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Chrysalis VCT Plc  -  CYS   

Chrysalis VCT PLC : Final Results

Released 17:29 19-Dec-2017

Chrysalis VCT PLC : Final Results

Chrysalis VCT plc
Reports & Accounts for the year ended 31 October 2017

  31 Oct
  31 Oct
Net asset value per share ("NAV") 80.00   80.80
Cumulative dividends paid per share since launch * 75.45   67.45
Total Return (Net asset value per share plus cumulative dividends) 155.45   148.25
Dividends in respect of financial year      
Interim dividend per share (paid) 1.75   1.75
Special dividend per share (paid) 3.00   2.00
Final proposed dividend per share 3.25   3.25
  8.00   7.00
* Excludes final proposed dividend      

*Total return of 8.9% for the year
*Total return on original 80p investment now at 155.45p
*Total dividends of 8.0p for the year

I am pleased to present my first Annual Report as Chairman of Chrysalis VCT plc. Throughout the year to 31 October 2017, the Company has continued to perform well and maintained its dividends at a high level, with a total of 8.0p per share being paid during the year.

Net asset value, results and dividends
The Company's NAV fell by a small margin from 80.8p to 80.0p over the year as dividends slightly exceeded net earnings for the period. After adding back the dividends of 8.0p which were paid in the year, the total return for the year was equivalent to 8.9% based on the opening NAV.

The return on activities after taxation for the year was £2.2 million (2016: £1.9 million), comprising a revenue return of £173,000 (2016: £154,000) and a capital return of £2.0 million (2016: £1.8 million).

The Company paid a final 2016 dividend of 3.25p per share on 28 February 2017. An interim 2017 dividend of 1.75p per share was combined with a special dividend of 3.0p per share, making a total of 4.75p per share paid on 4 August 2017.

Subject to Shareholder approval at the forthcoming AGM, your Board is proposing to pay a final 2017 dividend of 3.25p per share on 2 March 2018 to Shareholders on the register at 2 February 2018.

Venture capital portfolio
At the year end, the Company held a portfolio of 24 venture capital investments, valued at £17.0 million. During the year, three follow-on investments were made at a total of cost of £550,000.

There were a number of realisations from the venture capital portfolio, which generated proceeds of £3.2 million. Deferred consideration totalling £542,000 was also received during the year, most notably £525,000 from Wessex Advanced Switching Products Limited ("WASP"), which was exited in 2014.

As part of the preparation of the annual report, the Board has reviewed the valuations of the investments held and made a number of adjustments. nine investments fell in value, five increased in value and ten remained unchanged.

Valuation increases on venture capital investments totalled £1.8 million, including a £1.2 million uplift on Zappar Limited, an augmented reality solutions business, to bring the valuation in line with that of third parties. Coolabi Group Limited, an international media group, was also uplifted in value by £550,000, representing the premium on the loan notes held by the VCT.

Valuation decreases in respect of the venture capital portfolio amounted to £758,000, the largest of which related to MyTime Media Holdings Limited, a magazine publisher, and Locale Enterprises Limited, a restaurant operator, of £253,000 and £215,000 respectively, following a decline in the trading activity of each business.

Total unrealised movements for the year on the venture capital portfolio resulted in a net gain of £1.0 million, equivalent to approximately 3.6p per share.

Valuation increases on venture capital investments totalled £1.8 million, including a £1.2 million uplift on Zappar Limited, an augmented reality solutions business, to bring the valuation in line with that of third parties. Coolabi Group Limited, an international media group, was also uplifted in value by £550,000, representing the premium on the loan notes held by the VCT.

Other investments
The Company made one new non-qualifying investment of £750,000 in Impact Healthcare REIT plc, a newly launched investment trust which holds a portfolio of care homes. The Company participated in the launch of the trust, which continues to acquire new assets and recently undertook a second placing of shares.  This investment showed an unrealised gain of £15,000 as at 31 October 2017.

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

Cash and fixed income securities
One of the portfolio of three fixed income securities matured shortly before the year end date, generating proceeds equal to its par value of £689,000. The remaining two fixed interest investments were uplifted by a net of £46,000, to reflect their quoted values as at 31 October 2017.

The Company held £6.1 million in cash and fixed income securities at the year end; split between cash of £4.6 million and fixed income securities of £1.5 million.

