconciling differences between the previous financial reporting framework and the current financial reporting framework and the comparative figures represent the position under both current and previous financial reporting frameworks.

The Company implements new Financial Reporting Standards issued by the Accounting Standards Board when required.

Presentation of Income Statement
In order to better reflect the activities of a Venture Capital Trust and in accordance with the SORP, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. Net revenue is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Part 6 of the Income Tax Act 2007.

Fixed asset investments
Investments are designated as "fair value through profit or loss" assets, upon acquisition, due to investments being managed and performance evaluated on a fair value basis. A financial asset is designated within this category if it is both acquired and managed, with a view to selling after a period of time, in accordance with the Company's documented investment policy.

Judgements in applying accounting policies and key sources of estimation uncertainty
Of the Company's assets measured at fair value, it is possible to determine their fair value within a reasonable range of estimates. The fair value of an investment upon acquisition is deemed to be cost. Thereafter, investments are measured at fair value in accordance with FRS 102 sections 11 and 12 together with the International Private Equity and Venture Capital Valuation Guidelines ("IPEV").

Fixed income investments and investments quoted on AIM are measured using bid prices in accordance with the IPEV.

For unquoted investments, fair value is established using the IPEV. The valuation methodologies for unquoted entities used by the IPEV to ascertain the fair value of an investment are as follows:

*Price of recent investment;
*Net assets;
*Discounted cash flows or earnings (of underlying business);
*Discounted cash flows (from the investment); and
*Industry valuation benchmarks.

The methodology applied takes account of the nature, facts and circumstances of the individual investment and uses reasonable data, market inputs, assumptions and estimates in order to ascertain fair value.

Where an investee company has gone into receivership, liquidation, or administration (where there is little likelihood of recovery), the loss on the investment, although not physically disposed of, is treated as being realised. Permanent impairments in the value of investments are deemed to be realised losses and held within the Capital Reserve - Realised.

Gains and losses arising from changes in fair value are included in the Income Statement for the year as a capital item and transaction costs on acquisition or disposal of the investment expensed.

Judgements in applying accounting policies and key sources of estimation uncertainty (continued)
It is not the Company's policy to exercise controlling influence over investee companies. Therefore, the results of these companies are not incorporated into the Income Statement except to the extent of any income accrued. This is in accordance with the SORP and FRS102 sections 14 and 15 that do not require portfolio investments to be accounted for using the equity method of accounting.

Dividend income from investments is recognised when the Shareholders' rights to receive payment have been established, normally the ex-dividend date.

Interest income is accrued on a timely basis, by reference to the principal outstanding and at the effective interest rate applicable and only where there is reasonable certainty of collection.

All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Income Statement, all expenses have been presented as revenue items except as follows:

*Expenses which are incidental to the acquisition of an investment are deducted as a capital item.
*Expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment.
*Expenses are split and presented partly as capital items where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated. The Company has adopted the policy of allocating investment management fees, 75% to capital and 25% to revenue as permitted by the SORP. The allocation is in line with the Board's expectation of long term returns from the Company's investments in the form of capital gains and income respectively.
*Performance incentive fees arising from the disposal of investments are deducted as a capital item.

The tax effects on different items in the Income Statement are allocated between capital and revenue on the same basis as the particular item to which they relate using the Company's effective rate of tax for the accounting period.

Due to the Company's status as a Venture Capital Trust and the continued intention to meet the conditions required to comply with Part 6 of the Income Tax Act 2007, no provision for taxation is required in respect of any realised or unrealised appreciation of the Company's investments which arises.

Deferred taxation is not discounted and is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the accounts.

Other debtors and other creditors
Other debtors (including accrued income) and other creditors are included within the accounts at amortised cost.

2. Basic and diluted return per share

      2016   2015
Return per share based on:     £'000   £'000
Net revenue return for the financial year     154   296
Net capital gain for the financial year     1,379   1,698
Total return for the financial year     1,533   1,994
Weighted average number of shares in issue     29,917,025   29,917,025

As the Company has not issued any convertible securities or share options, there is no dilutive effect on return per share. The return per share disclosed therefore represents both basic and diluted return per share.

3. Basic and diluted net asset value per Ordinary Share


Shares in issue
Net asset value
Net asset value




per share


  Pence per share    


Ordinary Shares 29,917,025   29,917,025   80.8   24,163   81.3   24,312

As the Company has not issued any convertible securities or share options, there is no dilutive effect on net asset value per share. The net asset value per share disclosed therefore represents both basic and diluted return per share.

Principal risks
The Company's investment activities expose the Company to a number of risks associated with financial instruments and the sectors in which the Company invests. The principal financial risks arising from the Company's operations are:

*Market risks;
*Credit risk; and
*Liquidity risk.

The Board regularly reviews these risks and the policies in place for managing them. There have been no significant changes to the nature of the risks that the Company is exposed to over the year and there have also been no significant changes to the policies for managing those risks during the year.

The risk management policies used by the Company in respect of the principal financial risks and a review of the financial instruments held at the year-end are provided below.

Markets risks
As a VCT, the Company is exposed to investment risks in the form of potential losses and gains that may arise on the investments it holds in accordance with its investment policy. The management of these investment risks is a fundamental part of investment activities undertaken by Chrysalis VCT Management Limited and overseen by the Board. The Investment Manager monitors investments through regular contact with management of investee companies, regular review of management accounts and other financial information and attendance at investee company board meetings. This enables the Investment Manager to manage the investment risk in respect of individual investments. Investment risk is also mitigated by holding a diversified portfolio spread across various business sectors and asset classes.

