TIDMCYS
Chrysalis VCT plc
Reports & Accounts for the year ended 31 October 2016
FINANCIAL SUMMARY
31 Oct 31 Oct
2016 2015
pence Pence
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
CHAIRMAN'S STATEMENT
*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.
Portfolio
At the year end, the Company held a portfolio of 29 venture capital
investments, valued at GBP17.8 million. During the year, two new
companies joined the portfolio and two follow-on investments were also
completed at a total of cost of GBP0.8 million.
There were a number of loan stock redemptions, which generated proceeds
of GBP1.3 million, as well as the more deferred consideration from WASP,
from which we exited in 2014, which added a further GBP440,000 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 GBP599,000, GBP484,000, GBP440,000 and GBP429,000
respectively.
On the negative side, we have had to make a full provision of GBP1
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 GBP1.5 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 GBP6.3 million in cash and fixed income securities at
the year-end; split between cash of GBP4.2 million and fixed income
securities of GBP2.1 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 GBP1.9 million
(2014: GBP2.0 million), comprising a revenue return of GBP154,000 and a
capital return of GBP1.8 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.
Outlook
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
Chairman
INVESTMENT MANAGEMENT REPORT
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 GBP1.9 million for the year takes total profits in the last 12
and a half years, since the Company was reorganised and merged, to over
GBP25.9 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 GBP1.3 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 GBP600,000 in deferred payments
from previous sales, principally another GBP440,000 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 GBP440,000 in the next year.
This cash inflow helped fund the GBP2.1 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 GBP1
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 GBP949,000. 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
GBP150,000 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 (GBP500,000) and Cambridge Mechatronics Limited
(GBP30,000) and one other new investment, GBP75,000 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
REVIEW OF INVESTMENTS
Portfolio of investments
The following investments, all of which are incorporated in England and
Wales, were held at 31 October 2016:
Valuation
Movement % of portfolio
Cost Valuation in year by value
GBP'000 GBP'000 GBP'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
Additions
GBP'000
New venture capital investments
Inaspect Technology Limited 150
Fusion Catering Solutions Limited 75
225
Follow-on venture capital investments
Coolabi Group Limited 500
Cambridge Mechatronics Limited 30
530
Total investments 755
Disposals
Value at Gain Realised
Cost 01/11/15 Proceeds vs cost gain
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Venture capital
investments
Unquoted
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
Retentions
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
INCOME STATEMENT
for the year ended 31 October 2016
2016 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 0.5p 6.0p 6.5p 1.0p 5.7p 6.7p
diluted
return per
share
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.
BALANCE SHEET
at 31 October 2016
2016 2015
GBP'000 GBP'000 GBP'000 GBP'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
STATEMENT OF CASH FLOW
for the year ended 31 October 2016
2016 2015
GBP'000 GBP'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
NOTES TO THE ACCOUNTS
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;
*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.
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.
Income
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.
Expenses
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.
Taxation
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: GBP'000 GBP'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
2016 2015
Shares in issue Net asset value Net asset value
Pence
Pence per
2016 2015 per share GBP'000 share GBP'000
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: GBP54,000, 2015: GBP67,000) 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, GBP407,000 (2015: GBP412,000) 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 GBP41,000 (2015: GBP35,000) were due to
Chrysalis VCT Management Limited. At the year-end, GBP1,000 was
outstanding and payable (2015: GBP9,000).
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.
ANNOUNCEMENT BASED ON AUDITED ACCOUNTS
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 www.downing.co.uk/cys and
www.chrysalisvct.co.uk.
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
(END) Dow Jones Newswires
December 22, 2016 11:15 ET (16:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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