Share buybacks
There were no share buybacks undertaken during the year to 31 October 2017.  The Board recognises that there is limited liquidity in the Company's shares and that such buying or selling that arises is usually at a significant discount to the underlying net asset value per share.  The Board continues to monitor this situation and will consider buying back shares where it considers this to be in the best interests of all shareholders.

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

As noted in the Half Yearly Report, the former chairman, Peter Harkness, decided to retire as a non-executive director of the Company with effect from 30 September 2017.

Peter was a major influence on Chrysalis VCT since he joined the Board in 2005 and took over as Chairman in 2008. As most Shareholders will be aware, Peter presided over a period of excellent performance for the Company in which your Company's self-managed structure has continued to be very effective. On behalf of the Board, I would like to thank Peter for his substantial contribution to the Company over the last 12 years. The Board will miss working with him and wish him well for the future.

Following Peter's retirement, I agreed to take over the role of Chairman and the Board commenced a search to find a new non-executive director. I am pleased to report that we identified an excellent candidate in Robert Jeens, who agreed to join the Board on 2 October 2017. Robert has extensive experience in the asset management industry and significant exposure to the technology sector, from which I am certain we will benefit. Robert is a chartered accountant and has also taken over as chair of the Company's Audit Committee. We welcome Robert to the Board and look forward to working with him.

Market developments
Recent years have seen the progressive tightening of the regulations that venture capital trusts such as your Company have to comply with.  This has restricted the range of investment opportunities open to the Company and has also caused increasing competition for eligible investments offering potentially good returns.  As reported in the Investment Manager's report this has made the pricing of such transactions significantly less attractive.  Additionally over the past year the Government has carried out the Patient Capital Review ("the Review") the outcome of which was announced in the Budget in November. 

The consequence of these developments is that your Board is of the view that it is likely that the universe of attractive and available investments that will qualify as eligible for VCTs will continue to diminish. To this extent the outcome of the Review is not positive for the Company.  However, given that the Company is now relatively fully invested, the impact will not, it is thought by the Board, be immediately or significantly negative in the near term.

The Board is also aware that April 2018 will mark the end of the minimum five year holding period required to enable investors in the Share Realisation and Reinvestment Programme to secure the tax benefits that they may have claimed.

To take account of all these factors the Board plans to conduct a review of the options that may be available to the Company and will provide a further update to Shareholders in due course.

Annual General Meeting
The forthcoming AGM will be held at 6th Floor, St. Magnus House, 3 Lower Thames Street, London EC3R 6HD at 10:30am on 27 February 2018. Notice of the meeting is at the end of this document.

The Board continues to be satisfied with the existing investment portfolio and believes that it continues to contain investments which have the prospect of delivering good returns for Shareholders in the medium term.

I look forward to meeting some Shareholders at the AGM on 27 February 2018 and providing an update on developments in my statement with the Half Yearly Report to 30 April 2018 which is expected to be published in July.

Martin Knight

This has been another profitable year for Chrysalis VCT with total shareholder return being £2.2 million which is just slightly above the average annual return of £2.1 million we have achieved over the last thirteen and a half years.

This year nearly 60% of the return has come from realisations, both from four new exits this year and from final deferred payments from previous exits.

The most significant exit was the sale of our investment in Internet Fusion Limited (IF), an e-commerce business supplying a wide range of action sportswear and outdoor wear through a number of online stores.  We first provided £700,000 of development capital in 2012 and further supported the company with another £400,000 in September 2015 IF grew strongly throughout our involvement and was sold in March 2017, realising Chrysalis a profit over original cost of £1.3 million and an increase over this year's opening valuation of £313,000.

We are also hopeful of receiving some deferred consideration during 2017/18.

We also exited from our investment in Rhino Sport and Leisure Limited, which is involved in worldwide rugby, supplying training equipment and sportswear.  Trading has been difficult in recent years and we had made a full provision against our £304,000 investment.  However, a new investor was keen to become involved in the sector and we took the opportunity of getting all loan stock repaid, therefore crystallising only a small loss against cost.

This yet again shows the benefit of structuring an investment so that if it does not work out there is still a chance of significant recovery.

The third significant exit was Ensign Communications (Holdings) Limited which is a specialist supplier and installer of WIFI products.  Chrysalis originally backed an MBI of this company back in November 2005.  There was then a secondary buy-out in 2010 when we received all our original investment back but reinvested £275,000.  This was fully repaid in 2011 leaving Chrysalis with an effectively free equity stake.  Ensign was then sold to a trade buyer in May 2017 giving Chrysalis proceeds of £334,000 and increase over valuation of £169,000.