The key investment risks to which the Company is exposed are:

*Investment price risk; and
*Interest rate risk.

The Company has undertaken sensitivity analysis on its financial instruments, split into the relevant component parts, taking into consideration the economic climate at the time of review in order to ascertain the appropriate risk allocation.

Investment price risk
Market price risk arises from uncertainty about the future prices and valuations of financial instruments held in accordance with the Company's investment objectives. It represents the potential loss that the Company might suffer through market price movements in respect of quoted investments and also changes in the fair value of unquoted investments that it holds.

Interest rate risk
The Company accepts exposure to interest rate risk on floating-rate financial assets through the effect of changes in prevailing interest rates. The Company receives interest on its cash deposits at a rate agreed with its bankers and on liquidity funds at rates based on the underlying investments. Investments in loan stock and fixed interest investments attract interest predominantly at fixed rates. A summary of the interest rate profile of the Company's investments is shown below.

Interest rate risk profile of financial assets and financial liabilities
There are three levels of interest which are attributable to the financial instruments as follows:
*"Fixed rate" assets represent investments with predetermined yield targets and comprise fixed interest and loan note investments.
*"Floating rate" assets predominantly bear interest at rates linked to Bank of England base rate and comprise cash at bank.
*"No interest rate" assets do not attract interest and comprise equity investments, loans and receivables (excluding cash at bank) and other financial liabilities.

Credit risk
Credit risk is the risk that a counterparty to a financial instrument is unable to discharge a commitment to the Company made under that instrument. The Company is exposed to credit risk through its holdings of loan stock in investee companies, investments in liquidity funds, cash deposits and debtors.

The Company's financial assets that are exposed to credit risk are summarised as follows:

The Manager manages credit risk in respect of loan stock with a similar approach as described under Investment risks above. In addition the credit risk is partially mitigated by registering floating charges over the assets of certain investee companies. The strength of this security in each case is dependent on the nature of the investee company's business and its identifiable assets. The level of security is a key means of managing credit risk. Similarly, the management of credit risk associated with interest, dividends and other receivables is covered within the investment management procedures.

Cash is mainly held at Royal Bank of Scotland plc with a balance also maintained at Bank of Scotland plc, both of which are A minus rated financial institutions and ultimately part-owned by the UK Government. Consequently, the Directors consider that the risk profile associated with cash deposits is low.

There have been no changes in fair value during the year that can be directly attributable to changes in credit risk.

Liquidity risk
Liquidity risk is the risk that the Company encounters difficulties in meeting obligations associated with its financial liabilities. Liquidity risk may also arise from either the inability to sell financial instruments when required at their fair values or from the inability to generate cash inflows as required. The Company usually has a relatively low level of creditors (2016: £54,000, 2015: £67,000) and has no borrowings. The Company always holds sufficient levels of funds as cash and readily realisable investments in order to meet expenses and other cash outflows as they arise. For these reasons, the Board believes that the Company's exposure to liquidity risk is minimal.

The Company's liquidity risk is managed by Chrysalis VCT Management Limited in line with guidance agreed with the Board and is reviewed by the Board at regular intervals.

Related party transactions
Chrysalis VCT Management Limited, a wholly owned subsidiary, provides investment management services to the Company for a fee of 1.65% of net assets per annum. During the year, £407,000 (2015: £412,000) was paid to Chrysalis VCT Management Limited in respect of these fees. No amounts were outstanding at the year-end (2015: none).

A performance incentive fee is payable to Chrysalis VCT Management Limited based on realisations from all investments excluding quoted loan notes, redemptions of loan notes in the normal course of business and other treasury functions. The performance incentive fee is the greater of 1% of the cash proceeds of any exit or 5% of the gain to the Company after all exit costs for investments made after 30 April 2004 reduced to 2.5% of investments made prior to 30 April 2004. During the year performance incentive fees of £41,000 (2015: £35,000) were due to Chrysalis VCT Management Limited. At the year-end, £1,000 was outstanding and payable (2015: £9,000).

Peter Harkness holds positions of significant influence in MyTime Media Holdings Limited and Hoop Holdings Limited, both investments held by the Company, and therefore abstains from discussions surrounding the valuation or investment decisions regarding the investments. Details of the investments, including cost and valuation are shown within the Aannual Report

Martin Knight holds a position of significant influence within Cambridge Mechatronics Limited, an investment held by the Company, and therefore abstains from discussions surrounding the valuation or investment decisions regarding the company. Details of the investment, including cost and valuation are shown within the Annual Report.

The financial information set out in this announcement does not constitute the Company's statutory financial statements in accordance with section 434 Companies Act 2006 for the year ended 31 October 2016, but has been extracted from the statutory financial statements for the year ended 31 October 2016, which were approved by the Board of Directors on 22 December 2016 and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The Independent Auditor's Report on those financial statements was unqualified and did not contain any emphasis of matter nor statements under s498(2) and (3) of the Companies Act 2006.

The statutory accounts for the year ended 31 October 2015 have been delivered to the Registrar of Companies and received an Independent Auditors report which was unqualified and did not contain any emphasis of matter nor statements under s498(2) and (3) of the Companies Act 2006.

A copy of the full annual report and financial statements for the year ended 31 October 2016 will be printed and posted to shareholders shortly. Copies will also be available to the public at the registered office of the Company at Ergon House, Horseferry Road, London, SW1P 2AL and will be available for download from and

This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Chrysalis VCT PLC via Globenewswire


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Chrysalis VCT PLC : Annual Financial Report - RNS