The final exit of the year was of an even older investment, namely Cashfac plc.  This was a 1999 investment made at the height of the dotcom boom.  Initially the company struggled, and a full provision was made.  Over recent years Cashfac has however made considerable progress and has been consistently profitable which gave us an opportunity to finally exit at a profit over our valuation.

As shareholders will recall our most successful exit over recent times was the sale of Wessex Advanced Switching Productions Limited ("WASP") and again this year we received a deferred payment of £525,000 arising from that sale.  Unfortunately, this was the last such payment.

During the year Chrysalis also received £310,000 in loan repayments, £160,000 from Livvakt Limited and £150,000 from Zappar (Holding) Limited.  The latter loan has been acquired for just £25,000 so represented a profit over cost of £125,000.

This overall total cash inflow of £3.7 million was used to fund dividend payments of £2.4 million and new investments of £1.3 million.

As was reported last year the new VCT investment qualifying rules have considerably reduced the number of possible investment opportunities.  There is also a large volume of VCT money looking for qualifying investments which inevitably means that pricing of such deals has dramatically increased.

We have not been prepared to pay these higher prices believing that the risk reward equation has been detrimentally altered by the new rules. Accordingly, we have only invested in order to support our existing portfolio. Therefore, during this year, we have only subscribed a further £300,000 in equity on Zappar Holdings Limited, and provided loans of £200,000 and £50,000 to Life's Kitchen Ltd and Inaspect Technology Limited.

We also made a £750,000 allowable non-qualifying investment for liquidity purposes in Impact Healthcare REIT plc where Mahesh Patel, who is Chairman of our investee company, PDL Limited, is a major figure.

Generally, our portfolio has had a satisfactory year but there are increasing signs in some sectors we are invested in, of more difficult trading times ahead.

In particular, the casual dining sector in which Locale, K10 and Life's Kitchen operate in, is seeing increased food and drink costs, largely caused by the effects of the sterling's devaluation finally coming through, as well as increased staff costs due to the increases in the national living wage.  This clearly has put margins under pressure.  In addition, a shortage of drivers, partly due to EU drivers returning home, is also pushing up wage rates in the delivery sector which is not helping Driver Require's margins. There have however been several portfolio successes.
Zappar Limited which is involved in the development and application of augmented reality solutions had a very successful fund-raising round, raising over £2.0 million at three times the price of the previous round.  This should give the company sufficient cash to fund its development to the next level and enabled us to increase our valuation by £1.2 million.

Cambridge Mechatronics Limited has also made considerable progress during the year, signing deals with Samsung and various other mobile phone manufacturers.  It is currently discussing a fund-raising round at a valuation well in excess of our current valuation.

Our biggest investment Coolabi Group Limited has also made progress with television programmes "The Clangers" and "Scream Street" both enjoying high ratings on CBEEBIES and CBBC. Also, Driver Require has won two Hertfordshire Business Awards, the Business Growth Award and Medium Business of the Year.

As Shareholders may have seen in the November 2017 Budget, the Government has reviewed the VCT scheme as part of its broader "Patient Capital Review". The result has been a number of changes to the VCT regulations in an attempt to focus investment on potentially higher risk areas that require capital. It is not clear at this stage whether the rule changes will successfully achieve the Government's objectives. The new regulations will present some additional challenges to managing the portfolio and particularly in securing new investments while the transition to the new rules takes place.

With regard to the outlook for this year, for a whole host of macro and micro economic reasons, there appears to be more uncertainty now than there has been for some time. We will continue to work closely with all portfolio companies to ensure that any issues are dealt with at an early stage and risks are mitigated as much as possible.

Chrysalis VCT Management Limited


Portfolio of investments
The following investments, all of which are incorporated in England and Wales, were held at 31 October 2017:








% of
by value
  £'000 £'000 £'000  
Top ten venture capital investments        
Coolabi Group Limited 3,456 4,594 550 19.4%
Locale Enterprises Limited 2,513 2,554 (215) 10.7%
Zappar Limited 300 2,161 1,236 9.0%
Precision Dental Laboratories Group Limited 1,110 1,731 1 7.3%
K10 (London) Limited 950 1,117 (5) 4.7%
MyTime Media Holdings Limited 76 965 (253) 4.0%
Driver Require Group Limited 520 961 12 4.0%
Cambridge Mechatronics Limited 366 843 - 3.5%
Green Star Media Limited 650 719 - 3.0%
Life's Kitchen Ltd 400 400 (135) 1.7%
  10,341 16,045 1,191 67.3%
Other venture capital investments        
IX Group Limited 250 339 (49) 1.4%
Triaster Limited 71 231 (10) 1.0%
Inaspect Technology Limited 200 200 - 0.8%
Hoop Holdings Limited 150 135 (15) 0.6%
The Mission Marketing Group plc* 150 58 7 0.2%
The Kellan Group plc* 320 2 (1) 0.0%
Progility plc* 100 1 - 0.0%
Electrobase RP (Holdings) Limited 1,001 - - 0.0%
VEEMEE Limited 500 - - 0.0%
Art VPS Limited 358 - - 0.0%
G-Crypt Limited 305 - - 0.0%
Livvakt Limited 220 - - 0.0%
Fusion Catering Solutions Limited 75 - (75) 0.0%
Newquay Helicopters (2013) Limited 64 - - 0.0%
  3,764 966 (143) 4.0%
Fixed income securities        
Lloyds Banking Group 7% 746 719 (7) 3.0%
Intermediate Capital Group plc 7% 724 774 53 3.2%
  1,470 1,493 46 6.2%
Other quoted        
Impact Healthcare REIT plc* 750 765 15 3.2%
750 765 15 3.2%
16,325 19,269 1,109 80.7%
Cash at bank and in hand
  4,559   19.3%
Total investments
  23,828   100.0%

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

Investment movements for the year ended 31 October 2017


Venture capital investments  
Zappar Limited 300
Life's Kitchen Ltd 200
Inaspect Technology Limited 50
Other quoted  
Impact Healthcare REIT plc 750
Total investments 1,300








vs cost

  £'000 £'000 £'000 £'000 £'000
Venture capital investments          
Internet Fusion Limited 800 1,802 2,115 1,315 313
Ensign Communication (Holdings) Limited 292 165 335 43 170
Cashfac plc - 120 164 164 44
Livvakt Limited 160 160 160 - -
Zappar (Holding) Limited 25 150 150 125 -
Planet Sport Holdings 322 - - (322) -
Rhino Sport & Leisure Limited 304 - 254 (50) 254
  1,903 2,397 3,178 1,275 781
Dissolution/liquidation and retention          
Wessex Advanced Switching Products Limited - - 525 525 525
Newquay Helicopter Limited - - 14 14 14
Autocue Group Limited - - 3 3 3
  - - 542 542 542
Fixed income securities          
Provident Financial 7% 741 711 689 (52) (22)
  741 711 689 (52) (22)
Total 2,644 3,108 4,409 1,765 1,301

*Adjusted for purchases in the year where applicable

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

for the year ended 31 October 2017








Revenue   Capital   Total   Revenue   Capital   Total



£'000   £'000   £'000   £'000   £'000   £'000
Income   576   -   576   603   -   603



Gains on investments   -   2,411   2,411   -   2,100   2,100
    576   2,411   2,987   603   2,100   2,703
Investment management fees   (102)   (306)   (408)   (102)   (305)   (407)
Performance incentive fees   -   (127)   (127)   -   (41)   (41)
Other expenses   (268)   (6)   (274)   (310)   -   (310)
Return on ordinary activities before tax   206   1,972   2,178   191   1,754   1,945
Tax on ordinary activities   (33)   33   -   (37)   37   -
Return attributable to equity Shareholders   173   2,005   2,178   154   1,791   1,945
Basic and diluted return per share


0.6p   6.7p   7.3p   0.5p   6.0p   6.5p

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 ("FRS 102"). 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.

for the year ended 31 October 2017

  Called up share capital Capital redemption reserve  

Share premium


Special reserve
Capital reserve- realised Capital reserve- unrealised  

Revenue reserve


  £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 November 2015 299 89 1,478 1,357 1,926 15,022 3,439 702 24,312
Total comprehensive income  





283 1,508 154 1,945
Transfer between reserves  








Transactions with owners                  
Dividends paid - - - - - (1,720) - (374) (2,094)
At 31 October 2016 299 89 1,478 1,357 802 13,896 5,760 482 24,163
Total comprehensive income  





896 1,109 173 2,178
Transfer between reserves  








Transactions with owners                  
Dividends paid - - - - - (2,244) - (150) (2,394)
At 31 October 2017 299 89 1,478 1,357 602 13,715 5,902 505 23,947

*A transfer of £465,000 (2016: £44,000) representing previously recognised unrealised gains, transferred on disposal of investments during the year, has been made from the Capital Reserve - unrealised to the Capital Reserve - realised.  A transfer of £502,000 (2016: £857,000) representing a permanent diminution in value, has been made between the Capital Reserve - unrealised and the Capital Reserve - realised. A transfer of £200,000 (2016: £1,124,000) representing realised losses on disposal of investments, plus capital expenses and capital dividends in the year was made from Capital Reserve - realised to Special reserve. 

at 31 October 2017

      2017   2016
    £'000 £'000 £'000 £'000
Fixed assets          
Investments     19,269   19,968
Current assets          
Debtors   180   88  
Cash at bank and in hand   4,559   4,161  
    4,739   4,249  
Creditors: amounts falling due within one year   (61)   (54)  
Net current assets     4,678   4,195
Net assets     23,947   24,163

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     602   802
Capital reserve - realised     13,715   13,896
Capital reserve - unrealised     5,902   5,760
Revenue reserve     505   482
Total equity Shareholders' funds     23,947   24,163
Net asset value per share       80.0p     80.8p

for the year ended 31 October 2017

  2017   2016
  £'000   £'000
Cash flow from operating activities      
Profit on ordinary activities before taxation 2,178   1,945
Gains on investments (2,411)   (2,100)
(Increase)/decrease in debtors (92)   65
Increase/(decrease) in creditors 8   (13)
Net cash outflow from operating activities (317)   (103)
Cash flow from investing activities      
Purchase of investments (1,300)   (755)
Proceeds from disposal of investments 4,409   1,890
Net cash inflow from investing activities 3,109   1,135
Cash flow for financing activities      
Equity dividends paid (2,394)   (2,094)
Net cash outflow from financing activities (2,394)   (2,094)
Increase/(Decrease) in cash 398   (1,062)
Net movement in cash      
Beginning of the year 4,161   5,223
Net cash inflow/(outflow) 398   (1,062)
End of year 4,559   4,161

Accounting policies
Basis of accounting
The Company has prepared its financial statements in accordance with the Companies Act 2006, Financial Reporting Standard 102 ("FRS 102") and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" updated in January 2017 ("SORP"). The financial statements have been prepared on a going concern basis, under historical cost convention.

The financial statements are presented in pounds sterling and rounded to thousands. The company's functional and presentational currency is pounds sterling.

Presentation of Income Statement
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;
- Multiples;
- 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.

Redemption premiums are reflected in the valuations of fixed asset investments.

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 FRS 102 sections 14 and 15 that do not require portfolio investments to be accounted for using the equity method of accounting.

The carrying values of the Company's investments are disclosed in Note 9 and Note 15 of the full financial statements.

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. Where the recovery of accrued income is doubtful, provisions are made accordingly.
Basic and diluted return per share

      2017   2016
Return per share based on:     £'000   £'000
Net revenue return for the financial year     173   154
Net capital gain for the financial year     2,005   1,791
Total return for the financial year     2,178   1,945
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.

Basic and diluted net asset value per Ordinary Share


Shares in issue
Net asset value
Net asset value




per share


per share


Ordinary Shares 29,917,025   29,917,025   80.0   23,947   80.8   24,163

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 overleaf.

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 (2017: £61,000, 2016: £54,000) 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, £408,000 (2016: £407,000) was payable to Chrysalis VCT Management Limited in respect of these fees. At the balance sheet date £104,000 (2016: £nil) of prepaid fees were included in debtors.

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 £127,000 (2016: £41,000) were due to Chrysalis VCT Management Limited. At the year-end, £nil (2016: £1,000) was outstanding and payable.

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 included in the portfolio summary.

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 2017, but has been extracted from the statutory financial statements for the year ended 31 October 2017, which were approved by the Board of Directors on 19 December 2017 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 2016 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 2017 will be printed and posted to shareholders shortly. Copies will also be available to the public at the registered office of the Company at 6th Floor, St. Magnus House, 3 Lower Thames Street, London EC3R 6HD, 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 : Final Results - RNS